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NOT FOR PUBLICATION

UNITED STATES BANKRUPTCY APPELLATE PANEL

OF THE NINTH CIRCUIT

In re: ) BAP No. CC-15-1151-FKiKu

)

MOISEY FRIDMAN and ) Bk. No. 8:12-bk-11721-ES

ROSA FRIDMAN, )

)

Debtors. )

_____________________________ )

)

MOISEY FRIDMAN; ROSA FRIDMAN, )

)

Appellants, )

)

v. ) MEMORANDUM*

)

KARL T. ANDERSON, Chapter 7 )

Trustee; KARL AVETOOM, )

)

Appellees. )

______________________________)

Argued and Submitted on June 23, 2016

at Pasadena, California

Filed – July 15, 2016

Appeal from the United States Bankruptcy Court

for the Central District of California

Honorable Erithe A. Smith, Bankruptcy Judge, Presiding

 

Appearances: Appellant Rosa Fridman argued pro se; Juliet Y. Oh

argued for Appellee Karl T. Anderson, Chapter 7

Trustee; Appellee Karl Avetoom argued pro se.

 

Before: FARIS, KIRSCHER, and KURTZ, Bankruptcy Judges.

FILED

JUL 15 2016

SUSAN M. SPRAUL, CLERK

U.S. BKCY. APP. PANEL

OF THE NINTH CIRCUIT

* This disposition is not appropriate for publication. 

Although it may be cited for whatever persuasive value it may

have, see Fed. R. App. P. 32.1, it has no precedential value, see

9th Cir. BAP Rule 8024-1.
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INTRODUCTION

Appellants/chapter 71 debtors Moisey and Rosa Fridman appeal

the bankruptcy court’s order approving the sale of their right to

appeal an adverse state court judgment in favor of Appellee Karl

Avetoom. We hold that the court did not abuse its discretion in

approving the sale. Accordingly, we AFFIRM.

FACTUAL BACKGROUND2

The Fridmans and Mr. Avetoom are former neighbors at Beach

Crest Villas, where Mr. Avetoom is the president of the Beach

Crest Villas Homeowners Association (“HOA”). This appeal arises

from a long and contentious history of litigation between the

Fridmans and Mr. Avetoom, most of which is not relevant to this

case and need not be recounted here.

A. State court judgment and appeal

In November 2011, following a jury trial in California

superior court, Mr. Avetoom obtained a state court judgment

against the Fridmans for, among other things, intentional

infliction of emotional distress. The jury awarded Mr. Avetoom

non-economic damages totaling $600,000 and punitive damages

totaling $400,000. The punitive damages award was later reduced

to $50,000.

1 Unless specified otherwise, all chapter and section

references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, all

“Rule” references are to the Federal Rules of Bankruptcy

Procedure, Rules 1001-9037, and all “Civil Rule” references are

to the Federal Rules of Civil Procedure, Rules 1-86.

2 The Fridmans present us with a limited record. We have

exercised our discretion to review the bankruptcy court’s docket,

as appropriate. See Woods & Erickson, LLP v. Leonard (In re AVI,

Inc.), 389 B.R. 721, 725 n.2 (9th Cir. BAP 2008).

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After the superior court denied the Fridmans’ motion for new

trial and a motion for judgment notwithstanding the verdict, the

Fridmans appealed. 

B. Bankruptcy proceedings

While the appeal was pending, the Fridmans filed for

chapter 13 bankruptcy. They converted their case to chapter 7,

and appellee Karl Anderson (“Trustee”) was appointed as chapter 7

trustee (apparently after an election).

According to the Fridmans’ schedules, they have general

unsecured debts totaling approximately $60,245.76. Their only

other debts are the $650,000 judgment and a $119,000 equity line

of credit.

The Trustee made several attempts to extricate the estate

from the litigation and appeal. First, he filed a motion for

authority to sell the estate’s rights to pursue the Fridmans’

appeal to Mr. Avetoom for $25,000, subject to overbid. The

Fridmans complained that they could not afford to bid and would

oppose any such sale. The United States Trustee also expressed

concern that the proposed sale might be tantamount to an

impermissible waiver of discharge in violation of § 524(c).3 As

3 Debts for “willful and malicious injury” are not

dischargeable in bankruptcy under § 523(a)(6). A prebankruptcy

judgment that includes punitive damages can sometimes establish,

under issue preclusion principles, that the debtor’s conduct was

“willful and malicious.” See, e.g., Khaligh v. Hadaegh

(In re Khaligh), 338 B.R. 817, 831-32 (9th Cir. BAP 2006), aff’d,

506 F.3d 956 (9th Cir. 2007) (holding that “it was permissible

for the court to apply issue preclusion to establish willful and

malicious injury for purposes of § 523(a)(6)”). The sale (and

extinguishment) of the Fridmans’ appellate rights thus could have

saddled them with a nondischargeable debt.

