In Re Montgomery Ward, LLC

PRECEDENTIAL

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

Nos. 09-1735/1736

In re: MONTGOMERY WARD, LLC, et al,

Debtors,

DIKA-WARD LLC,

Appellant

Nos. 09-1745/1746

In re: MONTGOMERY WARD, LLC, et al,

Debtors,

PLAN ADMINISTRATOR OF MONTGOMERY
WARD, LLC; PA COMM OF MONTGOMERY
WARD, LLC,

Appellants
 On Appeal from the United States District Court
for the District of Delaware
(D. C. Nos. 2-08-cv-00201; 2-08-cv-00202)
District Judge: Honorable Joseph J. Farnan

Argued on June 2, 2010

Before: JORDAN, ROTH and TASHIMA*, Circuit Judges

(Opinion filed March 9, 2011)

Theodore J. Tacconelli, Esquire
Ferry, Joseph & Pearce
824 Market Street
P. O. Box 1351
Wilmington, DE 19899

David K. Welch, Esquire (Argued)
Crane, Heyman, Simon, Welch & Clar
Suite 3705
135 South LaSalle
Chicago, IL 60603

Counsel for Appellant

*Honorable A. Wallace Tashima, Senior United States
Circuit Judge for the Ninth Circuit, sitting by designation.

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Daniel B. Butz, Esquire
Morris, Nichols, Arsht & Tunnell
1201 North Market Street, 18th Floor
P. O. Box 1347
Wilmington, DE 19899

Richard S. Kanowitz, Esquire
Brent I. Weisenberg, Esquire (Argued)
Cooley
1114 Avenue of the Americas, 47th Floor
New York, NY 10036

Counsel for Appellee

OPINION

ROTH, Circuit Judge:

Dika-Ward filed a proof of claim in Montgomery
Ward=s second bankruptcy proceeding for amounts allegedly
due under a mortgage and a lease. The Bankruptcy Court,
ruling on the parties= motion and cross motion for summary
judgment, held that (1) Montgomery Ward was not personally
liable under the mortgage, (2) Montgomery Ward had no
liability for common area maintenance expenses under the
lease, and (3) Montgomery Ward=s Plan Administrator was
precluded from challenging whether the lease was a true
lease, as this was res judicata from Montgomery Ward=s first
bankruptcy proceeding. Both parties appealed this order, and
the District Court affirmed the judgment of the Bankruptcy

3
Court. We will affirm the summary judgment order as to the
claims for the mortgage note and for common area
maintenance. However, we will vacate the Bankruptcy
Court=s order, ruling that res judicata precluded the Plan
Administrator=s cause of action, and remand this case to the
District Court for remand to the Bankruptcy Court so that the
Plan Administrator may challenge the nature of the lease.

I. BACKGROUND

Prior to its bankruptcy petitions, Montgomery Ward
operated one of the largest retail merchandising organizations
in the United States. Montgomery Ward=s plans in the 1970s
to develop the Jefferson Square Mall in Joliet, Illinois, and a
new department store there gave rise to the disputed claims in
this appeal. Montgomery Ward, Joliet Mall Associates, and
Wieboldt Stores entered into a Reciprocal Construction,
Operation and Easement Agreement (RCOEA) in which the
parties agreed to develop the mall and share certain expenses,
including common area maintenance and repair expenses
(collectively referred to as Common Area Maintenance, or
CAM, expenses).

Montgomery Ward contracted with Jolward Associates
Limited Partnership (Jolward) to construct a department store
(the Department Store) on a parcel of land that Montgomery
Ward owned at the planned site of the Jefferson Square Mall
(the Land). The parties entered into a Ground Lease whereby
Montgomery Ward leased the Land to Jolward and Jolward
agreed to construct the Department Store. Montgomery Ward
consented to pledge its fee interest in the Land to secure
financing for the Department Store=s construction, with Ait
being expressly understood and agreed that Lessor

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[Montgomery Ward] assumes no personal liability for the
payment of any principal, interest or premium on the Notes
by so doing.@

State Farm Life Insurance Co. financed the
Department Store=s construction, with Jolward executing a
note (the Note) secured by Jolward=s rights in the Ground
Lease, the Lease and Sublease Agreement (as described
below), and the Department Store (the Mortgage).
Montgomery Ward joined in the execution of the Mortgage to
grant State Farm a security interest in its rights in and to the
Land, the Department Store, and the RCOEA. The Mortgage
agreement reiterated that Montgomery Ward Aassumes no
personal liability for the payment of any principal, interest or
premium, if any, on the Note@; that is, the Mortgage was
without recourse to Montgomery Ward.

