1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

 

UNITED STATES BANKRUPTCY APPELLATE PANEL

OF THE NINTH CIRCUIT

In re: ) BAP No. CC-13-1229-PaTaD

) 

TRACHT GUT, LLC, ) Bk. No. SV 12-20308-MT 

)

Debtor. ) Adv. No. SV 12-01433-MT

______________________________)

)

TRACHT GUT, LLC, )

)

Appellant, )

) 

v. ) O P I N I O N

)

COUNTY OF LOS ANGELES )

TREASURER AND TAX COLLECTOR; )

DAVID HAGHNAZARZADEH; YURI )

VOLODINSKY, )

 )

Appellees. )

______________________________)

Argued and Submitted on November 22, 2013

at Pasadena, California

Filed - January 3, 2014

Appeal from the United States Bankruptcy Court

for the Central District of California

Honorable Maureen Tighe, U.S. Bankruptcy Judge, Presiding

 

Appearances: Mark Eugene Goodfriend argued for appellant Tracht

Gut, LLC. Barry S. Glaser argued for appellee

County of Los Angeles Treasurer and Tax Collector.

Before: PAPPAS, TAYLOR and DUNN, Bankruptcy Judges.

FILED

JAN 03 2014

SUSAN M. SPRAUL, CLERK

U.S. BKCY. APP. PANEL

OF THE NINTH CIRCUIT
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

1

 Unless otherwise indicated, all chapter and section

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

“Rule” references are to the Federal Rules of Bankruptcy

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

of Civil Procedure.

-2-

PAPPAS, Bankruptcy Judge:

Chapter 111 debtor Tracht Gut, LLC (“Debtor”) appeals the

orders of the bankruptcy court dismissing without leave to amend

its adversary complaint against appellees Los Angeles County

Treasurer and Tax Collector (“the County”), David Haghnazarzadeh

(“Haghnazarzadeh”) and Yuri Volodinsky (“Volodinsky”) under Rule

7012 and Civil Rule 12(b)(6), and denying reconsideration of that

order under Rule 9024 and Civil Rule 60(b)(1). We AFFIRM. 

FACTS

This appeal concerns Debtor’s efforts to avoid the County’s

prepetition tax sales of two parcels of real property formerly

owned by Debtor.

The first property is located on Hatteras Street in Tarzana,

California (the “Hatteras Property”). Real property taxes owed

to the County had not been paid on the Hatteras Property since

2008. Pursuant to California tax law, the properties were “tax

defaulted” and “subject to [the County’s] power to sell” three

years after default. Debtor purchased the Hatteras Property from

E.R. Financial Services & Development, Inc. (“E&N”), NH Simpson

Partnership, OF General Partnership, and EM Partnership on April

9, 2012, for $60,000, subject to three deeds of trust totaling

$920,000. Debtor recorded the grant deed on July 11, 2012.
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

2

 The recorded grant deed, however, also provided that the

transfer was a “bona fide gift and grantor received nothing in

return.” The parties do not dispute that Debtor was the owner of

the San Fernando Property.

-3-

The second property is located in San Fernando, California

(the “San Fernando Property” and together, the “Properties”). 

Taxes on the San Fernando Property also had not been paid since

2008. On April 9, 2012, E&N transferred the San Fernando Property

to Debtor for “valuable consideration.”2 The record does not

indicate if there were any encumbrances on the San Fernando

Property at the time of that sale. Debtor recorded a grant deed

on November 26, 2012, one day before filing its bankruptcy

petition. 

On August 31, 2012, the County served a Notice of Auction

for a tax sale of the Properties on all interested parties; the

sale was set for October 22, 2012. The Notice of Auction was

published on that date in the Los Angeles Daily News. The record

indicates that Debtor, as record owner of the Hatteras Property,

was notified of the auction. Debtor is not on the list of

parties given notice concerning the sale of the San Fernando

Property, likely because the record owner of the San Fernando

Property in August 2012 was still E&N, who received notice.

The County conducted the tax sales of the Properties at

public auction on October 22, 2012. The Hatteras Property was

sold to appellee Haghnazarzadeh for $300,000, subject to the

three deeds of trust. The San Fernando Property was sold to

appellee Volodinsky for approximately $100,000. 

Debtor filed its petition for relief under chapter 11 on
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

-4-

November 27, 2012. On December 11, 2012, Debtor filed schedules. 

In Schedule A, Debtor claimed to own both of the Properties and

indicated that:

A disputed tax sale occurred on or about October 21,

2012. The sales price was far less than the market

value of this property. Debtor attempted to pay the

taxes in full, which the [County] refused to take. As

of the date of this petition, no Tax Deed has been

recorded and Debtor disputes the validity of the

transfer as an avoidable transfer.

The tax deeds transferring title of the Hatteras Property to

Haghnazarzadeh and the San Fernando Property to Volodinsky were

both recorded by the County on December 13, 2012.

On December 12, 2012, Debtor commenced the adversary

proceeding at issue in this appeal. In its complaint against the

Appellees, Debtor asked the bankruptcy court to grant relief on

five separate claims: (1) to avoid the tax sales as fraudulent

transfers; (2) for declaratory judgment; (3) for an injunction;

(4) for violation of the automatic stay; and (5) for unjust

enrichment.

The County filed a motion to dismiss the complaint on

January 22, 2013, citing Civil Rule 12(b)(6), made applicable in

adversary proceedings by Rule 7012. The County argued that

Debtor, on all five counts, had failed to state an adequate claim

for relief. According to the County, there were no facts alleged

in the complaint to support granting any relief to Debtor on its

claims. Additionally, the County argued that the Properties were

each sold before bankruptcy was commenced, at a regularly

scheduled tax sale with competitive bidding procedures, all in

compliance with applicable state law. As a result, the County

contended, the purchase price paid by the buyers of the
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 3

 Volodinsky did not actively participate in the bankruptcy

court proceedings.

