Epic Aviation, LLC v. Phillips et al

Filing 5

ORDER denying as moot 1 motion to stay pending appeal. The Clerk shall close the file. Signed by Judge John E. Steele on 5/7/2013. (RKR)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
FORT MYERS DIVISION
IN RE:
BONITA B.
JEFFREY S. PHILLIPS,

PHILLIPS

AND

Debtors.
___________________________________
EPIC AVIATION, LLC,
Appellant,
vs.

Case No. 2:12-cv-585-FtM-29
Bankr. No. 9:06-bk-5685-FMD
Bankr. No. 9:06-bk-07489-FMD
(Jointly Administered)

BONITA B. PHILLIPS and JEFFREY S.
PHILLIPS,
Appellees.
___________________________________
EPIC AVIATION, LLC,
Appellant,
vs.

Case No. 2:12-cv-669-FtM-29
Bankr. No. 9:06-bk-5685-FMD
Bankr. No. 9:06-bk-07489-FMD
(Jointly Administered)

BONITA B. PHILLIPS, and JEFFREY S.
PHILLIPS,
Appellees.
___________________________________
EPIC AVIATION, LLC,
Appellant,

Case No. 2:13-mc-5-FtM-291
Bankr. No. 9:06-bk-5685-FMD
Bankr. No. 9:06-bk-07489-FMD
(Jointly Administered)

vs.

BONITA B. PHILLIPS and JEFFREY S.
PHILLIPS,
Appellees.
___________________________________
OPINION AND ORDER
This matter comes before the Court on three appeals filed by
Epic Aviation, LLC (Epic Aviation) from orders of the Bankruptcy
Court.

Epic Aviation refers to these appeals as the Auction Order

Appeal (2:12-cv-585-FTM-29), the Lis Pendens Order Appeal (2:12-cv669-FTM-29), and the Sale Order Appeal (2:13-cv-113-FTM-29).

The

Court will do likewise, as well as referring to the appeals as the
First Appeal, the Second Appeal, and the Third Appeal respectively.
The Court heard oral arguments on March 5, 2013. Supplemental
authority was subsequently submitted.

(Docs. #26, 27.)

I.
The United States District Court functions as an appellate
court in reviewing decisions of the United States Bankruptcy Court.
28 U.S.C. § 158(a); In re Bullock, 670 F.3d 1160, 1163 (11th Cir.
2012)(citing In re Colortex Indus., Inc., 19 F.3d 1371, 1374 (11th

1

The underlying appeal, 2:13-cv-113-FTM-29, has since been
transmitted but was not yet ripe at the time of oral arguments.
The Briefing was completed and the appeal ripe as of April 15,
2013.
-2-

Cir. 1994)), cert. granted, 133 S. Ct. 526 (2012).

The legal

conclusions of the bankruptcy court are reviewed de novo, while
findings of fact are reviewed for clear error.
Corp., 567 F.3d 1291, 1296 (11th Cir. 2009).

In re Globe Mfg.

A finding of fact is

clearly erroneous when, “although there is evidence to support it,
the reviewing court on the entire record is left with a definite
and firm conviction that a mistake has been committed.”
v.

W.

Electric

Co.,

Inc.,

745

F.2d

1373,

1378

Crawford

(11th

Cir.

1984)(citing United States v. U.S. Gypsum Co., 333 U.S. 364, 395
(1948)); In re Walker, 515 F.3d 1204, 1212 (11th Cir. 2008).

Where

a matter is committed to the discretion of the bankruptcy court,
the district court must affirm unless it finds that the bankruptcy
court abused its discretion. Amlong & Amlong, P.A. v. Denny's,
Inc., 500 F.3d 1230, 1238 (11th Cir. 2006).

A court abuses its

discretion if it applies an incorrect legal standard, follows
improper procedures in making the determination, makes findings of
fact

that

are

clearly

erroneous,

unreasonable or incorrect manner.

or

applies

the

law

in

an

Collegiate Licensing Co. v. Am.

Cas. Co. of Reading, Pa., No. 12-10673,
1149936, *4 (11th Cir. Mar. 21, 2013).

F.3d

, 2013 WL

“The abuse of discretion

standard allows a range of choices for the [bankruptcy] court, so
long as any choice made by the court does not constitute a clear
error of judgment.”

Id. (citation omitted).

-3-

II.
Bonita Phillips (Bonita Phillips or Mrs. Phillips) and Jeffrey
Scott Phillips (Jeffrey Phillips or Mr. Phillips), her husband
(collectively

Debtors),

petitions in late 2006.

filed

separate

Chapter

7

bankruptcy

The cases were consolidated in the

Bankruptcy Court for administrative purposes only, and Diane Jenson
(Trustee) was appointed as trustee in both cases.
Epic Aviation was and is a creditor of Mr. Phillips, and has
a pre-bankruptcy judgment against him in the principal amount of
$322,603.30.

Epic Aviation’s judgment constituted approximately

seven percent of the claims against Mr. Phillips in his bankruptcy
case.

Epic Aviation was not a creditor of Mrs. Phillips and had no

claim against Mrs. Phillips in her bankruptcy case.
In April, 2007, the Trustee filed objections to exemptions
claimed by each Debtor; the Trustee also filed an adversary action
against Bonita Phillips seeking to defer her bankruptcy discharge.
In May 2007, the Bankruptcy Court approved mediation of these
disputes.
A.

