1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

ORDERED PUBLISHED

UNITED STATES BANKRUPTCY APPELLATE PANEL

OF THE NINTH CIRCUIT

In re: ) BAP No. NV-11-1620-KiPaD

)

CAVIATA ATTACHED HOMES, LLC, ) Bk. No. 11-52458-BTB

)

Debtor. )

 )

)

CAVIATA ATTACHED HOMES, LLC, )

)

Appellant, )

)

v. ) A M E N D E D

)

U.S. BANK, NATIONAL ) O P I N I O N

ASSOCIATION, )

)

Appellee. )

______________________________)

Argued and Submitted on June 15, 2012 

at Las Vegas, Nevada

Original Opinion Filed - June 29, 2012

Amended Opinion Filed - July 17, 2012

Appeal from the United States Bankruptcy Court

for the District of Nevada

Honorable Bruce T. Beesley, Bankruptcy Judge, Presiding

 

Appearances: Jeffrey L. Hartman, Esq. of Hartman & Hartman

argued for appellant, Caviata Attached Homes, LLC;

Joshua D. Wayser, Esq. of Katten Muchin Rosenman

LLP argued for appellee, U.S. Bank, National

Association. 

_______________________________

Before: KIRSCHER, PAPPAS, and DUNN, Bankruptcy Judges

FILED

JUL 17 2012

SUSAN M SPRAUL, CLERK

U.S. BKCY. APP. PANEL

OF THE NINTH CIRCUIT
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

 Unless specified otherwise, all chapter, code, and rule 1

references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and

the Federal Rules of Bankruptcy Procedure, Rules 1001-9037. The

Federal Rules of Civil Procedure are referred to as “Civil Rules.”

-2-

KIRSCHER, Bankruptcy Judge:

Appellant, chapter 11 debtor Caviata Attached Homes, LLC 1

(“Caviata”), appeals an order from the bankruptcy court dismissing

its second chapter 11 case due to Caviata’s inability to show that

an extraordinary change in circumstances substantially impaired

its performance under its confirmed plan to warrant the second

chapter 11 filing. In addressing this issue of first impression

within the Ninth Circuit, we AFFIRM.

I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY

A. Prepetition facts.

Caviata, a Nevada limited liability company, was formed in

July 2005 for the purpose of real estate development. The sole

owner of Caviata is Caviata 184, LLC, a Nevada limited liability

company. William Pennington (“Pennington”) and Dane Hillyard

(“Hillyard”) are Caviata’s managers. Caviata owns and operates a

184-unit apartment complex located in Sparks, Nevada (the

“Property”). The Property was initially developed by Caviata as a

condominium project, but due to downturns in the real estate

market, it was converted to rental apartments.

To develop the Property, on or about September 20, 2005,

Caviata obtained a construction loan for $40,700,000 on a recourse

basis from California National Bank (“CNB”). In exchange for the

loan, Caviata executed a promissory note and deed of trust in

favor of CNB, which assigned Caviata’s right, title and interest
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

-3-

in the Property, including all rents, income and profits. The

parties agreed to an interest rate of prime plus .25% and a

maturity date of September 20, 2007. Guarantors on the loan

included Caviata 184, LLC, Pennington, and Hillyard.

Caviata defaulted on the loan. On or about April 25, 2007,

Caviata and CNB entered into a forbearance agreement whereby CNB

agreed to forbear from exercising its rights under the loan

documents. The forbearance agreement was thereafter amended six

times, with the most recent amendment dated January 15, 2009. In

connection with the sixth amendment, Caviata and CNB executed an

amended note under which Caviata agreed to pay CNB the remaining

principal balance on the note of $27,476,632.88, plus 7% interest,

by no later than April 15, 2009.

Caviata again defaulted on the loan, and on April 24, 2009,

CNB sued Caviata and the loan guarantors in state court. On

October 30, 2009, the FDIC closed CNB, and its assets were

assigned to U.S. Bank, N.A. (“U.S. Bank”). Trial against the

guarantors was initially set for March 15, 2010. The guarantors

filed a motion to continue trial, contending they had no assets to

satisfy a judgment.

B. Caviata’s first chapter 11 case.

Caviata filed its first chapter 11 bankruptcy petition on

August 18, 2009 (Case No. 09-52786). The case was ultimately

assigned to the Hon. John L. Peterson, sitting by designation. As

of the petition date, U.S. Bank claimed it was owed

$29,564,308.77, as reflected in its filed proof of claim. Just

prior to Caviata’s filing, U.S. Bank had obtained an appraisal on

the Property on June 29, 2009, from its appraiser William Kimmel
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

 This amendment only amended the treatment of CNB’s claim 2

and all other aspects of Caviata’s disclosure statement remained

unchanged.

 In November 2009, the parties stipulated that Caviata is a 3

“Single Asset Real Estate” case as defined by § 101(51B). An

order to that effect was entered on November 10, 2009.

 Caviata’s appellate appendix does not include all the 4

documents listed in its Designation of Record. We thereby

exercise our discretion to independently review the docket in

Caviata’s first and second bankruptcy cases, and documents

electronically filed therein through the court’s CM/ECF system. 

See O’Rourke v. Seaboard Sur. Co. (In re E.R. Fegert, Inc.), 887

F.2d 955, 957-58 (9th Cir. 1989) (appellate court may take

judicial notice of underlying bankruptcy records).

-4-

(the “June 2009 Appraisal”), which valued the Property at

$23,100,000.

Caviata filed its chapter 11 plan and disclosure statement on

November 16, 2009, followed by a first amended plan and amendment

to Caviata’s disclosure statement on January 28, 2010 (the “First 2

Plan”). Pursuant to the First Plan, Caviata proposed to pay 3

U.S. Bank 4.25% interest on its allowed secured claim of

$27,476,632.88 for three years. After three years, Caviata

committed to sell the Property or refinance the loan to pay

U.S. Bank in full. If Caviata defaulted under the First Plan,

U.S. Bank was entitled to enforce its rights and foreclose. 

Caviata’s approved disclosure statement specifically disclosed 4

the following risks:

Because the Plan provides for the reorganization of

the Debtor as a going concern or sale of the Property,

many of the common risk factors found in typical

reorganizations apply with respect to the Plan. These

include (a) the value of the Debtor’s property has

suffered significantly as a result of the downturn in

the United States economy since the summer of 2007. 

