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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND CONSTRUCTIVIST FOUNDATION, INC. : v. :Civil Action No. DKC 2000-1930 : LESLIE BONNER : :

MEMORANDUM OPINION This case is before the court on appeal from the order of Bankruptcy Judge L. Edward Friend II terminating the automatic stay in Appellant's, Constructivist Foundation, Inc., Chapter 7 bankruptcy case. Appellee has also filed a motion to have this Oral argument is deemed unnecessary

appeal dismissed as moot.

because the facts and legal arguments are adequately presented in the briefs and record, and the decisional process would not be significantly aided by oral argument. See Bankr. Rule 8012.

For the reasons set forth below the court will grant Appellee's motion to dismiss this appeal as moot. I. Background This case has a lengthy history because of numerous motions that have been filed during the past several years. For

purposes of this appeal, however, the court need not detail here the long history of this case, and only facts pertinent to the issue of mootness with respect to this appeal follow.

Appellant is a private charitable foundation incorporated under the laws of Georgia. Appellee, Leslie Bonner, is trustee

of Reliance Trust No. 1, which held a lien on property owned by Appellant. In 1996, Appellant executed a promissory note

("Note") in the amount of $500,721.85 in favor of Reliance. Pursuant to the Note, Appellant granted a properly recorded security interest in and a lien on the only significant piece of property it owned. December 31, 1996, When the Note became payable in full on Appellant failed to make any payments.

Moreover, up until the time the property was sold to a third party on or about June 16, 2000, Appellant had failed to make any payments of principal or interest due under the Note. no. 6 at 2, 7. Appellant previously had filed two Chapter 11 bankruptcy cases, which were dismissed. Both these petitions were filed Paper

either on the eve or within a few days of foreclosure on and sale of the property. On or about May 1, 2000 Appellant again

filed for bankruptcy, but this time under Chapter 7, and as before, one day before Appellee was slated to sell the property in a foreclosure sale. In response to Appellant's third bankruptcy petition,

Appellee filed a Motion for Relief from Automatic Stay and Request for Emergency Hearing. The hearing took place on May 2

2

before

Judge

Friend.

Counsel

for

Appellant

appeared

via

telephone.

After carefully considering all the evidence before

him, Judge Friend granted the motion, terminating the automatic stay and allowing Appellee to proceed with its foreclosure sale. In an order dated May 11, Judge Friend clarified that the stay termination was effective as of May 2. exhibit G. Paper no. 6, Appellee's

Appellee, the mortgagee, foreclosed on, bid on and It

bought the property on May 2, immediately after the hearing.

subsequently sold the property to a third party on or about June 16.1 Appellant moved for a stay of the termination of the

automatic stay pending appeal, which the bankruptcy court denied by an order entered June 5, 2000. Appellant then moved to Paper no.

dismiss its own Chapter 7 bankruptcy case on June 15. 6, Appellee's exhibit J.

On June 23, the bankruptcy court

dismissed the case with prejudice because Appellant failed to file its statement of Financial Affairs and certain schedules, which the court had ordered it to do. In its motion to dismiss,

Appellant stated that it had no intention of filing either of these items.

Appellants point out that the "third party" to whom Appellee sold the property consists of family members of both the beneficiaries of Reliance Trust and Hugh S. Hunt, who founded Constructivist Foundation. Paper no. 11 at 5-6. 3

1

In

a

letter

dated

July

5,

2000

counsel

for

Appellee

suggested that this appeal was moot as the underlying bankruptcy case had been dismissed. Paper no. 6, Appellee's exhibit L. A

subsequent letter from Appellee's counsel to Appellant's counsel dated July 11, 2000 suggested the parties work together to have this appeal dismissed as moot. Id., exhibit N. On July 17,

this court entered an order to show cause why the appeal should not be dismissed for failure of Appellant to file a brief in a timely manner. not received Paper no. 3. "official" Appellant responded that it had that the appeal had been

notice

docketed.2 Paper no. 4.

Nevertheless, counsel for Appellant was

on notice that the appeal had been docketed as Appellee's July 5 letter, which Appellant acknowledged receiving, stated as much. Appellee filed a motion to dismiss this appeal as moot on August 14, 2000. Appellant filed its motion and memorandum in Appellee

support of its appeal on the merits on August 15.

filed its opposition to the appeal on the merits on September 6. Finally, Appellant filed its opposition motion to dismiss the appeal as moot on September 11. II. Standard of Review
2

Other reasons Appellant stated for its failure to file a timely brief included illness of its counsel and the Chapter 7 property owner. 4

"`[A] case is moot when the issues presented are no longer `live' or the parties lack a legally cognizable interest in the outcome.'" City of Erie v. Pap's A.M., 120 S. Ct. 1382, 1390 (2000) (citation omitted). "Federal courts lack jurisdiction to decide moot cases because their constitutional authority extends only to actual cases and controversies." Iron Arrow Honor

Society v. Heckler, 464 U.S. 67, 70 (1983) (citation omitted). To survive an assertion that a claim is moot, a party must have suffered an actual injury that "can be redressed by a favorable judicial decision." III. Analysis Appellee asserts that the foreclosure sale of the property mooted Appellant's appeal of the order terminating the automatic stay. The court agrees. Id. (citation omitted).

To the extent the stay is terminated by the court as to a particular creditor, that creditor may proceed to collect on his or her debt. Even if the an appeal is filed, the creditor may proceed. Furthermore, if the collection process results in a sale of the property, the appeal becomes moot . . . The only way the debtor can avoid this situation is to obtain a stay pending appeal.

In re Strawberry Square Associates, 152 B.R. 699, 701 (Bankr. E.D. N.Y. 1993) (citation omitted) (emphasis added). The bankruptcy court terminated the

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