# Opposition Brief — Holywell Corp. v. Smith

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Opposition Brief
- **Published:** January 1, 1988
- **Citation:** 488 U.S. 850

## Text

NO. 88-80 .

in the

Supreme Court
of the
United States

OCTOBER TERM, 1988

HOLYWELL CORPORATION and
THEODORE B. GOULD,

Petitioners

Vs.

FRED STANTON SMITH, Trustee of the
Miami Center Liquidating Trust, and
THE BANK OF NEW YORK,

Respondents

BRIEF IN OPPOSITION TO PETITION
FOR WRIT OF CERTIORARI TO
THE UNITED STATES COURT OF
APPEALS FOR THE ELEVENTH CIRCUIT

HERBERT STETTIN, ESQUIRE
AmeriFirst Building Suite 2215

One S.E. Third Avenue

Miami, Florida, 33131

Telephone: (305) 374-3353

Attorney for Respondent

Fred Stanton Smith, as Trustee

of the Miami Center Liquidating Trust

Mie ee

QUESTIONS FOR REVIEW

1. Whether the Petition for Writ of Certiorari
is moot in light of the opinion of the United States
Court of Appeals for the Eleventh Circuit in Miami
Center Limited Partnership v. Bank of New York,
838 F.2d 1547 (11th Cir. 1988), which held the plan
of reorganization is substantially consummated and
no effective relief is available to the parties?

2. Whether the petitioners have standing to
maintain this appeal on behalf of Twin
Development Corporation?

3. Whether the Court of Appeals for the
Eleventh Circuit and the United States District
Court correctly applied the doctrine of equitable
estoppel?

TABLE OF CONTENTS

QUESTIONS PRESENTED ........... Sp aihwe aie

ppt Bi ges Dr ra

WAR UP RFR RRGE RAM 56 ccc scccceencas

STATUTUSe S MAP TTS oc ice en sssabenya

ARGUMENT

L.

THE DISTRICT COURT’S APPLICATION
OF THE DOCTRINE OF EQUITABLE ES-
TOPPEL WAS ENTIRELY PROPER ...

A. THE DISTRICT COURT HAD
AUTHORITY TO BASE ITS DECI-
SION ON THE DOCTRINE OF
EQUITABLE ESTOPPEL.........

1. A district court reviewing a
bankruptcy court decision of a
contested matter has discretion
to consider an issue raised for
the first time on appeal .......

ii

PAGE

TABLE OF CONTENTS—(Continued)

B. THE PETITIONERS ARE EQUITA-
BLY ESTOPPED FROM CLAIMING
THE FUNDS ALLEGEDLY DUE
TWIN ARE NOT ASSETS OF THE
oe ee RO See SG eras

1. The debtors’ statements, -
conduct and acquiescence, as
well as Twin’s conduct and
acquiescence regarding the
proceeds from the sale of the
Washington properties caused
the bankruptcy court and the
creditors to believe the funds
were “owned” by Holywell as
dividends and were available
Op pay Greareers ..............

2. Gould, Holywell and Twin
acted willfuly or negligently
in misleading the bankruptcy
court and creditors with
respect to the Washington
a a Fe wc a's cc sess

3. The liquidating trustee and
creditors relied upon the
petitioners’ representations and
conduct to their detriment.....

ili

PAGE

10

1i

13

15

I.

IIT.

IV.

CONCLUSION

TABLE OF CONTENTS (Continued)

THE ARGUMENT THAT TWIN WAS
SUBSTANTIVELY CONSOLIDATED
WITH THE DEBTORS AND THAT ITS
ASSETS WERE SEIZED WITHOUT
DUE PROCESS IS FRIVOLOUS AND
PEPE eV Tee eee

THE PETITION FOR WRIT OF
CERTIORARI IS MOOT............

A. THE EFFECT OF GRANTING THE
PETITION FOR WRIT OF CER-
TIORARI WOULD BE A MODIFICA-
TION OF THE SUBSTANTIALLY
CONSUMMATED PLAN, WHICH IS
Oe ee

THE PETITIONERS LACK STANDING
TO RAISE THE CLAIMS ASSERTED
IN THE PETITION FOR WRIT OF
GHEE 6S Swed be RWas doce ccee

APPENDIX

iv

PAGE

17

18

20

21

25

TABLE OF AUTHORITIES
Case Page

Baker v. Carr,
ee ee, kin py cca Ves bbs oe we 22

Central States v. Central Transport, Inc.,
TUB LS Eo LS errr 19

Claybrook Driling Co. v. Divanco, Inc.,
336 F.2d 687 (10th Cir. 1964) ............06. 21

Highland Ins. Co. v. Trinidad & Tobago,
739 F.2d 536 (11th Cir. 1984) ............... 10

In re AOV Industries, Inc.,
792 F.2d 1140 (D.C. Cir. 1986)............... 19, 20

In re AT of Maine, Inc.,
56 B.R. 55 (Bkrtcy. D. Me. 1985)............. 21

In re Baldwin,
70 BR. 612 Oth Cir. B.A.P. 1967) ........... 9

In re Blumer,
66 B.R. 109 (9th Cir. B.A.P. 1986), affirmed,
826 F.2d 1069 (9th Cir. 1987) ............... 10, 19

In re Deak & Co., Inc.,
63 B.R. 422 (Bkrtcy. S.D. N.Y. 1986) ......... 23

In re Garfinkle,
672 F.2d 1340 (11th Cir. 1982) .............. 10

In re Golden Plan of California, Inc.,
37 BR. 167 Gertey. Ca. 1964)... 2.212022 0ee. 23

TABLE OF AUTHORITIES—(Continued)

Case Page
In re Golden Plan of California, Inc.,

820 F.2a TOS Gt Cle. 1GGG) on ccccccccccces 19, 23
In re Heatron,

34 B.R. 526 (Bkrtcy. W.D. Mo. 1983) ......... 21
In re Information Dialogues, Inc.,

662 F.2d 476 (th Cir. 1961) ...... ccc eccces 21
In re Johns-Manville Corp.,

68 B.R. 618 (Bkrtcy. S.D. N.Y. 1986) ......... 22
In re Kenitra, Inc.,

64 B.R. 841 (9th Cir. B.A.P. 1986) ........... 10
In re Koch,

14 B.R. 64 (Bkrtcy. Kan. 1981) .............. 23
In re Matos,

790 F.2d 664 (lith Cir. 1966) ........cccceee 19

In re Northampton Corp.,
OD Tim ee Ges BOs BODE occ cccccccccccccs 21

In re Peoples Bankshares, Ltd.,
68 B.R. 536 (Bkrtcy. N.D. Iowa 1986)......... 23

In re Revere Copper and Brass, Inc.,
gs S'mores ee 19

In re Roberts Farms, Inc.,
652 F.2d 768 (th Cir. 1961) ......cccccccces 21

vi

TABLE OF AUTHORITIES—(Continued)
Case

In re Saint Louis Freight Lines, Inc.,
45 B.R. 546 (Bkrtcy. E.D. Mich., N.D. 1984) ...

In re Seminole Park & Fairgrounds, Inc.,
505 F.2d 1011 (5th Cir. 1974) ...............

In re Sun Country Dev., Inc.,
764 F.2d 406 (Sth Cir. 1985) ................

In re Sun Valley Ranches, Inc.,
823 F.2d 1373 (9th Cir. 19867) ...............

In re Wallace,
66 B.R. 834 (Bkrtcy. E.D. Mo. 1986)..........

In re Windmill Farms, Inc.,
70 B.R. 618 (9th Cir. B.A.P. 1987) ...........

In re Zerodec Megacorp, Inc.,
60 B.R. 884, on remand 59 B.R. 272
re

Irvine v. Cargill Investor Services, Inc.,
799 F.2d 1461 (11th Cir. 1986) ..............

Johnson v. Fairco Corp.,
Ge es Se ED dc ccccccciveccocs

Lord v. Local Union No. 2088,
481 F.Supp. 419, affd in part, rev'd in part
646 F.2d 1057, rehearing denied,
654 F.2d 723 cert. denied, 458 US 1160.......

TABLE OF AUTHORITIES—(Continued)
Case Page

Matter of Andy Frain Services, Inc.,
798 F.2d 1113 (7th Cir. 1983) ............... 19

Matter of Combined Metals Reduction Co.,
Be ae NS OED cc cccsccccccccns 19

Matter of King Resources Co.,
651 F.2d 1326 (10th Cir. 1980) .............. 19

Matter of Louisiana Indus. Coatings, Inc.,
53 B.R. 464 (D.C. La. 1985) ....... kanes a a a 9

Miami Center Limited Partnership v.
The Bank of New York,
59 B.R. 340 (S.D. Fl. 1986), dismissed as moot,

838 F.2d 1547 (11th Cir. 1988) .............. 3, 15,
18, 20, 25
Minerals and Chemicals Philip Corp. v.
Milwhite Co.,
414 F.2d 428 (Sth Cir. 1969) ................ 10

Richards v. Dodge,
150 So.2d 477 (Fla. App. 1963) .............. 10

Rite-Research Improves Environment, Inc. v. Costle,
78 F.R.D. 321, rev'd, 650 F.2d 1312 .......... 21

R.T. Vanderbilt Co. v. OSHA Rev. Comm.,
708 F.2d 570 (lith Cir. 1983) ............... 22

State ex rel. Watson v. Gray,
I, ED oc cccncccccscacnececs 10

viii

TABLE OF AUTHORITIES—(Continued)
Case Page

Travelers Indem. Co. v. Swanson,
662 F.2d 1098 (llth Cir. 1981) .............. 11

Valley Forge Christian College v. Americans United
for Separation of Church and State, Inc.,
102 S. Ct. 752, 768, _._. US. __,

70 L.Ed. 2d 700 (1962) ......... cece renee 22
STATUTES:*
BE Wee I UD ab oS ic cccccccscccccscsves 17
Se ey IEE wieeccccbsccesessnsesesens 12
11 U.S.C. Section 541(a)..............000008- ‘4, 17, 22
BE WR, GOTO BRI vc ccc ct cccvcccsdsces 21
Se RE IE Fo dde cb oc et ccccverescnss 12
BD CEG, BTN FO occ ce ccccccccccsceces nea 8
BE Ge MN wesc crcccsscccccccesies 6, 8
Pi ED danas ncdceccccecccessebone 8

*The statutes have been printed in the appendix to this
brief.

STATEMENT OF THE CASE

Petitioners Holywell Corporation (“Holywell”) and
Theodore B. Gould (“Gould”) are two of five debtors! who filed
voluntary petitions under Chapter 11 in August, 1984. The
filing of these bankruptcy petitions followed the institution
of foreclosure actions by Respondent Bank of New York
(“‘bank’’) after the debtors defaulted on their obligations to
the bank. The bank had financed construction of the “Miami
Center Project,” a hotel and office complex in Miami with
a parking garage and shopping arcade (a5).?

Petitioner Gould is the sole shareholder and president
of Petitioner Holywell, which in turn is the sole shareholder
of Twin Development Corporation (“Twin”). In addition,
Gould is the president, director and sole agent of Twin (a6;
A 1).

On June 23, 1983, Holywell pledged, inter alia, Twin’s
stock to the bank to secure Holywell’s guaranty of the bank’s
construction loans to Holywell. Upon the debtors’ default of
their obligations to the bank and the resulting bankruptcy.
Twin’s stock became the “unfettered” property of the bank
under the terms of the agreement between the bank and
Holywell (a6).

Prior to the bankruptcy of its sole stockholder and its
president, Twin had entered into a contract to sell real and

‘Debtors Miami Center Corporation, a wholly owned subsidiary of
Holywell, Chopin Associates, a partnership in which Gould and Miami
Center Corporation are the sole general partners, and Miami Center
Limited Partnership, a limited partnership in which Gould and Miami
Center Corporation are the general partners, did not appeal the bankruptcy
court’s order which is the subject of this appeal.

*Petitioners’ appendix will be referred to as (a___). Respondent
liquidating trustee’s appendix will be referred to as (A___).

personal property owned by Twin and four limited
partnerships, all controlled by petitioners Gould and Holywell
(a6; a25). On October 22, 1984, the bankruptcy court entered
an order upon motion of Holywell and Gould authorizing and
approving the sale of this property, known as the Washington
properties (a25). The bankruptcy court ordered Holywell and
Gould to consummate the sale and to segregate the net
proceeds due Holywell and Gould until further court order
(a26). Gould testified during the course of the bankruptcy
proceedings that Twin’s share of the sale proceeds “has to
go to Holywell as dividends” (a 10). In Gould and Holywell’s
motion filed in the bankruptcy court to authorize and approve
the sale of Twin’s Washington properties, the petitioners
represented that

Consummation of the transaction proposed herein
is in the best interest of creditors in these
proceedings in that immediate cash infusion from
such sale which inures to Holywell and Gould will
provide the Debtors with capital much needed as
an essential part of the reorganization sought in
these proceedings (emphasis added) (A 4).

Following the sale of the Washington properties, the
bankruptcy court ordered Gould and Holywell to cause the
net proceeds received by Twin, Holywell and Gould from the
sale to be deposited into a segregated account, subject to
further court order (a17-19). Neither the petitioners nor Twin
appealed. In fact, Holywell and Gould deposited all funds
received as sale proceeds.

Thereafter, the bankruptcy court entered a cash collateral
order whereby all of the funds deposited by the petitioners
and Twin were deemed cash collateral of the bank (A 6).
Again, neither the petitioners nor Twin, which the petitioners
entirely controlled, appealed that order.

Subsequently, the bank and the five debtors submitted
proposed plans of reorganization. The bank’s plan was funded
in part by this cash collateral—the entirety of the proceeds
from the sale of the Washington properties (a6-7). That aspect
of the plan was revealed in the bank’s disclosure statement
(A 14).

The Holywell disclosure statement made it clear to the
bankruptcy court and all creditors that the cash proceeds
derived from the sale of the Washington properties accruing
to Twin would be available to pay creditors (A 10-13; a10).
The petitioners also filed certificates with the bankruptcy
court regarding their plans of reorganization in which the
petitioners stated the funds due Twin from the sale would
be used to pay creditors (a10).

The creditors overwhelmingly approved the bank’s plan,
and the bankruptcy court confirmed the bank’s Amended
Consolidated Plan of Reorganization, which expressly
included the entire proceeds from the sale of the Washington
properties. The United States District Court for the Southern
District of Florida affirmed the order of confirmation, as
amended after remand, and the United States Court of
Appeals for the Eleventh Circuit dismissed the five debtors’
appeal as moot because no stay was in effect,? the plan was
substantially consummated and the court could not grant
meaningful relief. Miami Center Limited Partnership v. The
Bank of New York, 838 F.2d 1547 (11th Cir. 1988). In June,
1988, the five debtors filed petitions for writs of certiorari
and mandamus in this Court, case numbers 87-1988 and
87-1989, directed to the Eleventh Circuit and the bankruptcy

*The bankruptcy court ordered a stay of the implementation of the plan
upon the posting of a $140 million bond. There were over 400 creditors
and claims of approximately $350 million. Although the district court
reduced the bond to $50 million, effective for ninety days, the debtors did
not post a bond and the plan became effective on October 10, 1985.

court. Respondent Fred Stanton Smith, as trustee of the
Miami Center Liquidating Trust (“liquidating trustee’’), and
the bank have filed briefs in opposition to those petitions,
and the matters pend before the Court. Twin never objected
to the bank’s plan and never appealed the order of
confirmation.

