Opinion
Bankruptcy No.: 1-94-01547, Adversary No.: 1-00-00249A.
March 9, 2004
OPINION
Drafted with the assistance of Wendy E. Morris, Law Clerk.
PROCEDURAL HISTORY
Before me are six (6) matters concerning Dealer Sales and Service agreements ("franchise agreements", "agreements") between Krystal Cadillac-Oldsmobile-GMC Truck, Inc. ("Debtor") and General Motors Corporation ("GM"): (1) GM Complaint for Declaratory Judgment that Franchise is Terminated or Terminable; (2) GM Motion for Relief from Stay to terminate the franchise; (3) Trustee's Amended Motion for Approval of Sale of Debtor's Dealer Sales and Service Agreement Free and Clear of Liens and Encumbrances to sell franchise to GM; (4) Trustee's Motion to Compromise and Settle Litigation; (5) Debtor's Motion to Stay and/or Enjoin Trustee's Application to Sell or Assign General Motors Franchise Agreement; and (6) Debtor's Motion to Sell General Motors Franchise Agreement to Weaver.
A hearing was held before Bankruptcy Judge Robert J. Woodside on November 30, 2000 concerning the Trustee's motion to sell the agreements. Judge Woodside conducted additional hearings on October 3 and 4, 2001 concerning the remaining matters. The November 30, 2000 hearing was incorporated into that record.
EVIDENTIARY RULINGS
Rulings on the admissibility of several exhibits were taken under advisement at the close of the October 4, 2001 record. I hereby admit Debtor's exhibits numbered 1, 1(A), 8 and 11 over the objections raised. I also admit GM's exhibits numbered from 6 through 12.
The admissibility of the following exhibits were taken under advisement: Debtor's exhibits 1, 1(A), 4, 8, 11, 15, 16; GM exhibits 6, 7, 8, 9, 10, 11, 12, 13, 14.
Objections to Debtor's exhibit number 4 are sustained because of hearsay. In addition, objections to Debtor's exhibit number 15 are sustained due to the untimeliness of the exhibit. Debtor's hearsay objection to GM's exhibit number 13 is also sustained.
STATEMENT OF FACTS
Harry Pappas created Debtor in 1987 and operated it as a licensed automobile dealership in Gettysburg, Pennsylvania. That same year, Mr. Pappas entered into franchise agreements on Debtor's behalf with GM's Cadillac, Oldsmobile, and GMC Truck divisions to sell its products for a three (3) year period within a designated Area of Primary Responsibility ("APR"). In 1990, Mr. Pappas executed new agreements that began on November 1, 1990 and carried a five (5) year term.
Each individual franchise agreement contains a clause incorporating GM's "`Standard Provisions,' (Form GMMS 1013)" ("Provisions"). In addition to stating that the agreements are governed by the laws of the State of Michigan, the Provisions also impose numerous contractual obligations on a dealer. Among these is an obligation in Article 5 to sell and promote the purchase, lease and use of the contracted products within the dealer's APR. Article 10 also obligates a dealer to have and maintain a floorplan in order to finance the dealer's purchase of new vehicles and avoid damage to goodwill.
According to Article 10, a dealer maintains a "floorplan" by having a separate line of credit from a creditworthy financial institution reasonably acceptable to GM and available to finance Dealer's purchase of new vehicles.
Article 13 and 14 of the Provisions outline various acts or events which GM may view as material breaches of an agreement. More specifically, Article 14.5.3 states that GM has the right to terminate an agreement if a dealer fails to conduct customary sales and service operations during customary business hours for seven consecutive business days. Article 13 includes a catch-all clause that allows GM to terminate an agreement for any other material breach of dealer's obligations under the agreement.
Although the record lacks a precise chronological time-line of events leading up to Debtor's bankruptcy filing, it does reveal that Debtor lost his floorplan from General Motors Acceptance Corporation (GMAC) in the latter part of 1991. Pursuant to the agreements' terms, GM could exercise its right to terminate the contract. GM sent a notice of termination to Debtor sometime thereafter and Debtor filed an appeal with Pennsylvania's State Board of Vehicle Manufacturers, Dealers and Salespersons ("Board"). The Board found the agreements to be terminated and Debtor filed an appeal with a Pennsylvania state court.
