Case 09-00389-jw Doc 885 Filed 09/08/10 Entered 09/09/10 14:44:37 Desc Main
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`UNITED STATES BANKRUPTCY COURT
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`DISTRICT OF SOUTH CAROLINA
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`Case Number: 09-00389-jw
`Adversary Proceeding Number: 09-80094-jw
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`
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`The relief set forth on the following pages, for a total of 13 pages including this page, is hereby
`ORDERED.
`
`ORDER
`
`
`FILED BY THE COURT
`09/08/2010
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`Entered: 09/09/2010
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`Chief US Bankruptcy Judge
`District of South Carolina
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`Case 09-00389-jw Doc 885 Filed 09/08/10 Entered 09/09/10 14:44:37 Desc Main
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`UNITED STATES BANKRUPTCY COURT
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`FOR THE DISTRICT OF SOUTH CAROLINA
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`
`IN RE:
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`Bankruptcy Case Number
`09-00389-jw
`Chapter 11
`
`
`Adversary Proceeding Number
`09-80094-jw
`
`
`
`ORDER DENYING MCI’S
`MOTION TO VACATE
`
`
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`DAUFUSKIE ISLAND PROPERTIES, LLC,
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` Debtor.
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`
`
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`The Melrose Club, Inc.
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`
`
`
`
`
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`Plaintiff,
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`
`
` v.
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`Robert C. Onorato, in his capacity as Chapter 11
`Trustee for the Estate of Daufuskie Island Properties,
`LLC; Stewart Kittredge Collins and/or Susan Charles
`Collins, Trustees of the Collins Family Trust Dated
`May 26, 1989;William R. Dixon, Jr. and Gayle Bulls
`Dixon; AFG, LLC; Carolina Shores, LLC; Beach
`First National Bancshares, Inc. d/b/a Beach First
`National Bank; Beach Cottages II, LLC; Pensco Trust
`Company, Inc.; The Beach Cottages, LLC; The
`Greenery, Inc.; Coastal Connections, Inc.; Beach
`Cottages III, LLC; Easter Beach Villas, LLC; and
`Ocean Front Villas, LLC,
`
`
`
` Defendants.
`The Melrose Club, Inc.,
` Plaintiff,
`
`v.
`
`DAUFUSKIE ISLAND PROPERTIES, LLC; William
`R. Dixon, Jr.; Gayle Bulls Dixon; Stewart Kittredge
`Collins and/or Susan Charles Collins, Trustees of the
`Collins Family Trust Dated May 26, 1989,
`
` Defendants,
`
`of whom Stewart Kittredge Collins and/or Susan
`Charles Collins, Trustees of the Collins Family Trust
`Dated May 26, 1989, is
`
`
`
` Third Party Plaintiff,
`v.
`
`William R. Dixon, Jr.,
` Third Party Defendant.
`
`
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`This matter comes before the Court upon the Motion to Vacate the Order and Judgment
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`entered on June 1, 2010 (“June 1st Order”) and the Motion to Vacate the Order and Judgment
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`entered on June 30, 2010 (“June 30th Order”), filed by The Melrose Club, Inc. (“MCI”)
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`(collectively “Motions to Vacate”). Objections and responses to the Motion to Vacate were
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`filed by William R. Dixon, Jr. and Gayle Bulls Dixon; Stewart Kittredge Collins and/or Susan
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`Charles Collins, Trustees of the Collins Family Trust Dated May 26, 1989 (“CFT”); Robert C.
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`Onorato, in his capacity as Chapter 11 Trustee for the Estate of Daufuskie Island Properties,
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`LLC; AFG, LLC; Carolina Shores, LLC; Beach First National Bancshares, Inc. d/b/a Beach First
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`National Bank n/k/a BNC Bank; Beach Cottages II, LLC (“Beach II”); Pensco Trust Company,
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`Inc.; and Beach Cottages III, LLC (“Beach III”) (collectively the “Defendants”).
