Charlton, In re, 82-5579

• Decision Date: 23 June 1983
• Docket Number: No. 82-5579,82-5579
• Citation: 708 F.2d 1449
• Parties: In re Richard CHARLTON, Debtor. James P. DUNLAVEY, Receiver, Plaintiff-Appellee, v. ARIZONA TITLE INSURANCE AND TRUST COMPANY, an Arizona corporation, et al., Defendants, Richard Charlton, Debtor-Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1449

708 F.2d 1449

10 Bankr.Ct.Dec. 981

In re Richard CHARLTON, Debtor James P. DUNLAVEY, Receiver, Plaintiff-Appellee, v. ARIZONA TITLE INSURANCE AND TRUST COMPANY, an Arizona corporation, et al., Defendants Richard Charlton, Debtor-Appellant.

No. 82-5579.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Jan. 12, 1983.

Decided June 23, 1983.

Jerry L. Cochran, Burch & Cracchiolo, Phoenix, Ariz., for plaintiff-appellee.

John P. Frank, Lewis & Roca, Phoenix, Ariz., for debtor-appellant.

Appeal from the United States District Court for the District of Arizona.

Before TANG, ALARCON, Circuit Judges, and KENYON, ^* District Judge.

ALARCON, Circuit Judge:

Appellant Richard Charlton (Charlton) appeals from the order of the district court which denied his petition for a writ of mandamus to require the bankruptcy court to vacate its orders approving and confirming the sale of the major asset of the estate, a parcel of real property (the property). For the reasons set forth below, we conclude that the district court's denial of the petition for writ of mandamus was proper. We do not reach the merits of Charlton's contentions concerning the validity of the orders approving and confirming the sale of the property. These issues were dismissed for mootness in this court's order of August 5, 1982.

I.

On May 7, 1979, Charlton filed a petition for relief under Chapter XI of the Bankruptcy Act. ¹ On November 24, 1980, Charlton filed a second amended plan of arrangement in the United States Bankruptcy Court, for the sale of the property to C.H. Alberding (Alberding). ²

Before confirmation hearings took place on Charlton's proposed plan, the Receiver in Bankruptcy filed an application with the bankruptcy court to sell the property to Cortez Development Corp. (Cortez).

The bankruptcy court considered the plans presented by Charlton and the Receiver at a February 2, 1981 hearing which was attended by Charlton, the Receiver, Cortez, Alberding, their respective counsel, twenty creditors of the estate, and other interested persons. During the hearing, the court announced its approval of the sale of the property to Cortez.

On February 6, 1981, Charlton filed a motion for reconsideration of the order approving the sale. On February 11, 1981, the bankruptcy court denied Charlton's motion for reconsideration. On February 12, 1981, On March 24, 1981, the district court enjoined the closing of the Cortez sale pending the filing of concurrent briefs by the parties. Following a hearing, the district court affirmed the bankruptcy court's orders in a memorandum and order filed April 8, 1981.

                the court issued a written order approving sale of the property to Cortez free and clear of liens and encumbrances. 3   Thereafter, Charlton moved to vacate these orders.  These motions were denied by the bankruptcy court.  Charlton appealed to the district court.
                

Pursuant to a motion filed by Cortez, the bankruptcy court held an evidentiary hearing on April 13, 1981 to determine the status of Cortez as a good-faith purchaser. Charlton, Cortez, and their respective counsel were present at this proceeding. The court found Cortez to be a good-faith purchaser. Charlton did not appeal this finding. The court gave Cortez five working days to comply with the terms and conditions of its land purchase contract that had been approved by the court in its February 12, 1981, order.

Charlton also filed motions in the district court on April 13, 1981 seeking reconsideration of the order issued April 8, 1981, and for a stay of the bankruptcy court's order approving sale of the property. The district court denied the motions. Thereafter Charlton timely filed a notice of appeal with this court.

On April 20, 1981, this court stayed the order of the bankruptcy court approving the sale to Cortez until April 22, 1981 or until further order of the court whichever occurred first. To aid this court in its consideration of Charlton's motion for a stay, we issued an order on April 23, 1981 extending the stay for 21 days and instructing the district court to remand the matter to the bankruptcy court for a determination as to whether the Alberding offer provided prompt payment to all creditors of the estate.

After a hearing attended by Charlton, his attorneys, Cortez, and the Receiver, the bankruptcy court found that the Alberding offer was inadequate to pay the claims against the estate and all administrative costs.

