Wintz v. American Freightways, Inc.

The Wintz Companies (WCo) (debtor) owned a long-term leasehold interest in a truck terminal facility (the leasehold interest). In December 1995, WCo transferred the leasehold interest to Wintz Properties, Inc. (WP) (plaintiff). WCo filed for Chapter 11 bankruptcy in August 1997. WCo’s Chapter 11 bankruptcy trustee (the trustee) filed an action to invalidate the transfer of the leasehold interest from WCo to WP on the grounds of actual and constructive fraud. The bankruptcy court set aside the transfer and recovered the leasehold interest for the bankruptcy estate. The trustee then solicited offers to purchase the leasehold interest; the highest bidder was American Freightways, Inc. (AFI) (defendant). The sale contract included a last-look provision stating that if there was an objection to the sufficiency of the proposed purchase price, then AFI would have the right to match the objector’s higher bid. The trustee petitioned the bankruptcy court to approve the sale, and the bankruptcy court approved the sale over WP’s objections. WP appealed, arguing that (1) the last-look provision rendered the sale procedurally defective because it chilled potential purchase offers and (2) the sale was procedurally defective because, provided that WP’s separate appeal challenging the bankruptcy court’s order vacating the transfer of the leasehold interest from WCo to WP was successful, the leasehold interest was not properly in WCo’s bankruptcy estate at the time it was sold to AFI. The trustee challenged, arguing that the last-look provision benefited the bankruptcy estate and that, pursuant to § 363(m) of the Bankruptcy Code, the sale of the leasehold interest to AFI was rendered final and unappealable upon approval by the bankruptcy court.