Pacifica L 51 LLC v. New Investments Inc., No. 13-36194 (9th Cir. 2016)Annotate this Case
After New Investments defaulted on a note borrowed from Pacifica, Pacifica commenced non-judicial foreclosure proceedings. New Investments then filed for Chapter 11 bankruptcy. The bankruptcy court confirmed New Investments’s plan of reorganization proposing to cure the default by selling the property to a third party and using the proceeds of the sale to pay the outstanding amount of the loan at the pre-default interest rate. In Great W. Bank & Tr. v. Entz-White Lumber & Supply, Inc., the court held that a debtor who cures a default “is entitled to avoid all consequences of the default— including higher post-default interest rates.” At issue is whether Entz-White’s rule that a debtor may nullify a loan agreement’s requirement of post-default interest remains good law in light of 11 U.S.C. 1123(d), a provision that Congress enacted after Entz-White. The court held that Entz-White’s rule of allowing a curing debtor to avoid a contractual post-default interest rate in a loan agreement is no longer valid in light of section 1123(d). In this case, the court concluded that Pacifica is entitled to receive payment of the loan at the post-default interest rate. Accordingly, the court reversed and remanded for further proceedings.