The HONORABLE D. BROOK BARTLETT, Chief United States

District Judge for the Western District of Missouri.

 The HONORABLE FRANK W. KOGER, Chief United States Bankruptcy

Judge for the Western District of Missouri.

 

No. 95-4211

 

In re: Food Barn Stores, Inc. *

 *

Debtor. *

 *

 *

------------------------- *

 * 

 * Appeal from the United States

Four B. Corporation, * District Court for the Western

 * District of Missouri.

Creditor - Appellant, *

 *

v. *

 *

Food Barn Stores, Inc., *

 *

Debtor - Appellee. *

 

 Submitted: September 12, 1996

 Filed: February 20, 1997

 

Before RICHARD S. ARNOLD, Chief Judge, FLOYD R. GIBSON, and ROSS,

Circuit Judges.

 

FLOYD R. GIBSON, Circuit Judge.

In this appeal, Four B. Corporation ("Four B") challenges the

district court's affirmance of a bankruptcy court order requiring Four B 1 2

to pay $2.1 million to secure assignment of a debtor's real property lease.

Utilizing a number of legal theories, Four B submits that the bankruptcy

court should have permitted it to
 Four B's attempt to restructure its finances was, in the

end, unsuccessful, and the company thus found it necessary to

liquidate its assets.

 The lessor for this property was the Equitable Life

Assurance Society of the United States ("Equitable").

2

tender only $1.5 million for the contract. After careful contemplation of

Four B's contentions, we affirm.

I. BACKGROUND

Food Barn Stores, Inc. ("Food Barn"), the debtor, owned and managed

supermarkets in Missouri and Kansas. On January 5, 1993, Food Barn filed

a voluntary petition for bankruptcy reorganization under Title Eleven of

the United States Bankruptcy Code. For several months thereafter, the

company continued to operate its business as a debtor-in-possession

pursuant to 11 U.S.C. §§ 1107-1108 (1994). On April 8, 1993, Food Barn

3

entered into a Purchase Agreement with Four B; the agreement, which by its

terms was subject to bankruptcy court approval, provided that Four B would

tender $1.5 million to purchase the lease and certain equipment, fixtures,

and inventory for the Food Barn store at a shopping center in Olathe,

Kansas. The Purchase Agreement also contained two "bid protection"

4

features. Specifically, the contract granted Four B the right to match any

rival offers for the property, and it precluded Food Barn from recommending

an alternate party's proposal unless the competing bidder agreed to

reimburse Four B no less than $10,000 for its "actual" legal and accounting

expenses. 

In order to effectuate the contract, Food Barn filed with the

bankruptcy court a motion seeking authorization for the transaction. At

a subsequent hearing on that request, Food Barn informed the judge that

Schnuck Markets, Inc. ("Schnuck"), the proprietor of yet another chain of

grocery stores, had offered $1.6 million for the lease. Nonetheless,

because Food Barn desired
 We are aware of the legal distinction between assignment of

rights and delegation of duties. When both rights and duties are

transferred, it is permissible to characterize the transaction as

an "assignment" of the lease or contract. See Metropolitan

Airports Comm'n v. Northwest Airlines, Inc. (In re Midway

Airlines, Inc.), 6 F.3d 492, 495 n.4 (7th Cir. 1993).

3

immediate consummation of the deal, it expressed a willingness to honor the

original Purchase Agreement with Four B. Various interested parties then

made arguments for or against assignment of the lease to Schnuck rather

than Four B. For instance, citing 11 U.S.C. § 365(b)(3)(D) (1994), which 5

essentially prohibits a bankruptcy court from approving a lease assignment

that will "disrupt any tenant mix or balance in [a] shopping center," and

professing its understanding that Schnuck did not intend to operate a

supermarket on the property, Equitable exhorted the court to deny Schnuck's

attempt to obtain the lease. The representative of the Unsecured Creditors

Committee, on the other hand, emphasized the importance of maximizing the

estate's assets and implored the court to approve Schnuck's more lucrative

bid. After some deliberation, the court orally declared its preliminary

inclination to authorize the original deal between Food Barn and Four B.

