Court Opinion

ID: 2645640
Source: CourtListenerOpinion
Date Created: 2013-12-12 01:02:07.179701+00
Date Added: 2024-06-11T12:31:10.778986
License: Public Domain

FILED
                                                          DEC 10 2013
 1
                                                      SUSAN M. SPRAUL, CLERK
 2                                                      U.S. BKCY. APP. PANEL
                                                        OF THE NINTH CIRCUIT

 3               UNITED STATES BANKRUPTCY APPELLATE PANEL
 4                         OF THE NINTH CIRCUIT
 5   In re:                        )      BAP No.   EC-12-1624-JuKiPa
                                   )
 6   SK FOODS, L.P.,               )      Bk. No.   EC-09-29162-RSB
                                   )
 7                   Debtor.       )      Adv. No. EC-11-02337-RSB
     ______________________________)
 8                                 )
     SK PM CORP., INC.; SCOTT      )
 9   SALYER REVOCABLE TRUST;       )
     SSC&L 2007 TRUST; MONTEREY    )
10   PENINSULA FARMS, LLC;         )
     FREDERICK SCOTT SALYER, aka   )
11   Scott Salyer, in his capacity )
     as Trustee for the Scott      )
12   Salyer Revocable Trust; ROBERT)
     PRUETT, in his capacity as    )
13   Trustee for the SSC&L 2007    )
     Trust; FAST FALCON, LLC,      )
14                                 )
                     Appellants,   )
15                                 )
     v.                            )      M E M O R A N D U M*
16                                 )
     BRADLEY D. SHARP, Chapter 11 )
17   Trustee,                      )
                                   )
18                   Appellee.     )
     ______________________________)
19
                 Argued and Submitted on October 18, 2013
20                      at Sacramento, California
21                       Filed - December 10, 2013
22            Appeal from the United States Bankruptcy Court
                  for the Eastern District of California
23
         Honorable Robert S. Bardwil, Bankruptcy Judge, Presiding
24                        _______________________
25
26        *
            This disposition is not appropriate for publication.
27   Although it may be cited for whatever persuasive value it may
     have (see Fed. R. App. P. 32.1), it has no precedential value.
28   See 9th Cir. BAP Rule 8013-1.

                                    -1-
 1            Appearances:   Kimberly Anne Wright, Esq. argued
                             for appellants; Kevin W. Coleman, Esq., of
 2                           Schnader Harrison Segal & Lewis LLP argued
                             for appellee Bradley D. Sharp.
 3                           _________________________
 4   Before:     JURY, KIRSCHER, and PAPPAS, Bankruptcy Judges.
 5            Appellants, SK PM Corp., Inc. (SKPM), Scott Salyer
 6   Revocable Trust (SSRT), the SSC&L 2007 Trust, Monterey Peninsula
 7   Farms, LLC (MPF), Frederick Scott Salyer (Salyer) in his
 8   capacity as Trustee for the SSRT, Robert Pruett in his capacity
 9   as Trustee for the SSC&L 2007 Trust, and Fast Falcon, LLC (Fast
10   Falcon) (collectively, Defendants), appeal from the bankruptcy
11   court’s November 29, 2012 Partial Judgment in favor of appellee,
12   Bradley D. Sharp, chapter 111 trustee (Trustee) for debtor
13   SK Foods, L.P. (SK Foods).
14            In the Partial Judgment, the bankruptcy court decided on
15   Trustee’s motion for summary judgment (MSJ) that (1) SK Foods,
16   rather than SKPM and SSRT, owned the stock (SKFA Stock) of an
17   entity affiliated with SK Foods known as SK Foods Australia Pty.
18   Ltd. (SKFA) and (2) SK Foods, rather than the SSC&L 2007 Trust,
19   had the exclusive right to payment on an intercompany loan
20   (Intercompany Loan) made by SK Foods to SKFA (collectively, the
21   SKFA Stock and Intercompany Loan are referred to as the Assets).
22   Therefore, the bankruptcy court concluded that the Assets were
23   property of SK Foods’ estate.      Having reviewed the voluminous
24   record, we AFFIRM.
25
          1
26          Unless otherwise indicated, all chapter and section
     references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532 and
27   “Rule” references are to the Federal Rules of Bankruptcy
     Procedure and “Civil Rule” references are to the Federal Rules of
28   Civil Procedure.

                                       -2-
 1                         I.   FACTS AND PROCEDURAL HISTORY
 2              SK Foods, SKFA, and defendants SKPM, SSRT, the SSC&L 2007
 3   Trust, MPF and Fast Falcon were part of Salyer’s expansive
 4   global network of related entities which included individual and
 5   revocable trusts, partnerships, limited liability companies,
 6   C Corporations, S Corporations and Trusts.
 7              SK Foods, a California limited partnership, was one of the
 8   largest producers of tomato products in the nation.        SKPM, a
 9   California corporation, was SK Foods’ general partner owning
10   55%.       SSRT, a California trust, of which Sayler was the
11   beneficiary, was SK Foods’ limited partner owning 45%.         SSRT
12   held 100% of SKPM’s shares.        Salyer’s related entities in
13   Australia and New Zealand, including SKFA,2 were also part of
14   the tomato and vegetable processing industry and had corporate
15   relationships among each other and SKPM and SSRT.
16              Sayler formed the SSC&L 2007 Trust, a California trust of
17   which Salyer is also a beneficiary, to effectuate a transfer of
18   the Intercompany Loan from SK Foods to the trust.         Sayler also
19   formed MPF, a California limited liability company, and Fast
20   Falcon, which was organized under the laws of Nevis, West
21   Indies, allegedly to shield assets such as the SKFA Stock and
22   Intercompany Loan from his creditors.
23              Ultimately, Sayler’s empire collapsed.   In 2005, SK Foods
24   and Sayler became the subject of a criminal investigation by the
25   United States Department of Justice.        This investigation
26
27
            2
            The Australian related entities were Cedenco JV Australia
28   and SS Farms Australia.

                                          -3-
 1   resulted in a criminal prosecution against Sayler for price-
 2   fixing and other criminal acts.     Sayler was convicted and
 3   sentenced to prison.
 4            In addition, SK Foods defaulted on its loans from its
 5   largest secured lender, the Bank of Montreal (BMO).      Although
 6   BMO and SK Foods attempted a work out, refinancing was not an
 7   option.     SK Foods investigated a possible sale and considered
 8   bankruptcy, but in BMO’s view, did neither in a timely manner.
 9            On May 5, 2009, BMO filed involuntary chapter 11 petitions
10   against SK Foods and RHM Industrial/Specialty Foods, Inc. d/b/a
11   Collusa County Canning Co. (RHM).       On May 7, 2009, SK Foods and
12   RHM filed voluntary chapter 11 petitions and the cases were
13   consolidated.     On May 14, 2009, Sharp was appointed Trustee.
14            Not long after SK Foods’ bankruptcy filing, in the Fall of
15   2009, ANZ Bank placed SKFA and its affiliates in Australia and
16   New Zealand into receivership.     ANZ Bank’s receiver subsequently
17   sold SKFA’s assets and, after paying the secured debt owed to
18   ANZ Bank, held a residue of more than $60 million for
19   distribution to SKFA’s remaining creditors and interest holders.
20            In May 2010, SKFA and its affiliates elected to proceed
21   with a voluntary liquidation and selected Sheahan Lock Partners
22   in Adelaide, Australia to serve as their liquidators
23   (Liquidators).3     On August 11, 2010, Mr. Sheahan and Mr. Lock
24
25        3
            On February 7, 2011, Liquidators obtained recognition of
26   the Australian liquidation under Chapter 15 of the Bankruptcy
     Code in the Northern District of California Bankruptcy Court.
27   They then obtained orders permitting them to issue subpoenas for
     production of documents and depositions of witnesses in relation
28                                                      (continued...)

                                       -4-
 1   were appointed as Liquidators for SKFA and its affiliates.
 2        With funds obtained from the receiver, Liquidators had
 3   enough money to pay all of SKFA’s creditors in full, including
 4   the owner of the Intercompany Loan, and to pay on account of
 5   SKFA Stock in excess of $32 million.   Under the Australian
 6   Corporations Act 2002 (Cth) (Corporations Act) s 501, any
 7   surplus in SKFA must be distributed to the members
 8   (shareholders) of the company in proportion to the shares held
 9   by them, subject to modification under SKFA’s constitution,
10   which was its governing document.
11        Trustee submitted proofs of debt (POD) to Liquidators for
12   payment on account of the Assets.    The SSC&L 2007 Trust and Fast
13   Falcon also submitted POD to Liquidators for the same.   Trustee
14   maintained that SK Foods owned the Assets on the Petition Date
15   because (1) SK Foods was listed on SKFA’s company register as
16   the owner of the stock on the Petition Date and (2) there were
17   no documents evidencing a transfer of the Intercompany Loan from
18   SK Foods to the SSC&L 2007 Trust prior to the Petition Date.
19   Defendants contended that, in contrast to SKFA’s company
20   register, SKPM and SSRT held the beneficial interest in the SKFA
21   Stock because various documents showed that SK Foods agreed to
22   transfer the stock to them.   They further argued that the SSC&L
23   2007 Trust held the beneficial interest in the Intercompany Loan
24
25        3
           (...continued)
26   to the ownership issues raised in this appeal. BMO sought to
     have the case dismissed. On April 13, 2012, the bankruptcy court
27   in the Northern District of California heard and denied BMO’s
     motion to dismiss and subsequently transferred the chapter 15
28   case to the Eastern District of California.

