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In re Bataa/Kierland LLC

United States District Court, D. Arizona

August 29, 2014

In re: BATAA/KIERLAND LLC, Debtor. JPMCC 2007--CIBC 19 EAST GREENWAY, LLC, Appellant,
v.
BATAA/KIERLAND LLC, Appellee

Decided August 28, 2014

Page 156

On Appeal From U.S. Bankruptcy Court, District of Arizona. Hon. Randolph J. Haines, Judge. Bankruptcy Case No. 2:11-bk-05850-MCW.

For JPMCC 2007 - CIBC 19 East Greenway LLC, Appellant: Dean Christian Waldt, LEAD ATTORNEY, Ballard Spahr LLP - Cherry Hill, NJ, Cherry Hill, NJ; Grant L Cartwright, LEAD ATTORNEY, Ballard Spahr LLP - Phoenix, AZ, Phoenix, AZ.

For Bataa/Kierland LLC, Debtor, Appellee: John J Hebert, Philip R Rudd, LEAD ATTORNEYS, Polsinelli PC - Phoenix, AZ, Phoenix, AZ.

For Bankers Trust Company, Appellee: John R Clemency, Julie K Rystad, LEAD ATTORNEYS, Gallagher & Kennedy PA, Phoenix, AZ.

For Bataa/Kierland II LLC, Appellee: Richard William Hundley, LEAD ATTORNEY, Berens Kozub Kloberdanz & Blonstein PLC, Scottsdale, AZ.

For United States Trustee, Appellee: Jennifer A Giaimo, LEAD ATTORNEY, U.S. Trustee's Office, Phoenix, AZ.

OPINION

JOHN W. SEDWICK, SENIOR UNITED STATES DISTRICT JUDGE.

Page 157

MEMORANDUM DECISION

JPMCC 2007-CIBC 19 East Greenway, LLC timely appeals from the order of the bankruptcy court confirming the Plan of Reorganization proposed by Debtor Bataa/Kierland LLC (hereinafter " Plan" ). The bankruptcy court had jurisdiction under 28 U.S.C. § § 157(a), (b)(2)(A) and 1334. This Court has jurisdiction under 28 U.S.C. § 158(a)(1), (c)(1)(A).

Dean C. Waldt and Andrew A. Harnish of Ballard Spahr LLP, Phoenix, Arizona, appeared on behalf of the Appellant JPMCC 2007-CIBC 19 East Greenway, LLC .

John J. Hebert and Philip R. Rudd of Polsinelli PC, Phoenix, Arizona, appeared on behalf the Appellee Bataa/Kierland LLC.

The court has determined that the facts and legal arguments are adequately presented in the briefs, and oral argument would not significantly assist in the resolution of the issues presented on appeal. Accordingly, the requests for oral argument are denied, and the matter is submitted for decision on the briefs.[1]

I. BACKGROUND/ISSUES PRESENTED

Once again this court must address the proposed plan of reorganization in this case.[2] Accordingly, the parties are familiar with the facts, and they are not repeated herein except to the extent necessary to an understanding of this decision. Bataa/Kierland LLC (hereinafter " Debtor" ) filed a petition for bankruptcy relief under Chapter 11 of the Bankruptcy Code. After holding a hearing, the bankruptcy court confirmed the plan of reorganization proposed by Debtor over the objections of JPMCC 2007-CIBC 19 East Greenway, LLC (hereinafter " JPMCC" ). JPMCC appealed from the confirmation order, this court vacated the decision of the bankruptcy court and remanded for further consideration consistent with the court's decision.[3] On remand, after Debtor amended the plan, the bankruptcy court confirmed the amended proposed plan over the objections of JPMCC. JPMCC has timely appealed from that order.[4]

Page 158

As relevant to this appeal, in vacating the first confirmation order and remanding in Bataa/Kierland II, this Court specifically held that: (1) the holding by the bankruptcy court that Debtor was required to reimburse Kierland II for part of the construction costs of the parking garage was unsupported by the evidence; (2) any claim that Kierland II had for the costs of erecting the parking garage should have been disallowed or, even if properly allowed, allowed as an unsecured claim; (3) re-characterization of the $14.9 million pre-petition transfer by Debtor to Kierland II was unsupported by the evidence; (4) questioned the treatment of $729,467.44 in net cash collateral proceeds; and (5) remanded for redetermination of the common expenses, if any, Debtor was required to reimburse Kierland II for the use of the parking garage. No further appeal was taken from that decision.

