FILED
AUG 14 2017
1 NOT FOR PUBLICATION
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-17-1016-KuLTa
)
6 ANA BEATRIZ BETANCOURT, ) Bk. No. 1:10-bk-14588-GM
)
7 Debtor. ) Adv. No. 1:12-ap-01221-GM
______________________________)
8 )
ANA BEATRIZ BETANCOURT, )
9 )
Appellant, )
10 )
v. ) MEMORANDUM*
11 )
MATTHEW BALLMER, )
12 )
Appellee. )
13 ______________________________)
14 Argued and Submitted on July 27, 2017
at Pasadena, California
15
Filed – August 14, 2017
16
Appeal from the United States Bankruptcy Court
17 for the Central District of California
18 Honorable Geraldine Mund, Bankruptcy Judge, Presiding
19 Appearances: Jeffrey D. Nadel argued for appellant; Derek L.
Tabone argued for appellee.
20
21 Before: KURTZ, LAFFERTY and TAYLOR, Bankruptcy Judges.
22
23
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 8024-1.
1 INTRODUCTION
2 On remand from this Panel, the bankruptcy court determined
3 that chapter 71 debtor Ana Beatriz Betancourt’s fraudulent
4 transfer scheme caused plaintiff Matthew Ballmer’s predecessor in
5 interest to suffer an injury giving rise to a legally cognizable
6 claim that could result in a money judgment. Based on this
7 determination and others, the bankruptcy court held – for the
8 second time – that Betancourt’s debt to Matthew arose from “a
9 willful and malicious injury to another entity” within the
10 meaning of § 523(a)(6), and the bankruptcy court entered an
11 amended judgment after remand in favor of Matthew.
12 Betancourt now appeals for the second time. As this Panel
13 directed in its disposition of Betancourt’s first appeal, the
14 bankruptcy court duly identified a legally cognizable claim that
15 could result in a money judgment in support of its § 523(a)(6)
16 judgment. None of the points Betancourt raises on appeal justify
17 reversal. Accordingly, we AFFIRM.
18 FACTS
19 Our prior decision, Betancourt v. Ballmer
20 (In re Betancourt),
2015 WL 3500322 (Mem. Dec.) (9th Cir. BAP
21 June 3, 2015), laid out the pertinent facts in great detail. We
22 will revisit only those facts necessary to set the stage for this
23 second decision.
24 Matthew is the son of Paul Ballmer and is the successor by
25
1
26 Unless specified otherwise, all chapter and section
references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and
27 all "Rule" references are to the Federal Rules of Bankruptcy
Procedure, Rules 1001-9037. All "Civil Rule" references are to
28 the Federal Rules of Civil Procedure.
2
1 assignment to Paul’s interest in a judgment debt against La Fe,
2 Inc. – Betancourt’s wholly-owned corporation.2 Paul obtained
3 this judgment by default when neither Betancourt nor La Fe’s
4 counsel of record Robert Rein appeared for the duly scheduled
5 trial set in Paul’s contract action against La Fe.
6 Betancourt strenuously complained in the bankruptcy court
7 that this state court judgment was unjust, but neither she nor
8 Rein made any effort either to have it set aside or to appeal it.
9 Instead, at the time of the December 2004 trial and immediately
10 thereafter, Betancourt, her significant other, Calvin Larson, and
11 Rein were busy perfecting a series of transfers that effectively
12 stripped La Fe of its only assets: vacant land located in
13 Topanga, California. In our prior decision, we generally
14 identified this land as consisting of three parcels and referred
15 to them as parcel 30-7, parcel 30-10 and parcel 27-29.
16 A. Parcel 30-7
17 On behalf of La Fe, Betancourt conveyed parcel 30-7 from
18 La Fe to Rein as an individual. The 30-7 grant deed was dated
19 October 2, 2002, but was not recorded until July 2004, well after
20 Paul had commenced his 2003 state court contract action.
21 Rein supposedly paid $200,000 cash for parcel 30-7, but the
22 evidence in the record indicates that these funds never made it
23 to La Fe. In fact, Betancourt admitted at trial that La Fe had
24 no bank account in which to deposit any consideration paid.
25
26
27
2
We refer to Matthew and Paul by their first names for the
28 sake of clarity. No disrespect is intended.
