Debtor sought to reject a pre-petition settlement agreement as an executory contract. The Court determined that the release provisions in the settlement agreement were effective upon payment of the settlement amount to Debtor and that rejection of the settlement agreement would not  undo the releases to allow Debtor to resume its claims against the settling party. The Court deferred its determination of whether the settlement agreement remains executory based on mutual non-disparagement provisions. The Court did not need to decide whether a provision in the settlement agreement rendered the entire agreement unenforceable as against public policy because the settlement agreement contained a severability provision.

The Court denied debtor’s motion to strike creditor’s motion to value property as duplicative and set the motion to value property together with plan confirmation. Even though Debtor’s plan included a motion to value property, nothing in the Code prohibits a creditor from filing a separate motion to value property. The Court’s local bankruptcy rules require debtors to include all pre-confirmation motions in the plan and contemplate that valuation issues be determined at confirmation. If the creditor does not object to confirmation or does not file a separate motion to value property in time to be heard at the same time as confirmation, the creditor risks that confirmation will have preclusive effect on the motion to value property or render the motion to value property moot. 

The case trustee moved for approval of a settlement with Debtors that would allow Debtors to buy their house from the estate and allow a substantial distribution to unsecured creditors. The motion was opposed by a credit union that had its security interest in Debtors’ house avoided because it failed to record its mortgages in the correct county records. The Court, finding that the trustee has satisfied the elements for settlement under Fed R. Bankr. P. 9019 and the elements for sale of estate property under 11 U.S.C. § 363, grants the motion.

Chapter 7 trustee filed a motion seeking approval of a compromise with the estate’s largest creditor. The creditor maintained that he had a lien on all of the estate’s assets arising from a pre-petition judgment against Debtor (Motiva), followed by a writ of execution and an attempted levy of Motiva’s property. In the alternative, the creditor asserted that he had an equitable lien based on the inequitable conduct of Motiva’s owner, William Ferguson—who went to extreme measures to avoid paying the creditor’s judgment against his company. To avoid litigation about whether the creditor’s claim was secured, the trustee and the creditor reached a compromised settlement agreement. In exchange for conceding that his claim is unsecured, the creditor will receive an increase in what he would receive if litigation resulted in a determination that his claim was unsecured. Benefits to the estate include pooling of any recovery from the creditor’s claims against Ferguson and his affiliates, the creditor’s counsel’s representation of the estate in its claims against Ferguson and his affiliates, and saved litigation costs. Ferguson and his affiliates, who are unsecured creditors of the estate, objected.  Concluding that the compromise is fair, equitable, and in the best interests of creditors overall, the Court overruled the objections and approved the compromise.