Court Opinion

ID: 3065218
Source: CourtListenerOpinion
Date Created: 2015-10-14 22:29:51.033658+00
Date Added: 2024-06-11T07:38:21.470860
License: Public Domain

FOR PUBLICATION
 UNITED STATES COURT OF APPEALS
      FOR THE NINTH CIRCUIT

In re: WILLIAM P. BENDER,             
                            Debtor,

CONGREJO INVESTMENTS, LLC, a
Washington limited liability                No. 08-15027
company,                                     BAP No.
                         Appellant,       AZ-07-01178-NKD
               v.
DIANE M. MANN, Chapter 7
Trustee,
                          Appellee.
                                      

In re: WILLIAM P. BENDER,             
                            Debtor,

DIANE M. MANN, Chapter 7                    No. 08-15225
Trustee,
                         Appellant,          BAP No.
                                          AZ-07-01178-NKD
               v.
                                              OPINION
CONGREJO INVESTMENTS, LLC, a
Washington limited liability
company,
                          Appellee.
                                      

                            14895
14896                       IN RE BENDER
                   Appeal from the Ninth Circuit
                    Bankruptcy Appellate Panel
      Neiter,1 Klein and Dunn, Bankruptcy Judges, Presiding

                     Argued and Submitted
          September 3, 2009—San Francisco, California

                     Filed November 5, 2009

 Before: J. Clifford Wallace, Diarmuid F. O’Scannlain, and
            Andrew J. Kleinfeld, Circuit Judges.

                   Opinion by Judge Wallace

  1
     Hon. Richard M. Neiter, U.S. Bankruptcy Judge for the Central Dis-
trict of California, sat by designation.
14898                  IN RE BENDER

                       COUNSEL

Christopher A. LaVoy, Esq., Phoenix, Arizona, for apellant-
appellee Congrejo Investments, LLC.

David W. Engelman, Esq., Phoenix, Arizona, for appellant-
appellee Diane M. Mann, Chapter 7 Trustee.
                         IN RE BENDER                     14899
                          OPINION

WALLACE, Senior Circuit Judge:

   This appeal arises out of an action brought by bankruptcy
trustee Diane Mann (trustee), seeking avoidance of the trans-
fer of a parcel of real property from a debtor in bankruptcy,
William Bender, to the defendant, Congrejo Investments,
LLC (Congrejo), a Washington limited liability company
formed and managed by Bender. Congrejo appeals from a
portion of the decision by the Bankruptcy Appellate Panel of
the Ninth Circuit (BAP), in which the BAP affirmed the bank-
ruptcy court’s determination that the doctrine of equitable
tolling applied to the trustee’s filing of this adversary pro-
ceeding. The trustee cross-appeals from a different portion of
the BAP’s order in which it vacated the bankruptcy court’s
summary judgment in favor of the trustee and remanded to the
bankruptcy court for further proceedings. Because we hold
that the appealed-from BAP decision was not final under 28
U.S.C. § 158(d)(1), we therefore lack jurisdiction to hear this
appeal and remand the case to the bankruptcy court for further
proceedings.

                               I.

   Sometime before 1992, Bender became the owner of a plot
of land in Hawaii. In 1993, Bender executed a quitclaim deed
that purported to convey title to this land to an entity named
the William P. Bender Trust (Trust). There is very little evi-
dence regarding the nature of the Trust or its operations, aside
from Bender’s assertion that the beneficiaries of the Trust are
himself, his brother, and his sister. The Trust provided no
consideration to Bender in exchange for the Hawaii property.
The property was mortgaged, developed, and divided into
three parcels, Lots A-1, A-2 and A-3. Lots A-1 and A-2 were
sold and are not involved in this appeal.

  In 1997, Bender filed a voluntary petition for relief under
Chapter 12 of the Bankruptcy Code. In 1998, the case was
14900                    IN RE BENDER
converted to a Chapter 11 proceeding, and later, in 2000, to
a Chapter 7 proceeding. Mann was appointed as the Chapter
7 trustee of the bankruptcy estate.

