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Full Opinion
MEMORANDUM OPINION AND ORDER
On July 28, 29, 30, and 31, 2015, the Court conducted an evidentiary hearing (the âConfirmation Hearingâ) to consider both confirmation of the Debtorâs Second Amended Plan of Reorganization [ECF No. 261] (the âPlanâ)
1. JURISDICTION AND VENUE
The United States District Court for the Northern District of Texas has subject matter jurisdiction over the Debtorâs bankruptcy case pursuant to 28 U.S.C. § 1334. Although bankruptcy courts do not have independent subject matter jurisdiction over bankruptcy cases and proceedings, 28 U.S.C. § 151 grants bankruptcy courts the power .to exercise certain âauthority conferredâ upon the district courts by title 28. Under 28 U.S.C. § 157, the district courts may refer bankruptcy cases and proceedings to the bankruptcy courts for either entry of a final judgment (core proceed
So, as relevant here, this Court exercises authority over the Debtorâs Chapter 11 bankruptcy case pursuant to the Order of Reference of Bankruptcy Cases and Proceedings Nunc Pro Tunc adopted in this district on August 3, 1984. Venue is proper with this Court under 28 U.S.C. § 1409. Confirmation of the Plan is a core proceeding under 28 U.S.C. § 157(b)(2)(A), (B), (L), and (0), while the Motion to Lift Stay is a core proceeding under 28 U.S.C. § 157(b)(2)(G).
II. EVIDENTIARY OBJECTIONS
A. Mansaâs Objection to the Debtorâs Methodology for Calculating the Cramdown Interest Rate Under the Plan is Overruled.
Mansa is the sole creditor objecting to confirmation.
To determine the Cramdown Interest Rate, the Debtor retained Christopher Lucas of ValueScope, Inc. (âLucasâ) as its testifying expert.
Taking its cue from ordinary lending practices, the [prime-plus] approach begins by looking to the national prime rate, reported daily in the press, which reflects the financial marketâs estimate of the amount a commercial bank should charge a creditworthy commercial borrower to compensate for the opportunity costs of the loan, the risk of inflation, and the relatively slight risk of default. Because bankrupt debtors typically pose a greater risk of nonpayment than solvent commercial borrowers, the approach then requires a bankruptcy court to adjust the prime rate accordingly. The appropriate size of that risk adjustment depends, of course, on such factors as the circumstances of the estate, the nature of the security, and the duration and feasibility of the reorganization plan.
Till, 541 U.S. at 479, 124 S.Ct. 1951 (footnotes omitted). The Till opinion also contains what is referred to as the âefficient markets footnote,â which recognizes that the prime-plus formula may not be the optimal approach in the Chapter 11 context. Id. at 476 n. 14, 124 S.Ct. 1951 (âThus, when picking a cramdown rate in a Chapter 11 case, it might make sense to ask what rate an efficient market would produceâ).
In Texas Grand Prairie, the Fifth Circuit applied the Till formula to determine the appropriate cramdown interest rate to be used in a Chapter 11 plan, but specifically acknowledged that it was applying Till because the parties stipulated that was the appropriate methodology. Texas Grand Prairie, 710 F.3d at 327. ThĂ© Fifth Circuit, however, explicitly stated' that it was not adopting Till in the Chapter 11 context. Id. at 337 (âHowever, we do not suggest that the prime-plus formula is the only â or even the optimal â method for calculating the Chapter 11 cramdown rateâ). Instead, the Fifth Circuit reaffirmed its holding in Fin. Sec. Assurance Inc. v. T-H New Orleans Ltd. Pâship (In re T-H New Orleans Ltd. Pâship), 116 F.3d 790 (5th Cir.1997), stating that
In T-H New Orleans, we â[declined] to establish a particular formula for determining an appropriate cramdown interest rateâ under Chapter 11, reviewing the bankruptcy courtâs entire § 1129(b) analysis for clear error. We reasoned that it would be imprudent to âtie the hands of the lower courts as they make .the factual determination involved in establishing an appropriate interest rate.â
Id. at 330 (footnotes and internal citations omitted).