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a result, the Trustee withdrew the motion.

The Trustee then attempted to transfer the appeal rights to

the Fridmans. The Trustee filed a motion for approval of a

compromise with the Fridmans (“Compromise Motion”). He sought

authority to abandon the appeal rights and to allow the Fridmans

to prosecute the appeal at their own expense. They were required

to recover and return to the estate certain funds that they had

paid to their prebankruptcy lawyers. 

While the Compromise Motion was pending, the Trustee

commenced an adversary proceeding against the Fridmans, seeking a

denial of discharge under § 727. 

At the hearing on the Compromise Motion, the court found

that the Trustee had the power to sell the right to appeal

because it was property of the Fridmans’ estate, but ordered that

the Compromise Motion be taken off calendar pending the

resolution of the adversary proceeding. The court also ordered

the state court appeal stayed.

Just prior to trial in the § 727 adversary proceeding, the

Fridmans stipulated to the entry of judgment denying their

discharge.

C. Sale of the appeal rights

The Trustee did not renew the Compromise Motion after the

§ 727 adversary proceeding was concluded. Instead, the Trustee

filed a motion seeking authority to sell the appeal rights to

Mr. Avetoom and the HOA, subject to overbid (“Sale Motion”).

The Sale Motion drew opposition from two parties. First,

the Fridmans argued that the sale of the right to appeal was

improper and that the overbid procedures were unfair. They

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argued that Mr. Avetoom was engaging in “threatening, unethical,

and malicious behavior” to prevent an appeal of the state court

judgment. They also claimed that the Trustee had already agreed

to abandon the appeal rights to them. Second, the law firm of

Darling & Risbrough, LLP, which had formerly represented the

Fridmans, objected to the inclusion of the HOA as one of the

proposed buyers, contending that the HOA lacked power to make

such a purchase.

In his reply brief, the Trustee represented that the HOA

agreed not to participate as a buyer. Mr. Avetoom agreed to

purchase the right to appeal with his own monies.

The court issued a tentative ruling indicating that it was

inclined to grant the Sale Motion. At the hearing,4 the Trustee

conducted an auction of the right to appeal pursuant to the

overbid procedures. The Fridmans were present, but only

Mr. Avetoom and the Darling & Risbrough law firm participated in

the auction. Mr. Avetoom eventually won the right to appeal with

a purchase price of $37,000. Following the auction, the court

granted the Sale Motion.

D. BAP appeal and post-appeal events

The court entered a written order approving the sale (the

“Sale Order”), which was a short, counsel-prepared order that

incorporated the court’s tentative ruling. The Fridmans had

already filed a premature notice of appeal. They did not obtain

4 The Fridmans did not include in their excerpts of record a

transcript of the hearing on the Sale Motion. They represented

that they did not have the financial resources to order the

transcript and asked for the Panel’s understanding.

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a stay of the Sale Order. 

Shortly thereafter, the state appellate court dismissed the

Fridmans’ state court appeal at Mr. Avetoom’s request (since he

then owned the appeal rights).

After filing the opening brief in this appeal, Mr. Fridman

passed away. A California state court appointed the Fridmans’

son Val Fridman as personal representative of Mr. Fridman’s

estate.

Appellees filed a motion to dismiss the appeal as moot. 

They argued that, because the Fridmans did not seek a stay of the

Sale Order and the state court appeal has been dismissed, the

present appeal is moot. The motions panel denied the motion,

subject to final decision by the merits panel.5

JURISDICTION

The bankruptcy court had jurisdiction pursuant to 28 U.S.C.

§§ 1334 and 157(b)(2)(N) and (O). Subject to our discussion of

mootness below, we have jurisdiction under 28 U.S.C. § 158.

ISSUES

(1) Whether this appeal is moot. 

(2) Whether a right to appeal is an estate asset that may be

sold by auction.

(3) Whether the bankruptcy court erred in approving the sale

of the Fridmans’ right to appeal the state court judgment.

(4) Whether the HOA is a bona fide creditor that may

5 Because they are relevant to the question of mootness and

Val Fridman’s appointment as personal representative, we will

take judicial notice of exhibits 3, 4, and 5 to docket 17;

exhibits 1, 2, and 3 to docket 54; docket 69; and docket 70. All

other requests for judicial notice are DENIED.

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participate in the bankruptcy case.

(5) Whether the sale is subject to scrutiny by the

Department of Homeland Security (“DHS”).

STANDARDS OF REVIEW

We review de novo our own jurisdiction, including questions

of mootness. Silver Sage Partners, Ltd. v. City of Desert Hot

Springs (In re City of Desert Hot Springs), 339 F.3d 782, 787

(9th Cir. 2003). “De novo review requires that we consider a

matter anew, as if no decision had been made previously.” 

