ML-CFC 2006-3 Seasons, LLC v. Seasons Partners LLC (In re Seasons Partners LLC)
- ML-CFC 2006-3 Seasons, LLC v. Seasons Partners LLC, Case No. 10-00772 (9th Circ. June 25, 2013) (Not for Publication)
- The Ninth Circuit DISMISSED creditor's appeal of confirmation of Debtor's plan as equitably moot because creditor failed to seek a stay pending the appeal. Court also noted that even had a stay been sought, plan was substantially consummated and reconsideration would significantly impact parties not before the Court.
- Procedural context:
- Appeal from the United States District Court for the District of Arizona.
- The Debtor, Seasons Partners ("Seasons" and appellee), received a $20.5M secured loan from ML-CFC 2006-3 Seasons, LLC ("Torchlight" and appellant) to build an apartment complex. The Debtor confirmed a Plan over Torchlight's objection for re-valuation of its collateral (the apartment complex).
Torchlight argued in their appeal that the bankrtupcy court erred in not allowing another reevaluation of the property, but the District Court affirmed the bankruptcy court's ruling. While the case was pending on appeal to the Ninth Circuit, the Debtor filed a motion to dismiss the appeal as equitably moot citing a decision by the 9th Circuit (In re Thorpe Insulation) that was decided while the appeal was pending. Thorpe supported the Debtor's argument that the effectiveness of the Plan, with no "stay" in place, would significantly affect the interests of other entities, not party to the appeal. Equity dictates that the effects of the Plan not be reversed so as to negatively impact third parties where the creditor has not sought a stay. The appeal was thus, equitably moot because the Court could not fashion an equitable remedy that would not have detrimental consequences to other creditors.
Because the Debtor, other creditors and investors likely acted in reliance on the plan, and based on Torchlight's failure to seek a stay, the Ninth Circuit granted the Motion to Dismiss.
- O'Scannlain, Hurwitz, and Piersol
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