Great Western Bank the Bank of America, Creditors-Appellees v. Sierra Woods Group, a California Limited Partnership, Debtor-Appellant

Sierra Woods Group (Sierra Woods) appeals the district court’s decision that Sierra Woods’ proposed reorganization plan, which included negative amortization, was not “fair and equitable” under 11 U.S.C. § 1129 (b). The bankruptcy court did not make specific factual findings regarding the fairness of the proposed deferral of *1175 interest, but rather adopted a per se rule against negative amortization. The district court did not address the legal permissibility of negative amortization, but concluded based upon a review of the record that the proposed plan was not fair and equitable. We hold that the fairness of a reorganization plan that includes the deferral of interest must be determined on a case-by-case basis. Therefore we reverse the district court’s decision and remand to the district court for further remand to the bankruptcy court so that the bankruptcy court may make factual findings concerning the fairness of the proposed plan.

FACTUAL AND PROCEDURAL BACKGROUND

This dispute centers on the Chapter 11 reorganization plan proposed by Sierra Woods. Its only asset is a ten-year-old apartment complex located in Sparks, Nevada. Bank of America owns a note secured by a first…

concurring in part and dissenting in part:

I agree with the majority that negative amortization is not always disallowed by the bankruptcy code, and I concur in that part of the opinion. I write separately, however, because I do not believe it is either necessary or appropriate to reverse and remand in this case.

The majority rejects the district court’s assessment of the reorganization plan, citing In re Hall, Bayoutree Assoc., Ltd., 939 F.2d 802, 804 (9th Cir.1991) for the proposition that a district court may not make its own findings of fact. This statement is true as far as it goes, but fails to account for a district court’s authority to consider issues on appeal not decided by the bankruptcy court if the issues are legal and are supported by the record. Id. at 804 ; see also Matter of Pizza of Hawaii, Inc., 761 F.2d 1374, 1377 (9th Cir.1985). While the inquiry into whéther the plan of reorganization is “fair and equitable” involves questions of fact, it is a legal determination. In re Acequia, 787 F.2d 1352 , 1358 n. 5 (9th Cir.1986). Thus, while the district court does seem to have over stepped by making some factual findings of its own, it was within the power of that…

953 F.2d 1174 60 USLW 2465 , 26 Collier Bankr.Cas.2d 342 , 22 Bankr.Ct.Dec. 949 , Bankr. L. Rep. P 74,428 GREAT WESTERN BANK; the Bank of America, Creditors-Appellees, v. SIERRA WOODS GROUP, a California Limited Partnership, Debtor-Appellant. No. 90-16500. United States Court of Appeals, Ninth Circuit. Argued and Submitted Nov. 7, 1991. Decided Jan. 13, 1992. Lee S. Molof and Robert C. Vohl, Henderson & Nelson, Reno, Nev., for debtor-appellant. Bruce T. Beesley, Gordon & Silver, Reno, Nev., for creditor-appellee Great Western Bank. Roland K. Martin, Beckley, Singleton, et al., Reno, Nev., for creditor-appellee Bank of America. Before POOLE, REINHARDT and FERNANDEZ, Circuit Judges. FERNANDEZ, Circuit Judge: 1 Sierra Woods Group (Sierra Woods) appeals the district court's decision that Sierra Woods' proposed reorganization plan, which included negative amortization, was not "fair and equitable" under 11 U.S.C. § 1129 (b). The bankruptcy court did not make specific factual findings regarding the fairness of the proposed deferral of interest, but rather adopted a per se rule against negative amortization. The district court did not address the legal permissibility of…