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`
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`Both the June 1st Order and June 30th Order (collectively “June Orders”) arose in this
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`adversary proceeding, a Declaratory Judgment Action initiated by MCI, to have the Court
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`determine the respective rights of various parties in relation to real property located on Daufuskie
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`Island, South Carolina, some owned by Debtor and some owned by other entities. In the June 1st
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`Order, the Court examined certain asserted counterclaims against MCI based solely on state law,
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`including contract law, and primarily reviewed events which occurred pre-petition. The Court
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`granted summary judgment to MCI as to the counterclaims of intentional interference with
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`contract and slander of title and denied summary judgment as to the counterclaims of civil
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`conspiracy and abuse of process. The latter counterclaims are pending for trial.
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`
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`In the June 30th Order, the Court considered and granted the Defendants’ multiple
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`motions for summary judgment. The June 30th Order specifically stated that it was based on a
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`more complete examination of the facts presented by the parties after the completion of
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`discovery. The Court found that (1) the reconveyance right had not been triggered because the
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`Debtor had made no election under Article 5 of the Transfer Agreement, (2) the Article 5
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`covenant should be nullified based on a change of conditions and public policy considerations,
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`(3) MCI’s asserted interest was not superior to the interests of those Defendants asserting liens
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`on bankruptcy assets or non-bankruptcy assets, and (4) the Debtor’s transfers of property to CFT,
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`Beach II and Beach III were valid under Section 14.1.6 of the Transfer Agreement, and thus,
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`MCI’s asserted interest is not superior to the interests of CFT, Beach II, Beach III, or any
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`Defendant asserting a lien on the property owned by those entities. The Court also found that the
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`property currently owned by CFT, Beach II, and Beach III are non-estate assets, which were not
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`intended to be, nor are subject to, the Article 5 covenant and asserted reconveyance right. The
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`Court denied summary judgment as to the claim that the Article 5 covenant was unenforceable
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`because it lacked independent consideration.
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`
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`In both the June Orders, the Court made Findings of Fact and Conclusions of Law based
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`upon the record and argument presented at each respective hearing. In fact, throughout the
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`adversary proceeding and the main Chapter 11 case, the Court has made independent findings
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`and has not incorporated by reference its findings from previous orders. MCI actively
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`participated in the hearings on the motions addressed by the June 1st and June 30th Orders, even
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`on occasion as the moving party.
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`A. Applicable Law
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`Rule 59 (e) of the Federal Rules of Civil Procedure, applicable in the Bankruptcy Court
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`pursuant to Fed. R. Bankr. P. 9024 allows the court to vacate a judgment to correct a clear error
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`of law. In re Sa’ad El-Amin, 252 B.R. 652, 654 (Bankr. E.D.Va 2000). Rule 60 (b)(4) of the
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`Federal Rules of Civil Procedure, made applicable through Federal Rule of Bankruptcy
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`Procedure 9024, allows a court to vacate an order where the judgment is void. Rule 60(b)(6)
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`3
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`provides: “On motion and just terms, the court may relieve a party . . . from a final judgment,
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`order, or proceeding for the following reasons: . . . (6) any other reason that justifies relief.” Id.
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`The grounds for such relief are narrow: "[A] judgment…is void only if the court that rendered it
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`lacked jurisdiction of the subject matter, or of the parties, or if it acted in a manner inconsistent
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`with due process of law.'" Schwartz v. United States, 976 F.2d 213, 217 (4th Cir. 1992) (quoting
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`11 Wright & Miller, Fed. Practice and Procedure § 2862 at 198-200 (1973).
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`B. MCI’s Motions to Vacate
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`In the Motions to Vacate, MCI asserts that the Court lacked jurisdiction to enter the June
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`Orders as a consequence of MCI filing identical Notices of Appeal on May 17, 2010 in this
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`consolidated adversary proceeding and the main Chapter 11 case.
