FILED NOV 27 2023 NOT FOR PUBLICATION SUSAN M. SPRAUL, CLERK U.S. BKCY. APP. PANEL UNITED STATES BANKRUPTCY APPELLATE PANEL OF THE NINTH CIRCUIT
OF THE NINTH CIRCUIT
In re: BAP No. NC-23-1042-SGB PRINCESCA N. ENE, Debtor. Bk. No. 21-50901
PRINCESCA N. ENE, Appellant, v. MEMORANDUM* GINA R. KLUMP, Chapter 7 Trustee; PATRICE DARISME, Appellees.
Appeal from the United States Bankruptcy Court for the Northern District of California M. Elaine Hammond, Bankruptcy Judge, Presiding
Before: SPRAKER, GAN, and BRAND, Bankruptcy Judges.
INTRODUCTION
Chapter 71 debtor Princesca N. Ene appeals from an order approving
a compromise under Rule 9019 between chapter 7 trustee Gina R. Klump
* 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, and all “Rule” references are to the Federal Rules of Bankruptcy Procedure. and Ene’s former spouse Patrice Darisme. The compromise resolved a
claims dispute between Klump and Darisme regarding Darisme’s $5.4
million claim based on a prepetition family court judgment. At the time of
the bankruptcy filing, Ene’s appeal from the family court judgment was
pending (“Family Court Appeal”). The compromise reduced Darisme’s
claim to $3 million and subordinated it to the claims of Ene’s general
unsecured creditors. The compromise also resulted in the dismissal with
prejudice of the Family Court Appeal. Ene argues that Klump undervalued
the Family Court Appeal, which she believes would have decreased
Darisme’s judgment claim to less than $1 million.
Opposing a Rule 9019 settlement that reduces a creditor’s prepetition
judgment pending on appeal is an uphill battle. To state the obvious, entry
of judgment after a contested trial is conclusive evidence of the creditor’s
claim unless revised on appeal. Contesting the claim necessarily requires
the expenditure of scarce resources and further delays distributions to the
estate’s creditors. Klump sufficiently explained why she settled the estate’s
claim objection; the settlement significantly reduced Darisme’s judgment
and subordinated the claim to the other unsecured creditors’ benefit. In
making its ruling, the bankruptcy court identified the correct legal
standard for assessing the compromise. Ene has not asserted, let alone
established, that any of the bankruptcy court’s findings were illogical,
implausible, or without support in the record. Accordingly, we AFFIRM.
2 FACTS2
Ene filed her chapter 11 petition in July 2021. In her schedules, she
listed a total of $7.1 million in assets and $6.4 million in liabilities. Of the
liabilities, Ene listed Darisme as having a disputed judgment claim for
$4,591,121.00. Aside from secured debt of $303,391.00, most of Ene’s other
liabilities consisted of unsecured attorney’s fee claims held by a handful of
other creditors. She disputed most of the attorney’s fee claims.
In September 2021, Darisme filed his proof of claim based on the
family court judgment and attached the judgment and amended judgment
entered after trial as exhibits. As amended, the proof of claim asserted that
the following amounts were owed based on the judgment:
Description Citation to Amount amended family court judgment Damages under Cal. Fam. Code § 1101(g) for 10:8-9; $2,402,645.70 breach of fiduciary duty 12:1 Attorney’s fees 10:19; $176,141.41 15:22-23 Damages under Cal. Fam. Code § 1101(h) for 10:27-28; $1,805,291.50 breach of fiduciary duty, with oppression, 12:4 fraud, or malice Sanctions under Cal. Fam. Code § 271 11:11; $107,043.25 16:1-3 25% ownership interest in Nano Alloys 11:17-18 $785,519.00
2 We exercise our discretion to take judicial notice of documents electronically filed in the underlying bankruptcy case and adversary proceeding. See Atwood v. Chase Manhattan Mortg. Co. (In re Atwood), 293 B.R. 227, 233 n.9 (9th Cir. BAP 2003). 3 Additional award for cash paid from Nano 11:27 $100,000.00 Alloys and paid to Ene Fair rental value of residence of $1,933.00 per 12:13 $21,263.00 month from December 1, 2020 to October 1, 2021 Total $5,400,903.86
That same month, Darisme commenced a nondischargeability action
against Ene. Darisme alleged that some of the amounts the family court
awarded in its judgment were nondischargeable under § 523(a)(2), (a)(4),
(a)(6), and (a)(15).
