Opinion
CASE NO. 1:03-cv-0412-DFH
January 28, 2004
ENTRY ON APPEAL FROM BANKRUPTCY COURT
This case presents chapter two in the appellate history of an adversary proceeding filed by debtor-plaintiffs American Public Automotive Group, Inc. ("APAG") and Baker O'Neal Holdings, Inc. ("BOHI") (collectively, "plaintiffs") in the United States Bankruptcy Court for the Southern District of Indiana against defendant Donald E. Massey. Count One of the plaintiffs' complaint sought to set aside as a fraudulent conveyance a payment of $2.5 million to Massey in 1997. Count Two sought to recover the same $2.5 million payment on a theory of unjust enrichment. The bankruptcy court first granted summary judgment for plaintiffs on Count One. Then, for reasons not evident from the record, the bankruptcy court entered a separate final judgment with respect to Count One, which prompted an immediate and separate appeal of that decision.
On September 30, 2003, in Cause No. 1:02-cv-1628, this court stated its intention to affirm the bankruptcy court's order granting partial summary judgment to plaintiffs on Count One, but withheld entry of a final judgment based on the court's belief that Counts One and Two needed to be reconsolidated for purposes of one final judgment at the district court level because both counts arose from the same transaction. See generally Fed.R.Civ.P. 54(b); OCD Communications Corp. v. Wenruth, 826 F.2d 509, 512 (7th Cir. 1987) (dismissing appeal attempted under Rule 54(b); noting that claims are not separate for Rule 54(b) purposes if the facts on which they depend are largely the same, or if appellate court would need to review same issues multiple times in separate appeals, or if separate claims merely present different legal theories for essentially the same recovery).
While the first appeal was being briefed, the bankruptcy court held a trial on Count Two and ruled in favor of plaintiffs on that count as well, entering a separate final judgment. Massey then filed this appeal docketed as Cause No. 1:03-cv-0412.
Background
Plaintiff APAG is wholly owned by plaintiff BOHI. BOHI was incorporated in Delaware in 1993. BOHI and APAG have their principal place of business in Indianapolis, Indiana. Their business plan was to own and operate "auto malls" near premier shopping malls. Patrick Baker is an officer and the sole shareholder of BOHI. James O'Neal was BOHI's president from its inception until September 2, 1998. APAG, another Delaware corporation, was founded in 1995. Patrick Baker is an officer and director of APAG. James O'Neal was APAG's president and secretary from its inception until September 2, 1998. O'Neal was removed from his positions with APAG and BOHI in September 1998 after Baker learned of O'Neal's misappropriation of funds.
Defendant Donald Massey is a resident of Michigan who has had a great deal of success in the auto business. He owns numerous dealerships across the country, including Cadillac, Buick, Pontiac, Chevrolet, Geo, and Saturn dealerships. In 1997, BOHI/APAG sought to purchase Massey's dealerships to help attain their business objective of establishing "auto malls." Though APAG paid Massey $2.5 million in connection with its attempt to negotiate the purchase of Massey's dealerships, a final deal was never struck. APAG and BOHI filed for bankruptcy in 1998 and brought the adversary proceeding in an effort to recover the $2.5 million payment to Massey.
At the core of the entire case is the following hand-written document:
Count One of the three count adversary proceeding alleged that the $2.5 million payment was a fraudulent conveyance under Michigan law, subject to recovery in connection with the APAG and BOHI bankruptcies because, among other things, the payment was made pursuant to an unenforceable agreement to agree and therefore was not supported by consideration. Count One also alleged that the cost of certain improvements made to Massey's dealerships, which were paid for by APAG and BOHI, were also fraudulent transfers and subject to recovery. (APAG and BOHI dropped their claim for funds spent on dealership improvements following receipt of partial summary judgment on Count One with respect to the $2.5 million payment.) This court's entry of September 30, 2003, stated the court's intent to affirm the bankruptcy court's September 2002 grant of summary judgment in favor of APAG and BOHI on Count One. The September 30, 2003 entry provides a more detailed factual account of the "agreement to agree" that led to the $2.5 million payment to Massey. Count Three of the adversary complaint sought reliance damages, but APAG and BOHI voluntarily dismissed that claim. Count Two alleged that the $2.5 million payment should be returned by Massey because he was unjustly enriched. This claim was the subject of a separate trial before the bankruptcy judge and is the subject of this appeal.
Before the trial of the unjust enrichment claim in November 2002, the bankruptcy court orally granted APAG's and BOHI's motion to have the bankruptcy court treat its earlier findings and conclusions with respect to Count One as also established for purposes of the trial on Count Two. After trial, the bankruptcy judge entered judgment in favor of APAG and BOHI and against Massey.
In Michigan an action for unjust enrichment may be available whenever one person or entity possesses money which in equity or good conscience belongs to another. Michigan Educational Employees Mutual Ins. Co. v. Morris, 596 N.W.2d 142, 151 (Mich. 1999). Based on its earlier findings from Count One and the additional evidence submitted by the parties on Count Two, the bankruptcy court found that plaintiffs had proved unjust enrichment. Defendant Massey had received a benefit with a corresponding inequity to the plaintiffs. See, e.g., Dumas v. Auto Club Ins. Ass'n, 473 N.W.2d 652, 663 (Mich. 1991). The bankruptcy court also found that, consistent with Michigan law, when the controlling equities favor the party claiming to have been injured and no enforceable express contract exists covering the payment, it should be returned. See, e.g., Barber v. SMH (US), Inc., 509 N.W.2d 791, 796 (Mich.App. 1993).
In pertinent part (with scrivener's errors included) the judgment initially entered by the bankruptcy court on Count Two read as follows:
IT IS, THEREFORE, ORDERED, ADJUDGED AND DECREED that Plaintiffs, BOHI and APAG, is [sic] entitled to judgment in its favor and against Defendant, Donald E. Massey on Count II of Plaintiffs' Complaint, quantum merit[sic]/unjust enrichment, in the principal amount of Two Million Five Hundred Thousand ($2,500,000) less the expense incurred by Massey in connection with the Arthur Andersen LLP audit in the amount of Thirty-Two Thousand Dollars ($32,000), for a principal amount of Four Hundred Sixty-Eight Thousand dollars [sic] ($2,468,000), plus pre-judgment interest calculated from May 28, 1997, through March 7, 2003 at the average prime rate of Seven and Forty-Two Hundreds Percent (7.42%) per annum compounded, in the amount of One Million, Two Hundred Sixty-Four Thousand, three Hundred thirty-One Dollars and Eighty Cents ($1,264,331.80) for a total judgment in the amount of Three Million, Seven Hundred Thirty-Two Thousand, Three Hundred Thirty-One Dollars and Eighty Cents ($3,732,331.80), plus costs to be determined upon a review of Plaintiffs' Bill of Costs pursuant to S.D. Ind. L.R. 54.1, with interest thereon until the judgment is satisfied in full pursuant to the statutory rate.
