Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca9-13-36194/USCOURTS-ca9-13-36194-0/pdf.json

Parties Involved:
New Investments Inc

Pacifica L 51 LLC
Appellant

Document Text:

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

IN RE NEW INVESTMENTS, INC,

Debtor.

PACIFICA L 51 LLC,

Creditor-Appellant,

v.

NEW INVESTMENTS INC.,

Debtor-Appellee.

No. 13-36194

D.C. No.

13-10948-MLB

OPINION

Appeal from the United States Bankruptcy Court

for the Western District of Washington

Marc Barreca, Bankruptcy Judge, Presiding

Argued and Submitted May 3, 2016

Seattle, Washington

Filed November 4, 2016

Before: Susan P. Graber, Marsha S. Berzon,

and Mary H. Murguia, Circuit Judges.

Opinion by Judge Murguia;

Dissent by Judge Berzon

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2 IN RE NEW INVESTMENTS, INC.

SUMMARY*

Bankruptcy

The panel reversed the bankruptcy court’s order

confirming a debtor’s Chapter 11 plan of reorganization,

which proposed to cure the debtor’s default on a loan by a

payment that reflected a pre-default interest rate and

extinguished any other late penalties required under the loan

agreement.

A Chapter 11 plan may include a provision authorizing

the debtor to remedy any breach of a loan agreement with a

creditor and return to pre-default conditions. Great W. Bank

& Tr. V. Entz-White Lumber & Supply, Inc. (In re Entz-White

Lumber & Supply, Inc.), 850 F.2d 1338 (9th Cir. 1988), held

that a debtor that cures a default is entitled to avoid all

consequences of the default, including higher post-default

interest rates. The panel held that this rule of Entz-White,

allowing a curing debtor to avoid a contractual post-default

interest rate in a loan agreement, is no longer good law in

light of later-enacted 11 U.S.C. § 1123(d), which provides

that, if a plan proposes to cure a default, “the amount

necessary to cure the default shall be determined in

accordance with the underlying agreement and applicable

nonbankruptcy law.” The panel remanded the case for further

proceedings.

Dissenting, Judge Berzon wrote that neither 11 U.S.C.

§ 1123(d) nor any other provision of the Bankruptcy Code

* This summary constitutes no part of the opinion of the court. It has

been prepared by court staff for the convenience of the reader.

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IN RE NEW INVESTMENTS, INC. 3

provides a definition of “cure” contrary to the one announced

in Entz-White. Accordingly, Entz-White has not been

displaced. Judge Berzon would affirm the bankruptcycourt’s

order confirming the debtor’s plan of reorganization, which

reflects the pre-default interest rate included in the

promissory note.

COUNSEL

Dillon E. Jackson (argued) and Terrance J. Keenan, Foster

Pepper PLLC, Seattle, Washington; Stuart P. Kastner, Stuart

P. Kastner PLLC, Seattle, Washington; for CreditorAppellant.

Lawrence K. Engel (argued), Bellevue, Washington, for

Debtor-Appellee.

OPINION

MURGUIA, Circuit Judge:

In loan agreements—and any subsequent bankruptcy

proceedings—a borrower “defaults” on a loan when he fails

to fulfill a material obligation under the terms of the loan

agreement, such as making a payment by a particular date. A

default can trigger certain consequences, such as foreclosure

on any property securing the loan, late fees and penalties, or

“acceleration,” which occurs when the entire unpaid amount

of the loan becomes immediately due and payable. But the

borrower can also “cure” the default, most often by paying

the arrearages and bringing the loan current. A cure generally

allows the borrower to avoid the consequences of default,

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4 IN RE NEW INVESTMENTS, INC.

restores the loan to its original terms, and allows the borrower

to keep the property.

The Bankruptcy Code incorporates the concept of cure. 

Chapter 11 provides that a debtor’s plan of reorganization

must “provide adequate means for the plan’s

implementation,” including the “curing or waiving of any

default.” 11 U.S.C. § 1123(a)(5)(G). This statute means that

a plan of reorganization may include a provision authorizing

the debtor to remedy any breach of a loan agreement with a

creditor and return to pre-default conditions. Great W. Bank

& Tr. v. Entz-White Lumber & Supply, Inc. (In re Entz-White

Lumber &Supply, Inc.), 850 F.2d 1338, 1340 (9th Cir. 1988).

