In re: Sk Foods, L.P.

• Court: United States Bankruptcy Appellate Panel for the Ninth Circuit
• Decided: December 10, 2013
• Docket: EC-12-1624-JuKiPa
• Status: Unpublished

Opinion

FILED DEC 10 2013 1 SUSAN M. SPRAUL, CLERK 2 U.S. BKCY. APP. PANEL OF THE NINTH CIRCUIT

3 UNITED STATES BANKRUPTCY APPELLATE PANEL 4 OF THE NINTH CIRCUIT 5 In re: ) BAP No. EC-12-1624-JuKiPa ) 6 SK FOODS, L.P., ) Bk. No. EC-09-29162-RSB ) 7 Debtor. ) Adv. No. EC-11-02337-RSB ______________________________) 8 ) SK PM CORP., INC.; SCOTT ) 9 SALYER REVOCABLE TRUST; ) SSC&L 2007 TRUST; MONTEREY ) 10 PENINSULA FARMS, LLC; ) FREDERICK SCOTT SALYER, aka ) 11 Scott Salyer, in his capacity ) as Trustee for the Scott ) 12 Salyer Revocable Trust; ROBERT) PRUETT, in his capacity as ) 13 Trustee for the SSC&L 2007 ) Trust; FAST FALCON, LLC, ) 14 ) Appellants, ) 15 ) v. ) M E M O R A N D U M* 16 ) BRADLEY D. SHARP, Chapter 11 ) 17 Trustee, ) ) 18 Appellee. ) ______________________________) 19 Argued and Submitted on October 18, 2013 20 at Sacramento, California 21 Filed - December 10, 2013 22 Appeal from the United States Bankruptcy Court for the Eastern District of California 23 Honorable Robert S. Bardwil, Bankruptcy Judge, Presiding 24 _______________________ 25 26 * 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- 1 Appearances: Kimberly Anne Wright, Esq. argued for appellants; Kevin W. Coleman, Esq., of 2 Schnader Harrison Segal & Lewis LLP argued for appellee Bradley D. Sharp. 3 _________________________ 4 Before: JURY, KIRSCHER, and PAPPAS, Bankruptcy Judges. 5 Appellants, SK PM Corp., Inc. (SKPM), Scott Salyer 6 Revocable Trust (SSRT), the SSC&L 2007 Trust, Monterey Peninsula 7 Farms, LLC (MPF), Frederick Scott Salyer (Salyer) in his 8 capacity as Trustee for the SSRT, Robert Pruett in his capacity 9 as Trustee for the SSC&L 2007 Trust, and Fast Falcon, LLC (Fast 10 Falcon) (collectively, Defendants), appeal from the bankruptcy 11 court’s November 29, 2012 Partial Judgment in favor of appellee, 12 Bradley D. Sharp, chapter 111 trustee (Trustee) for debtor 13 SK Foods, L.P. (SK Foods). 14 In the Partial Judgment, the bankruptcy court decided on 15 Trustee’s motion for summary judgment (MSJ) that (1) SK Foods, 16 rather than SKPM and SSRT, owned the stock (SKFA Stock) of an 17 entity affiliated with SK Foods known as SK Foods Australia Pty. 18 Ltd. (SKFA) and (2) SK Foods, rather than the SSC&L 2007 Trust, 19 had the exclusive right to payment on an intercompany loan 20 (Intercompany Loan) made by SK Foods to SKFA (collectively, the 21 SKFA Stock and Intercompany Loan are referred to as the Assets). 22 Therefore, the bankruptcy court concluded that the Assets were 23 property of SK Foods’ estate. Having reviewed the voluminous 24 record, we AFFIRM. 25 1 26 Unless otherwise indicated, all chapter and section references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532 and 27 “Rule” references are to the Federal Rules of Bankruptcy Procedure and “Civil Rule” references are to the Federal Rules of 28 Civil Procedure.

-2- 1 I. FACTS AND PROCEDURAL HISTORY 2 SK Foods, SKFA, and defendants SKPM, SSRT, the SSC&L 2007 3 Trust, MPF and Fast Falcon were part of Salyer’s expansive 4 global network of related entities which included individual and 5 revocable trusts, partnerships, limited liability companies, 6 C Corporations, S Corporations and Trusts. 7 SK Foods, a California limited partnership, was one of the 8 largest producers of tomato products in the nation. SKPM, a 9 California corporation, was SK Foods’ general partner owning 10 55%. SSRT, a California trust, of which Sayler was the 11 beneficiary, was SK Foods’ limited partner owning 45%. SSRT 12 held 100% of SKPM’s shares. Salyer’s related entities in 13 Australia and New Zealand, including SKFA,2 were also part of 14 the tomato and vegetable processing industry and had corporate 15 relationships among each other and SKPM and SSRT. 16 Sayler formed the SSC&L 2007 Trust, a California trust of 17 which Salyer is also a beneficiary, to effectuate a transfer of 18 the Intercompany Loan from SK Foods to the trust. Sayler also 19 formed MPF, a California limited liability company, and Fast 20 Falcon, which was organized under the laws of Nevis, West 21 Indies, allegedly to shield assets such as the SKFA Stock and 22 Intercompany Loan from his creditors. 23 Ultimately, Sayler’s empire collapsed. In 2005, SK Foods 24 and Sayler became the subject of a criminal investigation by the 25 United States Department of Justice. This investigation 26 27 2 The Australian related entities were Cedenco JV Australia 28 and SS Farms Australia.

-3- 1 resulted in a criminal prosecution against Sayler for price- 2 fixing and other criminal acts. Sayler was convicted and 3 sentenced to prison. 4 In addition, SK Foods defaulted on its loans from its 5 largest secured lender, the Bank of Montreal (BMO). Although 6 BMO and SK Foods attempted a work out, refinancing was not an 7 option. SK Foods investigated a possible sale and considered 8 bankruptcy, but in BMO’s view, did neither in a timely manner. 9 On May 5, 2009, BMO filed involuntary chapter 11 petitions 10 against SK Foods and RHM Industrial/Specialty Foods, Inc. d/b/a 11 Collusa County Canning Co. (RHM). On May 7, 2009, SK Foods and 12 RHM filed voluntary chapter 11 petitions and the cases were 13 consolidated. On May 14, 2009, Sharp was appointed Trustee. 14 Not long after SK Foods’ bankruptcy filing, in the Fall of 15 2009, ANZ Bank placed SKFA and its affiliates in Australia and 16 New Zealand into receivership. ANZ Bank’s receiver subsequently 17 sold SKFA’s assets and, after paying the secured debt owed to 18 ANZ Bank, held a residue of more than $60 million for 19 distribution to SKFA’s remaining creditors and interest holders. 20 In May 2010, SKFA and its affiliates elected to proceed 21 with a voluntary liquidation and selected Sheahan Lock Partners 22 in Adelaide, Australia to serve as their liquidators 23 (Liquidators).3 On August 11, 2010, Mr. Sheahan and Mr. Lock 24 25 3 On February 7, 2011, Liquidators obtained recognition of 26 the Australian liquidation under Chapter 15 of the Bankruptcy Code in the Northern District of California Bankruptcy Court. 27 They then obtained orders permitting them to issue subpoenas for production of documents and depositions of witnesses in relation 28 (continued...)

-4- 1 were appointed as Liquidators for SKFA and its affiliates. 2 With funds obtained from the receiver, Liquidators had 3 enough money to pay all of SKFA’s creditors in full, including 4 the owner of the Intercompany Loan, and to pay on account of 5 SKFA Stock in excess of $32 million. Under the Australian 6 Corporations Act 2002 (Cth) (Corporations Act) s 501, any 7 surplus in SKFA must be distributed to the members 8 (shareholders) of the company in proportion to the shares held 9 by them, subject to modification under SKFA’s constitution, 10 which was its governing document. 11 Trustee submitted proofs of debt (POD) to Liquidators for 12 payment on account of the Assets. The SSC&L 2007 Trust and Fast 13 Falcon also submitted POD to Liquidators for the same. Trustee 14 maintained that SK Foods owned the Assets on the Petition Date 15 because (1) SK Foods was listed on SKFA’s company register as 16 the owner of the stock on the Petition Date and (2) there were 17 no documents evidencing a transfer of the Intercompany Loan from 18 SK Foods to the SSC&L 2007 Trust prior to the Petition Date. 19 Defendants contended that, in contrast to SKFA’s company 20 register, SKPM and SSRT held the beneficial interest in the SKFA 21 Stock because various documents showed that SK Foods agreed to 22 transfer the stock to them. They further argued that the SSC&L 23 2007 Trust held the beneficial interest in the Intercompany Loan 24 25 3 (...continued) 26 to the ownership issues raised in this appeal. BMO sought to have the case dismissed. On April 13, 2012, the bankruptcy court 27 in the Northern District of California heard and denied BMO’s motion to dismiss and subsequently transferred the chapter 15 28 case to the Eastern District of California.

