In re: STEPHEN WILLIAM SLOAN
- Summarized by Michael Holmes , Grant, Konvalinka & Harrison, PC
- 3 months 1 week ago
- Case Type:
- Case Status:
- BAP No. EC-22-1119-BSG; Bk. No. 20-10809 (9th Circuit, Dec 15,2022) Not Published
- The bankruptcy court did not err overruling Debtor's objection to claim because the Debtor was bound by an earlier agreement with Secured Creditor for the amount of post-petition interest and late charges.
- Procedural context:
- Chapter 11 Debtor personally guaranteed a loan of about $33 million he obtained from a rescue finance company (the "Creditor") to refinance debt on his farm. This loan was also secured by deeds of trust on the farm and other property (the "Property"). He defaulted on the loan and filed Chapter 11 cases for the farm and personally. Creditor filed proofs of claims in both cases, asserting that he was owed about $57 million in partially secured debt and about $45 million unsecured. Creditor also filed motions for relief, arguing that Debtor had no equity in the Property. Debtor opposed the motions for relief, claiming the Property was worth more like $500 million. Before a hearing on the motions for relief, the parties entered a stipulation, approved by the court, that Debtor's failure to pay would result in owing payments such as interest and legal fees in addition to the principal. Debtor failed to pay and Creditor, and Creditor foreclosed on the Property. Creditor purchased the Property with a credit bid for a total sale price of about $30 million. Creditor filed an amended unsecured proof of claim for about $41 million. In the Debtor's amended plan, he proposed that the Creditor's claim be only about $27 million because it should not include post-petition interest and attorney's fees since filing bankruptcy. In response, the parties agreed to further stipulate that Creditor would not object to the plan in exchange for agreeing to determine the amount of the claim at a later hearing. Thus, the court confirmed Debtor's plan. Shortly after, Debtor filed an objection against Creditor's claim of about $41 million to the extent it was unsecured and to allow only about $28 million. Creditor argued that Debtor's stipulation was binding and that the sales price of the Property could be the proper determination of value. Debtor responded that the stipulation was a contractual amount owed, not the amount of the claim, which would be limited by § 506(b). In addition, Debtor argued the claim could not accumulate post-petition interest when the claim was unsecured. The bankruptcy court agreed with the Creditor that the Debtor was bound by the stipulation and overruled his objection.
- The BAP rejected Debtor's arguments about the claim being undersecured because it was sold and that it was not subject to post-petition interest as red herrings. The Debtor bound himself for the full amount by agreeing to the stipulation. The BAP interpreted this stipulation of the amount as a concession that the claim was fully secured. Debtor also raised the argument under § 506(a) that valuation in the context of relief for stay is not binding on the parties. The bankruptcy court rejected this argument because the Debtor did not request valuation at that time. Instead, he entered the stipulation that provided for the value of the claim for stay relief purposes.
- BRAND, SPAKER, and GAN
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