The 2007 Settlement Agreement:
The two-page Mediated Settlement Agreement dated May 14, 2007

(Settlement Agreement) (Bankr. Doc. #184, Exh. A)2 resolved “all

2

The Court will make reference to the documents filed in the
first appeal in 2:12-cv-585-FTM-29 and the underlying bankruptcy
case for 9:06-bk-5685-FMD throughout this Opinion and Order, unless
otherwise indicated. The Court will refer to the appellate dockets
(continued...)
-4-

matters and disputes between” the Trustee and the Debtors.
relevant terms and conditions were:

(1)

The

the Trustee would be paid

$825,0003 from the sale of Debtors’ home in Naples, Florida; (2)
upon payment, the Trustee and the Debtors would exchange mutual
general releases; (3) the Debtors’ home would “be put on the market
promptly and the Debtors will keep the Trustee advised of the
status of the sale and of any offers received;” (4) the Trustee was
to be given a lien on the home, subordinate to two mortgages and
real estate taxes; (5) the intentional failure of Debtors to pay
the

Trustee

the

$825,000

would

constitute

a

breach

of

the

Settlement Agreement which “shall be grounds for revocation of the
Debtors’ discharge;” and (6) the Trustee’s lien on the home was
property of the estate and protected by the automatic stay until
paid in full.

(Id., p. 1.)

The Settlement Agreement did not

provide any deadlines for the sale of the home or the payment of
the money to the Trustee, and did not set a price at which the home
would be offered for sale.

2

(...continued)
as “Doc.” and the bankruptcy case docket as “Bankr. Doc.” Copies
of the relevant documents are included in the record transmitted by
the Bankruptcy Court, or otherwise judicially noticed and
accessible through PACER.
3

The Trustee was to be paid $1,000,000 if Epic Aviation’s
adversary proceeding against Mr. Phillips was dismissed with
prejudice, but only $825,000 if the adversary proceeding was not
dismissed by Epic Aviation.
The adversary proceeding, 9:07-ap00181-ALP, was not dismissed.
-5-

On May 24, 2007, the Debtors and the Trustee filed a Joint
Motion for Authority to Compromise Controversies Between Diane
Jensen, The Chapter 7 Trustee and Bonita and Jeffrey Phillips
(Bankr. Doc. #78).

This joint motion summarized the terms of the

Settlement Agreement and explained why the compromise settlement
was in the best interests of the parties.
Epic Aviation had initially filed an objection to the joint
motion to approve the Settlement Agreement, but withdrew its
objection.

(Bankr. Doc. #86; Doc. #1-25, p. 3.)

At a September 5,

2007 hearing, the Trustee and Debtors’ counsel told the Bankruptcy
Court that there was no time limit on the sale of the home because
the real estate market was bad.
Bankruptcy

Court

that

the asking

The parties also told the
price would be

$6

million,

although they did not anticipate actually getting that much. (Doc.
#1-25, pp. 5-6.)
On October 9, 2007, the Bankruptcy Court issued an Order
Approving Joint Motion for Authority to Compromise Controversies
Between Diane Jensen, The Chapter 7 Trustee and Bonita and Jeffrey
Phillips (the Settlement Agreement Approval Order).
#102.)
granted

(Bankr. Doc.

In relevant part, the Settlement Agreement Approval Order
the

joint

motion,

approved

the

compromise

Settlement

Agreement, directed payment of $825,000 from the sale of the home,
and provided the Trustee a lien against the Debtors’ home to secure
their obligations under the Settlement Agreement, subordinate to

-6-

two specified mortgages and any real estate taxes.

The Settlement

Agreement Approval Order also authorized and directed the parties
take

all

steps

necessary

to

effectuate

and

consummate

the

settlement, including that the Debtors “shall” place the home “on
the market” for sale.

The Settlement Agreement Approval Order

further provided that the intentional failure of Debtors to pay the
Trustee the $825,000 “shall constitute a breach of the compromise
and shall be grounds for the revocation of the Debtors’ discharge.”
Like the Settlement Agreement, the Settlement Agreement Approval
Order did not set forth any restriction on the timing or price for
the sale of the home.

The validity of the Settlement Agreement and

the Settlement Agreement Approval Order have never been challenged,
and none of the current appeals attempt to do so.

(See id.)

The Settlement Agreement lien was recorded in the public
records in Collier County, Florida.

(Bankr. Doc. #102, ¶ 4.)

Debtors initially placed their home on the market for sale with an
asking price of $6 million.

(Doc. #1-25, p. 5.)

The home did not

sell, and Debtors declined to reduce the asking price.
In late 2010, the Trustee filed a Motion to Compel (Bankr.
Doc. #147) seeking to compel Debtors to reduce the asking price of
the home.

The Trustee argued that the Settlement Agreement’s

requirement to place the home on the market implicitly included the
obligation of a realistic asking price.

The Trustee conceded that

the house had been on the market continuously, and that the asking

-7-

prices started at $6.295 million and was $4.5 million at the time
of the hearing.

(Bankr. Doc. #147, ¶ 11.)

The Trustee further

admitted that she did not have sufficient information to determine
if the asking price was inflated or achievable (Doc. #1-31, p. 4),
but requested an evidentiary hearing to determine whether Debtors
were marketing the house in good faith (id., p. 6).

The Bankruptcy

Court denied the motion without prejudice to the initiation by the
Trustee of an adversary proceeding.

(Doc. #28.)

The Trustee did

not file such an adversary proceeding, and the home continued to be
on the market at a price that did not result in a sale.
B.

The Proposed Compromise of the Settlement Agreement:
In other litigation, the Bankruptcy Court denied Mr. Phillips

a Chapter 7 bankruptcy discharge and the District Court affirmed
the decision of the Bankruptcy Court. See In re Phillips, 2:10-cv212-FTM-29, 2011 WL 1196427 (M.D. Fla. 2011).

In April 2012, the

Eleventh

the

Circuit

Court

of

Appeals

affirmed

undersigned’s

Opinion and Order in the adversary proceeding brought by Epic
Aviation against Mr. Phillips.