Francis v. Wallace (In re Francis), 505 B.R. 914, 917 (9th Cir.

BAP 2014) (citations omitted). 

The question whether a purchaser is a good faith purchaser

under § 363(m) is a question of fact that we review for clear

error. Thomas v. Namba (In re Thomas), 287 B.R. 782, 785 (9th

Cir. BAP 2002).

We review for abuse of discretion an order approving a § 363

sale. Moldo v. Clark (In re Clark), 266 B.R. 163, 168 (9th Cir.

BAP 2001). Similarly, the bankruptcy court’s decision to approve

a compromise under Rule 9019 is reviewed for abuse of discretion. 

Martin v. Kane (In re A&C Props.), 784 F.2d 1377, 1380 (9th Cir.

1986).

To determine whether the bankruptcy court has abused its

discretion, we conduct a two-step inquiry: (1) we review de novo

whether the bankruptcy court “identified the correct legal rule

to apply to the relief requested” and (2) if it did, whether the

bankruptcy court’s application of the legal standard was

illogical, implausible, or “without support in inferences that

may be drawn from the facts in the record.” United States v.

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Hinkson, 585 F.3d 1247, 1262–63 & n.21 (9th Cir. 2009) (en banc).

“If the bankruptcy court did not identify the correct legal rule,

or its application of the correct legal standard to the facts was

illogical, implausible, or without support in inferences that may

be drawn from the facts in the record, then the bankruptcy court

has abused its discretion.” USAA Fed. Sav. Bank v. Thacker

(In re Taylor), 599 F.3d 880, 887–88 (9th Cir. 2010) (citing

Hinkson, 585 F.3d at 1261–62).

DISCUSSION

A. This appeal is not moot.

Appellees urge us to hold that this appeal is moot, because

the Fridmans did not obtain a stay of the Sale Order and the

state court appeal has been dismissed. We discuss two alternate

mootness grounds: statutory mootness and equitable mootness.

1. Statutory mootness

The “safe harbor” provision of § 363(m) states:

The reversal or modification on appeal . . . of a sale

or lease of property does not affect the validity of a

sale or lease under such authorization to an entity

that purchased or leased such property in good faith,

whether or not such entity knew of the pendency of the

appeal, unless such authorization and such sale or

lease were stayed pending appeal.

§ 363(m) (emphases added).

With respect to an appeal of a sale of assets in bankruptcy,

the Ninth Circuit has stated: “[W]hen, in the absence of a stay

of the order of sale, a sale to a ‘good faith purchaser’ has been

concluded, an appellate court cannot undo the sale. Because the

court cannot provide meaningful relief to the appellant under

those circumstances, any appeal of the order of sale thereby

becomes moot.” Dunlavey v. Ariz. Title Ins. & Tr. Co.

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(In re Charlton), 708 F.2d 1449, 1454 (9th Cir. 1983) (quoting

Taylor v. Lake (In re CADA Invs., Inc.), 664 F.2d 1158, 1160 (9th

Cir. 1981)). 

However, “[e]ven though an appeal from an order approving a

sale is moot if the sale has not been stayed and is consummated,

there are several exceptions. One exception to the mootness rule

is for appeals questioning whether the purchaser purchased the

property in good faith.” Fitzgerald v. Ninn Worx Sr, Inc.

(In re Fitzgerald), 428 B.R. 872, 880 (9th Cir. BAP 2010) (citing

Sw. Prods., Inc. v. Durkin (In re Sw. Prods., Inc.), 144 B.R.

100, 102-03 (9th Cir. BAP 1992)); see Onouli-Kona Land Co. v.

Richards (In re Onouli-Kona Land Co.), 846 F.2d 1170, 1173 (9th

Cir. 1988) (“Bankruptcy’s mootness rule operates only when a

purchaser bought an asset in good faith.”). 

In the present case, it is undisputed that the Fridmans did

not seek a stay of the Sale Order and that the state court appeal

has been dismissed. The question, then, is whether Mr. Avetoom

is a “good faith” purchaser entitled to the protections of

§ 363(m). 

A good faith purchaser is “one who buys ‘in good faith’ and

‘for value.’” Ewell v. Diebert (In re Ewell), 958 F.2d 276, 281

(9th Cir. 1992). The Ninth Circuit has “defined lack of good

faith as ‘fraud, collusion . . . or an attempt to take grossly

unfair advantage of other bidders.’” In re Onouli-Kona Land Co.,

846 F.2d at 1173 (quoting Cmty. Thrift & Loan v. Suchy

(In re Suchy), 786 F.2d 900, 902 (9th Cir. 1985)).

