Court Opinion

ID: 4192845
Source: CourtListenerOpinion
Date Created: 2017-08-03 17:02:56.933501+00
Date Added: 2024-06-11T14:40:22.296880
License: Public Domain

FILED
                                                               SEP 22 2015
 1
                                                          SUSAN M. SPRAUL, CLERK
                                                             U.S. BKCY. APP. PANEL
 2                                                           OF THE NINTH CIRCUIT

 3                  UNITED STATES BANKRUPTCY APPELLATE PANEL
 4                            OF THE NINTH CIRCUIT
 5   In re:                        )      BAP No.    CC-14-1563-KuPeTa
                                   )
 6   DORON EZRA; NAVA TOMER EZRA, )       Bk. No.    1:11-12168-MT
                                   )
 7                  Debtors.       )      Adv. No.   1:12-01001-MT
     ______________________________)
 8                                 )
     SHOSHANA EZRA,                )
 9                                 )
                    Appellant,     )
10                                 )
     v.                            )      OPINION
11                                 )
     DAVID SEROR, Chapter 7        )
12   Trustee,                      )
                                   )
13                  Appellee.      )
     ______________________________)
14
15                   Argued and Submitted on July 23, 2015
                            at Pasadena, California
16
                           Filed – September 22, 2015
17
               Appeal from the United States Bankruptcy Court
18                 for the Central District of California
19        Honorable Maureen A. Tighe, Bankruptcy Judge, Presiding
20
21   Appearances:     Shalem Shem-Tov of Netzah & Shem-Tov, Inc. argued
                      for appellant Shoshana Ezra; Richard D. Burstein
22                    of Ezra Brutzkus Gubner LLP argued for appellee
                      David Seror, chapter 7 trustee.
23
24
25   Before:   KURTZ, PERRIS* and TAYLOR, Bankruptcy Judges.
26
27
          *
             Hon. Elizabeth L. Perris, United States Bankruptcy Judge
28   for the District of Oregon, sitting by designation.
 1   KURTZ, Bankruptcy Judge:
 2
 3                               INTRODUCTION
 4        Shoshana Ezra appeals from the bankruptcy court’s judgment
 5   avoiding as fraudulent transfers two deeds of trust the debtors
 6   Doron Ezra and Nava Tomer-Ezra executed in her favor.   Shoshana1
 7   contends that at least some of the avoidance claims brought
 8   against her by the chapter 72 trustee David Seror were time
 9   barred, that there was insufficient evidence the debtors made the
10   transfers with the intent to hinder, delay or defraud their
11   creditors, and that there was no evidence of the debtors’
12   insolvency.
13        We disagree with Shoshana’s position on intent.    As for the
14   specific limitations defense she discusses in her opening appeal
15   brief, it differs from the statute of repose issue she raised in
16   the bankruptcy court.   We decline to address the limitations
17   defense on appeal because it was not sufficiently raised in the
18   bankruptcy court for the bankruptcy court to decide it.     As for
19   her statute of repose issue, she did not raise it in her opening
20   appeal brief; she only raised it in her appellate reply brief.
21   This is improper, and we similarly decline to address it.     On
22   these grounds, we AFFIRM.
23
24
          1
25           For the sake of clarity, we refer to the Ezras by their
     first names. No disrespect is intended.
26
          2
             Unless specified otherwise, all chapter and section
27   references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and
     all “Rule” references are to the Federal Rules of Bankruptcy
28
     Procedure, Rules 1001-9037.

                                      2
 1                                   FACTS
 2         Doron and Nava purchased their residence in 1996.    Since
 3   then, the residence has been the subject of several transactions
 4   involving various Ezra family members.    On October 17, 2001,
 5   Doron quitclaimed his interest in the residence to Nava in her
 6   name alone, but a week later Nava executed a new quitclaim deed
 7   transferring title to the residence back to her and Doron as
 8   husband and wife.   In January 2010, Doron once again quitclaimed
 9   his interest to Nava in her name alone.   At the time of their
10   joint bankruptcy filing in February 2011, Nava still held title
11   to the residence in her name alone.
12         In addition to the title transfers, four deeds of trust were
13   of record at the time of the commencement of the debtors’
14   bankruptcy case.    Of these four, the first and third deeds of
15   trust were held by banks and were not contested by Seror in the
16   debtors’ bankruptcy case.   The other two deeds of trust of record
17   were both held by Shoshana and are described as follows:
18   1.   A second deed of trust recorded in April 2004 in favor of
19   Doron’s mother Shoshana, as beneficiary, purportedly securing a
20   debt in the amount of $500,000; and
21   2.   A fourth deed of trust recorded in June 2009 in favor of
22   Shoshana, as beneficiary, purportedly securing a debt in the
23   amount of $500,000.
24         In January 2012, Seror filed his complaint seeking to avoid
25   as fraudulent transfers the 2004 and 2009 deeds of trust in favor
26   of Shoshana.   He also sought to recover the transfers for the
27   benefit of the estate pursuant to § 550(a).   In relevant part,
28   Seror alleged that the debtors did not receive reasonably

