FILED NOT FOR PUBLICATION DEC 31 2024 SUSAN M. SPRAUL, CLERK UNITED STATES BANKRUPTCY APPELLATE PANEL U.S. BKCY. APP. PANEL OF THE NINTH CIRCUIT OF THE NINTH CIRCUIT

In re: BAP Nos. SC-24-1034-BGC HOMESITE HOLDINGS LLC, SC-24-1035-BGC Debtor. (Related Appeals)

HOMESITE HOLDINGS LLC; MICHAEL Bk. No. 20-03216-MM7 R. CARTWRIGHT, II, Appellants, Adv. No. 21-90032-MM v. RONALD E. STADTMUELLER, Chapter 7 MEMORANDUM∗ Trustee; HOUSHANG AFRAMIAN; SMDL, LLC; T2, LLC, Appellees.

Appeal from the United States Bankruptcy Court for the Southern District of California Margaret M. Mann, Bankruptcy Judge, Presiding

Before: BRAND, GAN, and CORBIT, Bankruptcy Judges.

INTRODUCTION

The bankruptcy estate in this case was comprised of real property that

was encumbered by multiple liens, subject to remediation orders for landslides

that had occurred on the property, and which was in danger of further erosion

and landslides. After engaging in years of litigation, Ronald E. Stadtmueller

∗ This disposition is not appropriate for publication. Although it may be cited for

whatever persuasive value it may have, see Fed. R. App. P. 32.1, it has no precedential value, see 9th Cir. BAP Rule 8024-1. 1 ("Trustee"), the chapter 7 1 trustee in this case, entered into a global tripartite

settlement that resolved all of the litigation issues, resulted in the transfer of

the subject property to one of the creditors, and allowed for the closing of the

case. The bankruptcy court approved the settlement and at the same time

denied a motion for summary judgment filed by Appellants, chapter 7 debtor

Homesite Holdings LLC ("Debtor") and its principal Michael R. Cartwright, II

(together "Appellants"), that would have disallowed the claims of creditors

SMDL, LLC ("SMDL") and T2, LLC ("T2") (together "SMDL/T2"), the proposed

purchasers of the property under the global settlement.

Appellants appeal three orders in these related appeals: (1) the order

granting the joint motion to settle claims between multiple parties, sell

Debtor's real property to SMDL/T2, and dismiss several adversary

proceedings; (2) the order denying Appellants' motion for summary judgment

as to proofs of claim and the complaint filed against Debtor by SMDL/T2; and

(3) an order denying Appellants' motion for reconsideration of both of the

above orders. Seeing no reversible error by the bankruptcy court as to any of

its rulings, we AFFIRM.

FACTS

A. The parties

Mr. Cartwright is the manager and sole member of Debtor. In 2017,

Debtor acquired vacant land known as lots 5, 6, 7, and 8 on Castellammare and

1 Unless specified otherwise, all chapter and section references are to the Bankruptcy Code,

, all "Rule" references are to the Federal Rules of Bankruptcy Procedure, and all "Civil Rule" references are to the Federal Rules of Civil Procedure. 2 Revello Drives in the high-end community of Pacific Palisades near Los

Angeles ("Property"). The Property was Debtor's sole asset. Various owners

have tried to develop the Property since the 1990s without success; Debtor

made no changes to it since taking ownership in 2017.

Unsecured creditors SMDL/T2 own properties which adjoin and are

uphill from the Property. The ascending slope between the parties' properties

is steep and near vertical in places. SMDL/T2's properties receive lateral and

subjacent support from the Property.

Houshang Aframian held a senior lien on the Property for $1.275 million

and filed a proof of claim for that amount. Appellants' objection to the claim

was consolidated with Trustee's adversary proceeding against Mr. Aframian,

which sought disallowance of his claim and cancellation of his senior lien. Big

A Rancho Santa Fe, LLC ("Big A") held a $2 million junior lien on the Property.

In a settlement with Trustee, Big A agreed to reduce its lien to $21,000 plus

interest.

B. Relevant prepetition events

In 2002, in an attempted development of the Property, retaining walls

were constructed along some of the lots. In 2005, a landslide occurred on the

parties' properties. The City of Los Angeles ("City") issued stop work orders

and orders to comply, requiring the owners to correct the slope failure. In

2006, the City recorded Certificates of Substandard Property against the

properties based on a "Class I Slope Failure." Debtor's predecessor

unsuccessfully litigated with the City over the certificate. The landslide on

3 Debtor's Property has continued unabated since 2005. It is unknown what has

been done since 2005 on SMDL/T2's properties.

In 2009, the City approved a plan to repair the hillside, but the plan was

never completed. In 2014, the California Coastal Commission ("Commission")

approved proposed construction of new retaining walls on the parties'

properties to stabilize the hill, but the new walls were never constructed.

C. The bankruptcy case

After exhausting all state court efforts to stop a foreclosure by Mr.

Aframian, Debtor filed a chapter 7 bankruptcy case on June 25, 2020. Trustee

was appointed as the chapter 7 trustee.

