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NOTFOR PUBLICATION

UNITED STATES BANKRUPTCY APPELLATE PANEL

OF THE NINTH CIRCUIT

In re: ) BAP No. EC-15-1401-JuKuMa

)

YOUSIF H. HALLOUM, ) Bk. No. 12-21477-C-7

)

Debtor. ) Adv. No. 15-02091-C 

______________________________)

)

YOUSIF H. HALLOUM; IMAN Y. )

HALLOUM, )

)

 Appellants, )

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

)

MICHAEL G. KASOLAS, Trustee, )

)

Appellee. )

______________________________)

Submitted Without Oral Argument

on October 20, 2016**

Filed - October 27, 2016

Appeal from the United States Bankruptcy Court

for the Eastern District of California

Honorable Christopher M. Klein, Bankruptcy Judge, Presiding.

_________________________

Appearances: Yousif H. Halloum pro se on brief; Scott H.

McNutt, Michael C. Abel, and Thomas B. Rupp of

McNutt Law Group LLP on brief for appellee

Michael G. Kasolas, chapter 7 trustee. 

_________________________

FILED

OCT 27 2016

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.

** By order entered on August 8, 2016, a motions panel

determined this appeal suitable for submission on the brief and 

record without oral argument.

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Before: JURY, KURTZ, and MARTIN,*** Bankruptcy Judges.

Chapter 71 debtor, Yousif H. Halloum (Debtor) and his nondebtor spouse, Iman Y. Halloum (Ms. Halloum) (collectively, the

Halloums), appeal from the bankruptcy court’s order denying

their motion for leave to sue the chapter 7 trustee, appellee

Michael Kasolas (Motion For Leave). We AFFIRM. 

I. FACTS

A. Prepetition Events2

Beginning in 2005, the predecessor-in-interest to Midwest

Bank N.A. (MBNA) made loans to Debtor which were secured by

Debtor’s real and personal property. Debtor operated an ARCO

gas station and convenience store on the real property located

in Lodi, California (Real Property). Debtor also had his

business checking account with MBNA.

In late 2010 and thereafter, Debtor overdrew his checking

account with MBNA. Although Debtor said the overdrafts would be

repaid in the near term and the bank prodded him to do so, the

amount due increased over time. In October 2011, MBNA advised

*** Honorable Brenda K. Martin, United States Bankruptcy

Judge for the District of Arizona, sitting by designation.

1 Unless otherwise indicated, all chapter and section

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

“Rule” references are to the Federal Rules of Bankruptcy

Procedure, and “Civil Rule” references are to the Federal Rules

of Civil Procedure.

2 To provide context for this appeal we borrow from the

facts set forth in Halloum v. McCormick, Barstow, Sheppard, Wayte

& Carruth LLP; Hilton A. Ryder; Michael G. Kasolas, Trustee

(In re Halloum), BAP No. EC-14-1219-JuKuPa, 2015 WL 2386544 (9th

Cir. BAP May 19, 2015).

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Debtor that he had ten days to establish alternative banking

relationships for his business, no further overdrafts would be

honored after the ten days, and that no overdraft would be

honored in the interim if the cumulative total exceeded

$300,000. During this ten-day cautionary period, Debtor took

advantage of MBNA’s accommodation to boost the overdrafts from

approximately $190,000 to $297,372.49.

Around this time, Debtor also defaulted under the loans. 

On October 12, 2011, MBNA recorded a notice of default that

commenced nonjudicial foreclosure as to the Real Property. On

January 20, 2012, a notice of trustee’s sale under the trust

deed was recorded.

MBNA also sued the Halloums in the San Joaquin County

Superior Court to recover on the $297,372.49 overdraft. The

Halloums cross-complained against MBNA, alleging breach of a

contract to transform the overdraft into some unspecified term

loan. MBNA’s demurrer to the cross complaint was stayed by the

bankruptcy filing.

B. Bankruptcy Events

Debtor filed a chapter 11 petition on January 26, 2012. 

About two years later, Mr. Kasolas was appointed the chapter 11

trustee. Problems ensued which made confirmation of Debtor’s

chapter 11 plan extremely unlikely. Therefore, Trustee advised

the bankruptcy court that the case should be converted. As a

result of this advice, the bankruptcy court converted the case

to chapter 7 and Mr. Kasolas was appointed the chapter 7 trustee

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(Trustee).3

Trustee took possession of Debtor’s business. He also

negotiated a settlement with MBNA that allowed the business to

be sold, with MBNA discounting its claim and further agreeing to

lend up to $100,000 to the estate to support the sale process. 

The bankruptcy court approved Trustee’s settlement with MBNA

over Debtor’s objection. 