-5-

Properties should be conclusively presumed to represent

reasonably equivalent value and, therefore, there was no legal

basis to avoid the tax sales as fraudulent transfers under

§ 548(a). Further, since the tax sales occurred prepetition, the

County argued that the Properties were not property of the estate

under § 541 and thus were not protected by the automatic stay

when Debtor’s bankruptcy petition was filed. Haghnazarzadeh

filed a substantially similar motion to dismiss under Civil Rule

12(b)(6) on January 24, 2013.3

Debtor responded to the dismissal motions on February 11,

2013. It generally repeated its arguments that the sales were

not made for reasonably equivalent value and, thus, were

avoidable.

The hearing on the motions to dismiss was set for February

20, 2013. Before the hearing, the bankruptcy court posted a

tentative ruling providing, in part:

The Complaint is comprised purely of threadbare

recitals of the elements of the causes of action and

conclusory statements. As it reads, the Complaint and

the allegations therein, are not entitled to the

assumption of truth. Most of the information

surrounding the events in question (dates, relationship

among parties, etc.) is fleshed out solely within the

[motions to dismiss]. . . . For all the reasons stated

above, the Court shall dismiss the Complaint with leave

to amend.

The bankruptcy court’s tentative ruling also indicated its intent

to dismiss Debtor’s claims for declaratory relief and an

injunction because they were not claims, but merely forms of

relief.
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

-6-

At the hearing on the motions to dismiss on February 20,

2013, the bankruptcy court heard arguments from counsel for

Debtor, the County and Haghnazarzadeh. The bankruptcy court

concluded that the complaint should be dismissed and that

amendment of the complaint would be an exercise in futility.

Well, I generally allow one amendment . . . but this

complaint was unbelievably bad and just clearly was

such a placeholder to see if you could stab at some

legal theory that might slow things down, but it was

shockingly bad, and now I’m thinking about the legal

theories that you’ve really refocused my attention on

here at the argument. . . . I agree [with the County]

that I don’t see what you could plead to get around,

and you haven’t convinced me, Mr. Brownstein [Debtor’s

counsel], that you have some theory that can allow you

to plead facts which would warrant relief under

[§] 548. . . . So I’m going to grant the motion to

dismiss with prejudice for the reasons stated in the

tentative as supplemented by the argument here today.

Hr’g Tr. 10:18—11:12, April 20, 2013. 

The bankruptcy court entered an order granting the motions

to dismiss on March 13, 2013 (the “Dismissal Order”), stating

that:

1. The Debtor can never amend the Complaint to state

a viable cause of action as the real properties

foreclosed upon at the duly conducted tax sale of

the subject properties held on October 22, 2012 as

set forth in the Complaint, were and are not

properties of the Debtor’s estate for purposes of

11 U.S.C. § 541;

2. [t]he Debtor could not properly allege that the

County’s post-petition recording of the deeds

violated the automatic stay in 11 U.S.C. § 362 as

it was solely a ministerial act;

3. [t]he Debtor could not properly allege that the

duly conducted tax sale of the subject properties

could be the basis of an action under 11 U.S.C.

§§ 548 or 549; and 

4. [t]he Court thereby dismissed the Complaint, with

prejudice.
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

4 Debtor’s motion cites Civil Rules 55, 59 and 60,

applicable in adversary proceedings by Rules 7055, 9023 and 9024,

as authority for reconsideration, but Debtor only argued under

Civil Rule 60(b)(1). The bankruptcy court also analyzed Debtor’s

motion under that rule. Under these circumstances, Debtor’s

motion should have been treated as one under Civil Rule 59(e).

Am. Ironworks & Erectors, Inc. v. N. Am. Constr. Corp., 248 F.3d

892, 898-99 (9th Cir. 2001). However, since the outcome of

Debtor’s request would be the same under either standard, we also

consider only Debtor’s Civil Rule 60(b)(1) arguments. 

-7-

On March 27, 2013, Debtor filed a motion for reconsideration

of the Dismissal Order, arguing that “the judgment/order(s) were

entered as a result of surprise, excusable mistake, inadvertence

and/or neglect and/or error of law, that good cause exists

therefore, and that such relief would be in the interests of

justice.”4 Attached to the reconsideration motion was a proposed

First Amended Complaint. The First Amended Complaint contained

additional factual allegations for the first claim for avoidance

of the tax sales as fraudulent transfers, but simply restated

without factual support the second through fifth claims.

On May 7, 2013, the bankruptcy court entered a memorandum of

decision and an order denying reconsideration. The court also

concluded that Debtor’s proposed First Amended Complaint was not

viable:

 The fact that Debtor now has a proposed amended

complaint is too little too late. . . . Debtor had

ample opportunity to address the lack of a viable

complaint prior to the filing of the [dismissal

motions]. . . . There is no explanation why Debtor did

not complete due diligence or amend within the 21 days

following the filing of the complaint. Fed. R. Civ. P.

15(a)(1)(A). There is also no explanation why Debtor

did not complete due diligence and amend in response to

the [Civil Rule 12(b)(6) motions] as opposed to filing

an Opposition. Fed. R. Civ. P. 15(a). That Debtor’s

counsel filed an opposition to the [dismissal motions]

and now admits that his complaint was conclusory and
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

5 This is a proceeding which, in part, involved Debtor’s

attempt to recover a fraudulent transfer from third parties. 

Thus, the constitutional power of the bankruptcy court to enter a

final judgment resolving such claims may be in doubt for the

reasons discussed in Stern v. Marshall, 131 S. Ct. 2594 (2011)

and Exec. Benefits Ins. Agency v. Arkison (In re Bellingham Ins.

Agency, Inc.), 702 F.3d 553 (9th Cir. 2011), cert. granted, 133

S. Ct. 2880 (2013). Since none of the parties, either in the

bankruptcy court or this appeal, have questioned the authority of

the bankruptcy court, we also express no opinion concerning that

topic.

