Ramco-Remodel America Corp. v. Wallis (In re Ramco-Remodel America Corp.)

536 B.R. 213
United States Bankruptcy Court, W.D. Tennessee·Decided August 11, 2015·No. Case No. 09-20539; Adv. Proc. No. 13-00522·Published·Cited by 2 cases

Opinion

MEMORANDUM AND ORDER RE PLAINTIFF’S COMPLAINT AND DEFENDANTS’ ANSWER THERETO COMBINED WITH RELATED ORDERS AND NOTICE OF THE ENTRY THEREOF

David S. Kennedy, UNITED STATES CHIEF BANKRUPTCY JUDGE

INTRODUCTION

This adversary proceeding arises out of a declaratory judgment complaint filed pursuant to Fed. R. Bankr.P. 7001(9) by the plaintiff-debtor, Ramco-Remodel America Corporation (“Rameo”), and the answer filed in response thereto by the creditors/defendants, William and Barbara Wallis (collectively, “the Wallises”), in the above-captioned Chapter 11 case of Ram-eo.

The specific and ultimate question for judicial determination here is whether a postpetition, court approved lump sum cash payment of $5,000 from Rameo to the Wallises constituted a full and complete satisfaction and resolution of a prepetition claim that the Wallises asserted against Rameo, a corporate entity, and also Les W. Stone, president of Rameo (“Mr.Stone”), or, instead, whether the $5,000 payment was merely and solely consideration for the withdrawal of the vote cast by the Wallises rejecting confirmation of the corporate plan of reorganization proposed by Rameo. A subsequent December 30, 2009 Consent Order (“Consent Order”), discussed more fully hereinafter, was entered into by Rameo and the Wallises to memorialize this transaction.

[215] This is a core proceeding under 28 U.S.C. § 157(b)(2)(A)-(B). The following shall constitute this court’s findings of fact and conclusions of law in accordance with Rule 7052 of the Federal Rules of Bankruptcy Procedure.

BACKGROUND FACTS AND PROCEDURAL HISTORY

The relevant background facts and procedural history may be briefly summarized as follows. Before'the filing of the this Chapter 11 case, the Wallises filed a civil action lawsuit against both Rameo and Ramco’s president, Mr. Stone, individually, in the County Court of Desoto County, Mississippi, for asserted damages resulting from contract work performed by Rameo on the Wallises’ personal residence. On January 14, 2008, the Wallises obtained a default judgment against both Rameo and Mr. Stone in the amount of $51,872.18 which was subsequently recorded in Shelby County, Tennessee. Rameo commenced this voluntary Chapter 11 case on January 26, 2009. The Wallises timely filed a proof of claim against the estate of Rameo in the amount of $56,747.80, arising from the aforementioned prepetition default judgment obtained in Desoto County, Mississippi.

Rameo filed an objection to the Wallises’ proof of claim essentially asserting that their claim against Rameo concerned a prepetition disputed judgment and should, therefore, be disallowed. Rameo later filed its proposed Chapter 11 plan (“the Plan”), which provided, in relevant part, that the Wallises, as a Class 7 general unsecured creditor, would receive a monthly distribution of $833.33 for their prepetition claim over a period of 36 months. The Wallises rejected and voted against confirmation of Ramco’s plan.1

In an effort to resolve the Wallises’ objection to the corporate plan of reorganization, Rameo negotiated a Consent Order with the Wallises, whereby the Wallises withdrew their prior vote rejecting Ram-co’s plan in exchange for a lump sum cash payment of $5,000. The resulting Consent Order is the underlying document that actually is the basis of this adversary proceeding. The Consent Order provided, in pertinent part, that “consideration for the withdrawal of the Ballot [rejecting the proposed plan] is the payment to Wallis by Debtor of Five Thousand Dollars ($5,000.00) on or before January 30, 2010.” [Docket # 93]. The remainder of the Consent Order provided consequences of nonpayment and the remedies available to the Wallises in the event of future default.

Rameo subsequently filed this adversary proceeding seeking a declaratory judgment that the Consent Order agreed to by. Rameo and the Wallises, outlining the lump sum cash payment given in exchange for the withdrawal of the Wallises’ rejection to Ramco’s plan, also was intended as a full release of Mr. Stone from further liability. It is noted that Mr. Stone was neither a party nor a signatory to this Consent Order. Rameo and Mr. Stone allege that the parties “negotiated terms to resolve the objection to the confirmation as well as the entire debt.” [Docket # 1]. Moreover, the complaint states that the Consent Order was “intended to resolve the debt as to all parties, not simply the Debtor/Plaintiff’ Id. (emphasis added). [216] That is, Rameo asserts that Mr. Stone also was released from the prepetition judgment against him. The Wallises, on the other hand, denied that “they settled any claim against any non-debtor,” which would, in this case, be Mr. Stone. The Wallises claim that the $5,000 lump sum payment was consideration merely and solely for withdrawal of their ballot rejecting Ramco’s corporate plan rather than an absolute settlement of the claim in its entirety against both Rameo and a release of Mr. Stone. [Docket #2], The Wallises specifically point out that Ramco’s reorganization plan similarly fails to provide for the release of any co-debtors (e.g., Mr. Stone).

The Consent Order giving rise to this adversary proceeding was negotiated by John E. Dunlap, Esquire (“Mr.Dunlap”), then attorney for Rameo, and Mr. Earl Buckles (“Mr. Buckles”), then attorney for the Wallises. On a limited basis, Mr. Dunlap with court approval, has withdrawn from representation of Rameo in this adversary proceeding in order that he might serve as a trial witness to account for the substance of the settlement negotiations, as well as the parties’ intent, embodied in the Consent Order referred to above. Mr. Dunlap remains the attorney of record in the main Chapter 11 case, just not this particular adversary proceeding. Mr. Buckles, unfortunately, died after the confirmation of Ramco’s corporate plan.

On March 10, 2015, the Wallises filed “Defendants’ Motion In Limine” seeking, inter alia, to exclude any testimony at the trial of this adversary proceeding offered by Mr. Dunlap regarding the substance of postpetition/pre-confirmation discussions and negotiations exchanged between himself and Mr. Buckles arising out of this particular transaction. The court held a hearing on the motion in limine on April 28, 2015, and issued a written opinion granting the Wallises’ Motion in Limine on May 7, 2015. However, the court allowed Rameo to make an offer of proof, in “question and answer form,” as to the testimony that Mr. Dunlap would have provided had his testimony been admissible in order to preserve the quality of the trial court record.2 The court held a trial on the merits of this declaratory judgment action on August 4, 2015, whereby Mr. Stone, Mr. Dunlap (as an offer of proof), and Mr. Wallis testified. The court took the matter under submission.

DISCUSSION

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Ramco-Remodel America Corp. v. Wallis (In re Ramco-Remodel America Corp.), 536 B.R. 213 (Tenn. 2015).

536 B.R. 213 (Ramco-Remodel America Corp. v. Wallis (In re Ramco-Remodel America Corp.)) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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