The bankruptcy court entered that judgment on March 7, 2003. On March 17, 2003, APAG and BOHI filed a Motion to Correct Clerical Errors or In the Alternative to Alter and Amend Judgment, citing Rules 59(e) and 60(a) of the Federal Rules of Civil Procedure. The aim of the motion was to have the bankruptcy court change the judgment so that it would stand in favor of APAG only. APAG and BOHI represented that BOHI was a plaintiff in the adversary proceeding only for purposes of recovering the costs of dealership improvements it had advanced to Massey, and reliance damages associated with BOHI's expectation that Massey would sell his dealerships to the plaintiffs. Because those claims were voluntarily dismissed and the uncontradicted evidence at trial showed that APAG was the entity that made the $2.5 million payment, APAG and BOHI maintained that the judgment should be corrected to favor only APAG.
At the root of this very late and very unusual request by plaintiffs to deny BOHI the benefit of a judgment, is a potential set-off issue. Massey or a corporation he controlled filed a claim for $1,000,000 in the BOHI bankruptcy. BOHI and APAG want to prevent Massey from setting off his uncollected million dollar loan against any judgment arising from the $2.5 million payment to Massey. Over Massey's objection, the bankruptcy court granted the motion and changed the judgment and its findings so as to favor only APAG. BOHI and APAG have asked this court to do the same with respect to Count One.
Issues on Appeal
I. Standard of Review
Massey assigns a number of errors with respect to the bankruptcy court's decision on Count Two. In briefing before this court, the parties agree that a de novo standard of review applies because the claim of unjust enrichment does not fall within the range of "core proceedings" for which the bankruptcy court may enter a final judgment. However, the bankruptcy court entered what it asserted were separate final judgments on both Count One and Count Two. Count One of the complaint sought to recover the $2.5 million payment as a fraudulent conveyance. Such a claim is specifically identified in 28 U.S.C. § 157(b)(2)(H) as a core proceeding. Count Two pursued the same money under a non-core equitable theory of unjust enrichment. Thus the court is faced with an adversary proceeding with both core and non-core claims for resolution. The posture of the case became more tangled when the bankruptcy court decided to certify the judgment on Count One as a separate final judgment under the standards of Rule 54(b) of the Federal Rules of Civil Procedure before the trial on Count Two.
Though APAG and BOHI now acknowledge in their briefs that the unjust enrichment claim is non-core, they alleged otherwise in their complaint before the bankruptcy court.
The apparent reason for plaintiffs to pursue Count Two through a separate trial was the potential for obtaining greater pre-judgment interest with the unjust enrichment claim.
The Seventh Circuit has not spoken specifically to the question of how a bankruptcy court should handle an adversary proceeding that contains a mix of core and non-core claims. Jurisdiction of the bankruptcy court is not the issue, as it clearly retains jurisdiction over non-core disputes that are "related to" the bankruptcy, as is the case with the unjust enrichment claim here. The issue is whether the bankruptcy court may treat the entire adversary proceeding as core and enter a final judgment if the core issues predominate, e.g., In re Cinematronics, Inc., 111 B.R. 892 (Bankr. S.D. Cal. 1990), or whether the bankruptcy court is limited, claim by claim, to making a report and recommendation to the district court on non-core matters. E.g, Halper v. Halper, 164 F.3d 830 (3rd Cir. 1999). Another unresolved issue here, on which the precedent is also split, is whether a party waives the right to have an Article III judge enter a final order if the party fails to challenge the bankruptcy court's ability to do so during the course of the proceedings in that court. See, 1 Howard J. Steinberg, Bankruptcy Litigation § 1.18 (2003 supp.), and cases cited therein.
In this instance, where the parties agree that this court's review is de novo regardless, the difference between the district court acting as appellate tribunal or accepting a report and recommendation for review may be academic. However, in this court's view, the better approach in a mixed core and non-core proceeding is for the bankruptcy court to determine the extent of its jurisdiction with respect to each claim. Halper, 164 F.3d at 839. It should then enter a final judgment with respect to only those claims that are truly core matters and should forward a report and recommendation to the district court on the non-core but "related to" claims. Because the scope or extent of subject matter jurisdiction is at issue, allowing an implied waiver of the right to have an Article III court enter judgment on a non-core "related to" claim would not be consistent with the principles espoused in Northern Pipeline Construction Co. v. Marathon Pipe Line Co., 458 U.S. 50 (1982). Therefore, the bankruptcy court's entry of final judgment on Count Two is hereby vacated. This court has reviewed the bankruptcy court's findings of fact and conclusions of law on Count Two as though they were a report and recommendation.
II. Treating Count One's Undisputed Facts as Established for Count Two
In his initial brief on appeal, Massey challenged the bankruptcy court's ruling that most of its findings of undisputed fact with respect to Count One would be deemed established for purposes of trial on Count Two. The gist of his argument was that he appealed the grant of summary judgment on the basis that material questions of fact remained for determination by a trier of fact. This court's decision to affirm summary judgment on Count One followed submission of Massey's first brief on this appeal on Count Two. That decision mooted, for all practical purposes, Massey's argument on this point, and Massey made no further argument with respect to those facts in his reply brief.
Though this court agreed that the May 24, 1997 writing was an unenforceable agreement to agree, it did not agree with the bankruptcy court's determination that the writing was incapable of being performed. Therefore, this court rejects paragraph 4 in subsection II (A) of the bankruptcy court's findings of fact and any conclusion of law that the May 24, 1997 writing was impossible to perform. This court finds no other error in the bankruptcy court's designation of its previous findings as established for purposes of Count Two, and the lone error was harmless because the bankruptcy court's decision stands on independent grounds.
