Opinion
CIV. NO. 3:98-CV-1395-G.
Filed March 28, 2000.
MEMORANDUM ORDER
Before the court is the motion of the defendants Richard F. Toussaint and Gary W. Ketter (collectively, the "defendants") to alter or amend this court's judgment, pursuant to FED. R. Civ. P. 59(e). For the following reasons, the defendants' motion is denied.
I. BACKGROUND
On January 7, 2000, this court granted the motion of the plaintiffs Continental Casualty Company and American Casualty Company of Reading, Pennsylvania (collectively, "Continental") for summary judgment. See generally Continental Casualty Company v. Paredes, 3:98CV1395G, 2000 WI. 12903 (N.D. Tex. Jan. 7, 2000). As part of that order, the court wrote:
The defendants also attempt to raise an issue of material fact with regard to the Little Rock Project by asserting that, after obtaining relief from the automatic stay, Continental did not dispose of the defendants' collateral in a commercially reasonable manner under Article 9 of the Uniform Commercial Code. Response at 10-12. However, the use of the materials and equipment for their intended purpose on the project was the result of an Order of the bankruptcy court to lift the automatic stay, and is, therefore, conclusively deemed to have been commercially reasonable. See Order to Modify Automatic Stay, attached as Exhibit 9 to Motion; Reply at 10; TEX. BUS COM. CODE ANN. § 9.507(b) (Vernon 1991) ("A disposition which has been approved in any judicial proceeding or by any bona fide creditors' committee or representative of creditors shall conclusively be deemed to be commercially reasonable . . ."). The defendants have failed to raise any genuine issue of material fact with regard to this issue, either.Id. at *6.
The defendants now argue that this court erred in concluding that they failed to raise a genuine issue of material fact regarding the commercial reasonableness of Continental's disposition of the defendants' collateral. See Defendants' Brief in Support of Defendants' Motion for New Trial and for Reconsideration of Summary Judgment ("Motion") at 2. They contend that this disposition should not have been conclusively deemed commercially reasonable, because the Bankruptcy Court only granted Continental relief from the automatic stay and did not "approve" of any disposition of the collateral in connection with the order. Id. at 2-3. The defendants contend that there is a fact issue regarding Continental's failure to give them adequate notice before disposing of their collateral, as is required for debtors protected by Section 9.504 of the Texas Business and Commerce Code, and that this fact issue precludes summary judgment. Id. at 8-10.
II. ANALYSIS A. Standard of Review Pursuant to Fed.R.Civ.P. 59(e)
The clerk entered judgment in this case on January 24, 2000. The defendants filed their motion to reconsider this court's judgment on January 31, 2000. The court treats this motion, filed less than ten days after dismissal, as a motion to alter or amend judgment under FED. R. Civ. P. 59(e). See Lavespere v. Niagara Machine Tool Works, Inc., 910 F.2d 167, 173 (5th Cir. 1990) (holding that in context of final judgment, motion for "reconsideration" is treated as Rule 59(e) or 60(b) motion, depending on when served), abrogated on other grounds, Little v. Liquid Air Corporation, 37 F.3d 1069 (5th Cir. 1994) (en banc); Artemis Seafood, Inc. v. Butcher's Choice, Inc., 3:98-CV-0282d 1999 WL 1032798, at *1 (N.D. Tex. Nov. 10, 1999) (Fitzwater, J.) (same). "Because Rule 59(e) is not subject to the limitations of Rule 60(b), the district court has considerable discretion in deciding whether to reopen a case in response to a motion for reconsideration arising under the former rule." Lavespere, 910 F.2d at 174.
The defendants argue that, as a matter of law, an order granting relief from an automatic stay does not "approve a disposition of collateral" or otherwise excuse a creditor from complying with applicable state law in disposing of its collateral or enforcing its rights and remedies. Motion at 3, 7-10. They contend that the order lifting the stay only restores the parties to the legal relationships that existed before the stay became operative. Id. at 4-5. The court agrees with this statement of the law, see, e.g., Matter of Winslow, 39 B.R. 869, 871 (Bankr. N.D. Ga. 1984) ("An order which lifts the automatic stay returns the parties to the legal relationships that existed before the stay became operative."); Pemelton v. Russell Trusts Partnership, 913 S.W.2d 710, 713 (Tex.App.-Corpus Christi 1995, no writ) ("The hearing on a motion for relief from stay is meant to be a summary proceeding, and the statute requires the bankruptcy court's action to be quick. Accordingly, such hearings do not involve a full adjudication on the merits of claims, defenses, or counterclaims, but simply a determination as to whether a creditor has a colorable claim to property of the estate."), and its earlier opinion should not be read to imply otherwise.
