F I L E D
United States Court of Appeals
Tenth Circuit
PUBLISH
JAN 5 2001
UNITED STATES COURT OF APPEALS
PATRICK FISHER
Clerk
TENTH CIRCUIT
In re OVERLAND PARK
FINANCIAL CORPORATION,
Debtor,
Nos. 99-3176 & 99-3177
----------------
OFFICE OF THRIFT SUPERVISION,
Appellee and Cross-Appellant,
v.
OVERLAND PARK FINANCIAL
CORPORATION,
Appellant and Cross-Appellee.
Appeal from the United States District Court
for the District of Kansas
(D.C. No. 98-CV-2061)
Benjamin F. Mann (Kathryn B. Bussing with him on the briefs) of Blackwell
Sanders Peper Martin LLP, Kansas City, Missouri, for Appellant and Cross-
Appellee.
Martin Jefferson Davis (Carolyn J. Buck, Thomas J. Segal, Elizabeth R. Moore,
and Richard L. Rennert with him on the briefs), Office of Thrift Supervision,
Washington, D.C., for Appellee and Cross-Appellant.
Before BRORBY, POLITZ, * and BRISCOE, Circuit Judges.
BRORBY, Circuit Judge.
Before us is Overland Park Financial Corporation’s appeal, and the Office
of Thrift Supervision’s cross-appeal, from a district court order that reversed the
bankruptcy court’s holding. These cases raises the issue, as a matter of first
impression, of this circuit’s interpretation of 11 U.S.C. §365(o).
BACKGROUND
The facts of this case are well documented and not in dispute. See Office of
Thrift Supervision v. Overland Park Fin. Corp. (In re Overland Park Fin. Corp.),
232 B.R. 215, 216-18 (D. Kan. 1999). In 1978, Overland Park Financial
Corporation (“Overland Financial”) incorporated for the purpose of acquiring
Overland Park Savings & Loan Corporation (“Overland Savings & Loan”). In
1979, Overland Financial applied to the Federal Savings and Loan Insurance
Corporation for approval of the acquisition. 2 The Federal Home Loan Bank
*
The Honorable Henry Politz, United States Circuit Judge for the Fifth
Circuit, sitting by designation.
2
The Federal Savings & Loan Insurance Corporation’s approval was
required because it insured Overland Savings & Loan’s deposits at that time.
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Board, acting as the operating head of the Federal Savings & Loan Insurance
Corporation, conditionally approved the acquisition.
To satisfy one of the conditions, Overland Financial stipulated in writing to
the Federal Savings & Loan Insurance Corporation that Overland Financial would
maintain the net worth of Overland Savings & Loan, and, if necessary, infuse
sufficient additional capital. Overland Financial’s stipulation provided:
Overland Park Financial Corporation, a Missouri corporation,
hereby stipulates to the Federal Savings and Loan Insurance
Corporation (the “Corporation”) that it will cause the net worth of
Overland Park Savings and Loan Association, Overland Park,
Kansas, to be maintained at a level consistent with that required by
Section 563.13(b) of the Rules and Regulations for Insurance of
Accounts, as now or hereafter in effect, and where necessary, that it
will infuse sufficient additional equity capital to effect compliance
with such requirement in a form satisfactory to the Corporation.
The stipulation was signed by Overland Financial’s president. Overland Financial
then acquired Overland Savings & Loan.
In June 1990, the Office of Thrift Supervision 3 (“Thrift Supervision”)
3
The Financial Institutions Reform, Recovery, and Enforcement Act of
1989 (“FIRREA”) abolished the Federal Home Loan Bank Board, and transferred
to Thrift Supervision and its Director the role of primary federal regulator of
federally insured savings associations. See 12 U.S.C. § 1462a(e). Congress also
transferred the Federal Savings & Loan Insurance Corporation’s enforcement
powers to Thrift Supervision. See 12 U.S.C. § 1818(b). Title 12 U.S.C.
