Q: I purchased assets from a
receiver. The court approved the sale over the objection of one of the
defendants. The sale has now closed. I was just informed that the
defendant is appealing the order approving the sale. Can the defendant set
aside the sale to me or am I safe?
A: In United States v. Antiques Limited Partnership, 760
F.3d 668 (7th Cir. 2014), the federal government sued to enforce tax
assessments against a husband and wife and partnerships they controlled to
which they transferred property. A receiver was appointed to manage the
partnerships and to sell their assets to pay the assessments. The court
later approved the receiver’s sale of the partnership property and also
approved interim compensation for the receiver. The defendant appealed the
receiver’s appointment, the sale of the property, and the order approving
the receiver’s interim compensation, as well as other orders.
The Court of Appeal first dealt with the
issue of which orders were appealable. While it held that the order
appointing the receiver was immediately appealable, it held the orders
approving the sale and awarding the receiver interim compensation were
not. The Court stated that appellate jurisdiction over interlocutory
orders involving receivers is limited to only three types of orders: (1)
orders appointing a receiver; (2) orders refusing to windup a
receivership; and (3) orders refusing to take steps to accomplish the
purposes for winding up a receivership. Id. at 672. Interestingly, the
statute, 28 U.S.C. §1292(a)(2), actually states that an interlocutory
order “refusing to windup receiverships or take steps to accomplish the
purposes thereof, such as directing sales or other disposals of property”
are immediately appealable. The Court, however, found that the argument
that the language of the statute authorizes appeals from orders in route
to winding up the receivership could include the sale order “would strain
the statutory language and make anything the receiver did appealable
immediately, which could flood the courts of appeal with interlocutory
appeals.” Id. at 671-672. The Court cited to a number of cases,
including the Ninth Circuit’s decision in Plata v. Schwarzenegger,
603 F.3d 1088, 1099 (9th Cir. 2010), which agreed that the only types of
immediately appealable interlocutory orders involving receivers are the
three discussed above.
The orders approving the receiver’s sale
and awarding interim compensation were, therefore, held not immediately
appealable. The Court also held that: “in the absence of a stay, or some
other circumstance that would cast a cloud over the receiver’s sale…a
closed sale (that is, a sale that has been executed, not just contracted
for) of a debtor’s assets can’t be reopened.” Id. at 673. The Court
noted that, unlike a sale in a bankruptcy case, where the court needs to
make a finding of the buyer’s “good faith” to insulate the sale from being
set aside on appeal [11 U.S.C. § 363(m)], a district court is not required
to make such a finding.” Id. Even so, the better practice would be
to demonstrate the good faith of the buyer and to ask for such a finding
to eliminate any such issue. Therefore, it appears that your purchase from
the receiver is safe, despite what the defendant might threaten.
*Peter A. Davidson is a Partner of Ervin Cohen & Jessup LLP
a Beverly Hills Law Firm. His practice includes representing Receivers and
acting as a Receiver in State and Federal Court.
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