Appendix — Fishell v. Soltow

Supreme Court brief1995

Ask Donna

What actually matters in this document.

Text

95 20 Jol 199%

IN THE

SUPREME COURT OF THE UNITED STATES

October Term 1994

RICHARD L. FISHELL

and

DOROTHY M. FISHELL

Petitioners

ROBERT SOLTOW

and

ROSALEE SOLTOW

and

JOHN A. PORTER, Trustee

Respondents

PETITION FOR WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

APPENDIX VOLUME I

Lester N. Turner

1005 Timber Pass

Harbor Springs, MI

49740

(616) 526-9222

Counsei for Petitioners

No 94-1109

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

ORDER FILED

Apr 06 1995

IN RE: Leonard Green, Clerk

Richard L. Fishell and

Dorothy M. Fishel]

Debtors

Richard L. Fishell and

Dorothy M. Fishell

Plaintiffs-Appellants

Robert Sol tod and

Ros al ee Sol tou

Def endants- Appel lees

John A. Porter, Trustee

BEFORE: ENGEL, KENNEDY and

SUHRHEINRICH, Circuit Judges

The court having received a petition for

rehearing en banc, and the petition having

been circulated not only to the original

panel members but also to all other act: e

judges of this court, and no judge of this

court having requested a vote on the sugges-

tion for rehearing en banc, the petition

for rehearing has been referred to the

original hearing panel.

The panel has further reviewed the peti-

tion for rehearing and concludes that the

issues raised in the petition were fully

considered upon the original submission

and decision of this! ene. Accordingly,

the petition is denied.

ENTERED BY ORDER OF THE COURT

Leonard Green, Clerk pe

BEST AVAIL

No 94-1109

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

Filed

IN RE FISHELL Feb 16 1995

Leonard Green, Clerk

Debtors

Richard L Fishel l and

Dorothy M Fishel]

Plaintiffs-Appellants

v On Appeal from the

United States Dis-

trict Court for the

Pobert Soltow and Western District of

Rosalee Soltow Michigan

Defendants-Appellees

Not Recommended for

Full Text Publication

Sixth Circuit Rule 24

limits citation to

specific situations.

Please see Rule 24

before citing in a

proceeding in a court

in the Sixth Circuit.

If cited, a copy must

BLE COPY

be served on other

parties and the Court.

This notice is to be

prominently displayed

if this decision is

reproduced.

BEFORE: ENGEL, KENNEDY AND SUHRHEINRICH,

Circuit Judges

PER CURIAM. Over objection of the deb-

tors, the Bankruptcy Court approved a

compromise that settled an adversary pro-

ceeding between debtors and their primary

creditors, the Soltows. The debtors

appealed to the District Court, arguing

that the bankruptcy court abused its dis-

cretion in approving the compromise. The

District Court first ruled that debtors

lacked standing to appeal, but then pro-

ceeded to reach the merits of the appeal

and affirmed the Bankruptcy Court, hold-

ing that the court had “apprised itself

of the action's underlying facts and made

an independent judgment as to whether the

settlement was fair and equitable”. (Dist.

Ct. Op. at 10). The Debtors now appeal to

this court. We affirm.

This case traces its roots back to

1986, when Soltows loaned several hundred

thousand dollars to the Fishells. The

Fishells used the money to purchase a

certain parcel of real estate and gave the

Soltows a promissory note and mortgage on

the property. In 1988, after Fishells de-

faulted on the loan, the Fishells and the

Soltows entered into an amended agreement.

As part of this agreement, the Fishells exe-

cuted a new promissory note, which covered

the original amount of the 1986 loan, as

well as other interim, unsecured loans

made by the Soltows to the Fishells. In

return, the Soltows agreed not to start

foreclosure proceedings and extended the

time for repayment of the loan.

As part of the 1988 agreement, the

Fishells also executed a warranty deed con-

veying the property to the Soltows. This

deed was placed in escrow. According to

the escrow agreement, if the Fishells de-

faulted again, the escrow agent was 4

release the deed to the Sol tous, who

vould accept it as payment in full on the

loan. If the Fishells did pay the loan in

a timely manner, the escrow agent was to

return the deed to them.

The Fishells did indeed default, and

the escrow agent released the deed to the

Soltows in March 1989. The Soltows then

recorded the deed. In April 1989, however,

the Fishells filed suit against the Soltows

in Michigan state court, raising claims of

fraud, usury, and equitable mortgage, and

seeking to invalidate the warranty deed. In

conjunction with the suit, the Fishells

filed a notice of lis pendens. The Soltows

responded to the suit and the filing of the

notice by bringing a counterclaim for slan-

der of title.

After the state suit had been pending

for more than a year, the Fishells filed a

Chapter 11 bankruptcy petition and removed

the adversary proceeding to the Bankruptcy

Court. After the bankruptcy proceeding had

been pending for just over a year, the Uni-

ted States Trustee and several creditors

moved to have the petition converted to a

Chapter 7 proceeding. The Bankruptcy Court

granted the motion, in part because it felt

that it could no longer trust Mr Fishel]

to comply with the law. The court then

appointed a trustee to oversee the estate.

After investigating the adversary pro-

ceeding between Fishells and Soltows, the

trustee negotiated a settlement of that

litigation. The terms of the compromise

provided that both the Fishells and the

Soltows would dismiss their claims against

each other and that the court would cancel

the notice of lis pendens. The settlement

also required the Soltows to pay $2000

into the estate. In return, the Soltows

would keep the property as satisfaction for

the loan they made to Fishells. The trustee

felt this was the most expedient and fair

means of resolving the dispute and would

enable him to satisfy the claims of the pri-

mary prepetition creditors, while still re-

serving sufficient funds in the estate to

make substantial payments to the other

creditors.

On June 12, 1992, the trustee filed a

motion with the Bankruptcy Court asking it

to approve the compromise. The Fishells

objected to the compromise, but none of

the creditors objected. On July 10, 1992,

the Bankruptcy Court conducted a hearing

on the trustee's motion and issued an opi-

nion from the bench approving the settle-

ment. The Fishells appealed the decision

to the District Court, which concluded

that the Fishells did not have standing to

appeal and, even if they had standing, the

Mi Lee e *

. = 22

— *

Bankruptcy Court had not abused its dis-

cretion in approving the settlement. The

Fishells now appeal to this court.

A. Standing

Bankruptcy litigation, unlike other

proceedings, has a special doctrine of

appellate standing. Not all parties who

are entitled to notice in the bankruptcy

court are entitled to appeal the rulings

of that court. In general, only parties

to an adversary proceeding may appeal an

order settling that litigation. Courts

have, however, also created an exception

allowing other ‘aggrieved' parties to

appeal. In Re El San Juan Hotel, 809 F 2d

151, 154 (lst Cir 1987). For purposes

of the current appeal, the debtors are an

aggrieved party only if they can show

that a successful appeal would result in

an estate whose assets exceeded its lia-

bilities. Id. at 155 n 6.

rict

In ruling on this issue, the Dist-

Court stated:

The debtors contend that if the

trustee had prevailed in the ad-

versary proceeding and had suc-

cessfully defended the counter-

claim, the litigation would have

created as estate with assets in

excess of liabilities. The Deb-

tors provide proof of the proper-

ty's value and of Robert Soltow's

claim. However, they provide no

further information regarding the

estate's other assets and liabili-

ties, the cost of litigation, or

other factors regarding the liti-

gation's impact on the estate.

The court finds that the debtors

have not demonstrated that success

in the adversary proceeding would

have created an estate with assets

in excess of liabilities. Accord-

ingly, because the debtors have

not shown that they are persons

aggrieved by the bankruptcy court's

order, the debtors lack standing

to appeal.

(Dist Ct Op at 5).

The record filed with this court on

appeal does not contain everything that was

presented to the District Court. Based on

information available to us, we are unable

to say that the District Court erred in

resolving the standing issue against the

A10

—

Fishells. Even if that decision was

erroneous, however, it is clear that the

Fishells can not succeed on the merits of

their appeal.

B. Approval of Compromise

The Federal Rules of Bankruptcy

Procedure provide that

lo ln motion by the trustee and after

notice and a hearing, the court may

approve a compromise or settlement.

Notice shall be given to creditors,

the United States trustee, the deb-

tor, and indenture trustees as pro-

vided in Rule 2002 and to any other

entity as the court may direct.

Fed. R. Bankr. P. 9019. "The purpose of a

compromise agreement is to allow the trustee

and creditors to avoid the expenses and bur-

dens associated with litigating sharply con-

tested and dubious claims...The law favors

compromise and not litigation for its own

sake,... and as long as the bankruptcy

court has amply considered the various

factors that determinec the reasonableness

of the compromise, the court's decision

All

must be affirmed." In Re A & C Properties,

784 F 2d 1377, 1380-81 (9th Cir)(citations

omitted), cert denied, 479 US 854 (1986).

We review a bankruptcy court's approval of

a compromise under the abuse of discretion

standard. Id. at 1380.

The Supreme Court has declared that

[It here can be no informed and indepen-

dent judgment as to whether a proposed.

compromise is fair and equitable until

the bankruptcy judge has apprised him-

self of all facts necessary for an in-

telligent and objective opinion of the

probabilities of ultimate success

should the claim be litigated. Further,

the judge should form an educated esti-

mate of the complexity, expense, and

likely duration of such litigation,

the possible difficulties of collect-

ing on any judgment which might be ob-

tained, and all other factors relevant

to a full and fair assessment of the

wisdom of the proposed compromise.

Basic to this process in every instance,

of course, is the need to compare the

terms of the compromise with the likely

rewards of the litigation.

Protective Committee for Independent Stock-

holders of TMT Trailer Ferry, Inc. v Ander-

son, 390 US 414, 424-25 (1968). "A bankrupt-

cy judge need not hold a mini-trial or

Al2

write an extensive opinion every time he

approves or disapproves a settlement. The

judge need only apprise himself of the

relevant facts and law so that he can make

an informed and intelligent decision, and

set out the reasons for that decision. The

judge may make either written or oral fin-

dings; form is not important, so long as

the findings show the reviewing court that

the judge properly exercised his discretion."

In Re American Corporation, 841 F 2d 159,

163 (7th Cir 1987).

When evaluating the fairness and equity

of a proposed compromise, the court should

consider:

(a)The probability of success in the

litigation; (b) the difficulties, if

any, to be encountered in the manner

of collection;(c)the complexity of the

litigation involved, and the expense,

inconvenience and delay necessarily

attending it;(d)the paramount interest

of the creditors and a proper deference

to their reasonable views in the

premises.

In Re A & C Properties, 784 F 2d at 1381

(quoting In Re Flight Transportaion Corp.

Al3

Securities Litigation, 730 F 2d 1128, 1135

(8th Cir 1984), cert denied, 469 US 1207

(1985)). Although it is preferable that

these matters be addressed in the Bankruptcy

Court's opinion, “[iJf, indeed, the record

contains adequate facts to support the deci-

sion of the trial court to approve the pro-

posed compromises, a reviewing court would

be properly reluctant to attack that action

solely because the court failed adequately

to set forth its reasons or the evidence on

which they were based. Id. at 437.

While the bankruptcy court's opinion is

not quite as specific on some of these

issues as we would like, the record before

the court clearly supports the approval of

the compromise. The Bankruptcy Court had

before it the record developed in the

state court proceeding, as well as the

extensive record developed before the bank-

ruptcy court itself. The Bankruptcy Court

held several hearings and decided several

Al4

motions related to the instant proceeding.

These included motions for summary judgment

and a formal Rule 2004 examination of

Richard Fishell. Accordingly, the Bank-

ruptcy Court possessed a good deal of infor-

mation and knowledge about the dispute be-

tween the Fishells and the Soltows and how

that dispute affected the Fishells' other

creditors.

An examination of the relevant factors

Supports the Bankruptcy Court's decision to

approve the compromise. The first factor

directs the court's attention to the merits

of the adversary Proceeding. In this case,

there is not great merit to either Fishells'

or Soltows'claims. The Fishells brought

fraud, equitable mortgage and usury claims

against the Soltows arising out of the 1988

amended agreement. The fraud and equitable

mortgage claims were highly doubtful,

especially in view of Mr Fishell's extensive

experience in the real estate business.

Al5

That leaves only the usury claims, which,

while containing merit, were not for subs-

tantial sums of money, probably not what it

would cost to litigate those claims. The

Soltows’ slander of title claim is likewise

not very strong, although it might contain

sufficient merit to make it costly to liti-

gate. See e.g. Patten Corp. v Canadian

Lakes Dev. Corp., 788 F Supp 975 (WD Mich

1991); Kauffman v Shifman, 426 NW 2d 819

(Mich Ct App 1988); Sullivan v Thomas Organ-

ization, 276 NW 2d 522 (Mich Ct App 1979).

Thus, contrary to Fishells' assertions, the

positions of both parties lacked substantial

merit, and the estate did not have a strong

likelihood of winning much money.

The fact-intensive nature of the dis-

pute also means that any litigation would

be time consuming and expensive. Even if

the Fishells were completely victorious and

succeeded in revoking the deed, the estate

would still owe the Soltows more than half

Al6

a million dollars. The sol tous had taken

the deed in lieu of foreclosing on the land.

Should the deed be invalidated, the Soltows

would still have the equivalent of a mort-

gage securing their loans to the Fishells.

In addition, the Bankruptcy Court explicitly

found, the Fishells had established a pat-

tern of delaying legal proceedings, which

would only add to the estate's expenses.

The settlement al loved the Soltows to keep

the deed, required them to pay $2000 to the

estate, and left sufficient money in the

estate to make substantial payments to the

Fishells other creditors. These factors

support the conclusion that the compromise

was the most efficient and economical /way

of resolving the suit between the Fishells

and the Soltows.

The Fishells' primary argument on

appeal is that the Bankruptcy Court did not

conduct an evidentiary hearing and did not

explicitly inquire into many of the factual

Al7

issues underlying the adversary proceeding.

The court, however, is not requied to go

into the detail urged by the Fishells. The

result of any such requirement would be vir-

tually indistinguishable from a trial, which

is the very thing the compromise was designed

to avoid. The record before the Bankruptcy

Court was sufficient to conclude that those

factual matters would be time consuming to

resolve and that, regardless of the resolu-

tion, the litigation expenses would drain

more from the estate than was likely to be

recovered. Accordingly, the Bankruptcy

Court did not abuse its discretion in

approving the compromise, and the District

Court was correct to affirm that approval.

111

For the foregoing reasons, we AFFIRM

the judgment of the District Court.

Al8

UNITED STATES DISTRICT COURT

WESTERN DISTRICT OF MICHIGAN

SOUTHERN DIVISION

IN RE

Bankruptcy Court

RICHARD L. FISHELL and File No NG 90-85144

DOROTHY M. FISHELL Adv Pro No 91-8015

Debtors

RICHARD L. FISHELL and

DOROTHY M. FISHELL

File No 1:92-cv-845

Plaintiff/Appellants

Hon Benjamin F. Gibson

ROBERT SOLTOW and

ORDER

ROSALEE SOLTOW

Defendants/Appel lees

At a session of the Court held in and

for said District and Division in the

City of Grand Rapids, Michigan, this

7th day of December 1993.

PRESENT: HON BENJAMIN F. GIBSON,

U. 8. DISTRICT JUDGE

In accordance withthe Opinion dated

Al9

December 7, 1993, IT IS HEREBY ORDERED that

the United States Bankruptcy Court's July

14, 1992, Order Granting Trustee's Motion

to Approve Settlement is AFFIRMED.