The plan provided for the substantive consolidation of the
debtors and the creation of the Miami Center Liquidating
Trust, which was funded by all of the debtors’ 11 U.S.C.
Section 541(a) defined assets (A 17), and by the Washington
proceeds, including the sums due Twin from that sale.

Several months after the plan was confirmed and
implemented, and with no stay in effect, Gould filed an
emergency motion with the bankruptcy court for clarification
regarding the ownership and control of two United States
Treasury Bills held in the name of Twin, account no.
0002842207 at Florida National Bank of Miami, and having
a par value of $13,949,000. The bankruptcy court entered
an order in which it determined that the liquidating trustee
was the sole party entitled both to direct Florida National
Bank of Miami to cash the treasury bills at issue, and to
distribute the funds in accordance with the terms of the
confirmed plan (al5-16). Gould and Holywell appealed that
order. Twin did not. The district court affirmed (see opinion
at a5), as did the Eleventh Circuit (see opinion at a3), which
also denied Gould and Holywell’s petitions for rehearing and
rehearing en banc (see opinion at al). The Eleventh Circuit,
in affirming the district court, held:

The district court found that appellants were
equitably estopped with respect to their claim to
the proceeds of Twin Development Corporation’s
assets. We find no error in the district court’s
analysis, and the record abundantly supports the
district court’s findings. Appellants’ other claims
on appeal are frivolous (a3).

Twin never appealed the bankruptcy court’s order regarding
the proceeds from the sale of the Washington properties held
at the Florida National Bank of Miami, nor did it seek to
intervene in the appeal which was filed. Lastly, Twin is not
a party to the instant petition for writ of certiorari.

SUMMARY OF THE ARGUMENT

The district court correctly applied the doctrine of
equitable estoppel, for the debtors repeatedly represented to
the bankruptcy court and to their creditors that Twin’s
portion of the proceeds from the sale of the Washington
properties would be available to pay creditors of the debtors.
The failure of the bank and the liquidating trustee to plead
the doctrine of equitable estoppel in response to Gould’s
emergency motion is inconsequential, for under the
applicable Bankruptcy Rules no response, including
affirmative defenses, was required absent a cuurt order, and
there was no court order to do so. Moreover, the bank
thoroughly briefed the elements of the doctrine of equitable
estoppel in its answer brief filed with the district court. That
court had discretion to consider all issues presented in the
record.

The petitioners’ arguments regarding substantive
consolidation are entirely irrelevant in light of the Miami
Center Liquidating Trust’s right to Twin’s share of the funds,
as conferred in the confirmed plan.

The petitioners lack standing to maintain this appeal.
They seek to enforce the alleged rights of a third party rather
than their own rights, in derogation of well settled law. More
importantly, the Miami Center Liquidating Trust, not
Holywell, now controls Twin’s stock in accordance with the
plan of reorganization.

Lastly, this petition for writ of certiorari is moot in light
of the fact that, as no stay was in effect, the plan has been
implemented and the “Twin monies” were commingled with
other cash and used to pay creditors pursuant to the plan.
No effective relief is available to the petitioners who would
not be due the money in any event, unless and until the plan
provisions have been carried out.

ARGUMENT
I.

THE DISTRICT COURT’S APPLICATION OF
THE DOCTRINE OF EQUITABLE ESTOPPEL
WAS ENTIRELY PROPER

The district court’s application of the doctrine of equitable
estoppel was proper under the circumstances of the appeal.

A.

The District Court held authority to base its
decision on the doctrine of equitable estoppel

The petitioners’ contention that the district court could
not premise its ruling on the doctrine of equitable estoppel
because estoppel was not pled at the bankruptcy court level
is without merit, for Gould’s request for clarification as to
the ownership rights to the proceeds in Twin’s account at
Florida National Bank of Miami was brought as an
emergency motion to which no response was mandated except
as required by court order.

Gould’s emergency motion was not brought as an
adversary proceeding. His request for clarification was
governed by Bankruptcy Rule 9014, which provides:

CONTESTED MATTERS

In a contested matter in a case under the Code not
otherwise governed by these rules, relief shall be
requested by motion, and reasonable notice and
opportunity for hearing shall be afforded the party
against whom relief is sought. No response is
required under this rule unless the court orders an
answer to a motion. The motion shall be served in
the manner provided for service of a summons and
complaint by Rule 7004, and, unless the court
otherwise directs, the following rules shall apply:
7021, 7025, 7026, 7028-7037, 7041, 7042, 7052,
7054-7056, 7062, 7064, 7069, and 7071. The court
may at any stage in a particular matter direct that
one or more of the other rules in Part VII shail apply.
An entity that desires to perpetuate testimony may
proceed in the same manner as provided in Rule
7027 for the taking of a deposition before an
adversary proceeding. The clerk shall give iistice to
the parties of the entry of any order directing that
additional rules of Part VII are applicable or that
certain of the rules of Part VII are not applicable.
The notice shall be given within such time as is
necessary to afford the parties a reasonable
opportunity to comply with the procedures made
applicable by the order. 11 U.S.C. Section 9014
(emphasis added).

The bankruptcy court never required the bank or the
liquidating trustee to answer the motion, nor did the court
direct that any of the other rules contained in Part VII of
the Bankruptcy Rules be made applicable to the proceeding.

The petitioners complain that the Eleventh Circuit, by
affirming the district court, “has vitiated rules of procedure
promulgated by this Court and significantly departed from

accepted standards of review” (petition for writ of certiorari,
p.21). The only aspects of the law “vitiated” by the
petitioners’ argument are the rules governing bankruptcy
proceedings, for in their analysis the petitioners entirely
ignore the Bankruptcy Rules. Gould filed an emergency
motion, not an adversary complaint,‘ and motions are
governed by Bankruptcy Rule 9014. Rule 9014 incorporates
a number of rules relating to adversary proceedings, but it
does not include Rules 7008 or 7012, which would have
required the liquidating trustee or the bank to file a
responsive pleading containing affirinative defenses. This
specific exclusion is consistent with Rule 9014’s express
provision that no formal response is required unless the court
orders one. Notably, the petitioners do not argue that
Bankruptcy Rule 9014 is unconstitutional. They simply
ignore it and its effect.

The bankruptcy court did not order the filing of a response
to Gould’s emergency motion, nor did that court make any
of the other Bankruptcy Rules applicable. In light of these
uncontroverted facts, the petitioners cannot assert in good
faith that the failure of the liquidating trustee to file a
responsive pleading containing the affirmative defense of
equitable estoppel prevented the district court from basing
its decision on that theory. The petitioners entirely avoid
reference to the Bankruptcy Rules in their analysis of this
question, relying instead on Rule 52(a) of the Federal Rules
of Civil Procedure, and cases that have no applicability to
these facts.

The bank analyzed the elements of equitable estoppel in
detail in its answer brief to Gould and Holywell’s appeal of

“Rule 52(a) of the Federal Rules of Civil Procedure, relied upon by the
petitioners to support their claim that the district court lack authority
to base its decision on the doctrine of equitable estoppel, is applicable to
adversary proceedings, not motions. See 11 U.S.C. Section 7052.

the bankruptcy court’s order (A 19-39). The petitioners ignore
this fact as well. The district court properly relied on the
factors raised in the bank’s answer brief to support its
application of equitable estoppel. The decisions of the
bankruptcy court, district court and Eleventh Circuit should
be left undisturbed.

B.

A district court reviewing a bankruptcy court
decision of a contested matter has discretion to
consider an issue raised for the first time on appeal

A number of courts have held that a reviewing court has
discretion to consider for the first time an issue not expressly
raised before the bankruptcy court.

In the Ninth Circuit, a bankruptcy appellate panel has
held it is not precluded from considering an issue not raised
before the bankruptcy court where such consideration is
determinative of the outcome of the appeal. Jn re Windmill
Farms, Inc., 70 B.R. 618 (9th Cir. B.A.P. 1987). Another court
has held that where refusal to consider an issue raised for
the first time on appeal will result in a miscarriage of justice,
its consideration is appropriate. Matter of Louisiana
Industrial Coatings, Inc., 53 B.R. 464 (D.C. La. 1985). In
addition, an appellate court may also consider an issue not
raised before the bankruptcy court where the issue appears
in the record, or sufficient facts have been pled so that the
debtor is appraised of the issue. See In re Baldwin, 70 B.R.
612 (9th Cir. B.A.P. 1987); Johnson v. Fairco Corp., 61 B.R.
317 (N.D. Ill. 1986); and Jn re Zerodec Megacorp, Inc., 60 B.R.
884, on remand, 59 B.R. 272 (E.D. Pa. 1985).

The record below, replete with references to the
petitioners’ conduct, more than adequately put the petitioners
on notice of the issue on which the district court based its

decision. More importantly, that record is clear that the
district court properly exercised its discretion in this case,
as a substantial miscarriage of justice would otherwise have
resulted. See In re Blumer, 66 B.R. 109 (9th Cir. B.A.P. 1986);
In re Kenitra, Inc., 64 B.R. 841 (9th Cir. 1986), This is
particularly true where the Bankruptcy Rules not only do
not require a written response to a motion, they also do not
require written affirmative defenses, such as equitable
estoppel.

B.

The petitioners are equitably estopped from
claiming the funds allegedly due Twin are not
assets of the trust

All of the elements of equitable estoppel are present in
this case. The petitioners do not dispute what constitutes the
essential elements of an equitable estoppel:

1. words, acts, conduct or acquiescence by the
party to be estopped that have the effect of
misrepresenting material facts;

2. such words, acts, conduct or acquiescence by the
party to be estopped are willfull or negligent; and

3. the other party relies in good faith on such
words, acts, conduct or acquiescence, and is harmed
as a result of that reliance.

In re Garfinkle, 672 F.2d 1340, 1347 (11th Cir. 1982), citing
Minerals & Chemicals Philip Corp. v. Milwhite Co., 414 F.2d
428 (5th Cir. 1969); Richards v. Dodge, 150 So.2d 477 (Fla.
App. 1963); and State ex rel. Watson v. Gray, 48 So.2d 84 (Fla.
1950); see also Irvine v. Cargill Investor Services, Inc., 799
F.2d 1461 (11th Cir. 1986); Highland Ins. Co. v. Trinidad &

10

Tobago, 739 F.2d 536 (11th Cir. 1984); and Travelers Indem.
Co. v. Swanson, 662 F.2d 1098 (11th Cir. 1981). Each one of
these elements is present in this case.

1.

The debtors’ statements, conduct and acquiescence,
as well as Twin’s conduct and acquiescence
regarding the proceeds from the sale of the
Washington properties caused the bankruptcy court
and the creditors to believe the funds were “owned”
by Holywell as dividends and were available to pay
creditors

Prior to filing the emergency motion, the debtors and
Twin led all of the creditors and the bankruptcy court to
believe the funds would be available to pay creditors of the
debtors.

First, Gould and Holywell represented in their 1984
motion to approve the sale of the Washington properties that
the transaction would result in an “immediate cash
infusion. . . . which inures to Holywell and Gould [which]
will provide the Debtors with capital much needed as an
essential part of the reorganization sought in these
proceedings” (emphasis added) (A 4). The petitioners now
argue that this statement excluded funds due Twin, yet this
contention contradicts other statements of Gould and
Holywell. In that same motion, the petitioners sought an
order “‘authorizing and approving the sale by Holywell and
Gould of certain real and personal property owned by
Holywell and Gould as partners and stockholders in
Twin. . . .” (emphasis added) (A 2).

In addition, the district court found that prior to
confirmation of the bank’s plan, Holywell submitted a
disclosure statement and a proposed plan of reorganization

ll

which made it “manifestly” clear to the bankruptcy court
and all creditors that these funds would be available to pay
creditors (10a). The district court also found that Holywell
and Gould filed certificates with the bankruptcy court
regarding their proposed plans which revealed that funds in
excess of $14 million, including Twin’s proceeds from the sale
of the Washington properties, would be available to “quench”
creditors’ claims (10a). The district court also relied upon
statements made by Gould, who testified that Twin’s share
of the Washington sale proceeds “had to go to Holywell as
dividends” (10a). It is important to note that his testimony
was given during a Rule 2004 examination immediately after
the Washington sale.

The district court went on to cite additional findings with
respect to the petitioners’ misrepresentations:

In addition to these express representations, Gould
and Holywell acquiesced in the Bank’s justifiable
presumption that Twin’s proceeds from the
Washington properties would be included within
the debtors’ estates. For example, the bankruptcy
court directed Holywell to deposit into a segregated
account any net funds payable to Twin from the sale
of the Washington properties. Neither Gould nor
Holywell [nor Twin] appealed this order by the
bankruptcy court, but rather tacitly accepted the
order of the court. Moreover, after the Bank moved
for a determination that all funds, including the
Twin proceeds, were cash collateral subject tw the
Bank’s lien, the bankruptcy court ordered that the
proceeds constituted ‘cash collateral as defined in
Section 363 of the Bankruptcy Code’. Neither Gould
nor Holywell [nor Twin] took appeal from this order.

Subsequently, the Bank filed its proposed plan of
reorganization, which directed that the proceeds

12

from the Washington properties attributable to
Twin be incorporated with funds in the Miami
Center Liquidating Trust and serve as a font for
permissible claims against the debtors’
estates. ...

In totality, the express statements made by Gould
and Holywell, amalgamated with their conduct and
acquiescence respecting the availability of Twin’s
proceeds from the sale of the Washington
properties, results in the conclusion that their
representations caused the Bank to believe in, and
rely on, the existence of a certain state of things:
namely, that the Twin funds could be applied to
creditors’ claims against the liquidation fund
established by the bankruptcy court. Accordingly,
the first element of estoppel is satisfied (10-11a).

2.

Gould, Holywell and Twin acted willfully or
negligently in misleading the bankruptcy court and
creditors with respect to the sale prcveeds

The district court correctly found that the second element
of equitable estoppel was also met:

There can be no doubt that Holywell and Gould
were, at the very least, negligent in not informing
the Bank prior to this motion before the bankruptcy
court that it did not intend to allow Twin’s proceeds
to be applied to creditors’ claims. In point of fact,
there is a strong inference stemming from
Holywell’s disclosure statement, the appellants’
proposed plan of reorganization, Gould and
Holywell’s statement that the sale of the
Washington properties would be beneficial to

13

creditors, and Gould’s testimony, that the actions
of Gould and Holywell were willful. In any event,
it seems indisputable that Gould and Holywell
failed to conduct themselves in a reasonable
manner; by neglecting to object to the numerous
orders of the bankruptcy court establishing the
propriety of applying Twin’s proceeds to creditors’
claims, and by concealing from the Bank their true
intention to thwart such a use of the proceeds if at
all legally possible, the appellants evidenced the
requisite intent under equitable estoppel (12a).