There is no assurance that the economy will turn around

and that property values, in general, or the value of

the Debtor’s Property, in particular, will not continue
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

 Caviata’s unapproved disclosure statement filed in its 5

second bankruptcy case contained the same provision in § 12.1,

p. 16, except it amended the creditor’s name from “Cal National”

to “U.S. Bank”.

-5-

to decline; (b) the Plan is dependent, at least in part,

on continued leasing of the Property. There is no

assurance that the Debtor’[s] predictions of the rate of

stabilizing the Property and achieving performing leases

will occur, or that these predictions will occur within

the time period projected in the Plan; (c) because the

Plan is dependent on continued leasing of the Property,

there is a risk that the projections of net operating

income, with which to pay the Allowed Claims of

Creditors, may not be met; (d) the Debtor may not be

able to sell its Property; (e) the Debtor may not be

able to secure alternative financing to satisfy the

Allowed Secured Claim of Cal National or the Allowed

Secured Claim of Specialty Trust; (f) if Cal National is

not paid in accordance with the Plan, and the Debtor is

unable to sell the Property or to secure alternative

financing, Cal National may foreclose on the Property.

Caviata disclosure statement, Case No. 09-52786, Doc. No. 31,

§ 12.1, pp. 25-26 (Nov. 16, 2009).5

U.S. Bank objected to confirmation of the First Plan

contending, inter alia, that it was not feasible. In support of

its objection, U.S. Bank offered a declaration from Kimmel

appraising the Property at $20 million (the “January 2010

Appraisal”). According to Kimmel, although the Property’s

occupancy rate had increased since June 2009 from 95% to 98%,

average rent rates were down. Considering the uncertainty in the

market, which Kimmel opined showed no signs of improving in the

near future, and the lack of financing, the Property’s value was

now only $20 million. U.S. Bank argued that Caviata failed to

submit any evidence showing its ability to sell or refinance the

Property in the next three years in order to pay off the note. In

fact, argued U.S. Bank, although Pennington asserted that Caviata

could sell the Property for $34 million in three years, Pennington
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

-6-

and Hillyard had admitted they had not marketed the Property to

test its worth or sought any refinancing. U.S. Bank further

objected to Caviata’s proposed 4.25% interest rate, contending

that its expert, Richard Zelle (“Zelle”), who also brokers

commercial real estate loans, believed no efficient market existed

for a loan on the Property and that 9.25% was a more appropriate

rate.

The bankruptcy court held a confirmation hearing on the First

Plan on March 3, 2010. Pennington, who has over thirty years

experience in large-scale real estate development in Northern

Nevada, testified that he agreed with the June 2009 Appraisal

valuing the Property at $23,100,000; however, he believed the

Property would be worth $34 million within the next couple of

years because of its desirability and uniqueness in the market. 

Hr’g Tr., Mar. 3, 2010, 21:7-24:7. When asked why Caviata was

unwilling to sell the Property now, Pennington responded that the

current economic situation was unlike anything he had ever seen

before, and a sale now would fail to realize a maximum return on

the Property. Based on his experience, Pennington believed that

conditions were going to improve. Id. at 25:12-27:11. On crossexamination, Pennington admitted that he had not tried marketing

the Property or obtaining refinancing because that was not part of

his business plan, at least not yet. Id. at 33:18-35:17.

Caviata’s interest rate expert, Dr. Christopher Wazzan (“Dr.

Wazzan”), admitted that no loan market existed for a debtor like

Caviata. Nonetheless, he believed a fixed rate of 4.75% was an

appropriate interest rate for U.S. Bank’s secured claim and that

the First Plan was feasible at that rate. Id. at 76-93. Dr.
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

-7-

Wazzan further testified that although forecasting was difficult,

the empirical data showed that things were improving. Id. at

93:25-94:7.

Appraiser Kimmel then testified about his January 2010

Appraisal, to which Caviata’s counsel objected because Kimmel had

not disclosed a new report on which he based his testimony. Hr’g

Tr., Mar. 3, 2010, 115-24. The court noted the objection for the

record. Id. at 124:18-21. Kimmel explained that the January 2010

Appraisal for $20 million was consistent with testimony he gave in

January 2010 after reviewing Caviata’s income and expense

statements from that time period. Id. at 125. Kimmel disagreed

with Pennington’s and Dr. Wazzan’s opinion that the market was

improving in the Reno/Sparks area. He believed it had declined

since June 2009 because financing had become more difficult to

obtain, and buyers were not willing to pay the prices they were

before due to larger down payment requirements. Id. at 126:1-

127:12. On cross-examination, Kimmel admitted that the

Reno/Sparks apartment market was “getting better and the rents now

[were] starting to creep up again.” Id. at 146:21-147:8.

Interest rate expert Zelle testified that Caviata’s plan to

payoff U.S. Bank in three years was “a dream” and “a fairy tale,”

and for Caviata to pay $23 million or $29 million to U.S. Bank the

“property [was] going to have to become Disneyland in Reno.” Id.

at 169:12, 170:17-21. When asked about whether the market would

improve, Zelle testified that selling in three years was a risk

factor he considered because he did not see it happening. Id. at

171:7-22. Zelle further concluded that the First Plan was not

feasible because Caviata could not make the monthly payments or
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

 On March 12, 2010, U.S. Bank filed an amended proof of 6

claim for $32,801,217.95.

-8-

the balloon payment. Id. at 190:18-191:14. Zelle admitted he had

not provided any analysis as to why Caviata could not make the

balloon payment in three years. Id. at 191:15-18.

The bankruptcy court ordered post-hearing briefing on certain

issues. U.S. Bank’s supplemental brief asserted essentially the

same feasibility objection, contending that “the Plan [was] a mere

hope and prayer of the Debtor to pay off some of its debts.” 

U.S. Bank argued that a sale price of $34 million for the

Property, even if realized in three years, would not cover its

claim, which was already over $32 million, let alone the junior 6

lender’s claim, which was over $6 million.

On April 12, 2010, the bankruptcy court entered its

Memorandum Decision, Findings of Fact and Conclusions of Law and

Order overruling U.S. Bank’s objections and confirming the First

Plan. The court rejected U.S. Bank’s tardy amended proof of

claim, determining that it improperly included the accrual of

postpetition interest in violation of United Sav. Ass’n of Tex. v.

