Richard A. Marshack v. Linda Patow

• Court: Court of Appeals for the Ninth Circuit
• Decided: June 23, 2022
• Docket: 21-60051
• Status: Unpublished

Opinion

NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS JUN 23 2022 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT

In re: JAMES CHRISTOPHER PATOW, No. 21-60051

Debtor, BAP No. 20-1285

------------------------------ MEMORANDUM* RICHARD A. MARSHACK, Trustee,

Appellant,

v.

LINDA PATOW, as Trustee of the Alvin and Linda Patow 2006 Trust; JAMES CHRISTOPHER PATOW,

Appellees.

Appeal from the Ninth Circuit Bankruptcy Appellate Panel Gan, Taylor, and Lafferty III, Bankruptcy Judges, Presiding

Argued and Submitted June 8, 2022 Pasadena, California

Before: M. SMITH, BADE, and VANDYKE, Circuit Judges.

Bankruptcy trustee Richard Marshack appeals the Bankruptcy Appellate

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. Panel’s (“BAP”) determination that debtor James Patow disclaimed his interest in a

family trust when he signed a document waiving that interest. The parties’

underlying dispute turns on whether James actually “transferred” his interest to his

mother instead of disclaiming it, and therefore committed a fraudulent and voidable

transfer under the Bankruptcy Code and California law. We have jurisdiction under

28 U.S.C. § 158(d) and affirm the BAP.

James Patow was a beneficiary of a trust (“Patow Trust”) created by his

parents Alvin and Linda Patow to efficiently transfer property when they died.

When Alvin died in 2007, the Patow Trust provided that the trust estate would be

divided into two separate trusts: a revocable trust for Linda (“Survivor’s Trust”) and

an irrevocable trust meant for James and his sister Jennifer upon Linda’s death

(“Bypass Trust”). Seven years after Alvin’s death, Linda determined that the Bypass

Trust was no longer necessary for tax purposes, and wished to transfer all of the

assets in the Bypass Trust to the Survivor’s Trust. Although Linda believed she

already had the authority to transfer the assets, out of an abundance of caution she

asked James and Jennifer to sign an agreement waiving their interests in the Bypass

Trust. After James filed for Chapter 7 bankruptcy, Marshack filed this adversary

proceeding and argued that when James signed the agreement waiving his interest

in the Bypass Trust, he committed a voidable fraudulent transfer because he

“transferred” his interest to Linda, to the detriment of James’s creditors.

2 We affirm the BAP because James disclaimed his interest in the Bypass Trust

under California law when he waived “any and all rights that [he] may have [had]

under the terms of the Trust.” The California Probate Code states that a “disclaimer”

is “any writing which declines, refuses, renounces, or disclaims any interest that

would otherwise be taken by a beneficiary.” Cal. Prob. Code § 265. A valid

disclaimer must be in writing, signed by the disclaimant, identify the creator of the

interest, describe the interest to be disclaimed, and state the disclaimer and the extent

of the disclaimer. Id. § 278. Here, James satisfied all of the requirements for a

disclaimer under California law: he signed a “writing” before a notary, the writing

identified Alvin and Linda Patow as the creators of the interest, and he stated that he

agreed to “hereby waive any and all rights that [he] may have under the terms of the

Trust, including … [t]he right to receive the assets of [the] Bypass Trust upon the

death of Linda E. Patow.”1 Interpreting the words as written, it is clear that James

unilaterally renounced his interest in the Bypass Trust when he “waived” all of his

rights in the Trust. Because James satisfied California’s requirements for a valid

disclaimer, signed a document disclaiming his interest in the Bypass Trust, and did

1 The BAP correctly explained that the consent document James also signed (which was attached to the agreement as an exhibit) is consistent with his intention to waive his interest in the Bypass Trust because it merely evinces “a waiver of James’s right to sue Linda for breach of trust” if she acted beyond her power as trustee.

3 not accept or transfer that interest before disclaiming it, we affirm the BAP.2

AFFIRMED.

2 And even if James had failed to disclaim his interest in the Bypass Trust, he could not have transferred it to Linda, because the Patow Trust explicitly states James “may not sell, transfer, assign, alienate, encumber, hypothecate, or otherwise dispose of [his] interest in trust income or principal,” but could disclaim it. We need not address Marshack’s contention that Linda waived the argument that the spendthrift provision would have prevented any transfer by James because, even if waived, we would exercise our discretion to reach the argument because it is a pure question of law. See United States v. Alisal Water Corp., 431 F.3d 643, 654 n.4 (9th Cir. 2005).