III. Unclean Hands Defense
Massey argues that the doctrine of unclean hands should be invoked to prevent APAG and BOHI from prevailing in equity when their own conduct was inequitable. Massey sets forth a litany of perceived inequitable conduct on the part of Baker related to APAG's ability or intent to complete the deal being negotiated with Massey. Most of these perceived inequities involve Baker's failure to monitor carefully APAG's president and its finances sufficiently to understand its alleged inability to complete the proposed transaction with Massey, as well as Baker's failure to inform Massey of the same.
This court finds no error on this ground. First, the alleged inequities by APAG and BOHI have little to do with the $2.5 million payment or the claim that Massey was unjustly enriched. The evidence shows that Massey was aware that APAG was not liquid enough to enter the nine-figure deal without receiving some type of additional investment. Any supposed inequity in Baker's failure to tell Massey of that need is not persuasive. It was no secret that APAG needed to raise more than $200 million to complete the purchase of the Massey dealerships. So, unless APAG employed some deceit with regard to the payment of the $2.5 million or APAG's desire to eventually consummate the deal, the fact that Baker was not a particularly well-informed shareholder or officer of APAG does not muddy the equitable waters. In addition, it is undisputed that when Baker discovered O'Neal's misdeeds and removed him as an officer of APAG, Baker promptly informed Massey of the situation.
The parties agree that Michigan substantive law controls. The Supreme Court of Michigan has said that the clean hands doctrine is a tool "to be invoked by the Court in its discretion to protect the integrity of the Court." Stachnik v. Winkel, 230 N.W.2d 529 (Mich. 1975). When a party seeks to have a court exercise its equitable powers, the doctrine serves as a self-imposed ordinance that shuts the courtroom door to equitable relief to a party that has itself acted in a manner tainted with bad faith. While equity does not require a party to have led a blameless life, it does require that the party "shall have acted fairly and without fraud or deceit as to the controversy in issue." Precision Instrument Mfg. Co. v. Automotive Maintenance Machinery Co., 326 U.S. 806, 814-15 (1945). This is where Massey's argument fails. There is insufficient evidence to support a conclusion that APAG, Baker, or even O'Neal acted in a deceitful manner toward Massey with respect to APAG's payment of the $2.5 million or the desire to negotiate an eventual deal. O'Neal's indiscretions tainted his relationships with Baker and his companies, not the attempt by APAG to strike a deal with Massey.
Massey makes much of Baker's testimony that he wanted Massey to believe that APAG was capable of completing the deal that was being negotiated. Massey argues that Baker's wish for Massey to believe the deal could be completed, when combined with APAG's apparent lack of ability to attract sufficient investment funds, is tantamount to an intent to deceive and the type of conduct that should cause the court to invoke the unclean hands doctrine. The court disagrees. It has reviewed the testimony cited by Massey and does not find any evidence of an intent to deceive on the part of Baker or APAG. Rather, the testimony reinforces the view that all involved hoped that a deal could eventually be completed.
IV. Implied Contract to Return Deposit
The next error assigned by Massey is what he describes as the inappropriate application of an implied contract to return the $2.5 million deposit. According to Massey, finding in favor of plaintiffs on their unjust enrichment theory effectively implied a "contract in fact" to return the deposit. This, he argues, cannot be done when the parties expressed their intentions differently. He relies on his testimony that he was told that if he accepted the deal, he would be given a non-refundable deposit. He also cites Moll v. Wayne County, 50 N.W.2d 881 (Mich. 1952) as support for his argument.
APAG and BOHI argue first that there never was a meeting of the minds with regard to the overall deal or with respect to the deposit being non-refundable. They also assert that Massey is simply wrong with regard to the law of equity in general, and in Michigan, citing cases in which deposit monies were ordered returned to a party so as to avoid the unjust enrichment of another. According to APAG and BOHI, unjust enrichment is an equitable quasi-contract remedy appropriately applied to payments made in mistaken belief of the existence of a valid contract.
The court agrees with APAG and BOHI. Under Michigan law, unjust enrichment can occur where a deposit is made in anticipation of the completion of contractual obligations that turn out to be part of an unenforceable agreement to agree. In Moll, a county judge had voluntarily returned portions of his salary to the county during the Depression when other county employees had been forced to accept involuntary pay cuts. The Michigan Supreme Court found no equitable basis for ordering the county later to return portions of a judge's salary. There was no meeting of the minds between the county and the judge with regard to any return of the monies, and the equities did not compel the court to imply a contract of any sort. 50 N.W.2d at 883. But where the equities do favor return of monies held or paid in mistaken reliance upon a contract right, or otherwise, the Supreme Court of Michigan has made it clear that a court can find unjust enrichment and order that funds be returned. Michigan Educational Employees Mutual Ins. Co. v. Morris, 596 N.W.2d 142, 151-52 (Mich. 1999).
Massey asserts that it was agreed that if he accepted "the deal," the deposit would be non-refundable. That argument misses the point, which is that the parties' negotiations never ended in a legally enforceable deal of any kind. As this court explained regarding Count One, the May 1997 handwritten agreement left open too many material terms to constitute an enforceable contract. On this issue, as well, the court agrees with the bankruptcy court. The equities are such that justice is best served by the return of the $2.5 million deposit. The elements of an unjust enrichment claim are the receipt of a benefit by the defendant from the plaintiff and a corresponding inequity if the defendant is allowed to keep the benefit. Massey clearly benefitted from receipt of the $2.5 million deposit. Massey's acceptance of the $2.5 million did not prohibit him from attempting to sell his dealerships to others, nor is there any evidence that he actually passed up any offers to purchase as a result of accepting the money from plaintiffs. In fact, the evidence shows that shortly after he received the $2.5 million, he thought the deal was off and that the money had been forfeited because he had not received an additional $2.5 million to meet the term requiring a $5 million deposit. Plaintiffs on the other hand, were out $2.5 million paid under the mistaken belief that an agreement had been or would be reached while they unsuccessfully attempted to raise more money to complete the transaction. Because the terms of the May 1997 writing were deficient and judicially incurable, the plaintiffs received no legal rights in return for the $2.5 million payment.
Stripped to its core, Massey's argument is that non-refundable deposits are the way of the world when it comes to buying and selling auto dealerships, so that he should be entitled to keep the money. If the May 24, 1997 agreement had been enforceable, that argument might have carried the day. In equity, however, and in the absence of a legally enforceable agreement, it does not.