With this background in mind, the Court will turn to Lucasâs testimony and his methodology, which he testified complies with his analysis and understanding of both Till and Texas Grand Prairie, to wit:
So the key documents that I reviewed were the Debtorâs plan and disclosure statements, including the exhibits to the disclosure statement. To understand Mansaâs position, I reviewed their motion to lift the automatic stay. I wentâ I read both the Till and Texas Grand Prairie decisions and analyzed the Debt- or from the five different points that are enumerated in Texas Grand Prairie, including the quality of management; the ownerâs commitment to the business; the Debtorâs health, and I canât remember the rest of that description; the*721 quality of the collateral; and then also the feasibility and duration of the plan. And then finally, I looked at current market interest rates and made adjustments to current â and the current market interest rates on hotel loans, and then made adjustments to those based on my assessments of the five character â or the five characteristics described in Texas Grand Prairie.
Hrâg Tr. 7/29/15 at 163:20-164:10. Although Lucas testified that he did not believe an efficient market existed for the loan at issue in the Plan, he nonetheless looked to what he. considered comparable loans to estimate the current market rate for hotel loans. Id. at 209:23-24. To do so, Lucas visited the websites for Commercial Loans Direct and United Financial Group to view the offered rates on hotel loans with a similar loan-to-value ratio. Id. at 190:22-191:10.
Thus, as opposed to beginning with the current prime rate of 3.25% and making adjustments based upon the Texas Grand Prairie factors, Lucas began with base rates that he testified account for the industry risk associated with hotel lending: 4.19% (based upon information obtained from Commercial Loans Direct) and 4.3% (based upon information obtained from United Financial Group). Id. at 190:18-191:10; 194:15-23; 198:3-16. Lucas then adjusted each of those rates based upon his analysis of the Texas Grand Prairie factors.
Although the Court agrees with Mansa that Lucasâs methodology is not in strict compliance with Till, Texas Grand Prairie clarified that Till is merely instructive in determining cramdown rates in the Chapter 11 context. Moreover, in contrast to Texas Grand Prairie, the parties here have not stipulated that a strict, prime-plus' formula should be used. Indeed, although both experts rely on Till and Texas Grand Prairie, they interpret and apply the cases differently. Thus, under binding Fifth Circuit precedent, this Court is not required to follow a formulaic prime-plus approach when evaluating the Cramdown Interest Rate. Texas Grand Prairie, 710 F.3d at 331, 337. Instead, the Court has the discretion to consider additional factors in determining a proper cramdown interest rate, including industry risk.
For these reasons, the Court overrules Mansaâs objection and will consider Lucasâs testimony about what rate should be set as the Cramdown Interest Rate.
B. The Debtorâs Motion to Strike the âSub-Opinionsâ Given by Man-saâs Expert Witness is Denied.
At the Confirmation Hearing, Mansa called John Keeling of The Keeling Consultancy, LLC (âKeelingâ) to the stand. As reflected in Keelingâs appraisal report [Ex. M-29] (the âKeeling Reportâ),
Based on the facts, assumptions and procedures outlined in this report, it is my opinion that the market value of the fee simple estate as a going concern for the Wyndham Garden Hotel North in Dallas, Texas as of July 1, 2015 is: Eight Million Six Hundred Thousand Dollars ($8,600,000)[J
Id. at 35. Keeling was not the subject of a Daubert challenge, and no party has ques
Prior to the Confirmation Hearing, the parties exchanged expert reports. After receiving the Keeling Report, the Debtor informed Mansa that it would agree to stipulate that the current fair market value of the Dallas Hotel is $8.6 million. Mansa, however, chose not to accept that stipulation in lieu of calling Keeling as a witness at the Confirmation Hearing, and instead sought to put on evidence as to the value of the Dallas Hotel, including Keelingâs analysis and conclusions.
After Mansa called Keeling to the stand at the Confirmation Hearing, the Debtor objected to Keeling being permitted to testify regarding the predicate opinions and process he utilized to reach his ultimate conclusion of value, arguing that the testimony was irrelevant because it will not have any tendency to make the Dallas Hotelâs value more or less probable (as the Debtor had agreed to the $8.6 million value determined by Keeling). See Fed. R. Evid. 401. The Debtor further objected alleging that it was not given notice that Mansa intended to call Keeling to testify regarding the predicate conclusions (or sub-opinions) allegedly contained within the Keeling Report, and that the sub-opinions are not expressed as independent opinions within the Keeling Report.
