Court Opinion

ID: 9964641
Source: CourtListenerOpinion
Date Created: 2024-04-30 16:01:05.737904+00
Date Added: 2024-06-11T08:25:38.199003
License: Public Domain

FILED
                                                                                 APR 30 2024
                           NOT FOR PUBLICATION
                                                                            SUSAN M. SPRAUL, CLERK
                                                                               U.S. BKCY. APP. PANEL
                                                                               OF THE NINTH CIRCUIT
          UNITED STATES BANKRUPTCY APPELLATE PANEL
                    OF THE NINTH CIRCUIT

 In re:                                              BAP No. NV-23-1162-BCL
 DOUBLE JUMP, INC.,
              Debtor.                                Bk. No. 3:19-bk-50102-gs

 SANDRA SARKISSIAN, SUCCESSOR                        Adv. No. 3:21-ap-05026-gs
 TRUSTEE OF THE SAM SARKISSIAN
 AND SANDRA SARKISSIAN LIVING
 TRUST DATED SEPTEMBER 4, 1997,
               Appellant,
 v.                                                  MEMORANDUM∗
 CHRISTINA W. LOVATO, Chapter 7
 Trustee,
               Appellee.

               Appeal from the United States Bankruptcy Court
                         for the District of Nevada
                Gary A. Spraker, Bankruptcy Judge, Presiding

Before: BRAND, CORBIT, and LAFFERTY, Bankruptcy Judges.

                                  INTRODUCTION

      Appellant Sandra Sarkissian, Successor Trustee of the Sam Sarkissian

and Sandra Sarkissian Living Trust Dated September 4, 1997 ("Sarkissian"),1

appeals an order granting summary judgment to appellee, Christina W.

      ∗ 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 We refer to Ms. Sarkissian and the family trust as "Sarkissian."

                                              1
Lovato, chapter 72 trustee ("Trustee Lovato"), and denying summary

judgment to Sarkissian for the estate's fraudulent transfer/avoidance claim

against Sarkissian. That the transfer was fraudulent and avoidable was not

disputed; the only dispute was whether Trustee Lovato could recover from

Sarkissian without violating the single satisfaction rule under § 550(d). The

bankruptcy court concluded that she could. We AFFIRM.

                                         FACTS

A.    Prepetition events

      The material facts are undisputed. In February 2018, Sarkissian entered

into an agreement with Jeff and Paulette Carpoff for the sale of a warehouse

in California for $8 million. To purchase the warehouse, the Carpoffs caused

their then-owned California business, DC Solar Solutions, Inc. ("DC Solar"), to

transfer to Sarkissian a down payment of $2,387,335.34 (the "Transfer"). The

Carpoffs obtained a loan through their special purpose entity – 2750 Maxwell

Way, LLC ("Maxwell LLC") – for the remaining $5.6 million from CTBC Bank,

secured by the warehouse. When the sale closed, title to the warehouse was

transferred to Maxwell LLC. Unbeknownst to Sarkissian, the warehouse

purchase was part of an eight-year, $1 billion Ponzi scheme perpetrated by

the Carpoffs through DC Solar and other Carpoff entities.

      2
       Unless specified otherwise, all chapter and section references are to the
Bankruptcy Code, 11 U.S.C. §§ 101-1532, all "Rule" references are to the Federal Rules of
Bankruptcy Procedure, and all "Civil Rule" references are to the Federal Rules of Civil
Procedure.
                                             2
      The federal government raided DC Solar and other Carpoff entities'

headquarters in California in December 2018. Besides valuable personal

property, at least 41 real properties owned by the Carpoffs or their entities

were purchased with fraud proceeds.

B.    Postpetition events

      1.    The bankruptcy filings

      Between January 31 and February 5, 2019, DC Solar and nine other

Carpoff entities filed for chapter 11 bankruptcy in Reno, Nevada, in the

master case captioned: In re Double Jump, Inc., No. 19-bk-50102. Four of the

entities make up the DC Solar bankruptcy; six of the entities are California

LLC's (the "California LLC debtors") which held title to the multiple real

properties and make up the Dora Dog bankruptcy. Several Carpoff entities

owning real property did not file for bankruptcy including Maxwell LLC,

which owned the warehouse. When the bankruptcy court later converted the

cases to chapter 7, Trustee Lovato was appointed as trustee to the DC Solar

bankruptcy; W. Donald Gieseke ("Trustee Gieseke") was appointed as trustee

to the Dora Dog bankruptcy.

