Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-5_14-cv-03605/USCOURTS-cand-5_14-cv-03605-1/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

Northern District of California

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

SAN JOSE DIVISION

TRUE TRADITIONS, LC,

Appellant,

v.

CAROL WU, et al.,

Appellees.

Case No. 14-cv-03605-BLF 

A.P. No. 13-5062 SLJ

ORDER AFFIRMING JUDGMENT OF 

BANKRUPTCY COURT

Appellant True Traditions, LC (“Appellant” or “TT”) appeals the judgment of the 

bankruptcy court avoiding a fraudulent conveyance of real property located at 415-417 Tehama 

Street, San Francisco, California (“Tehama Property”). For the reasons stated herein, the 

judgment of the bankruptcy court is AFFIRMED.

I. BACKGROUND

A. Factual and Procedural Overview of this Case

This adversary proceeding stems from two bankruptcy cases involving a debtor, Richard 

(“Rick”) Louie, Jr.,1 who has gone to extraordinary lengths to conceal his assets. 

On May 3, 2013, Appellee Carol Wu, the chapter 7 trustee for the individual bankruptcy 

estates of Rick and his wife, Stephanie Chan, filed the originating complaint in the underlying 

adversary proceeding in bankruptcy court seeking declaratory relief and to avoid fraudulent 

transfer. Appellees’ App. (hereinafter “ER”), ECF 24, Exh. 1. The complaint asserted that Rick 

and Stephanie had failed to disclose as their personal assets a brokerage account at Merrill Lynch; 

 

1

This order uses individuals’ first names for ease of reference; the Court intends no disrespect by 

this informal mode of address.

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that funds from the Merrill Lynch account had been used to purchase the Tehama Property in the 

name of Rick’s mother, Mary Louie; that Mary then executed a grant deed transferring her fee title 

interest in the Tehama Property to Appellant True Traditions, LC, a purported New Mexico 

limited liability company, for no consideration; and that Rick, Stephanie, Mary, or TT might claim 

ownership over the Tehama Property. Id. ¶¶ 8-13. Appellee Wu accordingly sought a declaration 

that the Tehama Property belonged to the bankruptcy estate and to, among other things, avoid any 

transfer of interests in the Merrill Lynch account and Tehama Property made within two years of 

the filing of the complaint. 

On June 28, 2013, Appellee Linda Green, the chapter 11 trustee for the bankruptcy estate 

of Homer Ventures LLC, a limited liability company formed and controlled by Rick, filed a 

motion to intervene in the Tehama Property action. ER Exh. 2. That motion was granted, and the 

two trustees filed their combined complaint-in-intervention on August 1, 2013 naming Rick, 

Stephanie, Mary, and TT as defendants. ER Exh. 3. The trustees eventually entered into a 

settlement whereby trustee Green would prosecute this lawsuit and agree to split any recovery 

with trustee Wu. See ER Exh. 16 (Bankruptcy Court’s Order Following Trial (hereinafter “Trial 

Order”)) at 2. On January 15, 2014, the bankruptcy court also approved a joint stipulation of 

partial dismissal, through which the trustees agreed to dismiss Rick, Stephanie, and Mary without 

prejudice and pursue their declaratory relief and fraudulent transfer claims solely against 

Appellant TT. ER Exh. 6.

Appellant and Mary—represented by the same counsel—filed several motions thereafter. 

Appellant moved to dismiss the action for “lack of jurisdiction/authority” on January 27, 2014. 

ER Exh. 7. Mary filed a motion to intervene in the adversary proceeding as a plaintiff on February 

19, 2014 on the assertion that she owned the Tehama Property and could prove that ownership 

through a tracing of funds. ER Exh. 8. The bankruptcy court heard oral argument on both 

motions on March 31, 2014. With respect to the motion to dismiss, the bankruptcy court 

observed: 

The Court would like to point out that Defendants’ argument here 

that the Court has no jurisdiction conflicts with the answer filed in 

this case, in which it admitted the Court had jurisdiction. Somewhat 

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confusingly, the answer to the complaint in intervention, Defendant 

denied the Court had jurisdiction, even though both complaints 

consist of the same allegations and the same causes of action. 

Regardless, as explained earlier, the issue is not whether the Court 

has jurisdiction, but rather, whether the Court can enter a final 

judgment.

3/31/14 Hr’g Tr. 6:9-18. On that basis, the bankruptcy court denied Appellant’s motion to 

dismiss. ER Exh. 9. As to Mary’s motion to intervene, the bankruptcy court considered Mary’s 

arguments for intervention as of right and permissive intervention and rejected them both. In so 

doing, the court found that Mary’s application was untimely, 3/31/14 Hr’g Tr. 11:6-10, and that 

intervention would complicate the proceedings—which were close to trial—and prejudice the 

plaintiff-trustees, id. 11:11-12. Furthermore, the court found that Mary had no “protectable 

interest” in the Tehama Property:

[T]he Defendants, including Mary Louie, admitted in their original 

answer to the complaint in January 2013 that Mary Louie executed a 

grant deed transferring title to Tehama to True Traditions. Under 

both California and New Mexico law, Mary no longer owns the 

Tehama property even if she is a hundred percent owner of True 

Traditions. True Traditions owns the property. Therefore Mary has 

no legal – no protectable legal interest in that property, if it’s based 

only on the claim that she owns True Traditions.

Id. 13:10-19. The court also rejected Mary’s alternative argument that she has an equitable 

interest in the Tehama Property arising out of a constructive trust, explaining:

Movant insists that Mary can assert a constructive trust. Under 

California law, a constructive trust may be imposed on property as a 

remedy for things wrongfully detained. . . . Movant appears to 

argue that Mary satisfies the requirement for a constructive trust 

because she can prove the funds used to purchase Tehama can be 

traced to her. The Ninth Circuit decided a similar tracing theory in 

In re Advent Management . . . [and] found that the mere tracing of 

funds to a new entity was not sufficient to impose a constructive 

trust. The Circuit concluded that only money that was wrongfully 

acquired or detained by a person by a wrongful act would result in 

the imposition of a constructive trust. Mary Louie does not allege 

any wrongful act. The fact that Mary’s monies may have been used 

to purchase the property in and of itself does not give rise to the 

imposition of a constructive trust.

Id. 13:21-14:15. In sum, the court found that any interest Mary personally had in the Tehama 

Property was, “[a]t best, . . . an interest in True Traditions as the member of that company.” Id.

14:22-24. On the basis of that reasoning, the bankruptcy court concluded that any interest Mary 

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had in the property could be adequately represented by TT and its counsel. Id. 15:13-24, 16:1-

17:2. The motion to intervene was accordingly denied. ER Exh. 10. 

The parties then filed cross-motions for summary judgment, with Appellant affirmatively 

seeking judgment as a matter of law that “at least 89.3% of the Tehama property is equitably 

owned by True Traditionis, L.C. [sic] and/or Mary Louie” and that “as of October 1, 2009, 89.3% 

of the monies in the Merrill Lynch Account was not an ‘interest in the debtor [Rick Louie] in 

property.” ER Exh. 12 at 2. The bankruptcy court granted summary adjudication for Appellees

on certain facts not in material dispute. ER Exh. 13 (Order on Cross Mots. for Summary J. 

(hereinafter, “MSJ Order”)) at 9-10. The court denied Appellant’s cross-motion, finding that there 

were disputed “material issues of fact” on Appellant’s tracing evidence that may require the 

testimony of expert witnesses. Id. at 9. 

The case then proceeded to two-day bench trial on June 9 and 10, 2014. On July 14, 2014, 

the bankruptcy court entered its post-trial order finding for Appellees and ordering that title to the 

Tehama Property be reformed and placed in the name of the chapter 7 estate of Rick and 

Stephanie for administration by the trustee-Appellees. ER Exh. 16 (Order Following Trial 

(hereinafter, “Trial Order”)). On July 28, 2014, the bankruptcy court entered its Judgment 

Avoiding Fraudulent Transfer. ER Exh. 17. This appeal followed.

