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1 This disposition is not appropriate for publication. 

Although it may be cited for whatever persuasive value it may have

(see Fed. R. App. P. 32.1), it has no precedential value. See 9th

Cir. BAP Rule 8013-1.

2

 Hon. Fredrick E. Clement, Bankruptcy Judge for the Eastern

District of California, sitting by designation.

UNITED STATES BANKRUPTCY APPELLATE PANEL

OF THE NINTH CIRCUIT

In re: ) BAP No. CC-12-1268-KiClD

)

PATRICK ROY LEWIS, ) Bk. No. 1:11-13919-AA

)

Debtor. ) )

)

KALLMAN & COMPANY LLP, )

)

Appellant, )

)

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

)

DAVID K. GOTTLIEB, Chapter 7 )

Trustee; JUDITH LEWIS, )

)

Appellees. )

______________________________)

Argued and Submitted on May 16, 2013, 

at Pasadena, California

Filed - May 30, 2013

Appeal from the United States Bankruptcy Court

for the Central District of California

Honorable Alan M. Ahart, Bankruptcy Judge, Presiding 

Appearances: Michael Sanford Kogan, Esq. of Kogan Law Firm, APC,

appeared for appellant, Kallman & Company, LLP;

Simon Jonathan Dunstan, Esq. of Hughes & Dunstan,

LLP appeared for appellee, Judith Lewis; Lawrence

D. Simons, Esq. of the Law Offices of Larry D.

Simons appeared for appellee, David K. Gottlieb,

Chapter 7 Trustee. 

Before: KIRSCHER, CLEMENT2 and DUNN, Bankruptcy Judges.

FILED

MAY 30 2013

SUSAN M SPRAUL, CLERK

U.S. BKCY. APP. PANEL

OF THE NINTH CIRCUIT
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3 Unless specified otherwise, all chapter, code and rule

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

the Federal Rules of Bankruptcy Procedure, Rules 1001-9037. The

Federal Rules of Civil Procedure are referred to as “Civil Rules.”

-2-

Appellant, Kallman & Company LLP ("K & C"), appeals an order

from the bankruptcy court approving the sale of a claim to

appellee, Judith Lewis ("Judith"), which the court had previously

approved to be sold to K & C. We VACATE and REMAND for lack of

adequate findings under Rule 7052.3

I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY

Prior to the bankruptcy, debtor Patrick Lewis ("Patrick") was

employed by K & C. Judith is Patrick's non-debtor wife. They

have been married since 1992. In August 2010, Patrick filed a

complaint against K & C in state court alleging claims for breach

of contract, breach of fiduciary duty, failure to pay wages and

accounting (the "Claim"). K & C filed a cross-complaint in

response. 

Before any judgment had been determined on the Claim by the

state court, Patrick filed his chapter 7 bankruptcy case on

March 31, 2011. David K. Gottlieb ("Trustee") was appointed as

chapter 7 trustee to administer the case, including Patrick's

interest in the Claim, which was now part of his bankruptcy

estate. In Patrick's Schedule B, he identified the Claim, which

sought damages in excess of $200,000, as having a current value of

$20,000. Patrick did not designate how ownership in the Claim was

held - i.e., whether it belonged to him or to the marital

community. 

At some point, counsel for K & C approached Trustee about

purchasing the estate's interest in the Claim. K & C and Trustee
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engaged in negotiations and ultimately reached an agreement

whereby K & C would purchase the Claim for $40,000. The agreement

was reduced to writing and executed by the parties in January

2012. Pertinent provisions of the Agreement state:

1.1 Closing Date. The closing of the purchase and sale

provided herein (the "Closing Date"), shall take

place upon entry of a final, non-appealable order

from the United States Bankruptcy Court, Central

District of California, or other court of competent

jurisdiction, approving this Agreement. 

2.1 Acquisition of Assets. Subject to the terms and

conditions of this Agreement, and based on the

representations and warranties hereinafter set

forth, at the Closing, Seller shall sell, transfer,

convey, assign and deliver to Buyer, and Buyer shall

acquire and purchase from Seller, certain property,

properties and rights of Seller associated

therewith, consisting of Seller's right, title and

interest in and to the Complaint and the following

(the "Property")

(ii) The Trustee agrees to immediately

relinquish all rights upon execution of

this Agreement, but shall retain a

security interest in the Complaint to the

extent of any outstanding payments that

currently exist under this Agreement only.

