Sian v. Montoya (In re Sandia Resorts, Inc.)

Case Type:
Case Status:
NM-17-003 (10th Circuit, Aug 30,2017) Not Published
The trustee can overcome the burden of demonstrating that an appeal of a sale under § 363(b) is moot under § 363(m) if the appellant fails to offer a permissible theory for relief that would allow the court to fashion an equitable remedy. An appellant must at least identify an available remedy that will not affect the sale’s validity and a trustee need not disprove every possible legal remedy imaginable in demonstrating an appeal is mooted by § 363(m). In the absence of a stay of the sale order, the court must determine if the buyer qualifies as a good faith purchaser under §363(m).
Procedural context:
The bankruptcy court approved the sale of a hotel over appellant’s objection. Appellant appealed but failed to get a stay of the sale order and the sale closed. The 10th Circuit BAP reviewed the bankruptcy court’s (i) conclusions of law de novo; (ii) order approving the sale for abuse of discretion, and; (iii) factual findings, including good faith, for clear error. The 10th Circuit BAP affirmed finding the appeal moot under § 363(m).
Debtor Sandia Resorts owned America’s Best Value Inn in Albuquerque, New Mexico. Appellant Harminder Sian is the president and sole shareholder of the Debtor. Debtor defaulted on loan, the bank commenced a foreclosure, and the debtor filed chapter 11. Debtor confirmed a plan of reorganization but defaulted under the plan and the bank restarted the foreclosure and had a receiver appointed. Debtor filed a second chapter 11 that was originally dismissed as an impermissible attempt to circumvent the prohibition against post-substantial consummation plan modifications. On reconsideration, the bankruptcy court reopened the second case because debtor argued the bank had no standing. Six months prior to the filing of the second bankruptcy, the bank sold the loan to the appellee but for reasons not in the record, continued to pursue relief in its own name. Debtor failed to confirm a plan and the case converted to chapter 7. The bankruptcy court approved the sale of the hotel to appellee for $550,000.00 cash plus forgiveness of approximately $2.5 million in debt. Sian appealed and asked the bankruptcy court to stay the sale order which the bankruptcy court denied. Sian did not ask for a stay from the BAP.
Karlin, Nugent, Mosier (Karlin)

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