Within seconds, though, Schnuck announced that it was raising its offer to

$2.1 million. The bankruptcy judge at that time granted Food Barn's

request for a recess, stating, "Yeah, I think we all better have a recess

for a half a million dollars."

When the hearing reconvened, Food Barn proposed that the court compel

Schnuck to extend its best and final offer, which Four B would then be

allowed to equal. Four B, relying in part upon the tenant mix protections

in § 365(b)(3)(D), remonstrated that it was inappropriate for the court to

consider any of Schnuck's submissions, but the bankruptcy judge accepted

Food Barn's first suggestion to oblige Schnuck to submit its best and final

bid. Schnuck verified that $2.1 million was its final offer, and Four B

then volunteered to proceed under one of the two following courses
4

of action: (1) it would match the offer with a right to appeal the

bankruptcy court's insistence that Four B pay any amount in excess of the

original $1.5 million purchase price; or (2) it would match without

reservation Schnuck's initial bid of $1.6 million. The judge selected the

first option, and he subsequently approved the sale to Four B for $2.1

million. In accord with the court's order, Four B placed $600,000 of the

purchase price into an escrow account pending resolution of this appeal.

The district court affirmed the bankruptcy court's ratification of

the sale for $2.1 million, and the matter is now before us for disposition.

For reversal, Four B contends the bankruptcy judge committed error by (1)

considering Schnuck's proposals despite the fact that the tenant mix

provisions of § 365(b)(3)(D) would have prevented assignment of the lease

to that company, (2) allowing additional bids after the court had orally

accepted Four B's original $1.5 million offer, and (3) refusing to honor

Four B's right to match Schnuck's initial $1.6 million submission. We

consider each of these arguments seriatim.

II. DISCUSSION

A. Standard of Review

As a second court of review in bankruptcy proceedings, we apply the

same standards used by the district court. See Jones Truck Lines, Inc. v.

Foster's Truck & Equip. Sales, Inc. (In re Jones Truck Lines, Inc.), 63

F.3d 685, 686 (8th Cir. 1995). We examine the bankruptcy court's findings

of fact for clear error and its conclusions of law de novo. Id.

Furthermore, we will reverse on matters committed to the bankruptcy court's

discretion only if the court abused its discretion. See id.
 Food Barn, as debtor-in-possession, enjoyed all the powers

under § 365 as a duly appointed trustee. See 11 U.S.C. § 1107(a)

(1994). For ease of discussion, this opinion refers to Food Barn

as a trustee.

5

B. Schnuck's Ineligibility under § 365(b)(3)(D)

Section 365 of the Code allows the trustee, within a prescribed time 6

period and subject to statutory limitations as well as bankruptcy court

approval, to assume "any executory contract or unexpired lease of the

debtor." 11 U.S.C. § 365(a); see also Cameron v. Pfaff Plumbing & Heating,

Inc., 966 F.2d 414, 415 (8th Cir. 1992). In addition, the statute

authorizes the trustee to assign most types of contracts the trustee has

elected to assume. See 11 U.S.C. § 365(f). Before the court will sanction

an assignment, however, the trustee must provide "adequate assurance" that

the assignee will satisfactorily perform under the contract. See id. §

365(f)(2)(B).

In general, the Code is conspicuously silent on what suffices as

"adequate assurance of future performance." Nonetheless, as applied to one

discrete class of unexpired leases, Congress has supplied quite explicit

guidelines for determining when the trustee has met this standard. See id.

§ 365(b)(3). Namely, when the trustee seeks to assume or assign a lease

of real property in a shopping center, the trustee must furnish, inter

alia, adequate assurance "that assumption or assignment of such lease will

not disrupt any tenant mix or balance in such shopping center." Id. §

365(b)(3)(D). This legislative directive to protect the tenant mix in

shopping centers forms the basis for one of Four B's grounds for reversal.

