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NOT FOR PUBLICATION

UNITED STATES BANKRUPTCY APPELLATE PANEL

OF THE NINTH CIRCUIT

In re: ) BAP No. CC-16-1210-TaFC

)

IQBAL MAHMOOD, ) Bk. No. 2:15-bk-25281-DS

)

Debtor. )

______________________________)

)

IQBAL MAHMOOD, )

)

Appellant, )

)

v. ) MEMORANDUM*

)

ADNAN KHATIB, )

)

Appellee. )

______________________________)

Argued and Submitted on February 23, 2017

at Pasadena, California

Filed – March 17, 2017

Appeal from the United States Bankruptcy Court

for the Central District of California

Honorable Deborah J. Saltzman, Bankruptcy Judge, Presiding

 

Appearances: Michael R. Totaro of Totaro & Shanahan argued for

appellant; Janelle M. Dease of Borchard &

Callahan, APC argued for appellee.

 

Before: TAYLOR, FARIS, and CLEMENT,** Bankruptcy Judges.

FILED

MAR 17 2017

SUSAN M. SPRAUL, CLERK

U.S. BKCY. APP. PANEL

OF THE NINTH CIRCUIT

* This disposition is not appropriate for publication. 

Although it may be cited for whatever persuasive value it may

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

See 9th Cir. BAP Rule 8024-1(c)(2).

** The Hon. Fredrick E. Clement, United States Bankruptcy

Judge for the Eastern District of California, sitting by

designation.
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INTRODUCTION

Chapter 111 debtor Iqbal Mahmood appeals from the

bankruptcy court’s dismissal of his bankruptcy case as a bad

faith filing. We AFFIRM the bankruptcy court. 

FACTS2

A California appellate court once remarked: “Understanding

the complex series of events that led to this litigation is

necessary to frame the current appeal, and to explain our

holdings.” Mahmood v. Sharif, No. B175483 (Cal. Ct. App.

July 20, 2005). That was in 2005. Twelve years — and at least

two more appellate decisions — later, we meet an enhanced

challenge in explaining the long history of the underlying

disputes. Thankfully, the parties agree on most basic facts.

Pre-bankruptcy events. Debtor Iqbal Mahmood immigrated to

the United States in 1970. In 1981, he and Fehmida, his wife at

the time, purchased a mixed-use property in Cerritos, California

(the “Property”). Debtor has apparently lived and worked there

ever since.

In 1988, Adnan Khatib commenced a state court lawsuit

against Debtor and others and sought recovery based on alleged

slander. In April 1991, Debtor quitclaimed the Property to

Fehmida. Shortly thereafter, Khatib obtained a $542,159

1 Unless otherwise indicated, all chapter and section

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

2 We exercise our discretion to take judicial notice of

documents electronically filed in the underlying bankruptcy

case. See Atwood v. Chase Manhattan Mortg. Co. (In re Atwood),

293 B.R. 227, 233 n.9 (9th Cir. BAP 2003).

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judgment. And only three months thereafter, Fehmida filed for

divorce. Khatib and Debtor then entered into a settlement

agreement to satisfy the judgment; but concord did not follow.

In September 1992, Khatib again sued Debtor, among others;

he alleged four causes of action: (1) fraudulent conveyance;

(2) breach of contract; (3) fraud; and (4) conspiracy. As a

result of discovery sanctions, Khatib eventually obtained a

default judgment on the fraudulent conveyance and breach of

contract causes. The judgment set aside all transfers of the

Property after January 27, 1988, deemed title held by Debtor and

Fehmida as community property, enjoined Debtor from transferring

the Property, and awarded Khatib money damages on the breach of

contract cause.

Khatib then recorded an abstract of judgment. Debtor

appealed. In 1996, the California Court of Appeal affirmed the

fraudulent conveyance aspect of the judgment but reversed and

remanded for the trial court to recalculate the damages on the

breach of contract claim. The trial court entered a new

judgment the next year but erroneously assessed damages on the

fraud cause of action. Debtor again appealed, and the

California Court of Appeal again affirmed, albeit while also

modifying the judgment to reflect that the damages award was

based on the contract, not the fraud, cause of action.

