In re Maruko, Inc., Bankruptcy No. 91-12303-A11. Adv. No. 95-90485-A11.
| Decision Date | 30 September 1996 |
| Docket Number | Bankruptcy No. 91-12303-A11. Adv. No. 95-90485-A11. |
| Citation | 200 BR 876 |
| Parties | In re MARUKO, INC., Debtor. Nobutsugu AINO; Hiroshi Aoyama; et al., Plaintiffs, v. MARUKO, INC., Defendant. |
| Court | U.S. Bankruptcy Court — Southern District of California |
Arnold M. Quittner, Pachulski, Stang, Ziehl & Young, P.C., Joseph A. Eisenberg, P.C., Adrienne M. Coffin, Jeffer, Mangels, Butler & Marmaro L.L.P., Los Angeles, CA, Office of the U.S. Trustee, San Diego, CA, for Reorganized Debtor/Defendant.
Theodore W. Graham, Jeffrey Garfinkle, Brobeck, Phleger & Harrison, San Diego, CA, for Plaintiffs.
Plaintiffs Nobutsugu Aino, et al. ("Aino"), certain former co-owners of Beverly Plaza Shopping Center, Doubletree Rancho Bernardo, High Bluff Office Building, Holiday Inn Civic Center, Kauai Resort Hotel, Ptarmigan Inn, Sports Arena Travelodge and St. Tropez Hotel (the "Cash Co-Owners") have moved for summary judgment in their complaint for declaratory relief filed against Maruko, Inc.
A motion for summary judgment may be granted if upon consideration of the pleadings, depositions and declarations, the court is persuaded that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law. F.R.C.P. 56. Although Maruko's opposition lists six pages of "disputed issues of fact", upon a closer examination, many of the claimed factual disputes are really legal questions.1 Further, although Maruko disputes certain facts, the Court finds many of the disputed facts to be non-material. Materiality of disputed facts is examined when determining whether summary judgment is appropriate. As stated in Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 2509-2510, 91 L.Ed.2d 202 (1986):
By its very terms, this standard provides that the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact. As to materiality, the substantive law will identify which facts are material. Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted. (Italics in original).
The following factual summary sets out each undisputed fact which the Court believes is material to the decision of this motion for summary judgment.
Prior to filing its chapter 11 case in Japan, Maruko was in the business of developing commercial properties all over the world. It divided these properties into co-ownership interests and then sold those co-ownership interests to Japanese nationals. The Japanese nationals would then lease back their interests to Maruko through simultaneously executed agreements called "APAC contracts." These leasebacks or APAC contracts guaranteed fixed monthly rental payments to the co-owners.
In most cases, Maruko's subsidiary, General Lease, Inc. provided financing for the purchase of the co-ownership interests. However, the Cash Co-Owners who are the plaintiffs in this action, did not finance their purchases through General Lease. Most of these Cash Co-Owners obtained independent financing from various Japanese institutions. Despite the fact that Maruko has sold the properties in which these plaintiffs have co-ownership interests, Maruko has not, for the most part, repaid the plaintiffs their aliquot share.
On August 29, 1991 Maruko filed a reorganization case in Japan. Maruko's Japanese case is still pending before the Tokyo District Court. On October 30, 1991 Maruko commenced a separate chapter 11 case for the same entity in the United States to effect reorganization of all of its non-Japanese real property assets.
Sometime in December 1991 in the Japanese reorganization case, Maruko canceled its leases with all of its co-owners and notified them accordingly. Although the exact dates are somewhat unclear, it appears that the co-owners who financed through General Lease (the "General Lease Co-Owners") filed cancellation claims in February, July and October 1993 and February 1994. (See Exhibit "A" to Decl. of Hideyuki Sakai, dated Mar. 18, 1996 and Decl. of Mikio Moriga filed May 29, 1996 at 4:7-15) The Cash Co-Owners filed cancellation claims in April 1994. The defendant has not disputed plaintiffs' assertion that cancellation claims from some of the approximately 800 former Maruko co-owners had been filed in the Japanese case by July 1993.