                                       3
 1   equivalent value in exchange for the 2009 deed of trust and that
 2   the debtors were insolvent at the time or that the 2009 deed of
 3   trust rendered them insolvent.    Seror further alleged that, at
 4   the time both transfers were made, the debtors faced “demands
 5   and/or potential or pending litigation” and that the debtors made
 6   the transfers for the purpose of shielding from creditors any
 7   equity in their residence.   Based on these and other allegations,
 8   Seror asserted that he was entitled to avoid the 2009 deed of
 9   trust as an actual and constructive fraudulent transfer either
10   under § 548(a)(1)(A) and (B) or under § 544(b) and Cal. Civ. Code
11   §§ 3439.04(a) and 3439.05.   Seror further claimed that he was
12   entitled to avoid the 2004 deed of trust as an actual fraudulent
13   transfer under § 544(b) and Cal. Civ. Code § 3439.04(a).
14        Shoshana filed a summary judgment motion seeking dismissal
15   of Seror’s lawsuit.   Shoshana primarily argued that Seror’s
16   claims seeking avoidance of the 2004 deed of trust under
17   California law were time barred under the seven year statute of
18   repose set forth in Cal. Civ. Code § 3439.09(c), which states:
19        (c) Notwithstanding any other provision of law, a cause
          of action with respect to a fraudulent transfer or
20        obligation is extinguished if no action is brought or
          levy made within seven years after the transfer was
21        made or the obligation was incurred.
22   Cal. Civ. Code § 3439.09(c).3    According to Shoshana, because
23   more than seven years had elapsed between the recording of the
24
          3
25           Recently, the California legislature amended the
     California Uniform Fraudulent Transfer Act. The amendments make
26   relatively minor changes to the Act, and none of those changes
     affect our analysis in this appeal. Moreover, the amendments
27   generally do not apply to transfers made before the effective
     date of the amendments. See 2015 Cal. Legis. Serv. Ch. 44 (S.B.
28
     161).

