Big Time Holdings, LLC et al v. Musso

Filing 35

MEMORANDUM AND ORDER, The Court Dismisses the Appeal. The Clerk of Court is directed to close the case. (1-17-40960NHL) Ordered by Judge Margo K. Brodie on 6/24/2019. (Piper, Francine) Modified on 6/25/2019 (Piper, Francine).

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
--------------------------------------------------------------BIG TIME HOLDINGS, LLC,
Appellant,

MEMORANDUM & ORDER
18-CV-3535 (MKB)

v.
ROBERT J. MUSSO,
Appellee.
--------------------------------------------------------------MARGO K. BRODIE, United States District Judge:
Appellant Big Time Holdings, LLC, filed this appeal on June 18, 2018, appealing an
order issued in a bankruptcy proceeding in the United States Bankruptcy Court for the Eastern
District of New York (the “Bankruptcy Court”). (Notice of Appeal, Docket Entry No. 1.)
Appellant appeals the Bankruptcy Court’s June 10, 2018 Order confirming Appellee’s sale of
property located at 200-15 Linden Boulevard, St. Albans, New York (the “Property”). (Notice of
Appeal; Order Confirming Sale, annexed to Notice of Appeal as Ex. A, Docket Entry No. 1.)
Currently before the Court is Appellee’s motion to dismiss the appeal as statutorily moot.
(Appellee Mot. to Dismiss (“Appellee Mot.”), Docket Entry No. 17; Appellee Mem. of Law in
Supp. of Appellee Mot. (“Appellee Mem.”), Docket Entry No. 17-5.) Appellant opposes the
motion. (Appellant Aff’m in Opp’n to Appellee Mot. (“Appellant Opp’n”), Docket Entry No.
26.) For the reasons explained below, the Court grants Appellee’s motion.
I.

Background
The following facts are drawn from the parties’ submissions on the motion and the

Bankruptcy Court’s record on appeal. The facts are undisputed unless otherwise noted.

On March 1, 2017, Appellant filed a voluntary bankruptcy petition pursuant to Chapter
11 of the United States Bankruptcy Code. (Ch. 11 Voluntary Pet., In re Big Times Holdings,
LLC, No. 17-BK-40960, Docket Entry No. 1.) The bankruptcy petition stayed a foreclosure sale
of the Property previously ordered by the New York State Supreme Court, Queens County.
(Appellee Mot. 5; Appellant Opp’n 6.) Upon filing of the bankruptcy petition, Flushing Bank
filed a secured claim in the amount of $297,535.13 in the Bankruptcy Court proceeding.
(Appellee Mot. 5.)
On September 20, 2017, Appellant filed a motion to sell the Property free and clear of
liens under 11 U.S.C. 363(f). (Bankruptcy Court R. (“R.”) 11; Appellee Mot. 5.) Flushing Bank
filed a limited objection to the motion, arguing that the procedure Appellant proposed would
cause undue delay and that the sale “did not provide for payment of Flushing [Bank’s] claim
from the proceeds of the sale.” (Appellee Mot. 5.) On November 2, 2017, the Bankruptcy Court
granted Flushing Bank’s request for appointment of an operating trustee, and, on November 8,
2017, the Bankruptcy Court appointed Appellee as operating trustee. (Appellee Mot. 5; R. 13.)
On December 29, 2017, the Bankruptcy Court granted Appellee’s application to employ
Maltz Auctions, Inc. (“Maltz”) as broker to Appellee. (R. 14–15.) On February 15, 2018, Maltz
filed a notice of proposed use, sale, or lease of the Property. (R. 16; Appellee Mot. 5.) Although
the notice indicated that objections were to be filed on or before March 13, 2018, Appellant
failed to file any objection. However, on February 14, 2018, Andrew P. Jones, Esq., as President
of Appellant, filed a motion to stay all proceedings and enforcement of orders. (R. 16; Mot. to
Stay, annexed to Appellee Mot. as Ex. A, Docket Entry No. 17-1.) Jones requested a stay in
light of Appellant counsel’s motion to be relieved as counsel, and also requested additional time
to seek counsel and “oppose outgoing counsel’s application for fees and other open motions.”

