Cardenas v. Madison Realty Capital LP
Filing
25
Opinion and Order Closing Case with Notice of Entry 8016(b). All pending motions are denied as moot. This case is CLOSED. Signed by Judge Kenneth A. Marra on 9/25/2012. (ir)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
CASE NO. 12-20150-CIV-MARRA
In re
Biscayne Park, LLC.,
Debtor.
____________________________________/
TERESA CARDENAS,
Appellant,
v.
MADISON REALTY CAPITAL, L.P.,
Appellee.
____________________________________/
OPINION AND ORDER
THIS CAUSE is before the Court on the appeal by Appellant Teresa Cardenas (“Appellant”)
of the Order Determining Adversary Proceeding to Be Included in Sale of Assets, Denying Without
Prejudice Motion to Approve Compromise, and Granting Motion to Dismiss Case (“Underlying
Order”) and the accompanying Opinion of Bankruptcy Judge A. Jay Cristol, entered on October 7,
2011. The Court has carefully considered the briefs of Appellant and Appellee Madison Realty
Capital, L.P. (“Appellee”) and is otherwise fully advised in the premises.
I. Background1
A. Wal-Mart Cause of Action
On November 9, 2006, Biscayne Park, L.L.C. (“Debtor”) entered into a Mortgage Note with
the Appellee in the amount of $8,150,000.00, which secured the purchase of certain property.
Underlying Order at 3. The Debtor acquired the tract of land at a public auction without knowledge
that the property had previously sustained widespread environmental impact. Biscayne Park, LLC
v. Wal-Mart Stores East, LP, 34 So.3d 24, 25 (Fla. 3d DCA 2010). In March 2007, the Debtor
entered into a purchase agreement that permitted Wal-Mart to: (1) conduct due diligence inspections
on the property; and (2) terminate the agreement prior to closing if the inspections revealed the land
to be unfit for retail use. Id. As part of the inspections, Wal-Mart installed ground water monitoring
wells on the property. Id. Wal-Mart terminated the purchase agreement in October of 2007, but the
wells remained on the property. Id.
The Debtor subsequently entered into negotiations with another potential buyer, agreeing to
allow that buyer use of the wells on the property to conduct its own inspection. Id. Wal-Mart
became concerned about potential liability resulting from the use of the wells and sought
indemnification from the Debtor, as well as costs related to the installation of the wells. Id. at 25–26.
The Debtor rejected Wal-Mart’s request, claiming that the wells were permanent fixtures attached
to the property that belonged to the Debtor. Id. at 26.
1
Unless otherwise noted, the underlying facts are derived from various documents filed
in this docket, the underlying bankruptcy docket, the related adversary proceedings, and a
decision by the Third District Court of Appeal in Biscayne Park, LLC v. Wal-Mart Stores East,
LP, 34 So.3d 24 (Fla. 3d DCA 2010). These facts, which appear to be undisputed but are derived
from mainly adversarial documents, are provided for background purposes only, do not constitute
findings of fact by the Court, and shall serve no precedential purpose in future judicial
proceedings.
2
In November 2008, Wal-Mart filed a complaint against the Debtor for declaratory and
injunctive relief, and a verified motion for a temporary injunction. Id. As explained by the Third
District Court of Appeal:
Wal–Mart’s verified motion requested an order allowing entry onto the property for
the purpose of filling and capping the wells. At the time, [the Debtor] was using the
wells in its effort to remediate the property as required by a local environmental
regulatory agency.
On December 15, 2008, the trial court entered an order granting Wal–Mart's
motion for a temporary injunction. The trial court gave [the Debtor] two options: 1)
allow Wal–Mart to “abandon and seal” the wells; or 2) purchase a six-month
insurance policy insuring Wal–Mart with respect to the wells in the amount of
$20,000,000. Biscayne filed a motion for reconsideration, which the trial court
denied, and [an appeal to the Third District Court of Appeal] ensued. Wal–Mart
subsequently posted a $230,000 bond and, during the week of January 12, 2009,
entered the property and sealed the wells.
Id.