§ 1464(s)(1)(B) mandates the Director of Thrift Supervision to require all savings
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advised Overland Savings & Loan it would fail to meet its minimum capital
requirements. In turn, Overland Savings & Loan requested Overland Financial to
make a capital contribution pursuant to the stipulation. Overland Financial
refused to infuse capital at that time, but left open the possibility of future
contribution. No such capital infusion has been made to date.
In November 1992, Thrift Supervision appointed Resolution Trust
Corporation as receiver for Overland Savings & Loan. 4 At the time of
receivership, Overland Savings & Loan reported a risk-based deficiency of
$4,073,000. Overland Financial manages the property and affairs of the
bankruptcy estate as debtor-in-possession. See 11 U.S.C. § 1107 (stating a
debtor-in-possession, subject to certain limitations or exceptions, has the rights,
powers, and duties of a trustee serving under Chapter 11).
and loans to achieve and maintain adequate capital by “using such other methods
as the Director determines to be appropriate.”
4
Congress established Resolution Trust Corporation, a federally chartered
corporation, to act as conservator or receiver for federally insured thrifts that
failed between 1989 and 1995. 12 U.S.C. § 1441a(b)(1),(3). After the Resolution
Trust Corporation terminated at the end of 1995, the Federal Deposit Insurance
Corporation assumed the role of conservator or receiver in Resolution Trust
Corporation’s remaining cases. 12 U.S.C. § 1441a(m)(1).
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PROCEDURAL HISTORY
In July 1994, twenty months after Thrift Supervision placed Overland
Savings & Loan into receivership, Overland Financial filed a Chapter 11
bankruptcy petition. In response to Overland Financial’s bankruptcy petition,
Thrift Supervision filed an unsecured priority proof of claim, alleging Overland
Financial breached its capital maintenance commitment, and asserting its rights
under 11 U.S.C. § 365(o) (1994) or 11 U.S.C. § 507(a)(8). 5 Thrift Supervision
sought $4,073,000, the amount Overland Savings & Loan reported as its risk-
based capital deficiency on the date of receivership, in its proof of claim.
Overland Financial filed an objection to Thrift Supervision’s proof of claim, and
filed a proposed Plan of Reorganization. The Plan of Reorganization proposed a
liquidation of the estate, with its assets to be distributed among the allowed
claims. Subsequently, Thrift Supervision filed a motion for immediate cure and
for dismissal of the case under 11 U.S.C. §§ 365(o) and 1112(b)(2).
In December 1995, a Partial Pretrial Order was filed which consolidated
Thrift Supervision’s proof of claim with its motion for immediate cure under 11
5
Thrift Supervision’s proof of claim was filed pursuant to 11 U.S.C.
§ 507(a)(8), now amended as 11 U.S.C. § 507(a)(9). We will refer to the current
11 U.S.C. § 507(a)(9) provision.
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U.S.C. § 365(o). The order set forth Overland Financial’s defenses to Thrift
Supervision’s motion for immediate cure. 6
The bankruptcy court denied Thrift Supervision’s motion for immediate
cure. In re Overland Park Fin. Corp., 217 B.R. 879, 890-91 (Bankr. D. Kan.
1998). The court held Overland Financial’s informal capital maintenance
stipulation was not an enforceable executory contract, and therefore not subject to
11 U.S.C. § 365(o). Id. at 886, 890. As a result of its holding, the bankruptcy
court ruled on only the first of Overland Financial’s defenses without further
considering the remaining defenses. Thrift Supervision appealed to the district
court.
The district court reversed the bankruptcy court. 7 In re Overland Park Fin.
Overland Financial’s defenses, articulated in the bankruptcy proceedings
6
and in appellant’s brief, are: (1) the stipulation is not an enforceable contract; (2)
the stipulation terminated when Overland Savings & Loan was seized by Thrift
Supervision; (3) Thrift Supervision cannot maintain a private right of action for
damages to enforce a regulatory requirement; (4) Section 365(o) does not apply in
a Chapter 11 liquidation. Overland Financial raises the additional defenses of
estoppel and unclean hands due to Thrift Supervision’s lack of good faith in
dealing with Overland Financial’s efforts to recapitalize Overland Savings &
Loan and because its arbitrary change of allowed accounting practices contributed
to the existence of a capital deficiency.
