FILED MAR 23 2022 NOT FOR PUBLICATION SUSAN M. SPRAUL, CLERK U.S. BKCY. APP. PANEL OF THE NINTH CIRCUIT
UNITED STATES BANKRUPTCY APPELLATE PANEL OF THE NINTH CIRCUIT
In re: BAP No. AZ-21-1108-LBS SKYLINE RIDGE, LLC, Debtor. Bk. No. 4:18-bk-01908-BMW
SKYLINE RIDGE, LLC, Adv. No. 4:20-ap-00155-BMW Appellant, v. MEMORANDUM∗ CINCO SOLDADOS, LLC; LANDMARK TITLE ASSURANCE AGENCY OF ARIZONA, LLC, as Trustee for Landmark Title Trust No. 1852-T, Appellees.
Appeal from the United States Bankruptcy Court for the District of Arizona Brenda Moody Whinery, Bankruptcy Judge, Presiding
Before: LAFFERTY, BRAND, and SPRAKER, Bankruptcy Judges.
INTRODUCTION
In the midst of the bankruptcy court’s consideration of competing
plans of reorganization, debtor-in-possession Skyline Ridge, LLC
(“Skyline”) (now the reorganized debtor under the confirmed plan filed by
∗ This disposition is not appropriate for publication. Although it may be cited for whatever persuasive value it may have, see Fed. R. App. P. 32.1, it has no precedential value, see 9th Cir. BAP Rule 8024-1. 1 Cinco Soldado, LLC (“Cinco”)), filed a state court lawsuit against Cinco,
asserting claims for breach of contract and judicial foreclosure based on a
prepetition note and deed of trust. According to Skyline, the note
comprised the estate’s largest asset. Cinco removed the state court action to
the bankruptcy court. Before the bankruptcy court issued any dispositive
rulings in the removed action, it confirmed Cinco’s plan of reorganization,
which called for settlement of disputes between Skyline and Cinco,
including the disputes arising out of the same note and deed of trust. The
note payment called for under the plan was paid and the deed of trust was
reconveyed. After Skyline refused to dismiss the removed action, Cinco
moved for summary judgment dismissing it without prejudice, as called
for in the plan. The bankruptcy court granted the motion.
Skyline appeals, arguing that: (1) the bankruptcy court should have
abstained and remanded the removed action; (2) the bankruptcy court
lacked constitutional authority to enter a final order in the adversary
proceeding; and (3) because the order confirming Cinco’s plan is currently
on appeal, Skyline will be prejudiced if the order is reversed because it will
be time-barred from collecting the full amount owed to it.
As discussed herein, abstention doctrines do not apply to removed
actions, and the bankruptcy court had authority to enter a final order
enforcing the terms of the chapter 11 plan. Further, the note and deed of
trust that were the subject of the claims in the removed action have been
paid and reconveyed, respectively, thus rendering the claims moot.
2 Skyline’s arguments regarding the pending appeal of the confirmation
order have been presented and rejected by this Panel in connection with
Skyline’s request for a stay pending appeal of the confirmation order,
which we denied. We therefore AFFIRM.
FACTS
A. Pre-petition events
Skyline is an Arizona limited liability company formed in 1994 by
Ahmad Zarifi, its sole member and manager, to design, build, and sell
homes in the Tucson area. Cinco is an Arizona limited liability company
formed in 2006 by Zarifi and others to acquire and develop a 160-acre
parcel of land known as Rancho Soldados. The purchase of Rancho
Soldados was funded in part by a $4 million loan from Skyline, as
memorialized in a promissory note (the “Skyline Note”), which was
secured by a second position deed of trust on Rancho Soldados (“Skyline
DOT”).
Although the Skyline Note provided for the payment of interest,
Cinco took the position that the parties had orally agreed that the loan
would not accrue interest and that Zarifi would convert the Skyline Note
into equity when Rancho Soldados was platted. Cinco failed to pay the
Skyline Loan on its amended maturity date of June 30, 2016.