Trustee eventually sold the business,4 but not before

Ms. Holloum intervened and asserted her right as the non-debtor

spouse to purchase the business under § 363(i). She asserted

this right even though Debtor’s schedules listed the business

and its assets as his separate property, and the real property

records showed that the land upon which the business was located

was Debtor’s sole and separate property per an inter-spousal

transfer deed. Without concluding that Ms. Halloum had the

right, the bankruptcy court afforded her the opportunity to

purchase the business. 

Ultimately, Ms. Halloum was unable to complete her purchase

of the business and filed a motion seeking the return of her

deposit, which was granted. In the context of her seeking the

return of her security deposit, Ms. Halloum alleged that Trustee

3 On November 17, 2103, MBNA filed a motion to convert to

chapter 7. After several continued hearings on the motion,

Trustee conceded that conversion was appropriate and an order

converting the case was entered on February 12, 2014.

4 Debtor appealed the bankruptcy court’s order approving the

sale to the Panel. The Panel dismissed the appeal as moot since

the sale of the business had been completed. Debtor appealed the

dismissal ruling to the Ninth Circuit. That appeal is still

pending. [BAP No. 14-1170; 9th Cir. Case No. 14-60086].

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interfered with her ability to obtain a fuel franchise agreement

and that this prevented her from purchasing the business. At

other times, including in the underlying adversary complaint,

Ms. Halloum, or Debtor, has alleged that Trustee interfered with

her financing source and convinced the lender not to loan her

money to purchase the business. 

Apparently dissatisfied with the way things were going in

the bankruptcy court, on February 13, 2015, the Halloums filed

the underlying complaint in the Superior Court of California,

County of San Francisco, as case number CGC–15–544168. The

complaint sought redress against various defendants,5 including

Trustee in his individual capacity and as chapter 7 trustee, for

the loss of their business as the result of the pending

bankruptcy case. Trustee filed a timely notice of removal in

the bankruptcy court for the Northern District of California. 

That court subsequently transferred the adversary proceeding to

the bankruptcy court for the Eastern District of California.6 

5 Besides Trustee, Plaintiffs sued: Hilton A. Ryder;

McCormick, Barstow, Sheppard, Wayte & Carruth (“McCormick

Barstow”); David I. Katzen; Katzen & Schuricht; Scott H. McNutt;

Michael C. Abel; McNutt Law Group and Alan Scott Koenig. 

Defendant Ryder, a partner in defendant law firm McCormick

Barstow, was counsel to the debtor, who acted as

debtor-in-possession performing the duties of the trustee until

Trustee was appointed to act as Chapter 11 trustee on

November 22, 2013. Defendant Katzen, a partner in defendant law

firm Katzen & Schuricht, and defendant Koenig are attorneys who

represented the financial institution, MBNA, that was Plaintiffs’

principal adversary in the bankruptcy case. Defendants McNutt

and Abel, partners in defendant law firm McNutt Law Group, are

counsel who represent Trustee in the bankruptcy case.

6 The Halloums fought the removal and transfer through

(continued...)

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Trustee then took steps to prevent the Halloums from forum

shopping and interfering with property of the bankruptcy estate. 

On April 23, 2015, Trustee filed a motion requesting (1) a

contempt decree against the Halloums for stay violation;

(2) sanctions; and (3) an order restricting future filings to

the bankruptcy court (Sanctions Motion). The Sanctions Motion

argued that the Halloums had violated the automatic stay by

filing the complaint and pursuing damage claims which, if they

existed at all, would belong to Debtor’s bankruptcy estate. 

The Sanctions Motion and Trustee’s reply in support of the

motion further asserted that the Halloums’ refusal to accept the

jurisdiction of the bankruptcy court justified an order that

would “channel” any future litigation through the bankruptcy

court. 

The Halloums opposed Trustee’s motion arguing, among other

things, that the complaint should be litigated in the

San Francisco Superior Court. 

The bankruptcy court decided to treat the Sanctions Motion

as a counterclaim or affirmative defense to the complaint that

would be considered after addressing the substance of the

adversary proceeding. 

Trustee and MBNA filed motions for summary judgment in the

adversary proceeding. Instead of ruling on the motions, the

bankruptcy court ordered an evidentiary hearing at which the

Halloums were directed to present all their evidence in support

6(...continued)

various motions and appeals, none of which were successful.