The district court limited the issue on appeal to Thrift Supervision’s 11
7
U.S.C. § 365(o) claim, and struck Overland Financial’s attempt to raise additional
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Corp., 232 B.R. at 229. The district court held Overland Financial’s net worth
stipulation was a capital maintenance commitment subject to 11 U.S.C. § 365(o),
and ordered Overland Financial to cure the deficit immediately. Id. at 229.
Therefore, the district court reasoned all issues relating to Thrift Supervision’s
proof of claim were moot. Id. at 228. In a footnote, the district court raised the
specter Thrift Supervision may lack standing to pursue its proof of claim. Id. at
228 n.23. The court reasoned Thrift Supervision was not the agency with which
Overland Financial entered into the agreement. The district court suggested the
right properly belonged to Resolution Trust Corporation (now Federal Deposit
Insurance Corporation) as the “conservator” of Overland Savings & Loan. The
district court remanded to the bankruptcy court for further proceedings consistent
with its opinion. Id. at 229. Both parties appealed.
Overland Financial raises two issues on appeal: first, whether the net worth
maintenance stipulation is a capital maintenance commitment subject to 11 U.S.C.
§365(o), and second, whether Overland Financial is obligated to immediately cure
the capital deficit. Thrift Supervision, in its cross-appeal, requests this court to
issues on appeal due to its failure to file a cross-appeal. The district court also
declined to consider Overland Financial’s defenses because the bankruptcy court
did not reach those issues.
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order Overland Financial to effect the maximum cure possible, using all the
bankruptcy estate assets. In addition, Thrift Supervision argues it has standing to
assert and enforce its proof of claim, and the district court erred in holding Thrift
Supervision’s proof of claim moot.
JURISDICTION
We have jurisdiction over this matter, pursuant to 28 U.S.C. §158(d), as a
final, appealable order from the district court. “[A] decision of the district court
on appeal from a bankruptcy judge’s final order is not itself final if the decision
remands the case to the bankruptcy judge for significant further proceedings.”
Homa Ltd. v. Stone (In re Commercial Contractors, Inc.), 771 F.2d 1373, 1375
(10th Cir. 1985) (quotation marks and citation omitted).
The district court reversed the bankruptcy court, and remanded the case for
further proceedings consistent with its opinion. In this case, the district court’s
decision is final, despite the remand to the bankruptcy court, because the district
court left the bankruptcy court with no “significant further proceedings” to
conduct. Id. at 1373. We have recognized the district court’s order of remand is
not final when the bankruptcy court is required to perform “more than a mere
ministerial duty” or it involves the “exercise of considerable judicial discretion.’”
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State Bank of Spring Hill v. Bucyrus Grain Co. (In re Bucyrus Grain Co.), 905
F.2d 1362, 1366 (10th Cir. 1990) (quotation marks and citations omitted). As
both parties agree, the bankruptcy court’s only task on remand was to order
Overland Financial to immediately cure the deficit under its capital maintenance
stipulation without considering Overland Financial’s defenses.
DISCUSSION
11 U.S.C. § 365(o)
At the core of this case is the interpretation to be given to 11 U.S.C.
§365(o). The section provides, in relevant part:
In a case under chapter 11 ..., the trustee shall be deemed to have
assumed, ... and shall immediately cure any deficit under, any
commitment by the debtor to the Federal Deposit Insurance
Corporation, the Resolution Trust Corporation, the Director of the
Office of Thrift Supervision ... or its predecessors ... to maintain the
capital of an insured depository institution, and any claim for a
subsequent breach of the obligations thereunder shall be entitled to
priority under section 507. This subsection shall not extend any
commitment that would otherwise be terminated by any act of such
an agency.
Notably, Congress intended 11 U.S.C. §365(o) “‘to prevent institution-affiliated
parties from using bankruptcy to evade commitments to maintain capital reserve
requirements of a Federally insured depository institution.’” Resolution Trust
Corp. v. Firstcorp, Inc. (In re Firstcorp, Inc.), 973 F.2d 243, 246 (4th Cir. 1992)
(quoting H.R.Rep. No. 681(I), 101st Cong., 2d Sess. 179 (1990), reprinted in
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1990 U.S.C.C.A.N. 6472, 6585).