Jolward leased the Department Store and the Land
back to Montgomery Ward under a Lease and Sublease
Agreement. Montgomery Ward received an option to
purchase the Department Store at the end of the lease, and it
agreed to indemnify Jolward for any expenses or liabilities
incurred as a result of Jolward=s interest in the estate.

Over twenty years later, in 1997 and again in 2000,
Montgomery Ward filed bankruptcy petitions under Chapter
11 of the Bankruptcy Code. Creditors filed proofs of claim in
each of these bankruptcies on account of the Mortgage and
the Lease and Sublease Agreement, as described below.

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 A. Ward I

In Montgomery Ward=s first bankruptcy proceeding
(Ward I), State Farm filed a proof of claim for the outstanding
balance of the Mortgage. The Confirmed Plan of
Reorganization (the Ward I Plan) provided for no
distributions to State Farm on account of the Mortgage; State
Farm simply retained its security interest.

The Ward I debtor-in-possession (the Ward I Debtor)
assumed the Lease and Sublease Agreement, meaning that it
agreed to continue to be bound by the agreement and to pay
any past-due amounts to Jolward. State Farm, as assignee of
Jolward=s interest in the Lease and Sublease Agreement, filed
a proof of claim for these past due amounts, including unpaid
real estate taxes and CAM expenses (the Jolward I Claim).

The Ward I Debtor disputed the amount of the Jolward
I Claim, including the allegedly unpaid CAM expenses. The
parties settled this dispute, with State Farm receiving the full
amount of its claim and acknowledging that its claim was
fully satisfied (the Ward I Stipulation).1

B. Ward II

Montgomery Ward filed its second Chapter 11 petition
(Ward II) less than eighteen months after emerging from its

1
Jefferson Square Mall did not file a proof of claim for
unpaid CAM expenses. The Ward I Debtor scheduled two
claims on behalf of the mall (the Jefferson I Claims), which
the bankruptcy court expunged.

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first bankruptcy proceeding, this time with the goal of
winding down operations and liquidating assets. As part of
this plan, the Ward II debtor-in-possession (the Ward II
Debtor) rejected the Lease and Sublease Agreement.

Dika-Ward, an Illinois limited liability company,
acquired State Farm=s interests in both the Mortgage and the
Lease and Sublease Agreement and filed two proofs of claim.
First, it filed a proof of claim for the full amount of the Note
and argued that, as a consequence of the Ward I bankruptcy,
Montgomery Ward was personally liable for the full amount
of that loan. Dika-Ward contended that the Mortgage,
although initially nonrecourse, had become recourse in Ward
I under Section 1111(b) of the Bankruptcy Code.

Second, Dika-Ward filed a proof of claim for lease
rejection damages from the Lease and Sublease Agreement,
which included allegedly unpaid CAM expenses (the Jolward
II Claim). Dika-Jefferson B an affiliate of Dika-Ward that
acquired the Jefferson Square Mall B also filed a proof of
claim for unpaid CAM expenses (the Jefferson II Claim).

The Ward II Debtor entered into a settlement
agreement with Dika-Jefferson as to the Jefferson II Claim,
conveying its interest in the Land to Dika-Jefferson in
satisfaction of the claim (the Ward II Stipulation). But the
Ward II Debtor objected to the Jolward II Claim, and the
Ward II Plan Administrator, who was appointed to represent
the interests of the Ward II estate, filed a supplemental
objection.2 The supplemental objection asserted that the

2
The Plan Administrator filed this objection together
with the PA Committee of Montgomery Ward, LLC. For

7
Lease and Sublease Agreement was actually a structured
financing, not a true lease. As such, the Plan Administrator
argued that Dika-Ward=s only remedy would be against the
collateral securing that financing. The Plan Administrator
contended alternatively that, even if the Lease and Sublease
Agreement were a true lease, all CAM obligations were
discharged and released in the Ward II Stipulation.

Dika-Ward responded by arguing that the Ward I Plan
confirmation precluded the Plan Administrator from
challenging the Lease and Sublease Agreement on principles
of res judicata, equitable estoppel, and waiver.

