FILED DEC 16 2011 1 SUSAN M SPRAUL, CLERK U.S. BKCY. APP. PANEL 2 OF THE NINTH CIRCUIT
3 UNITED STATES BANKRUPTCY APPELLATE PANEL 4 OF THE NINTH CIRCUIT 5 In re: ) BAP No. CC-11-1323-KiDJu 6 ) DEAD OAK ESTATES, INC., ) Bk. No. 08-28230-MM 7 ) Debtor. ) Adv. No. 09-02730 8 ______________________________) ) 9 MICHAEL F. BURKART, Chapter 7 ) Trustee; SUSAN VINEYARD, ) 10 ) Appellants, ) 11 ) v. ) M E M O R A N D U M1 12 ) ROBERT KUPKA; CYNTHIA KUPKA, ) 13 ) Appellees. ) 14 ______________________________)
15 Argued and Submitted on November 16, 2011 at Sacramento, California 16 Filed - December 16, 2011 17 Appeal from the United States Bankruptcy Court 18 for the Eastern District of California
19 Honorable David E. Russell, Bankruptcy Judge, Presiding _____________________________________ 20 Appearances: Kristen Ditlevsen, Esq. argued for appellants, 21 Michael F. Burkart and Susan Vineyard; George C. Hollister, Esq. of the Hollister Law 22 Corporation argued for appellees, Robert Kupka and Cynthia Kupka. 23 _____________________________________
24 Before: KIRSCHER, DUNN, and JURY, Bankruptcy Judges. 25 26 1 This disposition is not appropriate for publication. 27 Although it may be cited for whatever persuasive value it may have (see Fed. R. App. P. 32.1), it has no precedential value. 28 See 9th Cir. BAP Rule 8013-1. 1 Appellants, chapter 72 trustee Michael F. Burkart 2 (“Trustee”) and Susan Vineyard (“Vineyard”)(collectively 3 “Trustee”), appeal a bankruptcy court judgment in favor of 4 defendants, appellees Robert Kupka (“Robert”) and Cynthia Kupka 5 (“Cynthia”)(collectively “Defendants”), on Trustee’s action for 6 declaratory relief regarding debtor’s rights under an option to 7 purchase real property owned by Defendants. We AFFIRM. 8 I. FACTUAL AND PROCEDURAL BACKGROUND 9 A. Prepetition Facts. 10 Debtor, Dead Oak Estates, Inc. (“Dead Oak”), is a Delaware 11 corporation originally incorporated on June 7, 1982. Dead Oak’s 12 name was changed to Hangtown Leasing Company by amendment filed 13 on July 11, 1986 (“Hangtown”). Dead Oak’s name was changed back 14 to Dead Oak Estates, Inc. by amendment filed on April 4, 2002. 15 Phil Sheridan (“Sheridan”) owned and operated a small 16 charter airline, Galaxy Airlines (“Galaxy”), located in Fort 17 Lauderdale, Florida. In January 1985, a Galaxy flight crashed in 18 Reno, Nevada, killing 70 of the 71 persons on board. Shortly 19 after the crash, the U.S. Department of Transportation (“DOT”) 20 suspended Galaxy’s operational certificate. Sheridan’s efforts 21 to reinstate the operational certificate were unsuccessful, and 22 he decided to sell Galaxy. 23 In 1987, Sheridan entered into a Stock Purchase Agreement 24 25 2 Unless otherwise indicated, all chapter, section and rule 26 references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and to the Federal Rules of Bankruptcy Procedure, Rules 1001-9037. 27 The Federal Rules of Civil Procedure will be referred to as “FRCP.” The Federal Rules of Evidence will be referred to as 28 ?FRE.” - 2 - 1 (“Agreement”) transferring his 100% interest in Galaxy to John 2 Kupka (“John”) and John’s assigns, in exchange for: a promissory 3 note to Sheridan in the amount of $400,000, an agreement to pay 4 Sheridan’s debt to Cardinal Corporation in the amount of 5 $900,000, and payment of Galaxy’s 941 tax obligation to the IRS. 6 John’s “assigns” were Hangtown n/k/a Dead Oak, one of several 7 corporations controlled by John through the Kupka Family Trust, 8 and William and Tammy Tsui (collectively “buyers”). In October 9 1987, the buyers attempted to rescind the Agreement for, inter 10 alia, Sheridan’s failure to disclose the correct amount of the 11 IRS’s tax lien, and the buyer’s inability to reinstate the 12 operational certificate with the DOT.3 Sheridan rejected the 13 rescission notice. 14 In 1988, Sheridan sued the buyers in a Florida federal court 15 for specific performance of the Agreement. While the suit was 16 pending, Sheridan filed for chapter 7 bankruptcy. In August 17 1993, the Florida court entered a default judgment in favor of 18 Donna Bumgardner, Sheridan’s chapter 7 trustee, and Cardinal 19 3 20 In January 1988, the DOT issued an Order to Show Cause (“OSC”) tentatively revoking Galaxy’s operational certificate for 21 failing to comply with the continuing aviation fitness requirements. Prior to the OSC, John had submitted documentation 22 to the DOT in an effort to get Galaxy’s operational certificate reinstated, including an Option to Purchase