Our review of the district court’s interpretation of 11 U.S.C. §365(o) is de
novo. Rushton v. State Bank of S. Utah (In re Gledhill), 164 F.3d 1338, 1340
(10th Cir. 1999). When reviewing an issue that is a question of law, the standard
of review on appeal is the same as that applied initially by the trial court. Id. We
will not give deference to the district court's opinion. Id.
A. “Commitment” to maintain capital
In any case of statutory construction, the starting point of our analysis must
begin with the language of the statute itself. Chickasaw Nation v. United States,
208 F.3d 871, 876 (10th Cir. 2000), petition for cert. filed, 69 U.S.L.W. 3269
(No. 00-507) (Oct. 3, 2000). When interpreting statutory language, this court
“must look to the particular statutory language at issue, as well as the language
and design of the statute as a whole.” True Oil Co. v. Commissioner of Internal
Revenue, 170 F.3d 1294, 1299 (10th Cir. 1999) (quotation marks and citation
omitted). The meaning of the words in the statute “must be construed in their
ordinary, everyday sense.” Chickasaw, 208 F.3d at 876 (quotation marks and
citation omitted). With this framework of statutory construction in mind, we must
resolve whether Overland Financial’s net worth maintenance stipulation
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constitutes a capital maintenance “commitment” pursuant to 11 U.S.C. §365(o).
We think it does.
The crux of Overland Financial’s argument and the bankruptcy court’s
decision is a “commitment” to maintain capital, under 11 U.S.C. §365(o), must
take the form of an enforceable contract. Overland Financial argues, and the
bankruptcy court agreed, the stipulation is informal and unenforceable because it
pre-dates the 1984 regulation 8 requiring “formal net worth agreements,” lacks
consideration, and is “open-ended.” Overland Park, 217 B.R. at 884-85.
According to Overland Financial, the pre-1984 stipulations were “merely
acknowledgement [sic] by the holding company of the regulatory requirement that
the savings association’s capital must be maintained at a minimum level in order
for the holding company to continue its operation of the savings association.” We
disagree with Overland Financial’s strained reading of the statute and its attempt
8
In 1984, the Federal Home Loan Bank Board promulgated a final rule
requiring an individual or group of individuals, applying for a de novo savings
and loan institution, to sign an agreement personally guaranteeing the net worth
maintenance of the savings and loan. 49 Fed. Reg. 41237 (Oct. 22, 1984).
Overland Financial draws a line between pre- and post-1984 stipulations.
Overland Financial argues pre-1984 stipulations are informal and unenforceable,
but in contrast, post-1984 stipulations are “formal” net worth maintenance
agreements “which look[] like real contracts or agreements.” Overland Financial
asserts its “informal stipulation” pre-dates 1984.
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to re-characterize the stipulation as a “mere acknowledgment.” 9
The plain language of 11 U.S.C. §365(o) reads “any commitment by the
debtor ... to maintain the capital ....” Based on our reading of this particular
statutory language, in the context of the statute as a whole, it is apparent that
nowhere in 11 U.S.C. § 365(o) does Congress mention the commitment must be
contractual, executory, formal, or post-1984. Congress undisputedly knew how to
include “executory” or other limiting language, but Congress did not do so in
§ 365(o). Compare 11 U.S.C. § 365(a)-(n) with 11 U.S.C. § 365(o). Based on the
plain language, we refuse to import Overland Financial’s constrictive
requirements into the statute’s express language. It is well recognized by this
circuit that in drafting legislation, we assume Congress says what it means.
Sundance Assoc., Inc. v. Reno, 139 F.3d 804, 808 (10th Cir. 1998). In 11 U.S.C.
§ 365(o), Congress clearly said “any commitment.”
