FILED

FEB 11 2020

SUSAN M. SPRAUL, CLERK

U.S. BKCY. APP. PANEL

OF THE NINTH CIRCUIT

ORDERED PUBLISHED

UNITED STATES BANKRUPTCY APPELLATE PANEL

OF THE NINTH CIRCUIT

In re:

MAGGIE LIU,

Debtor.

VINCENT JUE,

Appellant,

v.

MAGGIE LIU; RICHARD A.

MARSHACK, Chapter 7 Trustee; RUTAN

& TUCKER, LLP; YU HUO; U.S.

TRUSTEE, 

Appellees.

BAP Nos. CC-19-1039-STaF

 CC-19-1040-STaF 

Bk. No. 8:17-bk-12832-CB

Adv. No. 8:18-ap-01066-CB

OPINION

Argued and Submitted on September 26, 2019

at Pasadena, California

Filed – February 11, 2020

Appeals from the United States Bankruptcy Court

for the Central District of California

Honorable Catherine E. Bauer, Bankruptcy Judge, Presiding

 
Appearances: Kathleen P. March of The Bankruptcy Law Firm, P.C.

argued for appellant; David Edward Hays of Marshack

Hays LLP argued for appellee Richard A. Marshack,

Chapter 7 Trustee.

 

Before: SPRAKER, TAYLOR, and FARIS, Bankruptcy Judges.

Opinion by Judge Spraker

Concurrence by Judge Taylor

SPRAKER, Bankruptcy Judge:

INTRODUCTION

Vincent Jue appeals from two orders. First, he appeals from an order

entered in the main bankruptcy case denying a motion to dismiss debtor

Maggie Liu’s chapter 71 bankruptcy pursuant to § 109(g)(2). And second,

he appeals from a summary judgment entered in an adversary proceeding 

avoiding as preferential his attachment lien perfected shortly before Liu’s

commencement of her chapter 7 case. Even though these two rulings

occurred in distinct bankruptcy proceedings, Jue claims the latter ruling -

the summary judgment – triggered the finality of the former – the denial of

the motion to dismiss.

Jue chose to appeal the denial of the dismissal motion only after the

1

 Unless specified otherwise, all chapter and section references are to the

Bankruptcy Code, 11 U.S.C. §§ 101-1532, all “Rule” references are to the Federal Rules

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

Civil Procedure.

2
bankruptcy court entered summary judgment in the preference action. Jue

contends that his appeal was timely because the order denying his motion

was interlocutory when it was entered. We disagree. While orders denying

some types of case dismissal motions are considered interlocutory, a recent

Ninth Circuit decision, Aspen Skiing Co. v. Cherrett (In re Cherrett), 873 F.3d

1060 (9th Cir. 2017), held that the denial of a § 707(b) motion to dismiss is

final and immediately appealable. There is no basis for us to depart from or

distinguish this Ninth Circuit authority. Based upon In re Cherrett, we hold

that the appeal of the denial of the § 109(g)(2) dismissal motion was

untimely filed and must be DISMISSED for lack of jurisdiction. We publish

because there are no other cases from within this circuit determining the

finality of an order denying a § 109(g)(2) dismissal motion.

As for the appeal from the summary judgment, Jue focuses on the

bankruptcy court’s rejection of his affirmative defenses. But none of these

defenses justify reversal. The only substantive defenses available to a

preference defendant are those enumerated in the preference statute. Jue’s

defenses are not among the enumerated defenses. Additionally, many of

his defenses amount to an impermissible collateral attack on the order

denying Jue’s § 109(g)(2) motion to dismiss. Finally, Jue’s arguments that

the creation of his attachment lien relates back to events outside the 90-day

preference period are not supported by applicable law. Accordingly, we

AFFIRM the bankruptcy court’s summary judgment in favor of the trustee

3
in the preference action.2

FACTS

A. Liu’s First Bankruptcy Case And The State Court Lawsuits Against

Her.

In March 2017, Liu commenced her first bankruptcy case by filing a

chapter 13 petition. Within days of commencement of that case, Jue and

another creditor, Yu Huo, separately moved for relief from the automatic

stay. Jue sought to proceed with two lawsuits against Liu pending in the

Orange County Superior Court, which the state court had consolidated for

trial. Jue had commenced his first lawsuit in June 2015, asserting causes of

action for breach of promissory note, fraud, conversion, and fraudulent

transfer of personal property. Jue alleged that Liu induced him to loan her

money under false pretenses.

In furtherance of this lawsuit, Jue had obtained a right to attach order

and a writ of attachment. Jue provided the writ of attachment to the

Orange County Sheriff for recording in the county’s real property records.

However, before the Sheriff could record the document, Liu transferred

legal title in her residence to her daughters. This led to Jue’s second

lawsuit, filed in November 2015, seeking to avoid Liu’s transfer of her

residence as a fraudulent transfer. On November 30, 2015, shortly after

2

 On September 26, 2019, Jue filed a supplemental brief. The Panel neither

authorized, nor requested, supplemental briefing. Jue’s September 26, 2019,

supplemental brief is hereby ORDERED STRICKEN.

4
filing his second lawsuit, Jue recorded a lis pendens against the transferred

residence.

Liu’s chapter 13 bankruptcy filing stayed the consolidated trial in

Jue’s state court lawsuits. Additionally, Liu’s chapter 13 schedules

indicated that Liu’s daughters reconveyed the real property to her before

her chapter 13 filing, as she listed a fee simple interest in the residence in

her Schedule A/B. On April 5, 2017, the bankruptcy court entered an order

granting Jue relief from stay, permitting him to proceed with his state court

lawsuit for breach of the promissory note and fraud.3

Huo also moved for relief from stay. Her motion told a similar story.

Prior to Liu’s chapter 13 bankruptcy filing, Huo commenced a lawsuit in

the Orange County Superior Court for fraud, conversion, breach of

fiduciary duty, unjust enrichment, breach of contract, and fraudulent

transfer. Huo alleged that Liu misappropriated $1,000,000.00 entrusted to

her for investment purposes. Trial was set to begin on March 15, 2017, the

day after Liu filed her chapter 13 petition. According to Huo, Liu’s

bankruptcy was one of several ploys to delay trial. After hearing Huo’s

motion on an expedited basis, the bankruptcy court entered an order on

April 6, 2017, granting her relief from stay to proceed with the state court

action.

3

 In light of the reconveyance of the residence to Liu, Jue voluntarily dismissed

his fraudulent transfer action, with prejudice, on July 12, 2017.

5
On May 3, 2017, Liu requested dismissal of her chapter 13 case. The

next day, the bankruptcy court entered an order dismissing the case.

B. Liu’s Second Bankruptcy Case And The § 109(g)(2) Motion To

Dismiss.

On July 17, 2017, Liu filed a chapter 7 bankruptcy petition. In the

interim between the two bankruptcy cases, Huo obtained a money

judgment against Liu and was in the process of enforcing that judgment by

arranging for a sheriff’s sale of Liu’s residence. As for Jue, during the

interim between the two bankruptcy cases, he recorded his writ of

attachment against Liu’s residence on June 5, 2017, thereby creating an

attachment lien against the residence. In addition, Jue and Liu stipulated to

entry of a money judgment for $480,000 in the original action brought by

Jue.

Huo moved to dismiss the chapter 7 case. Huo contended that Liu’s

chapter 7 petition was filed in contravention of § 109(g)(2). This statute

provides that an individual is ineligible for relief under the Bankruptcy

Code if he or she has been a debtor in another case within 180 days and

obtained a voluntary dismissal of the prior case after the filing of a motion

for relief from the automatic stay. Liu filed her chapter 7 petition 74 days

after the voluntary dismissal of her chapter 13 case.

Jue joined in Huo’s motion to dismiss. The underlying basis for the

joinder was essentially the same as stated in the motion. Jue also relied on

§ 109(g)(2).

6
Both the United States Trustee and the chapter 7 trustee opposed the

motion to dismiss. The United States Trustee pointed to irregularities in

Liu’s schedules, which included inconsistent statements of income,

allegedly valueless overseas real property holdings, and large “loans” from

relatives made shortly before the bankruptcy filing even though Liu

claimed to have little or no cash on hand as of the date of her petition. 

These and other concerns regarding Liu’s conduct led the United

States Trustee to conclude that the bankruptcy court should exercise its

discretion under § 109(g)(2) to not dismiss Liu’s chapter 7 case. According

to the United States Trustee, keeping Liu in chapter 7 bankruptcy would

permit him and the chapter 7 trustee to complete a full and thorough

review of the case and to investigate Liu’s alleged misconduct. Under these

circumstances, the United States Trustee maintained that it would be unjust

and illogical to dismiss the case pursuant to § 109(g)(2).