3
1 B. Parcel 30-10
2 Betancourt conveyed parcel 30-10 from La Fe to Rein’s
3 wholly owned corporation, Racada Corp. Like the 30-7 deed, the
4 30-10 deed was dated October 2, 2002, and was executed by
5 Betancourt on behalf of La Fe. Unlike the 30-7 deed, the 30-10
6 deed was not recorded until December 20, 2004 – the week after
7 Betancourt failed to appear for the state court trial.
8 The only “consideration” Racada ever gave for parcel 30-10
9 was a promise to pay $100,000 secured by a deed of trust naming
10 Larson as the beneficiary.3 Whereas the 30-10 deed was dated
11 October 2, 2002, the Racada deed of trust was not executed until
12 December 10, 2004 (a few days before the state court trial) and
13 was not recorded until December 20, 2004 (the same day as the
14 30-10 deed was recorded). Neither Racada nor Rein ever made any
15 payment on the missing note. In February 2007, Rein executed, on
16 behalf of Racada, an assignment of deed of trust purporting to
17 assign the beneficial interest under the 30-10 deed of trust to
18 Betancourt, even though the holder of the beneficial interest
19 supposedly was Larson. At the bankruptcy court trial held in
20 December 2013, neither Betancourt nor Rein were able explain how
21 Racada as the trustor could convey the beneficial interest in the
22 30-10 deed of trust from Larson to Betancourt. Even so,
23 Betancourt substituted in a new trustee in 2007, and in 2008 the
24 new trustee executed a trustee’s deed upon sale conveying title
25 to Betancourt. Betancourt is identified in the trustee’s deed as
26
3
27 It is not clear from the record who held the promissory
note or who was named as payee in the promissory note. The note
28 apparently never was produced in discovery or presented at trial.
4
1 the foreclosing beneficiary for a credit bid of roughly $124,000
2 – the full amount of the debt Racada allegedly owed.
3 C. Parcel 27-29
4 On behalf of La Fe, Betancourt conveyed parcel 27-29 to
5 Larson.4 The 27-29 grant deed is dated March 27, 1998, but was
6 not recorded until December 20, 2004 – at the same time the 30-10
7 grant deed and trust deed were recorded. Inexplicably, in
8 October 1998 Larson recorded a deed of trust covering some of the
9 same parcels. The 27-29 deed of trust was dated February 15,
10 1992, was executed by Betancourt on behalf of La Fe and named
11 Larson as beneficiary. If Larson already owned parcel 27-29 per
12 the 27-29 grant deed executed on March 27, 1998, why would Larson
13 have needed to record in October 1998 the 27-29 deed of trust?
14 Betancourt’s attempts to explain these transactions did not
15 clarify matters. At times she indicated that Larson really owned
16 parcel 27-29; at other times she indicated that parcel 27-29
17 secured roughly $500,000 in “loans” Larson made, which enabled
18 La Fe to purchase and pay some of the expenses of parcel 27-29;
19 and at other times she indicated that Larson’s $500,000
20 constituted a capital investment in La Fe. Nor was Betancourt
21 able to explain why, in December 2004, she executed and recorded
22 a quitclaim deed conveying any interest she had as an individual
23 in parcel 27-29 to Larson.
24 In 2007, Larson conveyed parcel 27-29 to Betancourt for no
25 consideration. Thus, the net effect of all of the transfer
26
27
4
At least for property tax purposes, what we refer to as
28 parcel 27-29 actually consists of multiple distinct parcels.
5
1 documents recorded between 2004 and 2008 was the transfer of all
2 three parcels away from La Fe; parcels 30-10 and 27-29 ended up
3 in Betancourt’s hands – without her (or anyone else) having paid
4 any consideration to La Fe for these transfers.
5 D. The Bankruptcy Court’s First Decision And This Panel’s First
6 Decision
7 Looking at the timing and nature of the above-referenced
8 transactions, the bankruptcy court concluded after a one-day
9 trial in December 2013 that Betancourt engaged in a “flurry of
10 activity” in December 2004 to transfer out of La Fe all of its
11 assets. The bankruptcy court found that Betancourt undertook
12 these actions for the specific purpose of preventing Paul from
13 collecting from La Fe’s assets any judgment he obtained. The
14 bankruptcy court further found that there was no evidence of any
15 consideration paid by Larson for parcel 27-29. With respect to
16 parcel 30-10, the bankruptcy court found that La Fe did not
17 receive any consideration for this property and that Rein had
18 served as a “straw man” to enable Betancourt to strip this asset
19 from La Fe.5
20 According to the bankruptcy court, the evidence demonstrated
21 that, before Betancourt transferred them away, La Fe had equity
22 in each of the above-referenced parcels: $200,000 in parcel 30-7;
23 $100,000 in 30-10; and $100,000 in parcel 27-29. Based on all of
24
25 5
The bankruptcy court opined that parcel 30-7 was not part
26 of Betancourt’s scheme to denude La Fe of assets because the
evidence demonstrated that Rein actually paid $200,000 for this
27 property. The bankruptcy court did not make any finding
regarding the disposition of the $200,000 in sale proceeds, but
28 it is fairly clear that La Fe never received them.
