AKD Invsts v. Magazine Invsts I ( 2023 )

Case: 22-30602 Document: 00516863420 Page: 1 Date Filed: 08/18/2023
United States Court of Appeals
for the Fifth Circuit
United States Court of Appeals
Fifth Circuit
____________ FILED
August 18, 2023
No. 22-30602 Lyle W. Cayce
____________ Clerk
In the Matter of AKD Investments, L.L.C.
Debtor,
AKD Investments, L.L.C.,
Appellant,
versus
Magazine Investments I, L.L.C.,
Appellee.
______________________________
Appeal from the United States District Court
for the Eastern District of Louisiana
USDC No. 2:22-CV-619
______________________________
Before Duncan and Wilson, Circuit Judges, and Mazzant, District
Judge.*
Cory T. Wilson, Circuit Judge:
In November 2014, AKD Investments, LLC (AKD), filed for
bankruptcy. At that time, Magazine Investments I, LLC (Magazine), held
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*
District Judge in the Eastern District of Texas, sitting by designation.
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the notes on AKD’s main asset, a building on Magazine Street in New
Orleans, Louisiana. After Magazine resumed foreclosure proceedings, AKD
sought permission from the bankruptcy court to obtain financing to pay off
Magazine’s notes and thereby avoid the looming foreclosure sale of the
building. In a February 2015 order, the bankruptcy court authorized the
transaction, and the parties performed under the order. The bankruptcy
court confirmed AKD’s reorganization plan in April 2017. In August 2020,
AKD brought this action against Magazine as a core proceeding within the
still-open bankruptcy case. AKD alleged that it had overpaid Magazine in
2015 and sought to recoup the overpayment. But the bankruptcy court
granted summary judgment to Magazine, concluding that AKD’s claim was
barred by the law-of-the-case doctrine because the amount AKD paid
Magazine had been established by the court’s 2015 order. AKD appealed,
and the district court affirmed. AKD then timely appealed to our court.
AKD contends that the bankruptcy court erred in applying the law-of-
the-case doctrine because the 2015 order did not actually decide the amount
AKD owed Magazine. The order is ambiguous on that point. But deferring
to the bankruptcy court’s reasonable interpretation of its order, we
nonetheless affirm.
I.
AKD owned a building on Magazine Street in New Orleans (the
Property). AKD obtained two mortgages on the Property, one for $1.4
million and one for $100,000, both from a local bank.1 AKD failed to make
timely payments on the notes. Magazine acquired the non-performing notes
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1
AKD obtained its mortgages from Hancock Bank of Louisiana. Not long after,
Hancock Bank of Louisiana became Whitney Bank, which then held AKD’s notes until
they were sold to SummitBridge Credit Investments IV, LLC, in December 2012.
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and initiated foreclosure proceedings against AKD in Louisiana state court in
July 2014. The state court scheduled a foreclosure sale for November 13,
2014.
On the eve of the scheduled sale, AKD filed for Chapter 11
bankruptcy. This triggered an automatic stay preventing any collection
efforts against AKD or the Property. See 11 U.S.C. § 362(a). The foreclosure
sale was cancelled. A few days later, Magazine sought to lift the stay so that
foreclosure proceedings could continue. The bankruptcy court granted
Magazine’s request in December 2014. See 11 U.S.C. § 362(d) (authorizing
such motions). As a result, the foreclosure sale was reset for February 26,
2015.
Bankruptcy proceedings continued simultaneously. The bankruptcy
court ordered Magazine to file a proof of claim for AKD’s outstanding debt,
including an estimated “payoff” amount. Magazine filed its proof of claim
on February 2, 2015, specifying that AKD owed Magazine $2,174,844.27 as
of January 31, 2015, with interest and expenses continuing to accrue.
Seeking to forestall the scheduled foreclosure sale, AKD sought
financing to satisfy its debt with Magazine. AKD found a willing lender—
James M. Huger—and reached an agreement with Huger, memorialized in a
loan commitment letter dated February 19, 2015. The commitment letter
specified that Huger would loan AKD $2,225,000 to pay, among other
things, “the then outstanding amount of the loan” owed to Magazine in
order “to pay off [the] first mortgage note[s] held by Magazine.” The deal
was conditional upon the bankruptcy court’s approval.
