In re: MERUELO MADDUX PROPERTIES, INC.

FILED
1 APR 09 2013
SUSAN M SPRAUL, CLERK
2 U.S. BKCY. APP. PANEL
OF THE NINTH CIRCUIT
3 UNITED STATES BANKRUPTCY APPELLATE PANEL
4 OF THE NINTH CIRCUIT
5 In re: ) BAP No. CC-12-1303-TaMoMk
)
6 MERUELO MADDUX PROPERTIES, ) Bk. No. SV 09-13356-VK
INC., et al., )
7 )
Debtors. )
8 ______________________________)
)
9 BELINDA MERUELO, ) MEMORANDUM*
)
10 Appellant, )
)
11 v. )
)
12 MERUELO MADDUX PROPERTIES, )
INC., et al., )
13 )
Appellees. )
14 )
15 Argued and Submitted On February 21, 2013
at Pasadena, California
16
Filed - April 9, 2013
17
Appeal from the United States Bankruptcy Court
18 for the Central District of California
19 Honorable Victoria Kaufman, Bankruptcy Judge, Presiding
20
Appearances: Gregory M. Salvato of Salvato Law Offices on
21 behalf of Appellant Belinda Meruelo; Christopher
E. Prince of Lesnick Prince & Pappas LLP on behalf
22 of Evoq Properties, Inc. (formerly known as
Meruelo Maddux Properties, Inc.) and Merco Group -
23 2001-2021 West Mission Boulevard, LLC
24
25
26 *
This disposition is not appropriate for publication.
27 Although it may be cited for whatever persuasive value it may
have (see Fed. R. App. P. 32.1), it has no precedential value.
28 See 9th Cir. BAP Rule 8013-1.

1
 1 Before: TAYLOR, MONTALI,** and MARKELL, Bankruptcy Judges.
2 INTRODUCTION
3 Belinda Meruelo, individually, as trustee of the Meruelo
4 Living Trust u/d/t dated November 11, 1988 (“Trust”), and as
5 representative of the Estate of Homer Meruelo (hereinafter in all
6 capacities, “Belinda”1), filed a proof of claim in the chapter 11
7 bankruptcy case of Merco Group 2001-2021 West Mission Boulevard,
8 LLC (“Merco Group”), case no. 09-13403.2 Merco Group3 objected
9
10
**
The Honorable Dennis Montali, Bankruptcy Judge for the
11 Northern District of California, sitting by designation.
12 1
An appeal filed by Belinda Meruelo’s son Richard Meruelo
13 was also submitted to this Panel on February 21, 2013 in BAP No.
CC-12-1304. In order to avoid unnecessary confusion, the
14 appellant here will be referred to as “Belinda.” We intend no
disrespect by this informality.
15
2
16 We exercised our discretion and independently reviewed
certain imaged documents from the bankruptcy court’s electronic
17 docket. See Rourke v. Seaboard Sur. Co. (In re E.R. Fegert,
Inc.), 887 F.2d 955, 957-58 (9th Cir. 1989); Atwood v. Chase
18 Manhattan Mortg. Co. (In re Atwood), 293 B.R. 227, 233 n.9 (9th
19 Cir. BAP 2003). In so doing, we determined that on April 7,
2009, the bankruptcy court ordered joint administration of Merco
20 Group’s bankruptcy case with 53 related cases under case no.
09-13356, In re Meruelo Maddux Properties, Inc. (“MMPI”)(“Joint
21
Administration Order”). The Joint Administration Order directed
22 claimants to file proofs of claim in the case directly related to
their claims and to use the caption and case number for that case
23 when so doing. It also, however, directed use of the MMPI case
number, caption, and docket in connection with all other filings
24
in the jointly administered cases. As a result, the MMPI docket
25 included more than 3700 entries at the time of our review; this
significantly impeded our ability to independently identify
26 relevant documents.
27 3
On June 24, 2011, the bankruptcy court entered an order
28 confirming a plan of reorganization. The post-confirmation Merco
Group filed the motion for disallowance.