At appropriate intervals Khatib renewed his judgment: once

when he calculated the amount due as $1,256,537.37; and then

when he calculated the amount due as $2,029,423.50. Debtor

disputed this second renewal, but Khatib prevailed at both the

trial and appellate levels.

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In January 2013, Khatib applied to have the Property sold

by writ of execution. In response, Debtor’s daughter, as

trustee for a trust, filed a lawsuit for quiet title,

declaratory relief, and equitable relief: she claimed that the

trust had title to the Property, based on a series of transfers

going back to the April 1991 transfer from Debtor to Fehmida. 

The state court ruled in Khatib’s favor in her action, an appeal

followed, and the appellate court affirmed.

In July 2015, Khatib again sought to sell the Property by

writ of execution. Debtor was served with an “Application for

Issuance of an Order to Show Cause Why an Order for Sale of

Dwelling Should Not Issue”; it was set for hearing on October 6,

2015.

Debtor’s bankruptcy petition. But on October 4, 2015,

Debtor filed a voluntary chapter 11 petition. On Schedule A, he

listed two pieces of real property, the Property and vacant land

in Chico, CA. He valued his interest in them at $275,000 and

$44,000, respectively.

He listed four secured creditors on Schedule D, marking all

as “disputed”: Adhan Khatib [sic], 1994, $50,000; Butte County

Tax Collector, 2014, $2,000; James F. McGee, 1994, $50,000; and

Los Angeles County Tax Collector, 2015, $5,923.70. He then

listed six unsecured creditors on Schedule F, again marking all

as “disputed.” These included: Khatib, 1994, $1,422,034.20;

McGee, 1994, $1,422,034.20; Mohammad and Rukhsna Sharif, 1994,

$195,000; Mohammad S. Tremzai, 1992, $50,000; Rutan & Tucker,

2012, $10,000; and Shaheen Iqbal, 1992, $45,000.

Debtor also has a litigious history with Mohammad Sharif,

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Rukhsana Sharif, and M. Sharif (the “Sharifs”). The Sharifs

obtained a money judgment against Debtor in 2001. Debtor

appealed, but the Sharifs prevailed.

Debtor almost immediately filed a post-petition motion to

value the Property, asserting it was worth $275,000. Khatib

opposed. The bankruptcy court eventually valued the Property at

$550,000.

Debtor also promptly commenced an adversary proceeding

against Khatib and the Sharifs to determine the existence,

validity, and priority of the various liens.

Debtor then submitted a “corrected” disclosure statement

and a proposed plan of reorganization. As described in the

disclosure statement, the plan proposes to take the Property’s

$550,000 value, subtract a $175,000 homestead exemption, and

treat the secured claims as secured up to $375,000. The plan

then pays secured claims over 7 years at 3% interest. The

deficiency claims are treated as unsecured claims to receive a

2% dividend, without interest, in equal monthly installments

over 84 months. The disclosure statement also represents that

Debtor had averaged net monthly income of $3,758.94 in the six

months since the petition was filed.

Khatib responded to Debtor's bankruptcy efforts with a

motion to dismiss the bankruptcy case as a bad faith filing. 

After canvassing the parties’ history and discussing various

factors, Khatib argued that “totality of the circumstances

reveals that Debtor is fraudulently using bankruptcy as a way to

appeal and avoid the Judgment that allows Khatib to enforce

against the [Property].” He urged the bankruptcy court to find

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“that Debtor acted in bad faith in filing his petition.” He

then argued that dismissal would serve the best interest of all

creditors and the estate.

Debtor opposed. Among other things, he argued that if the

court found cause to dismiss, there were unusual circumstances

that established that neither dismissal nor conversion was in

the best interests of creditors and the estate: he related his

discovery that the liens and their respective priority was

unclear and needed judicial determination. His adversary

proceeding, he suggested, was a quick way to resolve the

dispute. He added: “If Debtor had to choose he would argue

dismissal would provide a better option for the creditors and

the estate as their claims would not be reduced further by

trustee fees and their attorney’s fees.” 

