N O T FO R PUB L ICAT IO N UNITED STATES C OUR T OF APPEALS FOR THE NINTH C IR C UIT
In the M a tte r of: NOVEM B E R 2005 LAND INVESTOR S, LLC , De

btor,
W ILM INGTON TR

UST, NATIONAL ASSOC IATION, Plaintiff - Appe lle e , v. B OH PAR

K HIGHLANDS NV, L.P., De fe nda

nt - Appe lla

nt. No. 14-15272

D.C . No. 2:13 c v-00639- PM P-

(C W H) M EM O R ANDUM *

In re : NOVEM B ER

2005 LAND INVESTOR S, LLC , De

btor,
B OH PAR

K HIGHLANDS NV, L.P., Plaintiff - Appe lla nt, No. 14-15273

D.C . No. 2:13 c v-01204- PM P- (CW H)



# FIL ED
FEB 29 2016 M OLLY C. DW Y ER, CLERK U

. S

. CO URT O F APPEALS

* This disposition is not a ppropria te for public a t ion a

nd is not pre c e de nt e xc e pt a s provide d

by 9th C ir. R . 36-3.v.

W ILM INGTON TR

UST, NATIONAL ASSOC IATION, De fe nda

nt - Appe lle e . Appe a ls from

the Unite d

Sta t e s Distric t C ourt for the Distric t of Ne v a da Philip M . Pro, Se nior Distric t Judge , Pre siding Subm itte d Fe brua

ry 10, 2016 * * Sa n Fran c isc o , C a lifornia B e fore : TASHIM A and W . FLETC H ER , C irc uit Judge s a nd GETTLEM AN, * ** Se nior Distric t Judge
. Appe lla nt B OH Park Highla

nds NV, L.P. (“ B OH” ) and Appe l le e W ilm ington Trust, Na

tiona l Assoc iation (“ W ilm ington” ) dispute the va lue of B OH’ s inte re st in theproc e e ds from the sa le of a

prope rty in ba nkruptc y c ourt. B OH a rgue s tha t the c ontra c t be twe e n the pa rtie s – the C onditiona l R e pa ym e nt a nd Funding Agre e m e nt (“ C RFA” ) – e ntitle s it to a p proxim a te ly

$4.9 m illion of the proc e e ds. B OH a lso a

rgue s tha t 11 U.S.C . § 363(e ) e n title s it to a de quate prote c tion of its inte

re st in theprope rty , whic h the ba nkruptc y c ourt fa ile d to

** The pa

ne l una nim ously finds this c a se suita

ble for de c ision without ora l argum e nt. S

e e Fe d. R . App. P. 34(a )(2)(C ). *** The Honora

ble R obe rt W . Ge ttle m an, Se nior Unite d State s Distric t Judge for the Northe rn Distric t of Illinois, sitting by de signa tion. 2provide . W ilm ington re sponds tha t the C R FA only c re a te s a

c ontinge nt inte re st. B e c a use B O H’ s right to pa

ym e nt wa s not trigge re d by the sa l e of the prope rty , B OH’ s c ontinge nt inte re st unde r the C RFA is worthle ss. The ba nkruptc y c ourt a

nd distric t c o urt both a g re e d

with W ilm ington, gra

nting sum m ary judgm e nt in its fa vor. W e have jurisdic tion unde r 28 U.S.C . § 158(d)(1) a nd we a ffirm
. I.

“ W e re vie w de novo the distric t c o urt’ s de c ision on a n a ppe a l from a ba nkruptc y c ourt.” Barc lay

v . Mac k e nzie (In re AFI Holding, Inc .) , 525 F.3d 700, 702 (9th C i r. 2008) (c i ting In re Raintre e He althc areC orp. , 431 F.3d 685, 687 (9th C ir. 2005)). W e a lso re vie w de novo a ba nkruptc y c ourt’ s gra

n t of sum m ary judgm e nt. Id. A c ourt should gra nt sum m ary judgm e nt “ i f the ple a dings a nd supporting docum e nts, vie we d in the light m ost fa vora ble to the non-m oving pa

rty , show tha t the re is no ge nuine issue a s to a m at e ria l fa c t a

nd the m o ving pa

rty is
e ntitle d to judgm e n t a s a

m a tte r of la

w.” Id. (c i ting Fe d. R . C iv. P. 56(c )). Se c tion 363 of the

B a nkruptc y C ode gove rns the “ use , sa le , or le a se ” of the ba nkruptc y e sta te ’ s prope rty . 11 U.S.C . § 363. Se c tion 363(f) a uthoriz e s the sa le of a prope rty by the ba nkruptc y c ourt “ fre e and c le ar of any inte re st in suc h prope rty of a n e ntity othe r tha n the e sta te , only if . . . (4) suc h inte re s t is in bona fide dispute ; or (5) suc h e ntity c ould be c om

pe lle d, in a

le ga l or e quita

ble 3proc e e ding, to a c c e pt a m one y satisfa c tion of suc h inte re st.” Id. He re , the pa rtie s
a gre e tha t the prope rty

wa s sold fre e and c le ar of B O H’ s dispute d inte re st pursua

nt to § 363(f)(4) a

nd/or § 363(f)(5). In a he a ring re ga rding a § 363(f) fre e -a nd-c le ar sa le , § 363(p) provide s tha t

