1 

NOT FOR PUBLICATION

UNITED STATES BANKRUPTCY APPELLATE PANEL

OF THE NINTH CIRCUIT

In re:

JOSEPH L. SANDERS, 

 Debtor.

BAP No. CC-23-1003-LSF

Bk. No. 8:21-bk-12001-TA

MEMORANDUM*

JOSEPH L. SANDERS,

 Appellant, 

v.

JOHN WATCHER; MABEL WATCHER; 

KAREN S. NAYLOR, Trustee, 

Appellees.

Appeal from the United States Bankruptcy Court

for the Central District of California 

Theodor C. Albert, Chief Bankruptcy Judge, Presiding

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

INTRODUCTION

Debtor Joseph L. Sanders appeals the bankruptcy court’s approval of 

a settlement pursuant to Rule 90191 between the chapter 7 trustee, Karen S. 

* 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. 

1 Unless specified otherwise, 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. 

FILED

AUG 9 2023

SUSAN M. SPRAUL, CLERK

U.S. BKCY. APP. PANEL

OF THE NINTH CIRCUIT
2

Naylor (the “Trustee”), and creditors, John and Mabel Watcher (jointly

with the Trustee, “Appellees”). Because we discern no error, we AFFIRM.

FACTS2

A. Prepetition events

In 2018, John and Mabel Watcher, ages 92 and 85, began litigation in 

Orange County Superior Court entitled John Watcher v. American Bankers, 

LLC, Rick Floyd, Joseph L. Sanders, et al. (the “State Court Litigation”). The 

State Court Litigation was based on loans made by Rick Floyd to others 

through his entity American Bankers, LLC (“American Bankers”), in part 

using $955,000 the Watchers had advanced for that purpose. Two of the 

American Bankers’ loans were made to Sanders; one dated April 7, 2016 for 

$110,000 with interest at 11.75% secured by Sanders’ real property located 

at 30269 Callaway Circle, Murrieta, CA (the “Callaway Circle Property”); 

and one dated November 15, 2016 for $283,000 with interest at 10.99%

secured by Sanders’ real property located at 1 Half Moon Bay, Corona Del 

Mar, CA (the “Half Moon Bay Property”). American Bankers was the

payee on the promissory notes and the beneficiary of the two deeds of 

trust. The Watchers received payments from Rick Floyd and American 

Bankers on their investment including the two Sanders loans until 

approximately February 2018 when the payments stopped. 

2 We exercise our discretion to take judicial notice of documents electronically 

filed in the underlying bankruptcy case. See Atwood v. Chase Manhattan Mortg. Co. (In re 

Atwood), 293 B.R. 227, 233 n.9 (9th Cir. BAP 2003).
3

The Watchers attempted to serve their complaint on Sanders for 

almost a year and a half and finally, with state court approval, served him 

by publication. Sanders did not answer the complaint and on April 8, 2021, 

the state court entered a default judgment against him and in favor of the 

Watchers on the conversion cause of action in the amount of $914,000 in 

general damages, and $2,472,000 in treble damages,

3 for a total of 

$3,386,000 plus costs of suit. The default judgment included damages of 

$31,244,000 against Floyd and American Bankers as well as reformation of

the two Sanders promissory notes which substituted the Watchers as the 

lender instead of American Bankers, and reformation of the two deeds of 

trust on Sanders’ properties which substituted the Watchers as the 

beneficiary of each.

In early 2022, Sanders obtained an order from the state court vacating 

the default and judgment against him, permitting him to defend himself. 

The basis for vacating the judgment was Sanders’ declaration that he had 

no knowledge of the suit. The Watchers appealed that order, and the 

appeal was pending when the settlement at issue here was reached. The 

set-aside order did not alter the judgment against Floyd or American 

Bankers which is now final. 

3 The default judgment does not specify the basis for the treble damages but the 

Watchers assert that it was based on California Penal Code § 496(c) – receiving stolen 

property. 
4

B. Sanders’ bankruptcy case

Sanders filed a chapter 11 petition in 2021. He disclosed ownership 

interests in ten real properties with a total value of $13 million. Secured 

debt on those properties exceeded $11.6 million which included the 

judgment amount owed to the Watchers of $3,386,000. Unsecured debt was 

listed as approximately $155,000 owed on several credit cards and no 

priority debt.

