UNPUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

No. 02-2386

In re: SHAWNEE HILLS, INCORPORATED,

Debtor.

--------------------------------------------

DRAWBRIDGE SPECIAL OPPORTUNITIES FUND, L.P.,

Plaintiff - Appellant,

versus

SHAWNEE HILLS, INCORPORATED,

Defendant,

WEST VIRGINIA DEPARTMENT OF HEALTH AND HUMAN

RESOURCES; PRESTERA CENTER FOR MENTAL HEALTH

SERVICES, INCORPORATED; U. S. DEPARTMENT OF

HEALTH & HUMAN SERVICES; WEST VIRGINIA HOUSING

DEVELOPMENT FUND; WEST VIRGINIA DIVISION OF

REHABILITATION,

Parties in Interest,

DEBRA A. WERTMAN, United States Trustee,

Trustee,

and

H. LYNDEN GRAHAM, JR., Chapter 7 Trustee,

Trustee - Appellee.
2

Appeal from the United States District Court for the Southern

District of West Virginia, at Charleston. Joseph Robert Goodwin,

District Judge. (CA-02-872-2; BK-02-20983)

Argued: September 24, 2003 Decided: March 3, 2005

Before WIDENER, TRAXLER, and KING, Circuit Judges.

Affirmed by unpublished per curiam opinion.

ARGUED: Amy Marie Smith, STEPTOE & JOHNSON, P.L.L.C., Clarksburg,

West Virginia, for Appellant. Stephen L. Thompson, BARTH &

THOMPSON, Charleston, West Virginia, for Appellee. ON BRIEF:

Michael L. Bray, STEPTOE & JOHNSON, P.L.L.C., Clarksburg, West

Virginia, for Appellant.

Unpublished opinions are not binding precedent in this circuit.

See Local Rule 36(c).
1Huntington has sold its loans and claims to Drawbridge

Special Opportunities, L.P., who is now the appellant. For ease of

reference, we continue to refer to the appellant as Huntington.

3

PER CURIAM:

Huntington National Bank (“Huntington”) appeals from the

district court’s order dismissing its bankruptcy appeal as

equitably moot. For the reasons stated below, we affirm the

district court.1

I. 

Debtor Shawnee Hills, Inc., (“Shawnee Hills”) is a non-profit

corporation that operates mental health, mental retardation, and

alcohol counseling and rehabilitation facilities throughout West

Virginia. On May 1, 2002, Shawnee Hills filed a voluntary petition

for protection under Chapter 7 of the Bankruptcy Code. At the

time, Shawnee Hills had roughly 775 employees and served

approximately ten thousand patients.

On May 2, 2002, Shawnee Hills learned that employee payroll

checks for its employees, written before Shawnee Hills filed its

bankruptcy petition, were not being honored by two separate banks

at which Shawnee Hills had deposit accounts: Huntington and City

National Bank (“City National”). Shawnee Hills estimated that

“when it filed [for bankruptcy,] there were outstanding checks for

employee payroll and withholding taxes in the approximate amount of

$15,000.00 written on its general operating account at Huntington
4

National Bank and in the approximate amount of $818,000.00 on its

account at City National Bank.” J.A. 41. Later the same day,

Shawnee Hills filed an emergency motion, seeking an order requiring

Huntington and City National to honor outstanding payroll checks

issued prior to the May 1st bankruptcy filing. The Trustee joined

in the emergency motion, and the bankruptcy court scheduled an

emergency hearing for 4:00 p.m. on May 2, 2002.

At the hearing, City National took no position and stated that

it would take whatever action the court directed. Because of the

short notice, counsel for Huntington could not attend the hearing

in person, but did appear telephonically. Huntington’s counsel

objected to the short notice and argued that an order requiring the

banks to honor the payroll checks written before the bankruptcy

petition was filed would be improper because Huntington held a

perfected security interest in the accounts receivable of Shawnee

Hills, and that this security interest extended to the accounts at

Huntington and City National.

At the conclusion of the emergency hearing, the bankruptcy

court stated that the $15,000 in Huntington’s account had adequate

protection from insurance and other secured property, but stated

that it was providing no protection for the City National account

because it had “no idea how [Huntington] could have an interest in

those funds.” J.A. 55. The court granted the emergency motion and
2According to the Trustee, as of July 5, 2002, approximately

$498,136.78 in payroll employee checks had cleared the City

National account, and approximately $15,000 in such checks had

5

entered an order requiring Huntington and City National to honor

the pre-petition payroll checks written by Shawnee Hills.

The following day, Huntington filed a motion for

reconsideration, again arguing that it had a perfected security

interest in the funds and that it was not provided sufficient

notice to allow it to advance this argument at the emergency

hearing. Huntington attached copies of security agreements and

filing statements to support its motion for reconsideration.

