Mootness of Appeals
11 U.S.C. Section 363(m)
"The reversal or modification on appeal of an authorization under subsection (b) or (c) of this section of a sale or lease of property does not affect the validity of a sale or lease under such authorization to an entity that purchased or leased such property in good faith, whether or not such entity knew of the pendency of the appeal, unless such authorization and such sale or lease were stayed pending appeal."
Did Congress intend orders authorizing purchases or leases to be reversed or modified on appeal?
Appeals to orders authorizing sales, and appeals to orders denying stays pending appeal, are rendered moot by bankruptcy trustees quickly concluding the sale of property.
Bankruptcy judges' orders, whether based on correct facts and law or not, are not subject to appellate review when purchases have been completed.
Notes:
1.On December 10, 2002, the bankruptcy court entered an order setting forth in pertinent part:
"Other than to the extent of permitting creditos to pursue their lawful remedies against the Debtor's interest in the above described asset, this Court retains jurisdiction of this matter for all purposes."
2. Request for clarification of the bankruptcy court's order was filed. See motion. Mary McGehee, a non-debtor, purchased the subject property from the bank. The bankruptcy trustee then sold the same property to another purchaser.
3. Bankruptcy Judge Schermer of the Bankruptcy Appellate Panel of the Eighth Circuit wrote the opinion. Within it, he states that neither appellant raised if the purchase was not in good faith. It may have been more applicable to have
(a) asked if the bankruptcy trustee's actions were not in good faith;
(b) how bankruptcy judge James G. Mixon entered an order "relaxing" the automatic stay, (without any citation to the Bankruptcy Code providing for automatic stays to be "relaxed" for creditors to pursue lawful remedies when the only remedy is to foreclose and sell the property), and
(c) by what statute can a bankruptcy trustee resale the property after it has been sold by the secured creditor to a non-debtor, good faith purchaser.
These questions and issues go without answers and explanations, as the Bankruptcy Appellate Panel rendered the appeals moot.
4. Notice how Judge Schermer states that "No stay of the sale order was in effect at the time the sale was consummated." It would be impossible for a stay order to be in effect, since bankruptcy Judge Mixon entered order denying the stay motion on the day in which the trustee closed on the sale of the property, thereby depriving the appellant of appellant review. Additionally, the order on appeal was the order denying stay pending appeal.
Judge Schermer applied circular logic in his decision. His reason for rendering the appeal moot includes that a stay was not obtained before the sale was consummated, while disregarding that the order denying the stay was entered on the same day that the trustee consummated the sale, making it impossible to obtain a stay before the sale was consummated.
5. Federal Rule provides 10 days to file notice of appeal to orders entered by the bankruptcy court, although bankruptcy judges interpret statute to deprive appellant review. To correct this contradiction between Federal Rule and the 11 U.S.C. 363(m), as well as constitutional provisions providing for appellant review, federal legislators must amend this statute.
The appellants will never know if the bankruptcy judge abused his discretion by denying the motion to stay pending appeal, as those judges who have sworn to uphold the constitution deny appellant review on the basis of bankruptcy trustees' actions.
The decision follows:
UNITED STATES BANKRUPTCY APPELLATE PANEL
FOR THE EIGHTH CIRCUIT
Nos. 04-6004/6005
In re: Stephen A. Griffin, Debtor.
Mary McGehee, Claimant - Appellant
Appeals from the United States Bankruptcy Court for the Western District of Arkansas
Barbara Griffin, Claimant - Appellant
Appellee, Richard Cox, Trustee
Submitted: April 21, 2004 Filed: June 3, 2004
The Honorable James G. Mixon, United States Bankruptcy Judge for the Eastern and
Western Districts of Arkansas.
Before SCHERMER, FEDERMAN and VENTERS, Bankruptcy Judges
SCHERMER, Bankruptcy Judge
Mary McGehee ("McGehee") appeals the bankruptcy court1order denying her Rule 59 motion to amend a sale order. Barbara Griffin ("Griffin") appeals the bankruptcy court order denying her request for stay of the sale order. We have jurisdiction over the appeal of final orders issued by the bankruptcy court. See 28U.S.C. Section 158(b).
