                                                           FILED
                                                            FEB 02 2012
 1                                                      SUSAN M SPRAUL, CLERK
                                                          U.S. BKCY. APP. PANEL
 2                                                        OF THE NINTH CIRCUIT
                    UNITED STATES BANKRUPTCY APPELLATE PANEL
 3
                              OF THE NINTH CIRCUIT
 4
 5   In re:                        )      BAP No.      CC-11-1375-MkLaPa
                                   )
 6   PATRICIA SANTIAGO CHRISTENSEN,)      Bk. No.      LA 08-10795-SK
                                   )
 7                  Debtor.        )      Adv. No.     LA 10-01289-SK
     ______________________________)
 8                                 )
     KATHY DOCKERY, Chapter 13     )
 9   Trustee; SAM LESLIE, Former   )
     Chapter 7 Trustee; GONZALEZ & )
10   ASSOCIATES, P.L.C.,           )
                                   )
11                  Appellants,    )
                                   )
12   v.                            )      MEMORANDUM*
                                   )
13   MARV S. BUSUEGO; REX B.       )
     CHRISTENSEN; OBOE HEALTH      )
14   SERVICES, INC.; NORA A.       )
     BUSUEGO,                      )
15                                 )
                    Appellees.     )
16   ______________________________)
17                  Argued and Submitted on January 20, 2012
                             at Pasadena, California
18
                            Filed - February 2, 2012
19
              Appeal from the United States Bankruptcy Court
20                for the Central District of California
21        Honorable Sandra R. Klein, Bankruptcy Judge, Presiding
22
     Appearances:     Rosendo Gonzalez of Gonzalez & Associates, PLC
23                    argued on behalf of Appellants Kathy Dockery, Sam
                      Leslie, and Gonzalez & Associates; Michael D.
24                    Franco argued on behalf of Appellees Marv Busuego,
                      Nora Busuego, Rex Christensen and Oboe Health
25                    Services, Inc.
26
27        *
           This disposition is not appropriate for publication.
28   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 8013-1.
 1   Before: MARKELL, LAFFERTY** and PAPPAS, Bankruptcy Judges.
 2        In this appeal, chapter 131 trustee Kathy Dockery
 3   (“Dockery”), former chapter 7 trustee Sam Leslie (“Leslie”) and
 4   the law firm that represented both Dockery and Leslie, Gonzalez &
 5   Associates (collectively, “Appellants”), appeal from the
 6   bankruptcy court’s order: (1) dismissing an adversary proceeding
 7   against Debtor’s deceased husband Rex B. Christensen (“Rex”) and
 8   others (collectively, the “Defendants”); and (2) dismissing the
 9   underlying bankruptcy case.   We MODIFY that portion of the order
10   dismissing the adversary proceeding to a dismissal without
11   prejudice and, as modified, AFFIRM the order.
12                                  FACTS
13        The essential facts are not in dispute.    In July 2004,
14   Debtor’s husband Rex acquired legal title to an office building
15   located at 1145 West 6th Street, Los Angeles, California
16   (“Property”).   The conveyance was by way of a grant deed (“Grant
17   Deed”) executed by the former owners, Lucas/Sixth Associates.
18   Concurrently with this transaction, Debtor executed an
19   interspousal transfer grant deed (“Interspousal Deed”), conveying
20   to Rex whatever interest she otherwise might have claimed in the
21   Property.   Both the Grant Deed and the Interspousal Deed were
22   recorded in the Official Records of Los Angeles County.
23
24        **
           Hon. William J. Lafferty, III, U.S. Bankruptcy Judge for
     the Northern District of California, sitting by designation.
25
          1
26         Unless specified otherwise, all chapter and section
     references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and
27   all "Rule" references are to the Federal Rules of Bankruptcy
     Procedure, Rules 1001-9037. All "Civil Rule" references are to
28   the Federal Rules of Civil Procedure.

