Colony Hill Associates, In re
| Decision Date | 09 April 1997 |
| Docket Number | No. 1294,D,1294 |
| Citation | 111 F.3d 269 |
| Parties | , Bankr. L. Rep. P 77,383 In re COLONY HILL ASSOCIATES, New York Limited Partnership, and Blydenburgh Properties, Inc., Debtors. KABRO ASSOCIATES OF WEST ISLIP, LLC, Plaintiff-Appellant, v. COLONY HILL ASSOCIATES, a New York Limited Partnership, and Blydenburgh Properties, Inc., Debtors-Appellees, The Greater New York Savings Bank and Republic National Bank, Creditor-Appellees, and The Holiday Organization, Inc., Appellee. ocket 96-5117. |
| Court | U.S. Court of Appeals — Second Circuit |
Ronald J. Rosenberg, Garden City, NY (William J. Birney, Lesley A. Reardon, of counsel), for Plaintiff-Appellant.
Jeffrey N. Rich, New York City (Winick & Rich, P.C., Jeffrey H. Weinberger, of counsel), for Debtors-Appellees.
Weil, Gotshal & Manges, New York City (Stephen Karotkin, of counsel), for Creditor-Appellee Greater New York Savings Bank; Cadwalader, Wickersham & Taft, New York City (Barry J. Dichter, Susan F. Dicicco, of counsel), for Creditor-Appellee Republic National Bank of New York; Certilman, Balin, Adler & Hyman, LLP, East Meadow, NY (Michael D. Brofman, Jaspreet S. Mayall, of counsel), for Appellee The Holiday Organization, Inc.
Before NEWMAN, Chief Judge, FEINBERG and McLAUGHLIN, Circuit Judges.
In an order dated July 29, 1996, the United States Bankruptcy Court for the Eastern District of New York, Robert J. Hall, Bankruptcy Judge, confirmed a sale to The Holiday Organization, Inc. (Holiday) of certain property of debtor Colony Hill Associates (Colony). Appellant Kabro Associates of West Islip, LLC (Kabro), a New York corporation engaged in real estate development in the tri-state area, appealed from this order to the United States District Court for the Eastern District of New York, Joanna Seybert, J. In a judgment entered September 23, 1996, Judge Seybert (1) denied Kabro's motion to stay the sale to Holiday pending appeal from the bankruptcy court's confirmation order, and (2) dismissed such appeal. Kabro now appeals from that judgment. For reasons set forth below, we affirm.
Colony, a New York limited partnership, operated as a Chapter 11 debtor-in-possession under the Bankruptcy Code from February 1991 through July 25, 1996, when its Plan of Reorganization (the Plan) was confirmed. During that period, Colony's primary assets included, among other things, the Marriot WindWatch Golf Course and some residential property (collectively the Property), both located near Colony's Marriot WindWatch Hotel, in Hauppauge, New York.
In June 1996, after five years of protracted proceedings, the bankruptcy court entered an order (the Notice) approving notice and bidding procedures with respect to sale of the Property. The Notice indicated that Colony had executed a contract to sell the Property to Gale & Wentworth, Inc. and Praedium Recovery Fund, L.P. (collectively G&W) for $7.5 million, "subject to higher and better offers" to be presented at a sale hearing on July 25. All bidders were required to submit initial bids to Colony in writing by 5:00 P.M. on or before July 15. An initial bid would be deemed "qualified" only if (1) it was irrevocable, not subject to any conditions and accompanied by a certified check for at least 15%, and (2) the bidder offered at least $8.15 million, demonstrated financial capability to complete the transaction and had a favorable reputation in the industry for undertaking similar projects. The bankruptcy judge required Colony to (1) mail the Notice to "the holders of claims and interests and all parties who have requested notices in this case or who may otherwise be entitled to notice pursuant to Federal Rule of Bankruptcy Procedure 2002" on or before June 28, and (2) publish the Notice at least once in the New York Times on or before July 10. Under the Plan, only secured creditors--the Greater New York Savings Bank (Greater NY) and Republic National Bank (Republic)--would benefit from an increase in the price at which the Property was sold.
As of the July 15 initial bid deadline, Colony had received only one qualified bid--from Holiday for $8.1 million. 1 However, on July 24, appellant Kabro filed an "emergency request" in the bankruptcy court for permission to submit a bid of $10 million at the sale hearing the next day, even though it had admittedly not submitted a timely initial bid. As justification for its noncompliance, Kabro claimed that notice of the sale had been insufficient, explaining that it had learned of the sale--but not of the initial bid requirement--only from a Newsday article dated June 14, 1996. Thereafter, instead of making a written inquiry regarding the sale, Kabro allegedly left phone messages for Colony expressing its desire to submit a bid. However, one of Colony's general partners and its counsel stated on the record in the bankruptcy court that they received no such messages. Kabro also asserted that it discussed with Republic and G&W its interest in purchasing the Property. Although these discussions allegedly took place before the July 15 deadline for initial bids, Kabro nevertheless maintains that it was not informed of this deadline until a meeting with G&W on July 17.
At the sale hearing on July 25, the bankruptcy court heard argument regarding whether it should allow Kabro to bid on the Property. Holiday opposed Kabro's motion, arguing that Kabro was not qualified to bid because it had not submitted an initial bid. The two secured creditors and G&W, on the other hand, initially stated either that they were amenable, upon certain conditions, to Kabro's participation in the auction, or that they favored a brief adjournment to further evaluate Kabro's bid. However, after Holiday increased its bid to $9.6 million and agreed to close on the purchase notwithstanding an appeal by Kabro, Republic opposed Kabro's participation in the bidding.