AKD filed an emergency motion seeking approval under 11 U.S.C.
§ 364(e) on February 20, 2015. AKD’s motion included the payoff amount
from Magazine’s proof of claim but emphasized that AKD “disputed the
amount of Magazine’s claim.” Because of the dispute, AKD requested that
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Huger loan proceeds of approximately $2,175,000 “be held in escrow”
pending resolution of the dispute.
Magazine opposed AKD’s motion, contending the amount to be
placed in escrow was insufficient. Because it was pegged to the payoff
amount in the proof of claim, the proposed escrow amount did not include
funds to cover the interest and attorney’s fees that had accrued since January
31 and that would continue to accrue while in escrow. Id. Magazine averred
that, as of February 25, 2015, Magazine’s claim was at least $2,177,817.10.2
In response to Magazine’s opposition, AKD amended its motion for
approval of the transaction. The amended motion dropped any reference to
a dispute over the amount owed. And it no longer sought to have funds held
in escrow; instead AKD proposed to use the Huger loan proceeds, as well as
bank deposits and rental income as necessary, to pay Magazine “in full the
amount of the claim of Magazine without prejudice immediately upon closing
of the loan.” Magazine continued to oppose AKD’s motion, even as
modified.
On February 25, 2015, the day before the scheduled foreclosure sale,
the bankruptcy court held a hearing to consider AKD’s amended motion.
The next day, the court entered an order granting the motion (the Order).
Specifically, the Order authorized AKD “to obtain credit and borrow from
James M. Huger $2,225,000 . . . pursuant to the terms and conditions of the
loan commitment letter,” and then “to pay Magazine . . . $2,181,919.72 by
cashier’s check in immediately available funds . . . on or before 11:30 am
central time on February 26, 2015.” Upon closing, Huger would receive a
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2
This estimate also excluded the commission Magazine would owe the sheriff,
pursuant to Louisiana law, if the bankruptcy court ordered cancellation of the writ of
seizure on the Property.
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first-priority lien against the Property, and all liens held by Magazine would
be cancelled, as would the foreclosure sale.3 The parties performed
according to the Order’s terms.
Two years later, in April 2017, the bankruptcy court confirmed
AKD’s plan of reorganization.
In August 2020, AKD filed this action as a core proceeding within its
bankruptcy case. AKD alleged that it had paid Magazine “excessive
attorney’s fees, interest charges, and other charges and expenses” in the
2015 transaction and sought to recover sums allegedly overpaid. After
discovery, Magazine filed a motion for summary judgment, which the
bankruptcy court granted. The court concluded that AKD’s action was
barred by the law-of-the-case doctrine because the Order set the amount
AKD paid Magazine. The bankruptcy court entered final judgment in favor
of Magazine and dismissed the action.
AKD appealed to the district court, which affirmed. Then AKD
timely appealed to this court.
II.
We review a “bankruptcy court’s grant of summary judgment de novo,
using the same standard employed by the district court.” In re Shcolnik, 670
F.3d 624, 627 (5th Cir. 2012). In adversarial proceedings in bankruptcy, Rule
56 of the Federal Rules of Civil Procedure governs review of summary
judgment motions. F. R. Bankr. P. 7056. Summary judgment is
appropriate when “the movant shows that there is no genuine dispute as to
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3
The Order also directed that Magazine would not be liable for any commission
due the sheriff in relation to cancellation of the foreclosure sale. See supra n.2. Instead,
“[s]hould any additional costs or commissions be owed, the Sheriff sh[ould] file a proof of
claim in” AKD’s bankruptcy case.
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any material fact and the movant is entitled to judgment as a matter of law.”
Fed. R. Civ. P. 56(a).
While we usually review the bankruptcy court’s interpretation of its
own orders de novo, we “defer to the bankruptcy court’s reasonable
resolution of . . . ambiguities in those documents.” In re Nat’l Gypsum Co.,
219 F.3d 478, 484 (5th Cir. 2000). “[H]owever, the documents must truly
be ambiguous, even in light of other documents in the record, before we will
defer.” Id.III.
