BCD Corp., In re

• Decision Date: 21 July 1997
• Docket Number: No. 95-4171,95-4171
• Citation: 119 F.3d 852
• Parties: , 97 CJ C.A.R. 1222 In re BCD CORPORATION, f/k/a Provo Aquatic Park, Inc., Debtor. GOLFLAND ENTERTAINMENT CENTERS, INC., Appellant, v. PEAK INVESTMENT, INC.; BCD Corporation and Robert E. Wilcox, the Commissioner of Insurance of the State of Utah and liquidator of Southern American Insurance Company, Appellees.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 852

119 F.3d 852

31 Bankr.Ct.Dec. 212, 97 CJ C.A.R. 1222

In re BCD CORPORATION, f/k/a Provo Aquatic Park, Inc., Debtor GOLFLAND ENTERTAINMENT CENTERS, INC., Appellant, v. PEAK INVESTMENT, INC.; BCD Corporation and Robert E Wilcox, the Commissioner of Insurance of the State of Utah and liquidator of Southern American Insurance Company, Appellees.

No. 95-4171.

United States Court of Appeals Tenth Circuit.

July 21, 1997.

Jeffrey L. Shields (Zachary T. Shields, with him on the brief) of Callister Nebeker & McCullough, Salt Lake City, UT, for Appellant.

Craig Carlile of Ray Quinney & Nebkeker, Provo, UT; and Duane H. Gillman (Leslie J. Randolph, with him on the brief) of McDowell & Gillman, Salt Lake City, UT, for Appellee.

Before EBEL, HOLLOWAY, and MURPHY, Circuit Judges.

HOLLOWAY, Circuit Judge.

Appellant Golfland Entertainment Centers, Inc. (Golfland) appeals from the district court's order affirming the bankruptcy court's vacating of a confirmed sale. We have jurisdiction over the district court's order pursuant to 28 U.S.C. § 1291 and we affirm.

I

The facts of this appeal, which are essentially undisputed except as noted below, are as follows:

The subjects of this appeal are a water park, a storage shed, and a barn property, all located in Provo, Utah. Appellee BCD Corporation (BCD) owned the water park, and the other two properties were owned by third parties who are not parties to this appeal. See I App. at 5, 49-50. When BCD entered into Chapter 11 bankruptcy proceedings, it sought to liquidate the water park, and the storage shed and barn property came under the jurisdiction of the bankruptcy court because all three had to be sold together to satisfy Utah zoning ordinances. Id. at 50-51. Between October and December 1993, B & B Properties Co. (B & B) and BCD made a number of offers and counteroffers regarding the three properties, culminating in an agreement on December 7, 1993. Id. at 5-34. The agreement noted that the bankruptcy court could approve another offer instead. Id. at 27.

BCD then sought higher and better offers than B & B's, with such offers to be filed at least two days before a hearing on BCD's motion to confirm the sale to B & B. Id. at 2-3. Golfland, Peak Investments, and University Properties, Inc. (UPI) submitted written offers. II App. at 574-75, 587. On February 22, 1994, BCD solicited additional offers by way of an oral auction. I App. at 390. At the oral auction, the bidders tracked the terms of UPI's offer, which waived the conditions of closing contained in paragraph 5 of the original B & B offer. ¹ Id. at 407-08. The bidding continued between Golfland and Peak Investments, with Golfland submitting the highest bid at $2.61 million. II App. at 467. Peak submitted a back-up bid of $2.2 million. I App. at 373-74. The bankruptcy court confirmed the sale to Golfland orally on February 23, 1994, id. at 66, and by written order on March 28, 1994. Id. at 85-87.

However, on April 7, 1994, Peak filed a motion to enforce sale to the alternative bidder, claiming, inter alia, that Golfland had changed the terms of the bid. Id. at 92. At issue was whether Golfland was demanding to be reimbursed for any environmental clean-up costs that might be incurred. Id. at 96. Golfland contended that no modification of terms had occurred. Instead, it argued that it had not waived the environmental warranties, only the conditions to closing. II App. at 685-86.

In response to this dispute, the bankruptcy court received evidence and testimony in a four-day hearing. The court's significant oral findings which followed at the June 6, 1994, hearing were that:

All of the written offers track the B & B offer except that of University, which waived nearly all of the conditions.

At the auction, University agreed that that included most of paragraph 5 of the B & B offer. Everyone at the offer believed that the risk of environmental problems on the property being purchased was thereby shifted to the buyer.

....

Thereafter, a dispute arose between the sellers and Golfland about the terms of the sale. The sellers agreed to make the following concessions to Golfland. Among others they were that the sellers would bear up to $200,000 of the costs of environmental remediation and one half of a $33,000 bond, which had been filed to meet the requirements of the City of Provo.

....

