In re Mercedes Homes, Inc., Case No. 09-11191-PGH, Jointly Administered (Bankr. S.D.Fla. 9/18/2009)

• Decision Date: 18 September 2009
• Docket Number: Case No. 09-11191-PGH, Jointly Administered.
• Parties: In re: MERCEDES HOMES, INC., et al. Chapter 11, Cases Debtors.
• Court: U.S. Bankruptcy Court — Southern District of Florida

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In re: MERCEDES HOMES, INC., et al. Chapter 11, Cases Debtors.

Case No. 09-11191-PGH, Jointly Administered.

United States Bankruptcy Court, S.D. Florida, West Palm Beach Division.

September 18, 2009.

FINDINGS OF FACT AND CONCLUSIONS OF LAW OVERRULING OBJECTION OF JEFFREY MACIK TO THE DEBTORS' JOINT PLAN OF REORGANIZATION (D.E. #1211)

PAUL G. HYMAN, Chief, Bankruptcy Judge

This matter came before the Court for hearing on August 31, 2009, in West Palm Beach, Florida (the "Hearing"). The following parties in interest, among others, appeared at the Hearing: (a) Mercedes Homes, Inc., ("MHI") and certain of its affiliates (collectively with MHI, the "Debtors"); (b) The Official Committee of Unsecured Creditors appointed in these Chapter 11 cases (the "Committee"); (c) Bank of America, N.A., as administrative agent for the Debtors' senior secured pre-petition lenders (the "First Lien Lenders"); (d) Real Estate Investment Ventures, LLC ("REIV"); (e) The United States Trustee; (f) Audrey Gillett and Brett Alexander (together, the "Settling ESOP Participants"); and (g) John Macik, Timothy Schooley, Jr., Robert Kalina, Toni Wilcox, Thomas McDonald, Sandra Schooley, and David Barin (collectively, the "Objecting ESOP Participants").

The Hearing concerned, among other things, confirmation of the "Debtors' Joint Plan of Reorganization Pursuant to Chapter 11 of the United States Bankruptcy Code" (the "Plan") [D.E. #1020], and final approval of the "Disclosure Statement Concerning the Debtors' Joint Plan of Reorganization Pursuant to Chapter 11 of the United States Bankruptcy Code" (the "Disclosure Statement") [D.E. #1021].

Prior to the Hearing, 30 objections to confirmation of the Plan and/or final approval of the Disclosure Statement were filed by the following parties: (1) Texas Comptroller of Public Accounts [D.E. #1149]; (2) Travis County Tax Assessor, et al. [D.E. ##1190, 1193]; (3) Lewisville Independent School District, et al. [D.E. #1243, 1266]; (4) Miami-Dade Tax Collector [D.E. #1227]; (5) County of Denton, Texas, et al. [D.E. #1216]; (6) Brevard County Tax Collector [D.E. ##1235, 1269]; (7) Orange County Tax Collector [D.E. ##1236, 1270]; (8) Fort Bend Independent School District, et al. [D.E. ##1247, 1273]; (9) Dallas County, et al. [D.E. ##1250, 1274]; (10) Celebration Pointe Community Development District [D.E. #1261]; (11) Lo Land Assets, LP [D.E. #1224]; (12) Jeffrey Macik [D.E. #1211]; (13) Brett Alexander and Audrey Gillett [D.E. ##1246, 1271]; (14) Park Row Lighting, LLC [D.E. #1169]; (15) Fashion Glass & Mirror LLC [D.E. #1170]; (16) Fashion Door & Window, Ltd. [D.E. #1171]; (17) Calvin's Electric, Ltd. [D.E. #1172]; (18) Casa Mechanical Services, Ltd. [D.E. #1173]; (19) Christianson Air Conditioning and Plumbing, LLC [D.E. #1174]; (20) ABC Fence Co. dba Builders Fence Co. [D.E. #1175]; (21) TNT Builders of Florida Enterprises, Inc. [D.E. #1225]; (22) Tri-County Drywall Services, Inc. [D.E. #1252]; (23) Potter Concrete Ltd. [D.E. #1256]; (24) Ace American Insurance Co. [D.E. #1251, 1296]; (25) Norpak Corporation [D.E. #1233, 1268]; (26) Symetra Life Insurance Company [D.E. #1244, 1267]; (27) Bond Safeguard Insurance Company and Lexon Insurance Company [D.E. #1254]; (28) National City Bank [D.E. #1232]; (29) Satellite Beach Partners, LLC [D.E. #1234]; and (30) Adversary Proceeding 09-01927-PGH which was filed by Audrey Gillett against REIV (the "Gillett Adversary Proceeding")¹ (collectively, the "Confirmation Objections").