3 B. Skyline's bankruptcy filing and the adversary proceeding
Skyline filed its chapter 111 bankruptcy case on March 1, 2018. After
the bankruptcy court terminated Debtor's exclusivity period, Debtor and
Cinco proposed competing chapter 11 plans. Debtor’s plan proposed
litigating disputed claims; Cinco’s plan (the “Cinco Plan”) called for the
settlement of disputed claims, including those relating to the Skyline loan.
In February 2020, while the competing plans were under
consideration, Skyline filed a complaint against Cinco in the Superior
Court of Arizona, Pima County. The complaint contained two claims for
relief: (1) breach of contract, based on Cinco’s alleged failure to comply
with the terms of the Skyline Note; and (2) judicial foreclosure of the
Skyline DOT. In May 2020, Cinco removed the state court lawsuit to the
bankruptcy court. Skyline promptly filed a motion for abstention and
remand (“Remand Motion”). The bankruptcy court deferred ruling on the
Remand Motion until after plan confirmation.
In June 2020, after a five-day trial, the bankruptcy court issued a
ruling and order denying confirmation of both plans. The parties each filed
amended plans, and in November 2020, the bankruptcy court entered an
order denying confirmation of Debtor’s plan and confirming the Cinco
Plan (the “Confirmation Order”).
Unless specified otherwise, all chapter and section references are to the 1
Bankruptcy Code, 11 U.S.C. §§ 101–1532. 4 The Cinco Plan provides for compromise and payment of the Skyline
Note, release of the Skyline DOT, and dismissal of the removed adversary
proceeding. Specifically, the Cinco Plan provides: “In consideration of
receipt of the Initial Settlement Payment on the Effective Date, Debtor and
Cinco shall exchange mutual releases, dismiss all pending actions without
prejudice, each party to bear its own attorneys’ fees, and Debtor shall
release all liens and claims upon property of Cinco.” The Cinco Plan also
provides for the retention of bankruptcy court jurisdiction to resolve
pending adversary proceedings and to enter orders necessary to
implement or consummate the provisions of the Cinco Plan.
On February 19, 2021, Cinco transferred $2,654,942 to the disbursing
agent in satisfaction of the Skyline Note, as provided in the plan.
Thereafter, the disbursing agent executed and delivered and caused to be
recorded a Full Deed of Release and Reconveyance of the Skyline DOT,
which released Skyline’s lien against Rancho Soldados.
In the meantime, Skyline appealed the Confirmation Order to this
Panel, which affirmed. Skyline Ridge, LLC v. Cinco Soldados, LLC (In re
Skyline Ridge, LLC), BAP Nos. AZ-20-1264-BTL & AZ-21-1000-BTL, 2021
WL 3829311 (9th Cir. BAP Aug. 25, 2021). Skyline has appealed the Panel’s
decision to the Ninth Circuit Court of Appeals (No. 21-60052); as of the
date of this Memorandum, that appeal remains pending. Skyline’s requests
for a stay pending appeal were denied by the bankruptcy court and this
5 Panel; Skyline has not requested a stay pending appeal from the Ninth
Circuit.
Shortly after the reconveyance was recorded, Cinco moved for
summary judgment dismissing the adversary proceeding. Cinco argued
that the Skyline Note had been paid and the Skyline DOT had been
released, thus there was no basis for litigating the claims, and the
adversary proceeding must be dismissed pursuant to the confirmed plan.
Skyline opposed the motion, arguing that dismissal was
inappropriate because the Confirmation Order was on appeal and might be
reversed. Skyline asserted that, even though the proposed dismissal was
without prejudice to filing a future action, it would be prejudiced because
the six-year statute of limitations would expire with respect to some of the
unpaid payments on the Skyline Note. Skyline also objected to the
bankruptcy court’s entry of a final order disposing of the adversary
proceeding, arguing that the court lacked constitutional authority to enter
such an order pursuant to Stern v. Marshall, 564 U.S. 462 (2011).
