In re: RUMSEY LAND COMPANY, LLC, Debtor.
RESOURCE LAND HOLDINGS, LLC; SORIN NATURAL RESOURCE PARTNERS, LLC; PUEBLO BANK AND TRUST COMPANY, LLC, Defendants - Appellees. RUMSEY LAND COMPANY, LLC, Plaintiff - Appellant,
from the United States District Court for the District of
Colorado (D.C. No. 1:16-CV-02117-CMA-SKC)
L. Wilcox, Wilcox Law Firm, LLC, Denver, Colorado for
Plaintiff - Appellant.
M. Rich, Minor & Brown, P.C., Denver, Colorado, and Sarah
B. Wallace, Ballard Spahr LLP, Denver, Colorado, (Andrew J.
Petrie, Ballard Spahr LLP, Denver, Colorado, with them on the
brief) for Defendants - Appellees.
HARTZ, SEYMOUR, and MATHESON, Circuit Judges.
MATHESON, CIRCUIT JUDGE.
appeal stems from a dispute involving land sold at a
bankruptcy auction. Rumsey Land Company, LLC
("Rumsey") owned a property subject to a first deed
of trust held by Pueblo Bank & Trust Company, LLC
("PBT"). In 2010, Rumsey filed for bankruptcy.
Resource Land Holdings, LLC ("RLH") offered to purchase the
property, but the bankruptcy court did not approve the sale.
Shortly thereafter, PBT purchased the property at a
bankruptcy auction. PBT then transferred the land to RLH.
2015, Rumsey discovered that during the bankruptcy
proceedings, RLH had entered a loan purchase agreement to
purchase PBT's interest in the property. The agreement
eventually led to litigation in state court between RLH and
PBT, which culminated with a settlement agreement allowing
RLH to purchase Rumsey's property from PBT for $4.75
believed the loan agreement, lawsuit, and settlement
influenced the price at its bankruptcy auction. It initiated
this adversarial proceeding in bankruptcy court against RLH
and PBT (collectively "Defendants"), alleging (1)
fraudulent concealment in violation of state law and (2)
collusive bidding activities in violation of 11 U.S.C. §
363(n). The case was transferred to federal district court,
which granted summary judgment to Defendants on both claims.
Exercising jurisdiction under 28 U.S.C § 1291 and §
1294(1), we affirm.
fraudulent concealment claim, we affirm summary judgment for
RLH on the alternative ground that RLH was not a party to a
business transaction with Rumsey and therefore had no duty to
disclose information. We affirm summary judgment for PBT
because Rumsey forfeited its arguments about PBT's duty
to disclose and has not argued plain error on appeal.
§ 363(n) collusive bidding claim, we distinguish between
Rumsey's alternative requests (1) to avoid the bankruptcy
sale and (2) for damages. As to the former, we affirm summary
judgment for Defendants on the alternative ground that the
claim was time-barred by the one-year limitations period in
Federal Rule of Civil Procedure 60(c)(1). As to damages, we
affirm summary judgment because Rumsey failed to demonstrate
a genuine dispute of material fact as to whether Defendants
intended to control the sale price at the bankruptcy auction.
a Colorado-based limited liability company, owned real
property in Evans, Elizabeth, and Nederland, Colorado. In
January 2010, it filed for bankruptcy in the United States
Bankruptcy Court for the District of Colorado. At the time it
filed for bankruptcy, Rumsey's holdings included a
property known as the Rumsey Farm ("the property"
or "the land"), which was encumbered by a first
deed of trust held by PBT.
RLH's Initial Attempts to Acquire the
March 2010, RLH attempted to purchase the property from
Rumsey. It discussed with Rumsey the possibility of buying
the PBT loan but ultimately offered to purchase the property
for $7, 484, 397.75.
April 2010, Rumsey filed a motion to approve the sale with
the bankruptcy court. Because three creditors objected, the
court denied the motion and instructed Rumsey to market the
property more broadly.