In contrast, the chapter 7 trustee’s opposition to the dismissal motion

focused on four liens that were placed on Liu’s residence during the 90-day

preference period preceding her chapter 7 bankruptcy filing. The liens

included Jue’s $140,371.16 attachment lien and Huo’s $704,043.90 judgment

lien.4 The chapter 7 trustee noted that these liens, unless avoided, would

fully consume the $1 million in equity in the residence. Therefore, the

4

 The other two liens were: (1) a $118,382.00 deed of trust in favor of Mei-Ling Su;

and (2) a $400,000.00 deed of trust in favor of Qiang Li. In addition to these four recent

liens, Liu’s schedules referenced a $375,000.00 first deed of trust.

7
chapter 7 trustee reasoned that the bankruptcy court should exercise its

discretion to deny the dismissal motion so that he could seek to avoid the

preferential liens and administer the residence for the benefit of all of the

estate’s unsecured creditors.

After hearing the matter, the bankruptcy court adopted the reasoning

of the United States Trustee and the chapter 7 trustee, and denied the

dismissal motion. According to the court, allowing the chapter 7 case to

proceed would promote the Bankruptcy Code’s policy of ratable

distribution to creditors while also facilitating civil and criminal 

investigation into any alleged misconduct in Liu’s bankruptcy cases.

The bankruptcy court entered its order denying the motion to dismiss

on September 26, 2017. Neither Jue nor Huo immediately appealed this

order.

C. The Trustee’s Preference Adversary Proceeding.

In April 2018, the chapter 7 trustee commenced an adversary

proceeding against Jue.5 The trustee alleged that Jue’s recording of his writ

of attachment created an attachment lien against Liu’s residence within 90

days of Liu’s chapter 7 bankruptcy filing. The trustee also alleged that,

unless avoided, this lien would enable Jue to receive more than he would

in Liu’s chapter 7 case absent the lien. The trustee thus concluded that the

attachment lien was an avoidable preferential transfer.

5

 The record indicates that Huo stipulated to avoidance of her judgment lien. 

8
In his answer to the complaint, Jue alleged several affirmative

defenses, including unclean hands, estoppel, and waiver. Each of these

defenses was based on the chapter 7 trustee’s opposition to the motion to

dismiss. Jue insisted that such opposition was wrongful and entitled him to

relief from the avoidance action.

Jue further asserted that the attachment lien should be treated as

having arisen before the 90-day preference period. He urged that the

attachment lien related back to the date the state court issued its right to

attach order. Alternatively, Jue argued that the attachment lien related back

to the date he recorded his lis pendens in the fraudulent transfer action.

Finally, Jue asserted that equity demanded the court protect him as an

innocent party from the consequences of Liu’s misconduct, which directly

led to the court’s denial of the § 109(g)(2) motion to dismiss.

The bankruptcy court heard the parties’ cross-motions for summary

judgment. The bankruptcy court ruled in favor of the trustee and against

Jue. In the process, the bankruptcy court effectively rejected all of Jue’s

affirmative defenses.

On February 21, 2019, Jue filed a notice of appeal from the

bankruptcy court’s oral rulings on the cross-motions for summary

judgment. On that same date, Jue filed a separate appeal from the

September 26, 2017 order denying the motion to dismiss Liu’s bankruptcy

case. On April 3, 2019, the bankruptcy court entered its judgment avoiding

9
and preserving Jue’s attachment lien. On April 4, 2019, Jue filed an

amended notice of appeal covering the final judgment in the adversary

proceeding.

JURISDICTION

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

157(b)(2)(A) and (F). Subject to the jurisdictional discussion set forth below,

we have jurisdiction under 28 U.S.C. § 158.

ISSUES

1. Did Jue timely appeal the order denying the § 109(g)(2) dismissal

motion?

2. Did the bankruptcy court err when it granted summary judgment in

favor of the trustee in the preference adversary proceeding?

STANDARD OF REVIEW

Timeliness is a jurisdictional issue that we consider de novo. Wilkins

v. Menchaca (In re Wilkins), 587 B.R. 97, 100 (9th Cir. BAP 2018). We also

consider de novo appeals from grants of summary judgment. Plyam v.

Precision Dev., LLC (In re Plyam), 530 B.R. 456, 461 (9th Cir. BAP 2015).

When we conduct a de novo review, we consider the matter anew, as

if the bankruptcy court had not previously resolved it. Kashikar v. Turnstile

Capital Mgmt., LLC (In re Kashikar), 567 B.R. 160, 164 (9th Cir. BAP 2017).

10
DISCUSSION

A. Jurisdictional Issue - Finality And Timeliness Of Appeal From The

Order Denying Case Dismissal Motion.

1. Finality In Bankruptcy Cases - Generally.

Finality is a critical component of bankruptcy appellate jurisdiction.

See Phillips v. Gilman (In re Gilman), 887 F.3d 956, 961 (9th Cir. 2018).

Ordinarily, a federal court order is final, and therefore appealable, when

“the decision presented for review ‘ends the litigation on the merits and

leaves nothing for the district court to do but execute the judgment.’”

Gugliuzza v. Fed. Trade Comm'n (In re Gugliuzza), 852 F.3d 884, 890 (9th Cir.

2017) (quoting Congrejo Invs., LLC v. Mann (In re Bender), 586 F.3d 1159,

1163 (9th Cir. 2009)). 

However, the Ninth Circuit takes a pragmatic or flexible approach to

finality in bankruptcy cases. See Dunkley v. Rega Props., Ltd. (In re Rega

Props., Ltd.), 894 F.2d 1136, 1138 (9th Cir. 1990). This approach to finality is

driven by the realization that “‘certain proceedings in a bankruptcy case

are so distinct and conclusive either to the rights of individual parties or

the ultimate outcome of the case that final decisions as to them should be

[immediately] appealable as of right.’” Id. (quoting United States v. Technical

Knockout Graphics, Inc. (In re Technical Knockout Graphics, Inc.), 833 F.2d 797,

800 (9th Cir. 1987)). 

The test for finality in bankruptcy typically asks two questions:

(1) whether the bankruptcy court’s order fully and finally determined the

11
discrete issue or issues it addressed; and (2) whether it “resolves and

seriously affects substantive rights.” Eden Place, LLC v. Perl (In re Perl), 811

F.3d 1120, 1126 (9th Cir. 2016) (quoting SS Farms, LLC v. Sharp (In re SK

Foods, L.P.), 676 F.3d 798, 802 (9th Cir. 2012)). This Panel applies the same

finality test used by the Ninth Circuit. See Aspen Skiing Co. v. Cherrett (In re

Cherrett), 523 B.R. 660, 665 (9th Cir. BAP 2014), as corrected, (Nov. 18, 2014),

aff'd, 873 F.3d 1060 (9th Cir. 2017).6

Using this finality standard, the Ninth Circuit has found many

different types of bankruptcy court orders to be final. See, e.g., In re Cherrett,

873 F.3d at 1065 (order denying motion to dismiss case under § 707(b));

Rosson v. Fitzgerald (In re Rosson), 545 F.3d 764, 769 (9th Cir. 2008) (case

conversion order); Dye v. Brown (In re AFI Holding, Inc.), 530 F.3d 832, 837

(9th Cir. 2008) (order removing chapter 7 trustee for cause); Duckor

Spradling & Metzger v. Baum Tr. (In re P.R.T.C., Inc.), 177 F.3d 774, 777, 780

6

 In some cases, the Ninth Circuit has applied a different, four part finality test

that looks at the following concerns: “(1) the need to avoid piecemeal litigation; 

(2) judicial efficiency; (3) the systemic interest in preserving the bankruptcy court's role

as the finder of fact; and (4) whether delaying review would cause either party

irreparable harm.” In re Perl, 811 F.3d at 1126 (quoting Sahagun v. Landmark Fence Co. (In

re Landmark Fence Co.), 801 F.3d 1099, 1102 (9th Cir. 2015)). The Ninth Circuit has held

that this four-part test should be applied only in appeals from district court or BAP

decisions remanding to the bankruptcy court for further findings. Id. at 1126; see also

Ocwen Loan Servicing, LLC v. Marino (In re Marino), __ F.3d ___, slip op. at 6 (9th Cir. Feb.

10, 2020) (stating that BAP decisions are not final when they remand for factual

determinations on key issues). In contrast, when the district court or the BAP affirms or

reverses the bankruptcy court without remanding, the Ninth Circuit applies the

standard two-part test set forth above. In re Perl, 811 F.3d at 1126.

12
(9th Cir. 1999) (order approving sale of estate assets); Law Offices of Nicholas

A. Franke v. Tiffany (In re Lewis), 113 F.3d 1040, 1044 (9th Cir. 1997) (order

for disgorgement of bankruptcy counsel’s attorney’s fees); Turgeon v.

Victoria Station Inc. (In re Victoria Station Inc.), 840 F.2d 682, 683–84 (9th Cir.

1988) (order denying motion to assume real property lease). 

The Supreme Court has recognized that “the ordinary understanding

of ‘final decision’ is not attuned to the distinctive character of bankruptcy

litigation.” Ritzen Grp., Inc. v. Jackson Masonry,LLC, 2020 WL 201023 *2, __

S.Ct. __ (Jan. 14, 2020); see also Bullard v. Blue Hills Bank, 575 U.S. 496, 135 S.