                                      2
 1         Rex passed away in July 2005, but before he passed, in March
 2   2005, he conveyed title to the Property to his wholly-owned
 3   corporation Oboe Health Services, Inc. (“Oboe”).   The transfer
 4   was made by quitclaim deed (“Quitclaim Deed”), and was
 5   accompanied by an assignment by Rex of all of his shares of Oboe
 6   stock to his stepson, and Debtor’s son, Marv Busuego (“Marv”).
 7   Marv did not record the Quitclaim Deed until January 13, 2010,
 8   after Debtor’s bankruptcy filing.
 9         Debtor filed her chapter 7 bankruptcy case on January 21,
10   2008, and she passed away on March 29, 2009, at the age of 81,
11   before her case was closed.   Notwithstanding her death and the
12   apparent lack of any substantial assets, the Debtor’s case has
13   had a long and tortured history.
14         The tale begins in March 2008, when the Debtor converted her
15   chapter 7 case to one under chapter 13.   The apparent purpose of
16   this conversion was an attempt to save her residence, or at least
17   the equity in it.2
18         Debtor successfully confirmed a chapter 13 plan on
19   December 31, 2008.    Before she died in March 2009, Debtor made
20   some plan payments.   These stopped after her death.   Dockery,
21   however, who did not know of Debtor’s death, used the lack of
22   payments as a basis for a motion to reconvert the case to chapter
23   7.   Unaware that Debtor had passed away, the bankruptcy court
24   granted the reconversion motion on October 21, 2009.
25         Leslie was reappointed as chapter 7 trustee shortly after
26
           2
27         On her Schedule C listing of property claimed as exempt,
     Debtor claimed a homestead exemption in her residence, which
28   Leslie did not oppose.

                                        3
 1   reconversion.   On December 17, 2009, he filed an application to
 2   employ counsel, and the bankruptcy court granted this application
 3   on January 22, 2010.     Shortly after the employment of counsel, on
 4   March 8, 2010, Leslie filed a complaint against the Defendants,
 5   consisting of Rex, Oboe, Marv and Marv’s wife Nora Busuego
 6   (“Nora”).
 7        The claims set forth in the complaint all concerned the
 8   Property.   After recounting the same history of transfers and
 9   conveyances outlined above, Leslie alleged that, prior to her
10   bankruptcy filing, Debtor paid certain costs and expenses
11   associated with the Property (“Payments”).    According to Leslie,
12   the Payments constituted both actual and constructively
13   fraudulent transfers.3    Leslie further alleged that the
14   Interspousal Deed also constituted an actual and constructively
15   fraudulent transfer.
16        Leslie next alleged that due to the validity of the
17   fraudulent transfer claim regarding the Interspousal Deed, the
18   January 2010 recordation of the Quitclaim Deed (from Rex to Oboe)
19   constituted a postpetition transfer of estate property in
20   contravention of § 549(a) and a violation of the automatic stay
21   under § 362(a).
22
23
          3
           In the process of denying Leslie's subsequent summary
24   judgment motion, the bankruptcy court ruled in part that Leslie
     presented no evidence whatsoever to support his allegations
25   regarding the existence of the Payments. Leslie did not even
26   mention the Payments in his summary judgment motion. Nor did
     Appellants mention the Payments in their opening brief on appeal.
27   Appellants thus have waived any issues in relation to the
     Payments. See Golden v. Chicago Title Ins. Co. (In re Choo),
28   273 B.R. 608, 613 (9th Cir. BAP 2002).

                                        4
 1        Based on all of the above-referenced alleged transfers,
 2   Leslie additionally asserted that he was entitled pursuant to
 3   § 550(a) to recover from the Defendants the value of the property
 4   transferred.   Finally, Leslie alleged that the Debtor’s Payments
 5   caused the Debtor to acquire an interest in the Property and that
 6   the bankruptcy court should grant Leslie declaratory relief
 7   recognizing the Debtor’s interest in the Property.4
 8        In the Spring of 2010, the Defendants (except for Rex)
 9   answered the Complaint, and Oboe filed a counterclaim against
10   Leslie to quiet title to the Property.5
11        In August 2010, Leslie filed a motion for summary judgment.
12   Leslie asserted in the motion that the undisputed facts
13   established: (1) that Rex and the Debtor acquired the Property in
14   July 2004; (2) that the July 2004 Interspousal Deed constituted a
15   fraudulent transfer of the Debtor’s interest in the Property;
16   (3) that when Rex died intestate, Debtor inherited 50% or 100%
17   ownership of the Property; (4) Leslie and his counsel did not
18   learn of the Debtor’s interest in the Property until January
19   2010; (5) Leslie did not learn of Debtor’s interest in the
20   Property earlier because the Defendants concealed the facts
21   establishing that interest; and (6) at the time Marv recorded the
22   Quitclaim Deed (from Rex to Oboe), the Property was property of
23
24        4
           Apparently, Appellants also have abandoned Leslie’s
     declaratory relief claim. In addition to not mentioning the
25
     Payments, Appellants also have not mentioned anything regarding
26   any interest Debtor acquired in the Property on account of or in
     exchange for the Payments. See footnote 3, supra.
27
          5
           By stipulation between the parties, on June 16, 2010, Marv
28   was substituted in place of Rex.

