PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
In Re: ADAMSON COMPANY INC.,
a/k/a Old Dominion Fabricators,
Debtor.
DEVELOPMENT COMPANY OF AMERICA,
No. 95-2965
Creditor-Appellant,
v.
ADAMSON COMPANY INC., a/k/a Old
Dominion Fabricators,
Debtor-Appellee.
Appeal from the United States District Court
for the Eastern District of Virginia, at Richmond.
Richard L. Williams, Senior District Judge.
(CA-95-507, BK-94-30676-S)
Argued: June 5, 1996
Decided: October 29, 1998
Before WIDENER and MURNAGHAN, Circuit Judges, and
HALL, Senior Circuit Judge.
_________________________________________________________________
Dismissed by published opinion. Judge Widener wrote the opinion, in
which Judge Murnaghan and Senior Judge Hall concurred.
_________________________________________________________________
COUNSEL
ARGUED: William Ray Baldwin, III, HIRSCHLER, FLEISCHER,
WEINBERG, COX & ALLEN, Richmond, Virginia, for Appellant.
Bruce H. Matson, LECLAIR, RYAN, P.C., Richmond, Virginia, for
Appellee. ON BRIEF: Michael Paul Falzone, HIRSCHLER, FLEIS-
CHER, WEINBERG, COX & ALLEN, Richmond, Virginia, for
Appellant.
_________________________________________________________________
OPINION
WIDENER, Circuit Judge:
Development Company of America (Development Company), a
creditor in the chapter 11 bankruptcy case of Adamson Company, Inc.
(Adamson), appeals the district court's order affirming the bankruptcy
court's decision to allow Adamson to assume and assign a lease
between Adamson and Development Company on a manufacturing
plant in Chester, Virginia. Adamson contends the appeal should be
dismissed because Development Company failed to seek a stay of the
bankruptcy court's order before the transaction, which included the
lease assignment, was completed. We agree and dismiss the appeal.
Adamson, a fabricator of steel tanks, maintained a manufacturing
plant in Chester, Virginia leased from Development Company (the
Chester lease). On February 23, 1994, Adamson filed a chapter 11
bankruptcy petition and from that time operated its business as
debtor-in-possession. Unable to reorganize, Adamson found a buyer
to take over the lease and purchase substantially all of its assets,
including its name, inventory, machinery, equipment, contract rights,
and a parcel of real estate, for $1,925,000 cash. The buyer, McCon-
nell Acquisition (McConnell), is owned by a single shareholder, Ward
McConnell, who also owns several manufacturing companies that
produce a variety of products including steel tanks similar to those
made by Adamson. McConnell's purchase agreement was contingent
on Adamson obtaining the required approval of the bankruptcy court,
so on March 7, 1995, Adamson moved for permission to sell substan-
tially all of its assets and to assign the Chester lease to McConnell.
Development Company opposed the motion, arguing that it had termi-
nated the lease or that Adamson had not properly exercised a right to
renew.
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Following two hearings, the bankruptcy court entered its memoran-
dum opinion and order which approved the sale and authorized
Adamson to assign the lease to McConnell.
On May 8, 1995, Adamson and McConnell closed the sale and
transferred Adamson's assets, including the Chester lease, to McCon-
nell. McConnell took possession of the plant and assets and continued
to operate the business. Development Company did not obtain a stay,
under Bankruptcy Rule 8005, of the bankruptcy court's order approv-
ing the sale and the assumption and assignment of the lease. Instead,
Development Company appealed the bankruptcy court's order to the
district court. The district court affirmed.
Adamson contends that because Development Company did not
seek a stay of the bankruptcy court's order authorizing the asset sale
and assumption and assignment of the lease, 11 U.S.C. § 363(m)
applies to moot Development Company's appeal. We agree.
11 U.S.C. § 363(m) provides:
The reversal or modification on appeal of an authorization
under sub-section (b) or (c) of this section of sale or lease
of property does not affect the validity of a sale or lease
under such authorization to an entity that purchased or
leased such property in good faith, whether or not such
entity knew of the pendency of the appeal, unless such
authorization and such sale or lease were stayed pending
appeal.
Although there is no question with respect to good faith, Develop-
ment Company now asks us to hold either that Adamson's tenancy
under the lease was terminated or expired, as it previously argued, or
that the bankruptcy court erred in allowing the assignment to McCon-
nell. In the absence of a stay, however, Adamson Company has essen-
tially been liquidated through the sale of its assets. Many of the assets
Adamson sold, such as inventory and accounts receivable, have obvi-
ously already been irrecoverably altered by McConnell's continued
operation of the business. Furthermore, invalidating the lease assign-
ment to McConnell would adversely affect individuals who are not
parties to this case, such as Adamson's former employees, bankruptcy
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creditors, and McConnell's current debtors and creditors. This reason-
ing, while supportive of § 363(m), is not necessary for our decision.
Development Company argues that it was not required to seek a
stay because 11 U.S.C. § 365 contains certain provisions with respect
to unexpired leases and that section contains no provision relating to
stays pending appeal. This argument, however, ignores both the plain
language and the purpose of section 363(m). By its terms, section
363(m) applies to "a sale or lease of property." 11 U.S.C. § 363(m).
It is elementary that a leasehold is personal property and possibly of
value to the debtor's estate, thus the assignment of a lease for a valu-
able consideration is a sale of property to which§ 363(m) applies. In
re: Stadium Management, 895 F.2d 845, 848 (1st Cir. 1990), and In
re: Exennium, 715 F.2d 1401, 1403 (9th Cir. 1983), are cases directly
on point, and we held, persuasive here, in Willemain v. Kivitz, 764
F.2d 1019, 1023 (4th Cir. 1985), that 11 U.S.C.§ 363(m) applied to
a 20% limited partnership interest which was an unregistered and
restricted security.
Stadium Management, Exxenium, and Willemain also teach that
such appeals as this should be dismissed as moot.
Accordingly, the appeal in this case is
DISMISSED.
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