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* Cadle Company II, Inc. v. PC Liquidation Corp. (In re PC Liquidation Corp.), 383 B.R. 856 (E.D.N.Y. Feb. 2008) (Feuerstein, J.)
Creditor overcame the presumption of equitable mootness, notwithstanding the substantial consummation of this liquidating plan. When the bankruptcy court below overruled the creditor's objection to the debtor's disclosure statements, the court acknowledged that it was "an awfully close case" for conversion to chapter 7 as opposed to a liquidation under a plan in chapter 11. Nevertheless, the court overruled the creditor's objection, entered an order confirming the plan of liquidation, and then denied the creditor's motion to stay the confirmation order pending appeal.
On an expedited appeal, the district court recognized that the events of this case met the technical definition of "substantial consummation" under section 1101(2) of the Code.67 Because the plan was substantially consummated, said the district court, there was a presumption that the appeal of the confirmation order was equitably moot. To determine whether that presumption could be rebutted, the district court looked to the Chateaugay II factors. In this case, the court found that the creditor had rebutted that presumption because:
(1) the creditor acted diligently by moving for a stay pending appeal and by seeking an expedited appeal when that staywas denied; (2) there were no concerns of upsetting the debtor's reorganization because the confirmed plan was a liquidating plan; (3) all parties in interest were given adequate notice of the appeal; (4) a potential remedy for the creditor was a conversion to chapter 7 as opposed to the confirmed plan of liquidation; and (5) such a conversion, according to the district court, would not "knock the props" off of the confirmed plan. Having concluded that the appeal was not equitably moot, however, the district court found the appealing creditor's substantive grounds for appeal to be without merit and affirmed the bankruptcy court's order.
* PVP Industries, Inc. v. Millburn Peat Co. (In re Millburn Peat Co.), 384 B.R. 510
(N.D. Ind. Feb. 2008) (Simon, J.)
Scrivener's error in a pre-confirmation stipulation spelled doom for the objecting creditor.
An unsecured creditor appealed two orders confirming affiliated debtors' plans of confirmation, arguing that the plans were not fair and equitable because they proposed to pay the secured lender bank in excess of the bank's liens. Prior to the confirmation hearings, the appellant creditor entered into a stipulation with the debtors that the bank "has a first priority security interest or mortgage on all of the property of each of the Affiliated Entities." Based in part upon this stipulation, the bankruptcy court found the bank to be fully secured by the debtors' pre- and post-petition assets. Because the court found the bankd to be fully secured, the bank was entitled to payment in full to the extent of its lien, as the plans fairly and equitably proposed to do. Accordingly, the court confirmed the plans.
On rehearing, and again on this appeal, the unsecured creditor argued that the bankruptcy court misconstrued a scrivener's error in the stipulation -- "has" was intended to be "had,"
67 The debtor had previously sold nearly all of its assets through a section 363 sale, leaving only the distribution of proceeds for the estate to administer. Thus, the consummation of the plan consisted of creating a liquidating trust, funding that trust with proceeds and interest in potential lawsuits, and beginning the process of distributing assets to creditors.
