                                                                         FILED
                                                                         MAR 29 2019
                           NOT FOR PUBLICATION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. NC-18-1042-KuFB

CECCHI GORI PICTURES; CECCHI                         Bk. Nos. 16-53499-MEH
GORI USA, INC.,                                               16-53500-MEH

               Debtors.                              Adv. No. 17-05007-MEH
G&G PRODUCTIONS, LLC; GABRIELE
ISRAILOVICI; GIOVANNI NAPPI,

                    Appellants,
v.                                                    MEMORANDUM*
CECCHI GORI PICTURES; CECCHI
GORI USA, INC.,

                    Appellees.

                          Argued on November 29, 2018
                           at San Francisco, California

                           Submitted on March 28, 2019

                               Filed – March 29, 2019

               Appeal from the United States Bankruptcy Court


         *
        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.
                      for the Northern District of California

          Honorable M. Elaine Hammond, Bankruptcy Judge, Presiding

Appearances:        Michael H. Weiss of Weiss & Spees, LLP argued for
                    appellants G&G Productions, LLC, Gabriel E. Israilovici,
                    and Giovanni Nappi; Ori Katz of Sheppard Mullin
                    Richter & Hampton LLP argued for appellees Cecchi Gori
                    Pictures and Cecchi Gori USA, Inc.



Before: KURTZ, FARIS, and BRAND, Bankruptcy Judges.

      Cecchi Gori Pictures (CGP) and Cecchi Gori USA, Inc. (CGUSA)

(collectively Debtors) filed an adversary complaint against G&G

Productions, LLC (G&G) and Gabriele Israilovici (collectively Defendants),1

alleging claims for, among others, avoidance and recovery of a constructive

fraudulent transfer under § 548(a)(1)(B)2 and California law. Debtors

moved for partial summary judgment on these claims. The bankruptcy

court granted Debtors' motion and ordered turnover of the transferred

property. Defendants appeal from this ruling. For the reasons explained


      1
        Debtors also named Giovannie Nappi and Vittorio Cecchi Gori as defendants.
Mr. Gori defaulted on all claims against him. Mr. Nappi was not named in the
constructive fraudulent transfer claims at issue in this appeal.
      2
       Unless specified otherwise, all chapter and section references are to the
Bankruptcy Code, 11 U.S.C. §§ 101-1532, "Rule" references are to the Federal Rules of
Bankruptcy Procedure, and "Civil Rule" references are to the Federal Rules of Civil
Procedure.

                                           2
below, we REVERSE.

                                   FACTS

A.    Prepetition Events

      Debtors, both California corporations, were part of a corporate family

of various entities that were owned or controlled by Mr. Gori, an Italian

film producer and politician. Debtors produced and developed motion

pictures and also held rights to scripts and other intellectual property that

potentially could be made into movies. CGUSA served as the holding

company, owning the various script related rights; CGP also had some

interest in those rights.

      In 2006, Mr. Gori's large production holding company Fin.Ma.Vi

S.p.A (FINMAVI) filed bankruptcy in Italy with $927 million in debt.

Mr. Gori was indicted for criminal fraud in Italy in connection with

FINMAVI's collapse.

      While Mr. Gori was preoccupied with FINMAVI's bankruptcy, he

became involved in a dispute with Gianni Nunnari, Debtors' CEO. Mr. Gori

alleged that Mr. Nunnari had engaged in self-dealing and violated his

fiduciary obligations to Debtors by trying to divert film projects to his own

production company. Mr. Gori terminated Mr. Nunnari. In turn,

Mr. Nunnari sued for wrongful termination in the California court, and

Mr. Gori filed claims against him for fraud, breach of fiduciary duty and

others.


                                       3
      Since Mr. Gori's assets were frozen due to FINMAVI's bankruptcy

and the Nunnari litigation was on-going, Mr. Gori turned to Mr. Israilovici

to provide consulting services for Debtors and for financial help. In July

2009, Debtors entered into a consulting agreement with Mr. Israilovici

whereby he was to act as a liaison between Debtors and Mr. Gori because

Mr. Gori seldom traveled to the United States and had little command of

the English language.

      1.    The Loan

      From November 2009 to October 2, 2011, Mr. Israilovici lent Debtors

a total of $1.5 million. For each loan, Mr. Gori signed and dated receipts

personally and in the name of, and on behalf of, Debtors, which he

delivered to Mr. Israilovici. Mr. Gori represented to Mr. Israilovici that

Debtors would use the advances to cover the attorney's fees and expenses

to the law firm Wolf, Rifkin, Shapiro, Schulman & Rabkin, LLP (Wolf

Rifkin) in connection with the Nunnari litigation and pay certain operating

expenses. Mr. Gori later admitted that he did not use the funds for those

purposes and that Debtors received none of the funds.

      2.    The Promissory Note

      A promissory note dated November 20, 2012 (Note) evidencing the

loan defined the "Borrower" as Mr. Gori, CGP and CGUSA. The Borrower

granted Mr. Israilovici a security interest in "scripts, contracts, brands"

(Security) until the Note was paid in full. The Note had a maturity date of


                                        4
January 15, 2015. If the Borrower defaulted in payment under the terms of

the Note or after demand for ten days, the Security would be immediately

provided to the lender, Mr. Israilovici. Mr. Gori signed the Note in his

individual capacity and on behalf of Debtors. Mr. Israilovici later testified

that he documented the loan at this time because Mr. Gori failed to pay

him for consulting services that he provided to Debtors even though the

Nunnari litigation had settled for over $5.45 million.