We held in Entz-White that a debtor who cures a default

“is entitled to avoid all consequences of the default—

including higher post-default interest rates.” Id. at 1342. In

other words, if a loan agreement provided for a higher, postdefault interest rate on arrearages in the event of default, a

debtor who “cures” is entitled to repay the arrearages at the

lower, pre-default interest rate. We concluded that “the

power to cure under the Bankruptcy Code authorizes a plan

to nullify all consequences of default, including avoidance of

default penalties such as higher interest,” even when the

terms of the loan agreement called for a higher interest rate

upon default. Id.

The case before us requires us to decide whether EntzWhite’s rule that a debtor may nullify a loan agreement’s

requirement of post-default interest remains good law in light

of 11 U.S.C. § 1123(d), a provision that Congress enacted

after Entz-White. Section 1123(d) provides that, if a plan

proposes to cure a default, “the amount necessary to cure the

default shall be determined in accordance with the underlying

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IN RE NEW INVESTMENTS, INC. 5

agreement and applicable nonbankruptcy law.” 11 U.S.C.

§ 1123(d). We hold that Entz-White’s rule of allowing a

curing debtor to avoid a contractual post-default interest rate

in a loan agreement is no longer valid in light of § 1123(d).

I.

New Investments, Inc. (“New Investments”) borrowed

$3,045,760.51 from Pacifica L 51, LLC’s (“Pacifica”)

predecessor in interest to purchase a hotel property in

Kirkland, Washington. The note, which was secured by a

deed of trust, provided for an interest rate of 8 percent. The

note also specifically provided that in the event of default, the

interest rate would increase by 5 percent.

New Investments defaulted on the note in 2009. When

Pacifica commenced non-judicial foreclosure proceedings,

New Investments filed for Chapter 11 bankruptcy. New

Investments’s plan of reorganization proposed to cure the

default by selling the property to a third party and using the

proceeds of the sale to pay the outstanding amount of the loan

at the pre-default interest rate. Pacifica objected to the plan

on the ground that, under the terms of the note, it was entitled

to be paid at the higher, post-default interest rate.

The bankruptcy court confirmed New Investments’s plan

over Pacifica’s objection and authorized the sale of the hotel

for $6,890,000. Of the sale proceeds, $2,830,877.28 would

be paid to Pacifica, reflecting the pre-default interest rate and

extinguishing any other late penalties. Anticipating an

appeal, the bankruptcy court ordered that $100,000 of the

proceeds be reserved for Pacifica’s attorney’s fees on appeal

and that $670,000 be set aside as a disputed claim reserve for

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6 IN RE NEW INVESTMENTS, INC.

Pacifica. Pacifica timely appeals from the confirmation

order.

II.

We have jurisdiction under 28 U.S.C. § 158(d), and we

review the bankruptcy court’s interpretation of bankruptcy

statutes de novo. Boyajian v. New Falls Corp. (In re

Boyajian), 564 F.3d 1088, 1090 (9th Cir. 2009). “When

construing the meaning of a statute, we begin with the

language of that statute.” Benko v. Quality Loan Serv. Corp.,

789 F.3d 1111, 1118 (9th Cir. 2015). “If the statutory text is

ambiguous, we employ other tools, such as legislative history,

to construe the meaning of ambiguous terms.” Id. “A party

contending that legislative action changed settled law has the

burden of showing that the legislature intended such a

change.” Green v. Bock Laundry Mach. Co., 490 U.S. 504,

521 (1989).

III.

Chapter 11 of the Bankruptcy Code provides that a plan

of reorganization must, among other things, “provide

adequate means for the plan’s implementation,” including the

“curing or waiving of any default.” 11 U.S.C.

§ 1123(a)(5)(G). In Entz-White, we observed that the

Bankruptcy Code did not define “cure.” 850 F.2d at 1340. 

