Coastline Re Holdings Corp. v. Maxwell Morgan, LLC ( 2022 )

105
This is a nonprecedential memorandum opinion
pursuant to ORAP 10.30 and may not be cited
except as provided in ORAP 10.30(1).
Argued and submitted January 15, 2021, affirmed July 27, 2022
COASTLINE RE HOLDINGS CORP.,
a California corporation,
Plaintiff-Respondent,
v.
MAXWELL MORGAN, LLC.,
a Nebraska limited liability company,
Defendant-Appellant.
Multnomah County Circuit Court
18CV52457; A171875
Kelly Skye, Judge.
Jeremy G. Tolchin argued the cause for appellant. On the
briefs were Nicholas J. Henderson and Motschenbacher &
Blattner LLP.
Teresa H. Pearson argued the cause for respondent. Also
on the brief were Miller Nash Graham & Dunn LLP.
Before Ortega, Presiding Judge, and Powers, Judge, and
Kamins, Judge.
POWERS, J.
Affirmed.
106 Coastline Re Holdings Corp. v. Maxwell Morgan, LLC
POWERS, J.
This is an appeal from an action for unjust enrich-
ment, restitution, and money had and received involving
plaintiff, Coastline Re Holdings Corporation, and defen-
dant, Maxwell Morgan, LLC. Both plaintiff and defen-
dant were secured lenders of Fagerdala USA—Lompoc,
Inc. (Fagerdala), who is not a party to this appeal. In 2014,
Fagerdala filed for Chapter 11 bankruptcy, which ultimately
reduced the total amount it had to pay back to plaintiff.
After the bankruptcy case made its way through the federal
court system, plaintiff dismissed the bankruptcy case and
filed this present action in Multnomah County Circuit Court
to recover $255,889.99 from defendant. Plaintiff contended
that, based on an appellate decision arising out of the bank-
ruptcy case, it should have been paid instead of defendant.
The trial court agreed with plaintiff’s position and granted
plaintiff’s motion for summary judgment and denied defen-
dant’s cross-motion for summary judgment. On appeal,
defendant now seeks reversal of the trial court’s decision in a
single assignment of error. For the reasons explained below,
we conclude that defendant’s argument rests on an incorrect
premise regarding the effect of the decision by the federal
appeals court on the bankruptcy court case. Accordingly,
because the trial court did not err in its summary judgment
rulings, we affirm.
The relevant facts are procedural in nature and
undisputed. Fagerdala filed a petition for bankruptcy under
Chapter 11 of the United States Bankruptcy Code, and
the bankruptcy court, as part of the reorganization plan,
entered two orders: (1) an order granting the motion to des-
ignate votes (Designation Order), which disqualified certain
votes in support of Fagerdala’s Chapter 11 plan of reorgani-
zation, and (2) an order confirming the fourth amended plan
of reorganization (Confirmation Order).1 Under the bank-
ruptcy plan, the total amount that Fagerdala had to pay
plaintiff was reduced. Because the plan limited the amount
plaintiff could be paid from the sale of Fagerdala’s assets,
plaintiff appealed both of the bankruptcy court’s orders.
1
A more detailed recitation of the facts concerning the bankruptcy court
proceedings are outlined in In Re Fagerdala USA—Lompoc, Inc., 891 F3d 848
(9th Cir 2018).
Nonprecedential Memo Op: 321 Or App 105 (2022) 107
The United States District Court for the District of
Oregon affirmed the bankruptcy court’s decision and dis-
missed the appeal. Plaintiff then appealed that ruling to
the United States Court of Appeals for the Ninth Circuit.
While the case was pending before the Ninth Circuit, how-
ever, Fagerdala sold the property secured by the parties,
and the title company paid plaintiff and defendant pursu-
ant to the original bankruptcy plan. As part of that dis-
tribution, defendant received $255,889.99 of the proceeds,
which plaintiff argued should have lawfully been paid to
plaintiff.
Several months after the sale, the Ninth Circuit
reversed the district court’s ruling, vacated the Designation
Order, and remanded the case to the bankruptcy court for
further proceedings. Specifically, the court’s decision pro-
vided, in part:
“Therefore, we reverse the district court’s order affirm-
ing the bankruptcy court, vacate the bankruptcy court’s
order granting Fagerdala’s motion to designate the
Purchased Claims, and remand this case to the bank-
ruptcy court for proceedings consistent with this opinion.”
In Re Fagerdala USA—Lompoc, Inc., 891 F3d 848, 857 (9th
Cir 2018). In a footnote, the court also briefly addressed the
Confirmation Order:
“In addition to the designation issue, [plaintiff] argued
that the bankruptcy court erred by allowing the Purchased
Claims to be segregated from the other general unsecured
claims. In its briefing, Fagerdala conceded the classifica-
tion issue if the bankruptcy court were reversed on the
designation question. Since we find the bankruptcy court
committed legal error by designating the votes of the
Purchased Claims, we also find that Fagerdala has con-
ceded that Purchased Claims were improperly classified
separately from the other general unsecured claims.”
Id. at 857 n 7.
Although the Ninth Circuit ruled in plaintiff’s
favor, because Fagerdala no longer had ongoing operations
or remaining assets, plaintiff moved to dismiss the bank-
ruptcy case. The bankruptcy court granted the motion and
dismissed the bankruptcy case.
108 Coastline Re Holdings Corp. v. Maxwell Morgan, LLC
Plaintiff subsequently filed this suit in state court
against defendant, asserting claims for unjust enrichment,
restitution, and money had and received. Plaintiff argued
that, because defendant was paid $255,889.99 based on
the terms of the bankruptcy plan that was reversed by the
Ninth Circuit, plaintiff was entitled to recover that amount
from defendant. Plaintiff moved for summary judgment,
and defendant filed a cross-motion for summary judgment.
