Biltmore Investments, LTD. v. TD Bank, N.A.

Filing 9

ORDER denying 2 MOTION for Leave to Appeal Pursuant to 28 U.S.C. Section 158(a)(3) and Stay Pending Appeal or Expedited Briefing Schedule. Appellant designations due by 12/7/2015. Appellee shall have 14 days to file addtl designation of items. Signed by District Judge Max O. Cogburn, Jr on 11/19/2015. (kby)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF NORTH CAROLINA
ASHEVILLE DIVISION
DOCKET NO. 1:15-cv-00194-MOC
Related Bankruptcy Case: 11-10053

BILTMORE INVESTMENTS,

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Appellant,
Vs.
TD BANK, N.A.,
Appellee.

ORDER

THIS MATTER is before the court on Appellant Biltmore Investments, LTD.’s,
(“Biltmore” or “Debtor”) “Motion for Leave to Appeal Pursuant to 28 U.S.C. § 158(a)(3) and
Stay Pending Appeal Or Expedited Briefing Schedule” (#2) and the associated brief for the
Motion for Leave to Appeal (#6). Biltmore previously moved to withdraw (#6) the “Motion for
Stay Pending Appeal” portion of its initial motion (#2), which the court granted (#7). TD Bank,
N.A. (“TD Bank”) has filed a timely response to the Motion for Leave to Appeal (#8), making
this matter ripe for review. By the instant Motion (#2), Biltmore seeks to appeal the following
Orders entered by the Honorable George R. Hodges, United States Bankruptcy Judge:
1. August 10, 2015 Order Granting Motion to Determine Settlement Amount Due Creditors
entered (Bankr. Doc. No. 321); and
2. August 14, 2015 Amended Order Granting Motion to Determine Settlement Amount Due
Creditors (Bankr. Doc. No. 323).
Having considered the matter and reviewed the pleadings, the court finds that for the reasons
explained herein, the Orders that Biltmore seeks to appeal are final orders that are appropriate for

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a direct appeal to this court, not an interlocutory appeal. Given the nature of bankruptcy appeals
and the fact that several procedural steps must be taken before the court can adjudicate the merits
of a direct appeal, the court will direct the parties to file the appropriate motions with the
Bankruptcy Court so that the appellate record may be transmitted to this court. At that time, the
court will set briefing deadlines for the matter on direct appeal so that the case is properly before
the court.
I.

Background

Biltmore correctly states by its motion that this court is somewhat familiar with the facts
of the underlying Bankruptcy proceedings, this being the third appeal to this court from such
proceedings. Generally stated, the relevant facts to this matter are as follows. Biltmore filed its
Petition in Bankruptcy Court on January 26, 2011 and is operating under a Chapter 11 Plan
confirmed on April 2, 2013 (Bankr. Doc No. 133). Among other things, the Plan describes two
then-pending adversary proceedings and states, "[i]n the event there is a cash recovery in either
pending adversary proceeding, the net proceeds will be split between the creditors and the
Debtor-in-Possession on an equal basis." (Id. at p. 4). On January 24, 2014, Biltmore entered into
a Settlement Agreement and Release ("Settlement Agreement") with David D’Anza and other
parties (one of the adversary proceedings, Case No.11-01021), which required those parties to
pay Biltmore $1,300,000 within 30 days ("Recovered Funds"). Upon a motion from Biltmore
(Bankr. Doc. No. 160), the Bankruptcy Court entered an Order on February 25, 2014, approving
the terms of the Settlement Agreement and an award of attorneys’ fees, consisting of a
contingent fee equal to one-third of the Recovered Funds. (Bankr. Doc. No. 171). While
Biltmore received the $1,300,000 in Recovered Funds, it did not make any payments to TD

