FILED AUG 25 2021 NOT FOR PUBLICATION SUSAN M. SPRAUL, CLERK U.S. BKCY.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 Nos. AZ-20-1264-BTL SKYLINE RIDGE, LLC, AZ-21-1000-BTL Debtor. (Related Appeals)

SKYLINE RIDGE, LLC; AHMAD ZARIFI, Bk. No. 4:18-bk-01908-BWM Appellants, v. MEMORANDUM ∗ CINCO SOLDADOS, LLC; SAMUEL ZARIFI; EARTH'S HEALING, INC.; VICKI PUCHI-SAAVEDRA; EDUARDO SAAVEDRA; DAVID PARRI; RALLIS CREDITOR GROUP; FOTINOS PROPERTIES, LLC; TRUDY NOWAK, Chapter 7 Trustee of Estate of RL Ventures; WILLPOWER PROPERTIES, LLC; AHMAD ZARIFI, Appellees.

Appeal from the United States Bankruptcy Court for the District of Arizona Brenda Moody Whinery, Bankruptcy Judge, Presiding

Before: BRAND, TAYLOR, and LAFFERTY, Bankruptcy Judges.

∗ 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. INTRODUCTION

Chapter 11 1 debtor Skyline Ridge, LLC ("Debtor") and Debtor's

principal, Ahmad Zarifi, appeal an order denying confirmation of Debtor's

proposed chapter 11 plan and confirming the plan proposed by creditor Cinco

Soldados, LLC ("Cinco"), as well as the court's prior rulings with respect to the

parties' competing plans. Seeing no reversible error by the bankruptcy court,

we AFFIRM.

FACTS

A. Background of the parties

Debtor is an Arizona limited liability company formed in 1994 by Zarifi,

its sole member and manager. Zarifi is a civil engineer, home designer, and

builder. Zarifi formed Debtor for the purpose of designing, building, and

selling homes in the Tucson area.

Cinco is an Arizona limited liability company formed in 2006 by Zarifi

and four other members, including Chris Sheafe and Michael Carlier. Sheafe,

Cinco's manager, is a developer of residential and commercial property.

Carlier is a real estate broker. Zarifi and Sheafe did not know each other prior

to forming Cinco.

Cinco was formed for the purpose of acquiring and developing a 160-

acre parcel of land known as Rancho Soldados ("Cinco Property"). The Cinco

Property was purchased for $11 million. It was funded by a $6 million loan

1Unless specified otherwise, all chapter and section references are to the Bankruptcy Code, 11 U.S.C. §§ 101–1532, and all "Rule" references are to the Federal Rules of Bankruptcy Procedure. 2 from Alliance Bank ("Bank Loan") secured by a first-position deed of trust on

the Cinco Property, a $4 million loan from Debtor ("Skyline Loan") secured by

a second-position deed of trust on the Cinco Property ("Skyline DOT"), and $1

million in cash contributions from Cinco's members. Zarifi's share of the

initial cash contribution was $250,000. The Skyline Loan was subordinate to

and "on the same terms as" the Bank Loan.

Per Cinco's Operating Agreement, the members provided personal

guaranties of the Bank Loan. Each Cinco member was responsible for making

his respective share of the Bank Loan payments. Cinco's members also

executed personal guaranties of the Skyline Loan, which were to "terminate

automatically" upon an event to be set forth in the loan agreement. Like the

Bank Loan, each Cinco member was obligated to make his respective share of

the Skyline Loan payments.

The documents relevant to the Skyline Loan include the Skyline Loan

Agreement, the Skyline Note, the Skyline DOT, and the (later) Skyline Note

Amendment. The Skyline Note provided for the payment of interest and

default interest and had a maturity date of July 21, 2008. Both the Skyline

Loan Agreement and the Skyline Note provided that no provision of either

document could be changed, discharged, terminated or waived except in a

signed writing.

Cinco's members agreed that $4 million of Zarifi's equity contribution to

Cinco would be in the form of the Skyline Note secured by the Skyline DOT

on the Cinco Property. Sheafe and Carlier testified that they understood Zarifi

3 would convert the Skyline Note into equity when the Cinco Property was

platted. None of the Skyline Loan documents refers to an agreement to

convert the Skyline Note to equity, and Zarifi disputed the existence of any

such agreement.

When some of Cinco's members could not contribute their share of a

$500,000 payment coming due on the Bank Loan, Sheafe negotiated an

agreement with the Bank under which he would fully pay his 1/5 share of the

Bank Loan ($1.67 million), and the Bank would defer the next payment for

one year. Sheafe loaned $1.67 million to Cinco make this payment ("Sheafe

Loan").

A memorandum dated October 24, 2006, from Sheafe to the other Cinco

members, explained that the Sheafe Loan and the Skyline Loan would be

obligations ahead of any members' distribution rights and noted that the

Sheafe Note, like the Skyline Note, would be converted to equity when the

final plat was recorded. The Sheafe Note provided for interest at 12% and had

a maturity date of December 1, 2015.

Sheafe further explained in the October 24 memorandum that an

amendment to the Operating Agreement ("First Amendment") was necessary

to memorialize the Sheafe Loan. A memorandum dated November 30, 2006,

from Sheafe to the other Cinco members included a draft copy of the First

Amendment to be signed by all members. The First Amendment provided:

(1) for Cinco's procurement of the Sheafe Loan for $1.67 million; (2) for

repayment of the Sheafe Loan in the same proportion and at the same time as

4 the Skyline Loan; (3) if Cinco was ever liable to pay any imputed interest to

Sheafe in connection with the Sheafe Loan or to Zarifi in connection with the

Skyline Loan, such imputed interest would be paid by Sheafe or Zarifi,

respectively; and (4) it controlled to the extent there were any inconsistencies

between it and the Operating Agreement. Zarifi, whose signature appears on

the First Amendment, did not deny signing "some" document, but he asserted

that he did not sign the version of the First Amendment presented at trial.

