NOT FOR PUBLICATION FILED

UNITED STATES COURT OF APPEALS DEC 17 2020

MOLLY C. DWYER, CLERK

U.S. COURT OF APPEALS

FOR THE NINTH CIRCUIT

In re: UBALDO JUAREZ, No. 19-60051

Debtor, BAP No. 19-1028

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MEMORANDUM*

EDGAR TODESCHI; GEORGINA

PONCE,

Appellants,

v.

UBALDO JUAREZ,

Appellee.

Appeal from the Ninth Circuit Bankruptcy Appellate Panel Faris, Lafferty III, and Brand, Bankruptcy Judges, Presiding

Submitted November 18, 2020** Phoenix, Arizona

Before: BYBEE, MURGUIA, and BADE, Circuit Judges.

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. ** The panel unanimously concludes this case is suitable for decision without oral argument. See Fed. R. App. P. 34(a)(2). Appellants Edgar Todeschi and Georgina Ponce (collectively, Creditors)

appeal the decision of the Bankruptcy Appellate Panel for the Ninth Circuit (BAP)

affirming the bankruptcy court’s confirmation of Appellee Ubaldo Juarez’s

Chapter 11 plan (Plan). We affirm.

This court reviews de novo the decision of the BAP, but gives the BAP no

deference, and reviews the bankruptcy court’s decision independently. In re

Salazar, 430 F.3d 992, 994 (9th Cir. 2005). The bankruptcy court’s decision to

confirm a Chapter 11 plan is reviewed for abuse of discretion. In re Marshall, 721

F.3d 1032, 1045 (9th Cir. 2013). “A bankruptcy court abuses its discretion if it

applies the law incorrectly or if it rests its decision on a clearly erroneous finding

of material fact.” Id. at 1039 (citation omitted).

1. Creditors assert that the Plan did not comply with 11 U.S.C.

§ 1129(a)(2). That provision requires that “[t]he proponent of the plan complies

with the applicable provisions of this title.” Id.

Creditors first contend that Juarez’s formation and operation of a limited

liability company (UBLA) was an “[a]buse of the Bankruptcy System [sic]”

because they assert he used UBLA to “incur debt and to buy property out of the

ordinary course without Court supervision.” But the bankruptcy court held an

evidentiary hearing in which Creditors probed their allegations of various

improprieties, and the bankruptcy court found that “no testimony was presented to

2 show that UBLA was not properly formed, funded, or operated.” This court

“give[s] great deference to the bankruptcy court’s findings” when they are based

on its assessment of testimony. In re Retz, 606 F.3d 1189, 1196 (9th Cir. 2010)

(citation omitted). Moreover, the bankruptcy court noted that Juarez disclosed his

ninety-percent interest in UBLA, that he amended his schedules to reflect an

increase in value of his interest in UBLA, and that he deposited a $10,000

distribution from UBLA into his debtor-in-possession account. These findings

support the bankruptcy court’s rejection of Creditors’ argument that UBLA was

being used for an improper purpose. Therefore, the bankruptcy court did not

clearly err in concluding that Juarez’s formation and operation of UBLA did not

violate any applicable bankruptcy provision.

Creditors also argue that Juarez transferred real estate commissions to his

longtime domestic partner and real estate associate, Leticia Arreola, and did not

properly report these commissions as his income in violation of 11 U.S.C. § 521.

However, the bankruptcy court heard the testimony of Juarez, Arreola, and one of

their business associates, and it concluded that “the[] transfers represented amounts

Ms. Arreola earned” and that “Creditors did not refute this testimony.” Again, we

accord the bankruptcy court’s factual findings “great deference” because they are

based on its evaluation of trial testimony. See Retz, 606 F.3d at 1196. The

3 bankruptcy court did not clearly err in finding Arreola earned the transferred

amounts.

Neither of the challenged findings were clearly erroneous. Therefore, we

conclude that the bankruptcy court did not abuse its discretion in rejecting

Creditors’ objection to the Plan under § 1129(a)(2).