In January 2022, the bankruptcy court granted Darisme’s motion for
appointment of a chapter 11 trustee, who promptly moved to convert the
case to chapter 7. In March 2022, the bankruptcy court granted the motion
to convert, and Klump was appointed the chapter 7 trustee.
In December 2022, Klump moved for approval of her compromise
with Darisme. She simultaneously moved to substantively consolidate into
Ene’s bankruptcy case certain non-debtor entities that Ene allegedly owned
and controlled. According to Klump, the family court judgment indicated
that Ene used these non-debtor entities to receive fraudulent transfers of
her assets to avoid having to give Darisme his share of the couple’s marital
assets. Klump additionally contended that Ene used funds putatively held
by these entities as if they were her own personal funds.
As for the compromise, Klump explained that her proposed
settlement with Darisme would fully and finally resolve their dispute
4 regarding his $5.4 million claim as well as a related lawsuit brought by
Nano Alloys, Inc. (“Nano”), one of the entities owned and controlled by
Ene subject to the substantive consolidation motion. Nano had asserted
claims against Darisme, and Darisme had filed crossclaims against Nano,
Ene, and others (collectively, “Nano Litigation”).
Under the settlement, the estate would allow Darisme a general
unsecured claim in the amount of $3 million against Ene’s estate (and
against any substantively consolidated entities). In addition to reducing his
claim by $2.4 million, Darisme agreed to subordinate his claim to those
allowed claims held by all other general unsecured creditors.3 But Klump
stated in her notice of the proposed compromise that allowance of
Darisme’s claim against the bankruptcy estate would be “without prejudice
to his claims as may be determined against the Debtor.” As Klump noted,
Darisme had previously filed a nondischargeability action against Ene.
As part of the proposed settlement, Klump and Darisme further
agreed to stipulate to the dismissal with prejudice of the Family Court
Appeal and the Nano Litigation. Additionally, Darisme agreed to consent
to substantive consolidation, and Klump acknowledged her statutory duty
under § 704(a)(6) to pursue any viable, non-frivolous, and advisable
objections to Ene receiving a discharge.
3 There is a reference in the compromise motion to certain subordinated tax penalties. Darisme’s allowed claim evidently was not being subordinated to the subordinated tax penalties. 5 In her declaration in support of the compromise, Klump detailed
why the compromise was in the estate’s best interests. She explained her
belief that the estate held roughly $7 million in assets in various defunct
entities, and that Darisme was the primary creditor based on his judgment.
Klump maintained that, absent settlement, numerous complex issues
would need to be further litigated and would require the services of
professionals with family law expertise, thereby engendering substantial
additional risk, cost, and delay in administering the chapter 7 estate.
Klump stated that child and spousal support, and the issues regarding
credits the former spouses might be required to give to each other, would
not be resolved by the settlement. These issues would be resolved in the
family court. According to Klump, however, the chapter 7 estate would
have no post-settlement stake in these issues. They would only affect Ene
and Darisme.
As for the allowance of Darisme’s claim in the amount of $3 million,
Klump and her professionals reviewed the Family Court Appeal and the
Nano Litigation. Based on their assessment of the litigation, Klump
concluded that allowance of Darisme’s claim in the agreed-upon amount of
$3 million was both reasonable and beneficial for the estate.
