In re Fullmer, Bankruptcy No. S-03-23102-BAM.

• Citation: 323 B.R. 287
• Decision Date: 05 April 2005
• Docket Number: Adversary No. 04-1228 BAM.,Bankruptcy No. S-03-23102-BAM.
• Parties: In re Patrick FULLMER, Debtor. Scott Acton, Plaintiff, v. Patrick Fullmer, Defendant.
• Court: United States Bankruptcy Courts. Ninth Circuit. U.S. Bankruptcy Court — District of Nevada

323 B.R. 287

In re Patrick FULLMER, Debtor.

Scott Acton, Plaintiff, v. Patrick Fullmer, Defendant.

Bankruptcy No. S-03-23102-BAM.

Adversary No. 04-1228 BAM.

United States Bankruptcy Court, D. Nevada.

April 5, 2005.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Gary L. Compton, Michael J. Dawson, Las Vegas, NV, for Debtor.

J. Michal Bloom, Las Vegas, NV, for U.S. Trustee.

David Mincin, Law Offices of Richard McKnight, P.C., Richard McKnight, Las Vegas, NV, for Plaintiff.

Michael J. Harker, Las Vegas, NV, for Defendant/Debtor.

AMENDED AND RESTATED OPINION ON REQUEST FOR STAY PENDING APPEAL

Scott Acton ("Acton") applies for a stay pending appeal of this court's judgment denying him specific performance of a land sale contract ("Contract"). Specifically, he seeks a stay of this court's order that his lis pendens against the property subject to the Contract be expunged. The court will deny Acton's application.

Patrick Fullmer ("Fullmer") filed a Chapter 11 case in October of 2003. As explained below, part of the reason for Fullmer's filing was to reject certain executory contracts for the sale of four parcels of land, with the intent to then resell them at a higher price. After Fullmer successfully rejected these pre-petition contracts, he entered into a process, approved by the court, to resell the parcels for 60% more than the pre-petition price.

One of the buyers in this process was Acton. As set forth below, a dispute arose during July of 2004 over when Acton had to pay the purchase price. When that dispute could not be resolved, Acton filed an adversary proceeding against Fullmer for specific performance of Fullmer's obligations to improve the land, and for a conveyance of the land after the price was paid. To preserve his right, Acton also immediately filed a lis pendens against the land.

Trial on this adversary proceeding was held on March 5, 2005. Each side filed post-trial briefs on March 11, 2005. The court entered judgment for Fullmer and against Acton on March 25, 2005. A written opinion setting for the grounds for this judgment was also entered on that date.

Following entry of judgment, Fullmer has moved: (1) to expunge the lis pendens; (2) for authority to sell the land at issue to another person; and (3) for attorneys' fees due him under the terms of the Contract.

Acton filed his notice of appeal on March 30, 2005. By this application, Acton seeks to stay or prevent items (1) and (2) above. Despite the filing of a notice of appeal, this court has jurisdiction to hear Acton's motion. Ho v. Dai Hwa Elec. (In re Ho), 265 B.R. 603 (9th Cir. BAP 2001).

I. Applicability of Rules 7062 and 8005

This action arises out of an adversary proceeding, and thus the 7000 series of rules of the Federal Rules of Bankruptcy Procedure apply. Rule 7062, in turn, incorporates the provisions of Rule 62 of the Federal Rules of Civil Procedure. Acton believes that Rule 62(d) applies to this case. That rule states:

(d) Stay Upon Appeal. When an appeal is taken the appellant by giving a supersedeas bond may obtain a stay subject to the exceptions contained in subdivision (a) of this rule. The bond may be given at or after the time of filing the notice of appeal or of procuring the order allowing the appeal, as the case may be. The stay is effective when the supersedeas bond is approved by the court.

In this regard, Acton asserts that a stay is his right under Rule 62(d) upon posting of an appropriate bond. See, e.g., 11 CHARLES A. WRIGHT, ARTHUR R. MILLER & MARY KAY KANE, FEDERAL PRACTICE AND PROCEDURE § 2905, at 520 (2d ed.1995) (indicating that "[t]he stay issues as a matter of right in cases within Rule 62(d)."); 12 MOORE'S FEDERAL PRACTICE § 62.03[1] (3d ed. 2005) ("An appealing party is entitled to a stay of enforcement as a matter of right under Rule 62(d) if a supersedeas bond is filed with the court.").

The initial issue, however, is whether Acton's appeal falls within Rule 62(d). Acton throughout this case has not sought damages for the alleged breach, but has steadfastly demanded specific performance. Fullmer's judgment on his counterclaim is also non-monetary. He sought and received a judicial determination that Acton had materially breached the contract, and that such material breach was grounds for termination of the contract. The result is that all relief requested and ordered was non-monetary in nature.

