                                                           FILED
                                                           MAR 20 2012
 1                                                    SUSAN M SPRAUL, CLERK
                                                          U.S. BKCY. APP. PANEL
 2                                                        OF THE NINTH CIRCUIT

 3                  UNITED STATES BANKRUPTCY APPELLATE PANEL
 4                            OF THE NINTH CIRCUIT
 5   In re:                        )       BAP No. NC-11-1187-SaDH
                                   )
 6   Global Reach Investment Corp.,)      Bk. No. 10-32303
                                   )
 7                  Debtor.        )
     ______________________________)
 8                                 )
     Herman Kwai                   )
 9                                 )
                    Appellant,     )
10                                 )
     v.                            )       M E M O R A N D U M1
11                                 )
     Andrea Wirum, Trustee         )
12                                 )
                    Appellee.      )
13   ______________________________)
14                        Submitted on January 19, 2012
                           at San Francisco, California
15
                             Filed - March 20, 2012
16
                 Appeal from the United States Bankruptcy Court
17                   for the Northern District of California
18            Honorable Dennis Montali, Bankruptcy Judge, Presiding
19
     Appearances:     Chinin Tana argued for Appellant; Charles Patrick
20                    Maher of Luce, Forward, Hamilton & Scripps LLP,
                      argued for Appellee.
21
22   Before: SALTZMAN,2 DUNN and HOLLOWELL, Bankruptcy Judges.
23
24
          1
            This disposition is not appropriate for publication.
25   Although it may be cited for whatever persuasive value it may
26   have (see Fed. R. App. P. 32.1), it has no precedential value.
     See 9th Cir. BAP Rule 8013-1.
27
          2
            Hon. Deborah J. Saltzman, Bankruptcy Judge for the Central
28   District of California, sitting by designation.
 1        This appeal arises from the bankruptcy court’s order
 2   granting the chapter 73 trustee’s motion to sell the debtor’s
 3   100% interest in stock of Starble International, Ltd. (“Starble”)
 4   to D. Chan Investment Co. (Cayman) Ltd. (“Chan Investment”) as
 5   designee of Burlingame Investment Corporation (“Burlingame”).
 6   For the reasons set forth below, we AFFIRM the bankruptcy court’s
 7   order authorizing the sale of the Starble stock to Chan
 8   Investment.
 9                               I.     FACTS
10        On June 22, 2010, Global Reach Investment Corp. (the
11   “Debtor”) filed a voluntary chapter 7 petition.      In its
12   bankruptcy schedules, the Debtor listed 100% ownership of the
13   Starble stock as an asset with a value of $4.7 million.       Before
14   the Debtor’s bankruptcy filing, Herman Kwai (“Kwai”), the
15   Debtor’s sole shareholder, and Burlingame, among other entities,
16   were involved in litigation in at least three different courts
17   regarding a variety of issues related to the Debtor and Starble,
18   including matters that could impact the ownership rights to the
19   Starble stock.
20        During the bankruptcy, Andrea Wirum, the chapter 7 trustee
21   (the “Trustee”), sought to sell the Debtor’s interest in the
22   Starble stock under section 363.       After some negotiations,
23
24
25
26        3
            Unless otherwise specified, all chapter and section
27   references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and
     all “Rule” references are to the Federal Rules of Bankruptcy
28   Procedure, Rules 1001-9037.

                                        2
 1   Burlingame offered $20,0004 to purchase the Debtor’s interest in
 2   the Starble stock by quitclaim deed.   Kwai, among others,5 raised
 3   several objections to the sale, asserting that: (1) the
 4   bankruptcy court could not approve a sale where ownership of the
 5   Starble stock was in dispute based on this panel’s decision in
 6   Darby v. Zimmerman (In re Popp), 323 B.R. 260, 265 (9th Cir. BAP
 7   2005); and (2) Chan Investment was not a “good faith purchaser”
 8   under section 363(m).
 9        Over Kwai’s objections, the bankruptcy court approved the
10   Trustee’s sale of the Debtor’s interest in the Starble stock to
11   Chan Investment.   In approving the sale, the bankruptcy court
12   concluded that In re Popp did not apply because the Trustee
13   sought only to sell the Starble stock by quitclaim deed (i.e.,
14   the dispute over ownership of the stock did not matter because
15   the Trustee sought only to sell whatever interest the Debtor
16   owned in the Starble stock, even if that interest was nothing).
17   The bankruptcy court further concluded that Chan Investment was a
18   good faith purchaser within the meaning of section 363(m) because
19   it had negotiated a deal with the Trustee at arms’ length, did
20
21
          4
22          Burlingame was a creditor of the Debtor and initially made
     a purchase offer of $20,000 plus a $50,000 reduction in its claim
23   against the Debtor. Because the bankruptcy court expressed
24   concerns that a $50,000 reduction in Burlingame’s claim was
     illusory, it was eliminated from the offer.
25
          5
            In addition to Kwai, Jeffrey Chang, Michael Choy, Rafael
26   Pacquing and Chinin Tana objected to the sale of the Starble
27   stock. The bankruptcy court overruled the objections of all
     parties except Kwai because they lacked standing to object. Only
28   Kwai appealed the bankruptcy court’s order approving the sale.