Dika-Ward and the Plan Administrator moved and
cross-moved for summary judgment. The Bankruptcy Court
granted summary judgment for Dika-Ward on the res judicata
issue, concluding that confirmation of the Ward I Plan barred
the Plan Administrator from challenging the nature of the
Lease and Sublease Agreement. The court held that the
confirmation order in Ward I was a final adjudication on the
merits, that the Ward I Debtor could have challenged the
nature of the Lease and Sublease Agreement in its dispute
concerning the amount of the Jolward I Claim, and that the
Ward II Debtor (and Plan Administrator) were successors in
interest to the Ward I Debtor. In dictum, the Bankruptcy
Court noted that, even if res judicata did not apply, equitable
estoppel and waiver would bar the Plan Administrator from
challenging the nature of the lease.

simplicity, this opinion will collectively refer to these parties
as Athe Plan Administrator.@

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 On the Dika-Ward Mortgage and the CAM expense
claims, the Bankruptcy Court granted summary judgment for
the Plan Administrator. The court held that section 1111(b)
did not make the Mortgage recourse but merely, during the
Ward I reorganization, granted the holder of the Mortgage a
claim as if it were recourse. In addition, the court concluded
that Dika-Ward had not established that Montgomery Ward
was liable for any CAM expenses to Jolward. The parties
appealed and cross-appealed this order, and the District Court
affirmed, adopting the reasoning and analysis of the
Bankruptcy Court. Both Dika-Ward and the Plan
Administrator appealed to this Court.3

II. DISCUSSION

A. Res Judicata

Res judicata bars re-litigation of a claim if Athere has
been (1) a final judgment on the merits in a prior suit
involving (2) the same claim and (3) the same parties or their

3
The Bankruptcy Court had jurisdiction under 28
U.S.C. ' 157(a); the District Court had jurisdiction under 28
U.S.C. '' 158(a)(1) and 1334, and we have jurisdiction under
28 U.S.C. '' 158(d)(1) and 1291.

AWe exercise plenary review over the District Court=s
appellate review of the Bankruptcy Court=s decision. We
review the Bankruptcy Court=s findings for clear error, and
apply plenary review to its conclusions of law.@ JELD-WEN,
Inc. v. Van Brunt (In re Grossman=s Inc.), 607 F.3d 114, 119
(3d Cir. 2010) (en banc).

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privies.@ E.E.O.C. v. U.S. Steel Corp., 921 F.2d 489, 493 (3d
Cir. 1990). The issue before us is whether the Ward II Plan
Administrator, as successor in interest to the Ward II Estate,
was the same party as, or privy of, the Ward I Debtor.4

The Ward I Debtor was a party to the Ward I Plan
confirmation proceeding. Upon confirmation of that plan, the
Ward I Debtor ceased to exist, and the reorganized
Montgomery Ward succeeded to the Ward I estate. As
Elizabeth Warren has explained,

Three entities are involved in a successful Chapter 11
plan confirmation: the pre-bankruptcy debtor, the
estate, and the post-bankruptcy business. The debtor
gives way to the bankruptcy estate at the time of the
initial filing, the estate gives way to the post-
bankruptcy entity on confirmation of the plan, and the
post-bankruptcy business survives the confirmation.

A Theory of Absolute Priority, 1991 Ann. Surv. Am. L. 9, 12
(1992). The filing of the Ward II bankruptcy resulted in a
new estate, with the Ward II Debtor as trustee of that estate.
See In re Jamesway Corp., 202 B.R. 697, 701 (Bankr.
S.D.N.Y. 1996).

4
We note that the confirmation order in Ward I was a
final judgment on the merits, In re Szostek, 886 F.2d 1405,
1408 (3d Cir.1989), but we do not reach the issue of whether
the two claims are identical for res judicata purposes because
the privity issue is dispositive.

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 The Ward II Debtor, as trustee of that new estate, was
not the same party as the Ward I Debtor. It was the successor
in interest to the reorganized Montgomery Ward and the
Ward I Debtor.

Res judicata may apply to a successor in interest,
despite the general rule against nonparty preclusion. Taylor
v. Sturgell, 553 U.S. 880, 892 (2008).5 The Court stated in

5
Taylor listed the following five other exceptions to
the general rule against non-party preclusion: (1) where the
nonparty agrees to be bound by a prior judicial determination
between other parties, (2) where the nonparty was adequately
represented in the prior litigation by someone with the same
interests, (3) where the nonparty assumed control of the prior
litigation, (4) where the nonparty is the proxy or agent of a
party to the prior litigation, and (5) where a special statutory
scheme, such as bankruptcy, expressly forecloses subsequent
litigation. Id. at 893-96.