                                      5
 1   the Debtor’s bankruptcy estate.   According to Leslie, these facts
 2   established Leslie’s entitlement to relief as a matter of law on
 3   his first through ninth claims for relief.
 4        On October 12, 2010, after the August 31, 2010 discovery
 5   cutoff, the Defendants filed their opposition to Leslie’s summary
 6   judgment motion.   Among other things, the Defendants argued:
 7   (1) that Debtor never acquired any interest in the Property, and
 8   disclaimed any such interest in the Property by way of the
 9   Interspousal Deed; (2) before Rex died, he validly conveyed title
10   to the Property to Oboe by way of the Quitclaim Deed; (3) the
11   fact that the Quitclaim Deed was not recorded until January 2010
12   did not render the Quitclaim Deed ineffective as against Rex or
13   his heirs; (4) Leslie’s fraudulent transfer claims for relief
14   were barred by the § 546(a) statute of limitations, which expired
15   on January 22, 2010;6 and (5) equitable tolling did not apply
16   because Leslie was aware of the relevant facts concerning his
17
          6
18         § 546(a) provides:

19        (a) An action or proceeding under section 544, 545,
          547, 548, or 553 of this title may not be commenced
20        after the earlier of --
21
              (1) the later of --
22
                 (A) 2 years after the entry of the order for
23               relief; or
24               (B) 1 year after the appointment or election
25               of the first trustee under section 702, 1104,
                 1163, 1202, or 1302 of this title if such
26               appointment or such election occurs before
                 the expiration of the period specified in
27               subparagraph (A); or
28
              (2) the time the case is closed or dismissed.

                                       6
 1   claims in February 2008.
 2        With respect to equitable tolling, the Defendants pointed to
 3   evidence demonstrating that Leslie was aware in February 2008
 4   (about 22 months before the statute of limitations ran) of all of
 5   the key facts underlying his fraudulent transfer claims.    By
 6   February 4, 2008, Leslie had obtained a chain of title search,
 7   which reflected, among other things: (1) that Rex was still of
 8   record as the holder of legal title; (2) that Rex acquired title
 9   by way of the Grant Deed; (3) that, at the time Rex acquired
10   title, Debtor contemporaneously conveyed any interest she
11   otherwise might have acquired in the Property by way of the
12   Interspousal Deed; and (4) that nothing in the chain of title
13   report reflected Rex’s conveyance of the Property to Oboe via the
14   Quitclaim Deed.   See Declaration of Brian Watkins (“Watkins
15   Declaration”) at ¶¶ 9 and exs. 34 and 35 thereto.7
16        In addition, Defendants further pointed out that, at the
17   initial meeting of creditors held on February 21, 2008, Leslie,
18   the Debtor and her counsel discussed Rex’s acquisition of the
19   Property in 2004, his conveyance of the Property to Oboe in 2005
20   shortly before his death, ownership of Oboe, the Interspousal
21   Deed, and the unrecorded Quitclaim Deed.   At various times during
22   the meeting, Debtor and her counsel identified Marv, or Marv’s
23
          7
           We did not find the Watkins Declaration in Leslie’s
24   otherwise extensive excerpts of record. Rather, we obtained an
25   electronic copy by accessing the bankruptcy court’s electronic
     adversary proceeding docket available on PACER. We can take
26   judicial notice of the filing and contents of the Watkins
     Declaration. See Atwood v. Chase Manhattan Mortg. Co. (In re
27   Atwood), 293 B.R. 227, 233 n. 9 (9th Cir. BAP 2003)(citing
     O'Rourke v. Seaboard Sur. Co. (In re E.R. Fegert, Inc.), 887 F.2d
28
     955, 957–58 (9th Cir. 1989)).

                                      7
 1   wife Nora, or both, as the owners of Oboe.   Also at this meeting,
 2   Leslie and Debtor’s counsel engaged in a colloquy that both sides
 3   have cited as evidence of their respective positions:
 4        MR. LESLIE: Did you assert -- did you look into the
          property?
 5
          MR. WATKINS: Yes.
 6
          MR. LESLIE: And can you tell me what you two uncovered?
 7
          MR. WATKINS: It was made Rex Christensen's separate
 8        property in the summer of '04.
 9        MR. LESLIE: All right.
10        MR. WATKINS: It was a business dealing with Mr.
          Christensen's [step] son. However, the deed to the
11        company that was owned by the son was unrecorded
          because of an error in the transaction. I have given
12        you a copy of the deed in '05, where the property was
          transferred from Rex Christensen to the company.
13
          MR. LESLIE: I see it went from Patricia -- well,
14        actually, to Rex. I see an unfiled deed dated December
          no, March 18th of 2005 --
15
          MR. WATKINS: Right.
16
          MR. LESLIE: -- to Oboe Health Services, Inc.
17
          MR. WATKINS: Ms. Christensen never had an ownership
18        interest in the property. The interspousal deed was
          filed during escrow prior to the actual vesting of Rex
19        Christensen, just to make sure that this was recognized
          as a separate property transaction.
20
          *   *   *
21
          MR. LESLIE: Okay. I am going to need -- because,
22        unfortunately, this isn't a recorded deed.
23        MR. WATKINS: I think it has been recorded. I just don't
          have the conformed copy.
24
          MR. LESLIE: The [chain] of title doesn't have a
25        (unintelligible) title on it.
26        MR. WATKINS: I know, but it takes a couple of weeks.
          We have been working on this nonstop –
27
          MR. LESLIE: Yeah, but I can't record post -- I need to
28        get –

