In Re Crown Corporation, Debtor. Fred Doehring v. Crown Corporation

Appellant, Fred Doehring, appeals from a grant of summary judgment in favor of the bankrupt, Crown Corporation, (Crown) entered by the district court. The court held that Doehring forfeited his right to recover his $55,000 deposit as the successful bidder for one of Crown’s assets after he failed to complete the purchase. We conclude that the district court erred as a matter of law in ruling in favor of Crown and, accordingly, reverse and remand.

I.

In 1978 Crown was a debtor in possession in a Chapter XI bankruptcy proceeding before the district court. In an effort to reduce its outstanding debts, Crown negotiated the sale of one of its assets, the Sunset Village Apartments located in Seattle, Washington, to three individuals (buyers) for a price of $2,210,000. The final Purchase and Sale Agreement (the Agreement) provided for a $20,000 “Earnest Money Deposit” which buyers would forfeit as liquidated damages in case of default.

Crown then petitioned the district court, sitting in bankruptcy, to approve and confirm the sale of the property at the agreed purchase price, or at a higher price of not less than $2,300,000 net to the seller if offered through overbids at the…