6
1 the above, the bankruptcy court held that Matthew had suffered a
2 willful and malicious injury within the meaning of § 523(a)(6).
3 Betancourt appealed the bankruptcy court’s December 2013
4 judgment, and this Panel issued a decision in June 2015 remanding
5 the matter to the bankruptcy court for additional findings.
6 Among other things, we said that the bankruptcy court needed to
7 make a finding on Betancourt’s subjective state of mind – whether
8 she subjectively intended to injure Paul when she made the
9 transfers described above.
10 In addition, we asked the bankruptcy court to make more
11 specific findings regarding any injury resulting from
12 Betancourt’s actions, as follows:
13 (1) if the injury was to Paul’s property, identifying the
14 specific property interest of Paul’s that Betancourt injured
15 by transferring away La Fe’s assets;
16 (2) if the injury was to Paul personally, identifying the
17 “legally cognizable claim which could result in a monetary
18 judgment” against Betancourt arising from the injury (citing
19 Quarre v. Saylor (In re Saylor),
178 B.R. 209, 213-14 (9th
20 Cir. BAP 1995), aff’d & adopted,
108 F.3d 219 (9th Cir.
21 1997)); and
22 (3) a finding quantifying the injury resulting from Betancourt’s
23 conduct – and segregating the nondischargeable debt (if any)
24 arising from Betancourt’s willful and malicious property
25 transfers from the dischargeable judgment debt arising from
26 her breach of her contract with Paul.
27 E. Proceedings on Remand
28 On remand, the bankruptcy court reviewed the evidence from
7
1 the December 2013 trial and gave the parties the opportunity to
2 present new evidence. The only new evidence initially presented
3 consisted of Betancourt’s additional trial testimony. However,
4 after presentation of the supplemental trial testimony, the
5 bankruptcy court issued an order asking the parties to present
6 evidence on two new issues: (1) when Paul and Matthew first
7 actually discovered Betancourt’s transfers of La Fe’s assets; and
8 (2) “when it would have been reasonable to discover the
9 transfers.”
10 In response to this order, Paul filed a declaration stating
11 that he did not actually learn of the transfers until July 2011.
12 Paul explained that he recorded an abstract of judgment in
13 February 2005 and that he thought the resulting judgment lien
14 against La Fe’s real property eventually would result in the
15 satisfaction of his judgment. Paul further explained that health
16 issues prevented him from making any further judgment enforcement
17 efforts until July 2011, when he discovered the transfers after
18 conducting a routine title search.
19 In spite of the clear language in the bankruptcy court’s
20 February 2016 order directing both Paul and Matthew to file
21 declarations, Matthew did not file any declaration. Betancourt
22 filed her own declaration in response to Paul’s declaration
23 contending that, even if Paul did not actually know of the
24 transfers, he reasonably should have known of them much earlier
25 than 2011 – as all of them were evidenced by recorded documents
26 in the public record. Betancourt further complained that, in
27 contravention of the bankruptcy court’s order, Matthew had not
28 submitted a declaration and had not presented any evidence
8
1 regarding when he actually learned of the transfers or the reason
2 why he had not discovered the transfers earlier.
3 Matthew filed a reply addressing the points made in
4 Betancourt’s declaration. Matthew essentially argued that Paul’s
5 declaration sufficed to address the issues raised by the
6 bankruptcy court in its February 2016 order.
7 F. The Bankruptcy Court’s First Decision On Remand
8 Based on all of the above evidence, the bankruptcy court
9 found that Betancourt carried out her scheme of transfers of
10 La Fe’s property with the intent to harm Paul by stripping La Fe
11 of assets from which his judgment could be satisfied.
12 As for the issues regarding the nature and extent of Paul’s
13 injury, the bankruptcy court determined that there was no injury
14 to any property interest of Paul’s; however, according to the
15 court, Paul was personally injured by Betancourt’s scheme of
16 transfers. And that injury, the bankruptcy court opined,
17 constituted a legally cognizable claim which could result in a
18 monetary judgment against Betancourt. Citing Cal Civ. Code
19 § 3439.08(b)(1)6 and Murray v. Bammer (In re Bammer),
131 F.3d
20
21 6
This section provides in relevant part:
22
(1) Except as otherwise provided in this section, the
23 creditor may recover judgment for the value of the
asset transferred, as adjusted under subdivision (c),
24 or the amount necessary to satisfy the creditor's
claim, whichever is less. The judgment may be entered
25 against the following:
26
(A) The first transferee of the asset or the person for
27 whose benefit the transfer was made.
28 (continued...)
