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In re Orange Tree Associates

filed: April 20, 1992.

IN RE: ORANGE TREE ASSOCIATES, LTD., DEBTOR. DALE C. ECKERT CORPORATION, APPELLANT,
v.
ORANGE TREE ASSOCIATES, LTD.; NEW WEST FEDERAL SAVINGS AND LOAN ASSOCIATION, SUCCESSOR TO AMERICAN SAVINGS AND LOAN ASSOCIATION, APPELLEES.



Appeal from the Ninth Circuit Bankruptcy Appellate Panel. BAP No. CC-89-1718-OPJ. Jones, Perris and Ollason, Judges, Presiding.

Before: James R. Browning, Arthur L. Alarcon and Thomas G. Nelson, Circuit Judges. Opinion by Judge Browning.

Author: Browning

BROWNING, Circuit Judge:

I

Orange Tree Associates is a limited partnership formed to develop a 100-unit condominium complex in Long Beach, California. Before the condominium project was completed, Orange Tree filed a petition for Chapter 11 bankruptcy in the Los Angeles bankruptcy court.

Orange Tree's principal creditors were the bank that financed the project, whose successor in interest is appellee New West Federal Savings and Loan, and appellant Dale C. Eckert Corporation, the general contractor.*fn1 New West had first claim to the condominium project under a deed of trust. Eckert held a $765,763 mechanics lien for construction work. The amount due New West under its deed of trust far exceeded the market value of the project, making Eckert's claim virtually worthless. Further, Orange Tree disputed Eckert's $765,763 claim against the Orange Tree estate. Eckert filed a Chapter 7 petition in the San Bernardino bankruptcy court.

The Eckert trustee agreed to exchange Eckert's disputed, secured claim of $765,763 for an undisputed, unsecured claim of $75,000. Orange Tree had proposed a reorganization plan under which unsecured creditors would be paid slightly more than 10 cents on the dollar. If the plan were adopted, Eckert would realize about $8,000 in satisfaction of its $765,763 claim. After the notice and hearing required by 11 U.S.C. § 1128, the Los Angeles bankruptcy court entered an order on June 6, 1988 in the Orange Tree bankruptcy confirming the reorganization plan pursuant to 11 U.S.C § 1129. The Eckert trustee voted for the plan.

One of Eckert's major creditors, a subcontractor owed more than $200,000 for work on the condominium project, learned of the compromise and the reorganization plan and considered them unfair. The subcontractor informed the Eckert trustee of its theory that New West was a joint venturer on the condominium project with Orange Tree and therefore could not also be the senior lien holder. If New West's deed of trust were set aside on this ground, Eckert could collect its claim. The Eckert trustee decided nonetheless not to challenge the New West deed of trust.*fn2

On September 22, 1988, more than two months after the Orange Tree reorganization plan had been confirmed, the Eckert trustee and Orange Tree filed a joint motion in Eckert's bankruptcy in the San Bernadino bankruptcy court seeking approval of the compromise of Eckert's claim pursuant to Bankruptcy Rule 9019(a).*fn3 The subcontractor objected on the ground the compromise was unfair to the Eckert estate. The subcontractor offered to pay the Eckert estate more than the $8,000 it would receive from the compromise and to hire special counsel to pursue Eckert's claim against Orange Tree for the benefit of the estate. The San Bernardino bankruptcy court accepted the offer, rejected the compromise, and authorized the subcontractor to hire special counsel.

Special counsel for the Eckert estate filed a complaint on March 3, 1989 in the Orange Tree bankruptcy in Los Angeles bankruptcy court seeking to overturn the order confirming the Orange Tree reorganization plan on the ground of fraud in its procurement.*fn4 The Los Angeles bankruptcy court dismissed the complaint, in part because it was filed after the 180-day limitations period provided by 11 U.S.C. § 1144. The Bankruptcy Appellate Panel (BAP) affirmed on this ground. Eckert filed this appeal.*fn5 We affirm.

II

An order confirming a Chapter 11 reorganization plan may be revoked only in accordance with 11 U.S.C. § 1144:

On request of a party in interest at any time before 180 days after the date of the entry of the order of confirmation, and after notice and a hearing, the court may revoke such order if ...


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