In re Figter Limited

Figter Limited (Figter) (plaintiff), the owner of Skyline Terrace, a 198-unit rental apartment complex, filed a Chapter 11 bankruptcy petition. Figter’s only secured creditor was Teachers Insurance and Annuity Association of America (Teachers) (defendant), which held a $15,600,000 promissory note secured by a first deed of trust on the property and $1,400,000 cash. Thirty-four unsecured claims were held by various creditors. Figter proposed a reorganization plan in which Teachers would be paid off in full. Skyline Terrace would be converted into condominiums, with Teachers being paid as units sold. The plan proposed paying the unsecured creditors 80 percent of the value of their claims. Teachers opposed Figter’s plan because, inter alia, the condo conversion might result in an unwieldy lien situation. Teachers offered to purchase the claims of the unsecured creditors for 100 percent of their value. The holders of 21 claims sold them to Teachers. Without objection by the unsecured creditors who did not sell, Teachers filed judicial notices for the transfer of such claims. Because Teachers withheld its acceptance of Figter’s reorganization plan on behalf of both the secured and unsecured creditor classes, the plan was not confirmable under 11 U.S.C. § 1129. The bankruptcy court concluded that Teachers had not acted in bad faith and that each of the 21 claims it purchased was entitled to a separate vote. The district court affirmed. Figter appealed.