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FILED

DEC 02 2016

SUSAN M. SPRAUL, CLERK

U.S. BKCY. APP. PANEL

OF THE NINTH CIRCUIT

NOT FOR PUBLICATION

UNITED STATES BANKRUPTCY APPELLATE PANEL

OF THE NINTH CIRCUIT

In re: ) BAP No. CC-16-1100-DKiF

)

ADVANCED BIOMEDICAL, INC., ) Bk. No. 14-15938-MW

)

Debtor. ) Adv. Proc. No. 14-01275-MW

______________________________)

)

ADVANCED BIOMEDICAL, INC., )

)

Appellant, )

)

v. ) M E M O R A N D U M1

)

SPECIALTY LABORATORIES, INC., )

)

Appellee. )

______________________________)

Argued and Submitted on November 17, 2016

at Pasadena, California

Filed - December 2, 2016

Appeal from the United States Bankruptcy Court

for the Central District of California

Honorable Mark S. Wallace, Bankruptcy Judge, Presiding

 

Appearances: Dixon Leon Gardner argued for Appellant; Timothy

Carl Aires of Aires Law Firm argued for Appellee.

 

Before: DUNN,2 KIRSCHER, and FARIS, Bankruptcy Judges.

1 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.

2 Hon. Randall L. Dunn, United States Bankruptcy Judge for

the District of Oregon, sitting by designation.
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Appellant Advanced Biomedical, Inc. (“ABI”) appeals from a

bankruptcy court judgment determining that, because ABI’s

accounts receivable (“Receivables”) were assigned prepetition to

Specialty Laboratories, Inc. (“SLI”), the Receivables were not

property of ABI’s chapter 113 bankruptcy estate. 

We AFFIRM.

I. BACKGROUND

SLI sued ABI in the Superior Court (“Superior Court”) of the

State of California, County of Orange (“State Court Litigation”). 

The State Court Litigation was resolved on January 10, 2014, by

the entry of a stipulated judgment (“State Court Judgment”) in

favor of SLI and against ABI in the amount of $227,386.99. On

January 15, 2014, SLI filed with the California Secretary of

State a Notice of Judgment Lien against ABI. 

When the State Court Judgment remained unsatisfied, SLI

sought and obtained relief in the Superior Court pursuant to Cal.

Civ. Proc. Code § 708.510 in the form of an “Assignment Order Re:

Rights to Payment of Money Due or to Become Due” (“Assignment

Order”). The Assignment Order provides in relevant part:

IT IS HEREBY ORDERED that the interest, if any, of

. . . [ABI] . . . in its rights to payment of money due

or to become due, whether styled accounts receivable,

general intangibles, accounts, deposit accounts,

royalties, fees, commissions, or otherwise, from its

activities as a provider of clinical laboratory

services to physicians, clinics, hospitals, and other

healthcare providers, whether standing in the name of

“Advanced Biomedical Inc.” or “Pathology Laboratory

Services,” and from or through any business entity or

3 Unless specified otherwise, all chapter and section

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

all “Rule” references are to the Federal Rules of Bankruptcy

Procedure, Rules 1001–9037.

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person [with] which they are affiliated . . . is

assigned to [SLI] . . . to the extent necessary to

satisfy the judgment entered in this action in full,

which as of September 3, 2014, is $242,320.07. 

The Assignment Order was entered in the State Court Litigation on

September 25, 2014. 

On October 1, 2014, ABI filed a voluntary Chapter 11

petition. On October 14, 2014, SLI commenced an adversary

proceeding by filing a complaint (“Complaint”), amended on

January 8, 2015, against ABI. The Complaint sought a

determination that the Receivables were not property of ABI’s

bankruptcy estate.4 

Although the record on appeal does not include a copy of

ABI’s answer to the Complaint, ABI’s amended trial brief filed on

November 6, 2015, asserted the following theories in opposition

to the Complaint:

- SLI has no right to enforce the Assignment Order. Under

this theory, ABI (1) disputes that under Cal. Civ. Proc. Code 

§ 708.510 the Assignment Order constitutes an absolute assignment

of the Receivables to SLI; (2) asserts that the Assignment Order

is not enforceable because (a) the IRS held a first priority lien

in the Receivables at the time the Assignment Order was entered

and because the IRS never received notice of the proceedings that 

resulted in the entry of the Assignment Order; (b) SLI never gave

notice of it to “anyone who owes money to [ABI]”; (c) SLI never

gave a written demand to ABI to turn over the proceeds of the

4 As alternative relief, the Complaint sought a

determination that SLI was a judgment lien creditor with a

security interest in the Receivables.