After a hearing, the trial court agreed with plaintiff’s posi-
tion, granted plaintiff’s motion for summary judgment, and
denied defendant’s cross-motion.
On appeal, the parties renew the arguments that
they made to the trial court. The parties’ dispute turns on
how to interpret the scope of the Ninth Circuit’s decision.
Defendant argues that the trial court erred in granting
plaintiff’s motion for summary judgment because the trial
court did not have authority to rule on a motion concerning
the disposition of Fagerdala’s property. According to defen-
dant, the Ninth Circuit vacated only the Designation Order
and did not disturb the Confirmation Order. Defendant
asserts that, because the Ninth Circuit’s decision “focused
solely on the Designation Order, and the case was remanded
to the Bankruptcy Court for proceedings consistent” with
the court’s ruling, the Confirmation Order remained in
effect. Thus, according to defendant, plaintiff was required
to pursue relief with the bankruptcy court consistent with
the Ninth Circuit’s opinion and plaintiff’s decision to dis-
miss the bankruptcy case “constituted a waiver of its right
to collect the monies at issue in this case.” Defendant fur-
ther argues that plaintiff’s dismissal of the bankruptcy
case did not operate to vacate the Confirmation Order or the
bankruptcy plan. In support of its argument on the effect of
a dismissal in a bankruptcy proceeding, defendant relies on
11 USC section 349(b) of the Bankruptcy Code, as well as
several cases interpreting that statute.
In response, plaintiff argues that both the Designation
Order and the Confirmation Order were before the Ninth
Circuit and both orders were reversed when the court
reversed the district court. Plaintiff contends that footnote
seven of the Ninth Circuit opinion specifically addressed
“an error in the Confirmation Order” and established that
Nonprecedential Memo Op: 321 Or App 105 (2022) 109
the Ninth Circuit’s decision did rule on the Confirmation
Order. Alternatively, plaintiff contends that, even if the
Ninth Circuit did not expressly rule on the Confirmation
Order, “its decision to vacate the Designation Order nec-
essarily had the legal effect of reversing the Confirmation
Order” because the Confirmation Order was dependent on
the Designation Order. Plaintiff argues that, under federal
law, “when a lower court’s order is reversed, any other order
that is dependent upon the reversed order is also reversed.”
Thus, according to plaintiff, there was no impediment to the
trial court deciding the case. Finally, plaintiff asserts that it
“has consistently made clear that it intended to recover” the
$255,889.99 paid to defendant, and therefore, did not waive
its rights to recover the funds.
After considering the parties’ briefing and argu-
ment, we agree with plaintiff’s position. Even assuming that
footnote seven addressing the Confirmation Order did not
amount to a ruling on the correctness of the Confirmation
Order, the Ninth Circuit’s resolution of the Designation
Order had the legal effect of vacating the Confirmation
Order. That is because the Confirmation Order was depen-
dent on the Designation Order. Defendant does not dispute
that the Confirmation Order relies on the Designation
Order, nor could it reasonably take that position given
that the Confirmation Order specifically provides that
the bankruptcy court considered the Designation Order,
along with other documents, in granting the Confirmation
Order.2 Further, a designation of claims is generally part
of a Chapter 11 plan of reorganization. See 11 USC § 11232
The Confirmation Order provides, in part:
“The Court, having considered the Plan, the Third Amended Disclosure
Statement (ECF No. 117), Debtor’s Memorandum in Support of Confirmation
of Plan (ECF No. 160), Debtor’s Supplemental Memorandum in Support of
Confirmation (ECF No. 171), Order Granting Motion to Designate Votes, the
pleadings and papers filed in connection with confirmation, the evidence and
arguments presented at or before the hearing in support of and in opposition
to the Plan and associated motions; hereby finds as follows:
“A. The Plan has been proposed in good faith and not by any means for-
bidden by law.
“* * * * *
“E. The Plan has been accepted in writing by an impaired class of
creditors.”
110 Coastline Re Holdings Corp. v. Maxwell Morgan, LLC
(governing the contents of a reorganization plan). Indeed, as
plaintiff’s argument contends, the only way that the bank-
ruptcy court could make its finding in the Confirmation
Order that the plan had been “accepted in writing by an
impaired class of creditors” was to rely on the decision in
the Designation Order. Thus, in vacating the Designation
Order, the Ninth Circuit also invalidated any dependent
orders—like the Confirmation Order. See 5 CJS Appeal
and Error § 1127 (2022) (“An order, judgment, or proceed-
ing dependent on, or ancillary and accessory to, a judgment,
order, or decree which is reversed or vacated falls with it.”);
Disher v. Citigroup Global Markets, Inc., 486 F Supp 2d 790,
797-800 (SD Ill 2007) (noting the guiding principles regard-
ing the reversal of a judgment or order); cf. ZRZ Realty v.
Beneficial Fire and Casualty Ins., 257 Or App 180, 186-87,
306 P3d 661, rev den, 257 Or App 180 (2013) (explaining that
the supplemental judgment was deemed reversed by opera-
tion of law when the court reversed the underlying attorney
fee award in the general judgment).
Accordingly, because defendant’s summary judgment
arguments rely on an incorrect premise about the effect of
the Ninth Circuit’s opinion, we reject defendant’s remaining
arguments and conclude that the trial court did not err in
granting plaintiff’s motion for summary judgment and in
denying defendant’s cross-motion for summary judgment.
Affirmed.