None of these exceptions applies here. The Ward II
Debtor did not agree to be bound by the Ward I Plan. The
Ward II Debtor was not adequately represented by the Ward I
Debtor, as the Ward I Debtor did not understand itself to be
acting in a representative capacity. Id. at 900 (adequate
representation requires that A(1) the interests of the nonparty
and her representative are aligned; and (2) either the party
understood herself to be acting in a representative capacity or
the original court took care to protect the interests of the
nonparty@) (citations omitted). The Ward I Debtor was not
the agent or proxy of the Ward II Debtor, as the Ward II
Debtor did not yet exist during Ward I. The Ward II Debtor
did not assume control of the Ward I proceeding. And

11
Taylor that nonparty claim preclusion applies if the nonparty
had a substantive legal relationship with a party, and a
successor in interest has such a relationship with its
predecessor. Id. A trustee in bankruptcy, including a debtor-
in-possession, may thus be considered the privy of the
prebankruptcy debtor for res judicata purposes.6 In re
WorldCom, Inc., 401 B.R. 637, 651 (Bankr. S.D.N.Y. 2009)
(Aa trustee is a successor to the property interests of the
debtor, thereby placing them in privity@); Edelman v. Mullins
Orchards (In re Silver Mill Frozen Foods, Inc.), 32 B.R. 783,
785 (Bankr. W.D. Mich. 1983) (AThe trustee in bankruptcy is
a successor to the bankrupt=s property and for many purposes
is deemed in privity with the bankrupt.@).

finally, even though this case involves the bankruptcy
statutory scheme, the last exception is not applicable here
because it deals with claims that were discharged in a
bankruptcy proceeding. See, e.g.. Martin v. Wilks, 490 U.S.
755, 762 n.2 (1989).
6
The Taylor Court acknowledged that the term privity
was often used to mean Asubstantive legal relationship,@ but
the Court consciously avoided using the term Aprivity@
because it is often broadly used Aas a way to express the
conclusion that nonparty preclusion is appropriate on any
ground.@ 553 U.S. at 894 n.8.

We use the word Aprivity@ and Aprivy@ in this broader
sense, Ato say that the relationship between the one who is a
party on the record and another is close enough to include that
other within res judicata.@ Nationwide Mut. Fire Ins. Co. v.
Hamilton, 571 F.3d 299, 311 n.13 (3d Cir. 2009) (internal
quotation marks omitted).

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 However, even though a trustee in bankruptcy has a
substantive legal relationship with the pre-bankruptcy debtor,
the A[t]rustee is not simply the successor in interest to the
Debtor: he represents the interests of all creditors of the
Debtor=s bankruptcy estate.@ In re WorldCom, 401 B.R. at
646 (internal quotation marks omitted). Because the trustee
also represents the general creditors= interests, the legal
relationship between the trustee and the pre-bankruptcy
debtor is incomplete, particularly when the interests of the
creditors diverge from those of the debtor. In re Silver Mill,
32 B.R. at 785.

In In re Silver Mill, Silver Mill filed for bankruptcy
protection under Chapter 11 and continued to operate the
business as a debtor-in-possession. As debtor-in-possession,
it issued a check to one of its vendors to settle a contract
dispute. A trustee in bankruptcy took over the administration
of the estate and filed an adversary proceeding to recover that
check as a preferential transfer under 11 U.S.C. ' 547. The
bankruptcy court held that the trustee was not precluded from
bringing this action. Even though the debtor-in-possession
could have brought the preference action, its failure to do so
did not preclude the trustee who, as representative of the
general unsecured creditors, had different interests than those
of the debtor-in-possession. Id. at 786. The court held that to
bar the trustee from bringing this action would unjustly
punish the other unsecured creditors and would disrupt the
fundamental bankruptcy principle that like creditors should be
treated alike. Id.