9
1 788 (9th Cir. 1997), abrogated in part on other grounds by,
2 Kawaauhau v. Geiger,
523 U.S. 57 (1998), the bankruptcy court
3 posited that Betancourt would have transferee liability as a
4 secondary transferee of the fraudulent transfers. By 2008, the
5 bankruptcy court pointed out, Betancourt ended up holding legal
6 title to both parcel 30-10 and parcel 27-29, and she did not
7 qualify for the good faith transferee safe harbors set forth in
8 § 3439.08(b)(1)(B).7
9 The bankruptcy court also determined the amount of the
10 nondischargeable debt. Based on the value of parcels 30-10 and
11 27-29 ($100,000 each) and the amount of debt the Ballmers were
12 prevented from collecting as a result of Betancourt’s actually
13 fraudulent transfers ($85,626), the bankruptcy court concluded
14 that Matthew held a potential monetary claim for $85,626, plus
15 interest, under Cal. Civ. Code §§ 3439.04(a)(1) and
16 3439.08(b)(2). According to the bankruptcy court, this claim
17 arose from a willful and malicious injury within the meaning of
18 § 523(a)(6).
19 But the bankruptcy court concluded that Matthew did not
20 actually have a legally cognizable claim for monetary damages
21
6
22 (...continued)
(B) An immediate or mediate transferee of the first
23 transferee, other than either of the following:
24 (i) A good faith transferee that took for value.
25 (ii) An immediate or mediate good faith transferee of a
26 person described in clause (i).
7
27 Neither Betancourt nor Larson ever obtained title to parcel
30-7, so the bankruptcy court did not consider that parcel as
28 part of its assessment of the injury to Paul.
10
1 that could be excepted from discharge under § 523(a)(6) given
2 that the Ballmers had failed to demonstrate that their claim was
3 not time barred under the applicable statute of limitations.
4 Because the Ballmers sought to avail themselves of the “discovery
5 rule” set forth in § 3439.09(a),8 and because plaintiffs invoking
6 this discovery rule bear the burden of proof to establish their
7 entitlement to apply it, the bankruptcy court held that Matthew’s
8 failure to submit a declaration regarding when he actually
9 discovered the transfers was fatal to both the fraudulent
10 transfer claim and, in turn, his nondischargeability claim.9
11 G. Matthew’s Motion For Relief From Judgment And The Bankruptcy
12 Court’s Amended Judgment On Remand
13 After the bankruptcy court entered its judgment upon remand,
14 Matthew filed a motion pursuant to Rules 9023 and 9024 seeking
15
8
16 This section provides in relevant part:
17 A cause of action with respect to a transfer
or obligation under this chapter is
18
extinguished unless action is brought . . .
19
(a) Under paragraph (1) of subdivision (a) of
20 Section 3439.04, not later than four years
after the transfer was made or the obligation
21 was incurred or, if later, not later than one
22 year after the transfer or obligation was or
could reasonably have been discovered by the
23 claimant.
9
24 On the other hand, the bankruptcy court concluded that
there was sufficient evidence in the record for it to conclude
25 that neither of the Ballmers reasonably should have discovered
26 the transfers (and their fraudulent nature) before Paul actually
discovered them in 2011. Thus, had Matthew filed a declaration
27 establishing that he did not actually discover the the fraudulent
transfers before Paul did, the Ballmers would have prevailed on
28 the statute of limitations issue.
11
1 retrial or relief from judgment. Matthew asserted that his
2 failure to file a declaration regarding when he actually
3 discovered Betancourt’s transfers was the result of his counsel’s
4 misreading of the bankruptcy court’s order and had resulted in a
5 miscarriage of justice. In his accompanying declaration, Matthew
6 explained that he took the assignment of the judgment from his
7 father in 2007 only because of his father’s health issues and
8 that the only knowledge he (Matthew) had regarding the subject
9 transfers was the information he received from his father, which
10 his father shared with him after he discovered the transfers in
11 July 2011.
12 In her opposition to Matthew’s motion, Betancourt argued
13 that the language in the February 2016 order was more than clear
14 regarding what evidence was necessary and that Matthew should not
15 be permitted under either Rule 9023 or Rule 9024 to present
16 evidence that was clearly available to him well before the
17 court’s decision and judgment.
18 The bankruptcy court held that Matthew was entitled to
19 relief from judgment. Even though Matthew’s motion did not focus
20 on excusable neglect as a ground for relief, the bankruptcy court
21 ruled that Matthew’s counsel’s excusable neglect supported the
22 granting of relief under Civil Rule 60(b)(1) (which is made
23 applicable in bankruptcy cases and adversary proceedings by
24 Rule 9024). Applying the four factors from Pioneer Inv. Servs.
25 Co. v. Brunswick Assocs. Ltd.,
507 U.S. 380, 395 (1993), the
26 bankruptcy court concluded: (1) that the facts presented
27 established excusable neglect; (2) that Matthew (belatedly) had
28 established his lack of actual knowledge of the transfers; and
12
1 (3) that Matthew was entitled to an amended judgment against
2 Betancourt excepting from discharge her debt in the amount of
3 $85,626.73, plus interest, for a total of $101,850.49.
