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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 8013-1.

UNITED STATES BANKRUPTCY APPELLATE PANEL

OF THE NINTH CIRCUIT

In re: ) BAP No. CC-11-1610-KiDMk

)

SMB GROUP, INC., ) Bk. No. 11-30426-BR

)

Debtor. ) )

)

SMB GROUP, INC., )

)

Appellant, ) 

)

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

)

RICHARD DIAMOND, Former )

Chapter 7 Trustee of Estates )

of Union Trim, Inc. and USB )

Group, Inc., )

)

Appellee. )

______________________________)

Argued and Submitted on July 20, 2012, 

at Pasadena, California

Filed - November 7, 2012

Appeal from the United States Bankruptcy Court

for the Central District of California

Honorable Barry R. Russell, Bankruptcy Judge, Presiding 

Appearances: David A. Tilem, Esq. of the Law Offices of David A.

Tilem argued for appellant, SMB Group, Inc.;

Matthew F. Kennedy of Danning, Gill, Diamond &

Kollitz, LLP argued for appellee, Richard Diamond. 

Before: KIRSCHER, DUNN, and MARKELL, Bankruptcy Judges.

FILED

NOV 07 2012

SUSAN M SPRAUL, CLERK

U.S. BKCY. APP. PANEL

OF THE NINTH CIRCUIT
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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. The

Federal Rules of Civil Procedure are referred to as “Civil Rules.”

3

 After hearing about facts from counsel at oral argument

regarding this case that were not submitted in the record either

before us or the bankruptcy court, we are even more convinced that

remanding this matter for an evidentiary hearing is the proper

course of action.

-2-

Appellant, chapter 112 debtor SMB Group, Inc. ("SMB Group"),

appeals an order from the bankruptcy court denying its motion for

contempt against appellee, former chapter 7 trustee Richard

Diamond ("Trustee"), for his alleged violation of the automatic

stay. Because the bankruptcy court did not make sufficient

findings under Civil Rule 52(a) to support its decision that

Trustee was entitled to judicial immunity, we VACATE and REMAND

with instruction that the bankruptcy court conduct a de novo

evidentiary hearing.3

I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY

A. Facts common to the related bankruptcy cases.

The following facts are as alleged by Jeff Shin f/k/a In Chul

Shin ("Shin"), principal and sole shareholder of SMB Group. Shin

is of Korean descent and speaks Korean. He speaks little English. 

He also does not read or write English. 

SMB Group is in the business of performing trim work for the

clothing industry, such as sewing buttons, collars, zippers and

pockets onto garments. Shin is also the sole shareholder of

USB Group, Inc. ("USB"), which was formed in 2003. Until

March 18, 2011, USB was in the business of selling commercial

grade sewing machinery and equipment. Shin is also one of two
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shareholders of another corporation called Union Trim, Inc.

("Union Trim"). Union Trim apparently ceased operations in 2010

when the other shareholder left the business and could not be

located. Shin formed SMB Group to acquire all of Union Trim’s

assets, including the right to use "Union Trim" as a trade name. 

Shin's businesses are located in two adjoining halves of a

leased building at 2635 S. Main Street, Suites #A and #B, in Los

Angeles, California (the "Premises"). On or about June 25, 2010,

USB d/b/a Alpha Sewing Machine obtained a business loan from First

Bank. In exchange for the loan, USB executed a promissory note in

favor of First Bank for $233,000. The note was secured by an

interest in all of USB's inventory, equipment, chattel paper,

accounts receivable, and general intangibles. Shin personally

guaranteed the loan. USB defaulted on the loan after making just

a couple of payments. On February 17, 2011, First Bank sued USB

and Shin in state court for breach of contract and sought a writ

of possession for USB's personal property. 

Faced with financial troubles exacerbated by USB’s loan

default, Shin sought the advice of legal counsel. After seeing an

advertisement in the Korean Times for a firm offering debt relief

services, Shin met with attorney Gene Choe ("Choe") at Choe's

office on March 3, 2011, in hopes of negotiating a payment plan

with First Bank. According to Shin, both Choe and Choe’s 

paralegal advised Shin to file bankruptcy, but Shin declined,

directing Choe only to negotiate a payment plan with First Bank. 

Choe told Shin to return the following day with retainer funds and

financial information. Shin returned, paid the retainer, and

provided Choe with financial information about himself and his
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businesses. During this meeting, Shin was also asked to sign

several documents written in English. The documents were not

translated for Shin, and, because he considered it disrespectful

to do so, Shin did not ask to have the documents translated and

signed everything as instructed. 