RLH and PBT's Loan Purchase Agreement and
RLH could not acquire the property from Rumsey directly, it
decided to pursue the possibility of purchasing the debt
Rumsey owed to PBT. On December 1, 2010, RLH signed a written
loan purchase agreement ("the loan purchase
agreement" or "the agreement") to purchase the
debt from PBT for $4.93 million. The agreement contained a
confidentiality provision prohibiting disclosure of the
agreement or its terms. The parties did not disclose the
agreement to Rumsey or to the bankruptcy court.
February 1, 2011, PBT refused to close on the loan purchase
agreement. On March 15, RLH sued PBT to enforce the
agreement. As explained below, this lawsuit eventually
settled. The parties did not inform Rumsey about the lawsuit.
Rumsey's Bankruptcy Auction
early March 2011, the bankruptcy court approved the sale and
notice procedures to auction the property. On March 31, 2011,
RLH submitted a $4 million stalking horse bid. The same day, PBT
submitted a credit stalking horse bid, which did not offer
new money but agreed to reduce Rumsey's debt by $5
million. Rumsey selected PBT's bid as the stalking horse.
after Rumsey selected PBT as the stalking horse bidder,
RLH's counsel e-mailed PBT regarding the pending lawsuit
with RLH. He noted that "[t]he indications that RLH has
received from [Rumsey's] marketing agent are that RLH was
the second place contender to be the stalking horse and no
other offers were really in the ball park." App. at 949.
He then added,
[PBT] and [RLH] may turn out to be the only two horses in
this race. If that should come to pass, there may be some
avenues for a consensual resolution of the disputes between
our clients . . . . Naturally, collusive bidding is
inappropriate and I'm not suggesting anything like that,
but the bankruptcy court might be a good forum for a global
Id. PBT's counsel responded that it did
"not want to create the appearance or impression of any
sort of impropriety or collusive bidding to which . . . some
other interested party could object pursuant to Section
363(n) of the Bankruptcy Code." Id. at 1019. It
therefore suggested that "until the auction and sale
process is concluded, . . . it would be unwise to engage in
any dispute resolution or settlement discussions, of any
nature, which may involve the property to be sold at the
auction or the underlying loan documents held by [PBT]."
11, 2011, Rumsey auctioned the property. RLH did not
participate in the auction. Confluence Resource Holdings, LLC
("Confluence") placed the winning bid.
25, 2011, Rumsey submitted a Proposed Sale Order, which
contained the following representation:
The Debtor and each Successful Bidder and the Back-Up Bidder
have fully disclosed all consideration to be given by each
Successful Bidder and the Back-Up Bidder and all other
agreements or arrangements entered into by each Successful
Bidder and the Back-Up Bidder in connection with the sale of
Id. at 963. RLH and PBT both received copies of the
Proposed Sale Order, but neither disclosed their loan
purchase agreement or lawsuit.
bankruptcy court entered the Proposed Order on June 17,
authorizing Confluence as the successful bidder and PBT as
the back-up bidder. In August, Confluence announced it would
not proceed with closing. As a result, Rumsey accepted
PBT's back-up bid.
Defendants' Settlement Agreement
September 13, 2011, RLH and PBT agreed to settle their
lawsuit. As part of their settlement, they agreed that after
PBT acquired the property through the bankruptcy sale, it
would sell the property to RLH for $4.75 million. On
September 20, the parties entered a contract formalizing this
Sale to PBT and Later Transfer to RLH
October 4, 2011, PBT moved the bankruptcy court to approve
transfer of the property from Rumsey to PBT. In the motion,
PBT represented that the property was "free and clear of
all liens, encumbrances, claims, and interests."
Id. at 1021. PBT provided a non-exhaustive list of
liens and encumbrances but did not disclose the loan purchase
agreement or settlement with RLH. The bankruptcy court's
proposed Supplemental Sale Order also did not mention the
loan purchase agreement, and it specified that "[t]he
acquisition of the Assets is undertaken by [PBT] without
collusion and in good faith." Id. at 1034. Both
RLH and PBT received copies of the Order, which the
bankruptcy court entered on October 6, 2011, thereby
transferring the property to PBT. On October 13, PBT conveyed
the property to RLH.
