              United States Bankruptcy Appellate Panel
                          FOR THE EIGHTH CIRCUIT

                                    ______

                                 No. 01-6086WM
                                     ______

In re:                                *
                                      *
Payless Cashways, Inc.,               *
                                      *
         Debtor.                      *
                                      *
Steve Brink                           *
                                      *
         Appellant,                   *   Appeal from the United States
                                      *   Bankruptcy Court for the Western
               v.                     *   District of Missouri
                                      *
Payless Cashways, Inc.,               *
Congress Financial Corporation        *
Hillco Capital, L.P.                  *
                                      *
         Appellees                    *

                                    ______

                           Submitted: July 25, 2002
                            Filed: August 8, 2002
                                   ______

Before KRESSEL, SCHERMER and DREHER, Bankruptcy Judges.
                             ______

KRESSEL, Bankruptcy Judge.
      Steve Brink appeals from the bankruptcy court order1 approving the sale of real
property to him for $1.7 million. The price approved by the bankruptcy court was
$191,000 higher than Brink had previously bid under a non-judicial, sealed bid
procedure conducted by the debtor’s real estate broker. We affirm.

                                  BACKGROUND
      The material facts are not in dispute. The debtor filed a Chapter 11 petition on
June 4, 2001, and undertook to liquidate its real estate interests. As part of that
process, the debtor employed a real estate broker, Blaine McClelland. McClelland
decided to use a sealed bid procedure. This procedure was never subjected to court
review or approval, nor were creditors given notice or an opportunity to comment.

       The initial procedure required bids for the subject property to be submitted, in
the form of a contract, by August 9, 2001. Brink submitted a bid of $1,509,000 to
McClelland on August 7, 2001. McClelland told Brink on August 9, 2001, that he
was the highest bidder. However, McClelland also advised Brink that because of the
interest shown in the property, the debtor was going to send out additional bid
contracts and revise and extend the bid deadline to August 15, 2001. Brink submitted
a new bid of $1,509,900 and McClelland again informed Brink, on August 15, 2001,
that he was the high bidder. McClelland requested, and Brink provided, a deposit of
$25,000. Brink, without counsel, and Payless then negotiated and executed a sale
contract.

       It is undisputed that the sale contract clearly stated that it was subject to court
approval, and that Brink was aware of that requirement. Despite this knowledge, and
prior to any hearing to approve the sale, Brink unilaterally, and still without the
advice of counsel, undertook the expense of obtaining a Phase I environmental study


      1
        The Honorable Arthur B. Federman, Chief Judge, United States Bankruptcy
Court for the Western District of Missouri.
                                            2
of the property. He also unilaterally purchased furniture and fixtures located on the
subject property. At no point did Brink ever attempt to obtain any bid protection
provisions in his agreement with Payless.

      Apparently, on or about September 10, 2001, Silverman Consulting, Inc, was
appointed as Chapter 11 trustee.2 The trustee filed a motion to approve the sale to
Brink, together with several other pending sales, and gave notice of the motion on
September 12, 2001. Pursuant to a standing order, all parties in interest had 10 days
in which to object. Objections to the motion were filed by the official committee of
unsecured creditors and by one of the debtor’s primary lenders, Congress Financial
Corporation. Brink admitted that he did not review the debtor’s sale motion, nor did
he make any effort to determine if objections to the proposed sale were filed.

       A hearing on the sale motion was held on September 25, 2001. Brink did not
attend the hearing. At the hearing, the trustee announced to the court that it appeared
another bidder, S&D Developers, had made a higher and better bid than Brink.3 The
trustee suggested to the court that the court should hold an auction, either by phone
that day or at a later date. When contacted, Brink objected to the court holding an
auction (taking the position that he had a final purchase contract). Brink further

      2
         We say “apparently” because such an appointment has not been made a part
of the record and the trustee has not been made a party to or otherwise participated
in this appeal, as we would have expected. If there is a trustee, it is the party in
interest, not the debtor. Since the parties have ignored the existence of the trustee and
its interest in this appeal, and because our decision is consistent with the interest of
any such trustee, we will proceed in the trustee’s absence.
      3
         S&D’s bid was $1,501,000 for the property, $8,000 less than Brink’s bid.
But, in addition, S&D offered to pay the debtor’s real estate broker’s commission and
the state transfer taxes; costs which Brink did not offer to pay. This allegedly
increased S&D’s bid to $1,548,000, apparently making it higher than Brink’s bid.
The bankruptcy court found it unnecessary to rule on whether S&D’s bid was higher
since the court determined that a judicial auction should be held.
                                           3
indicated that he wished to retain an attorney and did not want to proceed by phone
that day. Therefore, the bankruptcy court continued the hearing on the motion to
October 2, 2001.

