Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_06-cv-06037/USCOURTS-cand-3_06-cv-06037-0/pdf.json

Nature of Suit Code: 422
Nature of Suit: Bankruptcy Appeals Rule 28 USC 158
Cause of Action: 28:0158 Notice of Appeal re Bankruptcy Matter (BAP)

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United States District Court

For the Northern District of California

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1The bankruptcy case from which the instant motion arises is

Bk. Ct. No. 02-46485 ("Bankruptcy Proceeding"). The Court hereby

takes judicial notice of all of the filings and orders in that

case. When the parties have not filed documents from the

Bankruptcy Proceeding as exhibits in the instant action, the Court

will cite directly to the docket of Bk. Ct. No. 02-46485 in the

following format: "Bk. Ct. No. 02-46485 Docket No. ##." Citations

to the docket in the related adversary proceeding will be cited in

the following format: "Adv. Proc. 03-4100. Docket No. ##."

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

In re

MERVIN MARK SARCHET and JUNE LEE,

Debtors 

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No. C 06-6037 SC

ORDER DENYING LEAVE

TO APPEAL

Movant Wensen Tang Sarchet ("Movant") seeks Leave to Appeal

the Bankruptcy Court's Order Denying Motion for Clarification of

Order Re: Debtor's Motion to Compel ("Order re Clarification").1

Motion at 5. On January 12, 2007, the Court ordered the Movant

and Debtor Mervin Mark Sarchet ("Debtor") to brief the issue of

the Court's jurisdiction to hear this appeal. See Docket No. 7. 

The parties have both complied. See Docket Nos. 8, 9. For the

following reasons, the Court hereby DENIES the Motion for Leave to

Appeal.

Case 3:06-cv-06037-SC Document 11 Filed 03/14/07 Page 1 of 8
United States District Court

For the Northern District of California

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I. BACKGROUND

Movant's Motion for Leave arises out of a situation created

by parallel proceedings. Simultaneous with the Bankruptcy

Proceeding was a divorce proceeding involving Movant and Debtor in

the California Superior Court of Alameda ("Family Court"). See

Request for Judicial Notice ("RJN"), Ex F. The proceedings

overlapped chiefly as they related to the former family home of

Movant and Debtor ("Family Home"). Without getting into

unnecessary detail, the overlap and the instant motion relate to a

dispute which arose between Movant and Debtor as to whether

actions by the Movant delayed the sale of the Family Home and

caused it to be sold by the bankruptcy trustee for approximately

$900,000 less than it would have otherwise fetched ("$900,000

Difference"). 

The dispute was played out in the first instance before the

Bankruptcy Court. On December 2, 2002, Debtor, with his current

spouse June Lee, filed for Chapter 7 bankruptcy protection. See

Bk. Ct. No. 02-46485 Docket No. 1. On March 10, 2003 the

Bankruptcy Court issued a discharge order. See Bk. Ct. No. 02-

46485 Docket No. 35. On May 12, 2003, Movant initiated an

adversary proceeding against Debtor in the Bankruptcy Court,

Sarchet v. Sarchet, Adv. Proc. 03-4100 (N.D. Cal. Bankr.), seeking

to have certain claims against Debtor totaling $1,984,376.21

excepted from Debtor's discharge. See RJN, Ex. C. 

On January 12, 2005 the Bankruptcy Court issued an order

giving the trustee the authority to sell the Family Home for $1.8

million and distribute to Movant $745,000, representing Movant's

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"entire interest" in the Family Home. Id., Ex. C. On March 15,

2005, following her receipt of these funds and the resolution of

various other reimbursement issues by the Family Court, Movant

amended her claim to the amount of $1,007,606.11. See id., Ex. E. 

On July 1, 2005, after holding a trial on Movant's amended

claims in which Debtor asserted the $900,000 Difference as an

affirmative defense, the Bankruptcy Court issued its decision

("July 1, 2005 Decision"). See id. at 20. The decision found

that Movant could only maintain claims for a total of

approximately $200,000 plus various amounts of interest. See id.

at 19. More relevant for our purposes the court also stated the

following regarding debtor's affirmative defense:

Based on the evidence presented, the Court was persuaded

that, but for Wensen's [Movant] improper conduct,

motivated by anger at Mark [Debtor], the Residence would

have sold for $2.7 million, approximately $900,000 more

than the ultimate sale price. Mark contended that, if

this had not occurred, he would not have been required

to file for bankruptcy. This argument has merit.