4 The bankruptcy court entered its amended judgment upon
5 remand on January 12, 2017, and Betancourt timely appealed.
6 JURISDICTION
7 The bankruptcy court had jurisdiction pursuant to 28 U.S.C.
8 §§ 1334 and 157(b)(2)(I), and we have jurisdiction under
9 28 U.S.C. § 158.
10 ISSUES
11 1. Did the bankruptcy court commit reversible error in finding
12 that Betancourt acted with the subjective intent to injure
13 Paul?
14 2. Did the bankruptcy court commit reversible error in
15 determining that Betancourt’s willful and malicious conduct
16 gave rise to the type of injury or claim that qualifies for
17 nondischargeability under § 523(a)(6)?
18 3. Did the bankruptcy court commit reversible error in granting
19 Matthew’s motion for relief from judgment?
20 STANDARDS OF REVIEW
21 We review the bankruptcy court’s intent findings under the
22 clearly erroneous standard. See Ezra v. Seror (In re Ezra),
23
537 B.R. 924, 931 (9th Cir. BAP 2015). A bankruptcy court’s
24 factual findings are not clearly erroneous unless they are
25 illogical, implausible or without support in the record.
Id. at
26 930 (citing Retz v. Samson (In re Retz),
606 F.3d 1189, 1196
27 (9th Cir. 2010).
28 The question regarding the types of injuries within the
13
1 scope of § 523(a)(6) hinges on our construction of federal and
2 state law, which we review de novo. See Collect Access LLC v.
3 Hernandez (In re Hernandez),
483 B.R. 713, 719 (9th Cir. BAP
4 2012).
5 Orders on motions for relief from judgment under Rule 9024
6 and Civil Rule 60(b) are reviewed for an abuse of discretion.
7 Bateman v. U.S. Postal Serv.,
231 F.3d 1220, 1223 (9th Cir.
8 2000); Morris v. Peralta (In re Peralta),
317 B.R. 381, 385 (9th
9 Cir. BAP 2004).
10 The bankruptcy court abuses its discretion if it applies an
11 incorrect legal standard or its factual findings are clearly
12 erroneous. TrafficSchool.com, Inc. v. Edriver Inc.,
653 F.3d
13 820, 832 (9th Cir. 2011) (citing United States v. Hinkson,
14
585 F.3d 1247, 1262 (9th Cir. 2009) (en banc)).
15 DISCUSSION
16 The general standards applicable to § 523(a)(6) are set
17 forth in our prior Betancourt decision, and there is no need to
18 go through them all again here.10 We will focus instead on
19 Betancourt’s contentions on appeal.
20 A. Intent Finding
21 Betancourt, first, challenges the bankruptcy court’s finding
22 that she conducted the fraudulent transfers with the subjective
23 intent to injure Paul. An injury only is “willful” if the debtor
24 subjectively intended to cause injury or “actually believed that
25
10
26 Assignees of a debt, like Matthew, typically can pursue
the same nondischargeability claims as would have been available
27 to their assignor. See New Falls Corp. v. Boyajian
(In re Boyajian),
367 B.R. 138, 145–48 (9th Cir. BAP 2007),
28 aff'd,
564 F.3d 1088 (9th Cir. 2009).
14
1 injury was substantially certain to occur.” In re Betancourt,
2
2015 WL 3500322, at *5 (citing Carrillo v. Su (In re Su),
3
290 F.3d 1140, 1144–45 (9th Cir. 2002)).
4 The bankruptcy court’s intent finding was supported by ample
5 evidence. The timing and nature of the transfer of La Fe’s real
6 property, first, away from La Fe and, later, into Betancourt’s
7 hands is suggestive of an intent to injure Paul. Moreover, the
8 bankruptcy court found not credible Betancourt’s attempts to
9 offer alternate explanations for the transfers.
10 On appeal, Betancourt contends that, because Larson and
11 Racada gave consideration for the transfers they received, she
12 could not have made the transfers with the intent to injure Paul.
13 As a preliminary matter, it is far from clear that either the
14 so-called antecedent debt owed to Larson or Racada’s note and
15 deed of trust constituted any consideration to La Fe. The
16 bankruptcy court found to the contrary, that La Fe received no
17 consideration for the transfer of parcel 30-10 or for the
18 transfer of parcel 27-29. And the record supports this finding.
