In re Ancor Exploration Co., Bankruptcy No. 83-C-239-BT.
| Decision Date | 12 May 1983 |
| Docket Number | Bankruptcy No. 83-C-239-BT. |
| Citation | 30 BR 802 |
| Parties | In re ANCOR EXPLORATION COMPANY, a general partnership, Debtor. In re ANCOR PETROLEUM, INC., Debtor. In re BLUEBELL OIL & GAS, INC., Debtor. |
| Court | U.S. District Court — Northern District of Ohio |
Paul C. Kurland of Baer, Marks & Upham, New York City, Mack Muratet Braly & Associates, Tulsa, Okl., for Sixth Geostratic Energy Drilling Program 1980, Seventh Geostratic Energy Drilling Program 1980, Eighth Geostratic Energy Drilling Program 1980, First, Second and Third Ancor-Geostratic Drilling Partnerships 1980, Robert S. Sinn and Jan S. Mirsky.
Joseph R. Farris and Brenda J. Huddleston of Feldman, Hall, Franden & Woodard, Tulsa, Okl., for appellee, Robert A. Franden, Trustee for Ancor Exploration Co., Ancor Petroleum, Inc., and Bluebell Oil and Gas, Inc.
AMENDED ORDER
(REPLACING ORDER DATED MAY 4, 1983)
This matter comes before the Court on appeal from the March 3, 1983 order of the Bankruptcy Court approving the sale of substantially all of the assets of the debtors in a Chapter 11 proceeding pursuant to the "Notice of Hearing and Application for Order Approving Sale of Assets" filed on January 27, 1983, by Robert A. Franden, trustee for Ancor Exploration Company ("Ancor"), Bluebell Oil & Gas, Inc. ("Bluebell") and Ancor Petroleum, Inc., ("Petroleum"), collectively referred to herein as "debtors." The appeal presents the following question: In a Chapter 11 proceeding, with Bankruptcy Court approval and absent an emergency, can a trustee by private sale not in the ordinary course of business and over the objection of an interested party, sell substantially all of the estate assets without first complying with the plan and disclosure requirements of 11 U.S.C. § 1125 et seq?
Following the recent decision by the United States Supreme Court in Northern Pipeline Construction Co. v. Marathon Pipeline, ___ U.S. ____, 102 S.Ct. 2858, 73 L.Ed.2d 598 (1982), which found the jurisdictional grant of the Bankruptcy Reform Act unconstitutional, the judges of the United States District Court for the Northern District of Oklahoma entered an Order adopting a Rule which delegated certain authority to the judge of the Bankruptcy Court.1 Paragraph (e)(2)(B) of the Rule allows the District Court to conduct a de novo review of a bankruptcy court if it so desires. The Rule states:
"In conducting review, the District Judge may hold a hearing and may receive such evidence as appropriate and may accept, reject, or modify, in whole or in part, the order or judgment of the Bankruptcy Judge, and need give no deference to the findings of the Bankruptcy Judge."
In the exercise of its discretion, the Court concludes a de novo hearing will not be conducted.
The standard of review of the Bankruptcy Court's approval of the proposed sale is whether the Court's findings were clearly erroneous. Rule 810 of the Rules of Bankruptcy Procedure; United States v. United States Gypsum Company, 333 U.S. 364, 394-95, 68 S.Ct. 525, 541-42, 92 L.Ed. 746 (1948).
There are six Geostratic partnerships involved herein as creditors (sometimes referred to collectively as "the Geostratics"). Sixth Geostratic Energy Drilling Program 1980, Seventh Geostratic Energy Drilling Program 1980 and Eighth Geostratic Energy Drilling Program 1980 are known as the investor partnerships. They are limited partnerships whose general partner is Robert S. Sinn and Jan S. Mirsky and whose limited partners are unnamed investors. First Ancor-Geostratic Drilling Partnership 1980, Second Ancor-Geostratic Drilling Partnership 1980 and Third Ancor-Geostratic Drilling Partnership 1980 are known as the drilling partnerships. First, Second and Third Ancor-Geostratic Drilling Partnerships 1980 are limited partnerships in which Sixth, Seventh and Eighth Geostratic Energy Drilling Programs 1980 respectively are limited partners, the debtor, Ancor, is now a limited partner, and Sinn and Mirsky are now the general partner.3 Basically the investor partnerships raised the drilling program funds and the drilling partnerships developed and drilled the oil and gas leases. The investor partnerships and the drilling partnerships along with Sinn and Mirsky as individuals are appellants herein.