IT IS FURTHER ORDERED that the follow-

ing orders of the United States Bankruptcy

Court, entered in pursuance of the July 14,

1992 Order Granting Trustee's Motion to

Approve Settlement, are AFFIRMED: Stipula-

tion and Order of Dismissal of Counter-

Claim entered July 17, 1992; and Stipula-

tion and Order of Dismissal and Cancella-

tion of Lis Pendens entered July 20, 1992.

IT IS FURTHER ORDERED that the debtors’

appeal (filed on September 3, 1992) is

DISMISSED.

IT IS SO ORDERED

ee,

BENJAMIN F. GIBSON

U.3. DISTRICT JUDGE

A20

UNITED STATES DISTRICT COURT

WESTERN DISTRICT OF MICHIGAN

SOUTHERN DIVISION

IN RE

Bankruptcy Court

RICHARD L. FISHELL and File No NG 90-85144

DOROTHY M. FISHELL ‘Adv Pro No 91-8015

Debtors

RICHARD L. FISHELL and

DOROTHY M. FISHELL

Pile No 1:92-cv-845

Plaintiff/Appellants

Hon Benjamin F. Gibson

ROBERT SOLTOW and

OPINION

ROSALEE SOLTOW

Defendants/Appellees

This case involves an appeal from an

order of the United States Bankruptcy

Court for the Western District of Michi-

gan approving a settlement of an adver-

Sary proceeding in appellants’ Chapter

A21

7 case. At issue is whether the bank-

ruptcy court abused its discretion in

approving the settlement. For the

reasons stated below, the bankruptcy

court's decision is affirmed.

In July 1986, Debtors Richard L.

Fishell and Dorothy M. Fishell (“the

debtors") and Robert Soltow entered

into a promissory note and a mortgage.

Soltow loaned the debtors $350,000.00

at 15% interest per year, with semi-

annual payments due beginning January

7, 1987, and the principal and all

accrued interest due on July 7, 1989.

The obligation was secured by a mort-

gage on a parcel of real property in

Oneida Township, Eaton County, Michi-

gan (“the property“).

The debtors did not pay any

amounts to Soltow under the promissory

note. In early 1988, Soltow notified

A22

the debtors that the loan was in default

and that he would commence foreclosure

proceedings if they did not fully repay

the loan. In resolution, on August 25,

1988, the debtors and Soltow entered

into an amended promissory note, a mort-

gage modification agreement, and an es-

crow holding agreement. The amended

promissory note had a principal sum of

$610,446.14 and included additional

monies Soltow had loaned to the debtors.

Accordingly, the amended mortgage secured

indebtedness of $610,446.14.

Under the amended promissory note,

the debtors had until February 15, 1989,

to make full payment. The escrow holding

agreement provided that Soltow would

place a mortgage discharge in escrow and

that the debtors would place an executed

warranty deed in escrow. If the debtors

did not pay the indebtedness by February

15, 1989, the escrow agent was required

A23

to release the two documents to Soltow.

Soltow would be entitled to destroy the

mortgage discharge and record the warran-

ty deed. Conversely, if by February 15,

1989, the debtors paid the full amount

owed, the escrow agent was required to

release the documents to them. The

debtors then would be entitled to des-

troy the warranty deed and record the

mortgage discharge.

The debtors did not make any pay-

ments to Soltow. Therefore, pursuant

to the escrow holding agreement, the

escrow agent delivered the warranty

deed and mortgage discharge to Soltow.

On March 16, 1989, Soltow recorded the

warranty deed in the Eaton County Regis-

ter of Deeds.

In response, the debtors filed this

action against Robert Soltow and Rosa-

lee Soltow in the Circuit Court for the

County of Eaton, Michigan. The debtors

A24

sought to cancel the warranty deed.

The debtors alleged fraud, misrepresen-

tation, lack of consideration, that the

deed was in reality a mortgage, and that

the interest on the loans was usurious.

The debtors further filed a notice of

lis pendens with respect to the property.

The Soltows filed a counterclaim, alleg-

ing that the lis pendens had slandered

title to the property.

On November 16, 1990, the debtors

filed a voluntary petition for bankrupt-

cy under Chapter 11 of the Bankruptcy

Code. Thereafter, the debtors removed

this action to the bankruptcy court.

On January 13, 1992, following a hear-

ing on motions filed by the United

States Trustee and Robert Soltow 1, the

bankruptcy court entered an order con-

verting the debtors' case from a Chap-

ter 11 proceeding to a Chapter 7 liqui-

1. Creditor Patricia Andre filed a

brief in support of the trustee's

and Robert Soltow's motions.

A25

dation. The debtors appealed and this

Court affirmed the bankruptcy co t's

decision.

The Chapter 7 Trustee hired an

attorney to investigate and evaluate

the parties’ claims in this action.

After analysing the claims and after

conducting a hearing of debtor Richard

Fishell pursuant to Federal Rule of

Bankruptcy Procedure 2004, the Trustee

filed a motion to approve settlement

pursuant to Federal Rule of Bankruptcy

Procedure 9019. The debtors presented

the only opposition to the proposed

settlement. After a hearing on July

10, 1992, the bankruptcy court approved

the settlement. The bankruptcy court

denied the debtors’ amended motion for

rehearing and/or reconsideration.

This appeal followed.

Appellees arque that the debtors

A2 6

lack standing to appeal the bankruptcy

court's order approving the settlement.

In In Re Revco DS, Inc., 898 F 2d 498,

499 (6th Cir 1990), the sixth circuit

held that in bankruptcy, appellate stan-

ding is limited to "persons aggrieved"

by the bankruptcy court's actions.2

"Persons aggrieved" are “persons with a

financial stake in the bankruptcy court's

order.” Id. (citations omitted).

The general rule is that the debtor

is not a person aggrieved. In Re MCI, Inc.

151 BR 103, 106 (ED Mich 1992). However,

2. The Sixth Circuit further held that

the “pecuniary interest" test is not the

only test for appellate standing. In

addition, "[t]he Supreme Court has held

that a public interest may also give a

sufficient stake in the outcome of a

bankruptcy case to confer appellate

standing. In Re Revco DS Inc., 898 F

2d at 499 (citations omitted). However,

the debtors do not contend that they

have appellate standing based upon the

“public interest“ test.

A27

under the following two situations a

debtor has standing to appeal a

bankruptcy court's order:

(1){I]£ a successful appeal by the

debtor would create an estate that

has assets in excess of liabiliities;

or (2) an appeal taken from orders

that affect the terms, conditions

and extent of a debtor's discharge.

Id. (citations omitted).

The debtors contend that if the trustee

had prevailed in the adversary proceeding

and had successfully defended the counter-

claim, the litigation would have created

an estate with assets in excess of liabi-

lities. The debtors provide proof of the

property's value and of Robert Soltow's

claim. However, the provide no further

information regarding the estate's other

assets and liabilities, the costs of liti-

gation, or other factors regarding the

litigation's impact on the estate. The

Court finds that the debtors have not

demonstrated that success in the adversary

A28

proceeding would have created: an estate

with assets in excess of liabilities.

Accordingly, because the debtors have not

shown that they are persons aggrieved by

the bankruptcy court's order, the debtors

lack appellate standing.

111

Even if the debtors were persons ag-

grieved by the bankruptcy court's order,

this court finds that the bankruptcy

court did not abuse its discretion in

approving the settlement. Federal Rule

of Bankruptcy Procedure 9019(a) provides:

On motion by the trustee and after

a hearing on notice to creditors,

the United States Trustee, the deb-

tor and indenture trustees as pro-

vided in Rule 2002 and to such

other entities as the court may

designate, the court may approve

a compromise or settlement.

q Thus, the bankruptcy court must review all

settlements to determine whether they are

fair and equitable:

In bankruptcy proceedings, as dis-

A29

tinguished from ordinary civil

cases, any compromise between the

debtor and his creditors must be

approved by the court as fair and

equitable. Protective Committee

for Independent Stockholders of

TMT Trailer Ferry v Anderson, 390

US 414, 424, 88 S Ct 1157, 1163,

20 L Ed 2d 1 (1968); In Re A&C

Properties, 784 F 2d 1377, 1381

(9th Cir) cert denied 479 US 854,

107 S Ct 189, 93 L Ed 2d 122 (1986).

In considering a proposed compro-

mise, the bankruptcy court is

charged with an affirmative obli-

gation to apprise itself of the

underlying facts and to make an

independent judgment as to whether

the compromise is fair and equit-

able. In Re American Reserve Corp.

841 F 2d 159, 162-63 (7th Cir 1987).

The court is not permitted to act

as a mere rubber stamp or to rely

on the trustee's word that the

compromise is reasonable“. Id.

at 162.

Reynolds v Commissioner, 861 F 2d 469, 473

(6th Cir 1988); see also Bauer v Commerce

Union Bank, 859 F 2d 438, 441 (6th Cir 1988)

cert denied 489 US 1079 (1989).

This court reviews the bankruptcy court's

decision to approve the settlement for an

abuse of discretion. In Re A & C Properties,

784 F 2d at 1380; In Re American Reserve

Corp., 841 F 2d at 162. As the moving party,

A30

the trustee bears the burden of persuading

the bankruptcy court that the settlement is

fair and equitable and that the court should

approve the settlement. In Re A & C Proper-

ties, 784 F 2d at 1381. In analyzing a set-

tlement, “the court is obligated to weigh

all conflicting interests in deciding whether

the compromise is "fair and equitable", con-

sidering such factors as the probability of

success on the merits, the complexity and

expense of litigation, and the reasonable

views of creditors.” Bauer, 859 F 2d at 441

(citing In Re American Reserve Corp., 841

F 2d at 161). When examining a proposed

settlement, “[t]Jhe bankruptcy judge may

give weight to the opinions of the trustee,

the parties, and their attorneys." In Re

A & C Properties, 784 F 2d at 1384 (cita-

tion omitted).

In essence, the bankruptcy court must

make an independent judgment that a pro-

posed settlement is fair and equitable:

A31

As we have recognized in other con-

texts the abuse of discretion stan-

dard recognizes that because of the

bankruptcy judge's unique position,

second-guessing by appellate courts

will do little to improve upon bank-

ruptcy judge's decisions.

In exercising his discretion, the

bankruptcy judge must also give the

reviewing court some basis for dis-

tinguishing between well-reasoned

conclusions arrived at after compre-

hensive consideration of all rele-

vant factors, and mere boilerplate

approval...unsupported by evaluation

of the facts or analysis of the law”.

TMT Trailer Ferry, 390 US at 434, 88

S Ct at 1168. In other words, the

bankruptcy judge must make findings

and explain his reasoning sufficient-

ly to show that he examined the pro-

per factors and made an informed and

independent judgment.

In Re American Reserve Corp., 841 F 2d at

162 (citations omitted). However, the bank-

ruptcy court is not required to hold a mini-

trial or write an extensive opinion:

The judge need only apprise himself

of the relevant facts and law so

that he can make an informed and

intelligent decision, and set out

the reasons for his decision. The

judge may make either written or

oral findings; form is not impor-

tant, so long as the findings show

the reviewing court that the judge

A32

properly exercised his discretion.

In Re American Reserve Corp., 841 F 2d at

163. Therefore, "as long as the bankruptcy

court amply considered the various factors

that determined the reasonableness of the

compromise, the court's decision must be

affirmed. In Re A & C Properties, 784 F 2d

at 1381 (citation omitted).

At the July 10, 1992, hearing on the

trustee's motion to approve settlement, the

trustee's attorney and the Sol tous counsel

presented arguments in favor of the settle-

ment. No creditor opposed the proposed

settlement. The debtors made the only ob-

jections to the motion. The debtors did not

introduce evidence or testimony in opposi-

tion to the settlement.

The bankruptcy court stated that it

had read all briefs that were timely filed.

The bankruptcy court further specifically

stated that the court had read the debtors'

brief in opposition to the settlement.

A33

During the debtors’ presentation at the

hearing, the debtors filed an additional

brief with the court. The debtors’ attor-

ney acknowledged that the court would not

have time to read the brief during the

hearing and he stated that therefore he

had argued the brief s contents. Addi-

tionally, the release and settlement agree-

ment attached to the trustee's motion to

approve settlement contained a summary of

underlying facts and procedural history

along with the factors upon which the

settlement was based.

After hearing arguments by attorneys

for the trustee, the Soltows, and the

debtors, the bankruptcy court reviewed

the underlying facts of the action and

its procedural history. The court found

that the adversary proceeding had a long

history of delays and that if the action

were not settled, more delays would fol-

low. The bankruptcy court further found -

A34

that the debtors had repeatedly delayed

the action and stated that in the court's

opinion the debtors did not want the

action to come to trial. |

The bankruptcy court next commented

upon the merits of the claim and stated

that the debtors may have had a claim for

usurious interest. The bankruptcy court

was familiar with the parties' legal

theories. At the July 10, 1992, hearing,

the debtors' attorney acknowledged that

the court had held numerous hearings in

this action, including a hearing on the

Soltows’ and the debtors’ motions for

summary judgment. The debtors’ attorney

further stated that both parties had filed

„substantial“ motions for summary judgment.

This Court notes that the parties had ex-

tensively briefed the motions and their

respective opposition. The court finds

that the bankruptcy court's comments dur-

ing the July 10, 1992 hearing demonstrated

A35

that it was well versed in the law under-

lying the adversary proceeding.

The bankruptcy court further noted

that no creditor had objected to the pro-

posed settlement. The court noted that

the debtors had presented the only objec-

tion. The bankruptcy court stated that

in the court's opinion the debtors wanted

to create further expense, which the trus-

tee was trying to avoid. The bankruptcy

court stated that, generally, courts en-

courage settlements and that parties

usually are better able that the court to

settle actions on a reasonable basis.

Based upon its findings and analysis, the

bankruptcy court approved the proposed

settlement .3

3. Further, at the August 21, 1992,

hearing regarding the debtors’ motion

for rehearing of the order approving

settlement, the bankruptcy judge again

discussed the underlying facts and pro-

cedural history. The bankruptcy judge

again stated that the debtors had re-

peatedly delayed the action. The bank-

ruptcy court noted that the debtors

A36

Based upon review of the record in

this action, the Court finds that the

bankruptcy court fulfilled its affirm-

ative obligation to apprise itself of

the action's underlying facts and to

make an independent judgment as to

whether the proposed settlement was

fair and equitable. The Court further

finds that bankruptcy court's opinion

demonstrates that the court amply con-

sidered the various factors that deter-

mined the reasonableness of the proposed

settlement. Therefore, the bankruptcy

court did not abuse its discretion in

approving the settlement. Accordingly,

J. (ent.

presented the only opposition to the

settlement and that no basis existed

for their objections. The bankruptcy

court concluded that "the Court felt

that the settlement was reasonable and

the court approved of the settlement."

Accordingly, the bankruptcy court denied

the debtors'. motion for rehearing.

A37

the bankruptcy court's July 14, 1992,

Order Granting Trustee's Motion to

Approve Settlement is affirmed.

aml Oe

BENJAMIN F. GIBSON

U.S. DISTRICT JUDGE

Dated: December 7, 1993

A38

UNITED STATES BANKRUPTCY ‘COURT

FOR THE WESTERN DISTRICT OF MICHIGAN

IN RE

Chapter 7

RICHARD L. FISHELL and Hon David E. Nims Jr

Case No NG90-85144

DOROTHY M. FISHELL

Debtors )

ORDER DENYING MOTION FOR

RECONSIDERATION AND AWARDING

SANCTIONS

At a session of said Court held

in the U.S. Bankruptcy Court,

Western District of Michigan,

this 25th day of August 1992.