In re Phillips, 476 F. App’x 813

(11th Cir. 2012). The final judgment denied Mr. Phillips a Chapter
7 bankruptcy discharge under 11 U.S.C. § 727(a)(4)(A) for making
false oaths in connection with the official schedules and statement
of financial affairs in his bankruptcy case.

Epic’s adversary

proceeding, 9:07-ap-181-ALP was closed on May 11, 2012.

-8-

In about July 2012, Debtors proposed to compromise their
obligations under the 2007 Settlement Agreement by paying $500,000
to the Trustee in exchange for a release of the lien on their home.
The Trustee accepted this offer, and on July 31, 2012, the Trustee
filed a Motion to Approve Compromise of Controversy Between Trustee
and Jeffrey S. Phillips. (Bankr. Doc. #167.) The Trustee felt this
compromise was in the best interest of the bankruptcy estate
because the house had remained unsold for five years.

Epic

Aviation objected to the compromise, and offered to pay the Trustee
$525,000 for the Trustee’s rights under the Settlement Agreement.
(Bankr. Doc. #170; Doc. #5, p. 7.)
At a September 18, 2012 hearing on the motion to approve the
proposed compromise of the Settlement Agreement, the Trustee orally
requested a continuance of the hearing in order to allow the
parties to reach a compromise agreement or have a public auction of
the Trustee’s rights under the Settlement Agreement. Epic Aviation
and the Debtors agreed to the request.

(Doc. #5, pp. 8-9.)

The

Bankruptcy Court authorized the Trustee to serve Notice with
shortened deadlines to submit written objections, to submit a bid,
and to conduct the auction.

(Id.; Bankr. Doc. #187.)

Later that day the Trustee filed a Report and Notice of
Intention to Sell Property of the Estate at Public Sale (Bankr.
Doc. #184) stating an intent to hold a public sale of all the
Trustee’s rights and interests in and to the Settlement Agreement.

-9-

This Notice stated that the “Price” was “Highest Bid” and the sale
would be “to” the “Highest Bidder.”
were:

(1)

The “Terms” of the auction

The minimum bid would be $525,000.00, with 10% down and

the balance to be paid within 48 hours of the conclusion of the
telephonic auction; (2) all qualifying bids were to be received by
the Trustee by 5 p.m. on September 27, 2012; (3) the telephonic
auction would be conducted on September 28, 2012 at 2 p.m., if at
least two qualifying written bids and deposits were received; (4)
the balance of the high bid was due within 48 hours of the
conclusion of the auction; (5) if the highest bidder failed to
fulfill the auction terms, the Trustee “will sell the rights to the
next highest bidder at the last bid price;” and (6) auction bids
were to be in $25,000 increments, subject to the increments being
lowered by the Trustee during the auction.
C.

The Auction:
The telephonic auction was conducted on September 28, 2012.

(Doc. #2.)

The bidding commenced at $525,000, and eventually

Debtors bid $750,000.

Epic Aviation then bid $825,000.

Rather

than exceed this bid, Debtors said they would stop bidding and just
pay off the full original Settlement Agreement amount of $825,000.
(Bankr. Doc. #189, ¶ 4.)

After some discussion off the record, the

Trustee stated that if Mr. Phillips was willing to pay the $825,000
(less the deposit) within 48 hours, the Trustee would not sell her
rights under the Settlement Agreement, but would accept Debtors’

-10-

full payoff of the Settlement Agreement.

(Doc. #2, pp. 9-10.)

Epic Aviation objected, stating that Debtors no longer had a right
to pay the Settlement Agreement amount after participating in the
auction, and that Debtors did not win the auction because they were
not the highest bidder.

(Id., pp. 10-11.)

The Trustee gave Mr.

Phillips until October 2, 2012, to put the money into the Trustee’s
trust account, where it would remain pending a hearing in the
Bankruptcy Court to address Epic Aviation’s objection. (Id., p.
14.)
D.

Debtors’ Emergency Motion, Auction Order, and Appeal:
On October 2, 2012, -- the Debtors’ deadline to provide the

$825,000 to the Trustee’s escrow account -- the Debtors did not
provide the Trustee with the $825,000.

Instead, the Debtors filed

an Emergency Motion for Enlargement of Time to Make Settlement
Payment to the Trustee and for Order Authorizing the Sale of the
Debtors’ Homestead Property (Bankr. Doc. #189).

In the Emergency

Motion, the Debtors argued that the 48 hour payment deadline should
not apply because they were fulfilling the Settlement Agreement,
not complying with the auction terms. The Debtors stated that they
had received a verbal offer to purchase the property for $4.175
million,

which

was

sufficient

to

pay

all

mortgages

and

the

$825,000.00 to the Trustee, however “issues have arisen relating to
Epic’s conduct during the auction and Epic’s judgment against
Debtor, Jeffrey S. Phillips only.”

-11-

(Id., ¶ 6.)

The Debtors stated

that a 10% deposit had been wired and that they were prepared to
immediately wire an additional $500,000 pending the closing of the
sale, but that they did not believe that they should have to pay
the full $825,000 “due to the unknown agenda of Epic.”

(Id., ¶ 8.)

The Debtors indicated that the Trustee’s prior motion to compromise
“has essentially [been] withdrawn” by the Trustee, they were
prepared to pay the full payoff amount in the original Settlement
Agreement, and the reasons for an auction were no longer present.
(Id., ¶ 9.)

Debtors requested an unspecified amount of additional

time to make full payment and for an order authorizing sale of the
property free and clear of any lien of Epic Aviation.
Epic Aviation filed a written Response (Bankr. Doc. #193)
making a “limited objection” to the enlargement of time to make the
settlement payment.

Epic Aviation asserted that the Debtors were

essentially conceding that their bid at the auction above $500,000
had been with money they simply did not have.

Epic Aviation argued

that Debtors had not shown grounds for the Bankruptcy Court to
award additional time to comply with their auction obligations.
The Bankruptcy Court conducted a hearing on October 9, 2012.
(Doc. #3.)