-8-

lacked specificity tests the spirit of Rule 11. . . . 

Debtor failed at every stage of the litigation process

to provide the grounds of its entitlement to relief. 

Debtor’s failure to timely conduct due diligence and

amend evidences Debtor’s intent to merely delay the

litigation process. . . . Debtor’s failure to present 

a timely viable complaint was purposeful and a delaying

tactic. The Court declines to exercise its discretion

in favor of a party whose “gross negligence” has caused

the mistake from which relief is sought.

Debtor filed a timely appeal of the Dismissal Order and the

order denying reconsideration on May 14, 2013. 

JURISDICTION

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

§§ 1334 and 157(b)(2)(A) and (H).5 We have jurisdiction under 28

U.S.C. § 158.

ISSUES

Whether the bankruptcy court erred in dismissing Debtor’s

complaint under Civil Rule 12(b)(6).

Whether the bankruptcy court abused its discretion in

declining to allow Debtor to file an amended complaint.

Whether the bankruptcy court abused its discretion in

denying Debtor’s motion for reconsideration of the dismissal

order.
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

-9-

STANDARDS OF REVIEW

We review de novo the bankruptcy court’s order dismissing a

complaint under Civil Rule 12(b)(6). AE ex rel. Hernandez v.

Cnty. of Tulare, 666 F.3d 631, 636 (9th Cir. 2012). A dismissal

without leave to amend and with prejudice is reviewed for abuse

of discretion. Id. at 636, 637-38.

Denial of a motion for reconsideration under Civil Rule

60(b)(1) is reviewed for abuse of discretion. Morris v. Peralta

(In re Peralta), 317 B.R. 381, 385 (9th Cir. BAP 2004). A

bankruptcy court abuses its discretion if it applies an incorrect

legal standard or misapplies the correct legal standard, or its

factual findings are illogical, implausible or without support

from evidence in the record. United States v. Hinkson, 585 F.3d

1247, 1262 (9th Cir. 2009) (en banc).

DISCUSSION

I.

The bankruptcy court did not err in 

dismissing Debtor’s complaint.

A. The bankruptcy court did not err in dismissing Debtor’s

claim for fraudulent transfer.

Under Rule 7012 and Civil Rule 12(b)(6), a defendant may ask

by motion that a complaint be dismissed if it fails to “state a

claim upon which relief can be granted.” In reviewing a Civil

Rule 12(b)(6) motion, the trial court must accept as true all

facts alleged in the complaint and draw all reasonable inferences

in favor of the plaintiff. Maya v. Centex Corp., 658 F.3d 1060,

1068 (9th Cir. 2011); Newcal Indus., Inc. v. Ikon Office

Solution, 513 F.3d 1038, 1043 n.2 (9th Cir. 2008). However, the
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

-10-

trial court need not accept as true conclusory allegations in a

complaint or legal characterizations cast in the form of factual

allegations. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555-56

(2007); Warren v. Fox Family Worldwide, Inc., 328 F.3d 1136, 1139

(9th Cir. 2003). To avoid dismissal under Civil Rule 12(b)(6), a

plaintiff must aver in the complaint “sufficient factual matter,

accepted as true, to ‘state a claim to relief that is plausible

on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)

(quoting Twombly, 550 U.S. at 570). A dismissal under Civil Rule

12(b)(6) may be based on either the lack of a cognizable legal

theory or on the absence of sufficient facts alleged under a

cognizable legal theory. Johnson v. Riverside Healthcare Sys.,

534 F.3d 1116, 1121 (9th Cir. 2008).

In deciding to dismiss it, the bankruptcy court described

Debtor’s original complaint as “unbelievably bad and just clearly

was such a placeholder to see if [Debtor] could stab at some

legal theory that might slow things down, but it was shockingly

bad[.]” Hr’g Tr. 10:18—20, April 20, 2013. We agree. 

Debtor’s first claim for relief in that complaint, which

asserted that the tax sales were avoidable fraudulent transfers,

consisted of a verbatim recitation of § 548(a)(1)(B), followed by

a single sentence:

As such, pursuant to 11 U.S.C. Sections 548 and 549, as

well as on state law grounds, including, but not

limited to, California Civil Code 3275, the tax sales

of the Properties conducted by Defendants should be

avoided and set aside.

Simply put, even under the liberal rules referenced above,

Debtor’s cavalier approach to pleading a claim for relief is

inadequate. The complaint plainly fails to allege the facts
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

-11-

necessary to state a claim for avoidance of the tax sales. 

As to Debtor’s four other claims for relief, two appear, on

their faces, to be legitimate claims (i.e., unjust enrichment and

violation of the automatic stay). However, like the claim for

fraudulent transfer, they too are cast entirely as conclusory

statements, not facts. As to Debtor’s “claim” for an injunction

and for declaratory relief, while the bankruptcy court correctly

noted that injunction and declaratory relief are remedies, the

court’s dismissal of those claims solely on that basis was likely

harmless error. Courts routinely consider injunctive and

declaratory relief “claims” as demands for relief, provided that

there are other claims and facts asserted in the complaint that

would warrant such remedies. Wankowski v. Taylor Bean & Whitaker

Mortg. Corp., 2010 WL 5141745, at *3 (D. Nev. Dec. 13, 2010);

Infor Global Solutions (Michigan), Inc. v. Hanover Foods Corp.,

2009 WL 2778258, at *2 (N.D. Ga. Aug. 28, 2009). In this case,

though, there were no facts asserted in the claims for fraudulent

transfer, violation of the stay, or unjust enrichment to support

injunctive or declaratory relief, so the bankruptcy court’s

dismissal of those claims simply because they were incorrectly

labeled “claims” was harmless error. Further, Debtor did not

argue that dismissal of the claims for injunctive relief,

declaratory relief, and unjust enrichment was error in its

opening brief on appeal, and any such argument is therefore

waived. Ore. Natural Desert Ass’n v. Locke, 572 F.3d 610, 614

n.3 (9th Cir. 2009) (“this court will not address claims not

argued in the opening brief”). 