Four B emphasizes there is a strong inference that Schnuck, which

owns a grocery store across the street from the site at issue, did not

intend to open another supermarket in the location vacated by Food Barn.

At the hearing in bankruptcy court, Schnuck
 In light of the fashion in which we analyze this issue, we

need not decide whether § 365(b)(3)(D) is germane to leases, such

as the one before us, that do not include language restricting

use or purporting to preserve tenant mix. See generally In re

Ames Dep't Stores, Inc., 127 B.R. 744, 753 (Bankr. S.D.N.Y.

1991)("Where there is no indication of any intention by Congress

to do anything other than hold a shopping center debtor tenant to

its bargain with a landlord and to leave intact the property

interests of debtor and landlord as set forth in that bargain,

the courts should not imply an additional non-bargained-for

term."); In re Ames Dep't Stores, Inc., 121 B.R. 160, 165

(Bankr. S.D.N.Y. 1990)("[S]ection 365 (b)(3)(D) must be

interpreted to refer to contractual protections and not undefined

notions of tenant mix.").

 In In re Joshua Slocum, Ltd., 922 F.2d 1081 (3d Cir. 1990),

the Court of Appeals for the Third Circuit vacated the bankruptcy

court's opinion in In re Joshua Slocum, Ltd., 99 B.R. 250 (Bankr.

E.D. Pa. 1989). The circuit court's opinion, however, has

absolutely no impact upon In re Joshua Slocum, Ltd., 99 B.R. 261

(Bankr. E.D. Pa. 1989), which is the case we cite as authority. 

See In re Carlton Restaurant, Inc., 151 B.R. 353, 357 (Bankr.

E.D. Pa. 1993)(noting the subsequent history of the decision we

find relevant).

6

was evasive about its designs with regard to the property, but it conceded

that it would be disinclined to operate the premises as a grocery store.

See Transcript of Hr'g at 142 ("Our interest in consolidating volume would

be to acquire the property and sublease or lease the space to another

retail use, a non-food retail use."). Echoing the protestations originally

advanced by Equitable, Four B contends that Schnuck was not qualified to

bid on the lease because its acquisition of the property would have

necessarily disrupted the tenant mix in the Olathe shopping center.

According to Four B, it naturally follows that the bankruptcy court

committed error when it considered any of Schnuck's offers.7

We disagree. To begin with, we reject any intimation that a

bankruptcy court should prequalify bidders before conducting a sale of the

estate's property. Adoption of this custom would, in our view, needlessly

divert the court's time and resources to matters that are true issues only

in the most speculative sense. See In re Joshua Slocum, Ltd., 99 B.R. 261,

264 (Bankr. E.D. Pa. 1989).8
 It is notable that Four B, like the party favoring

prequalification in Joshua Slocum, had an identifiable interest

in keeping the sale price as low as possible.

7

Moreover, we are persuaded that a prequalification requirement would have

an adverse effect on the bidding process. Because a premature adjudicative

evaluation of an individual bidder's eligibility would almost certainly

require that person to hire an attorney and prepare for a hearing without

any assurance that his will be the triumphant offer, it seems obvious that

prequalification would deter some individuals who might otherwise be likely

to participate in the bidding. See id. ("[R]equiring . . . a pre9

bidding qualification hearing would put a damper upon free and open

participation by all retailers ready and willing to engage in the biddingprocess."). Indeed, even in the relatively distinct context of § 365, we

have located numerous cases in which courts solicited competing offers

before assessing the eventual assignee's ability to satisfactorily perform

under the relevant lease. See In re Casual Male Corp., 120 B.R. 256, 259

(Bankr. D. Mass. 1990)(describing practice through which the court accepted

offers before determining the prevailing party's qualifications); In re

Windmill Farms Management Co., 116 B.R. 755, 757 (Bankr. S.D. Cal.

