Court Opinion

ID: 4201347
Source: CourtListenerOpinion
Date Created: 2017-09-06 15:01:14.929604+00
Date Added: 2024-06-11T13:25:45.834107
License: Public Domain

United States Bankruptcy Appellate Panel
                          For the Eighth Circuit
                      ___________________________

                              No. 17-6009
                      ___________________________

                            In re: Martin J. Tirrell

                             lllllllllllllllllllllDebtor

                           ------------------------------

           Charles Gabus Motors, Inc., d/b/a Toyota of Des Moines

                     lllllllllllllllllllll Plaintiff - Appellee

                                         v.

                                Martin J. Tirrell

                    lllllllllllllllllllll Defendant - Appellant
                                    ____________

              Appeal from the United States Bankruptcy Court
               for the Southern District of Iowa - Des Moines
                               ____________

                           Submitted: July 28, 2017
                           Filed: September 6, 2017
                                ____________

Before SALADINO, Chief Judge, SCHERMER and NAIL, Bankruptcy Judges.
                             ____________
NAIL, Bankruptcy Judge.

      Martin J. Tirrell ("Debtor") appeals the January 31, 2017 judgment of the
bankruptcy court1 denying Debtor a discharge of his debts. We affirm.

                                  BACKGROUND

       Charles Gabus Motors, Inc. ("Gabus Motors") filed an adversary complaint
asking the bankruptcy court to determine the dischargeability of its claim against
Debtor and to deny Debtor a discharge in his chapter 7 case. Shortly before the
scheduled trial, Debtor and Gabus Motors entered into a settlement agreement,
pursuant to which Debtor was to pay Gabus Motors $45,000.00 in five installments,
the first of which was due by January 3, 2017. The parties agreed if Debtor made
these payments, Gabus Motors would dismiss the adversary proceeding. The parties
further agreed if Debtor failed to make these payments, Gabus Motors could file an
affidavit of default and ask the bankruptcy court to enter an order denying Debtor a
discharge. The bankruptcy court approved the parties' settlement agreement.

       Debtor failed to make the first payment, and Gabus Motors filed the requisite
affidavit of default. Debtor objected, claiming he was prevented from making the
payment by circumstances beyond his control, and asked the bankruptcy court to
order Gabus Motors to accept late payment.

      The matter came before the bankruptcy court. At the hearing, Debtor claimed
enforcing the default provision of the parties' settlement agreement would also violate

      1
      The Honorable Lee M. Jackwig, United States Bankruptcy Judge for the
Southern District of Iowa.

                                         -2-
IOWA CODE § 554.2718.2 The bankruptcy court overruled Debtor's objection and
directed the entry of a judgment denying Debtor a discharge. Judgment was entered,
and Debtor timely appealed.3

                            STANDARD OF REVIEW

      We review for clear error the bankruptcy court's findings of fact. Islamov v.
Ungar (In re Ungar), 633 F.3d 675, 679 (8th Cir. 2011). We review de novo the
bankruptcy court's conclusions of law. Id.

                                   DISCUSSION

      Debtor's principal argument is the bankruptcy court erred in not temporarily
excusing him from making the January 3, 2017 payment under the parties' settlement
agreement. In support of this argument, Debtor points us to Iowa common law that
recognizes both the doctrine of impracticability and the doctrine of temporary
impracticability, as described in the Restatement (Second) of Contracts.4

      2
       That section provides, in pertinent part: "A term [in an agreement] fixing
unreasonably large liquidated damages is void as a penalty." IOWA CODE § 554.2718
(2017).
      3
       On the same day he filed his notice of appeal, Debtor also filed a motion under
Fed.R.Bankr.P. 7052 for additional findings, which the bankruptcy court denied.
Debtor did not file a separate notice of appeal or an amended notice of appeal
regarding the bankruptcy court's order denying his motion. Consequently, he may not
challenge that order. Fed.R.Bankr.P. 8002(b)(3).
      4
        Both parties appear to presume Iowa contract law guided the bankruptcy
court's interpretation of their settlement agreement. Without deciding the issue, we
have done likewise.

                                         -3-
      The doctrine of impracticability applies

             [w]here, after a contract is made, a party's performance is
             made impracticable without his fault by the occurrence of
             an event the non-occurrence of which was a basic
             assumption on which the contract was made, his duty to
             render that performance is discharged, unless the language
             or the circumstances indicate the contrary.

Restatement (Second) of Contracts § 261 (Am. Law. Inst. 1981). As its name
suggests, the doctrine of temporary impracticability extends the doctrine of
impracticability to situations where the impracticability is only temporary:

             Impracticability of performance or frustration of purpose
             that is only temporary suspends the obligor's duty to
             perform while the impracticability or frustration exists but
             does not discharge his duty or prevent it from arising
             unless his performance after the cessation of the
             impracticability or frustration would be materially more
             burdensome than had there been no impracticability or
             frustration.

Restatement (Second) of Contracts § 269 (Am. Law. Inst. 1981).

       The sum and substance of the record before the bankruptcy court regarding this
issue may be gleaned from Debtor's affidavit in support of his objection to Gabus
Motors' affidavit of default. According to Debtor, on December 30, 2016, he left the
state to obtain the funds necessary to make the January 3, 2017 payment. On
January 3, 2017, he flew from Tampa to Chicago, where he arrived at 9:06 a.m. Due
to weather, his connecting flight, which was scheduled to land in Des Moines at
1:23 p.m., was cancelled, and he was not able to fly out of Chicago until January 4,

                                         -4-
2017. And he was prepared to deliver the January 3, 2017 payment to Gabus Motors
on January 4, 2017.5

      Debtor argues the weather conditions on January 3, 2017 were beyond his
control and the bankruptcy court should therefore have temporarily excused him from
making the January 3, 2017 payment. If one focuses only on Debtor's description of
the events of January 3, 2017, this is a permissible view of the record.