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Receivables; (d) SLI failed to follow proper procedures to

enforce the Assignment Order; and (e) SLI’s proof of claim filed

in the bankruptcy case admits that the Assignment Order is not

part of SLI’s claim.

- SLI failed to include debtor’s other secured creditors and

obligors in the adversary proceeding with the result that the

bankruptcy court cannot decide the priority and extent of SLI’s

lien.

- Assignment orders against debtors-in-possession are

disfavored as a matter of Ninth Circuit law.

- SLI filed the adversary proceeding in bad faith.

ABI’s post-trial brief filed on November 25, 2015, restated

its arguments that under California law, the Assignment Order is

ineffective to transfer title of ABI’s Receivables to SLI.

The bankruptcy court tried the issues raised in the

Complaint on November 20, 2015. Three days after the trial,

ABI’s counsel contacted a Bankruptcy Specialist at the Internal

Revenue Service (“IRS”). Shortly thereafter, the United States

of America, on behalf of its agency, the IRS, moved to intervene

in the Adversary Proceeding. The bankruptcy court granted the

motion and authorized the IRS to file a post-trial brief to

address the issue of whether the Assignment Order was effective

where recorded IRS tax liens existed at the time the Assignment

Order was entered. ABI joined in the IRS’s post-trial brief, and

incorporated into that joinder a “response,” in which ABI for the

first time asserted that any levy by SLI against the Receivables

under the Assignment Order constituted both a preferential

transfer and a violation of the absolute priority rule. 

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The bankruptcy court entered its Memorandum Decision and

Order (“Decision”) on March 22, 2016, in which it determined that

the Assignment Order effected an absolute transfer of ABI’s

interest in the Receivables to SLI, such that SLI became the

owner of the Receivables not later than September 25, 2014. The

Decision was followed by entry of judgment in favor of SLI on

March 31, 2016. ABI filed a timely Notice of Appeal on April 13,

2016. 

II. JURISDICTION

The bankruptcy court had jurisdiction under 28 U.S.C.

§§ 1334 and 157(b)(2)(A) and (O). We have jurisdiction under

28 U.S.C. § 158.

III. ISSUES

Whether the bankruptcy court erred when it determined that

the Assignment Order, entered pursuant to Cal. Code of Civ. Proc.

§ 708.510, was an absolute assignment.

Whether the bankruptcy court erred when it determined that

the Assignment Order was effective to transfer to SLI,

prepetition, ABI’s interest in the Receivables, such that the

Receivables were not property of ABI’s bankruptcy estate.

IV. STANDARDS OF REVIEW

We review a bankruptcy court's legal conclusions and

application of state law de novo. Circle K Corp. v. Collins

(In re Circle K Corp.), 98 F.3d 484, 486 (9th Cir. 1996); Hopkins

v. Cerchione (In re Cerchione), 414 B.R. 540, 545 (9th Cir. BAP

2009).

///

///

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V. DISCUSSION

A. The Scope of This Appeal is Limited to Matters Considered by

the Bankruptcy Court.

This panel generally will not consider a claim or issue that

was not properly raised in the bankruptcy court. Mano–Y & M,

Ltd. v. Field (In re Mortg. Store, Inc.), 773 F.3d 990, 998 (9th

Cir. 2014); Hasse v. Rainsdon (In re Pringle), 495 B.R. 447, 453

n.2 (9th Cir. BAP 2013).

Citing Jovanich v. United States, 813 F.2d 1035, 1037 (9th

Cir. 1987), ABI includes in its opening brief arguments that it

concedes “were not raised in the pleadings, at trial, and the

post-trial” proceedings, asserting that our consideration of

those arguments is “needed to prevent a miscarriage of justice

and to preserve the integrity of the judicial process.” ABI’s

Opening Brief at 11:6-9. However, as stated in Jovanich, the

Ninth Circuit has permitted “only narrow and discretionary

exceptions to the general rule against considering issues for the

first time on appeal.” 813 F.2d at 1037. Specifically, new

issues are considered “(1) when review is necessary to prevent a

miscarriage of justice or to preserve the integrity of the

judicial process, (2) when a change in law raises a new issue

while an appeal is pending, and (3) when the issue is purely one

of law.” Id. Under more recent case law, the Ninth Circuit

recognizes four exceptions which authorize an appellate court to

exercise its discretion to reach issues otherwise waived in the

trial court:

- Exceptional circumstances explain why the issue was

not raised in the trial court;

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- New issues have become relevant while the appeal was

pending because of a change in the law;

- The issue presented was purely legal and the opposing

party will not be prejudiced by the failure to raise

the issue in the district court; or

- Plain error has occurred and the issue must be

addressed to avoid an injustice.

