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FILED

MAR 22 2016

SUSAN M. SPRAUL, CLERK

U.S. BKCY. APP. PANEL

OF THE NINTH CIRCUIT

NOT FOR PUBLICATION

UNITED STATES BANKRUPTCY APPELLATE PANEL

OF THE NINTH CIRCUIT

In re: ) BAP No. CC-15-1026-KiKuF

)

GILES DUANE SPELLMAN, ) Bk. No. 12-bk-19871-WB

)

Debtor. )

 )

)

BRADLEY R. KIRK & ASSOCIATES, )

INC.; BRADLEY R. KIRK, )

)

Appellants, )

)

v. ) M E M O R A N D U M1

)

GILES DUANE SPELLMAN, )

)

Appellee. )

______________________________)

Argued and Submitted on October 22, 2015, 

at Los Angeles, California

Filed - March 22, 2016

Appeal from the United States Bankruptcy Court

for the Central District of California

Honorable Julia Wagner Brand, Bankruptcy Judge, Presiding.

 

Appearances: Fritz J. Firman argued for appellants Bradley R.

Kirk & Associates, Inc. and Bradley R. Kirk; Eric

Alan Mitnick argued for appellee Giles Duane

Spellman.

 

Before: KIRSCHER, KURTZ and FARIS, Bankruptcy Judges.

1 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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Creditor Bradley R. Kirk & Associates, Inc. (“Kirk”) appeals

an order of the bankruptcy court confirming Debtor Giles Duane

Spellman’s First Amended Chapter 13 Plan. We AFFIRM. 

I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY

Debtor is the beneficiary of the Giles J. Spellman Living

Trust (“Trust”), which was established by his now-deceased

grandfather, Giles J. Spellman. Article 5 of the Trust contains

spendthrift provisions limiting Debtor’s ability to spend the

trust proceeds until he turns thirty-five on November 22, 2017:

(a) The Trustee shall distribute to GILES DUANE

SPELLMAN, as soon as practicable after the death of

Trustor, cash in the sum of ten thousand dollars

($10,000). Thereafter, on the first of each month,

beginning with the month following Trustor’s death,

Trustee shall disburse to GILES DUANE SPELLMAN the

sum of one thousand dollars ($1,000), until said

beneficiary reaches the age of thirty-five (35). 

On said beneficiary’s 35th birthday, or as soon as

practicable thereafter, Trustee shall distribute to

GILES DUANE SPELLMAN the entire balance of

principal and earnings in said trust account. . . .

Debtor has a son who is a contingent beneficiary of the Trust

should Debtor pass away before November 22, 2017. The assets of

the Trust include a home located at 9503 Borson, Downey,

California, in which Debtor resides.

In 2006, Debtor retained Kirk to represent him in matters

relating to the Trust and litigation associated therewith. Debtor

signed two agreements with Kirk, one dated May 9, 2007, and the

second dated June 11, 2007. The second agreement provided that

Kirk would receive a contingency fee of 33% of all amounts and

property Debtor eventually received from the Trust. 

In 2009, a retired judge, who was appointed to serve as a

referee in the Trust litigation, found that a purported 

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revocation of the Trust by Giles J. Spellman in 2006 was invalid. 

The referee recommended that Debtor be appointed as successor

trustee under the Trust and indicated in his findings that Debtor

had requested that the Trust assets be distributed immediately,

rather than pursuant to the terms of the Trust.

Debtor claims he believed Kirk’s fee would be 3 to 7% of the

Trust and only learned in 2009, after the referee entered his

findings, that Kirk was claiming 33% of the Trust proceeds. 

Debtor also claims that he first learned during this same time

that if the spendthrift provision of the Trust was removed, Debtor

would immediately owe Kirk approximately $200,000 in legal fees. 

Debtor informed Kirk that “the fees were too high” and soon after

informed Kirk that Debtor no longer wanted Kirk to represent him. 

Kirk initiated a fee arbitration in November 2009, which the

California Bar dismissed as premature. Kirk then filed a lawsuit

against Debtor in December 2009 to collect the unpaid fees. 

Despite having been informed by Debtor that he no longer

wanted Kirk to represent him, and after Kirk had filed its lawsuit

against Debtor, Kirk filed an ex parte application with the Los

Angeles Superior Court requesting that it enter a judgment that

would allow the Trust assets to pass to Debtor immediately, rather

than pursuant to the terms of the Trust. Kirk also requested that

the Los Angeles Superior Court appoint Robert J. Dutil, rather

than Debtor, as successor trustee of the Trust. The ex parte

motion was granted on August 11, 2010, without notice to Debtor or

Dutil, and reads:

1. The Court declares that Giles D. Spellman is

the sole beneficiary of the Giles J. Spellman Living

Trust dated August 18, 2004 (the “Spellman 2004 Trust”)

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and that Daniel Wassgren’s interest as a contingency

remainder beneficiary has been assigned to Giles D.