Real Estate, dated 23 November 10, 1986 (the “Option”). Also in the DOT’s file submitted by John was a letter dated June 3, 1987, from John to 24 Richard Taylor, attorney for Galaxy on the DOT matter, in which John stated that “the family trust has first option on the 25 airport property for $1.8 [million],” and that Lodi Airport was worth “roughly $7.5 [million],” with total debt of “less than 26 $1.2 [million].” The DOT noted several reasons in the OSC for revoking 27 Galaxy’s operational certificate, including its apparent poor financial condition, John’s “overstated” value of Lodi Airport, 28 and John’s prior criminal record for false swearing under oath. - 3 - 1 Corporation (the third-party beneficiary to the Agreement) and 2 against John, Hangtown, and the Tsuis (the “Sheridan Judgment”). 3 In 1995, Marika Tolz succeeded Donna Bumgardner as trustee for 4 Sheridan’s estate. In 1996, the bankruptcy court approved 5 trustee Tolz’s employment of co-plaintiff Vineyard as collection 6 agent for the Sheridan Judgment. In 2000, Vineyard filed a 7 chapter 7 bankruptcy. John filed a chapter 7 bankruptcy in 2001. 8 In 2001, Cardinal Corporation assigned its portion of the default 9 judgment (about $1.4 million plus interest) to the trustee of 10 Vineyard’s bankruptcy estate. In 2003, the bankruptcy court 11 entered an order approving the trustee’s abandonment of 12 Vineyard’s estate’s interest in the Sheridan Judgment back to 13 Vineyard. After years of having no success in collecting on the 14 Sheridan Judgment, in May 2005, trustee Tolz filed a notice of 15 intent to abandon Sheridan’s portion of the Sheridan Judgment 16 (about $600,000 plus interest) back to Sheridan. In July 2005, 17 Sheridan affirmed and assumed the assignment agreement between 18 trustee Tolz and Vineyard for collection of the Sheridan 19 Judgment. 20 B. Postpetition Facts. 21 Vineyard filed an involuntary chapter 7 petition against 22 Dead Oak on June 20, 2008. John is the principal of Dead Oak.4 23 Upon no objection, an order for relief was entered in August 24 2008. Two proofs of claim were filed in Dead Oak’s case, 25 including a general unsecured claim by Vineyard for $5,955,000 26 27 4 John, father to Robert and Cynthia, passed away during 28 this case on October 5, 2010. - 4 - 1 based in part on the Sheridan Judgment. On August 21, 2009, the 2 bankruptcy court approved a compromise authorizing the joint 3 prosecution (at Vineyard’s expense) of the estate’s Option to 4 purchase real property owned by Defendants in Acampo, California, 5 commonly known as Lodi Airport for $1.8 million, and providing 6 for a division of any net recovery to Vineyard and the estate’s 7 other creditors. In September 2009, pursuant to an order based 8 on Dead Oak’s failure to file documents, Vineyard filed schedules 9 and a statement of financial affairs on behalf of Dead Oak. In 10 those documents, Vineyard identified the Option as property of 11 the estate. 12 On November 11, 2009, Trustee filed a declaratory relief 13 action against Defendants seeking a determination that Dead Oak’s 14 Option was valid. Attached to the complaint was a copy of the 15 Option, dated November 10, 1986, which stated: 16 The following is an option, with first right of refusal, given to Hangtown Leasing Company, a Delaware Corporation 17 to purchase all that real property described in exhibit “A” attached, commonly known as Lodi Airport situated in 18 Acampo, California. Option price is One million, eight hundred thousand dollars. ($1,800,000.00). 19 20 The Option reflected the signatures of Robert and Cynthia in 21 their individual capacities as co-owners of Lodi Airport. 22 Trustee alleged that Defendants never revoked the Option, and it 23 did not limit Dead Oak’s right to exercise it to any specific 24 time period or describe a particular manner in which it must be 25 exercised. Defendants disputed the validity of the Option, thus 26 explaining Trustee’s need for declaratory relief. 27 Defendants moved to dismiss Trustee’s complaint on 28 December 15, 2009. In their motion, Defendants denied knowing