                                       4
 1   (April) 2004 deed of trust and Seror’s January 2012 filing of his
 2   complaint, Seror’s fraudulent transfer claims arising from the
 3   2004 deed of trust had been extinguished by operation of law.
 4   The bankruptcy court denied Shoshana’s summary judgment motion,
 5   holding that the seven years provided by California’s statute of
 6   repose had not been exceeded because the debtors had commenced
 7   their February 2011 bankruptcy case within seven years of the
 8   transfer.
 9        Presumably because the statute of repose issue under Cal.
10   Civ. Code § 3439.09(c) was decided as a matter of law in the
11   summary judgment motion, Shoshana did not raise any factual or
12   legal issues regarding this defense in the pretrial stipulation
13   or in her trial documents.   Nor did she raise during the pretrial
14   or trial proceedings any issue related to the statute of
15   limitations defense set forth in Cal. Civ. Code § 3439.09(a),
16   which provides:
17        A cause of action with respect to a fraudulent transfer
          or obligation under this chapter is extinguished unless
18        action is brought pursuant to subdivision (a) of
          Section 3439.07 or levy made as provided in subdivision
19        (b) or (c) of Section 3439.07:
20        (a) Under paragraph (1) of subdivision (a) of Section
          3439.04, within four years after the transfer was made
21        or the obligation was incurred or, if later, within one
          year after the transfer or obligation was or could
22        reasonably have been discovered by the claimant.
23   Cal. Civ. Code § 3439.09(a).4
24
          4
25           Shoshana’s answer to Seror’s complaint included an
     affirmative defense alleging that Seror’s claims were barred
26   under the “applicable statute of limitations.” Nonetheless, the
                                                        (continued...)
27
28                                    5
 1        At the conclusion of trial, the bankruptcy court stated
 2   its findings of fact and conclusions of law on the record.      The
 3   court found not credible Doron’s testimony that his mother
 4   Shoshana and his (now) deceased father Shlomo expected repayment
 5   of amounts Doron and Nava spent on family trips to Israel and on
 6   groceries while in Israel and that the two deeds of trust secured
 7   repayment of those amounts.   According to the court, Doron’s
 8   testimony was both bizarre and inconsistent regarding whether
 9   these amounts were gifts or loans.      The court further found that
10   Doron’s “gifts and Israel” explanation did not jibe with Doron’s
11   alternate story that his parents lent him the money for various
12   real estate transactions.   In fact, the court explained, Doron’s
13   vague and inconsistent testimony about the bank accounts he used
14   to partially fund some of his real estate transactions led the
15   court to conclude that all of the accounts Doron referenced
16   effectively belonged to Doron – even those bank accounts he
17   claimed belonged to his parents.       As the bankruptcy court put it:
18        . . . he just used those accounts of his parents for
          his own purposes and they were effectively his accounts
19        and was not clear that the money coming out of the
          accounts was even from the parents or something that he
20        had put in earlier. There was no attempt to show the
          funds supplied by the parents. The statements all came
21        to [Doron’s] address, either the home or the business
          address.
22
23        4
           (...continued)
24   parties’ pretrial stipulation, approved by the court, did not
     reference this defense, and the stipulation explicitly provided
25   that it superseded the pleadings and was to govern the course of
     trial. See Patterson v. Hughes Aircraft Co., 11 F.3d 948, 950
26   (9th Cir. 1993) (“A pretrial order generally supersedes the
     pleadings, and the parties are bound by its contents.”).
27
28                                      6
 1   Tr. Trans. (Nov. 3, 2014) at p. 35:10-17.
 2        The bankruptcy court also did not believe Doron’s statements
 3   that his father Shlomo had kept ledgers and that he (Doron) lost
 4   the two promissory notes memorializing the loans supposedly
 5   secured by the two deeds of trust.   As the bankruptcy court
 6   explained, Doron was an experienced businessman who had made a
 7   living engaging in sophisticated real estate transactions.     In
 8   light of this background, the court found it exceptionally hard
 9   to believe (and did not believe) in the existence of the ledger
10   and the notes given Doron’s inability to produce them.   The court
11   found that Doron had not credibly reconciled his 20 years of
12   experience as a real estate investment professional - who owned
13   interests in and/or partially controlled a number of real estate
14   investment entities –   with his apparently nonchalant attitude
15   with respect to the financing of one of his family’s most
16   important assets: the family residence.
17        As for the intent to hinder, delay or defraud their
18   creditors, the court found that the debtors’ intent largely was
19   established by their pattern and practice of: (1) ensuring that
20   assets of value were kept in the name of other family members,
21   even though they continued to exercise control over the assets;
22   and (2) ensuring that any current or future equity the debtors
23   may have had in their residence was fully encumbered.    The court
24   inferred that the debtors’ practice was initially motivated by
25   Doron’s concern over the litigious nature of the business he was
26   engaged in and later by actual demands and lawsuits the debtors
27   faced.
28        The bankruptcy court also found that the debtors received

                                      7
 1   less than reasonably equivalent value in exchange for both deeds
 2   of trust.   The court further found, with respect to the 2009 deed
 3   of trust, that the debtors were insolvent at the time of the
 4   transaction or were rendered insolvent by the transaction, were
 5   left with insufficient assets in light of the business or
 6   transaction in which they were engaged, and intended to incur or
 7   reasonably should have believed they would incur debts beyond
 8   their ability to pay as they came due.     However, the court
 9   answered each of these financial status questions in the negative
10   with respect to the 2004 deed of trust.
11        Based on these findings, the bankruptcy court entered
12   judgment against Shoshana avoiding the 2004 deed of trust as an
13   actual fraudulent transfer under § 544(b) and Cal. Civ. Code
14   § 3439.04(a)(1) and avoiding the 2009 deed of trust as both an
15   actual and constructive fraudulent transfer under 11 U.S.C.
16   §§ 544(b) and 548, as well as Cal. Civ. Code §§ 3439.04(a)(1),
17   (a)(2)(A), (a)(2)(B) and 3439.05.    The bankruptcy court further
18   ordered both transfers recovered for the benefit of the estate
19   pursuant to § 550(a).   On November 26, 2014, Shoshana timely
20   filed her notice of appeal.
21                               JURISDICTION
22        The bankruptcy court had jurisdiction pursuant to 28 U.S.C.
23   §§ 1334 and 157(b)(2)(H).   We have jurisdiction under 28 U.S.C.
24   § 158.
25                                  ISSUE
26        Did the bankruptcy court correctly rule that the 2004 and
27   2009 deeds of trust were fraudulent transfers?
28