Under the contract agreements creating First, Second and Third Ancor-Geostratic Drilling Partnerships 1980, the debtor Ancor originally was the general partner. Ancor is an Oklahoma partnership comprised of Docko, Inc., an Oklahoma corporation, and Harry E. McPhail, Jr., individually. McPhail was the active managing partner and chief operating officer of Ancor and thereby the manager of First, Second and Third Ancor-Geostratic Drilling Partnerships 1980. On May 21, 1982, because of alleged defalcations of McPhail, Docko, Inc., moved to dissolve Ancor in the District Court of Tulsa County, Oklahoma and caused a temporary receiver to be appointed, thereby removing McPhail from his management position and further involvement in Ancor. On July 8, 1982, Docko, Inc., filed an involuntary petition for reorganization on behalf of Ancor under Chapter 11 of the Bankruptcy Code in this district. On the same day Docko, Inc., filed its voluntary bankruptcy petition for reorganization under Chapter 11.4
Pursuant to the provisions of paragraphs 15.1 and 15.2 of the First, Second and Third Ancor-Geostratic Drilling Partnerships 1980 written agreements, Sinn and Mirsky were elected and designated by the undersigned Court as the new general partner of First, Second and Third Ancor-Geostratic Drilling Partnerships 1980 on November 29, 1982.5
Docko, Inc., is an Oklahoma corporation formed for the purpose of being a partner in Ancor. Docko, Inc. is a wholly owned subsidiary of A/S Docko Corporation, a large Norwegian corporate conglomerate. A/S Docko Corporation also wholly owns A/S Selvaagbygg, another Norwegian corporation. A new company, "Newco," has now been organized as an Oklahoma corporation called Agathon, Inc. (referred to herein as "Newco/Agathon"). It is a wholly owned subsidiary of A/S Selvaagbygg. Moreover, A/S Docko originally owned 90 per cent of the stock of Bluebell but transferred the Bluebell stock to Ancor as the capital contribution of Docko, Inc. in the Ancor partnership. Ancor Petroleum, Inc., is wholly owned by Ancor. (See Exhibit "A").
The trustee for the debtors on January 27, 1983 applied to the Bankruptcy Court to sell substantially all of the assets of Ancor, Bluebell and Petroleum to Newco/Agathon. In consideration of the conveyance of the assets, A/S Selvaagbygg, the owner of Newco/Agathon, has proposed to the trustee the following transaction:
1. In exchange for substantially all the assets of the debtor estates (consisting primarily of oil and gas working interests, undeveloped leases, three drilling rigs and incidental office furniture and equipment), the debtor estates will receive:
2. Included in the terms of the "Newco" offer is a closing date of March 31, 1983, subsequently extended. Also included is an "upset price" provision which limits the trustee to accepting other offers only if in excess of $8,600,000.7
Appellants propose the following as additional terms of the sale:8 1) Appellants claim the working interests of Sixth, Seventh and Eighth Geostratic Energy Drilling Programs 1980 and revenue attributable to those working interests in the approximate amount of $500,000 were being held in trust by Ancor as the former general partner of the First, Second and Third Ancor-Geostratic Drilling Partnerships 1980. Appellants claim the Newco/Agathon offer should make some accommodation for the payment of the alleged trust monies; 2) Appellants claim the First National Bank of Oklahoma City lien should be removed from the working interests of the First, Second and Third Ancor-Geostratic Drilling Partnerships 1980; and 3) Appellants claim Newco/Agathon's liability as successor to Ancor should be bonded.
Several courts have considered whether a trustee may, with court approval and over the objection of an interested party, sell all or substantially all of the estate assets not in the ordinary course of business without compliance with Chapter 11 requirements. The underlying issue is how 11 U.S.C. § 363(b) fits into the reorganization scheme of Chapter 11.
11 U.S.C. § 363(b) provides:
"The trustee, after notice and a hearing, may use, sell, or lease, other than in the ordinary course of business, property of the estate."
11 U.S.C. § 1123(b)(4), dealing with the contents of a reorganization plan, states a plan may:
"provide for the sale of all or substantially all of the property of the estate, and the distribution of the proceeds of such sale among holders of claims or interests; . . . "
Under 11 U.S.C. § 1125(b), an acceptance or rejection of a plan may not be solicited from a creditor of the estate unless prior to the solicitation an approved plan and disclosure statement are transmitted to the creditor. The...
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