At the Hearing, counsel for the Debtors and the objecting parties advised the Court that 29 of the 30 Confirmation Objections had been consensually resolved, and that the only Confirmation Objection remaining was that of the Objecting ESOP Participants (the "Remaining Objection"). The Remaining Objection focuses on whether certain releases of non-Debtors contained in Article 12.4 of the Plan are warranted in these Chapter 11 cases. The following evidence was presented to the Court at the Hearing: (a) the "Declaration of Richard M. Williamson in Support of Debtors' Joint Plan of Reorganization Pursuant to Chapter 11 of the United States Bankruptcy Code" (the "Williamson Declaration") [D.E. #1306]; (b) the "Declaration of G. Grant Lyon in Support of Debtors' Joint Plan of Reorganization Pursuant to Chapter 11 of the United States Bankruptcy Code" (the "Lyon Declaration") [D.E. #1307]; (c) the "Supplemental Declaration of G. Grant Lyon in Support of Class 7 Treatment of Suntree Secured Claims Under Debtors' Joint Plan of Reorganization Pursuant to Chapter 11 of the United States Bankruptcy Code" (the "Supplemental Lyon Declaration") [D.E. #1334]; (d) the "Ballot Report for Debtors' Joint Plan of Reorganization" which included the "Declaration of Voting Agent Regarding Tabulation of Votes in Connection with Debtors' Joint Plan of Reorganization Pursuant to Chapter 11 of the United States Bankruptcy Code" attached as exhibit "1" (the "Ballot Report") [D.E. #1310]; (e) the live testimony of Richard Williamson in support of confirmation of the Plan; (f) the live testimony of Grant Lyon in support of confirmation of the Plan; and (g) the live testimony of Jeffrey Macik in support of his objection to confirmation of the Plan.

The Court takes judicial notice of the following items contained in the record in these Chapter 11 cases: (a) the "Plan Supplement to the Debtors' Joint Plan of Reorganization" (the "Plan Supplement") [D.E. #1096]; and (b) the "Amended Order: (A) Conditionally Approving Disclosure Statement; (B) Authorizing Solicitation of Votes on the Plan (C) Approving Solicitation Procedures; (D) Scheduling Combined Hearing for Final Approval of Disclosure Statement and Evidentiary Hearing on Confirmation of the Plan; (E) Approving Form, Manner and Sufficiency of Notice; and (F) Scheduling the Bar Date to File Claims Under Section 503(b)(9) of the Bankruptcy Code" [D.E. #1033].

In making these Findings of Fact and Conclusions of Law the Court has reviewed the following: (a) all of the evidence presented to the Court at the Hearing; (b) the Plan; (c) the Disclosure Statement; (d) the Remaining Objection; (e) the Plan Supplement; (f) the "Debtors' Memorandum In Support of Confirmation of Joint Plan of Reorganization" [D.E. #1311]; and (g) "Debtors' Supplemental Brief Regarding Unspecified Shareholder Derivative Actions by ESOP Participants" filed on September 4, 2009 [D.E. #1390] which attached a Transcript of the Hearing as exhibit "A" ("Transcript") . Based upon its review and consideration of the above, the Court makes the following findings of fact and conclusions of law pursuant to Rule 7052 of the Federal Rules of Bankruptcy Procedure.

FINDINGS OF FACT

I. Jurisdiction and Venue

The Court has jurisdiction over these Chapter 11 cases and the Remaining Objection pursuant to 28 U.S.C. § 1334. The Plan, the Remaining Objection, and the responses thereto are core proceedings pursuant to 28 U.S.C. § 157(b)(2)(A), (B) and (O). Venue of these Chapter 11 cases and the Remaining Objection in this Court is proper pursuant to 28 U.S.C. §§ 1408 and 1409. The Court takes judicial notice of the docket in these Chapter 11 cases, including, without limitation, all pleadings and other documents filed, all orders entered, and all evidence and arguments made, proffered, or adduced at, the hearings held before this Court during the pendency of these Chapter 11 cases. All oral findings of fact and conclusions of law entered by the Court at the Hearing are incorporated herein by this reference, in accordance with Bankruptcy Rule 7052(a).

II. Procedural Background

The Debtors filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code, 11 U.S.C. §§ 101 et seq., on January 26, 2009 (the "Petition Date").

All impaired classes of claims entitled to vote to accept or reject the Plan have voted to accept the Plan. The Ballot Report indicates that Class 7 — Suntree Secured Claims voted to reject the Plan; however, subsequent to filing the Ballot Report, the Debtors and Sun Trust Bank, the holder of the Class 7 Suntree Secured Claims reached a resolution regarding treatment of the Class 7 — Suntree Secured Claims. As part of that resolution, Sun Trust Bank changed its vote to a vote accepting the Plan. Thus, all Classes entitled to vote under the Plan voted to accept the Plan.

The Plan classifies the Objecting ESOP Participants as holding Class 11 equity interests in the Debtors. Because the Plan provides that holders of interests in Class 11 will not receive or retain any assets or distributions under the Plan, the Class was deemed to have rejected the Plan. The Debtors did not solicit votes from Class 11 members.

III. Testimony Presented at the Hearing

In addition to the Williamson Declaration, Lyon Declaration and Supplemental Lyon Declaration, Richard Williamson, the Chief Restructuring Officer of the Debtors, and G. Grant Lyon, a financial consultant retained by the Debtors, provided live testimony on direct and cross examination at the Hearing. Jeffrey Macik, one of the Objecting ESOP Participants, also provided live testimony on direct and cross examination at the Hearing to support the Remaining Objection.

III. Resolution of Settling ESOP Participant Objection

The Settling ESOP Participants filed an Objection to confirmation of the Plan on substantially similar grounds to that of the Objecting ESOP Participants, i.e., that the releases contained in Article 12.4 of the Plan are not warranted. During the Hearing, counsel for the Settling ESOP Participants and the Debtors advised the Court that the parties had consensually resolved the Objection of the Settling ESOP Participants to the release of non-debtor Directors and Officers (the "ESOP Settlement"), by agreeing to include language in an order confirming the Plan ("Clarifying Language") that will make it clear that the ESOP Participants are entitled to pursue claims and causes of action against...