In Re WDH Howell, LLC, et al.2003 U.S. Dist., a district court reversed a bankruptcy court order permitting a Section 363 sale “free and clear” of liens and interests, because the sale price was not greater than the face amount of the encumbering mortgage, i.e., the face amount of the debt secured by the mortgage.
The debtor obtained at auction a proposed sale price of $8.38 million for a property encumbered by a mortgage securing a debt of $11.88 million. The debtor contended that it lacked the cash flow necessary to service the mortgage and was unable to maintain the property, hence justifying its sale, and the bankruptcy court, satisfied, without other evidence, that the auction sale produced the best price, agreed with the debtor and approved the sale. The secured creditor appealed and the district court reversed.
