Key Points

  • The Eighth Circuit affirmed the Bankruptcy Appellate Panel's dismissal of Logan Riffenburg's appeal of a trustee's property sale as statutorily moot under 11 U.S.C. § 363(m).
  • Under In re Rodriquez, an objector's failure to challenge the purchaser's good faith in bankruptcy court is dispositive, even without an express good-faith finding.
  • The panel held that MOAC Mall Holdings, which held § 363(m) is not jurisdictional, did not disturb Rodriquez's bottom-line preservation rule.
  • A footnote said the panel was doubtful that Rodriquez is faithful to the statute's text and contrasted the Third Circuit's rule in In re Abbotts Dairies requiring a good-faith finding.
  • The panel rejected Riffenburg's argument that the bankruptcy court's ordering of evidence excused his failure to contest the buyer's good faith.

A federal appeals court held on Nov. 4 that a man who fought a bankruptcy trustee's sale of his ex-wife's share of their Arkansas property lost his appeal once the sale closed. He had never argued in bankruptcy court that the buyer acted in bad faith, the court said, and that failure ended the case even though the bankruptcy court made no specific finding that the buyer acted in good faith.

The U.S. Court of Appeals for the Eighth Circuit affirmed the Bankruptcy Appellate Panel for the Eighth Circuit, which had dismissed Logan Riffenburg's appeal as moot. Judge Gruender wrote for a panel that also included Judges Kelly and Kobes. No judge wrote separately.

The ruling keeps in force a 2001 circuit precedent, In re Rodriquez, under which an objector who does not contest a buyer's good faith in bankruptcy court cannot later unwind a completed sale. The panel held that the Supreme Court's 2023 decision in MOAC Mall Holdings LLC v. Transform Holdco LLC did not displace that rule. In a footnote, however, the panel said it doubted the precedent squares with the statute, and it pointed to the Third Circuit, which requires bankruptcy courts to make a good-faith finding whenever they approve such a sale.

According to the opinion, Riffenburg and his wife, Vanessa Roper, bought property in Mountain View, Arkansas, in August 2021 and divorced less than a year later, each keeping a one-half interest. In March 2023, Roper and her new husband filed for Chapter 7 bankruptcy.

The trustee, Mark Randy Rice, asked the bankruptcy court to approve a sale of Roper's interest in the property to Blue Sun Capital LLC. Riffenburg objected. The bankruptcy court overruled him, noting that the trustee was entitled to proceed because the sale was "in good faith, for fair value, and in the best interest of all parties." That analysis addressed the trustee's conduct, not the buyer's. At oral argument, the opinion notes, the trustee conceded that the bankruptcy court "made no specific finding one way or another as to the good faith of the purchaser."

Riffenburg appealed to the appellate panel and asked the bankruptcy court to halt the sale while the appeal was pending. The bankruptcy court refused. Months later he renewed the request before the appellate panel, and while that motion was pending the trustee moved to dismiss, saying the sale had closed. A divided appellate panel granted the motion.

The trustee relied on Section 363(m) of the Bankruptcy Code. The provision protects a sale to a buyer who "purchased or leased such property in good faith" from being undone on appeal unless the sale was put on hold pending the appeal. The Eighth Circuit calls this the "finality rule." The parties agreed that no stay had been obtained and that reversing the sale order would affect the sale, so the only question was whether Blue Sun Capital was a good-faith purchaser.

Judge Gruender wrote that Rodriquez answered that question. In that case, the court dismissed an appeal because the objector "did not challenge [the purchaser's] status as a good-faith purchaser before the bankruptcy court . . . the issue was not preserved." Applying that rule, he wrote, "Riffenburg's failure to challenge Blue Sun Capital's good faith in the bankruptcy court is dispositive."

Riffenburg argued that the bankruptcy court had made him present evidence of bad faith before the trustee presented any evidence, and that his objection to that order was overruled. The panel was unpersuaded. "But a procedural objection to that order of operations is no substitute for a substantive objection to the purchaser's good faith," Judge Gruender wrote, adding that the sequence did not stop Riffenburg from offering evidence against the buyer, "an opportunity he never pursued."

The panel also rejected a theory drawn from a dissent at the appellate-panel level. Judge Norton had concluded that MOAC invalidated the circuit's precedent. Riffenburg did not raise that view in his briefs but appeared to adopt it at oral argument, the opinion says. The Eighth Circuit acknowledged that MOAC's holding that Section 363(m) is not jurisdictional is "admittedly at odds" with how Rodriquez described the issue.

That mismatch did not change the result, the panel held. "But no matter the jurisdictional or non-jurisdictional nature of § 363(m), our bottom-line holding in Rodriquez remains undisturbed," Judge Gruender wrote: "to avoid mootness under that provision, a challenger to the sale of property by a bankruptcy trustee under § 363(b) must challenge the purchaser's good faith in the bankruptcy court."

The footnote then questioned that holding. "We are doubtful, however, that our holding in Rodriquez is faithful to the text of § 363(m)," the panel wrote. It noted that circuit precedent treats good faith as a factual question that is "the sole province of the bankruptcy court," and that the bankruptcy court here made no specific findings about the buyer. "Accordingly, under the plain meaning of the statute, the record before us suggests that the mootness rule should not apply," the footnote says.

The panel contrasted its approach with the Third Circuit's 1986 decision in In re Abbotts Dairies of Penn., Inc., which reversed a Section 363(m) mootness dismissal in similar circumstances and required bankruptcy courts approving sales to "make a finding with respect to the good faith of the purchaser." "But we, by contrast, are bound by Rodriquez to affirm the dismissal of this appeal under the same statute," the Eighth Circuit wrote.

The panel added that changing course might not have helped Riffenburg, because "the record reflects no real dispute between the parties regarding the good faith of the purchaser."

The decision affirms the appellate panel's order dismissing Riffenburg's appeal as statutorily moot, leaving the completed sale to Blue Sun Capital in place. Although the footnote questioned Rodriquez, the opinion does not ask the full Eighth Circuit to reconsider it.