SMDL/T2 filed unsecured proofs of claim for $3 million each. They

asserted that Debtor was liable for damages caused to their properties by

illegal and reckless grading activity on the Property from 2000-2002, which

caused the 2005 landslide and the deteriorating and unstable condition of the

hillside. SMDL/T2 asserted that Debtor was obligated to restore the lateral and

subjacent support for their properties and that such repairs could not be

completed until the landslide condition on Debtor's Property, which they

contended was a continuing nuisance, was repaired.

Appellants objected to SMDL/T2's proofs of claim. Thereafter, SMDL/T2

filed an adversary complaint for declaratory judgment that Debtor had a

statutory duty to provide lateral and subjacent support to SMDL/T2's uphill

properties and that Debtor's Property could not be sold free and clear of that

obligation. The bankruptcy court consolidated the claim objection and the

4 adversary since they involved common questions of law and fact, and both

matters proceeded in the adversary proceeding.

1. Summary judgment in the adversary

Appellants moved for summary judgment as to SMDL/T2's proofs of

claim and request for declaratory relief ("MSJ"). Appellants' expert opined that

Debtor's retaining walls actually stabilized, not caused, the 2005 landslide. He

maintained that SMDL/T2's actions, namely improper drainage pipes on their

properties, caused the 2005 landslide. However, even if work performed on

the Property was the cause, Appellants argued that Debtor was not liable for

damage caused by prior owners. And, even if Debtor was liable, argued

Appellants, SMDL/T2's claims for a permanent nuisance accrued in 2005 and

were barred by the three-year statute of limitations. Alternatively, if SMDL/T2

could prove that the conditions on Debtor's Property were a "continuing"

nuisance, which could give rise to successive actions for damages each with a

three-year time bar, Appellants argued that SMDL/T2 failed to provide

evidence of damages that occurred within the three years prior to their

complaint.

In opposition, SMDL/T2 argued that Appellants' expert's opinion as to

the cause of the 2005 landslide was controverted by the City's conclusion that

it was caused by the construction of the retaining walls based on faulty

geological plans. SMDL/T2's expert disputed Appellants' expert's "drainage

pipes" causation theory and maintained that an active landslide existed on the

Property, which was evidenced by winter storms in 2023 that caused debris to

5 push through the lower retaining wall and spill out onto the street.

SMDL/T2 argued that Appellants' position that Debtor had no successor

liability for the prior owner's excavation for the retaining walls was incorrect.

Rather, their claims were based on damage caused by construction of the

unfinished and unreasonably dangerous retaining walls still existing when

Debtor acquired the Property and Debtor's failure to remediate the dangerous

artificial condition. SMDL/T2 argued that the dangerous condition caused by

the unapproved and unfinished retaining walls, and the ongoing landslide

that was overtaking them, was a continuing nuisance that could be abated by

stabilizing the hillside. Estimates for hillside repairs, which might require

removal or enhancement of the retaining walls, ranged from $2.7 to $3.8

million. 2

In reply, Appellants argued that if the walls were a continuing nuisance,

SMDL/T2's estimated repair of $3.8 million was unreasonably high compared

to the Property's value, which Appellants contended was between $2.35 and

$3.8 million. Consequently, argued Appellants, the high remediation costs to

value rendered the nuisance permanent, not continuing, barring SMDL/T2's

claims.

2. The settlement and sale motion

Before the bankruptcy court ruled on the MSJ, Trustee, SMDL/T2, and

Mr. Aframian filed a joint motion for approval of a settlement and release of

2 Although SMDL/T2 obtained a repair bid in 2020 for $858,000, which Appellants raised, the engineer's plans for that bid were incorrect and the City would not approve it. 6 claims between them and a sale of the Property to SMDL/T2 ("Settlement and

Sale Motion"). The settlement terms of the agreement ("Agreement") are

summarized as follows:

• SMDL/T2 would withdraw their $3 million proofs of claim and Appellants' objections to those claims would be deemed withdrawn;

• SMDL/T2 would waive repayment of their administrative claim for $150,000, which they provided to Trustee to fund his investigation of Big A's liens; to date, SMDL/T2 had provided $141,141 of that $150,000;

• SMDL/T2 would dismiss their adversary proceeding against Debtor and agree with Trustee to a mutual general release of all claims;

• Mr. Aframian would reduce his $1.275 million senior lien on the Property to $150,000, release his lien upon payment at the sale, and withdraw his proof of claim;

• Trustee would dismiss the adversary proceeding against Mr. Aframian and agree to a mutual general release of all claims, and SMDL/T2 and Mr. Aframian would agree to a mutual general release of all claims;

• Big A's lien on the Property, which had been reduced to $21,300 plus interest, would be satisfied upon the sale to SMDL/T2.

As for the sale terms of the Agreement, Trustee would convey the Property to

SMDL/T2 subject to all liens, interests, and encumbrances, except the Aframian

and Big A liens to be paid by SMDL/T2 through escrow. SMDL/T2 would also

satisfy the approximate $200,000 delinquent property tax claims. Hence, under

the Agreement, Trustee would receive a total of $338,505.40.

In evaluating the settlement under A & C Properties, Trustee argued that

the settlement between SMDL/T2 and the estate, Mr. Aframian and the estate, 7 and SMDL/T2 and Mr. Aframian was fair and equitable, negotiated in good

faith, and in the best interest of creditors and the estate. In short, Trustee

argued that the tripartite settlement resolved all matters, disposed of the

distressed Property, and allowed him to finally close the case without further

expense and uncertainty of protracted litigation and potential appeals.

