Court Opinion

ID: 3176504
Source: CourtListenerOpinion
Date Created: 2016-02-10 21:07:52.345613+00
Date Added: 2024-06-11T12:05:23.644879
License: Public Domain

FILED
                            NOT FOR PUBLICATION
                                                                            FEB 10 2016
                    UNITED STATES COURT OF APPEALS                      MOLLY C. DWYER, CLERK
                                                                         U.S. COURT OF APPEALS

                            FOR THE NINTH CIRCUIT

In the Matter of: MERUELO MADDUX                 No. 13-56545
PROPERTIES, INC.,
                                                 D.C. No. 2:11-cv-05458-SVW
              Debtor,

                                                 MEMORANDUM*
JOHN CHARLES MADDUX; JOHN
CHARLES MADDUX TRUST, U/DT
dated July 24, 2006; SUNSTONE BELLA
VISTA, LLC,

              Appellants,

  v.

CHARLESTOWN CAPITAL
ADVISORS, LLC; HARTLAND ASSET
MANAGEMENT CORPORATION;
OFFICIAL COMMITTEE OF EQUITY
HOLDERS; GLOBAL ASSET CAPITAL,
LLC; GAC REAL ESTATE PARTNERS,
LLC,

              Appellees.,

  and

BANK OF AMERICA, NA,

        *
             This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
           Objector.

JOHN CHARLES MADDUX; JOHN                No. 13-56546
CHARLES MADDUX TRUST, U/DT
dated July 24, 2006; SUNSTONE BELLA      D.C. No. 2:11-cv-05832-SVW
VISTA, LLC,

           Appellants,

 v.

CHARLESTOWN CAPITAL
ADVISORS, LLC; HARTLAND ASSET
MANAGEMENT CORPORATION;
EVOQ PROPERTIES, INC.,

           Appellees.

In the Matter of: EVOQ PROPERTIES,       No. 13-56547
INC.,
                                         D.C. No. 2:11-cv-05577-SVW
           Debtor,

RICHARD MERUELO,

           Appellant,

 v.

CHARLESTOWN CAPITAL
ADVISORS, LLC; HARTLAND ASSET
MANAGEMENT CORPORATION,

                                     2
              Appellees.

                    Appeal from the United States District Court
                        for the Central District of California
                    Stephen V. Wilson, District Judge, Presiding

                      Argued and Submitted October 20, 2015
                               Pasadena, California

Before: RAWLINSON and NGUYEN, Circuit Judges and BOULWARE,** District
Judge.

      Appellants John Charles Maddux, The John Charles Maddux Trust U/D/T/

Dated July 24, 2006, Sunstone Bella Vista, LLC, and Richard Meruelo (Meruelo)

challenge the bankruptcy court’s confirmation of a plan of reorganization for

Meruelo Maddux Properties, Inc. (Debtors) proposed by Appellees Charlestown

Capital Advisors, LLC and Hartland Asset Management Corporation

(Charlestown). Appellants contend that the bankruptcy court erred in determining

the fair value for the price of shares in the reorganized debtor without holding a

valuation hearing to ascertain the reorganized debtor’s residual value based on

expert testimony. Appellants also assert that the bankruptcy court improperly took

judicial notice of the stock’s over-the-counter trading price.

       **
             The Honorable Richard F. Boulware, District Judge for the U.S.
District Court for the District of Nevada, sitting by designation.

                                           3
       “A bankruptcy court’s conclusions of law, including its interpretation of the

Bankruptcy Code, are reviewed de novo.” HSBC Bank USA v. Blendheim (In re

Blendheim), 803 F.3d 477, 489 (9th Cir. 2015) (citation omitted). We review the

bankruptcy court’s factual findings in confirming a plan of reorganization for clear

error. See Fireman’s Fund Ins. Co. v. Plant Insulation Co. (In re Plant Insulation

Co.), 734 F.3d 900, 908 (9th Cir. 2013).

       1.     Although Meruelo was the only party named in his notice of appeal,

we construe the notice of appeal as including entities whose interest he represented

during the bankruptcy proceedings. See Retail Flooring Dealers of Am., Inc. v.