“When Congress does not define a word, its common and ordinary usage
may be obtained by reference to a dictionary.” True Oil, 170 F.3d at 1299
9
Overland Financial candidly acknowledges courts will reject an
interpretation of a statute that produces an absurd result. See United States v.
Brown, 333 U.S. 18, 27 (1948) (statutory interpretation should not lead to
“patently absurd consequences”).
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(quotation marks and citation omitted). The common definition of “commitment”
is an “‘[a]greement or pledge to do something.’” Firstcorp, 973 F.3d at 249 n.5
(quoting Black’s Law Dictionary 248 (5th ed. 1979)). The facts of this case show
Overland Financial’s stipulation is well within the boundaries of this definition,
and unequivocally constitutes a “commitment.” First, the language employed in
the stipulation is mandatory and evinces Overland Financial’s understanding it is
obligated to maintain, and if necessary infuse, capital in order to ensure Overland
Financial’s compliance with federal regulatory code. Overland Financial even
admits it understood, at the time of the signing, the stipulation was an integral
condition precedent to the Federal Home Loan Bank Board’s approval of the
acquisition. In other words, Overland Financial could not have acquired Overland
Savings & Loan without the stipulation, and the President of Overland Financial
personally signed the stipulation. Thereafter, Overland Financial had the
privilege of operating Overland Savings & Loan from 1979 to 1992. In reviewing
this aggregated evidence, we hold Overland Financial provided, in its stipulation,
a unilateral pledge to maintain Overland Savings & Loan’s capital. Therefore,
Overland Financial’s stipulation is a binding commitment. We see no reason why
Overland Financial should not be held to its commitment absent a defense.
B. Assumption of cure
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Our second issue of statutory interpretation requires us to determine the
time in which Overland Financial’s duty to assume the cure matures and attaches.
Again, we find Firstcorp well-reasoned and persuasive. In Firstcorp, the
acquisition of a savings and loan was conditioned on the holding company’s
maintenance of capital at or above a specified level. 973 F.2d at 244. The
holding company ultimately refused to infuse capital to cure the savings and loan
subsidiary’s capital deficiency. Id. at 245. Thrift Supervision served the holding
company with a notice of charges and hearing and with a temporary order to cease
and desist. Id. Shortly after the agency’s action, the holding company filed a
Chapter 11 bankruptcy petition. Id. Two days after filing for bankruptcy, Thrift
Supervision appointed Resolution Trust Corporation as receiver for the savings
and loan. Id. The Fourth Circuit held:
[A]ssumption and cure under § 365(o) are prerequisites to obtaining
Chapter 11 protection. If a debtor cannot “immediately” cure a
deficit under a capital maintenance commitment that exists at the
time of a bankruptcy filing, then § 365(o) requires that debtor to
proceed not under Chapter 11 but under Chapter 7, to which § 365(o)
does not apply.
Id. at 247. Consistent with the Fourth Circuit, we hold before a debtor may
proceed with Chapter 11, and acquire Chapter 11 protection, the debtor’s
commitment to assume and cure its capital deficit must be satisfied.
OVERLAND FINANCIAL’S DEFENSES
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Despite the five years of litigation in this case, Overland Financial has not
had the opportunity to be heard by a court on each of its defenses. As we
previously stated, the bankruptcy court ruled in favor of Overland Financial,
thereby obviating the need to consider further defenses. Subsequently, the district
court declined to address the remaining defenses because the bankruptcy court did
not address the defenses in the first instance. On appeal, Thrift Supervision
believes Overland Financial’s remaining defenses should be resolved simply
because Thrift Supervision briefed the defenses. However, as a general rule, we
do not consider issues not passed upon below. R. Eric Peterson Constr. Co. v.
Quintek, Inc. (In re R. Eric Peterson Constr. Co.), 951 F.2d 1175, 1182 (10th Cir.
1991). We hold the bankruptcy court is the appropriate initial forum to hear and
address Overland Financial’s remaining defenses not addressed in this opinon.
Based on our resolution at this time, we decline Thrift Supervision’s invitation to
fashion an immediate cure remedy using all the bankruptcy estate assets.