“ the e ntity

a sse rting a

n inte re st in prope rty

ha s the burde n of proof on theissue of the v a lidity , priority , or e xte nt of suc h inte re st.” 11 U.S.C . § 363(p)(2). To sa tisfy this burde n, the pa

rty a sse rting the inte re st m ust prove two things: “

First, a s a pre l im ina ry m a tte r, the pa

rty m ust prove tha

t it holds a

pe rfe c te d se c urity inte re st in post-pe tition re ve nue s to whic h its lie ns still rightly a tta c h. Se c ond, a

pa rty m ust prove the am o unt of m o ne y to whic h its lie ns a

tta c h.” C he que rs Inv
. Assoc

s. v . Hote l Sie rra Vista Ltd. P’ship (In re Hote l Sie rra Vista Ltd. P’ship) , 112 F.3d 429, 434 (9th C i r. 1997) (c i tations omitte d). Ac c ordingly , it is B OH’ s burde n to prove the v a lue of its inte re s t. The pa rtie s a gre e tha

t the C RFA de fine s the va lue of B OH’ s inte re st, but diffe r a s to how the c ontra c t should be inte rpre t e d. Unde r Se c tion 1 of the C RFA, B OH is e ntitle d to $4.9 million in B uilde r Exc e ss Funding only in the e ve nt tha

t a le nde r “ e xe rc ise s re m e die s” ( i.e
. initia te s a fore c losure ) and e le c ts to buy out B OH through pa

ym e nt of the B uilde r Exc e s s Funding. The pa rtie s a gre e tha

t Se c tion 1

4wa s not trigge re d by the § 363(f) sa le and tha

t B OH thus is not e

ntitle d to pa ym e nt of the B u ilde r Exc e s s Funding unde r this provision. Se c tions 2–26 pla

inly do not gra

nt B OH a ny a dditiona l a ffirm a tive right to the B uilde r Exc e ss Funding, be y ond wha t Se c tion 1 provide s . The only re m a ining
se c t ion in theC RFA is Se c tion 27, whic h sta te s: This Agre e m e nt sha ll a

utom a tic a lly te rm inate and be of no furthe r forc e and e ffe c t upon the e arlie r of (i) the d a te t ha t the B uilde r Exc e ss Funding e qua ls zer o . . . (ii) t

he m a king of an Assum ption Ele c t ion by any a pplic a ble Suc c e ssors pursua

nt to Se c t ion 1.a of this A gre e m e nt an d (iii) the pa ym e nt to B uilde r of the B uilde r Exc e s s Funding. B OH a rgue s tha t , onc e the ba

nkruptc y c o urt sold theprope rty , Se c tion 27(iii)
re quire d pa ym e nt of the B uilde r Exc e ss Funding to sa t isfy the C RFA. A fa i r re a d i ng of Se c tion 27 doe s not support B OH’ s position. Se c t ion 27 spe c ifie s c o nditions unde

r whic h the C RFA will te rm inate . Ye t de fining whe n the C RFA will e xpire is not the sam e a s c re ating a n inde pe nde n t right to pa

ym e nt. Se c tion 27(iii) sta

te s only tha t the C RFA w ill te rm i na te upon pa y m e nt of the B uilde r Exc e ss Funding to B OH, if suc h pa ym e nt is m a de be fore (i) the B uilde r Exc e ss Funding e qua ls z e ro, a nd (ii) a Suc c e ssor m a ke s a

n Assum ption Ele c tion unde r Se c tion 1.a
. It doe s not logic a lly follow tha

t pa ym e nt of the B uilde r Exc e ss Funding to B OH is the only wa y to te rm inate the C R

FA. M o re ove r, how the C RFA te rm inate s is irre le va nt if the C RFA c an only

be e nforc e d onc e a

lie nholde r 5invoke s its rights unde r Se c tion 1. B e c a

use Se c t ion 27 doe s not c re a te any
a lte rna tive m e c ha

nism for the C RFA’ s e nforc e m e nt, it c annot gra nt B OH a right to pa ym e nt inde pe nde nt of Se c tion 1. Thus, onc e the ba

nkruptc y c ourt sold the

prope rty pursua nt to § 363(f), Se c tion 1 c ould no longer be trigge re d a nd the C RFA no longe r ha d any le ga l
e ffe c t. As a c ontinge nt inte re st tha t e xpire d upon the sa l e of the prope rty , the C RFA ha s no va lue to B OH. B OH sugge sts tha

t e ve n if Se c tion 27(iii) doe s not e ntitle it to theB uilde r Exc e ss Funding, the