2

(Mot. to Stay 1.) By order dated April 2, 2018, the Bankruptcy Court denied Jones’ motion for a
stay because he “failed to demonstrate any legal or factual basis for the relief requested.” (Order
dated Apr. 2, 2018, annexed to Appellee Mot. as Ex. B, Docket Entry No. 17-2.) Neither Jones
nor Appellant appealed the Bankruptcy Court’s order denying a stay.
On April 18, 2018, the Bankruptcy Court converted the case to a proceeding under
Chapter 7 of the United States Bankruptcy Code. (R. 21.) On April 25, 2018, the Bankruptcy
Court resolved a “limited objection” to the sale of the Property and allowed the trustee to
proceed with the Sale of the Property on April 26, 2018. (R. 22.) Maltz conducted an auction
for the sale of the Property, and Charles Okoh (the “Purchaser”) bid $445,000.000. (Appellee
Mot. 6.) Because the Purchaser’s bid was the highest bid at the auction, Appellee accepted the
bid. (Id.)
On April 27, 2018, Appellee filed a motion to confirm the sale of the Property to the
Purchaser. (R. 22.) Appellant objected to the motion, arguing that the sale of the Property was a
“product of fraud” and in violation of New York State law. (R. 23; Appellee Mot. 6.) After a
hearing, the Bankruptcy Court found that the Purchaser was acting in good faith when he
purchased the Property. (Appellee Mot. 7.) By order dated June 10, 2018, the Bankruptcy Court
confirmed the sale of the Property to the Purchaser (the “Sale Order”). (R. 25–26.) Based on the
evidence at the hearing, the Bankruptcy Court found that the “Purchaser is a purchaser acting in
good faith as such term is used in the Bankruptcy Code and is entitled to the protection set forth
in section 363(m) of the Bankruptcy Code if he consummates a purchase of the Property in
accordance with this Order and the Terms and Conditions of Sale.” (R. 26.) The Sale Order
provided for the sale of the Property free of all claims, liens, and interests in the Property. (R.
26.)

3

On June 18, 2018, Appellant appealed the Bankruptcy Court’s Sale Order to this Court.
II. Discussion
a.

Standard of review

District courts have appellate jurisdiction over “final judgments, orders, and decrees”
entered in bankruptcy court. 28 U.S.C. § 158(a). On appeal, a district court reviews the legal
conclusions of a bankruptcy court de novo, and its factual findings for clear error. Wenegieme v.
Macco, No. 17-CV-1218, 2018 WL 334032, at *2 (E.D.N.Y. Jan. 9, 2018) (citing In re Bayshore
Wire Prods. Corp., 209 F.3d 100, 103 (2d Cir. 2000)). “A finding is ‘clearly erroneous’ when,
on consideration of the record as a whole, the reviewing court ‘is left with the definite and firm
conviction that a mistake has been committed.’” Bongiovanni v. Grubin, No. 15-CV-2617, 2016
WL 4059349, at *3 (E.D.N.Y. July 28, 2016) (quoting Zervos v. Verizon N.Y., Inc., 252 F.3d
163, 168 (2d Cir. 2001)).
b.

Statutory mootness

Appellee argues that this appeal is statutorily moot because the sale of the Property
occurred prior to the filing of this appeal, and Appellant did not seek nor obtain a stay pending
appeal. (Appellee Mem. 2.)
Appellant argues that it “attempted twice to get the Bankruptcy Court to grant
Appellant[] a stay,” that section 363(m) of the Bankruptcy Code is unconstitutional under the
Fifth and Fourteenth Amendments of the U.S. Constitution, and that Flushing Bank engaged in
fraudulent conduct with regard to the mortgage on the Property. (Appellant Opp’n 7–9.)
Section 363(m) of the Bankruptcy Code provides:
The reversal or modification on appeal of an authorization under
subsection (b) or (c) of this section of a sale or lease of property does
not affect the validity of a sale or lease under such authorization to
an entity that purchased or leased such property in good faith,
4

whether or not such entity knew of the pendency of the appeal,
unless such authorization and such sale or lease were stayed pending
appeal.
11 U.S.C.A. § 363. The Second Circuit has interpreted this provision to mean that when a sale is
not stayed, a rule of “statutory mootness” substantially limits appellate review of a sale order
entered under sections 363(b) or (c) of the Bankruptcy Code, and the only issue to be decided is
whether the sale was made to a good-faith purchaser. In re WestPoint Stevens, Inc., 600 F.3d
231, 247 (2d Cir. 2010); see also In re Motors Liquidation Co., 428 B.R. 43, 53 (S.D.N.Y. 2010)
(“The Second Circuit, like the majority of other circuits, strictly enforces this so-called statutory
mootness rule of section 363(m), such that, ‘regardless of the merit of an appellant’s challenge to
a sale order, a reviewing court may neither reverse nor modify the judicially-authorized sale if
the entity that purchased or leased the property did so in good faith and if no stay was granted.’”
(alteration omitted) (first quoting Licensing by Paolo, Inc. v. Sinatra (In re Gucci), 105 F.3d 837,
840 (2d Cir. 1997); and then citing Bay Harbour Mgmt., L.C. v. Lehman Bros. Holdings, Inc. (In
re Lehman Bros. Holdings, Inc.), 415 B.R. 77, 85 (S.D.N.Y. 2009))). The Second Circuit has
observed that the “traditional equitable definition” of “good faith purchaser,” is “one who
purchases the assets for value, in good faith and without notice of adverse claims.” In re Gucci,
126 F.3d 380, 390 (2d Cir. 1997) (quoting Willemain v. Kivitz, 764 F.2d 1019, 1023 (4th Cir.
1985). In addition, the “good faith” component of this inquiry is “focused on the purchaser’s
conduct in the course of the bankruptcy proceedings,” and whether the purchaser engaged in
“fraudulent, collusive actions specifically intended to affect the sale price or control the outcome
of the sale.” Id.; see also In re Colony Hill Assocs., 111 F.3d 269, 276 (2d Cir. 1997). “Good
faith of a purchaser is shown by the integrity of his conduct during the course of the sale
proceedings; where there is a lack of such integrity, a good faith finding may not be made.” In
re Gucci, 126 F.3d at 390.
5