PRESENT: HON DAVID E. NIMS, JR.

U.S. Bankruptcy Judge

The Debtors’ Amended Motion for Re-

hearing and/or Reconsideration of an

Order approving the settlement of a

certain adversary proceeding between

the debtors, as plaintiffs, and Robert

and Rosalee Soltow, as defendants (Ad-

versary Proceeding No: 91-8015), having

come before the court, the court having

heard argument of counsel and finding

A39

that there is no basis for the Debtors’

Motion and that the imposition of sanc-

tions under Federal Rule of Bankruptcy

Procedure 90ll(a) is warranted, the

court being otherwise fully advised in

the premises;

NOW, THEREFORE, IT IS HEREBY

ORDERED that the Debtors’ Amended Motion

for Rehearing and/or Reconsideration of

Order Approving Settlement be and hereby

is denied.

IT IS FURTHER ORDERED that Roger L.

Fishell, the attorney signing the motion,

shall pay to Robert Soltow and Rosalee

Soltow, through their counsel, Mark A. Bush,

the sum of one thousand and 00/100

($1,000.00) dollars and shall pay the

Chapter 7 Trustee, John A. Porter, the sum

of five hundred and 00/100 ($500.00)

dollars as sanctions for violating Federal

Rule of Bankruptcy Procedure 9011.

IT IS FURTHER ORDERED that a copy of

A40

this order be served by ordinary first-

class mail upon the following interested

parties: Richard L. and Dorothy M. Fishell,

13625 Tallman Road, Eagle, MI 48220; Roger

L. Fishell, Esq., 1900 Main Street, Suite

214, Sarasota, FL 34236; Robert and Rosalee

Soltow, 13665 Taliman Road, Eagle, MI 48822:

Mark A. Bush, Esq., Fraser, Trebilcock,

Davis & Foster, 1000 Michigan National

Tower, Lansing, MI 48933; John A. Porter,

Esq., 622 Commerce Building, Grand Rapids,

MI 49503; Harold E. Nelson, Esq., Clary,

Nantz, Wood, Hoffius, Rankin & Cooper, 500

Calder Plaza Building, 250 Monroe Avenue,

N. N., Grand Rapids, MI 49503; and U. 8.

Trustee, 190 Monroe Avenue, N. F., Suite

200, Grand Rapids, MI 49503.

/s/

Hon David E. Nims Jr.

U. 8. Bankruptcy Judge

Return service copies to:

Harold E. Nelson, Esq.

500 Calder Plaza Building

250 Monroe Avenue, NW

Grand Rapids, MI 49503 z

UNITED STATES BANKRUPTCY COURT

WESTERN DISTRICT OF MICHIGAN

In re

RICHARD & DOROTHY FISHELL

Debtors Case No NG90-85144

RICHARD & DOROTHY FISHELL

Plaintiffs

v Adv Pro No 91-8015

ROBERT & ROSALIE SOLTOW

Defendants

APPEARANCES:

ROGER L. FISHELL, ESQ.

1900 Main St #214

Sarasota, FL 34236

On behalf of the Debtors

MARK A. BUSH, ESQ.

1000 Michigan National Tower

Lansing, MI 48933

On behlf of the Sol tous

HAROLD E. NELSON, ESQ.

500 Calder Plaza

Grand Rapids, MI 49503

On behalf of the Trustee

TRANSCRIPT

This is a transcript of the hearing on

the Motion for Rehearing held on Friday,

A42

August 21, 1992, at Grand Rapids, Michigan

before the HONORABLE DAVID E. NIMS, JR.,

U.S. Bankruptcy Judge. (p2)

The Clerk: Richard and Dorothy Fishell.

The Court: This case is before the

court for a hearing on the motion for

rehearing of an order approving a settle-

ment. Record may indicate the appearance

of Mr Roger L Fishell, Attorney for the

Debtors. Are there any other appearances?

Mr Bush: Yes, your Honor. Mark Bush on

behalf of Mr and Mrs Soltow.

The Court: Any--

Mr Nelson: Your Honor, Harold Nelson

representing the Chapter 7 Trustee, John

Porter, and the record should reflect

that Mr Porter is also in the court-

room.

The Court: All right. Any other

appearances? Apparently not.

Mr Fishell you may proceed.

Mr Fishell: Your Honor, this is a

A43

motion for rehearing as to the court's

prior approval of the settlement of the

adversary proceeding of the Fishells v.

Soltow. Much of--Much of the grounds

that are alleged in the motion for re-

hearing have been touched upon by both

Mr Turner at the hearing approving the

settlement and by myself at the prior

hearing on the objection to Mr Soltow's

claim. Now primarily the basis for the

objection and the request for rehearing,

aside from the fact that we contend that

the settlement was not within the realm

of reasonableness, is that it's generally

construed in (p3) the rules and in the

case law is that the manner in which the

court entered upon its consideration of

that settlement proposal in reaching the

conclusion that the case should be set-

tled. Now these matters are not insig-

nificant. This involves a substantial,

probably the most substantial potential

ASS

asset that the estate held in this case.

Hearings at which settlements are

made and approved are designed to be

something more than just merely going

along with what the trustee and the

creditor have entered into on their own.

It's not supposed to be something that

the court approves just as a matter of

form. The rule on approving settlements

contemplates something in the order of

an evidentiary hearing. Witnesses should

be examined, if--if the issues call for

it. I think there needs to be something

in the record.

The Court: Didn't you have an oppor-

tunity to present witnesses at the

hearing?

Mr Fishell: Your Honor, if you will

recall, at the hearing, Mr Turner was

present on behalf of the Debtors argu-

ing in opposition. Now under the rule,

the Trustee or the proponent of this

A45

settlement has the burden of proving

to the court, establishing adequate

grounds for approval of that sett le-

ment. There were no witnesses called

by either Mr Soltow or the trustee.

This is the major problem that I had--

that I do have with the manner in

which this was approved. It's not a

question of whether I can parade in

12 witnesses to (p4) testify to this,

that or the other thing.

The Court: Well, one--one--Just a

moment. One of the purposes of a

sett lenent is to avoid a lot of time

by the court and a lot of expense for

the other parties, and that's the

whole purpose of the settlement. An

officer of this court has come and

has presented this as being a good

settlement. No creditor objected. The

only ones that have objected is the

debtor himself and I am not sure that

A46

the debtor has even a position to be

heard on this but we have allowed him

to be heard. And he could have brought

in any testimony he wanted, if he |

desired to do so.

Mr Fishell: Your Honor, I understand

that. I believe the debtor has standing

in this case. This is not a no asset

case. The debtor certainly has standing

to object to a settlement of this

nature. Secondly, it's not the burden

on the party opposing the settlement

to come forward with evidence to show

that the settlement should not be

approved. The burden of proof is on the

proponents of the settlement to esta-

blish---

The Court: No. No. No.

Mr Fishell: --in the record before

the court so the court can have an ade-

quate basis to determine whether that

settlement meets the standards of

A47

reasonableness or not. The record can't

simply be devoid of anything in the way

of evidence or testimony that supports

the reasonableness of that settlement.

And that's exactly what we had in this

case, (p5) because neither Mr Nelson

nor Mr Bush presented any evidence at

the hearing. This is my objection. The

settlement--The settlement--

The Court: This court--This court has

hearings on settlement. On a motion day,

we'll have several hearings on a settle-

ment. In almost every case, as in this

case, nobody shows up to question the

settlement. In fact, the court has the

right not even to notice out a settle-

ment for the people to be heard. Rule

2002 does state that notice will be

given to all creditors but that the

court can dispense with the notice if

the court deems this to be necessary.

I didn't--I, in this case, I did notice

A48

it out. But there are many settlements

we don't even have to notice out. I

don't know what your basis is.

What are your relying on to--What *

your authority for the fact that ve

have to have a full blown hearing on

every settlement that this court has

before it?

Mr Fishell: Your Honor, I'm not

suggesting that we have a mini trial

of the trial of the adversary pro-

ceeding.

The Court: No. But what is your

authority that we have to have a ful]

hearing or a hearing of any kind in

this?

I'll read you 2002.

“Except as provided in subdivisions..."

And certain other subdivisions.

“the clerk, or some other person as" (ps)

“the court may direct, shall give the

debtor, the trustee, all creditors and

indenture trustees not less than 20

days notice by mail of"

A49

And then you go down the list.

"the hearing on approval of a

compromise or settlement of a

controversy, other than approval

of an agreement pursuant to Rule

4001(d), unless the court--"

Got to turn the page here. I can't get the

pages. Pages are stuck together. Do you

want to get me another book? Do you

have one down there?

Oh, okay. Here we are. Okay.

“the hearing on approval of a

compromise or settlement of a

controversy, unless the court

for cause shown directs that

notice not be sent.”

So you don't even have to give the notice

if some cause is shown.

There was no cause shown in this case

so--

Mr Fishell: Well, your Honor, I would

like to--

The court: --we did give the full notice.

Mr Fishell: Well, your Honor, I'm not

complaining about the notice aspect of

the hearing on the settlement, approving

A50

the settlement. My contention is that--

it's that if the settlement is being pro-

posed, the proponents have the burden of

presenting to the court enough of the

facts and circumstances in evidentiary

form that would permit the record to

show, would permit the court to have a

basis for concluding (p7) that the

settlement was fair and reasonable

under all the circumstances.

The Court: Was that your argument at

the original hearing?

Mr Fishell: At the original hearing,

your Honor, Mr Turner was arguing in

opposition to the approval--

The Court: Well,--

Mr Fishell: --of the settlement.

The Court:--did you handle the

Original hearing?

Mr Fishell: No, your Honor, I did not.

The court: Well, this is a motion for

rehearing. How can you come in here and--

A51

Mr Fishell: Your, Honor,--

The Court: --represent the Fishells--

Mr Fishell: Your Honor,--

The Court: --if you weren't present at

the original hearing?

Mr Fishell: If your will recall, your

Honor, Mr Turner did note at that hearing

that I was present and in fact I was pre-

sent. Mr Turner handled the argument of

the hearing.

I would like to present copies of a

couple of--Well, I have three or four

here cases which you are free to examine

regarding the standards that are to be

applied by the court in considering

approving a proposed settlement. (p8)

The court: Were these cited to the

court at the original hearing?

Mr Fishell: I believe not, your Honor, no.

The Court: Were they available at that

time?

Mr Fishell: I don't believe that I had

A52

them in my possession at that time. If

your recall, your Honor, Mr Turner sub-

mitted to you at that hearing a memoran-

dum on the subject of Mr Soltow's coun-

terclaim regarding slander of title.

His major contention at that hearing

was that there was no reason to com-

promise this case, certainly not for

the sums that were being proposed,

because the slander of title counter-

claim was essentially nonexistent.

If there was no slander of title

counterclaim, if there was no

$250,000 suit or countersuit, there

was no reason for the trustee to

get nervous and want to settle this

case because the estate wouldn't be

at risk by continuing the adversary

proceeding against Soltow.

The Court: Well, we'll have to

take our morning recess at this time.

We will reconvene in 20 minutes.

A53

(Court took a recess)

The Court: All right. Mr Fishell.

Mr Fishell: Your Honor, I'll provide

these to you now, these cases I was

referring to. In Re Lion Capital Group,

49 BR 163, In Re Correa, 123 BR 153,

In Re Trout, 108 235, In Re Goldstein,

131 367, and In re Energy Co-Op at

886 F 2d 921, also In Re A & C Properties

at 784 1377. Those (p 9) cases I

believe illustrate the burden that's

placed upon the proponent of a settle-

ment, and what standards the court

must hold them to, and what the evi-

dence must show in order to establish

an adequate basis for determining that

the matter is settled in a reasonable

fashion with full information as to

the propriety of the settlement.

Now the settlement agreement in this

case does not recite-- does not recite

any of the matters respecting a number

A54

of the issues that were raised in the

Fishells; complaint including the lack

of the failure of consideration for

the deed in lieu of foreclosure. The

documents themselves don't adequately

disclose what the consideration is.

It doesn't reveal in any--in any manner

that the deed in lieu of foreclosure

or any other documents contemplate that

the right of redemption which attends

every mortgage is being specifically

waived. All these things that go into

the issue of whether or not Fishells'

original claim had substantial merit

to it. The issue of usury is not

addressed. Mr Turner did a very

thorough analysis if the usury issue

on the--in the motion for summary

judgment. I think that Mr Soltow has

conceded that usury was involved in

various of the notes that were consoli-

dated into the amended promissory note.

A55

I think the transaction was one that

should have been set aside.

I think the lis pendens was properly

filed in the case. I don't think it

supports any claim or cause of action (p10)

for slander of title. I haven't seen any

legal authority provided by any of the

opponents that would make me believe

otherwise. That was one of the things

they should have established before this

court as a means of apprising you of

whether or not you should approve that

settlement. They should have been able

to show us how this slander of title

claim was so viable, how much it was

worth, and why the case should be com-

promised in the manner and in the

amount that it was.

In addition, there is one other

matter that was raised to me by Mr

Barry Gates who is an attorney who

is an attorney who is handling the

A56

Fishell malpractice case against the

Fraser law firm now pending in Circuit

Court in Ingham County. And at p 3,

the second--the full first complete

paragraph he contends or believes, or

suspects, or fears, perhaps, that that

paragraph contains such a broad dis-

charge of Mr Soltow'’s attorneys arising

for acts arising out of the real pro-

perty transaction at issue here that

he fears that this may provide a defense

to them in that malpractice claim. I

don't see anywhere in the settlement

agreement that that was contemplated by

either Mr Porter or Mr Soltow, but the

language is broad enough to cause him

to fear that that may be the case. And,

if your Honor does nothing else on this

motion for rehearing, it should be at

least clarified to make specific excep-

tion to that malpractice claim which

I understand the Trustee intends to

pursue just so that that could be

A57

completely (pll) divorced from the

settlement of this particular adversary

proceeding, that should be specified

in any order you make as a result of

today. But I think--I think the order

approving that settlement needs to be

vacated. The order--The order dis-

missing the claim and the counterclaim

discharging the lis pendens should be

set aside.

The Court: All right. Mr Bush.

Mr Bush: Thank you, your Honor.

Your Honor, on behalf of the Soltows,

I would like to briefly make several

points about this motion this morning.

The first is that this is the third

occasion that we have been over this

same ground; that is, the settlement

of the adversary proceeding. All of

these arguments were made on July 10.

They were made again on (August 7) under

the guise of an objection to the coun-

A58

terclaim. At that point the court pro-

perly ruled that that objection had

been mooted by the earlier settlement.

We are here again today. I don't think

we have heard any new argument that wasn't

raised at any of the earlier hearings

particularly, the July 10. The purpose

of a motion. for xehearing is not to.go...

over the same. ground, again and we object

to the proceeding being used. in that

fashion. „ rs te

With respect to the settlement itself,

this ig a situation in which following.

the conversion .of the case to a chapter

7, an experienced trugtee was appointed

who probably in his discretion could have

settled this case rather quickly. (p12)

Instead, to his credit, he chose to hire

outside counsel to. independently go, over

the case, make recommendations for settle-

ment, and pursue. negotiations to resolve

the case, This took place over. a period

A59

of months. All the information was brought

to the attention of the trustee and the

trustee did what he felt was in the best

interest of the entire estate. As the

court has noted, not a single person has

objected to the settlement, not a single

creditor, other than the debtors who would

be expected to object.

