United States Court of Appeals,

Eleventh Circuit.

No. 95-4379

Non-Argument Calendar.

In re GENERAL DEVELOPMENT CORPORATION, Debtor.

John E. SIPES; Mildred B. Sipes, Plaintiffs-Appellants,

v.

ATLANTIC GULF COMMUNITIES CORPORATION; General Development

Corporation, Defendants-Appellees.

June 7, 1996.

Appeal from the United States District Court for the Southern

District of Florida (No. 94-95 CIV-SMA), Sidney M. Aronovitz,

Judge.

Before TJOFLAT, Chief Judge, and KRAVITCH and HATCHETT, Circuit

Judges.

PER CURIAM:

We affirm on the basis of the opinion of the district court,

dated January 27, 1995, 177 B.R. 1000. The relevant portions of

the district court's opinion are attached as an appendix.

AFFIRMED.

APPENDIX

UNITED STATES DISTRICT COURT 

SOUTHERN DISTRICT OF FLORIDA 

IN RE: GENERAL DEVELOPMENT CORPORATION, et al., Debtors.

JOHN E. SIPES AND MILDRED B. SIPES, Appellants,

vs.

GENERAL DEVELOPMENT CORPORATION, n/k/a ATLANTIC GULF COMMUNITIES

CORPORATION, Appellee.

Case No. 94-0095-CIV-ARONOVITZ

BKC No. 90-12231-BKC-AJC
JAN 27 1995

ORDER ON PENDING MOTIONS AND AFFIRMING THE BANKRUPTCY COURT'S

ORDER GRANTING ATLANTIC GULF'S MOTION TO ENFORCE EXECUTORY

CONTRACT, DISCHARGE AND INJUNCTION PROVISIONS OF PLAN AND

CONFIRMATION ORDER, AND DENYING MOTION FOR EX PARTE RELIEF FROM THE

AUTOMATIC STAY, DATED NOVEMBER 5, 1993

BEFORE THIS COURT is an appeal from the Bankruptcy Court's

Order Granting Atlantic Gulf's Motion to Enforce Executory

Contract, Discharge and Injunction Provisions of Plan and

Confirmation Order, and Denying Motion for Ex Parte Relief from the

Automatic Stay, dated November 5, 1993. In addition, currently

pending before the Court are three motions: (1) Appellee General

Development Corporation's ("GDC") Motion to Strike Appendix A,

Appendix B and Appendix C to Appendix to Appellants' Reply Brief,

file dated April 4, 1994; (2) Appellee GDC's Motion to Supplement

Appellate Record, file dated April 4, 1994; and (3) Appellants'

John E. Sipes and Mildred B. Sipes (the "Sipes") Motion to

Supplement Appellate Record, file dated April 21, 1994.

This Court heard oral argument on this appeal on October 7,

1994, and has carefully considered all briefs submitted on appeal,

oral argument of counsel, the entire record including but not

limited to the three pending motions and responses filed thereto,

applicable law and is otherwise fully advised in the premises. For

the following reasons, it is ORDERED AND ADJUDGED that:

1. Appellee GDC's Motion to Strike Appendix A, Appendix B and

Appendix C to Appendix to Appellants' Reply Brief be, and the same,

is hereby GRANTED IN PART. Only Appendix C to Appendix to

Appellants' Reply Brief shall be stricken from the appellate

record, and Appendix A and B shall be considered part of the
appellate record.

2. Appellee GDC's Motion to Supplement Appellate Record be,

and the same, is hereby GRANTED.

3. Appellants Sipes' Motion to Supplement Appellate Record be

and the same, is hereby DENIED.

4. The Bankruptcy Court's Order Granting Atlantic Gulf's

Motion to Enforce Executory Contract, Discharge and Injunction

Provisions of Plan and Confirmation Order, and Denying Motion for

Ex Parte Relief from the Automatic Stay, dated November 5, 1993, is

hereby AFFIRMED in its entirety.

Factual and Procedural Background

The Sipes appeal from an Order Granting Atlantic Gulf's Motion

to Enforce Executory Contract, Discharge and Injunction Provisions

of Plan and Confirmation Order, and Denying Motion for Ex Parte

Relief From the Automatic Stay, entered by the Honorable A. Jay

Cristol, United States Bankruptcy Judge and dated November 5, 1993.

By this Order, Judge Cristol ruled, among other things, that an

installment land sale contract between the Sipes and Debtor GDC was

an executory contract subject to rejection by GDC pursuant to § 365

of the Bankruptcy Code.

The installment land sales contract at issue, entitled the

"Homesite Purchase Agreement", was entered into by the Sipes and

GDC for the sale of a homesite in Port St. Lucie, Florida (the

"Property") on July 15, 1972. The Agreement provided that GDC

would deliver to the purchaser a Warranty Deed once the purchaser

made all monthly payments. The Sipes completed all of their

payments due under the contract in March of 1983. However, due to
alleged construction delays, the homesite remained undeveloped as

of December of 1987.

GDC and its affiliates and subsidiaries ultimately filed

voluntary Chapter 11 petitions on April 6, 1990. On October 26,

1990, the Bankruptcy Court approved GDC's proposed Homesite

Purchaser Assurance Program (the "Program"), which set forth a

mechanism to assure purchasers that they will receive their deeds

upon payment of a reduced purchase price. Under the Program,

purchasers such as the Sipes whose homesites were on land which GDC

did not intend to develop were afforded the option to participate

in the Program and have their contract transferred to a developed

lot. The Sipes declined to participate and as a result, GDC

rejected the Sipes' Homesite Purchase Agreement on June 19, 1992.

