United States District Court, E.D. Wisconsin
Stadtmueller, U.S. District Judge
February 7, 2017, Appellant Christine Lindemann
(“Lindemann”) filed the instant appeal of the
bankruptcy court's January 26, 2017 “Order
Approving the Sale of the Bankruptcy Estate's Beneficial
Interest in the Testamentary Trust of Rene von Schleinitz
(The ‘Trust').” (the “Sale
Order”) (Docket #1-1 at 16-19). After some delays and
procedural missteps, Lindemann's brief in support of her
appeal was received on April 26, 2017. (Docket #10). Two days
later, Appellee Douglas F. Mann (“Mann”), trustee
of Lindemann's bankruptcy estate, filed a motion to
dismiss the appeal. (Docket #11). Lindemann responded to the
motion to dismiss on May 1, 2017. (Docket #13). Mann also
filed his brief in response to the appeal on May 18, 2017.
(Docket #18). No further briefing has been received on either
the motion to dismiss or the appeal itself. Also on May 1,
2017, Lindemann filed a motion to stay the sale that is the
subject of the Sale Order (the “Sale”) pending
disposition of this appeal. (Docket #14). That motion is
fully briefed. (Response, Docket #15; Reply, Docket #17). The
Court need not reach the briefing on the appeal itself
because, as described below, the motion to dismiss must be
bankruptcy estate had an interest in the Rene von Schleinitz
trust (the “Trust”). (Docket #1-1 at 16). Mann
moved the bankruptcy court to approve sale of that interest.
Id. After providing notice to all interested parties
and conducting multiple hearings, the bankruptcy court
granted Mann's motion and approved the Sale. Id.
at 16-18. The Sale Order made three findings in that vein: 1)
Mann had the legal authority to sell Lindemann's interest
in the Trust; 2) Mann could sell that interest to Arvonus
Realty Corporation (“Arvonus”), and directed Mann
to consummate the sale by accepting the buyer's money and
filing various subordination agreements; and 3) Arvonus was a
“good faith purchaser for reasonable value.”
Id. at 18-19. Mann represents that the Sale was
completed on or about January 27, 2017. (Docket #11 at
has filed a number of motions since the Sale. On February 1,
2017, she moved for a stay of “the trustee's
distribution of proceeds from the debtor's bankruptcy
estate” resulting from the Sale. In re
Lindemann, 16-25706-GMH, (E.D. Wis. Bankr.), (Docket
#118). The motion argued that the bankruptcy court should
stay the sale pending resolution of a petition Lindemann
filed in Wisconsin probate court. Id. The bankruptcy
court denied that motion on February 7, 2017, noting that
the debtor has not cited any authority for the proposition
that the court should issue a stay of the trustee's
distribution of the proceeds from that sale to await the
outcome of state-court litigation. Compare 11 U.S.C. §
363(m) (appellate court's reversal or modification of
sale order has no effect on good faith purchasers unless the
court stays the sale order pending appeal).
Id., (Docket #124). As noted above, Lindemann filed
her notice of appeal to this Court that same day. On April
10, 2017, Lindemann finally moved the bankruptcy court to
stay the sale itself pending her instant appeal.
Id., (Docket #155). The bankruptcy court heard the
motion on April 28, 2017 and denied it. Id., (Docket
#173 and #175). In both the hearing and the later-filed
minutes, the bankruptcy court noted that the sale had already
been concluded and so the requested stay was moot.
motion to dismiss presents the same mootness argument he used
to oppose the April 10 motion to stay in the bankruptcy
court. Mann's position relies on the Seventh
Circuit's recent opinion in Lardas v. Grcic, 847
F.3d 561 (7th Cir. 2017). That case involved, inter
alia, a sale of property in bankruptcy. Id. at
566-67. The bankruptcy court had ordered the sale of certain
property, and an appeal was taken of that order. Id.
The Court of Appeals did not reach the merits of the sale
order because the appeal had become moot. Id. at
567. The court reasoned:
[The debtor] opposed the sale of his interest in WSP through
a motion to compel the trustee to abandon that property and
through an objection to the trustee's motion to sell. The
bankruptcy court denied the motion to compel abandonment and
approved the sale over [the debtor's] objection. At that
point, if [the debtor] wanted to seek judicial review of the
sale order, he should have moved for a stay pursuant to
Federal Rule of Bankruptcy Procedure 8007(a)(1)(A), thereby
preserving the status quo.
Under 11 U.S.C. § 363(m), the reversal on appeal of an
authorized sale “does not affect the validity of a
sale. . .to an entity that purchased. . .property in good
faith. . .unless such authorization and such sale. . .were
stayed pending appeal.” In light of this safe harbor
provision, we have “repeatedly held that when a party
challenges the bankruptcy court's order approving the
sale of estate property to a good faith purchaser, it must
obtain a stay of that order pending appeal, lest the sale
proceed and the appeal become moot.” In re River
West Plaza-Chicago, LLC, 664 F.3d 668, 671 (7th Cir.
2011), quoting In re CGI Industries, Inc., 27 F.3d
296, 299 (7th Cir. 1994) (collecting cases).
Id. at 567-68.
found by the bankruptcy court in deciding Lindemann's
underlying motion to stay, Lardas' application
here is clear. The Sale was completed on January 27, 2017.
Lindemann's first motion to stay in the bankruptcy court
sought to stay distribution of the proceeds of the Sale, not
to prevent the Sale itself. In fact, the first time Lindemann
sought to stop the Sale was her April 10 motion. By then,
however, the Sale was long since concluded. Lindemann's
appeal is of an order to sell property, and if she wanted to
preserve her right to appeal that order, she needed to move
to stay the Sale Order before the Sale was consummated.
Lardas, 847 F.3d at 567. Lindemann failed to do so
and her appeal has become moot. Lindemann's opposition to
the motion to dismiss makes no attempt to distinguish
Lardas. See generally (Docket #13).
wrinkle remains, however. As cited by the bankruptcy court
and Lardas, 11 U.S.C. § 363(m) provides that a
sale completed pursuant to a bankruptcy court's approval
cannot be undone, even if the order approving the sale is
later reversed, as long as the buyer purchased the property
in good faith. Lardas, 847 F.3d at 567. Conversely,
“[t]he safe harbor in section 363(m) does not apply if
the sale was not conducted in good faith.” Id.
at 568. While Lindemann's other briefing argues bad faith
as a reason to reverse the Sale Order, she makes no mention
of the issue in her response to the motion to dismiss. See
(Docket #10 and #17). The Court is reluctant to act as her
legal advisor and insert that argument into her brief
opposing the motion to dismiss. See Anderson v.
Hardman, 241 F.3d 544, 545 (7th Cir. 2001).
assuming the argument was properly presented by Lindemann,
the Court would reject it. The majority of her “bad
faith” contentions in those other documents relate to
one of the purchaser's alleged violations of his
fiduciary duties as a trustee of the Trust, not to bad faith
in the Sale transaction itself. (Docket #10 at 8-11 and #17
at 2-4). As the remainder, Lardas again provide the
In its sale order, the bankruptcy court explicitly found that
the Grcics were “good faith purchasers” and that
the sale was “conducted at arms-length without fraud,
collusion, or undue influence by the purchasers.” The
bankruptcy court reached these findings after three hearings
and the submission of affidavits by the Grcics, the contents
of which Christofalos failed to rebut. These findings are
reviewable only for clear ...