IMH Dallas Arioso, LLC
MEMORANDUM DECISION GRANTING MOTION FOR RELIEF FROM STAY
Date: March 11, 2026
Time: 2:30 p.m.
Judge: Hon. J. Barrett Marum
I. INTRODUCTION
On December 1, 2025, IMH Dallas Arioso, LLC (the “Debtor“) filed a Voluntary Petition under Chapter 11 (the “Petition“), identifying itself as a Single Asset Real Estate (“SARE“) Debtor. ECF No. 1 at 2. The Debtor owns and operates its business renting out the residential property located at 3030
It is undisputed that the Property is underwater and that the Debtor has not commenced making the monthly payments that a SARE debtor may make to hold off stay relief after the 90th day of a bankruptcy case. The Debtor‘s Lender (defined below) has therefore moved for stay relief under sections
II. BACKGROUND
The Debtor purchased the Property in February 2022 for $64,000,000. Id. In the Debtor‘s Schedules, the Debtor now values the Property at $45,000,000. ECF No. 12 at 6. To complete the purchase, the Debtor borrowed $56,000,000 from RREF IV - D Clairemont Drive, LLC‘s (the “Lender‘s“) predecessor in interest by way of the “Senior Loan” as identified in the Debtor‘s Schedules. ECF No. 12 at 11. The Senior Loan is secured by a Deed of Trust against the Property. ECF No. 47-10 at 36; see also ECF No. 47-10 at 190-326. Through a series of assignments, the Lender became the owner of the Senior Loan. Id. After the Debtor filed the Petition, the Lender filed a claim totaling $63,790,457.73 (the “Claim“), which accounted for unpaid principal on the Senior Loan, accrued interest, fees, obligations and other liabilities, costs, and attorneys’ fees. POC No. 11; see also Addendum to Proof of Claim, ECF No. 47-10 at 5. The portion of the Claim that exceeds the value of the Property (the “Lender‘s Deficiency Claim“) is unsecured.
On February 13, 2026, the Lender filed a Motion for Relief from Automatic Stay (the “Motion“) to allow it to foreclose on the Property. ECF No. 47. The Lender argued the Debtor‘s lack of equity in the Property and inability to successfully reorganize (and thus that the Property is not necessary to an effective reorganization) entitled it to stay relief. ECF No. 47-1 at 5. On February 25, 2026, the Debtor
On March 11, 2026, the Court held a hearing on the Motion. Following the hearing, the Court required the parties to submit additional briefing to address its outstanding questions, specifically as to the Lender‘s claim for relief under
III. LEGAL STANDARD
Under
The Court must grant relief with respect to an act to gain possession of or exercise control over property of the estate pursuant to
The Court must also grant relief with respect to a stay of an act against single asset real estate by a creditor whose claim is secured by an interest in such real estate unless the debtor has done one of two things within 90 days of entry of the order for relief: “the debtor has filed a plan of reorganization that has a reasonable possibility of being confirmed within a reasonable time,” or the debtor has commenced making monthly payments that satisfy certain conditions.
IV. DISCUSSION
The Court concludes stay relief to allow the foreclosure sale to proceed is appropriate pursuant to both subsections First, the parties agree the Debtor lacks any equity in the Property. The Debtor concedes the value of the Property is lower than the total of the encumbrances upon it.1 Accordingly, the Court must determine whether the Property is necessary to an effective reorganization. As discussed above, if the Debtor has “a reasonable possibility of a successful reorganization within a reasonable time” for which the Property is necessary, then the Court need not grant the requested stay relief under this subsection. The Court concludes that there is no reasonable possibility of a successful reorganization within a reasonable time in this case for the reasons detailed below. The Plan would require a complete substantive overhaul for the Court to be able to confirm it, and the Debtor has provided little support for that possibility in its Supplemental Opposition. Nor is there any indication the Lender will change its The Court concludes the Plan improperly classifies the Lender‘s Deficiency Claim separately from other general unsecured claims based on the Guaranty executed on February 10, 2022, by and between the Lender‘s predecessor in interest and three individuals (Eric Jones, Tressa Majka, and Ed Monce, collectively the “Guarantors“). ECF No. 50-2 at 3. Under The Debtor improperly separately classified the Lender‘s Deficiency Claim here for three reasons. First, the Debtor has not submitted any evidence of the Guarantors’ current net worth and thus cannot demonstrate their meaningful solvency. Second, the current state court litigation on the Guaranty does not increase the probability of a third-party source of recovery without such evidence. Third, the Debtor does not present a legitimate business or economic reason