B. Transactional History of the Tehama Property

A little background on the origins of the Tehama Property is necessary to understand the 

convoluted arguments in this case. The essential facts are set forth in the bankruptcy court’s Trial 

Order, are largely undisputed, and are well-founded in the record.

i. The Sav-Mor Grocery store and the Buffalo Properties

In May 2003, Mary Louie and Richard Louie, Sr. sold a grocery store they owned and 

operated in Williams, California (“Sav-Mor Grocery”) for $280,000. Out of the proceeds of that 

sale, Mary and Richard Sr. purchased two investment properties at 965 Amherst Street and 241 

West Utica Street, Buffalo, New York (collectively, “The Buffalo Properties”). The properties 

were purchased for $695,000 through a 1031 tax free exchange. This meant the sale deferred 

Richard Sr.’s and Mary’s gains on the sale of the grocery store until the Buffalo Properties were 

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sold. Title to both of the Buffalo Properties was taken in the names of four individuals: Richard 

Sr., Mary, Rick (Richard Sr.’s and Mary’s only child), and Stephanie. 

Even before the sale of the Sav-Mor Grocery, on February 27, 2003, Richard Sr., Mary, 

Rick, and Stephanie entered into a Partnership Agreement, supposedly in connection with the 

purchase of the Buffalo Properties. Pl. Trial Exh. 9.2 This one-page agreement stated that Richard 

Sr. and Mary would be repaid their investment in the Buffalo Properties and that the four owners 

would divide amongst themselves funds generated by the properties, but only after paying Rick a 

6% management fee. Id. The bankruptcy court observed that “the document is very brief, and 

does not contain many of the usual terms one would associate with such an agreement.” Trial 

Order at 4. Furthermore, Appellees presented unrebutted testimony at trial from its expert, Ms. M. 

Patricia Fisher, that Mary’s signature on the agreement was a forgery. Id.; see also Pl. Trial Exh. 

2 at 4-8.3 In light of the sparse terms and the evidence of forgery, the bankruptcy court concluded 

that the Partnership Agreement “is not authentic” and disregarded it. Trial Order at 4.

On June 15, 2003, Richard Sr. and Mary executed grant deeds transferring ownership of 

the Buffalo Properties to Rick and Stephanie. The deeds state that consideration of $1.00 was 

paid. Richard Sr. passed away in October 2003. The grant deeds were not recorded until June 11, 

2007.4 See Pl. Trial Exhs. 13, 14.

In the bankruptcy court’s words, “[w]hatever the chain of title on the Buffalo Properties, 

the next steps were conducted solely by Rick Louie and Stephanie Chan.” Trial Order at 4. On 

July 17, 2007, Rick and Stephanie sold the two Buffalo Properties to a third party for $690,000. 

 

2

Filed as part of Appellees’ designation of the record on appeal at ECF 32-34.

3

Page numbering used is Appellees’ numbering for the report as trial exhibit, and not the original 

page numbers in the report.

4

For unknown reasons, Richard Sr., Mary, Rick, and Stephanie created a conflicting deed on May 

12, 2004 transferring the Buffalo Properties to Flanders Ventures, LLC. Flanders Ventures, LLC 

was another one of Rick’s limited liability company. This transaction is of limited relevance to 

the issues before the Court, as the bankruptcy court ignored the transaction noting that Appellant 

did not argue that Flanders Ventures had any interest in the Buffalo Properties and that Appellee’s 

expert witness reported that the deed was a forgery. Trial Order at 3 n.5; see also Pl. Trial Exh. 2 

at 7-10.

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They alone executed the warranty deed to the buyer, which was recorded on September 21, 2007. 

Pl. Trial Exh. 28. The buyer paid for the properties by assuming $473,541.64 in existing debt, 

executing a new promissory note for $146,458.76, and assuming $70,000 in liabilities. In 

September 2009, after refinancing the properties and paying off the loans, the buyer sent a check 

for $190,751 payable to Rick only. Pl. Trial Exh. 37. 

ii. The Merrill Lynch Account

Rick deposited the check from the buyer of the Buffalo Properties into a Merrill Lynch 

account ending in 70343, which was held in both Rick’s and Mary’s name. See Trial Order at 4; 

Pl. Trial Exhs. 39. The bankruptcy court found that “Rick Louie exercised substantial control over 

the Merrill Lynch Account.” Trial Order at 4. As the evidence showed, Rick and Stephanie used 

the Merrill Lynch account as their own personal account. On August 26, 2009, Rick and 

Stephanie deposited a $42,722.20 federal income tax refund into the account. Pl. Trial Exhs. 35, 

39 at 5. Beginning in 2011, Rick and Stephanie deposited $15,000 a month into the account and 

wrote numerous checks on the account for personal or family expenses. Pl. Trial Exhs. 1 at 8, 85. 

By contrast, Mary had minimal involvement with the Merrill Lynch account, receiving about 

$1,200 per month through checks written on the account that were signed by Rick. Pl. Trial Exh. 

1 at 575-95; see Trial Order at 4-5.

iii. The 580 Parkson Road Deficiency Judgment

In October 2007, Rick and Stephanie purchased an investment property at 580 Parkson 

Road, Henderson, Nevada (“Parkson Property”) through a limited liability company called 

Waiyan Ventures. Waiyan Ventures borrowed $2,650,000 to complete the purchase. In April 

2009, Waiyan Ventures defaulted on the loan and the lender instituted foreclosure proceedings. 

On January 15, 2010, the property was sold in foreclosure. Thereafter, on January 19, 2010, the 

lender filed a complaint against Rick and Stephanie to recover a deficiency judgment. The lender 

ultimately recovered a judgment on this claim in the amount of $1,725,489.19. Trial Order at 5.

iv. Purchase of the Tehama Property

On October 1, 2009, while the foreclosure on the Parkson Property was in progress, Rick 

negotiated the purchase of a promissory note from an unrelated entity called True Traditions, Inc. 

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secured by a lien on the Tehama Property. Pl. Trial Exhs. 40, 42. In the Loan Sale Agreement, 

Rick designated an entity called Homer Ventures, LLC, to complete the purchase of the note.5 

Homer Ventures, LLC paid $113,780.85 to purchase the promissory note (“Tehama Note”). The 

money for this purchase came from the Merrill Lynch account. Pl. Trial Exhs. 41, 83. The 

bankruptcy court noted that “there was no documentation to show whether Homer Ventures, LLC 

borrowed the money from Rick Louie and his mother Mary, whether it intended to repay that 

money, or whether it was some sort of investment by Rick Louie and his mother Mary.” Trial 

Order at 6. Several months later, “[i]n another transaction with opaque documentation,” Homer 

Ventures foreclosed on the Tehama Property and credit bid the loan balance in a foreclosure sale 

on July 19, 2010. Id.; Pl. Trial Exh. 48. One day after the foreclosure sale, on July 20, Homer 

Ventures recorded an assignment of its deed of trust on the property to Mary, who became the fee 

owner of record. Pl. Trial Exhs. 52, 53. 

v. Rick’s, Stephanie’s, and Homer Ventures, LLC’s bankruptcy cases

On May 5, 2011, Rick and Stephanie each filed petitions for chapter 7 bankruptcy. Pl. 

Trial Ex. 78. Neither spouse disclosed the Merrill Lynch account as an asset. On July 20, 2011, 

the holder of the Parkson Property loan filed an adversary action against Rick and Stephanie to 

deny their discharge for fraud. See 580 Parkson Road LLC v. Louie, U.S. Bank. Ct. N.D. Cal. 

A.P. No. 11-5217 SLJ. On August 17, 2012, Homer Ventures, LLC filed a separate chapter 11 

bankruptcy petition in the Santa Rosa division of the Northern District of California.6

The 580 Parkson Road court held a two day trial on January 7 and 8, 2013 to determine 

whether Rick and Stephanie should be denied a discharge. ER Exh. 1 (Compl.) Exh. A. That 

court ultimately ruled that Stephanie would be allowed to discharge her debt but that Rick and 

 

5 As the bankruptcy court observed, “Homer Ventures, LLC, is itself an enigmatic entity.” Trial 

Order at 6. Rick and Stephanie organized Homer Ventures in September 2003 and claimed, as late 

as April 2012, that they were the company’s 100% owners. Pl. Trial Exhs. 20, 71 at 168:8-23. 