Spellman.

3. The 2004 Trust is hereby modified in all

respects such that Giles D. Spellman shall be entitled

to immediate outright distribution of all assets owed by

such Trust and Daniel Wassgren shall have no interest in

the Trust.

4. Robert Dutil is hereby appointed as sole

Trustee of the Trust for all purposes.

5. That certain deed dated March 22, 2006

purporting to transfer that certain real property

commonly known as 9503 Borson, Downey, CA from the Giles

J. Spellman 2004 Trust into the name of Giles J.

Spellman, an individual, is hereby canceled. Title to

the Borson Property is hereby quieted for all purposes

in Giles D. Spellman, Trustee of the Giles J. Spellman

2004 Trust dated August 18, 2004. 

Debtor and Kirk subsequently participated in a fee

arbitration conducted by JAMS in December 2010. The arbitrator

found in favor of Kirk, awarding it 33% of the value of the Trust. 

Kirk petitioned the Los Angeles Superior Court to confirm the

arbitration award, which it did on March 2, 2011, ordering Debtor

to pay Kirk $214,447.88. 

Dutil was nominated to act as successor trustee of the Trust

on March 24, 2010; Dutil accepted on March 25, 2010. On

February 17, 2011, Dutil secured an order from the Los Angeles

Superior Court setting aside Kirk’s ex parte removal of the

spendthrift provision of the Trust. Like the August 11, 2010

order, the February 17, 2011 order also canceled the deed dated

March 22, 2006, that purportedly transferred the home at

9503 Borson, Downey, California from the Trust to Debtor, but

“quieted title for all purposes in Robert J. Dutil, Trustee of the

[Trust].” Among the reasons cited by the court for setting aside

the removal of the spendthrift provision were:

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2. [T]hat the Motion to Set Aside Portions of

the August 11, 2010 Order has merit based on the lack of

notice, the conflict of interest between Mr. Kirk and

Mr. Spellman due to the civil lawsuit filed against

Mr. Spellman by Mr. Kirk on December 28, 2009 which had

already been filed when the Petition for Order Adopting

the Report of the Referee was brought to this Court. 

The Court further finds that Mr. Spellman is now

represented by new counsel as shown in his declaration

filed December 29, 2010 and based on his declaration,

the original Petition for Order Adopting the Report of

the Referee were not his wishes and could not be based

on California Probate Code Section 15403. 

On January 31, 2012, Kirk filed a petition in the Los Angeles

Superior Court requesting various relief, including entry of an

order requiring Dutil to pay Kirk the monthly maintenance payments

Debtor was entitled to receive under the terms of the Trust. 

Before a scheduled hearing on Kirk’s petition, Debtor filed his

voluntary chapter 132 petition on March 20, 2012. Debtor was 29

years old on his petition date. 

Debtor filed his schedules, a chapter 13 plan and his

statement of financial affairs on April 3, 2012. On Schedule B,

Debtor listed under “Contingent and noncontingent interest in

estate of a decedent, death benefit plan, life insurance policy,

or trust” his interest in “Giles J. Spellman Trust (irrevocable,

spendthrift); not property of the estate; listed and claimed as

exempt out of abundance of caution. Debtor receives

$1,000/month.” Debtor claimed an exemption of $21,675.00 in the

foregoing property pursuant to California Code of Civil Procedure

§ 703-140(b)(5). Debtor’s other assets have a value totaling

$3,400.

2 Unless specified otherwise, all chapter, code, and rule

references are to the Bankruptcy Code, 11 U.S.C. §§ 101–1532, and

the Federal Rules of Bankruptcy Procedure, Rules 1001–9037.

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In his schedule of debts, Debtor listed a priority child

support obligation of $4,038. Debtor also listed unsecured debt

totaling $231,375, which consisted of debt owing to Bank of

America, a bail bond company and Kirk. Debtor also listed Robert

M. Papell, Esq. on his schedule F relating to a claim on behalf of

Pamela Bray. Pamela Bray filed a proof of claim asserting a claim

of $50,000 stemming from a dog bite incident that happened on

February 25, 2011.

Debtor did not complete high school and is not employed. Per

schedule J, Debtor’s sole source of income is the $1,000 per month

he receives from the Trust. Debtor’s monthly expenses total $655,

which amount includes $355 for child support, $200 for food, $5

for clothing and $50 for transportation.

