* This order and judgment is not binding precedent, e xcept under the

doctrines of law of the case, res judicata, and col lateral estoppel. The court generally disfavors the citation of orders and judg ments; nevertheless, an order and judgment may be cited under the terms and condi tions of 10th Cir. R. 36.3.

** Honorable Arthur L. Alarcon, Senior Circuit Judge, United States Court of Appeals for the Ninth Circuit, sitting by designati on.

UNITED STATES COURT OF APPEALS Filed 12/20/96 FOR THE TENTH CIRCUIT

JAMES GIBSON,

Appellant,

v. VITO ROTUNNO, JR.; JOAN ROTUNNO, Appellees. No. 96-4076 (D.C. No. 95-CV-28) (D. Utah)

ORDER AND JUDGMENT *

Before PORFILIO, ALARCON, ** and LUCERO, Circuit Judges.

After examining the briefs and appellate record, th is panel has determined unanimously that oral argument would not materiallyassist the determination of1 Joan Rotunno, Vito Rotunno’s ex-wife, purchased all of Vito Rotunno’s

rights to this action from his bankruptcy trustee. The bankruptcy court therefore entered its final judgment in favor of Joan Rotunno

. -2- this appeal. See Fed. R. App. P. 34(a); 10th Cir. R. 34.1.9. The c ase is therefore ordered submitted without oral argument. Appellant James M. Gibson (Gibson) appeals from an order of the district court affirming a bankruptcy court judgment againsthim. We affirm.

I. Appellees Vito Rotunno, Jr. and Joan Rotunno 1 (Rotunnos) filed this adversary proceeding against Gibson and Janet Henel , trustee of the Gibson Family Trust (Trust). The Rotunnos contended that Gibson fraudulently induced Vito Rotunno to execute a contract (the “1986 Agree ment”) to sell Gibson and the Trust his interest in the debtor, I.A. Corporation (I.A. Corp.). Their complaint requested, among other things, rescission of the 19 86 Agreement, damages for breach of contract, and determination of ownership of I.A. Corp. Gibson counterclaimed for return of alleged overpayment on the 1986 Agreement. After an extended trial, the bankruptcy court resci nded the 1986 Agreement on grounds of fraud and breach of contract. It awa rded Gibson and the Trust restitution of $92,800, but offset this amount by $ 20,800 discovery sanctions owed by Gibson and the Trust and an additional $72, 050 for reduction in value on2 Prior to the filing of this action, Gibson created the Trust and transferred

all of his assets into it, including his rights und er the 1986 Agreement. During the pendency of this action, he filed a personal ba nkruptcy petition. Therefore, the bankruptcy court in this action initially enter ed judgment only against the Trust. It certified this judgment as final, the T rust appealed to the district court, and its appeal was dismissed. Relief from the auto matic stay was then granted against Gibson, and the bankruptcy court entered fi nal judgment against him, as well.

-3- a note which it determined should have accrued to V ito Rotunno, for a net award to Joan Rotunno from Gibson and the Trust of $50. It declared that upon rescission, neither the Trust nor Gibson had any interest in the debtor. It further dismissed Gibson’s counterclaim, and awarded attorn ey’s fees and costs against the defendants. 2

II. “In reviewing a district court’s decision affirming the decision of a bankruptcy court, this court applies the same stand ards of review which governed the district court. The bankruptcy court’s finding s of facts will be rejected only if clearly erroneous. Its conclusions of law, however , are reviewed de novo .” Broitman v. Kirkland (In re Kirkland) , 86 F.3d 172, 174 (10th Cir. 1996)(further citations omitted). We apply California law to int erpretation of the 1986 Agreement, as provided therein.-4- III. Gibson first argues that neither the bankruptcy cou rt nor the district court had jurisdiction over this proceeding. 28 U.S.C. § 1334(b) grants federal district courts “original but not exclusive jurisdiction of all civil proceedings . . . arising in or related to cases under Title 11.” The statut es further provide that the bankruptcy court has jurisdiction to enter final ju dgment in such “related” matters with consent of the parties. See 28 U.S.C. § 157(c)(2). The parties, including Gibson, gave their consent t o entry of judgment by the bankruptcy court. Gibson argues, however, thathis consent did not confer jurisdiction and that he is therefore free to raise lack of jurisdiction on appeal. He contends that this proceeding is not sufficientl y “related to” I.A. Corp.’s Chapter 11 reorganization to fall within § 1334(b). We disagree. A proceeding is “related to” a bankruptcy, “if the outcome could al ter the debtor’s rights, liabilities, options, or freedom of action in any w ay, thereby impacting on the handling and administration of the bankruptcy estat e.” Gardner v. United States (In re Gardner) , 913 F.2d 1515, 1518 (10th Cir. 1990)(discussing f ormer 28 U.S.C. § 1471(b)). The outcome of this proceedi ng determined the ownership3 Gibson argues that since I.A. Corp.’s Plan of Reorg anization cancels the

ownership interests of interest holders, it is unne cessary to determine who these interest holders were. However, the Plan provides the former interest holders with certain rights and entitlements to distributio ns. Appellant’s App., tab 1 at 12, ¶ 5.9. The trustee needed to know who the owne rs of the canceled interests were in order to properly administer the Plan.