“‘Good faith’ is a factual determination to be reviewed for

clear error . . . .” In re Thomas, 287 B.R. at 785. The

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bankruptcy court’s factual finding must be supported by evidence

in the record. In re Fitzgerald, 428 B.R. at 880-81. An

appellate court will look past a “boilerplate ‘good faith’

finding” and ascertain whether the finding has “an evidentiary

foundation.” Id. at 881. “[P]arties who desire the protection

of section 363(m) [must] establish an evidentiary record for the

bankruptcy court to make the necessary findings of fact and

conclusions of law.” T.C. Inv’rs v. Joseph (In re M Capital

Corp.), 290 B.R. 743, 745 (9th Cir. BAP 2003); see

In re Fitzgerald, 428 B.R. at 881 (“The boilerplate ‘good faith’

finding in the Sale Order does not suffice under section 363(m),

and the bankruptcy court should not have signed such an order

without an evidentiary foundation.”).

The BAP will not make a finding of good faith (or the lack

thereof) in the first instance on appeal, because “determination

of section 363(m) good faith is the province of the trial court.” 

In re M Capital Corp., 290 B.R. at 747; see id. at 752 (“Without

such affirmative findings, the ramifications should be obvious:

no safe harbor[.]”). 

Here, the bankruptcy court made a finding of good faith in

the Sale Order: “The Purchaser is a ‘good faith’ purchaser of the

Appeal Rights within the meaning of 11 U.S.C. § 363(m).” The

court’s tentative ruling covered the elements of “good faith”

under the Ninth Circuit standard: “There is no evidence of any

fraud or collusion between the purchaser, Avetoom, and the court

finds that the transaction was negotiated and proposed in good

faith.” The court may have said more on this topic on the record

at the hearing on the Sale Motion, but the Trustee and

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Mr. Avetoom have not provided us with a copy of the hearing

transcript. 

The bankruptcy court’s finding has evidentiary support in

the record. Cf. In re Fitzgerald, 428 B.R. at 880 (“we see

absolutely no evidence in the record to support a ‘good faith’

finding under section 363(m)”). The Trustee offered evidence

that: the Trustee and Mr. Avetoom negotiated the proposed sale at

arm’s length and in good faith; there had been no fraud and

collusion; the Trustee sought competitive bids for the appeal

rights; and the Trustee had taken steps to obtain the highest

price possible. As such, we discern no clear error in the

bankruptcy court’s finding of good faith.

We make this determination with some unease. The amount of

energy which the parties have devoted to this litigation, and the

extraordinary degree of venom they have poured on each other,

make it clear that this case is more of a personal vendetta than

a rational attempt by the parties to protect their legitimate

interests. To say that either of these parties is acting in

“good faith” stretches the common meaning of that phrase to the

breaking point. But the case law ascribes a special meaning to

the phrase in the context of § 363(m). Given that definition, we

cannot say that the bankruptcy court erred.

But all of this assumes that § 363(m) applies. We have

repeatedly held that a transaction presented as a settlement of

litigation often must be analyzed both as a settlement under

Rule 9019 and as a sale under § 363(m). See Goodwin v. Mickey

Thompson Entm’t Grp., Inc. (In re Mickey Thompson Entm’t Grp.,

Inc.), 292 B.R. 415, 421 (9th Cir. BAP 2003). The converse is

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also true: a transaction presented as a sale that is in substance

a settlement under Rule 9019 must be analyzed under both

provisions. See In re Lahijani, 325 B.R. at 290;

In re Fitzgerald, 428 B.R. at 884. 

The hybrid nature of the motion is important here because,

while § 363(m) applies to sales, no comparable provision applies

to settlements under Rule 9019. Further, applying § 363(m) to

settlements would not further that subsection’s purpose. 

Section 363(m) is intended to increase the confidence of

purchasers in bankruptcy sales and then encourage them to buy

estate assets for higher prices. See In re Ernst Home Ctr.,

Inc., 209 B.R. 974, 986 (Bankr. W.D. Wash. 1997) (“The intent of

Section 363(m) is to encourage third parties to do business with

a debtor in possession, by providing certainty and finality to a

transaction where consideration is paid in good faith to the

estate by that third party.”). This purpose is not directly

related to settlements. 

We therefore conclude that this appeal is not statutorily

moot under § 363(m). 