-5- 1 as evidenced by accounting entries and other documents which, 2 they argued, amounted to an equitable assignment. 3 In May 2011, Trustee commenced the instant adversary 4 proceeding against Defendants seeking to recover the SKFA Stock 5 and Intercompany Loan, which were allegedly transferred to or by 6 various entities owned and controlled by Salyer, under §§ 544, 7 548 and 550 and Cal. Civ. Code §§ 3439.04, 3439.05 and 3439.07. 8 Trustee also asserted a willful violation of the automatic stay 9 occurred through postpetition attempts to effectuate the 10 transfers. 11 In December 2011, Liquidators admitted Trustee’s POD for 12 the Intercompany Loan in part and rejected the SSC&L 2007 13 Trust’s and Fast Falcon’s POD. Liquidators found that Trustee’s 14 POD was subject to set-off and calculated the claim at 15 $10,005,528. From this amount, they proposed to withhold 16 $867,022 to be remitted to the Australian Taxation Office, 17 leaving a net amount of $9,138,506 to SK Foods. Trustee 18 commenced a proceeding in the Federal Court of Australia 19 disputing Liquidators’ decision in relation to the set off 20 amounts. 21 On December 15, 2011, the SSC&L 2007 Trust and Fast Falcon 22 commenced a proceeding in the Federal Court of Australia 23 appealing Liquidators’ decision to admit Trustee’s POD for the 24 Intercompany Loan. The Federal Court of Australia subsequently 25 dismissed that appeal. 26 In February 2012, Trustee commenced a proceeding in the 27 Federal Court of Australian seeking declaratory relief as to the 28 legal and beneficial ownership of the SKFA Stock.

-6- 1 In May 2012, Liquidators concluded that Australian law 2 applied to the determination of the ownership of SKFA Stock and 3 under Australian law, SKPM and SSRT obtained an 4 equitable/beneficial interest in the SKFA Stock in late January 5 2007 or early 2008. They also determined that an equitable 6 assignment of the Intercompany Loan occurred around the same 7 time as evidenced by book entries and various emails and 8 correspondence between SKFA and SK Foods’ advisors and 9 executives. Defendants rely upon Liquidators’ decision to 10 support their arguments in this appeal. 11 In June 2012, Liquidators revoked their decision to admit 12 Trustee’s POD for the Intercompany Loan. 13 On July 3, 2012, Trustee filed a first amended complaint 14 in this adversary proceeding asserting eight claims for relief: 15 (1) Declaratory Relief - Determination of Property of the Estate 16 (Intercompany Loan) - As to All Defendants; (2) Declaratory 17 Relief - Determination of Property of the Estate (SKFA Stock) - 18 As to All Defendants; (3) Willful Violation of the Automatic 19 Stay - As to SSRT, SKPM, SSC&L 2007 Trust, MPF, and Fast Falcon; 20 (4) Avoidance and Recovery of Unauthorized Post-Petition 21 Transfer - As to SSRT, SKPM, MPF, and Fast Falcon; 22 (5) Declaratory Relief - Determination that Trustee Holds 23 Superior Title to the Intercompany Loan - As to SSC&L 2007 Trust 24 and Fast Falcon; (6) Declaratory Relief - Determination that 25 Trustee Holds Superior Title to the SKFA Stock - As to SSRT, 26 SKPM, MPF and Fast Falcon; and (7) Avoidance and Recovery of 27 Fraudulent Transfers - SKFA Stock - As to SKPM, SSRT, MPF, and 28 Fast Falcon; and (8) Breach of Fiduciary Duty/Conversion -

-7- 1 Imposition of Equitable Lien/Constructive Trust - As to SKPM. 2 Trustee also sought a permanent injunction to restrain 3 Defendants from further interfering with his control over 4 property of the estate and requested the bankruptcy court to 5 appoint a post-judgment receiver to take possession of the 6 fraudulently transferred property. 7 A. Trustee’s Motion for Summary Judgment 8 On August 8, 2012, Trustee filed his MSJ contending there 9 was no genuine dispute as to any material fact with respect to 10 his claims. The material facts4 which formed the basis of 11 Trustee’s MSJ are as follows: 12 In January 2002, SK Foods purchased 100 shares of SKFA from 13 an entity known as Cerebos, a New Zealand Sayler-related entity. 14 On January 11, 2002, SK Foods executed a consent to become a 15 member (shareholder) of SKFA. 16 On February 25, 2002, SK Foods loaned $6.25 million to 17 SKFA. SKFA entered this transaction on its books as a loan from 18 SK Foods. 19 The Consolidated Balance Sheets for Year Ended October 31, 20 2006, showed the receivable due in the amount of $13,713,000. 21 The October 31, 2006 Notes to the Consolidated Financial 22 Statements showed that SK Foods was the 100% shareholder of 23 SKFA. 24 4 We do not recite all the facts contained in this record 25 pertaining to the transfers of the Assets from SK Foods to SKPM, 26 SSRT and SSC&L 2007 Trust. Instead, we have identified those facts which we consider material for purposes of this appeal. To 27 the extent more is needed, the parties are familiar with the background facts and the bankruptcy court’s tentative ruling 28 contains a comprehensive rendition of the facts.

-8- 1 In 2007, an accounting problem with the Assets surfaced 2 during the preparation of SK Foods audited financial statements. 3 Moss Adams LLP (Moss Adams), which had been retained to prepare 4 audited financial statements for SK Foods, informed SK Foods 5 that, because of its ownership of the Assets, U.S. accounting 6 rules required SKFA’s financial statements to be consolidated 7 with SK Foods’ statements.5 Consolidation of the Australian and 8 New Zealand affiliates’ assets, liabilities and operations into 9 those of SK Foods created a burdensome accounting task because 10 SKFA’s year-end differed from SK Foods and SKFA’s financial 11 statements were audited under Australian accounting standards 12 which required a conversion to U.S. accounting standards prior 13 to consolidation. Salyer sought to avoid the time and cost 14 involved with complying with the accounting rules and instructed 15 his financial and legal advisors to devise a strategy for doing 16 so. 17 In November 2007, it was decided that SK Foods would 18 distribute the SKFA Stock to its partners, SSRT and SKPM (the 19 Spin Off). It was also decided that the Intercompany Loan would 20 be assigned to the SSC&L 2007 Trust, a trust under which Salyer 21 was the trustee and beneficiary, in exchange for a promissory 22 note of like amount. Finally, SK foods would backdate the 23 5 24 This accounting problem is what has been described in the record as the “FIN 46” issue. Under FIN 46, a company must 25 report the assets, liabilities, and financial performance of any 26 entity in which the reporting company holds an ownership, contractual, or other pecuniary interest the value of which is 27 subject to change based upon changes in the fair value of the other entity’s assets (referred to as a “variable interest 28 entity”).

-9- 1 purported transfers to November 1, 2006 (the first day of its 2 fiscal year) to avoid the need to consolidate. 3 In January 2008, Salyer and others signed a management 4 representation letter (Management Representation Letter) to Moss 5 Adams stating: 6 We have distributed our investments in foreign subsidiaries (Cedenco entities) to the partners and 7 sold the net related intercompany receivables to a revocable trust with common ownership with the Company 8 effective November 1, 2006. We determined that the Company does not have a variable interest in the 9 Cedenco entities. 10 On January 15, 2008, Moss Adams issued its opinion in 11 connection with the June 30, 2007 audit of SK Foods. The notes 12 to the June 30, 2007 financial statements state: 13 The Partnership distributed the investments in foreign subsidiaries to the partners effective November 1, 14 2006, and sold the Partnership’s inter-company receivables to a revocable trust with common ownership 15 with the Partnership. . . . The total receivable amount due from the revocable trust is $18,293,000. 16 17 The June 30, 2007 audited financial statements reflected a 18 reduction in owner’s equity by approximately $4.8 million. The 19 Intercompany Loan remained an asset on the balance sheet but now 20 payable by the SSC&L Trust. 21 Despite the transfers which were purportedly “effective” on 22 November 1, 2006, as late as 2008 no one could put their hands 23 on any of the underlying transfer documents pertaining to the 24 Assets. 25 At some point between February 18, 2008, and mid-March 26 2008, Gary Perry (Perry), Sayler’s outside counsel, drafted an 27 assignment instrument (General Assignment and Transfer) intended 28 to effectuate a transfer of the SKFA Stock from SK Foods to SKPM