Mansa countered by arguing that: (1) it never agreed to rely on the Debtorâs proposed stipulation to the value of the Dallas Hotel as determined by Keeling, (2) it is entitled to present its case as it sees fit, and (3) Keelingâs ultimate conclusion regarding the value of the Dallas Hotel is built upon various sub-opinions, which are relevant both to his ultimate conclusion of value and other confirmation requirements like feasibility of the Plan. In short, Mansa argued that the Court needed to hear Keelingâs testimony at the Confirmation Hearing to understand things like the market conditions in which the Dallas Hotel operates and what hotels Keeling believes are a part of its competitive set. And, while those items were considered by Keeling in coming to his ultimate conclusion regarding the current value of the Dallas Hotel, they are also relevant to whether the Plan is feasible. According to Mansa, the Debtor should not be permitted to circumvent Keelingâs testimony on these underlying issues by stipulating to Keelingâs ultimate conclusion of value.
To clarify this issue, the Court asked Mansaâs counsel to identify the sub-opinions that he wanted Keeling to testify to at the Confirmation Hearing, which were delineated as follows (collectively, the âSub-Opinionsâ):
(1) on a going forward basis, the Dallas Hotel is not going to perform against its competitive set;
(2) the Farmers Branch market, where the Dallas Hotel is located, is declining and that, as a result of the limits on penetration, the Dallas Hotelâs value and performance are going to continue to decline;
(3) the rates charged by the Debtor at the Dallas Hotel will lag behind those of its competitive set and be lower than its competition in the marketplace;
(4) the Dallas Hotelâs anticipated year of stabilization will be 2018;
(5) there are less than 10 years of economic life remaining for the Dallas Hotel, as configured; and
(6) the value of the Dallas Hotel is declining.
Hrâg Tr. 7/30/15 at 35-38.
With the Sub-Opinions identified, the Court permitted Mansa to elicit Keelingâs testimony, and the Debtor to cross examine Keeling, all subject to the Debtorâs objection and subsequent oral motion to
In its post-hearing brief [ECF No. 355] (the âDebtorâs Post-Hearing Briefâ), the Debtor argues that Keelingâs testimony regarding the Sub-Opinions should be stricken from the record because it: (1) was not properly disclosed as expert opinion as required by Fed. R. Civ. P. 26(a), (2) is irrelevant due to the Debtorâs stipulation regarding the value of the Dallas Hotel and unfairly prejudicial, and (3) is inadmissible hearsay summaries of reports and studies performed by third parties. The Court will address each of the Debtorâs arguments, and Mansaâs responses thereto, in turn.
1. Pursuant to Bankruptcy Rule 9014(c), Mansa was Not Required to Disclose the Sub-Opinions in the Keeling Report.
The Debtor complains that the Sub-Opinions were not sufficiently disclosed in the Keeling Report, in violation of Fed. R. Civ. P. 26(a)(2). Mansa, however, correctly points out that a hearing to consider confirmation of a plan of reorganization is a contested matter, not an adversary proceeding. And, pursuant to Fed. R. Bankr. P. 9014, Rule 26(a)(2) is among the provisions that âshall not apply in a contested matter unless the court directs otherwise.â Fed. R. Bankr.P. 9014(c); see In re Minh Vu, 2013 WL 4804822, *12 (D.Md. Sept. 6, 2013), aff'd, 556 Fed.Appx. 262 (4th Cir.2014) (unless the court orders, disclosures under Rule 26(a)(2) are not applicable to contested matters); In re Atlas Computers, Inc., 2012 WL 3018256, *5 (Bankr.N.D.Okla. July 24, 2012), affd, 2014 WL 1267007 (N.D.Okla. Mar. 26, 2014) (same).
Here, the parties apparently agreed to voluntarily exchange expert reports. Debtorâs PostHearing Reply Brief [ECF No. 358] ¶ 5. The Debtor argues that this voluntary exchange reflects Mansaâs implied agreement to comply with the disclosure requirements of Rule 26(a)(2). Id. However, Bankruptcy Rule 9014(c) expressly states that Rule 26(a)(2) shall not apply to contested matters âunless the Court directs otherwise,â which it has not, as the parties did not ask the Court to (1) apply Rule 26(a)(2) to this contested Confirmation Hearing, or (2) approve any agreement to do so. Thus, the Court finds and concludes that the partiesâ voluntary exchange of expert reports is insufficient, standing alone, to overcome application of Bankruptcy Rule 9014(c), and that Mansa was not required to disclose the Sub-Opinions under Rule 26(a)(2).
