1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

FILED

OCT 26 2015

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NOT FOR PUBLICATION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-14-1310-KuDTa

 )

KAHTAN BAYATI, ) Bk. No. 2:13-bk-36168-VZ

 )

Debtor. )

_______________________________)

 )

KAHTAN BAYATI, )

 )

Appellant, )

 )

v. ) MEMORANDUM*

 )

WILLIAM MUSHARBASH; TOWN SQUARE)

M PROPERTIES, LLC; NANCY K. )

CURRY, Chapter 13 Trustee; )

UNITED STATES TRUSTEE, )

 )

Appellees. )

_______________________________)

Submitted Without Oral Argument

on September 24, 2015

Filed – October 26, 2015

Appeal from the United States Bankruptcy Court

for the Central District of California

Honorable Vincent P. Zurzolo, Bankruptcy Judge, Presiding

 

Appearances: Appellant Kahtan Bayati on brief pro se; Bahram

Madaen on brief for appellees William Musharbash

and Town Square M Properties LLC.

 

Before: KURTZ, DUNN and TAYLOR, Bankruptcy Judges.

FILED

OCT 26 2015

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.
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

INTRODUCTION

Chapter 131 debtor Kahtan Bayati appeals from the bankruptcy

court’s relief from stay order permitting appellees William

Musharbash and Town Square M Properties LLC to proceed with state

court litigation regarding a disputed lease of real property. In

granting relief from stay, the bankruptcy court acted well within

the bounds of its discretion, and the record amply supports the

bankruptcy court’s key findings. Accordingly, we AFFIRM the

bankruptcy court’s relief from stay order, and we also AFFIRM the

bankruptcy court’s denial of Bayati’s reconsideration motion.

Bayati also seeks appellate review of the bankruptcy court’s

oral ruling denying his motion seeking a declaration that Town

Square M Properties effectively “rejected” its entitlement under

§ 365(h) to retain its rights under the lease and seeking

turnover of the property. However, that ruling was interlocutory

– not final – and we decline to grant leave to appeal. 

Accordingly, we DISMISS FOR LACK OF JURISDICTION Bayati’s appeal

of the bankruptcy court’s oral ruling denying his lease rejection

and turnover motion. 

FACTS

Bayati filed his chapter 13 petition on October 29, 2013. 

In his schedules, he listed two parcels of raw land located in

Pomona, California. In addition, he listed in his statement of

financial affairs his lawsuit pending in the Los Angeles County

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. All “Civil Rule” references are to the Federal Rules

of Civil Procedure.

2
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Superior Court against Musharbash, Town Square M Properties and

others alleging multiple causes of action, including eviction,

fraud and waste, all related to Town Square M Properties’ alleged

lease and occupancy of the Pomona land. Bayati did not mention

in his statement of financial affairs the numerous cross-claims

Town Square M Properties and Musharbash filed against him and

others for breach of lease, fraud, specific performance,

declaratory relief and so on.

In November 2013, Bayati filed his proposed chapter 13 plan. 

In the plan, Bayati proposed to reject the disputed real property

lease under § 365(a). Town Square M Properties filed an

opposition to the plan. Among other things, Town Square M

Properties asserted in its opposition that, depending on the

outcome of the state court litigation, the unsecured debt owed to

it might cause Bayati to exceed the eligibility limitations set

forth in § 109(e). Alternately, Town Square M Properties

asserted that the plan was not feasible because it failed to

account for Bayati’s potential liability to it. The bankruptcy

court ultimately confirmed the plan over Town Square M

Properties’ objection, but conditioned confirmation as follows:

“Case [plan] is confirmed pending determination of the amount of

the unliquidated, unsecured claim filed by creditor Town Square

 . . . . Trustee is to dismiss case if unsecured claim exceeds

debt limit.” Order Confirming Chapter 13 Plan (June 25, 2014) at

p. 2.

Meanwhile, in February 2014, Musharbash filed its motion for

relief from the automatic stay to permit Musharbash to proceed

with the state court litigation. In support of the motion,

3
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Musharbash submitted two declarations – one using the form

provided by the bankruptcy court – plus a supplemental

declaration, which accompanied Musharbash’s other moving papers

and exhibits.2

In his declarations, Musharbash explained that Bayati

commenced the state court lawsuit in June 2010, and the parties

had vigorously litigated their claims and crossclaims during the

next three years, up to the time of Bayati’s late-October 2013

bankruptcy filing. As Musharbash put it:

4. The abovementioned case has been completed and is

ready for trial. I have gone through numerous

motions and discoveries and spent substantial

amount of money to continue the case and prepare

for trial. ( A true copy of the case summary is

attached as exhibit “2”)

5. As of December 20, 2013, I have incurred legal

fees and cost through my attorney $589,480, and so

far I have paid $336,009 and I owe him $253,471.

