In re Malmgren

277 B.R. 755, 2002 Bankr. LEXIS 487, 39 Bankr. Ct. Dec. (CRR) 154, 2002 WL 1009132
CourtUnited States Bankruptcy Court, E.D. Wisconsin
DecidedMay 16, 2002
DocketNo. 2001-21495
StatusPublished
Cited by3 cases

This text of 277 B.R. 755 (In re Malmgren) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, E.D. Wisconsin primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re Malmgren, 277 B.R. 755, 2002 Bankr. LEXIS 487, 39 Bankr. Ct. Dec. (CRR) 154, 2002 WL 1009132 (Wis. 2002).

Opinion

DECISION DENYING EMERGENCY MOTION OF THE DEBTOR IN POSSESSION FOR RELIEF FROM THE COURT’S ORDER OF MAY 13, 2002

RUSSELL A. EISENBERG, Chief Judge.

This case was commenced on February 15, 2001, by the filing of a voluntary petition in bankruptcy under Chapter 11 of Title 11 of the United States Bankruptcy Code. The subsequent history of this case is well established in the court file, the court’s minute orders and the official hearing transcripts. As the court believes a full recital of all dates and events in this case is unnecessary for a determination of the pending motion, it will only discuss the dates and events relevant to this decision.

On February 15, 2002, after a lengthy hearing with extensive testimony, cross-examination, and argument, the court denied the motions of the United States Trustee and St. Francis Bank to convert [757]*757this case from Chapter 11 to Chapter 7 “subject to very strict conditions, terms and requirements” (Mins. & Order of February 15, 2002), which were read in detail into the court record. If any of the conditions was not met, the court indicated that it would sign a proposed order which would immediately convert the case from Chapter 11 to Chapter 7 (Hr’g Tr. of February 15, 2002, at 14).

The parties are in agreement that at least one of the February 15, 2002, Order conditions was not met, specifically, the refinancing of the Lodge. In fact, the debtor indicated at the hearing on May 3, 2002, that he was no longer attempting to obtain refinancing for the Lodge and would not attempt to do so in the future until he, at a minimum, was out of bankruptcy. Due to this lack of compliance with the February 15, 2002, Order, St. Francis Bank and the United States Trustee requested that the court enforce its prior order and convert the case immediately. The debtor opposed the conversion and sought relief from the portion of the February 15, 2002, Order which required him to obtain refinancing for the Lodge.

After another lengthy hearing, with extensive testimony, cross-examination, and argument, the court on May 13, 2002, denied the debtor’s motion for partial relief from the February 15, 2002, Order. The court’s findings of fact, conclusions of law, and its decision on May 13, 2002, were clear and concise. The court stated that it did not believe that the spirit or the purpose of the February 15, 2002, Order was fulfilled without the Lodge refinancing, as the debtor contended. The court further indicated that even if the court agreed with the debtor that it had substantially complied with the February 15, 2002, Order, regardless of not obtaining the required Lodge refinancing, substantial compliance with February 15, 2002, Order was not sufficient under thé facts of this case to justify the partial relief requested.

On May 14, 2002, the debtor filed an Emergency Motion for Relief from the Court’s Order of May 13, 2002. The motion itself states that it is brought pursuant to Federal Rule of Civil Procedure 60(b). In contrast, at oral argument on the motion, debtor’s counsel indicated that the motion was instead brought pursuant to Federal Rule of Civil Procedure 59(a). The court is never enthusiastic when a party midstream attempts to switch the law under which it is proceeding, because the court believes that such actions are unfair to the other parties in the case. Nonetheless, the court will address the merits of the motion and decide, regardless of what law this newest motion is brought under, whether the court should grant the substantive relief requested, in essence, whether the February 15, 2002, Order should remain fully in effect.

The debtor argues, for the first time, in its motion for relief from the May 13, 2002, Order that the court should not use Federal Rule of Bankruptcy Procedure 9024 and, thereby, Federal Rule of Civil Procedure 60(b) to rule on its motion for partial relief from the February 15, 2002, Order. The debtor believes that the February 15, 2002, Order was interlocutory and not final, and therefore, Rule 60(b) did not apply because it refers to a “final judgment, order, or proceeding.” The debtor may be correct on all accounts. The February 15, 2002, Order may not have been final, and therefore, Rule 60(b) may not be applicable to the motion for partial relief from the February 15, 2002, Order. But what the debt- or ignores is that the court did not base its decision exclusively, or even primarily, on Rule 60(b).

The February 15, 2002, Order created a “doomsday” provision. A “doomsday” is not uncommon in bankrupt[758]*758cy proceedings. Its general purpose is to give the debtor one last chance to rectify its situation, usually, as with this debtor, after previous defaults. In this case, the “doomsday” order, as with almost all “doomsday” orders, mandated strict compliance. The court explicitly stated in its oral decision .on February 15, 2002, page 6:

The Court.. .is imposing strict conditions on the debtor and the debtor’s counsel. And Mr. Kerkman, please stress to your client that these conditions are strict conditions. They’re not subject to negotiations. They’re not subject to argument. They’re not subject to coming back and saying will you change these? This is it. And these are the conditions which the debtor shall meet, not that the debtor may meet and not if the debtor is busy or something. He doesn’t have time to do something else. These conditions are mandated, and they’re strictly mandated.

The above language is unambiguous. It is not confusing, uncertain, or open to varying interpretations. The debtor acknowledges that he did not obtain the required refinancing, and therefore, the debtor was not in full compliance with the order. This is true whether the February 15, 2002, Order was considered final or not. This is true whether the court applies Rule 60(b) or not. The debtor is in default, and in accordance with the “doomsday” provision in the February 15, 2002, Order, the case must be converted from Chapter 11 to Chapter 7.

The debtor argues in its motion that a court always has the power to modify earlier orders in a pending case. That may very well be true, but the court has no intention for invoking its power to do so, if it in fact possesses such power, in this matter. The February 15, 2002, Order was neither precipitously nor improvidently entered by the court. The court carefully weighed the conditions which it enumerated. Each was fashioned after listening closely to the needs and requests of the parties, particularly the debtor himself, in an attempt to keep the debtor operating while still providing for some, albeit limited, protection to the other parties in the case. Even if the court were to “rethink” its earlier order, as the debtor urges in his motion, it would now impose the same conditions that it did on February 15, 2002, and it would now rule the same way that it did both on that day and on May 13, 2002.

The Lodge refinancing was a major, possibly even the major condition imposed in the February 15, 2002, Order.

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Cite This Page — Counsel Stack

Bluebook (online)
277 B.R. 755, 2002 Bankr. LEXIS 487, 39 Bankr. Ct. Dec. (CRR) 154, 2002 WL 1009132, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-malmgren-wieb-2002.