Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca9-14-55281/USCOURTS-ca9-14-55281-0/pdf.json

Parties Involved:
Castaic Partners II, LLC

DACA-Castaic, LLC
Appellee

Document Text:

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

IN THE MATTER OF CASTAIC

PARTNERS II, LLC,

Debtor,

CASTAIC PARTNERS II, LLC,

Appellant,

v.

DACA-CASTAIC, LLC,

Appellee.

No. 14-55281

D.C. No.

2:13-cv-05452-SJO

IN THE MATTER OF CASTAIC

PARTNERS, LLC,

Debtor,

CASTAIC PARTNERS, LLC,

Appellant,

v.

DACA-CASTAIC, LLC,

Appellee.

No. 14-56367

D.C. No.

2:13-cv-05997-SJO

OPINION

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2 IN THE MATTER OF CASTAIC PARTNERS II, LLC

Appeal from the United States District Court

for the Central District of California

S. James Otero, District Judge, Presiding

Argued and Submitted May 2, 2016

Pasadena, California

Filed May 23, 2016

Before: MILAN D. SMITH, JR., and JACQUELINE H.

NGUYEN, Circuit Judges, and CLAUDIA WILKEN,

*

Senior District Judge.

Opinion by Judge Milan D. Smith, Jr.

SUMMARY**

Bankruptcy

The panel dismissed bankruptcy appeals as moot under

Article III.

The bankruptcy court granted a party’s motion for relief

from the automatic bankruptcy stay so that it could proceed

with foreclosure sales. Debtors appealed to the district court,

* The Honorable Claudia Wilken, Senior District Judge for the U.S.

District Court for the Northern District of California, sitting by

designation.

** This summary constitutes no part of the opinion of the court. It has

been prepared by court staff for the convenience of the reader.

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IN THE MATTER OF CASTAIC PARTNERS II, LLC 3

but did not seek a stay of the bankruptcy court’s order

pending appeal. The foreclosures went forward. Thereafter,

with debtors’ consent, the bankruptcy cases were dismissed.

The panel held that debtors’ appeals were constitutionally

moot because there no longer was any case or controversy.

COUNSEL

David M. Gilmore (argued) and Stephen D. Blea, Gilmore,

Wood, Vinnard & Magness, Fresno, California, for

Appellants.

Dean T. Kirby, Jr., (argued), Kirby & McGuinn, A P.C., San

Diego, California, for Appellee.

OPINION

M. SMITH, Circuit Judge:

Debtors-Appellants Castaic Partners, LLC, and Castaic

Partners II, LLC, (collectively Castaic) appeal the district

court’s dismissal of this bankruptcy appeal as moot under

11 U.S.C. § 363(m). During the pendency of the appeal, the

bankruptcy court dismissed the underlying bankruptcy cases

as well. Castaic did not appeal those dismissals, and after 14

days, they became final. There is therefore no longer any case

or controversy, and this Court has no power to grant Castaic

any effective relief. We dismiss this appeal as moot under

Article III of the Constitution.

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4 IN THE MATTER OF CASTAIC PARTNERS II, LLC

FACTS AND PRIOR PROCEEDINGS

Castaic bought certain parcels of real property located in

rural Los Angeles County, California, with financing from a

number of investors through a Nevada loan-servicing

company. Shortly thereafter, Castaic defaulted on the loans.

That gave rise to what District Judge Robert C. Jones has

called a “hydra of litigation,” of which this consolidated

appeal represents one head. Richard & Sheila J. McKnight

2000 Family Trust v. Barkett, 2011 WL 3159137, at *8 (D.

Nev. July 26, 2011) (describing related litigation not at issue

in this appeal).

Through a complex series of transactions and

bankruptcies that need not trouble us here, Creditor-Appellee

DACA-Castaic (DACA) obtained a majority of the beneficial

interests in the loans—and, per Judge Jones, the power to

foreclose on them. Richard & Sheila J. McKnight 2000

Family Trust v. Barkett, 2012 WL 870503, at *6 (D. Nev.

Mar. 14, 2012). Relying on Judge Jones’s ruling, DACA

pursued foreclosure proceedings and recorded Notices of

Trustee’s Sale for the properties. The sales were scheduled

for July 31, 2012. On July 30, Castaic filed for bankruptcy in

the Central District of California. Accordingly, the sales were

halted pursuant to the automatic-stay provision of 11 U.S.C.

§ 362(a).

DACA moved the bankruptcy court for relief from the

automatic stay so that it could proceed with the foreclosure

sales. Castaic opposed the motion, arguing that DACA lacked

a valid interest in the properties and therefore did not have

standing to move for relief from stay or foreclose.1 The

1 Because we dismiss the appeal as moot, we do not reach this argument.

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IN THE MATTER OF CASTAIC PARTNERS II, LLC 5

bankruptcy court disagreed and granted DACA the requested

relief.

Castaic filed a notice of appeal in the district court, but

did not seek a stay of the bankruptcy court’s relief order

pending appeal. Accordingly, DACA foreclosed on the

properties and acquired them by credit bids at the foreclosure

sales. Shortly thereafter, on the motion of the United States

Trustee, the bankruptcycourt dismissed Castaic’s bankruptcy

cases because the properties had been Castaic’s only

significant assets. Castaic consented to and did not appeal the

dismissals.

