1. THE MILLERS REQUEST BOND PENDING APPEAL- At a hearing on March 18, 1998, the Millers orally requested a stay pending appeal. They suggested that the posting of a $400,000 bond would be appropriate. The debtors asked for a bond no less than $609,000 plus accruing interest and probable costs. The court denies the request (see, Part 2 of this decision), and, if ordered to set a bond by a higher court, sets the bond at $550,000 (see, Part 3).

2. THE COURT DENIES A BOND PENDING APPEAL- The stay requests the court enjoin the completion of a sale of real property to the National Bank of Alaska (NBA) under 11 USC § 363(b).

The court must analyze the Millers' right to the stay or injunctive relief pursuant to FRBP 8005. Such a stay is not a matter of right, but is subject to the bankruptcy court's discretion. Colliers on Bankruptcy, ¶ 8005-03 indicates:

5 ABR 173      While Rule 8005 regulates the matter of stays pending appeal, it must be read with Bankruptcy Rule 7062, which regulates the power of the bankruptcy courts to grant stays and injunctions. This is because the first sentence of Rule 8005 directs that a motion for a stay pending appeal "must ordinarily be presented to the bankruptcy judge in the first instance." Bankruptcy Rule 7062, not Bankruptcy Rule 8005, regulates the grant of a stay or injunction by the bankruptcy judge. Rule 8005 directs the appellant first to seek relief from the bankruptcy judge; it then provides the procedure to be followed in the district court or appellate panel if relief is denied by the bankruptcy judge.

The provisions of Bankruptcy Rule 7062 are discussed at length in Chapter 7062. Briefly stated however, under the terms of Rule 7062, an appellant may obtain a stay of a judgment pending appeal by filing a supersedeas bond in a sum satisfactory to the bankruptcy court. In most cases, a stay is available as of right, subject only to the condition that a satisfactory bond be filed. There are, however, important exceptions. A stay is not available as of right pending an appeal from:

. . . .

• an order authorizing or prohibiting the use of cash collateral or the use, sale or lease of property of the estate under section 363; ....

Stays pending appeals from such orders are discretionary with the bankruptcy court [footnotes omitted].

See, also, FRBP 7062, FRCP 62, and Colliers on Bankruptcy, ¶ ¶ 7062.05 and .06 regarding the discretion of the court with respect to granting stays in cases involving injunctive relief, and stays as a matter of right.

The issuance of an order under Rule 62(c) is within the discretion of the court. The standard to be applied in determining whether to issue such an order has been likened to the standards for issuing a preliminary injunction. Four factors are considered by the court: (1) the likelihood that the appellant will prevail on the merits of the appeal; (2) irreparable injury to the appellant unless the stay is granted; (3) the likelihood of substantial harm to appellee and other interested persons; and (4) the likelihood of harm to the public interest. Slight variations in these standards or their enunciation may exist among the various judicial circuits and the standard applicable in 5 ABR 174      the appropriate circuit should be consulted [ footnote omitted] .

In the 9^th Circuit, there is a primary and alternative test regarding whether or not to enter a preliminary injunction. See, American Motorcyclist Assoc. v Watt, 714 F2d 962, 965 (9^th Cir 1983):

We recognize two sets of standards for evaluating claims to injunctive relief, which we have termed the "traditional" and the "alternative" tests. The traditional equitable criteria for determining whether an injunction should issue are (1) Have the movants established a strong likelihood of success on the merits; (2) does the balance of irreparable harm favor the movants; (3) does the public interest favor granting the injunction?

The "alternative" test permits the moving party to meet its burden by demonstrating either a combination of probable success and the possibility of irreparable injury or that serious questions are raised and the balance of hardships tips sharply in its favor [ internal citation omitted] .

The debtors stand to lose substantial value if the NBA deal is torpedoed, as much if not more than the Millers. For these reasons, the request for a bond staying the sale to NBA is denied. The likelihood of there actually being profits to share is uncertain to begin with. This property has been held for over a decade awaiting development.

3. AMOUNT SET FOR BOND, IF ONE IS ORDERED BY A HIGHER COURT- If the decision to deny a stay pending appeal is overruled and a higher court requests this court to set a bond amount, the court sets that amount at $550,000. The Millers suggested that the amount be $400,000, and the debtors asked for something closer to $700,000. The court determines that a bond in the amount of $550,000 is appropriate.

5 ABR 175      At oral argument, the court determined this amount by using the value of Tract A-1, $400,000, plus approximately $100,000 lost in the National Bank of Alaska (NBA) probable foreclosure of the 96 acres and 3 separate lots, and $50,000 for probable costs of appeal.

In making this analysis, the court did not focus on the $115,600 value of Tract B, which was later discussed in relationship to the right of first refusal issue. This was discussed after the argument on the bond amount. Additionally, the Millers agreed the $400,000 amount could be raised to $451,600.

Nonetheless, the court will stick with the $550,000 based on its inference that NBA and possibly the Millers feel that Tract B at $115,600 is undervalued and, at least the Millers, feel that Tract A-1 at $451,000 is about $200,000 overvalued. These figures are net of real property taxes in the amount of $50,000, owed to the Municipality of Anchorage to reacquire the properties from foreclosure. Giving effect to all this, the court feels that $550,000 is the approximate amount necessary to protect the debtors' estates in the event of an unsuccessful appeal by the Millers.

DATED: March 18, 1998

HERBERT A. ROSS
U.S. Bankruptcy Judge