*1 938 case, Conversely, cases, in this jurisdiction ed as a court has assumed
ous this guidelines. did of merits the case and Beaumont not meet of in order reach extraordinary present v. does not defendant. See Clow Beaumont rule in favor construing appeal as and Urban case which Dept. Hous. demands United States of (9th Cir.1991) (as thus, we decline treat the Dev., 614, petition, 616 948 F.2d petition of jurisdiction appeal resolve for writ mandamus. suming subject matter defendant); appeal to treat the as a of Forster Because we decline of in favor merits case Barbara, 1146, jurisdiction lack mandamus re- County petition, 896 F.2d we v. Santa of Cir.1990) (9th jurisdiction district remand (ignoring quired 2 review the court’s 1147n. dispute, unre order. question of factual al because level, whether at court over
solved district timely appeal); of appellant notice filed V. States, 1506, 807 1507 v. F.2d Wolder United (9th Cir.1987) (“where jurisdictional CONCLUSION clearly question complex appeal and the is Generally, review a district court’s we will merit,” jurisdictional court will avoid without discretionary pendent of remand order state merits); Lehner v. question and rule on only upon petition for of man- claims writ States, 1187, F.2d 1189-90 United peti- An appeal damus. will be treated as (court Cir.1982) question of whether avoids extraordinary tion in cases. This case does money jurisdiction for exists over claims circumstances, present exceptional for not damages jurisdiction equitable over because treatment, such and we decline mandamus would not be claims clear merits jurisdiction. denied, 1039, affected), U.S. cert. APPEAL DISMISSED. (1983). Likewise, 1431, L.Ed.2d 790 S.Ct. Supreme jurisdiction has reserved Court questions al the case could alternative when
ly be on the merits favor resolved jurisdiction. Norton v.
party challenging Mathews, 2771, U.S. 96 S.Ct. (1976); 2775, Secretary L.Ed.2d Avrech, 677-78,
Navy v. 418 U.S. (1974). 3039, 3040, 41 S.Ct. L.Ed.2d 1033 ENTERPRISES, re LCO In Debtor.
Although jurisdictional in this question difficult, complex case is not or the district ALVARADO; Patrician by dismissing court did err the federal Inc.; Associates, LPC Alvarado remanding pendent claims and state claims II, Appellees, Phase juris finding an express personal without diction. WALSH, Trustee, Appellant. M. Edward Finally, fifth fails meet the Beaumont earlier, frequently guideline. noted As No. 92-15825. possesses the have held the district court Appeals, United States Court pendent discretion to decline exercise Ninth Circuit. jurisdiction. argument Beaumont’s district court mandated the federal Argued Submitted Oct. pendent jurisdiction rules exercise Decided Dec. process resolve the issue of service of does new, problems issues important not raise impression.'
of law first Org. Mari- National Reform Laws,
juana noted that 828 F.2d guidelines of test
where three the Bauman met, clearly appeal
were be treat- would *2 Darling, Goldberg,
Melanie M. Stinnett & MacDonald, Francisco, CA, appel- San for lant. James,
Barry Milgrom, Michael St. Rosen- blum, Bacigalupi, Francisco, Parish & San CA, appellees.
Recognizing that the situation was worsen-
ing
parties,
for both
re-
parties
relationship.
their
structured
agreed to a
leased
reduction
amount
rent,
space, a reduction in
and the execution
*3
TANG, TROTT and
Before:
long-term
respect
a new
lease. With
FERNANDEZ,
Judges.
Circuit
arrearage,
agreed
Lincoln
$175,496
$75,000
accept payment
years
over four
FERNANDEZ,
Judge:
Circuit
forgive the
and to
balance. The restructured
arrangement
lease
recorded
a
was
in.
ap-
appeal concerns the mechanics
This
.
plan and
11 disclosure statement and
distrib-
of 11 U.S.C.
plying
“greater
amount” test
plan was to
uted to LCO’s creditors. The
prepeti-
§
a
to determine whether
$200,000
by
funded
a
cash contribution from
pref-
a
to a landlord constitutes
and a new
LCO’s shareholders
investor.
question before us is whether
erence. The
Thereafter,
on
LCO
a
June
filed
hypothesize
bankruptcy court must
voluntary petition
reorganization
for
under
hypothetical chapter 7 trustee
whether a
Bankruptcy
11 of the
Code. The
lease, or
the court
whether
would assume
July
confirmed
1989.
was
on
its
on the fact that
must base
13,1989,
September
M.
