1 Warren J.

Stapleton, 018646
OSBORN MALEDON, P.A.
2
2929 North Central Avenue
3 21st Floor
Phoenix, Arizona 85012-2793
4 (602) 640-9000
5 E-mail: [email protected]

6
Attorneys for Sun Valley Marina Development Corporation
7

8 UNITED STATES BANKRUPTCY COURT

9 FOR THE DISTRICT OF ARIZONA

10 In re: Chapter 11
11 BOB BONDURANT SCHOOL OF HIGH No. 2:18-bk-12041-BKM
PERFORMANCE DRIVING, INC.
12
Debtor. SUN VALLEY MARINA
13 DEVELOPMENT CORPORATION’S
LIMITED OBJECTION TO THE
14 DEBTOR’S EXPEDITED MOTION
FOR INTERIM APPROVAL OF
15 POST-PETITION FINANCING
16

17 Sun Valley Marina Development Corporation (“Sun Valley”), a tribal corporation

18 chartered by the Gila River Indian Community (“GRIC”), is the landlord for the Bob
19 Bondurant School of High Performance Driving, Inc. (“Bondurant” or the “Debtor”). Sun
20 Valley files this limited objection to Bondurant’s expedited motion for interim approval
21 of post-petition financing (the “Financing Motion”). Dkt #146. While Sun Valley
22 supports the Financing Motion in most aspects, the Motion fails to set aside enough
23 money to make Sun Valley current on rent payments. Provided that this deficiency is
24 remedied, Sun Valley would support approval of the Financing Motion.
25 MEMORANDUM OF POINTS AND AUTHORITIES
26 I. Introduction.
27 Sun Valley leases non-residential real property located at 20000 S. Maricopa Road,
28 Gate 3, Chandler, Arizona 85226 (the “Property”) to Bondurant pursuant to that certain

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 1 sublease dated March 1, 2017 (the “Lease”). A copy of the Lease is attached as Exhibit
2 A to Sun Valley’s Motion to Compel Payment of Rent, Dkt # 118, #s118-1 to 118-4. As
3 set forth in the Lease, Sun Valley rents the property from GRIC pursuant to that certain
4 Master Lease, Lease No. B-GR-71, dated March 4, 1974. See Exh. A, p. 4. The Lease
5 commenced on March 1, 2017 and expires on March 1, 2029. See Exh. A, § 3, p. 6.
6 Bondurant is currently occupying and in possession of the Property, and uses the
7 Property in connection with its driving school, automotive, and racing business
8 operations. As set forth in the Lease, Bondurant rents Parcel A, the West Track, and the
9 Carousel/Looper (as those terms are defined in the Lease) for a monthly payment of
10 $61,228.18 per month due in advance on the first day of each month. See Exh. A, § 5.1,
11 pp. 8-9. (With the rent price adjustment provided for under Section 5.1(e) the current
12 monthly rent is $61,350.64.)
13 Bondurant filed its voluntary petition under Chapter 11 of the United States
14 Bankruptcy Code (the “Bankruptcy Code”) on October 2, 2018 (the “Petition Date”).
15 Although Bondurant made the “stub” rent payment for October 2018, Bondurant did not
16 pay its November rent (as it had indicated it would in connection with its cash collateral
17 budget). See Dkt #14, p. 11 (the budget). In addition, Bondurant missed the December
18 1, 2018 payment and the January 1, 2019 payment. Bondurant also did not pay the
19 February 1, 2019 payment contemplated in the budget attached to the Financing Motion.
20 See Dkt #146, p. 31 of 48 (as electronically stamped). This payment was to be made on
21 February 3, 2019, and has not been made. Thus, Bondurant is four months behind on
22 rent. The total amount now due and owing for post-petition rent is $245,402.56.
23 The Financing Motion proposes that Bondurant will borrow $675,000 from
24 “Arlington Street Investments or its nominee” (hereinafter the “Lender”). See Dkt #146,
25 p. 3. $281,186 of the loan proceeds will be funded within 48 hours of Court’s interim
26 approval of the Financing Motion. (The remaining $393,814 of the loan proceeds will be
27 funded within 24 hours of final approval of the Financing Motion. Id.) From the initial
28

