In re Henderson

• Decision Date: 26 January 2005
• Docket Number: No. 9:02-BK-16887-ALP.,9:02-BK-16887-ALP.
• Citation: 321 B.R. 550
• Parties: In re James Bronce HENDERSON, III, Debtor.
• Court: U.S. Bankruptcy Court — Middle District of Florida

321 B.R. 550

In re James Bronce HENDERSON, III, Debtor.

No. 9:02-BK-16887-ALP.

United States Bankruptcy Court, M.D. Florida, Fort Myers Division.

January 26, 2005.

Asher Rabinowitz, Tampa, FL, for Debtor.

AMENDED ORDER ON CONFIRMTION OF THE THIRD AMENDED PLAN, AS MODIFIED (Amending Doc. No. 528)

ALEXANDER L. PASKAY, Bankruptcy Judge.

THIS IS the next chapter in a seemingly endless battle between James Bronce Henderson, III (Debtor), and Van Buren Industrial Investors, LLC, and 6700 Development Associates, LLC, (the Objectors). To illustrate the history of this Chapter 11 case which was filed in this Court on August 29, 2002, the docket thus far has 519 entries, disregarding the notice entries; ninety percent of the entries relating to this Chapter 11 case are litigations between the Debtor and the only two antagonists of the Debtor, the Objectors. It should be helpful to briefly recap the underlying factual basis relevant to the commencement of this Chapter 11 case and the positions of the Objectors, vis-a-vis the Debtor.

At the time relevant, the Debtor was the president of DCT, Inc., (DCT), an automotive supply company in the metropolitan Detroit area. The Debtor as president of DCT guaranteed most, if not all, the major obligations of DCT, including two longterm leases entered into by DCT with the Objectors. In February 2002, DCT was placed into an involuntary Chapter 7 bankruptcy. In due course, the Bankruptcy Court in Detroit entered its Order for Relief and appointed a Trustee who has been, and still is, representing the estate of DCT in Detroit.

On August 29, 2002, the Debtor, faced with increasing collection pressures based on his guaranties of the primary obligations of DCT, filed for relief under Chapter 11 of the Bankruptcy Code in this Court. Shortly after the commencement of the case the Debtor sought the entry of an Order to fix the bar date to file claims, which was granted, and the Court fixed the bar date at December 16, 2002. The Objectors filed their respective Proofs of Claim. The Debtor promptly challenged the claims of both the Objectors, and filed his motions for summary judgment. Both motions for summary judgment were denied. In July 2003, this Court overruled the Debtor's objections to the claims of the Objectors but limited the amounts of each to the statutory cap provided by Section 502(b)(6) of the Bankruptcy Code. The Debtor properly filed a notice of appeal of this Court's decisions to the United States District Court for the Middle District of Florida. The Objectors also appealed contending that this Court erred in applying the statutory cap to their claims. Both these appeals are still pending before the District Court and, therefore, the parties are waiting for the decision.

During this Chapter 11 case the Debtor, with the help of his non-Debtor wife, Joann Henderson (Mrs. Henderson), has repaid all secured claims, totaling over $4,000,000. These claims include those of Homeside Lending (first mortgage on the condominium in Naples), Private Bank (first mortgage on the Heron Ridge house), Comerica Bank (second mortgage on the Naples condominium and on the Heron Ridge house, and the first mortgage on the Niblick Lane Homestead), and Betty G. Henderson Trust (third mortgagee on the Heron Ridge House).

The Debtor, notwithstanding the pendency of the appeals described earlier, filed several Disclosure Statements and Plans of Reorganization. Ultimately, on May 11, 2004, the Debtor filed the Third Amended Chapter 11 Plan of the Debtor (Doc. No. 374). On September 7, 2004, shortly before the scheduled confirmation hearing, the Debtor also filed his Modifications to Third Amended Chapter 11 Plan of the Debtor (Doc. No. 460), which is what is presently under consideration (Third Amended Plan, as modified). Needless to say, the Objectors wasted no time and immediately challenged the Third Amended Plan, as modified.

The Debtor's Third Amended Plan, as modified, has 10 classes of creditors and parties of interest. They are as follows:

(1) Class 1: Comerica Bank, secured.

(2) Class 2: Private Bank, secured.

(3) Class 3: Secured claim of Oakland County Tax Collector.

(4) Class 4: Betty Henderson Trust, secured.

(5) Class 5: Claim of Theodora Henderson, the Debtor's ex-wife, unsecured.

(6) Class 6: Claim of Van Buren and 6700 Development, unsecured.

(7) Class 7: Administrative convenience claims with a cap of $20,000, unsecured.

(8) Class 8: Claims of ex-employees of DCT, unsecured.