On February 26, 2009, the Debtor filed an Answer, Affirmative Defenses, and Counterclaim
to Wal-Mart’s Complaint. Case No. 10-BKC-03364-AJC (“Adversary Proceeding Docket”), DE
1 at 8–20. The Counterclaim consisted of three counts: (1) Declaratory Judgment; (2) Conversion;
and (3) Trespass. Id. The first count sought a declaratory judgment with regard to ownership of the
wells. Id. at 8–10. The second count sought damages associated with Wal-Mart’s January 12, 2009,
entry onto the property and sealing of the wells. Id. at 10–11. Finally, the third count also sought
damages associated with Wal-Mart’s January 12, 2009, entry onto the property and subsequent
depreciation in value. Id. at 11–12.
On February 17, 2010, the Third District Court of Appeal reversed the trial court’s December
15, 2008, Order granting Wal-Mart’s request for injunctive relief. Biscayne Park, 34 So.3d at 27.
The Third District held: “we conclude that the trial court erred in issuing the injunction, and reverse
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the December 15, 2008 order entered below. Moreover, because the wells on Biscayne’s property
were destroyed following the entry of an improper injunction, on remand Biscayne can proceed
against Wal–Mart’s posted bond on its claim for damages.” Id.
This dispute between the Debtor and Wal-Mart is the center of the appeal presently before
the Court.
B. Background Bankruptcy Proceedings
On April 26, 2010, the Debtor filed a voluntary petition for relief under chapter 11 of the
Bankruptcy Code. Case No. 10-BKC-20941-AJC (“Main Bankruptcy Docket”), DE 1. On July 26,
2010, counsel for the Debtor removed the state court proceeding outlined above to bankruptcy court.
Adversary Proceeding Docket, DE 1. On August 16, 2010, the Bankruptcy Court entered an Order
authorizing the Debtor to: (A) use cash collateral; and (B) grant certain liens and adequate
protections to Appellee, the holder of the 2006 promissory note. Bankruptcy Docket, DE 73 (“Cash
Collateral Order”). Among other things, the Cash Collateral Order granted Appellee a first priority
lien on “all of the real and personal property of [the] Debtor of any description whatsoever, wherever
located and whenever arising or acquired . . .” Id. at Ex. A, ¶ 21. The Bankruptcy Court noted that
“the Cash Collateral Order was . . . consented to by the Debtor (which is controlled by [Appellant]),
was not and has never been objected to by [Appellant] or any other person or entity.” Underlying
Order at 5.
On October 19, 2010,the Bankruptcy Court entered an Order Granting Motion To Approve
Bid Procedures Relating to Sale of the Debtors Assets; Approving the Form and Manner of Notice
of Sale by Auction.” Main Bankruptcy Docket, DE 94. The Bankruptcy Court noted that “the Bid
Procedures Order was . . . consented to by the Debtor (which is controlled by [Appellant]), was not
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and has never been objected to by [Appellant] or any other person or entity.” Underlying Order at
5. The Bankruptcy Court held a hearing to consider the sale of “substantially all of the assets of the
Debtor” on December 1, 2010. At that hearing, Appellee bid $1 million to acquire all of its collateral
as described in the Cash Collateral Order. Main Bankruptcy Docket, DE 126. Also at that hearing,
counsel for Appellee expressly noted that Appellee was “not purchasing [the Wal-Mart bond].
[Appellee is] purchasing choses of action only to the extent [Appellee has] a lien on them under our
collateral documents.” Id. at 24.
On December 30, 2010, the Bankruptcy Court declared Appellee’s bid to be the highest and
best bid and entered an Order: (I) Authorizing Sale of Assets and (II) Conveying Assets Free and
Clear of Liens, Claims, Encumbrances and Interests. Main Bankruptcy Docket, DE 110 (“Sale
Order”). Pursuant to that Order, Appellee acquired, among other items, the following assets:
•
•
•
•
All award and payments which may heretofore and hereafter be made with respect
to the property in question and any improvements or equipment related thereto. Id.
at Ex. A, ¶¶ a-e,
“All causes of actions and judgments pursuant thereto relating to the [property in
question], and all judgments awards of damages and settlements hereafter made
resulting from . . . improvements thereon or any part thereof, or to any rights
appurtenant thereto, including any award for change of grade of streets.” Id. at Ex.