                                      8
 1                            STANDARD OF REVIEW
 2        In appeals from judgments disposing of fraudulent transfer
 3   claims, the bankruptcy court’s findings of fact are reviewed
 4   under the clearly erroneous standard and its conclusions of law
 5   are reviewed de novo.    Decker v. Tramiel (In re JTS Corp.), 617
 6   F.3d 1102, 1109 (9th Cir. 2010).
 7        A bankruptcy court’s factual findings are not clearly
 8   erroneous unless they are illogical, implausible or without
 9   support in the record.   Retz v. Samson (In re Retz), 606 F.3d
10   1189, 1196 (9th Cir. 2010).
11                                 DISCUSSION
12   A.   Overview
13        As set forth above, the bankruptcy court avoided both the
14   2004 deed of trust and the 2009 deed of trust as actual
15   fraudulent transfers under § 544(b) and California Civil Code
16   § 3439.04(a)(1).   To the extent we can uphold the bankruptcy
17   court’s actual fraudulent transfer determination, we need not
18   reach the court’s constructive fraudulent transfer determination,
19   which only pertained to the 2009 deed of trust.
20        Under § 544(b), a chapter 7 trustee may exercise the
21   avoiding powers conferred upon creditors by California’s version
22   of the Uniform Fraudulent Transfer Act, Cal. Civ. Code § 3439, et
23   seq., to the same extent those powers could have been exercised
24   by a creditor holding an allowable unsecured claim against the
25   debtor’s bankruptcy estate.    Wolkowitz v. Beverly (In re
26   Beverly), 374 B.R. 221, 232 (9th Cir. BAP 2007), aff’d in part
27   and adopted, 551 F.3d 1092 (9th Cir. 2008); see also In re JTS
28   Corp., 617 F.3d at 1111 (“Section 544 enables a bankruptcy

                                        9
 1   trustee to avoid any transfer of property that an unsecured
 2   creditor with an allowable claim could have avoided under
 3   applicable state law.”).
 4          To decide whether a transfer is avoidable under California’s
 5   Uniform Fraudulent Transfer Act, we must interpret California
 6   law.   In re Beverly, 374 B.R. at 232.       We must answer any
 7   questions of law arising from the Act based on how the California
 8   Supreme Court would decide them.       Id.   If the California Supreme
 9   Court has not yet reached the issue in question, our job is to
10   predict how the California Supreme Court would decide it.
11   Kekauoha–Alisa v. Ameriquest Mortg. Co. (In re Kekauoha–Alisa),
12   674 F.3d 1083, 1087-88 (9th Cir. 2012) (citing Sec. Pac. Nat’l
13   Bank v. Kirkland (In re Kirkland), 915 F.2d 1236, 1239 (9th Cir.
14   1990)).
15   B.     Intent to Hinder, Delay or Defraud
16          The Act provides in relevant part that a transfer is
17   fraudulent as to a creditor, regardless of when the creditor’s
18   claim arose, if the debtor made the transfer with the actual
19   intent to hinder, delay, or defraud any creditor.       Cal. Civ. Code
20   § 3439.04(a)(1).   Bankruptcy courts examining transfers under
21   this provision must focus on the debtor’s state of mind.          In re
22   Beverly, 374 B.R. at 235.     As long as the debtor had the
23   requisite intent, a transfer will qualify as actually fraudulent
24   even if reasonably equivalent value was provided.       Id.   Because
25   § 3439.04(a)(1)’s language regarding the debtor’s state of mind
26   is stated in the disjunctive, intent to defraud a creditor is not
27   required.   Either an intent to hinder or an intent to delay a
28   creditor also will suffice.    Id.