                                      3
 1   not engage in fraud and did not collude with the Trustee to
 2   purchase the Starble stock.
 3           Subsequently, the bankruptcy court denied both Kwai’s timely
 4   motion to reconsider the order approving the sale and Kwai’s
 5   timely motion for a stay pending appeal.           This appeal followed,
 6   and Kwai immediately moved this Panel for a stay pending appeal.
 7   By order entered April 28, 2011, this Panel denied Kwai’s motion
 8   for stay pending appeal for lack of evidence supporting a
 9   discretionary stay pending appeal under the factors outlined in
10   Wymer v. Wymer (In re Wymer), 5 B.R. 802, 806 (9th Cir. BAP
11   1980).
12                                II.    JURISDICTION
13           The bankruptcy court had jurisdiction pursuant to 28 U.S.C.
14   §§ 1334 and 157(b)(1) and (b)(2)(N).          This Panel has jurisdiction
15   over appeals pursuant to 28 U.S.C. § 158.
16                                      III.   ISSUE
17           Whether the bankruptcy court erred in finding Chan
18   Investment a “good faith purchaser” within the meaning of section
19   363(m).
20                          IV.    STANDARDS OF REVIEW
21           This Panel reviews a bankruptcy court’s factual findings for
22   clear error.    In re BCE West, L.P., 319 F.3d 1166, 1170 (9th Cir.
23   2003) (citing Carillo v. Su (In re Su), 290 F.3d 1140, 1142 (9th
24   Cir. 2002)).    Mixed questions of law and fact are reviewed de
25   novo.    Id.   A finding is clearly erroneous if it is “illogical,
26   implausible, or without support in the record.”          Retz v. Samson
27   (In re Retz), 606 F.3d 1189, 1196 (9th Cir. 2010) (citing United
28   States v. Hinkson, 585 F.3d 1247, 1261-62 & n.21 (9th Cir. 2009)

                                               4
 1   (en banc)).
 2                             V.   DISCUSSION
 3   A.   Good Faith Finding
 4        Sales of estate property under section 363(b) and (c) are
 5   insulated from appeals by the safe harbor provision of section
 6   363(m).   Paulman v. Gateway Ventures Partners III, L.P. (In re
 7   Filtercorp, Inc.), 163 F.3d 570, 576 (9th Cir. 1998); In re
 8   Ewell, 958 F.2d 276, 280 (9th Cir. 1992); In re Onouli-Kona Land
 9   Co., 846 F.2d 1170, 1172-73 (9th Cir. 1988); see also Clear
10   Channel Outdoor, Inc. v. Knupfer (In re PW, LLC), 391 B.R. 25, 35
11   (9th Cir. BAP 2008).   Section 363(m) provides:
12        The   reversal   or  modification   on   appeal   of   an
          authorization under subsection (b) or (c) of this section
13        of a sale or lease of property does not affect the
          validity of a sale or lease under such authorization to
14        an entity that purchased or leased such property in good
          faith, whether or not such entity knew of the pendency of
15        the appeal, unless such authorization and such sale or
          lease were stayed pending appeal.
16
17   11 U.S.C. § 363(m).
18        Where no stay pending appeal is obtained, an appellate court
19   is precluded from reviewing issues other than the “good faith” of
20   the purchaser.   See Ferrari N. Am., Inc. v. Sims (In re R.B.B.,
21   Inc.), 211 F.3d 475, 478-80 (9th Cir. 2000); Ewell, 958 F.2d at
22   281 (“As indicated in § 363(m), a stay is not required to
23   challenge a sale on the grounds that an entity did not purchase
24   in good faith . . . .”); see also Licensing by Paolo v. Sinatra
25   (In re Gucci), 105 F.3d 837 (2d Cir. 1997) (failure to obtain
26   stay of order approving sale deprives appellate court of
27   jurisdiction to determine any issue other than good faith of
28   purchaser).   Phrased differently, “even though an appeal from an