The Board consists of seventeen (17) members responsible for administering and enforcing Pennsylvania's Board of Vehicles Act, 63 Pa. Stat. Ann. § 818.1 et al. See 63 Pa. Stat. Ann. §§ 818.3, 818.4.
Nothing in the record indicates which state court heard Debtor's appeal.
Prior to a determination from the state court, Debtor filed a Voluntary Petition under Chapter 11 of the Bankruptcy Code ("Code") on September 8, 1994. Despite the bankruptcy filing, the state court affirmed the Board's earlier decision.
A Chapter 11 Trustee was appointed to the case. In 1996, the Trustee filed a motion to assume and assign the franchise agreements to James Weaver for $500,000.00. Judge Woodside denied the request based on the state court's earlier determination. The District Court affirmed the Bankruptcy Court's ruling.
Debtor appealed the District Court's decision and the Third Circuit Court held on April 28, 1998 that the 1990 franchise agreements became property of Debtor's bankruptcy estate as of the petition's filing date. See Krystal Cadillac Oldsmobile GMC Truck, Inc. v. GM, 142 F.3d 631, 638 (3d Cir. 1998) ("Krystal"). The Trustee was therefore entitled to cure any defects and assume and assign the agreements. Id. The Circuit Court also found that the agreements did not automatically terminate upon the expiration of the five (5) year period on October 31, 1995. Id. at n. 3.
This Court notes that the Third Circuit Court's decision inKrystal did not address the substance of the Board and state court's determinations that the agreements were terminated based on the their terms. See 142 F.3d at 636.
Prior to the Circuit Court's decision, Debtor's Amended Plan of Reorganization was confirmed on October 28, 1997. The Plan required the sale of all of Debtor's assets, the cessation of all business operations, and the cancellation and surrendering of all operating licenses. See Amended Plan of Reorganization (Doc. 195) at ¶¶ 8.01 8.02. Oddly, in addition to releasing Debtor from all dischargeable debts, the confirmation order retained the Trustee's appointment and empowered him to commence and continue litigation over matters where this Court retained post-confirmation jurisdiction. See Order Confirming Amended Plan (Doc. 354) at 3 7.
The Plan also assumed the agreements for the purpose of eventual sale to an appropriate and qualified candidate. See Amended Plan (Doc. 195) at ¶ 9.01. Any default arising out of the agreements were to be cured by either the purchaser or Debtor. See id. at ¶ 9.02. The Plan also provides that the bankruptcy court retain jurisdiction to determine the actions necessary to cure and assume any franchise agreement or executory contract and approve their sale. See id. at ¶¶ 10.01 14.01. In the event the franchise agreements are sold, the Debtor's taxing authorities would receive the net proceeds as payment toward their priority claims. See Order (Doc. 354) at 7.
For some reason, Mr. Weaver's original offer fell to the wayside after the Third Circuit's decision. Instead, the Trustee allowed Mr. Pappas to solicit potential purchasers of the franchise agreements. The Trustee was satisfied with Mr. Pappas' efforts and was requested not to interfere. However, the Trustee gave Mr. Pappas until the early part of August 2000 before he would begin looking into alternatives. Despite Mr. Pappas' efforts, he never presented a potential buyer to the Trustee.
While Mr. Pappas was still searching for a buyer, GM filed a complaint on August 17, 2000 seeking a declaration that the agreements were terminated or terminable along with a separate motion to lift the automatic stay in order to terminate the agreements. The Trustee began negotiating with GM to resolve the conflict over the franchise agreements sometime in late September 2000.
On October 2, 2000, the Trustee filed a motion to sell the 1990 franchise agreements to GM for $37,500.00 which was later amended on November 2, 2000. Included with each motion was a notice of the sale to all creditors and parties in interest dated October 30, 2000. Anyone wishing to object to the sale or place a higher bid was required to file a formal pleading within twenty (20) days from the date of the notice. The Trustee also filed a motion to compromise and settle GM's adversary complaint for the same amount. It is the Trustee's opinion that approval of either motion would only result in payment of administrative claims or expenses, which have yet to be requested from the Court. The Trustee believes that remaining funds, if any, would go towards paying unsecured creditors.
Debtor filed an objection to the proposed sale on November 20, 2000. Debtor also submitted a late bid of $38,000.00.
