In re Bullion Hollow Enterprises, Inc.
| Decision Date | 03 August 1995 |
| Docket Number | 94-0259-B.,Bankruptcy No. 7-92-02845-HPB-11 |
| Citation | 185 BR 726 |
| Parties | In re BULLION HOLLOW ENTERPRISES, INC., Debtor. UNITED STATES of America, Appellant, v. BULLION HOLLOW ENTERPRISES, INC., Appellee. |
| Court | U.S. District Court — Western District of Virginia |
S. Randall Ramseyer, Asst. U.S. Atty., Abingdon, VA, Margaret M. Earnest, U.S. Dept. of Justice, Washington, DC, for appellant.
Robert Tayloe Copeland, Abingdon, VA, for appellee.
This case is before the Court on appeal from the decision of the United States Bankruptcy Court for the Western District of Virginia ("Bankruptcy Court"). The Appellant, United States, contends that the Bankruptcy Court erred by confirming the debtor's, Bullion Hollow Enterprises, Inc. ("Bullion Hollow"), post-confirmation modified plan. The United States argues that the confirmed plan could not be modified because it had been "substantially consummated." This Court has jurisdiction to decide this case pursuant to 28 U.S.C. § 158(a). The Court finds that the confirmed plan had been substantially consummated and there were no circumstance warranting an exception and, therefore, Bullion Hollow should not have been allowed to modify the plan.
Bullion Hollow is a mining operation owned by Randy Moore ("Moore") which filed its petition under Chapter 11 of the Bankruptcy Code on December 17, 1992. The United States, as the Internal Revenue Service ("IRS"), filed a proof of claim for pre-petition employment taxes totaling $556,819.08 with $47,489.96 being a secured claim, $406,614.47 being a priority claim and $102,714.65 being an unsecured claim. A plan of reorganization was filed by Bullion Hollow on August 17, 1993. Bullion Hollow filed an amended disclosure statement and plan on October 4, 1993 which was objected to by the IRS. The debtor and the IRS came to an agreement on the new plan on May 2, 1994. The new plan was confirmed by the Bankruptcy Court on May 9, 1994.
On June 7, 1994, Bullion Hollow filed a motion to modify the confirmed plan and objections were filed by the IRS and another creditor, General Engineering Company. The debtor claimed that they needed to modify the confirmed plan because of financial difficulties incurred due to new federal regulations in the mining industry. Bullion Hollow's motion for modification was denied on July 25, 1994 because the debtor had failed to comply with the disclosure provisions of the Bankruptcy Code. Bullion Hollow then filed another amended disclosure statement and modified plan on September 8, 1994. The IRS and General Engineering Company again filed objections along with Coastal Capital Corporation and Virginia Iron Coal & Coke Company. The Bankruptcy Court held that the confirmed plan had not been substantially consummated as defined in 11 U.S.C. § 1127(b) and confirmed the post-confirmation modified plan on October 4, 1994. It is the confirmation of this modified plan that is the subject of this appeal.
In reviewing a bankruptcy court's decision, the standard of review for findings of fact is clear error, and the standard of review for any legal determinations is de novo. In re Midway Partners, 995 F.2d 490, 493 (4th Cir.1993). Since the determination of whether a confirmed plan has been substantially consummated is a factual determination, the Bankruptcy Court's decision will be reviewed for clear error. See In re Jorgensen, 66 B.R. 104, 106 (9th Cir. BAP 1986).
The Bankruptcy Code provides that a debtor may modify a plan "at any time after confirmation of such plan and before substantial consummation of such plan." 11 U.S.C. § 1127(b). What constitutes "substantial consummation" is determined by its definition in 11 U.S.C. § 1101(2) which reads as follows:
The burden is on the proponent of the modification to demonstrate that the plan has not been substantially consummated. In re Dam Road Mini Storage, 156 B.R. 270, 271 (Bankr.S.D.Cal.1993); In re Modern Steel Treating Co., 130 B.R. 60, 64 (Bankr. N.D.Ill.1991). All of the requirements of the three subsections must be met in order to find substantial consummation. In re Bedford Springs Hotel, 99 B.R. 302, 303 (Bankr. W.D.Pa.1989). The dispute in this matter arises over whether payments to creditors is governed by subsection (A) or subsection (C) of the definition of substantial consummation. Other than how to interpret 11 U.S.C. § 1101 for payments to creditors, all other factors to find substantial consummation have been met. The debtor argues that payments to be made to creditors under the plan are to be considered property being transferred and fall under the requirements of subsection (A). Therefore, according to Bullion Hollow's argument, until "all or substantially all" of the payments to the creditors are made, the confirmed plan cannot be substantially consummated. The IRS argues that property referred to in subsection (A) does not include payments to be made to creditors. Instead, the IRS claims, payments to creditors falls under subsection (C) which only requires that distribution under the plan be commenced for substantial consummation to be attained. The Fourth Circuit has not ruled upon this issue.
Bullion Hollow relies mainly upon the case of In re Heatron, Inc., 34 B.R. 526 (Bankr. W.D.Mo.1983), for support of their argument. In Heatron, the court held that a bankruptcy plan had not been substantially consummated even though 53% of the payments to creditors had been completed. The court interpreted the language referring to the transferring of property in subsection (A) to include payments to creditors. The court in Heatron held that since payments to creditors was property under subsection (A), then "all or substantially all" of the payments to creditors must be made for a plan to be substantially consummated. The court went on to hold that 53% of the payments did not constitute "substantially all" of the payments and, thus, the plan had not been substantially consummated.
Almost all of the courts that have dealt with this issue since the rendering of the Heatron decision have refused to follow the Heatron analysis. See In re Hayball Trucking, Inc., 67 B.R. 681 (Bankr.E.D.Mich.1986); In re Earley, 74 B.R. 560 (Bankr.C.D.Ill. 1987); In re Bedford Springs Hotel, 99 B.R. 302 (Bankr.W.D.Pa.1989); In re Burlingame, 123 B.R. 409 (Bankr.N.D.Okla.1991); In re Burnsbrooke Apts. of Athens, Ltd., 151 B.R. 455 (Bankr.S.D.Ohio 1992); In re Dam Road Mini Storage, 156 B.R. 270 (Bankr.S.D.Cal. 1993). These decisions have all held that payments to creditors are not to be considered transferring property under subsection (A), but instead, fall under subsection (C) which only requires that the distribution of the payments to have commenced. This Court agrees with the reasoning of these cases which hold that distribution of payments to creditors need only be commenced in order for a plan to be substantially consummated.
In re Hayball Trucking, Inc., 67 B.R. at 683-84. Most courts subsequent to the Heatron and Hayball Trucking decisions have followed the logic of the Hayball Trucking opinion and this Court agrees with it as well. Therefore, this court holds that payment to creditors falls under subsection (C) of 11 U.S.C. § 1101 and, thus, the distribution of payments to creditors need only be commenced for there to be substantial consummation, if the requirements of the other subsections are met as well.
Next the Court must determine whether payments to creditors had, in fact, commenced under this plan. There is no percentage or specific number of payments needed to have been paid in order to qualify as "c...
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