19 But even if we were to hold that La Fe did receive some
20 consideration, or received reasonably equivalent value, this
21 would not justify reversal of the bankruptcy court’s intent
22 finding. The bankruptcy court’s intent finding was based on the
23 entirety of the circumstances and the presence or absence of
24 consideration was only one of a number of factors the bankruptcy
25 court considered. We cannot say that, given the nature and
26 timing of Betancourt’s transfers of La Fe’s properties, the
27 ostensible presence of some consideration precluded a finding
28 that Betancourt subjectively intended to injure Paul.
15
1 Our analysis is bolstered by the law governing actually
2 fraudulent transfers under Cal. Civ. Code § 3439.04(a)(1). The
3 absence of reasonably equivalent value is not a prerequisite to
4 finding that a debtor made a transfer with the actual intent to
5 hinder, delay, or defraud her creditors. In re
Ezra, 537 B.R. at
6 930 (citing Wolkowitz v. Beverly (In re Beverly),
374 B.R. 221,
7 235 (9th Cir. BAP 2007), aff'd in part and adopted,
551 F.3d 1092
8 (9th Cir. 2008)). Indeed, the presence or absence of reasonably
9 equivalent value is just one of several factors courts typically
10 consider when assessing whether the debtor had the requisite
11 state of mind to commit an actual fraudulent transfer. See Cal.
12 Civ. Code § 3439.04(b) (listing factors); see also In re Ezra,
13 537 B.R. at 930-31 (explaining that these factors – also known as
14 badges of fraud – are not prerequisites and should not be applied
15 formulaically).
16 In short, the bankruptcy court’s intent finding was
17 adequately supported by the record and the asserted presence of
18 consideration for the subject transfers does not render the
19 bankruptcy court’s intent finding clearly erroneous.
20 B. Type Of Injury
21 Our prior decision required the bankruptcy court, on remand,
22 to determine whether the nature of the injury to Paul resulting
23 from Betancourt’s willful and malicious conduct would give rise
24 to a legally cognizable claim for damages under California law.
25 In re Betancourt,
2015 WL 3500322, at *7 (citing In re Saylor,
26 178 B.R. at 213–214). The bankruptcy court on remand duly
27 determined that, as a result of her willful and malicious
28 conduct, Betancourt had transferee liability under Cal Civ. Code
16
1 § 3439.08(b)(1).
2 In making this determination, the bankruptcy court cited in
3 support In re
Bammer, 131 F.3d at 790. In Bammer, a son
4 attempted to help his mother evade the consequences of her
5 embezzlement by implementing a fraudulent transfer scheme
6 designed to strip her of the remaining equity in her residence.
7 Steven Bammer carried out this scheme by taking out a loan
8 secured by a third mortgage against his mother’s house. The
9 Ninth Circuit court of appeals held that the injury caused by
10 Steven Bammer’s instigation and receipt of the fraudulent
11 transfer was a willful and malicious injury that gave rise to a
12 nondischargeable debt under § 523(a)(6).
13 Betancourt attacks on appeal the bankruptcy court’s reliance
14 on Bammer. Betancourt argues that Bammer is distinguishable
15 because, unlike in Bammer, Larson and Racada gave consideration
16 for the transfers of parcels 30-10 and 27-29. More specifically,
17 Betancourt contends that, in light of the consideration La Fe
18 allegedly received, no actionable injury to Paul occurred under
19 the fraudulent transfer statutes.
20 As we explained above, however, the bankruptcy court found
21 that La Fe received no consideration for the transfers, and the
22 record supports this finding. Consequently, Betancourt’s attempt
23 to distinguish Bammer is unavailing.
24 In any event, the bankruptcy court’s determination that Paul
25 had a legally cognizable monetary claim against Betancourt under
26 California law did not hinge on Bammer or on the presence or
27 absence of consideration; instead, the determination hinged on
28 Cal. Civ. Code § 3439.08(b)(1), which provides that the creditor
17
1 victimized by the fraudulent transfer “may recover judgment for
2 the value of the asset transferred, or the amount necessary to
3 satisfy the creditor's claim, whichever is less.” Furthermore,
4 Cal. Civ. Code § 3439.08(b)(1) permits the creditor to recover
5 judgment against both immediate and mediate transferees, subject
6 to certain safe harbors not applicable here. Simply put, this
7 California fraudulent transfer statute established Paul’s right
8 to a monetary damages claim against Betancourt arising from her
9 receipt of the fraudulently transferred property.
10 Betancourt alternately argues that there was no evidence in
11 the record of the value of the transferred property and that she
12 could not have any fraudulent transfer liability without evidence
13 of such value. Under the above-referenced California statute,
1
4 Cal. Civ. Code § 3439.08(b)(1), damages against the transferee
15 are, indeed, limited to the value of the property transferred or
16 the amount of the creditor’s claim, whichever is less. However,
17 as a factual matter, Betancourt’s alternate argument lacks merit.