2. Equitable mootness

Equitable mootness requires “that practical and equitable

factors should be taken into consideration in determining if an

appeal is moot.” Twenty-Nine Palms Enters. Corp. v. Bardos

(In re Bardos), BAP No. CC-13-1316, 2014 WL 3703923, at *6 (9th

Cir. BAP July 25, 2014). Equitable mootness arises when

“appellants have failed and neglected diligently to pursue their

available remedies to obtain a stay of the objectionable orders

of the Bankruptcy Court, thus ‘permitting such a comprehensive

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change of circumstances to occur as to render it inequitable

. . . to consider the merits of the appeal.” Id. (quoting Focus

Media, Inc. v. NBC (In re Focus Media, Inc.), 378 F.3d 916, 922

(9th Cir. 2004)). The party asserting equitable mootness must

“demonstrate that the case involves transactions ‘so complex or

difficult to unwind’ that equitable mootness applies.” Id. at *7

(quoting Lowenschuss v. Selnick (In re Lowenschuss), 170 F.3d

923, 933 (9th Cir. 1999)). “Equitable mootness requires the

court to look beyond impossibility of a remedy to ‘the

consequences of the remedy and the number of third parties who

have changed their position in reliance on the order that is

being appealed.’” Clear Channel Outdoor, Inc. v. Knupfer

(In re PW, LLC), 391 B.R. 25, 33 (9th Cir. BAP 2008) (quoting

Darby v. Zimmerman (In re Popp), 323 B.R. 260, 271 (9th Cir. BAP

2005)). 

The Trustee argues that this appeal is equitably moot,

because the state appellate court dismissed the appeal, and that

order is final and non-appealable. Mr. Avetoom adds that other

litigation has been dismissed because the appeal has been

dismissed.

While perhaps unlikely, it may not be impossible for the

Fridmans to obtain effective relief if we were to reverse. We

cannot rule out the possibility that the California appellate

courts might exercise their inherent powers6 to set aside the

6 The California state courts have broad inherent powers to

effect justice. See, e.g., Clark v. First Union Sec., Inc.,

153 Cal. App. 4th 1595, 1608 (2007) (“All courts have inherent

powers that enable them to carry out their duties and ensure the

(continued...)

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dismissal of the appeal if we were to rule that the bankruptcy

court should not have put Mr. Avetoom in control of the appeal

rights. Similarly, Mr. Avetoom does not give us enough

information about the other dismissed litigation to persuade us

that the transaction cannot be unwound.

Moreover, the HOA is the only third party affected by this

case. But because the HOA was a party to the underlying

litigation, the HOA is not the type of third party that the

equitable mootness doctrine was meant to shield. See Bardos v.

Gladstone (In re Bardos), BAP No. CC–15–1217–FDKu, 2016 WL

1161225, at *6 (9th Cir. BAP Mar. 23, 2016) (“While it is true

that Twenty-Nine Palms is not a party to this appeal, it is the

largest creditor and a participant in both the Individual Case

and the Corporate Case. Accordingly, we cannot say that TwentyNine Palms is the type of third party that equitable mootness is

meant to protect.”). Also, there is no indication that the HOA

or other third parties have changed their positions in reliance

on the Sale Order. 

Thus, the appeal is not equitably moot.

B. The Fridmans’ right to appeal the adverse state court

judgment is property of their bankruptcy estate that the

Trustee can sell or compromise.

The Fridmans argue that the Trustee had no power to sell the

right to appeal. Essentially, they contend that, because the

sale of the right to appeal to Mr. Avetoom forecloses the

6(...continued)

orderly administration of justice. The inherent powers of courts

are derived from California Constitution, article VI, section 1,

and are not dependent on statute.”).

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possibility of reversing the state court judgment, the sale is

improper and against their “Constitutional right” of appeal. We

disagree.

The right to appeal a state court judgment is property that

is part of a debtor’s estate. See, e.g., McCarthy v. Goldman

(In re McCarthy), BAP No. CC-07-1083-MoPaD, 2008 WL 8448338, at

*16 (9th Cir. BAP Feb. 19, 2008) (implicitly agreeing with the

bankruptcy court that the debtor’s “Appeal Rights are property of

the estate”); In re Marciano, No. 1:11-BK-10426-VK, 2012 WL

4369743, at *1 (C.D. Cal. Sept. 25, 2012) (under California law,

the right to appeal an adverse judgment is a property right);

Mozer v. Goldman (In re Mozer), 302 B.R. 892, 896 (C.D. Cal.

2003) (“all of the Debtors’ appellate rights, including the

Defensive Appellate Rights, are saleable by the Trustee”).

The Fridmans fail to provide any legal authority in support

of their position. Rather, as discussed above, a right to appeal

may be sold as part of estate assets, even to the party against

whom the appeal is directed. See In re Mozer, 302 B.R. at 896. 

The fact that Mr. Avetoom purchased the appeal rights to

foreclose an appeal of the state court judgment in his favor is

not out of the ordinary or otherwise improper. 

The Fridmans also argue that the Trustee could not sell the

appeal rights to Mr. Avetoom, because he had already sold those

rights to them. The Fridmans misapprehend the bankruptcy

process. While it is true that the Trustee initially entered

into an agreement with the Fridmans to abandon the appeal rights,

the Trustee had no power to abandon or sell the appeal rights to

anyone absent court approval, and the bankruptcy court never

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approved the abandonment to the Fridmans. 

