Mountain Paradise Village, Inc. v. Federal National Mortgage Association

Filing 13

ORDER Denying the 3 Emergency Motion for Stay Pending Appeal. Signed by Judge Gloria M. Navarro on 10/15/2013. (Copies have been distributed pursuant to the NEF - SLD)

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UNITED STATES DISTRICT COURT

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DISTRICT OF NEVADA

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Mountain Paradise Village, Inc.,
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Appellant,
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Federal National Mortgage Association,

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Appellee.

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Case No.: 2:13-cv-01813-GMN
ORDER

This is a bankruptcy appeal from a final order of the United States Bankruptcy Court for

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the District of Nevada granting relief from the automatic stay and denying approval of the

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debtor’s Third Disclosure Statement. Now pending before the Court is the Emergency Motion

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for Stay Pending Appeal (ECF No. 3) filed by Debtor/Appellant Mountain Paradise Village,

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Inc. (“Debtor” or “Appellant”) pursuant to Rule 8005 of the Federal Rules of Bankruptcy

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Procedure. Appellee Federal National Mortgage Association (“Fannie Mae” or “Appellee”)

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filed a Response (ECF No. 5) in opposition, and Appellant filed a Reply (ECF No. 9). Having

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considered the parties’ briefs and oral arguments, the Court hereby denies the motion, for the

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reasons stated in this order and on the record at the October 15, 2013, hearing.

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I. BACKGROUND

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Appellant’s Chapter 11 bankruptcy proceedings in the underlying case were initiated in

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December 2011, and are still ongoing. After the bankruptcy judge denied approval of

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Appellant’s third proposed plan of reorganization and lifted the stay as to Fannie Mae, a

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trustee’s sale of the real property of the estate, an apartment complex, was scheduled for

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October 16, 2013. On October 1, 2013, the bankruptcy judge denied Appellant’s Motion for

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Stay Pending Appeal, and on October 3, 2013, the instant Emergency Motion for Stay Pending

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Appeal (ECF No. 3) was filed before this Court.

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II. LEGAL STANDARD

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“A motion for a stay of the judgment, order, or decree of a bankruptcy judge . . . must

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ordinarily be presented to the bankruptcy judge in the first instance,” and “may be made to the

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district court or the bankruptcy appellate panel, but the motion shall show why the relief,

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modification, or termination was not obtained from the bankruptcy judge.” Fed. R. Bankr. P.

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8005. The general purpose of such an order would be to “protect the rights of all parties in

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interest.” Fed. R. Bankr. P. 8005. “The district court or the bankruptcy appellate panel may

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condition the relief it grants under this rule on the filing of a bond or other appropriate security

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with the bankruptcy court.” Fed. R. Bankr. P. 8005. The general procedure for requests for

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expedited action on a motion are provided by Rule 8011 of the Federal Rules of Bankruptcy

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Procedure. Fed. R. Bankr. P. 8011.

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III. DISCUSSION

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As an initial matter, the Court notes Appellant’s failure to specifically address in its

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motion “why the relief, modification, or termination was not obtained from the bankruptcy

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judge,” as required by Rule 8005.

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Little controlling precedent is available in the bankruptcy context for a motion to stay

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pursuant to Rule 8005, and such a stay is generally discretionary on the part of the court.

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However, relevant factors for consideration of such a motion include: (1) whether appellant is

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likely to prevail on the merits of the appeal; (2) whether appellant will suffer irreparable

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damage if the stay is not granted; (3) whether irreparable harm to the public or to interested

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parties will occur if the stay is granted. See Schwartz v. Covington, 341 F.2d 537, 538 (9th Cir.

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1965).

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A. Appellant’s Likelihood of Success on the Merits of the Appeal

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The operation of an automatic stay in a bankruptcy proceeding is governed by 11 U.S.C.

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§ 362, which also provides for a bankruptcy court’s grant of relief from the automatic stay in

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certain circumstances. 11 U.S.C. § 362(a), (d). “The decision to grant or deny relief from the

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automatic stay is committed to the sound discretion of the bankruptcy court,” and is a final

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decision reviewable on appeal under the abuse of discretion standard. In re Conejo Enters.,

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Inc., 96 F.3d 346, 351 (9th Cir. 1996). “Decisions committed to the bankruptcy court’s

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discretion will be reversed only if ‘based on an erroneous conclusion of law or when the record

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contains no evidence on which [the bankruptcy court] rationally could have based that

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decision.’” Id. (quoting In re Windmill Farms, Inc., 841 F.2d 1467, 1472 (9th Cir. 1988)).

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In its order, the bankruptcy court granted Appellee’s motion for relief from the

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automatic stay pursuant to section 362(d)(2) and 362(d)(3). Here, having reviewed the order,

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as well as the transcript of the bankruptcy court’s August 20, 2013, hearing, the Court finds that

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Appellant has not shown a likelihood of success on the merits of its appeal, particularly where

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the reasoning of the bankruptcy court does not appear to show an abuse of discretion. To the

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extent that Appellant seeks review of other orders of the bankruptcy court, Appellant is unlikely

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to succeed where its appeal is untimely or procedurally deficient. See Fed. R. Bankr. P. 8002.

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B. Irreparable Harm to Appellant, the Public, or Any Other Interested Parties

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Here, Appellant claims irreparable harm in the form of prejudice to his ability to

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successfully reorganize, and loss of the rental income from the property. (Mot. to Stay, 7:20-22,

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ECF No. 3.) Although the Court is not persuaded by this argument, Appellant persuasively

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argues that the loss of appellate review itself is a form of irreparable injury where any

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successful outcome to his appeal would likely be rendered moot by the sale of the property. On

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this basis, the Court finds that irreparable harm could likely result if the stay is not granted.

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However, the Court also considers the harm to any other interested parties, including

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Appellee, other creditors, and the public in general. Here, Appellee argues that if a stay is

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granted, it will continue to lose cash collateral in the form of management fees paid to

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Appellant’s principal, Mr. Zeer. (Response, 13:1-8, ECF No. 5.) Also, Appellee argues that if a

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stay is granted, it will be “further delayed in its ability to collect and dispose of its collateral in

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the manner it deems most appropriate.” (Id. at 13:10-12.) Finally, Appellee argues that appeals

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such as this are an abuse of the system, and contrary to public policy, in that they present no

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valid appellate issues and represent unjustified delays in the resolution of a creditor’s recovery.

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(Id. at 13-14.) As discussed at the hearing, the parties also acknowledge that Appellee is the

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sole secured creditor at this time.

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Here, the Court finds that the issues presented by Appellant in its appeal are not likely to

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succeed. Imposition of the harms upon Appellee and the public, discussed above, cannot be

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justified solely for the sake of preserving the property in the unlikely event of a successful

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appeal. Accordingly, the Court finds no good cause for granting Appellant’s Motion for Stay

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Pending Appeal (ECF No. 3) and it will be denied.

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IV. CONCLUSION

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IT IS HEREBY ORDERED that the Emergency Motion for Stay Pending Appeal

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(ECF No. 3) is DENIED.

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DATED this 15th day of October, 2013.

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Gloria M. Navarro
United States District Judge

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