On
Edward Walsh
actually
11
assumed
lease was
(“Trust-
appointed as
11
hypo-
proceedings.
conclude that
We
ee”)
powers
disbursing
with limited
to act as
analysis required
chapter 7
thetical
object
claims,
investigate
agent, to
and to
547(b)(5)1
§
actual
must be based on the
pursue
preferential payments
and
or
decision of
of the case and affirm the
facts
fraudulent transfers. The Trustee filed this
Bankruptcy Appellate Panel.
adversary
Lincoln on
proceeding against
No-
aside,
sought
to set
vember
He
BACKGROUND FACTS
547(b),
partial
filing of
prior
rent
made
Enterprises
in 1981 to
LCO
was formed
petition.
provide
warehousing and distri-
merchandise
summary judgment
moved for
Lincoln
and
bution
LCO’s business flourished.
services.
argued
prove
that the
not
Trustee could
years
expanded from
Over the next seven
improved
position,
Lincoln
within
its
500,000
25,000 square
foot
to a
warehouse
547(b)(5),
meaning of
as a matter
law.
square
facility. When
custom-designed
foot
bankruptcy court denied Lincoln’s mo
The.
customer,
largest
forced
its
it was
LCO lost
tion.
It held that
a material
there was
issue
operations.
its
scale back
LCO vacated
of fact as to whether a
space
and leased
from
warehouse
assumed the lease. In re
have
trustee would
(col-
Associates, Inc.
and Patrician
Alvarado
Enters.,
(Bankr.N.D.Cal.1
LCO
B.R. 188
“Lincoln”)
early
lectively
and
late 1988
990).2
Bankruptcy Appellate
Panel
five-year
lease with a
1989. LCO executed
interlocutory
granted
appeal
leave for
$25,000,
.an
monthly
approximately
rent
Enters.,
LCO
reversed.
B.R.
monthly
two
with
month-to-month leases
1992).
BAP
Cir.
$15,000.
$22,000
approximately
rents of
months,
Within
fell behind
a few
JURISDICTION AND STANDARD
paying
partial
It
the rent.
OF REVIEW
May
June,
April,
totaled
ments
which
$92,007.46,
$175,496
jurisdiction pursuant
BAP
about
was still owed
but
158(b).
months.
those three
to 28 U.S.C.
Our
jurisdiction
ground
not assert
All references to Code sections are to Title
on the
Lincoln could
indi-
of the United States Code unless otherwise
cated.
ordinary course
defense
of business
547(c)(2)
as a
issue
matter of law. That
appealed to the
not before
BAP and is
us.
bankruptcy
granted
2. The
court also
the Trust-
partial summary judgment
ee's cross-motion for
158(d).
premised
on U.S.C.
We are in
date of
Similarly,
good position
on
filing,
as the BAP to
the date of the
review the
a secured creditor’s
amount,
Thus,
claim is fixed in
bankruptcy
decision of the
court.
value of the
security as of that date can
novo
be ’ascertained
review de
court’s denial
and the claim
fully
will be either
partially
summary judgment.
Viewing the evidence
lessor, however,
secured.
The debtor’s
Trustee,
light
most favorable to the
position.
stands in a different
Although the
any genu-
must determine whether there are
amount of the debtor’s prepetition default
ine issues of material fact and whether the
may
under the
be fixed on
lease
the date of
correctly applied
court
the rele-
filing,
the status of the lessor’s
vant substantive law. See In re
En-
United
yet
from the estate is not
fixed.
