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NOTFOR PUBLICATION

UNITED STATES BANKRUPTCY APPELLATE PANEL

OF THE NINTH CIRCUIT

In re: ) BAP No. WW-13-1391-JuKuPa

)

GURPREET KAUR, ) Bk. No. 12-16490-MLB

)

Debtor. ) Adv. No. 12-01872-MLB

______________________________)

)

GURPREET KAUR, )

)

Appellant, )

)

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

)

PARDEEP RATHINAM; SHARMILA )

RATHINAM; SATWANT SINGH; )

DHALIWAL REAL ESTATE LLC, )

)

Appellees. )

______________________________)

Submitted Without Oral Argument

on June 26, 2014**

Filed - July 9, 2014

Appeal from the United States Bankruptcy Court

for the Western District of Washington

Honorable Marc L. Barreca, Bankruptcy Judge, Presiding

_________________________

Appearances: Masafumi Iwama, Esq., on brief for appellant 

Gurpreet Kaur; John H. O’Rourke, Esq. 

on brief for appellees Pardeep and Sharmila 

Rathinam, Satwant Singh and Dhaliwal Real Estate 

LLC.

FILED

JUL 09 2014

SUSAN M. SPRAUL, CLERK

U.S. BKCY. APP. PANEL

OF THE NINTH CIRCUIT

* 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.

** On May 15, 2014, this Panel entered an order determining

that this appeal was suitable for submission without oral

argument.

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Before: JURY, KURTZ, and PAPPAS, Bankruptcy Judges.

Chapter 111 debtor Gurpreet Kaur owned real property in

Kent County, Washington comprised of two tax parcels (Property). 

Debtor’s home was on one acre designated as Parcel A and the

contiguous four acres were designated as Parcel B. Debtor

claimed a homestead exemption on Parcels A and B and filed an

adversary proceeding2 seeking to avoid the judgment lien of

Pardeep and Sharmila Rathinam (Rathinams), Satwant Singh

(Satwant) and Dhaliwal Real Estate, LLC (Dhaliwal)

(collectively, Appellees) pursuant to § 522(f). Debtor then

moved for summary judgment. In response, Appellees argued,

among other things, that Parcel B was not reasonably necessary

for the use and occupancy of debtor’s homestead under John

Hancock Mut. Life Ins. Co. v. Wagner, 174 Wash. 185, 24 P.2d 420

(Wash. 1933).

Debtor later discovered that Appellees had not recorded

their judgment. Therefore, under Washington law, no lien

attached to her Property. Further, her personal liability on

the debt had been discharged in a previous chapter 7 case. 

Debtor moved to dismiss the adversary proceeding, which the

bankruptcy court denied for reasons not apparent from the

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.

2 Rule 4003(d) provides that a proceeding by the debtor to

avoid a lien under § 522(f) shall be by motion in accordance with

Rule 9014. Appellees did not object to debtor proceeding by 

adversary complaint rather than by motion. Regardless, no due

process issues are triggered, since the adversary accords more

due process than a motion.

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record. 

Thereafter, the court held a trial to determine whether

debtor was entitled to claim Parcel B as part of her homestead

exemption. Without addressing the lien perfection issue, the

bankruptcy court issued its findings of fact and conclusions of

law, finding that debtor was entitled to claim Parcel A as

exempt, but that Parcel B was not reasonably necessary for the

use and enjoyment of her home as a dwelling under the holding in

Hancock. The court entered judgment in favor of debtor with

respect to Parcel A and in favor of Appellees with respect to

Parcel B. This appeal followed. For the reasons discussed

below, we VACATE the judgment of the bankruptcy court and REMAND

this matter with instructions that the bankruptcy court dismiss

this adversary proceeding.

I. FACTS3

A. The Purchase And Sale Agreement

In November 2006, Dhaliwal, through its managing member,

Satwant, offered to purchase the Property from the then-owner,

Harbhajan Singh (Harbhajan). Harbhajan agreed to sell the

Property for $1,615,000 and, as part of the agreement, Dhaliwal

was required to pay a $200,000 earnest money deposit which would

be applied to the purchase price. An addendum to the agreement

stated that the earnest money deposit would become nonrefundable

after a certain date. According to the agreement, the closing

3 We take judicial notice of various pleadings and documents

in this case and the adversary proceeding because the record on

appeal is incomplete. See Atwood v. Chase Manhattan Mortg. Co.

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

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would occur in August 2007 and was conditioned on two

contingencies: (1) the land had to be subdivisible and (2) the

subdivision had to yield at least seventeen lots. 