Counsel for Debtors summarized the events at the

auction, and stated that because of Epic Aviation’s objection to
the way the auction was concluded, the Trustee was not in a
position to sign a release in exchange for the $825,000 payoff
amount.

(Id., pp. 4-11.)

Counsel stated that he then had the

-12-

balance of the funds in his trust account ready to be paid to the
Trustee, pending resolution of the Epic Aviation objection.

(Id.,

pp. 12-13, 14.)
Counsel for Epic Aviation argued that the terms of sale at the
auction did not allow payment conditioned upon the sale of other
property, and the Notice clearly required all monies to be paid
within 48 hours.

(Id., pp. 19-20.)

Epic Aviation stated that it

sent $825,000 to the Trustee, and it was willing and able to close
as the highest bidder at the auction.

(Id., p. 20.)

Epic Aviation

further argued that the auction was noticed as going to the highest
bidder, and that the terms and conditions of the auction were
violated when the auction was terminated by the Trustee’s decision
to

allow

Debtors

to pay

Settlement Agreement.

their

original

obligation

under

the

(Id., p. 21.)

The Trustee’s position was that if the Debtors could fund the
$825,000 within 48 hours of a Bankruptcy Court ruling, she would
accept that as the highest and best offer at the auction.

If the

Debtors are unable to fund the $825,000, the Trustee would sell her
rights to Epic Aviation as the second highest and best bid.

The

Trustee’s position was that she had the business judgment and
discretion to decide the auction winner.

(Id., pp. 23-24.)

On October 9, 2012, the Bankruptcy Court filed an Order on
Debtors’

Emergency

Motion

for

Enlargement

of

Time

to

Make

Settlement Payment to the Trustee and For Order Authorizing Sale of

-13-

the Debtors’ Homestead Property (Doc. #1-2).

This Order adopted

the oral findings and determinations made at the hearing, in which
the Bankruptcy Court found: that the Debtors’ motion was timely
filed; that the Trustee was in the best position to determine the
highest and best bid at the auction; and that if Epic Aviation was
determined to be the winning bid and the $825,000 was tendered by
the Debtors,
payment.

Epic

(Doc.

Aviation

#3,

pp.

would

29-30.)

be obligated
The

Court

to

accept

noted

that

the
the

Settlement Agreement did not have a deadline for payment, did not
provide for interest, and did not provide for anything other than
that the Debtors would list the property for sale.

(Id., pp. 33-

34.) The Bankruptcy Court’s Order granted the emergency motion for
enlargement of time “only to the extent that the Debtors seek
additional time to fund the purchase price at the auction sale by
paying $825,000 in full satisfaction of the Settlement.” (Doc. #12, p. 2.)

The Order further stated:

2.
The Debtors are directed to wire transfer
$772,500 (the difference between the $825,000 bid and the
$52,500 deposit) to the Trustee on or before 5:00 P.M.,
October 11, 2012. If the Debtors timely make this
payment, (i) the Debtors will be deemed to be the
successful bidder at the auction sale; (ii) the
Settlement will be deemed paid in full, (iii) the Trustee
will provide the Debtors a release and satisfaction of
the lien created by recordation of the Settlement Order,
and (iv) the Trustee will return all monies paid by Epic
Aviation, LLC, in connection with the auction.
3.
If the Debtors fail to pay the $772,500 as
provided in paragraph 2 of the Order, then (i) Epic
Aviation, LLC, will be deemed the successful bidder at
the auction/sale; (ii) the Trustee will assign all of her
-14-

rights under the Settlement to Epic Aviation, LLC, and
(iii) the Trustee will return the deposit paid by the
Debtors in connection with in the auction.
(Doc. #1-2, pp. 2-3.)
The Debtors timely paid the remaining balance of the $825,000,
and on October 10, 2012, the Trustee executed a Satisfaction and
Release of Lien and Interest (Satisfaction and Release), releasing
Debtors of their obligations under the Settlement Agreement and
releasing

the

Trustee’s

lien

on

the

Debtors’

home,

and

the

Satisfaction and Release was recorded in the public records.
(Bankr. Doc. #198.)
On October 10, 2012, Epic Aviation filed its Notice of Appeal
(Doc. #1) of the Order on Debtors’ Emergency Motion for Enlargement
of Time to Make Settlement Payment to the Trustee and For Order
Authorizing Sale of

the Debtors’ Homestead Property (Doc. #1-2).4

After the appeal was transmitted, appellees filed an Emergency
Motion to Dismiss Appeal as Moot (Doc. #13), which was supplemented
(Doc. #15) and responded to by Epic Aviation (Doc. #17).

This

First Appeal is also referred to as the Auction Order Appeal.

4

Appellant Epic Aviation filed an Initial Brief (Doc. #11),
Bonita B. Phillips and Jeffrey S. Phillips (appellees) filed an
Answer Brief (Doc. #12), Diane Jensen, Chapter 7 Trustee (Trustee)
filed a Brief (Doc. #16), and Epic filed separate Reply Briefs
(Docs. ## 18, 23) in response to the appellees’ and Trustee’s
briefs.
-15-

E.

Judicial Lien and Request for Stay Pending Appeal:
On October 10, 2012, the Debtors filed an Emergency Motion to

Avoid Judicial Lien of Epic Aviation, LLC (Bankr. Doc. #198) in
order to clear title to the house.

On the same date, Epic Aviation

filed an Emergency Motion for Stay Pending Appeal (Bankr. Doc.
#202) with the Bankruptcy Court.
On October 12, 2012, the Bankruptcy Court held a hearing on
both motions.

(Doc. #4.)

After hearing arguments, the Bankruptcy

Court summarized the procedural history of the case, concluding
that the Trustee essentially called off the auction and decided to
allow the Debtors the opportunity to pay the full amount under the
Settlement Agreement.