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`MCI asserts that it has appealed separately from five orders of this Court. In its Notices
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`of Appeal, MCI states that it is appealing the following orders in the consolidated adversary
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`proceeding:
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`(1) Order Granting Partial Summary Judgment to Carolina Shores, LLC and
`The Melrose Club, Inc. and Denying the Motions for Summary Judgment as
`to the Remaining Claims of MCI, Carolina Shores, AFG, LLC and Beach
`First National Bancshares, Inc. (Adv. Pro. No. 09-80094, Entered on
`December 21, 2009, Adv. Pro. Docket No. 143). (“December 21st Order”)
`
`
`(2) Order Denying Motion to Alter or Amend the Order and Judgment entered
`December 21, 2009 filed by The Melrose Club, Inc. (Adv. Pro. No. 09-
`80094, Entered on April 2, 2010, Adv. Pro. Docket No. 187). (“April 2nd
`Order”)
`
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`The December 21st Order found that MCI’s reconveyance right under Section 5.1 of the
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`Transfer Agreement was a covenant running with the land but that MCI’s reconveyance right had
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`not been triggered at that time because the Debtor had not made an election under Section 5.1 of
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`the Transfer Agreement. The December 21st Order was based upon the Court’s interpretation of
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`the Transfer Agreement under state and contract law in order to define the parties’ rights in this
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`Declaratory Judgment Action.
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`
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`The Notices of Appeal further indicate that MCI appeals from the following orders
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`entered in the main Chapter 11 case:
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`(1) Order (1) Authorizing Sale of Substantially All Assets of the Estate Free and
`Clear of Liens, Claims, Encumbrances and Other Interests, and (2)
`Approving the Assumption and Assignment of Certain Unexpired Executory
`Contracts and Leases (Case No. 09-00389-jw, Entered on January 7, 2010,
`Docket No. 630) (“the Montauk Sale Order”)
`
`
`(2) Order Denying Motion to Vacate or in the Alternative, to Alter or Amend
`the Order (1) Authorizing the Sale of Substantially All Assets of the Estate
`Free and Clear of Liens, Claims, Encumbrances and Other Interests, and (2)
`Approving the Assumption and Assignment of Certain Unexpired Executory
`Contracts and Leases (Case No. 09-00389-jw, Entered on May 3, 2010,
`Docket No. 767) (“the Montauck Order Denying Motion to Vacate”)
`
`
`(3) Order (1) Authorizing Sale of Substantially All Assets of the Estate at
`Auction Free and Clear of Liens, Claims, Encumbrances and Other Interests,
`and (2) Approving the Assumption and Assignment of Certain Unexpired
`Executory Contracts and Leases (Case No. 09-00389-jw, Entered on May 7,
`2010, Docket No. 772) (“the Auction Order”)
`
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`(collectively “the Sale and Auction Orders”). The Sale and the Auction Orders found that the
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`Debtor’s Assets could be sold pursuant to bankruptcy law 11 U.S.C. § 363(b) and that such
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`transfer would be free and clear of alleged liens and interests, including MCI’s alleged interest,
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`either with the consent of interest holders, under 11 U.S.C. § 363(f)(1) based on the changed
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`circumstances doctrine, or under 11 U.S.C. § 363(f)(4) because there was a bona fide dispute
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`regarding the interest.1 The Sale and the Auction Orders were based upon motions brought
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`before the Court by the Chapter 11 Trustee for the benefit of all creditors and parties to the
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`bankruptcy case and applied standards set forth in specific sections of the Bankruptcy Code.2
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`1 Upon any sale under § 363(f), only liens or interests would transfer to the proceeds of the sale.
`2The Court notes that CFT, Beach II, and Beach III are owners of non-estate assets, and therefore, were not parties
`to the Sale and Auction Orders.
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`C. Analysis
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`MCI argues that the June Orders are void because the Court lacked jurisdiction to enter
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`those Orders. After reviewing the December 21st Order, the April 2nd Order, the Auction and
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`Sale Orders, the Notices of Appeal, the Motions to Vacate and objections, and considering the
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`arguments made at the hearing, the Court finds that the Notices of Appeal filed by MCI did not
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`divest the Court of jurisdiction to enter the June Orders and denies MCI’s Motions to Vacate.
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`The Court recognizes that the filing of a timely and sufficient notice of appeal of a final
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`order generally divests the lower court of jurisdiction and control over the matters on appeal.
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`Grand Jury Proceedings Under Seal v. United States, 947 F.2d 1188, 1190 (4th Cir. 1991), see
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`also In re Taylor, 198 B.R. 142, 154 (Bankr.D.S.C. 1996). An appeal, however, does not divest
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`the lower court of jurisdiction in three discrete circumstances: (1) over issues not involved in the
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`appeal; (2) when the order appealed from is not appealable; or (3) when the court’s action will
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`aid in the appeal. Bryant v. Bryant, 175 B.R. 9, 11-12 (W.D. Va. 1994); see also In re Taylor
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`198 B.R. at 154. Applying these principles, the Court concludes that, despite the filing of the
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`Notices of Appeal, it retained jurisdiction over this proceeding and thus, the June Orders were
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`properly entered.
