UNITED STATES DISTRICT COURT 

EASTERN DISTRICT OF MICHIGAN 

NORTHERN DIVISION 

In re: Michael B. White and 

 Darla Kay White (Whites II), 

 Debtors, 

MICHAEL B. WHITE, and 

DARLA KAY WHITE, 

 Appellants, Case No. 15-cv-11310 

v. Honorable Thomas L. Ludington 

COLLENE K. CORCORAN, Chapter 7 Trustee, 

 Appellee. 

_______________________________________/ 

ORDER GRANTING MOTION TO DISMISS AND DISMISSING APPEAL 

 On April 8, 2015, Appellants Michael and Darla White appealed a March 16, 2015 order 

of the Bankruptcy Court for the Eastern District of Michigan. The order authorized the Chapter 7 

Trustee Collene Corcoran to sell all of the property (personal, real, etc.) of the Whites’ Chapter 7 

bankruptcy estate. The bankruptcy court allowed the Trustee to sell the Whites’ personal goods, 

tools of trade, vehicles, lawsuits and legal claims, and three parcels of property. 

On August 10, 2015, Appellee Chapter 7 Trustee moved to dismiss the appeal as moot 

because the primary asset of the estate had been sold to a good faith purchaser and because the 

Whites did not obtain a stay of the order authorizing sale. 

I. 

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Michael and Darla White were a husband and wife who resided in Birch Run, Michigan.1

Michael White has worked in the fields of construction and sand mining. Darla White worked for 

a number of years in the insurance and trucking industries. The Whites’ careers changed 

significantly in 2007 when Darla White began suffering from a disability. She was no longer able 

to work and Michael, facing his own issues with employment, took time to care for her. Darla’s 

health never recovered after 2007 and she was unable to return to work. Eventually Michael 

found steady employment in the meat market at a local Meijer’s, where he still works. 

A. 

 The Whites purchased their primary residence at 11085 Block Road, Birch Run, 

Michigan (“Block Road property”), in 1990. The homestead consists of 40 acres of farmland and 

a farmhouse where the Whites reside. They paid the mortgage loan for the house in full in 2006. 

In 2007, the Whites sought a line of credit from Frankenmuth Credit Union (“FCU”). Their 

credit request was approved and they secured a $100,000.00 loan from FCU that was secured by 

a mortgage against the Block Road property. The loan money was withdrawn using a credit card 

issued to the Whites. 

 The Whites withdrew the full amount of the loan within eighteen months of the account 

being opened. By 2010, the Whites began to fall behind on their loan payments. They stopped 

making payments altogether in 2011. In response, FCU initiated a foreclosure action in Saginaw 

County Circuit Court. The Whites defended the action, contending that FCU’s mortgage was 

invalid, but were unsuccessful. The Saginaw County Circuit Court entered a judgment of 

foreclosure in favor of FCU on July 15, 2011. FCU was authorized to hold a foreclosure sale 

after August 5, 2011 and to recover $113,789.23 in costs and fees. 

 1

 Darla White passed away after appeal was taken in this case. 

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B. 

 On July 30, 2015, before FCU conducted a foreclosure sale, the Whites sought 

bankruptcy protection and the automatic stay barred the foreclosure sale. As part of the Chapter 

11 bankruptcy proceeding, the Whites were required to provide monthly operating reports to the 

bankruptcy court. Those reports were timely filed each month until the case was converted to a 

Chapter 7 proceeding. 

C. 

 During the roughly one year that the Whites were in bankruptcy they reported a negative 

cash flow in their monthly operating reports more often than not. Indeed, seven of the twelve 

reports reflected a deficit. These reports also did not make any mention of the mortgage 

payments. The Whites also did not consistently service their car loan while in bankruptcy, 

evidenced by the fact that only some of their monthly operating reports show payments on that 

loan. 

 In addition to filing monthly operating reports, the Whites had to file a schedule of their 

assets. This was filed with their initial petition, but was also included in the monthly reports. 

