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FILED

JUL 26 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NOT FOR PUBLICATION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-16-1053-KuFKi

)

YAN SUI, ) Bk. No. 8:11-bk-20448-CB

)

Debtor. )

______________________________)

)

YAN SUI; PEI-YU YANG, )

)

Appellants, )

)

v. ) MEMORANDUM*

)

RICHARD A. MARSHACK, Chapter 7)

Trustee, )

)

Appellee. )

______________________________)

Submitted Without Oral Argument

on June 23, 2016

Filed – July 26, 2016

Appeal from the United States Bankruptcy Court

for the Central District of California

Honorable Catherine E. Bauer, Bankruptcy Judge, Presiding

 

Appearances: Appellants Yan Sui and Pei-Yu Yang, pro se, on

brief; David Edward Hays and Chad V. Haes of

Marshack Hays LLP on brief for appellee Richard A.

Marshack, Chapter 7 Trustee. 

 

Before: KURTZ, FARIS and KIRSCHER, Bankruptcy Judges.

*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

Chapter 71 debtor Yan Sui and his wife Pei-Yu Yang appeal,

pro se, from the bankruptcy court’s order authorizing the trustee

Richard A. Marshack to offset against Yang’s interest in the

proceeds from the sale of the couple’s residence $93,832.72 in

contempt sanctions awarded in favor of the trustee and against

Sui and Yang. The order also authorized the trustee to pay

roughly $70,000 to Yang in full satisfaction of her claimed

interest in the sale proceeds and further authorized the trustee

to file a notice of acknowledgment of satisfaction of judgment

reflecting Yang’s “payment” of the sanctions award by way of the

offset.

On appeal, Sui and Yang argue that the bankruptcy court

lacked jurisdiction to enter the setoff order while their appeals

from other, prior orders were pending. Sui and Yang’s

jurisdictional argument lacks merit. Even so, in one of their

other appeals, the Panel has vacated the sanctions order on which

the setoff order was based. Based thereon, we also must VACATE

the setoff order, and we must REMAND for further proceedings.

FACTS

In July 2011, Sui filed a voluntary chapter 7 petition, and 

Marshack was appointed to serve as the chapter 7 trustee in Sui’s

bankruptcy case. In May 2013, Marshack obtained from the United

States District Court for the Central District of California a

1Unless specified otherwise, all chapter and section

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

all "Rule" references are to the Federal Rules of Bankruptcy

Procedure, Rules 1001-9037.

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judgment avoiding Sui’s fraudulent transfer to Yang of his

interest in the couple’s residence located in Costa Mesa,

California. This judgment provided in relevant part that the

avoidance resulted in the revesting of the residence in the names

of both Sui and Yang as joint tenants. Yang appealed the

fraudulent transfer avoidance judgment, but the Ninth Circuit

Court of Appeals affirmed.2

In October 2014, Marshack obtained a second judgment, this

one from the bankruptcy court. The bankruptcy court’s judgment

required Sui and Yang to turn over possession of the Costa Mesa

residence to Marshack and authorized Marshack to sell the

residence free and clear of all liens, claims and other

interests, including Yang’s joint tenancy interest. The order

further provided that the trustee could divide the sale proceeds

in accordance with § 363(j) and other applicable law.

In June 2015, the bankruptcy court entered an order

authorizing Marshack to sell the Costa Mesa residence to third

party EFK Properties, LLC. Among other things, the sale order

specified as follows: “Neither Yan Sui nor Pei-yu Yang shall

assert any lien, claim, or interest in the Property in violation

of the free and clear provisions of this order. Any actions

taken in violation of this order may be adjudicated to be

contempt.”

Sui and Yang appealed both the bankruptcy court judgment and

2We have exercised our discretion to take judicial notice of

the contents of the district court’s and the bankruptcy court’s

dockets and the imaged documents attached thereto. See O'Rourke

v. Seaboard Surety Co. (In re E.R. Fegert, Inc.), 887 F.2d 955,

957–58 (9th Cir. 1989).

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the sale order to this Panel, which dismissed both appeals as

moot. Sui and Yang then appealed the Panel’s dismissals to the

Ninth Circuit Court of Appeals, which appeals are still pending. 

On November 5, 2015, the bankruptcy court entered an order

holding Sui and Yang in contempt of court. As set forth in the

contempt order, Sui and Yang had violated both the bankruptcy

court’s judgment and its sale order by interfering with

Marshack’s efforts to sell the Costa Mesa residence. The

bankruptcy court awarded in favor of the trustee and against Sui

and Yang, jointly and severally, civil contempt sanctions in the

aggregate amount of $93,832.72.