Discovery of Defendants' Loan Purchase Agreement
RLH never disclosed their loan purchase agreement, lawsuit,
or settlement to Rumsey, and Rumsey did not learn of the
agreement until 2015. Rumsey stated that "the
[agreement] and subsequent efforts to enforce it had the
effect of limiting RLH's bid to the amount agreed to by
RLH and PBT," and that it "would have objected to
credit bidding as a part of the sale process if it had known
of the [agreement]." Id. at 964.
following table summarizes the events described above.
Events Relating to Sale of The
Events Relating to Loan Purchase
Rumsey files for bankruptcy.
RLH offers to purchase the property for approximately
Bankruptcy court denies Rumseyâs motion to approve sale
RLH signs agreement to purchase debt from PBT for $4.93
PBT refuses to close on loan purchase agreement.
Bankruptcy court approves sale and notice procedures
for bankruptcy auction of the property.
RLH sues PBT to enforce loan purchase agreement.
RLH and PBT submit stalking horse bids. Rumsey selects
PBT as the stalking horse.
Rumsey auctions the property. Confluence places winning
Rumsey submits Proposed Sale Order specifying parties
have disclosed agreements related to the property.
Bankruptcy court enters Proposed Sale Order designating
Confluence as winning bidder and PBT as back-up bidder.
Confluence backs out of sale, leaving PBT as winning
RLH and PBT agree to settle lawsuit; parties agree that
PBT will transfer the property to RLH for $4.75
RLH and PBT enter contract formalizing settlement and
sale from PBT to RLH.
PBT files motion to transfer the property from Rumsey
to PBT. It represents that property is free of liens
and encumbrances and that acquisition of assets was
undertaken without collusion.
Bankruptcy court enters Supplemental Sale Order
transferring the property to PBT.
PBT transfers the property to RLH.
Adversarial Proceeding Against RLH and PBT
2015, Rumsey initiated an adversarial proceeding against
Defendants in bankruptcy court. Its complaint alleged
Defendants "entered into a secret collusive agreement
which had the effect of corrupting the bidding mechanism
approved by the Court." Id. at 442.
Specifically, Rumsey noted RLH initially offered to purchase
Rumsey Farm from it for approximately $7.5 million and later
agreed to purchase PBT's loan for $4.9
Rumsey alleged that the loan purchase agreement between RLH
and PBT was "[a] 'secret deal' [that] allowed
[RLH] to acquire the Rumsey Farm for a savings of $2.5
million based on the price that they originally bid" and
"deprived [Rumsey's] creditors of . . . $2.5
million." Id. at 443.
Bankruptcy Court Proceedings
bankruptcy court re-opened Rumsey's bankruptcy case, and
Rumsey filed an amended complaint asserting six causes of
action: (1) fraud on the court (against Defendants), (2)
violation of 11 U.S.C. § 363(n)'s prohibition of
collusive bidding activities (against Defendants), (3) breach
of contract (against PBT), (4) negligence (against
Defendants), (5) fraudulent concealment (against Defendants),
and (6) breach of the duty of good faith and fair dealing
(against PBT). On the § 363(n) claim, Rumsey requested
two alternative forms of relief: "that the Bankruptcy
Court avoid the sale" or "[i]n the alternative, . .
. that PBT and RLH be required to pay damages in the amount
by which the value of the property sold exceeds the price at
which such sale was consummated . . . ." Id. at
PBT filed separate motions to dismiss for failure to state a
claim. The bankruptcy court denied the motions, finding
Rumsey had "alleged facts supporting a conclusion"
that PBT and RLH "reached a secret understanding or
agreement regarding the sale of [Rumsey's] Assets, which
agreement improperly lowered the ultimate sale price."
Id. at 689. The court also found Rumsey
"alleged sufficient facts to support a conclusion that
the agreement between RLH and [PBT] controlled the bidding
price for the sale of the property. Id. at 691.