                                     8
 1        MR. WATKINS: The grant deed -- the interspousal grant
          deed was recorded.
 2
          BY MR. LESLIE: Q. Right. I understand that. I
 3        understand that. . . .
 4   Transcript of Official Recording of Meeting of Creditors (Feb 21,
 5   2008) at 7:5-8:3, 9:8-21.
 6        In sum, based on the above-referenced evidence, the
 7   Defendants asserted that no one concealed anything from Leslie,
 8   nor did anyone mislead him.   Rather, Leslie knew in February 2008
 9   the factual basis that he later relied upon to assert his
10   fraudulent transfer claims.
11        On October 18, 2010, Leslie filed his response to the
12   Defendants’ opposition to his summary judgment motion.    The first
13   half of Leslie’s response is dedicated to the equitable tolling
14   issue.   Leslie did not directly confront the Defendants’
15   assertions that he was aware of the basis for his fraudulent
16   transfer claims in February 2008.     Instead, Leslie cited to a
17   laundry list of alleged omissions, misstatements and related
18   actions that according to Leslie demonstrated an intent to
19   conceal or mislead, as follows:
20   •    Debtor did not disclose in her Schedule B listing of
21        personal property that, when Rex died intestate, she was
22        Rex’s sole heir.
23   •    Debtor did not disclose in her Schedule B listing of
24        personal property that she inherited an interest in the
25        Property and in a lease between Rex as lessor and Oboe as
26        lessee (“Rex/Oboe Lease”).
27   •    Debtor did not disclose in her Schedule G listing of
28        executory contracts and unexpired leases: (1) the existence

                                       9
 1        of contracts concerning her residence in Pasadena or a
 2        parcel of property in Las Vegas; or (2) the existence of the
 3        Rex/Oboe Lease.
 4   •    Debtor did not disclose in Question 18 of her Statement of
 5        Financial Affairs (“Statement”) that she served as an
 6        officer of Oboe within six years of her bankruptcy filing.
 7   •    Debtor incorrectly testified under oath that everything in
 8        her petition, in her schedules and in her Statement was
 9        correct.
10   •    Even though Debtor’s counsel talked about the July 2004
11        Interspousal Deed at the February 21, 2008 meeting of
12        creditors, Debtor still testified at that meeting that she
13        had not transferred any of her assets in the last four
14        years.
15   •    Debtor also should have disclosed, but failed to disclose,
16        Rex’s 2005 transfer of all of his Oboe stock to Marv.
17   •    Debtor’s counsel incorrectly stated at the February 21, 2008
18        meeting of creditors that the Quitclaim Deed (from Rex to
19        Oboe) had been recorded.8
20
          8
           A fair reading of the transcript from the meeting of
21
     creditors indicates Debtor’s counsel was merely stating that he
22   thought the Quitclaim Deed had been recently recorded, admittedly
     after the filing of Debtor’s bankruptcy. See block quote from
23   Feb. 21, 2008 Transcript, supra. Otherwise, there would not have
     been any reason for him to say “it takes a couple of weeks.”
24   Presumably, he meant that it would take a couple of weeks for the
25   newly-recorded deed to show up on a chain of title report. See
     id. As it turned out, Debtor’s counsel’s statement was
26   inaccurate regarding the recent recording of the Quitclaim Deed.
     But we do not see how this inaccuracy in any way affected the
27   factual basis for any of Debtor’s claims for relief. Even if we
     were to assume that Debtor’s counsel meant to represent that the
28
                                                        (continued...)