6.1 Grounds for Termination. This Agreement may be 

 terminated at any time prior to the Closing Date:

c. by Seller by written notice thereof to Buyer if

any of the conditions set forth herein have

been incapable of fulfillment by or before the

Closing Date, and shall not have been waived by

Seller. 

7.4 Representations and Warranties. 

f. Each party hereto agrees that such party will

not take any action which would interfere with

the performance of this Agreement by any other

party hereto or which would adversely affect

any of the rights provided for herein[.] 

According to the Agreement, the sale of the Claim was subject to

overbid of at least $10,000 over K & C's offer of $40,000. The

parties further agreed to mutual releases of any past, present or
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4 Section 363(i) provides:

Before the consummation of a sale of property to which

subsection (g) or (h) of this section applies, or of property

of the estate that was community property of the debtor and

the debtor's spouse immediately before the commencement of

the case, the debtor's spouse, or a co-owner of such

property, as the case may be, may purchase such property at

the price at which such sale is to be consummated (emphasis

added).

-4-

future claims against one another. 

Trustee moved to approve the sale of the Claim to K & C under

§ 363(b). The K & C sale motion was heard on February 22, 2012. 

Patrick, Judith and Patrick's bankruptcy counsel, Simon Dunstan,

Esq. ("Dunstan"), attended. Patrick and Dunstan opposed the sale,

but did not qualify as overbidders. Based on the pleadings filed,

argument of counsel and lack of any overbids, the bankruptcy court

orally approved the sale of the Claim to K & C.

A week later on February 29, 2012, Dunstan drafted a letter

to Trustee informing him that Judith wished to exercise her rights

under § 363(I)4

 to purchase the Claim on the same terms reached

with K & C for $40,000.

Meanwhile, the bankruptcy court entered an order approving

the sale of the Claim to K & C on March 8, 2012 ("K & C Sale

Order"). 

On March 22, 2012, fourteen days after entry of the K & C

Sale Order, Patrick filed a motion to reconsider the sale, thereby

tolling the appeal time of the K & C Sale Order. 

On that same date, Trustee filed a motion to approve a

stipulation to sell the estate's interest in the Claim to Judith

under § 363(I) ("Judith Sale Motion"). According to Trustee,

after researching and receiving evidence that the funds Judith was
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5 The source of the funds to purchase the Claim was Bolero

Home Decor, Inc. Patrick and Judith represented that they had no

ownership or other pecuniary interest in that entity.

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tendering to purchase the Claim were not estate property, he and

Judith executed a stipulation on March 21, 2012, whereby he would

sell the Claim to Judith for $40,000.5 Trustee asserted that the

Claim was presumed to be community property because it arose

during the marriage. Therefore, argued Trustee, selling it to

Judith was proper because the sale had not yet been consummated

with K & C at the time she exercised her right of first refusal

under § 363(I). 

K & C opposed the Judith Sale Motion, contending that the

sale to K & C had already been consummated and that Judith lacked

any community property interest in the Claim. Specifically, K & C

contended that the prior sale had been "consummated" on

February 22 because the bankruptcy court held the sale hearing,

Patrick and Judith were represented by counsel at the hearing and

given an opportunity to overbid, Patrick's bid had been rejected,

Judith expressed no interest in purchasing the Claim at that time,

and the court orally approved the sale of the Claim to K & C. 

K & C further argued that Section 2.1(ii) of the Agreement

expressly transferred the estate's interest in the Claim "upon

execution" of the Agreement, which was on January 30, 2012. 

Therefore, according to K & C, because the estate's rights to the

Claim were transferred to K & C on January 30, Trustee had nothing

left to sell Judith (other than his security interest) on

March 21, 2012. If the court disagreed with these earlier

"consummation" dates, K & C alternatively argued that the sale was
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consummated upon entry of the K & C Sale Order on March 8, 2012. 

K & C also argued that Judith lacked standing to purchase the

Claim under § 363(I) because it was not identified as community

property in Patrick's Schedule B, which was signed under the

penalty of perjury, and Trustee had failed to demonstrate

otherwise. Finally, K & C argued that because the sale to Judith

did not (and could not) release Trustee and the bankruptcy estate

from liability on K & C's cross-claims, as did the Agreement,

K & C's offer was greater in amount than Judith's, and so the sale

of the Claim to her should not be approved. 