4 Appellees argue that Gibson lacks standing to raise this issue, because the Trust, not Gibson, owned the interest in PCL, and h ence, any resulting interest in I.A. Corp. belonged to the Trust, not Gibson. Gibs on, conversely, argues that since the interest belonged to the Trust, he could not alienate it. The bankruptcy court found that both Gibson and Janet Henel, trust ee of the Trust, ignored the separate existence of the Trust in Gibson’s busines s dealings, that PCL’s assets were in fact transferred to I.A. Corp., and that th e agreement provided that Gibson (not the Trust) was to receive the shares inI.A. Corp. after the $400,000 was paid. Neither party has shown that these findi ngs are clearly erroneous. If they were, Gibson would lack standing to raise this issue, and the result would be the same as that reached here: affirmance of the d istrict court as to this issue. Cf. generallyRestatement (Second) of Trusts § 280 (1959), comme nts e and j (trustee is proper party to seek rescission of tran saction involving trust property). -5- of the debtor, I.A. Corp., and therefore had a dire ct impact on its liabilities and administration of its estate. 3

IV. Gibson next argues that the bankruptcy court erred in determining that upon rescission, neither he nor the Trust 4 holds any further interest in I.A. Corp. Gibson contends that the Trust holds an original 50 % interest in I.A. Corp., independent of the interest he sought to purchase f rom Vito Rotunno. The bankruptcy court’s findings on this issue may b e summarized as follows. I.A. Corp. was organized as a successor t o Park City Limited (PCL), a-6-

partnership in which Gibson owned a fifty percent s hare. PCL’s assets were transferred to I.A. Corp. The owners of PCL agreedthat Gibson would receive a fifty percent share in I.A. Corp., but not until he repaid $400,000 which he owed to PCL. Since he never repaid the money, he never became a shareholder of I.A. Corp. Gibson has failed to show that these findings of fa ct are clearly erroneous. He contends, however, that the agreement to forego his shares in I.A. Corp. until he repaid the debt was unsupported by consideration . We disagree. Gibson promised to wait to receive his shares until he had made repayment, and the shareholders promised to reserve a fifty percent interest for him. These promises served as consideration for each other. See Bleecher v. Conte , 698 P.2d 1154, 1156 (Cal. 1981)(mutual promises in consideration o f each other form bilateral contract). We do not inquire into the adequacy of that consideration. See Harris v. Time, Inc. , 237 Cal. Rptr. 584, 587-88 (Cal. Ct. App. 1987).

V. Gibson next argues that the Rotunnos were not entit led to rescission because they were unable to restore the benefits wh ich they received under the 1986 Agreement. Gibson’s argument is moot in lightof the bankruptcy court’s ultimate judgment. Vito Rotunno received only mone y under the contract. The5 Gibson argues that forgiveness of the debt was a re asonable business

decision, for which he should not be penalized. He asserts that the obligor had filed bankruptcy in 1983 and was insolvent at the t ime the debt was forgiven. The bankruptcy court noted that the obligor made paymen ts on the Stroup note to Gibson in 1986, 1988 and 1989. It found that Rotun no would have been able to receive at least $72,050 on the note, if the 1986 A greement had not been (continued...) -7- bankruptcy court offset his obligation to restore this money by Gibson’s own obligations to the Rotunnos, to arrive at a net amo unt due from Gibsonof $50. Such offsets are permitted in rescission cases. Se e Runyan v. Pacific Air Indus.,
Inc. , 466 P.2d 682, 685-86 (Cal. 1970)(en banc). Where the plaintiff has been damaged by defendant in excess of the amount receiv ed, it is unnecessary for the plaintiff to restore the sums received under the co ntract to obtain rescission. See Peterson v. Wagner , 198 P. 25, 29 (Cal. Ct. App. 1921).

