NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT

__________ No. 20

- 2629

___________ In re: 388 ROUTE 22 READINGTON HOLDINGS, LLC , Debtor SB BUILDING ASSOCIATES LIMITED PARTNERSHIP, Appellant

________________ Appeal from United States District Court f or the District of New Jersey ( D.C. Civil Action No. 3:20

- cv
- 01252 ) District Judge: Freda L. Wolfson

________________ Submitted Under Third Circuit L.A.R. 34.1(a)

on September 28, 2021 Before: AMBRO, KRAUSE, and BIBAS, Circuit Judges

(Opinion filed : October 15, 2021 )

___________ OPINION *

___________

* This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7 does not constitute binding precedent.2

AMBRO, Circuit Judge Appellant SB Building Associates Limited Partnership is the sole owner of 388 Route 22 Readington Holdings, LLC (the “Debtor”) . SB is seeking to reverse an order by the United States Bankruptcy Court for the District of New Jersey authorizing the

trustee for the Debtor, Bunce Atkinson (the “Trustee”) , to sell the D ebtor’s property to Leon Kitovksy under 11 U.S.C. § 363. SB a ppealed the sale order to the District Court , but after the sale closed the Court dismissed the appeal as moot under § 363(m). SB no w appeals t hat dismissal. As we agree that the property was sold for appropriate value , we affirm the District Court’s order.
I. The Debtor has one significant asset: property located at 388 Route 22 , Readington , New Jersey

. In 2011, Iron Mountain I nformation Management, LLC, which
held the mortgage on the property, obtained a foreclosure judgment. To avoid a sheriff’s sale, the Debtor filed for Chapter 11 b ankruptcy. Litigation ensued ; e ventually the
Debtor and Iron Mountain agreed to a payment pl an. T his arrangement , however, was short

- lived. The Debtor filed for b ankruptcy a second time in 2018

. The Bankruptcy
Court converted the proceeding to a Chapter 7 liquidation and allowed Iron Mountain to foreclose on the Debtor’s property. Iron Mountain gave the Trustee until the end of September 2019 to sell th at property

. He hired a realtor, David Zimmel, to market it . Zimmel received one written , preliminary offer for $5 ,000,000 , but the Trustee turned it down because , in addition to
be ing unsigned and permitting cancellation for “any reason or for no particular reason,”3

Supp. App. 81

– 82, the proposal requested a due diligence period that would have required the sale to take place after the end of the previously agreed foreclosure stay
p eriod

. Plus, the offer contained two significant contingencies : (1) positive resolution of ongoing litigation to gain access to the public sewer system ; and (2) receipt of an exemption from local zoning ordinances to allow a non

- conf o rming use. Instead, the Trustee and Iron Mountain arranged for an auction in December
2019. Twenty

- two prospective buyers inspected the property , and fifteen made deposits to participate in bidding. Leon Kitovsky won with a bid of $3 ,200,000 . The Bankruptcy
Court approved the sale, which closed in March 2020. Th e sale price was sufficient to pay Iron Mountain and all claims against the Debtor’s bankruptcy estate in full while still providing a distribution of over $100,000 to SB

. But SB maintains that the price w as inadequate and moved to stay the sale. The Bankruptcy Court, the District Court, and our Court all denied the request. SB then appealed the sale order, and the District Court dismissed the appeal as moot per § 363(m). As noted, SB now appeals the dismissal.
II. Bankruptcy Code § 363(b) permits a trustee to sell the property of a bankruptcy

estate

. 11 U.S.C. § 363(b). Subs ection (m) promotes the finality of such sales. It provides that [t] he reversal or modification on appeal of an authorization

un der subsection (b)

. . . 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 the4 pende ncy of the appeal, unless such authorization and such sale or lease were stayed pending appeal. Put simply , § 363(m) moots a challenge to a sale when “(1) the underlying sale or lease was not stayed pending the appeal, and (2) the court, if reversing or m odifying the authorization to sell or lease, would be affecting the validity of such a sale or lease.” Schepis v. Burtch ( In re Pursuit Cap. Mgmt., LLC ) , 874 F.3d 124, 135 (3d Cir. 2017 )

