FILED APR 30 2025 NOT FOR PUBLICATION SUSAN M. SPRAUL, CLERK U.S. BKCY.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-24-1070-FSG GIANG THANH DONG and MARY TRAN NGUYEN, Bk. No. 8:23-bk-10014-SC Debtors. GIANG THANH DONG; MARY TRAN Adv. No. 8:23-ap-01035-SC NGUYEN; CA PROPMGT LLC, Appellants, v. MEMORANDUM ∗ THOMAS H. CASEY, Chapter 7 Trustee, Appellee.
Appeal from the United States Bankruptcy Court for the Central District of California Scott C. Clarkson, Bankruptcy Judge, Presiding
Before: FARIS, SPRAKER, and GAN, Bankruptcy Judges.
INTRODUCTION
In an action brought by the chapter 7 1 trustee of the estate of debtors
Giang Thanh Dong and Mary Tran Nguyen (“Debtors”), the bankruptcy
∗ 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. 1 Unless specified otherwise, all chapter and section references are to the
Bankruptcy Code, 11 U.S.C. §§ 101–1532, “Rule” references are to the Federal Rules of Bankruptcy Procedure, and “Civil Rule” references are to the Federal Rules of Civil Procedure. 1 court entered summary judgment avoiding transfers made by Mary 2 under
§ 548(a)(1)(A) and (a)(1)(B). The court allowed the trustee to recover under
§ 550(a), not only the transferred property, but also the proceeds of a loan
secured by the transferred property and certain other property and assets
that were acquired with the loan proceeds.
Mary appeals, arguing that the court should not have granted
summary judgment on claims turning on her intent and that her brother
David (who, for a time, owned the property with Mary) should have been
joined as a necessary party.
We AFFIRM the portion of the judgment that provided for avoidance
of the transfer. But because § 550(a) permits recovery only of the
transferred property in kind or a money judgment for the value of the
property, we VACATE the portion of the judgment that allowed not only
for the recovery of the transferred property, but also assets generated by
the transferred property, i.e., the loan proceeds and real properties
purchased with those proceeds. We REMAND so the bankruptcy court can
consider whether there is any other legal basis for that recovery.
2For ease of reference and to prevent confusion, we refer to Mary Tran Nguyen as “Mary” and her brother David Nguyen as “David.” No disrespect is intended. 2 FACTS 3
A. Prepetition events. In late 2007, Mary’s parents, as trustees of the V & P Family Trust,
Dated April 8, 2006 (the “V & P Trust”), executed a grant deed transferring
real property located in Tustin, California (the “Tustin Property”) to Mary
and her brother, David, as trustees of the same V & P Trust.
Years later, Mary and her husband, Mr. Dong, became embroiled in a
dispute with Jonathan and Tracy Dickman, whose investment accounts
Mr. Dong managed. The Dickmans eventually sued Debtors in state court,
asserting causes of action for breach of contract and breach of fiduciary
duty and requesting damages in the amount of $2.5 million. About two
months after the Dickmans sued Debtors, the V & P Trust executed a
“corrective deed” transferring the Tustin Property to Mary and David as
tenants-in-common, granting each a fifty percent interest in the property.
In December 2021, CA PROPMGT LLC (“CPM”) was registered as a
limited liability company. According to CPM’s operating agreement,
Mr. Dong was the Chief Executive Manager and Mary and David were fifty
percent members of CPM.
After the creation of CPM, the parties executed a Declaration of Land
Trust Agreement (the “Trust Agreement”) creating the Williams Land
3 We have taken judicial notice of the bankruptcy court docket and various documents filed through the electronic docketing system. See O'Rourke v. Seaboard Sur. Co. (In re E.R. Fegert, Inc.), 887 F.2d 955, 957-58 (9th Cir. 1989); Atwood v. Chase Manhattan Mortg. Co. (In re Atwood), 293 B.R. 227, 233 n.9 (9th Cir. BAP 2003). 3 Trust. The Trust Agreement identified Mary and David as grantors and
beneficiaries and CPM as trustee. Schedules A and B of the Trust
Agreement identified the Tustin Property as trust property. In accordance
with the Trust Agreement, Mary and David executed a Trust Transfer
Deed transferring the Tustin Property into the Williams Land Trust.