- 5 - 1 about the unrecorded Option until Vineyard’s counsel brought it 2 to their attention in February 2008. Defendants denied ever 3 agreeing to the Option and asserted that they had never received 4 any payment with respect to or on account of it. The motion also 5 referred to a letter sent by Defendants’s counsel to Trustee on 6 May 11, 2009. In the letter, attached to Robert’s Declaration in 7 support of the motion, counsel asserted that Robert’s and 8 Cynthia’s signatures on the Option had been forged, and that the 9 Option was never signed by either of them. Defendants’s motion 10 was denied on January 20, 2010. They filed an answer on 11 February 2, 2010. Defendants subsequently filed two motions for 12 summary judgment, both of which were denied. 13 Two days before trial, Trustee filed his trial brief and a 14 motion in limine to exclude certain evidence of Defendants. In 15 his brief, Trustee conceded that he was not convinced Cynthia 16 personally signed the Option based on the opinions of the 17 handwriting experts employed by both parties. However, contended 18 Trustee, their expert’s analysis of Cynthia’s questioned 19 signature was limited due to Defendants’s unwillingness to 20 produce known signature exemplars for her for the period from 21 1985 to 1990.5 As for Robert’s questioned signature, Trustee’s 22 expert concluded that it was probably genuine. Based on the 23 expert’s findings, Trustee contended that it was more probable 24 than not that Robert signed both his own signature and Cynthia’s 25 26 5 The bankruptcy court subsequently found that Cynthia’s 27 questioned signature on the Option was not genuine. Appellants do not appeal that finding. We discuss Cynthia’s testimony as it 28 relates to the conduct of John and Robert. - 6 - 1 signature, either mechanically or at her direction, or in his 2 capacity as her authorized agent. Cynthia had admitted at 3 deposition that Robert handled the day-to-day operations of Lodi 4 Airport, that she had little involvement with it, and that she 5 deferred to Robert’s judgment on documents to be executed on 6 their behalf. 7 In his motion in limine, Trustee disputed the admission of a 8 statement by Robert in his Alternate Direct Testimony (“ADT”). 9 In the ADT, Robert asserted that upon showing John a copy of the 10 Option in February 2008, John told Robert that he recognized the 11 document and stated that he had forged the signatures so the 12 Option would appear to be an asset for purposes of his 13 application to acquire Galaxy and DOT approval. Trustee 14 contended Robert’s statement was inadmissable hearsay being 15 offered for the first time on the eve of trial to exculpate 16 Defendants. Moreover, John had since passed away so Trustee was 17 unable to question him about it. Alternatively, Trustee 18 contended that John’s “forgery” statement to Robert should be 19 excluded under FRCP 37 for failing to disclose it in 20 interrogatories. 21 C. The Trial. 22 The two-day trial commenced on May 11, 2011. As a 23 preliminary matter, the parties agreed to address the basis of 24 Trustee’s motion in limine when Robert testified. 25 Cynthia testified that she had never authorized John to sign 26 any documents on her behalf, but that John had done so without 27 her authorization in the past. Specifically, when she was away 28 at college, John had signed three credit card applications in
- 7 - 1 Cynthia’s name without her knowledge. John subsequently failed 2 to pay the credit card debts and served time in jail as a result. 3 Cynthia also testified that she had never authorized Robert to 4 sign any document on her behalf, nor did she know of any 5 circumstance in which he had signed something on her behalf 6 without her knowledge. 7 Robert testified that even though he knew John had purchased 8 Galaxy in 1987, which in Robert’s opinion was a “crazy” idea, 9 Robert had no involvement with John’s efforts to reinstate 10 Galaxy’s operational certificate with the DOT. As for the 11 Option, Robert testified that although the questioned signature 12 looked like his, he did not sign it. Robert again confirmed that 13 once he showed the Option to John in 2008, John admitted faking 14 the document and forging the signatures as a means to acquire 15 Galaxy. Robert testified that he had never seen the Option 16 before February 2008. Robert admitted that he did not disclose 17 John’s “forgery” story in the interrogatories because he did not 18 remember it at the time, and he assumed his denial of signing it 19 was sufficient. 20 On cross-examination, Robert testified that he would never 21 have signed the Option. Robert further testified that Cynthia 22 never authorized him to sign her name on any documents, and he 23 never did so. Finally, Robert testified that John had also 24 obtained credit cards in Robert’s name without his knowledge. 25 Both expert witnesses testified on day two of the trial. 26 Trustee’s expert, David Moore (“Moore”), testified that even 27 though the Option was a copy, he found nothing in either 28 signature to suggest they were not naturally written. In other
