HERMANOS TORRES PEREZ INC

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
IN THE UNITED STATES BANKRUPTCY COURT FOR
THE DISTRICT OF PUERTO RICO
IN RE:
CASE NO. 09-05585 MCF
HERMANOS TORRES PEREZ INC 	Chapter 11
XXX-XX9491
FILED & ENTERED ON 06/02/2010
Debtor(s)
ORDER AND OPINION
BACKGROUND
The debtor in the instant case filed a voluntary petition for relief under
Chapter 11 of the Bankruptcy Code on July 7, 2009 (Docket No. 1). 	On November 2,
2009, debtor filed a first request for extension of the exclusivity period, where
it requested an extension of thirty (30) days to file a Disclosure Statement and
a Plan of Reorganization, and a period of sixty (60) days after the entry of an
Order 	approving 	the 	Disclosure 	Statement 	to 	solicit 	approval 	and 	secure
acceptance of a Plan of Reorganization (Docket No. 47).
On November 20, 2009, debtor filed a second motion requesting extension of
the exclusivity period. 	This time, debtor requested until January 10, 2010, to
file 	the 	Disclosure 	Statement 	and 	Plan 	of 	Reorganization, 	and, 	likewise, 	an
extension 	of 	sixty 	(60) 	days 	following 	the 	entry 	of 	an 	Order 	approving 	the
Disclosure Statement to secure acceptance of a Plan of Reorganization (Docket No.
53).
The Court issued an Order on December 4, 2009, granting debtor’s request
for extension of the exclusivity period to file a chapter 11 plan until January
Case:09-05585-EAG11 Doc#:147 Filed:06/02/10 Entered:06/02/10 13:12:10 Desc: Main
Document Page 1 of 10

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
10, 2010 (Docket No. 63). 	Debtor filed its Disclosure Statement and Chapter 11
Plan of Reorganization on January 11, 2010. (Docket No. 79 and 80). 1
Peerless 	Oil 	& 	Chemicals, 	Inc. 	(“Peerless”), 	a 	creditor 	and 	party 	in
interest in the present bankruptcy proceedings, filed a motion for leave to file
a competing Chapter 11 plan on April 22, 2010 (Docket No. 133). 	Debtor opposed
Peerless’ request on April 29, 2010, on the basis that debtor is still within its
extended exclusivity period; thus Peerless is impeded from proposing a competing
plan 	at 	this 	time 	(Docket 	No. 	139). 	Debtor’s 	position 	is 	premised 	on 	the
argument that the sixty (60) day exclusivity period for debtor to solicit votes
and obtain the acceptance of the Chapter 11 plan was automatically extended by
the Court’s December 4, 2009 Order.
Peerless filed a reply to debtor’s opposition on May 10, 2010 (Docket No.
144).
DISCUSSION
Before initiating our review, we must first recognize and take into account
how the law of the case of the instant proceedings correlates with the issue at
hand.
The "law of the case" doctrine "makes binding upon a court a ruling made
[in] the same . . . level [of court] during prior stages of the same litigation."
Lacy v. Gardino, 791 F.2d 980, 984 (1st Cir. 1986); Whitehouse v. Laroche, 277
F.3d 568, 573 (1st Cir. 2002). “The law of the case doctrine is a prudential
principle 	that 	'precludes 	relitigation 	of 	the 	legal 	issues 	presented 	in
successive stages of a single case once those issues have been decided.'" 	Field
v. Mans, 157 F.3d 35, 40 (1st Cir. 1998)(quoting Cohen v. Brown Univ., 101 F.3d
155, 167 (1st Cir. 1996)). 	Once an order is final, and the same has not been
appealed, it becomes the law of the case. 	First Am. Title Ins. Co. v. Pifalo (In
re Pifalo), 379 B.R. 1, 4 (B.A.P. 1st Cir. 2007).
1 Given that January 10, 2010 fell on a Sunday, and in accordance with Fed. R. Bank. P. 9006(a),
debtor timely filed its extended Chapter 11 Plan of Reorganization on January 11, 2010 (Docket No. 79
and 80).
Case:09-05585-EAG11 Doc#:147 Filed:06/02/10 Entered:06/02/10 13:12:10 Desc: Main
Document Page 2 of 10

