in re: catherine z. cass, 9th cir. bap (2013)

7/25/2019 In re: Catherine Z. Cass, 9th Cir. BAP (2013)

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1 Thi s di sposi t i on i s not appr opr i at e f or publ i cat i on.Al t hough i t may be ci t ed f or whatever persuasi ve val ue i t may have( see Fed. R. App. P. 32. 1) , i t has no pr ecedent i al val ue. See 9t hCi r . BAP Rul e 8013- 1.

UNITED STATES BANKRUPTCY APPELLATE PANEL

OF THE NINTH CIRCUIT

I n r e: ) BAP No. CC- 12- 1513- Ki PaTa)

CATHERI NE Z. CASS, ) Bk. No. 12- 16090- RK )

Debt or . ) Adv. No. 12- 1235- RK )

)CHARLES W. DAFF, Chapt er 7 )Tr ust ee, )

)Appel l ant , )

)

v. ) M E M O R A N D U M1

)J AMES WALLACE; REBECCA )WALLACE; GLORI A SUESS, )

)Appel l ees. )

______________________________)

Ar gued and Submi t t ed on Mar ch 22, 2013,at Pasadena, Cal i f or ni a

Fi l ed - Apr i l 11, 2013

Appeal f r om t he Uni t ed St at es Bankrupt cy Cour tf or t he Cent r al Di st r i ct of Cal i f or ni a

Honorabl e Robert N. Kwan, Bankr upt cy J udge, Presi di ng

Appear ances: Ed Hays, Esq. of Mar shack Hays LLP ar gued f orappel l ant , Char l es W. Daf f , Chapt er 7 Tr ust ee;Davi d B. Di mi t r uk, Esq. of t he Law Of f i ces of Davi dB. Di mi t r uk ar gued f or appel l ees, J ames and RebeccaWal l ace and Gl or i a Suess.

Bef ore: KI RSCHER, PAPPAS and TAYLOR, Bankr upt cy J udges.

FILEDAPR 11 2013

SUSAN M SPRAUL, CLERKU.S. BKCY. APP. PANELOF THE NINTH CIRCUIT


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2 Unl ess speci f i ed ot her wi se, al l chapt er , code and r ul er ef er ences ar e t o t he Bankrupt cy Code, 11 U. S. C. 101- 1532, andt he Federal Rul es of Bankr upt cy Pr ocedur e, Rul es 1001- 9037.

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Appel l ant , chapt er 72 t r ust ee Char l es W. Daf f ( Tr ust ee) ,

appeal s a j udgment f r om t he bankrupt cy cour t det ermi ni ng t hat t he

r ecor ded abst r act of j udgment of appel l ees, J ames and Rebecca

Wal l ace ( Wal l aces) and Gl or i a Suess ( Suess) ( col l ect i vel y t he

J udgment Cr edi t or s) at t ached t o pr oceeds f r om t he sal e of

debt or s r esi dence even t hough i t was r ecor ded af t er t he debt or

had f r audul ent l y t r ansf er r ed her i nt er est i n t he r esi dence t o her

daught er . The bankrupt cy cour t publ i shed i t s deci si on. See Daf f

v. Wal l ace ( I n r e Cass) , 476 B. R. 602 ( Bankr . C. D. Cal . 2012) . We

AFFI RM on t he nar r ow basi s t hat t he debt or , despi t e the t r ansf er ,

hel d an equi t abl e i nt er est i n t he Resi dence to whi ch t he J udgmentCr edi t or s j udgment l i en at t ached. As a r esul t , t he sal e pr oceeds

ar e subj ect t o t he J udgment Cr edi t or s' cl ai m. We expr ess no

opi ni on concer ni ng t he bankrupt cy cour t s det er mi nat i on t hat under

Cal i f or ni a l aw a t r ansf er of pr oper t y i n f r aud of credi t or s i s

voi d ab i ni t i o r at her t han mer el y voi dabl e.

I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY

A. The defamation lawsuit, the fraudulent transfer, the firstbankruptcy case, the state court judgment and appeal, and theabstract of judgment

The f act s of t hi s case ar e undi sput ed. The J udgment

Cr edi t or s ar e f or mer next door nei ghbor s of t he deceased chapt er 7

debt or , Cat her i ne Z. Cass ( Cass) . Af t er many year s of Cass s

dai l y har assment of her nei ghbor s by post i ng of def amat or y si gns

about t hem i n her f r ont yar d, di r ect i ng l oud musi c at t hei r homes,

maki ng ot her l oud noi ses t o di st ur b t hem t hr oughout t he ni ght ,


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oper at i ng yar d machi nes whi l e t hey t r i ed t o enj oy t hei r backyar ds,

and l eadi ng her dogs t o def ecate on t he Wal l aces f r ont yar d

wi t hout pi cki ng up af t er t hem, Suess and the Wal l aces sued Cass i n

st at e cour t f or def amat i on and nui sance on Apr i l 22, 2004

( Def amat i on Lawsui t ) . At t hat t i me, Cass owned her r esi dence

l ocat ed i n Sant a Ana, Cal i f or ni a ( Resi dence) .

One day af t er f i l i ng her answer , Cass execut ed and recor ded a

gr ant deed pur por t i ng t o t r ansf er t i t l e of t he Resi dence t o her

daught er , Chr i st i ne Zeman ( Zeman) , and r eservi ng a l i f e est at e

f or her sel f . Zeman pr ovi ded no consi der at i on f or t he t r ansf er .

Concur r ent wi t h t he t r ansf er , Zeman si gned a l et t er agr eementwher ei n she pr omi sed t o t r ansf er t he [Resi dence] back t o [Cass]

upon her r equest .

The t r i al i n t he Def amat i on Lawsui t was schedul ed t o begi n on

May 9, 2005, but was st ayed once Cass f i l ed a chapt er 13

bankr upt cy case on May 6, 2005. On J ul y 5, 2007, t he bankr upt cy

cour t di smi ssed Cass s chapt er 13 case as a bad f ai t h f i l i ng and

enj oi ned her f r om f i l i ng any f ur t her bankr upt cy pet i t i ons f or

180 days.

Af t er t r i al of t he Def amat i on Lawsui t , on Sept ember 15, 2005,

t he st at e cour t announced i t s or al r ul i ng agai nst Cass. On

Oct ober 28, 2005, t he st at e cour t ent er ed a j udgment i n f avor of

t he J udgment Cr edi t or s on t hei r nui sance and def amat i on cl ai ms f or

$320, 000, whi ch i ncl uded an award of $75, 000 f or puni t i ve damages

and i nj unct i ve r el i ef ( St at e Cour t J udgment ) . Pur suant t o t he

St ate Cour t J udgment , t he cour t determi ned:

Among ot her t hi ngs, t he puni t i ve and exempl ary damages ar edetermi ned by t he cour t t o be appr opr i ate based upon( 1) t he def endant ' s mal i ci ous and oppr essi ve conduct


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t owar d t he pl ai nt i f f s, whi ch conduct t he cour t f i nds wasest abl i shed by cl ear and convi nci ng evi dence, ( 2) t he netequi t y of t he r esi dence l ocat ed at 2420 N. Fai r mont Ave. ,Sant a Ana, Cal i f or ni a 92706, whi ch i s ef f ect i vel y owned byCat her i ne Cass despi t e t he pur por t ed t r ansf er of t i t l e t oher daught er Chr i st i ne Zeman wi t hout consi derat i on andagr eement s t o suppor t t he t r ansf er and whi ch t he cour tt ook i nt o consi der at i on i n det er mi ni ng t he amount ofpuni t i ve and exempl ary damages, and ( 3) t he t r ansf er oft i t l e t o t he r esi dence was t o avoi d t he possi bi l i t y of aj udgment t hat mi ght af f ect her abi l i t y t o hol d on t o t her esi dence ( emphasi s added) .

The J udgment Cr edi t or s r ecor ded an abst r act of t he Stat e Cour t

J udgment ( Abst r act ) i n Or ange County, Cal i f or ni a on November 1,

2005.

Cass appeal ed t he St at e Cour t J udgment . The Cal i f or ni a Cour tof Appeal s af f i r med t he damages award but st r uck some of t he

i nj unct i ve pr ovi si ons as unconst i t ut i onal l y br oad.

B. The fraudulent transfer lawsuit, the second bankruptcy case,removal of the fraudulent transfer lawsuit and the avoidancejudgment

I mmedi at el y af t er t he bankrupt cy cour t di smi ssed Cass s

chapt er 13 bankr upt cy case and, whi l e t he Def amat i on Lawsui t and

appeal were pendi ng, t he J udgment Cr edi t or s f i l ed anot her sui t

agai nst Cass and Zeman i n st ate cour t on J ul y 8, 2005, seeki ng t o

avoi d and set asi de as f r audul ent Cass s t r ansf er of t he Resi dence

t o Zeman ( "Fr audul ent Tr ansf er Lawsui t " ) under CAL. CI V. CODE

( CCC) 3439 et seq. , t he Cal i f or ni a Uni f or m Fraudul ent Tr ansf er

Act ( CUFTA) . The J udgment Cr edi t or s asser t ed t hat , despi t e t he

t r ansf er , Cass had r et ai ned excl usi ve use, possessi on and cont r ol

of t he Resi dence wi t hi n t he meani ng of CCC 3439. 04( b) ( 2) . The

Resi dence, whi ch was Cass s onl y asset , was bel i eved t o be wor t h

$500, 000 at t he t i me of t he t r ansf er . The J udgment Cr edi t or s

pr ayed f or mul t i pl e r emedi es under Cal i f or ni a l aw, i ncl udi ng an


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3 Zeman appar ent l y f i l ed a cr oss- compl ai nt i n t he Fr audul entTr ansf er Lawsui t , but we do not have a copy of i t i n t he r ecor d,and i t i s not cl ear as t o what cl ai ms she asser t ed.

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or der avoi di ng and set t i ng asi de t he t r ansf er and r est or i ng t i t l e

of t he Resi dence t o Cass, an at t achment agai nst t he Resi dence or

i t s pr oceeds, i nj unct i ve r el i ef and t he appoi nt ment of a

r ecei ver . 3

The t r i al i n t he Fr audul ent Tr ansf er Lawsui t was schedul ed t o

begi n on J anuary 8, 2007, but was st ayed once Cass f i l ed a

chapt er 7 bankrupt cy case on J anuar y 5, 2007. Shor t l y t her eaf t er ,

Tr ust ee f i l ed a Not i ce of Subst i t ut i on of Bankr upt cy Tr ust ee as

Pl ai nt i f f and Real Par t y i n I nt er est i n t he st at e cour t and

r emoved t he Fr audul ent Transf er Lawsui t t o t he bankr upt cy cour t

( now t he Fraudul ent Tr ansf er Adver sar y) . Al l act i vi t y i n t heFraudul ent Tr ansf er Adver sary was i ni t i al l y suspended whi l e Cass

pur sued her appeal of t he St ate Cour t J udgment .

