United States District Court, D. Maryland
March 19, 2014
IN RE: MINH VU HOANG & THANH HOANG MINH VU HOANG, Appellant,
GARY A. ROSEN, Appellee.
MEMORANDUM OPINION AND ORDER
DEBORAH K. CHASANOW, District Judge.
On January 17, 2012, Appellee Gary A. Rosen, the chapter 7 trustee in the underlying bankruptcy case, commenced an adversary proceeding against MV General Partnership and Thieny, LLC, as part of an ongoing effort to recover estate property fraudulently concealed by Debtor Minh Vu Hoang. The trustee alleged that Debtor had "caused thousands of dollars of monies controlled and owned by the Bankruptcy Estates [of Minh Vu Hoang and her husband, Thanh Hoang]... to be utilized to facilitate the settlement of a foreclosure and subsequent encumbrance of a parcel of property known as 1222 Spruce Avenue, Shady Side, Maryland 20764[.]" (Bankr. Case No. 12-00056, ECF No. 1, at 3). According to the complaint, the property was purchased at a foreclosure sale on March 23, 2004, by MV General Partnership for the amount of $110, 000.00. Citing an attached wire transaction detail report and bank statement, showing that the settlement amount of $99, 065.13 was wired from the Law Offices of Craig Parker from an account associated with Debtor, the trustee alleged that the purchase funds were, in fact, property of the bankruptcy estate. Thus, he sought a declaration that Spruce Avenue was estate property; the imposition of a constructive trust; a declaration that MV General Partnership had no legal right, title, or interest in the property, and that the trustee was entitled to dominion and control; a declaration that a deed of trust to Thieny was null and void; and an order directing turnover of the property and authorizing the trustee to sell it.
Uy Hoang, Debtor's son, proceeding pro se, attempted to respond on behalf of both defendants, but was advised by the clerk that, pursuant to Local Bankruptcy Rule 9101-1(a), these business entities must be represented by an attorney. When Mr. Hoang failed to retain counsel after being provided an opportunity to do so, default was entered. On February 15, 2013, the trustee moved for entry of default judgment. That motion was granted by the bankruptcy court on March 26, 2013, and a default judgment was entered against MV General Partnership and Thieny. The judgment provided, in relevant part, that the trustee was "authorized to list Spruce Avenue for sale with a multiple listing service through the offices of a real estate agent to be approved by this Court upon proper Application thereof by the Plaintiff/Trustee with any sale subject to notice to all parties-in-interest and opportunity to object thereto as provided by the Bankruptcy Code and Rules of Procedure." (Bankr. Case No. 12-00056, ECF No. 56, at 3).
On July 12, 2013, the trustee filed, in the main bankruptcy case, notice of his intent to sell the Spruce Avenue property and an application for compensation to a real estate agent associated with the sale. (Bankr. Case No. 05-21078, ECF Nos. 2294, 2295). On July 29, Debtor objected to the notice of sale, requesting that the bankruptcy court abstain from approving the sale and representing that she had "filed [a] Motion to Withdraw the Reference, pursuant to 28 U.S.C. 157(d) [and] for a stay and relief from a stay in the District Court[.]" ( Id. at ECF No. 2319). On August 9, 2013, the bankruptcy court overruled Debtor's objection and approved the sale of the property, finding, in relevant part:
[Debtor's] objection fails for any number of reasons. First, this court would not abstain from a request by a chapter 7 trustee to approve the sale of estate property under 11 U.S.C. § 363. Few matters are more fundamental to the chapter 7 process tha[n] the trustee's liquidation of estate property, and no basis exists for [Debtor] to request this court to abstain from that process. Cf. 28 U.S.C. § 1334(c)(1) and (2) (providing grounds for mandatory and permissive abstention, respectively, neither of which is remotely proper here). Second, Adv. Proc. No. 12-00056 has long been resolved by final order entered on March 26, 2013. See Docket No. 56, Adv. Proc. No. 12-00056. [Debtor's] apparent effort to revive that proceeding does not provide a valid objection to the Trustee's request to sell the property.
(ECF No. 1-5, at 2). Further noting that no objection had been filed with respect to "the terms of the sale, but solely  to the court adjudicating the matter, " the bankruptcy court approved the sale of the Spruce Avenue property. ( Id. ). By separate order on the same date, the bankruptcy court, referencing the trustee's motion for compensation to the real estate agent related to the Spruce Avenue sale, entered an order awarding the real estate agent "the sum of $5, 430.00 in commissions for the sale of the Debtor's real property located at 521 69th Place, Capitol Heights, MD 20743[.]" (ECF No. 1-4).
On August 12, 2013, Debtor noted an appeal in the bankruptcy court from the order in the main bankruptcy case authorizing the sale of the Spruce Avenue property and payment of the commission in relation thereto. (ECF No. 1). Seven days later, the Spruce Avenue property was sold to JLN Development, LLC, for the sum of $107, 033.96. (Bankr. Case No. 05-21078, ECF No. 2356).
The instant appeal was docketed in district court on September 19. Debtor filed an appellate brief on November 20 (ECF No. 9) and the trustee filed a brief in opposition on December 2 (ECF No. 10). Debtor did not file a reply brief.
The trustee contends that the "[s]ale of the [s]ubject [p]roperty rendered this [a]ppeal moot, as the issues presented in [Debtor's] [b]rief are no longer live and Debtor lacks a legally cognizable interest in the outcome of the [a]dversary [p]roceeding." (ECF No. 10, at 9). The court agrees. Pursuant to 11 U.S.C. § 363(m):
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, whether or not such entity knew of the pendency of the appeal, unless such authorization and such sale or lease were stayed pending appeal.
Here, there is no dispute that the Spruce Avenue property was purchased in good faith by JLN Development, LLC, and Debtor did not obtain a stay pending appeal. "Where a sale of a bankrupt's assets has not been stayed, an appeal challenging the sale's validity is moot because the court has no remedy that it can fashion even if it would have determined the issues differently.'" In re Rare Earth Minerals, 445 F.3d 359, 363 (4th Cir. 2006) (quoting Anheuser-Busch, Inc. v. Miller ( In re Stadium Mgmt. Corp. ), 895 F.2d 845, 847 (1st Cir. 1990)); see also In re Adamson Co. Inc., 159 F.3d 896, 897-98 (4th Cir. 1998) (dismissing appeal as moot under similar circumstances); Willemain v. Kivitz, 764 F.2d 1019, 1023 (4th Cir. 1985) ("Regardless of whether [the debtor] has standing to object to the sale of the interest[, ]... [the debtor's] appeal is moot because [the debtor] failed to secure a stay of the approved sale pending appeal and because that interest was sold to a good faith purchaser"); Constructivist Foundation, Inc. v. Bonner, 254 B.R. 863, 866 (D.Md. 2000) ("Once the property was sold, Appellant's challenge to the bankruptcy court's ruling to terminate the automatic stay became moot").
ACCORDINGLY, it is this 19th day of March, 2014, by the United States District Court for the District of Maryland, ORDERED that:
1. The appeal filed by Appellant Minh Vu Hoang (ECF No. 1) BE, and the same hereby IS, DISMISSED AS MOOT; and
2. The clerk is directed to transmit copies of this Memorandum Opinion and Order to counsel for Appellee Gary A. Rosen, to United States Bankruptcy Judge Thomas J. Catliota, and directly to Appellant and CLOSE this case.