By 2011, Zarifi and Sheafe were the only Cinco members left, with Zarifi

holding a 43.53% interest in Cinco, and Sheafe holding a 56.47% interest. To

keep things afloat during the downturn in the market, Zarifi and Sheafe

contributed funds necessary for improvements to the Cinco Property and for

paying operating expenses.

By June 2014, Cinco had not made any payments on the Skyline Loan

(or the Sheafe Loan). On June 23, 2014, Cinco and Debtor executed the Skyline

Note Amendment, which extended the maturity date to June 30, 2016. The

Skyline Note Amendment acknowledged that there was a dispute between

the parties as to whether any interest was owing, or had ever been owed, on

the Skyline Note. The Bank Loan was paid in full in 2016, which put the

Skyline DOT in first position on the Cinco Property. Cinco failed to pay the

Skyline Loan on the new maturity date. In fact, Cinco did not make any

payments on the Skyline Loan until after Debtor filed for bankruptcy.

B. Debtor's bankruptcy filing and the disputed claims

Debtor filed its chapter 11 bankruptcy case on March 1, 2018. As of the

5 petition date, Debtor's assets consisted mostly of real property, litigation

claims, and the Skyline Note. Debtor valued its assets at over $12 million.

The secured claims in this case are not at issue. Debtor did, however,

challenge all but one of the non-insider general unsecured claims ("Disputed

Unsecured Claims"). The Cinco claim is the only one of these claims that

requires any substantive discussion.

Debtor, Cinco, Zarifi, Sheafe, and their affiliates have been in litigation

for years. Prior to plan confirmation, there remained unresolved disputes

regarding the amount Cinco owed on the Skyline Note, including whether

interest was owing and in what amount, Sheafe's claims for pro-rata payment

of the Sheafe Note with the Skyline Note, and Cinco's claim for damages

caused by Debtor's or Zarifi's alleged dumping of trash and construction

debris on the Cinco Property. Cinco filed a general unsecured proof of claim

in an unknown amount.

The primary dispute is whether the Skyline Note bore interest and, if so,

in what amount. Sheafe and Carlier testified that it was their understanding

that no interest would accrue on either the Skyline Note or the Sheafe Note

because they were to be converted to equity upon the platting of the Cinco

Property. Debtor maintained that the Skyline Note did bear interest pursuant

to the Skyline Loan documents, which were never modified by a signed

writing. Debtor maintained that the balance due on the Skyline Note was

$8,431,137.17. This included $4,000,000 in unpaid principal, $1,787,803.84 in

unpaid non-default interest, and $2,643,333.33 in unpaid default rate interest.

6 Debtor argued that any extrinsic evidence offered by Cinco to establish

that the Skyline Note did not accrue interest was barred by the parol evidence

rule, statute of frauds, and other related doctrines. Cinco countered that the

parties' conduct was admissible to prove that they agreed no interest would

accrue on the Skyline Note and that the Skyline Note was to be converted into

equity, citing theories of oral modification, part performance, reformation,

and estoppel. Notwithstanding the parties' positions, it was undisputed with

respect to the Skyline Note that: no monthly interest payments were made; no

statements were issued; Cinco had no record of interest liability in its books or

tax returns; Zarifi never mentioned the lack of interest in Cinco's books to

Cinco's accountant when they reviewed records; Debtor made no demands

for payment until after the Bank Loan was paid in 2016; and Debtor never

issued any written default notices to Cinco to trigger the default rate interest.

C. The original plans

After the bankruptcy court terminated Debtor's exclusivity period under

§ 1121 for cause, Debtor and Cinco proposed various chapter 11 plans. The

first round of relevant plans was Debtor's plan dated June 4, 2019 ("Debtor's

Plan") and Cinco's plan dated September 18, 2018, as modified March 2, 2020

("Cinco's Plan"). Debtor's Plan and Cinco's Plan (and the amended versions of

both) were full payment plans. The main difference was how they treated the

Disputed Unsecured Claims. Debtor proposed resolving them through

litigation; Cinco proposed settling them, including its own claim, which

Debtor vehemently opposed.

7 1. Debtor's Plan and the objections

In Debtor's Plan, Zarifi would continue as manager of Debtor. Debtor's

accountant, Christopher Linscott, would serve as the Disbursing Agent. The

Disputed Unsecured Claims would be paid, to the extent allowed, over three

years, with interest, with payments to start on the earlier of payment in full of

all claims of higher priority or one year after the effective date. Debtor would

deposit funds into a reserve account to pay those claims that were ultimately

allowed.

Cinco (and others) objected to Debtor's Plan, arguing that Zarifi's

continued management would not be in the best interest of creditors or public

policy in violation of § 1129(a)(5). The objectors argued that Zarifi ignored the

law, as demonstrated by his not paying judgments and sanctions, committing

assault, and engaging in illegal contracting; he ignored the Code and Rules

during the course of the bankruptcy case; he breached promises and did not

keep his word; he took actions that furthered irrational grievances; he made

false, unsupported payment demands; and he did not testify honestly before

the bankruptcy court.

The objectors also argued that Debtor's Plan unfairly discriminated

against non-accepting classes (i.e., the Disputed Unsecured Claims) in

violation of § 1129(b) by imposing undue risk in terms of payment delays.

Given the delay involved with litigation, which was entirely under Zarifi's

control, the objectors argued it was possible that insider claims would be paid

prior to the Disputed Unsecured Claims.