We borrowed the Second Circuit’s definition: “A default is an

event in the debtor-creditorrelationship which triggers certain

consequences. Curing a default commonlymeans taking care

of the triggering event and returning to pre-default conditions. 

The consequences are thus nullified. This is the concept of

‘cure’ used throughout the BankruptcyCode.” Id. (alteration

omitted) (quoting Di Pierro v. Taddeo (In re Taddeo),

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IN RE NEW INVESTMENTS, INC. 7

685 F.2d 24, 26–27 (2d Cir. 1982)). We held that “the power

to cure under the Bankruptcy Code authorizes a plan to

nullify all consequences of default, including avoidance of

default penalties such as higher interest.” Id. at 1342. As a

result, a debtor whose plan proposed to cure a default would

allow him to avoid having to pay a higher, post-default

interest rate called for in the loan agreement.

Entz-White was decided in 1988. In 1994, Congress

amended § 1123 to add subsection (d). Pub. L. No. 103-394,

Title II, § 305, Oct. 22, 1994, 108 Stat. 4106. Subsection (d)

provides:

Notwithstanding subsection (a) of this section

and sections 506(b), 1129(a)(7), and 1129(b)

of this title, if it is proposed in a plan to cure

a default the amount necessary to cure the

default shall be determined in accordance with

the underlying agreement and applicable

nonbankruptcy law.

11 U.S.C. § 1123(d).

Subsection § 1123(d) renders void Entz-White’s rule that

a debtor who proposes to cure a default may avoid a higher,

post-default interest rate in a loan agreement. Subsection (d)

governs here because New Investments’s plan proposes to

cure a default. The underlying agreement—here, the

promissory note—requires the payment of a higher interest

rate upon default. And “applicable nonbankruptcy law”—

here, Washington state law—allows for a higher interest rate

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8 IN RE NEW INVESTMENTS, INC.

upon default when provided for in the loan agreement.1See

Wash. Rev. Code Ann. § 61.24.090(1)(a) (providing that a

borrower may cure a monetary default by paying the trustee

“[t]he entire amount then due under the terms of the deed of

trust and the obligation secured thereby, other than such

portion of the principal as would not then be due had no

default occurred”). In other words, under § 1123(d), “the

amount necessary to cure [New Investments’s] default” is

governed by the deed of trust and Washington law, which

respectively require and permit repayment at a higher, postdefault interest rate.

The plain language of § 1123(d) compels the holding that

a debtor cannot nullify a preexisting obligation in a loan

agreement to pay post-default interest solely by proposing a

cure. But even if we were to read ambiguity into the statute,

the legislative history would not help New Investments. The

House Report for the bill that became § 1123(d) states that

Congress was primarily concerned with overruling the

Supreme Court’s decision in Rake v. Wade, 508 U.S. 464

(1993). H.R. Rep. No. 103-835, at *55 (1994). Rake had

held that a Chapter 13 debtor who proposed to cure a default

was required to pay interest on his arrearages to a secured

creditor even if the underlying loan agreement did not

provide for such interest. 508 U.S. at 472. Congress viewed

this as an untoward result that allowed for “interest on

1

 We reject New Investments’s argument that Washington’s deed of

trust law cannot constitute “applicable nonbankruptcy law” under

§ 1123(d) because the Bankruptcy Code’s automatic stay would prevent

foreclosure under Washington law. See 11 U.S.C. § 362(a); Wash. Rev.

Code Ann. § 61.24.040. This reading would render the phrase “applicable

nonbankruptcy law” meaningless because the automatic stay would

always trump state law foreclosure provisions, contrary to the statutory

text and intent.

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IN RE NEW INVESTMENTS, INC. 9

interest payments” and provided an unbargained-for windfall

to creditors. H.R. Rep. No. 103-835, at *55. The House

Report states that § 1123(d) would “limit the secured creditor

to the benefit of the initial bargain with no court contrived

windfall.” Id. It further stated that it was “the Committee’s

intention that a cure pursuant to a plan should operate to put

the debtor in the same position as if the default had never

occurred.” Id.