Notwithstanding the finding that the Alberding offer was inadequate, on May 19, 1981, this court again stayed the order approving the sale to Cortez pending appeal. Extension of the stay was conditioned upon Charlton's filing a bond of adequate security, posted within a time and in an amount to be determined by the bankruptcy court.

On June 12, 1981, Charlton submitted a million dollar bond in the form of a letter of credit to the district court. The bond was rejected because it did not provide coverage for Cortez and was not supported by adequate security.

Charlton then filed an emergency motion with this court seeking a ruling that: (1) a letter of credit would be adequate; and, (2) that the bond should not run in favor of Cortez. Thereafter, Charlton advised this court that he would be posting a cash bond with the district court in the required amount. On June 12, 1981, this court entered an order declining to intervene any further in the matter, stating that the issue concerning the adequacy of the letter of credit was now moot.

On June 18, 1981, the bankruptcy court denied Charlton's motion requesting permission for separate bonding to run to the benefit of Cortez. Charlton did not appeal this order. Charlton withdrew the letter of credit that had been unacceptable to the district court and failed to submit a cash bond in the stipulated amount or with the specified beneficiaries. Because of the failure of Charlton to post an adequate bond, the stay issued by this court expired.

The property was sold on or about June 17, 1981. The Receiver accepted the full cash price of $1,175,000, and conveyed title to Seventh Camel, the named nominee of

Cortez. At the time of the sale, Charlton's appeal (from the affirmance of the bankruptcy court order of February 12, 1981, approving sale of the property) was pending in this court.

II.

On June 23, 1981, Cortez filed a motion with this court to dismiss Charlton's appeal for mootness. Charlton opposed the motion and requested a factual determination as to whether Seventh Camel was a good-faith purchaser pursuant to Rule 805. The issue of Seventh Camel's good-faith status had not been raised previously by Charlton in the bankruptcy court or in the district court.

On July 31, 1981, this court issued the following order:

Appellee's motion to dismiss this appeal as moot is granted, and the appeal is dismissed. See In re Royal Properties, Inc., 621 F.2d 984 (9th Cir.1980). The matter is remanded to the district court with directions to vacate the judgment appealed from, and to remand the matter to the bankruptcy court for similar action. Appellee's motion for substitution of parties is denied as moot. (emphasis added).

In response to the court's order of July 31, 1981, the district court, on remand, issued the following order on August 5, 1981:

pursuant to the order of the Ninth Circuit Court of Appeals, IT IS ORDERED: The judgment appealed from herein is vacated and the matter is remanded to the bankruptcy court for similar action. (emphasis added).

On the same date (August 5, 1981), this court issued a substituted order which provided as follows:

The court's order of July 31, 1981, is vacated. Appellee's motion to dismiss this appeal as moot is granted, and the appeal is dismissed. See In re Royal Properties, Inc., 621 F.2d 984 (9th Cir.1980). The matter is remanded to the district court with directions to vacate the judgment appealed from, and to remand the matter to the bankruptcy court for appropriate action. Appellee's motion for substitution of parties is denied as moot. (emphasis added).

On August 19, 1981, Charlton filed a petition with this court for reconsideration of our order of dismissal for mootness, or in the alternative for clarification of the August 5, 1981 order. Cortez also filed a motion for clarification. On August 28, 1981 this court denied each motion and issued the following order:

Appellee's motion for clarification of the Court's order of August 5, 1981, is denied. Under the principles set forth by the Supreme Court in United States v. Munsingwear, Inc., 340 U.S. 36 [71 S.Ct. 104, 95 L.Ed. 36] (1950), the proper course of action for an appellate court to take when an appeal becomes moot is to vacate the judgment appealed from--thereby relegating the parties to the positions they then occupied, albeit without the compulsion of a binding decree. As applied in this case, this procedure requires that we leave the parties in the positions they would have occupied had no appeal been taken from the bankruptcy court's order approving the sale of the property at issue. The court having been deprived of the opportunity to rule on the merits of the appeal by its becoming moot, no other disposition is warranted--nor is any other disposition required in order to protect appellees' interests.

Appellant's petition for reconsideration and alternative motion for clarification are denied.

Charlton filed petitions for a rehearing with this court and for certiorari with the United States Supreme Court. Both were denied.

This court's order, dated August 5, 1981, which vacated the July 31, 1981 order was not received in the district court until August 14, 1981. On September 4, 1981, the bankruptcy court issued the following order:

This matter having come on for hearing on special emergency matter before this Court at approximately 12 p.m. September 1. That the real property described in the Receiver's Deed attached hereto as Exhibit 1 is the property of Seventh Camel...