Farm Credit of Cent. Florida, ACA v. Polk
| Decision Date | 19 November 1993 |
| Docket Number | No. 93-628-Civ-T-17B.,93-628-Civ-T-17B. |
| Parties | FARM CREDIT OF CENTRAL FLORIDA, ACA, Appellant, v. Freeman F. POLK, Appellee. |
| Court | U.S. District Court — Middle District of Florida |
Bruce James Sperry, Edwards, White & Galloway, P.A., Plant City, FL, for appellant.
Jeffrey W. Warren, Bush, Ross, Gardner, Warren & Rudy, P.A., Tampa, FL, for appellee.
ORDER AFFIRMING THE DECISION OF THE UNITED STATES BANKRUPTCY COURT
This cause is before the Court on the appeal of Farm Credit of Central Florida, ACA, which filed its appellate brief (Docket No. 4) on June 7, 1993. Appellant seeks a reversal of the denial of its Motion for Relief from Stay by the United States Bankruptcy Court for the Middle District of Florida, Tampa Division. Appellee, Freeman F. Polk, filed his brief in opposition (Docket No. 7) on July 20, 1993 and Appellant filed a reply brief (Docket No. 8) on July 29, 1993.
The Appellee correctly sets forth, in his brief, the appropriate standard for review of the Bankruptcy Court's decision. The applicable standard of appellate review is de novo or complete review for the Bankruptcy Court's conclusions of law and the "clearly erroneous" standard for its findings of fact. Matter of T & B general Contracting, Inc., 833 F.2d 1455 (11th Cir.1987). Bankruptcy Rule 8013 provides that when a district court hears an appeal from a bankruptcy judge's order "findings of fact, whether based on oral or documentary evidence, shall not be set aside unless clearly erroneous, and due regard shall be given to the opportunity of the bankruptcy court to judge the credibility of the witnesses." In re Alchar Hardware Co., Inc., 764 F.2d 1530, 1533 (11th Cir.1985); In re Daikin Miami Overseas, Inc., 868 F.2d 1201, 1206 (11th Cir. 1989).
The issues to be addressed are whether the trial court erred by not granting Appellant's Motion for Relief From Stay, based upon the contractual language in the parties' forbearance agreement and whether the trial court erred by not granting relief pursuant to the provisions of § 362(d)(2)(B) of the Bankruptcy Code. The relevant facts, as presented by the appellate briefs, are as follows:
On November 9, 1991, a Summary Final Judgment of Foreclosure was entered against Defendants, Freeman F. Polk, and Gwendolyn J. Polk, Freeman F. Polk and Gwendolyn J. Polk, as Trustees of a Trust Agreement dated February 8, 1973, known as Freeman F. Polk Revocable Trust, in favor of Plaintiff, Farm Credit. This Summary Judgment scheduled a foreclosure sale for March 3, 1992, representing an agreement between the parties to delay the sale in order to provide a further opportunity to sell the property.
On February 28, 1992, the foreclosure trial court approved a joint stipulation of the parties cancelling the March 3, 1992, foreclosure sale and rescheduling the sale to May 1, 1992. On May 1, 1992, the trial court approved another joint stipulation which cancelled the May 1, 1992, foreclosure sale and rescheduled the sale for June 30, 1992. This joint stipulation mentioned the parties' forbearance agreement, dated May 1, 1992, which contained Defendants' agreement not to contest a motion to lift stay in the event Defendants' filed for bankruptcy protection.
On June 30, 1992, Appellee filed his Chapter 11 Petition in Bankruptcy Court. Appellant filed its Motion for Relief and Modification of Automatic Stay and Request for Adequate Protection on July 15, 1992. On July 17, 1992, Polk filed his response to the motion asserting that cause did not exist to terminate or modify the stay. At the preliminary hearing held on August 11, 1992, the Court granted limited adequate protection and scheduled an evidentiary hearing for November 6, 1992. The hearing on Appellant's Motion for Relief From Stay was heard on November 6, 1992, but was continued to January 15, 1993, and thereafter continued to and completed on February 15, 1993. The Court entered its Amended Order Denying Farm Credit's Motion for Relief From Stay on March 11, 1993. Appellee timely filed its Notice of Appeal of that order on March 19, 1993.