- 8 - 1 words, the signatures were not traced. Moore further testified 2 that he had a sufficient amount of known signature exemplars from 3 Robert and concluded that Robert’s questioned signature was 4 “probably” genuine. Moore explained that on the scale used by 5 forensic document examiners, with the finding of “did sign it” at 6 the far right end and the finding of “did not sign it” at the far 7 left end, a conclusion of “probably” was just below the finding 8 of “very probably,” which was just below “did sign it.” Moore 9 further explained that in the middle of the scale is the finding 10 of “no conclusion,” which means the evidence is evenly split or 11 insufficient information exists to lean one way or the other. In 12 this case, explained Moore, his finding of “probably” with 13 respect to Robert’s signature meant the evidence was strong but 14 some limiting factors existed - i.e., the absence of an original. 15 Because the Option was only a copy, Moore could not exclude the 16 possibility that Robert’s signature was a “cut-and-paste.” Moore 17 could also not recall an instance where a document contained both 18 a forged signature and a cut-and-paste signature of another. 19 On cross-examination, Moore testified that he was not asked 20 to determine whether Cynthia’s questioned signature was written 21 by Robert. He did opine, however, that since their signatures 22 were so sufficiently dissimilar it would be like comparing apples 23 and oranges, and he would be unable to determine whether or not 24 Robert wrote Cynthia’s signature. 25 Defendants’s expert, James Blanco (“Blanco”), testified 26 next. When asked whether it was “probable” that Robert, assuming 27 his signature on the Option was genuine, wrote the questioned 28 “Cynthia Kupka” signature, Blanco replied: “I would say it would
- 9 - 1 not be probable.” Trial Tr. (May 12, 2011) 77:6. On cross- 2 examination, Blanco testified that he saw no evidence of cut-and- 3 paste, but admitted that he was retained only to opine on 4 Cynthia’s signature, not Robert’s, because Robert had admitted 5 that the questioned signature looked like his. Blanco further 6 testified that he saw no traces of Robert’s signature 7 characteristics in Cynthia’s signature that indicated Robert 8 signed for her. 9 After Blanco’s testimony, Trustee’s counsel asserted that 10 any pending evidentiary objections, particularly all hearsay 11 objections with respect to submitted documents, needed to be 12 resolved before he could present closing argument. The 13 bankruptcy court responded that all exhibits had been admitted as 14 far as it was concerned. During further colloquy on this issue, 15 the court stated that any documents containing hearsay statements 16 of John would be disregarded, to which Trustee’s counsel 17 responded: 18 Well, your Honor, before you come to that conclusion, there may be some things in there you may regard. You 19 may accept them. You’re perfectly capable of weighing the evidence. 20 21 Trial Tr. (May 12, 2011) 100:5-8. The court then noted that the 22 primary issue in the case was whether Robert forged Cynthia’s 23 signature on the Option. However, it believed Blanco had ruled 24 out that possibility. Furthermore, Robert had testified he had 25 never signed Cynthia’s name, and Cynthia had testified she never 26 authorized anyone to sign her name on any document. 27 Trustee’s counsel then stated he had one more witness to 28 call before closing his case in chief. The court asked counsel
- 10 - 1 for an offer of proof regarding this witness “because at this 2 stage in the game, [Trustee] d[id]n’t have a case.” Id. at 3 104:1-2. Counsel offered that this witness would impeach 4 Robert’s testimony, to which the court responded: “You have an 5 unfortunate problem there because I happen to believe that 6 [Robert] was a very reliable witness.” Id. at 104:13-15. The 7 court then asked counsel whether the witness would impeach 8 Robert’s testimony about not signing the Option. Counsel 9 responded that the witness would impeach Robert’s testimony about 10 having no involvement in the DOT proceedings. In response, the 11 court stated: 12 I don’t care about that. I really don’t care about that. That’s got nothing to do with this case as I see it. And 13 I believe Mr. Kupka’s testimony. 14 . . . . 