Opinion ID: 722412
Heading Depth: 2
Heading Rank: 3

Heading: Village's Motion for Restitution

Text: 38 After the district court issued its order vacating the bankruptcy court's adjudication of the eminent domain claim and remanding the proceeding to state court, the Village moved for reconsideration. The Village noted that on December 31, 1993 it transferred $7.2 million to the Cathedral in compensation for the property at issue, pursuant to a bankruptcy court order that the money be paid forthwith. The Village argued that when the district court vacated the bankruptcy court's adjudication of the eminent domain proceeding, it also should have vacated the order that followed from that adjudication requiring the Village to compensate the Cathedral. The Village claimed that principles of restitution required the return of the funds it had paid to the Cathedral. Because the Cathedral would otherwise be incapable of making reimbursement, the Village also sought an order requiring the Cathedral's creditors to return the funds distributed to them. 6 39 The district court ruled against the Village, noting that the Village might have waived the issue by failing to raise it in its initial briefs and that the Village had failed to demand a stay when the bankruptcy court ordered it to pay forthwith. 40 The district court was understandably reluctant to unwind the Settlement payments, causing inevitable dislocation, while the future of GCC's claim remained uncertain. If GCC ultimately fails to establish its claim, such dislocation would have been for naught. 41 Under these provisional circumstances, we believe the district court's denial of the Village's application was a proper exercise of its discretion. This ruling does not foreclose return to the question, upon a proper application by the Village, in the event GCC's claim against the Village is sustained. If GCC prevails in state court, the bankruptcy court would need to decide whether equitable principles, such as the doctrine of equitable mootness, apply. Compare In re Chateaugay, Corp., 10 F.3d 944, 952-53 (2d Cir.1993) with Atlantic Coast Line R.R. Co. v. Florida, 295 U.S. 301, 309-10, 55 S.Ct. 713, 716-17, 79 L.Ed. 1451 (1935); Restatement (First) of Restitution § 74 (1937). The bankruptcy court (which should not have required the Village to pay forthwith, especially in view of the Village's rights under the MOU) should hold the bankruptcy case open pending adjudication of GCC's claim in the state courts to allow the Village to seek an unwinding of the Settlement payments in the event GCC prevails. The district court should so direct.