Timbers of Inwood Forest Assocs., 484 U.S. 365 (1988), as well as

unreasonable (and unrequested) attorney’s fees. The court also

rejected Kimmel’s January 2010 Appraisal as a “devious tactic” by

U.S. Bank to increase the amount of its unsecured claim in order

to defeat Class 4 acceptance of the First Plan, and it struck it

from the record as an improper report prejudicial to Caviata

because it contained no supporting data, exhibits, or basis for

its $20 million value. Mem. Dec., Apr. 12, 2010, Doc. No. 152

pp. 8-9. The court found that what data it did provide was
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

 U.S. Bank appealed the confirmation order on several 7

grounds, including the bankruptcy court’s finding that the First

Plan was feasible. While the appeal was pending, Caviata filed an

objection to U.S. Bank’s claim. The parties eventually entered

into a stipulation resolving the appeal and claim objection and

agreed that U.S. Bank would have a claim of $29,564,308.77 against

Caviata. The order approving the stipulation was entered on

January 12, 2011. The appeal of the confirmation order was

dismissed on January 24, 2011.

-9-

contradicted by other data within the declaration and/or Kimmel’s

testimony at the confirmation hearing. Accordingly, the court

accepted Kimmel’s June 2009 Appraisal of the Property for

$23,100,000, which Caviata had accepted as its own, and determined

that U.S. Bank held a secured claim in that amount.

As for the interest rate on the secured portion of

U.S. Bank’s claim, the bankruptcy court found Dr. Wazzan’s

testimony credible and consistent with Till v. SCS Credit Corp.,

541 U.S. 465 (2004). The court found Zelle’s approach flawed and

not credible because it resulted in a negative LTV ratio due to

failing to bifurcate U.S. Bank’s claim. The court further found

that Zelle’s “coerced” loan approach had been rejected in Till. 

As a result, Dr. Wazzan’s proposed interest rate of 4.75% applied.

Finally, as to feasibility, the bankruptcy court found

Pennington’s testimony credible that Caviata should be able to

sell the Property for at least $34 million within three years,

when the cycle of downturn would improve.7

Per the First Plan, Caviata began making monthly payments of

$120,500.53 to U.S. Bank in June 2010. To date, Caviata’s plan

payments are current.

C. Caviata’s second chapter 11 case.

Approximately fifteen months after confirming the First Plan
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

-10-

and almost two years after its first chapter 11 filing, Caviata

filed its second chapter 11 case on August 1, 2011 (Case No. 11-

52458). Caviata valued the Property at $23,420,928 in its

schedules filed on August 23, 2011. U.S. Bank’s appraiser, Scott

Beebe, conducted an appraisal of the Property as of August 23,

2011, and he asserted that the Property’s value had decreased to

$20,900,000.

On September 9, 2011, U.S. Bank moved to dismiss Caviata’s

second bankruptcy case. In short, U.S. Bank contended the second

filing was a bad faith filing and a backdoor attempt to circumvent

the prohibition on modifying a substantially consummated plan

under § 1127. While acknowledging that some courts have created a

limited “good faith” exception to this prohibition, U.S. Bank

contended that Caviata failed to demonstrate that an extraordinary

change in circumstances occurred after substantial consummation of

the First Plan, which substantially impaired its performance under

the First Plan. U.S. Bank argued that “extraordinary

circumstances” did not include decreased income, increased

expenses, or reasonably foreseeable changes in debtor’s

operations, the market or the economy. U.S. Bank noted that in

Caviata’s first quarter report filed on April 25, 2011, Caviata

represented that it did not foresee any circumstances that would

affect its ability to perform under the First Plan. A hearing on

the motion to dismiss was set for October 7, 2011.

Caviata opposed dismissal, contending that substantial and

fundamental changes had seriously impacted the finance and real

estate markets beyond any level that could have been foreseen,

and, at the time of confirmation, Caviata did not and could not
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

-11-

have known that recovery from the 2007-2009 recession would not

occur as predicted, but, rather, the economy would suffer a

relapse. Although it was not yet in default under the First Plan,

Caviata contended that modifications were necessary or it would be

unable to fully perform its confirmed plan. Caviata acknowledged

that while courts have typically determined that changed market

conditions alone are insufficient to warrant a second chapter 11

filing, such cases were based upon “general” market fluctuations,

not the global economic crisis the world was currently

experiencing. Notwithstanding these cases, argued Caviata, courts

have allowed a second filing when an “unforeseeable” economic

change fundamentally changes market conditions, citing Lincoln

Nat’l Life Ins. Co. v. Bouy, Hall & Howard and Assocs. (In re

Bouy, Hall & Howard and Assocs.), 208 B.R. 737, 745 (Bankr. S.D.

Ga. 1995) [hereinafter “Bouy Hall”]. Because Caviata believed

this matter involved highly disputed factual issues requiring

evidentiary support and expert testimony, it asked the court to

set an evidentiary hearing.

In support of its opposition, Caviata offered the declaration

of banking expert Tod Little (“Little”), who was retained to opine

on the state of the country’s economy as of March 3, 2010 –-- the

First Plan confirmation hearing date. Little offered his

declaration in lieu of a forthcoming report he claimed would

support his testimony at a future evidentiary hearing on

U.S. Bank’s motion. According to Little, no one, including

Caviata, could have predicted at the time of confirmation of the

First Plan in 2010 that a relapse in the recession not seen since

the Great Depression of the 1930s would occur, or that it would
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

-12-

continue for such an extended period of time. Typically, asserted

Little, national economic recessions cycle and recover within 10-

22 months, with the average duration being 18 months. Little

claimed that significant, unforeseen national economic changes

during the past eighteen months seriously impacted Caviata’s

ability to fully perform the First Plan. These events included:

! The U.S. experienced an economic recession during 2007-

2009 which significantly impacted the residential and

commercial real estate markets causing real estate values

to plummet, banks to collapse, and lending to become nonexistent;

! In late 2009/early 2010 the federal government adopted

numerous reforms, instituted stimulus programs and

created incentives for banks and lending institutions;

! In early 2010, prominent national economists, including

Fortune 500 CEOs and the chairman of the federal reserve,

and even President Obama, were touting that our economy

had “hit bottom” and could only improve;

! The European banking system meltdown compounded the

U.S. Banking crisis;

! A market for new loans or refinancing of existing loans

still did not exist due to few active lenders and

stricter underwriting guidelines, and no resolution to

the banking system problem would be achieved anytime

soon;

! FDIC policy changes, which caused lenders to benefit more

from foreclosure than working out agreements with

borrowers, added to the disruption of the normal economic

relationship between borrowers and banks.

