Court: United States Bankruptcy Court, M.D. Pennsylvania; September 26, 2013; Us Bankruptcy; United States Bankruptcy Court
An Amended Complaint has been filed by Adams County Asphalt Company (ACA) against Oldcastle, Inc. and Pennsy Supply, Inc. The Defendants have moved for summary judgment. ACA alleges that an August 15, 1995, Quarry Lease between Pennsy Supply and the quarry owner, as well as an Asset Purchase Agreement between ACA and Pennsy, are no longer valid. ACA claims to be a 'third party beneficiary' but lacks clarity on the specific agreement it refers to. It argues that it has no adequate legal remedy and that an arbitration ruling, which affirmed Pennsy's valid possession of the lease until 2015, violated the automatic stay of bankruptcy that was in effect at the time of the ruling, suggesting the arbitration is void concerning ACA.
The court emphasizes the importance of jurisdiction, referencing Stern v. Marshall and Nuveen Municipal Trust, noting that it must independently assess its jurisdiction. ACA's claim predates its bankruptcy filing, suggesting the court generally has non-core jurisdiction over prepetition claims. Since the Complaint was filed before ACA's Chapter 11 Plan confirmation, the court maintains jurisdiction. The court will now review the Defendants' Motion for Summary Judgment under Rule 56(a), which allows for summary judgment when there is no genuine dispute of material fact. The standard requires that the record must not support a rational finding for the non-moving party.
The Amended Complaint contains three Counts: Count I addresses quasi-contract, unjust enrichment, and quantum meruit; Count II pertains to promissory estoppel; and Count III seeks turnover of property to the debtor’s estate under 11 U.S.C. § 542. ACA's claims seem to stem from: 1) breach of the Asset Purchase Agreement involving ACA; 2) breach of an unspecified agreement regarding discounted product availability; 3) breach of the Quarry lease, with ACA as a third-party beneficiary; and 4) denial of rights granted to ACA by the owner. The Defendants argue that the statute of limitations for claims arising from the August 15, 1995, Asset Purchase Agreement has expired, which is supported by Pennsylvania law indicating a four-year limitation. Although bankruptcy in 2003 may extend this by two years, the initial complaint was filed after this period expired in 2006. Consequently, no cause of action under the Asset Purchase Agreement exists due to the elapsed statute of limitations, and equitable remedies are generally unavailable when an express contract exists, as established in Mitchell v. Moore.
There is a suggestion that ACA may argue wrongful denial of rights as an 'affiliate' of the property owner. The second claim relates to an alleged negotiated ability for ACA to purchase materials at a reduced rate, referencing Section 6 of the Asset Purchase Agreement, though the time elapsed undermines this argument. The third claim involves a breach of the Quarry Lease, which exists but the status of ACA as a beneficiary is disputed, presenting a material fact that could affect summary judgment. The fourth claim hinges on an unidentified agreement allowing ACA to establish a blacktop plant, allegedly based on a commitment from Robert Mumma, II, the owner’s principal. ACA contests the validity of an arbitration award favoring the Defendants, claiming it was issued during an automatic stay, and highlights an arbitration initiated by the owner to declare the Quarry lease terminated around February 25, 2010.
The arbitrator determined that the Quarry Lease remains effective until 2015. ACA's recent Amended Complaint, filed on September 21, 2010, claims the contracts are no longer valid due to denied access by the Defendants. The arbitration's outcome is crucial for both the Debtor's ability to litigate against the Defendants and ACA's assertion that the arbitration violated an automatic stay, rendering it void. If the Debtor had an interest in the Quarry Lease and the arbitration proceeded without its involvement, the Debtor's rights might be unaffected, as the arbitrator's ruling could be null for the Debtor.
ACA contests the arbitrator's conclusion about the lease's validity, arguing it is not binding; however, this argument is weakened by the fact that both ACA and the property owner are controlled by Robert Mumma, II. In December 2008, the Defendants sought to compel arbitration, which ACA opposed, claiming the contracts were terminated due to the Defendants' default. The court denied the Defendants' request for arbitration on January 28, 2009, accepting ACA's position.
The document raises concerns about ACA's strategic decision not to participate in the arbitration, suggesting that it may have been a deliberate choice to argue against being bound by its outcome later. ACA's awareness of the arbitration without intervening might support an annulment of the automatic stay under 11 U.S.C. 362(d), validating the arbitration results against ACA. Moreover, the situation presents a conflict of interest, with ACA and the property owner presenting opposing arguments in different forums, which raises integrity concerns for the court. The principle of judicial estoppel may prevent ACA from arguing now that it should have participated in the arbitration after previously opposing it.
The court addressed ACA's request to override an arbitrator's finding regarding the Quarry Lease, emphasizing the importance of respecting contractual agreements and the arbitration process. The court noted that the Debtor's cause of action hinges on the termination of the Quarry Lease, which the arbitrator ruled was still valid until 2015. Consequently, without the lease being terminated, ACA lacks a basis for claims against the Defendants that are not rooted in the contract. The court acknowledged the non-core status of the matter, permitting it to submit findings of fact and conclusions of law to the District Court, which the parties consented to. The court granted the Defendants' Motion for Summary Judgment, reaffirming that the Quarry Lease was initially established under the ownership of Robert M. Mumma, II's trust and later transferred to Mann Realty, while asserting that ACA, as a potential affiliate, might possess certain rights depending on the lease's validity. Additionally, a dialogue between the court and the Debtor's counsel highlighted the decision point regarding the direction of the litigation, with the counsel asserting the absence of a valid agreement, which would negate the basis for arbitration. Thus, the court concluded that without a valid contract, arbitration could not be compelled.