                                      5
 1   order approving a sale is moot if the sale has not been stayed
 2   and is consummated, there are several exceptions.”      One such
 3   exception is “questioning whether the purchaser purchased the
 4   property in good faith.”      In re Fitzgerald, 428 B.R. 872, 880
 5   (9th Cir. BAP 2010) (citing Sw. Prods., Inc. v. Durkin (In re Sw.
 6   Prods.), 144 B.R. 100, 102-03 (9th Cir. BAP 1992)).
 7          Here, despite two attempts (one in bankruptcy court and one
 8   in this court), Kwai did not obtain a stay pending appeal.
 9   Because Kwai never successfully obtained a stay, we are precluded
10   from reviewing anything other than the “good faith” of Chan
11   Investment.
12   B.     Good Faith Purchaser
13          The Bankruptcy Code does not define “good faith purchaser,”
14   but the Panel has found a “good faith purchaser” to be one who
15   buys “in good faith” and “for value.”      T.C. Investors v. Joseph
16   (In re M Capital Corp.), 290 B.R. 743, 746 (9th Cir. BAP 2003).
17   “Typically, lack of good faith is shown by fraud, collusion
18   between the purchaser and other bidders or the trustee, or an
19   attempt to take grossly unfair advantage of other bidders.”
20   Ewell, 958 F.2d at 279.       The burden of proof to show “good faith”
21   is on the proponent of good faith.       M Capital Corp., 290 B.R. at
22   747.
23          Here, Kwai attacks the bankruptcy court’s factual finding
24   that Chan Investment was a “good faith purchaser” by arguing that
25   because Chan Investment had knowledge of adverse ownership claims
26   to the Starble stock (i.e., as the designee of Burlingame, Chan
27   Investment knew of the state court action regarding the ownership
28   dispute), it could not have been a “good faith purchaser” under

                                          6
 1   the reasoning of In re Mark Bell Furniture Warehouse, Inc.,
 2   992 F.2d 7, 8 (1st Cir. 1993).6
 3        Conversely, the Trustee argues that Chan Investment was a
 4   good faith purchaser because it negotiated the purchase of the
 5   Starble stock for $20,000 at arms’ length, no fraud or collusion
 6   existed, and Chan Investment did not take grossly unfair
 7   advantage of any other potential purchasers.   The Trustee further
 8   contends that Mark Bell is unpersuasive because it does not
 9   sufficiently define what constitutes “knowledge of adverse
10   claims.”
11        The bankruptcy court did not err in finding Chan Investment
12   a “good faith purchaser” within the meaning of section 363(m).
13   The bankruptcy court relied on both written evidence (Mitchell
14   Meyer’s declaration) and oral representations of the Trustee at
15   the sale hearing to make its decision.   Kwai has not identified
16   any factual basis to show that the bankruptcy court erred in
17   making this determination.   Instead, Kwai attempts to persuade
18   this Panel to adopt another circuit’s legal standard when the law
19   in the Ninth Circuit is clear:7 a “good faith purchaser” is one
20   who buys “in good faith” and “for value.”   M Capital Corp, 290
21
          6
22          A good faith purchaser is “one who buys property . . . for
     value, without knowledge of adverse claims.” In re Mark Bell
23   Furniture Warehouse, Inc., 992 F.2d 7, 8 (1st Cir. 1993)
24   (emphasis added).
          7
25          Mark Bell, a First Circuit decision, is not binding
     precedent in the Ninth Circuit. See Hart v. Massanari, 266 F.3d
26   1155, 1172-73 (9th Cir. 2001) (“[A]n opinion of our court is
27   binding within our circuit, not elsewhere in the country. The
     courts of appeal, and even the lower courts of other circuits,
28   may decline to follow the rule we announce . . .”).

