MATTER OF WPRV-TV, INC.
| Decision Date | 19 December 1991 |
| Docket Number | Bankruptcy No. 89-02453.,Civ. No. 91-02276(GG) |
| Citation | 143 BR 315 |
| Parties | In the Matter of WPRV-TV, INC., Debtor. |
| Court | U.S. District Court — District of Puerto Rico |
Charles A. Cuprill-Hernández, Ponce, P.R., for Ponce Federal Bank, appellant-appellee.
García-Arregui & Fullana, Andrés García Arregui, Isabel M. Fullana, Santurce, P.R., for Ponce Federal Bank, F.S.B.
Carlos A. Piovanetti Rivera, Hato Rey, P.R., for Puerto Rico Family Channel, appellant-appellee.
García & Fernández, Edgardo Muñoz, Hato Rey, P.R., for trustee Evangelina Vives.
Ivonne Aguilú, San Juan, P.R., for Puerto Rico Telephone Co.
Alejandro Alveira, Hato Rey, P.R., Asst. U.S. Trustee.
Lillian Mendoza, Santurce, P.R., for Autoridad Energía Eléctrica.
This court has before us trustee's motion for authority to sell estate assets under § 363 of the Bankruptcy Code1 and Ponce Federal Bank, FSB's ("Ponce Federal") opposition thereto. After holding a hearing on November 12, 1991 and examining the record before us, we issue the following opinion overruling Ponce Federal's objection and approving the sale proposed by the trustee.
I. FACTUAL AND PROCEDURAL INTRODUCTION
The voluntary bankruptcy petition upon which this case was commenced was filed by WPRV-TV, INC. ("debtor") with the U.S. Bankruptcy Court for the Eastern District of Oklahoma. After unsuccessful attempts at reorganization under Chapter 11, the case was converted for liquidation under Chapter 7 and transferred to this district by the Oklahoma court.
Chief U.S. Bankruptcy Judge Enrique S. Lamoutte presided over the case until October 10, 1991, when Judge Lamoutte disqualified himself and transferred the case to the District Court, since Bankruptcy Judge Sara de Jesus had prior ties to one of the law firms involved. The case was then assigned to this court.
The trustee made various efforts to sell the estate's assets including holding a public auction on September 30, 1991. The trustee did not recommend any of the auction offers, but recommended a private sale pursuant to another offer received after the auction. The trustee issued notice pursuant to § 363(b) and Rule 6004, Federal Rules of Bankruptcy Procedure, and requested approval to conduct said sale free of liens under § 363(f).
Ponce Federal was the only party to oppose the sale. The hearing's focus was on whether the private sale should be approved over Ponce Federal's objection. We rule that the private sale should be approved. We make the following:
II. FINDINGS OF FACTS
1. WPRV-TV, INC. filed for bankruptcy under Chapter 11 on December 3, 1987 in the United States Bankruptcy Court for the Eastern District of Oklahoma (Case No. 87-01393).
2. A June 6, 1989 Order by the Oklahoma Bankruptcy Court converted debtor's Chapter 11 petition to a Chapter 7 case and transferred it to Puerto Rico for final liquidation.
3. Upon transfer, Evangelina Vives was appointed operating and liquidating trustee of debtor's assets. The trustee assumed all administrative powers of the station, maintaining its operation to preserve the going concern value and the FCC transmission license.
4. The trustee held a public auction on September 30, 1991.
5. At the auction Ponce Federal offered to purchase all estate assets for a total price of $4,850,000.00. This was not a cash offer, but a bid of $4,800,000.00 credit plus $50,000 cash.
6. The trustee did not recommend any of the auction offers2.
7. The Puerto Rico Family Channel, Inc. made a bid after the auction, which the trustee recommended as beneficial to the estate.
8. The trustee jointly filed the October 23rd notice of private sale and a motion to sell property free of liens. The proposed sale was comprised of the following:
The trustee recommended the following offer made by the Puerto Rico Family Channel, Inc.
