In re Space Bldg. Corp., Civil Action No. 96-10587-DPW.
| Decision Date | 31 October 1996 |
| Docket Number | Civil Action No. 96-10587-DPW. |
| Citation | 206 BR 269 |
| Parties | In re SPACE BUILDING CORPORATION, Debtor. |
| Court | U.S. District Court — District of Massachusetts |
Harold B. Murphy, Hanify & King, P.C., Boston, MA, for Space Building Corp.
Eric K. Bradford, Office of U.S. Trustee, Boston, MA, for Eric Bradford, U.S. Trustee.
James C. Gross, Klieman, Lyons, Schindler, Gross & Pabian, Boston, MA, for Office of Unsecured Creditors Committee.
Victor G. Milione, Peabody & Brown, Boston, MA, for WHBB Real Estate Ltd. Partnership.
MEMORANDUM AND ORDERS
Debtor Space Building Corporation ("Appellant") filed this appeal requesting a modification of the Bankruptcy Court's "Order Dismissing Chapter 11 Case and Declaring the Continued Validity of the Mortgage," ("Dismissal Order") pursuant to Bankruptcy Rule 8013.1 Appellant asserts that Judge Kenner erred as a matter of law by upholding expressly the validity of a mortgage granted to creditors pursuant to the confirmed reorganization plan but failing expressly to uphold Appellant's confirmation plan and discharge order. In opposition, the United States Trustee ("Appellee") contends that Appellant's appeal does not present this Court with a justiciable controversy because there is no live dispute concerning the continued vitality of the plan or discharge. For the reasons outlined below, I will dismiss this appeal.
Appellant is a subchapter "S" corporation wholly owned by Robert N. DiCroce. On June 2, 1993, Debtor filed a voluntary Chapter 11 bankruptcy petition. At that time, Appellant together with various non-debtor entities owed the Bank of Boston approximately $3,800,000. Appellant secured this loan by granting Bank of Boston a lien on, among other things, real property it owned. Appellant defaulted on this loan. Under a post-petition restructuring agreement, RND, Inc., a non-debtor corporation owned by DiCroce, guaranteed the Bank of Boston loan up to the amount of $3,000,000 and further secured it with a first mortgage on real property known as the Stevens Street Property. The mortgage was subsequently assigned to WHBB Real Estate Limited Partnership.
On May 23, 1995, the Bankruptcy Court entered an Order Confirming the Debtor's Second Amended Plan of Reorganization ("Confirmation Order"). Among other things, the Confirmation Order set the deadline for the filing of final fee applications on December 1, 1995. The Confirmation Order also directed Appellant to file its application for final decree to close the case on or before January 31, 1996.
Under the Confirmed Reorganization Plan ("the Plan"), Appellant was discharged from certain pre-petition general unsecured claims. In exchange for this discharge, RND, Inc. agreed to grant the general unsecured creditors of Debtor Appellant a second mortgage on the property known as the Stevens Street Property in the amount of $350,000. The Plan authorized the Trust through which these creditors were to be paid2 to foreclose its mortgage on the Stevens Street Property if ". . . (a) the Trust had not received $350,000 on or before March 15, 1996 and (b) a Purchase and Sale Agreement to sell the Stevens Street Property which requires a sale of the property on or before June 1, 1996 is not legally effective as of March 15, 1996 . . ." Brief of Appellee at 6 (emphasis in original).
On October 20, 1995, RND entered into a purchase and sale agreement to sell the Stevens Street Property to W/S Development Associates Limited Partnership for a purchase price of $5,000,000. The sale agreement granted W/S successive option periods to complete the purchase. W/S failed to make the required payment under the Sale Agreement on January 17, 1996. Thereafter, the purchase arrangement terminated.
In late November 1995, counsel for Debtor and the Creditors Committee filed a joint motion to extend the deadline for filing final application fees in order to accommodate RND's delayed sale of the Stevens Street Property.3 At the hearing on the motion to extend, held in the bankruptcy court on December 18, 1995, Judge Kenner expressed concern and disappointment regarding Debtor's failure to consummate the confirmed Plan.4 At the conclusion of the hearing, Judge Kenner issued an order requiring Appellant to show cause why its Chapter 11 case should not be dismissed.5 (Record Appendix at 42.)
Appellant filed its Response to the Order to Show Cause on January 24, 1996. In its Response, Debtor "generally opposed dismissal of the case, but argued that in the event of dismissal that the Bankruptcy Court should condition dismissal upon the continuing effectiveness of (1) the Confirmation Order, (2) the Plan, (3) the Debtor's discharge, and (4) the Creditor's mortgage." The Committee filed a separate Response in which it argued that Judge Kenner should not dismiss the Chapter 11 case, but requested that if the case were dismissed, the dismissal order "clearly declare that the Creditor Mortgage remains valid and enforceable despite such dismissal . . ." Id. at 65.