The Bankruptcy Court entered an order on April 25, 2018, resolving Flushing Bank’s
limited objection to the sale and approving the sale of the Property by public auction to be held
on April 26, 2018. (Order dated Apr. 25, 2018.) Appellant did not request a stay of the order
approving the sale. By auction held on April 26, 2018, the Property was sold. (See Trustee
Report of Sale, In re Big Times Holdings, LLC, 17-BK-40960, Docket Entry No. 152.) After the
trustee filed the Report of Sale, on June 10, 2018, the Bankruptcy Court entered an order
confirming the sale. (Sale Order.) The order provided that “based on the evidence at the hearing
on the Motion, Purchaser is a purchaser acting in good faith as such term is used in the
Bankruptcy Code and is entitled to the protection set forth in section 363(m) of the Bankruptcy
Code if he consummates a purchase of the Property.” (Id. at 2.) The Sale Order also provided
that the “Purchaser shall be entitled to the protection of section 363(m) of the Bankruptcy Code
with respect to the sale of the Property approved and authorized herein in the event this Order or
any authorization contained herein is reversed or modified on appeal.” (Id. at 2–3.)
Subsequent to the sale, Appellant objected to the sale of the Property and requested a stay
from the Bankruptcy Court because “success on this Objection can end . . . th[e] action in favor
of the [Appellant].” (Debtor Obj. to Trustee Confirming Sale 8, In re Big Times Holdings, LLC,
17-BK-40960, Docket Entry No. 153.) The Bankruptcy Court did not stay enforcement of its
order confirming the sale of the Property. Appellant therefore failed to obtain a stay pending
appeal of the Bankruptcy Court’s order confirming the sale of the Property.1

1

The Court notes that in Appellant’s brief to this Court appealing the Sale Order,
Appellant mentions that he is requesting a stay of enforcement of the Bankruptcy Court’s Sale
Order pending appeal. (Appellant Br. 12, Docket Entry No. 3 (“Given that a success on this
Objection can end in this action in favor of the Debtor, we respectfully ask the court to stay these
proceedings in its entirety and enforcement of all orders pending out of this motion for all the
facts and issues raised above and any and other further relief that the court may deem just and
6

Further, Appellant’s argument that section 363(m) is unconstitutional under the Fifth and
Fourteenth Amendments is meritless. While Appellant states that this provision is
unconstitutional because the case “turns on whether one obtains a stay or not thus denying a
litigant his right of appeal which a litigant is [c]onstitutionally entitled to as long as it is timely
filed,” (Appellant Opp’n 9), he provides no legal support for his conclusory assertion and the
Court therefore declines to entertain his argument.2 Moreover, the Second Circuit has repeatedly
relied on section 363(m) in affirming district courts’ dismissals of bankruptcy appeals. See, e.g.,
Frank v. Lynch, 728 F. App’x 71, 72 (2d Cir. 2018) (finding that the district court “properly
ruled that the bankruptcy appeals were moot” under section 363 because “the sale of the house
had already occurred”); In re Friedberg, 634 F. App’x 333, 335 (2d Cir. 2016) (finding that the

proper.”).) Construing this statement as a request for a stay of the enforcement of the Sale Order,
the request is procedurally improper. Whether filed in the bankruptcy court or district court,
Rule 8007 of the Federal Rules of Bankruptcy Procedure requires a request for a stay to be
brought by motion with notice to all parties, and requires “reasons for granting the relief
requested[,] . . . affidavits or other sworn statements supporting facts subject to dispute . . . [,]
and relevant parts of the record.” See Fed. R. Bankr. P. 8007(b)(4). Rule 8007 also provides that
a motion to stay can only be made in the district court when the appellant makes a showing that
“moving first in the bankruptcy court would be impracticable” or “if a motion was made in the
bankruptcy court, either . . . that the court has not yet ruled on the motion, or . . . that the court
has ruled and set out any reasons given for the ruling.” Fed. R. Bankr. P. 8007(b)(2)(A)–(B),
and (3). Appellant provides no indication that moving for a stay in the Bankruptcy Court would
have been impracticable nor does Appellant provide reasons for granting the stay, sworn
statements, or relevant parts of the record.
2