In further support of its opposition, Caviata also offered a

declaration from Pennington. Pennington stated that he had

contacted no less than five lenders seeking refinancing of

Caviata’s existing loan on the Property, but all five had advised

him that no financing was available due to the credit markets and

the restrictions placed on banks by the FDIC. The lenders also

advised Pennington that until the economy recovered, the chances
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

 Caviata had also intended to submit a declaration from real 8

estate expert Reese Perkins (“Perkins”) concerning the local

market and how values had been impacted by the unforeseen changed

circumstances occurring since early 2010, but Perkins was out of

town and unavailable until just days before the dismissal hearing.

-13-

of Caviata obtaining a new loan or refinancing for the Property

were nonexistent. Pennington further represented that he was also

seeking to sell the Property for $32,400,000, but was told by

several brokers that until the credit markets opened up to buyers

of multi-residential properties, it was highly doubtful the

Property would sell. Finally, Pennington stated that because of

the representations by President Obama and the nation’s leading

economists in early 2010 that the recession had ended and had

entered a state of recovery, he believed the First Plan’s threeyear term was reasonable at the time of confirmation, and he could

not have foreseen the changes articulated by Little that occurred

after confirmation of the First Plan.8

Caviata filed a proposed second plan and disclosure statement

on September 27, 2011, which extended the time within which it was

required to sell or refinance the Property from three years to ten

years, reduced the amount paid to U.S. Bank from $29,564,308.77 to

$22,420,928.00, and reduced the interest rate on U.S. Bank’s

secured claim from 4.75 to 4.00%.

In its reply, U.S. Bank contended that from the beginning of

the first bankruptcy case its experts had warned Caviata that the

First Plan was a pipe dream, but, instead of heeding these

warnings, Caviata essentially stuck its head in the sand and went

forward with its First Plan. According to U.S. Bank, Caviata’s

opposition failed to explain how a recession that was present
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

-14-

during the first bankruptcy case and was still present during the

second bankruptcy case was “unforeseeable,” or how it was a

“changed” market condition when the market was just as bad now as

it was then. U.S. Bank further argued that mere opinion of public

figures on the improved state of the economy in early 2010 was not

evidence that the recession was an unforeseeable circumstance or a

changed market condition. U.S. Bank opposed an evidentiary

hearing as a waste of the court’s time; it was common knowledge

that the economy was bad in both 2010 and 2011.

The hearing on U.S. Bank’s motion to dismiss took place on

October 7, 2011, before the Hon. Bruce T. Beesley. Before hearing

oral argument, the bankruptcy court recited a brief history of

Caviata’s first bankruptcy case and noted that the First Plan had

been ongoing for about “10 months.” Hr’g Tr., Oct. 7, 2011, 2:8-

19. Caviata’s counsel confirmed the court’s version of the facts. 

Id. at 2:20. The court then noted that it had considered the

pleadings, declarations, attachments, and parts of the First Plan

and proposed second plan. It summarized the parties’ positions

regarding the First Plan and then posed the following question to

Caviata:

So I have difficulty understanding how this is a surprise

to the debtor as a basis for filing a new . . . Chapter

11 while the existing Chapter 11 is pending because you

have to show as I understand it some significant change

in circumstances that wasn’t anticipated. And I guess --

my question is and what I have real problems with is I

can’t see given the objection by the secured party how

they can say that their -- we had no inkling that this

was going to happen because they were fighting with

somebody who says exactly what has happened did happen.

It’s very difficult for me to understand how that can be

a surprise, but I’m happy to hear from you.

Id. at 5:4-17. Caviata’s counsel began by noting that an
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

-15-

evidentiary hearing was necessary because not all of the facts

were set forth in the declarations. The court responded by asking

counsel for an offer of proof as to what facts he would present if

an evidentiary hearing were granted. Counsel stated that although

he had not yet obtained a declaration from Perkins, Little and

Pennington would testify that the economy taking such a turn for

the worse was an unforeseeable event, and it fundamentally changed

the real estate market by eliminating funding for new loans. Id.

at 6:11-8:12.

Caviata’s counsel and the court then engaged in a lengthy

colloquy about Bouy Hall. Id. at 8:12-9:25. When the court

opined that loans were also not available when the First Plan was

confirmed in April 2010, counsel responded that no evidence had

been presented at that time about the possibility of a recession

of this magnitude, and no such evidence could have been presented

because no one knew or thought it could happen. Had there been

any such evidence, argued counsel, the First Plan would not have

been confirmed. Counsel further noted that although U.S. Bank

disputed the First Plan’s feasibility, its experts had never

opined that the real estate market would collapse or that no

funding would be available during the First Plan’s term.

U.S. Bank contended that during the proceedings culminating

in confirmation of the First Plan, it had articulated doubts about

the Property appreciating in three years to a value sufficient to

pay off its claim. U.S. Bank further argued that the fact the

loan market was currently tight was not a new fact supporting the

extraordinary change required for filing a second case; the market

was also tight in 2010 and everyone knew it. Finally, U.S. Bank
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

-16-

argued that an evidentiary hearing was not necessary for a motion

to dismiss.

After hearing further argument from the parties, the

bankruptcy court orally granted U.S. Bank’s motion to dismiss. 

The court again noted that it had reviewed the pleadings,

declarations, a number of cases including Bouy Hall, and § 1141.

Hr’g Tr., Oct. 7, 2011, 25:11-14. It then entered its findings

and conclusions on the record:

[A] plan of reorganization which is confirmed is a

contract between two parties. It’s between the secured

lender here and the debtors, and the fact that the

economy changes doesn’t relieve people from their

contractual obligations. If I have purchased a car and

because of the economy I lose my job, I don’t get to go

back to the person who financed my car and say I want to

do this over because I don’t have enough money.