As the court further pointed out, the

court has been more than fair and patient

and lenient with the debtors. The court

could have approved the settlement in

chambers by issuing an order. It didn't

do that. It noticed it out. It again

heard argument not only on July 10 but

again on (August 7) and again today. The

court didn't need to do that but the

court did that to be fair to the debtors.

I don't want to take the time to go

through all the points brought up in the

motion. But we think it's well within

the court's experience that it is not

A60

customary to make the trustee take the

stand and be subject to cross-examina-

tion, which in this case, your Honor, I

can assure you, the intent by Mr Turner

would have been to grill John Porter for

hours about why he did this or why he

did that. We don't think that the bank-

ruptcy court is designed to put a trustee

through that type of grilling in order

to get a simple settlement approved.

We (pl3) think that would have been

improper. We think that what is going

on here is an attempt to try to reliti-

gate the whole adversary proceeding

under the guise of a motion to approve

the settlement. We think that's impro-

per. So for these reasons, your Honor,

we would ask that the motion be denied.

This is the third time I've been

over from Lansing on this matter and I

am hopeful that at this point this will

be the last hearing the court will ever

A61

have on this adversary proceeding. And

that the relief, if any, for the debtors

will come from the Appellate court.

This being the third time we have been

over on this, your Honor, we would ask

for sanctions under Rule 11. We would ask

for $1,000 assessed against Mr Fishell,

Roger Fishell, not against the estate.

The estate does not deserve that. But we

have an attorney here, actually two

attorneys who are putting the court and

the party through a lot of nonsense is

what we believe it is and we think it

ought to stop. And we would ask that the

motion be denied and that sanctions in

the amount of $1,000 be assessed.

The Court: Mr Nelson.

Mr Nelson: Thank you, your Honor. For

the most part, I agree with Mr Bush. I

think that this indeed is the third time

we have covered the ground concerning

the merits of the case and how it was

A62

evaluated. Quite frankly, I have never

spent as much time in my career trying

to evaluate the merits (pl4) of a claim

and counterclaim as I have in this case.

My file in this matter is a foot thick.

And for all intents and purposes, it's

been solely--my services have been con-

fined to attempting to evaluate and

ultimately resolve this one adversary

proceeding. We went so far as to conduct

a lengthy Rule 2004 examination of

Richard Fishell before we ever made our

final determination as to what should

be done with this adversary proceeding.

Suffice it to say, we have a different

view of the merits than do the debtors.

The only new issue that I believe has

been raised by the debtors in this motion

for reconsideration is essentially the

question of whether the settlement agree-

ment whereby this adversary proceeding

was resolved somehow releases the Fraser

A63

law firm from a pending malpractice case

in the Ingham County Circuit Court. I can

state unequivocally that it was not the

trustee's intention to release anyone

from any other litigation. The intention

of the trustee was to simply resolve the

Soltow adversary proceeding, not to resolve

in any manner the pending malpractice

claim against the debtors--against the

Fraser firm. I believe that Mr Bush shares

that interpretation of the settlement

agreement that indeed it does not release,

or somehow resolve, or discharge the mal-

practice action. For the record I should

state, however, that the Trustee has not

made a determination whether the estate

intends to pursue that action or not.

Quite frankly, we have not even begun to

evaluate the (p15) merits of that case.

And I guess that's something that's left

for the trustee and counsel to do on

another day. But, to clarify, I guess

A64

the impact of this settlement agreement

on that other litigation, I would ask

that Mr Bush indicate to the court the

interpretation of his law firm with res-

pect to whether or not it is somehow re-

leased from any potential liability under

that Ingham County Circuit Court action.

Mr Bush: I agree with Mr Nelson, your

Honor. The intent of this settlement was

to have nothing to do with the malpractice

case. We studiously attempted to keep them

separate, primarily for the benefit of our

client, Mr Soltow. There may be some issues

that are related, obviously if you look

at the complaint and the two cases, they

all say about the same thing. That Mr

Fishell didn't understand these documents

and so forth when he entered into them.

There may be some questions interms of

res judicata of the decision that Judge

Eveland made back in Ingham County Circuit

court back in 1990 but, as far as this

A65

settlement agreement, we do not view that

as releasing ourselves from that Ingham

County malpractice litigation.

The Court: Anything further, Mr Fishell?

Mr Fishell: Just briefly to reiterate,

your Honor. I think that it's unfortunate.

Personally, I believe this--this whole

thing should have been resolved otherwise.

But, aside from that, forgetting that for

a minute, in order for (p16) the court

to appropriately determine a proposed

settlement, the court must do something

more than rely upon essentially what are

little more than general representations

made by the proponents of the settlement.

In order for the court to validly deter-

mine the reasonableness of a settlement,

it must make some independent examination

of the facts and the circumstances sur-

rounding the case and what the trustee

went through in arriving at his conclusion.

That wasn't done in this case. That's the

A66

reason for the motion. That's the reason

that this matter should be set aside and

reheard.

Thank you, your Honor.

The Court: This case comes before the

court for a hearing on a motion by Richard

L. Fishell and Dorothy M. Fishell for a

rehearing or a reconsideration of the pre-

vious order of this court approving a

settlement of adversary proceedings

between the debtors and Robert Soltow and

Rosalie Soltow.

The underlying proceedings in this case

commenced sometimes prior to the filing

date of this case. There was a case pend-

ing in the state court, as I recall, and

had been pending for some time at the time

that this voluntary Chapter 11 proceedings

was filed by the Fishells with this court.

That adversary proceeding was brought over

from the state court to this court as an

adversary proceeding and has been pending

A67

ever since until the attempt to settle the

proceedings after the Chapter 11 case had

been converted to a case under Chapter 7. (p17)

The original case, as I recall, and it's

been so long now I may be a little hazy

on the facts, but it involved a mortgage

or land contract, I don't remember which,

between the Soltows and the debtors. There

had been nonpayment on the mortgage--or

it's a land contract--for some time and

finally there had been a foreclosure pro-

ceedings commenced. And, as a settlement

of that foreclosure proceedings, there

was worked out a proceedings where the

Soltows executed a dicharge of the mort-

gage in question. I guess it must have

been a mortgage now because I think it

was a discharge of the mortgage, or may-

be it was a quitclaim deed, I can't

remember which, but one of the two. And

also the debtors executed a deed to the

property in question. These documents

A68

were turned over to Transamerica Title

Company, as I recall, a completely dis-

interested party. And the agreement was

that if a payment was not made on the--

or if the mortgage was not paid, the

American Title Company would turn over

the deed to Mr Soltow. If the money were

paid, then the title company would turn

over a full discharge to the Fishells.

The money was not paid and the American

Title Company did turn the deed over to

Soltows. 80 there was a deed on record

from the Fishells to the Soltows and this

was duly recorded. And then this proceed-

ings, the adversary proceedings was then

brought in the state court to set aside

the deed and to indicate that it was

actually a mortgage. The case ig

gered for a long time in the state courts

and then was (pl8) brought into this

court.

There was delay, after delay, after delay.

A69

The court did everything possible to try

to move this case along but everytime

that the court would take some action,

there would be counteraction by the

Fishells and their attorney to delay the

matter further. Finally we had a pretrial

on the proceedings. One of the things

that came up at the time of the pretrial

was a matter of a jury trial. And here

again the court felt that there was no

right to a jury trial under these--

under the provisions, and the court held

that we would proceed and a trial date

was set, we would proceed with a speedy

trial. However, before the trial date

came, there was an appeal taken to the

District Court, as the Fishells had the

right to do, on the matter of the jury

trial. That matter lingered for some time

before the District court and eventually

the District Court affirmed the bank-

ruptcy court and returned the matter to

A70

the bankruptcy court.

And then I can't remember just what

happened after that but somewhere along

the line there was a transfer of the case

to case under Chapter 7. And I believe

that when Mr Porter got into the matter,

for the first time there was progress

made and for the first time the matter

was brought to a settlement. Mr Porter

felt that under the circumstances he

should obtain an expert bankruptcy

attorney. He retained Mr Nelson's firm.

Mr Nelson did agree to handle the case.

As Mr Nelson (pl9) has indicated here

today, he spent a lot of time investi-

gating into whether or not there should

be a settlement and there were a lot of

reasons for the settlement. And the

court felt that the settlement was

reasonable and the court approved the

settlement.

Since then, we have had--the Fishells

A71

have objected to the settlement. They're

the only ones that have objected, the

debtors themselves. And not one creditor

objected.

The whole purpose of the right to

settle proceedings especially in the bank-

ruptcy court is to prevent what has hap-

pened here, untold amount of fees that

have been generated because of the

tremendous number of delays that have

taken place in this court and not only

in the adversary proceedings but in

other ways.

So this court is satisfied that there

is no basis for the objection. The

court feels that the only thing that

this hearing today has caused is more

expenses, more reason why the creditors

of the Fishells would not receive any

funds on hand. Not only has the estate

had more fees run up by reason of the

attorney, the appearance of the attor-

A72

ney and the appearance of the trustee

in this--at this hearing, but also Mr

Soltow, he's had ample expenses. He's

had to pay the taxes on this property

over all this time. I have not heard

that the Fishells ever claimed that

they were the persons that should pay

the taxes. I don't think they have paid

them. I (p20) think, as I recall, the

testimony was that Mr Soltow has paid

all the taxes, all the expenses on the

property. Not one cent has been paid

by the Fishells, at least there's been

no testimony in that court--in this

court to that effect. So the court

would hold that the motion for recon-

sideration is dismissed and denied.

Now the question comes up as to

sanctions. Mr Bush has asked for

Sanctions. Certainly the estate should

not have to pay more money of the

creditors for the expense that has

A73

been incurred in getting ready for

this hearing and for the holding of

the hearing itself. The only thing

here is of course Mr Nelson didn't

have to come from Lansing as did Mr

Bush. So I guess now, Mr Fishell,

the court would ask you, is there

any reason why sanctions should not

be imposed under Bankruptcy rule

9011, Rules of Civil Procedure 11?

Mr Fishell: Well, your Honor, as

I understand that rule, that requires

something to be done that is unneces-

sarily--unnecessary and basically

frivolous. None of the arguments that

I have advanced either today or the

last time that I was here should be

categorized in that nature.

The Court: We're not talking about

any sanctions for any hearing except

the one today. You had the perfect

right to make the hearings the last

A74

time but this time we are re-- as

far as the court can determine, we

are just going right over the same

materials, the same matters that we

had before. (p21)

Mr Fishell: I understand that,

your Honor. But one of the purposes

of a motion for rehearing is to offer

you an opportunity to correct something

that you may have made a mistake about

the first time, even if it's not some-

thing new and completely different.

I mean, why would you have a rehearing

if you had to dredge up something new

that you didn't argue the first time?

That wouldn't --That wouldn't make any

sense. You might--could--You might be

faced with the argument if you didn't

raise it before, it was waived. So one

of the purposes of a rehearing, to my

way of thinking, is to point out to

the court where they made a mistake

A75

the first time. That's perfectly proper.

It's perfectly reasonable.

Now I agree that when I was here

the prior time on the objection to

claim, that matter was set by the

court and I appeared. I came from

Florida. I came from Florida again

today. This hearing today is perfectly

proper. It's provided for by the rules.

If nothing else, we have addressed an

issue in the - in the settlement agree-

ment that we didn't cover before. Mr

Bush and Mr Nelson have both acknow-

ledged that that point on that point

that there was no intent to abandon

or compromise the malpractice claim.

That was the basis of my argument on

that point. And I still--I stand by

the arguments that I have made today.

I have made them in good faith. I

believe the law supports the positions

I have taken. This (p22) is not some-

A76

thing that I have come here merely for

the purpose of delay or expense

because I have had to be put to some

expense of my own. And that’s why I

don't think that any--anything in the

nature of sanctions are appropriate.

The Court: Mr Nelson.

Mr Nelson: Well, your honor, as I

indicated in my prior remarks, the

only thing that I saw that was new

in the motion for reconsideration was

this, I guess, request or issue

raised as to how does this settlement

attempt to affect the malpractice

case? Bu’. I don't think that vas

necessary because I mean there was no-

that wzs not an issue as between the

trustwe and Mr Soltow’s counsel. We

understood how it affected that case.

It didn't affect that case. It was

never intended to affect that case.

It seems that this was an issue or a

A77

question only in the minds of the

Fishells; it certainly wasn't a

question in our mind. Nothing has

really been clarified that--except

perhaps to the debtors. It was al-

ready clear, there was a clear under-

standing between us and the Soltows

and the counsel.

Mr Fishell: Your Honor, if I could

respond to that. As I mentioned earlier

it was Mr Gates who is the attorney who

was hired by the Fishells to prosecute

that malpractice claim who when he

received this sometime after it was

approved raised this issue with me. I |

made that a part of my motion because

of his concerns. Now, if for some

reason the (p23) trustee were to aban-

don that case to the Fishells, then

cetainly the Fishells would have an

interest in knowing and having it

clarified, because how--what would be-

A78

—

what would prevent the Fraser firm

from raising that issue as a defense

in the circuit court case if it ever

came to that? Now it's fine that the

trustee and Mr Bush recognize between

themselves the meaning of it. Mr Gates

was concerned, that's the reason it

was raised. And if there is something

that can be made a part of the order

today that clarifies that point, I

think that would serve the interest

of all in the end.

The Court: I'm not clear. Is the

malpractice suit, is that an asset of

this estate? That--Isn't that for

things that happened after the filing

of the original petition back in 19--

Let's see.--1990?

Mr Bush: Your Honor, what has been

alleged is arises out of the same

nucleus of operative fact as does the

adversary proceeding. In other words,

A79

the allegation is that when these docu-

ments were drawn in 88, the escrow

agreement that the attorney for my firm

who did that, Mr Austin, did so impro-

perly and in a way the Fishells contend

was malpractice.

The Court: Does this go back to 887

Mr Bush: Yes

The Court: Longer than I thought.

Four years.

Mr Bush: Your Honor, we think that case

is probably more frivolous than this case,

given that Judge Eveland (p24) in the

state court has already entered a three

page opinion after hundreds of pages of

testimony finding no improprieties on the

part of our firm.

The Court: But that was before the

filing so it would be an asset of this

estate.

Mr Bush: Interestingly, your Honor,

that that case was filed prior to the

A80

bankruptcy filing, was not disclosed,

was concealed from this court at the

time of the bankruptcy filing and only

came up upon further discovery and ‘is

amended schedule. So this is also some-

thing that bears on this.

Mr Fishell: Your, honor, there is--

there was never--That's been an allega-

tion all along that was willfully con-

cealed. That's not the case. But the

suit was--

The Court: Well, it was put in the

schedules then?

Mr Fishell: It was omitted from the

original schedules, that's correct,

your Honor. He is correct on that

point.

The Court: Well, it was concealed then.

The schedules were signed under penalty

of perjury.

Mr Fishell: That's correct, your Honor.

But there is--I deem a difference bet-

A81

ween inadvertence and concealment.

That's the point I was trying to make.

But this suit was commenced prior to

the petition being filed.

The Court: It shows they didn't think

much of, their suit to start with.(p25)

Well, the court is of the opinion

that sanctions should be imposed upon

counsel and sanctions will be allowed

in the sum of 81,000 for the payment

of the fees and expenses of Mr Soltow.

And the court, as the court has stated,

certainly the creditors should not have

to pay for this unnecessary proceeding.

And so the court would indicate that

there shall be paid to the estate the

sum of 8500 to cover preparation and

the attendance of this proceeding by

Mr Nelson.

Mr Nelson, would you prepare the

orders for the Court?

Mr Nelson: I will, your Honor. Am I

A82

... CC w

correct on the sanctions are on the

debtors’ counsel?