The bankruptcy court refused to adjourn the hearing and denied Kabro's motion to submit a bid, finding that notice of the sale had been adequate and that Kabro should not be excused for failing to submit an initial bid by July 15. The court designated Holiday the successful bidder, stating in an order dated July 25, 1996, that Holiday had made the "highest and best offer." The bankruptcy court also denied Kabro's motion for a stay of the sale pending appeal.
On appeal to the district court, Kabro argued that notice of the sale was inadequate and that the bankruptcy court (1) erred in refusing to allow Kabro to bid, and (2) abused its discretion by refusing to adjourn the hearing briefly to enable Colony and the creditors to properly evaluate Kabro's bid. Kabro also moved in the district court to stay the sale of the Property during the appeal. At a hearing in August 1996, Judge Seybert denied Kabro's motion for a stay and dismissed Kabro's appeal. Her oral rulings were incorporated into a judgment entered September 23.
On September 25, Kabro filed a notice of appeal and moved in this court for a stay of the sale pending appeal. That same day, the Clerk's Office granted Kabro an interim stay pending disposition of its motion. However, on October 8, 1996, during oral argument of Kabro's motion, Holiday informed a panel of this court that less than an hour before issuance of the interim stay, Holiday had closed on the sale of the Property. In an order dated October 8, that panel denied Kabro's motion for a stay. Thereafter, on Kabro's motion, we expedited the appeal.
Kabro asks us to set aside approval of the sale to Holiday, arguing that (1) by refusing to allow Kabro to bid, when faced with a bid by Holiday that was "grossly disproportionate" to the value of the Property, the bankruptcy court breached its duty to obtain the highest and best offer, (2) the bankruptcy court erred by refusing to adjourn the sale hearing to enable Colony and the secured creditors to fully examine Kabro's bid, (3) notice of the sale was inadequate, (4) the sale resulted from collusive bidding between Holiday and the creditors, and (5) Holiday was not a good faith purchaser. Holiday counters that Kabro's appeal is moot under 11 U.S.C. § 363(m) because Kabro failed to obtain a stay of the sale.
Section 363(m) provides, in relevant part, that:
The reversal or modification on appeal of an authorization ... 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.
Id. (emphasis added). We recently explained that this language "preclud[es] this Court from reviewing ... issues, other than the good faith of the purchaser, if the sale has closed ..." before the appeal is heard, even when an "appellant's challenge might raise [other] meritorious arguments." Licensing by Paolo, Inc. v. Sinatra (In re Paolo Gucci), 105 F.3d 837, 840 (2d Cir.1997). Limiting appellate jurisdiction in this manner "furthers the policy of finality in bankruptcy sales ... and assists the bankruptcy court to secure the best price for the debtor's assets." Id. (citing United States v. Salerno, 932 F.2d 117, 123 (2d Cir.1991)).
As noted above, on October 8, 1996, a panel of this court denied Kabro's motion for a stay, presumably based on affidavits submitted by Holiday showing that it had closed on its purchase of the Property shortly before the Clerk's Office entered its interim stay on September 25. Although Kabro suggests that the panel failed to take into account "defects" in that closing, we find no occasion to reconsider our prior panel's ruling. Because Kabro failed to obtain a stay before Holiday closed, all of Kabro's arguments are moot except its claim that Holiday was not a good faith purchaser under § 363(m).
...
To continue reading
Request your trial
-
In re Bennett Funding Group, Inc.
... ... See Shugrue, 922 F.2d at 988; In re Colony Hill Assoc., 111 F.3d 269, 273 (2d Cir. 1997). Under this standard, the District Court places ... ...
-
In re Trailer Source, Inc.
... ... v. Colony Hill Assocs. (In re Colony Hill Assocs.), 111 F.3d 269, 273 (2d Cir. 1997); Morgenstern v. Revco ... ...
-
Barnet v. Barnet
... ... of W. Islip, LLC v. Colony Hill Assocs. ( In re Colony Hill Assocs. ), 111 F.3d 269, 273 (2d Cir.1997) (internal quotation ... ...
-
In re Motors Liquidation Co.
...whether the property was sold to a good faith purchaser." Gucci I, 105 F.3d at 839 (emphasis in original); see also In re Colony Hill Assocs., 111 F.3d 269, 273 (2d Cir.1997) (similar). "Regardless of the merit of an appellant's challenge," an appellate court "may neither reverse nor modify......
-
So You Want To Sell (Or Buy) A Company Under Section 363? Here's How
...do not.'); Trans World Airlines, supra; see also Kabro Assocs of West Islip, LLC v. Colony Hill Assocs. (In re Colony Hill Assocs.), 111 F.3d 269, 273-74, 30 (2d Cir. 1997) (concluding that a bidder had standing to challenge the intrinsic fairness of a sale when the bidder asserted that the......
-
Jason Binford, Collusion Confusion: Where Do Courts Draw the Lines in Applying Bankruptcy Code Section 363(n)?
...135 B.R. 387 (Bankr. E.D. Cal. 1991). 36 Id. at 392. 37 Kabro Assocs. of W. Islip, LLC v. Colony Hill Assocs. (In re Colony Hill Assocs.), 111 F.3d 269 (2d Cir. 1997). 38 Id. at 271-72 (Holiday's bid for real estate owned by the debtor was $8.1 million. Kabro's tardy bid was for $10 million......
-
Elizabeth B. Rose, Chocolate, Flowers, and Sec. 363(b): the Opportunity for Sweetheart Deals Without Chapter 11 Protections
...of appeal does not affect the purchasers good faith assessment); see also Karbo Assocs. v. Colony Hill Assocs. (In re Colony Hill Assoc.), 111 F.3d 269, 272-74 (2d Cir. 1997) (inquiring whether a sale transaction was in good faith for purposes of Sec. 363(m) is not subject to mootness and i......