The court entered the Dismissal Order on January 26, 1996. Pursuant to the Dismissal Order, Judge Kenner:
ORDERED, pursuant to section 349 of the Bankruptcy Code, that the mortgage granted to the general unsecured creditors of this estate on certain real property owned by RND, Inc., a non-Debtor, which property is located on Stevens Street, Taunton, Massachusetts shall remain valid and enforceable despite this Court\'s dismissal of the Chapter 11 case.; and ORDERED, that this Chapter 11 case be and hereby is DISMISSED.
Appellant does not now contend that Judge Kenner erred in dismissing its Chapter 11 case. Rather, Appellant asserts that because Judge Kenner expressly upheld the continuing effectiveness of the Creditor's Mortgage, and failed to do the same for the Confirmation Order, the Plan, and the Debtor's Discharge, she has committed legal error. Appellant asks this Court to modify the Dismissal Order to reflect the continued enforceability of all orders made pursuant to the confirmed Plan. Appellee, to the contrary, contends that because the "Dismissal Order did not revoke the Appellant's discharge, vacate the terms of the Plan or alter the effect of the Confirmation Order," such actions were not effected. Brief of Appellee at 9-10. Appellee agrees with Appellant that the Dismissal Order did not affect the confirmed Plan. See id. at 17-18. Accordingly, Appellee contends that "no party in interest, and no party in this appeal, has contested the validity of the Confirmation Order, the discharge it provided to Appellant per the terms of the Plan or the Trust Mortgage," and no justiciable controversy exists for this Court to resolve. Id. at 11-12.
As a threshold matter, I must determine whether a justiciable controversy exists for this Court to resolve. The Constitution requires that Article III Courts adjudicate only live cases or controversies. See U.S. Const., Art. III, § 2, cl. 1. The First Circuit has stated that in order "for the court to assume jurisdiction, there must be an actual, ongoing controversy between the parties." Pustell v. Lynn Public Schools, 18 F.3d 50, 52 (1st Cir.1994) (citations omitted). Moreover, "some indication that the controversy has a concrete impact on the parties is also necessary before a case is ripe for adjudication." Id. (citation omitted).
Appellee contends Space Building's appeal should be dismissed for lack of jurisdiction because no party in interest has challenged the validity of the Plan, the discharge, or the Confirmation Order. Appellee argues, therefore, that Appellant's concern that the Dismissal Order does not expressly affirm its discharge pursuant to the Plan "presents the Court with a hypothetical or abstract dispute." Brief of Appellee at 11. Appellant, conversely, asserts that a controversy does exist "because appellant has challenged as an abuse of discretion, the Bankruptcy Court's failure to expressly uphold the enforceability of the Debtor's discharge . . ." Appellant's Reply at 2. Further, because "Rule 8013 of the Federal Rules of Bankruptcy Procedure gives the district court broad discretion to `affirm, modify, or reverse' a bankruptcy judge's order or to `remand with instructions' for further proceedings," Appellant urges this Court to modify Judge Kenner's Dismissal Order. Id.
I will first address whether there is an actual, ongoing controversy between the parties. Appellee argues that there is no actual controversy because neither it, nor any other party in interest, has contested the validity of the Confirmation Order, or any other order made pursuant to the confirmed Plan. (Brief of Appellee at 11) Because no attack has been mounted, if I were to resolve the question presented, the argument goes, I would be issuing an advisory opinion. Cf. Pustell, 18 F.3d at 52 ().
The Supreme Court enunciated the criteria that make a case ripe for adjudication in Abbott Laboratories v. Gardner, 387 U.S. 136, 87 S.Ct. 1507, 18 L.Ed.2d 681 (1967). The Court there stated that "the problem is best seen in a twofold aspect, requiring us to evaluate both the fitness of the issues for judicial decision and the hardship to the parties of withholding court consideration." Id. at 149, 87 S.Ct. at 1515. For an issue to be appropriate for judicial review, it should be "purely legal" and "final." Id. Additionally, the impact of the challenged action must be "sufficiently direct and immediate." Id. at 152, 87 S.Ct. at 1517.6 The issue presented in this appeal does not meet these requirements and is not ripe for adjudication.
As an initial matter, I note that the question presented is not purely legal. Even assuming that fairly to modify or clarify the Dismissal Order were "purely legal" and "final" action,...
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