In March 2022, Mary and David, individually and for CPM, executed
a promissory note in favor of HomeBridge Financial Services, Inc.
(“HomeBridge”) for the principal amount of $850,000. Around the same
time, CPM, in its capacity as trustee of the Williams Land Trust, transferred
the Tustin Property back to CPM. Upon transfer back to CPM, CPM
executed a Deed of Trust against the Tustin Property in favor of the lender.
Soon thereafter, CPM used $427,613.25 of the loan proceeds to
acquire two parcels of real property in Oklahoma City, Oklahoma (the
“Oklahoma Properties”). The remainder of the loan proceeds were used to
pay expenses in connection with the purchase of the Oklahoma Properties
or transferred into a TD Ameritrade account held by CPM.
B. Debtors’ bankruptcy filing and the adversary proceeding. On January 5, 2023, Debtors filed a joint chapter 7 petition. In their
concurrently filed schedules, Debtors identified an interest in the Tustin
Property as well as a $847,910 lien against the Tustin Property in favor of
Shellpoint Mortgage Servicing. Debtors also identified the Dickmans’ $2.5
million state court litigation claim.
4 In amended schedules, Debtors disclosed a fifty percent interest in
CPM. Debtors also identified the Oklahoma Properties and the TD
Ameritrade account, noting that those assets were owned by CPM.
In May 2024, Thomas H. Casey, as chapter 7 trustee (the “Trustee”),
filed a complaint against Debtors and CPM. Among other things, he sought
to recover the Tustin Property from the Williams Land Trust and CPM as
fraudulent transfers made with the intent to hinder, delay, or defraud their
creditors under § 548(a)(1)(A), and that the transfers were constructively
fraudulent under § 548(a)(1)(B). The Trustee did not name David as a
defendant in this adversary proceeding. The Trustee sought a judgment
avoiding the multiple transfers of the Tustin Property from Mary to CPM
and the Williams Land Trust. The Trustee further sought to recover for the
benefit of the estate the Tustin Property, the Oklahoma Properties, and any
remaining loan proceeds.
The Trustee filed a motion for summary judgment on his claims (the
“MSJ”). Debtors opposed the MSJ on three grounds.
First, Debtors contended that David held a fifty percent ownership
interest in the Tustin Property, was a beneficiary of the Williams Land
Trust, and held a fifty percent membership interest in CPM. Thus, Debtors
asserted that the Trustee was required to join David as a necessary party to
this adversary proceeding pursuant to Civil Rule 19.
Second, Debtors argued that the Trustee did not provide evidence
that Mary acted with intent to hinder, delay, or defraud when she
5 facilitated the subject transfers. In support of this contention, Mary
submitted a declaration in which she asserted that she “never intended to
defraud anyone.” Mary further asserted that the original transfer from the
V & P Trust to Mary and David was made because she was unable to get a
loan without first changing title to the Tustin Property and because counsel
advised her that they had to execute the corrective deeds to pursue
financing.
Third, Debtors contested the “constructively fraudulent” transfer
claims, but they have abandoned those arguments on appeal.
Before the hearing on the MSJ, the court issued a tentative ruling in
which it requested clarification from the Trustee on a few issues, including:
(i) the Trustee’s authority to avoid transfers involving non-debtor third
parties, i.e., David; and (ii) Debtors’ asserted factual dispute regarding
Mary’s intent.
At the hearing on the MSJ, the Trustee clarified that he was not
seeking to avoid the transfers of David’s fifty percent interest in the Tustin
Property, instead only requesting a judgment avoiding the transfers of
Mary’s fifty percent tenancy-in-common interest.
In April 2024, the court issued its findings of fact and conclusions of
law related to the MSJ. The court found that the Trustee had met its burden
of proving Mary’s actual intent to hinder, delay, or defraud because the
badges of fraud were present. Specifically, the bankruptcy court found
that: (i) Mary made the subject transfers after the Dickmans sued;
6 (ii) Debtors’ schedules indicated minimal assets compared to the value of
the Tustin Property; (iii) Debtors admitted that the Dickman litigation
forced them into bankruptcy; and (iv) Mary is a beneficiary and trustee of
the Williams Land Trust. The court held that Mary’s conclusory statement
that she lacked intent to defraud was “inapposite, based on the presence of
badges of fraud,” and, as a result, Debtors did not raise a genuine issue of
material fact with respect to Mary’s intent.
