Biltmore Investments, LTD. v. TD Bank, N.A. , 626 F. App'x 390 ( 2015 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 15-1076
BILTMORE INVESTMENTS, LTD.,
Debtor - Appellee,
v.
TD BANK, N.A.,
Creditor - Appellant.
Appeal from the United States District Court for the Western
District of North Carolina, at Asheville. Max O. Cogburn, Jr.,
District Judge. (1:14-cv-00099-MOC)
Submitted: August 27, 2015 Decided: October 1, 2015
Before NIEMEYER, KING, and GREGORY, Circuit Judges.
Vacated and remanded by unpublished per curiam opinion.
Lance P. Martin, Norman J. Leonard II, WARD AND SMITH, P.A.,
Asheville, North Carolina, for Appellant. Edward C. Hay, Jr.,
PITTS, HAY, HUGENSCHMIDT & DEVEREUX, P.A., Asheville, North
Carolina; T. Scott Tufts, TUFTS LAW FIRM, PLLC, Maitland,
Florida, for Appellee.
Unpublished opinions are not binding precedent in this circuit.
PER CURIAM:
TD Bank, N.A., appeals the district court’s Order of
December 22, 2014 (the “Order”), reversing the bankruptcy
court’s order and concluding that the automatic stay, see 11
U.S.C. § 362, bars TD Bank from satisfying its state court
judgment against Walter McGee by foreclosing on McGee’s common
stock in Biltmore Investments, Ltd., the debtor in the
underlying bankruptcy proceeding. Because the automatic stay
had already expired when the bankruptcy court confirmed
Biltmore’s plan of reorganization, we vacate the Order and
remand for further proceedings.
I.
The relevant facts of the case are undisputed. Biltmore
filed a petition for bankruptcy under Chapter 11 of the
Bankruptcy Code in January 2011. In its bankruptcy court
filings, Biltmore scheduled three secured creditors, one of
which was TD Bank. In July 2012, TD Bank obtained from a North
Carolina state court a $2.5 million judgment against McGee, who
owns all of Biltmore’s common stock. In April 2013, the
bankruptcy court confirmed Biltmore’s second amended plan of
reorganization (the “Plan”). TD Bank had objected to the Plan
in bankruptcy court, but did not appeal the order confirming the
Plan. The Plan included a provision that, if Biltmore recovered
2
in an adversary proceeding it had brought against a third party,
that recovery would be “split between the creditors and
[Biltmore] on an equal basis.” J.A. 333.
After the Plan was confirmed, the adversary proceeding
settled for $1.3 million – a much greater sum than anyone had
anticipated. Apparently out of fear that Biltmore would
distribute its share of the settlement proceeds to McGee rather
than reinvest them in the business, TD Bank attempted to satisfy
its judgment against McGee by executing on McGee’s stock in
Biltmore. See N.C. Gen. Stat. § 1-324.3. To that end, TD Bank
filed a motion in the bankruptcy court requesting a declaration
that the automatic stay provided in 11 U.S.C. § 362 did not bar
TD Bank from executing on McGee’s shares. The bankruptcy court
granted TD Bank’s motion, and then denied Biltmore’s motion for
reconsideration of that order. Biltmore appealed to the
district court, which reversed and “stayed” TD Bank from “taking
any action directed at Walter T. McGee, in state court or
otherwise, to seize or sell his shares of stock in Biltmore.”
See Order 11.
In its Order, the district court applied the standard we
articulated in A.H. Robins Co. v. Piccinin, 788 F.2d 994, 999
(4th Cir. 1986). There, we explained that, although the
protections of the automatic stay typically extend only to the
debtor, the stay may under “unusual circumstances” be extended
3
to non-bankrupt third parties. Id. Unusual circumstances may
be found, for example, when “there is such identity between the
debtor and the third-party defendant that the debtor may be said
to be the real party defendant and that a judgment against the
third-party defendant will in effect be a judgment or finding
against the debtor.” Id. Here, the district court determined
that unusual circumstances existed because, in its view, “[w]hat
is ultimately at issue in this matter is control of Biltmore,”
and “TD Bank’s state court actions amount to an action to obtain
possession of, or exercise control over, property of the
debtor’s bankruptcy estate (Mr. McGee’s stock), which is, in
effect, an action against the debtor.” Order 9. The court
observed that, if TD bank was allowed to execute on McGee’s
stock, “there is the potential that TD Bank or a third party”
would buy the stock and that “the new stockholder may not act in
the best interests of Biltmore by, for example, failing to
comply with the terms of the confirmed Plan or simply
liquidating the company.” Id. at 9-10. TD Bank timely appealed
the Order to this Court.