2
 1 to the claim and moved for disallowance; the bankruptcy court
2 granted the disallowance motion. Belinda appeals the bankruptcy
3 court’s order disallowing the claim. We AFFIRM.
4 FACTS4
5 Pre-Petition Sale of the Property.
6 In early 2005, Merco Group, as buyer, entered into a
7 contract with Meruelo Pomona, LLC, as seller, to purchase
8 improved real property located in Pomona, California (the
9 “Property”) for $20,000,000. Belinda and her late husband, Homer
10 Meruelo, managed and owned the selling entity (“Seller”). Their
11 son, Richard Meruelo, managed Merco Group.
12 When Seller and Merco Group executed the purchase agreement
13 (“Purchase Agreement”), a deed of trust securing debt owed by
14 Seller to PNL Pomona, L.P. (“PNL”) encumbered the Property. PNL
15 also held a written guaranty from Belinda (“Guaranty”)
16 guaranteeing repayment of its loan to Seller.
17 The sale transaction closed over two years later on or about
18 July 27, 2007. On closing, Merco Group paid the sales price, in
19 part, by assuming the obligation to repay the PNL loan which had
20 a then outstanding balance of $8,763,304.85. The Purchase
21 Agreement did not require a release of the Guaranty, and Belinda
22 remained bound by the Guaranty after assumption.
23 Post-Petition Proceedings.
24 On or about March 27, 2009, Merco Group and 53 related
25 entities filed voluntary petitions under chapter 11. The
26
27 4
The record on appeal reflects that the background facts
28 are not in dispute.

3
 1 Property became an asset of a bankruptcy estate. On
2 September 24, 2009, Belinda filed the original proof of claim
3 (“Original Claim"). The Original Claim stated that it was an
4 indemnification claim and sought payment to the extent Belinda,
5 in the future, incurred losses associated with Merco Group’s
6 failure to re-pay PNL.
7 Thereafter, PNL sued Belinda in an action seeking recovery
8 on the Guaranty in Los Angeles Superior Court, PNL Pomona, L.P.
9 v. Belinda Meruelo, et al., case number KC055493 (“Guaranty
10 Action”).5 As a result, on December 6, 2011, Belinda filed an
11 amendment to the Original Claim (“Amended Claim”) and asserted a
12 specific claim for $3,306,941.05 based on a proposed judgment
13 dated October 20, 2011 in the Guaranty Action. In the Amended
14 Claim, Belinda alleged that: (1) as a third party beneficiary to
15 the Purchase Agreement, she may enforce the Purchase Agreement
16 against Merco Group pursuant to California Civil Code section
17 1559 (“CC Section 1559");6 and (2) she holds rights to
18 reimbursement and indemnification under California law, including
19 California Civil Code section 2847 (“CC Section 2847").7
20
21
5
It is not disputed that at some point thereafter, PNL
22 foreclosed non-judicially against the Property.
23 6
CC Section 1559 provides: “A contract, made expressly
24 for the benefit of a third person, may be enforced by him at any
time before the parties thereto rescind it.”
25
7
CC Section 2847 provides, in relevant part, that:
26 “If a surety satisfies the principal obligation, or any part
27 thereof, whether with or without legal proceedings, the principal
is bound to reimburse what he has disbursed, including necessary
28 costs and expenses. . . .”

4
 1 On January 23, 2012, Merco Group filed its Motion for Order
2 Disallowing Claim of [Belinda] (“Motion”) and sought disallowance
3 on two grounds. First, Merco Group argued that section 502(e)8
4 of the Bankruptcy Code9 bars recovery under the Amended Claim as
5 Belinda had not yet paid the PNL judgment. Second, Merco Group
6 asserted that section 580d of the California Code of Civil
7 Procedure (“CCP Section 580d”) barred recovery. Merco Group,
8 citing Union Bank v. Gradsky, 265 Cal. App. 2d 40, 44-47 (1968),
9 argued that just as this anti-deficiency statute protects a
10 borrower from a lender’s deficiency claim after a non-judicial
11 foreclosure, it also protects a borrower from the guarantor’s
12 reimbursement claim.
13 Belinda filed an opposition to the Motion (“Opposition”).10
14
8
15 Section 502(e) provides, in relevant part, that:

16 [T]he court shall disallow any claim for reimbursement
or contribution of an entity that is liable with the
17
debtor on or has secured the claim of a creditor to the
18 extent that (A) such creditor’s claim against the
estate is disallowed; (B) such claim for reimbursement
19 or contribution is contingent as of the time of
20 allowance or disallowance of such claim for
reimbursement or contribution; or (C) such entity
21 asserts a right to subrogation under section 509 of
this title.
22
9
Unless otherwise specified, all chapter and section
23
references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and
24 all “Rule” references are to the Federal Rules of Bankruptcy
Procedure, Rules 1001-9037.
25
10
The Opposition initially sought a six month continuance
26 of the hearing on the Motion on the grounds that the matter was
27 not ripe, as Belinda alleged that damages were likely to
increase. At that time, Belinda alleged out-of-pocket damages in
28 (continued...)

5
 1 In substance, Belinda argued that Merco Group’s first basis for
2 disallowance, section 502(e), did not apply, because Merco Group
3 was not liable with Belinda on the Guaranty. Belinda noted that
4 the confirmed plan allowed PNL to non-judicially foreclose, that
5 this foreclosure eradicated PNL’s deficiency rights against Merco
6 Group by operation of California law, and that this left only
7 Belinda liable to PNL.
8 The Opposition did not address Merco Group’s second basis
9 for disallowance, CCP Section 580d. Instead, Belinda argued that
10 Merco Group breached the Purchase Agreement when, having agreed
11 to assume the PNL debt, it failed to satisfy the PNL debt in full
12 and thereby release Belinda from obligations under the Guaranty.
13 Belinda alleged that Seller contracted with Merco Group for the
14 “express purpose of relieving [Belinda’s] mortgage debt through
15 the assumption of the loan by [Merco Group].” Opposition at
16 54:19-21. Belinda asserted, therefore, that as the third party
17 beneficiary of the Purchase Agreement, she had the right to
18 compel Merco Group to perform its obligations under the Purchase
19 Agreement. Belinda, thus, requested that the bankruptcy court
20 infer that such contractual obligations included payment of all
21 the alleged damages incurred, or to be incurred, as a result of
22 the Guaranty Action and Merco Group’s failure to pay PNL in full.
23
10
24 (...continued)
the amount of $425,521.05, for attorney’s fees incurred in
25 defense of the Guaranty Action, but the proposed judgment in the
Guaranty Action had not been entered. The bankruptcy court
26 continued the initial hearing on the Motion, scheduled for
27 March 15, 2012, to May 11, 2012, based on the parties’
stipulation and order thereon. Neither the stipulation nor the
28 order thereon, however, mentioned the ripeness argument.

6
 1 The bankruptcy court heard oral argument on the Motion and
2 Opposition on May 11, 2012. After hearing brief argument, the
3 bankruptcy court granted the Motion, on the following stated
4 grounds:
5 The Court doesn’t see her as a third-party beneficiary.
They bought the property. The intention wasn’t to
6 relieve her of the debt, it was to acquire the
property. And so the Court’s going to - - and for the
7 other grounds explained in the motion. So the
objection is sustained. Okay.
8
9 Hr’g Tr. (May 11, 2012) at 3:19-24. The Court entered the order
10 disallowing the Amended Claim on May 29, 2012 (“Order”). The
11 Order, prepared by Merco Group’s counsel, recites that it is
12 based on the “Motion, the Opposition to the Motion, the Reply in
13 support, the arguments presented at the hearing, and the
14 pleadings and papers on file in this proceeding . . . .” Order,
15 Dkt. 3768 at 2:6-7. Belinda filed a timely notice of appeal.
16 JURISDICTION
17 The bankruptcy court had jurisdiction pursuant to 28 U.S.C.
18 §§ 1334 and 157(b)(2)(B). We have jurisdiction under 28 U.S.C.
19 § 158.
20 ISSUE
21 Did the bankruptcy court err in disallowing the Amended
22 Claim?
23 STANDARD OF REVIEW
24 We review the bankruptcy court's legal conclusions de novo
25 and its findings of fact for clear error. See Allen v. US Bank,
26 NA (In re Allen), 472 B.R. 559, 564 (9th Cir. BAP 2012). We
27 review the bankruptcy court’s order disallowing the claim de
28 novo. See Continental Ins. Co. v. Thorpe Insulation Co.