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of their claims and to identify aspects of their case that

required discovery. The evidentiary hearing was held on

August 12 and 13, 2015. Debtor testified and was crossexamined; he offered no other witnesses. Ms. Halloum did not

testify. After the Halloums presented their case, the

bankruptcy court entered judgment based on partial findings

pursuant to Civil Rule 52(c), made applicable to adversary

proceedings by Rule 7052 and 9014. The bankruptcy court placed

these findings of fact and conclusions of law orally on the

record. The evidentiary hearing did not reach the stage where

the court took evidence on defenses or counterclaims.

The bankruptcy court later supplemented its findings of

fact and conclusions of law in a memorandum decision Halloum v.

Ryder, et al. (In re Halloum), 2015 WL 5095340 (Bankr. E.D. Cal.

Aug. 27, 2015). There, the bankruptcy court determined that

there was no basis for liability against any of the defendants. 

The court also dismissed the case against Trustee because the

Halloums had not sought leave from the bankruptcy court before

suing Trustee in the San Francisco Superior Court, finding: 

It is settled law that a trustee may be sued only with

leave of the court that appointed the trustee. Barton

v. Barbour, 104 U.S. 126, 128 (1881); Beck v. Ft.

James Corp. (In re Crown Vantage, Inc.), 421 F.3d 963,

970–71 (9th Cir. 2005).

The plaintiffs’ action against Mr. Kasolas filed in

the state superior court alleges only activity

associated with the stewardship by Mr. Kasolas of the

bankruptcy estate. Accordingly, the assertion that he

is being sued in his individual capacity in addition

to his capacity as trustee is a transparent sham not

made in good faith and is stricken.

This court did not grant permission to sue the

trustee. End of analysis. The action against

Mr. Kasolas is dismissed.

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2015 WL 5095340, at *3. On the same date, the bankruptcy court 

entered an order dismissing the adversary complaint as to

Trustee and entered a separate judgment in favor of all

defendants on the merits (Dismissal and Merits Judgment). 

On August 29, 2015, MBNA and others filed a

motion/application to augment determinations which the

bankruptcy court had made at the evidentiary hearing pursuant to

Rules 7052 and 9023, which incorporate Civil Rules 52(b) and

59(e) (Augment Motion). 

On August 27, 2015, the Halloums filed a notice of appeal

of the bankruptcy court’s order dismissing the complaint against

Trustee. On August 31, 2015, they filed an amended notice of

appeal to add the bankruptcy court’s Dismissal and Merits

Judgment dated August 27, 2015. 

On October 5, 2015, the Halloums filed the Motion For

Leave. The motion begins by referring to the bankruptcy court’s

dismissal of Trustee from the state court action filed by the

Halloums and removed to the bankruptcy court by Trustee. 

According to the Halloums, they were not required to seek the

bankruptcy court’s permission before filing the state court

action against Trustee. The Halloums reasoned that they no

longer had a bankruptcy estate and all their assets had been

sold. In other words, there was no bankruptcy proceeding that

could be impacted by the suit against Trustee in the state

court. They further argued that their claims against Trustee

were not connected to his duties as trustee even though the

bankruptcy court had previously found in its memorandum decision

that the adversary complaint alleged only activity associated

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with Trustee’s administration of the estate. 

Finally, the Halloums contended that the factors for

evaluating a motion for leave to sue a trustee set forth in

Kashani v. Fulton (In re Kashani), 190 B.R. 875, 886-87 (9th

Cir. BAP 1995) weighed in their favor. According to the

Halloums, none of their claims against Trustee pertained to his

actions while administering the estate. Instead, they

maintained that the claims involved Trustee as an individual who

was not acting within the scope of his authority and his breach

of fiduciary duty through gross negligence and willful and

deliberate violations. For these reasons, the Halloums asserted

that their motion should be granted to sue Trustee in the state

superior court. 

On October 16, 2015, the bankruptcy court entered an order

denying the Augment Motion, but clarified in its order that in

addition to dismissing Trustee due to the Halloums’ failure to

request permission to sue in another forum, its detailed nomerit findings and conclusions applied to Trustee (and his

counsel). 

On October 20, 2015, Trustee opposed the Motion For Leave

on the ground, among others, that the bankruptcy court had

dismissed the Halloums’ claims against him based on the merits. 

On November 6, 2015, the bankruptcy court entered an order

denying the Motion For Leave. There, the court noted that it

had dismissed the adversary proceeding against Trustee because

the Halloums did not seek permission to sue him, and, in the

alternative, the court found in favor of Trustee (and all other

defendants) on the merits after an evidentiary hearing. The

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court also noted that the judgment in favor of Trustee and the

other defendants was on appeal to this Panel (BAP No. 15-1292). 

