FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

IN THE MATTER OF

TRANSWEST RESORT 

PROPERTIES, INC.,

Debtor,

JPMCC 2007-C1

GRASSLAWN LODGING,

LLC,

Appellant,

v.

TRANSWEST RESORT 

PROPERTIES INCORPORATED;

SWVP LA PALOMA LLC;

SWVP HILTON HEAD LLC,

Appellees.

No. 16-16221

D.C. Nos.

4:12-cv-00024-RCC

4:12-cv-00121-RCC

OPINION

Appeal from the United States District Court

for the District of Arizona

Raner C. Collins, Chief District Judge, Presiding

Argued and Submitted October 25, 2017

San Francisco, California

Filed January 25, 2018
2 IN RE TRANSWEST RESORT PROPERTIES

Before: J. CLIFFORD WALLACE, MILAN D. SMITH, 

JR., and MICHELLE T. FRIEDLAND, Circuit Judges.

Opinion by Judge Milan D. Smith, Jr.;

Concurrence by Judge Friedland

SUMMARY*

Bankruptcy

The panel affirmed the district court’s affirmance of the 

bankruptcy court’s order approving a Chapter 11 

“cramdown” reorganization plan of five related debtors.

The debtors had previously acquired two resorts. A 

lender, whose claim was undersecured, elected to have its 

entire claim treated as secured pursuant to 11 U.S.C. 

§ 1111(b)(2). The plan restructured the lender’s loan to a 

term of 21 years and included a due-on-sale clause requiring 

the debtors to pay the lender the outstanding balance of the 

loan if the resorts were sold. The due-on-sale clause did not 

apply if the debtors were to sell the resorts between years 

five and fifteen.

The panel held that an election under § 1111(b)(2) does 

not require that a due-on-sale clause be included in a 

reorganization plan.

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

has been prepared by court staff for the convenience of the reader.
IN RE TRANSWEST RESORT PROPERTIES 3

The panel also held that § 1129(a)(10), which requires 

that at least one impaired class accept a “cramdown” plan, 

applies on a “per plan” basis, rather than a “per debtor” basis. 

Concurring, Judge Friedland agreed that § 1111(b)(2) 

does not require that a bankruptcy plan include complete 

due-on-sale protection for the creditor and that § 1129(a)(10) 

applies on a “per plan” basis. She wrote separately to 

acknowledge the argument of the lender that it was unfairly 

deprived of the ability to object effectively to reorganization 

of two of the debtors, despite being their only creditor. 

Judge Friedland wrote that any unfairness resulted not from 

the interpretation of § 1129 challenged by the lender, but 

instead from the fact that the reorganization treated the five 

debtor entities as if they had been substantively 

consolidated—something the lender did not object to in the 

bankruptcy court.

COUNSEL

David M. Neff (argued) and Eric E. Walker, Perkins Coie 

LLP, Chicago, Illinois; Dean C. Waldt, Ballard Spahr LLP, 

Phoenix, Arizona; for Appellant.

Donald A. English (argued) and Christy I. Yee, English & 

Gloven APC, San Diego, California; Susan G. Boswell and 

Brad D. Terry, Quarles & Brady LLP, Tucson, Arizona; for 

Appellees.
4 IN RE TRANSWEST RESORT PROPERTIES

OPINION

M. SMITH, Circuit Judge:

JPMCC 2007-C1 Grasslawn Lodging, LLC (Lender) 

objected to the Chapter 11 plan of five related entities 

(collectively, Debtors) who previously acquired two hotels. 

Despite these objections, the bankruptcy court approved a 

“cramdown” reorganization plan. The Lender appealed to 

the district court, but the district court concluded that the 

Lender’s appeal was equitably moot. In 2015, we reversed 

the district court’s equitable mootness determination, and 

remanded to the district court for consideration of the 

Lender’s appeal on the merits. See In re Transwest Resort 

Props., Inc., 801 F.3d 1161 (9th Cir. 2015) (Transwest I).