This brings us to the motion from which this appeal arose. 

In December 2015, Marshack filed his motion seeking to setoff

from Yang’s share of the sale proceeds the $93,832.72 contempt

sanction award. Marshack’s motion also requested authorization

to pay to Yang roughly $70,000 in full satisfaction of Yang’s

claimed interests in the sale proceeds and authorization for

Marshack to file a notice acknowledging full satisfaction of

judgment, reflecting Yang’s “payment” of the sanctions award by

way of the offset.

Sui and Yang filed a four-page opposition to the setoff

motion. Sui and Yang noted that appeals were pending from all of

the orders and judgments leading up to Marshack’s setoff motion,

including the bankruptcy court judgment, the sale order and the

contempt order. Sui and Yang asserted that the bankruptcy court

lacked jurisdiction to hear and decide Marshack’s setoff motion

while these appeals were pending.

At the hearing on the setoff motion, the bankruptcy court

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granted all of the relief Marshack requested in his motion. On

February 19, 2016, the bankruptcy court entered an order granting

Marshack’s motion in full, and Sui and Yang timely filed a notice

of appeal.

Recently, the Panel issued a decision in Sui and Yang’s

appeal from the bankruptcy court’s sanctions order (BAP No.

CC-15-1352). In that decision, the Panel affirmed in part,

reversed in part, and (most importantly for our purposes) vacated

the sanctions order.

JURISDICTION

Subject to the jurisdictional discussion set forth below,

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

§§ 1334 and 157(b)(2)(A). We have jurisdiction under 28 U.S.C.

§ 158.

ISSUES

1. Did the bankruptcy court have jurisdiction to hear and

decide Marshack’s setoff motion while Sui and Yang’s appeals

from other, prior orders were pending?

2. Can the bankruptcy court’s setoff order stand in light of

the Panel’s decision vacating the sanctions order?

STANDARDS OF REVIEW

We review jurisdictional issues de novo. See Wilshire

Courtyard v. Cal. Franchise Tax Bd. (In re Wilshire Courtyard),

729 F.3d 1279, 1284 (9th Cir. 2013).

The issue presented here regarding the availability of

setoff is a question of law. The resolution of this appeal

merely requires us to identify and apply the the correct legal

rule to the undisputed facts presented. We review questions of

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law de novo. Bechtold v. Gillespie (In re Gillespie), 516 B.R.

586, 590 (9th Cir. BAP 2014)

DISCUSSION

The only comprehensible argument that Sui and Yang raised in

their appeal brief is jurisdictional. Sui and Yang contend that

the bankruptcy court lacked jurisdiction to hear and decide

Marshack’s setoff motion while their appeals from the bankruptcy

court’s other, prior orders were pending. We disagree.

It generally is true that the filing of an appeal will

divest the bankruptcy court of jurisdiction to hear and decide

matters that will affect the order on appeal. Hill & Sandford,

LLP v. Mirzai (In re Mirzai), 236 B.R. 8, 10 (9th Cir. BAP 1999). 

However, there are several exceptions to this rule. Id. One

exception recognizes the trial court's continuing authority,

while an appeal is pending and in the absence of a stay pending

appeal, to issue orders enforcing a prior judgment or order. Id.

(citing Wedbush, Noble, Cooke, Inc. v. SEC, 714 F.2d 923, 924

(9th Cir. 1983)). Another exception recognizes the trial court's

continuing authority to "proceed with matters not involved in the

appeal." Id. (citing Pyrodyne Corp. v. Pyrotronics Corp.,

847 F.2d 1398, 1403 (9th Cir. 1988)). This latter exception is

particularly important in bankruptcy cases. The rule divesting

courts of jurisdiction during the pendency of an appeal must be

applied with caution in the bankruptcy context because it is not

practicable for all aspects of a bankruptcy case to come to a

halt when an appeal is filed from a bankruptcy court ruling. To

hold otherwise would enable one recalcitrant party in interest to

bring a bankruptcy case to a standstill by the simple expedient

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of filing appeals from various bankruptcy court orders.

Here, no stay pending appeal had been granted, so the

bankruptcy court had authority to enter the setoff order to

effectuate and enforce the contempt order and the sale order. 

Absent a stay pending appeal, federal judgments are immediately

enforceable. Bennett v. Gemmill (In re Combined Metals Reduction

Co.), 557 F.2d 179, 190 (9th Cir. 1977). 