However, the membership agreement was amended in 2008 to make Mary a 50% owner. Trial 

Order at 6.

6 Appellees assert that Rick forum-shopped by using a Cotati, California mobile home owned by 

his bookkeeper as Homer Ventures’ address and the basis for asserting a Santa Rosa venue. 

Appellee Br. 7-8.

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Homer Ventures should be denied a discharge due to Rick’s “false oaths” in connection with both 

his own bankruptcy case and that of Homer Ventures. Id. at 19-21. Critical to the court’s 

consideration was Rick’s failure to disclose the Merrill Lynch account and the Tehama Property, 

both indicative of a broader pattern of engaging in “countless transactions and in countless ways . . 

. to make his interests and those of Homer Ventures opaque.” Id. at 20.

vi. Mary transfers the Tehama Property to Appellant

On January 19, 2013, days after 580 Parkson Road court tried the case but before it had 

rendered its decision, Rick, in another bid to hide assets, prepared another grant deed whereby 

Mary transferred her interest in the Tehama Property to “True Traditions, L.C.” for no 

consideration. Three days later, Rick created the New Mexico limited liability company that is 

now Appellant in this case and named himself manager. Rick then recorded the grant deed from 

Mary to Appellant on January 28, 2013. Pl.’s Trial Exhs. 66, 67. In deposition, Mary testified 

that she knew nothing about any of her son’s machinations in connection with the Tehama 

Property. See generally Pl. Trial Exhs. 73, 74.

The bankruptcy court reviewed this sequence of events and concluded that “[t]he timing, 

the use of related entities, and the transparent attempt to keep his name off the property all show 

fraudulent intent.” Trial Order at 13.

C. Trial Evidence

In addition to extensive documentary evidence, the parties presented four witnesses in the 

two-day bench trial before the bankruptcy court. Appellees introduced the testimony and expert 

reports of Jay Douglas Crom, an expert on accounting and insolvency issues, and M. Patricia 

Fisher, a handwriting expert. Pl. Trial Exh. 1 (Crom Report), Exh. 2 (Fisher Report). 

Mr. Crom testified and confirmed his opinion from his report that he could not conclude 

that the money used to purchase the Tehama Note came from the proceeds of the sale of Richard 

Sr.’s and Mary’s Sav-Mor Grocery in 2003. Trial Tr. 15:21-16:10. He explained that there had 

been “extensive commingling” of funds between Rick, his wife, and his parents and that the funds 

used to purchase the Tehama Note came from “numerous transactions that involved title changes” 

as well as sources of money that were solely belonged to Rick and Stephanie. Id. 16:11-17:1. 

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Furthermore, Mr. Crom testified that he examined the transaction papers that led to Mary being 

recorded as the title owner of the Tehama Property and opined that there was no evidence Homer 

Ventures received lawful consideration for that transfer. Id. 17:4-18. The bankruptcy court found 

his report “helpful in laying out a factual background for the case” but disregarded Mr. Crom’s 

factual conclusions, which were “the court’s province.” Trial Order at 7.

Ms. Fisher testified only long enough to be qualified as an expert and to authenticate her 

report. Trial Tr. 66:7-70:9. In her report, Ms. Fisher opined regarding 28 signatures on 

documents purported to be those of Mary Louie and concluded that the “vast majority” were not 

her signature, but rather facsimiles or copies. Trial Order at 7; Pl. Trial Exh. 2. The only question 

that Appellant asked on cross-examination was whether Ms. Fisher requested originals of the 

documents that she examined and she acknowledged that she requested the originals but never 

received them. Trial Tr. 70:3-7.

Appellant introduced the testimony of William Higgins, the New York attorney who 

represented the Louie family in the acquisition of the Buffalo Properties, as well as the testimony 

and report of Howard Grobstein, an experienced chapter 7 trustee, who opined that the proceeds 

from the sale of the Sav-Mor Grocery could be traced to the purchase of the Tehama Property.7 

Mr. Higgins identified and explained certain documents involved in the 1031 exchange 

involving the Sav-Mor Grocery and the Buffalo Properties. He admitted that he never spoke to 

Mary, did not know who made the money transfers involved in the transaction, and that he sent the 

balance left over from the exchange to Rick and not to Mary. Trial Tr. 93:9-10, 94:11-96:14.

Mr. Grobstein conducted tracing analysis to demonstrate that a significant portion of the 

funds for the purchase of Tehama Property came from the proceeds of the sale of the Sav-Mor 

Grocery. See Trial Tr. 119:19-129:21. He opined from his tracing analysis that Mary had an 

equitable interest of approximately 83% to 85% in the Tehama Property. Id. 131:2-6. On crossexamination, Mr. Grobstein admitted that he reviewed only the documents that Rick provided him 

and that he had not seen the 2003 grant deed transferring interest in the Buffalo Properties from 

 

7

The Grobstein report was admitted as Defendant’s Trial Exhibit B in the bankruptcy court, but it 

is not part of the designated record on appeal.

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Mary and Richard Sr. to Rick and Stephanie, nor had he seen the monthly checks that Rick wrote 

to Mary from the Merrill Lynch account. Id. 136:22-5, 143:8-144:8, 159:3-161:10. The 

bankruptcy court credited Mr. Grobstein’s testimony but concluded that he was wrong. Trial 

Order at 7.

Neither Rick nor Mary testified at trial. Appellees did enter into evidence the transcripts 

from their prior depositions, including two depositions of Mary conducted on November 19, 2012 

and March 6, 2014. Pl. Trial Exhs. 73 (11/19/12 Mary Louie Dep. Tr.), 74 (3/6/14 Mary Louie 

Dep. Tr.).

II. QUESTIONS PRESENTED

Appellant charges the bankruptcy court with a number of errors. The questions presented 

in this appeal, quoted from Appellant’s opening brief, are as follows:

1. Did the Bankruptcy Court err in failing to apply state law 

presumptions of fraud, undue influence and void transfers when 

it found that Fiduciary Rick Louie took his Mother Mary Louie’s 

ownership interest in Buffalo, New York properties sometime 

between 2003 and 2009?

2. Did the Bankruptcy Court err in failing to follow the pre-trial 

established law of the case that Appellant True Traditions, L.C. 

could adequately present Mary’s Louie’s [sic] claims, and then 

at trial refuse to allow True Traditions, L.C. to assert Mary’s 

constructive trust claim?

3. Did the Bankruptcy Court err in failing to allow leave to 

intervene?

4. Did the Bankruptcy Court err when it asserted Appellant True 

Traditions, L.C. waived its right to have the Bankruptcy Court’s 

findings of fact and conclusions of law reviewed by the District 

Court because Appellant filed a Cross-Motion for Summary 

Judgment after Appellant True Traditions objected to 

jurisdiction in its Answer, had its Motion for lack of jurisdiction 

denied, and though Appellant True Traditions, L.C. suggested 

the Summary Judgment ruling be treated as findings of fact and 

conclusions of law?

5. Did the Bankruptcy Court err when it failed to apply a 

preponderance of the evidence standard of review to Appellants 

tracing argument when it ruled that they must “conclusively” 

show Mary Louie’s monies were the source funds for purchasing 

the Tehama property?

6. Did the Bankruptcy Court err in failing to enforce the 

Partnership Agreement?

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Appellant Br. at ii (“Questions Presented”), ECF 18. The applicable standard of review on appeal 

depends on whether the bankruptcy court properly entered final judgment. As such, the Court 

must address Appellant’s fourth question—which this Court construes as a threshold challenge to 

the bankruptcy court’s authority to enter final judgment—first. The Court therefore considers 

Appellant’s appeal issues in this more logical sequence: (1) whether the bankruptcy court had 

consent to enter a final judgment (Question 4); (2) whether the bankruptcy court erred in 

concluding that the Tehama Property is a part of Rick Louie’s bankruptcy estate (Questions 1, 5, 

and 6); and (3) whether the bankruptcy court erred in denying Mary Louie leave to intervene to 

assert a constructive trust claim and whether it should have allowed Appellant to assert that claim 

on Mary’s behalf (Questions 2 and 3).