The Court: On Mr Fishell. Roger

Fishell.

Mr Nelson: Okay. I will prepare the

order, your Honor.

The Court: I assume that he's the one

that signed the motion. Mr Turner did

not sign the motion.

Mr Bush: That's correct, your Honor.

Mr Fishell: That's correct, your Honor.

Mr Bush: Thank you, your Honor.

The Clerk: How about the other one,

Judge?

The Court: Pardon?

The Clerk: The other Fishell matter.

The Court: oh, we have another Fishell.

Well, that matter is moot now. That was

for a stay pending the (p26) court's

determination of the reconsideration.

Since the court has already done that

A8 3

and disposed of that matter, that

matter is moot.

Mr Bush: Thank you, your Honor.

Mr Fishell: Thank you, your Honor.

Mr Nelson: Thank you, your Honor.

* * *

REPORTER'S CERTIFICATE

I, Gail L. Beach, do hereby certify

that the foregoing is a true and

accurate transcript of the hearing

held on Friday, August 21, 1992, at

Grand Rapids, Michigan, before the

HONORABLE DAVID E. NIMS, Jr., U. 8.

Bankruptcy Judge, consisting of 26

pages.

„

Gail L. Beach, CSR257 4

Certified Shorthand

Reporter

6863 Mildred SE

Grand Rapids, MI 49508

A84

UNITED STATES BANKRUPTCY COURT

WESTERN DISTRICT OF MICHIGAN

In Re:

Richard L. Fishel l and

Dorothy M. Fishell

Case No NG90-85144

Debtors

Richard L. Fishell and

Dorothy M. Fishell

Plaintiffs

vs Adv Proc No 91-8015

Robert Soltow and

Rosalee Soltow

Defendants

Harold E. Nelson P27974

Attorney for John A. Porter,

Trustee of the Estate of

Richard L. and Dorothy M.

Fishell, Debtors

500 Calder Plaza

Grand Rapids, MI 49503

(616) 459-9487

Mark A. Bush P35775

Attorney for Soltows

A85

1000 Michigan National Tower

Lansing, MI 48933

(517) 482-5800

ORDER

At a session of said Court, held

in the City of Grand Rapids, Michi-

gan, this 24th day of July 1992.

PRESENT: HONORABLE DAVID E. NIMS JR.

U.S. BANKRUPTCY JUDGE

The Debtors, Richard L. Fishell and Doro-

thy M. Fishell, having filed a document on

June 22, 1992 entitled Objection to Claim,

the same pertaining to a certain slander of

title claim raised by Robert Soltow in the

above referenced adversary proceeding, said

Debtors’ Objection having come on for hear-

ing before the court on July 22, 1992, the

court having heard oral argument and having

otherwise been fully advised in the premises;

IT IS HEREBY ORDERED AND ADJUDGED that

the aforementioned claim by Debtors is moot

because of the court's July 10, 1992 appro-

val of settlement of the adversary proceed-

A8 6

ing, said settlement including disposition

of the slander of title claim made by Rob-

ert Soltow. The. request for sanctions

made by counsel of Robert Soltow is hereby

ordered held in abeyance pending hearing

on a motion for 8

filed on behalf of the Debtors.

/s/

David E. Nims, Jr.

U.S. Bankruptcy Judge

A87

UNITED STATES BANKRUPTCY COURT

FOR THE WESTERN DISTRICT OF MICHIGAN

IN RE |

RICHARD L. FISHELL and Case No 90-85144

DOROTHY M. FISHELL

Debtors

RICHARD L. FISHELL and

DOROTHY M. FISHELL

Adv Pro No 91-8015

Plaintiff/Appellants

ROBERT SOLTOW and

ROSALEE SOLTOW

Defendants/Appellees

Harold E. Nelson

Attorney for Trustee, John Porter

500 Calder Plaza

Grand Rapids, Michigan 49503

(616)459-9487

Mark A. Bush

Attorney for Defendants

1000 Michigan National Tower

Lansing, Michigan 48933

(517) 482-5800

A8 8

7 FER ee mR eT ta

ae ba Sen a a

* fs

AMENDED

MOTION FOR REHEARING AND/OR

RECONSIDERATION OF ORDER APPROVING

SETTLEMENT

Pursuant to Rule 9023 of the Bank-

ruptcy Rules of Procedure the Debtors

move the court for rehearing and/or

reconsideration of the order of this

court entered on the 14th day of July

1992 wherein the court approved the

settlement of the above styled adversary

proceeding and the Debtors show as

grounds:

1. The court failed to conduct even

the most rudimentary evidentiary inquiry

into the merits of the Trustee's motion

or the legal issues raised by the com-

plaint and counterclaim.

2. The court failed to require any

support, by way of citation of legal auth-

ority, for the position adopted by the

A8&9

Trustee on any legal issue raised by the

complaint or counterclaim. The failed

entirely to consider the legal argument

presented by the attorney for the debtors

when offered at the hearing.

3. The court failed to consider signi-

ficant legal issues raised by the complaint

such as usury, the circumstances surround-

ing the execution of the documents on 25

August 1988 and the role of the Soltows'/

Fishells‘ common attorney in procuring

same; the law regard.ag the construction

of deed as mortgage when given under cir-

cumstances of this case; misinformation

and misrepresentation concerning the docu-

ments and their legal effect and the issue

of fraud. Further, the court failed to

consider the substantial absence of merit

associated with the counterclaim for

slander of title in that neither the

Trustee nor Soltows presented any legal

authority for the proposition that the

A90

filing of a lis pendens vould serve as

any basis for such a claim. Further,

the Trustee and Soltows failed to note

any statutory basis for such a cause of

action.

4. The arguments advanced by the

Trustee and Sdoltows were couched in gener-

alities and were speculative in nature.

Insufficient evidence was offered to

support any of the reasons advanced in

support of approval of the settlement.

5. The court's ruling, announced

orally at the conclusion of the argument,

conceded the possibility of error in

recollection and focused primarily on

the origin of the Fishell/Soltow dis-

pute in 1988. The court focused only on

its having originated as an agreement

and did not consider the circumstances

alleged in the complaint which would

have vitiated any such agreement.

6. The court failed to require any

A91

concrete showing from the moving parties

which would have been sufficient to meet

the test of reasonableness required for

such compromises and the court failed

to adequately apprise itself of suffi-

cient facts upon which to render an in-

formed decision as to any aspect of the

complaint or counterclaim. In particu-

lar, the court was provided with no sup-

port for the purported slander of title

claim nor how Soltows' damages, if any,

might be estimated.

7. The court misapprehended the

purpose and effect of the lis pendens,

failed to consider how Sol tous might

have mitigated any damages“ suffered

and failed to note how any such damages

are limited by the applicable statute.

8. The slander of title claim was

not adequately considered by the court

or the moving parties and its lack of

merit was of particular significance.

A92

1... »A B— T ̃²— v

Without a slander of title claim, the

estate was not at any arguable risk

should the litigation continue. The

court should have given greater 1

tion to this issue particularly where

an objection specifically directed to

that claim was noticed for hearing

before the court.

3 The court, in its oral ruling,

focused also on what it considered

delays and speculated about future

delays. This was not warranted given

that the trial was set for August 1992.

The reference to delay attending the

appeal of the jury issue was also un-

warranted because it was a meritorious

issue which the debtors raised.

10. The settlement requires clari-

fication to the extent that it may have

any effect on the legal malpractice claim

pending in the Ingham County Circuit Court.

To the extent that the settlement and the

A93

order approving it m4. be construed as

relieving the Fraser law firm of liability

on such claim, the settlement and court

approval was entirely in error, was with-

out consideration, was without appropriate

notice and was without explicit factual

or legal basis.

Wherefore, the Debtors pray the court

to grant any and all relief appropriate

with respect to the order of 14 July 1992,

including but not limited to vacating the

same in its entirety, and to grant any and

all relief appropriate under Rule 9023.

/s/

Roger L. Fishell

1900 Main Street, Suite 214

Sarasota, Florida 34236

(813) 351-2883

Attorney for Debtors

(Certificate of Service Omitted)

A94

Seba

FFC TINS ERAN ARIF TD

UNITED STATES BANKRUPTCY COURT

WESTERN DISTRICT OF MICHIGAN

IN RE

RICHARD L. FISHELL and Case No N90-85144

HON DAVID E. NIMS JR

DOROTHY M. FISHELL

Chapter 11

Debtors

8 on PERS: EGFR CLONE RIE e eren Fe

RICHARD L. FISHELL and

DOROTHY M. FISHELL

Plaintiffs

ROBERT SOLTOW and

ROSALEE SOLTOW

Defendants

Harold E. Nelson

Attorney for John Porter, Trustee

of the Estate of Richard L. Fishell

and Dorothy M. Fishell, Debtors

500 Calder Plaza

Grand Rapids, Michigan 49503

(616)459-9487

Mark A. Bush

Attorney for Defendants

1000 Michigan National Tower

Lansing, Michigan 48933

(517) 482-5800

A95

Adversary No 91-8015

STIPULATION AND ORDER OF DISMISSAL

AND CANCELLATION OF LIS PENDENS

The parties 3 stipulate and agree

that the above-referenced adversary pro-

ceeding having been amicably resolved

pursuant to Release and Settlement Agree-

ment of June 12, 1992, thesame being in-

corporated herein by reference, the same

shall be dismissed with prejudice and

without costs to any party. The parties

further hereby stipulate and agree that

a certain Notice of Lis Pendens, des-

cribed in the aforementioned Release

and Settlement Agreement and recorded

in Liber 795, Page 409 with the Eaton

County Register of Deeds on May 1, 1989

with respect to certain real property

described in the aforementioned Release

and Settlement Agreement is hereby can-

A96

celled.

_/s/ /s/

Harold E. Nelson Mark A. Bush

Attorney for Attorney for Soltows

Trustee of Fishells

Dated: 7/14/92 Dated: July 13,1992

ORDER

At a session of said Court, held

in the City of Grand Rapids, State

of Michigan this 20th day of July,

1992.

PRESENT: HONORABLE DAVID E. NIMS JR.,

U. S. Bankruptcy Judge

Upon reading and filing the Stipulation

of the parties hrein and the Court being

fully advised in the same:

IT IS HEREBY ORDERED that the above-

referenced advesary proceeding having been

amicably resolved pursuant to Release and

Settlement Agreement of June 12, 1992, the

same being incorporated herein by refer-

ence, the same shall be and are hereby

dismissed with prejudice and without costs

to any party.

A97

IT IS FURTHER ORDERED that the Notice of

Lis Pendens recorded in Liber 795, Page 409

Eaton County register of Deeds on May l,

1989 is hereby cancelled.

/s/

DAVID E. NIMS JR.

U. S. Bankruptcy Judge

A98

UNITED STATES BANKRUPTCY COURT

WESTERN DISTRICT OF MICHIGAN

IN RE

RICHARD L. FISHELL and Case No N90-85144

HON DAVID E. NIMS JR

DOROTHY M. FISHELL& ö

Chapter 11

Debtors

RICHARD L. FISHELL and

DOROTHY M. FISHELL

Adversary No 91-8015

Plaintiffs

ROBERT SOLTOW and

ROSALEE SOLTOW

Defendants

Harold E. Nelson

Attorney for John Porter,- Trustee

of the Estate of Richard L. Fishel]

and Dorothy M. Fishell, Debtors

500 Calder Plaza

Grand Rapids, Michigan 49503

(616) 459-9487

Mark A. Bush

Attorney for Defendants

1000 Michigan National Tower

Lansing, Michigan 48933

(517) 482-5800

A99

STIPULATION AND ORDER OF DISMISSAL

OF COUNTER-CLAIM |

Now come the parties hereto, by and

through their attorneys, and hereby

stipulate and agree that the above-

referenced adversary proceeding having

been amicably resolved, the counter-

claim brought by Defendants Robert Sol-

tow and Rosalee Soltow against Debtors

Richard L. Fishell and Dorothy M.

Fishell shall be dismissed with pre-

judice and without costs to any party.

/s/ /s/

Harold E. Nelson Mark A. Bush

Attorney for Attorney for Soltows

Trustee of Fishells

Dated: 7/14/92 Dated: July 13,1992

ORDER

At a session of said Court, held

in the City of Grand Rapids, State

of Michigan this 17th day of July,

A100

a ee

1992.

PRESENT: HONORABLE DAVID E. NIMS JR.,

U. 8. Bankruptcy Judge

Upon reading and filing the Stipulation

of the parties herein and the Court being

fully advised in the premises:

IT IS HEREBY ORDERED that the above-

referenced advesary proceeding having been

amicably resolved, the counter-claim brought

by Defendants Robert Soltow and Rosalee

Soltow against Debtors Richard L. Fishel]

and Dorothy M. Fishel] shall be dismissed

with prejudice and without costs to any

party.

/s/

DAVID E. NIMS JR.

U. 8. Bankruptcy Judge

A101

UNITED STATES BANKRUPTCY COURT

FOR THE WESTERN DISTRICT OF MICHIGAN

In Re: Chapter 7

RICHARD L. FISHELL AND

DOROTHY M. FISHELL

Debtors Hon David E.

Nims Jr.

Case No NG90-85144

ORDER GRANTING TRUSTEE'S MOTION

TO APPROVE SETTLEMENT

At a session of said Court held

in the U.S. Bankruptcy Court,

for the Western District of

Michigan, this 14th day of July

1992.

PRESENT: HON DAVID E. NIMS, JR.

U.S. Bankruptcy Judge

The Trustee's Motion to Approve Set-

tlement, filed June 12, 1992, having come

before the court for hearing on July 10,

1992, and the court being familiar with

the pleadings and other matters of record

appearing in the court's file in this case

and in the adversary proceeding which is

A102

the subject matter of the Trustee's Motion,

the court having heard argument of counsel,

and the court being otherwise fully advised

in the premises;

NOW, THEREFORE, for the reasons stated

on the record at the hearing, IT IS HEREBY

ORDERED that the proposed settlement between

the Trustee and Robert and Rosalee Soltow,

which is more fully set forth in the Release

and Settlement Agreement dated June 12, 1992

between said parties, be and hereby is appro-

ved and authorized, nunc pro tunc to the date

of the hearing, July 10, 1992.

IT IS FURTHER ORDERED that a copy of this

Order be served by ordinary mail upon the

following: Gary C. Rowers, Prager Trebilcock,

Davis & Foster, P. C. 1000 Michigan National

Tower, Lansing, MI 48933; Robert and Rosalee

Soltow, 13665 Tallman Road, Eagle, MI 48822;

Lester N. Turner, Esq., 1005 Timber Pass,

Harbor Springs, MI 49740; John A. Porter,

Esq., 622 Commerce Building, Grand Rapids,

A103

MI 49503; Richard L. and Dorothy M. Fishell,

13625 Tallman Road, Eagle, MI 48822; and

US Trustee, 190 Monroe Avenue, NW, Suite

200, Grand Rapids, MI 49503

/s/

Hon David E. Nims, Jr.

U. S. Bankruptcy Judge

Return Service Copies to:

Harold E. Nelson, Esq.

500 Calder Plaza Building

250 Monroe Avenue, NW

Grand Rapids, MI 49503

A104

UNITED STATES BANKRUPTCY COURT

WESTERN DISTRICT OF MICHIGAN

In Re:

Richard and Dorothy Fishel]

Case No NG90-85144

Debtors

Richard and Dorothy Fishell

Plaintiffs

vs Adv Proc No 91-8015

Robert and Rosalie Seiten

Defendants

Hearing on the Trustee's Motion to

Approve Settlement in the above-entitled

matter taken on the 10th day of July 1992,

at the Federal Building, Grand Rapids,

Michigan, before the Honorable David E.