      2.    The forfeiture actions and warehouse sale

      Shortly after the bankruptcy filings, the United States filed two in rem

forfeiture actions in California against the multiple properties and entities

connected to the Carpoffs' fraud. The first action included 25 real properties

and the six California LLC debtors ("Forfeiture I"); the second action included

14 real properties, some of the California LLC debtors, and some nondebtor

                                        3
Carpoff entities ("Forfeiture II") (together, the "Forfeiture Actions"). Forfeiture

II included the warehouse and Maxwell LLC.

      Trustee Gieseke contested the Forfeiture Actions by seeking an order to

enforce the automatic stay, but Trustee Lovato did not take any such action.

Unlike the California LLC debtors which were defendants in the Forfeiture

Actions and whose estates were being administered by Trustee Gieseke in the

Dora Dog bankruptcy, the DC Solar debtors were not defendants in the

Forfeiture Actions as their estates did not own any of the forfeited properties,

although DC Solar was used as a means to purchase most, if not all, of them.

      The United States later sold the warehouse to a third party for $8.3

million. CTBC Bank was paid its $5.6 million debt from the proceeds.

      3.    The coordination agreement

      Prior to the warehouse sale, Trustee Gieseke began negotiating a

"Coordination Agreement" with the United States to address the real

properties in the Forfeiture Actions and their competing claims to some of

those properties. Trustee Lovato was not involved in those negotiations. After

the Coordination Agreement was substantially finalized, Trustee Lovato was

informed that her signature was required to effectuate it. She reviewed the

document, made no material changes, and signed it.

      Broadly speaking, the Coordination Agreement resolved the dispute

between the United States and Trustee Gieseke over the 39 real properties in

the Forfeiture Actions, allocating 31 to the United States to liquidate and eight

to Trustee Gieseke to administer in the Dora Dog bankruptcy. No properties

                                         4
were allocated to Trustee Lovato. The Coordination Agreement's recitals

stated in relevant part:

      (a) the United States and "the Chapter 7 Trustees seek to (i) resolve
      their respective claims to the Forfeiture I, Forfeiture II, and other
      properties addressed herein; (ii) maximize recovery to victims and
      creditors; and (iii) minimize expenses through the coordination of
      their respective efforts for the victims and creditors."

      (b) "there is a significant overlap of identity between victims of the
      fraud and creditors of the DC Solar, California LLCs and Carpoff-
      related entities currently in Chapter 7 proceedings in Reno,
      Nevada, and competing litigation would result in the overall
      diminishment of the recovery for all victims and creditors alike as
      well as undue delay in the distribution of assets."

      (c) "the United States and the Chapter 7 Trustees desire to
      minimize litigation risk, unnecessary cost, and undue delay, and
      to compromise and resolve their respective claims to property
      identified in the Forfeiture I and II actions and certain additional
      property addressed herein."

The parties to the Coordination Agreement agreed in part:

      (a) the United States "will forfeit [i.e., recover] the In Rem
      Defendant real properties [including the warehouse], and will
      liquidate those assets for the benefit of the victims of the criminal
      fraud . . . ."

      (b) the "Chapter 7 Trustees specifically acknowledge, agree, and
      stipulate that the real property [including the warehouse] is
      forfeitable to the [United States] . . . and that the bankruptcy
      estates have no claim or right to that property or any net equity
      arising from its liquidation or ongoing management[.]"

      (c) "in exchange for the consideration set forth herein and except
      as otherwise provided . . . the [United States] agrees it shall not
                                        5
     pursue forfeiture of, or any claim on or to, any additional real or
     personal property owned by Double Jump, the DC Solar Entities,
     or the California LLCs[.]"

     Trustee Lovato moved for approval of the Coordination Agreement in

the DC Solar bankruptcy. She explained that because DC Solar's funds were

used to purchase the forfeited properties, she had filed $30 million in claims

in the Dora Dog bankruptcy, and DC Solar's estate would receive whatever

funds remained from sales by Trustee Gieseke after satisfying all debts

against those properties. The bankruptcy court approved the Coordination

Agreement in both the DC Solar and the Dora Dog bankruptcies; the district

court approved it for the United States.