Ct. 1686, 1692-93 (2015). In Bullard, the Supreme Court considered the

finality of an order denying confirmation of a chapter 13 plan for appeal. 

The Court explained the differences inherent in bankruptcy matters from

more traditional litigation cases: 

The [finality] rules are different in bankruptcy. A bankruptcy

case involves an aggregation of individual controversies, many

of which would exist as stand-alone lawsuits but for the

bankrupt status of the debtor. Accordingly, Congress has long

provided that orders in bankruptcy cases may be immediately

appealed if they finally dispose of discrete disputes within the

larger case. The current bankruptcy appeals statute reflects this

approach: It authorizes appeals as of right not only from final

judgments in cases but from “final judgments, orders, and

decrees . . . in cases and proceedings.” § 158(a). 

Id. at 1692 (non-statutory citations and some internal quotation marks

omitted). 

13
Ultimately, the Court found that the relevant “proceeding” for

purposes of finality within the bankruptcy was the confirmation process as

a whole. Denial of the chapter 13 plan was not final because “only plan

confirmation - or case dismissal - alters the status quo and fixes the rights

and obligations of the parties.” Id. at 1692. Despite denial of the plan the

debtors could continue with the plan process, so that “[d]enial of

confirmation with leave to amend, by contrast, changes little.” Id. at 1693.7

Applying Bullard, the Supreme Court recently held that denials of

relief from stay were final for purposes of appeal. In Ritzen Grp., Inc., the

Court again noted the difficulties in applying traditional concepts of

finality to bankruptcy decisions. Recognizing the often interdependent

nature of bankruptcy decisions, the Court remarked that “[d]elaying

appeal until the termination of the entire bankruptcy case, therefore, could

have this untoward consequence: Reversal of a decision made early on

could require the bankruptcy court to unravel later adjudications rendered

7

 After Bullard, the Ninth Circuit has held that its four-part bankruptcy finality

test does not permit it to treat as final district court or BAP remands solely because they

involve purely legal questions the resolution of which would materially aid the

bankruptcy court’s decisional process. In re Gugliuzza, 852 F.3d at 897-98. According to

In re Gugliuzza, a decision that remands a case for further findings will rarely “finally

dispose of [a] discrete dispute [] within the larger case.” Id. at 897 (citing Bullard, 135 S.

Ct. at 1692). Moreover, In re Gugliuzza read Bullard to adopt a general rule “that only

decisions that alter the status quo or fix the parties’ rights and obligations could be

appealed.” Id. The Ninth Circuit has held, however, that its two-part finality test

generally is consistent with Bullard. In re Gilman, 887 F.3d at 962-63.

14
in reliance on an earlier decision.” 2020 WL 201023, at *2. The Court then

concluded that relief from stay motions presented a discrete, independent

“proceeding” that qualified as final for purposes of appeal. In doing so, the

Court rejected the argument that motions for relief from stay merely

determined the appropriate forum for the larger process of claims

adjudication recognizing that stay relief decisions “can significantly

increase creditors’ costs.” Id. at *5. Similarly, the Court rejected concerns

regarding piecemeal appeals pointing to the substantial resources

expended on subsequent litigation of the creditor’s claim in the bankruptcy

and confirmation of the debtor’s plan of reorganization that flowed from

the denial of relief from stay. Rejecting the request to restart the litigation

on the moving creditor’s claim, the Court observed that “[t]he second bite

Ritzen seeks scarcely advances the finality principle.” Id. at *7. 

Though the need for an expanded concept of finality for bankruptcy

decisions is well established, the bankruptcy finality standard is not

without its downside. Every time an appellate court declares that a certain

type of order is flexibly final and hence immediately appealable, it has the

potential to erode whatever certainty there is concerning the timely

commencement of an appeal. The stakes could not be higher. Failure to

timely appeal a final order is a jurisdictional defect, which deprives the

appellate court of the power to review the order. See Ozenne v. Chase

Manhattan Bank (In re Ozenne), 841 F.3d 810, 814 (9th Cir. 2016) (en banc); In

15
re Wilkins, 587 B.R. at 107. Thus, for every type of bankruptcy order for

which the prevailing finality standard permits immediate review, there is a

potential trap for the unwary litigant: the failure to recognize that a

particular type of bankruptcy order is final and immediately appealable

typically means that the litigant will miss the appeal deadline and lose his

or her right and ability to appeal. Ritzen Grp, Inc., 2020 WL 201023, at *3

(“an erroneous identification of a final order as interlocutory may cause a

party to miss the appellate deadline”).

This situation, however, is not new. The Ninth Circuit has long

advised litigants in bankruptcy who are unsure about the finality of an

order to file a notice of appeal to preserve their rights whether the matter

was final or interlocutory. See Ryther v. Lumber Products, Inc. (In re Ryther),

799 F.2d 1412, 1414 (9th Cir. 1986); see also Silver Sage Partners, Ltd. v. City of

Desert Hot Springs (In re City of Desert Hot Springs), 339 F.3d 782, 787 (9th

Cir. 2003) (“In Ryther, we noted that if a litigant is unsure about the nature

of an order, the litigant should file both a notice to appeal and a motion for

leave to appeal before the BAP or district court.”).

2. Finality Of Orders Denying Motions To Dismiss Bankruptcy

Cases.

a. Traditional Application.

“Ordinarily, orders denying a motion to dismiss would not constitute

final, appealable orders because they do not ‘end[ ] the litigation on the

16
merits and leave[ ] nothing for the court to do but execute the judgment.’”

In re Cherrett, 873 F.3d at 1064-65 (quoting In re Landmark Fence Co., 801 F.3d

at 1102). In the bankruptcy appeal context, the Ninth Circuit traditionally

has held that denials of a motion to dismiss the bankruptcy are

interlocutory because the appellants would not be irreparably harmed in

the absence of an immediate appeal. See Farber v. 405 N. Bedford Dr. Corp.

(In re 405 N. Bedford Dr. Corp.), 778 F.2d 1374, 1377-79 (9th Cir. 1985) (denial

of dismissal of chapter 11 case for bad faith); In re City of Desert Hot Springs,

339 F.3d at 790 (denial of dismissal of chapter 9 for bad faith); In re Rega

Props., Ltd., 894 F.2d at 1138–39 (denial of dismissal of chapter 11 for bad

faith). 

In re 405 N. Bedford Dr. Corp. is particularly instructive. There, the

Ninth Circuit dismissed as interlocutory an appeal from the denial of a

motion to dismiss a bankruptcy case under § 1112(b) for bad faith. In

assessing the finality of the denial of the dismissal motion, In re 405 N.

Bedford Dr. Corp. focused upon the absence of a need for immediate

appellate review to prevent irreparable harm: 

Although the beneficiaries will have to continue

their participation in the reorganization process,

their interests will be protected while they

participate. . . . As secured creditors, the

beneficiaries can protect their interests by moving

the bankruptcy court to provide them adequate

protection as defined by 11 U.S.C. § 361, or by

17
seeking relief from the automatic stay under 11

U.S.C. § 362(d) if such protection is not provided.

In re 405 N. Bedford Dr. Corp., 778 F.2d at 1377. 

The Ninth Circuit distinguished the continuation of the chapter 11

case before it from other instances where it permitted immediate appeal

despite the continuation of the bankruptcy. Citing Mason v. Integrity Ins. Co.

(In re Mason), 709 F.2d 1313 (9th Cir. 1983), the court noted that an appeal

from the denial of a debtor’s motion to vacate the order for relief in an

involuntary chapter 7 bankruptcy case was sufficiently final to warrant an

immediate appeal for two reasons. First, the procedures surrounding an

involuntary bankruptcy were similar to those employed in other civil and

criminal litigation that result in a final judgment. Therefore, the court

reasoned, the procedural framework suggested that an order for relief

should be treated as final. In re 405 N. Bedford Dr. Corp., 778 F.2d at 1378.

Second and more importantly, the Ninth Circuit found that, once the order

for relief was entered, there were no statutory provisions adequately

protecting involuntary debtors against irreparable injury from the

continuation of the bankruptcy.8

Id. 

8

In re 405 N. Bedford Dr. Corp. also distinguished orders denying relief from stay

from orders denying dismissal. It explained that orders denying relief from stay were

final and appealable because they “will frequently cause [the creditor] irreparable harm

if he has to wait to the end of the bankruptcy case to appeal.” 778 F.2d at 1379 (citing

Crocker Nat’l Bank v. Am. Mariner Indus., Inc. (In re Am. Mariner Indus., Inc.), 734 F.2d 426

(9th Cir. 1984)). Accord Ritzen Grp., Inc., 2020 WL 201023, at *6 (observing that excluding

denials of relief from stay from immediate appeal “would force creditors who lose

(continued...)

