Opinion ID: 484920
Heading Depth: 1
Heading Rank: 3

Heading: analysis

Text: 10 Title 11 U.S.C. Sec. 544(a), the strong arm clause, gives a bankruptcy trustee special powers to set aside transfers or liens against property in the bankruptcy estate. Section 544(a)(3) allows the trustee to avoid all obligations and transfers that would be avoidable by a bona fide purchaser of real property ... that obtains the status of a bona fide purchaser ... at the time of the commencement of the [bankruptcy] case, whether or not such a purchaser exists. Section 544(a) grants the bankruptcy trustee this power without regard to any knowledge of the trustee or of any creditor. The powers of a bona fide purchaser for purposes of section 544(a) are defined by state law. Maine Nat'l Bank v. Morse (In re Morse), 30 B.R. 52, 54 (Bankr. 1st Cir.1983); Saghi v. Walsh (In re Gurs), 27 B.R. 163, 164 (Bankr. 9th Cir.1983); C.R. Loup v. Great Plains W. Ranch Co. (In re Great Plains W. Ranch Co., 38 B.R. 899, 905 (Bankr.C.D.Cal.1984); see 4 Collier on Bankruptcy p 544.02 (L. King 15th ed. 1986).
11 Placer asserts that the original business venture between Marino, Lugliani, and the Xuerebs was a partnership because it was an association of two or more persons to carry on as co-owners of a business for profit. Cal.Corp.Code Sec. 15006(1); Kaufman-Brown Potato Co. v. Long, 182 F.2d 594, 599 (9th Cir.1950), and because the co-owners filed partnership tax returns. The district court expressly did not determine whether a partnership existed. Marino, 49 B.R. 600, 603 n. 3. Because the question whether a partnership existed under California law is a question of intent, Kaufman-Brown Potato Co., 182 F.2d at 599, it is essentially factual, and best resolved by the fact-finding tribunal. Pullman-Standard v. Swint, 456 U.S. 273, 288, 102 S.Ct. 1781, 1790, 72 L.Ed.2d 66 (1982); Commissioner v. Duberstein, 363 U.S. 278, 289, 80 S.Ct. 1190, 1198, 4 L.Ed.2d 1218 (1960); United States v. McConney, 728 F.2d 1195, 1203-04 (9th Cir.), cert. denied, 469 U.S. 824, 105 S.Ct. 101, 83 L.Ed.2d 46 (1984).
12 Section 544(a)(3) gives Walsh, as bankruptcy trustee, the power to avoid liabilities that could be avoided by a hypothetical bona fide purchaser of real property. Nevertheless, Placer maintains that section 544(a)(3) will not protect the proceeds of the sale of the debtor's real property interest in the Waters' Edge Apartments because a bona fide purchaser under California law (1) cannot be assigned a partnership interest, and (2) cannot take a partnership interest free of partnership liabilities. However, Cal.Corp.Code section 15010(3) states: 13 Where title to real property is in the name of one or more of the partners, whether or not the record discloses the right of the partnership, the partners in whose name the title stands may convey title to such property, but the partnership may recover such property ... unless the property has been conveyed to a bona fide purchaser for value without knowledge that the partner in executing the conveyance has exceeded his authority. 14 Section 15010(3) provides for the situation at issue here. Walsh, by virtue of section 544(a)(3), has the rights of a hypothetical bona fide purchaser without notice. The language of the section renders the trustee's actual knowledge irrelevant. The Third Circuit, in McCannon v. Marston, 679 F.2d 13, 16-17 (3d Cir.1982), held that constructive notice or inquiry notice may limit the trustee's section 544(a)(3) avoidance power, but neither constructive notice nor inquiry notice are present in this case. 15 Moreover, in Barton v. Ludy, 11 Cal.2d 1, 76 P.2d 654 (1938), the California Supreme Court allowed an assignment of partnership real property when the assignee had no notice of the partnership. Although Barton was decided under a predecessor to the present California partnership act, the result is consistent was the language of section 15010(3). Section 544(a)(3) will protect the debtor's real estate interest from the partnership claims asserted by Placer.