-10- 1 and SSRT. On March 28, 2008, Perry emailed the draft assignment 2 instrument to Lisa Crist, an SK Foods employee, requesting that 3 she give it to Salyer to execute. An October 27, 2008 email 4 from Jeanne Johnston, an SK Foods employee and Salyer’s 5 assistant, to Mark McCormick at SK Foods, stated that the 6 General Assignment and Transfer document had been “executed” and 7 attached a copy. 8 Months later, on May 15, 2009, ten days after SK Foods’ 9 Petition Date, Nick Frankish (Frankish), then the CFO of 10 Cedenco, transmitted the General Assignment and Transfer 11 document via facsimile to Henry John Heath (Heath), one of 12 SKFA’s directors. The facsimile transmission sheet begins with 13 the instruction “Looks like we need to advise ASIC [Australian 14 Securities and Investments Commission] of ownership change.” 15 On the same day, Heath sought advice from Deloitte Touche 16 Tohatsu (Deloitte) on what steps were necessary to effect the 17 purported ownership change from SK Foods to SKPM and SSRT in 18 relation to the stock. At that time, Ms. Morgan (Morgan), a 19 Client Manager in the Melbourne office of Deloitte, informed 20 Heath that she would need to prepare the documentation required 21 by Australian law and the SKFA constitution. Specifically, when 22 there was a change in membership, the company was required to 23 notify ASIC by filing a Form 484. 24 On July 16, 2009, Morgan sent by email the Form 484 to 25 Frankish and Heath. On July 19, 2009, the form was forwarded to 26 Richard Lawrence, SKFA’s former CEO and director, so that he, 27 Sayler and Heath could sign it. Morgan’s July 16, 2009 email 28 also attached other documents to effectuate the transfer of

-11- 1 ownership of the SKFA Stock including: (1) Standard Transfer 2 Forms for the SKFA Stock transfer dated 11/1/2006; (2) a letter 3 dated November 1, 2006, signed by Sayler and sent to the 4 directors at SKFA giving notice that he held 45 SKFA shares for 5 the benefit of SSRT (Notice Letter); (3) a Declaration of Trust 6 dated November 1, 2006, signed by Sayler which showed the 7 distribution of 45 shares of SKFA stock to Sayler as trustee for 8 the SSRT; (4) Share Certificates showing that SSRT was the 9 holder of 45 shares of the SKFA stock and SKPM was the holder of 10 55 shares of the SKFA stock, both “signed in accordance with the 11 constitution of the company on [11/1/2006]”; and (5) Minutes of 12 the Meeting of Directors (Minutes) showing that the directors of 13 SK Foods resolved to approve the transfer of the SKFA Stock to 14 SSRT and SKPM. The Minutes did not reflect the date on which a 15 meeting was held. 16 Despite all these documents purporting to effectuate the 17 transfer of SKFA Stock, as of the Petition Date, SKFA’s company 18 register showed SK Foods as a member of SKFA and ASIC’s database 19 showed that SK Foods owned the shares. 20 On August 18, 2009, Defendants filed Form 484 with the 21 ASIC, reflecting the transfer of SKFA Stock to SKPM and SSRT as 22 of November 1, 2006. 23 Documents purportedly relating to the Intercompany Loan 24 were also prepared. Perry prepared a Debt Assignment Agreement 25 dated November 1, 2006, whereby the SSC&L 2007 Trust agreed to 26 become an obligor on certain receivables. This document however 27 shows an agreement between SK Foods, the SSC&L 2007 Trust and 28 Cedenco Foods, Ltd., a New Zealand Company (Cedenco). Nowhere

-12- 1 is SKFA mentioned. 2 On January 14, 2008, Perry sent a copy of the executed 3 original Debt Assignment Agreement to Sayler for his records. 4 In March of 2009, Perry prepared an Accounts Receivable 5 Setoff Agreement. This agreement was entered into on March 24, 6 2009, between SK Foods, the SSC&L 2007 Trust and Cedenco and 7 purported to terminate the Debt Assignment Agreement dated 8 November 1, 2006. The parties agreed that the SSC&L 2007 Trust 9 would no longer have any liability on the previously assigned 10 receivables. During an examination by Liquidators on 11 October 13, 2011, Frankish testified that the purpose of the 12 agreement was to restore the Intercompany Loan to SK Foods to 13 allow SKFA to setoff certain trade debts SK Foods owed to SKFA 14 against the Intercompany Loan. 15 Through Bills of Sale dated January 17, 2009, SKPM and SSRT 16 sold their alleged respective interests in SKFA’s Stock to MPF. 17 MPF then sold 100% of SKFA’s Stock to Fast Falcon for 18 $1,000,000, effective June 29, 2009. The record indicates that 19 Sayler formed Fast Falcon so that he could protect assets held 20 by SK Foods and his other entities from his creditors. The 21 record also shows that Fast Falcon is wholly owned by the Hawker 22 Sydley Trust, a Cook Islands trust. The trustee of the Hawker 23 Sydley Trust is the Asia Trust Limited. 24 Many of actions taken by Defendants to effectuate the 25 transfers of the Assets and obtain distributions from 26 Liquidators occurred after the Petition Date. The SSC&L 2007 27 Trust and Fast Falcon submitted POD to Liquidators for payment 28 on account of the Assets. Defendants also submitted unsworn

-13- 1 declarations to Liquidators in December 2010 concerning their 2 ownership interests. They also appeared at creditors meetings 3 in December 2010 and February 2012 in San Francisco, CA, in 4 connection with SKFA’s chapter 15 proceeding, at which they 5 purported to exercise the rights of holders of the Assets. 6 After Liquidators admitted Trustee’s POD for the Intercompany 7 Loan in part, Defendants commenced a proceeding in the Federal 8 Court of Australia, challenging Liquidators’ decision and naming 9 Trustee as a defendant. Trustee contended that these acts were 10 in violation of the automatic stay. 11 B. The Bankruptcy Court’s September 26, 2012 Ruling on its Jurisdiction and Allowing Defendants Additional Time for 12 Discovery 13 Trustee originally scheduled the MSJ for hearing on 14 August 29, 2012, and re-noticed it for hearing on September 26, 15 2012. 16 On September 12, 2012, Defendants filed an opposition to 17 the MSJ contending, among other things, that the bankruptcy 18 court should dismiss or abstain from hearing the adversary 19 proceeding and let the Federal Court of Australia decide the 20 matter. The factual basis for Defendants’ argument was that 21 (1) SKFA was an Australian entity which had not appeared in the 22 adversary proceeding; (2) SKFA’s liquidation was under the 23 supervision of the Federal Court of Australia; (3) ownership of 24 the Assets was concurrently being litigated in Australia; and 25 (4) the rights and ownership issues were governed by Australian 26 law. Based on these facts, Defendants argued that (1) SKFA was 27 an indispensable party under Civil Rule 19 that could not be 28 joined because the bankruptcy court lacked personal jurisdiction

-14- 1 over it and (2) the bankruptcy court should abstain from hearing 2 the matter under the doctrines of international comity and forum 3 non conveniens. 4 Defendants also requested a continuance of the MSJ to 5 conduct discovery. According to Defendants, they requested a 6 stay of the adversary proceeding almost immediately after it was 7 filed, which was granted. Defendants maintained that they did 8 not conduct discovery during the stay which expired at the end 9 of June 2012 and, shortly thereafter, on August 1, 2012, Trustee 10 filed his MSJ. As further grounds for a continuance of the MSJ, 11 Defendants argued that the bankruptcy court entered a Scheduling 12 Order on August 9, 2012, which set a discovery cut-off date of 13 January 31, 2013. As a result, Defendants asserted it would be 14 unfair to hear the MSJ before that date. Finally, Defendants 15 contended that Liquidators gave them no documents related to 16 their investigation into ownership of the Assets6 and that 17 depositions of BMO employees were essential to oppose the MSJ 18 because BMO encouraged the Spin Off. 19 On September 26, 2012, the bankruptcy court issued a 20 21 6 Throughout 2011 and 2012, Liquidators investigated the circumstances surrounding the purported transfers of the SKFA 22 Stock to SKPM and SSRT and Intercompany Loan to SSC&L 2007 Trust. 23 They conducted extensive discovery, including taking at least seven depositions in the United States and in Australia, 24 interviewing numerous other witnesses, and obtaining the production of thousands of documents from Trustee, BMO, and other 25 members of Debtor’s secured lender group. Defendants were 26 represented by counsel at the United States examinations and were provided with all of the documents produced to Liquidators during 27 their investigation. Liquidators also provided Defendants with affidavits outlining in detail their investigation and 28 conclusions.

