Ruti-Sweetwater, Inc., In re
| Decision Date | 08 January 1988 |
| Docket Number | No. 85-1390,INC,RUTI-SWEETWATE,85-1390 |
| Citation | 836 F.2d 1263,17 CBC 2d 1459 |
| Parties | 17 Collier Bankr.Cas.2d 1459, 17 Bankr.Ct.Dec. 155, Bankr. L. Rep. P 72,156 In re; Sweetwater; Resort Systems; Sweetwater Properties; Timeshare Realty, Inc.; First Western Security; Sweetwater Park; Sweetwater Condoshare Exchange, Debtors. Allan HEINS; Janet Heins; and Hildegard Heins, Appellants, v. ; Sweetwater; Resort Systems; Sweetwater Properties; Timeshare Realty, Inc.; First Western Security; Sweetwater Park; Sweetwater Condoshare Exchange, Appellees. |
| Court | U.S. Court of Appeals — Tenth Circuit |
Richard F. Bojanowski (Peter J. Kuhn with him on the brief), Salt Lake City, Utah, for appellants.
Jeffrey C. Swinton and Ronald L. Dunn of Woodbury, Bettilyon, Jensen, Kesler & Swinton, Salt Lake City, Utah, Michael Z. Hayes, Mazuran, Verhaaren & Hayes, Salt Lake City, Utah, (on the brief), for appellees.
Before HOLLOWAY, Chief Judge, BALDOCK, Circuit Judge, and BARRETT, Senior Circuit Judge.
Allan Heins, Janet Heins and Hildegard Heins, hereinafter collectively referred to as "Heins" or appellants, seek reversal of an order of the district court affirming a bankruptcy ruling.
During the early 1980s, Ruti-Sweetwater and seven related entities, hereinafter referred to as "debtors" or "reorganized debtors," were actively engaged in the business of vacation time sharing. As structured, the debtors provided thousands of customers with time use at various resorts. In late 1983 and early 1984, debtors filed petitions for relief under Chapter 11 of the Bankruptcy Code. Their eight cases were procedurally consolidated for purposes of administration.
At the time of their filings, the debtors faced demands from secured and unsecured creditors holding claims of millions of dollars in addition to the obligations owed to thousands of timeshare owners. Following their filings, the debtors prepared a complicated (120 pages) Plan of Reorganization which included treatment of eighty-three separate classes of secured creditors and forty separate classes of time share owners.
The Heins are judgment lien creditors of debtors in the amount of $30,000 plus $8,000 in interest. The Heins secured a lien by filing a transcript of their judgment prior to ninety days before debtors' petition date. The Heins' lien attached to a parcel of real estate known as the Ferrell Spencer property. Under the Plan of Reorganization, the Heins were treated as a separate subclass and entitled to vote as a separate subclass. The Plan provided that Heins' lien was to be transferred to unsold timeshare intervals, whereby the Heins would realize a small portion of their claim when each interval was sold. The Plan also provided, however, that the Heins would receive the entire amount of their claim, with interest, within the first forty-eight months following confirmation of the Plan.
In accordance with Bankruptcy Rules 3017(c) 1 and 3020(b)(1) 2, the bankruptcy court set May 28, 1984, as the final date for filing written objections to confirmation of the Plan and May 30, 1984, as the final date for voting on the Plan. The Heins did not file written objections to the Plan nor did they exercise their right under 11 U.S.C. Sec. 1126 3 to vote on the Plan. Twenty separate classes of secured claims, including the Heins, failed to vote.
The bankruptcy court held confirmation hearings on debtors' Plan on June 1, 2, and 5, 1984. The Heins did not appear at the hearings, either in person or through counsel. On June 5, the bankruptcy court approved the sale of the Ferrell Spencer property, free and clear of all liens, including the Heins' lien. On June 8, 1984, the bankruptcy court entered an order confirming debtors' Plan. During the confirmation hearings, the bankruptcy court ruled that the non-voting creditors were deemed to have accepted the Plan for purposes of 11 U.S.C. Sec. 1129(b)(1) 4. This ruling was made after none of the creditors at the hearing objected thereto:
Mr. Mabey [Counsel for Debtor]: We believe that it is the law that those parties in interest who have failed to vote are deemed, under Section 1129(a)8 to have voted in favor of the plan in order to avoid the requirement of having to affect [sic--effect] a cram-down.
