In re Patriot Place, Ltd.

• Decision Date: 11 January 2013
• Docket Number: Nos. 11–31024–HCM, 12–31019–HCM.,s. 11–31024–HCM, 12–31019–HCM.
• Citation: 486 B.R. 773
• Parties: In re PATRIOT PLACE, LTD., Debtor. In re Three Legged Monkey, L.P., Debtor.
• Court: U.S. Bankruptcy Court — Western District of Texas

486 B.R. 773

In re PATRIOT PLACE, LTD., Debtor. In re Three Legged Monkey, L.P., Debtor.

Nos. 11–31024–HCM, 12–31019–HCM.

United States Bankruptcy Court,

W.D. Texas,

El Paso Division.

Jan. 11, 2013.

Carlos A. Miranda, III, Carlos A. Miranda, III & Associates P.C., El Paso, TX, for Patriot Place, Debtor.

David D. Ritter, Dallas, TX, Sidney J. Diamond, El Paso, TX, for Three Legged Monkey, Debtor.

CONSOLIDATED OPINION REGARDING MOTION TO ASSUME SHOPPING CENTER LEASE, CONFIRMATION OF PLANS OF REORGANIZATION, AND RELATED MOTIONS

H. CHRISTOPHER MOTT, Bankruptcy Judge.

These controversies present the latest episode of an ongoing public saga that found its way to this Court, when the Chapter 11 bankruptcy filing of one debtor (Patriot Place) spawned yet another Chapter 11 bankruptcy filing by a different debtor (Three Legged Monkey). This latest episode became a battle between one debtor (Patriot Place, the owner and landlord of Hawkins Plaza) that wants to sell its business at Hawkins Plaza to the City of El Paso to settle its ground lease dispute with the City—and the other debtor (Three Legged Monkey, a rather notorious tenant at Hawkins Plaza) that is fighting the proposed sale to the City so that it can save its business at Hawkins Plaza. Many interesting factual and legal issues are presented in this very unusual and highly contentious battle between two separate debtors, with the City waiting in the wings.

Will this be the final episode of the saga? Regrettably, no.

I.INTRODUCTION

A. CONSOLIDATED HEARING AND CONSOLIDATED OPINION

On November 15 and 16, and December 6, 7, and 11, 2012, the Court conducted a consolidated hearing (herein “ Consolidated Hearing ”) with respect to the following contested matters: (1) Motion to Assume Non–Residential Lease of Real Property With Patriot Place Pursuant to 11 U.S.C. § 365 filed by Three–Legged Monkey L.P. in case no. 12–31019 (dkt# 18), and all objections and responses thereto; (2) confirmation of the competing Second Amended Plan of Reorganization, as amended, filed by Three Legged Monkey L.P. in case no. 11–31024 (dkt# 275, 358), and all objections and responses thereto; (3) confirmation of the Third Amended Plan of Reorganization, as modified, filed by Patriot Place Ltd. in case no. 11–31024 (dkt# 283, 348, 367, 396) and all objections and responses thereto; (4) Motion For Determination of Value of Leasehold Interest of Three Legged Monkey at Hawkins Plaza Shopping Center Pursuant to 11 U.S.C. § 363(e) and (f) filed by Patriot Place Ltd. in case no. 11–31024 (dkt# 330), and all objections and responses thereto; (5) Expedited Motion To Designate the Classes of 1(A) and 3 As Being Unimpaired and Strike the Ballots of Such Classes As Not Being Accepted, Solicited or Procured in Good faith Pursuant to 11 U.S.C. § 1126(E) filed by Three Legged Monkey L.P. in case no. 11–31024 (dkt# 337), and all objections and responses thereto; and (6) Request to Strike Ballots of Three Legged Monkey filed by Patriot Place Ltd. in case no. 11–31024 (dkt# 357), and all objections and responses thereto (herein collectively “ Contested Matters ”).

The Court consolidated the hearing and evidence on all of the Contested Matters under Rules 7042(a)(1) and 9014(c) of the Federal Rules of Bankruptcy Procedure (herein “ Bankruptcy Rules ”) due to the common questions of fact and law, as well as the common witnesses, exhibits and evidence with respect to the Contested Matters.

This Consolidated Opinion constitutes the Court's findings of fact and conclusions of law with respect to each of the Contested Matters in accordance with Bankruptcy Rules 7052(a)(1) and 9014(c).¹ In reaching the findings and conclusions set forth in this Consolidated Opinion, the Court has considered and weighed all the evidence, testimony, admitted exhibits, arguments of counsel, and pleadings and briefs filed by all parties with respect to the Contested Matters, regardless of whether or not they are specifically referred to in this Consolidated Opinion.

B. JURISDICTION

The Court has jurisdiction over each of the Contested Matters under 28 U.S.C. §§ 157 and 1334. The Contested Matters arise in bankruptcy cases referred to this Court by the Standing Order of Reference entered in this District. The Contested Matters are core proceedings pursuant to 28 U.S.C. § 157(b)(2)(A), (L), (M) and (N). The Court is authorized to enter a Final Order with respect to each of the Contested Matters.

II.PROCEDURAL BACKGROUND

A. BANKRUPTCY CASES—PROCEDURAL BACKGROUND

On May 30, 2011, Patriot Place Ltd. (herein “ PPL ”), as a debtor, filed a voluntary petition under Chapter 11 of the Bankruptcy Code in this Court, case no. 11–31024 (herein “ PPL Case ”). PPL owns and operates a shopping center known as Hawkins Plaza, and leases space to various tenants.

