Continental Airlines, In re
| Decision Date | 15 March 1987 |
| Citation | 91 F.3d 553 |
| Parties | , 36 Collier Bankr.Cas.2d 785, 29 Bankr.Ct.Dec. 629 In re CONTINENTAL AIRLINES. NationsBank of Tennessee, N.A., f/k/a NationsBank of Tennessee, as Collateral Trustee under a Secured Equipment Indenture and Lease Agreement dated |
| Court | U.S. Court of Appeals — Third Circuit |
Gary S. Jacobson (argued), Nicholas J. DiCarlo, James G. Scotti, Kelley, Drye & Warren, New York City, for Appellant NationsBank of Tennessee.
Hal L. Baume, Louis T. DeLucia, Norman Peer, Wilentz, Goldman & Spitzer, Woodbridge, NJ, for Appellant New Jersey National Bank.
Richard G. Elliott, Jr., Daniel J. DeFranceschi, Richards, Layton & Finger, Wilmington, DE, for Appellants Harris Trust and Savings Bank and Boatman's First National Bank of Oklahoma.
Richard P. Schifter (argued), Andrew T. Karron, Michael L. Bernstein, Kari M. Desgalier, Arnold & Porter, Washington, DC, Laura D. Jones, Robert S. Brady, Young, Conaway, Stargatt & Taylor, Wilmington, DE, for Appellee.
Michael J. Malone, Steven B. Carlin, Battle Fowler, LLP, New York City, for amicus curiae Crummy, Del Deo, Griffinger & Vecchione, P.C.
Before: SLOVITER, Chief Judge, ALITO and SEITZ, Circuit Judges.
Before: SLOVITER, Chief Judge, BECKER, STAPLETON, MANSMANN, GREENBERG, SCIRICA, COWEN, NYGAARD, ALITO, LEWIS, McKEE, SAROKIN and SEITZ, Circuit Judges.
Before the in banc court is an appeal by NationsBank of Tennessee (Collateral Trustee) and New Jersey National Bank, Harris Trust and Savings Bank, and Boatman's First National Bank of Oklahoma (First, Second, and Third Priority Secured Equipment Certificate Trustees), who are collectively referred to in this opinion as the "Trustees," from the order entered by the district court in the Chapter 11 bankruptcy proceeding of Continental Airlines, Inc. dismissing as "moot" three appeals by the Trustees. Those appeals were from orders of the bankruptcy court which 1) denied the Trustees' Renewed Motion for adequate protection, 2) confirmed Continental's revised second amended joint plan of reorganization, and 3) denied the Trustees' motion for the establishment of a cash deposit of $123,479,287. In essence, the Appellant Trustees seek payment for an asserted administrative claim of approximately $117 million against the reorganized company. The Appellee, Continental Airlines, Inc., defends the district court's decision to dismiss the Trustees' appeal and argues, in the alternative, that the underlying rulings of the bankruptcy court were correct as a matter of law and fact.
Continental filed its Chapter 11 bankruptcy petition on December 3, 1990. Appellant Trustees serve as successor Collateral and Series Trustees for certificate holders who had provided Continental with operating capital. The certificates were secured at the time of Continental's petition by a pool of 29 commercial aircraft with engines, and 81 additional jet engines which, we were advised, serviced about one-third of Continental's operating fleet. Under the Bankruptcy Code, the debtor in possession, which has most of the rights, powers, functions and duties of a trustee, see 11 U.S.C. § 1107(a), "may use property of the estate in the ordinary course of business without notice or a hearing." 11 U.S.C. § 363(c)(1).
Section 363(e) provides Notwithstanding any other provision of this section, at any time, on request of an entity that has an interest in property used ... by the [debtor in possession], the court, with or without a hearing, shall prohibit or condition such use ... as is necessary to provide adequate protection of such interest.
11 U.S.C. § 363(e).
On February 21, 1991, First Fidelity Bank of New Jersey, predecessor to NationsBank as Collateral Trustee, filed a motion along with many other aircraft lessors and financiers alleging, inter alia, a decline in the value of the collateral and seeking adequate protection under section 363(e). First Fidelity later withdrew from this motion, but on June 28, 1991 it, and the predecessors of the other Appellant Trustees, filed a motion seeking similar relief. The bankruptcy court held an evidentiary hearing on the motion from September 3 through September 6, 1991 limited to the Trustees' assertion that they were entitled to adequate protection payments as a result of the collateral's post-petition decline in market value.
