Court Opinion

ID: 2964477
Source: CourtListenerOpinion
Date Created: 2015-09-21 21:26:17.29655+00
Date Added: 2024-06-11T11:37:24.887498
License: Public Domain

USCA1 Opinion

	

                                [NOT FOR PUBLICATION]

                            UNITED STATES COURT OF APPEALS
                            UNITED STATES COURT OF APPEALS

                                FOR THE FIRST CIRCUIT
                                FOR THE FIRST CIRCUIT

                                 ____________________

        No. 96-1638

                           BANK OF NEW ENGLAND CORPORATION,

                                Defendant, Appellant,

                                          v.

                                   LACY G. NEWMAN,

                                 Plaintiff, Appellee.

                                 ____________________

                     APPEAL FROM THE UNITED STATES DISTRICT COURT

                          FOR THE DISTRICT OF MASSACHUSETTS

                     [Hon. William G. Young, U.S. District Judge]
                                             ___________________

                                 ____________________

                                        Before

                                 Selya, Circuit Judge,
                                        _____________

                            Aldrich, Senior Circuit Judge,
                                     ____________________

                              and Boudin, Circuit Judge.
                                          _____________

                                 ____________________

            James Donnell with  whom Andrews &  Kurth L.L.P. was on  brief for
            _____________            _______________________
        appellant.
            George F.  Parker, III  with whom  Lawrence J.  Cohen and  Badger,
            ______________________             __________________      _______
        Dolan, Parker & Cohen were on brief for appellee.
        _____________________

                                 ____________________

                                  December 16, 1996
                                 ____________________

                      ALDRICH, Senior Circuit Judge.  The agreed question
                               ____________________

            in  this appeal from the bankruptcy court is whether security

            for  an employer's  breach of  contract posted  following the

            execution  of a  written employment  contract on  November 1,

            1990,  was  security  for  that,   or  was  security  for  an

            antecedent  debt within  11 U.S.C.    547(b) because  an oral

            contract had already been made in June.  If it  was June, the

            security was invalid as a preference -- November 1 being less

            than  90 days before the employer's filing under Chapter 7 of

            the Bankruptcy Code on January 7, 1991.  11 U.S.C.   547.1

                      By  granting   defendant   Bank  of   New   England

            Corporation  (Bank)'s trustee's  motion for  summary judgment

            the bankruptcy  court ruled, without opinion,  that plaintiff

            Lacy  G.  Newman (Newman)  and  defendant  Bank had  in  fact

            contracted  by  June  18,  1990, when  Newman  started  work.

            Newman  v. Bank  of  New England  Corp.,  187 B.R.  405,  409
            ______     ____________________________

                                
            ____________________

            1.  11 U.S.C.   547 provides in relevant part:

            (b) Except as provided in subsection (c) of this section, the
            trustee may avoid any  transfer of an interest of  the debtor
            in property--

                      (1) to or for the benefit of a creditor;

                      (2) for or on account of an antecedent debt owed by
            the debtor before such a transfer was made;

                      (3) made while the debtor was insolvent;

                      (4) made--

                           (A)  on or within  90 days before  the date of
            the filing of the petition . . . .

                                         -2-

            (Bankr.  D.  Mass. 1995).   On  Newman's appeal  the district

            court reversed, stating that, on the record before it, it was

            not possible  to tell whether  there was an  agreement before

            the written contract in November.  Upon remand for trial, the

            bankruptcy court found "there was no definite agreement until

            November  1, 1990."    On Bank's  appeal  the district  court

            affirmed.  On Bank's further appeal, we too affirm.

                      The  contractual  problem  arose  because   of  the

            provisions of the bankruptcy  laws and the desire of  Newman,

            in  no way  opposed  by Bank,  that  in case  his  employment

            contract was terminated without  cause,2 his damages would be

            secured.  The facts were these.  In May, 1990 Bank and Newman

            began consideration  of the  latter's becoming employed  as a

            senior vice  president.  There  were, of course,  talks about

            terms, but by June 18, the parties, as evidenced by a written

            memorandum, had  agreed that Newman's employment  was for two

            years;  his title was to be Senior Vice President; his annual

            salary was $225,000, with  a guaranteed bonus the first  year

            of  $25,000; there was to be a relocation bonus and expenses,

            and an option for 35,000 shares of common stock with standard

            anti-dilution  provisions.   Particularly where  Newman began

            working,  if the matter had ended there, this might have been

                                
            ____________________

            2.  It   is  disputed  whether   the  Chapter  7  proceedings
            terminated the  contract.  The  successor bank did  not adopt
            it.   The bankruptcy court's finding in Newman's favor is too
            clearly correct to call for further discussion.

                                         -3-

            a  typical  case  permitting  a  finding  of  an  established

            contract even though the parties planned a writing that might

            add  minor   details.     Chedd-Angier  Prod.  Co.   v.  Omni
                                      ________________________       ____

            Publications Int'l, 756 F.2d  930, 935 (1st Cir. 1985).   The
            __________________

            matter,  however,  did  not   stop  there.    The  memorandum

            indicated  that  there was  to be  added  a provision  to the

            effect that in  case of termination without fault on Newman's

            part, damages were to  be secured to protect him  from having

            to claim with ordinary creditors.  Bank agreed in principle -

            -  apportionment   among  its   creditors  would  be   of  no

            consequence to  it.    The  problem,  as  recognized  in  the

            memorandum, was the needed approval of the bank regulators.

                      This matter  was of consequence to  Newman, who had

            an unhappy  memory of  what happened  to his  severance claim

            when employed by a previous bank that went into receivership.

            The  present  resolution  took  some  four  months.    Partly

            responsible, as the bankruptcy court noted, was the fact that

            Bank's  senior  counsel "had  neither  previously written  an

            employee or severance agreement nor understood the applicable

            banking  regulations   [and]  struggled  to  draft   a  final

            document."  Thereby went the passage of time.

                      This  produced  an  unusual  situation.    If  full

            expression  of  the  promised  severance  provision   was  an

            essential matter, Rosenfield v.  United States Trust Co., 290
                              __________     _______________________

            Mass.  210, 216, 195 N.E.  323, 325 (1935),  Newman went four

                                         -4-

            months without any contractual protection at  all in order to

            obtain  an  agreement in  which  it  was positively  assured.

            Without mentioning  this dilemma the  bankruptcy court  found

            that Newman had in fact chosen the positive security route.

                      We see  possible grounds  for this conclusion.   In

            the  first place, the importance of being secured was high in

            Newman's mind  not only from past  experience, but especially

            because Bank was  a "troubled  institution."  He  was not  in

            need  of this  particular  employment; he  had other  offers.

            Against  waiting  for  final  resolution,  however,  Bank had

            agreed that it  was willing  to afford security  and to  work

            jointly in appeasing the bank regulators.  It had even agreed

            to work  out some other device if the regulators did not come

            through.   Might  not  this be  enough so  that  there was  a

            definite June  contract, the  eventually selected form  to be

            but  a detail?  Could this not  have been claimed if the Bank

            had discharged Newman in October?

                      There  was,  however,   a  further  reason.     The

            bankruptcy court  found that  the various severance  packages

            that  were  considered  "varied  as  to  amount  and  terms."

            "Varied"  was  an  understatement.   The  record  shows  that

            amounts differed so substantially that Newman might well have

            delayed over this aspect alone.

                      Taken  altogether,  we  can accept  the  bankruptcy

            court's finding  that there  was no completed  June contract.

                                         -5-

            Hence the funds deposited in escrow were in connection with a

            November agreement, and thus reachable.

                      Affirmed.
                      _________

                                         -6-