Trustee asserted that the outcome of the pending litigation between him

and the various parties was uncertain. If the Agreement was not approved, he

believed that the SMDL/T2 matter would continue to be heavily litigated,

especially given Mr. Cartwright's propensity to litigate, and was likely

resolvable only through the use of expert witnesses which the insolvent estate

could not afford. Trustee argued that settlement with SMDL/T2 would avoid

trial and the cost, delay, and risk of complex litigation. The settlement with Mr.

Aframian also avoided trial and its related cost, delay, and risk. The settlement

additionally provided cash to the estate, payment of Big A's allowed lien, and

payment of the long-outstanding property taxes. Trustee argued that

settlement was in the best interest of Debtor, its creditors, its estate, and the

public; all creditors' claims would be resolved through payment or otherwise

and a public hazard would finally be addressed.

Regarding the sale of the Property to SMDL/T2 under § 363(b), Trustee

asserted that it was negotiated at arm's length and in good faith, was in the

best interest of estate, was fair and reasonable, and should be approved based

on his sound business judgment. While Trustee did not put a value on the

Property, he did not believe it was worth as much as Mr. Cartwright asserted.

8 Trustee explained that a broker tried to sell the Property but those efforts

failed. Trustee said he learned that the Property was borderline valueless

because it was fraught with many legal and practical problems as evidenced

by the failed sale attempt and preliminary title report. Trustee argued that due

to the complex issues related to the Property, it was impossible to establish

overbid terms that would equate to the value of the Agreement. Trustee

requested a finding under § 363(m) that SMDL/T2 were good faith purchasers.

Appellants opposed the Settlement and Sale Motion. They argued that

Trustee presented no analysis regarding the probability of success of the

SMDL/T2 litigation. Appellants continued to challenge the claims as baseless,

for the same reasons asserted in their MSJ. Appellants also challenged

Trustee's concerns about the expense of litigation, noting that Mr. Cartwright

had been paying for the SMDL/T2 and Aframian litigation and that he could

continue to do so through trial.

Appellants further argued that Trustee failed to show he was getting

optimal value for the Property. Although he stated that his broker's efforts to

sell the Property had failed, he did not provide any details about what those

efforts were or provide a declaration from the broker explaining why he was

unable to sell the Property, which was in a highly desirable oceanfront

neighborhood. Appellants asserted that SMDL/T2's baseless claims and

litigation tainted the Property and depressed its value so that they could buy it

for a grossly inadequate price, which supported the argument that they were

not good faith purchasers under § 363(m).

9 In response to an unsolicited overbid submitted by another Cartwright

entity, 3 SMDL/T2 disclosed that they had recently filed an emergency

application with the Commission (the "September application") for a permit to

repair the hillside, which included three of Debtor's four lots. SMDL/T2's

expert explained in his declaration that the slope remediation plans included

the drilling and placement of "soil nails" that would hold a steel "Tecco" mesh

to restrain the surface soils from sliding. Although the September application

the expert referenced was not filed with his declaration, SMDL/T2 corrected

that error by filing it later that day.

3. Ruling on MSJ and Settlement and Sale Motion

The bankruptcy court denied the MSJ, ruling that triable issues of fact

regarding Debtor's liability precluded summary judgment ("MSJ Order"). It

was disputed as to who or what caused the unremediated landslide which was

possibly still active, and whether Debtor was alternatively liable for failing to

repair the retaining walls, which may or may not have been a dangerous

artificial condition and may have created an exception to the general rule that

a successor is not liable for removal of support. It was also disputed if Debtor

was liable for nuisance, whether permanent or continuing, which was key to

the applicability of the three-year statute of limitations. The court found that

abatement costs of $2.7 million could be found to be reasonable at trial given

3 Although the Agreement was not subject to overbids, CTPC, LLC submitted one. Ultimately, the bankruptcy court rejected the overbid in favor of the Agreement. This is not challenged on appeal, but we discuss it as it relates to the reconsideration motion. 10 Mr. Cartwright's valuation of the Property at $3.8 million, which could

support a continuing nuisance theory.

Next, the bankruptcy court approved the Settlement and Sale Motion

("Settlement and Sale Order"). Applying the four factors under A & C

Properties, the court found that the settlement part of the Agreement was

reasonable, fair, and equitable. Though Trustee had not separately evaluated

SMDL/T2's claims and the probability of success in litigating them, the court

said that its summary judgment denial accomplished a thorough evaluation of

those claims and their inherent challenges. The extensive summary judgment

briefing identified triable issues of fact that would depend on further

testimony from key and expert witnesses to resolve. Among those issues was

whether liability ran with the land, which depended on the triable issue of

whether the landslide or retaining walls were a continuing nuisance. Difficulty

in collection was not critical. In the court's opinion, the settlement's value was

not the recovery of money, but the reduction or elimination of claims that

resulted in equity for the estate. The court found that risk in the litigation with

SMDL/T2 was substantial because of the disputed facts that would require

expert witnesses and significant litigation to complete. Besides the high costs

and delay in what was a very complex case, delay in closing the estate carried

the additional risk that the landslide would be exacerbated and render the

estate more administratively insolvent. Further, proceeding with litigation

might not yield any better return for creditors. Finally, and what the court

found most important, the settlement served the paramount interest of

11 creditors. It resolved all claims and had been negotiated at arm's length

resulting in a fair and reasonable agreement. Further litigation put creditors at

risk of receiving nothing.

