In Re: Leatherstocking Antiques, Inc.
1:12-cv-07758
S.D.N.Y.Sep 27, 2013Background
- Debtor Leatherstocking Antiques filed Chapter 11 on April 13, 2010, listing six real properties as estate assets. Sterngass is the former president/CEO and appellant.
- Case converted to Chapter 7 on May 18, 2012; a Chapter 7 trustee was appointed and sought authority to sell the six properties by auction under § 363.
- Notice of sale and auction occurred in August 2012; Sterngass objected in bankruptcy court but did not seek a stay of any sale orders.
- Bankruptcy Court approved three sale orders on August 24, 2012; each order included a finding that purchasers would be protected as good-faith buyers under § 363(m) absent a stay.
- Trustee closed on all six property sales between September 17 and September 21, 2012. Sterngass filed a notice of appeal on August 31, 2012 but missed the Bankruptcy Rule 8006 filing deadline (he filed the designation on September 28, 2012).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the appeal is reviewable where sales closed and no stay was obtained | Sterngass challenges the sale orders on appeal (substantive errors) | Trustee: appeal is barred by § 363(m) because sales closed to good‑faith purchasers and no stay was sought | Appeal is statutorily moot under § 363(m); court cannot reverse/modify unstayed sales to good‑faith purchasers |
| Whether equitable mootness bars the appeal despite possible relief | Sterngass contends relief on appeal is appropriate | Trustee: implementation of sales and distribution makes effective relief impracticable and inequitable | Appeal is equitably moot; Chateaugay II factors not met (especially failure to seek a stay and closed sales) |
| Whether Sterngass’s late BR 8006 filing affects appeal | Sterngass filed designation late (Sept. 28) but proceeded with appeal | Trustee: failure to timely comply with Rule 8006 provides independent basis to dismiss | Court finds Sterngass failed to timely comply with Rule 8006; supports dismissal (procedural deficiency) |
| Whether purchasers acted in bad faith such that § 363(m) protection is unavailable | Sterngass did not allege or prove purchaser bad faith | Trustee: purchasers acted in good faith; orders explicitly provided § 363(m) protection absent a stay | No basis to find purchaser bad faith; § 363(m) protection applies |
Key Cases Cited
- In re Motors Liquidation Co., 428 B.R. 43 (S.D.N.Y. 2010) (§ 363(m) bars reversal of unstayed sales to good‑faith purchasers)
- Contratian Funds LLC v. Aretex LLC (In re WestPoint Stevens, Inc.), 600 F.3d 231 (2d Cir. 2010) (strict enforcement of statutory mootness under § 363(m))
- Licensing by Paolo, Inc. v. Sinatra (In re Gucci), 105 F.3d 837 (2d Cir. 1997) (appellant bears risk of challenging sale without seeking stay)
- In re Metromedia Fiber Network, Inc., 416 F.3d 136 (2d Cir. 2005) (equitable mootness doctrine and its application to implemented reorganizations)
- Frito–Lay, Inc. v. LTV Steel Co. (In re Chateaugay Corp.), 10 F.3d 944 (2d Cir. 1993) (enumerating five Chateaugay II factors to overcome equitable mootness)