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United States Court of Appeals for the Seventh Circuit
June 7, 1977, Argued ; March 31, 1978
[*1196] BAUER, Circuit Judge.
Litton Systems, Inc. appeals the district court's dismissal of its appeal of a bankruptcy judge's order confirming the sale of Rock Industries' assets to Joseph Gabriel as moot under Rule 805 of the Federal Rules of Bankruptcy Procedure because a stay of the order confirming the sale had not been obtained from the bankruptcy judge. Litton contends here that its appeal was not mooted by the failure to obtain a stay order because Gabriel was not a "good faith purchaser" within the meaning of Rule 805. We disagree and affirm the district court's judgment for the reasons noted below.
These proceedings were commenced in 1973 under Chapter 11 of the National Bankruptcy Act. On April 12, 1976, Rock Industries was adjudicated a bankrupt, and straight bankruptcy proceedings began. [**2] Litton, a creditor of Rock, claims title to certain assets held by Rock at the time it was adjudicated bankrupt and has pursued the claim against the trustee in a pending civil action in the district court.
On July 9, 1976, a notice of a public sale of Rock's assets was issued which inadvertently made no reference to the assets claimed by Litton. Three days later, the judge issued an order authorizing the sale of the bankrupt's assets, including the assets in dispute. Upon receiving notice of the order authorizing sale, Litton moved to have the assets to which it claimed title impounded and withheld from sale. Its motion was not acted upon by the bankruptcy judge, but the trustee's counsel did tell Litton that the assets in dispute would not be sold at the auction. Nevertheless, on August 10, 1976, a public auction was held offering Rock's assets for sale, including the assets in dispute. Joseph Gabriel successfully bid $ 380,000 for the bankrupt's assets in bulk, free and clear of all liens and encumbrances.
[*1197] At the confirmation hearing held the next day, the trustee told the court that he could not recommend confirmation of Gabriel's bid because the assets of the bankrupt [**3] could not be delivered to any bulk bidder free and clear of the Litton claim that was pending in the district court. Gabriel then came forward with a modified bid of $ 350,000. Under the terms of his proposed bulk bid, he would take free and clear title to all the bankrupt's assets except those in dispute between the trustee and Litton. As to the assets in dispute, Gabriel would receive a quit claim of whatever interest the trustee held in the assets subject to the outcome of the pending litigation. Both the trustee and the auctioneer recommended that the court confirm the bid or any higher bid received at the hearing on the same terms. Litton's counsel then moved to postpone the hearing for 24 hours so that counsel could determine whether Litton wished to bid for the assets. When Gabriel refused to hold his offer open during any postponement, the judge denied Litton's motion. The assets were then offered for sale to those present at the confirmation hearing on the basis proposed by Gabriel, and his bid was confirmed over Litton's objections: (1) that the notice of sale inadequately described the assets to be sold at auction; and (2) that the court abused its discretion in permitting [**4] the trustee to hold what was, in effect, a "private" sale at the confirmation hearing. An order confirming the sale of the assets was entered on August 13, 1977.
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572 F.2d 1195 *; 1978 U.S. App. LEXIS 11912 **; 16 Collier Bankr. Cas. (MB) 417; 44 A.L.R. Fed. 889
IN RE ROCK INDUSTRIES MACHINERY CORP., f/k/a LIPPMANN, INC., Bankrupt. LITTON SYSTEMS, INC., Appellant
Prior History: [**1] Appeal from Order of the United States District Court for the Eastern District of Wisconsin. No. 73 B 1245 - Myron L. Gordon, Judge.
In re Rock Indus. Mach. Corp., 1976 U.S. Dist. LEXIS 17499 (E.D. Wis., Dec. 23, 1976)
bid, good faith purchaser, confirming, bankrupt's, purchaser, notice, postponement, confirmation hearing, district court, good faith, auction, bidders, adverse claim, bulk, pendency of an appeal, free and clear
Bankruptcy Law, Procedural Matters, Judicial Review, Bankruptcy Appeals Procedures, Contracts Law, Personal Property, Bona Fide Purchasers, Administrative Powers, Estate Property Lease, Sale & Use, General Overview, Modification & Reversal, Real Property Law, Title Quality, Marketable Title, Estate, Gift & Trust Law, Trustees, Duties & Powers, Standards of Care