In re 255 Park Plaza Associates Ltd. Partnership
| Citation | 100 F.3d 1214 |
| Decision Date | 19 November 1996 |
| Docket Number | Nos. 95-1738,s. 95-1738 |
| Parties | In re: 255 Park Plaza Associates Ltd. Partnership, Debtor. 255 Park Plaza Associates Ltd. Partnership (95-1738) and First of America Bank -- Southeast Michigan, N.A. (95-1761), Plaintiffs-Appellants, v. Connecticut General Life Insurance Company, Defendant-Appellee. /1761 |
| Court | United States Courts of Appeals. United States Court of Appeals (6th Circuit) |
On Appeal from the United States District Court for the Eastern District of Michigan
Sheldon S. Toll, (argued and briefed) Honigman, Miller, Schwartz & Cohn, Detroit, MI, for 255 Park Plaza Associates Ltd. Partnership.
Robert D. Mollhagen (briefed), Howard & Howard, Bloomfield Hills, MI, James H. Geary (argued), Howard & Howard, Lansing, MI, for First of America Bank-Southeast Michigan, N.A.
William T. Burgess, Dickinson, Wright, Moon, Van Dusen & Freeman, Bloomfield Hills, MI, Clifton R. Jessup Jr. (argued and briefed), Dixon & Dixon, Dallas, TX, for Connecticut General Life Insurance Company in No. 95-1761.
Before: GUY, RYAN, and MOORE, Circuit Judges.
MOORE, J., delivered the opinion of the court, in which GUY and RYAN, JJ., joined, with GUY, J. (p. 13), also delivering a separate concurring opinion.
The debtor in this single-asset Chapter 11 bankruptcy case, 255 Park Plaza Associates Limited Partnership ("Debtor"), and First of America Bank--Southeast Michigan, N.A. ("FOA"), a creditor of Debtor, appeal the decision of the United States District Court for the Eastern District of Michigan, which affirmed the decision of the United States Bankruptcy Court for the Eastern District of Michigan. The bankruptcy court confirmed the plan of reorganization submitted by Connecticut General Life Insurance Company ("Connecticut General") and denied confirmation of Debtor's plan. The bankruptcy court also voided the claim of FOA for lack of consideration and lack of a promise by Debtor to pay FOA. Because Debtor's and FOA's appeals are moot, we dismiss the appeals for lack of jurisdiction.
Debtor, a Michigan limited partnership, owned and operated an office building at 255 S. Woodward Avenue, Birmingham, Michigan. The property, which was Debtor's primary asset, was valued at $7.5 million. Connecticut General held a valid first mortgage on the property and also held a valid first security interest in all of the rents, profits, and leases from the property. The mortgage and security interest were security for an $8 million promissory note executed by Debtor and payable to Connecticut General. On March 8, 1993, Debtor commenced this single-asset bankruptcy case by filing a voluntary petition under Chapter 11 of the Bankruptcy Code. At the time of filing, Debtor was indebted to Connecticut General for $8,161,339.17.
Debtor and Connecticut General filed competing plans of reorganization. While Debtor's plan proposed a reorganization of Debtor, Connecticut General's plan proposed a liquidation of the property through a sale. On July 14, 1993, Connecticut General sent letters to all non-insider unsecured creditors offering to purchase their respective claims against Debtor. It subsequently purchased all but one of these claims. Connecticut General, however, refused to recognize FOA's alleged claim. FOA possessed a mortgage on the property that was granted by Debtor after Connecticut General's mortgage was granted. The mortgage was given for a $1.5 million promissory note, which was executed and delivered by Bloomfield Long Lake Associates Limited Partnership ("Bloomfield") and further secured by a separate guarantee from Mike Kojaian, C. Michael Kojaian, and Kenneth J. Kojaian ("the Kojaians"). The Kojaians are the sole and equal limited partners of Debtor, and they are the sole and equal shareholders of the corporation that is Debtor's general partner. They also control Bloomfield under a similar relationship. J.A. at 1924. It is undisputed that Debtor never signed the promissory note, guarantee, or any other debt instrument for FOA.
Connecticut General filed an objection to FOA's claim, contending that Debtor had made no promise to pay, that there was no consideration given to Debtor, and that FOA had no value in the property. The bankruptcy court agreed with Connecticut General and entered an order finding that FOA had no claim under the Bankruptcy Code.
