In re: Chonghee Jane Kim

NOT FOR PUBLICATION FILED
MAR 3 2021
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. CC-20-1204-FLG
CHONGHEE JANE KIM,
Debtor. Bk. No. 2:13-bk-25661-BB
ALEXANDRE OH, Adv. No. 2:17-ap-01277-BB
Appellant,
v. MEMORANDUM *
EDWARD M. WOLKOWITZ, Chapter 7
Trustee,
Appellee.
Appeal from the United States Bankruptcy Court
for the Central District of California
Sheri Bluebond, Bankruptcy Judge, Presiding
Before: FARIS, LAFFERTY, and GAN, Bankruptcy Judges.
INTRODUCTION
Creditor Alexandre Oh appeals from the bankruptcy court’s $100,000
* 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.
money judgment against him and in favor of chapter 7 1 trustee Edward M.
Wolkowitz (“Trustee”) based on a fraudulent transfer that Mr. Oh received
from debtor Chonghee Jane Kim. Mr. Oh argues that the Trustee’s claims
and request for relief were barred by the statute of limitations.
We hold that Mr. Oh waived the statute of limitations defense when
he agreed that the Trustee could pursue his fraudulent transfer claims in a
new action. Accordingly, we AFFIRM.
FACTS 2
A. Prepetition events
In 2010, a law firm sued Ms. Kim in state court and obtained a
judgment against her. Before the entry of judgment, Ms. Kim transferred
real property in Los Angeles (the “Property”) to a company that she wholly
owned (the “LLC”).
Ms. Kim later caused the LLC to encumber the Property with two
deeds of trust, securing promissory notes payable to Mr. Oh ($100,000) and
Benjamin Hooshim ($50,000). Mr. Oh and Mr. Hooshim had previously
1Unless specified otherwise, all chapter and section references are to the
Bankruptcy Code, 11 U.S.C. §§ 101-1532, all “Rule” references are to the Federal Rules
of Bankruptcy Procedure, and all “Civil Rule” references are to the Federal Rules of
Civil Procedure.
2 The basic facts and procedural history in this case are not in dispute. We
borrow liberally from our earlier decision, Hooshim v. Wolkowitz (In re Kim), BAP No.
CC-15-1273-TaKuF, 2016 WL 2654350 (9th Cir. BAP May 2, 2016), aff’d, 700 F. App’x 710
(9th Cir. 2017). We also exercise our discretion to review the bankruptcy court’s docket
in this case and related cases, as appropriate. See Woods & Erickson, LLP v. Leonard (In re
AVI, Inc.), 389 B.R. 721, 725 n.2 (9th Cir. BAP 2008).
2
loaned money to Ms. Kim in those amounts, but the LLC did not execute
the notes or the deeds of trust until several months later and just one week
before entry of the judgment against Ms. Kim in the state court action.
After the law firm discovered these transfers, it commenced a second
state court action against Ms. Kim to set aside the transfers as fraudulent.
Ms. Kim immediately caused the LLC to transfer the Property back to her.
She did not, however, take any action to remove the deeds of trust from the
Property. She then filed a chapter 7 petition; that case was dismissed when
she failed to attend a § 341(a) meeting of creditors.
B. The present chapter 7 case and original adversary proceeding
Later, Ms. Kim filed a second chapter 7 case (the case from which this
appeal emanates), and the Trustee was appointed.
The Trustee sought to sell Ms. Kim’s real property, including the
Property, subject to overbid and subject to any existing liens. Ms. Kim
emerged as the successful bidder for $35,000. The bankruptcy court
confirmed the sale, and the Trustee quitclaimed the Property to Ms. Kim.
Later, the Trustee commenced an adversary proceeding (the
“Original Adversary Proceeding”) against Mr. Oh and Mr. Hooshim. He
sought to avoid the liens created by the deeds of trust under § 544 and
California Civil Code section 3439. He requested a declaration that the
Property was property of the estate free and clear of liens.