I think the economy is terrible, but I think that in 2010

there were certainly inklings that the economy was very

bad. It was only 10 months ago and the situation has not

deteriorated that badly in the last 10 months. It’s been

awful. The debtor when they made their plan basically

said, you know, our best guess that we can get confirmed

is we think we can get this done in three years. They

were just wrong. And I’m not saying that’s a bad faith

issue in this case, but I don’t think just being wrong

that the economy is worse than they thought it was going

to be is a basis for filing a new plan.

Id. at 25:15-26:8. As a result of the dismissal, Caviata was

still operating under the First Plan. Caviata’s request for an

evidentiary hearing was denied. Id. at 26:19-22.

The bankruptcy court entered an order granting U.S. Bank’s

motion to dismiss Caviata’s second chapter 11 case on October 27,

2011. Caviata timely appealed.

II. JURISDICTION

The bankruptcy court had jurisdiction under 28 U.S.C.

§§ 157(b)(2)(A) and 1334. We have jurisdiction under 28 U.S.C.
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

-17-

§ 158.

III. ISSUES

1. Did the bankruptcy court abuse its discretion when it denied

Caviata’s request for an evidentiary hearing?

2. Did the bankruptcy court abuse its discretion in dismissing

Caviata’s second chapter 11 case?

IV. STANDARDS OF REVIEW

We review for an abuse of discretion the bankruptcy court’s

decision not to conduct an evidentiary hearing. Zurich Am. Ins.

Co. v. Int’l Fibercom, Inc. (In re Int’l Fibercom, Inc.), 503 F.3d

933, 939 (9th Cir. 2007).

We review the bankruptcy court’s decision to dismiss a case

for abuse of discretion. Leavitt v. Soto (In re Leavitt), 171

F.3d 1219, 1223 (9th Cir. 1999).

In applying the abuse of discretion standard, we first

“determine de novo whether the [bankruptcy] court identified the

correct legal rule to apply to the relief requested.” United

States v. Hinkson, 585 F.3d 1247, 1262 (9th Cir. 2009) (en banc). 

If it applied the correct legal rule, we then review the

bankruptcy court’s fact findings for clear error. Id. at 1262 &

n.20. We must affirm the bankruptcy court’s fact findings unless

we conclude that they are “(1) ‘illogical,’ (2) ‘implausible,’ or

(3) without ‘support in inferences that may be drawn from the

facts in the record.’” Id. at 1262.

We may affirm on any basis supported by the record. Pac.

Capital Bancorp, N.A. v. E. Airport Dev., LLC (In re E. Airport

Dev., LLC), 443 B.R. 823, 828 (9th Cir. BAP 2011).
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

 Rule 9014(d) provides: 9

 (d) Testimony of witnesses. Testimony of witnesses with

respect to disputed material factual issues shall be taken in

the same manner as testimony in an adversary proceeding.

-18-

V. DISCUSSION 

A. The bankruptcy court did not abuse its discretion when it

denied Caviata’s request for an evidentiary hearing.

Caviata asserts that it requested an evidentiary hearing to

show: (1) extraordinary changed circumstances occurred in the

economy and market (other than a general decline) that warranted

its second chapter 11 filing; and (2) that the extraordinary

changed circumstances were unforeseeable to Caviata. Caviata

argues that because a factual dispute between the parties existed

on these issues, the bankruptcy court was required to provide

procedures and schedule an evidentiary hearing on the matter. 

Caviata argues that, because the bankruptcy court weighed the

evidence before it knowing that the record was incomplete and yet

made its determination to dismiss the second chapter 11 filing,

the court violated Caviata’s due process rights and severely

prejudiced Caviata by not allowing it to present its entire case. 

We disagree.

U.S. Bank’s motion to dismiss is a contested matter subject

to Rule 9014. See Rule 1017(f)(1). A contested matter hearing

under Rule 9014, as amended in 2002, “ordinarily requires trial 9

testimony in open court with respect to disputed material factual

issues in the same manner as an adversary proceeding.” Khachikyan

v. Hahn (In re Khachikyan), 335 B.R. 121, 126 (9th Cir. BAP 2005). 

The advisory committee’s note provides: 
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

-19-

Subdivision (d) is added to clarify that if the motion

cannot be decided without resolving a disputed material

issue of fact, an evidentiary hearing must be held at

which testimony of witnesses is taken in the same manner

as testimony is taken in an adversary proceeding or at a

trial in a district court civil case. Rule 43(a),

rather than Rule 43(e)[now 43(c)], F.R.Civ.P., would

govern the evidentiary hearing on the factual dispute. 

Under Rule 9017, the Federal Rules of Evidence also

apply in a contested matter. Nothing in the rule

prohibits a court from resolving any matter that is

submitted on affidavits by agreement of the parties.

Rule 9014(d), Advisory Comm. Note to 2002 amendments. 

Consequently, through Rule 9017, such testimonial evidence is

taken pursuant to Civil Rule 43(a), unless the parties agree to

submit the contested matter on affidavits. Such agreement to use

affidavits did not exist between the parties in this case. If a

court determines that no “disputed material factual issues” exist,

it may then hear a motion on affidavits, oral testimony or

depositions when the motion relies on facts outside the record. 

See Civil Rule 43(c) incorporated by Rule 9017.

Section 1112(b) provides for the dismissal of a debtor’s case

for cause “after notice and a hearing.” “Notice and a hearing” is

defined in § 102(1)(A) to mean “after such notice as is

appropriate in the particular circumstances, and such opportunity

for a hearing as is appropriate in the particular

circumstances[,]” subject to the discretionary limitation imposed

by Rule 9014(d). The bankruptcy court specifically noted its

partial review of the record in the first bankruptcy case in

conjunction with the affidavits submitted in the second case.

Caviata’s approved disclosure statement in the first case

identified through its designated risks the factual issues that

Caviata now argues were unforeseen at the time of confirmation in
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

-20-

the first case. Caviata specifically disclosed in § 12.1:

(a) the value of the Debtor’s property has suffered

significantly as a result of the downturn in the United

States economy since the summer of 2007. There is no

assurance that the economy will turn around and that

property values, in general, or the value of the

Debtor’s Property, in particular, will not continue to

decline; (b) the Plan is dependent, at least in part, on

continued leasing of the Property. There is no

assurance that the Debtor’[s] predictions of the rate of

stabilizing the Property and achieving performing leases

will occur, or that these predictions will occur within

the time period projected in the Plan; (c) because the

Plan is dependent on continued leasing of the Property,

there is a risk that the projections of net operating

income, with which to pay the Allowed Claims of

Creditors, may not be met; (d) the Debtor may not be

able to sell its Property; (e) the Debtor may not be

able to secure alternative financing to satisfy the

Allowed Secured Claim of Cal National or the Allowed

Secured Claim of Specialty Trust; (f) if Cal National is

not paid in accordance with the Plan, and the Debtor is

unable to sell the Property or to secure alternative

financing, Cal National may foreclose on the Property.