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
In the case at bar, debtor filed a first request for extension of both the
filing and acceptance exclusivity periods on November 2, 2009, that is, one
hundred 	and 	eighteen 	(118) 	days 	after 	the 	order 	of 	relief 	(Docket 	No. 	47).
Before the Court had an opportunity to rule upon debtor’s request, and during the
extended term proposed by debtor, on November 20, 2009, debtor filed a second
motion 	requesting, 	again, 	the 	extension 	of 	both 	the 	filing 	and 	acceptance
exclusivity periods (Docket No. 53).
This Court issued an Order on December 4, 2009, which determined that
“[d]ebtor(s)’ 	request 	for 	extension 	of 	the 	exclusivity 	period 	for 	filing 	a
chapter 11 plan...is hereby granted, until January 10, 2010.” (Docket No. 63)
(emphasis 	added). 	Debtor 	did 	not 	request 	reconsideration, 	nor 	appealed, 	the
Court’s December 4, 2009 mandate.
Given 	the 	above-delineated 	background, 	there 	is 	no 	question 	that 	the
Court's 	December 	4, 	2009 	ruling 	to 	extend 	the 	exclusivity 	period 	to 	file 	a
Chapter 11 plan became the law of the case. 	Therefore, it is undisputed that the
Court only conceded the extension of the exclusivity period to file the Chapter
11 plan, and not the exclusivity period to accept the plan.
Notwithstanding the above, debtor argues at its opposition to Peerless'
request for leave to file a competing plan that the Court's order extending the
exclusivity period to file the Chapter 11 plan had, as a matter of law, the
immediate and automatic effect of extending the exclusivity period to accept the
Chapter 11 plan (Docket No. 139). 	Debtor's argument is a novel one and a matter
of first impression before this Court.
As such, the main controversy before this Court becomes the following: was
debtor’s exclusivity period to accept the plan automatically extended by virtue
of the Court’s extension of debtor’s exclusivity period to file a Chapter 11
plan?
Case:09-05585-EAG11 Doc#:147 Filed:06/02/10 Entered:06/02/10 13:12:10 Desc: Main
Document Page 3 of 10

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
In order to consider this issue, we must first analyze how the exclusivity
period, and its extensions thereof, operate under the Bankruptcy Code. 	We begin
our review by considering the contents of section 1121.
Section 1121 states at its pertinent parts:
(a) 	The 	debtor 	may 	file 	a 	plan 	with 	a 	petition 	commencing 	a
voluntary case, or at any time in a voluntary case or an involuntary
case.
(b) 	Except as otherwise provided in this section, only the debtor
may file a plan until after 120 days after the date of the order for
relief 	under 	this 	chapter.
(c) 	Any party in interest, including the debtor, the trustee, a
creditors' 	committee, 	an 	equity 	security 	holders' 	committee, 	a
creditor, an equity security holder, or any indenture trustee, may
file a plan if and only if--
(1) 	a 	trustee 	has 	been 	appointed 	under 	this 	chapter;
(2) the debtor has not filed a plan before 120 days after the
date of the order for relief under this chapter; or
(3) 	the 	debtor 	has 	not 	filed 	a 	plan 	that 	has 	been 	accepted,
before 180 days after the date of the order for relief under this
chapter, by each class of claims or interests that is impaired under
the plan.
11 U.S.C. § 1121(a)–(c).
Sections 1121(b) and (c) of the Bankruptcy Code contains what is commonly
referred to as the “exclusivity period” provisions in a Chapter 11 context.
These sections codify those periods of time in which the debtor, and only the
debtor, may file a Chapter 11 plan and/or solicit acceptance of the Chapter 11
plan. 	Creditors and other parties in interest are barred from filing a competing
plan during this time.
Section 	1121(c) 	separates 	the 	exclusivity 	periods 	in 	two 	separate
categories. 	The first is a 120-day period to file a Chapter 11 plan (the “filing
period”), and the second is a 180-day period for accepting the Chapter 11 plan
(the “acceptance period”). 	Both of these periods commence after the order for
relief has been entered and they both run concurrently. 	In re Gibson & Cushman
Dredging Corp., 101 B.R 405, 407 (E.D.N.Y. 1989). 	From a practical standpoint,
both of these exclusivity periods operate in the following fashion: debtor is
allotted 120 days after the order of relief to file a Chapter 11 plan, and,
Case:09-05585-EAG11 Doc#:147 Filed:06/02/10 Entered:06/02/10 13:12:10 Desc: Main
Document Page 4 of 10