VI. Gibson takes issue with the offsets ordered by the bankruptcy court. He contends the Rotunnos were not entitled to damages for diminished value of the “Stroup note.” The Stroup note was an obligation o wed to Salt Lake City, Ltd. (SLCL), a limited partnership. Vito Rotunno sold h is fifty percent interest in SLCL to Gibson as part of the 1986 Agreement. The bankruptcy court found that after the sale, Gibson received and endorsed paymen ts under the Stroup note, and that he later forgave the balance of the Stroup not e. 5 It found that the total5 (...continued)

executed. Gibson has failed to show that these fin dings are clearly erroneous. -8- benefit received by Gibson on the Stroup note was $ 144,100, half of which ($72,050) it allocated to the Rotunnos as damages. Gibson argues that he could not be held liable to t he Rotunnos for this sum, because the Stroup note belonged to SLCL, not the R otunnos. This argument ignores the Rotunnos’ fifty percent interest in SLC L. Since rescission was ordered, Gibson had to return the interest in SLCL to the Rotunnos; however, that interest had been diminished by the reduction in va lue of the Stroup note, which was attributable to Gibson. Where the defendant in a rescission action cannot restore the full value of the property he has recei ved, the court has the power to award consequential damages in order to provide complete relief to the plaintiff.
See Cal. Civ. Code § 1692 (West 1982). The bankruptcycourt properly awarded damages in proportion to Rotunnos’ interest in SLCL

. Gibson next argues that the bankruptcy court could not use discovery sanctions to offset amounts due from the Rotunnos. He cites no authority for this proposition, and we have found none. Section 1692 allows the court to “adjust the equities between the parties.” Given the permi ssive nature of § 1692's statutory language, we review the district court’s adjustment of the equities for abuse of discretion. Dollar Sys., Inc. v. Avcar Le asing Sys., Inc. , 890 F.2d 165,-9-

174 (9th Cir. 1989). The bankruptcy court did not abuse its discretion in ordering the offset, considering the broad power granted und er the statute. Finally, Gibson argues that the discovery sanctions were unsupported by proper findings. As this argument was not raised i n the district court, we do not consider it here. See Walker v. Mather (In re Walker) , 959 F.2d 894, 896 (10th Cir. 1992).

VII. Gibson next argues that Vito Rotunno breached the 1 986 Agreement in two respects and was therefore not entitled to rescissi on. He argues that Rotunno pledged the proceeds due him from the sale of his i nterest in I.A. Corp. to secure a loan from William Stuart. The bankruptcy court f ound that the pledge did not encumber the underlying assets and therefore did no t breach the 1986 Agreement. Gibson has not shown that this finding is clearly e rroneous. Gibson now presents a transcript of judgment showin g that Stuart purportedly obtained a judgment against I.A. Corp. after Rotunno failed to pay the underlying obligation. Gibson fails to show, howev er, that this transcript of judgment ever was made part of the record before th e bankruptcy court; we therefore do not consider it. Cf. Branding Iron Motel, Inc. v. Sandlian Equity, Inc. (In re Branding Iron Motel, Inc.) , 798 F.2d 396, 399 (10th Cir.-10-

1986)(appellate court reviewing bankruptcy court de cision may not receive new evidence). Gibson next argues that Rotunno failed to prepare and deliver an $850,000 promissory note from I.A. Corp. to Rotunno to evide nce the debt owed to Rotunno by I.A. Corp. and assigned by him to Gibsonunder the 1986 Agreement. This argument is raised for the first time on appea l, and so we do not consider it.
See Walker , 959 F.2d at 896. Gibson argues in his reply brief , however, that the argument should be considered in order to prevent amiscarriage of justice. See Tele-Communications, Inc. v. Commissioner , 12 F.3d 1005, 1007 (10th Cir. 1993). We disagree. Gibson does not state any compelling reason for his failure to raise this argument before the district court. Even if he is correct in his assertion that Rotunno failed to prepare and delive r the note, Gibson also has not shown that this alleged failure constituted a mater ial breach of the contract.

VIII. Finally, Gibson argues that the bankruptcy court erred in awarding attorney’s fees to Rotunno. He contends that the 1 986 Agreement allows the prevailing party attorney’s fees only in actions fo r enforcement and interpretation, not rescission. The bankruptcy court gave three re asons for awarding attorney’s fees: (1) attorney’s fees were required to afford complete relief to the Rotunnos;-11-

(2) the principle of reciprocity required the award of attorney’s fees for rescission because the contract called for attorney’s fees forits enforcement; and (3) attorney’s fees are available in an action for frau d in the inducement. We have reviewed the authorities upon which the bankruptcy court relied, and conclude that it did not abuse its discretion in awarding attorney’s fees to the Rotunnos.
IX. The judgment of the United States District Court fo r the District of Utah is AFFIRMED. Appellant’s motion to supplement the rec ord on appeal is DENIED.

Entered for the Court

John C. Porfilio Circuit Judge