(9th Cir.1991).
ergy
Corp., 944 F.2d
*4
That is because
position
the lessor’s
relative
depends
other creditors
on whether the
DISCUSSION
lease is assumed or
If the lease is
rejected.;
547(b)
Bankruptcy
Section
of the
assumed,
the lessor is entitled to prompt
Code
enables
Trustee to recover for the
payment
in
any
full of
default under the
benefit of
the estate certain
made
lease, and the debtor is
to continued
entitled
by a
days
debtor to a creditor within the 90
365(b).
property.
use of the
11 U.S.C.
If
preceding
bankruptcy.
A
rejected,
the lease is
the lessor is entitled to
preference only
is avoidable as a
if
possession
property
immediate
of his
and
payment improved
position
the creditor’s
holds an
unpaid
unsecured claim for the
rent.
compared
to other creditors of the same
Inn, Inc.,
630,
In re Elm
See
F.2d
633-
547(b)(5).
class.
U.S.C.
Section
(9th Cir.1991).
547(b)(5) provides that
may
the trustee
avoid
importantly,
More
in this ease the differ
any transfer of an interest of the
debtor
assumption
rejection
ence between
de
property:
termines
the outcome of the
ac
(5) that enables such creditor to receive
assumed,
tion.
the lease is
the debtor
more than such creditor would receive if—
1,1
any
365(b).
must
cure
default.
U.S.C.
(A) the case
were a case under
Thus, if
rent
had not been made
title;
7 of this
prepetition, they had to be
the time
(B)
assumption.
pay
LCO had
Lincoln
made;
the transfer had not been
(or
full
any
amount of rent
lesser amount to
agreed)
which Lincoln
prepetition
either
(C) such creditor
received
assumption.
at the time of
purposes
For
provided
such debt to
the extent
“greater
test,
amount”
Lincoln stands in
provisions of this title.
position
similar to that of a secured credi
section,
This
sometimes referred to as the
secured,
fully
tor.
If a creditor is
a prepeti
“greater
test, requires
amount”
the court to
tion
him
preferential
transfer to
is not
be
hypothetical chapter
construct a
7 case and
cause the secured creditor is entitled to 100%
determine what the creditor would have re
Ctr.,
of his claim. See In re
Fin.
World
Serv.
if
proceeded
ceived the case
chap
Inc.,
(9th
1987),
78 B.R.
241-42
Cir. BAP
Ehring,
ter
See In re
900 F.2d
(9th
aff'[d,
Cir.1988);
one-third of TROTT, concurring part in Judge, Reorga- Circuit page five of Plan of ments. On dissenting part: in nization, rejected Long Term LCO Lease, page it listed the lease but on seven It unfair that the Trustee seeks does seem Long Term Lease was as assumed. to “have his leased and his rent majority’s reading, rejected, then under the majority payments, too.” The is confident payments— right had no to the rent this and Lincoln never intended LCO proper- had a to the return its result, agree. I If Lincoln insisted that ty. provi- Reorganization contain a the Plan of my opinion, approach is to in the better protecting the sion 547(b)(5): liq- attack, § follow the test outlined preference from LCO and its ments analysis, though “the case were agreed to that uidation probably creditors would have
945
ness, rather,
'll
chapter
7 of this title.”
U.S.C.
it is the maximization of the
547(b)(5) (1988).
is,
Chapter
chap
liquidation
7 it
estate’s
for the
value
benefit
concedes,
ter 7'it must be. As the
the creditors.
consistently
liqui
courts have
held that the
The
Circuit’s decision in In
Sixth
re Tenna
analysis
dation
should be conducted as
547(b)(5)
good example
is a
of how
petition
bankruptcy
date the
is filed. See
applied.
majority briefly
The
discusses
Brown,
Clay
Palmer
Prods. Co. v.
297 U.S.
decision,
explanation
but I think a fuller
450, 450,
56 S.Ct.
ford
Nevertheless,
liens to the new lenders.
(Bankr.C.D.Cal.1989); 4 Collier on Bank
unsuccessful,
reorganization was
and ten
¶
(Lawrence
ruptcy
King,
547.08 547-42
P.
months later the case was converted to a
1989).
ed., 15th ed.
proceeding.