The Court: Your statement is they are deemed to have accepted rather than they wouldn't be counted or otherwise it would be the same thing without it?
Mr. Mabey: Yes, your Honor. We argue only that they should be deemed to have accepted for purposes of relieving the plan proponent of the cram-down requirements. That is the only avenue which we believe must be perceived at this hearing.
R. Tr. June 8, 1984, Appellees' Brief, Exhibit C.
On June 12, 1984, the bankruptcy court held a hearing on the distribution of the proceeds of the June 5, 1984, sale of the Farrell Spencer property, during which the Heins, represented by counsel, appeared for the first time and challenged the Plan. They attacked those provisions of the Plan under which the Heins' secured interest in the Ferrell Spencer property was removed:
Mr. Bojanowski (Counsel for Heins): Now, the problem arises, when, as debtor's counsel indicated, that the Heins family would be treated under section 4.28; namely, the secured interest that they would have in this property would be removed by virtue of the confirmed plan which would go into effect on June 19th, '84. However, it is the creditor's position that the sale was consummated prior to the effective date of the plan. An offer was made, an acceptance was received, submitted to the Court for approval. That approval was obtained I believe that was obtained on June 5th, '84, that the effective date of the plan would remove their lien would not take place until June 19th.... [t]he distribution of the funds, therefore, should be based upon the creditor's legal position as a judgment lien creditor not affected by any provisions in a plan. That will not take effect until June 19th....
* * *
* * *
Mr. Mabey (Counsel for Debtors): Your Honor, the argument of the Heins claimants is that even though they did not object to confirmation of a plan which removed their lien, even though the sale under section 363 was an inherent and integral part of that plan, even though the Court, therefore, went ahead and confirmed the plan, nevertheless, they are entitled to ignore the plan and take under the sale under other circumstances. This cannot be a [sic--should be "the"] law. In the first instance, the sale itself is an integral part of the plan of reorganization. In the second instance, section 363(f) under which the sale occurred was carefully designed for a purpose of allowing sales to go forward free and clear of liens and then later determining the value itself of the liens....
R., Tr. June 12, 1984, pp. 3-8.
The Heins appealed the order of the bankruptcy court confirming debtors' Plan of Reorganization. The district court entered its order affirming the ruling of the bankruptcy court confirming the Plan of Reorganization, 57 B.R. 748. The court found/held:
Whether a secured creditor accepts a plan of reorganization is important in determining whether the plan must comply with the so-called "cram down" provisions of section 1129(b). If a class of creditors does not accept the plan, and if that class is impaired under the plan (it is undisputed that the Heins are impaired under the Plan), the Bankruptcy court may confirm the plan only if it "does not discriminate unfairly, and is fair and equitable, with respect to each class of claims or interests that is impaired under, and has not accepted the plan." 11 U.S.C. Sec. 1129(b). However, if a class of creditors accepts the plan under section 1129(a)(8), the bankruptcy court may confirm the plan without showing that the plan satisfies the "unfair discrimination" and "fair and equitable" standards of section 1129(b).
* * *
* * *
Accordingly, if any creditor in a class votes, any other creditors in that class who fail to vote are entirely disregarded for the purpose of determining whether the class has accepted or rejected the plan. The presumption under the prior law that non-voting creditors rejected the plan has been removed. Non-voting creditors are deemed neither to have accepted the plan nor rejected it; they are simply bound by the result produced by those who vote. The necessity of deeming a failure to vote as either an acceptance or a rejection of a plan arises only when [as here] no members of a class cast a vote.
R., Vol. II at pp. 460-61, 462.
