Court Opinion

ID: 9691620
Source: CourtListenerOpinion
Date Created: 2023-08-24 20:44:26.193417+00
Date Added: 2024-06-11T18:19:23.758954
License: Public Domain

DREHER, Bankruptcy Judge,
dissenting.
I respectfully disagree and would affirm. The record establishes that the bankruptcy court enforced, precisely, the agreement ReGen reached with the Missouri Debtors. To me, it is plain that ReGen knew from the start that its agreement with the Missouri Debtors did not, and was not intended to, foreclose the Committee, a nonparty to the Stipulation, from asserting whatever claims it might have, or claim to have, against ReGen.
This is not an appeal that turns on whether the bankruptcy court properly applied the Flight Transportation factors in deciding to approve the Stipulation. Neither the Committee nor any other party objected to the Stipulation between ReGen and the Missouri Debtors on that ground. Rather, the Committee objected to being bound by the terms of a Stipulation to which it had not agreed and which it had a duty, under the Bankruptcy Code, to investigate and challenge if appropriate. See 11 U.S.C. § 1103(c)(2). The Committee and the Missouri Debtors are distinct entities. Each possesses an independent right to raise any issue in the case. See 11 U.S.C. § 1109(b). To the extent these rights or duties were affected by the Stipulation, it was the Committee’s intent, as expressed by its limited objection, to preserve its rights and carry on its duties.
The bankruptcy court did not specifically address the Flight Transportation factors as they relate to the objections of the Committee. There was no need to do so, *670and there is certainly no need to remand to require it to do so, because ReGen, the Committee, the Missouri Debtors and the bankruptcy court all agreed that the agreement between ReGen and the Missouri Debtors was within the realm of reasonable compromise under Rule 9019. See Continental Airlines, Inc. v. Air Line Pilots Ass’n (In re Continental Airlines, Corp.), 907 F.2d 1500, 1508 (5th Cir.1990); Pineo v. Turner (In re Turner), 274 B.R. 675, 681 (Bankr.W.D.Pa.2002).
The issue before the bankruptcy court was how to properly interpret the Stipulation in light of ReGen’s apparent after-the-fact recognition that the deal it had made with the Missouri Debtors did not conclude the matter. The issue we should be focusing on in this appeal is whether the bankruptcy court accurately read the Stipulation. The bankruptcy court interpreted the Stipulation to be unambiguous and to not bind any party that objected and whose objection was not overruled. We review de novo the bankruptcy court’s determination that the Stipulation was unambiguous. See John Morrell & Co. v. Local Union 304A, United Food & Commercial Workers, 913 F.2d 544, 550 (8th Cir.1990); Porous Media Corp. v. Midland Brake, Inc., 220 F.3d 954, 959-60 (8th Cir.2000). If the bankruptcy court’s review of the Stipulation did not go beyond the “four corners” of the unambiguous, written Stipulation, we also review its interpretation of that Stipulation de novo. Stevenson v. Stevenson Assocs. (In re Stevenson Assocs., Inc.), 777 F.2d 415, 418 (8th Cir.1985). Only if we agree with the bankruptcy court’s interpretation of the terms of the Stipulation do we set aside the bankruptcy court’s approval of the Stipulation if there was plain error or abuse of discretion. See New Concept Hous., Inc. v. Arl W. Poindexter (In re New Concept Hous., Inc.), 951 F.2d 932, 939 (8th Cir.1991).
The Stipulation was reached by ReGen and the Missouri Debtors on the eve of the January 4 hearing in the Delaware bankruptcy court. At the commencement of that hearing, counsel for the Missouri Debtors and ReGen advised the Delaware bankruptcy court that they had reached an agreement. In return for the Missouri Debtors’ agreement that ReGen be allowed a secured claim in the Missouri bankruptcy case of $434,954.59 and to payment out of the proceeds of a pending sale of the Missouri Debtors’ assets, ReGen would withdraw its motion for contempt and agree to the Missouri Debtors’ motion to proceed in the Missouri bankruptcy court. In explaining the agreement to the court, ReGen’s counsel repeatedly referred to it being one between the Missouri Debtors and ReGen only. Counsel for the Committee made clear that, while the Committee had no objection to the case proceeding in Missouri, the Committee was not a party to the Stipulation and wished to preserve its rights to object in the Missouri court proceedings: “... the Committee has no objection to the stipulation as long as it’s clear ... that the Committee will have a full opportunity to review and comment on the Stipulation in this Missouri case.” (emphasis added)
The language of the Stipulation which recorded this understanding and which came on for approval in the Missouri bankruptcy court on January 30 preserved these two features: first that the agreement was one between the Missouri Debtors and ReGen only; and second, that nonparties were bound only if they did not object or their objections were overruled. Throughout, the Stipulation recites that the agreement is one between ReGen and the Missouri Debtors only. Most importantly, Paragraph 5 of the Stipulation specifically provides: “This Stipulation and Order shall be served upon all creditors *671and parties in interest in the Missouri cases and any creditor or party in interest who fails to object or whose objection is overruled by the Court shall be bound by the terms of this Stipulation and Order.” Further, in paragraph 9, the Missouri Debtors “and their successors and assigns” gave a general release to ReGen, but that release was qualified as being subject to and “excluding the rights and obligations arising out of the Stipulation,” thus specifically excluding from its scope any release by nonparties to the Stipulation.
When the Stipulation was noticed for settlement, the Committee objected on a limited basis. Noting that it had not been a party to the Stipulation, the Committee agreed that ReGen had an unsecured claim in the agreed-upon amount, but “preserved its right” to object to any award of interest and attorneys’ fees and to challenge the validity of ReGen’s claim.
At the hearing on the approval of the settlement, Debtors’ counsel acknowledged that ReGen’s judgment hen might be subject to avoidance but urged that the Debtors had satisfied themselves that it was in their best interests, given the cost of litigation, to make the settlement. Placing Debtors’ understanding of the Stipulation squarely on the record, counsel acknowledged, however, that “debtor can only bind itself and stipulate from its perspective,” that the agreement said “nothing about preference exposure,” and that “we always took the position that we would have to notice this out to all parties.” He made clear that the Debtors had complied, in his view, with Debtors’ obligations under this agreement. Committee counsel then urged that, while the Committee felt that agreement was clear on its face, it would like language to the effect that the Committee’s rights to proceed with claims against ReGen were unaffected. The court, over the objection of ReGen’s counsel who proclaimed surprise that the Committee was taking this stance,5 agreed;