Musharbash Decl. (Feb. 3, 2014) at ¶¶ 4-5. According to

Musharbash, at the time of Bayati’s bankruptcy filing, the state

court was about to hold (on October 30, 2013) its final case

2Bayati argues that the bankruptcy court should have denied

the relief from stay motion because the wrong bankruptcy case

number was listed on the supplemental declaration. This argument

is specious. In spite of the clerical error, there was no

legitimate doubt that the supplemental declaration pertained to

Bayati’s bankruptcy case. His name is correctly listed as

“debtor” right next to the erroneous case number, and the

contents of the declaration unequivocally concern Bayati’s

bankruptcy case and the state court litigation commenced by

Bayati. Furthermore, the supplemental declaration with the

erroneous case number was filed in the correct bankruptcy case

and was accompanied by all of the other relief from stay moving

papers, which listed the correct case number and which were

served on Bayati’s counsel.

4
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

management conference, and trial was set for mid-November 2013. 

Much of the rest of Musharbash’s supplemental declaration is

devoted to describing the lease dispute that the parties had been

litigating in the state court since 2010. Generally speaking,

the litigation involves a purported lease by Town Square M

Properties of vacant land, which lease Bayati alleges he never

actually entered into or alternately alleges he is entitled to

rescind. To counter these allegations, Musharbash asserts among

other things that he has made hundreds of thousands of dollars in

lease payments to Bayati, that he is current on the lease

payments and that Bayati has accepted the lease payments. Bayati

disputes that Musharbash is current on the lease payments.

The parties stipulated to continue the relief from stay

hearing and filed multiple papers in support of and in opposition

to the relief from stay motion. Both parties’ papers are largely

devoted to describing (and arguing) the disputes at issue in the

state court litigation, but the precise details of those disputes

are not material to our resolution of this appeal. It suffices

for us to say that these disputes are hotly contested and concern

events spanning several years, from the alleged commencement in

2006 of negotiations for the lease of the Pomona land to the

filing of Bayati’s state court complaint in 2010. The parties

also disagree about how much in rent has been paid since the

lawsuit began.

In his opposition to the relief from stay motion, Bayati

admitted that he already has spent over $500,000 litigating in

the state court. Indeed, he states that the amounts he had spent

prosecuting the state court lawsuit impoverished him and directly

5
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

led to his bankruptcy filing.

In March 2014, while the relief from stay motion was

pending, Bayati filed a motion seeking a declaration that Town

Square M Properties had “rejected” the purported lease under

§ 365(h) and also seeking turnover of the land based on this

alleged rejection. At the April 14, 2014 hearing on Bayati’s

lease rejection and turnover motion, the bankruptcy court orally

denied the motion, but that oral ruling never was reduced to

writing. The court directed counsel for Town Square M Properties

to lodge an appropriate form of order, but counsel never did so. 

At the April 29, 2014 relief from stay hearing, the

bankruptcy court stated that it would grant the stay relief as

Musharbash requested. The court explained its reasoning as

follows:

The moving party has given me admissible evidence

establishing that the state court had advanced to a

significant stage. They were prepared to go forward.

They are very close -- actually trial had been set.

There were parties involved besides the Debtor which

would complicate having the matter adjudicated in two

different foraa [sic], i.e. having the

nondischargeability adversary proceeding adjudicated

here, as well as having the matter also adjudicated in

state court with regards to other parties. Finally,

the fact that the filing of the bankruptcy case was

just before trial was about to commence in the state

court action, I draw the inference that the Debtor

filed this bankruptcy case to delay the state court

action.

Hr’g Tr. (April 29, 2014) at 2:25-3:12.

After the bankruptcy court orally granted relief from stay 

but before entry of the relief from stay order, Bayati filed a

reconsideration motion in which he mainly complained that

Musharbash had lied to the court. Whereas Musharbash had stated

that trial was set for November 12, 2013, Bayati pointed out that

6
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

trial actually was set for six days later – on November 18,

2013.3

At the hearing on the reconsideration motion, the bankruptcy

court stated that it would deny reconsideration for two reasons:

(1) the court had not yet entered a final order granting relief

from stay; and (2) Bayati had not presented any evidence to

establish any grounds for relief under either Rule 9023 or Rule

9024.