The Sipes filed an objection to the rejection on July 9, 1992.

Meanwhile, on March 27, 1992, GDC's reorganization plan was

confirmed. The GDC Plan provided that homesite purchasers whose

contracts were rejected would receive a Class 2.2 (secured) claim

in respect to their lien rights under § 365(j) of the Code, a Class

10 (unsecured) claim in respect of prepetition principal and

interest payments not covered by § 365(j), and an administrative

claim for any payments made after filing date. The Confirmation

Order provided that "all of the property of the estate, wherever

situated, is vested in the Reorganized Company, free and clear of

all claims and interests of creditors and of security equity

holders, except as provided in the Plan and this Order." It also

discharged all prepetition debts and enjoined all persons from

recovering on their claim.
On June 20, 1992, GDC sent the Sipes a special proof of claim

form, calculating the Sipes' claim to be $5,088.00. The Sipes

disagreed and asserted a claim of $5,096.26. In November of 1992,

the Sipes filed a state court action against GDC, seeking specific

performance and damages. The action was dismissed with prejudice

due to GDC's pending bankruptcy.

After learning of GDC's efforts to replat and redevelop the

subdivision in which their property is located, the Sipes filed in

the bankruptcy court a pro se Motion for Ex Parte Relief From the

Automatic Stay on September 24, 1993. GDC thereafter filed a

motion to enforce the executory contract, discharge and injunction

provisions of the Confirmation Order against the Sipes. GDC sought

an order (i) declaring that any claim or interest of the Sipes in

the Property was terminated by GDC's rejection of the Homesite

Purchase Agreement and that the Property vested in Atlantic Gulf

free and clear of any interest or claim of the Sipes; (ii)

declaring that any prepetition claim of the Sipes was discharged

pursuant to the Confirmation Order and § 1141(d) of the Code; and

(iii) enjoining the Sipes from seeking to enforce or assert an

interest in the Property and from interfering with GDC's use and

development thereof.

Following a hearing on the two motions, Judge Cristol denied

the Sipes' ex parte motion and granted GDC's enforcement motion.

He found that the Agreement was an executory contract subject to

rejection under 11 U.S.C. § 356(a) and that the Property was vested

in Atlantic Gulf free and clear of any interest of claim of the

Sipes. He also enjoined the Sipes from asserting an interest in
the property or otherwise interfering with Atlantic Gulf's use and

development of the Property. The Sipes appeal this Order.

As noted herein, also pending before this Court are three

motions: (1) Appellee GDC's Motion to Strike Appendix A, Appendix

B and Appendix C to Appendix to Appellants' Reply Brief; (2)

Appellee GDC's Motion to Supplement Appellate Record; and (3)

Appellants Sipes' Motion to Supplement Appellate Record.

In the course of examining the record, the appellate briefs

and the outstanding motions in preparation for oral argument on the

merits of the appeal, it became apparent that the Bankruptcy

Court's Order on appeal was devoid of any factual findings to

support its ruling with respect to the Appellants' procedural due

process claim. This claim was raised at the trial level in the

Response to Reorganized Debtors' Motion to Enforce Executory

Contract, Discharge and Injunction Provisions of Plan and

Confirmation Order, dated October 26, 1993.

In addition, it was apparent that the Bankruptcy Court's Order

contained no citations to authority to support its ruling that the

Homesite Purchase Agreement at bar was an executory contract

subject to rejection pursuant 11 U.S.C. § 365. No citations to

legal authority, other than "courts and commentators alike," and no

findings of fact were made to support the ruling. Issues of fact

therefore remained undetermined. Accordingly, on May 11, 1994,

this Court entered an Order remanding this case to the United

States Bankruptcy Court to (1) hold an evidentiary hearing and make

findings of fact and conclusions of law regarding the Appellants'

procedural due process claim, and to determine which documents
should be admitted into the record on that issue; and (2) to make

findings of fact and further conclusions of law, and to hold an

evidentiary hearing if necessary, regarding the issue of whether

the Homesite Purchase Agreement at issue was an executory contract

for rejection purposes under § 365 of the Bankruptcy Code. On

September 16, 1994, the Bankruptcy Court entered its Order on

Evidentiary Hearing Pursuant to Remand. ("Order on Remand") This

Court has carefully considered said Order on Remand and the

arguments presented on appeal, including oral argument of counsel

on October 7, 1994.

Standard of Review

In accordance with Federal Rule of Bankruptcy Procedure 8013,

the Bankruptcy Court's findings of fact will not be set aside

unless clearly erroneous. In re Chase & Sanborn Corp., 904 F.2d

588 (11th Cir.1990); In re T & B General Contracting, Inc., 833

F.2d 1455 (11th Cir.1987). Equitable determinations by the

Bankruptcy Court are subject to review under an abuse of discretion

standard. In re Red Carpet Corp. of Panama City Beach, 902 F.2d

883 (11th Cir.1990). Conclusions of law are subject to de novo

review. In re Chase & Sanborn Corp., 904 F.2d at 593; In re

Sublett, 895 F.2d 1381 (11th Cir.1990).

