Minesen Company, The v. Army Morale, Welfare, and Recreation Fund

CourtDistrict Court, D. Hawaii
DecidedFebruary 27, 2023
Docket1:21-cv-00478
StatusUnknown

This text of Minesen Company, The v. Army Morale, Welfare, and Recreation Fund (Minesen Company, The v. Army Morale, Welfare, and Recreation Fund) is published on Counsel Stack Legal Research, covering District Court, D. Hawaii primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

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Minesen Company, The v. Army Morale, Welfare, and Recreation Fund, (D. Haw. 2023).

Opinion

UNITED STATES DISTRICT COURT

DISTRICT OF HAWAII

THE MINESEN COMPANY, CIV. NO. 21-00478 LEK-WRP

Debtor/Appellant/ Cross-Appellee,

vs.

ARMY MORALE, WELFARE, AND RECREATION FUND,

Creditor/Appellee/ Cross-Appellant,

and

PANGOLIN LLC,

Creditor/Party-in- Interest/Appellee/ Cross-Appellant.

ORDER DISMISSING APPEALS FROM THE BANKRUPTCY COURT’S MEMORANDUM OF DECISION REGARDING ASSUMPTION EXECUTORY CONTRACTS AND LEASES

On November 17, 2021, the bankruptcy court issued its Memorandum of Decision Regarding Assumption of Executory Contracts and Leases (“11/17/21 Decision”) in In re the Minesen Company, Case No. 19-00849 (“BK 19-849” or “the Bankruptcy Case”). [BK 19-849, 11/17/21 Decision, filed 11/17/21 (dkt. no. 505).1] The bankruptcy court issued the 11/17/21 Decision

1 The 11/17/21 Decision is also available as Appendix 1 in Debtor-Appellant the Minesen Company’s Appendix (Excerpts of Records) to Opening Brief (Appendices “1” - “51”) (“Minesen Appendix”). [Minesen Appendix 1, filed 2/7/22 (dkt. no. 12-1).] after an evidentiary hearing held on June 2, 3, and 7, 2021, July 28 and 29, 2021, and August 2, 4, 12, 18, and 19, 2021. [Minesen App’x 1 (11/17/21 Decision) at PageID.258.] On December 2, 2021, the bankruptcy court transmitted Debtor-Appellant The Minesen Company’s (“Minesen”) notice of

appeal of the 11/17/21 Decision (“Appeal”). [Notice of Transmittal to District Court, filed 12/2/21 (dkt. no. 1) (“Minesen Transmittal Notice”).] On December 15, 2021, the bankruptcy court transmitted: Creditor-Appellee/Cross-Appellant Army Morale, Welfare, and Recreation Fund’s (“MWR”) notice of cross-appeal of the 11/17/21 Decision (“MWR Cross-Appeal”); and Creditor/Party-in-Interest/Cross-Appellant Pangolin LLC’s (“Pangolin”) notice of cross-appeal of the 11/17/21 Decision (“Pangolin Cross-Appeal”). [Transmittal of Documents for Pending Appeal, filed 12/15/21 (dkt. no. 5) (“MWR Transmittal Notice”); Transmittal of Documents for Pending Appeal, filed 12/15/21 (dkt. no. 6) (“Pangolin Transmittal Notice”).]

Minesen filed its Opening Brief on February 7, 2022 (“Minesen Brief”). [Dkt. no. 11.] Pangolin filed its Combined Responsive Brief in the Appeal and Opening Brief in Cross-Appeal (“Pangolin Brief”) on March 7, 2022, and MWR filed the Creditor- Appellee’s Responsive/Cross-Appellant’s Opening Brief (“MWR Brief”) on March 21, 2022. [Dkt. nos. 20, 21.] Minesen filed its Combined Reply Brief and Answering Brief on May 5, 2022 (“Minesen Response Brief”), and Pangolin filed a joinder in the Minesen Response Brief on May 9, 2022. [Dkt. nos. 24, 25.] On May 19, 2022, MWR filed the Creditor Appellee’s Responsive/Cross-Appellant’s Reply Brief (“MWR Response Brief”). [Dkt. no. 26.]

The Court finds these matters suitable for disposition without a hearing pursuant to Rule LR7.1(c) of the Local Rules of Practice for the United States District Court for the District of Hawaii (“Local Rules”). For the reasons set forth below, Minesen’s Appeal, the MWR Cross-Appeal, and the Pangolin Cross-Appeal are dismissed for lack of appellate jurisdiction. BACKGROUND The Bankruptcy Case is the Chapter 11 proceeding initiated by Minesen on July 4, 2019. See Minesen Transmittal Notice, dkt. no. 1-3 (docket sheet for BK 19-849); see also BK 19-849, Voluntary Petition for Non-Individuals Filing for Bankruptcy, filed 7/4/19 (dkt. no. 1).