Id. at 20. However, the court continued:

The procedural problem presented is that the claim

belongs at present to the bankruptcy estate. The

trustee has the right to assert this claim as an offset

to any claim Wensen might assert against the bankruptcy

estate. If Wensen has not filed a proof of claim or to

the extent the offset is not exhausted with respect to

that claim, it may be abandoned to Mark after notice and

hearing.

Id. (emphasis added). Thus, the court chose to delay final

judgment in the adversary proceeding until the trustee "fully

administered the estate." Id. 

On July 21, 2005, the trustee filed an objection to Movant's

remaining claims, which totaled $397,000, on the grounds that

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these claims were fully offset by the $900,000 Difference. See

See Bk. Ct. No. 02-46485 Docket No. 152. The Bankruptcy Court

issued an order sustaining the objection on September 21, 2005. 

See Bk. Ct. No. 02-46485 Docket No. 157. In response, Debtor

filed a motion to compel the trustee to abandon the $503,000

remainder of the $900,000 Difference. See Bk. Ct. No. 02-46485

Docket No. 161. 

On December 9, 2005, after holding a hearing on the matter

and receiving submissions by the Movant, the Bankruptcy Court

issued the following corrected order ("Abandonment Order"), which

adopts the proposed corrected order submitted by Movant on

December 8, 2005:

. . . 

Ordered:

1. The Trustee, Lois I. Brady, shall abandon any

remaining claims of this bankruptcy estate against

Wensen Sarchet to the Debtor, Mervin Mark Sarchet.

2. The Alameda County Superior Court is free to

determine whether the Trustee has released or exhausted

all of its claims against Wensen Sarchet, and thus

whether any claims of value are, in fact, abandoned to

the Debtor by the Trustee.

. . .

Bk. Ct. No. 02-46485 Docket No. 180; see Bk. Ct. No. 02-46485

Docket No. 178, Ex C (proposed order) 

On April 25, 2006, the Family Court awarded Debtor

$536,452.28 in satisfaction of his breach of fiduciary duty claim

against Movant. See RJN, Ex. F at 13. In doing so, the Family

Court explicitly based its decision on the Bankruptcy Court's July

1, 2005 Decision and Abandonment Order:

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This award for damages of 100% is based upon and

consistent with the findings made by [the Bankruptcy

Court] that the conduct of [Movant] in delaying the sale

of the [Family Home] was malicious, i.e. intended to

cause injury to [Debtor], and was oppressive in that it

was intended to force [debtor] into bankruptcy.

Id.; see also id. 10-13 (discussing the bankruptcy proceeding).

On July 6, 2006, Movant filed the Motion for Clarification,

seeking to have the Bankruptcy Court modify its Abandonment Order. 

See Bk. Ct. No. 02-46485 Docket No. 199. 

On August 25, 2006, Movant filed an appeal of the Bankruptcy

Court's decision in the adversary proceeding. See Adv. Proc. 03-

4100 Docket No. 61. 

On September 1, 2006, the Bankruptcy Court denied the Motion

for Clarification; in its minutes order, the court states "the

moving party's remedy is to appeal." Bk. Ct. No. 02-46485 Docket

No. 208. The Court has not been presented with any record of the

Bankruptcy Court's reasoning behind this decision. However, both

parties state that the decision was based on the Bankruptcy

Court's finding that Movant's Motion for Clarification sought

review of the Family Court's April 25, 2006 decision, which was

barred by the Rooker-Feldman doctrine (discussed below). See

Motion at 5, Opposition at 6.

 On September 28, 2006, Movant filed the instant Motion. See

Docket No. 1. On November 15, 2006, the Bankruptcy Court issued

its final decree in Debtor's Chapter 7 proceeding, ordering that

the case be closed. See Bk. Ct. No. 02-46485 Docket No. 224. 

