Unsecured Creditors' Committee of Robert L. Helms Construction & Development Co. v. Southmark Corp.

with whom MICHAEL DALY HAWKINS and THOMAS, Circuit Judges, join, concurring in part and dissenting in part:

I agree with most of what is written in the majority opinion. However, while it may seem unduly captious to focus upon a few words here or there, I feel compelled to do so because I believe that those words are exceedingly important.

As the majority emphasizes, the use of the word “explicitly” in the clause, “we can’t determine with full confidence whether the plan explicitly resolves the question whether the option was an executory contract,” at page 704 of the opinion means that the plan itself must either describe the Southmark option by name or indicate that it refers to options, or must contain a definition of execu-tory contracts which includes options. That is an overly restrictive direction to the bankruptcy court. That court should remain free to consider such issues as whether the plan simply rejected all executory contracts, and whether at the time and place of its execution and approval that reference should be read to include this option contract.

Also, as the majority emphasizes, the phrase “(as described above)” in the clause “if the plan does not resolve…

Opinion by Judge KOZINSKI; Partial Concurrence and Partial Dissent by Judge THOMAS; Concurrence by Judge RYMER; Partial Concurrence and Partial Dissent by Judge FERNANDEZ.

Guided, or misguided, by Gill v. Easebe Enters. (In re Easebe Enters.), 900 F.2d 1417, 1419 (9th Cir.1990), the bankruptcy court below held that an option is an executo-ry contract. We took the case en bane to consider whether Easebe was correctly decided.

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Southmark, a Texas corporation, sold the Double Diamond Ranch in Nevada to the Double Diamond Ranch Limited Partnership, retaining an option to buy back part of the ranch. Southmark later filed for bankruptcy in the Northern District of Texas. As part of its chapter 11 reorganization plan it assumed various executory contracts by filing a Notice of Assumption; the plan provided that all executory contracts not listed were deemed rejected. See 11 U.S.C. § 1123 (b)(2). The Notice didn’t list the option to buy back the ranch, so it would have been deemed rejected if it was an executory contract. No one, however, raised the question in the Texas bankruptcy proceeding and the bankruptcy court there apparently did not have occasion to rule on the…

with whom MICHAEL DALY HAWKINS, Circuit Judge, joins, concurring in part and dissenting in part:

I concur in the majority’s holding that Gill v. Easebe Enters. (In re Easebe Enters.), 900 *707 F.2d 1417 (9th Cir.1990), should be overruled. For the reasons ably stated in the majority opinion, option contracts do not necessarily fit the traditional definitions of “ex-ecutory contracts,” nor can they always be construed as assets. That determination should be made on a case by case basis under the theory long propounded by Professor Countryman.

However, I join Judges Fernandez and Rymer in their concerns about the constraints placed on the bankruptcy court on remand. In addition to the issues identified by Judge Fernandez, the bankruptcy court should be allowed to examine any other issues presented by the parties or apparent to the court, such as the effect of Southmark’s failure to disclose the option in its bankruptcy, 1 the reversionary provisions of the plan, and whether Southmark is in fact the proper party. The majority, in my view, unnecessarily and improvidently precludes the bankruptcy court from these inquiries on remand.

There is, however, an additional aspect to the…

with whom

FERNANDEZ, MICHAEL DALY HAWKINS and THOMAS, Circuit Judges, join, concurring:

The bankruptcy court felt it had only to decide the legal question of whether the option was an executory contract and believed (correctly, at the time) that it was bound by Easebe to conclude “yes.” In re Easebe Enters., 900 F.2d 1417 (9th Cir.1990). Today, we erase Easebe from the books, correctly, in my view. Having done that, proceedings in the bankruptcy court go back to square one and everything else should remain open to the parties and the bankruptcy court to consider afresh under “Countryman” on remand. I therefore concur in the judgment.