Nims, Jr., U. 8. Bankruptcy Judge.

A105

APPEARANCES

On Behalf of Plaintiffs:

Lester N. Turner

Attorney at Law

1005 Timber Pass

Harbor Springs, Michigan 49740

On Behalf of Defendants:

Fraser, Trebilcock, Davis & Foster

Attorneys at Law

By: Mark A. Bush

By: Gary C. Rogers

1000 Michigan National Tower

Lansing, Michigan 48933

On Behalf of the U. S. Trustee

Clary, Nantz, Wood, Hoffius, Rankin

and Cooper

Attorneys at Law

By: Harold E. Nelson

500 Calder Plaza

Grand Rapids, Michigan 49503

Also Present:

John A. Porter, Trustee

622 Commerce Building

Grand Rapids, Michigan 49503

Robert Soltow

A106

Grand Rapids, Michigan (p.) 3

July 10, 1992

* * *

The Clerk: Richard and Dorothy Fishell

The Court: This case is before the court

for a hearing on the trustee's motion for

the approval of proposed settlement be-

tween the trustee and Robert Soltow and

Rosalie Soltow. The record may indicate

the appearance of Mr Harold E Nelson repre-

senting the trustee. We have mr Mark A Bush

the attorney for the Soltows, and is Mr

Roger Fishell here?

Mr Turner: He's not here to argue today,

Your Honor.

The Court: Pardon?

Mr Turner: He's not here to argue today, no.

The Court: Is there anyone--

Mr Turner: I'm appearing.

The Court: Is Richard L. Fishell present?

Mr Turner: My name is Lester N. Turner. I'm

appearing on behalf of the Fishells, Your

A107

Honor.

The Court: Oh, Roger Fishell, apparently,

signed as attorney in the filing of an ob-

jection. So, Mr Turner, you are represent-

ing the Fishells now? }

Mr Turner: I'm here representing them

(p.) 4

today for the purposes of arguing this

motion, Your Honor.

The Court: You're here representing them?

Mr Turner: Yes, that's correct.

The Court: Okay, Mr Turner. Are there any

other appearances? Apprently not. Mr. Nel-

son.

Mr Nelson: Thank you, Your Honor. As a

preliminary matter, I should point out to

the court--

The Court: By the way, can this matter be

disposed of within an hour?

Mr Nelson: Certainly my portion of it can,

Your Honor. I can't speak for the other

counsel.

~~ A108

The Court: Mr Bush.

Mr Bush: Certainly, Your Honor.

The Court: Mr Turner.

Mr Turner: Depends on how much they--time

they take, Your Honor, but I would think

we can do it within an hour.

The Court: I'm going to have to spread it

out. Now, how many do we have to hear?

Three?

Mr Nelson: I believe so, Your Honor.

The Court: It will be 20 minutes a piece.

Mr Turner: Actually, we have two from one

side, Your Honor, and one from the other,

so I presume they can split their 30 minutes,

and I can have my (p. 5) 30 minutes?

The Court: Each of you have 20 minutes.

Mr Turner: Okay.

The Court: All right. Mr Nelson.

Mr Nelson: Thank you, Your Honor. As a

preliminary matter, I should point out to

the Court that the underlying release and

settlement agreement entered into between

A109

the trustee and the Soltows, which is before

the court for approval today, had a couple

of legal descriptions attached to it as

Exhibit A and Exhibit B. It's come ee the

parties attention that Exhibit A and Ex-

hibit B, when they were attached to the

agreement, were, in fact, reversed, and

the parties understand that and agree that

that, in fact, for purposes of accepting

the release and settlement agreement,

those exhibits will be, in fact, reversed.

And I don't think that presents a problem

for the court here today.

Your Honor, with respect to the motion

to approve the settlement under Bankruptcy

Rule 9019, I would like to state that both

the trustee, in his own right and through

cur office as his counsel, has spent a

great deal of time and effort investigat-

ing the background and the merits of both

the claim and the counterclaim that are

pending with reference to the (p. 6)

A110

adversary proceeding that we're trying to

settle here today. That adversary proceed-

ing, I think, was commenced originally in

the State Court, was--when the Fishells

filed for Chapter 11, was removed to this

Court and was prosecuted and defended by

the various parties during the Chapter 11

phase of this case, which lasted for a

little over a year, the case having con-

verted to Chapter 7 several months ago.

Based on that relatively exhaustive

investigation, the trustee has determined

that this settlement is in the best

interest of the creditors and bases that

determination on the fact that there is

a significant litigation risk from the

estate's perspective in pursuing the

adversary proceeding. This--I believe,

that the court is relatively aware of

the facts of the adversary proceeding

litigation, and there are complicated

facts, and also fairly complicated legal

Alll

issues are raised.

Your Honor, just reading the various

briefs that had been filed during the

course of this adversary proceeding con-

sumed many hours. As the Court may appre-

ciate, those briefs are voluminous.

That alone indicates the complexity of

the factual and legal issues.

Our belief is this Court has denied

motions (p.7) for summary judgment

brought by the parties, which also indi-

cates that there are certainly disputed

issues of fact that have to be resolved

here. It's difficult to assess, with any

degree of precision, the exact litigation

risk, because the case is so factually

intensive. It ultimately depends on which

set of witnesses the tryer of fact ulti-

mately believes.

However, if the estate were unsuccess-

ful in pursuing this litigation, a very

large claim by the Soltows would end up

All2

being--would result against the estate,

and it's quite possible that the bulk of

that claim would be administrative in

nature, because of the fact that the

slander of title counterclaim that the

Soltows have brought, many of the time--

much of the time, when that title was

allegedly slandered, occurred while the

Debtors were official possessors in the

Chapter 11. In the risk of additional

litigation, the trustee has taken into

account the inevitable delay in litiga-

tion. Although the adversary proceeding,

I believe, is scheduled for trial in

August, I think this court has observed

on the record in the past in this case

that an appeal is virtually certain. In

fact, I think there's been one or more

appeals in connection with this adver-

sary proceeding already. 80 we would be

measuring the time frame for resolving

this case (p.8) probably in years, rather

A113

than months or weeks.

The cost of the litigation is another

factor that the trustee relies on. This

is clearly going to be a hotly contested

adversary proceeding, and as I mentioned

before, both the legal and factual issues

are very complicated and numerous. It

will be a very expensive lawsuit to try,

win, lose or draw.

Another factor that the trustee is taking

into account, as he is required to take

into account as the standards that have

been developed by the courts under the

Rule 9019, is the paramount interest of

the creditors of the estate. The posture

of this case is such, Your Honor, that

the claim on file against the estate by

the Soltows will be completely eliminated

by this settlement. That represents the

single largest claim against the estate,

Your Honor. The other assets of the estate,

outside the adversary proceedings, should

All4

be sufficient, once we eliminate the Sol-

tous claim, to return a substantial divi-

dend to the remainder of the creditors.

And not having to go through the time con-

suming process and cross-legged process

of litigating the adversary proceeding,

that substantial dividends should be able

to be returned to the creditors relatively

promptly, and, Your Honor, for all of

those reasons, the trustee asks that the(p.9)

settlement be approved.

The Court: You only used up five minutes of

your time. All right. Mr Bush, can you do

as well?

Mr Bush: Thank you, Your Honor. For the

record, Mark Bush on behalf of Robert and

Rosalie Soltow. Mr Soltow's in the court

with us today. Bankruptcy Counsel Gary

Rogers is also with me today. I'm trial

counsel on the adversary proceeding.

Your Honor, my perspective on this matter

is, having lived with this case longer than

A115

anyone else has, since April of 1989 when

it was filed, we strongly support the posi-

tion taken by the trustee in this matter,

both as defendants in the adversary pro-

ceeding and, as indicated, the largest

creditor.

We should point out that the settlement

arrangement has an important contingency,

and that contingency is that it is subject

to approval today by the court. In other

words, if the court were not to approve the

settlement today, there is no agreement

for this settlement to otherwise proceed.

One of the reasons for that, Your Honor,

is we are faced with an August trial date

which is going to require substantial pre-

paration, and we need to get a determina-

tion from the trustee and the court--

The Court: How many days are set for the(p.10)

trial?

Mr Bush: Well, I believe, approximately a

week, give or take a few days.

A116

The Court: One week.

Mr Bush: So it's very important that we get

a resolution today, if possible. The trustee

has studied this matter through counsel ex-

tensively, like he has indicated. Counsel

has taken copious information from our side

of the case and, I presume, from the other

side of the case, as well. So it's a very

knowledgeable type of decision that the

trustee and counsel has made.

I'd like to make five principle points

in terms of why, from the standpoint of

Mr Soltow, and for everybody else for that

matter, the settlement is a good idea for

the estate, for the creditors and for all

concerned.

The first was alluded to briefly, and

that is additional delay that would be en-

gendered by allowing the litigation to pro-

ceed. As I've indicated, this case has been

around since April of 1989. It has been

before three different judges, Judges Eve-

All?

land, Stevenson, and Your Honor. We've had

hearings in four different courtrooms in

Charlotte, Hastings, Lansing and Grand

Rapids. It was scheduled for trial, the(pll)

court may recall, originally last August.

We now have a trial date of this August.

If, for some reason, the case continued and

couldn't be tried at that time, I presume,

given the court's retirement, Your Honor's

retirement, we would have a fourth judge

in this case.

This piece of property has been tied up

now for over three years, and no one has

been able to do anything useful with it.

This case has had more adjournments than

any case I've ever handled. It seems like

anytime we get to a depositive point in

the case, someone wants an adjournment.

We believe that if the case were conti-

nued, these delays would go on. There cer-

tainly would be an appeal. There have al-

ready been appeals all the way through the

A118

Michigan State decision, on a decision

made by Judge Eveland. There's been an

appeal on the Federal System on a Court's

decision that a jury trial may, as been

requested by the debtor, would not be

improper, and we just think that that

pattern would continue for years and

years and years, based upon the attitude

of the parties and the attorneys who have

handled it. We don't think that's in any-

one‘s best interest to string this case

out to 1993, 1994, 1995. We believe that

the delay, alone, which would prevent the

administration of the estate, is reason

enough for the Court to approve (p. 12)

the settlement, apart from everything else

that's been mentioned.

Reason number two, Your Honor, the estate.

The expense in litigating this case for

everyone has been overwhelming. No doubt they

would continue. The largest single expense

would be the trial, and preparation for the

A119

trial, by both sides, and the appeal. That

could run into six figures for the estate,

for everyone else. We think that given the

circumstances presented, the expense, alone,

for the litigation to continue, and the

burden that that would place upon the credi-

tors in the estate is sufficient reason

alone for the court to approve this parti-

cular settlement.

The third reason, Your Honor, is the ex-

posure which the case presents to the

court--I‘'m sorry, to the estate and to the

creditors. In State court, we filed, at

the time that the lis pendens was filed in

the property, a counterclaim for slander

of title. The court, using the court's own

language from an earlier hearing in this

case, has recognized, and I quote the

Court, “And this is the matter that has

been mentioned by counsel for Mr Soltow

that has been holding up any disposition

of any property and is probably causing

A120

very much damages to Mr Soltow and--(pl3)

if he prevails eventually, and will mean

a lot of expenses and a large claim to

be decided in this case." That's from the

hearing of January 31 of this year, which

is absolutely true. Should Mr Soltow pre-

vail in the adversary proceeding, he in-

tends to vigorously and fully prosecute

that slander of title claim.

This piece of property has been dormant,

as I've indicated, for over three years.

It will remain dormant until the case is

tried, if it needs to be tried. He's lost

any opportunity to develop it for three

years. He's lost any opportunity to use

it himself. No one will touch this piece

of property as long as this adversary pro-

ceeding continues. His legal expenses have

been enormous, and we can guarantee the

court that that slander of title counter-

claim would not only be in the six-figure

range, probably would be over a half-of-a-

Al21

million dollars worth of exposure to the

estate. We don't think it's necesssary

that the estate bears that risk and that

exposure if the case can be resolved in

terms that the trustee and we believe to

be reasonable and favorable, and that's

what we're presenting to the court today.

The fourth reason, Your Honor, is that

the settlement which has been proposed

requires a cash payment by Mr Soltow to

the estate in the amount of (p.14) $2,000.

Now, in a case of this magnitude, that

may not strike the court as enormous.

However, Mr Soltow feels very strongly

that given the lack of merit in the pri-

mary case presented against him, that, in

fact, constitutes quite a fair amount of

consideration for a claim that we believe

is as specious as it is. We believe tiat

that amount of consideration, alone, would

warrant the trustee recommending approval

to the court.

Al22

Definitely, Your Honor, it's important

for all of us to remember that even if the

Fishells were somehow to prevail in the

adversary proceeding, which we think is

fairly unlikely, this would mean that Mr

Soltow would still have to have a mortgage

on this piece of property. There has been

some dispute and debate in terms of how

much that mortgage would be, and it would

depend on how the interest is calculated.

The mortgage specifically reserves attor-

neys fees and collection costs. We believe

that if the Fishells were to prevail in

this matter, the amount of the mortgage

would be over $1 million. We think it's

highly questionable whether the value of

that property in today's depressed real

estate market would exceed that, it at all,

and possibly would not exceed that number.

We think that this is a very important

factor to take into account. In other

words, (p 15) the case could be fully

A123

litigated, and there would still be no

benefit to the Fishells.

Finally, Your Honor, we do have a ques-

tion of standing, and I've pointed this

out in my brief in support of the motion.

The case law has indicated it's highly

questonable whether, in circumstances such

as this, the debtors even have standing to

question the wisdom of the trustee, who

has exclusive control and authority over

the course of the adversary proceeding, and

standing to object to a motion of this type.

The case law is not totally clear, but it

scene to depend upon whether the debtor is

insolvent.

So, we think, for all the foregoing

reasons, the settlement is very appropriate,

and should be approved today. To the extent

the other side would even have standing,

that being the debtors, to object, there's

been no formal objection filed. There has

been an objection filed to Mr Soltow's

A124

claim, which has been noticed on for a

week or two from now. We think that the

court's ruling today will moot that objec-

tion, and we can get this case wrapped up

and get this estate administered properly.

Thank you very much, Your Honor.

The Court: Okay. Mr Turner.

Hr Turner: Your Honor, on behalf of the (p16)

Fishells, I might want to point out to the

court that Mr Fishell is not here today

because he had unscheduled surgery on Tues-

day, and I guess to show the proper atti-

tude of counsel on the other side, we've

requested to adjourn this until Mr Fishell

is out of the hospital, and that was

refused. And the reason given for the

refusal was there was a drop dead date on

the settlement as of today. I can appre-

ciate Mr Soltow's attorneys wanting a drop

dead date as of today, because the court

has set the objection of their claim for

July 22nd, and I would assume they want to

A125

try to avoid that project, not because of

the time, but because of the likely result.

I think that it appears from both pre-

vious counsel that the real guts to this

thing as to why they want this settlement

approved is because of this horrendously

large claim that they're going to have in

their counterclaim for slander of title.

It's interesting that neither counsel have

cited any case authority to support this

great recommendation as made to the court

on settling this alleged counterclaim.

I think if the trustee in bankruptcy

was concerned with this counterclaim, he

should have brought a motion for summary

disposition, and maybe he would have been

relieved of any fears that he had (p 17)

concerning the counterclaim.

I think that two things are evident.

