Case No. 02-43582-H4-11, JOINTLY ADMINISTEREDUnited States Bankruptcy Court, S.D. Texas, Houston Division
March 12, 2003
ORDER APPROVING DEBTORS’ EXPEDITED MOTION TO SELL CERTAIN ASSETS OF ENCOMPASS MECHANICAL SERVICES SOUTHEAST, INC. (F/K/A SIBLEY SERVICES) FREE AND CLEAR OF LIENS, CLAIMS, ENCUMBRANCES AND OTHER INTERESTS SUBJECT TO HIGHER AND BETTER OFFERS [This instrument pertains to Docket #1595]
WILLIAM R. GREENDYKE, United States Bankruptcy Judge
Upon consideration of the Debtors’ Expedited Motion to Sell Certain Assets of Encompass Mechanical Services Southeast, Inc. (f/k/a Sibley Services) Free and Clear of Liens, Claims, Encumbrances and Other Interests Subject to Higher and Better Offers (the “Motion”), dated February 26, 2003, filed by Encompass Services Corporation and certain of its direct and indirect subsidiaries, as debtors and debtors in possession (collectively, the “Debtors”); and all objections to the Motion having been overruled; and it appearing that as more specifically set forth herein, the Debtors have marketed the Assets[1] in a manner that has resulted in the sale being approved herein as being in the best interests of the Debtors’ creditors and their estates; and based on the evidence presented to the Court at the sale hearing held by the Court on March 12, 2003 (the “Sale Hearing”).
IT IS HEREBY FOUND AND DETERMINED THAT:
A. The findings and conclusions set forth herein constitute the Court’s findings of fact and conclusions of law pursuant to Federal Rule of Bankruptcy Procedure 7052, as made applicable to these proceedings pursuant to Federal Rule of Bankruptcy Procedure 9014. To the extent that any finding of fact shall later be determined to be a conclusion of law, it shall be so deemed and vice versa.
B. The Court has jurisdiction over the subject matter of the Motion pursuant to 28 U.S.C. § 1334(b) and the standing order of reference of the District Court. This matter is a core proceeding pursuant to 28 U.S.C. § 157(b)(1), (b)(2)(A), (b)(2)(N) and (b)(2)(O).
C. Venue in this Court is proper under 28 U.S.C. § 1408 and 1409.
D. In the Motion, the Debtors moved this Court for the entry of an order pursuant to 11 U.S.C. § 363(b) and (f) and 365 approving (a) the sale of certain assets of Encompass Mechanical Services Southeast, Inc. relating directly or indirectly to that portion of the business formerly operated under the name “Sibley Services,” which is based in and operating from its office on Pleasant Hill, Memphis, Tennessee, to JDT, LLC (the “Buyer”) for consideration in the amount of $100,000, plus assumption of certain liabilities, free and clear of all liens, claims, encumbrances, and other interests, and (b) the assumption and assignment of certain executory contracts and unexpired leases included in such assets.
E. Attached to the Motion was a purchase and sale agreement (the “Purchase and Sale Agreement”) with the Buyer that described, inter alia, the assets to be sold (the “Assets”), the contracts and leases to be assumed and assigned (the “Assigned Contracts”), and the purchase price.
F. The Buyer has timely completed its due diligence, and all other contingencies to the sale, save for the ordinary and customary conditions of closing, have been satisfied such that the Buyer is now ready, willing and able to close after Court approval of the sale.
G. The Debtors are the sole and lawful owners of the Assets.
H. In the Debtors’ business judgment, consummation of the proposed sale transaction is in the best interests of the Debtors’ estates and their creditors and should be authorized by this Court.
I. Based on the evidence presented to the Court at the Sale Hearing, the Court finds that the purchase price to be paid by the Buyer is fair and reasonable, the consummation of the proposed sale transaction is in the best interests of the Debtors’ estates and their creditors, and the sale to the Buyer should be authorized and approved by this Court. Further, the sale of the Assets to the Buyer pursuant to the terms presented at the Sale Hearing presents the best opportunity to realize the maximum value of the estates’ assets for distribution to creditors.
J. Section 363(b) of the Bankruptcy Code provides that a debtor-in-possession, after notice and a hearing, may sell property of the estate outside the ordinary course of business. 11 U.S.C. § 363(b), 1107(a).