At a st atus conf erence on May 27, 2008, Trust ee announced

t hat he, Zeman and t he J udgment Cr edi t ors had negot i ated a

st i pul at i on t o undo t he t r ansf er of t he Resi dence and r est or e

t i t l e t o Tr ust ee and t o di smi ss Zeman f r om t he Fr audul ent Tr ansf er

Adver sary. Cass opposed t he st i pul at i on. The bankrupt cy cour t

not ed t hat because Cass was not a par t y to i t , she coul d st i l l

pur sue her appel l at e r i ght s r espect i ng t he St at e Cour t J udgment

wi t h t he Cal i f or ni a Supr eme Cour t .

The St i pul at i on f or Ent r y of J udgment Avoi di ng and Recover i ng

Tr ansf er of Real Pr oper t y ( St i pul at i on) and separ at e j udgment

( Avoi dance J udgment ) were f i l ed on May 29, 2008. The Avoi dance

J udgment avoi ded and set asi de t he t r ansf er of t he Resi dence under


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4 CCC 3439. 04( a) ( 1) , whi ch i s t he r el evant sect i on her e,pr ovi des:

A t r ansf er made or obl i gat i on i ncur r ed by a debt or i sf r audul ent as t o a credi t or , whet her t he credi t or ' s cl ai mar ose bef or e or af t er t he t r ansf er was made or t he obl i gat i onwas i ncur r ed, i f t he debt or made t he t r ansf er or i ncur r ed t heobl i gat i on as f ol l ows:

( 1) Wi t h act ual i nt ent t o hi nder , del ay, or def r aud anycredi t or of t he debt or .

5 CCC 3439. 07, whi ch sets f or t h a credi t or s r emedi es,pr ovi des i n r el evant par t :

( a) I n an acti on f or r el i ef agai nst a t r ansf er or obl i gat i onunder t hi s chapt er , a credi t or , subj ect t o t he l i mi t at i ons i nSect i on 3439. 08, may obt ai n:

( 1) Avoi dance of t he t r ansf er or obl i gat i on t o t heext ent necessar y t o sat i sf y t he credi t or ' s cl ai m.( 2) An at t achment or ot her pr ovi si onal r emedy agai nstt he asset t r ansf er r ed or i t s pr oceeds . . .( 3) Subj ect t o appl i cabl e pr i nci pl es of equi t y and i naccor dance wi t h appl i cabl e r ul es of ci vi l pr ocedur e, t hef ol l owi ng:

( A) An i nj unct i on agai nst f ur t her di sposi t i on byt he debt or or a t r ansf er ee, or bot h, of t he assett r ansf er r ed or i t s pr oceeds.( B) Appoi nt ment of a r ecei ver t o t ake char ge of t heasset t r ansf er r ed or i t s pr oceeds.( C) Any ot her r el i ef t he ci r cumst ances may r equi r e.

( b) I f a cr edi t or has commenced an act i on on a cl ai m agai nstt he debt or , t he cr edi t or may at t ach t he asset t r ansf er r ed ori t s pr oceeds i f t he r emedy of at t achment i s avai l abl e i n t heact i on under appl i cabl e l aw and t he pr oper t y i s subj ect t oat t achment i n t he hands of t he t r ansf er ee under appl i cabl el aw.

( c) I f a cr edi t or has obt ai ned a j udgment on a cl ai m agai nstt he debt or , t he cr edi t or may l evy execut i on on t he assett r ansf er r ed or i t s pr oceeds.

6 I n the Zeman Adver sar y ( 07- 1094) , t he J udgment Cr edi t orsal l eged cl ai ms t o deny Cass s di schar ge and sought a det er mi nat i ont hat t hei r l i en r i ght s i n t he Resi dence wer e super i or t o Zeman s.

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CCC 3439. 044 and 3439. 07, 5 r ecover ed i t f or t he benef i t of t he

est ate under 550, and di smi ssed Zeman s cr oss- compl ai nt and t he

Zeman Adver sar y6 wi t h pr ej udi ce. Al l cl ai ms agai nst Zeman wer e

now r esol ved and di smi ssed wi t h pr ej udi ce.


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7 The Decl ar at or y Rel i ef Adver sar y was i ni t i al l y f i l ed i nSant a Ana and assi gned case no. 10- 1058. When i t was t r ansf er r edt o t he Los Angel es Di vi si on, i t was r enumbered 12- 1235.

8 Tr ust ee had al so asser t ed a cl ai m under 549, seeki ng t oavoi d, r ecover and pr eser ve any l i en t hat ar ose post pet i t i on i n

( cont i nued. . . )

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Cass appeal ed t he St i pul at i on and Avoi dance J udgment t o t he

Panel . She al t er nat i vel y r equest ed t hat t he bankrupt cy cour t

r econsi der i t s appr oval of t he St i pul at i on and Avoi dance J udgment .

The bankr upt cy cour t deni ed Cass s r equest t o r econsi der .

On J une 11, 2008, t he Cal i f orni a Supr eme Cour t deni ed Cass s

pet i t i on f or r evi ew of t he appel l at e cour t s deci si on af f i r mi ng

t he damages awarded i n t he Stat e Cour t J udgment . The Stat e Cour t

J udgment was t her ef or e f i nal .

Cass di ed on Febr uary 7, 2009. On J une 11, 2009, t he Panel

di smi ssed her appeal of t he St i pul at i on and Avoi dance J udgment f or

l ack of pr osecut i on.C. Trustees adversary proceeding against the Judgment Creditors

1. Pretrial events

a. Trustees complaint, the Judgment Creditorscounterclaims, the homestead exemption order andthe sale of the Residence

On J anuar y 27, 2010, Tr ust ee f i l ed a compl ai nt agai nst t he

J udgment Cr edi t or s seeki ng a decl ar at or y j udgment t hat t he

Abst r act never at t ached t o the Resi dence ( Decl ar at or y Rel i ef

Adver sary) . 7 Speci f i cal l y, Tr ust ee cont ended t hat t he J udgment

Cr edi t ors had no j udgment l i en on t he Resi dence, because Cass had

t r ansf er r ed t i t l e t o i t t o Zeman bef or e t hey recor ded t he

Abst r act , and any l i en agai nst Cass' s l i f e est at e had t er mi nat ed

upon her deat h. 8


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8( . . . cont i nued)f avor of t he J udgment Cr edi t or s upon ent r y of t he Avoi danceJ udgment . Tr ust ee l at er dropped t hi s cl ai m at t r i al af t er t heJ udgment Cr edi t or s conceded t hey never cont ended t hei r j udgmentl i en ar ose under such a t heor y. Theref or e, we do not f ur t herdi scuss t he 549 cl ai m.

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The J udgment Cr edi t or s f i l ed an answer and count er cl ai m

seeki ng decl ar at or y r el i ef and i nj unct i on agai nst Tr ust ee.

Speci f i cal l y, t he J udgment Cr edi t or s sought a det er mi nat i on t hat

( a) Tr ust ee had t o appl y the sal e pr oceeds of t he Resi dence t o

sat i sf y t hei r cl ai ms agai nst Cass, ( b) t he Abst r act was super i or

t o al l cl ai ms of i nt er est i n t he Resi dence and ( c) Cass s t r ansf er

t o Zeman was a f r audul ent t r ansf er t hat nul l i f i ed and voi ded t hat

t r ansf er , i ncl udi ng t he l i f e est at e.

On May 6, 2010, t he bankr upt cy cour t ent ered an order on

Tr ust ee s obj ect i on t o Cass s cl ai med homest ead exempt i on

( Homest ead Exempt i on Or der ) :I T I S HEREBY ORDERED t hat t he Debt or s di sput ed cl ai m ofexempt i on i n her l i f e est at e i s r ender ed moot by herdeat h. Upon t he Debt or s deat h, t he l i f e est at et er mi nat ed and no l onger const i t ut ed pr oper t y ofbankr upt cy est ate whi ch coul d be admi ni st ered by theTr ust ee f or t he benef i t of cr edi t or s. I f and when t heTr ust ee sel l s t he Est at e s r i ght s i n t he r eal proper t ycommonl y known as 2420 N. Fai r mont Avenue, Sant a Ana,Cal i f or ni a t hat wer e est abl i shed pur suant t o [ t heAvoi dance J udgment ] ent er ed as Docket No. 155 on May 29,2008, no por t i on of t he pr oceeds of sal e shal l const i t ut epr oceeds of t he sal e of t he Debt or s i nt er est i n her l i f eest at e.

On J une 1, 2010, t he bankr upt cy cour t ent ered an order

aut hor i zi ng Tr ust ee t o sel l t he Resi dence f r ee and cl ear of al l

l i ens, cl ai ms and i nt er est s f or $321, 000, wi t h t he caveat t hat t he

J udgment Cr edi t or s di sput ed l i en at t ached t o t he sal e proceeds

pendi ng r esol ut i on of t he Decl ar at or y Rel i ef Adver sar y.


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9 CCP 697. 340( a) pr ovi des:

A j udgment l i en on r eal pr oper t y at t aches t o al l i nt er est s i nr eal pr oper t y i n t he count y wher e t he l i en i s cr eat ed( whet her pr esent or f ut ur e, vest ed or cont i ngent , l egal orequi t abl e) t hat ar e subj ect t o enf or cement of t he moneyj udgment agai nst t he j udgment debtor . . . at t he t i me t hel i en was cr eat ed, but does not r each . . . r eal pr oper t y t hati s subj ect t o an at t achment l i en i n f avor of t he cr edi t or andwas t r ansf er r ed bef ore j udgment ( emphasi s added) .

