Justia Contracts Opinion Summaries

Coles sued to recover an overdue loan that he had extended to a real estate investment company, Cascade. The loan was guaranteed by Glaser and Taylor. That case was settled when Cascade ostensibly paid off the loan, and Coles, in return, executed a release. Shortly after the settlement, Cascade filed for bankruptcy. Coles was forced to surrender most of the settlement proceeds to the bankruptcy trustee as a preferential payment. In a second suit, against Glaser and Taylor, the trial court found that the defendants had breached the settlement agreement and entered judgment in favor of Coles. The court of appeal affirmed, holding that a debt of a contractual co-obligor is not extinguished by another co- obligor's​ pre-bankruptcy payment to a creditor that is later determined to be a bankruptcy preference. View "Coles v. Glaser" on Justia Law

The adversary action comprises the claims, counterclaims, and affirmative defenses between two sides of a business scheme to buy, renovate, and operate a Days Inn. This appeal stems from the district court’s order affirming a bankruptcy court judgment rendered after trial in the adversary action. Appellant and his brother formed the plan to buy the hotel, and appellees are the investors that the brothers convinced to buy a fifty-percent stake in the scheme and the company that the three investors formed to hold their membership interest. The court concluded that appellant's res judicata argument fails where the release claim at issue was filed in the original action while summary judgment was still interlocutory. Thus, the claim was properly preserved through the severance order for later adjudication, and res judicata does not bar it. The court also concluded that the district court did not err in affirming the bankruptcy court judgment that appellant breached the settlement agreement. Further, the district court properly affirmed the bankruptcy court's dismissal of appellant's breach-of-guaranty claim against the investors, but not as to the company. The court affirmed in part and vacated in part, remanding for additional proceedings, including a determination of what percentage of the attorney’s fees were attributable to the breach-of-contract claim. View "Pirani v. Baharia" on Justia Law

In 2005, Water's Edge, LLC purchased lots 62-69 of "Re-Subdivision A" in Baldwin County, commonly referred to as Gulf Shores Yacht Club and Marina ("the property"). Fairfield Financial Services, Inc. loaned Water's Edge $12.8 million of the $13 million needed to purchase the property. In 2006, Fairfield notified Water's Edge that it would not renew Water's Edge's loan. The members of Water's Edge authorized the managers to seek new financing. In December 2006, Vision Bank agreed to loan Water's Edge $14.5 million. Vision Bank later merged with SE Property Holdings, LLC ("SEPH"). Certain members of Water's Edge signed agreements guaranteeing all of Water's Edge's debt to SEPH. In October 2008, SEPH notified Water's Edge that the loans were in default. In October 2010, SEPH sued Water's Edge and 28 individuals, including the guarantors, based on the promissory notes and guaranty agreements pertaining to the various loans issued over the years. The trial took place in late 2014. The trial court did not submit the case to the jury, but instead discharged the jury and entered an order granting SEPH's motion for a JML. The trial court found the guarantors and the other defendants jointly and severally liable on continuing unlimited guaranty agreements. The trial court found each of them individually liable for differing amounts based on continuing limited guaranty agreements they had signed. A month later, the trial court revised its earlier order, taking into account settlements and declarations of bankruptcy that certain guarantors had declared. The guarantors timely filed a motion to alter, amend, or vacate the judgment, which the trial court denied. The guarantors then appealed. The Alabama Supreme Court dismissed the appeals, finding that the trial court's judgment was not final because the trial court did not have jurisdiction to dismiss SEPH's claims against one of the guarantors, and the trial court did not certify its order as final pursuant to Rule 54(b). "An order entered in violation of the automatic bankruptcy stay is void as to the debtor, thus leaving the claims against [one of the guarantors] pending and rendering the judgment nonfinal. A nonfinal judgment will not support an appeal." View "Gaddy v. SE Property Holdings, LLC" on Justia Law