The Bankruptcy Court noted that this could

be viewed either as the Trustee determining the Debtors were the
highest

and

best

offer

at

the

auction,

or

that

the

Trustee

determined to go forward with the provisions of the Settlement
Agreement.

The

Bankruptcy

Court

found that the

Trustee

had

determined that Debtors’ offer was the highest and best offer
pursuant to the terms of the auction, and gave Debtors a time limit
in which to transmit funds into the Trustee’s trust account.

The

Bankruptcy Court found that it had the discretion to grant the
extension of time, the decision was not clearly erroneous, and the
relevant factors did not weigh in favor of granting a stay pending
appeal.

(Id., pp. 53-55.)

As to the lien, the Bankruptcy Court

indicated that the avoidance would be granted if a Continuous

-16-

Marriage Affidavit was filed establishing that the parties were
married when the property was acquired and that it was acquired as
tenants by the entireties, and then Epic Aviation would have an
opportunity to seek reconsideration on a good faith basis.
pp. 65, 68.)

The Affidavit was filed.

Aviation did not seek reconsideration.

(Bankr. Doc. #217.)

(Id.,
Epic

Debtors’ motion to avoid

the judicial lien was granted by the Bankruptcy Court on October
17, 2012.

(Bankr. Doc. #222.)

The stay was denied by the

Bankruptcy Court by an order filed on October 23, 2012.

(Bankr.

Doc. #236.)5
F.

Lis Pendens Order Appeal:
On October 12, 2012, Epic Aviation recorded a Notice of Lis

Pendens (2:12-mc-38-FTM-29, Doc. #4, Exh. B) in the Collier County
public records against the Debtors’ residence based upon its
interests and rights under its appeal of the Auction Order.
On October 30, 2012, Debtors filed an Emergency Motion to
Dissolve Lis Pendens Filed by Epic Aviation, LLC (Bankr. Doc. #244)
asserting

that the

lis

pendens

filed

improper and illegal under Florida law.

against

their

home was

Epic Aviation’s Response

(Bankr. Doc. #250) asserted that the Bankruptcy Court lacked

5

On October 26, 2012, Epic Aviation filed an Emergency Motion
for Stay Pending Appeal with the District Court. On November 9,
2012, the undersigned denied the motion for stay in a written
Opinion and Order. In re Phillips, 2:12-mc-38-FtM-29, Doc. #7,
2012 WL 5467541 (M.D. Fla. Nov. 9, 2012).
-17-

subject-matter jurisdiction over the motion after the filing of a
notice of appeal, and in any event, the lis pendens was lawful.
The Bankruptcy Court held a hearing on November 5, 2012.
(Bankr. Doc. #257.)

On November 7, 2012, the Bankruptcy Court

issued its Order Granting Debtors’ Emergency Motion to Dissolve Lis
Pendens Filed by Epic Aviation, LLC (Bankr. Doc. #254).

The

Bankruptcy Court found “that there is an insufficient nexus between
the Debtors’ jointly owned homestead property . . . and the dispute
asserted by Epic relating to the appeal of this Court’s Order . .
. .”, granted the motion, and dissolved the lis pendens.
Doc. #254, p.1; Bankr. Doc. #257, p. 28.)

(Bankr.

Epic Aviation filed a

Notice of Appeal (Bankr. Doc. #256) from this order (the Lis
Pendens Order Appeal, or the Second Appeal).6

After the appeal was

transmitted, appellees filed an Emergency Motion to Dismiss Appeal
as Moot (2:12-cv-669-FTM-29, Doc. #4), which was responded to by
Epic Aviation (Id., Doc. #13). This Second Appeal is also referred
to as the Lis Pendens Order Appeal.
G.

The Sale Order Appeal:
Debtors subsequently obtained a written contract to sell their

residence for $4.375 million, but the sale was contingent upon
Debtors obtaining dismissals or resolution of the appeals and Epic

6

In 2:12-cv-669-FTM-29, appellant Epic Aviation filed an
initial Brief of Appellant (Doc. #15), Bonita B. Phillips and
Jeffrey S. Phillips (appellees) filed an Answer Brief (Doc. #18),
and Epic filed a Reply Brief (Doc. #19).
-18-

Aviation’s lis pendens.

(Doc. #15, ¶ 2; 2:12-cv-669-FTM-29, Doc.

#4.)
On January 11, 2013, Debtors filed an Emergency Motion For
Order Approving Sale of Debtors’ Property Free and Clear of any
Interest of Epic Aviation, LLC (Bankr. Doc. #283; 2:12-cv-669-FTM29, Doc. #16, Exh. A) in the Bankruptcy Court.

Debtors sought

Bankruptcy Court approval of the sale of their residence free and
clear of Epic Aviation’s interests, i.e., its interests created by
the pending appeals.

Debtors pointed out that while Epic Aviation

had a $322,603.30 pre-petition judgment against Mr. Phillips, Epic
Aviation would never have rights against the residence, which was
jointly owed with Mrs. Phillips as tenants by the entirety.

(Id.,

¶ 8.)
Epic Aviation filed a Response (Bankr. Doc. #286; 2:12-cv-669FTM-29, Doc. #16, Exh. B), stating that the residence was claimed
as exempt property by debtors, and was therefore no longer property
of the bankruptcy estate. Therefore, Epic Aviation argued, Debtors
could not sell the property as requested.
The Bankruptcy Court held a hearing on January 15, 2013.
(2:13-mc-5-FTM-29, Doc. #1-2.) On January 17, 2013, the Bankruptcy
Court filed an Order Granting Debtors’ Emergency Motion for Order
Approving Sale of Debtors’ Property Free and Clear of Any Interest
of Epic Aviation, LLC (2:13-mc-5-FTM-29, Doc. #1-1; Bankr. Doc.
#288).