Two months into the chapter 11 case, the United States Trustee filed a 

motion to convert the case to chapter 7 which the bankruptcy court

granted.

C. Activities in the chapter 7 case

1. The sale of the Half Moon Bay Property

On June 28, 2022, the bankruptcy court approved the Trustee’s sale of 

the Half Moon Bay Property to a third party for $6,060,000.4 The sale closed 

on July 29, 2022 with the estate receiving $3,334,466.29 after payment of the

costs of sale and undisputed secured claims. Of that, the Trustee ultimately 

paid Sanders $350,000 in settlement of a dispute regarding his homestead 

exemption claim.

5 The Watchers’ lien attached to the remaining proceeds. 

4 The property had been listed in Sanders’ initial schedule A/B at $3,500,000.

5 In his schedule C, Sanders claimed a $600,000 homestead exemption in real 

property located at 1049 Baja Street, Laguna Beach, CA 92651, even though his petition 

listed his residence as the Half Moon Bay Property. He later amended schedule C to 

claim the exemption on the Half Moon Bay Property. The Trustee objected to the 

exemption on the Half Moon Bay Property as part of her motion to approve the sale of 

that property. 
5

2. The Watchers’ proof of claim

The Watchers filed their proof of claim on February 18, 2022 asserting 

a secured claim of $4,262,220.26. The claim had four basic components: 

(i) a $283,000 equitable lien granted by the Superior Court on 

March 7, 2019 and recorded against the Half Moon Bay 

Property;

(ii) $419,383.83 owed under the Half Moon Bay Property deed of 

trust, which included accrued interest as of February 15, 2022;

(iii) $173,836.43 owed under the Callaway Circle Property deed of 

trust, with accrued interest as of February 15, 2022; and,

(iv) the State Court Litigation judgment of $3,386,000 secured by 

abstracts of judgment filed in Orange County and Riverside 

County on June 16, 2021 (i.e., within the preference period). 

The amounts in the proof of claim did not include prepetition and 

postpetition attorney’s fees and costs.

On August 29, 2022, Sanders filed an objection to the Watchers’ proof 

of claim. At the initial hearing on the objection, the bankruptcy court set an 

evidentiary hearing for December 13, 2022. 

3. The Watchers’ motion to estimate their claim

On August 9, 2022, the Watchers filed a motion to estimate their 

claim at “$4,518,287.77 pursuant to § 502(c) as a final claim for purposes of 

distribution.” In the motion, they broke down the amount of their claim as

follows:
6

(i) $741,790.24 as secured by the net proceeds of the sale 

of the Half Moon Bay Property as required by the Sale Order; 

(ii) $390,397.53 as secured by the Deed of Trust on the 

Callaway Property; and,

$3,386,000 as an unsecured claim.

The secured claim on the Half Moon Bay Property included 

approximately $270,000 of attorney’s fees and interest through June 10, 

2022. The secured claim on the Callaway Circle Property included 

approximately $135,000 in attorney’s fees and interest through July 2022. 

The Watchers included with their motion to estimate their claim a 

declaration of creditor Sandra Shohat who stated that she was a personal 

friend of Sanders and Floyd. She stated that she personally knew of the 

State Court Litigation between the Watchers and Sanders and that she had 

text messages (which copies were attached) that establish that Sanders 

knew of the existence of the State Court Litigation as well, even though he 

declared to the state court that he was unaware that he had been sued by 

the Watchers. 

Sanders opposed the motion to estimate the claim arguing that the 

Watchers’ claims against him had no merit, contending that the claims 

could and should be “resolved with an expedited trial in the state court,”

and generally attacking the Watchers. 

The Trustee filed a statement of position and partial joinder to the 

motion advising the bankruptcy court that she supported and joined the 

Watchers’ request for estimation of the claim except that she took no 
7

position on whether the amount of attorney’s fees included in the claim 

were reasonable or otherwise allowable in the amount requested. 

The bankruptcy court requested further briefing and at a hearing on 

September 7, 2022, ordered the parties to attend mediation. The motion 

was ultimately taken off calendar based on the settlement between the 

Trustee and the Watchers as described below. 

4. The motion to approve the Trustee’s settlement with the 

Watchers

On September 20, 2022, prior to the mediation, the Trustee and the 

Watchers agreed that the Trustee would release $300,000 to the Watchers as 

payment of a portion of the Watchers’ secured claim against the Half Moon 

Bay Property. The bankruptcy court approved the stipulation the same 

day. 