On March 4, 2011, Choe filed three separate chapter 7

bankruptcy cases for Shin (as an individual), for USB, and for

Union Trim. No case was filed for SMB Group. Trustee was

thereafter appointed in the USB and Union Trim cases. According

to Shin, he did not sign any of the petitions or authorize any of

the bankruptcy filings. Shin further claims he was unaware of the

bankruptcy filings until March 18, 2011, when Trustee’s agents

appeared at the Premises and shut down the businesses. 

B. The Union Trim and USB bankruptcies. 

1. Union Trim bankruptcy case.

The skeletal petition filed for Union Trim listed its place

of business in Suite #A of the Premises. It also listed "other"

business names used: DBA USB Group, Inc.; DBA Alpha Sewing

Machine; DBA SMB Group, Inc.; DBA Union Trim. An “Electronic

Filing Declaration” and “Statement Regarding Authority to Sign and

File Petition,” both of which reflected Shin's handwritten

signature, were included with the petition. Choe filed Union

Trim's schedules and statement of financial affairs on March 18,

2011. According to its Schedule B, Union Trim had $100,000 worth

of sewing machines and parts in its inventory. Union Trim listed

no secured creditors and only one unsecured creditor, with a

disputed claim in an unknown amount. A § 341(a) meeting of

creditors was scheduled for April 13, 2011.
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4 Union Trim’s case was eventually dismissed on July 28,

2011, for failure to appear at the § 341(a) meeting of creditors. 

The case was closed on August 25, 2011.

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Just three weeks after filing the petition, Choe moved to

dismiss the Union Trim case on March 25, 2011. Trustee opposed

dismissal, contending that more time was needed to investigate the

case as Union Trim's schedules and financial affairs were

"woefully inadequate," no one had appeared for the debtor at the

§ 341(a) meeting of creditors held on April 13, and, despite Union

Trim's assertion that it was doing business as "USB Group, Inc.,"

USB had filed its own chapter 7 petition on the same date as Union

Trim. Trustee noted that the relationship, if any, between Union

Trim and USB was unclear, and it was not clear whether the assets

listed in Union Trim's Schedule B actually belonged to it or to

USB. Trustee further noted that his administrator had sent an

email to Choe on March 8, before the schedules were filed, asking 

Choe whether any assets existed that would be of concern to the

Trustee, such as cash, inventory, or equipment. After getting no

response from Choe, and learning from First Bank that Union Trim

was still conducting business, the administrator sent a second

email to Choe on March 17 instructing Choe to inform his client

that all business operations had to cease immediately. Trustee

sent a similar cease and desist email to Choe later that same day. 

Choe quickly responded, stating that his client would comply with

Trustee's demand.

The bankruptcy court denied Union Trim's motion to dismiss at

a hearing on May 3, 2011. An order was entered to that effect on

May 12, 2011.4
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2. USB bankruptcy case.

The skeletal petition filed for USB listed its place of

business in Suite #B of the Premises. The petition also stated

that USB did business as "Alpha Sewing Machine." An Electronic

Filing Declaration, which reflected Shin's handwritten signature,

was included with the petition. No schedules or statement of

financial affairs were ever filed for USB.

Just two weeks after filing its chapter 7 petition, Choe

moved to convert USB’s case to chapter 11 on March 18, 2011. 

Trustee opposed the motion, contending that USB had wrongfully

operated the business postpetition and had failed to cooperate

with Trustee in providing any information regarding its assets,

liabilities, prepetition transfers, or creditors. Therefore,

argued Trustee, no evidence existed showing that USB was even

eligible for chapter 11. Trustee again referred to the emails

sent to Choe on March 8 and 17 and explained that, because both

Union Trim and USB had failed to cease operations as instructed,

he was forced to send his representative, Ken Roelke (“Roelke”),

on March 18, 2011, to shut down their operations, padlock the

building, and hire 24-hour security. First Bank also opposed

converting the case. A hearing on the conversion motion was

requested but never held. 

On April 18, 2011, USB, with new bankruptcy counsel David

Tilem ("Tilem"), filed a second, ex parte emergency motion to

convert USB’s case to chapter 11. In its moving papers, USB

contended that Shin had not authorized its (or any other)

bankruptcy filing, and, other than its debt to First Bank, USB was

generally paying its debts as they came due. USB alleged that in
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5 Shin also claimed that his signature on the Electronic

Filing Declaration in the Union Trim case had been forged.

-7-

Shin's individual case and USB's case, the "blank" Electronic

Filing Declaration signed by Shin was first duplicated and then

altered by someone to add the names of the debtors.5 USB also

contended that on March 18, 2011, Trustee had not only shut down

USB's business, but also the business of nondebtor SMB Group,

which does business as "Union Trim," but was not the same company

as Union Trim, Inc. Thus, argued USB, Trustee was not only

damaging the victimized debtor, but also a business which was not

in bankruptcy. 