B, ¶ 2.
“All contract rights, causes of actions, claims, demands of Debtor.” Id. at Ex. B, ¶
4.
“the right, in the name and on behalf of Debtor, to appear in and defend any action
or proceeding brought with respect to the [property in question and its improvements
and to commence any action or proceeding to protect interests in the [property in
question and its improvements]. Id. at Ex. C, ¶ h.
The Sale Order also provided that:
Notwithstanding anything to the contrary contained herein, [Appellee] agrees
that the Assets sold to the [Appellee] shall not include: (a) [a specific mobile home];
and (b) the $230,000 supersedeas bond posted by Wal-Mart in Miami-Dade County
Circuit Court under Case Number 08-67361 CA 22.
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Id. at ¶ 6. The Bankruptcy Court noted that “the Sale Order was . . . consented to by the Debtor
(which is controlled by [Appellant]), was not and has never been objected to by [Appellant] or any
other person or entity.” Underlying Order at 7.
C. The Order on Appeal
On August 23, 2011, Appellee filed an Amended Motion to Approve Compromise. Main
Bankruptcy Docket, DE 148.2 Through that Motion, Appellee moved to have the Bankruptcy Court
approve a settlement agreement between Appellee, Wal-Mart, and Pecker & Abramson, litigation
counsel for the Debtor, with regard to the Adversary Proceeding. Id. As part of the agreement, the
parties sought to preclude Appellees from suing Wal-Mart and its counsel. Id. at ¶ 11. On
September 7, 2011, Appellee concurrently filed a Motion to Dismiss (the main bankruptcy case),
Main Bankruptcy Docket, DE 151. That Motion stated:
1.
2.
3.
4.
5.
6.
The bankruptcy case should be dismissed for cause.
The substantial assets of [D]ebtor have been sold including, apparently, the
Debtor-in-possession account.
Continuation of the bankruptcy serves no purpose. The case is, in fact, being
continued to achieve purposes not intended by the Bankruptcy Code.
The manner in which the case has been administered has rendered all of the
post-petition vendors and employees, particularly those that rendered services
during the month of December without payment as [Appellee] was allowed
to seize all the income for the month of December (2010) without paying any
of the bills for the month of December.
Furthermore, a valuable counterclaim the Debtor and it’s [sic] principles own
against Walmart that was pending in the State Court before the filing of the
petition in this case has been included in the ‘sale of assets’ in a confusing
manner which was not in fact intended or understood by [Appellant].
The continuation of the bankruptcy serves no purpose but to continue to incur
multiple levels of fees and costs for which the estate may not be able to
recover except through State Court litigation.
2
The initial motion was filed on August 19, 2011 (DE 145), but was amended on August
23, 2011.
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Id.
Also on September 7, 2011, Appellant filed an Objection to Appellee’s Motion to
Compromise Controversy, Main Bankruptcy Docket, DE 152. That Motion stated
1.
2.
3.
4.
5.
6.
This Court has questionable jurisdiction to approve a settlement between two
non-debtors.
This settlement has been entered into simply in an effort to protect Walmart
and its attorneys who seek a release and a bar order with respect to any claims
or causes of actions of [Appellant]. As it is a settlement between parties that
does not involve the Debtor, such a bar order exceeds the jurisdiction of the
Court, even under § 105(a).
Furthermore, [Appellee] purports to be settling the cause of action of the
Debtor as represented by the Debtor’s counterclaim against Walmart in the
state court action and which is now the removed action. This is a cause of
action which has been identified as being worth millions of dollars.
Madison is seeking this Court’s approval of the settlement for an ulterior
purpose. One such ulterior purpose is that [Appellee] is seeking a deficiency
judgment against [Appellant] and others and is seeking to take their separate
property from them under a claimed “deficiency” in the state court.
[Appellee] knows that if it settles the claim with Walmart, this will create a
defense for [Appellant] and the other guarantor shareholders in the state court
action for a deficiency and therefore, [Appellee] is seeking the “approval” of
this Court in an effort to clothe this questionable and ulteriorly motivated
settlement with some presumption of validity and correctness when it has
none.
