Roberts Farms, Inc., In re
| Decision Date | 23 July 1981 |
| Docket Number | Nos. 79-4744,79-7561,s. 79-4744 |
| Citation | 652 F.2d 793 |
| Parties | , Bankr. L. Rep. P 68,325 In re ROBERTS FARMS, INC., a corporation, Debtor. Curvin J. TRONE, Jr., and Herbert Kunzel, Trustee and Additional Trustee of the Estates of Westgate-California Corporation; Westgate-Realty Company; and Tri-County Ranches, Appellants, v. ROBERTS FARMS, INC., a corporation; The Federal Deposit Insurance Corporation; and the Creditors' Committee of Roberts Farms, Inc., Appellees. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Isaac M. Pachulski, Stutman, Treister & Glatt, Los Angeles, Cal., for appellants.
Patrick A. Murphy, William T. Laube, Murphy, Weir & Butler, San Francisco, Cal., Michael Ahrens, Bronson, Bronson & McKinnon, San Francisco, Cal., Andrew William Wright, McCormick, Barstow, Sheppard, Coyle & Wayte, Fresno, Cal., for appellees.
Appeal from the United States District Court for the Eastern District of California.
Before TRASK and ALARCON, Circuit Judges, and THOMPSON, * District Judge.
This appeal arises from an order of the Honorable Myron D. Crocker, United States District Court Judge, Eastern District of California, filed October 19, 1979, which dismissed as moot the appeal taken by Curvin J. Trone, Jr., and Herbert Kunzel, Trustee and Additional Trustee of the Estates of Westgate-California Corporation, Westgate-California Realty Co., and Tri-County Ranches, Inc., (hereinafter collectively referred to as "Appellants" or "Trustees") from three orders of the Bankruptcy Court in Chapter XI Case No. 77-1366 of Roberts Farms, Inc. (hereinafter referred to as "RFI" or "the Debtor").
On July 10, 1979, the Bankruptcy Court entered the following three orders:
(1) "Order Disallowing Claims 155, 156 and 157" (hereinafter referred to as "Disallowance Order").
(2) "Order Confirming Plan of Arrangement" (hereinafter referred to as "Confirmation Order").
(3) "Order Confirming and Approving Settlement with FDIC and Validating FDIC Security Interests (hereinafter referred to as "Order Approving FDIC Settlement").
The Disallowance Order disallowed the Trustees' claims (filed in excess of $1.5 billion) under § 57(d) of the Bankruptcy Act (11 U.S.C. § 93(d) as not capable of liquidation or of reasonable estimation without undue delay of the Debtor's Chapter XI Case.
The Confirmation Order confirmed the Debtor's Fifth Amended Plan of Arrangement (hereinafter sometimes referred to as "the Plan") which provided for payment in full of all allowed general unsecured claims plus interest at 7% per annum from the date of the Debtor's original petition to date of payment. These creditors were to be paid in full and in cash immediately upon the effective date of the Plan.
The Plan also provided for partial payment to the Federal Deposit Insurance Corporation, as receiver for the now defunct United States National Bank, (hereinafter referred to as "FDIC") of its claims, which obligation was to be secured by security interests in most of the Debtor's assets.
The Order Approving FDIC Settlement authorized the FDIC and RFI to pay the FDIC claims (filed in an aggregate amount in excess of $40.0 million) for $17.2 million under the Plan. The FDIC agreed to subordinate its payment to that of the general On July 19, 1979, Appellants attempted to obtain a writ of mandamus and, failing that, a stay from Judge Myron D. Crocker of the United States District Court, Eastern District of California. The Court denied the request for a writ and declined to grant a stay of the orders.
unsecured creditors and agreed to extend its payments over a period of over four years.
The Trustees then appealed from these three orders to the District Court. Prior to the hearing on the Trustees' Appeal, the Debtor and the FDIC moved to dismiss the Trustees' Appeal as moot on the ground, among others, that the plan had been substantially carried out. The District Court granted the motion and entered its "Order Dismissing Appeal" on October 19, 1979. The District Court specifically declined to hear the appeal on its merits.
The Trustees then filed with this Court of Appeals a Petition for Writ of Mandamus with respect to the District Court's Order Dismissing Appeal as moot and, immediately thereafter filed a Notice of Appeal. Because a petition for writ of mandamus was not the procedurally correct method for pursuit of this appeal, this Court ordered that the Petition for Writ of Mandamus be construed as a notice of appeal. Apparently at the time of such order, this Court was unaware that an appeal had also been filed since Appellants failed to mention it in connection with their petition.