7
 1 (In re Thorpe Insulation Co.), 671 F.3d 1011, 1020 (9th Cir.
2 2012), cert. denied, 133 S. Ct. 119 (2012). See also Varela v.
3 Dynamic Brokers, Inc. (In re Dynamic Brokers, Inc.), 293 B.R.
4 489, 493 (9th Cir. BAP 2003) (issues related to disallowance are
5 questions of law reviewed de novo). This case also involves
6 contract interpretation; again, de novo review is appropriate.
7 Simpson v. Burkart (In re Simpson), 366 B.R. 64, 70-71 (9th Cir.
8 BAP 2007).
9 DISCUSSION
10 The Bankruptcy Code sets forth the grounds for disallowance
11 of proofs of claim primarily in section 502(b). See Heath v. Am.
12 Express Travel Related Servs. Co., Inc. (In re Heath), 331 B.R.
13 424, 426 (9th Cir. BAP 2005). Section 502(b)(1) provides for
14 disallowance of a claim that “is unenforceable against the debtor
15 and property of the estate, under any agreement or applicable law
16 for a reason other than because such claim is contingent or
17 unmatured.” The bankruptcy court’s oral ruling articulated only
18 one specific ground for disallowance; Belinda was not a third
19 party beneficiary of the Purchase Agreement. Belinda disputes
20 this conclusion, but she never addresses the bankruptcy court’s
21 general reference to other grounds set forth in the Motion and
22 the resultant inclusion of CCP Section 580d as a basis for
23 disallowance. We conclude, first, that the necessary application
24 of CCP Section 580d is dispositive here. We then also conclude
25 that the bankruptcy court correctly determined that Belinda was
26 not a third party beneficiary of the Purchase Agreement entitled
27
28

8
 1 to specific performance rights under California law.11
2 CCP Section 580d Requires Disallowance of the Amended Claim.
3 Merco Group cited CCP Section 580d in its Motion as grounds
4 for disallowance. It argued that non-judicial foreclosure
5 extinguished any indirect obligation it otherwise owed to Belinda
6 on account of the Guaranty. Belinda did not respond directly to
7 this argument prior to appeal either in writing or at oral
8 argument.12 The bankruptcy court, likely as a result, did not
9 discuss this objection specifically in its oral ruling. But, it
10 generally references the “other grounds explained in the motion”
11 as a basis for its disallowance of the claim. Hr’g Tr. (May 11,
12 2012) at 3:23-24.
13 In her opening brief on appeal, Belinda addresses not CCP
14 Section 580d, but her Guaranty’s Gradsky waiver. In her reply
15 brief, she responds more directly to Merco Group’s CCP Section
16 580d argument, and states that she found no case authority
17 providing that CCP Section 580d applies to the claim of a third
18 party beneficiary. To the extent Belinda retained any right to
19 dispute the CCP Section 580d basis for disallowance of the
20 Amended Claim, these arguments fail to justify a reversal. Merco
21
22 11
To the extent that we misread the bankruptcy court’s
reference to other grounds as including CCP Section 580d, we note
23
that we may affirm the bankruptcy court on any grounds supported
24 by the record. Com-1 Info, Inc. v. Wolkowitz (In re Maximus
Computers, Inc.), 278 B.R. 189, 194 (9th Cir. BAP 2002).
25
12
Belinda may not argue the inapplicability of CCP Section
26 580d for the first time on appeal. Golden v. Chicago Title Ins.
27 Co. (In re Choo), 237 B.R. 608, 613 (9th Cir. BAP 2002) (issues
not raised at the trial court will not be considered for the
28 first time on appeal).