While the Bankruptcy Court's factual findings are subject to

a clearly erroneous standard, that standard does not apply when

determining the propriety of the Bankruptcy Judge's conclusions of

law, (i.e.) determination of what law applies or determination of

the ultimate legal conclusions resulting from the application of

the law to the facts. Legal conclusions made by the Bankruptcy
Judge may not be approved by the District Court without an

independent determination. In re Columbia Data Products, Inc., 99

B.R. 682, 684 (D.Md.1989), affirmed, 892 F.2d 26 (4th Cir.1989);

citing, In re Hunter Sav. Ass'n., 34 B.R. 368, 374 (Bankr.S.D.Ohio

1983), reversed on other grounds, 750 F.2d 536 (6th Cir.1984); In

re Hollock, 1 B.R. 212, 215 (Bankr.M.D.Pa.1979).

Three Pending Motions

1. Appellee GDC's Motion to Strike Appendix A, B and C of

Appellants' Appendix to Reply Brief

When the Sipes filed their reply brief, they also filed a

second appendix containing, among other things, GDC's certificate

of service regarding the conformation hearing ("Appendix A"), GDC's

certificate of service regarding the disclosure statement

("Appendix B"), and an 10/27/93 GDC letter to the Sipes ("Appendix

C"). According to the reply brief, these documents were added in

support of the Sipes' claim that they were denied procedural due

process in connection with the confirmation hearing.

GDC moved to strike these documents on the ground that they

were never designated as part of the record on appeal, that they

are misleading, and that the Sipes never moved to supplement the

record with these documents pursuant to Fed.R.App.P. 10(e). It

further contends that the GDC letter (Appendix C) is a privileged

settlement offer that should be stricken as an improper disclosure

of settlement discussions.

In response, the Sipes contend that the two certificates of

service (Appendices A and B) are and were part of the record below

and therefore should not be stricken on appeal. These documents
were attached to their reply brief in direct response to new

arguments raised by GDC for the first time in GDC's answer brief.

As to Appendix C, the letter was not, as GDC maintains, a

settlement offer but rather, GDC's proposed final resolution of the

Sipes' claim.

2. Appellee GDC's Motion to Supplement Appellate Record

In a separate motion, GDC has moved pursuant to Fed.R.App.P.

10(e) to supplement the record on appeal to include John Sipes'

Ballot rejecting the GDC Plan ("Exhibit A"); Mildred Sipes' Ballot

rejecting the GDC Plan ("Exhibit B"); and GDC's Ballot and

Disclosure Statement ("Exhibit C"). These documents are offered to

rebut the Sipes' claim that they should not be bound by the GDC

Plan or Confirmation Order because they allegedly did not receive

notice thereof. The Ballots (Exhibits A and B) advised the Sipes

that "The Second Amended Joint Plan of Reorganization ... can be

confirmed by the Bankruptcy Court and thereby made binding on you

if it is accepted ..." The Sipes executed the Ballots by rejecting

the Plan on November 1, 1991. (The Plan was confirmed in 1992).

Exhibit C is a compilation of documents which GDC submits was sent

with the ballots. Included in Exhibit C is the notice of the

confirmation hearing. GDC argues that the Sipes could not have

received the ballots without receiving Exhibit C.

GDC further submits that the Sipes' claim of no notice should

not be considered on appeal because it was not raised below, and

that it is contrary to the lower court's finding in a December 20,

1991 Memorandum Opinion that proper notice was given to all

affected claimants.
 1

See, In re Neshaminy Office Building Ass'n, 62 B.R. 798

(E.D.Pa.1986). 

In response, the Sipes maintain that the documents at issue

should not be placed into the appellate record because they were

not part of the record in the trial court.1

 They also argue that

the documents are irrelevant.

3. Sipes' Motion to Supplement the Record

The Sipes move to supplement the appellate record to include

the transcript of a March 27, 1992 hearing which they maintain

shows (1) that the final confirmation hearing occurred on March 27,

1992; and (2) that GDC's assumptions/rejections of many of the

homesite contracts were made after the confirmation.

In response, GDC opposes said supplementation on the ground

that the transcript is not a document which was considered by the

bankruptcy court in its deliberations. It then argues that the

Sipes have mischaracterized the proceedings in the March 27, 1992

hearing.

Discussion on Three Pending Motions

All of the contested documents relate to and stem from the

Sipes' claim that they are not bound by the GDC Plan and

Confirmation Order because they did not receive adequate notice of

the confirmation hearing and therefore, were denied procedural due

process. GDC erroneously asserts that the due process argument is

being raised for the first time in this case at the appellate

level. The argument was raised at the trial level in the Sipes'

response to GDC's Motion to Enforce Executory Contract, Discharge

and Injunction Provisions of Plan and Confirmation Order.
 2

One of the listed issues to be presented on appeal is

"[w]hether GDC's Reorganization Plan is applicable to John and

Mildred Sipes." 

Moreover, it was included in the Sipes' Statement of Issues to be

Presented on Appeal.2 Appellants' initial brief, however, did not

address the claim at all.

Because the Bankruptcy Court's Order on appeal did not address

the procedural due process issue, this Court remanded the issue

back to the Bankruptcy Court for further findings. On remand, the

Bankruptcy Court specifically found that:

Based upon the documentary and testimonial evidence presented,

the Court finds that the Sipes were afforded and received full

due process. They received all requisite notice that the law

requires be provided to creditors in a Chapter 11 case.

Moreover, despite their claims to the contrary, they were

provided the opportunity to participate in GDC's Chapter 11

case and object thereto. [footnote omitted] ...

