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Holding: The court held that the debtor's plan, which lacked specificity in naming each creditor and its assigned class, lacked an indication of whether each class was impaired, and lacked the treatment for one creditor, could not be confirmed for failing to comply with 11 U.S.C. §§ 1123 (a), 1129(a)(1).
ix. In re Patriot Place, LTD, 486 B.R. 773 (Bankr. W.D. Tex. 2013)
Issue: Whether either of two competing plans, one proposed by the debtor owner of a shopping center and one proposed by a tenant in that shopping center, could be confirmed.
Holding: The tenant and the shopping center owner proposed competing plans in the shopping center owner's bankruptcy case, and a consolidated hearing was held on the tenant's bankruptcy case and the shopping center owner's bankruptcy case, as both were in bankruptcy. The tenant's plan for the shopping center owner provided that the shopping center owner continue to operate the shopping center by assuming its lease with the tenant, as well as its ground lease with the city. The tenant's plan also proposed a litigation trust to pursue claims against the city, neighbors, and others. The court held that the tenant's plan was not feasible. The court found the shopping center owner's future earnings were uncertain because the tenant, the shopping center's major tenant and primary source of income, was also in bankruptcy and the tenant's rehabilitation was uncertain. Additionally, the shopping center owner only owned the improvements to the shopping center and not the underlying real estate, which was ground leased from the city. The city had also been trying to terminate the ground lease. With so much uncertainty, the court found the tenant's plan to not be feasible. The court next held that the litigation trust was "unnecessary, wasteful of [the debtor's] assets, and when viewed in the totality of the circumstances, [was] not proposed in good faith." In so holding the court found that the shopping center owner and its creditors were opposed to the trust and the shopping center owner, whom the tenant's plan designated as the trustee of the litigation trust, refused to serve in that capacity. The court also held that the tenant's plan's "deemed" assumption of the shopping center owner's ground lease with the city was improper because it attempted to circumvent the on-going contested matter between the shopping center owner and the city regarding the assumption of the ground lease. Due to the above findings, the court denied confirmation of the tenant's plan. The court next turned to the shopping center owner's proposed plan, which provided, among others, for the sale of the shopping center "free and clear" to the city with the assignment of all tenant leases, except that of the major tenant and one other, and the termination of the lease with the major tenant. The court held that the owner's plan could not be confirmed because it could not sale the shopping center "free and clear" under 11 U.S.C. 363 (f)(4), (5), the provisions under which the owner proposed to the sell the shopping center. In particular, the court had already found that the lease with the tenant was not in dispute by holding that the tenant, in its own bankruptcy, could cure and assume its lease with the shopping center. The court also found no law supporting the proposition that the tenant could be compelled to accept money in exchange of its leasehold interest. The shopping center owner's plan could also not be confirmed because it contained improper non-debtor releases and exculpations that were "vague, overbroad, and d[id] not comply with Fifth Circuit precedent and
©2014 William L. Norton III