On remand, the district court evaluated the merits of the 

Lender’s appeal, and concluded that (1) an election under 

11 U.S.C. § 1111(b)(2) does not require that a Chapter 11 

plan contain a due-on-sale clause; and (2) 11 U.S.C. 

§ 1129(a)(10) applies on a “per plan,” not a “per debtor,” 

basis. This appeal is limited to the construction of 11 U.S.C. 

§ 1111(b)(2) and 11 U.S.C. § 1129(a)(10).1 Based on the 

plain language of both statutory sections, we affirm.

FACTUAL AND PROCEDURAL BACKGROUND

In 2007, the Debtors acquired the Westin Hilton Head 

Resort and Spa and the Westin La Paloma Resort and 

Country Club (collectively, the Resorts). The Debtors were 

composed of: Transwest Hilton Head Property, LLC, and 

Transwest Tucson Property, LLC (Operating Debtors); 

 1 Unless otherwise noted, subsequent statutory references are to 

Title 11 of the United States Code.
IN RE TRANSWEST RESORT PROPERTIES 5

Transwest Hilton Head II, LLC, and Transwest Tucson II, 

LLC (Mezzanine Debtors); and Transwest Resort Properties, 

Inc. (Holding Company Debtor). The Holding Company 

Debtor was the sole owner of the Mezzanine Debtors. The 

Mezzanine Debtors were, in turn, the sole owners of the two 

Operating Debtors, who owned and operated the Resorts. 

The acquisitions were financed by (1) a $209 million 

mortgage loan to the Operating Debtors from the Lender, 

secured by the Resorts (the Operating Loan); and (2) a $21.5 

million loan from Ashford Hospitality Finance, LP 

(Mezzanine Lender), secured by the Mezzanine Debtors’ 

interests in the Operating Debtors (the Mezzanine Loan).

In 2010, the Debtors filed for Chapter 11 bankruptcy. 

The five cases involved were jointly administered, but not 

substantively consolidated.2 The Lender filed a claim in the 

bankruptcy proceeding for $298 million, based on the 

Operating Loan. The Mezzanine Lender filed a $39 million 

claim based on the Mezzanine Loan. The Lender 

subsequently acquired this claim from the Mezzanine

Lender.

The Debtors filed a joint Chapter 11 reorganization plan 

(the Plan), whereby third-party investor Southwest Value 

Partners would acquire the Operating Debtors for $30 

million, thereby extinguishing the Mezzanine Debtors’ 

ownership interest in the Operating Debtors.

The Lender, whose claim was undersecured, elected to 

have its entire claim treated as secured pursuant to 11 U.S.C. 

§ 1111(b)(2). The Plan restructured the Lender’s loan to a 

term of 21 years, and required monthly interest payments, 

 2 The Lender never objected to or argued that the bankruptcy court 

was treating the case as if substantive consolidation had occurred.
6 IN RE TRANSWEST RESORT PROPERTIES

and a balloon principal payment at the end of the term. The 

Plan included a due-on-sale clause requiring the Debtors to 

pay the Lender the outstanding balance of the restructured 

loan in the event the Resorts were sold. However, the dueon-sale clause did not apply if the Debtors were to sell the 

Resorts between Plan years five and fifteen. The Lender 

voted against the Plan. Several other impaired classes voted 

to approve the Plan.

The Lender objected to two aspects of the Plan.3 First, 

the Lender objected to the ten-year exception in the due-onsale clause. It contended that the exception in the due-onsale clause would allow the Debtors to partially negate the 

benefit of the Lender’s section 1111(b)(2) election. Second, 

the Lender asserted that section 1129(a)(10), which requires 

that at least one impaired class accept the Plan, applies on a 

“per debtor,” not a “per plan,” basis. Because the Lender is 

the only class member for the Mezzanine Debtors and did 

not vote to approve the Plan, the Lender argued that the Plan 

did not satisfy section 1129(a)(10). Despite the Lender’s 

objections, the bankruptcy court approved the Plan.

