In re: Chonghee Jane Kim

• Court: United States Bankruptcy Appellate Panel for the Ninth Circuit
• Decided: March 3, 2021
• Docket: CC-20-1204-FLG
• Status: Unpublished

Opinion

NOT FOR PUBLICATION FILED MAR 3 2021 SUSAN M. SPRAUL, CLERK U.S. BKCY. APP. PANEL OF THE NINTH CIRCUIT

UNITED STATES BANKRUPTCY APPELLATE PANEL OF THE NINTH CIRCUIT

In re: BAP No. CC-20-1204-FLG CHONGHEE JANE KIM, Debtor. Bk. No. 2:13-bk-25661-BB

ALEXANDRE OH, Adv. No. 2:17-ap-01277-BB Appellant, v. MEMORANDUM * EDWARD M. WOLKOWITZ, Chapter 7 Trustee, Appellee.

Appeal from the United States Bankruptcy Court for the Central District of California Sheri Bluebond, Bankruptcy Judge, Presiding

Before: FARIS, LAFFERTY, and GAN, Bankruptcy Judges.

INTRODUCTION

Creditor Alexandre Oh appeals from the bankruptcy court’s $100,000

* This disposition is not appropriate for publication. Although it may be cited for whatever persuasive value it may have, see Fed. R. App. P. 32.1, it has no precedential value, see 9th Cir. BAP Rule 8024-1. money judgment against him and in favor of chapter 7 1 trustee Edward M.

Wolkowitz (“Trustee”) based on a fraudulent transfer that Mr. Oh received

from debtor Chonghee Jane Kim. Mr. Oh argues that the Trustee’s claims

and request for relief were barred by the statute of limitations.

We hold that Mr. Oh waived the statute of limitations defense when

he agreed that the Trustee could pursue his fraudulent transfer claims in a

new action. Accordingly, we AFFIRM.

FACTS 2

A. Prepetition events

In 2010, a law firm sued Ms. Kim in state court and obtained a

judgment against her. Before the entry of judgment, Ms. Kim transferred

real property in Los Angeles (the “Property”) to a company that she wholly

owned (the “LLC”).

Ms. Kim later caused the LLC to encumber the Property with two

deeds of trust, securing promissory notes payable to Mr. Oh ($100,000) and

Benjamin Hooshim ($50,000). Mr. Oh and Mr. Hooshim had previously

1Unless specified otherwise, all chapter and section references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, all “Rule” references are to the Federal Rules of Bankruptcy Procedure, and all “Civil Rule” references are to the Federal Rules of Civil Procedure. 2 The basic facts and procedural history in this case are not in dispute. We borrow liberally from our earlier decision, Hooshim v. Wolkowitz (In re Kim), BAP No. CC-15-1273-TaKuF, 2016 WL 2654350 (9th Cir. BAP May 2, 2016), aff’d, 700 F. App’x 710 (9th Cir. 2017). We also exercise our discretion to review the bankruptcy court’s docket in this case and related cases, as appropriate. See Woods & Erickson, LLP v. Leonard (In re AVI, Inc.), 389 B.R. 721, 725 n.2 (9th Cir. BAP 2008).

2 loaned money to Ms. Kim in those amounts, but the LLC did not execute

the notes or the deeds of trust until several months later and just one week

before entry of the judgment against Ms. Kim in the state court action.

After the law firm discovered these transfers, it commenced a second

state court action against Ms. Kim to set aside the transfers as fraudulent.

Ms. Kim immediately caused the LLC to transfer the Property back to her.

She did not, however, take any action to remove the deeds of trust from the

Property. She then filed a chapter 7 petition; that case was dismissed when

she failed to attend a § 341(a) meeting of creditors.

B. The present chapter 7 case and original adversary proceeding

Later, Ms. Kim filed a second chapter 7 case (the case from which this

appeal emanates), and the Trustee was appointed.

The Trustee sought to sell Ms. Kim’s real property, including the

Property, subject to overbid and subject to any existing liens. Ms. Kim

emerged as the successful bidder for $35,000. The bankruptcy court

confirmed the sale, and the Trustee quitclaimed the Property to Ms. Kim.