The court upheld the bankruptcy court's ruling that a non-voting, non-objecting creditor who is the only member of a class, such as the Heins, is deemed to have accepted the plan for purposes of Sec. 1129(b). On appeal, the Heins contend that the district court erred in affirming the bankruptcy court's ruling that non-voting, non-objecting creditors who are the only members of a class are deemed to have accepted the Plan of Reorganization for purposes of Sec. 1129(a)...
To continue reading
Request your trial
-
In re American Solar King Corp.
... ... Gary B. Clark, Gardere & Wynne, Dallas, Tex., for Cardinal Inv. Co., Inc ... David Dickson, Sheehy, Lovelace & Mayfield, Waco, Tex., for Sears, Roebuck & Co ... Richard J. VanderWoude, ... See 11 U.S.C. § 1126(f); In re Ruti-Sweetwater, Inc., 836 F.2d 1263 (10th Cir.1988). The debtor, it will be seen, is incorrect, as Class V is indeed impaired, though not because the class is left ... ...
-
In re Pardee
... ... Inc. (In re Federated Group, Inc.), 107 F.3d 730, 732 (9th Cir.1997) (citing Abele v. Phoenix Suns Ltd. Partnership (In re Harrell), 73 F.3d 218, 219 ... One begins with the leading chapter 11 implied acceptance case, In re Ruti-Sweetwater, Inc., 836 F.2d 1263, 1266 (10th Cir. 1988), which has never achieved any following and which has been squarely rejected by the Ninth Circuit ... ...
-
Rinn v. First Union Nat. Bank of Maryland
... ... I. BACKGROUND ... Ruppert Brothers of Maryland, Inc. ("Ruppert Brothers"), a Maryland corporation, served as a holding company for the assets of four subsidiaries. The subsidiaries, Baltimore Home ... Mixed questions of fact and law which contain "primarily a consideration of legal principles" are considered de novo. In re Ruti-Sweetwater, Inc., 836 F.2d 1263, 1266 (10th Cir.1988). In this case, the two issues on appeal — the applicability of equitable subrogation and its ... ...
-
U.S. v. P.H.E., Inc., 91-4149
... ... Bessemer City, 470 U.S. 564, 573, 105 S.Ct. 1504, 1511, 84 L.Ed.2d 518 (1985) (quoting United States v. United States Gypsum Co., 333 U.S. 364, 395, 68 S.Ct. 525, 542, 92 L.Ed. 746 (1948)). The court's conclusions of law are examined de novo. In re Ruti-Sweetwater, Inc., 836 F.2d 1263, 1266 (10th Cir.1988). The extent of this court's jurisdiction is a question of law which we determine in the first instance. See McGeorge v. Continental Airlines, Inc., 871 F.2d 952, 953 (10th Cir.1989) ... In 1985, then Utah United States Attorney Brent ... ...
-
R. Travis Santos, the Legal Way to Defeat Optimus Sub-prime
...186 FED. R. BANKR. P. 3015(f). 187 See Thaxton, 335 B.R. at 374; see also Heins v. Ruti-Sweetwater, Inc. (In re Ruti-Sweetwater, Inc.), 836 F.2d 1263, 1267 (10th Cir. 1988) ("[C]reditors are obligated to take an active role in protecting their claims."); Factors Funding Co. v. Fili (In re F......
-
Scott Alberino, the Honorable Judith Fitzgerald, Scott Greenberg, Gary Marsh, the Corporate Bankruptcy Panel: Hot Chapter 11 Plan Issues
...§ 102(7).12 In re Owens Corning, 419 F.3d 195, 210-11 (3d Cir. 2005).See Heins v. Ruti-Sweetwater, Inc. (In re Ruti-Sweetwater, Inc.), 836 F.2d 1263 (10th Cir. 1988).See In re Adelphia Commc’ns. Corp., 368 B.R. 140 (Bankr. S.D.N.Y. 2007).requirements, and at the same time, they also, like I......