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 1 loan proceeds, Bondurant proposes to pay Sun Valley $212,000 (the approximate amount
2 sought in Sun Valley’s Motion to Compel Payment of Rent).
3 In exchange for this funding, Bondurant will give the Lender a priming lien on all
4 of its assets. Id. at p. 4. The priming lien includes securitization of Bondurant’s interest
5 in the lease. See Dkt #146, p. 22 of 48, ¶ 12(a) (proposed order grant’s lien in Bondurant’s
6 “leasehold interests”); Shaffer Declaration, Dkt #150, ¶ 14. In addition, Bondurant will
7 grant Lender a super-priority administrative expense claim for the amount of the loan. Id.
8 at p. 4. In other words, the lien that is to be granted to Lender will prime any landlord’s
9 lien, and grant Lender a preferred position vis a vis any administrative expense claims
10 that may arise in the case.
11 II. Limited Objection.
12 It should be noted at the outset that representatives of Sun Valley and
13 representatives from the Lender have met and had positive communications. Sun Valley
14 understands that the post-petition lending is critical and likely a precursor to the Debtor’s
15 sale of the business to Lender (or a Lender-controlled nominee). At this point, that looks
16 like the best option available to the Debtor, although Sun Valley is aware that there are
17 other potential purchasers interested in the business.
18 Nevertheless, in view of the broad securitization proposed – and the impact that
19 such securitization will have on Sun Valley’s landlord’s lien and administrative expense
20 claims – Sun Valley objects to the extent that its current administrative claim for post-
21 petition rent is not paid in full. As noted above, Sun Valley has not been paid for
22 November, December, January, or February rent. The total amount owing is $245,402.56
23 (or $33,402.56 more than the current Financing Motion provides). As a practical matter,
24 if the February rent is not paid, then Sun Valley would be forced to continue to pursue its
25 motion to compel payment of rent – which could close the business and result in less for
26 all concerned.
27 In addition, Sun Valley objects to Bondurant’s grant of a lien over its leasehold
28 interest. The lease that governs the parties’ relationship does not permit Bondurant to

3
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 1 grant such liens without Sun Valley’s permission, without the Gila River Indian
2 Community’s (“GRIC”) permission (GRIC is the Master Lessor), or the permission of
3 the Secretary of the Bureau of Indian Affairs. See Dkt #118-1, pp. 10 and 16-17 of 53
4 (dealing with Approved Encumbrances). A lessee may not reject parts of the lease (like
5 one giving the landlord the ability to approve liens on the leasehold), without rejecting
6 the whole lease. See, e.g., NLRB v.Bildisco & Bildisco, 465 U.S. 513, 531, 104 S.Ct.
7 1188, 1199 (1984);In re Abitibibowater, Inc., 418 B.R. 815 (Bankr. D. Del. 2009).
8 In any case, allowing the Debtor to place a lien on the leasehold would have a
9 negative impact on the Debtor’s future ability to assume and assign the lease. Ordinarily,
10 a Debtor would only have to “cure” the past-due obligations to assume a lease, but if the
11 Debtor’s leasehold is covered by the Lender’s security interest, then assumption of the
12 leasehold would require satisfaction of the amount owed to the Lender as a condition of
13 assumption and assignment, i.e., it could not transfer the Lender’s collateral without
14 paying the Lender in full. Such a circumstance plainly negates the free transferability
15 policy underlying the statutory scheme of Section 365 of the Bankruptcy Code. This not
16 only harms the Debtor and the landlord (Sun Valley), but potentially hurts Bondurant’s
17 other creditors – as the position of the Lender may chill bidding for a sale of Bondurant’s
18 assets.
19 III. Landlord’s Lien/Fixtures – Reservation of Rights.
20 In the event that the Court declines to approve the Financing Motion, Sun Valley
21 reminds the Court and the parties that it has a landlord’s lien over the personal property
22 located on the leased realty. See A.R.S. § 33-362. That lien predates Chase Bank’s 2011
23 lien (Bondurant has been leasing the premises since 1993). 1 In addition, Sun Valley has
24
1
The landlord's lien attaches at the commencement of the lease or when the personal
25 property is brought on the leased premises and exists independently of the institution of
26
any proceeding. Dewar v. Hagans, 61 Ariz. 201, 205, 146 P.2d 208, 209 (1944); U. S.
(Treasury Dep't, Internal Revenue Serv.) v. Globe Corp., 113 Ariz. 44, 47, 546 P.2d 11,
27 14 (1976). However, the landlord's lien does not take priority over a creditor who
obtained a security interest in collateral prior to the time the collateral is brought on the
28 premises, even where the lease pre-existed the loan by the secured creditor. Ex-Cell-O
4
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 1 a property interest in all property affixed to the realty. Sun Valley reserves all rights with
2 respect to fixtures and its landlord’s lien.
3 IV. Conclusion.
4 In light of the foregoing, Sun Valley respectfully requests that the Court only
5 approve the Financing Motion if it is amended to (a) include full payment for November,
6 December, January, and February rent out of the interim loan amount, and (b) delete
7 Bondurant’s leasehold interest from the Lender’s collateral. Sun Valley respectfully
8 requests any further relief that the Court deems appropriate.
9 DATED this 12th day of February, 2019.
10
OSBORN MALEDON, P.A.
11