Later, the Trustee commenced an adversary proceeding (the

“Original Adversary Proceeding”) against Mr. Oh and Mr. Hooshim. He

sought to avoid the liens created by the deeds of trust under § 544 and

California Civil Code section 3439. He requested a declaration that the

Property was property of the estate free and clear of liens.

The bankruptcy court entered judgment against Mr. Oh and

Mr. Hooshim avoiding the notes and deeds of trust as intentional

3 fraudulent transfers and allowing the Trustee to recover both the notes and

the deeds of trust. The bankruptcy court held that all rights, title, and

interests in the notes and the trust deeds were transferred to the Trustee

and preserved for the benefit of the estate pursuant to §§ 550 and 551.

C. The first appeal

Mr. Oh and Mr. Hooshim timely appealed the bankruptcy court’s

decision to this Bankruptcy Appellate Panel (“BAP”). While the appeal was

pending, the Trustee informed the BAP that he had exercised the power of

sale under the trust deeds and foreclosed on the Property. 3

The BAP reversed in part. We held that the Trustee lacked standing

to avoid the transfers because avoidance of the liens would not redress any

injury to the estate. The fraudulent liens on the Property in favor of Mr. Oh

and Mr. Hooshim injured the estate by reducing the sale price. But once the

Trustee sold the Property subject to those liens, avoidance of the liens

would benefit only the buyer (Ms. Kim), and not the estate.

Although no party had pressed the point, the BAP also stated that the

Trustee neither requested nor preserved a claim for money judgment

3 The Trustee retained TD Foreclosure Services, Inc. (“TD”) to conduct the foreclosure sale. The Trustee was the successful bidder under Mr. Oh’s deed of trust, then TD sold the Property to GB Inland Properties, LLC (“GB”) under Mr. Hooshim’s deed of trust and did not pay the sale price to the Trustee. GB then sold the Property to third-party buyers. Ms. Kim, Mr. Oh, and Mr. Hooshim sued the buyers, GB, and TD in state court for the wrongful foreclosure sale. The parties settled that case for over $140,000, with Mr. Oh receiving approximately $76,000. The Trustee filed a similar suit, which we discuss briefly below.

4 under § 550 and noted that the time for doing so had passed. In re Kim,

2016 WL 2654350 at *4.

The BAP further held that the bankruptcy court erred when it

granted the Trustee relief that he did not seek in the complaint.

The panel vacated the judgment and dismissed the appeal. The Ninth

Circuit affirmed, agreeing that the Trustee lacked standing to avoid the

liens and deeds of trust and could not seek relief exceeding what was

sought in the complaint in the Original Adversary Proceeding.

D. The new adversary proceeding

While the appeal was pending before the Ninth Circuit, the Trustee

sought to consolidate the Original Adversary Proceeding with two other

related cases: (1) Ms. Kim’s suit against the Trustee for quiet title and

declaratory relief and (2) the Trustee’s suit against TD and GB arising out

of the botched foreclosure sale. On May 19, 2017, he filed a new adversary

complaint (“Combined Complaint”) against Mr. Oh, Mr. Hooshim,

Ms. Kim, TD, GB, and the two companies’ owners and managers. The

complaint focused largely on the wrongful foreclosure and the

disgorgement of sale proceeds. Mr. Oh, Mr. Hooshim, and Ms. Kim were

named as defendants because the Trustee requested that the court declare

that they had no right, interest, or title to the Property or the sale proceeds.

Mr. Oh, Mr. Hooshim, and Ms. Kim answered the Combined

Complaint and raised the statute of limitations as an affirmative defense.

In a status report to the court in the wrongful foreclosure case, the

5 Trustee discussed the Combined Complaint and stated that he sought to

consolidate the three cases. He requested that the court “consolidate the

herein case with the other listed matters in the Consolidated Complaint

without any prejudice to the Trustee, the Estate, [or] the pending 9th

Circuit Appeal . . . .”

The bankruptcy court held a status conference in the new adversary

proceeding, Ms. Kim’s adversary proceeding, and the Trustee’s wrongful

foreclosure action and discussed combining all proceedings under the new

adversary proceeding. Mr. Oh did not provide a transcript of the status

conference, but the bankruptcy court later said that the parties agreed to

dismiss the three original actions without prejudice and agreed that the

dismissal would not affect the ability of any party to assert rights and

claims that had been asserted in the original actions.

