Court Opinion

ID: 3205819
Source: CourtListenerOpinion
Date Created: 2016-05-23 17:02:06.478637+00
Date Added: 2024-06-11T14:45:46.473806
License: Public Domain

FOR PUBLICATION

  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

IN THE MATTER OF CASTAIC             No. 14-55281
PARTNERS II, LLC,
                       Debtor,          D.C. No.
                                   2:13-cv-05452-SJO

CASTAIC PARTNERS II, LLC,
                      Appellant,

               v.

DACA-CASTAIC, LLC,
                       Appellee.

IN THE MATTER OF CASTAIC             No. 14-56367
PARTNERS, LLC,
                       Debtor,          D.C. No.
                                   2:13-cv-05997-SJO

CASTAIC PARTNERS, LLC,
                    Appellant,         OPINION

               v.

DACA-CASTAIC, LLC,
                       Appellee.
2       IN THE MATTER OF CASTAIC PARTNERS II, LLC

         Appeal from the United States District Court
             for the Central District of California
          S. James Otero, District Judge, Presiding

              Argued and Submitted May 2, 2016
                    Pasadena, California

                        Filed May 23, 2016

    Before: MILAN D. SMITH, JR., and JACQUELINE H.
    NGUYEN, Circuit Judges, and CLAUDIA WILKEN,*
                  Senior District Judge.

             Opinion by Judge Milan D. Smith, Jr.

                           SUMMARY**

                            Bankruptcy

    The panel dismissed bankruptcy appeals as moot under
Article III.

   The bankruptcy court granted a party’s motion for relief
from the automatic bankruptcy stay so that it could proceed
with foreclosure sales. Debtors appealed to the district court,

    *
    The Honorable Claudia Wilken, Senior District Judge for the U.S.
District Court for the Northern District of California, sitting by
designation.
  **
     This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
      IN THE MATTER OF CASTAIC PARTNERS II, LLC             3

but did not seek a stay of the bankruptcy court’s order
pending appeal. The foreclosures went forward. Thereafter,
with debtors’ consent, the bankruptcy cases were dismissed.

  The panel held that debtors’ appeals were constitutionally
moot because there no longer was any case or controversy.

                        COUNSEL

David M. Gilmore (argued) and Stephen D. Blea, Gilmore,
Wood, Vinnard & Magness, Fresno, California, for
Appellants.

Dean T. Kirby, Jr., (argued), Kirby & McGuinn, A P.C., San
Diego, California, for Appellee.

                         OPINION

M. SMITH, Circuit Judge:

    Debtors-Appellants Castaic Partners, LLC, and Castaic
Partners II, LLC, (collectively Castaic) appeal the district
court’s dismissal of this bankruptcy appeal as moot under
11 U.S.C. § 363(m). During the pendency of the appeal, the
bankruptcy court dismissed the underlying bankruptcy cases
as well. Castaic did not appeal those dismissals, and after 14
days, they became final. There is therefore no longer any case
or controversy, and this Court has no power to grant Castaic
any effective relief. We dismiss this appeal as moot under
Article III of the Constitution.
4         IN THE MATTER OF CASTAIC PARTNERS II, LLC

             FACTS AND PRIOR PROCEEDINGS

    Castaic bought certain parcels of real property located in
rural Los Angeles County, California, with financing from a
number of investors through a Nevada loan-servicing
company. Shortly thereafter, Castaic defaulted on the loans.
That gave rise to what District Judge Robert C. Jones has
called a “hydra of litigation,” of which this consolidated
appeal represents one head. Richard & Sheila J. McKnight
2000 Family Trust v. Barkett, 2011 WL 3159137, at *8 (D.
Nev. July 26, 2011) (describing related litigation not at issue
in this appeal).

    Through a complex series of transactions and
bankruptcies that need not trouble us here, Creditor-Appellee
DACA-Castaic (DACA) obtained a majority of the beneficial
interests in the loans—and, per Judge Jones, the power to
foreclose on them. Richard & Sheila J. McKnight 2000
Family Trust v. Barkett, 2012 WL 870503, at *6 (D. Nev.
Mar. 14, 2012). Relying on Judge Jones’s ruling, DACA
pursued foreclosure proceedings and recorded Notices of
Trustee’s Sale for the properties. The sales were scheduled
for July 31, 2012. On July 30, Castaic filed for bankruptcy in
the Central District of California. Accordingly, the sales were
halted pursuant to the automatic-stay provision of 11 U.S.C.
§ 362(a).

    DACA moved the bankruptcy court for relief from the
automatic stay so that it could proceed with the foreclosure
sales. Castaic opposed the motion, arguing that DACA lacked
a valid interest in the properties and therefore did not have
standing to move for relief from stay or foreclose.1 The

 1
     Because we dismiss the appeal as moot, we do not reach this argument.
      IN THE MATTER OF CASTAIC PARTNERS II, LLC              5

bankruptcy court disagreed and granted DACA the requested
relief.

    Castaic filed a notice of appeal in the district court, but
did not seek a stay of the bankruptcy court’s relief order
pending appeal. Accordingly, DACA foreclosed on the
properties and acquired them by credit bids at the foreclosure
sales. Shortly thereafter, on the motion of the United States
Trustee, the bankruptcy court dismissed Castaic’s bankruptcy
cases because the properties had been Castaic’s only
significant assets. Castaic consented to and did not appeal the
dismissals.