The bankruptcy court entered both its order granting relief

from stay and its order denying reconsideration on June 12, 2014,

and Bayati timely filed a notice of appeal on June 16, 2014. In

addition to referencing the court’s relief from stay order and

the order denying reconsideration, Bayati’s notice of appeal

referenced the court’s oral ruling denying his lease rejection

and turnover motion. 

JURISDICTION

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

§§ 1334 and 157(b)(2)(A), (E) and (G). Except as otherwise

stated in this decision, we have jurisdiction under 28 U.S.C.

§ 158.

3This minor inaccuracy regarding the trial date does not

support reversal of either the bankruptcy court’s relief from

stay order or its denial of Bayati’s reconsideration motion. On

this record, we are convinced that this six-day difference would

not have changed (and should not have changed) the bankruptcy

court’s rulings. In this sense, the trial date discrepancy was

harmless error, and the bankruptcy court was obliged to ignore

harmless error. See Civil Rule 61 (made applicable in bankruptcy

cases by Rule 9005).

7
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

ISSUES

1. Did the bankruptcy court abuse its discretion when it

granted Town Square M Properties’ relief from stay motion?

2. Did the bankruptcy court abuse its discretion when it denied

Bayati’s reconsideration motion?

3. Does this court have jurisdiction to consider Bayati’s

appeal from the bankruptcy court’s oral ruling denying

Bayati’s lease rejection and turnover motion?

STANDARDS OF REVIEW

We review for an abuse of discretion the bankruptcy court’s

order granting relief from stay. Moldo v. Matsco, Inc.

(In re Cybernetic Servs.), 252 F.3d 1039, 1045 (9th Cir. 2001);

Benedor Corp. v. Conejo Enters., Inc. (In re Conejo Enters.,

Inc.), 96 F.3d 346, 351 (9th Cir. 1996).

We also review for an abuse of discretion the bankruptcy

court’s denial of Bayati’s reconsideration motion. Benson v.

JPMorgan Chase Bank, N.A., 673 F.3d 1207, 1211 (9th Cir. 2012). 

The bankruptcy court abuses its discretion if it applies an

incorrect legal rule or its factual findings are illogical,

implausible or unsupported by the record. United States v.

Hinkson, 585 F.3d 1247, 1262 (9th Cir. 2009) (en banc).

Considering the finality of the bankruptcy court’s oral

ruling denying Bayati’s lease termination and turnover motion is

a jurisdictional issue, which we have a duty to raise sua sponte

and which we review de novo. Wolkowitz v. Beverly

(In re Beverly), 374 B.R. 221, 230 (9th Cir. BAP 2007), aff'd in

part, dismissed in part, 551 F.3d 1092 (9th Cir. 2008); see also

Arbaugh v. Y & H Corp., 546 U.S. 500, 514 (2006) (“courts . . .

8
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

have an independent obligation to determine whether

subject-matter jurisdiction exists, even in the absence of a

challenge from any party.”).

DISCUSSION

Under § 362(a), an automatic stay is imposed in most

bankruptcy cases upon commencement of the case, which stay

enjoins non-debtors from, among other things, moving forward with

litigation against the debtor pending outside the bankruptcy

court. In re Conejo Enters., Inc., 96 F.3d at 351. However, the

bankruptcy court may modify or terminate the stay “for cause.”

§ 362(d)(1). In the context of a relief from stay motion seeking

to proceed with pending state court litigation, what constitutes

cause is determined on a case-by-case basis. Id. at 352; 

Christensen v. Tucson Estates, Inc. (In re Tucson Estates, Inc.),

912 F.2d 1162, 1166 (9th Cir. 1990).

Here, the bankruptcy court explicitly considered several 

factors. The court noted the presence of non-debtor parties –

parties other than Bayati against whom Town Square M Properties

and Musharbash have filed cross-claims in the state court

lawsuit. The court also noted that Musharbash and Town Square M

Properties had commenced a nondischargeability proceeding arising

from the same disputed lease transaction. But most important to

the bankruptcy court was the advanced state of the state court

lawsuit, which was ready for trial and for which a trial date

already had been set. In essence, the bankruptcy court

determined that the interests of efficient and economical

resolution of the parties’ dispute strongly militated in favor of

permitting the state court to finish the lawsuit, which was well

9
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

on its way to completion.

