Wilmington Trust v. Boh Park Highlands NV, L.P. (In Re November 2005 Land Investors, LLC)Wilmington Trust v. Boh Park Highlands NV, L.P. (In Re November 2005 Land Investors, LLC)
Philip M. Pro, Senior District Judge, Presiding
Submitted February 10, 2016**
San Francisco, California
Before: TASHIMA and W. FLETCHER, Circuit Judges and GETTLEMAN,*** Senior District Judge.
Appellant BOH Park Highlands NV, L.P. (“BOH“) and Appellee Wilmington Trust, National Association (“Wilmington“) dispute the value of BOH‘s interest in the proceeds from the sale of a property in bankruptcy court. BOH argues that the contract between the parties – the Conditional Repayment and Funding Agreement (“CRFA“) – entitles it to approximately $4.9 million of the proceeds. BOH also argues that
I.
“We review de novo the district court‘s decision on an appeal from a bankruptcy court.” Barclay v. Mackenzie (In re AFI Holding, Inc.), 525 F.3d 700, 702 (9th Cir. 2008) (citing In re Raintree Healthcare Corp., 431 F.3d 685, 687 (9th Cir. 2005)). We also review de novo a bankruptcy court‘s grant of summary judgment. Id. A court should grant summary judgment “if the pleadings and supporting documents, viewed in the light most favorable to the non-moving party, show that there is no genuine issue as to a material fact and the moving party is entitled to judgment as a matter of law.” Id. (citing
Section 363 of the Bankruptcy Code governs the “use, sale, or lease” of the bankruptcy estate‘s property.
In a hearing regarding a § 363(f) free-and-clear sаle, § 363(p) provides that “the entity asserting an interest in property has the burden of proof on the issue of the validity, priority, or extent of such interest.”
The parties agree that the CRFA defines the value of BOH‘s interest, but diffеr as to how the contract should be interpreted. Under Section 1 of the CRFA, BOH is entitled to $4.9 million in Builder Excess Funding only in the event that a lender “exercises remedies” (i.e. initiates a foreclosure) and elects to buy out BOH through payment of the Builder Excess Funding. The parties agree that Section 1
Sections 2–26 plainly do not grant BOH any additional affirmative right to the Builder Excess Funding, beyond what Seсtion 1 provides. The only remaining section in the CRFA is Section 27, which states:
This Agreement shall automatically terminate and be of no further force and effeсt upon the earlier of (i) the date that the Builder Excess Funding equals zero . . . (ii) the making of an Assumption Election by any applicable Successors pursuant tо Section 1.a of this Agreement and (iii) the payment to Builder of the Builder Excess Funding.
BOH argues that, once the bankruptcy court sold the property, Section 27(iii) required payment of the Builder Excess Funding to satisfy the CRFA.
A fair reading of Section 27 does not support BOH‘s position. Section 27 specifies conditions under which the CRFA will terminate. Yet defining when the CRFA will expire is not the same as creating an independent right to payment. Section 27(iii) states only that the CRFA will terminate upon payment of the Builder Excess Funding to BOH, if such payment is made before (i) the Builder Excess Funding equals zero, and (ii) a Successor makes an Assumption Election under Section 1.а. It does not logically follow that payment of the Builder Excess Funding to BOH is the only way to terminate the CRFA. Moreover, how the CRFA terminates is irrelevant if the CRFA can only be enforced once a lienholder
Thus, once the bankruptcy court sold the property pursuant to § 363(f), Section 1 could no longer be triggered and the CRFA no longer had any legal effect. As a contingent interest that expired upon the sale of the property, the CRFA has no value to BOH.
BOH suggests that even if Section 27(iii) does not entitle it to the Builder Excess Funding, the CRFA may still have some independent value as a contingent proрerty interest. However, BOH offers no method of valuation to define its interest and the record does not otherwise indicate what the value of that contingent interest might be. BOH has not met its burden; thus, we conclude that its contingent interest has no value.
II.
Section 363(e) protects contested interests in the bankruptcy еstate by requiring that “on request of an entity that has an interest in property used, sold, or leased, or proposed to be used, sold, or leased, by the trustee, the court, with or without a hearing, shall prohibit or condition such use, sale, or lease as is necessary
BOH argues that
III.
BOH has no right to payment in any amount under the CRFA. BOH has not established the value оf its interest in the property. We affirm the bankruptcy court‘s grant of summary judgment to appellee Wilmington Trust.
AFFIRMED.