Here, as with the trustee=s claim in In re Silver Mill,
the Plan Administrator=s challenge is for the benefit of the
Ward II Estate and its general unsecured creditors. The Ward

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I Debtor could have brought this cause of action in the Ward I
proceeding, but it did not do so because it had an incentive
not to challenge the lease: it wanted Montgomery Ward to
continue operating at the Department Store. Subsequently, in
Ward II, the Plan Administrator did have an incentive to
challenge the lease because Montgomery Ward was
liquidating, and a successful challenge would increase returns
to the general unsecured creditors. See In re Cmty. Hosp. of
Rockland County, 15 B.R. 785, 787 (Bankr. S.D.N.Y. 1981)
(A[T]he debtor-in-possession seeks to continue its economic
life under the aegis of a reorganization, whereas the trustee in
bankruptcy aims to terminate the estate's existence and
distribute the property of the estate in accordance with the
concept of equality of distribution.@)

These misaligned incentives indicate that, when the
Plan Administrator raised this challenge to the Lease and
Sublease Agreement, he did not have a substantive legal
relationship with the Ward I Debtor of the kind contemplated
in Taylor. We conclude that, in bringing this challenge on
behalf of the Ward II general unsecured creditors, the Plan
Administrator was not the privy of the Ward I Debtor. Res
judicata, therefore, does not preclude him from arguing that
the Lease and Sublease Agreement was in fact a structured
financing. Similarly, because the Plan Administrator was not
in privity with the Ward I Debtor, the Ward I Debtor=s actions
neither waived the Plan Administrator=s right to raise this
challenge nor equitably estopped him from doing so.

B. CAM Expenses

Dika-Ward=s claim for CAM expenses is a component
of its lease rejection damages claim. For that reason, this

14
claim may be recharacterized on remand to the Bankruptcy
Court. However, whether the Lease and Sublease Agreement
is deemed a structured financing or a true lease, Montgomery
Ward has no CAM liability under the Jolward II Claim.

If on remand the Bankruptcy Court determines that the
Lease and Sublease Agreement is a structured financing,
Dika-Ward=s only remedy for an alleged breach of that
structured financing would be to foreclose on the Department
Store and the Land. Dika-Ward has already obtained this
remedy: it has foreclosed on the Mortgage, and Dika-
Jefferson acquired Montgomery Ward=s interest in the Land.

If the Bankruptcy Court finds that the Lease and
Sublease Agreement is a true lease, then Dika-Ward=s claim
for CAM expenses also fails because, as found by the
Bankruptcy Court, Dika-Ward has failed to establish that the
Ward II Debtor is liable for any CAM expenses. Dika-Ward
alleged that Montgomery Ward owes $3.2 million in CAM
expenses and that, A[t]o the extent Jolward is found to be
liable for any such amount, it possesses a claim against the
Debtor.@ Dika-Ward has never alleged or introduced any
evidence that Jolward has been found liable for any CAM
expenses, and in any event the Ward II Stipulation released
Montgomery Ward=s CAM liabilities.

C. Mortgage Claim

The last issue is whether the Mortgage became
recourse in Ward I under section 1111(b) of the Bankruptcy
Code.7 Generally, this statute provides that if a debtor elects

7
A claim secured by a lien on property of

15
to continue using encumbered property in its reorganization,
the bankruptcy court will grant the nonrecourse creditor,
whose claim is secured by an interest in that property, an
allowed claim under section 502 as if its security interest had
recourse. The key language in this statute concerns the
allowance of claims under section 502: Section 502
determines if a creditor can assert a claim against the debtor
and in what amount; creditors receive a distribution from the
bankruptcy estate based on their allowed claim. 11 U.S.C. '
507.

the estate shall be allowed or disallowed
under section 502 of this title the same as
if the holder of such claim had recourse
against the debtor on account of such
claim, whether or not such holder has
such recourse, unless--
(i) the class of which such claim
is a part elects, by at least
two-thirds in amount and more
than half in number of allowed
claims of such class, application
of paragraph (2) of this
subsection; or
(ii) such holder does not have
such recourse and such property is
sold under section 363 of this title
or is to be sold under the plan.

11 U.S.C. § 1111(b)(1)(A).

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 Mechanically, section 1111(b) affects the distribution
to creditors by granting nonrecourse creditors an allowed
claim against the debtor that they would not normally receive
under section 502(b)(1). In general, section 502(b)(1) allows
a creditor=s claim to the extent that it would be enforceable
against the debtor and the debtor=s property. A claim secured
by a nonrecourse security interest is, by definition,
enforceable only against the debtor=s property. A claim
secured by a recourse security interest is enforceable against
both the collateral and, to the extent the claim exceeds the
value of the collateral, against the debtor. If the recourse
creditor=s claim exceeds the value of the collateral B that is, if
the recourse creditor is undersecured B section 506(a)
bifurcates the claim into a secured claim for the value of the
collateral and an unsecured claim for the deficiency. By
treating nonrecourse creditors as if they had recourse, section
1111(b)(1)(A) gives undersecured nonrecourse creditors the
unsecured deficiency claim they otherwise would not receive.
680 Fifth Ave. Assoc. v. Mut. Benefit Life Ins. Co. (In re 680
Fifth Ave. Assoc.), 29 F.3d 95, 97 (2d Cir. 1994); Kenneth N.
Klee, All You Ever Wanted to Know About Cram Down
Under the New Bankruptcy Code, 53 Am. Bankr. L.J. 133,
161 (1979).