A hearing concerning the Trustee's motion to sell was held and concluded on November 30, 2000. As of the hearing date, it was the Trustee's belief that Debtor's unsecured creditors had received payments equal to seventy-five (75) percent of their claims.
It was revealed to the Court during the hearing that Mr. Pappas had executed new franchise agreements with GM on Debtor's behalf on October 25, 2000 for a new five (5) year term beginning on November 1, 2000. Like the 1990 agreements, the 2000 agreements also incorporate the Provisions and are governed by Michigan law.
After the November 30, 2000 hearing and while the matters were under advisement by the Court, Debtor filed motions on January 29, 2001 to sell the 2000 franchise agreements to James Weaver for $650,000.00 and enjoin or stay the Trustee's application to sell or assign the agreements.
An additional hearing was held on October 3 and 4, 2001 concerning the remaining matters between the parties in both the main and adversary cases. Mr. Pappas revealed during this hearing that Debtor had obtained a new floorplan through the Theodore Couch Irrevocable Trust on October 2, 2001. He also testified that Debtor still owed approximately $50,000.00 to the Internal Revenue Service as of the hearing date, in addition to $1,000.00 in quarterly fees to the U.S. Trustee.
GM employee Norman A. Jay testified that third party contractors were responsible for generating and disbursing the 2000 franchise agreements to a list of approved dealers GM had generated. The contractors were directed to hold the contracts that were prepared for dealers that GM had not approved. According to Mr. Jay, Debtor should not have received the 2000 franchise agreements because it had not fulfilled its obligations under the prior agreements. GM's Dealer Retail Sales Performance Review reports disclosed that Debtor did not sell any automobiles from 1998 through 2000.
Mr. Pappas admitted that Debtor did not purchase any vehicles from GM during this period but maintained that vehicles were purchased from other dealers and re-sold to the public. Notwithstanding, he was unable to locate any documentation reflecting these transactions. He also could not locate documentation that Debtor performed mechanical service on GM vehicles during this period despite his insistence that it occurred.
Sometime after the hearing, the parties filed a stipulation that as of September 30, 1996, Debtor had an outstanding balance of $72,092.90 under the agreements. Whether any portion of this amount reflected pre-petition debt was not indicated.
DISCUSSION
I. 2000 Franchise Agreements
The Court initially turns its attention to the 2000 franchise agreements. The Debtor's motion seeks approval to sell the 2000 agreements and not the 1990 agreements. Both GM and Debtor advance arguments outlining the reasons why I should either grant or deny this request. Yet, a review of the facts raises a question of whether this Court has post-confirmation jurisdiction to adjudicate the sale of an asset that Debtor acquired post-confirmation.
Nothing in titles 11 or 28 of the United State Code expressly grant bankruptcy courts with post-confirmation subject matter jurisdiction. An analysis of this Court's post-confirmation jurisdiction must begin with 28 U.S.C. § 1334. See United States Trustee v. Gryphon at Stone Mansion, Inc., 166 F.3d 552, 555 (3d Cir. 1999). Section 1334(b) grants "original and exclusive jurisdiction of all cases under title 11" and "original, but not exclusive jurisdiction of all civil proceedings arising under title 11 or arising in or related to cases under title 11." See 28 U.S.C. § 1334(b). Therefore, post-confirmation statutory subject matter jurisdiction exists under Section 1334(b) if the proceeding either "arises under title 11" or "arises in a case under title 11" or is "related to a case under title 11."
First, the contractual dispute between the Debtor and GM does not "arise under title 11." Title 11 does not contain a provision dealing with the adjudication of contractual disputes.
Second, the matter does not "arise in a case under title 11." "Proceedings arise in bankruptcy if they have no existence outside the bankruptcy." Gryphon, 166 F.3d at 556 (citing Wood v. Wood (In re Wood), 825 F.2d 90, 97 (5th Cir. 1987)). Debtor's and GM's post-confirmation contract relationship was created outside the realm of bankruptcy — i.e., state domain — and lives and breathes under state law.