The facts go beyond those relied upon by the district court
to support equitable estoppel in this case. In their initial brief
on the appeal to the district court from’ the August 8, 1985
order of confirmation, the debtors stated:

Holywell and Gould also had equity participations
in limited partnerships that owned three office
buildings in the District of Columbia and Virginia
[the Washington properties at issue]. The
partnerships sold those office buildings for an
aggregate price in excess of $100,000,000. The sales
were closed on December 31, 1984 and January 5,
1985. Holywell and Gould realized approximately
$32 million from these sales (case no. 85-3225-CIV-
Aronovitz) (emphasis added).

Clearly, when the petitioners were atiacking confirmation
they did not acknowledge, as they do now, that Twin had any
genuine participation in the $32 million.

The petitioners claimed in their brief to the district court
in their appeal from the Order on Emergency Motion for
Clarification that they “raised vociferous objections as soon
as it became clear in January 1986 how the Liquidating
Trustee planned to use the Twin funds” (Appellants’ Brief,

p. 30). That statement belies the facts. The bank’s plan,
served on the petitioners in the first part of 1985, states the
balance of the Washington Proceeds will be available for
distribution to the creditors (A 17). In addition, the November
22, 1985 report of the Liquidating Trustee, which was
approved by order of the bankruptcy court, lists these funds
as an asset of the trust. Neither the petitioners nor Twin
appealed that order. Lastly, the debtor-petitioners never
properly took issue with the plan provision regarding the
Washington proceeds. In the bankruptcy court’s findings and
conclusions contained in the order of confirmation on remand,
the court found that the proceeds from the sale of the
Washington properties, some $32 million, were the bank’s
cash collateral to be used to fund the trust and pay the
debtors’ creditors (A 6-9). The district court affirmed those
findings, Miami Center Limited Partnership v. The Bank of
New York, 59 B.R. 340 (S.D. Fla. 1986), and specifically noted
the plan used “the proceeds from the sale by the debtors of
certain realty owned by them in Washington, D.C.” 59 B.R.
at 345. The Eleventh Circuit held the debtor/petitioners’
appeal was moot, as the plan had been substantially
consummated and the court could not fashion effective relief.
Miami Center Limited Partnership v. The Bank of New York,
838 F.2d 1547 (11th Cir. 1988). Twin never objected to the
plan, never appealed from the order of confirmation, and never
sought to intervene. That inaction is fatal to this proceeding.

3.

The liquidating trustee and creditors relied upon the
petitioners’ representations and conduct to their
detriment

The bankruptcy court, the creditors, and later the
liquidating trustee all relied to their detriment upon the
petitioners’ conduct and representations as to the use of the
sale proceeds. The district court found that because of the

15

debtors’ representations and conduct, the bank included the
sale proceeds in its plan for distribution to creditors (12-13a).
The district court concluded that the petitioners’ statement
that the sale of the Washington properties would accrue to
the ultimate benefit of creditors with its cash infusion into
the debtors’ estates was relied upon by the bank in deciding
not to object to the transaction (al2). The same could be said
for all creditors who voted in favor of the bank’s plan. In
addition, the district court found that the bank relied on
Holywell’s disclosure statement, the petitioners’ failure to
complain about the part of the bank’s plan in question and
Gould’s testimony, “all of which suggested expressly or
implicitly that Twin’s share of the proceeds from the sale of
the Washington properties was available for payment to
creditors” (al2-13). Again, the same statement regarding
reliance could be said to apply to all creditors. Even more
importantly, neither the petitioners nor Twin ever appealed
the cash collateral order, which deemed the entirety of the
sale proceeds to be the bank’s cash collateral. In reliance on
the petitioners’ conduct, the bank funded the plan, in part,
with the sale proceeds (its cash collateral), and the creditors
voted for that plan. The plan was implemented in 1985, and
the liquidating trustee has used the Twin proceeds to pay
creditors since that date.

The liquidating trustee, the bankruptcy court and all of
the creditors have relied to their detriment on the petitioners’
representations. The petitioners are estopped from changing
the story at this stage of the proceedings.

16

Il.

THE ARGUMENT THAT TWIN WAS
SUBSTANTIVELY CONSOLIDATED WITH
THE DEBTORS AND THAT ITS ASSETS
SEIZED WITHOUT DUE PROCESS IS
FRIVOLOUS AND IRRELEVANT

The petitioners argue that the inclusion of the
Washington proceeds in the plan is the equivalent of
substantively consolidating Twin with the five debtors and
that the inclusion of the Washington proceeds constitutes a
seizure of property without due process. These arguments
have no merit whatever in light of the fact that early in the
bankruptcy proceedings Gould testified the funds in question
are dividends due Holywell’s estate, and all of Holywell’s
Section 541(a) defined assets became assets of the Miami
Center Liquidating Trust upon confirmation of the plan.

The plan, as confirmed, did not substantively consolidate
Twin with the debtors. There is no order of such substantive
consolidation. The plan simply provided that the funds in
question would become an asset of the trust available to pay
creditors of the debtors.

No other assets of Twin, if there are any,’ were
consolidated with the debtors’ assets, “‘substantively”’ or
otherwise. Substantive consolidation simply never happened,
either as provided in 11 U.S.C. Section 105, or in any other
way. The district court found that there was no substantive
consolidation, for ““Twin’s assets and liabilities, with the
exception of the proceeds from the sale of the Washington

‘In its Schedule to its Statement of All Liabilities of Debtor, Holywell
lists itself as the 100% stockholder of Twin. That schedule does not list
any of Twin’s liabilities. Rather, it lists Twin’s value at $13,210,000—the
amount of the Washington proceeds payable to Twin (A 28).

17

properties, remained wholly intact under the plan of
reorganization” (al3).

There has been no taking of a third party’s property
without due process, as the property in question (the
Washington proceeds), as petitioner Gould testified, ““had to
go to Holywell as dividends” (al0). Thus, these funds,
although technically earmarked as belonging to Twin, in fact
belonged to Holywell by Gould’s own admission. It is
important to note that Gould, the sole shareholder of
Holywell, was also the president, director, and sole agent of
Twin. Because the funds belonged to a debtor’s bankruptcy
estate, it was entirely proper that they were utilized to pay
creditors. The petitioners’ argument to the contrary is
meritless in light of these facts.

Ill.

THE PETITION FOR WRIT OF CERTIORARI
IS MOOT

The petition for writ of certiorari is moot in light of the
Eleventh Circuit’s recent decision in Miami Center Limited
Partnership v. The Bank of New York, 838 F.2d 1547 (11th
Cir. 1988), in which the Eleventh Circuit dismissed the
debtors’ appeal of the order of confirmation as moot because
no stay was in effect, the plan had been substantially
consummated, and thus the court could not fashion
meaningful relief. That opinion is the subject of other
proceedings in this Court by the petitioners by way of
petitions for writs of certiorari and mandamus, case numbers
87-1988 and 87-1989, in which proceedings the liquidating
trustee has filed briefs in opposition. The plan, as confirmed,
is the law of the case.

This petition for writ of certiorari is moot because the
asset in question was specifically made part of a plan of

18

reorganization, which was confirmed and substantially
consummated. The money that the petitioners claim is due
Twin was commingled with other trust monies and was used
to pay over 400 innocent creditors. The law is well settled
that an appeal will be dismissed as moot when events occur
which prevent the court from fashioning meaningful relief,
for Article III of the Constitution envisions a live controversy;
it does not encompass the rendering of advisory opinions.
Central States v. Central Transport, Inc., 841 F.2d 92 (4th
Cir. 1988); In re Sun Valley Ranches, Inc., 823 F.2d 1373 (9th
Cir. 1987); In re Golden Plan of California, Inc., 829 F.2d 705
(9th Cir. 1986); In re AOV Industries, Inc., 792 F.2d 1140 (D.C.
Cir. 1986); In re Matos, 790 F.2d 864 (11th Cir. 1986); Matter
of Andy Frain Services, Inc., 798 F.2d 1113 (7th Cir. 1983);
Matter of King Resources Co., 651 F.2d 1326 (10th Cir. 1980);
In re Revere Copper, & Brass, Inc., 78 B.R. 17 (Bkrtcy. S.D.
N.Y. 1987); In re Blumer, 66 B.R. 109 (9th Cir. B.A.P. 1986).

It is equally well settled that in a bankruptcy proceeding,
with no stay in effect, a court cannot undo a sale to a third
party purchaser who is not before the court. See In re Sun
Valley Ranches, Inc., 823 F.2d at 1375; Central States v.
Central Transport, Inc., 841 F.2d at 96; Matter of King
Resources Co., 651 F.2d at 1331-32; In re AOV Industries,
Inc., 792 F.2d at 1147-48; and Matter of Combined Metals
Reduction Co., 557 F.2d at 188.

In this case, the Washington Properties were sold to a
third party not before the Court. The sale proceeds have been
used to fund the trust and pay creditors.

In determining that the court could not award the debtors

effective relief, the Eleventh Circuit analyzed the effect of
undoing this plan:

19

(The bank] surrendered $30 million of cash
collateral it was holding [the proceeds from the sale
of the Washington properties]. These funds have
been the primary source for payments to creditors
and reserves totaling approximately $30
million. . . . The trustee pressed his view that

. . rejection [of the plan] would require him to
seek to reclaim what he had paid out, much of
which was unrecoverable. Miami Center Limited
Partnership v. The Bank of New York, 838 F.2d at
1556.

The Eleventh Circuit further stated that should the plan be
unwound, as the debtors suggest, the bank might wish to
realize on the cash collateral it held, but the court noted that
“the debtors have not given a meaningful suggestion of
how. . . . to get back the cash collateral; they say only that
the creditors have some or all of it and are entitled to be paid

and that the trustee need not seek to recover back from
them.” Ibid.

A.

The effect of the petition for writ of certiorari
would be a modification of the substantially
consummated plan, which is prohibited.

The debtor/petitioners seek a piecemeal dismantling of
a confirmed plan of reorganization, in derogation of well
settled law. In re AOV Industries, Inc., 792 F.2d 1140, 1149
(D.C. Cir. 1986), cited with approval by the Eleventh Circuit
in Miami Center Limited Partnership v. The Bank of New
York, supra. The attempt to return Twin’s share of the
proceeds from the sale of the Washington properties is
nothing more than an attempt to modify a substantially
consummated plan. This the petitioners cannot do. See 11

20

U.S.C. Section 1127(b);§ In re Sun Country Dev., Inc., 764 F.2d
406, 407 (5th Cir. 1985); In re Information Dialogues, Inc.,
662 F.2d 475, 476 (8th Cir. 1981); In re Roberts Farms, Inc.,
652 F.2d 793, 797 (9th cir. 1981); In re Seminole Park and
Fairgrounds, Inc., 505 F.2d 1011, 1014 (5th Cir. 1974);
Claybrook Drilling Co. v. Divanco, Inc., 336 F.2d 697, 701
(10th Cir. 1964); In re AT of Maine, Inc., 56 B.R. 55, 57
(Bkrtcy. D. Me. 1985); In re Northampton Corp., 59 B.R. 963,
968-69 (E.D. Pa. 1984); and In re Heatron, 34 B.R. 526 (Bkrtcy.
W.D. Mo. 1983).

The confirmed and unstayed plan, which specifically
includes the funds at issue, is binding on all parties to the
proceeding regardless of whether they accepted the plan. It
is no longer subject to modification. See In re St. Louis Freight
Lines, Inc., 45 B.R. 546, 552 (Bkrtcy. E.D. Mich., N.D. 1984).

IV.

THE PETITIONERS LACK STANDING TO
RAISE THE CLAIMS ASSERTED IN THE
PETITION FOR WRIT OF CERTIORARI

All of the arguments contained in Petition for Writ of
Certiorari center on the premise that the disputed funds
belong to Twin. Assuming for the sake of argument that this
is true, then the petitioners lack standing to raise these
claims on behalf of Twin, as the petitioners cannot assert the
rights of a third party. See Lord v. Local Union No. 2088,
481 F.Supp. 419, affirmed in part, revised in part, 646 F.2d
1057, rehearing denied, 654 F.2d 723, cert. denied, 458 U.S.
1160; Rite-Research Improves Environment, Inc. v. Costle, 78
F.R.D. 321, revised, 650 F.2d 1312.

*Section 1127(b) of the Bankruptcy Code provides: “The proponent of
a plan or a reorganized debtor may modify such plan any time after
confirmation of such plan and before substantial consummation of such
plan. . . .” (emphasis added).

21

“At an irreducible minimum, Article III requires the
party who invokes the court’s authority to ‘show that he
personally has suffered some actual or threatened injury as
a result of the putatively illegal conduct of the defendant,’
and that the injury ‘fairly can be traced to the challenged
action’ and is likely to be redressed by a favorable decision.”
Valley Forge Christian College v. Americans United for
Separation of Church and State, Inc., 102 S.Ct. 752, 758,
___U.S.___, 70 L.Ed. 2d 700 (1982) (citations omitted). This
the petitioners have failed to do. Their only claim is that
Twin’s assets, not theirs, have been taken.

As the Court has observed in Baker v. Carr, “the gist of
the question of standing” is whether the petitioners have
alleged ‘‘such a personal stake in the outcome of the
controversary as to assure that concrete adverseness which
sharpens the presentation of issues upon which the court so
largely depends for illumination of difficult constitutional
questions.” 369 U.S. 186, 204 (1962). Assuming that the
petitioners’ claim that the funds belonged to Twin is true,
then the petitioners clearly have no personal stake in the
outcome of the controversy. Moreover, in light of the tenor
of the petitioners’ arguments, it should be noted that
“standing is not measured by the intensity of the litigant’s
interest or the fervor of his advocacy.” Valley Forge Christian
College, 102 S.Ct. at 765. The petitioners cannot confer
standing on themselves by asserting the rights of others. R.T.
Vanderbilt Co. v. OSHA Rev. Comm., 708 F.2d 570, 574 (11th
Cir. 1983); Matter of Johns-Manvilie Corp., 68 B.R. 618
(Bkrtcy. S.D. N.T. 1986).

