Melcher

MEMORANDUM **

This bankruptcy dispute arises out of a state divorce action in which Jacqueline Melcher was ordered to sell a 3.75 acre property on Martha’s Vineyard (“Stonewall”) and split the proceeds with her ex-husband Terry Melcher. The Superior Court of California, Monterey County, ordered that Jacqueline accept a $12 million cash offer for Stonewall. Jacqueline did not want to lose Stonewall and appealed the order to the California Court of Appeal. The trial court granted her request for a supersedeas bond, fixing it at $7.24 million and requiring it to be posted within five days. Jacqueline did not post the bond. On June 28, 2001, twelve hours before escrow closed on the Stonewall sale, Jacqueline filed a voluntary Chapter 11 petition in the U.S. Bankruptcy Court for the Northern District of California. Because of the automatic stay, the sale could not proceed.

*456 During the next three-and-a-half years, various plans of reorganization were filed by Terry, Jacqueline, and the creditors’ committee, none of which were confirmed. In November, 2004, Terry died. In January, 2005, Jacqueline proposed a new plan of reorganization (“Plan”). The Plan provided that Stonewall would…