Rumsey Land Co. v. Res. Land Holdings, LLC (In re Rumsey Land Co.), 18-1452
| Decision Date | 20 December 2019 |
| Docket Number | No. 18-1452,18-1452 |
| Citation | 944 F.3d 1259 |
| Parties | IN RE: RUMSEY LAND COMPANY, LLC, Debtor. Rumsey Land Company, LLC, Plaintiff - Appellant, v. Resource Land Holdings, LLC; Sorin Natural Resource Partners, LLC; Pueblo Bank and Trust Company, LLC, Defendants - Appellees. |
| Court | U.S. Court of Appeals — Tenth Circuit |
Ronald L. Wilcox, Wilcox Law Firm, LLC, Denver, Colorado for Plaintiff - Appellant.
David M. Rich, Minor & Brown, P.C., Denver, Colorado, and Sarah B. Wallace, Ballard Spahr LLP, Denver, Colorado, (Andrew J. Petrie, Ballard Spahr LLP, Denver, Colorado, with them on the brief) for Defendants - Appellees.
Before HARTZ, SEYMOUR, and MATHESON, Circuit Judges.
This appeal stems from a dispute involving land sold at a bankruptcy auction. Rumsey Land Company, LLC ("Rumsey") owned a property subject to a first deed of trust held by Pueblo Bank & Trust Company, LLC ("PBT"). In 2010, Rumsey filed for bankruptcy. Resource Land Holdings, LLC ("RLH")1 offered to purchase the property, but the bankruptcy court did not approve the sale. Shortly thereafter, PBT purchased the property at a bankruptcy auction. PBT then transferred the land to RLH.
In 2015, Rumsey discovered that during the bankruptcy proceedings, RLH had entered a loan purchase agreement to purchase PBT's interest in the property. The agreement eventually led to litigation in state court between RLH and PBT, which culminated with a settlement agreement allowing RLH to purchase Rumsey's property from PBT for $4.75 million.
Rumsey believed the loan agreement, lawsuit, and settlement influenced the price at its bankruptcy auction. It initiated this adversarial proceeding in bankruptcy court against RLH and PBT (collectively "Defendants"), alleging (1) fraudulent concealment in violation of state law and (2) collusive bidding activities in violation of 11 U.S.C. § 363(n). The case was transferred to federal district court, which granted summary judgment to Defendants on both claims. Exercising jurisdiction under 28 U.S.C § 1291 and § 1294(1), we affirm.
On the fraudulent concealment claim, we affirm summary judgment for RLH on the alternative ground that RLH was not a party to a business transaction with Rumsey and therefore had no duty to disclose information. We affirm summary judgment for PBT because Rumsey forfeited its arguments about PBT's duty to disclose and has not argued plain error on appeal.
On the § 363(n) collusive bidding claim, we distinguish between Rumsey's alternative requests (1) to avoid the bankruptcy sale and (2) for damages. As to the former, we affirm summary judgment for Defendants on the alternative ground that the claim was time-barred by the one-year limitations period in Federal Rule of Civil Procedure 60(c)(1). As to damages, we affirm summary judgment because Rumsey failed to demonstrate a genuine dispute of material fact as to whether Defendants intended to control the sale price at the bankruptcy auction.
Rumsey, a Colorado-based limited liability company, owned real property in Evans, Elizabeth, and Nederland, Colorado. In January 2010, it filed for bankruptcy in the United States Bankruptcy Court for the District of Colorado. At the time it filed for bankruptcy, Rumsey's holdings included a property known as the Rumsey Farm ("the property" or "the land"), which was encumbered by a first deed of trust held by PBT.
In March 2010, RLH attempted to purchase the property from Rumsey. It discussed with Rumsey the possibility of buying the PBT loan but ultimately offered to purchase the property for $7,484,397.75.
In April 2010, Rumsey filed a motion to approve the sale with the bankruptcy court. Because three creditors objected, the court denied the motion and instructed Rumsey to market the property more broadly.