Polk and Farm Credit entered into a Forbearance Agreement on May 1, 1992, whereby Farm Credit agreed to extend the date of the foreclosure sale in exchange for Polk agreeing not to contest a motion for relief from stay by Farm Credit in the event that Polk filed for bankruptcy protection. The Bankruptcy Court found that a prepetition agreement that entitled Appellant to an immediate lifting of the automatic stay, in and of itself, is not sufficient to lift the stay unless there is a showing of other criteria, such as bad faith.
Farm Credit contends that while Polk cannot contract away his right to file for protection under the bankruptcy laws, he can enter into a prepetition agreement limiting and/or waiving rights available to him under those laws. Further, Farm Credit asserts that the Bankruptcy Court erred because Polk cannot be allowed to circumvent the contractual terms he voluntarily entered into under the Forbearance Agreement. Farm Credit relies on a series of single asset bankruptcy decisions to support its argument that a prepetition waiver of rights should be enforceable. In re Matter of International Supply Corp. of Tampa, Inc., 72 B.R. 510 (Bankr. M.D.Fla.1987); In re Gulf Beach Development Corp., 48 B.R. 40 (Bankr.M.D.Fla. 1985); In re Citadel Properties, Inc., 86 B.R. 275 (M.D.Fla.1988); In re McBride Estates, Ltd., 154 B.R. 339 (Bankr.N.D.Fla.1993); B.O.S.S. Partners I, 37 B.R. 348 (Bankr. M.D.Fla.1984). Farm Credit holds that the Bankruptcy Court's decision is in conflict with the aforementioned line of cases.
This Court agrees with Appellee that the Bankruptcy court was fully aware of the aforementioned decisions and rejected the applicability of the reasoning of those cases to the present case. A review of the underlying facts of the cases cited by Farm Credit does confirm that in each case the Bankruptcy Court, expressly or impliedly, determined that the debtor could not effectively reorganize. This Court agrees that the fact patterns existing in this line of cases are not present in the instant case.
Unlike the debtors in that line of cases, Polk has operated significant business enterprises since the mid-1950's. These business enterprises include ranching operations, management of substantial commercial and investment properties and a major heavy machinery repair business. These business enterprises employ a number of people, generate substantial income and involve the types of activity for which Chapter 11 was designed.
Additionally, Polk has a significant number of creditors, both secured and unsecured, and his proposed plan of reorganization provides for the treatment of 17 separate classes of claims and the payment in full of $12,000,000.00 in obligations. Tr 11/6 at 80-82; App. D. Stay Order ¶ 8. This Court concurs with Appellee, Polk, that courts that have held that a prepetition waiver of the § 362 automatic stay provision is valid and enforceable have done so in single asset bankruptcy cases where bad faith existed and the court determined that there was no prospect for a successful reorganization. Those cases do not support the claim of Farm Credit.
This Court also agrees with Appellee, Polk, that the automatic stay is a key component of federal bankruptcy law. In a Chapter 11 reorganization proceeding, the stay prevents the dissipation or diminution of the debtor's assets while rehabilitative efforts are undertaken. In re S.I. Acquisition, Inc., 817 F.2d 1142 (5th Cir.1987). The stay goes into effect without regard to conduct by the debtor or his creditors. Relief from the automatic stay must be authorized by the Bankruptcy Court. The stay prevents certain creditors from gaining a preference for their claims against the debtor and, in general, avoids interference with the orderly liquidation or rehabilitation of the debtor. Association of St. Croix Condominium Owners v. St. Croix Hotel Corp., 682 F.2d 446, 448 (3d Cir.1982).
The Bankruptcy Court found that the provision in an agreement "entitling Farm Credit to an immediate lifting of the automatic stay in and of itself is not sufficient to lift the stay unless there is a showing of other criteria, such as bad faith." App. D, Stay Order, ¶ 12. The Bankruptcy Court further found that under the totality of circumstance presented in this case that bad faith did not exist, and therefore the provision should not be enforced against Polk to the detriment of his creditors. App. 4, Stay Order, ¶ 12.
The issue of enforceability of a prepetition agreement to waive the automatic stay has been considered by other courts in the same manner as the Bankruptcy Court for the Middle District of Florida, Tampa Division. The secured creditor in In re Sky Group Int'l, Inc., 108 B.R. 86, 88 (Bankr.W...
To continue reading
Request your trial