According to Debtor, Movant has appealed the Family Court to the

California State Appellate Court. See Opposition at 6. 

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United States District Court

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II. LEGAL STANDARD

The Order re Clarification is a general interlocutory order. 

See In re Travelers, 202 B.R. 624, 625 (9th Cir. BAP 1996). As

such, Movant has no direct right of appeal, but rather must

request leave to do so. See 28 U.S.C. § 158(a)(3); compare 28

U.S.C. §§ 158(a)(1)(giving a direct right of appeal from "final

judgments, order, and decrees"), 158(a)(2)(giving a direct right

of appeal from interlocutory orders and decrees issued under 11

U.S.C. § 1121(d)). 

Neither the Bankruptcy Code nor Rules give any guidance as to

when a district court should grant such leave. Thus, the Court is

guided by 28 U.S.C. § 1292(b), which establishes when a district

court may grant a party leave to appeal an interlocutory order of

the court to the court of appeals. See In re Bertain, 215 B.R.

438, 441 (9th Cir. BAP 1997). The conditions for granting such

leave are that the interlocutory order: 1) "involves a controlling

question of law" 2) "as to which there is substantial ground for

difference of opinion" 3) "and that an immediate appeal from the

order may materially advance the ultimate termination of the

litigation." 28 U.S.C. § 1292(b).

III. DISCUSSION

The crux of Movant's claim of error by the Bankruptcy Court

is that the Family Court "misinterpreted" the Bankruptcy Court's

Abandonment Order, and by refusing to clarify the Abandonment

Order the Bankruptcy Court failed to prevent "a miscarriage of

justice." Motion at 5. The Court refuses to grant Movant leave

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to appeal on these grounds.

A. The Order re Clarification Does Not Involve a

Controlling Question of Law

An order involves a controlling question of law if "either

(1)reversal of the bankruptcy court's order would terminate the

action, or (2) determination of the issue on appeal would

materially affect the outcome of the litigation." In re Ames

Department Stores, Inc., No. 01-42217, 2002 WL 511556, *2 (April

3, 2002 S.D.N.Y.). The Bankruptcy Court has issued its final

decree in the Bankruptcy Proceeding and ordered the case closed. 

See Bk. Ct. No. 02-46485 Docket No. 224. Thus, the action is

already terminated and no decision by the Court regarding the

Order re Clarification at this time can affect its outcome. Even

if the case had not yet been closed, reversing the Order re

Clarification would not have terminated the action or materially

affected the outcome of the litigation, viz. Debtor's Chapter 7

discharge.

B. There is No Substantial Ground for Difference of Opinion

re the Reasoning Underlying the Order re Clarification

It is undisputable that "the Rooker-Feldman doctrine[]

precludes federal adjudication of a claim that amounts to nothing

more than an impermissible collateral attack on prior state court

decisions." Ignacio v. Judges of U.S. Court of Appeals for Ninth

Circuit, 453 F.3d 1160, 1165 (9th Cir. 2006) (internal quotation

omitted). Thus, even accepting that the Order re Clarification

involves a controlling issue of law, it is not one on which

substantial grounds for differences of opinion exist. Movant

brought the motion for clarification in order to cure the

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"miscarriage of justice" allegedly caused when the Family Court

"misinterpreted" the Abandonment Order. Motion at 5. There are

no grounds, let alone substantial grounds, for differences of

opinion regarding the Bankruptcy Court's decision that under the

Rooker-Feldman Doctrine Movant's remedy is to seek appeal of the

Family Court decision in the California Appellate Court rather

than attack it collaterally in the Bankruptcy Court.

C. Granting Movant Leave to Appeal the Order re

Clarification Would Not Materially Advance Ultimate

Termination of the Litigation

As discussed above, the litigation to which the Motion

relates has already been terminated. See supra. Granting the

Motion would thus have no effect on the litigation's ultimate

termination. 

IV. CONCLUSION

For the foregoing reasons, Movant's Motion for Leave to

Appeal is DENIED.

IT IS SO ORDERED.

Dated: March 14, 2007

 

UNITED STATES DISTRICT JUDGE

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