Club Associates, In re, 91-8027
| Decision Date | 30 March 1992 |
| Docket Number | No. 91-8027,91-8027 |
| Citation | 956 F.2d 1065 |
| Parties | , Bankr. L. Rep. P 74,526 In re CLUB ASSOCIATES, Debtor. FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS, Plaintiff-Appellant, v. CLUB ASSOCIATES, A Georgia Limited Partnership, Defendant-Appellee. |
| Court | U.S. Court of Appeals — Eleventh Circuit |
C. Richard McQueen, William D. Matthews, Greene, Buckley, Jones & McQueen, Atlanta, Ga. and Grady L. Pettigrew, Jr., Arter & Hadden, Columbus, Ohio, for plaintiff-appellant.
Mark S. Kaufman, Long, Aldridge & Norman and J. James Johnson, Long, Aldridge & Norman, Atlanta, Ga., for defendant-appellee.
Appeal from the United States District Court for the Northern District of Georgia.
Before COX and DUBINA, Circuit Judges, and GODBOLD, Senior Circuit Judge.
In this appeal, we address the doctrine of mootness in the context of reviewing a bankruptcy confirmation order. Before the district court was a consolidated appeal challenging both the bankruptcy court's confirmation of appellee's reorganization plan under Chapter 11 and its denial of appellant's motion for relief from the automatic stay. The district court dismissed the appeal as moot as well as for reasons of equity. We affirm.
Appellee Club Associates ("Club") is a Georgia limited partnership that owns and operates the Tahoe Club Apartments (the "Apartments") in DeKalb County, Georgia. 1 Club purchased the Apartments on November 30, 1984, from Consolidated Capital Realty Investors ("CCRI") for $26.8 million. Club paid $4.8 million in cash at closing and gave CCRI a promissory note ("Note") for $22 million. 2 CCRI, following a name change, became Vinland Property Trust. Vinland's interest in the Note was later transferred to Club and Oaks Limited Club filed for Chapter 11 protection on February 23, 1987. Club's principal assets included the Apartments and Club's entitlement to future capital contributions from its partners. Its primary liability was the Note. Club also owed a number of trade debts, claims held by three first mortgage lenders whose loans were included in the Note, money owed on a ground lease, tenants' security deposits, and funds advanced by Club's general partners for management and administrative services.
Partnership. Appellant First Union Real Estate, Equity and Mortgage Investments ("First Union") later succeeded to Club and Oaks's interest in the Note. 3 First Union's motion to substitute for Club and Oaks as the real party in interest in this appeal was granted by the district court
From the time of the filing, Club was a debtor retaining possession of the Apartments. On March 20, 1987, the bankruptcy court entered by consent a Preliminary Order on Debtor's Use of Cash Collateral ("Cash Collateral Order") authorizing Club to use income generated by the Apartments to pay taxes, satisfy monthly principal and interest obligations under prior mortgages, pay rent on the ground lease, and meet operating expenses of the Apartments up to $91,000 a month. Club paid the remainder of the revenue to First Union (post-petition payments). 4
On October 7, 1987, First Union filed a motion for relief from the automatic stay. The bankruptcy court entered an order on January 12, 1989, denying the motion. On January 19, 1989, Club submitted its Second Amended Plan of Reorganization (the "Plan") to the bankruptcy court. The court confirmed the Plan on September 18, 1989. In re Club Associates, 107 B.R. 385 (Bankr.N.D.Ga.1989) (). First Union filed a timely notice of appeal on October 18, 1989.
Pursuant to the Plan, see infra, Club filed a certificate on November 17, 1989, declaring that it had engaged in a supplemental securities offering and had thereby obtained an additional $183,300 in cash and executed investor notes totalling $549,900. 5 First Union objected to the certification on November 27, 1989. Then, on November 30, 1989, First Union moved for a stay pending appeal in the bankruptcy court. The bankruptcy court denied the motion for a stay on April 4, 1990.
