In re Art and Architecture Books of 21st Century, 2:13-bk-14135-RK. (2016)
Court: United States Bankruptcy Court, C.D. California
Number: inbco20160516515
Visitors: 9
Filed: Apr. 25, 2016
Latest Update: Apr. 25, 2016
Summary: NOT FOR PUBLICATION ORDER DISAPPROVING AND DENYING WITHOUT PREJUDICE "STIPULATION BETWEEN PLAN AGENT AND STATE OF CALIFORNIA EMPLOYMENT DEVELOPMENT DEPARTMENT REGARDING RELEASE OF ANY LIEN OF THE STATE OF CALIFORNIA EMPLOYMENT DEVELOPMENT DEPARTMENT AGAINST PROCEEDS OF THE SALE OF THE BEVERLY HILLS PROPERTY" [Stipulation at Dkt. No. 1928] [No Hearing Required] ROBERT KWAN , Bankrutpcy Judge . Pending before the court is the "Stipulation Between Plan Agent and State of California Em
Summary: NOT FOR PUBLICATION ORDER DISAPPROVING AND DENYING WITHOUT PREJUDICE "STIPULATION BETWEEN PLAN AGENT AND STATE OF CALIFORNIA EMPLOYMENT DEVELOPMENT DEPARTMENT REGARDING RELEASE OF ANY LIEN OF THE STATE OF CALIFORNIA EMPLOYMENT DEVELOPMENT DEPARTMENT AGAINST PROCEEDS OF THE SALE OF THE BEVERLY HILLS PROPERTY" [Stipulation at Dkt. No. 1928] [No Hearing Required] ROBERT KWAN , Bankrutpcy Judge . Pending before the court is the "Stipulation Between Plan Agent and State of California Emp..
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NOT FOR PUBLICATION
ORDER DISAPPROVING AND DENYING WITHOUT PREJUDICE "STIPULATION BETWEEN PLAN AGENT AND STATE OF CALIFORNIA EMPLOYMENT DEVELOPMENT DEPARTMENT REGARDING RELEASE OF ANY LIEN OF THE STATE OF CALIFORNIA EMPLOYMENT DEVELOPMENT DEPARTMENT AGAINST PROCEEDS OF THE SALE OF THE BEVERLY HILLS PROPERTY"
[Stipulation at Dkt. No. 1928]
[No Hearing Required]
ROBERT KWAN, Bankrutpcy Judge.
Pending before the court is the "Stipulation Between Plan Agent and State of California Employment Development Department Regarding Release of Any Lien of The State of California Employment Development Department Against Proceeds of The Sale of The Beverly Hills Property" ("Stipulation"), ECF 1928, made by and between Sam S. Leslie, solely in his capacity as the Plan Agent under the Modified Second Amended Plan of Reorganization of Official Committee of Unsecured Creditors ("Plan") in the above-captioned case ("Plan Agent"), through his Special Counsel, Victor A. Sahn of SulmeyerKupetz, A Professional Corporation, on the one hand, and the State of California Employment Development Department (the "EDD," and, together with the Plan Agent, the "Parties"), through its employee, Tax Administrator I Andria Rodriquez. The court, having reviewed and considered the Stipulation, and good cause appearing thereof,
IT IS HEREBY ORDERED that the Stipulation as proposed is DISAPPROVED AND DENIED WITHOUT PREJUDICE for the following reasons.
1. There appears to be a typographical error in the Stipulation. Paragraph 5, page 4 of the Stipulation provides that, "Notwithstanding the payment plan identified in paragraph 3, above, in no event will the Plan Agent make any distributions to allowed holders of Class 5 prepetition unsecured claims against the Debtor until such time as the claim to the EDD addressed in this Stipulation is paid in full." Per the confirmed Plan, ECF 1859, Class 5 includes the Plan treatment for Westminster Finance, Inc.'s secured claim. Plan at 27-31. Class 7 includes the Plan treatment for general unsecured claims. Id. at 31-32. The Stipulation refers to "Class 5 prepetition unsecured claims" which apparently does not mean the Class 5 secured claim of Westminster Finance, but Class 7 general unsecured claims. The Stipulation cannot be approved unless this error is corrected.
2. To the extent the Stipulation seeks to affect and alter the Plan treatment for Class 5 (Westminster Finance, Inc.'s secured claim), the Stipulation seeks to improperly modify the confirmed Plan under the Bankruptcy Code. Specifically, 11 U.S.C. § 1127(b) expressly provides that,
The proponent of a plan or the reorganized debtor may modify such plan at any time after confirmation of such plan and before substantial consummation of such plan, but may not modify such plan so that such plan as modified fails to meet the requirements of sections 1122 and 1123 of this title. Such plan as modified under this subsection becomes the plan only if circumstances warrant such modification and the court, after notice and a hearing, confirms such plan as modified, under section 1129 of this title.
