Opinion
Bankruptcy No. 01-37560DWS
December 2, 2003
Allen B. Dubroff, Esquire, Philadelphia, PA, for DEBTOR
Allison M. Berger, Esquire, Lawrenceville, NJ, for DEBTOR
Bonnie R, Golub, Esquire, Weir Partners, LP, Philadelphia, PA, for UNION NAT'L BANK TRUST
MEMORANDUM OPINION
Before the Court is the Motion of the Reorganized Debtor for Court Intervention to Resolve a Dispute Arising in Connection with Debtor's Confirmed Plan of Reorganization (the "Motion"). The dispute involves the secured lender Union National Bank and Trust ("Union") which failed to file an answer to the Motion, appearing in Court by counsel to oppose the Motion. Neither party presented any evidence. For the reasons that follow, the Motion is Denied.
In the absence of an answer, I will consider all factual matters pled as admitted. In any event, Union's counsel did not contest any of the facts but rather the relief being sought.
BACKGROUND
On May 27, 2003 this Court confirmed Debtor's Second Amended Plan of Reorganization. Doc. No. 168. Union has now transmitted a default letter to the Reorganized Debtor seeking to foreclose on the collateral securing the liens held by Union. The collateral consists of substantially all of the Reorganized Debtor's assets. Motion ¶ 4. According to the Reorganized Debtor, Union relies on § 4.1(b) of the Plan as the basis for its default letter. Id. ¶ 6. In essence, that section requires the Reorganized Debtor to make a final balloon payment under two identified matured loans (the "Matured Loans") by August 1, 2003 and August 17, 2003, respectively. The Reorganized Debtor has admittedly not done so, its attempts to refinance these loans still being pursued.Id. ¶ 9. The Reorganized Debtor relies on § 4.1(d) of the Plan which states that the reorganized debtor will use its best efforts to repay the entire Allowed Secured Claim of Union within eighteen months of confirmation of the Plan. Id. ¶ 5. The Reorganized Debtor is prepared to continue to make monthly principal and interest payments while it continues its efforts to secure refinancing.Id. ¶ 11. It seeks an Order from this Court enjoining Union from exercising its contractual remedies until December 30, 2003.
I shall take judicial notice of the docket entries in this case. Fed.R.Evid. 201, incorporated in these proceedings by F.R.Bankr.P. 9017. See Maritime Elec.Co., Inc. v. United Jersey Bank, 959 F.2d 1194, 1200 n. 3 (3d Cir. 1991); Levine v. Egidi, 1993 WL 69146, at *2 (N.D. Ill. 1993); In re Paolino, 1991 WL 284107, at *12 n. 19 (Bankr. E.D. Pa. 1991); see generally In re Indian Palms Associates. Ltd., 61 F.3d 197 (3d Cir. 1995).
Pending the payment of the balloon, the Reorganized Debtor was allowed to make monthly principal and interest payments of $5,000 each. The balance due on September 15, 2003 on the Matured Loans was $260,500. Union has refused to accept continuing monthly payments tendered after August 2003, the date for the pay-off.
It also represented that it would have a commitment in place on or before October 15, 2003 with closing to occur on or before December 6, 2003. While the hearing on the Motion was held on November 18, 2003, there was no evidence that these expectations have been realized. Presumably if the refinancing was in place, pursuit of this Motion would not be necessary.
At the hearing on the Motion, when I inquired of the Reorganized Debtor's counsel as to this Court's jurisdiction to grant the relief it seeks, its counsel relied on the Plan language concerning post-confirmation jurisdiction. I reminded him of the Confirmation Order which expressly states that "this Court will retain subject matter jurisdiction of post-confirmation disputes only to the extent allowed by federal bankruptcy law, any language in the confirmed plan notwithstanding." While the Motion expressly seeks an injunction barring Union from pursuing its remedies on default, counsel tied that request for relief to this Court's recognized post-confirmation jurisdiction to enforce and interpret the Plan, claiming a dispute with Union as to its meaning is the dispositive issue.
Article VIII is captioned "Retention of Jurisdiction" and provides:
8.1 The Court shall retain jurisdiction of this Case for the purposes of Sections 105(a), 1127 and 1142(b) of the Code and for the following purposes:
(a) To hear all Objections to Claims, which Objections shall be filed no later that ninety (90) days after the entry of a final Order and served upon the holder of such claim to which the Debtor has objected. Unless otherwise ordered by the Bankruptcy Court, objections to claims may be litigated to judgment, settled or withdrawn.
(b) To determine applications for allowance of compensation and reimbursement of expenses.
(c) To enforce and interpret the Plan, to resolve any disputes arising under or in connection with the Plan, to effectuate payments under the Plan and/or to compel performance of any Person in accordance with the provisions of the Plan.