To resolve an objection to confirmation by the Orange County

Department of Child Support Services, Debtor filed a First Amended

Chapter 13 Plan on May 30, 2012 (“Plan”). Debtor’s Plan provides

for payments of $345 per month for 36 months, with a proposed

distribution of $7,012, or 3%, to unsecured creditors. Debtor’s

monthly Plan payment of $345 represents the difference between

Debtor’s monthly Trust income of $1,000 and his expenses of $665. 

Per the notice of commencement of case entered March 20,

2012, the hearing on confirmation of Debtor’s plan was originally

scheduled for November 28, 2012, and the deadline for

non-governmental entities to file proofs of claims was set for

July 18, 2012. In a separate Notice entered April 3, 2012, the

deadline for filing objections to Debtor’s Plan was set for

April 12, 2012. Bradley Kirk, Esq., through counsel, filed a

proof of claim on July 12, 2012, asserting a claim in the amount

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of $237,007.88. On November 21, 2012, Debtor objected to Bradley

Kirk’s proof of claim, correctly arguing that Bradley Kirk was not

a creditor. 

Kirk amended Bradley Kirk’s proof of claim on November 28,

2012, to identify the creditor as “Bradley Kirk, Esq. & Bradley R.

Kirk & Associates, Inc.” The amended proof of claim again

asserted a claim of $237,007.88 stemming from the judgment entered

March 2, 2011, in the Superior Court. 

Debtor filed an objection to Kirk’s claim. On September 22

and 26, 2014, the bankruptcy court held a trial on Debtor’s

objection to Kirk’s claim. At a hearing held December 2, 2014,

the bankruptcy court entered its oral ruling, reducing Kirk's

claim to $43,875, reasoning, in part: 

Mr. Kirk also had a conflict. I feel once the fee

dispute arose, his conduct in going to court ex parte to

confirm the petition to make the trust assets available

immediately, with no notice to the new trustee or the

debtor, when he did that, is troubling to me.

I think he should have given them notice. There’s

a new trustee in place. I don’t think that that was

appropriate.

I find Mr. Kirk's statement that he did this for

the benefit of his client to be not credible. I think

Mr. Kirk did this for his own benefit, rather than for

the benefit of his client.

On January 2, 2015, the bankruptcy court entered an order allowing

Kirk’s claim as a general unsecured nonpriority claim in the

amount of $43,875, with the balance of the claim denied. Kirk

appealed the bankruptcy court’s January 2, 2015 order.3

3 On September 17, 2015, the United States District Court for

the Central District of California reversed the bankruptcy court’s

(continued...)

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Bradley Kirk filed an objection to confirmation of Debtor’s

Plan on November 14, 2012, arguing that Debtor’s bankruptcy case

and Plan were filed in bad faith because Kirk had successfully

obtained an order for an early distribution of the Trust, which

early distribution Kirk alleges Debtor refused after learning of

Kirk’s fees. According to Bradley Kirk, instead of taking the

early distribution, Debtor filed his chapter 13 bankruptcy case

and proposed a plan that would pay Kirk pennies on the dollar,

while allowing Debtor, upon turning 35, to collect hundreds of

thousands of dollars from the Trust. On November 21, 2012, Debtor

filed a response to Bradley Kirk’s objection, arguing in part,

that Bradley Kirk was not a creditor who had standing to object to

confirmation of Debtor’s Plan and that Bradley Kirk’s “objections

appear[ed] to be untimely and entirely without merit.”

Kirk filed its own objection to confirmation of Debtor’s Plan

on October 15, 2014. Kirk, like Bradley Kirk in his earlier

3(...continued)

ruling on Debtor’s objection to Kirk’s claim. According to the

District Court:

[A]t least where there is a state court Judgment

establishing the amount of attorneys’ fees, § 502(b)(4)

does not allow a Bankruptcy Court to ignore that

Judgment. Instead, 28 U.S.C. § 1738 requires that such

a judgment be accorded the Bankruptcy Court’s full faith

and credit. “Since the confirmation of a private

arbitration award by a state court has the status of a

judgment, federal courts must, as a matter of full faith

and credit, afford the confirmation the same preclusive

consequences as would occur in state court.” 

In re Khaligh, 338 B.R. 817, 824 (B.A.P. 9th Cir. 2006). 

Bradley R. Kirk & Assoc., Inc. v. Spellman (In re Spellman),

Case 2:15-cv-00507-PA, Docket No. 16 (C.D. Cal. Sept. 17,

2015). Debtor appealed this order to the Ninth Circuit Court

of Appeals on September 30, 2015. Docket No. 17.

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objection, argued that Debtor’s bankruptcy case and Plan were

filed in bad faith and, in addition, argued that Debtor’s Plan

failed to meet the best interest of creditors test found at 

§ 1325(a)(4).