      3.    The Private Agreement

      On November 29, 2012, Mr. Gori, personally and as CEO of Debtors,

entered into a private agreement with Mr. Israilovici (Private Agreement).

Mr. Gori acknowledged the $1.5 million loan made by Mr. Israilovici and

promised to pay that loan and the $1 million owed to Mr. Israilovici for

consulting services. Mr. Gori also gave Mr. Israilovici the authority to

operate Debtors for the purpose of making a number of films abroad and

transferred the "Cecchi Gori" trademark "immediately" to Mr. Israilovici.

The Private Agreement stated that if Mr. Gori did not pay Mr. Israilovici

$2.5 million by January 15, 2015, Mr. Gori would transfer to Mr. Israilovici

(1) all the rights pertaining to the scripts listed in the attachment to the

agreement; (2) all the rights pertaining to remakes of the films produced by

Mr. Gori or his companies; and (3) the rights deriving from the film entitled

Silence.

      Mr. Israilovici later declared in connection with the summary


                                        5
judgment proceedings that the Cecchi Gori trademark rights and rights

pertaining to the remakes of Mr. Gori's films that were transferred to him

in the Private Agreement had not been previously transferred to Debtors.

Accordingly, Mr. Israilovici maintained that these rights were the separate

rights of Mr. Gori (Separate Gori Property) and did not belong to Debtors.

      4.    The First Assignment

      Mr. Gori did not pay Mr. Israilovici by the January 15, 2015 due date.

Accordingly, on April 1, 2015, Mr. Gori, acting for Debtors, transferred

some or all of Debtors' assets consisting of (1) forty-two film projects

(Assets); (2) film rights pertaining to the remakes of films produced by

Mr. Gori or his companies; (3) all Mr. Gori's rights derived from the film

entitled Silence, including but not limited to all Mr. Gori's rights pertaining

to a purchase agreement dated August 9, 2013, between Mr. Gori, as

owner, and Georgia Film Fund Twenty One, LLC, as purchaser;

(4) intellectual property rights including the trademark and brand name

Cecchi Gori; and (5) Mr. Gori's contractual rights arising out of certain

settlement agreements (First Assignment).

      The First Assignment acknowledged that the parties entered into the

Private Agreement dated November 29, 2012, whereby Mr. Gori, CGP and

CGUSA, defined as the "Assignor," agreed to repay Mr. Israilovici certain

monies by January 15, 2015 and, if they failed to make that payment, the

transfer of the assets reflected in the Private Agreement became effective


                                       6
January 15, 2015. The First Assignment further stated that it was an

agreement to "formally codify the transfer of any and all rights held by the

Assignor in those assets described in the 2012 [Private] Agreement, as well

as any and all rights held by Assignor in certain other assets," a complete

list of which was attached as Exhibit A. That exhibit listed forty-two scripts,

film rights, intellectual property rights, and contractual rights.

      The First Assignment further stated:

      [F]or good and valuable consideration, the mutual receipt and
      sufficiency of which is hereby acknowledged, the Parties hereto
      agree as follows:
      ...
      2.     Consideration: In consideration for Assignor's assignment of
             the Assets, Assignee has paid to Assignor as full compensation
             One Dollar ($1.00), the receipt and sufficiency of which is
             hereby acknowledged.
      ...
      8.     Entire Agreement: This Agreement (together with all
             attachments hereto) expresses the entire understanding of the
             parties hereto with respect to the matters contained herein and
             supersedes any former agreements, understandings and
             representations relating to the subject matter hereof. This
             Agreement cannot be modified or amended except by an
             instrument in writing signed by the parties hereto. This
             agreement may be executed in counterparts, and faxed or
             electronic signatures are effective.

      5.    The Second Assignment

      On the same day as the First Assignment, Mr. Israilovici and

Mr. Gori's personal attorney, Mr. Nappi, formed G&G. Mr. Israilovici then

                                       7
immediately re-transferred the Assets and Separate Gori Property to G&G

under an assignment and assumption agreement.

      G&G's operating agreement showed that Mr. Israilovici and

Mr. Nappi were the sole members of G&G, with Mr. Israilovici acting as

manager (Operating Agreement). Mr. Israilovici and Mr. Nappi each held

50% of the membership interests in G&G. Mr. Israilovici's contribution of

the Assets was valued at $2 million and Mr. Nappi's contribution,

consisting of all his rights to a Jean-Michel Basquiat painting entitled Wine

of Babylon, was also valued at $2 million.

      6.    Sale of the Assets to Fabrica Services, Inc.

      A year after the First and Second Assignments, on April 16, 2016,

G&G sold the Assets and Separate Gori Property to Fabrica Services, Inc.

(Fabrica) for $300,000, with additional payments to follow per agreement

between the parties (Fabrica Agreement).

      Fabrica's initial $300,000 payment was allocated as follows: $150,000

for a 50% interest in one asset (the project known as The Easy Life), $30,000

for the rights to the Cecchi Gori Name, and $120,000 for exclusivity for five

years in connection with the licensing to third parties or acquisition by

Fabrica of certain rights to the Assets.

