A Debtor’s Silence May Waive its Right to Enforce its Rights
under a Confirmed Plan of Reorganization

By: Benjamin Ranalli

St. John’s University School of Law

American Bankruptcy Institute Law Review, Staff Member

In a debtor/creditor relationship, a debtor may explicitly, or implicitly, waive their rights. Afifirmative actions and intentional relinquishment may indicate express waivers, while clear decisive acts may indicate an implicit waiver. In In re Parkland Properties, the Bankruptcy Court for the Northern District of Illinois held that a debtor may implicitly waive its right to enforce a reorganization plan confirmed under Chapter 11 of Title 11 of the United States Code (the “Bankruptcy Code”).[1] On June 18, 2013, Parkland II, LLC (“Parkland and/or the “Debtor”) filed a voluntary petition under Chapter 11 of the Bankruptcy Code in response to four judgements received by Bridgeview Bank Group (“Bridgeview”) against Parkland and two of its principals.[2]  The judgments were then recorded as judgment liens on property owned by the Debtor (the “Artesian Property”).”[3] In an attempt to recover payments, Parkand filed its Sixth modification of its Plan of Reorganization (the “Plan”) that sought to dismiss its Adversary Proceeding against Bridgeview.[4] The court approved Parkland’s modification to its Plan of Reorganization stating that if Bridgeview successfully bid on the Artesian Property in a foreclosure sale, Bridgeview would finance Parkland’s purchase of it from the creditor.[5] Additionally, the provision set out terms where Bridgeview retained sole discretion on purchase terms for the sale.[6] The foreclosure sale took place and Bridgeview’s nominee purchased the property.[7]

Several attempts were later made by Bridgeview’s counsel to contact Parkland in order to facilitate the sale of the Artesian Property.[8] However, between June 25 and July 31 of 2018, Parkland’s communication was sparse.[9] During that time, Bridgeview sent several drafts of the loan document to be reviewed by Parkland, and requested a closing date of July 31, 2018.[10] Parkland failed to respond to these requests.[11] On the date of the proposed closing Bridgeview informed Parkland that it failed to appear at the closing and Bridgeview would “no longer wait for [Parkland] to decide whether it want[ed] to close.”[12] On September 27, 2018, Bridgeview sold the Artesian Property to a third party. On October 8, 2018, Parkland contacted Bridgeview and claimed it did not receive notice of the sale.[13] Bridgeview replied by attaching the July 31, 2018 letter; almost six months later, on March 28, 2019, Parkland filed its motion to enforce the Confirmation Order that confirmed its Plan.[14] After reviewing the facts, including the Debtor’s vast silence, the North Dakota Bankruptcy Court denied Parkland’s motion to enforce its Plan.[15]

Here, the court held that the reorganization plan did not bind the creditor to sell the property it purchased at a foreclosure sale to its debtor.[16] Additionally, even if the reorganization plan bound the creditor to sell its acquired property to the debtor, the debtor implicitly waived its ability to enforce that right by its failure to respond to the creditor’s attempts to complete a contract for sale.[17] A confirmed Chapter 11 plan of reorganization “binds the debtor, any entity issuing securities under the plan. . . and any creditor. . . or general partner in the debtor.”[18] Courts have the authority to interpret the terms and conditions of a confirmed plan, finding the language is ambiguous and unclear, or inconsistent with the order confirming it.[19] Here, the disputed language from the modified section 3.07 of the Plan was clear.[20] Under the Plan, Bridgeview was not required to sell the property absent Parkland’s cooperation.[21] Additionally, Bridgeview was not obligated under the Plan to hold onto the property indefinitely until, if ever, Parkland decided to purchase.[22]

A party to a contract may waive its legal right to strict performance either expressly or implicitly by its conduct.[23] A waiver is the “voluntary and intentional relinquishment of a known right.”[24]  Absent an express waiver, a waiver may be implied through “a clear, unequivocal, and decisive act” that can be determined from undisputed material facts in support of the alleged implied waiver.[25] Here, the parties did not dispute the unresponsiveness of Parkland after Bridgeview obtained the Artesian Property.[26] Therefore the material facts supporting the implied waiver were not in dispute. [27] The debtor’s long and many silences when a reasonable person would have spoken out,” waived its right to enforce its rights under the Plan regardless of whether the right was statutory in nature.[28]

[1] See In re Parkland Properties, LLC, Bankruptcy No. 13 B 22702, 2019 WL 3214384, at *9 (Bankr. N.D. Ill July 16, 2019).

[2] See id. at *2.

[3] See id.

[4] See id. at *3.

[5] Id.

[6] Id.

[7] Id. at *4.

[8] Id.

[9] Id.

[10] Id. at *5.

[11] Id.

[12] Id.

[13] Id.

[14] Id.

[15] See id. at *13.

[16] See id. at *7.

[17] Id. at *9.

[18] Id. at *6 (quoting In re Castle Home Builders Inc., 520 B.R. 98, 106 (Bankr. N.D. Ill. 2014)).

[19] Id. (citing In re Doty, 129 B.R. 571, 588 (Bankr. N.D. Ind. 1991)).

[20] Id.

[21] Id. at *7.

[22] Id.

[23] See Lake County Grading Co. of Libertyville, Inc. v Advance Mech. Contractors, Inc., 654 N.E.2d 1109, 1118 (Ill. App. Ct. 1995) (“A party to a contract may waive, by express agreement or by its course of conduct, its legal right to strict performance of the terms of a contract.”).

[24] Id. at *7 (citing Anderson v. Holy See, 878 F. Supp. 2d 923, 933 (N.D. Ill. 2012)).

[25] Id. (citing Anderson, 878 F. Supp. 2d at 933).

[26] Id. at *9.

[27] See id.

[28] In re Parkland, 2019 WL 3214384, at *9.