1990)(same); Joshua Slocum, 99 B.R. at 264-66. As such, it cannot be

gainfully argued that the bankruptcy court abused its discretion when it

failed to precertify Schnuck as an acceptable assignee.

In apparent recognition of the weight of authority against this

position, Four B explains that it did not expect the bankruptcy court to

precertify Schnuck. Instead, seizing upon the Joshua Slocum court's

observation that none of the bidders in that case was "patently

unqualified" or "insincere," Joshua Slocum, 99 B.R. at 263, 265, Four B

maintains that Schnuck, which it describes as manifestly unacceptable under

§ 365(b)(3)(D), was clearly
 We do not mean to imply that the court must receive evidence

any time a conflict about tenant mix arises. We merely observe

that where, as here, the parties' attorneys are unable to agree

on a possible assignee's intentions and the effect upon tenant

mix caused by an alleged change in use, it would be highly

irregular to render a dispositive decision before, at minimum,

hearing some testimony on the issue. 

 After the court announced its partiality toward the Four B

proposal, Schnuck advised the court that it was prepared to raise

its offer. The court replied, "Well, you know, it -- that's

probably a possibility, but I think, in this instance, if I had

time and the debtor had time, but the debtor has told me they

haven't got time." Transcript of Hr'g at 64-65 (emphasis added). 

This immediate response bolsters our understanding that the need

for an instantaneous deal, and not a belief that Schnuck was an

absolutely ineligible assignee, caused the court to view Four B's

bid more favorably. To be sure, had the court deemed Schnuck to

be patently unqualified, it would not have acknowledged the

"possibility" that the company might increase its offer. 

8

ineligible to bid even in the absence of a prequalification process. To

buttress this point, Four B adverts that, at the time the judge initially

issued an oral "ruling" in its favor, its bid was $100,000 lower than

Schnuck's proposal. Four B continues that the only rationale supporting

acceptance of the lower offer was Schnuck's inability to satisfy the

command of § 365. Consequently, because Schnuck was patently unqualified

when it extended the first offer, the company must also have been patently

unqualified when it raised the bid to $2.1 million.

Unlike Four B, we do not think that Schnuck was patently unqualified

when it engaged in the bidding. Though it is true that the court at first

expressed a predilection toward Four B's $1.5 million offer, we can by no

means agree that the court made this decision based on § 365(b)(3)(D). In

fact, when the court stated its preliminary intentions, it had not yet

received any evidence pertinent to the tenant mix issue. We simply cannot

accept that the experienced bankruptcy judge made a definitive

determination on a hotly disputed factual question solely in reliance on

the somewhat vague representations of counsel. The judge's comments do 10

reveal that he was pondering the application of § 365 to the facts before

him, but our review of the record discloses that his preference for Four

B's bid was counseled more by perceived time constraints than by any final

resolution of the tenant mix arguments. The court never ruled, or even 11

hinted, that it
 After approving the $2.1 million sale to Four B, the court,

in an attempt to "protect th[e] record," allowed the parties to

introduce evidence on the tenant mix question. The results of

this post-hoc procedure have no bearing on the question of

whether Schnuck was patently unqualified at the time it submitted

bids.

9

considered Schnuck to be patently unqualified, and we decline to

12

retroactively hold that the company occupied that status.

Likewise, we could not rightfully characterize Schnuck as an

insincere bidder. Schnuck may have possessed suspect motivations for

participating in the auction and seeking to procure the lease, but it

appears undisputed that the company is a financially sound party which

truly desired the assignment and would have been ready, willing, and able

to remit the purchase price should it have won the coveted prize. Thus,

despite our admitted misgivings about Schnuck's conduct, we cannot hold

that it acted insincerely.

There was no need for the bankruptcy court to precertify Schnuck, and

the company was not a patently unqualified or insincere bidder. Under

these circumstances, the district court did not abuse its discretion by

entertaining Schnuck's overtures.