-15- 1 tentative ruling finding that Trustee’s claims against 2 Defendants all arose under Title 11 and therefore were “core” 3 matters that it could hear and determine. The court further 4 explained that although the ownership of the SKFA Stock was a 5 matter of foreign law, whether property was property of the 6 estate was governed by U.S. bankruptcy law. The bankruptcy 7 court concluded that it had jurisdiction over the Assets under 8 28 U.S.C. § 1334(e)(1), which gave it exclusive jurisdiction 9 over property of the estate, wherever located, as of the 10 commencement of the case. The court did not address Defendants’ 11 arguments with respect to Civil Rule 19 or the doctrines of 12 international comity and forum non conveniens. 13 After hearing argument from Defendants’ counsel on why a 14 continuance of the MSJ and discovery was necessary, the 15 bankruptcy court gave them an additional thirty days to complete 16 discovery on a limited basis. The court concluded that 17 discovery related to BMO, i.e., what the bank officers knew or 18 said with respect to the Spin Off, was not relevant to the 19 claims Trustee asserted, which involved whether the transfers of 20 the Assets were proper, whether there was consideration paid, 21 and whether the transfers were fraudulent or avoidable.7 The 22 bankruptcy court excluded discovery with respect to BMO, but 23 allowed Defendants other limited discovery. The court continued 24 25 7 Mark M. McCormick an executive employee of SK Foods from 26 September 2007 through March 2009, submitted a declaration dated November 18, 2010. McCormick stated that BMO specifically 27 requested that the Australian entities be separate from U.S. operations because they were not part of the borrowing group in 28 the USA.

-16- 1 the MSJ hearing to November 7, 2012, and then to November 29, 2 2012. 3 C. The Bankruptcy Court’s Ruling on Trustee’s MSJ 4 On November 28, 2012, the bankruptcy court issued a lengthy 5 and comprehensive tentative ruling granting Trustee’s MSJ on the 6 first, second, third, fifth and sixth claims for relief. In its 7 tentative, the court certified that its partial summary judgment 8 was a final judgment. 9 On November 29, 2012, the bankruptcy court heard the 10 matter. On the same day, the court entered an order granting 11 the MSJ in part and entered Partial Judgment for Trustee. The 12 bankruptcy court also entered a Letter of Request on the same 13 day addressed to the Justices of the Federal Court of Australia, 14 seeking to have them recognize the Partial Judgment and order 15 Liquidators to do the same.8 Defendants timely appealed from 16 the Partial Judgment. 17 18 19 8 20 On May 30, 2013, in apparent recognition of the Partial Judgment, the Federal Court of Australia entered judgment in 21 favor of Trustee in parallel litigation between Defendants and Trustee in that court over who owns the Assets. The Federal 22 Court of Australia found that the Partial Judgment barred 23 Defendants from relitigating the ownership dispute. SK Foods LP v SK Foods Australia Pty Ltd (In Liq) (No. 3) [2013] FCA 526 24 (Austl.), 2013 WL 2326997. We take judicial notice of the Federal Court of Australia’s decision in the parallel litigation 25 pursuant to Fed. R. Evid. 201. See United States ex rel. 26 Robinson Rancheria Citizens Council v. Borneo, Inc., 971 F.2d 244, 248 (9th Cir. 1992) (courts may take notice of proceedings 27 in other courts, both within and without the federal judicial system, if those proceedings have a direct relation to matters at 28 issue).

-17- 1 II. JURISDICTION 2 The bankruptcy court had jurisdiction over this proceeding 3 under 28 U.S.C. §§ 1334 and 157(b)(2)(A) and (K). We have 4 jurisdiction under 28 U.S.C. § 158. 5 III. ISSUES 6 A. Did the bankruptcy court abuse its discretion by 7 ruling on the MSJ without giving Defendants sufficient time to 8 conduct discovery relevant to their case? 9 B. Did the bankruptcy court abuse its discretion when it 10 refused to dismiss the adversary proceeding on the grounds that 11 SKFA was a necessary and indispensable party under Civil 12 Rule 19? 13 C. Did the bankruptcy court properly exercise its 14 jurisdiction to determine the ownership of the Assets when those 15 issues were being litigated in SKFA’s Australian liquidation 16 proceeding? 17 D. Did the bankruptcy court err in deciding that the 18 Assets were property of SK Foods’ bankruptcy estate? 19 E. Did the bankruptcy court err in deciding that the 20 Trustee could avoid the prepetition transfers of property of 21 SK Foods under § 544(a)(1)? 22 IV. STANDARDS OF REVIEW 23 We review under an abuse of discretion standard the 24 bankruptcy court’s: (1) refusal to permit further discovery 25 before ruling on a MSJ; (2) determinations under Civil Rule 19; 26 and (3) refusal to abstain based on international comity. 27 Cont’l Ins. Co. v. Thorpe Insulation Co. (In re Thorpe 28 Insulation Co.), 671 F.3d 1011, 1024 (9th Cir. 2012)

-18- 1 (discovery); Am. Greyhound Racing, Inc. v. Hull, 305 F.3d 1015, 2 1022 (9th Cir. 2002) (Civil Rule 19); Sarei v. Rio Tinto, PLC, 3 487 F.3d 1193, 1211 (9th Cir. 2007) (comity). A bankruptcy 4 court abuses its discretion by identifying an incorrect legal 5 standard, or by applying the correct standard illogically, 6 implausibly, or in a manner without support in inferences that 7 may be drawn from facts in the record. United States v. 8 Hinkson, 585 F.3d 1247, 1251 (9th Cir. 2009) (en banc). 9 We review de novo choice of law questions, the bankruptcy 10 court’s decisions on summary judgment and whether property is 11 property of the estate. Mazza v. Am. Honda Motor Co., 666 F.3d 12 581, 589 (9th Cir. 2012) (choice of law); Ghomeshi v. Sabban 13 (In re Sabban), 600 F.3d 1219, 1221–22 (9th Cir. 2010) (summary 14 judgment); White v. Brown (In re White), 389 B.R. 693, 698 (9th 15 Cir. BAP 2008) (property of the estate). The bankruptcy court’s 16 determination that Trustee was entitled to avoid the prepetition 17 transfers of the Assets under § 544(a) is a conclusion of law. 18 A.O. Smith Water Prods. Co. v. Varner (In re Varner), 219 B.R. 19 867, 869 (9th Cir. BAP 1998). 20 V. DISCUSSION 21 On appeal, Defendants attempt to obtain reversal on a 22 non-merits and merits basis. In effect, Defendants seek 23 reversal on non-merits grounds such as forum non conveniens, 24 comity, and the “first to file” rule contending that the 25 bankruptcy court erred by reaching the merits of the case. On 26 the merits, Defendants argue that under Australian law, the 27 requirements for an equitable transfer of the Assets were met as 28 a matter of law. We discuss each argument in turn.

-19- 1 A. Premature Summary Judgment: Opportunity for Discovery 2 Defendants’ first ground for reversal is that the 3 bankruptcy court’s ruling on the MSJ was premature. Defendants 4 complain that the bankruptcy court gave them insufficient time 5 to conduct discovery when the court’s own Scheduling Order set a 6 January 13, 2012 discovery deadline. Defendants further assert 7 that the bankruptcy court erred in limiting their discovery to 8 depositions of persons favorable to Trustee and excluding 9 depositions of BMO employees when BMO’s knowledge of the Spin 10 Off was the crux of their defense. We are not persuaded. 11 A bankruptcy court abuses its discretion in denying 12 discovery before ruling on a MSJ only if “the movant diligently 13 pursued its previous discovery opportunities, and can 14 demonstrate that allowing additional discovery would have 15 precluded summary judgment.” In re Thorpe Insulation Co., 16 671 F.3d at 1024.9 On this record, Defendants did not meet 17 their burden under either prong. 18 Defendants did not demonstrate that they diligently pursued 19 previous discovery opportunities. Defendants contend a stay of 20 the adversary proceeding was imposed, but nowhere is there a 21 22 9 Defendants’ request for a continuance of the MSJ was 23 raised in their opposition to the MSJ. Generally, a party opposing a motion for summary judgment on the ground that further 24 discovery is necessary is required to file a motion under Civil Rule 56(d). Brae Transp., Inc. v. Coopers & Lybrand, 790 F.2d 25 1439, 1443 (9th Cir. 1986). However, the failure to file such a 26 motion is not a proper ground to deny discovery. See Garrett v. City and Cnty. of S.F., 818 F.2d 1515, 1518 (9th Cir. 1987). 27 Defendants’ failure to file a formal motion under Civil Rule 56(d) was not discussed by the bankruptcy court nor does the 28 record suggest that this was a basis for the court’s ruling.