In his declaration in support of USB's second motion to

convert, Tilem stated that on April 6, 2011, he called Trustee's

office to see if Trustee would stipulate to the conversion, but

was unable to reach anyone. Tilem then sent an email to Trustee

and the staff attorney assigned to USB's case, Matthew Kennedy

("Kennedy"). Tilem explained that the chapter 7 petitions filed

for Shin individually, USB, "and a third business also owned by

Mr. Shin - SMB" - had not been authorized, and that Tilem had been

hired "to get the SMB case dismissed" and represent USB in

chapter 11. Tilem stated that Shin would be unable to prepare

schedules unless he was given access to the Premises. In response

to Tilem's email, Kennedy stated that Trustee would not stipulate

to the conversion, but he would allow Shin access to the Premises

so that Shin could review USB's books and records for the purpose

of preparing schedules and a statement of financial affairs. On

April 15, 2011, Trustee and Tilem spoke by phone. According to

Tilem, he told Trustee that the lockdown of USB was also affecting
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the business of nondebtor, SMB Group, but Trustee responded that

Tilem's only evidence of this was his word. Tilem then proposed a

meeting with Trustee and Shin, but Trustee refused.

Shin stated in his declaration in support of conversion that 

on March 18, 2011, when Trustee had shut down his businesses, he

went to see Choe to find out what was going on. Choe told Shin

about the bankruptcies, and stated that he could help Shin obtain

a loan or that he would personally lend him the money. Shin

claimed he refused Choe's loan offer, demanded a refund of his

retainer funds (of which he recovered $6,000 of the $8,000 paid),

left Choe's office, and started looking for another attorney. 

Shin also stated that during a meeting with Tilem on April 7,

2011, Shin discovered a paper, written in Korean, which said that

Shin had completed credit counseling. Shin asserted that he never

received credit counseling, and the document contained what Shin

claimed was his forged signature. Finally, Shin stated that

Trustee's offer to allow him access to the Premises to get

information to file bankruptcy schedules was not acceptable

because Shin had not authorized the bankruptcy filings, which were

destroying the businesses he had built for over 10 years.

According to Shin, he was losing customers due to the closure of

USB and SMB Group, particularly those whose inventory was locked

inside. 

On April 19, 2011, the bankruptcy court entered an order

denying USB's emergency motion to convert for failing to file

schedules, a statement of financial affairs, and other required

documents, and because the first motion to convert, which was

opposed by Trustee and First Bank, was never set for hearing. In
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6 While USB's conversion motion was pending, First Bank had

moved for relief from stay to foreclose on its interest in USB's

personal property. That motion was granted on April 21, 2011.

-9-

response to the order, USB set a hearing on its second motion to

convert for May 13, 2011. However, before the hearing could take

place, USB withdrew its conversion motion on April 26, 2011.6

On April 29, 2011, USB moved to dismiss its chapter 7 case

based on the unauthorized filing. USB's moving papers were

virtually identical to those filed for its motion to convert. The

only notable exception was a declaration filed by Sylvia Lew,

Tilem's associate attorney. She stated that in both the USB and

Union Trim bankruptcies no corporate resolution had been filed

indicating that either company's Board of Directors had authorized

the bankruptcy filings. 

Trustee filed his opposition to the dismissal motion on

May 17, 2011. Trustee contended that, despite Shin's

unsubstantiated victimization story, USB had failed to comply with

its duties under the Code to date, including failing to provide

Trustee or the court with any information regarding its assets,

liabilities, or creditors. Trustee noted that his offer to Shin

on April 15, 2011, to gain access to books and records so that he

could complete USB's schedules and statement of financial affairs

had been rejected. Trustee further noted that all three debtors -

Union Trim, USB, and now SMB Group (which had just filed a

chapter 11 bankruptcy on May 12, 2011) were listed as having the

same address and principal, and he opposed dismissal because he

needed more time to determine which debtor owned what assets,

since no papers had been filed with the court which could answer
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7 Shin's personal bankruptcy case was dismissed on May 2,

2011, for non-appearance at the § 341(a) meeting of creditors. 

His case was closed on June 24, 2011.

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this question. First Bank joined Trustee's opposition.

USB filed its reply on May 23, 2011, contending that it would

never voluntarily cooperate in a bankruptcy it did not authorize

or initiate, either by completing schedules or appearing at a

§ 341(a) meeting of creditors. USB rejected Trustee's argument

that he could not distinguish what assets belonged to which

debtor. First, argued USB, the businesses were in two different

halves of the Premises. Second, USB had already informed Trustee

that Union Trim had no assets; all of its assets had been sold to

SMB Group when Union Trim’s other shareholder disappeared, and

those assets were property of SMB Group's chapter 11 estate.