See Kaass Law v. Wells Fargo Bank, N.A., 799 F.3d 1290, 1293 (9th

Cir. 2015). 

ABI’s Opening Brief is replete with arguments not presented

to the bankruptcy court, including that (1) the Assignment Order

violated due process under the 5th and 14th Amendments of the

U.S. Constitution, (2) transfer of title to the Receivables to

SLI without the IRS’s consent and before its priority tax liens

were paid in full constitutes a conversion pursuant to Cal. Civ.

Proc. Code § 701.040, and (3) the Assignment Order is avoidable

as a preference pursuant to § 547 of the Bankruptcy Code. We

decline ABI’s invitation to consider new issues in this appeal.

“[W]e will not reframe an appeal to review what would be in

effect a different case than the one decided by the [trial]

court.” Baccei v. United States, 632 F.3d 1140, 1149 (9th Cir.

2011). Further, an issue merely alluded to or raised in passing

at the trial court level, such as the preference issue raised in

ABI’s joinder to the IRS’s post-trial brief, is not necessarily

preserved for appeal. See Conservation NW v. Sherman, 715 F.3d

1181, 1188 (9th Cir. 2013). Here, the preference issue was

buried in a brief authorized by the bankruptcy court solely on

the issue of whether the existence of IRS tax liens precluded the

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Assignment Order from becoming effective as a matter of law.5

B. The Receivables Are Not Property of ABI’s Bankruptcy Estate.

When ABI filed its bankruptcy petition, all of its legal or

equitable interests in property held on that date became property

of its bankruptcy estate. See § 541. In this appeal, the

ultimate issue is whether the Assignment Order served to divest

ABI of title to the Receivables before the bankruptcy case was

commenced. The existence and scope of ABI’s interest in the

Receivables is determined under California state law. See Butner

v. United States, 440 U.S. 48, 54 (1979).

1. The Assignment Order Effectively Transferred Title to

the Receivables to SLI.

Cal. Civ. Proc. Code § 708.510 provides the relevant

statutory authority for disposition of this appeal:

Assignment of right to payments; service of notice;

factors considered in ordering assignment; amount

assigned

(a) Except as otherwise provided by law, upon

application of the judgment creditor on noticed motion,

the court may order the judgment debtor to assign to

the judgment creditor . . . all or part of a right to

payment due or to become due, whether or not the right

is conditioned on future developments . . .

. . . 

(d) A right to payment may be assigned pursuant to this

article only to the extent necessary to satisfy the

5 Further, subsequent to filing the instant appeal, ABI

commenced an adversary proceeding in the bankruptcy court seeking

to avoid the Assignment Order as a preferential transfer. SLI

filed a motion to dismiss the complaint, inter alia, because it

argues that the preference claim was a compulsory counterclaim in

the litigation which resulted in the judgment upon which this

appeal is based. The proceedings on these issues are ongoing in

the bankruptcy court.

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money judgment.

. . .

(Emphasis added.)

The bankruptcy court determined that, on its face, the

Assignment Order satisfied all of the requirements and

prerequisites of Cal. Civ. Proc. Code § 708.501(a) and (d):

The Assignment Order recites that it was issued in

response to a noticed motion (“with proof of service

having been made”) brought by [SLI]. The [State Court]

assigned to [SLI] all rights to payment due or to

become due, but only to the extent necessary to satisfy

the [State Court Judgment] of $242,320.07. No doubt

exists that [SLI] is a “judgment creditor” within the

meaning of section 708.510(a).

Decision at 6:3-7. 

Further, the bankruptcy court determined that a direct

assignment of the Receivables by the Superior Court to SLI did

not impact the validity of the assignment, despite the language

of Cal. Civ. Proc. Code § 708.501(a), which appears to authorize

the Superior Court only to “order the judgment debtor to assign

to the judgment creditor.” In reaching this conclusion, the

bankruptcy court relied on Weingarten Realty Investors v. Chiang,

212 Cal. App. 4th 163 (4th Dist. 2012). As noted by the

bankruptcy court, in Weingarten, the California Court of Appeal

found no defect in the assignment order before it which directly

transferred property to a judgment creditor rather than merely

ordering the judgment debtor to transfer the property.

We agree that, by its terms, the Assignment Order

transferred title to the Receivables to SLI as authorized by Cal.

Civ. Proc. Code § 708.510, and that the direct assignment is

valid under California law.

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However, ABI asserts the Assignment Order was not effective

to transfer title based on the language of Cal. Civ. Proc. Code

§ 708.530, which provides: 

(a) Except as provided in subdivision (b), the effect

and priority of an assignment ordered pursuant to this

article is governed by Section 955.1 of the Civil Code.

