Wells Fargo Bank v. Mariposa Road Self Storage , 693 F. App'x 486 ( 2017 )

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NOT FOR PUBLICATION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