However, the controlling law prior to the initiation of the bankruptcy proceedings gave Continental the right to use the equipment and material (deemed by the defendants as their "collateral") for completion of the project separate and apart from any security interest governed by Chapter 9 of the Texas Business and Commerce Code. Paragraphs 8 and 9 of the General Agreement of Indemnity signed by the parties provide as follows:
8. In the event the Indemnitors, or any of them, shall . . . (g) have proceedings instituted against them, or any of them, the effect of which may be to deprive any of them of the use of any part of the equipment used in connection with the work under the contract so as to hinder, delay or impede the normal satisfactory progress of the work, the Company shall have the right, but not the obligation, to take possession of the work under the contract and under any other contract in connection with which the Company has given its bond or bonds within the purview of this General Agreement of Indemnity and, at the expense of the Indemnitors, to complete the contract(s), or cause, or consent, to the completion thereof.
9. The Indemnitors hereby assign, transfer, and set over to the Company (to be effective as of the date of such bond or bonds, but only in the event of default as aforesaid), all of their rights under the contract(s), including their right, title and interest in and to all subcontracts let in connection therewith; all machinery, plant, equipment, tools and materials which shall be upon the site of the work or elsewhere for the purposes of the contract(s), including all materials ordered for the contract(s); and all other sums due under the contracts(s) at the time of such default, or which may thereafter become due, and the Indemnitors hereby authorize the Company to endorse in the name of the payee, and to receive and collect any check, draft, warrant or other instrument made or issued in payment of any such sum, and to disburse the proceeds thereof.
Plaintiffs' Brief in Support of Plaintiffs' Response to Defendants' Motion for New Trial and for Reconsideration of Summary Judgment and Request for Hearing ("Response") at 5-6 (quoting General Agreement of Indemnity ("Agreement") ¶¶ 8, 9).
The Agreement is in the summary judgment record as Attachment 7 to the Affidavit of Derryl B. Card.
These contractual provisions clearly gave Continental the right to take possession of all material and equipment as necessary to complete the project. Therefore, even if this court assumes that the earlier Bankruptcy Court order did not constitute judicial approval of Continental's proposed use of the defendants' collateral, but instead only returned the parties to a position whereby Continental could dispose of the collateral in the manner dictated by the parties' Agreement, it reaches the same result with regard to Continental's motion for summary judgment.
After reviewing the record again in this case, this court remains convinced that to argue that the purpose of the bankruptcy court in lifting the stay was anything other than to allow Continental to complete the project (in part by incorporating the subject equipment and material into the project as intended) is clearly disingenuous. The record leads to no other conclusion. See, e.g., Letter from Stephen Ruschak to C. Bill Paredes, attached as Exhibit 6 to Plaintiffs' Motion for Summary Judgment ("Motion") ("[Continental] has filed a motion to lift stay with respect to that project in order to get the court's consent to respond to Little Rock's demand on its performance bond."); Letter from Dan F. Hamilton, General Counsel for Little Rock Wastewater Utility, to Parsons Systems Engineers, Inc., attached as Exhibit 8 to Motion ("The allegations of [Continental's] pending motion for relief from the bankruptcy stay accurately reflect the current status of this matter. The Utility intends to join in this motion, if necessary, subject to the court's approval so that the project can be completed as economically and expeditiously as possible without further delay since time is of the essence."); Transcript of Proceedings before the bankruptcy court on August 28, 1996 at 12-13 ("Their [defendants'] work has been unsatisfactory. They've had numerous personnel changes that have slowed down the job. There is approximately $179,000 worth of unpaid accounts for equipment purchased by [sic] not paid for by the debtor. . . . The debtor has not been on the job for 30 days. The debtor was defaulted on the job prior to bankruptcy. Demand has been made on the surety to complete the job for which a performance bond has been issued. . . . All we're asking for is to have the stay lifted so that the surety can perform as they've — as demand has been made on them to perform by the Little Rock Water Utility district.").
The court also notes that it has assumed for the purposes of this motion that the defendants were "debtors" within the meaning of Article Nine of the Texas Business and Commercial Code, although "[w]here the debtor and owner of the collateral are not the same person, the term `debtor' means the owner of the collateral in any provision of the chapter dealing with the collateral." TEX. BUS. COM. CODE ANN. § 9.105(a)(4) (Vernon Supp. 2000). There is no evidence in the record that the defendants here owned the disputed assets or that they had any rights in the equipment assigned to them by the owner. Continental also points to evidence that the defendants had never paid for the assets, that Continental was ultimately responsible for completion of the project, and that the assets in questions were purchased exclusively for and included within the cost of the project. Response at 4.
III. CONCLUSION
For the above reasons, the defendants' motion to alter or amend this court's judgment is DENIED.SO ORDERED.