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USCA1 Opinion
[NOT FOR PUBLICATION]
UNITED STATES COURT OF APPEALS UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT FOR THE FIRST CIRCUIT
____________________
No. 96-1638
BANK OF NEW ENGLAND CORPORATION,
Defendant, Appellant,
v.
LACY G. NEWMAN,
Plaintiff, Appellee.
____________________
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. William G. Young, U.S. District Judge] ___________________
____________________
Before
Selya, Circuit Judge, _____________
Aldrich, Senior Circuit Judge, ____________________
and Boudin, Circuit Judge. _____________
____________________
James Donnell with whom Andrews & Kurth L.L.P. was on brief for _____________ _______________________
appellant.
George F. Parker, III with whom Lawrence J. Cohen and Badger, ______________________ __________________ _______
Dolan, Parker & Cohen were on brief for appellee. _____________________
____________________
December 16, 1996
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ALDRICH, Senior Circuit Judge. The agreed question ____________________
in this appeal from the bankruptcy court is whether security
for an employer's breach of contract posted following the
execution of a written employment contract on November 1,
1990, was security for that, or was security for an
antecedent debt within 11 U.S.C. 547(b) because an oral
contract had already been made in June. If it was June, the
security was invalid as a preference -- November 1 being less
than 90 days before the employer's filing under Chapter 7 of
the Bankruptcy Code on January 7, 1991. 11 U.S.C. 547.1
By granting defendant Bank of New England
Corporation (Bank)'s trustee's motion for summary judgment
the bankruptcy court ruled, without opinion, that plaintiff
Lacy G. Newman (Newman) and defendant Bank had in fact
contracted by June 18, 1990, when Newman started work.
Newman v. Bank of New England Corp., 187 B.R. 405, 409 ______ ____________________________
____________________
1. 11 U.S.C. 547 provides in relevant part:
(b) Except as provided in subsection (c) of this section, the
trustee may avoid any transfer of an interest of the debtor
in property--
(1) to or for the benefit of a creditor;
(2) for or on account of an antecedent debt owed by
the debtor before such a transfer was made;
(3) made while the debtor was insolvent;
(4) made--
(A) on or within 90 days before the date of
the filing of the petition . . . .
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(Bankr. D. Mass. 1995). On Newman's appeal the district
court reversed, stating that, on the record before it, it was
not possible to tell whether there was an agreement before
the written contract in November. Upon remand for trial, the
bankruptcy court found "there was no definite agreement until
November 1, 1990." On Bank's appeal the district court
affirmed. On Bank's further appeal, we too affirm.
The contractual problem arose because of the
provisions of the bankruptcy laws and the desire of Newman,
in no way opposed by Bank, that in case his employment
contract was terminated without cause,2 his damages would be
secured. The facts were these. In May, 1990 Bank and Newman
began consideration of the latter's becoming employed as a
senior vice president. There were, of course, talks about
terms, but by June 18, the parties, as evidenced by a written
memorandum, had agreed that Newman's employment was for two
years; his title was to be Senior Vice President; his annual
salary was $225,000, with a guaranteed bonus the first year
of $25,000; there was to be a relocation bonus and expenses,
and an option for 35,000 shares of common stock with standard
anti-dilution provisions. Particularly where Newman began
working, if the matter had ended there, this might have been
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2. It is disputed whether the Chapter 7 proceedings
terminated the contract. The successor bank did not adopt
it. The bankruptcy court's finding in Newman's favor is too
clearly correct to call for further discussion.
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a typical case permitting a finding of an established
contract even though the parties planned a writing that might
add minor details. Chedd-Angier Prod. Co. v. Omni ________________________ ____
Publications Int'l, 756 F.2d 930, 935 (1st Cir. 1985). The __________________
matter, however, did not stop there. The memorandum
indicated that there was to be added a provision to the
effect that in case of termination without fault on Newman's
part, damages were to be secured to protect him from having
to claim with ordinary creditors. Bank agreed in principle -
- apportionment among its creditors would be of no
consequence to it. The problem, as recognized in the
memorandum, was the needed approval of the bank regulators.
This matter was of consequence to Newman, who had
an unhappy memory of what happened to his severance claim
when employed by a previous bank that went into receivership.
The present resolution took some four months. Partly
responsible, as the bankruptcy court noted, was the fact that
Bank's senior counsel "had neither previously written an
employee or severance agreement nor understood the applicable
banking regulations [and] struggled to draft a final
document." Thereby went the passage of time.
This produced an unusual situation. If full
expression of the promised severance provision was an
essential matter, Rosenfield v. United States Trust Co., 290 __________ _______________________
Mass. 210, 216, 195 N.E. 323, 325 (1935), Newman went four
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months without any contractual protection at all in order to
obtain an agreement in which it was positively assured.
Without mentioning this dilemma the bankruptcy court found
that Newman had in fact chosen the positive security route.
We see possible grounds for this conclusion. In
the first place, the importance of being secured was high in
Newman's mind not only from past experience, but especially
because Bank was a "troubled institution." He was not in
need of this particular employment; he had other offers.
Against waiting for final resolution, however, Bank had
agreed that it was willing to afford security and to work
jointly in appeasing the bank regulators. It had even agreed
to work out some other device if the regulators did not come
through. Might not this be enough so that there was a
definite June contract, the eventually selected form to be
but a detail? Could this not have been claimed if the Bank
had discharged Newman in October?
There was, however, a further reason. The
bankruptcy court found that the various severance packages
that were considered "varied as to amount and terms."
"Varied" was an understatement. The record shows that
amounts differed so substantially that Newman might well have
delayed over this aspect alone.
Taken altogether, we can accept the bankruptcy
court's finding that there was no completed June contract.
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Hence the funds deposited in escrow were in connection with a
November agreement, and thus reachable.
Affirmed. _________
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Document Info
Docket Number： 96-1638
Filed Date： 12/19/1996
Precedential Status： Precedential
Modified Date： 9/21/2015