Lazy D Diamond Ranch, Inc. v. U.S. Department of Agriculture

MEMORANDUM *

Appellants Lazy D Diamond Ranch, Inc., Bennie Lee Danelson, and Bennie *419 Lee Danelson, Inc. appeal from the district court’s order granting summary judgment to Appellee United States Department of Agriculture (“USDA”) in Appellants’ action seeking declaratory relief and a permanent injunction prohibiting the enforcement of a promissory note and seeking the disbursement of farm subsidies that the USDA had held as offset for the debt. We affirm in part and vacate and remand in part.

Because the parties are familiar with the facts, we do not recite them here. With a few exceptions not relevant in this case, a discharge in a Chapter 12 bankruptcy does not discharge co-debtors if the reorganization plan does not address co-debtor liability. See 11 U.S.C. § 524 (e) (“Except as provided in subsection (a)(3) of this section, discharge of a debt of the debtor does not affect the liability of any other entity on, or the property of any other entity for, such debt.”); Underhill v. Royal, 769 F.2d 1426, 1432 (9th Cir.1985). Under the circumstances here, neither confirmation of the Lazy D Diamond Ranch, Inc., Chapter 12 reorganization Plan, nor the subsequent discharge of the…