The plan, as confirmed, provides that all of the debtors’
assets, as defined by Section 541(a) of the Bankruptcy Code,
are assets of the trust. Section 541(a) includes “‘all legal or
equitable interests of the debtor in property as of the
commencement of the case.” 11 U.S.C. Section 541(aX1). The
scope of the definition of “property” in Section 541(aX1) is

extraordinarily broad and includes all types of property and
rights to property which the debtor possesses. Jn re Golden
Plan of California, Inc., 37 B.R. 167 (Bkrtcy. Ca. 1984); In
re Koch, 14 B.R. 64 (Bkrtcy. Kan. 1981). This property right
encompasses all the stock owned by a debtor, including the
stock of wholly owned subsidiary companies of a corporate
debtor. In re Deak and Co., Inc., 63 B .R. 422 (Bkrtcy. S.D.
N.Y. 1986) (shares of stock owned or controlled by the debtor
were property of the estate thereby providing the bankruptcy
court with in rem jurisdiction in an adversary proceeding to
declare stock pledge a voidable preference); In re Peoples
Bankshares, Ltd., 68 B.R. 536 (Bkrtcy. N.D. lowas 1986); Jn
re Wallace, 66 B.R. 834 (Bkrtcy. E.D. Mo. 1986). Thus, all
of the stock owned by the petitioners, including the stock of
Twin, became property of the Miami Center Liquidating
Trust pursuant to the express terms of the confirmed plan.
The petitioners lack standing to assert otherwise.’

Even if Holywell were still entitled to claim and use the
stock of Twin, Holywell would not have standing to raise the
issues contained in the petition for writ of certiorari; only
Twin would have this power,and it never has exercised it.

A shareholder may institute a derivative lawsuit to
enforce rights of a corporation under certain conditions, but
this never happened here. No shareholder’s derivative action

7Twin has brought suit against the liquidating trustee in his individual
capacity in the United States District Court for the Western District of
Virginia, for a preliminary and permanent injunction to prevent the
trustee from taking any action with respect to the stock, to quiet title,
to recover its stock certificates on behaif of Holyweil, to establish that
Holywell is the sole shareholder and to recover money damages (A 81-86).
Interestingly enough, Holyweli, the real party in interest, is not a party
in that proceeding.

23

on behalf of Twin was begun by Holywell (assuming Holywell
still controls Twin’s stock, a fact which the liquidating trustee
strongly disputes) or by the Miami Center Liquidating Trust.
The present appeal arose out of an emergency motion filed
by Gould and Holywell for clarification of the ownership of
the proceeds from the sale of the Washington properties. All
other issues are collateral.

24

CONCLUSION

The instant petition is yet another of the debtors’
collateral attacks on the confirmed plan. That Twin never
appealed any of the relevant orders and that the petitioners
seek to assert a claim on behalf of Twin lends further credence
to the bankruptcy court’s finding that the difficulty in tracing
the obligations and claims against the affiliated creditors was
“completely attributable to the labyrinth that Gould has
created.”’ Miami Center Limited Partnership v. The Bank of
New York, 838 F.2d at 852. It is now too late to modify the
confirmed plan, for the funds at issue have been co-mingled
with other trust assets and used to pay creditors. The plan
has been substantially consummated and the Court cannot
award meaningful relief. The issue is moot. Moreover, the
petitioners lack standing to raise the claims presented in
their petition.

Lastly, the district court was correct in applying the
doctrine of equitable estoppel to prevent Gould and Holywell
from reneging on their earlier representations as to the
availability of the funds in question to pay creditors. The
petitioners and Twin misled the bankruptcy court and the
creditors into believing these monies were to be used to pay
creditors of the debtors.

The petition for writ of certiorari should be denied on the
merits. Alternatively, these proceedings should be dismissed
on the ground of mootness and on the additional ground that
the petitioners lack standing to assert claims belonging to
a third party.

RESPECTFULLY SUBMITTED,

Herbert Stettin, Esquire

25

a

Appendix

PS Awe OE

Mi y CNS TO WN ed a OY PON ed SA ed ee 0 Le * ON

TABLE OF CONTENTS

1. Verification signed by Theodore B. Gould,
Gis AI oi sk 6 kk seeks wes 1

2. Motion filed in the Bankruptcy Court for
Order Approving and Authorizing Holywell
Corporation and Theodore B. Gould to
Consummate the Sale of Certain Real and
Personal Property, dated September 28, 1984 . 2

3. Bankruptcy Court Order on Emergency
Motion to Treat Proceeds of the Sale as Cash
Collateral, to Segregate and Account for Cash
Collateral, dated December 31, 1984 ........ 6

4. Excerpts from Disclosure Statement of
eg eee 10

5. Excerpts from Amended Consolidated
Disclosure Statement of the Bank of New
nate eae El a OP ee ig ag a a 14

6. Excerpts from confirmed Amended
Consolidated Plan Of Reorganization ........ 17

~]

Answer Brief of Appellee Bank of New York,

case no. 86-0848-CIV-Ryskamp, United States
District Court of Appeals for the Southern

District of Florida, dated November 7, 1986 .. 19

8. United States Bankruptcy Court for the
Southern District of Florida, Order on
Remand, dated January 29, 1986 ........... 40

10.

11.

12.

13.

14.

15.

TABLE OF CONTENTS—(Continued)

Complaint and Application for Preliminary
and Permanent Injunction, styled Twin
Development Corporation v. Fred Stanton
Smith, The Bank of New York and Irving
Wolff, in the United States District Court for
the Western District of Virginia,
Charlottesville Division ...................
BE 7 OT ns ne in kp en ena eweee
413: USC. Beeties O68. ian ii ce cndenee
St UB. Siem O68 ok. ke haa eee
11 USA. Sookion FOSS oi ccc ine ccesanseus
1] USL. Section BOM: ......k00s ens eeeas

ORANG PO. GE. ik che dh eae eee

PAGE

81

87

87

93

96

96

97

VERIFICATION

Theodore B. Gould, being first duly sworn, deposes and
says:

I am the President of Twin Development Corporation, the
Plaintiff herein; I have read the contents of this Complaint,
including the request for Preliminary Injunction, Permanent
Injunction, and Declaratory Relief, and belief the same to

be true according to the best of my knowledge, information,
and belief.

/s)/ THEODORE B. GOULD

Theodore B. Gould, President
Twin Development Corporation

Sworn to and Subscribed before me this 4th day of August,
1987.

/s/ FAYE M. McBURNEY
Notary Public

My Commission Expires: My Commission Expires June 29,
1990

UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF FLORIDA

Chapter 11

Case Nos. 84-01590-BKC-TCB
through 84-01594-BKC-TCB

In Re:
HOLYWELL CORPORATION, et al.,
Debtors.

MOTION FOR ORDER APPROVING AND
AUTHORIZING HOLYWELL CORPORATION AND
THEODORE B. GOULD TO CONSUMMATE THE
SALE OF CERTAIN REAL AND PERSONAL PROPERTY

Holywell Corporation (“Holywell”) and Theodore B.
Gould (‘“‘Gould’”’), debtors and debtors-in-possession, move this
court for an order authorizing and approving the sale by
Holywell and Gould of certain real and personal property
owned by Holywell and Gould as partners and stockholders
in Twin Development Corporation, a Virginia corporation
(“Twin”), 1300 North 17th Street Associates, a Virginia
limited partnership (‘1300’), 1616 Reminc Limited
Partnership, a Virginia limited partnership (“1616”), Eleven
DuPont Circle Associates, a District of Columbia limited
partnership (“Eleven”) and DuPont Land Associates, a
District of Columbia limited partnership (“DuPont Land’’)
(collectively the ‘Sellers’’), pursuant to §363(b) of the
Bankruptcy Code and as grounds therefor state:

1. On August 22, 1984 (the “Filing Date’’), Holywell,
Gould and the other debtors herein (collectively the

A2

Ba

“Debtors’’) each filed a petition for reorganization under
Chapter 11, §301 of the Bankruptcy Code (the ‘‘Code’’) and
each has continued in the management and operation of its
respective business and properties as a debtor-in-possession
pursuant to §1107 and §1108 of the Code. The within Chapter
11 cases are being jointly administered pursuant to order of
this Court. No trustee or examiner has been appointed.

2. The Debtors are principally engaged in the business
of owning and operating office buildings, hotels and other
commercial real property.

3. Gould, one of the Debtors herein, is the President of
Twin and is the managing general partner of 1300, 1616,
Eleven and DuPont Land. Holywell, one of the Debtors
herein, owns all of the issued and outstanding shares of
common stock of Twin. Gould owns all of the issued and i
outstanding shares of common stock of Holywell.

4. Sellers have entered into a Purchase Agreement (the
“Purchase Agreement’’), dated July 26, 1984, with Hadid
Investment Group, Inc., a Virginia corporation, and/or
assigns (““Hadid’’), which was amended by First Amendment
to Purchase Agreement between Sellers and Hadid dated
August 28, 1984 (the “First Amendment’’), whereby Hadid
shall acquire all of Seller’s right, title and interest in and
to two office buildings located in Arlington, Virginia, and
commonly referred to as the 1616 Property and the Twin
Property, and one office building located in Washington, D.C.
and commonly referred to as the Washington Property, for
a purchase price of One Hundred Twelve Million Dollars
($112,000,000). A copy of the Purchase Agreement and the
First Amendment are annexed hereto and incorporated
herein as Exhibit “A” and reference should be made thereto
for the specific terms and provisions thereof. Since the
inception of these Chapter 11 proceedings, Holywell and
Gould have been unable to proceed with the closing of the

A3

Purchase Agreement inasmuch as their status as Debtors-
in-Possession has effectively precluded the Seller’s ability to
close and consummate the sale transaction as contemplated
by the Purchase Agreement. Additionally, the entry of an
Order of this Court authorizing Holywell and Gould, Debtors
herein, to sell their right, title and interest in the real and
personal property is a condition precedent to the closing of
the transaction.

5. The purchase price for the subject properties, as set
forth in the Purchase Agreement, is fair and equitable, and
represents not less than the fair market value of such
property, having been negotiated at arm’s length. The
Purchaser has no affiliation with any Seller entity or with
any Debtor in these proceedings.

6. Consummation of the transaction proposed herein is
in the best interest of the Debtors and of the creditors in these
proceedings in that the immediate cash infusion from such
sale which inures to Holywell and Gould will provide the
Debtors with capital much needed as an essential part of the
reorganization sought in these proceedings.

7. Under §363(b) of the Code, a Debtor-in-Possession,
after notice and a hearing, may use, sell or lease, other than
in the ordinary course of business, property of the estate.
Bankruptcy Rule 2002(a) (2) provides that in the event of a
sale pursuant to §363(b), the Debtor-in-Possession shall give
all creditors not less than Twenty (20) days notice of the
hearing on such sale. The Debtors intend to comply with the
notice requirements set forth in Bankruptcy Rule 2002.

WHEREFORE, movants pray for the entry of an order:

(a) Approving and authorizing Holywell and Gould to
consummate the sale of the 1616 Property, the Twin Property
and the Washington Property to Hadid upon the terms and
conditions set forth in the Purchase Agreement and the First
Amendment; and

A4

a ate v

(b) Granting such other and further relief as this Court
deems just and proper.

Dated: Miami, Florida
September 28, 1984

KENT, WATTS, DURDEN, KENT,
NICHOLS & MICKLER

By /s/ Fred H. Kent, Jr.

Fred H. Kent, Jr.
Robert C. Nichols

850 Edward Ball Building
Jacksonville, FL 32202
904/354-1600

Attorneys for Debtors

UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF FLORIDA

Cases Nos.: 84-01590-BKC-TCB
84-01591-BKC-TCB
84-01592-BKC-TCB
84-01593-BKC-TCB
84-01594-BKC-TCB

Proceedings in Chapter 11

IN RE: HOLYWELL CORPORATION, et al.,
Debtors.

ORDER ON EMERGENCY MOTION TO TREAT
PROCEEDS OF THE SALE AS CASH COLLATERAL,
TO SEGREGATE AND ACCOUNT
FOR CASH COLLATERAL

The Bank of New York (“BNY’”’, a secured creditor,
moves this Court, pursuant to Bankruptcy Code § 363
and Bankruptcy Rules 4001 and 9014, for an order to
compel the Debtors in these jointly administered Chapter
11 proceedings to deem the proceeds of the saie of certain
real and personal property (the ‘Washington Proper-
ties’) pursuant to a Purchase Agreement dated as of
July 26, 1984, as amended on August 28, 1984, between
Hadid Investment Group as purchaser and Twin Devel-
opment Corporation (“TDC”), 1300 North 17th Street
Associates (“1300”), 1616 Remine Limited Partnership
(“1616”), Eleven Dupont Circle Associates (“Dupont
Circle”), and Dupont Land Associates (“Dupont Land’’)
as sellers (the “Purchase Agreement’) as cash collateral.

The Court examined the memoranda which were filed
both in support of and in opposition to the Motion of

Aé6

BNY, and having heard representation by the attorneys
for Debtors, Holywell Corporation (“Holywell”) and
Theodore B. Gould (“Gould’’), as well as argument by
the parties hereto, the Court finds as follows:

(a) This Court entered an Order on the 11th day of
December, 1984, requiring that all of the beneficial in-
terests of Gould and Holywell to the net proceeds from
the sale of the Washington Properties are to be placed
in a segregated, interest bearing account and held pur-
suant to further order of this Court.

(b) BNY appears to have a first lien on the interests
of Holywell and Gould in the net proceeds from the sale
of the Washington Properties, except for an amount of
$264,669. Attorneys for the Creditors’ Committees did
not object to the claim of BNY at this hearing, although
they have reserved the right to contest BNY’s claim to
a first lien at a future time if they desire to do so.

(c) Holywell provides administrative support for each
of the selling entities, their partners, limited partners,
and to the service companies which heretofore have been
providing services to the Washington Properties. It will
be necessary for Holywell to continue to provide these
services until such time as the affairs of these companies,
their partners and limited partners are terminated and
all obligations to the Internal Revenue Service are de-
termined and paid.

(d) Holywell, after the sale of the Washington Prop-
erties, no longer will have any source of income except
from the net proceeds of that sale and any interest it
may receive from the investment of those net proceeds.
Therefore, Holywell requires the use of a portion of the
net proceeds of that sale in the immediate future to pay
current, ordinary business expenses, including salaries,
and will continue to require monies from either the net
proceeds of the sale or interest income from the invest-
ment of thuse proceeds until such time as Holywell can
wind up the affairs of those selling entities.

A7

(e) BNY has agreed to the use of the proceeds of the
sale and/or interest for the expenses of Holywell subject
to the prior approval by BNY of those expenses, and has
agreed to an amount of $70,000 to be released immedi-
ately for the payment of December salaries payable on
December 31, 1984, and other business expenses payable
in January, 1985.

Upon consideration of the following, it is
ORDERED and ADJUDGED as follows:

1. This Court’s Order of December 11, 1984 shall con-
tinue unchanged except as supplemented herein.

2. The net proceeds of the Washington sale constitute
cash collateral as defined in § 363 of the Bankruptcy
Code.

3. The Bank of New York has a first lien on all of
the net proceeds due Gould and Holywell from the sale
‘of the Washington properties, as well as the interest
which shall accrue from the investment of those proceeds,
except for an amount of $264,669. However, the Holy-
well and Gould Creditors’ Committees or other creditors
of Holywell and Gould, or the Debtors, may contest the
lien of Bank of New York in subsequent, appropriate
proceedings.