18 The bankruptcy court found that, at the time of the transfer,
19 La Fe had equity in each of the transferred parcels: $100,000 in
20 30-10 and $100,000 in parcel 27-29. And there was sufficient
21 evidence in the record to support this finding. The aggregate
22 value of these two properties – $200,000 – exceeded the amount
23 Paul was owed, so the value of the properties did not limit the
24 amount of Paul’s monetary claim against Betancourt or the amount
25 nondischargeable under § 523(a)(6).
26 In short, we reject all of Betancourt’s theories on appeal
27 attempting to explain why Paul did not suffer the type of injury
28
18
1 covered by § 523(a)(6).11
2 C. The Motion For Relief From Judgment And Application Of The
3 Discovery Rule To The Fraudulent Transfer Claim
4 Under Civil Rule 60(b)(1), a court may grant a party relief
5 from judgment based on excusable neglect after considering all of
6 the surrounding circumstances and ordinarily after focusing on
7 the following four factors:
8 (1) the danger of prejudice to the non-moving party,
(2) the length of delay and its potential impact on
9 judicial proceedings, (3) the reason for the delay,
including whether it was within the reasonable control
10 of the movant, and (4) whether the moving party's
conduct was in good faith.
11
12 Pincay v. Andrews,
389 F.3d 853, 855, 859 (9th Cir. 2004)
13 (en banc) (citing
Pioneer, 507 U.S. at 395); see also Briones v.
14 Riviera Hotel & Casino,
116 F.3d 379, 381-82 (9th Cir. 1997)
15 (applying Pioneer’s four-factor test to Civil Rule 60(b) motion).
16 Here, the bankruptcy court duly applied the Pioneer four-
17 factor test to determine that Matthew should be given relief from
18 judgment and permitted to submit an additional declaration
19 establishing his lack of actual knowledge of the fraudulent
20 transfers until 2011, when his father advised him of the results
21 of his routine title search. Betancourt has not directly
22
23
11
An injury only is actionable under § 523(a)(6) when it
24 arises from conduct that is recognized as tortious under state
law. See Lockerby v. Sierra,
535 F.3d 1038, 1041 (9th Cir. 2008)
25 (citing Petralia v. Jercich (In re Jercich),
238 F.3d 1202, 1206
26 (9th Cir. 2001). At oral argument before this Panel, Betancourt
acknowledged her concession in the bankruptcy court that an
27 actual fraudulent transfer action under California law qualifies
as an intentional tort. Nor has Betancourt attempted to withdraw
28 this concession on appeal.
19
1 challenged on appeal the bankruptcy court’s specific Pioneer
2 findings. Instead, she argues that, as a matter of law,
3 Matthew’s “mistake” was beyond the scope of Civil Rule 60(b)
4 excusable neglect relief. As Betancourt put it, Matthew’s
5 counsel’s noncompliance with the clear and unequivocal language
6 of the bankruptcy court’s order directing both Matthew and Paul
7 to file additional evidence on the discovery rule issue “cannot
8 be grounds to grant” a motion for relief based on excusable
9 neglect. In support of this contention, Betancourt relies on
10 Engleson v. Burlington Northern Railroad Co.,
972 F.2d 1038 (9th
11 Cir. 1992), but Betancourt’s reliance on Engleson is misplaced.
12 Engleson was decided before Pioneer. Subsequent to Pioneer, the
13 Ninth Circuit has clarified that counsel error in responding to
14 directives in court orders and rules is not per se excluded from
15 excusable neglect relief. See
Pincay, 389 F.3d at 859.
16 Betancourt also attempts to argue that the excusable neglect
17 standard was inapplicable because Matthew did not demonstrate the
18 existence of any neglect or error. Instead, Betancourt claims,
19 Matthew made an affirmative strategic decision not to present
20 into evidence his own declaration, and an intentional, calculated
21 failure to present sufficient evidence in support of an issue on
22 which Matthew bore the burden of proof is not the type of conduct
23 that should be addressed by way of an excusable neglect motion.
24 We might have considered this argument more persuasive but
25 for the unusual procedural history pertaining to the presentation
26 of evidence on the discovery rule issue. Recall that the
27 bankruptcy court issued an order after the close of evidence on
28 remand raising the discovery rule issue and directing the parties
20
1 to present additional evidence. This order provided in part as
2 follows:
3 The parties will have a period of time to do discovery
and present evidence of the date(s) when either of the
4 Ballmers or their agents did or should reasonably have
discovered the transfers. This can be by way of
5 declaration, interrogatory, deposition, or other
evidence. The Court will review the evidence and
6 determine whether a further evidentiary hearing is
required.