K. Approval of the sale contemplated hereby is appropriate because the Debtors have demonstrated that there is “some articulated business justification for using, selling, or leasing the property outside the ordinary course of business.” Institutional Creditors of Continental Air Lines, Inc. v. Continental Air Lines, Inc. (In re Continental Air Lines, Inc.), 780 F.2d 1223, 1226 (5th Cir. 1986). Factors to be considered in evaluating such sales include the proportionate value of the asset to the estate as a whole, the duration of the proceeding, the effect on any future plan of reorganization, and the value of the proceeds to be obtained for the estate. Id. Considering the foregoing factors, the Debtors’ election to consummate the sale of the Assets is clearly justified.
L. The Court has determined that the sale of the Assets is exempt from any sales or other transfer taxes otherwise applicable, pursuant to the provisions of section 1146(c) of the Bankruptcy Code. Section 1146(c) provides that the “making or delivery of an instrument of transfer under a plan confirmed may not be taxed under any law imposing a stamp tax or similar tax.” 11 U.S.C. § 1146(c). The language of section 1146(c) has been interpreted to include transfers made pursuant to a sale outside of, but in furtherance of, effectuating a plan. See, e.g., In re United Press Int’l, Inc., Case No. 91-B-13955 (PSC) 1992 Bankr. LEXIS 842 at *4 (Bankr. S.D.N.Y., May 18, 1992).
M. The Buyer has acted in good faith in accordance with the standards of applicable law. The proposed sale transactions are the result of extended arm’s-length, good-faith negotiations.
N. The Buyer is a “good-faith” purchaser within the meaning of section 363(m) of the Bankruptcy Code, and as such is entitled to the protections afforded thereby. The reversal or modification on appeal of the authorization provided herein to consummate each of the sale shall not affect the validity of any of the sale transactions to the Buyer, unless such authorization is duly stayed pending such appeal prior to the closing of such sale transaction. No party has engaged in any conduct that would cause or permit any sale consummated pursuant to this Order to be avoided under section 363(n) of the Bankruptcy Code. The Buyer has demonstrated that it has the financial ability to close on the purchase of the Assets.
O. Upon the entry of this Order: (i) the Debtors shall have full corporate power and authority, and are directed forthwith, to execute and deliver any and all documents necessary to consummate the sale to the Buyer; (ii) the Debtors shall have all corporate power and authority necessary to take any further actions needed to consummate the sale; and (iii) no consents, approvals or further orders are required for the Debtors to consummate the sale.
P. Section 363(f) of the Bankruptcy Code provides in part that a debtor-in-possession may sell property of the estate outside the ordinary course of business free and clear of any other entity’s interest in such property if such entity consents, such interest is in bona fide dispute, or if such entity could be compelled, in a legal or equitable proceeding, to accept a money satisfaction of such interest. 11 U.S.C. § 363(f)(2), (f)(4), (f)(5), 1107(a).
Q. In this case, the Debtors believe that their pre-petition and post-petition lenders (collectively, the “Lenders”) are the only entities holding any liens on the Debtors’ assets. The Lenders have consented to the sale of the Debtors’ assets free and clear of their liens and security interests, as provided in sections 363(f) and 1129(b)(2)(A) of the Bankruptcy Code; provided, however, that the proceeds of any sale consummated pursuant to this Order shall be paid in accordance with any final order of this Court approving the Debtors’ post-petition financing.
R. Section 1129(b)(2)(A) permits a debtor to sell property subject to a lien, free and clear of such lien, if such lien attaches to the net proceeds of the sale, subject to any claims and defenses that the debtor may possess with respect thereto. In this case, the Debtors propose that any interests in the Assets to be sold by the Debtors attach to the net proceeds of the sale.
S. Section 365(a) of the Bankruptcy Code authorizes a debtor in possession to assume an executory contract or unexpired lease subject to the bankruptcy court’s approval. The standard that is historically applied in determining whether an executory contract or unexpired lease should be assumed is the debtor’s “business judgment” that assumption is in its economic best interests. Richmond Leasing Co. v. Capital Bank, N.A., 762 F.2d 1303 (5th Cir. 1985). The Debtors’ business is dependent upon its many contractual relationships with its vendors, customers, and sub-contractors. Assumption of the Assigned Contracts is a sound exercise of the Debtors’ business judgment. The Debtors have satisfied each of the requirement set forth in section 365(b)(1) of the Bankruptcy Code in connection with assumption of the Assigned Contracts.
T. The Debtors have provided counterparties to the Assigned Contracts with adequate assurance of future performance pursuant to section 365(f)(2).