C. The Propriety of Receiving Schnuck's $2.1 Million Offer

Proclaiming the undoubted importance of finality and integrity in

judicial sales, Four B complains that it was improper for the bankruptcy

court to accept additional offers after it had verbally approved the

Purchase Agreement negotiated by Four B and Food Barn. Four B attaches

much significance to In re Gil-Bern Indus., 526
10

F.2d 627 (1st Cir. 1975), in which the Court of Appeals for the First

Circuit declared that "[i]f there is no local custom to the contrary, . .

. it is an abuse of discretion for a bankruptcy court to refuse to confirm

an adequate bid received in a properly and fairly conducted sale merely

because a slightly higher offer has been received after the bidding is

closed." Id. at 629.

By way of this relatively benign statement, the First Circuit aligned

itself with the scores of courts which have adopted the modern rule

outlining the limited circumstances under which an approved judicial sale

may be undone. Typically, a court will reopen bidding, and thereby upset

the results of a properly conducted judicial auction, only if "there was

fraud, unfairness or mistake in the conduct of the sale . . . or . . . the

price brought at the sale was so grossly inadequate as to shock the

conscience of the court." In re Stanley Eng'g Corp., 164 F.2d 316, 318 (3d

Cir. 1947), cert. denied, 332 U.S. 847 (1948); accord In re WPRV-TV, Inc.,

983 F.2d 336, 340-41 & n.12 (1st Cir. 1993); In re Chung King, Inc., 753

F.2d 547, 549-50 (7th Cir. 1985).

We are in complete agreement with these general conventions, but we

are also cognizant that an unwavering adherence to formality is not

normally advisable in bankruptcy cases. See Committee of Equity Sec.

Holders v. Lionel Corp. (In re Lionel Corp.), 722 F.2d 1063, 1069 (2d Cir.

1983)("[A] bankruptcy judge must not be shackled with unnecessarily rigid

rules when exercising the undoubtedly broad administrative power granted

him under the Code."). Finality and regularity of proceedings are

significant factors whenever the courts are involved in a sale of property,

for devotion to those principles encourages fervent bidding and ensures

that interested parties will sincerely extend their best and highest offers

at the auction itself. See In re Webcor, Inc., 392 F.2d 893, 899 (7th Cir.

1968)("If parties are to be encouraged to bid at judicial sales, there must

be stability in such sales and a time must come when a fair bid is accepted

and the proceedings are
11

ended."), cert. denied, 393 U.S. 837 (1968). This, in turn, redounds to

the benefit of bankruptcy estates in general by increasing a trustee's

ability to command top dollar for items sold.

But these are not the only elements at play during bankruptcy sales.

As a counterweight, the court must also remain mindful of the ubiquitous

desire of the unsecured creditors, and a primary objective of the Code, to

enhance the value of the estate at hand. See, e.g., Metropolitan Airports

Comm'n v. Northwest Airlines, Inc. (In re Midway Airlines, Inc.), 6 F.3d

492, 494 (7th Cir. 1993)("Section 365 . . . advances one of the Code's

central purposes, the maximization of the value of the bankruptcy estate

for the benefit of creditors."). The existence of these competing

considerations in judicial sales has not gone unheeded in the First

Circuit, as that court has explained, in cases subsequent to Gil-Bern, that

"th[e] policy [of inspiring confidence in sales under the supervision of

the court] must be weighed against the purpose to be achieved by these

judicial sales, which is to benefit the creditors and debtor." Munro

Drydock, Inc. v. M/V Heron, 585 F.2d 13, 14 (1st Cir. 1978).