Ene opposed the compromise. First and foremost, she disputed
Klump’s assessment of the prospects of successful further litigation. Ene
had a much more optimistic view of the likely outcome of the Family Court
Appeal and the Nano Litigation. She projected that the appeal would lead
6 to reduction of the various sums awarded in the amended family court
judgment in the following specific amounts:
Description Amended Ene’s Projected Judgment Post-Appeal Amount Amount Damages under Cal. Fam. Code $2,402,645.70 $0 § 1101(g) for breach of fiduciary duty Attorney’s fees $176.141.41 $0 Damages under Cal. Fam. Code $1,805,291.50 $887,291.00 § 1101(h) for breach of fiduciary duty, with oppression, fraud, or malice Sanctions under Cal. Fam. Code § 271 $107,043.25 $107,043.25 25% ownership interest in Nano Alloys $788,519.00 $788,519.00 Additional award for cash paid from $100,000.00 $0 Nano Alloys and paid to Ene Fair rental value of residence of $21,263.00 Omitted from Ene’s $1,933.00 per month from December 1, projections without explanation 2020 to October 1, 2021 Total $5,400,903.86 $1,782,853.25 4
Ene maintained that her projections were supported by the contents
of a motion for new trial she prepared and filed seeking to challenge the
amended family court judgment. She attached a copy of this motion to her
declaration in support of her opposition to the compromise. Among other
things, she contended in her new trial motion that there was insufficient
evidence of malice to support most of the family court’s § 1101(h) award. 5
4 Ene calculated a different total—$994,334.25—but her total obviously omits the $718,519.00 included in Ene’s projections for 25% of Nano Alloys. 5 Neither the parties’ statements nor the record indicate when, whether, or how
7 Ene raised multiple additional arguments: (1) her projected outcome
of the appeal was the only correct one; (2) the proposed compromise only
would benefit Darisme; (3) Darisme was not giving anything of value in
exchange for the allowance of his claim in the amount of $3 million; (4) she
was being deprived of her “day in court” with respect to the Family Court
Appeal; (5) because the compromise left unresolved the issues of
nondischargeability, spousal support, child support, and when and how
each spouse should receive credits for marital property distributed in
accordance with the family court’s rulings, the compromise complicated
rather than simplified the lingering issues for litigation; (6) other general
unsecured creditors would be paid in full regardless of the compromise
(this argument seems to assume that Ene’s view of the prospects for a
successful Family Court Appeal would come true); (7) the core issue in the
bankruptcy case was a two-party dispute between Ene and Darisme that
should be resolved in family court and not by the bankruptcy court; and
(8) the compromise failed to balance the estate’s interests against Ene’s
interests. Most of these arguments were not supported by any reference to
evidence or law.
In her reply, Klump provided more detail regarding her analysis and
assessment of the prospects of prevailing in the Family Court Appeal. First,
she pointed out that Ene’s calculations effectively acknowledged that
the family court finally disposed of the new trial motion; however, Klump stated that the state court issued a tentative ruling to deny the motion. 8 Darisme was entitled to no less than $1,782,853.25. Additionally, Klump
specifically challenged Ene’s premise that Darisme would be denied any
recovery for her transfer of 50% of the ownership in Nano to third party
Wilson Eng.6 Klump explained that the family court had awarded damages
to Darisme for the loss of the community interest in Nano based on Ene’s
breach of fiduciary duty rather than recovering the loss as an avoidable
transfer from Ene. Klump conceded, however, that she believed the
community interest was overvalued as it did not account for $3.6 million in
tax liabilities. Klump agreed it was likely that the damages awarded to
Darisme for the loss of his community interest would be reduced from the
$2,402,645.70 awarded to $1,502,645.70.
Klump further rejected Ene’s exclusion of any attorney fees, or the
reimbursement for monies Ene had taken from Nano, awarded to Darisme
in the judgment. Based on her review, and the absence of a reasonable
justification by Ene, Klump believed there was no chance that these
damages would be reversed on appeal.
Based on her review of the appeal and the related documents,
including Ene’s new trial motion, Darisme’s response thereto, and the
family court’s tentative ruling denying the new trial, Klump maintained
that even after a “successful” appeal, the Darisme claim would end up
being allowed in an amount of somewhere between $2,847,513.66 and
6 Eng is one of the named cross-defendants in the Nano Litigation and the alleged recipient of the avoidable transfer of a 50% ownership interest in Nano. 9 $4,461,640.36. The ultimate amount of Darisme’s claim, according to
Klump, largely depended on whether some other valuation of the
community interest in Nano was required.
Klump also reiterated that the compromise would facilitate the
efficient administration of the estate and the substantive consolidation of
the non-debtor entities into the bankruptcy case. Klump believed that the
compromise ultimately would make it possible to pay in full all general
unsecured creditors other than Darisme.
On January 19, 2023, the bankruptcy court held hearings on both the
substantive consolidation motion and the compromise motion. The court
granted the unopposed substantive consolidation motion for the reasons
set forth in the motion.
