Gregory Grantham, et al v. Timothy Cory, et al

Filing

FILED OPINION (DIARMUID F. O'SCANNLAIN, FERDINAND F. FERNANDEZ and JAY S. BYBEE) AFFIRMED. Judge: FFF Authoring, FILED AND ENTERED JUDGMENT. [7831230]

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FOR PUBLICATION

UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
In re: FLAMINGO 55, INC.; VEGAS
TOWNHOMES PARTNERS, L.P.,
Debtors,
GREGORY GRANTHAM; JOHN SABA,
Appellants,
v.
TIMOTHY S. CORY, Chapter 7
Trustee; EMERALD GATE
CONSTRUCTION, INC.,
Appellees.





No. 10-15755
D.C. No.
2:07-cv-01640-RCJLRL
OPINION



Appeal from the United States District Court
for the District of Nevada
Robert Clive Jones, Chief District Judge, Presiding
Argued and Submitted
June 14, 2011—San Francisco, California
Filed July 25, 2011
Before: Diarmuid F. O’Scannlain, Ferdinand F. Fernandez,
and Jay S. Bybee, Circuit Judges.
Opinion by Judge Fernandez

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IN RE FLAMINGO 55, INC.

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COUNSEL
Gregory Grantham, Santa Ana, California, for the appellants.
Michael F. Thomson and Duane H. Gillman, Durham Jones
& Pinegar, Salt Lake City, Utah, for appellee Timothy S.
Cory, Chapter 7 Trustee.
Mark Stern, Mark Stern & Associates, LLC, Norwalk, Connecticut, for appellee Emerald Gate Construction, Inc.

OPINION
FERNANDEZ, Circuit Judge:
Gregory Grantham and John Saba appeal the district court’s
order affirming the bankruptcy court’s decision1 that they
were not entitled to subrogation pursuant to the provisions of
11 U.S.C. § 509.2 We affirm.

1

In re Flamingo 55, Inc., 378 B.R. 893 (Bankr. D. Nev. 2007).
They do not raise any issue regarding the other holdings in the bankruptcy court’s opinion. See Flamingo 55, 378 B.R. at 904-19 (parts III,
IV). Those are not before us, and we express no opinion on them.
2

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IN RE FLAMINGO 55, INC.

The bankruptcy court issued a lengthy and detailed opinion
dealing with the facts and issues before it and we perceive no
reason to iterate the details of its discussion.3 Therefore, we
adopt the bankruptcy court’s statements of facts in part II of
its decision. In re Flamingo 55, 378 B.R. 893, 900-04 (Bankr.
D. Nev. 2007).
With one clarification and one exception, we also adopt the
bankruptcy court’s discussion and determination denying
Grantham and Saba’s assertion that they were entitled to subrogation pursuant to 11 U.S.C. § 509. See Flamingo 55, 378
B.R. at 919-21 (part V).
(1)

Clarification:

[1] The bankruptcy court determined that Grantham and
Saba’s predecessor in interest, Broadway-Acacia, LLC, and
the debtor Flamingo 55, Inc., were partners or coventurers in
a venture to develop certain property, and that the loan in
question was to them for the purpose of pursuing that venture.
As a result, the bankruptcy court determined that Grantham
and Saba do not come within the provisions of 11 U.S.C.
§ 509(a), which provides for subrogation,4 and do come
within the provisions of 11 U.S.C. § 509(b)(2), which precludes subrogation.5 We clarify that it is Broadway-Acacia’s
position as a partner or coventurer in the development enterprise that distinguished it as a joint borrower rather than a
3
We review the bankruptcy court’s findings of fact for clear error and
its conclusions of law de novo. See Consol. Freightways Corp. of Del. v.
Aetna, Inc. (In re Consol. Freightways Corp. of Del.), 564 F.3d 1161,
1164 (9th Cir. 2009). We do so without deference to the district court. See
id. We review the bankruptcy court’s ruling on a motion for reconsideration for abuse of discretion. See Harrison v. Emerald Outdoor Adver.,
LLC (In re Emerald Outdoor Adver., LLC), 444 F.3d 1077, 1082 n.7 (9th
Cir. 2006).
4
Flamingo 55, 378 B.R. at 919-20 (part V.B.1).
5
Id. at 920-21 (part V.B.3).

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mere surety, guarantor or accommodation comaker.6 That
drove and supported the bankruptcy court’s subrogation determinations. Neither our nor its decision should be read as
reaching further than the situation presented by the relationship between the borrowers in this case.
(2)

Exception:

[2] Although it does not affect the result here, we do not
agree with the bankruptcy court’s determination that simply
because the loan from the creditor, Datacom Investment Co.,
to Flamingo 55 and Broadway-Acacia was discharged by
means of foreclosure on property, which secured that loan and
was then owned by Grantham and Saba, it was not actually
paid by Grantham and Saba within the meaning of 11 U.S.C.
§ 509(a). See Flamingo 55, 378 B.R. at 920 (part V.B.2). That
is an overly restrictive reading of the words “pay” and “payment” in § 509(a). As other courts have recognized, payment
is not to be taken in some technical sense, which refers to
cash payments alone. See Aetna Cas. & Sur. Co. v. Chateaugay Corp. (In re Chateaugay Corp.), 89 F.3d 942, 948 (2d
Cir. 1996); Feldhahn v. Feldhahn, 929 F.2d 1351, 1354 (8th
Cir. 1991). And here, while it is no doubt true that the actual
cash came from foreclosure of a deed of trust on Grantham
and Saba’s property, the fact is that what was obtained
thereby was the value of the property itself. That is, Grantham
and Saba’s valuable property was sold at foreclosure, and part
of the cash proceeds was paid to Datacom to satisfy the debt.
For this purpose, it really is no different from a sale by
Grantham and Saba themselves with the proceeds used to pay
the debt, and little different from a direct taking of that property by Datacom in payment of the debt. Thus, we reject that
portion of the bankruptcy court’s opinion.
Therefore, we agree with the district court’s ultimate deter6

That determination was not clearly erroneous.

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IN RE FLAMINGO 55, INC.

mination and affirm the bankruptcy court’s decision with the
clarification and exception noted above.7
AFFIRMED.

7

The bankruptcy court did not abuse its discretion when it refused to
consider new evidence, which could have been presented earlier, and
denied Grantham and Saba’s motion for reconsideration. See Marlyn
Nutraceuticals, Inc. v. Mucos Pharma GmbH & Co., 571 F.3d 873, 880
(9th Cir. 2009). Moreover, Grantham and Saba’s res judicata argument
regarding a prior state court action was not raised in the bankruptcy court
or in the district court and was, therefore, waived. See Smith v. Marsh, 194
F.3d 1045, 1052 (9th Cir. 1999); Crawford v. Lungren, 96 F.3d 380, 389
n.6 (9th Cir. 1996).