for separate classification. As a threshold matter, the Guaranty does not serve as “security” for the Lender‘s Deficiency Claim as the Debtor argued. ECF No. 50-1 at 2. To constitute security for a loan, an instrument must pledge specific assets as collateral from which the lender could seek recovery. Under the Guaranty, the Guarantors “irrevocably and unconditionally guarantee[d] to Lender the prompt and unconditional payment and performance of the Guaranteed Obligations as and when the same shall be due and payable, whether by lapse of time, by acceleration of maturity or otherwise. Guarantor hereby irrevocably and unconditionally covenants and agrees that it is liable for the Guaranteed Obligations as a primary The Court thus turns to whether the Guaranty in this case renders the Lender‘s Deficiency Claim unique from other unsecured creditors’ claims such that it is not “substantially similar” to those claims and warrants separate classification. Here, the Lender‘s unsecured deficiency claim is substantially similar to other unsecured claims and the Guaranty cannot justify separate classification. When examining a guaranty‘s effect on claim classification, courts look to evidence regarding a creditor‘s ability to actually recover on the guaranty. The court in In re South Loop 2656, LLC, No. 8:12-bk-20466-MW, 2013 Bankr. Lexis 5554 at *3 (Bankr. C.D. Cal. Oct. 16, 2013) held: There is more to the matter than the bare existence of a guarantee. There must be a showing that the guarantors are solvent in a meaningful way (i.e., de minimis solvency will not suffice). If the Guarantors are all insolvent, the guarantee does not render the US Bank‘s deficiency claim dissimilar to other general unsecured creditors. Here, Debtor has not made a sufficient showing that the Guarantors are meaningfully solvent (or, indeed, solvent at all). Because Debtor has the burden of proof on this issue, this component of the analysis is decided in favor of US Bank. Ninth Circuit Courts have since adopted this reasoning. For example, the court in In re NNN Parkway 400 26, LLC, agreed that: since this entire question of separate classification is one addressed to separating reality from facade, it follows that the basis for the distinction must be one that is meaningful. As in South Loop this court holds that a guaranty from an insolvent guarantor provides nothing meaningful and so it becomes a distinction without a difference and cannot alone support separate classification. In re NNN Parkway 400 26, LLC, 505 B.R. 277, 284 (Bankr. C.D. Cal. 2014). The NNN Parkway 400 26 court concluded the debtor could not separately classify a claim based on a guaranty where the “evidentiary showing regarding the strength of this guaranty is so thin as to be almost non-existent,” and the debtor presented no persuasive evidence as to meaningful solvency or the probability of recovery in the state court litigation. Id. The Debtor‘s entire basis for separately classifying the Lender‘s Deficiency Claim hinges on the Guaranty and the Court cannot by way of the Declaration determine whether the Guaranty actually provides a third-party source of repayment. ECF No. 50-1 at 3 (“Because Secured Lender‘s deficiency claim has a third-party source of repayment that other unsecured claims do not, it is not substantially similar to other unsecured claims and must be separately classified pursuant to section 1122(a).“). The Debtor had the burden to demonstrate the Guarantors are solvent in a meaningful way and failed to do so. The Debtor further argued that because the Lender “very recently sued the Guarantors” to enforce the Guaranty in state court, this case is distinct from other plans with guaranteed loans on the basis that the litigation increases the Lender‘s chance of third-party recovery. ECF No. 50-1 at 5. In support of this proposition, the Debtor cited In re Johnston, 21 F.3d 323 (9th Cir. 1994), as amended (May 6, 1994), where the Ninth Circuit concluded the debtor properly separately classified a creditor‘s claim in its plan when the debtor and the creditor engaged in state court litigation respecting the claim. The Court concludes the Johnston case does not stand for the proposition that, on its own, the existence of state court litigation based on a guaranty justifies separate classification. Instead, the case illustrated that a debtor can justify separate classification of a claim when the claimant with an unsecured claim can seek In Johnston, the debtor commenced litigation contemporaneously with his bankruptcy filing and the creditor countersued with respect to delivered products and a personal guarantee for the cost of the products. The bankruptcy court, affirmed by both the Bankruptcy Appellate Panel and the Ninth Circuit, confirmed the debtor‘s plan including the separate classification of the creditor‘s claim against the debtor/guarantor because it “considered [the creditor] to be situated