12 By /s/ Warren J. Stapleton

Warren J. Stapleton
13 2929 North Central Avenue
14 21st Floor
Phoenix, Arizona 85012-2793
15 Attorneys for Sun Marina Development
Corporation
16

17

18

19
COPY of the foregoing sent via email and/or
20 U.S. Mail this 12th day of February, 2019.
21
Hillary L. Barnes Elizabeth C. Amorosi
22
Allen Barnes & Jones, PLC Office of the U.S. Trustee
23 1850 N. Central Ave., Ste. 1150 230 N First Ave Ste 204
Phoenix, AZ 85004 Phoenix AZ 85003-1706
24 [email protected] [email protected]
25 Attorney for Debtor

26

27 Corp. v. Lincor Properties of Arizona, 158 Ariz. 307, 309, 762 P.2d 594, 596 (App.
1988); Schatt–Ajax Industries v. Churchill, 3 Ariz. App. 34, 411 P.2d 457 (1966)
28 (landlord's lien is subordinate to creditor's interest under conditional sales contract).
5
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 1 Michelle E. Shriro Thomas E. Littler
Singer & Levick, P.C. Littler, PC
2
16200 Addison Rd Ste 140 341 W Secretariat Dr
3 Addison TX 75001 Phoenix AZ 85284
[email protected] [email protected]
4 Attorneys for Moses Smith Racing LLC Attorneys for Semple Marchal Cooper
5 PLC

6 Christopher C. Simpson Sheryl L. Toby

Stinson Leonard Street LLP Dykema Gossett PLLC
7
1850 N Central Ave Ste 2100 39577 Woodward Ave Ste 300
8 Phoenix AZ 85004 Bloomfield Hills MI 48304
[email protected] [email protected]
9 Attorneys for FCA US LLC Attorneys for FCA US LLC
10
2060 Digital Phoenix Hubbard American Express
11 Lockbox 511553 PO Box 981535
PO Box 511553 El Paso TX 79998-1535
12
Los Angeles CA 90051-8108
13
Arizona Business Bank Bancorp Bank
14 Cardmember Services Attn: Lease Payment Center
15 PO Box 790408 PO Box 140733
St Louis MO 63179-0408 Orlando FL 32814-0733
16
Chase Cardmember Services Clifton Larson Allen LLP
17
PO Box 94014 PO Box 31001-2433
18 Palatine IL 60094-4014 Pasadena CA 91110-2433

19 Crain Communications Inc DIG-Phoenix

20 29588 Network Pl PO Box 730824
Chicago IL 60673-1295 Dallas TX 75373-0824
21
Firefly Graphics Inc Goodyear
22
734 W Main St 200 Innovation Way
23 Mesa AZ 85201 Akron OH 43306

24 Kneaders Bakery and Cafe Lamar Companies

25 871 S Auto Mall Dr PO Box 96030
American Fork UT 84003 Baton Rouge LA 70896
26
Philadelphia Insurance Co Racer Media & Marketing Inc.
27
PO Box 70251 17030 Red Hill Ave
28 Philadelphia PA 19176-0251 Irvine CA 92614

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 1
S&S Paving and Construction Inc. Semple, Marchal & Cooper
2
3401 E Illini St 2700 N Central Ave 9th Fl
3 Phoenix AZ 85040 Phoenix AZ 85004-1147
4 Sun Valley Marina Development Corp. Tempe Dodge Chrysler Jeep Ram Kia
5 PO Box 5090 7975 S Autoplex Loop
Chandler AZ 85226 Tempe AZ 85284
6
Western States Petroleum Christopher R. Kaup
7
450 S 15th Ave Tiffany & Bosco P.A.
8 Phoenix AZ 85007 2525 E Camelback Rd 7th Floor
Phoenix AZ 85016-4237
9 Attorneys for Patricia and Robert
10 Bondurant

11 Leslie A. Berkoff Larry O. Folks

Moritt Hock & Hamroff LLP Folks Hess Kass, PLLC
12
400 Garden City Plaza 1850 N Central Ave Ste 1140
13 Garden City NY 11530 Phoenix AZ 85004
[email protected] Attorneys for JP Morgan Chase Bank NA
14 Attorneys for Unifi Equipment Finance
15
Jared G. Parker Christopher C. Simpson
16 Parker Schwartz PLLC Stinson Leonard Street LLP
7310 N 16th St Ste 330 1850 N Central Ave Ste 2100
17
Phoenix AZ 85020 Phoenix AZ 85004-4584
18 Attorneys for Goodyear Tire & Rubber Attorneys for FCA US LLC
Co.
19

20 James E. Cross
The Cross Law Firm, PLC
21 1850 N Central Ave Ste 1150
Phoenix AZ 85004
22
Attorneys for Arlington Street
23 Investments

24

25 /s/ Peggy L. Nieto

7941340
26

27

28

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