8 2. Cinco's Plan and the objections

As noted above, Cinco intended to settle the Disputed Unsecured

Claims. Cinco's Plan disclosed the details of the settlements reached with each

of the claimants. For the Cinco claim, Cinco proposed to settle its and Debtor's

disputes as follows: (1) Cinco would pay Debtor the unpaid principal balance

of the Skyline Note (no interest) of $2,793,959 in full satisfaction of the Skyline

Note; (2) Debtor and Zarifi would have to remove the trash they dumped on

the Cinco Property; and (3) Cinco would waive its claims for attorney's fees

and damages caused by the dumping. Linscott, Debtor's proposed Disbursing

Agent, would serve as the Disbursing Agent for Cinco.

Debtor (and others) objected to Cinco's Plan, arguing that it failed to

comply with § 1129(a)(1) and (2), was not proposed in good faith in violation

of § 1129(a)(3), did not satisfy the best interests of creditors test in § 1129(a)(7),

was not feasible as required by § 1129(a)(11), and was not fair and equitable

and was discriminatory in violation of § 1129(b).

The principal objection was that Cinco's Plan was based on "forced

settlements" of the Disputed Unsecured Claims, particularly Cinco's claim.

The objectors argued that Cinco could not unilaterally settle the Disputed

Unsecured Claims without Debtor's consent, and even if it could, the

proposed settlements were not fair or reasonable in violation § 1129(a)(1) and

(2). The objectors also argued that Cinco's Plan was not proposed in good

faith but rather was an obvious attempt to advance the interests of Sheafe, the

majority member of Cinco, who stood to gain by substantially reducing the

9 amount Cinco owed to Debtor.

The objectors further argued that Cinco's Plan impaired Zarifi's equity

interest, because it proposed to strip him of any right to determine whether

and on what terms Debtor would settle its claims. Moreover, Zarifi would

receive substantially less under Cinco's Plan than he would under a

hypothetical chapter 7 liquidation, because there was no evidence that a

chapter 7 trustee would agree to such an extremely discounted payoff of the

Skyline Note or to any of the other proposed, unreasonable settlements. The

objectors also argued that Cinco's Plan was not feasible because Cinco had not

demonstrated that it had the funds available to implement Cinco's Plan.

Finally, the objectors argued that Cinco's proposed treatment of Zarifi's

impaired equity interest was not fair or equitable.

3. Ruling on Debtor's Plan and Cinco's Plan

After a five-day trial and testimony from multiple witnesses, the

bankruptcy court entered its 70-page Ruling and Order Regarding Plan

Confirmation denying confirmation of both plans (the "Ruling and Order").

Many of the court's decisions in the Ruling and Order are at issue on appeal.2

The court denied confirmation of Debtor's Plan for the reasons raised in

the objections. It found that Zarifi's continued management of Debtor was not

2 The Ruling and Order denying confirmation of both plans was not a final appealable order until the bankruptcy court entered its later and final order confirming Cinco's Amended Plan. Bullard v. Blue Hills Bank,

(2015) (bankruptcy court's order denying confirmation of a proposed repayment plan is not a final order); Giesbrecht v. Fitzgerald (In re Giesbrecht),

(9th Cir. BAP 2010) (interlocutory order denying plan confirmation merged into court's final confirmation order, thereby 10 in the best interest of creditors or public policy in violation of § 1129(a)(5). It

also found that Debtor's Plan unfairly discriminated against the Disputed

Unsecured Claims in violation of § 1129(b) because Debtor was not obligated

to fund the claims reserve account.

The court overruled nearly all of the objections to Cinco's Plan,

including the objection that only Debtor could propose settlements of its

claims. The court concluded that Cinco could propose such settlements as a

plan proponent under § 1123(b)(3)(A). After a painstaking analysis of each

proposed settlement of the Disputed Unsecured Claims under Martin v. Kane

(In re A & C Properties),

(9th Cir. 1986), the court found that they

were fair and equitable, with the exception of Cinco's. The Cinco settlement

did not account for the possibility that Debtor could prevail in part, and it was

not clear if Sheafe had agreed to waive his right, if any, to interest under the

Sheafe Note or his right to pro-rata payment. As a result, Cinco had to modify

the Cinco settlement to clarify the Sheafe issues, and to provide Debtor with

full recovery of principal on the Skyline Note and of Zarifi's capital

contribution, plus additional consideration, before Sheafe could recover any

payment on the Sheafe Note or any payment of his additional contributions to

Cinco.

D. The amended plans

The parties then filed their amended plans – Debtor's plan dated July 10,

supporting appellate jurisdiction of the earlier interlocutory order). 11 2020 ("Debtor's Amended Plan"), and Cinco's plan dated September 18, 2018,

as modified July 24, 2020 ("Cinco's Amended Plan").

1. Debtor's Amended Plan and the objections

To address the court's concerns about Zarifi's management of and

control over Debtor, Debtor's Amended Plan proposed installing Linscott as

manager, giving him full managerial authority over Debtor, including

exclusive control over Debtor's funds, the power to set litigation and

operating budgets, and the authority to negotiate the Disputed Unsecured

Claims. As for the court's concerns under § 1129(b), Debtor's Amended Plan

provided that insiders would not receive any payments until all of the

Disputed Unsecured Claims were either paid in full or disallowed.

In opposition, Cinco argued that Debtor's Amended Plan still failed to

satisfy § 1129(a)(5), because it gave Linscott only nominal control over

litigation, especially with respect to Cinco, and material decisions still

required Zarifi's consent or court approval. Further, argued Cinco, Linscott's

term was ambiguous, and it was possible that Zarifi could regain control of

Debtor prior to resolution of the disputes between Debtor and Cinco.