DISCUSSION

“In bankruptcy, mootness comes in a variety of flavors:

constitutional, equitable, and statutory.” Clear Channel

Outdoor Inc. v. Knupfer (In re PW, LLC), 391 B.R. 25, 33

(B.A.P. 9th Cir. 2008). Constitutional mootness is

jurisdictional and derives from the case-or-controversy

requirement of Article III. Id. Equitable mootness concerns

whether changes to the status quo following the order being

appealed make it impractical or inequitable to “unscramble

the eggs.” Id. (quoting Baker & Drake, Inc. v. Pub. Serv.

Comm’n (In re Baker &Drake, Inc.), 35 F.3d 1348, 1352 (9th

Cir. 1994)). Finally, statutory mootness codifies part, but not

all, of the doctrine of equitable mootness. Id. at 35; see

11 U.S.C. § 363(m); Onouli-Kona Land Co. v. Estate of

Richards(In re Onouli-Kona Land Co.), 846 F.2d 1170, 1172

(9th Cir. 1988) (holding that the codification of § 363(m) did

not abrogate the rest of the equitable-mootness doctrine).

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6 IN THE MATTER OF CASTAIC PARTNERS II, LLC

This appeal is constitutionally moot.2“The test for

mootness of an appeal is whether the appellate court can give

the appellant any effective relief in the event that it decides

the matter on the merits in his favor.” Motor Vehicle Cas. Co.

v. Thorpe Insulation Co. (In re Thorpe Insulation Co.),

677 F.3d 869, 880 (9th Cir. 2012) (quotation marks omitted).

If it cannot grant such relief, the matter is moot. See id. In a

bankruptcy appeal, when the underlying bankruptcy case is

dismissed and that dismissal is allowed to become final, there

is likely no longer any case or controversy “with respect to

issues directly involving the reorganization of the estate.” See

Olive St. Inv., Inc. v. Howard Sav. Bank, 972 F.2d 214, 215

(8th Cir. 1992) (quotation marks omitted).

The Eighth Circuit’s decision in Olive St. is instructive. In

that case, a creditor sought to foreclose on a debtor’s property

pledged as collateral for a note. Id. The debtor petitioned for

bankruptcy, triggering an automatic stay, but the creditor

sought and obtained relief from the stay. Id. It then held a

foreclosure sale and obtained the property on a credit bid. Id.

The debtor appealed, but failed to seek a stay of the relief

order. Accordingly, the district court dismissed the appeal as

equitably moot. Id. The debtor appealed again, but while its

appeal was pending, the bankruptcy court dismissed the

underlying bankruptcy case pursuant to 11 U.S.C.

§ 1112(b)(1). Id. The debtor appealed that order to the district

court, but when that court affirmed, the debtor did not pursue

2 The district court determined that this case is statutorily moot.

Statutory mootness applies only to sales or leases conducted pursuant to

the authority of 11 U.S.C. §§ 363(b) or (c). § 363(m). Those subsections,

in turn, concern sales by the bankruptcy trustee or debtor-in-possession.

Here, foreclosure sales were conducted by trustees under the deeds of

trust—not the bankruptcy trustee. Thus, statutorymootness is inapplicable

in this case.

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IN THE MATTER OF CASTAIC PARTNERS II, LLC 7

an appeal to the Court of Appeals. Id. Therefore, the

dismissal became final. Id. The Eighth Circuit held that

[o]nce the bankruptcy proceeding is

dismissed, neither the goal of a successful

reorganization nor the debtor’s right to the

automatic stay continues to exist.

Accordingly, it no longer serves any purpose

to determine whether the bankruptcy court

properly lifted the automatic stay; the appeal

has become moot.

Id. at 216 (citing Armel Laminates, Inc. v. Lomas &Nettleton

Co. (In re Income Prop. Builders, Inc.), 699 F.2d 963, 964

(9th Cir. 1982) (per curiam)).

The facts of Olive St. are materially identical to the facts

in this case. As in Olive St., the bankruptcy court here

dismissed the underlying cases pursuant to § 1112(b) while

an appeal was pending.

3 Then, Castaic failed to appeal the

orders of dismissal.4 The bankruptcycourt here dismissed one

case on January 29, 2013, and the other on January 30. Under

Federal Rule of Bankruptcy Procedure 8002(a)(1), the orders

of dismissal became final 14 days later. At that time, “a

bankruptcy court no longer had power to order [a] stay or to

award damages allegedly attributable to its vacation.” See

3 This order of events is permissible because the filing of a notice of

appeal does not divest the trial court of jurisdiction over matters or issues

not appealed. See Wade v. State Bar of Arizona (In re Wade), 115 B.R.

222, 230 (B.A.P. 9th Cir. 1990).

 

4 The only distinction that can be drawn makes no difference: In Olive

St., the debtor did appeal the dismissal as far as the district court; in this

case, Castaic did not appeal the orders of dismissal at all.

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8 IN THE MATTER OF CASTAIC PARTNERS II, LLC

Income Prop. Builders, 699 F.2d at 964.

5 Absent an appeal

from the dismissal orders, we have no power to restore the

bankruptcy proceeding. Id.; see Olive St., 972 F.2d at 216.

This appeal is therefore moot.

CONCLUSION

Had Castaic appealed from the order of dismissal, this

Court might have had some power to grant effective relief.

Absent such power, this appeal does not present a justiciable

case or controversy. It is therefore

DISMISSED.

5

Income Property Builders is also materially similar to this case. The

primary distinction is that the appeal there was brought by a third party

claiming a mechanic’s lien on the foreclosed property. 699 F.2d at 964.

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