FILED
NOV 5 2020
NOT FOR PUBLICATION SUSAN M. SPRAUL, CLERK
U.S. BKCY. APP. PANEL
OF THE NINTH CIRCUIT
UNITED STATES BANKRUPTCY APPELLATE PANEL
OF THE NINTH CIRCUIT
In re: BAP No. EC-19-1317-TLS
HSIN-SHAWN CYNDI SHENG,
Debtor. Bk. No. 2:17-bk-25114
HSIN-SHAWN CYNDI SHENG,
Appellant,
v. MEMORANDUM*
ERIC J. NIMS, Chapter 7 Trustee; SARINA
M. PERALES,
Appellees.
Appeal from the United States Bankruptcy Court
for the Eastern District of California
Ronald H. Sargis, Chief Bankruptcy Judge, Presiding
Before: TAYLOR, LAFFERTY, and SPRAKER, Bankruptcy Judges.
INTRODUCTION
1
Chapter 7 debtor Hsin-Shawn Cyndi Sheng appeals from the
bankruptcy court’s order authorizing the refund of a tenant’s security
deposit. While she alleges leasehold damage, her attorney neither timely
*
This disposition is not appropriate for publication. Although it may be cited for
whatever persuasive value it may have, see Fed. R. App. P. 32.1, it has no precedential
value, see 9th Cir. BAP Rule 8024-1.
1
Unless specified otherwise, all chapter and section references are to the
Bankruptcy Code, 11 U.S.C. §§ 101–1532, and all “Rule” references are to the Federal
Rules of Bankruptcy Procedure.
opposed the relevant motion nor provided evidence of such damage to the
bankruptcy court. We AFFIRM.
FACTS2
Ms. Sheng filed a chapter 13 case and scheduled approximately $2.7
million in assets, $1.6 million in secured claims, and $17,000 in unsecured
claims. Her financial difficulties apparently arose from a lack of liquidity.
Because her secured debt exceeded the § 109(e) maximum for a chapter 13
case, however, the case promptly converted to chapter 7.
The record reflects that Ms. Sheng found the post-conversion loss of
asset control difficult. Despite conversion, she entered into an
unauthorized lease of her Fremont, California residential rental property
(“Property”) and took possession of a $3,500 security deposit (“Security
Deposit”). Because the Property had over $600,000 of scheduled non-
exempt equity, the Trustee initially elected to sell it and obtained turnover
orders. But subsequently, the Trustee and the tenant, Ms. Perales, reached
an agreement; she remained in the Property and the Trustee collected
approximately $32,000 in ongoing rental income. And then he changed
course; he abandoned the Property and other estate assets to Ms. Sheng
2
We note that Ms. Sheng failed to provide the Panel with a record sufficient to
permit review of her claims of error. While we have the discretion to dismiss her appeal
for this error, see Jones v. City of Santa Monica, 382 F3d 1052, 1057 (9th Cir. 2004), we will
consider it to the extent we can take judicial notice of documents electronically filed in
the underlying bankruptcy case to ascertain the relevant facts, see Atwood v. Chase
Manhattan Mortg. Co. (In re Atwood),
293 B.R. 227, 233 n.9 (9th Cir. BAP 2003).
2
while retaining cash to pay all unsecured creditors and administrative
claims.
Ms. Perales thereafter vacated the Property and requested a refund of
her Security Deposit. Ms. Sheng refused the request and told her to obtain
it from the Trustee.
So Ms. Perales sought a refund from the Trustee, who then filed a
motion seeking to abandon $3,500 of estate property to her. He explained
that after accounting for payment of all unsecured claims and approved
administrative expenses, surplus funds approximating $6,400 remained in
the estate. Thus, the estate could afford to pay Ms. Perales.
Ms. Sheng did not file a written opposition to the abandonment
motion, but her counsel appeared at the hearing and stated her contention
that she recently discovered damage to the Property and now wanted the
Security Deposit retained. But he hedged on this assertion, also stating that
he did not file a written opposition because he, at least initially, suspected
that Ms. Sheng caused the damage. And he provided neither specifics nor
proof of damage and further failed to request a continuance of the hearing
to do so. His one point of law was a statement that abandonment to Ms.
Perales would be improper because she did not have a possessory interest
in the Security Deposit.
The bankruptcy court rejected these arguments and assertions and
later entered its order granting the motion. Ms. Sheng timely appealed.
3
JURISDICTION
The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334 and
157(b)(2)(A). We have jurisdiction under 28 U.S.C. § 158.
ISSUES
(1) Did the bankruptcy court abuse its discretion when it approved
the Trustee’s payment of $3,500 to Perales?
(2) Was the bankruptcy court biased against Ms. Sheng?
STANDARD OF REVIEW
The bankruptcy court’s decision to award or deny administrative
expense claims is reviewed for abuse of discretion. Gonzalez v. Gottlieb (In re
Metro Fulfillment, Inc.),
294 B.R. 306, 309 (9th Cir. BAP 2003). The
bankruptcy court abuses its discretion if it applies the wrong legal
standard, misapplies the correct legal standard, or makes factual findings
that are illogical, implausible, or without support in inferences that may be
drawn from the facts in the record. See TrafficSchool.com, Inc. v. Edriver Inc.,
653 F.3d 820, 832 (9th Cir. 2011).
We may affirm on any basis supported by the record. Shanks v.