B.    Bankruptcy Events

      CGP and CGUSA filed their chapter 11 petitions in December 2016.

The bankruptcy court entered an order directing the joint administration of


                                       8
the estates.

      On April 6, 2017, Mr. Israilovici filed a proof of claim for $2.5 million

based on the $1 million due to him for consulting services and the $1.5

million due under the Note.

      1.       The Adversary Proceeding

      In February 2017, Debtors filed an adversary proceeding against the

Defendants. Debtors alleged eight claims for relief, only two of which are

relevant here. In the third claim for relief, Debtors alleged that the transfer

of the Assets was constructively fraudulent under § 548(a)(1)(B). In the fifth

claim for relief, Debtors alleged that the transfer of the Assets was

constructively fraudulent under Cal. Civ. Code §§ 3439.04(a)(2). In both

claims, Debtors sought to avoid and recover the Assets from Mr. Israilovici,

the initial transferee, and G&G, the subsequent transferee.

      Defendants answered the complaint with blanket denials and

asserted numerous affirmative defenses, including that Mr. Israilovici

cancelled his prior $1.5 million loan to Debtors in exchange for the transfer

of the Assets.

      2.       Debtors' Motion For Partial Summary Judgment

      Debtors moved for partial summary judgment on their constructive

fraudulent transfer claims. Debtors maintained that it was undisputed that

there was a transfer from Debtors to Defendants and that Debtors were

rendered insolvent on the date of and after the transfer of the Assets.


                                       9
      They further argued that there was no dispute that Debtors received

$1.00 in consideration of the transfer as stated in the First Assignment, and

that this was essentially "no value." Debtors argued that the analysis for

"reasonably equivalent value" began and ended with the First Assignment

because it was fully integrated by its terms and made no mention of the

satisfaction of any present or antecedent debt owing by Debtors to

Mr. Israilovici. Debtors maintained that the bankruptcy court was

prohibited from considering any extrinsic evidence to the contrary.

      Debtors further asserted that the conduct and admissions of both

G&G and Mr. Israilovici showed that the value of the Assets was materially

in excess of $1.00. They pointed to the Operating Agreement where the

Assets were given a fair market value of $2 million at the time of the

transfer. They further noted that the Fabrica Agreement showed that

$150,000 was allocated for a 50% interest in one of the Assets (The Easy Life).

According to Debtors, this evidence established that the fair valuation of a

small portion of the Assets was worth more than $1.00.

      Finally, Debtors maintained that the transfer of the Assets did not

result in payment of pre-existing debt allegedly owed by Debtors to

Mr. Israilovici and that his loans neither directly nor indirectly benefitted

Debtors since none of the monies went to them.

      Debtors submitted several declarations in support of their motion.

      Declaration of Mr. Katz: The declaration of Mr. Ori Katz, counsel for


                                      10
Debtors, attached a copy of (1) Mr. Israilovici's declaration filed in the

adversary proceeding; (2) the First Assignment; (3) the agreement that

G&G entered into with Fabrica; (4) the Operating Agreement of G&G;

(5) an accounting of the initial $300,000 payment Fabrica made to G&G in

connection with the Fabrica Agreement; (7) the specific pages of

Mr. Israilovici's deposition taken March 24, 2016 filed in G&G Prods., LLC v.

Rusic, No. 15-02796, 2016 WL 38803032 (C.D. Cal. July 6, 2016); and (8) the

specific pages of Mr. Nappi's deposition taken May 7, 2016, filed in the

Rusic matter.

      Declaration of Mr. de Camara: Andrew de Camara, the chief

executive officer for both Debtors, testified that Debtors had no assets of

material value after the transaction on April 1, 2015, whereby Debtors

assigned the Assets to Mr. Israilovici. He further testified that a review of

all deposits to Debtors of $10,000 or more showed that none of the money

made its way directly from Mr. Israilovici or in the form of transfer through

Mr. Gori, to either debtor or Wolf Rifkin for purposes of the Nunnari

litigation.

      Declaration of Mr. Rosenbaum: Mark Rosenbaum, a partner with the

law firm of Wolf Rifkin, acted as counsel to Debtors and Mr. Gori during

the period from April 2009 to November 2012 in connection with the

Nunnari litigation. Mr. Rosenbaum declared that after June 24, 2009, Wolf

Rifkin received no payments in connection with the Nunnari litigation


                                       11
from Mr. Gori or Debtors.

      Declaration of Mr. Jayarantna: Padmal Jayarantna, an employee of

City National Bank (CNB) filed a declaration pertaining to the bank

accounts of Debtors and attached statements, checks and wires for the time

periods reflected. This declaration was submitted to show that Debtors'

bank account at CNB had a de minimis balance at all relevant times until it

was closed in July 2015.

      3.    Defendants' Opposition

      In their opposition, Defendants conceded the following: (1) there was

a transfer; (2) Debtors were or were rendered insolvent at the time of the

transfer; and (3) despite Mr. Gori's representations, they could locate no

evidence that the funds advanced by Mr. Israilovici benefitted Debtors.

Defendants did not claim that Debtors received an "indirect benefit" from

the advances.