7
8 Order To Provide Further Evidence (February 16, 2016) at 4:5-10.
9 Based on this language and other language in its order, the
10 bankruptcy court found that its order was ambiguous and that the
11 ambiguity had caused Matthew’s counsel to misinterpret what was
12 required. The bankruptcy court further found, in terms of
13 assessing the reason for Matthew’s counsel’s error, that it
14 resulted from this misinterpretation – and not from any strategic
15 decision to withhold evidence as Betancourt asserted. We cannot
16 say that the bankruptcy court’s findings regarding the reason for
17 Matthew’s counsel’s error were clearly erroneous. Nor can we say
18 that its other findings on the Pioneer factors – lack of
19 prejudice to Betancourt, the limited amount of delay caused by
20 Matthew’s error and the Ballmers’ good faith – were clearly
21 erroneous.
22 Accordingly, the bankruptcy court did not abuse its
23 discretion in granting Matthew’s motion for relief based on
24 excusable neglect.
25 Betancourt also challenges on appeal the bankruptcy court’s
26 determination that Matthew met his burden of proof to establish
27 the applicability of the discovery rule in order to extend the
28 fraudulent transfer statute of limitation. More specifically,
21
1 Betancourt challenges the bankruptcy court’s finding that Matthew
2 and his father Paul had acted diligently despite their failure to
3 earlier discover the fraudulent nature of Betancourt’s transfers.
4 The bankruptcy court correctly found Matthew bore the burden of
5 proof on this issue. See Samuels v. Mix,
22 Cal. 4th 1, 10, 91
6 Cal. Rptr. 2d 273,
989 P.2d 701 (1999). “To successfully rely on
7 the discovery rule, a plaintiff must prove (a) lack of knowledge;
8 (b) lack of a means of obtaining knowledge (in the exercise of
9 reasonable diligence the facts could not have been discovered at
10 an earlier date); [and] (c) how and when he did actually discover
11 the [claim].” Migliori v. Boeing N. Am., Inc.,
114 F. Supp. 2d
12 976, 982 (C.D. Cal. 2000) (citations and internal quotation marks
13 omitted).
14 Betancourt contends that the bankruptcy court erred when it
15 held that, notwithstanding their obligation to exercise
16 reasonable diligence, Matthew and Paul did not have reason to
17 discover the fraudulent nature of the transfers until they
18 actually did in July 2011 – nearly seven years after the
19 December 2004 recordation of the conveyances transferring away
20 La Fe’s real property. In so holding, the bankruptcy court
21 determined that the 2004 recordation of the conveyances did not
22 put the Ballmers on constructive notice or give them actual
23 knowledge of the fraudulent nature of the transfers. As a matter
24 of California law, we agree with the bankruptcy court that the
25 recordation did not put the Ballmers – as judgment creditors – on
26 constructive notice. See Cal. Civ. Code § 1213 (stating that
27 recordation only puts “subsequent purchasers and mortgagees” on
28 constructive notice); cf. McCabe v. Grey,
20 Cal. 509, 516 (1862)
22
1 (construing predecessor statute and holding that “the only effect
2 of recording a conveyance is to impart notice to subsequent
3 purchasers and mortgagees.”).
4 As a factual matter, there was nothing clearly erroneous
5 about the bankruptcy court’s finding that the Ballmers had acted
6 in a reasonably diligent manner even though they failed to
7 discover earlier the fraudulent nature of the transfers. As the
8 court explained, the Ballmers, as judgment creditors, were not
9 obliged to conduct any sort of inquiry into La Fe’s real property
10 assets or to aggressively attempt to enforce their judgment
11 against La Fe. California law grants judgment creditors an
12 initial right to enforce a judgment for a period of ten years,
13 with an option to renew the judgment thereafter. See Cal. Civ.
14 Proc. Code §§ 683.020; 683.110.
15 Moreover, it is not uncommon, in California, to simply
16 record an abstract of judgment and then wait for the judgment
17 debtor to attempt to sell or hypothecate his or her real property
18 in order to collect on a judgment. See generally Cal. Prac.
19 Guide Enf. J. & Debt §§ 6:150, et seq. (The Rutter Group eds.
20 2017) (describing numerous practical advantages of using a
21 recorded abstract of judgment as a judgment enforcement device).
22 As set forth in the record, Paul recorded an abstract of judgment
23 shortly after he obtained the judgment against La Fe. On this
24 record, the Ballmers were not required to do anything more in
25 order to act diligently with respect to their judgment against
26 La Fe.
27 Thus, we reject all of Betancourt’s arguments related to the
28 bankruptcy court’s application of the discovery rule in favor of
23
1 Matthew. Given that none of Betancourt’s arguments on appeal
2 have any merit, we will AFFIRM.
3 CONCLUSION
4 For the reasons set forth above, the bankruptcy court’s
5 amended judgment on remand is AFFIRMED.
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