While the asset schedules initially reflected significant assets relative to their debt, the Whites 

reduced the value assigned to their assets during the bankruptcy proceeding. Between April and 

May 2014, the Whites reduced the estimated asset value of their Block Road property from 

$360,000.00 to $170,000.00 and their WCI2

 stock from $240,000.00 to $20,520.00. 

 The Whites proposed two plans of reorganization. The first came ten months into the 

bankruptcy. All significant parties in interest objected to confirmation of the plan, including 

FCU, Ally Financial (holder of the Whites’ car loan), and the United States Trustee. The plan’s 

 2

 This is the acronym representing the Whites’ personal incorporated entity. They use this entity to sell items 

on Amazon, amongst other things. 

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defining feature was a reduction of the amount owed by the Whites to FCU under the loan 

secured by their residence. At the time the first plan was proposed, FCU was owed $158,401.60 

but the Whites proposed reducing that amount to $70,000.00, $30,000.00 of which would come 

from a Michigan state program set up to help those hardest hit by the mortgage crisis and only 

$40,000.00 would be paid by the Whites. The Whites also proposed that the $40,000.00 be paid 

over 25 years. The plan was not confirmed and the Whites were given 28 days to propose a new 

plan. 

 Shortly after the Whites proposed their first plan, the United States Trustee moved to 

have their case dismissed or converted to a Chapter 7 proceeding. FCU and Ally also moved to 

have the automatic stay lifted, allowing FCU to continue the foreclosure. 

D. 

 The Whites filed their second plan of reorganization on August 21, 2014. A hearing was 

held the next day on the plan, the United States Trustee’s motion to dismiss or convert, and the 

creditors’ motion to lift the automatic stay. As with the first plan, the Whites’ second plan 

attempted to reduce the amount actually owed to FCU, this time claiming that, if they owed 

anything, it “should not exceed $76,556.70.” R. at 340. With this new plan, the Whites still 

proposed that FCU receive $30,000.00 in state funds, but increased the amount they would pay 

to $45,000.00, this time amortized over 40 years. The plan included a number of contingencies 

and liquidated payments to be made to them by the creditors, particularly FCU, pending the 

results of collateral proceedings unrelated to the bankruptcy. R. at 320. These included FCU 

agreeing, by confirming the plan, to paying the “Whites $175,000.00 for liquidated damages 

related to their loss of credit rating, pain & suffering, and related issues, in addition to any direct 

damages” if the Whites prevailed over FCU in their state court appeal. Id. The Whites also 

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inserted a condition that FCU would pay them $250,000.00 if the Whites lost their home to 

foreclosure but prevailed in the state court appeal. Id. Lastly, the Whites also required those 

payments to be made by FCU if “a government regulator deems the credit union to have 

committed any errors or wrongdoing in this matter” even if the Whites do not prevail in their 

state court appeal. Id. 

 The bankruptcy court declined to affirm the Whites plan and granted the motion to 

convert, converting the proceeding to a Chapter 7 bankruptcy, and lifted the stay imposed upon 

property securing the FCU and Ally loans. The Whites appealed to this Court. The bankruptcy 

court’s decision to convert the case to a Chapter 7 proceeding was affirmed on July 31, 2015. 

The Whites’ motion for reconsideration of that opinion was denied on March 7, 2016. 

E. 

 After the bankruptcy filing was converted to a Chapter 7 proceeding, the Chapter 7 

Trustee, Colleen Corcoran, moved for permission to sell property of the bankruptcy estate. The 

order permitted the sale of miscellaneous personal property, including jewelry and tools of trade. 

It also permitted the sale of a potential medical malpractice suit held by Darla White. The order 

also set parameters for the sale of the Whites automobile. Finally, the order contemplated the 

sale of three different parcels of property: 11085 Block Road, the Whites’ primary residence and 

the most valuable piece of real estate; 11255 Block Road; and one half of “Lot 35 Shay Lake Sub 

2 lot on boat canal Dayton Township, Tuscola County, Michigan.” March 16, 2015 Order 

Allowing Sale, Doc. 299. 