In addition, the court held that the subject transfers were
constructively fraudulent. Thus, the court concluded that the transfers
could be avoided under § 548(a)(1)(B) as well as § 548(a)(1)(A). The court
also concluded that David was not a necessary party because the Trustee
was not seeking to avoid the transfers of David’s interests in any assets.
The court entered a judgment in accordance with its findings of fact
and conclusions of law. The initial judgment allowed the Trustee to recover
Mary’s fifty percent interest in: (i) the Tustin Property; (ii) the loan
proceeds; and (iii) the Oklahoma Properties. Subsequently, the court
entered an amended judgment that again allowed for the Trustee to
recover Mary’s fifty percent interest in the Tustin Property, and also
allowed the Trustee to recover all of the loan proceeds generated by
financing the Tustin Property and both Oklahoma Properties in full (the
“Amended Judgment”).
Debtor timely appealed. After the Panel held oral arguments, the
bankruptcy court issued an “Indicative Ruling and Order Proposing to
7 Vacate the Order Granting Motion for Summary Judgment” (the
“Indicative Ruling”). In the Indicative Ruling, the court noted that the
portions of the Amended Judgment allowing the Trustee to recover 100%
of the Oklahoma Properties and the remaining loan proceeds were entered
in error. The court stated that it intended to amend the judgment only to
add a parcel number identifying the subject property, and that the original
judgment contained the accurate remedy determination by the court, i.e.,
allowing recovery of only fifty percent of the Tustin Property, the
Oklahoma Properties, and the loan proceeds, representing Mary’s fifty
percent interest in those assets. The court indicated that if the Panel
remanded, the court would vacate the Amended Judgment.
JURISDICTION
The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334 and
157(b)(2)(A) and (H). We have jurisdiction over the bankruptcy court’s
determination under 28 U.S.C. § 158.
ISSUES
1. Did the bankruptcy court err in holding on a motion for summary
judgment that Mary made the subject transfers with “actual intent
to hinder, delay, or defraud” under § 548(a)(1)(A)?
2. Was David a necessary party to the adversary proceeding under
Civil Rule 19(a)(1)?
3. Did the bankruptcy court err in its determination regarding
recovery under § 550(a)?
8 STANDARD OF REVIEW
We review the bankruptcy court’s decision to grant or deny a motion
for summary judgment de novo. Botosan v. Paul McNally Realty, 216 F.3d
827, 830 (9th Cir. 2000). We apply the same standards used by the
bankruptcy court under Civil Rule 56, as made applicable by Rule 7056.
Meade v. Cedarapids, Inc., 164 F.3d 1218, 1221 (9th Cir. 1999). Facts
determined for summary judgment proceedings are not entitled to the
clearly erroneous standard of appellate review. Audre, Inc. v. Casey (In re
Audre, Inc.), 216 B.R. 19, 25 (9th Cir. BAP 1997), overruled on other grounds as
recognized by Lopez v. Emergency Serv. Restoration, Inc. (In re Lopez), 367 B.R.
99, 104 n.2 (9th Cir. BAP 2007); Gertsch v. Johnson & Johnson, Fin. Co. (In re
Gertsch), 237 B.R. 160, 165 (9th Cir. BAP 1999).
DISCUSSION
Sections 548(a)(1)(A) and (B) allow a bankruptcy trustee to avoid
fraudulent transfers of a debtor’s property. Section 548(a)(1)(A) requires a
finding that the debtor transferred property “with actual intent to hinder,
delay, or defraud,” while § 548(a)(1)(B) allows for avoidance of transfers
without such a finding if certain conditions were present at the time of
transfer.
Section 550(a), in turn, governs recovery after a transfer is avoided.
The statute allows for recovery of either “the property transferred, or, if the
court so orders, the value of such property . . . .”