                                    -5-
 1   as evidenced by accounting entries and other documents which,
 2   they argued, amounted to an equitable assignment.
 3        In May 2011, Trustee commenced the instant adversary
 4   proceeding against Defendants seeking to recover the SKFA Stock
 5   and Intercompany Loan, which were allegedly transferred to or by
 6   various entities owned and controlled by Salyer, under §§ 544,
 7   548 and 550 and Cal. Civ. Code §§ 3439.04, 3439.05 and 3439.07.
 8   Trustee also asserted a willful violation of the automatic stay
 9   occurred through postpetition attempts to effectuate the
10   transfers.
11        In December 2011, Liquidators admitted Trustee’s POD for
12   the Intercompany Loan in part and rejected the SSC&L 2007
13   Trust’s and Fast Falcon’s POD.    Liquidators found that Trustee’s
14   POD was subject to set-off and calculated the claim at
15   $10,005,528.   From this amount, they proposed to withhold
16   $867,022 to be remitted to the Australian Taxation Office,
17   leaving a net amount of $9,138,506 to SK Foods.   Trustee
18   commenced a proceeding in the Federal Court of Australia
19   disputing Liquidators’ decision in relation to the set off
20   amounts.
21        On December 15, 2011, the SSC&L 2007 Trust and Fast Falcon
22   commenced a proceeding in the Federal Court of Australia
23   appealing Liquidators’ decision to admit Trustee’s POD for the
24   Intercompany Loan.   The Federal Court of Australia subsequently
25   dismissed that appeal.
26        In February 2012, Trustee commenced a proceeding in the
27   Federal Court of Australian seeking declaratory relief as to the
28   legal and beneficial ownership of the SKFA Stock.

                                      -6-
 1        In May 2012, Liquidators concluded that Australian law
 2   applied to the determination of the ownership of SKFA Stock and
 3   under Australian law, SKPM and SSRT obtained an
 4   equitable/beneficial interest in the SKFA Stock in late January
 5   2007 or early 2008.   They also determined that an equitable
 6   assignment of the Intercompany Loan occurred around the same
 7   time as evidenced by book entries and various emails and
 8   correspondence between SKFA and SK Foods’ advisors and
 9   executives.   Defendants rely upon Liquidators’ decision to
10   support their arguments in this appeal.
11        In June 2012, Liquidators revoked their decision to admit
12   Trustee’s POD for the Intercompany Loan.
13        On July 3, 2012, Trustee filed a first amended complaint
14   in this adversary proceeding asserting eight claims for relief:
15   (1) Declaratory Relief - Determination of Property of the Estate
16   (Intercompany Loan) - As to All Defendants; (2) Declaratory
17   Relief - Determination of Property of the Estate (SKFA Stock) -
18   As to All Defendants; (3) Willful Violation of the Automatic
19   Stay - As to SSRT, SKPM, SSC&L 2007 Trust, MPF, and Fast Falcon;
20   (4) Avoidance and Recovery of Unauthorized Post-Petition
21   Transfer - As to SSRT, SKPM, MPF, and Fast Falcon;
22   (5) Declaratory Relief - Determination that Trustee Holds
23   Superior Title to the Intercompany Loan - As to SSC&L 2007 Trust
24   and Fast Falcon; (6) Declaratory Relief - Determination that
25   Trustee Holds Superior Title to the SKFA Stock - As to SSRT,
26   SKPM, MPF and Fast Falcon; and (7) Avoidance and Recovery of
27   Fraudulent Transfers - SKFA Stock - As to SKPM, SSRT, MPF, and
28   Fast Falcon; and (8) Breach of Fiduciary Duty/Conversion -

                                    -7-
 1   Imposition of Equitable Lien/Constructive Trust - As to SKPM.
 2            Trustee also sought a permanent injunction to restrain
 3   Defendants from further interfering with his control over
 4   property of the estate and requested the bankruptcy court to
 5   appoint a post-judgment receiver to take possession of the
 6   fraudulently transferred property.
 7   A.       Trustee’s Motion for Summary Judgment
 8            On August 8, 2012, Trustee filed his MSJ contending there
 9   was no genuine dispute as to any material fact with respect to
10   his claims.     The material facts4 which formed the basis of
11   Trustee’s MSJ are as follows:
12            In January 2002, SK Foods purchased 100 shares of SKFA from
13   an entity known as Cerebos, a New Zealand Sayler-related entity.
14   On January 11, 2002, SK Foods executed a consent to become a
15   member (shareholder) of SKFA.
16            On February 25, 2002, SK Foods loaned $6.25 million to
17   SKFA.     SKFA entered this transaction on its books as a loan from
18   SK Foods.
19            The Consolidated Balance Sheets for Year Ended October 31,
20   2006, showed the receivable due in the amount of $13,713,000.
21   The October 31, 2006 Notes to the Consolidated Financial
22   Statements showed that SK Foods was the 100% shareholder of
23   SKFA.
24
          4
            We do not recite all the facts contained in this record
25   pertaining to the transfers of the Assets from SK Foods to SKPM,
26   SSRT and SSC&L 2007 Trust. Instead, we have identified those
     facts which we consider material for purposes of this appeal. To
27   the extent more is needed, the parties are familiar with the
     background facts and the bankruptcy court’s tentative ruling
28   contains a comprehensive rendition of the facts.

                                       -8-
 1             In 2007, an accounting problem with the Assets surfaced
 2   during the preparation of SK Foods audited financial statements.
 3   Moss Adams LLP (Moss Adams), which had been retained to prepare
 4   audited financial statements for SK Foods, informed SK Foods
 5   that, because of its ownership of the Assets, U.S. accounting
 6   rules required SKFA’s financial statements to be consolidated
 7   with SK Foods’ statements.5      Consolidation of the Australian and
 8   New Zealand affiliates’ assets, liabilities and operations into
 9   those of SK Foods created a burdensome accounting task because
10   SKFA’s year-end differed from SK Foods and SKFA’s financial
11   statements were audited under Australian accounting standards
12   which required a conversion to U.S. accounting standards prior
13   to consolidation.      Salyer sought to avoid the time and cost
14   involved with complying with the accounting rules and instructed
15   his financial and legal advisors to devise a strategy for doing
16   so.
17             In November 2007, it was decided that SK Foods would
18   distribute the SKFA Stock to its partners, SSRT and SKPM (the
19   Spin Off).      It was also decided that the Intercompany Loan would
20   be assigned to the SSC&L 2007 Trust, a trust under which Salyer
21   was the trustee and beneficiary, in exchange for a promissory
22   note of like amount.      Finally, SK foods would backdate the
23
           5
24          This accounting problem is what has been described in the
     record as the “FIN 46” issue. Under FIN 46, a company must
25   report the assets, liabilities, and financial performance of any
26   entity in which the reporting company holds an ownership,
     contractual, or other pecuniary interest the value of which is
27   subject to change based upon changes in the fair value of the
     other entity’s assets (referred to as a “variable interest
28   entity”).

                                        -9-
 1   purported transfers to November 1, 2006 (the first day of its
 2   fiscal year) to avoid the need to consolidate.
 3        In January 2008, Salyer and others signed a management
 4   representation letter (Management Representation Letter) to Moss
 5   Adams stating:
 6        We have distributed our investments in foreign
          subsidiaries (Cedenco entities) to the partners and
 7        sold the net related intercompany receivables to a
          revocable trust with common ownership with the Company
 8        effective November 1, 2006. We determined that the
          Company does not have a variable interest in the
 9        Cedenco entities.
10        On January 15, 2008, Moss Adams issued its opinion in
11   connection with the June 30, 2007 audit of SK Foods.   The notes
12   to the June 30, 2007 financial statements state:
13        The Partnership distributed the investments in foreign
          subsidiaries to the partners effective November 1,
14        2006, and sold the Partnership’s inter-company
          receivables to a revocable trust with common ownership
15        with the Partnership. . . . The total receivable
          amount due from the revocable trust is $18,293,000.
16
17        The June 30, 2007 audited financial statements reflected a
18   reduction in owner’s equity by approximately $4.8 million.    The
19   Intercompany Loan remained an asset on the balance sheet but now
20   payable by the SSC&L Trust.
21        Despite the transfers which were purportedly “effective” on
22   November 1, 2006, as late as 2008 no one could put their hands
23   on any of the underlying transfer documents pertaining to the
24   Assets.
25        At some point between February 18, 2008, and mid-March
26   2008, Gary Perry (Perry), Sayler’s outside counsel, drafted an
27   assignment instrument (General Assignment and Transfer) intended
28   to effectuate a transfer of the SKFA Stock from SK Foods to SKPM