STANDING
We must determine whether Thrift Supervision has standing to pursue its
unsecured priority claim, filed pursuant to 11 U.S.C. § 365(o) or § 507(a)(9).
"We review de novo issues such as standing that are prerequisites to this court's
jurisdiction." Kansas Health Care Ass'n, Inc. v. Kansas Dep't of Soc. & Rehab.
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Servs., 958 F.2d 1018, 1021 (10th Cir.1992).
In order to understand Thrift Supervision’s standing to pursue its capital
maintenance claim, it is necessary to reiterate briefly its statutory authority. In
FIRREA, Congress vested Thrift Supervision with broad federal regulatory and
enforcement authority over savings and loans. See Franklin Sav. Ass’n v.
Director, Office of Thrift Supervision, 934 F.2d 1127, 1136 (10th Cir. 1991), cert.
denied, 503 U.S. 937 (1992). In particular, the Director of Thrift Supervision
“shall provide for the examination, safe and sound operation, and regulation of
savings associations.” 12 U.S.C. §§ 1462(1), 1463(a)(1). Congress vested Thrift
Supervision with the powers formerly charged to the Federal Home Loan Bank
Board, and provided Thrift Supervision with the Federal Savings & Loan
Insurance Corporation’s enforcement powers. See 12 U.S.C.
§§ 1462a(e), 1818(b). Thus, Thrift Supervision succeeded the two prior agencies,
and became the new bank regulatory agency responsible for the supervision and
oversight of all thrift institutions. 12 U.S.C. §§ 1462a(e), 1463(a)(1).
Based on Thrift Supervision’s statutory succession to the two agencies
involved with the stipulation, we hold Thrift Supervision is entitled, if not
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obligated, to pursue its capital maintenance claim. 10 It seems only logical an
agency endowed with regulatory and enforcement power to ensure the safety,
soundness and compliance of the thrift industry would be rendered virtually
impotent without its ability to pursue and, perhaps, rectify a thrift’s capital
deficit. See generally Cohen v. De La Cruz, 523 U.S. 213, 218 (1998) (explaining
“debt” is a “liability on a claim”; “claim” is defined as a “right to payment”; and a
“right to payment ... is nothing more nor less than an enforceable obligation.”)
(quotation marks and citation omitted).
MOOTNESS
The district court concluded at the end of its opinion that Overland
Financial’s duty to immediately cure renders Thrift Supervision’s proof of claim
moot. In re Overland Park Fin. Corp., 232 B.R. at 228. We review the issue of
mootness de novo. Boullioun Aircraft Holding Co. v. Smith Mgmt. (In re Western
Pac. Airlines, Inc.), 181 F.3d 1191, 1194 (10th Cir. 1999) (quoting Anderson v.
United States Dep’t of Health & Human Serv., 3 F.3d 1383, 1384 (10th Cir.
1993)). In general, “a federal court cannot give opinions absent a live case or
controversy before it.” In re Western Pac., 181 F.3d at 1194 (citing Mills v.
10
Neither Resolution Trust Corporation nor Federal Deposit Insurance
Corporation is a party to this litigation. We therefore will not address their
standing, as Overland Savings & Loan’s receiver, to pursue a proof of claim.
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Green, 159 U.S. 651, 653 (1895)). A case is moot when it is “impossible for the
court to grant ‘any effectual relief whatever’ to a prevailing party.” Church of
Scientology v. United States, 506 U.S. 9, 12 (1992) (quoting Mills, 159 U.S. at
653). A live controversy continues to exist in this case because, as we have
already discussed, the bankruptcy court must consider Overland Financial’s
remaining defenses, and until such time as cure is rendered, if at all, Thrift
Supervision’s proof of claim is not moot.
Accordingly, we hold Thrift Supervision has standing to enforce its proof
of claim, we AFFIRM the district court’s holding the stipulation is a binding
commitment subject to 11 U.S.C. § 365(o) cure, REVERSE the district court’s
mootness determination, and REMAND to the district court with instructions to
remand to the bankruptcy court to further consider Overland Financial’s defenses
not addressed in this opinion.
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