At the confirmation hearing on March 3, 2010, U.S. Bank also

raised issues through its expert, William G. Kimmel, concerning

the ability to refinance, Hr’g Tr., Mar. 3, 2010, 126:20-127:6,

the poor global economic situation, id. 146:15-19, and the status

of the housing market, id. 126:15-19.

In the second case, Caviata submitted declarations from

Little and Pennington in support of its opposition to U.S. Bank’s

motion to dismiss. The bankruptcy court considered these

declarations. The court went one step further and asked Caviata’s

counsel for an offer of proof. Counsel stated that although he

had not yet obtained a declaration from Perkins, Little and

Pennington would testify that the worsening economy from 2010 to

2011 was an unforeseeable event, and that it fundamentally changed

the real estate market by eliminating funding for new loans.

Caviata set forth similar disclosures in the approved
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

-21-

disclosure statement filed in the first case. Additionally,

U.S. Bank provided such evidence during the confirmation hearing

in the first case. The material facts before the bankruptcy court

in the second case were not disputed. Such evidence already

existed in the record from the first case and was not disputed in

the second case. Any economic changes alleged by Caviata were

foreseeable, as affirmed by the evidence submitted by U.S. Bank in

both the first and second cases and by Caviata in its approved

disclosure statement in the first case. Consequently the factual

issues were not disputed as required under Rule 9014(d). “Where

the . . . core facts are not disputed, the bankruptcy court is

authorized to determine contested matters . . . on the pleadings

and arguments of the parties, drawing necessary inferences from

the record.” Tyner v. Nicholson (In re Nicholson), 435 B.R. 622,

636 (9th Cir. BAP 2010) (quoting Gonzalez–Ruiz v. Doral Fin. Corp.

(In re Gonzalez–Ruiz), 341 B.R 371, 381 (1st Cir. BAP 2006)). We

conclude the bankruptcy court had sufficient undisputed evidence

before it to issue its ruling without any further evidentiary

hearing and did not abuse its discretion in denying the request

for an evidentiary hearing. In re Int’l Fibercom, Inc., 503 F.3d

at 939; Murphy v. Schneider Nat’l, Inc., 362 F.3d 1133, 1139 (9th

Cir. 2004).

B. The bankruptcy court did not abuse its discretion in

dismissing Caviata’s second chapter 11 case.

Under § 1141(a), the terms of a confirmed plan are binding on

all parties. Section 1127(b) provides that a chapter 11 plan may

be modified before but not after “substantial consummation” of the
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

 “Substantial consummation” is defined in § 1101(2) as: 10

(A) transfer of all or substantially all of the property

proposed by the plan to be transferred;

(B) assumption by the debtor or by the successor to the

debtor under the plan of the business or of the management of

all or substantially all of the property dealt with by the

plan; and

(C) commencement of distribution under the plan.

The parties do not dispute that the First Plan has been

substantially consummated.

-22-

plan. Taken together, “§§ 1127(b) and 1141(a) impose an 10

important element of finality in chapter 11 proceedings, allowing

parties to rely on the provisions of a confirmed reorganization

plan.” Integon Life Ins. Corp. v. Mableton-Booper Assocs. (In re

Mableton-Booper Assocs.), 127 B.R. 941, 943 (Bankr. N.D. Ga.

1991).

Although § 1127(b) prohibits modification of a substantially

consummated plan, several courts have held that serial chapter 11

filings are not per se impermissible, and that a second plan may

modify the first plan where there has been an unforeseeable or

unanticipated change in circumstances. See Elmwood Dev. Co. v.

Gen. Electric Pension Trust (In re Elmwood Dev. Co.), 964 F.2d

508, 511-12 (5th Cir. 1992) (“[A] second petition would not

necessarily contradict the original proceedings because a

legitimately varied and previously unknown factual scenario might

require a different plan to accomplish the goals of bankruptcy

relief.”) (citing Johnson v. Home State Bank, 501 U.S. 78 (1991));

PNC Mortg. v. Deed & Note Traders, LLC (In re Deed & Note Traders,

LLC), 2012 WL 1191891, at *6-7 (9th Cir. BAP Apr. 5, 2012); In re

Woods, 2011 WL 841270, at *3-4 (Bankr. D. Kan. Mar. 7, 2011); In

re 1633 Broadway Mars Rest. Corp., 388 B.R. 490, 500 (Bankr.
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

 The Seventh Circuit in Fruehauf Corp. v. Jartran, Inc. 11

(In re Jartran, Inc.), 886 F.2d 859 (7th Cir. 1989), held that

serial bankruptcy filings are not per se impermissible, but it did

not expressly discuss unforeseen or unanticipated changed

circumstances as a basis for a serial filing.

-23-

S.D.N.Y. 2008); In re Motel Props., Inc., 314 B.R. 889, 895-96

(Bankr. S.D. Ga. 2004); In re Tillotson, 266 B.R. 565, 569 (Bankr.

W.D.N.Y. 2001); In re Adams, 218 B.R. 597, 601-02 (Bankr. D. Kan.

1998); In re Northtown Realty, Co., 215 B.R. 906, 913 (Bankr.

E.D.N.Y. 1998); In re Woodson, 213 B.R. 404, 405-06 (Bankr. M.D.