After a hearing on the matter, and upon USB's agreement not

to file another bankruptcy case for 365 days, the bankruptcy court

entered an order granting USB's motion to dismiss on May 31,

2011.7 

C. SMB Group bankruptcy.

Meanwhile, with Shin's authorization, SMB Group filed a

chapter 11 bankruptcy on May 10, 2011. SMB Group listed its place

of business in Suite #B of the Premises. In its schedules,

SMB Group listed no assets but several unsecured creditors. 

On May 24, 2011, SMB Group moved for an order finding Trustee

in contempt under § 105 for violating the automatic stay under

§ 362(a)(3)(the "Contempt Motion"). SMB Group claimed that it was

damaged when Trustee seized and refused to turn over what

SMB Group alleged was its property located at the Premises. 
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-11-

SMB Group contended that Trustee had refused to permit Shin access

to the Premises to identify SMB Group's property, he had refused

to cooperate in any effort to separate the property of SMB Group

from that of USB, and he had failed to take any action to separate

the assets of the two entities even though he had exclusive

control over the books and records to help sort out any confusion. 

SMB Group argued that damages included not only the value and lost

profits of its business, but also the fees and costs incurred

filing the chapter 11 case, which was the proximate result of

Trustee's actions.

In support of the Contempt Motion, SMB Group submitted

declarations from Tilem and Shin, and various documents reflecting

communications between Tilem and the Trustee's office. In a

letter dated May 11, 2011, Tilem advised Kennedy that SMB Group

had filed chapter 11 and requested that Trustee immediately

release and turn over all property owned by SMB Group, which was

located in Suite #B of the Premises. Tilem offered to provide

Trustee with a partial inventory list of assets. Kennedy's

response letter, dated May 12, 2011, stated that Trustee was

willing to cooperate regarding this issue, however, he could not

turn over any property without the promised inventory list and

proof of SMB Group's ownership. In an email from Tilem to Kennedy

dated May 13, 2011, Tilem attached a list identifying some of the

equipment Shin asserted belonged to SMB Group, at least what Shin

could recall without access to the Premises. Tilem asserted that

basically everything in Suite #B belonged to SMB Group or one of

its customers, so he saw no basis for any further delay in

releasing the contents of Suite #B. Later that same day, Tilem
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8 SMB Group later filed an amended Schedule B on May 31,

2011, which listed the same personal property identified in the

list Shin had provided to Trustee.

-12-

sent an email to Kennedy stating that he was incorrect about the

Suite #B reference; SMB Group's business was actually located in

Suite #A. Kennedy responded by email on May 16, 2011, informing

Tilem that, due to prior history and the uncertainties regarding

this case and the related cases, Trustee would neither grant

access to, nor turn over, any personal property in the absence of

a court order. Tilem's final email to Kennedy, dated May 20,

2011, demanding that Trustee turn over SMB Group's property, went

unanswered. 

In his opposition to the Contempt Motion, Trustee contended

that his actions were within the scope of his duties and protected

by judicial immunity. Trustee argued that due to the allegations

of unauthorized filings and forgeries with respect to the related

bankruptcy cases, he had a duty to act with great care and

caution, and consequently he could not be held responsible for

willfully violating the automatic stay for acting in accordance

with his duties and responsibilities. Specifically, Trustee

contended that he was justifiably uncertain about title to and

ownership of the property at the Premises given the absence of

schedules in the related cases, Shin's refusal to cooperate, the

multiple filings, and the purported use of the same business names

by multiple entities sharing common business premises. In

Trustee's opinion, Shin’s one-page list of equipment, with

scribbled notes, was wholly inadequate to substantiate SMB Group’s

ownership of the property.8 Thus, contended Trustee, he was
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9 On May 11, 2011, the bankruptcy court entered an order in

the Union Trim case approving a stipulation for turnover between

Trustee and Golden Textile, Inc. Golden Textile, Inc. was a

customer of Union Trim which had materials locked inside the

Premises. Trustee stated that Golden Textile, Inc. had complied

with his request to establish ownership of the materials, so he

agreed to turn them over.

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justified in requiring a court order for turnover, as he had with

Golden Textile, Inc.,9

 before turning over any of the property

that may or may not have belonged to SMB Group.

Alternatively, Trustee argued that no violation of the

automatic stay occurred because he had not wrongfully exercised

control or obtained possession of property belonging to

SMB Group's estate. Trustee noted that on June 2, 2011, shortly

after USB's case was dismissed, his counsel personally gave Shin

the key to the Premises, and, on June 3, 2011, Roelke had met with

Shin at the Premises to inspect the property and turn it over. 

In addition to the opposition, Trustee filed an evidentiary

objection to various statements made in Shin's declaration on the

grounds of hearsay, lack of foundation and personal knowledge,

argument, best evidence rule, and relevance.