III. APPELLANT IMPLIEDLY CONSENTED TO THE BANKRUPTCY COURT’S 

ENTRY OF FINAL JUDGMENT.

In ruling on the parties’ cross-motions for summary judgment, the bankruptcy court 

concluded that Appellant had impliedly consented to the court’s authority to enter final judgment 

by (1) not objecting to Appellees’ summary judgment motion based on the court’s lack of 

authority to enter final judgment and (2) filing its own cross-motion for final judgment in its favor. 

MSJ Order at 4-5. Appellant challenges that finding of implied consent on appeal.

The Court begins by observing that despite raising the issue in its “Questions Presented,” 

Appellant’s opening brief contains no argument addressing whether the bankruptcy court had 

consent to enter a final judgment. See Appellant Br. 14-20. Appellant moreover fails to engage 

with the different standards of review to explain what difference, if any, there would be in the 

outcome of this appeal if the bankruptcy court did not have consent to enter final judgment.8 As 

such, Appellant’s opening brief fails to comply with Bankruptcy Local Rules 8010-2 and 9033-1. 

However, because Appellees have substantively addressed the bankruptcy court’s authority to 

enter final judgment, and because Appellant takes the issue up again in reply, see Appellant Reply 

 

8

Indeed, most of the issues that Appellant raises on appeal are questions of law or mixed 

questions of law and fact, which are subject to de novo review regardless of whether the 

bankruptcy court had consent to enter final judgment.

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14-15, ECF 25, the Court will address this threshold issue on the merits.

Fraudulent conveyance claims are “core proceedings” under 28 U.S.C. § 157(b)(2) that 

bankruptcy courts are expressly authorized to “hear and determine.” Id. § 157(b)(1). While § 

157(b)(1) also authorizes bankruptcy courts to enter final judgment on such proceedings, Article 

III of the Constitution proscribes that authority. Thus, bankruptcy courts may not, as a 

constitutional matter, enter final judgment in proceedings—even core ones—that do not “stem[] 

from the bankruptcy itself or would necessarily be resolved in the claims allowance process.” 

Stern v. Marshall, 131 S. Ct. 2594, 2618 (2011); In re Bellingham Ins. Agency, Inc., 702 F.3d 553, 

565 (9th Cir. 2012) aff’d sub nom. Executive Benefits Ins. Agency v. Arkison, 134 S. Ct. 2165 

(2014) (bankruptcy courts do not have “the general authority to enter final judgments on 

fraudulent conveyance claims asserted against noncreditors to the bankruptcy estate.”). Such socalled Stern claims may, however, be heard and determined “in a manner consistent with the 

strictures of Article III.” Bellingham, 702 F.3d at 565. This means that bankruptcy courts can 

hear Stern claims and submit proposed findings of fact and recommendations of law to the district 

court or enter final judgment with the parties’ consent. Id.; see also 28 U.S.C. § 157(c)(1).

Consent need not be express. Because the authority of a bankruptcy court to enter final 

judgment is not an issue of subject matter jurisdiction but rather one of constitutional limitations, a 

party can waive its right to adjudication by an Article III court by impliedly consenting to the 

bankruptcy court’s jurisdiction. See Wellness Int’l Network, Ltd. v. Sharif, 135 S. Ct. 1932, 1942-

45 (2015). “[T]he implied consent standard articulated in [Roell v. Withrow, 538 U.S. 580, 590 

(2003)] supplies the appropriate rule for adjudications by bankruptcy courts under § 157.” Id. at 

1948. The consent must be knowing and voluntary, as “Roell makes clear that the key inquiry is 

whether ‘the litigant or counsel was made aware of the need for consent and the right to refuse it, 

and still voluntarily appeared to try the case’ before the non-Article III adjudicator.” Id. (quoting 

Roell, 538 U.S. at 590); see also Bellingham, 702 F.3d at 567-70. 

As recognized by a Ninth Circuit Bankruptcy Appeal Panel, “passive and unwitting 

participation is not sufficient for a finding of voluntary consent.” In re Pringle, 495 B.R. 447, 461 

(B.A.P. 9th Cir. 2013). “The Ninth Circuit, for example, has rejected implied consent where a pro 

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se plaintiff’s initial act was to demand a hearing in the district court; the plaintiff proceeded with 

the magistrate judge only because she thought it was her only choice to obtain relief.” Id. (citing 

Anderson v. Woodcreek Venture Ltd., 351 F.3d 911, 919 (9th Cir. 2003)). On the other hand, the 

right to seek Article III adjudication can also invite litigation hijinks. Courts confronted with the 

thorny issue of implied consent to enter final judgment are finely attuned to the concerns of 

litigation misconduct and sandbagging identified in Stern. Stern, 131 S. Ct. at 2608. This concern 

is particularly acute where, as here, a party seeks affirmative relief from the bankruptcy court 

believing it might win and then cries foul over the court’s entry of final judgment when it loses. 

Bellingham, 702 F.3d at 570; see also In re Carter, 506 B.R. 83, 88-89 (D. Ariz. 2014); In re G & 

S Livestock Co., 478 B.R. 906, 917-18 (S.D. Ind. 2012); In re Washington Coast I, L.L.C., 485 

B.R. 393, 409-11 (B.A.P. 9th Cir. 2012).

Here, Appellant answered the original complaint admitting that the bankruptcy court had 

jurisdiction. Only after Appellees stipulated to dismiss Rick, Stephanie, and Mary from the action 

did Appellant file its motion to dismiss claiming a purported lack of jurisdiction. As the 

bankruptcy court properly found—a finding unchallenged by Appellant—jurisdiction was not in 

issue, only whether Appellant had consented to the bankruptcy court’s entry of final judgment. 

See 3/31/14 Hr’g Tr. 6:9-18. 

Appellant then filed a cross-motion for summary judgment affirmatively seeking judgment 

in its favor. The motion did not raise the issue of consent. See ER Exh. 12. Indeed, no party 

mentioned consent until the bankruptcy court revived the issue sua sponte on the record at the 

May 5, 2014 hearing on the parties’ cross-motions for summary judgment. There, the bankruptcy 

court queried whether Appellant had impliedly consented to the bankruptcy court’s entry of final 

judgment by filing a cross-motion for summary judgment. When Appellant’s lawyer hedged, the 

bankruptcy court asked: 

Well then are you going to argue before the District Court that I 

didn’t have authority to enter an order that you asked me to enter, 

and then just take another cut at that? It seems like you can’t really 

do it that way, to me. You either have to decide I don’t have the 

authority to enter a final order, which is – you know, that’s okay to 

decide that – and at the end of the case, I’ll decide what I’m going to 

do in terms of whether I enter a final order or propose – you know, 

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propose findings of fact and conclusions of law. But I think when 

you in the middle of the case move for summary judgment, you’re 

essentially inviting me to enter a final order. If I entered an order on 

your motion, I would be doing exactly what you asked me to do, 

which seems to me to be consent.

5/5/14 Hr’g Tr. 4:9-22. Appellant’s response was twofold. First, it argued that it felt it had to 

bring a motion for summary judgment because Appellees filed one. This argument was properly 

rejected by the bankruptcy court because Appellant sought affirmative relief in its cross-motion

rather than merely oppose Appellees’ motion. Id. 4:23-6:15. Second, Appellant appeared to 

suggest that the bankruptcy court could enter proposed findings of fact and conclusions of law on 

the parties’ cross-motions for summary judgment. The bankruptcy court properly rejected that 

notion on the basis of In re Healthcentral.com, 504 F.3d 775 (9th Cir. 2007), and the bankruptcy 

court’s authority to dispose of pre-trial matters. Id. 7:9-8:13. The only evidence of its continued 

objection to the bankruptcy court’s authority to enter of final judgment that Appellant is able to 

point to is this colloquy from the summary judgment hearing. Appellant Reply 14-15. 

