Wintz v. American Freightways, Inc., 99-2308

• Decision Date: 14 June 2000
• Docket Number: No. 99-2308,99-2308
• Citation: 219 F.3d 807
• Court: U.S. Court of Appeals — Eighth Circuit
• Parties: (8th Cir. 2000) IN RE: WINTZ COMPANIES, D/B/A MILBANK FREIGHTWAYS, DEBTOR. GEORGE L. WINTZ, APPELLANT, v. AMERICAN FREIGHTWAYS, INC.; CHARLES W. RIES, APPELLEES. GEORGE L. WINTZ, APPELLANT, v. STAN KOCH & SONS TRUCKING, INC.; CHARLES W. RIES, APPELLEES. GEORGE L. WINTZ, APPELLANT, v. SPINDRIFT, INC.; CHARLES W. RIES, APPELLEES. WINTZ PROPERTIES, INC., APPELLANT, v. AMERICAN FREIGHTWAYS, INC.; CHARLES W. RIES, APPELLEES. WINTZ PROPERTIES, INC., APPELLANT, v. STAN KOCH & SONS TRUCKING, INC.; CHARLES W. RIES, APPELLEES. WINTZ PROPERTIES, INC., APPELLANT, v. SPINDRIFT, INC.; CHARLES W. RIES, APPELLEES. Submitted:

Page 807

219 F.3d 807 (8th Cir. 2000)

IN RE: WINTZ COMPANIES, D/B/A MILBANK FREIGHTWAYS, DEBTOR.

GEORGE L. WINTZ, APPELLANT, v. AMERICAN FREIGHTWAYS, INC.; CHARLES W. RIES, APPELLEES.

GEORGE L. WINTZ, APPELLANT, v. STAN KOCH & SONS TRUCKING, INC.; CHARLES W. RIES, APPELLEES.

GEORGE L. WINTZ, APPELLANT, v. SPINDRIFT, INC.; CHARLES W. RIES, APPELLEES.

WINTZ PROPERTIES, INC., APPELLANT, v. AMERICAN FREIGHTWAYS, INC.; CHARLES W. RIES, APPELLEES.

WINTZ PROPERTIES, INC., APPELLANT, v. STAN KOCH & SONS TRUCKING, INC.; CHARLES W. RIES, APPELLEES.

WINTZ PROPERTIES, INC., APPELLANT, v. SPINDRIFT, INC.; CHARLES W. RIES, APPELLEES.

No. 99-2308

UNITED STATES COURT OF APPEALS FOR THE EIGHTH CIRCUIT

Submitted: June 14, 2000

Filed: July 27, 2000

Appeal from the United States Bankruptcy Appellate Panel for the Eighth Circuit. [Copyrighted Material Omitted] Before Murphy, Heaney, and Magill, Circuit Judges.

Murphy, Circuit Judge.

This appeal grows out of a bankruptcy proceeding initiated against Wintz Companies in which the trustee moved to avoid several transfers as fraudulent conveyances and to approve sales of certain estate properties. The bankruptcy court ¹ authorized the sales, and the Bankruptcy Appellate Panel ² affirmed. George Wintz and Wintz Properties appealed, but by the time of oral argument the only remaining controversy on this appeal related to approval of the sale of a property located on Terminal Road in Roseville, Minnesota. We affirm.

In the early 1990s, George Wintz owned a number of companies, including Wintz Properties, Inc., a real estate management company, and Wintz Companies, a trucking company doing business under the name of Milbank Freightways. Wintz Companies held fee interests in two Minnesota properties: a warehouse and nine hole golf course located at 13500 South Robert Trail in Rosemount and a warehouse at 2500 Walnut Street in Roseville. It also had a long term leasehold interest in a truck terminal that served as its primary place of business at 2323 Terminal Road in Roseville. Between 1993 and 1995, Wintz and Wintz Companies borrowed more than $11 million, using the latter's interests in the three properties as collateral. In August 1995, the Internal Revenue Service filed federal tax liens of approximately $3.4 million against Wintz, Wintz Companies, Wintz Properties, and other entities. The liens grew out of tax liabilities of two other Wintz corporations: Wintz Parcel Drivers, Inc., and Wintz Freightways, Inc. Between December 1995 and January 1996, Wintz Companies sold occupancy interests in the three parcels in Rosemount and Roseville to Wintz Properties, which subsequently sold its interest in the Rosemount property to Spindrift, Inc.

An involuntary bankruptcy petition was filed against Wintz Companies in August 1997 under Chapter 7 of the United States Bankruptcy Code. After Charles Ries was appointed trustee for the bankruptcy estate, he moved to set aside as fraudulent conveyances the transfers Wintz Companies had made to Wintz Properties and to recover the property interests for the estate. The bankruptcy court granted partial summary judgment in favor of the trustee, voiding interests claimed by Wintz Properties and Spindrift in the parcels.

At the same time that the trustee was attempting to reclaim the estate interests in these properties, he was soliciting offers for them through a professional real estate agent. The trustee used the same bidding process for each of the properties. Prospective purchasers were given notice of the opportunity to submit written bids on the properties; the trustee then allowed the three highest bidders on each to submit additional bids. The process also permitted a putative purchaser a 'last look': the purchaser would be able to submit a new bid if there was an objection to the adequacy of the purchase price before the sale closed.