The bankruptcy court next confirmed Connecticut General's plan and denied confirmation of Debtor's plan. Debtor then appealed to the district court, alleging numerous deficiencies with Connecticut General's plan and challenging the denial of its own plan as well as the denial of FOA's claim. FOA also appealed, challenging the denial of its claim as well as the denial of Debtor's plan. Simultaneous with its appeal to the district court, Debtor filed a motion for a stay of the sale of the property pending appeal with the bankruptcy court. The bankruptcy court denied this motion, finding that Debtor was not likely to succeed on the merits of its appeal. Debtor appealed this ruling to the district court, which concluded that "[t]here is no likelihood of success on the merits of the appeal and no serious issue exists." Order Den. Mot. for Stay at 2; J.A. at 71. Neither Debtor nor FOA appealed to the Sixth Circuit regarding this order denying a stay. In fact, FOA never moved in any court for a stay of the sale of the property. On April 24, 1994, pursuant to Connecticut General's plan, the property in question was sold at an auction. While there were several bidders at the auction, including both Connecticut General and Debtor, Connecticut General was the highest, purchasing the property for $6.7 million.
On June 2, 1995, the district court issued its order that affirmed all of the decisions of the bankruptcy court. It concluded the following: (1) Debtor's appeal was not moot, because Michigan state law provided for a right of redemption that had not elapsed yet; (2) because Connecticut General was an undersecured creditor, its failure to disclose its legal fees did not violate 11 U.S.C. Section(s) 1129(a)(4); (3) Connecticut General did not act in bad faith when it purchased claims prior to the vote on Debtor's plan; (4) FOA's claim was properly disallowed; (5) Connecticut General's plan could properly be silent on the issue of which taxes were to be paid by the liquidating trust; and (6) Connecticut General's plan was capable of performance. District Ct. Order; J.A. at 18-44.
Debtor has appealed conclusions (2), (3), (4), and (6), and FOA has appealed conclusion (4). Debtor now also contends that because Connecticut General's plan provided for the sale of the property, it improperly granted Connecticut General a deficiency claim. In addition to contesting all of these arguments, Connecticut General alleges that appellants' appeals are now moot. Because we agree with Connecticut General that Debtor's and FOA's appeals are moot, we decline to reach the merits of appellants' arguments.
In a bankruptcy proceeding, the district court reviews the bankruptcy court's conclusions of law de novo and upholds its findings of fact unless they are clearly erroneous. Nicholson v. Isaacman (In re Isaacman), 26 F.3d 629, 631 (6th Cir. 1994). This court, in turn, considers directly the judgment of the bankruptcy court, "using the same standards of review as the district court." Id.
Connecticut General argues that because of bankruptcy's mootness rule, this court should not reach the merits of Debtor's or FOA's claims. "Bankruptcy's mootness rule applies when an appellant has failed to obtain a stay from an order that permits a sale of a debtor's assets." Onouli-Kona Land Co. v. Estate of Richards (In re Onouli-Kona Land Co.), 846 F.2d 1170, 1171 (9th Cir. 1988). The bankruptcy mootness rule differs from general mootness law because it is based on "the general rule that the occurrence of events which prevent an appellate court from granting effective relief renders an appeal moot, and the particular need for finality in orders regarding stays in bankruptcy." Id. at 1172 (emphasis added) (citation omitted). See also Miami Ctr. Ltd. Partnership v. Bank of New York, 838 F.2d 1547, 1553-54 (11th Cir.), cert. denied, 488 U.S. 823 (1988) . Because appellants failed to obtain a stay, Connecticut General contends that the present case falls squarely within this mootness doctrine.1
Bankruptcy's mootness rule is codified at 11 U.S.C. Section(s) 363(m): The reversal or modification on appeal of an authorization under subsection (b) or (c) of this section 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.
Subsections (b) and (c) in turn refer to transactions undertaken by the bankruptcy trustee. In this case, the sale of the building was made by the "Liquidating and Disbursing Agent," a post-confirmation trustee, created by Connecticut General's liquidation plan. See Mancuso v. Sullivan (In re Sullivan), 153 B.R. 751, 757 n.6 (Bankr. N.D. Tex. 1993) (). The first question, therefore, is whether bankruptcy's mootness rule is limited to what is codified in Section(s) 363(m).
The Ninth Circuit analyzed this question in depth and answered it in the negative. In Algeran, Inc. v. Advance Ross Corp., 759 F.2d 1421 (9th Cir. 1985), the court recognized that under former...
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