The Appellants have appealed from the order of the District Court which dismissed the appeals from the three orders of the Bankruptcy Court because the appeals were moot. The three orders of the Bankruptcy Court (1) disallowing the Trustees' unliquidated claims, (2) confirming the plan of arrangement, and (3) confirming and approving settlement with FDIC (which were appealed to the District Court) are only incidentally and collaterally involved on this appeal which is a review of the appropriate exercise of the District Court's judgment on the issue of mootness.
The tactics adopted by Appellants in the Bankruptcy Court and the District Court are lessons in procedural ineptitude. After the three substantive orders (disallowing the claims, approving the settlement, and confirming the plan) were entered, Appellants did not at any time apply to the bankruptcy judge for a stay, and this despite the unambiguous directions of Bankruptcy Rule 805. 1
Instead, Appellants waited nine days and then filed a petition in the District Court for a Writ of Mandamus. The petition prayed for an order of the District Court vacating the three substantive orders of the Bankruptcy Court. The petition was accompanied by a motion to stay the three orders and to expedite the hearing. The petition for a Writ of Mandamus in lieu of a direct appeal was a procedural monstrosity. 2
At that time no direct appeal had been taken. The District Court held a hearing on the petition for mandamus on July 19, 1979 and denied the petition and the motion for a stay, as well. The Notice of Appeal to the District Court from the three orders in question was not filed until July 20, 1979.
The Appellees have moved to dismiss the appeals as moot. Just prior to the date scheduled for oral argument, this court requested a report from the Appellees disclosing the extent to which the confirmed plan of arrangement had been implemented and consummated. A reply was received by letter dated April 2, 1980 which is annexed hereto as an appendix. Appellants have not disputed this report.
In the field of the administration of estates under the bankruptcy laws, the policy of the law strongly supports a requirement that a stay be obtained if review on appeal is not to be foreclosed because of mootness. This policy was memorialized by a 1976 amendment to Rule 805 by the addition of the last sentence:
"Unless an order approving a sale of property or issuance of a certificate of indebtedness is stayed pending appeal, the sale to a good faith purchaser or the issuance of a certificate to a good faith holder shall not be affected by the reversal or modification of such order on appeal, whether or not the purchaser or holder knows of the pendency of the appeal."
This amendment is said to be declaratory of existing case law. In the Matter of Abingdon Realty Corp., Bankrupt, 530 F.2d 588 (4th Cir. 1976). It has been applied to bar consideration of an appeal on the merits in a number of situations.
The Abingdon case, supra, involved the sale of a bankrupt's principal asset in a straight bankruptcy proceeding. In the Matter of National Homeowners Sales Service Corp., 554 F.2d 636 (4th Cir. 1977), the debtor's principal asset was ordered sold in a Chapter XI proceeding. An appeal was taken but no stay was obtained. Again in Country Fairways, Inc. v. Mottaz, 539 F.2d 637 (7th Cir. 1976), there was a confirmed sale of all the bankrupt's assets. Although the order was appealed, no stay was obtained. A like situation obtained in Sterling v. Blackwelder, 405 F.2d 884 (4th Cir. 1969). In re Rock Industries Machinery Corp., 572 F.2d 1195 (7th Cir. 1978), also involved a confirmed sale and an appeal not supported by a stay order. In each of the foregoing cases the merits of the appeals were not considered because no stays were obtained. See: Annotation, 44 A.L.R.Fed. 896. In each of them the appeals were dismissed because the issues were moot. In re Royal Properties, Inc., 621 F.2d 984 (1980).
Both Appellants and Appellees rely upon the decision of our court in Matter of Combined Metals Reduction Co., 557 F.2d 179 (9th Cir. 1977). This court had before it ten separate appeals from orders entered by the District Court in a proceeding for the reorganization of Combined Metals under Chapter X of the Bankruptcy Act. 11 U.S.C. § 501 et seq. The plan of reorganization was confirmed by court order on June 4 " the practical necessities involved in a successful reorganization require that unless an order of the bankruptcy judge or the district judge is stayed pending appeal, the trustee's acts in accordance with that order should not thereafter be subject to reversal, even if the order is subsequently overturned on appeal."
1973. There had been one sale of property on court order prior to such confirmation. Subsequently other sales and transactions were effectuated after specific court authorization followed by an order of confirmation and approval. The appellee-trustee moved to dismiss eight of the ten appeals on the ground of mootness. The Circuit Court dealt with each of the appeals independently. In a thoroughly reasoned opinion it concluded that six of the appeals were moot and...
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