Cardenas v. Madison Realty Capital LP (In re Biscayne Park, LLC)

In Re: BISCAYNE PARK, LLC, Debtor.TERESA CARDENAS, Plaintiff - Appellant, v. MADISON REALTY CAPITAL LP, Defendant - Appellee.

No. 12-16142

D.C. Docket No. 1:12-cv-20150-KAM

D.C. Docket No.10-20941-AJC

UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT

Dated: October 28, 2013

[DO NOT PUBLISH]

Appeal from the United States District Court

for the Southern District of FloridaBefore HULL and MARTIN, Circuit Judges, and BOWEN,^* District Judge.

MARTIN, Circuit Judge:

Madison Realty Capital, LP (Madison) bought substantially all of the assets of Biscayne Park, LLC (Biscayne) as part of a bankruptcy proceeding. Madison argues the Sale Order entered by the Bankruptcy Court included a law suit brought by Biscayne against Wal-Mart before the bankruptcy filing. Teresa Cardenas, the majority shareholder of Biscayne Park, LLC (Biscayne), disputes that the Wal-Mart cause of action was properly a part of the Sale Order. Ms. Cardenas brings this appeal challenging the Bankruptcy Court order affirmed by the District Court, which included the Wal-Mart cause of action as a part of the Sale Order. Upon a careful review of the record, and with the benefit of oral argument, we affirm the rulings of both courts.

I.

In November 2006, Biscayne got a one-year, $8,150,000.00, mortgage with Madison to secure the purchase of a sixteen acre tract. Biscayne hoped to re-sell the property "to a big box retailer (for a sum in excess of twenty million dollars) due to its size and favorable location." To this end, Biscayne and Wal-Mart entered into a purchase agreement in March 2007. Biscayne Park, LLC v. Wal-Mart Stores E., LP, 34 So. 3d 24, 25 (Fla. 3d DCA 2010). However, the purchaseagreement allowed Wal-Mart to install wells in order to test the groundwater at the site, and after doing so, Wal-Mart backed out of the deal. Id.

Biscayne then sought and found a new potential buyer, and during negotiations agreed to allow them to test the groundwater using the wells installed by Wal-Mart. Id. When Wal-Mart learned of this plan they sought to stop it, because the company "became concerned about its potential liability resulting from this use of the wells that it had previously installed." Id. Wal-Mart got a temporary injunction in state court that allowed it to enter the property and seal the wells. Id. at 26. The state court also required Wal-Mart to post a $230,000.00 bond. Id.

Meanwhile, Biscayne remained unable to re-sell the property, and began to have trouble paying back the loan. On account of its inability to pay off the loans in full, Biscayne paid an extension fee of $41,000 in October 2007, and then another such fee in October 2008. The 2008 extension fee was nearly three times the amount paid the year before. After Biscayne's failure to make certain tax payments and an installment due in May 2009, Madison began foreclosure proceedings in Miami-Dade County Circuit Court. In April 2010, Biscayne filed a voluntary petition for relief under Chapter 11 of the Bankruptcy code.

Between the beginning of the foreclosure proceedings and the filing of the bankruptcy petition, a Florida appellate court reversed and remanded the decisiongranting Wal-Mart the injunction that permitted the sealing of the wells. Id. at 27. In setting aside the injunction, the Florida appeals court said "because the wells on Biscayne's property were destroyed following the entry of an improper injunction, on remand Biscayne can proceed against Wal-Mart's posted bond on its claim for damages." Id. (citations omitted). After this ruling of the Florida appeals court, and pursuant to Federal Rule of Bankruptcy Procedure 9027, Biscayne filed a Notice of Removal, bringing the Wal-Mart action into the Bankruptcy Court. The removed case consisted of three counts brought by Biscayne in a counterclaim to Wal-Mart's complaint: (1) Declaratory Judgment; (2) Conversion; and (3) Trespass. The Notice of Removal stated in part: "Upon removal of the claim or cause of action this proceeding is core; or, if non-core, [Biscayne] consents to entry of final orders or judgment by the bankruptcy judge."

Then in August 2010, the Bankruptcy Court entered a Cash Collateral Order, granting Madison a first priority lien on "[a]ll of the real and personal property of [Biscayne] of any description whatsoever, wherever located and whenever arising or acquired." Biscayne did not object to the Cash Collateral Order. In October 2010, the Bankruptcy Court entered a Bid Procedures Order, and again, Biscayne did not object. The Bid Procedures Order set certain procedures for the sale of "substantially all of the assets of" Biscayne.