In July 1998 the trustee filed separate motions for judicial approval of the sale of the three property interests. He proposed selling the Terminal Road interest to American Freightways, Inc. for $2.5 million; the Walnut Street interest to Stan Koch & Sons Trucking for $3 million; and the Rosemount interest to Spindrift, Inc. for $6 million. The trustee and American Freightways subsequently modified the terms of sale for the Terminal Road property to account for defaults under the lease and to obtain consent from the lessors to the transfer of the leasehold. ³ The parties also agreed that the trustee would make certain repairs prior to transfer and would escrow funds to remediate any environmental problems that might be revealed by a study to be carried out by American Freightways. The purchase price was reduced to $2.1 million, and the net sale proceeds to the estate amounted to $1.5 million, after deductions for repairs and escrow funds. The notice of sale on the amended sales terms was served on September 4, 1998 on all parties in interest, including the previous high bidders, and a hearing was held on September 17, 1998. No new bids were submitted.

The bankruptcy court granted partial summary judgment to the trustee on September 21, 1998, voiding the interest of Wintz Properties in each of the three real properties. On the same day the court entered orders authorizing sale of the properties. On October 2, 1998, the Terminal Road leasehold passed to American Freightways when that sale closed. ⁴ The motion by Wintz and Wintz Properties for a stay pending appeal of the orders authorizing the sales was denied by the bankruptcy court on October 6, 1998.

Wintz and Wintz Properties appealed the bankruptcy court decisions to the Bankruptcy Appellate Panel. The panel issued two decisions. In the one before us on this appeal it affirmed approval of the sales. See In re Wintz Cos., 230 B.R. 840 (8th Cir. BAP 1999). In the other it reversed the grant of summary judgment avoiding the transfers and remanded those issues for further proceedings. See In re Wintz Cos., 230 B.R. 848 (8th Cir. BAP 1999). In respect to the sales, the panel held that the finality rule of 11 U.S.C. 363(m) (1994) prevented reversal or modification of the authorizations of sale because the appellants had not obtained a stay pending appeal and the sales were to good faith purchasers. Id. at 845. Neither were the sales invalidated by the 'last look' provision in the sales procedures. Id. at 845-46. The panel found that the notice of the amended sales terms for the Terminal Road property was sufficient, that the reduced sales price was not so grossly inadequate as to require the sale to be set aside, and that the appeal was moot because the sale had already closed. Id. at 847-48.

This appeal by Wintz and Wintz Properties now relates only to the sale of the Terminal Road property because the parties have meanwhile settled matters relating to the Rosemount property and mutually agreed to terminate the sale of the Walnut Street property. Appellants argue that the finality rule of 11 U.S.C. 363(m) does not apply because the sale of the Terminal Road property was contingent upon the avoidance of the interest of Wintz Properties and the partial summary judgment voiding its interest was reversed by the Bankruptcy Appellate Panel. They also ask this court to set aside the sale and restore the interest of Wintz Properties because the notice of the amended sales terms was inadequate, the sale was tainted by the last look provision, and the amended bid for the property was grossly inadequate. The trustee responds that the finality rule of 11 U.S.C. 363(m) moots their appeal and that in any event the sales procedure was appropriate and maximized the value of the property. Our standard of review for findings of fact is clear error and for conclusions of law is de novo. See In re Food Barn Stores, Inc., 107 F.3d 558, 562 (8th Cir. 1997).

Contained within 11 U.S.C. 363 is a rule of finality designed to permit the sale of property in a bankruptcy estate to a good faith purchaser. The rule allows value to be produced for the estate while protecting the rights of purchasers. Under the statute, a "reversal or modification on appeal of [a judicial authorization] of a sale or lease of property does not affect the validity of the sale or lease ... to an entity that purchased or leased such property in good faith ... unless such authorization and such sale or lease were stayed pending appeal." 11 U.S.C. 363(m). Appellate courts have interpreted this section to prevent the overturning of a completed sale to a bona fide third party purchaser in the absence of a stay. See, e.g., United States v. Fitzgerald, 109 F.3d 1339, 1342 (8th Cir. 1997). This rule protects the finality of bankruptcy sales and the reasonable expectations of third party purchasers. See Veltman v. Whetzal, 93 F.3d 517, 521 n.4 (8th Cir. 1996). It also reflects the inability of courts to supply a remedy once property has left the bankruptcy estate. See id. ; see also In re Van Iperen, 819 F.2d 189, 191 (8th Cir. 1987) (per curiam) ("Once collateral is taken and converted into cash, no court is able to formulate adequate relief to the debtor."). Claims against the property once sold may be maintained only against the proceeds of the sale. See MacArthur Co. v. Johns-Manville Corp., 837 F.2d 89, 93 (2d Cir. 1988).

In this case, the trustee and American Freightways entered into an agreement for the sale of the Terminal Road leasehold pursuant to an auction procedure. The modified purchase agreement was approved by the bankruptcy court, and the sale was authorized. Appellants did not obtain a stay before the property was transferred to American Freightways. The estate received approximately $1.5 million on closing, and these funds remain within the estate. Rather than waiting to seek payment from those proceeds should they defeat the fraudulent conveyance claims pending in the bankruptcy court, appellants want to overturn the sale to American Freightways.

Appellants assert that the finality rule...