## Facts

- Meruelo Maddux Properties, Inc. (MMPI) operated a Los Angeles-area real estate business through more than 50 subsidiaries with centralized management.
- MMPI and its subsidiaries operated on a consolidated basis, including sweeping subsidiary revenues into a general operating account and filing consolidated financial reports and tax returns.
- Meruelo Maddux Properties–760 S. Hill Street LLC (MMP Hill), a subsidiary, was a special-purpose entity that owned and operated a single apartment complex at 760 S. Hill Street in Los Angeles.
- Bank of America made a loan to MMP Hill to renovate the property; the loan was secured by the property.
- MMPI and each subsidiary (including MMP Hill) filed separate Chapter 11 petitions, triggering the automatic stay.
- MMP Hill sought a determination that it was not subject to the Bankruptcy Code’s single asset real estate (SARE) provisions; Bank of America cross-moved to classify MMP Hill as a SARE debtor and obtain relief under § 362(d)(3).

## Issues

1. Whether the appeal became moot after plan confirmation lifted the automatic stay, or whether the dispute remained justiciable under an exception to mootness.
2. Whether MMP Hill qualified as a SARE debtor under 11 U.S.C. § 101(51B) despite being part of an integrated, consolidated corporate real-estate enterprise.

## Decision

- The Ninth Circuit held the appeal was not moot because the dispute was capable of repetition yet evading review.
- The court affirmed the district court’s reversal of the bankruptcy court.
- The court held MMP Hill was a SARE debtor under § 101(51B).
- The court rejected any implied “whole enterprise” or “integrated enterprise” exception to SARE status.

## Legal Principles

- An appeal is not moot when the challenged action is capable of repetition yet evading review, including when the issue typically arises early in bankruptcy proceedings and often becomes unreviewable before appellate review concludes.
- Under 11 U.S.C. § 101(51B), a debtor is a SARE debtor when it owns a single income-producing real property or project that generates substantially all of the debtor’s gross income and the debtor conducts no substantial business other than operating the property and incidental activities.
- SARE status is determined by examining the individual debtor entity; consolidated management, revenue sweeping, and affiliation with a larger corporate group do not create a statutory exception.
- Because the statutory text contains no “whole enterprise” exception, courts may not exempt otherwise qualifying debtors based on corporate integration with affiliates.

## Conclusion

The Ninth Circuit held that a special-purpose subsidiary owning a single income-producing property met the statutory definition of single asset real estate, and that neither consolidated operations nor membership in a larger real-estate enterprise prevents application of the SARE provisions; the court also reached the merits because the issue was capable of repetition yet evading review.


In re Meruelo Maddux Props., Inc., 667 F.3d 1072 (9th Cir. 2012)