The bankruptcy court heard the matter, entertained oral

argument, and ruled from the bench. It clarified that bad faith

was grounds for dismissal under § 1112(b). And it identified

five relevant factors: 

whether the debtor has only one asset; whether the

debtor has an ongoing business to reorganize; whether

. . . there [are] unsecured creditors; whether the

debtor has any cash flow or sufficient source of

income consisting a plan; and finally, whether this is

essentially a case that is a two-party dispute that is

capable of being adjudicated in state court as opposed

to a bankruptcy court.

It then discussed each of the factors. From them, it concluded

“that we have . . . a pretty clear case for dismissal based on

bad faith.” Finally, the bankruptcy court decided: “I don’t

believe that appointment of a trustee or an examiner in this

case would be an appropriate option either because there’s no

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need for any sort of investigation, there’s no need for another

party to come in to operate a business or to oversee the conduct

of a case.” It then entered an order dismissing the case. 

Debtor timely appealed.

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.

ISSUE

Whether the bankruptcy court abused its discretion when it

dismissed Mahmood’s chapter 11 petition.

STANDARDS OF REVIEW

“We review de novo whether the cause for dismissal of a

Chapter 11 case under 11 U.S.C. § 1112(b) is within the

contemplation of that section of the Code.” Marsch v. Marsch

(In re Marsch), 36 F.3d 825, 828 (9th Cir. 1994). We review for

abuse of discretion the bankruptcy court’s decision to dismiss a

chapter 11 case as a “bad faith” filing. Hutton v. Treiger

(In re Owens), 552 F.3d 958, 960 (9th Cir. 2009); Sullivan v.

Harnisch (In re Sullivan), 522 B.R. 604, 611 (9th Cir. BAP

2014). We apply a two-step test to determine whether the

bankruptcy court abused its discretion. In re Sullivan,

522 B.R. at 611 (citing United States v. Hinkson, 585 F.3d 1247,

1261-62 (9th Cir. 2009) (en banc)). First, we consider de novo

whether the bankruptcy court applied the correct legal standard

to the relief requested. Id. Then we review for clear error

the bankruptcy court’s findings of fact. Id. (citing cases). 

“We must affirm the bankruptcy court’s fact findings unless we

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conclude that they are illogical, implausible, or without

support in the record.” Id. A factual determination is clearly

erroneous “if it was without adequate evidentiary support or was

induced by an erroneous view of the law.” Id.

DISCUSSION

Section 1112(b)(1) provides that “the court shall convert a

case under this chapter to a case under chapter 7 or dismiss a

case under this chapter, whichever is in the best interests of

creditors and the estate, for cause . . . .” 11 U.S.C.

§ 1112(b)(1). If cause is established, the decision to convert

or dismiss the case falls within the bankruptcy court’s

discretion. In re Sullivan, 522 B.R. at 612. If a bankruptcy

court determines that there is cause to convert or dismiss, it

must also: (1) decide whether dismissal, conversion, or the

appointment of a trustee or examiner is in the best interests of

creditors and the estate; and (2) identify whether there are

unusual circumstances that establish that dismissal or

conversion is not in the best interests of creditors and the

estate. 11 U.S.C. § 1112(b)(1), (b)(2); In re Sullivan,

522 B.R. at 612.

Debtor concedes that a determination that a bankruptcy

petition was filed in bad faith constitutes cause under

§ 1112(b). In re Marsch, 36 F.3d at 828. We now turn to

whether the bankruptcy court’s dismissal was an abuse of

discretion.

A. The bankruptcy court properly applied the correct

legal standard. 

As discussed in more detail below, the bankruptcy court

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weighed various factors before finding that Debtor filed his

chapter 11 petition in bad faith. On appeal, Debtor argues that

the bankruptcy court misapplied the correct legal standard

because it failed to consider the totality of the circumstances

when it considered only some, but not other, factors. 