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`1. The Orders Appealed from are Not Appealable
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`a. Finality of Orders
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`Initially, the Court considers the validity, timeliness, and nature of MCI’s Notices of
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`Appeal. It is well settled that only final orders are appealable as a matter of right. In re RPC
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`Corp., 114 B.R. 116, 118 (M.D.N.C. 1990); see also 28 U.S.C. § 158 (a). Final orders are those
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`that resolve the litigation, decide the merits, settle liability, establish damages, or determine the
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`rights of the parties. In re Looney, 823 F.2d 788, 790 (4th Cir. 1987); see also Dilly v. S.S.
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`Kresge, 606 F.2d 62 (4th Cir. 1979) (“a final decision generally is one which ends the litigation
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`on the merits and leaves nothing for the court to do but execute the judgment”).
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`The December 21st Order is not a final appealable order from which MCI could appeal.
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`The December 21st Order granted partial summary judgment on certain, discrete issues but
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`expressly left several matters undetermined, including the validity, priority and enforceability of
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`the Article 5 covenant and the Defendants’ various affirmative defenses.3 See Kountaki v.
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`Johnson, 2007 WL 4570161, at *2 (S.D. Tex. Dec. 26, 2007) (a bankruptcy court’s order is not
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`final if it leaves unresolved questions); see also City of New York v. Exxon Corp., 932 F.2d
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`1020, 1023 (2d Cir. 1991) (orders that leave affirmative defenses undecided are not final).
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`Additionally, the December 21st Order left unresolved certain of MCI’s requests, including, for
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`example, MCI’s request for a declaration that particular property transfers were invalid or
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`voidable because they were in violation of the Transfer Agreement. See Dilly, 606 F.2d at 62
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`(an order granting partial summary judgment is not a final appealable order); see also DiMeglio
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`v. Haines, 45 F.3d 790, 807 (4th Cir. 1995) (holding a denial of summary judgment is not treated
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`as final).
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`MCI moved to alter or amend the interlocutory December 21st Order and this Court
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`denied MCI’s motion on April 2, 2010. The Court also finds that the April 2nd Order is not a
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`final appealable order. An order on a motion to reconsider an interlocutory order does not
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`convert an otherwise nonappealable order into an appealable one. See In re Urban Broadcasting
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`Corp., 401 F.3d 236, 246 (4th Cir. 2005) (affirming the district court’s ruling that both an order
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`denying a motion to extend a claim objection deadline and an order denying a motion to
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`reconsider that order were interlocutory in nature and thus not appealable); see also Litvinuk v.
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`3 The December 21st Order found that the reconveyance right had not been triggered under the terms of the Transfer
`Agreement at the time the order was entered, whereas the June 30th Order nullified the covenant applying state law.
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`Litvinuk, 27 Cal.2d 38, 43-44 (1945) (“[I]t is the general rule that an appeal may not be taken
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`from a nonappealable order by the device of moving to vacate and appealing from a ruling
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`denying the motion.”).
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`Since the December 21st and April 2nd Orders are interlocutory, the Court considers them
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`in light of Rule 54(b) of the Federal Rules of Civil Procedure, made applicable by Bankruptcy
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`Rule 7054. Rule 54(b) states, in pertinent part:
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`When more than one claim for relief is presented . . . , or when multiple parties
`are involved, the court may direct the entry of a final judgment as to one or more
`but fewer than all of the claims or parties only upon express determination that
`there is no just reason for delay and upon express direction for the entry of
`judgment. In the absence of such determination and direction, any order or other
`form of decision, however designated, which adjudicates fewer than all of the
`claims or the rights and liabilities of fewer than all the parties shall not terminate
`the action as to any of the claims or parties, and the order or other form of
`decision is subject to revision at any time before the entry of judgment
`adjudicating all the claims and the rights and liabilities of all the parties.