Cases are uniform, however, that Rule 62(d) pertains primarily, if not exclusively, to monetary judgments. NLRB v. Westphal, 859 F.2d 818, (9th Cir.1988) (defendant's motion for stay upon issuance of bond denied when appeal was from subpoena compliance order); In re Capital West Investors, 180 B.R. 240, 242-43 (N.D.Cal.1995), rev'd on merits after stay denied, 186 B.R. 497 (N.D.Cal.1995) (appeal from plan confirmation order not subject to Rule 62(d)); Government Guarantee Fund of Finland v. Hyatt Corp., 167 F.R.D. 399, 400 (D.Vi.1996) ("The loser in an action for an injunction thus is not entitled to a stay by giving a supersedeas bond."); Stephenson v. Rickles Electronics & Satellites (In re Best Reception Systems, Inc.), 219 B.R. 988, 996 (Bankr.E.D.Tenn.1998) ("[C]ourts have restricted the application of Rule 62(d)'s automatic stay to judgments for money because a bond may not adequately compensate a non-appealing party for loss incurred as a result of the stay of a non-money judgment.'"), quoting Hebert v. Exxon Corp. 953 F.2d 936, 938 (5th Cir.1992).

This view is rooted in the text of Rule 62. Rule 62(d) provides that its provisions regarding the provision of a supersedeas bond are "subject to the exceptions contained in subdivision (a) of this rule." Rule 62(a), in turn, provides for a ten-day automatic stay of the effect of a judgment unless that judgment is a "final judgment in an action for an injunction." Such injunctions include injunctions requiring specific performance, as was requested here. Miller v. LeSea Broadcasting, Inc., 927 F.Supp. 1148, 1151 (E.D.Wis.1996). See also Moore v. Townsend, 577 F.2d 424, 426 (7th Cir.1978). As stated by Wright, Miller & Kane: "[i]f the district court has denied an injunction ... defendant is free to take the action sought to be enjoined...." 11 CHARLES A. WRIGHT, ARTHUR R. MILLER & MARY KAY KANE, FEDERAL PRACTICE AND PROCEDURE § 2904, at 498 (2d ed.1995).

There is a procedure, of course, to obtain a stay in such circumstances. Rule 62(c) fulfills this role. Under Rule 62(c):

When an appeal is taken from [a] ... final judgment ... denying an injunction, the court in its discretion may suspend, modify, restore, or grant an injunction during the pendency of the appeal upon such terms as to bond or otherwise as it considers proper for the security of the rights of the adverse party.

The factors that the court must consider in analyzing Acton's request for an injunction under Rule 62(c) are:

(1) whether the stay applicant has made a strong showing that he is likely to succeed on the merits; (2) whether the applicant will be irreparably injured absent a stay; (3) whether issuance of the stay will substantially injure the other parties interested in the proceeding; and (4) where the public interest lies.

Hilton v. Braunskill, 481 U.S. 770, 776, 107 S.Ct. 2113, 95 L.Ed.2d 724 (1987). See also 11 CHARLES A. WRIGHT, ARTHUR R. MILLER & MARY KAY KANE, FEDERAL PRACTICE AND PROCEDURE § 2904, at 501 (2d ed.1995).

Not surprisingly, these same factors have been incorporated under Federal Rule of Bankruptcy Procedure 8005. That rule states:

Notwithstanding Rule 7062 but subject to the power of the district court and the bankruptcy appellate panel reserved hereinafter, the bankruptcy judge may suspend or order the continuation of other proceedings in the case under the Code or make any other appropriate order during the pendency of an appeal on such terms as will protect the rights of all parties in interest.

Courts in the Ninth and other circuits have construed this rule to incorporate essentially the same standards as applicable under Rule 62(c). In re Universal Life Church, Inc., 191 B.R. 433, 444 (E.D.Cal.1995), aff'd in part and dismissed in part, 128 F.3d 1294 (9th Cir.1997), cert. denied, 524 U.S. 952, 118 S.Ct. 2367, 141 L.Ed.2d 736 (1998). See also Hunt v. Bankers Trust Co., 799 F.2d 1060, 1067 (5th Cir.1986); Virginia Dep't of Med. Assistance Servs. v. Shenandoah Realty Partners, L.P. (In re Shenandoah Realty Partners, L.P.), 248 B.R. 505 (W.D.Va.2000); In re Holtmeyer, 229 B.R. 579, 581 (E.D.N.Y.1999); In re Bradford, 192 B.R. 914, 917 (E.D.Tenn.1996); Beneficial Homeowner Service Corp. v. Moreau (In re Moreau) 135 B.R. 209 (N.D.N.Y.1992); In re Edwards, 228 B.R. 573, 575 (Bankr.E.D.Pa.1999); In re Great Barrington Fair & Amusement, Inc., 53 B.R. 237 (Bankr.D.Mass.1985); 10 COLLIER ON BANKRUPTCY ¶ 8005.7 (15th rev. ed.2005).

Accordingly, I have to assess Acton's request for a stay under the discretionary standards of Rule 62(c) and 8005, not the more mechanical provisions of Rule 62(d). There are thus four elements to consider: (1) Acton's likelihood of success on the merits; (2) whether Acton will be irreparably injured; (3) whether issuance of the stay will substantially injure Fullmer; and (4) where the public interest lies. In applying these factors, the court is mindful that a discretionary stay pending appeal is viewed as an extraordinary remedy. Minor Metals, Inc. v. United States, 38 Fed.Cl. 379 (1997).

II. Application of the Four Factors Related to Equitable Relief

A. Acton's Success on the Merits

1. Background on the Trial

During the trial, the court found that the Contract initially obligated Fullmer to sell and Acton to buy real property in the northwest area of the greater Las Vegas metropolitan area. Both parties testified, as did Christopher White, who was Acton's and Fullmer's real estate broker ("White"). Testimony was also received from three individuals, Adam Knecht, Karl Wolff and Louis Hillegas, who...