differently from all other unsecured creditors” due to the pending lawsuit. Id. at 326. In Johnston, the claim was “partially secured by collateral of the business debtor and “the primary obligor,” or actual assets over and above the personal guaranty by the individual debtor and CEO of the business debtor. Id. at 328. Importantly, the individual debtor‘s case rose to the Ninth Circuit on appeal, so the collateral at issue was indeed non-debtor collateral from which the claimant could seek recovery. Although the Ninth Circuit affirmed on the basis that “the legal character of [the creditor‘s] claim is not ‘substantially similar to the other claims or interests of such class[es]‘” and that the creditor thus had ‘“a status different from the other unsecured creditors,“’ this Court concludes the legal character of the Lender‘s Deficiency Claim here does not warrant separate classification. Id. at 328 citing In re Los Angeles Land & Invs., Ltd., 282 F. Supp. 448 (D. Haw. 1968), aff‘d, 447 F.2d 1366 (9th Cir. 1971). The Johnston court went on to explain courts look to the nature of the claim in the “ordinary common vernacular” sense in assessing claim classification, looking to the rights conferred on a creditor by the claim‘s legal character. Id. at 327. Other Ninth Circuit courts have since applied these principles to determine proper classification of claims. Even if state court litigation on a guaranty ensues, if the guarantors are not meaningfully solvent such litigation will not alter the probability of third-party recovery. In LOOP 76, an Arizona Bankruptcy Court analyzed Johnston, concluding “the only factor in Johnston that seems at all relevant to either the bankruptcy court‘s finding, or the Ninth Circuit‘s affirmance of substantial dissimilarity, is that the creditor had a non-debtor source of repayment of the claim.” In re LOOP 76, LLC, 442 B.R. 713 (Bankr. D. Ariz. 2010), aff‘d sub nom. In re Loop 76, LLC, 465 B.R. 525 (B.A.P. 9th Cir. 2012), aff‘d, 578 F. App‘x 644 (9th Cir. 2014) (emphasis added). Here, however, the Lender could be successful in the state court litigation and still recover nothing if the Guarantors are insolvent or only barely solvent. Nothing before the Court, in either the Plan or the Declaration, points to a different outcome and it is not at all uncommon for a plaintiff to prevail in a lawsuit and then recover nothing. The Plan could have, but did not, leverage the Guarantors by including them through either pledges of funds or capital contributions; instead, the Debtor simply argues that the Lender could sue the Guarantors in state court, which does not bolster the Plan‘s possibility of confirmation. In concluding that the plan‘s classification scheme in Johnston did not unfairly discriminate and was fair and equitable, the court reasoned “there were reasonable, nondiscriminatory reasons for” the separate classification. Id. The court in In re Barakat reasoned along the same lines, holding in similar circumstances that “absent a legitimate business or economic reason, separate classification is not permitted.” In re Barakat, 99 F.3d 1520 (9th Cir. 1996). The debtor could not separately classify the creditor‘s claim in Barakat because the “Debtor classified [the creditor‘s] unsecured deficiency claim separately from other general unsecured claims for the purpose of creating an impaired class that would accept the Plan.” Id. at 1524. The “one clear rule” to which courts agree respecting separate classification mandates that debtors “not classify similar claims differently in order to gerrymander an affirmative vote on a reorganization plan.” In re Barakat, 99 F.3d 1520 at 1525, quoting Matter of Greystone III Joint Venture, 995 F.2d 1274, 1279 (5th Cir. 1991), on reh‘g (Feb. 27, 1992); see also In re Tucson Self-Storage, Inc., Here, to conclude the Lender‘s Deficiency Claim is not substantially similar to other unsecured creditors and thus may be separately classified would be fundamentally unfair where the value of the Lender‘s Deficiency Claim constitutes approximately 95% of the value of the unsecured claims in this case.2 To allow separate classification would be to allow impermissible gerrymandering of claims for the purpose of securing plan confirmation. Principles of equity do not so permit. The Debtor suggested a business purpose for separate classification in the Supplemental Opposition, stating “Debtor will have a continued need for the services of these trade vendors as it operates the Property. Failing to pay their general unsecured claims in a timely manner could jeopardize the Debtor‘s ability to obtain these services in the future.” ECF No. 86 at 16. However, a continued need to employ vendors at the Property does not necessarily support separately classifying the usual vendors’ claims. Grand Prairie, Texas has a population of nearly 200,000 people and is in very close proximity to both Dallas and