9 On appeal, Debtors dispute the court’s conclusion that Mary acted
“with actual intent to hinder, delay, or defraud” for purposes of
§ 548(a)(1)(A). But Debtors do not address the court’s alternative
conclusion that the subject transfers could be avoided as constructively
fraudulent transfers. Thus, as we discuss in section B, any error regarding
the finding of intent would be harmless; in any event, Mary’s declaration
was insufficient to create a genuine issue of material fact regarding Mary’s
intent. As we discuss in section C, Debtors’ arguments under Civil Rule 19
are also not persuasive.
Nevertheless, as we discuss in section D, the court’s judgment
allowed the trustee to recover, not only the “property transferred” (the
Tustin Property), but also other properties and assets acquired using the
transferred property, i.e., the proceeds of the loan secured by the Tustin
Property and the Oklahoma Properties that were bought with the loan
proceeds. Section 550(a) does not authorize recovery of the additional
properties and assets.
A. Summary judgment standard. Civil Rule 56(a), made applicable by Rule 7056, provides that
summary judgment is appropriate when “there is no genuine dispute as to
any material fact and the movant is entitled to judgment as a matter of
law.” A dispute over material facts is genuine where a reasonable jury
10 could return a verdict for the nonmoving party based on the evidence
presented. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
Once the movant has come forward with uncontroverted facts
entitling it to relief, the burden shifts to the nonmovant to establish that
there is a specific and genuine issue of material fact to warrant a trial. See
Celotex Corp. v. Catrett, 477 U.S. 317, 332 n.3 (1986) (Brennan, J., dissenting).
The nonmovant “may not rely on denials in the pleadings but must
produce specific evidence, through affidavits or admissible discovery
materials, to show that the dispute exists.” Barboza v. New Form, Inc. (In re
Barboza), 545 F.3d 702, 707 (9th Cir. 2008) (citation omitted). Conjecture,
surmise or “metaphysical doubt” by the nonmovant of the movant’s
assertions will not defeat a summary judgment motion. See Matsushita Elec.
Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986); In re Gertsch, 237
B.R. at 165 (even in cases where intent is at issue, summary judgment may
be appropriate if the nonmovant “rests merely upon conclusory
allegations, improbable inferences, and unsupported speculation”) (citation
omitted)).
In deciding whether material factual issues exist, the court must
resolve all ambiguities and draw all reasonable inferences against the
moving party. Matsushita Elec. Indus. Co., 475 U.S. at 587. But the court must
do so only if a nonmoving party submits specific evidence that contradicts
a fact specifically averred by the moving party. Lujan v. Nat'l Wildlife Fed'n,
497 U.S. 871, 888 (1990). If a motion for summary judgment is properly
11 supported and the nonmovant does not set forth specific facts showing a
genuine issue for trial, the court must grant summary judgment. Civil Rule
56(a); Rule 7056.
B. The bankruptcy court did not err in granting summary judgment on the avoidance issues. Debtors first dispute the bankruptcy court’s conclusion that Mary
effectuated the subject transfers with fraudulent intent. They argue that,
because Mary submitted a declaration denying that she harbored
fraudulent intent, the court should not have granted summary judgment
on that issue.
Even if the bankruptcy court erred in holding that there was no
genuine issue of material fact regarding Mary’s intent, the error would be
harmless. Debtors did not appeal the court’s holding that the subject
transfers were constructively fraudulent under § 548(a)(1)(B). Section
548(a)(1)(B) does not require a finding of intent. Reversal of the court’s
judgment of actual fraud under § 548(a)(1)(A) would not disturb the court’s
findings and conclusions regarding constructive fraud, and the Trustee
would still be able to avoid all the same transfers and recover all the same
assets.
In any event, the bankruptcy court did not err in concluding that
there was no genuine issue of material fact regarding Mary’s intent.
Although Debtors are correct that “[q]uestions involving a person’s state of
mind . . . are generally factual issues inappropriate for resolution by
12 summary judgment,” this is not a per se rule. Lovering Tubbs Tr. v. Hoffman
(In re O’Gorman), 115 F.4th 1047, 1058 (9th Cir. 2024) (emphasis added)
(quoting Braxton-Secret v. A.H. Robins Co., 769 F.2d 528, 531 (9th Cir. 1985)).