This unsecured deficiency claim enables the
undersecured nonrecourse creditor to vote on the debtor=s
plan of reorganization. Absent the unsecured deficiency
claim, the undersecured nonrecourse creditor would not be
able to vote so long as it received the collateral=s appraised
value. 11 U.S.C. ' 1124(1) (a claim is unimpaired if the plan
Aleaves unaltered the legal, equitable, and contractual rights to
which such claim or interest entitled the holder of such claim
or interest@); 11 U.S.C. ' 1126(f) (holders of unimpaired

17
claims are Aconclusively presumed to have accepted the
plan@); see Michael J. Kaplan, Nonrecourse Undersecured
Creditors Under New Chapter 11 B the Section 1111(b)
Election: Already a Need for Change, 53 Am. Bankr. L.J.
269, 270-71 (1979). Without a vote, the nonrecourse
undersecured creditor would not be able to challenge the
appraisal process. Such a creditor would have lost its
contractual state law right to bid on the collateral at a
foreclosure sale or renegotiate the loan to allow the debtor to
retain the collateral.

Practically, section 1111(b) provides the undersecured
nonrecourse creditor with Athe benefit it would otherwise
obtain from its nonrecourse loan bargain.@ In re 680 Fifth
Ave. Assoc., 29 F.3d at 97; see also Tampa Bay Assoc., Ltd. v.
DRW Worthington, Ltd. (In re Tampa Bay Assoc., Ltd), 864
F.2d 47, 50 (5th Cir. 1989). If the debtor elects to sell the
collateral in the Chapter 11 proceeding, the creditor can bid
on it. If the debtor elects to continue using the collateral,
section 1111(b) ensures that the creditor has the ability to
vote on the debtor=s plan.

Section 1111(b)=s language and purpose indicate that
the recourse transformation is for distribution purposes only.
It does not change the nature or terms of a creditor=s security
interest. In re DRW Property Co., 57 B.R. 987, 992 (Bankr.
N.D. Tex. 1986) (AThe transformation of non-recourse claims
into recourse claims is for distribution purposes only in a
Chapter 11 reorganization case where the debtor has been
given the power to retain encumbered property (over the
objection of the secured creditor) for use in its plan of
reorganization.@).

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 Dika-Ward=s argument overlooks the mechanics of the
claims allowance process and, if accepted, would have the
practical result of placing the nonrecourse creditor in a better
position than it would have been outside of bankruptcy, a
result not contemplated by Section 1111(b). In re DRW, 57
B.R. at 992 (A>It was obviously not intended by according
recourse . . . to nonrecourse claims [under section 1111(b)]
that the holders of these claims would be given any additional
rights under state law.=@) (quoting 3 Norton Bankr. L & Prac.
' 57.02). Because we conclude that section 1111(b)=s
transformation is for distribution purposes only, we conclude
that, following Ward I, the Mortgage remained nonrecourse.
Dika-Ward, as holder of that nonrecourse Mortgage, can look
only to the property secured by the Mortgage.

III. CONCLUSION

We conclude that the Plan Administrator was not a
privy of the Ward I Debtor for purposes of challenging the
Lease and Sublease Agreement, and therefore the Plan
Administrator is not barred by res judicata, equitable
estoppel, or waiver from challenging whether that agreement
was in fact a structured financing. Moreover, regardless of
whether the Lease and Sublease Agreement is a true lease,
Dika-Ward has no claim for any unpaid CAM expenses.
Finally, Dika-Ward has no claim against the Ward II Debtor
on account of the Mortgage, as that security interest remained
nonrecourse as to Montgomery Ward. Accordingly, we will
affirm the Bankruptcy Court=s order granting summary
judgment for the Plan Administrator, but we will vacate the
Bankruptcy Court=s order granting summary judgment for
Dika-Ward and remand this case to the District Court for
remand to the Bankruptcy Court so that the Plan

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Administrator may raise its challenge to the Lease and
Sublease Agreement.

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