Sun Valley Ranches, Inc., In re

• Decision Date: 05 August 1987
• Docket Number: Nos. 86-4222,86-4319,s. 86-4222
• Citation: 823 F.2d 1373
• Parties: 17 Collier Bankr.Cas.2d 449, Bankr. L. Rep. P 71,937 IN RE SUN VALLEY RANCHES, INC., Debtor SUN VALLEY RANCHES, INC., Petitioner-Appellant, v. THE EQUITABLE LIFE ASSURANCE SOCIETY OF the UNITED STATES, Respondent-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1373

823 F2d 1373

17 Collier Bankr.Cas.2d 449, Bankr. L. Rep. P 71,937

IN RE SUN VALLEY RANCHES, INC., Debtor

SUN VALLEY RANCHES, INC., Petitioner-Appellant, v. THE EQUITABLE LIFE ASSURANCE SOCIETY OF the UNITED STATES,

Respondent-Appellee.

Nos. 86-4222, 86-4319.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted July 10, 1987.

Decided Aug. 5, 1987.

C. Tom Arkoosh, Boise, Idaho, for petitioner-appellant.

Dale G. Higer, Boise, Idaho, for respondent-appellee.

Appeal from the United States District Court for the District of Idaho.

Before FARRIS, ALARCON and WIGGINS, Circuit Judges.

FARRIS, Circuit Judge:

Equitable Life Assurance held a first mortgage interest in property owned by Sun Valley Ranches, Inc. Sun Valley has sought to reorganize under Chapter 11 of the bankruptcy code. Sun Valley appeals from two orders of the district court in the bankruptcy action. One order lifted the automatic stay in bankruptcy, permitting Equitable Life Assurance to go ahead with foreclosure and sale of Sun Valley's property. The second order denied Sun Valley's motion to stay the lifting of the automatic stay pending appeal. The day after the second motion was entered, the sale was held and Equitable purchased the property.

BACKGROUND

Sun Valley Ranches, debtor in this bankruptcy action, is an Idaho corporation operating a large farm in Camas County, Idaho. Until the mid-1970s, Sun Valley operated as a dry farm. In 1978, Sun Valley borrowed $1,250,000 from Equitable to purchase and install irrigation equipment. This loan was secured by a first mortgage interest on the farm property.

Sun Valley defaulted on its loan to Equitable in April 1983, and has paid nothing on the debt in the four years since. Sun Valley first sought to reorganize under Chapter 11 in May 1983. That petition was dismissed in May 1985. Equitable sought to foreclose on the property. On March 26, 1986, the district court entered a judgment and decree of foreclosure.

Sun Valley filed the present petition under Chapter 11 on May 9, 1986. The sale, scheduled for June 13, was therefore automatically stayed under 11 U.S.C. Sec. 362(a). On May 27, 1986, Equitable moved under Sec. 362(d) to lift the automatic stay. On June 12, the magistrate entered an order lifting the stay retroactive to May 9. The district court stayed the magistrate's order until Sun Valley could appeal. On September 18, 1986, the district court ruled that lifting the stay was justified because the debtor had made no showing that it could successfully reorganize, that it had admitted it had no equity in the property, and that Equitable was not protected against the declining value of the property. In making its ruling, the district court ordered the stay lifted immediately.

Sun Valley moved to stay this decision of the district court pending appeal, but the court denied the motion, saying that the bond Sun Valley proposed was to small. The court authorized a marshal's sale on October 24. A motions panel of the Court of Appeals denied Sun Valley's emergency motion to stay the order authorizing the sale. Sun Valley asked the district court for a temporary restraining order on October 23, which the court denied. The sale went ahead on October 24, and Equitable purchased the property for the full amount of the debt and costs, subject to Sun Valley's statutory rights of redemption. This appeal followed.

