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Epicenter Partners, LLC v. Sonoran Desert Land Investors LLC

United States District Court, D. Arizona

May 16, 2018

Epicenter Partners, LLC, et al., Debtors.
v.
Sonoran Desert Land Investors, LLC, et al., Appellees. CPF Vaseo Associates, LLC, Appellant,

          ORDER

          HONORABLE STEVEN P. LOGAN UNITED STATES DISTRICT JUDGE.

         Appellant CPF Vaseo Associates, LLC (“CPF”) brings an appeal pursuant to 28 U.S.C. § 158 of a judgment issued by the United States Bankruptcy Court, District of Arizona (the “Bankruptcy Court”), in the Chapter 11 bankruptcy cases of Epicenter Partners LLC, et al., No. 2:17-cv-03346-SPL. This Court has reviewed the Bankruptcy Court's ruling denying the inclusion of per diem late fees in CPF's proofs of claim and CPF's request for discovery and an evidentiary hearing on the same issue. The appeal is fully briefed, and for the reasons that follow, the judgment will be affirmed.

         I. Background

         Appellees Sonoran Desert Land Investors, LLC (“SDLI”), East of Epicenter, LLC (“EoE”), and Gray Phoenix Desert Ridge II, LLC (“GPDR II”, together with SDLI and EoE, the “Debtors”) entered into two loan agreements with Pacific Coach, Inc. (“Pacific Coach”). (Doc. 12-1 at 1.) The first loan was made to SDLI and GPDR II in the principal amount of $26.5 million (the “$26.5 MM Loan”), evidenced by a loan agreement and promissory note dated December 10, 2014, and the second loan was made to EoE in the principal amount of $3.7 million (the “$3.7 MM Loan, ” together with the $26.5 MM Loan the “Loans”), evidenced by a loan agreement and promissory note dated September 17, 2014. (Doc. 12-1 at 3.) The loan agreements call for steep penalties in the event of the Debtors' default.

         Section 2.5(e) of the $26.5 MM Loan Agreement provides:

In the event that any payment of principal or interest shall not be made on the due date (including without limitation the Maturity Date) and such payment remains outstanding five (5) days after the due date, Borrower agrees to pay a late charge equal to Ten Thousand Dollars ($10, 000) per day for each day the payment is so overdue beginning from the payment due date through and including the day the delinquent payment is made. Such late charge represents the reasonable estimate of Lender of a fair average compensation for the loss that may be sustained by lender due to the failure of Borrower to make timely payments.

(Doc. 12-2 at 110.)

         Section 8 of the $26.5 MM Promissory Note provides:

(a) If any payment of interest, principal or impounds is not received by Lender when due (including without limitation at maturity) and such payment remains outstanding five (5) days after the due date, Borrower agrees to pay a late charge equal to Ten Thousand Dollars ($10, 000.00) per day for each day the payment is so overdue beginning from the payment due date through and including the day the delinquent payment is made.
(b) If any sum is not paid on the due date thereof, then (in addition to the late charge state above) the interest rate on the unpaid principal balance shall be increased to eighteen percent (18%) per annum from the date of the last payment and such rate shall continue until all payments have been made current.

(Doc. 12-2 at 135.)

         Section 2.5(e) of the $3.7 MM Loan Agreement provides:

In the event that any payment of principal or interest shall not be made on the due date (including without limitation the Maturity Date) and such payment remains outstanding five (5) days after the due date, Borrower agrees to pay a late charge equal to One Thousand Five Hundred Dollars ($1, 500.00) per day for each day the payment is so overdue beginning from the payment due date through and including the day the delinquent payment is made. Such late charge represents the reasonable estimate of Lender of a ...

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