II.
Biltmore argues we lack jurisdiction of this appeal under
28 U.S.C. § 158(d)(1), because the district court’s Order was
not final. However, our jurisdiction does not depend on whether
4
the Order was final, for 28 U.S.C. § 1292(a)(1) gives us
jurisdiction of “[i]nterlocutory orders of the district courts
. . . granting, continuing, modifying, refusing, or dissolving
. . . injunctions.” See Conn. Nat’l Bank v. Germain, 503 U.S.
249, 252 (1992) (explaining that jurisdiction over bankruptcy
appeals under § 158(d) does not limit jurisdiction over
interlocutory orders under § 1292).
TD Bank argues that the district court misapplied our
decision in A.H. Robins Co., while Biltmore defends the district
court’s determination of unusual circumstances and extension of
the automatic stay to McGee. The parties – like the district
court and bankruptcy court – assume that 11 U.S.C. § 362’s
automatic stay is still in effect. Such an assumption, however,
is erroneous. Thus, instead of “address[ing] an issue
predicated on [a] misconception,” see Genesis Healthcare Corp.
v. Symczyk, 133 S. Ct. 1523, 1537 (2013) (Kagan, J.,
dissenting), we vacate the Order and remand for further
proceedings.
Under the plain language of the Bankruptcy Code, the
confirmation of Biltmore’s Plan terminated the automatic stay.
Upon confirmation, the Plan “re-vested [Biltmore] with its
assets subject only to all outstanding liens which are not
avoidable by [Biltmore] under the [Bankruptcy] Code.” J.A. 334;
see also 11 U.S.C. § 1141(b) (“Except as otherwise provided in
5
the plan or the order confirming the plan, the confirmation of a
plan vests all of the property of the estate in the debtor.”).
Pursuant to § 362(c)(1), the re-vesting of the bankruptcy
estate’s assets in the debtor terminated the stay of acts
“against the property of the estate.” See McKinney v. Waterman
S.S. Corp., 925 F.2d 1, 4 (1st Cir. 1991) (“Since confirmation
revests the property of the estate in the debtor . . . the stay
of an act against the property of the estate would no longer be
applicable.”). Confirmation of the Plan also discharged “any
and all amounts due by [Biltmore] to its creditors.” J.A. 335;
see also 11 U.S.C. § 1141(d)(1)(A) (“Except as otherwise
provided in this subsection, in the plan, or in the order
confirming the plan, the confirmation of a plan . . . discharges
the debtor from any debt that arose before the date of such
confirmation . . . .”). Pursuant to § 362(c)(2), the discharge
ended the stay of “other act[s]” enumerated in § 362(a). See
United States v. White, 466 F.3d 1241, 1245 (11th Cir. 2006)
(“[C]onfirmation of the plan discharges the debtor, and . . .
discharge of the debtor lifts the automatic stay.”). Because
the automatic stay had expired, the district court erred in
extending it to McGee and in invoking the expired stay to enjoin
TD Bank’s efforts to collect on its judgment against McGee in
state court.
6
Biltmore argues in the alternative that an injunction is
proper under 11 U.S.C. § 105, which provides that a bankruptcy
court may “issue any order . . . that is necessary or
appropriate to carry out the provisions of this title.” The
district court declined “to address the propriety of” the
bankruptcy court’s refusal to grant an injunction pursuant to
§ 105. See Order 10-11. Rather than consider whether an
injunction should have issued under § 105, we remand for the
district court to consider that issue in the first instance, and
for such other and further proceedings as may be appropriate.
We dispense with oral argument because the facts and legal
contentions are adequately presented in the materials before
this court and argument would not aid the decisional process.
VACATED AND REMANDED
7