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In re Tri-Cities Memory Gardens, Inc.

United States District Court, E.D. Tennessee, Greeneville Division

December 12, 2014



J. RONNIE GREER, District Judge.

The appellant/debtor, Tri-Cities Memory Gardens, Inc. ("TCMG"), has filed a Motion for Emergency Stay Pending Appeal, [Doc. 3]. TCMG seeks a stay of the October 20, 2014 order of the United States Bankruptcy Court for the Eastern District of Tennessee (the "Bankruptcy Court") dismissing TCMG's Chapter 11 case. The appellees, East Tennessee Funeral Home & Crematory, LLC ("ETFHC") and Tennessee Department of Commerce and Insurance, Division of Regulatory Boards, Burial Services Section ("TDC&I"), have responded, [Docs. 10 and 12], and the matter is ripe for review.

On December 9, 2014, this Court temporarily stayed the matter until such time as the Court could render a decision on the merits of the motion. The Court has now thoroughly reviewed the record. For the reasons that follow, TCMG's Motion to Stay is DENIED; however, the temporary stay shall remain shall remain in effect until 10 days after the entry of this Order.

TCMG owns and operates two cemeteries in East Tennessee. One is located in Blountville and the other in Church Hill. These include land, mausoleums, and chapels at each location. TCMG secured a $1.7 million loan from First Tennessee Bank ("FTB") to renovate the Blountville cemetery and build the funeral home at that location. TCMG defaulted on this loan, and FTB was proceeding to foreclose on the property. TCMG, however, filed for Chapter 11 bankruptcy protection on March 30, 2012.

On November 16, 2012, the Bankruptcy Court entered an Agreed Order between TCMG and FTB which set forth agreed terms of the Bankruptcy Plan. This plan was opposed by TDC&I. After a hearing, TCMG and TDC&I reached an agreement, and those terms were incorporated into a Fourth Amended Plan of Reorganization (the "Plan"). The Bankruptcy Court confirmed that Plan on July 22, 2013.

Under the terms of the Plan, among other things, TCMG was to pay six monthly payments of principal and interest with the balance of all remaining principal and interest due on January 31, 2014. The Plan also contained conditions to ensure TCMG complied with state cemetery and burial law. TCMG was to create a new pre-need funeral trust fund and make certain required deposits into existing trust funds.

On December 11, 2013, the Bankruptcy Court entered a Final Decree that the bankruptcy case had been fully administered. That same month, on December 30, 2013, FTB sold its note to ETFHC. TCMG did not pay the note balance by January 31, 2014. Thus, ETFHC sent TCMG a letter on February 4, 2014, giving TCMG the right to cure. TCMG offered to purchase the note for $80, 000.00 more than ETFHC paid for the note and requested an extension of the note. ETFHC refused and notified TCMG on March 6, 2014, that it had scheduled a foreclosure sale for April 11, 2014. TCMG commenced the current Chapter 11 case on April 4, 2014.

ETFHC moved to dismiss the current case pursuant to Title 11 United States Code section 1112(b) because TCMG filed the case in bad faith. See 11 U.S.C. § 1112(b (2014). TDC&I joined in the motion. The Bankruptcy Court granted ETFHC and TDC&I's motion on October 28, 2014. On November 5, 2014, ETFHC informed TCMG that a foreclosure sale was scheduled for the Blountville, Tennessee property and improvements on December 10, 2014. TCMG filed a Notice of Appeal of the Bankruptcy Court's dismissal to this Court on November 6, 2014. That same day, TCMG filed a Motion for Stay of the Dismissal Order Pending Appeal in the Bankruptcy Court. On December 2, 2014, the Bankruptcy Court denied the motion. Then on December 4, 2014, TCMG filed the instant Motion to Stay to prevent the December 10, 2014 foreclosure sale. As stated above, the Court issued a temporary stay on December 9, 2014.

Rule 8005 provides:

Stay pending appeal: A motion for a stay of the judgment, order, or decree of a bankruptcy judge, for approval of a supersedeas bond, or for other relief pending appeal must ordinarily be presented to the bankruptcy judge in the first instance. Notwithstanding Rule 7062 but subject to the power of the district court and the bankruptcy appellate panel reserved hereinafter, the bankruptcy judge may suspend or order the continuation of other proceedings in the case under the Code or make any other appropriate order during the pendency of an appeal on such terms as will protect the rights of all parties in interest. A motion for such relief, or for modification or termination of relief granted by a bankruptcy judge, may be made to the district court or the bankruptcy appellate panel, but the motion shall show why the relief, modification, or termination was not obtained from the bankruptcy judge. The district court or the bankruptcy appellate panel may condition the relief it grants under this rule on the filing of a bond or other appropriate security with the bankruptcy court....

Fed. R. Bankr. P. 8005. When deciding a motion to stay pursuant to this Rule, the Court must balance the following four factors: (1) the likelihood that the party seeking the stay will prevail on the merits of the appeal; (2) the likelihood that the moving party will be irreparably harmed absent a stay; (3) the prospect that others will be harmed if the court grants the stay; and (4) the public interest in granting the stay. Michigan Coalition of Radioactive Material Users, Inc. v. Griepentrog, 945 F.2d 150, 153-54 (6th Cir. 1991); see also In re McInerney, 490 B.R. 540, 544 (Bkrtcy. E.D. Mich. 2013). The Court will discuss each of these in turn.

1. Likelihood of Success on Appeal

TCMG appeals the Bankruptcy Court's dismissal of the current Chapter 11 bankruptcy case. The Bankruptcy Court dismissed the case for cause under § 1112(b), reasoning that it was filed in bad faith. Generally, TCMG argues that it is likely to succeed on appeal because the appeal presents three questions of law which are issues of first impression in the Sixth Circuit. These are:

(1) Does the Laguna eight (8) factor test or Laguna itself not apply in a case involving Chapter 11 serial filings, even though the basis ...

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