Following an unsuccessful emergency motion for a stay 

pending appeal, the district court dismissed the Lender’s 

appeal as equitably moot. In 2015, we reversed this 

dismissal and remanded to the district court with instructions 

to evaluate the Lender’s objections on the merits. Transwest 

I, 801 F.3d at 1173. On remand, the district court ruled that 

an election under section 1111(b)(2) does not require that a 

due-on-sale clause be included in the Plan, and that section 

1129(a)(10) applies on a “per plan” basis. The district court 

 3 The Lender raised other objections to the Plan, but the parties 

previously resolved those objections.
IN RE TRANSWEST RESORT PROPERTIES 7

thereby affirmed the bankruptcy court’s confirmation of the 

Plan. The Lender timely appealed to our court.

JURISDICTION AND STANDARD OF REVIEW

We have jurisdiction over this appeal pursuant to 

28 U.S.C. § 158(d)(1). Because the Lender appeals from the 

district court’s conclusions of law and interpretations of the 

Bankruptcy Code, we review de novo. See Smith v. Arthur 

Andersen LLP, 421 F.3d 989, 1006 (9th Cir. 2005); In re 

Barakat, 99 F.3d 1520, 1523 (9th Cir. 1996).

ANALYSIS

I. 11 U.S.C. § 1111(b)

The Lender first challenges the district court’s 

conclusion that a due-on-sale clause need not be included in 

the Plan when an undersecured creditor elects to have its 

claim treated as secured pursuant to section 1111(b)(2). This 

section must be read in context. Pursuant to section 506(a), 

an undersecured creditor’s claim is bifurcated into: (1) “a 

secured claim equal to the value of the collateral” and (2) “an 

unsecured claim equal to the remainder of the obligation 

owing to the creditor as of the petition date.” In re 

Weinstein, 227 B.R. 284, 291–92 (B.A.P. 9th Cir. 1998). 

The undersecured creditor may elect to have its entire claim 

treated as secured pursuant to section 1111(b)(2). Id. at 293; 

see 11 U.S.C. § 1111(b)(2). The effect of such an election 

is that the undersecured creditor obtains certain benefits 

reserved for secured, but not unsecured, creditors. See, e.g.,

11 U.S.C. § 1129(b)(2)(A)–(B) (distinguishing between the 

“fair and equitable” requirements for secured and unsecured 

claims). The Lender contends that the absence of a due-onsale clause covering sales of the Resorts occurring between 

years five and fifteen of the loan term partially diminishes 
8 IN RE TRANSWEST RESORT PROPERTIES

the benefits of its section 1111(b)(2) election, thereby 

violating section 1111(b)(2).

“The starting point for our interpretation of a statute is 

always its language.” United States v. Fei Ye, 436 F.3d 

1117, 1120 (9th Cir. 2006) (quoting Cmty. for Creative NonViolence v. Reid, 490 U.S. 730, 739 (1989)). We must 

consider “the language itself, the specific context in which 

that language is used, and the broader context of the statute 

as a whole.” Robinson v. Shell Oil Co., 519 U.S. 337, 341 

(1997); see also King v. Burwell, 135 S. Ct. 2480, 2489 

(2015) (“[W]hen deciding whether the language is plain, we 

must read the words ‘in their context and with a view to their 

place in the overall statutory scheme.’” (citation omitted)). 

Only where the statutory text is ambiguous do we “look to 

other interpretive tools, including the legislative history,” in 

order to determine the statute’s meaning. See Exxon Mobil 

Corp. v. Allapattah Servs., Inc., 545 U.S. 546, 567 (2005).

Section 1111(b) provides, in pertinent part:

(1)(A) A claim secured by a lien on property 

of the estate shall be allowed or disallowed 

under section 502 of this title the same as if 

the holder of such claim had recourse against 

the debtor on account of such claim, whether 

or not such holder has such recourse, 

unless—

(i) the class of which such claim is a party 

elects, by at least two-thirds in amount 

and more than half in number of allowed 

claims of such class, application of 

paragraph (2) of this subsection;
IN RE TRANSWEST RESORT PROPERTIES 9

. . . .

(2) If such an election is made, then 

notwithstanding section 506(a) of this title, 

such claim is a secured claim to the extent 

that such claim is allowed.