Pursuant to this agreement, the bankruptcy court dismissed the three

original cases. It dismissed Ms. Kim’s adversary proceeding “without

prejudice to the ability of any party to assert claims formerly asserted in

this action in the pending action for declaratory relief,” stating that the

parties agreed on the record that the Combined Complaint “preserves all of

the relevant issues.” Similarly, the bankruptcy court dismissed the

wrongful foreclosure case, stating that it “granted the Trustee’s request to

dismiss the herein adversary proceeding without any prejudice to the

Trustee’s pending Consolidated Complaint or any other claim the Trustee

has or may have against the Defendants named in this matter or others.”

6 After the Ninth Circuit remanded, the bankruptcy court held similar

discussions with the parties in the Original Adversary Proceeding. Mr. Oh

again did not provide a transcript of any of the discussions, but he

acknowledges that the parties agreed “that ‘all issues would be preserved

unaffected.’ Both sides stated they had no objection. . . .”

Thus, the bankruptcy court similarly dismissed the Original

Adversary Proceeding. The order states that “[a]ll issues in this proceeding

having now been consolidated into the new Adv. No. 2:17-ap-01277-BB and

there being no reason for this adversary proceeding to remain pending, IT

IS HEREBY ORDERED that [the Original Adversary Proceeding] is

dismissed without prejudice.”

The parties filed competing motions for summary judgment and for

judgment on the pleadings. The court dismissed the Trustee’s claims

against Ms. Kim, Mr. Oh, and Mr. Hooshim with leave to amend.

The Trustee filed a first amended Combined Complaint, for the first

time seeking a money judgment against Mr. Oh and Mr. Hooshim in an

amount equal to the value of the deeds of trust that the court had already

determined were made with the actual intent to hinder, delay, or defraud

creditors. Mr. Oh and Mr. Hooshim again sought dismissal of the

complaint, arguing that the claims were barred by the statute of limitations

and untimely under § 546(a). They also argued that the Trustee could not

seek relief exceeding the prayer in the original adversary complaint

because the Trustee had obtained judgment by default.

7 The court denied the motion as to Mr. Oh and Mr. Hooshim, agreeing

with the Trustee that the claims in the Combined Complaint related back to

the original adversary complaint because they were based on the same

facts and merely sought a different remedy. It stated that it was the intent

of the court and the parties to treat the consolidated action as merely a

continuation of the three adversary proceedings. However, it granted the

motion as to the fraudulent transfer claims against Ms. Kim because she

was not named as a defendant in the Original Adversary Proceeding.

The Trustee filed a second amended Combined Complaint, which

included claims against Ms. Kim for fraudulent transfers. Again, the

defendants filed a motion to dismiss based on the statute of limitations and

failure to state a claim against Ms. Kim. The court struck the fraudulent

transfer claims and gave the Trustee another chance to amend the

complaint.

The Trustee filed his third amended Combined Complaint. He

requested that “the Estate . . . be paid the reasonable [sic] equivalent value

of the Hooshim Deed of Trust and the Oh Deed of Trust via a joint and

severable [sic] judgment against Mr. Hooshim and Mr. Oh.”

Ms. Kim, Mr. Oh, and Mr. Hooshim answered the third amended

Combined Complaint, again asserting a statute of limitations defense. They

also filed a motion for summary judgment, arguing that the statute of

limitations barred the Trustee from seeking monetary recovery. The court

denied that motion.

8 The Trustee then filed a motion for summary adjudication. He sought

damages against Mr. Oh totaling $145,608.38 (the principal amount of the

note secured by the deed of trust plus interest).

The court granted the Trustee’s motion in part. It stated that it had

already found that the deeds of trust were executed with the actual intent

to hinder, delay, or defraud Ms. Kim’s creditors. It rejected the defendants’

argument that the claims were barred by the statute of limitations. It held

that the claims in the Combined Complaint:

are timely because the filing of this action relates back to the filing of the original Adversary Complaint . . . . Further, the court instructed the Plaintiff to consolidate the Original Complaint with the prior actions by commencing a new consolidated action (namely, the above-entitled adversary proceeding) to more efficiently adjudicate these matters and to prevent any inconsistent rulings. Importantly, the Plaintiff did not give up or otherwise lose any substantive right by virtue of the aforementioned consolidation actions.