The Court notes that in previous pleadings filed with the

district court, the Sipes denied receiving notice of the

confirmation hearing as well as the Disclosure Statement and

Summary of Plan. Apparently, these documents were

subsequently located by the Sipes who stipulated prior to the

evidentiary hearing in the Joint Pre-Evidentiary Order entered

by the Court on June 14, 1994 that they "did receive copies of

the Disclosure Statement for Creditors for Classes 2.3, 3.3,

10, 13, 14, and 16, Accompanying Summary of Second Amended

Joint Plan of Reorganization of General Development

Corporation, GDC documents Accompanying the Ballot and

Disclosure Statement," and that "any prior claims by the Sipes

that they did not receive the aforementioned documents prior

to the December 1991 confirmation hearings is withdrawn."

(Joint Pre-Evidentiary Hearing Order at ¶ 3) Accordingly,

this issue is now moot. (underlining supplied) Order on

Remand, pp. 7-9.

A review of the Order on Remand reflects that the contested

documents as described above, with the exception of the 10/27/93

GDC letter to the Sipes ("Appendix C"), and the transcript of a

March 27, 1992 hearing, were considered by the Bankruptcy Court in
its determination that the Sipes were afforded and received full

due process. Because the 10/27/93 GDC letter to the Sipes

("Appendix C"), and transcript of a March 27, 1992 hearing were not

considered by the Bankruptcy Court they shall not be permitted to

become part of the appellate record. However, those contested

documents as described above, except for the 10/27/93 GDC letter to

the Sipes ("Appendix C"), and transcript of a March 27, 1992

hearing, shall be allowed to become part of the appellate record.

Accordingly, it is ORDERED AND ADJUDGED that:

1. Appellee GDC's Motion to Strike Appendix A, Appendix B and

Appendix C to Appendix to Appellants' Reply Brief be, and the same,

is hereby GRANTED IN PART. Only Appendix C to Appendix to

Appellants' Reply Brief shall be stricken from the appellate

record, and Appendix A and B shall be considered part of the

appellate record.

2. Appellee GDC's Motion to Supplement Appellate Record be,

and the same, is hereby GRANTED.

3. Appellants Sipes' Motion to Supplement Appellate Record be

and the same, is hereby DENIED.

Appellants Sipes' Arguments on Appeal

The Sipes maintain that the dispositive issue on appeal is

whether the Homesite Purchase Agreement is executory in nature.

Section 365(a) of the Code provides that the trustee, subject to

the court's approval, may assume or reject any executory contract

of the debtor. The court below reasoned that the Homesite Purchase

Agreement was an executory contract. The Sipes argue that the

Agreement was not an executory contract because installment land
 3

The Sipes assert that the law of the state where the

property is situated governs questions of property rights, even

in the context of a bankruptcy proceeding. See Stellwagen v.

Clum, 245 U.S. 605, 38 S.Ct. 215, 62 L.Ed. 507 (1918); Butner v.

United States, 440 U.S. 48, 99 S.Ct. 914, 59 L.Ed.2d 136 (1979); 

Johnson v. First Nat'l Bank of Montevideo, MN, 719 F.2d 270 (8th

Cir.1983); Heartline Farms, Inc. v. Daly, 128 B.R. 246

(Bankr.D.Neb.1990); Shaw v. Dawson, 48 B.R. 857

(Bankr.D.C.N.M.1985). 

sale contracts are only security devices under Florida law.3 See

First Federal Savings & Loan Ass'n v. Fox, 440 So.2d 652 (Fla. 2d

DCA 1983); Cain & Bultman, Inc. v. Miss Sam, Inc., 409 So.2d 114

(Fla. 5th DCA 1982). In such situations, the purchaser is

initially vested with equitable title and legal title remains in

the seller only as security for the payment of the purchase price.

The Sipes further submit that the legislative history of § 365

indicates that the term "executory contract" refers to a contract

on which performance remains due to some extent on both sides. In

re Charter Co., 52 B.R. 267 (Bankr.M.D.Fla.1985); In re Adolphsen,

38 B.R. 776 (Bankr.D.Minn.1983). In this case, since they had

fully completed their performance under the contract seven years

prior to GDC's bankruptcy filing, the contract is not executory.

The remedy they seek is specific performance; to compel GDC to

convey an executed warranty deed for the Property at issue.

The Sipes argue that they are not bound by the GDC Plan

because they were never given notice of the confirmation hearing

and therefore, were denied due process. Citing, Reliable Electric

Co., Inc. v. Olson Construction Co., 726 F.2d 620 (10th Cir.1984).

As evidence of the lack of notice, the Sipes attached to their

Reply Appendix copies of the certificates of service on the

confirmation hearing (Appendix A) and on the Disclosure Statement
 4

These certificates of service are the subject of GDC's

motion to strike discussed supra. 

(Appendix B). Neither lists the Sipes as a recipient.4

The Sipes claim that they are entitled to specific

performance, which is an equitable remedy available when the legal

remedies are inadequate. The legal remedies here are inadequate in

that the Sipes were never offered a full refund of their payments

but only a fraction thereof, and any alternative property offered

to them was considerably less in value than the lot they originally

purchased. In addition, given the unique nature of land, it is

well established that money damages to a purchaser of land is

inadequate. See Henry v. Ecker, 415 So.2d 137 (Fla. 5th DCA 1982).

