Woodhollow Loft, Inc. v. Sisters of St. Francis Health Servs., Inc.
| Decision Date | 25 May 2010 |
| Docket Number | Civil No. 2:10cv83. |
| Citation | 472 B.R. 494 |
| Parties | WOODHOLLOW LOFT, INC., Appellant/Defendant, v. SISTERS OF ST. FRANCIS HEALTH SERVICES, INC. d/b/a St. Margaret Mercy Healthcare Centers, Appellee/Plaintiff. |
| Court | U.S. District Court — Northern District of Indiana |
OPINION TEXT STARTS HERE
Carl Daniel Motsinger, Indianapolis, IN, Jeffrey M. Monberg, Robert A. Anderson, Steven P. Lammers, Schererville, IN, for Appellee.
Andrew L. Kraemer, Merrillville, IN, David C. Jensen, Hammond, IN, Michael P. Mulchay, Robert J. Feldt, Hammond, IN, Samuel T. Miller, for appellant.
This matter is before the court on an appeal from the Bankruptcy Court for the Northern District of Indiana, Hammond Division. Appellant Woodhollow Loft, Inc., (“Woodhollow”), filed its opening brief on March 9, 2010. The Appellee/Cross Appellant, Sisters of St. Francis Health Services, Inc. d/b/a St. Margaret Mercy Healthcare Centers (“SSFHS”), filed its response on March 22, 2010, to which Woodhollow replied on April 6, 2010. SSFHS filed a reply to the cross-appeal on April 19, 2010.
For the following reasons, the decision of the Bankruptcy Court will be affirmed.
The sole issue on direct appeal is whether the Bankruptcy Court, the Honorable J. Philip Klingeberger presiding, erred in determining that Woodhollow has no right or privilege to the continued use of Indiana Type 210–1 Retailer Alcoholic Beverage Permit No. RR45–16715.
The sole issue in the cross-appeal is whether the Bankruptcy Court erred in determining that SSFHS' proof of claim against Woodhollow was untimely and therefore not allowable for consideration by the Bankruptcy Court.
At all times relevant to this action, Woodhollow was an Indiana corporation that has maintained an office in Munster, Indiana and operated a restaurant and bar in Schererville, Indiana at all times relevant hereto. Woodhollow is the debtor in the underlying Chapter 11 proceeding.
SSFHS is an Indiana not-for-profit corporation that has operated healthcare-related facilities at various locations in north and central Indiana, including Omni–41 in Schererville, Indiana at all times relevant hereto.
St. Margaret Mercy Healthcare Centers (“SMMHC”) is an Indiana not-for-profit corporation and wholly-owned subsidiary of SSFHS.
Woodhollow now appeals the Bankruptcy Court's November 16, 2009 judgment order and memorandum decision in which it determined that the appellant did not have a right or privilege to the continued use of Indiana Type 210–1 Retailer Alcoholic Beverage Permit No, RR45–16715 (the “Permit”) and was therefore required to transfer the Permit to SSFHS' designee.1
The Bankruptcy Court Clerk entered judgment on November 16, 2009 as required by Fed.R.Bankr.P. 9021(a) and 9022. Woodhollow filed a timely Notice of Appeal on November 25, 2009 pursuant to Fed.R.Bankr.P. 8001 and 8002.
The Bankruptcy Court maintained jurisdiction as to the adversary proceeding pursuant to 28 U.S.C. § 1334(b), 28 U.S.C. § 157(a), and N.D.Ind.L.R. 200.1(a). The adversary proceeding was a “core” proceeding under 28 U.S.C. § 157(b)(2)(A) and (C). The adversary proceeding was submitted to the Bankruptcy Court for disposition on a stipulated record.
The district court has appellate jurisdiction over the subject judgment. Matter of Andy Frain Services, Inc., 798 F.2d 1113, 1124 (7th Cir.1986); 28 U.S.C. § 158(a); N.D.Ind.L.R. 200.1(d).
The Bankruptcy Court's findings of fact are reviewed for clear error and all legal determinations are reviewed de novo. Monarch Air Serv., Inc. v. Solow, 383 F.3d 663, 666 (7th Cir.2004). “When both the relevant law and the specified facts are clear, and the job of the bankruptcy court was to apply the law to the facts of the case, we reverse that court's conclusion only if clearly erroneous.” In re Rovell, 194 F.3d 867 (7th Cir.1999); Cook v. City of Chicago, 192 F.3d 693, 696 (7th Cir.1999). If the record supports more than one permissible conclusion, the factfinder's selection therefrom cannot serve as a basis for clear error. EEOC v. Sears, Roebuck & Co., 839 F.2d 302, 352 (7th Cir.1988). However, a deferential standard does not allow the appellate court to ignore errors that it is duty bound to reverse. Cook, 192 F.3d at 697. Reasonable doubt should be resolved in favor of the factfinder. Id.