Steven Fustolo’s affiliate companies issued four promissory notes to Patton Drive, LLC. Fustolo personally guaranteed two of the notes. When the principal debtors defaulted on all four notes, Patton drive sued Fustolo. The Massachusetts state court found Fustolo liable for breach of contract and entered judgment against Fustolo. Fustolo appealed, challenging the interest due. Meanwhile, Patton Drive joined with two of Fustolo’s other creditors to file a petition seeking to place Fustolo into involuntary Chapter 7 bankruptcy. Fustolo, in turn, asserted that Patton Drive was not qualified it to serve as a petitioning creditor because his pending state court appeal subjected Patton Drive’s judgment to “bona fide dispute as to liability or amount.” The bankruptcy court allowed Patton Drive to join in initiating involuntary bankruptcy proceedings against Fustolo. The district court affirmed, finding that Fustolo’s state court appeal could not raise a bona fide dispute as to Patton Drive’s claim. The First Circuit affirmed, holding that because the amount of Fustolo’s liability on the guaranteed notes was not subject to bona fide dispute, and because Patton Drive’s claim on the guaranteed notes could be considered separately from Patton Drive’s claim on the judgment within which its underlying contract claims were submerged, Patton Drive qualified as a petitioning creditor. View "Fustolo v. 50 Thomas Patton Dr., LLC" on Justia Law

Redondo Construction Corporation filed for Chapter 11 bankruptcy. Through the proceedings, Redondo filed three complaints against the Puerto Rico Highway and Transportation Authority for money owed under construction contracts, alleging that it was entitled to damages and prejudgment interest. The bankruptcy court ruled in Redondo’s favor and found that Redondo was entitled to prejudgment interest. The First Circuit vacated the award of prejudgment interest and remanded. On remand, the bankruptcy court awarded Redondo prejudgment interest on its contract claims under Article 1061 of the Puerto Rico Civil Code, accruing through the payment of principal. The Authority moved to amend the judgment. The bankruptcy court denied the Authority’s motion, and the district court affirmed. The First Circuit vacated the judgment, holding (1) Redondo did not forfeit its claim to prejudgment interest under Article 1061; but (2) 28 U.S.C. 1961 exclusively controls awards of postjudgment interest in federal court, and therefore, the bankruptcy court should not have extended the prejudgment interest accrual period past the entry of judgment. Remanded for a calculation of section 1961 interest and a recalculation of Article 1061 interest. View "P.R. Highway & Transp. v. Redondo Constr. Corp." on Justia Law

Appellants and the company they own filed suit against David Fisher and other defendants, alleging claims arising from an unfulfilled real estate purchase agreement. Fisher filed an answer and counterclaim. Three years later, Fisher filed for Chapter 7 bankruptcy. Appellants filed an adversary proceeding in the bankruptcy case, requesting a determination that their claims against Fisher were not dischargeable in bankruptcy. The district court subsequently dismissed Appellants’ claims. Thereafter, the bankruptcy court ruled that Appellants’ claims against Fisher were dischargeable in bankruptcy. Appellants then filed a motion to modify the district court’s order dismissing the action and a renewed motion for summary judgment. The district court denied both post-dismissal motions, noting that the matter had already been dismissed. On appeal, the Supreme Court treated Appellants’ motions as motions for relief from the dismissal order pursuant to Wyo. R. Civ. P. 60(b) and affirmed, holding that, under the circumstances of this case, the district court did not abuse its discretion in denying Appellants’ motions. View "Bartel v. West" on Justia Law

MERV, an LLC formed to purchase and operate an antique mall, encountered difficulties paying its mortgage loan and entered into a forbearance agreement with the Bank. MERV later defaulted and filed a Chapter 11 Bankruptcy Petition. Although a plan of reorganization was confirmed, MERV again defaulted. The Bank foreclosed its mortgage on the property. Before the bankruptcy case closed, MERV retained special counsel and filed an adversary proceeding against some of its founders and the Bank. The claims against the Bank alleged breach of contract, “facilitation of fraud and theft”, and equitable subordination of the Bank’s claim. MERV sought punitive damages. The bankruptcy court granted summary judgment, agreeing with the Bank that MERV had executed a release of all of the claims as part of the forbearance agreement. The Sixth Circuit Bankruptcy Appellate Panel affirmed, finding that the Bank offered prima facie evidence of a complete affirmative defense to the complaint by showing that MERV executed a Release of all claims. MERV did not demonstrate a genuine issue of material fact as to the validity of that Release. MERV did not file a motion or a Rule 56(d) affidavit or declaration with the bankruptcy court requesting more time for discovery. View "In re: MERV Props., LLC" on Justia Law