                                   -10-
 1   and SSRT.   On March 28, 2008, Perry emailed the draft assignment
 2   instrument to Lisa Crist, an SK Foods employee, requesting that
 3   she give it to Salyer to execute.     An October 27, 2008 email
 4   from Jeanne Johnston, an SK Foods employee and Salyer’s
 5   assistant, to Mark McCormick at SK Foods, stated that the
 6   General Assignment and Transfer document had been “executed” and
 7   attached a copy.
 8        Months later, on May 15, 2009, ten days after SK Foods’
 9   Petition Date, Nick Frankish (Frankish), then the CFO of
10   Cedenco, transmitted the General Assignment and Transfer
11   document via facsimile to Henry John Heath (Heath), one of
12   SKFA’s directors.   The facsimile transmission sheet begins with
13   the instruction “Looks like we need to advise ASIC [Australian
14   Securities and Investments Commission] of ownership change.”
15        On the same day, Heath sought advice from Deloitte Touche
16   Tohatsu (Deloitte) on what steps were necessary to effect the
17   purported ownership change from SK Foods to SKPM and SSRT in
18   relation to the stock.   At that time, Ms. Morgan (Morgan), a
19   Client Manager in the Melbourne office of Deloitte, informed
20   Heath that she would need to prepare the documentation required
21   by Australian law and the SKFA constitution.    Specifically, when
22   there was a change in membership, the company was required to
23   notify ASIC by filing a Form 484.
24        On July 16, 2009, Morgan sent by email the Form 484 to
25   Frankish and Heath.   On July 19, 2009, the form was forwarded to
26   Richard Lawrence, SKFA’s former CEO and director, so that he,
27   Sayler and Heath could sign it.   Morgan’s July 16, 2009 email
28   also attached other documents to effectuate the transfer of

                                    -11-
 1   ownership of the SKFA Stock including:   (1) Standard Transfer
 2   Forms for the SKFA Stock transfer dated 11/1/2006; (2) a letter
 3   dated November 1, 2006, signed by Sayler and sent to the
 4   directors at SKFA giving notice that he held 45 SKFA shares for
 5   the benefit of SSRT (Notice Letter); (3) a Declaration of Trust
 6   dated November 1, 2006, signed by Sayler which showed the
 7   distribution of 45 shares of SKFA stock to Sayler as trustee for
 8   the SSRT; (4) Share Certificates showing that SSRT was the
 9   holder of 45 shares of the SKFA stock and SKPM was the holder of
10   55 shares of the SKFA stock, both “signed in accordance with the
11   constitution of the company on [11/1/2006]”; and (5) Minutes of
12   the Meeting of Directors (Minutes) showing that the directors of
13   SK Foods resolved to approve the transfer of the SKFA Stock to
14   SSRT and SKPM.   The Minutes did not reflect the date on which a
15   meeting was held.
16        Despite all these documents purporting to effectuate the
17   transfer of SKFA Stock, as of the Petition Date, SKFA’s company
18   register showed SK Foods as a member of SKFA and ASIC’s database
19   showed that SK Foods owned the shares.
20        On August 18, 2009, Defendants filed Form 484 with the
21   ASIC, reflecting the transfer of SKFA Stock to SKPM and SSRT as
22   of November 1, 2006.
23        Documents purportedly relating to the Intercompany Loan
24   were also prepared.    Perry prepared a Debt Assignment Agreement
25   dated November 1, 2006, whereby the SSC&L 2007 Trust agreed to
26   become an obligor on certain receivables.   This document however
27   shows an agreement between SK Foods, the SSC&L 2007 Trust and
28   Cedenco Foods, Ltd., a New Zealand Company (Cedenco).   Nowhere

                                     -12-
 1   is SKFA mentioned.
 2        On January 14, 2008, Perry sent a copy of the executed
 3   original Debt Assignment Agreement to Sayler for his records.
 4        In March of 2009, Perry prepared an Accounts Receivable
 5   Setoff Agreement.    This agreement was entered into on March 24,
 6   2009, between SK Foods, the SSC&L 2007 Trust and Cedenco and
 7   purported to terminate the Debt Assignment Agreement dated
 8   November 1, 2006.    The parties agreed that the SSC&L 2007 Trust
 9   would no longer have any liability on the previously assigned
10   receivables.   During an examination by Liquidators on
11   October 13, 2011, Frankish testified that the purpose of the
12   agreement was to restore the Intercompany Loan to SK Foods to
13   allow SKFA to setoff certain trade debts SK Foods owed to SKFA
14   against the Intercompany Loan.
15        Through Bills of Sale dated January 17, 2009, SKPM and SSRT
16   sold their alleged respective interests in SKFA’s Stock to MPF.
17   MPF then sold 100% of SKFA’s Stock to Fast Falcon for
18   $1,000,000, effective June 29, 2009.    The record indicates that
19   Sayler formed Fast Falcon so that he could protect assets held
20   by SK Foods and his other entities from his creditors.    The
21   record also shows that Fast Falcon is wholly owned by the Hawker
22   Sydley Trust, a Cook Islands trust.     The trustee of the Hawker
23   Sydley Trust is the Asia Trust Limited.
24        Many of actions taken by Defendants to effectuate the
25   transfers of the Assets and obtain distributions from
26   Liquidators occurred after the Petition Date.    The SSC&L 2007
27   Trust and Fast Falcon submitted POD to Liquidators for payment
28   on account of the Assets.   Defendants also submitted unsworn

                                      -13-
 1   declarations to Liquidators in December 2010 concerning their
 2   ownership interests.    They also appeared at creditors meetings
 3   in December 2010 and February 2012 in San Francisco, CA, in
 4   connection with SKFA’s chapter 15 proceeding, at which they
 5   purported to exercise the rights of holders of the Assets.
 6   After Liquidators admitted Trustee’s POD for the Intercompany
 7   Loan in part, Defendants commenced a proceeding in the Federal
 8   Court of Australia, challenging Liquidators’ decision and naming
 9   Trustee as a defendant.    Trustee contended that these acts were
10   in violation of the automatic stay.
11   B.      The Bankruptcy Court’s September 26, 2012 Ruling on its
             Jurisdiction and Allowing Defendants Additional Time for
12           Discovery
13           Trustee originally scheduled the MSJ for hearing on
14   August 29, 2012, and re-noticed it for hearing on September 26,
15   2012.
16           On September 12, 2012, Defendants filed an opposition to
17   the MSJ contending, among other things, that the bankruptcy
18   court should dismiss or abstain from hearing the adversary
19   proceeding and let the Federal Court of Australia decide the
20   matter.    The factual basis for Defendants’ argument was that
21   (1) SKFA was an Australian entity which had not appeared in the
22   adversary proceeding; (2) SKFA’s liquidation was under the
23   supervision of the Federal Court of Australia; (3) ownership of
24   the Assets was concurrently being litigated in Australia; and
25   (4) the rights and ownership issues were governed by Australian
26   law.    Based on these facts, Defendants argued that (1) SKFA was
27   an indispensable party under Civil Rule 19 that could not be
28   joined because the bankruptcy court lacked personal jurisdiction

                                      -14-
 1   over it and (2) the bankruptcy court should abstain from hearing
 2   the matter under the doctrines of international comity and forum
 3   non conveniens.
 4            Defendants also requested a continuance of the MSJ to
 5   conduct discovery.     According to Defendants, they requested a
 6   stay of the adversary proceeding almost immediately after it was
 7   filed, which was granted.     Defendants maintained that they did
 8   not conduct discovery during the stay which expired at the end
 9   of June 2012 and, shortly thereafter, on August 1, 2012, Trustee
10   filed his MSJ.     As further grounds for a continuance of the MSJ,
11   Defendants argued that the bankruptcy court entered a Scheduling
12   Order on August 9, 2012, which set a discovery cut-off date of
13   January 31, 2013.     As a result, Defendants asserted it would be
14   unfair to hear the MSJ before that date.     Finally, Defendants
15   contended that Liquidators gave them no documents related to
16   their investigation into ownership of the Assets6 and that
17   depositions of BMO employees were essential to oppose the MSJ
18   because BMO encouraged the Spin Off.
19            On September 26, 2012, the bankruptcy court issued a
20
21        6
            Throughout 2011 and 2012, Liquidators investigated the
     circumstances surrounding the purported transfers of the SKFA
22
     Stock to SKPM and SSRT and Intercompany Loan to SSC&L 2007 Trust.
23   They conducted extensive discovery, including taking at least
     seven depositions in the United States and in Australia,
24   interviewing numerous other witnesses, and obtaining the
     production of thousands of documents from Trustee, BMO, and other
25   members of Debtor’s secured lender group. Defendants were
26   represented by counsel at the United States examinations and were
     provided with all of the documents produced to Liquidators during
27   their investigation. Liquidators also provided Defendants with
     affidavits outlining in detail their investigation and
28   conclusions.