 The 11085 Block Road property was sold at an online auction. The final bid received by 

the Trustee as a result of the auction was $156,115.23. The Whites dispute that this figure was 

the result of the live auction. The Trustee concedes that this figure was not the final bid but that 

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the highest bidder was contacted and the Trustee negotiated a higher price from the high-bidder 

in order to satisfy the mortgage-holder of the property. 

 There is no record of any other property of the bankruptcy estate being sold. On April 15, 

2015, the Trustee filed a motion in the bankruptcy court to abandon much of the miscellaneous 

personal property, including the jewelry and tools of trade, and the Whites’ personal automobile, 

and the half lot on Shay Lake back to the Whites. As to the 11255 Block Road property, the 

Trustee represents that it has been sold and closing is pending. That piece of real estate was 

specifically not abandoned by the Trustee. The Whites argue that they have made an offer and 

deposited earnest money in consideration of its sale. 

 The Whites attempted to compel abandonment of the 11255 Block Road property on 

September 18, 2015, but that motion was denied on October 22, 2015. When the bankruptcy 

court denied the Whites’ motion to abandon the property it directed that any funds the Whites 

may have advanced in order to participate in an auction on the property had to be returned to the 

Whites. It also ordered that the Whites “be given notice of any future attempt to sell the property, 

and be given an opportunity to increase any price being offered.” Oct. 22, 2015 Order Denying 

M. Compel, Doc. 433. 

 There have been no further material developments with the bankruptcy estate. As of this 

date, the only property remaining in the Chapter 7 estate that has not been sold or abandoned to 

the debtors are: the 11255 Block Road property; the Whites state court case against Frankenmuth 

Credit Union, the mortgage holder for the 11085 Block Road property; the potential medical 

malpractice action; and certain stock and assets held by one of the Whites’ incorporated entities. 

II. 

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The Whites appeal the order allowing the trustee to sell property of the estate free and 

clear of liens. See In re Fortier, 161 F. App’x 514, 516-517 (6th Cir. 2005) (describing the 

conditions under which a bankruptcy order is final and holding that an order authorizing the sale 

of property is a final order). The Chapter 7 Trustee moved to dismiss the appeal as moot. In 

response to the Trustee’s motion, the Whites filed their Appellant Brief. The Trustee then filed a 

supplemental brief in support of her motion. Following the Trustee’s supplemental brief, the 

Court ordered additional briefing so that both parties had an equal opportunity to brief both the 

Trustee’s motion and the issues presented by the appeal. Accordingly, both the Trustee’s motion 

and the merits of the appeal are fully briefed and ready for disposition.3

 

A. 

 The Chapter 7 Trustee has moved to dismiss the appeal as moot pursuant to 11 U.S.C. § 

363(m). That section provides: 

The reversal or modification on appeal of an authorization under subsection (b) or 

(c) 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. 

11 U.S.C. § 363(m). The “mootness rule applies when an appellant has failed to obtain a stay 

from an order that permits a sale of a debtor’s assets.” In re Parker, 499 F.3d 616, 620-21 (6th 

Cir. 2007) (quoting In re 255 Park Plaza Assocs. Ltd. P’ship, 100 F.3d 1214, 1216 (6th 

Cir.1996)). “This provision limits appellate review of a consummated sale . . . regardless of the 

merits of legal arguments raised against it.” In re Made in Detroit, Inc., 414 F.3d 576, 581 (6th 

Cir. 2005) (internal quotation marks omitted). The rule “maximizes the purchase price of assets 

because without this assurance of finality, purchasers could demand a large discount for 

 3

 The merits of the appeal are only relevant if the Trustee’s motion to dismiss is meritless. 

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investing in a property that is laden with the risk of endless litigation as to who has rights to 

estate property.” Id. 

 The primary piece of real estate associated with the Whites’ bankruptcy estate is the 

11085 Block Road property. The bankruptcy court authorized the sale of the property on March 

16, 2015 and then confirmed the sale on June 25, 2015. There is no evidence in the bankruptcy 

record that the Whites obtained a stay of the property sale by posting the appropriate cash bond. 

