Appeal from the Ninth Circuit Bankruptcy Appellate Panel Pappas, Jury, and Kaufman, Bankruptcy Judges, Presiding, BAP No. WW-08-1104- KaJuPa.
The opinion of the court was delivered by: Hawkins, Senior Circuit Judge
Argued and Submitted August 31, 2010 -- Seattle, Washington
Before: Michael Daly Hawkins, M. Margaret McKeown and Carlos T. Bea, Circuit Judges.
On an issue of first impression, we examine whether a bankruptcy court retains jurisdiction over a collateral attack- based on a state breach of contract theory-on its previous sale order, having already approved a Chapter 11 Plan, including the sale of real property, closed the case, overseen payment of creditors, and discharged the debtor. Determining that the bankruptcy court lacked jurisdiction, we reverse the Bankruptcy Appellate Panel ("BAP") and remand with instructions to vacate the bankruptcy court's judgment for lack of jurisdiction.
Douglas M. Ray (the "Debtor") filed a Chapter 11 petition on August 10, 2005. At that time, the Debtor and Irwin P. Jessen ("Jessen") were co-owners of commercial real estate consisting of a shopping center commonly known as the Battle Ground Plaza Shopping Mall ("Battle Ground Mall").
In December 2000, the Debtor and Jessen (together the "Sellers") entered into a purchase and sale agreement (the "Battle Ground Mall Agreement") with Battle Ground Plaza, LLC ("BG Plaza") for the sale of the Battle Ground Mall.*fn1
The Agreement gave BG Plaza a right of first refusal for an undeveloped, one-half acre adjoining parcel (the "1/2 -Acre Parcel") also owned by the Sellers.
The bankruptcy court confirmed the Third Amended Plan of Reorganization (the "Plan") on March 7, 2002. The Plan referenced the Debtor's sale of the Battle Ground Mall to BG Plaza, but noted the sale had yet to close due to discovery of "adverse environmental conditions." The Plan also expressed the Debtor's intention to sell his interest in the 1/2 -Acre Parcel, either to BG Plaza pursuant to its first refusal rights, to his partner Jessen, or to another party altogether.
Subsequently, the Sellers decided to jointly convey their interest in the 1/2 -Acre Parcel. On May 18, 2005, Dean Maldonado ("Maldonado") signed and tendered a purchase and sale agreement (the "Maldonado Agreement") for the 1/2 -Acre Parcel. The Maldonado Agreement included language making Maldonado's duty to close the transaction contingent on his review of any "cross parking agreements," i.e., any agreements that may have existed providing the 1/2 -Acre Parcel the right to use the Battle Ground Mall's parking lot and vice versa.
Following the Maldonado Agreement, Jessen's attorney sent a letter to BG Plaza, notifying it of the Sellers' intended sale of the 1/2 -Acre Parcel. Rather than exercising or declining its first refusal rights, BG Plaza claimed its rights were "not ripe until the underlying sale [of the Battle Ground Mall] is closed."
The Sellers responded in turn by executing the Maldonado Agreement. The Debtor then moved the bankruptcy court to approve the sale, which it did in a July 5, 2005 order, pursuant to 11 U.S.C. § 363. BG Plaza, which received notice of the proposed sale, did not object to or appeal this Sale Order, though, in any event, the 1/2 -Acre Parcel was not ultimately sold pursuant to it.
In August 2005, Jessen's counsel prepared a Reciprocal Easement Agreement ("the Easement") and sent copies to the Debtor's attorney, the Sellers' real estate agent, and Maldonado. The Easement created valuable cross parking rights for the 1/2 -Acre Parcel in the existing parking areas of the Battle Ground Mall. The parties did not execute the Easement agreement at this time, nor is there evidence the Sellers brought the Easement to BG Plaza's attention.
During a pre-closing due diligence survey of the 1/2 -Acre Parcel, Maldonado discovered a sewer pipe requiring removal. The parties subsequently agreed to a reduction of the purchase price and an extension of closing until November 15. Notified of the new purchase price, BG Plaza gave notice of its intent to exercise its first refusal rights, providing a $5,000 promissory note, stating principal and interest would be payable by December 19, 2005.
Shortly thereafter, the Debtor moved the bankruptcy court (with notice to BG Plaza) to approve the sale of the 1/2 -Acre Parcel to Maldonado.
BG Plaza promptly took two actions. First, it filed a motion objecting to the proposed sale, asserting it violated the conditions of its first refusal rights. Second, it requested copies of "all parking agreements" that Maldonado had previously requested from the Sellers pursuant to the Maldonado Agreement. Sellers did not answer this request, apparently concluding that BG Plaza, having responded to the terms of the Maldonado Agreement with a promissory note containing materially different terms, no longer had an "interest in the property and had no reason to have a copy" of the parking agreements.
Following a hearing,*fn2 the bankruptcy court approved the sale of the 1/2 -Acre Parcel to Maldonado "free and clear of all liens and encumbrances . . . including but not limited to the right of first refusal granted to [BG Plaza]." The bankruptcy court found BG Plaza's attempted exercise of its right of first refusal failed to mirror the Maldonado Agreement, because it allowed until December 19 to determine whether to even proceed with the purchase and proposed an extension of the closing. Subsequently, the bankruptcy court denied BG Plaza's motion for reconsideration. BG Plaza failed to either appeal the sale order or seek a stay necessary to prevent a direct appeal from becoming moot. See 11 U.S.C. § 363(m).
Sellers and Maldonado then executed the Easement, and the Sellers conveyed the 1/2 -Acre Parcel by statutory warranty deed to an assignee of Maldonado. The Debtor's share of the sale enabled him to pay the remaining creditors under the Plan, and, on December 29, 2005, ...