      Defendants argued, however, that there were triable issues of fact on

whether Mr. Israilovici had given reasonably equivalent value to Debtors

in exchange for the Assets. First, Defendants asserted that the transfer was

in satisfaction of a valid obligation of Debtors to Mr. Israilovici for $1.5

million. Defendants further explained that Mr. Israilovici initially did not

recall that he had surrendered the original Note to Mr. Gori when he filed

his proof of claim. However, Mr. Gori confirmed that he obtained the

original Note shortly after the First Assignment. According to Defendants,


                                       12
once the bankruptcy court took the surrender of the Note into account, an

issue of fact arose as to whether Debtors received value for the Assets.

      Defendants also maintained that there was a triable issue of fact as to

whether the Assets had any value for Debtors' creditors. Defendants

argued that if the $1.5 million debt was discharged, the alleged $2 million

value as reflected in the G&G contribution agreement might still be

considered reasonably equivalent. Defendants further pointed out that

Debtors submitted no expert evidence on the value of the Assets.

According to Defendants, the Assets had almost no independent value to

creditors of Debtors unless coupled with the Separate Gori Property which

was transferred to Mr. Israilovici in the 2012 Private Agreement; i.e., the

trademark rights to the Cecchi Gori name and rights pertaining to the

remake of over three hundred films produced by Mr. Gori or his

companies. Defendants argued that these separate rights, which were

transferred to Fabrica, did not belong to Debtors. Defendants pointed to the

declaration of Mr. Pavlovich, the principal of Fabrica, who declared that

the Assets had no value to Fabrica without the Separate Gori Property; i.e.,

use of the Cecchi Gori trademark.

      Next, Defendants asserted that the script rights Debtors transferred to

Mr. Israilovici were "contingent" and thus it was necessary to discount the

face value of the Assets, if any, by the probability that the contingency

would occur. Defendants explained that whether the Assets could be


                                      13
turned into cash depended upon whether a production company agreed to

buy a script or project for which production financing had been arranged

and the script becomes a successful film. Defendants argued that Debtors

had to show whether any such contingency might occur at the time of the

First Assignment on April 1, 2015. Without evidence that the contingency

might occur, Defendants contended that the expected value was zero,

citing Hayden v. Denos (In re Hayden), Bankr. No. 1:14-BK-11187-MT, Adv.

No. 1:14-ap-01182-MT, 2015 WL 9491310, at *11 (Bankr. C.D. Cal. Dec. 28,

2015)(in insolvency analysis, the court observed that if there was a

contingent asset or contingent liability, that asset or liability must be

reduced to its present, or expected value) (citing Sierra Steel, Inc. v. Totten

Tubes, Inc. (In re Sierra Steel, Inc.), 96 B.R. 275, 278 (9th BAP Cir.1989)

(reducing value of a contingent liability to a present value of zero where

evidence shows zero liability on claim) (citing In re Xonics Photochemical,

Inc., 841 F.2d 198, 200 (7th Cir. 1988) (hypothesizing that where there was a

1% chance that a contingency would occur, the liability is discounted to

reflect that chance)).

      Lastly, Defendants asserted that unless Debtors had a clear chain of

title to the scripts, they had no value. Defendants maintained that of the

forty-two film projects transferred, thirteen of those projects had no value

since they had been made and Debtors expected no further payments. For

fifteen of the projects, Debtors lacked a clear chain of title and thus were


                                        14
worthless. Defendants conceded that Debtors may have owned fourteen

projects with clear title, but explained that independent film projects have

value only if the chain of title analysis is performed by independent

persons such as Thomson Compumark or Dennis Angel. Neither of these

independent persons provided a chain of title analysis. Defendants

complained that the limited chain of title analysis was done by a lawyer

that worked for Mr. Gori or Debtors. According to Defendants, without

proof that Debtors had clear title to the fourteen projects, it was impossible

to specify a value.

      Defendants submitted the following declarations in support of their

opposition:

      Declaration of Brian L. Berlandi: Brian L. Berlandi served as

transactional counsel to Mr. Gori and Debtors from June 2013 to February

2015. Mr. Berlandi declared that there were only twelve titles with

apparently clear chain of title transferred to G&G through the April 2015

transfer, but the exhibit attached to his declaration showed fourteen scripts

were owned by Debtors. Mr. Berlandi further opined that Debtors did not

own thirteen of the titles and that ownership of fifteen scripts were unclear

because there were no chain of title documents.

      Declaration of Mr. Pavlovich: Mr. Pavlovich testified that the primary

motive of Fabrica in entering into the Fabrica Agreement was to acquire the

rights to remake The Easy Life, one of Mr. Gori's separate rights. According


                                      15
to Mr. Pavlovich, Fabrica believed that the rights to remake The Easy Life

belonged to Mr. Gori. Without the remake rights to The Easy Life and the

use of the "Cecchi Gori" likeness, Fabrica viewed the film projects as having

no independent value.

      Declaration of Mr. Gori: Mr. Gori's declaration verified the amounts

loaned by Mr. Israilovici for the purpose of funding the Nunnari litigation

and Debtors' operations. He declared that he did not use the money to fund

Debtors' operations or the Nunnari litigation. He further declared that the

Private Agreement showed that the Assets and Separate Gori Property

would be transferred to Mr. Israilovici if the Note and $1 million owed for

Mr. Israilovici's consulting fees were not paid by January 15, 2015.

According to Mr. Gori, the amounts were not paid by that date and thus

the parties entered into the First Assignment. Finally, Mr. Gori declared

that shortly after the execution of the First Assignment on April 1, 2015,

someone from Mr. Israilovici's office delivered the original Note to him in

Rome.