11 U.S.C. § 1111(b). The Lender’s position that section 

1111(b)(2) requires a due-on-sale clause to be included in 

the Plan finds no support in the text of the statute, nor does 

the language of the statute implicitly require the inclusion of 

such a clause.

The broader statutory context of Chapter 11 further 

undermines the Lender’s position. Section 1123 describes 

the required contents of a Chapter 11 plan. See 11 U.S.C. 

§ 1123. Nothing in section 1123 requires the inclusion of a 

due-on-sale clause in a plan, let alone following a section 

1111(b)(2) election. Instead, section 1123(b)(5) indicates 

that a plan may “modify the rights of holders of secured 

claims.” This would include the ability to determine whether 

to include a due-on-sale clause in the documentation of any 

secured creditors’ claims. Further, section 

1129(b)(2)(A)(i)(I) requires that in order for a plan to be fair 

and equitable, the holder of a claim must retain the lien 

securing that claim even when “the property subject to such 

liens is . . . transferred to another entity.” Thus, the statute 

expressly allows a debtor to sell the collateral to another 

entity so long as the creditor retains the lien securing its 

claim, yet the statute does not mention any due-on-sale 

requirement, further undermining the Lender’s position that 

a due-on-sale clause must be included in the Plan.

Our conclusion is consistent with the reasoning of the 

Seventh Circuit in In re Airadigm Commc’ns, Inc., 519 F.3d 
10 IN RE TRANSWEST RESORT PROPERTIES

640 (7th Cir. 2008). There, FCC regulations required that, 

under certain circumstances, a due-on-sale clause be 

included in the documentation when a licensee transfers a 

license to a non-qualifying entity. Id. at 653. A licensee 

filed a reorganization plan, which a bankruptcy court 

approved even though it did not contain a due-on-sale clause. 

Id. at 646. The FCC objected to the plan because it “did not 

keep the FCC’s due-on-sale rights.” Id. at 646, 653. While 

the FCC did not make an election under section 1111(b), the 

Seventh Circuit concluded that a due-on-sale provision was 

not a “lien that the bankruptcy court had to ‘retain’ in order 

to approve the plan pursuant to § 1129.” Id. at 654. Instead, 

the provision is merely a mechanism “regarding the terms of 

payment for the debt.” Id. at 655. The same reasoning 

applies in this case—a due-on-sale clause is a mechanism

regarding the terms of payment of a debt, not a substantive 

right of creditors making an election pursuant to section 

1111(b)(2).

Neither the plain language of section 1111(b)(2) nor the 

broader context of Chapter 11 requires that a plan involving 

an electing creditor contain a due-on-sale clause. We need 

not address the Lender’s remaining arguments because the 

statutory text renders the Lender’s other arguments 

meritless. See Satterfield v. Simon & Schuster, Inc., 

569 F.3d 946, 951 (9th Cir. 2009). We therefore hold that 

section 1111(b)(2) does not require that a plan involving an 

electing creditor contain a due-on-sale clause.4

 4 This holding does not imply that “due-on-sale” protection is 

irrelevant to whether a plan is “fair and equitable” under section 1129(b). 

Although the Lender here waived any argument that the Plan was not 

“fair and equitable,” the availability of due-on-sale protection may 

inform whether a plan is confirmable in other reorganizations. Cf. In re 
IN RE TRANSWEST RESORT PROPERTIES 11

II. 11 U.S.C. § 1129(a)(10)

The Lender next challenges the district court’s 

conclusion that section 1129(a)(10) applies on a “per plan” 

basis. Generally, a bankruptcy court may confirm a plan 

only if each class of impaired creditors consents. 11 U.S.C. 

§ 1129(a)(8). However, in certain instances, a plan 

proponent can confirm a “cramdown” Chapter 11 plan over 

the objections of one or more of the creditors. RadLAX 

Gateway Hotel, LLC v. Amalgamated Bank, 566 U.S. 639, 

641–42 (2012); see 11 U.S.C. § 1129(b). Section 1129 lists 

the requirements for approval of a cramdown plan, and 

“contains a number of safeguards for secured creditors who 

could be negatively impacted by a debtor’s reorganization 

plan.” In re The Vill. at Lakeridge, LLC, 814 F.3d 993, 1000 

(9th Cir. 2016). One such safeguard is in section 

1129(a)(10), which requires that at least one impaired 

creditor has accepted the plan. See 11 U.S.C. § 1129(a)(10).