18
Indeed, the Ninth Circuit in In re Mason specifically found “the other

protections under the Bankruptcy Code insufficient to outweigh the

potential for irreparable injury once an order for relief is entered.” In re

Mason, 709 F.3d at 1317-18 (emphasis added). Pertinent to the instant

matter on appeal, In re Mason held that immediate review was appropriate

because:

An order for relief, being a conclusive determination of the

debtor’s status as bankrupt, carries with it a great potential for

irreparable injury if immediate appeal is not allowed. An order

for relief effectively divests the debtor of his assets, creating an

estate controlled by the bankruptcy court. In a Chapter 7 case

the trustee is obligated to gather the assets of the estate,

liquidate them, and to the extent possible satisfy creditors’

claims. The debtor is then discharged, 11 U.S.C. § 727, and the

case closed, 11 U.S.C. § 350. During the administration of the

estate the debtor’s rights are limited. On entry of the order for

relief he loses control of his assets, which may include a

business. A debtor may possibly attack the propriety of every

sale by appeal, but to effectively do so he must seek to stay the

sale.

Id. at 1317 (emphasis added and internal citations and quotations omitted). 

b. In re Cherrett.

In In re Cherrett, a creditor moved to dismiss the debtors’ chapter 7

8

(...continued)

stay-relief motions to fully litigate their claims in bankruptcy court and then, after the

bankruptcy case is over, appeal and seek to redo the litigation all over again in the

original court.”)(quoting Ritzen Grp. Inc. v. Jackson Masonry, LLC (In re Jackson Masonry,

LLC), 906 F.3d 494, 503 (6th Cir. 2018)). 

19
bankruptcy under § 707(b) for abuse.9

 523 B.R. at 664-65. The creditor

argued that § 707(b) applied because the Cherretts’ debts were primarily

consumer. The bankruptcy court disagreed and denied the motion to

dismiss. Id. at 665. On appeal, the BAP held that the order was final for

review. Id. at 666. The BAP noted that although the Ninth Circuit had not

yet addressed the finality of orders denying motions to dismiss under

§ 707(b), the First, Third, Fourth, Fifth, Seventh and Eighth Circuits

“consider such orders to be final based on practicality, judicial efficiency

and other pragmatic considerations.”Id. Citing various comments from

these decisions, the BAP held that the denial of the dismissal motion was

final, reasoning:

If such an order is not considered final, the moving party and

the debtor will have to wait until the case is completed, which

wastes debtor resources that should be used to pay creditors,

and forces trustees and bankruptcy courts to expend their

scarce institutional resources on abusive Chapter 7 petitioners.

Moreover, postponing the appeal until the end of the

bankruptcy case could result in the need to unwind various

administrative actions, likely with some difficulty (e.g., having

to revoke the debtor’s discharge, potentially compelling

creditors to disgorge distributions made by the trustee).

Id. at 667 (citations and internal quotation marks omitted). 

9

 As amended by the Bankruptcy Abuse Prevention and Consumer Protection

Act of 2005, Pub. L. No. 109–8, 119 Stat. 23, § 707(b) presumes that a chapter 7 case is

abusive, and should be dismissed, unless the debtor is able to satisfy the “means test”

also set forth in the amended statute. See McDow v. Dudley, 662 F.3d 284, 288 (4th Cir.

2011) (describing 2005 amendments to § 707(b)).

20
The Ninth Circuit affirmed, also relying on the decisions of its sister

circuits and noting: “[t]hese circuits recognize that the current version of

§ 707(b) . . . ‘manifest[s] a congressional policy to police all Chapter 7 cases

for abuse at the outset of a Chapter 7 proceeding.’” In re Cherrett, 873 F.3d

at 1065 (quoting McDow, 662 F.3d at 288). It further pointed to the other

circuits’ focus on “‘pragmatic considerations that indicate that the denial of

a § 707(b) motion to dismiss is different from the denial of other motions to

dismiss.’” Id. (quoting McDow, 662 F.3d at 288). 

The Ninth Circuit did not expressly consider whether any harm or

injury would arise if the appellant creditor were forced to wait until the

end of the bankruptcy case to appeal the denial of its § 707(b) dismissal

motion.10

 Instead, it focused on “policies of judicial efficiency and finality”

10

In re Cherrett’s finality analysis in large part relied on McDow, 662 F.3d at 287-

90, which also considered the finality of an order denying dismissal of a bankruptcy

under § 707(b) and emphasized the pragmatic harm that would result if appellate

review was delayed until completion of the bankruptcy case:

Delaying appellate consideration of abuse could frustrate both principles

of judicial economy and Congress’s goal of ensuring that debtors allocate

as much of their resources as possible toward repaying their debts. The

resources of the debtor could be wasted in completing the bankruptcy

proceeding before finally resolving the abuse issue. Requiring trustees to

complete Chapter 7 proceedings before appealing denial of their § 707(b)

motions wastes debtor resources that should be used to pay creditors, and

forces trustees and bankruptcy courts to expend their scarce institutional

resources on abusive Chapter 7 petitioners.

Id. at 290 (citations and internal quotation marks omitted).

21
to conclude that the denial of dismissal was a final order. Id. (quotingZolg

v. Kelly (In re Kelly), 841 F.2d 908, 911 (9th Cir. 1988)). The court found that

these policies justified treating the denial of appellant’s § 707(b) dismissal

motion as final, explaining:

“Section 707(b) creates a statutory gateway based on whether

the case is abusive, and an order denying that motion to

dismiss as abusive, in effect, finally and conclusively resolves

the issue. If the denial of a § 707(b) motion to dismiss cannot be

appealed immediately. . . , the Chapter 7 proceedings would

have to be completed before it could be determined whether

the proceedings were abusive in the first place.”

In re Cherrett, 873 F.3d at 1065 (quoting McDow, 662 F.3d at 289–90).

3. Finality In This Appeal: The Order Denying Dismissal Of

The Chapter 7 Bankruptcy Under § 109(g).

Having set forth the relevant legal framework, we consider the order

on appeal: the denial of Jue’s § 109(g)(2) motion to dismiss Liu’s chapter 7

bankruptcy case. 

a. Language And Effect Of § 109(g)(2).

In assessing whether the denial of the § 109(g)(2) dismissal motion is

final, we must consider the language and effect of the statute. Cf. McDow,

662 F.3d at 287-90. Section 109(g) provides:

(g) Notwithstanding any other provision of this section, no

individual or family farmer may be a debtor under this title

who has been a debtor in a case pending under this title at any

time in the preceding 180 days if--

22
(1) the case was dismissed by the court for willful failure

of the debtor to abide by orders of the court, or to appear

before the court in proper prosecution of the case; or

(2) the debtor requested and obtained the voluntary

dismissal of the case following the filing of a request for

relief from the automatic stay provided by section 362 of

this title.

Congress enacted § 109(g)(2) to prevent a specific type of abusive 

bankruptcy filing: serial bankruptcies filed merely as a means of obtaining

repeated bankruptcy stays in order to frustrate creditors’ efforts to enforce

their rights and interests under state law. Greenwell v. Carty (In re Carty),

149 B.R. 601, 603 (9th Cir. BAP 1993) (identifying the “obvious thrust” of

the statute as preventing debtors from denying creditors the benefit of a

stay termination by filing another bankruptcy case); see also In re Hieter, 414

B.R. 665, 669 (Bankr. D. Idaho 2009) (noting that Congress enacted

§ 109(g)(2) to prevent abusive repeat filings). 

Eligibility under § 109(g), however, is not jurisdictional and can be

waived if not raised. Leafty v. Aussie Sonoran Capital, LLC (In re Leafty), 479

B.R. 545, 550 (9th Cir. BAP 2012) (§ 109(g)(2) is not jurisdictional); see also

Soames Lane Tr. v. Gonzalez (In re Soames Lane Tr.), BAP No.

CC–16–1042–FDKu, 2016 WL 4198426 * 4 (9th Cir. BAP Aug. 8, 2016) (“This

Panel has repeatedly held that the bankruptcy court has subject matter

jurisdiction even if the debtor is ineligible under § 109.”). Additionally, we

have previously recognized that bankruptcy courts may suspend this

23
eligibility requirement in those limited situations where “mechanical

application of § 109(g) would produce an illogical, unjust, or capricious

result, or when the benefit of a dismissal would inure to a bad faith

creditor.” In re Leafty, 479 B.R. at 551 (citing Home Sav. of Am., F.A. v. Luna

(In re Luna), 122 B.R. 575, 576 (9th Cir. BAP 1991)).

b. Jue’s Arguments On Finality.

Jue argues that In re Cherrett is limited to denials of dismissal motions

under § 707(b). He contends that In re 405 N. Bedford Dr. Corp. states the

general rule that decisions that enable a bankruptcy case to continue are

not final, even under the bankruptcy finality standard. In support of his

argument, Jue cites our decision in Moen v. Hull (In re Hull), 251 B.R. 726

(9th Cir. BAP 2000), in which we reviewed a denial of a creditor’s motion to

dismiss under § 109(e) and the bankruptcy court’s determination that the

debtor did not exceed the debt limits for chapter 13 eligibility. After denial

of the motion to dismiss, the bankruptcy court confirmed the debtor’s

chapter 13 plan. Upon confirmation, the creditor appealed, challenging

both the debtor’s eligibility for chapter 13 as well as confirmation of the

plan. Id. at 730.