One is that the law, generally, in the

United States is that filing a lis pen-

dens privilege so you can't slander the

A126

title. Michigan has not looked at that

issue in that light at this time. Michigan

does have some case, though, that are very

interesting on that issue. One of them is

Kauffman v Shefman, which is 169 Mich Appeal

829, which is a 1988 case, where there was

a malicious prosecution claimed because

a lis pendens was filed. The court held that

an action could not be maintained for mali-

cious prosecution by the filing of a lis

pendens, and the court went on to say,

"Notice of lis pendens serves an important

public purpose by protecting the right to

litigation involving real property and pro-

tecting prospective purchasers by apprising

them of disputes regarding rights in the

land. These policies should not be thwarted

while allowing the filing of a notice of lis

pendens by an ultimately unsuccessful liti-

gant to constitute grounds for a malicious

prosecution action. Such a result would be

contrary to the policy announced by our

A127

Supreme Court in Friedman: to refrain from

intimidating those seeking to adjudicate

their claims in the courts. Accordingly,

we hold that the filing of a (p. 18)

notice of lis pendens in this case is not

equivalent to a seizure of property for

purposes of a malicious prosection claim."

And it's not like filing a claim.

And the only case that I could see that

counsel may glean some hope from is the

Sullvan case, which is an 88 Michigan

Appeal case 77, where they said that the--

that filing the claim could be grounds for

slander of title. The filing of a claim,

not notice of lis pendens. Notice of lis

pendens is going to be privileged filing

of a claim. But even in a filing of a claim

situation, it's incumbent upon the person

claiming slander of title to show malici-

ousness and intent, and the court requires

a true showing of maliciousness, not just

the filing of--the filing of an improper

A128

document is not maliciousness, and it's--

I think this court has sat through

enough hearings on this case. We had a

very substantial motion for summary

disposition, as did defendants, and this

court was not able to grant motions for

summary dispositions on either side. I :

think in coming to that conclusion, the

court has to recognize that Mr Fishell's

claim against Mr Soltow is a legitimate

claim, and if Mr Fishell's claim against

Mr Soltow is a legitimate claim, whether

he's successful or not, (p 19) that viti-

ates any possible claim that his lis pen-

dens was filed maliciously, or with the

intention of due harm to Mr Soltow, rather

than the purpose of lis pendens, to put

everybody on notice that he is claiming

and interest in this property.

So I think that if the court--and we

have a memorandum that we'll submit to

the court today on just that issue, not

A129

the issue of the counterclaim, because

the counterclaim we've always looked at

as hot air. There's no question under

Michigan law that you're allowed to file

a lis pendens, and Mr Fishell properly

filed a lis pendens, and the counterclaim

is an intimidation or scare tactic. We

never filed a motion. At least I didn't.

There was a motion filed for summary judg-

ment counterclaim in Circuit Court before

I was in it. We didn't pursue it. In all

honesty, we didn't care if they tried to

bring that up in a trial. Particularly, if

this court remembers, we've claimed all

along, until you and Judge Gibson wrote to

the contrary, that we were entitled to a

jury trial, and we would have--

The Court: We didn't hold that, the State

Supreme Court did--not the Supreme Court.

The Sixth Circuit Court of Appeals did.

Mr Turner: Not in my case. In my case

you (p. 20) and Judge Gibson did, but once

A130

it was ruled that we were not entitled to

a jury trial, up to that point, we were

anxious to see counsel and Mr Soltow try

to manufacture or try to persuade a jury

that there was a slander of title issue

in the matter.

We think that we have made their credi-

bility on the main suit even less likely,

and let's get to the main suit, because

I think the court ought to look at that

for just a moment, too.

Counsel talks about--counsel for the

trustee talks about these evaluations that

they have made concerning their recommen-

dation to this court. And my recollection

is the first one that he pointed out was

that there are very voluminous factual and

legal issues that will be hotly contested.

That may be the case, but I think that there

are some very significant issues, factual

and legal, that this court has to recognize

are definitely in Mr Fishell's favor, some

A131

that are not testimony, some that are just

documents that we have offered in support--

that we had offered in support of our

motion for summary disposition.

There is no dispute that the dollars owed

to Mr Soltow originally started out as a

mortgage, no question about that. 80 I

think that gives rise to the (p. 21)

legal theory that we have about equitable

mortgage, once there was a deed that taken

out of escrow and filed.

There is no doubt about the fact that Mr

Soltow has exhibited an interest in owning

this property and not just getting his

money back. He's so testified in his depo-

sition that he decided that once Mr

Fishell signed the documents on August

the 25th, 1988 that gave rise to the pre-

sent litigation. There is no question

that Mr Soltow, within six days after he

loaned Mr Fishell the last $55,000 to

complete making his property marketable

A132

commenced the wheels to demand payment

from Mr Fishell in all the millions that

he had signed to Mr Soltow. There is no

question that that very note, that Mr

Soltow was usurious. That's why counsel--

The Court: Mr Soltow did what?

Mr Turner: Every promissory note that Mr

Fishell signed of indebtedness to Mr

Soltow had usurious interest rates, and

we've given the court all the documenta-

tion on that. They haven't--there's no

documents-- they haven't denied it was

usurious, and I think that's why counsel

hedges when he says that one of the--

one of the things involved in this is

what value, or the amount of money that

Mr Fishell would (p 22) eventually owe

to Mr Soltow if Mr Soltow would be suc-

cessful in this adversary proceeding,

and he has a hard time putting a handle

on it. I can understand because there's

been about $450,000 in principal, and,

A133

of course, it's our position that there

is no interest, because it was all

usurious, and if you take away the

usurious interest--and I don't be-

lieve that there's any way that

counsel is going to be able to col-

lect any attorney's fees on a case

that the court determines was equi-

table mortgage, or was brought about

by fraud. So Mr Fishell looks at

owing Mr Soltow $450,000, not a mil-

lion dollars.

The record shows that when this liti-

gation was commenced, the property was

worth a million three, and Mr Soltow

had some exhibit that we got in a depo-

sition that shows he put the value at

a million five, and so we're probably

talking about property that's worth,

at least, a million five, and there's

indebtedness of about 8450, 000. I can

understand why Mr Soltow would like to

A134

buy it for only another $2,000.

And don't let counsel for Mr Soltow

kid you. Mr Soltow desperately wants

this property. I think the depositions

we've taken shows that he wants this

property. I think his conduct before

this court (P 23) shows that he des-

parately wants this property. If this

court recalls, there was the Andre pro-

perty which is adjacent to this property,

and Mr Soltow was attempting to buy both

of them from Mr Fishell, and Mr Fishel]

wouldn't do it, so counsel and Mr Sol-

tow came up with the documents that led

to this litigation.

When Mr Fishell filed Chapter 11, this

court removed its injunctive order on the

Andre property, and it went through fore-

closure. Now, who bought it at foreclosure?

Mr Soltow.

When Mr Fishell sold his right of redemp-

tion to a third party, and they redeemed

A135

the property timely, who came to this

court to try to have this transaction set

aside? Mr Soltow. |

Mr Soltow knows, as Mr Fishell, the

values of both these properties. Mr Sol-

tow would like to get this property that's

involved in this litigation for the

$450,000 that he's paid, plus another

$2,000. I think $2,000 to settle this

case is ludicrous. I think that all that

he's doing is this property at a bargain

sale.

I think that there is no exposure to

the estate and to the creditors, because

the counterclaim is useless. I think if

the court waited until it resolves that

issue on the objection of the (p 24)

counterclaim, that will be very abundant

to the court.

I think that the court has--I'll get

back to Mr Nelson's list. Litigation risk

was the first one. What the court has seen

A136

the motions for summary judgment, the court

couldn't grant any. Obviously, I feel that

the defense has no merit. We've been pur-

suing this litigation for almost three

years now. Mr Fishell spent a lot of time

and effort, as have I, and I don't think

we would do it unless we thought that they

were--

We expected to get at least partial

summary judgments granted on our motion

for summary judgment on usury or, at least,

on fraud or innocent misrepresentation.

And I think the court ought to recall,

when its going through this mental analy-

sis, that there's very strong evidence of

misconduct and misrepresentation by the

Fraser firm and their dealings with Mr

Soltow and Mr Fishell in this matter. And,

of course, the court knows that there is

presently a malpractice case pending by

Mr Fishell against the Fraser firm, and

the trustee has not decided how it's

A137

going to proceed with that particular

asset of the estate.

But litigation risk, there is always risk

in litigation. I guess, I don't think

there's, what I (p 25) call, any substan-

tial risk or real risk in the counterclaim

by the Soltows. I don't think any large

claims could possibly result against the

estate, because of this counterclaim.

I don't know what inevitable delay is.

If that--if Mr Bush is telling us that if

we're successful in the trial in August,

we're going to appeal it, I don't think

that’s any justification for giving away

the claim.

Cost of litigation. This is, this is

almost humerous, if it wasn't so serious.

When the trustee was considering pursuing

this lawsuit, I advised him that I thought

that Mr Fishell had really taken the abuse

from the Fraser firm and Mr Soltow, and

that I had worked without receiving pay-

A138

ment for my time up to that point, other

than just keeping track of it, an I would

continue to do so through the trial of this

issue, if that was going to be a concern

to the trustee, that he had to pay attor-

ney fees to pursue this claim, because I

felt very strongly about the claim.

Evidently, that trustee has decided that

he's got a greater cost risk, because he's

decided he'd rather get something than

represent Mr Fishell. In the past, I think,

that along that line, Mr Bush made (p 26)

the comment that the trustee had copious

meetings with Mr Soltow in coming to this

settlement, in reaching this--a conclusion,

and assumed the trustee had done the same

with PFishell.

I want the court to understand that isn't

true. We had one meeting with Mr--I'm

sorry, with the trustee, not the attorney,

with the trustee, who--one time, right after

he became the trustee. We gave him copies

A139

of the brief and appendix that we filed in

our motion for summary disposition. We soli-

cited additonal meetings, we were refused.

We particularly solicited additional meet-

ings when we knew that they were meeting

with Soltow and his attorney. We were re-

fused. I don't know what copious work has

been done to evaluate this from Mr Fishell's

side, other than reading our brief in sup-

port of our motion for summary disposition

and our exhibits, which are attached to it.

I think it's really unfortunate that Mr

Fishell sought the protection of the bank-

ruptcy court, as counsel for the trustee

pointed out, to see if we can wipe out

the Soltow claim. There's sufficient

money to give substantial payments to al]

the creditors.

I don't doubt that when Mr Fishell filed

(p 27) for protection in this court, it

was the cash flow situation that was the

real problem, and the fact that the Andre

A140

property was going to be sold at foreclo-

sure, and the only business assets that

Mr Fishell, that he was using in the busi-

ness fashion, were the Soltow property

litigation and the Andre property litiga-

tion. He had a home and a farm free and |

clear of this, probably worth a couple

hundred thousand dollars, and he had a

condo in Florida that was probably worth

a couple hundred thousand.

Immediately upon being in Chapter 11,

this court came to the conclusion that

there was no equity in the Andre property

and released that to proceed to foreclo-

sure, so Mr Fishell was out of luck as

far as that property was concerned in

getting any plan organized to develop

that property and make any money off that

property. Then the trustee, the federal

trustee, moved to have this, with the

assistance of Mr Soltow and his attorneys,

moved to have this matter converted to a

9141

Chapter 7. To avoid that, Mr Fishell

tried to get this court to let him keep

it in Chapter 11, either borrow or sell

the property in Florida, to do something

with the Andre property. The court dec-

lined that request to borrow money,

because the court had determined that

there was no equity in the Andre (p 28)

property.

The next thing that occurs to Mr

Fishell is that he, because the court

won't let him borrow against that money,

he sells that right of redemption for

$1.00. The next thing this trustee, the

new trustee, then does for him is he files

a complaint before this court denying him

a discharge in bankruptcy, because he has

sold this valuable, according to this court

valueless, right of redemption for a dollar.

So everything that has come up since Mr

Fishell has filed for protection of this

bankruptcy court has buried him a little

Al42

deeper. If they do this, if they get rid

of this asset that's worth a million-and-

a-half for indebtedness of $450,000, that

just buries him a little deeper, I suppose,

and it's really frustrating to come to get

protection under bankruptcy court and end

up having the trustee in bankruptcy sel]

the property in Florida to pay off credi-

tors and to settle the Soltow litigation,

which is the biggest asset that Mr Fishel]

had, settle that for $2,000.

And I don't know what he's going to do

with the malpractice claim against the

Fraser firm, and I don't know what he's

going to do considering the farm, but it's

no wonder that they can repreent to this(p29)

court if they dispose of this groundless

counterclaim for $2,000, they can make sub-

stantial payments to other creditors. I

would think so. Mr Fishell, when he filed

this petition in bankruptcy, other than

ridiculous claim by Mr Soltow that he pro-

A143

bably owed less than $200,000 in indebted-

ness and had $400,000, so it does not sur-

prise me they can do that.

It does surprise me that they yr"

represent to this court that the counter-

claim by Mr Soltow has any merit at all,

and they have any fear of any large claim

against the estate based upon the counter-

claim.

And we would respectfully request that

the court, to not approve this settlement,

particularly at this time. Let it get on

for hearing on the objection to Mr Sol-

tow’'s claim. Let that be disposed of. Let

us go to trial in August and conclude the

Soltow matter, probably without any coun-

terclaim, and maybe that gets some of the

protection that Mr Fishell came to this

court to receive in the first place.

And I would file with this court our

memorandum in opposition to the trustee's

motion to settle the Soltow adversary pro-

Al44

ceeding, and that memorandum just goes to

the issue of the counterclaim, Your Honor.

(p 30) The court is well aware of the claims

and the factual situations and the legal

issues involved in the initial adversary

suit by Mr Fishell against the Soltows.

The Court: You understand, Mr Turner,

that I have not had an opportunity to read

this. I have read every one of the other

briefs that have been filed timely, but I

can't read a brief--how many pages is this,

at the time of the trial with all the

other cases we have, with all the other

people that are in this courtroom that

have matters to be heard. There's no way

-that I can read this brief and hold them

up.

Mr Turner: That's why I tried to argue

what's in the brief, Your Honor, but, in

addition to that, you had an advantage

that I haven't had, because I haven't

seen any brief that was filed in this

4145

thing, but I have seen a motion.

The Court: Well, I surprised when you

were here. I understood that the Fishells

were being represented by their son.

Mr Turner: Well, as this court is aware,

I've been the attorney--

The court: He did file a brief, and I did

read that brief.

Mr Turner: As the court is aware, Ive (p 31)

been the attorney ff record for the Fishells

in the adversary proceeding since day one

in this-- in the bankruptcy court, and I

would assume that if a brief was filed,

either by Mr Nelson or by Mr Bush, that a

copy of it would have been sent either to

Mr Fishell, Richard Fishel! or Dorothy

Fishell, and/or to Roger Fishell, and I

have seen no brief. I've seen a motion.

I wondered if they didn't have to file a

motion to--brief to support their motion,

and I wondered if they would have to take

testimony so that we could cross-examine

A146

them as to how they arrived at the conclu-

sion they presented to this court.

The court: Okay. Your time is up now.

Mr Nelson, any rebuttal--or I iat oak.

do you desire to present any evidence?

Mr Nelson: No, we don't desire to present

any evidence. I believe that the case law

in Rule 9019 indicates that the court can

take judicial notice of the matters that

are in the court's file, which are volumi-

nous enough, without taking any more of

the court's time by presenting evidence

which would merely attempt to summarize

all that.

The Court: Okay. Mr Bush, did you want to

take--put on any evidence?