The undisputed facts in the record further reflected an

absence of factors militating against relief from stay. In light

of the pending nondischargeability proceeding and a pending

objection to Town Square M Properties’ proof of claim, the

determination of Bayati’s liability (if any) to Town Square M

Properties and the determination of the amount of that liability

needed to be adjudicated either in the state court or the

bankruptcy court, and the state court was poised to resolve those

issues. Thus, permitting the state court lawsuit to proceed 

fostered the expeditious administration of the bankruptcy case. 

In addition, the issues concerning the existence and amount of

liability were controlled in this instance by state law and not

bankruptcy law. See generally § 502(b)(1); Johnson v. Righetti

(In re Johnson), 756 F.2d 738, 741 (9th Cir. 1985) (“in proof of

claim litigation under 11 U.S.C. § 502(b)(1), the validity of the

claim is determined under state law.”). Finally, the bankruptcy

court’s inference that Bayati filed his bankruptcy case in bad

faith in order to delay the state court proceedings also

militated in favor of lifting the stay.

In any event, the lynchpin of the bankruptcy court’s relief

from stay ruling was its finding that allowing the state court

action to proceed would promote the efficient and economical

resolution of the parties’ dispute, and the Ninth Circuit has

held that, in some instances, interests of efficiency and economy

by themselves may be sufficient to support an order granting

relief from stay. See Packerland Packing Co. v. Griffith

Brokerage Co. (In re Kemble), 776 F.2d 802, 807 (9th Cir. 1985)

10
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

(“The prior extensive preparation for the damages retrial made

proceeding with that trial efficient. The decision to lift the

stay could be upheld on this ground alone.”).

In short, the bankruptcy court considered the appropriate

factors, and the record amply supported the findings the court

made in support of its relief from stay ruling. We certainly

cannot say that any of its findings were illogical, implausible

or without support in the record. Therefore, the bankruptcy

court did not abuse its discretion in granting Musharbash’s

relief from stay motion.

As for Bayati’s reconsideration motion, the bankruptcy court

correctly treated it as a motion for relief under Rule 9023 and

Rule 9024. See Am. Ironworks & Erectors Inc. v. N. Am. Constr.

Corp., 248 F.3d 892, 898–99 (9th Cir. 2001). The bankruptcy

court also correctly found that Bayati had not submitted any

evidence demonstrating any of the grounds for relief set forth in

Rules 9023 and 9024. Mere disagreement with the court’s ruling

is not a proper basis for seeking reconsideration under Civil

Rule 59(e) or Civil Rule 60 (made applicable in bankruptcy cases

by Rules 9023 and 9024). See, e.g., Faysound Ltd. v. United

Coconut Chemicals, Inc., 878 F.2d 290, 296 (9th Cir. 1989);

Backlund v. Barnhart, 778 F.2d 1386, 1388 (9th Cir. 1985).

Consequently, the bankruptcy court did not abuse its discretion

in denying Bayati’s reconsideration motion.

The only other issue we must address is the finality of the

bankruptcy court’s oral ruling denying Bayati’s lease rejection

and turnover motion. The bankruptcy court correctly stated that

the motion should have been brought as an adversary proceeding. 

11
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

See Rule 7001(1), (9). This was the principal reason the

bankruptcy court cited for denying the motion.

The court also expressed concern that the motion was

“confused and confusing” with respect to its assertion that the

lease should be “deemed rejected” based on the conduct of Town

Square M Properties - the non-debtor party to the lease. The

court highlighted this concern by pointing out the following:

(1) only the bankruptcy trustee (or a debtor-in-possession) may

assume or reject an unexpired lease under § 365; (2) any attempt

by Bayati – as the debtor – to reject the lease was not effective

unless and until the bankruptcy court entered an order approving

the rejection; and (3) even if Bayati duly rejected the lease,

Town Square M Properties would have the option under

§ 365(h)(1)(A)(ii) to retain its use and occupancy rights under

the lease. The court further noted its concern that Bayati might

not even satisfy the eligibility requirements set forth in

§ 109(e) for chapter 13 debtors. Based on all of the abovereferenced points and concerns, the bankruptcy court denied the

motion.

