607 B.R. 715
M.D. Fla.2019Background
- University Village (a continuing-care retirement community) was owned by two debtor limited partnerships that filed Chapter 11; a liquidating trustee (Jeffrey Warren) was appointed.
- CPIF was a prepetition secured creditor asserting a large lien; Bankruptcy Court earlier valued the Independent Living Facility at $12.9 million.
- SouthPoint agreed to provide a $2 million postpetition revolving facility and received superpriority administrative status and liens; it advanced $488,000 but then refused further advances.
- The trustee sought replacement postconfirmation financing; CPIF (and Rosemawr earlier) offered priming loans up to $2–2.5 million with superpriority status and priming liens on Debtors’ and related-party collateral.
- Bankruptcy Court approved CPIF replacement financing over SouthPoint’s objection, finding CPIF negotiated in good faith and that existing lienholders (including SouthPoint) were adequately protected.
- SouthPoint appealed; the district court affirmed, holding most relief sought was mooted by 11 U.S.C. § 364(e) but also upholding the Bankruptcy Court’s adequate-protection finding.
Issues
| Issue | SouthPoint's Argument | Liquidating Trustee / CPIF's Argument | Held |
|---|---|---|---|
| Mootness under 11 U.S.C. § 364(e) (can district court grant relief absent a stay?) | Appeal is not moot; Swedeland allows courts to craft meaningful relief (e.g., prohibit further advances or subordinate liens). | Appeal is moot as to invalidating or modifying CPIF’s liens/priorities because SouthPoint did not obtain a stay and CPIF acted in good faith. | Appeal is moot to the extent it seeks to invalidate or modify CPIF’s liens/priorities; Bankruptcy Court’s good-faith finding stands. |
| Adequate protection required by § 364(d)(1) (did priming lien adequately protect SouthPoint?) | Trustee’s proofs were speculative and conclusory; SouthPoint’s interest was impaired and not sufficiently protected. | Replacement financing would fund capital improvements, justify a fee increase and marketing that materially increase collateral value and thus adequately protect SouthPoint. | Bankruptcy Court’s factual finding that SouthPoint was adequately protected was not clearly erroneous. |
| Law‑of‑the‑case / Supplanting SouthPoint’s earlier superpriority claim | SouthPoint’s prior financing order remained binding and cannot be supplanted; SouthPoint’s superpriority should control. | The SouthPoint order was not an appellate law-of-the‑case; Bankruptcy Court retained jurisdiction and could approve replacement financing. | Argument forfeited (not raised below) and law‑of‑the‑case inapplicable; court declined to reconsider. |
| Equity / requiring repayment of SouthPoint from CPIF proceeds | Equity and due process require that replacement proceeds repay SouthPoint or that CPIF’s priority be conditioned on repayment. | Conditioning or cutting off replacement funding would harm the estate and creditors; replacement financing was necessary to preserve value. | Court found Bankruptcy Court did not abuse discretion; equitable relief denied. |
Key Cases Cited
- Varsity Carpet Servs., Inc. v. Richardson (In re Colortex Indus., Inc.), 19 F.3d 1371 (11th Cir. 1994) (district court reviews bankruptcy court findings of fact for clear error and legal conclusions de novo)
- Rush v. JLJ Inc. (In re JLJ Inc.), 988 F.2d 1112 (11th Cir. 1993) (appellate review standard for bankruptcy factual findings)
- Shapiro v. Saybrook Mfg. Co., Inc. (Matter of Saybrook Mfg. Co., Inc.), 963 F.2d 1490 (11th Cir. 1992) (purpose of § 364(e) is to encourage postpetition financing by protecting lenders)
- Resolution Trust Corp. v. Swedeland Dev. Grp., Inc. (In re Swedeland Dev. Grp., Inc.), 16 F.3d 552 (3d Cir. 1994) (en banc) (§ 364(e) does not automatically bar all appellate relief; courts may sometimes craft meaningful remedies)
- Desert Fire Prot. v. Fontainebleau Las Vegas Holdings, LLC (In re Fontainebleau Las Vegas Holdings, LLC), 434 B.R. 716 (S.D. Fla. 2010) (discussing priming liens and the narrow, extraordinary nature of § 364(d) relief and adequate protection analysis)
- Keltic Fin. Partners, LP v. Foreside Mgmt. Co., LLC (In re Foreside Mgmt. Co., LLC), 402 B.R. 446 (B.A.P. 1st Cir. 2009) (failure to get a stay commonly renders appeals of postpetition financing moot under § 364(e))
- Unsecured Creditors’ Comm. v. First Nat’l Bank & Tr. Co. of Escanaba (In re Ellingsen MacLean Oil Co., Inc.), 834 F.2d 599 (6th Cir. 1987) (good-faith finding is factual and reviewed for clear error)
- Burchinal v. Central Washington Bank (In re Adams Apple, Inc.), 829 F.2d 1484 (9th Cir. 1987) (policy behind § 364(e) supports finality where lender relied on authorization)