In the meantime, First Union again moved for relief from the automatic stay. The bankruptcy court expressly denied this motion on December 15, 1989. First Union appealed to the district court the denial of its second motion for relief from the automatic stay. This appeal was consolidated with its appeal of the bankruptcy court's Confirmation Order. First Union also moved the district court for a stay pending appeal on April 26, 1990. Club moved the district court to dismiss both appeals for mootness and reasons of equity. 6 Finding that the Plan had been substantially consummated, that First Union had not sought a stay pending appeal in a timely manner, and that it was unable to grant effective relief, the district court granted Club's motions and dismissed First Union's appeal because of mootness and for reasons of equity. This appeal followed.
The Plan called for Club to continue its ownership and operation of the Apartments. It also restructured the Note by extending the maturity date from 1994 to 1999, reducing Club's monthly debt service payments, and applying Club's post-petition The Plan also required Club to: (1) certify that it had raised $487,500 of new commitments from its limited partners or new investors through a supplemental securities offering before the Plan's effective date 8; (2) pay all administrative expenses in cash by the effective date; (3) pay all trade creditors 80 percent of their claims within 30 days of confirmation; and (4) assume the ground lease, repay all tenant security deposits, subordinate all remaining insider claims to the full payment of the Note, assume the Apartments's management agreement, restructure another note, and decide whether to reject or assume a Satellite Master License.
payments to reduce Club's principal indebtedness on the Note. 7
The Plan also contained a self-destruct mechanism. If Club failed to raise the required $487,500 within the applicable time frame, Club would not have opposed First Union's immediate foreclosure on the Apartments.
First Union argues that the Plan was not substantially consummated as of the effective date and therefore effective judicial relief was still possible at the time the district court issued its order. First Union bases this argument on its alleged willingness to post a bond to protect all the interests that could be adversely affected by a reversal of the Plan on appeal. In addition, First Union argues that its motion for stay pending appeal in the bankruptcy court was timely (and therefore the finding of inequity on the part of First Union was error) and that the district court failed to evaluate each of its issues on appeal. 9
Club's arguments parallel the conclusions reached by the district court. It contends that substantial consummation had occurred at the time of the order, Club had re-emerged as a prospering entity, all of First Union's issues on appeal threatened Club's re-emergence as a prospering entity and effective judicial relief was impossible. Effective judicial relief was not possible, Club contends, because its limited partners had invested $183,300 in cash and committed another $549,900 in the form of notes, thereby modifying the relationship between the investors and Club. Club also argues that it had entered into contracts with third parties in reliance on the Plan, and paid off various administrative and unsecured trade creditors claims. In addition, Club contends that First Union's motion to stay was untimely (and hence, the finding that First Union did not have equity on its side was correct). Lastly, Club argues that, in light of First Union's untimely motion for stay, the district court would not have been in error for dismissing First Union's appeal, in the alternative, solely for reasons of equity.
The only issue before this court is whether the district court erred in dismissing First Union's appeal as moot. 10
Determinations of law made by either the bankruptcy court or the district court are reviewed by this court de novo. The bankruptcy court's factual determinations are subject to review under the clearly erroneous standard. A district court is not authorized to make independent factual findings. In re Sublett, 895 F.2d 1381, 1383-84 (11th Cir.1990).
Central to a finding of mootness is a determination by an appellate court that it cannot grant effective judicial relief. Put another way, the court must determine whether the "reorganization plan has been so substantially consummated that effective relief is no longer available." Miami Center Ltd. Partnership v. Bank of New York, 820 F.2d 376, 379 (11th Cir.1987) (hereinafter Miami Center I ). As the district court properly noted, substantial consummation by itself does not resolve the issue. Even if substantial consummation has occurred, a court must still consider all the circumstances of the case to decide whether it can grant effective relief. 11
The test for mootness reflects a court's concern for striking the proper balance between the equitable considerations of finality and good faith reliance on a judgment and the competing interests that underlie the right of a party to seek review of a bankruptcy court order adversely affecting him. In re Information Dialogues, Inc., 662 F.2d 475, 477 (8th Cir.1981).
First Union's primary contention on appeal is that the district court could have granted effective relief had it requested First Union to post an adequate bond. This may be so, but it is of no moment in this appeal. We are a reviewing court. Our responsibility is to decide whether the district court committed an error based on the record before it. We should not fault the district court for not considering whether a bond would enable it to render effective judicial relief in this case in light of the fact...
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