On May 15, 2002, the bankruptcy court held a hearing on

Huntington’s motion for reconsideration. After the hearing, the

court entered an order denying the motion for reconsideration,

finding that “Huntington Bank may be fully secured by sufficient

real estate and other assets in addition to proceeds from accounts

receivables and the deposit accounts now or formerly held by City

National Bank and Huntington Bank which are the subject of

Huntington Bank’s Motion” and that insurance on Shawnee Hill’s

other properties provided “adequate protection” to Huntington.

J.A. 106. Huntington appealed the bankruptcy court’s decision to

the district court. However, because Huntington did not seek a

stay of the bankruptcy court’s order, by the time its challenge

reached the district court, the payroll checks had been cashed by

the employees and honored by the banks.2
cleared the Huntington account. 

6

On appeal to the district court, Huntington challenged the

bankruptcy court’s entry of the emergency order, arguing that the

court had erred in its application of the Uniform Commercial Code

and Bankruptcy Code, and that its order requiring the banks to

honor the payroll checks had deprived Huntington of its interest in

property without due process of law. The Bankruptcy Trustee

responded by filing a motion to dismiss the appeal, arguing that

the appeal was constitutionally and equitably moot.

Rather than addressing the merits of Huntington’s challenge,

the district court granted the Trustee’s motion to dismiss the

appeal as equitably moot. Noting Huntington’s failure to seek a

stay at any time during the pendency of the emergency order, the

district court cited to the impracticality of recovering the wages

paid to Shawnee Hill’s employees.

Huntington acknowledges that putting into effect a

reversal of the Bankruptcy Court’s order would involve

disgorging funds from the employees who have cashed their

payroll checks. . . . [A]s to the issue of equitable

mootness, the question is . . . whether disgorgement is

practicable. In this case, the cash collateral at issue

has been distributed to many, probably hundreds, of

Shawnee Hills employees. Tracking down these many

employees, determining whether they are entitled to keep

the funds as innocent transferees, and, if not,

determining whether they are able to repay the funds,

would be an impracticable, if not literally impossible,

venture.

J.A. 132 (citation omitted). This appeal followed.
7

II.

“[T]he doctrine of equitable mootness is a pragmatic

principle, grounded in the notion that, with the passage of time

after a judgment in equity and implementation of that judgment,

effective relief on appeal becomes impractical, imprudent, and

therefore inequitable.” Mac Panel Co. v. Virginia Panel Corp., 283

F.3d 622, 625 (4th Cir. 2002); see also In re US Airways Group,

Inc., 369 F.3d 806, 809 (4th Cir. 2004). To determine whether a

bankruptcy appeal has become equitably moot, we consider the

following factors:

(1) whether the appellant sought and obtained a stay; (2)

whether the reorganization plan or other equitable relief

ordered has been substantially consummated; (3) the

extent to which the relief requested on appeal would

affect the success of the reorganization plan or other

equitable relief granted; and (4) the extent to which the

relief requested on appeal would affect the interests of

third parties.

Mac Panel, 283 F.3d at 625.

Like the district court, we find that these factors weigh

heavily in favor of a finding of equitable mootness. Most striking

is that Huntington failed to seek a stay of the bankruptcy court’s

order. It is well-settled that the failure of a party to seek a

stay of a bankruptcy order can alone render further appeal moot.

See Taylor v. Austrian, 154 F.2d 107, 108 (4th Cir. 1946) (per

curiam). Huntington did not seek a stay of the bankruptcy court’s

order after the initial emergency hearing or after the subsequent

hearing on its motion to reconsider. The consequences of
3The parties disagree as to whether we should review the

district court’s order de novo or for an abuse of discretion.

Because we would affirm the district court under either standard,

we need not resolve that question. We likewise express no opinion

as to the merits of the bankruptcy order and note that, in view of

the district court’s dismissal of the appeal, we need not address

Huntington’s claim that the bankruptcy court deprived it of due

8

Huntington’s failure to seek a stay are evident. The bankruptcy

court’s order has been carried out and hundreds of Shawnee Hill

employees have cashed (and likely spent) their payroll checks.

And, it is highly unlikely that any other pre-petition checks

remain outstanding and unpaid at this time. Thus, the bankruptcy

court’s order has been fully consummated. A reversal at this

juncture would substantially affect the equitable relief granted

and could significantly impact the third-party employees, who were

not parties to the appeal and have received no notice that

Huntington might seek to compel them to disgorge their wages. The

district court held that any attempt to grant Huntington relief

“would be impractical and would impose significant hardship on

hundreds of employees who cashed their regular paychecks months ago

and who are not parties to this appeal.” J.A. 134. The district

court’s reasoning is sound and remains applicable -- the months

that had passed since the payroll checks were cashed have now

become years. Accordingly, we hold that the district court

correctly determined that the equities in this case favor a

determination that Huntington’s appeal from the bankruptcy court is

equitably moot.3
process of law by failing to provide sufficient notice and

opportunity to be heard.

9

III.

For the reasons stated, we affirm the district court’s order

dismissing Huntington’s appeal from the bankruptcy court as

equitably moot.

AFFIRMED