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
subsequently, debtor shall have an additional 60 days to get said plan confirmed
(120 + 60 = 180 days).
Section 1121(c) lists the three instances in which debtor’s exclusivity
period will conclude. 	These instances are: (1) the appointment of a Chapter 11
trustee, (2) should debtor not file a Chapter 11 plan within the 120 day filing
period, or (3) should debtor not be able to accept a timely filed Chapter 11 plan
within the 180 day acceptance period.
The 	three 	events 	listed 	at 	section 	1121(c) 	are 	in 	the 	disjunctive.
Therefore, “[o]nce one of these instances occurs, the debtor's exclusive right to
file a plan ends, and competing plans are fai[r] game.” 	In re Grant Family
Farms, Inc., 2007 Bankr. LEXIS 2779 (Bankr. D.Co. 2007).
Section 1121(d) provides debtor the opportunity to move the Court for an
extension of the exclusivity periods to file and/or to accept a Chapter 11 plan.
This section provides:
(d) (1) Subject to paragraph (2), on request of a party in interest
made within the respective periods specified in subsections (b) and
(c) of this section and after notice and a hearing, the court may
for 	cause 	reduce 	or 	increase 	the 	120-day 	period 	for 	the 	180-day
period referred to in this section.
(2) (A) The 120-day period specified in paragraph (1) may not be
extended beyond a date that is 18 months after the date of the order
for relief under this chapter.
(B) The 180-day period specified in paragraph (1) may not be
extended beyond a date that is 20 months after the date of the order
for relief under this chapter.
(2) the time the case is closed or dismissed.
11 U.S.C. § 1121(d).
Pursuant to section 1121(d), a debtor may extend the 120-day filing period,
as well as may extend the 180-day acceptance period, should debtor meet the
following requirements:
1. 	The request must be timely:
a. 	For an extension of the filing period, the same must be made
within 120 days after the order of relief;
b. 	For an extension of the acceptance period, the same must be
made within 180 days after the order of relief;
Case:09-05585-EAG11 Doc#:147 Filed:06/02/10 Entered:06/02/10 13:12:10 Desc: Main
Document Page 5 of 10

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
2. 	The requested extension may not be:
a. 	Greater 	than 	18 	months 	after 	the 	order 	of 	relief 	for
extensions of the filing exclusivity period;
b. 	Greater 	than 	20 	months 	after 	the 	order 	of 	relief 	for
extensions of the acceptance exclusivity period
3. 	Debtor must show the existence of cause for the extension; and
4. 	Notice and hearing must be afforded to all parties in interest.
Even though section 1121 lists the filing period as being separate and
distinct 	from 	the 	acceptance 	period, 	some 	courts 	have 	applied 	the 	extension
provisions of section 1121(d) in very different ways. 	In this regard, “[t]here
is 	disagreement 	among 	the 	bankruptcy 	courts 	on 	the 	question 	of 	whether 	the
exclusive period for obtaining acceptances is automatically extended whenever the
exclusive period for filing a plan is extended.” 	7-1121 Collier on Bankruptcy P
1121.04.
The cases of In re Barker Estates, Inc., 14 B.R. 683 (Bankr. W.D.N.Y. 1981)
and In re Trainer's, Inc., 17 B.R. 246 (Bankr. E.D. Pa. 1982) have found that the
filing period and the acceptance period are mutually exclusive, and that the
extension 	of 	the 	filing 	period 	does 	not 	automatically 	extend 	the 	180 	day
acceptance period. 	On the other hand, cases such as In re Ravenna Industries,
Inc., 20 B.R. 886 (Bankr. N.D. Ohio 1982) and In re Judd, 173 B.R. 941 (Bankr. D.
Kan. 1994) have held that “where a debtor asks for an extension of the 120-day
period and an extension is granted without objection by any party in interest,
then the extension automatically operates to extend the 180-day period as well.”
Ravenna Industries, 20 B.R. at 891.
The case of In re United Press International, Inc., 60 B.R. 265 (Bankr.
D.C. 	1986), 	however, 	presents 	an 	interesting 	approach 	with 	regards 	to 	the
extension of the exclusivity periods:
Sections 1121(c)(2) and (c)(3) relate to two different acts, within
two consecutive time periods. But unless and until the first act
takes place, the second act -- and its time period -- simply do not
yet come into play. Logically, a plan cannot be accepted until it
Case:09-05585-EAG11 Doc#:147 Filed:06/02/10 Entered:06/02/10 13:12:10 Desc: Main
Document Page 6 of 10