. T o reach this two

- part test, we must first ask whether the buyer “ purchased . . . the property in good faith.” Id. (quoting § 363(m)) (alterations omitted). That requires a purchase for “appropriate value. ” Id. at 137. The sole issue on appeal is whether Leon Kitovsky bought the property for appropriate (or fair) value. SB challenges the Bankruptcy Court’s decision on both legal and factual grounds.
It argues the Bankruptcy Court misapplied the law by suggesting that a non

- collusive auction is always sufficient to conclude value was paid. S B also challenge s the C ourt ’ s factual findings and its decision not to hear additional testimony. We consider each
argumen t in turn. SB faults the Bankruptcy Court for applying a per se rule that the results of a non

collusive auction conclusively establ ish fair value . But this misstates its decision . The
Court found “ that a properly advertised and actively participated in auction produces the best possible measure of fair value ” and “[t]he lack of any irregularity in the auction process coupled with 15 qualified bidders is strong evidence that the $3.2 million sale price is fair value

. ” Supp. App. a t 126 , 129

. Its opinion correctly aligns with our holding
in Pursuit Cap ital that , absent collusion, “ a competitive auction strongly indicates that a5

purchaser has paid appropriate value for estate assets.” In re Pursuit Cap. Mgmt. , 784
F.3d at 137 ; see also In re Abbot ts Dairies of Pa ., Inc. , 788 F. 2 d 143, 149 (3d Cir. 1986) (holding that while “an auction may be sufficient to establish that one has paid ‘value’ for the assets of a bankrupt, ” it does not establish value when there is collusive conduct). 1 Here there was no allegation of collusion, leading the District Court to conclude

— properly

— that the au ction was strong evidence that the purchaser paid fair value for the property. In addition , the Bankruptcy Court’s factual findings were not clearly erroneous. It
found the a uction was well marketed and generated substantial interest from numerous potential bidders. Ultimately fifteen prospective buyers deposited money to participate in the auction, and the property was sold for approximately 40% more than its assessed
value in 2014. And as the District Court explained, c onsiderable additional evidence also supported the Bankruptcy Court’s decision.
SB has not identified a ny persuasive reason that the Bankruptcy Court’s
conclusion was incorrect. In that Court, SB argued a $ 5 ,00 0 ,000 offer was a better
indicator of value than the auction result. T he Court , however, concluded it was “illusory.” Supp. App. at 124

. It explained that Iron Mountain was under no obligation to give the T rustee more time to close the sale (as that offer required) and the offer

1 We need not decide if Pursuit Capital misrepresented the holding of Abbotts Dairies when it s tated that “a public auction, as opposed to appraisals and other evidence, is the best possible determinant of the value of assets.” 874 F.3d at 136 (alterations omitted). Regardless whether a public auction is always the “best possible” way to determine the value of assets, Pursuit Capital instructs that a competitive auction is highly probative and , if c ompetitive , can be sufficient to determine an asset’s fair value. See i d. at 138

.6

“contain[ed] two substantial, perhaps insurmountable, contingencies” (resolution of the

sewer
- capacity litigation and obtain ing a non
- conf o rming use exemption). Id. Nor did
the Court err in declining to hear additional testimony or order a new assessment because it already had sufficient evidence to determine that the purchase was for fair value . T here
is no clear indication that additional evidence was needed when it already h ad the sale price from a competitive auction. In particular, the Court found that the auctioneer accurately described the property’s sewer access and concluded that the a u ction advertising was adequate. This was sufficient evidence to conclude that the p roperty was sold for appropriate value

.

* * * * * It has now been ten years since Iron Mountain obtained the foreclosure judgment

. Over tha t decade SB used the bankruptcy process to delay repeatedly the sale of the
D ebtor’s property

. But proceedings eve ntually end. Section 363(m) serves to promote the finality of sale s , and the District Court properly recognized that SB’s challenge to the
sale fails as moot. Accordingly, we affirm its order dismissing SB’s appea l

.