2. Cinco's Amended Plan and the objections

To rectify the court's concerns about the Cinco settlement, Cinco's

Amended Plan proposed that: (1) Cinco would pay Debtor the full amount of

principal due on the Skyline Note (no interest); (2) Zarifi would receive his

initial Cinco capital contribution of $250,000, and Sheafe would subordinate

payment on the Sheafe Note to Zarifi's payment, without interest; (3) Cinco

12 would pay the real estate taxes owed on the Cinco Property; (4) Sheafe would

waive his right under the First Amendment to pro-rata payment on the Sheafe

Note and waive his right to interest on the Sheafe Note; and (5) Cinco would

fund and complete a $60,000 improvement on the Cinco Property which

would result in significant sales benefitting Cinco, and by implication Zarifi.

Cinco argued that this amendment rendered the Cinco settlement fair and

equitable, and therefore it satisfied § 1129(a)(1).

In opposition, Debtor argued that the Cinco settlement was still not fair

and equitable. It did not provide one more dollar to Debtor or any other

additional consideration from Cinco to Debtor or from Cinco to Zarifi that

Cinco was not already obligated to pay.

3. Ruling on Debtor's Amended Plan and Cinco's Amended Plan

The bankruptcy court entered a Memorandum Decision and

Confirmation Order denying confirmation of Debtor's Amended Plan and

confirming Cinco's Amended Plan. In denying confirmation of Debtor's

Amended Plan, the court found that it still failed to comply with § 1129(a)(5)

given Zarifi's continuing control over the Disputed Unsecured Claims.

Specifically, the court was concerned about settlement of these claims.

Without Zarifi's consent, Linscott would have to seek court approval for such

settlements, which Zarifi would likely object to, resulting in unnecessary

delay and expense. Even though Debtor had subsequently settled some of

these claims, some remained unresolved.

Further, the court found that the control Debtor's Amended Plan

13 purported to give Linscott with respect to Cinco's claim was illusory. Linscott

was authorized to settle for no less than $5.5 million without Zarifi's consent.

However, that minimum settlement amount was greater than the maximum

amount Debtor could collect on the Skyline Note based on Debtor's expert's

valuation of the Cinco Property at $5 million. In addition, nothing in Debtor's

Amended Plan prohibited Zarifi from unreasonably withholding his consent

to a settlement of Cinco's claim, nor did it allow Linscott to bring any such

settlement before the court for approval. Because Debtor's Amended Plan

failed to comply with § 1129(a)(5), the court did not determine whether

Debtor had addressed the § 1129(b) issues raised in the Ruling and Order.

In contrast, the court found that Cinco's Amended Plan rectified the

prior deficiencies in the proposed settlement of Cinco's claim. Rejecting

arguments to the contrary, the court found that the amendments to the Cinco

settlement rendered it fair, equitable and reasonable. Thus, Cinco's Amended

Plan complied with § 1129(a)(1). This timely appeal followed.

JURISDICTION

The bankruptcy court had jurisdiction under

and

157(b)(2)(L). We have jurisdiction under

.

ISSUES

1. Did the bankruptcy court abuse its discretion in confirming Cinco's

Amended Plan?

2. Did the bankruptcy court abuse its discretion in denying confirmation

of Debtor's Amended Plan?

14 STANDARDS OF REVIEW

We review the bankruptcy court's decision to confirm a chapter 11 plan

for an abuse of discretion. Marshall v. Marshall (In re Marshall),

(9th Cir. 2013). A bankruptcy court abuses its discretion if it applies the

wrong legal standard, misapplies the correct legal standard, or makes factual

findings that are illogical, implausible, or without support in the record.

United States v. Hinkson,

(9th Cir. 2009) (en banc).

Factual findings regarding whether a plan meets the requirements for

confirmation under § 1129 are reviewed for clear error. See Computer Task Grp.,

Inc. v. Brotby (In re Brotby),

(9th Cir. BAP 2003). Factual

findings are clearly erroneous if they are illogical, implausible, or without

support in the record. Retz v. Samson (In re Retz),

(9th Cir.

2010).

DISCUSSION

The requirements for confirming a chapter 11 plan are set forth in

§ 1129(a)(1)-(16). If all the provisions of § 1129(a) are satisfied with the

exception of § 1129(a)(8), 3 a plan can nevertheless be confirmed if it satisfies

§ 1129(b). The plan proponent bears the burden of establishing that its plan

satisfies the confirmation requirements by a preponderance of the evidence.

Liberty Nat'l Enters. v. Ambanc La Mesa Ltd. P'ship (In re Ambanc La Mesa Ltd.

P'ship),

, 653 (9th Cir. 1997).

3 No one disputes the bankruptcy court's finding that neither plan satisfied § 1129(a)(8). 15 A. The bankruptcy court did not abuse its discretion in confirming Cinco's Amended Plan.

Debtor argues that the bankruptcy court's confirmation of Cinco's

Amended Plan was the result of numerous legal errors which require

reversal. We address Debtor's arguments in turn.

1. The bankruptcy court did not err in finding that Cinco's Amended Plan complied with § 1129(a)(1).

Debtor first takes issue with the bankruptcy court's decision that

Cinco could settle the Disputed Unsecured Claims without its consent. Debtor

argues that § 1123(b)(3)(A) cannot be read to permit a settlement over the

debtor's objection because a settlement that is the product of one party

releasing itself from liability rather than a genuine arms-length negotiation is

no "settlement" at all. While this argument has some surface appeal, we

disagree, as have other courts.

Under § 1123(b)(3)(A), a plan may provide for the settlement or

adjustment of any claim belonging to the debtor or to the estate. Put simply,

"the Code expressly provides that a plan proponent may propose a settlement

of any claim held by the estate." In re Cellular Info. Sys.,

(Bankr. S.D.N.Y. 1994); e.g., In re BBL Grp., Inc.,

(Bankr. N.D.