After the bankruptcy court made its oral ruling on

December 2, 2014, regarding Debtor’s objection to Kirk’s claim,

Kirk argued for an evidentiary confirmation hearing. Debtor

countered that the bankruptcy court could rule on confirmation as

a matter of law based on the evidence already before the court. 

The bankruptcy court agreed that further consideration of the

matter was necessary and continued the December 3, 2014

confirmation hearing to January 7, 2015.

Although no January 7, 2015 minute entry appears on the

bankruptcy court’s docket, the transcript of Debtor’s January 7,

2015 confirmation hearing reflects that the chapter 13 trustee

appeared at that hearing, as did counsel for both Debtor and Kirk. 

No witness testimony or exhibits were offered, but counsel for

Debtor and Kirk argued their respective positions. Counsel for

Kirk argued, in part:

[Debtor] doesn’t meet the liquidation analysis. 

This case is a poster child for bad faith, and the Court

ought to deny confirmation and dismiss this case, or set

this matter for an evidentiary hearing, and make the

Debtor come in and testify and convince you of his bona

fides and convince you of his good faith.

At the conclusion of the parties’ arguments, the court ruled:

All right. I’m going to overrule the objection to

confirmation by Bradley R. Kirk and Associates. I have

– for good faith I look at the totality of the

circumstances in making a good-faith determination here.

Here, I find that the Debtor did file the case in

good faith. He’s exercising his rights under the law

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with respect to the Spend Thrift Trust. It is what it

is, and he has the right to file bankruptcy to address

his debts. He has more debts than simply the debt to

Bradley R. Kirk and Associates. And he has the right to

file a plan that complies with the bankruptcy code,

which is what he did.

And so, I think that he did file the case in good

faith. The objection I found when I re-read it again

today, restates many of the issues that we covered

during the claim objection and, you know, Mr. Kirk and

Kirk and Associates are unhappy because there's no

distribution because, again, because the Spend Thrift

Trust is not available to the Debtor when Mr. Kirk acted

to make it available to him early. That’s the crux of

the argument.

And, you know, we’ve been through that many times

already in various pleadings here, and in the testimony

that we had on the claim objection trial. And the

Court, upon the motion, reversed that order. It’s

reversed. There's a Spend Thrift Trust in place, and

that's legitimate.

And so, on that basis, I find that the case was

filed in good faith. And that also addresses the

liquidation analysis issue, too, because it’s the

objection with respect to the liquidation, under

Chapter 7 is, a, speculative, that the Trustee would

keep the case open for three more years in order to

claim that money. But, secondly, it relies on the fact

that he should be able to get that money now, and that

simply is not the case. So, that objection is also

overruled.

The bankruptcy court’s oral ruling was reduced to writing and

entered on January 13, 2015. Kirk filed a timely notice of appeal

on January 27, 2015.

Subsequent to entry of the confirmation order, Debtor filed

on February 19, 2015, a “Certification of Compliance Under

11 U.S.C. § 1328(a) and Application for Entry of Discharge,”

representing he had completed all payments required under the

terms of his confirmed Plan. 

On October 7, 2015, Kirk filed a request that the Panel take

judicial notice of the District Court’s September 17, 2015 ruling

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in Bradley R. Kirk & Assoc., Inc. v. Spellman (In re Spellman),

Case 2:15-cv-00507-PA, Docket No. 16 (C.D. Cal. Sept. 17, 2015). 

Kirk argues that such ruling impacts the feasibility of Debtor’s

Plan. Kirk also requests that the Panel take judicial notice of

the fact that Debtor appealed the District Court’s ruling to the

Ninth Circuit Court of Appeals on September 30, 2015. Debtor

opposes Kirk’s request for judicial notice, arguing Kirk’s

feasibility issue was not one of the issues designated or briefed

on appeal.

II. JURISDICTION

The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334

and 157(b)(2)(L). We have jurisdiction under 28 U.S.C. § 158.

III. ISSUES

1. Did the bankruptcy court err in finding that Debtor’s

proposed plan satisfied the good faith requirements of

§ 1325(a)(3)?

2. Did the bankruptcy court err in finding that Debtor’s

proposed plan satisfied the “best interests of creditors” test

under § 1325(a)(4)?

3. Did the bankruptcy court abuse its discretion in not

holding an evidentiary hearing on confirmation of Debtor’s Plan?

IV. STANDARDS OF REVIEW

A bankruptcy court’s decision concerning confirmation of a

chapter 13 plan is reviewed for abuse of discretion. Bank of Am.

