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Nature of Suit Code: 442
Nature of Suit: Civil Rights Employment
Cause of Action: 

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V . FILED 

UNITED STATES COURT OF APPEALS 

FOR THE TENTH CIRCUIT 

oued Srates Courc of Appc,ls 

Tenth Cir-:uit 

M.£\Y 3 11991 

.ROBERT L. HOECKER 

MOHAWK RUBBER COMPANY, Clerk 

Plaintiff-Appellant, 

v. 

OTASCO, INC., AMERITRUST COMPANY 

NATIONAL ASSOCIATION, OFFICIAL 

UNSECURED CREDITORS' COMMITTEE, 

Defendants-Appellees. 

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ORDER AND JUDGMENT* 

No. 89-5112 

(D.C. No. 88-C-1611-B) 

(N.D. Okla.) 

Before ANDERSON, TACHA, and BRORBY, Circuit Judges. 

Plaintiff Mohawk Rubber Company, a creditor of defendant 

Otasco, Inc., appealed an order of the district court affirming a 

bankruptcy court order denying in part Mohawk's request for relief 

from the automatic stay. However, defendants Otasco, Inc., 

Ameritrust Company National Association, and the Official 

Unsecured Creditors' Committee (collectively defendants) filed a 

joint motion to dismiss based on mootness. 1 We grant defendants' 

* This order and judgment has no precedential value and shall 

not be cited, or qsed by any court within the Tenth Circuit, 

except for purposes of establishing the doctrines of the law of 

the case, res judicata, or collateral estoppel. 10th Cir. R. 

36.3. 

1 Tenth Circuit Rule 34.1.8 provides that there will be no oral 

argument on petitions or motions except as ordered by the court. 

(continued on next page) 

Appellate Case: 89-5112 Document: 010110118046 Date Filed: 05/31/1991 Page: 1 
motion and dismiss this appeal. 

In 1988, Otasco filed a petition for relief under Chapter 11 

of the Bankruptcy Code. Mohawk, which held a security interest in 

certain Mohawk-brand tires in Otasco's possession, requested 

relief from the automatic stay so that it could repossess its 

collateral. Mohawk's security interest was limited to the tires 

specified in a security agreement with Otasco and did not include 

proceeds from the sale of those tires. 

In its order addressing Mohawk's request for relief, the 

bankruptcy court held that Mohawk could repossess approximately 

$700,000 worth of Mohawk-brand tires, which it later did. The 

bankruptcy court, however, refused to hold that Mohawk was also 

secured for the repayment of a $1,117,068 "open account" 

obligation owed to it by Otasco. It is the latter portion of the 

bankruptcy court's ruling that became the subject of this appeal. 

See In re Otasco, Inc., No. 88-03410-W, slip op. at 2 (Bankr. N.D. 

Okla. Dec. 9, 1988). 

The district court affirmed the finding of the bankruptcy 

court, holding that a promissory note and a security and 

subordination agreement executed by Mohawk, Otasco and Ameritrust 

were part of one transaction; that the agreement only secured the 

debt created by the promissory note; that the agreement did not 

contain a future advance clause; and that Mohawk's claim for the 

unpaid $1,117,068 open account debt was an allowed unsecured 

(continued from preceeding page) 

The panel determined unanimously not to order oral argument on 

this motion. See 10th Cir. R. 34.1.8. 

2 

Appellate Case: 89-5112 Document: 010110118046 Date Filed: 05/31/1991 Page: 2 
claim. Mohawk Rubber Co. v. Otasco, Inc., No. 88-C-1611-B, slip 

op. at 8 (N.D. Okla. June 1, 1989). 

Mohawk did not request a stay of the bankruptcy court order 

or the affirming order of the district court pending appeal. 

During the pendency of this appeal, Otasco sold the balance of the 

Mohawk tires in its possession claiming that this sale was 

pursuant to 11 u.s.c. § 363(c)(1)(1978). 2 

In a later adversary proceeding instituted in the bankruptcy 

court by Otasco, Mohawk counterclaimed that Otasco and .Ameritrust 

had "knowingly · and wrongfully taken and sold Mohawk-brand tires 

(having a value of $786,271.58) in which Mohawk held a properly 

perfected security interest." Answer and Counterclaim of Mohawk 

Rubber Company at 7. This action has been stayed by the district 

court. Otasco, Inc. v. Mohawk Rubber Co. (In re Otasco, Inc.), 

No. 88-03410-W, slip op. at 1 (N.D. Okla. Oct. 23, 1989). 

