Court Opinion

ID: 9909231
Source: CourtListenerOpinion
Date Created: 2023-12-12 19:01:16.058858+00
Date Added: 2024-06-11T12:48:21.004165
License: Public Domain

NOT FOR PUBLICATION                     FILED
                        UNITED STATES COURT OF APPEALS                   DEC 12 2023
                                                                      MOLLY C. DWYER, CLERK
                                                                       U.S. COURT OF APPEALS
                                 FOR THE NINTH CIRCUIT

In re: ALEX A. KHADAVI,                             No.   23-60020

                   Debtor,                          BAP No. 22-1205

------------------------------
                                                    MEMORANDUM*
GREEN COIN,

                   Appellant,

  v.

ALEX A. KHADAVI; JASON M. RUND,
Chapter 7 Trustee,

                   Appellees.

                             Appeal from the Ninth Circuit
                              Bankruptcy Appellate Panel
            Spraker, Corbit, and Lafferty III, Bankruptcy Judges, Presiding

                                 Submitted December 8, 2023**
                                     Pasadena, California

Before: CALLAHAN, R. NELSON, and BADE, Circuit Judges.

       *
             This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
       **
             The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
      Green Coin appeals from the Bankruptcy Appellate Panel’s (“BAP”) order

affirming the bankruptcy court’s summary judgment for the bankruptcy Trustee in

an adversary proceeding. Green Coin contracted with Alex Khadavi, the

bankruptcy debtor, to buy his residential property for $85 million with a 3%

deposit requirement. After Green Coin failed to pay the full deposit, the Trustee,

as successor-in-interest to Khadavi, moved for summary judgment on the grounds

that Green Coin had defaulted on the purchase agreement and therefore the

bankruptcy estate could retain the amount of the deposit that had been paid,

$900,000, as liquidated damages. The bankruptcy court ruled in favor of the

bankruptcy estate, finding that Green Coin had defaulted by failing to pay the full

deposit and that liquidated damages were proper. The BAP affirmed.

      We have jurisdiction over final decisions of three-judge bankruptcy

appellate panels under 28 U.S.C. § 158(d)(1). In re Gugliuzza, 852 F.3d 884, 891

(9th Cir. 2017). We affirm.

      1.     Under the liquidated damages clause of the purchase agreement, “[i]f

Buyer fails to complete th[e] purchase because of Buyer’s default, Seller shall

retain, as liquidated damages, the deposit actually paid.” The term “default” is not

defined in the purchase agreement, so “[t]he clear and explicit meaning of [the

term], interpreted in [its] ordinary and popular sense, . . . controls judicial

interpretation.” California v. Cont’l Ins. Co., 281 P.3d 1000, 1004 (Cal. 2012)

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(internal quotation marks and citations omitted).

      Green Coin argues that its failure to pay the full deposit was not a default for

purposes of the liquidated damages provision because the default did not prevent

the sale from closing. This interpretation of the liquidated damages provision is

flawed because it is too narrow. The liquidated damages provision includes a

conditional clause preceding the “default” clause: “If Buyer fails to complete this

purchase because of Buyer’s default, Seller shall retain, as liquated damages, the

deposit actually paid.” Under the clear meaning of this conditional phrasing, the

buyer’s default leads to a failure to complete the purchase, not the reverse. See

Cont’l Ins. Co., 281 P.3d at 1004. And the phrase in this provision, “deposit

actually paid,” includes a failed purchase in which the buyer paid part, but not all,

of the deposit, as happened here.

       Beyond that, the ordinary meaning of “default” encompasses more than a

failure to complete a purchase. Rather, it is the “[t]he omission or failure to

perform a legal or contractual duty.” Default, Black’s Law Dictionary (11th ed.

2019); see In re Hawkeye Ent., LLC, 49 F.4th 1232, 1237 (9th Cir. 2022) (“The

ordinary meaning of ‘default’ is uncontroversial: it means ‘[a] failure to perform a

task or fulfill an obligation.’” (citing American Heritage Dictionary of the English

Language 345 (1976) and Black’s Law Dictionary 505 (4th ed. 1968))). Here, it is

undisputed that Green Coin failed to timely pay the full amount of the required

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deposit. And timely payment of the deposit was a contractual duty under the

purchase agreement. Given its ordinary meaning, “default” includes the failure to

complete a contractual duty, like the timely payment of a deposit. See Default,

Black’s Law Dictionary (11th ed. 2019). The liquidated damages provision was

therefore triggered when Green Coin failed to timely pay the full deposit.

      2.     No record evidence supports Green Coin’s position that Khadavi’s

December 6, 2021 declaration operated to unilaterally cancel the purchase

agreement and trigger ¶ 14D’s requirement that the seller must return the deposit

upon unilateral cancellation. Khadavi did not indicate in his declaration that he

intended to return the deposit, and his counsel affirmatively stated in court that

Khadavi would “seek to retain th[e] deposit.”

      In addition, under ¶ 14D, “Seller” may not unilaterally cancel until it

“deliver[s] to Buyer a [notice to buyer to perform].” Khadavi sent Green Coin a

notice to perform on December 1, 2021. The notice states that Green Coin needed

to perform “within [three] Days After Delivery” before Khadavi “may cancel the

Agreement.” Based on the definitions in the purchase agreement, Green Coin was

required to perform no later than 11:59 p.m. on Monday, December 6, 2021. See

Cont’l Ins. Co., 281 P.3d at 1004 (“If contractual language is clear and explicit, it

governs.” (citation omitted)). This means that Khadavi could not have validly

cancelled the agreement under ¶ 14D until the day after he filed his declaration.

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Considering those undisputed facts, Green Coin fails to carry its burden to show

that Khadavi unilaterally cancelled the agreement. See generally In re Adbox, Inc.,

488 F.3d 836, 843 (9th Cir. 2007) (explaining that the non-moving party bears the

burden “to identify ‘specific facts showing that there is a genuine issue for trial.’”

(quoting Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986))).

      3.     Lastly, there is evidence in the record that Khadavi and Green Coin

attempted to mutually cancel the purchase agreement and disburse the deposit

funds that were held in escrow through the cancellation of contract form and

Addendum #3, which is inconsistent with Khadavi’s alleged unilateral cancellation

of that agreement. Regardless, their purported agreement was unenforceable

because it was never approved by the bankruptcy court pursuant to the court’s sale

order. And Green Coin does not dispute the findings of the bankruptcy court and

the BAP that the agreement in Addendum # 3 to split the deposit was “an

attempted compromise of the parties’ dispute over the deposit,” and was thus

“subject to notice and the requirements of [Federal Rule of Bankruptcy Procedure]

9019.” Rule 9019 requires a compromise or settlement to be approved by the

bankruptcy court “[o]n motion by the trustee and after notice and a hearing.” Yet

Green Coin never points to any evidence in the record indicating that the

cancellation of contract form and Addendum #3 were ever presented to the

bankruptcy court for approval. The purchase agreement was therefore never

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validly cancelled. See Fed. R. Bankr. P. 9019. Accordingly, the bankruptcy court

did not err in concluding that the bankruptcy estate was entitled to retain the

$900,000 partial deposit as liquidated damages upon Green Coin’s default.

      AFFIRMED.

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