In fact, Gil-Bern itself did not completely disregard the tightrope

a bankruptcy judge must navigate when presiding over judicial sales. The

court there held that, absent any local rule to the contrary, the judge was

constrained to confirm the highest bid submitted pursuant to the procedure

described in the notice of sale. Gil-Bern, 526 F.2d at 628-29. Despite

what the court viewed as the "prima facie meaning" of that notice, however,

it determined that the judge's approval of a later bid would be affirmed

if the bankruptcy court followed a known custom of allowing additional

offers at confirmation hearings. Id. Underpinning this reasoning was the

First Circuit's recognition that the participants in a judicial sale should

receive what they have "reason to expect." Id. at 628; see also Munro

Drydock, 585 F.2d at 16 ("It is
 This is not to say that the standard from Stanley is

pertinent only when the court has actually entered a confirmation

order. Numerous other scenarios can be envisioned in which the

parties' expectations will be adequately solidified to justify

additional bidding only upon proof of exceptional circumstances,

but we need not attempt to enumerate each such set of events.

Cf. In re Northern Star Indus., 38 B.R. 1019, 1022 (E.D.N.Y.

1984)(describing situation where no objections were received in

response to notice of sale, and where, after learning that no

party had objected, expectant buyer expended significant sums to

improve subject property).

12

important, in the ordinary case, to honor the expectations of those bidding

at the sale."); In re Wintex, Inc., 158 B.R. 540, 545 (D. Mass.

1992)("[T]he hallmark of Gil-Bern is . . . fealty to bidders'

expectations.").

By implicitly utilizing bidders' reasonable expectations as a

guidepost in reviewing the propriety of a bankruptcy court's actions, the

First Circuit charted what we feel is a logical path in balancing the need

for finality against the interest in maximizing the estate's worth. The

concern the emphasis on finality is intended to serve, encouraging

confidence in judicial sales, is satisfied so long as members of the public

are treated in an anticipated manner. Thus, employing a sliding scale

approach, the importance of estate enhancement diminishes as an auction

participant's reasonable expectations, and the gravity of finality,

increase. At some point, such as when the court actually enters an order

approving the sale, expectations become sufficiently crystallized so as to

render it improper to frustrate anticipated results except in the limited

circumstances where there is a grossly inadequate price or fraud in the

conduct of the proceedings. Cf. In re Muscongus Bay Co., 597 F.2d 11, 12 13

(1st Cir. 1979)("The policy favoring confirmation of a bankruptcy sale to

the highest bidder at a fairly conducted public auction gives way to the

goal of benefitting the bankrupt estate and its creditors when the sale

price would be 'grossly inadequate.'"); Stanley, 164 F.2d at 318

(articulating modern rule). In other
13

situations, where the sale had not progressed to a comparable plateau, a

reviewing court should evaluate the bankruptcy judge's decisions on a case

by case basis, with due regard both for the parties' expectations and the

judge's broad discretion to weigh the multifarious interests involved.

To summarize, we think that the important notions of finality and

regularity in judicial auctions are appeased if the court acts consistently

with the rules by which the particular sale is conducted and in compliance

with the bidders' reasonable expectations. See Consumer News & Bus.

Channel Partnership v. Financial News Network, Inc. (In re Financial News

Network, Inc.), 980 F.2d 165, 170 (2d Cir. 1992)(commenting that submission

of post-auction proposal was consistent with both the rules of the auction

and the participants' expectations). We realize that this is a deferential

standard, but we feel it provides the bankruptcy court, in the first

instance, with ample latitude to strike a satisfactory balance between the

relevant factors of fairness, finality, integrity, and maximization of

assets. "The bankruptcy court must be accorded sufficient discretion to

decide the truly close cases as best it can in view of these competing

considerations." Muscongus, 597 F.2d at 13; see also Financial News, 980

F.2d at 170 ("There are cases where the bankruptcy court's discretion must

be sufficiently broad so that in making its decision it can compass these

competing considerations as best it can."). 

Turning, then, to the facts before us, we conclude that the

bankruptcy court acted within its wide discretion when it accepted bids

after announcing its intention to approve the proffered Purchase Agreement.