For the purpose of priority, an assignee of a right to

payment pursuant to this article shall be deemed to be

a bona fide assignee for value under the terms of

Section 955.1 of the Civil Code.

Cal. Civil Code § 955.1 provides:

(a) Except as provided in Sections 954.5 and 955

and subject to subdivisions (b) and (c), a transfer

other than one intended to create a security interest

pursuant to paragraph (1) or (3) of subdivision (a) of

Section 9109 of the Commercial Code, of any payment

intangible, as defined in Section 9102 of the

Commercial Code, and any transfer of accounts, chattel

paper, payment intangibles, or promissory notes

excluded from the coverage of Division 9 of the

Commercial Code by paragraph (4) of subdivision (d) of

Section 9109 of the Commercial Code shall be deemed

perfected as against third persons upon there being

executed and delivered to the transferee an assignment

thereof in writing.

 (b) As between bona fide assignees of the same right

for value without notice, the assignee first giving

notice of the right to the obligor in writing has

priority.

 (c) The assignment is not, of itself, notice to the

obligor so as to invalidate any payments made by the

obligor to the transferor.

. . .

ABI contends that taken together these two statutes

establish that the transfer under the Assignment Order is only

“perfected” in the assignee as a creditor, not as an owner. We

disagree. An assignee is not a creditor for purposes of these

statutes. By its terms, Cal. Civ. Proc. Code § 708.530 provides

that SLI is “deemed an assignee for value.” Cal. Civil Code

§ 955.1 merely establishes SLI’s rights with respect to third

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parties. Specifically, by giving notice to an obligor, SLI could

obtain priority over subsequent assignees. 

As further support for its contention that there was no

absolute assignment of the Receivables, ABI points out that there

was no mechanism in the Assignment Order to assign back to ABI

rights to collect the Receivables once the underlying judgment

debt had been satisfied. ABI argues that the absence of a

reassignment mechanism establishes there was no absolute transfer

in the first instance. However, there was no need for the

Assignment Order to establish a reassignment mechanism. The

existence of Cal. Civ. Proc. Code § 708.560, which provides a

statutory mechanism for reassignment, defeats this argument. 

Cal. Civ. Proc. Code § 708.560 provides:

(a) Either the judgment creditor or the judgment debtor

may apply to the court on noticed motion for an order

to modify or set aside the assignment order. The

notice of motion shall be served on the other party. 

Service shall be made personally or by mail.

(b) The court shall make an order modifying or setting

aside the assignment order upon a showing that there

has been a material change in circumstances since the

time of the previous hearing on the assignment order. 

The court may order a reassignment of the right to

payments as necessary. The order shall state whether

and to what extent it applies to payments already made.

The bankruptcy court did not err when it determined that

title to the Receivables was transferred to SLI prepetition. As

such, the Receivables did not become property of ABI’s bankruptcy

estate.

2. The Assignment Order is Not Void.

Notwithstanding that the Assignment Order was entered as

authorized pursuant to Cal. Civ. Proc. Code § 708.510 and

expressly transfers the Receivables to SLI, ABI contends that a

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number of “infirmities” nevertheless render the Assignment Order

void. In addressing these varied arguments, we begin with the

premise that 

The preclusive effect of a state court judgment in a

subsequent federal lawsuit generally is determined by

the full faith and credit statute, which provides that

state judicial proceedings “shall have the same full

faith and credit in every court within the United

States . . . as they have by law or usage in the courts

of such State . . . from which they are taken.”

28 U.S.C. § 1738.

Gayden v. Nourbakhsh (In re Nourbakhsh), 67 F.3d 798, 800 (9th

Cir. 1995) (internal citations omitted). ABI did not appeal the

Assignment Order, so for purposes of the current dispute, it is

final.

First, ABI asserts that the Assignment Order violates

bankruptcy policies and purposes. Specifically, ABI contends

that the purpose of bankruptcy is to rehabilitate debtors

successfully and to maximize the value of the bankruptcy estate,

and that bankruptcy courts are required to preserve a level

playing field for all parties. ABI’s argument in this regard

suggests that, in determining that the Assignment Order

effectively transferred ABI’s interest in the Receivables, the

bankruptcy court violated this purpose and has increased rather

than minimized litigation in the bankruptcy case because the

bankruptcy court’s Decision “forces [ABI] to file an adversary

proceeding to recover the Receivables under [§ 547] as a

preferential transfer.” Opening Brief at 20:17-18. Nothing in

the Bankruptcy Code or case law supports ABI’s contention that,

as a matter of policy, a bankruptcy court must determine an order

void so that a party does not need to litigate whether that order

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is avoidable as a preferential transfer.