C RFA m ay

still ha ve som e inde p e n de nt va lue a s a c ontinge nt prope rty inte re st. Howe ve r, B OH offe rs no m e thod of va luation to de fine its inte re s t a n d the re c ord doe s not othe rwise indic a te what the va lue of tha t
c ontinge nt inte re st m ight be . B OH ha s not m e t its burde n ; thus, we c onc lude tha t its c o ntinge nt inte re st ha s no va lue . 11 U.S.C . § 363(p)(2); In re Hote l Sie rra Vista Ltd. P’ship , 112 F.3d a

t 434. I I. Se c tion 363(e ) prote c ts c onte ste d inte re sts in the ba nkruptc y e sta

te by
re quiring tha

t “ on re que st of a

n e ntity tha t ha s a n inte re s t in prope rty

use d, sold, or le a se d, or propose d to be use d, sold, or le a se d, by the truste e , the c o urt, with or without a he aring, sha ll prohibit or c ondition suc h use , sa le , or le a s e a s is ne c e ssa ry 6to provide a de quate prote c tion of suc h inte re st.” 11 U.S.C . § 363(e ). This

prote c tion is spe c i fic a lly

inte nde d to gua

rd a g a i nst a

situa tion whe re a

sa le unde r § 363(f) “ re sults in a

de c re a se in the va lue of suc h e ntity ’ s inte re st in suc h prope rty .” 11 U.S.C
. § 361(1). “ M ost ofte n, a de quate prote c t ion in c onne c tion with a sa le fre e and c le ar of othe r inte re sts will be to ha ve those inte re sts a

tta c h to the p roc e e ds of the sa le .” H.R . R e p. No. 95-595, 95th C ong., 1st Se s s. 345 (1977); S. R e p . No. 95-989, 95th C ong., 2d Se ss. 56 (1978), reprinte d in 1978 U.S.C .C .A.N. 5963, 6302; s e e also A uste in v . Sc hw artz (In re Ge rw e r) , 898 F.2d 730, 733 (9th C ir. 1990). Tha t is e xa c tly

what the ba nkruptc y c ourt did in the insta nt c a se . As the distric t c o urt note d, “ the ba nkruptc y c o urt provide d a de quat e prote c tion for B OH’ s inte re s t through a p prova l of the pa

rtie s’ stipula

tion re ga rding the s a le . The stipula

tion provide d tha

t the m a xim

um am ount of B OH’ s inte re st would be withhe ld from

the proc e e ds of the sa le , a nd the pa rtie s ’ inte re s ts would
a tta c h to the proc e e d s to the sa

m e e xte nt a

nd with thesa

m e priority

a s the y ha d with re spe c t to the prope rty .” B OH a rgue s tha t § 363(e ) of the B ankruptc y C o de goe s furthe r,
a ffirm a tive ly

re quiring theba

nkruptc y c ourt to a

ward it the $4.9 m illion in B uilde r Exc e ss Funding be c a

use the prope rty ’ s sa le e xtinguishe d B O H’ s c ontinge nt inte re s t. B OH is m i sta

ke n . Se c tion 363(e ) only re quire s the ba

nkruptc y c ourt to 7e nsure tha

t the inte re st-holde r re c e ive s the va lue of its ba rga ine d-for inte re st in the
e sta te . C roc k e r N a t’l Bank v . Am. Marine r Indus., Inc . (In reAm. Marine r Indus., Inc
. ) , 734 F.2d 426, 431 (9th C ir. 1984), ov e rrule d on othe r grounds by Unite d Sav . Ass’n v . Timbe rs of Inw ood Fore st Assoc s., Ltd. , 484 U.S. 365 (1988). As
e xpla ine d a

bove , the C RFA c re a te d a c ontinge nt inte re st in B O H. Tha t inte re st fa ile d to ripe n be fore the prope rty wa s sold a

nd B OH propose d no othe r m e ans of
va luing it. The

c ontinge nt inte re st wa s the re fore worthle ss. Ac c ordingly , §363(e ) only re quire d tha

t the ba nkruptc y c ourt pre se rve the dispute d am ount, pe nding a de te rm i na tion of theC RFA’ s va lue . Ha v ing done so, the ba

nkruptc y c ourt m e t its sta tutory obliga tions. III. B OH ha s no right to pa

ym e nt in a

ny a m ount unde r the C RFA. B OH ha s not
e sta blishe d the va l ue of its inte re st in theprope rty . W e a ffirm the ba nkruptc y
c ourt’ s grant of sum

m ary judgm e nt to a

ppe lle e W ilm ington Trust. AFFIRM E D.

8