According to the Lender, a complication arises when 

there is a jointly administered plan consisting of multiple 

debtors. The Lender argues that in such a situation, a “per 

debtor” approach that requires plan approval from at least 

one impaired creditor for each debtor involved in the plan is 

necessary. In contrast, the Debtors argue that the plain 

language of the statute contemplates a “per plan” approach 

in which a plan only requires approval from one impaired 

creditor for any debtor involved. As a matter of first 

impression among the circuit courts, we hold that section 

1129(a)(10) applies on a “per plan” basis.

 Monarch Beach Venture, Ltd., 166 B.R. 428, 436 (Bankr. C.D. Cal. 

1993) (“[T]o be fair and equitable, a plan of reorganization cannot 

unfairly shift the risk of a plan’s failure to the creditor.”).
12 IN RE TRANSWEST RESORT PROPERTIES

As with section 1111(b)(2), we begin our analysis of 

section 1129(a)(10) with its plain language. See In re HP 

Inkjet Printer Litig., 716 F.3d 1173, 1180 (9th Cir. 2013). 

Section 1129(a) provides that a court may confirm a plan 

only if a number of requirements are met. Section 

1129(a)(10) details one such requirement: “If a class of 

claims is impaired under the plan, at least one class of claims 

that is impaired under the plan has accepted the plan, 

determined without including any acceptance of the plan by 

any insider.” 11 U.S.C. § 1129(a)(10).

The plain language of the statute supports the “per plan” 

approach. Section 1129(a)(10) requires that one impaired 

class “under the plan” approve “the plan.” It makes no 

distinction concerning or reference to the creditors of 

different debtors under “the plan,” nor does it distinguish 

between single-debtor and multi-debtor plans. Under its 

plain language, once a single impaired class accepts a plan, 

section 1129(a)(10) is satisfied as to the entire plan. 

Obviously, Congress could have required plan approval 

from an impaired class for each debtor involved in a plan, 

but it did not do so. It is not our role to modify the plain 

language of a statute by interpretation. See King, 135 S. Ct. 

at 2489 (“If the statutory language is plain, we must enforce 

it according to its terms.”).

The statutory context of section 1129(a)(10) does not aid 

the Lender’s argument. The Lender, citing the only court 

that has applied the “per debtor” approach, argues that 

section 102(7) requires that section 1129(a)(10) apply on a 

“per debtor” basis. See In re Tribune Co., 464 B.R. 126, 

182–83 (Bankr. D. Del. 2011). We disagree. Section 

102(7), a rule of statutory construction, provides that “the 

singular includes the plural.” 11 U.S.C. § 102(7). This rule 

of construction does not change our analysis. Section 102(7) 
IN RE TRANSWEST RESORT PROPERTIES 13

effectively amends section 1129(a)(10) to read: “at least one 

class of claims that is impaired under the plans has accepted 

the plans.” The “per plan” approach is still consistent with 

this reading. Therefore, section 102(7) does not undermine 

our view that section 1129(a)(10) applies on a “per plan”

basis.

Nor do other subsections in section 1129(a) indicate that 

section 1129(a)(10) must apply on a “per debtor” basis. The 

court in Tribune concluded that section 1129(a)(10) must 

apply on a “per debtor” basis because other subsections 

apply on a “per debtor” basis. 464 B.R. at 182–83. For 

example, section 1129(a)(3) requires that “[t]he plan has 

been proposed in good faith.” 11 U.S.C. § 1129(a)(3). This 

argument fails for two reasons. First, as with subsection ten, 

nothing in the plain text of subsection three indicates that it 

applies on a “per debtor” basis. See BedRoc Ltd. v. United 

States, 541 U.S. 176, 183 (2004) (holding a court presumes 

that Congress says in the statute what it means). Second, 

while a statute must be “read as a whole,” King v. St. 

