In re the Ground Round, Inc.

• Decision Date: 15 December 2005
• Docket Number: No. 04-11325-WCH.,No. 05-39.,Adversary No. 04-01390.,05-39.,04-11325-WCH.
• Citation: 335 B.R. 253
• Court: U.S. Bankruptcy Appellate Panel, First Circuit
• Parties: THE GROUND ROUND, INC., et al., Debtors. Joseph A. Abboud, Elias N. Dow, Wazen J. Wyzew, a Pennsylvania Partnership, and Byblos, Inc., Plaintiffs-Appellees, v. The Ground Round, Inc., et al., Defendants-Appellants.

335 B.R. 253

THE GROUND ROUND, INC., et al., Debtors.

Joseph A. Abboud, Elias N. Dow, Wazen J. Wyzew, a Pennsylvania Partnership, and Byblos, Inc., Plaintiffs-Appellees, v. The Ground Round, Inc., et al., Defendants-Appellants.

No. 05-39.

No. 04-11325-WCH.

Adversary No. 04-01390.

United States Bankruptcy Appellate Panel of the First Circuit.

December 15, 2005.

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Appeal from the United States Bankruptcy Court for the District of Massachusetts, (Hon. William C. Hillman, U.S. Bankruptcy Judge).

Harold B. Murphy, Esq. Andrew G. Lizotte, Esq. and Christian J. Urbano, Esq., on brief for Defendants-Appellants.

Eugene J. Malady, Esq., on brief for Plaintiffs-Appellees.

Before LAMOUTTE, HAINES and DEASY, United States Bankruptcy Appellate Panel Judges.

DEASY, U.S. Bankruptcy Judge.

This is an appeal from an order of the bankruptcy court granting summary judgment in favor of Joseph A. Abboud, Elias N. Dow, Wazen J. Wyzew, and Byblos, Inc. (collectively, "Landlord"), in their adversary proceeding to determine the interest of the debtor, The Ground Round, Inc. (the "Debtor"), in a Pennsylvania liquor license previously used in its operation of a restaurant at a leased premises in West Chester, Pennsylvania. At issue in this appeal is whether after rejection of a lease under the Bankruptcy Code the Landlord is entitled to enforce a lease provision requiring the Debtor to retransfer to the Landlord upon termination of the lease a liquor license transferred to the Debtor by the Landlord at the inception of the lease. For the reasons stated below, we hereby affirm the bankruptcy court's decision.

BACKGROUND

In 1977, the Landlord leased certain nonresidential property located in West Chester, Pennsylvania ("Property") to Howard Johnson Company, Inc. The lease was for a term of ten years plus six five-year extensions. Through a series of assignments, the Debtor subsequently succeeded Howard Johnson Company, Inc.'s rights as lessee and thereafter operated a Ground Round restaurant at the Property.¹

In January, 1978, Byblos, Inc. (one of the entities collectively referred to as Landlord), acquired the subject liquor license. An addendum to the lease required the Landlord to transfer the liquor license to the Debtor for $1.00 for use during the terms of the lease. The addendum also provided that "[a]t the termination of this lease" the Debtor was required to "transfer such liquor license to [the Landlord]" for consideration of $1.00. The Landlord transferred the liquor license to the Debtor as required by the lease, and the Debtor used the liquor license for 24 years in connection with its operation of a full-service Ground Round restaurant at the Property.

On February 19, 2004, the Debtor and its affiliates filed voluntary petitions under Chapter 11 of the Bankruptcy Code.² Although the Debtor continued operations as a debtor-in-possession, it ceased restaurant operations at the Property. Thereafter, the Debtor filed a motion to reject various leases, including the lease of the Property. The motion provided that, notwithstanding rejection, "[t]he Debtors shall retain any interest in the liquor license associated with the Rejected Locations...." The Landlord did not file an objection, and the bankruptcy court entered an endorsement order granting the motion.

In November, 2004, the Landlord commenced an adversary proceeding to determine the Debtor's interest in the liquor license.³ The Landlord argued that the provisions of the lease which required the Debtor to retransfer the liquor license to the Landlord upon termination of the lease were specifically enforceable against the Debtor notwithstanding its rejection of the lease. The Debtor responded to the complaint, arguing that the liquor license constituted property of the bankruptcy estate, that the Landlord was not entitled to specific performance of the license transfer provisions of the rejected lease, and that any rights that the Landlord had in the liquor license were avoidable by the Debtor pursuant to § 544.

The parties filed cross-motions for summary judgment and, after a hearing, the bankruptcy court took the matter under advisement. On June 6, 2005, the bankruptcy court issued a "Memorandum of Decision on Complaint Seeking Determination of the Interest of Debtors' Estate in Pennsylvania Liquor License," concluding as follows:

For the stated reasons, I will enter an order granting Landlord's motion for summary judgment and denying Debtor's cross-motion. Landlord shall present a form of order directing Debtor to tender the license to Landlord for transfer to it. All costs of the transfer are to be borne by Landlord.