In reply, Trustee disputed K & C's contention that the sale

had already been consummated. In his opinion, no sale had been

consummated because no monies had been tendered. Trustee had

previously informed the parties that he would not accept any funds

until the bankruptcy court had entered an order either approving

or denying the sale to Judith.

In her reply to K & C's opposition, Judith argued that her

mere presence at the sale hearing was not a waiver of her rights

under § 363(I) because she was not represented by Dunstan at that

time, and she had no notice that her rights might be impacted. 

Contrary to K & C's position, Judith argued that she was not

required to bid at the auction, or assert her intention to do so,

because that would have been tantamount to a co-owner bidding up

the price to her own detriment. Judith contended that § 363(I)

allowed her to wait until the marketplace determined the Claim's

value and then exercise her right to acquire it at that price. 

Judith disputed K & C's contention that the Claim was transferred

and the sale was consummated "upon execution" of the Agreement on
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6 The parties did not include a copy of the tentative ruling

(continued...)

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January 30, 2012. Under the Agreement, nothing could be

transferred until the "Closing Date," which was not until a final,

non-appealable order had been entered by the bankruptcy court,

and, because of Patrick's timely motion to reconsider, the K & C

Sale Order was not yet final. Alternatively, argued Judith,

Trustee had a contractual right to terminate the Agreement based

on Section 6.1(c). 

Judith further argued that despite Patrick's omission in his

Schedule B, which was not binding on her, the Claim was community

property because she and Patrick had been married since 1992, the

Claim against K & C arose during their marriage, and she had never

signed an agreement giving up any interest in property, community

or otherwise. 

Finally, Judith rejected K & C's argument that its offer was

superior to hers because of K & C's release of its cross-claims

against the bankruptcy estate. The Agreement allowed for overbids

from third parties without a release, and it was not clear as to

whether K & C was actually releasing the bankruptcy estate from

liability. Moreover, K & C's unsecured cross-claims had no value

in any event because the IRS held a priority claim for $101,747,

which would consume whatever funds were available for distribution

to Patrick's unsecured creditors.

The bankruptcy court held a hearing on the Judith Sale Motion

and Patrick's reconsideration motion on April 18, 2012. At the

start, the parties confirmed that they had reviewed the court's

tentative rulings on the two matters.6 The parties agreed that
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6(...continued)

in the record, but we took the liberty of retrieving it from the

bankruptcy court's electronic docket. See O’Rourke v. Seaboard

Sur. Co. (In re E.R. Fegert, Inc.), 887 F.2d 955, 957-58 (9th Cir.

1989)(appellate court can take judicial notice of documents filed

with the bankruptcy court). That ruling states in its entirety:

Grant the Motion and authorize sale of the Claim to

Judith Lewis per the Stipulated Agreement.

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they could not locate any case law determining when a sale is

"consummated" for purposes of § 363(I). Nonetheless, they were in

complete disagreement about when the sale of the Claim to K & C

was consummated, whether it was upon execution of the Agreement,

entry of the K & C Sale Order, or when the funds exchanged hands. 

After hearing argument from the parties, the bankruptcy court

asked Trustee's counsel to explain what would happen to K & C's

counterclaim if the court approved the sale of the Claim to

Judith. Counsel replied that Patrick would presumably return to

state court to litigate his claims against K & C, and K & C would

retain its rights to defend itself and assert its counterclaim. 

Upon that representation, the bankruptcy court approved the Judith

Sale Motion:

Okay. So I'm going to grant the motion on that basis.

My tentative ruling is adopted and amended accordingly.

Hr'g Tr. (Apr. 18, 2012) 18:6-8. Based on that ruling, the

bankruptcy court denied Patrick's reconsideration motion. 

The bankruptcy court entered an order denying Patrick's

motion to reconsider on May 8, 2012. That order was not appealed. 

Thus, the K & C Sale Order became final on May 23, 2012.

The bankruptcy court entered an order approving the Judith

Sale Motion under § 363(I) on May 11, 2012 ("Judith Sale Order"). 
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The Judith Sale Order states that the court "made its findings of

fact and conclusions of law as stated on the record" pursuant to

Rule 7052. This timely appeal followed. 