In its joint motion to dismiss, defendants argue that because 

the tires which are the subject of this dispute have been sold 

pursuant to a lawful order of the bankruptcy court which was not 

stayed or modified, and because Mohawk's security interest did not 

extend to the proceeds of that sale, this appeal is moot. We 

agree. 

Mohawk advances two arguments against this result. First, it 

argues that defendants' motion to dismiss was untimely and outside 

2 Mohawk argues for the first time on appeal that the sale of 

these tires was not in the ordinary course of business and was in 

violation of the cash collateral order. Issues not raised in the 

courts below will not be considered for the first time by this 

court on appeal. Settles v. Golden Rule Ins. Co., 927 F.2d 505, 

508 n.2 (10th Cir. 1991); Farmers Ins. Co. v. Hubbard, 869 F.2d 

565, 570 (10th Cir. 1989). 

3 

Appellate Case: 89-5112 Document: 010110118046 Date Filed: 05/31/1991 Page: 3 
the scope of Rule 27.2.1 of this Circuit. 3 This argument is 

without merit. The time limits specified in Rule 27.2.1 are 

advisory not mandatory. Further, defendants explained the reason 

for its delay in filing its motion in its reply memorandum. 

Mohawk further complains that Rule 27.2.1 "expressly forbids the 

filing of a motion to dismiss on grounds of mootness." Response 

to Joint Motion to Dismiss at 4. While we acknowledge that the 

rule separately describes jurisdictional defects as a basis for 

"dismissal" and mootness as a basis for "summary disposition," 

mootness is jurisdictional and is thus a proper basis on which to 

bring a motion to dismiss. See Colorado Interstate Gas Co. v. 

Federal Energy Regulatory Comm'n, 890 F.2d 1121, 1126 (10th Cir. 

1989); United Auto., Aerospace & Agricultural Implement Workers v. 

Telex Computer Prods., Inc., 816 F.2d 519, 521 (10th Cir. 1987). 

In any event, whether this case is dismissed or "summarily 

disposed of," the result to the litigants is the same. 

Mohawk's second argument is that this appeal is not moot 

because issues before this court are pertinent to the adversary 

3 Rule 27.2.1 provides in pertinent part: 

Except as otherwise expressly provided in this 

rule, no motion may be filed to affirm the judgment 

appealed from or to dismiss the appeal. A party 

may file a motion to dismiss only on the ground 

that the appeal is not within the jurisdiction of 

this court; for summary disposition only because of 

a supervening change of law or mootness; or for 

remand for additional trial court or administrative 

proceedings. Any motion shall contain a discussion 

of the grounds for the motion. Motions may be 

filed under this rule at any time, but filing 

within 15 days after the notice of appeal is filed 

is favored. Motions filed thereafter should show 

why filing within the initial 15-day period was 

impracticable. 

4 

Appellate Case: 89-5112 Document: 010110118046 Date Filed: 05/31/1991 Page: 4 
proceeding regarding the sale of the tires now stayed in the 

district court. If this appeal is dismissed, Mohawk argues that 

the findings of the bankruptcy court will be res judicata as to 

the second suit. Unfortunately for Mohawk, the spectre of res 

judicata does not affect the question of mootness. 4 

We consider questions of mootness using a plenary standard of 

review. International Bhd. of Boilermakers v. Kelly, 815 F.2d 

912, 914 (3d Cir. 1987). Initially we offer some general comments 

regarding mootness. "Mootness, like ripeness and standing, has 

its constitutional origin in the 'case or controversy' limitation 

of Article III which insures that courts exercise their power only 

in cases where true adversary context allows informed judicial 

resolution." Wiley v. National Collegiate Athletic Ass'n, 

612 F.2d 473, 475 (10th Cir. 1979), cert. denied, 446 U.S. 943 

(1980) (citations omitted). "The actual controversy between the 

parties 'must exist at stages of appellate or certiorari review, 

and not simply at the date the action is initiated.'" Id. (citing 

Roe v. Wade, 410 U.S. 113, 125 (1973)). In general, when events 

occur that prevent the reviewing court from granting a litigant 

any effective relief, an appeal should be dismissed as moot. 

4 Mohawk's concern more correctly involves the narrower 

doctrine of collateral estoppel. Res judicata would operate to 

bar a second suit involving defendants and Mohawk based on the 

same cause of action (relief from stay) as litigated in the 

bankruptcy court. Parklane Hosiery Co. v. Shore, 439 U.S. 322, 

326 n.5 (1979). Collateral estoppel, in contrast, involves a 

second suit on a different cause of action and precludes 

relitigation of issues actually litigated and necessary to the 

decision in the first action. Id. Since the second suit here is 

on a different cause of action, the risk to Mohawk is that 

collateral estoppel will prevent relitigating the issue of whether 

it had a perfected security interest in the tires eventually sold 

by Otasco. 