The Fridmans complain that the Trustee kept part of the

funds he received pursuant to the compromise, even though the

court never approved the compromise and the Trustee did not carry

out his end of the deal. The record on this issue is opaque, but

the Trustee apparently handled the funds in accordance with the

bankruptcy court’s orders that no one appealed. In any event,

the only issue before us is whether the court erred in approving

the transaction with Mr. Avetoom.

Therefore, the right to appeal was property of the

bankruptcy estate that the Trustee could choose to sell or

auction.

C. The bankruptcy court did not abuse its discretion in

granting the Sale Motion.

The Fridmans contend that the sale of the appeal rights to

Mr. Avetoom was improper for a number of reasons. Although the

Fridmans do not state a legal basis for their position, we

consider whether the Sale Order was proper under § 363 and

Rule 9019.

1. The sale was proper under § 363(b)(1).

Section 363(b)(1) provides that “[t]he trustee, after notice

and a hearing, may use, sell, or lease, other than in the

ordinary course of business, property of the estate . . . .” 

§ 363(b)(1). “The trustee (and, ultimately, the bankruptcy

court) must assure that the estate receives optimal value as to

the asset to be sold.” DeBilio v. Golden (In re DeBilio),

BAP No. CC-13-1441-TaPaKi, 2014 WL 4476585, at *6 (9th Cir. BAP

Sept. 11, 2014) (citing § 363(b)(1); Simantob v. Claims

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Prosecutor, LLC (In re Lahijani), 325 B.R. 282, 288-89 (9th Cir.

BAP 2005)). “Ordinarily, the position of the trustee is afforded

deference, particularly where business judgment is entailed in

the analysis or where there is no objection. Nevertheless,

particularly in the face of opposition by creditors, the

requirement of court approval means that the responsibility

ultimately is the court’s.” In re Lahijani, 325 B.R. at 289. We

also stated that, “[i]n the Ninth Circuit, a § 363(b)(1) sale

does not require a good faith finding.” Id. (citing

In re Thomas, 287 B.R. at 785 (“While no bankruptcy judge is

likely to approve a sale that does not appear to be in ‘good

faith,’ an actual finding of ‘good faith’ is not an essential

element for approval of a sale under § 363(b).”)).

In its tentative ruling (incorporated in the Sale Order),

the court held:

The trustee has exercised sound business judgment

in pursuing the sale of the Appeal Rights. The

proposed sale will generate funds in the amount of

$25,000 for the benefit of the bankruptcy estate. The

alternative, prosecuting the appeal, would result in

the incurring of additional attorneys fees and, best

case scenario, a reduction of Avatoom’s [sic] claim

against the estate. Given the nature of the asset, the

proposed sale is fair and reasonable.

There is no evidence of any fraud or collusion

between the purchaser, Avatoom [sic], and the court

finds that the transaction was negotiated and proposed

in good faith. Further, the trustee and the trustee

[sic] has sought competitive bids for the Appeal Rights

from those most interested -- Debtors and the Darline

[sic] & Risbrough law firm but neither has expressed an

intent to submit an overbid. In this regard, the court

also finds that the proposed overbid procedure

(starting at $26,000 with subsequent overbids in

increments of $1000) to be reasonable. As the trustee

has a duty to maximize the liquidation of assets of the

estate, it follows that no limit should be placed on

the purchase price.

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The court properly determined that: (1) the sale had a sound

business purpose of bringing money into the estate; (2) the sale

was in the best interest of the estate, because the sale price

was fair and reasonable, and it would bring in $25,000 or more

and avoid the cost and uncertainty of further litigation; (3) the

Trustee marketed the asset and sought competitive bids from the

Fridmans and Darling & Risbrough; and (4) the sale was proposed

and made in good faith, because there was no fraud or collusion. 

We find no error in the court’s ruling. 

The Fridmans allege that Mr. Avetoom was allowed to select

the chapter 7 trustee overseeing his case; there was “collusion

between Mr. Avetoom and Trustee Anderson, but nobody listened,

and if they did, no one cared enough to stop it”; the Trustee was

self-interested and was only concerned about his commission; and

it was improper for Mr. Avetoom to overbid. The Fridmans provide

no support for these allegations,7 and we find no basis in the

record for any of them.

The Fridmans also argue that good faith requires an

“identifiable purchaser” who gives “value.” They contend that

Mr. Avetoom cannot be an “identifiable purchaser” because he

“said he got the money from several different generous sources,

presumably ‘people,’ but never disclosed their identities[,]”

which “reeks of a sham transaction, or raises questions of the

involvement of money that has potentially been laundered.” The

7 The record suggests that the Trustee was elected under

§ 702. This may be the basis for the Fridmans’ argument that

Mr. Avetoom chose the Trustee (since Mr. Avetoom is the largest

creditor). But there is nothing improper about the election of a

trustee.