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Bank, though it states that it had ongoing conversations with all of its creditors for nearly a year
after closing the settlement about how to distribute the creditors’ share of the settlement. See
((#6) at p. 2).
On December 19, 2014, TD Bank filed a “Motion for Order Enforcing Chapter 11 Plan,”
asking the Bankruptcy Court to compel Biltmore to distribute a portion of the Recovered Funds
to TD Bank. (Bankr. Doc. No. 208). After a hearing, the Bankruptcy Court entered an Order on
March 31, 2015 granting TD Bank's Motion (“Enforcement Order”). (Bankr. Doc. 248). In that
Enforcement Order, the Bankruptcy Court held:
25. The Court finds that the Debtor has failed to comply with the terms of its
confirmed Plan. The Debtor has been in possession of the Recovered Funds for
over a year but has failed to distribute any of the Recovered Funds to TD Bank.
…
30. The Plan language clearly provides that the Recovered Funds "will" be split
between the Debtor and the creditors on an equal basis. The term "will" is
mandatory and affords the Debtor no discretion in this matter.
…
32. The Debtor has an obligation to perform according to the terms of its confirmed
Plan and that requires it to distribute 50% of the net proceeds of the Recovered
Funds to all of its creditors, including TD Bank.
(Id. at ¶¶ 25, 30, 32). The Bankruptcy Court then instructed:
35. At this time, the Court will reserve ruling on the exact amount to which TD
Bank is entitled. The Debtor is directed to make a distribution to TD Bank within
10 days of entry of this Order. The distribution shall be for the full amount to which
TD Bank is entitled consistent with the terms of the Plan.
36. If the Debtor’s payment to TD Bank is for less than the amount to which TD
Bank contends that it is entitled under the Plan, then TD Bank or the Debtor may
file a motion with the Court for this Court to determine (1) the dollar amount
represented by 50% of the net proceeds of the Recovered Funds and (2) the formula
to be used for payment of TD Bank and the other creditors from that amount.
(Id. at ¶¶ 35-36).

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On June 25, 2015, TD Bank filed a “Motion for an Order Finding Debtor in Default
under Chapter 11 Plan or, in the alternative, Motion to Determine Settlement Amount Due
Creditors.” (Bankr. Doc No 292). By that Motion, TD Bank argued that the amount calculated by
Biltmore to be distributed to creditors ($115,832.01) was in error, and that the amount of the
settlement proceeds distributed to TD Bank (and other creditors) was not in conformance with
the Chapter 11 Plan. (Id.) On August 10, 2015, the Bankruptcy Court entered an Order granting
TD Bank’s Motion to Determine Settlement Amount Due Creditors, and directing that Biltmore
place Three Hundred Seventeen Thousand Five Hundred One and 32/100 Dollars ($317,501.32)
into a trust account for distribution under the terms of the Debtor’s Plan to its creditors. (Bankr.
Doc. No. 321 at Order ¶ 3). The Bankruptcy Court entered an amended Order on August 14,
2015, adding a pro forma outlining the proposed distribution amounts to all of the creditors,
which was calculated on a pro rata basis. (Bankr. Doc. No. 323). That Order invited all parties to
file comments or objections to the pro forma within 30 days. (Id. at ¶ 59). No party filed any
objections. Biltmore filed its Notice of Appeal of those orders on August, 24, 2015. (Bankr. Doc.
No. 324).
By the instant Motion (#2), Biltmore seeks reversal of these Orders. Biltmore states the
following “points of disagreement” with the Bankruptcy Court Orders:
1) The Court adopts a meaning of “net proceeds” which does not take into account
the substantial tax liability attributed to the settlement. Biltmore contends that
the Court should have arrived at “net proceeds” by taking the taxes off the top
as an expense.
2) In calculating the amount to be paid to TD Bank and others, Biltmore was not
given credit at all for the payment that it had made to TD Bank of One Hundred
Eleven Thousand and no/100 ($111,000.00) Dollars in compliance with the
Court’s Order from April, 2015.
3) The allocation of payments between creditors on a pro-rata basis, while perhaps
fair on its face, was inconsistent with the Biltmore business plan, was not
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anticipated in Biltmore’s confirmed Plan, and was not adopted by any of the
creditors other than TD Bank.
See ((#6) at p. 2). Biltmore contends that the action taken by the Bankruptcy Court
amounted to an actual modification of the Chapter 11, which is not authorized under the
Bankruptcy Code. In addition to reversal, Biltmore seeks a declaration by this court that
the Debtor’s Plan may only be modified by Biltmore alone, that Biltmore retains
authority to determine the specifics of the distribution of the fund, and that the
Bankruptcy Court’s mandate represents an unauthorized modification of the Chapter 11
Plan. See (#2) at ¶ 2.
II.

