American Colonial Broadcasting Corp., In re

• Decision Date: 03 April 1985
• Docket Number: 84-1654 and 84-1655,Nos. 84-1609,s. 84-1609
• Citation: 758 F.2d 794
• Parties: 12 Collier Bankr.Cas.2d 799, 12 Bankr.Ct.Dec. 1301, Bankr. L. Rep. P 70,367 In re AMERICAN COLONIAL BROADCASTING CORP., Debtor. Appeal of LOCAL SERVICE TELEVISION, INC., and/or Mr. Charles Woods, Appellant. In re AMERICAN COLONIAL BROADCASTING CORP., Debtor. Appeal of AMERICAN COLONIAL BROADCASTING CORP., Appellant. In re AMERICAN COLONIAL BROADCASTING CORP., Debtor. Appeal of COMMITTEE OF EQUITY SECURITY HOLDERS OF AMERICAN COLONIAL BROADCASTING CORP., Appellant.
• Court: U.S. Court of Appeals — First Circuit

Page 794

758 F.2d 794

12 Collier Bankr.Cas.2d 799, 12 Bankr.Ct.Dec. 1301,

Bankr. L. Rep. P 70,367

In re AMERICAN COLONIAL BROADCASTING CORP., Debtor.

Appeal of LOCAL SERVICE TELEVISION, INC., and/or Mr. Charles

Woods, Appellant.

In re AMERICAN COLONIAL BROADCASTING CORP., Debtor.

Appeal of AMERICAN COLONIAL BROADCASTING CORP., Appellant.

In re AMERICAN COLONIAL BROADCASTING CORP., Debtor.

Appeal of COMMITTEE OF EQUITY SECURITY HOLDERS OF AMERICAN

COLONIAL BROADCASTING CORP., Appellant.

Nos. 84-1609, 84-1654 and 84-1655.

United States Court of Appeals,

First Circuit.

Argued Feb. 5, 1985.

Decided April 3, 1985.

Patrick Duffy O'Neill, Hato Rey, P.R., with whom Colorado, Martinez, Odell, Calabria & Sierra, Hato Rey, P.R., was on brief for Charles Woods.

Jose A. Cestero, Hato Rey, P.R., for Committee of Equity Security Holders of American Colonial Broadcasting Corporation.

Robert P. Fletcher with whom Joaquin A. Marquez, Santurce, P.R., and Hamel & Park, Washington, D.C., were on brief for Joaquin Villamil and/or Television Broadcasting Corp.

Maximiliano Trujillo-Gonzalez, Hato Rey, P.R., for American Colonial Broadcasting Corp.

Benjamin Rodriguez-Ramon, Hato Rey, P.R., with whom Rodriguez-Ramon, Pena & Cancio, Hato Rey, P.R., was on brief for Juan Labadie-Eurite.

Before COFFIN, Circuit Judge, WISDOM, ^* Senior Circuit Judge, and BOWNES, Circuit Judge.

BOWNES, Circuit Judge.

This is an appeal from a judgment entered by the United States District Court for the District of Puerto Rico dismissing an appeal from an order of the United States Bankruptcy Court for the District of Puerto Rico. The Bankruptcy Court order had authorized the Special Master Juan Labadie-Eurite to negotiate the sale of two television stations, WKBM-TV (Channel 11) and WSUR-TV (Channel 9), owned by the debtor, American Colonial Broadcasting Corporation (ACBC), to the high bidder, Joaquin Villamil. This order was appealed to the district court by Charles Woods, the losing bidder. Separate appeals of this order were also filed by ACBC and the Committee of Equity Security Holders of ACBC. ACBC's appeal was dismissed by the district court for failure to prosecute. The appeals of Woods and the Equity Security Holders were also dismissed by the district court on the grounds that the bankruptcy court order was not final and appealable as of right and that leave to appeal should not be granted because the order in question was moot. Woods, the Equity Security Holders, and ACBC appeal the district court's decisions.

FACTS

In August of 1981, ACBC filed for protection under Chapter 11 and was designated a debtor-in-possession. By the spring of 1983, the slow progress of the Chapter 11 reorganization process led the creditors' committee to petition the bankruptcy court for the appointment of a special master to Since both parties indicated at the hearing that they wished to amend and clarify their offers, the bankruptcy court gave the parties until 5:00 P.M. on August 31 to submit their final written offers as sealed bids. Both parties were also directed to include in the offers financial information and guarantees and the identity of the group making the offer. ¹ The court then ordered that the offers be placed for public inspection with the clerk's office on September 1 and stated that the court would issue its decision on September 2 naming which party could negotiate with the special master for the sale of the TV stations.

negotiate and conduct a sale of the debtor's main assets, WKBM-TV and WSUR-TV. A special master was appointed and began receiving offers from potential buyers. On July 20, the special master filed a report with the bankruptcy court listing three offers: an offer from Villamil to purchase stock or television assets for $4.5 million; an offer from Woods to purchase the television assets for $10 million; and an offer from a third party which was subsequently withdrawn. Notice of a hearing was sent to all interested parties and a hearing was held on August 29. Each party discussed his offer. Woods explained that the $10 million offer consisted of $5 million in cash and $5 million payable over five years. Villamil's offer included indemnification of a contingent claim by Television de Puerto Rico (TVPR) against ACBC over and above the $4.5 million cash offer. At the time the TVPR claim was valued at $37 million, but was subject to revaluation by the bankruptcy court.