The bankruptcy court held an evidentiary hearing on damages.

Neither Mr. Oh 4 nor the Trustee called any witnesses, so the bankruptcy

court decided the issue based on the legal arguments, stipulated facts, and

documentary evidence, including the Trustee’s counsel’s declaration.

In his trial brief, Mr. Oh again raised his defense that the claims were

barred by the statute of limitations. He argued that the Combined

4 Mr. Hooshim had settled with the Trustee and obtained approval from the court under Rule 9019 prior to the evidentiary hearing.

9 Complaint was untimely under § 546 because it was filed more than two

years after the petition date, so the consolidation of complaints did not

affect his substantive right to raise his statute of limitations defense. He

claimed that the BAP had already ruled that the time to seek a money

judgment under § 546 had passed.

He argued that the Combined Complaint was barred under § 550,

because it was filed more than a year after the judgment setting aside the

fraudulent transfer. He also contended that the Trustee had not actually

avoided any transfer, so he could not obtain any money judgment for the

value of the transferred asset.

The court rejected these arguments. It held that claims in the

Combined Complaint were not barred by the statute of limitations because

it was a continuation of the Original Adversary Proceeding, which was

timely filed. The Original Adversary Proceeding was “only dismissed

based upon a discussion among the Court and the parties in which it was

agreed that the Trustee would file a new, single action that incorporated all

of the parties’ respective claims against one another and that no one’s

rights would be prejudiced in the process.” It thus concluded that the

remedy sought related back to the filing of the original complaint.

The court rejected Mr. Oh’s argument that the claims were barred by

§ 550(f). It said that § 550(f) concerned the commencement of an action, not

the amendment of an existing action to assert an alternate form of relief. It

also held that the fact that the Trustee did not actually recover any asset

10 does not preclude recovery under § 550.

The court then valued Mr. Oh’s lien at $100,000 and awarded the

Trustee judgment in that amount. Mr. Oh timely appealed.

JURISDICTION

The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334 and

157(b)(2)(H). We have jurisdiction under 28 U.S.C. § 158.

ISSUES

(1) Whether the bankruptcy court erred in holding that the claims

and requested remedy in the Combined Complaint were not barred by the

statute of limitations.

(2) Whether the bankruptcy court erred in holding that the default

judgment in the Original Adversary Proceeding did not preclude the

Trustee from seeking a different remedy in the Combined Complaint.

(3) Whether the bankruptcy court erred because the Trustee lacked

standing to recover a monetary award under § 550.

STANDARD OF REVIEW

Mr. Oh argues that the bankruptcy court erred as a matter of law. We

review questions of law de novo. See Gerritsen v. Consulado Gen. De Mexico,

989 F.2d 340, 343 (9th Cir. 1993) (“We review an application of the statute of

limitations de novo.”); Bernhardt v. Cty. of L.A., 279 F.3d 862, 867 (9th Cir.

2002) (“Standing is a question of law reviewed de novo.”).

“De novo review requires that we consider a matter anew, as if no

decision had been made previously.” Francis v. Wallace (In re Francis), 505

11 B.R. 914, 917 (9th Cir. BAP 2014).

“We may affirm on any basis supported by the record.” Caviata

Attached Homes, LLC v. U.S. Bank, Nat’l Ass’n (In re Caviata Attached Homes,

LLC), 481 B.R. 34, 44 (9th Cir. BAP 2012) (citation omitted).

DISCUSSION

A. The Combined Complaint’s request for monetary relief was timely. Mr. Oh argues that the Trustee’s request for a monetary remedy was

untimely. We disagree.

Section 546(a) provides that:

(a) An action or proceeding under section 544 . . . of this title may not be commenced after the earlier of –

(1) the later of –

(A) 2 years after the entry of the order for relief; or

(B) 1 year after the appointment or election of the first trustee under section 702, 1104, 1163, 1202, or 1302 of this title if such appointment or such election occurs before the expiration of the period specified in subparagraph (A); or

(2) the time the case is closed or dismissed.