4. An amount of $70,000 shall be released immediately
to Holywell to pay its salaries and other business ex-
penses due on December 31, 1984 and during January
1985.

5. Holywell shall submit to the Bank of New York
each month its anticipated expenses, including salaries,
for the subsequent month. If the Bank of New York
approves those expenses as submitted, they will be re-
leased without further order of this Court.

A8

DONE and ORDERED in Miami, Florida this 31 day
of December 1984.

s/ Thomas C. Britton
THOMAS C. BRITTON
U.S. Bankruptcy Judge
Copies to:

Fred H. Kent, Jr., Esq.
All Members of the Creditors’ Committees
All Attorneys of Record

Service of this Order to be performed
by Fred H. Kent, Jr.

|

UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF FLORIDA

Case No. 84-01590-BKC-TCB
In re:
HOLYWELL CORPORATION, a Delaware corp.,

Debtor.

DISCLOSURE STATEMENT

A 10

Exhibit “‘E”’ [to Holywell’s Disclosure Stmt]

HOLYWELL CORPORATION
(DEBTOR IN POSSESSION)

LIQUIDATION ANALYSIS
FEBRUARY 15, 1985

Cash

Advances due from MCLP

Loans due from Officer

Note due from MCLP

Mortgage note due (Charleston)

Accounts receivable

Furniture and equipment, net
8. Investments—Twin
Development Corp.

9. Investments—Washington
subsid. corps.

10. Investments—Miami
subsid. corps.

11. Investments—Affiliated
ptns.—1300

12. Investments—Affiliated
ptns.—MCLP

TOTAL LIQUIDATION VALUE

PRIORITIES (2/15/85)
1. Secured debt
2. Estimated costs and expenses
of liquidation
3. Post-petition priority creditors
4. IRS—corp. taxes

TOTAL PRIORITIES
TOTAL AVAILABLE FOR

DISTRIBUTION TO UNSECURED
CREDITORS

NOAP ON

ASSETS

(2/15/85)
$15,110,000
4,080,000
2,015,000
490,000
50,000
183,000
64,400
13,128,533
550,000
9,168,000
925,000

_ 5,250,000

$51,013,933

$ 2,015,000

150,000
20,000

$ 2,185,000

$48,828,933

LIQUIDATION
__VALUE

$15,110,000
0
0
490,000
50,000
170,000
20,000

13,128,533
550,000

0

0

0
$29,518,533
$ 2,015,000

150,000
20,000

$12,333,533

[This Liquidation Analysis is qualified by and should be read in conjunction
with the notes that follow it.|

Exhibit ‘‘C’’ [to Holywell’s plan]

HOLYWELL CORPORATION
PRO FORMA BALANCE SHEET
FEBRUARY 15, 1985

ASSETS
INVESTMENTS

Twin Development Corp.—Cash
Other subsidiary corps.—Washington
Other subsidiary corps.—Miami
Affiliated partnerships—1300
—MCLP

OTHER ASSETS

Cash°

Advances and interest receivable—MCLP
Loans and interest receivable—Officer
Note receivable—MCLP

Mortgage note receivable

Accounts and interest receivable
Furniture and equipment, net

TOTAL ASSETS
LIABILITIES

Accounts payable
Notes payable—1300
Notes and interest payable—BNY

NET EQUITY

A 12

$13,128,533
550,000
9,168,000
925,000
5,250,000

$29,021,533

$15,110,000
4,080,000
2,015,000
490,000
50,000
183,000
64,400

$21,992,400

$51,013,933

$ 900,000
380,000
2,015,000

$ 3,295,000

$47,718,933

HOLYWELL CORPORATION
(DEBTOR IN POSSESSION)
NOTES TO LIQUIDATION ANALYSIS
FEBRUARY 15, 1985

A. ASSET LIQUIDATION VALUE

Values shown are based on the company’s estimation that
on forced liquidation, the Company’s assets would produce
the following percentage of recovery:

Cash 100%
Advances, loans and other due from MCLP 9%
Accounts and mortgages receivable 94%
Investments—Washington subsidiary corps. 100%
Personal property 31%

B. BOOK VALUE OF INVESTMENTS—WASHINGTON
SUBSIDIARY CORPS.

The book value for wholly owned Washington, D.C. based
subsidiary corporations is based on the net realizable value
of receivables due to the corporations by independent third
parties.

C. AMOUNT OF SECURED DEBT

The amount of secured debt shown involves interest, all
of which is due to the Bank of New York.

D. SECURED DEBT GUARANTEES AND
CONTINGENCIES

The Miami Center Limited Partnership and Chopin
Associates construction and land loan of $195,086,028 and
accrued interest of approximately $30,492,880 are secured
by (1) first deeds of trust on the land and leasehold; (2)
substantially all the assets of Holywell! Corporation; and (3)
the personal guarantee of Theodore B. Gould.

A 13

UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF FLORIDA

CASE NOS. 84-01590-BKC-TCB
84-01591-BKC-TCB
84-01592-BKC-TCB
84-01593-BKC-TCB
84-01594-BKC-TCB

Proceedings in Chapter 1]
In re:

HOLYWELL CORPORATION, et al.,
Debtors.

AMENDED CONSOLIDATED DISCLOSURE
STATEMENT OF HOLYWELL CORPORATION,
MIAMI CENTER LIMITED PARTNERSHIP,
CHOPIN ASSOCIATES, MIAMI CENTER
CORPORATION AND THEODORE B. GOULD
PROPOSED BY THE BANK OF NEW YORK

AMENDED CONSOLIDATED
DISCLOSURE STATEMENT

This Amended Disclosure Statement is submitted on
behalf of The Bank of New York (“BNY’”’) in support of its
Consolidated Plan of Reorganization (“BNY’s Plan”). BNY’s
Plan, dated February 26, 1985, as amended, is on file with
the Bankruptcy Court and a copy is annexed hereto as
Exhibit 1.

BNY is the major secured creditor of each of the Debtors.

The Debtors are indebted to BNY, under direct and guarantee
obligations, in the amount of approximately $234,342,743 as

A 14

of March 1, 1985, which amount does not include expenses
of approximately $1,611,563 to March 14, 1985. Interest and
expenses are currently accruing at a rate of approximately
$2,390,000 per month. BNY holds, as security for the
indebtedness, inter alia, first mortgages on Miami Center,
which has an appraised value of $255,600,000 and a first
security interest in approximately $32,422,798 in cash. Under
BNY’s Plan, which contemplates a substantive consolidation
of the estates and a liquidation of the assets, BNY will
purchase Miami Center for $255,600,000, within 45 days from
the Effective Date. Upon such purchase, BNY will release
all other collateral that it holds as security for the BNY Debt,
including its security interest in the $32,422,798 in cash,
subject, however, to the security interest in such cash and
other collateral that BNY will retain as collateral for the
BNY-Holywell Loan in the principal amount of $1,750,000.

Based on a prompt sale of Miami Center and the release of
those funds, it is anticipated that all administrative claims,
all priority claims and all claims of unsecured creditors, other
than Affiliated Creditors, will be paid substantially in full
or in full. Based on the Debtors’ analysis of the outstanding
claims, an equity may remain for the Debtors.

THE FINANCIAL INFORMATION CONTAINED IN
THIS DISCLOSURE STATEMENT RELATING TO THE
INDEBTEDNESS OF THE DEBTORS TO BNY AND THE
SECURITY THEREFOR WAS PREPARED BY BNY FROM
ITS RECORDS AND THE INFORMATION TO THE BEST
KNOWLEDGE OF BNY IS ACCURATE AND COMPLETE.
CERTAIN FINANCIAL AND OTHER INFORMATION
WAS OBTAINED FROM THE DEBTORS’ PLANS.
ACCORDING TO THE DEBTORS’ PLANS, SUCH
INFORMATION WAS PREPARED BY AGENTS AND
EMPLOYEES OF THE DEBTOR AND HAS NOT BEEN
AUDITED; HOWEVER, ACCORDING TO THE DEBTORS’
PLANS THE INFORMATION IS ACCURATE AND

eT eT

COMPLETE TO THE BEST KNOWLEDGE OF SUCH
AGENTS AND EMPLOYEES. CERTAIN OTHER
INFORMATION WAS PROVIDED BY GOULD AND
CERTAIN OTHER DEBTORS TO BNY FROM TIME TO
TIME PRIOR TO THE FILING OF THESE CASES. BNY
HAS NO INDEPENDENT KNOWLEDGE OF THE TRUTH,
COMPLETENESS OR ACCURACY OF SUCH
INFORMATION.

4
a

ie SS

A 16

UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF FLORIDA

CASE NOS. 84-01590-BKC-TCB
84-01591-BKC-TCB
84-01592-BKC-TCB
84-01593-BKC-TCB
84-01594-BKC-TCB

CHAPTER 11 Proceedings

IN RE:
HOLYWELL CORPORATION, et. al.
Debtors

AMENDED CONSOLIDATED PLAN OF
REORGANIZATION PROPOSED BY
THE BANK OF NEW YORK

V. CREATION OF TRUST

1. A Trust is hereby declared and established on behalf
of the Debtors effective on the Effective Date and an
individual to be appointed by the Court (and if requested,
after nominations by any party-in-interest) is designated as
Trustee of all property of the estates of the Debtors within
the meaning of §541(a) of the Code, including but not limited
to, Miami Center, the Washington Proceeds, and all claims
and causes of action, if any, of the Debtors described in
Exhibit C and those pending in the litigation against BNY
(“Trust Property’) to hold, liquidate, and distribute such
Trust Property according to the terms of this Plan. The Trust
shall be known as the “Miami Center Liquidating Trust’.

2. Onthe Effective Date, all right, title and interest of
the Debtors in and to the Trust Property, including Miami
Center, shall vest in the Trustee, without further act or deed
by the Debtors or any other of them, and without the filing
or recording of any instrument of conveyance, assignment
or transfer, subject however, to all existing liens, mortgages,
security interests and encumbrances.

A 18

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA

CASE NO. 86-0848-Civ-Ryskamp

(Bankruptcy Cases No.
84-01590-BKC-TCB and
84-01594-BKC-TCB)

HOLYWELL CORPORATION, and
THEODORE B. GOULD,

Debtor/Appellants,
v.

THE BANK OF NEW YORK, and
FRED STANTON SMITH,
as Liquidating Trustee,

Appellees.

On Appeal from the United States Bankruptcy Court
for the Southern District of Florida

ANSWER BRIEF OF APPELLEE,
THE BANK OF NEW YORK

S. Harvey Ziegler, Esquire
Kirkpatrick & Lockhart
Suite 400

1428 Brickell Avenue
Miami, Florida 33131

Of Counsel: (305) 374-8112

Thomas F. Noone, Esquire Vance E. Salter, Esquire

Emmet Marvin & Martin Steel Hector & Davis

48 Wall Street 4000 Southeast Financial Center
New York, New York 10005 Miami, FL 33131-2398

(212) 422-2974 (305) 577-2804

TABLE OF CONTENTS

Tee OF GOI oi i's a in cud ds anne cacesckes
Teebe OE CRMEBOMG ona ccc cnc iccccecncine
IE, 5.5 6k. o0S5 0 60S kh os cee obi ck eens es
Statement of The Issues ..... 1.0... cee cece:
Standard of Review ..... 2... ccc ccccccccccnecs:
Statement of The Case ...........2 0 cece escnce:
PUIIIOE ok ccc docs eno rensnccsendeveeenecies
I. THE BANKRUPTCY COURT RULED
CORRECTLY THAT TWIN’S FUNDS
WERE PART OF THE LIQUIDATING
WE Nan bo EER dW 6 EN RNA ei 5k sn dees
A. Substantive Consolidation ............
B. The Guarantees and Stock Pledge......
II. THIS APPEAL IS MOOT ................
CN ii hace iT en ere bee adetscdasnauen

Lg RE CCCEERERER TT TEECT UTE ee

ee a rr

A 20 |

ewe

TABLE OF CITATIONS

Page

In re AOV Industries, Inc.,

792 F.2d 1140 (D.C. Cir. 1986) ............. 17
In re Cada Investments, Inc.,

664 F.2d 1158 (9th Cir. 1981) .............. 16
Dade County Classroom Teachers’ Ass’n. v Rubin,

238 So.2d 284 (Fla. 1979), cert. den.,

400 U.S. 1009, 91 S.Ct. 569,

Be Rae ee EE ak nv ekc Con kvsatusees 13
In re Garfinkle,

672 F.2d 1340 (1ith Cir. 1982) ............. 2
Hildreth v. Union News Co.,

315 F.2d 548 (6th Cir. 1963) ............... 13
Locke v. Board of Public Instruction of
Palm Beach County,

499 F.2d 360 (Sth Cir. 1974) ............... 18
In re Matos,

790 F.2d 864 (11th Cir. 1986) .............. 2,18
R. T. Vanderbilt Co. v. OSHA Rev. Comm.,

7086 F.2d 570 (llth Cir. 1963) ...........:.. 14
In re Roberts Farms, Inc.,

G62 F.2a 700 Gt Gir. 1GG1) 2.00 ccea aves 16
In re Sewanee Land, Coal, & Cattle, Inc.,

708 F.28 1906 Citta Cl: 1988 . i ok 2,18

A 21

TABLE OF CITATIONS

(Continued)

620.63 Florida Statutes

11 U.S.C. 105

11 U.S.C. 363

11 U.S.C. 1101(2) .

28 U.S.C. 158

Bankruptcy Rules

5 Collier on Bankruptcy

§ 1100.06[1] (15th ed. 1985)

A 22

Page

16

12

JURISDICTION

This Court has jurisdiction over appeals from orders of
the Bankruptcy Court under 28 U.S.C. §158 and Bankruptcy
Rule 8001 et seq. However, as set forth in Section II of this
brief, the Court should decline to exercise jurisdiction over
the subject matter of this particular appeal on grounds of
mootness. The funds in controversy below have been paid or
otherwise irrevocably applied in accordance with the terms
of a plan of reorganization proposed by appeliee, The Bank
of New York (the “Bank”’), duly confirmed on August 8, 1985
by the Bankruptcy Court. The Confirmation Order was
subsequently affirmed by the United States District Court
on March 20, 1986.' The appellants did not post a supersedeas
bond (as required by the District Court) in order to stay the
consummation of the plan, and it has now been substantially
consummated. Mr. Gould himself, who is one of the appellants
here and was also sole shareholder of the other appellant,
stated in open court on June 9, 1986, that, “this plan has
obviously been substantially consummated.’”

Thus, the relief sought by the appellants would
dismember a plan of reorganization that has been confirmed,
affirmed, and substantially consummated, and that has not
been stayed. That relief is neither fair nor possible, and
accordingly this appeal should be dismissed as moot. Jn re
Matos, 790 F.2d 864 (11th Cir. 1986); In re Sewanee Land,
Coal & Cattle, Inc., 735 F.2d 1294 (11th Cir. 1984); 11 U.S.C.
§1101(2).

