American Grain Ass'n v. Lee-Vac, Ltd., LEE-VA
| Decision Date | 05 November 1980 |
| Docket Number | LTD,No. 80-3303,LEE-VA,80-3303 |
| Citation | 630 F.2d 245 |
| Parties | Bankr. L. Rep. P 67,742 AMERICAN GRAIN ASSOCIATION, Plaintiff-Appellee, v., Defendant-Appellant. Summary Calendar. . Unit A |
| Court | U.S. Court of Appeals — Fifth Circuit |
James G. Burke, Jr., New Orleans, La., for defendant-appellant.
Scofield, Bergstedt, Gerard, Hackett & Mount, Thomas M. Bergstedt, Lake Charles, La., for plaintiff-appellee.
Appeal from the United States District Court for the Western District of Louisiana.
Before GEE, RUBIN and RANDALL, Circuit Judges.
In the course of a proceeding for an arrangement under Chapter XI of the Bankruptcy Act, the debtor, American Grain Association, solicited bids for the sale of its grain elevator in Mermentau, Louisiana. The elevator stood on property subleased to American Grain by Lee-Vac, Ltd., which leased the property from the owner, the Fred B. and Ruth B. Zigler Foundation. The most favorable bid for the elevator was made by Bunge Corporation. American Grain accepted this bid and negotiated with Bunge a "Sublease with Option to Purchase." Under the terms of this instrument, Bunge was to lease the elevator and sublease the site from American Grain for one year. American Grain also granted Bunge an option to purchase the elevator at the end of the year. If Bunge decided to purchase the elevator, American Grain agreed to assign its remaining interest in the lease of the site to Bunge.
The lease agreement between American Grain and Lee-Vac provided that American Grain would not assign or sublease without the written approval of Lee-Vac and the Zigler Foundation. The lease agreement also stated that this "approval will not be unreasonably withheld."
In Mid-December, 1979, American Grain requested that Lee-Vac and the Zigler Foundation approve the agreement with Bunge. The Foundation promptly consented to the arrangement. Although American Grain informed Lee-Vac that "time was of the essence" in its efforts to close the deal with Bunge, Lee-Vac never responded to American Grain's request for consent. On January 4, 1980, American Grain filed a petition in the bankruptcy court requesting that the court hold a hearing at which Lee-Vac would be required to show cause why it should not be ordered to approve the agreement with Bunge.
On February 6, 1980, the bankruptcy court held such a hearing and found the following facts: (1) Lee-Vac had not given American Grain any reason why its approval was withheld; (2) Lee-Vac had sought no information regarding the contents of the agreement between American Grain and Bunge; (3) Lee-Vac had sought no information regarding the financial strength of Bunge. On the basis of these facts, the bankruptcy court concluded that Lee-Vac had unreasonably withheld its approval and the court ordered Lee-Vac to consent to the agreement.
Lee-Vac appealed the bankruptcy court's order to the district court which affirmed the bankruptcy court's judgment. Lee-Vac then filed a notice of appeal to this court. Lee-Vac did not, however, seek a stay of the order requiring it to consent. Lee-Vac complied with the order and gave written approval of the arrangement between American Grain and Bunge, although Lee-Vac noted in a certificate appended to the consent that it was appealing the order of the bankruptcy court. Thereafter, American Grain and Bunge closed their transaction and the sublease and option agreements were executed.
American Grain subsequently filed a motion to dismiss Lee-Vac's appeal as moot on the grounds that Lee-Vac's failure to seek a stay of the order entitled American Grain and Bunge to treat the judgment as final notwithstanding the pending appeal. American Grain argues that since Bunge and American Grain took irreversible action in reliance on the order, the appeal has become moot because the relief Lee-Vac seeks (i. e. the prohibition of the sublease) can no longer be obtained. We agree that Lee-Vac's appeal is now moot.
Although as a general rule a party need not seek a stay of a lower court's judgment in order to protect its right to appeal, the "consequence of failing to obtain a stay is that the prevailing party may treat the judgment of the district court as final ...." 9 J. Moore, Federal Practice P 208.03, at 8-9 (2nd ed. 1979). Thus, in the absence of a stay, action of a character which cannot be reversed by the court of appeals may be taken in reliance on the lower court's decree. As a result, the court of appeals may become powerless to grant the relief requested by the appellant. Under such circumstances the appeal will be dismissed as moot. Moore, id. at 8-10.
This general rule of appellate procedure is made specifically applicable to proceedings in bankruptcy...
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