Dixie Broadcasting, Inc., In re, BARCLAYS-AMERICAN

Citation871 F.2d 1023
Decision Date28 April 1989
Docket NumberBARCLAYS-AMERICAN,No. 88-7035,88-7035
Parties20 Collier Bankr.Cas.2d 1521, Bankr. L. Rep. P 72,874 In re DIXIE BROADCASTING, INC. and Martin Broadcasting of Alabama, Inc., Debtors./BUSINESS CREDIT, INC., Plaintiff-Appellant, Dixie Broadcasting, Inc. and Martin Broadcasting, Plaintiffs-Appellants, v. RADIO WBHP, INC., Defendant-Appellee.
CourtUnited States Courts of Appeals. United States Court of Appeals (11th Circuit)

Arent, Fox, Kintner, Plotkin & Kahn, William B. Sullivan and Joel D. Rubin, Washington, D.C., Lanier, Shaver & Herring, P.C., John M. Heacock, Jr., and Bell, Richardson & Sparkman, P.A., Tazewell T. Shepard III, Huntsville, Ala., for plaintiffs-appellants.

Berkowitz, Lefkovits, Isom & Kushner, John P. Whittington, Susan Salonimer Wagner, Birmingham, Ala., and Watts, Salmon, Roberts, Manning & Noojin, and Charles E. Richardson, III, Huntsville, Ala., for defendant-appellee.

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

Before RONEY, Chief Judge, JOHNSON, Circuit Judge, and TIDWELL, * District Judge.

RONEY, Chief Judge:

This is an appeal by two debtor corporate owners of a radio station, and its secured creditor, from a bankruptcy court order lifting the automatic stay of 11 U.S.C.A. Sec. 362, which was affirmed by the district court. The removal of the stay cleared the way for continuation of state court litigation in which another radio station sought specific performance by the debtors of a contract to sell their station. Also under attack is the district court's order remanding the case to the bankruptcy court for a determination of whether the debtors filed the bankruptcy petition in bad faith for purposes of dismissal. We affirm the order lifting the stay, but dismiss the appeal from the remand order for lack of jurisdiction.

Background

Debtor-appellant Dixie Broadcasting, Inc. is the owner of radio stations WHOS-AM and WDRM-FM in Decatur, Alabama. Debtor-appellant Martin Broadcasting of Alabama, Inc. was formed for the sole purpose of acquiring Dixie stock and is its sole shareholder. Donald G. Martin and J. Mack Bramlett are the president and vice-president of both Dixie and Martin. Martin and Bramlett also have engaged in other businesses together, including coal mining and leasing of coal mining equipment through various corporations and joint ventures, and they control other radio and television stations in Vermont and Alabama.

Appellee Radio WBHP is a "stand alone" AM radio station broadcasting out of Huntsville, Alabama, and is owned by W.H. Pollard, Jr. After on-and-off negotiations for a period of three years, Dixie entered into a Memorandum of Agreement on April 11, 1984, to sell WDRM to WBHP for $925,000. A Purchase and Sale Agreement was executed on May 17, 1984. Despite the executed purchase and sale agreement, Dixie apparently continued to entertain other offers to purchase the station. Colonial Broadcasting Co., which had offered to buy WDRM in 1983 for $875,000, purportedly upped its price to $1.25 million in June 1984. Dixie then refused to join WBHP in its application for a transfer of the FCC license from WDRM to WBHP, as required in the agreement. Dixie's attorney wrote to WBHP that the reason Dixie could not join in the application was that appellant Barclays-American/Business Credit, Inc., a secured creditor of Dixie, had refused to consent to the sale of the station.

Barclays was a secured creditor by virtue of a May 10, 1984, security interest executed by Dixie which extended and amended a prior loan guarantee with a principal of $1 million secured by all of the real and personal property of Dixie, both tangible and intangible, used in connection with the station, including the FCC license and 100 percent of the issued and outstanding Dixie capital stock. This agreement, executed after Dixie and WBHP had completed their memorandum of agreement on April 11, but before the final purchase and sale agreement of May 17, gave Barclays the right to withhold consent to the sale of Dixie's assets. The loan for which Dixie executed the security agreement was for Martin's and Bramlett's coal mining and related operations.

When WBHP heard of the Colonial offer, it filed suit against Dixie and Martin in an Alabama circuit court. This court enjoined Martin and Dixie from transferring WDRM to anyone other than WBHP and later entered partial summary judgment for WBHP, ordering Dixie to join with it in an FCC application. Several months later, the court vacated the partial summary judgment in response to Dixie's and intervenor Barclay's motion suggesting the court had failed to consider Barclay's security interest when it entered the summary judgment. The court then directed WBHP to seek a declaratory ruling before the FCC.