The bankruptcy court’s oral ruling amounted to nothing more

than a denial without prejudice of the relief requested. Reading

the court’s comments as a whole, we are convinced that the

bankruptcy court manifested an intent not to preclude Bayati from

seeking the same relief by way of a properly commenced adversary

proceeding, in which Bayati could have clarified his allegations

and the nature of the relief he was seeking.4

4In spite of the ambiguities noted by the bankruptcy court,

(continued...)

12
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

An order dismissing an action or denying relief is

considered interlocutory and not final if the court manifested an

intent to permit further litigation in the matter. See WMX

Technologies, Inc. v. Miller, 104 F.3d 1133, 1136 (9th Cir. 1997)

(en banc); Giesbrecht v. Fitzgerald (In re Giesbrecht), 429 B.R.

682, 687 (9th Cir. BAP 2010) (citing Slimick v. Silva

(In re Slimick), 928 F.2d 304, 307 (9th Cir. 1990)). This is

true in bankruptcy cases because the governing principles of

flexible finality dictate that a bankruptcy court ruling only is

considered final if it “1) resolves and seriously affects

substantive rights and 2) finally determines the discrete issue

to which it is addressed.” Rosson v. Fitzgerald (In re Rosson),

545 F.3d 764, 769 (9th Cir. 2008). “In bankruptcy, a complete

act of adjudication does not need to end the entire case, ‘but

must end any of the interim disputes from which appeal would

lie.’” In re Giesbrecht, 429 B.R. at 687 (quoting In re Slimick,

928 F.2d at 307 n.1). Here, the bankruptcy court’s oral ruling

denying Bayati’s lease termination and turnover motion satisfied

none of the flexible finality criteria.

We acknowledge that Bayati’s attempt to appeal the denial of

his lease rejection and turnover motion also is problematic

because the court never entered a written order denying the

motion. See Rule 8002(2) (“A notice of appeal filed after the

4(...continued)

Bayati has made it clear on appeal that, by way of his motion, he

was arguing that Town Square M Properties forfeited or otherwise

lost its rights under § 365(h)(1)(A)(ii) by allegedly not making

lease payments after Bayati commenced his bankruptcy case. We

express no opinion on the merits of Bayati’s argument.

13
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

bankruptcy court announces a decision or order – but before entry

of the judgment, order, or decree – is treated as filed on the

date of and after the entry.”) (emphasis added). We further

acknowledge that the Ninth Circuit Court of Appeals, on occasion,

has chosen to bypass the requirement of an entered written

judgment or order. See, e.g., Noli v. C.I.R., 860 F.2d 1521,

1525 (9th Cir. 1988); but see Sewell v. MGF Funding, Inc.

(In re Sewell), 345 B.R. 174, 181 (9th Cir. BAP 2006) (noting

inherent limitations in Noli’s holding). Here, it would have

been easy enough for us to grant a limited remand with a

direction for the bankruptcy court to enter a written order and

thereby rectify the absence of a written order for appeal

purposes.

Nonetheless, the finality issue we address above overshadows

the lack of an entered written order. Regardless of whether the

bankruptcy court eventually enters an order or not, the

interlocutory nature of the court’s ruling would persist.

Even though the bankruptcy court’s ruling was interlocutory,

and no motion for leave to appeal was filed, we can and will

consider Bayati’s timely notice of appeal as a motion for leave

to appeal. See Rule 8004(d); Roderick v. Levy (In re Roderick

Timber Co.), 185 B.R. 601, 604 (9th Cir. BAP 1995). Having

considered Bayati’s appeal papers and the governing standards for

granting leave to appeal, we are not persuaded that his appeal

from the denial of his lease termination and turnover motion

involves a controlling question of law as to which there is

substantial ground for difference of opinion. Nor are we

persuaded that permitting immediate appeal of that ruling would

14
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

potentially advance the ultimate termination of the parties’

litigation. As a result, we deny leave to appeal, and we lack

jurisdiction to hear the appeal from the denial of Bayati’s lease

termination and turnover motion. 

CONCLUSION

For the reasons set forth above, we AFFIRM the bankruptcy

court’s order granting Town Square M Properties’ relief from stay

motion. We also AFFIRM the bankruptcy court’s denial of Bayati’s

reconsideration motion, and we DISMISS FOR LACK OF JURISDICTION

Bayati’s appeal of the bankruptcy court’s interlocutory oral

ruling denying his lease rejection and turnover motion.

15