In re Overland Park Financial Copr., Nos. 99-3176

• Decision Date: 05 January 2001
• Docket Number: Nos. 99-3176
• Parties: (10th Cir. 2001) In re OVERLAND PARK FINANCIAL CORPORATION, Debtor, OFFICE OF THRIFT SUPERVISION, Appellee and Cross-Appellant, v. OVERLAND PARK FINANCIAL CORPORATION, Appellant and Cross-Appellee. & 99-3177
• Court: U.S. Court of Appeals — Tenth Circuit

Page 1246

236 F.3d 1246 (10th Cir. 2001)

In re OVERLAND PARK FINANCIAL CORPORATION, Debtor,

OFFICE OF THRIFT SUPERVISION, Appellee and Cross-Appellant, v. OVERLAND PARK FINANCIAL CORPORATION, Appellant and Cross-Appellee.

Nos. 99-3176 & 99-3177

UNITED STATES COURT OF APPEALS TENTH CIRCUIT

January 05, 2001

Appeal from the United States District Court for the District of Kansas (D.C. No. 98-CV-2061 ) [Copyrighted Material Omitted] Benjamin F. Mann (Kathryn B. Bussing with him on the briefs) of Blackwell Sanders Peper Martin LLP, Kansas City, Missouri, for Appellant and Cross-Appellee.

Martin Jefferson Davis (Carolyn J. Buck, Thomas J. Segal, Elizabeth R. Moore, and Richard L. Rennert with him on the briefs), Office of Thrift Supervision, Washington, D.C., for Appellee and Cross-Appellant.

Before BRORBY, POLITZ,^* and BRISCOE, Circuit Judges.

BRORBY, Circuit Judge.

Before us is Overland Park Financial Corporation's appeal, and the Office of Thrift Supervision's cross-appeal, from a district court order that reversed the bankruptcy court's holding. These cases raises the issue, as a matter of first impression, of this circuit's interpretation of 11 U.S.C. §365(o).

BACKGROUND

The facts of this case are well documented and not in dispute. SeeOffice of Thrift Supervision v. Overland Park Fin. Corp. (In re Overland Park Fin. Corp.), 232 B.R. 215, 216-18 (D. Kan. 1999). In 1978, Overland Park Financial Corporation ("Overland Financial") incorporated for the purpose of acquiring Overland Park Savings & Loan Corporation ("Overland Savings & Loan"). In 1979, Overland Financial applied to the Federal Savings and Loan Insurance Corporation for approval of the acquisition.² The Federal Home Loan Bank Board, acting as the operating head of the Federal Savings & Loan Insurance Corporation, conditionally approved the acquisition.

To satisfy one of the conditions, Overland Financial stipulated in writing to the Federal Savings & Loan Insurance Corporation that Overland Financial would maintain the net worth of Overland Savings & Loan, and, if necessary, infuse sufficient additional capital. Overland Financial's stipulation provided:

Overland Park Financial Corporation, a Missouri corporation, hereby stipulates to the Federal Savings and Loan Insurance Corporation (the "Corporation") that it will cause the net worth of Overland Park Savings and Loan Association, Overland Park, Kansas, to be maintained at a level consistent with that required by Section 563.13(b) of the Rules and Regulations for Insurance of Accounts, as now or hereafter in effect, and where necessary, that it will infuse sufficient additional equity capital to effect compliance with such requirement in a form satisfactory to the Corporation.

The stipulation was signed by Overland Financial's president. Overland Financial then acquired Overland Savings & Loan.

In June 1990, the Office of Thrift Supervision³ ("Thrift Supervision") advised Overland Savings & Loan it would fail to meet its minimum capital requirements. In turn, Overland Savings & Loan requested Overland Financial to make a capital contribution pursuant to the stipulation. Overland Financial refused to infuse capital at that time, but left open the possibility of future contribution. No such capital infusion has been made to date.

In November 1992, Thrift Supervision appointed Resolution Trust Corporation as receiver for Overland Savings & Loan.⁴ At the time of receivership, Overland Savings & Loan reported a risk-based deficiency of $4,073,000. Overland Financial manages the property and affairs of the bankruptcy estate as debtor-in-possession. See 11 U.S.C. § 1107 (stating a debtor-in-possession, subject to certain limitations or exceptions, has the rights, powers, and duties of a trustee serving under Chapter 11).

PROCEDURAL HISTORY

In July 1994, twenty months after Thrift Supervision placed Overland Savings &amp Loan into receivership, Overland Financial filed a Chapter 11 bankruptcy petition. In response to Overland Financial's bankruptcy petition, Thrift Supervision filed an unsecured priority proof of claim, alleging Overland Financial breached its capital maintenance commitment, and asserting its rights under 11 U.S.C. § 365(o) (1994) or 11 U.S.C. § 507(a)(8).⁵ Thrift Supervision sought $4,073,000, the amount Overland Savings & Loan reported as its risk-based capital deficiency on the date of receivership, in its proof of claim. Overland Financial filed an objection to Thrift Supervision's proof of claim, and filed a proposed Plan of Reorganization. The Plan of Reorganization proposed a liquidation of the estate, with its assets to be distributed among the allowed claims. Subsequently, Thrift Supervision filed a motion for immediate cure and for dismissal of the case under 11 U.S.C. §§ 365(o) and 1112(b)(2).

