Moody v. Amoco Oil Co.

Gerald Moody and his wholly owned corporation (collectively, Moody) (debtors) operated three Amoco Oil Company (Amoco) service stations (the dealerships) and a wholesale business that sold Amoco products (the jobbership). Moody defaulted on payments to Amoco for products sold in the jobbership business. On February 1, 1983, Amoco gave Moody notice that the jobbership would terminate on May 6, 1983, unless Moody paid Amoco $230,000 owed for the products within 15 days—i.e., unless Moody cured its nonperformance. Additionally, checks that Moody had given Amoco in connection with two of the dealerships had been dishonored by Moody’s bank. On February 3, 1983, Amoco sent notice to Moody that the two dealerships would terminate in 90 days. Moody filed for Chapter 11 bankruptcy on February 4, 1983, and received the dealership-termination notices the next day. Moody filed an adversary proceeding against Amoco in the bankruptcy court, asking the court for a determination that Moody could assume the dealership and jobbership contracts to continue operating the businesses. The bankruptcy court held that Moody could not assume the contracts, and the district court affirmed. Moody appealed to the Seventh Circuit. The Seventh Circuit held that the dealership-termination notices were effective on the date they were sent, which was before Moody’s bankruptcy filing. The court then considered Moody’s arguments that (1) because Moody filed for bankruptcy during the 90-day period before the dealership terminations became effective, the dealership contracts were still executory and could be assumed by Moody, and (2) because Moody filed for bankruptcy during the 15-day cure period provided by the jobbership-termination notice, the jobbership contract was still executory and could be assumed by Moody if Moody cured the default. With respect to Moody’s second argument, Amoco argued that under 11 U.S.C. § 108(b), Moody had only 60 days from the date of the bankruptcy filing to cure its default and assume the contract, but Moody had failed to do so.