Arlington, Texas, both large cities with countless businesses. If some or all of the Debtor‘s pre-petition vendors refuse to do business with it post-confirmation because they are not quickly paid in full under the Plan, the Debtor does not explain why it will not simply be able to find, for example, a new painting company to replace G & C Painting, which the Debtor scheduled as being owed a little over $25,000. ECF No. 16 at 26. Or a new plumber to replace Fred‘s Plumbing, which the Debtor scheduled as being owed about $12,000. Id. Accordingly, the Court concludes that the Debtor In sum, the Debtor can only successfully reorganize within a reasonable time if the Debtor can separately classify the Lender‘s claims, otherwise no impaired consenting class will exist (because the Lender will vote its unsecured claim against confirmation) and the Plan will not be confirmed. But the Debtor has not adequately demonstrated the Lender has a non-debtor source of repayment for the Lender‘s Deficiency Claim, nor that the Debtor has a legitimate business or economic reason for separate classification. Moreover, the Lender‘s Deficiency Claim swamps the other claims’ aggregate value within the general unsecured class. This, plus the dubious rationales the Debtor has offered to support the separate classification, strongly indicates that the Debtor‘s attempt to separately classify the Lender‘s Deficiency Claim in the first instance constitutes impermissible gerrymandering of claims for the purpose of plan confirmation. The Plan‘s proposed treatment of the classes of claims further supports this conclusion (as detailed further below). Accordingly, the Debtor has no reasonable possibility of a successful reorganization within a reasonable time; the Debtor cannot separately classify the Lender‘s Deficiency Claim and the Lender indicated it will vote against a plan when properly classified with the remaining vendor claims such that the Debtor will not be able to confirm a plan. ECF No. 47-1 at 16 (“In the instant case, the Secured Lender will not vote in favor of any plan.“). Under The Court also concludes the Plan‘s treatment of the secured portion of the Lender‘s Claim is not fair and equitable. For purposes of determining whether a plan provides fair and equitable treatment toward a class of secured claims, courts refer to (I) that the holders of such claims retain the liens securing such claims, whether the property subject to such liens is retained by the debtor or transferred to another entity, to the extent of the allowed amount of such claims; and (II) that each holder of a claim of such class receive on account of such claim deferred cash payments totaling at least the allowed amount of such claim, of a value, as of the effective date of the plan, of at least the value of such holder‘s interest in the estate‘s interest in such property; (ii) for the sale, subject to section 363(k) of this title, of any property that is subject to the liens securing such claims, free and clear of such liens, with such liens to attach to the proceeds of such sale, and the treatment of such liens on proceeds under clause (i) or (iii) of this subparagraph; or (iii) for the realization by such holders of the indubitable equivalent of such claims. The Plan as drafted fails to satisfy any of the means for demonstrating fair and equitable treatment. In particular, the Court concludes the negative amortization under the proposed Plan is not fair and equitable. Ninth Circuit courts consider ten factors in determining whether proposed negative amortization may be fair and equitable. Great W. Bank v. Sierra Woods Grp., 953 F.2d 1174, 1178 (9th Cir. 1992). The Court concludes that the negative amortization at issue in this case is not fair and equitable according to at least seven of those factors. The Plan does not offer a prime rate of interest and present value of the deferred payments, the amount and length of the proposed deferral is not reasonable, the ratio of debt to value throughout the plan is not satisfactory, the Debtor‘s financial projections are not sufficiently proven and the Plan does not appear feasible (as detailed further below), the Plan unduly shifts the risks to the Lender, and the risks are borne by just one creditor. The Court is Finally, the Court concludes the Plan as written is not feasible. The Plan‘s success hinges on a speculative proposed sale of the Property. The Debtor claims, with little support, that in June 2029 the Debtor will be able to sell the Property for $81,600,000.00. ECF No. 53 at 64. Feasibility is primarily demonstrated by the Debtor showing the Plan‘s “reasonable probability of success.” In re Acequia, Inc., 787 F.2d 1352, 1364-1365 (9th Cir. 1986); see In re Sunnyslope Housing Limited Partnership, 859 F.3d 637, 646-647 (9th Cir. 2017) (holding that feasibility “requires the debtor to demonstrate that the plan has a reasonable probability of success“) (internal