Daughtrey et al v. Rivera
Filing
20
OPINION AND ORDER denying request for oral arguments; affirming Order Denying Debtors' Motion to Convert to a Case Under Chapter 11, Order Denying Debtors' Motion for Reconsideration of Order Denying Debtors' Motion to Convert to a Case Under Chapter 11, Order Granting Chapter 7 Trustee's Amended Motion and Notice of Proposed Compromise of Controversy, Order Denying Joseph Gilberti & Land Tech Design Group, Inc.'s Motion for Reconsideration of Order Granting Motion and Notice of Compromise of Controversy. The Clerk shall enter judgment accordingly, transmit a copy to the Clerk of the Bankruptcy Court, and close the file. Signed by Judge John E. Steele on 9/23/2015. (RKR)
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
FORT MYERS DIVISION
IN RE: CECIL DAUGHTREY, JR.
and PATRICIA A. DAUGHTREY
CECIL DAUGHTREY, JR.
PATRICIA A. DAUGHTREY,
and
Appellants,
v.
Case No: 2:15-cv-29-FtM-29
Bankr. No. 8:13-bk-14831-FMD
LUIS E. RIVERA, II,
Appellee.
CECIL DAUGHTREY, JR.
PATRICIA A. DAUGHTREY,
and
Appellants,
v.
Case No: 2:15-cv-35-FtM-29
Bankr. No. 8:13-bk-14831-FMD
LUIS E. RIVERA, II,
Appellee.
OPINION AND ORDER
This matter comes before the Court on the consolidated 1 appeal
by debtors Cecil Daughtrey, Jr. and Patricia A. Daughtrey from the
following orders issued by the Bankruptcy Court:
1
(1)
the October
The appeals were consolidated on January 29, 2015. (Doc.
#9.) The Court will refer to documents filed in the lead case,
Case No. 2:15-cv-29-FTM-29, only.
3, 2014 Order Denying Debtors’ Motion to Convert to a Case Under
Chapter 11; (2) the October 7, 2014 Order Granting Chapter 7
Trustee’s Amended Motion and Notice of Proposed Compromise of
Controversy Between Trustee and 72 Partners, LLC; (3) the November
18, 2014 Order Denying Debtors’ Motion for Reconsideration of Order
Denying Debtors’ Motion to Convert to a Case Under Chapter 11; and
(4) the November 18, 2014 Order Denying Joseph Gilberti & Land
Tech Design Group, Inc.’s Motion for Reconsideration of Order
Granting Motion and Notice of Compromise of Controversy Between
Trustee and 72 Partners, LLC. 2
Debtors-Appellants filed an Initial
Brief (Doc. #18) and the U.S. Trustee-Appellee filed an Answer
Brief (Doc. #19).
No reply brief was filed, and the appeal is
ripe for review.
I.
Standard of Review
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 Colortex Indus., Inc., 19 F.3d 1371,
1374 (11th Cir. 1994).
The legal conclusions of the bankruptcy
court are reviewed de novo, while findings of fact are reviewed
for clear error.
In re Globe Mfg. Corp., 567 F.3d 1291, 1296
2
The Court will hereinafter cite documents filed with the
District Court as “Doc.”, and documents filed in the Bankruptcy
case as “Bankr. Doc.”.
Copies of the relevant documents were
included in the record transmitted by the Bankruptcy Court on March
30, 2015, or are otherwise available through PACER and judicially
noticed.
- 2 -
(11th Cir. 2009).
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.”
Crawford v. W. Electric Co., Inc.,
745 F.2d 1373, 1378 (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, or applies the law in an unreasonable or incorrect
manner.
Collegiate Licensing Co. v. Am. Cas. Co. of Reading, Pa.,
713 F.3d 71, 77 (11th Cir. 2013).
“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.”
II.
Id. (citation omitted).
Background
On November 7, 2013, Cecil Daughtrey Jr. and Patricia A.
Daughtrey jointly filed a Voluntary Petition seeking Chapter 7
protection under the Bankruptcy Code.
Schedule A and C list
debtors’ 2500 acre ranch, a residential/commercial homesteaded
- 3 -
property, as having a current value of $70 million.
pp. 8, 12.)
(Doc. #17-8,
Schedule B identifies a partnership or joint venture
with Gilberti Water Company and LandTech Design Engineering Group
– Florida valued at $5,125,000; water and mineral rights in the
property valued at $50 million; and pending litigation in Sarasota
worth $15 million.