“Well, I think that’s — those are issues that I would have in a preference action if you chose to bring one. Let me look at your objection. Well, I could approve the Stipulation and order with the caveat that, as set out in Paragraph 5 that the Stipulation and order is not binding on the committee insofar as it purports to restrict the committee’s ability to contest the intent of — the validity, extent and priority of the liens that are claimed by ReGen. And that, in my view, comports with Paragraph 5, does not violate Paragraph 5 in the Stipulation because it instructs it is only binding on those parties who fail to object. The Committee has objected and I will sustain the Committee’s objection to the extent the stipulation purports to bind them or — purports to — in the event it does not purport to restrict with that caveat.” (emphasis added)
The Order from which this appeal is taken conformed to these recorded comments. The court approved the Stipulation, ordering that “Neither the Amended Motion nor the Stipulation are binding on the Committee. Nothing in the Order shall restrict the committee’s ability to object to the allowance, extent or priority of ReGen’s alleged judgment hens (‘The Liens’), including the avoidability of the Liens, as to certain of the Debtor’s real property.” To provide the comfort that the Committee sought, it further “sustained the objection ‘to the extent the Stipulation attempts to bind the Committee.’ ”
The bankruptcy court correctly interpreted the Stipulation and it certainly did not err by providing more than it needed to in the way of the comfort language. As *672is clear from the detailed review of the record, the court’s true analysis is that such language was totally unnecessary.
ReGen argued, and the majority agreed, that by determining it could both approve the Stipulation and sustain the objection, the bankruptcy court modified the terms of the agreement. To the contrary. The bankruptcy court interpreted the unambiguous Stipulation to allow it to do both. State contract law governs the interpretation of agreements in bankruptcy. Stevenson Assocs., 777 F.2d at 419; In re Frye, 216 B.R. 166, 170 (Bankr.E.D.Va.1997). The intention of the parties to an unambiguous contract must be determined from the contract alone.6 Morgan v. City of Rolla, 947 S.W.2d 837, 841 (Mo.Ct.App.1997). “Of course it is true that the words used, even in their literal sense, are the primary, and ordinarily the most reliable, source of interpreting the meaning of any writing: be it a statute, a contract, or anything else.” Cabell v. Markham, 148 F.2d 737 (2nd Cir.1945) (Hand, J.), aff'd, 326 U.S. 404, 66 S.Ct. 193, 90 L.Ed. 165 (1945). The bankruptcy court interpreted paragraph 5 according to its express language and the plain meaning of the words. See Sonoma Management Co. v. Boessen, 70 S.W.3d 475, 477 (Mo.Ct.App.2002) (holding that words should be given their natural and ordinary meaning). The terms of paragraph 5 are unambiguous and mean exactly what they say. The Stipulation bound any party that did not object or whose objection was overruled. The Committee objected, its objection was not overruled, and by its plain meaning the Stipulation did not bind the Committee. See Farm Credit Servs. v. Heine Feedlot Co. (In re Heine Feedlot Co.), 107 F.3d 622, 624-25 (8th Cir.1997) (holding that, where the language of a stipulated order is clear and unambiguous, the plain language of the stipulation controls and the contract should be enforced according to its terms).
In its appellate brief and at argument, counsel for ReGen urged that it simply never occurred to ReGen that it needed to draft for the circumstances where an objection was sustained, but the Stipulation still approved. Despite this lack of foresight, “a court is not free to save parties from what it believes are contractual mistakes or oversights.” Towers Hotel Corp. v. Rimmel, 871 F.2d 766, 773 (8th Cir.1989). The record makes clear that Debtors’ counsel had no such misunderstanding of the Stipulation. Debtor’s could “only bind itself and stipulate from its perspective.” The Debtors knew the Stipulation did not bind the Committee, but apparently ReGen did not. In essence, ReGen’s argument boils down to one of unilateral mistake. Absent fraud of some other exceptional circumstance, courts are not free to relieve parties of a unilateral mistake of fact. See Gaines v. Jones, 486 F.2d 39, 43 (8th Cir.1973), cert. denied, 415 U.S. 919, 94 S.Ct. 1418, 39 L.Ed.2d 474 (1974) (applying Missouri law). If the agreement of the Committee was necessary to provide ReGen the benefits of its agreement, it should have negotiated with the Committee and made it a party to the Stipulation. Since the Stipulation was unambiguous, the bankruptcy court’s interpretation of the Stipulation is subject to de novo review, and upon review I interpret the Stipulation exactly as interpreted by the bank*673ruptcy court. See Porous Media Corp., 220 F.3d at 959.
In the alternative, ReGen argues that the Committee was bound to the agreement prior to its approval by the bankruptcy court. The Committee’s comments at that hearing and Debtor’s counsel’s comments at the hearing before the bankruptcy court, however, make clear that its consent in Delaware was subject to its review of the agreement prior to bankruptcy court approval in Missouri. The Committee was a non-party not bound by the Stipulation unless it failed to object. See Byrd v. Sprint Communications Co., 931 S.W.2d 810, 814 (Mo.Ct.App.1996) (rejecting contention that non-party can be bound by agreement). The Missouri Debtors and ReGen simply had no power to contract away the Committee’s role in this case. See 11 U.S.C. § 1103(c)(2), (5); In re Eastern Maine Elec. Coop., 121 B.R. 917, 932 (Bankr.D.Me.1990) (discussing committee’s role in the “initiation of various proceedings”).
Where I believe the majority especially errs is in its conclusion that the bankruptcy court’s order expands the rights of the Committee and alters the terms of the Stipulation. I do not believe this was the intent of the bankruptcy court or a correct interpretation of its order. The order simply states that “[njothing in this Order shall restrict the Committee’s ability to object to the allowance, extent and priority of ReGen’s alleged judgment liens (the ‘Liens’), including the avoidability of the Liens, on certain of Debtors’ real property.” I again interpret this to mean exactly what it says: the order shall not “restrict” the rights of the Committee. If the Committee has the right or the duty to object to the allowance, extent and priority of liens, those rights and obligations are not restricted by the order. I do not interpret the order to expand the rights of the Committee or to confer standing to the Committee where it does not otherwise exist.7 These are issues best left for another day.
Having properly interpreted the language of the agreement, the bankruptcy court’s approval can only be reversed on appeal if the bankruptcy court clearly abused its discretion by authorizing it. Martin v. Cox (In re Martin), 212 B.R. 316, 319 (8th Cir. BAP 1997). The bankruptcy court did exactly what ReGen requested; it approved the stipulation as drafted and did not abuse its discretion in doing so. The bankruptcy court’s decision should be affirmed.8