A. Real property described above................................$2,000,000.00
B. Equipment subject to Ponce Federal's lien....................$ 280,500.00
C. All other equipment..........................................$ 300,000.00
D. Going concern value..........................................$2,250,000.00
Total price ..................................................$4,830,500.00
9. After due notice3, Ponce Federal filed the sole objection to the sale and only opposition to the request to sell free of liens.
10. No one else at the hearing objected to the proposed sale, and several major creditors stated they favored the sale.4
11. The private sale, as itemized in trustee's notice, will benefit the estate's unsecured creditors for at least, $2,438,750.00.5 The private sale's price represents the best price obtainable under the circumstances, which have included sustained sales efforts and a public auction. We find that such price reflects the fair market value of the assets being sold.6
12. Ponce Federal's auction bid would only benefit the estate in its $50,000.00 cash component, and then, only theoretically since Ponce Federal has repeatedly claimed a super priority of $48,021.00.
13. At the hearing, Ponce Federal made another credit bid of $2,000,000.00 for part of the equipment encumbered by its lien. Since it was a credit offer and not a cash bid, it is subject to the same analysis in terms of benefit to the estate as the other credit bid.
14. Ponce Federal failed to prove the extent of its secured interest in the property being sold since they failed to submit any evidence on the current value of specific items of collateral.7
15. The Puerto Rico Family Channel, Inc. stated they would not modify their offer, to exclude any items of equipment listed in its offer which are purportedly subject to liens by Ponce Federal.
Applying the law to the facts as found, we make the following:
III. CONCLUSIONS OF LAW
A. The proposed private sale may be approved free and clear of liens pursuant to §§ 363(f)(3) and (f)(5) of the Bankruptcy Code.
B. The proposed sale provides adequate protection to lien holders since liens attach to sale proceeds, and the sale's price represents fair market value.
C. Ponce Federal has not presented a valid objection to confirmation of the private sale proposed by the trustee.
IV. DISCUSSION
Ponce Federal's objections are the following:
a. That the sale of property subject to liens may not be approved free of liens under § 363(f)(3) unless equity remains for the estate after covering all the monetary amounts secured by liens;
b. That the sale may not be approved under § 363(f)(5) unless all lien holders receive full money satisfaction on claims;
c. That the sale should not be approved in light of their bids.
The Bankruptcy Code designates the trustee as the representative of the estate.8 The trustee has ample discretion to administer the estate, including authority to conduct public or private sales of estate property.9 Courts have much discretion on whether to approve proposed sales, but the trustee's business judgment is subject to great judicial deference.10 As one treatise notes:
"The fact that the . . . time, place or manner of sale or the choice of items to be sold may not be right or that the price is inadequate would be possible reasons to object to the sale but even as to the latter, the court is likely to be reluctant to substitute its business judgment for that of the debtor in possession or trustee."11
The proposed private sale is the most beneficial to the estate. All competing offers have been withdrawn, except for Ponce Federal's, which consists primarily of credit. Those credit bids would produce practically no benefit for any other creditor. (See Findings of Facts 11-13). The only issue remaining is whether the sale should be approved over Ponce Federal's objections.
SALES FREE AND CLEAR OF LIENS SECTION 363(f)(3) & (5)
The trustee has requested approval of the sale of assets free of liens, pursuant to § 363(f) of the code. The right to sell property free of liens has long been a part of the bankruptcy power and dates back to the historic general equity powers of courts, as noted by Justice Brandeis in Van Huffel v. Harkelrode, 284 U.S. 225, 227-228, 52 S.Ct. 115, 116-117, 76 L.Ed. 256 (1931); See also Cowans, Bankruptcy Law and Practice, § 11.9 pg. 412 (West Publishing Co., 1989). Sales may be made free of liens without first determining the rights in the proceeds. In re Saco Local Development, Corp., 19 B.R. 119, 121 (1st Cir. BAP 1982).
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