NOT FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

In re: FARIBORZ ZANJANEE BABAEE; 

MALIHE P. BABAEE, 

Debtors, 

------------------------------

FARIBORZ ZANJANEE BABAEE; 

MALIHE P. BABAEE, 

Appellants, 

 v. 

RICHARD A. MARSHACK, Chapter 7 

Trustee, 

Appellee.

No. 22-60022 

BAP No. 21-1230 

MEMORANDUM*

In re: FARIBORZ ZANJANEE BABAEE; 

MALIHE P. BABAEE, 

Debtors, 

------------------------------

FARIBORZ ZANJANEE BABAEE; 

MALIHE P. BABAEE, 

No. 22-60023 

BAP No. 21-1231 

* This disposition is not appropriate for publication and is not precedent 

except as provided by Ninth Circuit Rule 36-3.

FILED

SEP 13 2023

MOLLY C. DWYER, CLERK

U.S. COURT OF APPEALS
2 

Appellants, 

 v. 

RICHARD A. MARSHACK, Chapter 7 

Trustee, 

Appellee.

Appeal from the Ninth Circuit

Bankruptcy Appellate Panel

Lafferty III, Gan, and Taylor, Bankruptcy Judges, Presiding

Argued and Submitted August 24, 2023

Pasadena, California

Before: RAWLINSON and BRESS, Circuit Judges, and ZOUHARY,** District 

Judge.

In January 2020, Fariborz Zanjanee Babaee and Malihe P. Babaee (“Debtors”) 

filed a joint Chapter 7 petition. The appointed Chapter 7 Trustee, Richard Marshack 

(“Trustee”), negotiated lien-assignment agreements (“Agreements”) with two of 

Debtors’ secured creditors—Comerica Bank (“Comerica”) and Valley Economic 

Development Center, Inc. (“VEDC”)—who held liens on Debtors’ overencumbered 

residential property. In exchange for partial payment from the sale of the property, 

Comerica and VEDC agreed to: (1) subordinate a portion of their liens to the claims 

of Trustee and unsecured creditors; (2) transfer those portions to the estate; and (3)

** The Honorable Jack Zouhary, United States District Judge for the 

Northern District of Ohio, sitting by designation.
3 

consent to the sale of the Debtors’ residential property free and clear of their liens. 

In the process, Debtors’ homestead exemption became junior to claims of the 

Trustee and unsecured creditors. 

Debtors challenged the lien assignments, arguing Trustee improperly 

circumvented their homestead exemption. The bankruptcy court found Trustee 

acted properly, and Debtors appealed to the Bankruptcy Appellate Panel of the Ninth 

Circuit (“BAP”). The BAP found Debtors lacked standing because reversing the 

Agreements would not allow payment on the homestead exemption. We have 

jurisdiction under 28 U.S.C. § 158(d)(1), and affirm.

1. Debtors do not have constitutional or prudential standing to challenge the 

lien assignments. We review the BAP’s decision on standing de novo. In re 

Palmdale Hills Prop., LLC, 654 F.3d 868, 873 (9th Cir. 2011). Constitutional 

standing requires an injury in fact that is caused by, or fairly traceable to, some 

conduct, and which the requested relief will likely redress. Id. Prudential standing 

provides that “only a person aggrieved, that is, someone who is directly and 

adversely affected pecuniarily by a bankruptcy court’s order, has standing to appeal 

that order.” In re Point Ctr. Fin., Inc., 890 F.3d 1188, 1191 (9th Cir. 2018) (cleaned 

up). 

Debtors contend their injury in fact was the impairment of their homestead 

exemption. However, Debtors fail to show they would have been eligible to receive 
4 

their homestead exemption but for the negotiated Agreements. As the BAP noted, 

the value of the property encumbered by Comerica and VEDC never belonged to 

Debtors and thus could not be subject to their homestead exemption prior to the 

execution of the Agreements. California law provides that consensual liens must be 

paid ahead of homestead exemptions. See Cal. Civ. Proc. Code § 704.850; see also 

Amin v. Khazindar, 112 Cal. App. 4th 582, 588 (Cal. 2003) (finding that homestead 

exemption has no effect on liens created voluntarily by property owners, nor does it 

have any effect on the claims of creditors secured by liens with priority). Here, the 

subject property was overencumbered. At oral argument, counsel confirmed 

Debtors are likely to receive nothing at this point in the bankruptcy proceedings. 

The same would be true had the Agreements not been executed. 

2. The BAP properly concluded that unwinding the Agreements would 

provide Debtors no redress. Restoring the parties to their original positions would 

simply return the liens to the original lienholders: Comerica and VEDC. Those 

creditors would be entitled to payment on the outstanding liens from the sale 

proceeds. Because the balance of the outstanding lien assignments is worth more 

than the remaining proceeds held by the Trustee, Debtors would not be eligible for 

payment on their homestead exemption. Debtors argue, for the first time on appeal, 

that the severability provisions in the Agreements allow an alternative option for

redress. As an initial matter, although we have discretion to consider arguments 
5 

raised for the first time on appeal, we will only do so under “exceptional 

circumstances.” In re Am. W. Airlines, 217 F.3d 1161, 1165 (9th Cir. 2000). Debtors 

offer no exceptional circumstances that justify consideration of their untimely 

argument. 

Nonetheless, Debtors’ proposed alternative is without support. Debtors fail 

to explain the basis or feasibility of severing portions of the Agreements to which 

they are not a party. Debtors propose striking specific sentences in certain sections, 

effectively rewriting the Agreements, and ignore a clause in the severability 

provisions that states deletion cannot “violate the obvious primary purpose and 

intent of the Parties.” Debtors cannot prove Trustee’s actions caused them injury in 

fact, or that a viable option for redress is available to them. 

AFFIRMED.