The court also found that Trustee's sound business judgment supported

approving the sale of the Property to SMDL/T2, which liquidated the estate's

sole asset that was subject to landslide risks and extricated the estate from

litigation. The court did not fault Trustee for not stating a value for the

Property. In denying the MSJ, the court found that it may be worth a range of

values and that its value could not be determined without resolving disputed

factual issues as to the scope of the landslide, the cost to remediate, and

whether or to what extent either or both parties were responsible. Put simply,

determining the true value of the Property was impossible without a trial.

Finally, the court found that SMDL/T2 were good faith purchasers under

§ 363(m). Trustee and Mr. Weintraub, SMCL/T2’s principal, attested that the

sale was not the result of fraud, collusion, or coercion, but was the result of

three years of litigation involving zealous advocacy on all sides and extensive

arm's-length, good faith negotiations. The court rejected Appellants' argument

that SMDL/T2 lacked good faith because they were pursuing baseless claims to

leverage a grossly inadequate sale price; the summary judgment ruling was to

the contrary. Without extensive litigation, noted the court, it was impossible to

determine which party or parties were responsible for the landslide. And

while SMDL/T2's claims may not be as strong as they thought, the court found

that this did not affect their good faith.

12 4. Motion to reconsider

Appellants moved for reconsideration of the MSJ Order and the

Settlement and Sale Order and requested a stay of both orders. They sought

relief under Civil Rule 59(e) based on newly discovered evidence, and under

Civil Rule 60(b)(3) based on SMDL/T2's alleged fraud.

Appellants asserted that they were entitled to relief based on their

discovery of an undisclosed application SMDL/T2 submitted to the

Commission in October 2023 (the "October application"). The October

application proposed a completely different repair system from the September

application submitted to the bankruptcy court. Appellants' expert opined that

the soil nails/Tecco mesh repair identified in the October application would

not be possible if, as SMDL/T2 contended, the retaining walls on Debtor's

Property were defective, unstable, or were a contributory cause of the 2005

landslide. And it was these supposed defects and instability in the retaining

walls, argued Appellants, that SMDL/T2 claimed were an unreasonably

dangerous artificial condition, thus allowing them to avoid the successor

liability rule, the three-year statute of limitations for a permanent nuisance,

and summary judgment. In short, argued Appellants, the October application

showed that SMDL/T2 now admitted that Debtor's retaining walls were not a

dangerous condition but actually provided stability for their latest proposed

repair for the slope failure.

Appellants argued that the October application constituted "new

evidence" because it was not discovered until after the hearing where the court

13 announced that it was approving the Settlement and Sale Motion and denying

the MSJ. Appellants argued that SMDL/T2 concealed the October application

and should have disclosed it in discovery. Instead, Appellants had to learn

about it by contacting the Commission.

Appellants also argued that SMDL/T2 had engaged in fraud and

misconduct by misrepresenting to the court, Trustee, and all parties that they

were relying on the September application for their repair plans, when they

were really relying on the October application which flatly contradicted any

notion that Debtor's retaining walls were defective or unstable. Appellants

argued that the concealment of this information appeared to be deliberate

because the plans attached to the October application were dated September

2022 – one year before the October application was submitted to the

Commission.

In opposition, SMDL/T2 argued that Appellants did not establish that

failure to disclose the October application was fraudulent and further that the

information it contained was available prior to the hearing on the MSJ and the

Settlement and Sale Motion. SMDL/T2's expert disclosed the soil nails/Tecco

mesh repair proposed in the October application in their response to CTPC's

overbid in advance of the hearing. Unfortunately, the September application

was mistakenly referenced and filed with the court, but SMDL/T2 argued that

this was a mistake rather than "fraud." In any case, their expert disagreed with

Appellants' expert. SMDL/T2's expert asserted that the proposed repair

method of soil nails/Tecco mesh did not depend upon the condition of the

14 retaining walls. Therefore, they argued, the factual issues regarding whether

the soil nails/Tecco mesh repair could be used if Debtor's retaining walls were

defective or unstable were disputed and would not change the outcome for

Appellants.

5. Ruling on reconsideration

The bankruptcy court denied reconsideration of the MSJ Order and the

Settlement and Sale Order and Appellants' request for a stay. Ruling under

Civil Rule 59(e), the court rejected Appellants' argument that the October

application, which proposed the repair of soil nails/Tecco mesh, was "newly

discovered evidence." It was available to them by inquiry to the Commission

before the hearing and the court's final ruling, but neither Appellants nor their

expert thought to look for it. Further, even if SMDL/T2 could be faulted for

failing to supplement their discovery responses with the October application,

the court observed that the case had progressed well beyond the discovery

stage.

However, and what the court found crucial, the October application only

confirmed its reasons for entering the MSJ Order and Settlement and Sale

Order in the first place. SMDL/T2's expert's opinion had not changed, and

Appellants did not "prove" that only SMDL/T2 were responsible for the slope

instability. The court found that even if the October application had been part

of the record when it ruled on the MSJ, it still would have held that a trial was

necessary. Consequently, relief from the orders was not warranted.