15 . . . [A]nd I also believe [Robert’s] testimony that all of this has to do with John . . . trying to get some 16 evidence in, trying to get something together to show that he had assets. 17 . . . . 18 So how does that ever get you to the point where this 19 option, 30-year-old option, whatever it is, that is not signed by either Mr. Kupka or his sister, how can that 20 possibly result in something that you can enforce? 21 Id. at 105::21-23; 106:6-15. In the court’s opinion, even if 22 Trustee’s witness testified that Robert was involved with the DOT 23 proceedings, it would not rehabilitate the Option, which was a 24 “complete nothing.” Id. at 108:21. Even if Robert was not 25 telling the truth, opined the court, the outcome remained 26 unchanged because both signatures had to be genuine for a valid 27 Option, and the evidence showed that Cynthia never signed it and 28 never authorized Robert to sign it (or anything else) on her
- 11 - 1 behalf. 2 Despite the court’s position, Trustee’s counsel stated that 3 he still wanted to put on his last witness the following day, to 4 which the court responded: “You may do so.” Id. at 110:17. 5 Counsel explained that the witness was the county planner from 6 1987 who spoke with Robert about moving Galaxy from Florida to 7 Lodi Airport. The court responded that regardless of what the 8 planner had to say, it would not render the Option valid. 9 Furthermore, the evidence showed that John had previously forged 10 Cynthia’s name on various documents, and even if Robert had at 11 one time expressed to the county planner an interest in moving 12 Galaxy to Lodi Airport, Robert had testified that he determined 13 the prospect was useless considering Galaxy’s debt load. 14 Finally, the court noted that even Trustee’s expert could not 15 rule out the possibility that Robert’s signature on the Option 16 was a cut-and-paste job. 17 Upon counsel’s further offer of proof about the planner’s 18 testimony, the court stated: 19 Don’t buy it. I have no reason to. As I said, I think Robert Kupka is a reliable witness. I heard him testify. 20 I have no reason to doubt his testimony. I believe him. I believe his sister. And they’re both saying, “Hey, we 21 didn’t have anything to do with this stupid document.” There you are. 22 23 Id. at 118:8-14. The court reiterated that Trustee’s counsel 24 could call the planner to testify, but that it would not be 25 persuaded: 26 You’ve made your offer of proof, which I think is adequate, I mean, sufficient to at least bring to the 27 attention of any appellate court as to what kind of evidence you were going to bring on, namely, that there 28 was a conversation between [Robert] and the planner that
- 12 - 1 was in charge, I guess, of Lodi Airport improvements -- that they were talking about bringing [Galaxy] to the 2 Lodi Airport. But, as I said before . . . it doesn’t do anything for this bogus document. That document, that 3 option agreement is bogus. 4 Id. at 121:17-122:3. Counsel then explained that the planner’s 5 testimony was not based just on his memory of conversations with 6 Robert, but it was also based on a report that is part of the 7 public record. The court paused momentarily, but ultimately 8 determined the planner’s testimony was not going to change the 9 court’s mind. As a result, it dismissed Trustee’s complaint with 10 prejudice.6 The court further denied Trustee’s motion in limine 11 to exclude John’s “forgery” hearsay statement to Robert. 12 An order denying Trustee’s motion in limine was entered on 13 May 17, 2011. A judgment in favor of Defendants was entered on 14 June 8, 2011. This timely appeal followed. 15 II. JURISDICTION 16 The bankruptcy court had jurisdiction under 28 U.S.C. 17 §§ 157(b)(2)(A) and 1334. The order denying Trustee’s motion in 18 limine was an interlocutory order that merged into the final 19 judgment. United States v. Real Prop. Located at 475 Martin 20 Lane, Beverly Hills, Cal., 545 F.3d 1134, 1141 (9th Cir. 2008) 21 (under the merger rule interlocutory orders entered prior to the 22 judgment merge into the judgment and may be challenged on 23 appeal). Therefore, we have jurisdiction over both the order 24 denying the motion in limine and the judgment under 28 U.S.C. 25 26 6 Since the dismissal occurred at the close of the evidence 27 presented on Trustee’s case in chief, including his offer of proof, it appears to have been a Judgment on Partial Findings as 28 allowed by FRCP 52(c), as incorporated by Rule 7052. - 13 - 1 § 158. 