      Supplemental Declaration of Mr. Israilovici: Mr. Israilovici's

declaration reiterated much of what was said by Mr. Gori with respect to

their various agreements. Mr. Israilovici further declared that when he had

filed his proof of claim he did not know that he had surrendered the

original Note or that possession of the original was necessary to enforce it.

      Mr. Israilovici also explained that developing script rights entails


                                      16
numerous costs which can be recouped only if a production company

decides to move forward with the project and obtains financing. Even then,

there was no guarantee that the script rights owner will receive full

reimbursement for its sunk costs. Mr. Israilovici declared that there were

vast uncertainties of getting a film produced and even greater uncertainty

that the film would succeed. Accordingly, he concluded that the value of a

script right was highly contingent.

      Mr. Israilovici further declared that absent independent proof that

Debtors had clean title to each of the film projects, it was impossible to

value these assets.

      Finally, he declared that Mr. Gori's personal right to remake over

three hundred films already produced was included in the rights

transferred in the First Assignment. Mr. Israilovici declared that Mr. Gori

had not previously transferred these rights to Debtors prior to their

November 29, 2012 agreement. He stated that the part of the remake rights

to The Easy Life belonged to him because he acquired them from Mr. Gori

on November 29, 2012; whereas, Debtors' rights were limited to a new

script based on the concept of the earlier movie. According to

Mr. Israilovici, without both rights, neither party could claim clear title and

thus could not make the movie.

      Mr. Israilovici also declared that the $2 million value attributed to the

Assets and other rights contributed to G&G represented his approximate


                                      17
"cost basis" or "book value" of those assets; i.e., the approximate amount he

had paid for or invested in them, not his assessment of the then-current fair

market of the Assets. According to Mr. Israilovici, the value assigned was

attributed to a combination of Debtors' Assets with the Separate Gori

Property which substantially enhanced their value.

      4.    The Bankruptcy Court's Ruling

      After a hearing, the bankruptcy court took the matter under

submission. On February 2, 2018, the bankruptcy court granted Debtors'

motion for partial summary judgment finding that Debtors had shown

there was no genuine dispute of material fact on any element of a

constructive fraudulent transfer claim under § 548(a)(1)(B).

      The court first noted that Defendants conceded that Debtors

transferred substantially all of their assets to Mr. Israilovici on April 1,

2015, less than two years from the petition date, and that Debtors were

insolvent on the date of that transfer.

      In addition, the bankruptcy court found that Debtors did not receive

reasonably equivalent value for the transfer of the Assets. Using the two-

step analysis for determining reasonable equivalent value that is employed

in this Circuit, the bankruptcy court considered whether value was given

in exchange for substantially all of Debtors' Assets. Ultimately, the court

concluded that the value given was $1.00 as reflected in the First

Assignment.


                                          18
      The court reached this conclusion for two reasons. First, it rejected

Defendants' argument that more than $1.00 value was given because

Defendants surrendered the Note to Mr. Gori thereby suggesting that the

$1.5 million debt was satisfied. The bankruptcy court reasoned that the

First Assignment was a fully integrated agreement and thus parol evidence

was inadmissible. Without parol evidence, the court found that there was

no evidence to support Defendants' assertion that the Assets were

transferred in satisfaction of a debt.

      Next, the court held, as a matter of law, that the underlying Note was

not discharged by surrender to Mr. Gori as it was not a negotiable

instrument under California law. The bankruptcy court noted that Cal.

Com. Code § 3604 permits a lender to discharge an instrument by

surrender. An instrument is defined in Cal. Com. Code § 3104(b) as a

negotiable instrument. Cal. Comm. Code § 3104(a) defines a negotiable

instrument as, among other things, an unconditional promise or order to

pay a fixed amount of money, payable to a bearer or to order at the time it

is issued or first comes into possession of a holder.

      The bankruptcy court held that the Note was not made payable to

bearer. The court also noted that to qualify as made "to order," the Note

must contain the language "payable to the order of" or similar language. See

Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A. v. Baily, 710 F. Supp. 737,

738-39 (C.D. Cal. 1989); Banco Mercantil S.A. v. Sauls, Inc., 140 Cal. App. 2d


                                         19
316, 318-19 (1956); Cal. Com. Code § 3109. Since the Note merely stated that

it was payable to Lender, it was not a negotiable instrument and its

surrender, without more, did not constitute discharge. Accordingly, the

only value given by Mr. Israilovici in exchange for the Assets was $1.00 as

reflected in the First Assignment.

      Turning to the second step of the analysis, the bankruptcy court

considered whether the $1.00 value given was reasonably equivalent to the

value of the Assets. There was no direct evidence of the value of the Assets.

Instead, the court relied upon circumstantial evidence from which it made

inferences of value. The bankruptcy court observed that Mr. Israilovici's

contemporaneous capital contribution of the Assets to G&G which were

valued at $2 million was evidence that the Assets were worth more than

$1.00. The bankruptcy court rejected Defendants' argument that

Mr. Israilovici's contribution was not reflective of market value, but instead

based on book value, because this was contrary to the language in the

Operating Agreement and Contribution Agreement which referred to fair

market value of the property contributed.