V. Denial of Motion to Amend
Following the bankruptcy court's grant of partial summary judgment on Count One, Massey filed a Motion for Leave to Amend Pleadings. Massey sought to add what he describes as a "springing claim" of promissory estoppel against APAG and BOHI, based on a quasi-contract theory. According to Massey, he could not have asserted this claim until after the bankruptcy court ruled against him on Count One. Massey's argument is difficult to understand, but he seems to contend that he could not have asserted his own claim for a quasi-contract remedy prior to the determination that no enforceable contract existed because his assertion of such an inconsistent claim would have been fraudulent. No authority is offered by Massey for his "springing claim" theory.
Pursuant to Rule 7015 of the Federal Rules of Bankruptcy Procedure, Rule 15(a) of the Federal Rules of Civil Procedure applies in an adversary proceeding. Rule 15(a) provides that after the period of time provided for amendment of pleadings as a matter of right, a party may amend only upon agreement of the parties or with the court's permission, which should be freely granted as justice requires. However, it is clear that trial courts have a great deal of discretion in assessing the propriety of granting leave to amend. Appellate courts will reverse only upon a determination that no justification existed for denying a proposed amendment. Johnson v. Methodist Medical Center of Illinois, 10 F.3d 1300 (7th Cir. 1993).
The bankruptcy court denied Massey's motion to amend after extensive briefing. APAG and BOHI asserted undue delay (three and one-half years after the answer had been filed), unfair prejudice (no discovery directed to the claim), and futility (Massey's testimony that he thought that the May 1997 deal had come to naught only days after not receiving the second half of the proposed $5 million deposit), among other reasons for denying the motion. Any of these reasons was independently sufficient to support the denial of the amendment. There was no abuse of discretion, and this court would have reached the same conclusion independently.
VI. Exclusion of Evidence of Detrimental Reliance
At trial on Count Two, Massey attempted to show that he had relied to his own detriment on the apparent existence of a deal to sell his dealerships to plaintiffs. He offered such evidence as a basis for reducing his own liability for any unjust enrichment. According to Massey, he detrimentally relied on APAG and BOHI's financial ability to complete the transaction and therefore gave up opportunities to negotiate deals with others. APAG and BOHI moved to bar or strike evidence of detrimental reliance for Massey's failure to plead the same as an affirmative defense. The bankruptcy court ruled that evidence of Massey's lost opportunities to sell his dealerships would not be allowed, but that evidence supporting a reduction of any unjust enrichment by deduction of expenses incurred by Massey as a result of the May 1997 writing would be accepted. The bankruptcy court later found that Massey's claim of lost opportunities to sell his dealerships could not be supported. That finding was based on his repeated testimony that he thought the May 1997 deal was dead (and the $2.5 million forfeited) within a week to ten days after the writing, when plaintiffs failed to make an additional payment of $2.5 million.
Despite the ruling that lost opportunity evidence would not be admitted, much of the deposition testimony submitted or read into the record by both sides contains questions or answers regarding Massey's "opportunities" with The Colonel's International and General Motors.
Massey claims that the bankruptcy court erred by disallowing any evidence of lost opportunities and evidence that would tend to show he was not unjustly enriched. If the two are not coextensive, Massey offers no explanation of what evidence was refused, other than evidence of his lost opportunities.
In fact, the bankruptcy court indicated that, for the purposes of determining the scope of damages, it did allow evidence related to the only two opportunities Massey identified in his deposition. His deposition testimony was the extent of Massey's testimony at trial, as well. He did not attend the trial. An offer of Colonel's International to purchase Massey dealerships predated the May 24, 1997 writing. The testimony of General Motors' David Ciesco established that GM and Massey were well into negotiations regarding purchase of the dealerships by August 1997, after Massey had already concluded that his deal with APAG was dead. Coupled with the fact that the May 1997 writing contained no mention of its exclusivity, and Massey's own testimony that he thought the APAG writing was a live deal for only a few days, these facts show that Massey's claim of detrimental reliance is without merit even if the failure to plead it did not amount to waiver.
The bankruptcy court appropriately rejected the claim of detrimental reliance.
VII. Additional Evidentiary and Procedural Rulings
Massey argues that the bankruptcy court erred in additional rulings at trial. First, Massey claims that the bankruptcy court allowed Baker to testify to what O'Neal had told Massey about the financing of the dealership purchase at various meetings attended by the three. Neither O'Neal nor Massey attended the trial. Baker's testimony regarding what O'Neal told Massey would clearly be hearsay if offered for the truth of the matter asserted by O'Neal. See Fed.R.Evid. 801(c). APAG and BOHI argue that what O'Neal told Massey was offered not to show how the dealership purchase was to be financed, but to show that Massey was aware that funds needed to be raised to complete the purchase. Further, APAG and BOHI argue that even if the testimony was inadmissible hearsay, it was a harmless error because ample additional evidence supports the bankruptcy court's finding that Massey knew that plaintiffs needed to raise capital via an initial public offering or private stock placement to complete the purchase. Massey replies with a cry of disingenuousness because the bankruptcy court based its finding of how the purchase of the dealerships was to have been made on what Massey was told by O'Neal.
In light of (a) Massey's testimony that he considered the deal off and the $2.5 million forfeited within ten days of the May 1997 writing, and (b) Massey's failure to plead detrimental reliance, the court has already rejected the suggestion that Massey missed opportunities to sell his dealerships. With that in mind, this court also agrees with the assertion of APAG and BOHI that even if Baker's testimony was hearsay, its admission would have been a harmless error because the result would be the same without the testimony. Further, the statements by O'Neal were not hearsay because they were not offered for the truth of the matters asserted. (There is no genuine issue as to whether APAG and BOHI needed to raise additional funds.) The statements were relevant to prove that Massey knew that APAG and BOHI did not yet have the funds needed to complete the deal.
The next ruling challenged by Massey is the bankruptcy court's limitation of Massey's re-direct examination of witness Robert Vawter, an accountant who worked on transactions involving Massey and his automobile dealerships. Following direct examination by Massey's counsel and cross-examination by counsel for plaintiffs, the bankruptcy judge examined Vawter with respect to "napkin deals" described by Vawter during his earlier testimony. Massey describes the court's examination as being intense and eliciting responses favorable to the plaintiffs. Following this examination by the bankruptcy judge, counsel for Massey engaged in re-direct.
During the re-direct examination, plaintiffs' counsel objected to the questioning on three grounds. First, an objection was made to questioning that would elicit expert opinions because there was an agreement in place that the witness was not offered as an expert. Next, plaintiffs' counsel objected to the questioning on grounds of relevance. Finally, counsel objected to questions calling for speculation. The bankruptcy judge overruled the objections, except that he did bar inquiry that sought a legal opinion from the witness regarding whether the terms included in a "napkin deal" were sufficient to constitute a contract between the parties.
