In the Matter of Beverly Hills Bancorp, a California Corporation, Debtor. Commercial Paper Holders v. R.W. Hine, as Trustee of Beverly Hills Bancorp

This is an appeal brought by 227 commercial paper holders (CPH) of Beverly Hills Bancorp (Bancorp). We will review two orders of the district court affirming the bankruptcy court’s orders (1) reforming a settlement agreement covering the claims of the CPH against the bankrupt estate of Bancorp, and (2) denying CPH standing to vote on Bancorp’s reorganization plans. We have jurisdiction under section 24 of the Bankruptcy Act of 1898, 11 U.S.C. § 47 (a), superseded by the Bankruptcy Reform Act of 1978, 11 U.S.C. § 101 et seq. We reverse and remand.

I

This appeal is part of an ongoing flood of litigation following Bancorp’s default on its commercial paper in 1973. We need not dwell on the earlier history, which is adequately narrated in our prior opinion. See In re Beverly Hills Bancorp, 649 F.2d 1329 (9th Cir.1981) (Bancorp). In that appeal, the CPH sought reversal of the district court’s order affirming the bankruptcy court’s interpretation of the Bank Fund Settlement Agreement (Settlement Agreement), in which the CPH compromised their claims against Bancorp. The bankruptcy court had attempted to both reform and interpret the Settlement Agreement. We stated that its reformation…