-20- 1 copy of such an order in the record. Therefore, we cannot tell 2 whether any stay prohibited Defendants from conducting discovery 3 in the first place. 4 In addition, Defendants do not dispute that they were 5 litigating the ownership of the Assets in the Australian SKFA 6 liquidation proceeding. The record shows that Liquidators had 7 sought and obtained recognition of the SKFA liquidation 8 proceeding in Chapter 15 so that they could conduct extensive 9 discovery on the ownership issues raised in this appeal and that 10 Defendants participated in that discovery with counsel. 11 However, Defendants offer no explanation why they did not 12 conduct their own Rule 2004 examination of BMO, or others, in 13 those proceedings. 14 Defendants also failed to demonstrate that discovery from 15 BMO would preclude summary judgment. At the September 26, 2012 16 hearing, the bankruptcy court asked Defendants’ counsel “what is 17 it with the employees of Bank of Montreal that you think will 18 aid your case? And what is it you anticipate to discover from 19 them?” Counsel answered by stating that BMO’s knowledge of the 20 Spin Off of the foreign entity, SKFA, from SK Foods was 21 necessary to assist them in proving their equitable assignment 22 claim.10 However, even assuming BMO’s knowledge of, or alleged 23 10 24 In Liquidators’ affidavit dated March 3, 2012, they reversed their decision in favor of Trustee. The affidavit 25 states that part of the reason for reversing their decision was 26 based on the discovery of a number of documents from BMO and Wells Fargo Bank concerning their knowledge of the Spin Off and 27 its effect. Liquidators stated in the affidavit that they would voluntarily make available for inspection by the parties to these 28 (continued...)

-21- 1 consent to, the Spin Off of SKFA, we agree with the bankruptcy 2 court that this knowledge is not relevant to the ownership 3 issues raised in this appeal. 4 Although Defendants did not meet their burden for a 5 continuance of the MSJ to conduct unlimited discovery to the 6 January 13, 2013 discovery deadline contained in the Scheduling 7 Order, the bankruptcy court exercised its discretion and gave 8 Defendants an additional thirty days to conduct limited 9 discovery. This is not a situation where the bankruptcy court 10 disregarded Defendants’ request for discovery all together and 11 simply ruled on the MSJ. See Brown v. Miss. Valley State Univ., 12 311 F.3d 328 (5th Cir. 2002) (reversing district court’s 13 decision on summary judgment when district court did not rule on 14 plaintiff’s request for discovery but granted summary judgment 15 on the grounds that there was insufficient evidence of 16 defendant’s involvement in a conspiracy, precisely the type of 17 evidence sought by plaintiff). In sum, under these 18 circumstances, we perceive no abuse of discretion. 19 B. Indispensable Parties: SKFA Australian Liquidators 20 Defendants’ second ground for reversal is that the 21 bankruptcy court failed to dismiss the adversary proceeding on 22 the ground that Liquidators and SKFA were necessary and 23 indispensable parties under Civil Rule 19. Civil Rule 19 24 provides in relevant part: 25 (a) Persons Required to Be Joined if Feasible. 26 10 27 (...continued) proceedings “all of these discovery documents, subject to any 28 obligations of confidentiality which may apply.”

-22- 1 (1) Required Party. A person who is subject to service of process and whose joinder will not deprive 2 the court of subject-matter jurisdiction must be joined as a party if: 3 (A) in that person’s absence, the court cannot accord 4 complete relief among existing parties; or 5 (B) that person claims an interest relating to the subject of the action and is so situated that 6 disposing of the action in the person’s absence may: 7 (i) as a practical matter impair or impede the person’s ability to protect the interest; or 8 (ii) leave an existing party subject to a substantial 9 risk of incurring double, multiple, or otherwise inconsistent obligations because of the interest. 10 (2) Joinder by Court Order. If a person has not been 11 joined as required, the court must order that the person be made a party. A person who refuses to join 12 as a plaintiff may be made either a defendant or, in a proper case, an involuntary plaintiff. 13 . . . . 14 (b) When Joinder Is Not Feasible. If a person who is 15 required to be joined if feasible cannot be joined, the court must determine whether, in equity and good 16 conscience, the action should proceed among the existing parties or should be dismissed. The factors 17 for the court to consider include: 18 (1) the extent to which a judgment rendered in the person’s absence might prejudice that person or the 19 existing parties; 20 (2) the extent to which any prejudice could be lessened or avoided by: 21 (A) protective provisions in the judgment; 22 (B) shaping the relief; or 23 (C) other measures; 24 (3) whether a judgment rendered in the person’s 25 absence would be adequate; and 26 (4) whether the plaintiff would have an adequate remedy if the action were dismissed for nonjoinder. 27 . . . . 28

-23- 1 Defendants never argued that Liquidators were necessary or 2 indispensable parties in the bankruptcy court. Therefore, this 3 argument is waived. Orton v. Hoffman (In re Kayne), 453 B.R. 4 372, 386-87 (9th Cir. BAP 2011) (issue not raised in bankruptcy 5 court is waived on appeal). However, Defendants made the Civil 6 Rule 19 argument with respect to SKFA in the bankruptcy court. 7 The bankruptcy court’s rulings on September 26, 2012 and 8 November 29, 2012, do not address this argument. We may, 9 however, consider Civil Rule 19 sua sponte. Provident 10 Tradesmens Bank & Trust Co. v. Patterson, 390 U.S. 102, 111-12 11 (1968) (“[A] court of appeals should, on its own initiative, 12 take steps to protect the absent party, who of course had no 13 opportunity to plead and prove his interest below.”). Since 14 there is no decision to review for abuse of discretion, we 15 address the issue as a question of law and examine it de novo. 16 To succeed on their claim, Defendants must establish under 17 Civil Rule 19 that (1) SKFA is a required party and (2) the 18 action cannot proceed, in equity and good conscience, without 19 it. Cachil Dehe Band of Wintun Indians of the Colusa Indian 20 Cmty. v. State of Cal., 547 F.3d 962, 969 (9th Cir. 2008). 21 Neither of these requirements was established here. A party 22 might be required under Civil Rule 19 for two alternative 23 reasons: (A) in that party’s absence, the court cannot accord 24 complete relief among existing parties; or (B) the party has a 25 legally protected interest in the proceedings. Civil 26 Rule 19(a)(1); Cachil, 547 F.3d at 970. 27 Although SKFA is not a party to the adversary proceeding, 28 complete relief is possible between the parties before this

-24- 1 court. See Pesch v. First City Bank of Dallas, 637 F. Supp. 2 1530, 1536-37 (N.D. Tex. 1986) (in dispute between plaintiff and 3 defendant over ownership of company’s stock, company was not a 4 real party in interest). Furthermore, Defendants fail to 5 discuss what legally protected interest SKFA has in this 6 dispute. From a practical perspective, it is difficult to 7 imagine how SKFA could assert any rights at all to the Assets if 8 it were joined in this proceeding. SKFA has asserted no claim 9 of ownership over the Assets nor does SKFA dispute its 10 obligation to pay the Intercompany Loan to someone or that 11 someone owns 100 shares of its stock. Cf. Salem Trust Co. v. 12 Mfrs’ Fin. Co., 264 U.S. 182, 190 (1924) (company was not 13 indispensable party and had no interest in dispute where real 14 parties in interest were arguing over assets held by the 15 company, whose “only obligation is to pay over the amount 16 deposited with it when it is ascertained which of the other 17 parties is entitled to it.”). 18 We conclude that SKFA is neither a necessary nor 19 indispensable party to this proceeding. We also discern no 20 prejudice to SKFA since this litigation has proceeded with the 21 existing parties and SKFA has not appeared on our doorstep 22 clamoring to get in. In short, Civil Rule 19 does not provide a 23 basis for reversal. 24 C. The Determination of Ownership of the Assets Was Properly Before the Bankruptcy Court 25 26 Defendants next seek reversal on the grounds that the 27 bankruptcy court abused its discretion in refusing to dismiss 28 Trustee’s adversary proceeding under the doctrines of forum non

-25- 1 conveniens, comity, and the “first to file” rule. Having 2 concluded that it had core jurisdiction over the ownership 3 issues, the bankruptcy court did not address any of these 4 arguments which relate to whether its exercise of that 5 jurisdiction was proper.11 6 While ordinarily we “do[ ] not consider an issue not passed 7 upon [by] the [bankruptcy court],” the decision to resolve a 8 question “for the first time on appeal is one left primarily to 9 the discretion of the courts of appeals, to be exercised on the 10 facts of individual cases.” Singleton v. Wulff, 428 U.S. 106, 11 120–21 (1976). We may resolve an issue not decided by the 12 bankruptcy court where “the proper resolution of that issue is 13 beyond any doubt.” Id. at 121. Further, we may resolve issues 14 which were not resolved [by the bankruptcy court] where, “both 15 parties have briefed and argued [the issue’s] merits,” and where 16 “the benefit of a [bankruptcy] court hearing is minimal because 17 proper resolution of the issue is clear.” United States v. 18 Brown, 739 F.2d 1136, 1145 (7th Cir. 1984). 19 1. Forum Non Conveniens 20 To prevail on a motion to dismiss on forum non conveniens 21 22 11 There is no dispute that the bankruptcy court had 23 jurisdiction to determine whether the assets were property of the estate. Zimmerman v. First Union Nat’l Bank, N.A. (In re Silva), 24 185 F.3d 992, 994-95 (9th Cir. 1999). Moreover, bankruptcy courts have jurisdiction over property of the estate located in a 25 foreign country. Hong Kong & Shanghai Banking Corp., Ltd. v. 26 Simon (In re Simon), 153 F.3d 991, 996 (9th Cir. 1998) (all property of the debtor, wherever located, is in custodia legis of 27 the bankruptcy court, including property outside the territorial jurisdiction of the United States). Therefore, the bankruptcy 28 court had jurisdiction to decide the merits of the dispute.