The Lapideses renewed a loan from Venture Bank secured by a third mortgage on their home. Howard subsequently filed for Chapter 7 bankruptcy. After Howard’s personal debts were discharged, the Lapideses executed two “Change in Terms Agreements,” each of which extended the maturity date of the loan for six months. When Howard ceased making payments under these agreements, Venture Bank sought a declaratory judgment that the agreements were valid and enforceable. Howard counterclaimed that Venture Bank’s efforts to obtain payments after his discharge violated the discharge injunction under 11 U.S.C. 524(a)(2). The bankruptcy court denied Venture Bank’s claim for a declaratory judgment and awarded Howard damages and attorney’s fees. The district court and Eighth Circuit affirmed, upholding a finding that Howard’s payments were not voluntary within the meaning of section 524(f) and did not comply with the requirements of a reaffirmation agreement under section 524(c). The post-discharge agreements served no purpose other than reaffirmation agreements in which Howard agreed to repay all of his discharged personal debt and lacked consideration. View "Venture Bank v. Lapides" on Justia Law

The Richers filed for bankruptcy. Morehead, who had invested in commercial real estate owned by a trust controlled by Richer, filed an unsecured claim for $945,000 in the proceeding. The Richers filed an adversary action claiming that Morehead’s only lawful interest in the property was to receive a share of the net proceeds of the property if and when it was sold. The bankruptcy judge, the district court, and the Seventh Circuit upheld Morehead’s claim. The 2005 “Equity Participation Agreement” provided no security for Morehead, but did give him “the sole and exclusive option to convert his Participation Interest to a Demand Note payable within one hundred eighty (180) days of conversion.” Four years later, Morehead sent Richer by certified mail, a letter purporting to convert Morehead’s participation interest to a demand note for $700,000 (plus interest), effective the day after the letter was mailed, November 25, 2009—the anniversary date. The court rejected an argument that the letter had to be mailed or otherwise communicated to them on November 25, the anniversary date, neither before nor after. The Agreement provides that “the Conversion Option is exercised on the … anniversary date,” not that communication must occur on that date. View "Richer v. Morehead" on Justia Law

Falco sold insurance for Farmers, under a 1990 Agent Agreement, which provided that Falco would be paid Contract Value upon termination of the Agreement. As a Farmers agent, Falco was entitled to borrow money from the Credit Union. In 2006, Falco obtained a $28,578.00 business loan and assigned his interest in his Agreement receivables—including Contract Value—as security. The loan document gave the Credit Union authority to demand payments that Farmers owed Falco; it could tender Falco’s resignation to levy on Falco’s Contract Value. Falco failed to make payments and filed a Chapter 7 bankruptcy petition, listing the loan on his schedules. Falco received a discharge in February 2011, covering his liability under his Credit Union loan. In April 2011, the Credit Union notified Farmers that Falco had defaulted and exercised the power of attorney to terminate his Agent Agreement. Farmers notified Falco that the resignation had been accepted, calculated Contract Value as $104,323.30, paid the Credit Union $29,180.92, and paid the balance to Falco. The Eighth Circuit affirmed summary judgment in favor of defendants, finding that the Credit Union’s secured interest survived bankruptcy; it did not tortuously interfere with Falco’s Agreement because it had a legal right to terminate the Agreement; and Falco failed to show an underlying wrongful act or intentional tort as required under civil conspiracy. View "Falco v. Farmers Ins. Grp." on Justia Law