665 B.R. 214
S.D.N.Y.2024Background
- Sei Insieme LLC originally owned property at 307–309 Sixth Avenue, later sold to 307 Assets LLC in 2017, partially financed by a mortgage.
- 307 Assets defaulted on its mortgage, prompting foreclosure proceedings and a foreclosure judgment in New York State court.
- To protect its interests as a junior mortgagee, Sei filed for Chapter 11 bankruptcy, then sought to stay the foreclosure sale but only received a brief temporary restraining order.
- 307 Assets filed its own Chapter 11 petition, proposed a plan to sell the property, and the Bankruptcy Court ultimately confirmed this plan and approved the sale.
- Sei repeatedly challenged the plan and sale but did not obtain a stay of the confirmed sale order; subsequently, 307 Assets fully consummated the plan, transferring the property and disbursing proceeds to creditors.
- Sei appealed the confirmation order but did not obtain a stay pending appeal; 307 Assets moved to dismiss the appeal as equitably moot.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is Sei’s appeal equitably moot after consummation of the sale? | Appeal addresses sale’s approval and bad faith; equitable mootness inapplicable. | Appeal is moot: sale closed, plan consummated, no stay sought. | Appeal is equitably moot; dismissed. |
| Can relief still be granted (monetary or reversing the sale)? | Effective relief possible (reverse sale or damages). | Unwinding sale is inequitable and prejudicial; all proceeds distributed per plan. | Relief would be inequitable; no viable remedy. |
| Did Sei diligently pursue remedies (i.e., a stay)? | Did not seek stay due to expected futility. | Sei never sought a stay, enabling irreversible changes. | Failure to seek stay fatal to appeal. |
| Were all affected parties notified of appeal? | Only two real parties, so further notice not needed. | Others (e.g., City, broker, Trustee) affected with no notice. | Lack of notice weighs against Sei. |
Key Cases Cited
- In re Chateaugay Corp., 988 F.2d 322 (2d Cir. 1993) (equitable mootness applies when changed circumstances make relief inequitable)
- In re BGI, Inc., 772 F.3d 102 (2d Cir. 2014) (strong presumption of mootness when plan is substantially consummated)
- In re Charter Communs., Inc., 691 F.3d 476 (2d Cir. 2012) (standards for bankruptcy appeals and equitable mootness set forth)
- In re Motors Liquidation Co., 829 F.3d 135 (2d Cir. 2016) (test for when bankruptcy appeal becomes equitably moot)
- In re Metromedia Fiber Network, Inc., 416 F.3d 136 (2d Cir. 2005) (party must seek stay even if unlikely to succeed, to preserve appellate options)