As a preliminary matter, we noted that confirmation of the chapter 13

plan implicitly determined eligibility as it was a prerequisite for

confirmation. Id. at 730-31. Therefore, the bankruptcy court’s eligibility

ruling was, at least implicitly, treated as interlocutory and became final

24
only upon entry of an order confirming the chapter 13 plan. Id.

In re Hull does not assist Jue. In In re Hull, the creditor appealed the

§ 109(e) eligibility determination after confirmation. Confirmation of the

chapter 13 plan effectively “closed” the case for finality purposes. See

Giesbrecht v. Fitzgerald (In re Giesbrecht), 429 B.R. 682, 688 (9th Cir. BAP

2010) (“the interlocutory Order Denying Confirmation merged into the

court’s final [chapter 13] confirmation order, and is sufficient to support

appellate jurisdiction of the earlier interlocutory order”); see also Burns v.

MacGibbon (In re MacGibbon), BAP No. WW-05-1422-PaNK, 2006 WL

6810935, at *10 (9th Cir. BAP Aug. 14, 2006) (“once the bankruptcy court

entered its order confirming the [chapter 11] plan of reorganization, the

bankruptcy court’s ruling on the motions to dismiss, convert or appoint

trustee [became] final and appealable”). Thus, In re Hull stands for the

proposition that the denial of a dismissal motion becomes final for appeal

no later than confirmation.

In any event, unlike §§ 109(g) and 707(b), § 109(e) is not a

congressional response to perceived abuse in the bankruptcy system that

Congress enacted as a threshold barrier to abusive filings.11

More importantly, if we were to accept Jue’s argument that In re Hull

is apposite and In re Cherrett is limited to denials of dismissal motions

11

 We need not decide whether the distinctions between § 109(e) on the one hand 

and §§ 109(g) and 707(b) on the other hand are sufficient to justify the divergent

treatment of dismissal motions under § 109(e) for finality purposes. 

25
under § 707(b), then we would need to resolve an even more problematic

issue: in a chapter 7 case, when would the denial of a § 109(g)(2) motion to

dismiss become final? Traditional notions of bankruptcy finality suggest

that the denial of Jue’s motion would not become final and appealable until

the closing, conversion, or dismissal of the chapter 7 case. Unlike In re Hull,

there is no plan to confirm in a chapter 7 case, so the denial of the

§ 109(g)(2) dismissal motion would continue to be interlocutory until the

case was later converted or dismissed or Liu’s chapter 7 case was closed.

Here, the trustee continues to administer Liu’s chapter 7 case.

Recognizing that Liu’s bankruptcy has not been “closed” for

purposes of appellate finality, Jue contends that the denial of the § 109(g)(2)

motion to dismiss became final when the bankruptcy court entered

judgment in the preference action. Jue reasons that this is when his rights

were seriously affected. We disagree with this ad hoc application of finality

as it contravenes the very rule Jue advocates. As articulated in In re Mason

and In re 405 N. Bedford Dr. Corp., finality for denial of dismissals hinged on

the potential for irreparable harm and the protections included in the

Bankruptcy Code to mitigate the risk of such harms. In re 405 N. Bedford Dr.

Corp., 778 F.2d at 1378; In re Mason, 709 F.3d 1317-18.

Doctrinally, the date of judgment in the adversary proceeding makes

little sense for use in determining the finality of eligibility rulings in the

main bankruptcy case because each adversary proceeding is a discrete

26
“judicial unit” for finality purposes. See Belli v. Temkin (In re Belli), 268 B.R.

851, 855 (9th Cir. BAP 2001). Each adversary proceeding is fully resolved

only upon entry of a final judgment. Id. Thus, there is no special

bankruptcy finality rule applicable in adversary proceedings. Id.

And what of those bankruptcies in which there are no adversary

proceedings? In chapter 7 cases, finality would presumably occur upon the

closing, conversion, or dismissal of the case. But the uncertainty of when

these milestone events might occur makes them unsuitable as triggers for

finality. As a practical matter, accepting Jue’s contention would lead to an

unworkable piecemeal system of finality, where an order denying case

dismissal would become final for different parties in interest at different

times. Finality would depend on when, or whether, a party’s rights were

adversely adjudicated sometime in an adversary proceeding. In short, Jue

argues that finality arises only when the potential harms considered in In re

Mason and In re 405 N. Bedford Dr. Corp. are actually realized by a party in

interest. Aside from being exceedingly haphazard, this would force the

parties and the bankruptcy court to litigate disputes that might be rendered

moot if an appellate court later determines that the bankruptcy case should

have been dismissed at the outset. Put bluntly, Jue’s position on finality in

this context, if accepted, would render bankruptcy finality highly

impractical. 

27
c. Application Of Finality After In re Cherrett And

McDow.

We find no meaningful distinction between the denial of dismissal

under § 109(g) and the denial of dismissal under § 707(b) held to be final in

In re Cherrett. Congress enacted both statutes to address abusive

bankruptcy filings and to serve as statutory gateways to proceeding in

bankruptcy. Both adjudicate a debtor’s initial eligibility for bankruptcy,

thereby concluding a discrete proceeding that dramatically “alters the

status quo and fixes the rights and obligations of the parties.” Bullard, 135

S. Ct. at 1692.

These situations differ from the motions to dismiss for bad faith at

issue in In re 405 N. Bedford, In re City of Desert Hot Springs, and In re Rega

Properties. As recognized in In re City of Desert Hot Springs, a debtor’s bad

faith is subject to continuing examination in a reorganization, and denial of

dismissal for bad faith does not preclude the bankruptcy court from

dismissing the bankruptcy on the same basis later if it subsequently

appears that the debtor is not acting in good faith.12

 339 F.3d at 790. In

12

 These cited cases arose in chapter 11 and chapter 9. Similarly, a chapter 7 case

may be dismissed for bad faith as cause under § 707(a). See Sherman v. SEC (In re

Sherman), 491 F.3d 948, 967 n.24 (9th Cir. 2007) (holding that denial of dismissal of

chapter 7 case under § 707(a) is interlocutory). Hickman v. Hana (In re Hickman), 384 B.R.

832, 836 (9th Cir. BAP 2008), presents an interesting case where the BAP granted

interlocutory review of the bankruptcy court’s denial of the debtor’s voluntary motion

to dismiss under § 707(a). Because the BAP granted the debtor leave to pursue an

interlocutory appeal, there was no need to closely examine the finality of the order

(continued...)

28
contrast, the bankruptcy court’s order denying the § 109(g)(2) dismissal

motion “finally and conclusively resolve[d] the issue” of Liu’s eligibility to

file this chapter 7 bankruptcy. In re Cherrett, 873 F.3d at 1065 (quoting

McDow). In this regard, the denial of the § 109(g) dismissal motion had the

same functional effect as the denial of dismissal under § 707(b) in In re

Cherrett. In both situations, the denial of dismissal determined that the

bankruptcy was not abusive and would proceed.13

Second, if denial of the § 109(g)(2) dismissal motion cannot be

immediately appealed, “the Chapter 7 proceedings would have to be

completed before it could be determined whether the proceedings were

abusive in the first place.” Id. (quoting McDow, 662 F.3d at 289–90). Both In

re Cherrett and McDow explained how the absence of an immediate appeal

in this situation offends the dual policies of judicial economy and the

conservation of estate resources. 

In this sense, as in In re Mason, the continuation of the bankruptcy

case “carries with it a great potential for irreparable injury if immediate

appeal is not allowed.” In re Mason, 709 F.2d at 1317. In re Mason focused on

the potential injury to an involuntary debtor. But bankruptcy alters the

12

(...continued)

appealed under In re Mason, In re 405 N. Bedford Dr. Corp., and now as supplemented by

In re Cherrett.

13

 We acknowledge that the Fifth Circuit has held that the denial of a § 109(g)

dismissal motion is interlocutory rather than final. See Promenade Nat’l Bank v. Phillips

(In re Phillips), 844 F.2d 230, 235-36 (5th Cir. 1988). However, In re Phillips cannot

persuade us that we should depart from In re Cherrett, which we are bound to follow.