In Cinco’s reply, it argued that Skyline was again attempting to
obtain a stay pending appeal, which had already been denied. It also
suggested that the bankruptcy court treat the adversary proceeding as non-
core and enter proposed findings and conclusions for de novo review by
the district court.
After a hearing, the bankruptcy court issued a ruling and order
(“Dismissal Order”) granting Cinco’s motion for summary judgment based
6 on the terms of the confirmed Cinco Plan and the fact that the terms of the
settlement of the Skyline loan had been satisfied. With respect to its
authority to enter a final judgment, the court concluded that it had “related
to” jurisdiction over the adversary proceeding, and that it had ancillary
jurisdiction to enter an order dismissing it because dismissal was required
under the Confirmation Order. The court concluded that, based on its
ancillary jurisdiction, it had constitutional authority to enter a final
judgment because it was enforcing the Confirmation Order. Nevertheless,
the bankruptcy court included a footnote in its ruling stating, “[i]f it is
determined that this Court lacks authority to enter a final order disposing
of this Adversary Proceeding, the foregoing constitute the Court’s
proposed findings of fact and conclusions of law.” The bankruptcy court
did not make any findings or conclusions regarding Skyline’s Remand
Motion.
Skyline timely appealed. Despite Skyline’s assertion that the
bankruptcy court lacked constitutional authority to enter the Dismissal
Order, it did not elect to have the appeal heard by the district court.
JURISDICTION
As discussed below, the bankruptcy court had jurisdiction under
28 U.S.C. §§ 1334 and 157(b)(2)(L) and the retention of jurisdiction
provision of the confirmed plan.
We have jurisdiction over final orders and decrees, and from
interlocutory orders with leave. 28 U.S.C. § 158(a). Here, the bankruptcy
7 court’s order dismissed the adversary proceeding “without prejudice.”
Orders dismissing adversary proceedings without prejudice are generally
interlocutory. Barnes v. Belice (In re Belice), 461 B.R. 564, 571‐72 (9th Cir. BAP
2011). At the same time, “[a] disposition is final if it contains a complete act
of adjudication, that is, a full adjudication of the issues at bar, and clearly
evidences the judge’s intention that it be the court’s final act in the matter.”
Slimick v. Silva (In re Slimick), 928 F.2d 304, 307 (9th Cir. 1990) (cleaned up).
Skyline contends, and we agree, that the Dismissal Order meets these
criteria. The Cinco Plan required that pending proceedings be dismissed
without prejudice, so that is what the court did. But the court dismissed the
adversary proceeding in its entirety, and nothing in the record suggests
that there is anything further to be done in that matter. Accordingly, we
may treat the order as final. We thus have jurisdiction. 2
ISSUES
Did the bankruptcy court abuse its discretion in implicitly denying
Skyline’s Remand Motion?
Did the bankruptcy court have constitutional authority to enter a
final order in the adversary proceeding?
Did the bankruptcy court err in granting summary judgment
dismissing the adversary proceeding?
2 Cinco does not dispute that the order was intended to be final. To the contrary, it asserts in its brief that the Panel has jurisdiction over the appeal of the dismissal order because the order was final. 8 STANDARDS OF REVIEW
A bankruptcy court’s denial of a motion to remand under 28 U.S.C.
§ 1452(b) is reviewed for abuse of discretion. McCarthy v. Prince (In re
McCarthy), 230 B.R. 414, 416 (9th Cir. BAP 1999). To determine whether the
bankruptcy court abused its discretion, we conduct a two-step inquiry:
(1) we review de novo whether the bankruptcy court “identified the correct
legal rule to apply to the relief requested” and (2) if it did, whether the
bankruptcy court's application of the legal standard was illogical,
implausible, or “without support in inferences that may be drawn from the
facts in the record.” United States v. Hinkson, 585 F.3d 1247, 1261–62 (9th
Cir. 2009) (en banc).