Despite this very limited restriction, Massey erroneously describes the record in his brief to this court. At page 36 of Massey's brief on appeal, he asserts that the bankruptcy judge's examination went on for several minutes "over Massey's counsel's objection." This court has reviewed the transcript more than once and has found no recorded objection made during the bankruptcy court's examination of Vawter. Nor does an examination of the transcript reveal that the bankruptcy court sustained any objection to a completed question by counsel for Massey to Vawter on re-direct. In fact, the transcript shows the following exchange between counsel for Massey and the bankruptcy court:
MR. HUSER: What I want to ask him, Your Honor, is typically what kind of terms and provisions are contained on the napkin deals in this industry.
THE COURT: And I think that he — you can do that, but then have — going for the next step and saying, "Are these all the material firms [sic — "terms"] that are necessary," that's where I think we cross the line. You can ask him about what terms are usually in here, you can ask him about what his part is usually in these things, but as far as going the next step and saying, "Oh, and therefore, they have created a binding contract," no, I don't think so.
Day 2 trial transcript at 38.
Further, Massey argues that the bankruptcy court erred "when it intensely cross examined this witness in a light most favorable to the Plaintiff and then disallowed re-direct by Massey's counsel who attempted to rehabilitate his own witness." The bankruptcy judge did not disallow re-direct examination of the witness. The bankruptcy court's examination may have elicited responses that favored the plaintiffs, but it was hardly inappropriate or adversarial in nature. So long as no impartiality is demonstrated, there is nothing wrong with a judge posing questions to a witness to clarify issues. United States v. Webb, 83 F.3d 913, 917 (7th Cir. 1996). This is especially true in a bench trial. The transcript shows that the bankruptcy judge was clarifying or reaffirming facts that were already of record as a result of his earlier summary judgment ruling. There is no error in this.
Next, Massey argues that the bankruptcy court improperly allowed plaintiffs to introduce deposition testimony into the record as part of their rebuttal case. Plaintiffs' case in chief consisted of deposition testimony. Massey objected when counsel for APAG and BOHI offered more deposition testimony in rebuttal. Plaintiffs had all the deposition testimony ahead of time, of course, and Massey contends that the parties engaged in the process of designation and counter-designation process to avoid a situation where one party sought to designate further at trial. Massey cites McCollough v. Archibald Ladder, 605 N.E.2d 175, 179 (Ind. 1993), for the proposition that a court should exclude evidence offered in rebuttal that should have been offered in a party's case in chief.
Plaintiffs respond that each of the designations was made for the specific purpose of contradicting, disproving or providing context to either testimony from live witnesses or deposition testimony offered in Massey's case in chief. Plaintiffs point out the high level of deference given by reviewing courts to the order in which a trial judges admits evidence. Finally, plaintiffs maintain that no prejudice can be claimed because the deposition excerpts were from the depositions of Massey and GM employee David Ciesco, which had been available to all parties for some time, and APAG had previously designated these same excerpts. The deposition designations were indeed in the nature of rebuttal. The excerpts gave context to testimony elicited from Baker on cross-examination, as well as to a previously admitted exhibit offered by Massey. The excerpts also addressed Massey's ongoing negotiations with GM in response to his testimony that he believed he had a moral or ethical obligation to work toward completion of the deal with plaintiffs. There was no error.
Further, there is no real support for Massey's argument in the McCullough decision. McCullough dealt with whether an expert witness, retained prior to trial but not disclosed, could be offered as a rebuttal witness. The expert testimony was offered in response to trial testimony which the party seeking to rebut was fully aware of, and likely expected, as a result of earlier discovery. 605 N.E.2d at 177-78. In this case, though, there was no surprise witness. In fact, the Indiana Supreme Court went on to say in McCullough that it was not persuaded by the defendants' additional argument that the plaintiff was obligated to present the expert during her case in chief. Id. at 180. The court's concern was the attempt to surprise by the failure to disclose the expert as a potential witness. In this case, Massey could not have been surprised by his own deposition testimony.
Further, he offered no evidence when given an opportunity for sur-rebuttal, and he describes no unfair prejudice resulting from the admission of the deposition excerpts.
The Seventh Circuit has often stated that trial courts are entitled to considerable deference in managing the admission of evidence. The order of admission of evidence or a determination of whether evidence is rebuttal in nature is a part of that wide discretion granted to trial courts in managing trials. Spesco, Inc. v. General Electric Co., 719 F.2d 233, 239-40 (7th Cir. 1983). This court has reviewed the trial transcript and the evidence admitted on rebuttal. The bankruptcy court acted appropriately when it allowed the deposition excerpts (Trial Exhibits 20-25) to be made a part of the record.
VIII. Interest
Massey challenges the bankruptcy court's award and computation of pre-judgment interest which, for reasons previously described, is being treated as a report and recommendation rather than as part of any final judgment. The bankruptcy court first deducted from the $2.5 million payment the expenses of $32,000 that Massey incurred in connection with his efforts under the May 1997 writing. The bankruptcy court opined that pre-judgment interest should be awarded from the time of the $2.5 million payment through entry of its judgment on March 7, 2003. The bankruptcy court calculated an average prime rate to compute the interest and compounded annually to reach a principal and interest figure of $3,732,331.80 as of March 7, 2003. Massey questions the starting date, the rate, and the annual compounding.
This figure has not been challenged on appeal. It was an appropriate deduction from the $2.5 million payment to be returned.
A. Starting Date
Massey argues that pre-judgment interest should accrue from the point a demand was made for the return of the $2.5 million deposit, September 4, 1998, and not from the date it was paid to him, May 28, 1997. He maintains that the cases relied upon by the bankruptcy court to start interest from the date of payment pertain to wrongful death or personal injury cases, and that it would be inappropriate to apply their analyses to this case. The bankruptcy court set forth two reasons for allowing interest to accrue from the date of the payment: (1) it is consistent with Michigan cases opining that interest should accrue from the point the cause of action accrues (further stating that because the May 1997 writing was unenforceable, Massey was unjustly enriched immediately upon payment); and (2) any demand for return of the payment would have been futile in light of Massey's belief that the deal was dead within a few days, and that the $2.5 million had been forfeited.