   In February 1999, while Bender’s bankruptcy petition was
pending, the Trust executed a quitclaim deed purporting to
convey title to Lot A-3 back to Bender. Again, no consider-
ation was exchanged for the conveyance. Bender never dis-
closed an interest in Lot A-3 in any of his bankruptcy
schedules or statements, either before or after the February
1999 transfer of the property from the Trust to Bender. Bend-
er’s bankruptcy schedule B contained a one-word reference to
a “trust,” but did not assign a value. Bender’s schedules did
not list the holder of a mortgage on the property as a creditor.

   On May 31, 2000, in exchange for no consideration and
without the approval of the bankruptcy court, Bender
recorded a quitclaim deed purporting to convey title to Lot A-
3 to Congrejo, a company he managed. Congrejo’s members
are Bender, his brother, and his sister — the same three indi-
viduals who, Bender has claimed, are the beneficiaries of the
Trust. On June 26, 2002, the trustee filed an adversary com-
plaint against Congrejo seeking to avoid the 2000 transfer of
Lot A-3 from Bender to Congrejo pursuant to 11 U.S.C.
§ 549, which authorizes a trustee to avoid a transfer of estate
property occurring after commencement of the bankruptcy
action and without authorization by the court. 11 U.S.C.
§ 549(a)(1), (a)(2)(B) (2009).

   The trustee moved for summary judgment against Con-
grejo. In a cross-motion for summary judgment, Congrejo
argued that the trustee’s action was barred by the statute of
limitations set forth in 11 U.S.C. § 549(d), because it was not
filed within two years of the deed’s execution. See id.
§ 549(d)(1). Congrejo also argued that the transfer could not
be avoided because Lot A-3 was not property of the bank-
ruptcy estate. Congrejo asserted that a bankruptcy estate is
generally comprised of all “legal or equitable interests of the
                          IN RE BENDER                     14901
debtor in property as of the commencement of the case,” id.
§ 541(a)(1) (emphasis added), and property acquired by the
debtor after the date of filing belonged to the debtor. See
Smith v. Kennedy (In re Smith), 235 F.3d 472, 478 (9th Cir.
2000). Thus, Congrejo urged, Lot A-3 was not part of the
bankruptcy estate because Bender did not own it at the time
he filed his bankruptcy petition. Rather, at the time of filing,
Lot A-3 was owned by the Trust and Bender’s re-acquisition
of title to the property occurred post-petition.

   The bankruptcy court agreed with Congrejo that the trust-
ee’s action had been filed outside of the statute of limitations,
but held that there were disputes of material fact relating to
the application of the doctrine of equitable tolling. After con-
ducting an evidentiary hearing on that issue, the bankruptcy
court concluded that the statute of limitations should be equi-
tably tolled. Turning to the trustee’s assertion that Lot A-3
was property of the estate, the bankruptcy court, relying on
Rau v. Ryerson (In re Ryerson), 739 F.2d 1423 (9th Cir.
1984), held that Lot A-3 was “so sufficiently rooted in [Bend-
er’s] pre-bankruptcy past that it should not be excluded from
property of the bankruptcy estate.” Thus, the bankruptcy court
concluded, Lot A-3 was property of the estate and the trustee
could avoid the 2000 transfer of that property from Bender to
Congrejo.

   Congrejo appealed to the BAP, seeking review of the bank-
ruptcy court’s conclusion that the statute of limitations was
tolled and that Lot A-3 was property of the estate. The BAP
affirmed the bankruptcy court’s holding that equitable tolling
was appropriate. On the second issue, whether Lot A-3 was
estate property, the BAP held that the bankruptcy court had
incorrectly applied In re Ryerson, 739 F.2d 1423, and vacated
that portion of the bankruptcy court’s order. The BAP deter-
mined that there was a genuine issue of material fact as to
whether the Trust was valid or a sham. If the Trust was the
alter ego of Bender, then Lot A-3 would have been the prop-
erty of Bender at all relevant times prior to the 2000 transfer
14902                    IN RE BENDER
and therefore the property of the bankruptcy estate. Accord-
ingly, the BAP remanded the case to the bankruptcy court for
trial regarding these issues.