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
has been filed; hence, § 1121(c)(3) does not become operative until
a 	plan 	has 	been 	filed. 	Therefore, 	however 	many 	times 	and 	for
whatever periods extensions are granted for the carrying out of the
first act, the time limit for carrying out the second act has no
applicability until the first act -- the filing of the debtor's plan
-- has actually taken place. At that point, the time period for
accomplishing 	the 	second 	act 	becomes 	relevant 	again, 	and 	at 	or
before 	that 	point 	the 	debtor 	must 	request 	an 	extension 	for
completion of the second act -- obtaining acceptances of the plan
that has been filed.
Id. at 269 (emphasis added).
Given 	the 	lack 	of 	uniformity 	among 	the 	bankruptcy 	courts 	as 	to 	the
extension provisions of section 1121(d), and in order for this Court to properly
evaluate 	debtor’s 	position 	on 	whether 	the 	acceptance 	period 	should 	be
automatically extended when the filing exclusivity period has been extended, we
must turn to the intent and history surrounding section 1121 of the Bankruptcy
Code.
Prior to the enactment of section 1121 as part of the Bankruptcy Reform Act
of 1978, the debtor enjoyed the sole right to propose a plan of reorganization
throughout the bankruptcy proceedings of a chapter XI case (which later became
the Chapter 11 of our current Bankruptcy Code). Gibson, 101 B.R. at 409. 	This
exclusive right gave debtors an “undue bargaining leverage, because by delay he
can force a settlement out of otherwise unwilling creditors...The debtor is in
full control, often to the unfair disadvantage of creditors.” 	Report of the
Committee on the Judiciary, House of Representatives, to accompany H.R.8200, H.R.
Rep. No. 95-595, 95th Cong., 1st Sess., pp. 231-232 (1977); In re Public Serv.
Co. of New Hampshire, 88 B.R. 521, 534-535 (Bankr. D.N.H. 1988).
Section 1121, including its provisions for debtor’s exclusivity period and
its extensions thereafter, was enacted by Congress as a means to balance debtor's
exclusive right to propose a plan while recognizing the stake of the creditors in
debtor's business.
Proposed chapter 11 recognizes the need for the debtor to remain in
control 	to 	some 	degree, 	or 	else 	debtors 	will 	avoid 	the
reorganization provisions in the bill until it would be too late for
them 	to 	be 	an 	effective 	remedy. 	At 	the 	same 	time, 	the 	bill
recognizes the legitimate interests of creditors, whose money is in
Case:09-05585-EAG11 Doc#:147 Filed:06/02/10 Entered:06/02/10 13:12:10 Desc: Main
Document Page 7 of 10

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
the enterprise as much as the debtor's, to have a say in the future
of the company.
Report of the Committee on the Judiciary, House of Representatives, pp. 231-232;
Public Serv. Co., 88 B.R. at 534-535.
“The goal reflected in 11 U.S.C. § 1121, in allowing other interested
parties to file a plan of reorganization after the expiration of the debtor's
exclusivity period, was predicated on the theory that there should be a relative
balance 	of 	negotiating 	strength 	between 	debtors 	and 	creditors 	during 	the
reorganization process.” 	In re Texaco, Inc., 76 B.R. 322, 325 (Bankr. S.D.N.Y.
1987). 	By way of section 1121, Congress intentionally created an ongoing tension
between 	the 	debtor 	and 	its 	creditors 	“which 	will 	hopefully 	lead 	to 	[an]
appropriate 	administration 	of 	and 	a 	successful 	conclusion 	to 	the 	Chapter 	11
case.” 	In re Tony Downs Foods Co., 34 B.R. 405, 407 (Bankr. Minn. 1983).
It is uncontested that debtor requested on two separate occasions for the
extension 	of 	both 	the 	filing 	and 	acceptance 	exclusivity 	periods. 	Despite
debtor’s requests, the Court solely, and exclusively, conceded the extension of
the 120-day filing exclusivity period at its December 4, 2009 ruling. 	Based on
this, and as above discussed, the law of the case in the instant proceedings is
clear, whereby debtor's 120-day filing period, and only debtor's 120-day filing
period, was extended until January 11, 2010.
In view of the facts herein discussed, and in consideration of the legal
analysis above-exposed, the Court is persuaded to apply the standard adopted in
the cases of In re Barker Estates, Inc., 14 B.R. 683, and In re Trainer's, Inc.,
17 B.R. 246, with regards to the issue on whether the exclusivity period to
accept a Chapter 11 plan should be automatically extended whenever the filing
exclusivity period has been extended under section 1121(d).
As such, it is the Court’s position that the filing exclusivity period and
the acceptance exclusivity period are, indeed, mutually exclusive between each
other. 	This is made apparent by the clear language of sections 1121(c) and
1121(d) (which separates the filing period from the acceptance period to the
Case:09-05585-EAG11 Doc#:147 Filed:06/02/10 Entered:06/02/10 13:12:10 Desc: Main
Document Page 8 of 10

