Stadium Management Corp., In re, ANHEUSER-BUSC

• Decision Date: 09 November 1989
• Docket Number: INC,Nos. 89-1576,ANHEUSER-BUSC,s. 89-1576
• Parties: , Bankr. L. Rep. P 73,229 In re STADIUM MANAGEMENT CORP., Debtor., Plaintiff, Appellant, v. Stanley MILLER, Trustee, Defendant, Appellee. In re STADIUM MANAGEMENT CORP., Debtor. Appeal of KMS PATRIOTS, L.P. to 89-1578. . Heard
• Court: U.S. Court of Appeals — First Circuit

Page 845

895 F.2d 845

20 Bankr.Ct.Dec. 341, Bankr. L. Rep. P 73,229

In re STADIUM MANAGEMENT CORP., Debtor.

ANHEUSER-BUSCH, INC., Plaintiff, Appellant, v. Stanley MILLER, Trustee, Defendant, Appellee.

In re STADIUM MANAGEMENT CORP., Debtor.

Appeal of KMS PATRIOTS, L.P.

Nos. 89-1576 to 89-1578.

United States Court of Appeals, First Circuit.

Heard Nov. 9, 1989.

Decided Feb. 8, 1990.

Order on Denial of Rehearing Nos. 89-1577 and 89-1578 March

12, 1990.

Rehearing En Banc Denied in Nos. 89-1577 and 89-1578 March 12, 1990.

Peter Nils Baylor, with whom Frank Glazer and Nutter, McClennen & Fish, Boston, Mass., were on brief, for plaintiff, appellant Anheuser-Busch, Inc.

Jerome Gotkin, with whom Laura L. Carroll, Widett, Slater & Goldman, Boston, Mass., Carl F. Goodman, and Jones, Day, Reavis & Pogue, were on brief, for appellant KMS Patriots, L.P.

Daniel C. Cohn, with whom Michael B. Roitman, Michael C. Fee, Nathalie D. Martin and Fine & Ambrogne, Boston, Mass., were on brief, for defendant, appellee.

Before CAMPBELL, Chief Judge, BOWNES, Circuit Judge, VAN GRAAFEILAND, Senior Circuit Judge ^*.

BOWNES, Circuit Judge.

Appellants, KMS Patriots L.P. (Patriots) and Anheuser-Busch, Inc. (A-B), object to the approval by the bankruptcy court of motions related to the sale to K Corp. of the assets of Stadium Management Corporation, a Chapter 11 debtor (the debtor) that owned Sullivan Stadium (Stadium) in Foxborough, Massachusetts. Neither of the appellants requested a stay of the sale of the debtor pending appeal, so the sale has been completed. We hold that any objections to the sale and the related motions are now moot.

I.

We begin with a brief outline of the parties' claims. The Stadium is the home playing field of the New England Patriots football team (Patriots). The land under the Stadium was leased to the debtor's predecessor in interest, Stadium Realty Trust (SRT), from the town of Foxborough until the year 2022. SRT in turn subleased the Stadium parcel to the Patriots (Patriots sublease). In the fall of 1981, the debtor purchased the Stadium and related assets from SRT. ¹ In 1982, the debtor constructed enclosed luxury boxes at the Stadium. On September 15, 1982, A-B and the debtor entered into an agreement under which A-B paid three million dollars in exchange for advertising space within the stadium for a period of twelve years. A-B prepaid the entire contract price.

The debtor filed a petition under Chapter 11 of the Bankruptcy Code on February 23, 1989. Stanley Miller, the appellee, was appointed trustee and determined that a sale of the debtor's assets was the best option for the creditors. All of the assets of the debtor were to be sold pursuant to the "Second Amended Motion to Sell the Stadium and Related Assets Free and Clear of Interest" (sale motion) made by the trustee on September 30, 1988. Along with the sale motion the trustee filed ten motions related to the sale which implemented the conditions of the final bid (the related motions). These included a motion for approval of assumption and assignment of the Patriot sublease to the new purchaser and a motion for approval of the rejection of the advertising agreement between Anheuser-Busch and the debtor. The sale motion and related motions were granted by the bankruptcy judge and affirmed by the district court 99 B.R. 137. A number of parties objected to the sale initially, but no stay pending appeal was requested or entered. Because there was no stay or even an appeal of the sale, the parties went ahead with the transaction. The sale was completed on July 6, 1989.

Recognizing that the sale cannot now be reversed, neither appellant is explicitly objecting to it now. Instead, the appellants claim to be objecting to the granting of the related motions.

The Patriots object to the interpretations given to certain provisions of their sublease in the process of granting the motion for approval and assumption of their sublease. In particular, they contend that they are entitled to the revenues from the luxury boxes and are entitled to certain credits from the Stadium concession operation. The Patriots also argue that the sublease is in default because of the failure of the lessor to make necessary repairs and the A-B objects to the rejection of its advertising contract. It characterizes the agreement with the debtor as either a non-executory contract or a lease, neither of which could be rejected.

failure of the lessor to give adequate assurance of performance of the lease. ²

As enticing for an appellate court as these issues might be, the trustee urges us not to consider them because they are moot. The sale of the Stadium has been consummated and the appellants failed to request a stay of the sale pending appeal. The appellants counter that they have not appealed from the sale motion and are not attempting to unravel the sale of the Stadium. Instead, they contend that they are seeking determinations of the claims arising under the related motions. We think that the appellants have construed both the scope of the bankruptcy judge's power and the scope of the sale too narrowly. Because the sale has been completed, this court is without power to fashion a remedy; therefore, this case is moot.