       The bankruptcy court, however, looked beyond the events of January 3, 2017
and found Debtor's attempt to justify his failure to make the January 3, 2017 payment
lacking. Debtor did not explain to the bankruptcy court's satisfaction why, when the
bankruptcy court had approved the parties' settlement agreement on December 20,
2016, he waited until the last minute to obtain the funds necessary to make the
January 3, 2017 payment. Debtor likewise did not explain to the bankruptcy court's
satisfaction why, if he did not have the financial wherewithal to make the January 3,
2017 payment when he signed the settlement agreement on November 29, 2016, he
unconditionally committed himself to do so. Finally, Debtor did not explain to the
bankruptcy court's satisfaction why he could not have anticipated–and allowed
for–inclement weather in the Midwest at the beginning of January.

       Given these circumstances, the bankruptcy court chose to place the blame for
Debtor's failure to make the January 3, 2017 payment on Debtor and his
procrastination between November 29, 2016 and January 3, 2017, not the weather on
January 3, 2017. This is also a permissible view of the record. That being so, we
cannot say the bankruptcy court's finding was clearly erroneous. Anderson v. City of
Bessemer City, North Carolina, 470 U.S. 564, 574 (1985) ("Where there are two
permissible views of the evidence, the factfinder's choice between them cannot be
clearly erroneous.”).

      5
          Debtor offered no evidence to corroborate his affidavit.

                                           -5-
        Debtor also argues the parties' settlement agreement is subject to the provisions
of article 2 of Iowa's uniform commercial code.6 While Debtor did not expressly raise
this issue in the bankruptcy court, by claiming enforcing the settlement agreement's
default provision would violate IOWA CODE § 554.2718 (2017) (one of the provisions
of article 2 of Iowa's uniform commercial code), he did at least raise it by implication.
This argument, however, fails.

       Article 2 of Iowa's uniform commercial code "applies to transactions in
goods[.]" IOWA CODE § 554.2102 (2017). Goods are generally described as "all
things . . . which are movable at the time of identification to the contract for sale other
than the money in which the price is to be paid, investment securities[,] . . . and things
in action." IOWA CODE § 554.2105(1) (2017) (in pertinent part). This definition
cannot be stretched to encompass the parties' settlement agreement, which does not
involve either "things . . . which are movable" or a "contract for sale." Consequently,
the parties' settlement agreement is not subject to article 2 of Iowa's uniform
commercial code.

      Debtor also argues the settlement agreement's default provision is a liquidated
damages clause that is void as a penalty under IOWA CODE § 554.2718. The
bankruptcy court did not expressly reject this argument. However, by overruling
Debtor's objection, it did do so implicitly. See Fonder v. United States, 974 F.2d 996,
999-1000 (8th Cir. 1992) ("Oral findings and conclusions . . . must be liberally
construed and found to be in consonance with the judgment if the judgment has
support in the record evidence.") (internal quotation marks and citation omitted).
This argument also fails.

      6
       Debtor's argument focuses on the parties' original contract, which is not before
us. Debtor does not explain why we should look to that contract to determine
whether the parties' agreement to settle the adversary proceeding is subject to these
provisions. In any event, we decline to do so.

                                           -6-
        As previously noted, the parties' settlement agreement is not subject to article 2
of Iowa's uniform commercial code. And even if it were, the settlement agreement's
default provision is not a liquidated damages clause. As Debtor himself points out
in his reply brief (citing Black's Law Dictionary 391 (6th ed. 1990) and incorporating
its definition of "liquidated damages"), a liquidated damages clause is one in which
"a specific sum of money has been expressly stipulated by the parties to a . . . contract
as the amount of damages to be recovered by either party for a breach of the
agreement by the other." This definition cannot be stretched to encompass the
settlement agreement's default provision, which does not set forth a "specific sum of
money," does not address "damages," and does not provide for "recover[y] by either
party."

        Debtor raises a number of other issues for the first time on appeal: Whether
Debtor's failure to make the January 3, 2017 payment was a material breach of the
parties' settlement agreement; whether the settlement agreement's default provision
is a liquidated damages clause that is void as a penalty under Iowa common law;7 and
whether Gabus Motors failed to tender substitute performance8 under IOWA CODE
§§ 554.2614 (2017) (substituted performance) and 554.2615 (2017) (excuse by
failure of presupposed conditions). Because Debtor did not raise these issues before
the bankruptcy court, we have not considered them on appeal. Edwards v.
Edmondson (In re Edwards), 446 B.R. 276, 280 (B.A.P. 8th Cir. 2011) (discussion
and citations therein), aff'd, 477 F. App'x 405 (8th Cir. 2012).

      7
       As discussed above, Debtor did raise the related issue of whether the default
provision is a liquidated damages clause that is void as a penalty under IOWA CODE
§ 554.2718 in the bankruptcy court.
      8
       Presumably, Debtor meant to say Gabus Motors failed to accept substitute
performance.

                                           -7-
                                  CONCLUSION

       Having reviewed for clear error the bankruptcy court's finding that Debtor and
his procrastination, not the weather, were to blame for Debtor's failure to make the
January 3, 2017 payment under the parties' settlement agreement and having reviewed
de novo the bankruptcy court's implicit conclusion that the settlement agreement's
default provision was not a liquidated damages clause that was void as a penalty
under IOWA CODE § 554.2718, we affirm the bankruptcy court's judgment denying
Debtor a discharge.

                                         -8-