                                      10
 1   •    In a February 28, 2008 letter from Leslie to Debtor’s
 2        counsel following up on the first meeting of creditors,
 3        Leslie reiterated his request that the Debtor produce a
 4        number of documents as discussed at the meeting, but Debtor
 5        never produced them as requested.
 6   •    Debtor’s counsel, in a letter to Marv dated March 11, 2008,
 7        talked about the Trustee’s apparent fraudulent transfer
 8        theory and about the need to convert Debtor’s case to
 9        chapter 13 (because of a relief from stay motion filed by a
10        creditor holding a first deed of trust against the Debtor’s
11        residence).
12   •    Debtor never corrected the misstatements and omissions in
13        her schedules and Statement.
14   •    When Leslie’s counsel wrote and called Marv in January 2010
15        to inquire about the Property, Marv finally recorded the
16        Quitclaim Deed.
17        Based on all of the alleged misstatements and omissions,
18   Leslie asserted that he “did not have all the required facts and
19   documentation (as required by Rule 9011 of the Federal Rules of
20   Bankruptcy Procedure) to timely commence the adversary proceeding
21   prior to January 21, 2010.”   Response to Defendant’s opposition
22   to summary judgment motion (Oct. 18, 2010) at 15:9-16.
23        At about the same time that the parties were litigating over
24   Leslie’s summary judgment motion, Marv twice moved to vacate the
25
          8
26         (...continued)
     Quitclaim Deed was recorded before the Debtor’s bankruptcy
27   filing, we still don’t see any connection between such a
     misstatement and Leslie’s fraudulent transfer claims, which are
28   based upon the Interspousal Deed and not on the Quitclaim Deed.

                                     11
 1   October 21, 2009 order reconverting Debtor’s case from chapter 13
 2   to chapter 7.   As set forth in the motion to vacate, the
 3   bankruptcy court was not made aware before entry of the
 4   reconversion order that Debtor had passed away, and in light of
 5   the Debtor’s death, her bankruptcy case should not have been
 6   reconverted on the basis of delinquent plan payments.   Leslie
 7   opposed both motions to vacate.    The bankruptcy court denied the
 8   first motion to vacate without prejudice, and the court
 9   ultimately set the hearing on the second motion to vacate for the
10   same date as the summary judgment hearing, on November 1, 2010.
11        Neither of the parties have provided us with the transcript
12   from the November 1, 2010 hearing, nor from the first continued
13   hearing, apparently held on November 3, 2010.   Consequently, we
14   don’t know precisely what transpired at either of these hearings.
15   But we do have the transcript from the final hearing on the
16   summary judgment motion and the second motion to vacate, held on
17   December 15, 2010.   This transcript, and the supplemental briefs
18   that the parties filed just prior to the final hearing, give us
19   some indication regarding what transpired at the first two
20   hearings.   Apparently, at the prior hearings, the bankruptcy
21   court rejected Leslie’s equitable tolling argument, concluded
22   that Leslie’s fraudulent transfer claims were barred by the
23   statute of limitations, and directed the parties to file
24   supplemental briefs regarding Leslie’s claims alleging a
25   postpetition transfer and violation of the stay.
26        At the December 15 hearing, the bankruptcy court ruled that
27   Leslie’s summary judgment motion would be denied.   According to
28   the bankruptcy court, Leslie’s summary judgment papers consisted

                                       12
 1   of conclusory statements regarding his key allegations, but no
 2   evidence to support these allegations.   In addition, the
 3   bankruptcy court reiterated several times its ruling that the
 4   fraudulent transfer claims were barred by the statute of
 5   limitations.   As for Marv’s second motion to vacate the order
 6   reconverting the case from chapter 13 to chapter 7, the
 7   bankruptcy court agreed with Marv that reconversion had been
 8   inappropriate in light of Debtor’s death and Rule 1016.
 9   Accordingly, the bankruptcy court granted the motion to vacate
10   the reconversion order, but warned the Defendants: “That doesn’t
11   mean, you know, the adversary proceeding disappears.    I guess it
12   will now be up to the Chapter 13 trustee to determine whether or
13   not she wants to pursue it . . . .”   Hr’g Tr. (Dec. 15, 2010) at
14   5:7-10.
15        The bankruptcy court entered orders denying Leslie’s summary
16   judgment motion and granting Marv’s motion to vacate.   After
17   that, Dockery was reappointed as chapter 13 trustee, and she
18   sought and obtained authority to retain Leslie’s counsel as her
19   special litigation counsel, so that she could continue to pursue
20   the adversary proceeding.   The bankruptcy court’s employment
21   order specified that compensation to pay for counsel’s services
22   would be awarded “only from the proceeds of any assets recovered
23   for the estate by Gonzalez & Associates.”
24        The adversary docket indicates that the adversary proceeding
25   was for the most part dormant during the first half of 2011.
26   However, in the underlying bankruptcy case, Marv filed a motion
27   to dismiss.    The operative document, Marv’s second amended motion
28   to dismiss chapter 13 case, was filed on April 26, 2011.    In that