Lastly, the conflict is not "related to a case under title 11." A matter is "related to" a title 11 case if it "could alter the debtor's rights, liabilities, options, or freedom of action (either positively or negatively) and which in any way impacts upon the handling and administration of the bankruptcy estate."Belcufine v. Aloe, 112 F.3d 633, 636 (3d Cir. 1997). There is no dispute that Debtor executed the 2000 franchise agreements after its plan was confirmed. Unlike the 1990 franchise agreements, the 2000 agreements were never a part of Debtor's estate and never a part of Debtor's bankruptcy Plan. It was the post-confirmation Debtor that acquired the 2000 franchise agreements and not Debtor's estate. See 11 U.S.C. § 541(a)(7);see also In re Doemling, 127 B.R. 954, 956 (W.D. Pa. 1991) ("[T]he estate has an existence that is completely separate from that of the debtor. Section 541(a)(7) covers only property that the estate itself acquires after the commencement of the proceeding.") Once Debtor's Plan was confirmed, its estate dissolved and all of the property contained therein reverted back under Debtor's control (subject to the Trustee's grant of authority in the plan). See In re Victorian Park Assoc., 189 B.R. 147, 151 (Bankr. N.D.Ill. 1995); In re Grinstead, 75 B.R. 2, 3 (Bankr. D.Minn. 1985); 11 U.S.C. § 1141(b). The 2000 franchise agreements were never a part of the "administration of the estate" and have no impact on the implementation of the confirmed plan.
This Court lacks post-confirmation jurisdiction under 28 U.S.C. § 1334 to adjudicate the dispute surrounding the 2000 franchise agreements. Debtor's motion to sell the 2000 franchise agreements is hereby dismissed for lack of post-confirmation subject matter jurisdiction under 28 U.S.C. § 1334(b).
II. 1990 Franchise Agreements
The Court turns its attention to the 1990 agreements. GM filed an adversary complaint seeking a declaration that the 1990 agreements are terminated or terminable according to their terms. The Trustee has a motion before this Court seeking approval of a settlement of this complaint. The Trustee is also seeking to sell the same agreements to GM.
This Court's post-confirmation jurisdiction over the Trustee's motion to settle GM's adversary complaint is based on its relation to Debtor's bankruptcy case. It directly relates to whether Debtor still has rights to dispose of an asset that holds an intricate position in the administration of Debtor's estate through its plan. See Gryphon, 166 F.3d at 556.
The proposed settlement entails a payment of $37,500.00 from GM in exchange for the Trustee's acknowledgment that the franchise agreements are terminated. The Trustee believes that the estate would be subject to administrative expenses in the approximate amount of $37,500.00 that would go unpaid but for the approval of the settlement. The Trustee's motion to sell the agreements to GM is also for $37,500.00.
The approval of settlement agreements are governed by Rule 9019 of the Federal Rules of Bankruptcy Procedure. A determination on the merits of a settlement agreement "requires a bankruptcy judge to assess and balance the value of the claim that is being compromised against the value to the estate of the acceptance of the compromise proposal." Myers v. Martin (In re Martin), 91 F.3d 389, 393 (3d Cir. 1996). Relying on the Supreme Court's decision in Protective Committee for Independent Stockholders of TMT Trailer Ferry, Inc. v. Anderson, 390 U.S. 414, 424 (1968), the Court recognized four criteria that a bankruptcy court should consider:
(1) the probability of success in litigation; (2) the likely difficulties in collection; (3) the complexity of the litigation involved, and the expense, inconvenience and delay necessary attending it; and (4) the paramount interest of the creditors.
Id.
Consideration of the Martin factors supports my decision to approve the settlement. First, the probability of the Trustee's success in the adversary proceeding is low and borders on non-existent. More specifically, there is a direct correlation between the Trustee's success in the underlining adversary and its ability to sell the same agreements to GM.
With respect to his ability to sell the agreements, Section 363 of the Code appears to be the most applicable provision. Section 363 states, in part:
As previously stated, Debtor's bankruptcy estate dissolved once its Plan of Reorganization was confirmed. The agreements reverted back into Debtor's possession post-confirmation. See 11 U.S.C. § 1141(b). The Court reiterates these points because there does not appear to be a provision in the Code that deals with a post-confirmation request to sell non-estate property. Nevertheless, the Court will use Section 363 to help guide its decision.
(b)(1) The trustee, after notice and hearing, may use, sell, or lease, other than in the ordinary course of business, property of the estate.