                       DISCUSSION

     “In bankruptcy, mootness comes in a variety of flavors:
constitutional, equitable, and statutory.” Clear Channel
Outdoor Inc. v. Knupfer (In re PW, LLC), 391 B.R. 25, 33
(B.A.P. 9th Cir. 2008). Constitutional mootness is
jurisdictional and derives from the case-or-controversy
requirement of Article III. Id. Equitable mootness concerns
whether changes to the status quo following the order being
appealed make it impractical or inequitable to “unscramble
the eggs.” Id. (quoting Baker & Drake, Inc. v. Pub. Serv.
Comm’n (In re Baker & Drake, Inc.), 35 F.3d 1348, 1352 (9th
Cir. 1994)). Finally, statutory mootness codifies part, but not
all, of the doctrine of equitable mootness. Id. at 35; see
11 U.S.C. § 363(m); Onouli-Kona Land Co. v. Estate of
Richards (In re Onouli-Kona Land Co.), 846 F.2d 1170, 1172
(9th Cir. 1988) (holding that the codification of § 363(m) did
not abrogate the rest of the equitable-mootness doctrine).
6       IN THE MATTER OF CASTAIC PARTNERS II, LLC

     This appeal is constitutionally moot.2 “The test for
mootness of an appeal is whether the appellate court can give
the appellant any effective relief in the event that it decides
the matter on the merits in his favor.” Motor Vehicle Cas. Co.
v. Thorpe Insulation Co. (In re Thorpe Insulation Co.),
677 F.3d 869, 880 (9th Cir. 2012) (quotation marks omitted).
If it cannot grant such relief, the matter is moot. See id. In a
bankruptcy appeal, when the underlying bankruptcy case is
dismissed and that dismissal is allowed to become final, there
is likely no longer any case or controversy “with respect to
issues directly involving the reorganization of the estate.” See
Olive St. Inv., Inc. v. Howard Sav. Bank, 972 F.2d 214, 215
(8th Cir. 1992) (quotation marks omitted).

    The Eighth Circuit’s decision in Olive St. is instructive. In
that case, a creditor sought to foreclose on a debtor’s property
pledged as collateral for a note. Id. The debtor petitioned for
bankruptcy, triggering an automatic stay, but the creditor
sought and obtained relief from the stay. Id. It then held a
foreclosure sale and obtained the property on a credit bid. Id.
The debtor appealed, but failed to seek a stay of the relief
order. Accordingly, the district court dismissed the appeal as
equitably moot. Id. The debtor appealed again, but while its
appeal was pending, the bankruptcy court dismissed the
underlying bankruptcy case pursuant to 11 U.S.C.
§ 1112(b)(1). Id. The debtor appealed that order to the district
court, but when that court affirmed, the debtor did not pursue

    2
      The district court determined that this case is statutorily moot.
Statutory mootness applies only to sales or leases conducted pursuant to
the authority of 11 U.S.C. §§ 363(b) or (c). § 363(m). Those subsections,
in turn, concern sales by the bankruptcy trustee or debtor-in-possession.
Here, foreclosure sales were conducted by trustees under the deeds of
trust—not the bankruptcy trustee. Thus, statutory mootness is inapplicable
in this case.
        IN THE MATTER OF CASTAIC PARTNERS II, LLC                           7

an appeal to the Court of Appeals. Id. Therefore, the
dismissal became final. Id. The Eighth Circuit held that

         [o]nce the bankruptcy proceeding is
         dismissed, neither the goal of a successful
         reorganization nor the debtor’s right to the
         automatic stay continues to exist.
         Accordingly, it no longer serves any purpose
         to determine whether the bankruptcy court
         properly lifted the automatic stay; the appeal
         has become moot.

Id. at 216 (citing Armel Laminates, Inc. v. Lomas & Nettleton
Co. (In re Income Prop. Builders, Inc.), 699 F.2d 963, 964
(9th Cir. 1982) (per curiam)).

    The facts of Olive St. are materially identical to the facts
in this case. As in Olive St., the bankruptcy court here
dismissed the underlying cases pursuant to § 1112(b) while
an appeal was pending.3 Then, Castaic failed to appeal the
orders of dismissal.4 The bankruptcy court here dismissed one
case on January 29, 2013, and the other on January 30. Under
Federal Rule of Bankruptcy Procedure 8002(a)(1), the orders
of dismissal became final 14 days later. At that time, “a
bankruptcy court no longer had power to order [a] stay or to
award damages allegedly attributable to its vacation.” See

  3
    This order of events is permissible because the filing of a notice of
appeal does not divest the trial court of jurisdiction over matters or issues
not appealed. See Wade v. State Bar of Arizona (In re Wade), 115 B.R.
222, 230 (B.A.P. 9th Cir. 1990).
  4
    The only distinction that can be drawn makes no difference: In Olive
St., the debtor did appeal the dismissal as far as the district court; in this
case, Castaic did not appeal the orders of dismissal at all.
8         IN THE MATTER OF CASTAIC PARTNERS II, LLC

Income Prop. Builders, 699 F.2d at 964.5 Absent an appeal
from the dismissal orders, we have no power to restore the
bankruptcy proceeding. Id.; see Olive St., 972 F.2d at 216.
This appeal is therefore moot.

                          CONCLUSION

    Had Castaic appealed from the order of dismissal, this
Court might have had some power to grant effective relief.
Absent such power, this appeal does not present a justiciable
case or controversy. It is therefore

        DISMISSED.

    5
    Income Property Builders is also materially similar to this case. The
primary distinction is that the appeal there was brought by a third party
claiming a mechanic’s lien on the foreclosed property. 699 F.2d at 964.