‘Holywell Corp., et al, v. The Bank of New York, Case No. 85-3225-Civ-
Aronovitz

*Court Paper Number 1314, page 73; excerpt attached as Bank's App.
1. “Bank's App. " is a reference, by tab number, to the record excerpts
attached to this brief.

A 23

STATEMENT OF THE ISSUES

I. Was the Bankruptcy Court’s Order of January 28,
1986 “Clearly Erroneous’’?

Il. Is This Appeal Moot?
STANDARD OF REVIEW

The Bankruptcy Court’s finding of fact are to be affirmed
unless “clearly erroneous”. Bankruptcy Rule 8013. To the
extent that the Bankruptcy Court’s findings were affirmed
by District Judge Aronovitz’s Order affirming confirmation
of the Plan [Dbt. App. 387], the clearly erroneous standard
must be given “strict application”. Jn re Garfinkle, 672 F.2d
1340, 1344 (11th Cir. 1982).

STATEMENT OF THE CASE

The appellants are two of five related debtors in the
Chapter 11 bankruptcy proceedings below. Debtor Theodore
B. Gould (“Gould”) owned 100% of the stock of Debtor
Holywell Corporation (“Holywell”), and also served as
President and a director of Holywell. In turn, Holywell owned
100% of the stock of Debtor Miami Center Corporation
(“MCC”); Gould served as President and a director of MCC
as well. Gould and MCC were the sole general partners of
Debtor Chopin Associates (“Chopin”) and of Debtor Miami
Center Limited Partnership (“MCLP”). All five Debtors were
involved in developing the Miami Center Project, an office
building and hotel complex in downtown Miami. The complex
interrelationships among the Debtors and other affiliated
entities are depicted on Bank’s App. 2.

debtor/appellants’ brief

A 24

EE —

Debtor Holywell owned many subsidiaries other than
Debtor MCC. One such non-debtor subsidiary, wholly-owned
by Holywell, was Twin Development Corporation (““Twin’’).
Gould served as President and as a director of Twin as well.

The Bank was the construction lender for the Miami
Center Project, and held a secured claim in the bankruptcies
for over $200 million. In an adversary proceeding to establish
its lien, the Bank obtained a judgment for over $234 million
as of March 14, 1985, with interest accruing at over $2 million
per month thereafter [Bank’s App. 3]. The Bank disputes the
Debtors’ chronology in their “Statement of the Facts” as to
both accuracy and relevance. Since the focus of this appeal
should be upon the rights of various parties to the $13,163,490
realized by Twin from the sale of its Washington, D.C. office
building, it is important to review carefully the record on that
subject.

1. On June 23, 1983, Holywell pledged the stock of Twin
(and other subsidiaries) to the Bank to secure Holywell’s
guaranty of the construction loans [Dbt. App. 258).

2. On February 1, 1984, Holywell and the other Debtors
defaulted on the loan obligations, and the loans remained
in default through the filing of the bankruptcy petitions on
August 22, 1984 [C.P. No. 385h, pages 176-77].* By virtue
of the default and the terms of the stock pledge, the Bank
had the right to exercise all rights of ownership over the Twin
stock [Dbt. App. 272-77].

3. The money realized by Twin was part of the
“Washington Proceeds” —approximately $30 million in net

*““C.P. No. ___” refers to the Bankruptcy Court Paper Number of a
document in the Bankruptcy Court record below. “Adv. Pro. No. —_”
indicates that a particular document was separately docketed in a
designated adversary proceeding within the five bankruptcy cases.

A 25

proceeds received by the five debtors (the “Gould Group’’)
from the sale of three properties in Washington D.C. in
December, 1984 and January, 1985. Until they filed the
motion at issue here, Gould and Holywell always recognized
and agreed that the Washington Proceeds would be used to
pay allowed claims against the debtors:

(a) Gould and Holywell admitted their ability to
control Twin and its assets by seeking Bankruptcy Court
approval in October, 1984 for the sale of Twin’s real estate
{[Dbt. App. 1]. In that motion, Gould and Holywell
acknowledged that Bankrutcy Court approval of the sale of
Twin’s real estate was a condition precedent to the closing
[Dbt. App. 3, Paragraph 4; Dbt. App. 64]. More significantly,
Gould and Holywell represented to the Bankruptcy Court and
to the hundreds of creditors (including the Bank) that:

6. Consummation of the transaction proposed
herein is in the best interest of the Debtors and of
the creditors in these proceedings in that the
immediate cash infusion from such sale which
inures to Holywell and Gould will provide the
Debtors with capital much needed as an essential
part of the reorganization sought in these
proceedings. [Dbt. App. 3; emphasis supplied].

Thus, Holywell and Gould represented and admitted that
Twin’s share of the net proceeds of sale (ultimately $13.1
million) was to be controlled and/or utilized by Holywell and
Gould. If, as the appellants now argue, Twin was an
independent entity, there would have been no reason or
necessity for Gould and Holywell to have sought Bankruptcy
Court approval for the sale of Twin’s property.

(b) Based upon the representations by Gould and by

Holywell that Twin’s proceeds would be a “cash infusion”’
for the two Debtors, the Bank and other creditors did not

A 26

oppose the sale, and all parties agreed that the sales proceeds
should be (a) segregated and (b) subject to the jurisdiction of
the Bankruptcy Court [Dbt. App. 68 to 71]. The Bankruptcy
Court directed that:

1. Holywell shall cause Twin Development
Corp. (“Twin’’), a wholly owned subsidiary of
Holywell, to deposit into a segregated account,
subject to further order of this Court, any net funds
payable to Twin from the sale of certain improved
real and personal property (the ‘Washington
Properties’’) pursuant to a Purchase Agreement
dated as of July 26, 1984, as amended August 26,
1984, between Hadid Investment Group, Inc., as
purchaser and Twin, 1300 North 17th Street
Associates, 1616 Reminc Limited Partnership,
Eleven Dupont Circle Associates and Dupont Land
Associates as sellers (the “Purchase Agreement’’).

* * *

3. Holywell and Gould shall deposit all funds,
including any beneficial interest, into a segregated
account, subject to further order of this Court
including any and all funds payable to or by Gould,
Holywell or to any other entity or entities which
are owned (wholly or partially) or controlled (wholly
or partially) by Holywell and/or Gould as a result
of the sale of the Washington Properties. The funds
shall not include the proceeds payable to any
independent person or entity in which neither
Gould, Holywell, nor any related entity has any
interest of any nature whatsoever. [Dbt. App. 68-70]

Neither Twin nor either of the appellants appealed that
Order of December 16, 1984.

A 27

(c) Thereafter, the Bank moved for a determination
that all such funds, including the Twin proceeds, were cash
collateral subject to the Bank’s lien [Bank’s App. 4]. After
a hearing, the Bankruptcy Court granted that motion [Dbt.
App. 77 to 80]. Specifically, the Bankruptcy Court determined
in an Order of December 31, 1984, that, “‘the net proceeds
of the Washington sale constitute cash collateral as defined
in §363 of the Bankruptcy Code” [Dbt. App. 79]. Once again,
neither Twin nor either of the appellants took an appeal from
the entry of that Order.

(d) Subsequently the Debtors filed Schedules and
Statements of Affairs listing their respective assets and
liabilities. Holywell admitted its 100% control over Twin, and
the absence of any liabilities on the part of Twin, by
scheduling Twin’s value in the Holywell Schedules as
$13,210,000.00—the amount of Washington Proceeds payable
to Twin. [C.P. No. 275, Schedule B-2; Bank’s App. 5).

(e) Thereafter, the Debtors promulgated separate (but
similar) disclosure statements and plans of reorganization.
The Holywell disclosure statement advised creditors that
Twin’s cash from the “Washington Proceeds” would be used
to pay the claims of creditors [C.P. No. 466, page 4].

(f) Next, the Bank proposed a plan of reorganization
and companion disclosure statement (the ““Bank’s Plan’’). As
amended, the Bank’s Plan clearly disclosed that the
‘“‘Washington Proceeds’, including Twin’s proceeds, would
(1) become part of the Miami Center Liquidating Trust and
(2) be used to pay Allowed Claims (Dbt. App. 96, 101-02, 115,
124-25]. The Bank’s disclosure statement listed the exact
amount of the Washington Proceeds, $32,422,798.37, so it
was unmistakeable that Twin’s proceeds were included [Dbt.
App. 96, 101). The Bank reiterated that, “the Bankruptcy
Court has determined that the Washington Proceeds are
BNY’s (the Bank’s] cash collateral” [Dbt. App. 102]. Although

A 28

the debtors and various related entities filed numerous
objections to the Bank’s Plan [C.P. No. 534, 545, 580, 849,
888a], neither Twin nor either of the appellants ever objected
to the inclusion and use of Twin’s proceeds as part of the
Bank’s Plan.

(g) Pursuant to the Bankruptcy Court’s Orders, both
the debtors and the Bank were required to file certificates
relating to the voting by creditors and to the source of cash
to fund their respective plans of reorganization. On May 13,
1985, counsel for the appellants certified that $14,738,000
was available to fund the debtors’ proposed plans, including
funds in the “Twin Development Trust Account” at Florida
National Bank [C.P. No. 664; Bank’s App. 6]. In so certifying,
the debtors again evidenced their complete control over
Twin’s interests in the Washington Proceeds, and the clear
understanding that such funds would be used—under both
the debtors’ and the Bank’s proposed plan—to pay creditors.

(h) When the Bankruptcy Court confirmed the Bank’s
Plan [August 8, 1985, Dbt. App. 237], (1) Twin did not take
an appeal and (2) the debtors never raised, as an issue on
appeal, the disposition of Twin’s $13.1 million pursuant to
the terms of the Bank’s Plan. To the contrary, in their initial
brief in the appeal from the Confirmation Order,’ the debtors
stated as a fact that:

Holywell and Gould also had equity participations
in limited partnerships that owned three office
buildings in the District of Columbia and Virginia.
The partnerships sold those office buildings for an
aggregate price in excess of $100,000,000. The sales
were closed on December 31, 1984 and January 5,
1985. Holywell and Gould realized approximately
$32 million from these sales. [emphasis supplied].

5Case No. 85-3225-Civ-Aronovitz; the initial brief is docket item number
13 in that case, and the quotation is from page 9 of the brief.

A 29

Similarly, Twin and the appellauts did not raise the
argument that they now raise—that substantive consolidation
was a “subterfuge” to take Twin’s money—at the hearing
on substantive consolidation on July 18, 1985 [Dbt. App. 417].

(i) Thereafter, neither Twin nor either of the
appellants posted an appeal bond (as required by the District
Court) in order to stay the implementation of the Bank’s Plan.
Accordingly, the Liquidating Trustee was appointed [Dbt.
App. 241] and began to pay creditors with the funds in the
Liquidating Trust. If Twin or the appellants truly intended
to prevent the use of Twin’s proceeds to pay allowed claims
as provided by the Bank’s Plan, it was incumbent upon Twin
and/or the appellants to post an appeal bond as required.

(j) On November 22, 1985, the Liquidating Trustee
filed his first report, which clearly listed the Twin cash as
an asset subject to disposition by the Liquidating Trustee
[Dbt. App. 293, 300]. The Bankruptcy Court entered an Order
approving the report on November 26, 1985 [Dbt. App.
301-03]. Neither Twin nor either of the appellants took an
appeal from that Order.

(k) On December 30, 1985, the District Court
remanded the Debtors’ appeal from the Confirmation Order
back to the Bankruptcy Court for che entry of more detailed
findings of fact and conclusions of law [Dbt. App. 309].
Although invited and directed to raise any issue during the
remand, the appellants never mentioned the Plan’s
utilization of Twin’s proceeds. The Bankruptcy Court entered
detailed findings and conclusions on January 29, 1986, as
requested [Dbt. App. 329], reciting again that the Washington
Proceeds of approximately $30 million (which included Twin’s
share) were the Bank’s cash collateral [Dbt. App. 344] and
were to be used to pay creditors. The District Court affirmed
those findings [Dbt. App. 387], noting specifically that the
Bank’s Plan utilized, “the proceeds of the sale by the debtors

A 30

of certain real property owned by them in Washington, D.C.
($32,000,000)” [Dbt. App. 396]. In their appeal to the Eleventh
Circuit from that District Court Order,* the debtors have not
disputed that determination by the District Court.

(1) Nonetheless, the appellants asked the Bankruptcy
Court to “clarify” that Twin’s portion of the Washington
Proceeds could not be used by the Liquidating Trustee to pay
creditors [Dbt. App. 244]. When the Bankruptcy Court ruled
against the appellants and they initiated this appeal,
however, they did not obtain a stay pending the appeal.
Accordingly, the Liquidating Trustee has continued to use
Twin’s proceeds (as provided by the Bank’s Plan) to pay
creditors.

4. Twin never appeared separately in the bankruptcies
below. In keeping with its membership in the Gould Group
and its 100% ownership by debtor/appellant Holywell,
Gould’s and Holywell’s lawyers always spoke on behalf of
Gould and Holywell for Twin (as they continue to do in this
appeal). Twin never filed objections to the Bank’s Plan, and
Gould (as President of Twin) controlled Twin’s funds. Gould
testified that Twin’s funds had to be paid to Holywell:

Q. Twin Development Corporation?

A. It’s a wholly-owned subsidiary of Holywell.
Q. What does it do?
A

. It owned the general partnership in 1300 North 17th
Street.

Case No. 86-5286, pending in the Eleventh Circuit.

A 31

Q. That had something to do with the Washington
property?

A. It is one of the buildings in the Washington area.

Q. If one of those subsidiaries had some money coming
out of that closing, that would have gone to Holywell?

A. It has to go to Holywell as dividends.
[C.P. No. 385h, pages 49-50, emphasis supplied).

The foregoing facts, omitted from the appellants’
“Statement of the Case’’, demonstrate that the appellants
always understood and agreed that Twin’s assets were under
the control of the appellants and would be used to pay
creditors under the debtors’ plans or the Bank’s Plan,
whichever the Bankruptcy Court confirmed.

ARGUMENT

I. The Bankruptcy Court Ruled Correctly
That Twin’s Funds Were Part of The
Liquidating Trust.

A. Substantive Consolidation.

The debtor/appellants argue that the Bankruptcy Court,
“in effect sanctioned the substantive consolidation of Twin
Development with the Debtors” [appellants’ brief at 14]. That
is not correct.

Substantive consolidation is an equitable doctrine,
available under Section 105 of the Bankruptcy Code, under
which, “‘the assets and liabilities of different entities may
be consolidated and dealt with as if the assets were held by,
and the liabilities were incurred by, a single entity”. 5 Collier

A 32

on Bankruptcy §1100.06{1] at 1100-32 (15th ed. 1985). The
Bank’s Plan provided for the substantive consolidation of the
five debtors, but never purported to make Twin liable for the
obligations of the debtors. Instead, the Bank’s Plan did what
the debtors’ plans had proposed to do, and what the creditors
themselves could have ultimately done in the absence of the
bankruptcies—the Bank’s Plan provided that Twin’s share
of the Washington Proceeds would be used to pay creditors.