The Bankruptcy Court found that it had the power and

-19-

authority to grant the request pursuant to Section 105 of the
Bankruptcy Code, and it was in furtherance of its prior October 9,
2007 order approving the Settlement Agreement, the October 9, 2012
order enlarging time to make settlement payment, its October 17,
2012 order to avoid judicial lien, and its November 7, 2012, order
dissolving lis pendens.

The Bankruptcy Court agreed with Epic

Aviation that § 363 did not authorize the sale of the property, but
found its authority under § 105.

The Order authorized Debtors to

sell their residence free and clear of any interest of the Chapter
7 Trustee and/or Epic Aviation, including any interest arising out
of Epic Aviation’s appeals.

As a condition of the sale, Debtors

were required to escrow the net proceeds of the sale, and any
interests of the Trustee or Epic Aviation in the property was to
attach exclusively to the net proceeds and not follow the property
transferred to the buyer so that marketable title may pass to the
buyer.
Epic Aviation filed a third Notice of appeal (2:13-mc-5-FTM29, Doc. #1-3; Bankr. Doc. #289) (the Sale Order Appeal).

Epic

also filed an Emergency Motion For A Stay Pending Appeal (2:13-mc5-FTM-29, Doc. #1), to which Debtors filed a Response in Opposition
(Id., Doc. #2).

This motion is pending in the miscellaneous case,

and appeal is now ripe.

See 2:13-cv-113-FTM-297.

7

Appellant Epic Aviation filed a Brief (Doc. #9), Bonita B.
Phillips and Jeffrey S. Phillips (appellees) filed an Answer Brief
(continued...)
-20-

III.
A threshold matter is Debtors’ Emergency Motion to Dismiss
[the First] Appeal as Moot (Doc. #13) filed on November 20, 2012,
and Supplement (Doc. #15) filed on November 28, 2012.

Appellant

filed a Response in Opposition (Doc. #17) on December 4, 2012.
Debtors argue that the full payment of the Settlement Agreement
amount and the recording of a release by the Trustee results in the
inability of the court to provide any effective relief, and thus
renders Epic Aviation’s appeal moot.

The Court disagrees.

Article III of the United States Constitution restricts the
power of federal courts to “Cases” and “Controversies,” which must
be present through all stages of federal judicial proceedings,
including appeal.

Chafin v. Chafin, 133 S. Ct. 1017, 1023 (2013).

While mootness will defeat the case or controversy requirement,
“[a] case becomes moot only when it is impossible for a court to
grant any effectual relief whatever to the prevailing party.” Knox
v. SEIU, Local 1000, 132 S. Ct. 2277, 2287 (2012)(citations and
quotation marks omitted). See also In re Club Assocs., 956 F.2d
1065, 1069 (11th Cir. 1992).

This does not require the ability to

return the parties to the status quo ante, but only requires the
possibility of a partial remedy.

Church of Scientology v. United

States, 506 U.S. 9, 12-13 (1992); Chafin, 133 S. Ct. at 1023;

7

(...continued)
(Doc. #10) and appellant filed a Reply Brief (Doc. #11).
-21-

FTC

v. Phoebe Putney Health Sys., Inc., 133 S. Ct. 1003, 1009 n.3
(2013).
The First Appeal is not moot because it is possible for the
Court to grant Epic Aviation some effective relief.

This could

include an order requiring the Trustee to return $825,000 to the
Phillips and to accept $825,000 from Epic Aviation, or re-opening
the auction, or some injunctive relief to preserve the status quo.
The real property has not been sold, the most recent contract
having fallen through, so there is no issue of statutory mootness
under 11 U.S.C. § 363(m).

Even if the Debtors do sell the home

pursuant to the Bankruptcy Court’s Order at issue in the Third
Appeal, the appeals will not be moot.

The Bankruptcy Court has

directed that the $825,000 obtained from the sale of the home be
placed in escrow.

The presence of the escrowed funds would defeat

the assertion of mootness.
133 S. Ct. 735 (2013).

Lozman v. City of Riviera Beach, Fla.,

The motion to dismiss the First Appeal as

moot is DENIED.
IV.
Epic Aviation asserts that the Auction Order Appeal, while
ostensibly about an order granting a brief extension of time to pay
money, actually raises claims as to the proper conduct of the
auction itself. Epic Aviation stated at oral argument that, in its
view, the Trustee’s acceptance of $825,000 from the Debtors was
pursuant to a determination that the Debtors were the winning

-22-

bidder at the auction, not as a result of the consummation of the
Settlement Agreement.

Both the Trustee and the Debtors stated at

oral argument that, in their view, the Trustee’s acceptance of
$825,000 from the Debtors was pursuant to the Settlement Agreement,
not as a result of the auction.
As summarized above, and with the benefit of hindsight, it
becomes apparent that neither the Trustee nor the Bankruptcy Court
has been consistent in the characterization of the events.

At the

auction, the Trustee stated that if Debtors paid the $825,000
within 48 hours she would not sell her rights under the Settlement
Agreement, but would accept their full payoff. In their motion for
an extension of time, Debtors took the position that they were not
the winning bid at the auction, but were merely paying of the full
Settlement Agreement amount (and therefore the 48 hour auction
deadline did not apply).
morphed somewhat.

At the hearing, the Trustee’s position

She stated that if the Debtors funded the full

amount within 48 hours of an order, she would accept the Debtors as
the highest and best offer at the auction; otherwise, Epic Aviation
would prevail as the second highest and best bid.
Court’s

Order

from

this

hearing

found

that

The Bankruptcy

the

Trustee

had

determined the Debtors’ bid was the highest and best, and that if
Debtors timely paid, Debtors would “be deemed to be the successful
bidder at the auction sale”.
2012

hearing,

the

(Doc. #1-2.)