      4.   The adversary proceeding and cross motions for summary
           judgment

     Trustee Lovato filed an adversary complaint against Sarkissian, seeking

to avoid and recover the Transfer. Trustee Lovato alleged that, in furtherance

of their Ponzi scheme, the Carpoffs caused DC Solar to pay the nearly $2.4

million down payment to Sarkissian for the warehouse for which DC Solar

received no value or benefit. Trustee Lovato alleged that the Transfer was

both an actual and constructive fraudulent transfer avoidable under

§ 548(a)(1)(A) and (B), and recoverable under § 550(a).

     Trustee Lovato then moved for summary judgment ("MSJ"). Sarkissian

did not dispute that DC Solar made the Transfer (1) with the actual intent to

hinder, delay, or defraud creditors (based on the Carpoffs' admitted Ponzi

scheme); (2) while insolvent; and (3) for which it received zero value in

                                       6
exchange; and that (4) Sarkissian was the initial transferee. Trustee Lovato

argued that, because § 550(a)(1) is a strict liability statute, she could recover

from Sarkissian the property transferred or its value, which, in this case, was

the same since the Transfer was cash.

      Sarkissian opposed the MSJ and filed a cross motion for summary

judgment ("Cross MSJ"), arguing that, as a matter of law, Trustee Lovato

could not recover the Transfer from her because it would be a double

recovery barred by § 550(d). Sarkissian argued that the Coordination

Agreement was Trustee Lovato's single satisfaction permitted by the statute.

Sarkissian argued that, by trading her claims to the warehouse and

surrendering her right to pursue Sarkissian in exchange for the right to

pursue her own claims in the DC Solar bankruptcy without government

interference, Trustee Lovato received the full value for the warehouse.

Further, the government recovered the $2.4 million paid by DC Solar.

Consequently, argued Sarkissian, Trustee Lovato received her single recovery

of the value of the Transfer, and seeking to recover the same $2.4 million from

Sarkissian constituted a double recovery, violating § 550(d).

      Trustee Lovato disputed Sarkissian's double recovery argument. She

argued that the "single satisfaction defense" was inapplicable for two reasons:

(1) it did not apply under the plain language of § 550(d); and (2) because she

had not "recovered" any of the $2.4 million Transfer and the estate's claim

against Sarkissian was not "satisfied" by the Coordination Agreement.

Trustee Lovato argued that § 550(d) limits application of the single

                                         7
satisfaction defense to situations where the trustee has already achieved a

recovery under § 550(a) and its seven triggering statutes (§§ 544, 545, 547, 548,

549, 553(b), and 724(a)). But that did not occur here; the Coordination

Agreement was not achieved under § 550(a).

      Further, argued Trustee Lovato, Sarkissian had not met her burden to

show that Trustee Lovato recovered the debt from another source via the

Coordination Agreement, which was a multi-faceted agreement addressing

many entities, properties, rights, and claims without meaningfully tying any

one item to another. It identified the warehouse as only 1 of 39 parcels of real

property without distinction, did not identify or mention the Transfer or any

other fraudulent transfer claims, and addressed jointly the two trustees

overseeing 10 bankruptcy estates. Nothing in the Coordination Agreement,

continued Trustee Lovato, connected any benefit to her regarding the

fraudulent transfer/avoidance claim or supported an argument that such

claim against Sarkissian was satisfied, or that Trustee Lovato achieved any

relevant recovery. The government's non-interference with the administration

of the estate, argued Trustee Lovato, did not constitute a recovery of the

Transfer or satisfaction of Sarkissian's $2.4 million obligation. Rather, her only

means to recover on the fraudulent transfer claim was through the adversary

proceeding.

      Trustee Lovato argued that, contrary to Sarkissian's position, she had

no claim to the warehouse to relinquish in exchange for the government's

agreement not to interfere with the DC Solar bankruptcy, and even if she did,

                                        8
relinquishing any such claim would not satisfy her fraudulent transfer claim.