Mr. Monson, the attorney documenting the transaction for the sellers, wanted to attach to the order a document showing what the offer was, but because the parties couldn't agree just referred to the offer made at the sale.

....

In this case the terms were not disclosed to the court. The terms that the parties thought they were bargaining on and bidding on turn out not to be the terms of the sale which is ultimately proposed to the court. The court didn't have the opportunity to give that vital protection because the court didn't have the information that it needed. The parties didn't have the information they needed to make appropriate objections and arguments. That part of the notice and hearing requirement for the sale of property simply was not met.

II App. at 789-91 (emphasis added).

The bankruptcy court's written order vacated the confirmed sale to Golfland, stating in part that

1. The sale to Golfland is not a sale which has been approved by the Court, and that sale is, therefore, not authorized.

2. The major changes in the terms of the sale did not give the bidders a fair opportunity to bid at the sale and the notice and further proceedings did not give the Court an opportunity to make a reasoned decision about whether or not to approve the sale and other parties an opportunity to properly object.

3. The Order Approving Sale of Property Free and Clear of Liens, Interests and Encumbrances dated March 31, 1994, is hereby set aside.

4. The Debtor is ordered not to proceed with a final sale of the water park property without further order of the Court.

DATED this 6 day of July, 1994.

II App. at 807.

The district court affirmed the bankruptcy court's decision, concluding that the bankruptcy court's finding of a mistake in the sale was supported by the record and was legally sufficient to set aside the sale. Id. at 1015-16. This appeal followed.

After the filing of the notice of this appeal, but before oral argument to this court occurred, BCD sold the water park and adjacent properties to BTS with a high bid of $3.6 million in a second sale. See Aple. Trustee's Reply to Appellant's Memorandum of Points and Authorities and Authorities in Opposition to Appellee's Motion for Summary Disposition, Ex. J, at 2; id. at Ex. K, at 2. ² Golfland did not seek a stay of this second sale to BTS; Golfland argues that its "decision not to seek a stay of the sale to BTS was based, in part, upon the representations of the Debtor [BCD] and the Bankruptcy Court that Golfland's interest would attach to such proceeds." See Aplt. Memorandum of Points and Authorities in Opposition to Appellee's Motion for Summary Disposition, at 10. Arguing that the property which is the subject of this appeal has been sold to a good faith purchaser, BCD has moved to dismiss as moot this appeal from the order vacating the first sale to Golfland, which led to the second sale to BTS.

II

We address the issue of mootness as a threshold question because in the absence of a live case or controversy, we have no subject-matter jurisdiction over an appeal. See Beattie v. United States, 949 F.2d 1092, 1093 (10th Cir.1991).

BCD argues that this appeal should be dismissed as moot because the subject of the bankruptcy appeal--the water park--has been sold to a good faith purchaser and hence there would be no remedy available even if Golfland were to prevail on the merits of its appeal. See 11 U.S.C. § 363(m) (stating that the validity of a good faith purchase will not be disturbed unless the sale is stayed pending appeal). In Tompkins v. Frey, 706 F.2d 301, 304-05 (10th Cir.1983), we held that where a party appealing from an order authorizing the sale of a debtor's property fails to obtain a stay of the order and the property is subsequently sold to a "good faith purchaser," the property is removed from the jurisdiction of the courts and the appeal is mooted.

However, in Osborn v. Durant Bank & Trust Co., 24 F.3d 1199, 1203-04, 1210 (10th Cir.1994), we held that because it was not impossible there to grant some measure of effective relief (in that case under Texas constructive trust principles), the appeal was not moot, although the debtors had not obtained a stay of the sale of their home. We noted that § 363(m) had removed only the possibility of remedies that would affect the validity of a sale to a good faith purchaser. Id. at 1203-04. Moreover, we cited the applicable Texas constructive trust principles and their flexibility and breadth. Id. And we note that on remand a money judgment of some $9,276 was recovered by the debtors due to the exercise of equitable powers of the bankruptcy court, In re Osborn, 176 B.R. 941, 949 (1994), aff'd, 83 F.3d 433 (10th Cir.1996) (table), after determination of the facts on remand. That recovery was upheld by the district court and this court on appeal in unpublished opinions. Osborn is thus an exception to the general rule of Tompkins and is available here because, as a practicable matter, equitable relief might be granted, as noted below.

In a similar case the Seventh Circuit held that an appeal would not be dismissed as moot where there was a possibility of recovery, to which the appellant might be entitled, from proceeds of a sale of property in a bankruptcy case. See Matter of Lloyd, 37 F.3d 271 (7th Cir.1994). A sale of land was made without a stay being sought and it was held that therefore the debtor's claim for return of the land was moot. Nevertheless there were proceeds from the sale and the debtor's assertion that she should recover compensation from those undistributed funds for the value of land...