Vincent’s Hosp., 502 U.S. 215, 221 (1991), the Lender 

provides no support for its position that all subsections must 

uniformly apply on a “per debtor” basis, especially when the 

Bankruptcy Code phrases each subsection differently. 

Instead, the Lender’s argument is essentially a regurgitation 

of a summary of the Tribune decision unsupported by 

argument or other case law. These deficiencies defeat the 

Lender’s argument that section 1129(a)(10) unambiguously 

applies on a “per debtor” basis based on other subsections in 

section 1129(a).

The Lender also argues that while the Plan states it is a 

jointly administered plan, it was, in effect, a substantive 

consolidation. The Lender’s argument faces two hurdles. 

First, the Lender never objected to the Plan on this basis. As 
14 IN RE TRANSWEST RESORT PROPERTIES

the Lender’s counsel concedes, the only issue before us is 

the construction of sections 1111(b)(2) and 1129(a)(10). 

These are the objections the Lender raised before the 

bankruptcy court, the objections it appealed to the district 

court, and the issues we previously identified. See 

Transwest I, 801 F.3d at 1166–67. Therefore, whether the 

parties and the bankruptcy court dealt with the Plan approval 

as if it were a substantive consolidation is not properly 

before us on appeal. Second, to the extent the Lender argues 

that the “per plan” approach would result in a parade of 

horribles for mezzanine lenders, such hypothetical concerns 

are policy considerations best left for Congress to resolve. 

See Henson v. Santander Consumer USA Inc., 137 S. Ct. 

1718, 1726 (2017) (stating that “the proper role of the 

judiciary” in statutory interpretation is “to apply, not amend, 

the work of the People’s representatives”).

Because the plain language of section 1129(a)(10) 

indicates that Congress intended a “per plan” approach, we 

need not to look to the statute’s legislative history or address 

the Lender’s remaining policy concerns. See Tahara v. 

Matson Terminals, Inc., 511 F.3d 950, 953 (9th Cir. 2007) 

(citing SEC v. McCarthy, 322 F.3d 650, 655 (9th Cir. 2003)). 

We therefore hold that section 1129(a)(10) applies on a “per 

plan” basis.

CONCLUSION

For the foregoing reasons, we affirm the district court’s 

conclusions that 11 U.S.C. § 1111(b) does not require the 

inclusion of a due-on-sale clause in the Plan, and that 

11 U.S.C. § 1129(a)(10) applies on a “per plan” basis.

AFFIRMED.
IN RE TRANSWEST RESORT PROPERTIES 15

FRIEDLAND, Circuit Judge, concurring:

I agree that 11 U.S.C. § 1111(b)(2) does not require that 

a bankruptcy plan include complete due-on-sale protection 

for the creditor. And although I think the statutory language 

is somewhat ambiguous, I further agree that the better 

reading of 11 U.S.C. § 1129(a)(10) is that it applies on a “per 

plan,” rather than “per debtor,” basis. I write separately, 

however, to acknowledge the argument advanced by 

JPMCC 2007-C1 Grasslawn Lodging, LLC (“Lender”) that 

it was unfairly deprived of the ability to object effectively to 

reorganization of the Mezzanine Debtors, despite being their 

only creditor. While Lender’s concern is not unfounded, I 

believe any unfairness resulted not from the interpretation of 

§ 1129 that Lender challenged in this appeal, but instead 

from the fact that this particular reorganization treated the 

five Debtor entities as if they had been substantively 

consolidated—something Lender did not object to in the 

bankruptcy court.

Joint administration and substantive consolidation are 

both mechanisms to facilitate multi-debtor reorganizations. 

