Court Opinion

ID: 9363190
Source: CourtListenerOpinion
Date Created: 2023-01-13 18:57:50.28382+00
Date Added: 2024-06-11T17:15:29.763753
License: Public Domain

NOT FOR PUBLICATION                         FILED
                    UNITED STATES COURT OF APPEALS                       DEC 28 2022
                                                                      MOLLY C. DWYER, CLERK
                                                                       U.S. COURT OF APPEALS
                             FOR THE NINTH CIRCUIT

In re: REGENCY PARK CAPITAL 2011,               No.    22-15280
INC., DBA SUPER 8 GOODYEAR,
            Debtor                              D.C. No. 2:21-cv-00502-PHX-DJH
_______________________________                 Bankruptcy Case No. 2:15-bk-
                                                15280-PC
SJ GROUP LLC,

                Appellant,                      MEMORANDUM*

 v.

ERIC M HALEY, as the Chapter 11
Liquidating Agent for Debtor,

                Appellee.

                   Appeal from the United States District Court
                             for the District of Arizona
                   Diane J. Humetewa, District Judge, Presiding

                     Argued and submitted December 9, 2022
                               Phoenix, Arizona

Before: WARDLAW and BUMATAY, Circuit Judges, and GLEASON, ** District
Judge.

      *
             This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
      **
              The Honorable Sharon L. Gleason, Chief United States District Judge
for the District of Alaska, sitting by designation.
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      SJ Group LLC appeals the district court’s affirmance of the bankruptcy

court’s Order and Judgment holding that SJ Group was not entitled to the return of

its $250,000 deposit that it had placed in escrow after it terminated the purchase and

sale agreement (PSA) with Eric Haley, the liquidating agent for the bankruptcy

proceeding.    The PSA governed the purchase of a Super 8 Motel in Goodyear,

Arizona. We “review de novo a district court’s decision on appeal from a bankruptcy

court” and we examine the bankruptcy court’s conclusions of law de novo and its

factual findings for clear error. In re Marshall, 721 F.3d 1032, 1038–39 (9th Cir.

2013). We have jurisdiction under 28 U.S.C. § 158(d)(1) and we reverse as we

conclude that Bankruptcy Judge Sala’s Sale Order did not extinguish the “buyer

protection” terms of the PSA.

      SJ Group executed the PSA on June 18, 2019 and deposited $250,000 with

the Escrow Agent. The PSA provided that “[e]xcept in the event Buyer is not the

Winning Bidder, the Bid Deposit shall be nonrefundable under any circumstances.”

Nonetheless, the PSA included several provisions that provided for the return of the

deposit in certain circumstances, such as a “flood . . . or other casualty” before the

sale closed. Haley returned the signed PSA to SJ Group the day after the auction. It

is undisputed that the water leak on July 15, 2019, qualified as a “casualty” or

“flood” within the meaning of § 15(b) of the PSA, permitting SJ Group to terminate

the agreement and regain its deposit.

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      Bankruptcy Judge Collins and the district court held that Judge Sala’s issuance

of the Sale Order following the auction overrode the “buyer protection” terms of the

PSA. The Sale Order provided that “[t]he Winning Bidder’s $250,000 deposit is

non-refundable,” without referring to any exceptions. The record, however, reflects

no evidence that Judge Sala intended to modify or override the PSA. At the auction

hearing, Haley’s representative, who presented the terms of the sale, stated that “[a]ll

of the qualified bidders today have executed a purchase and sale agreement, which

if they are the successful bidder, the final amount will be filled in and the liquidating

agent will execute that agreement.” So Judge Sala and the parties were clearly on

notice that the PSA governed the sale. Neither at the auction, nor in the Sale Order,

did Judge Sala purport to alter or supersede the PSA.

      We reject the argument that Judge Sala’s comments regarding the bid deposit

at the auction negated the deposit refund terms of the PSA. Regarding the deposit,

Judge Sala commented

      [I]f you’re bidding and you’re the successful bidder, your $250,000
      goes hard and will be forfeited if you can’t close. You won’t be able to
      rely on the fact that you couldn’t get financing, you couldn’t get your
      funds by the right day, you couldn’t get the transfer of the franchise
      approved. So everyone needs to understand so you’re all on the same
      plain.

      This statement is not inconsistent with the PSA. Judge Sala’s comment

simply explains that any failure on the buyer’s part to close the sale would result in

the forfeiture of the deposit. The statement does not mandate forfeiture of the deposit
                                           3
in the case of a casualty to the property as contemplated by the “buyer protection”

terms of the PSA.

      Nor does the language of the Sale Order override the PSA’s terms. The Sale

Order states, without elaboration, that “[t]he Winning Bidder’s $250,000.00 deposit

is non-refundable.” We do not take this general statement to override the specific

refund provisions in the PSA. The Sale Order’s language mirrors the general

statement in § 2(a)(i) of the PSA that “the Bid Deposit shall be nonrefundable under

any circumstances.”     Yet the PSA also includes several more specific terms

providing a mechanism for the buyer to terminate the contract and regain the deposit

in the event of a casualty. In interpreting a contract, “specific terms and exact terms

are given greater weight than general language.” Restatement (Second) of Contracts

§ 203 (1981). The Sale Order’s general statement about the nonrefundability of the

deposit does not override the specific refund terms of the PSA.

      Because SJ Group properly terminated the PSA pursuant to § 15(b), it is

entitled to the refund of its $250,000 deposit.

      REVERSED.

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