- 9-

Ul t i mat el y, Trust ee r ecei ved $292, 730. 95 i n pr oceeds. Af t er

payment of i nt er i m compensat i on and r ei mbur sement of cost s f or

Tr ust ee and hi s prof ess i onal s i n t he amount of $92, 371. 66, Tr ust ee

hel d t he bal ance of $193, 459. 29 i n net sal e pr oceeds.

b. The cross-motions for summary judgment, the orderdenying summary judgment and the appeal of thatorder

Tr ust ee and t he J udgment Cr edi t or s f i l ed cr oss - mot i ons f or

summar y j udgment i n September 2010. The bankrupt cy cour t deni ed

t he cr oss- mot i ons, det er mi ni ng t hat cer t ai n genui ne i ssues of

mat er i al f act exi sted f or t r i al . Fi r st , as t o t he par t i es

conf l i ct i ng ar gument whet her i n Cal i f or ni a a f r audul ent t r ansf eri s voi dabl e or voi d ab i ni t i o, t he cour t obser ved t hat nei t her

par t y had ci t ed a Cal i f or ni a case hol di ng one way or t he ot her

under t he CUFTA, and t he cour t had not l ocat ed any such case. The

cour t f ur t her det er mi ned t hat a genui ne i ssue of mat er i al f act

exi st ed as t o Cass s r et ent i on of cont r ol over t he Resi dence af t er

t he t r ansf er of t he remai nder i nt er est t o Zeman wi t hi n t he meani ng

of t he CUFTA and the common l aw, whi ch needed t o be r esol ved at

t r i al . Fi nal l y, t he par t i es needed t o addr ess at t r i al t he

conf l i ct bet ween CAL. CODE CI V. P. ( CCP) 697. 340( a) , 9 whi ch

cont ai ns an except i on f or pr oper t y t r ansf er s bef or e j udgment i s

obt ai ned, and case l aw hol di ng t hat f r audul ent t r ansf er s ar e voi d.


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The par t i es t i mel y f i l ed cr oss - appeal s of t he i nter l ocut or y

summary j udgment order and mot i ons f or l eave. On J une 15, 2011,

t he Panel i ssued an or der denyi ng l eave and di smi ssi ng t he cross-

appeal s due t o t he par t i es i nabi l i t y t o est abl i sh t he f actor s

necessar y t o obt ai n l eave t o appeal .

2. The trial, the memorandum decision and the judgment infavor of the Judgment Creditors

I n t hei r f i l ed J oi nt Pr et r i al Or der ( J oi nt PTO) and J oi nt

Compendi um of Exhi bi t s i n suppor t , t he par t i es cont ended t hat no

i ssues of mat er i al f act wer e i n di sput e and t hat t he mat t er coul d

be deci ded wi t hout any wi t ness t est i mony. The bankr upt cy cour tapproved the J oi nt PTO on November 8, 2011.

On December 19, 2011, Tr ust ee and t he J udgment Cr edi t or s

f i l ed a second st i pul at i on i n t he Fraudul ent Tr ansf er Adver sar y

( t he December 19 St i pul at i on) , di smi ssi ng al l r emai ni ng cl ai ms

bet ween t he par t i es not pr evi ousl y di smi ssed wi t hout pr ej udi ce so

t hat t hose cl ai ms coul d be adj udi cat ed i n t he Decl ar at or y Rel i ef

Adver sary. Under t he December 19 St i pul at i on, t he par t i es agr eed

t hat di smi ssal of t he Fr audul ent Tr ansf er Adver sary woul d not

gi ve r i se to any adver se l egal or ot her ef f ect on any par t y or

i ssue t o be det er mi ned i n [ t he Decl ar at or y Rel i ef Adver sar y] .

The bankr upt cy cour t ent er ed an or der on December 20, 2011,

appr ovi ng t he December 19 St i pul at i on ( t he December 20 Or der) .

Bot h par t i es submi t t ed openi ng t r i al br i ef s, r esponses and

r epl i es i n suppor t . I n shor t , Tr ust ee cont ended t hat under CCP

697. 340( a) an abst r act of j udgment has no af f ect on pr evi ousl y

t r ansf er r ed pr oper t y. Because t he J udgment Cr edi t or s r ecor ded

t hei r Abst r act af t er Cass t r ansf er r ed her r emai nder i nt er est i n


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t he Resi dence t o Zeman, t he Abst r act at t ached onl y t o Cass s l i f e

est at e, whi ch l apsed upon her deat h and ext i ngui shed any exi st i ng

l i ens. He f ur t her ar gued t hat t he st at e cour t had not det er mi ned

Cass had an i nt er est i n t he Resi dence at t he t i me t he Abst r act was

r ecor ded. As a r esul t , ar gued Tr ust ee, t he J udgment Cr edi t or s had

no secur ed cl ai m agai nst t he r emai nder i nt er est i n t he Resi dence.

The cr ux of Tr ust ee s ar gument was t hat i n Cal i f or ni a

f r audul ent t r ansf er s ar e voi dabl e, not voi d ab i ni t i o, because t he

CUFTA superceded t he common l aw t hat f r audul ent t r ansf ers ar e voi d

wi t h a speci f i c pr ovi si on t hat such t r ansf er s ar e subj ect onl y t o

avoi dance. Ther ef or e, cont r ar y t o t he J udgment Cr edi t or sposi t i on, t he f r audul ent t r ansf er of Cass s r emai nder i nt er est was

not aut omat i cal l y voi d at t he moment i t occur r ed, whi ch i s t he

onl y way t he Abst r act coul d have at t ached and pr ovi ded t he

J udgment Cr edi t or s wi t h a secur ed j udgment l i en. I n f act , ar gued

Tr ust ee, t he bankrupt cy cour t s pr i or r ul i ng i n t he Homest ead

Exempt i on Or der i mpl i ci t l y f ound t hat t he t r ansf er was not voi d,

based on i t s f i ndi ng t hat Cass s onl y i nt er est i n t he Resi dence as

of t he pet i t i on dat e was a l i f e est at e; i f t he t r ansf er had been

voi d, t he cour t woul d have f ound t hat Cass st i l l hel d a remai nder

i nt er est i n t he Resi dence despi t e t he t r ansf er t o Zeman. Thus, i t

was l aw of t he case t hat t he t r ansf er was avoi ded and never

adj udi cat ed t o be voi d.

Al t er nat i vel y, Tr ust ee ar gued t hat even i f t he t r ansf er coul d

be decl ar ed voi d, onl y he had st andi ng t o seek such a

det er mi nat i on. Accor di ng t o Tr ust ee, because t he Avoi dance

J udgment avoi ded, r ecover ed and preser ved t he t r ansf er of t he

r emai nder i nt er est i n t he Resi dence and vest ed t i t l e i n Tr ust ee


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f or t he benef i t of t he est at e, t he J udgment Cr edi t or s l ost t hei r

r i ght t o l aunch a f ur t her at t ack t o est abl i sh t he t r ansf er was

voi d ab i ni t i o and obt ai n a cl ai m super i or t o t he est at e. I n

addi t i on, cl ai m pr ecl usi on f ur t her bar r ed t he J udgment Cr edi t or s

f r om asser t i ng t hat t he t r ansf er was voi d because t he Avoi dance

J udgment concl usi vel y det er mi ned i t was avoi dabl e.

The J udgment Cr edi t or s essent i al l y ar gued t hat t hei r Abst r act

at t ached t o t he Resi dence when i t was f i l ed on November 1, 2005,

i n one of t wo ways: ( 1) Cass was t he owner or t he equi t abl e owner

of t he Resi dence when t he Abst r act was r ecor ded, so i t at t ached

pur suant t o CCP 697. 340( a) ; or ( 2) because Cass was gui l t y of af r audul ent t r ansf er , such t r ansf er was voi d and coul d be

di sr egar ded by cr edi t or s, so t he Abst r act at t ached t o t he

Resi dence and t hen t o t he pr oceeds, and Trust ee s subsequent

acqui si t i on of bar e t i t l e coul d not def eat t he pr i or r ecor ded

Abst r act .

Speci f i cal l y, t he J udgment Cr edi t or s asser t ed t hat t hei r

Abst r act at t ached t o the Resi dence even t hough Cass had pr evi ousl y

t r ansf er r ed t i t l e t o i t t o Zeman because CCP 697. 340( a) di ct at ed

t hat t hei r j udgment l i en, whi ch t hey per f ect ed by recor di ng t he

Abst r act , at t ached i mmedi at el y to t he Resi dence and subj ect ed i t

t o t he sat i sf act i on of t he St at e Cour t J udgment . Ther ef or e, t he

quest i on was whether Cass had any i nt erest i n t he Resi dence when

t he Abst r act was r ecor ded. The J udgment Cr edi t or s argued t hat t he

r ecor d, par t i cul ar l y t he f i ndi ngs by t he st at e cour t , est abl i shed

her owner shi p at t hat t i me.

The J udgment Cr edi t or s al t er nat i vel y ar gued t hat t he Abst r act

at t ached t o t he f ee i nt er est Cass at t empt ed t o f r audul ent l y


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t r ansf er t o Zeman because t he t r ansf er was voi d and as t hough i t

never occur r ed. They ar gued t hat , cont r ar y t o Tr ust ee s posi t i on,

t he CUFTA, par t i cul ar l y CCC 3439. 07( a) ( 1) and i t s use of t he

t er ms avoi dance and avoi d, di d not di spl ace or expr essl y

super cede t he l ong- est abl i shed l aw i n Cal i f or ni a t hat f r audul ent

t r ansf er s ar e consi der ed voi d. As a r esul t , ar gued t he J udgment

Cr edi t or s, t i t l e and owner shi p t o the Resi dence r emai ned i n Cass,

t he f r audul ent gr ant or , and Tr ust ee s subsequent acqui si t i on of

bar e l egal t i t l e f r om Zeman ( who admi t t ed t he t r ansf er was

f r audul ent by ent er i ng i nt o t he St i pul at i on) was subor di nat e t o

t hei r pr i or r ecor ded Abst r act . As a r esul t , t hey wer e ent i t l ed t ot he bal ance of t he net sal e pr oceeds.

The J udgment Cr edi t or s r ej ect ed Tr ust ee s st andi ng ar gument ,

cont endi ng t hat whi l e he was t he onl y par t y abl e t o pr osecut e the

f r audul ent t r ansf er cl ai ms, t he r esul t of set t i ng asi de t he

t r ansf er di d not necessar i l y i nval i dat e t hei r Abst r act . They al so

r ej ect ed Tr ust ee s ar gument t hat hi s r ecover y and pr eservat i on of

t he Resi dence f or t he est at e t er mi nat ed t hei r compet i ng cl ai ms,

cont endi ng t hat when a t r ust ee r ecover s f r audul ent l y t r ansf er r ed

pr oper t y, t he r ecover ed pr oper t y st i l l r emai ns subj ect t o what ever

secur ed l i ens wer e agai nst i t .