As a preliminary matter, it is significant that the judge chose to adopt

a very informal and flexible bidding process, and to the extent the method

used can even be called an auction, it was an auction marked by a lack of

applicable rules and
 The attorneys present at the hearing noted and even lamented

this dearth of governing rules. See, e.g., Transcript of Hr'g at

79-80 ("And, in fact, we would love to see the Court establish

what procedures we follow in the future so that we don't get into

this mess again."). Under appropriate circumstances, a complete

lack of standards, resulting in chaos, could conceivably give

rise to an independent claim that the court abused its

discretion, but this is not such a case.

14

guidelines. Unlike Gil-Bern and other similar cases, there was no

14

definite time by which the court required parties to submit offers, and,

prior to the judge's announcement, Schnuck had no notice that cessation of

bidding was imminent. Literally seconds following the court's "surprise"

statement, Schnuck tendered what was ultimately its best and final

proposal. Given these events, we are comfortable that this is not a

situation in which a potential buyer purposely bided its time during the

auction, taking an opportunity to survey the landscape of the sale, only

later to submit an upset bid at the lowest possible price. Cf. Stanley,

164 F.2d at 319 ("This unwillingness [to upset a judicial sale at auction]

results from the effect upon such sales of knowing that a prospective

bidder may abstain from bidding at the auction . . . and may then outbid

the price at which the property has been struck down.")(quotation omitted).

Instead, Schnuck obeyed what it perceived to be the rules of the sale, and

its $2.1 million submission was untimely only in light of the court's

unforeseeable declaration.

Also, we cannot say that the court's decision to entertain additional

offers was inconsistent with Four B's justifiable expectations. Four B

knew, and contractually acknowledged, that assignment of the lease was

subject to bankruptcy court approval, and it protected itself against

unfavorable consequences by bargaining for bid protection features in the

Purchase Agreement. These facts, especially when viewed in tandem with the

bankruptcy
 The bankruptcy judge himself remarked that "out-of-town

counsel are probably not aware of my proclivities. I love to

sell in the courtroom. . . . Had several auctions in my tenure." 

Transcript of Hr'g at 64. It seems, though, that the judge

underestimated his reputation, as Schnuck's attorney, who

practices in St. Louis, divulged that even he was aware of the

judge's penchant for holding auctions in court. See Transcript

of Hr'g at 82 ("[Y]ou've got a reputation for holding auctions. 

[I c]ertainly expected to have an auction here.").

15

judge's known propensity to auction estate property in open court, make 15

it highly likely that Four B had an acute awareness of the possibility that

the court might, on the day of the hearing, consider additional proposals

for this apparently valuable commodity. We are therefore convinced that,

though Four B may have had some fledgling expectation to procure the

assignment if all went well at the hearing, it was not nearly mature enough

to render the bankruptcy judge's decision an abuse of discretion.

We also reject the notion that acceptance of further bids was

reversible error due to any expectation that may have developed during the

hearing itself. Notably, Four B learned when the proceedings began that

it had been outbid, and it would assuredly be counterintuitive to suggest

as a general proposition that a low bidder has a supportable expectation

to receive property on the auction block. See Wintex, 158 B.R. at 545 ("A

high bidder expects to win the bid under ordinary circumstances . . . .").

While the court's declaration of an intention to approve the Purchase

Agreement, if left unchallenged, would almost certainly have led to

crystallization of Four B's expectations, the announcement was met

forthwith by Schnuck's offer to increase its bid by $500,000. A recess

ensued, and we would be hard pressed to hold that the few seconds during

which Four B considered itself the victor were of such significance to

preclude the bankruptcy court from entertaining an alternative that would

substantially benefit the estate.
 Another body of law lends support to the bankruptcy court's

