Opinion
Case No. F95-00795-DMD, Chapter 7
May 17, 2001
Erik LeRoy, Esq. on behalf of Larry Compton, Trustee.
Dean Dunsmore, Esq. on behalf of U.S. Department of Justice.
Elliott Dennis, Esq. attorney for Northwest Exploration, Inc.
Dan Winfree, Esq. (telephonic) attorney for Johne and Charles Binkley.
Allen Todd, Esq. (telephonic) attorney for Doyon, Ltd.
Michael Brain, Esq attorney for Gene Desjarlais.
Paul Shearer (telephonic) himself.
ORDER DENYING TRUSTEE'S APPLICATIONS TO LEASE AND SELL INTERESTS IN MINING PATENTS, FREE AND CLEAR OF ALL CLAIMS OR INTERESTS
A continued hearing on 1) the trustee's application to lease and sell interests in Moose, Bueno and Rainy patents free and clear of all claims or interests, and 2) the trustee's application to lease and sell interests in Moose and Taybo patents free and clear of all claims or interests was held on May 16, 2001.
The pending motions contemplated the sale of real property in Kantishna, Alaska, by private sale to Gene Desjarlais. At the hearing, the trustee indicated that he wanted to instead auction the property because he had received several inquiries from other interested parties and believed he could get a higher offer. Mr. Desjarlais objected and asked that the sale to him be approved. Having reviewed the motions and responding pleadings thereto and considered the arguments of the parties made at the hearing,
IT IS ORDERED that the trustee's application to lease and sell interests in Moose, Bueno and Rainy patents free and clear of all claims or interests, and the trustee's application to lease and sell interests in Moose and Taybo patents free and clear of all claims or interests, both filed on April 13, 2001, are denied, without prejudice.
IT IS FURTHER ORDERED that the trustee shall submit a proposed auction procedure to the court, which procedure will provide a fair and equitable method for disposing of the estate's interest in the Moose, Bueno, Rainy, and Taybo patents, by auction or otherwise, under firm terms and conditions, and after providing adequate notice to all potential purchasers.
Discussion
A bankruptcy court has broad discretion in determining whether to approve a sale under 11 U.S.C. § 363. The court may decline to approve a sale in cases where it is aware that there are other offers which may be better for the estate. The court does not have authority to select a buyer from competing bidders for an estate asset, but must instead permit an avenue for sale which will give all interested parties a full and fair opportunity to bid.
In re WPRV-TV, Inc., 983 F.2d 336, 340 (1st Cir. 1993); Matter of Chung King, Inc., 753 F.2d 547, 549 (1st Cir. 1985); In re Bakalis, 220 B.R. 525, 532 (Bankr.E.D.N.Y. 1998).
G-K Dev. Co., Inc. v. Broadmoor Place Inv., L.P. (In re Broadmoor Place Inv., L.P.), 994 F.2d 744, 746 (10th Cir. 1993); see also Big Shanty Land Corp. v. Comer Prop., Inc., 61 B.R. 272, 278 (N.D.Ga. 1985) [even though offer would have paid all outstanding claims and resulted in quick end to case, bankruptcy court had discretion to disapprove of sale where it was faced with a "rapidly changing scenario" and at least three additional parties had expressed interest in purchasing the land].
Matter of Ohio Corrugating Co., 59 B.R. 11, 12 (Bankr.N.D.Ohio 1985).
Mr. Desjarlais's offer appears to be very favorable to the estate. However, he does not have an enforceable interest in the Kantishna property until this court has approved the sale. The property which is the subject of Mr. Desjarlais's offer is very unique. Although the extent of the estate's interest is subject to litigation now on appeal in state court, it nonetheless appears to be very valuable. Since the time that the trustee has noticed the proposed sale to Mr. Desjarlais, several other interested parties have come forward and expressed an interest in acquiring the Kantishna property on terms which may be more favorable to the estate.
Broadmoor Place Inv., 994 F.2d at 745 n. 1.
A chapter 7 trustee is required to "collect and reduce to money the property of the estate . . . and close such estate as expeditiously as is compatible with the best interests of parties in interest." The trustee "has a fiduciary obligation to conserve the assets of the estate and to maximize distribution to creditors." Consistent with these duties, the trustee must obtain the highest and best price for an asset of the bankruptcy estate.
United States v. Rigden (In re Rigden), 795 F.2d 727, 730 (9th Cir. 1986).
Chung King, 753 F.2d at 549 [governing principle for confirmation of a sale is the securing of the highest price for the bankruptcy estate]; DeMarco, Inc. v. Campo, 163 B.R. 49, 52 (S.D.N.Y.) [even after bidding had closed, trustee was not compelled to seek confirmation of highest bid, and could reopen bidding to obtain a higher offer].
Under the circumstances present here, I will decline to approve the sale to Mr. Desjarlais, without prejudice. The trustee will be given the opportunity to fashion a fair and equitable method for marketing this property, so that all interested parties will have a chance to present offers for his consideration.