I n r esponse, Tr ust ee cont ended t hat t he J udgment Cr edi t or s

wer e pr ecl uded f r om ar gui ng Cass hel d an equi t abl e i nt er est i n t he

Resi dence af t er t he t r ansf er because t hat ar gument was out si de t he

scope of t he J oi nt PTO, and t her ef or e i t had been wai ved. Tr ust ee

f ur t her ar gued t hat t he i ssue of whet her Cass r et ai ned a

benef i ci al i nt er est i n t he Resi dence ot her t han a l i f e est at e was

bar r ed because t he bankrupt cy cour t had al r eady r ul ed i n the


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- 14-

Homest ead Exempt i on Or der t hat no por t i on of t he sal e pr oceeds

wer e subj ect t o Cass s cl ai med homest ead exempt i on. Fi nal l y,

Tr ust ee ar gued t hat t he Avoi dance J udgment , whi ch avoi ded,

r ecover ed and pr eserved the r emai nder i nt er est i n t he Resi dence,

cl ear l y est abl i shed t hat t he J udgment Cr edi t or s cl ai ms of any

super i or l i en r i ght s t o Zeman wer e di smi ssed wi t h pr ej udi ce.

The t r i al on Tr ust ee s compl ai nt and t he J udgment Cr edi t or s

count er cl ai ms was hel d on Apr i l 6, 2012. As an i ni t i al

housekeepi ng mat t er , al l exhi bi t s i n t he J oi nt Compendi um of

Exhi bi t s wer e admi t t ed i nt o evi dence, and al l st i pul at ed f act s i n

t he J oi nt PTO wer e deemed est abl i shed. Af t er hear i ng or alar gument f r om t he par t i es, t he bankrupt cy cour t r equest ed f ur t her

br i ef i ng f r om t he par t i es. The par t i es t i mel y submi t t ed t he

or der ed post - t r i al br i ef s, and t he t r i al was cont i nued t o J une 12,

2012.

At t he cont i nued t r i al on J une 12, 2012, t he bankrupt cy cour t

announced t hat i t was t aki ng t he mat t er under submi ss i on.

The bankrupt cy cour t enter ed i t s Memor andum Deci si on i n f avor

of t he J udgment Cr edi t or s and di smi ssi ng Tr ust ee s compl ai nt on

August 31, 2012. The cour t f ound t hat Cass r et ai ned an equi t abl e

i nt er est i n t he Resi dence despi t e t he f r audul ent t r ansf er t o

Zeman. Theref ore, when t he J udgment Cr edi t ors r ecor ded t hei r

Abst r act , t hey per f ect ed a j udgment l i en under Cal i f or ni a l aw,

whi ch at t ached t o Cass s equi t abl e i nt er est i n t he Resi dence.

I n r e Cass, 476 B. R. at 608. Thi s r esul t was obt ai ned whet her a

f r audul ent t r ansf er i s voi d or voi d ab i ni t i o under st at e l aw.

I d. Never t hel ess, t he cour t hel d t hat under Cal i f or ni a l aw, a

f r audul ent t r ansf er i s voi d ab i ni t i o, except t o t he ext ent t hat


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10 The bankrupt cy cour t r ej ect ed Tr ust ee s cont ent i on t hatvar i ous pr ecl usi on doct r i nes bar r ed l i t i gat i on of t he J udgmentCr edi t or s cl ai ms t hat t he Abst r act at t ached t o t he Resi dence ort hat t he t r ansf er was voi d ab i ni t i o. I n r e Cass, 476 B. R. at

610- 13.11 The or i gi nal j udgment was ent ered on Oct ober 4, 2012, but

Tr ust ee had l odged an obj ect i on t o t he f or m of t hat j udgmentbecause i t i ncl uded what he cont ended were i mpermi ss i bl e f i ndi ngst hat had been separatel y st ated i n t he memorandum deci si on. Thebankrupt cy cour t agr eed and ent ered t he amended j udgment , whi chhad del et ed al l f i ndi ngs.

- 15-

t he CUFTA has made i t voi dabl e f or good f ai t h pur chasers f or

val ue. I d. Tr ust ee had not est abl i shed t hat t he CUFTA changed

t he common l aw t hat f r audul ent t r ansf er s are voi d as t o t he

t r ansf er or s credi t or s. I d. at 617- 18. Any cases r el i ed upon by

Tr ust ee ei t her wer e di st i ngui shabl e on t he f act s or appl i ed l aw of

anot her st at e, whi ch was subst ant i vel y di f f er ent f r om Cal i f or ni a.

I d. at 616- 19. Accor di ngl y, Tr ust ee was t o appl y t he sal e

pr oceeds f r om t he Resi dence t o sat i sf y the J udgment Cr edi t or s

cl ai ms agai nst Cass, except t hose i nt er est s super i or t o t hei r

November 1, 2005 j udgment l i en. I d. at 618- 19. 10

On Oct ober 5, 2012, t he bankrupt cy cour t ent ered an amendedj udgment agai nst Tr ust ee s compl ai nt and i n f avor of t he J udgment

Cr edi t or s on t hei r count er cl ai ms ( t he Decl ar at or y Rel i ef

J udgment ) . 11

Tr ust ee t i mel y appeal ed t he Decl ar at or y Rel i ef J udgment on

Oct ober 9, 2012. On t hat same dat e, he al so f i l ed a mot i on f or

st ay pendi ng appeal i n t he bankr upt cy cour t . The J udgment

Cr edi t ors opposed t he mot i on. The bankr upt cy cour t deni ed t he

mot i on f or st ay pendi ng appeal f or Tr ust ee s f ai l ur e t o

demonst r at e t hat he woul d suf f er i r r epar abl e i nj ur y. For t hese


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same r easons, t he BAP mot i ons panel deni ed Trust ee s emergency

mot i on f or st ay pendi ng appeal on November 9, 2012.

II. JURISDICTION

The bankrupt cy cour t had j ur i sdi ct i on under 28 U. S. C. 1334

and 157( b) ( 2) ( F) and ( K) . We have j ur i sdi ct i on under 28 U. S. C.

158.

III. ISSUES

1. Coul d t he J udgment Cr edi t or s seek a det er mi nat i on as t o

whet her t hei r j udgment l i en at t ached t o the Resi dence?

2. Di d t he bankr upt cy cour t abuse i t s di scret i on by not appl yi ng

i ssue pr ecl usi on or j udi ci al est oppel ?3. Di d t he bankr upt cy cour t er r i n det er mi ni ng t hat Cass

r et ai ned an equi t abl e i nt er est i n t he Resi dence t o whi ch t hei r

j udgment l i en at t ached despi t e t he pur por t ed t r ansf er of her

r emai nder i nt erest t o Zeman?

IV. STANDARDS OF REVIEW

We r evi ew de novo t he bankrupt cy cour t s concl usi ons of l aw

and r evi ew f or cl ear er r or i t s f i ndi ngs of f act . McDonal d v.

Checks- N- Advance, I nc. ( I n r e Fer r el l ) , 539 F. 3d 1186, 1189 ( 9t h

Ci r . 2008) ( per cur i am) .

We r evi ew a bankrupt cy cour t s i nt er pr et at i on of Cal i f or ni a

l aw de novo i n or der t o det er mi ne i f i t cor r ect l y appl i ed t he

subst ant i ve l aw. Ki pper man v. Pr oul x ( I n r e Bur ns) , 291 B. R. 846,

849 ( 9t h Ci r . BAP 2003) ; Ast ai r e v. Best Fi l m & Vi deo Cor p. ,

116 F. 3d 1297, 1300 ( 9t h Ci r . 1997) ( i ssues of st at e l aw ar e

r evi ewed de novo) .

We revi ew quest i ons r egar di ng t he appl i cat i on of r es

j udi cat a, i ncl udi ng i ssue and cl ai m precl usi on, de novo, as mi xed


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12 Sect i on 550( a) pr ovi des:

( a) Except as ot her wi se pr ovi ded i n t hi s sect i on, t o t he( cont i nued. . . )

- 17-

quest i ons of l aw and f act i n whi ch l egal quest i ons predomi nat e.

Khal i gh v. Hadaegh ( I n r e Khal i gh) , 338 B. R. 817, 823 ( 9t h Ci r .

BAP 2006) , af f d, 506 F. 3d 956 ( 9t h Ci r . 2007) ( ci t at i ons omi t t ed) .

Once i t i s det er mi ned t hat pr ecl usi on doct r i nes ar e avai l abl e t o

be appl i ed, t he actual deci si on t o appl y t hem i s l ef t t o t he t r i al

cour t s di scr et i on. I d. at 823 ( ci t at i ons omi t t ed) .

We r evi ew a bankrupt cy cour t s appl i cat i on of j udi ci al

est oppel f or abuse of di scr et i on. Cheng v. K&S Di ver si f i ed I nvs. ,

I nc. ( I n r e Cheng) , 308 B. R. 448, 452 ( 9t h Ci r . BAP 2004) ( ci t i ng

Hami l t on v. St at e Far m Fi r e & Cas. Co. , 270 F. 3d 778, 782 ( 9t h

Ci r . 1999) ) . Li kewi se, we r evi ew a bankrupt cy cour t si nt er pr et at i on of i t s own or der f or an abuse of di scret i on.

Ar enson v. Chi . Mer cant i l e Exch. , 520 F. 2d 722, 725 ( 7t h Ci r .

1975) . A bankr upt cy cour t abuses i t s di scret i on i f i t appl i ed t he

wr ong l egal st andar d or i t s f i ndi ngs wer e i l l ogi cal , i mpl ausi bl e

or wi t hout suppor t i n t he r ecor d. Tr af f i cSchool . com, I nc. v.

Edr i ver I nc. , 653 F. 3d 820, 832 ( 9t h Ci r . 2011) .

V. DISCUSSION

A. The Judgment Creditors could seek a determination in theDeclaratory Relief Adversary about whether their judgmentlien attached to the Residence.

Under 541( a) ( 1) , as of t he commencement of t he bankr upt cy

case, a debt or s i nt er est i n pr oper t y, whet her a l egal or an

equi t abl e i nt er est , becomes pr oper t y of t he bankrupt cy est at e.

Pr oper t y of t he est at e al so i ncl udes any i nt er est i n pr oper t y

r ecover ed under 55012 and any i nt er est i n pr oper t y t hat i s


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12( . . . cont i nued)extent t hat a t r ansf er i s avoi ded under sect i on 544, 545,547, 548, 549, 553( b) , or 724( a) of t hi s t i t l e, t he t r ust eemay recover , f or t he benef i t of t he est at e, t he pr oper t yt r ansf er r ed, or , i f t he cour t so or der s, t he val ue of suchpr oper t y, f r om- -

( 1) t he i ni t i al t r ansf er ee of such t r ansf er or t heent i t y f or whose benef i t such t r ansf er was made; or( 2) any i mmedi at e or medi at e t r ansf er ee of such i ni t i al

t r ansf er ee.13 Sect i on 551 pr ovi des:

Any t r ansf er avoi ded under sect i on 522, 544, 545, 547, 548,549, or 724( a) of t hi s t i t l e, or any l i en voi d under sect i on506( d) of t hi s t i t l e, i s pr eser ved f or t he benef i t of t heest at e but onl y wi t h r espect t o pr oper t y of t he est at e.

