Morrison v. J Beck & Associates, Inc.

Filing 6

Order denying Motion (COMPLAINT) for Leave to File Appeal of Bankruptcy Order. This case is CLOSED. Signed by Judge Kenneth A. Marra on 4/23/2014. (ir)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
CASE NO. 14-60514-MC-MARRA
In re:
TOUSA, INC. et al.,
____________________________________/
OPINION AND ORDER
This cause is before the Court upon Appellant Robert B. Morrison’s Amended Motion for
Leave to Appeal (DE 1). Appellee J. Beck and Associates, Inc., as Trustee for TOUSA
Liquidation Trust, filed a response. No reply memorandum was filed. The Court has carefully
considered the Motion and the response and is otherwise fully advised in the premises.
I. Background
The facts, based upon the parties’ respective statement of facts in their appellate briefs
and the appellate record, are as follows:
TOUSA Homes, Inc. (“Appellee” or “TOUSA”) filed for bankruptcy protection on
January 29, 2008. On February 20, 2009, an involuntary case under chapter 11 of the bankruptcy
code was commenced against Superior Homes and Investments, Inc. (“Appellant” or “Superior”).
In 2003 and 2004, TOUSA and Superior entered into two contracts, the Oakmont contract and
the Regal Oaks contract. Every version of these contracts contain the identical language
regarding the rights of Superior in the event of a default. The contracts state in pertinent part:
in Buyer’s sole discretion as a Buyer’s sole and exclusive remedy for any such failure or
breach, shall be entitled to either (i) terminate this Contract and receive from Escrow
Agreement an immediate refund of so much of the Deposit as has not been applied to the
Aggregate Purchase Price or (ii) exercise any and all rights and remedies available to the
Buyer in equity, including, without limitation, the right of specific performance . . . provided,
however, Buyer hereby waives any right it may now or in the future have, at law, in equity

or otherwise, to seek or obtain money damages from Seller. Buyer acknowledges and agrees
that Seller was materially induced to enter into this Contract in reliance upon Buyer’s
agreement to accept the forgoing limitation on its remedies in case of a failure to perform or
breach of this Contract by Seller, and that Seller would not have entered into this Contract
but for Buyer’s agreement to so limit its remedies.
In conjunction with the execution of the Contracts, Superior made deposits of $2,341,002.02 on the
Oakmont contract and $1,929,843.75 on the Regal Oak Contract. The contracts were executory at
the time TOUSA filed its bankruptcy case.
In 2008, TOUSA rejected the contracts with Superior pursuant to 11 U.S.C. § 365(g).1 The
bankruptcy court approved rejection of the contracts, and TOUSA’s performance under the contracts
was excused. In 2010, Superior filed its proof of claim in TOUSA’s bankruptcy case in the amount
1

Title 11 U.S.C. § 365(g) provides:

(g) Except as provided in subsections (h)(2) and (i)(2) of this section, the rejection of an
executory contract or unexpired lease of the debtor constitutes a breach of such contract
or lease-(1) if such contract or lease has not been assumed under this section or under a plan
confirmed under chapter 9, 11, 12, or 13 of this title, immediately before the date of the
filing of the petition; or
(2) if such contract or lease has been assumed under this section or under a plan
confirmed under chapter 9, 11, 12, or 13 of this title-(A) if before such rejection the case has not been converted under section 1112,
1208, or 1307 of this title, at the time of such rejection; or
(B) if before such rejection the case has been converted under section 1112, 1208,
or 1307 of this title–
(i) immediately before the date of such conversion, if such contract or
lease was assumed before such conversion; or
(ii) at the time of such rejection, if such contract or lease was assumed
after such conversion.
11 U.S.C. § 365(g).
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of $33,840.263.67. Two years later, TOUSA filed an objection to the claim, which was eventually
followed by an amended motion for summary judgment on the objection.
On January 26, 2014, the bankruptcy court made the following rulings. First, it held that
under section 365(g) of the bankruptcy code, the contracts were rejected by TOUSA. Thus, Superior
was deprived of its specific performance. Next, the bankruptcy court turned to Florida state law to
determine whether an alternative remedy was available under non-bankruptcy law for breach of
contract. The bankruptcy court held that, by their express terms, the contracts bar Superior from
recovering money damages as a result of breach by TOUSA. The bankruptcy court then applied
Schachter v. Krzynwek, 958 So. 2d 1061 (Fla. Dist. Ct. App. 2007). In Schachter, the Florida state
appellate court found that the buyer was entitled to monetary damages, notwithstanding a contractual
limitation of remedies where the seller intentionally breached the contract to take advantage of a
higher purchase offer from a third party. Schachter held that the contractual limitation of remedies
did not preclude the buyer from recovering damages in the amount of the difference between the
original buyer’s offer and the higher price paid by the third party.
The bankruptcy court distinguished Schachter on the basis that TOUSA did not find a new
buyer before closing and did not profit from the sale of properties for a higher price to Superior’s
detriment. Instead, the bankruptcy court noted that the driving factors in the failure of these
transactions were the declining housing market and real estate prices. Furthermore, unlike here, the
contract in Schachter contained no language barring money damages as part of any equitable remedy.
The bankruptcy court also found that the limitation provision is neither unconscionable nor illusory,
and Superior could have taken actions to prevent the perceived unjust results. In the end, the
bankruptcy court granted Appellee’s motion for summary judgment as to any claim for money
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damages and reserved ruling on the claim for return of contractual deposits.
Appellant moves for leave to appeal. In so moving, Appellant argues that the bankruptcy
court’s order concludes all substantive issues of law that control the final adjudication of TOUSA’s
objection to Superior’s claim; i.e., whether rejection of a contract under section 365(a), which
eliminates a specific performance remedy, gives rise to a claim for damages despite language in the
contract that limits the non-breaching party to specific performance. According to Appellant, the
only issue remaining is the determination of the amount of the deposits. Appellant points to the
Schachter opinion as demonstrating “a differing opinion as to the equities of a situation when one
party to a contract effectively eliminates any meaningful remedy available to the other party.” (Mot.
at 7.) Finally, Appellant claims that interlocutory review would prevent an unnecessary trial on the
amount of the remaining deposits.
In response, Appellee states that the waiver issues is not one of pure law on which there is
a substantial difference of opinion. Specifically, the Appellee asserts that the bankruptcy order
focused almost entirely on one case and Appellant has not identified any conflicting case law.
Lastly, Appellee argues that the bankruptcy court must still adjudicate the deposit issue.
III. Discussion
District court are authorized to grant leave to hear appeals of interlocutory orders entered by
a bankruptcy court pursuant to 28 U.S.C. § 158(a). However, that provision does not provide the
district court with any criteria for determining how to exercise its discretionary authority to grant a
leave to appeal. Therefore, a district court must instead turn to 28 U.S.C. § 1292(b) which governs
discretionary interlocutory appeals from district courts to the courts of appeals. In re Charter Co., 778
F.2d 617, 620 n.5 (11th Cir. 1985). In order to grant interlocutory review under 28 U.S.C. § 1292(b),
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a party must demonstrate that (1) the order presents a controlling question of law (2) over which
there is a substantial ground for difference of opinion among courts, and (3) the immediate resolution
of the issue would materially advance the ultimate termination of the litigation. See McFarlin v.
Conseco Svcs., LLC, 381 F.3d 1251, 1255 (11th Cir. 2004).
Even applying these factors, the moving party still has “the burden of persuading the court
that exceptional circumstances justify a departure from the basic policy of postponing appellate
review until after the entry of final judgment.” Coopers & Lyband v. Livesay, 437 U.S. 463, 475
(1978) (in discussing the role of the court of appeals in interlocutory appeals). Moreover, district
courts should allow interlocutory bankruptcy appeals sparingly since interlocutory bankruptcy
appeals should be the exception, not the rule. United States Trustee v. PHM Credit Corp., 99 B.R.
762, 767 (E.D. Mich. 1989). Put another way, “[r]outine resort to [section] 1292(b) requests would
hardly comport with Congress' design to reserve interlocutory review for exceptional cases while
generally retaining for the federal courts a firm final judgment rule.” Caterpiller Inc. v. Lewis, 519
U.S. 61, 74 (1996) (internal quotation marks omitted).
With that in mind, the Court finds that there are not exceptional circumstances that compel
the Court to grant the motion for interlocutory review. The Court finds that Appellant has failed to
show that the matter raises a question of law in which there is a substantial ground for difference of
opinion or that the immediate resolution of that issue would materially advance the ultimate
termination of the litigation. The bankruptcy court focused almost exclusively on the Schachter case
and neither the bankruptcy court nor Appellant has identified conflicting case law. Furthermore,
permitting an interlocutory appeal of the bankruptcy court’s summary judgment order will not
materially advance the termination of the objection to the claim. As stated in the bankruptcy court’s
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order, the bankruptcy court left often the adjudication of how much of the deposits were due to be
returned to Appellant. Indeed, even if Appellant were to prevail on an interlocutory appeal and
additional monetary remedies became available to it, the deposit issue would still need to be
addressed by the bankruptcy court and Appellant might later seek to appeal an adverse ruling on that
issue. Thus, the likelihood of piecemeal appeals is high and the Court does not see how judicial
efficiency would be served by such an approach.2
III. Conclusion
Accordingly, it is hereby ORDERED AND ADJUDGED that Appellant Robert B.
Morrison’s Amended Motion for Leave to Appeal (DE 1) is DENIED. The Clerk shall close this
case and all pending motions are denied as moot.
DONE AND ORDERED in Chambers at West Palm Beach, Palm Beach County, Florida,
this 23rd day of April, 2014.
______________________________________
KENNETH A. MARRA
United States District Judge

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The Court rejects Appellant’s “proposal,” raised in a footnote, that the Court review the
bankruptcy court’s order under the “marginal finality” doctrine. (Mot. at 6.) Marginal finality is
the “most extreme” exception to the final judgment rule and comes into play when an issue is
“fundamental to further conduct of the case.” In re F.D.R. Hickory House, Inc., 60 F.3d 724, 727
(11th Cir. 1995). The Court does not see how resolution of this issue is fundamental to how the
remaining part of the bankruptcy case will be conducted. Moreover, Appellant will not be denied
justice by refusing to hear its appeal now. The appeal can easily be taken after the adjudication
of the amount of the deposits.
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