2 III. ISSUES 3 1. Did the bankruptcy court clearly err in finding that the 4 Option was invalid? 5 2. Did the bankruptcy court abuse its discretion by not having 6 the county planner testify and by admitting the hearsay 7 testimony? 8 3. Did the bankruptcy court apply the proper burden of proof? 9 IV. STANDARDS OF REVIEW 10 We review the bankruptcy court’s findings with respect to 11 the validity of the Option for clear error. A finding is clearly 12 erroneous when it is illogical, implausible or “without support 13 in inferences that may be drawn from the facts in the record.” 14 United States v. Hinkson, 585 F.3d 1247, 1261-62 (9th Cir. 2009) 15 (en banc). If the trial court’s account of the evidence is 16 plausible in light of the record viewed in its entirety, the 17 court of appeals may not reverse it even though convinced that 18 had it been sitting as the trier of fact, it would have weighed 19 the evidence differently. S.E.C. v. Rubera, 350 F.3d 1084, 1094 20 (9th Cir. 2003)(citing Anderson v. City of Bessemer City, N.C., 21 470 U.S. 564, 573-74 (1985)). Great deference is to be given to 22 the bankruptcy court’s determinations on witness credibility due 23 to its opportunity to observe the witness. Retz v. Samson 24 (In re Retz), 606 F.3d 1189, 1196 (9th Cir. 2010)(citing 25 Anderson, 470 U.S. at 575 (1985)). 26 To reverse an evidentiary ruling, we must conclude that the 27 bankruptcy court both abused its discretion and that the error 28 was prejudicial. Latman v. Burdette, 366 F.3d 774, 786 (9th Cir.
- 14 - 1 2004). We review the bankruptcy court’s ruling on a motion in 2 limine for an abuse of discretion. United States v. Rude, 3 88 F.3d 1538, 1549 (9th Cir. 1996). To determine whether the 4 bankruptcy court abused its discretion, we conduct a two-step 5 inquiry: (1) we review de novo whether the bankruptcy court 6 “identified the correct legal rule to apply to the relief 7 requested” and (2) if it did, whether the bankruptcy court's 8 application of the legal standard was illogical, implausible or 9 “without support in inferences that may be drawn from the facts 10 in the record.” Hinkson, 585 F.3d at 1261-62. 11 Whether the bankruptcy court properly applied the correct 12 burden of proof is a question of law reviewed de novo. United 13 States v. Banuelos, 322 F.3d 700, 704 (9th Cir. 2003). 14 V. DISCUSSION 15 We begin by noting that our review of this appeal is 16 hindered due to Trustee’s failure to include in his excerpts of 17 record: the complaint, answer, all pretrial motions including the 18 subject motion in limine and related order, the pretrial order, 19 any pretrial statements, Trustee’s trial brief, the Alternate 20 Direct Testimony of Robert and Blanco, Blanco’s report, the 21 notice of appeal, and the judgment. This is a severe violation 22 of Rule 8009(b) subjecting Trustee’s appeal to dismissal. Kyle 23 v. Dye (In re Kyle), 317 B.R. 390, 393 (9th Cir. BAP 2004). 24 Nonetheless, we exercised our discretion to retrieve many of 25 these items from the bankruptcy court’s electronic docket, of 26 which we take judicial notice. See Atwood v. Chase Manhattan 27 Mortg. Co. (In re Atwood), 293 B.R. 227, 233 n.9 (9th Cir. BAP 28 2003)(we are free to take judicial notice of relevant documents
- 15 - 1 on the bankruptcy court’s docket). However, the Alternate Direct 2 Testimony of Robert and expert witness Blanco, as well as 3 Blanco’s report, were not available. 4 A. The bankruptcy court did not clearly err in finding that the Option was invalid.7 5 Trustee disputes the bankruptcy court’s finding that the 6 Option was not valid based on what he believes was compelling 7 evidence to the contrary. In order to reverse the bankruptcy 8 court on this basis, we must conclude that its findings of fact 9 are illogical, implausible, or not supported by the record. 10 Hinkson, 585 F.3d at 1261-62. 11 Trustee contends he established the Option’s validity by the 12 following. The copy of the Option and John’s 1987 letter 13 referencing the Option demonstrated its existence. Robert and 14 Cynthia’s names appear on the Option, signed by someone. Both 15 experts opined that Robert’s signature was probably written by 16 him, and Robert admitted that it looked like his signature. 