Trustee Lovato argued that she received only two benefits in the

Coordination Agreement, which Trustee Gieseke also received: (1) an

agreement that the United States would not pursue forfeiture of, or any claim

to, any real or personal property owned by the DC Solar entities or the

California LLC debtors not allocated to the United States; and (2) access to

documents seized by the United States. Trustee Lovato argued that what she

and Trustee Gieseke gave up was: (1) any right to file a claim or petition for,

or otherwise contest the forfeiture of, any properties in the Forfeiture Actions;

and (2) any estate claims or rights to the 31 properties allocated to the United

States or any net equity from their liquidation. Trustee Lovato maintained

that any waiver of her potential claims was not related to the forfeited

properties, but to claims against the government for restitution.

      After a hearing, the bankruptcy court entered its oral ruling on the cross

motions for summary judgment, granting the MSJ and denying the Cross

MSJ. The court later entered an order and judgment consistent with its oral

ruling, awarding Trustee Lovato a judgment of $2,733,920.93 (including

prejudgment interest) against Sarkissian. Sarkissian timely appealed.

                               JURISDICTION

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

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

                                        9
                                     ISSUES

1.    Did the bankruptcy court err in granting the MSJ?

2.    Did the bankruptcy court err in denying the Cross MSJ?

                          STANDARDS OF REVIEW

      We review de novo the bankruptcy court's summary judgment ruling.

Ulrich v. Schian Walker, P.L.C. (In re Boates), 551 B.R. 428, 433 (9th Cir. BAP

2016). A bankruptcy court's conclusions of law, including its interpretation of

a contract and the Code, are also reviewed de novo. Flores v. Am. Seafoods Co.,

335 F.3d 904, 910 (9th Cir. 2003) (interpretation of a contract); Reswick v.

Reswick (In re Reswick), 446 B.R. 362, 365 (9th Cir. BAP 2011) (interpretation of

the Code). De novo means that our review is independent, with no deference

given to the bankruptcy court's conclusions. First Ave. W. Bldg., LLC v. James

(In re Onecast Media, Inc.), 439 F.3d 558, 561 (9th Cir. 2006).

                                  DISCUSSION

A.    Summary judgment standards

      Summary judgment is appropriately granted where review of the

relevant record establishes that there is no genuine issue as to any material

fact, and the moving party is entitled to judgment as a matter of law. Civil

Rule 56(a), applicable in adversary proceedings under Rule 7056; Celotex Corp.

v. Catrett, 477 U.S. 317, 322 (1986). "When the material facts are not in dispute,

our only function is to determine whether the bankruptcy court correctly

applied the law." Patow v. Marshack (In re Patow), 632 B.R. 195, 202 (9th Cir.

                                         10
BAP 2021) (citation omitted), aff'd, No. 21-60051, 2022 WL 2256325 (9th Cir.

June 23, 2022).

B.    Avoidance and recovery of estate property generally

      When a bankruptcy court avoids a fraudulent transfer under § 548, the

trustee may recover for the benefit of the estate either "the property

transferred" or "the value of such property" from the "initial transferee," the

"entity for whose benefit such transfer was made," or any "immediate or

mediate transferee" of the initial transferee. § 550(a)(1), (2).

      "Generally, the purpose of § 550(a) is to restore the estate to the

financial condition it would have enjoyed if the transfer had not occurred."

Aalfs v. Wirum (In re Straightline Invs., Inc.), 525 F.3d 870, 883 (9th Cir. 2008)

(cleaned up). Per § 550(d), the "trustee is entitled to only a single satisfaction"

under § 550(a), not to a double recovery or windfall. See id. at 883 & n.3; Loo v.

Martinson (In re Skywalkers, Inc.), 49 F.3d 546, 549 (9th Cir. 1995) (applying the

"single satisfaction" rule under § 550(c) [now (d)] to a debtor's recovery of

both a liquor license and payments made to procure that license); see also

Freeland v. Enodis Corp., 540 F.3d 721, 740 (7th Cir. 2008) (recognizing that a

trustee can recover from any combination of the entities mentioned in

§ 550(a) subject to the limitation of a "single satisfaction").