Undeterred, the Debtor further argues that under Fed. R. Civ. P. 37(c), which does apply to contested matters, â[i]f a party fails to provide information or identify a witness as required by Rule 26(a) ..., the party is not allowed to use that information or witness to supply evidence ... at a hearing, or at trial, unless the failure was substantially justified or is harmless.â Fed. R. Civ. P. 37(c); Fed. R. Bankr.P. 7037. Basically, the Debtor argues that, even if a party is excused from the application of Rule 26(a)(2), it should nonetheless be sanctioned for failing to comply with Rule 26(a)(2).
Mansa disagrees, as does this Court. Rule 37 generally addresses a partyâs failure to make required disclosures or participate in discovery. See generally Fed. R. Civ. P. 37; Fed. R. Bankr.P. 7037. Bankruptcy Rule 9014, however, expressly states that Rule 26(a)(2) does not apply to a contested proceeding, unless otherwise
Finally, it appears that the Debtor had the opportunity to discover the Sub-Opinions when it took Keelingâs deposition, which was scheduled. But, the Court understands that the Debtor elected to cancel Keelingâs deposition. Thus, it appears that if the Debtor was surprised by the Sub-Opinions, it only has itself to blame.
For all of these reasons, the Debtorâs objection is overruled.
2. The Relevance of the Sub-Opinions is Not Outweighed by the Risk of Unfair Prejudice.
Under the Federal Rules of Evidence, â[e]vidence is relevant if: (a) if has any tendency to make a fact more or less probable than it would be without the evidence; and (b) the fact is of consequence in determining the action.â Fed. R. Evid. 401. The Debtor argues that the Sub-Opinions are irrelevant because it has stipulated to the value of the Dallas Hotel. And, to the extent the Sub-Opinions are relevant, they should nonetheless be excluded because their value is substantially outweighed by the risk of unfair prejudice. See Fed. R. Evid. 403. Mansa counters with the arguments that Keelingâs testimony is relevant to matters other than valuation, such as feasibility; and, in any event, this Court should not permit the Debtor to âą unilaterally âstipulateâ how Mansa should be permitted to present its case. Both parties rely on Old Chief v. United States, 519 U.S. 172, 117 S.Ct. 644, 136 L.Ed.2d 574 (1997) in support of their respective positions.
In Old Chief the defendant was convicted of, among other things, being a felon in possession of a firearm. Id. at 174, 117 S.Ct. 644. In relation to trial, the defendant offered to stipulate to the fact that he was a convicted felon within the meaning of the relevant statute, but the Assistant U.S. Attorney refused to join in the stipulation, insisting on the governmentâs right to prove the case as it saw fit. Id. at 177, 117 S.Ct. 644. The district court agreed with the government, and the court records regarding the prior felony conviction were admitted at trial. Id. On appeal, the Ninth Circuit affirmed, holding that the district court did not abuse its discretion. Id. The defendant appealed the ruling to the Supreme Court. Id.
On appeal, the Supreme Court acknowledged the general rule that a party has the right to prosecute its case as it sees fit. Id. at 189, 117 S.Ct. 644. The Court, however, also acknowledged that this rule has âvirtually no application when the point at issue is a defendantâs legal status, dependent on some judgment rendered wholly and independently of the concrete event of later criminal behavior charged against him.â Id. In Old Chief the defendant fell under the statute by virtue of a past conviction for a qualifying offense, and that was the most the jury needed to know. Id. In summary, the Court held:
Given these peculiarities of the element of felony-convict status and of admissions and the like when used to prove it, there is no cognizable difference between the evidentiary significance of an admission and of the legitimately probative component of the official record the prosecution would prefer to place in evidence. For purposes of the Rule 403 weighing of the probative against the prejudicial, the functions of the competing evidence are distinguishable only by the risk inherent in the one and wholly absent from the other. In this case, as in any other in which the prior conviction is for an offense likely to support*725 conviction on some improper ground, the only reasonable conclusion was that the risk of unfair prejudice did substantially outweigh the discounted probative value of the record of conviction, and it was an abuse of discretion to admit the record when an admission was available.
Id. at 191, 117 S.Ct. 644 (footnote omitted).