Bankruptcy

Court

-23-

After an October 12,

found

that

the

Trustee

essentially called off the auction and decided to allow the Debtors
to pay off the Settlement Agreement amount, but then also concluded
that the Trustee had found Debtors’ offer was the highest and best
pursuant to the terms of the auction.

(Doc. #4, pp. 46-47.)

The outcomes of the appeals, however, are not dependent on how
the events are characterized.

Under either characterization, the

final orders of the Bankruptcy Court are due to be affirmed.
A.

Consummation of Settlement Agreement:
If the Trustee’s acceptance of $825,000 from the Debtors is

viewed as having been done pursuant to the terms of the Settlement
Agreement, it is clear that the appeal of the order extending the
time for payment is without merit. The Trustee’s acceptance of the
full $825,000 from the Debtors needed no additional Bankruptcy
Court approval.

The amount had been approved by the Bankruptcy

Court in 2007, and the money was not yet due because the Debtors’
house had not sold.

The Trustee’s decision to give the Debtors 48

hours to make the full payment, or to resume the auction to sell
the Trustee’s rights in the Settlement Agreement, was well within
her authority under the Settlement Agreement.

While there was no

need for Bankruptcy Court approval if this was payment under the
Settlement Agreement, once involved it cannot be seriously argued
that the Bankruptcy Court erred by approving the Trustee’s 48 hour
deadline extension.

A Bankruptcy Court’s extension of time is

reviewed under the abuse of discretion standard, In re Coady, 588

-24-

F.3d 1312, 1316 (11th Cir. 2009), and granting a 48 hour extension
to

pay

a

discretion.

debt

that

was

not

yet

due

cannot

be

an

abuse

of

Indeed, to do otherwise under the facts of this case

would have been an abuse of discretion.

Even if the Trustee’s 48

hour deadline was not met, the Trustee would have had no legal
basis to refuse the Debtors’ tender of the full amount if it
occurred any time prior to the sale of the Trustee’s rights in the
Settlement Agreement.

The Bankruptcy Court’s order extending the

time period for payment of the $825,000 was not an abuse of
discretion if payment was being made pursuant to the Settlement
Agreement.
Epic Aviation argues, however, that the Trustee could not have
been accepting the $825,000 pursuant to the Settlement Agreement
because the Trustee’s ability to do so ended with her decision to
hold an auction.

The Court disagrees.

The Trustee’s decision to

auction her rights under the Settlement Agreement did not limit or
terminate the Debtors’ rights under the Settlement Agreement.
Debtors had the right to pay $825,000 in full satisfaction of the
Settlement Agreement, and that right did not terminate because the
Trustee was in the process of auctioning her own rights under the
Settlement

Agreement

or

because

auction.

-25-

Debtors

participated

in

the

B.

Winning Bid at Auction:
The result does not change if the events are viewed as a

determination that Debtors were the winning bidder at the auction.
Under this scenario, Epic Aviation argues that the Bankruptcy Court
erred as a matter of law, which inherently qualifies as an abuse of
discretion, because the Debtors were simply not the winning bidder.
Thus,

Epic

extension

Aviation
of

time

argues,
for

the

payment

Bankruptcy
to

a

Court

non-winning

granted
party,

an
and

effectively precluded the winning party (Epic Aviation) from having
its tender of $825,000 accepted by the Trustee.
It is clear that a bankruptcy trustee, with approval of the
Bankruptcy Court, has the power to auction the property of the
bankruptcy estate.

“The trustee, after notice and a hearing, may

use, sell, or lease, other than in the ordinary course of business,
property of the estate. . . .” 11 U.S.C. § 363(b)(1).

A trustee's

management of the procedural details surrounding bidding and sale
are “ultimately a matter of discretion that depends upon the
dynamics of the particular situation.”

In re Nuttery Farm, Inc.,

467 F. App’x 711, 712 (9th Cir. 2012)(quoting In re Mickey Thompson
Entm't Group, Inc., 292 B.R. 415, 422 (9th Cir. BAP 2003)).

The

Trustee is entitled to exercise “business judgment” in deciding
which bid to accept, and this business judgment is entitled to
“great judicial deference.”

In re Bakalis, 220 B.R. 525, 532

(Bankr. E.D.N.Y. 1998)(citations omitted).

-26-

See also In re Lionel

Corp., 722 F.2d 1063 (2d Cir. 1983); In re Moore, 608 F.3d 253, 263
(5th Cir. 2010).

Matters within the Trustee’s business judgment

include determining which bid to accept as the best and highest
bid, and electing to accept a lower monetary bid.

In re Moore, 608

F.3d at 263 (“a bankruptcy court may accept a lower bid in the
presence of sound business reasons”); In re Castre, Inc., 312 B.R.
426, 430-31 (Bankr. D. Colo. 2004)(“the trustee [ ] is entitled to
great judicial deference in deciding which bid to accept as the
best and highest bid on the sale of the Debtor’s assets; and,
although the trustee’s [ ] discretion is not without limit, the
Court should not step in and assume a role and responsibility
properly placed by the Code in another's hands.”); In re Bakalis,
220 B.R. at 533 (“a ‘highest’ bid is not always the ‘highest and
best’ bid.”).

The Bankruptcy Court evaluates whether the Trustee

exercised sound and reasonable business judgment, but without
substituting its own judgment for that of the Trustee.

2-363

Collier Bankruptcy Manual ¶ 363.02, at § 363(b)[4] (4th Ed. 2012).
Factors considered by the Bankruptcy Court include whether there
was an improper motive or bad faith, the fairness of the price, and
the adequacy of the procedures followed.

In re Gulf States Steel,

Inc. of Ala., 285 B.R. 497, 514 (Bankr. N.D. Ala. 2002).