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pr eserved f or t he benef i t of t he est at e under 551. 13 Sect i on

541( a) ( 3) , ( a) ( 4) .

Sect i on 550 al l ows t he t r ust ee t o r ecover f r audul ent l y

t r ansf er r ed pr oper t y f or t he benef i t of t he est at e t o t he ext ent

t hat a t r ansf er i s avoi ded as f r audul ent under ei t her 544 or

548. Once a t r ust ee r ecover s an asset f or t he est at e t hr ough one

of t he enumer at ed t r ansf er or l i en avoi dance pr ovi si ons, 551

aut omat i cal l y pr eser ves t he asset f or t he benef i t of t he est at e.

Hei nt z v. Car ey ( I n r e Hei nt z) , 198 B. R. 581, 584 ( 9t h Ci r . BAP

1996) ( ci t i ng The Ret ai l Cl er ks Wel f ar e Tr ust v. McCar t y ( I n r e Van

De Kamp s Dut ch Baker i es) , 908 F. 2d 517, 520 ( 9t h Ci r . 1990) ) ;I n r e Schmi el , 319 B. R. 520, 529 ( Bankr . E. D. Mi ch. 2005) ( once t he

t r ansf er of an asset i s avoi ded, 551 aut omat i cal l y ret ur ns t hat

st i ck t o t he bundl e t hat makes up est at e pr oper t y and

pr eser ves i t f or t he benef i t of t he est at e) .

Faci ng an expi r ed st at ut e of l i mi t at i ons pr obl em pr ecl udi ng

an avoi dance act i on under 548, Trust ee pr oceeded under 544 t o

avoi d Cass s f r audul ent t r ansf er of t he Resi dence t o Zeman.


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Sect i on 544 i s what conf er r ed st andi ng t o Tr ust ee i n pl ace of t he

J udgment Cr edi t or s t o prosecut e t he Fr audul ent Tr ansf er Adver sar y.

See Gen. El ec. Capi t al Aut o Lease, I nc. v. Br oach ( I n r e Lucas

Dal l as, I nc. ) , 185 B. R. 801, 804 ( 9t h Ci r . BAP 1995) ( t r ust ee l acks

st andi ng t o asser t i ndependent st at e l aw cr eat ed f r audul ent

t r ansf er cl ai ms and can onl y do so by way of 544( b) ) . Under

544( b) ( 1) , a t r ust ee may avoi d any t r ansf er of an i nt er est of

t he debt or i n pr oper t y . . . t hat i s voi dabl e under appl i cabl e

l aw - i . e. , st at e l aw. The t r ansf er her e was avoi dabl e by

Tr ust ee as a f r audul ent t r ansf er under Cal i f or ni a l aw,

speci f i cal l y, t he CUFTA, f ound i n CCC 3439 et seq. See Kupet zv. Wol f , 845 F. 2d 842, 845 ( 9t h Ci r . 1988) ( Sect i on 544( b) per mi t s

a t r ust ee t o st and i n a credi t or s shoes t o asser t any stat e l aw

cl ai ms t hat a cr edi t or may have. ) .

Tr ust ee ar gues t hat t he bankrupt cy cour t er r ed when i t

ent er ed j udgment i n f avor of t he J udgment Cr edi t ors because t hei r

cl ai ms as t o whet her t hey hel d an i nt er est i n t he Resi dence, t hat

t he t r ansf er was voi d ab i ni t i o, or t hat t hei r pur por t ed l i en

at t ached t o t he Resi dence were cut of f once he avoi ded, r ecover ed

and pr eser ved t he Resi dence f or t he benef i t of t he est at e under

550 and 551. He f ur t her argues t hat because t he Resi dence was

pr eserved under 551, t hei r j udgment l i en di sappear ed. Tr ust ee

al so ar gues t hat he was t he onl y par t y wi t h st andi ng t o seek

avoi dance of t he f r audul ent t r ansf er and r ecover y of t he

Resi dence.

I t i s undi sput ed t hat Tr ust ee was t he onl y par t y wi t h

st andi ng t o pr osecut e what became t he Fraudul ent Transf er

Adver sar y agai nst Cass and Zeman. See Est ate of Spi r t os v. One


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San Ber nardi no Cnt y. Super . Ct . , 443 F. 3d 1172, 1776 ( 9t h Ci r .

2006) ; I n r e PWS Hol di ng Cor p. , 303 F. 3d 308 ( 3d Ci r . 2002) , cer t .

deni ed, 538 U. S. 924 ( 2003) ( al t hough i ndi vi dual cr edi t or s may be

per mi t t ed t o br i ng a f r audul ent t r ansf er act i on der i vat i vel y on

behal f of t he est at e, t hey have no st andi ng t o pr osecut e such an

act i on i n t hei r own r i ght and f or t hei r own benef i t , even i f t hey

woul d have had st andi ng t o do so out si de of bankr upt cy) . However ,

Tr ust ee f ai l s t o ci t e any aut hor i t y suppor t i ng hi s cont ent i on

t hat , because a t r ust ee has avoi ded and r ecover ed pr opert y

i ni t i al l y subj ect t o a secur ed credi t or s f r audul ent t r ansf er

l awsui t , such credi t or l oses al l r i ght s t o any cl ai ms or def ensesi t may have. The bankr upt cy cour t r ej ected t hi s ar gument at

t r i al . We di sagr ee t hat Quar r e v. Sayl or ( I n r e Sayl or ) , 178 B. R.

209 ( 9t h Ci r . BAP 1995) , af f d 108 F. 3d 219 ( 9t h Ci r . 1997)

suppor t s Tr ust ee s posi t i on. Sayl or di d not addr ess the l i en

r i ght s of a j udgment cr edi t or , as t hat was not an i ssue i n t he

case. Sayl or mer el y hel d t hat a j udgment cr edi t or di d not have

st andi ng to pr osecut e an except i on t o di schar ge cl ai m under

523( a) ( 6) based on an al l eged f r audul ent t r ansf er of r eal

pr oper t y.

To t he ext ent Tr ust ee ar gues t hat t he J udgment Cr edi t or s

di smi ssed t hei r cl ai ms by ent er i ng i nt o t he St i pul at i on and

Avoi dance J udgment , we r ej ect t hi s ar gument f or t he same r easons

ar t i cul at ed by the bankrupt cy cour t , whi ch we expl ai n i n mor e

det ai l bel ow. As f or Tr ust ee s pol i cy ar gument t hat r ecover ed

pr oper t y i s not i nt ended t o benef i t j ust one credi t or but i s t o be

equi t abl y shar ed by t hem al l , t hi s pol i cy per t ai ns t o unsecur ed

cr edi t or s, not secur ed ones. See gener al l y 507 and 726.


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Tr ust ee al so f ai l s t o ci t e any aut hor i t y hol di ng t hat , once a

f r audul ent l y t r ansf er r ed pr oper t y i s avoi ded under st at e l aw and

r ecover ed and pr eser ved under 550 and 551, a secur ed cr edi t or s

per f ect ed j udgment l i en ( or ot her per f ect ed secur i t y i nt er est )

di sappear s. Sect i on 551 does not operat e t o somehow make a

secur ed cr edi t or s per f ect ed l i en di sappear upon t he t r ust ee s

l at er avoi dance of t he t r ansf er . I n r e Mat hi ason, 129 B. R. 173,

177 ( Bankr . D. Mi nn. 1991) af f d, 16 F. 3d 234 ( 8t h Ci r . 1994) .

That st at ute i s i ntended t o prevent j uni or l i enhol der s f r om

i mpr ovi ng t hei r posi t i on at t he expense of t he est at e when a

seni or l i en i s avoi ded. I d. ( ci t i ng S. Rep. No. 989, 95t h Cong. ,2d Sess. 91 ( 1978) , U. S. Code Cong. & Admi n. News 1978, p. 5787) ) .

I t i s not i nt ended t o st r i p f r om r ecover ed pr oper t y, i nt er est s

equal or seni or t o t he t r ansf er avoi ded. I d. Assumi ng t hat t he

J udgment Cr edi t or s had a per f ect ed seni or l i en i n t he Resi dence,

whi ch we bel i eve t hey di d, Tr ust ee t ook the Resi dence subj ect t o

t hat seni or l i en. Tr ust ee al so of f er s no ar gument t o count er

Cal i f or ni a l aw t hat per f ect ed j udgment l i ens are ext i ngui shed onl y

by t he r ecor di ng of an acknowl edgment of sat i sf act i on of t he

under l yi ng j udgment or by t he j udgment cr edi t or s r el ease of t he

l i en. CCP 697. 400( a) , ( c) .

Accor di ngl y, t he bankrupt cy cour t di d not er r by al l owi ng t he

J udgment Cr edi t or s t o asser t t hei r cl ai ms agai nst Tr ust ee or r ai se

any def enses ther et o.

B. The bankruptcy court did not abuse its discretion when itdetermined that issue preclusion and judicial estoppel didnot preclude the Judgment Creditors claims.

Al t hough Tr ust ee asser t ed t he doct r i nes of cl ai m pr ecl usi on,

i ssue pr ecl usi on, j udi ci al est oppel , l aw of t he case and el ect i on


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of r emedi es bef or e t he bankrupt cy cour t and i n hi s st at ement of

i ssues on appeal i n hi s openi ng br i ef , he pr ovi des ar gument onl y

as t o t he doct r i nes of i ssue pr ecl usi on and j udi ci al est oppel .

Ther ef or e, we address onl y t hese t wo, as he has wai ved any r i ght

t o asser t t he ot her doct r i nes. See McLai n v. Cal der on, 134 F. 3d

1383, 1384 n. 2 ( 9t h Ci r . 1998) ( i ssue ment i oned i n st at ement of

i ssues but not di scussed i n br i ef i s consi der ed wai ved) .