The law-of-the-case doctrine “is based on the salutary and sound
public policy that litigation should come to an end.” White v. Murtha, 377
F.2d 428, 431 (5th Cir. 1967). Despite its importance, the doctrine “is an
amorphous concept” with no “precise requirements.” Arizona v. California,
460 U.S. 605, 618 (1983). Generally, “when a court decides” an issue, “that
decision should continue to govern the same issues in subsequent stages of
the same case.” Id. The doctrine has an important limitation: It “applies
only to issues that were actually decided, rather than all questions in the case
that might have been decided but were not.” Alpha/Omega Ins. Servs. v.
Prudential Ins. Co. of Am., 272 F.3d 276, 279 (5th Cir. 2001) (emphasis
added). But “the issues need not have been explicitly decided; the doctrine
also applies to those issues decided by ‘necessary implication.’” Id. (quoting
In re Felt, 255 F.3d 220, 225 (5th Cir. 2001)).
The parties dispute whether the bankruptcy court properly applied
the law-of-the-case doctrine in this case. They spar over whether the
bankruptcy court actually decided the payoff amount in the Order, such that
the doctrine bars AKD’s claim to recover its alleged overpayment to
Magazine. AKD contends that “neither the correctness of the amount AKD
paid Magazine nor the merits of AKD’s claim[] to recover[] the amount of
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its overpayment” were actually decided in the Order. Magazine counters
that the Order “decided the issue.”
AKD’s argument hangs on a single phrase in the Order: “without
prejudice.” The Order provides “that immediately upon closing of the
Huger [l]oan, [AKD] is authorized to pay Magazine . . . the Magazine
[p]ayoff by the [p]ayoff [d]eadline without prejudice and without conditions
by cashier’s check as provided above from the proceeds of the Huger
[l]oan.”4 According to Black’s Law Dictionary, the phrase “without
prejudice”:
import[s into a transaction] that the parties have agreed that,
as between themselves, the receipt of the money by one, and
the enjoyment by the other, shall not . . . have any legal effect
upon the rights of the parties” and “that such rights will be as
open to settlement by negotiation or legal controversy as if the
money had not been turned over by the one to the other.
Without Prejudice, Black’s Law Dictionary (11th ed. 2019). AKD
reasons that the inclusion of “without prejudice” in the Order thus means
that the Order did not determine “the correct amount [AKD] owed to
Magazine.”
By contrast, Magazine contends that the Order actually decided the
final, correct payoff amount. Magazine points to two sections of the Order
that emphasize the finality of its terms as evidence that the Order did not
leave the payoff amount open to subsequent challenge. The first provides:
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4
AKD also points out that it “specifically stated in its original motion for
authorized [sic] to refinance its debt [that] it disputed the amount of Magazine’s claim.”
But as the district court pointed out, “this was not the motion that was granted.” Instead,
“[a]ny language in the first motion regarding a potential dispute . . . was removed [by
AKD] upon amendment [and] is therefore of no moment.” But AKD included in its
amended motion a request that the payment be made “without prejudice.”
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that the [c]ommitment [l]etter and all other documents,
agreements and instruments necessary to effectuate and
consummate the transaction contemplated by the
[c]ommitment [l]etter together with the provisions and terms
of this Order are specifically enforceable against and binding
upon, and shall not be subject to rejection or avoidance, by
[AKD], and any assigns, including without limitation an[y]
trustee, responsible person, estate administrator,
representative or similar person hereinafter appointed for or in
connection with [AKD]’s estate or affairs in this or any
subsequent or controverted case under the Bankruptcy Code
involving [AKD].