29
entirety of debtor-creditor relationships. Significant potential harm arises

from the wrongful continuation of any bankruptcy, whether initiated

voluntarily or involuntarily. The disposition of the estate’s assets and fixing

of other rights during the completion of the chapter 7 case doubtlessly has

the potential to deprive particular creditors of some or all of the recovery

they would be able to obtain outside of bankruptcy. Thus, the continuation

of the chapter 7 case often results in dramatic and irreversible changes not

only in the debtors’ affairs, but also, as this case demonstrates, for creditors

now subject to the statutorily augmented rights of the bankruptcy estate.14

In addition to the debtor and creditors, we also are concerned about

the impact of the continuing chapter 7 case on the trustee and the 

professionals the trustee employs to help promptly liquidate the estate. See

generally § 704(a)(1) (setting forth trustee’s duty to liquidate the bankruptcy

estate’s assets). In order to complete a chapter 7 bankruptcy, the trustee

frequently must sell estate property, object to claims and exemptions,

challenge the debtor’s discharge, and avoid certain transfers of estate

property. Courts and interested parties must act in reliance on entered

14

 The impact of the denial of a motion to dismiss a bankruptcy case is multifaceted. Aside from the variety of parties potentially impacted, discussed above, the

continuation of the case also affects parties in interest temporally because the date of the

bankruptcy petition fixes the rights of parties with respect to many different types of

issues, including claims, discharge, exemptions, and avoidance rights. See generally,

Ritzen Grp., Inc., 2020 WL 201023, at *6 (observing that continuation of bankruptcy case

without affording immediate appeal from a denial of relief from stay can have

significant adverse consequences on all parties to the bankruptcy case).

30
orders. To delay appellate review of a debtor’s alleged abuse places all

chapter 7 activity, and the resulting consequences, at risk of a later

appellate determination that the case was, in fact, abusive from the outset.

This has particular consequences for the chapter 7 trustee and his or

her professionals, who are compensated (if at all) from property of the

estate. Estate professionals work on contingency; they are paid only from

assets recovered for the bankruptcy estate. Unlike debtors’ professionals in

a reorganization that may still pursue payment from their debtors if the

reorganization is dismissed, chapter 7 professionals have no means of

compensation if it were later determined, possibly years afterwards, that

the debtor’s bankruptcy violated either § 109(g)(2) or § 707(b). 

This case amply demonstrates the risks to the trustee and the estate

professionals. Once in bankruptcy, the trustee quickly identified and

pursued the sale of real property and avoidance of preferences related to

that property to recover monies for all of the unsecured creditors.

Withholding a right of immediate appeal here would only exacerbate the

adverse economics chapter 7 professionals frequently encounter and run

counter to the concerns for judicial efficiency and finality at the heart of In

re Cherrett, and more recently raised by the Supreme Court in Ritzen Grp.,

Inc. 

We conclude that the order denying dismissal was final when

entered. Because we lack jurisdiction over Jue’s appeal from the order

denying the case dismissal motion, our merits review is limited to Jue’s

31
appeal from the bankruptcy court’s summary judgment in the preference

adversary proceeding.

B. Merits Issue – Summary Judgment In Preference Adversary

Proceeding.

In both the bankruptcy court and on appeal, Jue did not directly

challenge the basic elements for establishing an avoidable preference.

Instead, he has focused almost exclusively on a handful of his affirmative

defenses. The defenses Jue identifies and relies upon include unclean

hands, equitable estoppel, breach of fiduciary duty, and “relation back.”15

1. Basic Law Governing Preferential Transfers And The

Unavailability Of Equitable Defenses.

Generally speaking, the transfer of property of the debtor is an

avoidable preference if it has the following five characteristics: (1) it

benefits a creditor; (2) it was made on account of an antecedent debt; (3) it

was made while the debtor was insolvent; (4) it was made during 90 days

immediately preceding the bankruptcy filing; and (5) it enables the creditor

to receive a larger amount than it would have received from the estate

absent the transfer. Union Bank v. Wolas, 502 U.S. 151, 154–55 (1991) (citing

15

 In reality, some of these so-called defenses are not properly classified as

defenses at all. For example, the breach of fiduciary duty ”defense” actually is a cause

of action under California law. See generally Oasis W. Realty, LLC v. Goldman, 51 Cal. 4th

811, 821 (2011) (identifying cause of action and its elements). Nor is “relation back” an

affirmative defense under California law. More precisely, relation back is a legal

doctrine Jue has asserted in an attempt to negate the timing element necessary for

establishing an avoidable preference. Even so, the proper characterization of these

principles does not change our analysis or resolution of this appeal.

32
11 U.S.C. § 547(b)). Congress “broadly authorized bankruptcy trustees” to

avoid preferential transfers “unless one of seven exceptions defined in

subsection (c) [of § 547] is applicable.” Id. at 154 (emphasis in original).

This Panel has held that there are no exceptions or defenses to

avoidance of preferences other than those specified in the statute. See

Enserv Co., Inc. v. Manpower, Inc./Cal. Peninsula (In re Enserv Co., Inc.), 64

B.R. 519, 521 (9th Cir. BAP 1986), aff’d 813 F.2d 1230 (9th Cir. Mar. 19,

1987)(table). In re Enserv reasoned that the plain language of § 547(c)

limited preference defenses to those therein and that “Congress did not

intend that actions pursued under Section 547 would be subject to question

based on equitable considerations.” Id. Furthermore, In re Enserv is

consistent with the Supreme Court’s observation: “[w]e have long held that

‘whatever equitable powers remain in the bankruptcy courts must and can

only be exercised within the confines of’ the Bankruptcy Code.” Law v.

Siegel, 571 U.S. 415, 421 (2014) (quoting Norwest Bank Worthington v. Ahlers,

485 U.S. 197, 206 (1988)).

Outside of the Ninth Circuit, the vast majority of cases that have

expressly considered the issue have held that substantive defenses to § 547

actions are limited to those set forth in the statute. See, e.g., Ogle v. Advent,

Inc. (In re HDD Rotary Sales, LLC), Case No. 11-38053, 2012 WL 6694072, at

*4 (Bankr. S.D. Tex. Dec. 20, 2012) (“This court joins the host of others that

have held that § 547(c) . . . provides the exclusive list of substantive

affirmative defenses to a § 547(b) preference action”); Guinn v. Irwin Mortg.

33
Corp. (In re Patterson), 330 B.R. 631, 642 (Bankr. E.D. Tenn. 2005); contra,

Philip Servs. Corp. v. Luntz (In re Philip Servs. (Delaware), Inc.), 267 B.R. 62,

70–71 (Bankr. D. Del. 2001) (rejecting plaintiffs’ assertion that defendants

could not raise any affirmative defenses other than those contained in §

547(c)).16

In sum, as indicated by In re Enserv and the other cited authority, the

Bankruptcy Code’s statutory scheme governing preferences does not

permit Jue to raise the equitable defenses he attempts to raise based on

allegations of unclean hands, breach of fiduciary duty, and estoppel.

2. Jue’s Equitable Defenses Also Are Impermissible Because

They Collaterally Attack The Bankruptcy Court’s Order

Denying The § 109(g)(2) Motion To Dismiss.

Even if the Code did permit equitable defenses, we still would

conclude that Jue’s defenses are meritless. They all are based on the same

fatally-flawed premise: that the chapter 7 trustee’s opposition to the

§ 109(g)(2) motion to dismiss and the bankruptcy court’s denial of that

motion contravened the plain terms of § 109(g)(2). As a matter of equity,

Jue maintains that his attachment lien should not have been avoided when

it would not have been avoidable as a preferential transfer but for the

16

 The majority cases typically distinguish, and permit, “threshold” or procedural

defenses like “lack of personal jurisdiction, standing, or service of process.” In re

Patterson, 330 B.R. at 642 (citing Kmart Corp. v. Uniden Am. Corp. (In re Kmart Corp.), 318

B.R. 409, 415 (Bankr. N.D. Ill. 2004)). In re Enserv Co., Inc. did not address the issue of

threshold or procedural defenses. 64 B.R. at 521. In any event, all of the defenses Jue has

attempted to assert are substantive in nature.

34
wrongful failure to dismiss Liu’s chapter 7 case.

The obvious problem with this argument is that it amounts to an

impermissible collateral attack on the denial of the § 109(g)(2) motion to

dismiss. As we have explained above, the bankruptcy court’s order

denying this motion was a final order, and Jue failed to timely appeal that

order. He cannot now attack the basis of that order, or the consequences

flowing from that order, in his appeal from the preference adversary

proceeding. This is exactly what Jue attempts to do by way of his unclean

hands, breach of fiduciary duty, and estoppel arguments. 

Our prior decisions make clear that appellants cannot successfully

challenge an order on appeal by attacking a prior final order that they did

not timely appeal. See, e.g., Alakozai v. Citizens Equity First Credit Union (In re

Alakozai), 499 B.R. 698, 704 (9th Cir. BAP 2013) (“Alakozai's challenge to . . .

the In Rem Order in the Fourth Case amounts to a collateral attack on a

final order”); Heritage Pac. Fin., LLC v. Machuca (In re Machuca), 483 B.R. 726,

735–36 (9th Cir. BAP 2012) (“the bankruptcy court’s order granting

summary judgment was final. HPF cannot collaterally attack that judgment

through the § 523(d) proceeding”); Woods & Erickson, LLP v. Leonard (In re

AVI, Inc.), 389 B.R. 721, 731 (9th Cir. BAP 2008) (“to the extent that W & E

seeks to collaterally attack the validity of that order vacating and annulling

the dismissal, it cannot do so in this appeal because the order is final and

the time to appeal has passed”); see also Valley Nat'l Bank of Ariz. v. Needler

(In re Grantham Bros.), 922 F.2d 1438, 1442 (9th Cir. 1991) (rejecting as

35
frivolous appellant’s attempted collateral attack on bankruptcy court’s

prior sale order).

