Miami Center Ltd. Partnership v. Bank of New York

• Decision Date: 10 March 1988
• Docket Number: Nos. 86-5286,86-5386,s. 86-5286
• Citation: 838 F.2d 1547
• Parties: 18 Collier Bankr.Cas.2d 887, Bankr. L. Rep. P 72,254 MIAMI CENTER LIMITED PARTNERSHIP, Miami Center Corporation, Theodore B. Gould, Chopin Associates, and Holywell Corporation, Plaintiffs-Appellants, v. BANK OF NEW YORK, Defendant-Appellee. MIAMI CENTER CORPORATION and Chopin Associates, Plaintiffs-Appellants, v. BANK OF NEW YORK, et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1547

838 F.2d 1547

18 Collier Bankr.Cas.2d 887, Bankr. L. Rep. P 72,254

MIAMI CENTER LIMITED PARTNERSHIP, Miami Center Corporation,

Theodore B. Gould, Chopin Associates, and Holywell

Corporation, Plaintiffs-Appellants, v. BANK OF NEW YORK, Defendant-Appellee.

MIAMI CENTER CORPORATION and Chopin Associates, Plaintiffs-Appellants, v. BANK OF NEW YORK, et al., Defendants-Appellees.

Nos. 86-5286, 86-5386.

United States Court of Appeals Eleventh Circuit.

March 10, 1988.

Robert A. Mark, Stearns, Weaver, Miller, Weissler, Alhadeff & Sitterson, P.A., Miami, Fla., Robert M. Musselman, Charlottesville, Va., for plaintiffs-appellants.

Theodore B. Gould, pro se.

Irving M. Wolff, Holland & Knight, Miami, Fla., for Smith.

Vance E. Salter, Coll Davidson Carter Smith Salter & Barkett, P.A., S. Harvey Ziegler, Kirkpatrick & Lockhart, Miami, Fla., Thomas F. Noone, Emmet, Marvin & Martin, New York City, for Bank of New York.

Before ANDERSON, Circuit Judge, SWYGERT ^* and GODBOLD ^**, Senior Circuit Judges.

ON PETITION FOR REHEARING AND SUGGESTION FOR REHEARING EN

BANC BY APPELLANTS AND PETITION FOR REHEARING BY APPELLEES

(Opinion June 29, 1987, 11 Cir., 820 F.2d 376).

GODBOLD, Senior Circuit Judge:

On petition for rehearing by appellants/debtors we entered an order on September 8, 1987, 826 F.2d 1010 (11th Cir.1987), in which we attempted to correct what we believed was an error in our opinion, 820 F.2d 376 (11th Cir.1987). In this order we reaffirmed our conclusion that these consolidated appeals should be dismissed and denied appellants' petition for rehearing. Subsequently the appellants/debtors filed a petition for rehearing en banc, and the appellees filed a petition for rehearing with respect to the September 8 order.

It now appears that our correction was wrong. We have, therefore, gone back to square one and have reviewed the record and the numerous briefs. There are two appeals before us. No. 86-5286 is an appeal from an order of the district court entered in an appeal to it affirming two orders of the bankruptcy court. This appeal to us is the primary subject of this opinion. We hold that the district court should have dismissed the appeal to it as moot, and we remand to the district court with instructions that it do so. No. 86-5386, a related case, is an appeal to us from an order of the district court dismissing a civil action for damages brought in the district court by the debtors in No. 86-5286 against the major creditors. Our disposition of this appeal is controlled by our decision in No. 86-5286. In No. 86-5386 we affirm the district court's dismissal.

The appellants are five Chapter 11 debtors--an individual debtor, Theodore B. Gould, and four other debtors owned, controlled, or dominated by Gould. All have been involved in development of the Miami Center project, a modern thirty-five story hotel and office building structure, joined by a restaurant and shopping complex, plus a parking garage, situated at a bay-front site in downtown Miami, Florida. The Bank of New York financed the construction of the project and is the principal creditor. Its mortgage fell into default, and it began foreclosure. The five debtors filed voluntary petitions for bankruptcy, and the bankruptcy court consolidated the estates. The debtors continued in possession.

The debtors and the bank filed competing reorganization plans. The creditor committees and individual creditors overwhelmingly approved the bank's amended plan and rejected the debtors' plans. The bank's amended plan included a proposal that the estates of the five debtors be consolidated. The bankruptcy court entered two orders that are central to No. 86-5286. On July 23, 1985 it approved substantive consolidation of the debtors' estates and overruled debtors' objections to that aspect of the reorganization plan. The court noted:

The consolidation of the five estates is for the purpose of allowing all available funds and assets of the estates to be used in accordance with the Bank's Amended Plan, if confirmed, to pay all allowed creditor's [sic] claims.