For this Court to approve a settlement under these circumstances would
greatly prejudice the estate and movants/interested parties[, the shareholders.]
Further, the settlement proposes to distribute the Walmart injunction bond,
as if it is the property of [Appellee] and it is not the property of [Appellee].
Id.
On September 14, 2011, the Bankruptcy Court held a hearing on Appellee’s Motion to
Compromise Controversy, Main Bankruptcy Docket, DE 145/148. Main Bankruptcy Docket DE
154. At that hearing, Appellee set forth two arguments. Id. First, the phrase “contract rights, causes
of actions, claims, demands of Debtor” does not apply to the Wal-Mart Cause of Action because that
action is one in tort, and the phrase only governs contract causes of action. Id. Second, Appellee
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argued that the $230,000 supersedeas bond was carved out of the sale of assets and therefore the
Wal-Mart Cause of Action was also carved out of the sale of assets. Id.
On October 4, 2011, the Bankruptcy Court held a separate hearing on Appellee’s Motion to
Dismiss the Bankruptcy Case (Main Bankruptcy Docket, DE 151). Main Bankruptcy Docket, DE
200. At that hearing, Appellant argued that there was nothing left for the Bankruptcy Court to
resolve in the Debtor’s estate, and that therefore dismissal of the Main Bankruptcy case was
warranted. Id. Appellee responded that it would not object to the dismissal of the bankruptcy case
if the Bankruptcy Court ruled that Appellee did, in fact, purchase the Wal-Mart Cause of Action.
Id. at 10.
Finally, on October 7, 2011, the Court entered the order currently on appeal: an Order
Determining Adversary Proceeding to be Included in Sale of Assets, Denying Without Prejudice
Motion to Approve Compromise, and Granting Motion to Dismiss Case. Main Bankruptcy Docket,
DE 160. In that Order, the Bankruptcy Court held that the phrase “contract rights, causes of actions,
claims, demands of Debtor” in the Sale of Assets did include the Wal-Mart Cause of Action.
Underlying Order at 8–9. The Bankruptcy Court also acknowledged that Appellee did not acquire
the $230,000 supersedeas bond, but that the bond was completely separate from a cause of action
arising out of it. Id. at 9–10. Next, the Bankruptcy Court refused to approve the bar order in the
settlement agreement because it would bind third-parties (namely Appellant) who was never a party
to the settlement negotiations. Id. at 10. Because the Court determined that the Adversary
Proceeding was transferred by the Debtor to Appellee, and noting no objections to the dismissal of
the case, the Court dismissed the main bankruptcy proceeding. Id.
Appellant now appeals the Underlying Order.
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II. Legal Standard
The Court reviews the Bankruptcy Court’s factual findings for clear error and its legal
conclusions de novo. In re Globe Manufacturing Corp., 567 F.3d 1291, 1296 (11th Cir. 2009); In
re Club Assoc., 951 F.2d 1223, 1228–29 (11th Cir. 1992).
III. Discussion
Appellant makes four arguments on appeal: (1) the Wal-Mart Cause of Action was not
included in the Sale of Assets because that asset was not specified or mentioned by adversary
number; (2) the Wal-Mart Cause of Action was not included in the Sale of Assets because the
supersedeas bond was explicitly carved out of the Sale of Assets; (3) the Bankruptcy Court erred in
failing to hold an evidentiary hearing to determine whether the Wal-Mart Cause of Action was
included in the Sale of Assets; and (4) the Wal-Mart Cause of Action could not be assigned as a
matter of law because it was a tort claim.
1. Inclusion in the Sale of Assets
The Court begins by concluding that the Bankruptcy Court did not err in concluding that the
Wal-Mart Cause of Action was included in the Sale of Assets. The Sale of Assets explicitly
provided that “All contract rights, causes of action, claims, demands of Debtor” were included in the
sale from the Debtor to Appellee. Main Bankruptcy Docket, DE 110 at Ex. B, ¶ 4.