C.    The bankruptcy court did not err in granting the MSJ and denying
      the Cross MSJ.

      Sarkissian conceded that the Transfer of the $2.4 million DC Solar paid

towards the warehouse purchase made for the benefit of Maxwell LLC was

                                         11
avoidable under § 548(a)(1), and that she was liable as the initial transferee

under § 550(a)(1). The only dispute was whether the Coordination Agreement

satisfied the fraudulent transfer/avoidance claim against Sarkissian and

constituted a recovery of the value of the Transfer by Trustee Lovato under

§ 550(a). If it did, then allowing a separate recovery against Sarkissian was an

impermissible double recovery and violated § 550(d).

      Sarkissian reasoned that Trustee Lovato recovered the "value" of the

Transfer by releasing her claims and rights to certain properties including the

warehouse, which the United States sold for $8.3 million, in exchange for

other properties and the government's release of its claims and rights in those

properties and its agreement not to interfere in the DC Solar bankruptcy.

Sarkissian argued that, because Trustee Lovato opted for that exchange of

value, she exhausted her single-satisfaction remedy, and seeking to recover

the same $2.4 million the government already recovered from the warehouse

liquidation violated § 550(d).

      The bankruptcy court disagreed, determining that the Coordination

Agreement did not constitute a satisfaction of the fraudulent transfer/

avoidance claim against Sarkissian or a recovery of the value of the Transfer

by Trustee Lovato under § 550(a), and therefore Trustee Lovato could recover

from Sarkissian. Sarkissian argues that this was error. While the bankruptcy

court focused more on a trustee's discretion as to which parties she or he can

seek to recover from under § 550(a), we interpret the Coordination

Agreement to be neither a satisfaction of the DC Solar estate's fraudulent

                                       12
transfer/avoidance claim against Sarkissian nor a recovery of the value of the

Transfer by Trustee Lovato under § 550(a).

      When applying federal contract law,3 the court considers first the plain

language of the contract. See Doe 1 v. AOL LLC, 552 F.3d 1077, 1081 (9th Cir.

2009) ("When we interpret a contract under federal law, we look for guidance

to general principles for interpreting contracts.") (cleaned up), overruled on

other grounds by Atl. Marine Constr. Co. v. U.S. Dist. Ct. for W. Dist. of Texas, 571

U.S. 49 (2013). "Contract terms are to be given their ordinary meaning, and

when the terms of a contract are clear, the intent of the parties must be

ascertained from the contract itself." Id. (citation omitted).

      To be clear, the Transfer here was the $2.4 million in cash paid by DC

Solar as the down payment for the warehouse; it was not the warehouse.

Sarkissian continues to focus on the warehouse, but the DC Solar estate had

no rights to the warehouse itself, which was owned by nondebtor Maxwell

LLC. The only "rights" the DC Solar estate had respecting the warehouse

were fraudulent transfer/avoidance claims against Maxwell LLC, the entity

for whose benefit the Transfer was made, and Sarkissian, the initial

transferee. Hence, Trustee Lovato did not, and could not, give up any rights

to the warehouse itself.

      In any case, Sarkissian's position fails for several reasons. First, her

argument is contrary to the plain language of § 550(d). That provision applies

      3
        The Coordination Agreement did not contain a choice-of-law provision, so we
apply federal law.
                                         13
only when the trustee has already avoided and recovered a transfer under

§ 550(a) and one of its triggering sections. 45 John Lofts, LLC v. Meridian Cap.

Grp. LLC (In re 45 John Lofts, LLC), 599 B.R. 730, 749 (Bankr. S.D.N.Y. 2019).

Sarkissian has not shown that the Coordination Agreement was an avoidance

and recovery by Trustee Lovato under § 550(a). Certainly, the Coordination

Agreement was not achieved under § 550(a).