                                       7
 1   B.R. at 746.   In the Ninth Circuit, the “good faith” inquiry
 2   centers on fraud, collusion between the purchaser and other
 3   bidders or the trustee or an attempt to take grossly unfair
 4   advantage of other bidders - not whether a buyer knows of adverse
 5   claims.   See Ewell, 958 F.2d at 279.
 6        Chan Investment’s knowledge of adverse ownership claims to
 7   the Starble stock is immaterial.       The bankruptcy court found that
 8   Chan Investment did not defraud other parties, did not collude
 9   with the Trustee, did not take grossly unfair advantage of other
10   potential purchasers and paid $20,000 for the stock.      The
11   bankruptcy court correctly applied Ninth Circuit law in finding
12   Chan Investment a “good faith purchaser” and did not err in this
13   determination.    To the extent Kwai challenges the merits of this
14   appeal based on the applicability of In re Popp, 323 B.R. 260, we
15   address this challenge below.
16   C.   Applicability of In re Popp
17        Kwai alternatively contends that the safe harbor protections
18   of section 363(m) cannot apply to a sale to which section 363
19   does not apply.   See In re Popp, 323 B.R. 260 (reversing approval
20   of a sale of real property under section 363 where the bankruptcy
21   court made a determination that the estate was authorized to sell
22   the property while litigation over ownership was pending).      Kwai
23   asserts that because ownership of the Starble stock was in
24   dispute, it was unclear whether the stock even constituted
25   property of the estate to which section 363 could apply.8
26
          8
27          Section 363 provides that “[t]he trustee, after notice and
     a hearing, may use, sell, or lease, other than in the ordinary
28                                                      (continued...)

                                        8
 1   Following In re Popp, Kwai argues that the bankruptcy court
 2   should have waited until ownership of the Starble stock was
 3   finally determined in the state court action before proceeding
 4   with a sale under section 363(b).
 5        In response, the Trustee asserts that In re Popp is
 6   inapplicable for two reasons: (1) the Trustee was selling only
 7   whatever interest the estate owned (i.e., quitclaiming the
 8   estate’s interest, if any, to the potential buyer); and (2) the
 9   Debtor specifically listed 100% ownership interest in the Starble
10   stock on its bankruptcy schedules and never disclosed a dispute
11   over ownership until the Trustee sought to sell the stock.
12        The Trustee’s arguments are more persuasive.    This case is
13   distinguishable from In re Popp.     In In re Popp, the chapter 7
14   trustee sought to convey fee title in real property while title
15   was held in a non-debtor third party’s name, and there was
16   pending litigation as to whether the real property was property
17   of the estate.   Here, the Trustee seeks only to sell whatever
18   interest, if any, the Debtor may own in the Starble stock.
19   Although several parties have sued the Debtor over ownership of
20   the stock, the Debtor unambiguously listed in Schedule B under
21   the subheading “Stock and interests in incorporated and
22   unincorporated businesses” that it “owns 500 shares of common
23   stock [in Starble International Ltd.], representing a 100%
24   interest in Starble . . . .”
25        Chan Investment knew of the pending ownership dispute, knew
26
          8
27         (...continued)
     course of business, property of the estate . . .”     11 U.S.C.
28   § 363(b)(1) (emphasis added).

                                      9
 1   the sale terms, knew it would receive the Starble stock by
 2   quitclaim deed and knew the Debtor could possibly have no
 3   ownership interest in the stock.       The bankruptcy court’s order
 4   simply authorized the Trustee to sell whatever interest the
 5   estate had – even if that interest was nothing - to a buyer with
 6   full knowledge of the situation.       Nothing in In re Popp precludes
 7   such an order.9
 8                            VI.     CONCLUSION
 9        For the reasons set forth above, the bankruptcy court did
10   not err in finding Chan Investment a good faith purchaser subject
11   to the protections of section 363(m) and authorizing the sale of
12   the Starble stock accordingly.    We AFFIRM.
13
14
15
16
17
18
19
20
21
22
23
          9
            Further, In re Popp was primarily based on In re Rodeo
24
     Canon Dev. Corp., 362 F.3d 603 (9th Cir. 2005), which held that a
25   bankruptcy court could not authorize a sale under section 363
     until the court determined whether the estate had an ownership
26   interest in the property to be sold. However, the Ninth Circuit
27   withdrew that opinion on March 8, 2005. See In re Rodeo Canon
     Dev. Corp., 2005 WL 663421, Nos. 02-56999, 02-57203 (9th Cir.
28   March 8, 2005).

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