Because RLH could not acquire the property from Rumsey directly, it decided to pursue the possibility of purchasing the debt Rumsey owed to PBT. On December 1, 2010, RLH signed a written loan purchase agreement ("the loan purchase agreement" or "the agreement") to purchase the debt from PBT for $4.93 million. The agreement contained a confidentiality provision prohibiting disclosure of the agreement or its terms. The parties did not disclose the agreement to Rumsey or to the bankruptcy court.
On February 1, 2011, PBT refused to close on the loan purchase agreement. On March 15, RLH sued PBT to enforce the agreement. As explained below, this lawsuit eventually settled. The parties did not inform Rumsey about the lawsuit.
In early March 2011, the bankruptcy court approved the sale and notice procedures to auction the property. On March 31, 2011, RLH submitted a $4 million stalking horse bid.2 The same day, PBT submitted a credit stalking horse bid, which did not offer new money but agreed to reduce Rumsey's debt by $5 million. Rumsey selected PBT's bid as the stalking horse.
Id. PBT's counsel responded that it did "not want to create the appearance or impression of any sort of impropriety or collusive bidding to which ... some other interested party could object pursuant to Section 363(n) of the Bankruptcy Code." Id. at 1019. It therefore suggested that "until the auction and sale process is concluded, ... it would be unwise to engage in any dispute resolution or settlement discussions, of any nature, which may involve the property to be sold at the auction or the underlying loan documents held by [PBT]." Id.
On May 11, 2011, Rumsey auctioned the property. RLH did not participate in the auction. Confluence Resource Holdings, LLC ("Confluence") placed the winning bid.
On May 25, 2011, Rumsey submitted a Proposed Sale Order, which contained the following representation:
The Debtor and each Successful Bidder and the Back-Up Bidder have fully disclosed all consideration to be given by each Successful Bidder and the Back-Up Bidder and all other agreements or arrangements entered into by each Successful Bidder and the Back-Up Bidder in connection with the sale of the Assets.
Id. at 963. RLH and PBT both received copies of the Proposed Sale Order, but neither disclosed their loan purchase agreement or lawsuit.
The bankruptcy court entered the Proposed Order on June 17, authorizing Confluence as the successful bidder and PBT as the back-up bidder. In August, Confluence announced it would not proceed with closing. As a result, Rumsey accepted PBT's back-up bid.
On September 13, 2011, RLH and PBT agreed to settle their lawsuit. As part of their settlement, they agreed that after PBT acquired the property through the bankruptcy sale, it would sell the property to RLH for $4.75 million. On September 20, the parties entered a contract formalizing this agreement.
On October 4, 2011, PBT moved the bankruptcy court to approve transfer of the property from Rumsey to PBT. In the motion, PBT represented that the property was "free and clear of all liens, encumbrances, claims, and interests." Id. at 1021. PBT provided a non-exhaustive list of liens and encumbrances but did not disclose the loan purchase agreement or settlement with RLH. The bankruptcy court's proposed Supplemental Sale Order also did not mention the loan purchase agreement, and it specified that "[t]he acquisition of the Assets is undertaken by [PBT] without collusion and in good faith." Id. at 1034. Both RLH and PBT received copies of the Order, which the bankruptcy court entered on October 6, 2011, thereby transferring the property to PBT. On October 13, PBT conveyed the property to RLH.
PBT and RLH never disclosed their loan purchase agreement, lawsuit, or settlement to Rumsey, and Rumsey did not learn of the agreement until 2015. Rumsey stated that "the [agreement] and subsequent efforts to enforce it had the effect of limiting RLH's bid to the amount agreed to by RLH and PBT," and that it "would have objected to credit bidding as a part of the sale process if it had known of the [agreement]." Id. at 964.
* * * *
The following table summarizes the events described above.
Events Relating to Sale of The Property Events Relating to Loan Purchase Agreement
01/15/2010 Rumsey files for bankruptcy
03/08/2010 RLH offers to purchase the property
for approximately $7.5 million
09/03/2010 Bankruptcy court denies Rumsey's
motion to approve sale to RLH
12/01/2010 RLH signs agreement to purchase
debt from PBT for $4.93 million
02/01/2011 PBT refuses to close on loan
purchase agreement
03/02/2011 Bankruptcy court approves sale and
notice procedures for bankruptcy
auction of the property
03/15/2011 RLH sues PBT to enforce loan...To continue reading
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