(Emphasis added). If the Stipulation meant to modify Class 5 secured claimant Westminster Finance's rights under the confirmed plan, then this would modify the terms of the confirmed plan requiring court approval pursuant to 11 U.S.C. § 1127(b). The Stipulation is unclear and ambiguous as to which creditor class's rights are affected by it and may not be approved until this is clarified.
3. To the extent the Stipulation seeks to affect and alter the Plan treatment for Class 7 general unsecured claims, the court notes that the confirmed Plan provides: "Each holder of an allowed Class 7 claim will receive such holder's Pro Rata share of the Post-Confirmation Debtor's cash that remains after (i) making payment in full (or the establishment of adequate reserves to make such payment) to the holder of any allowed claim entitled to greater priority under the Plan, including Priority Tax Claims and Administrative Expenses, and (ii) the payment in full (or the establishment of reserves to make such payment) of the Post-Confirmation Debtor and the Plan Trust's obligations and expenses arising on or after the Effective Date. . ." Plan at 31. It appears that the Stipulation was intended to effectuate an installment payment agreement between the Plan Agent and EDD for payment of EDD's tax claims over the next 34 months in full satisfaction of such claims, which were apparently the subject of its proof of claim, Claim No. 26-1, in the total amount of $144,355.02, of which $116,937.51 is claimed to be unsecured priority and $27,417.51 is claimed to be general unsecured. To effectuate this agreement, the Stipulation contemplates a delay of payment to Class 7 general unsecured claims by this 34 month period for the EDD installment payment agreement to be performed. While the Plan contemplates that Class 7 general unsecured claims are to be paid after the payment of priority tax claims, the Plan did not contemplate an additional 34-month delay in the payment of Class 7 general unsecured claims. Nothing in the Stipulation indicates that this 34-month delay has a reasonable basis in fact (i.e., why should general unsecured creditors wait an additional 34 months to be paid any distribution in this case?). The Stipulation also lumps the EDD's priority and general unsecured tax claims together, but nothing in the Stipulation addresses whether part of the EDD's tax claims being paid under the installment payment agreement includes the general unsecured claims of the EDD, which if this were the case, would be giving it preferential treatment other Class 7 general unsecured claims. The Stipulation asserts that it is a resolution of the disputes between the Plan Agent and the EDD regarding the latter's claimed secured status of its tax claims as indicated by the pending tax lien motion to disallow EDD's secured tax claims (Docket No. 1887), but if this is a compromise of such a controversy, there is no factual basis to support the reasonableness of any compromise, i.e., there is no evidence showing that the EDD has a reasonable factual and legal basis to assert that its claims are secured. See Fed. R. Bankr. P 9019; 11 U.S.C. § 545(2) (statutory liens such as the claimed EDD tax liens must be perfected as to a hypothetical bona fide purchaser pursuant to 26 U.S.C. § 6323 or similar provision of state or local law; the EDD proof of claim, Claim No. 26-1, refers to the tax claims as unsecured, but the Stipulation refers to recordation of state tax lien notices between 2009 and 2012, but copies were not attached to the Stipulation or proof of claim); Fed. R. Bankr. P. 9019). Given the potential prejudice to the rights of Class 7 general unsecured creditors under the Plan if the Stipulation is approved, given the concerns raised by the court in this order, and lack of information showing the reasonableness of the compromise reflected in the Stipulation, the court will require the Parties to the Stipulation to seek approval of the Stipulation with notice to all general unsecured creditors by a written motion noticed for hearing pursuant to Local Bankruptcy Rule 9013-1(d).
4. Lastly, the court notes that the Stipulation was not signed on behalf of the EDD, an entity party, by an attorney. Instead, an employee of the EDD, Tax Administrator I Andria Rodriguez, who does not appear to be a licensed attorney (since no state bar number for her was provided), signed the Stipulation on behalf of the EDD in violation of Local Bankruptcy Rule 9011-2(a), which provides in pertinent part that ". . . any [ ] unincorporated association . . . may not file a petition or otherwise appear without counsel in any case or proceeding, except that it may file a proof of claim, file or appear in support of an application for professional compensation, or file a reaffirmation agreement, if signed by an authorized representative of the entity.). The Stipulation, which is not one of the excepted pleadings under Local Bankruptcy Rule 9011-2, may not be filed with the court on behalf of an entity party, such as the EDD, unless it is signed on its behalf by an attorney in compliance with Local Bankruptcy Rule 9011-2. Thus, the Stipulation may not be approved in its current form on this basis as well.
IT IS SO ORDERED.
Source: Leagle
