Bonnett v. Gillespie (In re Irish Pub-Arrowhead, LLC)

Summarized by Geoffrey Miller , Dentons US LLP
12 years 3 weeks ago

Citation:

Bonnett v. Gillespie (In re Irish Pub-Arrowhead, LLC), Case Nos. 13-1024, 13-1043 (9th Cir. BAP Feb. 6, 2014) [Not for Publication]

Tag(s):

Ruling:

The Ninth Circuit BAP affirmed the Bankruptcy Court on appeal. The BAP explained that the appeal was not moot because the subject sale transaction was not so complex that it would be difficult to unwind as the proceeds of the subject sale remained in the Trustee’s possession and would not be distributed pending the outcome of the appeal. Additionally, the BAP held that the Bankruptcy Court did not abuse its discretion in denying the motion to set aside the sale finding the Trustee adequately identified the purchasers in his sale order because, unlike case law relied on by Creditors, there was no concern regarding the financial ability of the buyers. The BAP also found that the Trustee did not abuse his business judgment by not requiring an earnest money deposit from the Buyers in advance of the sale because this was a negotiation tactic to get the Buyers to agree to a mutual release of claims when the Trustee believed that the estate’s claims against the Buyers were not worth pursuing.

Procedural context:

The Creditors timely appealed the Bankruptcy Court order denying their motion to set aside the sale of estate assets.

Facts:

Chapter 11 Trustee (“Trustee”) filed a motion to sell estate assets under § 363 to a group of buyers (“Buyers”) for an original offer $75,000, together with a mutual release of the Buyers’ claims against the estate and the Trustee’s claims against the Buyers. Two creditors (“Creditors”) objected to the sale motion because the Buyers allegedly engaged in wrongful prepetition conduct damaging the debtor and, therefore, could not be good faith purchasers. The Bankruptcy Court granted the sale motion over this objection because there was no evidence that the Buyers wrongfully conducted themselves in connection with the auction sale and the Buyers made the highest and best offer to purchase the assets for $115,000. The Creditors then filed a motion to set aside the sale order arguing that the purchasers were not properly identified because a third party, not identified until after the sale order was entered, provided $105,000 of the purchase price. The Bankruptcy Court entered an order denying the motion to set aside the sale.

Judge(s):

Pappas, Kurtz and Dunn, Bankruptcy Judges.

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