(Id., p. 9.)
Creditors 72 Partners, LLC and
Gilberti Water Company are the only identified secured claims.
(Id., p. 13.)
Creditor 72 Partners, LLC is also listed as an
unsecured creditor.
On November 12, 2013, creditor 72 Partners, LLC filed a Motion
for Relief From Automatic Stay and/or for Adequate Protection (Doc.
#16-9) seeking to lift the automatic stay and foreclose on its
$4,267,436.71
Uniform
Final
Judgment
of
Mortgage
Foreclosure
issued by the Twelfth Judicial Circuit Court, in and for Sarasota
County, Florida.
On December 9, 2013, finding no objection, the
Bankrupt Court granted relief from the stay to allow 72 Partners,
LLC to foreclose on its liens.
Subsequently, debtors moved to
vacate the order granting relief from the stay, and the U.S.
Trustee
also
separately
moved
for
expedited
reconsideration
because the real property had sufficient equity to pay secured
creditors in full.
(Docs. #16-19; #16-20.)
A hearing on the motions was conducted on March 3, 2014.
(Doc.
#16-13.)
At
the
hearing,
the
Southwest
Florida
Water
Management District appeared to alert the Court that there was a
- 4 -
free-flowing well on the property that reaches 1500 feet down into
the Florida aquifer posing a danger of contamination.
Joseph
Gilberti (Mr. Gilberti) 3 also appeared on the record to state that
the well had been capped.
The Bankruptcy Court found no credible
evidence as to valuation of the property, and set an evidentiary
hearing as to valuation.
motion
as
moot,
but
The Bankruptcy Court denied debtors’
granted
the
Trustee’s
reconsideration and reinstated the automatic stay.
request
for
(Doc. #16-21;
#16-22.)
On April 1, 2014, the Trustee filed an Objection to debtors’
claim of a homestead exemption because the real property far
exceeded the 160 acre cap allowed under the Florida Constitution.
(Doc. #16-25, ¶ 9; Doc. #17-30.)
On May 16, 2014, the Bankruptcy
Court sustained the objection and directed debtors to surrender
any non-exempt assets to the Trustee.
(Doc. #17-33.)
On May 29, 2014, the Trustee filed an Amended Motion and
Notice of Proposed Compromise of Controversy Between Trustee and
72 Partners, LLC (Doc. #16-26) seeking approval of a proposed
compromise that would require 72 Partners, LLC to pay the Trustee
$300,000, with $50,000 due immediately into a trust, and release
3
Mr. Gilberti was permitted to speak, file objections, and
eventually appear through counsel. At no time did Mr. Gilberti
file an actual proof of claim, and the Bankruptcy Court later
determined that he likely had no standing based on an interest in
property acquired after the recording of a lis pendens.
(Doc.
#16-17, p. 23.)
- 5 -
its lien on the homesteaded 160 acre portion of the real property,
in exchange for a release of the remainder of the real property to
72 Partners, LLC free and clear but without warranties.
The
proposal further stated that the stay could be lifted with regard
to the remainder of the real property to allow 72 Partners, LLC to
pursue its state court remedies, and all defenses and appeal rights
of the Trustee and debtors would be waived in the foreclosure
action.
On June 23, 2014, debtors filed an Objection (Doc. #16-27)
stating that $300,000 was inadequate in light of the true market
value
of
Objection
the
property,
(Doc.
#16-29)
and
Joseph
indicating
Gilberti
filed
that
had
he
an
Amended
appealed
the
validity of the Final Judgment of Foreclosure in state court for
lack of notice and because he was deeded an interest to a portion
of the real property, including subsurface mineral rights.
Mr.
Gilberti also asserted that a better offer had been made for the
property and the proposed compromise under-valued the property.
On July 23, 2014, the Trustee filed a Supplement (Doc. #1737), essentially responding to the objections, and stating that
Mr. Gilberti was given the opportunity numerous times to provide
a higher offer and he failed to do so, and that his deed was void.
The Supplement further stated that the compromise was reached in
part because the tax ramifications for a sale would be in excess
of $1.5 million for an initial sale of $6 million, and there was
- 6 -
potential liability to the Southwest Florida Water Management
District.
support
The Trustee also noted that debtors had failed to
their
claim
that
the
property
was
worth
more
by
an
appraisal or other evidence.
