Unsecured Creditors Committee v. Southmark Corp.

The question presented by these consolidated appeals from a decision of the Bankruptcy Appellate Panel of the Ninth Circuit (“B.A.P.”) is whether an option contract is an executory contract which, under Section 365 of the Bankruptcy Code, may be assumed or rejected by the trustee. In Gill v. Easebe Enters. (In re Easebe Enters.), 900 F.2d 1417 (9th Cir.1990), we held that an option contract is an executory contract governed by Section 365. Id. at 1419 .

The Bankruptcy Court below found the option contract at issue to be an executory contract as a matter of federal law, relying on Easebe as clear Ninth Circuit authority, as well as complementary Fifth Circuit precedent. The B.A.P. reversed, holding that the option contract in this proceeding is not *1472 executory as a matter of law, and remanded the action for determination of an appropriate remedy. We reluctantly reverse the B.A.P. decision, because it is contrary to controlling Ninth Circuit authority as set forth in Easebe.

The B.A.P. Decision

The sole issue the B.A.P. addressed was whether an option contract to purchase real estate was executory in nature and thereby deemed rejected by a confirmed plan in a prior…