II. JURISDICTION

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

and 157(b)(2)(N). We have jurisdiction under 28 U.S.C. § 158. 

III. ISSUE

Did the bankruptcy court make sufficient findings of fact and

conclusions of law to allow for meaningful review of this appeal? 

IV. STANDARD OF REVIEW 

Sales under § 363 are reviewed for abuse of discretion. 

Moldo v. Clark (In re Clark), 266 B.R. 163, 168 (9th Cir. BAP

1998). A bankruptcy court abuses its discretion if it applied the

wrong legal standard or its findings were illogical, implausible

or without support in the record. TrafficSchool.com, Inc. v.

Edriver Inc., 653 F.3d 820, 832 (9th Cir. 2011).

V. DISCUSSION

The bankruptcy court did not make sufficient

findings of fact and conclusions of law to

support approval of the Judith Sale Motion.

A. Rules 9014 and 7052

Because it was opposed, the Judith Sale Motion was a

contested matter subject to Rule 9014. See Rule 6004(b). As a

contested matter, the bankruptcy court was required to make

findings of fact, either orally on the record or in a written

decision. See Rule 9014(c) (incorporating Rule 7052, which in

turn incorporates Civil Rule 52); Harris v. U.S. Trustee

(In re Harris), 279 B.R. 254, 260 (9th Cir. BAP 2002)(in contested

matters the bankruptcy court is required to make findings on
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disputed issues of material fact). Specifically, in an action

tried on the facts without a jury, "the court must find the facts

specially and state its conclusions of law separately." Civil

Rule 52(a)(1), incorporated by Rule 7052. These findings must be

sufficient to indicate the factual basis for the court’s ultimate

conclusion. Unt v. Aerospace Corp., 765 F.2d 1440, 1444 (9th Cir.

1985). The findings must be explicit enough to give the appellate

court a clear understanding of the basis of the trial court’s

decision, and to enable it to determine the grounds on which the

trial court reached its decision. Mattel, Inc. v. Walking

Mountain Prods., 353 F.3d 792, 815 (9th Cir. 2003); Unt, 765 F.2d

at 1444; Veal v. Am. Home Mortg. Servicing, Inc. (In re Veal),

450 B.R. 897, 919 (9th Cir. BAP 2011). 

B. Analysis

Findings of fact and conclusions of law are essential to

appellate review of this matter. In the absence of complete

findings, we may vacate a judgment and remand to the bankruptcy

court to make the required findings. See United States v.

Ameline, 409 F.3d 1073 (9th Cir. 2005). However, even when a

bankruptcy court does not make formal findings, we may conduct

appellate review "if a complete understanding of the issues may be

obtained from the record as a whole or if there can be no genuine

dispute about omitted findings." In re Veal, 450 B.R. at 919-20

(citations omitted).

The Judith Sale Order, which was drafted by counsel for

Trustee, indicates that the bankruptcy court stated its findings

of fact and conclusions of law on the record. Review of the

transcript from the sale hearing reflects that the bankruptcy
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court did not articulate any findings or conclusions on the

record, other than implying that the Judith Sale Motion was

approved on the basis that both parties could pursue their claims

in state court. Whether that finding was even essential to a sale

under § 363(I) is debatable. Further, despite the bankruptcy

court's indication at the sale hearing that it had made findings

in its tentative ruling, a review of that tentative ruling

reflects otherwise. 

The issues of when the sale to K & C was "consummated" and

whether the Claim was "community property" were disputed issues of

material fact essential to a ruling on the sale of the Claim to

Judith under § 363(I). The bankruptcy court made no specific

findings on either of these issues. As a result, we have no basis

for evaluating whether it abused its discretion in approving the

sale of the Claim to Judith. Accordingly, we must VACATE the

Judith Sale Order and REMAND.

VI. CONCLUSION

Because the bankruptcy court did not make sufficient findings

to support the sale of the Claim to Judith under § 363(I), we

VACATE the Judith Sale Order and REMAND with instructions that the

bankruptcy court enter the required findings of fact and

conclusions of law in accordance with Rule 7052, and further

determine whether the Judith Sale Order supersedes the K & C Sale

Order.