The Watchers, Sanders and the Trustee attended a full-day mediation 

with Hon. Scott C. Clarkson on September 26, 2022. By the end of the 

mediation, the Trustee and the Watchers agreed on a basic structure for a

settlement with a number of details to be resolved over the following 

weeks. Thereafter, the Watchers and the Trustee executed a Settlement 

Agreement. The Settlement Agreement included Sanders as a proposed 

party, however he did not and has not executed it. 

On November 10, 2022, the Trustee filed her Motion to Approve 

Compromise and Settlement Between the Estate and John and Mabel

Watcher Regarding Allowance of Claim (the “Settlement Motion”). The 
8

Settlement Motion sets forth the following pertinent provisions in the 

Settlement Agreement: 

1. The Allowed Claim. The Watchers’ Claim shall be 

deemed allowed as of October 27, 2022 in the total amount of 

$1,550,000.00 (the “Allowed Claim”). The Allowed Claim shall 

be fixed for all purposes in the Case, including distribution 

pursuant to Section 726 of the Code;

2. The Components of the Allowed Claim. The Allowed 

Claim shall be allowed as a secured claim in the amount of 

$425,000.00 (the “Secured Portion of the Allowed Claim”), and 

a general unsecured claim in the amount of $1,125,000.00 (the 

“GUC Portion of the Allowed Claim”);

3. Proposed Distribution from the [Half Moon Bay 

Property] Sale Proceeds. Upon entry of a final order granting 

this Motion, the Trustee will be authorized to distribute to the 

Watchers the sum of $425,000.00 from the [Half Moon Bay 

Property] Sale Proceeds, which distribution shall be in full and 

complete satisfaction of the Secured Portion of the Allowed 

Claim.

4. Potential Interim Distribution. [omitted here].

5. Payments on Account of Any Allowed Claims Owing 

by the Debtor to American Bankers. As set forth above, the 

Trustee has been informed by the Debtor that he is indebted to 

American Bankers on account of the Notes. The Watchers have 

obtained a final non-appealable judgment against American 

Bankers, and based thereupon have filed a notice of lien in the 

bankruptcy case evidencing their right to the proceeds of the 

Notes. Accordingly, any distribution on account of the GUC 

Portion of the Allowed Claim shall be applied first to the 

satisfaction of the Notes so as to ensure the Estate will not be 
9

obligated to make any distributions directly to American 

Bankers on account of such Notes.6 

6. Additional Consideration to the Estate for the Proposed 

Settlement. Following entry of a final 9019 Order, and payment 

to the Watchers of the Secured Portion of the Allowed Claim, 

the Watchers shall file or record a notice of reconveyance of the 

deed of trust they assert against the [Half Moon Bay] Property 

in a format satisfactory to Lawyers Title Co. In addition, upon 

satisfaction in full of the GUC Portion of the Allowed Claim, 

the Watchers shall file or record a notice of release of any 

interest they assert in the deed of trust against the Callaway 

[Circle] Property in a format satisfactory to Lawyers Title Co.

As the Watchers had just received $300,000 from the Trustee, the total

settlement was $1,850,000, of which the Watchers would receive an 

additional $425,000 when the Settlement Motion was granted, and an 

unsecured claim of $1,125,000. The $725,000 in present payments 

approximated the amount they were owed on the Half Moon Bay Property 

including interest and attorney’s fees through approximately June, 2022. 

The Settlement Agreement did not include any general releases. It

included a provision that if Sanders opposed the upcoming Settlement 

Motion, the Watchers would retain their rights to proceed against him 

6 As the Watchers claimed a lien on the debt Sanders owed to American Bankers, 

subsequent payments by the estate to American Bankers would be paid to the 

Watchers. This would result in them receiving more than the settlement amount from 

the estate. The parties designed Part 5 to treat the Trustee’s payments to the Watchers as 

also a payment on Sanders’ debt owed to American Bankers. Therefore, the payment to 

the Watchers reduced both their claim against the estate as well as American Bankers’ 

claim against the estate. 
10

including in their pending non-dischargeability adversary proceeding 

against him. 