As for the compromise motion, Ene rested on her papers. Counsel for
Darisme represented to the court that he and Klump had spent “significant
amounts of time” assessing the merits of the Family Court Appeal “and
that is in large part what persuaded the parties to resolve the issue in the
way that they have.” The bankruptcy court then made its findings of fact
and conclusions of law orally on the record. It identified the applicable
legal standard set forth in Martin v. Kane (In re A & C Properties), 784 F.2d
1377, 1381 (9th Cir. 1986), which required it to consider the following
factors: (1) the prospects of success in the litigation, (2) the difficulty of
collecting any resulting judgment, (3) the complexity of the litigation and
the attendant expense, inconvenience, and delay associated with it, and
10 (4) the “paramount interest of the creditors,” with “proper deference to
their reasonable views.” Id.
The court found that the second factor was inapplicable to this
compromise and that all the other A &C factors favored approval of the
compromise. The court essentially credited Klump’s assessment of the
litigation and rejected Ene’s more optimistic view. Among other things, the
court explained that Ene’s assessment failed to account for certain awards
and issues that necessarily would raise the aggregate amount of the post-
appeal judgment claim, even if Klump were to partially prevail on appeal.7
As for the complexity of the litigation, the court found that multiple
issues were being consensually resolved that otherwise would need to be
addressed in the state court litigation. According to the court, litigation of
these issues would be inherently expensive. And the need to retain special
counsel to represent the estate would take money from the pockets of the
estate’s creditors.
With respect to the fourth factor—the paramount interest of creditors
and deference to their reasonable views—the court observed that no
creditors had opposed the compromise and that the only objecting party
was Ene. The court additionally opined that capping and subordinating
7 As part of its ruling, the court declined to consider the contents of a late-filed declaration by Adam R. Bernstein filed on January 13, 2023. In addition to being tardily filed, the court noted that it contained non-expert opinion testimony and hearsay. Ene has forfeited any issues related to the exclusion of the Bernstein declaration by not raising them on appeal. 11 Darisme’s claim would enable the other general unsecured creditors to be
paid in full. The court further noted that, based on Klump’s projections,
Darisme’s anticipated recovery on its allowed subordinated claim would
be closer to $2.7 million than the $3 million allowed.
The court similarly rejected Ene’s complaint that the settlement was
not a global settlement and offered her no benefit. The court reasoned that
the surviving issues such as Darisme’s nondischargeability action, spousal
support, and child support did not implicate the estate’s interests or
involve the chapter 7 trustee. It further opined that spousal and child
support only could be decided in state court.
On January 27, 2023, the bankruptcy court entered its order
approving the compromise. Ene timely appealed.
JURISDICTION
The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334 and
157(b)(2)(A). We have jurisdiction under 28 U.S.C. § 158.
ISSUE
Whether the bankruptcy court abused its discretion when it
approved the compromise between Klump and Darisme.
STANDARD OF REVIEW
We review for an abuse of discretion the bankruptcy court’s
compromise order. Spark Factor Design, Inc. v. Hjelmeset (In re Open Med.
Inst., Inc.), 639 B.R. 169, 180 (9th Cir. BAP 2022), aff’d in two separate
decisions, Case No. 22-60017, 2023 WL 7123763, Case No. 22-60018, 2023 WL
12 7122577 (9th Cir. Oct. 30, 2023). The bankruptcy court abused its discretion
if it applied an incorrect legal rule or its factual findings were illogical,
implausible, or without support in the record. TrafficSchool.com v. Edriver
Inc., 653 F.3d 820, 832 (9th Cir. 2011).
DISCUSSION
A. Compromise standards.
Rule 9019(a) in relevant part provides that, “[o]n motion by the
trustee and after notice and a hearing, the court may approve a
compromise or settlement.” To approve a compromise, the bankruptcy
court must determine that it is “fair and equitable.” In re Open Med. Inst.,
Inc., 639 B.R. at 180 (citing In re A & C Props., 784 F.2d at 1381). For
purposes of Rule 9019, a proposed compromise is considered “fair and
equitable” when the bankruptcy court after considering the four A & C
Properties factors determines that it should approve the proposed
compromise. In re A & C Props., 784 F.2d at 1381. Those four factors are:
(a) The probability of success in the litigation; (b) the difficulties, if any, to be encountered in the matter of collection; (c) the complexity of the litigation involved, and the expense, inconvenience and delay necessarily attending it; (d) the paramount interest of the creditors and a proper deference to their reasonable views in the premises.
