C.O.P. Coal Development Co. v. C.W. Mining Co. (In re C.W. Mining Co.)

Citation: 
C.O.P. Coal Development Co. V. C.W. Mining Co. (In re C.W. Mining Co.), Case No. 10-4054 (10th Cir., April 19, 2011)
Ruling: 
The Tenth Circuit upheld the decision of the bankruptcy court, which determined that the Coal Operating Agreement between the debtor and C.O.P. was property of the estate and could be assumed and sold by the Chapter 7 trustee. The Court also denied the trustee's motion to dismiss the appeal, which was based upon the doctrine of equitable mootness (because the agreement was sold to a good faith purchaser after the notice of appeal was filed), and instead decided to rule in favor of the trustee on the merits of the appeal.
Procedural context: 
This is an appeal from a decision by the Bankruptcy Appellate Panel for the Tenth Circuit, which upheld the bankruptcy court's ruling that the agreement between the debtor and C.O.P. was property of the estate and could be assumed and sold by the Chapter 7 trustee. The Tenth Circuit affirmed the decision of the BAP and thus, the bankruptcy court.
Facts: 
Debtor and C.O.P entered into the Coal Operating Agreement (the "Agreement") in March 1997. Beginning in November 2007, C.O.P. sent several notices to debtor regarding Debtor's alleged defaults under the Agreement. C.O.P.'s last notice, sent on January 6, 2008, informed debtor that if it did not cure its defaults under the Agreement or negotiate a new agreement with C.O.P. on or before close of business on January 8, 2008, the Agreement would terminate pursuant to its terms without further notice. On January 8, 2008, at 3:36 p.m. MST, a group of debtor's creditors filed an involuntary Chapter 11 bankruptcy against debtor. The case was subsequently converted to a Chapter 7 proceeding and a trustee was appointed. After the bankruptcy filing, the bankruptcy trustee filed a motion to extend the time to assume or reject the Agreement. C.O.P. objected, arguing that the Agreement terminated on January 8 and thus, was not property of the estate. After hearing evidence, the bankruptcy court concluded that the Agreement did not automatically terminate and was in fact property of the estate. C.O.P. appealed the decision to the Bankruptcy Appellate Panel (BAP), which upheld the decision of the bankruptcy court. On March 4, 2010, C.O.P. filed its appeal with the Tenth Circuit. On August 25, 2010, the Agreement was sold to a good faith purchaser via an approved sale order. Subsequent to the sale, the trustee filed a motion to dismiss the appeal as moot. Deciding that it was best to rule on the merits of the appeal, the Tenth Circuit upheld the decision of the bankruptcy court. Specifically, the Court agreed that the unambiguous language of the Agreement did not provide for automatic termination. Thus, Section 541(b)(2) of the Bankruptcy Code did not prevent the Agreement from being included in the debtor's estate. Accordingly, the trustee had the authority to a assume and sell the Agreement.
Judge(s): 
Kelly, McKay and Matheson