(9) Class 9: Other general unsecured creditors.

(10) Class 10: Debtor's interest in properties.

As noted earlier, the Debtor settled all secured claims, thus, there are no longer any secured claims dealt with under the Plan. The claim of Theodora Henderson in Class 5 is unimpaired. The claims set forth in Class 6 (Van Buren and 6700 Development), Class 7 (Convenience class), Class 8 (Ex-employees of DCT), and Class 9 (Other unsecured creditors), are all impaired under the Plan.

The Debtor obtained an affirmative vote of acceptance of the Third Amended Plan, as modified, by all impaired classes except the Objectors. At that time, the Plan submitted to unsecured creditors in Class 8 provided a dividend of 10% on their allowed claims. The latest modification to the Plan has reduced the Class 8 dividend to 5%. The modification to the Plan was not formally submitted to the affected creditors, thus, did not allow them the opportunity to consider the change provided for by the modification. However, it is now represented to this Court by counsel for the Debtor that he has obtained a unanimous acceptance of this change from the attorney representing the creditors in Class 8. On December 27, 2004, counsel for the Debtor electronically filed an email exchange between himself and the attorney representing the creditors in Class 8, indicating that the members of the class accepted the modified treatments of their claims by reducing the dividend from 10% to 5%.

The Objectors, who are in Class 6, were originally offered two alternative treatments of their claims. Under Alternative (A) of the Third Amended Plan, as modified, Mrs. Henderson offered to transfer title to a residential home described as the Heron Ridge property located in Michigan, and a land contract with the current occupants of the residence identified as the Abrahams, to the Objectors. Under Alternative (A), the Objectors will have to pay the sum of $2 million to Mrs. Henderson and, in turn, the Objectors will receive title to the Heron Ridge property and the assignment of Mrs. Henderson's rights under the land contract to sell the property to the Abrahams for $2.7 million within one year. In addition, the Debtor also offered to pay to the Objectors $150,000 one year after the effective date of the Plan.

It should be noted that at one time the Objectors indicated their willingness to purchase the Heron Ridge property for the sum of $2,800,500. The Objectors rejected Alternative (A) due to the highly speculative premise that the Abrahams will exercise their option to purchase the Heron Ridge property and will pay to the Objectors $2.7 million. The rejection of this proposition is fully justified.

In the Third Amended Plan, as modified, Alternative (B) offered the Objectors $800,000 cash subject to an escrow arrangement until all appeals involving this Court's Orders on allowances of the claims of the Objectors are exhausted. In short, the $800,000 will be kept in escrow and not released to the Objectors until the Debtor loses the appeal and, thus, the claims of the Objectors are allowed with finality. In addition, under Alternative (B) the Debtor offers 40% on the net proceeds he hopes to receive from litigation brought by the Debtor against J.E. Myles, Inc., J.E. Myles and Scott Myles his former business associates. The Objectors have also rejected Alternative (B) of the Third Amended Plan.

FEASIBILITY OF THE THIRD AMENDED PLAN, AS MODIFIED

In order to meet the requirement of Section 1129(a)(11) of the Code as to feasibility of the Third Amended Plan, as modified, the Debtor offered to contribute funds he may receive from the sale of his 16.39% interest in the Fort Wayne Wizards, a minor league baseball team. However, the Debtor is willing to contribute his interest only to the extent that such payment is needed to meet the payment of $800,000 under Alternative (B) which will be held in escrow.

In addition, the Debtor proposed that he will borrow $490,000 from Comerica Bank and grant a mortgage to Comerica on his Niblick Lane Homestead as security on this loan and use the loan proceeds to partially fund Alternative (B). The Debtor will also use the $271,000 which is currently in escrow and earmarked for the payment of allowed unsecured claims and some administrative expenses, other than the allowed claims of the Objectors, to partially fund Alternative (B). In this connection, it should be noted that the Debtor does not propose to pay the administrative expenses in full because the administrative claimants agreed to the reduction of their claims and also agreed to take their payments over time. The payment due to the administrative claimants under the Plan will be secured by a second mortgage on the Niblick Lane Homestead. As additional funding for the Plan, Mrs. Henderson agreed to contribute 75% of the $700,000 in funds she expects to receive under the land contract from the Abrahams on August 31, 2005, for a total of $525,000 to fund the Plan.

At the conclusion of the confirmation hearing, this Court announced that based on the evidence it was satisfied that the Third Amended Plan, as modified, met the requirements of Section 1129(a)(1)(2)(3) and (11) of the Code. However, due to the total lack of persuasive evidence to establish the extent of the Debtor's interest in the Wizards, this Court stated that it was impossible to determine, based on this record, whether the Plan meets the requirements of Section 1129(a)(7)(the best interest...