Springpark Associates, Matter of, 78-1739

• Decision Date: 25 July 1980
• Docket Number: No. 78-1739,78-1739
• Parties: In the Matter of SPRINGPARK ASSOCIATES, a Limited Partnership, Debtor-Appellant. CROWN LIFE INSURANCE CO., Plaintiff-Appellee, v. SPRINGPARK ASSOCIATES, a Limited Partnership.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1377

623 F.2d 1377

7 Bankr.Ct.Dec. 1244

In the Matter of SPRINGPARK ASSOCIATES, a Limited Partnership, Debtor-Appellant CROWN LIFE INSURANCE CO., Plaintiff-Appellee, v. SPRINGPARK ASSOCIATES, a Limited Partnership.

No. 78-1739.

United States Court of Appeals Ninth Circuit.

Submitted April 11, 1980.

Decided July 25, 1980.

Joseph Bernfeld, Los Angeles, Cal., for debtor-appellant.

Jon R. Moss, Los Angeles, Cal., for plaintiff-appellee.

Appeal from the United States District Court for the Central District of California.

Before TUTTLE ^*, WALLACE and NELSON, Circuit Judges.

TUTTLE, Circuit Judge:

This is an appeal by a debtor from an order of a bankruptcy court, lifting an automatic stay which resulted in the sale of the debtor's property. The district court affirmed the judgment of the bankruptcy court. We also affirm the judgment.

In 1972, Springpark Associates (Springpark), a one-asset limited partnership, borrowed $650,000, securing the loan with a trust deed which was subsequently assigned to Crown Life Insurance Company (Crown). In November 1975, after the failure of Springpark to pay some real property taxes, Crown caused a notice of default and election to sell the trust property. In February 1976, Springpark filed a Chapter XII bankruptcy petition that had the effect of staying Crown's foreclosure sale. Crown filed an adversary complaint seeking to lift the stay.

At a May trial, one of Springpark's general parties represented that the partnership could arrange refinancing which would enable it to pay its debts to Crown without a foreclosure sale, but that the loan could not be obtained while Springpark was engaged in Chapter XII proceedings. The parties thereupon agreed upon a stipulation which said:

IT IS HEREBY ORDERED that:

1. The automatic stay issued pursuant to Rule 12-43, Rules of Bankruptcy Procedure, is hereby terminated, subject to the following conditions:

A. Plaintiff shall not commence advertising any Trustee's sale, pursuant to the power of sale provision of its Deed of Trust, prior to October 15, 1976.

B. Plaintiff shall not cause any such Trustee's sale to be scheduled for any date prior to November 5, 1976.

1. (sic) The rents, issues and profits of the property encumbered by Plaintiff's Trust Deed are sequestered effective February 26, 1976 subject to the following conditions:

A. The sequestered funds shall not include those funds necessary for the ordinary operating and maintenance expenses of the property.

B. The excess, if any, may be used by Debtor to pay any costs, not exceeding $12,000, incurred by the event that Defendant is able to sell or completely refinance the property prior to November 5, 1976, any such excess shall be paid over to Plaintiff.

C. In the event that Debtor is able to sell or completely refinance the property prior to November 5, 1976, Plaintiff shall not collect or demand any prepayment by reason of the pay-off of its loan incident to such sale or refinancing, provided that any such pay-off of Plaintiff's (sic) also include payment of Plaintiff's expenses, not exceeding $12,000 incident to foreclosure including any attorney's, witness and Trustee's fees.

By a separate order, the Court also granted Springpark's motion to dismiss the Chapter XII proceeding.

However, the refinancing never materialized and, after granting Springpark several extensions, Crown set December 30, 1976 as the final date for the foreclosure sale. Hours before the sale was to take place, Springpark filed a second Chapter XII petition, again invoking the portion of the Bankruptcy Rules that a petition stays other proceedings. Crown again sought relief from this stay.

In a January hearing, the bankruptcy court decided that it was bound by the August 12 stipulation. On January 11, it lifted the automatic stay and the property was sold. That order forms the basis of this appeal.

In its opinion, the district court found first that the sale of the property had not mooted the issue in this case because alternative remedies were available to aid the appellant should the court conclude that the bankruptcy court had erred. Turning to the merits, the court concluded, however, that the August 12 stipulation was binding on the parties and that therefore the bankruptcy court acted correctly.

In this Court, as an initial point the appellee argues again that this case is now moot because the property in question has been sold. This argument is similar to the question this Court addressed recently in In re: Royal Properties, Inc., 621 F.2d 984 (9th Cir. 1980). In that case, this Court found that the issue there had been mooted because "the purchasers of the property have not been made parties to the appeal, and we cannot grant effective relief in their absence." Id. at 987.

Here, however, Crown purchased the property at the foreclosure sale, so it would not be impossible for the Court to fashion some sort of relief. We therefore uphold the district court's judgment that this case is not moot.

Turning to the merits, the appellant argues essentially that the bankruptcy court had no right to lift the stay that was automatically imposed when Springpark filed the second Chapter XII petition. The appellant also urges that the bankruptcy court erred in proceeding under Rule 12-43(e), ¹ since there was no proof of irreparable harm to Crown. Therefore, it urges, the Court should have proceeded under subsection (d) of the rule, ² affording Springpark an opportunity to file an answer and proof.

Like the district court, we find that the principal issue to be considered here is the effect to be accorded the August stipulation agreement. We find that the August 12 agreement should be enforced. As stated by this Court in Dacanay v. Mendoza, 573 F.2d 1075, 1078 (9th Cir. 1978):

. . . a litigant can no more repudiate a compromise agreement than he could disown any other binding contractual relationship. . . . Moreover, it is equally well settled in the usual litigation context...