Because Harbhajan could not speak English, Satwant helped

prepare the subdivision plan and preliminary approval was

granted by the City of Kent. During the development process,

the Rathinams became parties to the purchase and sale agreement

through an assignment by Dhaliwal. In connection with the

purchase and sale, Appellees made a downpayment of $500,000,

$200,000 of which was the earnest money deposit. It is unclear

from the record whether the Rathinams paid the entire amount. 

Ultimately, the transaction did not close and none of the money

was refunded.

B. The State Court Lawsuits And Transfer Of The Property

Appellees commenced a lawsuit against Harbhajan in the King

County Superior Court seeking the return of their $500,000

downpayment. They obtained a judgment against him by default in

the amount of $501,735.

In late October 2008, debtor purchased the Property from

Harbhajan. In connection with the purchase, debtor obtained a

loan from Provident Funding Associates, LP (Provident) in the

amount of $417,000 which is evidenced by a promissory note

secured by a first deed of trust against the Property (both

Parcels A and B). Debtor has been living on the Property since

August 2004 with her extended family members, including

Harbhajan, who is debtor’s father.

After learning about the transfer of the Property,

Appellees commenced an action against Harbhajan, his wife, and

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debtor in the King County Superior Court, seeking to avoid the

alleged fraudulent transfer of the Property from Harbhajan to

debtor and alleging that debtor had received $200,000 of the

$500,000 downpayment (Case No. 09-2-15396-5KNT). In April 2010, 

Appellees obtained a judgment by default against debtor in the

amount of $200,000 and the superior court avoided the transfer

of the Property (the April 2010 Judgment).

C. Debtor’s Chapter 7 And Chapter 13 Cases

Shortly after, on September 21, 2010, debtor filed a

chapter 7 petition (Case No. 10-21208-MLB). In Schedule A,

debtor valued the Property at $350,000 and identified it as her

residence. Debtor listed the Rathinams as secured creditors

against the Property. In Schedule C, she claimed the federal

homestead exemption. Debtor obtained her discharge on

January 19, 2011. 

Prior to her discharge, on January 9, 2011, debtor filed a

chapter 13 case, this time claiming state exemptions in

Schedule C. That case was dismissed for failure to make plan

payments. 

In January 2012, upon Appellees’ motion, the bankruptcy

court reopened debtor’s chapter 7 case so that they could file

an adversary proceeding seeking to revoke debtor’s discharge

under § 727(d)(1) and (2). Upon debtor’s motion, the bankruptcy

court granted partial relief in her favor, dismissing the

§ 727(d)(2) claim entirely and dismissing Satwant and Dhaliwal

as parties to the § 727(d)(1) claim. After a trial on the

§ 727(d)(1) claim, the bankruptcy court denied revocation and

upheld debtor’s discharge order in its findings of fact and

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conclusions of law entered on August 7, 2012. With her § 727

discharge intact, debtor’s personal liability on the debt owed

to Appellees was discharged.

D. Debtor’s Chapter 11 Case

Meanwhile, Provident commenced foreclosure proceedings

against the Property. Debtor filed a chapter 11 case on

June 21, 2012, to stop the proceedings. In Schedule A, debtor

valued the Property at $408,000. She characterized Parcel B as

wetlands having no value and she indicated the Property was

encumbered by approximately $501,000 of secured claims. She

again listed the Rathinams as secured creditors against the

Property. In Schedule C, she claimed the federal homestead

exemption. 

On October 4, 2012, debtor filed an adversary proceeding

seeking to avoid Appellees’ judgment lien arising out of the

April 2010 Judgment. Debtor maintained that the lien impaired

her homestead exemption within the meaning of § 522(f). 

Debtor then filed a motion for summary judgment (MSJ) on

the lien avoidance issue, which the bankruptcy court denied on

February 4, 2013. In opposition to the MSJ, Appellees argued

that Parcel B, which was vacant land, was not necessary for the

use and occupancy of debtor’s homestead under Hancock.

On January 15, 2013, debtor filed amended Schedules A and

C. In Schedule A, she valued the Property at $600,000. She

again characterized Parcel B as wetlands having no value and she

again indicated the Property was encumbered by approximately

$501,000 in secured claims. In Amended Schedule C, she claimed

the state law homestead exemption.