quotations omitted). To demonstrate feasibility in liquidating plans, courts in the Ninth Circuit generally focus on evidence such as appraisals of real estate or analyses of publicly traded stock prices. See In re Coastal Equities, Inc., 33 B.R. 898, 907 (Bankr. S.D. Cal. 1983) (finding a liquidating plan feasible where the Debtor provided competent evidence of the subject property‘s appraised value which was utilized in the plan). In the context of the sale of real property, as here, the Debtor must therefore provide evidence of the Property‘s value as utilized in the Plan and the Debtor‘s ability to complete the sale as contemplated by the Plan. Here, the Debtor proposes to eventually liquidate the Property following certain renovations and increases in occupancy at the Property. In the Supplemental Opposition, the Debtor attached a 2022 appraisal of the Property (the “Appraisal“) that reflects the Property‘s value with 94% occupancy at $65,100,000. ECF No. 86-1 at 7. According to the Appraisal, which anticipated $5,000,000 in renovations in 2022, the Property would have been worth $76,800,000 at the same occupancy rate the Debtor now aims to achieve. ECF No. 86-1 at 9. Now, the Debtor proposes to expend only $2,000,000 on renovations (the funds for which it will draw from projected income, which is also speculative), but still expects the value for the Property and business to far exceed that in the Appraisal‘s projected increase. ECF No. 53 at 64. The Debtor has not provided competent evidence to support the Plan‘s Moreover, as the Lender pointed out in the Supplemental Reply, the Plan “provides no mechanism for how the Property will be marketed or sold.” ECF No. 56 at 9. Accordingly, the Court concludes the Plan as drafted is not feasible. In the Motion, the Lender claimed, “the Debtor‘s cash-flow is woefully insufficient to make monthly payments to the Secured Lender at the non-default rate under the Loan (as hereafter defined),” and the Debtor did not dispute the same. ECF No. 47-1 at 6. So, the only means by which the Debtor could support the Court‘s denying stay relief under The Court concludes the standard for reasonable success by the Debtor under The reasoning in In re BGM Pasadena, LLC, No. 2:15-BK-27833-BB, 2016 WL 1738109 (Bankr. C.D. Cal. Apr. 27, 2016) further persuades the Court that Congress intended to require the Debtor to file a substantively confirmable plan within 90 days of filing a SARE petition. In BGM, the court detailed whether the debtor was entitled to a stay pending appeal after it entered two orders granting relief from the automatic stay. In so doing, the court analyzed the debtor‘s likelihood of success on the merits in showing the creditor was not entitled to stay relief. The court had granted stay relief under both The whole purpose of section 362(d)(3) is to expedite the process of proposing a realistic plan in cases that Congress believed should and could move promptly toward reorganization. If a debtor wants to take more than 90 days to formulate its plans for reorganization, Congress decided that the debtor should have to pay for that privilege by making monthly payments. Id. When the debtor filed multiple versions of a plan leading up to the 90-day deadline and “none of the[] versions ha[d] a realistic prospect of reorganization within a reasonable period,” the subsection dealing especially with SARE cases afforded the creditor stay relief. Id. However, the Court does not go so far as to conclude The Court concludes the Plan in this case suffers the same fatal defect-it is a visionary scheme at best. In other words, the Plan is patently unconfirmable as written (and thus the Lender is entitled to relief even under the Debtor‘s proposed standard). Under the Plan, the Debtor cannot pay interest, even at the prime rate. The Plan also shifts all the economic risk to the Lender. The existence of the Guaranty and the Lender‘s pursuit of the Guarantors does not change this analysis. For the same reasons the Plan is unconfirmable under The Debtor failed to demonstrate that it either has a reasonable possibility of a successful reorganization within a reasonable time or that it has filed a plan of reorganization that has a reasonable possibility of being confirmed within a reasonable time. Accordingly, the Court GRANTS the Motion. The Court does not waive the fourteen-day stay of this Order under FRBP 4001. Dated: April 14, 2026 J. BARRETT MARUM, Judge United States Bankruptcy CourtA. Section 362(d)(2)
1. The Lender‘s Deficiency Claim Must Be Classified With All Other Unsecured Creditors
a. Meaningful Solvency of Guarantors and Separate Classification
b. Litigation on the Guaranty and Separate Classification
c. Legitimate Business or Economic Reasons for Separate Classification
2. Impermissible Discrimination Between Classes of Claims
3. The Plan is not Fair and Equitable
4. The Plan is not Feasible
B. Section 362(d)(3)