Sears v. U.S. Trustee (In re AFY)

Summarized by Bruce Weiner , Rosenberg, Musso & Weiner
12 years 4 months ago

Citation:

11-2283

Tag(s):

Ruling:

The Eighth Circuit affirmed the District Court holding that the appeals of the Debtor's principals and of an entity related to the Debtor must be dismissed. The Debtor's principals appealed from an order authorizing the chapter 11 debtor to sell assets. That appeal had to be dismissed because the bankruptcy court found that the buyer was a good faith purchaser within the meaning of 11 U.S.C. §363(m) and no stay pending appeal was granted. Once the sale was consummated, the appeal was moot. The District Court also correctly dismissed the appeals of the Debtor's principals from orders authorizing the Trustee to pay a secured creditor and to convert the case because under the "person aggrieved doctrine" they lacked standing to object to the orders and to appeal from them. The principals were not persons aggrieved because they would not receive any money from the sale of the Debtor's assets and had no pecuniary interest in the outcome of the case. Finally, although the Debtor was a farmer and 11 U.S.C. §1112(c) states that a case of a farmer could only be converted on the request of a debtor, a chapter 11 trustee was a debtor within the meaning of that section and could request conversion of the case to one under chapter 7.

Procedural context:

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

Facts:

AFY, Inc. filed a chapter 11 petition in March 2010 and in May 2010, Joseph Badami was appointed as chapter 11 trustee. The Trustee moved to assume a pre-petition contract to sell assets by the Debtor and a related entity. The Debtor's principals objected, but the court approved the sale and found that the purchaser was a good faith purchaser. The principals appealed. The motion for a stay pending appeal was denied and the district court dismissed the appeal as moot because the sale was consummated. The bankruptcy court also granted the Trustee's motion to pay a secured creditor and to convert the case to one under chapter 7. The district court dismissed those appeals finding that the appellants lacked standing to appeal.

Judge(s):

Riley, Loken, and Shepherd

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