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In re Warner Springs Ranchowners Association

United States District Court, Ninth Circuit

December 17, 2013

In Re: WARNER SPRINGS RANCHOWNERS ASSOCIATION, Debtor.
v.
WARNER SPRINGS RANCHOWNERS ASSOCIATION, et al., Appellees. DEBT ACQUISITION COMPANY OF AMERICA V, LLC, Appellant, Bankruptcy No. 12-3031-LA11

ORDER

WILLIAM Q. HAYES, District Judge.

The matter before the Court is the Motion for Dismissal of Appeal filed by Appellee Pacific Hospitality Group, Inc. ("PHG" or "Appellee"). (ECF No. 12).

I. Background

The Warner Springs Ranch Association ("Debtor") was the majority owner of the tenancy-in-common interests controlling ownership of the historic Warner Springs Ranch Resort ("Ranch"), located in San Diego County. Minority ownership interests were held by Appellant Debt Acquisition Company of America V, LLC ("DACA" or "Appellant"), Pala Band of Mission Indians ("Pala"), and others. Debtor experienced financial difficulties, and entered into an agreement to sell Debtor's interest in the Ranch to Pala. After the sale to Pala failed to close, Debtor filed a Chapter 11 bankruptcy petition in the United States Bankruptcy Court for the Southern District of California on March 1, 2012.

On May 4, 2012, Debtor filed an adversary proceeding in the bankruptcy court seeking to sell the Ranch in its entirety (including the interests of DACA, Pala and all other co-owners) under 11 U.S.C. § 363(h). On December 18, 2012, DACA stipulated to the sale of its interest, stipulated that all statutory conditions set forth in 11 U.S.C. § 363(h) had been satisfied, and stipulated that judgment may be entered authorizing Debtor to sell its interest in the Ranch together with the interests of all co-owners. (Request For Judicial Notice in Support of Motion for Dismissal ("RFJN"), Ex. 1, ECF No. 12-4). Pursuant to DACA's stipulation for entry of judgment, and the bankruptcy court entered judgment in the adversary proceeding, finding that all statutory conditions set forth in 11 U.S.C. § 363(h) had been satisfied.

On December 20, 2012, Debtor filed its motion to sell assets and approve bid procedures. On February 28, 2013, the bankruptcy court entered the "Order on Debtor's Motion for Order: (A) Authorizing and Scheduling the Sale of Substantially All of the Assets of the Estate and Co-Owners Interest Therein, Free and Clear of All Liens, Claims, Encumbrances and Interests; (B) Approving the Stalking Horse Bid and Related Break-Up Fee; (C) Approving Procedures for the Submission of Qualifying Bids and Conducting the Sale; and (D) Approving the Form and Manner of Notice Pursuant to Federal Rule of Bankruptcy Procedure 2002f" ("Bid Procedures Order"). (RFJN, Ex. 5, ECF No. 12-4).

On March 6, 2013, the bankruptcy court conducted the sale auction. On April 12, 2013, the bankruptcy court entered a "Final Order Approving Sale of Assets Pursuant to Debtor's Motion for Order: (A) Authorizing and Scheduling the Sale of Substantially All of the Assets of the Estate and Co-Owners Interest Therein, Free and Clear of All Liens, Claims, Encumbrances and Interests; (B) Approving the Stalking Horse Bid and Related Break-Up Fee; (C) Approving Procedures for the Submission of Qualifying Bids and Conducting the Sale; and (D) Approving the Form and Manner of Notice Pursuant to Federal Rule of Bankruptcy Procedure 2002" ("Sale Order"). (RFJN, Ex. 2, ECF No. 12-4). The Sale Order confirmed the sale of the Ranch to Warner Springs Ranch Resort, LLC ("WSRR" or "Purchaser") and identified Pala as the backup bidder should the sale to WSRR not close. The Sale Order states that, "[p]ursuant to Section 363(b) of the Bankruptcy Code, Debtor... [is] authorized... to take any and all actions necessary or appropriate to... consummate the Sale of the Ranch and Co-Owners' Interests therein to the Purchaser pursuant to the terms of the [Purchase and Sale Agreement]...." Id. at 5. The Sale Order stated: "The Purchaser is purchasing the Ranch in good faith and is a good faith purchaser of the Ranch within the meaning of Section 363(m) of the Bankruptcy Code and is, therefore, entitled to all the protections afforded by that provision." Id. at 3.

On April 17, 2013, DACA filed an appeal of the Sale Order. (ECF No. 1). DACA did not seek a stay of enforcement of the Sale Order pending appeal. DACA named PHG, the predecessor-in-interest to WSRR, as a party to the appeal.[1] DACA did not name the purchaser, WSRR, as a party to the appeal. Id. On April 29, 2013, WSRR closed the sale, and as of the filing date of the Motion for Dismissal of Appeal, WSRR was the record owner of the Ranch. (Grand Decl. ¶¶ 2, 9, ECF No. 12-2).

On May 3, 2013, PHG filed an election to have the appeal heard by this Court. (ECF No. 1). On September 9, 2013, DACA filed the Appellant's opening brief in support of the appeal.[2] (ECF No. 6). On October 15, 2013, PHG filed the Appellee's brief in opposition to the appeal. (ECF No. 11). No other named appellees responded to the appeal. On October 15, 2013, PHG filed the Motion for Dismissal of Appeal. (ECF No. 12). On November 4, 2013, DACA filed a reply brief in support of the appeal and an opposition to the Motion for Dismissal of Appeal. (ECF No. 17, 20). On November 12, 2013, PHG filed a reply in support of the Motion for Dismissal of Appeal. (ECF No. 21). On December 12, 2013, the Court conducted oral argument on the Motion for Dismissal of Appeal and all other issues raised by the appeal.

II. Contentions of the Parties

PHG contends that the appeal should be dismissed for the following reasons:

First, DACA failed to name WSRR, the buyer of the assets, in its appeal. WSRR is the party most affected by the appeal of the Sale Order, and thus an indispensable party to the appeal and the appeal should not proceed due to this fatal flaw. Second, the appeal must be dismissed because the appeal is both statutorily moot and equitably moot. Third, DACA waived its right to appeal its post-auction objections to the bid procedures because it did not object to entry of the Consensual Bid Procedures Order. Fourth, the issues on appeal asserted by DACA establish that DACA was not prejudiced by the Court's ruling.

(ECF No. 12-1 at 7-8). PHG contends that the Sale Order was authorized by § 363(b) and thus is subject to the statutory mootness protection of § 363(m). PHG contends that In re Nashville Senior Living, LLC, 620 F.3d 584 (6th Cir. 2010) supports PHG's position that this action is moot pursuant to 11 U.S.C. § 363(m).

DACA contends that the appeal is not statutorily moot, constitutionally moot, nor equitably moot. DACA contends that policy considerations favor appealability because state court partition laws do not contain mootness provisions, and applying the federal bankruptcy mootness provision to this case would encourage forum shopping. DACA contends that the Sale Order was authorized by § 363(h)-not § 363(b)-and therefore DACA's appeal is not subject to § 363(m). DACA contends that the reasoning of Clear Channel Outdoor, Inc. ...


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