Joint administration is a tool of convenience; “[t]here is no 

merging of assets and liabilities of the debtors,” and 

“[c]reditors of each debtor continue to look to that debtor for 

payment of their claims.” In re Parkway Calabasas Ltd., 

89 B.R. 832, 836 (Bankr. C.D. Cal. 1988). By contrast, 

substantive consolidation replaces “two or more debtors, 

each with its own estate and body of creditors,” with “a 

single debtor, a single estate with a common fund of assets, 

and a single body of creditors.” Id. at 836–37; see also In re 

Bonham, 229 F.3d 750, 764 (9th Cir. 2000). Accordingly, 

“consolidation depends on substantive considerations and 

affects the substantive rights of the creditors of the different 

estates.” In re Bonham, 229 F.3d at 762 (quoting Fed. R. 
16 IN RE TRANSWEST RESORT PROPERTIES

Bankr. P. 1015 advisory committee’s note). Here, the cases 

of the five Debtors were jointly administered pursuant to 

Federal Rule of Bankruptcy Procedure 1015, but neither 

party moved for substantive consolidation.

Nevertheless, I think Lender is correct that the 

distribution scheme adopted by the Plan involved a degree 

of substantive consolidation. Debtors’ respective 

bankruptcy estates may technically have remained separate, 

but the Plan treated Debtors as a single entity. Specifically, 

by subordinating the Mezzanine Loan claims to the 

Operating Loan claims, the creditors for different Debtors all 

drew from the same pool of assets. And had the Mezzanine 

Lender voted to accept the Plan, its claims would have been 

paid from the assets of the reorganized Operating Debtors, 

demonstrating that the Plan did not differentiate based on the 

recipient of a particular creditor’s loan. As the bankruptcy 

court itself explained, this arrangement treated the 

Mezzanine Lender’s claims as if the cases had been 

substantively consolidated.

In many cases involving a reorganization plan that 

effectively merges the assets and liabilities of multiple 

debtors, “the constituents in the chapter 11 proceeding either 

reach this result by consensus, or, no objection is made by 

any creditor or party in interest.” In re Tribune, 464 B.R. 

126, 183 (Bankr. D. Del. 2011). The plan can thus proceed 

under a “de facto” substantive consolidation, absent a formal 

assessment of whether substantive consolidation is 

appropriate. Here, however, two classes of creditors 

objected to the Plan: (1) the class consisting of Lender’s 

secured claim, which arose from the mortgage loan secured 

by the resorts, and (2) the class consisting of the secured and 

unsecured mezzanine claims, which arose from the 

mezzanine loan originally provided by Ashford Hospitality 
IN RE TRANSWEST RESORT PROPERTIES 17

Finance, LP, and subsequently purchased by Lender. 

Because there was no consensus over these bankruptcy 

proceedings, there should have been an evaluation of 

whether substantive consolidation was appropriate before it 

(effectively) occurred.

To determine whether substantive consolidation is 

appropriate, a bankruptcy court evaluates “(i) whether 

creditors dealt with the entities as a single economic unit and 

did not rely on their separate identity in extending credit; or 

(ii) whether the affairs of the debtors are so entangled that 

consolidation will benefit all creditors.” FDIC v. Colonial 

Realty Co., 966 F.2d 57, 61 (2d Cir. 1992) (quoting In re 

Augie/Restivo Baking Co., Ltd., 860 F.2d 515, 518 (2d Cir. 

1988)) (internal quotation marks omitted); see also In re 

Bonham, 229 F.3d at 766 (adopting the Second Circuit’s test 

for substantive consolidation). The “sole aim” of this 

analysis is “fairness to all creditors.” In re Bonham, 

229 F.3d at 765 (quoting Colonial Realty, 966 F.2d at 61). 

Assessing whether substantive consolidation was 

appropriate here would thus have required the bankruptcy 

court to consider whether consolidation was fair to Lender, 

among other creditors.