The bankruptcy court did not err in concluding that Appellant’s actions constituted implied 

consent to its authority to enter final judgment. Appellant was aware of the need to consent and 

challenged the bankruptcy court’s jurisdiction earlier in the proceeding (after initially admitting 

the court’s jurisdiction). When it came time for summary judgment, however, Appellant sought 

final judgment in its favor without ever mentioning consent. Appellant argues that “if not allowed 

to bring a Cross-Motion for Summary Judgment, how else could Appellant True Traditions, L.C. 

seek a summary decision on the findings of fact? There is no statutory basis to file a CrossMotion for Summary Judgment for findings of fact?” Appellant Reply 15. Indeed, there is no 

such thing as a motion for summary judgment for findings of fact, as the summary judgment 

standard requires that the facts not be in dispute. Fed. R. Civ. P. 56(a), as incorporated by Fed. R. 

Bankr. P. 7056; Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). More fundamentally, 

Appellant did not seek a finding that certain facts were not in dispute. Rather, it sought judgment

as a matter of law in its favor that the funds used to purchase the Tehama Property could be traced 

to the proceeds from the sale of Richard Sr.’s and Mary’s Sav-Mor Grocery. See ER Exh. 12 at 2. 

The unmistakable implication from Appellant’s motion is that it sought an entry of final 

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judgment in its favor. See 5/5/14 Hr’g Tr. 5:20-6:15. Courts confronted with this situation have 

time and again concluded that the movant had impliedly consented to the bankruptcy court’s 

authority to enter final judgment. Bellingham, 702 F.3d at 570; Carter, 506 B.R. at 88-89; G & S 

Livestock, 478 B.R. at 917-18; Washington Coast I, 485 B.R. at 409-11. Without a doubt, had 

Appellant prevailed, it would have been happy to see the bankruptcy court enter final judgment in 

its favor. Instead, Appellant lost. “Having lost before the bankruptcy court, [Appellant] cannot 

assert a right it never thought to pursue when it still believed it might win.” Bellingham, 702 F.3d 

at 570. “In such cases, as here, the consequences of a litigant ‘sandbagging’ the court—remaining 

silent about his objection and belatedly raising the error only if the case does not conclude in his 

favor—can be particularly severe.” Stern, 131 S. Ct. at 2608 (internal quotation marks, 

alterations, and citations omitted). Here, the consequence of Appellant’s decision to seek 

summary judgment in its favor, and of failing to raise the issue of consent in either its opposition 

to Appellees’ summary judgment motion or its own affirmative motion, is the appropriate finding 

that Appellant consented to the bankruptcy court’s authority to enter final judgment.

That Appellant asked the bankruptcy court to enter proposed findings of fact and 

conclusions of law after the court raised the issue of consent sua sponte does not detract from this 

conclusion. By filing an affirmative motion for summary judgment, Appellant had already 

consented to entry of final judgment by the bankruptcy court. In order to maintain its objection to 

the bankruptcy court’s authority, Appellant could have withdrawn its motion for summary 

judgment. After the bankruptcy court’s summary judgment order issued, Appellant could have 

filed a motion to withdraw its consent. Appellant remained silent, proceeding through trial and 

post-trial briefing without raising the issue of consent again until this appeal. See ER Exhs. 15, 

18. As such, Appellant’s reliance on the colloquy from the summary judgment hearing to 

demonstrate an absence of consent is inapposite. If anything, it is merely more evidence of 

Appellant’s adoption of a series of inconsistent positions when it suited its purpose: first admitting 

jurisdiction, then challenging it; seeking judgment from the bankruptcy court in its favor, then

claiming lack of consent only when the bankruptcy court raised the issue; finally proceeding to 

trial on the merits (again without raising consent) and then seeking relief from this Court based on 

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a purported lack of consent after losing on the merits. Given this course of conduct, Appellant has 

waived the right to seek final judgment by an Article III court.

In sum, the Court finds that the bankruptcy court did not err in concluding that Appellant, 

through the filing of an affirmative motion for summary judgment in its favor, had impliedly 

consented to that court’s entry of final judgment. Thus, to the extent this appeal implicates any of 

the bankruptcy court’s findings of fact, those findings are subject to the “clear error” standard of 

review.

9

IV. THE BANKRUPTCY COURT DID NOT ERR IN CONCLUDING THAT THE 

FUNDS USED TO PURCHASE THE TEHAMA PROPERTY ARE AN “INTEREST 

OF THE DEBTOR [RICK] IN PROPERTY.”

A. Legal Standard

District courts employ the same standard of review of bankruptcy court decisions as do 

circuit courts in reviewing the decisions of the district court. See, e.g., Ford v. Baroff (In re 

Baroff), 105 F.3d 439, 441 (9th Cir. 1997). Findings of fact are reviewed for clear error, while 

conclusions of law are reviewed de novo. In re Strand, 375 F.3d 854, 857 (9th Cir. 2004). On a 

clear error review of the bankruptcy court’s findings of fact, those findings should not be disturbed 

unless “the court is left with the definite and firm conviction that a mistake has been committed.” 

In re Greene, 583 F.3d 614, 618 (9th Cir. 2009). 

Mixed questions of law and fact are reviewed de novo. In re Chang, 163 F.3d 1138, 1140 

(9th Cir.1998); see generally In re JTS Corp., 617 F.3d 1102, 1109 (9th Cir. 2010). Because the 

bulk of Appellant’s appeal implicates conclusions of law or mixed questions of law and fact, the 

Court has reviewed the bankruptcy court’s findings and conclusions de novo. 

B. Discussion

Appellant does not challenge the bankruptcy court’s findings of undisputed facts at 

summary judgment, which includes the finding that Appellant is not a “good faith transferee” as 

the term is used in 11 U.S.C. § 550(b). MSJ Order at 10. Nor does it appear to challenge the 

 

9

In any case, the Court has reviewed the evidentiary record de novo and agrees with the 

bankruptcy court’s recitation of the facts.

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court’s ultimate conclusion that the transfer of the Tehama Property from Homer Ventures to 

Appellant was conducted with actual intent to defraud and, as such, constituted an avoidable 

fraudulent conveyance. Trial Order at 13-14. Instead, Appellant first, fifth, and sixth arguments 

on appeal can best be characterized as evidentiary challenges to the bankruptcy court’s conclusion 

that the Tehama Property was purchased using funds that were an “interest of the debtor [Rick] in 

property.” Id. at 12-13. If that conclusion was proper, then the Bankruptcy Court’s determination 

that the subsequent transfer in ownership is an avoidable fraudulent conveyance stands.

Thus properly focused, Appellant advances three challenges to the bankruptcy court’s 

determination that the Tehama Property was acquired using funds from the debtor’s (Rick’s) 

estate: (1) that the court held Appellant to the wrong burden of proof to prove tracing (Question 

5); (2) that the court should have applied a presumption of undue influence to the 2003 grant deed 

concerning the Buffalo Properties (Question 1); and (3) that the court should have enforced the 

2003 Partnership Agreement among Rick, Stephanie, Richard, and Mary (Question 6). The Court 

rejects each of these challenges.

i. The bankruptcy court did not apply the incorrect burden of proof to 

Appellant’s tracing argument.

Funds from a commingled bank account in the debtor’s control are presumed to be 

property of the debtor’s estate. Danning v. Bozek (In re Bullion Reserve of North America), 836 

F.2d 1214, 1217 (9th Cir. 1988). However, “funds held by a debtor in constructive trust for 

another person” wherein “the equitable interest in the trust funds belongs to the trust beneficiary, 

not the debtor” are not part of the bankruptcy estate. In re Advent Mgmt. Corp., 104 F.3d 293, 295 

(9th Cir. 1997) (citing In re Unicom Computer Corp., 13 F.3d 321, 324 (9th Cir. 1994)). “State 

law determines whether a trust exists in federal bankruptcy proceedings.” Bullion Reserve, 836 

F.2d at 1217. Under California law, an express trust can be created in several ways but requires 

the settlor to “properly manifest[] an intention to create a trust.” Cal. Prob. Code § 15201. A 

constructive trust may also be imposed on property if that property is “wrongfully detain[ed],” 

Cal. Civ. Code § 2223, or gained “by fraud, accident, mistake, undue influence, the violation of a 

trust, or other wrongful act,” id. § 2224. In either instance, a party asserting an equitable interest 

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in property that presumptively belongs to the debtor’s estate bears the burden of “tracing the 

alleged trust property ‘specifically and directly’” back to the act that created the trust. Advent, 104 

F.3d at 296; Bullion Reserve, 836 F.2d at 1218; see also In re Goldberg, 158 B.R. 188, 196 

(Bankr. E.D. Cal. 1993) aff’d, 168 B.R. 382 (B.A.P. 9th Cir. 1994) (“Strict tracing requires a 

creditor to demonstrate that the property subject to the constructive trust was specifically and 

directly exchanged for the property sought to be recognized as trust property.”).

