Beal Bank USA v. Windmill Durango Office, LLC (In re Windmill Durango Office, LLC)
481 B.R. 51
9th Cir. BAP2012Background
- Beal Bank appeals two orders in Windmill Durango Office, LLC's chapter 11 case: ballot order denying Beal Bank's motion to change Benedict's ballot and plan confirmation order.
- Windmill Durango Office, LLC owns 4.49 acres of commercial real estate valued around $19.4 million, with Allegiant Air as its primary tenant at 87% of space and 95% of revenue.
- Beal Bank acquired Benedict’s prepetition claim after Benedict voted to accept the plan; Beal sought to withdraw Benedict’s ballot to block cramdown.
- The debtor proposed a second amended plan with Beal Bank in Class 1 and unsecured nonpriority creditors in Class 3; Beal contested feasibility, good faith, and cramdown terms.
- The bankruptcy court found at evidentiary hearing that at least one impaired class (unsecured nonpriority creditors) accepted the plan and adopted a 4.52% cramdown interest rate for Beal Bank, concluding the plan was feasible and proposed in good faith.
- Beal Bank timely appealed both the ballot denial and the plan confirmation, which the appellate court affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did the court err in denying the ballot motion to change Benedict's vote? | Beal Bank contends cause exists; it acted to block confirmation and did not rely on improper motive. | Beal Bank acquired Benedict’s claim after vote; motive to block confirmation is improper, so cause not shown. | No reversible error; denial upheld. |
| Was the second amended plan feasible under §1129(a)(11)? | Beal Bank argues feasibility fails due to lease risk, balloon payment, and uncertain refinancing. | Debtor demonstrated sufficient cash flow, equity cushion, and potential refinancing/sale to fund the plan. | Feasibility established. |
| Was the second amended plan proposed in good faith under §1129(a)(3)? | Beal Bank contends the plan gerrymandered the voting class by deferring unsecured claims. | Totality of circumstances shows plan aligns with Code goals; no bad faith in plan structure. | Plan confirmed in good faith. |
Key Cases Cited
- Marsch v. Marsch (In re Marsch), 36 F.3d 825 (9th Cir.1994) (abuse of discretion standard for dismissal for bad faith under §1112(b))
- In re Kellogg Square P'ship, 160 B.R. 332 (Bankr. D. Minn. 1993) (assignment after vote; lack of cause to change vote under Rule 3018(a))
- In re MCorp Fin., Inc., 137 B.R. 237 (Bankr. S.D. Texas 1992) (timing and motivation considerations for vote changes under Rule 3018(a))
- Till v. SCS Credit Corp., 541 U.S. 465 (2004) (appropriate cramdown interest rate framework)
- Shanks v. Dressel, 540 F.3d 1082 (9th Cir. 2008) (clear-error standard for feasibility and related plan confirmations)
- In re Hotel Assocs. of Tucson, 165 B.R. 470 (9th Cir. BAP 1994) (impairment and good faith considerations in plan confirmation)
- In re Loop 76, LLC, 465 B.R. 525 (9th Cir. BAP 2012) (feasibility standards and confirmation considerations)
- United States v. Hinkson, 585 F.3d 1247 (9th Cir. 2009) (abuse-of-discretion standard and two-step analysis for identifying legal rules)