The Sipes further rely on Ocean Dunes of Hutchinson v. Colangelo,

463 So.2d 437 (Fla. 4th DCA 1985), where the court held that

specific performance was proper where the contractual remedies were

neither reasonable nor mutual.

The Sipes argue that the United States Supreme Court in Butner

v. United States, supra, made clear that state law governs

questions of property rights in bankruptcy. Nevertheless, they

assert that the contract in question is not an executory contract

under either state or federal law. The controlling definition of

an executory contract is found in the legislative history of the

Code, which provides that executory contracts are those "on which

performance remains due to some extent on both sides." The Sipes

further assert that their equitable lien or interest in the

Property was not extinguished by the bankruptcy because the

Homesite Purchase Agreement was not an executory contract subject
to rejection. Moreover, that the GDC Plan has already been

confirmed and substantially consummated is irrelevant. The Sipes

contend that the specific performance relief they seek will not

affect the reorganization.

Appellee GDC's Arguments on Appeal

In rebuttal, GDC argues that aside from the issue of whether

the Homesite Purchase Agreement was or was not an executory

contract, the fact remains that any claims or interests the Sipes

may have had were extinguished by the GDC Plan and the Confirmation

Order. It is well established that confirmation of a Chapter 11

plan has three effects: (1) all creditors are bound by the plan;

(2) all property vests in the debtor free and clear of all claims

and interest of creditors, except as otherwise provided in the plan

or confirmation order; and (3) the debtor is discharged of all

prepetition debts. In re American Properties, Inc., 30 B.R. 239,

246 (Bankr.D.Kan.1983); In re Holywell Corp., 93 B.R. 780

(S.D.Fla.1988), affirmed, Miami Center v. Bank of New York, 881

F.2d 1086 (11th Cir.1989). Two years after the confirmation of the

GDC Plan, the Sipes ask the Court to exonerate them from these well

established principles, to ignore the fresh start and

rehabilitative purposes of the Bankruptcy Code, to disregard the

discharge and injunction provisions of the Confirmation Order, and

to modify the GDC Plan as it pertains to the treatment of homesite

purchasers for them alone. The GDC Plan was confirmed, the Sipes

did not object to the confirmation nor did they appeal it. GDC

argues that it is now too late for them to claim that they are

entitled to different treatment. Citing, In re Dore & Associates
Contracting, Inc., 43 B.R. 717 (Bankr.E.D.Mich.1984); In re Horne,

99 B.R. 132 (Bankr.M.D.Ga.1989).

GDC concedes that although state law generally governs

questions of property rights in bankruptcy in the absence of any

conflict between state law and bankruptcy law, this deferral to

state law gives way where there is a specific federal interest

governing the relationship between the parties in bankruptcy. Such

a federal interest exists here, GDC maintains. As recognized by

one court "Congress has expressed an overriding federal interest in

certain executory contracts, i.e., collective bargaining agreements

and real property sales contracts when the debtor is the seller

..." In re Buchert, 69 B.R. 816 (Bankr.N.D.Ill.1987), affirmed,

1987 WL 16019 (N.D.Ill.1987) (emphasis added).

The distinction between a debtor as the seller versus a buyer

of real property is fundamental to the determination of whether the

sales contract may or may not be deemed executory, GDC asserts.

This is because:

.. non-debtor vendees, by virtue of Sections 365(i) and

365(j), may receive more favorable treatment in bankruptcy

than debtor/vendees. And debtor/vendors, because of other

policies and provisions in the Code, may fair better than

debtor/vendees. It may be argued that this disparity in

treatment is warranted because of the risk of default when

debtor is vendor, or because the non-debtor ... is an innocent

victim.

In re Booth, 19 B.R. 53, 63 (Bankr.D.Utah 1982). The court

concluded that:

... it is the consequences of applying Section 365 to a party,

especially in terms of benefits to the estate and the

protection of creditors, not the form of contract between

vender and vendee, which controls.

Id. at 57. Where the debtor is the seller of real estate, the
courts have found the contract to be an executory one. See, e.g.,

In re Waldron, 36 B.R. 633 (Bankr.S.D.Fla.1984), reversed on other

grounds, 785 F.2d 936 (11th Cir.1986) (option to purchase real

estate was executory contract); In re Hardie, 100 B.R. 284

(Bankr.E.D.N.C.1989) (debtor/vendor's contract to sell option to

purchase property would be permitted to reject option as executory

contract); In re W. & L. Associates, Inc., 71 B.R. 962

(E.D.Pa.1987) (debtor/vendor may reject contract to sell

notwithstanding that non-debtor/vendee had fully performed under

contract). GDC argues that in each of the cases cited by the

Sipes, the debtor was the buyer of real property, not the seller.

GDC further adds that its ability to reject the tens of

thousands of homesite contracts was critical to its reorganization.

Moreover, the non-debtor buyers were protected by the provisions of

the Code. Section 365(j) provides that a non-debtor purchaser who

is not in possession of the property "has a lien on the interest of

the debtor in such property for the recovery of any portion of the

purchase price that such purchaser or party has paid." 11 U.S.C.

§ 365(j).