                                       -15-
 1   tentative ruling finding that Trustee’s claims against
 2   Defendants all arose under Title 11 and therefore were “core”
 3   matters that it could hear and determine.     The court further
 4   explained that although the ownership of the SKFA Stock was a
 5   matter of foreign law, whether property was property of the
 6   estate was governed by U.S. bankruptcy law.     The bankruptcy
 7   court concluded that it had jurisdiction over the Assets under
 8   28 U.S.C. § 1334(e)(1), which gave it exclusive jurisdiction
 9   over property of the estate, wherever located, as of the
10   commencement of the case.     The court did not address Defendants’
11   arguments with respect to Civil Rule 19 or the doctrines of
12   international comity and forum non conveniens.
13            After hearing argument from Defendants’ counsel on why a
14   continuance of the MSJ and discovery was necessary, the
15   bankruptcy court gave them an additional thirty days to complete
16   discovery on a limited basis.     The court concluded that
17   discovery related to BMO, i.e., what the bank officers knew or
18   said with respect to the Spin Off, was not relevant to the
19   claims Trustee asserted, which involved whether the transfers of
20   the Assets were proper, whether there was consideration paid,
21   and whether the transfers were fraudulent or avoidable.7     The
22   bankruptcy court excluded discovery with respect to BMO, but
23   allowed Defendants other limited discovery.     The court continued
24
25        7
            Mark M. McCormick an executive employee of SK Foods from
26   September 2007 through March 2009, submitted a declaration dated
     November 18, 2010. McCormick stated that BMO specifically
27   requested that the Australian entities be separate from U.S.
     operations because they were not part of the borrowing group in
28   the USA.

                                       -16-
 1   the MSJ hearing to November 7, 2012, and then to November 29,
 2   2012.
 3   C.       The Bankruptcy Court’s Ruling on Trustee’s MSJ
 4            On November 28, 2012, the bankruptcy court issued a lengthy
 5   and comprehensive tentative ruling granting Trustee’s MSJ on the
 6   first, second, third, fifth and sixth claims for relief.        In its
 7   tentative, the court certified that its partial summary judgment
 8   was a final judgment.
 9            On November 29, 2012, the bankruptcy court heard the
10   matter.     On the same day, the court entered an order granting
11   the MSJ in part and entered Partial Judgment for Trustee.       The
12   bankruptcy court also entered a Letter of Request on the same
13   day addressed to the Justices of the Federal Court of Australia,
14   seeking to have them recognize the Partial Judgment and order
15   Liquidators to do the same.8     Defendants timely appealed from
16   the Partial Judgment.
17
18
19
          8
20          On May 30, 2013, in apparent recognition of the Partial
     Judgment, the Federal Court of Australia entered judgment in
21   favor of Trustee in parallel litigation between Defendants and
     Trustee in that court over who owns the Assets. The Federal
22
     Court of Australia found that the Partial Judgment barred
23   Defendants from relitigating the ownership dispute. SK Foods LP
     v SK Foods Australia Pty Ltd (In Liq) (No. 3) [2013] FCA 526
24   (Austl.), 2013 WL 2326997. We take judicial notice of the
     Federal Court of Australia’s decision in the parallel litigation
25   pursuant to Fed. R. Evid. 201. See United States ex rel.
26   Robinson Rancheria Citizens Council v. Borneo, Inc., 971 F.2d
     244, 248 (9th Cir. 1992) (courts may take notice of proceedings
27   in other courts, both within and without the federal judicial
     system, if those proceedings have a direct relation to matters at
28   issue).

                                       -17-
 1                               II.   JURISDICTION
 2        The bankruptcy court had jurisdiction over this proceeding
 3   under 28 U.S.C. §§ 1334 and 157(b)(2)(A) and (K).   We have
 4   jurisdiction under 28 U.S.C. § 158.
 5                                 III.    ISSUES
 6        A.    Did the bankruptcy court abuse its discretion by
 7   ruling on the MSJ without giving Defendants sufficient time to
 8   conduct discovery relevant to their case?
 9        B.    Did the bankruptcy court abuse its discretion when it
10   refused to dismiss the adversary proceeding on the grounds that
11   SKFA was a necessary and indispensable party under Civil
12   Rule 19?
13        C.    Did the bankruptcy court properly exercise its
14   jurisdiction to determine the ownership of the Assets when those
15   issues were being litigated in SKFA’s Australian liquidation
16   proceeding?
17        D.    Did the bankruptcy court err in deciding that the
18   Assets were property of SK Foods’ bankruptcy estate?
19        E.    Did the bankruptcy court err in deciding that the
20   Trustee could avoid the prepetition transfers of property of
21   SK Foods under § 544(a)(1)?
22                         IV.    STANDARDS OF REVIEW
23        We review under an abuse of discretion standard the
24   bankruptcy court’s:   (1) refusal to permit further discovery
25   before ruling on a MSJ; (2) determinations under Civil Rule 19;
26   and (3) refusal to abstain based on international comity.
27   Cont’l Ins. Co. v. Thorpe Insulation Co. (In re Thorpe
28   Insulation Co.), 671 F.3d 1011, 1024 (9th Cir. 2012)

                                          -18-
 1   (discovery); Am. Greyhound Racing, Inc. v. Hull, 305 F.3d 1015,
 2   1022 (9th Cir. 2002) (Civil Rule 19); Sarei v. Rio Tinto, PLC,
 3   487 F.3d 1193, 1211 (9th Cir. 2007) (comity).      A bankruptcy
 4   court abuses its discretion by identifying an incorrect legal
 5   standard, or by applying the correct standard illogically,
 6   implausibly, or in a manner without support in inferences that
 7   may be drawn from facts in the record.       United States v.
 8   Hinkson, 585 F.3d 1247, 1251 (9th Cir. 2009) (en banc).
 9        We review de novo choice of law questions, the bankruptcy
10   court’s decisions on summary judgment and whether property is
11   property of the estate.   Mazza v. Am. Honda Motor Co., 666 F.3d
12   581, 589 (9th Cir. 2012) (choice of law); Ghomeshi v. Sabban
13   (In re Sabban), 600 F.3d 1219, 1221–22 (9th Cir. 2010) (summary
14   judgment); White v. Brown (In re White), 389 B.R. 693, 698 (9th
15   Cir. BAP 2008) (property of the estate).      The bankruptcy court’s
16   determination that Trustee was entitled to avoid the prepetition
17   transfers of the Assets under § 544(a) is a conclusion of law.
18   A.O. Smith Water Prods. Co. v. Varner (In re Varner), 219 B.R.
19   867, 869 (9th Cir. BAP 1998).
20                             V.    DISCUSSION
21        On appeal, Defendants attempt to obtain reversal on a
22   non-merits and merits basis.    In effect, Defendants seek
23   reversal on non-merits grounds such as forum non conveniens,
24   comity, and the “first to file” rule contending that the
25   bankruptcy court erred by reaching the merits of the case.        On
26   the merits, Defendants argue that under Australian law, the
27   requirements for an equitable transfer of the Assets were met as
28   a matter of law.   We discuss each argument in turn.

                                      -19-
 1   A.       Premature Summary Judgment:   Opportunity for Discovery
 2            Defendants’ first ground for reversal is that the
 3   bankruptcy court’s ruling on the MSJ was premature.       Defendants
 4   complain that the bankruptcy court gave them insufficient time
 5   to conduct discovery when the court’s own Scheduling Order set a
 6   January 13, 2012 discovery deadline.       Defendants further assert
 7   that the bankruptcy court erred in limiting their discovery to
 8   depositions of persons favorable to Trustee and excluding
 9   depositions of BMO employees when BMO’s knowledge of the Spin
10   Off was the crux of their defense.       We are not persuaded.
11            A bankruptcy court abuses its discretion in denying
12   discovery before ruling on a MSJ only if “the movant diligently
13   pursued its previous discovery opportunities, and can
14   demonstrate that allowing additional discovery would have
15   precluded summary judgment.”     In re Thorpe Insulation Co.,
16   671 F.3d at 1024.9     On this record, Defendants did not meet
17   their burden under either prong.
18            Defendants did not demonstrate that they diligently pursued
19   previous discovery opportunities.        Defendants contend a stay of
20   the adversary proceeding was imposed, but nowhere is there a
21
22        9
            Defendants’ request for a continuance of the MSJ was
23   raised in their opposition to the MSJ. Generally, a party
     opposing a motion for summary judgment on the ground that further
24   discovery is necessary is required to file a motion under Civil
     Rule 56(d). Brae Transp., Inc. v. Coopers & Lybrand, 790 F.2d
25   1439, 1443 (9th Cir. 1986). However, the failure to file such a
26   motion is not a proper ground to deny discovery. See Garrett v.
     City and Cnty. of S.F., 818 F.2d 1515, 1518 (9th Cir. 1987).
27   Defendants’ failure to file a formal motion under Civil Rule
     56(d) was not discussed by the bankruptcy court nor does the
28   record suggest that this was a basis for the court’s ruling.