  Congrejo appeals from the BAP’s decision to our court,
arguing that the BAP erred in affirming the bankruptcy
court’s application of equitable tolling. The trustee cross-
appeals from the BAP’s decision to vacate the bankruptcy
court’s summary judgment in her favor. The trustee also
maintains that our court lacks jurisdiction to hear this appeal
because the BAP’s decision does not constitute a final,
appealable order. We now turn to that jurisdictional question.

                              II.

   Under 28 U.S.C. § 158(d)(1), circuit courts have jurisdic-
tion over appeals from “all final decisions, judgments, orders,
and decrees” entered by a BAP. The question here is whether
the BAP’s order was final. 28 U.S.C. § 158(d)(1) (2009).

   [1] In the context of other appeals, such as those pursuant
to 28 U.S.C. § 1291, finality is a relatively straightforward
inquiry: we ask whether the decision presented for review
“ends the litigation on the merits and leaves nothing for the
district court to do but execute the judgment.” Firestone Tire
& Rubber Co. v. Risjord, 449 U.S. 368, 373 (1981) (internal
quotation marks and citations omitted). In the past, however,
we have taken a more flexible approach to jurisdiction in the
context of bankruptcy appeals pursuant to section 158(d),
because “[t]he unique nature of bankruptcy procedure dictates
that we take a pragmatic approach to finality” and use “a
more liberal finality standard” for section 158(d) than for sec-
tion 1291. Bonner Mall P’ship v. U.S. Bancorp Mortgage Co.
(In re Bonner Mall P’ship), 2 F.3d 899, 903 (9th Cir. 1993).

   [2] In Connecticut National Bank v. Germain (Germain),
the Supreme Court cast doubt on our application of a flexible
standard to section 158(d), by reasoning that sections 158(d)
                         IN RE BENDER                     14903
and 1291 were coextensive in their application to district
courts acting as bankruptcy appellate courts. 503 U.S. 249,
253 (1992). If our appellate jurisdiction pursuant to sections
158(d) and 1291 is functionally coextensive, then, “[t]o afford
the same jurisdiction, both statutes would have to have the
same finality standards in bankruptcy proceedings.” Vylene
Enters., Inc. v. Naugles, Inc. (In re Vylene Enters., Inc.), 968
F.2d 887, 892 (9th Cir. 1992) (Vylene) (citation omitted); see
also Saxman v. Educ. Credit Mgmt. Corp. (In re Saxman),
325 F.3d 1168, 1177-78 (9th Cir. 2003) (Wallace, J., dissent-
ing) (observing that Germain invalidates cases that treat final-
ity under section 158(d) differently than finality under section
1291). But see In re Bonner Mall P’ship, 2 F.3d at 904 n.11
(stating in dicta that “nothing in Germain casts doubt upon the
liberal standard for finality we have adopted regarding [sec-
tion] 158(d)”). No post-Germain case has concluded, how-
ever, that our earlier precedent must be overturned. Vylene
avoided the challenge presented by Germain to our circuit’s
case law by holding that jurisdiction was lacking even under
the older, more flexible finality standard. Vylene, 968 F.2d at
894. Similarly, in Stanley v. Crossland, Crossland, Chambers,
MacArthur & Lastreto (In re Lakeshore Village Resort, Ltd.)
(Lakeshore), our court stated that, “Germain implies that a
decision appealable under section 158(d) also should be
appealable under traditional applications of section 1291 in
nonbankruptcy proceedings,” but concluded it was unneces-
sary to decide whether Germain curtailed the circuit’s section
158(d) finality standard because the decision presented for
review was not final under either standard. 81 F.3d 103, 106
(9th Cir. 1996).

   [3] This case once again begs for an answer to the critical
question: in light of Germain, must we abandon our modifica-
tion of what should be the proper finality standard for bank-
ruptcy appeals? Circuit precedent may be overturned without
an en banc rehearing if the Supreme Court has “undercut the
theory or reasoning underlying the prior circuit precedent in
such a way that the cases are clearly irreconcilable.” Miller v.
14904                     IN RE BENDER
Gammie, 335 F.3d 889, 899-900 (9th Cir. 2003). Like Vylene
and Stanley, however, we need not decide this broader ques-
tion, because we conclude that the BAP’s decision was not
final even under our circuit’s flexible finality standard.

                              III.