The bankruptcy court entered judgment against Mr. Oh and
Mr. Hooshim avoiding the notes and deeds of trust as intentional
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fraudulent transfers and allowing the Trustee to recover both the notes and
the deeds of trust. The bankruptcy court held that all rights, title, and
interests in the notes and the trust deeds were transferred to the Trustee
and preserved for the benefit of the estate pursuant to §§ 550 and 551.
C. The first appeal
Mr. Oh and Mr. Hooshim timely appealed the bankruptcy court’s
decision to this Bankruptcy Appellate Panel (“BAP”). While the appeal was
pending, the Trustee informed the BAP that he had exercised the power of
sale under the trust deeds and foreclosed on the Property. 3
The BAP reversed in part. We held that the Trustee lacked standing
to avoid the transfers because avoidance of the liens would not redress any
injury to the estate. The fraudulent liens on the Property in favor of Mr. Oh
and Mr. Hooshim injured the estate by reducing the sale price. But once the
Trustee sold the Property subject to those liens, avoidance of the liens
would benefit only the buyer (Ms. Kim), and not the estate.
Although no party had pressed the point, the BAP also stated that the
Trustee neither requested nor preserved a claim for money judgment
3 The Trustee retained TD Foreclosure Services, Inc. (“TD”) to conduct the
foreclosure sale. The Trustee was the successful bidder under Mr. Oh’s deed of trust,
then TD sold the Property to GB Inland Properties, LLC (“GB”) under Mr. Hooshim’s
deed of trust and did not pay the sale price to the Trustee. GB then sold the Property to
third-party buyers. Ms. Kim, Mr. Oh, and Mr. Hooshim sued the buyers, GB, and TD in
state court for the wrongful foreclosure sale. The parties settled that case for over
$140,000, with Mr. Oh receiving approximately $76,000. The Trustee filed a similar suit,
which we discuss briefly below.
4
under § 550 and noted that the time for doing so had passed. In re Kim,
2016 WL 2654350 at *4.
The BAP further held that the bankruptcy court erred when it
granted the Trustee relief that he did not seek in the complaint.
The panel vacated the judgment and dismissed the appeal. The Ninth
Circuit affirmed, agreeing that the Trustee lacked standing to avoid the
liens and deeds of trust and could not seek relief exceeding what was
sought in the complaint in the Original Adversary Proceeding.
D. The new adversary proceeding
While the appeal was pending before the Ninth Circuit, the Trustee
sought to consolidate the Original Adversary Proceeding with two other
related cases: (1) Ms. Kim’s suit against the Trustee for quiet title and
declaratory relief and (2) the Trustee’s suit against TD and GB arising out
of the botched foreclosure sale. On May 19, 2017, he filed a new adversary
complaint (“Combined Complaint”) against Mr. Oh, Mr. Hooshim,
Ms. Kim, TD, GB, and the two companies’ owners and managers. The
complaint focused largely on the wrongful foreclosure and the
disgorgement of sale proceeds. Mr. Oh, Mr. Hooshim, and Ms. Kim were
named as defendants because the Trustee requested that the court declare
that they had no right, interest, or title to the Property or the sale proceeds.
Mr. Oh, Mr. Hooshim, and Ms. Kim answered the Combined
Complaint and raised the statute of limitations as an affirmative defense.
In a status report to the court in the wrongful foreclosure case, the
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Trustee discussed the Combined Complaint and stated that he sought to
consolidate the three cases. He requested that the court “consolidate the
herein case with the other listed matters in the Consolidated Complaint
without any prejudice to the Trustee, the Estate, [or] the pending 9th
Circuit Appeal . . . .”
The bankruptcy court held a status conference in the new adversary
proceeding, Ms. Kim’s adversary proceeding, and the Trustee’s wrongful
foreclosure action and discussed combining all proceedings under the new
adversary proceeding. Mr. Oh did not provide a transcript of the status
conference, but the bankruptcy court later said that the parties agreed to
dismiss the three original actions without prejudice and agreed that the
dismissal would not affect the ability of any party to assert rights and
claims that had been asserted in the original actions.