Second, ABI asserts that the Assignment Order is void

because it violates California law. Citing Global Money Mgmt. v.

McDonnold, 2009 WL 3352574 *3 (S.D. Cal. Oct. 15, 2009), ABI

contends that the Assignment Order is not enforceable. ABI

asserts that the California court could not affect title to

property in another state even with personal jurisdiction over

the property’s owner. ABI asserts that Global Money Mgmt. stands

for the proposition that “a California Superior Court has

personal jurisdiction over a non-resident defendant who owns

property outside of California, because there is no change of

title to property under any assignment order issued under [Cal.

Civ. Proc. Code] § 708.510.” Opening Brief at 23:18-24:10 

(emphasis added). By this argument ABI appears to contend that

to the extent the Receivables were owed by persons or entities

outside of California, the California court had no jurisdiction

to assign them to SLI. The error in this argument stems from

ABI’s misapprehension of the nature of the Assignment Order. 

What was assigned to SLI was ABI’s “rights to payment of money

due or to become due.” Nothing in the Assignment Order purports

to impact the rights of any person or entity obligated to pay. 

See Cal. Civ. Proc. Code § 708.540 (“The rights of an obligor are

not affected by an order assigning the right to payment until

notice of the order is received by the obligor. For purposes of

this section, ‘obligor’ means the person who is obligated to make

payments to the judgment debtor or who may become obligated to

make payments to the judgment debtor depending upon future

developments.”). Further, as stated by the bankruptcy court, 

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The mere fact that [the Assignment Order] may not be

effective against a particular obligor (or even all

obligors) because of lack of notice to them does not

alter the effectiveness of the [Assignment Order]

against [ABI].

Decision at 10:23-26. We observe, as did the bankruptcy court,

that Cal. Civ. Proc. Code § 708.510 contains no condition

precedent that obligors receive notice prior to the issuance of

the Assignment Order.

Third, ABI asserts that the Assignment Order is void because

the IRS did not receive notice of the proceedings under Cal. Civ.

Proc. Code § 708.510. As stated by the bankruptcy court,

“[N]othing in the language of the Assignment Order mentions the

IRS or in any way affects or purports to affect the IRS’s

rights.” Decision at 9:28-10:1. Nothing in Cal. Civ. Proc. Code

§ 708.510 requires that lien creditors receive notice prior to

the issuance of the Assignment Order. This is not surprising,

because an assignee takes property subject to existing liens.

Moreover, 26 U.S.C. § 7425 preserves the IRS’s liens in the

context of the Assignment Order. 

Notwithstanding our discussion of ABI’s contentions that the

Assignment Order is void, we restate that the Assignment Order is

a final order entered in the State Court Litigation that ABI did

not appeal. ABI’s challenges to the validity of the Assignment

Order therefore constitute nothing more than an impermissible

collateral attack on the Assignment Order.

3. The Bankruptcy Court’s Judgment is Not Void.

ABI asserts that the bankruptcy court’s judgment itself is

void, because “bankruptcy law disfavors levies and assignments.” 

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ABI cites to cases6 which hold that a bankruptcy court does not

enforce a levy against property of the bankruptcy estate. While

true, it is a principle inapplicable in the context of this

appeal. There has been no attempt to levy in the bankruptcy

court. The Assignment Order was entered before the bankruptcy

petition was filed, and the bankruptcy court determined that the

Receivables were not property of the bankruptcy estate for the

reasons cited above.

VI. CONCLUSION

The Assignment Order was effective to transfer title to the

Receivables to SLI prior to the commencement of the bankruptcy

case. Therefore, the Receivables never became property of ABI’s

bankruptcy estate. We AFFIRM the judgment of the bankruptcy

court.

We deny ABI’s request that in the event we affirm the

judgment we require the bankruptcy court to consider issues

relating to the value of the Receivables, the impact of the IRS’s

liens on SLI’s rights in the Receivables, and the impact on SLI’s

rights in the Receivables to the extent obligors are not

California residents as not properly within the scope of issues

before the Panel to decide in this appeal. Such issues may or

may not have to be decided by the bankruptcy court in further

proceedings in ABI’s bankruptcy case.

6 Priestly v. Hilliard & Tabor (In re Argonaut Shoe Co.),

187 F. 784 (9th Cir. 1911); Grant v. Burns (In re Am. Elec. Tel.

Co.), 211 F. 88 (7th Cir. 1914); and NVLAND, Inc. v. Vogel

(In re Ocean Downs Racing Ass’n, Inc.), 164 B.R. 249 (Bankr. D.

Md. 1993).

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