Appellants timely appealed. They sought a stay of the pending appeals

15 from the BAP, which was denied. SMDL/T2 moved to dismiss the appeals as

moot. As we explain below, the motion is DENIED.

JURISDICTION

The bankruptcy court had jurisdiction under

and

157(b)(2)(N) and (O). Subject to our discussion of standing and mootness

below, we have jurisdiction under

.

ISSUES

1. Do Appellants have standing to challenge the orders on appeal?

2. Are the appeals moot?

3. Did the bankruptcy court clearly err in finding that SMDL/T2 were good

faith purchasers under § 363(m)?

4. Did the bankruptcy court err in denying the MSJ or abuse its discretion

in granting the Settlement and Sale Motion?

5. Did the bankruptcy court abuse its discretion in denying reconsideration

of the MSJ Order and the Settlement and Sale Order?

STANDARDS OF REVIEW

While standing to appeal is generally a legal issue we review de novo,

whether an appellant is a "person aggrieved" by the order appealed is a

question of fact we review in the first instance. See Palmdale Hills Prop., LLC v.

Lehman Com. Paper, Inc. (In re Palmdale Hills Prop., LLC),

(9th

Cir. 2011). Mootness is a question of law reviewed de novo. Ellis v. Yu (In re

Ellis),

(9th Cir. BAP 2014).

We review de novo the bankruptcy court's grant or denial of summary

16 judgment. Fresno Motors, LLC v. Mercedes Benz USA, LLC,

(9th Cir. 2014).

We review a § 363(m) "good faith" finding for clear error. Thomas v.

Namba (In re Thomas),

(9th Cir. BAP 2002). Factual findings are

clearly erroneous if they are illogical, implausible, or without support in the

record. Retz v. Samson (In re Retz),

(9th Cir. 2010).

We review § 363 sale orders for an abuse of discretion. Fitzgerald v. Ninn

Worx Sr, Inc. (In re Fitzgerald),

(9th Cir. BAP 2010). And we

likewise review the bankruptcy court's approval of a settlement for an abuse of

discretion. Martin v. Kane (In re A & C Props.),

(9th Cir.

1986).

We review orders denying reconsideration for an abuse of discretion,

whether the motion for reconsideration is based on Civil Rule 59(e) or Civil

Rule 60(b). Sch. Dist. No. 1J v. AC&S, Inc.,

, 1262 (9th Cir. 1993).

A bankruptcy court abuses its discretion if it applies an incorrect legal

standard, misapplies the correct legal standard, or makes factual findings that

are illogical, implausible, or not supported by the record. United States v.

Hinkson,

(9th Cir. 2009) (en banc).

DISCUSSION

A. Appellants have standing.

An appellant of a bankruptcy court order must establish both Article III

standing and that it is aggrieved by the order. Clifton Cap. Grp., LLC v. Sharp (In

re E. Coast Foods, Inc.),

(9th Cir. 2023), as amended (citing

17 Fondiller v. Robertson (In re Fondiller),

(9th Cir. 1983)). Article

III or constitutional standing requires an injury in fact that is caused by or

fairly traceable to some conduct and which the requested relief will likely

redress. Id. at 906. The "person aggrieved" standard is a prudential rule of

appellate standing. Harkey v. Grobstein (In re Point Ctr. Fin., Inc.),

(9th Cir. 2018). "[O]nly a person aggrieved, that is, someone who is

directly and adversely affected pecuniarily by a bankruptcy court's order, has

standing to appeal that order."

(cleaned up). "An order that diminishes

one's property, increases one's burdens, or detrimentally affects one's rights

has a direct and adverse pecuniary effect for bankruptcy standing purposes."

(citation omitted).

Mr. Aframian argues that Appellants lack standing because the estate is

administratively insolvent. Therefore, he argues, Appellants do not meet the

"person aggrieved" standard nor have they suffered a redressable injury

because, as equity interest holders, they do not stand to receive distributions

from the estate after payment of all claims and administrative expenses.

It is true that when an appellant's chances of receiving a distribution

from the bankruptcy estate are hopeless, the appellant may lack standing to

appeal orders affecting the size of the bankruptcy estate. See Duckor Spradling

& Metzger v. Baum Tr. (In re P.R.T.C., Inc.),

, 778 n.2 (9th Cir. 1999);

In re Fondiller,

. But Mr. Aframian presupposes that the

bankruptcy court was correct in its rulings on the MSJ and the Settlement and

Sale Motion. If we were to reverse the MSJ Order, thereby disallowing

18 SMDL/T2's claims totaling $6 million, as well as the Settlement and Sale Order,

and accept Appellants' $3.8 million valuation for the Property as possible, then

there might be a surplus upon a sale. And this could be true even if Mr.

Aframian's senior lien remained at $1.275 million and property tax claims are

$200,000. Notably, neither Mr. Aframian nor Trustee stated how much

administrative expenses are to date. Accordingly, for these reasons, we decline

to dismiss these appeals on appellate standing grounds.

B. Mootness

We lack jurisdiction over a moot appeal. In re Ellis,

.