       On October 2, 2001, the court first held an evidentiary hearing to determine
whether to proceed with the judicial auction. The court took extensive testimony and
evidence. Brink took the position that, although his contract was subject to court
approval, his expectations rose to the level that he had a binding deal that could only
be upset if the bid price was shown to be grossly inadequate or there were
“irregularities” in the process. Brink testified that McClelland advised him that the
sale was subject to bankruptcy court approval, and he further stated that he
understood that the sale was contingent upon bankruptcy court approval. Brink also
acknowledged that the sale contract stated that it was subject to court approval.
Nonetheless, he testified that his understanding, from speaking with McClelland, was
that the court might not approve the sale if it was for less than fair value, but
regarding the bidding process, the sale to him was a “done deal.” The broker’s
testimony disputed this version. McClelland stated that he informed Brink both of
the need for bankruptcy court approval and that it was possible another potential
bidder could appear at the hearing to challenge the sale to Brink. The bankruptcy
court found that Brink should have understood, “if nothing else, then from the
documents that the process was subject to court approval.”

      Applying the Eighth Circuit Court of Appeals case Food Barn,4 the bankruptcy
court made detailed findings, and determined that “the most appropriate thing to do
consistent with Food Barn [wa]s to rebid the matter.” The court then held an auction
in open court. Competing, countering bids were received from Brink and S&D.
Eventually, Brink submitted the highest bid of $1.7 million, which the court


      4
       Four B. Corp. v. Food Barn Stores, Inc., (In re Food Barn Stores, Inc.), 107
F.3d 558 (8th Cir. 1997).
                                          4
approved. The court allowed Brink to escrow the difference between his auction bid
and sealed bid pending the outcome of this appeal. Brink’s bid at the judicial auction
was $191,000 higher than the broker’s sealed bid procedure would have realized.

      Brink alleges that the court committed errors of law by: (1) holding a “second
auction” after the debtor had conducted a non-judicial, sealed bid auction wherein
Brink alleges he submitted the highest bid5; and (2) holding a second auction after the
debtor had signed a contract to sell the property to Brink. As set forth below, Brink’s
arguments are without merit.



                                   DISCUSSION
                                 Standard of Review
      We review the bankruptcy court’s factual findings for clear error and its
conclusions of law de novo. Blackwell v. Lurie (In re Popkin & Stern), 223 F.3d 764,
765 (8th Cir. 2000); Wendover Fin. Servs. v. Hervey (In re Hervey), 252 B.R. 763,
765 (B.A.P. 8th Cir. 2000). We will reverse matters committed to the bankruptcy
court’s discretion only if the bankruptcy court abused its discretion. See Four B.
Corp. v. Food Barn Stores, Inc., (In re Food Barn Stores, Inc.), 107 F.3d 558, 562
(8th Cir. 1997).

                                    Food Barn
      The parties agree that this case is governed by Food Barn.6 Brink disputes
whether the bankruptcy court properly applied Food Barn. The cause of this dispute
arises primarily from Brink’s misreading of Food Barn and complete
misunderstanding of the proper standard to be applied under these circumstances.


      5
        Whether Brink’s bid was the highest was disputed, but it is not necessary to
resolve and is not an issue on appeal.
      6
          107 F.3d 558.
                                          5
       In Food Barn, the Eighth Circuit Court of Appeals held that, in determining
whether to “re-open” bidding, a bankruptcy court should employ a “sliding scale
approach” where “the importance of estate enhancement diminishes as an auction
participant’s reasonable expectations, and the gravity of finality, increase.” Food
Barn, 107 F.3d at 565 (emphasis added). Up to the point where the court actually
enters an order confirming the sale, the Eighth Circuit recognized that a bankruptcy
court has broad discretion to accept or reject bids and to conduct sales or auctions in
the manner deemed most appropriate by the court. See id. at 565-67; see also Wintz
v. Am. Freightways, Inc., (In re Wintz Cos.), 219 F.3d 807, 812 (8th Cir. 2000)
(reiterating that “bankruptcy courts have wide discretion in structuring the sales of
estate assets”).

         Brink does not dispute the court’s findings of fact. Instead, he disputes the
court’s application of the law, essentially arguing that the court lacked the discretion
to reject a bid obtained through a non-judicially approved bid procedure developed
by a broker. Brink argues that his expectations rose to the level of finality of the sale
and that the court therefore had no discretion to conduct an auction because there was
“no evidence of a grossly inadequate price or fraud in the conduct of the proceeding
. . . .” However, the “grossly inadequate price or fraud” standard is not applicable to
the situation here, where there was no judicially approved sale. Brink’s entire appeal
is predicated upon a legal standard that is totally inapplicable in this case. Further,
to the extent that Brink believed he had a “done deal,” his expectations, as found by
the bankruptcy court, were not reasonable since, as stated by the court, he should
have at least realized through the documents, including the sale contract, that the sale
was contingent upon court approval.