On July 24, 2014, the Bankruptcy Court held a hearing where
Mr. Gilberti raised the issue of an underground spring and a well
of significant value that should be included in the 160 acre
homestead.
debtors
The Bankruptcy Court expressed concerns as to why
sought
bankruptcy
protection
and
why
the
estate
was
essentially being administered for the benefit of the one secured
creditor, 72 Partners, LLC.
The hearing was continued for 30 days
to allow the parties to consider re-drawing the lines.
(Doc. #16-
14.)
On August 27, 2014, the Trustee filed the Second Supplement
(Doc. #17-38) indicating that the Trustee and 72 Partners, LLC had
reached an agreement to modify the compromise, and had agreed that
the well could be included in the homestead.
A proposed survey
included the well and buildings owned by debtors.
Mr. Gilberti
filed an Amended Objection (Doc. #17-39) which appears to be
substantially the same as the previous objection.
At the August 28, 2014 hearing, the Trustee presented a map
to reflect the change suggested by the Second Supplement, and to
move forward with the compromise.
Counsel for debtors appeared
and objected because an investor had stepped forward who would be
- 7 -
entering into a contract with debtors, and the investor would pay
off 72 Partners, LLC.
Counsel further stated that debtors would
also seek to convert to a Chapter 11, and in doing so acknowledged
that the Trustee’s attorney’s fees and administrative expenses
would also have to be paid.
The Court continued to express
concerns about the delay, and that other unlisted creditors may
have an interest in the property.
another
30
days
for
the
The case was continued for
contract
with
the
investor
to
be
effectuated and/or a resolution to be reached with the Trustee.
(Doc. #16-15.)
On September 17, 2015, Mr. Gilberti, Gilberti Water Company,
LLC and Land Tech Design Group, Inc. filed a Motion for Conversion
to Chapter 11 Bankruptcy (Doc. #17-40), and on September 22, 2014,
debtors also filed their own Motion to Convert to a Case Under
Chapter 11 (Doc. #17-41).
On September 25, 2014, the Bankruptcy Court conducted the
continued hearing, and further heard argument on the motions to
convert to Chapter 11.
Also raised was a motion to withdraw by
debtors’ counsel from the last hearing, and a motion to quash by
debtors’ first and former counsel.
Debtors appeared with a third
and new counsel, and therefore the hearing was continued on the
motion to quash to allow new counsel to file amended schedules,
- 8 -
and alleviate the need for former counsel to turn over documents.
The motion to withdraw by the second counsel was granted.
New counsel stated that there was a buyer who was paying for
a proper survey on the property before funds would be escrowed.
Once a survey was available, debtors would amend their schedules
to give notice to any unsecured creditors and propose a Chapter 11
Plan.
On the issue of conversion, the Trustee argued that it was
not an absolute right, and the factors weighed against allowing
the conversion.
The sole known and verified secured creditor, 72
Partners, LLC, argued that debtors had no means of paying, and
that any conversion would likely come back to a Chapter 7.
Debtors
stated that their buyer had made an offer of $3 million for 1400
acres of the property, so the per acre price was better than what
the Trustee was proposing, and 72 Partners, LLC could make up the
additional million it was owed by selling the remaining acreage.
The Bankruptcy Court summarized the delays since the original
petition was filed, the change of counsel three times, the failure
to object to the secured creditor’s motion for relief from stay,
the existence of a final and non-appealable foreclosure judgment
by the same secured creditor, the sudden or potential appearance
of other unsecured creditors who would share in distribution, and
that no signed or pending contract by a buyer had been produced
thus far.
The Bankruptcy Court found that the last minute request
- 9 -
to convert to a Chapter 11 was not appropriate under Marrama 4,
especially after benefiting from 11 months of protection, and that
the compromise proposed by the Trustee should be granted.
(Doc.
#16-16.)
On October 3, 2014, the Bankruptcy Court issued an Order
Denying Joseph Gilberti & Land Tech Design Group, Inc.’s Motion
for Conversion to Chapter 11 Bankruptcy (Doc. #17-44) and Order
Denying Debtors’ Motion to Convert to a Case Under Chapter 11 (Doc.
#17-2) for the reasons stated orally on the record.
On October
7, 2014, the Bankruptcy Court issued an Order Granting Chapter 7
Trustee’s Amended Motion and Notice of Proposed Compromise of
Controversy Between Trustee and 72 Partners, LLC (Doc. #17-45).