Massey's brief argues that the bankruptcy court erred by inducing him not to continue with his proposed offer of an exhibit and corresponding deposition testimony that would have established when plaintiffs demanded return of the $2.5 million. At the close of trial on Count Two, the parties and court went through the exhibits that had or had not been offered. In the dialogue, Massey's attorney attempted to have the court accept into evidence the exhibit and testimony that plaintiffs, not Massey, had earlier designated and had then withdrawn. Although this court does not have the benefit of "being there," it appears from the transcript that the bankruptcy judge thought the offer mattered little because the date of demand had been part of his factual and legal findings in connection with partial summary judgment on Count One. The evidence clearly establishes that the demand date was September 4, 1998. There was no error.
After reviewing numerous cases from Michigan on the availability and application of pre-judgment interest, at least one theme remains fairly consistent; in equitable proceedings, whether to fashion an award of interest as a part of an award of damages is more or less within the discretion of the court. E.g., Cyranoski v. Keenan, 109 N.W.2d 815 (Mich. 1961); L. A. Young Spring Wire Corp. v. Falls, 11 N.W.2d 329 (Mich. 1943); Militzer v. Kal-Die Casting Corp., 200 N.W.2d 323 (Mich.App. 1972); see also, 6A Mich. Pl. Pr. § 42:50 (2d ed.). On this point, the fact that the unjust enrichment claim is a non-core proceeding makes a difference, for the discretion on this issue is given to this court rather than the bankruptcy court.
Massey points to Vowels v. Arthur Murray Studios of Michigan, Inc., 163 N.W.2d 35, 38 (Mich.App. 1968), as a matter in equity where the court found the proper attachment point for interest to be the time the plaintiff asked for her money back. She had paid for dance lessons at a local studio that closed down shortly after receiving her advance payment. She was offered a chance to take the lessons at other franchise locations, but she refused to accept the substitute. After the entry of a judgment rescinding the contract and ordering the return of the advance payment, the Michigan Court of Appeals found that interest should accrue from the point the plaintiff declined the alternative posed by the defendant dance studio and demanded the return of her money. Id. at 38.
There is some merit in the application of the simple analysis the court used in Vowels. This court is reluctant to adopt the rather conclusory statement that Massey was unjustly enriched immediately upon receipt of the payment as a basis for adopting that date as an attachment point for pre-judgment interest. Perhaps most persuasive to this court, which now has the benefit of the evidence on both Counts One and Two, are the equities relative to the situation that existed following payment of the $2.5 million.
Right or wrong, Massey clearly believed that he had entered into an enforceable agreement in May 1997 and that the failure of plaintiffs to pay promptly the remainder of the $5 million initial deposit called for in the May 24, 1997 writing constituted a failure to perform that would allow him to cancel the deal and keep the $2.5 million. Meanwhile, as is known from the evidence submitted under Count One, APAG was insolvent and financially incapable of moving the deal forward. To prove their claims for fraudulent conveyance and unjust enrichment, plaintiffs were not required to prove that Massey knew APAG was insolvent. Though courts with the benefit of time and hindsight have disagreed with him, Massey's belief that he was entitled to keep the $2.5 million is understandable and, save for APAG's insolvency, a potential impetus to the eventual completion of a transaction of some sort between the parties. Also, plaintiffs did not ask for their money back, but continued to try to work with Massey to put a deal together.
Like the defendant dance studio in Vowels, which understandably thought the plaintiff might accept her lessons at another location, it is hard to see why Massey should be deemed to have been obliged to return the deposit before plaintiffs gave up the negotiation efforts and demanded its return. That result is in line with other Michigan cases opining that interest should run from the time that payment or return of funds should have been made. See, e.g., Wilson v. Doehler-Jarvis Division of National Lead Co., 100 N.W.2d 226, 229 (Mich. 1960) (holding that interest should be paid on delayed worker's compensation payments). Accordingly, this court does not accept the bankruptcy court's recommendation with regard to when pre-judgment interest should begin to accrue. Interest should begin accruing as of September 4, 1998.
In most situations, pre-judgment interest would continue to accrue until the entry of final judgment. In this case, pre-judgment interest should accrue only until the date the bankruptcy court entered final judgment on Count One on October 9, 2002. After that date, plaintiffs had a judgment in place for a principal amount that exceeded the principal they could be awarded under their unjust enrichment theory. Obviously, plaintiffs may not "double dip," nor do they seek to do so. Victory on Count One provided plaintiffs with an award of the full $2.5 million deposit as opposed to the $2,468,000 recovered under the unjust enrichment theory (after deduction of the $32,000 credit for Massey's expenses for the Arthur Andersen audit). Another way to look at it is to say that after October 9, 2002, Massey was no longer unjustly enriched.
In any event, the bankruptcy court's decision to divide the case and enter separate judgments with respect to Count One and Two should not work to provide plaintiffs with a windfall of additional "pre-judgment interest" accruing after entry of judgment. During the applicable period, pre-judgment interest, if calculated at market rates as discussed below, generally provides for a higher rate of interest than post-judgment interest pursuant to 28 U.S.C. § 1961. If pre-judgment interest were allowed to accrue until the entry of final judgment on Count Two by this court, the result could be an untenable circumstance where the smaller principal award becomes the larger recovery, under dual theories of recovery, simply because of the bankruptcy court's division of the two theories into two separate cases. That should not happen.
B. Interest Rate and Compounding
The bankruptcy court opined that plaintiffs would be fully compensated on Count Two only if the remedy includes interest in an amount that would compensate for the full use of their funds. To reach that end, the court calculated and applied an average prime rate, compounded annually. Massey argues that the bankruptcy court had no evidentiary foundation to support any departure from the 5% simple interest rate set forth in the Michigan usury statutes at Mich. Comp. Laws § 438.31 and that simple interest is the default mode of application in Michigan. Plaintiffs argue that Massey waived these arguments by not raising them with the bankruptcy court, and that Michigan courts have routinely found that interest in excess of the rate set forth in the usury statute may be imposed by a court sitting in equity, if needed to compensate a party adequately. See Gianetti v. Commie, 530 N.W.2d 121, 124 (Mich.App. 1995).