In December 1995, a Partial Pretrial Order was filed which consolidated Thrift Supervision's proof of claim with its motion for immediate cure under 11 U.S.C. § 365(o). The order set forth Overland Financial's defenses to Thrift Supervision's motion for immediate cure.⁶

The bankruptcy court denied Thrift Supervision's motion for immediate cure. In re Overland Park Fin. Corp., 217 B.R. 879, 890-91 (Bankr. D. Kan. 1998). The court held Overland Financial's informal capital maintenance stipulation was not an enforceable executory contract, and therefore not subject to 11 U.S.C. § 365(o). Id. at 886, 890. As a result of its holding, the bankruptcy court ruled on only the first of Overland Financial's defenses without further considering the remaining defenses. Thrift Supervision appealed to the district court.

The district court reversed the bankruptcy court.⁷ In re Overland Park Fin. Corp., 232 B.R. at 229. The district court held Overland Financial's net worth stipulation was a capital maintenance commitment subject to 11 U.S.C. § 365(o), and ordered Overland Financial to cure the deficit immediately. Id. at 229. Therefore, the district court reasoned all issues relating to Thrift Supervision's proof of claim were moot. Id. at 228. In a footnote, the district court raised the specter Thrift Supervision may lack standing to pursue its proof of claim. Id. at 228 n.23. The court reasoned Thrift Supervision was not the agency with which Overland Financial entered into the agreement. The district court suggested the right properly belonged to Resolution Trust Corporation (now Federal Deposit Insurance Corporation) as the "conservator" of Overland Savings & Loan. The district court remanded to the bankruptcy court for further proceedings consistent with its opinion. Id. at 229. Both parties appealed.

Overland Financial raises two issues on appeal: first, whether the net worth maintenance stipulation is a capital maintenance commitment subject to 11 U.S.C §365(o), and second, whether Overland Financial is obligated to immediately cure the capital deficit. Thrift Supervision, in its cross-appeal, requests this court to order Overland Financial to effect the maximum cure possible, using all the bankruptcy estate assets. In addition, Thrift Supervision argues it has standing to assert and enforce its proof of claim, and the district court erred in holding Thrift Supervision's proof of claim moot.

JURISDICTION

We have jurisdiction over this matter, pursuant to 28 U.S.C. §158(d), as a final, appealable order from the district court. "[A] decision of the district court on appeal from a bankruptcy judge's final order is not itself final if the decision remands the case to the bankruptcy judge for significant further proceedings." Homa Ltd. v. Stone (In re Commercial Contractors, Inc.), 771 F.2d 1373, 1375 (10th Cir. 1985) (quotation marks and citation omitted).

The district court reversed the bankruptcy court, and remanded the case for further proceedings consistent with its opinion. In this case, the district court's decision is final, despite the remand to the bankruptcy court, because the district court left the bankruptcy court with no "significant further proceedings" to conduct. Id. at 1373. We have recognized the district court's order of remand is not final when the bankruptcy court is required to perform "more than a mere ministerial duty" or it involves the "exercise of considerable judicial discretion.'" State Bank of Spring Hill v. Bucyrus Grain Co. (In re Bucyrus Grain Co.), 905 F.2d 1362, 1366 (10th Cir. 1990) (quotation marks and citations omitted). As both parties agree, the bankruptcy court's only task on remand was to order Overland Financial to immediately cure the deficit under its capital maintenance stipulation without considering Overland Financial's defenses.

DISCUSSION

11 U.S.C. § 365(o)

At the core of this case is the interpretation to be given to 11 U.S.C. §365(o). The section provides, in relevant part:

In a case under chapter 11 ..., the trustee shall be deemed to have assumed, ... and shall immediately cure any deficit under, any commitment by the debtor to the Federal Deposit Insurance Corporation, the Resolution Trust Corporation, the Director of the Office of Thrift Supervision ... or its predecessors ... to maintain the capital of an insured depository institution, and any claim for a subsequent breach of the obligations thereunder shall be entitled to priority under section 507. This subsection shall not extend any commitment that would otherwise be terminated by any act of such an agency.

Notably, Congress intended 11 U.S.C. §365(o) "'to prevent institution-affiliated parties from using bankruptcy to evade commitments to maintain capital reserve requirements of a Federally insured depository institution.'" Resolution Trust Corp. v. Firstcorp, Inc. (In re Firstcorp, Inc.), 973 F.2d 243, 246 (4th Cir. 1992) (quoting H.R.Rep. No. 681(I), 101st Cong., 2d Sess. 179 (1990), reprinted in 1990 U.S.C.C.A.N. 6472, 6585).

Our review of the district court's interpretation of 11 U.S.C. §365(o) is de novo. Rushton v. State Bank of S. Utah (In re...