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Massachusetts Agencies



Section 363(m) of the Bankruptcy Code states:

The reversal or modification on appeal of an authorization under subsection (b) or (c) of this section of a 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.

The general rule of section 363(m) is that the failure of the Appellant to stay the subsection (b) bankruptcy sale to a "good faith" purchaser pending its appeal precludes appellate review of the Bankruptcy court's sales order upon which the subsection (b) sale was based. Absent a stay, the court must dismiss a pending appeal as moot because the court has no remedy that it can fashion even if it would have determined the issues differently.

Keep in mind, however, that Bankruptcy Rule 6004(g) seems to have changed this. It provides:

An order authorizing the use, sale or lease of property other than cash collateral is stayed until the expiration of 10 days after entry of the order, unless the court orders otherwise.

The rule leads to the conclusion that the default situation is exactly opposite to that previously in place, i.e., that the order now is stayed without any action on the part of the court and that for the statute's provisions to apply it is presently necessary for the court to enter an order lifting the stay.