Nat’l Trust & Sav. Ass’n v. Slade (In re Slade), 15 B.R. 910, 913

(9th Cir. BAP 1981). This standard has two parts. First, we

consider whether the bankruptcy court applied the correct legal

standard; and second, we must decide whether the court’s factual

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findings supporting the legal analysis were clearly erroneous. 

United States v. Hinkson, 585 F.3d 1247, 1261–62 (9th Cir. 2009)

(en banc).

Rulings concerning confirmation of a chapter 13 plan present

mixed questions of fact and law. The bankruptcy court’s factual

determinations are reviewed under the clearly erroneous standard,

while its legal determinations are reviewed de novo. Meyer v.

Lepe (In re Lepe), 470 B.R. 851, 855 (9th Cir. BAP 2012) (citing

Andrews v. Loheit (In re Andrews), 155 B.R. 769, 770 (9th Cir. BAP

1993)).

V. DISCUSSION

Kirk, in its Opening Brief, asserts that five issues exist on

appeal, even though it asserted additional issues in its Statement

of Issues. We have consolidated Kirk’s five issues into the three

issues noted above.

A. Good Faith

We first consider Kirk’s asserted issues involving good

faith. As a threshold matter, Kirk argued in its amended

objection to confirmation of Debtor’s Plan that:

The Trust was revoked. The order that Mr. Kirk obtained

says the Trust is valid. Mr. Spellman undid that order

but he wants to cherry pick and say the revocation of

the Trust is void but reject the rest of the order

allowing early distribution. Mr. Spellman had all the

assets in hand and then sought to void that order and

put the assets out of reach of all creditors by seeking

to hide behind the spendthrift provision of the [T]rust.

Kirk continues to contend on appeal that the “question of trust

revocation is still an open question” because Giles J. Spellman

signed a “Revocation of Living Trust” on March 22, 2006, and,

thus, Giles J. Spellman’s assets belonged to his probate estate

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and should have been distributed to Debtor immediately. The

judgment, prepared by Kirk and entered by the Los Angeles Superior

Court on August 11, 2010, is set forth above.

The above judgment does not contain a paragraph 2 and is

internally inconsistent in that it appoints Dutil as trustee of

the Trust in paragraph 4, but then, in paragraph 5, quiets title

in the property at 9503 Borson in Giles J. Spellman, Trustee of

the Giles J. Spellman 2004 Trust dated August 18, 2004. The

judgment, by its plain terms, modified the Trust to entitle Debtor

“to immediate outright distribution of all assets owned by such

Trust[.]” 

Upon motion of Dutil, the above judgment was modified on

February 17, 2011, to set aside that portion of paragraph 3 of the

August 11, 2010 judgment that granted Debtor the “immediate

outright distribution of all assets owed by such Trust[.]” The

February 17, 2011 judgment also corrected the internal

inconsistency in the August 11, 2010 judgment by quieting title in

the 9503 Borson property in “Robert J. Dutil, Trustee of the Giles

J. Spellman 2004 Trust[.]” The end effect of the two judgments

was that Daniel Wassgren had no interest in the Trust, Dutil was

the trustee of the Trust, title to the property at 9503 Borson was

quieted in the Trust, and the spendthrift provision remained

intact as originally provided for in the Trust. Consistent with

the foregoing, Kirk argued in a petition filed with the

Los Angeles Superior Court on January 31, 2012, that “as it stands

now, all of the Trust assets remain in the Trust, and [] Dutil is

acting as trustee of the Trust. The current assets of the Trust

are believed to be approximately $620,000. Dutil will presumably

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continue to act as Trustee until the Trust is distributed in

2018.” Kirk’s argument that Giles J. Spellman revoked the Trust

in 2006 is contrary to the facts in the record and is an improper

attack on the judgments entered by the Los Angeles Superior Court

in 2010 and 2011.

In considering Kirk’s § 1325(a)(3) argument, a debtor must

prove that its chapter 13 plan is proposed in good faith and not

by any means forbidden by law. § 1325(a)(3). The debtor, as the

chapter 13 proponent, has the burden of proof in establishing good

faith (as well as all other elements of plan confirmation in 

§ 1325). Meyer v. Hill (In re Hill), 268 B.R. 548, 552 (9th Cir.

BAP 2001). 