                                      13
 1   motion, Marv argued that, because Debtor had died, she no longer
 2   was eligible for chapter 13.   Marv also claimed that Dockery as
 3   chapter 13 trustee was not authorized under the Bankruptcy Code
 4   to collect and reduce to money property of the estate because the
 5   specific provision authorizing chapter 7 trustees to do so,
 6   § 704(a)(1), did not apply to chapter 13 trustees, as set forth
 7   in § 1302(b)(1).
 8        Dockery opposed the motion, contending that she did have
 9   authority under the Bankruptcy Code to prosecute the adversary
10   proceeding.   She further asserted that she should be allowed to
11   prosecute the adversary proceeding because it was the estate’s
12   only asset and the only way creditors might receive a
13   distribution from the case.    Dockery alternately argued that, if
14   the bankruptcy court were inclined to dismiss the case, the
15   payment of all administrative claims should be made a condition
16   to dismissal.
17        While Marv’s dismissal motion was pending, Leslie and his
18   counsel filed applications for compensation for the services they
19   rendered on behalf of the estate.     In his fee application, Leslie
20   sought recovery of $24,261.00 in fees.    Meanwhile, his counsel
21   sought $110,186.00 in fees and $3,057.57 in expenses.    Marv filed
22   an opposition to the fee applications.
23        The hearing on the motion to dismiss and on the fee
24   applications originally was set for May 12, 2011.    It was then
25   rescheduled for June 15, 2011 and later continued to June 29,
26   2011, in order to allow the parties to file supplemental briefs
27   regarding what the bankruptcy court had identified as the
28   dispositive issue: whether the estate had any interest in the

                                      14
 1   Property.9
 2        The bankruptcy court ultimately granted the fee
 3   applications, but also granted the dismissal motion.   The
 4   bankruptcy court declined to condition dismissal of the case upon
 5   payment of the awarded fees.   Moreover, at the same time it ruled
 6   on the fee applications and the case dismissal motion, the
 7   bankruptcy court sua sponte dismissed the adversary proceeding.
 8   The bankruptcy court issued a lengthy tentative ruling, which it
 9   ultimately referenced and relied upon when it issued its final
10   dismissal order.   In deciding to dismiss the bankruptcy case, the
11   bankruptcy court reasoned that there was no justification for the
12   bankruptcy case to continue unless the adversary proceeding was
13   viable.   After reviewing the papers filed in support of and in
14   opposition to the prior summary judgment motion, and after
15   listening to the audio recordings from the prior summary judgment
16   hearings, Judge Klein essentially adopted Judge Carroll’s prior
17   ruling that Leslie’s fraudulent transfer claims were barred by
18   § 546(a)’s statute of limitations.   The bankruptcy court further
19   ruled that, on the undisputed facts, the bankruptcy estate had no
20   interest in the Property, so Leslie’s claims based on § 362(a)
21   and § 549(a) also must fail.   Because Leslie’s remaining claims
22   all were predicated on the fraudulent transfer claims or on the
23   § 549(a) claim, the bankruptcy court also rejected the remaining
24
          9
           From the commencement of the bankruptcy case through the
25   ruling on Leslie’s summary judgment motion, the case and the
26   adversary proceeding were assigned to Judge Ellen Carroll.
     However, shortly before the hearings on Marv’s case dismissal
27   motion and the fee applications, both the bankruptcy case and the
     adversary proceeding were administratively transferred to Judge
28   Sandra Klein.

                                     15
 1   claims.   Having determined that the adversary proceeding should
 2   be dismissed, the bankruptcy court concluded that the bankruptcy
 3   case also should be dismissed.
 4        The bankruptcy court entered on July 12, 2011, its order
 5   dismissing both the bankruptcy case and the adversary proceeding.
 6   Leslie timely appealed.
 7                                JURISDICTION
 8        The bankruptcy court had jurisdiction under 28 U.S.C.
 9   §§ 1334 and 157(b)(2)(H) and (O).      We have jurisdiction under
10   28 U.S.C. § 158.
11                                   ISSUES
12        1.   Did the bankruptcy court err when it dismissed the
13   bankruptcy case?
14        2.   Did the bankruptcy court err when it dismissed the
15   adversary proceeding?
16                             STANDARDS OF REVIEW
17        We review the bankruptcy court’s interpretation of statutes
18   and rules as questions of law under the de novo standard of
19   review.   Heath v. Am. Express Travel Related Servs. Co. (In re
20   Heath), 331 B.R. 424, 428 (9th Cir. BAP 2005).
21        We review dismissal of a chapter 13 bankruptcy case for
22   abuse of discretion.    Ellsworth v. Lifescape Med. Assocs., P.C.
23   (In re Ellsworth), 455 B.R. 904, 914 (9th Cir. BAP 2011).       To
24   ascertain whether the bankruptcy court abused its discretion, we
25   apply a two-part test.    United States v. Hinkson, 585 F.3d 1247,
26   1261–62 (9th Cir. 2009) (en banc).       First we consider de novo
27   whether the bankruptcy court identified the correct law to apply;
28   if the court identified the correct law, we then determine under