At bottom, none of Debtor’s claims presented “sufficient
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 6

 There is California case law suggesting that a

foreclosure sale induced by fraud or irregularities might be set

aside and, consequently, the power to redeem revived. Luna v.

(continued...)

-12-

factual matter, accepted as true, to ‘state a claim to relief

that is plausible on its face.’” Iqbal, 556 U.S. at 678;

Twombly, 550 U.S. at 570. Indeed, even liberally read, Debtor’s 

complaint presented no factual matter to support its prayer for

relief. The bankruptcy court’s decision to dismiss the complaint

was proper. 

B. The bankruptcy court did not err in dismissing Debtor’s

claim for violation of the automatic stay.

As mentioned above, Debtor did not argue in its opening

brief that the bankruptcy court erred in dismissing the other

four claims asserted in its original complaint, and we will not

ordinarily address matters not argued in the opening brief. 

Locke, 572 F.3d at 614 n.3. However, since the County has

addressed the stay violation claim in its brief, we review it

here.

In the original complaint, Debtor claimed that its legal

title in the Properties was not extinguished until the tax deeds

were recorded. Because this occurred postpetition, Debtor argued

that the recordings of the deeds violated the automatic stay

under § 362(a). There are at least two flaws in Debtor’s

argument. 

First, Debtor’s right of redemption as to the Properties

lapsed the day before the tax sales occurred. Cal. Rev. & Tax

Code § 3707. A tax deed subsequently provided to a purchaser

“conveys title to the purchaser free of all encumbrances of any

kind.” Cal. Rev. & Tax Code § 3712.6 Under these facts, since
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 6

(...continued)

Citibank, N.A., 202 Cal. App.4th 89, 104 (2011). However, Debtor

has not argued either in the bankruptcy court or in this appeal

that there were any irregularities or fraud in the tax sale.

-13-

Debtor’s interest in the Properties lapsed before it filed for

bankruptcy, the Properties never became property of the estate

under § 541, and any action by the County concerning those

Properties would not run afoul of the automatic stay under

§ 362(a).

Secondly, as the bankruptcy court ruled, the recording of

the tax deeds postpetition was a ministerial act and, as such,

would not violate the automatic stay. The Ninth Circuit adopted

the ministerial act exception to the automatic stay in McCarthy,

Johnson & Miller v. North Bay Plumbing, Inc. (In re Pettit), 217

F.3d 1072, 1080 (9th Cir. 2000) (“Ministerial acts or automatic

occurrences that entail no deliberation, discretion, or judicial

involvement do not constitute continuations of such a [judicial]

proceeding” for purposes of possible violations of the automatic

stay). In Pettit, the court cited with approval to a First

Circuit case that extended the ministerial act exception to acts

of public officials. Soares v. Brockton Credit Union (In re

Soares), 107 F.3d 969, 973-74 (1st Cir. 1997) (“Thus, when an

official’s duty is delineated by, say, a law or a judicial decree

with such crystalline clarity that nothing is left to the

exercise of the official’s discretion or judgment, the resultant

act is ministerial.”). Cal. Rev. & Tax Code § 3708.1 provides:

“Upon execution [of the tax sale and payment of the purchase

price] the tax collector shall immediately record the deed with

the county recorder and pay the recording fees.” There is no

indication in this or related provisions of California law that
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

7 At oral argument before the Panel, counsel for Debtor

again conceded that the bankruptcy court did not err in

dismissing the original complaint. He conceded that the First

Amended Complaint Debtor attempted to submit with its

reconsideration motion was also deficient in pleaded facts. 

8 Civil] Rule 15(a) provides in relevant part that:

Amended and Supplemental Pleadings.

(a) Amendments Before Trial.

 (1) Amending as a Matter of Course. A party may

amend its pleading once as a matter of course within:

 (A) 21 days after serving it, or

 (B) if the pleading is one to which a responsive

(continued...)

-14-

the tax collector has any discretion in recording the deed; he

instead is commanded to record it. 

On this record, we conclude that the County’s recording of

the tax deeds was a ministerial act, and the bankruptcy court did

not err in ruling that the recordings did not violate the

automatic stay.

II.

Debtor could not amend the complaint as a matter of right.

On appeal, Debtor apparently concedes that its complaint was

deficient factually: “The [bankruptcy] court admittedly did not

have the requisite factual allegations to render a decision[.]”

Debtor’s Op. Br. at 8.7 Rather, Debtor’s focus on appeal is its

contention that the bankruptcy court abused its discretion when

it denied Debtor’s request to amend the complaint.

Debtor’s first argument is that, under these facts, it could

amend the complaint at any time as a matter of right. To support

this contention, Debtor argues that Civil Rule 15(a)8 allows a
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

8(...continued)

pleading is required, 21 days after service of a

responsive pleading or 21 days after service of a

motion under Rule 12(b), (e), or (f), whichever is

earlier.

(2) Other Amendments. In all other cases, a party may 

amend its pleading only with the opposing party’s written

consent or the court’s leave. The court should freely give

leave when justice so requires.

Civil Rule 15(a) (2013) (emphasis added).

9 Car Carriers, Inc. v. Ford Motor Co., 745 F.2d 1101 (7th

Cir. 1984); Kelly v. Del. River Jt. Comm’n, 187 F.2d 93 (3d Cir.

1951); McGruder v. Phelps, 608 F.2d 1023 (5th Cir. 1979); Adams

v. Campbell City. School Dist., 483 F.2d 1351 (10th Cir. 1973);

Smith v. Blackledge, 451 F.2d 1201 (4th Cir. 1971); Nolen v.