9
 1 Group argues that even if it “impliedly promised Belinda that it
2 would pay the underlying debt, CCP Section 580d would still
3 preclude her claim for reimbursement.” Apl’e Brief at 10. We
4 agree.
5 CCP Section 580d provides, in pertinent part, that:
6 No judgment shall be rendered for any
deficiency upon a note secured by a deed of
7 trust or mortgage upon real property or an
estate for years therein hereafter executed
8 in any case in which the real property or
estate for years therein has been sold by the
9 mortgagee or trustee under power of sale
contained in the mortgage or deed of trust.
10
11 And it is well settled that CCP Section 580d: “prevents both the
12 creditor and the guarantor from obtaining any deficiency judgment
13 against the debtor after nonjudicial sale of the security.”
14 Union Bank v. Gradsky, 265 Cal. App. 2d at 41. And as the
15 Gradsky court further noted:
16 The Legislature clearly intended to protect
the debtor from personal liability following
17 a nonjudicial sale of the security. No
liability, direct or indirect, should be
18 imposed upon the debtor following a
nonjudicial sale of the security. To permit
19 a guarantor to recover reimbursement from the
debtor would permit circumvention of the
20 legislative purpose in enacting [CCP Section
580d].
21
22 Id. at 46.
23 Thus, when PNL foreclosed, CCP Section 580d extinguished all
24 PNL’s claims against Merco Group. And concurrently,
25 CCP Section 580d also barred any Guaranty-based claim by Belinda
26 against Merco Group based on California laws such as CC Section
27 2847.
28 The Guaranty contains extensive waivers of defenses by the

10
 1 guarantor, Belinda, and includes a “Gradsky waiver” wherein
2 Belinda acknowledged the impact of a non-judicial foreclosure on
3 any rights to recovery against the borrower and agreed to be
4 bound by her guarantee notwithstanding. Belinda asserts that she
5 never waived her right to reimbursement from Merco Group under
6 California law, despite the Gradsky and other suretyship waivers
7 contained in the Guaranty. Without citation to legal authority,
8 she argues that any waivers of reimbursement claims under the
9 Guaranty were extinguished as a result of the provision in Merco
10 Group’s confirmed plan that allowed PNL to proceed to
11 non-judicial foreclosure in full satisfaction of its claim.
12 Belinda misses the point. The Guaranty’s waivers are intended to
13 protect PNL from an argument that a non-judicial foreclosure
14 exonerates the Guaranty, precisely because foreclosure negatively
15 impacts Belinda’s rights against Merco Group. Belinda did not
16 simply waive the right to assert suretyship defenses against PNL
17 in the Guaranty; in addition, she acknowledged that a non-
18 judicial foreclosure terminated all such rights. Again, non-
19 judicial foreclosure did not revitalize Belinda’s rights to
20 recovery from PNL - it extinguished them. And as a result, the
21 bankruptcy court correctly disallowed the Amended Claim.
22 The Bankruptcy Court Did Not Err In Disallowing The Claim
Notwithstanding Alleged Third Party Beneficiary Rights.
23
24 Perhaps in recognition of the impact of CCP Section 580d on
25 her ability to recover against Merco Group after a non-judicial
26 foreclosure, Belinda also asserted rights to recovery as a third
27 party beneficiary of the Purchase Agreement. CC Section 1559
28 permits a third party beneficiary to enforce a contract “made

11
 1 expressly” for its benefit. A court finds such express benefit
2 where the contracting parties must have intended to benefit the
3 third party and where such intent appears in the express terms of
4 the contract. Bancomer, S.A. v. Superior Court, 44 Cal. App. 4th
5 1450, 1458 (1996) (citation omitted). Ascertaining the parties’
6 intent is a question of contract interpretation. Hess v. Ford
7 Motor Co., 27 Cal. 4th 516, 524 (2002). A third party bears the
8 burden of proving that the contractual performance it seeks was
9 actually promised. Garcia v. Truck Ins. Exchange, 36 Cal. 3d
10 426, 436 (1984).
11 Belinda argues on appeal that testimony and declarations
12 establish that the parties to the Purchase Agreement intended her
13 to benefit by Merco Group’s assumption of the PNL debt and by
14 having all obligations on the debt to PNL released. But, she
15 cites to no part of the record on appeal for any such testimony
16 or declaratory evidence. The Panel’s review of the appellate
17 record and its limited review of the extensive bankruptcy court
18 docket also failed to uncover any such evidence. Thus, the Panel
19 must conclude that the bankruptcy court necessarily based its
20 ruling on its review and interpretation of the only evidence
21 properly before it, the Purchase Agreement itself and the
22 relevant closing statements.13
23
13
24 In her Opening Brief, Belinda states, without citation,
that “the parties’ testimony, including that of Richard Meruelo”
25 established that the intent of the parties to the Purchase
Agreement was to purchase the Property and to relieve Belinda of
26 her “obligation on the Property otherwise owing to PNL.” Apl’t
27 Opening Brief at 12. The record on appeal, however, contained no
such testimony. At oral argument, Belinda acknowledged the
28 (continued...)