At trial, Appellant’s main defense to Appellees’ claim under 11 U.S.C. § 548 to avoid the 

fraudulent transfer of the Tehama Property to Appellant was its argument that the funds used to 

purchase the Tehama Property were not “an interest of the debtor [Rick] in Property” and thus not 

subject to the trustees’ avoidance power. This was because, as argued by Appellant, the money 

used to purchase the Tehama Note actually belonged to Mary and could be traced to the proceeds 

from the sale of the Sav-Mor Grocery store in 2003.10 Appellant thus bore the burden of 

demonstrating specific and direct tracing.

Appellant contends that the bankruptcy court applied an incorrect burden of proof on 

tracing based solely on one sentence from the court’s post-trial order. After explaining that 

Appellees had demonstrated Rick’s interest in the Tehama Property sufficient to shift the burden 

to Appellant to prove tracing, the court stated: “In other words, [Appellant] must show 

 

10 The Court pauses to observe that it is not entirely clear what trust theory Appellant presented at 

trial. As the bankruptcy court already noted in denying Mary’s motion to intervene, a constructive 

trust requires tracing to a wrongful act. Appellant’s trial brief asserts in one sentence that “Rick 

was a trustee for Mary’s monies” and concludes that “If Plaintiff Trustees are correct that Homer 

Ventures, LLC or Rick are the true owners of the Tehama property, than [sic] this suggests Rick 

committed a fraud, mistake or other wrongful act as her trustee in converting Mary’s monies into 

assets belonging to him or Homer Ventures, LLC. ER Exh. 15 (TT Trial Brief) at 14-15. The 

bulk of the brief is devoted to a somewhat inapposite discussion regarding whether Rick’s and 

Stephanie’s bankruptcy attorney had a conflict of interest with Mary. At trial, Appellant only 

introduced testimony regarding tracing the proceeds of the sale from the Sav-Mor Grocery to the 

funds used to purchase the Tehama Property and thus appears to have been pursuing an express 

trust theory of tracing. On appeal, Appellant maintains that the bankruptcy court should have 

imposed a constructive trust on the Tehama Property because of some purported wrongdoing 

perpetrated by Rick along the way. Compare TT Answer ¶ 11 (“the funds for purchase of this 

note came from sale of Mary Louie’s grocery store”) and id. ¶ 14 (“Mary Louie was not paid 

consideration because she owned the property and 100% of True Traditions. Homer Ventures was 

a facilitator of a trust action by way of son’s financial power of attorney.”) with Appellant Br. 4 

(“the Complaint allegations indicate either mistake, negligence, fraudulent conduct, or some other 

wrong by Rick in using Mary’s monies to acquire properties in the names of other entities, and 

then failing to show the Bankruptcy Court that she was the true owner of the asset”).

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conclusively that the money in the account belonged to Mary Louie.” Trial Order at 12 (emphasis 

added). Appellant takes from this verbiage that the bankruptcy court placed on it a greater burden 

of proving tracing than by a preponderance of the evidence. Appellant Br. 16-17. That contention 

is meritless.

“Conclusively” is not an evidentiary standard found in modern legal usage, as 

demonstrated by Appellant’s reliance on Black’s Law Dictionary and cases from before the turn of 

the 20th century. See Appellant Br. 17 (citing “The Law Dictionary Featuring Black’s Law 

Dictionary Free Online Legal Dictionary 2nd Ed. Law Dictionary”; Hoadley v. Hammond, 63 

Iowa 599, 19 N.W. 794 (1884); and Bixler’s Appeal, 59 Cal. 550 (1881)11). There is no 

suggestion from the record that the bankruptcy court used the term “conclusively” to convey such 

an archaic burden of proof. Rather, the unfortunate word choice appears to have been a colloquial 

manner of stating that tracing must be proven “specifically and directly,” which is indisputably the 

standard for tracing in the Ninth Circuit. Advent, 104 F.3d at 296. In fact, the bankruptcy court 

cited to the correct legal authorities in articulating this standard. See Order Following Trial at 8 

(citing Bullion Reserve, 836 F.2d at 1217 and Advent, 104 F.3d at 296). 

Other than the quoted sentence from the bankruptcy court’s order, Appellant identifies 

nothing else in the record to suggest that the bankruptcy court deviated from the preponderance of 

the evidence standard and instead applied the archaic “conclusive evidence” standard. Appellant 

moreover does not attempt to demonstrate in any way that the outcome should have been different 

had the bankruptcy court applied a preponderance of the evidence standard. Nor can it, because 

the record amply supports the bankruptcy court’s conclusion that Appellant failed to carry its 

burden of demonstrating strict and direct tracing. 

At trial, the issue came down to a battle of the experts. Appellees’ expert, Jay Crom, 

submitted a report that detailed “Rick Louie’s financial empire” and opined that he could not 

conclude that the money used to purchase the Tehama Note came from the proceeds of the sale of 

Richard Sr.’s and Mary’s Sav-Mor Grocery in 2003. Pl. Trial Exh. 1; Trial Tr. 15:21-16:10. The 

 

11 Incorrectly cited in Appellant’s brief as a case from 1907.

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bankruptcy court found this testimony credible but properly reserved for itself the actual factual 

conclusions that could be drawn from the evidence. Trial Order at 7. By contrast, the testimony 

of Appellant’s expert, Howard Grobstein, was determined by the bankruptcy court to be creditable 

but wrong. Id. Notably, at trial, Appellees elicited admissions from Mr. Grobstein that he formed 

his opinion regarding tracing based upon documents provided to him by Rick, that Rick had not 

shown him the two grant deeds executed by Mary and Richard Sr. transferring their interests in the 

Buffalo Properties to Rick and Stephanie, and that Rick never told him about Rick’s monthly 

payments to Mary from the Merrill Lynch account. Trial Tr. 136:22-5, 143:8-144:8, 159:3-

161:10. These admissions significantly undermine the accuracy of Mr. Grobstein’s opinion, and 

the bankruptcy court appropriately afforded his opinion no weight.

Ultimately, the bankruptcy court concluded that Appellant’s tracing argument was 

“inconsistent with the record developed at trial” and proceeded to detail all of the evidence 

adduced at trial showing that “whatever interest Mary Louie had in the Buffalo Properties was 

terminated sometime between 2003 (when she executed the first deed) to 2009 . . . .” Trial Order 

at 12-13. Appellant does not challenge this conclusion on appeal.12 Thus, even had the 

bankruptcy court applied an incorrect burden of proof for tracing—and there is no indication that 

it did—the error would be harmless because the evidence simply does not support a theory of 

tracing. See Kennedy v. S. California Edison Co., 268 F.3d 763, 770-71 (9th Cir. 2001) (harmless 

error applies to a trial court’s error in allocating burden of proof). 

ii. The bankruptcy court was not required to apply a presumption of undue 

influence.

Appellant next charges the bankruptcy court with error in refusing to apply a presumption 

of undue influence to a number of transactions that led to the Tehama Property’s current 

ownership, including (1) the 2003 grant deed whereby Mary and Richard Sr. transferred their 

interests in the Buffalo Properties to Rick and Stephanie; (2) the purchase of the Tehama Note in 

 

12 As explained below, to the extent Appellant appears to seek reversal of this conclusion through 

its contention that the bankruptcy court erred in failing to apply a presumption of undue influence

or to enforce the 2003 Partnership Agreement among Richard Sr., Mary, Rick, and Stephanie, 

those contentions are meritless.