On
October
17,
2014,
debtors
filed
a
Motion
to
for
Reconsideration (Doc. #17-46), and attached a copy of the $3
million Agreement to Purchase Real Estate originally referenced,
and a Vacant Land Contract executed on October 14, 2014 with Flint
Family Farms, LLC and Georgiana, LLC to purchase the property for
$4,621,000, with $4,596,000 in cash due at closing if the buyer
obtains approval for the sale from the Bankruptcy Court.
Attached
was an Addendum to Vacant Land Contract providing that the contract
was contingent upon the issuance of a final, nonappealable order
from the Bankruptcy Court approving the sale and providing for
4
Marrama v. Citizens Bank of Massachusetts, 549 U.S. 365,
372 (2007).
- 10 -
marketable title unencumbered by any claims, including those of 72
Partners, LLC and Mr. Gilberti.
On October 21, 2014, Mr. Gilberti filed his own Motion for
Rehearing/Reconsideration
(Doc.
#16-10)
seeking
a
rehearing
because debtors now had a written agreement, and because the
Trustee’s proposed compromise was based on a foreclosure judgment
containing an inaccurate legal description and subject to his own
motion to intervene in the state court.
On November 5, 2014, the Bankruptcy Court heard argument on
the motions for reconsideration, and the previously continued
motion to quash.
The Bankruptcy Court was notified about the
executed contract for purchase, but it remained unclear why an
agreement could not be reached to move forward with the sale in
the Chapter 7 case rather than converting to a Chapter 11 case.
The Bankruptcy Court noted that every objection that debtors or
Mr. Gilberti raised had been addressed, but a year later the case
still had not moved forward.
Counsel for debtors indicated that
the sale could proceed within 15 days.
The Trustee responded that the serious tax consequences meant
that the property would have to sell for $6 or $7 million in order
to pay the taxes as well as 72 Partners, LLC in full, and there
was no indication that a buyer would pay that amount for the
property.
The Trustee suggested that conversion would be futile,
and it would need to be a structured dismissal.
- 11 -
Counsel for
debtors agreed that the property could not be “sold” through the
Chapter 7, but that everyone would gain through a Chapter 11 if
the Bankruptcy Court granted a motion to sell free and clear of
liens that have attached to the property, most or all filed by Mr.
Gilberti post-petition.
Counsel for 72 Partners, LLC indicated to the Court that the
compromise reached with the Trustee had already been fulfilled,
and served to achieve the same result that this pending contract
would try to achieve, and in fact would leave 160 acres for
debtors.
72 Partners, LLC further stated that the Trustee had
already handed over the deed to the property, and that 72 Partners,
LLC had incurred considerable expense by recording the deed.
Also, counsel stated that the Trustee was paid the $300,000 and 72
Partners, LLC has since secured the property and learned that
debtors had been receiving payment from sod companies who were
stripping the property of sod and that there were hunting leases
for the property for which debtors have been receiving money.
There was some argument by counsel for Mr. Gilberti that the
inaccuracy of the legal description for the property requires the
foreclosure process to start over because the final judgment would
be void.
The Bankruptcy Court noted that Mr. Gilberti had never
filed a proof of claim in the Chapter 7 case, and would not
otherwise
have
standing
in
the
- 12 -
foreclosure
proceedings
to
intervene under
Florida law. 5
In the end,
finding that the
settlement had already been consummated, the Bankruptcy Court
found that debtors were in at least as good a position with the
Trustee’s compromise as they would be if they closed on the
contract with the purchaser.
2014,
the
Bankruptcy
reconsideration.
(Doc. #16-17.)
Court
denied
On November 18,
both
motions
for
(Docs. #16-11; #17-13.)
On December 8, 2014, debtors filed their Notice of Appeal
(2:15-cv-29-FTM-29, Doc. #1-1) from the Order granting the amended
compromise and denying reconsideration of the same; and, debtors
also filed an Amended Notice of Appeal (2:15-cv-35-FTM-29, Doc.
#1-1) from the Order denying conversion to Chapter 11, as well as
the Order denying reconsideration.
On
February
27,
2015,
the
Court
granted
appellants
an
extension of time to supplement the record on appeal and to file
a statement of issues with the Bankruptcy Court for transmittal.
(Doc. #11.)
On March 19, 2015, the Court issued an Opinion and
Order (Doc. #15) denying appellee’s request to dismiss the appeal
and allowing for a second transmittal of the record on appeal.
5
On
Argument was presented an exception existed where the legal
description of the land was inaccurate, but the issue was not
before the Bankruptcy Court.
- 13 -
March 30, 2015, the Court received the amended designations of the
record.