The court reserved consideration of whether all other aspects of the reorganization plan entitled it to confirmation.

On August 8, 1985 the bankruptcy court considered whether to confirm the debtors' plans or the bank's plan. The debtors' major objections to the bank's plan were, first, that the assets were worth substantially more than the bank was willing to pay. Second, the Gould interests objected to the provision for consolidation of estates that had been approved in the July 23 order. The court rejected debtors' plans and approved the bank's. In its order, reported as In re Holywell Corp., 54 B.R. 41 (Bkrtcy.S.D.Fla.1985), it noted that an application for rehearing and reconsideration of the July 23 order was pending; the court denied the application for rehearing.

Under the amended reorganization plan that was confirmed a liquidating trustee would be appointed and would take charge of the property. The Bank of New York would acquire the Miami Center property from the trustee, together with the furniture, fixtures, and equipment therein, for $255,600,000, a valuation based upon an MIA appraisal. ¹ This purchase would be funded through cancellation of the judgment lien held by the bank (approximately $240 million) ², plus any new cash necessary to come up to the $255.6 million figure. In addition, the bank agreed to release to the trustee $30 million realized from the sale of unrelated property located in Washington, D.C. that had been owned by some of the debtors; this cash was additional collateral held by the bank and subject to its lien.

Moreover, the bank was required to set aside $14 million, backed by surety bonds, to protect the rights of creditors affiliated with Gould, who had been found in a separate order to be lessors of equipment and fixtures located in Miami Center that had been included with the sale to the bank. This order was the subject of a separate appeal. Should the bond ultimately have to pay the lessors for the FF & E under this arrangement it would be entitled to seek reimbursement from the estate pursuant to a trustee's certificate.

Also the plan provided that certain creditors affiliated with the Gould interests would be "equitably subordinated" to claims of other creditors with lower priority because these Gould-affiliated creditors were "insiders."

The debtors had filed in the U.S. District Court a separate suit for damages charging that in connection with its loan the bank had committed fraud and various RICO violations. The approved reorganization plan provided that this case, which the bank asserted was a chose in action of the bankruptcy estate and thus due to be under the control of the trustee, was to be dismissed by the trustee.

Debtors moved in the bankruptcy court for a stay of the confirmation order pending appeal. After a hearing the bankruptcy court granted a stay conditioned upon debtors posting a bond in the amount of $140 million, based upon the court's estimate that an appeal would take a year. In October 1985, on review, the district court reduced the amount of the bond to $50 million, on the assumption an appeal could be expedited and determined in 90 days, and required the bond be filed by October 10, 1985. The debtors appealed the bond ruling to this court, which dismissed for lack of jurisdiction. The debtors did not post a bond, and, beginning October 11, 1985, the trustee and the bank set about immediately to consummate the reorganization plan as approved. The trustee conveyed to the bank's designee, a land trust, title to Miami Center and its furniture, fixtures and equipment. The bank gave up its judgment lien, and, in addition, paid approximately $13.6 million of new money, to make up the total consideration of $255.6 million. Also, it released the $30 million of additional cash collateral. The trustee began making payments to 400-plus creditors of the five estates.

On appeal to the district court the debtors attacked the consolidation order and the confirmation order. They asserted that: the necessary bases for the consolidation order were not proved; various of their claims were improperly subordinated to claims of general creditors; the bankruptcy court failed to have a hearing on valuation; the reorganization plan improperly required the trustee to dismiss the separate suit filed by debtors in the federal district court; the reorganization plan discriminated against mechanics and materialmen and some unsecured creditors; and the bankruptcy court denied debtors' due process.

In November 1985 the bank and the trustee moved to dismiss the appeal to the district court as moot because no stay of the reorganization plan had been obtained.

The district court (Sidney M. Aronovitz, D.J.) held that the consolidation and confirmation orders were "intertwined and independent" and that the order approving the plan of reorganization "includes inferentially the effect of the [earlier] Order of Substantive Consolidation." With respect to both orders, however, the court held that the bankruptcy court had failed to enter sufficient findings of fact and sufficient explanations of its legal reasoning to support adequate appellate review. The court remanded the matter to the bankruptcy court with directions for it:

to schedule and to hold such further adversarial hearings and to make and enter such findings of fact and conclusions of law as are necessary to provide this Court with an adequate basis to decide the instant appeal on the merits.

Order, p. 12.

Despite its conclusion that there were insufficient findings to support appellate review, the court proceeded to address the appellees' motion to dismiss the appeal for mootness. ³ It looked to the mootness doctrine formerly stated in Bankruptcy Rule 805:

Unless an order approving a sale of property or issuance of a certificate of indebtedness is stayed pending appeal, the sale to a good faith...