§ 546(a) (emphasis added).

Similarly, § 550 provides that, if a transfer is avoided, the trustee may

recover “the property transferred, or, if the court so orders, the value of

such property . . . .” § 550(a). That section also provides that:

(f) An action or proceeding under this section may not be

12 commenced after the earlier of –

(1) one year after the avoidance of the transfer on account of which recovery under this section is sought; or

§ 550(f) (emphasis added).

Mr. Oh argues that these limitations precluded the new remedy in

the Combined Complaint. He contends that the Combined Complaint

initiated a new action (following the dismissal of the Original Adversary

Proceeding), and because that new action was commenced after the

statutory time periods had run, the Trustee’s claims were untimely. He

argues that Civil Rule 15, made applicable by Rule 7015, does not allow the

Combined Complaint to relate back to the Original Adversary Proceeding.

Mr. Oh ignores the fact that his counsel agreed on the record that the

dismissal of the Original Adversary Proceeding would have no effect on

the rights of the Trustee or anyone else in the new adversary proceeding.

The limitations periods are waivable. See, e.g., Pugh v. Brook (In re Pugh), 158

F.3d 530, 538 (11th Cir. 1998) (“[T]he limitations periods prescribed in 11

U.S.C. §§ 546(a) and 549(d) are statutes of limitations that can be waived.”).

The Ninth Circuit has stated in a non-bankruptcy context that “the statute

of limitations is not jurisdictional and can be waived” if the waiver is

knowing and voluntary. United States v. Caldwell, 859 F.2d 805, 806 (9th Cir.

1988) (citing United States v. Akmakjian, 647 F.2d 12 (9th Cir. 1981)).

Although the parties may not have specifically discussed the statute

13 of limitations, the agreement only makes sense if it included a waiver of

any defenses based on the fact that the Combined Complaint was filed later

than the first complaint. The Trustee certainly would not have sought to

dismiss the Original Adversary Proceeding and proceed under the

Combined Complaint if the dismissal would necessarily terminate his right

to recovery. The court surely would not have encouraged a dismissal

merely for the sake of efficiency and convenience if it destroyed the

plaintiff’s claims. The court made its intentions clear in the dismissal orders

in the other two actions; those orders explicitly provide that the dismissals

would not prejudice any party from pursuing their rights from the

underlying actions. Although the order in the Original Adversary

Proceeding was more terse, it must mean the same thing. Mr. Oh’s counsel

must have realized that the reservation of claims included a waiver of his

statute of limitations defense. By agreeing that the Combined Complaint

would replace the Original Adversary Proceeding, he necessarily agreed to

allow the Trustee to maintain his existing claims against him. 5

Thus, based on Mr. Oh’s agreement, the dismissal of the original

actions and the filing of the Combined Complaint did not affect the

Trustee’s ability to maintain his existing claims against Mr. Oh.

5Mr. Oh has not provided us with any transcript of the status conferences indicating otherwise. We are entitled to presume nothing in them would help his arguments on appeal. See Gionis v. Wayne (In re Gionis), 170 B.R. 675, 680-81 (9th Cir. BAP 1994).

14 Mr. Oh argues at length that the Combined Complaint could not

relate back to the original adversary complaint. We need not address this

argument because the Combined Complaint was itself timely (based on

Mr. Oh’s agreement), including the amendments which added to the

Combined Complaint the avoidance claims related to the fraudulent deeds

of trust. Therefore, the claims are timely whether or not they related back

to the complaint in the Original Adversary Proceeding.

Mr. Oh also points out that the BAP’s prior decision stated that the

statute of limitations for seeking monetary relief had passed. However, as

he acknowledges, this language in the decision is dicta. This issue was not

squarely before the Panel, so neither the bankruptcy court nor this Panel is

bound by the BAP’s prior statement. See United States v. Pinjuv, 218 F.3d

1125, 1129 (9th Cir. 2000) (“We are not bound by dicta in decisions from

our court or any other circuit.”). More importantly, when the BAP made

this statement, it could not have known that Mr. Oh would waive his

defenses based on timeliness.