Both Woods and Villamil submitted bids by the 5:00 P.M. deadline. Woods had reduced his offer to $6 million while Villamil had increased his to $6 million. Since Villamil's offer still included indemnification of the TVPR claim, subsequently estimated by the bankruptcy court to be worth $1.635 million, the Villamil offer was higher. On September 1, Woods learned that the Villamil offer was higher than his own. In the predawn hours of September 2, Woods sent telegrams to the special master and the bankruptcy court judge in which he attempted to reinstate his prior offer of $10 million for the purchase of the two TV stations. It does not appear that the judge received the telegram until after September 2. After learning about the $10 million offer, the debtor, ACBC, presented a letter to the judge's secretary on the morning of September 2 indicating that the debtor preferred the $10 million offer, and also filed an informative motion to the same effect late that same afternoon.

On September 2, the bankruptcy court issued an order in which it "accepted [the Villamil offer] subject to the approval of the F.C.C." and ordered the special master to "negotiate the sale of debtor's assets to [Villamil] ..., and to prepare all documents necessary for F.C.C. approval of such transfer." On September 3, Woods, concerned that the bankruptcy judge had not received the telegram sent on September 2, sent a letter to the judge by Express Mail with the same message. A similar letter was sent on September 5. Both the letters and the September 2 telegram were docketed on September 6. On September 8, Woods sent a letter to the judge raising his offer to purchase the two TV stations to $11 million and followed this up with a letter detailing his financial assets on September 9.

On September 12, the debtor, the Equity Security Holders, and Woods each filed motions for reconsideration of the September 2 order. The debtor's motion drew attention to the fact that Villamil had not disclosed the identity of the principal parties as required by the August 29 order. The debtor suggested that Villamil's offer might depend upon foreign investment and that this could result in denial of the license by the FCC due to alien-ownership restrictions. The motions of the debtor and the Equity Security Holders also pointed out what the parties considered to be unfavorable terms in the Villamil offer The motions for reconsideration were denied by the bankruptcy court on September 16. In its order, the court stated:

compared to the new $11 million offer by Woods. William Bernton, who had been appointed as Special FCC Counsel to the debtor by the bankruptcy court also filed similar comments in favor of reconsideration. The motion filed by Woods also pointed out the possibility that the FCC might reject Villamil's license application and argued that, in any event, the $11 million offer was so much more beneficial to the debtors and creditors that reconsideration of the September 2 order was justified. Two motions opposing the motions for reconsideration were filed: one by Televisa, a creditor, and one by TVPR. Both supported the Villamil bid and stressed the need for expedited payment to creditors.

Pleadings and oral arguments in this case are plagued with references and allegations to the critical nature of the TV industry and a need for expediency in the ultimate determination of this matter. A prior purchase offer, during the pendency of this case, dissolved and failed to materialize due to an alleged lack of expediency. A final deadline was therefore, set. Therefore, any offers submitted after the expiration date of said final deadline cannot be entertained.

On September 19, Woods, the debtor, and the Equity Security Holders each filed separate notices of appeal of the September 2 order to the United States District Court for the District of Puerto Rico. At the same time, Woods filed a motion to stay the negotiations between the special master and Villamil during the pendency of the appeal. The motion for a stay was denied by the bankruptcy court on September 27. The denial of a stay was appealed to the district court which affirmed the bankruptcy court.

While the appeal of the September 2 order was pending before the district court, negotiations between Villamil and the special master took place. By December 5, 1983, the parties had agreed to a sale of the debtor's assets by means of a merger of ACBC and Villamil's corporation, Television Broadcasting Corporation (TBC). The objections of several interested parties, however, led the principals to scrap the merger agreement and substitute in its place a stock purchase and sale agreement. This alternative plan was first presented to the court during a hearing on January 23, 1984, which had originally been scheduled for consideration of the merger agreement. At this time the parties expressed their intention to sign a stock purchase and sale agreement within fourteen days. A hearing was set for February 10. At this second hearing, the debtor, the stockholders and Villamil signed and delivered to the court a stock purchase and sale agreement which the special master endorsed. Written and oral objections to the new agreement were made by Woods, the creditors' committee, and independent creditors. During the hearing, the court advised the parties that several provisions of the agreement were unacceptable and granted them additional time to negotiate a compromise. An amended agreement was filed with the court on February 14, 1984, and was approved...