The Sipes' argument that their Homesite Purchase Agreement was

merely a security device under Florida misconstrues the nature of

the agreement, GDC submits. Unlike the agreements for deed

involved in the cases cited by the Sipes, the Sipes received

neither possession nor ownership of the property at the time of

entering into the Homesite Purchase Agreement. In addition,

Florida courts have recognized that not all installment land sale

contracts are security devices. In H. & L. Land Co. v. Warner, 258
So.2d 293 (Fla. 2d DCA 1972), the court held that a vendor under an

installment land sale contract who gave the purchaser possession of

the land and the benefits and burdens of ownership was in no

different position than a vendor who conveyed legal title and took

back a mortgage. The court also held that its ruling did not apply

to a contract "that is not specifically enforceable or to one under

which the buyer has no right to possession or other benefits and

burdens of ownership." Id. at 296.

GDC argues that Sipes' requested relief of specific

performance is foreclosed by the language of their Homesite

Purchase Agreement. That agreement limited the Sipes' remedies in

the event of GDC's default to: (1) a refund of all payments made;

or (2) an exchange of the Property for other property of similar

value in any of GDC's communities. The Sipes failed to avail

themselves of these remedies. Moreover, even if the Sipes had a

right of specific performance under the contract, such relief is

barred by the applicable one year statute of limitations under

Florida law. See Fla.Stat. § 95.11(5)(a); City of Orlando v.

Williams, 493 So.2d 15 (Fla. 5th DCA 1986).

Discussion on Appeal

Bankruptcy Court's Order Granting Atlantic Gulf's Motion to

Enforce Executory Contract, Discharge and Injunction Provisions of

Plan and Confirmation Order, and Denying Motion for Ex Parte Relief

from the Automatic Stay, dated November 5, 1993

Upon careful consideration of the arguments made by the

parties and a review of the entire record, including all appellate

briefs, as well as the Order on Remand, this Court agrees and

adopts the Bankruptcy Court's well reasoned analysis in its Order

on Remand. The two dispositive issues in this case are (1) whether
Appellants' were denied procedural due process and (2) whether the

Homesite Purchase Agreement at issue is an executory contract

subject to rejection under § 365 of the Bankruptcy Code.

Appellants Were Not Denied Due Process

On remand, the Bankruptcy Court made the following detailed

findings:

As early as 1980, GDC began sending correspondence to the

Sipes advising of problems which prevented GDC from completing

development of and deeding the Sipes the specific homesite lot

for which they had contracted. This correspondence continued

not only through GDC's filing of its Chapter 11 petition but

continued throughout GDC's Chapter 11 case. (See GDC Exhibit

Nos. 2, 3, 4, 5 and 7) ...

The Sipes were clearly put on notice that the homesite lot

identified in their homesite purchase agreement was

undeveloped and that they could elect to be transferred to

another lot pursuant to HPAP. [Homesite Purchaser Assurance

Program] Dispositively, the Florida Public Offering Statement

which was mailed to the Sipes, as well as tens of thousands of

other homesite purchasers offered HPAP, left no question as to

GDC's plans with respect to Port St. Lucie Section 38, the

section in which the homesite lot identified in the Sipes'

homesite purchase agreement was located ...

The Sipes were also advised of the consequences of their

decision not to accept HPAP ... This notice was consistent

with correspondence which the Sipes received from the Special

Representative James Paul, [footnote omitted] as well as a

letter sent by GDC to the Sipes dated February 6, 1991 in

which the Sipes were advised that GDC apologized "for not

being able to comply with your request," that GDC immediately

deliver a warranty deed and title insurance policy to the

Sipes in connection with the homesite lot covered by their

homesite purchase agreement. (See Exhibit Nos. 6 and 7) ...

In October, 1991, in connection with confirmation of GDC's

proposed plan of reorganization, the Sipes also received (i)

a Disclosure Statement for Creditors of Classes 2.2, 3.3, 10,

13, 14 and 16 Accompanying Summary of Second Amended Joint

Plan of Reorganization of General Development Corporation,

(ii) Documents Accompanying the Ballot and Disclosure

Statement, and (iii) Ballots for Accepting or Rejecting the

Second Amended Joint Plan of Reorganization. (GDC Exhibit

Nos. 16, 17, 18 and 19) Indeed, not only did the Sipes

receive these documents, but as testified to by Mr. Sipes,

evidently took the time and effort to scrutinize the same in

great detail, highlighting and underlining sections which Mr.
Sipes testified he believed relevant. The Sipes thereupon

executed and returned ballots rejecting GDC's Second Amended

Joint Plan of Reorganization (the "GDC Plan"). (GDC Exhibit

Nos. 18 and 19)

The confirmation hearing on the GDC Plan, of which the Sipes

received notice in the Documents Accompanying the Ballot and

Disclosure Statement, was held in December, 1991 ... After

confirmation of the GDC Plan and entry of the Court's Order

Confirming Second Amended Joint Plan of Reorganization of

General Development Corporation, dated March 27, 1992 (the

"Confirmation Order"), the Sipes were notified of GDC's

rejection of their homesite purchase agreement and provided

with a special proof of claim form in which they could assert

a claim arising from rejection of their homesite purchase

agreement. The Sipes duly noted their objection to the amount

that GDC claimed was due and owing ($5,088.00) and returned

this special proof of claim form to the court setting forth

and reiterating their previously filed claim for $5,096.26

(GDC Exhibit No. 24). With respect to GDC's notice advising

the Sipes of the rejection of their homesite purchase

agreement, the Sipes did file a response objecting thereto.

(GDC Exhibit No. 25) Order on Remand, pp. 3-6.