U. Based upon the foregoing, the requirements of section 363(f) of the Bankruptcy Code are satisfied, and the sale of the Assets free and clear of all liens, claims, encumbrances and other interests is appropriate.
V. Rules 6004 and 9014 of the Federal Rules of Bankruptcy Procedure (the “Bankruptcy Rules”) generally require that any request to sell property free and clear of liens or other interests must be made only upon motion and on notice to all parties who have liens or other interests in the property to be sold, the Debtors’ creditors and indenture trustees, any committee appointed under the Bankruptcy Code, the United States Trustee, and any other party-in-interest requesting notice.
W. In addition to the secured creditors described above, notice of the Motion has been given to all parties on the Debtors’ Official Combined Service List, all known parties in interest who could assert liens against the Assets, the Buyer, and counterparties to the Assigned Contracts (with the exception of de minimis Assigned Contracts). The Debtors have provided adequate notice of the sale to be consummated pursuant to this Order and of the Sale Hearing. including adequate notice of assumption and assignment of the Assigned Contracts.
BASED ON THE FOREGOING, IT IS THEREFORE
ORDERED that the Motion of the Debtors is hereby granted in all respects; that this Order constitutes a Final Order within the meaning of 28 U.S.C. § 158(a); and that the provisions of this Order are non-severable and mutually dependent; and it is further
ORDERED that the sale and transfer of the Assets to the Buyer, as described in this Order, is in all respects approved and the sale approved herein is in the best interests of the Debtors, their estates and their creditors; and it is further
ORDERED that the sale and transfer of the Assets to the Buyer shall:
(i) Be free and clear of any and all liens, claims, interests and encumbrances of any kind, nature or description, including but not limited to any claim as defined in Section 101(5) of the Bankruptcy Code, whether arising prior to or after the Commencement Date with all such liens, claims, encumbrances and interests to attach to the proceeds of the sale in the order of their priority, with the same validity, force and effect which they now have as against the Assets, subject to any claims and defenses the Debtors may possess with respect thereof; provided, however, that the proceeds of any sale consummated pursuant to this Order shall be paid in accordance with any final order of this Court approving the Debtors’ post-petition financing; and provided further, that any rights of equitable subrogation or other equitable lien rights held or to be held by any surety in projects subject to an Assigned Contract for which the surety has issued a payment or performance bond, due to the surety’s performance under such bond, shall remain in effect, subject to any defenses parties in interest may possess with respect thereto;
(ii) Constitute a legal, valid and effective transfer of the Assets to the Buyer and, upon closing, marketable title to such Assets shall vest with the Buyer;
(iii) Be binding upon the Debtors, their creditors, any subsequent trustee that may be appointed in Debtors’ bankruptcy cases and the reorganized Debtors, including the appropriate representative(s) of the reorganized Debtors;
(iv) Constitute a sale and transfer in exchange for reasonably equivalent value and fair consideration under the Bankruptcy Code and the laws of the United States, any state, territory, possession or the District of Columbia; and
(v) Constitute transactions undertaken in good faith on behalf of the Buyer and the Debtors; and it is further
ORDERED that under no circumstances shall the Buyer be deemed a successor of or to any Debtor for any lien, claim, encumbrance or other interest against or in a Debtor or the Assets of any kind or nature whatsoever. Except as expressly permitted or otherwise specifically provided for in the Purchase and Sale Agreement or this Order, the sale, transfer, assignment and delivery of the Assets to the Buyer under the Purchase and Sale Agreement shall not be subject to any lien, claim, encumbrance or other interest, and all liens, claims, encumbrances or other interests of any kind or nature whatsoever shall remain with, and continue to be obligations of, the Debtors. All persons holding liens, claims, encumbrances or other interests of any kind or nature whatsoever against or in the Debtors or the Assets of any kind of nature whatsoever shall be, and hereby are, forever barred, estopped, and permanently enjoined from asserting, prosecuting, or otherwise pursuing such liens, claims, encumbrances or other interests against the Buyer, its property, successors and assigns, or the Assets with respect to any liens, claims, encumbrances or other interests of any kind or nature whatsoever such person or entity had, has or may have against or in the Debtors or their estates, officers, directors or shareholders or the Assets. Following the closing of the sale to the Buyer under the Purchase and Sale Agreement, no holder of any lien, claim, encumbrance or other interest in the Debtors shall interfere with such Buyer’s title to or use and enjoyment of the Assets sold to such Buyer based upon or related to such lien, claim, encumbrance or other interest or any actions that the Debtors may take in its chapter 11 case; and it is further