Whether the bankruptcy court had the constitutional authority to
finally determine an issue is reviewed de novo. Hasse v. Rainsdon (In re
Pringle), 495 B.R. 447, 455 (9th Cir. BAP 2013). We also review de novo a
bankruptcy court’s grant of summary judgment. Salven v. Galli (In re Pass),
553 B.R. 749, 756 (9th Cir. BAP 2016). Under de novo review, we look at the
matter anew, as if it had not been heard before, and as if no decision had
been rendered previously, giving no deference to the bankruptcy court's
determinations. Freeman v. DirecTV, Inc., 457 F.3d 1001, 1004 (9th Cir. 2006).
9 DISCUSSION
A. The bankruptcy court did not abuse its discretion in implicitly denying Skyline’s Remand Motion. The bankruptcy court never explicitly ruled on Skyline’s Remand
Motion, but its dismissal of the adversary proceeding operated as an
implicit denial of that motion. On appeal, Skyline does not directly address
remand but focuses its argument on abstention doctrines. Skyline contends
that the bankruptcy court was required to abstain from exercising
jurisdiction over the adversary proceeding pursuant to 28 U.S.C. § 1334(c).
But abstention provisions do not apply when a state court action has been
removed to federal court. This is because abstention, whether discretionary
or mandatory, requires the existence of a parallel state court proceeding.
Schulman v. Cal. (In re Lazar), 237 F.3d 967, 981-82 (9th Cir. 2001); Sec. Farms
v. Int’l Bhd. of Teamsters, Chauffers, Warehousemen & Helpers, 124 F.3d 999,
1009 (9th Cir. 1997). Once a state court proceeding has been removed to
federal court, that requirement is no longer met. See id. at 1010 (state court
proceeding was “extinguished” upon removal to federal court).3
Accordingly, Skyline’s request for abstention should be treated as a
motion to remand under 28 U.S.C. § 1452(b). Id. That statute provides, “The
court to which such claim or cause of action is removed may remand such
claim or cause of action on any equitable ground.” Skyline’s arguments on
3 At oral argument, counsel for Skyline conceded that this is a correct statement of Ninth Circuit law, but he believes it to be wrong and wishes to preserve the argument for a potential appeal to the Ninth Circuit Court of Appeals. 10 appeal address only the question of mandatory abstention, which is
inapplicable. The adversary proceeding involved an asset of the
bankruptcy estate, and the Cinco Plan that was on file at the time of filing
provided for resolution of the claims in the adversary proceeding. Further,
the payment of the Skyline Note and reconveyance of the Skyline DOT
mooted the claims in the removed action; there was no case or controversy
to remand. We thus find no abuse of discretion in the bankruptcy court’s
implicit denial of the Remand Motion.
B. The bankruptcy court had constitutional authority to enter the Dismissal Order. Skyline contends that the bankruptcy court lacked constitutional
authority, i.e., judicial power, to enter a final order in the adversary
proceeding because it was not a core proceeding and because Skyline did
not consent to entry of a final order. The bankruptcy court rejected this
argument. It implicitly treated Cinco’s motion for summary judgment as a
motion to enforce the Confirmation Order. This was appropriate: despite
its label, the motion was in substance a request for the court to enforce the
provision of the Cinco Plan and Confirmation Order that required the
adversary proceeding to be dismissed once the required payment had been
made and the Skyline DOT reconveyed. See Bankr. Receivables Mgmt. v.
Lopez (In re Lopez), 274 B.R. 854, 862 (9th Cir. BAP 2002) (“A pleading is to
be judged by its substance rather than by its form or label.” (cleaned up),
aff’d, 345 F.3d 701 (9th Cir. 2003)). Although Cinco styled the motion as one
11 for summary judgment of dismissal and filed it in the adversary
proceeding, Cinco could have instead filed a motion to enforce the
Confirmation Order in the main case. The motion alleged that the
conditions for dismissal had been satisfied but that Skyline had refused to
dismiss the action unconditionally, and the evidence attached to the motion
confirmed this. Skyline does not contend otherwise.
