Court Opinion

ID: 9363880
Source: CourtListenerOpinion
Date Created: 2023-01-17 21:00:33.167946+00
Date Added: 2024-06-11T17:15:34.684876
License: Public Domain

NOT FOR PUBLICATION                        FILED
                        UNITED STATES COURT OF APPEALS                       JAN 17 2023
                                                                         MOLLY C. DWYER, CLERK
                                                                          U.S. COURT OF APPEALS
                                 FOR THE NINTH CIRCUIT

In re: AGUINA AGUINA,                              No.   22-60005

                   Debtor,                         BAP No. 21-1163

------------------------------
                                                   MEMORANDUM*
AGUINA AGUINA,

                   Appellant,

  v.

CHOONG-DAE KANG; et al.,

                   Appellees.

                             Appeal from the Ninth Circuit
                              Bankruptcy Appellate Panel
                  Faris and Lafferty III, Bankruptcy Judges, Presiding

                                 Submitted January 9, 2023**
                                    Pasadena, California

Before: CALLAHAN, R. NELSON, and H.A. THOMAS, Circuit Judges.

       Chapter 7 debtor Aguina Aguina appeals from the Bankruptcy Appellate

       *
             This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
       **
             The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
Panel for the Ninth Circuit (BAP), which affirmed the bankruptcy court’s approval

of a settlement agreement between the bankruptcy trustee, Karl T. Anderson, and

Aguina’s primary creditors: his ex-wife, Choong-Dae Kang, and her siblings

(Kang Parties). In re Aguina, No. CC-21-1163, 2022 WL 325579, at *1. We

review the BAP’s decision de novo and “apply the same standard of review that

the BAP applied to the bankruptcy court’s ruling”—here, abuse of discretion. In re

Ahaza Sys., Inc., 482 F.3d 1118, 1123 (9th Cir. 2007). We have jurisdiction

pursuant to 28 U.S.C. § 158(d). We affirm.

      1. “Only those persons who are directly and adversely affected pecuniarily

by an order of the bankruptcy court . . . have standing to appeal that order.” Matter

of Fondiller, 707 F.2d 441, 442 (9th Cir. 1983). The trustee argues that Aguina

lacks standing because “there is no reasonable possibility” that the bankruptcy

estate, after satisfying all of its debts, will have a surplus available with which to

pay Aguina. We disagree. If we were to reverse the BAP’s decision and order that

it vacate the bankruptcy court’s approval of the settlement agreement, there would

exist a possibility—however remote—that the family court would make

determinations concerning community property and community debt that would,

upon satisfaction of the bankruptcy estate’s debts, produce a surplus for Aguina.

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Because Aguina is thus not “hopelessly insolvent,” he has standing to appeal the

BAP’s order. See id.

      2. A bankruptcy court abuses its discretion either (i) by applying an incorrect

legal rule for the sort of relief requested (an issue which we review de novo), or

(ii) by applying the correct legal rule in a way that is “illogical, implausible, or

without support in inferences that may be drawn from the facts in the record.” In re

Taylor, 599 F.3d 880, 887–88 (9th Cir. 2010). Here, the bankruptcy court correctly

applied the four-factor test set forth in In re A & C Properties, 784 F.2d 1377,

1381 (9th Cir. 1986), to determine that the settlement agreement between the

trustee and the Kang Parties was fair and equitable. That test requires a court

reviewing a bankruptcy settlement agreement to consider “(a) [t]he 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 the premises.” Id.

While reasonable minds might disagree about its conclusions, the bankruptcy

court’s application of the A & C Properties test was logical, plausible, and

supported by inferences that could be drawn from facts in the record. See id. (“The

law favors compromise and not litigation for its own sake, . . . and as long as the

bankruptcy court amply considered the various factors that determined the

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reasonableness of the compromise, the court's decision must be affirmed.”)

(citation omitted).

      First, the court considered the paramount interest of the creditors. See id.

The court noted that the seven remaining claims in the bankruptcy case would be

resolved by the agreement, five of them by voluntary withdrawal and two of them

by using the funds the Kang Parties would give to the trustee as part of the

settlement. Given that the agreement would resolve all of the remaining creditors’

claims, the court did not abuse its discretion in concluding that that this factor

supported approval of the agreement.

      Second, the court considered the complexity of the litigation, as well as any

related expense, inconvenience, and delay. See id. The court found that Aguina had

been litigating with the Kang Parties for many years and that a rejection of the

proposed agreement would potentially lead to many more years of litigation,

adding expense, inconvenience, and delay for all concerned parties. Since the

settlement would bring the litigation to an end, the court plausibly concluded that it

would be “very wise” and “very advantageous” to approve the settlement.