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
extent that the Bankruptcy Code gives each one a different deadline) as well as
by 	debtor’s 	own 	actions 	where, 	on 	two 	different 	and 	distinct 	motions, 	it
separated the request for extension of the exclusivity period to file a Chapter
11 plan from the request for extension of the exclusivity period to solicit votes
and accept the plan (Dockets No. 47 and 53).
It is this Court’s position that the extension of the 120-day filing period
does not automatically extend the 180-day acceptance period. 	We believe that
this interpretation is more in tune with Congress’ intent of promoting a healthy
tension between the debtor-in-possession and the creditors during the Chapter 11
bankruptcy administration. 	Furthermore, this application coincides with the
Court’s December 4, 2009 decision. 	In this regard, “it has been held that courts
considering extensions of the exclusivity period must ‘avoid reinstituting the
imbalance between the debtors and its creditors that characterized proceedings’
under prior law.” 	Gibson, 101 B.R. at 409 (quoting In re Timbers of Inwood
Forest Associates, Ltd., 808 F.2d 363, 372 (5th Cir. 1987), aff'd en banc, 484
U.S. 365, 98 L. Ed. 2d 740, 108 S. Ct. 626 (1988)).
Debtor’s original exclusivity period to file a Chapter 11 plan in the
instant case was due on November 4, 2009, and the original exclusivity period to
accept the Chapter 11 plan was due on January 4, 2010. 	By virtue of this Court’s
December 4, 2009 Order, the exclusivity period to file the Chapter 11 plan was
extended until January 11, 2010. 	However, the exclusivity period deadline to
obtain acceptances for the plan remained the same, that is, until January 4,
2010. 	According to the case record, debtor did not request any additional time
to extend either the filing and/or acceptance exclusivity periods.
Based on the law of the case, both the filing exclusivity period and the
acceptance 	exclusivity 	period 	elapsed 	on 	January 	11 	and 	January 	4, 	2010,
respectively. 	Therefore, any creditor or party in interest would have been able
to file a competing plan since January 12, 2010.
Case:09-05585-EAG11 Doc#:147 Filed:06/02/10 Entered:06/02/10 13:12:10 Desc: Main
Document Page 9 of 10

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Debtor 	has 	been 	operating 	under 	the 	presumption 	that 	its 	request 	for
extension 	of 	the 	180-day 	acceptance 	period 	was 	tacitly 	and/or 	automatically
approved by this Court at the December 4, 2009 Order. 	As such, according to
debtor’s 	calculations, 	the 	extended 	acceptance 	period 	would 	have 	been 	for 	a
period 	of 	sixty 	(60) 	days 	following 	the 	entry 	of 	an 	Order 	approving 	the
Disclosure Statement (Docket No. 53). 	Given that the Disclosure Statement was
not approved until April 20, 2010, debtor was under the impression that the
extended 	exclusivity 	period 	for 	accepting 	the 	Chapter 	11 	plan 	(had 	it 	been
approved by the Court) would have concluded on June 21, 2010.
Pursuant to the facts at bar, and the memorandum herein portrayed, we can
observe 	that 	the 	filing 	period 	concluded 	on 	January 	11, 	2010, 	and 	that 	the
acceptance 	period 	concluded 	on 	January 	4, 	2010. 	Wherefore, 	debtor 	is 	not
currently enjoined by any exclusivity provisions with which to bar any party in
interest from filing a competing plan at this time. 2
ORDER
WHEREFORE IT IS ORDERED that Peerless’ motion for leave to file a competing
plan (Docket No. 133) shall be, and hereby is, GRANTED.
SO ORDERED.
Ponce, Puerto Rico, this 2nd day of June, 2010.
MILDRED CABAN FLORES
U.S. Bankruptcy Judge
c: 	DEBTOR
CARMEN D CONDE TORRES
2 Before concluding with this matter, the Court finds it necessary to address an ancillary issue
raised by debtor at its objection to Peerless’ motion for leave to file a competing plan. 	The issue
in question revolves around debtor’s argument that “Peerless is now trying to promote a competing
plan to its own benefit, since the confirmation of the same would obviously have the effect of
dismissing the [$15 million Complaint that has been] filed by the Debtor [against Peerless]”. 	Docket
No. 139 at p. 4.
The foregoing issue is not ripe for determination, thus the Court will not delve at this time into
debtor’s speculation on whether Peerless will contemplate, as part of the provisions of its competing
plan, the dismissal of the Adversary Proceeding filed by debtor against Peerless.
Case:09-05585-EAG11 Doc#:147 Filed:06/02/10 Entered:06/02/10 13:12:10 Desc: Main
Document Page 10 of 10