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Homer Ventures, LLC’s name; and (3) the transfer of title in the Tehama Property from Mary to 

Appellant. Appellant Br. 14-16. Appellant claims that a presumption was warranted because 

Mary is elderly, that she was in a “fiduciary/confidential relationship” with Rick and trusted her 

money to him, had little or no knowledge of the transfers, and because there was evidence in the 

record of Rick’s prior fraudulent conduct, including his filing of false oaths with the bankruptcy 

court. The Court finds no merit in this argument.

First and foremost, Appellant did not raise the undue influence argument until its closing 

remarks after the presentation of evidence. See Appellee Br. 20; Trial Tr. 193:10-22. The theory 

that Appellant asserted and presented at trial was that the funds from the Merrill Lynch account 

used to purchase the Tehama Property could be traced back to Mary’s and Richard Sr.’s sale of the 

Sav-Mor Grocery store and that Rick held those funds in trust. See ER Exh. 5 (Answer to 

Complaint-in-Intervention); Exh. 12 (TT’s Cross-Mot. for Summary J.); Exh. 15 (TT’s Trial 

Brief); see also Defendants’ Case Management Statement, A.P. No. 13-5062 SLJ, ECF 21 (filed 

9/19/2013) (“Mary’s Monies Purchased Tehama Property. Debtors/Defendants core theory is that 

a straightforward accounting will show that Mary’s Louie’s [sic] monies from the $280,000 sale of 

her Grocery Store in Williams, CA were transferred into a Merrill Lynch account. Monies were 

then transferred out of the Merrill account to purchase the subject San Francisco Tehama 

property.”). Rick’s purported exercise of undue influence over Mary in securing the transfer of 

the Buffalo Properties or in any other transaction was not raised or even hinted at until the close of 

evidence at trial. This new theory rests not on the contention that the funds to purchase the 

Tehama Property were always Mary’s, but rather on an implicit concession that she did relinquish 

her interest to Rick, but that the grant should be voided as a matter of public policy. See 6/9/14 

Trial Tr. 191:19-24. The bankruptcy court appropriately pointed out that Appellant’s undue 

influence argument presented “a totally different lawsuit.” Id. 195:23. As even Appellant’s own 

cited authority explains, it is highly improper for an appellant to advance a new theory after trial 

where the facts essential to the theory are in dispute. Strasberg v. Odyssey Grp., Inc., 51 Cal. 

App. 4th 906, 920-21 (1996). As such, the bankruptcy court would not have abused its discretion 

had it simply refused to consider Appellant’s untimely undue influence argument. Accord

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Strasberg, 51 Cal. App. at 920.

Furthermore, Appellant introduced no evidence at trial that would warrant the imposition 

of an evidentiary presumption based upon elder abuse or undue influence. Appellant cites to 

California Civil Code § 1575 and a bevy of case law discussing the presumption of undue 

influence in will contests. In the case of conveyances inter vivos, a party seeking the presumption 

of undue influence must present evidence of “the susceptibility to imposition, the extreme age and 

infirmity, of the grantor,” together with “slight evidence of circumstances from which it may be 

inferred that the instrument was the product of coercion.” O’Neil v. Spillane, 45 Cal. App. 3d 147, 

155 (Ct. App. 1975) (citing Longmire v. Kruger, 80 Cal. App. 230, 238 (1926)). Here, Appellant 

produced no evidence demonstrating that Mary is or was infirm or lacking in mental vigor to 

protect herself against Rick’s imposition. See Longmire, 80 Cal. App. at 237. 

Mary was in her early seventies when she executed the 2003 grant deed transferring her 

interest in the Buffalo Properties to Rick and Stephanie.

13

 She testified in deposition that she was 

and is of sound mind and body. She also testified that she gave money to Rick and Stephanie with 

no expectation that they would give the money back. Pl. Trial Exh. 74 (3/6/14 Mary Louie Dep. 

Tr.) 31:9-11. In 2013, the bankruptcy court presiding over the 580 Parkson Road adversary 

proceeding found that “Mary Louie, who is eighty years old and appears to be of sound mind and 

body, is completely unaware of the myriad financial dealings her son Richard Louie carries out, 

nominally in her name.” ER Exh. 1 (Compl.) Exh. A ¶ 28. Even at trial in this case, Appellant’s 

counsel acknowledged that Mary would not sue her son. Trial Tr. 201:2-6. There was thus no 

basis for presuming that Rick—Richard Sr.’s and Mary’s only child—had obtained ownership of 

 

13 Mary testified in 2014 that she would be 82 on March 25th of that year, placing her in her early 

seventies in 2003. See Pl. Tr. Exh. 74 (3/6/14 Mary Louie Dep. Tr.) at 44:19. Appellant 

acknowledges that as of the date of its reply brief, Mary was 82 years old. Appellant Reply 6. For 

some reason, the proposed Complaint-in-Intervention that Mary attempted to file in February of 

2014 alleges that she was born in 1925, which would have made her 78 in 2003. See Proposed 

Compl.-in-Intervention ¶ 1, A.P. No. 13-5062 SLJ, ECF 46-1 (filed Feb. 19, 2014). The Court 

assumes that this latter assertion was a drafting error on the part of Mary’s attorney (also 

Appellant’s counsel in this case), as all of the other evidence in the record indicates that Mary is 

presently in her eighties and was therefore in her early seventies in 2003. 

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the Buffalo Properties through undue influence.14 Cf. Stewart v. Marvin, 139 Cal. App. 2d 769, 

775 (1956) (“extreme age and infirmity of the grantor” together with “slight evidence of 

circumstances” from which coercion could be inferred sufficient to shift burden to grantee to 

affirmatively show that transaction was fair and free from influence); Beckmann v. Beckmann, 174 

Cal. App. 2d 717, 722 (1959) (applying presumption where grantor was nearly 80 years of age and 

“in a weak mental condition due to advanced senility”).

Appellant’s argument that the bankruptcy court found wrongdoing by finding that “Rick 

Louie took the proceeds from the sale” of the Buffalo Properties is unpersuasive. See Appellant 

Br. 15 (“The badges of fraud identified by the Court in its Trial Ruling also point to Rick’s taking

Mary’s Buffalo properties assets, since the Bankruptcy Court found he took her assets.” (emphasis 

in original)); Trial Order at 13. The bankruptcy court made no such finding. A fair reading of the 

bankruptcy court’s order following trial indicates that it merely found, on the basis of the 

numerous opaque transactions that Rick engaged in using his mother as a figurehead, that Mary’s 

interest in the Buffalo Properties terminated sometime between 2003 and 2009. See Trial Order at 

13 (“the court concludes that whatever interest Mary Louie had in the Buffalo Properties was 

terminated sometime between 2003 (when she executed the first deed) to 2009, when Rick Louie 

took the proceeds from the sale.”). This finding was not erroneous, even when reviewed de novo.

Insofar as Appellant contends that it was entitled to a presumption of undue influence 

based upon the evidence, a presumption merely shifts the burden to the grantee or beneficiary to 

prove the absence of undue influence. See Appellant Br. 14. The “grantee” of the Buffalo 

Properties in this instance was Rick, who clearly has no interest in assisting Appellees to void his 

own fraudulent transfer. More to the point, even had it been appropriate to apply such a 

 

14 As Appellees also appropriately point out, this undue influence argument fails to account for the 

fact that Richard Sr. also signed the grant deeds transferring his interest in the Buffalo Properties 

to Rick and Stephanie. Appellee Br. 20. The Court also finds no evidentiary basis for presuming 

undue influence in connection with any of the later transactions that Rick carried out in Mary’s 

name, as she appears to have been largely unaware of those transactions. Because this Court 

agrees with the bankruptcy court that Mary lost whatever interest she had in the Buffalo Properties 

sometime between 2003 and 2009, the transactions involving the Tehama Property were carried 

out using funds from the debtor’s (Rick’s) estate, even if he appended his mother’s name to the 

papers in an effort to conceal his involvement.

