Delta Resources, Inc., In re

• Decision Date: 14 June 1995
• Docket Number: No. 93-6919,93-6919
• Citation: 54 F.3d 722
• Parties: , 33 Collier Bankr.Cas.2d 1484, 27 Bankr.Ct.Dec. 501, Bankr. L. Rep. P 76,523 In re DELTA RESOURCES, INC., Debtor. ORIX CREDIT ALLIANCE, INC., Appellee, v. DELTA RESOURCES, INC., Appellant.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 722

54 F.3d 722

64 USLW 2046, 33 Collier Bankr.Cas.2d 1484,

27 Bankr.Ct.Dec. 501, Bankr. L. Rep. P 76,523

In re DELTA RESOURCES, INC., Debtor.

ORIX CREDIT ALLIANCE, INC., Appellee, v. DELTA RESOURCES, INC., Appellant.

No. 93-6919.

United States Court of Appeals, Eleventh Circuit.

June 14, 1995.

Melinda Murphy Dionne, Schoel, Ogle, Benton & Centeno, Jerry W. Schoel, Birmingham, AL, for appellant.

Michael L. Hall, Gary W. Farris, Robert B. Rubin, William Hereford, Burr & Forman, Birmingham, AL, for appellee.

Appeal from the United States District Court for the Northern District of Alabama.

Before EDMONDSON and CARNES, Circuit Judges, and MOYE ^*, Senior District Judge.

PER CURIAM:

Delta Resources, Inc., ("Delta") appeals the district court's order requiring payment of postpetition interest as part of the adequate protection it was required to pay as debtor-in-possession to appellee, Orix Credit Alliance Inc. ("Orix"). We reverse.

I. FACTS AND PROCEDURAL BACKGROUND

On November 30, 1992, appellant Delta filed a voluntary petition under Chapter 11 of the Bankruptcy Code, 11 U.S.C. Sec. 101 et seq., in the United States Bankruptcy Court for the Northern District of Alabama. On December 29, 1992, appellee Orix, claiming to be an oversecured creditor, moved for relief from the automatic stay, pursuant to 11 U.S.C. Sec. 362, on the ground that, inter alia, its perfected security interest in the purchase money equipment was not adequately protected.

At the final hearing before the bankruptcy court the parties agreed that the then-value of the collateral, approximately 13 pieces of heavy equipment, was $643,500. The bankruptcy court concluded that the collateral was slightly depreciating but did not find whether Orix in fact was an oversecured creditor. ¹ Instead, the court merely assumed, as Orix had asserted, that Orix was an oversecured creditor.

The bankruptcy court determined that the equipment at issue was necessary to the effective reorganization of the debtor and thus, under 11 U.S.C. Sec. 362(d)(2), Orix could not receive relief from the automatic stay. ² However, the bankruptcy court did not determine whether the creditor was entitled to postpetition interest reasoning that that issue should be dealt with at the time of confirmation of the debtor's Chapter 11 plan.

The bankruptcy court also determined that Orix's secured interest in its collateral would be adequately protected by periodic cash payments in accordance with 11 U.S.C. Sec. 361(1). ³ The bankruptcy court granted Orix adequate protection in the amount of $9,972.41 per month to cover accruing depreciation of the equipment, but rejected Orix's contention that as an oversecured creditor it was entitled to receive postpetition interest as part of adequate protection. Accordingly, the bankruptcy court denied Orix's motion for relief from stay.

On April 26, 1993, Orix filed a notice of appeal to the district court from the bankruptcy court's order denying relief from the automatic stay. Orix also filed a motion for leave to appeal.

After Delta failed to pay the first required adequate protection payment, Orix filed a motion to compel payment which the bankruptcy court denied on April 19, 1993. Orix then filed a notice of appeal to the district court from the bankruptcy court's denial of its motion to compel payment. Once again, Orix filed a motion for leave to appeal. Thereafter, Delta filed a motion to stay the briefing schedule and objected to the appeals as premature and thus not properly before the district court.

By order of June 22, 1993, the district court consolidated those appeals. The district court determined that the appeals from the bankruptcy court's orders were as of right. Alternatively, however, the court stated that it would exercise its discretion to hear the appeals and granted the motions for leave to appeal.

On October 19, 1993, the district court entered a "final order" reversing the bankruptcy court. Extending the holding of United Sav. Ass'n v. Timbers of Inwood Forest Assocs., Ltd., 484 U.S. 365, 108 S.Ct. 626, 98 L.Ed.2d 740 (1988), the district court determined that an oversecured creditor is entitled to postpetition interest as part of adequate protection. The district court found that Delta should retroactively pay to Orix monthly adequate protection payments consisting of $9,972.41 for the monthly depreciation of its collateral, as well as an additional amount of $8,292.90 in postpetition interest to maintain its equity cushion. The district court remanded the case to the bankruptcy court directing that Delta pay that amount to Orix retroactive to March 17, 1993, the date of the bankruptcy court's order from the bench denying relief from stay but ordering adequate protection. Delta filed a notice of appeal challenging the district court's reversal of the bankruptcy court's orders. There is no certification under 28 U.S.C. Sec. 1292(b).