Continental argued, inter alia, that because the Trustees had not filed a motion for relief from the automatic stay, they were not entitled to an award of adequate protection under section 363(e). The motion remained pending in the bankruptcy court until August 27, 1992 when the court ruled on the Trustees' motion, rejecting Continental's legal argument but finding as a fact, based on the "Blue Books," a publication issued by a company that appraises aircraft, that the market value of the collateral had not declined during the period at issue in the motion. In re Continental Airlines, Inc., 146 B.R. 536 (Bankr.D.Del.1992) [hereinafter Continental I ].
Approximately two weeks before the bankruptcy court issued that opinion, the Trustees filed their first motion under section 362(d) of the Bankruptcy Code to lift the automatic stay ("Lift-Stay Motion"). See 11 U.S.C. § 362(d). This section permits a creditor to move for relief from the automatic stay of delineated activities, such as repossession of collateral, effected by section 362(a) of the Bankruptcy Code.
On September 14, 1992, the Trustees also filed a renewed motion for adequate protection for alleged decline in the collateral's value for the period after September 1991, when the original 1991 motion was argued ("Renewed Motion"). There were various hearings on the Renewed Motion between November 3, 1992 and February 5, 1993. Toward the end of that period, the Trustees filed a motion dated January 29, 1993, asking the bankruptcy court to establish a cash deposit of some $123 million, of which $117 million was attributable to alleged market decline, to preserve what the Trustees claimed was the administrative priority status of the Trustees' adequate protection claim if Continental emerged from bankruptcy as a reorganized debtor ("Deposit Motion").
During this period efforts to reorganize the debtor continued. On November 9, 1992 Continental entered into an Investment Agreement under which the Investors (Air Partners, L.P. and Air Canada) agreed and committed to an investment of $450 million in the reorganized entity under a complex arrangement and subject to certain conditions. App. at 391 et seq. One of those conditions, and the one most relevant to this proceeding, was a limitation on the amount and nature of liabilities and administrative expense claims required to be assumed by or attributable to the reorganized company. App. at 408. On January 13, 1993 Continental filed a second amended joint plan of reorganization ("Plan") which referenced that Investment Agreement. The Plan provided, inter alia, for assumption of "allowed administrative claims" by the reorganized Continental. App. at 656.
The confirmation hearing was held for a number of days during the period March 16, 1993 through April 16, 1993. The parties reached a settlement on April 12 concerning adequate protection due to use and/or maintenance of the collateral by Continental, and no issue relating to use decline (the impairment in value attributable to the use of the At the conclusion of the confirmation hearing on April 16, 1993, the bankruptcy court denied the Deposit Motion and the Renewed Motion. In a published opinion, the bankruptcy court held that it was necessary for the Trustees to have sought relief from the automatic stay to be entitled to adequate protection for market value decline; that therefore the Trustees were not entitled to adequate protection due to market decline until after the date of their Lift-Stay Motion, i.e. August 14, 1992; and that no decline in the market value of the collateral had taken place since that date. In re Continental Airlines, Inc., 154 B.R. 176 (Bankr.D.Del.1993) [hereinafter Continental II ]. Also on April 16, 1993, the bankruptcy court signed the Confirmation Order. The court made a series of detailed findings of fact and conclusions of law underlying the Confirmation Order which will be referred to throughout this opinion when pertinent.
collateral by the debtor in possession) is before us. However, the parties did not settle the Trustees' adequate protection claims based on decline in market value.
On April 20, 1993 the Trustees filed three notices of appeal to the district court from the bankruptcy court's denial of the Renewed Motion for Adequate Protection, its denial of the Deposit Motion, and its order confirming the Plan. Two days later, the Trustees filed a motion for a partial stay of the consummation of the Plan ("Conditional Stay Motion"), but filed that motion in the district court, which referred them to the bankruptcy court. On April 26, 1993, the Trustees filed that stay request in the bankruptcy court. Because the bankruptcy judge was not available, the hearing on the motion was held the next day in the district court, which stated, without explanation or analysis, that the Trustees were likely to prevail on their appeal to the district court, but denied the stay because the Trustees were "unable to post a bond satisfactory to the Court." App. at 1755-56. The...
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