“[W]here the palpable facts are substantially undisputed, such issues can
become questions of law which may be properly decided by summary
judgment.” Id.
As explained by the Ninth Circuit, where the plaintiff provides
evidence of fraud, and the defendant fails to carry its “burden of raising a
genuine dispute that there was ‘significantly clear’ evidence of a ‘legitimate
supervening purpose’ for the transfer,” summary judgment is appropriate.
Id. at 1058-59 (quoting Acequia, Inc. v. Clinton (In re Acequia, Inc.), 34 F.3d
800, 806 (9th Cir. 1996)). Because “[i]t is often impracticable, on direct
evidence, to demonstrate an actual intent to hinder, delay or defraud
creditors,” bankruptcy courts “frequently infer fraudulent intent from the
circumstances surrounding the transfer, taking particular note of certain
recognized indicia or badges of fraud.” Id. at 1058 (quoting In re Acequia,
Inc., 34 F.3d at 805-06).
This Panel has affirmed several orders granting motions for summary
judgment on claims that involve a finding of fraudulent intent. See, e.g.,
Kresock v. U.S. Tr. (In re Kresock), BAP No. AZ-20-1270-BSL, 2021 WL
6097523, at *10 (9th Cir. BAP Dec. 22, 2021) (“conclusory statements of fact
and self-serving declarations are insufficient to create genuine issues of
material fact”) (citing United States v. Wilson, 881 F.2d 596, 601 (9th Cir.
13 1989)); Stasz v. Gonzalez (In re Stasz), BAP No. CC-06-1380-BPaMa, 2007 WL
7370101, at *5 (9th Cir. BAP Aug. 9, 2007) (no genuine issue of material fact
regarding intent where nonmoving party provided only a “bare assertion
to the contrary in her declaration”); Sarp v. Mork (In re Sarp), BAP No. WW-
06-1089-SPaMo, 2007 WL 7540976, at *5 (9th Cir. BAP Apr. 18, 2007) (“self-
serving, unsubstantiated statements” by the nonmoving party regarding
his intent were insufficient “[w]hen stacked against the very substantial
evidence presented by the trustee”); see also Joudeh v. Truppa (In re Truppa),
BAP No. CC-16-1281-KuFL, 2017 WL 1533381, at *9 (9th Cir. BAP Apr. 27,
2017) (aggregating additional cases where the Panel has affirmed a
bankruptcy court’s finding of fraudulent intent on a motion for summary
judgment).
Here, as in the cases referenced above, the only evidence offered by
Mary was a self-serving statement that she did not intend to defraud
anyone. Mary did not substantiate this conclusory statement with other
evidence, rebut the Trustee’s evidence regarding the badges of fraud, or
provide an alternative narrative regarding the purpose behind the subject
transfers. Under the authorities above, this was insufficient to raise a
genuine issue of material fact regarding Mary’s intent.
Further, the only explanation that Mary offered regarding her intent
related to the transfer of the Tustin Property from the V & P Trust to Mary
and David. Mary explained that an attorney advised the family to transfer
title so they could obtain a loan. However, the original transfer from the V
14 & P Trust to Mary is not a subject of this adversary proceeding; the Trustee
could not avoid that transfer because it was a transfer to Debtors. As a
result, Mary’s intent in connection with this transfer is irrelevant. Mary’s
declaration did not contradict the overwhelming circumstantial evidence
that she and David transferred the Tustin Property to CPM and the
Williams Trust in order to protect that property from the creditors of Mary
and her husband, Mr. Dong.
Debtors assert that the bankruptcy court was obligated to hear
Mary’s testimony at trial before making any findings regarding Mary’s
intent. They are incorrect. The court has no such obligation unless a
nonmoving party raises a genuine issue of material fact. Further, Debtors
have not articulated any testimony they would offer at trial that would
defeat the Trustee’s evidence regarding intent. At best, Debtors’
declarations and arguments amount to “metaphysical doubt,” which “will
not defeat a summary judgment motion.” Matsushita Elec. Indus. Co., 475
U.S. at 586. 4
The court did not err in holding that Debtors did not raise a genuine
issue of material fact regarding Mary’s intent.
