In re: Crown Winthrop Operating Partnership

• Decision Date: 01 March 2001
• Docket Number: No. 99-55584,99-55584
• Citation: 241 F.3d 1121
• Parties: (9th Cir. 2001) In re: CROW WINTHROP OPERATING PARTNERSHIP, a Maryland general partnership, Debtor. CROW WINTHROP DEVELOPMENT LIMITED PARTNERSHIP; CROW ORANGE COUNTY MANAGEMENT COMPANY, INC., Appellants, v. JAMBOREE LLC, Appellee
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1121

241 F.3d 1121 (9th Cir. 2001)

In re: CROW WINTHROP OPERATING PARTNERSHIP, a Maryland general partnership, Debtor.

CROW WINTHROP DEVELOPMENT LIMITED PARTNERSHIP; CROW ORANGE COUNTY MANAGEMENT COMPANY, INC., Appellants, v. JAMBOREE LLC, Appellee.

No. 99-55584

UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

Argued and Submitted September 13, 2000

Filed March 1, 2001

COUNSEL: Ronald Rus, Joel S. Miliband and Leo J. Presiado, Rus, Miliband and Smith, Irvine, California, and Thomas R. Malcolm, Jones, Day, Reavis and Pogue, Irvine, California for the appellants.

Betty M. Shumener, Robert J. Odson and Henry H. Oh, Dewey Ballantine, Los Angeles, California for the appellees.

Appeal from the United States District Court for the Central District of California Terry J. Hatter, Jr., Chief District Judge, Presiding D.C. No.CV-98-01354-TJH

Before: James R. Browning, Thomas G. Nelson, and Barry G. Silverman, Circuit Judges.

Per Curiam Opinion

OPINION

PER CURIAM:

Crow Winthrop Development Limited Partnership ("Crow Development") and Crow Winthrop Operating Partnership ("Crow Operating") were formed to acquire a parcel of property, consisting of office buildings ("Headquarters Facility") and the surrounding land. Crow Operating owned the Headquarters Facility and Crow Development owned the surrounding land. Under the terms of a reciprocal easement agreement, an affiliate of Crow Development was the managing agent of the surrounding land, which was to be used as common areas and for parking. Following a dispute and litigation about the Crow Development affiliate's management of the common areas and parking, the parties entered into a settlement agreement which allowed an affiliate of Crow Operating to manage the common areas and parking in exchange for a substantial monthly payment to Crow Development. The settlement agreement contained a change in ownership provision, providing that the parking and management provisions would terminate if Crow Operating no longer owned the Headquarters Facility.

Crow Operating subsequently filed for bankruptcy. The reorganization plan eventually approved by the bankruptcy court transferred ownership of the Headquarters Facility from Crow Operating to Jamboree. In addition, during the plan confirmation process, Crow Operating filed an assignment motion, requesting approval of the assignment of certain executory contracts to Jamboree, including the settlement agreement. The bankruptcy court entered an order approving the assignment.

Shortly thereafter, Jamboree, as the new owner of the Headquarters Facility, began receiving notices from Crow Development purporting to terminate the parking and management provisions of the settlement agreement pursuant to the change in ownership provision. Following negotiations, Jamboree filed a compliance motion, asking the bankruptcy court to determine the validity of the change in ownership provision under 11 U.S.C. S 365(f), which invalidates antiassignment clauses in debtors' contracts. After a hearing, the bankruptcy court issued an order invalidating the change in ownership provision as an anti-assignment clause, unenforceable under S 365(f). The district court affirmed the bankruptcy court and Crow Development appeals.

We have jurisdiction under 28 U.S.C. S 158(d). We review the bankruptcy court's conclusions of law de novo and review findings of fact for clear error. In re Video Depot, Ltd., 127 F.3d 1195, 1197 (9th Cir. 1997).

We must first determine whether the bankruptcy court properly considered the validity of the change in ownership provision on a motion rather than in an adversary proceeding. Rule 6006(a) of the Federal Rules of Bankruptcy Procedure provides that "a proceeding to assume, reject, or assign an executory contract . . . other than as part of a plan, is governed by Rule 9014." Rule 9014 states that "[i]n a contested matter . . . not otherwise governed by these rules, relief shall be requested by motion."

On motion of Crow Operating under Rule 6006(a), the bankruptcy court issued an initial order, approving assignment of certain contracts to Jamboree pursuant to S 365. The subsequent order, issued on Jamboree's compliance motion, invalidated the change of ownership provision pursuantS 365(f). We agree with Jamboree that when the bankruptcy court issued the order invalidating the change of ownership provision under S 365(f), it was simply determining the legal effect of its initial order approving contract assignment under S 365. See In re Office Products, 136 B.R. 992, 996 (Bankr. W.D. Texas 1992); In re Holly's, Inc., 190 B.R. 297, 298 (Bankr. W.D. Mich. 1995).

Because S 365(f) applies by operation of law, it is irrelevant that Jamboree did not challenge the change of ownership provision at the time of the initial assignment motion. "[T]he outcome would be the same regardless when the issue [was] considered." In re Office Products, 140 B.R. 407, 411 (W.D. Texas 1992). Acco...