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`This Court has not, nor has MCI requested that either the December 21st Order or the
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`April 2nd Order be certified as final. Furthermore, MCI’s Notices of Appeal cannot be treated as
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`a request for leave to appeal under Rule 8003(c) because MCI did not file a timely notice of
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`appeal as to these claims. The Order Denying the Motion to Alter or Amend the December 21st
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`Order was entered on April 2, 2010. MCI did not file a notice of appeal until May 17, 2010.4
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`Therefore, MCI’s notice of appeal cannot be considered timely for purposes of a request for
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`leave to appeal.
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`The authority cited by MCI for the proposition that an interlocutory order can be
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`converted into a properly appealable order does not support such a result in this case. Of the
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`cases cited by MCI, the only one that the Court need address is the case of In re Urban
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`4 Even assuming the Order Denying the Motion to Alter or Amend the Order entered December 21, 2009 is a final,
`appealable order, MCI did not file a notice of appeal within the fourteen day limit prescribed by Rule 8002(a).
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`Broadcasting Corp., 401 F.3d 236 (4th Cir. 2005). In Urban Broadcasting, the Fourth Circuit
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`Court of Appeals rejected an attempted appeal of interlocutory orders under the “collateral
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`order” doctrine. In doing so, the Fourth Circuit set out the requirements for the application of the
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`doctrine, stating:
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`Under the collateral order doctrine, interlocutory orders of the bankruptcy court
`are appealable if they conclusively determine [a] disputed question, resolve an
`important issue completely separate from the merits of [an] action, and [are]
`effectively unreviewable on appeal from a final judgment.
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`Id. (internal quotations omitted).
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`In this case, the issues decided in the December 21st and April 2nd Orders are a part of and
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`not completely separate from the merits of the declaratory judgment proceeding nor are they
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`effectively unreviewable on appeal from a final judgment in the adversary proceeding. Similar
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`to the order in the Urban Broadcasting case, the interlocutory December 21st and April 2nd Orders
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`are not properly appealable.
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` b. The December 21st Order is Distinct from the Sale and Auction Orders.
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`MCI attempts to circumvent the interlocutory nature of the December 21st Order by
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`claiming that the rulings are so intertwined with the Sale and Auction Orders that they cannot be
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`separated. The Court agrees with the objecting parties that MCI cannot “bootstrap” an untimely
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`appeal of the December 21st Order with the appeals of the Sale and Auction Orders, orders based
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`upon a specific application of § 363 of the Bankruptcy Code. The primary issues considered in
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`the Sale and Auction Orders are different from that of the December 21st Order. The Sale and
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`Auction Orders were not dependent upon the December 21st Order’s determination that the
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`Article 5 covenant had not been triggered and do not address the effect of Section 14.1.6 of the
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`Transfer Agreement. Even if the Sale and Auction Orders were overturned, the rulings in the
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`December 21st Order would still stand. Additionally, the Sale and Auction Orders are silent with
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`respect to the non-estate assets so it would be illogical and unfair to allow MCI to bootstrap the
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`appeals as to the Defendants with interests in non-estate assets.
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`Furthermore, the Court finds that subsequent events have rendered MCI’s appeal of the
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`Sale and Auction Orders moot, thereby precluding MCI’s reliance on these orders for the appeal
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`of the December 21st and April 2nd Orders. Initially, it appears that reversal of the Montauk Sale
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`Order is unnecessary because the Trustee has advised that the Asset Purchase Agreement with
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`Montauk Resorts, LLC (“Montauk”) had been terminated. Even if the Agreement were to be
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`reinstated, reversal of the Montauk Sale Order based upon MCI’s appeal would be inappropriate
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`because of a settlement agreement reached between MCI, the Trustee, and Montauk, which the
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`Court has approved, which allowed the sale. In that agreement, MCI agreed to release all of its
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`claims against the estate property, including a dismissal of all appeals and motions to alter or
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`amend, upon the payment of one million dollars from the proceeds of the sale. A reversal of the
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`Montauck Sale Order at MCI’s request may be a breach of that settlement agreement. Since a
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`reversal of the Montauk Sale Order and the Montauck Order Denying Motion to Vacate cannot
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`afford MCI relief, MCI’s appeal should be considered moot and MCI’s attempt to link the
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`untimely appeal of the December 21st and April 2nd Orders to the appeal of these orders be
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`precluded.
