Opinion
No. 88-03168.
March 8, 1989.
Gary W. Short, attorney for the debtor.
Douglas A. Campbell, attorney for the Rosenblooms.
Paul David Burke, attorney for the Halls.
Executory Contracts — Real Estate — Specific Performance. — A prepetition state court order adopting a settlement agreement between debtor-sellers and a potential buyer was not the same as anorder of specific performance, so the debtors ratained theoption to asume or reject that contract. (The picture was clluded somewhat becuase the debtros had another outstanding contract for the sale of the same parcel of land.) Although an order of specific performance renders a contract for the sale of realty non-executory — on the theory that the seller has no material obligations left, but only the ministerial duty to convey title — the order here was not for specific performance.
See Sec. 365(a)at ¶ 8629.
The matter before the Court is Debtor's Motion for Authorization to reject Executory Contract for the Sale of real Property. In May. 1986 Gladys B. Eisele (hereafter Debtor) entered into an agreement of sale with James P. and Linda Rosenbloom for certain real property. Thereafter a dispute arose between the parties over rights of way. In September of 1986 the Rosenblooms filed a suit in the Allegheny County Court of Common Pleas for specific performance. Thereafter Debtor executed, in October of 1986, an agreement to sell the same property to Jonathan C. and Beth McKenna Hall. The Debtor and the Halls tried to close the sale in December of 1986 but the title searcher discovered the pendency of the Rosenblooms' specific performance suit. The Halls were denied the right to intervene in the Rosebnblomms' suit in April of 1988. In May of 1988 the Rosenblooms and Debtor entered into an agreement in settlement of the Rosenblooms' specific peformance suit. This agreemenbt was approved as a settlement by the Common Pleas Judge. The Judge's order read "AND NOW, to-wit, this 6th day of May, 1988, it is hereby ORDERED, ADJUEGED and DECREED that the abovecaptioned action is hereby settle pursuant to the terms and conditions of the Agreement which is attached hereto, which Agreement shall be legally binding upon James P. Rosenbloom and Linda Rosenbloom, his wife, and Gladys P. [sic] Eisele." debtor contends that this court order is a decree for specific performance which renders the sales agreement with the Rosenblooms non-executory and, therefore, non-rejectable. Debtor further argues that this court must enter an order approving rejection of the Hall agreement inasmuch as at the time it was executed Debtor retained no property subject to transfer. Debtor bases this conclusion on the case of In Re Pribonic, 70 B.R. 596 (Bankr. W.D. Pa. 1987).
In Pribonic the Bankruptcy Court for the Western District of Pennsylvania found that an agreement of sale which has been made the subject of a decree for specific performance cannot be rejected in the context of a bankruptcy case inasmuch as the specific performance decree leaves the Debtor with only a single future obligation which is ministerial: delivery of title. 70 B.R. at 600.
We find, however, that the order entered by the Common Pleas Court in the case at bar was not a decree for specific performance but was instead merely approval of a settlement reached by the parties. Accordingly, the agreement between Debtor and the Rosenblooms is an executory contract. In re Philadelphia Penn Worsted Co., 278 F.2d 661 (3d Cir. 1960). We further find that the court-approved settlement agreement which by its terms supersedes the previous agreement between Debtor and the Rosenblooms is the only contract existing between Debtor and the Rosenblooms. Because the Halls also had only an agreement of sale with Debtor, their contract is also executory. Id.
The Debtor moved to amend its original motion to add a request for authority to assume the Rosenbloom agreement. We find, because the Rosenbloom agreement was not the subject of a decree for specific performance, that there are two executory contracts. We cannot determine from the state of the pleadings which, if either, would be in the best interests of the estate. Accordingly, the hearing scheduled for March 14, 1989, of which the parties previously received notice, will be held to permit the parties to present evidence as to which, if either, is in the best interests of the estate and the creditors.
An appropriate order will be entered.