We disagree. This Panel (and others) have elucidated

helpful circumstantial factors that might indicate bad faith

when considering a totality of the circumstances. The

bankruptcy court did not have to consider all the factors; nor

did it have to weigh them equally. A bankruptcy court may find

one factor dispositive. Indeed, a bankruptcy court may find bad

faith even if none of the factors are present.

Here, the bankruptcy court recited and considered factors

this Panel has endorsed. See St. Paul Self Storage Ltd. P’ship

v. Port Auth. (In re St. Paul Self Storage Ltd. P’ship),

185 B.R. 580 (9th Cir. BAP 1995). In St. Paul, we remarked:

To determine whether a debtor has filed a petition in

bad faith, courts weigh a variety of circumstantial

factors such as whether:

(1) the debtor has only one asset;

(2) the debtor has an ongoing business to

reorganize;

(3) there are any unsecured creditors;

(4) the debtor has any cash flow or sources

of income to sustain a plan of

reorganization or to make adequate

protection payments; and

(5) the case is essentially a two party

dispute capable of prompt adjudication in

state court.

See In re Stolrow’s, Inc., 84 B.R. [167, 171 (9th Cir.

BAP 1988)]. Generally speaking, when factors such as

these indicate that a debtor is unreasonably deterring

or harassing creditors rather than attempting a speedy

and feasible reorganization, the court may conclude

that the petition has been filed in bad faith and

dismiss it.

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Id. at 582–83 (some citations omitted). The list is admittedly

not exhaustive; an even earlier Panel decision set forth a more

expansive list of eight factors. See In re Stolrow’s, Inc.,

84 B.R. at 171. The bankruptcy court could have discussed all

eight circumstantial factors; but it was not obliged to. 

Indeed, in St. Paul the Panel affirmed a bad faith finding based

on the more limited list of five factors — the precise factors

the bankruptcy court, here, considered.

Debtor also believes the bankruptcy court should have

evaluated factors that he raised (factors that do not appear on

even the longer list). But we are not persuaded that the

bankruptcy court ignored them.3 First, Debtor emphasizes that

his insolvency is relevant to the case and that the

“disinclination to examine debtor’s overall financial status was

a factor in an erroneous conclusion [that] the Sullivan case was

filed in bad faith.” Aplt’s Opening Br. 14. As this panel and

the Ninth Circuit have observed, a debtor’s financial status is

relevant. In re Sullivan, 522 B.R. at 615 (citing In re Arnold,

806 F.2d at 939). But Sullivan is distinguishable; there, the

bankruptcy court erroneously viewed the debtor’s alleged

insolvency as a “non-issue” and inappropriately limited its

examination of the debtor’s financial status. Id. Here, the

bankruptcy court did consider Debtor’s financial status (i.e.,

his assets, cash flow, liabilities, etc.), and it did not

erroneously determine that Debtor was solvent. 

3 Debtor raised them in his papers. And the bankruptcy

court informed counsel, on the record, that “I have reviewed the

papers.”

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Second, Debtor contends that “the very fact” that he has

been diligently “working toward reorganization is inconsistent

and incongruous with this being a ‘bad faith filing.’” Aplt’s

Opening Br. at 14. But Debtor is not the first to raise this

argument; in St. Paul, the debtor also argued that it did not

file its bankruptcy petition in bad faith, and to “support this

contention, [d]ebtor refers to the fact that it filed a proposed

disclosure statement and plan, filed all monthly operating

reports, and paid all quarterly fees to the United States

Trustee.” 185 B.R. at 583. The St. Paul Panel was not

convinced: “However, notwithstanding Debtor’s reverence for

form, the substance of this case indicates that the bankruptcy

court’s finding of bad faith was not clearly erroneous nor did

it abuse its discretion when dismissing the case.” Id. We are

similarly unimpressed with Debtor's form over substance

argument. Put bluntly: if a debtor’s timely filing all

operating reports, complying with various reporting

requirements, and “working toward reorganization” rebutted

indicia of bad faith, then every debtor who complied with the

bare minimum of procedural requirements would be immunized from

a bad faith finding. 

