In Re Gary Ronald Perez, Debtor. Frank Everett v. Gary Ronald Perez

Opinion by Judge KOZINSKI; Dissent by Judge ZILLY.

In this appeal from an order approving a Chapter 11 reorganization plan, we confront the iron maiden of bankruptcy reorganizations — the dreaded cram-down.

I

This case arises out of a personal Chapter 11 petition filed by the debtor, Gary Ronald Perez. The estate is not large, and neither is the claim of the objecting creditor, Frank Everett. Nevertheless, the ease has generated a fair number of difficult legal issues and more than a little acrimony. Perhaps both consequences are endemic to a legal process so complex and malleable that, as happened here, even experts are led astray.

Perez makes his living buying, renovating and selling income property, and owning and managing two Jimboy’s Tacos franchises. He hired Frank Everett to supervise the remodelling of one of the franchises. After the work was completed, the two had a falling out and Everett sued to get paid. Everett won but Perez panned by filing a Chapter 11 petition.

Perez proposed two successive plans of reorganization which the bankruptcy court rejected, the first because it unfairly discriminated against Everett and the second because it did not justify Perez’s…

30 F.3d 1209 63 USLW 2131 , 25 Bankr.Ct.Dec. 1513 , Bankr. L. Rep. P 75,998 In re Gary Ronald PEREZ, Debtor. Frank EVERETT, Appellant, v. Gary Ronald PEREZ, Appellee. No. 92-15971. United States Court of Appeals, Ninth Circuit. Argued and Submitted Nov. 5, 1993. Decided July 27, 1994. Barbara Peyton, Peyton & Associates, Sacramento, CA, for appellant. Michael A. Peritore, Sacramento, CA, for appellee. Appeal from the Ninth Circuit Bankruptcy Appellate Panel Meyers, Jones and Ollason, Bankruptcy Judges, Presiding. Before: KOZINSKI, O'SCANNLAIN, Circuit Judges, and ZILLY, * District Judge. Opinion by Judge KOZINSKI; Dissent by Judge ZILLY. KOZINSKI, Circuit Judge. 1 In this appeal from an order approving a Chapter 11 reorganization plan, we confront the iron maiden of bankruptcy reorganizations--the dreaded cram-down. 2 * This case arises out of a personal Chapter 11 petition filed by the debtor, Gary Ronald Perez. The estate is not large, and neither is the claim of the objecting creditor, Frank Everett. Nevertheless, the case has generated a fair number of difficult legal issues and more than a little acrimony. Perhaps both consequences are endemic to a legal process so…

dissenting:

I concur only with Part III of Judge Ko-zinski’s opinion, which affirms the bankruptcy court’s ruling that 11 U.S.C. Section 1322 (c) does not apply to Chapter 11 proceedings. I dissent from the remaining portions of the opinion. I do not agree with Parts I and II of the opinion which hold that the debtor’s third plan (“Plan III”) failed to *1220 satisfy the cram-down provisions of 11 U.S.C. § 1129 (b)(2)(B). Nor do I agree with Part IV which remands to the BAP for consideration of the alleged inadequacy of the debt- or’s disclosure statement. I would affirm the decisions of the bankruptcy court and the BAP.

The bankruptcy judge entered Findings of Fact and Conclusions of Law in this ease. The bankruptcy court found that “the factual assertions set forth in the Creditor’s Objection to Plan of Reorganization, [and Creditor’s Supplement to Objection to Plan] filed by Franklin Everett, were unsupported by admissible, competent or persuasive evidence.” In addition, the court concluded that “the plan provides that with respect to each class of unsecured claims, that each holder of a claim of such class shall receive on account of such claim property of a value, as of the…