The parties have agreed to the statement of the case, as follows. SMMHC, now a wholly-owned subsidiary of SSFHS, purchased the facility located at 221 South Route 41 in Schererville (“Omni–41”) in January 1998. [See, R. ExA, R. ExD, R. ExE.] 2 The asset purchase agreement (“Asset Purchase”) included certain assets of Et Al, Inc., the owner and operator of the Time–Out Sports Bar, a bar and restaurant located within Omni–41.3 At the time of the purchase, Et Al owned Indiana Type 210–1 Retailer Alcoholic Beverage Permit No. RR45–16715 (“Permit”) issued by the Indiana Alcoholic Beverage Commission (“Commission”).4 The Permit was excluded from the Asset Purchase and remained the property of Et Al.5
In conjunction with the Asset Purchase, SMMHC entered into a Consulting and NonCompetition Agreement (the “Consulting Agreement”) with Joseph Pellar and Et Al.6 The Consulting Agreement had a three-year term which began on January 1, 1998.7 Under that agreement, Time–Out would continue to operate with the assistance of Pellar and Et Al. During that time, Et Al was to maintain the Permit for use at Time–Out. SMMHC issued an one-time payment of $10,000 to Et Al for its efforts under the Consulting Agreement.8 SMMHC never purchased the Permit from Pellar or Et Al.9
In April 1999, SMMHC entered into an agreement with The Sunshine Boys, Inc. (“TSB”) to lease the premises formerly occupied by Time–Out for a period of five years. (“Lease”).10 The original shareholders of TSB were Thomas Fife, Jeff Heuertz and Robert Stiglich.11
Et Al subsequently transferred the Permit to Woodhollow, which was formed by Fife, Heuertz and Stiglich, on August 30, 1999. The transfer was made without condition, reservation or right of reversion.12 The Permit was transferred at the request of SMMHC.13 SMMHC never demanded the return of the Permit from Et Al or Pellar and could not do so as the records maintained by the Commission show that neither SMMHC nor SSFHS have been holders of the Permit or within its chain of title.14 Neither Pellar nor Et Al received any consideration from SMMHC or Woodhollow for the transfer of the Permit.15 Woodhollow never issued any consideration to SMMHC to facilitate its receipt of the Permit.16
Armed with the Permit, Woodhollow continually operated a bar and restaurant within the leased premises from October 1999 through July 2007 when it agreed to vacate the premises. During that period, SMMHC and SSFHS never sought to make Woodhollow a party to the Lease.17 In fact, SSFHS denied Woodhollow's request to assume the Lease. As a result, Woodhollow was a tenant at sufferance during the term of its occupancy.18
SMMHC initiated an action against Woodhollow in the Lake Superior Court under cause number 45D05–0108–CP–384 seeking ejectment and prejudgment possession of the leasehold. On August 27, 2001, the state court entered an Agreed Order Regarding Prejudgment Possession (“Agreed Order”) which required TSB and Woodhollow to make certain fixed rent payments while the action remained before the court. Woodhollow made all payments required under the Agreed Order. 19
Woodhollow filed its Chapter 11 Voluntary Petition on February 2, 2007. 20 Counsel for SSFHS entered their appearance on February 27, 2007. 21 On March 21, 2007, SSFHS filed its Motion for Relief from Stay and Abandonment of Real Property.22 Woodhollow filed its response to the SSFHS motion on April 17, 2007.23 Woodhollow then filed its Motion to Assume Lease or Executory Contract Re: Application for Order Granting Authorization to Assume Month to Month Tenancy on June 2, 2007. SSFHS filed its response to Woodhollow's motion on June 22, 2007.24 Woodhollow filed its reply on June 26.25 The hearing on the parties' respective motions was held on June 27, 2007. The parties agreed that Woodhollow would vacate the premises by July 31, 2007. The Court issued its order memorializing the outcome of the hearing on July 17, 2007.26 Woodhollow subsequently vacated the premises in accordance with the July 17th order.
SSFHS initiated adversary proceeding 07–02123 on December 4, 2007 seeking declaratory judgment as to the ownership of the Permit.27 Through its verified complaint, SSFHS seeks recovery on the basis of: (1) breach of the Agreed Order, (2) bailment and (3) unjust enrichment.
On December 21, 2007, Woodhollow sought the Court's permission to transfer the Permit and enter into a lease at a new location.28 SSFHS filed its objection to Woodhollow's request on January 10, 2008.29 The Court entered an order on January 31, 2008 granting Woodhollow's motion to transfer the Permit and enter into a new lease agreement.30
SSFHS filed its claim 5–1 in the Chapter 11 proceeding on January 10, 2008. SSFHS alleged that the minimum value of its claim was $790,560.55 ($303,716.00 in pre-petition rent, $178,901.00 in interest and attorney's fees of $292,950.55). The claim was based on the provisions of the Lease and Ind.Code § 32–31–1–17. On April 23, 2008, Woodhollow filed an objection to SSFHS' claim (# 5–1) and sought the consolidation of the contested claim with adversary proceeding 07–02123.31 A response to the Debtor's objection was filed on June 23, 2008.32 The Court granted the motion to consolidate that same day.
This matter was initially set for a three-day bench trial commencing April 7, 2009. The parties appeared at a final pre-trial conference on March 18, 2009. At that time, the Court was advised that the entire matter would be submitted for determination on a stipulated record.33
The parties jointly filed their Statement of Undisputed Material Facts in Support of Determination on Stipulated Record,...
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