The fact that Congress had a particular purpose in mind

when enacting a statute does not limit the effect of the

statute’s text, a principle Entz-White itself recognized. See

850 F.2d at 1341 (noting that a Senate Report for the bill that

became 11 U.S.C. § 1124 showed “only that the drafters in

the Senate were concerned primarily with defaults resulting

in acceleration; it does not show that they meant to confine

the section to that situation”). Rather, “[t]he fact that

Congress may not have foreseen all of the consequences of a

statutory enactment is not a sufficient reason for refusing to

give effect to its plain meaning.” Union Bank v. Wolas,

502 U.S. 151, 158 (1991). By its terms, § 1123(d) tells us to

look to the promissory note and Washington law to determine

what amount New Investments must pay to cure its default. 

Here, that analysis requires the payment of post-default

interest.

This result is further consistent with the intent of

§ 1123(d) because it holds the parties to the benefit of their

bargain. Moreover, the House Report’s statement “that a cure

pursuant to a plan should operate to put the debtor in the same

position as if the default had never occurred” is consistent

with the concept of cure generally, which § 1123(d) has not

altered or attempted to define. See Taddeo, 685 F.2d at

26–27 (“Curing a default commonly means taking care of the

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10 IN RE NEW INVESTMENTS, INC.

triggering event and returning to pre-default conditions. The

consequences are thus nullified.”).

What § 1123(d) affects is how a debtor returns to predefault conditions, which can include returning to a lower,

pre-default interest rate. In the traditional case, a borrower

who has defaulted on a loan obligation can cure the default by

paying arrearages. See Restatement (Third) of Property

(Mortgages) § 8.1(b) & cmt. c (1997); Wash. Rev. Code Ann.

§ 61.24.090(a)(1). This procedure allows the borrower to

avoid acceleration or foreclosure, which are some of the more

common consequences of default. See Restatement (Third)

of Property (Mortgages) § 8.1(a); Wash. Rev. Code Ann.

§ 61.24.090(a). However, the borrower does not effectuate a

cure merely by paying past due installments of principal at

the pre-default interest rate. Rather, the borrower’s cure

obligations may also include “late charges, attorneys’ and

trustee’s fees, and publication and court costs.” Restatement

(Third) of Property (Mortgages) § 8.1 cmt. c; see also Wash.

Rev. Code Ann. § 61.24.090(1)(b). It is only once these

penalties are paid that the debtor can return to pre-default

conditions as to the remainder of the loan obligation.

The common law treatment of cure is consistent with the

BankruptcyCode’s protections for creditors who would have

been entitled to receive accelerated payment on a defaulted

loan. For a debtor to render such a creditor “unimpaired” and

unable to object to the debtor’s plan, Platinum Capital, Inc.

v. Sylmar Plaza, L.P. (In re Sylmar Plaza, L.P.), 314 F.3d

1070, 1075 (9th Cir. 2002); 11 U.S.C. § 1126(f), the debtor

must cure the default but may not “otherwise alter the legal,

equitable, or contractual rights” of the creditor, 11 U.S.C.

§ 1124(2)(E). Here, one of those rights is post-default

interest, and New Investments’s cure may not alter that right.

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IN RE NEW INVESTMENTS, INC. 11

Consistent with § 1124(2), the debtor can return to predefault conditions, which can include a lower, pre-default

interest rate, only by fulfilling the obligations of the

underlying loan agreement and applicable state law. 

11 U.S.C. § 1123(d). By its terms, § 1123(d) requires that we

look to the “underlying agreement,” not only to the “predefault interest provisions” of the underlying agreement. To

read any such limitation into § 1123(d) would be “to add

specific language that Congress did not include in a carefully

considered statute.” Illinois v. Abbott & Assocs., Inc.,

460 U.S. 557, 572, (1983); see also United States v. Plaza

Health Labs., Inc., 3 F.3d 643, 649 (2d Cir. 1993) (“[W]e

cannot add to the statute what congress did not provide.”). 

Here, the note provided that upon default, the interest rate on

the loan would increase by 5 percent. Unfortunately for New

Investments, the increased interest rate applies to the entirety

of the note and not just to arrearages.