Last, Debtor twice argues that filing bankruptcy to “save

equity in one’s home” is a legitimate reason for filing

bankruptcy and then suggests that his motivation for filing is

similar. See Aplt’s Opening Br. at 13, 15. It is a legitimate

reason, except Debtor has no equity to save. He wants to

preserve his homestead exemption. But he does not need

bankruptcy protection to do so.

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In sum, we conclude that the bankruptcy court properly

considered the totality of the circumstances; it listed

appropriate factors and from those factors found bad faith. 

B. The bankruptcy court’s “bad faith” finding was not

clearly erroneous.

“We must affirm the bankruptcy court’s fact findings unless

we conclude that they are illogical, implausible, or without

support in the record.” In re Sullivan, 522 B.R. at 612. “We

may view a factual determination as clearly erroneous if it was

without adequate evidentiary support or was induced by an

erroneous view of the law.” Id.

The bankruptcy court found that Debtor’s petition was filed

in bad faith. It based this, in part, on a finding that Debtor

“is using this bankruptcy as a litigation tactic in connection

with his disputes with Mr. Khatib and using bankruptcy as a

litigation tactic or as a grounds to delay creditor’s collection

. . . .” Debtor argues that the bankruptcy “court failed to

explain what that ‘litigation tactic’ was.” Aplt’s Opening Br.

at 25. He reasons: “This was just collection efforts to sell

Mahmood’s home and place of business so no actual ‘tactic’ just

following a viable procedure to seek to pay debts and retain his

property.” Aplt’s Opening Br. at 26. We disagree.

The evidence before the bankruptcy court reflected: in

1991, Khatib obtains judgment, Debtor and Khatib later settle,

but Debtor fraudulently conveys the Property; Khatib obtains a

second judgment, Debtor appeals, judgment affirmed in part

remanded in part, new judgment, Debtor appeals, judgment

affirmed; Khatib renews the judgment; Khatib renews the judgment

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again, Debtor appeals, renewed judgment affirmed; Khatib begins

the sale process, Debtor’s daughter brings quiet title action,

Khatib prevails at trial, Debtor’s daughter appeals, judgment

affirmed; finally, Khatib renews the sale process, Debtor files

bankruptcy. We recognize Debtor’s belief that, along the way,

he scored minor victories. But the bankruptcy court’s finding

that Debtor was using the bankruptcy petition as the latest in a

decades-old campaign to delay Khatib’s collection efforts was

not clear error.

For the sake of completeness, we also address Khatib’s more

specific arguments. Debtor disputes the bankruptcy court’s

analysis on nearly every factor; he argues that the bankruptcy

court’s factual findings were clearly erroneous.4

Whether Debtor has only one asset. The bankruptcy court

concluded that the case was “essentially a one-asset case.” It

observed that Debtor “clearly filed this case to protect this

particular asset.” It acknowledged that there were other items

on the schedules, but noted that they were “of de minimis

value.” On appeal, Debtor argues that a case is either a single

asset case or not; accordingly, this case cannot be a “oneasset” case because Debtor has other assets: he co-owns a parcel

of vacant land and has postpetition income. But as Debtor

concedes, the bankruptcy court did not find that Debtor only had

4 Debtor does not, however, dispute the bankruptcy court’s

conclusion that the “ongoing business to reorganize” factor was

not particularly useful: “[T]he debtor’s practice right out of

his home it’s -- it appears to be a relatively straightforward

one. It doesn’t appear the bankruptcy is to be used as a tool

to reorganize the business.”

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one asset; it looked at the schedules, acknowledged that Debtor

had other assets, but concluded that they were negligible. 

Although the bankruptcy court did not explicitly identify

Debtor’s postpetition income as an asset, we are not persuaded

this would have altered the calculus. Accordingly we conclude

that the bankruptcy court’s finding that this was “essentially”

a one-asset case was not clearly erroneous.