Here, the Debtor argues that both its offered stipulation of value and the Sub-Opinions lead to the same conclusion â that the Dallas Hotel has a fair market value .of $8.6 million as of July 1, 2015;
The Keeling Report contains facially relevant statements that are potentially harmful to the Debtorâs case, not only as to valuation but also as to Plan feasibility.
3. The Sub-Opinions are Keelingâs Expert Opinion.
Finally, the Debtor argues that the Sub-Opinions are not Keelingâs expert opinion; instead, they are charts and data derived from third-party sources or, alternatively, mere âstepping stonesâ used by Keeling to arrive at his ultimate opinion regarding the value of the Dallas Hotel. Debtorâs Post-Hearing Brief [ECF No. 355] ¶¶ 10-15, 22. According to the Debt- or, for such information to come into the record, it must be independently admissible.
Mansa counters that, although the Sub-Opinions were âcertainly derived from hearsay data in the Hotel Horizons and STR reports, the sub-opinions themselves are the product of Mr. Keelingâs expert analysis synthesizing data from the Dallas Hotel, comparing it with similar data relating to the Dallas Hotelâs competitive set, and projecting future performance based upon, and informed by, Mr. Keelingâs years of experience in the hotel industry.â Mansaâs Post-Hearing Reply Brief [ECF No. 357] ¶ 13. According to Mansa:
*726 Mr. Keelingâs expert report was no cut and paste job from readily available summaries of the Farmerâs Branch hotel market. Instead, Mr. Keeling identified a competitive set of four hotels that would most closely approximate the Dallas Hotel and provide a useful point of comparison for his analysis. Keeling Report at 9. He then calculated the changes in the historical performance of the competitive set to provide a baseline for his analysis. 7/30/15 Hearing Tr. at 61:5-13. Mr. Keeling further testified that he employed an econometric model of the sort regularly relied upon by experts in the hotel industry. 7/30/15 Hearing Tr. at 65:6-18.
Id.% 14.
The Court finds Mansaâs argument on this point persuasive, as it will now explain.
[a]n expert may base an opinion on facts or data in the case that the experts has been made aware of or personally observed. If experts in the particular field would reasonably rely on those kinds of facts or data in forming an opinion on the subject, they need not be admissible for the opinion to be admitted. But if the facts or data would otherwise be inadmissible, the proponent of the opinion may disclose them to the jury only if their probative value in helping the jury evaluate the opinion substantially outweighs their prejudicial effect.
Fed. R. Evid. 703. The purpose of Rule 703 is largely practical â experts generally base their opinions on information which, to be admissible in court, would entail âthe expenditure of substantial time in producing and examining various authenticating witnesses.â Factory Mut. Ins. Co. v. Alon USA L.P., 705 F.3d 518, 524 (5th Cir.2013) (quoting Fed. R. Evid. 703, advisory committeeâs note). âBecause experts may use their past experience and professional judgment to make critical decisions on the basis of such information outside of court, Rule 703 was intended âto bring the judicial practice into line with the practice of the experts themselves when not in court.â â Id. at 524 (quoting Fed. R. Evid. 703, advisory committeeâs note). Courts nevertheless must serve a gate-keeping function with respect to Rule 703 opinions to ensure âthe expert isnât being used as a vehicle for circumventing the rules of evidence.â Id. (quoting In re James Wilson Assocs., 965 F.2d 160, 173 (7th Cir.1992)). Further, the Fifth Circuit has made clear that â[a]n expert is permitted to disclose hearsay for the limited purpose of explaining the basis of his expert opinion, Fed. R. Evid. 703, but not as general proof of the truth of the underlying matter, Fed. R. Evid. 802.â Fox v. Taylor Diving & Salvage Co., 694 F.2d 1349, 1356 (5th Cir.1983).