Maruko filed its initial proposed plan of reorganization in the U.S. case during the Spring 1993. There were subsequent amendments. The amendment contained in the plan of reorganization dated August 16, 1993 added a new Class 4E purporting to treat "claims of Japanese domiciled creditors arising from rescission or for damages arising from the purchase or sale of their investment." (Plan of Reorganization dated Aug. 16, 1993, at 18:23-25) No distribution was to be made to Class 4E claimants. The amended disclosure statement dated August 16, 1993 explained the reason for the amendment:
The Japanese Investors\' claims were scheduled in that amount $39 million. They were served with notices of the bar date and the scheduling of their claims and the fact that, if they disagreed with their claims as scheduled, they had to file a proof of claim or be forever barred. It is a condition to participating as a Class 4B Creditor claims of Japanese domiciled creditors arising out of lease rejections in the U.S. Plan that such Japanese Investor does not pursue a claim in either the U.S. Proceeding or the Japanese Proceeding for rescission or damages from the purchase of such Investor\'s investment. To the extent that a Japanese Investor elects to pursue such a claim, the Investor shall be classified in Class 4E. The holders of Allowed Claims in Class 4E are subject to subordination under Code section 510(b) and will receive no distribution in the U.S. Plan.
The Japanese co-owners strenuously objected to this added provision as grossly discriminatory and violative of the best interest of creditors test. (Obj. to Adequacy of Debtor's Disclosure Statement in Support of Debtor's Plan of Reorganization dated Aug. 16, 1993 filed Aug. 20, 1993.) Negotiations ensued between the Japanese co-trustees and the Yoyogi law firm representing a large number of co-owners (both General Lease Co-Owners and Cash Co-Owners). On November 2, 1993 the Japanese co-trustees and Yoyogi signed a "memorandum of understanding" in which Maruko agreed to delete the following language in the plan:
Class 4B Claimants may not pursue Claims in the Japanese Proceeding for lease rejection or termination, rescission, or damages from the purchase of their investment or any other Claims.
(Mem. of Understanding, dated Nov. 2, 1993 at 1.)
Instead the following language was to be inserted in the proposed plan:
Class 4B Claimants may assert claims in the Japanese Proceeding. The plan shall have no effect on the rights of Class 4B Claimants to assert claims in the Japanese Proceeding nor shall it have any effect on the rights of Co-Trustees to object to such claims in the Japanese proceeding, provided, however, that in the event the Japanese Court admits and allows the claims of Class 4B Claimants asserted in the Japanese Proceeding, an amount equivalent to any distributions that Class 4B Claimants receive on account of their claims in the U.S. Proceeding under the plan shall be deducted from their distributions in the Japanese Proceeding.
(Mem. of Understanding, dated Nov. 2, 1993 at 1.)
At the confirmation hearing held November 29, 1993 the co-owners withdrew their objections and consented to plan confirmation based upon these amendments to the plan. The order confirming the plan entered February 3, 1994 inserted the agreed language provided in the Memorandum of Understanding and deleted Class 4E which subordinated co-owner claimants who had filed rescission claims.
In deciding this motion it is also important to review the history of the section 363(h) adversary proceedings filed by Maruko. In 1992, Maruko commenced 13 separate lawsuits to sell various syndicated properties free and clear of the interests of their co-owners pursuant to section 363(h) of the Bankruptcy Code. Each complaint contained the following typical provision:
Upon consummation of a sale of the syndicated property, Maruko shall distribute to the Co-owners and to the estate the proceeds of the sale, less unreimbursed operating losses and costs incurred by Maruko on behalf of the Co-owners, and less the costs and expenses reasonably attributable to the sale, according to the interests of the Co-owners and of the estate, and subject to the prior satisfaction of all valuable liens, charges or encumbrances on the syndicated property (including liens, charges or encumbrances on the interests of Co-owners).
(See, for example, Compl. to Authorize the Sale by Debtor in Possession of Property Held in Co-Tenancy with Def. (Beverly Plaza Shopping Center), Adv. Case No. 93-90223 filed Feb. 9, 1992.)
The Cash Co-Owners did not answer or otherwise defend these complaints although other co-owners did. As a result of settlement discussions with objecting co-owners, stipulated judgments were entered against all co-owners which permitted Maruko to market these properties for sale free and clear of the co-owners' interests. As offers to purchase arose, Maruko would bring a motion to sell the property. When the sale closed, Maruko provided the co-owners with information concerning the proposed distribution of the sale of proceeds. ...
To continue reading
Request your trial