United States District Court, M.D. Florida, Tampa Division
IN RE WESTPORT HOLDINGS TAMPA, LP, Debtor.
WESTPORT HOLDINGS TAMPA, LP, WESTPORT HOLDINGS TAMPA II, LP, OFFICIAL COMMITTEE OF RESIDENT CREDITORS, and JEFFREY WARREN, Debtors/Appellees. CPIF LENDING, LLC, Creditor/Appellant,
Virginia M. Hernandez, Judge
context of a Chapter 11 bankruptcy proceeding, Appellant CPIF
Lending, LLC appeals the Bankruptcy Court's order
confirming a joint plan of liquidation and order valuing
CPIF's collateral. The appeal is fully briefed and, as
discussed below, the Court affirms both orders.
Village is a continuing care retirement community located in
Tampa, Florida. (Doc. # 7 at 9). University Village is
comprised of independent living apartments and villas
(Independent Living Facility) and an assisted living and
skilled nursing facility (Health Center). (Doc. # 11 at 7).
Independent Living Facility is owned by Westport Holdings
Tampa, LP (Westport I) and Westport Holdings Tampa II, LP
(collectively, Debtors), both of which are debtors in the
underlying bankruptcy proceeding. (Doc. # 7 at 9). Health
Center is owned by Westport Nursing Tampa, LLC, which is not
a debtor in the underlying bankruptcy proceeding.
(Id.). A full history of these entities'
corporate structure is unnecessary, but suffice it to say
that Westport Nursing used to be a wholly-owned subsidiary of
Westport I. (Doc. # 11 at 8). Westport I's transfer of
its ownership interest in Westport Nursing - and thus, Health
Center - eventually led to proceedings by the Florida
Department of Financial Services. (Id.).
September 22, 2016, Debtors filed voluntary petitions for
relief under Chapter 11 of the Bankruptcy Code.
(Id.). Shortly thereafter, the United States Trustee
appointed the Official Committee of Resident Creditors
(Resident Committee) to represent the interests of
Independent Living Facility's residents. (Id. at
9). CPIF, one of Debtors' creditors, filed a secured
claim in the amount of $9, 781, 224.58 based on a $9.5
million loan from CPIF in favor Debtors. (Id. at
10). The loan was secured by a lien on all of Debtors'
assets, including Independent Living Facility and any cash
collateral generated by Independent Living Facility. (Doc. #
7 at 11). CPIF's secured claim was subject to objections
and an adversary proceeding, which remained pending before
the Bankruptcy Court when this appeal was filed. (Doc. # 11
at 10). Throughout the bankruptcy proceedings, the Bankruptcy
Court entered numerous orders permitting Debtors' use of
cash collateral. The cash collateral orders provided that
CPIF's “cash collateral, ” as “defined
in Section 363(a) of the Bankruptcy Code, ” would
receive adequate protection against any diminution in value.
See (Doc. ## 3-7 to 3-20, 3-23, 3-42, 3-45, 3-49,
January 18, 2018, the Bankruptcy Court approved a settlement
agreement reached between Debtors, Westport Nursing, the
Resident Committee, and others to transfer Westport
Nursing's ownership interests back to Westport I, thereby
reunifying the ownership of University Village. (Doc. # 11 at
9). That same day, Debtors and the Resident Committee
submitted a Chapter 11 plan to the Bankruptcy Court.
(Id.). Among other things, the plan called for the
sale of the unified University Village - comprised of both
Independent Living Facility and Health Center. (Id.
at 9-10). CPIF objected to the plan and opposed confirmation
on numerous grounds. (Doc. # 7 at 10). As a result, the
plan's proponents pursued confirmation under 11 U.S.C.
§ 1129(b) - commonly known as the “cramdown”
provision. (Doc. # 11 at 13).