    [4] We have divined four factors to determine whether a
BAP’s decision to remand a case to the bankruptcy court is
“final” under section 158(d): “(1) the need to avoid piecemeal
litigation; (2) judicial efficiency; (3) the systemic interest in
preserving the bankruptcy court’s role as the finder of fact;
and (4) whether delaying review would cause either party
irreparable harm.” Lakeshore, 81 F.3d at 106, citing Vylene,
968 F.2d at 895-96.

   Some of our opinions have, somewhat confusingly, applied
a standard that was set forth in the pre-Germain case of King
v. Stanton (In re Stanton), 766 F.2d 1283 (9th Cir. 1985)
(Stanton). In Stanton, we observed in a footnote that jurisdic-
tion might be appropriate even where a BAP has remanded to
the bankruptcy court for fact-finding, if the appeal involved
a central legal issue, the resolution of which would either (1)
dispose of the case and obviate the need for the fact-finding,
or (2) materially aid the disposition of the case on remand. Id.
at 1287 n.8. This concept was absorbed into this circuit’s later
case law on finality. See, e.g., In re Bonner Mall P’ship, 2
F.3d at 904 (“We believe that the Stanton principle is sound
and we adopt it here.”); Zolg v. Kelly (In re Kelly), 841 F.2d
908, 911 (9th Cir. 1988) (applying Stanton where underlying
facts were not disputed and legal issues predominated).
Applying the reasoning of the Stanton footnote, some cases
have observed that if the matters to be contemplated on
remand “concern primarily factual issues about which there is
no dispute, and the appeal concerns primarily a question of
law, then the policies of judicial efficiency and finality are
best served by our resolving the question now.” North Slope
Borough v. Barstow (In re Bankruptcy Est. of MarkAir), 308
                         IN RE BENDER                     14905
F.3d 1057, 1060 (9th Cir. 2002) (internal quotation marks and
citation omitted); see also Countrywide Home Loans, Inc. v.
Hoopai (In re Hoopai), 581 F.3d 1090, 1096 (9th Cir. 2009)
(concluding that the BAP’s order was final where the issues
on appeal were “primarily legal, and concern[ed] undisputed
facts,” and the “fact-finding directed on remand would not
address these issues.”).

   Those cases following the Stanton footnote have been vari-
ously described as applying a “narrow exception[ ]” to the
Vylene factor test, see, e.g., Lundell v. Anchor Constr. Spe-
cialists, Inc. (In re Lundell), 223 F.3d 1035, 1038 (9th Cir.
2000), or a separate, free-standing alternative test. See, e.g.,
United States v. Fowler (In re Fowler), 394 F.3d 1208, 1211
(9th Cir. 2005) (observing that “[t]wo tests have developed in
the Ninth Circuit to address the question of finality for bank-
ruptcy proceedings”); Neilson v. United States (In re Olshan),
356 F.3d 1078, 1082-83 (9th Cir. 2004) (describing that
recent cases had applied the two-factor Stanton test and the
Vylene four-factor test “interchangeably” or “both in conjunc-
tion and separately”). Nevertheless, in Lakeshore we con-
cluded that Vylene set forth the proper analysis:

    Under the direction of Germain, Vylene refined Stan-
    ton and Kelly and set forth the considerations we
    should balance in determining whether a district
    court’s decision remanding a case to the bankruptcy
    court is a final decision. . . . In Bonner Mall, we rec-
    ognized that Vylene set forth the proper approach.
    . . . For additional guidance, however, we referred to
    the Stanton dicta . . . .

Lakeshore, 81 F.3d at 106-07. In Lakeshore we clarified that,
although some cases frame their analysis in terms of the Stan-
ton dicta only, those cases were not heard en banc and “could
not have overruled Vylene, [and thus] we must assume that
the court implicitly held that the considerations set forth in
Vylene weighed in favor of exercising jurisdiction.” Id. at
14906                     IN RE BENDER
107; see also Neary v. Padilla (In re Padilla), 222 F.3d 1184,
1188 (9th Cir. 2000) (“While the court has not always explic-
itly considered these [Vylene] factors, determination of a
remanding decision’s finality must be based on analysis of
these factors”).