17 Cynthia admitted that she was unfamiliar with the business 18 dealings of Lodi Airport, and that she would sign documents when 19 Robert advised her to do so. Cynthia also admitted she had 20 little memory of the time period when the Option was executed, 21 22 7 Trustee contends the bankruptcy court did not appear to be 23 fully familiar with the written materials submitted by the parties prior to trial and did not have a complete grasp on 24 Trustee’s arguments. Trustee further contends the court let Defendants’s counsel argue extensively in his opening statement, 25 which likely influenced the court’s evaluation of the evidence presented. 26 First, we see no objections by Trustee’s counsel to any of Defendants’s opening statement in the transcript. Further, the 27 transcript reflects that the bankruptcy court was familiar with Trustee’s legal arguments, but it chose to reject them based on 28 the evidence. - 16 - 1 and that she could not remember signing several airport-related 2 documents at the time she signed them. Trustee asserts that even 3 if Cynthia did not sign the Option, the evidence suggests she may 4 have authorized Robert to sign it on her behalf. Thus, contends 5 Trustee, even assuming Cynthia’s signature is not genuine, 6 Robert’s signing of both their signatures is sufficient to 7 establish their intent to be bound by the Option’s terms. In 8 short, Trustee asserts that based on the evidence one of the 9 following must have occurred: either John forged the Option, or 10 Robert signed it and forged Cynthia’s signature, either with her 11 authorization or without it. 12 Although Trustee’s scenario of Robert forging Cynthia’s 13 signature on the Option is plausible, we also have to consider 14 all of the evidence and testimony offered in this case. In 15 addition to Cynthia’s testimony that she would sign documents 16 when Robert advised her to do so, and that she could not remember 17 signing various airport-related documents at the time she signed 18 them, Cynthia also testified that she did not sign the Option. 19 Both experts agreed that Cynthia’s signature on the Option was 20 not genuine. Cynthia also testified that she never authorized 21 Robert to sign any document on her behalf, including the Option. 22 As for whether Robert forged Cynthia’s signature on the Option, 23 Blanco determined that Robert probably did not, and Moore could 24 not determine that Robert did. Robert testified that he did not 25 forge Cynthia’s signature. Robert testified that he did not sign 26 the Option, and both experts could not conclusively rule out the 27 possibility that his signature was a cut-and-paste job. Cynthia 28 and Robert also testified as to John’s history of forging his
- 17 - 1 children’s signatures on documents. Furthermore, according to 2 the DOT’s OSC, one of the reasons it refused to reinstate 3 Galaxy’s operational certificate was John’s prior criminal record 4 of lying under oath. The bankruptcy court made explicit findings 5 that Robert and Cynthia were credible witnesses. It also found 6 expert Blanco’s testimony more persuasive than expert Moore’s. 7 Even if we as the fact-finder would have weighed the 8 evidence differently, “when there are two permissible views of 9 the evidence, the trial judge’s choice between them cannot be 10 clearly erroneous.” Village Nurseries v. Gould (In re Baldwin 11 Builders), 232 B.R. 406, 410 (9th Cir. BAP 1999). We cannot 12 conclude on this record that the bankruptcy court clearly erred 13 in finding the Option was bogus. This finding is not illogical, 14 implausible, or without any support in the record viewed in its 15 entirety. Hinkson, 585 F.3d at 1261-62. 16 B. The bankruptcy court did not abuse its discretion by not having the county planner testify or by admitting the 17 “forgery” hearsay testimony. 18 Trustee contends the bankruptcy court abused its discretion 19 when it “refused” to allow him the opportunity to call the county 20 planner, whose testimony would have impeached Robert’s testimony 21 on the key issue of his involvement with John’s efforts with the 22 DOT and to bring Galaxy to Lodi Airport. Despite Trustee’s 23 failure to disclose the county planner as a witness in the 24 pretrial order, the record clearly shows that the bankruptcy 25 court did not deny Trustee the opportunity to call him. The 26 court considered Trustee’s offer of proof regarding the planner’s 27 testimony and ultimately concluded that regardless of what he had 28 to say about Robert’s involvement with relocating Galaxy to Lodi