It appears to the Court that the Debtor is confusing the information underlying the Sub-Opinions and the Sub-Opinions themselves. For example, in support of Keelingâs testimony regarding Sub-Opinions (1) through (3),
As to Sub-Opinion (4),
As to Sub-Opinion (5),
As to the final Sub-Opinion,
The Debtor is a closely-held Montana corporation headquartered in Dallas, Texas that currently owns and operates two hotels: (1) a limited-service hotel located in Corpus Christi, Texas that is currently operated as a Howard Johnson (the âCorpus Hotelâ), and (2) a full-service hotel located in Dallas, Texas that is currently operated as a Wyndham Garden Inn (the âDallas Hotelâ and, together, the âHotelsâ). The Debtorâs stock is held by two individuals: John Blomfield (âBlomfieldâ) and Shelby Weaver (âWeaverâ). Blom-field, a 70% shareholder, serves as the Debtorâs Secretary and Treasurer. He resides at the Dallas Hotel and is involved in the day-to-day management of the Hotels. Weaver, a 30% shareholder, serves as the Debtorâs President. She assists with the Debtorâs accounting and bookkeeping functions, which she mainly performs from Anchorage, Alaska, with periodic visits to Dallas. Brittany Blomfield (âBrittanyâ), Blomfieldâs daughter, is the Debtorâs Vice President.
The Debtor began its operations approximately 60 years ago with the ownership of a few cabins located at the entrance to Glacier National Park. Hugh Black, the forest ranger who started the Debtor, grew the company such that, by 2007, the Debtor owned a number of other real estate projects, including a 125 room resort. Blomfield, along with a partner, purchased the Debtorâs stock in 2008, and ultimately sold the Montana assets in 2011. Thereafter, the Debtor purchased and remodeled various hotel properties that, as of the Petition Date, consisted of: (1) a 110 room hotel in Las Vegas, Nevada operating as a Howard Johnson (the âLas Vegas HoJo Hotelâ), (2) a 121 room hotel in Las Vegas, Nevada that was previously operating as a ValuePlace Hotel, but subsequently operated as an independent hotel (the âLas Vegas VP Hotelâ and, together with the Las Vegas HoJo Hotel, the âLas Vegas Hotelsâ), (3) the Corpus Hotel, and (4) the Dallas Hotel.
A. The Las Vegas Hotels
In September 2011, the Debtor entered into a number of loan documents with Armed Forces Bank, N.A. (âAFBâ) in conjunction with the purchase of the Las Vegas Hotels. The Debtor defaulted on the AFB loan, and AFB sought appointment of a state court receiver. AFBâs request was granted, and by order of the District Court of Clark County, Nevada, dated September 10, 2014, Smiling Hospitality Inc. was appointed as receiver (the âReceiverâ). After its appointment, the Receiver prepared its Initial Report regarding the Las Vegas Hotels, which was admitted into evidence at the Confirmation Hearing [Ex. D-22] (the âReceiverâs Reportâ). Ultimately, the Debtor and AFB reached an agreement regarding the Las Vegas Hotels, which resulted in AFB submitting a credit bid for the Las Vegas Hotels in the full amount of its claim against the Debtor. See Order Approving Settlement Pursuant to Federal Rule of Bankruptcy Procedure 9019 and Agreement Related to Stay with Respect to Las Vegas Hotels Pursuant to Federal Rule of Bankruptcy Procedure 4001(d) [ECF No. 163], As reflected in stipulations filed with the Court [ECF Nos. 298 and 317], the Debtor reached agreement with each of Howard Johnson International, Inc. (âHoJoâ) and Value Place Franchise Services LLC (âValue Placeâ) regarding the treatment of their respective claims under the Plan, and the resolution of Value Placeâs objection to confirmation.
B. The Corpus Hotel
In June 2013, the Debtor entered into a Promissory Note and Loan Agreement
C. The Dallas Hotel
After purchasing the Dallas Hotel, the Debtor took steps to brand it ĂĄs a Wynd-ham Night Hotel. In order to facilitate the associated renovation and construction, the Debtor entered into a loan agreement with Mansa. The documents associated with this loan include: (1) a Loan Agreement dated July 3, 2013 between the Debt- or, as borrower, Blomfield and Weaver, as guarantors, and Mansa, as lender, in the original principal amount of $8,870,000 [Ex. M-3] (the âMansa Noteâ), (2) a Deed of Trust, Assignment of Rents, and Security Agreement dated July 3, 2013 securing the Debtorâs obligations under the Mansa Note [Ex. M-4], (3) an All-Assets Security Agreement dated July 3, 2013 between the Debtor, as borrower, Blomfield and Weaver, as guarantors, and Mansa, as lender [Ex. M-5] (the âAll-Asset Security Agreementâ), (4) a Continuing Guaranty executed by each of Blomfield