Ala. 1996) (holding same and citing cases).

The bankruptcy court in Cellular Information Systems addressed this

precise issue. There, debtor had sued the creditor lender. The creditor's

competing plan proposed to settle the suit at a significant discount. Debtor

argued that what the creditor proposed was not a "settlement" because the 16 creditor was seeking to agree with itself as to the amount of its liability. While

recognizing that the proposed settlement was not the product of arms-length

negotiations between the parties, the court held that it could consider the

creditor's proposed settlement under § 1123(b)(3)(A), using the same factors

set forth by the Supreme Court in Protective Committee for Independent

Stockholders of TMT Trailer Ferry, Inc. v. Anderson,

(1968). In

re Cellular Info. Sys.,

. 4 Accord In re Grivas,

(Bankr. S.D. Cal. 1989) (rejecting debtor's argument that plan proponent's

"compulsory" settlement of debtor's claim was not a true settlement because

the term "settlement" implied a consensual termination of the controversy,

and holding that § 1123(b)(3)(A) authorizes the court to consider and, if

appropriate, approve a plan proposing a settlement over a debtor's objection);

see also In re Andreuccetti,

(7th Cir. 1992) (approving creditors'

proposed plan which included settlement of debtor's state law claims against

the creditors where bankruptcy court applied similar A & C Properties

standard used in Rule 9019 settlements); Tex. Extrusion Corp. v. Lockheed Corp.

(In re Tex. Extrusion Corp.),

(5th Cir. 1988) (court approved plan

proposed by lawsuit defendant and committee of unsecured creditors which

provided for settlement of the suit in exchange for, among other things,

expungement of defendant's $7 million claim against debtor).

Debtor relies on In re Bigler LP,

(Bankr. S.D. Tex.

2010), for the proposition that § 1123(b)(3)(A) does not authorize the court to

4 These are essentially the same factors found in A & C Properties,

. 17 approve a settlement without the debtor's consent. However, that case does

not conclude that a creditor plan may not provide for settlement of a claim

against the creditor. Bigler involved a nonconsensual, third-party release, not

a settlement of the debtor's claims against the plan proponent where the

parties had an opportunity to litigate the issues.

Debtor argues that allowing the creditor to settle a claim against itself

deprives the debtor of its right to its day in court to litigate the claim. But

Debtor had its day in court. It had the exclusive right to file and confirm a

plan prior to the exclusivity period expiring under § 1121(b). It did not do so.

At that point, Cinco was able try its hand at accomplishing this task. § 1121(c).

Read together, § 1121(c) and § 1123(b)(3)(A) authorized Cinco to file a

confirmable plan and to propose a settlement in that plan.

Although Debtor argues that it should have had exclusive control over

its claims against Cinco (and the other Disputed Unsecured Claims) and that

it was deprived of due process with Cinco's unilateral settlement(s),

Congress's intent in § 1123(b)(3)(A) is clear: the debtor or the trustee do not

have sole authority to propose settlements in a plan. But the creditor's ability

is not unfettered. The proposed settlement must still pass muster for fairness

under A & C Properties. Debtor's concern that Cinco was not acting to

maximize the value of the estate by settling claims for less than their worth,

especially the Cinco claim, is overstated. The court still has a duty to evaluate

the merits of a claim and determine whether the proposed settlement falls

within the range of reasonableness. Ultimately, if the court applies the same

18 standard to all proposed settlements under § 1123(b)(3)(A), then it should not

matter which party proposes the settlement.

Debtor then argues that even if unilateral settlements are permissible

under § 1123(b)(3)(A), they must be subject to stricter scrutiny. Debtor argues

that the bankruptcy court abused its discretion by applying the A & C

Properties factors, without more, to conclude that the Cinco settlement was fair

and equitable. We are not so convinced and believe that the A & C Properties

factors provide a proper standard for reviewing proposed settlements in a

plan under § 1123(b)(3)(A).

In support of its argument, Debtor cites Whispering Pines Estates, Inc. v.

Flash Island, Inc. (In re Whispering Pines Estates, Inc.),

(1st Cir. BAP

2007). There, the creditor plan proponent proposed a release of any and all

claims (both current and future) held by the debtor, trustee and the estate

against the creditor.

. The estate had two causes of action against the

creditor of uncertain merit and value.

. Debtor objected to the release

provision. The First Circuit Bankruptcy Appellate Panel viewed the release as

two distinct releases rolled into one: "'a settlement or adjustment of claims

belonging to the debtor and the estate' within the meaning of § 1123(b)(3)(A);

and a release (or limitation of liability, or grant of immunity) of a party

responsible for implementing the plan." Id. at 460. As to the former, the Panel

held that a bankruptcy court must not give deference to a settlement that is

not put forth by an estate fiduciary who negotiated it in an arms-length

transaction but rather unilaterally by the very party who would be receiving

19 the benefit of the release. Id. at 461.

First, we distinguish Whispering Pines because it involved a release of

liability, not a settlement of pending claims between the debtor and the plan

proponent. Further, even if applicable, the bankruptcy court here did not

afford any deference to Cinco in evaluating the proposed settlement. To the

contrary, it engaged in an exhaustive analysis of all the relevant factors to

conclude that the Cinco settlement was fair and equitable. It even denied

confirmation the first time around because it found that the proposed

settlement was not fair and equitable. The bankruptcy court in Whispering

Pines failed to analyze the release at all, under any set of factors, which is not

the case here.

Next, Debtor argues that the bankruptcy court exceeded its authority by

confirming a plan that required dismissal of a non-core, state law claim.