In his declaration in support of Trustee’s opposition to the

Contempt Motion, Roelke, who had closed down the businesses on

behalf of Trustee on March 18, stated that based on the layout of

the Premises there was no way to discern what property belonged to

which entity. Roelke further stated that business was conducted

by both USB and Union Trim from the same Premises, with only a

curtain separating them, and that the assets of the two entities
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10 Trustee’s counsel acknowledged at oral argument before us

that actually a demising wall, as opposed to a curtain, separated

the entities at the Premises.

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were commingled.10

In its reply brief, SMB Group contended that judicial

immunity, if it even applied, likely covered only those actions

Trustee took on March 18 when he seized the Premises; it did not

cover his actions after May 10 (and up until June 2, 2011) of

refusing to investigate, meet with Shin, or turn over the property

he seized which belonged to SMB Group. These actions, argued

SMB Group, fell outside the scope of Trustee's authority, and

therefore immunity did not apply. SMB Group further contended

that Trustee's evidentiary objections should be overruled. 

A very short hearing on the Contempt Motion was held on

October 4, 2011. As to Trustee’s evidentiary objections, the

bankruptcy court stated:

Well, actually the evidentiary -- I will rule but as in

most cases, not all, but in many that's not going to make

a difference because I understand what happened. I am

going to overrule the first but I am going to sustain the

rest of the objections. But as I say, given the nature

of this case still the facts are what they are. 

Hr’g Tr. (Oct. 4, 2011) 1:19-24. The parties declined the

opportunity to present further argument. Thereafter, the

bankruptcy court entered its ruling orally on the record in favor

of Trustee:

. . . I am going to deny the motion. I think it probably

is immunity but even setting that aside this has been a

very unusual case and a lot quite frankly has been caused

by the principals of the Debtor. If I were in the

trustee's position I would have done exactly the same.

So, I'll just leave it at that.
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Id. at 2:5-10. When counsel for SMB Group asked the court to

enter findings due to a probable appeal, the bankruptcy court

replied:

All right. Then, in that case I will rule that there is

immunity to begin with but even if there weren't it

wouldn't make any difference. At the end of the day, my

findings are very specific that given the circumstances,

as laid out by the way in the response from the trustee,

given those circumstances the conduct was totally

justifiable and I'll leave it at that. 

Id. at 2:16-24. 

The bankruptcy court entered an order denying the Contempt

Motion on October 18, 2011 (“Contempt Order”). SMB Group timely

appealed.

II. JURISDICTION

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

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

III. ISSUES

1. Did the bankruptcy court err in determining that Trustee had 

immunity? 

2. Did the bankruptcy court abuse its discretion in denying

the Contempt Motion?

3. Did the bankruptcy court abuse its discretion in its

evidentiary rulings?

IV. STANDARDS OF REVIEW

Whether property is included in a bankruptcy estate is a

question of law subject to de novo review. Sticka v. Lambert

(In re Lambert), 283 B.R. 16, 18 (9th Cir. BAP 2002). 

Whether the automatic stay provisions of § 362 have been

violated is also a question of law reviewed de novo. Del Mission

Ltd. v. Traxel, 98 F.3d 1147, 1150 (9th Cir. 1996). 
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The bankruptcy court's conclusions of law regarding the

immunity of a bankruptcy trustee are reviewed de novo, while

findings of fact are reviewed for clear error. Curry v. Castillo

(In re Castillo), 297 F.3d 940, 946 (9th Cir. 2002)(citing

Petralia v. Jercich (In re Jercich), 238 F.3d 1202, 1205 (9th Cir.

2001)).

An award or denial of sanctions under § 105(a) is reviewed

for abuse of discretion. Nash v. Clark Cnty. Dist. Attorney's

Office (In re Nash), 464 B.R. 874, 878 (9th Cir. BAP 2012)(citing

Missoula Fed. Credit Union v. Reinertson (In re Reinertson),

241 B.R. 451, 454 (9th Cir. BAP 1999)). 

The bankruptcy court's evidentiary rulings are reviewed for

an abuse of discretion. Fireman's Fund Ins. Cos. v. Alaskan Pride

P’ship, 106 F.3d 1465, 1467 (9th Cir. 1997).

To determine whether the bankruptcy court 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. Hinkson,

585 F.3d 1247, 1261-62 (9th Cir. 2009)(en banc).

V. DISCUSSION

A. The bankruptcy court did not make sufficient findings for a

meaningful review.

1. Applicable bankruptcy law.

Upon the filing of a bankruptcy petition, an estate is

created comprised of all legal or equitable interests of the
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11 Trustee would appear to be an “entity” subject to § 542(a). 