Fitzharris, 450 F.2d 958 (9th Cir. 1971); Smith v. Cal., 336 F.2d

530 (9th Cir. 1964).

-15-

plaintiff to amend a complaint once as a matter of course, and

that the rule does not treat a motion to dismiss under Civil Rule

12(b)(6) as a “responsive pleading” that would terminate the

right to file an amended pleading within 21 days. Debtor cites

several cases that, arguably, support its position.9

Unfortunately for Debtor, the version of Civil Rule 15 upon

which it relies in its briefing was amended in 2009, after the

cases cited in Debtor’s brief were decided. A newly added

provision, Civil Rule 15(a)(1)(B), dictates that the right to

amend once as a matter of course terminates 21 days after service

of a motion under Civil Rule 12(b), (e), or (f). The Advisory

Committee Notes to the 2009 Amendments provide instruction

regarding the effects of the change:

Former Rule 15(a) addressed amendment of a pleading to

which a responsive pleading is required by

distinguishing between the means used to challenge the

pleading. Serving a responsive pleading terminated the
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

10 It is puzzling why Debtor continues to make this

argument on appeal. In its Memorandum Decision, the bankruptcy

court explicitly cited to Civil Rule 15(a)(1)(B) as an example of

Debtor’s complicity in delaying judicial process: “There is also

no explanation why Debtor did not complete due diligence and

amend in response to the [motions to dismiss], as opposed to

filing an opposition. Fed. R. Civ. P. 15(a)(1)(B).” 

-16-

right to amend. Serving a motion attacking the pleading

did not terminate the right to amend, because a motion

is not a “pleading” as defined in Rule 7. The right to

amend survived beyond decision of the motion unless the

decision expressly cut off the right to amend.

 The distinction drawn in former Rule 15(a) is

changed [so that] the right to amend once as a matter

of course terminates 21 days after service of a motion

under Rule 12(b), (e), or (f). This provision will

force the pleader to consider carefully and promptly

the wisdom of amending to meet the arguments in the

motion. A responsive amendment may avoid the need to

decide the motion or reduce the number of issues to be

decided, and will expedite determination of issues that

otherwise might be raised seriatim. It also should

advance other pretrial proceedings.

[Civil Rule] 15 Advisory Committee Notes (2009).

The County’s motion was filed on January 22, 2013. Under

the applicable revised version of Civil Rule 15(a)(1), Debtor’s

right to amend its complaint as a matter of course expired on

February 12, 2013. Rather than file an amended complaint within

that time, Debtor was instead satisfied to file only an

opposition to the motion to dismiss on February 11, 2013. In

other words, Debtor’s rule and case law authorities are no longer

good law.10

III.

The bankruptcy court did not abuse its discretion when it denied

Debtor’s request to file an amended complaint.

Since Debtor’s right to file an amended complaint as a

matter of course expired on February 12, 2013, under Civil Rule

15(a)(2), Debtor was required either to obtain the County’s
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

-17-

consent or leave of the bankruptcy court to amend its complaint. 

Here, the County did not consent to Debtor’s request to amend its

complaint, and Debtor faults the bankruptcy court for refusing to

grant leave to amend. 

Civil Rule 15(a)(2) requires that the trial court freely

grant leave to amend “when justice so requires.” There is

extensive case law examining the relevant considerations for a

trial court’s decision to grant or deny leave to amend a

complaint. The best known, and most frequently cited, precedent

is the Supreme Court’s decision in Foman v. Davis, 371 U.S. 178

(1962). In Foman, the Court considered, among other issues,

whether a district court abused its discretion by denying leave

to amend a complaint without providing any reasons for its

decision. The Court instructed that:

In the absence of any apparent or declared reason –

such as undue delay, bad faith or dilatory motive on

the part of the movant, repeated failure to cure

deficiencies by amendments previously allowed, undue

prejudice to the appealing party by virtue of allowance

of the amendment, futility of amendment, etc. – the

leave sought should, as the rules require, be “freely

given.”

Id. at 182. Based on this decision, the exceptions to the policy

and rule requiring a liberal approach to requests to amend a

complaint have come to be known as the “Foman Factors.” 

The Ninth Circuit has employed the Foman Factors to review

whether a trial court properly exercised its discretion in

determining whether to grant leave to amend a complaint. Sonoma

City. Ass’n of Retired Emples. v. Sonoma City, 708 F.3d 1109,

1118 (9th Cir. 2013); Griggs v. Pace Am. Group, Inc., 170 F.3d

877, 880 (9th Cir. 1999) (holding that a trial court should
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

-18-

decide a motion to amend a complaint by ascertaining the presence

of any of four factors: bad faith, undue delay, prejudice to the

opposing party, and/or futility). Of the Foman Factors, the

Ninth Circuit has held that a trial court’s denial of leave to

amend for futility, alone, will be upheld if it is clear that the

complaint could not be saved by any amendment. Carvalho v.

Equifax Info. Servs., LLC, 629 F.3d 876, 892 (9th Cir. 2010). 

In this case, the bankruptcy court based its decision to deny

leave to Debtor to file an amended complaint on two of the Foman

Factors, explaining that an amendment would be futile, and

concluding that Debtor had engaged in undue delay in proposing

the amendment. These reasons constitute an adequate basis to

sustain the bankruptcy court’s decision. Ecological Rights

Found. v. Pac. Gas & Elec. Co., 713 F.3d 502, 520 (9th Cir. 2013)

(denying leave to amend for futility and undue delay).

As to undue delay, the bankruptcy court determined that,

There is no explanation why Debtor’s counsel did not

complete due diligence prior to filing the complaint.

Debtor’s counsel simply states that he intended to meet

and confer with the principal of Debtor and Debtor’s

real estate attorney, and then he intended to file an

amended complaint. 