Beaulieu of Am., LLC, 339 F.3d 1146, 1148 (9th Cir. 2003) (articulating that “if it

appears on the face of the notice that an appeal is intended by a party not named,

then the appeal is deemed well taken”); see also Fed. R. App. P. 3(c)(4) (“An

appeal must not be dismissed for informality of form or title of the notice of

appeal, or for failure to name a party whose intent to appeal is otherwise clear from

the notice.”).1

       1
        Consistent with our prior order denying Charlestown’s motion to dismiss,
we conclude that this appeal is not jurisdictionally or equitably moot. See JPMCC
2007-C1 Grasslawn Lodging, LLC. v. Transwest Resort Prop. Inc. (In re
Transwest Resort Prop., Inc.), 801 F.3d 1161, 1173 (9th Cir. 2015) (holding that a
bankruptcy appeal was not moot because some form of limited relief may be
provided on remand to the bankruptcy court despite substantial consummation of
                                                                        (continued...)

                                           4
      2.     The bankruptcy court did not err in confirming the plan of

reorganization that divided insider and non-insider shareholders into separate

classes. See Barakat v. Life Ins. Co. of Va. (In re Barakat), 99 F.3d 1520, 1525

(9th Cir. 1996).

      3.     Appellants failed to demonstrate that the bankruptcy court was

statutorily or legally compelled to utilize a certain valuation method in determining

a fair value for stock in the reorganized debtor. The bankruptcy court properly

valued the stock based on the competitive bidding process resulting from

negotiations in support of the various proposed plans of reorganization. See Bank

of America Nat’l Trust & Savings Ass’n v. 203 North LaSalle Street P’ship, 526
U.S. 434, 457 (1999) (approving a market-based method to assess value because

“the best way to determine value is exposure to a market”) (citations omitted). The

record supports the bankruptcy court’s determination that forty-five cents was a

fair and equitable stock price, as reflected in Debtors’ proposed plan offering

twenty-five cents per share and Debtors’ agreement that a lender could tender its

shares at fifty cents per share as consideration for a secured loan.

      1
       (...continued)
the plan of reorganization).

                                           5
      Neither Consolidated Rock Prod. Co. v. Du Bois, 312 U.S. 510 (1941), nor

Protective Comm. For Independent Stockholders of TMT Trailer Ferry Inc. v.

Anderson, 390 U.S. 414 (1968), compels a contrary conclusion. In those pre-

Bankruptcy Code decisions, the Supreme Court did not denominate a valuation

hearing with expert testimony concerning the reorganized debtor’s residual value

the exclusive method to determine value. See Consolidated Rock, 312 U.S. at 525;

see also TMT Trailer, 390 U.S. at 444. The bankruptcy court simply was not

required to determine the residual value of the enterprise as a going concern as an

alternative to competitive bidding. See LaSalle, 526 U.S. at 457.

      4.     The bankruptcy court did not err in taking judicial notice of the

stock’s over-the-counter price as an additional measurement of fair value. See

Metzler Inv. GMBH v. Corinthian Colleges, Inc., 540 F.3d 1049, 1064 & n.7 (9th

Cir. 2008), as amended. In one of its proposed plans of reorganization, Debtors

offered eight cents per share premised on the over-the-counter price. In addition,

Appellants were afforded an opportunity to challenge the bankruptcy court’s

consideration of the stock price, and the bankruptcy court conducted an extensive

hearing to resolve the valuation issue. The forty-five cents per share price inured

                                          6
to Appellants’ benefit, as it was well above Debtors’ proposed valuation of twenty-

five cents per share.

      5.     Appellants’ argument that the bankruptcy court impermissibly shifted

the burden of proof concerning the stock’s value to Appellants is unavailing.

Rather, the bankruptcy court provided Appellants an equal opportunity to present

evidence of value. See Fireman’s Fund Ins. Co., 734 F.3d at 909 (considering

solution proposed by objectors).

      AFFIRMED.

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