On July 26, 2011, PPL filed a Motion For Order Authorizing the Assumption of Commercial Ground Lease with the El Paso International Airport/City of El Paso (herein “ Motion to Assume Ground Lease ”) in the PPL Case (PPL Case, dkt# 29). In general, through this Motion, PPL sought to assume a Commercial Ground Lease dated May 10, 1996 (herein “ Ground Lease ”) between PPL, as lessee, and the City of El Paso (herein “ City ”), as lessor. Shortly thereafter, on July 29, 2011, PPL filed an Omnibus Motion For Order Authorizing Assumption of Fifteen Unexpired Leases with Current Tenants of Hawkins Plaza (herein “ Motion to Assume Tenant Leases ”) (PPL Case, dkt# 34). In general, through this Motion, PPL sought to assume the leases with its tenants at Hawkins Plaza, including its shopping center lease with Three Legged Monkey L.P.

In August and September 2011, the City filed Objections to PPL's Motion to Assume Ground Lease and Motion to Assume Tenant Leases (PPL Case, dkt# 36, 41, 62). In general, through such Objections, the City contended that the Ground Lease could not be assumed and should be terminated, primarily based on the activities of the Three–Legged Monkey L.P., a tenant of PPL. On August 18, 2011, City Bank (“City Bank”) filed a Response and Joinder, supporting PPL's Motion to Assume Ground Lease (PPL Case, dkt# 39). At these parties' request, the Court entered a Scheduling Order on September 8, 2011 with respect to the Motion to Assume Ground Lease and related Motions (PPL case, dkt # 57). Such Scheduling Order set a hearing on the merits for December 16, 2011 on the Motion to Assume Ground Lease and related Motions, and ordered PPL, the City, and City Bank to participate in mediation in an effort to resolve their disputes. Due to the length of the mediation, and at the request of these parties, the Court amended and extended various deadlines in the Scheduling Order.

The mediation between PPL and the City was conducted before retired Bankruptcy Judge Frank R. Monroe over a period of several months. This mediation culminated in a Settlement Agreement dated May 23, 2012 between the City and PPL (herein “ Settlement Agreement ”), which was subject to Court approval through a Plan of Reorganization to be filed by PPL (PPL Case, dkt# 283, Ex. A). As a result, the Court continued the hearing on the merits on the Motion to Assume Ground Lease, Motion to Assume Tenant Leases, and related Motions, so that approval of the Settlement Agreement could be sought from the Court. The Court also set a deadline of June 11, 2012 for PPL to file a proposed Plan of Reorganization seeking Court approval of the Settlement Agreement (PPL Case, dkt# 161). The Settlement Agreement between PPL and the City, provided, in part, for the termination of the shopping center lease between PPL and Three Legged Monkey L.P., and the sale of Hawkins Plaza by PPL to the City.

Shortly thereafter, on June 2, 2012, Three Legged Monkey L.P. (herein “ 3LM ”) as a debtor, filed a voluntary petitionunder Chapter 11 of the Bankruptcy Code in this Court, case no. 12–31019 (herein “ 3LM Case ”). 3LM operates a sports bar and restaurant in Hawkins Plaza. 3LM leases its facilities from PPL pursuant to a Shopping Center Lease dated November 28, 2005 (herein “ Shopping Center Lease ”) between PPL, as landlord, and 3LM, as tenant.

On June 28, 2012, PPL filed a Motion For Relief From Automatic Stay in the 3LM Case (3LM Case, dkt# 21), which was opposed by 3LM. On August 16, 2012, the Court conducted a hearing on such Motion. By Order entered August 17, 2012, the Court granted such Motion and lifted the automatic stay in the 3LM Case so that PPL could proceed with seeking confirmation of its Plan of Reorganization in the PPL Case (herein “ Order Lifting Stay ”) (3LM Case, dkt# 62).²

B. CONTESTED MATTERS—PROCEDURAL BACKGROUND

On June 12, 2012, PPL filed its proposed Plan of Reorganization and accompanying Disclosure Statement in the PPL Case, based on its Settlement Agreement with the City (PPL Case, dkt# 169, 170). Following a series of hearings and various amendments, PPL filed its proposed Third Amended Plan of Reorganization on September 20, 2012 (PPL Case, dkt# 283). On September 21, 2012, the Court entered an Order approving PPL's Third Amended Disclosure Statement for its proposed Third Amended Plan and set November 15, 2012 as the date for the confirmation hearing on the PPL Third Amended Plan (PPL Case, dkt # 284).

The PPL Third Amended Plan with accompanying Disclosure Statement was then mailed to creditors and parties in interest for voting and objections. On November 2, 2012, PPL filed its Ballot Summary reflecting the voting by creditors on the PPL Third Amended Plan (herein “ PPL Plan Ballot Summary ”) (PPL Case, dkt# 328). Limited objections to confirmation of PPL's Third Amended Plan were filed by the City of El Paso Tax Assessor and the U.S. Trustee, which were later withdrawn (PPL Case, dkt # 313, 316). Significant objections to confirmation of PPL's Third Amended Plan were filed by 3LM and Monaco Entertainment Group (herein “ Monaco ”) (PPL Case, dkt# 324, 322). Thereafter, PPL filed its First...