                                       16
 1   the clearly erroneous standard whether the court’s factual
 2   findings, and its application of those findings to the relevant
 3   law, were clearly erroneous.   Id.
 4         We may affirm on any basis supported by the record.      Pac.
 5   Capital Bancorp, N.A. v. E. Airport Dev., LLC (In re E. Airport
 6   Dev., LLC), 443 B.R. 823, 828 (9th Cir. BAP 2011).
 7                                DISCUSSION
 8   A.   Dismissal of Bankruptcy Case
 9         1.   Underlying law and procedure
10         Under § 1307(c), the bankruptcy court may dismiss a
11   bankruptcy case “for cause” if it is in the best interests of the
12   estate and its creditors.   While the statute sets forth a
13   nonexhaustive list of examples of “cause,” courts have identified
14   many others.   Keith M. Lundin & William H. Brown, Chapter 13
15   Bankruptcy, 4th ed., § 333.1, at ¶ 1 (Section Last Revised Jun.
16   16, 2004).    The for-cause determination is fact intensive, and
17   each case tends to turn upon its own facts.   Id.
18         In this case, in the process of ruling on Marv’s case
19   dismissal motion, the bankruptcy court determined that the
20   adversary proceeding was meritless, dismissed the adversary
21   proceeding, and ruled that the bankruptcy case also should be
22   dismissed.    According to the bankruptcy court, because the
23   adversary proceeding was the only asset of the estate and because
24   it was meritless, there was nothing for the trustee to
25   administer.
26         As a matter of procedure, Appellants initially argue that
27   the bankruptcy court improperly based its case dismissal on a
28   merits disposition of the adversary proceeding that it should not

                                      17
 1   have been making in the context of a case dismissal motion.    For
 2   purposes of this discussion, we will assume that it was improper
 3   for the bankruptcy court to fully and finally dispose of the
 4   merits of the adversary proceeding in this context.10   Even so,
 5   under the circumstances presented here, the bankruptcy court
 6   properly could assess the worth of the adversary proceeding as
 7   part of its determination of whether the bankruptcy case should
 8   be dismissed.   It is commonplace for bankruptcy courts to assess
 9   the worth of property and claims as part of the performance of
10   their duties.   For instance, bankruptcy courts routinely estimate
11   the value of claims against the estate under § 502(c)(1).    See,
12   e.g., In re Texans CUSO Ins. Group, LLC, 426 B.R. 194, 204
13   (Bankr. N.D. Tex. 2010); Future Asbestos Claimants v. Asbestos
14   Property Damage Committee (In re Federal-Mogul Global, Inc.),
15   330 B.R. 133, 154-55 (D. Del. 2005); see also First City Beaumont
16   v. Durkay (In re Ford), 967 F.2d 1047, 1049 n.3 (5th Cir. 1992)
17   (explaining that bankruptcy court claim estimation process under
18   § 502(c)(1) is at heart an equitable and discretionary process).
19        Similarly, in the context of determining whether "cause"
20   exists to grant relief from stay under § 362(d)(1), bankruptcy
21   courts routinely assess the value or worth of estate assets.
22   See, e.g., In re BLX Group, Inc., 419 B.R. 457, 469-71 (Bankr. D.
23   Mont. 2009); In re Gibson, 355 B.R. 807, 811-12 (Bankr. E.D. Cal.
24   2006); see also Pistole v. Mellor (In re Mellor), 734 F.2d 1396,
25   1401 (9th Cir. 1984) (in the context of relief from stay motion
26
27
          10
           We address the propriety of the dismissal of the adversary
28   proceeding infra.

                                     18
 1   under § 362(d)(1), assessing the value of debtor's property and
 2   holding that equity cushion of 20% constituted adequate
 3   protection of secured creditor's interest in property).
 4        Simply put, it is not at all unusual or improper for a
 5   bankruptcy court, in the context of a contested matter, to assess
 6   the value of an asset of the estate.   Moreover, it was
 7   appropriate, here, for the bankruptcy court to assess the worth
 8   of the adversary proceeding in the process of determining whether
 9   cause existed to dismiss the Debtor's bankruptcy case under
10   § 1307(c).   Appellants have admitted that the adversary
11   proceeding was the only asset of the bankruptcy estate that might
12   lead to a distribution to creditors.   Consequently, when the
13   court determined that the adversary proceeding was essentially
14   worthless, it became clear that cause existed to dismiss the
15   bankruptcy case; there was no purpose to proceeding with the case
16   when there were no assets to administer and no potential
17   distribution available to the estate's creditors.
18        Appellants contend that the bankruptcy court nonetheless
19   should have conditioned dismissal on payment of their fees.     But
20   this contention makes no sense.    Appellants have articulated no
21   viable source from which such fees could have been legally
22   required to be paid as a prerequisite to case dismissal.   In
23   support of their position, Appellants primarily rely on Gill v.
24   Hall (In re Hall), 15 B.R. 913, 915 (9th Cir. BAP 1981), but Hall
25   is inapposite.   There, the debtor was seeking voluntary dismissal
26   of his chapter 7 case, and the Hall court noted that there was a
27   possibility of a source of assets that might be recoverable and
28   used to pay at least something in partial satisfaction of claims