An “entity” is defined as including a “person.” § 101(15). A

“person” includes an “individual.” § 101(41). A chapter 13

trustee has been determined to be an “entity” for purposes of

§ 542(a), but not a “custodian” for purposes of § 543(b). 

Resendez v. Lindquist, 691 F.2d 397, 398 (8th Cir. 1982).

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debtor in property, wherever located or by whomever held, as of

the commencement of the case. § 541(a)(1). Furthermore, while

§ 541 sets forth what interests of the debtor must be transferred

to the bankruptcy estate, it does not address “‘the threshold

questions of the existence and scope of the debtor's interest in a

given asset.’” Dumas v. Mantle (In re Mantle), 153 F.3d 1082,

1084 (9th Cir. 1998)(quoting State of Cal. v. Farmers Mkts., Inc.

(In re Farmers Mkts., Inc.), 792 F.2d 1400, 1402 (9th Cir. 1986)). 

Rather, the bankruptcy court must look to state property law to

determine whether, and to what extent, the debtor has any legal or

equitable interests in property as of the commencement of the

case. Id. (citing Butner v. United States, 440 U.S. 48, 55

(1979)).

The filing of the bankruptcy petition also creates an 

automatic stay under § 362(a), which operates to enjoin, among

other things, "any act to obtain possession of property of the

estate or of property from the estate or to exercise control over

property of the estate.” § 362(a)(3). 

Under § 542(a), an “entity,” other than a custodian, who

possesses or is in control of property of the estate on the date

the bankruptcy petition is filed has an obligation to turn that

property over to the debtor or to the trustee. The same is true

for “custodians” under § 543(b).11 An entity “who fails to return

the estate's property after it knows of the debtor's bankruptcy is
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subject to sanction for willful violation of the automatic stay.” 

Expeditors Int’l of Wash., Inc. v. Colortran, Inc. (In re

Colortran, Inc.), 210 B.R. 823, 826-27 (9th Cir. BAP 1997), aff'd

in part and vacated in part on other grounds, 165 F.3d 35 (9th

Cir. 1998); Abrams v. Sw. Leasing and Rental Inc. (In re Abrams),

127 B.R. 239, 241-43 (9th Cir. BAP 1991)(creditor's continuing

retention of repossessed vehicle after receiving notice of

bankruptcy violated automatic stay). See also Sternberg v.

Johnston, 595 F.3d 937, 943-45 (9th Cir.), cert. denied, 131 S.Ct.

180 (2010)(automatic stay imposes on nondebtor parties an

affirmative duty of compliance, and to comply with the affirmative

duty under the automatic stay a nondebtor party must do what it

can to relieve the violation). “‘To effectuate the purpose of the

automatic stay, the onus to return estate property is placed upon

the possessor; it does not fall on the debtor to pursue the

possessor.’” Hayden v. Wells (In re Hayden), 308 B.R. 428, 432

(9th Cir. BAP 2004)(quoting Del Mission, 98 F.3d at 1151). 

Section 362(k) permits sanctions for willful violations of

the automatic stay under § 362(a). "A willful violation is

satisfied if a party knew of the automatic stay, and its actions

in violation of the stay were intentional." Eskanos & Adler, P.C.

v. Leetien, 309 F.3d 1210, 1215 (9th Cir. 2002)(citing Pinkstaff

v. United States (In re Pinkstaff), 974 F.2d 113, 115 (9th Cir.

1992)). Once a party has knowledge of the bankruptcy, it is

deemed to have knowledge of the automatic stay. See Ramirez v.

Fuselier (In re Ramirez), 183 B.R. 583, 589 (9th Cir. BAP 1995). 

However, § 362(k) only allows an “individual” to recover

damages for violations of the automatic stay; corporations are not
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“individuals” for purposes of § 362(k). In re Goodman, 991 F.2d

613, 616 (9th Cir. 1993)(analyzing the former § 362(h)). 

Nonetheless, a corporation may recover contempt sanctions for

violations of the stay under § 105. Id. Damages under § 362(k)

are mandatory, whereas damages are discretionary for civil

contempt under § 105. In re Colortran, Inc., 210 B.R. at 828

(analyzing the former § 362(h))(citing In re Goodman, 991 F.2d at

616). Under civil contempt, the moving party must prove by clear

and convincing evidence that the offending party violated the stay

order. Knupfer v. Lindblade (In re Dyer), 322 F.3d 1178, 1191

(9th Cir. 2003).

2. Quasi-Judicial Immunity.

Trustee contended that his actions were protected by judicial

immunity. Historically, judges have been granted absolute

immunity from suits for their judicial acts. Nilsen v. Neilson

(In re Cedar Funding, Inc.), 419 B.R. 807, 822 (9th Cir. BAP

2009)(citing Forrester v. White, 484 U.S. 219, 225-28 (1988)). 