1. Issue preclusion as to the Avoidance Judgment

The pr ecl usi ve ef f ect of a f eder al cour t j udgment i s

det er mi ned by f eder al common l aw, but t he r ul e of deci si on di f f er s

dependi ng upon whet her t he f eder al cour t s j ur i sdi ct i on over t hei ssue was based on di ver si t y or f eder al quest i on. Hal i bur t on

Ener gy Servs. , I nc. v. McVay ( I n r e McVay) , 461 B. R. 735, 741

( Bankr . C. D. I l l . 2012) ( ci t i ng Tayl or v. St ur gel l , 553 U. S. 880,

891 ( 2008) ) . Under f eder al common l aw, a f eder al di ver si t y

j udgment i s t o be accor ded t he same precl usi ve ef f ect t hat woul d

be appl i ed by the st at e cour t s i n t he st at e i n whi ch t he f eder al

di ver si t y cour t si t s. I d. ( ci t i ng Tayl or , 553 U. S. at 891 n. 4) ;

Semt ek I nt l I nc. v. Lockheed Mar t i n Cor p. , 531 U. S. 497, 508

( 2001) ) . For j udgment s i n f eder al quest i on cases, f eder al common

l aw suppl i es the r ul e of deci si on. I d. ( ci t i ng Tayl or , 553 U. S.

at 891) .

The bankrupt cy cour t appl i ed Cal i f or ni a i ssue precl usi on l aw

t o the Avoi dance J udgment , whi ch avoi ded t he f r audul ent t r ansf er

of t he Resi dence under Cal i f or ni a l aw by Tr ust ee under 544( b) .

Tr ust ee r ecover ed and preser ved t he Resi dence f or t he benef i t of

t he est at e under 550 and 551. Bot h t he Avoi dance J udgment and

Homest ead Exempt i on Or der wer e entered by t he bankrupt cy court .


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14 Cal i f or ni a i ssue pr ecl usi on l aw i s vi r t ual l y i dent i cal t of eder al l aw. I n Cal i f or ni a, t he par t y asser t i ng i ssue pr ecl usi onmust est abl i sh t he f ol l owi ng f i ve el ement s: ( 1) t he i ssue sought

t o be pr ecl uded f r om r el i t i gat i on must be i dent i cal t o t hatdeci ded i n a f or mer pr oceedi ng; ( 2) t hi s i ssue must have beenact ual l y l i t i gat ed i n t he f or mer pr oceedi ng; ( 3) i t must have beennecessar i l y deci ded i n t he f or mer pr oceedi ng; ( 4) t he deci si on i nt he f or mer pr oceedi ng must be f i nal and on t he mer i t s; and ( 5) t hepar t y agai nst whom pr ecl usi on i s sought must be t he same as, or i npr i vi t y wi t h, t he par t y t o t he f or mer pr oceedi ng. Luci do v.Super . Ct . , 51 Cal . 3d 335, 341 ( Cal . 1990) ( ci t at i ons omi t t ed) .

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Hence, we have two j udgment s entered by a f ederal cour t deci di ng

what wer e ul t i mat el y f eder al quest i ons, al t hough root ed i n st at e

l aw. Ther ef or e, we concl ude t hat f eder al i ssue pr ecl usi on l aw

shoul d have been appl i ed i n t hi s case. Nonet hel ess, whet her

f eder al or Cal i f or ni a i ssue pr ecl usi on l aw14 appl i ed, t he r esul t i s

t he same. The J udgment Cr edi t ors were not precl uded f r omseeki ng

a det er mi nat i on t hat t hei r j udgment l i en at t ached t o t he

Resi dence.

I ssue pr ecl usi on bar s successi ve l i t i gat i on of an i ssue of

f act or l aw t hat was act ual l y l i t i gat ed and r esol ved i n a val i d

cour t det er mi nat i on essent i al t o t hat pr i or j udgment , even i f t hei ssue r ecur s i n t he cont ext of a di f f er ent cl ai m. Tayl or ,

553 U. S. at 892 (quot i ng New Hampshi r e v. Mai ne, 532 U. S. 742,

748- 49 ( 2001) ) . As the par t y asser t i ng i ssue pr ecl usi on, Tr ust ee

had t he bur den of est abl i shi ng al l el ement s r equi r ed f or i t s

appl i cat i on. Pal m v. Kl apper man ( I n r e Cady) , 266 B. R. 172, 183

( 9t h Ci r . BAP 2001) ( ci t i ng Wat son v. Shandel l ( I n r e Wat son) ,

192 B. R. 739, 747 ( 9t h Ci r . BAP 1996) ; Ber r v. FDI C ( I n r e Ber r ) ,

172 B. R. 299, 306 ( 9t h Ci r . BAP 1994) ) . Under t he f eder al

st andar d, f our el ement s must be met f or i ssue pr ecl usi on t o appl y:

( 1) The i ssue sought t o be pr ecl uded must be t he same as t hat


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i nvol ved i n t he pr i or act i on; ( 2) t he i ssue must have been

act ual l y l i t i gat ed; ( 3) i t must have been det er mi ned by a val i d

and f i nal j udgment ; and ( 4) t he determi nat i on must have been

essent i al t o t he f i nal j udgment . I d. ( ci t i ng I n r e Ber r , 172 B. R.

at 306) .

Tr ust ee ar gues t hat t he bankrupt cy cour t shoul d have appl i ed

i ssue pr ecl usi on t o t he Avoi dance J udgment and r ul ed t hat t he

J udgment Cr edi t or s wer e precl uded f r om seeki ng a det er mi nat i on

t hat t he t r ansf er was voi d ab i ni t i o. Speci f i cal l y, he cont ends

t he bankr upt cy cour t er r ed i n f i ndi ng t hat t he Avoi dance J udgment

di d not adj udi cat e t he same i ssues as t he i nst ant Decl ar at or yRel i ef Adver sar y when t he Avoi dance J udgment est abl i shed t hat t he

t r ansf er occur r ed, was avoi ded, and r est or ed al l owner shi p

i nt er est s i n t he Resi dence t o Tr ust ee f or t he benef i t of t he

est at e.

I n deci di ng t hat Trust ee had not met hi s bur den of

est abl i shi ng t he el ement s f or i ssue pr ecl usi on t o t he Avoi dance

J udgment , t he bankrupt cy cour t was i nter pret i ng i t s own or der . We

accor d subst ant i al def er ence t o a cour t s i nt er pr et at i on of i t s

own or der s and wi l l not over t ur n t hat i nt er pr et at i on unl ess we ar e

convi nced i t amount s t o an abuse of di scr et i on. Mar ci ano v. Fahs

( I n r e Mar ci ano) , 459 B. R. 27, 35 ( 9t h Ci r . BAP 2011) . See

Hal l et t v. Mor gan, 296 F. 3d 732, 739- 40 ( 9t h Ci r . 2002) ( speci al

consi der at i on i s gi ven t o t he t r i al cour t s i nt er pr et at i on of i t s

own or der s) ; Col oni al Aut o Ct r . v. Toml i n ( I n r e Toml i n) , 105 F. 3d

933, 941 ( 4t h Ci r . 1997) ( t he bankr upt cy j udge who has pr esi ded

over a case f r om i t s i ncept i on i s i n t he best posi t i on t o cl ar i f y

t he cour t s rul i ngs).


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We ar e not convi nced t hat t he bankr upt cy cour t s

i nt erpr etat i on of t he Avoi dance J udgment was an abuse of

di scr et i on. I t det er mi ned t hat t he Avoi dance J udgment di d not

addr ess, l et al one adj udi cat e, t he i ssues r el at ed t o t he J udgment

Cr edi t or s cl ai ms of : ( 1) whet her t he j udgment l i en f r om t he

r ecor ded Abst r act at t ached t o t he Resi dence; ( 2) whet her t he

j udgment l i en i s super i or t o Tr ust ee s i nter est s; or ( 3) whet her

t he t r ansf er f r om Cass t o Zeman was voi d or voi dabl e. I n r e Cass,

476 B. R. at 610- 11. I t f ur t her f ound t hat t he Avoi dance J udgment

di d not el i mi nat e t he J udgment Cr edi t or s r i ght s t o t hei r cl ai ms

f or decl ar at or y and i nj unct i ve r el i ef . I d. at 611. To t hecont r ar y, t he par t i es expr ess l y agr eed i n t he December 19

St i pul at i on t hat t hose cl ai ms woul d be di smi ssed wi t hout pr ej udi ce

i n t he Fr audul ent Tr ansf er Adver sary so they coul d be adj udi cat ed

i n t hi s act i on, and t hat t he di smi ssal of t hose cl ai ms woul d not

gi ve r i se to any adver se l egal or ot her ef f ect on any par t y or

i ssue t o be det er mi ned i n t hi s act i on. I d. Accor di ngl y, Tr ust ee

had not est abl i shed t hat t he i ssue was act ual l y and necessar i l y

deci ded. We see no abuse of di scr et i on i n t he bankrupt cy cour t s

deci si on.

For t hese same reasons, we al so r ej ect Trust ee s ar gument

t hat i ssue pr ecl usi on f or ecl osed t he J udgment Cr edi t or s f r om

cl ai mi ng t hat t he Abst r act at t ached t o any equi t abl e i nt er est i n

t he Resi dence, ot her t han Cass s l i f e est at e. Because t he par t i es

had agr eed t o di smi ss t he remai ni ng cl ai ms bet ween t hemso t hat

t hose cl ai ms/ i ssues coul d be deci ded i n t he Decl ar at or y Rel i ef

Adver sary, t he J udgment Cr edi t or s coul d seek a deter mi nat i on of

whet her t he Abst r act at t ached t o any i nt er est Cass had at t he t i me


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i t was r ecor ded, equi t abl e or ot her wi se.

2. Issue preclusion as to the Homestead Exemption Order

The bankrupt cy cour t r ej ect ed Tr ust ee s f l awed cont ent i on

t hat t he Homest ead Exempt i on Or der precl uded the J udgment

Cr edi t or s f r om asser t i ng t hey had per f ect ed a j udgment l i en based

on a post - t r ansf er r ecor dat i on of t he Abst r act . I n r e Cass,

476 B. R. at 612 n. 3. To be pr eci se, t he cour t deter mi ned t hat

i ssue pr ecl usi on di d not appl y because: ( 1) t he Homest ead

Exempt i on Or der was not a j udgment on t he mer i t s because t he court

deni ed Cass s cl ai med exempt i on as moot i n l i ght of her deat h; and

( 2) t he per f ect i on i ssue was not actual l y l i t i gat ed i n t hehomest ead exempt i on l i t i gat i on and was not actual l y and

necessar i l y deci ded i n t he cour t s deni al of t he cl ai med homest ead

exempt i on. I d.