Id. (citations omitted). When assessing the compromise, a bankruptcy court
“need not rule upon disputed facts and questions of law, but rather only
canvass the issues. A mini trial on the merits is not required.” Burton v.
13 Ulrich (In re Schmitt), 215 B.R. 417, 423 (9th Cir. BAP 1997) (citations
omitted). “If the court were required to do more than canvass the issue[s],
there would be no point in compromising; the parties might as well go
ahead and try the case.” In re Open Med. Inst., Inc., 639 B.R. at 181 (quoting
Suter v. Goedert, 396 B.R. 535, 548 (D. Nev. 2008)).
As A & C Properties explained, “[t]he law favors compromise and not
litigation for its own sake, and as long as the bankruptcy court amply
considered the various factors that determined the reasonableness of the
compromise, the court’s decision must be affirmed.” In re A & C Props., 784
F.2d at 1381 (citations omitted). On the other hand, the trustee as the
proponent of the compromise bore the burden of demonstrating to the
bankruptcy court that the compromise was fair and equitable. Id.
B. Ene’s arguments on appeal.
1. The settlement does not affect future credits Ene and Darisme may have.
Ene first argues that the compromise should have fully resolved the
series of credits provided for in the amended family court judgment. But
apart from the claims involving Nano, the settlement left any lingering
questions concerning credits associated with the property division between
Ene and Darisme to be addressed outside of bankruptcy. Klump was aware
of these credits and the surviving litigation issues relating to them. She
exercised her business judgment to allow Darisme’s claim in the amount of
$3 million without attempting to resolve the complex issues arising from
14 the remaining property division and resulting credits, some of which
remained to be determined. As part of the compromise motion
proceedings, Klump provided a detailed breakdown of the credits at issue
which in total showed aggregate credits potentially owing to Darisme of
$2,903,133.85 and aggregate credits potentially owing to Ene of
$2,612,484.66. Thus, in the absence of modification of the family court’s
credit rulings, the net amount of the credits in favor of Darisme would be
$290,649.19 ($2,903,133.85 - $2,612,484.66 = $290,649.19). Ene has never
challenged Klump’s stated amounts.
In her opening appeal brief, Ene complained that the estate’s
settlement unfairly benefited Darisme to her detriment. Ene explained that
the failure to resolve the credits provided “Creditor with a greater recovery
than allowed under the Family Court judgment by approving Creditor’s
claims against the bankruptcy estate but not limiting the claims based on
the debit credit system of the Amended Judgment.”
We disagree. The compromise only addressed allowance of
Darisme’s claim for purposes of the trustee’s obligation to distribute estate
assets to the estate’s creditors. It specifically provided that the allowance of
Darisme’s claim in the amount of $3 million was for purposes of “full and
final satisfaction” of his claim against the estate and the entities to be
substantively consolidated. Critically, the allowance of his claim against the
estate was “without prejudice to his claims as may be determined against
the Debtor.” This necessarily cuts both ways. The family court’s ultimate
15 determination of the net credits will control whether Ene’s personal
liability increases or decreases. This only matters to the extent that some
part of Ene’s debt is determined to be nondischargeable. Indeed, the
bankruptcy court’s compromise order further specifically encapsulated this
concept by stating that, “the Settlement Agreement does not address or
resolve issues regarding assets not subject to Bankruptcy Court jurisdiction
or issues involving discharge of debts between Debtor and Patrice
Darisme.” 8
Ene doubtlessly would have preferred to require the estate to litigate
on her behalf or assist her in obtaining a better deal that limited her
potential exposure for personal liability in the event her debt to Darisme is
held to be nondischargeable.9 But this was not a material concern for the
8 Furthermore, we express no opinion as to the potential preclusive effect in the discharge action of the trustee’s dismissal of the family court appeal. See generally Delannoy v. Woodlawn Colonial, L.P. (In re Delannoy), 2018 WL 4190874, at *7-8 (9th Cir. BAP Aug. 31, 2018), aff'd, 833 F. App’x 116 (9th Cir. 2020). 9 The record indicates that Ene made no effort to pursue her pending family