Pursuant to § 1325(a)(3), “the court shall confirm a plan if

. . . the plan has been proposed in good faith and not by any

means forbidden by law.” In examining application of the good

faith standard in cases involving denial of confirmation of

chapter 13 plans, this Panel has explained that a bankruptcy court

must apply a totality of the circumstances test in determining

good faith and consider “(1) whether the debtor misrepresented

facts, unfairly manipulated the Bankruptcy Code or otherwise

proposed the plan in an inequitable manner; (2) the history of the

debtor's filings and dismissals; (3) whether the debtor intended

only to defeat state court litigation; and (4) whether the

debtor's behavior was egregious. [Leavitt v. Soto (In re Leavitt),

171 F.3d 1219, 1224 (9th Cir. 1999)] (applying same factors for

good faith filing of chapter 13 petition).” Drummond v. Welsh

(In re Welsh), 465 B.R. 843, 851 (9th Cir. BAP 2012), aff'd

711 F.3d 1120, 1129 (9th Cir. 2013); see also HSBC Bank USA, Nat’l

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Ass’n, as Indenture Tr. of the Fieldstone Mortg. Inv. Tr., Series

2006-1 v. Blendheim (In re Blendheim), 803 F.3d 477, 499 (9th Cir.

2015). Courts should examine a debtor’s intentions and the legal

effect of confirmation in light of the spirit and purposes of

chapter 13. Fid. & Cas. Co. of N.Y. v. Warren (In re Warren),

89 B.R. 87, 93 (9th Cir. BAP 1988) (citing Chinichian v.

Campolongo (In re Chinichian), 784 F.2d 1440, 1444 (9th Cir.

1986)).

Factors to be considered in determining good faith include,

but are not limited to:

1. The amount of the proposed payments and the amounts of

the debtor's surplus;

2. The debtor's employment history, ability to earn, and

likelihood of future increases in income;

3. The probable or expected duration of the plan;

4. The accuracy of the plan's statements of the debts,

expenses and percentage of repayment of unsecured debt,

and whether any inaccuracies are an attempt to mislead

the court;

5. The extent of preferential treatment between classes of

creditors;

6. The extent to which secured claims are modified;

7. The type of debt sought to be discharged, and whether

any such debt is dischargeable in Chapter 7;

8. The existence of special circumstances such as

inordinate medical expenses;

9. The frequency with which the debtor has sought relief

under the Bankruptcy [Code];

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10. The motivation and sincerity of the debtor in seeking

Chapter 13 relief; and

11. The burden which the plan's administration would place

upon the trustee.

In re Warren, 89 B.R. at 93.

Kirk, citing an unpublished decision entered by this Panel in

Mead v. Loheit (In re Mead), BAP No. EC-09-1241-MkHDu (9th Cir.

BAP June 15, 2010), aff’d, No. 10-60034 (9th Cir. June 20, 2013),

suggests that Debtor’s Plan was filed in bad faith because Debtor

is depriving Kirk of its state law rights. In Mead, the debtor

sought to discharge a secured obligation owing to an ex-spouse by

mischaracterizing the debt as an unsecured debt. No evidence

exists in our record that Debtor has made any misrepresentations

or mischaracterizations such as were made in Mead.

More persuasive is the recent decision in Blendheim, where

the Ninth Circuit Court of Appeals found that a bankruptcy court

did not err in concluding that debtors had filed their chapter 13

bankruptcy case in good faith where the chapter 20 debtors filed

their petition only one day after receiving their chapter 7

discharge, on the eve of a foreclosure sale, and to avoid a wholly

unsecured junior lien on the debtors’ principal residence. As

noted in that decision, while the debtors may have been

“motivated” to “avoid the foreclosure sale of their Residence,”

the debtors had other “additional, valid reasons” for filing their

chapter 13 bankruptcy. In re Blendheim, 803 F.3d at 499. Indeed,

“[m]any Chapter 13 debtors file for bankruptcy on the eve of

foreclosure sale as a last resort.” Id. (quoting In re Blendheim,

2011 WL 6779709, at *9 (Bankr. W.D. Wash. Dec. 27, 2011)). 

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Here, Debtor had other valid reasons for filing his petition,

such as the debt owed to Orange County Department of Child Support

Services and the $50,000 dog bite claim; he is not unlike other

debtors who file a bankruptcy petition as a last resort. Under

the particular facts of this case, Debtor’s actions simply do not

constitute bad faith. 

Kirk argues in its objection to confirmation that the timing

of this case cannot be coincidence. It most likely is not a

coincidence, just as it is not a coincidence when debtors file

bankruptcy on the eve of a foreclosure sale. 

Based upon the record, Kirk has an unsecured claim against

Debtor in the amount of $237,007.88. Kirk argues Debtor’s Plan

was not proposed in good faith because Debtor, as a beneficiary of

the Trust, stands to receive assets worth $600,000 in November

2017. Other than his interest in the Trust, Debtor has minimal

assets valued at $3,400. Debtor is not employed; his sole source

of income is the $1,000 per month he receives from the Trust. 

