Daewoo Motor America, Inc. v. Daewoo Motor, Co. ( 2014 )

FILED
NOT FOR PUBLICATION FEB 11 2014
MOLLY C. DWYER, CLERK
UNITED STATES COURT OF APPEALS U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
In the Matter of: DAEWOO MOTOR No. 12-56004
AMERICA, INC.,
D.C. No. 2:10-cv-05445-SVW
Debtor,
MEMORANDUM*
DAEWOO MOTOR AMERICA, INC.,
Reorganized Debtor,
Appellant,
v.
DAEWOO MOTOR, CO., LTD.,
Appellee.
Appeal from the United States District Court
for the Central District of California
Stephen V. Wilson, District Judge, Presiding
Submitted February 7, 2014**
Pasadena, California
Before: KLEINFELD, SILVERMAN, and HURWITZ, Circuit Judges.
*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
**
The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
-2-
Daewoo Motor America (“DMA”), a chapter 11 debtor, seeks review of the
district court’s order affirming a bankruptcy court judgment entered in favor of the
debtor’s parent and creditor, Daewoo Motor Co., Ltd. (“DWMC”), on DMA’s
objection to DWMC’s proof of claim. The bankruptcy court: (1) declined to
recharacterize debt claimed by DWMC as equity in the debtor; and (2) allowed
DWMC to recoup amounts it owed to DMA against DMA’s obligations. We
review the bankruptcy court’s decision independently, and we affirm. See In re
Dominguez, 51 F.3d 1502, 1506 (9th Cir. 1995).
DWMC argues that the bankruptcy court did not have authority to
recharacterize DWMC’s claim as one of equity in the appellant, relying on In re
Pacific Express, 69 B.R. 112 (B.A.P. 9th Cir. 1986), a decision of the Bankruptcy
Appellate Panel for the Ninth Circuit. This court’s recent opinion in In re Fitness
Holdings. Int’l, Inc., however, held that bankruptcy courts may recharacterize a
debtor’s obligations to reflect the nature of the obligation under state law, rejecting
Pacific Express’s strict limitation to equitable subordination under 11 U.S.C. §
510(c). 714 F.3d 1141, 1147 (9th Cir. 2013).
The Fitness Express decision directs that, in distinguishing between debt and
equity, the applicable authority is state law. 714 F.3d at 1148. The parties agree
-3-
that, in this case, the governing state law is identical to the multi-factor test used by
the lower courts. Based on this agreement, we proceed to a review of the merits.
The bankruptcy court did not clearly err in denying DMA’s request to
recharacterize DWMC’s obligations. See In re AutoStyle Pastics, Inc., 269 F.3d
726 (6th Cir. 2001); Hardman v. United States, 827 F.2d 1409, 1411-12 (9th Cir.
1987). The bankruptcy court’s determination that the obligations were debts was
supported by the parties’ agreements, the contemporaneous documentation
evidencing the transactions, and DMA’s statements to third parties, including its
own auditors.
The bankruptcy court also did not abuse its discretion in allowing DWMC to
recoup its debt against that owed to DWMC by DMA, since the obligations arose
from the same agreements. See Newbery Corp. v. Fireman’s Fund Ins. Co., 95
F.3d 1392, 1399 (9th Cir. 1996).
Finally, we deny as moot DWMC’s request to dismiss or to summarily
affirm this appeal.
AFFIRMED.