Federal Deposit Insurance Corp. v. Casey

SIMMS, Justice. This appeal presents a single issue: Did the trial court err in denying appellant’s motion to release judgment under the provisions of 12 O.S.Supp.1983, § 706.B,1 on the grounds that the confirmed plan of reorganization approved by a bankruptcy court did not constitute satisfaction of a state court judgment entered against the individual appellants. I. In 1981, the Casey Wood Company, a general partnership consisting of appellants, J.P. Casey, J.C. Wood, N.E. Wood, executed promissory notes to the Penn Square Bank. Appellants also signed individual guaranty agreements for the indebtedness of the Casey Wood Company to the Penn Square Bank. In 1983, the FDIC (Appellee) as the Receiver of Penn Square Bank commenced foreclosure proceedings against the Casey Wood Company for default on the partnership’s promissory notes. In addition, the FDIC sought judgments against the appellants on the basis of their individual guaranty agreements relating to the partnership debt. The FDIC was stayed from foreclosure of the partnership debt when the Casey Wood Company successfully filed for relief under the Bankruptcy Code. The Bankruptcy Court approved a plan of reorganization for the Casey Wood Company, over the objections of the appellee. The court ordered reinstatement of the original terms of the promissory note after curing the default and payment of the arrearages due by the partnership. FDIC was granted summary judgment against the appellants to enforce the individual guaranty agreements. The FDIC recovered judgment for the entire accelerated balance due under the notes with interest at a default rate. II. Appellants allege that a single debt is owed to appellee, even though the partnership and the individual partners as guarantors, are liable for payment of that debt. Appellants contend that the nature and extent of the indebtedness was reflected in the confirmed plan of reorganization as a single debt that was reinstated and cured by the Bankruptcy Court. Appellants maintain the objectives of the Bankruptcy Code do not require individual partners to file separately for bankruptcy in order to obtain a discharge for themselves. In support of their position, appellants rely on Matter of Consolidated Motor Inns, 632 F.2d 1178 (5th Cir.1980), for the proposition that a plan of reorganization for a partnership contemplates relief for both the partnership and the individual partners. As the appellee correctly notes the Matter of Consolidated Motor Inns, supra, was decided under the “old” Bankruptcy Act and has since been vacated. See: 666 F.2d 189 (5th Cir.1982). In vacating its prior opinion in Consolidated Motor Inns, the Fifth Circuit followed the Tenth Circuit opinion in Acme Tool Inc. v. Fletcher, 309 F.2d 636 (10th Cir.1962), which states: “The Bankruptcy Act provides that the discharge of a partnership does not discharge the individual general partner from the partnership debts.” Id. at 637. The Fifth Circuit further held that the debts of individual partners who did not file bankruptcy with regard to creditors who had opposed the partnership’s plan of reorganization were not discharged by the partnership plan. Because the appellee opposed the Casey Wood plan of reorganization and appellants did not file for individual bankruptcy relief, the partnership discharge has no bearing on appellant’s guaranty agreements. III. Appellants contend the partnership’s plan of reorganization constitutes satisfaction of the state court judgment entered [465] against them under the provisions of 12 O.S. 706.B. As stated above, the discharge of partnership debt and the discharge of the individual partner’s debt are not always co-existent. Oklahoma’s statutory scheme provides separate treatment for 'actions against guarantors and actions against principal debtors. A guarantor is liable immediately to the guarantee upon the default of the principal without demand or notice. 12 O.S.Supp.1983, § 706.B. Creditors do not have to join the principal debtor in an action against the guarantor or show that an effort was made to collect from the principal debtor. 12 O.S.1981, § 234. Janeway v. Vandeventer, 172 Okl. 379, 45 P.2d 79 (1935). The discharge of a partnership in bankruptcy does not prevent actions against members of the partnership unless they are individually involved in bankruptcy proceedings. Ellet-Kendall Shoe Co. v. Miller, 95 Okl. 270, 215 P. 417 (1923). The claim filed by the FDIC against the appellants as individual guarantors is distinct from the partnership bankruptcy proceedings. The judgment rendered by the Bankruptcy Court must conform to the statutory interpretation of “satisfaction” if it is to be sufficient to grant a motion to release judgment. In state court, the FDIC received judgment for payment in accordance with the guaranty agreements. In Continental Gin Co. v. Arnold, 52 Okl. 569, 153 P. 160, this Court defined “payment” to be: “Generally understood as a discharge of the debt ... if the obligation calls for a money discharge, then there cannot be payment except by paying the full amount called for in money, or the representatives of money.” Id. 153 P. at 162 IV. 15] Appellee alleges no payments have been received from the appellants in accordance with the state court judgment. Those payments received from the partnership are distinct. The partnership payments stem from the Bankruptcy Court’s confirmed plan of reorganization which did not protect or discharge the appellant’s individual guaranty agreements. As defined by Oklahoma law, the partnership’s discharge does not constitute “payment” sufficient to release the state court’s judgment as being satisfied. JUDGMENT OF THE TRIAL COURT AFFIRMED. HARGRAVE, V.C.J., and HODGES, LAVENDER, OPALA and SUMMERS, JJ., concur. ALMA WILSON, J., concurs specially. DOOLIN, C.J., dissents. Footnotes [1] § 706.B provides: "The lien of any judgment when satisfied or otherwise discharged shall be released by the court upon written motion by the judgment debtor, ..." [E.A.]