Tr ust ee ar gues t hat t he Homest ead Exempt i on Or der necessar i l y

det er mi ned Cass di d not have an i nt er est i n t he pr evi ousl y

t r ansf er r ed r emai nder i nt er est i n t he Resi dence because, i f i t

had, such i nt erest woul d have been subj ect t o t he homest ead

exempt i on. He f ai l s t o addr ess t he bankrupt cy cour t s ot her

f i ndi ng t hat t he per f ect i on i ssue was not actual l y l i t i gat ed i n

t he cont ext of t he homest ead exempt i on.

I n deci di ng t hat Trust ee had not met hi s bur den of

est abl i shi ng t he el ement s f or i ssue pr ecl usi on t o t he Homest ead

Exempt i on Or der , t he bankrupt cy cour t was i nt er pr et i ng i t s own

or der , and we gi ve subst ant i al def er ence t o t hat i nt er pr et at i on.

I n r e Mar ci ano, 459 B. R. at 35. Agai n, Tr ust ee has not convi nced

us t hat t he bankrupt cy cour t abused i t s di scr et i on i n det er mi ni ng

t he Homest ead Exempt i on Or der di d not precl ude t he J udgment


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15 Sect i on 522( g) pr ovi des:

Not wi t hst andi ng sect i ons 550 and 551 of t hi s t i t l e, t hedebt or may exempt under subsect i on ( b) of t hi s sect i onpr oper t y t hat t he t r ust ee recover s under sect i on 510 ( c) ( 2) ,542, 543, 550, 551, or 553 of t hi s t i t l e, t o t he ext ent t hat

t he debt or coul d have exempt ed such pr oper t y under subsect i on( b) of t hi s sect i on i f such pr oper t y had not beent ransf err ed, i f ( 1) ( A) such t r ansf er was not a vol unt ar y t r ansf er of such

pr opert y by t he debt or ; and( B) t he debt or di d not conceal such pr oper t y; or

( 2) t he debt or coul d have avoi ded such t r ansf er undersubsecti on ( f ) ( 1) ( B) of t hi s secti on.

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Cr edi t or s f r om asser t i ng t hey had per f ect ed t hei r j udgment l i en.

We al so not e t hat , al t hough i t i s not t he basi s f or our deci si on,

Tr ust ee di d not provi de i n t he r ecor d any of t he under l yi ng

document s f i l ed i n the homest ead exempt i on mat t er t o support hi s

cont ent i on about what t he bankrupt cy cour t necessar i l y deci ded.

We f ur t her r ej ect Tr ust ee s cont ent i on t hat Cass s r emai nder

i nt erest woul d have been subj ect t o a homest ead exempt i on. A

debt or who has vol unt ar i l y t r ansf er r ed pr oper t y i n f r aud of

credi t or s pr epet i t i on, whi ch i s l at er r ecover ed, l oses any

exempt i on i n t hat r ecover ed pr oper t y. Hi t t v. Gl ass

( I n r e Gl ass) , 164 B. R. 759, 762 ( 9t h Ci r . BAP 1994) ; 522( g) .15

3. Judicial estoppel as to the Avoidance Judgment

J udi ci al est oppel i s an equi t abl e doct r i ne t hat pr ecl udes a

par t y f r om gai ni ng an advant age by asser t i ng one posi t i on, and

t hen l at er seeki ng an advant age by t aki ng a cl ear l y i nconsi st ent

posi t i on. Hami l t on, 270 F. 3d at 782 ( ci t i ng Ri sset t o v. Pl umber s

& St eamf i t t er s Local 343, 94 F. 3d 597, 600- 01 ( 9t h Ci r . 1996) ) .

The doct r i ne i s ai med at not onl y prevent i ng a part y f r om gai ni ng

an advant age by asser t i ng i nconsi st ent posi t i ons, but al so

ensur i ng t he or der l y admi ni st r at i on of j ust i ce and . . . t he


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di gni t y of j udi ci al pr oceedi ngs, and t o pr ot ect agai nst a

l i t i gant pl ayi ng f ast and l oose wi t h t he cour t s. Russel l v.

Rol f s, 893 F. 2d 1033, 1037 ( 9t h Ci r . 1990) .

Tr ust ee cont ends t he J udgment Cr edi t or s wer e j udi ci al l y

est opped f r om asser t i ng t he i nconsi st ent posi t i on t hat t he

f r audul ent t r ansf er was voi d and had never occur r ed when t hey

sought a j udgment i n st at e cour t avoi di ng t he t r ansf er and

r est or i ng t i t l e t o Cass, t her eby admi t t i ng Cass had no equi t abl e

i nt er est i n t he Resi dence and t hat her t r ansf er r ed i nt er est had t o

be r est or ed f or t hei r l i en t o at t ach. Tr ust ee f ur t her argues that

t he J udgment Cr edi t or s f ai l ed t o pr eserve i n t he Avoi danceJ udgment , whi ch avoi ded t he t r ansf er under CCC 3439. 04 and

3439. 07, t he ar gument t hat t he t r ansf er coul d l at er be at t acked as

voi d ab i ni t i o under CCC 3439. 10.

The bankrupt cy cour t deter mi ned t hat j udi ci al est oppel di d

not appl y because t he J udgment Cr edi t ors had not t aken

i nconsi st ent posi t i ons i n t he Fraudul ent Tr ansf er Adver sar y and i n

t he Decl ar at or y Rel i ef Adver sar y. I n r e Cass, 476 B. R. at 613.

We agr ee. Fi r st , j udi ci al est oppel gener al l y appl i es onl y t o bar

a par t y f r om maki ng a f act ual asser t i on i n a l egal pr oceedi ng

whi ch di r ect l y cont r adi ct s an ear l i er asser t i on made i n t he same

pr oceedi ng or a pr i or one. Russel l , 893 F. 2d at 1037. The

J udgment Cr edi t or s r equest f or r el i ef of avoi di ng and set t i ng

asi de t he f r audul ent t r ansf er i s not a f act ual asser t i on, and

t hei r compl ai nt di d not admi t t hat Cass had no equi t abl e i nt er est

i n t he Resi dence. I n f act , t he J udgment Cr edi t or s al l eged t hat

t he t r ansf er was a f r audul ent t r ansf er wi t hi n t he meani ng of

common l aw of f r audul ent t r ansf ers and wi t hi n t he meani ng of [ CCC]


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16 CCC 3439. 08( a) pr ovi des:

A t r ansf er or an obl i gat i on i s not voi dabl e under par agr aph( 1) of subdi vi si on ( a) of Sect i on 3439. 04, agai nst a per sonwho t ook i n good f ai t h and f or a r easonabl y equi val ent val ueor agai nst any subsequent t r ansf er ee or obl i gee.

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3439. 04 and 3439. 05, and shoul d be avoi ded and set asi de.

Cal i f or ni a common l aw t r eat s such t r ansf er s voi d as t o cr edi t or s.

Hence, t hei r posi t i on was not i nconsi st ent f r om t he ear l i er sui t .

As f or Tr ust ee s second ar gument , t he bankrupt cy cour t f ound, and

we agr ee, t hat t he J udgment Cr edi t or s preserved t hei r r emai ni ng

cl ai ms i n t he December 19 St i pul at i on and December 20 Or der .

Accor di ngl y, t he bankrupt cy cour t pr oper l y decl i ned t o appl y

t he doct r i ne of j udi ci al est oppel i n t hi s case.

C. The bankruptcy court did not err when it determined that Casshad an equitable interest in the Residence to which thejudgment lien attached upon recordation of the Abstract.

1. Governing California law

The CUFTA per mi t s def r auded cr edi t or s t o r each proper t y i n

t he hands of a t r ansf er ee. Fi del i t y Nat l Ti t l e I ns. Co. v.

Schr oeder , 179 Cal . App. 4t h 834, 840 ( Cal . Ct . App. 2009) ( ci t i ng

Mej i a v. Reed, 331 Cal . 4t h 657, 663 ( Cal . 2003) ) . I t i s

undi sput ed t hat Cass s t r ansf er of t he Resi dence t o Zeman was a

f r audul ent t r ansf er , and t hat Zeman was not a good f ai t h

t r ansf eree under CCC 3439. 08. 16 I t i s al so undi sput ed t hat t he

t r ansf er was avoi ded under CCC 3439. 04 and 3439. 07.

A j udgment l i en on r eal pr oper t y i s cr eat ed by r ecor di ng an

abst r act of a money j udgment wi t h t he count y recor der .

CCP 697. 310( a) ; Weeks v. Pederson ( I n r e Pederson) , 230 B. R.

158, 160 ( 9t h Ci r . BAP 1999) ( i n Cal i f or ni a t he r ecor di ng of an

abst r act of a money j udgment i n t he count y cr eat es a j udgment l i en


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on r eal pr oper t y, whi ch at t aches t o al l debt or s i nt er est s i n r eal

pr oper t y i n t he count y) . Under CCP 697. 340( a) , a r ecor ded

j udgment l i en on r eal proper t y at t aches t o al l i nt er est s t he

j udgment debtor has i n r eal proper t y i n t he count y wher e t he l i en

i s creat ed, i ncl udi ng equi t abl e i nt er est s, and subj ect s t hat

pr oper t y t o enf orcement of t he money j udgment .

2. Analysis

The bankrupt cy cour t i ni t i al l y f ound as a f act ual mat t er

t hat Cass had an equi t abl e i nt er est i n t he Resi dence af t er she

made t he t r ansf er t o whi ch t he J udgment Cr edi t or s l i en at t ached

upon r ecor di ng of t he Abst r act . I n r e Cass, 476 B. R. at 608.El abor at i ng on t hi s poi nt , t he cour t expl ai ned t hat Cass r et ai ned

an equi t abl e i nt erest i n t he Resi dence based on t he agr eement t hat

Zeman woul d reconvey t i t l e t o Cass upon demand:

For al l i nt ent s and pur poses, t he Resi dence was t heDebt or s pr oper t y. She cont i nued t o enj oy t he r i ght t ouse t he pr oper t y t hr ough her r et ent i on of t he l i f e est at ei n t he pr oper t y, and she cont i nued t o cont r ol Zeman sr i ght t o di spose of t he pr oper t y, as evi denced by t he si deagr eement bet ween Debt or and Zeman t o r e- convey t her emai nder i nt er est . On t hi s recor d, t he cour t f i nds by apr eponderance of t he evi dence that t he Debt or r etai ned anequi t abl e i nt er est i n t he Resi dence af t er she pur por t edl yt r ansf er r ed a remai nder i nt er est t o her daught er .