Debtor’s monthly expenses total $655, of which $355 is for child

support. Debtor’s Plan provided for 36 monthly payments of $345

each, which payments Debtor has made. Debtor has no secured

creditors; after payment of administrative and priority claims,

Debtor’s plan payments will be distributed to unsecured creditors. 

Additionally, Debtor’s Plan does not attempt to discharge an

otherwise nondischargeable debt, nor is there any unfair

discrimination or dishonesty by the debtor. 

On the record before us and based on our analysis set forth

above, we cannot conclude that the bankruptcy court committed

reversible error in its application of the totality of the

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circumstances test or that it clearly erred in making its good

faith findings.

B. Best Interests of Creditors

Kirk also asserts that Debtor’s Plan does not satisfy the

“best interests of creditors” test under § 1325(a)(4). Analysis

under § 1325(a)(4) requires a court to make two determinations: 

(1) the present value of the property to be distributed to

unsecured creditors (the value of the stream of plan payments) as

of the “effective date of the plan;” and (2) the amount available

to unsecured creditors if a chapter 7 liquidation were held on the

“effective date of the plan.” The “best interests of creditors”

test has been met if the present value of the distributions to

unsecured creditors as of the “effective date of the plan” is

equal to or greater than the value of a hypothetical chapter 7

liquidation held on such date.

The crux of Kirk’s argument is that Debtor could have had or

had $600,000 in hand and that such amount should factor into the

confirmation analysis. Section 541(a)(1) provides that property

of a bankruptcy estate is comprised of “all legal or equitable

interests of the debtor in property as of the commencement of the

case.” However, § 541(c)(2), which operates as an exception to

§ 541(a)(1), provides that “[a] restriction on the transfer of a

beneficial interest of the debtor in a trust that is enforceable

under applicable nonbankruptcy law is enforceable in a case under

this title.” Property that falls within this latter category is

excluded from property of the bankruptcy estate. See Spacone v.

Atwood (In re Atwood), 259 B.R. 158, 161 (9th Cir. BAP 2001).

California law recognizes the validity of spendthrift trusts. 

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See Neuton v. Danning (In re Neuton), 922 F.2d 1379 (9th Cir.

1990) (citing Cal. Prob. Code §§ 15300 et seq.). The critical

inquiry in determining whether a spendthrift trust is valid under

California law is whether the trust's beneficiaries exercise

excessive control over the trust. See In re Witwer, 148 B.R. 930,

937 (Bankr. C.D. Cal. 1992). 

On Debtor’s petition date, the Trust contained a spendthrift

provision restricting Debtor's ability to transfer his beneficial

interests and the ability of third parties to levy upon Debtor's

interests. Nothing in the record, other than unsubstantiated

argument of counsel, shows that Debtor exercised control over the

Trust on his petition date; in fact, other than the monthly

payment of $1,000, Debtor does not have access to the Trust's

benefits until he turns 35 on November 22, 2017 (a postpetition

event). Finally, the Debtor (as beneficiary) was not the settlor

of the Trust; the Trust was thus not “self-settled.” 

Consequently, under California law, the Trust is a valid

spendthrift trust, and according to Ninth Circuit law, 75% of

Debtor’s interest in the Trust is excluded from property of the

bankruptcy estate pursuant to § 541(c)(2). Bendon v. Reynolds

(In re Reynolds), 479 B.R. 67, 75 (9th Cir. BAP 2012); Cisneros v.

Kim (In re Kim), 257 B.R. 680, 688 (9th Cir. BAP 2000).

The foregoing analysis suggests that a hypothetical chapter 7

trustee could reach 25% of the Trust and that 25% of the value of

the Trust should factor into the § 1325(a)(4) analysis. However,

“[e]ven though a bankruptcy trustee may reach 25% of what the

debtor/beneficiary is entitled to receive, that amount may be

reduced by whatever amount the court determines is necessary for

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the beneficiary's (and his dependents’) support.” In re Reynolds,

479 B.R. at 75 (citing Cal. Prob. Code § 15306.5(c); In re Neuton,

922 F.2d at 1384). While the bankruptcy court did not make

specific findings on this point, the record shows that Debtor

lives in the home at 9503 Borson. Based on numbers posited by

Kirk, the home represents roughly one-half the value of the Trust. 

The remainder of the Trust provides Debtor’s sole source of

support for himself and his son. 

Based upon the facts before us, the bankruptcy court’s

finding that Debtor’s Plan satisfied § 1325(a)(4) is not

illogical, implausible, or without support in inferences that may

be drawn from the record. The foregoing ruling would also apply

to § 1325(a)(7)’s requirement that the petition be filed in good

faith; given the facts of this case, the other provisions of

§ 1325(a) do not appear to be at issue, despite Kirk’s arguments

to the contrary. See Rule 3015(f) (“If no objection is timely

filed, the court may determine that the plan has been proposed in

good faith and not by any means forbidden by law without receiving

evidence on such issues.”)

