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finding that while the court could not determine if a claim was equitably moot, the appeal was "statutorily moot by operation of 11 U.S.C. § 363(m), which provides that reversal or modification of a sale order on appeal does not affect the validity of a sale to a good-faith buyer unless the sale was stayed pending appeal."
Summary of this case from Girardi v. Miller (In re Keese)Opinion
21-56177
10-25-2022
In re: BRUCE ELIEFF, Debtor, v. HOWARD M. EHRENBERG, Chapter 11 Trustee, Appellee. CITI INVESTMENT CAPITAL, INC., Appellant,
NOT FOR PUBLICATION
Submitted October 19, 2022 Pasadena, California
This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3.
Appeal from the United States District Court for the Central District of California Josephine L. Staton, District Judge, Presiding D.C. No. 8:20-cv-01780-JLS
Before: KLEINFELD, CHRISTEN, and BUMATAY, Circuit Judges.
MEMORANDUM
Plaintiff Citi Investment Capital, Inc. (Citi) appeals the district court's order affirming the bankruptcy court's order authorizing the sale of a residence (the Property). We have jurisdiction pursuant to 28 U.S.C. § 158(d)(1), and we dismiss the appeal as moot. Because the parties are familiar with the facts of this case, we need not recite them here.
We review de novo a district court's decision on an appeal from a bankruptcy court, AFI Holding, Inc. v. Mackenzie (In re AFI Holding, Inc.), 525 F.3d 700, 702 (9th Cir. 2008), and a bankruptcy court's order authorizing the sale of property of a bankruptcy estate is reviewed for abuse of discretion, Simantob v. Claims Prosecutor, LLC (In re Lahijani), 325 B.R. 282, 287 (B.A.P. 9th Cir. 2005). A bankruptcy court abuses its discretion if it fails to apply the correct legal standard or if its factual findings were clearly erroneous. Veal v. Am. Home Mortg. Servicing, Inc. (In re Veal), 450 B.R. 897, 915 (B.A.P. 9th Cir. 2011). Whether property is property of the bankruptcy estate is a question of law. White v. Brown (In re White), 389 B.R. 693, 698 (B.A.P. 9th Cir. 2008).
As an initial matter, the Trustee asserts this appeal is equitably and statutorily moot because Citi did not seek a stay pending appeal and the sale of the Property to a third party has been consummated. On this record, we cannot ascertain whether this transaction is sufficiently "complex and difficult to unwind" to render Citi's appeal equitably moot. See Popp v. Zimmerman (In re Popp), 323 B.R. 260, 271 (B.A.P. 9th Cir. 2005) (quoting Lowenschuss v. Selnick (In re Lowenschuss), 170 F.3d 923, 933 (9th Cir. 1999)). However, for the reasons stated below, we hold the bankruptcy court properly determined the Property belonged to the bankruptcy estate. As a result, this appeal is statutorily moot by operation of 11 U.S.C. § 363(m), which provides that reversal or modification of a sale order on appeal does not affect the validity of a sale to a good-faith buyer unless the sale was stayed pending appeal.
The bankruptcy court correctly determined the Property was an asset of the bankruptcy estate. Though Citi was the winning bidder at a non-judicial foreclosure sale of the Property prior to the debtor filing for bankruptcy, the foreclosure sale was invalid because the lender accepted reinstatement of the debtor's loan prior to the sale. See Bank of Am. v. La Jolla Grp. II, 129 Cal.App.4th 706, 712-13 (2005). Consequently, title never passed to Citi, and under California law, the only remedy available to Citi was the return of its bid funds plus interest. See Residential Cap. v. Cal-W. Reconveyance Corp., 108 Cal.App.4th 807, 823 (2003). Because we agree with the bankruptcy court's conclusion that "there is no persuasive evidence that Citi holds any legally cognizable claim to the Property," we do not reach the issue of whether Citi waived its claims to ownership of the Property.
Relying on In re Popp and In re Rodeo, Citi suggests the bankruptcy court nevertheless abused its discretion when it authorized the sale of the Property because doing so while Citi's adversary proceeding was still pending "fail[ed] to provide finality on the issue of ownership." See In re Popp, 323 B.R. at 268-70; Warnick v. Yassian (In re Rodeo Canon Dev. Corp.), 362 F.3d 603, 608-10 (9th Cir. 2004), opinion withdrawn and superseded on other grounds, 126 Fed.Appx. 553 (9th Cir. 2005). But In re Popp and In re Rodeo are inapposite. In those cases, the bankruptcy court expressly left the ownership dispute unresolved or found the estate had something less than a full ownership interest in the relevant property, despite authorizing sale of the property. In re Popp, 323 B.R. at 264 &n.7; In re Rodeo, 363 F.3d at 608. Here, the limited excerpts of the sale motion hearing transcript provided by Citi do not establish the bankruptcy court created any inconsistency. And more saliently, we see no ambiguity or inconsistency in the district court's sale order issued nearly a month after the sale motion hearing. The sale order conclusively determined the Property belonged to the bankruptcy estate and nothing suggested this ownership finding did not apply to Citi's identical claims in the adversary proceeding.
Because the bankruptcy court determined with finality that the Property belonged to the bankruptcy estate, 11 U.S.C. § 363(m) applies and renders this appeal equitably moot.
DISMISSED AS MOOT.
The panel unanimously concludes this case is suitable for decision without oral argument. See Fed. R. App. P. 34(a)(2).