Opinion ID: 573138
Heading Depth: 2
Heading Rank: 1

Heading: Applicability of Section 365 to the Asset Sale

Text: 10 The appeal questions the district court order 1 confirming the sale and transfer of the Scott contracts and the Preminger agreement to RHI Entertainment. Specifically, we must determine if the district court erred in finding that neither agreement was executory and therefore subject to the requirements of § 365 of the Bankruptcy Code. We review the district court's conclusions of law de novo. United States v. McConney, 728 F.2d 1195, 1201 (9th Cir.) (en banc), cert. denied, 469 U.S. 824, 105 S.Ct. 101, 83 L.Ed.2d 46 (1984). 11 Section 363 of the Code allows a debtor to sell assets of the estate, after notice and a hearing, including a sale of substantially all the assets of the estate. 11 U.S.C. § 363(b)(1). An executory contract does not become an asset of the estate until it is assumed pursuant to § 365 of the Code. See § 365(a); In re Tleel, 876 F.2d 769, 770 (9th Cir.1989) (Unless and until rights under an executory contract are timely and affirmatively assumed by the trustee, they do not become property of the debtor's estate). Therefore, the sale of Qintex's assets will not include any contract that is executory unless Qintex first assumes the contract. 12 Whether a contract is executory for a party in bankruptcy is a question of federal law. In re Wegner, 839 F.2d 533, 536 (9th Cir.1988). Although the Code does not specifically define the term executory contract, the Supreme Court has defined it as a contract on which performance remains due to some extent on both sides. NLRB v. Bildisco & Bildisco, 465 U.S. 513, 522 n. 6, 104 S.Ct. 1188, 1194 n. 6, 79 L.Ed.2d 482 (1984). We have observed that executory contracts contain obligations of both parties that are so far unperformed that the failure of either party to complete performance would constitute a material breach and thus excuse the performance of the other. Wegner, 839 F.2d at 536. Thus, we will only consider a contract executory if material unperformed obligations remain for both parties.