I d. at 616. The bankr upt cy cour t t hen hel d t hat because Cass had

at l east an equi t abl e i nt er est i n t he Resi dence, despi t e t he

pur por t ed t r ansf er of t he remai nder i nt er est t o Zeman, and because

CCP 697. 340( a) pr ovi des t hat a j udgment l i en at t aches t o al l

i nt er est s i n r eal pr oper t y, i ncl udi ng equi t abl e i nt er est s, t he

J udgment Cr edi t or s j udgment l i en at t ached t o t hi s i nter est when

t hey r ecor ded t he Abst r act per CCP 697. 310( a) . I d. at 616- 17.

Tr ust ee cont ends t hat t he Abst r act di d not at t ach under


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CCP 697. 340( a) , because i t was not f i l ed unt i l af t er t he

t r ansf er and, because t he t r ansf er was not avoi ded unt i l May 29,

2008, t he Abst r act had not hi ng t o whi ch i t coul d at t ach at t he

t i me of r ecor dat i on i n 2005 ot her t han Cass s l i f e est at e, whi ch

l apsed upon her deat h. Trust ee f ur t her argues t hat t he J udgment

Cr edi t or s di d not pl ead a const r uct i ve or r esul t i ng t r ust i n t he

Fr audul ent Transf er Lawsui t , and t he Avoi dance J udgment di d not

est abl i sh a const r uct i ve or r esul t i ng t r ust based on any al l eged

equi t abl e i nt er est Cass r et ai ned i n t he Resi dence t o whi ch t he

Abst r act coul d at t ach.

The bankrupt cy cour t di d not address t he i ssue ofconst r uct i ve or r esul t i ng t r ust s i n i t s deci si on. I t det er mi ned,

as a mat t er of f act , t hat Cass r et ai ned an equi t abl e i nt er est i n

t he Resi dence because Zeman had agr eed t o r econvey the r emai nder

i nt er est t o Cass upon demand. Tr ust ee has not di sput ed t hi s f act .

He ar gues, however , i n hi s r epl y br i ef , t hat t he bankrupt cy cour t

f ai l ed t o ci t e any aut hor i t y t o suppor t i t s concl usi on t hat Cass

hel d an equi t abl e i nt er est i n t he Resi dence t o whi ch t he Abst r act

coul d have at t ached. Al t hough we ar e f r ee t o r ej ect t hi s ar gument

because i t was not r ai sed i n Tr ust ee s openi ng br i ef , we exer ci se

our di scr et i on t o addr ess i t . See Smi t h v. Mar sh, 194 F. 3d 1045,

1052 ( 9t h Ci r . 1999) ( i ssues not r ai sed i n appel l ant ' s openi ng

br i ef are deemed wai ved) . We pr ef ace our di scussi on by not i ng

t hat we appl y Cal i f or ni a l aw t o det er mi ne t he nat ur e and extent of

a debt or s i nt er est i n pr oper t y. See But ner v. Uni t ed St at es,

440 U. S. 48, 54 ( 1979) .

Under Cal i f or ni a l aw, a t r ansf er ee of pr oper t y t r ansf er r ed i n

f r aud of cr edi t or s by the t r ansf er or hol ds onl y nomi nal or bar e


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l egal t i t l e t o t he pr oper t y conveyed; t he t r ansf er or r et ai ns t he

benef i ci al and equi t abl e i nt er est i n t he conveyed pr oper t y, whi ch

r emai ns l i abl e t o t he debt s of credi t or s. Sasaki v. Kai ,

56 Cal . App. 2d 406, 410 ( Cal . Ct . App. 1942) ( ci t i ng McAl vay v.

Consumer s Sal t Co. , 112 Cal . App. 383, 394 ( Cal . Ct . App. 1931) ) ;

Al hambr a Bl dg. & Loan Assn. v. DeCel l e, 47 Cal . App. 2d 409, 412

( Cal . Ct . App. 1941) ( gr ant ee hol ds mer e naked l egal t i t l e of

f r audul ent l y conveyed pr oper t y when he hol ds i t i n secr et t r ust

f or t he j udgment debt or , who remai ns t he benef i ci al owner of t he

pr oper t y) ; 30 Cal . J ur . 3d ENFORCEMENT OF J UDGMENTS 118 ( 2013)

( Wher e onl y nomi nal t i t l e i s conveyed t o a t hi r d par t y by thej udgment debtor , t he debtor s benef i ci al i nter est i n t he proper t y

i s l i abl e f or t he debt s of subsequent credi t or s as wel l as t hose

exi st i ng at t he t i me of t he t r ansf er . ) . See al so Br eeden v.

Smi t h, 120 Cal . App. 2d 622, 664- 66 ( Cal . Ct . App. 1953) ( al t hough i n

t he cont ext of a homest ead exempt i on, t he cour t r ecogni zed t hat a

j udgment debtor who t r ansf er s hi s i nter est i n proper t y t o t he

t r ansf er ee t o hol d i n secret t r ust i n f r aud of cr edi t or s but who

r emai ns i n excl usi ve possessi on of t hat pr oper t y r et ai ns f ul l

equi t abl e i nt er est i n t he pr oper t y; t r ansf er ee hol ds onl y bar e

l egal t i t l e) ; and Put nam Sand & Gr avel Co. , I nc. v. Al ber s,

14 Cal . App. 3d 722, 726 ( Cal . Ct . App. 1971) ( hol di ng same) ; and

Tar l esson v. Br oadway For ecl osure I nvs. , LLC, 184 Cal . App. 4th 931,

937 ( Cal . Ct . App. 2010) ( ci t i ng Br eeden and Al ber s and hol di ng

same) . Thi s resul t i s based on t he pr i nci pl e t hat one cannot be

t he equi t abl e owner of pr oper t y and st i l l have i t exempt f r om hi s

debt s. Sasaki , 56 Cal . App. 2d at 410 ( quot i ng McAl vay,

112 Cal . App. at 394) .


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17 Even i f we di d addr ess t hi s i ssue, we di sagr ee wi t h Tr ust eet hat under Schr oeder , supr a at 29, whi ch di d not i nvol ve a CUFTAcl ai m, t he J udgment Cr edi t or s wer e r equi r ed t o pl ead a r esul t i ngt r ust cause of act i on i f t hey want ed a r ul i ng t hat t he Abst r actat t ached t o any equi t abl e i nt er est cr eat ed by the r esul t i ng t r ust .Schr oeder di d not hol d t hat a credi t or must pl ead a cause ofact i on f or a r esul t i ng ( or const r uct i ve) t r ust i n or der f or anabst r act of j udgment t o at t ach t o a f r audul ent debt or s equi t abl ei nt er est i n pr oper t y. Fur t her , even i f t he J udgment Cr edi t or swer e r equi r ed t o pl ead t hi s equi t abl e r emedy, because thi s case

was t r i ed on t he mer i t s, t he bankrupt cy cour t coul d have af f or dedsuch r el i ef whet her t hey r equest ed i t or not . See Am. Mot or i st sI ns. Co. v. Cowan, 127 Cal . App. 3d 875, 883 ( Cal . Ct . App. 1982)( af t er a t r i al on t he mer i t s t he cour t may af f or d any f or m ofr el i ef suppor t ed by the evi dence and as t o whi ch t he par t i es wer eon not i ce, whet her r equest ed i n t he pl eadi ngs or not ) ( ci t i ngCCP 580 and 3 Wi t ki n, Cal . Procedur e PLEADI NG, 374, 376,pp. 2038, 2039- 40) ( 2d ed. 1971) ) .

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Accordi ngl y, we agr ee wi t h t he bankrupt cy cour t t hat Cass

r et ai ned an equi t abl e i nt er est i n t he Resi dence, despi t e t he

pur por t ed t r ansf er . Because CCP 697. 340( a) pr ovi des that a

per f ect ed j udgment l i en at t aches t o al l debt or s i nt er est s i n r eal

pr oper t y, i ncl udi ng equi t abl e i nt er est s, t he J udgment Cr edi t or s

j udgment l i en at t ached t o t hi s equi t abl e i nter est when t hey

r ecorded t he Abst r act per CCP 697. 310(a) on November 1, 2005.

As f or Tr ust ee s r esul t i ng t r ust t heor y, we f ai l t o see wher e

he r ai sed t hi s ar gument bef or e t he bankrupt cy cour t . As such, we

t r eat i t as wai ved. See El l swor t h v. Li f escape Med. Assocs. , P. C.

( I n r e El l swor t h) , 455 B. R. 904, 919 ( 9t h Ci r . BAP 2011) ( f ai l i ngt o demonst r ate that argument was pr oper l y r ai sed t o t he bankr upt cy

cour t can r esul t i n wai ver ) . 17

We al so di sagr ee wi t h Trust ee t hat t he bankr upt cy cour t er r ed

i n consi der i ng t he st at e cour t s comment s t hat Cass ef f ect i vel y

owned t he Resi dence t o concl ude t hat Cass had an equi t abl e

i nt er est i n t he Resi dence t o whi ch t he J udgment Cr edi t or s l i en

coul d at t ach. Because t hese comment s by t he st ate cour t i n t he


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Def amat i on Lawsui t wer e par t of t he undi sput ed f act s i n t he J oi nt

PTO, whi ch wer e deemed est abl i shed at t r i al , t he bankrupt cy cour t

was wel l wi t hi n i t s di scret i on t o consi der t hem. Fur t her , not hi ng

i n t he bankr upt cy cour t s deci si on i ndi cat es t hat i t r el i ed sol el y

on t hese comment s t o reach t he concl usi on t hat Cass owned an

equi t abl e i nt er est i n t he Resi dence at t he t i me t he Abst r act was

r ecor ded. To t he cont r ar y, t he bankrupt cy cour t r eached t hi s

concl usi on on i t s own f i ndi ngs and appl i cat i on of Cal i f or ni a l aw.

VI. CONCLUSION

We concl ude that Cass hel d an equi t abl e i nt er est i n t he

Resi dence at t he t i me the J udgment Cr edi t or s r ecorded t hei rAbst r act , and t hat equi t abl e i nt er est was subj ect t o at t achment by

her cr edi t or s. Because t hei r per f ect ed j udgment l i en at t ached t o

Cass s equi t abl e i nt er est i n t he Resi dence pur suant t o

CCP 697. 340( a) , Tr ust ee t ook t he Resi dence subj ect t o t he

J udgment Cr edi t or s seni or i nt er est when he avoi ded and r ecover ed

i t . As a r esul t , t he Decl ar at or y Rel i ef J udgment i s AFFI RMED, and

Tr ust ee must appl y t he sal e proceeds f r om t he Resi dence t o sat i sf y

t he J udgment Cr edi t or s cl ai ms agai nst Cass, except t hose

i nt er est s super i or t o t hei r November 1, 2005 j udgment l i en.

in re: catherine z. cass, 9th cir. bap (2013)

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