Accordingly, we reject Sui and Yang’s jurisdictional

argument.

Sui and Yang’s other complaints set forth in their appeal

brief either make no sense or demonstrate a fundamental

misunderstanding of how bankruptcy courts and federal appellate

courts resolve matters before them. For instance, Sui and Yang

complain that the bankruptcy court should not have affirmed its

own order and should not have taken steps that might render Sui

and Yang’s other appeals moot. The bankruptcy court did not

“affirm” any of its prior orders. It merely permitted Marshack

to proceed with administration of the bankruptcy estate in

accordance with the orders’ terms. As for their mootness

complaint, we express no opinion as to whether the bankruptcy

court’s setoff order might have rendered any of Sui and Yang’s

other, prior appeals moot, but we note that there is no rule

generally prohibiting bankruptcy courts from taking subsequent

actions that might render an appeal moot. In fact, appeals from

bankruptcy court orders often become moot upon the occurrence of

subsequent events, including further action by the bankruptcy

court. See, e.g., Armel Laminates, Inc. v. Lomas & Nettleton Co.

(In re Income Prop. Builders, Inc.), 699 F.2d 963, 964 (9th Cir.

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1983); Bay Vista Apartments, LLC v. Fed. Nat'l Mortg. Ass'n

(In re Bay Vista Apartments, LLC), 2011 WL 7145995, at *1

(Mem. Dec.) (9th Cir. BAP Dec. 19, 2011); Omoto v. Ruggera

(In re Omoto), 85 B.R. 98, 100 (9th Cir. BAP 1988).

Finally, Sui and Yang complain that the bankruptcy court

should not have authorized Marshack to file the notice

acknowledging satisfaction of the judgment unless and until Yang

actually cashed the sale proceeds check Marshack sent to Yang

pursuant to the setoff order. This complaint is premised on Sui

and Yang’s mistaken belief that there is some relationship

between the notice of acknowledgment and Marshack’s payment of

sale proceeds to Yang. To the contrary, the notice of

acknowledgment only concerned Yang’s satisfaction of the

sanctions award provided for in the bankruptcy court’s contempt

order. That satisfaction occurred as a result of the setoff the

bankruptcy court authorized Marshack to make. Yang’s cashing (or

not cashing) of the sale proceeds check has no relevance to the

setoff.

Notwithstanding Sui and Yang’s failure to present a

meritorious argument in their appeal brief, we nonetheless will

vacate the bankruptcy court’s setoff order. The Panel’s recent

decision vacating the bankruptcy court’s sanctions order fatally

undermines the setoff order because the relief granted in the

setoff order was premised on the validity of the sanctions order.

It is axiomatic that there can be no right of setoff unless there

exist two valid offsetting debts. See generally McDaniel v. City

& Cty. of S.F., 259 Cal. App. 2d 356, 364-65 (1968) (describing

when right of setoff arises under California law); FDIC v.

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Mademoiselle of Cal., 379 F.2d 660, 663 (9th Cir. 1967)

(describing same under federal common law).

Thus, we consider ourselves compelled to vacate and remand

the setoff order so that the bankruptcy court, on remand, can

take a fresh look at the setoff motion in light of the Panel’s

ruling on the sanctions order.

There is one other issue we need to address. Sui and Yang

filed a motion in both this appeal and in the sanctions order

appeal requesting that the Panel order Marshack to withdraw his

filing of the notice acknowledging satisfaction of the sanctions

award, which reflects Yang's "payment" of the sanctions award by

way of the offset. According to Sui and Yang, the filed notice

of acknowledgment might interfere with or hinder disposition of

the sanctions order appeal, the setoff order appeal, or both. We

will DENY this motion as unnecessary. The notice of

acknowledgment has not, in fact, interfered with either appeal. 

Nor are we aware of any other grounds necessitating the

withdrawal of the notice of acknowledgment. All the notice of

acknowledgment currently does is give notice of the satisfaction

of a vacated sanctions award. If, for whatever reason, either

party on remand decides it is necessary to take action with

respect to the notice of acknowledgment, they are free to revisit

the issue with the bankruptcy court.

CONCLUSION

For the reasons set forth above, we conclude that the

bankruptcy court had jurisdiction to hear and decide Marshack’s

setoff motion. However, the recent decision of the Panel

vacating the bankruptcy court’s sanctions order fatally

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undermined the bankruptcy court’s setoff order. Therefore, we

also must VACATE the setoff order, and we REMAND for further

proceedings.

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