The various cases cited by both sides show that Michigan courts have not reached a consistent opinion with regard to when and how a court might apply a rate above the 5% simple interest set forth in the usury statutes when computing pre-judgment interest. Section 438.31 provides the default "legal interest rate" for money in the state of Michigan. The statute allows parties to charge a higher rate of interest if stipulated in writing and also sets forth numerous exceptions to the application of the statute. Some Michigan courts have used the default rate from the usury statute when computing pre-judgment interest, but some have not. The Eastern District of Michigan saw this inconsistency when it found that the most recent state court opinions and Michigan's standard jury instructions seem to indicate that pre-complaint interest is an element of common law damages, and not mandated at any particular rate by statute. Manley, Bennett, McDonald Co. v. St. Paul Fire Marine Ins. Co., 821 F. Supp. 1225, 1227-28 (E.D. Mich. 1993). The court applied several different interest rates in excess of 5% (as high as 12%) to particular periods of time at issue, and also compounded the interest. Id. at 1229. The Sixth Circuit affirmed. 33 F.3d 55 (6th Cir. 1994). Indeed, the Michigan state courts have made it fairly clear that, at least when a court sits in equity, it need not apply Section 438.31 to decide the rate of pre-judgment interest. Cyranoski v. Keenan, 109 N.W.2d 815 (Mich. 1961); Gianetti v. Cornille, 530 N.W.2d 121, 124 (Mich.App. 1995).
The Seventh Circuit has often required trial courts to take market conditions into account in setting pre-judgment interest rates, and has often recommended or required that trial judges use the prime rate when calculating pre-judgment interest where, as here, there is no statutorily mandated rate. E.g., Fritcher v. Health Care Service Corp., 301 F.3d 811, 820 (7th Cir. 2002); Gorenstein Enterprises, Inc. v. Quality Care-USA, Inc., 874 F.2d 431, 436 (7th Cir. 1989). The application of prime rate with compounding has also gained favor with the Seventh Circuit. Cement Div., National Gypsum Co. v. City of Milwaukee, 144 F.3d 1111 (7th Cir. 1998). The bankruptcy court correctly found that it is appropriate to use the average prime rate, compounded annually, in calculating pre-judgment interest under these and most other circumstances.
IX. Motion to Correct Clerical Errors
Following the trial on Count Two, the bankruptcy court entered its findings and what was labeled a final judgment in favor of APAG and BOHI and against Massey on March 7, 2003. Massey filed his notice of appeal one week later. Then APAG and BOHI filed a Motion To Correct Clerical Errors, or In The Alternative, To Alter or Amend Final Judgment. The motion, which was granted, sought to have the final judgment "corrected" to stand only in favor of APAG. Massey objected.
The motion filed by APAG and BOHI sought relief pursuant to Rules 59 and 60 of the Federal Rules of Civil Procedure. Massey has challenged the application of both rules, as well as the propriety, in general, of any post-trial effort to change the identity of the parties. Because the bankruptcy court did not have jurisdiction to enter final judgment on Count Two, and because the complaint filed by APAG and BOHI clearly alleged that both APAG and BOH were damaged by the unjust enrichment of Massey, this court examines the plaintiffs' request as though it were a motion, made by BOHI only, to dismiss Count Two.
APAG and BOHI do not attempt to hide the reasons for this unusual request. It stems from a million dollar claim against BOHI by Massey or a corporation he controls, and a desire to avoid having to defend against any effort to set-off the million dollar claim against the judgment. Plaintiffs argue that the uncontradicted evidence at trial establishes that only APAG made the $2.5 million dollar payment to Massey, so that it is only consistent and proper that the judgment be entered in favor of APAG only.
Federal Rule of Civil Procedure 41(a) governs a request to dismiss a claim voluntarily. Subsection (a)(2) provides that the court may grant a request to dismiss a claim upon such terms and conditions as it deems appropriate under the circumstances. The court is not required to grant the request to dismiss voluntarily. As the Seventh Circuit determined when it gave up its status as the last federal circuit holding that dismissal was always a matter of right, a district court has discretion in resolving a request to dismiss voluntarily. Grivas v. Parmelee Transp. Co., 207 F.2d 334, 336-37 (7th Cir. 1953). The purpose of the discretion given by Rule 41(a)(2) is to thwart potential prejudice to another party. See 9 Charles Alien Wright Arthur R. Miller, Federal Practice and Procedure
§ 2364 (2d ed. 1995), and cases cited therein.
This case is different from typical voluntary requests to dismiss. In the vast majority of cases, a plaintiff seeks to dismiss the claim or case without prejudice. The district court's discretion is more naturally used as a deterrent against an unfair attempt to litigate elsewhere or on other similar grounds when a defendant has already incurred much time and expense. Here, the court views the plaintiffs' request to enter judgment only in favor of APAG as amounting to BOHI's request for dismissal with prejudice, a situation where many courts have said, absent extraordinary circumstances, a plaintiff has an undeniable right to "go away for good." See, e.g., Bioxy, Inc. v. Birko Corp., 935 F. Supp. 737, 740 (E.D.N.C. 1996). But courts have recognized that extraordinary circumstances can exist. Especially where the proceedings have nearly run their course or where a dismissal with prejudice would not entirely end the dispute between the parties, a district court has the discretion to prevent a dismissal with prejudice that would work an injustice to one of the parties. E.g., Hudson Engineering Co. v. Bingham Pump Co., 298 F. Supp. 387, 388-89 (S.D.N.Y. 1969).
Plaintiffs did not change their approach in this case until the entire case had been tried in the bankruptcy court and when half of it was already on appeal in this court. Until that time, this case was consistently a joint effort by both plaintiffs. The complaint, dispositive motions, appeals, briefing and discovery by plaintiffs all treated APAG and BOHI as two entities moving in unison toward a common litigation goal. The factual background supports such unity of purpose as well. The record suggests that BOHI and APAG (which is wholly owned by BOHI) were both entities solely dedicated to putting together the "auto mall" concept. What advantage the plaintiffs saw in jointly pursuing the litigation is uncertain, but the court must assume that they either saw some advantage or, like the court, saw no reason to differentiate the two.
BOHI has filed a similar separate motion in connection with this court's decision affirming judgment in its favor on Count One in a separate appeal. The court is issuing a separate ruling today on that motion, as well.
The plaintiffs' evident belief that they should be treated in tandem is apparent on the face of the complaint. Not only were the prayers for relief put forth without distinguishing between the two, but fundamental allegations in the complaint contained either inconsistent references or references that suggested that plaintiffs believed that APAG and BOHI were treated as the same by the key players in connection with the attempt to purchase the Massey dealerships. The following are examples of paragraphs containing such references from the complaint:
4. The Debtor [BOHI] is a Delaware Corporation doing business at 11550 North Meridian Street, Suite 393, Carmel Indiana. . . .