      The bankruptcy court also considered whether the Separate Gori

Property, which was part of Mr. Israilovici's capital contribution to G&G,

was worth $2.0 million thereby leaving the Assets worth nothing or close to

$1.00, or whether the value of the separate property was inseparable from

the Assets such that one could not determine if they were worth more than


                                      20
$1.00. The bankruptcy court found that per the terms of the Fabrica

Agreement, Fabrica paid $30,000 for use of the Cecchi Gori name in 2016.

According to the court, if the Cecchi Gori name was only worth $30,000 in a

subsequent sale to Fabrica, Defendants' argument meant that the Separate

Gori Property was worth about $1,970,000.00. The court found no evidence

showing, directly or indirectly, that these various rights were worth that

amount.

      In addition, the court noted that the Fabrica Agreement delineated a

$5,000 payment for each one of the Assets that held "activity or interest,"

which was further indication that the Assets themselves held some value,

whether it be $5,000 per project as decided by the Fabrica Agreement, or

some other amount.

      In the end, the court concluded that the First Assignment's net effect

was a drain on the estate, as it resulted in all of Debtors' assets being

transferred away. Moreover, the bankruptcy court noted that the question

before it was merely whether the Assets were worth more than $1.00.

Mr. Israilovici's capital contribution and amounts received from the Fabrica

Agreement were probative evidence that the Assets were worth more than

$1.00 and this evidence was undisputed. Accordingly, the bankruptcy court

found that Debtors did not receive reasonably equivalent value for the

Assets.

      The bankruptcy court then found that the Fabrica Agreement showed


                                       21
there was a market for the Assets and that the market was willing to offer

more than $1.00. Although the court found that the Fabrica Agreement was

relevant to the finding of value, the court noted that it was not dispositive

because it occurred over a year after the First Assignment and Operating

Agreement. Nonetheless, the subsequent sale to Fabrica indicated that the

Assets were not blindly unloaded to G&G in an effort to lighten a sinking

ship - clearly, the Assets were worth a second marketing and sale effort.

      In addition, the bankruptcy court found no evidence in the record

indicating that the Assets were worthless or should be discounted to zero

to reflect their contingent value at the time of the transfer; i.e., that their

value was dependent on their future purchase by a production company or

on other development. The court distinguished the various cases cited and

noted that although the full potential of the Assets' value may only be

realized upon sale and production, they retained some value independent

of these events.

      The bankruptcy court also rejected Defendants' argument that the

value of the Assets should be discounted to nothing because at least

twenty-eight of the film rights lacked a clear chain of title. The court found

that, even assuming that the twenty-eight projects were wholly worthless,

at least fourteen of the remaining projects were free from title issues. The

bankruptcy court noted that a limited chain of title analysis had been

performed on these projects and that they were later sold under the Fabrica


                                        22
Agreement, which was further evidence of some value.

      Finally, the bankruptcy court found that Mr. Pavlovich's declaration

was not admissible to re-interpret the values assigned within the Fabrica

Agreement because the agreement was integrated and there were no

ambiguities.

      In sum, the bankruptcy court found that Defendants had not shown

any disputed issues of material fact regarding the value of the Assets.

Therefore, as a matter of law, it was reasonable to infer from the evidence

provided by Debtors that the Assets transferred were worth more than

$1.00 and thus Debtors did not receive reasonably equivalent value in

exchange.

      On February 8, 2018, the bankruptcy court entered judgment in favor

of Debtors. The judgment, which contained a Civil Rule 54(b) certification,

stated that the transfer of the Assets to Defendants was found fraudulent

under § 548(a)(1)(B) and Cal. Civ. Code § 3439.04(a)(2). Defendants filed a

timely appeal.

                              JURISDICTION

      The bankruptcy court had jurisdiction pursuant to 28 U.S.C. §§ 1334

and 157(b)(2)(H). We have jurisdiction under 28 U.S.C. § 158.

                                  ISSUES

      Whether the bankruptcy court erred in finding that, as a matter of

law, Mr. Israilovici gave $1.00 in "value" in exchange for the Assets; and


                                      23
      Whether the bankruptcy court erred in finding that, as a matter of

law, the $1.00 given in value was not reasonably equivalent to what

Defendants received.

                         STANDARD OF REVIEW

      We review de novo a bankruptcy court's decision to grant summary

judgment. Marciano v. Fahs (In re Marciano), 459 B.R. 27, 35 (9th Cir. BAP

2011), aff'd, 708 F.3d 1123 (9th Cir. 2013). De novo review requires that "we

consider a matter anew, as if no decision had been rendered previously."

Mele v. Mele (In re Mele), 501 B.R. 357, 362 (9th Cir. BAP 2013).

                                DISCUSSION

A.    Legal Standards: Summary Judgment

      In reviewing the bankruptcy court's decision on a motion for

summary judgment, we apply the same standards as the bankruptcy court.

Summary judgment is properly granted when no genuine and disputed

issues of material fact remain, and, when viewing the evidence most

favorably to the non-moving party, the movant is entitled to prevail as a

matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). Material

facts which would preclude entry of summary judgment are those which,

under applicable substantive law, could affect the outcome of the case. The

substantive law will identify which facts are material. Anderson v. Liberty

Lobby, Inc., 477 U.S. 242, 248 (1986). At the summary judgment stage, the

court does not weigh the evidence and determine the truth of the matter,


                                       24
but determines whether there is a genuine issue for trial. Id. at 249.