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`The Court also finds that the Auction Order does not save MCI’s otherwise untimely and
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`improper appeal of the December 21st and April 2nd Orders. In opposing the auction sale motion
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`that ultimately resulted in the Auction Order, MCI’s initial response incorporated its earlier,
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`original objection to the Montauk Sale Order. However, at the sale hearing MCI acknowledged
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`the application of § 363(f)(4) as grounds for permitting the sale. When the Court requested
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`proposed orders from the parties, MCI submitted a proposed order which actually provided for
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`authorization of the sale under the bona fide dispute provisions of 11 U.S.C. § 363(f)(4).
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`Furthermore, MCI appears to recognize that opposition to the sale of Debtor’s property only
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`invites continuing deterioration of the assets to the detriment of all creditors and parties in
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`interest. This is consistent with MCI’s repeated statements that it will not seek a stay pending
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`appeal that would prevent a sale of the Debtor’s property. Since the application of § 363(f)(4)
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`alone is sufficient grounds for authorization of the Auction Order, the appeal or reversal will
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`afford MCI no relief, and for this additional reason, MCI should not be allowed to rely on the
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`Auction Order to assert an appeal of the December 21st and April 2nd Orders.
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`The Court, therefore, concludes that the December 21st and April 2nd Orders are
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`interlocutory and no timely notice of appeal or request for leave of appeal has been filed that
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`would divest the Court of jurisdiction. The Sale and Auction Orders are not intertwined with the
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`December 21st and April 2nd Orders because different issues were decided and all of the orders
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`entered were based on independent Findings of Fact and Conclusions of Law. Further, MCI’s
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`appeal of the Sale and Auction Orders has been rendered moot by subsequent events. Thus, the
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`June Orders were properly entered.
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`2. The Court Retains Jurisdiction over Those Issues Not Raised on Appeal
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`Notwithstanding the untimeliness of MCI’s appeal, the Court also concludes that it
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`retained jurisdiction over this proceeding because the issues on appeal are not affected by the
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`matters addressed in the June Orders. See In re Taylor, 198 B.R. at 154 (“A pending appeal of a
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`bankruptcy decision does not deprive the bankruptcy court of jurisdiction over issues not
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`involved in the appeal.”).
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` a. June 1st Order
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`The June 1st Order partially granted MCI’s motion for summary judgment on certain
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`counterclaims against it. The Court refused to grant summary judgment on the abuse of process
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`and civil conspiracy counterclaims because the counterclaimants demonstrated that genuine
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`issues of fact exist based upon various actions taken by MCI’s board.5 These counterclaims are
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`not centered upon the December 21st and April 2nd Orders adjudicating MCI’s rights pursuant to
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`the 1996 Transfer Agreement. Additionally, the Court has continually made independent
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`findings after hearings in which MCI fully participated with respect to the rights of MCI and the
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`rights of Counterclaimants. Therefore, the Court concludes that MCI’s appeal of the December
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`21st Order is not affected by the issues raised in MCI’s motion for summary judgment, and thus,
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`the Court retained jurisdiction to enter the June 1st Order.
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` b. June 30th Order
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`The issues on appeal with respect to the December 21st and April 2nd Orders do not
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`encompass the issues raised in the Defendants’ motions for summary judgment so as to have
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`precluded the Court from entering the June 30th Order. As detailed earlier, the December 21st
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`and April 2nd Orders did not adjudicate the issues of the validity and enforcement of the Article 5
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`covenant, whereas, the June 30th Order addresses those issues directly. Thus, even if the
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`December 21st and April 2nd Orders were reversed, the Court’s finding with respect to the
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`validity and enforceability of the Article 5 covenant (i.e. the annulment based on changed
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`circumstances) would not be affected. See In re Taylor, 198 B.R. at 154 (finding that the
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`5 In the June 1st Order, the Court granted summary judgment in favor of MCI on the intentional interference with
`contract counterclaim because the counterclaimants did not adequately demonstrate that any alleged interference by
`MCI with Debtor’s property sales to third parties directly resulted in damages to them. The Court relied on state
`law, not the December 21st Order, in determining that the elements of intentional interference with contract were
`simply not met. The Court also ruled in favor of MCI on the slander of title counterclaim because the
`counterclaimants abandoned this claim.