court appeal after she filed her bankruptcy petition. At oral argument, Ene’s counsel was unable to point to anything in the record to suggest that she had sought to further the estate’s litigation of the appeal. Though she now makes a passing complaint that she has been denied her “day in court” with respect to her appeal, this is a consequence of her decision to file bankruptcy which divested her of control of the litigation. § 541(a). Moreover, there is nothing to suggest that Ene attempted to acquire the appeal rights or fund the estate’s litigation. Rather, Ene left the estate to litigate the appeal and Klump chose to settle it as part of her administration of the estate. See Delannoy v. Woodlawn Colonial, L.P. (In re Delannoy), 615 B.R. 572, 587 (9th Cir. BAP 2020), aff'd, 852 F. App’x 279 (9th Cir. 2021) (suggesting that debtors might forfeit defensive appeal rights by not seeking to preserve or pursue them while the bankruptcy case is pending but noting that even when debtors take such steps, the debtor’s voluntary election to file bankruptcy necessarily puts the appeal rights at risk of being sold or settled by a 16 chapter 7 trustee or for the bankruptcy court. Klump, and the court, were
obliged to put the creditors’ interests first. A & C Properties describes the
interests of creditors as “paramount.” In re A & C Props., 784 F.2d at 1381. It
additionally requires bankruptcy courts to give due deference to the
creditors’ views of the settlement and to preserve their rights. Id. at 1384.
This focus on the creditors’ interests necessarily disregards a chapter 7
debtor’s complaints that a settlement was neither “fair” to her, nor in her
best interest. Aguina v. Choong-Dae Kang (In re Aguina), 2022 WL 325579, at
*7 (9th Cir. BAP Feb. 3, 2022), aff'd, 2023 WL 195546 (9th Cir. Jan. 17, 2023)
(“In the context of a settlement, the trustee and the court must consider the
paramount interest of creditors and need not consider the debtor’s
interest.”); Isom v. Hopkins (In re Isom), 2020 WL 1950905, at *7 (9th Cir. BAP
Apr. 22, 2020), aff'd, 836 F. App’x 562 (9th Cir. 2020). 10
bankruptcy trustee to the ultimate detriment of such debtors). 10 Isom noted that to the extent the bankruptcy estate is solvent, the chapter 7
trustee also owes a fiduciary duty to the debtor. In re Isom, 2020 WL 1950905, at *7 n.5. But the mere possibility of a solvent estate does not mean that chapter 7 trustee must pursue litigation of questionable value for a debtor’s potential benefit at the creditors’ risk and expense. As we explained in Aguina:
All litigation is risky. Plaintiffs settle cases to gain the certainty of recovering something and avoid the risk of recovering nothing. But when the plaintiff is a bankruptcy trustee, creditors and the debtor have different tolerance for litigation risk. The rewards and risks of litigation fall unequally on creditors and debtors, because creditors must get paid in full before the debtor receives any distribution. Therefore, a settlement that produces money for creditors may be worthless to the debtor. This means that debtors often want the trustee to pursue risky litigation, rather than settle, in the hope that the recovery will be big enough to pay all 17 Ene maintains that the primacy of creditors’ interests is somehow
negated when, as here, creditors of the estate are few. But she has
presented no authority to support this novel proposition. Nor are we aware
of any.11
In short, the court properly considered the benefits of the proposed
settlement and did not abuse its discretion by approving the compromise
even though it did not resolve Ene’s personal liability, or her and
Darisme’s credits.
2. Ene failed to demonstrate any error with respect to the bankruptcy court’s compromise findings.
The bankruptcy court found that Klump’s settlement with Darisme
obviated the need for Klump to pursue uncertain litigation which was not
creditor claims in full and leave something for the debtor. If the gamble does not pay off and the litigation is unsuccessful, the creditors have lost the benefit of the settlement, while the debtor is no worse off (the debtor would have gotten nothing under the settlement and still gets nothing when the litigation fails).