5 

Appellate Case: 89-5112 Document: 010110118046 Date Filed: 05/31/1991 Page: 5 
Colorado Interstate Gas, 890 F.2d at 1126; International Bhd. of 

Boilermakers, 815 F.2d at 915 ("there must be 'a real and 

substantial controversy admitting of specific relief through a 

decree of a conclusive character, as distinguished from an opinion 

advising what the law would be upon a hypothetical state of 

facts'") (citations omitted); Thournir v. Buchanan, 710 F.2d 1461, 

1463 (10th Cir. 1983). Because the tires which were the subject 

of Mohawk's security interest have been sold pursuant to a 

lawfully entered order of the bankruptcy court, there is no longer 

any property in the debtor's estate in which Mohawk has a secured 

claim. Even if this court were to reverse the district court and 

find that Mohawk had a secured claim to the balance of the tires, 

no relief would be forthcoming to Mohawk because its security 

interest, by virtue of the terms of the security agreement, did 

not extend to the proceeds from the sale of those tires. The 

possibility that the tires themselves could somehow be retrieved 

is not suggested by Mohawk and would not, in any event, be 

possible given the mandate of 11 u.s.c. § 363(m), which provides: 

The reversal or modification on appeal of an 

authorization under subsection (b) or (c) [sections 

dealing with sale of estate property in the 

ordinary course of business and otherwise] of this 

section of a sale or lease of property does not 

affect the validity of a sale or lease under such 

authorization to an entity that purchased or leased 

such property in good faith, whether or not such 

entity knew of the pendency of the appeal, unless 

such authorization and such sale or lease were 

stayed pending appeal. 

(Emphasis added). 

With regard to the specific facts of this case, we note the 

advice given by this court in Tompkins v. Frey (In re Bel Air 

6 

Appellate Case: 89-5112 Document: 010110118046 Date Filed: 05/31/1991 Page: 6 
·. 

Assocs., Ltd.), 706 F.2d 301, 304 (10th Cir. 1983): "[A] party 

appealing from an order which authorizes the sale of property of a 

debtor should obtain a stay of the order. Otherwise the property 

may be sold to a 'good faith purchaser,' removing the property 

from the jurisdiction of the courts and rendering moot the appeal 

from the order authorizing the sale." (emphasis added) (construing 

Fed. R. Bankr. P. 805, the precursor to modern Bankr. R. 8005); 

at 

Vetter Corp.). 

305 

724 

n.10; 

F.2d 

Hoese Corp. v. Vetter Corp. (In re 

52, 55 (7th Cir. 1983). 5 

In arguing that the threat of res judicata removes the 

mootness problem from this case, Mohawk cites Oklahoma City v. 

Sanders, 94 F.2d 323 (10th Cir. 1938), for the proposition that 

"[w]henever a judgment, if left unreversed, will preclude a party 

as to a matter of fact or law vital to his controversy, the appeal 

will be heard despite the fact the appealed matter has become 

moot." Mohawk Response to Motion to Dismiss at 9. We find no 

support in Sanders for this proposition. In Sanders the court 

refused to find a controversy involving a contractor and the city 

of Oklahoma City moot even though the low income housing project 

which was the subject of the dispute had been built and accepted 

by the federal government before the case came before the court on 

5 The order of the bankruptcy court did not authorize the sale 

of the tires per se. Rather, it found that Mohawk had a senior 

secured lien in the amount of $712,655.54 and allowed Mohawk to 

take possession of tires valued at that amount. In re Otasco, 

Inc., No. 88-03410-W, slip op. at 2 (Bankr. N.D. Okla. Dec. 9, 

1988). The order of the district court, Mohawk Rubber Co. v. 

Otasco, Inc., No. 88-C-1611-B, slip op. at 5 (N.D. Okla. June 1, 

1989), treated the bankruptcy court order as one authorizing sale 

and, indeed, the parties do not argue any substantive issue in 

this distinction. 

7 

Appellate Case: 89-5112 Document: 010110118046 Date Filed: 05/31/1991 Page: 7 
appeal. The court held that, because the contractor was subject 

to criminal prosecution for all offenses committed during the 

building period, the questions raised in the suit were not moot. 