The appellants have already attacked substantive
consolidation on appeal, and have lost that appeal [Dbt. App.
399-404]. District Judge Aronovitz “studiously examined”
that issue, and concluded that substantive consolidation,
‘“‘was proper and correct as a matter of law and was based
on sufficient factual findings which were not, themselves,
clearly erroneous” [/d.]. That opinion characterizes the
evidence in the record justifying substantive consolidation
as “strong and convincing” [Dbt. App. 401]. The Order
affirming substantive consdlidation is “law of the case’’, and
may not be attacked again by the debtor/appellants in the
District Court. Hildreth v. Union News Co., 315 F.2d 548,
550 (6th Cir. 1963); Dade County Classroom Teachers’ Ass’n.
v. Rubin, 238 So.2d 284, 289 (Fla. 1970), cert. den., 400 U.S.
1009, 91 S.Ct. 569, 27 L.Ed.2d 623 (1971).

The debtor/appellants have noted in their brief that
substantive consolidation is, ‘one of the issues on appeal to
the Eleventh Circuit’’,’ so it is doubtful that this Court can
even consider the issue.

Twin was not “substantively consolidated” with the
debtors. Twin’s obligation and liability to pay its share of
the Washington Proceeds to Holywell—expressly and
repeatedly admitted by the debtors—was a property right of
Holywell’s. When the Plan was consummated on October 10,

’Appellants’ initial brief at page 15, note 7.

A 33

1985, the Liquidating Trustee acquired and utilized that
property right.

The creditors of debtors Gould, Holywell, MCLP, and
Chopin could have reached Twin’s share of the Washington
Proceeds. Under Section 620.63, Fla.Stat., Gould was
personally liable to all creditors of MCLP and of Chopin, as
well as to all of his own creditors.* All such creditors—MCLP’s
Chopin’s, and Gould’s—could have levied or executed upon
his 100% ownership interest in Holywell. In turn, all of those
creditors and all of Holywell’s creditors could have levied or
executed upon Holywell’s 100% ownership interest in Twin,
which included the $13.1 million portion of the Washington
Proceeds. Thus, the provisions of the Bank’s Plan and the
actions of the Liquidating Trustee were entirely consistent
with Florida’s creditors’ rights law, and did not prejudice
Twin. The appellants argue that the use of Twin’s funds
“would be grossly unfair to Twin’s creditors and equity
holders’’, but of course:

(a) The appellants lack standing to complain about
hypothetical or supposed injuries to creditors that are not
before this Court. [Dbt. App. 406; R.T. Vanderbilt Co. v.
OSHA Rev. Comm., 708 F.2d 570, 574 (11th Cir. 1983)]; and

(b) The only “equity holder” of Twin is debtor/
appellant Holywell, which has already taken and lost an

appeal from the confirmation and operation of the Bank’s
Plan.

All of the “substantive consolidation” cases raised by the
appellants were taken into account by District Judge
Aronovitz in approving the confirmation of the Plan. A case-
by-case analysis of the authorities cited by the appellants

‘Because Gould was a general partner of debtors MCLP and Chopin,
which are both Florida partnerships.

A 34

would serve no purpose here, because they are the same
authorities that have been cited (a) by the debtors in their
unsuccessful appeal from the order of substantive
consolidation and from the Confirmation Order, (b) by District
Judge Aronovitz in approving substantive consolidation and
the other aspects of the Bank’s Plan attacked by the debtors,
and (c) by the debtors in their further appeal from Judge
Aronovitz’s Order to the Eleventh Circuit. In addition, the
Plan’s use of Twin’s portion of the Washington Proceeds did
not amount to “substantive consolidation” as argued by the
debtors. Twin’s existence as a corporation, its other assets,
and all of its liabilities were unaffected by the Plan. Only
the funds that “‘had”’ to be dividended to Holywell? and that
were part of the Bank’s cash collateral were affected by the
Plan. That is far short of “substantive consolidation’’.

B. The Guarantees and Stock Pledge.

The appellants next argue that their own guarantees and -
Holywell’s pledge of Twin’s stock to the Bank, “did not mean
{the Bank] could simply grab the Twin assets” [appellant’s
initial brief at 26).

The Bank did not “grab the Twin assets”. Twin’s share
of the Washington Proceeds has been applied to pay the Gould
Group’s creditors, which is a result that the creditors could
have obtained by execution against Gould and Holywell. The
Bank’s Plan did precisely what the debtors repeatedly
proposed to do—it used the Washington Proceeds to pay the
Gould Group’s creditors. The cash collateral Order [Dbt. App.
77) brought Twin’s portion of the Washington Proceeds under
the jurisdiction of the Bankruptcy Court. If Twin had an
objection to that result (which Twin plainly did not, since it
was controlled by Holywell and Gould ard neither appealed
the Order), it was required to file an appeal on or before

%See the testimony of appellant Gould at page 12 of this brief.

A 35

January 10, 1985. Bankruptcy Rule 8002. Twin failed to do
so, and thereby abanduned any right to dispute the
Bankruptcy Court’s jurisdiction over Twin’s share of the
Washington Proceeds or to claim that the debtors had no
control over those funds.

ll. This Appeal Is Moot.

In the absence of an order staying the implementation
of a plan of reorganization or disposition of property, an
appeal becomes moot. Jn re Cada Investments, Inc., 664 F.2d
1158, 1160 (9th Cir. 1981). The same is true with respect to
an unstayed appeal from a plan that has been substantially
consummated. In re Roberts Farms, Inc., 652 F.2d 793, 797
(9th Cir. 1981).'° The Bank’s Plan has been substantially
consummated as defined by 11 U.S.C. §1101(2), as specifically
determined by the Bankruptcy Court [Dbt. App. 367-68,
Paragraph 57], and as admitted in open court by appellant
Gould himself [Bank’s App. 1). There is simply no way that
the Liquidating Trustee can identify Twin’s portion of the
Washington Proceeds or reclaim it from the creditors who
were paid over the past year (consummation of the Plan began
over a year ago, on October 10, 1985). Nor can Twin simply
recover its $13 million and walk away into the sunset, as
the appellants apparently hope and urge.'' The use of that
money by the debtors was a material aspect of the Bank’s
Plan. The Bank would not have (a) released its lien over that

See also In re AOV Industries, Inc., 792 F.2d 1140 (D.C. Cir. 1986).
That opinion notes that the failure to obtain a stay is fatal, “to the extent
reversal of the confirmation order would require the invalidation of good
faith transfers.” Jd. at 1147.

"Such a result would allow over $13 million to leave the five estates
out a “side door” before all creditors were paid and the five cases closed
Bécause of Gould's direct and complete control over Twin, he would in

effect receive the $13 million as an equity distribution before payment
of all creditors.

A 36

ee

» & ee et ee: a SOT e~ es

cash and the balance of the Bank’s cash collateral, (b) waived
the default interest differential on its construction loans to
the debtors (several million dollars), or (c) bought the Miami
Center Project for $255.6 million, including approximately
$14 million of new cash, if Twin’s funds had been unavailable
as a matte: of law for the payment of other creditors. Since
the sale closed on October 10, 1985 and Twin’s portion of the
Washington Proceeds was turned over to the Liquidating
Trustee as of that date pursuant to the terms of the Plan and
of that sale, it is now too late to unwind the transaction. Jn
re Matos, 790 F.2d 864 (11th Cir. 1986); Jn re Sewanee Land,
Coal & Cattle Co., Inc., 735 F.2d 1294 (11th Cir. 1984).

Mootness is jurisdictional, and this appeal should be
dismissed on that basis. Locke v. Board of Public Instruction
of Palm Beach County, 499 F.2d 359, 363-64 (5th Cir. 1974).

CONCLUSION

Having lost a direct attack on the Bank’s Plan in this
Court [Dbt. App. 387], the debtors are now attempting to raise
an argument on behalf of one of their many wholly-owned
and totally-controlled subsidiaries [Bank’s App. 2]. For their
own purposes, the debtors repeatedly represented that Twin’s
share of the Washington Proceeds were available to Holywell
and for the payment of the Gould Group’s creditors. In
seeking permission to sell the Washington, D.C. properties
that generated Twin’s cash, the appellants told the
Bankruptcy Court that “the immediate cash infusion” would
inure to their benefit and would be “‘an essential part of the
reorganization” [Dbt. App. 3].

Now the appeliants want to argue that Twin was outside
the sphere of the bankruptcies, and that the Bankruptcy
Court and the Bank’s Plan could not deal with Twin’s share
of the Washington Proceeds, even though those funds “had”

A 37

to be paid to Holywell [see Mr. Gould’s testimony at page
12 of this brief).

The Bankruptcy Court correctly rejected that transparent
change in position by the debtors. Moreover, District Judge
Aronovitz has already heard and rejected the appellants’
objections to the Bank’s Plan; this appeal is merely another
bite at the apple. Accordingly, it is respectfully submitted
that this Court should dismiss this appeal as moot or, in the
alternative, affirm the Bankruptcy Court’s Order below.

Respectfully submitted,

Attorneys for

The Bank of New York
KIRKPATRICK & LOCKHART
1428 Brickell Avenue

Miami, Florida 33131
Telephone: (305) 374-8112

By: /s/ [illegible], for
S. Harvey Ziegler

Of Counsel: STEEL HECTOR & DAVIS
Thomas F. Noone 4000 Southeast Financial Center
EMMET MARVIN & MARVIN 200 South Biscayne Boulevard
48 Wall Street Miami, Florida 33131-2398

New York, New York 10005 Telephone: (305) 577-2804

Telephone: (212) 422-2974
By: /s/ [illegible), for
Vance E. Salter

A 38

ee

eee

wtedt

ee ee

CERTIFICATE OF SERVICE

I HEREBY CERTIFY that a true copy of the foregoing
Motion to Dismiss Appeals as Moot was furnished by
overnight courier this 7th day of November, 1986 to Fred H.
Kent, Jr., Esq., Kent, Watts & Durden, 1400 Florida National
Bank Tower, 225 Water Street, Florida 32202, and Raymond
Bergan, Esq., Williams & Connolly, 839 Seventeenth Street
N.W., Washington, D.C., 20006, as attorneys for appellants;
and by messenger to Irving M. Wolff, Esq., Holland & Knight,
1200 Brickell Avenue, Miami, Florida 33131, as attorney for
the Liquidating Trustee.

/s/ [illegible], for
Vance E. Salter

A 39

i,

UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF FLORIDA

Case No. 84-01590-BKC-TCB

Case No. 84-01591-BKC-TCB

Case No. 84-01592-BKC-TCB

Case No. 84-01593-BKC-TCB

Case No. 84-01594-BKC-TCB
Chapter 11

IN RE: HOLYWELL CORPORATION,
MIAMI CENTER LIMITED PARTNERSHIP,
MIAMI CENTER CORPORATION,

CHOPIN ASSOCIATES, and THEODORE B. GOULD,

Debtors,

—

ORDER ON REMAND

The District Court Order of Remand dated December
30 reached this court on January 6 (C. P. No. 1145).
It requires that one or more hearings be held, proposed
findings and conclusions be entertained, and that this
court not later than January 29:

“make and enter such findings of fact and conclu-
sions of law as are necessary to provide the Dis-
trict Court with an adequate basis to decide the
... appeal on the merits.”

At a conference held January 14, the debtor requested
and on January 18 the court held an evidentiary hear-
ing to receive additional evidence on three issues: (a)
the value of the Miami Center Project, (b) the value
to the estate of a lawsuit pending before Judge Hoeveler,
and (c) amount of the Bank’s lien. The parties also re-

A 40

3: at aE Siero arate RM eee

|
?
NG

quested leave to submit their proposed findings and con-
clusions by January 23. The parties agreed that no
other hearings were necessary.

Although counsel for MCJV and O&Y attended both
hearings, neither they nor any party other than the
debtors and the Bank participated.

On January 23, both the debtors (C. P. No. 1175) and
the Bank (C. P. No. 1176) submitted comprehensive and
detailed proposed findings and conclusions, respectively
43 and 52 pages in length.’ In addition, the debtors
filed on January 28 the debtors’ 22-page response to the
Bank’s proposed findings and conclusions.

I presume counsel understand what will best assist
Judge Aronovitz. Recognizing the weight accorded to
adopted findings, Anderson v. Bessemer City, 470 U.S.
, 84 L.Ed.2d 518, 527 (1985), I have used the time
available to me to review carefully the proposed findings
and conclusions and the debtors’ Response together with
the entire record, instead of attempting to reword and
retype forty to fifty pages of similar detail. For the
most part the facts flow from uncontroverted matters of
record. The parties differ in the emphasis they give and
the inferences they draw from the undisputed events.

I reject the proposals of the debtors as reflecting in
essential respects the contentions I considered and re-
jected previously. I adopt the Bank’s proposed findings
of fact and conclusions of law, copies of which are at-
tached and incorporated in this Order. They accurately
represent my own considered conclusions as to both the
facts and legal principles implicit in the Confirmation
Order of August 8, 1985 (C. P. No. 906) and the earlier

1 Official Form 31, prescribed by the Judicial Conference pursu-
ant to Bankruptcy Rule 9009 as the form for a chapter 11 Order
Confirming Plan, is a page and a half and contains only the eight
statutory requirements of 11 U.S.C. §1129(a) rephrased as mixed

A 41

Consolidation Order (C. P. No. 840). The earlier order
followed one session of the extended confirmation hear-
ing and resolved one bitterly contested element of the
confirmation issues. It was not possible, in this case, to
hear all the issues and parties during one uninterrupted
session.

In a matter of this magnitude, fought as hard as this
one has been, it is easy to lose sight of the forest while
concentrating on the trees. Neither this review, the ad-
ditional evidence tendered, nor the subsequent events
have caused me to recede from the decisions I reached
after spending a year with all the parties and the -is-
sues they presented, which I attempted to put into per-
spective in the Confirmation Order.

FINDINGS OF FACT AND CONCLUSIONS
OF LAW UPON REMAND

Findings of Fact
A. Parties

1. The debtors are Holywell Corporation, a Delaware
corporation (‘‘Holywell’), of which debtor Theodore B.
Gould (“Gould”) is the sole stockholder and president;
Miami Center Limited Partnership, a Florida limited
partnership (““MCLP”) of which Gould and debtor Miami
Center Corporation (‘““MCC’’) are sole general partners
and are also limited partners; MCC, a Florida corpora-
tion and wholly-owned subsidiary of Holywell (Gould is
also president of this entity) ; Chopin Associates, a Flor-
ida general partnership (“Chopin”) of which Gould and
MCC are the sole general partners; and Gould himself.