                                       -20-
 1   copy of such an order in the record.    Therefore, we cannot tell
 2   whether any stay prohibited Defendants from conducting discovery
 3   in the first place.
 4         In addition, Defendants do not dispute that they were
 5   litigating the ownership of the Assets in the Australian SKFA
 6   liquidation proceeding.    The record shows that Liquidators had
 7   sought and obtained recognition of the SKFA liquidation
 8   proceeding in Chapter 15 so that they could conduct extensive
 9   discovery on the ownership issues raised in this appeal and that
10   Defendants participated in that discovery with counsel.
11   However, Defendants offer no explanation why they did not
12   conduct their own Rule 2004 examination of BMO, or others, in
13   those proceedings.
14         Defendants also failed to demonstrate that discovery from
15   BMO would preclude summary judgment.    At the September 26, 2012
16   hearing, the bankruptcy court asked Defendants’ counsel “what is
17   it with the employees of Bank of Montreal that you think will
18   aid your case?    And what is it you anticipate to discover from
19   them?”     Counsel answered by stating that BMO’s knowledge of the
20   Spin Off of the foreign entity, SKFA, from SK Foods was
21   necessary to assist them in proving their equitable assignment
22   claim.10    However, even assuming BMO’s knowledge of, or alleged
23
          10
24          In Liquidators’ affidavit dated March 3, 2012, they
     reversed their decision in favor of Trustee. The affidavit
25   states that part of the reason for reversing their decision was
26   based on the discovery of a number of documents from BMO and
     Wells Fargo Bank concerning their knowledge of the Spin Off and
27   its effect. Liquidators stated in the affidavit that they would
     voluntarily make available for inspection by the parties to these
28                                                      (continued...)

                                      -21-
 1   consent to, the Spin Off of SKFA, we agree with the bankruptcy
 2   court that this knowledge is not relevant to the ownership
 3   issues raised in this appeal.
 4        Although Defendants did not meet their burden for a
 5   continuance of the MSJ to conduct unlimited discovery to the
 6   January 13, 2013 discovery deadline contained in the Scheduling
 7   Order, the bankruptcy court exercised its discretion and gave
 8   Defendants an additional thirty days to conduct limited
 9   discovery.   This is not a situation where the bankruptcy court
10   disregarded Defendants’ request for discovery all together and
11   simply ruled on the MSJ.   See Brown v. Miss. Valley State Univ.,
12   311 F.3d 328 (5th Cir. 2002) (reversing district court’s
13   decision on summary judgment when district court did not rule on
14   plaintiff’s request for discovery but granted summary judgment
15   on the grounds that there was insufficient evidence of
16   defendant’s involvement in a conspiracy, precisely the type of
17   evidence sought by plaintiff).    In sum, under these
18   circumstances, we perceive no abuse of discretion.
19   B.   Indispensable Parties:     SKFA Australian Liquidators
20        Defendants’ second ground for reversal is that the
21   bankruptcy court failed to dismiss the adversary proceeding on
22   the ground that Liquidators and SKFA were necessary and
23   indispensable parties under Civil Rule 19.    Civil Rule 19
24   provides in relevant part:
25        (a) Persons Required to Be Joined if Feasible.
26
          10
27          (...continued)
     proceedings “all of these discovery documents, subject to any
28   obligations of confidentiality which may apply.”

                                      -22-
 1   (1) Required Party. A person who is subject to
     service of process and whose joinder will not deprive
 2   the court of subject-matter jurisdiction must be
     joined as a party if:
 3
     (A) in that person’s absence, the court cannot accord
 4   complete relief among existing parties; or
 5   (B) that person claims an interest relating to the
     subject of the action and is so situated that
 6   disposing of the action in the person’s absence may:
 7   (i) as a practical matter impair or impede the
     person’s ability to protect the interest; or
 8
     (ii) leave an existing party subject to a substantial
 9   risk of incurring double, multiple, or otherwise
     inconsistent obligations because of the interest.
10
     (2) Joinder by Court Order. If a person has not been
11   joined as required, the court must order that the
     person be made a party. A person who refuses to join
12   as a plaintiff may be made either a defendant or, in a
     proper case, an involuntary plaintiff.
13
     . . . .
14
     (b) When Joinder Is Not Feasible. If a person who is
15   required to be joined if feasible cannot be joined,
     the court must determine whether, in equity and good
16   conscience, the action should proceed among the
     existing parties or should be dismissed. The factors
17   for the court to consider include:
18   (1) the extent to which a judgment rendered in the
     person’s absence might prejudice that person or the
19   existing parties;
20   (2) the extent to which any prejudice could be
     lessened or avoided by:
21
     (A) protective provisions in the judgment;
22
     (B) shaping the relief; or
23
     (C) other measures;
24
     (3) whether a judgment rendered in the person’s
25   absence would be adequate; and
26   (4) whether the plaintiff would have an adequate
     remedy if the action were dismissed for nonjoinder.
27
     . . . .
28

                              -23-
 1         Defendants never argued that Liquidators were necessary or
 2   indispensable parties in the bankruptcy court.   Therefore, this
 3   argument is waived.   Orton v. Hoffman (In re Kayne), 453 B.R.
 4   372, 386-87 (9th Cir. BAP 2011) (issue not raised in bankruptcy
 5   court is waived on appeal).   However, Defendants made the Civil
 6   Rule 19 argument with respect to SKFA in the bankruptcy court.
 7         The bankruptcy court’s rulings on September 26, 2012 and
 8   November 29, 2012, do not address this argument.   We may,
 9   however, consider Civil Rule 19 sua sponte.   Provident
10   Tradesmens Bank & Trust Co. v. Patterson, 390 U.S. 102, 111-12
11   (1968) (“[A] court of appeals should, on its own initiative,
12   take steps to protect the absent party, who of course had no
13   opportunity to plead and prove his interest below.”).     Since
14   there is no decision to review for abuse of discretion, we
15   address the issue as a question of law and examine it de novo.
16         To succeed on their claim, Defendants must establish under
17   Civil Rule 19 that (1) SKFA is a required party and (2) the
18   action cannot proceed, in equity and good conscience, without
19   it.   Cachil Dehe Band of Wintun Indians of the Colusa Indian
20   Cmty. v. State of Cal., 547 F.3d 962, 969 (9th Cir. 2008).
21   Neither of these requirements was established here.   A party
22   might be required under Civil Rule 19 for two alternative
23   reasons:   (A) in that party’s absence, the court cannot accord
24   complete relief among existing parties; or (B) the party has a
25   legally protected interest in the proceedings.   Civil
26   Rule 19(a)(1); Cachil, 547 F.3d at 970.
27         Although SKFA is not a party to the adversary proceeding,
28   complete relief is possible between the parties before this

                                    -24-
 1   court.   See Pesch v. First City Bank of Dallas, 637 F. Supp.
 2   1530, 1536-37 (N.D. Tex. 1986) (in dispute between plaintiff and
 3   defendant over ownership of company’s stock, company was not a
 4   real party in interest).   Furthermore, Defendants fail to
 5   discuss what legally protected interest SKFA has in this
 6   dispute.   From a practical perspective, it is difficult to
 7   imagine how SKFA could assert any rights at all to the Assets if
 8   it were joined in this proceeding.     SKFA has asserted no claim
 9   of ownership over the Assets nor does SKFA dispute its
10   obligation to pay the Intercompany Loan to someone or that
11   someone owns 100 shares of its stock.    Cf. Salem Trust Co. v.
12   Mfrs’ Fin. Co., 264 U.S. 182, 190 (1924) (company was not
13   indispensable party and had no interest in dispute where real
14   parties in interest were arguing over assets held by the
15   company, whose “only obligation is to pay over the amount
16   deposited with it when it is ascertained which of the other
17   parties is entitled to it.”).
18        We conclude that SKFA is neither a necessary nor
19   indispensable party to this proceeding.    We also discern no
20   prejudice to SKFA since this litigation has proceeded with the
21   existing parties and SKFA has not appeared on our doorstep
22   clamoring to get in.   In short, Civil Rule 19 does not provide a
23   basis for reversal.
24   C.   The Determination of Ownership of the Assets Was Properly
          Before the Bankruptcy Court
25
26        Defendants next seek reversal on the grounds that the
27   bankruptcy court abused its discretion in refusing to dismiss
28   Trustee’s adversary proceeding under the doctrines of forum non

                                     -25-
 1   conveniens, comity, and the “first to file” rule.    Having
 2   concluded that it had core jurisdiction over the ownership
 3   issues, the bankruptcy court did not address any of these
 4   arguments which relate to whether its exercise of that
 5   jurisdiction was proper.11
 6         While ordinarily we “do[ ] not consider an issue not passed
 7   upon [by] the [bankruptcy court],” the decision to resolve a
 8   question “for the first time on appeal is one left primarily to
 9   the discretion of the courts of appeals, to be exercised on the
10   facts of individual cases.”   Singleton v. Wulff, 428 U.S. 106,
11   120–21 (1976).   We may resolve an issue not decided by the
12   bankruptcy court where “the proper resolution of that issue is
13   beyond any doubt.”   Id. at 121.    Further, we may resolve issues
14   which were not resolved [by the bankruptcy court] where, “both
15   parties have briefed and argued [the issue’s] merits,” and where
16   “the benefit of a [bankruptcy] court hearing is minimal because
17   proper resolution of the issue is clear.”    United States v.
18   Brown, 739 F.2d 1136, 1145 (7th Cir. 1984).
19         1.   Forum Non Conveniens
20         To prevail on a motion to dismiss on forum non conveniens
21
22        11
            There is no dispute that the bankruptcy court had
23   jurisdiction to determine whether the assets were property of the
     estate. Zimmerman v. First Union Nat’l Bank, N.A. (In re Silva),
24   185 F.3d 992, 994-95 (9th Cir. 1999). Moreover, bankruptcy
     courts have jurisdiction over property of the estate located in a
25   foreign country. Hong Kong & Shanghai Banking Corp., Ltd. v.
26   Simon (In re Simon), 153 F.3d 991, 996 (9th Cir. 1998) (all
     property of the debtor, wherever located, is in custodia legis of
27   the bankruptcy court, including property outside the territorial
     jurisdiction of the United States). Therefore, the bankruptcy
28   court had jurisdiction to decide the merits of the dispute.