Standards for Motion for Leave to Appeal

Appeals from bankruptcy proceedings are governed by 28 U.S.C. § 158(a), which provides,
in pertinent part:
The district courts of the United States shall have jurisdiction to hear appeals:
(1) from final judgments, orders, and decrees;
…
(3) with leave of the court, from other interlocutory orders and decrees.
Id. An order is “final” if it “resolve[s] the litigation, decide[s] the merits, settle[s] liability,
establish[es] damages, or determine[s] the rights of ... one of the parties.” In re Looney, 823 F.2d
788, 790 (4th Cir. 1987). The standard for finality of bankruptcy court orders is generally more
relaxed from that of non-bankruptcy district court orders under 28 U.S.C. § 1291. See A.H.
Robins Co. v. Piccinin, 788 F.2d 994, 1009 (4th Cir.1986); 16 Charles Alan Wright, Arthur
Miller, & Edward H. Cooper, Federal Practice and Procedure § 3926.2 (3d ed. 2015) (“Virtually
all decisions agree that the concept of finality applied to appeals in bankruptcy is broader and
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more flexible than the concept applied in ordinary civil litigation.”). Thus, “‘orders in bankruptcy
cases may be immediately appealed if they finally dispose of discrete disputes within the larger
case.’” In re Computer Learning Centers, Inc., 407 F.3d 656, 660 (4th Cir. 2005) (quoting In re
Saco Local Dev. Corp., 711 F.2d 441, 444 (1st Cir.1983)).
When a party seeks to appeal an order of the Bankruptcy Court that is not final, it must
proceed under 28 U.S.C. § 158(a)(3) and seek leave to appeal such interlocutory order. “In
seeking leave to appeal an interlocutory order or decision [of the Bankruptcy Court], the
appellant must demonstrate that exceptional circumstances justify a departure from the basic
policy of postponing appellate review until after the entry of a final judgment.” In re Robinson,
No. 1:10CV226, 2011 WL 1695914, at *3 (W.D.N.C. May 3, 2011) (quoting KPMG Peat
Marwick, L.L.P. v. Estate of Nelco, Ltd., 250 B.R. 74, 78 (E.D.Va. 2000)). District courts in this
circuit employ an analysis similar to that employed by the Court of Appeals in certifying
interlocutory review under 28 U.S.C. § 1292(b) when deciding whether to grant leave to appeal
an interlocutory order of the Bankruptcy Court. See Atlantic Textile Group, Inc. v. Neal, 191
B.R. 652, 653 (E.D.Va. 1996). A motion for leave to appeal an interlocutory order should be
granted only when (1) it involves a controlling question of law, (2) as to which there is
substantial ground for a difference of opinion, and (3) and an immediate appeal would materially
advance the termination of the litigation. See id.; In re Robinson, 2011 WL 1695914, at *3; In re
Pawlak, 520 B.R. 177, 182 (D. Md. 2014); 28 U.S.C. § 1292(b). All three elements must be
satisfied in order for a district court to grant leave to appeal an interlocutory decision. KPMG
Peat Marwick, 250 B.R. at 79.

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III.

Discussion

By its Motion for Leave to Appeal, Biltmore argues that leave to appeal from this court is
appropriate because the practical effect of the Bankruptcy Court Orders requiring Biltmore to
distribute $317,501.32 to its creditors under the terms of the Debtor’s Plan is to “virtually
guarantee that Biltmore will default under the Plan and to terminate any prospects that Biltmore
will reorganize.” (#6 at p. 3). Biltmore makes little attempt at showing why the Orders it seeks to
appeal involve controlling questions of law as to which there is substantial ground for difference
of opinion, but does argue that an immediate appeal would materially advance the termination of
the litigation because Biltmore cannot substantially consummate its Plan and close this case until
the issues regarding distribution of the settlement are resolved. Biltmore contends that the Order
appealed from modifies the Chapter 11 Plan in a manner which makes it no longer feasible.
The court finds that Biltmore assumes, without offering any explanation, that the Orders
it seeks to appeal are interlocutory. As TD Bank notes in its response, while the Orders that
Biltmore seeks to appeal were interlocutory in nature at the time of appeal, they are now final
Orders because the time for objections to the pro forma outlining the proposed distribution to
creditors expired on September 14, 2015. As the Orders currently stand, nothing remains for the
Bankruptcy Court to do except enforce their terms. TD Bank thus argues, and the court agrees,
that the Order “finally dispose[s] of discrete disputes within the larger case,” In re Computer
Learning Ctrs., 407 F.3d at 660, to wit, how much money from the Recovered Funds each party
is entitled to under the terms of the Chapter 11 Plan. In this court’s opinion, the Orders
mandating that Biltmore pay a certain sum of the Recovered Funds into a trust account
conclusively “determines[s] the rights of…the parties,” to such funds under the Chapter 11 Plan.