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Debtor later discovered that Appellees had never recorded

the judgment at the King County Recorder’s Office. On

February 11, 2013, debtor moved to dismiss the adversary

proceeding on the grounds that the judgment did not attach to

her homestead under Wash. Rev. Code (RCW) 6.13.0904 and thus

there was no controversy for the court to decide. The

bankruptcy court denied her motion by order entered on March 28,

2013, for reasons not apparent from the record.5

On May 6, 2013, the bankruptcy court held a trial to

determine the exact portion of debtor’s property covered by the

homestead exemption. At the commencement of trial, the court

observed that it was the lien claimant’s burden to show that

they actually had a lien. The court later stated:

I can’t read [RCW] 6.13.090 as anything other than

saying, if you don’t record the judgment, you don’t

have a lien against real property, even if it’s in the

county where the judgment was taken. That’s just how

[RCW] 6.13.090 works. That’s always been my

understanding of it. I didn’t see any case law cited

to me that may be in the exception for that. I think

the thing that is missing in the defendants’ analysis

on that is the discharge injunction stays from you now

recording it. So if it wasn’t recorded and I do

determine that both parcels are homestead, then as I

4 RCW 6.13.090 states in relevant part: 

A judgment against the owner of a homestead shall

become a lien on the value of the homestead property in

excess of the homestead exemption from the time the

judgment creditor records the judgment with the

recording officer of the county where the property is

located. . . .”

5 There is no transcript of the hearing on the motion to

dismiss in the record or on the docket and the order denying

debtor’s motion does not contain findings of fact or conclusions

of law. Therefore, we are unable to discern the precise basis

for the bankruptcy court’s decision to deny debtor’s motion.

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see it, there’s just no lien there, and I could enter

a judgment declaring that there is no lien against

that property, and then your client’s precluded --

because I already determined the debt’s dischargeable,

you’d be precluded from then recording the judgment

lien because of the discharge injunction.

Without further discussion or argument on the lien perfection

issue, the matter proceeded to trial on whether Parcel B was

included in debtor’s homestead. 

During the trial, debtor testified that she and her family

utilized the entire property for their residence. Her driveway

begins at the west boundary of Parcel B and ends at the

northeast corner of Parcel A. The driveway is the only

practical means of access to her residence. There are two

appurtenant buildings located on Parcel B, one of which is

served by an electric power line attached to the residence. 

This structure is used as a storage shed. The other structure

is a goat house where debtor keeps her two goats. She keeps a

garden and maintains fruit trees on the portion of her property

designated as Parcel B. Parcel B also includes a wetland where

debtor and her family pick berries and where her children often

play. She parks her commercial vehicles on Parcel B, which

affords her additional recreational area for her family.

The bankruptcy court issued its ruling on June 6, 2013,

where it found in debtor’s favor as to Parcel A. However,

relying on the Washington Supreme Court’s Hancock decision, the

court found that the homestead exemption did not cover Parcel B

because it was not reasonably necessary for debtor’s use and

enjoyment of her home as a dwelling. The court found that

although debtor used Parcel B for storage, for gardens, to house

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her two goats and as a recreation area for children and pets,

those uses did not make Parcel B reasonably necessary for the

use of the dwelling as her home. The court further opined that

debtor could relocate those activities to Parcel A because

Parcel A was sufficient in size to accommodate those activities.

On July 31, 2013, the bankruptcy court entered the judgment

which states, among other things: “Defendants are also granted

judgment in their favor as to continued attachment of the stated

judgment lien as to Parcel B because Plaintiff has no exemption

in Parcel B . . . .” Debtor timely appealed from this portion

of the judgment.

II. JURISDICTION

The bankruptcy court had jurisdiction pursuant to 28 U.S.C.

§§ 1334 and 157(b)(2)(B). We have jurisdiction under 28 U.S.C.

§ 158. 

III. ISSUE

Whether the bankruptcy court erred by holding a trial on

the scope of debtor’s homestead exemption when there was no case

or controversy before it. 

IV. STANDARD OF REVIEW

Whether the case or controversy requirement has been met is

a question of law. We review questions of law de novo. Bias v.

Moynihan, 508 F.3d 1212, 1223 (9th Cir. 2007). 

V. DISCUSSION

The bankruptcy court as a unit of the Article III district

court is a court of limited jurisdiction and is bound by the

requirement that, as a preliminary matter, it have before it an

actual case or controversy. City of L.A. v. Lyons, 461 U.S. 95,

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101 (1983); see also Day v. Klingler (In re Klingler), 301 B.R.