Sanders opposed the Settlement Motion arguing, as he does here, that 

based on the set-aside of the state court default judgment, the damages 

awarded against him, including the treble damages, were unliquidated 

and, in his view, were likely to be reduced by the state court to very little

once he had a chance to defend himself. He also asserted that the 

bankruptcy court denied him due process by ruling on the Settlement 

Motion because it was a non-core proceeding. He requested an evidentiary 

hearing. No other party objected. 

At the hearing on the Settlement Motion, the bankruptcy court heard 

considerable argument by Sanders, the Watchers, and the Trustee. The 

court adopted its lengthy tentative ruling going through the factors in 

Martin v. Kane (In re A & C Properties), 784 F.2d 1377, 1381 (9th Cir. 1986) in 

detail. It made comments focusing on the uncertainty of the cost of the 

litigation if it were to proceed, the delay in getting creditors paid, and the 

possibility that the Watchers’ judgment might ultimately survive the setaside order which could increase their claim to more than $5 million. 

The bankruptcy court approved the settlement and Sanders timely 

appealed. 

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.
11 

ISSUE

Did the bankruptcy court err in approving the compromise between 

the Trustee and the Watchers? 

STANDARDS OF REVIEW

Whether a bankruptcy court has jurisdiction is a question of law 

reviewed de novo. Marciano v. Fahs (In re Marciano), 459 B.R. 27, 34 (9th Cir.

BAP 2011), aff’d, 708 F.3d 1123 (9th Cir. 2013). “De novo review requires 

that we consider a matter anew, as if no decision had been made 

previously.” Francis v. Wallace (In re Francis), 505 B.R. 914, 917 (9th Cir. BAP 

2014). Moreover, whether the Settlement Motion was a core proceeding 

giving the bankruptcy court the judicial power to rule on the Settlement 

Motion is a question of law which we review de novo. 

We review the bankruptcy court’s decision to approve a compromise

for abuse of discretion. Goodwin v. Mickey Thompson Ent. Grp., Inc. (In re 

Mickey Thompson Ent. Grp., Inc.), 292 B.R. 415, 420 (9th Cir. BAP 2003); see In 

re A & C Prop., 784 F.2d at 1380. Similarly, “[a] court’s decision whether to 

hold an evidentiary hearing is also reviewed for an abuse of discretion.”

Zurich Am. Ins. Co. v. Int'l Fibercom, Inc. (In re Int'l Fibercom, Inc.), 503 F.3d 

933, 939-40 (9th Cir. 2007).

To determine whether the bankruptcy court has abused its discretion, 

we conduct a two-step inquiry: (1) we review de novo whether the 

bankruptcy court “identified the correct legal rule to apply to the relief 

requested” and (2) if it did, we consider whether the bankruptcy court's 
12

application of the legal standard was illogical, implausible, or without 

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

United States v. Hinkson, 585 F.3d 1247, 1262-63 & n.21 (9th Cir. 2009) (en 

banc).

DISCUSSION

Sanders argues that the bankruptcy court abused its discretion for 

three reasons: first, the bankruptcy court should have made a specific 

finding on the probability of whether the Watchers would prevail should 

the matter proceed in state court; second, the bankruptcy court gave undue 

weight to the factors of delay in litigation, costs of litigation, and the ages 

of the Watchers; and third, the bankruptcy court considered improper 

factors such as Sanders’ conduct in the bankruptcy case to date and his 

relationship with Floyd. 

A. The bankruptcy court properly identified the A & C Properties

factors to evaluate the fairness and reasonableness of the 

settlement. 

Rule 9019(a) provides that, “[o]n motion by the trustee and after 

notice and a hearing, the court may approve a compromise or settlement.”

“The bankruptcy court has great latitude in approving compromise 

agreements.” Woodson v. Fireman’s Fund Ins. Co. (In re Woodson), 839 F.2d 

610, 620 (9th Cir. 1988) (citation omitted). The Ninth Circuit has directed 

that the bankruptcy court must determine that the compromise is “fair and 

equitable” based on four factors:
13

(a) The probability of success in the litigation; (b) the 

difficulties, if any, to be encountered in the matter of collection; 

(c) the complexity of the litigation involved, and the expense, 

inconvenience and delay necessarily attending it; (d) the 

paramount interest of the creditors and a proper deference to 

their reasonable views [].

In re A & C Prop., 784 F.2d at 1381 (citation omitted). The law favors 

compromise, “and as long as the bankruptcy court amply considered the 

various factors that determined the reasonableness of the compromise, the 

court’s decision must be affirmed.” Id. (citation omitted).