SMDL/T2 appear to argue that the appeal of the MSJ Order is constitutionally

moot, and that the appeal of the Settlement and Sale Order is both statutorily

and equitably moot. "The party moving for dismissal on mootness grounds

bears a heavy burden." Motor Vehicle Cas. Co. v. Thorpe Insulation Co. (In re

Thorpe Insulation Co.),

(9th Cir. 2012) (citation omitted); United

States v. Gould (In re Gould),

(9th Cir. BAP 2009), aff'd,

(9th Cir. 2010).

1. The MSJ Order is not constitutionally moot.

An appeal becomes constitutionally moot "when, by virtue of an

intervening event, a court of appeals cannot grant any effectual relief whatever

in favor of the appellant." Calderon v. Moore,

(1996) (cleaned

up). The Constitution requires that "an actual controversy be extant at all

stages of review." Campbell-Ewald Co. v. Gomez,

(2016)

(cleaned up). SMDL/T2 argue that the appeal of the MSJ Order is

19 constitutionally moot because the adversary proceeding was dismissed with

prejudice, and so there is no longer a live case or controversy. This argument

lacks merit. The MSJ was dismissed because the Agreement required it, and

SMDL/T2's additional argument that the dismissal with prejudice makes it

impossible for us to reverse the MSJ Order ignores the Panel's power to reverse

the MSJ Order, as well as the Settlement and Sale Order, and find in favor of

Appellants on SMDL/T2's claims. While dismissal might be what Appellants

wanted in the adversary proceeding, which SMDL/T2 contend precludes

Appellants' ability to challenge it, Appellants sought to defeat SMDL/T2's

proofs of claim. Therefore, the appeal of the MSJ Order is not constitutionally

moot.

2. The Settlement and Sale Order is not statutorily moot and we decline to consider if it is equitably moot.

SMDL/T2 argue that the appeal of the Settlement and Sale Order is

statutorily moot because Appellants did not obtain a stay, the bankruptcy

court found that SMDL/T2 were good faith purchasers entitled to the

protections of § 363(m), and the sale has closed. We disagree.

Section 363 authorizes a trustee to sell property of the estate. Under

§ 363(m), when "a sale of assets is made to a good faith purchaser, it may not

be modified or set aside unless the sale was stayed pending appeal." Paulman

v. Gateway Venture Partners III, L.P. (In re Filtercorp, Inc.),

(9th

Cir. 1998) (citing § 363(m)). But several exceptions exist to the statutory

mootness rule. One exception is for appeals questioning whether the buyer

purchased the property in good faith. In re Fitzgerald,

(citing Sw. 20 Prods., Inc. v. Durkin (In re Sw. Prods., Inc.),

(9th Cir. BAP

1992)). Indeed, Appellants attack the good faith finding on appeal, which we

address below. If we reverse on this point, we could examine the sale itself. See

Ferrari N. Am., Inc. v. Sims (In re R.B.B., Inc.),

(9th Cir. 2000).

SMDL/T2 additionally argue that the appeal of the Settlement and Sale

Order is equitably moot because the sale has closed, money was paid, liens

were released, adversary proceedings were dismissed, and the Property has

been transferred from SMDL/T2 to a third party. We may dismiss an appeal if

we deem it equitably moot. Clear Channel Outdoor, Inc. v. Knupfer (In re PW,

LLC),

(9th Cir. BAP 2008). Because we affirm the bankruptcy

court's decision on the merits, we decline to reach the question of equitable

mootness. See Harkey v. Grobstein (In re Point Ctr. Fin., Inc.),

, 1002

(9th Cir. 2020) (circuit panel declining to exercise its discretion to consider if

appeal was equitably moot since it was affirming the district court's ruling on

the merits).

C. The bankruptcy court did not clearly err in finding that SMDL/T2 were good faith purchasers under § 363(m).

A good faith purchaser is "one who buys in good faith and for value."

Ewell v. Diebert (In re Ewell),

(9th Cir. 1992) (cleaned up).

Typically, a lack of good faith is shown by "fraud, collusion between the

purchaser and other bidders or the trustee, or an attempt to take grossly unfair

advantage of other bidders." Adeli v. Barclay (In re Berkeley Del. Ct., LLC),

(9th Cir. 2016) (quoting In re Filtercorp, Inc.,

).

The relevant focus of inquiry is good faith during the course of the sale 21 proceedings. Cmty. Thrift & Loan v. Suchy (In re Suchy),

(9th

Cir. 1985).

The bankruptcy court found that the sale of the Property to SMDL/T2

was not the result of fraud, collusion, or coercion, but was the result of three

years of litigation involving zealous advocacy on all sides and extensive arm's-

length, good faith negotiations. These findings were supported by declarations

from Trustee and SMDL/T2's principal, Mr. Weintraub.

Appellants argue that the bankruptcy court erred in finding that

SMDL/T2 were good faith purchasers because the sale process was tainted.

Specifically, they contend SMDL/T2 sabotaged the marketing and sale process

by filing baseless claims and litigation against Debtor and claiming that Debtor

was liable for the alleged removal of lateral or subjacent support for

SMDL/T2's properties by a previous owner. Appellants argue that SMDL/T2's

unsupported claims were used to leverage a grossly inadequate sales price.