At the time of the 11/17/21 Decision, Minesen was operating the Inn at Schofield Barracks (“the Inn”), which is a hotel located on the United States Army’s (“the Army”) Schofield Barracks installation. See Minesen App’x 1 (11/17/21 Decision) at PageID.258. In connection with its operation of the Inn, Minesen entered into the following agreements: 1. Contract No. NAFBA3-93-C-001 between Minesen and US Army Morale, Welfare and Recreation Fund, a Non-Appropriated Fund Instrumentality, dated January 14, 1993 (the “MWR Contract”);

2. Amendment/Modification No. P00018 to the MWR Contract, dated April 18, 2017 (the “MWR Contract Modification”);

3. Lease No. DACA84-1-91-14 between the United States of America through the Secretary of the Army, as lessor, and Minesen, as lessee, dated February 1, 1993 (the “Lease”);

4. Lease No. DACA84-1-17-121, between the Secretary of the Army, as lessor, and Minesen, as lessee (the “Picnic Area Lease”); and

5. Memorandum of Agreement between the 25th Infantry Division (Light)/US Army Garrison Hawaii; US Army Community and Family Support Center; and Minesen, effective May 11, 1994 (the “Operating Agreement”).

[Id. at PageID.257 (emphases and citations omitted).] These agreements will be referred to collectively as “the Contracts.” Minesen is both the debtor and the debtor-in-possession and, as the debtor-in-possession, Minesen filed a motion to assume the Contracts, pursuant to 11 U.S.C. § 365.2 See Minesen App’x 1

2 Section 365(d)(2) states:

In a case under chapter 9, 11, 12, or 13 of this title, the trustee may assume or reject an executory contract or unexpired lease of residential real property or of personal property of the debtor at any time before the confirmation of a plan but the court, on the request of any party to such contract or lease, may order the (. . . continued) (11/17/21 Decision) at PageID.256 & n.1; see also BK 19-849, Minesen’s Motion for Order Authorizing Assumption of Executory Contracts and Leases, filed 10/21/19 (dkt. no. 100) (“Assumption Motion”). Section 365(b)(1) contains certain requirements that must be met prior to the assumption of a debtor’s executory

contract or unexpired lease that has been in default. Further, § 365(c)(1) sets forth certain circumstances under which a debtor’s executory contract or unexpired lease cannot be assumed. Under § 365, MWR had the burden to establish any material defaults in the Contracts and that proper notice of the defaults was given. If MWR carried its burden, the burden shifted to Minesen to establish that: it either had already cured the defaults or would cure the defaults promptly; and there was adequate assurance of Minesen’s future performance. See Minesen App’x 1 (11/17/21 Decision) at PageID.259-63 (summarizing the applicable legal standards). The bankruptcy court found that Minesen was in default

under the Contracts because of the following material breaches: failing to pay its electric bills, leaving an outstanding amount

trustee to determine within a specified period of time whether to assume or reject such contract or lease.

Under 11 U.S.C. § 1107(a), a debtor-in-possession has the power of a trustee for purposes of § 365. See Minesen App’x 1 (11/17/21 Decision) at PageID.260. of $561,538.89 through June 2021; [id. at PageID.277;] selling distilled spirits at the Inn; [id. at PageID.279;] selling beer and wine, without a liquor license, at the Inn; [id. at PageID.282;] failing to obtain MWR’s consent before entering into a subrogation transaction with Pangolin3 that the bankruptcy

court found constituted a refinancing of Minesen’s loan from First Hawaiian Bank (“FHB”), which was a loan that MWR had previously consented to; [id. at PageID.288-89;] failing to make required deposits in its replacement reserve account (“RRA”);4 [id. at PageID.289-90;] and charging guests $1,097,438.95 more than the approved room rates, in addition to charging guests “$9,027 in excess of the maximum lodging portion of the transient lodging allowance,” [id. at PageID.294]. However, the bankruptcy court found that, even after curing these defaults, Minesen was “likely [to] generate substantial . . . profits from operating the Inn during the remaining term of the MWR Contract.” [Id.

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Minesen Company, The v. Army Morale, Welfare, and Recreation Fund, Counsel Stack Legal Research, https://law.counselstack.com/opinion/minesen-company-the-v-army-morale-welfare-and-recreation-fund-hid-2023.