Thereafter, the equipment, which was the subject of the motion for relief from stay, was sold and Orix was paid the proceeds of the sale. On January 3, 1994, with the approval of the bankruptcy court, the parties entered into a consent order on remand concerning the district court's order for adequate protection. The equipment at issue having "been sold and the proceeds of the equipment and the interplead adequate protection payments covering depreciation only," Supp.Rec. doc. 19, having been paid to Orix, the issue on appeal was limited to whether the postpetition interest payments ordered by the district court "are due to be paid now because it [Orix] is an unsecured creditor." Id. The parties also agreed that Orix would temporarily postpone its collection efforts for the adequate protection payments for postpetition interest and that, at that time, the bankruptcy court need not enforce the mandate of the district court.

On February 18, 1994, the district court granted in part and denied in part Delta's motion to supplement the record. The district court granted Delta's motion to include: 1) the January 3, 1994, consent order on remand entered by Bankruptcy Judge George S. Wright; 2) Orix's November 18, 1993, opposition to motion to stay pending appeal; and 3) Orix's November 2, 1993, motion to enforce appellate order. The district court denied Delta's motion to supplement the record as to: 1) the December 21, 1993, order and memorandum of decision by Bankruptcy Judge Wright applying the "transformation rule" to the competing interests of AmSouth Bank, N.A. and Orix, and 2) Orix's January 3, 1994, motion to reconsider transformation rule decision because these documents post-dated the district court's order on appeal and had not been before the district court during the course of the appeal.

Nonetheless, this Court may take judicial "notice of another court's order ... for the limited purpose of recognizing the 'judicial act' that the order represents or the subject matter of the litigation and related filings." United States v. Jones, 29 F.3d 1549, 1553-54 (11th Cir.1994). Here, the bankruptcy court entered an order on December 21, 1993, in the adversary proceeding between creditors AmSouth Bank, N.A. and Orix deciding which creditor had the first priority liens on the heavy equipment at issue and about which Orix claims to be oversecured. See AmSouth Bank, N.A. v. Orix Credit Alliance, Inc. (In re Delta Resources), 162 B.R. 562 (Bankr.N.D.Ala.1993).

Although we may not take judicial notice of a finding of fact by the bankruptcy court, United States v. Jones, 29 F.3d at 1553, we may note that that the bankruptcy court determined as matter of law that the "transformation rule" is yet the law of the Eleventh Circuit and that under the undisputed facts of this case "AmSouth's security interest in all the debtor's accounts receivables and its equipment is superior to that of ORIX Credit Alliance--including the equipment ORIX originally financed for the debtor, and which was the subject of previous contested matters in this court." In re Delta Resources, 162 B.R. at 572. Whether the bankruptcy judge's ruling on the motions for summary judgment in this adversary proceeding may yet reach this Court is uncertain.

II. ANALYSIS

A. Appellate Jurisdiction in Bankruptcy

The first issue presented for decision is whether we may take jurisdiction of this appeal. In the case sub judice, the district court accepted Orix's appeal of right as well as in its discretion granting Orix leave to appeal the bankruptcy court's order denying Orix's motion for relief from the automatic stay and awarding Orix only a portion of the adequate protection it sought. At that time, the bankruptcy court had made no finding whether the creditor was entitled to postpetition interest, ostensibly because the issue of postpetition interest might be dealt with in confirmation of the debtor's Chapter 11 plan. And, since the adversary proceeding between AmSouth Bank, N.A. and Orix was pending, it was not then possible to determine precisely what collateral Orix held and, thus, a formal valuation of Orix's secured interest was not possible.

Whether the bankruptcy court's order was a final order, vel non, we need say no more than the district court properly exercised jurisdiction. For, even assuming that the bankruptcy court order was not a final order, the district court did not abuse its discretion in exercising interlocutory jurisdiction over the bankruptcy court order.

Had we concluded that the bankruptcy court order at issue was an interlocutory order, the critical question nevertheless would be whether the district court issued a final order which could be appealed to the court of appeals under 28 U.S.C. Sec. 158(d). To begin, in order for a court of appeals to have jurisdiction over a bankruptcy appeal from the district court, the order being appealed from the district court must have been a final order itself, or alternatively, some exception to the finality rule must be applicable. Martin Bros....