In short, Jue’s unclean hands, breach of fiduciary duty, and estoppel

defenses amount to an impermissible collateral attack on the order denying

the § 109(g)(2) dismissal motion. Accordingly, these defenses do not

support reversal of the bankruptcy court’s summary judgment in favor of

the trustee in the preference action.17

3. Jue’s Relation Back Argument Also Lacks Merit.

The only other argument of Jue’s we need to discuss is Jue’s relation

back argument as it impacts the date of the preferential transfer. Jue’s

argument is twofold. First, Jue argues that his attachment lien related back

17

 It also is worth noting that Jue’s breach of fiduciary duty defense lacks merit on

its own terms. It is premised on Jue’s belief that the trustee had a duty to Jue as an

individual creditor to protect and preserve his individual lien interest over and above

what the trustee might have thought best for Liu’s entire body of creditors, or her

bankruptcy estate, as a whole. This belief is mistaken. The chapter 7 trustee represents

the estate as a whole and is charged with gathering and liquidating all of the estate’s

assets. §§ 323(a); 704(a)(1); see also In re Wisdom, 478 B.R. 394, 399 (Bankr. D. Idaho 2012),

aff'd, 490 B.R. 412 (D. Idaho 2013), aff’d sub nom. Wisdom v. Gugino, 649 F. App’x 583 (9th

Cir. 2016) (“‘[t]he trustee is a fiduciary charged with protecting the interest of all estate

beneficiaries – namely, all classes of creditors . . . .’”) (quoting United States Trustee,

Handbook for Chapter 7 Trustees, p. 4-2 (Effective October 1, 2012)). The task of

gathering and liquidating all of the estate’s assets typically is the most important duty

the trustee fulfills. See Dye v. Brown (In re AFI Holding, Inc.), 530 F.3d 832, 845 (9th Cir.

2008) (stating that trustee’s “primary job is to marshal and sell assets, so that those

assets can be distributed to the estate’s creditors and then close the estate.”)(quoting

U.S. Trustee v. Joseph, (In re Joseph), 208 B.R. 55, 60 (9th Cir. BAP 1999)). In carrying out

this duty, “the trustee ‘may not be the representative of any particular creditor, but

must represent all creditors without partiality.’” Id. at 844 (quoting Gross v. Russo (In re

Russo), 18 B.R. 257, 270–71 (Bankr. E.D.N.Y. 1982)).

36
to the lis pendens he filed in his state court fraudulent transfer action. And

second, Jue argues that the attachment lien related back to the date of the

state court’s issuance of a right to attach order. Both of these dates fall

outside the 90-day preference period under § 547(b)(4)(A) and thereby

would negate the timing requirement for the chapter 7 trustee’s preference

claim. But neither of these relation back arguments have any merit.

California law simply does not support them.

a. The Lis Pendens Has No Relation Back Effect On Jue’s

Attachment Lien.

Jue insists that the priority of his attachment lien should relate back

to the date he recorded a lis pendens in relation to his real property

fraudulent transfer action. Because his lis pendens was recorded outside of

the 90-day preference period, Jue maintains that his subsequently acquired

attachment lien is not avoidable as a preference. 

“‘A lis pendens is a recorded document giving constructive notice

that an action has been filed affecting title or right to possession of the real

property described in the notice.’”Mira Overseas Consulting Ltd. v. Muse

Family Enters., Ltd., 237 Cal. App. 4th 378, 383 (2015) (quoting Kirkeby v.

Sup. Ct., 33 Cal. 4th 642, 647 (2004)). “Because a lis pendens provides

constructive notice of the litigation, ‘any judgment later obtained in the

action relates back to the filing of the lis pendens.’” Id. at 383-84 (quoting

Slintak v. Buckeye Retirement Co., L.L.C., Ltd., 139 Cal. App. 4th 575, 586

(2006)) (emphasis added); see also Cal. Civ. Proc. Code (“C.C.P.”) § 405.24

37
(“The rights and interest of the claimant in the property, as ultimately

determined in the pending noticed action, shall relate back to the date of

the recording of the notice.”).

But Jue never obtained a judgment in his real property fraudulent

transfer action. To the contrary, he voluntarily dismissed it with prejudice.

Consequently, the rule that enables a judgment in an action affecting real

property to relate back to the date of a recorded lis pendens has no

application here.18

 Jue nonetheless maintains that, for purposes of relation back, the

attachment lien he obtained in his action for breach of the promissory note

should be treated as if it were the same as a fraudulent transfer judgment.

He only offers one basis for this treatment: according to Jue, Liu linked the

two state court lawsuits by filing a notice of related cases in both the breach

of promissory note action and in the fraudulent transfer action. In light of

18

 In support of his argument, Jue relies on Hurst Concrete Products., Inc. v. Lane

(In re Lane), 980 F.2d 601 (9th Cir. 1992). But Jue’s reliance on In re Lane is misplaced. In

re Lane involved a creditor who had obtained, in the same action, a judgment in its favor

for both monetary damages and for the debtor’s fraudulent transfer of real property. Id.

at 604. Here, in contrast, Jue never obtained any judgment against Liu for fraudulent

transfer of real property. The absence of this type of judgment, here, is critical. As In re

Lane explained, “The ultimate operation of the lis pendens on the Lanes’ property is

measured by the terms and effective scope of the decision rendered in the Superior

Court.” Id. (citing Rose v. Knapp, 153 Cal. App. 2d 379, 386 (1957)). Here, given the

absence of a judgment in Jue’s favor for the fraudulent transfer of real property, Jue’s

recorded lis pendens could not possibly have any relation back effect. See Mira Overseas

Consulting Ltd., 237 Cal. App. 4th at 383-84. 

38
the notice of related cases, Jue argues that his attachment lien should be

given the same effect in the fraudulent transfer action as a fraudulent

transfer judgment would have. He cites no authority to support this

argument.

Jue’s relation back argument relying on the prior lis pendens to

purportedly take his attachment lien outside the 90-day preference period

makes no sense. The law pertaining to lis pendens practice makes clear that

the only relevant action for lis pendens and relation back purposes was

Jue’s fraudulent transfer action. See C.C.P. § 405.24; Mira Overseas

Consulting Ltd., 237 Cal. App. 4th at 383-84. But no judgment was entered in

that case, and he later dismissed that action. A mere notice of related cases

is not substantive. It cannot, and should not, be viewed as potentially

changing settled, substantive California law. See generally Cal. R. Ct. Rule

3.300 (describing practice and procedure governing notices of related

cases); see also Hon. Lee Smalley Edmon & Hon. Curtis E. A. Karnow, Cal.

Practice Guide: Civ. Proc. Before Trial ¶ 12:38 (The Rutter Group 2019)

(“The purpose [underlying related case notices] is to promote judicial

efficiency and to prevent plaintiffs from ‘judge shopping’ . . . .”). In short,

we find Jue’s relation back argument based on the lis pendens wholly

unpersuasive. We therefore reject it.

39
b. The Right To Attach Order Has No Relation Back Effect

On Jue’s Attachment Lien.

Jue alternately claims that his attachment lien related back to the date

the state court issued its right to attach order. To support this claim, Jue

relies on Wind Power Systems, Inc. v. Cannon Financial Group, Inc. (In re Wind

Power Systems, Inc.), 841 F.2d 288 (9th Cir. 1988). In re Wind Power Systems,

Inc. dealt with a bankruptcy trustee’s preference claim and the effect of a

creditor’s overlapping liens arising, respectively, from a temporary

protective order and a subsequent levy on a writ of attachment. 841 F.2d at

290. Relying on Cal. Civ. Proc. Code § 488.500(a) & (e), In re Wind Power

Systems, Inc. held that when a creditor attaches property that already is

subject to the creditor’s lien arising from a temporary protective order, the

priority of the subsequent attachment lien “relates back” to the date of the

earlier lien. Id. at 291. As a result, In re Wind Power Systems, Inc. concluded

that the creditor’s attachment lien, which was created within the 90-day

preference period, was not avoidable as a preference, because the creditor’s

prior lien arising from the temporary protective order was created outside

of the 90-day preference period. Id. at 292.

By relying on In re Wind Power Systems, Inc., Jue effectively claims

that, for relation back purposes, the right to attach order he obtained is the

same thing as a temporary protective order. We disagree. Jue never

obtained a temporary protective order. Moreover, temporary protective

orders are not by any means the same as right to attach orders. Temporary

40
protective orders create liens, per C.C.P. § 486.110, and require a showing

that they are necessary to prevent great or irreparable harm. See C.C.P. 