Upon remand, JPMCC moved in the bankruptcy court for an order converting the case to a Chapter 7 case and, concurrently therewith moved separately for relief from the automatic stay. The bankruptcy court denied both motions, and JPMCC appealed to this court. In Bataa/Kierland IV this Court affirmed the decision of the bankruptcy court to the extent that it denied the motion to convert; and reversed to the extent it denied the motion for relief from the automatic stay, remanding for reconsideration consistent with this Court's decision.[5] Debtor has appealed from that Order.[6]

Debtor filed a document entitled " Notice of: (1) Amendment to Proposed Parking Agreement; and (2) Amendment to Amended Plan of Reorganization dated September 2, 2011." The amendment of the plan was limited to increasing the amount of the new capital contribution from $350,000.00 to $550,000.00.[7] As relevant to this appeal, the bankruptcy court confirmed the plan as amended, finding: (1) after deducting the value of the parking on Kierland II property that the value of Debtor's real property was $13.9 million; (2) declined to approve or disapprove the Parking Agreement; and (3) that Debtor did not have any ownership interest in or possession of the $14.9 million transferred from Debtor to Bataa Oil.[8]

On appeal, JPMCC raises fifteen issues:

1. Whether the bankruptcy court erred by entering the Confirmation Orders and confirming the Amended Plan in non-compliance with the mandates of this court set forth in the District Court Confirmation Decision and the District Court Reversal Decision;

2. Whether the bankruptcy court erred by confirming the Amended Plan, which incorporates the Amended Parking Agreement, and reducing the value of the Property by the cost to Debtor of the Amended Parking Agreement, thereby reducing Appellant's allowed secured claim in that amount, while simultaneously holding that the bankruptcy court did not " approve" the Amended Parking Agreement to bypass the mandate of this court in the District Court Reversal Decision;

3. Whether the bankruptcy court erred by determining that the value of the Property is $13.9 million, which included an express deduction in value for the net present value cost to Debtor of the Amended Parking Agreement, in disregard of the mandate of this court in the District Court Reversal Decision.

Page 159

4. Whether the bankruptcy court erred by confirming the Amended Plan without ruling on whether the Amended Plan meets the requirements of Section 1129(a)(7) (other than feasibility under Section 1129(a)(11)), and specifically declining to apply the requirements of Section 1129(a), including but not limited to, the good faith requirement of Section 1129(a)(3), the best interest of creditor test of Section 1129(a)(7) or the requirement of acceptance of at least one impaired class of Section 1129(a)(10);

5. Whether the bankruptcy court erred by confirming the Amended Plan that violates Section 1129(a)(3) because it was not proposed in good faith;

6. Whether the bankruptcy court erred by confirming the Amended Plan that violates Section 1129(a)(7) because it fails the best interest of creditors test;

7. Whether the bankruptcy court erred by confirming the Amended Plan that violates Section 1129(a)(10) because Appellant is the only remaining creditor for purposes of confirmation and Appellant affirmatively objects to the Amended Plan;

8. Whether the bankruptcy court erred by finding that the Amended Plan was feasible under Section 1129(a)(11);

9. Whether the bankruptcy court erred by confirming the Amended Plan that violates the absolute priority rule of Section 1129(b)(2)(B) without satisfaction of the judicially created " new value" exception to the absolute priority rule;

10. Whether the bankruptcy court erred when finding that by increasing the proposed new value contribution of Bataa Oil, LLC (" Bataa Oil" ) from $350,000 (an amount which was found by this court in the District Court Confirmation Decision to be de minimis as a matter of law) to $550,000 the contribution was no longer de minimis ;

11. Whether the bankruptcy court erred by finding that Debtor satisfied the five requirements of the new value exception to the absolute priority rule in accordance with the mandates of this court under the District Court ...


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