Unpublished Disposition, 935 F.2d 273 (9th Cir. 1989)

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U.S. Court of Appeals for the Ninth Circuit - 935 F.2d 273 (9th Cir. 1989)

In re CINEMA CITY CAR WASH, INC., Debtor.David R. HABERBUSH, Chapter 11 Trustee of Cinema City CarWash, Plaintiff,andCinema City Car Wash, Inc., Appellant,v.GARFIELD BANK, Defendant-Appellee.

No. 90-55771.

United States Court of Appeals, Ninth Circuit.

Submitted June 6, 1991.* Decided June 10, 1991.

Before D.W. NELSON, O'SCANNLAIN and TROTT, Circuit Judges.


The bankrupt debtor, Cinema City Car Wash, Inc., challenges the district court's affirmance of the bankruptcy court's approval of a compromise between its Chapter 11 trustee and its secured creditor, Garfield Bank. Cinema City contends that the compromise, which authorizes the trustee to sell the estate's realty and associated personalty, was approved without a full and fair examination of the Bank's claims and does not provide sufficient consideration to the bankrupt estate.1  We now affirm.

* The bankruptcy court had proper jurisdiction under 28 U.S.C. § 157; the district court had proper jurisdiction under 28 U.S.C. § 158; and this court has proper jurisdiction over this timely appeal under 28 U.S.C. § 1291. "Because we are in as good a position as the district court to review the bankruptcy court's findings, we independently review the bankruptcy court's decision." In re Herbert, 806 F.2d 889, 891 (9th Cir. 1986). We review the bankruptcy court's findings of fact for clear error and its conclusions of law de novo. Id.


Bankruptcy Rule 9019(a) provides that " [o]n motion by the trustee and after a hearing on notice to creditors, the debtor and indenture trustees as provided in Rule 2002(a) and to such other entities as the court may designate, the court may approve a compromise or settlement" between the bankrupt estate and a creditor or class of creditors. Bankr.R. 9019(a) (1988). A bankrupt debtor has standing to challenge such an agreement between its trustee and its creditors. In re S.F. Bros. Co., 151 F. Supp. 150, 151 (E.D. Mich. 1955). However, the bankruptcy court's approval of a compromise will be upheld if the court (a) provided the notice and hearing that the Rule requires and (b) did not abuse its discretion in determining that the trustee's offer or acceptance of the compromise was in the best interests of the bankrupt estate. See In re A & C Properties, 784 F.2d 1377, 1380 (9th Cir. 1986) ("bankruptcy court's order approving the trustee's application to compromise ... is reviewed for an abuse of discretion"); 11 U.S.C. § 704(a) (1988) (trustee must close the estate "as expeditiously as is compatible with the best interests of [the] parties in interest").

Here, the record clearly reflects that Cinema City received proper notice and a proper hearing on its objections to the compromise. Indeed, Cinema City has essentially conceded this much. See Brief for Appellant at 4-5. The only question, therefore, is whether the bankruptcy court abused its discretion in determining that the compromise is in the best interests of the estate.

In determining the fairness, reasonableness and adequacy of a proposed settlement agreement, the [bankruptcy] court must consider:

(a) The probability of success in the litigation; (b) the difficulties, if any, to be encountered in the matter of collection; (c) the complexity of the litigation involved, and the expense, inconvenience and delay necessarily attending it; (d) the paramount interest of the creditors and a proper deference to their reasonable views in the premises.

A & C Properties, 784 F.2d at 1381 (quoting In re Flight Transp. Corp. Sec. Litig., 730 F.2d 1128, 1135 (8th Cir. 1984) (citations omitted)).

Here again, the record clearly reflects that the bankruptcy court properly discharged its duties. The court explicitly weighed the above considerations before approving the proposed compromise. See In re Cinema City Car Wash, Inc., No. 83-19515 at p 10 (Bankr.C.D. Cal. Nov. 13, 1989) (order approving compromise). "The law favors compromise and not litigation for its own sake, and as long as the bankruptcy court amply considered the various factors that determined the reasonableness of the compromise, the court's decision must be affirmed." A & C Properties, 784 F.2d at 1381 (citations omitted). Cinema City has presented no evidence to warrant finding an abuse of discretion in the bankruptcy court's consideration of the compromise, and it has cited no legal authority whatsoever to support its position.

Cinema City's contention that the compromise provides legally insufficient consideration to the estate is equally without merit. By its plain terms, the compromise settles the estate's disputes with Garfield Bank. The estate's trustee has agreed to pay the Bank nearly $1.65 million to satisfy claims secured by the subject property in return for the Bank's consent to sale of the property and its release of those claims. The estate is clearly receiving a benefit in the bargain.

Moreover, the bankruptcy court expressly found that the terms of the compromise "are fair, reasonable and in the best interests of the creditors and the estate." In re Cinema City Car Wash, Inc., No. 83-19515 at p 1. In fact, the court found that " [t]he sale price [of $2,580,000] is the best price obtainable under the circumstances," id. at p 6, and represents the property's fair market value. Id. at p 7. Cinema City has presented no evidence to demonstrate that the court's valuation is clearly erroneous. Given that valuation and the terms of the compromise, this court cannot conclude that the bankruptcy court abused its discretion in finding that the compromise is beneficial to the estate.



The panel unanimously finds this case suitable for submission on the record and briefs and without oral argument. Fed. R. App. P. 34(a), Ninth Circuit R. 34-4


This disposition is not appropriate for publication and may not be cited to or by the courts of this circuit except as provided by Ninth Circuit R. 36-3


Cinema City also argued below that the bankruptcy court did not properly consider the adequacy of the Bank's proffered collateral, a letter of credit, before approving the compromise. Having concluded that this court's decision in a related appeal, In re Cinema City Car Wash, Inc., No. 87-6577 (9th Cir. May 23, 1990) (unpublished), has mooted that contention, Cinema City has since abandoned that argument, and we therefore need not address it. See Brief for Appellant at 6