Pursuant to this agreement, the bankruptcy court dismissed the three
original cases. It dismissed Ms. Kim’s adversary proceeding “without
prejudice to the ability of any party to assert claims formerly asserted in
this action in the pending action for declaratory relief,” stating that the
parties agreed on the record that the Combined Complaint “preserves all of
the relevant issues.” Similarly, the bankruptcy court dismissed the
wrongful foreclosure case, stating that it “granted the Trustee’s request to
dismiss the herein adversary proceeding without any prejudice to the
Trustee’s pending Consolidated Complaint or any other claim the Trustee
has or may have against the Defendants named in this matter or others.”
6
After the Ninth Circuit remanded, the bankruptcy court held similar
discussions with the parties in the Original Adversary Proceeding. Mr. Oh
again did not provide a transcript of any of the discussions, but he
acknowledges that the parties agreed “that ‘all issues would be preserved
unaffected.’ Both sides stated they had no objection. . . .”
Thus, the bankruptcy court similarly dismissed the Original
Adversary Proceeding. The order states that “[a]ll issues in this proceeding
having now been consolidated into the new Adv. No. 2:17-ap-01277-BB and
there being no reason for this adversary proceeding to remain pending, IT
IS HEREBY ORDERED that [the Original Adversary Proceeding] is
dismissed without prejudice.”
The parties filed competing motions for summary judgment and for
judgment on the pleadings. The court dismissed the Trustee’s claims
against Ms. Kim, Mr. Oh, and Mr. Hooshim with leave to amend.
The Trustee filed a first amended Combined Complaint, for the first
time seeking a money judgment against Mr. Oh and Mr. Hooshim in an
amount equal to the value of the deeds of trust that the court had already
determined were made with the actual intent to hinder, delay, or defraud
creditors. Mr. Oh and Mr. Hooshim again sought dismissal of the
complaint, arguing that the claims were barred by the statute of limitations
and untimely under § 546(a). They also argued that the Trustee could not
seek relief exceeding the prayer in the original adversary complaint
because the Trustee had obtained judgment by default.
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The court denied the motion as to Mr. Oh and Mr. Hooshim, agreeing
with the Trustee that the claims in the Combined Complaint related back to
the original adversary complaint because they were based on the same
facts and merely sought a different remedy. It stated that it was the intent
of the court and the parties to treat the consolidated action as merely a
continuation of the three adversary proceedings. However, it granted the
motion as to the fraudulent transfer claims against Ms. Kim because she
was not named as a defendant in the Original Adversary Proceeding.
The Trustee filed a second amended Combined Complaint, which
included claims against Ms. Kim for fraudulent transfers. Again, the
defendants filed a motion to dismiss based on the statute of limitations and
failure to state a claim against Ms. Kim. The court struck the fraudulent
transfer claims and gave the Trustee another chance to amend the
complaint.
The Trustee filed his third amended Combined Complaint. He
requested that “the Estate . . . be paid the reasonable [sic] equivalent value
of the Hooshim Deed of Trust and the Oh Deed of Trust via a joint and
severable [sic] judgment against Mr. Hooshim and Mr. Oh.”
Ms. Kim, Mr. Oh, and Mr. Hooshim answered the third amended
Combined Complaint, again asserting a statute of limitations defense. They
also filed a motion for summary judgment, arguing that the statute of
limitations barred the Trustee from seeking monetary recovery. The court
denied that motion.
8
The Trustee then filed a motion for summary adjudication. He sought
damages against Mr. Oh totaling $145,608.38 (the principal amount of the
note secured by the deed of trust plus interest).
The court granted the Trustee’s motion in part. It stated that it had
already found that the deeds of trust were executed with the actual intent
to hinder, delay, or defraud Ms. Kim’s creditors. It rejected the defendants’
argument that the claims were barred by the statute of limitations. It held
that the claims in the Combined Complaint:
are timely because the filing of this action relates back to the
filing of the original Adversary Complaint . . . . Further, the
court instructed the Plaintiff to consolidate the Original
Complaint with the prior actions by commencing a new
consolidated action (namely, the above-entitled adversary
proceeding) to more efficiently adjudicate these matters and to
prevent any inconsistent rulings. Importantly, the Plaintiff did
not give up or otherwise lose any substantive right by virtue of
the aforementioned consolidation actions.
The bankruptcy court held an evidentiary hearing on damages.