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Fridmans again have no legal authority for the proposition that a

purchaser in a bankruptcy sale must always identify the

purchaser’s funding sources. Nor have they offered any evidence

that Mr. Avetoom got any of the money from a tainted source.

They also argue that Mr. Avetoom could not have given

“value.” They say that value “has yet to be determined, because

the value of the appeal is only realized once it is heard.” They

assert that the Trustee did not consider the real value of the

right to appeal, which ranged from $1,000,000 (the original

judgment) to $720,000 (the purported value of their home) to

$375,000 (the “discounted sale price”) to “priceless” (the value

of their “vindication”). The Fridmans fail to recognize another

possibility: the appellate court might reject the appeal, in

which case the appeal rights were worthless. In any event, the

Fridmans’ argument leads to the absurd conclusion that a trustee

cannot settle an appeal, or sell the estate’s right to appeal,

until after the appeal has concluded. The bankruptcy court did

not err when it found that the Trustee properly exercised his

business judgment in selling those rights to the highest bidder

for $37,000.

We thus hold that the court did not abuse its discretion in

holding that the sale was proper under § 363(b)(1). 

2. Viewing the transaction as a compromise under

Rule 9019, the bankruptcy court did not err.

Our inquiry does not end with § 363(b)(1). Fitzgerald and

Lahijani both considered the sale of litigation claims to a

person against whom those claims might be asserted. Both

decisions rest on the common-sense proposition that a “sale” of

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claims to a defendant has the same effect as a settlement of

those claims, and vice versa, so such transactions should be

evaluated both as sales and as settlements. See In re Lahijani,

325 B.R. at 290; In re Fitzgerald, 428 B.R. at 884 (“The

bankruptcy court erred when it issued the Sale Order without

performing the analysis required by the case law regarding

compromises under Rule 9019.”).

Rule 9019(a) provides that, “[o]n motion by the trustee and

after notice and a hearing, the court may approve a compromise or

settlement. Notice shall be given to creditors, the United

States trustee, the debtor, and indenture trustees as provided in

Rule 2002 and to any other entity as the court may direct.” 

Rule 9019(a).

“The bankruptcy court has great latitude in approving

compromise agreements.” Woodson v. Fireman’s Fund Ins. Co.

(In re Woodson), 839 F.2d 610, 620 (9th Cir. 1988) (citing

In re A&C Props., 784 F.2d at 1380-81).

It is clear that there must be more than a mere

good faith negotiation of a settlement by the trustee

in order for the bankruptcy court to affirm a

compromise agreement. The court must also find that

the compromise is fair and equitable. See, e.g.,

Citibank, N.A. v. Baer, 651 F.2d 1341, 1345–46 (10th

Cir. 1980).

In determining the fairness, reasonableness and

adequacy of a proposed settlement agreement, the court

must consider:

(a) The probability of success in the litigation;

(b) the difficulties, if any, to be encountered in

the matter of collection; (c) the complexity of

the litigation involved, and the expense,

inconvenience and delay necessarily attending it;

(d) the paramount interest of the creditors and a

proper deference to their reasonable views in the

premises.

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In re A&C Props., 784 F.2d at 1381 (citation omitted). The Ninth

Circuit has also stated that “[t]he trustee, as the party

proposing the compromise, has the burden of persuading the

bankruptcy court that the compromise is fair and equitable and

should be approved.” Id. (citing In re Hallet, 33 B.R. 564,

565–66 (Bankr. D. Me. 1983)). 

The law favors compromise, “and as long as the bankruptcy

court amply considered the various factors that determined the

reasonableness of the compromise, the court’s decision must be

affirmed. Thus, on review, we must determine whether the

settlement entered into by the trustee was reasonable, given the

particular circumstances of the case.” Id. (internal citations

omitted).

Moreover, “‘[w]hen assessing a compromise, courts need not

rule upon disputed facts and questions of law, but only canvass

the issues.’ If the court were required to do more than canvass

the issue, ‘there would be no point in compromising; the parties

might as well go ahead and try the case.’” Suter v. Goedert,

396 B.R. 535, 548 (D. Nev. 2008) (citations omitted).

In the present case, the bankruptcy court acknowledged that

the sale may be subject to Rule 9019. Neither the tentative

ruling nor the counsel-prepared Sale Order indicates that the

bankruptcy court engaged in the analysis required by A&C

Properties. But we cannot conclusively say that the court did

not consider Rule 9019 and make appropriate findings at the

hearing. We cannot review the oral ruling because the Fridmans

have not provided us with the hearing transcript.

