Court Opinion

ID: 3006544
Source: CourtListenerOpinion
Date Created: 2015-10-01 19:00:55.432584+00
Date Added: 2024-06-11T18:03:11.298212
License: Public Domain

UNPUBLISHED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Vacated and remanded by unpublished per curiam opinion.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Unpublished opinions are not binding precedent in this circuit.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

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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

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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

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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

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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

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