We are mindful that “[t]he principal purpose of the

Bankruptcy Code is to grant a fresh start to the honest but

unfortunate debtor.” Marrama v. Citizens Bank of Mass.,

549 U.S. 365, 367 (2007) (internal quotation marks omitted). 

And Congress wanted to protect debtors against unbargainedfor interest requirements in enacting § 1123(d). But the

Bankruptcy Code is not a purely remedial statute. Fla. Dep’t

of Revenue v. Piccadilly Cafeterias, Inc., 554 U.S. 33, 51

(2008). “Rather, Chapter 11 strikes a balance between a

debtor’s interest in reorganizing and restructuring its debts

and the creditors’ interest in maximizing the value of the

bankruptcy estate.” Id. If the loan agreement did not require

a higher, post-default interest rate, New Investments would

not have to pay it. However, today’s result holds New

Investments to its bargain by adhering to the terms of its loan

agreement with Pacifica, as required by § 1123(d).

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12 IN RE NEW INVESTMENTS, INC.

Both the text and the legislative history of § 1123(d) make

clear that the provision was intended to limit parties to the

benefit of their bargain when a debtor seeks to effectuate a

cure and return to pre-default conditions. The parties

bargained for a higher interest rate on the note in the event of

default, and Pacifica is entitled to the benefit of that bargain

under the terms of § 1123(d).

IV.

We conclude that Pacifica is entitled to receive payment

of the loan at the post-default interest rate. We therefore

reverse the decision of the bankruptcy court and remand for

further proceedings.

REVERSED and REMANDED.

BERZON, Circuit Judge, dissenting:

Neither 11 U.S.C. § 1123(d) nor any other provision of

the BankruptcyCode provides a definition of “cure” contrary

to the one this Court announced in Great Western Bank &

Trust v. Entz-White Lumber & Supply, Inc. (In re Entz-White

Lumber &Supply, Inc.), 850 F.2d 1338, 1340 (9th Cir. 1988). 

We are therefore bound by this Court’s precedent, according

to which New Investments may, in curing its default, pay the

pre-default interest rate contained in the promissory note.

Instead of abiding by our longstanding case law, the

majority concludes that Congress displaced Entz-White when

it passed § 1123(d). Because neither the text of the statute

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IN RE NEW INVESTMENTS, INC. 13

nor the legislative history of § 1123(d) support the majority’s

departure, I dissent.

I.

Chapter 11 requires that a debtor’s plan of reorganization

“provide adequate means for the plan’s implementation, such

as . . . curing or waiving of any default.” 11 U.S.C.

§ 1123(a)(5). In the absence of any statutory definition, this

Court held in Entz-White that “[c]uring a default” means

“returning to pre-default conditions,” such that any

consequences of the default are “nullified.” 850 F.2d at 1340

(quoting Di Pierro v. Taddeo (In re Taddeo), 685 F.2d 24,

26–27 (2d Cir. 1982)). Because curing a default returns the

debtor to the status quo ante, we concluded, “the power to

cure under the Bankruptcy Code authorizes a plan to nullify

all consequences of default, including avoidance of default

penalties such as higher interest.” Id. at 1342.

After this Court decided Entz-White, Congress enacted

11 U.S.C. § 1123(d). Section 1123(d), part of the 1994

amendments to the Bankruptcy Code, provides:

Notwithstanding subsection (a) of this section

and sections 506(b), 1129(a)(7), and 1129(b)

of this title, if it is proposed in a plan to cure

a default the amount necessary to cure the

default shall be determined in accordance with

the underlying agreement and applicable

nonbankruptcy law.

Pacifica maintains—and the majority agrees—that this

provision overruled Entz-White’s holding that a debtor who

cures a default, thus “nullify[ing] all consequences of” that

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14 IN RE NEW INVESTMENTS, INC.

default, may repay arrearages at the pre-default interest rate. 

See 850 F.3d at 1342.

Pacifica bears the burden of showing that Congress, in

passing § 1123(d), intended to change settled law. Tome v.