And the second details:
that the terms and conditions of the [c]ommitment [l]etter are
an integral part of the refinancing and that, in view of: (i) the
good faith of the lender and of Magazine Investments I, LLC,
(ii) the reasonableness of the terms of the [c]ommitment
[l]etter, and (iii) the fact that the terms and conditions of the
[c]ommitment [l]etter are integral part of the refinancing, the
reversal or modification on appeal or otherwise of this Order
shall not affect the validity or enforceability of the payoff of the
debt of Magazine Investments I, LLC or the validity or
enforceability of the Huger [l]oan or the validity,
enforceability, or priority of the lien or mortgage against the
Property granted to James M. Huger or his assign(s) pursuant
to this Order or any of the terms or conditions of the
[c]ommitment [l]etter . . . .
Read in isolation, the sections of the Order cited by each side
somewhat support their proposed interpretations of the Order. AKD
correctly points out that the Order says that AKD’s payment to Magazine
was made “without prejudice,” seemingly meaning that the terms of
payment remained open for legal controversy. Yet the two sections cited by
Magazine clearly state that the Order and its terms—presumably including
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the payoff amount to Magazine—are “specifically enforceable against and
binding upon, and shall not be subject to rejection or avoidance by,” AKD.
Read as a whole, the Order appears internally inconsistent about whether the
payoff amount was “without prejudice” (as AKD contends) or “specifically
enforceable against and binding upon” AKD (as Magazine contends).
Neither party offers a compelling way to harmonize the Order in toto, making
sense of the apparent contradiction.
AKD suggests that we could resolve the contradiction by reading the
two sections cited by Magazine as limited only to securing the liens granted
under the Order. Specifically, according to AKD, those two sections
“addressed only the effectiveness, enforceability, and perfection of the
security interests granted to Huger to secure the Huger loan” and therefore
do not render unreviewable the amount AKD paid Magazine. But this
suggested reading conflicts with the text of the relevant sections of the Order,
which are plainly not limited to Huger’s lien. Instead, the first section
extends broadly to “the [c]ommitment [l]etter and all other documents,
agreements, and instruments necessary to effectuate and consummate the
transaction contemplated by the [c]ommitment [l]etter together with the
provisions and terms of this Order.” And the second section specifically
emphasizes “the validity [and] enforceability of the payoff of the debt of
Magazine” in addition to the validity of Huger’s lien. Accordingly, AKD’s
proposed reading is untenable.5
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5
AKD relies on out-of-circuit cases regarding 11 U.S.C. § 364(e) to support its
preferred reading. See Shapiro v. Saybrook Mfg. Co., 963 F.2d 1490, 1493 (11th Cir. 1992);
see also Kham & Nate’s Shoes No. 2, Inc. v. First Bank of Whiting, 908 F.2d 1351, 1355 (7th
Cir. 1990). But we have never read § 364(e) to focus myopically on liens. Instead, we have
read it as a stay requirement. See In re TMT Procurement Corp., 764 F.3d 512, 519 (5th Cir.
2014) (“A failure to obtain a stay of an authorization under [§ 364(e)] moots an appeal of
that authorization[.]”); see also In re Pacific Lumber Co., 584 F.3d 229, 240 (5th Cir. 2009)
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Magazine suggests that “without prejudice” is of no moment here
because it is insufficiently specific to reserve any rights. As support,
Magazine cites two Louisiana intermediate appellate court opinions. See
Barnett v. La. Med. Mut. Ins. Co., 51908 (La. App. 2 Cir. 5/23/18), 248 So. 3d
594; Advanced Com. Contracting v. Powell Ins. Agency, 09-758 (La. App. 5 Cir.
12/29/09), 30 So. 3d 851. We fail to see the relevance of these cases, which
pertain to the interpretation of reservation-of-rights clauses in private
settlement agreements under state law, to our immediate task of interpreting
an order entered by the bankruptcy court. Regardless, we hesitate to agree
with Magazine that the phrase “without prejudice” is without meaning.
Rather, we “lean in favor of a construction which will render every word
operative, rather than one which may make some idle and nugatory.”
Antonin Scalia & Bryan A. Garner, Reading Law: The
Interpretation of Legal Texts 174 (2012) (citations omitted). So
we endeavor to give meaning to all the words written into the Order by the
bankruptcy court. But Magazine is right insofar as the scope of “without
prejudice” is the source of ambiguity in the Order.