       The standard which Brink wants applied is the standard used by courts where
a party seeks to re-open bidding following a judicially approved auction or sale. See
Food Barn, 107 F.3d at 564-65 (and cases cited therein); In the Matter of Chung



                                           6
King, Inc., 753 F.2d 547, 549-550 (7th Circuit 1985).7 As the Eighth Circuit stated
in explaining its sliding scale approach:

             At some point, such as when the court actually enters an
             order approving the sale, expectations become sufficiently
             crystallized so as to render it improper to frustrate
             anticipated results except in the limited circumstances
             where there is a grossly inadequate price or fraud in the
             conduct of the proceeding.

Food Barn, 107 F.3d at 565 (emphasis added); see also Chung King, 753 F.2d at 549-
550 (discussing the bankruptcy court’s lesser discretion to set aside an order
confirming a sale).

       In this case, the bidding procedure was a procedure developed by the debtor’s
broker. It was never subjected to court review, and never noticed to creditors and
other parties in interest. To argue that the bankruptcy court had no discretion to hold
an auction in the face of a competing higher bid, based upon Brink’s perception that
he had a final contract with the debtor, is wrong and unsupported by any case law.
The findings of the bankruptcy court included: (1) that the broker-conducted auction
was not conducted by the court nor approved by the court; (2) the contract stated it
was subject to court approval and Brink knew this; (3) that the standing order in the
case allowed parties ten days in which to object to the sale motion and two parties
did, in fact, object; (4) Brink should have understood, if nothing else, then from the
documents, that his bid was subject to court approval; (5) there was some question


      7
          We are baffled by Brink’s reliance on Chung King, and similar cases, as
supposed examples of cases wherein courts have refused to re-open bidding where
the initially approved price was obtained in a “non-judicial” setting. Chung King
clearly involved an attempt to re-open bidding following a bankruptcy court order
approving a sale. See Chung King, 753 F.2d at 548-49.
                                          7
as to whether Brink’s bid was, in fact, the highest and best bid; and (6) Brink should
have been aware of the possibility of a higher bid as he had some notice of this from
the debtor’s broker. The bankruptcy court committed no error in making these
findings. Although Brink undoubtedly had some inchoate expectation to purchase the
property for his original bid, the bankruptcy court did not abuse its discretion in
finding that this expectation did not rise to a level warranting an approval of his bid
without conducting a judicial auction. See Food Barn, 107 F.3d at 566-67.

       Further, Brink unilaterally took a risk in proceeding with the environmental
study and in purchasing the furniture and fixtures. He did so despite his knowledge
that the contract was subject to court approval, and that no such approval had yet been
received. His unilateral actions do not rise to a level where his expectations outweigh
the creditors’ interests in maximizing the benefit to the estate. Moreover, since Brink
ultimately did succeed in purchasing the property, he benefitted from his premature,
unilateral actions and cannot demonstrate any detrimental reliance regarding what the
broker may have told him.

      Brink also argues that the court erred as a matter of law in holding the judicial
auction since the debtor signed a “final contract” with Brink committing to sell the
property to him. This argument is utterly without merit.

       First, Brink failed to include the contract in question in the record on appeal.
As a reviewing court, we cannot determine whether a bankruptcy court committed
clear error in its factual findings where the parties fail to provide the factual record.
See Hervey, 252 B.R. at 767.

      Second, the bankruptcy court correctly determined that the contract was subject
to court approval, and Brink admitted that the contract specifically stated this
contingency. Regardless of whether the contract contained this statement, the sale of



                                           8
the bankruptcy estate’s property was clearly subject to court approval under the
express terms of the Bankruptcy Code. See 11 U.S.C. § 363(b).

       Finally, the only case Brink cites in support of this argument, In re Table Talk,
Inc., 53 B.R. 937 (Bankr. D. Mass. 1985), is inapplicable and distinguishable. In
Table Talk, the bankruptcy court upheld a bargained for contractual right of first
refusal provided to the original bidder, which right had not received prior court
approval. See id. Upholding this right did not mean that the bidder was able to
purchase the property for his original bid, it merely allowed him to match a
subsequent higher offer. When the second bidder wished to increase his bid, the
court rejected it finding that the original bidder should have the benefit of its
bargained for right of first refusal. See id. at 942-44. No such bid protection
measures are at issue here. Moreover, the bankruptcy court committed no error in
noting that Table Talk is a Massachusetts case, whereas the court here was bound by
the Eighth Circuit’s Food Barn decision, which allows a court more discretion and
flexibility.

                                   CONCLUSION
        The bankruptcy court was presented with objections to Brink’s non-judicially
obtained bid and with a potentially higher bid from S&D. The court did exactly what
the Court of Appeals in Food Barn said it should do. The court’s findings of fact
were not erroneous, and we hold that the bankruptcy court did not abuse its discretion
in determining to conduct a judicial auction. The judgment of the bankruptcy court
is affirmed.

      A true copy.

             Attest:

                     CLERK, U.S. BANKRUPTCY APPELLATE
                     PANEL, EIGHTH CIRCUIT.

                                           9