The bankruptcy court then noted that Debtor could not

satisfactorily explain why it did not complete due diligence and

seek to amend the complaint (a) within the 21-day period after

filing the original complaint, (b) within the 21-day period

following the filing of the County’s Civil Rule 12(b)(6) motion, 

(c) instead of, or in conjunction with, filing an opposition to

the Civil Rule 12(b)(6) motion, or (d) otherwise prior to the

hearing on the County’s motion to dismiss. Indeed, Debtor made
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

-19-

no attempt to file an amended complaint until the Reconsideration

Motion, three months after filing the original complaint. As the

bankruptcy court observed, 

Debtor failed at every stage of the litigation process

to provide the grounds of its entitlement to relief. 

Debtor’s failure to timely conduct due diligence and

amend evidences Debtor’s intent to merely delay the

litigation process.

Our review of the record confirms that the facts support the

bankruptcy court’s determination that Debtor engaged in undue

delay in attempting to amend the complaint. Thus, at least one

Foman Factor supports the court’s decision to deny leave to amend

the complaint.

Another and compelling ground for denying leave to amend

Debtor’s complaint is futility. Ecological Rights Found., 713

F.3d at 520. Indeed, a determination that any amendment would be

futile requires the trial court to dismiss the complaint with

prejudice. Mirmehdi v. United States, 689 F.3d 975, 985 (9th

Cir. 2012) (“However, a party is not entitled to an opportunity

to amend his complaint if any potential amendment would be

futile. See, e.g., May Dep’t Store v. Graphic Process Co., 637

F.2d 1211, 1216 (9th Cir. 1980).”); Sanford v. MemberWorks, Inc.,

625 F.3d 550, 557 (9th Cir. 2010) (observing that although leave

to amend is to be “freely given when justice so requires,” denial

of a motion to amend is proper if it is clear “that the complaint

would not be saved by any amendment.”). 

Here, the bankruptcy court determined that,

The Debtor could not properly allege that the duly

conducted tax sale of the subject properties could be

the basis of an action under 11 U.S.C. [§]§ 548 or
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

11 It was never clear in Debtor’s complaint why it referred

to § 549, the Code provision dealing with avoidance of

unauthorized postpetition transfers, in the context of the first

claim for fraudulent transfer, a claim which, by definition,

deals solely with prebankruptcy transfers. Perhaps Debtor was

conflating the claim for fraudulent transfer with the claim for

violation of the automatic stay. As to the other claims for

injunction, declaratory judgment, and unjust enrichment, Debtor

has not discussed these claims in its opening brief and we will

not address them. Ore. Natural Desert Ass’n v. Locke, 572 F.3d

610, 614 n.3 (9th Cir. 2009) (“this court will not address claims

not argued in the opening brief”).

-20-

549.11

In other words, the bankruptcy court concluded that any attempt

by Debtor to amend the first claim for relief would be futile

because a duly conducted tax sale under California law

presumptively provides for reasonably equivalent value, and thus

the essential condition for avoidance of the sales as fraudulent

transfers, i.e., for less than reasonably equivalent value, could

not be established. We agree with the bankruptcy court. 

An analysis of the relationship of tax foreclosure sales to

“reasonably equivalent value” for purposes of § 548(a)(1)(B)

should begin with a review of the U.S. Supreme Court’s opinion in

BFP v. Resolution Trust Corp., 511 U.S. 531 (1994). In BFP, the

Supreme Court addressed whether a regularly conducted

prebankruptcy mortgage foreclosure sale gives rise to a

conclusive presumption that the price obtained at that sale was

for reasonably equivalent value such that the sale could not

later be avoided under § 548(a) as a constructively fraudulent

transfer. In that case, BFP held title to a parcel of real

property encumbered by a deed of trust. After BFP defaulted on
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

12 By its ruling in BFP, the Supreme Court effectively

endorsed what was known as the “Madrid Rule,” a term attributable

to this Panel’s decision in Lawyers Title Insurance Corp. v.

Madrid (In re Madrid), 21 B.R. 424 (9th Cir. BAP 1982), aff’d,

725 F.2d 1197, 1199 (9th Cir. 1982). The Panel reiterated the

Madrid Rule in deciding the appeal that eventually led to the

Supreme Court’s BFP decision. BFP v. Imperial Savings & Loan

Ass’n (In re BFP), 132 B.R. 748, 750 (9th Cir. BAP 1991)(“A

non-collusive and regularly conducted nonjudicial foreclosure

sale prior to the filing of a bankruptcy case cannot be

challenged as a fraudulent conveyance because the consideration

received in such a sale establishes ‘reasonably equivalent value’

as a matter of law.”), aff’d, 974 F.2d 1144 (9th Cir. 1992),

aff’d sub nom., BFP v. Resolution Trust Corp., 511 U.S. 531

(1994).

-21-

the loan payments, the creditor properly noticed a foreclosure

sale in compliance with applicable California law. At that sale,

the property was purchased by a third party for $433,000. After

BFP initiated a chapter 11 case, it filed a complaint to avoid

the foreclosure sale and transfer to the third party as a

constructively fraudulent transfer under § 548(a), arguing that,

as compared to the sale price, the property was actually worth

$725,000 at the time of the sale. The bankruptcy court held that

the foreclosure sale was not collusive or fraudulent because it

was conducted in compliance with state law, and so the sale could

not be avoided. This Panel and the Ninth Circuit affirmed. 

Id.12

On appeal, the Supreme Court held that fair market value was

not the appropriate measure of “reasonably equivalent value”

under § 548(a) because market value, as commonly understood, has

no applicability in the forced-sale context; indeed, it is “the

very antithesis of forced-sale value.” Id. at 537. The Court

held that § 548(a) “requires judicial inquiry into whether the
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

-22-

foreclosed property was sold for a price that approximated its

worth at the time of sale.” Id. at 538-39. Recognizing that the

state mortgage foreclosure regulatory scheme is designed to

achieve just such a result, the Court held that “[a]bsent a clear

statutory requirement to the contrary, we must assume the

validity of this state-law regulatory background and take due

account of its effect.” Id. at 539.