Quasi-judicial immunity is an offshoot of judicial immunity and

extends to nonjudicial officers for “‘all claims relating to the

exercise of judicial functions.’” Id. (quoting In re Castillo,

297 F.3d at 947). 

The United States Supreme Court in Antoine v. Byers &

Anderson, Inc., 508 U.S. 429 (1993), set forth a two-part test for

determining whether a nonjudicial officer is entitled to quasijudicial immunity. The first prong requires the court to inquire

thoroughly into the immunity historically given to the relevant

official at common law and the public interest behind it. Id. at

432. The Ninth Circuit has conducted this inquiry and has
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concluded that bankruptcy trustees are afforded quasi-judicial

immunity because they perform some functions which are judicial in

nature. In re Castillo, 297 F.3d at 950. 

The second prong requires a court to examine whether immunity

covers the trustee’s functions at issue. Id. at 949. Questions

regarding a trustee’s immunity under this prong are decided on a

case-by-case basis because not all “‘of the trustee’s many

functions are covered by absolute quasi-judicial immunity.’” 

In re Cedar Funding, Inc., 419 B.R. at 822 (quoting In re

Castillo, 297 F.3d at 953). Trustees may only be “‘immune for

actions that are functionally comparable to those of judges, i.e.,

those functions that involve discretionary judgment.’” Id.

(quoting In re Castillo, 297 F.3d at 947)(citing Antoine, 508 U.S.

at 436). The focus on whether a particular function is judicial

in nature is on the “ultimate act,” not the constituent parts of

the act. In re Castillo, 297 F.3d at 952. 

A chapter 7 bankruptcy trustee’s duties are set forth in

§§ 323 and 704. In general, the trustee must: collect and

liquidate property of the estate; be accountable for the estate;

ensure that the debtor performs his or her obligations;

investigate the financial affairs of the debtor; review proofs of

claim; oppose the debtor’s discharge if necessary; furnish

relevant information to parties in interest; and by court order,

operate the debtor’s business on a short-term basis. 

§ 704(a)(1)-(8). The trustee also must prepare the final report

and an accounting for the administration of the estate. 

§ 704(a)(9).

It has long been established that bankruptcy trustees are
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12 Although the Ninth Circuit has held that trustees are not

immune for their negligent violation of duties imposed by law (see

United States v. Hemmen, 51 F.3d 883, 891 (9th Cir. 1995) and

Bennett, 892 F.2d at 823), it has subsequently held that trustees

are not liable for negligent acts when immunity applies. In re

Castillo, 297 F.3d at 953 (“Because we decide that [the trustee]

is entitled to immunity, we need not reach Castillo's argument

that bankruptcy trustees may be liable for negligence.”). 

However, since Trustee’s actions here were intentional, whether he

is immune from any negligent acts in this case is not relevant.

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entitled to quasi-judicial immunity from liability for actions

carried out within the scope of the their official duties. 

Kashani v. Fulton (In re Kashani), 190 B.R. 875, 883 (9th Cir. BAP

1995)(citing Bennett v. Williams, 892 F.2d 822, 823 (9th Cir.

1989); Mullis v. United States Bankruptcy Court for Dist. of Nev.,

828 F.2d 1385, 1390-91 (9th Cir. 1987), cert. denied, 486 U.S.

1040 (1988); Read v. Duck (In re Jacksen), 105 B.R. 542, 544 (9th

Cir. BAP 1989)). “A trustee is entitled to such immunity only if

the trustee is acting within the scope of authority conferred upon

the trustee by the appropriate statute(s) or the court.” 

In re Kashani, 190 B.R. at 883 (citing In re Jacksen, 105 B.R. at

545 and Cent. Transp., Inc. v. Roberto (In re Tucker Freight

Lines, Inc.), 62 B.R. 213, 217 (W.D. Mich. 1986)). Trustees are

not immune for intentional violation of duties imposed upon them

by law. Bennett, 892 F.2d at 823.12 

A trustee can be personally liable for seizing or failing to

turn over property in possession of the estate but owned by

someone else, which is considered an ultra vires act. See, e.g.,

Leonard v. Vrooman, 383 F.2d 556 (9th Cir. 1967), cert. denied,

390 U.S. 925 (1968). This is true even if the trustee had ample

reason to believe that a preferential transfer or a transfer in

fraud of creditors had occurred. Id.
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3. Analysis.