Sanders, 94 F.2d at 325. In Sanders, unlike the present 

situation, there was a vehicle by which the appellate court could 

grant relief to the complainant city: it could find that the 

contractor had violated city ordinances, thus allowing the city to 

extract the appropriate penalty. 6 Here, because the tires to 

which Mohawk claims its security interest attached are no longer 

within the jurisdiction of the courts, see In re Bel Air, 706 F.2d 

6 In a case involving a factual situation similar to that of 

Sanders, the Illinois Supreme Court, relying on precedent from its 

jurisdiction, acknowledged that the case was moot but, because of 

concerns that the legal issues involved may be relevant to 

controversies in later proceedings where the municipal defendant 

would be bound by precedent from the trial court opinion, the 

court ordered the trial court judgment set aside and reversed and 

remanded the case with instructions to dismiss the complaint. 

Bankers Life & Casualty Co. v. City of Chicago, 21 Ill.2d 172, 171 

N.E.2d 577, 579 (1961). This case is not on point. The Illinois 

Supreme Court acknowledged that the case was moot and did not 

address the merits of the controversy, but rather remanded with 

instructions to dismiss. The case involved the appellate court's 

concern at leaving intact the trial court's legal conclusions, 

which could not be reviewed on appeal. Its holding is akin to 

those cases in which an otherwise moot question is nevertheless 

reviewed by an appellate court because of concerns that the 

questions presented were "capable of repetition, yet evading 

review." See Southern Pac. Terminal Co. v. Interstate Commerce 

Comm'n, 219 U.S. 498, 515 (1911); cf. Weinstein v. Bradford, 

423 U.S. 147, 149 (1975) (refusing to review an otherwise moot 

appeal because case was not "capable of repetition"). The 

"evading review" doctrine does not apply here. In non-class 

actions, the doctrine is limited to cases where both "'(l) the 

challenged action [is] in its duration too short to be fully 

litigated prior to its cessation or expiration, and (2) there [is] 

a reasonable expectation that the same complaining party would be 

subjected to the same action again.'" Schepp v. Fremont County~ 

900 F.2d 1448, 1453 (10th Cir. 1990) (quoting Weinstein, 423 U.S. 

at 149). Here, the challenged finding of the bankruptcy court 

could have been fully litigated had Mohawk obtained a stay, and 

there is no reason to expect that Mohawk will be subject to the 

same action again. 

8 

Appellate Case: 89-5112 Document: 010110118046 Date Filed: 05/31/1991 Page: 8 
at 304, there is no res upon which this court can act to grant 

Mohawk effective relief. 

Mohawk's citation of Supreme Court precedent is similarly 

unavailing. In Fis_hgold v. Sullivan Drydock & Repair Corp., 

328 U.S. 275, 283 (1946), the Court rejected a claim of mootness 

on appeal directed against a union defendant by an employee who 

had recovered a money judgment in the trial court against the 

employer but not against the union. The Court rejected the 

employee's claim that the union had no appealable interest. It 

reasoned that the collective bargaining agreement was which was 

operative at the time of trial and at issue therein was still in 

existence at the time of the appeal. Because an interpretation of 

the contract would affect the union in the future, and because the 

union still had an active right at stake regarding that 

interpretation, the case was not moot as to the union. Id. at 

7 282-83. Mohawk can point to no similar contractual right still 

in existence as a result of its dealings with Otasco which will be 

affected by this court's judgment on appeal. 

Reed v. Allen, 286 U.S. 191 (1932), the other Supreme Court 

case cited by Mohawk, did not deal with mootness. It recognized 

that a party may need to appeal an initial decision in order to 

prevent it from becoming res judicata in a later action. 

Defendants do not contest Mohawk's right to appeal the judgment of 

7 DeGarmo v. Goldman, 19 Cal.2d 755, 123 P.2d 1 (1942), is 

similarly distinguishable. There the court refused to dismiss an 

appeal on the basis of mootness because at the time the suit was 

commenced one -of the defendants "was employed by the corporation 

under a contract and ... the determination of his appeal may 

affect the rights thereunder." Id. at 9. 

9 

Appellate Case: 89-5112 Document: 010110118046 Date Filed: 05/31/1991 Page: 9 
' ,· 

the bankruptcy court; it correctly argues, however, that Mohawk 

should have applied for a stay of the bankruptcy court's action in 

order to preserve its collateral pending the appeal. We agree 

with that argument and do not find Reed v. Allen to the contrary. 

The joint motion to dismiss this appeal is hereby GRANTED. 

ENTERED FOR THE COURT 

Wade Brorby 

Circuit Judge 

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