After a hearing, the Bankruptcy Court found Madison's bid was the highest and best, and entered a Sale Order for assets described in exhibits to that Order. These included "[a]ll causes of actions and judgments pursuant thereto relating to the Premises," "[a]ll contract rights, causes of actions, claims, [and] demands of [Biscayne]," and "the right, in the name and on behalf of [Biscayne] to appear in and defend any action or proceeding brought with respect to the Premises." In addition to listing what was included, the Sale Order also noted what was not, expressly excluding "the $230,000 supersedeas bond posted by Wal-Mart in Miami-Dade County Circuit Court under Case Number 08-67361 CA 22." Again, Biscayne offered no objection to this Order. As part of the Sale Order, the Bankruptcy Court retained jurisdiction "for the purpose of: (1) determining the validity, enforceability, or priority of any 'Claim' (as that term is defined in the Sale Order); (2) enforcing the Sale Order; and (3) determining any disputes under . . . the Sale Order."

After the sale, Madison filed a motion in the Bankruptcy Court seeking a ruling that the "Adversary Proceeding," namely the counterclaim by Biscayne against Wal-Mart, "was included in the sale of [Biscayne]'s assets to Madison." At a hearing on this motion, Ms. Cardenas argued that the Sale Order did not transfer the Wal-Mart cause of action because the Sale Order's "causes of action" language "doesn't talk about tort claims. . . . If you read this, all causes of actionrelating to the premises, does not necessarily sell a tort cause of action against Wal-Mart that's independent of the land itself."

II.

Ms. Cardenas moved to dismiss the bankruptcy. In her motion to dismiss, Ms. Cardenas argued that the Wal-Mart cause of action "has been included in the 'sale of assets' in a confusing manner which was not in fact intended or understood by the shareholders of [Biscayne]."

On October 7, 2011, the Bankruptcy Court issued the order that is the subject of this appeal. The Bankruptcy Court found that "Madison had a lien on the Wal-Mart Cause Of Action under both the Cash Collateral Order and the Prepetition Loan Documents, and purchased the Wal-Mart Cause Of Action via its credit bid on that Collateral at the Sale Hearing and pursuant to the Sale Order." The Bankruptcy Court also granted the motion to dismiss the bankruptcy and dismissed the case with prejudice.

Ms. Cardenas appealed the Bankruptcy Court's Order to the U.S. District Court for the Southern District of Florida. After the case was fully briefed in the District Court, Biscayne filed a Motion to Join in the Appeal and to Adopt the Briefs of the Appellant, which the District Court granted the following day. Ultimately the District Court affirmed the Bankruptcy Court's Order, rejecting four arguments raised by Ms. Cardenas.

First, the District Court determined that the Wal-Mart action was included in the Sale Order even if not explicitly referenced by adversary number because "[t]he Sale of Assets explicitly provided that 'All contract rights, causes of action, claims, [and] demands of [Biscayne]' were included in the sale from [Biscayne] to [Madison]." Second, the District Court found that "the Bankruptcy Court correctly distinguished the bond from causes of action associated with it." Third, the District Court rejected the notion that the Bankruptcy Court should have held an evidentiary hearing on whether the Sale Order included the Wal-Mart cause of action. Fourth, the District Court found that Ms. Cardenas had waived her argument that the Wal-Mart cause of action could not be assigned as a matter of law "since that issue was never argued before the Bankruptcy Court." The District Court acknowledged that Ms. Cardenas argued at the Bankruptcy Court that the sale of assets only allowed for contract causes of action, and not tort causes of action. "But [Ms. Cardenas] never argued before the Bankruptcy Court that tort causes of action are unassignable as a matter of law." Her appeal to this Court followed.

As in the District Court, Ms. Cardenas, not Biscayne, originally filed the appeal to this Court. And similar to what happened in the District Court, after Ms. Cardenas filed her brief in this Court, Biscayne filed a Motion to Join in theAppeal and to Adopt the Briefs of the Appellant. Initially, this Court denied Biscayne's motion, but later vacated that decision and granted the motion to join.¹

III.

For bankruptcy cases, this Court functions as a second court of review, and thus independently examines the factual and legal determinations made by the Bankruptcy Court and employs the same standards of review as the District Court. In re Optical Technologies, Inc., 425 F.3d 1294, 1299-300 (11th Cir. 2005). Generally we review legal the conclusions of the Bankruptcy Court and District Court de novo, and review findings of fact for clear error. Id. When reviewing a Bankruptcy Court's interpretation of the effect of its own order, this Court will defer to that interpretation unless the Bankruptcy Court clearly abused its discretion. Id.

A.

Ms. Cardenas raises two issues in this appeal. First, she argues that the bond and cause of action are inextricably linked, and thus the Bankruptcy Court and District Court erred in finding that the cause of action was included in the Sale Order when the bond...