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`bankruptcy court retained jurisdiction to rule on the defendant’s motion for summary judgment
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`where the order on appeal did not adjudicate the issues of the validity and enforceability).
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`Turning to the Sale and Auction Orders, MCI argued that the finding of changed
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`circumstances in the June 30th Order is related to and dependent on the issues involved in the
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`appeal of the Sale and Auction Orders. As properly noted by the Defendants, the problem with
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`this argument is that it discounts the manner in which the Court addressed the issue of annulment
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`in each of its orders. While the Court has ruled consistently on the issue of annulment based on
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`changed circumstances, the Court considered the issue on a de novo basis each time and under
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`the proper standard and applicable law relative to the type of proceeding before it.6 When
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`considering the changed circumstances defense in connection with the June 30th Order, the Court
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`declined to give preclusive effect to its ruling on changed circumstances in the Auction and Sale
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`Orders.
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`The rationale for the Court’s actions rest in the different procedural contexts in which the
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`decisions were made. The issue decided with respect to the Sale and Auction Orders was
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`whether the Trustee had presented facts sufficient to meet his burden of proof that applicable
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`bankruptcy law permitted the sale free and clear of MCI’s interest. The Court applied the
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`Bankruptcy Code in ruling on the Sale and Auction Orders. In deciding the parties’ relative
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`rights in the June 30th Order, the Court applied state law in determining, among others, the issue
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`of whether the undisputed facts then before the Court established as a matter of law that the
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`Article 5 covenant should be annulled due to a change of circumstances. The issue of whether
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`the Trustee met his burden of proof in connection with the Sale and Auction Orders is different
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`from whether the Defendants met the standard required for summary judgment in connection
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`6 On each occasion after the Court first addressed the issue relating to changed circumstances, MCI argued that the
`prior rulings should not be accorded res judicata, collateral estoppel or law of the case status, and the Court, in fact,
`considered the issue on its merits each time.
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`with their motions in this consolidated adversary proceeding. The Court further notes that the
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`Sale and Auction Orders do not address any matters related to the non-estate assets, whereas, the
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`June 30th Order made certain findings with respect to those specific properties.
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`The Court, therefore, concludes that the issues on appeal regarding the December 21st and
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`April 2nd Orders in this adversary proceeding and the Sale and Auction Orders in the main
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`Chapter 11 case are not affected by the Defendants’ motions for summary judgment, and thus,
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`the Court was well within its jurisdiction to enter the June 30th Order.
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`3. Aid in the Appeal
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`Finally, this Court’s June 30th Order would serve to aid in any appeal by further
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`clarifying and supplementing the factual context for the determination of changed circumstances.
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`This is especially true given the timing of the Court’s consideration of the various motions in the
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`Chapter 11 case and in this consolidated adversary proceeding. The hearing on the motions for
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`summary judgment was held shortly before the entry of the Auction Order. The June 30th Order
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`was entered after completion of an extended discovery period to fully develop the facts of the
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`case. The June 30th Order is a complete presentation of the effect of the Transfer Agreement on
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`the Chapter 11 case, whereas, sale motions, such as the Auction Order, by their very nature are
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`intended to be a summary process under bankruptcy law. See e.g., In re Collins, 180 B.R. 447,
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`452 (Bankr.E.D.Va 1995) (finding a bona fide dispute exists under § 363(f) does not require the
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`court to resolve the underlying dispute); In re NJ Affordable Homes Corp., 2006 WL 2128624,
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`*10 (Bankr.D.N.J. 2006) (determining whether a bona fide dispute exists does not require the
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`determination of the probable outcome prior to authorizing a sale under § 363(f)(4)).
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`To the extent that the June 30th Order addresses the same issues addressed by Auction
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`Order, the situation in this case is analogous to that presented in In re Grand Jury Proceedings
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`Under Seal v. United States, 947 F.2d 1188 (4th Cir. 1991). In that case, the Fourth Circuit
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`Court of Appeals held that the trial court had jurisdiction to conduct additional