In a recent memorandum and decision posted on the SDNY bankruptcy court’s website (December 22, 2016) the court denied a debtor’s motion for a stay pending appeal of an order approving the sale of a million-dollar apartment.
On May 22, 2012, the debtor, Dorothy Palmer, filed a chapter 11 case. Her principal asset was her apartment which she valued at $4 million. Her monthly costs (mortgage and maintenance) was $12,000, but her monthly income was only $800. She did not pay the mortgage and maintenance since she filed chapter 11. Despite the lack of payment, she continued to live in the apartment. The chapter 11 case “languished” and various motions to dismiss or convert were made. Concerned about the lack of progress and the absence of an exit strategy, the court entered an order directing the debtor to file a plan and disclosure statement by March 28, 2016. She did file a plan, but it was not confirmable on its face. The bankruptcy court eventually granted a motion to convert the case and appointed a chapter 7 trustee.
Despite the conversion, the debtor continued to live in the apartment without paying. The trustee marketed the apartment at a competitive auction and received a bid for $4.8 million. The debtor was apparently disappointed at the sale price and objected to the trustee’s motion to approve the sale. She thought the apartment was worth $6 million (but could offer no evidence to back up that price). She also filed an appeal of the sale order and a stay pending her appeal.
The bankruptcy court denied her request for a stay pending appeal. When deciding a stay matter, courts look at four factors: (1) did the applicant make a strong showing that she is likely to succeed on the merits, (2) will she be irreparably injured absent a stay, (3) will a stay substantially injure other parties interested in the proceeding, and (4) the public interest. In this case the bankruptcy court decided that Palmer did not have a strong likelihood of success on the merits. The apartment had been properly marketed by a broker (with mass mailings and ads in the New York Times and Wall Street Journal, among other things) and a competitive auction was held. Palmer provided very little evidence to back up her price estimate of $6 million. The court also decided that Palmer did not show irreparable injury and that the creditors on the other hand had already waited almost 5 years to be paid. Finally, there was the integrity of the auction process to be considered and respected.