12
 1 Belinda argues that the Purchase Agreement, augmented by the
2 closing statements, provides that: “[Merco Group] assumed the
3 entire liability for the indebtedness with the objective of
4 eliminating Meruelo’s liability.” Apl’t Opening Brief at 12.
5 Our review reveals major flaws in Belinda’s position.
6 The Purchase Agreement was a contract between Seller and
7 Merco Group for the sale and purchase of the Property. On its
8 face, it contemplated that Merco Group would obtain new financing
9 for its acquisition of the Property. Paragraph 5, “Financing
10 Contingency,” allows Merco Group until the closing date to
11 satisfy itself as to its ability to obtain financing. The
12 Purchase Agreement, in contrast, never referenced PNL, the
13
14 13
(...continued)
15 absence of such testimony in her designation of the record, and,
further, never specified where on the docket such alleged
16 testimony resides. The Panel conducted some appropriate docket
review. But, it was not required to cull an unidentified piece
17 of evidence from an undesignated and unidentified document; and
18 this is particularly true given the fact that the docket here
exceeds 3,700 entries. To the extent that this evidence exists,
19 it is buried in the docket and must remain interred.
In particular, the Panel reviewed the docket and found no
20 other hearing held on this matter (the first hearing was
21 continued in advance on the parties’ stipulation), including no
evidentiary hearing. The transcript of the hearing contains no
22 party testimony, only the short argument by counsel for Belinda
and the bankruptcy court’s terse ruling.
23 Thus, the record before us establishes that the only
24 evidence submitted by Belinda to the bankruptcy court directly in
support of her third party beneficiary claim is attached to the
25 Amended Claim: a copy of the Purchase Agreement and the Seller’s
and Buyer’s closing statements. Belinda’s argument that the
26 bankruptcy court also should have considered parol evidence,
27 thus, must refer to the closing statements, which follow the copy
of the Purchase Agreement attached to the Amended Claim; she
28 discussed and provided nothing else.

13
 1 existing PNL debt amount or loan terms, nor the Guaranty.
2 Similarly, the due diligence documents listed in the incorporated
3 exhibits to the Purchase Agreement do not include any documents
4 associated with the existing PNL loan. Nor does the Purchase
5 Agreement contain any mention of notice to, or request for
6 consent to loan assumption from, PNL. Finally, Exhibit “C” to
7 the Purchase Agreement, the “Standard Provisions”, contains an
8 integration clause and the requirement that all amendments be in
9 writing. The only reference to existing financing, by logical
10 inference, is the line item in the closing statements:
11 “Assumption” and the amount credited toward the $20,000,000
12 purchase price: $8,763,304.85.
13 Obviously, Merco Group’s acquisition of new financing and
14 related retirement of the existing PNL debt on close of escrow
15 would have satisfied Belinda’s obligations to PNL. As Belinda
16 alleges, however, and as the closing statements evidence, Merco
17 Group, instead, took the Property subject to the existing PNL
18 debt. The Purchase Agreement contained no provisions addressing
19 Belinda’s obligations to PNL under the Guaranty and no expressed
20 intent to benefit Belinda directly. And the closing statements
21 are similarly silent as to Belinda and the Guaranty. And there
22 is no other evidence before us on appeal. On this record, there
23 is no evidence of express intent to benefit Belinda directly and
24 in her capacity as a guarantor. We, thus, determine that the
25 bankruptcy court correctly found that Belinda did not meet her
26 burden of proving third party beneficiary status in relation to
27 the Purchase Agreement and for CC Section 1559 purposes.
28 But even if extra-contractual evidence of intent existed,