Before the bankruptcy court entered the Confirmation Order, Debtor filed a

complaint against Cinco in state court to enforce the Skyline Note. When

Cinco removed the case, Debtor moved for remand and gave notice that it did

not consent to the bankruptcy court's entry of final judgment. In light of its

non-consent, Debtor argues that the bankruptcy court lacked authority to

enter any final order resolving the suit, including the Confirmation Order,

citing Wellness International Network, Ltd. v. Sharif,

(2015).

Debtor's argument lacks merit. The Skyline Note and Debtor's claims

against Cinco arising from it and the related loan documents are assets of the

estate. Plan confirmation is a "core" proceeding over which the bankruptcy

20 court has exclusive jurisdiction.

(b)(2)(L). As part of its plan,

Cinco could settle Debtor's loan-related claims against it under § 1123(a)(3)(B),

which is what occurred here, despite Debtor's argument that it was a

compelled "dismissal" of its pending state law claims without its consent.

Moreover, Cinco's settlement also resolved Debtor's objection to Cinco's proof

of claim, which directly concerned the administration of the estate, both "core"

proceedings under

(b)(2)(A) & (B). Accordingly, the

bankruptcy court had jurisdiction to enter the Confirmation Order, which

effectively and finally resolved the suit.

Debtor next argues, even if we conclude that A & C Properties is the

proper standard to apply in evaluating the Cinco settlement, the bankruptcy

court's approval of it as a fair and equitable compromise should be reversed

for two reasons: it was the product of the court's erroneous interpretation and

application of Arizona law; and Cinco's settlement was no settlement at all, as

it gave Cinco the maximum relief it could possibly achieve.

The bankruptcy court carefully reviewed the proposed Cinco settlement

(and all of the proposed settlements) under A & C Properties to determine

whether it was fair and equitable. The four relevant factors in assessing

fairness and equity under A & C Properties are: (a) probability of success in the

litigation; (b) difficulties, if any, to be encountered in the matter of collection;

(c) complexity of the litigation involved, and the expense, inconvenience and

delay necessarily attending it; and (d) paramount interest of the creditors and

a proper deference to their reasonable views. In re A & C Props.,

1381.

No one factor is dispositive; "the factors should be considered as a

whole to determine whether the settlement compares favorably with the

expected rewards of litigation. " Greif & Co. v. Shapiro (In re W. Funding Inc.),

(9th Cir. BAP 2016), aff'd,

(9th Cir. 2017).

Because a court has discretion as to how much weight to give to each of the

factors, "any one factor may have weight in isolation that justifies the

settlement." Tieni v. Mastan (In re Bondanelli), BAP No. CC-19-1175-TaFS,

, at *2 (9th Cir. BAP Mar. 18, 2020).

"The law favors compromise and not litigation for its own sake[.]" In re

A & C Props.,

. "[W]hen assessing a compromise, courts

. . . canvass the issues and need not rule on disputed facts and questions of

law." In re Bondanelli,

, at *2. "If the court were required to do

more, there would be no point in compromising; the parties might as well try

the case."

The primary dispute between the parties is whether the Skyline Note

accrued interest. Debtor said it did; Cinco said it didn't. In its 16-page analysis

of the first A & C Properties factor – probability of success in litigation – the

bankruptcy court considered Debtor's argument that extrinsic evidence

offered by Cinco to establish that the Skyline Note did not accrue interest was

barred by the parol evidence rule and the statute of frauds. The court also

considered Cinco's arguments that, despite the express terms of the Skyline

Note, a court could consider the parties' conduct – i.e., the failure to pay

22 interest, and the failure to bill for, demand, or even account for interest – as

proof that they agreed no interest would accrue on the Skyline Note, under

the theories of oral modification, part performance, reformation, and estoppel.

Ultimately, the bankruptcy court concluded that a court receiving the

evidence could find that the doctrine of part performance and/or equitable

estoppel applied to overcome the application of the statute of frauds, or that

the parties orally modified the Skyline Note, or that the evidence might

support a reformation claim, which is not subject to the parol evidence rule.

Debtor argues that the bankruptcy court made legal errors to reach its

conclusion that Cinco could potentially succeed on its asserted theories of oral

modification, part performance, reformation, or estoppel to overcome the

express terms of the Skyline Note that interest accrued. However, we see no

error by the court in its lengthy and well-reasoned analysis of Arizona law

and the highly complex facts of this case. Further, in the settlement context,

the court was required to only canvass the issues, not conduct a "mini-trial" on

the merits of each disputed legal question. In re W. Funding Inc.,

.

Even if Debtor were correct that the court erred in analyzing the legal

theories and defenses raised by Cinco, the probability of success in litigation

was only one of the factors it had to consider. If any of the other three A & C

Properties factors weighed in favor of settlement, any error by the bankruptcy

court as to the first factor would not constitute reversible error. The third and

fourth A & C Properties factors clearly weighed in favor of settlement. The cost

23 and delay of litigating these complex issues between the parties would be

substantial. It already has been. And litigating these issues to no reasonable

end is certainly not in the best interest of creditors or the estate.

Debtor maintains that the bankruptcy court was correct in initially

holding that the amount Cinco proposed to pay Debtor in Cinco's Plan was

insufficient, thereby precluding a finding that the Cinco settlement was fair

and equitable. However, Debtor argues that the court erred in holding that

Cinco's Amended Plan cured this defect, as it provided zero additional

consideration from Cinco to Debtor. Debtor complains that the only

amendments Cinco made to its settlement proposal were to require Cinco to

make payments it was already obligated to pay, or which were entirely

worthless to Debtor.