United States, 513 U.S. 150, 163 (1995) (quoting Green v.

Bock Laundry Mach. Co., 490 U.S. 504, 521 (1989)). In

determining whether Pacifica has met this burden, we “will

not read the Bankruptcy Code to erode past bankruptcy

practice absent a clear indication that Congress intended such

a departure.” Hamilton v. Lanning, 560 U.S. 505, 517 (2010)

(citations and internal quotation marks omitted).

Pacifica has not carried this burden, as both the statutory

text and the legislative history of § 1123(d) support the

continuing viability of Entz-White’s holding. The majority

opinion errs in concluding otherwise, and, in doing so,

wrongly imposes a severe penalty on debtors in New

Investments’ situation.

II.

The BankruptcyReform Act of 1994, among other things,

added nearly identical language regarding how one cures a

default to Chapters 11, 12, and 13 of the Bankruptcy Code. 

Pub. L. No. 103-394, § 305, 108 Stat. 4106 (1994). Like the

subsection here at issue, 11 U.S.C. §§ 1222(d) and 1322(e)

provide that, notwithstanding other provisions of the

BankruptcyCode not relevant here, “if it is proposed in a plan

to cure a default, the amount necessary to cure the default,

shall be determined in accordance with the underlying

agreement and applicable nonbankruptcy law.”

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Nowhere did the 1994 amendments define “cure a

default” or suggest that this Circuit’s then-operative

definition of “cure” was incorrect. Rather, § 1123(d)

indicates which materials the parties may consult in

determining how to cure a default. Accordingly, as a result

of the 1994 amendments, the terms of a cure are

circumscribed by the underlying agreement and applicable

nonbankruptcy law.

Neither § 1123(d) nor any other provision of the

BankruptcyCode explains where in the underlying agreement

to look for the provisions that apply in the event of a cure. If,

as Entz-White held, “[c]uring a default” means “returning to

pre-default conditions,” 850 F.2d at 1340, the provisions of

the agreement setting out the pre-default interest rate provide

the relevant information. If “curing a default” means paying

a penalty triggered by the default, the provisions of the

agreement addressing higher post-default interest rates

establish the relevant requirements. But in Entz-White, we

decisively rejected this alternative definition of “cure.” Id. at

1342. We called the creditor’s argument in favor of this

reading “spurious,” as it “amount[ed] to saying, once more,

that the higher rate of interest is not a consequence of default

that can be cured.” Id.

In short, the text of § 1123(d) makes clear that New

Investments’ cure will be based on the terms of the

promissory note, but offers no guidance on which of the

note’s provisions governs here. Entz-White provides that

guidance, by specifying that a “cure” permits the debtor to

“avoid all consequences of the default.” Id. Applying that

understanding, it is the pre-default interest provisions of the

underlying agreement that govern. The majority’s conclusion

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that § 1123(d) overruled Entz-White has no basis in the text

of the statute.

III.

The legislative history of § 1123(d) confirms that

Congress did not mean to disturb this Court’s holding in EntzWhite. In adding § 1123(d), Congress focused on addressing

an entirely separate matter—the Supreme Court’s holding in

Rake v. Wade, 508 U.S. 464 (1993). H.R. Rep. No. 103-835,

at 55 (1994); see also S. Rep. No. 103-168, at 53 (1993)

(discussing the parallel provision included in the Senate bill).

In Rake, the Supreme Court held that an oversecured

creditor was entitled to pre- and post-confirmation interest on

mortgage arrearages paid to cure a default under a Chapter 13

plan. 508 U.S. at 471–75. This reading of the relevant

provisions of the Bankruptcy Code, §§ 506(b), 1322(b), and

1325(a)(5), permitted secured creditors to collect interest on

top of the interest payments paid by debtors under their

mortgages. Id. at 470–75.

Congress overtly rejected this result in enacting

§ 1123(d). H.R. Rep. No. 103-835, at 55. The amendments

to § 1123 were contained in § 305 of the Bankruptcy Reform

Act of 1994, which is entitled “Interest on Interest.” Pub. L.