Whether there are any unsecured creditors. The bankruptcy

court found that there were few, if any, true unsecured

creditors in the case. On appeal, Debtor acknowledges that some

of the creditors listed on the schedules did not file proofs of

claims, but he argues that the court should look at the

schedules at the time of filing. Debtor also contends that the

bankruptcy court ignored the natural result of claim

bifurcation: all but $375,000 of the “secured” claims would be

treated as unsecured. In reaching its conclusion, the

bankruptcy court looked at Debtor’s initial schedules, Debtor’s

proposed amended schedules, and the claims register. There was

no clear error in its conclusion — even if Debtor’s bankruptcy

plan would treat some claims as undersecured.

Whether Debtor has any cash flow or sources of income to

sustain a plan of reorganization. The bankruptcy court found:

“it seems to me that the debtor is not likely to be able to fund

the proposed plan while also funding basic needs of his own

life.” The bankruptcy court looked at the proposed plan and

disclosure statement; based on the information in them, it

calculated that Debtor would have about $198 per month left over

after expenses and plan payments. Then it compared the income

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reported in the disclosure statement (based on the six months

since the petition was filed) with Debtor’s initial Schedule I. 

Based on Schedule I, Debtor could not cover the proposed plan

payments. Hr’g Tr. 15:24-16:3. Last, it acknowledged that

Debtor intended to rely on family members for emergencies but

concluded that there was no evidence “that’s been provided by

the debtor as to specifics regarding those contributions or

under what circumstances they would be made.” 

On appeal, Debtor urges that the income disparity between

the disclosure statement and schedules was a positive

development because it showed that Debtor had increased his

income by nearly $500 per month since the petition was filed. 

And he argues that the bankruptcy court misread the submitted

declaration because it indicated that Debtor’s son-in-law was

committed to providing at least $1,000 or more a month to

Debtor.

We hesitate to discuss this factor at length. This was not

a hearing to confirm the plan or approve the disclosure

statement. See In re Sullivan, 522 B.R. at 617-19 (concluding

that a bankruptcy court’s determination that debtor could not

file a confirmable plan may be premature at an early stage in

the case). But Debtor had submitted a proposed plan and

disclosure statement and the case was well developed, so the

bankruptcy court could consider them. In doing so, the

bankruptcy court looked at the plan’s feasibility, Debtor’s

admitted need for outside funding, and the declaration attesting

to outside funding. We recognize that, with some clarification

(and assuming his son-in-law’s cooperation), Debtor might have

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corrected any deficiency in the offered declaration. 

Nevertheless, we conclude that the bankruptcy court did not

clearly err in finding that Debtor did not have sufficient cash

flow to sustain a reorganization plan — any increase in the

interest rate paid to creditors, litigation costs, or other

changes to the plan would have made it difficult, if not

impossible, for Debtor to make plan payments.

Whether the case is essentially a two-party dispute capable

of prompt adjudication in state court. The bankruptcy court

found:

Finally, this is a two-party dispute and while there

are . . . maybe a couple of unsecured creditors,

obviously we have the Sharifs, ultimately it really

appears to me that this is a dispute between the

debtor and Mr. Khatib and this is a dispute that has

been going on since I believe about 1991. . . . And

. . . . there’s . . . a story to this case and it all

indicates that there is a history between these two

parties of litigation with a number of findings that

are certainly not favorable to the debtor. And we

have the debtor in this case now making arguments that

appear to be exactly the same as arguments that were

made unsuccessfully and decided against the debtor in

other forums. 

It later added: “I think the record is clear that this is . . .

a two-party dispute that is better resolved and, in fact, is

likely already largely been resolved outside of this court.” 

After the bankruptcy court’s ruling, Debtor’s counsel

interjected; the bankruptcy court then clarified: “[Mr. Sharif]

is one of the two parties in the other -- in the two-party

dispute and I did mention the Sharifs as well. But even if that

factor . . . did weigh in favor finding that this was a case

that was filed in good faith, I think that the other factors

very much outweigh that one factor.”