      Third, the court considered any difficulties to be encountered in collection,

namely the collection of funds that would have to change hands in fulfillment of

the settlement agreement. See id. On the record, counsel for the Kang Parties

represented that he had all of the promised funds in a trust account and was

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prepared to facilitate collection by the trustee. The court did not abuse its

discretion in relying upon this representation to conclude that this factor also

supported approval of the agreement.

       Fourth and finally, the court considered the probability of success in the

litigation over the dissolution of Aguina’s and Choong-Dae Kang’s marriage. See

id. The court noted that the proposed agreement would result in a waiver of claims

by the Kang Parties, including the waiver of any claims Choong-Dae Kang was

pursuing in the dissolution action. Since the settlement would resolve the litigation

without placing any new obligations on Aguina, it was logical for the bankruptcy

court to conclude that the agreement was a preferable alternative to continuing

litigation.

       3. Aguina’s objections to the bankruptcy court’s ruling are without merit.

Though not clearly articulated by Aguina, his strongest objection is that the

settlement agreement should be reversed because it is not “in the best interests of

the estate.” See In re Mickey Thompson Ent. Grp., Inc., 292 B.R. 415, 422 (9th Cir.

BAP 2003). Aguina states that Choong-Dae Kang possesses “numerous properties

and great wealth” which “most likely have a community property component,” and

that Kang therefore possesses “property belonging to Aguina and to the

Bankruptcy Estate.” He thus implies that (i) the trustee’s calculations do not

                                           5
account for these potential assets, and (ii) the proposed settlement is therefore

unfair and inequitable. We reject these contentions.

      In filing for bankruptcy, all of Aguina’s legal and equitable interests,

including all of Aguina’s interests in community property, became the property of

the bankruptcy estate. See 11 U.S.C. § 541(a). The bankruptcy court therefore

came to have exclusive jurisdiction over all of Aguina’s interests in community

property, despite ongoing community property disputes in Aguina’s dissolution

proceedings with Choong-Dae Kang. See In re Teel, 34 B.R. 762, 763–64 (9th Cir.

BAP 1983). And the trustee’s primary responsibility was to administer the assets of

the estate for the benefit of Aguina’s creditors, see In re DBSI, Inc., 869 F.3d 1004,

1016 (9th Cir. 2017), even if Aguina thought he could have “handled his financial

affairs in a more advantageous way outside of bankruptcy.”

      The trustee explained to the court that after carefully considering the

ongoing dissolution proceedings and reviewing various documents concerning the

potential community property assets, he concluded that the proposed settlement

was “in the best interest of the estate.” In various filings, he also provided the

bankruptcy court with reason to believe that the potential community property

assets were not of significant value and that it would be both expensive and

                                           6
impractical to liquidate them. The bankruptcy court did not abuse its discretion in

relying on this information and discounting Aguina’s objection.

      Aguina also argues that the court was “obliged to consider, as part of [its]

‘fair and equitable’ analysis, whether any property of the estate that would be

disposed of in connection with the settlement might draw a higher price through a

competitive process and be the proper subject of a sale under 11 U.S.C. § 363.” In

re Thompson, 292 B.R. at 422. After learning of the proposed settlement

agreement, Aguina offered the bankruptcy estate $53,000—a “higher price” than

the $49,726.77 the Kang Parties were willing to pay the trustee in fulfillment of the

settlement agreement. Aguina argues that his superior offer should have led the

bankruptcy court to consider a sale under section 363 or that the court should have

at least provided a “reasoned explanation” for choosing not to do so. See In re

Woodson, 839 F.2d 610, 621 (9th Cir. 1988) (“Broad as the bankruptcy court’s

power may be, it may not completely ignore a nonfrivolous objection, at least

without giving a reasoned explanation for doing so.”). We are not persuaded that

the settlement amounted to an asset sale under In re Thompson, given the mutual

release of claims. See In re Thompson, 292 B.R. at 421 (concluding a proposed

settlement where estate unilaterally released its claims amounted to an asset sale).

To the extent that the bankruptcy court was required to consider Aguina’s offer, its

statement that Aguina failed to present a way to “extinguish or eliminate” the Kang

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Parties’ most significant claims against him as creditors was ample support for its

decision to approve the trustee’s proposed settlement, despite Aguina’s offer.

      Aguina’s remaining objections also fail. The bankruptcy court did indeed

mention the particular facts of this case in its order; though public policy is not one

of the four A & C Properties factors, it nevertheless supports ending a dispute that

has long been a drain on taxpayer money and judicial resources; and Aguina has

failed to demonstrate that the settlement agreement is illegal or allows a party to

take advantage of its wrongdoing.

      AFFIRMED.

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