4 Debtors also argue that courts cannot make credibility determinations at the summary judgment stage. That may be true as a general proposition, but the bankruptcy court did not make any findings of credibility. Instead, the court was entitled to disregard Mary’s testimony because she only attempted to explain a different transfer and did not explain the questioned transfers at issue. 15 C. David was not a necessary party for purposes of Civil Rule 19(a). Pursuant to Civil Rule 19(a)(1), “[a] person who is subject to service
of process and whose joinder will not deprive the court of subject-matter
jurisdiction must be joined as a party” where the following is true:
(A) in that person’s absence, the court cannot accord complete relief among existing parties; or
(B) that person claims an interest relating to the subject of the action and is so situated that disposing of the action in the person’s absence may:
(i) as a practical matter impair or impede the person’s ability to protect the interest; or
(ii) leave an existing party subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations because of the interest.
“There is no precise formula for determining whether a particular
nonparty should be joined under Rule 19(a)[.] The determination is heavily
influenced by the facts and circumstances of each case.” EEOC v. Peabody
W. Coal Co., 610 F.3d 1070, 1081 (9th Cir. 2010) (quoting N. Alaska Env’t Ctr.
v. Hodel, 803 F.2d 466, 468 (9th Cir. 1986)).
Although Debtors cite to all three subsections of Civil Rule 19(a)(1) as
bases for requiring the joinder of David as a party to this adversary
proceeding, Debtors’ argument that David would somehow be prejudiced
by this litigation pertains only to Civil Rule 19(a)(1)(B)(i). Debtors do not
contend that the bankruptcy court was unable to accord complete relief
16 among the Trustee and Debtors. See Official Comm. Of Unsecured Creditors v.
JP Morgan Chase Bank, N.A. (In re M. Fabrikant & Sons, Inc.), 394 B.R. 721, 744
(Bankr. S.D.N.Y. 2008) (holding that the inquiry under Civil Rule
19(a)(1)(A) is limited to whether the court can grant complete relief to
existing parties and the “effect a decision may have on the absent party is
not material”). Nor do Debtors assert that excluding David places Debtors
at risk of incurring inconsistent obligations.
With respect to joinder under Civil Rule 19(a)(1)(B)(i), courts “focus[]
on the prejudice to the absent party if the litigation proceeds in its
absence.” Id. “The absentee must ‘claim a legally protected interest relating
to the subject matter of the action,’ and the impact of any adjudication must
be ‘direct and immediate.’” Id. (quoting Northrop Corp. v. McDonnell
Douglas Corp., 705 F.2d 1030, 1043 (9th Cir. 1983); Janney Montgomery Scott,
Inc. v. Shepard Niles, Inc., 11 F.3d 399, 407 (3d Cir. 1993)).
Debtors have not articulated an impact on David that is “direct and
immediate” and “legally protected.” Debtors’ sole argument is that David
holds a fifty percent interest in the Tustin Property, that he did not want to
be a co-owner with the Trustee, and that he feared that the Trustee would
seek to sell both his interest and Mary’s interest in the Tustin Property
pursuant to § 363(h). Debtors’ argument fails because David has no “legally
protected” right in not becoming a co-owner with the Trustee. When Mary
and Mr. Dong filed their bankruptcy petition, all of their interests in
17 property became property of their bankruptcy estate by operation of law. 5
This means that Mary’s interest in CPM and the Williams Land Trust, and
her indirect interest in the Tustin Property and the Oklahoma Properties,
came under the control of the Trustee, whether David likes it or not.
During the hearing on the MSJ, counsel for Debtors clarified that
David’s main concern was the potential for sale of the Tustin Property. But
the Trustee could not sell both Mary’s and David’s interests in the Tustin
Property without commencing and prevailing in a separate adversary
proceeding under § 363(h) and Rule 7001. David would be free to assert
any rights David may have in the Tustin Property in that adversary
proceeding.