14
 1 beneficiary status of the type that allows specific performance
2 under CC Section 1559 does not exist here, because the Purchase
3 Agreement itself is silent on this point. CC Section 1559 allows
4 certain third party beneficiaries to compel specific enforcement
5 of a contract between other parties. It does not provide
6 enforcement rights to all third parties who derive some
7 incidental benefit from a contract. The statute provides real
8 party in interest status only for a narrow category of third
9 party beneficiaries.
10 In order for a court to find third party beneficiary
11 standing under CC Section 1559, the third party must be more than
12 a party who derives some benefit from the contract; instead, it
13 must be expressly clear from the face of the contract that the
14 party is an intended beneficiary.14 Expressly, for purposes of
15 CC Section 1559 means: “. . . in an express manner; in direct or
16 unmistakable terms; explicitly; definitely; directly.”
17 R.J. Cardinal Co. v. Ritchie, 218 Cal. App. 2d 124, 135 (1963).
18 Here, the Purchase Agreement never mentions Belinda, and the
19 bankruptcy court did not err in finding that there was no express
20 intention to contract for her benefit. Put another way, the
21 bankruptcy court correctly found that the express intent of the
22 Purchase Agreement was to benefit the Seller through the sale and
23 not to benefit Belinda through an assumption. The bankruptcy
24 court, thus, correctly determined that CC Section 1559 does not
25
14
A classic example of a contract allowing third party
26 beneficiary enforcement under CC Section 1559 is a will. The
27 heirs, who are expressly named therein, may bring an action
requiring specific performance. Sonnicksen v. Sonnicksen,
28 45 Cal. App. 2d 46, 53 (1941).

15
 1 allow her to specifically enforce the Purchase Agreement.
2 Cases cited by Belinda do not require a different result.
3 R.J. Cardinal Co. involved an oral contract wherein the
4 defendants allegedly expressly promised to pay a debt owed to the
5 plaintiff-third party creditor. 218 Cal. App. 2d at 133. Here,
6 there is no evidence or even argument that the contract at issue
7 included a direct obligation to pay Belinda or to make payment on
8 her behalf. And, in any event, the appellate court in
9 R.J. Cardinal Co. reversed based on the exclusion of evidence
10 relevant to the alleged lack of consideration for the alleged
11 third party contract. Id. at 137. The facts are clearly
12 distinguishable, and the case fails to advance Belinda’s
13 position.
14 Ralph C. Sutro Co. v. Paramount Plastering, Inc., 216 Cal.
15 App. 2d 433 (1963) involved a construction loan agreement.
16 Belinda cites Sutro for the proposition that in determining third
17 party beneficiary status a contract: “should be read in light of
18 the circumstances under which it was entered.” Apl’t Opening
19 Brief at 11. This Panel agrees, but does not find this
20 unremarkable assertion helpful to Belinda here. The Sutro Co.
21 court determined that it was clear that the construction loan
22 agreement at issue was made for the benefit of not only the
23 borrower, but also for the benefit of the laborers and
24 materialmen who completed the construction, as it expressly
25 conditioned loan advances on a showing that the laborers and
26 materialmen were paid. Id. at 437. Again, the contract at issue
27 in Sutro Co. expressly named the third party plaintiffs - at
28 least by class; and this was sufficient. Id. Here, again, the

16
 1 Purchase Agreement is silent.
2 Finally, Schauer v. Mandarin Gems of Cal., Inc., 125 Cal.
3 App. 4th 949 (2005), involved an action by an ex-wife to recover
4 for breach of a warranty in the contract between her ex-husband
5 and a jeweler that arose in connection with the ex-husband’s
6 purchase of her engagement ring. The Schauer court echoed the
7 definition of “expressly” used by the R.J. Cardinal Co. court,
8 and added the requirement that the intent to create third party
9 beneficiary status must be expressly manifested by the
10 contracting parties. Id. at 957-58. The Schauer court then
11 concluded that the promisor (in that case the jeweler) must have
12 understood that a third party beneficiary with specific
13 enforcement rights was intended and had no difficulty finding
14 that a seller of engagement rings would understand that the buyer
15 intended to gift the ring to his bride-to-be. Id. at 958. Here,
16 there is no such logical leap that can or should be made to
17 overcome the lack of a direct reference to Belinda or the
18 Guaranty in the Purchase Agreement itself. Clearly, the Seller
19 intended to benefit itself and to directly enjoy the benefits of
20 the sale of the Property. Belinda’s benefit, if any in relation
21 to her status as Guarantor, was at best incidental. And the
22 bankruptcy court correctly determined that this was not enough
23 for CC Section 1559 purposes.
24 Finally, we note that the specific performance that Belinda
25 desires - payment in full of the PNL loan – is not expressly
26 required by the Purchase Agreement. Nothing in the Purchase
27 Agreement or closing statements can reasonably be interpreted to
28 require that the debt, once assumed, be paid off in full by Merco