“Each factor need not be treated in a vacuum; rather, the factors 

should be considered as a whole to determine whether the settlement

compares favorably with the expected rewards of litigation.” Grief & Co. v. 

Shapiro (In re W. Funding Inc.), 550 B.R. 841, 851 (9th Cir. BAP 2016), aff’d, 

705 F. App’x 600 (9th Cir. 2017). Ultimately, “[t]he trustee, as the party 

proposing the compromise, has the burden of persuading the bankruptcy 

court that the compromise is fair and equitable and should be approved.” 

In re A & C Prop., 784 F.2d at 1381 (citation omitted).

The bankruptcy court “need not rule upon disputed facts and 

questions of law, but only canvass the issues. A mini trial on the merits is 

not required.” Burton v. Ulrich (In re Schmitt), 215 B.R. 417, 423 (9th Cir. 

BAP 1997) (citations omitted). 

B. The bankruptcy court did not err in applying the A & C Properties

factors. 

1. Probability of success
14

Sanders is adamant that he would be successful if he were permitted

to defend himself in the State Court Litigation. He argues that the 

Watchers’ investments were not made with him; in fact, he claims he never 

even met them. He argues therefore that he could not have taken their 

money improperly, and thus the conversion cause of action must fail. 

Sanders argues that the Watchers have a low probability of obtaining “any 

recovery.” 

But Sanders ignores the fact that the state court reformed the two 

promissory notes in favor of the Watchers and its judgment is now final. 

He conceded at oral argument that he was liable to the Watchers on the 

notes irrespective of the liens. As to the amount owed on the loans, Sanders 

argues that the total amount loaned to him was $393,000 (in 2016) and 

suggests that the recovery should be limited to that amount. This argument 

ignores the interest at 10.99% on the Half Moon Bay Property loan and 

11.75% on the Callaway Circle Property loan and the late charges and

attorney’s fees to enforce the notes. With unpaid interest accruing since the 

payments stopped in early 2018, the total amount owed on those two loans 

was at least $1 million at the time of the settlement. The Watchers are 

entitled to receive that amount from the proceeds of the sale of the two 

properties irrespective of the results of the State Court Litigation. 

The settlement reduced the Watchers’ general unsecured claim of 

$3,386,000 (plus interest at 10% for the past two years if the judgment is 

upheld) to $1,125,000 (although payment of that amount will also satisfy 
15

their secured claim of $400,000 on the Callaway Circle Property). The

Watchers’ unsecured claim will be paid pro-rata with the other unsecured 

creditors after payment of all administrative costs including those of the 

Trustee and her counsel (although it appears likely that there are sufficient 

funds in the estate to pay all claims in full).

The Trustee argues that the Watchers “have an ironclad conversion 

action against [Sanders] for wrongfully retaining the Watchers’ stolen 

money in the face of multiple demands to turn over the stolen property.”

Appellee Opening Br. p. 23. (emphasis in original). She believes that the 

Watchers are likely to recover “well in excess of $1.85 million with respect 

to the claims.” Id. p. 22.

The bankruptcy court acknowledged that it was unable to evaluate 

with any precision the likelihood that the Watchers would be successful 

first in getting the set-aside order reversed and then in prevailing at trial. 

But the court is not required to make such a finding. There is no right to a 

mini trial. 

Given the risks and uncertainties, the bankruptcy court did not err in 

finding that this factor weighed in favor of the settlement. 

2. Difficulty of collection

The parties agreed this factor does not apply. 
16

3. The complexity of the litigation involved, and the expense, 

inconvenience, and delay

Assuming the Watchers’ appeal in state court was unsuccessful, their 

claim would have to be liquidated. That would be a contested matter

resulting in motions, discovery, and likely a lengthy trial. The litigation 

would be both legally and factually complex. There had been no significant 

activity in the state court case other than the default prove-up hearing.

Absent the settlement, the estate faced either a potential reversal of 

the set-aside order resulting in affirmance of the full amount of the 

judgment plus interest for at least two years, or litigation which was likely 

to be lengthy and expensive. The attorney’s fees and costs incurred in 

continuing the litigation would likely approximate some meaningful 

portion of the settlement amount of $1,125,000. The Trustee’s failure in the 

litigation could lead to the full amount of the judgment being allowed, or a 

$4 to $5 million claim after the expense of litigation. 

