Rev Op Group v. ML Manager LLC (In Re Mortgages Ltd.)

FILED
NOT FOR PUBLICATION NOV 12 2014
MOLLY C. DWYER, CLERK
UNITED STATES COURT OF APPEALS U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
In re: MORTGAGES LTD., No. 12-15229
Debtor, D.C. Nos. 2:11-cv-00853-RCJ
2:08-bk-07465-RJH
REV OP GROUP,
MEMORANDUM*
Appellant,
v.
ML MANAGER LLC,
Appellee.
REV OP GROUP, No. 12-15438
Appellant, D.C. No. 2:10-cv-01819-RCJ
v.
ML MANAGER LLC, an Arizona limited
liability company,
Appellee,
MORTGAGES LTD.,
*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
Debtor - In Re.
In the Matter of: MORTGAGES LTD., No. 12-16293
Debtor, D.C. No. 2:10-cv-01917-RCJ
BEAR TOOTH MOUNTAIN
HOLDINGS, L.L.P.; et al.,
Appellants,
v.
ML MANAGER LLC,
Appellee.
In re: MORTGAGES LTD., No. 12-16725
Debtor, D.C. No. 2:12-cv-00036-RCJ
QUEEN CREEK XVIII, L.L.C.,
Appellant,
v.
ML MANAGER LLC,
Appellee.
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Appeal from the United States District Court
for the District of Arizona
Robert Clive Jones, District Judge, Presiding
Argued and Submitted January 16, 2014
San Francisco, California
Before: WALLACE and BYBEE, Circuit Judges, and GETTLEMAN, Senior
District Judge.**
In two Opinions filed with this Memorandum, we address three of the six
appeals filed by Rev Op Group, objecting investors to certain decisions made by
ML Manager LLC (ML Manager), which manages and operates the loan portfolio
of bankrupt debtor Mortgages Ltd. In this Memorandum, we address the other
three appeals, which are from district court affirmances of four orders by the
bankruptcy court that involve different legal issues than those in the two Opinions.
Pursuant to the Declaratory Judgment of the bankruptcy court, ML Manager sold
four properties of the estate, over Rev Op Group’s objection, with the bankruptcy
court’s approval. Rev Op Group appealed each approval to the district court, which
affirmed. Rev Op Group filed timely notices of appeal. We have jurisdiction over
these appeals under 28 U.S.C. § 158(d)(1), and dismiss the appeals of these sales
orders as equitably moot.
We treat sales orders differently than the orders subject to the other appeals
for purposes of equitable mootness. Appeals from unstayed orders approving a sale
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to a good faith purchaser are moot except when the sale is subject to a state right of
redemption, even if the appellant sought a stay and otherwise diligently exercised
its appellate rights. In re Onouli-Kona Land Co., 846 F.2d 1170, 1172–73 (9th Cir.
1988).
Rev Op Group sought stays of two of the sales orders in the bankruptcy and
district courts, but it could not obtain stays because of the high cost of the
calculated bond. Therefore, none of the sales orders Rev Op Group now challenges
were stayed. Arizona does not have a state right of redemption. Mid Kansas Fed.
Sav. & Loan Ass’n of Wichita v. Dynamic Dev. Corp., 804 P.2d 1310, 1315 n.3
(Ariz. 1991) (in banc).
The bankruptcy court specifically found that the purchasers of the Citi Lofts
and Zacher Properties acted in good faith, and the district court affirmed that
finding. We accept those factual findings because they are not “clearly erroneous.”
In re Filtercorp, Inc., 163 F.3d 570, 577 (9th Cir. 1998). The bankruptcy court did
not make “explicit finding[s] of good faith” for the purchasers of the University
and Ash and Dysart Properties. Nonetheless, like in Onouli-Kona, we still conclude
those purchasers bought in good faith as a matter of law, because Rev Op Group
has never argued or shown that the purchasers bought with “fraud, collusion or an
attempt to take grossly unfair advantage of other bidders.” Onouli-Kona, 846 F.2d
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at 1173–74 (citation and alterations omitted). Thus, these appeals of unstayed sales
orders to good faith purchasers are moot.
Rev Op Group makes three arguments to the contrary, which we reject. First,
even though in our opinion in Rev Op Group v. ML Manager LLC, Nos. 12-15229,
12-15438, 12-16293 & 12-16725 we reverse the legal basis for the sales, appeals of
unstayed sales orders to good faith purchasers are moot under the broader
“bankruptcy mootness rule” that complements bankruptcy law regardless of
whether the sales should have been made. Id. at 1172.
Second, even if the purchasers of the properties actually or constructively
knew of Rev Op Group’s disputes against ML Manager’s authority, and thus
bought the properties subject to Rev Op Group’s claim under Arizona law, these
appeals are moot because once Rev Op Group failed to obtain stays of the sales it
“accepted the sale[s] as a final distribution from the collective proceeding.” Id. at
1174. Any Arizona law that purports to retain Rev Op Group’s interest in the
properties “preserved no rights of [Rev Op Group] that remained intact after [Rev
Op Group’s] failure to obtain a stay.” Id.
Finally, Rev Op Group’s legal citations are obviously distinguishable. Our
decision in Goodwin v. United States, 935 F.2d 1061 (9th Cir. 1991) does not
apply here, because that case was decided under the Internal Revenue Code, which
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has “no similar [bankruptcy] mootness provision.” Id. at 1064. Moreover, we are
not bound by, nor are we required to defer to, the Bankruptcy Appellate Panel’s
decision in In re PW, LLC, 391 B.R. 25 (B.A.P. 9th Cir. 2008). Regardless, that
decision – which “reattach[ed]” the interests of junior lien holders to a property
after it was sold “free and clear” – is inapplicable, because in that case all affected
parties were “before the court, and no third-party action [was] required to
reestablish” the junior lienholders’ interests, whereas here, the third party
purchasers are not before us. Id. at 34.
APPEALS DISMISSED.
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