The Zuercher Trust of 1999 v. Kravitz (In re The Zuercher Trust of 1999)

In re The Zuercher Trust of 1999, No. NC-13-1299-PaJuKu (9th Cir. B.A.P. Dec. 17, 2014).
The appeal of a sale-approval order is not equitably moot if the buyer is before the court and the sale can be unwound equitably. Allegations of events occurring after bankruptcy-court approval of a sale that bear on the appellee's good faith require remand to the bankruptcy court for fact-finding. Not-for-publication memorandum.
Procedural context:
The chapter 11 trustee obtained an order authorizing the trustee to sell property to Vista. The bankruptcy court found that Vista was a good-faith buyer. The trustee sold the property to Win Win, which then re-sold the property to Vista. The debtor opposed the sale and appealed the sale order, but did not seek a stay pending appeal. The BAP remanded the case to the bankruptcy court for fact-finding regarding post-sale events that could bear on Win Win's good faith.
Even though the debtor-appellant did not seek a stay pending appeal of the order authorizing the sale, the appeal was not equitably moot because no subsequent event rendered consideration of the appeal inequitable. Win Win resold the property to Vista, which submitted a declaration in support of Win Win's appellate brief. Thus, Vista was “before the court” in both the bankruptcy case and the appeal. Also, Win Win's agreement with Vista specified the consequences and respective rights and responsibilities of the parties if the sale order were reversed on appeal. Thus, the sale and later transactions were not “so complex or difficult to unwind” that equitable mootness would prevent reversal of the sale order. Because the debtor directed the BAP's attention to facts occurring after entry of the sale order that could plausibly support an inference of collusion between the trustee-seller and Win Win, the BAP was required to remand the appeal to the bankruptcy court for fact-finding regarding those post-sale-order events and their effect on Win Win's good faith.
Jim D. Pappas, Meredith A. Jury, and Frank L. Kurtz, Bankruptcy Judges.

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