§ 486.020(d). In contrast, right to attach orders do not create liens and do

not require a showing of great or irreparable harm. See C.C.P.§ 484.090; see

also Hon. Alan M. Ahart, Cal. Practice Guide: Enforcing Judgments & Debts

¶ 4:129 (The Rutter Group 2019) (stating that a right to attach order “is like

a ‘declaratory relief’ order, determining for purposes of the action that the

plaintiff’s claim is one for which a [writ of attachment] may issue, then or

later.”).

At bottom, Jue would have us conflate his right to attach order with a

temporary protective order merely because he believes it would lead to an

equitable result in this case. Assuming without deciding that equity

supports the result Jue seeks to reach, we decline to re-fashion California

law merely to fit his general notion of what equity requires. California’s

attachment procedures are strictly construed, and we are not free to expand

or alter them in this manner. See Kemp Bros. Constr. v. Titan Elec. Corp., 146

Cal. App. 4th 1474, 1476 (2007) (noting strict construction of California’s

attachment procedures); see also VFS Fin., Inc. v. CHF Express, LLC, 620 F.

Supp. 2d 1092, 1095–96 (C.D. Cal. 2009) (explaining purpose and basic

requirements of California’s attachment laws). Accordingly, we reject as

meritless Jue’s relation back argument. 

At the end of the day, given that Jue’s relation back argument has no

merit and that Jue obtained his attachment lien within 90 days of Liu’s

41
chapter 7 bankruptcy filing, it was not even necessary for the trustee to

prevail on his preference claim in order to prevent Jue from enforcing the

lien. By operation of California law, the attachment lien automatically

terminated upon the filing of Liu’s chapter 7 petition. C.C.P. § 493.030(b);

see also In re Wind Power Systems, Inc., 841 F.2d at 293 (“The purpose of

[C.C.P. § 493.030(b)] is to have a lien of attachment declared void without

court action“); In re Aslanyan, Case No. 17-24195-A-7, 2017 WL 6520450, at

*1 n.1 (Bankr. E.D. Cal. Dec. 20, 2017) (citing same statue and stating: “[h]ad

the attachment lien been recorded less than 90 days prior to the

bankruptcy, it would have terminated when the debtor filed this case.”); 12

Miller & Starr, Cal. Real Est. § 42:40 (4th ed. 2019) (“When . . . a voluntary

or involuntary petition in bankruptcy has been filed, any attachment or

temporary protective order issued within the preceding 90 days is

terminated”).19

19

 California law also provides for the automatic preservation of the lien for the

estate’s benefit. C.C.P. § 493.060 (“Upon the filing of a petition commencing a case

under Title 11 of the United States Code (Bankruptcy), a lien terminated pursuant to

this chapter is preserved for the benefit of the estate.”). Even so, the chapter 7 trustee’s

preference action was not a meaningless endeavor. Before the bankruptcy court could

have applied either §§ 547 and 550, or C.C.P. §§ 493.030 and 493.060, the bankruptcy

court needed to ascertain whether Jue’s relation back arguments had any merit. If Jue

had prevailed on either of those arguments, then the attachment lien would have been

treated as created before the 90-day preference period. This would have been sufficient

to defeat both the trustee’s preference claim and application of C.C.P. §§ 493.030 and

493.060. See In re Wind Power Systems, Inc., 841 F.2d at 292-93.

42
CONCLUSION

For the reasons set forth above, we DISMISS for lack of jurisdiction

Jue’s appeal from the order denying the § 109(g)(2) dismissal motion, and

we AFFIRM the bankruptcy court’s preference summary judgment in favor

of the chapter 7 trustee.

Concurrence begins on next page.

43
TAYLOR, Bankruptcy Judge, concurring:

I join in the well-reasoned decision to dismiss the appeal from the

order denying the § 109(g)(2) dismissal motion for lack of jurisdiction.

I also agree with my colleagues’ analysis regarding the preference

action. I write separately, however, to make plain my view that, while

litigation involving the attachment lien was inevitable, a preference action

to set it aside was unnecessary. Mr. Jue obtained his attachment lien under

California law and during the 90 day preference period preceding

Ms. Liu’s bankruptcy filing. I, thus, conclude that under California law it

terminated on the petition date.

In early 1979, the California Legislature anticipated Congressional

enactment of the new bankruptcy code. The Legislative Counsel’s Digest,

as relevant here, discussed this pending legislation as follows:

AB 617, as introduced, McAlister (Jud.). Attachment.

Under existing state law, . . . the filing of a petition in

bankruptcy terminates a lien . . . of attachment if the lien was

created within 4 months prior to the . . . the filing of the

petition.

This bill would reduce such time period to 90 days,

consistent with the 90-day preference period of the recently

enacted federal Bankruptcy Reform Act of 1978 (hereinafter

Act).

Existing law provides that, where a lien of attachment

terminates as a result of the . . . filing of a petition in

bankruptcy . . . the trustee, receiver, or debtor in possession if

1
there is no trustee or receiver, may secure the release of the

attachment by filing a request therefor. The recently enacted

federal Act prohibits a bankruptcy judge from appointing a

receiver in a bankruptcy case but authorizes appointment of an

interim trustee.

This bill would delete receivers as a category of persons

who may secure the release of attachment and substitute

interim trustees, thus making state law consistent with federal

law.

Under current federal law, a court must determine

whether or not a transfer should be preserved for the benefit of

a bankrupt estate where such transfer has been avoided.

However, the recently enacted federal Act, to take effect

October 1, 1979, provides that any avoided transfer is

automatically preserved for the benefit of the estate. Existing

state law acknowledges that, under federal law, the bankruptcy

court could order a lien preserved for the benefit of a bankrupt

estate.

This bill would delete such acknowledgment in state law

and, instead, provide, consistent with the recently enacted

federal Act, that a lien of . . . attachment terminated by the

filing of a petition commencing a case under specified federal

law is preserved for the benefit of the bankrupt estate.

The bill would become effective immediately as an

urgency measure, but would not become operative until

October 1, 1979, thus coinciding with the operative date of the

federal Act.

The bill would not apply to any bankruptcy case

commenced prior to October 1, 1979.

A.B. 617, Assemb. Reg. Sess., at 1-2 (Cal. 1979-80).

Consistent with this statement of legislative intent, the California

2
Legislature enacted C.C.P. § 493.030(b) which, since its operative date of

October 1, 1979, has stated as follows:

The filing of a petition commencing a voluntary or involuntary

case under Title 11 of the United States Code (Bankruptcy)

terminates a lien of . . . attachment if the lien was created within

90 days prior to the filing of the petition.

C.C.P. § 493.040 recognizes that, as a practical matter, the automatic

termination of the lien may not accomplish a return of assets or a

clarification of the public record. So, it provides a procedure for acquiring

such cooperation. In particular, the levying officer must release the

attachment 10 days from the date of mailing of papers to the plaintiff

unless otherwise ordered. C.C.P. § 493.040(f). 

Finally, as relevant here, C.C.P. § 493.060(b) provides as follows:

Upon the filing of petition commencing a case under Title 11 of

the United States Code (Bankruptcy), a lien terminated

pursuant to this chapter is preserved for the benefit of the

estate.

These provisions of California law were clearly intended to mirror

the Bankruptcy Code and to provide for release of attachment liens without

the necessity of an involved judicial process. See In re Wind Power Sys., Inc.

v. Cannon Financial Group, Inc. (In re Wind Power Sys., Inc.), 841 F.2d 288, 293

(9th Cir. 1988) (“The purpose of [C.C.P. § 493.030(b)] is to have a lien of

attachment declared void without court action.”).

During oral argument, we asked counsel for the chapter 7 trustee

3
why he filed a preference action; he responded only with a nonspecific

concern regarding preservation of the lien for the benefit of the estate. But,

C.C.P. § 493.060(b) already provides for lien preservation. And in my

review I found no case even questioning that California law automatically

invalidated attachment liens and preserved them for the benefit of the

estate.

As a result, I believe that the preference action was unnecessary.

Under California law, the lien had already ceased to exist. And under

California law, the lien had already been preserved for the benefit of the

estate. All that was left here was for the trustee to obtain an order requiring

expungement of the attachment from the public record.

Having said the above, I again acknowledge that this is an unusual

case. First, Mr. Jue also obtained a stipulated judgment during the

preference period. But the record does not evidence that he also obtained a

judgment lien. I found no case holding that a judgment during the

preference period negated automatic termination of a preference period

attachment lien. And, as my colleagues make clear, Mr. Jue did not raise

defenses arising under preference law; he attacked the bonafides of the

bankruptcy filing and argued that the attachment itself arose outside the

90 days prior to filing the petition. Thus, I acknowledge again that this

litigation was inevitable; Mr. Jue would have raised these points even if the

trustee took the path I suggest and merely sought expungement of the

4
attachment from the public record. 

In sum, I feel compelled to make these points because silence may be

viewed as a green light at best, and at worst a mandate, that trustees ignore

the California law that terminates attachment liens obtained during the 90-

day preference period. In my opinion, they shouldn’t.

5