Bankruptcy Court held a three-day trial on confirmation of
the plan. (Id.). To challenge the plan's
feasibility and other confirmation requirements, CPIF
presented an expert witness, Ed Smith, who testified the
value of Independent Living Facility was $12.9 million as of
February 6, 2018. (Doc. # 7 at 15). Smith also testified the
value of Independent Living Facility was $16.9 million as of
September 22, 2016 - the petition date. (Id. at
15-16). Smith's testimony was relied upon by two other
experts who testified on the plan's feasibility, the
“best interest of the creditors” test, and an
appropriate interest rate. (Id. at 16).
this testimony, Debtors orally moved to establish the value
of Independent Living Facility and CPIF's secured claim
at $12.9 million. (Id. at 17). CPIF objected,
arguing the value of Independent Living Facility and
CPIF's secured claim should be based on the actual amount
Independent Living Facility is sold for in a fair market
sale. (Id.). The Bankruptcy Court accepted
Smith's valuation and held that for purposes of the
confirmation hearing, the value of Independent Living
Facility was $12.9 million. (Doc. # 3-70 at 147).
Bankruptcy Court explained in its oral confirmation ruling
that while Debtors had a few interested potential buyers, no
actual buyer existed yet. (Doc. # 3-71 at 14:19-15:5). The
Bankruptcy Court also noted the sales process was hindered by
a few issues, including returning Health Center back to
Westport I. (Id. at 15:7-21). Nonetheless, the
Bankruptcy Court concluded the plan was fair and equitable,
To be fair and equitable, the plan must provide that
CPIF's lien attaches to the University Village's
sale proceeds and that CPIF will receive, on account of its
lien, payments totaling the allowed amount of such claim as
of the effective date of the plan. To determine whether the
Debtors' plan satisfies that requirement, the Court must
first determine the amount of CPIF's secured claim.
Significantly, the Debtors and the [Resident] Committee have
objected to CPIF's claim. There's an adversary
proceeding dealing with that claim that is pending. So as of
confirmation, CPIF does not have an allowed secured claim.
Putting that aside, the Court determined that the value of
CPIF's collateral, the Independent Living Facility, was
$12.9 million. So the maximum amount of CPIF's secured
claim is $12.9 million.
(Id. at 19:18-20:11).
modified by the Bankruptcy Court, the confirmed plan provides
for the creation of a liquidating trust to pursue the sale of
the unified University Village. (Doc. # 3-78 at 35-36). Any
sale of University Village by the liquidating trustee is
subject to approval under 11 U.S.C. § 363 and CPIF's
ability to object. (Id.).
when CPIF's secured claim will be paid depends on when
University Village is sold. If University Village is sold
within six months of the plan's effective date,
CPIF's lien will attach to the proceeds of the sale.
(Id. at 26-27). Alternatively, if University Village
is sold beyond that date, CPIF's lien will also attach to
the proceeds of the sale, but only if the buyer does not
assume the obligation to repay CPIF. (Id.). If the
buyer assumes the obligation, University Village will be sold
subject to CPIF's liens, and CPIF will be paid through
deferred cash payments over ten years with an interest rate
of 5.84%. (Id.). Also, after the six-month period,
and until University Village is sold, CPIF will be paid
through deferred cash payments over ten years with an
interest rate of 5.84% by the liquidating trustee.
is to be paid from the cash sale proceeds, the plan requires
a reserve be established in favor of CPIF equal to $12.9
million, less outstanding taxes. (Id.). The reserve
must be funded before the liquidating trustee can use the
cash sale proceeds to pay any allowed claims junior to
CPIF's allowed secured claim. (Id.). If the sale
of University Village generates proceeds in excess of $12.9
million, the excess proceeds may be used to pay junior
8, 2018, the Bankruptcy Court entered its valuation order,
which reiterated that Independent Living Facility's value
is $12.9 million for confirmation purposes and the maximum
amount of CPIF's secured claim is $12.9 million, less
outstanding taxes. (Doc. # 3-2). On May 10, 2018, the
Bankruptcy Court entered its confirmation order, which
overruled CPIF's objections and granted the plan
proponents' cramdown request. (Doc. # 3-3). This appeal
Standard of Review
entry of a final order by the Bankruptcy Court, a party may
appeal to the District Court pursuant to 28 U.S.C. §
158(a). The United States District Court functions as an
appellate court in reviewing decisions of the United States
Bankruptcy Court. In re Colortex Indus., Inc., 19
F.3d 1371, 1374 (11th Cir. 1994). This Court reviews de novo