The Supreme Court then reviewed the history of state

foreclosure laws:

Foreclosure laws typically require notice to the

defaulting borrower, a substantial lead time before the

commencement of foreclosure proceedings, publication of

a notice of sale, and strict adherence to prescribed

bidding rules and auction procedures. . . . When these

procedures have been followed, however, it is “black

letter” law that mere inadequacy of the foreclosure

sale price is no basis for setting the sale aside,

though it may be set aside (under state foreclosure

law, rather than fraudulent transfer law) if the price 

is so low as to “shock the conscience or raise a

presumption of fraud or unfairness.”

Id. at 542. A state’s interest in its real estate laws was at

the heart of the BFP Court’s analysis: “a fair and proper price,

or a ‘reasonably equivalent value,’ for foreclosed property, is

the price in fact received at the foreclosure sale, so long as

all the requirements of the State’s foreclosure law have been

complied with.” Id. at 545.

Many of the elements of the BFP analysis are also applicable

to state tax foreclosure sales. As noted by the Court, federal

courts should pay considerable deference to state law on matters

relating to real estate, and where there has been “notice to the

defaulting party, a substantial lead time before the commencement

of foreclosure proceedings, publication of a notice of sale, and
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

-23-

strict adherence to prescribed bidding rules and auction

procedures,” a tax sale is likely to yield reasonably equivalent

value for the foreclosed property. Indeed, numerous other courts

have applied the teachings of the Supreme Court in BFP in

analyzing whether a conclusive presumption arises that reasonably

equivalent value is present as the result of regularly-conducted

state tax-defaulted property sales. 

Notably, two circuit courts have extended BFP’s holding to a

non-collusive tax sale of real property conducted in accordance

with state law. In Kajima v. Girandole Intel Ltd. Lab. Co. (In

re Grandote Country Club Co., Ltd.), 252 F.3d 1146 (10th Cir.

2001), the Tenth Circuit ruled that:

[T]he decisive factor in determining whether a transfer

pursuant to a tax sale constitutes “reasonably

equivalent value” is a state’s procedure for tax sales,

in particular, statutes requiring that tax sales take

place publicly under a competitive bidding procedure.

Id. at 1152. The Kajima court compared the requirements set

forth in BFP to the Colorado tax sale procedures and found those

procedures to be consistent with BFP. The court therefore held

that a Colorado tax sale was for reasonably equivalent value. 

Id.

Earlier, the Fifth Circuit had applied the teachings of BFP

to tax-defaulted property sales under Oklahoma law. The court 

determined that not only was BFP applicable to determining

reasonably equivalent value under § 548(a) regarding a

prepetition tax sale, but also to determining present fair

equivalent value under § 549 concerning a post-petition tax sale. 

T.F. Stone Co. v. Harper (In re T.F. Stone Co.), 72 F.3d 466,

468-69 (5th Cir. 1995).
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

-24-

Bankruptcy courts have also applied BFP’s holding in the tax

sale context. Russell-Polk v. Bradley (In re Russell-Polk), 200

B.R. 218, 220-22 (Bank. E.D. Mo. 1996); Golden v. Mercer County

Tax Claim Bureau (In re Golden), 190 B.R. 52, 58 (Bankr. W.D. Pa.

1995); Holla v. Myers (In re Holla), 184 B.R. 243, 252 (Bankr.

M.D.N.C. 1995); Lord v. Neumann (In re Lord), 179 B.R. 429,

432-35 (Bankr. E.D. Pa. 1995); McGrath v. Simon (In re McGrath),

170 B.R. 78, 82 (Bankr. D.N.J. 1994).

Informed by this case law, we conclude that the holding in

BFP should be applied to regularly conducted sales of taxdefaulted real property in California, where there is a

substantial lead time before the commencement of foreclosure

proceedings, there is publication of a notice of the sale, and

there is strict adherence to prescribed competitive bidding rules

and auction procedures as formulated in the state law. Put

another way, based on the procedural requirements of California

law, the tax-default sales of the Properties held in this case on

October 22, 2012, were for reasonably equivalent value.

Cal. Rev. & Tax Code § 3691(a)(1)(A) provides that, after a

property has become tax-defaulted, the tax collector shall have

the power to sell all or any part of a tax-defaulted property

that has not been redeemed. The sale of a non-residential

commercial property may take place three years after the tax

default. Id. Cal. Rev. & Tax Code § 3691.1, 3691.2 and 3691.4

require that when the property becomes available for tax sale,

the tax collector must file notice with the county clerk and the

notice is recorded. Cal. Rev. & Tax. Code § 3699 requires that

the county board of supervisors must approve the tax sale. 
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

-25-

Debtor has not argued that any of these provisions were not

satisfied.

 Cal. Rev. & Tax Code § 3701 provides that the notice of a

tax sale must be given to interested parties no less than 45

days, nor more than 120 days, before the proposed sale. The

Notice of Auction concerning these sales was dated August 31,

2012, 53 days before the date set for the auction, October 22,

2012.

Cal. Rev. & Tax Code § 3702 requires that the notice of sale

be published in a newspaper of general circulation, once a week

for three consecutive weeks. Cal. Rev. & Tax Code § 3704

requires extensive information in the notice of sale: (a) date,

time and place of the sale; (b) location of publicly available

computer workstations if the sale allows internet bids; (c)

description of the property; (d) name of last assignee of the

property; (e) minimum bid; (f) statement that right of redemption

ceases day before the sale; (g) statement that parties in

interest have right to file claims in excess of liens and costs

to be recovered; (h) statement that parties will be notified of

any excess proceeds; ( I) if property remains unsold after the

scheduled sale, date, time, and place of subsequent sale; (j)

deposit if required for bidding; (k) if property purchased by

credit bid, notice that right of redemption would revive if full

payment not made by a date specified [not relevant in this

appeal]. In this case, the sale notice was published in the Los

Angeles Daily News. Debtor has not challenged that the notice

requirements were not satisfied.

