Court Opinion

ID: 9689449
Source: CourtListenerOpinion
Date Created: 2023-08-24 18:32:39.644203+00
Date Added: 2024-06-11T18:18:48.180222
License: Public Domain

VOLINN, Bankruptcy Judge,
concurring:
I concur with the result but differ with the majority in their application of 11 U.S.C. § 108(b) to the facts in this case. Rather than viewing Santa Fe’s rights as those of an optionee, I would characterize its rights as those arising from an executo-ry contract.1
*169In attempting to avoid the impact and reasoning of Good Hope Refineries, Inc. v. Benavides, 602 F.2d 998 (1st Cir. 1979) cert. denied, 444 U.S. 992, 100 S.Ct. 523, 62 L.Ed.2d 421 (1979), the majority tries to distinguish § 108(b) of the Code from § 11(e) of the prior Bankruptcy Act. The Good Hope court, while considering § 11(e), had occasion to also consider its successor, § 108(b). The court reasoned that basically, as with § 11(e), the term “or perform any other similar act” related to the preceding language, particularly as to curing a default. Since lapse of an option does not involve default, the time for cure is not extended by § 108(b).
The wording of § 108(b), emphasized by the majority, that an extension is provided for the trustee “to cure default, or perform any other similar act” is still subject to the logic of Good Hope. There is a significant qualitative difference between default and allowing an option to lapse. The essential characteristic of an option is that it purchases a specific calendar period during which the optionee has the discretion to make a choice. Non-exercise of the option does not involve a default, but, rather, exercise of discretion not to proceed with the option. Default, on the other hand, implies failure to meet a binding commitment. In this regard, the logic in Good Hope is persuasive. See also In re Trigg, 630 F.2d 1370 (10th Cir. 1980).
The fundamental legal relationship between Santa Fe and the McCormacks was based on their contract for purchase and sale of real estate. Disagreements arose and litigation ensued. Consequently, in July, 1979, the parties entered into a settlement agreement which provided that:
“In the event Santa Fe does not close escrow on or before June 16,1980, then in such event, Santa Fe shall, upon payment to McCormacks of the sum of $25,000 cash on or before June 17, 1980, have an additional 30 days to close said escrow until July 15, 1980. . .”
The agreement provided for three extensions to September 15, 1980, further providing that:
“In the event said escrow does not close on or before September 15, 1980, then, in such event, Santa Fe shall have no further right or interest in and to the subject real property...”
The agreement made it clear that the foregoing provisions were ancillary to, and in settlement of, the original contract and litigation thereon. The litigation was not to be concluded until the alternatives incident to settlement had occurred. It states:
“It is the intent of this agreement to eliminate any further disputes or litigation between the parties hereto. If Santa Fe does not close escrow on or before September 15, 1980, the dismissal with prejudice of all parties shall be filed in the above entitled action. If Santa Fe closes escrow on or before September 15, 1980, the dismissal with prejudice shall likewise be filed by the escrow in the above entitled action concurrently with the recording of the deed.”
No option to purchase was involved in the settlement agreement. The agreement focuses upon September 15, 1980, more or less as a deadline replacing that stated in the original contract.
The question presented in this light is whether §§ 365 and 362 apply. The automatic stay of § 362 came into effect on August 5, 1981, when Santa Fe filed bankruptcy. This suspended the rights of the parties under the settlement. Bankruptcy intercepted the conclusion of the litigation insofar as it could effect dismissal of appellant’s claim. Although the two $25,000 payments to extend the date escrow was to be closed did not apply to the purchase price and did not create an equity in the property, they may be considered from an equitable standpoint. Since the time within which to close escrow was extended by operation of § 365 of the Code, if the trustee decides to adopt the contract, it will have to make the $25,000 payment it missed, with *170interest. See Matter of Gulfco Investment Corporation, 520 F.2d 741, 744 (10th Cir. 1975). In the event that the trustee rejects the contract, appellees will have a claim against the estate for damages. Id.
In conclusion, I would hold that the legal relationship between the parties originated in an executory contract subject to a settlement which was not concluded prior to bankruptcy. Consequently, the filing of bankruptcy gave the debtor-in-possession or the trustee, the right to accept or reject the contract as provided for by § 365. In effect the date on which escrow had to be closed, was suspended.

. In their brief, appellants argue that the contract between the parties is executory which *169may be assumed or rejected under 11 U.S.C. § 365. Ironically, reference to § 108(b) surfaced tangentially in appellee’s brief with a quote from Good Hope, infra.