In re Montgomery

152 B.R. 266, 1993 Bankr. LEXIS 484, 1993 WL 89069
CourtUnited States Bankruptcy Court, E.D. Arkansas
DecidedMarch 10, 1993
DocketBankruptcy No. 91-2578S
StatusPublished

This text of 152 B.R. 266 (In re Montgomery) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, E.D. Arkansas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re Montgomery, 152 B.R. 266, 1993 Bankr. LEXIS 484, 1993 WL 89069 (Ark. 1993).

Opinion

ORDER OVERRULING OBJECTION TO MODIFIED PLAN

MARY D. SCOTT, Bankruptcy Judge.

THIS CAUSE is before the Court upon an Objection to the Modified Plan, filed on November 19,1992, and the amended objection filed on January 12, 1993. The Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 157(a), 1334. Moreover, this Court concludes that this is a “core proceeding” within the meaning of 28 U.S.C. § 157(b) as exemplified by 28 U.S.C. § 157(b)(2)(L).

The debtor filed a voluntary Chapter 13 petition in bankruptcy on October 21, 1991. He also submitted a proposed plan which provided that he would surrender his equity in certain real property held with his ex-wife, “in satisfaction” of over $17,000 in child support arrearages. The debtor neglected to make any provision for payment of approximately $25,000 owed to his ex-wife regarding that real property. That debt arose when the debtor failed to pay his one-half share of the mortgage on the home where his children lived.

The debtor’s ex-wife, Ms. Montgomery, filed a pro se objection to confirmation on February 10, 1992, and an amended objection on May 11, 1992. On May 12, 1992, after the matter was called for hearing, the Court determined that' Ms. Montgomery could not proceed effectively without assistance of counsel. Accordingly, the Court continued the matter in order for Ms. Montgomery to obtain counsel. An attorney entered an appearance and filed an objection to confirmation on June 17, 1992, which objection was set for hearing. When the matter was called for hearing, on August 11, 1992, the parties were so unprepared that the Court, sua sponte, halted the hearing and thereafter issued a pretrial Order directing exchange of exhibits and witness lists.

Ms. Montgomery hired new counsel on September 11, 1992, Mr. Geoffrey Treece, [268]*268who obtained a settlement of the matter. Mr. Treece submitted an Order to the Court for signature which set forth the settlement of the parties. This Order was filed and entered on October 20,1992, after which, pursuant to the agreement, the debtor filed and noticed a proposed modification to the plan.

On November 19, 1992, Ms. Montgomery filed a pro se objection to the modification, asserting that she did not agree with the terms of the settlement. At this point, Mr. Treece sought, and was granted, permission to withdraw as counsel of record for Ms. Montgomery.

On January 12,1993, the Court called the amended objection for hearing, at which time a third attorney appeared on behalf of Ms. Montgomery. Since there existed assertions that the settlement previously reached by the parties was void, the Court continued the matter in order that Mr. Treece could testify regarding his authority to settle the contested matter. On February 25, 1993, the Court once again called the matter for hearing, at which time the parties presented evidence regarding the settlement entered into between the parties.

It is questionable whether this matter is properly before the Court. The debt- or asserts that further litigation of the issues raised by the objection to the modified plan are foreclosed by virtue of the Order entered October 20, 1992. This argument has merit because there exists an Order of Court resolving the issues raised by the objection to confirmation. Until a motion is filed to set aside an Order, see, e.g., Fed.R.Bankr.Proc. 9024, the matter is concluded. Any attempt to litigate issues resolved by this Order is not properly before the Court until that Order is set aside. Cf In re North Broadway Funding Corp., 34 B.R. 620 (Bankr.E.D.N.Y.1983); Trout v. Trout, 984 F.2d 977 (8th Cir.1993) (requiring parties to follow procedural rules in filing motions). Despite these procedural infirmities, the Court heard testimony and argument on the issue of whether there exists a valid settlement as reflected in the Order of October 20, 1992.

In order for a settlement to be valid, the attorneys must be cloaked with the appropriate authority and there can be no fraud or mutual mistake as to the effect of the agreement. Boyd, 356 F.Supp. at 922-23. If the attorneys negotiating the settlement have authority from their respective clients, the agreement made by the attorneys is binding upon the clients. McKenzie v. Boorhem, 117 F.Supp. 433 (W.D.Ark.1954). Whether the attorney is clothed with the appropriate authority is a factual issue. Rowland v. Worthen Bank & Trust Company, N.A., 13 Ark.App. 139, 680 S.W.2d 726 (Ark.Ct.App.1984).

Due to court preference for settlements, “one who attacks a settlement must bear the burden of showing that the contract he has made is tainted with inval-idity_” Boyd v. Larco-Industrial Painting Corp., 356 F.Supp. 917, 922 (W.D.Ark.1973) (quoting Callen v. Pennsylvania R. Co., 332 U.S. 625, 630, 68 S.Ct. 296, 298, 92 L.Ed. 242 (1948); Accord In re North Broadway Funding Corp., 34 B.R. 620 (Bankr.E.D.N.Y.1983); Justine Realty Co. v. American National Can Co., 976 F.2d 385, 391 (8th Cir.1992). An agreement will not be set aside because one party later decides it is disadvantageous. Worthy v. McKesson Corp., 756 F.2d 1370, 1373 (8th Cir.1985).

Ms. Montgomery asserts that since Mr. Treece did not have the authority to' settle her case, the October 20,1992, Order is invalid. Upon review of the documentary evidence and after considering the testimony and demeanor of the witnesses, the Court concludes that Mr. Treece had authority from Ms. Montgomery to make an offer of settlement to debtor’s counsel. Once that offer was accepted by counsel, there existed a valid enforceable settlement agreement which was later reduced to a valid Order of Court. See McKenzie v. Boorhem, 117 F.Supp. 433 (W.D.Ark.1954).

Ms. Montgomery held two claims against the debtor. First, debtor owed approximately $17,000 in child support arrear-ages. Ms. Montgomery also obtained judgment against debtor in the amount of $14,-[269]*269250 plus interest for his failure to pay one-half of the mortgage payment on certain real property. The debtor’s plan proposed to abandon his interest in the residence in satisfaction of all debts. Clearly, this provision in the plan was insufficient under the Bankruptcy Code.

Mr. Treece, with his client’s concurrence, obtained virtually the maximum relief available to her. Under the settlement, Ms. Montgomery relinquished only the amount it would cost her to revive her state-court judgments and a full trial on the merits of her objection to the plan. The Order of October 20, 1992, incorporating the terms of the settlement agreement has four basic provisions. First, the objection to confirmation was sustained and the debtor granted twenty days to modify his plan.

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Related

Callen v. Pennsylvania Railroad
332 U.S. 625 (Supreme Court, 1948)
In Re Kye Trout, Jr. Kye Trout, Jr. v. Mary S. Trout
984 F.2d 977 (Eighth Circuit, 1993)
McKenzie v. Boorhem
117 F. Supp. 433 (W.D. Arkansas, 1954)
Matter of North Broadway Funding Corp.
34 B.R. 620 (E.D. New York, 1983)
Boyd v. Larco-Industrial Painting Corporation
356 F. Supp. 917 (W.D. Arkansas, 1973)
Rowland v. Worthen Bank & Trust Co.
680 S.W.2d 726 (Court of Appeals of Arkansas, 1984)

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Bluebook (online)
152 B.R. 266, 1993 Bankr. LEXIS 484, 1993 WL 89069, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-montgomery-areb-1993.