It also appears that the very nature of the agreements require additionally analysis under Section 365 of the Code when measuring the Trustee's ability to sell the agreements. Because performance remains due to some extent from both the Debtor and GM, the franchise agreements are executory contracts and therefore subject to Section 365.See Western Pocono Estates, Inc. v. Miskowski (In re Miskowski), 182 B.R. 5, 7 (Bankr. M.D.Pa. 1995). Despite the fact that they may be sold pursuant to Section 363, Section 365 actually dictates the procedure for their transfer to a third party. See Krebs Chrysler-Plymouth, Inc. v. Valley Motors, Inc., 141 F.3d 490, 498 (3d. Cir. 1998). Section 365 provides, in relevant part:
(b)(1) If there has been a default in an executory contract or unexpired lease of the debtor, the trustee may not assume such contract or lease unless, at the time of assumption or such contract or lease, the trustee —
(A) cures, or provides adequate assurance that the trustee will promptly cure, such default;
(B) compensates, or provides adequate assurance that the trustee will promptly compensate, a party other than the debtor to such contract or lease, for any actual pecuniary loss to such party resulting from such default; and
(C) provides adequate assurance of future performance under such contract or lease.
11 U.S.C. § 365(b)(1). Under Section 365, all defaults arising out of an executory contract — pre/post-petition and monetary/non-monetary — must be cured prior to an assumption or assignment. See South St. Seaport Ltd. Partnership v. Burger Boys, Inc. (In re Burger Boys, Inc.), 94 F.3d 755, 763 (2d Cir. 1996); Claremont Pontiac/GMC Truck, Inc., v. GMC (In re Claremont Acquisition Corp., Inc.), 113 F.3d 1029, 1033 (9th Cir. 1997).
The confirmed Plan states that Debtor assumed the franchise agreements upon confirmation. However, their assumption is contingent upon all monetary and non-monetary defaults being cured pursuant to Section 365. See Claremont, 113 at 1033;Amended Plan (Doc. 195) at ¶ 9.02. GM argues that the agreements are plagued with certain incurable non-monetary defaults which render the agreements terminated or terminable under their own terms. Whether incurable non-monetary defaults exist under the agreements is a pivotal factor in this Court's analysis.
Unlike contractual monetary obligations, contractual non-monetary obligations generally require a party to act or refrain from acting. See James I. Stang, Assumption of Contracts and Leases: The Obstacle of the Historical Default, 24 Cal. Bankr. J. 39, 40 (1998) (citing Madisonview Towers v. Yardley (In re Yardley), 77 B.R. 643, 645 (Bankr. M.D.Tenn. 1987)). These obligations may also relate to use, access, or behavior. See id. A number of courts have dealt with the issue of whether Section 365(b)(2) automatically absolves a debtor from curing all non-monetary defaults prior to the ultimate assumption or assignment of an executory contract and have concluded that it does not. See e.g. Claremont, 113 F.3d at 1033-34; In re Williams, 299 B.R. 684, 686 (Bankr. S.D.Ga. 2003); In re New Breed Realty Enter., Inc., 278 B.R. 314, 321 (Bankr. E.D.N.Y. 2002). This Court agrees with the reasoning outlined in those cases.
Sub-section 365(b)(2) provides:
(2) Paragraph (1) of this subsection does not apply to a default that is a breach of a provision relating to —
(A) the insolvency or financial condition of the debtor at any time before the closing of the case;
(B) the commencement of a case under this title;
(C) the appointment of or taking possession by a trustee in a case under this title or a custodian before such commencement; or
(D) the satisfaction of any penalty rate or provision relating to a default arising from any failure by the debtor to perform nonmonetary obligations under the executory contract or unexpired lease.
Nothing on the face of the statute excuses an obligation to satisfy both monetary and non-monetary defaults under the agreements. The only non-monetary defaults absolved from cure are listed in Section 365(b)(2). "If Congress intended that non-monetary defaults be incurable under § 365, it would be unnecessary if not inconsistent for Congress to exempt the laundry list of non-monetary defaults in § 365(b)(2)." Yardley, 77 B.R. at 645. As such, all of Debtor's alleged non-monetary defaults must be cured in tandem with all monetary defaults prior to the franchise agreements' assumption by way of the confirmed plan.
GM points to specific provisions in the Provisions to support its contention that Debtor incurred incurable non-monetary defaults under the agreements. It argues that Debtor breached the franchise agreements by failing to sell the respected brand lines to the public and maintain a floorplan pursuant to Articles 5 and 10 of the Provisions. As such, GM should be allowed to exercise its rights under the Provisions and terminate the franchise agreements.
