636 F. App'x 723
9th Cir.2016Background
- BOH Park Highlands NV, L.P. and Wilmington Trust dispute BOH’s interest in bankruptcy-sale proceeds.
- The CRFA defines a potential $4.9 million Builder Excess Funding for BOH, but its payment depends on contingencies.
- BOH contends §363(e) requires adequate protection and payment of the CRFA amount.
- The property was sold free and clear under §363(f), which extinguished any untriggered CRFA rights.
- The bankruptcy and district courts granted summary judgment for Wilmington; the panel affirmed, holding the CRFA had no value as a contingent interest.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the CRFA create a payment right for Builder Excess Funding? | BOH: CRFA guarantees $4.9M if remedies are exercised. | Wilmington: CRFA creates only a contingent interest not triggered by sale. | CRFA creates a contingent interest with no value after sale. |
| Does Section 27 of the CRFA create an independent right to payment? | BOH: Section 27(iii) triggers payment upon CRFA termination. | CRFA termination rules do not establish an independent payment right. | Section 27 does not create an alternative payment right; no value post-sale. |
| What is the impact of §363(e) adequate protection when the contingent interest is worthless? | BOH: §363(e) requires payment/adequate protection for its interest. | Adequate protection is satisfied by preserving value; CRFA's value remains zero. | §363(e) requires only preservation of bargained-for value; nothing more. |
| Did the bankruptcy court adequately protect BOH’s interest in the sale proceeds? | BOH: court failed to provide adequate protection. | Court ensured protection by attaching BOH’s interest to proceeds as before. | Court properly protected and preserved BOH’s asserted interest; no payment due. |
| Does BOH have any remaining value to enforce under the CRFA? | BOH asserts residual/independent value in CRFA. | No independent value; contingent interest expired with sale. | BOH’s contingent interest has no value; no payment. |
Key Cases Cited
- Chequers Inv. Assocs. v. Hotel Sierra Vista Ltd. P’ship (In re Hotel Sierra Vista Ltd. P’ship), 112 F.3d 429 (9th Cir. 1997) (burden to prove validity and extent of postpetition liens under §363(p))
- Crocker Nat’l Bank v. Am. Mariner Indus., Inc., 734 F.2d 426 (9th Cir. 1984) (adequate protection and value of interests in bankruptcy)
- In re Am. Mariner Indus., Inc., 484 U.S. 365 (1988) ( Timbers of Inwood Forest; standard for §363(e) adequacy)
- In re AFI Holding, Inc., 525 F.3d 700 (9th Cir. 2008) (de novo review of district court on bankruptcy appeal; summary judgment standard)
- In re Raintree Healthcare Corp., 431 F.3d 685 (9th Cir. 2005) (de novo review; standard for determining issues on appeal)
- Austein v. Schwartz (In re Gerwer), 898 F.2d 730 (9th Cir. 1990) (context for adequate protection and lien priorities)
- United Sav. Ass’n v. Timbers of Inwood Forest Assocs., Ltd., 484 U.S. 365 (1988) (principles on adequacy of protection and lien interests)