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First Foundation Bank v. Ramin Pourteymour (In re: Pourteymour)

Case Type:
Case Status:
SC-22-1008-GFB, SC-22-1009-GFB, SC-22-1010-GFB (9th Circuit, Apr 12,2023) Not Published
The U.S. Bankruptcy Appellate Panel of the Ninth Circuit affirmed a bankruptcy court's orders dismissing a chapter 11 case pursuant to 11 U.S.C. § 1112(b) and denying a creditor's pending motions as moot. The dismissal order did not violate the Supreme Court’s holding in Czyzewski v. Jevic Holdings Corp.; rather, it returned the parties to the prepetition status quo in accordance with 11 U,S,C, § 349. The bankruptcy court's statements at the dismissal hearing did not override its thorough written order. issued after the hearing
Procedural context:
The BAP evaluated the bankruptcy court's order dismissing Debtor's case for an abuse of discretion, and reviewed de novo the bankruptcy court's denial of Creditor's motion for an accounting and turnover and motion to reject a lease. Creditor contended the dismissal order either expressly or impliedly violated Jevic insofar as it conditioned dismissal on Debtor making payments to some, but not all, unsecured creditors, thereby constituting an improper structured dismissal deviating from the Bankruptcy Code's priority scheme. To fashion its argument, Creditor relied heavily on the bankruptcy court's statements at the final hearing on the dismissal motion, which were not incorporated by reference into the court's dismissal order.
Debtor Ramin Pourteymour obtained three prepetition loans from Creditor First Foundation Bank (FFB) secured by two parcels of real estate in La Jolla, California (Blackgold and Box Canyon). Debtor filed a chapter 11 petition in the U.S. Bankruptcy Court for the Southern District of California in November 2020 to head off foreclosure after he stopped paying the loans due to a disruption in rental income. The bankruptcy court granted Debtor's motion to use cash collateral generated by Blackgold and Box Canyon. In the summer of 2021, after the court granted FFB's motion for stay relief as to Blackgold, FFB took title to that property through a non-judicial foreclosure. FFB then moved to compel Debtor to account for and turn over all net rents Blackgold generated under 11 U.S.C. § 542, and moved to compel rejection of Debtor’s postpetition lease of Blackgold under § 549 because Debtor had not obtained court approval to lease the property under 11 U.S.C. § 365. Debtor, however, moved to dismiss his case for cause under 11 U.S.C. § 1112(b), arguing the loss of Blackgold constituted a material change of circumstances impeding his ability to confirm a reorganization plan and asserting that a dismissal was in the best interests of creditors and the estate. Over the next several months, Debtor proposed to condition dismissal on his use of DIP account and non-estate funds to pay certain claims, arguing the proposals did not violate the Bankruptcy Code's priority scheme or the Supreme Court’s holding in Czyzewski v. Jevic Holdings Corp. The Office of the United States Trustee (UST) and FFB both objected, contending Debtor hadn't shown dismissal, as opposed to conversion, was in the best interests of creditors and the estate. UST also contended Debtor's ultimate dismissal proposal violated Jevic. After multiple hearings, the bankruptcy court issued a detailed written order finding cause to dismiss or convert the case under § 1112(b), in part due to the loss of Blackgold. The order explained that the interests of creditors and the estate wouldn't be better served by appointing a trustee, and unusual circumstances didn't exist to warrant conversion or dismissal. The order rejected dismissal proposals from Debtor and UST, explaining Debtor’s proposed structured dismissals would violate either Jevic's holding or spirit. The order then concluded, based on a balancing test, dismissal was appropriate. After entering the dismissal order, the bankruptcy court entered orders denying FFB’s pending motions as moot. FFB timely appealed.

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