      Sarkissian has also not shown that the DC Solar estate's fraudulent

transfer/avoidance claim was satisfied by, or that Trustee Lovato recovered

the value of the Transfer from, the Coordination Agreement. To sustain a

defense based on § 550(d)'s prohibition of double recovery by a trustee,

Sarkissian had the burden "to show clearly" that Trustee Lovato recovered the

Transfer from another party. Sarachek v. Luana Sav. Bank (In re Agriprocessors,

Inc.), 547 B.R. 292, 322 (N.D. Iowa 2016) (citations omitted), aff'd, 859 F.3d 599

(8th Cir. 2017); accord White v. Jones (In re Butler Innovative Sols., Inc.), No. 08-

00065, 2015 WL 1926814, at *6 (Bankr. D.D.C. Apr. 27, 2015) (reasoning that

defendant should bear the burden to prove the single satisfaction defense

under § 550(d)). Nothing in the Coordination Agreement suggests that

Trustee Lovato released fraudulent transfer/avoidance claims against any

party including Sarkissian, or that she received any benefit satisfying such

claims. The focus of the Coordination Agreement was to divide up the many

real properties seized by the government in the Forfeiture Actions, some of

which were also assets of the Dora Dog estate and none of which were assets

of the DC Solar estate. The benefit Trustee Lovato received in exchange for

                                          14
her general release to those properties was largely the promise of no

interference from the government in the DC Solar bankruptcy. Sarkissian has

failed to show how this fully satisfied, or even reduced, her $2.4 million

obligation to the DC Solar estate.

      Further, Sarkissian's "single satisfaction" argument is contrary to the

plain language of the Coordination Agreement. The United States expressly

agreed that it would not pursue forfeiture of, or any claim on or to, any

property – real or personal – not expressly accounted for in the Coordination

Agreement. Thus, such personal property, including any causes of action the

DC Solar or Dora Dog estates held against others, was allocated to the

bankruptcy estates. Hence, the Coordination Agreement did not satisfy any

fraudulent transfer/avoidance claims against Sarkissian and others because

Trustee Lovato did not release any such claims. Nor did the Coordination

Agreement impair Trustee Lovato's ability to seek recovery for an admitted

fraudulent transfer from the initial transferee.

      Finally, it is a logical leap to say that Trustee Lovato recovered $2.4

million when Sarkissian has failed to even quantify the value of what Trustee

Lovato received in the Coordination Agreement. She certainly did not receive

any money. As the bankruptcy court pointed out, the United States would

have forfeited the warehouse without the Coordination Agreement because

Maxwell LLC was a nondebtor. The proceeds from the warehouse liquidation

did not, and would never, inure to the benefit of the DC Solar estate.

Consequently, those proceeds could not be applied under a theory of double

                                        15
recovery to claims that independently existed, and the Coordination

Agreement had no effect on that outcome.

      Put simply, the recovery of the warehouse by the United States is not

the same as the estate's recovery of the $2.4 million Transfer from Sarkissian.

Even though there is some overlap of creditors in both the Forfeiture Actions

and the DC Solar and Dora Dog bankruptcies, the United States and Trustees

Lovato and Gieseke are different plaintiffs with different claims, and the

Coordination Agreement did not affect or preclude Trustee Lovato's

avoidance claim against Sarkissian or her ability to recover the $2.4 million

from Sarkissian on behalf of the DC Solar estate.

      Sarkissian argues that the bankruptcy court improperly focused on

Trustee Lovato's intent or purpose for entering into the Coordination

Agreement – or rather, the absence of express language in that document – to

determine that its purpose had nothing to do with the avoidance action

against Sarkissian. Sarkissian argues that even if the Coordination Agreement

expressly included the avoidance claims, it made no difference to the

outcome: the Coordination Agreement still satisfied the fraudulent transfer/

avoidance claim and constituted a single recovery under § 550(a), because

Trustee Lovato obtained the value of the Transfer in exchange for the release

of the warehouse. As we noted above, the DC Solar estate had no rights to the

warehouse itself, so Trustee Lovato purportedly "releasing" that property had

no consequence or value to her. And, for the reasons we have already stated,

Sarkissian has not shown that whatever value Trustee Lovato received from

                                       16
the Coordination Agreement was sufficient to satisfy the DC Solar estate's

$2.4 million claim against Sarkissian.

      Because Trustee Lovato had not previously recovered on the DC Solar

estate's fraudulent transfer/avoidance claim by the Coordination Agreement,

her recovery action against Sarkissian was not an impermissible double

recovery in violation of § 550(d). Accordingly, the bankruptcy court did not

err in granting the MSJ and denying the Cross MSJ.

                               CONCLUSION

      For the reasons stated above, we AFFIRM.

                                         17