7 trustee
petition
the date
filed its
On
LCO
bank-
against
then
filed
action
ruptcy,
LCO’s Plan of
attacking
Internal Revenue Service
a tax
yet
been filed
confirmed. On that
payment
ninety days prior
made within
date,
required
LCO was not
to assume the
filing
the'
365(d)(1),
leases. Under
if the trustee did
critical
issue was the date on which the
days,
not assume the leases within 60
liquidation analysis should occur.
Therefore,
rejected.
leases would be deemed
original petition
If it was the date the
agree
with the
court that a
filed,
preference.
the tax
was not a
disputed issue of material
fact
remains:
If it
subsequent
was the date of the
adver-
hypothetical chapter
would a trustee
7 sary hearing,
prefer-
the tax
was a
reject
peti-
case assume or
the leases on the
intervening superpriority
ence because of the
tion date. See Walsh v. Lincoln Alvarado
liens.
(In
Enters.),
re LCO
116 B.R.
analy-
The Sixth Circuit held the
(Bankr.N.D.Cal.1990).
inquiry requires
This
filing
sis should occur as of the
date of the.
liquidation
of the leases’
value on
Tenna,
bankruptcy petition.
It too “vacuum,” analysis in a expenses in- 7 to be conducted including administrative that events, must, by excluding postpetition then into the during reorganization curred Congressional go. intention If Lincoln and LCO necessity, a we must show vacuum during reorganiza- being into the vacu- incurred wanted to avoid sucked that all debts expenses 547(b)(5), included. Administrative um of the Plan of tion be in all element in rent are a constant should have addressed some verge can be derived with proceedings by, LCO on the certainty, even when construct- degree of bankruptcy. liquidation.... ing Lincoln, majority muddles saves but
Id.
bright-line
rule
the statute.
Instead of
squared
majority’s opinion cannot be
evaluating potential preferences as of the
Tenna,
Tenna. Under
with In re
bankruptcy petition,
filing
date
filing
analysis must occur as of the
chapter 7
analysis
a new
majority clouds the
with
ex-
bankruptcy petition. As dis
date of the
Now,
ception.
postpetition
some
events will
yet
previously,
was not
bound
cussed
considered,
analysis
liquidation
and the
reject
leases on that date.
assume or
a later date which the
will be conducted on
Moreover,
majority’s analysis
“ac
appropriate. Analyzing hypo-
court deems
like the “actual results”
tual facts” looks
liquidation
enough
hard
thetical
rejected by
court.
argument
the In re Tenna
interjecting uncertainty as to the
without
analysis.
good
I think a
vacuum
date of that
Instead,
majority
reasoning
finds the
help
away
fog.
of this
might
clear
some
in Seidle v. GATX
of the Eleventh Circuit
(11th Cir.1985),
Leasing Corp.,
failed as of the occur See Gosch
date of the (In Finn), 86 B.R.
v. Burns re
(Bankr.E.D.Mich.1988) (rejecting Seidle be 547(b)(5) analysis
cause “must be under bankruptcy, and
taken as of the moment of date”), later, unspecified not some HUBBARD, William R. aff'd (E.D.Mich.1989), rev’d on other B.R. 123 Plaintiff-Appellant, (6th Cir.1990). grounds, F.2d 903 Sec ond, the Seidle court’s conclusion SHALALA, Secretary E. Donna improve position because creditor did its Services, Health and Human agreement entitled the credi postpetition Defendant-Appellee. preferential tor to all the does not apply present case. The debtor in No. 93-7011. promised pay its creditor and cure Seidle Appeals, United States Court court-approved to a all defaults Tenth Circuit. stipulation, which the describes as equivalent assumption of the leases. LCO’s Oct. However, agree LCO did not to cure all *9 assuming the defaults as a condition of leas fact, pro the Plan of
es. Lincoln waived and all claims
vided that May for overdue rents owed as of held join majority’s opinion be- cannot ignores
cause I think it the text of “equita- attempt in its to reach an