SMB Group had the burden to show that Trustee violated the

automatic stay. It, however, first needed to request the 

bankruptcy court to determine whether the disputed property held

by Trustee was property of SMB Group’s bankruptcy estate. Trustee

had the burden of showing that he was entitled to quasi-judicial

immunity. In addition to assigning error by the bankruptcy court

in ruling that Trustee was entitled to quasi-judicial immunity for

his conduct, SMB Group contends that because the bankruptcy court

made little to no findings on the issues at hand, the case should

be remanded. We agree. 

The Contempt Motion was a “contested matter” subject to

Rule 9014. See Rule 9020. Rule 9014 incorporates the provisions

of Civil Rule 52, which requires that findings and conclusions be

stated on the record after the close of the evidence or to appear

in an opinion or memorandum of decision filed by the court.

Specifically, in an action tried on the facts without a jury, “the

court must find the facts specially and state its conclusions of

law separately.” Civil Rule 52(a)(1), incorporated by Rule 7052. 

These findings must be sufficient to indicate the factual

basis for the court’s ultimate conclusion. Unt v. Aerospace

Corp., 765 F.2d 1440, 1444 (9th Cir. 1985). The findings must be

explicit enough to give the appellate court a clear understanding

of the basis of the trial court’s decision, and to enable it to

determine the ground on which the trial court reached its

decision. Mattel, Inc. v. Walking Mountain Prods., 353 F.3d 792,

815 (9th Cir. 2003); Unt, 765 F.2d at 1444. 

Review of the bankruptcy court’s ruling here is difficult
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because no detailed findings of fact or conclusions of law exist,

either on the record or in a separate opinion or memorandum

decision. At the hearing on the Contempt Motion, the bankruptcy

court initially denied the motion because immunity “probably”

applied. After counsel for SMB Group pressed for more findings in

light of a probable appeal, the bankruptcy court found that

immunity did apply, or, alternatively, that Trustee’s conduct, as

set forth in his opposition to the Contempt Motion, was

justifiable. Contrary to the bankruptcy court’s statement that

its findings were “specific,” the court made no findings of fact

and summarily concluded that immunity applied. Adopting Trustee’s

brief as the court’s findings does not comply with Civil

Rule 52(a). This failed procedure inadequately supports the

court’s decision to deny the Contempt Motion. 

We further note that the bankruptcy court made no findings as

to whether SMB Group or some other entity owned the property at

issue, which would necessarily preface the determination of

whether a stay violation occurred. In order to make a

determination as to the ownership of the property, an adversary

proceeding is required under Rule 7001(2). See Jahr v. Frank

(In re Jahr), BAP No. EW-11-1538, 2012 WL 3205417, at *4 (9th Cir.

BAP Aug. 1, 2012)(citing Brady v. Commercial W. Fin. Corp.

(In re Commercial W. Fin. Corp.), 761 F.2d 1329, 1336-38 (9th Cir.

1985); Cogliano v. Anderson (In re Cogliano), 355 B.R. 792, 804-05

(9th Cir. BAP 2006); and In re Colortran, Inc., 218 B.R. at

510-11. Upon further evidentiary proceedings, if the bankruptcy

court finds that SMB Group owns the property as claimed, it then

needs to determine whether Trustee’s act of not turning it over to
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SMB Group violated the stay. If Trustee’s conduct did violate the

stay, the bankruptcy court must determine whether such conduct was

protected by immunity. If it was not, SMB Group would appear to

have a claim for contempt, as long as it can prove damages. 

Findings of fact and conclusions of law are essential to

appellate review of the Contempt Order. In the absence of

complete findings, we may vacate a judgment and remand the case to

the bankruptcy court to make the required findings. See United

States v. Ameline, 409 F.3d 1073 (9th Cir. 2005). Accordingly, we

VACATE the Contempt Order and REMAND with instruction that the

bankruptcy court conduct proceedings consistent with this

memorandum. 

B. The evidentiary rulings.

Because we are vacating and remanding this matter for further

proceedings, we need not reach the issue of whether the bankruptcy

court abused its discretion in its evidentiary rulings. We do

note, however, that many of Shin’s statements made in his 

declaration in support of the Contempt Motion and objected to by

Trustee had already been made in Shin’s declaration submitted with

the second motion to convert USB’s case to chapter 11 on April 18,

2011. Trustee raised no objections to Shin’s declaration in that

case. Thus, it would appear that many of Trustee’s objections to

Shin’s declaration in support of the Contempt Motion, which the

bankruptcy court sustained, had actually been waived. See Local

Bankruptcy Rule 9013-1(i)(2): “An evidentiary objection may be

deemed waived unless it is (A) set forth in a separate document;

(B) cites the specific Federal Rule of Evidence upon which the

objection is based; and (C) is filed with the responsive or reply
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papers.”

VI. CONCLUSION

Based on the foregoing reasons, we VACATE and REMAND with

instruction that the bankruptcy court conduct proceedings

consistent with this memorandum.