Unpublished Disposition, 888 F.2d 1394 (9th Cir. 1989)

MEMORANDUM^* 

Halliburton appeals the BAP affirmance of the bankruptcy court's order compelling dismissal of Halliburton's state court action against the Bank. We affirm.

DISCUSSION

I. The bankruptcy court did not commit clear error in finding that the parties entered into an oral agreement that included release of Halliburton's alleged claims against the Bank.

To find an oral agreement the court had to consider parol evidence and find the objective manifestation of the parties' intent. Halliburton argues that admission of the parol evidence was improper because the Stipulation entered into by the parties was an integrated writing. The bankruptcy court found otherwise and the legal conclusion of nonintegration is reviewed de novo.

The Stipulation was not integrated and the court properly considered parol evidence. The key to determining whether an agreement is integrated is the parties intent as reflected in several considerations. See A. Kemp Fisheries, Inc. v. Castle & Cook, Inc., 852 F.2d 493, 495 (9th Cir. 1988). The Stipulation had no integration clause nor any terms vaguely similar. The attorney for each party testified that the Stipulation did not include all the terms. Finally, the parol evidence of a release of claims does not conflict with the written terms. It makes sense that such an agreement was not included in the Stipulation. Cf. Masterson v. Sine, 68 Cal. 2d 222, 65 Cal. Rptr. 545, 548-49, 436 P.2d 561 (1968). The Stipulation was addressed to the lifting of the Automatic Stay to which the release would not be relevant.

"If a contract is not integrated, the parol evidence rule does not apply. The court can admit all evidence relevant to the parties' intent, including negotiations and prior agreements." Kemp, 852 F.2d at 495.

The bankruptcy court was left with the task of determining the parties' intent by evaluating the testimony and the documents, both of which had conflicting and inconsistent statements. The question was one of credibility. The bankruptcy court believed the Bank's witnesses. The Bank's attorney, testified that an agreement had been reached. This was supported by other testimony. There was also support in the Disclosure Statement, prepared by Halliburton. It provided: " [i]n order to reach a resolution of the various claims of the Bank and the Debtors as against one another, a Stipulation was entered into and approved by the Bankruptcy Court...."

The bankruptcy court found, on credible evidence, that "the Debtors agreed ... to release any claims." The court in further discussing the objective manifestation of intent, explained that its finding was based on Halliburton's conduct and the representations of both Halliburton and his attorney.

There is evidence to support the finding of an oral agreement and this court is not left with a definite and firm conviction that a mistake was made. The finding was therefore not clearly erroneous. This finding of objectively manifested intent to agree to release the claims is pivotal in the courts alternative finding of fraud and misrepresentation by Halliburton and estoppel of Halliburton.

II. The bankruptcy court did not commit clear error in finding Halliburton engaged in fraud and misrepresentation in inducing the Bank to settle.

Cal.Civ.Code Sec. 1709 defines "fraudulent deceit" as follows:

One who willfully deceives another with intent to induce him to alter his position to his injury or risk, is liable for any damage which he thereby suffers.

To establish fraud the Bank needed to prove five elements:

A. Misrepresentation, suppression, or concealment of facts or intent;

B. Knowledge of the true facts or intent;

C. An intent to induce reliance;

E. Damages arising from justifiable reliance.

See, e.g., Seeger v. Odell, 18 Cal. 2d 404, 414, 115 P.2d 977 (1941). Concealment of facts or intent, (a), and an intent to induce reliance, (c), is supported by the oral agreement, the Disclosure Statement about resolving claims, the failure to disclose the state court action during the Plan confirmation process, which occurred after the complaint was filed, and Halliburton's unexplained delay in serving the state court complaint. Halliburton had knowledge of the true facts or intent, (b), since he claims he never intended to release the claims. Given the existence of an agreement, as found by the bankruptcy court, the Bank's reliance was reasonable, (d). And the Bank suffered damages in having to defend the suit in state court, (e).

The misrepresentation aspect is highlighted by the lack of discussion of the claims in the Disclosure Statement and during the Plan confirmation process. An accurate Disclosure Statement is a premise to Chapter 11 reorganization. " [C]reditors and security holders must have certain information prior to the acceptance or rejection of a plan in order to make an informed judgment of their own.... [And] the pursuit of substantial causes of action and their evaluation may constitute an important ingredient in any plan and should be part of the disclosure statement." B. Weintraub & A. Resnick, Bankruptcy Law Manual p 8.20 (1986). Testimony also demonstrated that Halliburton's attorney purposefully avoided the topic of a release, concealing Halliburton's intent and conduct of pursuing the claims.

The factual findings are supported by the record and the bankruptcy court did not clearly err.

III. The bankruptcy court did not commit clear error in finding Halliburton was estopped from contending that he did not release the claims.

The following facts, reasonably found, establish estoppel:

A. Halliburton knew the true facts of his intent to pursue the claims;

B. By Halliburton's conduct of orally agreeing to a release of the claims, as found to be objectively manifested, the Bank could have reasonably believed that Halliburton intended the conduct (the oral agreement) to be acted upon;

C. The Bank was ignorant of the true facts, that Halliburton was going to pursue the claims, and;

D. The Bank relied to its injury by entering the Stipulation and performing thereunder, by not objecting to the Plan, and by having to defend the state court action.

See, e.g., Citizens Suburban Co. v. Rosemont Dev. Co., 244 Cal. App. 2d 666, 53 Cal. Rptr. 551, 560 (1966). There is evidence to support these factual findings and to show estoppel is proper. The bankruptcy court did not clearly err.

AFFIRMED.