As previously noted herein, the Bankruptcy Court further found:

Based upon the documentary and testimonial evidence presented,

the Court finds that the Sipes were afforded and received full

due process. They received all requisite notice that the law

requires be provided to creditors in a Chapter 11 case.

Moreover, despite their claims to the contrary, they were

provided the opportunity to participate in GDC's Chapter 11

case and object thereto. (emphasis added) [footnote omitted].

Order on Remand, pp. 7-8.

The Bankruptcy Court goes on to state:

The Court has considered the Sipes' claim that they did not

receive the full GDC Plan, but rather a summary of the same.

The Court does not find this argument convincing as the Sipes

were advised that the full and complete GDC Plan was on file

for review or could be obtained upon request. That the Sipes

took the time to review the documents which they did receive

and voted to reject the GDC Plan is indicative that the Sipes

had sufficient information with respect to the treatment of

their claim to make an informed decision as to whether to vote

to accept or reject the GDC Plan.

Finally, the fact that the Sipes did not file an objection to

the Disclosure Statement or contest confirmation based upon

their claimed mistaken belief that they were not affected by

the GDC Plan or the bankruptcy as a whole does not lend any

support to an argument that the Sipes were denied due process.
The Sipes were provided with all of the information and

documentation which creditors similarly situated could have

expected and were required to expect in a case of this size ... There is simply no evidence from the record presented to

this Court or of which the Court is independently aware that

the Sipes were denied due process. (emphasis added) Order on

Remand, pp. 9-10.

Upon review of these specific findings and the arguments

presented, Appellants have not demonstrated to this Court that the

Bankruptcy Court clearly erred in its findings and conclusion on

remand that the Sipes were not denied due process. Moreover, this

Court agrees with the Bankruptcy Court that the Sipes were provided

with all of the information and documentation which creditors

similarly situated could have expected and were required to expect

in a case of this size. This Court adopts and affirms the

Bankruptcy Court's findings and conclusion that the Sipes were not

denied due process.

The Homesite Purchase Agreement is an Executory Contract Subject

to Rejection Under § 365 of the Bankruptcy Code

The Bankruptcy Court's analysis on remand as to this issue is

well reasoned and worthy of restating in relevant part.

Specifically, the Bankruptcy Court states on remand:

Section 365(a) of the Bankruptcy Code, as made applicable to

a debtor-in-possession by Section 1107(a) of the Bankruptcy

Code, permits a debtor to "assume or reject any executory

contract or unexpired lease of the debtor." The power of a

debtor to reject a contract as part of its reorganization

efforts is consistent with the fresh start and rehabilitative

purposes of the Bankruptcy Code. [citations omitted]

The Sipes argue that their homesite purchase agreement was not

an executory contract because they had fulfilled all

performance obligations under such agreement by completing

payments of principal and interest in March, 1983. They urge

this Court to apply the definition of "executory" contract as

articulated by Professor Vern Countryman in a law review

article published in the Minnesota Law Review in 1963, which

definition requires unperformed mutual obligations on both
sides. Countryman, Executory Contracts and Bankruptcy, Part

1, 57 Minn.L.Rev. 439 (1963).

However, this court as well as other courts and commentators

have consistently expanded the definition of "executoriness"

beyond the static definition articulated by Professor

Countryman and beyond that urged by the Sipes. [citations

omitted] While counsel for the Sipes argued that the

legislative history of Section 365 reflects that Congress

intended an executory contract to be one in which there

remained mutual obligations due and owing from the parties,

this Court must respectfully disagree. As this Court stated

in Arrow Air,

The legislative history of § 365 and the statute itself,

establish that it is not always the case that there must

be outstanding obligation on the part of both parties to

a contract in order for a contract to be deemed executory

... The express language of § 365 reflects that congress

did not adopt a specific definition of an "executory

contract" which would require mutual obligations, in

spite of its clear opportunity to do so. Legislative

history for that section evidences that congress

considered mutual obligation to be indicative of an

executory contract in some [sit], but not all, cases ...

Even though there may be material obligations outstanding

on the part of only one of the parties to the contract,

it may nevertheless be deemed executory under the

functional approach if its assumptional rejection would

ultimately benefit the estate and its creditors.

(emphasis added) In re Arrow Air, Inc., 60 B.R. 117, 12-

22 (Bankr.S.D.Fla.1986) ...

In the instant case, GDC's ability to reject homesite

purchase agreements which obligated it to improve and

deed developed homesite lots to tens of thousands of lot

purchasers, when it was simply financially unable to fill

such contractual obligations, was critical to GDC's

reorganization. The very purpose of rejection, as even

recognized by Professor Countryman, was thus served in

the instant case by GDC's ability to reject such homesite

purchase agreements ...

While the concept of executoriness will no doubt engender

additional debate in the future, this court finds no

support in the Code itself or the legislative history of

section 365 to apply as rigid a definition of "executory"

contract as Sipes would urge this Court to apply. It is

clear that the Sipes' homesite purchase agreement

represented an unperformed contract. Whether the Sipes

were required to undertake any further actions after

completing payments of principal and interest under their

agreement is not determinative of whether the purposes of
rejection and reorganization would be served by defining

such homesite purchase agreement as an executory

contract. [footnote omitted] In the instant case, it is

undisputed that at least GDC, as seller, had unfulfilled

obligations under the terms of the homesite purchase

agreement as of its Chapter 11 filing. Rejection

permitted GDC to avoid obligations which it was

financially unable to meet and which would have prevented

a meaningful reorganization for the benefit of hundreds

of thousands of creditors who might not have otherwise

received any recovery in respect of their claims.