-26- 1 grounds, Defendants bear the burden of demonstrating an adequate 2 alternative forum and that the balance of private and public 3 interest factors favors dismissal. Carijano v. Occidental 4 Petroleum Corp., 643 F.3d 1216, 1224 (9th Cir. 2011). 5 Defendants generally aver that the Federal Court in 6 Australia is an adequate alternative forum because the SKFA 7 Stock is of an Australian company, SKFA, and the debt at issue 8 is located in Australia. However, nowhere do Defendants respond 9 to the bankruptcy court’s determination that the ownership 10 issues surrounding the Assets concerned property of SK Foods’ 11 estate which is a core matter. They do not explain why the 12 Australian court provides an adequate alternative forum to 13 adjudicate disputes involving core bankruptcy matters. We 14 cannot simply assume that this is so. Defendants thus failed to 15 establish a threshold requirement for the relief requested and, 16 therefore, their forum non conveniens argument fails as a matter 17 of law. 18 2. International Comity 19 Defendants next contend that the bankruptcy court erred by 20 refusing to consider principles of international comity before 21 exercising jurisdiction over the dispute. According to 22 Defendants, the bankruptcy court’s exercise of jurisdiction over 23 the dispute inevitably created potential conflicting judgments,12 24 25 12 Trustee’s proceeding in Australia evidently was adjourned 26 pending the outcome of the MSJ. Further, although Liquidators had allowed Defendants’ POD based on Defendants’ asserted 27 equitable ownership interest in the Assets, their decision was not a final binding decision. Under these circumstances, there 28 (continued...)

-27- 1 was a waste of judicial resources, affected the rights and 2 liabilities of indispensable parties,13 and encouraged forum 3 shopping. 4 Under the international comity doctrine, courts sometimes 5 defer to the laws or interests of a foreign country and decline 6 to exercise jurisdiction that is otherwise properly asserted. 7 See, e.g., Societe Nationale Industrielle Aerospatiale v. U.S. 8 Dist. Ct. for the S. Dist. of Iowa, 482 U.S. 522, 544 n.27 9 (1987) (“Comity refers to the spirit of cooperation in which a 10 domestic tribunal approaches the resolution of cases touching 11 the laws and interests of other sovereign states.”) 12 “International comity in transnational insolvency proceedings 13 must be considered in the context of bankruptcy theory.” 14 In re Simon, 153 F.3d at 998. “[T]he Code provides for a 15 flexible approach to international insolvencies dependent upon 16 the circumstances of the particular case.” Id. Depending upon 17 the circumstances, the bankruptcy court may proceed jointly with 18 a foreign court, or may choose to exercise its power to the full 19 extent of its jurisdiction in an appropriate case. Id. 20 A threshold inquiry for the doctrine to apply is that there 21 must be a true conflict between domestic and foreign law. Id. 22 at 999. “[W]hat [i]s required to establish a true conflict [i]s 23 an allegation that compliance with the regulatory laws of both 24 countries would be impossible.” Maxwell Commc’ns Corp. v. 25 12 26 (...continued) is little risk of conflicting decisions and inconsistencies. 27 13 We have concluded that there are no indispensable parties 28 to this litigation.

-28- 1 Societe Generale (In re Maxwell Commc’ns Corp.), 93 F.3d 1036, 2 1050 (2d Cir. 1996). 3 Defendants do not identify any true conflict between the 4 laws of California and Australia with respect to the underlying 5 dispute, nor do we discern one. Further, they made no showing 6 of a conflict between Australian law and our bankruptcy law 7 where extraterritorial application of § 541 expressly includes 8 all of the debtor’s property regardless of geographic location. 9 Accordingly, we conclude that Defendants have failed to show, as 10 a matter of law, that the threshold requirement for application 11 of the international comity doctrine applies. 12 3. First-to-File Rule 13 This rule has no application to this case. The “first-to- 14 file” rule is a generally recognized doctrine of federal comity 15 “which permits a district court to decline jurisdiction over an 16 action when a complaint involving the same parties and issues 17 has already been filed in another district.” Pacesetter Sys., 18 Inc. v. Medtronic, Inc., 678 F.2d 93, 94-95 (9th Cir. 1982). 19 However, the rule has never been applied where the two courts 20 involved are not courts of the same sovereignty. See Crosley 21 Corp. v. Hazeltine Corp., 122 F.2d 925, 929 (3d Cir. 1941), 22 cert. denied, 315 U.S. 813 (1942) (rule applies when two actions 23 are pending in courts of equal dignity within the judicial 24 system of a single sovereignty); see also Leomporra v. Jet Linx 25 Aviation, Inc., 2009 WL 1514517, at *2 n.2 (D. Minn. 2009); 26 Cliffs–Neddrill Turnkey Int’l–Oranjestad v. M/T Rich Duke, 27 734 F.Supp. 142 (D. Del. 1990) (“When related cases are before 28 two different sovereigns, the appropriate procedure is to permit

-29- 1 both jurisdictions to proceed, with any decision of one becoming 2 res judicata on the other.”). Therefore, Defendants’ first-to- 3 file argument fails as a matter of law. 4 D. The Merits: Trustee’s MSJ 5 We now reach the merits issues raised in this appeal. 6 1. Standards for Summary Judgment 7 In reviewing the bankruptcy court’s decision on a motion 8 for summary judgment, we apply the same standards as the 9 bankruptcy court. Summary judgment is properly granted “when 10 the movant shows that there is no genuine dispute as to any 11 material fact and the movant is entitled to judgment as a matter 12 of law.” Civil Rule 56(a), incorporated by Rule 7056; Celotex 13 Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). In making this 14 determination, conflicts are resolved by viewing all facts and 15 reasonable inferences in the light most favorable to the 16 non-moving party. United States v. Diebold, Inc., 369 U.S. 654, 17 655 (1962). “A party asserting that a fact cannot be or is 18 genuinely disputed must support the assertions by: (A) citing 19 to particular parts of material in the record . . .; or, 20 (B) showing that the material cited does not establish the 21 absence or presence of a genuine dispute, or that an adverse 22 party cannot produce admissible evidence to support the fact.” 23 Civil Rule 56(c). 24 2. Property of the Estate 25 Property of the estate includes “all legal or equitable 26 interests of the debtor in property as of the commencement of 27 the case.” § 541(a)(1). The debtor’s “equitable or legal 28 interests” in the property of the estate are “created and

-30- 1 defined by state law.” Wilson v. Bill Barry Enters., Inc., 2 822 F.2d 859, 861 (9th Cir. 1987) (citing Butner v. United 3 States, 440 U.S. 48, 55 (1979)). Upon the filing of a 4 bankruptcy petition, the rights of parties become fixed, subject 5 to the rights and remedies incorporated in the Bankruptcy Code. 6 In re Storm Tech., Inc., 260 B.R. 152, 155–56 (Bankr. N.D. Cal. 7 2001). We therefore consider, as we must, the rights of the 8 parties on the Petition Date. 9 The property of estate issues in this appeal concern 10 SK Foods’ transfer or assignment of (1) the SKFA Stock to SKPM 11 and SSRT and (2) the right to collect under Intercompany Loan to 12 the SSC&L 2007 Trust. 13 3. Transfer of the SKFA Stock 14 a. The Requirements for a Stock Transfer Under Australian Law 15 16 Under Australian corporate law,14 a company is required to 17 set up and maintain a register of members that complies with 18 Corporations Act s 169. See Corporations Act s 168.15 19 Membership in a company results from entry of a person’s name in 20 14 Under the Corporations Act s 5, ¶¶ 4, 7, each provision 21 of the Act applies, according to its tenor, in relation to acts 22 and omissions outside of the Australian jurisdiction, including all incorporated and unincorporated entities, whether formed or 23 carrying on business in Australia or not. SKFA Foods was formed pursuant to the Corporations Act. 24 15 The Corporations Act s 168 sets out the information that 25 must be recorded in the company’s register. Generally, that 26 information includes the name and address of each member, the date upon which and the number of shares allocated in each 27 allotment of shares that takes place, the number and class of shares held by each member and the amount paid or unpaid on those 28 shares.

