United States District Court, E.D. New York
LIBERTY TOWERS REALTY, LLC; LIBERTY TOWERS REALTY I, LLC; NCC CAPITAL, LLC, Appellants,
RICHMOND LIBERTY, LLC; WF LIBERTY LLC, Appellees. Bankruptcy Nos. 16-01014 (ESS), 15-44866 (ESS), 15-1065 (ESS), 15-1066 (ESS), 15-1191 (ESS), 15-1197 (ESS), 15-1198 (ESS), 14-45187 (ESS), 14-45189 (ESS)
OPINION & ORDER
R. ROSS UNITED, STATES DISTRICT JUDGE
Liberty Towers Realty, LLC (“LTR”), and Liberty
Towers Realty I, LLC (“LTR I”; collectively
“Liberty Towers” or the “debtor”),
together with their junior secured creditor, NCC Capital, LLC
(“NCC”), appeal the decision of the Honorable
Elizabeth S. Strong, United States Bankruptcy Judge, to
approve a settlement agreement Liberty Towers signed but has
since repudiated. Because I find that the bankruptcy court
did not abuse its discretion in approving the settlement, the
appeal is dismissed.
court assumes the parties' familiarity with the
underlying facts and summarizes the relevant background
briefly. LTR and LTR I are each single asset real
estate debtors whose sole assets are adjacent vacant lots on
Staten Island (collectively, the “Properties”).
Appellee WF Liberty LLC (“WF”) holds mortgages on
the Properties and is the senior lienholder in each case.
Appellant NCC holds a junior lien on one of the Properties.
Appellee Richmond Liberty, LLC (“Richmond”) holds
an interest in the Properties by virtue of a contract of sale
with WF, whereby WF agreed to sell the Properties to Richmond
for $8, 500, 000 if WF obtained them after foreclosure.
initiated foreclosure proceedings against Liberty Towers when
the latter defaulted on its mortgages. On January 24, 2011,
WF obtained a judgment of foreclosure and sale on LTR's
property. On July 7, 2014, WF obtained a judgment of
foreclosure and sale on LTR I's property.
LTR I filed voluntary petitions for relief under Chapter 11
of the United States Bankruptcy Code on October 15, 2014.
According to its petition, WF had a $15, 000, 000 claim
against LTR, of which $8, 000, 000 was secured by the
Properties, and NCC held a $1, 000, 000 claim fully secured
by a subordinate lien on the Properties. Record at
January 12, 2015, WF moved for the bankruptcy court to lift
the automatic stay to enable it to proceed with the
foreclosure auction. Record at 125. With its motion, WF
presented an appraisal showing the properties to be worth far
less than the value of its mortgage. Id. at 118,
142-43, 335. The court granted WF relief from the automatic
stay on April 28, 2015. On July 16, 2015, WF Liberty was the
winning bidder at the foreclosure sale, and Richmond's
purchase right became fixed on that date.
its guarantors brought a motion to vacate the foreclosure
sale. On September 3, 2015, the state court issued an order
giving Liberty Towers the opportunity to redeem the
Properties by making a payment to WF via electronic funds of
$12, 500, 000 on or before September 24, 2015, later extended
to October 13, 2015. On October 12, 2015, LTR attempted to
transfer certain real property or membership interests to WF
in an effort to redeem the mortgage. The parties dispute
whether such an effort constituted a valid redemption.
However, it is undisputed that LTR did not transfer $12, 500,
000 to WF by electronic funds, as required by the literal
terms of the state court order.
many years of litigation, encompassing nine bankruptcy cases
and several state court proceedings, the parties entered into
a global settlement agreement on June 2, 2016. The settlement
agreement was signed by Liberty Towers, Richmond, WF, and
nonparty guarantors of Liberty Towers's debts. Settlement
Agreement, Record at 1043-58. NCC took no part in the
bankruptcy proceedings prior to this settlement and did not
sign the Settlement Agreement.
to the Settlement Agreement, Richmond would obtain clear and
marketable title to the Properties. Id. ¶ 3. In
exchange, Richmond would pay $10, 500, 000 to WF, reduced by
up to $50, 000 for administrative expenses related to the
bankruptcy cases and up to $50, 000 for other creditors of
Liberty Towers. Id. Liberty Towers agreed not to
pursue any claim to the Properties, and waived any rights it
held by virtue of the attempted redemption. Id.
¶ 6. Finally, the parties agreed to discontinue all
litigation amongst themselves and executed global releases.
Id. ¶¶ 7-8.
important provisions of the Settlement Agreement include the
Upon the execution of this Agreement, Richmond, through its
counsel, shall promptly prepare and file a motion under
Bankruptcy Rule 9019 seeking Bankruptcy Court approval of the
terms and conditions of this Agreement. Upon entry of a
“Final Order” . . . by the Bankruptcy Court
approving the terms and conditions of this Agreement, this
Agreement shall become binding upon all Parties. In the event
the Bankruptcy Court does not approve this Agreement, this
Agreement shall be null and void and of no force and effect
and the rights of all Parties are specifically reserved as if
this Agreement had not been entered into.
Id. ¶ 2. The Settlement Agreement is governed
by New York law. Id. ¶ 10.
subsequently moved for bankruptcy court approval of the
Settlement Agreement. On July 22, 2016, the bankruptcy court
held a hearing on the motion to approve the Settlement
Agreement. At this hearing, Liberty Towers withdrew its
support for the Settlement Agreement. The court held numerous
hearings on the motion over the next six months, and by order
dated January 11, 2017, the bankruptcy court approved the
settlement, finding it to be in the best interests of the
creditors and estate. Liberty Towers and NCC timely appealed
appeal, a district court reviews a bankruptcy court's
conclusions of law de novo. Asbestosis Claimants v. U.S.
Lines Reorganization Tr. (In re U.S. Lines, Inc.), 318
F.3d 432, 435 (2d Cir. 2003). Findings of facts made by a
bankruptcy court may not be set aside unless clearly
erroneous. Sumpter v. DPH Holdings Corp. (In re DPH
Holdings Corp.), 468 B.R. 603, 611 (S.D.N.Y. 2012).
“Mixed questions of law and fact are reviewed de
novo. Matters left to the court's discretion are
reviewed for abuse of discretion.” In re
Hirsch, 339 B.R. 18, 24 (E.D.N.Y. 2006) (citing
Babitt v. Vebeliunas (In re Vebeliunas), 332 F.3d
85, 90 (2d Cir. 2003); DG Creditor Corp. v. Dabah (In re
DG Acquisition Corp.), 151 F.3d 75, 79 (2d Cir. 1998)).
Abuse of discretion occurs when a bankruptcy court rests its
decision “'on an error of law (such as application
of the wrong legal principle) or a clearly erroneous factual
finding'” or where its decision,
“‘though not necessarily the product of a legal
error or a clearly erroneous factual finding, cannot be
located within the range of permissible
decisions.'” Schwartz v. Aquatic Dev. Grp.,
Inc. (In re Aquatic Dev. Grp., Inc.), 352 F.3d 671, 678
(2d Cir. 2003) (quoting Zervos v. Verizon N.Y.,
Inc., 252 F.3d 163, 169 (2d Cir. 2001)). “A
bankruptcy court's decision to approve a settlement is
reviewed extremely deferentially.” In re
Schneider, No. 14-CV-1166 (JMA), 2015 WL 1412364, at *3
(E.D.N.Y. Mar. 26, 2015) (citing Cousins v. Pereira (In
re Cousins), No. 09 Civ. 1190 (RJS), 2010 WL
5298172, at *3 (S.D.N.Y. Dec. 22, 2010)).