Court Opinion

ID: 4180821
Source: CourtListenerOpinion
Date Created: 2017-06-26 20:04:05.17041+00
Date Added: 2024-06-11T13:01:30.650976
License: Public Domain

FILED
                           NOT FOR PUBLICATION
                                                                           JUN 26 2017
                   UNITED STATES COURT OF APPEALS                       MOLLY C. DWYER, CLERK
                                                                         U.S. COURT OF APPEALS

                           FOR THE NINTH CIRCUIT

In re: MARIPOSA ROAD SELF-                       No.   15-16896
STORAGE ASSOCIATES LLC, et al.,
                                                 D.C. No. 4:11-cv-00641-FRZ
          Debtor,
______________________________
                                                 MEMORANDUM*
WELLS FARGO BANK, NA,

              Plaintiff-Appellant,

 v.

SAHUARITA SELF-STORAGE LLC;
THORNYDALE SELF STORAGE
ASSOCIATES LLC; MARIPOSA
ROAD SELF-STORAGE
ASSOCIATES LLC; ARIZONA SELF-
STORAGE AT LINDSAY ROAD LLC;
NOGALES SELF-STORAGE
ASSOCIATES LLC; CULVER CITY
SELF-STORAGE LLC; ABERDEEN
GROUP LLC; MAX CHRIS
MONSON; IRENE MURRAY
MONSON; 4415 EAST GRANT ROAD
LLC,

              Defendants-Appellees.

      *
             This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
                                                                                 page 2

                    Appeal from the United States District Court
                             for the District of Arizona
                     Frank R. Zapata, District Judge, Presiding

                         Argued and Submitted June 9, 2017
                               Pasadena, California

Before:      THOMAS, Chief Judge, KOZINSKI, Circuit Judge, and
             KORMAN,** District Judge.

      1. Wells Fargo’s 11 U.S.C. § 1111(b)(2) election didn’t waive its guarantee

claims. Nor did Wells Fargo waive its guarantee claims by electing its treatment as

to Grant Road and failing to file a Rule 60(b) motion, as there’s no language in the

Grant Road election indicating that the election would release Aberdeen or the

Monsons. Wells Fargo also isn’t estopped from challenging the plan’s treatment of

the guarantee deficiencies. See Bob’s Big Boy Family Rest. v. N.L.R.B., 625 F.2d
850, 854 (9th Cir. 1980).

      2. The reorganization plan improperly extinguished the guarantee

obligations. See 11 U.S.C. § 524(e); Star Phx. Mining Co. v. W. Bank One, 147
F.3d 1145, 1147 n.2 (9th Cir. 1998) (“[T]he discharge of the principal debtor in

bankruptcy will not discharge the liabilities of . . . guarantors.”). The plan

      **
             The Honorable Edward R. Korman, United States District Judge for
the Eastern District of New York, sitting by designation.
                                                                                   page 3
discriminated against Wells Fargo in violation of 11 U.S.C. § 1129(b)(1) by

allowing the guarantors to avoid paying Wells Fargo while other unsecured

claimants were paid in full. The plan also broke the absolute priority rule because

it allowed the debtors to retain equity interests without first satisfying Wells

Fargo’s unsecured guarantee claims. See 11 U.S.C. § 1129(b)(2)(B). Wells Fargo

didn’t “receive or retain under the plan” at least the amount it would receive “if the

debtor were liquidated under chapter 7.” See 11 U.S.C. § 1129(a)(7)(A)(ii). And

the plan didn’t determine the amounts necessary to cure the defaults on Wells

Fargo’s secured claims “in accordance with the underlying agreement and

applicable nonbankruptcy law.” 11 U.S.C. § 1123(d). The bankruptcy court erred

in confirming the joint Chapter 11 reorganization plan.

      3. The district court didn’t commit clear error by crediting expert testimony

that the Sahuarita loan modification was feasible. See Matter of Pizza of Haw.,

Inc., 761 F.2d 1374, 1377 (9th Cir. 1985) (feasibility is reviewed under clearly

erroneous standard). But it must consider on remand whether the negative

amortization repayment plan for the Sahuarita loan modification was fair and

equitable to Wells Fargo. See 11 U.S.C. § 1129(b)(1); Great W. Bank v. Sierra
                                                                               page 4
Woods Grp., 953 F.2d 1174, 1178 (9th Cir. 1992) (listing factors relevant to

determining fairness of a reorganization plan with negative amortization).

REVERSED AND REMANDED