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In re Looney, 823 F.2d 788, 790 (4th Cir. 1987). The court thus finds that the Orders Biltmore
seeks to appeal are final Orders subject to a direct, not interlocutory, appeal. Accordingly, the
court will proceed with this matter as a direct appeal pursuant to 28 U.S.C. § 158(a)(1) and
instruct the parties to take the necessary procedural steps to bring the matter appropriately before
the court.1 The court therefore enters the following Order.
ORDER
IT IS, THEREFORE, ORDERED that Appellant’s “Motion for Leave to Appeal
Pursuant to 28 U.S.C. § 158(a)(3)” (#2) is DENIED, as leave is not required, and the parties
are instructed to proceed with this appeal as a direct appeal pursuant to 28 U.S.C. § 158(a)(1).
IT IS FURTHER ORDERED THAT within 14 days of this Order, Appellant file with
the Bankruptcy Court the designation of items to be included in the record on appeal and a
statement of the issues to be presented in conformance with Fed. R. Bankr. P. 8009(a)(1).
Appellee shall have 14 days to file additional designation of items if it so chooses, in
conformance with Fed. R. Bankr. P. 8009(a)(2). Once the court receives the record from the

1 TD Bank also argues that any appeal in this matter will be moot because Biltmore failed to object to the pro forma
in Bankruptcy Court per the express Order of the Bankruptcy Court. See (#8 at p. 3) (citing Muth v. United States, 1
F.3d 246, 250 (4th Cir. 1993)) (“issues raised for the first time on appeal generally will not be considered.”).
Biltmore maintains, however, that it objected to the court’s actions. See ((#6) at p. 3) (“Biltmore contends that the
action taken by the Bankruptcy Court in directing Biltmore to make specific dollar and cents distribution to named
creditors amounted to an actual modification of the Biltmore’s Chapter 11 Plan. Especially since the action taken
was over Biltmore’s objections, Biltmore contends that Bankruptcy Court was without authority to rewrite, change,
or add components to Biltmore’s Chapter 11 Plan.”). Biltmore clearly opposed TD Bank’s “Motion for Order
Finding Debtor in Default Under Chapter 11 Plan or, in the Alternative, Motion to Determine Settlement Amount
Due Creditors” (Bankr. Doc. No. 292), as indicated by its responsive filings in the Bankruptcy Court, see (Bankr.
Doc. No. 298), and its arguments at the hearing asking the Bankruptcy Court to deny TD Bank’s Motion. See
(Transcript of July 22, 2015 hearing (Bankr. Doc. No. 311 at p. 44-45)). Thus, it appears to the court that Biltmore
may have preserved its objection to all actions taken by the Bankruptcy Court on TD Bank’s Motion by clearly
opposing it in its papers and at oral argument. At this point, the court will not dismiss this appeal based on
Biltmore’s failure to object to the terms of the pro forma, given that Biltmore clearly indicated that it did not want to
court to enter any such pro forma at all. However, if TD Bank wishes to renew its argument on this matter in its
brief on direct appeal and offer the court additional legal authority in support of its position, it may do so.

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Bankruptcy Clerk pursuant to Fed. R. Bankr. P. 8010(b), the court will set briefing deadlines in
accordance with Fed. R. Bankr. P. 8018, thereby allowing the parties to offer the court any
additional legal authority it wishes to be considered in the substance of this appeal.

Signed: November 19, 2015

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