ORDERED that the sale and transfer of the Assets was entered into following arm’s-length, good faith, non-collusive negotiations and the sale of the Assets represents a good faith transaction, and the Buyer, as transferee, is a “good faith” purchaser within the meaning of section 363(m) of the Bankruptcy Code and, therefore, entitled to the protections afforded by such section in the event of a reversal or modification on appeal of this Order and the Buyer is hereby granted such protection. The consideration provided by the Buyer for the Assets to be sold to such Buyer is fair and reasonable and the sale may not be avoided under 11 U.S.C. § 363(n); and it is further
ORDERED that the terms and conditions of the sale of the Assets to the Buyer represents fair and reasonable consideration and the amount paid by the Buyer for the Assets represents the highest and best offer for such Assets; and it is further
ORDERED that every federal, state and local government agency or department shall be and hereby is authorized and directed to accept any and all documents and instruments necessary and appropriate to consummate all transactions contemplated by this Order and in reasonable compliance with the applicable laws and regulations of such agency or department; and it is further
ORDERED that the Debtors are hereby authorized and directed to take all appropriate actions necessary to consummate the sale transaction; and it is further
ORDERED that the Buyer is hereby ordered to close the sale in accordance with the Motion, the terms of the Purchase and Sale Agreement and this Order, except that any Purchase and Sale Agreement, when executed, and any related agreements, documents or other instruments may be modified, amended or supplemented by the parties thereto in accordance with the terms thereof without further order of the Court, provided that any such modification, amendment or supplement is not material; and it is further
ORDERED that the clerk of each filing and recording office of the respective parishes and/or counties in which any liens or encumbrances shall have been filed on Debtors’ interests in the Assets is hereby ordered to cancel and remove from the public records of such parishes and counties all such liens and encumbrances from the Assets; and it is further
ORDERED that upon the Debtors’ and the Buyer’s request, any and all holders of any liens or encumbrances filed of public record on the Assets are hereby ordered to execute a release of such liens and encumbrances as they affect the Assets; and it is further
ORDERED that the provisions of Bankruptcy Rules 6004(g) and 6006(d) shall not apply to stay consummation of the sale to the Buyer under the Purchase and Sale Agreement, as contemplated in the Motion and approved by this Order, and the Debtors and the Buyer are hereby authorized to consummate the transactions contemplated and approved herein immediately upon entry of this Order; and it is further
ORDERED that the provisions of this Order shall not be modified or superseded by any subsequent order including, without limitation, an order of liquidation, approving a sale of other assets pursuant to section 363 of the Bankruptcy Code, granting relief from the automatic stay or abandonment with regard to any property that is the subject of the Purchase and Sale Agreement, or authorizing any distribution or disposition of property pursuant to chapter 7 of the Bankruptcy Code. Unless consented to by the Buyer, no subsequent Order of this Court may conflict with the terms or provisions of this Order, and this Order shall survive entry of, and shall govern with respect to any conflict with, any subsequent Order, including the terms, conditions, and provisions of an Order confirming any plan of reorganization or liquidation; and it is further
ORDERED that the Debtors and their officers, employees, and agents are hereby authorized and directed to execute such documents as are necessary or desirable to carry out the sale of the Assets as authorized herein; and it is further
ORDERED that the Debtors are authorized to assume the Assigned Contracts and to assign such Assigned Contracts to the Buyer; provided,however, that Automotive Rentals, Inc.’s agreement to a partial assignment of obligations under its master lease shall not constitute a waiver of rights under the master lease, and such assignment includes assumption by the Buyer of any personal property tax obligation on vehicles subject to assignment; and it is further
ORDERED that pursuant to section 1146(c) of the Bankruptcy Code, the sale of the Assets to the Buyer and the transactions contemplated and authorized herein shall be exempt from any and all transfer, stamp, value-added, recording and similar taxes, and any transfer or recording fees or other similar costs incurred or assessed by any federal, state, local or foreign taxing authority (including interests and penalties, if any) in connection with the sale of the Assets to the Buyer and the transactions contemplated and authorized herein; and it is further
ORDERED that this Court shall retain its jurisdiction to hear and determine all matters arising from or related to the sale of the Assets to the Buyer and the construction, performance and enforcement of the Purchase and Sale Agreement, a sale, any relief granted herein, or this Order.