Reviewing the Order, the Huger commitment letter, and the
bankruptcy court record, we find nothing that clarifies the scope and import
of “without prejudice” as used in the Order. Thus, the Order is
“truly . . . ambiguous, even in light of other documents in the record.” In re
Nat’l Gypsum Co., 219 F.3d at 484. In these circumstances, we apply a
deference rule: As long as the bankruptcy court reasonably resolved the
ambiguity as it construed the Order in weighing Magazine’s motion for
summary judgment in this case, we defer to that court’s interpretation. Id.
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(Section 364(e) “prevent[s] the appellate reversal of an order to sell property or obtain
post-petition financing unless such orders were stayed pending appeal.”).
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The bankruptcy court resolved the ambiguity by concluding that the
Order specifically decided that AKD owed Magazine $2,181,919.72. This
was reasonable. When the bankruptcy court issued the Order in 2015, it had
before it Magazine’s proof of claim, including its suggested payoff amount as
of January 31, 2015, and a breakdown of how Magazine calculated that
amount; Magazine’s updated estimate as of February 25; the relevant
mortgage documents; and the parties’ stipulations and discussion during the
hearing on the motion. Based on this information, the resulting Order set the
payoff amount at $2,181,919.72, a very specific number. To be sure, the full
scope of “without prejudice” remains unclear, but in granting Magazine
summary judgment in this case, the bankruptcy court reasonably determined
that the phrase—whatever its scope—did not apply to the payoff amount to
Magazine. The court’s interpretation of its prior Order is entitled to
deference.
AKD disagrees, contending that the bankruptcy court’s interpretation
conflicts with Alpha-Omega Insurance Services, Inc. v. Prudential Insurance Co.
of America, where our court stated:
[E]ven when issues have not been expressly addressed in a
prior decision, if those matters were “fully briefed to the
appellate court and . . . necessary predicates to the [court’s]
ability to address the issue or issues specifically discussed,
[those issues] are deemed to have been decided tacitly or
implicitly, and their disposition is law of the case.”
272 F.3d 276, 279 (5th Cir. 2001) (all alterations except first in original)
(quoting In re Felt, 255 F.3d 220, 225 (5th Cir. 2001)). Based on Alpha-
Omega, AKD asserts that the Order could not have decided the payoff
amount because “neither party briefed” “the correct [payoff] amount”
“either in connection with the refinancing motion or elsewhere” “in the
main bankruptcy case.” But AKD’s contention miscasts the record.
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Magazine briefed the correct payoff amount in the main bankruptcy case,
both in its proof of claim and in its opposition to AKD’s motion. Moreover,
AKD misconstrues Alpha-Omega. That case specifically does not limit a
court’s ability to decide issues presented but not fully briefed. See Alpha-
Omega, 272 F.3d at 281 (recognizing that the court “could have gone beyond
the scope of the . . . parties’ briefs to independently assess the . . . issue”).
Rather, Alpha-Omega reiterates our rule from In re Felt that an issue briefed
on appeal that is a “necessary prerequisite[]” to an issue actually decided in
the appellate opinion is the law of the case, even if the appellate court’s
opinion does not explicitly decide the prerequisite issue or grapple with the
arguments in the briefs. In re Felt, 255 F.3d at 225–26. Here, though, we
defer to the bankruptcy court’s reasonable determination that the Order in
fact determined the correct value for the payoff amount, whatever the scope
of the parties’ briefs, and whatever the scope of “without prejudice” as used
in the Order.6
IV.
The bankruptcy court’s 2015 Order is internally contradictory. Its
meaning is therefore ambiguous as to the question at hand: Whether the
Order actually decided the correct amount that AKD owed to Magazine.
Accordingly, we defer to the bankruptcy court’s reasonable interpretation of
its Order—that it did—and affirm its invocation of the law-of-the-case
doctrine to grant Magazine summary judgment as to AKD’s claim here.
AFFIRMED.
_____________________
6
Because we affirm on law-of-the-case grounds, we need not reach whether AKD’s
instant claim is also barred by res judicata or prior settlement.
12