Fla. 1997); Bouy Hall, 208 B.R. at 743-44; In re Del. Valley

Broadcasters L.P., 166 B.R. 36, 40 (Bankr. D. Del. 1994); In re

Roxy Real Estate Co., 170 B.R. 571, 576 (Bankr. E.D. Penn. 1993);

In re Mableton-Booper Assocs., 127 B.R. at 943-44 (“Where

unexpected circumstances doom the debtor’s chances for success,

binding the parties to the original confirmation decision in the

name of finality would frustrate [the goal of reorganization], and

the confirmation decision should be reevaluated.”); In re Casa

Loma Assocs., 122 B.R. 814, 817-18 (Bankr. N.D. Ga. 1991). 11

However, “[e]ven extraordinary and unforeseeable changes will not

support a new Chapter 11, if these changes do not substantially

impair the debtor’s performance under the confirmed plan.” In re

Adams, 218 B.R. at 602; see also In re Woods, 2011 WL 841270, at

*4. Thus, for the bankruptcy court to consider a debtor’s second

chapter 11 filing and plan, the unforeseeable or unanticipated

change in circumstances must have affected the debtor’s ability to

fully perform under its confirmed plan. In re Woods, 2011 WL

841270, at *4; In re Adams, 218 B.R. at 602; In re Northtown

Realty, Co., 215 B.R. at 913; In re Woodson, 213 B.R. at 405; In
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

-24-

re Roxy Real Estate, 170 B.R. at 576; In re Casa Loma Assocs., 122

B.R. at 818. Examples of unforeseen changed circumstances in the

above cases include a change in federal law affecting tenancy of

an apartment building, termination of service by major airlines

which had provided vital customers for an airport hotel, lost

crops due to hail, cattle and pasture lost due to fire, and

substantial adverse judgments.

In cases of economic change, courts have held generally that

changed market conditions alone are insufficient to warrant a

second chapter 11 filing. In re Elmwood Dev. Co., 964 F.2d at

512-13 (event of national “credit crunch” in early 1990’s might be

a changed circumstance justifying a second chapter 11 filing but

appellate court upheld bankruptcy court’s decision to reject it);

In re 1633 Broadway Mars Rest. Corp., 388 B.R. at 502 n.17

(recession of late 2007 was a change in general economic condition

and insufficient basis for second chapter 11 filing); In re Motel

Props., Inc., 314 B.R. at 896 (foreseeable risk of operating any

business is the fluctuation in supply and demand and its impact on

the market); In re Tillotson, 266 B.R. at 569 (changes associated

with realities of economic change are an insufficient reason to

allow second chapter 11 filing); In re Adams, 218 B.R. at 602

(same); In re Northtown Realty Co., 215 B.R. at 913; Bouy Hall,

208 B.R. at 745; In re Roxy Real Estate Co., 170 B.R. at 576 (a

change in market condition for rental properties or real estate is

insufficient changed circumstance); In re Mableton-Booper Assocs.,

127 B.R. at 944; In re Casa Loma Assocs., 122 B.R. at 818.

However, “where a debtor experiences a ‘fundamental change in

its market’ and not the typical fluctuations of supply and demand,
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

-25-

if unforeseeable, the change may represent sufficiently changed

circumstances to warrant a second filing.” Bouy Hall, 208 B.R. at

745; In re Motel Props., Inc., 314 B.R. at 896 (second filing

permitted when an unforeseeable economic event fundamentally

changes the market conditions). “When an unforeseeable economic

change effects a significant change in the market, a second filing

may be permitted.” Bouy Hall, 208 B.R. at 745 (emphasis in

original).

Cases in which a chapter 11 debtor has been successful at

showing unforeseen changed circumstances to warrant a second

chapter 11 filing are clearly the exception rather than the rule. 

Bouy Hall and In re Casa Loma Associates are two of those rare

exceptions. In Bouy Hall, after the debtor had confirmed and

substantially consummated its chapter 11 plan, the debtor’s hotel

business was damaged when a nearby airport which supplied much of

the hotel’s customer base relocated its terminal to a location

further away. Id. at 740. In addition, two major airlines

eliminated their service into the airport and another airline had

filed a chapter 7 bankruptcy, further eroding the debtor’s

customer market. Id. Based upon this showing, the bankruptcy

court overruled the creditor’s argument that debtor’s problems

were either foreseeable or purely economic and denied its motion

to dismiss the debtor’s second chapter 11 case. Id. at 746. 

According to the court, the debtor had not only demonstrated that

the demand for its service decreased, but also that the market

itself had been significantly altered. Id. at 745.

In In re Casa Loma Associates, the bankruptcy court held that

an unanticipated change in federal law prohibiting “adults only”
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

-26-

apartment complexes, which severely affected debtor’s tenancy

rates, and discovery of fire damage and structural defects in an

apartment building, which were unknown at the time of plan

confirmation, were changed circumstances warranting the second

chapter 11 filing. 122 B.R. at 818-19. Accordingly, dismissal of

debtor’s second chapter 11 case was denied. Id. at 819. The

bankruptcy court did note, however, that the result would have

been different had the debtor relied merely on changed market

conditions to support the second filing. Id. at 818.

Caviata asserts that fundamental and significant changes in

the national and local economy have taken place since it confirmed

the First Plan, which were not only unforeseeable, but seriously

impacted its ability to fully perform the First Plan. Caviata

argues that the bankruptcy court ignored the case law and failed

to consider whether the change in the economy was a general market

decline, as opposed to a fundamental economic change effecting a

significant change in the market. We disagree.

In reviewing the statements made by the bankruptcy court at

the dismissal hearing, it is clear that it considered the

relevant, although not binding, case law, and that it recognized

what extraordinary circumstances Caviata needed to show to permit

the second chapter 11 filing. The court noted that it had

reviewed Bouy Hall and several other cases, and it even discussed

some of the facts in Bouy Hall on the record. The court also

warned Caviata at the beginning of the hearing that the alleged

changed circumstances were not unforeseeable based on U.S. Bank’s

objections to the First Plan. While agreeing that the current

economy is “terrible,” the bankruptcy court concluded Caviata had
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

-27-

not shown that at the time of confirmation of the First Plan it

was unforeseeable that the economy would remain depressed and not

improve as Caviata had predicted.

Caviata also argues that the bankruptcy court’s findings are

not supported by the record and are contrary to the evidence

presented. Specifically, Caviata contends the bankruptcy court

failed to consider its evidence that significant changes occurred

after confirmation of the First Plan that could not have been

foreseen by Caviata. We now review the evidence presented in this

case to see if it supports the bankruptcy court’s decision.