Even if Sanders agreed to shoulder the cost of the litigation, which he 

did not and has not offered, the cost to the estate would be significant.7 The 

bankruptcy court properly considered the expense, inconvenience, and 

delay which would be caused if the litigation continued. The bankruptcy 

court did not err in concluding that this factor weighed in favor of the 

settlement. 

7 Sanders’ counsel’s statement at oral argument that Sanders was ready to fund 

the litigation, assuming it is true, is too little, too late. 
17

4. Best interests of the creditors

Finally, the bankruptcy court considered the “paramount interests of 

the creditors and gave proper deference to their views.” In re A & C Prop., 

784 F.2d at 1381. As this appears to be a solvent estate, especially given the 

reduction of the Watchers’ claim via the settlement, all creditors will likely

be paid in full. It is in the best interest of creditors that they be paid sooner 

rather than later. 

The bankruptcy court identified the correct legal rule via the factors 

set forth in A & C Properties. We cannot say that its application of the rule 

was illogical, implausible, or without support in inferences that may be 

drawn from the facts in the record. 

C. Sanders’ further arguments fail. 

1. Sanders was not denied due process by the approval of the 

Settlement Motion. 

Sanders argues that the bankruptcy court “abused its discretion 

because the resolution of non-core claims via summary approval of the 

compromise without an evidentiary hearing deprived Sanders of due 

process.”8 Opening Br., p. 24. He argues that the conversion claim “rests on 

California substantive law and is, thus, not a core-proceeding” citing 

Maitland v. Mitchell (In re Harris Pine Mills), 44 F.3d 1431, 1436 (9th Cir. 

1995) to support that statement. We disagree. 

8 Sanders notes in his required Jurisdictional Statement in his Opening Brief that 

“[a]pproval of the settlement was a core proceeding pursuant to 28 U.S.C. § 157(b).” 

Opening Br., Pg. 10. 
18

In Harris Pine Mills, a purchaser of certain assets of a bankruptcy 

estate sued the chapter 7 trustee in state court alleging state court causes of 

action. The trustee removed the matter to the bankruptcy court which 

thereafter entered judgment for the trustee. The purchaser asserted that the 

matter was not core and therefore the bankruptcy court did not have 

judicial power to enter a final judgment in the matter. The Ninth Circuit 

disagreed ruling that the claims against the trustee were core because the 

conduct of the trustee at issue was inextricably intertwined with the 

trustee’s sale of property belonging to the estate. Id. at 1438. 

The Ninth Circuit in Harris Pine Mills noted that a core proceeding is 

one that invokes a substantive right created by federal bankruptcy law 

which does not exist outside of bankruptcy. Id. Proceedings under Rule 

9019 are core because the power of the trustee to settle claims is a 

fundamental part of federal bankruptcy law and does not exist outside of 

the bankruptcy realm. 

Further, Congress provided in 28 U.S.C. § 157(b) a list of 16 examples 

of core proceedings, which included (A) matters concerning the 

administration of the estate; (B) allowance or disallowance of claims 

against the estate. . .; (O) other proceedings affecting the liquidation of the 

assets of the estate or the adjustment of the debtor-creditor . . . relationship, 

except personal injury tort or wrongful death claims. The Settlement 

Motion implicates each of the three examples. See In re ISE Corp., Case No. 

10-14198-MM 11, 2012 WL 1377085, at *4 (Bankr. S.D. Cal. Apr. 13, 2012) 
19

(finding approval of a settlement agreement to be core proceeding) (citing 

Harris v. Wittman, (In re Harris), 590 F.3d 730, 738 (9th Cir. 2009) (explaining 

that matters involving the implementation of the parties’ settlement 

agreement was within bankruptcy court’s core jurisdiction.)).

The Settlement Motion concerned the administration of the estate. 

See, e.g., In re Moses, 225 B.R. 360, 364 (E.D. Mich. 1998) (“In this case, the 

Bankruptcy Court’s ruling on the settlement motion was a matter 

‘concerning the administration of the estate’ because it dealt specifically 

with the disposition of the property of the estate.”). The Settlement 

Agreement concerned the allowance or disallowance of a claim against the 

estate and adjusted the debtor-creditor relationship by ending the State 

Court Litigation. “[T]he restructuring of debtor-creditor relations . . . is at 

the core of the federal bankruptcy power,” Northern Pipeline Constr. Co. v. 