DISCUSSION

1. Mootness

Equitable argues that this case is moot because the foreclosure sale has occurred and the court can therefore offer no effective relief. We have generally held that where an automatic stay is lifted, the debtor's failure t obtain a stay pending appeal renders an appeal moot after assets in which the creditor had an interest are sold. See, e.g., Algeran, Inc. v. Advance Ross Corp., 759 F.2d 1421, 1423-24 (9th Cir.1985) (stock sold as per a foreclosure sale stipulated by contract); In re Suchy, 786 F.2d 900, 902 (9th Cir.1985) (house sold as per a foreclosure sale stipulated by contract); In re Roberts Farms, Inc., 652 F.2d 793, 798 (9th Cir.1981) (real property sold to third party); In re Royal Properties, Inc., 621 F.2d 984, 986 (9th Cir.1980) (same); In re Combined Metals Reduction Co., 557 F.2d 179, 187-90 (9th Cir.1977) (same).

We have, however, carved out a narrow exception to this rule, where real property is sold to a creditor who is a party to the appeal. Matter of Springpark Associates, 623 F.2d 1377 (9th Cir.), cert. denied, 449 U.S. 956, 101 S.Ct. 364, 66 L.Ed.2d 221 (1980); see also Matter of Cada Investments, Inc., 664 F.2d 1158, 1160 (9th Cir.1981) ("[I]n contrast to other cases in which we have addressed comparable mootness problems, all essential parties are before the court."). In Springpark we held that a debtor's failure to obtain a stay from the lifting of the automatic stay, followed by the sale of debtor's property, did not moot the debtor's subsequent appeal because the creditor-purchaser was before the court. Springpark, 623 F.2d at 1379 (distinguishing In re Royal Properties, 621 F.2d 984, where the purchaser was a third party). In such a case, we said in Springpark, "it would not be impossible for the Court to fashion some sort of relief." Id.

This exception to the rule is especially appropriate here, where the foreclosure sale is subject to statutory rights of redemption. Where the assets sold were shares of stock, we said that "the fact that the purchaser is a party to [an] appeal does not change the applicability of the mootness rule." Algeran, 759 F.2d at 1424. But the existence of statutory rights of redemption indicates a difference between the sale of stock and the sale of real property. Based on equitable principles, redemption has long provided a means for reversing sales of real property. Where, as here, the creditor-purchaser is before the court, the court could exercise similar equitable principles and reverse the sale. We decline to follow the Eleventh Circuit's contrary position. See In re Matos, 790 F.2d 864, 866 (11th Cir.1986); In re Sewanee Land, Coal & Cattle, Inc., 735 F.2d 1294, 1296 (11th Cir.1984). Sun Valley's appeal is therefore not moot.

2. Giving Immediate Effect to the Court's Order

On September 18, 1986, when the district court upheld the magistrate's lifting of the automatic stay, it did not stay its order for ten days as permitted under Bankruptcy Rule 8017(a): "Judgments of the district court ... are stayed until the expiration of 10 days after entry, unless otherwise ordered by the district court...." (emphasis added). During what would otherwise have been the ten-day stay of the district court's order, Equitable obtained a writ of execution for a foreclosure sale, an action that Sun Valley contends should have been void. Because the Rule by its terms gives the district court discretion to make its order effective immediately, the Court of Appeals will review this matter for abuse of discretion if Rule 8017(a) applies.

Equitable argues that not Rule 8017(a), but Bankruptcy Rule 7062 applies to this situation. Rule 7062 creates an explicit exception to Fed.R.Civ.P. 62(a), which requires that a district court's judgment not be enforced for ten days after its entry. Rule 7062 provides that the automatic stay provisions of Rule 62(a) apply in "adversary proceedings, except that an order granting relief from an automatic stay provided by Sec. 362 ... shall be [an] additional exception[] to Rule 62(a)." (Emphasis added.) This gives a court discretion to give immediate effect to the lifting of an automatic stay.

Whether Rule 8017 or rule 7062 applies, Sun Valley contends that the court's action was an abuse of discretion because it gave inadequate reasons for making the order effective immediately. The policy behind the automatic stay provision is to give debtors a "breathing spell." Because this policy is so important, Sun Valley argues, the court needed to give more reasons for making for lifting the stay are also reasons for lifting it immediately. Those reasons, especially the declining value of the mortgaged property, are adequate to support the district court's decision to make its order effective immediately. The court did not abuse its discretion.

3. Lifting the Automatic Stay

We review the district court's order lifting the automatic stay under the provisions of Rule 8013...