-31- 1 the register of members. A person is a member of a company if 2 they: 3 (a) are a member of the company on its registration; or (b) agree to become a member of the company after 4 its registration and their name is entered on the register of members; or (c) become a member of the 5 company under section 167 (membership arising from conversion of a company from one limited by guarantee 6 to one limited by shares). 7 See Corporations Act s 231(b). 8 “In general, the company is not concerned with equitable 9 interests in the shares. The person entered in the register as 10 the holder of security is the legal owner of the security.” 11 Business Organisations (1993) 4.3 Company Finance Chapter 6 at 12 249. (Hereinafter, Business Organisations). Under Australian 13 law, Defendants’ asserted equitable rights in the SKFA Stock did 14 not give them the rights of membership. RE Exclusive Master 15 Book-Binding and Mfg. Pty. Ltd. (1977) 2 ACLR 549 (Austl.) (1977 16 WL 182319) (holder of unregistered shares had no entitlement in 17 liquidation of company); Re Indep. Quarries Pty. Ltd. (1993) 18 12 ACSR 188, 191 (Austl.) (parties not deemed member by virtue 19 of holding equitable interest in stock). 20 If there is a change in membership, transfer of the legal 21 title must be reflected in the company’s register and the 22 company is required to notify ASIC by filing a Form 484. See 23 Corporations Act s 178A. If there is a transaction pending, the 24 legal title to registered securities remains in the person 25 registered as the holder until a proper instrument of transfer 26 is registered by the company. Business Organisations at 249 27 (citing Sung Li Holdings Ltd. v Medicom Fin. Pty Ltd. (1995) 28 13 ACLC 955 (Austl.)).

-32- 1 It is undisputed that SK Foods was a member of record on 2 SKFA’s register since 2002 and a member of record as of the 3 Petition Date. The Corporations Act specifies that legal title 4 to SKFA’s shares was transferable from SK Foods to SKPM and SSRT 5 only by registering their names in SKFA’s company register. 6 That was not done here until August 18, 2009. Therefore, on the 7 Petition Date, by statute, SK Foods was the legal (registered) 8 owner of SKFA’s shares. 9 However, Corporations Act s 231(b) requiring the 10 registration of stock for purposes of membership does not define 11 “own” for purposes of contracts between private parties. “Like 12 any other property, company securities are, in general, capable 13 of being held subject to equitable interests of persons other 14 than the registered holder.” Business Organisations at 249. We 15 therefore consider whether the transfer of shares from SK Foods 16 to SKPM and SSRT was effective in equity under Australian law 17 and at what point in time. 18 b. The Requirements for An Equitable Assignment Under Australian Law 19 20 Under Australian law, an equitable assignment requires a 21 clear, manifest intention by the assignor to divest the assignor 22 of property and vest it in the assignee. ABB Austl. Pty. Ltd. v 23 Comm’r of Taxation [2007] FCA 1063 (Austl.). In addition, an 24 assignment or conveyance of property will be effective in equity 25 in two circumstances. The first occurs where the assignment or 26 agreement to assign is given for valuable consideration and that 27 consideration is paid or executed. Mid-City Skin Cancer and 28 Laser Ctr. v Zahedi-Anarak [2006] NSWSC 844 at [161] (Austl.)

-33- 1 (“a contract, for value, to assign legal property, effects an 2 equitable assignment when the consideration is paid or executed; 3 this is a case where equity regards as done that which ought to 4 be done. . . .”). Second, when the assignor has done everything 5 necessary to effect a transfer of legal title; i.e., all 6 remaining steps to transfer legal title may be effected by the 7 assignee without further involvement of the assignor. Corin v. 8 Patton (1990) 169 CLR 540 (Austl.) (1990 WL 1035673); see also 9 Norman v Fed. Comm’r of Taxation (1963) HCA 21 (Austl.) (the 10 general rule of equity is that an effective assignment occurs 11 only if the donor does all that, according to the nature of the 12 property, he must do to transfer the property to the donee). 13 The undisputed evidence shows that SK Foods failed to 14 effectively transfer an equitable interest in the SKFA Stock to 15 SKPM and SSRT prior to the Petition Date.16 The prepetition 16 evidence of the alleged transfer of the SKFA Stock consists of 17 accounting entries, the Management Representation Letter, and 18 the signed General Assignment and Transfer document, which was 19 prepared by Perry in March 2008. These documents fail to 20 demonstrate that there was a transaction that passed an 21 equitable property interest in the stock to SKPM and SSRT. 22 16 23 Because this matter arose on summary judgment, Defendants needed to provide sufficient evidence for a reasonable fact 24 finder to hold in their favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986) (“[T]here is no issue for trial unless 25 there is sufficient evidence favoring the non-moving party for a 26 jury to return a verdict for that party.”). Despite having the opportunity, Defendants did not provide sufficient evidence to 27 show that the purported transfer and assignment vested equitable title to the SKFA Stock in SKPM and SSRT prior to the Petition 28 Date.

-34- 1 First, the record does not show that SKPM and SSRT gave 2 consideration for the stock; no money changed hands. Although 3 SK Foods’ financial statement shows a reduction of owner’s 4 equity in the amount of $4.8 million, there was no reduction of 5 SK Foods’ liabilities. Without a reduction of liabilities, the 6 accounting entries do not show valuable consideration was paid 7 or executed. 8 Second, the Management Representation Letter cannot be 9 construed as a proper instrument of transfer (which requires a 10 simple writing under Australian law) nor was it delivered to 11 SKFA as required under the Corporations Act s 1071B(2). At 12 most, it states that the stock was distributed and it is 13 addressed to SKFA’s auditors. However, as demonstrated by the 14 evidence in the record, SK Foods had not prepared or executed 15 any instrument to actually transfer the SKFA Stock at that point 16 in time. 17 Finally, the General Assignment and Transfer document which 18 was attached to the October 27, 2008 email from Johnston to 19 McCormick is the earliest record of a signed copy of any 20 “transfer” document. However, standing alone, this document did 21 not transfer the SKFA Stock to SKPM and SSRT because SK Foods 22 had not done everything necessary to effectuate the transfer at 23 that point in time. Additional documentation to complete the 24 transfer was prepared postpetition. 25 In short, under Australian law, no effective transfer or 26 assignment of the SKFA Stock had occurred prepetition. As a 27 result, SK Foods held both the equitable and legal title to the 28 SKFA Stock on the Petition Date. Accordingly, the bankruptcy

-35- 1 court correctly found that the SKFA Stock was property of 2 SK Foods’ estate. 3 4. Transfer of the Intercompany Loan 4 Defendants fare no better with their argument that SK Foods 5 effectuated an equitable assignment of the Intercompany Loan to 6 the SSC&L 2007 Trust prepetition. The Debt Assignment Agreement 7 and Accounts Receivable Setoff Agreement are the only two 8 documents purporting to transfer the Intercompany Loan from 9 SK Foods to the SSC&L 2007 Trust. However, SKFA was not a party 10 to the Debt Assignment Agreement which instead named the New 11 Zealand entity Cedenco and the Debt Assignment Agreement does 12 not mention the Intercompany Loan. As a result, on its face, 13 this document does not show that SK Foods transferred its rights 14 in the Intercompany Loan to the SSC&L 2007 Trust. Further, the 15 Accounts Receivable Setoff Agreement effectively canceled the 16 Debt Assignment Agreement as of March 24, 2009. Therefore, to 17 the extent Defendants rely on the Debt Assignment Agreement as 18 evidence of the transfer, their argument fails. 19 “[T]here is no issue for trial unless there is sufficient 20 evidence favoring the non-moving party for a jury to return a 21 verdict for that party.” Anderson, 477 U.S. at 249. To enforce 22 an equitable assignment under Australian law, there must be 23 consideration and the assignor must have done everything 24 necessary to effect a transfer of legal title. Here, there is 25 no evidence of a document purporting to transfer or assign 26 SK Foods’ right to collect the Intercompany Loan to the SSC&L 27 2007 Trust, nor is there evidence that the SSC&L 2007 Trust gave 28 value to SK Foods for that right. Therefore, the SSC&L 2007