GM also relies on a number of cases where courts held, under applicable state law, that a dealer's suspension of contractually and statutorily required operations was an incurable non-monetary default. See Claremont, 113 F.3d at 1033-34; In re Beverage Enterprises, Inc., 1997 WL 177352*1 (Bankr. E.D.Pa. 1997); In re Lee West Enter., Inc., 179 B.R. 204, 208-209 (Bankr. C.D.Cal. 1995); In re Toyota of Yonkers, Inc., 135 B.R. 471, 477 (Bankr. S.D.N.Y. 1992); In re Deppe, 110 B.R. 898, 904 (Bankr. D.Minn. 1990).
The Court does not hesitate in concluding that the professed obligations are of a non-monetary nature and were imposed on Debtor under the agreements. It is also clear that Debtor has failed to perform these obligations for an extended period of time.
There is nothing in the evidence that corroborates Mr. Pappas' claim that Debtor operated as a dealership pursuant to the agreements' terms in either 1998, 1999 or 2000. GM's Dealer Retail Sales Performance Review reports disclose that Debtor did not sell any automobiles during this period. These report are partially substantiated by Mr. Pappas' admission that Debtor did not purchase any vehicles from GM during this period. However Mr. Pappas' claim that Debtor purchased and re-sold vehicles from other dealers to customers carries little evidentiary weight due to his inability to locate any records of these transactions.
The Court also finds it incredulous that Mr. Pappas expects it to give any weight to his assertion that Debtor performed out-of-pocket warranty service for customers in light of an additional admission that he — once again — can not locate any of the records purportedly kept documenting these services.
These defaults are further compounded by the fact that Debtor violated the agreements' terms by not having a floorplan from 1991 to 2001. Debtor's procurement of a new floorplan just prior to the eve of the October 3, 2001 hearing comes at too late an hour.
Debtor is clearly in default on these non-monetary obligations under the agreements. In total, the defaults are historical facts that can not be altered. See Williams, 299 B.R. at 686; Lee West Enter., Inc., 179 B.R. at 206; Toyota of Yonkers, Inc., 135 B.R. at 477; Deppe, 110 B.R. at 904. By definition, these defaults are incapable of being cured.
Notwithstanding the determination that the non-monetary defaults are incurable, their existence does not necessarily preclude assumption of the franchise agreements. See In re New Breed Realty Enter., Inc., 278 B.R. 314, 321 (Bankr. E.D.N.Y. 2002). The Third Circuit Court addressed a bankruptcy court's discretionary power of enforcing Section 365 in Joshua Slocum when dealing with a commercial lease. Relying on the bankruptcy court's decision, the Circuit Court agreed that a minimum sales clause in a commercial lease is "only enforceable if the landlord is able to establish that such terms are material and jeopardize the economic position of the landlord." In re Joshua Slocum, Ltd., 922 F.2d 1081, 1092 (3d Cir. 1991).
Bankruptcy courts have applied this discretion to other types of executory contracts. See e.g. New Breed Realty Enter., Inc., 278 B.R. at 321 ( contract to purchase); Lee West Enter., Inc., 179 B.R. at 208 ( franchise agreement); In re Whitsett, 163 B.R. 752 (Bankr. E.D. Pa. 1994) ( lease agreement). I conclude that this same level of discretion is applicable in the assumption and assignment of franchise agreements. Whether Debtor's defaults may be overlooked depends on the materiality and economic significance of the obligations.
Materiality Economic Significance
Under Joshua Slocum, "the determining factor appears to be the materiality of the default in issue." Whitsett, 163 B.R. at 754 (citing Joshua Slocum, 922 F.2d at 1092); see also New Breed Realty Enter., Inc., 278 B.R. at 321-22. Michigan courts consider factors outlined in the Restatement (Second) of Contracts when determining the materiality of a default — i.e., breach — under a contract:
(a) the extent to which the injured party will be deprived of the benefit which he reasonably expected;
(b) the extent to which the injured party can be adequately compensated for the part of that benefit of which he will be deprived;
(c) the extent to which the party failing to perform or to offer to perform will suffer forfeiture;
(d) the likelihood that the party failing to perform or to offer to perform will cure his failure, taking account of all the circumstances including any reasonable assurances;
(e) the extent to which the behavior of the party failing to perform or to offer to perform comports with standards of good faith and fair dealing.