decision to consider Schnuck's $2.1 million offer. Although the

court uses a business judgment test in deciding whether to

approve a trustee's motion to assume, reject, or assign an

unexpired lease or executory contract, this entails a

determination that the transaction is in the best interest of the

estate. See Nostas Assocs. v. Costich (In re Klein Sleep Prods.,

Inc.), 78 F.3d 18, 25 (2d Cir. 1996)("Th[e] decision [to allow a

debtor to assume an unexpired lease] required a judicial finding

-- up-front -- that it was in the best interests of the estate

(and the unsecured creditors) for the debtor to assume the lease

. . . ."). Where the trustee's request is not manifestly

unreasonable or made in bad faith, the court should normally

grant approval "[a]s long as [the proposed action] appears to

enhance [the] debtor's estate." Richmond Leasing Co. v. Capital

Bank, N.A., 762 F.2d 1303, 1309 (5th Cir. 1985) (quotation

omitted). Had the court blindly proceeded to enter an order

confirming the original Purchase Agreement without giving the

slightest thought to Schnuck's substantially higher bid, it might

have been accused of dereliction in its duty to guarantee that

the particular assignment was in the best interest of the estate

and the unsecured creditors.

16

We have no doubt that Four B possessed some inchoate expectation to

obtain the assignment for $1.5 million. The company knew that procurement

of the lease was not a foregone conclusion, however, and it protected

itself against harm should its attempts have gone awry. Accordingly, for

the reasons already discussed, we are of the opinion that the company's

expectations had not progressed to a level which should have prohibited the

solicitation of additional bids except under the standard explicated in

Stanley. This case is a classic example of the challenges confronted by

the bankruptcy court in making decisions that incorporate, and attempt to

mollify, each of the antagonistic considerations relevant to a sale of

estate property. It is in the best interest of our bankruptcy system to

allow learned bankruptcy judges to make these value determinations

unrestrained by an unwarranted fear of reversal should another court

appraise the balance slightly differently. With this precept in mind, we

do not think that the bankruptcy judge's actions constituted an abuse of

his broad discretion.16
17

D. Four B's Contractual Right to Match Competing Offers

Finally, Four B alleges that the bankruptcy court committed

reversible error by refusing to respect its contractual right to match

Schnuck's $1.6 million offer. As we understand this argument, Four B

claims that the right of first refusal granted by the Purchase Agreement

afforded it the option to complete the sale by matching a competing

suitor's first offer. Under this theory, Schnuck's $2.1 million proposal

was, for practical purposes, void, and the bankruptcy court was wrong to

"ignore" Four B's prerogative to close the deal by matching Schnuck's

initial $1.6 million submission.

We do not read the contract's match provision as broadly as Four B.

The operative paragraph indicates that the company enjoyed the "opportunity

to match all competing bids," but it says absolutely nothing about limiting

Food Barn's ability to entertain multiple offers from the same party. The

express terms of the Purchase Agreement gave Four B the privilege to secure

assignment of the lease by equalling another bidder's offer, and the

bankruptcy court scrupulously honored this aspect of the bargain. Four B

obtained the lease by matching Schnuck's $2.1 million submission, and it

has no foundation from which to argue that the court "ignored" the bid

protection feature.

In any event, we would be extremely reluctant to hold a bankruptcy

court to the particulars of the right of first refusal envisioned by Four

B. Some amount of bid protection is, of course, permissible under the

Code, and the trustee is not normally required to seek court approval

before in good faith entering into an agreement which includes a right of

first refusal. See In re Table Talk, Inc., 53 B.R. 937, 942 (Bankr. D.

Mass. 1985). "A contrary position might discourage potential buyers from

negot[i]ating with trustees, thereby forcing down the market value of the

bankruptcy estate['s] property in general." Id. Still, it
18

would be unwise to allow the parties to hamstring the court's discretion

to implement bidding procedures it deems to be fit under the circumstances.

The bankruptcy judge must retain the capability to conduct sales in a

manner that most benefits the bankruptcy estate, and we would be loath to

accept any contractual provisions that purport to limit this authority.

III. CONCLUSION

Because the bankruptcy court did not commit reversible error when it

required Four B to remit $2.1 million for the lease assignment, we affirm.

AFFIRMED.

A true copy.

Attest:

CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.