For the reasons set forth below, we dismiss the appeal as moot.
ISSUES
The issues on appeal are whether the bankruptcy court abused its discretion in denying the motion to amend its order approving the sale of an asset free and clear of liens and whether the bankruptcy court abused its discretion in denying a motion to stay the effect of the sale order. Each of the orders appealed follows and is related to an order approving the sale by the trustee of property of the estate. The sale has been completed, rendering this appeal moot. Accordingly, we must dismiss the appeal.
BACKGROUND
On December 23, 2003, the bankruptcy court approved the motion filed by Richard L.
Cox, ("Trustee"), Trustee of the Bankruptcy Estate of Stephen A. Griffin ("Debtor"), seeking authority to sell certain real property (the "Lake House").Objections to the sale motion had been filed by McGehee and Griffin. The court overruled and denied such objections. An order authorizing the sale was entered.
A second order granting the motion to sell the Lake House was entered on December 30, 2003. The December 30 order was later vacated on January 5,2004. The December 23 order is the order which authorized the sale of the Lake House. The Order being simultaneously entered in Case Number 03-6069 sets forth the history of the case and the disputes among the parties in greater detail.
On December 29, 2003, Griffin filed a motion to stay the sale of the Lake House and McGehee filed a motion to reconsider the order authorizing the sale. The court held a hearing on the motion for stay and the motion to reconsider the sale on January 13, 2004. On January 14, 2004, the court entered its orders denying the motion to stay the sale and denying the motion to reconsider the order authorizing the sale.
On January 14, 2004, the Trustee consummated the sale of the Lake House. On January 16, 2004, the Trustee filed his report of sale with respect to the Lake House. On January 21, 2004, McGehee filed her notice of appeal of the order denying her motion to reconsider the sale and Griffin filed her notice of appeal of the order denying her motion to stay the sale. On January 22, 2004, the bankruptcy court entered its order confirming the Trustee's sale of the Lake House.
STANDARD OF REVIEW
We review the bankruptcy court's findings of fact for clear error and its conclusions of law de novo. Fed. R. Bankr. P. 8013; Official Comm. of Unsecured Creditors v. Trism, Inc. (In re Trism, Inc.), 328 F.3d 1003, 1006 (8thCir. 2003); Jefferson Co. v. Halverson (In re Paulson), 276 F.3d 389, 391 (8thCir. 2001); Wintzv. Am. Freightways, Inc. (In re Wintz Cos.), 219 F.3d 807, 811 (8thCir.
2000).
DISCUSSION
Section 363 of the Bankruptcy Code authorizes a trustee to sell property of the estate. 11 U.S.C. Section 363(b). Section 363(m) specifically protects the finality of a bankruptcy sale from reversal on appeal absent a stay.
In the instant case, the Trustee completed the sale of the Lake House in January, 2004. No stay of the sale order was in effect at the time the sale was consummated. Furthermore, no evidence was presented nor has either appellant even raised an argument that the sale was not in good faith. The sale of the Lake House cannot be reversed on appeal. 11 U.S.C. Section 363(m); Trism, 328 F.3d at 1006-07; Paulson, 276F.3d at 391-92; Nieters v. Sevcik (In re Rodriquez),258 F.3d 757,759 (8thCirl.2001);Wintz, 219 F.3d at 811.
Here the sale order is not directly on appeal. However, the two orders which are the subject of this appeal, the order denying the motion to reconsider the sale order and the order denying the motion to stay the sale, are directly related to the sale. The reversal of either order on appeal could not provide any effective relief. Paulson,276 F.3d at 392. The sale order can no longer be reconsidered because the sale has been consummated and cannot be reversed on appeal. Therefore a reconsideration would be meaningless. Likewise, the sale cannot be stayed after it has been completed. The appeal of any order the reversal of which would affect the validity of the sale is mooted by the completion of the sale. Trism, 328 F.3d at 1006-07. This appeal must therefore be dismissed as moot.