Even an

auction sale confirmed by the Bankruptcy Court can be vacated due
to concerns about the winning bidder, although under more limited
circumstances than in deciding which bid should initially be

-27-

accepted.

In re WPRV-TV, Inc., 983 F.2d 336, 341 (1st Cir. 1993).

In this case, the Bankruptcy Court deferred to and approved
the Trustee’s business judgment that Debtors’ offer to meet Epic
Aviation’s full price $825,000 bid was the “highest and best
offer.”

(Id., p. 48.)

The Bankruptcy Court’s decision is fully

supported in the record.
The Debtors’ bid was not a lower bid, but was for the same
dollar amount as made by Epic Aviation.

The $825,000 was the full

economic value of the Settlement Agreement.

The Trustee could

legitimately question the motives of Epic Aviation, since there
does not appear to be any reasonable economic incentive for Epic
Aviation to pay $825,000 in order to purchase an agreement which
would allow it to receive $825,000 at an indeterminate time in the
future without interest.

The Trustee also legitimately considered

that Epic Aviation’s avowed purpose was to initiate litigation
against the

Debtors

based

on

the

Settlement

Agreement.

The

anticipated litigation as articulated by Epic Aviation’s counsel
has no record support, would clearly be only for the purpose of
harassment, and would injure the bankruptcy estate by embroiling
the Trustee in potentially costly and numbing litigation to the
financial detriment of the bankruptcy estate. The Bankruptcy Court
clearly found the proposed litigation to be adequate justification
to reject Epic Aviation’s bid, doc. #4, pp. 13-14, as does this
Court.

The order of the Bankruptcy Court granting an extension of

-28-

time, was not an abuse of discretion even if viewed as a referendum
on the auction process.
Appellant relies heavily on In re Moore, 608 F.3d 253 (5th
Cir. 2010), but the present case is clearly distinguishable.

The

Trustee in this case did not reach a settlement instead of holding
an auction or considering higher offers. Rather, the settlement in
this case occurred years before, an auction was in fact conducted
in this case, objections were considered at a hearing by the court,
and the Trustee then determined the better offer was to allow
Debtors

to

pay

the

full

amount

set

forth

in

the

Settlement

Agreement.
The Bankruptcy Court has the discretion, “for cause shown” to
enlarge a set period of time if the request is timely made.

Fed.

R. Bankr. P. 9006(b)(1). In summary, the Bankruptcy Court did not
abuse its discretion by accepting the Trustee’s business judgment
and approving the acceptance of the Debtors’ bid.
V.
The Lis Pendens Order dissolved and extinguished the Notice of
Lis Pendens recorded at O.R. 4845, Page 1105 of the Public Records
of Collier County on debtors’ jointly owned homestead property.
(Bankr. Doc. #254.)

Based on the findings in Section IV above, the

Auction Order is due to be affirmed and therefore the lis pendens
based on the first filed appeal from this Order is no longer valid.
As a result, the Lis Pendens Order will also be affirmed because

-29-

lis pendens is properly dissolved and the Court need not address
the nexus arguments.
VI.
The Sale Order granted debtors’ motion to approve a sale of
the real property, free and clear of any interest of Epic Aviation.
In granting the motion, the Bankruptcy Court authorized the sale,
free and clear of any interest arising from the first two appeals
but making the sale conditional on debtors placing in escrow the
net proceeds from the sale, after payment of liens, mortgages, and
ordinary expenses of sale and commissions, with the interests of
the Chapter 7 Trustee and Epic Aviation to attach to the net
proceeds without following the property so that marketable title
could pass to a buyer.

At oral arguments before the undersigned,

debtors indicated that the appeal was essentially moot because
there was no buyer with a contract ready to purchase the property
and that the Bankruptcy Court’s Order could be vacated.

On May 6,

2013, appellees made a Supplemental Filing (Doc. #29) indicating
that a new party has expressed an interest in the property.

The

Court will vacate the Order without prejudice to any pending
contract that may arise.
Accordingly, it is hereby
ORDERED AND ADJUDGED:
1.

Appellees’ Emergency Motion to Dismiss Appeal as Moot

(Doc. #13) in 2:12-cv-585-FTM-29 is DENIED.

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2.

The Order on Debtors’ Emergency Motion for Enlargement of

Time to Make Settlement Payment to the Trustee and For Order
Authorizing Sale of the Debtors’ Homestead Property (Bankr. Doc.
#197) is AFFIRMED.
3.

Appellees’ Emergency Motion to Dismiss Appeal as Moot

(Doc. #4) in 2:12-cv-669-FTM-29 is DENIED.
4.

The Order Granting Debtors’ Emergency Motion to Dissolve

Lis Pendes Filed by Epic Aviation (Bankr. Doc. #254) is AFFIRMED.
5.

Appellant’s Emergency Motion for a Stay Pending Appeal

(Doc. #1) in 2:13-mc-5-FTM-29 is DENIED AS MOOT.

The Clerk shall

close the miscellaneous file.
6.

The Order Granting Debtors’ Emergency Motion for Order

Approving Sale of Debtors’ Property Free and Clear of Any Interest
of Epic Aviation (Bankr. Doc. #288) in 2:13-cv-113-FTM-29 is
VACATED without prejudice.
7.

The Bankruptcy Court may enter any subsequent Orders as

necessary to facilitate payment of the $825,000 to the Chapter 7
Trustee for distribution, consistent with this Opinion and Order.
8.

The Clerk shall enter judgment accordingly, transmit a

copy of this Opinion and Order and the Judgment to the Clerk of the
Bankruptcy Court, terminate the appeals, and close the files.
DONE AND ORDERED at Fort Myers, Florida, this
May, 2013.

-31-

7th

day of

Copies:
Clerk, Bankr. Ct.
Hon. Caryl E. Delano
Counsel of record

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