                                       10
 1        As the plaintiff, Seror had the burden of proof to establish
 2   by a preponderance of the evidence the existence of the requisite
 3   state of mind.   Id.   Because direct evidence regarding the
 4   debtor’s fraudulent or obstructive intent rarely is available,
 5   courts typically infer the debtor’s intent from the surrounding
 6   circumstances.   Id.   To facilitate this process, the Act
 7   enumerates eleven non-exclusive “badges of fraud” – factors the
 8   court can consider in deciding whether the requisite intent
 9   existed.   Cal. Civ. Code § 3439.04(b).   These factors include the
10   following:
11        (1) Whether the transfer or obligation was to an
          insider.
12        (2) Whether the debtor retained possession or control
          of the property transferred after the transfer.
13        (3) Whether the transfer or obligation was disclosed or
          concealed.
14        (4) Whether before the transfer was made or obligation
          was incurred, the debtor had been sued or threatened
15        with suit.
          (5) Whether the transfer was of substantially all the
16        debtor’s assets.
          (6) Whether the debtor absconded.
17        (7) Whether the debtor removed or concealed assets.
          (8) Whether the value of the consideration received by
18        the debtor was reasonably equivalent to the value of
          the asset transferred or the amount of the obligation
19        incurred.
          (9) Whether the debtor was insolvent or became
20        insolvent shortly after the transfer was made or the
          obligation was incurred.
21        (10) Whether the transfer occurred shortly before or
          shortly after a substantial debt was incurred.
22        (11) Whether the debtor transferred the essential
          assets of the business to a lienholder who transferred
23        the assets to an insider of the debtor.
24   Cal. Civ. Code § 3439.04(b).
25        Notwithstanding the inclusion of this list in the statute,
26   the list does not set in concrete the factors the trier of fact
27   can or must consider to ascertain the debtor’s intent.   No single
28   factor necessarily is determinative, and no minimum or maximum

                                      11
 1   number of factors dictates a particular outcome.      As we explained
 2   in In re Beverly, the list should not be applied formulaically.
 3   In re Beverly, 374 B.R. at 236.    Instead, the trier of fact
 4   should consider all of the relevant circumstances surrounding the
 5   transfer.   Id. (citing Filip v. Bucurenciu, 129 Cal.App.4th 825,
 6   834 (2005)).
 7        Shoshana argues on appeal that the bankruptcy court’s intent
 8   findings were clearly erroneous.       With respect to the 2004 deed
 9   of trust, she states that the evidence regarding value given in
10   exchange for the 2004 deed of trust might have been equivocal,
11   but inadequate consideration alone cannot support a finding of
12   actual intent to hinder, delay or defraud creditors.      Shoshana
13   also points to other “badges of fraud” factors and correctly
14   notes that there is no evidence in the record that the debtors
15   were insolvent in 2004 or that they were plagued by pending
16   lawsuits at that time.   In fact, while Shoshana did not mention
17   it in her appeal brief, we further note that there was no
18   evidence of concealment of the 2004 deed of trust, no evidence
19   that the 2004 deed of trust transferred substantially all of the
20   debtors’ assets, and no evidence that the debtors were in the
21   process of absconding at the time.
22        Even so, Shoshana’s intent argument completely (and fatally)
23   ignores the key findings on which the bankruptcy court based its
24   intent determination.    The bankruptcy court found that the
25   debtors, particularly Doron, were engaged in a pattern and
26   practice of shielding their assets from creditors.      The court
27   inferred from the entirety of the debtors’ conduct that the
28   various transfers the debtors made affecting title to and

                                       12
 1   encumbrances against their residence – including the 2004 deed of
 2   trust – were made for the purpose of keeping any equity in their
 3   residence as far away from their creditors as possible.   The
 4   bankruptcy court acknowledged the absence of evidence of pending
 5   or imminently threatened litigation at the time of the 2004 deed
 6   of trust.   The court nonetheless inferred from all of the
 7   circumstances that Doron realized at the time of the 2004 deed of
 8   trust that he was engaged in lines of business – real estate
 9   lending and real estate investment – that were inherently
10   litigious and that this generic litigation risk constantly placed
11   his family’s assets at risk.   As a result, the court concluded,
12   this generic litigation risk motivated the debtors to execute and
13   record the 2004 deed of trust.
14        Shoshana has not offered us any reason why we should
15   conclude that the bankruptcy court’s intent-related findings with
16   respect to the 2004 deed of trust were illogical, implausible or
17   without support in the record.   Nor are we aware of any such
18   reasons.    Therefore, these intent-related findings were not
19   clearly erroneous.
20        Shoshana offers even less argument in her opening brief
21   challenging the bankruptcy court’s intent-related findings
22   pertaining to the 2009 deed of trust.   Indeed, her argument is
23   limited to a single paragraph, as follows:
24             There was likewise no evidence of bad faith as to
          the 2009 Deed of Trust. That deed of trust was created
25        by the Debtor because he erroneously believed that the
          2004 Deed of Trust had been reconveyed. For the same
26        reasons the 2004 Deed of Trust has no indicia of bad
          faith or fraudulent intent, the 2009 Deed of Trust,
27        intended merely to replace it, likewise could not have
          been the product of any bad faith or fraudulent intent.
28