III. Appeal
The three issues on appeal are (1) whether the Bankruptcy
Court properly denied debtors the right to convert to a Chapter 11
case; (2) whether the Bankruptcy Court could approve the Trustee’s
settlement with a secured creditor over objections; and (3) whether
the second issue was rendered moot by the Trustee and creditor
having already consummated the settlement.
(1)
Conversion to Chapter 11
Under the Bankruptcy Code, a debtor “may convert a case under
this chapter to a case under chapter 11” at any time if the case
has not previously been converted and debtor qualifies as a debtor
under such chapter. 11 U.S.C. §§ 706(a), (d).
The right to convert
is expressly conditioned on the ability to qualify as a debtor
under Chapter 11.
Marrama v. Citizens Bank of Massachusetts, 549
U.S. 365, 372 (2007).
“The decision whether to convert is left
in the sound discretion of the court, based on what will most inure
to the benefit of all parties in interest.”
In re Gordon, 465
B.R. 683, 692 (Bankr. N.D. Ga. 2012) (quoting S. REP. NO. 95–989,
at 940 (1978), reprinted in 1978 U.S.C.C.A.N. 5787, 5880).
There
are no set factors to consider for conversion to a Chapter 11 case,
however, some factors considered by the Bankruptcy Courts include:
(1)
the
futility
of
conversion
- 14 -
or
absence
of
grounds
for
reconversion; (2) whether a confirmable plan is proposed; (3) the
purpose for the conversion, including if only to liquidate; (4)
whether it furthers the goals of the Bankruptcy Code and benefits
all parties involved; and (5) the debtor’s ability to repay the
debt.
Id.; In re Hardigan, 517 B.R. 379, 383-84 (S.D. Ga. 2014).
At the September 25, 2014 Hearing, the Bankruptcy Court
specifically found that debtors had enjoyed 11 months of protection
with no resolution and a steady change of counsel; that the secured
creditor sought and obtained relief from the automatic stay without
objection from the debtor, and that there existed a final state
court judgment of foreclosure in said creditor’s favor; and that
even months after the original compromise had been proposed, there
was still no valid offer of purchase presented; and there could be
unidentified unsecured creditors to share in distribution.
#16-16, pp. 12, 23, 26.)
(Doc.
The Bankruptcy Court found Marrama was
controlling, that debtors were not able to present any alternative
after so many months, and that conversion to a Chapter 11 case
would be a lengthy process.
(Id., pp. 25-26.)
The Bankruptcy
Court did not find that conversion should be denied because the
case was “too old to convert”, and made no findings of fraud.
(Doc. #18, pp. 8, 10.)
The matter was continued to allow for
verification of any additional creditors.
At the November 5, 2014 Hearing, the Bankruptcy Court stated:
I don’t know why the Daughtreys would need to
go through a Chapter 11. I don’t understand
- 15 -
that concept. If they have a buyer ready,
willing and able to close on the property for
$4.621 million, then tell us what the closing
date is and work it out.
(Doc. #16-17, p. 12.)
The Bankruptcy Court noted that she was not
being told that a Plan would in fact be filed within a certain
timeline, and the Trustee’s counsel had incurred reimbursable
expenses that would have to be paid.
(Id., pp. 12-13.)
The
Trustee was willing to step back and take no position if debtors
could in fact close within 15 days, pay all fees and costs, and
both 72 Partners, LLC and the $2,900 unsecured creditor in full.
(Id., pp. 13-14.)
Counsel for the Trustee noted that the purchase
offer would have to be considerably higher to cover the tax
consequences
on
the
inherited
land.
(Id.,
p.
17.)
After
discussion of the tax liability, the Bankruptcy Court noted that
the Trustee’s proposal would be a compromise without a sale, and
therefore debtors could avoid the tax consequences.
(Id., p. 17.)
Counsel for 72 Partners, LLC pointed out that it had already
secured the property and recorded the deed at considerable expense,
and that the Trustee’s proposal had been fully consummated.
(Id.,
pp. 20-21.)
The Bankruptcy Court noted that debtors would receive their
160 acres and the well, and if an issue arises with regard to
boundary lines, counsel for 72 Partners, LLC indicated that it
would be corrected.
The Bankruptcy Court concluded that “the
Daughtreys are in as good a position as they would be if they
- 16 -
accepted this -- or if they were able to close on this $4.621
million offer, and they have no tax consequences as a result, which
sounds like a win-win to them.”
(Id., p. 27.)
