An appeal from a stay-modification order is constitutionally moot once dismissal of the bankruptcy case itself is final, according to a Ninth Circuit opinion adopting a holding by the Eighth Circuit.
The owner of real property filed bankruptcy to halt foreclosure. The bankruptcy judge modified the stay. Although the debtor filed an appeal, the lender completed foreclosure because the debtor did not obtain a stay pending appeal.
Meanwhile, the U.S. Trustee filed a motion to dismiss the bankruptcy. The debtor consented to dismissal, and the dismissal order became final.
The district court dismissed the appeal from the stay-modification order under Section 363(m), which makes appeals from sale-approval orders statutorily moot unless enjoined pending appeal.
In the court of appeals, Circuit Judge Milan D. Smith Jr. said in his May 23 opinion that it was incorrect for the district court to rely on Section 363(m) in dismissing the appeal as moot because that section applies to sales or leases, not to foreclosures.
Distinguishing among constitutional mootness, statutory mootness and equitable mootness, Judge Smith adopted the Eighth Circuit’s Olive St. opinion, which dismissed a factually identical case as constitutionally moot because the court could not grant “any effective relief” on appeal once dismissal of the underlying bankruptcy was final. Had the debtor also appealed the dismissal order, he said the appeals court “might have had some power to grant effective relief.”