According to Lender, its treatment under the Plan was 

unfair, and the root of the potential unfairness is that 

§ 1129(a)(10) was interpreted as applying on a “per plan,” 

rather than a “per debtor,” basis. Section 1129(a)(10) 

requires that at least one impaired class of creditors accept a 

plan in order for it to be confirmed. Under the “per plan” 

approach, this provision was satisfied here as soon as any 

one impaired class from any of the five Debtors accepted the 

Plan. But if this provision had been applied on a “per debtor” 

basis, then one impaired class for each of the five Debtors 

would have had to accept the Plan. Because Lender was the 
18 IN RE TRANSWEST RESORT PROPERTIES

only creditor for the Mezzanine Debtors following its 

purchase of the mezzanine claims, under the “per debtor” 

interpretation of § 1129(a)(10) Lender’s objection would 

have prevented the Plan from being confirmed. Lender 

argues that use of the “per plan” approach had the same 

effect as substantive consolidation because one impaired 

class of creditors for one Debtor was able to bind all of the 

involved creditors, nullifying the leverage Lender would 

have otherwise had in the confirmation process under the 

“per debtor” approach.

Lender thus characterizes the “per plan” approach as “de 

facto” substantive consolidation. But this characterization is 

correct only to the extent that the “per plan” approach 

allowed for confirmation of a Plan that effectively merged 

the Debtor entities. The root of Lender’s objection is that 

the reorganization here was governed by a single plan that 

did not delineate among separate debtor-creditor 

relationships. Had the Debtors—and thus their 

reorganization plans—remained separate, there would have 

been no need to invoke the “per debtor” approach to preserve 

the effectiveness of any objection Lender had.

Although Lender’s “per debtor” interpretation would 

have allowed Lender to object and thereby block 

confirmation of the Plan, the problem in my view is not the 

interpretation of the statute, but rather that the Plan 

effectively merged the Debtors without an assessment of 

whether consolidation was appropriate. Such an assessment 

would have required the bankruptcy court to evaluate 

whether it was fair to proceed on a consolidated basis. In re 

Bonham, 229 F.3d at 765. Had the court taken this step of 

“balanc[ing] the benefits that substantive consolidation 

would bring against the harms that it would cause,” id., it 
IN RE TRANSWEST RESORT PROPERTIES 19

might have alleviated concerns about whether consolidation 

of the proceedings was in fact unfair.

Given that Lender asserts now that de facto substantive 

consolidation was inappropriate, it is unclear why Lender 

did not challenge the Plan on that basis prior to confirmation. 

It is possible that, if there had been an objection raising the 

question, Debtors’ single-purpose entity structure would 

have defeated any request for substantive consolidation. The 

original loan documents required maintaining the Operating 

Debtors and the Mezzanine Debtors as separate entities. As 

a result, the bankruptcy court might have concluded that 

creditors treated Debtors as separate entities, and further that 

the special-purpose entity structure prevented their assets 

from becoming entangled—thus rendering substantive 

consolidation unavailable under this circuit’s test. See id. at 

765–66. If so, the court could have required altering the 

distribution scheme to maintain entity separateness, thus 

preserving Lender’s leverage over the Plan.

If, however, the bankruptcy court had instead determined 

that this case was a candidate for substantive consolidation, 

then an appeal of that determination would have involved an 

evaluation of this particular Plan on its facts and resulting 

equities—rather than a challenge to the interpretation of a 

statute that governs all Chapter 11 reorganizations. But 

because Lender focused solely on the statute, the substantive 

consolidation objection is now waived.

In sum, I am not unsympathetic to Lender’s argument 

that it was deprived of an opportunity to object to 

confirmation of the Plan, and I have concerns that entangling 

various estates in a complex, multi-debtor reorganization 

diminishes the protections afforded to creditors by the 

Bankruptcy Code. But I do not believe bolstering these 
20 IN RE TRANSWEST RESORT PROPERTIES

protections requires the blanket statutory solution that 

Lender proposes. Rather, if a creditor believes that a 

reorganization improperly intermingles different estates, the 

creditor can and should object that the plan—rather than the 

requirements for confirming the plan—results in de facto 

substantive consolidation. Such an approach would allow 

this issue to be assessed on a case-by-case basis, which 

would be appropriate given the fact-intensive nature of the 

substantive consolidation inquiry. See In re Bonham, 

229 F.3d at 765 (“[O]nly through a searching review of the 

record, on a case-by-case basis, can a court ensure that 

substantive consolidation effects its sole aim: fairness to all 

creditors.” (quoting Colonial Realty, 966 F.2d at 61)).