                                      13
 1   Aplt. Opn. Br. at 27 (citation omitted).
 2        The bankruptcy court’s intent-related findings pertaining to
 3   the 2009 deed of trust generally hinged on the same circumstances
 4   the court relied upon in finding the requisite intent with
 5   respect to the 2004 deed of trust.    However, in addition to the
 6   generic litigation risk noted above, the bankruptcy court also
 7   found that, by the time of the 2009 deed of trust, the debtors’
 8   financial condition had deteriorated and the threat of litigation
 9   arising from specific claims had significantly increased, which
10   only served to reinforce the bankruptcy court’s determination
11   that the debtors executed the 2009 deed of trust for the purpose
12   of keeping any equity in their residence as far away from their
13   creditors as possible.    For the same reasons we conclude that the
14   bankruptcy court’s intent-related findings with respect to the
15   2004 deed of trust were not clearly erroneous, we similarly
16   conclude that its intent-related findings with respect to the
17   2009 deed of trust were not clearly erroneous.
18   C.   Limitations Defense Under Cal. Civ. Code § 3439.09(a) - Does
          the One Year Limitation Run from Discovery of the Transfer
19        or Discovery of the Fraud?
20        The only other challenge of Shoshana’s that we need to
21   discuss concerns the timeliness of Seror’s claim under § 544(b)
22   and Cal. Civ. Code § 3439.04(a)(1) with respect to the 2004 deed
23   of trust.   In her opening appeal brief, Shoshana argues for the
24   first time that this claim of Seror’s was untimely under Cal.
25   Civ. Code § 3439.09(a).
26        Neither in her summary judgment motion nor at trial did
27   Shoshana defend against Seror’s claim based on Cal. Civ. Code
28   § 3439.09(a).   Nor did the parties’ pretrial stipulation identify

                                      14
 1   any issue of law or fact that required the bankruptcy court to
 2   address the statute of limitations set forth in Cal. Civ. Code
 3   § 3439.09(a).
 4        Ordinarily, federal appellate courts will not consider
 5   issues not properly raised in the trial courts.   O’Rourke v.
 6   Seaboard Sur. Co. (In re E.R. Fegert, Inc.), 887 F.2d 955, 957
 7   (9th Cir. 1989); see also Moldo v. Matsco, Inc. (In re Cybernetic
 8   Servs., Inc.), 252 F.3d 1039, 1045 n.3 (9th Cir. 2001)(stating
 9   that appellate court would not explore ramifications of argument
10   because it was not raised in the bankruptcy court); Scovis v.
11   Henrichsen (In re Scovis), 249 F.3d 975, 984 (9th Cir. 2001)
12   (stating that court would not consider issue raised for first
13   time on appeal absent exceptional circumstances).   An issue only
14   is “properly raised” if it is raised sufficiently to permit the
15   trial court to rule upon it.   In re E.R. Fegert, Inc., 887 F.2d
16   at 957.
17        Notwithstanding this general rule, “[a] reviewing court may
18   consider an issue raised for the first time on appeal if
19   (1) there are exceptional circumstances why the issue was not
20   raised in the trial court, (2) the new issue arises while the
21   appeal is pending because of a change in the law, or (3) the
22   issue presented is purely one of law and the opposing party will
23   suffer no prejudice as a result of the failure to raise the issue
24   in the trial court.”   Franchise Tax Bd. v. Roberts (In re
25   Roberts), 175 B.R. 339, 345 (9th Cir. BAP 1994) (internal
26   quotations omitted) (citing United States v. Carlson, 900 F.2d
27   1346, 1349 (9th Cir. 1990)).
28        Shoshana has not identified any exceptional circumstances