The court further found the Halloums’ arguments without

merit. The Halloums had alleged there was no ongoing bankruptcy

proceeding, which the bankruptcy court found incorrect since the

case was still open. Next, the Halloums’ had asserted that

their claims against Trustee were not connected to the

performance of his duties as Trustee. The bankruptcy court

found “That is all incorrect - ‘but for’ the existence of

Trustee as the trustee in their underlying bankruptcy case, the

Halloums would have no connection with, and no claims against,

Trustee in any capacity.” 

The Halloums filed a timely notice of appeal from this

order.7 

 II. JURISDICTION

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

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

§ 158.

7 As noted, the Halloums also filed an appeal from the

Dismissal and Merits Judgment (EC-15-1292). The Panel issued a

conditional order of dismissal indicating that appellants had not

filed a brief with respect to this appeal. The Halloums filed a

response stating that the brief and excerpts for EC-15-1292

should be considered in determining this appeal and that the

appeals should be consolidated. They also filed a supplemental

brief in this case. The Panel denied their request for

consolidation of the two appeals and further ordered that their

supplemental brief would be considered their opening brief in

this appeal. Attached to the supplemental brief are excerpts of

record that mostly pertain to the merits of their underlying

allegations in the state court complaint. These excerpts are of

limited use in this appeal.

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III. ISSUE

Whether the bankruptcy court abused its discretion by

denying the Halloums’ Motion For Leave. 

IV. STANDARD OF REVIEW

The denial of leave for a party to sue the trustee is

within the sound discretion of the appointing court. 

In re Kashani, 190 B.R. at 883–85. In determining whether the

court abused its discretion we first determine de novo whether

the trial court identified the correct legal rule to apply to

the relief requested and then, if the correct legal standard was

applied, we determine whether the court’s application of that

standard was “(1) illogical, (2) implausible, or (3) without

support in inferences that may be drawn from the facts in the

record.” United States v. Loew, 593 F.3d 1136, 1139 (9th Cir.

2010).

V. DISCUSSION

Under the Barton doctrine,8 a party must first obtain leave

of the bankruptcy court before he or she initiates an action in

another forum against a bankruptcy trustee. Beck v. Fort James

Corp. (In re Crown Vantage, Inc.), 421 F.3d 963, 971 (9th Cir.

2005); In re Kashani, 190 B.R. at 883–85. “Before such leave

may be granted, the prospective plaintiffs must set forth a

prima facie case against the trustee.” In re Kashani, 190 B.R.

at 885. In considering whether a prima facie case has been

made, the appointing court determines whether the plaintiff can

8 The doctrine set forth in Barton v. Barbour, 104 U.S. 126

(1881) requires a party to obtain permission of the appointing

court before bringing suit against a receiver.

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present adequate grounds upon which to proceed against the

trustee in another forum. Id. 

We discern no abuse of discretion with the bankruptcy

court’s denial of the Halloums’ Motion For Leave. Initially,

the Halloums are mistaken that the Barton doctrine does not

apply. They contend the doctrine is inapplicable because their

assets have been sold. However, as noted by the bankruptcy

court, Debtor’s main bankruptcy case is open and ongoing. 

Further, in this Circuit, the doctrine continues to apply even

after the bankruptcy estate has been closed. In re Crown

Vantage, Inc., 421 F.3d at 972. In addition, the Halloums’

claims against Trustee were all connected with his acts or

conduct while performing his duties as trustee of Debtor’s

bankruptcy estate. The Barton doctrine applies to claims based

on alleged misconduct in the discharge of a trustee’s duties. 

Id. at 970. In the end, other than conclusory arguments

connected to the Kashani factors, the Halloums failed to

demonstrate why the Barton doctrine did not apply. 

Since the Barton doctrine applies as a threshold matter,

the Halloums must plead the elements of a prima facie case

against Trustee. Here, the bankruptcy court acknowledged in its

order denying the Motion For Leave that it previously found no

merit to the Halloums’ claims against Trustee and that its

decision was the subject of a separate appeal. In doing so, the

bankruptcy court implicitly recognized that the Halloums were

asserting claims against Trustee which were already litigated in

the bankruptcy court. Therefore, allowing the Halloums to

pursue the same underlying claims against Trustee in the state

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court as those involved in their appeal would result in a

tremendous waste of both judicial and the parties’ resources. 

See In re Kashani, 190 B.R. at 886 (In exercising its discretion

to grant or deny leave to sue the trustee in a court other than

the one in which the trustee has been appointed, the bankruptcy

court is instructed to balance the interests of all parties

involved.) This alone would be a sufficient reason for the

bankruptcy court to deny the motion. 

 VI. CONCLUSION

For the reasons set forth above, the bankruptcy court’s

order denying the Halloums’ Motion For Leave is AFFIRMED.

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