In U.S. Bank’s objection to confirmation of the First Plan,

Kimmel opined in his declaration that because the real estate

market showed no signs of improving in the near future and because

financing was unavailable, he believed the Property’s value was

now only $20 million, down from his previous June 2009 Appraisal

of $23,100,000. However, the bankruptcy court struck Kimmel’s

declaration from the record. Nonetheless, Kimmel testified at the

confirmation hearing in March 2010 that since June 2009, financing

had become more difficult to obtain, and buyers were not willing

to pay the prices they were before due to larger down payment

requirements. However, on cross-examination, Kimmel admitted that

the apartment market in Reno/Sparks was getting better. Interest

rate expert Zelle testified that Caviata’s plan to payoff

U.S. Bank in three years was “a dream” and “a fairy tale,” and

that the Property would have to become “Disneyland in Reno” in

order to pull it off. The bankruptcy court rejected Zelle’s

“coerced” loan approached to support his 9.25% interest rate. 

However, Zelle, who brokers commercial real estate loans, also
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

-28-

testified at the confirmation hearing that he did not see the real

estate market improving in three years as Caviata predicted.

In support of the First Plan, Caviata offered the testimony

of interest rate expert, Dr. Wazzan, and Caviata’s manager,

Pennington. Dr. Wazzan testified at the confirmation hearing that

although forecasting was difficult, the empirical data showed that

things were improving. Pennington, with his thirty-plus years of

experience in large-scale real estate development in Northern

Nevada, testified that he believed conditions would improve and

the Property, which was worth $23,100,000 at the time of

confirmation, would be worth $34 million within the next couple of

years because of its desirability and uniqueness in the market. 

Pennington offered no further details as to why he thought the

Property’s value would appreciate to such a degree in a rather

short period of time.

In support of its motion to dismiss Caviata’s second chapter

11 case, U.S. Bank did not offer any direct evidence, but it did

ask the bankruptcy court to take judicial notice of Caviata’s

first quarter report filed on April 25, 2011. In that report,

Caviata represented that it did not foresee any circumstances that

would affect its ability to perform under the First Plan. 

Arguably, some (if not all) of the catastrophic events Little

described had occurred by then, yet Caviata did not foresee any

problems fully consummating the Plan in April 2011, which was

approximately four months before the second filing.

In its opposition to dismissal, Caviata offered the Little

and Pennington declarations. Little articulated a laundry list of

events occurring after confirmation of the First Plan that he
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

 The bankruptcy court also found that Caviata’s second 12

chapter 11 filing was not in bad faith, a necessary element for a

(continued...)

-29-

opined no one, including Caviata, could have predicted at the time

of confirmation of the First Plan in 2010, which warranted the

second chapter 11 filing. Pennington stated that, because of the

representations by President Obama and the nation’s leading

economists in early 2010 that the recession had ended and had

entered a state of recovery, he believed the First Plan’s threeyear term was reasonable at the time of confirmation. Pennington

asserted that he could not have foreseen the changes articulated

by Little that occurred post-confirmation. Notably, during his

testimony at the confirmation hearing on the First Plan,

Pennington never stated that his belief that the market would

improve or that the Property would be worth $34 million in the

next couple of years was based on these early 2010 representations

by national figures. Pennington also stated that he contacted

several lenders seeking refinancing of Caviata’s existing loan on

the Property, and all had advised him that no financing was

available due to the credit market and the restrictions placed on

banks by the FDIC. Pennington did not offer any loan application

documents or declarations from these lenders in the record. He

also did not offer any declarations from the several brokers he

claimed he spoke to about listing the Property for sale.

Not finding the testimony offered by Little and Pennington

persuasive, the bankruptcy court found that a decline in the

economy between 2010 and 2011 was not an unforeseeable and changed

circumstance justifying Caviata’s second chapter 11 filing. 12
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

(...continued) 12

successful second chapter 11 filing. In re Elmwood Dev. Co., 964

F.2d at 511-12; In re Jartran, Inc., 886 F.2d. at 866-67; In re

Deed & Note Traders, LLC, 2012 WL 1191891, at *7; In re 1633

Broadway Mars Rest. Corp., 388 B.R. at 500; In re Motel Props.,

Inc., 314 B.R. at 896; In re Tillotson, 266 B.R. at 569; In re

Adams, 218 B.R. at 601-02; In re Northtown Realty, Co., 215 B.R.

at 913; In re Woodson, 213 B.R. at 405-06; Bouy Hall, 208 B.R. at

744; In re Del. Valley Broadcasters L.P., 166 B.R. at 40; In re

Roxy Real Estate Co., 170 B.R. at 576; In re Mableton-Booper

Assocs., 127 B.R. at 943-44; In re Casa Loma Assocs., 122 B.R. at

817-18. U.S. Bank does not dispute this finding, so we need not

elaborate on the point.

-30-

Caviata in its approved disclosure statement from the first case

specifically highlighted that risk. We cannot conclude, on this

record, that the bankruptcy court’s findings are illogical,

implausible, or without support in inferences that may be drawn

from the facts in the record. Hinkson, 585 F.3d at 1262. 

Although it may be that no one could have anticipated the

precipitous decline in the economy that occurred in 2008, in late

2009/early 2010, when Caviata filed and sought confirmation of the

First Plan, the real estate market in many parts of the country,

including Northern Nevada, was still depressed. Even Little

testified that the lending market at that time was “nonexistent.” 

Some people believed in early 2010 that the economy was

recovering; some believed that recovery was still to be seen. As

the bankruptcy court put it, Caviata took its “best guess” that

things would only get better in the next three years, but it

guessed wrong. Even if the economic changes from 2010 to 2011

were as catastrophic as Little indicated, it was not unforeseeable

that the real estate and lending markets would not recover as soon

as some, including Caviata, had thought especially given Caviata’s

disclosure of risks and facts in its approved disclosure
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

-31-

statement.

Upon the request of a party in interest, the bankruptcy court

may dismiss or convert a chapter 11 case for “cause.” § 1112(b). 

Here, the “cause” relied upon by U.S. Bank and found by the

bankruptcy court was Caviata’s inability to show an extraordinary

change in circumstances which substantially impaired its

performance under the First Plan to warrant the second chapter 11

filing. Because the bankruptcy court applied the correct legal

standard, and its factual findings are not illogical, implausible,

or without support in the record, we conclude that it did not

abuse its discretion in dismissing Caviata’s second chapter 11

case. Accordingly, Caviata is still operating under the First

Plan.

VI. CONCLUSION

For the foregoing reasons, we AFFIRM.