                                     15
 1   that prevented her from raising the statute of limitations issue
 2   under Cal. Civ. Code § 3439.09(a) in the bankruptcy court.     Nor
 3   did a change in law spawn the issue.     Nor is the issue “purely”
 4   one of law.   The statute of limitations issue raises the
 5   subsidiary question of when the fraudulent transfer “could
 6   reasonably have been discovered.”     Cal. Civ. Code § 3439.09(a).
 7   According to Shoshana, as a matter of law, because the 2004 deed
 8   of trust was recorded in 2004, any and all creditors of the
 9   debtors reasonably should have discovered the transfer within one
10   year of the 2004 recordation.   But we do not read the discovery
11   provision contained in Cal. Civ. Code § 3439.09(a) as literally
12   as Shoshana does.   We believe that the one-year period under Cal.
13   Civ. Code § 3439.09(a)’s discovery rule does not commence until
14   the plaintiff has reason to discover the fraudulent nature of the
15   transfer.
16        The California Supreme Court has not yet construed the
17   discovery provision as set forth in Cal. Civ. Code § 3439.09(a).
18   Nor have we found any published decisions from the California
19   Courts of Appeal on this issue.5     Consequently, as noted above,
20   we must predict how the California Supreme Court will decide this
21   issue.   In interpreting California’s version of the Uniform
22
23        5
             We are aware of one unpublished California Court of
24   Appeal decision, Hu v. Wang, 2009 WL 1919367, at *6 (Cal. Ct.
     App. July 6, 2009), which held in part that Cal. Civ. Code
25   § 3439.09(a)’s discovery rule means and refers to discovery of
     the fraudulent nature of the transfer and not just discovery of
26   the transfer itself. In predicting the California Supreme
     Court’s interpretation of Cal. Civ. Code § 3439.09(a), we do not
27
     rely upon Hu because it is an unpublished decision, and it may
28   not be cited by California state courts. See Cal. Rules of Court
     Rule 8.1115.

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 1   Fraudulent Transfer Act, the California Supreme Court has said
 2   that courts should primarily focus on the statutory text      Mejia
 3   v. Reed, 31 Cal. 4th 657, 663 (2003).    As Mejia explained, giving
 4   the text its usual, ordinary and contextual meaning is the first
 5   and most important part of the statutory construction process.
 6   Id.    As Mejia put it:
 7          Because the statutory language is generally the most
            reliable indicator of legislative intent, we first
 8          examine the words themselves, giving them their usual
            and ordinary meaning and construing them in context.
 9          Every statute should be construed with reference to the
            whole system of law of which it is a part, so that all
10          may be harmonized and have effect.
11   Id. (citations and internal quotation marks omitted).    Mejia
12   further indicated that, when the contextual meaning of the
13   statutory text is sufficient to answer the statutory construction
14   question presented, it generally is unnecessary to consider
15   secondary statutory construction aids like maxims of
16   construction, legislative history and public policy.    Id.
17          Even though the California courts have not addressed the
18   question of the meaning of the discovery provision set forth in
19   Cal. Civ. Code § 3439.09(a), we are not working in a vacuum.      A
20   number of courts from other jurisdictions have construed the same
21   language in their versions of the Uniform Fraudulent Transfer
22   Act.   See Field v. Estate of Kepoikai (In re Maui Indus. Loan &
23   Fin. Co.), 454 B.R. 133, 137 (Bankr. D. Haw. 2011) (listing
24   cases).   Some of these courts have strictly construed the
25   statutory text and have held that the literal language of the
26   Act’s discovery provision requires courts to focus solely on
27   discovery of the transfer itself.     See id. (listing cases).
28   Other courts have more liberally construed the text and have held

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 1   that a contextual reading of the statute requires courts to focus
 2   on discovery of the fraudulent nature of the transfer; mere
 3   discovery of the transfer itself is not enough.   See, e.g.,
 4   Schmidt v. HSC, Inc., 319 P.3d 416, 426-27 (Haw. Ct. 2014);
 5   Freitag v. McGhie, 947 P.2d 1186, 1189-90 (Wash. Ct. 1997).
 6        We find the reasoning of the Schmidt-Freitag line of cases
 7   compelling.   As explained in detail in Schmidt, a contextual
 8   reading of the statute as well as common sense and the purpose of
 9   the Uniform Fraudulent Transfer Act – to provide relief to
10   victims of fraudulent transfers – all militate in favor of a
11   liberal construction of the discovery rule.    Schmidt, 319 P.3d at
12   426-27 (citing Freitag, 47 P.2d at 1189-90).
13        With the exception of different statute numbering, the
14   Hawaii discovery provision at issue in Schmidt and the Washington
15   discovery provision at issue in Freitag are identical to
16   California’s discovery provision as set forth in Cal. Civ. Code
17   § 3439.09(a).   Nor do we perceive any material difference in
18   underlying purpose between California’s version of the Uniform
19   Fraudulent Transfer Act and the versions of the Act codified in
20   Washington and Hawaii.   Compare Schmidt, 319 P.3d at 426 (“the
21   obvious purpose of the UFTA is to prevent fraud and to provide a
22   remedy to those who are victims of fraudulent transfers”) with
23   Mejia v. Reed, 31 Cal. 4th 657, 664 (2003) (“This Act, like its
24   predecessor and the Statute of 13 Elizabeth, declares rights and
25   provides remedies for unsecured creditors against transfers that
26   impede them in the collection of their claims.”) (quoting Legis.
27   Comm. Cmt. accompanying Cal. Civ. Code § 3439.01).
28        Furthermore, adoption of the liberal interpretation of Cal.

