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Litton Loan Servicing, L.P. v. Dennis Schubert

Summarizing by Amir Shachmurove

Fallon Family, L.P. v. Goodrich Petroleum Corp.

Case Type:
Case Status:
No. 17-20278 (5th Circuit, Jun 27,2018) Published
5th Cir. affirmed ruling of District Court (SD Tx.) and bankruptcy court that creditor could not claim void recorded mineral lease based on default under related promissory note and settlement agreement. Recorded lease had no indication that it was subject to full payment of note and indicated that debtor had paid full consideration. Settlement agreement was not executory contract; thus 11 USC 365 was inapplicable. Under 11 USC 544(a), notwithstanding actual notice of note obligation and default, DIPs could stand in shoes of BFP, and estate's interest was not avoidable.
Procedural context:
Creditor moved to compel assumption or rejection of executory contract, or in the alternative, for dissolution of settlement agreement based on default. Bankruptcy court denied motion. Creditor appealed to District Court, which affirmed. Creditor appealed to 5th Circuit.
In 2014, Fallon Family LP ("Fallon"), as part of settlement agreement with Goodrich Petroleum Corporation and Goodrich Petroleum Company LLC (collectively, "Goodrich"), executed a ratification of a previously disputed mineral lease in favor of Goodrich. In conjunction with the ratified mineral lease, Goodrich provided Fallon with a promissory note for future payments. Although the settlement agreement and note required substantial cash payments over time to Fallon, the recorded ratified lease did not reflect this fact and only indicated that good and sufficient consideration had been paid for the ratification. Goodrich paid the initial $100k installment, and then filed bankruptcy, leaving $900k owing under the note and settlement agreement.
Davis, Jones, Higginson

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