[footnote omitted] Accordingly, the Court finds that the

Sipes' homesite purchase agreement was an executory

contract subject to rejection pursuant to section 365 of

the Bankruptcy Code. (underlining supplied) Order on

Remand, pp. 11-16.

This Court has reviewed de novo the Bankruptcy Court's

conclusion that Sipes' Homesite Purchase Agreement was an executory

contract subject to rejection pursuant to section 365 of the

Bankruptcy Code. The Court agrees with the application by the

Bankruptcy Court of the "functional approach" in this case. Under

this approach, the question of whether a contract is executory is

determined by the benefits that assumption or rejection would

produce for the estate. See In re G-N Partners, 48 B.R. 462

(Bankr.Minn.1985); In re Norquist, 43 B.R. 224 (Bankr.Wash.1984);

In re Booth, 19 B.R. 53 (Bankr.D.Utah 1982). GDC's ability to

reject contracts which obligated it to improve and deed developed

homesite lots was critical to its reorganization since it did not

have the financial ability to fulfill such contractual obligations.

While it does not appear that the Eleventh Circuit has adopted

the "functional approach" over the "Countryman approach", the

Eleventh Circuit in In re Martin Brothers Toolmakers, Inc., 796

F.2d 1435 (11th Cir.1986) appears more inclined to embrace the

"functional approach." In In re Martin Brothers Toolmakers, Inc.,
the Eleventh Circuit stated in dicta:

It is true that a real estate lease, as well as an installment

sales contract, may be the functional equivalent of a secured

financing transaction. [citations omitted] The determination

in bankruptcy, however, of whether a particular agreement is

in fact a lease or a security agreement for purposes of § 365

often depends on which characterization will best serve the

interests of the estate. Section 365 enables the bankruptcy

trustee to affirm or reject leases and executory contracts,

and is based on the trustee's long-standing power to abandon

obligations burdensome to the estate.

APPENDIX—Continued

Id. at 1439. Citing to the Sixth Circuit, the Eleventh Circuit

continued:

The key, it seems, to deciphering the meaning of [§ 365's

lease-executory contract provision] is to work backward,

proceeding from an examination of the purposes rejection is

expected to accomplish. If those objectives have already been

accomplished, or if they can't be accomplished through

rejection, the [agreement] is not [a lease or executory

contract] within the meaning of the Bankruptcy Act.

Id. (citing In re Becknell & Crace Coal Co., Inc., 761 F.2d 319,

322 (6th Cir.1985)). Since it appears the Eleventh Circuit is more

amenable toward the functional approach, the Bankruptcy Court

properly applied said approach to the case at bar. Moreover, this

Court agrees with the Bankruptcy Court's conclusion that the

Homesite Purchase Agreement did not constitute a security device

under Florida law where the Sipes neither had possession nor

incurred the benefits and burdens of ownership at any time since

their execution of said Agreement in July, 1972. Rather, the

Bankruptcy Court properly found that:

It is clear from the facts presented to this Court that their

homesite purchase agreement was indeed a contract to convey

real property which GDC, as a debtor/seller, was entitled to

reject as an executory contract pursuant to Section 365(a) of

the Bankruptcy Code. Order on Remand, p. 19.
Appellants, therefore, have not demonstrated that the

Bankruptcy Court erred as matter of law in concluding that Sipes'

Homesite Purchase Agreement was an executory contract subject to

rejection pursuant to section 365 of the Bankruptcy Code.

Likewise, Appellants have not shown that the Bankruptcy Court erred

in its Order Granting Atlantic Gulf's Motion to Enforce Executory

Contract, Discharge and Injunction Provisions of Plan and

Confirmation Order, and Denying Motion for Ex Parte Relief from the

Automatic Stay. To the contrary, the Bankruptcy Court's legal

determinations are well reasoned and supported by law.

Accordingly, this Court affirms and ratifies the Bankruptcy Court's

(1) Order Granting Atlantic Gulf's Motion to Enforce Executory

Contract, Discharge and Injunction Provisions of Plan and

Confirmation Order, and Denying Motion for Ex Parte Relief from the

Automatic Stay, dated November 5, 1993, and its (2) Order on

Evidentiary Hearing Pursuant to Remand, dated September 16, 1994.

In summary and for the reasons set forth herein, it is ORDERED

AND ADJUDGED that:

* * *

1. Appellee GDC's Motion to Strike Appendix A, Appendix B and

Appendix C to Appendix to Appellants' Reply Brief be, and the same,

is hereby GRANTED IN PART. Only Appendix C to Appendix to

Appellants' Reply Brief shall be stricken from the appellate

record, and Appendix A and B shall be considered part of the

appellate record.

2. Appellee GDC's Motion to Supplement Appellate Record be,

and the same, is hereby GRANTED.
3. Appellants Sipes' Motion to Supplement Appellate Record be

and the same, is hereby DENIED.

4. The Bankruptcy Court's Order Granting Atlantic Gulf's

Motion to Enforce Executory Contract, Discharge and Injunction

Provisions of Plan and Confirmation Order, and Denying Motion for

Ex Parte Relief from the Automatic Stay, dated November 5, 1993, is

hereby AFFIRMED in its entirety.

DONE AND ORDERED in Chambers at Miami, Florida, this 27 day of

January, 1995.