No. 103-394, § 305, 108 Stat. 4106, 4134 (1994). The

relevant House Report states that the amendments “will have

the effect of overruling the decision of the Supreme Court in

Rake v. Wade,” because Rake “had the effect of providing a

windfall to secured creditors” by giving them “interest on

interest payments, and interest on the late charges and other

fees, even where applicable laws prohibit[] such interest and

even when it was something that was not contemplated by

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IN RE NEW INVESTMENTS, INC. 17

either party in the original transaction.” H.R. Rep. No. 103-

835, at 55.

Far from repudiating Entz-White’s holding, the House

Report reiterated Entz-White’s interpretation of “cure,”

stating, “[i]t is the Committee’s intention that a cure pursuant

to a plan should operate to put the debtor in the same position

as if the default had never occurred.” Id. The legislative

history thus indicates, at the very least, that the new provision

was not meant sub silentio to enact a definition of “cure”

conflicting with that adopted in Entz-White. It also suggests

that the relevant provisions of the “underlying agreement” for

a “cure” are those that would have applied “if the default had

never occurred.” See id.

In sum, the pertinent 1994 amendments eliminated the

possibility of a “court contrived windfall” for secured

creditors. Id. Pacifica’s challenge to the BankruptcyCourt’s

confirmation order does not implicate the concern that

animated Congress. Like the text of the statute, the

legislative history in no way suggests that Entz-White’s

definition of “cure” is incorrect or was overruled.

Here, the underlying agreement provides both pre- and

post-default interest rates. As the statute requires, we look to

that agreement in determining which rates may apply. And

in selecting which provision of the contract governs, we rely

on our precedent and use the pre-default rate. New

Investments therefore could cure the default by paying

interest on the debt at the pre-default rate.

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18 IN RE NEW INVESTMENTS, INC.

IV.

Notwithstanding its recitation of the relevant text and

legislative history, the majority somehow concludes that

Entz-White is no longer controlling. Relying on an incorrect

interpretation of § 1123(d), the majority’s opinion mistakenly

upsets this Circuit’s binding precedent.

A three judge panel of this Court is “bound by decisions

of prior panels unless an en banc decision, Supreme Court

decision or subsequent legislation undermines those

decisions.” Gen. Const. Co. v. Castro, 401 F.3d 963, 975 (9th

Cir. 2005) (quoting Benny v. U.S. Parole Comm’n, 295 F.3d

977, 983 (9th Cir. 2002)). No act of Congress or intervening

higher authority justifies the panel’s departure from our

precedent here.

As discussed, Congress has not defined “cure the default”

in the years since we decided Entz-White. There is thus no

“clear indication that Congress intended . . . a departure,”

Hamilton, 560 U.S. at 517, from this Court’s past practice. 

The interpretation of the statute best supported by the

legislative record favors continuity. No intervening case law

from the Supreme Court or the Ninth Circuit calls Entz-White

into doubt. On the contrary, this Court has continued to rely

on Entz-White’s holding. See Platinum Capital, Inc. v.

Sylmar Plaza, L.P. (In re Sylmar Plaza, L.P.), 314 F.3d 1070,

1075 (9th Cir. 2002) (concluding Entz-White precluded a

creditor’s argument “that a plan intended to nullify the

consequences of a default (thereby avoiding the higher postdefault interest rate) does not meet the purposes of the

Bankruptcy Code”); cf. Gen. Elec. Capital Corp. v. Future

Media Prods. Inc., 547 F.3d 956, 960–61 (9th Cir. 2008)

(treating Entz-White as good law, but concluding it did not

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IN RE NEW INVESTMENTS, INC. 19

apply to a claim paid in full as a result of asset sales outside

of a Chapter 11 plan).

Stare decisis thus requires us to apply Entz-White and

hold that New Investments “is entitled to avoid all

consequences of the default—including higher post-default

interest rates.” 850 F.2d at 1342. I would affirm the

Bankruptcy Court order confirming New Investments’ plan

of reorganization, which reflects the pre-default interest rate

included in the promissory note.

 Case: 13-36194, 11/04/2016, ID: 10185901, DktEntry: 36-1, Page 19 of 19