Because Debtors have not articulated any “legally protected” impact
on David, either before the bankruptcy court or before this Panel, the
exclusion of David from this adversary proceeding did not run afoul of
Civil Rule 19(a)(1).
D. The legal basis of the court’s recovery decision is unclear. Section 550(a) provides that, if the trustee successfully avoids a
fraudulent transfer, the trustee may recover “the property transferred, or, if
the court so orders, the value of such property.” In other words, the trustee
can recover either the transferred property itself or a money judgment for
its value. But in this case, the bankruptcy court allowed the Trustee to
5Although there are some statutory exclusions from the property of the estate, Debtors do not contend that any exclusion applies to any of those property interests. 18 recover “the property transferred” (Mary’s interest in the Tustin Property)
and additional assets (the loan proceeds generated by the Tustin Property
and the Oklahoma Properties purchased with those proceeds).
The court did not provide a legal basis for its allowance of recovery
beyond the Tustin Property or its value. In both the original and the
Amended Judgment, the court references only § 550(a). However, the plain
language of § 550(a) expressly limits recovery to the transferred asset or a
money judgment for its value. Section 550(a) does not provide for the
recovery of what one might call proceeds of the transferred asset, such as
money borrowed against the transferred property after the transfer, or
other properties acquired with those loan proceeds.
There may be other legal grounds on which a trustee could recover
the proceeds of a fraudulently transferred property, but neither the Trustee
nor the bankruptcy court articulated them. The bankruptcy court may
address any such alternative theories on remand. For purposes of this
appeal, it is sufficient to say that § 550(a), standing alone, does not permit
recovery of anything other than the transferred property or a money
judgment for its value.
Even if there is a legal theory on which the Trustee could recover the
proceeds of the Tustin Property, we see no basis on which the Trustee
could recover all of those proceeds. This is because the Trustee can only
avoid the transfer of Mary’s fifty percent interest in the Tustin Property.
Allowing recovery of fifty percent of the transferred property but 100% of
19 its proceeds is both illogical and unjust to David, who owned the other fifty
percent of the Tustin Property.
As we have noted, the bankruptcy court has issued an Indicative
Ruling stating that, if it had jurisdiction to do so, it would vacate the
Amended Judgment. We are unwilling to remand the matter to the
bankruptcy court without providing further guidance, because simply
vacating the Amended Judgment could simultaneously go too far and not
far enough.
The Indicative Ruling may go too far because it provides that the
court will vacate the Amended Judgment in its entirety. But the court’s
determination on the avoidance issues was not error, so there is no reason
to vacate that aspect of the decision.
The Indicative Ruling does not go far enough because it would not
explicitly address both issues concerning the court’s recovery decision. The
Indicative Ruling demonstrates the court’s understanding that the Trustee
cannot recover the entirety of the Oklahoma Properties and the loan
proceeds because he was only entitled to avoid the transfer of Mary’s fifty
percent interest in the Tustin Property. But the Indicative Ruling does not
address the point that § 550(a) does not authorize the recovery of any
“proceeds” of a fraudulently transferred asset.
Consequently, we remand this matter for the bankruptcy court to
reconsider what the Trustee is entitled to recover and decide whether there
is a legal basis on which the Trustee can recover anything other than
20 Mary’s interest in the Tustin Property itself or a money judgment for the
value of that interest. 6
CONCLUSION
The bankruptcy court did not err in concluding that Debtors did not
raise a genuine issue of material fact regarding Mary’s intent and that
David was not a necessary party to the adversary proceeding. We therefore
AFFIRM the court’s judgment with respect to those conclusions. However,
the bankruptcy court’s determination regarding recovery of assets
exceeded the scope of § 550(a), and it is unclear if the bankruptcy court
relied on alternative theories allowing for the recovery of assets beyond
what is allowed under § 550(a). We therefore VACATE the portion of the
court’s judgment related to recovery under § 550(a) and REMAND this
matter for further proceedings conforming to this Memorandum.
6 On March 7, 2025, the Trustee filed a motion before this Panel for leave to correct the Amended Judgment entered by the bankruptcy court. Because we are vacating that judgment in part, we DENY the Trustee’s motion as moot. 21