   Of course, all of this is troubling for litigants. Too often
they are placed in a position to guess about whether there is
appellate jurisdiction. Afraid of guessing wrong to the possi-
ble detriment of their client’s interests, lawyers appeal to find
the answer with its attendant financial costs to litigants and
added burden to an already over-burdened appellate judiciary.
Adhering only to the Supreme Court’s Germain test might
well be the only effective and fair solution.

                              IV.

   Although we recognize the continuing drift of additions and
substitutes to the Vylene test, with their resultant movement
away from real finality, we conclude that until the court
embraces Germain, we should follow Lakeshore. We there-
fore turn to the application of the four Vylene factors.

   [5] The first factor, the need to avoid piecemeal litigation,
weighs against our jurisdiction here. “[W]hen an intermediate
appellate court remands a case to the bankruptcy court, ‘the
appellate process likely will be much shorter if we decline
jurisdiction and await ultimate review on all the combined
issues.’ ” Lakeshore, 81 F.3d at 106, quoting Stanton, 766
F.2d at 1287-88. The case before us does not involve a situa-
tion where “all that remains to do on remand is a purely
mechanical or computational task such that the proceedings
on remand are highly unlikely to generate a new appeal or to
affect the issue that the disappointed party wants to raise on
appeal.” In re Saxman, 325 F.3d at 1172 (internal quotation
marks, citations and punctuation omitted). Rather, if we were
to hear this appeal and affirm the BAP’s holdings, the case
would likely be remanded for further fact-finding, and it is
                          IN RE BENDER                      14907
likely that the disappointed party would appeal again, first to
the BAP or the district court, and then to this court. If we
were to agree with Congrejo that the trustee’s complaint is
untimely and not entitled to equitable tolling, the litigation
would indeed end; this, however, is essentially always true of
statute of limitations defenses. If we were to assert jurisdic-
tion over this case because acceptance of one party’s statute
of limitations defense might end the litigation, we would
create an asymmetric rule permitting appellate jurisdiction
whenever a BAP rejected a statute of limitations defense. We
certainly do not need one more patch on the patchwork of our
flexible standard. Ernst & Young v. Matsumoto (In re United
Ins. Mgmt., Inc.) is distinguishable because there, the question
on appeal regarding equitable tolling was purely legal. 14
F.3d 1380, 1384 (9th Cir. 1994) (considering “whether equita-
ble tolling applies to the Bankruptcy Code and, if it does,
whether . . . the trustee can invoke the doctrine on the undis-
puted facts of the case” (emphasis added)). Here, the facts rel-
evant to the equitable tolling determination were contested in
the bankruptcy court and were the subject of a full evidentiary
hearing.

   [6] The second consideration under Vylene, that of judicial
efficiency, also militates against the exercise of appellate
jurisdiction here. As discussed above, an appeal now would
not necessarily avoid an appeal later. In addition, a closely
related issue is pending in the underlying bankruptcy case.
The holder of the mortgage on Bender’s original parcel of
Hawaiian property (which included Lot A-3) has filed a credi-
tor’s proof of claim based on that mortgage. The bankruptcy
court has consolidated the remand of this appeal with pro-
ceedings related to the proof of claim and intends to resolve
the remaining issues together, and to issue one judgment on
those matters. Appellate jurisdiction will delay the bankruptcy
court’s effort to adjudicate efficiently all issues related to this
property.

  [7] The third Vylene consideration, preserving the bank-
ruptcy court’s role as finder of fact, weighs against jurisdic-
14908                    IN RE BENDER
tion. Dismissing this appeal will preserve the bankruptcy
court’s role as the finder of fact by allowing it to determine
the nature of the Trust before we review the related legal
question of whether Lot A-3 is properly considered part of the
bankruptcy estate.

   [8] The fourth Vylene consideration also weighs against
appellate jurisdiction, as neither party has argued that imme-
diate appellate review would prevent irreparable harm.

   With all four Vylene considerations pointing to a denial of
jurisdiction for this appeal, our course is clear.

   [9] Because we lack jurisdiction to hear this appeal, we do
not reach the remaining issues raised by the parties. We there-
fore dismiss the appeal and cross-appeal and remand the case
to the bankruptcy court for further proceedings.

  APPEAL DISMISSED.