Although the Court declines to consider Appellant’s argument, the Eight Circuit
Bankruptcy Appellate Panel has rejected a similar argument. See In re Veg Liquidation, Inc.,
583 B.R. 203, 213 (B.A.P. 8th Cir. 2018) (rejecting the trustee’s Fifth Amendment due process
argument, which suggested “that the bankruptcy court interpreted [section] 363(m) to bar de
novo review by an Article III court unless the Article I court issuing the order grants a
discretionary stay,” because the argument wrongly assumed that the trustee could not obtain a
stay of the judgment from an Article III court”); see also Northcutt v. Leasure, No. 13-CV-25,
2013 WL 2458709, at *3–4 (W.D. Ky. June 6, 2013) (rejecting the appellant’s argument that
section 363(m) denied him his due process rights where the petitioner was given reasonable
notice of the section 363(m) sale and section 363(m) “moots appeal from the unstayed [s]ale
order”).
7

district court properly dismissed the bankruptcy appeal under section 363(m) where “the sale of
the [p]roperty was not stayed pending appeal”). Indeed, the Second Circuit has emphasized “the
uniquely important interest in assuring the finality of a sale that is completed pursuant to 11
U.S.C. § 363(b) or (c) in bankruptcy proceedings.” In re WestPoint, 600 F.3d at 248; see also In
re Rare Earth Minerals, 445 F.3d 359, 363 (4th Cir. 2006) (“Section 363(m) codifies Congress’s
strong preference for finality and efficiency in the bankruptcy context, particularly where third
parties are involved.”).
Accordingly, Appellant’s challenge to the Bankruptcy Court’s approval of the Sale Order
is moot, and the Court’s appellate jurisdiction is limited to the issue of whether the successful
bidder of the Property was a good faith purchaser.
Appellant has not presented any allegations to suggest that the Purchaser was not a good
faith purchaser. Indeed, Appellant’s brief and opposition to Appellee’s motion is devoid of any
argument that the Purchaser did not act in good faith in bidding for and purchasing the Property.
As a result, there is no basis in the record to disturb the Bankruptcy Court’s decision approving
the sale of the Property. As the Bankruptcy Court noted in the Sale Order, several bidders
attended the auction, and the Purchaser “offered to buy the Property for $445,000.00, plus a
buyer’s premium of 5% or $22,500.00.” (Sale Order.) The Purchaser’s bid was “the highest and
best bid received at the Sale” and the Trustee “accepted the bid according to the Terms and
Conditions of Sale.” (Id.) Because the record lacks any evidence suggesting that the Purchaser
did not purchase the Property in good faith, Appellant has not shown that the Bankruptcy Court
erred in finding that the Purchaser acted in good faith. In re Colony Hill Assocs., 111 F.3d at
276; see also Deep v. Danaher, 310 F. App’x 433, 434 (2d Cir. 2009) (affirming denial of
motion to stay sale because “[n]othing in the record indicate[d] that [the purchaser] acted in bad

8

faith in purchasing the property and there is no evidence that [the purchaser] inappropriately
influenced the bankruptcy court’s scheduling of the sale”); In re Motors Liquidation Co., 428
B.R. at 54 (finding the bankruptcy appeal of a sale order moot where applications for a stay
pending appeal were denied by the bankruptcy court and the district court, appellants did not
contest the bankruptcy court’s finding that the purchaser was acting in good faith, and there were
no allegations to suggest that the good faith finding was erroneous); In re Metaldyne Corp., 421
B.R. 620, 625 (S.D.N.Y. 2009) (affirming the bankruptcy court’s finding of good faith because
the appellant “fail[ed] to cite to any portion of the record” supporting its assertion that the
bankruptcy court erred in finding good faith).
III. Conclusion
For the foregoing reasons, the Court dismisses the appeal. The Clerk of Court is directed
to close this case.
Dated: June 24, 2019
Brooklyn, New York

SO ORDERED:
s/ MKB
MARGO K. BRODIE
United States District Judge

9