16 Section 544(3)(a), however, does not protect the debtor's interest in the fifty-year lease to the land on which the Waters' Edge Apartments were built. The leasehold interest is personal property under California law. Dabney v. Edwards, 5 Cal.2d 1, 10-11, 53 P.2d 962, 964 (1935) (per curiam); Callahan v. Martin, 3 Cal.2d 110, 118-20, 43 P.2d 788, 792-93 (1935). See also Soper v. Crystal Palace Gambling Hall, Inc., (In re Crystal Palace Gambling Hall, Inc.), 36 B.R. 947, 951 (Bankr. 9th Cir.1984) appeal dismissed, 785 F.2d 315 (9th Cir.1986). The leasehold, therefore, is not subject to section 544(a)(3). Because section 544(a)(3) cannot be applied, Walsh does not possess the rights of a hypothetical bona fide purchaser of the leasehold estate. If a partnership exists, then that part of the debtor's estate attributable to the leasehold may be subject to Placer's claim arising out of its payments to Devcon, et al. See Cal.Corp.Code Sec. 15025(2)(c). Nothing in the record establishes what part, if any, of the value of the debtor's 18.35% ownership interest arises from the leasehold.
17 Walsh argues that, as a matter of law, Placer is estopped from asserting that a partnership existed. We disagree. 18 Walsh alleges that (1) in Placer's memorandum of points and authorities in support of its motion to intervene as a defendant in the bankruptcy action, Placer referred to itself as fee-owner of the Waters' Edge Apartments; and (2) Placer affirmatively prayed for an order to sell the apartments under 11 U.S.C. Sec. 363(h), which only applies to property held in tenancy in common, joint tenancy, or tenancy by the entirety. 19 While Placer may not have been consistent in its characterization of the apartments property, its admissions of cotenancy do not amount to grounds for equitable estoppel. Detrimental reliance is a prerequisite for equitable estoppel. Kinzli v. City of Santa Cruz, 539 F.Supp. 887, 902 (N.D.Cal.1982); See Shamrock Development Co. v. City of Concord, 656 F.2d 1380, 1386 (9th Cir.1981). Walsh has not shown how they might have relied on Placer's characterization of their ownership relationship. 20 Walsh argues that the court should impose judicial estoppel to prevent Placer from asserting that a partnership existed. He grounds his argument for judicial estoppel on two cases, Glick v. White Motor Co., 458 F.2d 1287, 1291 (3d Cir.1972), and Scarano v. Central R.R. Co. of New Jersey, 203 F.2d 510, 513 (3d Cir.1953). The preclusion rule set forth in these cases is inapplicable here. That rule bars a plaintiff who has obtained relief from an adversary by asserting and offering proof to support one position from making a second inconsistent claim. Scarano, 203 F.2d at 513. Although Placer arguably gained an opportunity to purchase the apartments from Walsh by asserting section 363(h), inconsistent with its present claim that the apartments were held as a partnership, that opportunity cannot be construed as relief obtained from an adversary.
21 Placer claims an equitable lien against the debtor's share of the proceeds from the sale of the Waters' Edge Apartments. Placer argues that this lien arises out of its payment of the obligations to Devcon, et al. We hold, as a matter of law, that no equitable lien exists. 22 To assert that its alleged equitable lien is not avoidable under section 544(a)(3), Placer depends on the fact that under California law the leasehold on which the Waters' Edge Apartments are built is personal property, Dabney v. Edwards, 5 Cal.2d 1, 53 P.2d 962, and therefore not subject to section 544(a)(3). 23 However, at the time Placer paid the debts to Devcon, et al., in October 1984, Placer was 100% owner of the apartments. Therefore, its payment did not benefit Walsh or the debtor's estate. An equitable lien is a remedy for unjust enrichment. United States v. Adamant Co., 197 F.2d 1, 10 (9th Cir.), cert. denied, 344 U.S. 903, 73 S.Ct. 283, 97 L.Ed. 698 (1952). There is no evidence of unjust enrichment here. 24 In support of its claim to an equitable lien, Placer offers Restatement of Restitution Sec. 105(1) (1937), which allows a lien when one co-tenant has taken reasonably necessary action for the preservation of the subject matter or of [the co-tenants'] common interests. This section is not persuasive because the payment of the debts was not reasonably necessary for preservation and because Walsh and Placer were not co-tenants at the time the action was taken.