A recent decision from the U.S. Court of Appeals for the Fifth Circuit showed considerable deference to the bankruptcy court’s finding concerning the good faith purchaser status of a lender affiliated with the debtor that acquired real property via bidding its debt as the consideration under a  §363 sale over the objection of a construction lienor. SR Construction, Incorporated v. Hall Palm Springs L.L.C. (In re Palm Springs II, L.L.C.), No. 21-11244 (5th Cir April 17, 2023).

Based on its holding, the circuit court affirmed dismissal of an appeal of the sale as statutorily moot under  §363(m) of the Bankruptcy Code. The lender was an affiliate of the debtor, the lender selected the management of the debtor, and the real estate broker running the bankruptcy sale process, all while retaining a veto over the sale.

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