Boston Post Road Limited Partnership v. Federal Deposit Insurance Corporation

Boston Post Road Limited Partnership (BPR) (debtor) owned a residential and office complex in Connecticut. In 1988 BPR took out a loan from Connecticut Bank and Trust Company (Connecticut Bank). In exchange, BPR granted Connecticut Bank a mortgage in the complex. BPR defaulted on the mortgage, and Connecticut Bank initiated a foreclosure action against BPR. During the proceedings, Connecticut Bank became insolvent, and the Federal Deposition Insurance Company (FDIC) (creditor) became the holder of the mortgage in the complex. BPR filed for Chapter 11 bankruptcy to delay the foreclosure. The FDIC filed a proof of claim in BPR’s bankruptcy proceedings that contained secured and unsecured portions. BPR proposed a reorganization plan with several classes of creditors. The proposed plan included two classes of unsecured creditors—one class for the unsecured portion of the FDIC’s claim, and another class for BPR’s other unsecured creditors. The proposed plan also included a class of secured creditors who were tenants in the residential complex. The FDIC, BPR’s largest creditor, opposed the reorganization plan. Two classes of noninsider creditors—the non-FDIC unsecured creditors and the residential tenants—voted to approve the plan. At the confirmation hearing, the bankruptcy court held that BPR had improperly classified its creditors. The bankruptcy court reasoned that all of BPR’s unsecured creditors, including the FDIC, should have been included in the same class. The bankruptcy court also held that the residential tenants were not impaired creditors and, therefore, were not entitled to vote on the plan. The bankruptcy court concluded that the plan had not been properly approved by BPR’s creditors. The district court affirmed the bankruptcy court. BPR appealed.