2. The Bank was the construction lender for Phase I
of the debtors’ “Miami Center” complex. That Phase con-
sists of the Edward Ball Office Building, the Pavillon
Hotel, retail space between them known as the “Podium”,

A 42

ee ee ee ee ee ee eee

and an adjoining parking garage (collectively, the “Miami
Center Project”). The Bank has its offices in New York,
New York, and is chartered under the laws of the State
of New York.

3. Miami Center Joint Venture (‘““MCJV”) is a Flor-
ida general partnership formed by debtor Gould and
Olympia & York Florida Equity Corp. (“O&Y’’), a Flor-
ida corporation established by a large Canadian real es-
tate development company. At all material times, Gould
served as “managing venturer” and general partner of
MCJV. MCJV owns four vacant lots near the Phase I .
Project. Gould and O&Y originally planned to construct
Phases II and III of Miami Center on those lots, but
disputes and litigation between the two partners pre-
vented any such construction.

4. Holywell Leasing Company (“HLC’’) and Holywell
Telecommunications Company (“HTC”) are two of nu-
merous non-debtor subsidiaries wholly owned by debtor
Holywell (wholly owned, in turn, by Gould). Gould was
president of each at all material times.

5. Over 400 other creditors have an interest in these
proceedings, including the IRS, the Dade County Tax
Collector, many of the contractors and subcontractors in-
volved in the construction, former employees, and others.
Creditors’ committees were appointed by this Court, and

have been active, for the Holywell, MCLP, and MCC
estates.

B. Jurisdiction

6. This Court has jurisdiction over these reorganiza-
tion proceedings and over the parties pursuant to 28
U.S.C. § 157, the standing order of reference in this
District, and the Order of Remand.

C. The Debtors’ Plans

7. The debtors filed a separate, amended disclosure
statement and plan for each estate; however, all were

A 43

nearly identical in form and substance [C.P. No. 466-
470].

8. The debtors’ plans were predicated upon:

(a) the sale of the Miami Center Project to Hadid
Investment Group, Inc. (‘‘Hadid’”’) for $260 million;

(b) the payment of undisputed claims from approxi-
mately $32 million realized by Holywell, a wholly-owned
subsidiary, and Gould in January, 1985 from the sale of
other real estate in the Washington, D.C. area (by Order
entered December 31, 1984, C.P. No. 303, such funds
were determined to be cash collateral under 11 U.S.C.
§ 363, subject to the Bank’s first lien) ;

(c) the pursuit in the District Court of a lawsuit
against the Bank and its participating lenders (Miami
Center Limited Partnership, et al. v. The Bank of New
York, et al., Case No. 85-0228-Civ-Hoeveler; the “District
Court Action”) for alleged fraud, usury, breach of con-
tract, and civil claims under the federal RICO act; and

(d) equitable subordination of the Bank’s construction
loan and mortgages under 11 U.S.C. § 510(c).

D. Objections to the Debtors’ Plans

9. Objections to the debtors’ amended plans were filed
by:

(a) O&Y [C.P. No. 533], upon the grounds that:

(1) the debtors’ plans were based on a “wholly specu-
lative agreement” with Hadid, “replete with holes and
contingencies” ;

(2) O&Y and MCJV, “would be subjected to contin-
uing delays, mounting costs and interest charges”, and:

The past record of the Debtors, and notably of Mr.
Gould as the controlling and dominating person, is
replete with evidence of unfounded representations,

A 44

ei rie ain ie al: hig Rl Alas UR RO Dg

Liev I A He.

= Tes thle BSL:

ATE A Bor PUT! 00

commitments and undertakings breached, and a myr-
iad of obligations, assurances and agreements un-
fulfilled and repudiated. The record in these very
proceedings, reflect the repeated experiences of part-
ners and creditors with such abandoned commit-
ments and undertakings.

(Id., Paragraph 3];

(3) “Gould, as proponent of the Debtors’ consolidated
plans, in light of his loss of credit and credibility in the
real estate and financial markets, is perhaps the least
likely prospect to achieve a prompt sale and disposition
of the properities concerned and a discharge of the claims
of creditors.” [Jd., Paragraph 5];

(4) the debtors’ plans classified the O&Y claims “in a
separate and subordinate class’, below those of other un-
secured creditors;

(5) the debtors’ plans lacked “sufficient funds . . . to
provide for the repayment of all of [O&Y’s] claims”;

(6) the debtors’ plans failed to provide for the dis-
charge of the claims of O&Y under two agreements
covering certain furniture, fixtures and equipment (the
“FF&E”’) ; and

(7) the debtors’ plans failed to provide for the pay-
ment of debtor Holywell’s liability, “to MCJV and
[O&Y] of an amount of approximately $1.7 million ...
arising from Gould’s and Holywell’s acts of diversion and
misappropriation” [Id., Paragraphs 13 and 14].

(b) the Bank [C.P. No. 535}, upon the grounds that:

(1) the debtors’ plans were misleading, and were
based upon contingencies unlikely to materialize and re-
quiring years of litigation to resolve;

(2) the debtors’ plans failed to meet the “‘best interest
of creditors” (Section 1129(a)(7)), feasibility (Section
1129(a)(11)), and “cram down” (Section 1129(b) (1) )
requirements under the Code; and

A 45

(3) the debtors’ “equitable subordination proposal in
respect to the Bank’s liens was moot in light of this
Court’s March 20, 1985 decision [C.P. No. 20 in Adv.
Pro. No. 85-0160-BKC-TCB-A] holding that two releases
executed by the debtors in favor of the Bank and its
participating lenders) barred the debtors’ claims of
wrongdoing.

(c) the MCC and MCLP Creditors’ Committees [C.P.
No. 567], upon the grounds that:

(1) the debtors’ plans were not feasible, because the
Hadid contract was “not a true and valid offer’;

(2) the matter of equitable subordination of the
Bank’s claim had been adjudicated against the debtors;

(3) the debtors’ plans would eliminate the estates’
equity because of the accrual of interest on the Bank’s
mortgages during the litigation and the Hadid contract
delays;

(4) the debtors’ plans unfairly discriminated against
creditors and were not fair and equitable;

(5) the debtors failed to comply with 11 U.S.C. § 1129
(a) (5) (A) (i) ; and

(6) the debtors made solicitations of creditors through
improper “telephone calls and a mailgram, which did not
truthfully represent the facts’, attempting in bad faith
to obtain acceptances, in contravention of 11 U.S.C.
§ 1126(e).

(d) Julian J. Studley, Inc. [C.P. No. 526], an un-
secured creditor, because of the improper classification of
its claims and failure to comply with 11. U.S.C. § 1123
(a) (4).

(e) the Holywell Creditors’ Committee [C.P. No.
516], upon the following grounds: %

(1) the “illusory” nature of the debtors’ plans because,
“they do not present a binding contract with a purchaser,

A 46

but represent merely an option to a real estate broker
which can be extended through September, 1985, under
the Contract”, and the “down payment” was merely 2
promissory note; and

(2) the debtors’ plans would entail substantial delays
because of (i) the “study period” and extensions under
the Hadid contract and (ii) the litigation involved in the
attempt to subordinate the Bank’s claims.

E. The Bank’s Plan

10. The Bank filed an amended, consolidated disclo-
sure statement and plan [C.P. No. 478] which was fur-
ther amended [C.P. No. 854] during the course of the
confirmation proceedings. The Bank also entered into
certain stipulations with the Creditors’ Committees [C.P.
No. 564, 614, 709c, and 876a]. Neither the stipulations
nor the second amendment to the Bank’s plan adversely
affected any party other than the Bank.

11. The central features of the Bank’s amended, con-
solidated plan are:

(a) the purchase by the Bank (or its designee) of
the Miami Center Project, including the FF&E, for its
MAI-appraised value of $255.6 million, comprised of (i)
satisfaction of the Bank’’s judgment lien, computing in-
terest at the contract or “good standing” rate rather
than the higher default rate, and (ii) the balance, after
closing adjustments and prorations, in new cash;

(b) the establishment of the “Miami Center Liquidat-
ing Trust”, consisting of all other assets of the debtors,
for the payment of all other claims by a court-appointed
Liquidating Trustee;

(c) the release by the Bank of its cash collateral (ap-
proximately $30 million), for addition to the new cash
generated by the sale of the Miami Center Project (ap-
proximately $13.6 million), with the combined funds to

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be used by the Liquidating Trustee to pay the claims of
all other creditors;

(d) a further financing commitment of approximately
$14.4 million by the Bank for payment of the claim of
MCJV for the FF&E, (i) if and when such claim is
allowed over the Bank’s pending objections, (ii) to the
extent other assets of the Liquidating Trust prove in-
sufficient to pay the claim, and (iii) if it is ultimately
determined that MCJV has been damaged by its (al-
legedly) improper classification under the Bank’s plan;

(e) dismissal of the District Court Action by the
Liquidating Trustee; and

(f) the consolidation of all five estates in a manner
such that the unaffiliated creditors of Holywell are paid
first, the unaffiliated creditors of the other debtors are

paid next, and the many inter-debtor and related party
claims are paid thereafter.

F. Objections to the Bank’s plan

12. Objections to the Bank’s Plan were filed by:

(a) the Holywell Creditors’ Committee [C.P. No. 515],
but these objections were subsequently withdrawn by
stipulation [C.P. No. 614, paragraph 6];

(b) O&Y [C.P. No. 532, 817a, 871], upon the grounds
that:

(1) the Bank’s plan assumes title to the MCJV FF&E
without adequate and priority payment of sums allegedly
due under the FF&E agreements; and

(2) the Bank’s plan, “fails to provide for payment of
Gould’s and Holywell Corporation’s obligations to O&Y
through MCJV of an amount of approximately $1.7

million . . . arising from Gould’s and Holywell’s acts of
diversion and misappropriation ...”.

(c) Shutts & Bowen, a cali and law firm represent-
ing the debtors [C.P. No. 537a], upon the grounds that:

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So

(1) the Bank’s plan is “unfairly discriminatory and is
not fair and equitable” to impaired classes;

(2) the Bank’s valuation of assets and claims is errone-
ous;

(3) the Bank’s plan assumes liabilities of MCJV;

(4) the Liquidafing Trust is violative of 11 U.S.C.
§ 1129(5) (A) (i) ; and

(5) the plan’s priority scheme does not comply with 11
US.C. § 1129.

(d) MCJV [C.P. No. 808], though comprised of Gould
and O&Y, in separate objections alleging that the plan

fails to provide proper payment and priority for the
MCJV FF&E claims.

(e) the debtors [C.P. No. 534, 545, 580, 849, and 888a],
upon the grounds that:

(1) the Bank’s plan fails to pay in full for the FF&E;

(2) the Bank’s plan deprives mechanics’ lien claimants’
of their security;

(3) the Bank’s plan and disclosure statement are mis-
leading;

(4) substantive consolidation would only result in “un-
just enrichment” to the Bank and other creditors;

(5) the Bank’s plan would cause the limited partners
to lose their investment and to become liable for addi-
tional taxes;

(6) the District Court Action would be “summarily”
dismissed, “without due process of law’; and

(7) the appointment of a Liquidating Trustee violates
11 U.S.C. § 1104 (a).

G. Voting by the Creditors

13. After the debtors’ and the Bank’s disclosure state-
ments were approved, and pursuant to this Court’s order

A 49

[C.P. No. 405], separate ballots for the debtors’ plans
and for the Bank’s plan were transmitted to all creditors
for return by April 29, 1985. On that date, the Court held
an initial confirmation hearing and, with the assistance
of counsel, established a procedure for the tabulation of
the ballots and for certification by the plan proponents of
the availability of all funds necessary for consummation
should a plan be confirmed [C.P. No. 611, 612, 619].

14. The requisite certificates respecting the voting and
the funding were filed by each side on May 13, 1985, as
directed [C.P. No. 658-664], and were reviewed by the
Court.

15. The voting indicated overwhelming support for the
Bank’s plan among the creditors, and rejection of the
debtors’ plans. Creditors in Classes 1 through 6 approved
the Bank’s plan by well over the minimum margins re
quired (one-half in number and two-thirds in dollar
amount, per 11 U.S.C. § 1126(c)). However, O&Y and
MCJV (Class 7 under the Bank’s plan), certain wholly-
owned subsidiaries of Holywell controlled by Gould (Class
8), and the debtors themselves (Class 9), voted against
the Bank’s plan. Accordingly, the Court was required to

determine whether the plan met the requirements of 11
U.S.C. § 1129(b).

H. Establishment of the Bank’s Lien

16. In order to establish the amount, validity, and
priority of its lien over the debtors’ property, the Bank

filed an adversary proceeding against the debtors (Adv.
Pro.No. 85-0160-BKC-TCB-A).

17. The debtors sought a stay of the scheduled trial
of the lien proceeding (a) initially in the Bankruptcy
Court [C.P. No. 3A in Adv.Pro. 85-0160], and (b) then
in the District Court Action. Both Courts refused to enter
such a stay, and the trial went forward as scheduled.

A 50

18. That proceeding culminated in the entry by this
Court of:

(a) a final judgment in favor of the Bank for principal
and interest of $234,342,742.93, plus interest of over
$75,000 per day from March 14, 1985, forward [C.P. No.
21 in Adv.Pro. 85-0160] ; and

(b) a memorandum decision upholding the two releases
executed by the debtors in favor of the Bank (and its
participating lenders), and determining that those re-
leases barred the fraud, breach of contract, usury, and
RICO theories raised by the debtors as purported defenses
in this Court and as claims in the District Court Action
(C.P. No. 20 in Adv.Pro. 85-0160}.

At the remand hearing on January 18, 1986, the debtors
presented evidence which purported to show a discrepancy
in the amount of the Bank’s lien. However, since that
amount has been embodied in a final judgment [C.P. No.
21 in Adv. Pro. 85-0160) that is now en appeal before
the District Court (Gould et al. v. The Bank of New
York, Case No. 85-2263-Civ-NCR), the Court will not
revisit that issue. The Court has also been directed to the
debtors’ brief in that appeal which states, at page 23,
that the debtors, “do not contest that the principal amount
advanced by The Bank of New York is $196,711,481.58”,
exactly the amount set forth in the final judgment [tran-
script of hearing of January 18, 1986, page 11).

I. The FF&E Leases

19. Next, as part of the continuing confirmation proc-
ess, the parties advised the Court that characterization of
two agreements, relating to the FF&E and between MCJV
and MCLP (debtor Gould was managing general partner
of each), as “true leases” cr as “financing agreements”
could be dispositive of the FF&E claims asserted by O£Y
and MCJV. The Bank filed [Adv.Pro.No. 85-0566-BKC-
TCB-A] an adversary proceeding against the affected
parties seeking a determination of the nature (secured

A 5l

or unsecured), extent, and value of such claims. The
Bank also filed an objection to the FF&E claim filed by
O&Y and MCJV [C.P. No. 811], which remains pending.

20. After an evidentiary hearing, the Court

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385019_2032%3A3. Public record. Not legal advice.