(d) To correct any defect, to cure any omission or to reconcile any inconsistency in the Plan or in the Confirmation Order as may be necessary or advisable to carry out the intents and/or purposes of the Plan;
(e) To determine such other matters and for such other purposes as may be provided in the Confirmation Order or otherwise deemed appropriate to accomplish its intents and purposes; and
(f) To enter a Final Order closing this Case.
(g) To effectuate, interpret and enforce the provisions of the Plan.
(h) To determine any and all: (i) causes of action brought by the Debtor against third persons; (ii) adversary proceedings; (iii) contested matters.
(i) To determine such other matters as may be provided for in the Confirmation Order or as may be authorized under the provisions of the Bankruptcy Code.
(j) To determine any and all applications for compensation through the effective date.
Plan ¶ 8.1. Debtor did not indicate what part of the foregoing language would support its request. Presumably it contends that this is a dispute arising in connection with the Plan. The breadth of this retention of jurisdiction provision, part of the form language used by most debtors in their Chapter 11 plans, gave rise to the form of confirmation order I (and other judges) use to make clear that the confirmed plan cannot expand this Court's subject matter jurisdiction.
Neither Debtor nor Union provided the Plan, the Debtor merely excerpting the disputed provisions. While not requested by Union, I have reviewed the entire Plan as to which I may take judicial notice. While a court may not take judicial notice sua sponte of facts contained in the debtor's file that are disputed, In re Augenbaugh, 125 F.2d 887 (3d Cir. 1942), it may take judicial notice of adjudicative facts "not subject to reasonable dispute . . . [and] so long as it is not unfair to a party to do so and does not undermine the trial court's factfinding authority." In re Indian Palms Assoc., 61 F.3d 197, 205 (3d Cir. 1995) ( citing Fed.R.Evid. 201(f) advisory committee note (1972 proposed rules).
DISCUSSION
It is generally recognized that "although the jurisdiction of the bankruptcy court continues until the Chapter 11 case is closed, once a plan has been confirmed, the court's jurisdiction begins to weaken."Walnut Associates v. Saidel, 164 B.R. 487, 491 (E.D. Pa. 1994). As has been noted by my colleague Chief Bankruptcy Judge Bruce I. Fox and repeated in decisions in this and other districts:
[C]ourts have recognized the competing interests between retaining jurisdiction after confirmation until entry of the final decree (see Bankr.R.3020) and ending the `tutelage1 status of reorganization, a period `which may limit and hamper [the corporation's] activities and throw doubt upon its responsibility.'
In re Cinderella Clothing Industries. Inc., 93 B.R. 373, 376 Bankr. E.D.Pa. 1988) ( citing North American Can Corp. v. Peerless Weighing Vending Machine Corp., 143 F.2d 938, 940 (2d Cir. 1944)).
The Bankruptcy Code specifically identifies certain areas where the competing interests are to be resolved in favor of retaining jurisdiction. Section 1142 authorizes the bankruptcy court to enter orders "necessary for the consummation of the plan." That section along with § 105 have been the basis of orders construing and enforcing terms of a confirmed plan. Courts have long held that a bankruptcy court retains jurisdiction after confirmation
to protect its [confirmation] decree, to prevent interference with the execution of the plan, and to aid otherwise in its operation.
In re Dilbert's Quality Supermarkets. Inc., 368 F.2d 922, 924 (2d Cir. 1966). Accord, e.g., In re Pittsburgh Terminal Coal Corp., 183 F.2d 520 (3d Cir.), cert. denied, 340 U.S. 904 (1950); Pennsylvania Companies. Inc. v. Stone. (In re Greenley Energy Holdings of Pennsylvania, Inc.), 110 B.R. 173 (Bankr. E.D. Pa. 1990); Cinderella Clothing Industries, supra. However, the authority conferred by § 1142 is at all times limited by the requirement of 28 U.S.C. § 1334 that the outcome of the dispute conceivably affect the implementation of the plan.See Zer and Bernal Group. Inc. v. Cox (In re Gary Metal Products. Inc.)., 152 B.R. 927, 931-32 (Bankr. N.D.Ill.), aff'd, 158 B.R. 459 (N.E. Ill. 1992), aff'd, 23 F.3d 159 (7th Cir. 1994);Greenley Energy, 110 B.R. at 184. This principle is consistent with the goal of weaning the debtor from dependence on the bankruptcy court in order to stand on its own feet with respect to post-confirmation matters. See In re Haws, 158 B.R. 180, 182 (Bankr. C.D. Cal. 1993); In re Morgan Morgan. Inc., 24 B.R. 518, 521 (Bankr. S.D. N.Y. 1982).
To the extent that the Reorganized Debtor is asking me to grant it relief from the confirmed Plan to allow it additional time to comply with its obligations to Union thereunder, I refuse to do so. The Plan is a contract and I am not free to rewrite it. I do not retain jurisdiction for that purpose. Thus, the request that I deny Union the right to commence action in furtherance of its default demand is rejected.
