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Marcus v. F.H. Lawson Co. (In re F.H. Lawson Co.)
Citations: 97 B.R. 895; 1989 Bankr. LEXIS 469Docket: Bankruptcy No. 1-88-01054
Court: United States Bankruptcy Court, S.D. Ohio; February 17, 1989; Us Bankruptcy; United States Bankruptcy Court
A dispute has arisen in a Chapter 11 bankruptcy case regarding the sale of real estate owned by the debtor, F.H. Lawson Company, specifically Plant No. 2. The court has jurisdiction under 28 U.S.C. 1334(b) and identifies the matter as a core proceeding. The debtor initially contracted to sell the property to Peter Marcus, trustee, on January 15, 1988, with a closing date set for April 1, 1988. However, the bankruptcy was filed on March 25, 1988, prior to the closing. The parties later executed a second contract on May 13, 1988, reducing the sale price from $385,000 to $380,000 and including conditions for court approval and addressing potential contamination issues. This second contract explicitly states that it supersedes the earlier January contract. Objections to the second contract were raised by the City of Cincinnati and the Creditors’ Committee, leading the court to sustain those objections based on the city's offer to pay more than the agreed contract price. Currently, movants have filed a motion under 11 U.S.C. 365(d)(2) to set a date for the assumption or rejection of the January 14, 1988 contract. However, there is a critical question regarding the existence of that contract due to the May 13, 1988 contract's express statement of supersession. If the January contract is deemed non-existent, the movants would have no basis to claim breach of that agreement, a position supported by the debtor's assertion that the January contract cannot be assumed or rejected. The May 13, 1988 contract was intended by the parties to replace the earlier January 14, 1988 contract, thereby superseding it. The intention of the parties, clearly expressed in the May 13 document, governs the contractual relationship, negating the need for parol evidence. The May 13 contract is recognized as a 'substituted contract,' discharging the January contract. Movants argue that the debtor lacked authority to terminate the January contract or enter into the May contract without Bankruptcy Court approval. These arguments are rejected. The assertion regarding 11 U.S.C. 365, which governs the assumption or rejection of executory contracts, does not limit the debtor's ability to supersede a contract. The Bankruptcy Code does not impose such limitations, allowing a debtor-in-possession the flexibility to act in the best interest of creditors. Additionally, the claim that a contract is void without prior court authorization is unfounded, as 11 U.S.C. 363(b) only outlines procedural requirements for selling estate property and does not affect the validity of contracts entered into by a debtor-in-possession prior to obtaining court approval. As the movants' arguments lack merit, the motion to contest the validity of the contracts will be denied.