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Debtor disagrees; but his position is not persuasive. 

First, he rightly argues that the presence of a two-party

dispute does not per se constitute a bad faith filing. But here

the bankruptcy court also found that the dispute could be

resolved outside the bankruptcy court’s jurisdiction; Debtor

does not argue otherwise.

Second, Debtor emphasizes that he does not intend to

challenge the judgments — instead, the dispute is about the

judgment liens. He urges that his filing bankruptcy has leveled

the playing field because, after reviewing the proofs of claim,

he discovered “what appears to be a problem with Khatib’s

current claimed judgment lien which must be resolved before any

efforts to sell the Property as the Sharifs may have liens

senior to Khatib’s.” Aplt’s Opening Br. at 22. But he has not

“leveled” the playing field;5 he identifies no bankruptcy tool

that would be uniquely helpful. At best, he has identified that

the Sharifs, and not Khatib, may have a senior interest. This

does not require the bankruptcy court’s special expertise; the

state court is more than competent to resolve the dispute.

Third, Debtor’s hyper-technical assertion that there were

other parties and properties involved in his and Khatib’s

history, although true, misses the mark. Khatib’s bringing

actions against other parties does not transform his dispute

with Debtor into a multi-party action. That said, the

description of this as a two-party dispute is not technically

5 Nor is this postpetition discovery particularly relevant

to whether Debtor filed the petition in good faith.

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apt. The bankruptcy court acknowledged this when Debtor’s

counsel pointed it out at the hearing; but it reasoned that,

even absent this being a two-party dispute, it would still find

that the petition was filed in bad faith. We agree.

In short, this was an at most three-party dispute involving

a single asset. Debtor’s interest is ostensibly to protect his

homestead exemption; but by filing bankruptcy, Debtor

coincidentally manages to retain possession and further

forestall the Property’s sale.

In sum, we conclude that the bankruptcy court’s finding

that Debtor filed the bankruptcy petition in bad faith was not

clearly erroneous.

C. Any error in failing to consider the interests of all

creditors when deciding to dismiss or convert the case was

harmless.

On appeal, Debtor argues that the bankruptcy court abused

its discretion by: (1) not considering the best interests of all

creditors when it concluded that appointment of a trustee or

examiner was not appropriate; (2) not weighing the best

interests of all creditors and the estate before dismissing the

case; and (3) not considering Debtor’s argument that unusual

circumstances existed establishing that dismissal and conversion

are not in the best interests of creditors or the estate. 

Debtor chiefly points to the lien priority issue (i.e., his

allegation that Khatib may not have a first priority lien) and

consequently urges that the bankruptcy court failed to properly

consider the interest of all creditors (i.e., the Sharifs, who

may now be in a first position) and the estate.

But Debtor waived the first two arguments. At oral

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argument, Debtor’s counsel conceded that, if Debtor stated below

that he preferred dismissal, Debtor waived these arguments. 

Debtor did, in fact, concede that he would prefer dismissal if

put to the choice. What’s more, no party below argued against

dismissal in favor of another option.

That leaves the third point: Debtor’s contention that the

bankruptcy court did not even consider his argument that the

lien priority issue was an unusual circumstances. We disagree; 

Debtor’s counsel apprised the court of the adversary

proceeding’s status and his interest in having Judge Ahart

mediate the matter. Despite this, the bankruptcy court found

that Debtor and Khatib’s dispute, including the potential senior

interests of the Sharifs, could be better resolved outside the

bankruptcy court. Further, disputes over liens and their

respective priority are not “unusual circumstances.” See

In re Prod. Int’l Co., 395 B.R. 101, 109 (Bankr. D. Ariz. 2008)

(“Section 1112(b) does not define ‘unusual circumstances.’ 

However, the phrase contemplates conditions that are not common

in chapter 11 cases.”). Although the bankruptcy court did not

specifically address this issue under the rubric of unusual

circumstances, we conclude that any error was harmless.

CONCLUSION

Based on the foregoing, we AFFIRM.

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