United States District Court, D. Colorado
In re: LARRY RALPH GENTRY, also known as Larry Gentry, officer, director, shareholder Ball four, Inc., and SUSAN ELLEN GENTRY, also known as Susan Gentry, officer, director, shareholder Ball Four, Inc. Debtors.
LARRY RALPH GENTRY, and SUSAN ELLEN GENTRY Appellees. 2011-SIP-1 CRE/CADC Venture, LLC, Appellant, Bankr. No. 11-37658-MER
ORDER AFFIRMING ORDERS OF THE BANKRUPTCY COURT
ROBERT E. BLACKBURN, District Judge.
This matter is before me on the appeal filed by creditor 2011-SIP-1 CRE/CADC Venture, LLC (SIP) concerning its objections to the Chapter 11 plan of the debtors, Larry and Susan Gentry, and to the confirmation of that plan. The appellant filed an opening brief [#23], the debtors filed a response brief [#24], and the appellant filed a reply [#25]. I affirm the orders of the bankruptcy court.
Under 28 U.S.C. § 1334, United States District Courts have original jurisdiction in all civil proceedings arising in cases under Title 11, United states Code. I have jurisdiction to adjudicate this bankruptcy appeal under 28 U.S.C. § 158(a)(1).
II. STANDARD OF REVIEW
I am bound by the findings of fact, of the bankruptcy court unless they are clearly erroneous. FED. R. BANKR. P. 8013; In re Branding Iron Motel, Inc., 798 F.2d 396, 399 (10th Cir.1986). A finding of fact is clearly erroneous only if the appellate court has the definite and firm conviction that a mistake has been committed. United States v. United States Gypsum Co., 333 U.S. 364 (1948). It is the responsibility of an appellate court to accept the ultimate factual determination of the fact finder, i.e., the bankruptcy court, unless that determination either (1) is completely devoid of minimum evidentiary support displaying some hue of credibility, or (2) bears no rational relationship to the supportive evidentiary data. Jardine's Professional Collision Repair, Inc. v. Gamble, 232 B.R. 799, 800 (D. Utah, 1999) (citing Gillman v. Scientific Research Prods. (In re Mama D'Angelo, Inc.), 55 F.3d 552, 555 (10th Cir. 1995) (internal citations omitted); In re Dinviney, 225 B.R. 762, 769 (B.A.P. 10th Cir. 1998) (internal citations omitted); In re Inv. Co. of The Sw., Inc., 341 B.R. 298, 310 (B.A.P. 10th Cir. 2006). I review de novo conclusions of law reached by the bankruptcy court. In re Mullet, 817 F.2d 677, 678 (10th Cir.1987).
The debtors, Susan and Larry Gentry, are the sole shareholders, officers, and directors of Ball Four, Inc. In 2010, Ball Four sought bankruptcy protection under Chapter 11 of the United States Bankruptcy Code. In 2011, the Gentrys sought bankruptcy protection under Chapter 11. The issues raised by the appellant in this appeal concern its treatment under the Chapter 11 plan of the Gentrys and the relationship of the Gentry plan to the Chapter 11 plan of Ball Four.
Ball Four operates a sports complex. In 2005, FirsTier Bank loaned about 1.9 million dollars to Ball Four. The loan proceeds were to be used to pay off a previous loan and to fund the construction of two buildings to expand the business. R II, p. 164. The FirsTier loan was secured by real estate owned by Ball Four. The Gentrys each signed separate personal guaranties of this debt. R. II, pp. 10-15. The terms of the two guaranty agreements are identical.
On September 21, 2010, Ball Four filed a petition seeking relief under Chapter 11. FirsTier asserted a secured claim in the amount of 3, 572, 158.12 dollars. R. II, p. 33. FirsTier estimated that its security interest in real estate owned by Ball Four was sufficient to secure its claim. Id. Ball Four proposed a plan of reorganization which provided that FirsTier's claim would be paid in full, plus 6% interest, and that FirsTier would retain its lien on Ball Four's property until FirsTier's claim was paid in full. R. II, pp. 164-65. FirsTier did not object to the Ball Four plan. R. II, p. 165.
In January 2011, the Colorado Division of Banking closed FirsTier, and the Federal Deposit Insurance Corporation was appointed as receiver. R. II, p. 164. The FDIC did not object to the Ball Four plan. R. II, p. 165. On August 5, 2011, the FDIC conveyed all rights under the Ball Four promissory note to the appellant, 2011-SIP-1 CRE/CADC Venture, LLC (SIP). R. II, p. 164. SIP did not object to its treatment under the Ball Four plan. R. II, p. 165. Ball Four's Chapter 11 plan was confirmed by the bankruptcy court on August 29, 2011. Id.
Holding both the Ball Four promissory note and the guaranties signed by the Gentrys, SIP filed suit against the Gentrys in state court seeking to collect under the guaranties. On November 29, 2011, the Gentrys sought bankruptcy protection under Chapter 11. Under the Gentry Chapter 11 plan, SIP is treated as an unsecured creditor of the Gentrys. The Gentry plan provides that SIP will be paid under the confirmed Chapter 11 plan of Ball Four. R. II, pp. 166-167. Ultimately, SIP was the only creditor whose objections to the Gentry plan were addressed and resolved by the bankruptcy court. The bankruptcy court overruled the objections of SIP. V. II, pp. 163-177. On September 27, 2013, the bankruptcy court confirmed the Gentry Chapter 11 plan. R. II, p, 202.
In this appeal, SIP raises three issues based on the objections overruled by the bankruptcy court and, ultimately, the confirmation of the Gentry plan. The issues raised by SIP challenge two orders entered by the bankruptcy court: (1) the September 12, 2013, order of the bankruptcy court overruling the objections to confirmation asserted by SIP, R. II, pp. 163-177; and (2) the September 27, 2013, order of the bankruptcy court confirming the Gentry Chapter 11 plan. R. II, p, 202. First, SIP contends the Gentry plan violates the plain language of the guaranties signed by the Gentrys because the Gentry plan equates the liability of the Gentrys under the guaranties with the allowed amount of SIP's claim in the Ball Four bankruptcy. In essence, SIP contends the Gentry plan improperly reduces the value of SIP's claim against the Gentrys under the terms of the guaranties. Second, SIP contends the Gentry plan violates the absolute priority rule by permitting guarantors, the Gentrys, to maintain shares in their wholly-owned business, Ball Four, even though their plan pays SIP only the amount of the claim allowed in the Ball Four bankruptcy and not the full ...