                                       -26-
 1   grounds, Defendants bear the burden of demonstrating an adequate
 2   alternative forum and that the balance of private and public
 3   interest factors favors dismissal.       Carijano v. Occidental
 4   Petroleum Corp., 643 F.3d 1216, 1224 (9th Cir. 2011).
 5         Defendants generally aver that the Federal Court in
 6   Australia is an adequate alternative forum because the SKFA
 7   Stock is of an Australian company, SKFA, and the debt at issue
 8   is located in Australia.   However, nowhere do Defendants respond
 9   to the bankruptcy court’s determination that the ownership
10   issues surrounding the Assets concerned property of SK Foods’
11   estate which is a core matter.     They do not explain why the
12   Australian court provides an adequate alternative forum to
13   adjudicate disputes involving core bankruptcy matters.        We
14   cannot simply assume that this is so.      Defendants thus failed to
15   establish a threshold requirement for the relief requested and,
16   therefore, their forum non conveniens argument fails as a matter
17   of law.
18         2.   International Comity
19         Defendants next contend that the bankruptcy court erred by
20   refusing to consider principles of international comity before
21   exercising jurisdiction over the dispute.      According to
22   Defendants, the bankruptcy court’s exercise of jurisdiction over
23   the dispute inevitably created potential conflicting judgments,12
24
25        12
            Trustee’s proceeding in Australia evidently was adjourned
26   pending the outcome of the MSJ. Further, although Liquidators
     had allowed Defendants’ POD based on Defendants’ asserted
27   equitable ownership interest in the Assets, their decision was
     not a final binding decision. Under these circumstances, there
28                                                      (continued...)

                                       -27-
 1   was a waste of judicial resources, affected the rights and
 2   liabilities of indispensable parties,13 and encouraged forum
 3   shopping.
 4         Under the international comity doctrine, courts sometimes
 5   defer to the laws or interests of a foreign country and decline
 6   to exercise jurisdiction that is otherwise properly asserted.
 7   See, e.g., Societe Nationale Industrielle Aerospatiale v. U.S.
 8   Dist. Ct. for the S. Dist. of Iowa, 482 U.S. 522, 544 n.27
 9   (1987) (“Comity refers to the spirit of cooperation in which a
10   domestic tribunal approaches the resolution of cases touching
11   the laws and interests of other sovereign states.”)
12   “International comity in transnational insolvency proceedings
13   must be considered in the context of bankruptcy theory.”
14   In re Simon, 153 F.3d at 998.     “[T]he Code provides for a
15   flexible approach to international insolvencies dependent upon
16   the circumstances of the particular case.”    Id.   Depending upon
17   the circumstances, the bankruptcy court may proceed jointly with
18   a foreign court, or may choose to exercise its power to the full
19   extent of its jurisdiction in an appropriate case.    Id.
20         A threshold inquiry for the doctrine to apply is that there
21   must be a true conflict between domestic and foreign law.      Id.
22   at 999.    “[W]hat [i]s required to establish a true conflict [i]s
23   an allegation that compliance with the regulatory laws of both
24   countries would be impossible.”    Maxwell Commc’ns Corp. v.
25
           12
26          (...continued)
     is little risk of conflicting decisions and inconsistencies.
27
          13
            We have concluded that there are no indispensable parties
28   to this litigation.

                                     -28-
 1   Societe Generale (In re Maxwell Commc’ns Corp.), 93 F.3d 1036,
 2   1050 (2d Cir. 1996).
 3        Defendants do not identify any true conflict between the
 4   laws of California and Australia with respect to the underlying
 5   dispute, nor do we discern one.   Further, they made no showing
 6   of a conflict between Australian law and our bankruptcy law
 7   where extraterritorial application of § 541 expressly includes
 8   all of the debtor’s property regardless of geographic location.
 9   Accordingly, we conclude that Defendants have failed to show, as
10   a matter of law, that the threshold requirement for application
11   of the international comity doctrine applies.
12        3.   First-to-File Rule
13        This rule has no application to this case.    The “first-to-
14   file” rule is a generally recognized doctrine of federal comity
15   “which permits a district court to decline jurisdiction over an
16   action when a complaint involving the same parties and issues
17   has already been filed in another district.”    Pacesetter Sys.,
18   Inc. v. Medtronic, Inc., 678 F.2d 93, 94-95 (9th Cir. 1982).
19   However, the rule has never been applied where the two courts
20   involved are not courts of the same sovereignty.   See Crosley
21   Corp. v. Hazeltine Corp., 122 F.2d 925, 929 (3d Cir. 1941),
22   cert. denied, 315 U.S. 813 (1942) (rule applies when two actions
23   are pending in courts of equal dignity within the judicial
24   system of a single sovereignty); see also Leomporra v. Jet Linx
25   Aviation, Inc., 2009 WL 1514517, at *2 n.2 (D. Minn. 2009);
26   Cliffs–Neddrill Turnkey Int’l–Oranjestad v. M/T Rich Duke,
27   734 F.Supp. 142 (D. Del. 1990) (“When related cases are before
28   two different sovereigns, the appropriate procedure is to permit

                                    -29-
 1   both jurisdictions to proceed, with any decision of one becoming
 2   res judicata on the other.”).    Therefore, Defendants’ first-to-
 3   file argument fails as a matter of law.
 4   D.   The Merits:    Trustee’s MSJ
 5        We now reach the merits issues raised in this appeal.
 6        1.      Standards for Summary Judgment
 7        In reviewing the bankruptcy court’s decision on a motion
 8   for summary judgment, we apply the same standards as the
 9   bankruptcy court.    Summary judgment is properly granted “when
10   the movant shows that there is no genuine dispute as to any
11   material fact and the movant is entitled to judgment as a matter
12   of law.”   Civil Rule 56(a), incorporated by Rule 7056; Celotex
13   Corp. v. Catrett, 477 U.S. 317, 322-23 (1986).     In making this
14   determination, conflicts are resolved by viewing all facts and
15   reasonable inferences in the light most favorable to the
16   non-moving party.    United States v. Diebold, Inc., 369 U.S. 654,
17   655 (1962).    “A party asserting that a fact cannot be or is
18   genuinely disputed must support the assertions by:    (A) citing
19   to particular parts of material in the record . . .; or,
20   (B) showing that the material cited does not establish the
21   absence or presence of a genuine dispute, or that an adverse
22   party cannot produce admissible evidence to support the fact.”
23   Civil Rule 56(c).
24        2.      Property of the Estate
25        Property of the estate includes “all legal or equitable
26   interests of the debtor in property as of the commencement of
27   the case.”    § 541(a)(1).   The debtor’s “equitable or legal
28   interests” in the property of the estate are “created and

                                      -30-
 1   defined by state law.”    Wilson v. Bill Barry Enters., Inc.,
 2   822 F.2d 859, 861 (9th Cir. 1987) (citing Butner v. United
 3   States, 440 U.S. 48, 55 (1979)).     Upon the filing of a
 4   bankruptcy petition, the rights of parties become fixed, subject
 5   to the rights and remedies incorporated in the Bankruptcy Code.
 6   In re Storm Tech., Inc., 260 B.R. 152, 155–56 (Bankr. N.D. Cal.
 7   2001).     We therefore consider, as we must, the rights of the
 8   parties on the Petition Date.
 9         The property of estate issues in this appeal concern
10   SK Foods’ transfer or assignment of (1) the SKFA Stock to SKPM
11   and SSRT and (2) the right to collect under Intercompany Loan to
12   the SSC&L 2007 Trust.
13         3.     Transfer of the SKFA Stock
14                a.   The Requirements for a Stock Transfer Under
                       Australian Law
15
16         Under Australian corporate law,14 a company is required to
17   set up and maintain a register of members that complies with
18   Corporations Act s 169.    See Corporations Act s 168.15
19   Membership in a company results from entry of a person’s name in
20
          14
            Under the Corporations Act s 5, ¶¶ 4, 7, each provision
21   of the Act applies, according to its tenor, in relation to acts
22   and omissions outside of the Australian jurisdiction, including
     all incorporated and unincorporated entities, whether formed or
23   carrying on business in Australia or not. SKFA Foods was formed
     pursuant to the Corporations Act.
24
          15
             The Corporations Act s 168 sets out the information that
25   must be recorded in the company’s register. Generally, that
26   information includes the name and address of each member, the
     date upon which and the number of shares allocated in each
27   allotment of shares that takes place, the number and class of
     shares held by each member and the amount paid or unpaid on those
28   shares.