The bankruptcy court rejected these arguments, finding that its denial of

summary judgment for Appellants demonstrated that SMDL/T2's claims

against Debtor were neither baseless nor unsupported. Precisely, the court

found that, while SMDL/T2's claims might not be as strong as they thought,

this did not affect their good faith.

Further, successor liability based on the removal of lateral or subjacent

support was not SMDL/T2's only theory of liability. They also asserted a

continuing nuisance theory based on the landslide, and argued that the

retaining walls and Debtor's failure to repair them created a dangerous

22 artificial condition. Under California law, even if the defendant did not create

the nuisance, it may still be liable if it knew of the nuisance and did nothing to

abate it. Both the parties who maintain the nuisance and who create the

nuisance are responsible for the ensuing damages. City of L.A. v. San Pedro Boat

Works, No. CV 02-7986 ABC (JWJx),

, at *10 (C.D. Cal. Apr.

28, 2008) (citing cases), aff'd,

(9th Cir. 2011);

In addition, under § 366 of the Restatement (Second) of Torts, Debtor

as successor owner could be liable for ongoing damages if, as asserted by

SMDL/T2, the retaining walls are a dangerous artificial condition.5 For these

reasons, the bankruptcy court correctly rejected Appellants' claim that

SMDL/T2's claims were used to impair Trustee's ability to sell the Property

and leverage a grossly inadequate sale price.

Appellants also argue that the bankruptcy court erred in finding that

SMDL/T2 were good faith purchasers, because SMDL/T2 misled the court

regarding the stability of Debtor's retaining walls in order to obtain a vastly

discounted sale price. Appellants argue that SMDL/T2 claimed in opposition

4

provides: "Every successive owner of property who neglects to abate a continuing nuisance upon, or in the use of, such property, created by a former owner, is liable therefor in the same manner as the one who first created it." 5 Section 366 of the Restatement (Second) of Torts provides an exception to the

general rule of successor liability, when the successor owner knowingly takes possession of real property upon which an unreasonably dangerous structure or artificial condition exists, without the consent of those affected by it, and the owner has failed after a reasonable opportunity to make it safe or protect such persons against it. Appellants are incorrect that California does not recognize this exception. The court simply did not apply it in Lee v. Takao Building Development Co.,

(1985), because an artificial condition was not the basis for plaintiff's claim. 23 to the MSJ that Debtor's retaining walls were unstable, but then withheld from

the court and Appellants the October application which presupposed the

stability of the retaining walls. This is a red herring. The bankruptcy court

properly rejected these arguments when Appellants raised them in their

reconsideration motion. This information was available to Appellants before

the hearing had they requested it, and even without the October application,

SMDL/T2's expert addressed the same soil nails/Tecco mesh repair identified

in the October application in his declaration in support of SMDL/T2's response

to CTPC's overbid. Further, SMDL/T2's expert opined that the soil nails/Tecco

mesh repair did not depend on the stability of the retaining walls. As the

bankruptcy court found, the October application and dueling expert opinions

simply confirmed its reasons for entering the MSJ Order and the Settlement

and Sale Order in the first place.

Therefore, because Appellants did not obtain a stay, and the bankruptcy

court's finding of good faith under § 363(m) is supported by the record and

was not clearly erroneous, we are unable to reach the merits of the sale portion

of the Settlement and Sale Order or undo the sale, which is the relief

Appellants seek.

D. The bankruptcy court did not abuse its discretion in approving the settlement portion of the Settlement and Sale Motion, nor did it err in denying the MSJ.

Rule 9019 allows the bankruptcy court to approve a compromise or

settlement. The bankruptcy court has great latitude in approving a

compromise or settlement under Rule 9019. Goodwin v. Mickey Thompson Ent.

24 Grp., Inc. (In re Mickey Thompson Ent. Grp., Inc.),

(9th Cir. BAP

2003). Even so, the compromise must be fair and equitable, in the best interests

of the estate, and reasonable.

Rather than conduct an exhaustive

investigation or a mini-trial on the merits of the claims sought to be

compromised, the court's role is to "canvas the issues and see whether the

settlement falls below the lowest point in the range of reasonableness." In re

Pac. Gas & Elec. Co.,

(Bankr. N.D. Cal. 2004) (citations

omitted); see also Burton v. Ulrich (In re Schmitt),

(9th Cir. BAP

1997).

In determining whether a proposed compromise is fair, reasonable, and

adequate, the bankruptcy court must consider: (1) the probability of success in

the litigation; (2) the difficulties, if any, of collection; (3) the complexity of the

litigation involved, and the expense, inconvenience, and delay necessarily

attending it; and (4) the paramount interest of the creditors and a proper

deference to their reasonable views in the premises. In re A & C Props.,

.

Despite the multifaceted settlement, Appellants contest only Trustee's

settlement with SMDL/T2. They argue that the bankruptcy court erred by

concluding that SMDL/T2's claims were potentially viable and they should not

have been considered in the A & C Properties analysis. Basically, Appellants'

argument is that the bankruptcy court misapplied the law on SMDL/T2's

claims on summary judgment, so therefore these claims should never have

25 been considered for, nor a part of, any settlement. 6

Here, the bankruptcy court amply considered the A & C Properties factors

and did not err in applying them to ultimately determine that the settlement

was reasonable, fair, and equitable and in the best interests of the estate. While

Trustee did not present evidence regarding the likelihood of success on the

SMDL/T2 claims, the court's thorough analysis of the claims in the context of

the summary judgment motion served that purpose. The court made detailed

findings as to each of the factors and those findings were not clearly erroneous.

