QUESTION: 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?
ANSWER: In United States v. Antiques Limited Partnership, 760 F. 3rd 668 (7th Cir. 2014) the federal government sued to enforce tax assessments against a husband and wife and partnerships they controlled and transferred property to. 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 the order appointing the receiver it was immediately appealable, it held the order 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 Plata v. Schwarzenegger, 603 F. 3rd 1088, 1099 (9th Cir. 2010), that agreed that the only types of interlocutory orders involving receivers that are immediately appealable are the three discussed above.
The order 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.