Without
providing any authority, Appellant argues that the Sale of Assets needed to explicitly identify the
Wal-Mart Cause of Action by its adversary number to be included in the Sale of Assets. The Court
agrees with the sound logic of the Bankruptcy Court on this point:
Here, there is no language which would indicate that “[a]ll contract rights, causes of
actions, claims, demands of Debtor” means anything other than what it says and
certainly nothing to suggest (as [Appellee argues]) “contract” modifies the entire
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phrase. “Contract rights” is a phrase with a generally understood meaning and there
is nothing contained within the Sale Order which would lead to the conclusion that
the parties or the Court intended any other meaning than its generally accepted
meaning. The Court concludes that the word “contract” modifies only the word
“rights” and not “causes of actions, claims, and demands of debtor.”
Underlying Order at 8–9. Accordingly, the Court rejects this challenge.
2. Carve Out of the Bond
Next, Appellant argues that the Wal-Mart Cause of Action was not included in the Sale of
Assets because the $230,000 supersedeas bond was expressly carved out from that order. The
relevant excerpt from the Sale of Assets provides that:
Notwithstanding anything to the contrary contained herein, [Appellee] agrees
that the Assets sold to the [Appellee] shall not include: (a) [a specific mobile home];
and (b) the $230,000 supersedeas bond posted by Wal-Mart in Miami-Dade County
Circuit Court under Case Number 08-67361 CA 22.
Main Bankruptcy Docket, DE 110 at ¶ 6. Both Appellee and the Court agree with Appellant that the
bond itself was not included in the Sale of Assets. However, the Bankruptcy Court correctly
distinguished the bond from causes of action associated with it. The Sale of Assets expressly
provided that all “causes of action” were transferred to Appellee, and nothing in the carve-out
provision of the Sale of Assets provides that the Wal-Mart Cause of Action was not intended to be
transferred from the Debtor to the Appellee. The bond itself can, and must, be distinguished from
the cause of action associated with it based on the plain language of the Sale of Assets. If Appellant
objected to the inclusion of the Wal-Mart Cause of Action in the Sale of Assets, it should have
objected to the language at that time. Accordingly, this challenge is also rejected.
3. Failure to Hold an Evidentiary Hearing
Next, Appellant asserts that the Bankruptcy Court erred when it failed to conduct an
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evidentiary hearing on the issue of whether the Wal-Mart Cause of Action was included in the Sale
of Assets. The only authority advanced by Appellant in support of this argument is that the relevant
orders are subject to different interpretations, and therefore a question of law exists.
An
interpretation of a bankruptcy court’s order, however, is a question of law that can be resolved
without an evidentiary hearing. See Bel-Bel Intern Corp. v. Community Bank of Homestead, 162
F.3d 1101, 1110 n. 21 (11th Cir. 1998). Accordingly, this argument is also rejected.
4. Inability to Transfer Tort Causes of Action
Finally, Appellant argues that the Bankruptcy Court erred in allowing the sale of the trespass
and conversion counterclaims set forth in the Wal-Mart Cause of Action because, as a matter of law,
tort claims cannot be assigned. However, the Court need not address the merits of this question
because this argument has been waived by Appellant since that issue was never argued before the
Bankruptcy Court.
“A litigant waives her right to present an argument on appeal when she fails to present that
argument before the bankruptcy court or district court.” In re DeGennaro, 315 F. App’x 817, 819
(11th Cir. 2009) (citing First Ala. Bank of Montgomery, N.A., v. First State Ins. Co., Inc., 899 F.2d
1045, 1060 n.8 (11th Cir. 1990)). Here, Appellant argued before the Bankruptcy Court that the sale
of assets allowed for the sale of only “contract causes of action” and not tort causes of action. But
Appellant never argued before the Bankruptcy Court that tort causes of action are unassignable as
a matter of law. Accordingly, Appellant cannot now, for the first time on appeal, argue that the
bankruptcy court was unable to assign a tort cause of action as a matter of law.
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IV. Conclusion
For the aforementioned reasons, the Order Denying Motion to Dismiss is AFFIRMED.
This case is CLOSED. All pending motions are DENIED AS MOOT.
DONE AND ORDERED in Chambers at West Palm Beach, Palm Beach County,
Florida, this 25th day of September, 2012.
______________________________________
KENNETH A. MARRA
United States District Judge
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