. In light of the record made in Delaware, this position is difficult to understand.

. If the contract was deemed ambiguous, Re-Gen would still not prevail as the ambiguity was of its own making. ReGen drafted the Stipulation and "[i]t is a longstanding principle of contract law that, absent parol evidence as to the meaning of an ambiguous term, ambiguous terms of a contract are construed against the drafter of the contract.” Hennessy v. Daniels Law Office, 270 F.3d 551, 553-54 (8th Cir.2001) (citing Webb v. James, 147 F.3d 617, 623 (7th Cir.1998)).

. Whereas a debtor-in-possession "has explicit statutory authority to institute suit on behalf of the estate with which it is entrusted, see 11 U.S.C. §§ 323, 704, 1106 and 1107, there is no such explicit authority for creditors' committees to initiate adversary proceedings.” Official Comm. of Unsecured Creditors v. Hudson United Bank (In re America’s Hobby Center, Inc.), 223 B.R. 275, 280 (Bankr.S.D.N.Y. 1998) (citing Unsecured Creditors Comm. v. Noyes (In re STN Enters. Inc.), 779 F.2d 901, 904 (2d Cir.1985)). On the other hand,
[a] creditors’ committee may acquire standing to pursue the debtor's claims if (1) the committee has the consent of the debtor in possession or trustee, and (2) the court finds that suit by the committee is (a) in the best interest of the bankruptcy estate, and (b) is ‘necessary and beneficial’ to the fair and efficient resolution of the bankruptcy proceedings.
Commodore Int'l Ltd. v. Gould (In re Commodore Int’l Ltd.), 262 F.3d 96, 99-100 (2d Cir.2001) (citing Liberty Mut. Ins. Co. v. Official Unsecured Creditors’ Comm. (In re Spaulding Composites Co.), 207 B.R. 899, 904 (9th Cir. BAP 1997)).

. I agree with the majority opinion that the Stipulation was entered into by the debtor-in-possession and that this appeal was not moot.