Neither Mr. Oh 4 nor the Trustee called any witnesses, so the bankruptcy
court decided the issue based on the legal arguments, stipulated facts, and
documentary evidence, including the Trustee’s counsel’s declaration.
In his trial brief, Mr. Oh again raised his defense that the claims were
barred by the statute of limitations. He argued that the Combined
4 Mr. Hooshim had settled with the Trustee and obtained approval from the
court under Rule 9019 prior to the evidentiary hearing.
9
Complaint was untimely under § 546 because it was filed more than two
years after the petition date, so the consolidation of complaints did not
affect his substantive right to raise his statute of limitations defense. He
claimed that the BAP had already ruled that the time to seek a money
judgment under § 546 had passed.
He argued that the Combined Complaint was barred under § 550,
because it was filed more than a year after the judgment setting aside the
fraudulent transfer. He also contended that the Trustee had not actually
avoided any transfer, so he could not obtain any money judgment for the
value of the transferred asset.
The court rejected these arguments. It held that claims in the
Combined Complaint were not barred by the statute of limitations because
it was a continuation of the Original Adversary Proceeding, which was
timely filed. The Original Adversary Proceeding was “only dismissed
based upon a discussion among the Court and the parties in which it was
agreed that the Trustee would file a new, single action that incorporated all
of the parties’ respective claims against one another and that no one’s
rights would be prejudiced in the process.” It thus concluded that the
remedy sought related back to the filing of the original complaint.
The court rejected Mr. Oh’s argument that the claims were barred by
§ 550(f). It said that § 550(f) concerned the commencement of an action, not
the amendment of an existing action to assert an alternate form of relief. It
also held that the fact that the Trustee did not actually recover any asset
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does not preclude recovery under § 550.
The court then valued Mr. Oh’s lien at $100,000 and awarded the
Trustee judgment in that amount. Mr. Oh timely appealed.
JURISDICTION
The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334 and
157(b)(2)(H). We have jurisdiction under 28 U.S.C. § 158.
ISSUES
(1) Whether the bankruptcy court erred in holding that the claims
and requested remedy in the Combined Complaint were not barred by the
statute of limitations.
(2) Whether the bankruptcy court erred in holding that the default
judgment in the Original Adversary Proceeding did not preclude the
Trustee from seeking a different remedy in the Combined Complaint.
(3) Whether the bankruptcy court erred because the Trustee lacked
standing to recover a monetary award under § 550.
STANDARD OF REVIEW
Mr. Oh argues that the bankruptcy court erred as a matter of law. We
review questions of law de novo. See Gerritsen v. Consulado Gen. De Mexico,
989 F.2d 340, 343 (9th Cir. 1993) (“We review an application of the statute of
limitations de novo.”); Bernhardt v. Cty. of L.A., 279 F.3d 862, 867 (9th Cir.
2002) (“Standing is a question of law reviewed de novo.”).
“De novo review requires that we consider a matter anew, as if no
decision had been made previously.” Francis v. Wallace (In re Francis), 505
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B.R. 914, 917 (9th Cir. BAP 2014).
“We may affirm on any basis supported by the record.” Caviata
Attached Homes, LLC v. U.S. Bank, Nat’l Ass’n (In re Caviata Attached Homes,
LLC), 481 B.R. 34, 44 (9th Cir. BAP 2012) (citation omitted).
DISCUSSION
A. The Combined Complaint’s request for monetary relief was timely.
Mr. Oh argues that the Trustee’s request for a monetary remedy was
untimely. We disagree.
Section 546(a) provides that:
(a) An action or proceeding under section 544 . . . of this title
may not be commenced after the earlier of –
(1) the later of –
(A) 2 years after the entry of the order for relief; or
(B) 1 year after the appointment or election of the
first trustee under section 702, 1104, 1163, 1202, or
1302 of this title if such appointment or such
election occurs before the expiration of the period
specified in subparagraph (A); or
(2) the time the case is closed or dismissed.
§ 546(a) (emphasis added).