For all of these
reasons, the Bankruptcy Court denied conversion and approved the
compromise. 6
The Court finds that the factual findings were not
clearly erroneous based on what was presented by all interested
parties.
The Court further finds no abuse of the Bankruptcy
Court’s discretion by denying conversion based on the findings of
fact.
(2)
Mootness
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).
6
This does not require the
The Trustee hints that bad faith existed for the belated
request to convert, however the Bankruptcy Court made no specific
findings of bad faith. As no bad faith was found, and bad faith
is not required to deny conversion, the Court will not address the
issue in the first instance on appeal.
- 17 -
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; FTC v. Phoebe Putney Health Sys., Inc., 133 S.
Ct. 1003, 1009 n.3 (2013).
At the November 5, 2014 Hearing, counsel for 72 Partners, LLC
pointed out that it had already secured the property and recorded
the deed at considerable expense, and that the Trustee’s proposal
had been fully consummated.
(Doc. #16-17, pp. 20-21.)
In this
case, if in fact debtors could produce a buyer willing to pay
sufficient funds to cover the resulting taxes, fees and expenses
of
the
Trustee
and
counsel,
pay
both
secured
and
unsecured
creditors, and clear the liens imposed by Mr. Gilberti, there would
remain a possibility of some remedy despite consummation of the
settlement.
(3)
Therefore, the appeal is not moot.
Compromise of Claim
Under the Bankruptcy Code, “[o]n motion by the trustee and
after notice and a hearing, the court may approve a compromise or
settlement.”
Fed. R. Bankr. P. 9019(a).
When a bankruptcy court decides whether to
approve or disapprove a proposed settlement,
it must consider:
(a) The probability of success in the
litigation; (b) the difficulties, if any, to
be encountered in the matter of collection;
(c) the complexity of the litigation involved,
and the expense, inconvenience and delay
necessarily attending it; (d) the paramount
- 18 -
interest of the creditors and a proper
deference to their reasonable views in the
premises.
In re Justice Oaks II, Ltd., 898 F.2d 1544, 1549 (11th Cir. 1990)
(citations
omitted).
The
Bankruptcy
Court’s
approval
of
a
settlement agreement is reviewed for abuse of discretion, and
consideration of the Justice Oaks factors need not be explicit.
In re Chira, 567 F.3d 1307, 1313 (11th Cir. 2009).
Contrary to debtors’ position, the Court finds that these
factors
were
considered.
A
recurring
issue
was
the
tax
consequence if debtors were to sell the property to a potential
buyer,
rather
than
proceeding
under
the
proposed
settlement.
Although debtors eventually produced a buyer, the agreement was
for less than the whole property, for an amount less than would be
available to pay the creditors, and the sale would have been
subject to an enormous tax consequence.
The Bankruptcy Court
noted the lack of a better option than the settlement agreement,
and therefore implicitly found an unlikelihood of success.
The
Bankruptcy Court also found that the alternative, conversion to a
Chapter 11 case, would be lengthy and result in no better a
conclusion than with the settlement agreement.
In the end, in
light of the final foreclosure judgment and the apportionment of
160 acres of land, including the desired well, the Bankruptcy Court
found approval of the settlement agreement was in the best interest
- 19 -
of the secured creditor and debtors.
The Court finds no abuse of
discretion.
Accordingly, it is hereby
ORDERED AND ADJUDGED:
1. The request for oral arguments is denied.
2. The Order Denying Debtors’ Motion to Convert to a Case
Under Chapter 11 and Order Denying Debtors’ Motion for
Reconsideration of Order Denying Debtors’ Motion to Convert
to a Case Under Chapter 11 are affirmed.
3. The Order Granting Chapter 7 Trustee’s Amended Motion and
Notice
of
Proposed
Compromise
of
Controversy
Between
Trustee and 72 Partners, LLC and Order Denying Joseph
Gilberti
&
Land
Tech
Design
Group,
Inc.’s
Motion
for
Reconsideration of Order Granting Motion and Notice of
Compromise of Controversy Between Trustee and 72 Partners,
LLC are affirmed.
4. The Clerk shall enter judgment accordingly, transmit a copy
of this Opinion and Order to the Clerk of the Bankruptcy
Court, electronically or otherwise, and close both files.
DONE and ORDERED at Fort Myers, Florida, this
of September, 2015.
- 20 -
23rd
day
Copies:
Hon. Caryl E. Delano
Clerk, Bankruptcy Court
Counsel of Record
- 21 -
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?