Based on this interpretation, the bankruptcy court reasoned that it
had ancillary jurisdiction to dismiss the adversary proceeding as
enforcement of the Confirmation Order, a core proceeding. 4 See Huse v.
Huse-Sporsem, A.S. (In re Birting Fisheries, Inc.), 300 B.R. 489, 499 (9th Cir.
BAP 2003) (bankruptcy court’s core jurisdiction includes confirmation of
plans, and core jurisdiction continues for the court to enforce its orders,
even after the case has been closed). See also Gray v. CPF Assocs., LLC (In re
Gray), 614 B.R. 96, 105 (D. Ariz. 2020) (“Actions to interpret or enforce a
prior order are effectively a continuation of that earlier proceeding, thus if
that earlier proceeding was ‘core,’ then the later one is too.” (citing
McCowan v. Fraley (In re McCowan), 296 B.R. 1, 3–4 (9th Cir. BAP 2003)). In
concluding that it had ancillary jurisdiction, the bankruptcy court
recognized that its post-confirmation jurisdiction is limited to matters that
4 Skyline asserted in its opening brief that the bankruptcy court found that the adversary proceeding was not a core proceeding. To the contrary, the court stated, “[g]iven that this Court is exercising ancillary jurisdiction to enforce this Court’s Confirmation Order by dismissing this Adversary Proceeding, it is this Court’s determination that this is a ‘core’ proceeding.” 12 have a “close nexus” to the plan; that is, matters affecting “the
interpretation, implementation, consummation, execution, or
administration of the confirmed plan.” Montana v. Goldin (In re Pegasus Gold
Corp.), 394 F.3d 1189, 1194 (9th Cir. 2005) (quoting Binder v. Price Waterhouse
& Co., LLP (In re Resorts Int’l, Inc.), 372 F.3d 154, 167 (3d Cir. 2004)). The
dismissal of the adversary proceeding was indisputably required to
implement the confirmed plan.
But whether the bankruptcy court had ancillary jurisdiction is not the
relevant question.5 Under the unique facts and procedural posture of this
case, the court’s entry of the Dismissal Order was within its judicial power
for two reasons: first, it was a ministerial act that was required under the
terms of the confirmed plan, i.e., it disposed of the procedural “shell”
containing the resolved claims; and second, it was a determination of
matters which did not require the court to make findings on any disputed
issues of fact, and therefore did not implicate any deferential standard of
review on appeal.
5 We emphasize here the difference between subject matter jurisdiction and judicial power. A court’s jurisdiction is determined as of the time of filing. Grupo Dataflux v. Atlas Glob. Grp., L.P., 541 U.S 567, 570 (2004). And because subject matter jurisdiction “involves a court’s power to hear a case, it can never be forfeited or waived.” Arbaugh v. Y&H Corp., 546 U.S. 500, 514 (2006) (quoting United States v. Cotton, 535 U.S. 625, 630 (2002)). Unlike subject matter jurisdiction, however, a bankruptcy court’s constitutional authority to enter a final order may be consented to, or an objection to it can be waived. See Wellness Int’l Network, Ltd. v. Sharif, 575 U.S. 665, 683-84 (2015) (litigant may implicitly consent to bankruptcy court authority). 13 With respect to the ministerial nature of the dismissal of the
adversary proceeding, we do not suggest that plan confirmation
transformed the substantive claims in the adversary proceeding from non-
core to core. Rather, the fact that the initial complaint involved non-core
claims is irrelevant because those claims, i.e., the parties’ substantive rights,
had already been finally disposed of in the plan confirmation process; the
Confirmation Order was the final order adjudicating the claims.6
More fundamentally, we discern no error in the court’s disposition of
the adversary proceeding.
