Castaic Partners II, LLC v. Daca-Castaic, LLC
2016 U.S. App. LEXIS 9380
| 9th Cir. | 2016Background
- Castaic Partners I & II purchased rural LA County parcels financed by investors; they defaulted.
- DACA-Castaic obtained majority beneficial interests in the loans and initiated trustee foreclosure sales.
- Castaic filed bankruptcy the day before scheduled sales, triggering the automatic stay under 11 U.S.C. § 362(a).
- DACA obtained relief from the automatic stay from the bankruptcy court and proceeded with foreclosure sales (no stay sought on appeal).
- DACA acquired the properties by credit bid; the United States Trustee then moved to dismiss Castaic’s bankruptcy cases, which Castaic consented to and did not appeal.
- After the dismissal became final, Castaic’s pending appeal of the stay-relief order reached the Ninth Circuit.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the appeal challenging bankruptcy court’s grant of relief from the automatic stay is justiciable after the bankruptcy cases were dismissed and dismissals became final | Castaic argued the bankruptcy court erred in granting relief from the stay and sought reversal | DACA argued the appeal is moot because the underlying bankruptcy cases have been dismissed and dismissals became final, precluding effective relief | Appeal is constitutionally moot under Article III because, with final dismissals, the court cannot grant any effective relief regarding reorganization or the stay |
Key Cases Cited
- Motor Vehicle Cas. Co. v. Thorpe Insulation Co., 677 F.3d 869 (9th Cir. 2012) (mootness test: whether appellate court can grant effective relief)
- Olive St. Inv., Inc. v. Howard Sav. Bank, 972 F.2d 214 (8th Cir. 1992) (dismissal of bankruptcy case renders appeal of stay-relief moot)
- In re Income Prop. Builders, Inc., 699 F.2d 963 (9th Cir. 1982) (dismissal eliminates reorganization goal and automatic stay)
- In re Baker & Drake, Inc., 35 F.3d 1348 (9th Cir. 1994) (discussion of equitable mootness and the difficulty of "unscrambling the eggs")
- In re Onouli-Kona Land Co., 846 F.2d 1170 (9th Cir. 1988) (statutory mootness under § 363(m) does not exhaust equitable mootness doctrine)