      The moving party bears the initial burden of showing that there is no

material factual dispute. If the moving party meets its initial burden, the

burden then shifts to the non-moving party to set out, by affidavits or

admissible discovery material, specific facts showing a genuine issue for

trial. Celotex, 477 U.S. at 324. The party opposing summary judgment must

produce affirmative evidence that is sufficiently probative on the issue that

a jury reasonably could rely on that evidence to decide the issue in his

favor at trial. Matsushita Elec. Indust. Co., Inc. v. Zenith Radio Corp., 475 U.S.

574, 588 (1986). Without such evidence, there is no reason for a trial. Celotex,

477 U.S. at 323.

      Finally, the evidence presented by the parties must be admissible. Orr

v. Bank of Am., NT & SA, 285 F.3d 764, 773 (9th Cir. 2002) ("A trial court can

[ ] consider [only] admissible evidence in ruling on a motion for summary

judgment.").

B.    Whether Summary Judgment Was Appropriate

      Section 548(a)(1)(B) of the Bankruptcy Code provides that a transfer

of property of the debtor can be avoided by the trustee if (1) it occurred

within two years of the petition date; (2) the debtor was insolvent on the

date that such transfer was made or such obligation incurred, or became

insolvent as a result of it; and (3) the debtor received less than reasonably

equivalent value in exchange. See § 548(a)(1)(B); see also Official Comm. of


                                         25
Unsecured Creditors v. Hancock Park Capital II, L.P. (In re Fitness Holdings

Int'l, Inc.), 714 F.3d 1141, 1145 (9th Cir. 2013).

       Here, it is undisputed that Debtors had some interest in the forty-two

scripts which were transferred to Mr. Israilovici on April 1, 2015, through

the First Assignment.3 This was less than two years from the petition date,

and Debtors were insolvent on or after that date. Therefore, only the third

element, whether Debtors received less than reasonably equivalent value in

exchange for the transfer, is at issue.

       An examination into reasonably equivalent value includes two

inquires: (1) whether value was given in exchange for the transfer and

(2) whether the value of what was transferred was reasonably equivalent to

what the debtor received. Greenspan v. Orrick, Herrington & Sutcliffe LLP (In

re Brobeck, Phleger & Harrison LLP), 408 B.R. 318, 341 (Bankr. N.D. Cal. 2009).

"By its terms and application, the concept of 'reasonably equivalent value'

does not demand a precise dollar-for-dollar exchange." Hasse v. Rainsdon

(In re Pringle), 495 B.R. 447, 463 (9th Cir. BAP 2013).




       3
        We observe that under the terms of the Note, Debtors gave Mr. Israilovici a
security interest in the Assets. The bankruptcy court did not avoid this transfer or
decide that the security interest was unenforceable. A transfer of collateral to a secured
creditor is not a fraudulent transfer, so long as the security interest is enforceable and
the debtor gets appropriate credit against the debt. See In re Fitness Holdings Int'l, Inc.,
714 F.3d at 1145-46 ("to the extent a transfer constitutes repayment of the debtor’s
antecedent or present debt, the transfer is not constructively fraudulent").

                                             26
      1.     Value

      As to the first inquiry, "value" for purposes of fraudulent transfer law

means "property, or satisfaction or securing of a present or antecedent debt

of the debtor." § 548(d)(2). The parties dispute the amount Mr. Israilovici

gave in exchange for the Assets. Debtors take the position that

Mr. Israilovici gave $1.00 in exchange for the Assets as a matter of law

because that amount was reflected in the First Assignment—an integrated

agreement, which made no mention that the transfer was made in

satisfaction of a debt. Defendants argue that the parol evidence rule does

not bar evidence that a particular transaction is a fraudulent transfer. They

further contend that once all the admissible evidence is considered, it

shows there is a genuine dispute for trial as to whether Debtors' transfer of

the Assets was in satisfaction of the $1.5 million debt owed to

Mr. Israilovici.

      Before considering the summary judgment evidence, we address the

applicability of the parol evidence rule. According to the First Assignment,

California law governs the interpretation and enforcement of the

agreement between the parties. The parol evidence rule, codified in

California Code of Civil Procedure §§ 18564 and 1625,5 generally prohibits


      4
        Cal. Code Civ. Proc. § 1856 entitled "Terms in writing intended as final
expression of agreement; exclusion of parol evidence; exceptions" provides:

                                                                            (continued...)

                                           27
the introduction of either oral or written extrinsic evidence to vary, alter, or

add to the terms of an integrated written agreement. Casa Herrera, Inc. v.

Beydoun, 32 Cal. 4th 336, 343 (2004). The rule is one of substantive law

based on the concept that a written integrated contract establishes the

terms of the agreement between the parties and evidence that contradicts

the written terms is irrelevant. Id. at 343–44.