-36- 1 Trust did not meet its burden of establishing that there are 2 triable issues of fact with respect to the transfer of the 3 Intercompany Loan.17 Thus, as a matter of law, the Intercompany 4 Loan was property of SK Foods’ estate on the Petition Date. 5 5. Applicability of § 544(a) 6 Section 544 provides: 7 (a) The trustee shall have, as of the commencement of the case, and without regard to any knowledge of the 8 trustee or of any creditor, the rights and powers of, or may avoid any transfer of property of the debtor or 9 any obligation incurred by the debtor that is voidable by-- 10 (1) a creditor that extends credit to the 11 debtor at the time of the commencement of the case, and that obtains, at such time and 12 with respect to such credit, a judicial lien on all property on which a creditor on a 13 simple contract could have obtained such a judicial lien, whether or not such a 14 creditor exists; 15 (2) a creditor that extends credit to the debtor at the time of the commencement of 16 the case, and obtains, at such time and with respect to such credit, an execution against 17 the debtor that is returned unsatisfied at such time, whether or not such a creditor 18 exists; or 19 (3) a bona fide purchaser of real property, other than fixtures, from the debtor, 20 against whom applicable law permits such transfer to be perfected, that obtains the 21 status of a bona fide purchaser and has perfected such transfer at the time of the 22 commencement of the case, whether or not such a purchaser exists. 23 24 The § 544(a) rights of a trustee as a hypothetical bona fide 25 purchaser or judicial lien creditor are defined by state law. 26 17 27 Trustee did not seek summary judgment with respect to the amount of the Intercompany Loan that was payable to SK Foods nor 28 do we address that issue in this appeal.

-37- 1 Robertson v. Peters (In re Weisman), 5 F.3d 417, 420 (9th Cir. 2 1993); Siegel v. Boston (In re Sale Guar. Corp.), 220 B.R. 660, 3 669 (9th Cir. BAP 1998). 4 Here, after determining that Australian law applied,18 the 5 bankruptcy court found that even if the SKFA Stock was 6 transferred effective November 1, 2006, Trustee held a superior 7 title to it as a bona fide purchaser for value under § 544(a). 8 The court did not specify what subsection under § 544(a) it was 9 relying upon, but the only subsection of § 544(a) addressing 10 bona fide purchaser status is subsection (3) which relates to 11 real property. That subsection is inapplicable to personal 12 property.19 13 The court further found that SKPM’s and SSRT’s “simple 14 omission of properly registering the purported transferees on 15 the SKFA register of members as of the Petition Date renders the 16 [Trustee] the victor in the priority battle.” Implicit in the 17 bankruptcy court’s decision is that an unregistered transfer of 18 stock is an “unrecorded interest,” which is inferior to the 19 interest of a judicial lien or unsatisfied execution creditor. 20 However, under Australian law, an unregistered transfer of 21 stock standing alone does not change an assignee’s relative 22 18 23 Because the SKFA stock is of an Australian company, the applicable law is Australia’s. 24 19 But see Nat’l Bank of the Pac. v. W. Pac. Ry. Co., 108 P. 25 676 (Cal. 1910) (unregistered transfers of stock are valid as 26 against all the world, except subsequent purchasers in good faith, without notice); Farmers’ Nat’l Gold Bank v. Wilson, 27 58 Cal. 600 (Cal. 1881) (a purchaser under an execution sale, without notice of transfer, would take the stock free from the 28 claims of the transferee).

-38- 1 rights vis-a-vis an attaching or execution creditor. In 2 Australia, a judgment creditor must obtain a charging order. 3 The charging order only operates to charge the beneficial 4 interest of the person against whom the order is made. It is 5 not possible to obtain an effective charging order over 6 unregistered shares of stock where the person against whom the 7 order is made holds them as bare trustee.20 See Hawks v McArthur 8 [1951] 1 All E.R. 22 (Austl.). 9 In Hawks, the shareholder sold his shares to two persons in 10 contravention of provisions in the company’s articles. Because 11 of the contravention, the transfer was never registered, 12 although the purchasers had paid the shareholder the full 13 purchase price. A judgment creditor of the shareholder-seller 14 sought to execute on the shares still registered in the 15 shareholder-seller’s name. The court found that although the 16 stock was still in the shareholder-seller’s name, the 17 shareholder-seller had received something for the sale of the 18 shares and had executed a transfer under seal. Therefore, the 19 court concluded that the equitable rights of the purchasers 20 prevailed over the equitable or quasi-equitable rights of the 21 judgment creditor under the charging order, because at the time 22 when the charging order was obtained, the rights of the 23 purchasers had already accrued. 24 25 20 Similarly, in California, a judgment creditor who 26 attempts to levy against a debtor’s personal property in satisfaction of his debt obtains a lien only upon the debtor’s 27 interest. Where no actual interest is shown, the attaching creditor gets nothing. Henry v. Gen. Forming, Ltd., 33 Cal.2d 28 223, 226 (Cal. 1948).

-39- 1 The priority rule in Hawks does not assist SKPM and SSRT in 2 this case. To have priority over a judgment lien or execution 3 creditor, SKPM’s and SSRT’s equitable rights in the stock must 4 have accrued prior to the Petition Date, i.e., consideration 5 must have passed and SK Foods must have done everything 6 necessary to effectuate the transfer at that point in time.21 7 These requirements were not met. Thus, the transfer of the 8 SKFA Stock to SKPM and SSRT was not effective prepetition. 9 Under these circumstances, Trustee would prevail under 10 § 544(a)(1)-(2). Accordingly, we agree with the bankruptcy 11 court’s conclusion, albeit for different reasons,22 that as a 12 matter of law, Trustee’s rights and powers under § 544(a)(1)-(2) 13 would allow him to defeat any interest SKPM and SSRT may claim 14 in the SKFA Stock. 15 We do not perceive that a different analysis is warranted 16 for the Intercompany Loan. There was no effective prepetition 17 transfer of the right to collect under the Intercompany Loan as 18 evidenced by the lack of consideration and documentation.23 19 Therefore, § 544(a)(1)-(2) would give Trustee superior rights in 20 the loan. 21 22 21 23 Under California law the result would be the same. See generally Rony v. Yucca Water Co., 220 Cal.App.2d 613 (1963). 24 22 We may affirm on any ground supported by the record. 25 Lambert v. Blodgett, 393 F.3d 943, 965 (9th Cir. 2004). 26 23 Defendants did not assert a security interest in the 27 Intercompany Loan. Therefore, an analysis relating to the perfection of payment intangibles under the provisions of the 28 California Commercial Code is unnecessary.

-40- 1 6. Applicability of §§ 362 and 549 2 Under § 362(a), the filing of SK Foods’ bankruptcy petition 3 stayed any act by Defendants to, inter alia, obtain possession 4 of, perfect an interest in, enforce a lien against, exercise 5 control over, or take any other action to deprive SK Foods of 6 the SKFA Stock. In the Ninth Circuit, actions taken in 7 violation of the automatic stay are void. Schwartz v. United 8 States (In re Schwartz), 954 F.2d 569, 571 (9th Cir. 1992). 9 However, “[§] 362's automatic stay does not apply to sales 10 or transfers of property initiated by the debtor.” Id. at 574. 11 Instead, under § 549(a), the trustee may avoid a transfer of 12 property of the estate that occurs after the commencement of the 13 case and that was not authorized by the bankruptcy court. Aalfs 14 v. Wirum (In re Straightline Inv., Inc.), 525 F.3d 870, 877 (9th 15 Cir. 2008) (citing §§ 549(a)(1), (2)(B)). 16 Here, the record shows that other documents required to 17 complete the transfer of the SKFA Stock from SK Foods to SKPM 18 and SSRT under the Corporations Act and the SKFA constitution 19 were drafted in July 2009, two months after the Petition Date. 20 Attached to Morgan’s July 16, 2009 email to Frankish were the 21 Standard Transfer Forms, the Declaration of Trust, the Share 22 Certificates and the Minutes. These attempts to transfer the 23 stock were actions to deprive SK Foods of the stock 24 postpetition, undertaken by the related entities, not the 25 debtor, and are therefore void in violation of the automatic 26 stay. 27 Defendants make no arguments with respect to the bankruptcy 28 court’s findings regarding violations of the automatic stay on

-41- 1 appeal. “Issues not raised in the opening brief usually are 2 deemed waived.” Dilley v. Gunn, 64 F.3d 1365, 1367 (9th Cir. 3 1995). The bankruptcy court properly concluded that § 549 was 4 not implicated because the postpetition acts to transfer the 5 stock were not undertaken by the debtor. This conclusion was 6 not erroneous. 7 VI. CONCLUSION 8 For these reasons, we AFFIRM. 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

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