                                      -31-
 1   the register of members.    A person is a member of a company if
 2   they:
 3           (a) are a member of the company on its registration;
             or (b) agree to become a member of the company after
 4           its registration and their name is entered on the
             register of members; or (c) become a member of the
 5           company under section 167 (membership arising from
             conversion of a company from one limited by guarantee
 6           to one limited by shares).
 7   See Corporations Act s 231(b).
 8           “In general, the company is not concerned with equitable
 9   interests in the shares.    The person entered in the register as
10   the holder of security is the legal owner of the security.”
11   Business Organisations (1993) 4.3 Company Finance Chapter 6 at
12   249.    (Hereinafter, Business Organisations).   Under Australian
13   law, Defendants’ asserted equitable rights in the SKFA Stock did
14   not give them the rights of membership.    RE Exclusive Master
15   Book-Binding and Mfg. Pty. Ltd. (1977) 2 ACLR 549 (Austl.) (1977
16   WL 182319) (holder of unregistered shares had no entitlement in
17   liquidation of company); Re Indep. Quarries Pty. Ltd. (1993)
18   12 ACSR 188, 191 (Austl.) (parties not deemed member by virtue
19   of holding equitable interest in stock).
20           If there is a change in membership, transfer of the legal
21   title must be reflected in the company’s register and the
22   company is required to notify ASIC by filing a Form 484.    See
23   Corporations Act s 178A.    If there is a transaction pending, the
24   legal title to registered securities remains in the person
25   registered as the holder until a proper instrument of transfer
26   is registered by the company.    Business Organisations at 249
27   (citing Sung Li Holdings Ltd. v Medicom Fin. Pty Ltd. (1995)
28   13 ACLC 955 (Austl.)).

                                      -32-
 1        It is undisputed that SK Foods was a member of record on
 2   SKFA’s register since 2002 and a member of record as of the
 3   Petition Date.   The Corporations Act specifies that legal title
 4   to SKFA’s shares was transferable from SK Foods to SKPM and SSRT
 5   only by registering their names in SKFA’s company register.
 6   That was not done here until August 18, 2009.    Therefore, on the
 7   Petition Date, by statute, SK Foods was the legal (registered)
 8   owner of SKFA’s shares.
 9        However, Corporations Act s 231(b) requiring the
10   registration of stock for purposes of membership does not define
11   “own” for purposes of contracts between private parties.    “Like
12   any other property, company securities are, in general, capable
13   of being held subject to equitable interests of persons other
14   than the registered holder.”   Business Organisations at 249.      We
15   therefore consider whether the transfer of shares from SK Foods
16   to SKPM and SSRT was effective in equity under Australian law
17   and at what point in time.
18             b.     The Requirements for An Equitable Assignment
                      Under Australian Law
19
20        Under Australian law, an equitable assignment requires a
21   clear, manifest intention by the assignor to divest the assignor
22   of property and vest it in the assignee.    ABB Austl. Pty. Ltd. v
23   Comm’r of Taxation [2007] FCA 1063 (Austl.).     In addition, an
24   assignment or conveyance of property will be effective in equity
25   in two circumstances.   The first occurs where the assignment or
26   agreement to assign is given for valuable consideration and that
27   consideration is paid or executed.     Mid-City Skin Cancer and
28   Laser Ctr. v Zahedi-Anarak [2006] NSWSC 844 at [161] (Austl.)

                                     -33-
 1   (“a contract, for value, to assign legal property, effects an
 2   equitable assignment when the consideration is paid or executed;
 3   this is a case where equity regards as done that which ought to
 4   be done. . . .”).   Second, when the assignor has done everything
 5   necessary to effect a transfer of legal title; i.e., all
 6   remaining steps to transfer legal title may be effected by the
 7   assignee without further involvement of the assignor.   Corin v.
 8   Patton (1990) 169 CLR 540 (Austl.) (1990 WL 1035673); see also
 9   Norman v Fed. Comm’r of Taxation (1963) HCA 21 (Austl.) (the
10   general rule of equity is that an effective assignment occurs
11   only if the donor does all that, according to the nature of the
12   property, he must do to transfer the property to the donee).
13        The undisputed evidence shows that SK Foods failed to
14   effectively transfer an equitable interest in the SKFA Stock to
15   SKPM and SSRT prior to the Petition Date.16   The prepetition
16   evidence of the alleged transfer of the SKFA Stock consists of
17   accounting entries, the Management Representation Letter, and
18   the signed General Assignment and Transfer document, which was
19   prepared by Perry in March 2008.   These documents fail to
20   demonstrate that there was a transaction that passed an
21   equitable property interest in the stock to SKPM and SSRT.
22
         16
23          Because this matter arose on summary judgment, Defendants
     needed to provide sufficient evidence for a reasonable fact
24   finder to hold in their favor. Anderson v. Liberty Lobby, Inc.,
     477 U.S. 242, 249 (1986) (“[T]here is no issue for trial unless
25   there is sufficient evidence favoring the non-moving party for a
26   jury to return a verdict for that party.”). Despite having the
     opportunity, Defendants did not provide sufficient evidence to
27   show that the purported transfer and assignment vested equitable
     title to the SKFA Stock in SKPM and SSRT prior to the Petition
28   Date.

                                    -34-
 1        First, the record does not show that SKPM and SSRT gave
 2   consideration for the stock; no money changed hands.   Although
 3   SK Foods’ financial statement shows a reduction of owner’s
 4   equity in the amount of $4.8 million, there was no reduction of
 5   SK Foods’ liabilities.   Without a reduction of liabilities, the
 6   accounting entries do not show valuable consideration was paid
 7   or executed.
 8        Second, the Management Representation Letter cannot be
 9   construed as a proper instrument of transfer (which requires a
10   simple writing under Australian law) nor was it delivered to
11   SKFA as required under the Corporations Act s 1071B(2).    At
12   most, it states that the stock was distributed and it is
13   addressed to SKFA’s auditors.   However, as demonstrated by the
14   evidence in the record, SK Foods had not prepared or executed
15   any instrument to actually transfer the SKFA Stock at that point
16   in time.
17        Finally, the General Assignment and Transfer document which
18   was attached to the October 27, 2008 email from Johnston to
19   McCormick is the earliest record of a signed copy of any
20   “transfer” document.   However, standing alone, this document did
21   not transfer the SKFA Stock to SKPM and SSRT because SK Foods
22   had not done everything necessary to effectuate the transfer at
23   that point in time.    Additional documentation to complete the
24   transfer was prepared postpetition.
25        In short, under Australian law, no effective transfer or
26   assignment of the SKFA Stock had occurred prepetition.    As a
27   result, SK Foods held both the equitable and legal title to the
28   SKFA Stock on the Petition Date.   Accordingly, the bankruptcy

                                     -35-
 1   court correctly found that the SKFA Stock was property of
 2   SK Foods’ estate.
 3        4.   Transfer of the Intercompany Loan
 4        Defendants fare no better with their argument that SK Foods
 5   effectuated an equitable assignment of the Intercompany Loan to
 6   the SSC&L 2007 Trust prepetition.     The Debt Assignment Agreement
 7   and Accounts Receivable Setoff Agreement are the only two
 8   documents purporting to transfer the Intercompany Loan from
 9   SK Foods to the SSC&L 2007 Trust.     However, SKFA was not a party
10   to the Debt Assignment Agreement which instead named the New
11   Zealand entity Cedenco and the Debt Assignment Agreement does
12   not mention the Intercompany Loan.    As a result, on its face,
13   this document does not show that SK Foods transferred its rights
14   in the Intercompany Loan to the SSC&L 2007 Trust.    Further, the
15   Accounts Receivable Setoff Agreement effectively canceled the
16   Debt Assignment Agreement as of March 24, 2009.    Therefore, to
17   the extent Defendants rely on the Debt Assignment Agreement as
18   evidence of the transfer, their argument fails.
19        “[T]here is no issue for trial unless there is sufficient
20   evidence favoring the non-moving party for a jury to return a
21   verdict for that party.”   Anderson, 477 U.S. at 249.    To enforce
22   an equitable assignment under Australian law, there must be
23   consideration and the assignor must have done everything
24   necessary to effect a transfer of legal title.    Here, there is
25   no evidence of a document purporting to transfer or assign
26   SK Foods’ right to collect the Intercompany Loan to the SSC&L
27   2007 Trust, nor is there evidence that the SSC&L 2007 Trust gave
28   value to SK Foods for that right.     Therefore, the SSC&L 2007

