FB Acquisition Property I, LLC v. Gentry
807 F.3d 1222
| 10th Cir. | 2015Background
- Larry and Susan Gentry are sole owners of Ball Four, which obtained a $1.9 million loan in 2005; the Gentrys personally guaranteed the loan.
- Ball Four filed Chapter 11 in 2010 after default; FirsTier’s claim (later owned by SIP and then FB Acquisition) was allowed in a Ball Four plan confirmed in 2011 that repaid the claim over 25 years and preserved the lender’s lien.
- The Gentrys filed their own Chapter 11 in 2011; their amended plan provided that Ball Four would satisfy the guaranteed obligation and the Gentrys would be liable only if Ball Four did not pay.
- Bankruptcy court confirmed the Gentry plan in 2013, finding it feasible and concluding the guaranties limited the Gentrys’ liability to whatever Ball Four ultimately owed; the district court affirmed in 2014.
- FB Acquisition (successor to SIP) appealed, challenging (1) the Gentry plan’s feasibility and (2) the bankruptcy court’s interpretation limiting guarantor liability to borrower liability.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Feasibility of the Gentry Plan | FB Acquisition: plan lacked reasonable assurance of success; court improperly relied on Ball Four’s feasibility and failed to evaluate other relevant factors | Gentrys: court independently reviewed contingencies, Ball Four’s confirmed plan status, and the Gentrys’ personal ability to pay; safeguards exist if Ball Four defaults | Court: AFFIRMED that plan was feasible (review for clear error); bankruptcy court’s finding "barely" met the reasonable-assurance standard |
| Scope of guarantor liability | FB Acquisition: guaranties require Gentrys to remain liable notwithstanding Ball Four’s bankruptcy; guaranties’ language and § 524(e) preserve creditor’s claim against guarantors | Gentrys: guaranties should be limited to the amount Ball Four is ultimately found to owe; Ball Four’s bankruptcy reductions modify indebtedness | Court: REVERSED—bankruptcy context and guaranty text mean Gentrys may be liable even if Ball Four’s liability is discharged; remand to reassess claim amount and feasibility |
Key Cases Cited
- In re Paul, 534 F.3d 1303 (10th Cir. 2008) (standards of appellate review in bankruptcy appeals)
- In re Ames, 973 F.2d 849 (10th Cir. 1992) (feasibility requires reasonable assurance, not guarantee)
- In re Miniscribe Corp., 309 F.3d 1234 (10th Cir. 2002) (standard for overturning factual findings)
- In re W. Real Estate Fund, Inc., 922 F.2d 592 (10th Cir. 1990) (discharge of borrower does not extinguish guarantor liability)
- In re Sure-Snap Corp., 983 F.2d 1015 (11th Cir. 1993) (bankruptcy principle preserving claims against guarantors)
- NCNB Tex. Nat’l Bank v. Johnson, 11 F.3d 1260 (5th Cir. 1994) (creditors obtain guaranties as alternative repayment source)
- Cont’l Nat’l Bank v. Dolan, 564 P.2d 955 (Colo. App. 1977) (state-law rule equating guarantor liability with borrower absent contrary language)
- First Interstate Bank of Denver v. Colcott Partners IV, 833 P.2d 876 (Colo. App. 1992) (Colorado rule on guaranty scope)