Marathon Pipe Line Co., 458 U.S., 50, 71 (1982). The bankruptcy court had the 

judicial power to grant the Settlement Motion and to enter a final order 

thereon because it was a core proceeding. 

Sanders also argues that he has been deprived of due process because 

the Watchers’ claims (against him) are “speculative” and there is “no 

evidentiary basis” to support a judgment (against him) which is, he argues, 

required before the court can approve the motion. We disagree.

The Trustee settled the claim against the estate. The settlement does 

not finally resolve the issues between Sanders and the Watchers because of 

the pending non-dischargeability action. The Watchers have not released 
20

Sanders under the Settlement Agreement which specifically provides that 

“in the event that [Sanders] opposes the Trustee’s 9019 Motion, the 

Watchers reserve all of their rights and remedies to enforce their claims 

against [Sanders].” As Sanders opposed the Settlement Motion, the 

Watchers are entitled to proceed with their pending adversary proceeding 

against him to determine whether any amount of the debt will survive the 

bankruptcy proceeding. He will be able to litigate the issues at that time. 

2. Sanders has no right to an offset based on the Watchers’ 

recoveries against other parties. 

Sanders argues that because the Watchers have apparently recovered 

$444,000 from three other parties in the State Court Litigation,9 those 

payments “have the impact of lowering the Watchers’ claims.” Opening 

Br., p. 30-31. Sanders offers no factual or legal basis to support that 

position. 

3. The bankruptcy court did not err by considering Sanders’ 

general conduct in the bankruptcy case and his relationship 

with Floyd. 

Sanders argues that the bankruptcy court considered improper 

factors such as Sanders’ conduct in the bankruptcy case to date and his 

relationship with Floyd. Sanders takes offense to the bankruptcy court’s 

comment that he is not “’exactly an altar boy’ and had not cooperated with 

the bankruptcy process.” Opening Br., p. 36. He argues without legal 

9 These payments were disclosed to the bankruptcy court by the Trustee in the 

Settlement Motion. Estate of Wilber Sowers, $25,000; John Edward, $170,000; and 

Katherine Floyd, $249,030. 
21

support that these were improper factors “which require reversal.” He cites 

Jen Hung Ng v. INS, 804 F.2d 534, 538 (9th Cir. 1986) for support but that 

case does not discuss which factors may or may not be proper in 

considering a Rule 9019 motion. 

More importantly, permitting the litigation to proceed would require 

the Trustee to partner up with Sanders whose dependability is dubious, as 

evidenced by his conduct in the bankruptcy case. This is a relevant factor 

when considering the probability of success in what will be complex 

litigation. Sanders’ relationship with Floyd is also relevant to the 

conversion claim since his entreaties that he was a stranger to the Watchers 

may ring hollow when considering the use of and whereabouts of the 

Watchers’ funds. The bankruptcy court noted these anomalies and we 

cannot second guess the Trustee’s concern. 

D. The bankruptcy court did not err in declining to hold an 

evidentiary hearing. 

Finally, Sanders argues that the bankruptcy court erred in rejecting 

his request for discovery and an evidentiary hearing. We disagree.

The bankruptcy court was within its discretion when it declined to 

draw out the proceedings any further with discovery and an evidentiary 

hearing. It was not required to make factual determinations on every 

disputed issue. See In re Int’l Fibercom, Inc., 503 F.3d at 946 (holding that, 

where there was an adequate factual basis for the bankruptcy court’s 

decision, an evidentiary hearing was unnecessary); Aguina v. Kang (In re 
22

Aguina), Case No. CC-21-1163-FLS, 2022 WL 325579, at *8 (9th Cir. BAP 

Feb. 3, 2022) (“Rule 9019 does not require an evidentiary hearing on every 

settlement agreement presented to the Court” quoting In re Kent, Case No. 

07-BK-03238-SSC, 2008 WL 5047821, at *1 (Bankr. D. Ariz. July 25, 2008)).

The bankruptcy court’s decision to approve the Settlement Motion had an 

adequate factual basis. 

CONCLUSION

The bankruptcy court did not abuse its discretion in approving the

compromise between the Trustee and the Watchers. We AFFIRM.