2. Creditors argue that Juarez’s formation and operation of UBLA and

transfers of commissions to Arreola indicate that the Plan was not “proposed in

good faith” as 11 U.S.C. § 1129(a)(3) requires. But the formation and operation of

UBLA and transfers of commissions to Arreola are not relevant to the § 1129(a)(3)

good faith inquiry. The focus under § 1129(a)(3) is limited to “the manner of the

plan’s proposal,” not on a debtor’s allegedly bad faith activities unrelated to plan

proposal, because § 1129(a)(3) does not require that a plan “comply with all

applicable law.” See Garvin v. Cook Invs. NW, SPNWY, LLC, 922 F.3d 1031,

1035 (9th Cir. 2019); In re Sylmar Plaza, L.P., 314 F.3d 1070, 1074 (9th Cir.

2002). Juarez’s operation and formation of UBLA and the transfers of

commissions to Arreola are not relevant to the § 1129(a)(3) inquiry as neither

pertains to Juarez’s proposal of the Plan.

But, even if this conduct were relevant under § 1129(a)(3), the bankruptcy

court’s factual findings are not clearly erroneous. As discussed above, the

bankruptcy court did not clearly err in finding that UBLA was not formed or

4 operated for an improper purpose and that Arreola earned the transferred

commissions. Thus, the bankruptcy court did not abuse its discretion in denying

Creditors’ objection under § 1129(a)(3).

3. Creditors argue that Juarez’s transfers of commissions to Arreola

meant that the Plan was unconfirmable under § 1129(a)(15). According to

Creditors, this transfer “underscores the fact that [Juarez] has failed to commit all

his disposable income to the plan over five years” and “to comply with the statute,

[Juarez] would have to contribute the secreted commissions to the plan over five

years.” But again, this argument fails because the bankruptcy court did not clearly

err in finding that these commissions were earned by Arreola and thus were not

part of Juarez’s disposable income.

4. Creditors contend that the Plan does not comply with 11 U.S.C.

§ 1129(a)(7), which provides that where a creditor does not accept the Chapter 11

plan, as is the case here, the creditor “will receive or retain under the plan on

account of such claim or interest property of a value . . . that is not less than the

amount that such holder would so receive or retain if the debtor were liquidated

under chapter 7.” 11 U.S.C. § 1129(a)(7)(A)(ii). The bankruptcy court did not err

in confirming the plan over Creditors’ § 1129(a)(7) objection. Juarez offered

evidence that a Chapter 7 liquidation would yield approximately $68,974. After

payment of administrative expenses, the federal secured tax lien, and federal and

5 state priority tax liens (totaling about $242,225), there would be nothing left for the

class of unsecured creditors, which includes Creditors. In contrast, the Plan

offered $33,580.51 to this class, divided between all creditors in the class. Clearly

some portion of $33,580.51 is greater than nothing.

Creditors argue, however, that the bankruptcy court abused its discretion by

applying the law incorrectly as Juarez’s “residence remained property of the

estate”—subject to liquidation—and thus, the liquidation would have equaled

about $212,974 (i.e., $68,974 plus an additional $144,000 worth of unencumbered

equity in the house). But $212,974 is still less than $242,225 (the amount of

administrative expenses and liens). Consequently, under Creditors’ scenario, the

amount that Creditors would receive under Chapter 7 liquidation—still nothing—is

less than receiving some portion of $33,580.51 under the Plan. Even under

Creditors’ theory, § 1129(a)(7) is satisfied.