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 1   Civ. Code § 3439.09(a) would be consistent with California case
 2   law before the enactment of the Uniform Fraudulent Transfer Act,
 3   which applied the generic fraud discovery rule contained in Cal.
 4   Code Civ. Proc. § 338(4) – now § 338(d) – to pre-Act fraudulent
 5   transfer actions.   See Adams v. Bell, 5 Cal.2d 697, 703 (1936)
 6   (citing Cal. Code Civ. Proc. § 338(4) and stating “if the
 7   creditor knows nothing about the fraudulent conveyance, the cause
 8   (in the absence of laches) does not arise until he discovers the
 9   fraud by which his rights have been invaded.”) (emphasis added).
10        Based on the persuasiveness of cases like Schmidt and
11   Freitag, supra, we predict that the California Supreme Court
12   ultimately will hold that the one-year period under Cal. Civ.
13   Code § 3439.09(a)’s discovery rule does not commence until the
14   plaintiff has reason to discover the fraudulent nature of the
15   transfer.   Thus, any question regarding discovery of the
16   fraudulent nature of the 2004 deed of trust is a factual
17   question, and so the exception permitting consideration of
18   “purely” legal issues raised for the first time on appeal does
19   not apply here.   Accordingly, we decline to resolve Shoshana’s
20   Cal. Civ. Code § 3439.09(a) issue for the first time on appeal.
21   D.   Limitations Defense Under Cal. Civ. Code § 3439.09(c) -
          Statute of Repose
22
23        We acknowledge that Shoshana did argue in the bankruptcy
24   court, in her summary judgment motion, that the statute of repose
25   set forth in Cal. Civ. Code § 3439.09(c) barred Seror from
26   pursuing this claim.   However, the statute of repose issue under
27   Cal. Civ. Code § 3439.09(c) and the statute of limitations issue
28   under Cal. Civ. Code § 3439.09(a) are factually and legally

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 1   distinct issues.   See Rund v. Bank of Am. Corp. (In re EPD Inv.
 2   Co., LLC), 523 B.R. 680, 685-88 (9th Cir. BAP 2015).
 3        Shoshana did not discuss her argument under Cal. Civ. Code
 4   § 3439.09(c) in her opening appeal brief.    Instead, she waited
 5   until her reply brief to address the Cal. Civ. Code § 3439.09(c)
 6   statute of repose issue.   This would be sufficient grounds for us
 7   to decline to consider the statute of repose issue.    See
 8   Christian Legal Soc’y v. Wu, 626 F.3d 483, 487–88 (9th Cir.
 9   2010); Brownfield v. City of Yakima, 612 F.3d 1140, 1149 n.4 (9th
10   Cir. 2010).
11        In any event, even if we were to consider this issue, this
12   panel recently held that Cal. Civ. Code § 3439.09(c)’s seven-year
13   statute of repose does not bar a claim under § 544(b) and Cal.
14   Civ. Code § 3439.04 so long as the claim arose less than seven
15   years before the debtor’s bankruptcy filing.    In re EPD Inv. Co.,
16   LLC, 523 B.R. at 691-92.     Here, the debtor’s February 2011
17   bankruptcy case was filed within seven years of the April 2004
18   deed of trust, so Cal. Civ. Code § 3439.09(c)’s statute of repose
19   did not bar Seror’s Cal. Civ. Code § 3439.04 claim with respect
20   to the 2004 deed of trust.
21                                 CONCLUSION
22        For the reasons set forth above, we AFFIRM the bankruptcy
23   court’s judgment avoiding the 2004 deed of trust and the 2009
24   deed of trust and recovering those transfers for the benefit of
25   the estate.
26
27
28

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