Mr. Oh argues that the one-year limitations period in § 550(f) bars the

Trustee from seeking recovery. But the avoidance order in the Original

Adversary Proceeding was appealed to the BAP and the Ninth Circuit and

was vacated. The Trustee could not be expected to seek monetary relief

under § 550 while the case was on appeal. Accord Giovanazzi v. Schuette (In

re Lebbos), BAP No. EC-11-1735-KiDJu, 2012 WL 6737841, at *15 (9th Cir.

BAP Dec. 31, 2012), aff’d, 600 F. App’x 521 (9th Cir. 2015) (holding that

15 laches does not bar recovery under § 550 where the trustee timely filed a

complaint within seven months of the disposition of an appeal). Thus, the

claims were not barred by the statute of limitations.

B. The vacated default judgment does not preclude monetary relief.

Mr. Oh argues that, because the court struck his answer to the

original adversary complaint, under Civil Rule 54, the Trustee could not

amend the original adversary complaint to request a monetary judgment.

Civil Rule 54(c), made applicable in adversary proceedings by Rule

7054(a), provides that “[a] default judgment must not differ in kind from,

or exceed in amount, what is demanded in the pleadings.”

But the court’s judgment in favor of the Trustee was not based on the

now-vacated default judgment in the Original Adversary Proceeding.

Instead, it was based on the claims pled and relief sought in the new

Combined Complaint. Mr. Oh responded to the Combined Complaint,

vigorously litigated it through numerous dispositive motions, and the

bankruptcy court entered a judgment on the merits after an evidentiary

hearing. This was not a default judgment, so Civil Rule 54 is inapplicable in

this case.

C. The Trustee had standing to request monetary relief under § 550.

Finally, Mr. Oh argues that the Trustee lacks standing to request

monetary relief under § 550 because the BAP held that the Trustee lacked

standing to avoid the liens. He argues, without authority, that a party who

lacks standing to request avoidance would similarly lack standing to

16 request monetary damages. He also contends that the Trustee did not

successfully “avoid” any transfer, so he cannot recover damages.

This argument confuses the concepts of “avoidance” and “recovery.”

See In re AVI, Inc., 389 B.R. at 733 (“The concepts of avoidance and recovery

are separate and distinct.”); see also Lippi v. City Bank, 955 F.2d 599, 605 (9th

Cir. 1992) (“There are, in effect, three conceptual steps to the trustee’s case;

the trustee must establish: 1) fraud or illegality under the applicable

substantive law; 2) resulting voidness or voidability of the transfer under

the applicable law so as to allow avoidance pursuant to 544(b); and

3) liability of the particular transferee pursuant to the provisions of section

550.”).

Section 548(a) and the comparable provision of California law,

California Civil Code section 3439.04, permit the avoidance of transfers

made with the actual intent to hinder, delay, or defraud creditors. The

bankruptcy court held that Ms. Kim acted with the requisite intent; thus,

the deeds of trust have been avoided.

Once a transfer has been avoided, the court must determine what and

from whom the trustee may “recover” under § 550. That section generally

permits the recovery of either the transferred property or its value. See

USAA Fed. Sav. Bank v. Thacker (In re Taylor), 599 F.3d 880, 890 (9th Cir.

2010) (“If a bankruptcy court permits the trustee recovery, the court has

discretion whether to award the trustee recovery of the property

transferred or the value of the property transferred.”). In this case, both the

17 BAP and Ninth Circuit rejected the Trustee’s attempt to “recover” the

transferred property interest – the lien that Ms. Kim’s LLC granted to

Mr. Oh – because that recovery would not have redressed the injury to the

estate that the fraudulent transfer caused. Lien avoidance would not have

benefitted the estate at all. Rather, it would have benefitted only the buyer

of the Property: Ms. Kim, who perpetuated the fraudulent transfer.

The judgment on appeal is based on the other option under § 550 –

recovery of the value of the transferred property interest. The monetary

recovery under that judgment will flow directly and exclusively to the

estate and will redress the loss to the estate. The Trustee had standing to

seek that recovery, irrespective of the BAP’s earlier holding that the Trustee

lacked standing to avoid the liens.

CONCLUSION

For the foregoing reasons, the bankruptcy court did not err in

entering a money judgment in favor of the Trustee and against Mr. Oh. We

AFFIRM.