The Whites had until July 2, 2015 to do so. Thus, the only way that the Whites can avoid the 

mootness rule is by demonstrating bad faith on the part of the purchaser. 

 “To show lack of good faith, the debtor must demonstrate that there was fraud or 

collusion between the purchaser and the seller or the other bidders, or that the purchaser’s actions 

constituted an attempt to take grossly unfair advantage of other bidders.” In re 255 Park Plaza, 

100 F.3d at 1218 (internal quotation marks omitted). The Whites allege that the purchaser and 

the auctioneer colluded to drive up the final bid in private, settling on a purchase price of 

$156,115.23. The Chapter 7 Trustee concedes that the final bid at the online auction was less and 

that the Trustee negotiated with the eventual purchasers to raise their final bid to the $156,115.23 

figure. 

 But the Whites do not explain how this negotiation evinces bad faith on the part of the 

purchaser. It is difficult to conceive of a circumstance where a trustee and purchaser would 

collude to offer a deceptively low bid at auction (although while still being the highest bidder) 

and then after the close of the auction negotiate to raise that offer. No bad faith explanation could 

be conceived for this situation. Indeed, the explanation offered by the Trustee is logical and the 

bankruptcy court did not err in adopting it. The Trustee explains that she negotiated with the 

highest bidders to raise their price so that the remaining proceeds of the sale (after costs) would 

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be $135,000. The primary lienholder on the property, the mortgage-holder, indicated that it 

would not accept less than $135,000 to release its claim, which was well in excess of that 

amount. The Trustee continued negotiations to secure a better result for the bankruptcy estate. 

The Whites have not offered a different explanation, let alone one that amounts to bad faith. 

 Thus, since the Whites cannot show bad faith by the purchaser of the 11085 Block Road 

property, all claims on appeal related to that real estate are moot. 

B. 

 The Whites’ appeal from the order allowing the sale of property in the bankruptcy estate 

also focuses on property in addition to the 11085 Block Road property. The other items approved 

for sale in the order allowing the sale of property have not been sold. It should be noted that the 

appeal may still be mooted, however, since there is no evidence that the Whites have obtained a 

stay of the sale order. Absent a stay, the same policy concerns justifying the mootness rule apply 

with equal force. That is, appeals should not be taken from orders permitting the sale of property 

where the property is open to bidding. Where a stay is in place, those concerns are not present. 

Thus, under the rule articulated in In re 255 Park Plaza, the appeal is still moot and should be 

dismissed. 

 But even if the appeal should not be mooted based on the lack of a stay obtained by the 

Whites, the Whites do not explain how the bankruptcy court erred in entering the order allowing 

the sale. The only pieces of property addressed in that order (aside from 11085 Block Road) that 

the Whites here challenge are the other two real estate parcels. One of those parcels (the half lot 

on Shay Lake) has been abandoned. The other parcel (11255 Block Road) has, according to the 

Trustee, been purchased and is awaiting closing.4

 The arguments made by the Whites in their 

 4

 Although this point may now be in doubt in light of the bankruptcy court’s order denying the Whites’ 

motion to abandon the property. 

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briefs amount to a request to compel sale of the parcel to them. Such an argument does not 

identify any error in the bankruptcy court’s decision to allow sale of the 11255 Block Road 

property. The Whites appeal would, alternatively, be meritless. 

IV. 

 Accordingly, it is ORDERED that Appellee Chapter 7 Trustee’s motion to dismiss, ECF 

No. 8, GRANTED. 

 It is further ORDERED that the Appeal, Case No. 15-cv-11310, is DISMISSED with

prejudice. 

Dated: March 10, 2016 s/Thomas L. Ludington 

 THOMAS L. LUDINGTON 

 United States District Judge 

 

PROOF OF SERVICE 

The undersigned certifies that a copy of the foregoing order was served 

upon each attorney or party of record herein by electronic means or first 

class U.S. mail on March 10, 2016. 

 

 s/Michael A. Sian 

 MICHAEL A. SIAN, Case Manager 

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