The bankruptcy court did not issue a separate order or judgment at that time. On June 15, 2005, the Debtors filed a Notice of Appeal with respect to the Memorandum. In August, 2005, the Panel issued an order remanding the matter to the bankruptcy court for entry of an order conforming to the Memorandum. Thereafter, on August 23, 2005, the bankruptcy court entered two orders: (1) an order granting the Landlord's motion for summary judgment and denying the Debtor's cross-motion for summary judgment, and (2) an order directing the Debtor to return the liquor license to the Landlord.⁴

JURISDICTION

I. Final Order

A bankruptcy appellate panel may hear appeals from "final judgments, orders and decrees [pursuant to 28 U.S.C. § 158(a)(1)] or with leave of the court, from interlocutory orders and decrees [pursuant to 28 U.S.C. § 158(a)(3)]." Fleet Data Processing Corp. v. Branch (In re Bank of New England Corp.), 218 B.R. 643, 645 (1st Cir. BAP 1998). "A decision is final if it `ends the litigation on the merits and leaves nothing for the court to do but execute the judgment.'" Id. at 646 (citations omitted). An interlocutory order "`only decides some intervening matter pertaining to the cause, and requires further steps to be taken in order to enable the court to adjudicate the cause on the merits.'" Id. (quoting In re American Colonial Broad. Corp., 758 F.2d 794, 801 (1st Cir.1985)). A bankruptcy appellate panel is duty-bound to determine its jurisdiction before proceeding to the merits even if not raised by the litigants. See In re George E. Bumpus, Jr. Constr. Co., 226 B.R. 724 (1st Cir. BAP 1998). A bankruptcy court's order granting a motion for summary judgment is a final order. See Jones v. Svreck (In re Jones), 300 B.R. 133, 137 (1st Cir. BAP 2003); Ragosa v. Canzano (In re Colarusso), 295 B.R. 166, 171 (1st Cir. BAP 2003) (recognizing that order denying motion for summary judgment that also grants opposing party's cross-motion for summary judgment is final order because it ends litigation on the merits), aff'd, 382 F.3d 51 (1st Cir.2004).

II. Timeliness

Timely filing a notice of appeal is mandatory and jurisdictional. See Johnson v. Teamsters Local 559, 102 F.3d 21, 28 (1st Cir.1996) (citing Acevedo-Villalobos v. Hernandez, 22 F.3d 384, 387 (1st Cir.1994)). If a notice of appeal is not timely filed, the bankruptcy appellate panel does not have jurisdiction over the appeal. See Colomba v. Solomon (In re Colomba), 257 B.R. 368, 369 (1st Cir. BAP 2001). Although the Debtor's Notice of Appeal was filed prior to the entry of the subject orders on August 23, 2005, the appeal is timely. See Fed.R.Civ.P. 8002(a) ("A notice of appeal filed after the announcement of a decision or order but before the entry of the judgment, order, or decree shall be treated as filed after such entry and on the day thereof").

STANDARD OF REVIEW

We evaluate the bankruptcy court's findings of fact pursuant to the "clearly erroneous" standard of review and its conclusions of law de novo. Grella v. Salem Five Cent Sav. Bank, 42 F.3d 26, 30 (1st Cir.1994); see also Fed. R. Bankr.P. 8013; Palmacci v. Umpierrez, 121 F.3d 781, 785 (1st Cir.1997). A trial court's grant of summary judgment, as well as its determination that there are no issues of material fact in dispute, are reviewed de novo. See Canzano v. Ragosa (In re Colarusso), 382 F.3d 51, 57-58 (1st Cir.2004); McCrory v. Spigel (In re Spigel), 260 F.3d 27, 31 (1st Cir.2001); Beatrice v. Braunstein (In re Beatrice), 296 B.R. 576, 577 (1st Cir. BAP 2003).

DISCUSSION

I. Debtor's Interest in the Liquor License

The Debtor argues that the bankruptcy court erred in its findings and conclusions regarding the scope of the Debtor's interest in the liquor license. According to the Debtor, the liquor license is property of the estate which can be marketed and sold for the benefit of its creditors. We disagree.

Section 541(a)(1) of the Bankruptcy Code provides that property of a bankruptcy estate includes "all legal or equitable interests of the debtor in property as of the commencement of the case." 11 U.S.C. § 541(a); see also Ostrander v. Lalchandani (In re Lalchandani), 279 B.R. 880, 883 (1st Cir. BAP 2002). Section 541 is construed broadly to bring any and all of the debtor's property rights within the bankruptcy court's jurisdiction and the umbrella of protections granted by the Bankruptcy Code, and to promote the goal of equality of distribution. See United States v. Whiting Pools, Inc., 462 U.S. 198, 205 n. 9, 103 S.Ct. 2309, 76 L.Ed.2d 515 (1983). The question of whether an interest claimed by the debtor is "property of the estate" is a federal question to be decided by federal law; however, courts must look to state law to determine whether and to what extent the debtor has any legal or equitable interests in property as of the commencement of the case. See Butner v. United States, 440 U.S. 48, 54, 99 S.Ct. 914, 59 L.Ed.2d 136 (1979). Given the fact that the liquor license is titled in the Debtor's name, it is clear that the license constituted one of the "legal or equitable interests" of the Debtor at the commencement of this case, and that interest (whatever it is) is property of the Debtor's estate under § 541. We turn to Pennsylvania law⁵ to determine the...