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presumption to place the burden on Appellees to demonstrate Rick’s lack of undue influence over 

his mother, Appellees had no opportunity to present any rebuttal evidence at trial because it had no 

notice of the argument until after trial. It would thus be fundamentally unfair to hold, as Appellant 

urges, that “Appellees failed to overcome the presumption that the transfers of Mary [sic] assets to 

others were the result of fraud, undue influence, and presumptively void.”15 Appellant Br. 16.

In conclusion, the bankruptcy court did not err in rejecting Appellant’s untimely and 

unwarranted attempt to bring what would essentially be a “totally different lawsuit” in the guise of 

an evidentiary presumption. As explained below, regardless of the (questionable) merits of the 

undue influence and constructive trust arguments, the bankruptcy court likewise did not err in 

concluding that Appellant—a New Mexico company—could not bring such a claim on Mary’s 

behalf. See Trial Order 14.

iii. The bankruptcy court did not err in disregarding the 2003 Partnership 

Agreement.

In challenging the bankruptcy court’s conclusion that the Tehama Property was purchased 

using funds from Rick’s bankruptcy estate, Appellant also ascribes error to the bankruptcy court’s 

decision to disregard the one-page Partnership Agreement dated February 27, 2003 and signed by 

Richard Sr., Mary, Rick, and Stephanie. Pl. Trial Exh. 9; see Appellant Br. 18-19. It is not clear 

what relevance the Partnership Agreement has in light of the bankruptcy court’s conclusion, 

affirmed by this Court, that the subsequent grant deed in June 2003 terminated Mary’s interest in 

the Buffalo Properties. In any case, the bankruptcy court did not err in disregarding the 

Partnership Agreement because the undisputed evidence established that Mary did not sign the 

agreement. See Trial Order at 3-4. 

Appellant contends that “[t]here was no evidence [Mary’s] signature was a forgery” and 

that “Appellees’ Expert Handwriting Expert [sic] did not opine that any of the documents with 

 

15 The Court moreover rejects Appellant’s suggestion that Rick’s prior filing of false oaths before 

the bankruptcy court should count toward a finding that he obtained ownership of the Buffalo 

Properties through fraud. See Appellant Br. 15. It is undisputed that Rick incorporated Appellant 

and is its designated manager. To allow Rick’s prior fraud upon the bankruptcy court to inure to 

his benefit now would be an affront to basic notions of fundamental fairness.

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Mary’s name signed on them were forgeries.” See Appellant Br. 18. The record wholly belies 

these contentions. Ms. Fisher opined in her report that “Q-1 through Q-8 are fabricated documents 

containing the same signature that has been transposed onto each of these documents.” Pl. Trial 

Exh. 2 at 8. “Q-2” is the Partnership Agreement. Id. at 4. The only conclusion that can be drawn 

from this unrebutted opinion is that the Partnership Agreement is not enforceable because Mary’s 

signature on the document was faked. To the extent Appellant would argue that copying and 

pasting Mary’s signature onto a document is not a “forgery,” that distinction is absurd. 

Furthermore, to the extent Appellant contends that Mary “authorized Rick to act on her behalf,” 

Appellant Br. 18, there is no evidence in the record of such blanket authorization to apply her 

signature to the number of documents that Ms. Fisher concluded were fabricated. Appellant’s 

reliance on Mr. Crom’s report stating that Mary trusts her son implicitly is not evidence of 

authorization to copy and paste her signature on documents she had not seen. See id. The 

bankruptcy court thus appropriately rejected the Partnership Agreement.

iv. Conclusion

In conclusion, the bankruptcy court did not apply an incorrect burden of proof in 

concluding that Appellant had failed to demonstrate strict and direct tracing of the proceeds from 

the sale of the Sav-Mor Grocery to the funds used to purchase the Tehama Property. Nor did the 

bankruptcy court err in disregarding the 2003 Partnership Agreement urged by Appellant or in 

rejecting Appellant’s dilatory assertion of undue influence. Because there was no error in the 

bankruptcy court’s findings of fact and conclusions of law, the Court AFFIRMS the bankruptcy 

court’s conclusion that the funds used to purchase the Tehama Property were an “interest of the 

debtor [Rick Louie] in property.”

V. THE BANKRUPTCY COURT DID NOT ERR IN DENYING MARY LOUIE’S 

MOTION TO INTERVENE

Finally, the Court turns to Appellant’s argument that the bankruptcy court erred in denying 

Mary Louie’s motion to intervene as a plaintiff in this case and that the court further erred in 

refusing to allow Appellant to assert a constructive trust claim on Mary’s behalf. Appellant Br. 

17-18. 

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The Court, as an initial matter, agrees with Appellees that Appellant does not have 

standing to appeal the denial of Mary’s motion to intervene. Appellee Br. 1-2. That Appellant has 

inexplicably identified Mary as an “appellant” in this case does not make her one. In any event, 

even assuming that Mary is a proper appellant in this action, her appeal is untimely because the 

bankruptcy court denied her motion to intervene on April 1, 2014, a final order that she did not 

appeal within the time proscribed by the Federal Rules of Bankruptcy Procedure. ER Exh. 10; 

Fed. R. Bankr. P. 8002(a). Appellant has no rejoinder to Appellees’ standing and timeliness 

arguments. As such, the Court concludes that the bankruptcy court’s denial of Mary’s motion to 

intervene is barred from appellate review. Wiersma v. Bank of the West (In re Wiersma), 483 F.3d 

933, 938 (9th Cir. 2007). 

Turning to Appellant’s contention that the bankruptcy court improperly refused to allow 

Appellant to assert a constructive trust claim on Mary’s behalf, that argument rests on an imperfect 

understanding of the bankruptcy court’s order denying Mary’s motion to intervene. Appellant 

appears to believe that it is “law of the case” that it could “adequately present Mary Louie’s 

claims.” Appellant Br. at ii (Question 2). There is no such law of the case. Appellant in its 

opening brief quotes extensively the same passages from the March 31, 2014 motion hearing that 

this Court quoted above. See supra Part I.A; Appellant Br. 5-6. In denying Mary’s motion to 

intervene, the bankruptcy court stated again and again that Mary had no legally protectable interest 

in the Tehama Property, whether as the 100% owner of Appellant True Traditions, LC or pursuant 

to a constructive trust theory.16 3/31/14 Hr’g Tr. 13:16-19, 14:13-17, 14:21-24. If anything, these 

findings are “law of the case.” 

Appellant ignores all of these findings to focus solely on the bankruptcy court’s conclusion 

that “there is no evidence that Mary has presented that her interests would not be protected by 

[Appellant’s counsel].” Id. 15:22-24. That “interest,” however, is merely the “same ultimate 

objective of keeping the property, the Tehama property, out of the bankruptcy estate and the hands 

of the Plaintiff Trustees.” Id. 15:13-17. As such, the bankruptcy court made no ruling that 

 

16 At the time that Mary sought to intervene, she did not assert undue influence or any wrongful 

act by Rick. 3/31/14 Hr’g Tr. 13:21-14:15.

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Appellant could bring claims on Mary’s behalf, only that Appellant and Mary shared the same 

objective. As the bankruptcy court itself explained during trial, this was not leave for Appellant to 

bring, for example, a tort claim on Mary’s behalf. Trial Tr. 193:5-9. Mary’s constructive trust 

claim would be hers individually, not that of Appellant True Traditions. 

There was thus no error or inconsistency in the bankruptcy court’s conclusion that 

Appellant could not assert a constructive trust in the Tehama Property on Mary’s behalf. Trial 

Order at 14. That claim must be left for “a totally different lawsuit.” Trial Tr. 195:23.

VI. ORDER

For the foregoing reasons, the findings and conclusions in the bankruptcy court’s July 14, 

2014 Order Following Trial, as well as the bankruptcy court’s July 28, 2014 Judgment Avoiding 

Fraudulent Transfer are AFFIRMED. The Clerk of the Court shall enter judgment and close the 

case file.

IT IS SO ORDERED.

Dated: September 8, 2015

______________________________________

BETH LABSON FREEMAN

United States District Judge

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