WBHP sought reconsideration of the court's order. After a two-hour argument on this motion in a December 5, 1986 hearing, the court told the parties that it was ready to rule in WBHP's favor, but that it needed to recess the hearing for a few hours and ordered the parties to meet during this time to try to settle the litigation. The parties did meet and for the first time, the debtors mentioned the potential of filing for bankruptcy. No resolution was reached and the parties resumed negotiations during a January 30, 1987 meeting. It was during a lunch break in this negotiating session that Dixie and Martin filed for Chapter 11 bankruptcy.

WBHP sought dismissal of Dixie's petition, or in the alternative, relief from the automatic stay granted by section 362(a) of the Code. The bankruptcy court first found that because an FCC broadcasting license is not readily obtainable in the open market, and because there were no other FCC FM broadcasting station licenses available in the North Alabama market, the license at issue here was unique and WBHP's interest could not be adequately protected while a stay was in effect. The court further found that Dixie filed its petition:

[F]or the primary purpose of (1) avoiding the consequences of an anticipated adverse state court decision; (2) relitigating the same controversy between the two parties in bankruptcy forum; and (3) invoking the automatic stay provision to evade the pending state court litigation.

Order Terminating Stay at 15. The court noted that the litigation had been pending for two and one-half years and was on the verge of completion when Dixie filed its petition "in order to obtain a last-minute escape chute out of the civil litigation." Id. The court concluded that Dixie's actions amounted to bad faith and justified relief from the stay.

On appeal, the district court stated that it had reviewed the order, was convinced that it was correct and that the stay was due to be lifted. Nevertheless, the court remanded the case back to the bankruptcy court for further proceedings on the bad faith filing issue. Although reciting numerous facts such as the timing of events, the financial health of Dixie, and the debt which Dixie secured but received no benefit from, which "more than merely intimate a bad faith filing," the court found that the "motive, intent and need" of the debtors was still subject to question. Thus, the bankruptcy court was instructed to hold a hearing and make a finding as to the debtors' good faith in filing the petition. The court further instructed the bankruptcy judge to dismiss the petition should he find bad faith.

The Automatic Stay

Under 28 U.S.C.A. Sec. 158(d), the federal appellate courts have jurisdiction in bankruptcy cases over "appeals from all final decisions, judgments, orders, and decrees" of the district courts. A district court order affirming or reversing the bankruptcy judge's grant or denial of relief from an automatic stay consistently has been held by the courts to be a final decision reviewable on appeal. See, e.g., In re Regency Woods Apartments, Ltd., 686 F.2d 899, 902-03 (11th Cir.1982); In re Sun Valley Foods Co., 801 F.2d 186, 190 (6th Cir.1986); In re Boomgarden, 780 F.2d 657, 659-60 (7th Cir.1985); Grundy Nat'l Bank v. Tandem Mining Corp., 754 F.2d 1436, 1439 (4th Cir.1985); In re American Mariner Indust., Inc., 734 F.2d 426, 429 (9th Cir.1984); In re Leimer, 724 F.2d 744, 745 (8th Cir.1984); In re Comer, 716 F.2d 168, 172 (3d Cir.1983); In re Taddeo, 685 F.2d 24, 26 n. 4 (2d Cir.1982).

An automatic stay may be terminated for "cause" pursuant to section 362(d)(1) of the Bankruptcy Code. The statute specifically provides that "the lack of adequate protection of an interest in property" is cause to lift a stay. Further, a petition filed in bad faith also justifies relief from a stay. In re Natural Land Corp., 825 F.2d 296 (11th Cir.1987). A decision to lift the stay is discretionary with the bankruptcy judge, and may be reversed only upon a showing of abuse of discretion. Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 814 F.2d 844 (1st Cir.1987); In re Holtkamp, 669 F.2d 505 (7th Cir.1982).

The bankruptcy court found both that WBHP's interest was inadequately protected given the unique character of an FCC license and that Dixie's actions amounted to bad faith. On appeal, Dixie argues that WBHP's unsecured, prepetition and unliquidated contract claim is not entitled to adequate protection, but that it nonetheless is protected because the value of the radio station has steadily increased. WBHP does not address the adequate protection argument, contending that the presence of bad faith alone compels relief from the stay in this case.

We hold that the bankruptcy court did not err in its determination that there was bad faith to justify lifting the stay. The evidence of bad faith in this case includes:

(1) the filing of the petition during a lunch recess in eleventh-hour court ordered settlement negotiations in the state court litigation;

(2) use of bankruptcy proceedings despite the apparent good financial health of the debtor;

(3) use of bankruptcy to avoid a contract that had become less profitable in...

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