A secured creditor filed a motion for civil contempt and sanctions to force the debtor to turn over machinery and equipment and execute a deed as provided for in the confirmed plan. After hearings, the court granted the motion and entered a writ of execution authorizing the creditor to repossess and sell the machinery and equipment at issue. Members of the debtor then filed a motion to amend the order, claiming that some of the equipment actually belonged to them and not to the debtor.
After an evidentiary hearing on the ownership issues, the bankruptcy court concluded the members were equitably estopped from claiming ownership of the bulk of the machinery and equipment. The court specifically found that one of the members had intentionally and willfully made false representations to the court and the creditor concerning ownership of the equipment. The court further found the creditor exercised reasonable prudence, relied on the false representations in the debtor's schedules, and acted in accordance with that reliance by agreeing to the terms of the plan and dismissing litigation against the members in their capacity as guarantors. Accordingly, the court denied in large part the members' motion to amend the sanctions order and ordered the members to turn over the property at issue.