In re Nashville Senior Living, LLC, 061109 FED6, 08-8089

Docket Nº:08-8087, 08-8089, 08-8090, 08-8091, 08-8092, 08-8093, 08-8094, 08-8095
Party Name:In re NASHVILLE SENIOR LIVING, LLC, et al., Debtors. v. ANDERSON SENIOR LIVING PROPERTY, LLC, et al., Appellees. OFFICIAL COMMITTEES OF UNSECURED CREDITORS, Appellants,
Case Date:June 11, 2009
Court:United States Courts of Appeals, Court of Appeals for the Sixth Circuit
 
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In re NASHVILLE SENIOR LIVING, LLC, et al., Debtors.

OFFICIAL COMMITTEES OF UNSECURED CREDITORS, Appellants,

v.

ANDERSON SENIOR LIVING PROPERTY, LLC, et al., Appellees.

Nos. 08-8087, 08-8089, 08-8090, 08-8091, 08-8092, 08-8093, 08-8094, 08-8095

United States Court of Appeals, Sixth Circuit

June 11, 2009

Appeal from the United States Bankruptcy Court for the Middle District of Tennessee, at Nashville. No. 08-07254.

Before: FULTON, RHODES, and SHEA-STONUM, Bankruptcy Appellate Panel Judges.

OPINION

MARILYN SHEA-STONUM, Bankruptcy Appellate Panel Judge. The Official Committees of Unsecured Creditors ("Committee"), comprised solely of the non-debtor co-owners of the Properties (defined herein), appeal an order of the bankruptcy court granting the Debtors1 authority to sell the Properties held in a tenancy in common between the Debtors and the co-owners pursuant to 11 U.S.C. § 363(b) and (h). The Committee sought a stay of the order from both the bankruptcy court and this Panel. Those requests were denied, and the sale of the Properties has closed. The good faith of the purchaser has not been challenged.

Because the bankruptcy court's order was not stayed and the sale has closed, the Debtors seek dismissal of the appeal pursuant to 11 U.S.C. § 363(m). The Committee argues that § 363(m) should not apply to the aspect of the order that authorized the sale of the co-owners' interest under § 363(h). For the reasons set forth below, we conclude that the appeal is moot pursuant to § 363(m).

I. ISSUE ON APPEAL

The issue that would be raised in this appeal is whether the bankruptcy court erred when it granted the Debtors' motion to sell to a third party, pursuant to 11 U.S.C. § 363(b), (f) and (h), property held by the Debtors and the co-owners as tenants in common. Because we conclude that the appeal is moot, we do not reach the merits of this issue.

II. JURISDICTION ANDSTANDARDOFREVIEW

We have jurisdiction to decide this appeal. The United States District Court for the Middle District of Tennessee has authorized appeals to the Bankruptcy Appellate Panel of the Sixth Circuit and no party has elected to have the appeal heard by the district court. A final order of the bankruptcy court may be appealed as of right. 28 U.S.C. § 158(a)(1). For purposes of appeal, a final order "ends the litigation on the merits and leaves nothing for the court to do but execute the judgment." Midland Asphalt Corp. v. United States, 489 U.S. 794, 798, 109 S.Ct. 1494, 1497 (1989) (citations omitted). An order approving a sale is a final order. Sugarloaf Ind. & Marketing Co., LLC v. Quaker City Castings, Inc. (In re Quaker City Castings, Inc.), 337 B.R. 729, 2005 WL 3078607, *1 (B.A.P. 6th Cir. 2005) (unpublished table decision) (citing In re Sax, 796 F.2d 994, 996 (7th Cir. 1986)).

III. FACTS

Prior to filing voluntary petitions for relief under chapter 11 of the Bankruptcy Code, each of the Debtors owned a parcel of real property improved with a facility for the elderly. Four of those properties were located in North Carolina and three others were located in South Carolina (collectively the "Properties"). The Debtors acquired the Properties in conjunction with a December 2006 transaction pursuant to which tenancy in common interests in the Properties were sold to investors. A group of approximately thirty investors (the tenants in common, or "TIC") purchased tenant in common interests in the Properties pursuant to the December 2006 transaction reflected in the Tenants in Common Agreement (the "TIC Agreement"). See Exhibit A to TIC's objection to motion to dismiss. Under the TIC Agreement, the TIC had various rights, including the right to partition the Properties and to require unanimous approval of any sale, transfer, or exchange of the Properties. The Debtors own approximately a 60% undivided interest in the Properties and the TIC own 40%.

In conjunction with the TIC Agreement, the TIC signed a Debt Assumption and Indemnification Agreement pursuant to which the TIC obligated themselves to Merrill Lynch Capital, apparently the predecessor in interest to GE Business Financial Services, Inc. ("GE"), for a specified portion of the debt and agreed that their fee interest was subordinate to GE. The Debtors defaulted on their payment obligations to GE, and GE accelerated the loan. In July 2008, GE commenced foreclosure proceedings.2 (Bankr. Ct. Docket #266).

On August 17, 2008, the Debtors filed voluntary petitions for relief under chapter 11 of the Bankruptcy Code. After filing their petitions for relief, the Debtors sought authority pursuant to 11 U.S.C. § 363 to sell the Properties to the highest and best bidder. Following the marketing of the Properties by the Debtors' broker, Five Star Quality Care, Inc. ("Five Star") eventually emerged as the highest and best bidder. The Debtors and Five Star entered into an agreement regarding the sale of the Properties. On October 10, 2008, the Debtors filed a motion seeking approval of bidding procedures for the sale of the Properties, recognition of Five Star as the "stalking horse," and authority to sell the Properties pursuant to 11 U.S.C. § 363(b) to the highest and best bidder (the "Sale Motion"). The Committee opposed the Sale Motion. The Debtors also filed adversary proceedings against the TIC in which Debtors sought permission to sell the TIC's interest in the Properties pursuant to § 363(h). The Debtors filed motions for summary judgment in each of those proceedings, and the TIC opposed those motions.

On October 21, 2008, the bankruptcy court held a hearing at which it approved the proposed sale procedures over the objections of the Committee and set November 12, 2008 as the date for the hearing on the approval of the sale of the Properties to the highest and best bidder. At the conclusion of the sale hearing, the court approved the sale of the Properties to Five Star. On November 20, 2008, the court issued an order approving the sale based on, inter alia, a finding that the Debtors had satisfied the requirements of § 363(h) (the "Sale Order"). The court entered orders granting the Debtors' motions for summary judgment in the adversary proceedings on November 24, 2008.

On November 20, 2008, the Committee filed a notice of appeal of the Sale Order and an Expedited Motion for Stay Pending Appeal with the bankruptcy court. The Committee also filed notices of appeal in the adversary proceedings on November 25, 2008,3 and again requested that the bankruptcy court stay the sale pending appeal. On November 25, 2008, the bankruptcy court denied the Committee's motions for stay pending appeal. On December 2, 2008, the bankruptcy court denied the Committee's motion for stay pending appeal in the adversary proceedings.

On December 3, 2008, the Committee filed an "Emergency Motion for Stay Pending Appeal" before this Panel.4 The Debtors filed a response in opposition on the afternoon...

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