In re Aguina, 2022 WL 325579, at *6 (emphasis added). 11 Ene further believes that the court should have denied approval of the
settlement because the issues involved can be characterized as a two-party dispute that must be resolved in state court. The “two-party dispute” argument is typically raised as evidence of the debtor’s bad faith supporting dismissal of the bankruptcy. See, e.g., Liebmann v. Goden, 629 F. Supp. 3d 314, 323–24 (D. Md. 2022), aff'd sub nom., Rullan v. Goden, 2023 WL 4787463 (4th Cir. July 27, 2023) (chapter 7 case); Angelo v. Touch Worldwide Holdings Ltd. (In re Angelo), 580 B.R. 862, 866–67 (W.D. Wash. 2017) (chapter 13 case); Sullivan v. Harnisch (In re Sullivan), 522 B.R. 604, 616–17 (9th Cir. BAP 2014) (chapter 11 case). Ene’s contention, even if true, in no way justifies impeding the chapter 7 trustee’s administration of the bankruptcy estate. 18 likely to prove as successful as Ene hoped. The court specifically found that
such litigation would be expensive and would delay the administration of
the estate. In contrast, the proposed settlement was likely to result in full
payment of all general unsecured creditors other than Darisme. This led
the court to conclude that the proposed settlement was in the best interest
of the estate’s creditors.
Ene disagrees with these findings. She claims that the benefits to the
creditors are illusory and that the harm to her is real because continued
litigation with Darisme necessarily would have led to reduction of
Darisme’s allowed claim to less than $1 million. But Ene has done nothing
to explain or demonstrate why the bankruptcy court’s decision was clearly
erroneous. Ene has failed to show why the court’s reliance on Klump’s
litigation assessment over her own was illogical, implausible, or without
support in the record. Neither appellant’s mere disagreement with the
bankruptcy court’s findings, nor the existence of some conflicting evidence
are sufficient to establish clear error. Valente v. Nowland (In re Valente), 2023
WL 3270877, at *8 (9th Cir. BAP May 5, 2023); Haig v. Shart (In re Shart),
2014 WL 6480307, at *13, 15-18 (9th Cir. BAP Nov. 19, 2014). Put differently,
“[w]here there are two permissible views of the evidence, the factfinder’s
choice between them cannot be clearly erroneous.” Anderson v. City of
Bessemer City, 470 U.S. 564, 574 (1985).
Klump sufficiently established that creditors’ interests would be best
served by the settlement with Darisme and that the allowance of his claim
19 in the amount of $3 million was fair and equitable under the circumstances.
Indeed, the settlement materially incorporated much of the proposed
benefits of the appeal and materially reduced the estate’s liability. Nothing
Ene has said in the bankruptcy court or on appeal demonstrates that the
bankruptcy court clearly erred in rendering its findings in support of
approving the compromise. As a result, we reject Ene’s argument to the
extent it challenges the bankruptcy court’s compromise findings. 12
Ene voluntarily chose to commence a bankruptcy case. The case was
duly converted to chapter 7. Put bluntly, in exchange for the benefits and
protections of bankruptcy, Ene accepted the risk that her assets would be
liquidated for the benefit of her creditors. As the chapter 7 trustee, Klump
was statutorily obligated to liquidate the estate’s assets and administer
them for the benefit of creditors. See §§ 704(a)(1), 726. Klump necessarily
controlled the administration of the estate’s assets, including pending
appeals and the decision whether to pursue such appeals or consensually
resolve them. Ene, therefore, is in no position to complain of the perceived
unfairness of the trustee’s resolution of her defensive appeal within the
administration of the chapter 7. See In re Delannoy, 615 B.R. at 584, 587.
12 Ene alternately argues that the bankruptcy court erred in approving the compromise because it was not a global settlement of all issues and failed to resolve the credits issues, spousal support, or child support. She further asserts that the negative effect of the settlement on her so dwarfs and outweighs any benefit to the estate that the court should not have approved the compromise. These arguments are nothing more than variations of the points addressed and rejected above. They fail for the same reasons. 20 The settlement between the bankruptcy estate and Darisme
efficiently resolved outstanding issues and claims that Klump reasonably
concluded had varying chances of success. The settlement further avoided
time and costs while materially reducing the creditor’s judgment amount
and ensuring payment in full of other creditors. Ene does not legitimately
argue otherwise. Under these circumstances, Ene’s belief that she was
adversely affected by the compromise is of little or no moment.
CONCLUSION
For the reasons set forth above, we AFFIRM.