Even with jurisdiction, the absence of an evidentiary record here would preclude the entry of injunctive relief.
However, it is within my jurisdiction to construe and enforce the terms of a confirmed plan. Both counsel argue that a reading of the language of ¶¶ 4.1(b) and (d) together supports their respective views of the Debtor's obligations. Paragraph 4.1(b) obligates the Reorganized Debtor to pay the balance of the Loans by August 2003. It has not done so, and Union has properly claimed a default. However, paragraph 4.1(d) allows the Reorganized Debtor eighteen months from confirmation,i.e., until November 27, 2004, to seek refinancing to repay Union's "entire Allowed Claim." Both contend that the dispositive word is "entire."
This may explain the absence of an evidentiary record, both parties believing the Plan is unambiguous so as not to require extrinsic evidence for its interpretation. A contract is unclear and ambiguous, "if, and only if, it is reasonably or fairly susceptible of different constructions and is capable of being understood in more senses than one and is obscure in meaning through indefiniteness of expression or has a double meaning." Glenn Distributors Corp. v. Carlisle Plastics. Inc., 297 F.3d 294, 300 (3d Cir. 2002). To determine whether ambiguity exists in a contract, the court may consider `the words of the contract, the alternative meaning suggested by counsel, and the nature of the objective evidence to be offered in support of that meaning.'Bohler-Uddeholm America. Inc. v. Ellwood Group. Inc., 247 F.3d 79, 93 (3d Cir. 2001) ( quoting Mellon Bank. N. A. v. Aetna Bus. Credit. Inc., 619 F.2d 1001, 1011 (3rd Cir. 1980)). However, in so doing, the court must be mindful not to modify the plain meaning of the words under the guise of interpretation. Osial v. Cook, 803 A.2d 209, 213 (Pa.Super. 2002). Furthermore, an ambiguity should not be the result of a strained or contrived interpretation. See Steuart v. McChesney, 444 A.2d 659, 663 (Pa. 1982) (recognizing that," . . . scarcely an agreement could be conceived that might not be unreasonably contrived into the appearance of ambiguity"). In other words, a court shall not rewrite the contract or give it a construction in conflict with the accepted plain meaning of the language used. Osial, 803 A.2d at 213. As noted below, I find, as a matter of law, that the Plan is capable of only one reasonable interpretation.
Union states that the provisions are harmonious because the Loans comprise only part of the Allowed Secured Claim and that while Debtor has eighteen months to pay the entire claim, it is obligated to pay at least the two matured loans by August 2003. This argument is borne out by the Plan. Not quoted in the Motion is § 4.1(a) which describes three amortizing loans separate and apart from the matured loans referenced in § 4.1(b). The amortizing loans are to be paid according to their terms. The claim of Union is deemed an Allowed Secured Claim of $371,482 represented by "the outstanding principal balance of all loans from Union to Debtor as of January 31, 2003." Plan ¶ 4.1. (Emphasis added.) The balloon payment required by § 4.1(b), on the other hand, was approximately $260,000 as of September 15, 2003. The Plan thus allows Debtor an additional period of time to refinance the balance of its indebtedness to Union while concomitantly requiring the matured loans to be paid off more quickly. This makes some business sense since the amortizing loans were not in default.
Reorganized Debtor, on the other hand, states that § 4. 1(d) allows it to pay the entire claim in eighteen months. As the Loans are part of the "entire" claim, it therefore has eighteen months to secure refinancing to repay them. Unlike Union's explanation, the Reorganized Debtor fails to harmonize § 4.1(d) with § 4.1(b). Indeed its explanation reads § 4.1(b) out of the Plan. It is hornbook law that in construing a contract a court should give meaning to all its words and phrases and adopt a construction that avoids surplusage. Washington Hospital v. White, 889 F.2d 1294, 1300 (3d Cir. 1989);Continental Insurance Co. v. Allstate Insurance Co., 820 F. Supp. 890, 897 (E.D.Pa. 1993). See also Pines Plaza Bowling. Inc. v. Rossview. Inc., 394 Pa, 124, 145 A.2d 672, 676 (1958) (In construing a contract, the agreement must be interpreted as a whole, and the words given their ordinary meaning). Construing the Plan as a whole, the only rational interpretation of § 4.1 that gives effect to all its language is the one proffered by Union.
Having resolved the one issue properly before me, I leave the parties to enforce their contractual rights and defenses in the appropriate non-bankruptcy forum. An Order consistent with this Memorandum Opinion shall be entered.
ORDER
AND NOW, this 2nd day of December 2003, upon consideration of the Motion of the Reorganized Debtor for Court Intervention to Resolve a Dispute Arising in Connection with Debtor's Confirmed Plan of Reorganization (the "Motion"), after notice and hearing, and for the reasons in the accompanying Memorandum Opinion;
It is hereby ORDERED and DECREED that the Motion is DENIED.