Without the benefit of the hearing transcript, we are unable

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to discern (1) whether the bankruptcy court identified the proper

legal standard and (2) whether the bankruptcy court’s application

of the legal standard was illogical, implausible, or “without

support in inferences that may be drawn from the facts in the

record.” Hinkson, 585 F.3d at 1261–62.

It is the Fridmans’ duty to provide the Panel with a

complete record on appeal. See Welther v. Donell (In re Oakmore

Ranch Mgmt.), 337 B.R. 222, 226 (9th Cir. BAP 2006) (the

appellant “bears the burden of presenting a complete record”)

(citing Kritt v. Kritt (In re Kritt), 190 B.R. 382, 387 (9th Cir.

BAP 1995)). “The settled rule on transcripts in particular is

that failure to provide a sufficient transcript may, but need

not, result in dismissal or summary affirmance and that the

appellate court has discretion to disregard the defect and decide

the appeal on the merits.” Kyle v. Dye (In re Kyle), 317 B.R.

390, 393 (9th Cir. BAP 2004), aff’d, 170 F. App’x 457 (9th Cir.

2006) (citations omitted). But see Ehrenberg v. Cal. State Univ.

(In re Beachport Entm’t), 396 F.3d 1083, 1087 (9th Cir. 2005)

(“Although summary dismissal is within the BAP’s discretion, it

‘should first consider whether informed review is possible in

light of what record has been provided.’”).

Even if the court did not articulate an analysis of the

A&C Properties factors, we may affirm on any ground supported by

the record. See California ex. rel. Cal. Corps. Comm’r v. Yun

(In re Yun), 476 B.R. 243, 251 (9th Cir. BAP 2012). There is no

doubt that the record supports a determination that the test is

satisfied. Therefore, we find no error concerning the

application of Rule 9019.

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D. The Fridmans’ argument that the HOA is not a bona fide

creditor is untimely and irrelevant.

Next, the Fridmans argue that the court erred, because the

HOA was not a bona fide creditor under 28 U.S.C. § 1359. We

perceive no error.

 28 U.S.C. § 1359 (incorrectly cited by the Fridmans as

23 U.S.C. § 1359) states: “A district court shall not have

jurisdiction of a civil action in which any party, by assignment

or otherwise, has been improperly or collusively made or joined

to invoke the jurisdiction of such court.” Although the Fridmans

invoke this section, they fail to explain how it is relevant to

this appeal or how the HOA was “improperly or collusively made or

joined” in the bankruptcy court litigation. Their bottom-line

argument appears to be that, because the HOA is colluding with

Mr. Avetoom, it was an error to sell the appeal rights to

Mr. Avetoom. 

The Fridmans did not raise this argument before the

bankruptcy court and have waived this argument for the purposes

of appeal. See Yamada v. Nobel Biocare Holding AG, No. 14-55263,

--- F.3d ----, 2016 WL 3207650, at *5 (9th Cir. Apr. 20, 2016)

(“[g]enerally, an appellate court will not hear an issue raised

for the first time on appeal”); Ezra v. Seror (In re Ezra),

537 B.R. 924, 932 (9th Cir. BAP 2015) (“Ordinarily, federal

appellate courts will not consider issues not properly raised in

the trial courts.”). No exceptional circumstances warrant our

review of these issues in the first instance on appeal. See

In re Ezra, 537 B.R. at 932. 

Moreover, the Fridmans incorrectly argue that only creditors

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can bid in a bankruptcy sale. The Trustee is tasked with

realizing the greatest profit when selling estate assets, and

limiting sales only to creditors would not serve this purpose. 

Further, the HOA ultimately did not bid.

Accordingly, the Fridmans waived their argument concerning

the HOA’s standing as a creditor, and, in any event, the argument

is unpersuasive.

E. The Fridmans’ argument that the sale is subject to DHS

jurisdiction is untimely and irrelevant.

Finally, the Fridmans contend that the funds that

Mr. Avetoom used to purchase the right to appeal are of suspect

origin and should have been scrutinized by the DHS. Again, we

discern no error.

The Fridmans did not raise this argument before the

bankruptcy court, and we deem it waived on appeal. See id. 

Even if we were to consider the merits of the Fridmans’

argument, they do not identify any error. The Fridmans offer no

evidence that Mr. Avetoom’s funds are from some nefarious source. 

They do not provide any authority for their assertion that all

transactions of more than $5,000 are subject to DHS review.

Nor do we find any merit in the Fridmans’ implication that

the Trustee behaved improperly or abused his position.

Accordingly, we reject this unsupported argument.

CONCLUSION

For the reasons set forth above, we AFFIRM the bankruptcy

court’s order approving the sale of the Fridmans’ appeal rights

to Mr. Avetoom.

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