C. Failure to Hold an Evidentiary Hearing

Kirk also complains that the bankruptcy court erred by not

holding an evidentiary confirmation hearing. Local Bankruptcy

Rule (“Local Rule”) 3015-1(g)(1) of the United Stated Bankruptcy

Court for the Central District of California provides that

objections to confirmation of a chapter 13 plan are to be

“supported by appropriate declarations or other admissible

evidence[.]” Between the objections to confirmation filed by

Bradley Kirk and Kirk, together with Debtor’s responses thereto,

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the bankruptcy court had before it in excess of 100 pages of

exhibits and the declarations of Bradley R. Kirk, Fritz J. Firman,

Robert J. Dutil, CLPF, Min N. Thai, Regina Filippone and Eric Alan

Mitnick. In addition to the foregoing, the bankruptcy court had

previously held a two-day trial on Debtor’s objection to Kirk’s

claim, where the bankruptcy court considered numerous exhibits and

heard the testimony of Debtor, Min Thai, and Bradley R. Kirk. 

By the time of Debtor’s confirmation hearing on January 7,

2015, the bankruptcy court had already considered a vast amount of

evidence that directly related to Kirk’s confirmation objections. 

As explained by the Ninth Circuit in Acequia v. Clinton

(In re Acequia), 787 F.2d 1352, 1358-59 (9th Cir. 1986), a

bankruptcy court may consider evidence from prior evidentiary

hearings even though the court must hold an evidentiary

confirmation hearing. 

Kirk objected to confirmation of Debtor’s Plan, arguing it

failed to satisfy §§ 1325(a)(3) and (a)(4). Kirk does not

indicate what additional evidence could or should have been

presented at the confirmation hearing that was not already

presented at the objection to claim trial. By the time of

confirmation, the bankruptcy court was amply familiar with the

facts leading up to Debtor’s bankruptcy and the facts that gave

rise to Kirk’s confirmation objections. The bankruptcy court did

not abuse its discretion when it concluded that a further

evidentiary hearing was not necessary.

D. Issues Not Addressed

Kirk’s Statement of Issues identifies eight issues to be

presented in this appeal, but Kirk only lists five issues in its

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Opening Brief, which we have consolidated into the three issues

noted above. Any of the issues identified in the Statement of

Issues that are not addressed by argument in the Opening Brief are

deemed abandoned. See Branam v. Crowder (In re Branam), 226 B.R.

45, 55 (9th Cir. BAP 1998), aff’d, 205 F.3d 1350 (9th Cir. 1999)

(an issue not adequately addressed by appellant in its opening

brief is deemed abandoned). 

Further, Kirk suggests that Debtor is the alter ego of the

Trust. Kirk presented no admissible evidence to support such an

assertion. Kirk also argues that a chapter 7 trustee could avoid,

pursuant to §§ 548(a)(1)(A) and 544, the order Dutil secured on

February 17, 2011, setting aside portions of the judgment Kirk

obtained ex parte. Because Kirk did not assert such claim before

the bankruptcy court and exceptional circumstances are lacking, we

refuse to consider that argument now. See El Paso City v. Am. W.

Airlines, Inc. (In re Am. W. Airlines), 217 F.3d 1161, 1165 (9th

Cir. 2000) (“Absent exceptional circumstances, we generally will

not consider arguments raised for the first time on appeal,

although we have discretion to do so.”). See also Mano–Y & M,

Ltd. v. Field (In re The Mortg. Store, Inc.), 773 F.3d 990, 998

(9th Cir. 2014); Baldwin v. Marshack (In re Baldwin), 70 B.R. 612,

617 (9th Cir. BAP 1987) (citing Diamond Nat’l Corp. v. Lee,

333 F.2d 517, 528 (9th Cir. 1964)). 

E. Request for Judicial Notice

Finally, Kirk requests that the Panel take judicial notice of

the decision entered in Bradley R. Kirk & Assoc., Inc. v. Spellman

(In re Spellman), Case 2:15-cv-00507-PA, Docket No. 16 (C.D. Cal.

Sept. 17, 2015), and the appeal thereof at Docket No. 17. The

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Panel takes judicial notice of the above, but agrees with Debtor

that it would not be proper for this Panel to consider any

feasibility issue stemming therefrom as that issue was neither

designated nor briefed in this appeal. 

VI. CONCLUSION

For the foregoing reasons, we AFFIRM the holding of the

bankruptcy court.

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