II.

The trustee was authorized to sell the Stadium under 11 U.S.C. Sec. 363(b), which is the primary authorization for a trustee to sell a debtor's property outside of the ordinary course of business. Good faith purchasers under Sec. 363 are protected from the reversal of a sale on appeal unless there is a stay pending appeal. 11 U.S.C. Sec. 363(m). ³

It has been held that 11 U.S.C. Sec. 363(m)

reflects the salutary policy of affording finality to judgments approving sales in bankruptcy by protecting good faith purchasers, the innocent third parties who rely on the finality of bankruptcy judgments in making their offers and bids.... The finality and reliability of the judicial sales enhance the value of the assets sold in bankruptcy.

Tri-Cran, Inc. v. Fallon (In re Tri-Cran, Inc.), 98 B.R. 609, 617 (Bankr.D.Mass.1989) (citations omitted). See also In re Onouli-Kona Land Co., 846 F.2d 1170, 1172-73 (9th Cir.1988); In re Sax, 796 F.2d 994, 998 (7th Cir.1986). The effect of Sec. 363(m) is that "when an order confirming a sale to a good faith purchaser is entered and a stay of that sale is not obtained, the sale becomes final and cannot be reversed on appeal." Creditor Committee v. Armstrong Business Credit Corp. (In re Saco Local Development Corp.), 19 B.R. 119, 121 (BAP 1st Cir.1982). Absent a stay, the court must dismiss a pending appeal as moot because the court has no remedy that it can fashion even if it would have determined the issues differently. In re the Charter Co., 829 F.2d 1054 (11th Cir.1987) (per curium), cert. denied, 485 U.S. 1014, 108 S.Ct. 1488, 99 L.Ed.2d 715 (1988); Miami Center Partnership v. Bank of New York, 820 F.2d 376, corrected in part and rehearing denied, 826 F.2d 1010 (11th Cir.1987), vacating , reaffirming and rehearing denied, 838 F.2d 1547 (11th Cir.1988), cert. denied, --- U.S. ----, 109 S.Ct. 69, 102 L.Ed.2d 46 (1988); In re Sax, 796 F.2d 994 (7th Cir.1986); International Union, U.A.W. v. Morse Tool, Inc. (In re MTI Holding Corp.), 85 B.R. 666, 668 (D.Mass.1988).

There are two complementary policies at work in Sec. 363 and the Bankruptcy Code cases. The first emphasizes the importance of encouraging finality in bankruptcy sales by protecting good faith purchasers and thereby increasing the value of the assets that are for sale. See, e.g., In re Onouli-Kona Land Co., 846 F.2d at 1172 ("the primary goal of the mootness rule is

                to protect the interest of a good faith purchaser ... of the property thereby assuring finality of sale."    (quotation and citation omitted));  Greylock Glen Corp. v. Community Sav. Bank, 656 F.2d 1, 4 (1st Cir.1981);  In re Sax, 796 F.2d at 998 (finality increases value).  The second policy is broader and stresses a court's general jurisdictional bar from deciding cases in which it cannot provide a remedy.  See, e.g., Mills v. Green, 159 U.S. 651, 653, 16 S.Ct. 132, 132-33, 40 L.Ed. 293 (1895) (discussing generally court's impossibility of relief mootness policy);  In re Cantwell, 639 F.2d 1050, 1053 (3d Cir.1981) ("generally, an appeal will be dismissed as moot when events occur during the pendency of an appeal [that] prevent the appellate court from granting any effective relief").  Both of these policies have existed in bankruptcy law long before the most recent code and are based in the caselaw as well as the statute.  The two policies interact because the finality rule limits the remedies a court can offer.  Miami Center, 820 F.2d at 379 (the rationale for dismissing as moot certain cases is that "a court cannot order relief without compromising the integrity of the sale of the property to a good faith purchaser.")
                

III.

The effect of Sec. 363(m) on an appeal from a sale by the Trustee is common ground that the appellants do not explicitly attack. ⁴ Instead, they attempt to squeeze around the direct bar by distinguishing the sale motion from the related motions. But the facts of this case prohibit such a solution. The sale and the related motions were considered together and remain a package. The final bid for the Stadium by K Corp. was expressly conditioned upon certain approvals by the bankruptcy court including the two "related motions" at issue here: that the Patriots' sublease be transferred free of any claims or right of set-off and not be in default and that the advertising contract be rejected. These conditions were contained in the related motions and were made part of the judge's opinion approving the sale. Without having the court pass on those motions, it is unlikely that K Corp. would have proceeded with the sale. All of the motions were considered at the same time as the sale motion. They all affect aspects of the deal of which a purchaser would want to be certain prior to...