USCA1 Opinion
UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
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No. 95-1074
FISH MARKET NOMINEE CORPORATION,
Appellant,
v.
JOEL PELOFSKY,
UNITED STATES TRUSTEE,
Appellee.
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No. 95-1483
FISH MARKET NOMINEE CORPORATION,
Appellant,
v.
G.A.A., INC., ET AL.,
Appellees.
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APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Rya W. Zobel, U.S. District Judge]
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[Hon. Richard G. Stearns, U.S. District Judge]
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Before
Cyr, Circuit Judge,
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Bownes, Senior Circuit Judge,
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and Boudin, Circuit Judge.
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Stephen F. Gordon with whom Peter J. Haley and Gordon & Wise were
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on briefs for appellant.
Eric K. Bradford, Office of the United States Trustee, for
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appellee Joel Pelofsky, United States Trustee.
Douglas R. Gooding with whom Charles L. Glerum and Choate, Hall &
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Stewart were on consolidated brief for appellees G.A.A., Inc and
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H.N.R.G., Inc.
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December 22, 1995
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BOUDIN, Circuit Judge. Appellant Fish Market Nominee
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Corp. ("Fish Market") was the owner of an entertainment
complex in Baltimore's Inner Harbor area which closed in June
1989. Fish Market failed to pay real estate taxes for the
years 1989-90 and 1990-91. The property was sold at a tax
sale on May 13, 1991, and, through a subsequent purchase from
the tax sale buyer, appellees G.A.A., Inc. and H.N.R.G., Inc.
eventually acquired non-possessory tax title to the property,
subject to Fish Market's right of redemption.
On December 7, 1993, GAA and HNRG obtained an amended
order of redemption from the Baltimore City Circuit Court
requiring Fish Market to pay $1,056,852.79 within 30 days or
lose its right of redemption. On January 6, 1994, Fish
Market filed for protection from its creditors under chapter
11 of the bankruptcy code, 11 U.S.C. 1101 et seq.,
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forestalling under the automatic stay provision (11 U.S.C.
362(a)) any further action by GAA and HNRG to foreclose Fish
Market's redemption rights.
After an initial meeting of creditors, 11 U.S.C. 341,
the United States Trustee, also an appellee here, filed for
dismissal or (alternatively) conversion of the case to a
liquidation under chapter 7. Following a hearing, the
bankruptcy judge granted the motion to dismiss the case on
March 31, 1994, noting that Fish Market had no employees, no
ongoing business operations, no income, and no cash; that
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there was no indication of any agreement for new financing;
and that the debtor was unable to pay the property taxes on
the property and had left the property uninsured.
Upon dismissal by the bankruptcy court, Fish Market made
an oral motion for a stay pending appeal which was
immediately denied by the bankruptcy judge. That same
afternoon, GAA and HNRG obtained from the Baltimore City
Circuit Court final decrees terminating Fish Market's right
of redemption. GAA and HNRG paid just over $1.4 million for
the property. Thereafter, it was resold to the City of
Baltimore for $1.7 million.
On April 7, 1994, Fish Market began an adversary
proceeding in the bankruptcy court under 11 U.S.C. 362(h).
It sought damages and a temporary restraining order vacating
the final decree of the Baltimore City Circuit Court and
preventing GAA and HNRG from taking further action to obtain
possession of the property; the premise was that the state
proceedings had violated the automatic stay of section
362(a). The bankruptcy court denied the temporary
restraining order on April 15 and dismissed the adversary
proceeding on June 20, 1994.
Fish Market then pursued two separate appeals in the
district court. The first appeal challenged the bankruptcy
court's dismissal of the chapter 11 case; this appeal was
dismissed as moot on the motion of GAA and HNRG. The second
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appeal challenged the dismissal of the April 7 complaint in
the adversary proceeding; the district court affirmed the
order of the bankruptcy court. Fish Market separately
appealed both district court orders. We consolidated the two
appeals and now affirm.
Appeal from the Dismissal of the Chapter 11 Case. We
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consider first whether Fish Market's chapter 11 proceeding
was properly terminated. Section 1112(b) of the Bankruptcy
Code, 11 U.S.C. 1112(b), provides that a case may be
dismissed or converted to chapter 7 for cause; Fish Market
poses no challenge to the bankruptcy court's findings of
fact, which amply justified the termination of the chapter 11
proceeding.