       The parol evidence rule has no applicability under these

circumstances. First, this is not a contract action. The bankruptcy court was

not required to interpret the First Assignment to determine the rights and

liabilities of the parties. Instead, the court was required to determine

whether Debtors' transfer of the Assets to Mr. Israilovici was for reasonably

equivalent value. The bankruptcy court could admit any testimony and

extrinsic evidence that was probative on this inquiry. See In re Brobeck,

Phleger Harrison LLP, 408 B.R. at 341 (in constructive fraudulent transfer


       4
        (...continued)
       (a) Terms set forth in a writing intended by the parties as a final
       expression of their agreement with respect to the terms included therein
       may not be contradicted by evidence of a prior agreement or of a
       contemporaneous oral agreement.
       5
         Cal. Code Civ. Proc. § 1625 entitled "Written contracts; effect on negotiations or
stipulations" provides:

       The execution of a contract in writing, whether the law requires it to be
       written or not, supersedes all the negotiations or stipulations concerning
       its matter which preceded or accompanied the execution of the
       instrument.

                                            28
analysis, the court examines all the circumstances surrounding the

transaction); see also Brown v. Raygoza (In re Addinton), Bankr. No. 12-10029,

2015 WL 3404505, at *4 (Bankr. E.D. Ky. May 27, 2015) (noting that a

fraudulent transfer adversary proceeding goes to the substance of the

transaction, not the interpretation of the parties' contract).

      Second, the existence of an integration clause in a contract does not,

in and by itself, exclude parol evidence. California law provides an

exception to the parol evidence rule that allows parties to contradict a

recital of executed consideration, i.e., money which the contract states has

been received. Doria v. Int'l Union, Allied Ind. Workers of Am., AFL-CIO, 196

Cal. App. 2d 22, 39 (1961); see also Shiver v. Liberty Bldg.-Loan Assn., 16

Cal.2d 296, 299 (1940); Simmons v. Cal. Inst. of Tech., 34 Cal. 2d 264, 272

(1949). Here, the $1.00 shown as consideration is a recital or mere statement

of the receipt of money and not a contract term. Accordingly, the $1.00

consideration is not conclusive and Mr. Israilovici may present extrinsic

evidence to show the true value exchanged. In sum, the bankruptcy court

erred by excluding admissible evidence on the issue of "value" by

application of the parol evidence rule.

      Moreover, "a contract may validly include the provisions of a

document not physically a part of the basic contract. . . .'It is, of course, the

law that the parties may incorporate by reference into their contract the

terms of some other document.'" Shaw v. Regents of Univ. of Cal., 58 Cal.


                                        29
App. 4th 44, 54 (1997). "The contract need not recite that it 'incorporates'

another document, so long as it 'guide[s] the reader to the incorporated

document.'" Id.

      Here, the First Assignment refers to the Private Agreement. In that

agreement, the parties agreed that Debtors would pay Mr. Israilovici $1.5

million for his loan and $1 million for his consulting services no later than

January 15, 2015. And, if they failed to make that payment, the transfer of

the assets reflected in the Private Agreement became effective January 15,

2015. The First Assignment goes on to say that it is an agreement to

"formally codify" the transfer of those assets in the 2012 Private Agreement

as well as others. It is unclear whether the bankruptcy court considered this

language and the Private Agreement which showed the transfer of the

Assets was in satisfaction of a debt owed by Debtors to Mr. Israilovici if not

repaid by January 15, 2015.

      Finally, Defendants argue that delivery of the original Note to

Mr. Gori shows that Mr. Israilovici intended the transfer of the Assets to

satisfy the $1.5 million debt. Defendants argue that combined with other

admissible evidence such as Mr. Israilovici's lien on the Assets as

evidenced by the Note, and Mr. Gori's testimony that the original Note was

surrendered at or around the time of the First Assignment, a trier of fact

could reasonably infer that Mr. Israilovici intended to cancel the debt by

delivering the Note.


                                       30
      Granted, there is contrary evidence in the record from which a trier of

fact could also reasonably infer that Mr. Israilovici did not intend to cancel

the debt in exchange for the Assets. He filed a proof of claim showing that

he was owed the debt and declared that he did not remember delivering

the Note to Mr. Gori at the time he filed his claim. Further, Mr. Israilovici

did not submit a declaration in opposition to the summary judgment

stating that he intended to cancel the Note in exchange for the Assets.

      Presented with the contrary evidence, a court's role is only to

determine whether a genuine issue of material facts exists, not to make

determinations of credibility or weigh conflicting evidence. Anderson, 477

U.S. at 255. And the court is required to draw all justifiable inferences in

favor of the nonmovants. Id. Here, a genuine triable issue remains as to

whether the "value" given for the transfer was satisfaction of the $1.5

million debt. If the underlying debt is valid, delivery of the Note coupled

with the transfer of the Assets to Mr. Israilovici as contemplated by the

First Assignment, Mr. Israilovici's lien on the Assets, and the subsequent

delivery of the Note to Mr. Gori, provide sufficient evidence to raise an

inference that Debtors' transfer of the Assets to Mr. Israilovici was in

satisfaction of the $1.5 million debt. Because of this evidence, a contrary

inference from Mr. Israilovici's proof of claim and the lack of a declaration

regarding intent cannot be made as a matter of law. Accordingly, summary

judgment was not appropriate.


                                       31
     2.     Reasonably Equivalent to What Was Received

     Because of our decision to reverse the bankruptcy court's ruling with

respect to the "value" prong of the reasonably equivalent value analysis, it

is premature to address any remaining issues relevant to the second prong

- whether the value of what was transferred was reasonably equivalent to

what Debtors received. Although the bankruptcy court correctly found that

the forty-two scripts had value over $1.00, a more precise value may be

required.

                              CONCLUSION

     For the reasons explained above, we REVERSE.




                                     32