Restatement (Second) of Contracts § 241 (1981) (previously cited as § 275 in the Restatement (First) of Contracts); see also Omnicom v. Giannetti Investment Co., 561 N.W.2d 138, 141 (Mich.Ct.App. 1997) (citing Walker Co. v. Harrison, 81 N.W.2d 352 (Mich. 1957) (citing Restatement (First) of Contracts § 275 (1932))).
I am left with a strong indication from the record that Debtor abandoned its obligations under each agreement. There is little in the record establishing that Debtor actually conducted any sales or serviced any Cadillac, Oldsmobile or GMC Truck vehicles during either 1998, 1999 or 2000. Moreover, it was without a floorplan for a period of ten (10) years. The Court fails to see what benefit GM received — economic or otherwise — from Debtor's failure to perform these contractual obligations. The breach of these obligations are "material in the sense that [they go] to the very essence of the contract, i.e., the bargained for exchange" and reflect the economic loss associated with buying and selling in a market atmosphere. See Joshua Slocum, 922 F.2d at 1092.
A determination that the agreements may not be sold due to incurable non-monetary defaults may also provide adequate reasons for determining under the agreements that they are terminated or terminable. This significantly lowers the Trustee's probability of success on GM's adversary complaint.
Resuming my analysis under Martin, the second factor, which relates to the difficulties in collection, is inapplicable in the present situation. In Martin the Third Circuit Court dealt with a plaintiff — the Trustee — seeking approval of a settlement offer. In the case at bar, the Court is confronted with a settlement offer being advanced by the Defendant — the Trustee — and not a plaintiff.
In addition, consideration of the complexity of the litigation involved in litigating the adversary complaint and the associated expense or delay is immaterial since the litigation was done in conjunction with the other matters currently pending before the Court.
Under the last Martin factor, the paramount interest of creditors must be evaluated. Despite the Trustee's belief that the bulk of the settlement would go towards administrative claims or expense, the Court has not yet approved an application from any administrative claimant, so reaching this conclusion is premature. Whether the Trustee is correct in his belief that unsecured creditors are entitled to an additional dividend on their claims or that he, in fact, must tender payment to priorities claimants, something is always better than nothing. Any opportunity to help make creditors whole should be embraced by the Court.
The Court hereby approves the Trustee's Motion to Compromise and Settle Litigation of GM's Complaint for Declaratory Judgment that Franchise is Terminated or Terminable in the amount of $37,500.00. Adjudication of the Trustee's motion to sell the 1990 agreements and Debtor's Motion to Stay and/or Enjoin Trustee's Application to Sell or Assign General Motors Franchise Agreement is unnecessary.
III. GM's Motion to Lift Automatic Stay
Since Debtor's confirmed Plan of Reorganization had a duel effect of re-vesting it with title to its property and discharging its dischargeable pre-petition debts, there is no further application of the automatic stay in Debtor's bankruptcy case. See Hillis Motors, Inc. V. Hawaii Auto. Dealers' Ass'n, 997 F.2d 581, 587 (9th Cir. 1993); 11 U.S.C. §§ 362(c), 1141(b) (d). GM's Motion for Relief from Stay is therefore denied as unnecessary.
An Order will follow.
ORDER
For those reasons indicated in the Opinion filed this date, IT IS HEREBY ORDERED that
1. Trustee's Amended Motion for Approval of Sale of Debtor's Dealer Sales and Service Agreement Free and Clear of Liens and Encumbrances to General Motors is denied;
2. Trustee's Motion to Compromise and Settle Litigation is granted;
3. General Motors Corporation's Complaint for Declaratory Judgment that Franchise is Terminated or Terminable is settled;
4. Motion of General Motors Corporation for Relief from Stay is denied;
5. Debtor's Motion to Stay and/or Trustee's Application to Sell or Assign General Motors Franchise Agreement is denied; and
6. Debtor's Motion to Sell General Motors Franchise Agreement to Weaver is dismissed.
A CONFERENCE to discuss the current status of the above bankruptcy case is scheduled for Friday, March 19, 2004, at 10:00 o'clock A.M in the Bankruptcy Courtroom at the Federal Building, Third Walnut Streets, Harrisburg, Pennsylvania.