In re National Homeowners Sales Service Corporation

554 F.2d 636

In the Matter of NATIONAL HOMEOWNERS SALES SERVICE CORPORATION d/b/a George Mason Hotel and George Mason Inn, Bankrupt. ALEXANDRIA NATIONAL BANK OF NORTHERN VIRGINIA and United Virginia Bank/National, Appellees, v. NATIONAL HOMEOWNERS SALES SERVICE CORPORATION, Appellant, Savage-Fogarty Companies, Inc., Purchaser of George Mason Hotel as confirmed by U. S. Bankruptcy Judge, Appellee.

No. 76-2051.

United States Court of Appeals, Fourth Circuit.

Argued April 6, 1977. Decided May 10, 1977.

Randolph A. Sutliff, Fairfax, Va. (Stephen L. Best and McCandlish, Lillard, Bauknight, Church & Best, Fairfax, Va., on brief), for appellant.

James M. Lewis, Alexandria, Va. (John S. Stump and Boothe, Prichard & Dudley, Alexandria, Va., on brief), for appellees Alexandria National Bank of Northern Virginia and United Virginia Bank/National.

Charles A. Trainum, Jr., Washington, D. C. (Henry H. Glassie and Glassie, Pewett, Beebe & Shanks, Washington, D. C., on brief), for appellee Savage/Fogarty Companies, Inc.

Before WINTER, BUTZNER and HALL, Circuit Judges.

PER CURIAM:

1

This is an appeal from an order of the district court modifying and affirming an order of the bankruptcy court.

2

The National Homeowners Sales Service Corporation, finding itself in financial trouble, agreed to a Chapter XI reorganization proceeding. 1 The bankruptcy court ordered sold the debtor's principal asset, the George Mason Hotel, to Savage/Fogarty Companies, Inc. The district court affirmed the sale over the objection of National. Sale of the hotel was consummated and the debtor now appeals.

3

After confirmation of the purchase agreement by the district court, the debtor sought and was granted a stay of execution of the order of sale pending appeal to this Court. The stay, however, was conditioned on the posting of a supersedeas bond by the debtor. Bankruptcy Rule 805. No bond was ever posted. Savage/Fogarty then paid the price called for in the contract and a deed to the property was executed, delivered and recorded.

4

The debtor contends on appeal that (1) the bankruptcy court lacked jurisdiction to order sale of the debtor's major asset under Chapter XI reorganization proceedings, (2) the sale of the hotel was improperly conducted, (3) the bankruptcy court abused its discretion in not confirming a contract for purchase of the hotel for a higher price by an affiliate of the debtor, and (4) the district court lacked jurisdiction to modify the purchase agreement.

5

Contrary to the debtor's assertion, the bankruptcy court had jurisdiction to order sale of the debtor's property. In Chapter XI proceedings, a court of bankruptcy has exclusive jurisdiction over the debtor and property, wherever located. 11 U.S.C. § 711 .

6

We need not consider the debtor's other contentions because the appeal must be dismissed for mootness.

7

Rule 805 of the Rules of Bankruptcy and Rule 62(d) of the Federal Rules of Civil Procedure permit a district court to stay enforcement of a bankruptcy court order pending appeal. Under those rules, the district court may condition the granting of the stay upon the filing of a supersedeas bond. In that event, the filing of the petition for review does not effect a stay unless the bond is filed. See, e. g., Country Fairways, Inc. v. Mottaz, 539 F.2d 637, 641 (7th Cir. 1976).

8

This Court recently considered this issue. In Matter of Abingdon Realty Corp., 530 F.2d 588 (4th Cir. 1976), involved an appeal by a bankrupt where no supersedeas bond had been filed nor a stay pending appeal otherwise effected. In holding that the bankruptcy court order was moot and affirming an order of dismissal, we said at 530 F.2d 589 -90:

9

It is settled law that the filing of a petition to review an order of a bankruptcy judge (formerly a referee in bankruptcy), does not stay the effect or operation of the order unless a supersedeas bond is filed or the order itself provides for a stay. (Citing cases and 2A Collier on Bankruptcy, 14th ed., 1974, P 39.26, p. 1526). A proposed amendment to Bankruptcy Rule 805, which has been approved by the Judicial Conference of the United States, would add the following sentence at the end of that rule: 'Unless an order approving a sale of property or issuance of a certificate of indebtedness is stayed pending appeal, the sale to a good faith purchaser or the issuance of a certificate to a good faith holder shall not be affected by the reversal or modification of such order on appeal, whether or not the purchaser or holder knows of the pendency of the appeal.' The Advisory Committee's Note states that the sentence proposed to be added 'is declaratory of existing case law.' We agree. (Citing cases, including Fink v. Continental Foundry & Machine Co., 240 F.2d 369 (7 Cir. 1957), cert. denied, 354 U.S. 938 , 77 S.Ct. 1401 , 1 L.Ed.2d 1538 , and 11 Wright & Miller, Federal Practice and Procedure: Civil § 2904, n. 31.)

10

Here, as in Abingdon, there was a confirmed sale to a good faith purchaser. Substantial investment has been made upon reliance of good title to the hotel property having vested in Savage/Fogarty. The appeal from the district court order modifying and affirming the bankruptcy court order of sale became moot in the absence of an effective stay order.

11

APPEAL DISMISSED.

1

Chapter XI of the Bankruptcy Act, 11 U.S.C. §§ 722 et seq