17
 1 Group as would be necessary to relieve Belinda of obligations
2 under the Guaranty. Debt assumption is not the same as a promise
3 to pay in full. Nothing contained in the Purchase Agreement
4 would prevent Merco Group from subsequently selling the Property,
5 as had the Seller, subject to the existing financing with PNL and
6 without release of Belinda’s obligations under the Guaranty.15
7 The bankruptcy court specifically disapproved Belinda’s
8 third-party-beneficiary theory, finding that the “intention
9 wasn’t to relieve [Belinda] of the debt, it was to acquire the
10 property.” Hr’g Tr. (May 11, 2012) at 3:21-22. The record
11 before the bankruptcy court was sufficient for it to properly
12 make this determination, as a matter of law and fact. Here, the
13 contract at issue does not expressly state any intention to
14 benefit Belinda. And, as noted above, there is no parol evidence
15 available to the Panel to establish that this was the parties’
16 intention. Even if it was, however, the argument would fail
17 given contractual silence on this point. Parol evidence may be
18 appropriate to determine the parties’ intent, but CC Section 1559
19 requires that the contract be unambiguous on this point on its
20 face. Here, silence leads inescapably to a determination of
21 facial ambiguity on this point. And here, the reliance on
22 CC Section 1559 appears to be nothing other than a less than
23 subtle attempt to recover a deficiency from the borrower where
24 such recovery is absolutely barred by CCP Section 580(d).
25
26 15
Belinda did not retain any rights limiting Merco Group's
27 ability to reassign, and in the Guaranty she generally agreed
that PNL could allow such assumption without exonerating the
28 Guaranty.

18
 1 Therefore, the bankruptcy court properly disallowed Belinda’s
2 claim to the extent based on this theory.
3 And having concluded that CCP Section 580d bars Belinda’s
4 claim against Merco Group, in any event, and finding no error in
5 the bankruptcy court’s conclusion that Belinda’s claim based on
6 alleged third party beneficiary standing also fails, we need not
7 address Belinda’s’s remaining arguments on appeal.16
8 CONCLUSION
9 For all of the reasons set forth above, we hold that the
10 bankruptcy court did not err when it disallowed Belinda’s Amended
11 Claim, and we AFFIRM.
12
13
14
15 16
Belinda argues that the bankruptcy court should have
16 analyzed the allegedly paid attorneys’ fees claims separately
from the as yet unpaid indemnification claim amount. Any such
17 error would be harmless in light of this disposition, and we
18 generally ignore harmless error. See Van Zandt v. Mbunda (In re
Mbunda), 484 B.R. 344, 2012 Bankr. LEXIS 5940 *20 (9th Cir. BAP
19 2012)(citing Litton Loan Serv’g, LP v. Garvida (In re Garvida),
347 B.R. 697, 704 (9th Cir. BAP 2006)).
20 In addition, Belinda dedicated a substantial part of her
21 opening brief on appeal in response to Merco Group’s argument,
raised for the first time on reply before the bankruptcy court,
22 that it should not be required to pay claims relating to work by
Belinda’s attorney due to a conflict of interest. Appellee Merco
23 Group did the same. Merco Group also alleged that the bankruptcy
24 court made findings on this issue, and it cited to multiple pages
of the transcript of the hearing that was held on May 11, 2012,
25 in support. This discussion, however, actually occurred in
connection with another claim objection, which is the subject of
26 a separate appeal heard by this Panel, in CC-12-1304. At oral
27 argument, the parties confirmed that such citations were the
result of confusion. The argument adds nothing to our analysis
28 and conclusions here.

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