- 18 - 1 Airport, it would not rehabilitate what the court determined was 2 a bogus document. The court went further to say that even if 3 Robert was not being truthful about his involvement with the DOT 4 proceedings, the Option was still invalid because Cynthia never 5 signed it and never authorized anyone else to sign it on her 6 behalf, and to be a valid contract both signatures had to be 7 genuine. We see no abuse of discretion here. 8 Trustee also contends the bankruptcy court abused its 9 discretion by precluding the admission of relevant documentary 10 evidence demonstrating Robert’s involvement in John’s affairs 11 that would have discredited Robert and diminished the weight the 12 court could reasonably have placed on his testimony. Trustee 13 fails to state what “documentary evidence” the court failed to 14 admit, but we assume he is referring to the planner’s report from 15 1987. As the bankruptcy court noted, even if Robert was not 16 being truthful about his involvement with relocating Galaxy to 17 Lodi Airport or the DOT proceedings, the planner’s documentary 18 evidence could not render the Option valid. 19 Finally, Trustee contends that the bankruptcy court abused 20 its discretion by admitting the hearsay testimony that John told 21 Robert he forged the signatures on the Option because its 22 admission must have tainted the outcome of his case. “Hearsay” 23 is a statement, other than one made by the declarant while 24 testifying at the trial or hearing, offered in evidence to prove 25 the truth of the matter asserted. FRE 801(c). Unless falling 26 under an exception in FRE 803 and 804, hearsay statements are 27 inadmissible under FRE 802. The “forgery” hearsay testimony was 28 subject to the motion in limine, which the bankruptcy court
- 19 - 1 denied. A motion in limine is “any motion whether made before or 2 during trial to exclude anticipated prejudicial evidence before 3 the evidence is actually offered.” Luce v. United States, 4 469 U.S. 38, 40 (1984). 5 We agree with Trustee that the bankruptcy court erred by 6 allowing in the “forgery” hearsay testimony. However, on this 7 record, such error was harmless because it was not the only 8 evidence before the court on the genuineness of the signatures. 9 Early in the litigation, counsel for Defendants informed Trustee 10 by letter that the signatures on the Option were forgeries. 11 Admittedly, Defendants did not provide the basis for their 12 position. Nonetheless, both experts concluded that Cynthia’s 13 signature was not genuine. Moore could not conclusively 14 determine that Robert forged Cynthia’s signature, and Blanco 15 determined that Robert had not forged it. Cynthia testified that 16 she did not sign the Option and did not authorize or tell Robert 17 to sign it on her behalf. Robert testified that he did not sign 18 Cynthia’s name or his name. Finally, neither expert could rule 19 out the possibility that Robert’s signature was not the product 20 of cut-and-paste. On this record, the bankruptcy court could 21 plausibly have found the Option was invalid without the hearsay 22 testimony. 23 Accordingly, we cannot conclude the court abused its 24 discretion or that Trustee was unfairly prejudiced by allowing in 25 the “forgery” hearsay testimony. 26 C. The bankruptcy court applied the correct burden of proof. 27 Trustee contends the bankruptcy court erred by applying a 28 clear and convincing standard of proof to his declaratory relief
- 20 - 1 action, rather than the required standard of preponderance of the 2 evidence. Under a preponderance of the evidence standard, the 3 trier of fact is simply required to believe that the existence of 4 a fact is more probable than its non-existence. Concrete Pipe 5 and Prods. of Cal., Inc. v. Constr. Laborers Pension Trust for 6 S. Cal., 508 U.S. 602, 622 (1993). 7 Trustee’s contention is purely conjecture. He points to 8 nothing specific in the record to support his assertion that the 9 bankruptcy court applied an improper burden of proof. We note 10 that during the trial, Trustee’s counsel stated that the burden 11 of proof in this case was preponderance of the evidence. The 12 bankruptcy court expressly agreed. Trial Tr. (May 12, 2011) 13 116:9-13. 14 We see nothing in the record to conclude that anything other 15 than a preponderance of the evidence standard was applied. 16 Because we conclude the bankruptcy court applied the proper 17 burden of proof, we need not address Trustee’s argument about 18 what the court might have determined with respect to the Option 19 if it had applied a preponderance standard. 20 VI. CONCLUSION 21 Based on the foregoing reasons, we AFFIRM. 22 23 24 25 26 27 28
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