Creditors also contend that the bankruptcy court erred because it “made no

valuation determination at any point in the confirmation process” and denied

Creditors “the right to [] a valuation hearing.” This argument fails because it

misstates the record. Creditors objected to plan confirmation because Juarez

“undervalued his assets,” and Creditors had an opportunity to contest the valuation

of Juarez’s non-exempt assets during the evidentiary hearing before the bankruptcy

court. During that hearing, Creditors asked Juarez various questions about the

6 value of some of his property, specifically focusing on the value of his boat. The

bankruptcy court found that “there was no evidence to controvert the Debtor’s

statement of value” as to the boat “[o]ther than the fact that the liability coverage

on the boat exceeded [its] value.” Ultimately, it rejected Creditors’ contention that

Juarez had undervalued his assets. The bankruptcy court did not err in doing so.

Based on the record, § 1129(a)(7)’s requirements were met. Therefore, the

bankruptcy court did not err in overruling Creditors’ objection.

5. Finally, Creditors contend that the bankruptcy court erred in rejecting

their objection under § 1129(b). Creditors argue that the Plan did not comply with

§ 1129(b) because they assert Juarez will retain exempt property without offering

reasonably equivalent new value for it in violation of the absolute priority rule

embodied in § 1129(b)(2)(B)(ii). See In re Bonner Mall P’ship, 2 F.3d 899, 906–

09 (9th Cir. 1993), abrogated on other grounds by Bullard v. Blue Hills Bank, 575

U.S. 496 (2015).1

1 It appears that Creditors also contend that the new value contribution provided for in the Amended Plan does not satisfy the new value corollary as it is less than five percent of the unsecured claims in this case, and thus, is not “substantial.” See Bonner Mall P’ship, 2 F.3d at 906–09. But Creditors’ argument is relegated to a conclusory footnote. “We will not manufacture arguments for an appellant, and a bare assertion does not preserve a claim, particularly when, as here, a host of other issues are presented for review.” Kohler v. Inter-Tel Techs., 244 F.3d 1167, 1182 (9th Cir. 2001) (citation omitted). Therefore, Creditors have waived any argument regarding whether the new value contribution was not substantial. See id.

7 However, § 1129(b)(2)(B)(ii) only prohibits a debtor from receiving or

retaining property “on account of” an interest that is junior to claims held by

unsecured creditors. See Bonner Mall P’ship, 2 F.3d at 908–09; see also Zachary

v. Cal. Bank & Tr., 811 F.3d 1191, 1195 (9th Cir. 2016) (recognizing that

§ 1129(b)(2)(B)(ii) applies to individual debtors). We have stressed that

“Congress must have intended the ‘on account of’ language to have some

significant meaning as well as some particular limiting effect,” and thus, the phrase

“on account of” is critical to the proper application of § 1129(b)(2)(B)(ii)’s

absolute priority rule. Bonner Mall P’ship, 2 F.3d at 909.

Consequently, § 1129(b)(2)(B)(ii) is not implicated when a debtor retains

exempt property as a debtor does not “receive or retain” exempt property “under

the plan on account of [a] junior claim or interest.” 11 U.S.C. § 1129(b)(2)(B)(ii)

(emphasis added). Rather, “[i]t is widely accepted that property deemed exempt

from a debtor’s bankruptcy estate revests in the debtor” under 11 U.S.C. § 522. In

re Smith, 235 F.3d 472, 478 (9th Cir. 2000) (emphasis added) (collecting

authorities). In fact, the bankruptcy estate “consists of all the interests in property,

legal and equitable, possessed by the debtor at the time of filing,” but “an interest

[is] withdrawn from the estate” where an exemption is allowed. Owen v. Owen,

500 U.S. 305, 308 (1991). A debtor therefore obtains exempt property from the

bankruptcy estate by virtue of the right to exempt certain property under § 522, not

8 “under the plan on account of [a] junior claim or interest” such that

§ 1129(b)(2)(B)(ii) is triggered. Accordingly, the bankruptcy court did not err in

failing to consider exempt property as part of its analysis under § 1129(b).2

AFFIRMED.

2 We grant the motion for leave to file a brief as amici curiae filed by National Consumer Bankruptcy Rights Center and National Association of Consumer Bankruptcy Attorneys, Dkt. 25-1. See Fed. R. App. P. 29(a).

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