5. APAG is a Delaware Corporation doing business at 11550 North Meridian Street, Suite 393, Carmel Indiana. . . .
Summary of Claims
. . . . In addition, Massey has been unjustly enriched and the Plaintiffs have been harmed because Massey has (i) retained $2.5 million conveyed by the Debtor. . . .
17. The Plaintiffs' primary business objective was to own and operate multi-manufacturer "auto malls". . . .
18. Plaintiffs sought to achieve that business objective by attempting to acquire Massey's dealerships. . . .
* * * * * 40. . . . . 21st Century Automotive Group, Inc. was created by the Plaintiffs as a corporate entity to acquire Massey's dealerships, . . . . * * * * * *
45. On June 15, 1998, O'Neal — without appropriate authorization from Baker O'Neal Holdings, Inc. [BOHI] — executed a "Promissory Note" prepared by Melissa Henaughen that purported to obligate O'Neal and Baker O'Neal Holdings, Inc., jointly and severally, to pay "Massey Enterprises, Inc." $1 million "without interest due on the 15th day of July 1998." On June 15, 1998, Henaughen provided a "Massey Enterprises, Inc." check in the amount of $1 million payable to "Baker O'Neal Holdings, Inc. and James T. O'Neal, Jr." It appears that Massey provided the check to permit O'Neal to return investments to certain dissatisfied APAG investors. Massey provided the check to O'Neal in the form of a "loan" rather than return the entire deposit because Massey wished to maintain the appearance that he would complete the transaction.
* * * * *
49. Massey never completed the transaction with the Plaintiffs.
* * * * * *
61. A measurable benefit has been conferred by the Plaintiffs upon Massey under circumstances in which Massey's retention of the benefit without payment would be unjust;. . .
No one could detect from these excerpts any real effort on plaintiffs' part to distinguish between APAG and BOHI on important substantive bases. In fact, one might infer from paragraph 45 that plaintiffs believed that, at least with respect to the effort to consummate a deal to buy Massey's dealerships, which entity's name was on a check did not really matter.
One thing is certain. In preparing his defense, Massey had no reason to believe that it would be important to distinguish between the two plaintiffs or perhaps to try to pierce the corporate veil between them. As pointed out by the bankruptcy court, in equity the corporate form may be disregarded if the reasons to do so are compelling or if justice would otherwise be subverted. Bitmar v. Wakim, 572 N.W.2d 191, 192 (Mich. 1998). Massey would be prejudiced now if this court were to allow BOHI to dismiss its claim. Judgment should be entered in favor of both BOHI and APAG, which is what plaintiffs jointly sought all along, and the chips should be allowed to fall where they may with regard to any attempt by Massey to set-off the million dollar loan.
Conclusion
For the reasons set forth above, this court views the Findings of Facts and Conclusions of Law on Count Two of the complaint filed by APAG and BOHI as being recommended by the bankruptcy court, and those recommendations are adopted with the following exceptions:
1. The May 24, 1997 written agreement between Massey and APAG/ James O'Neal was not impossible to perform and therefore paragraph 4 of subsection II (A) of the bankruptcy court's findings of fact is not accepted.
2. Pre-judgment interest should accrue from September 4, 1998, the date upon which a demand for return of the $2.5 million deposit was made, rather than from the date of payment. Pre-judgment interest should end as of October 9, 2002, the date when the bankruptcy court entered final judgment in favor of plaintiffs on Count One of the complaint. The federal statutory post-judgment interest rate should apply from that point forward. Accordingly, paragraphs 46, 47 and 48 of subsection III (C)(2)(b)(i) and paragraphs 51 and 52 of subsection III (C)(3) of the bankruptcy court's conclusions of law are not accepted.
3. Allowing BOHI to dismiss its claim against Massey this late in the proceedings would be unfairly prejudicial to him. Accordingly, the bankruptcy court's entry of June 12, 2003 granting Plaintiffs' Motion to Correct Clerical Error is rejected.
As indicated, the bankruptcy court did not have jurisdiction to enter a final judgment on Count Two of the complaint, therefore that judgment is hereby vacated. On Count Two, APAG and BOHI should recover from Massey the amount of $2,468,000 plus pre-judgment interest through October 9, 2002 calculated in the same manner as pre-judgment interest on Count One was calculated by the bankruptcy court in its October 9, 2002 Entry of Final Judgment On Plaintiffs' Motion For Partial Summary Judgment. This will result in the award to plaintiffs under Count One being greater in amount than the award under Count Two. Both counts sought to recover the same $2.5 million deposit, and plaintiffs are limited to a single recovery. As a result, there is no need to make the actual calculation of pre-judgment interest on Count Two unless any further appeal of the decision on Count One proves successful.
None of the parties has raised an issue in this appeal, or in the appeal of the summary judgment granted on Count One, with regard to the formula used by the bankruptcy court in calculating an average prime rate of interest.
Contemporaneously, the court is entering Final Judgment in favor of APAG and BOHI and against Massey as described in this entry.
AGREEMENT
This is an Agreement to Purchase stock and assets of the Don Massey Dealership Group. The Seller is Don Massey and the Buyer is James O'Neal, Jr. and American Public Automotive Group, Inc. Seller and Buyer acknowledge their knowledge of the property and stock related to the Agreement. (Final Agreement to follow this Agreement.)
Buyers agrees [sic] to purchase all the stock and all assets of the Massey Group for the price of $300,000,000 00/100. New car inventory for cost in addition to the purchase price of all other assets.
1. The purchase price shall be payable as follows:
A.) Deposit with this Agreement $5,000,000 28 May 97.
B.) Additional cash of $245,000,000 on 31 July 1997.
C.) Seller to have option of $50,000,000 in cash or "Selling Book" 50,000,000 on IPO.
2. Massey will continue as Dealer Operator until he decides not to do so (at such time a replacement acceptable to Massey, O'Neal and GM will be named). Technical succession arrangements subject to final document.
3. Massey will provide Buyer with a copy of required 94, 95, 96 financials on 28 May 97.
4. Massey may cancel this Agreement and retain deposit if Buyer fails to perform as required in paragraph (1) "the money" or if GM does not grant approval of this transaction, funds will be returned.
5. Massey may elect to be paid in stock of the Buyer at market value.
Seller: s/Donald Massey Buyer: s/James O'Neal Date 24 May 97 Date 24 May 97