Mr Bush: No, Your Honor. (p 32)

The Court: Okay. Go ahead, then, Mr Nelson.

Mr Nelson: I'm not going to get into any

detailed debate or analysis as to the

merits of this case. Mr Turner suggests

that the counterclaim is clearly without

A147

merit, and that his--the plaintiff's case

in chief appears to be pretty much a sure

thing. If that were the case, if we weren

if our office were to agree with that, per-

haps we wouldn't be here today bringing

this motion.

Suffice it to say that I can't be

nearly as dogmatic about the merits or

lack of merits with respect to the claim--

counterclaim as can Mr Turner. We have con-

ducted legal, independent legal research

in this. We have reviewed virtually all of

the adversary proceeding pleadings, all of

the briefs, deposition transcripts, hear-

ing transcripts, court opinions that have

been rendered out of the state court and

perhaps out of this court, as well. And

our conclusion is as we've set forth in

our prior argument with respect to the

litigation risks.

I would like to address the issue of--

that I think was implied by Mr Turner that

A148

our office was meeting extensively with the

Soltows and their counsel and not with his.

And, quite frankly, I have never met (p 33)

with Soltows' counsel. We've had some tele-

phone conversations requesting copies of

deposition transcripts, entering into stipu-

lations, essentially freezing the property

until we've had a chance to evaluate the

claim, and to negotiate the ultimate settle-

ment. I've never met Mr Soltow. And 1 un-

derstand he‘s in the courtroom today. I

wouldn't recognize him, because I've never

met him.

I did take an opportunity to examine Mr

Fishell, Richard Fishell, in this-- in this

courtroom in an extensive Rule 2004 exami-

nation in an effort to try and evaluate the

merits of the case from his perspective.

So, if anything, I've spent more time with

the--looking at the Fishell side of the

story than the Soltow side of the story.

It appears to me in summary, however,

A149

Your Honor, that Mr Turner's interest is

solely from the debtors point of view.

He's--he indicated that he agreed there

would probably be —

assets for substantial distribution to

creditors even with this settlement taking

place, but he essentially said that left

nothing--or little or nothing for the

Fishells. Well, he, too, has to consider

all the creditors.

And for the reasons we've already

stated, (p 34) and I would emphasize that

one of the factors is the paramount inter-

est of the creditors of the estate, and I

think it's absolutely clear, and no one

has suggested otherwise, that the inter-

ests of all the creditors are better served

by this settlement, and so we're again

asking that the court approve the motion.

The court: Mr Bush, anything further?

Mr Bush: Just very briefly in rebuttal,

Your Honor. Your Honor, I think the court

A150

has heard from the attorneys involved in

the adversary proceeding perhaps exactly

what it expected to hear, and that is that

Mr Turner indicated he felt he had a good

case. I told you I felt he had a poor case,

and I told you I thought we had an excel-

lent counterclaim. And the final analysis,

I don't think it's important, particularly,

what the attorneys, who were hotly involved

in the litigation, think.

What is important is what the independent

trustee, who is charged with the legal res-

ponsibility to look out for the best in-

terests of all involved in the estate and

the creditors, what he thinks. And I think

in that regard, the comments made by the

attorneys, but notwithstanding the facts,

that I think the points I've made have tre-

mendous validity. I think they ought to be

looked at in that light. (p 35)

With respect to our counterclaim, we

A151

should point out a couple of things, Your

Honor, and that is I haven't had a chance

to review this material either, but suffice

it to say, our counterclaim for slander of

title would be pursued both under Michigan

Statute and under Michigan Common Law.

The court: Was the counterclaim filed?

Mr Bush: Yes, Your Honor.

The court: How long ago?

Mr Bush: It was filed at the time of res-

ponsive pleading in Eaton County Circuit

Court.

The Court: It was filed before you came in-

before the bankruptcy took over?

Mr Bush: That's right, Your Honor, and I

think this court has recognized in the pas-

sage I read from the prior hearing that the

Court recognizes that the claim is out there

and would be pursued.

I just want to say that the--in terms of

the specific nature of the claim, it will

be both statutory and common law. Cameron,

A152

which is kind of the gospel on real pro-

perty in Michigan, indicates that, section

30.18, in discussing the requirement for a

slander of title action, that this malice

that Mr Turner referred to as a hecdesery

component of the cause of action can be

inferred from any wrongful act (p 36)

done intentionally without just cause or

excuse.

It's been our position throughout this

case, Your Honor, that this entire claim

has been done without just cause, simply

to hold up Mr Soltow from disposing or

utilizing this piece of property.

The specific statute which empowers a

slander of title cause of action, I think,

has been set forth earlier to the court in

MCLA 600.2725. 80 we feel very strongly

that is a large claim with significant ex-

posure to the estate.

Finally, Your Honor, with respect to Mr

Fishell seeking the protection of the court,

A153

and so on, and being disappointed on how

things have gone in bankruptcy court. This

court is very familiar with the procedural

history about this case. This case was

converted to a Chapter 7, and I quote the

court's language from the hearing of Janu-

ary 21, "partly the fact that I don't think

I can trust Mr Fishell anymore to comply

with the law to do the things he's supposed

to do." So I think the comments that are

made by Mr Turner ought to be looked at in

light of what actually has gone on here

since they came into bankruptcy court back

in November 1990.

We would ask that the motion be approved

and granted, and that the trustee be empow-

ered to enter (p 37) into the settlement.

The Court: As indicated by counsel, this

case has had a long history. The litiga-

tion between the Soltows and the Fishells

commenced before this case was filed.

Voluntary petition and chapter 11 was

A154

filed November 16, 1990. I don't recall

now when the State court proceedings was

commenced, but that was sometime before

that.

This court cannot possibly recall at

this time all of the things that have

happened in this case that happened before

the filing and happened after the filing.

My recollection is that there was a dis-

pute between the Soltows and the Fishells

having to do with the property in question,

that Mr Fishell had not paid on a mortgage

which Mr--which the Sol tous held.

The mortgage was being foreclosed, was

almost at the date of the foreclosure pro-

ceedings, when there was some sort of an

agreement reached between the parties

whereby the-- and I could be wrong on some

of these details, but as I recall, there

was a proceeding whereby Mr Fishell-- the

Fishells executed a warranty deed to the

property in question, and Soltows executed

A155

a discharge of the mortgage.

Both of these documents were placed in

the hands of an escrow agent, Transamerica

Title Company (p 38) comes to mind, but it

could be some other company, but, at

least, it was a title company. It pro-

vided that Mr Fishell would be given fur-

ther time--or the Fishells would be given

further time in which to pay the amount

due and owing on the mortgage. If he didn't

pay it by that certain time, the escrow

agent would turn over the deed in question

to the Soltows. If he did pay the mortgage

off to the escrow agent, then the discharge

of the mortgage would be turned over to

the Fishells. The money was not paid, the

deed was given to the Soltows, and, of

course, the mortgage discharge was not

given to the Fishells.

So the Soltows are the titleholders of

the property in question due to an agree-

ment, a presumed settlement, between the

A156

parties. The purpose being, as I recall,

that the the Soltows would not have to

go through the proceedings of foreclosure;

and therefore, would give more 1 to

the Fishel ls to pay up the amount due and

owing. I amy be wrong about some of those

details, but something like that.

80 you do have a situation where you

had somewhat of a settlement way back long

before this bankruptcy was filed. But

courts usually are receptive to settle-

ments, and it is very seldom for courts

to set aside a settlement that the par-

ties have entered into (p 39) by them-

selves. This--and there are many cases

to that effect.

Now, one of the problems that, of course,

the trustee in this proceeding has, he has

a case where there was a settlement, there

was a deed, a warranty deed, given to the

Soltows, and the Soltows do hold the pro-

perty, by the warranty deed.

A157

This bankruptcy proceeding was filed,

as I say,back in November 1990, and this

proceeded under the debtors, as debtors in

possession, under chapter 11, from that

date until January 13, 1992. 80 for well

over a year, this whole proceeding was

under the control of the Fishells. This

proceeding that, as I say, was commenced

in the Circuit Court, was brought over

into this court and became an adversary

proceeding in this court.

This court has made every effort that

it has been able to make to try to move

this case along. We are--Courts are often

criticized for delays in cases. This Court

has run up against all kinds of frustra-

tions in this proceedings. Every motion

that almost is imaginable has been filed,

and disposed of.

There was a claim for a jury trial. The

court was of the opinion that this case did

not require a jury trial, was held. And an

A158

appeal was taken, and (p 40) that appeal

took some time before the appeal was decided

by the District Judge, Judge Gibson. As I

recall, the Sixth circuit held that bank-

ruptcy courts had no jurisdiction to hold

a jury trial. So that disposed of that

matter.

And we now have the case set, I believe,

as indicated by the arguments of counsel,

and I wouldn't argue with them, that this

case is now set for trial in August, but

I'm sure there will be more--if this is

not settled, there will be more delays.

There will be more applications for ad-

journments. For some reason or another,

the Fishells just don't want this case

to come to trial.

This case could have been tried long

ago. It was pre-tried, a trial date was

set, long, long ago, and--but we couldn't

get to the trial. Because of the fact

that there was being nothing done in con-

A159

nection with the Chapter 11 case, as I

recall, we didn't even have a plan filed,

but I could be wrong on that, but, at

least, there was no plan ever confirmed,

and so we have had those delays.

It is true, I denied a summary judg-

ment. It is true, there is a claim, I

think possibly a valid claim, for usuri-

ous interest. Whether that was taken into

effect in the settlement that was made some

time (p 41) ago, that, I don't know, but

I'm sure that the trustee has taken that

into consideration in making the settle-

ment that he has made and which is brought

before the court today.

The court does approve usually settle-

ments. We prefer settlements. The Court--

usually, the parties in a proceedings are

better able to settle on a reasonable basis

than even the court can.

There has been no objection made by any

creditor in this case to the proposed set-

A160

tlement. The only objection that is made is

from the debtors, themselves. Only the

debtors want to go ahead and run up further

expenses for this case, which is the--

what the trustee is trying to avoid.

I recognize the fact that the decision

of this court in approving of the settlement

may lead to another appeal, and, probably,

the Fishells will appeal that. 1 don't know

if they have any position to do that, if a

debtor can object to an appeal, but they are

doing it here, and we haven't objected, and

I suppose we can take an appeal on this

matter and delay this matter for a much

longer time.

But, at least, if an appeal is taken, in

that case, we will have to put up a bond,

I'm sure, to protect the Soltows from any

further expenses they may (p 42) have, and

to protect them from any further damages

that may be put upon them, because of the

fact that here they have this apparently

A161

nice piece of property, but they haven't

had any right to do anything with it for

all these years that have gone by, and,

of course, if an appeal is now taken,

there will be even a longer time. So

they will have to put up a bond to take

care of that so that there will be monies

available by some bonding company to take

care of that situation.

So because of the facts that I have

indicated, the motion, the proposed settle-

ment, is approved by the court, and an

order may be entered.

Mr Nelson, would you prepare the order,

please?

Mr Nelson: I'll prepare an order, Your Honor,

and present it before the end of the day.

The Court: Thank you.

Mr Bush: Thank you, Your Honor.

(Matter concluded)

(P. 43, Certificate of shorthand

reporter Lisa C. Dunmore omitted. )

A162

UNITED STATES BANKRUPTCY ‘COURT

FOR THE WESTERN DISTRICT OF MICHIGAN

IN RE

Chapter 7

RICHARD L. FISHELL and Hon David E. Nims Jr

Case No NG90-85144

DOROTHY M. FISHELL

Debtors

TRUSTEE'S MOTION TO APPROVE SETTLEMENT

NOW COMES John A. Porter the chapter

7 Trustee ("Trustee") by his attorneys,

Clary, Nantz, Wood, Hoffius, Rankin &

Cooper, and pursuant to Federal Rule of

Bankruptcy Procedure 9019 requests that

this court enter an order approving the

settlement described in this Motion. In

support of this motion the Trustee

states:

1. The Debtor's filed a Voluntary

Petition under Chapter 11 of the Bankrupt-

cy code on November 16, 1990.

2. On January 13, 1992 this case was

A163

converted to a case under Chapter 7 of the

Bankruptcy Code and the Trustee was appoin-

ted to serve as the Chapter 7 Trustee.

3. At the time of the conversion of

this case an adversary proceeding was pend-

ing entitled Richard L. Fishell and Dorothy

M. Fishell, plaintiff/counterdefendants v

Robert Soltow and Rosalee Soltow, defendant/

counter-plaintiffs, Adversary Proceeding No.

91-8015 (the “Adversary Proceeding”). The

Adversary Proceeding was commenced by the

Debtors’ pre-petition in state court and

was ultimately removed to this court follow-

ing the filing of the Debtor's voluntary

Chapter 11 petition.

4. The Adversary Proceeding involves

the Debtors’ claim of title to certain vacant,

but relatively valuable, real property

located in Oneida Township, Eaton County

Michigan (the Property“). The Defendants,

Robert and Rosalee Soltow (the "Soltows"),

A164

filed the counter claim seeking substantial

money damages against the Debtors on a slander

of the title theory.

5. The Trustee and his counsel dne ex-

pended substantial resources in investigating

and evaluating the merits of both the claims

and the counter-claims raised in the adver-

Sary proceeding. Following such investiga-

tion and evaluation, the Trustee has deter-

mined that it is in the best interest of the

estate and all of the creditors that the

adversary proceeding be settled as set forth

below. The Trustee bases his decision to

enter into the proposed settlement upon fac-

tors which include, but are not limited to,

the following:

A. Avoiding the risk of litigation which

includes the risk that a large damage claim

could potentially be asserted against the

estate depending upon the outcome of the ad-

versary proceeding.

A165

B. Avoiding the delay inherent in the

litigation process at both the trial and

appellate levels.

C. Avoiding the cost to the estate of

litigating the adversary proceeding which

would involve numerous and complicated legal

and factual issues.

D. Eliminating any claim against the

estate by the Soltows who represented the

Debtors largest pre-petition creditors.

6. The material terms and conditions of

settlement are summarized below. A complete

copy of the proposed Release and Settlement

Agreement is available for inspection at the

office of the Bankruptcy Court Clerk from

8:00 a.m. to 4:30 p.m., Monday through Fri-

day.

A. All claims and counterclaims in the

adversary proceeding shall be dismissed with

prejudice and without costs and all Lis Pen-

dens filed with respect to the property shall

A166

be terminated and discharged

B. The Trustee and the Soltow's shall

mutually release the other (and, in the case

of the Soltows, release the Debtors) from

all claims generally, including any pre-

petition debt claims which the Soltows could

assert against the bankruptcy estate. The

only exception to the mutual release is with

respect to the Soltows claim of ownership

of certain property known as the Andre pro-

perty which is located adjacent to the Pro-

perty.

C. The Soltows shall pay the bank-

ruptcy estate the sum of $2,000.

D. The Settlement is subject to bank-

ruptcy court approval and the entry of an

order approving the settlement on or before

July 10, 1992.

WHEREFORE, the Trustee requests that

this court enter an order approving the

proposed settlement between the Trustee

167

and the Soltow's and enter such-other and

further orders as may be necessary to con-

summate the settlement.

CLARY, NANTZ, WOOD, HOFFIUS

RANKIN & COOPER

Attorneys for the Trustee

Dated June 12, 1992 By. 7 5 /

Harold E. Nelson

527974

Business Address 8

Telephone:

500 Calder Plaza

250 Monroe Avenue NW

Grand Rapids, MI 49503

1616) 459-9487

A168

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.