Cal. Rev. & Tax Code § 3691(a)(3)(A) and Cal. Civ. Code
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

-26-

§ 2924b(c)(1) require that the notice of the sale be sent by

certified mail to all parties in interest, including the

defaulting parties, within the 45-120 day period. Debtor has not

argued that this notice was not properly given.

Finally, Debtor does not challenge that the actual sales

were not regularly conducted in compliance with all applicable

statutes, including Cal. Rev. & Tax Code § 3693, which requires

that all tax sales “shall be at public auction to the highest

bidder”; and Cal. Rev. & Tax Code § 3691(a)(1)(A), which provides

that “[a]ny person, regardless of any prior or existing lien on,

claim to, or interest in the property, may purchase at the sale.”

In addition, Cal. Rev. & Tax Code § 3701 provides that the

property owner’s right of redemption expires at the close of

business of the last business day preceding the sale. Debtor did

not redeem the Properties prior to the sales. Cal. Rev. & Tax

Code § 3708 provides that the tax collector shall execute a deed

to the purchaser for the property; the recorded tax deeds are in

the excerpts of record submitted in this appeal. This is

significant, because Cal. Rev. & Tax Code § 3711 provides that

the deeds issued by the tax collector are “conclusive evidence of

the regularity of all proceedings from the assessment of the

assessor to the execution of the deed.” 

Debtor has not argued in the bankruptcy court or this appeal

that the tax sales of the Properties did not comply with the

applicable state statutes. To the contrary, as noted above, the

record supports that there was an appropriate lead time before

the commencement of foreclosure proceedings, notice was properly

given to the defaulting parties, there was publication of a
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

-27-

notice of sale, and there was competitive bidding at a public

auction in strict adherence to prescribed competitive bidding

rules and auction procedures as clearly formulated in the

California statutes. Under BFP and the cases applying the rule

in that decision to state tax sales, the transfer of the

Properties in this case at the sales on October 22, 2012,

resulted in a conclusive presumption that the sales were for

reasonably equivalent value. Therefore, the transfers were not

subject to avoidance under § 548(a), and the bankruptcy court did

not abuse its discretion in declining to allow Debtor an

opportunity to file an amended complaint, since any amendment

would have been a futile gesture.

In sum, the bankruptcy court did not abuse its discretion

when it declined to allow Debtor to file an amended complaint. 

IV. 

The bankruptcy court did not abuse its discretion 

in denying reconsideration of its Dismissal Order.

Debtor asked the bankruptcy court to reconsider its

Dismissal Order under Civil Rule 60(b)(1), incorporated by Rule

9024. That rule provides that, “On motion and just terms, the

court may relieve a party or its legal representative from a

final judgment, order, or proceeding for the following reasons:

(1) mistake, inadvertence, surprise, or excusable neglect[.]” In

the bankruptcy court, Debtor argued it should be granted relief 

based on excusable neglect.

A careful review of the motion for reconsideration, and

Debtor’s brief in this appeal, shows that Debtor does not discuss

or identify the “neglect” from which it wishes to be excused. 
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

-28-

Debtor’s arguments are solely directed to alleged errors by the

bankruptcy court in dismissing the complaint with prejudice. 

Debtor likewise does not address the concerns expressed by the

bankruptcy court for Debtors’ dilatory tactics and failure “at

every stage of the litigation process to provide the grounds of

its entitlement to relief.” 

The bankruptcy court’s Memorandum Decision detailed Debtor’s

conduct and, based on those actions, found that the Debtor

intended to delay the proceedings and, in doing so, abused the

bankruptcy process. We therefore find it noteworthy that Debtor

began its motion for reconsideration by proclaiming that

“[e]xcusable neglect may serve as the basis for relief, provided

the moving party has shown diligence in seeking relief, and the

opposing party has not suffered prejudice in this interim.” 

While suggesting that the County would not be prejudiced by

reconsideration, Debtor never addressed its repeated failures

throughout the proceedings to exercise diligence in seeking

relief. 

When faced with a motion for relief from an order under

Civil Rule 60(b)(1), a recent Ninth Circuit opinion notes that

“[a trial] court may exercise its discretion to deny relief to a

defaulting defendant based solely upon a finding of defendant’s

culpability.” Brandt v. Am. Bankers Ins. Co., 653 F.3d 1108,

1112 (9th Cir. 2011). Here, the bankruptcy court made extensive

findings concerning Debtor’s culpability in failing to exercise

diligence in seeking to amend its complaint. The bankruptcy

court did not abuse its discretion in denying Debtor’s motion for
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

13 With its motion for reconsideration, Debtor submitted a

First Amended Complaint and has suggested repeatedly in both the

bankruptcy court and this appeal that by submitting the amended

complaint it had satisfied the bankruptcy court’s demands that it

provide the grounds for its entitlement to relief. However, as

the bankruptcy court properly noted, submitting the First Amended

Complaint at the reconsideration stage was yet another example of

the Debtor’s dilatory behavior and was “too little, too late.” 

Memorandum Decision at 2, May 7, 2013. Further, at oral argument

before the Panel, counsel for Debtor conceded that, even as

amended, the First Amended Complaint was still deficient in the

necessary facts to support the claims.

-29-

reconsideration.13

CONCLUSION

We conclude that the bankruptcy court did not err in

dismissing Debtor’s complaint under Civil Rule 12(b)(6) and did

not abuse its discretion in denying leave to amend the complaint

and reconsideration of the Dismissal Order. We therefore AFFIRM

the bankruptcy court’s orders.