Similarly, § 550 provides that, if a transfer is avoided, the trustee may
recover “the property transferred, or, if the court so orders, the value of
such property . . . .” § 550(a). That section also provides that:
(f) An action or proceeding under this section may not be
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commenced after the earlier of –
(1) one year after the avoidance of the transfer on
account of which recovery under this section is sought; or
(2) the time the case is closed or dismissed.
§ 550(f) (emphasis added).
Mr. Oh argues that these limitations precluded the new remedy in
the Combined Complaint. He contends that the Combined Complaint
initiated a new action (following the dismissal of the Original Adversary
Proceeding), and because that new action was commenced after the
statutory time periods had run, the Trustee’s claims were untimely. He
argues that Civil Rule 15, made applicable by Rule 7015, does not allow the
Combined Complaint to relate back to the Original Adversary Proceeding.
Mr. Oh ignores the fact that his counsel agreed on the record that the
dismissal of the Original Adversary Proceeding would have no effect on
the rights of the Trustee or anyone else in the new adversary proceeding.
The limitations periods are waivable. See, e.g., Pugh v. Brook (In re Pugh), 158
F.3d 530, 538 (11th Cir. 1998) (“[T]he limitations periods prescribed in 11
U.S.C. §§ 546(a) and 549(d) are statutes of limitations that can be waived.”).
The Ninth Circuit has stated in a non-bankruptcy context that “the statute
of limitations is not jurisdictional and can be waived” if the waiver is
knowing and voluntary. United States v. Caldwell, 859 F.2d 805, 806 (9th Cir.
1988) (citing United States v. Akmakjian, 647 F.2d 12 (9th Cir. 1981)).
Although the parties may not have specifically discussed the statute
13
of limitations, the agreement only makes sense if it included a waiver of
any defenses based on the fact that the Combined Complaint was filed later
than the first complaint. The Trustee certainly would not have sought to
dismiss the Original Adversary Proceeding and proceed under the
Combined Complaint if the dismissal would necessarily terminate his right
to recovery. The court surely would not have encouraged a dismissal
merely for the sake of efficiency and convenience if it destroyed the
plaintiff’s claims. The court made its intentions clear in the dismissal orders
in the other two actions; those orders explicitly provide that the dismissals
would not prejudice any party from pursuing their rights from the
underlying actions. Although the order in the Original Adversary
Proceeding was more terse, it must mean the same thing. Mr. Oh’s counsel
must have realized that the reservation of claims included a waiver of his
statute of limitations defense. By agreeing that the Combined Complaint
would replace the Original Adversary Proceeding, he necessarily agreed to
allow the Trustee to maintain his existing claims against him. 5
Thus, based on Mr. Oh’s agreement, the dismissal of the original
actions and the filing of the Combined Complaint did not affect the
Trustee’s ability to maintain his existing claims against Mr. Oh.
5Mr. Oh has not provided us with any transcript of the status conferences
indicating otherwise. We are entitled to presume nothing in them would help his
arguments on appeal. See Gionis v. Wayne (In re Gionis), 170 B.R. 675, 680-81 (9th Cir.
BAP 1994).
14
Mr. Oh argues at length that the Combined Complaint could not
relate back to the original adversary complaint. We need not address this
argument because the Combined Complaint was itself timely (based on
Mr. Oh’s agreement), including the amendments which added to the
Combined Complaint the avoidance claims related to the fraudulent deeds
of trust. Therefore, the claims are timely whether or not they related back
to the complaint in the Original Adversary Proceeding.
Mr. Oh also points out that the BAP’s prior decision stated that the
statute of limitations for seeking monetary relief had passed. However, as
he acknowledges, this language in the decision is dicta. This issue was not
squarely before the Panel, so neither the bankruptcy court nor this Panel is
bound by the BAP’s prior statement. See United States v. Pinjuv, 218 F.3d
1125, 1129 (9th Cir. 2000) (“We are not bound by dicta in decisions from
our court or any other circuit.”). More importantly, when the BAP made
this statement, it could not have known that Mr. Oh would waive his
defenses based on timeliness.