First, the bankruptcy court’s authority to enter a final order or
judgment was not called into question here because there were no
genuinely disputed issues of material fact as to the claims for which
summary judgment was sought. As noted, the bankruptcy court was
therefore not making determinations of disputed issues of fact that would
implicate a deferential standard of review by an Article III tribunal.
Moreover, an order granting summary judgment is subject to de novo
review upon appeal in any event. United States v. Phattey, 943 F.3d 1277,
1280 (9th Cir. 2019) (citation omitted). But Cinco does not even argue that
the adversary proceeding was erroneously dismissed.
6 Nothing in this memorandum should be interpreted to mean that the court’s ancillary jurisdiction to enforce a confirmed plan that settles non-core claims converts those claims from non-core to core. Rather, as explained, in the unique circumstances presented here, the bankruptcy court had the judicial power to enter the order granting summary judgment. 14 Therefore, to the extent it matters, the policy reasons for limiting the
power of an Article I court to enter a final order in a non-core matter are
not present here. This is not a situation where a stranger to the bankruptcy
is being forced to have its claims heard by a non-Article III court. See
Wellness, 575 U.S. at 682-83 (“[T]he cases in which this Court has found a
violation of a litigant’s right to an Article III decisionmaker have involved
an objecting defendant forced to litigate involuntarily before a non-Article
III court.”). At the time it filed the removed action, Skyline was a debtor-in-
possession, and the claims it asserted involved the estate’s largest asset.
Those claims were in the process of being resolved through plan
confirmation, and while Skyline’s plan called for the claims to be litigated,
Skyline was not required to litigate them in state court.
Nevertheless, out of an abundance of caution, the bankruptcy court
included language in its order declaring that, if necessary, its order could
be treated as proposed findings of fact and conclusions of law.
Finally, despite Skyline’s ostensible objection to having a non-Article
III court decide the motion, and the bankruptcy court’s explicit provision
that the Dismissal Order could be treated as proposed findings and
conclusions, Skyline appealed to this Panel rather than the district court,
which arguably constituted a waiver of its Stern objection. See Wellness, 575
U.S. at 683-84.
For all these reasons, we conclude that the bankruptcy court had the
power to enter the Dismissal Order.
15 C. The bankruptcy court did not err in granting summary judgment. Summary judgment is appropriate if the pleadings and supplemental
materials demonstrate that there is no genuine issue as to any material fact
on the claims at issue, and the moving party is entitled to judgment as a
matter of law. Roussos v. Michaelides (In re Roussos), 251 B.R. 86, 91 (9th Cir.
BAP 2000), aff’d, 33 F. App’x 365 (9th Cir. 2002). This appeal presents no
factual disputes.
As noted, the payment and release of the Skyline DOT that occurred
in accordance with the Cinco Plan mooted the claims in the adversary
proceeding. Moreover, because the conditions for dismissal of the
adversary proceeding set forth in the Cinco Plan had been satisfied, in the
absence of a stay pending appeal, the bankruptcy court did not err in
granting summary judgment and dismissing the adversary proceeding
without prejudice.
Skyline argues that if the Confirmation Order is reversed in the
pending Ninth Circuit appeal, then the Dismissal Order should also be
reversed. It further argues that even if that occurs, and Skyline is allowed
to pursue its breach of contract and foreclosure claims against Cinco at a
later date, it would be prejudiced because it may be time-barred from
collecting interest on payments that came due more than six years before
filing. Skyline’s arguments would be pertinent to a request for a stay
pending appeal of the Confirmation Order. But Skyline has already
16 presented similar arguments to the bankruptcy court and this Panel, which
rejected them.
CONCLUSION
For the reasons set forth above, the bankruptcy court did not abuse
its discretion in declining to remand the adversary proceeding. The court
also had the constitutional authority to enter the Dismissal Order, and it
did not err in doing so. Accordingly, we AFFIRM.