Fish Market nevertheless insists the bankruptcy court
erred by failing to explain its decision to dismiss the case
rather than to convert it to a liquidation proceeding under
chapter 7. Citing In re Superior Siding and Window, Inc., 14
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F.3d 240, 242 (4th Cir. 1994), Fish Market argues that
conversion is a separate choice that must be explicitly
considered by the bankruptcy court. The short answer to the
argument is that Fish Market waived it by failing to raise it
in the bankruptcy court. In re Mark Bell Furniture
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Warehouse, Inc., 992 F.2d 7, 9 (1st Cir. 1993).
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The district court granted appellee's motion to dismiss
Fish Market's appeal on mootness grounds without further
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explanation. Apparently, the district court thought that the
transfer of the property meant that there was nothing of
substance left in the estate. It could be argued that so
long as the appeal in the adversary proceeding remained open,
Fish Market retained some hope, however forlorn, of
recovering its right of redemption. We need not pursue the
mootness issue further, preferring to affirm on the merits
the bankruptcy court's dismissal of the chapter 11 case.
Appeal from the Dismissal of the Adversary Proceeding.
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In the adversary proceeding, Fish Market argued that the
state court proceedings to foreclose its right of redemption
were independently unlawful because they violated the
automatic stay of 11 U.S.C. 362(a), as extended by Fed. R.
Civ. P. 62(a) for 10 days after dismissal of the chapter 11
case. This alleged violation, Fish Market argues, should
entitle it at least to damages, if not to a return of its
interest in the property by reestablishing its right of
redemption.
It is common ground that state court proceedings to
foreclose a right of redemption are barred during the period
while the automatic stay is in effect. Section 362(a)
protects the estate of the debtor from adverse claims unless
the court lifts the stay in particular instances, see 11
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U.S.C. 362(d), or unless such claims fall within codified
exceptions not applicable here. But the stay under section
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362(a) itself expired as soon as the judgment dismissing the
chapter 11 case was entered, 11 U.S.C. 362(c); In re De
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Jesus Saez, 721 F.2d 848, 851 (1st Cir. 1983), unless Fed. R.
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Civ. P. 62 operated to extend the stay, a question we have
never decided.
Excepting injunctions, receivership actions, and some
accountings, Rule 62(a) provides that "no execution shall
issue upon a judgment nor shall proceedings be taken for its
enforcement until the expiration of 10 days after its entry."
The rule primarily serves to give one against whom a money
judgment is entered time to post a supersedeas bond to stay
enforcement of that judgment pending appeal. It is clear in
this case that no action by the appellees was an "execution"
on the judgment of dismissal.1 The only question that
remains is whether GAA's and HNRG's commencement of
proceedings in state court to terminate Fish Market's right
of redemption constituted "enforcement" of the judgment of
dismissal.
Contrary to Fish Market's position, Rule 62(a) does not
purport to make a judgment ineffective for 10 days after
entry; on the contrary, the judgment retains full force and
effect for other purposes--e.g., res judicata. Instead Rule
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62(a) merely stays proceedings to enforce the judgment, for
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1"Execution" refers to process issued to enforce a
judgment--for example, an order to the marshal to seize
assets to pay such a judgment. Fed. R. Civ. P. 69.
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example, discovery to determine the location of a judgment
debtor's property available to satisfy the judgment. Cf.
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Huron Holding Corp. v. Lincoln Mine Operating Co., 312 U.S.
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183, 189 (1941) (noting that although supersedeas stays
execution it does not impair the finality of the judgment).
We hold that a state court proceeding to foreclose a right of
redemption is not "enforcement" of a judgment dismissing a
chapter 11 case.2 To conclude, the dismissal of the
chapter 11 proceeding was a proper disposition on the present
record. As for the adversary proceeding, we conclude that
Fed. R. Civ. P. 62(a) does not extend section 362(a)'s
automatic stay for 10 days after a chapter 11 case is
dismissed, resolving the issue left open by In re De Jesus
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Saez, 721 F.2d 848.
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Accordingly, the decision of the district court in No.
95-1483 is affirmed; the decision of the district court in
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No. 95-1074 is modified to affirm the bankruptcy court on the
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merits and, as modified, is affirmed.
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2Accord In re Whatley, 155 B.R. 775 (Bankr. D. Colo.
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1993), aff'd, 169 B.R. 698 (D. Colo. 1994), aff'd, 54 F.3d
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788 (10th Cir. 1995); In re Weston, 101 B.R. 202 (Bankr. E.D.
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Cal. 1989), aff'd 123 B.R. 466 (9th Cir. B.A.P. 1991), aff'd
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967 F.2d 596 (9th Cir. 1992), cert. denied, 113 S. Ct. 973
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(1993).
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