Mr. Oh argues that the one-year limitations period in § 550(f) bars the
Trustee from seeking recovery. But the avoidance order in the Original
Adversary Proceeding was appealed to the BAP and the Ninth Circuit and
was vacated. The Trustee could not be expected to seek monetary relief
under § 550 while the case was on appeal. Accord Giovanazzi v. Schuette (In
re Lebbos), BAP No. EC-11-1735-KiDJu, 2012 WL 6737841, at *15 (9th Cir.
BAP Dec. 31, 2012), aff’d, 600 F. App’x 521 (9th Cir. 2015) (holding that
15
laches does not bar recovery under § 550 where the trustee timely filed a
complaint within seven months of the disposition of an appeal). Thus, the
claims were not barred by the statute of limitations.
B. The vacated default judgment does not preclude monetary relief.
Mr. Oh argues that, because the court struck his answer to the
original adversary complaint, under Civil Rule 54, the Trustee could not
amend the original adversary complaint to request a monetary judgment.
Civil Rule 54(c), made applicable in adversary proceedings by Rule
7054(a), provides that “[a] default judgment must not differ in kind from,
or exceed in amount, what is demanded in the pleadings.”
But the court’s judgment in favor of the Trustee was not based on the
now-vacated default judgment in the Original Adversary Proceeding.
Instead, it was based on the claims pled and relief sought in the new
Combined Complaint. Mr. Oh responded to the Combined Complaint,
vigorously litigated it through numerous dispositive motions, and the
bankruptcy court entered a judgment on the merits after an evidentiary
hearing. This was not a default judgment, so Civil Rule 54 is inapplicable in
this case.
C. The Trustee had standing to request monetary relief under § 550.
Finally, Mr. Oh argues that the Trustee lacks standing to request
monetary relief under § 550 because the BAP held that the Trustee lacked
standing to avoid the liens. He argues, without authority, that a party who
lacks standing to request avoidance would similarly lack standing to
16
request monetary damages. He also contends that the Trustee did not
successfully “avoid” any transfer, so he cannot recover damages.
This argument confuses the concepts of “avoidance” and “recovery.”
See In re AVI, Inc., 389 B.R. at 733 (“The concepts of avoidance and recovery
are separate and distinct.”); see also Lippi v. City Bank, 955 F.2d 599, 605 (9th
Cir. 1992) (“There are, in effect, three conceptual steps to the trustee’s case;
the trustee must establish: 1) fraud or illegality under the applicable
substantive law; 2) resulting voidness or voidability of the transfer under
the applicable law so as to allow avoidance pursuant to 544(b); and
3) liability of the particular transferee pursuant to the provisions of section
550.”).
Section 548(a) and the comparable provision of California law,
California Civil Code section 3439.04, permit the avoidance of transfers
made with the actual intent to hinder, delay, or defraud creditors. The
bankruptcy court held that Ms. Kim acted with the requisite intent; thus,
the deeds of trust have been avoided.
Once a transfer has been avoided, the court must determine what and
from whom the trustee may “recover” under § 550. That section generally
permits the recovery of either the transferred property or its value. See
USAA Fed. Sav. Bank v. Thacker (In re Taylor), 599 F.3d 880, 890 (9th Cir.
2010) (“If a bankruptcy court permits the trustee recovery, the court has
discretion whether to award the trustee recovery of the property
transferred or the value of the property transferred.”). In this case, both the
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BAP and Ninth Circuit rejected the Trustee’s attempt to “recover” the
transferred property interest – the lien that Ms. Kim’s LLC granted to
Mr. Oh – because that recovery would not have redressed the injury to the
estate that the fraudulent transfer caused. Lien avoidance would not have
benefitted the estate at all. Rather, it would have benefitted only the buyer
of the Property: Ms. Kim, who perpetuated the fraudulent transfer.
The judgment on appeal is based on the other option under § 550 –
recovery of the value of the transferred property interest. The monetary
recovery under that judgment will flow directly and exclusively to the
estate and will redress the loss to the estate. The Trustee had standing to
seek that recovery, irrespective of the BAP’s earlier holding that the Trustee
lacked standing to avoid the liens.
CONCLUSION
For the foregoing reasons, the bankruptcy court did not err in
entering a money judgment in favor of the Trustee and against Mr. Oh. We
AFFIRM.
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