                                    -36-
 1   Trust did not meet its burden of establishing that there are
 2   triable issues of fact with respect to the transfer of the
 3   Intercompany Loan.17   Thus, as a matter of law, the Intercompany
 4   Loan was property of SK Foods’ estate on the Petition Date.
 5        5.   Applicability of § 544(a)
 6        Section 544 provides:
 7        (a) The trustee shall have, as of the commencement of
          the case, and without regard to any knowledge of the
 8        trustee or of any creditor, the rights and powers of,
          or may avoid any transfer of property of the debtor or
 9        any obligation incurred by the debtor that is voidable
          by--
10
                (1) a creditor that extends credit to the
11              debtor at the time of the commencement of
                the case, and that obtains, at such time and
12              with respect to such credit, a judicial lien
                on all property on which a creditor on a
13              simple contract could have obtained such a
                judicial lien, whether or not such a
14              creditor exists;
15              (2) a creditor that extends credit to the
                debtor at the time of the commencement of
16              the case, and obtains, at such time and with
                respect to such credit, an execution against
17              the debtor that is returned unsatisfied at
                such time, whether or not such a creditor
18              exists; or
19              (3) a bona fide purchaser of real property,
                other than fixtures, from the debtor,
20              against whom applicable law permits such
                transfer to be perfected, that obtains the
21              status of a bona fide purchaser and has
                perfected such transfer at the time of the
22              commencement of the case, whether or not
                such a purchaser exists.
23
24   The § 544(a) rights of a trustee as a hypothetical bona fide
25   purchaser or judicial lien creditor are defined by state law.
26
         17
27          Trustee did not seek summary judgment with respect to the
     amount of the Intercompany Loan that was payable to SK Foods nor
28   do we address that issue in this appeal.

                                    -37-
 1   Robertson v. Peters (In re Weisman), 5 F.3d 417, 420 (9th Cir.
 2   1993); Siegel v. Boston (In re Sale Guar. Corp.), 220 B.R. 660,
 3   669 (9th Cir. BAP 1998).
 4        Here, after determining that Australian law applied,18 the
 5   bankruptcy court found that even if the SKFA Stock was
 6   transferred effective November 1, 2006, Trustee held a superior
 7   title to it as a bona fide purchaser for value under § 544(a).
 8   The court did not specify what subsection under § 544(a) it was
 9   relying upon, but the only subsection of § 544(a) addressing
10   bona fide purchaser status is subsection (3) which relates to
11   real property.   That subsection is inapplicable to personal
12   property.19
13        The court further found that SKPM’s and SSRT’s “simple
14   omission of properly registering the purported transferees on
15   the SKFA register of members as of the Petition Date renders the
16   [Trustee] the victor in the priority battle.”   Implicit in the
17   bankruptcy court’s decision is that an unregistered transfer of
18   stock is an “unrecorded interest,” which is inferior to the
19   interest of a judicial lien or unsatisfied execution creditor.
20        However, under Australian law, an unregistered transfer of
21   stock standing alone does not change an assignee’s relative
22
         18
23          Because the SKFA stock is of an Australian company, the
     applicable law is Australia’s.
24
         19
            But see Nat’l Bank of the Pac. v. W. Pac. Ry. Co., 108 P.
25   676 (Cal. 1910) (unregistered transfers of stock are valid as
26   against all the world, except subsequent purchasers in good
     faith, without notice); Farmers’ Nat’l Gold Bank v. Wilson,
27   58 Cal. 600 (Cal. 1881) (a purchaser under an execution sale,
     without notice of transfer, would take the stock free from the
28   claims of the transferee).

                                    -38-
 1   rights vis-a-vis an attaching or execution creditor.    In
 2   Australia, a judgment creditor must obtain a charging order.
 3   The charging order only operates to charge the beneficial
 4   interest of the person against whom the order is made.    It is
 5   not possible to obtain an effective charging order over
 6   unregistered shares of stock where the person against whom the
 7   order is made holds them as bare trustee.20   See Hawks v McArthur
 8   [1951] 1 All E.R. 22 (Austl.).
 9         In Hawks, the shareholder sold his shares to two persons in
10   contravention of provisions in the company’s articles.    Because
11   of the contravention, the transfer was never registered,
12   although the purchasers had paid the shareholder the full
13   purchase price.   A judgment creditor of the shareholder-seller
14   sought to execute on the shares still registered in the
15   shareholder-seller’s name.   The court found that although the
16   stock was still in the shareholder-seller’s name, the
17   shareholder-seller had received something for the sale of the
18   shares and had executed a transfer under seal.   Therefore, the
19   court concluded that the equitable rights of the purchasers
20   prevailed over the equitable or quasi-equitable rights of the
21   judgment creditor under the charging order, because at the time
22   when the charging order was obtained, the rights of the
23   purchasers had already accrued.
24
25        20
            Similarly, in California, a judgment creditor who
26   attempts to levy against a debtor’s personal property in
     satisfaction of his debt obtains a lien only upon the debtor’s
27   interest. Where no actual interest is shown, the attaching
     creditor gets nothing. Henry v. Gen. Forming, Ltd., 33 Cal.2d
28   223, 226 (Cal. 1948).

                                      -39-
 1         The priority rule in Hawks does not assist SKPM and SSRT in
 2   this case.   To have priority over a judgment lien or execution
 3   creditor, SKPM’s and SSRT’s equitable rights in the stock must
 4   have accrued prior to the Petition Date, i.e., consideration
 5   must have passed and SK Foods must have done everything
 6   necessary to effectuate the transfer at that point in time.21
 7   These requirements were not met.   Thus, the transfer of the
 8   SKFA Stock to SKPM and SSRT was not effective prepetition.
 9   Under these circumstances, Trustee would prevail under
10   § 544(a)(1)-(2).   Accordingly, we agree with the bankruptcy
11   court’s conclusion, albeit for different reasons,22 that as a
12   matter of law, Trustee’s rights and powers under § 544(a)(1)-(2)
13   would allow him to defeat any interest SKPM and SSRT may claim
14   in the SKFA Stock.
15         We do not perceive that a different analysis is warranted
16   for the Intercompany Loan.   There was no effective prepetition
17   transfer of the right to collect under the Intercompany Loan as
18   evidenced by the lack of consideration and documentation.23
19   Therefore, § 544(a)(1)-(2) would give Trustee superior rights in
20   the loan.
21
22
          21
23          Under California law the result would be the same. See
     generally Rony v. Yucca Water Co., 220 Cal.App.2d 613 (1963).
24
          22
            We may affirm on any ground supported by the record.
25   Lambert v. Blodgett, 393 F.3d 943, 965 (9th Cir. 2004).
26        23
            Defendants did not assert a security interest in the
27   Intercompany Loan. Therefore, an analysis relating to the
     perfection of payment intangibles under the provisions of the
28   California Commercial Code is unnecessary.

                                    -40-
 1           6.   Applicability of §§ 362 and 549
 2           Under § 362(a), the filing of SK Foods’ bankruptcy petition
 3   stayed any act by Defendants to, inter alia, obtain possession
 4   of, perfect an interest in, enforce a lien against, exercise
 5   control over, or take any other action to deprive SK Foods of
 6   the SKFA Stock.    In the Ninth Circuit, actions taken in
 7   violation of the automatic stay are void.      Schwartz v. United
 8   States (In re Schwartz), 954 F.2d 569, 571 (9th Cir. 1992).
 9           However, “[§] 362's automatic stay does not apply to sales
10   or transfers of property initiated by the debtor.”     Id. at 574.
11   Instead, under § 549(a), the trustee may avoid a transfer of
12   property of the estate that occurs after the commencement of the
13   case and that was not authorized by the bankruptcy court.     Aalfs
14   v. Wirum (In re Straightline Inv., Inc.), 525 F.3d 870, 877 (9th
15   Cir. 2008) (citing §§ 549(a)(1), (2)(B)).
16           Here, the record shows that other documents required to
17   complete the transfer of the SKFA Stock from SK Foods to SKPM
18   and SSRT under the Corporations Act and the SKFA constitution
19   were drafted in July 2009, two months after the Petition Date.
20   Attached to Morgan’s July 16, 2009 email to Frankish were the
21   Standard Transfer Forms, the Declaration of Trust, the Share
22   Certificates and the Minutes.    These attempts to transfer the
23   stock were actions to deprive SK Foods of the stock
24   postpetition, undertaken by the related entities, not the
25   debtor, and are therefore void in violation of the automatic
26   stay.
27           Defendants make no arguments with respect to the bankruptcy
28   court’s findings regarding violations of the automatic stay on

                                      -41-
 1   appeal.   “Issues not raised in the opening brief usually are
 2   deemed waived.”   Dilley v. Gunn, 64 F.3d 1365, 1367 (9th Cir.
 3   1995).    The bankruptcy court properly concluded that § 549 was
 4   not implicated because the postpetition acts to transfer the
 5   stock were not undertaken by the debtor.     This conclusion was
 6   not erroneous.
 7                             VI.   CONCLUSION
 8        For these reasons, we AFFIRM.
 9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

                                     -42-