Dressel,
540 F.3d 1082, 1086 (9th Cir. 2008).
DISCUSSION
A. The bankruptcy court did not err in approving the payment to Ms.
Perales.
While the Trustee packaged his request to pay Ms. Perales as an
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abandonment, he acknowledged that Ms. Sheng had dissipated the
Security Deposit. Thus, there was no asset to abandon, and, in substance,
he requested authorization to pay Ms. Perales $3,500 as an administrative
expense claimant under § 503(b)(1)(A). The bankruptcy court apparently
understood the true nature of the relief requested; it confirmed that the
Trustee sought payment of a postpetition claim from estate funds rather
than a turnover of the actual Security Deposit.
A chapter 7 trustee generally administers property of the estate by
liquidating the assets to cash and then distributing them to the estate’s
creditors. See § 704(a)(1). But a trustee may manage rental property for a
time under § 721 and collect rents for the benefit of the estate. This is
consistent with § 541(a)(6), which defines property of the estate to include
certain: “[p]roceeds, product, offspring, rents, or profits of or from
property of the estate . . . .” § 541(a)(6) (emphasis added).
Section 503(b)(1)(A) allows as administrative expenses “the actual,
necessary costs and expenses of preserving the estate[.]” § 503(b)(1)(A). A
claimant seeking administrative expense treatment must show that the
debt asserted to be an administrative expense: (I) arose postpetition;
(ii) arose from a transaction with the trustee (or, alternatively, that the
claimant gave consideration to the trustee); and (iii) directly and
substantially benefitted the estate. Microsoft Corp. v. DAK Indus., Inc. (In re
DAK Indus., Inc.),
66 F.3d 1091, 1094 (9th Cir. 1995).
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There is no dispute that Ms. Perales paid the Security Deposit and
rents under a postpetition rental agreement. True, Ms. Sheng improperly
initiated the lease, but the Trustee eventually adopted it as binding on the
estate. And the transaction was directly and substantially beneficial to the
estate as the Trustee collected approximately $32,000.
Once the tenancy ended, Ms. Perales had a claim for her Security
Deposit. Under California law, a residential landlord must hold a tenant’s
security deposit and, when a tenant vacates the premises, the landlord
must return it or assert a claim against the tenant as compensation for,
among other things, a tenant’s rent default or to pay for damages caused
by the tenant. See Cal. Civil Code §§ 1950.5(d), (e). A bad faith claim or
retention by the landlord or the landlord’s successor in interest of the
security deposit may subject the landlord or the landlord’s successor in
interest to statutory damages of up to twice the amount of the security, in
addition to actual damages. Cal. Civil Code § 1950.5(l).
Here, Ms. Sheng did not hold the Security Deposit, refused the
requested refund, and directed Ms. Perales to seek it from the Trustee. Ms.
Perales then provided declaratory evidence that she returned the Property
in satisfactory condition. In the absence of any evidence of rent default or
damage to the Property, the Trustee and the bankruptcy court
appropriately assumed that the estate faced a damage claim if the Trustee
refused the refund request. Thus, he appropriately sought bankruptcy
6
court authorization to pay the $3,500 administrative claim, and the record
entirely supports affirmance.
While Ms. Sheng complains on appeal that she provided her counsel
with evidence of Property damage, such evidence was never filed with the
bankruptcy court, and her counsel never requested a continuance of the
hearing to do so. Thus, Ms. Sheng waived her only opposition to the
payment to Ms. Perales. See Rule 8009(b)(5); Mano-Y & M, Ltd. v. Field (In re
Mortg. Store, Inc.),
773 F.3d 990, 998 (9th Cir. 2014); Syncom Capital Corp. v.
Wade,
924 F.2d 167, 169 (9th Cir. 1991). To the extent she takes issue with
the adequacy of her counsel’s representation, her dispute lies with him and
not with the bankruptcy court.
B. There is no evidence that the bankruptcy court was prejudiced.
Ms. Sheng also asserts that the bankruptcy court was prejudiced
against her. The record does not support this assertion.
“Judicial impartiality is presumed.” First Interstate Bank of Ariz., N.A.
v. Murphy, Weir & Butler,
210 F.3d 983, 987 (9th Cir. 2000). An individual
claiming judicial bias must “overcome a presumption of honesty and
integrity in those serving as adjudicators.” Withrow v. Larkin,
421 U.S. 35, 47
(1975). And where, as here, the allegation does not stem from an
extrajudicial source, the party claiming bias must submit evidence that the
judge exhibited “such a high degree of favoritism or antagonism as to
make fair judgment impossible.” Liteky v. United States,
510 U.S. 540, 554-55
7
(1994). The test is as follows: “whether a reasonable person with
knowledge of all the facts would conclude that the judge's impartiality
might reasonably be questioned.” Seidel v. Durkin (In re Goodwin),
194 B.R.
214, 222 (9th Cir. BAP 1996) (citations and internal quotation marks
omitted).
Ms. Sheng failed to meet her heavy burden. Her unsubstantiated
assertion that the bankruptcy court was prejudiced against her “starting
from day one” is legally insufficient.
CONCLUSION
Based on the foregoing, we AFFIRM.
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