The bankruptcy court considered these same arguments and rejected

them. Cinco's Amended Plan provided: (1) for Sheafe's waiver of rights to

interest on the Sheafe Note and the subordination of any Sheafe Note

payments to the extent of Zarifi's $250,000 initial capital contribution; (2) that

Cinco would bring current the property taxes on the Cinco Property; and

(3) that Cinco would fund and complete improvements to the Cinco Property

to boost lot sales. Over Debtor's objection, the court found that these items

were sufficient additional consideration to make the Cinco settlement fair and

equitable, because even to the extent they did not directly benefit Debtor, they

clearly benefitted Zarifi, the sole member of Debtor and a member of Cinco.

24 We see no error in the court's finding that the additional consideration offered

in Cinco's Amended Plan rendered the Cinco settlement fair and equitable.5

Debtor also makes similar arguments with respect to Cinco's proposed

settlements of two of the Disputed Unsecured Claims – the RL Ventures claim

and the Stachowski/Stromberg claim. Debtor argues that, even if the

settlements were permissible, they were not fair or reasonable. Again, Debtor

wishes to litigate the merits, or lack thereof, of these individual claims and

focuses only on the first A & C Properties factor. However, after careful review

of all four factors as to each proposed settlement, the bankruptcy court found

that all four weighed in favor of settlement of the RL Ventures claim, and that

all four factors were either neutral or weighed in favor of settlement of the

Stachowski/Stromberg claim. More importantly, the court found that both

settlements were fair and equitable, and Debtor fails to articulate how the

court's findings with respect to these settlements were clearly erroneous.

Further, Debtor loses some credibility in trying to argue that the RL

Ventures claim was meritless, when Debtor later settled that claim in a last-

ditch effort to get its amended plan confirmed. And Debtor's argument that

the bankruptcy court erred in granting Stachowski and Stromberg leave to file

an untimely claim without conducting an evidentiary hearing to determine if

they had knowledge of Debtor's bankruptcy before the claims bar date

expired is not well-taken. The case cited by Debtor, Zidell, Inc. v. Forsch (In re

5 Debtor's argument that Cinco had to pay Zarifi the entire $1.9 million he contributed to Cinco and not just his initial $250,000 contribution is wrong. As the 25 Coastal Alaska Lines, Inc.),

(9th Cir. 1990), did not hold that an

evidentiary hearing is required to determine a claimant's knowledge of the

bankruptcy or claims bar date. Further, it was undisputed that Debtor did not

list Stachowski and Stromberg as creditors in its schedules, and testimony

established that they did not learn of Debtor's bankruptcy case until July 2019,

nearly 10 months after the claims bar date.

2. The bankruptcy court did not err in finding that Cinco's Plan complied with § 1129(a)(7).

Debtor argues there was no evidence that Zarifi, Debtor's only equity

holder, would receive as much money on account of his equity interest in

Debtor under Cinco's Plan as he would in a hypothetical chapter 7. Put

simply, Debtor argues that Cinco's Plan failed the best interests test as to

Zarifi's equity interest. We disagree.

Section 1129(a)(7) requires that a plan provide each holder of an

impaired class of claims or interests at least the liquidation value of the claim

or interest unless the holder accepts the plan. § 1129(a)(7)(A). To determine

whether a plan satisfies § 1129(a)(7), a court must determine what creditors

and interest holders would receive under a hypothetical chapter 7 liquidation,

and compare that hypothetical liquidation return with what creditors and

interest holders would receive under the proposed plan. Schoenmann v. Bank of

the W. (In re Tenderloin Health),

(9th Cir. 2017). An

unimpaired class is deemed to have accepted the plan and thus satisfies

bankruptcy court noted, it only required Cinco to pay Zarifi his initial $250,000 contribution, nothing more. 26 § 1129(a)(7). § 1126(f).

Even if Zarifi's equity interest was impaired, an argument which Debtor

dubiously raised on Zarifi's behalf before the bankruptcy court, the court

found that he would receive under Cinco's Plan at least as much as he would

in a chapter 7 liquidation. This was based on a liquidation value of no more

than $5 million for the Skyline Note (i.e., Debtor's appraised value of the

Cinco Property), which would be reduced by substantial chapter 7 trustee fees

and administrative expenses. Although Debtor complains that there was "no

evidence" to show what these fees and expenses would be or that they could

be substantial, the court could speculate that they could be substantial. See In

re Sierra-Cal,

(Bankr. E.D. Cal. 1997). Given Zarifi's litigious

nature, it would not be an irrational assumption that the administrative

expenses in a chapter 7 case would be high. One also has to consider that the

First Amendment provided that the Sheafe Note was entitled to parity with

the Skyline Note in payment and term, which would also reduce the value of

Zarifi's interest. On this record, we see no clear error in the court's finding that

§ 1129(a)(7) was satisfied in this case.

3. The bankruptcy court did not err in finding that Cinco's Plan complied with § 1129(a)(3).

Section 1129(a)(3) requires that a plan be "proposed in good faith and

not by any means forbidden by law." A court need only look "to the proposal

of a plan, not the terms of the plan." Garvin v. Cook Invs. NW, SPNWY, LLC,

(9th Cir. 2019). "A plan is proposed in good faith where it

achieves a result consistent with the objectives and purposes of the Code." 27 Platinum Cap., Inc. v. Sylmar Plaza, L.P. (In re Sylmar Plaza, L.P.),

,

1074 (9th Cir. 2002).

Debtor argued before the bankruptcy court, and argues before us, that

Cinco's Plan was proposed in bad faith because Cinco – i.e., Sheafe – had an

ulterior motive to obtain its own release for as little money as possible. Debtor

argues that this is inconsistent with the objectives and purposes of the Code.

The bankruptcy court rejected Debtor's argument, ruling that it was not

required to evaluate the "terms" of Cinco's Plan for purposes of § 1129(a)(3),

and there was no evidence that Cinco had proposed its plan in bad faith. But

even when the court looked to the terms of Cinco's Plan, it was still not

persuaded by Debtor's argument.