519, 522–23 (Bankr. N.D. Ill. 2003) (“The limits Article III

imposes on federal jurisdiction apply equally to bankruptcy

courts.”). If the bankruptcy court does not have an actual case

or controversy before it, it has no power to hear the matter in

question. In re Klinger, 301 B.R. at 523. The

case-or-controversy requirement subsists through all stages of

federal judicial proceedings, which means that the parties must

continue to have a personal stake in the outcome of the lawsuit. 

Steffel v. Thompson, 415 U.S. 452, 459 n.10 (1974). 

The requirement that a claimant have “standing is an

essential and unchanging part of the case-or-controversy

requirement of Article III.” See Lujan v. Defenders of

Wildlife, 504 U.S. 555, 560 (1992). To qualify for standing, a

claimant must present an injury that is concrete,

particularized, and actual or imminent; fairly traceable to the

defendant’s challenged behavior; and likely to be redressed by a

favorable ruling. Id. at 560-61. “We are obliged to examine

standing sua sponte where standing has erroneously been assumed

below.” Adarand Constructors, Inc. v. Mineta, 534 U.S. 103, 110 

(2001) (per curiam) (citing Steel Co. v. Citizens for a Better

Environment, 523 U.S. 83, 95 (1998)). In Steel Co., the United

States Supreme Court went on to say: “‘[When the lower federal

court] lack[s] jurisdiction, we have jurisdiction on appeal, not

of the merits but merely for the purpose of correcting the error

of the lower court in entertaining the suit.’” 523 U.S. at 95.

Here, the case or controversy requirement was not met when

debtor filed her adversary complaint. Instead, the parties and

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the bankruptcy court proceeded under the false assumption that

Appellees had recorded their judgment and thus there was a

judicial lien against debtor’s Property subject to avoidance

under § 522(f). However, in the context of her motion to

dismiss, debtor showed that Appellees’ judgment lien never

attached to her Property because they failed to record it. See

RCW 6.13.090; Mehl v. Roberts (In re Deal), 933 P.2d 1084,

1086-87 (Wash. Ct. App. 1997) (judgment creditor who wishes his

or her judgment to attach to the value of a homestead in excess

of the homestead exemption need only record the judgment under

RCW 6.13.090). Because the judgment lien did not attach to

debtor’s Property, there was no lien to avoid. Consequently,

debtor had no injury in fact. It follows that the adversary

proceeding could give her no more than what she already had — a

homestead exemption that was not impaired by Appellees’ judicial

lien. See Cetacean Cmty. v. Bush, 386 F.3d 1169, 1174 (9th Cir.

2004) (“A suit brought by a plaintiff without Article III

standing is not a ‘case or controversy,’ and an Article III

federal court therefore lacks subject matter jurisdiction over

the suit”).

Appellees fare no better. Because Appellees had not

recorded their judgment in conformance with Washington law, 

their lien never attached to debtor’s Property and thus they

were not secured creditors in debtor’s chapter 11 case. 

Further, because debtor’s personal liability on the underlying

debt had already been discharged in her prior chapter 7 case,

they were not unsecured creditors in debtor’s chapter 11 case. 

As a result, they did not have standing to challenge the

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validity of debtor’s homestead exemption6 nor did they meet the

conditions under the broader constitutional standing test. See

Rule 4003(d) (stating that a “creditor” may object to a motion

filed under § 522(f) by challenging the validity of the

exemption asserted to be impaired by the lien); Lujan, 504 U.S.

at 560-61.

In sum, there was no dispute between the parties that could

support the case or controversy requirement. Since there was no

dispute, the bankruptcy court should have dismissed the

adversary proceeding, as it had no power to hear the matter. 

The bankruptcy court compounded the error by granting judgment

in Appellees’ favor “as to the continued attachment of the

judgment lien,” even though Appellees never recorded their

judgment as required for attachment under Washington law. 

VI. CONCLUSION

Accordingly, we VACATE the judgment of the bankruptcy court

and REMAND this matter with instructions that the bankruptcy

court dismiss this adversary proceeding.

6 Here, Appellees raised the objection to the claim of

exemption as an affirmative defense to the § 522(f) avoidance. 

Their need for standing is no different than if they had

affirmatively objected to the exemption under Rule 4004(b) which

states that a “party in interest” may file an objection to the

list of property claimed exempt. See Brown v. Sobczak

(In re Sobczak), 369 B.R. 512, 517-18 (9th Cir. BAP 2007) (a

“party in interest” is a party that has a pecuniary interest in

the matter or that has a practical stake in the resolution of the

matter). As they were neither secured nor unsecured creditors,

Appellees had no pecuniary interest or practical stake in the

outcome of a dispute over the validity of debtor’s exemption.

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