Opinion
No. 96 Civ. 4572 (BSJ)
June 24, 1996
OPINION AND ORDER
Crosswinds Associates (the "Debtor") has moved this Court, on an emergency basis, for a stay pending appeal of a Bankruptcy Court order lifting the automatic stay imposed by section 362(a) of the Bankruptcy Code. On May 14, 1996, the United States Bankruptcy Court for the Southern District of New York (Lifland, J.) issued an order lifting the automatic stay to allow Colony GFP Partner, L.P. (the "Creditor") to complete its foreclosure sale of the property in issue. On May 24, 1996, the Debtor filed an appeal in the Southern District of New York, challenging the order granting vacatur of the automatic stay. The Debtor has now moved this Court pursuant to Rule 8005 of the Federal Rules of Bankruptcy Procedure for a stay of the Bankruptcy Court's order pending the appeal. For the reasons stated below, the Debtor's motion is denied.
DISCUSSION
Rule 8005 of the Federal Rules of Bankruptcy Procedure provides that a motion for a stay of a Bankruptcy Court order may be made to the District Court pending appeal of the order. Fed.R.Bankr.P. 8005. In order to obtain a stay pursuant to Rule 8005, the movant must establish (1) the strong likelihood of success on the merits of the appeal; (2) that the movant will suffer irreparable injury if the stay is denied; (3) that no substantial harm will be suffered by others if the stay is granted; and (4) what the harm to the public interest, if implicated, is. In re Advanced Mining Systems, Inc., 173 B.R. 467, 468 (S.D.N.Y. 1994); In re Friedberg, 1991 WL 259038 at [*]2 (S.D.N.Y. Nov. 25, 1991). All four criteria must be satisfied before relief under Rule 8005 will be granted. Advanced Mining Systems at 468.
Strong Likelihood of Success on the Merits
The Bankruptcy Court found that the Creditor had satisfied the requirements of sections 362(d)(1) and (2) of the Bankruptcy Code, and was therefore entitled to relief from the automatic stay. Tr. at 158; 11 U.S.C. § 362(d)(1) and (2). Under section 362(d)(3)(a), the lift of the stay can be avoided if within 90 days "the debtor has filed a plan of reorganization that has a reasonable possibility of being confirmed within a reasonable time." 11 U.S.C. § 362(d)(3)(a). Unable to avail itself of § 362(d)(3)(a) relief, the Debtor urges that the Bankruptcy Court erred when it found the Debtor could not demonstrate a feasible plan of reorganization. Order to Show Cause at ¶ 61. This, presumably, will be the basis of its appeal.
The Debtor also urges that the Bankruptcy Court "erred when it found the debtor should have filed a plan of reorganization by the return date of the hearing." Order to Show Cause at ¶ 63. The record, however, does not reflect any such finding on the part of the Court. After surveying the evidence, Bankruptcy Judge Lifland stated "[t]here is no realistic Plan, confirmable Plan in prospect, and the record has demonstrated that," Tr. 158 (emphasis supplied). Bankruptcy Judge Lifland's comment is more properly understood as a factual finding than a procedural bar, and will be construed as such.
It should be noted that in support of its eleventh-hour motion, the Debtor submitted to this Court nothing more than an affidavit from its general partner and a number of accompanying exhibits. While in these papers the Debtor claims that the Bankruptcy Court erred twice in making factual conclusions, see ¶¶ 61 and 63, the Debtor nowhere actually articulates what points it would press on appeal. Accordingly, absent a memorandum of law or anything else so indicating, this Court has had to speculate as to what would most likely be Debtor's basis for appeal.
"Conclusions of the Bankruptcy Court based on testimony offered by a witness at a hearing before that court are considered factual findings. . . ." In re Jet Express, Inc. 158 B.R. 578, 580 n. 3 (S.D.N.Y. 1993). While a district court reviews the legal conclusions of a bankruptcy court de novo, it reviews factual findings under a "clearly erroneous" standard. Fed.R.Bankr.P. 8013; Jet Express at 580. See also In re Crysen/Montenay Energy Co., 156 B.R. 922 (S.D.N.Y. 1993), aff'd, 19 F.3d 9 (1994). As a result, conclusions based on witness testimony can be reversed only if clearly erroneous. Jet Express at 580 n. 3 (quoting In re Lomas Fin. Corp., 117 B.R. 64, 67 n. 2 (S.D.N.Y. 1990)). Under this standard, the court will reverse only if "left with the definite and firm conviction that a mistake has been committed." Jet Express at 580 (internal quotations and citations omitted).
This Court is left with no such conviction. The evidence supports Bankruptcy Judge Lifland's conclusion that no feasible plan of reorganization existed. The Bankruptcy Court's finding that substantial disrepair existed in the property is amply supported by the record. See, e.g., Tr. 38, 40-41, 45, 61, 87-90. Also supported was the Bankruptcy Court's finding of the need for substantial repairs and maintenance, and of the Debtor's inability to pay for such work. See, e.g., Tr. 47-48, 50-51, 53. Additionally, the Bankruptcy Court's finding that a sufficient capital infusion could not timely be raised was supported by testimony that, as of the date of the hearing, no attempt had been made to raise capital from Debtor's limited partners. Tr. 133-34.
By contrast, the only testimony supporting the Debtor's contention that the property could generate positive cash flow sufficient to provide the Creditor adequate protection of its interest was that of the general partner of the Debtor itself. Tr. 130-32, 140-41. This testimony, though, amounted to nothing more than a disputing of the conclusions drawn from the appraiser's findings, and was properly found by the Court to be "conclusory," and "speculative." Tr. 155-58. Indeed, the Bankruptcy Court found the testimony of the Debtor's sole witness sufficiently unavailing as to characterize the Creditor's evidence as "essentially unrebutted." This Court finds no reason to disturb the Bankruptcy Court's findings.
This Court, therefore, finds that the Debtor's likelihood of success on appeal is not strong, and that the Debtor has therefore not satisfied that prong under Federal Rule of Bankruptcy Procedure 8005 and the related case law.
Remaining Requirements under Rule 8005
The test for granting a stay under Federal Rule of Bankruptcy Procedure 8005 is conjunctive; each of its four requirements must be satisfied. See In re Advanced Mining Systems, Inc., 173 B.R. 467, 468 (S.D.N.Y. 1994);In re Friedberg, 1991 WL 259038 at [*]2 (S.D.N.Y. Nov. 25, 1991). Since the Debtor has failed to satisfy the strong likelihood of success requirement, it cannot obtain Rule 8005 relief. Accordingly, it is unnecessary for this Court to consider whether the Debtor has satisfied the remaining three requirements.
CONCLUSION
For the reasons stated above, the Debtor's motion pursuant to Fed.R.Bankr.P. 8005 for a stay pending appeal of the Bankruptcy Court's lifting of the automatic stay is denied.
So ordered.