Debtor argues that the bankruptcy court's holding that Cinco acted in

good faith because it proposed a "full-payment plan" was both legally

erroneous and factually inaccurate. Debtor argues that Cinco's ability to

propose full payment to creditors flowed only from Debtor's solvency, which

had nothing to do with Cinco. And with or without the "settlement" payment

from Cinco, Debtor argues that it had sufficient assets to pay its creditors in

full. Debtor argues that Cinco's proposal to pay creditors with Debtor's own

money did not negate the fact that Cinco's Plan served an improper ulterior

motive of escaping millions of dollars in liability to Debtor.

While Debtor focuses on the bankruptcy court's statement that Cinco's

Plan was a full-payment plan, that was not the extent of the court's findings. It

also found that Debtor would still retain millions of dollars in unencumbered

28 cash and property, that Zarifi would retain his 100% ownership interest in

Debtor and remain its manager, and that Zarifi would retain his ownership

interest in Cinco. The court was also not convinced by Debtor's argument that

paying Debtor less on the Skyline Note would benefit Sheafe by being able to

distribute more to himself from Cinco. Zarifi is likewise a member of Cinco

and would be entitled to any distributions made to members. We perceive no

clear error in the bankruptcy court's finding that Cinco's Plan was proposed in

good faith.

4. Debtor's arguments regarding Cinco's nondisclosure of its proposed new loan terms and feasibility evidence fail.

In what appear to be throwaway arguments, Debtor argues that it did

not know enough about Cinco's exit financing terms, alleging that Cinco

failed to provide adequate information about the loan's terms or present any

evidence as to feasibility such as a term sheet. Debtor argues that this violated

the disclosure requirements of § 1125 and the feasibility requirement of

§ 1129(a)(11). Notwithstanding, Debtor does not articulate how the

bankruptcy court erred with respect to these issues. Issues that are raised but

not supported by argument are typically deemed abandoned. Acosta-Huerta v.

Estelle,

(9th Cir. 1992). In any event, any argument as to

feasibility appears to be moot given that Cinco received the exit financing.

To the extent Zarifi argues that Cinco failed to sufficiently disclose the

terms of the "new, nonconsensual secured loan" which subordinated his

interest in Cinco, that is an issue concerning the internal management of

Cinco and not one the bankruptcy court needed to (or even could) consider. 29 5. The bankruptcy court did not err in finding that Cinco's Plan was fair and equitable under § 1129(b).

Debtor argues that, because Cinco's Plan was rejected by impaired

classes of claims and interests, it could be confirmed only if it satisfied the

requirements of § 1129(b), which provides in pertinent part that a plan is fair

and equitable if any junior interest holder will not receive or retain any

property under the plan on account of such junior interest. § 1129(b)(2)(C)(ii).

Debtor argues that the bankruptcy court erred in finding that Cinco's

Plan complied with § 1129(b). Debtor argues that Cinco's proposed treatment

of Zarifi's impaired equity interest under Cinco's Plan was not fair or

equitable because it stripped him of millions of dollars of equity by

involuntarily subjecting Debtor to "windfall settlements" of various claims

and defenses whose merit was tenuous, and it proposed to enrich Sheafe at

Debtor's and Zarifi's expense.

Noting that Zarifi had not filed an objection to Cinco's Plan, the

bankruptcy court rejected these same arguments from Debtor, finding either

that Zarifi's equity interest was not impaired under Cinco's Plan and thus

§ 1129(b) did not apply, or if it was impaired, Cinco's proposed treatment was

fair and equitable and satisfied § 1129(b)(2)(C)(ii) given that there were no

junior equity interest holders who would receive or retain anything. Debtor

has not demonstrated any clear error by the bankruptcy court in finding that

Cinco's Plan satisfied § 1129(b).

30 B. The bankruptcy court did not abuse its discretion in denying confirmation of Debtor's Amended Plan.

The bankruptcy court found that Debtor ultimately met the

requirements of confirmation other than § 1129(a)(5), finding that Zarifi's

control over the post-confirmation debtor was not "consistent with the

interests of creditors and equity security holders and with public policy."

§ 1129(a)(5)(A)(ii). Debtor argues that the bankruptcy court's ruling that

Debtor's Amended Plan violated § 1129(a)(5) because Zarifi retained the right

to object to settlements proposed by Linscott was wrong. But that was not the

court's ruling.

The bankruptcy court ruled that Zarifi's continued control over the

settlements was not in the best interest of creditors because he made it clear

that he would continue to litigate the Disputed Unsecured Claims no matter

the cost, no matter the delay, even if such litigation was not in the financial

interest of Debtor or its creditors. And Debtor's Amended Plan vesting post-

confirmation management exclusively in Linscott failed to resolve the court's

concerns on that issue, because Zarifi's consent or court approval over his

objection as sole member of a solvent debtor would be required for all

settlements of the Disputed Unsecured Claims.

Debtor argues that Zarifi's retention of some right to object to proposed

settlements of the Disputed Unsecured Claims or the Skyline Note would not

have any effect on the interests of creditors in receiving payment on their

allowed claims. That may not be true. Debtor's unending and costly litigation

over the Disputed Unsecured Claims had the potential to dissipate Debtor's 31 assets to the point that those claims could be at risk of not getting paid, if

allowed. On this record, the court's finding that Debtor's Amended Plan did

not satisfy § 1129(a)(5) was not clearly erroneous.

CONCLUSION

For the reasons stated above, we AFFIRM the Confirmation Order

confirming Cinco's Amended Plan and denying confirmation of Debtor's

Amended Plan.

32