As A & C Properties explained, "[t]he law favors compromise and not litigation

for its own sake, and as long as the bankruptcy court amply considered the

various factors that determined the reasonableness of the compromise, the

court's decision must be affirmed."

(citations omitted). We see

no abuse of discretion in the court's decision respecting the compromise, and

Appellants have not identified any.

Moreover, the bankruptcy court did not err in denying summary

judgment. The court carefully reviewed the record and considered the parties'

arguments and determined that disputed issues of material fact precluded

judgment in Appellants' favor. Summary judgment may only be granted

where there is no material factual dispute. See Civil Rule 56(a); Rule 7056; T.W.

6 Although Appellants spend a great deal of time discussing the legal standards for a compromise under Rule 9019, much of their argument goes to the sale of the Property and their contention that insufficient evidence existed as to its value and that the bankruptcy court lacked sufficient information to determine if Trustee received "optimal value" for it. Since the bankruptcy court's § 363(m) good faith finding is supported by the record, we are precluded from reviewing the merits of the sale. 26 Elec. Serv., Inc. v. Pac. Elec. Contractors Ass'n,

, 630 (9th Cir. 1987) (if

the trier of fact might resolve an issue of material fact in favor of the

nonmovant, summary judgment must be denied). SMDL/T2 asserted different

theories of liability and each required resolution of disputed facts, which

would likely only be resolvable with expert witnesses. The court did not make

any real findings or legal conclusions as Appellants suggest. Such

determinations could only be made after trial. We agree, and conclude that the

bankruptcy court did not err in denying the MSJ.

E. The bankruptcy court did not abuse its discretion in denying reconsideration.

Appellants moved for reconsideration under Civil Rules 59(e) and

60(b)(3), applicable here by Rules 9023 and 9024. The bankruptcy court ruled

under only Civil Rule 59(e), presumably because the motion was filed within

14 days after entry of the MSJ Order and the Settlement and Sale Order.

Ultimately, the court found that no grounds warranted reconsideration of

either order.

Relief to alter or amend a judgment under Civil Rule 59(e) is appropriate

if the movant demonstrates: (1) a manifest error of law or fact; (2) intervening

change in the controlling law; or (3) newly discovered evidence that was not

available at the time of the original hearing. See Zimmerman v. City of Oakland,

(9th Cir. 2001). For relief under Civil Rule 60(b)(3), the

movant must prove that an order was obtained through fraud,

misrepresentation, or other misconduct that prevented the movant from fully

and fairly presenting its defense. Also, the fraud must not have been 27 discoverable with the exercise of due diligence. Casey v. Albertson's Inc.,

(9th Cir. 2004) (citations omitted).

Appellants argue that relief was warranted based on SMDL/T2's "bait

and switch" with the September application and the October application,

which they argue flatly contradicted any notion that Debtor's retaining walls

were defective or unstable, because the soil nails/Tecco mesh repair was only

possible if the walls were stable. Appellants argue that without any evidence

of defects in Debtor's retaining walls, the reason for the court to refuse to grant

summary judgment was eliminated, along with SMDL/T2's multi-million

dollar claims.

Ruling under Civil Rule 59(e), the bankruptcy court determined that the

October application was not "newly discovered evidence" because it was

available to them from the Commission before the January 25 hearing on the

MSJ and the Settlement and Sale Motion and the court's final ruling on

February 26. Alternatively, we conclude that at least the pertinent information

Appellants rely upon to make their point about the soil nails/Tecco mesh

repair and the walls' stability was available to them in SMDL/T2's expert's

declaration filed with SMDL/T2's response to CPTC's overbid, which was filed

on January 22. While that was only three days before the hearing, this evidence

was not newly discovered within the meaning of Civil Rule 59(e). See Feature

Realty, Inc. v. City of Spokane,

(9th Cir. 2003) (evidence in the

possession of the movant before the order was rendered is not "newly

discovered").

28 Appellants were also not entitled to relief under Civil Rule 60(b)(3), even

though the bankruptcy court did not deny relief on that basis. Although

SMDL/T2 should have provided the October application to Appellants, its

absence did not prevent them from fully and fairly presenting their defense,

because the pertinant information upon which they depend was available

before the hearing and the court's ruling. In addition, although Appellants

stress that the offending conduct need not be outcome determinative for relief

under Civil Rule 60(b)(3) – i.e., that the movant would have prevailed had the

offending conduct not occurred – the practical reality is that the information

regarding the soil nails/Tecco mesh did not necessarily resolve the retaining

wall issue in Appellants' favor and eliminate the need for trial, as the

bankruptcy court found. SMDL/T2's expert testified that this proposed repair

was not dependent upon the condition of the retaining walls. In other words, it

did not prove their stability or that they were not a dangerous artificial

condition.

Accordingly, the bankruptcy court did not abuse its discretion in

denying reconsideration of the MSJ Order or the Settlement and Sale Order.

CONCLUSION

For the reasons stated above, we AFFIRM.

29