                                       19
 1   against the estate.       Id. at 917.    Here, by contrast, the Debtor
 2   has passed away, and the estate has no reasonable prospect of
 3   recovering any assets to pay the Appellants’ fees or any other
 4   estate claims.
 5        Nor can Appellants credibly contend that they were not given
 6   an adequate opportunity to develop the dispositive facts and
 7   argue the key issues which the bankruptcy court relied on in
 8   concluding that the adversary proceeding essentially was
 9   worthless.    The parties extensively briefed the application of
10   equitable tolling, whether the Property was property of the
11   Debtor’s bankruptcy estate, and the efficacy/validity of the
12   unrecorded Quitclaim Deed.      Furthermore, the bankruptcy court
13   held a number of hearings at which the parties were given the
14   opportunity to orally argue these same points.        All of this
15   briefing and argument occurred after the close of discovery in
16   the adversary proceeding, and occurred in contexts in which the
17   parties had every incentive to present their best arguments and
18   to present all of their evidence in support of these arguments.
19        In short, the bankruptcy court properly considered the worth
20   of the adversary proceeding when it dismissed the underlying
21   bankruptcy case.
22        2.      Accuracy of bankruptcy court assessment of adversary
23                proceeding
24        Even though we have held, above, that the bankruptcy court
25   properly could assess the worth of the adversary proceeding in
26   the process of ruling on Marv’s case dismissal motion, Appellants
27   also complain that the bankruptcy court’s assessment was wrong.
28   They contend that the bankruptcy court reached the wrong

                                         20
 1   conclusion regarding each of the key adversary proceeding issues
 2   the court considered: (1) the applicability of equitable tolling,
 3   (2) the efficacy/validity of the unrecorded Quitclaim Deed, and
 4   (3) whether the Property was property of the estate.   We will
 5   address each of these issues below.
 6              a.   Applicability of equitable tolling
 7        The doctrine of equitable tolling may be applied to the
 8   limitations period set forth in § 546(a).   Ernst & Young v.
 9   Matsumoto (In re United Ins. Mgmt., Inc.), 14 F.3d 1380, 1384-85
10   (9th Cir. 1994).    Under the equitable tolling doctrine, when a
11   litigant “‘remains in ignorance of [a wrong] without any fault or
12   want of diligence or care on his part,’” the limitations period
13   will not run until the wrong is discovered.   Id. at 1384
14   (emphasis added) (quoting Lampf, Pleva, Lipkind, Prupis &
15   Petigrow v. Gilbertson, 501 U.S. 350 (1991)).    Ordinarily,
16   whether equitable tolling applies in a particular case is a
17   question of fact.   In re United Ins. Mgmt., 14 F.3d at 1385.
18   However,
19        when application of equitable tolling turns on the
          plaintiff's diligence in discovering a cause of action,
20        courts may hold, as a matter of law, that the doctrine
          does not apply. The extent to which a plaintiff used
21        reasonable diligence is tested by an objective
          standard. A district court may, therefore, grant a
22        summary judgment motion if the uncontroverted evidence
          irrefutably demonstrates that a plaintiff discovered or
23        should have discovered the fraud but failed to file a
          timely complaint.
24
25   Id. (emphasis added and internal quotation marks omitted) (citing
26   Volk v. D.A. Davidson & Co., 816 F.2d 1406, 1417 (9th Cir.
27   1987)); see also Gardenhire v. IRS (In re Gardenhire), 209 F.3d
28   1145, 1151-52 (9th Cir. 2000) (expressing doubt as to whether IRS


                                      21
 1   successfully could invoke equitable tolling when it knew,
 2   thirteen days before the deadline ran, the facts it needed to
 3   know in order to timely file a proof of claim).
 4        Here, the uncontroverted facts in the record demonstrate
 5   that Leslie knew the essentials of his fraudulent transfer claims
 6   in February 2008, but he did not commence the adversary
 7   proceeding until March 2010.    We acknowledge that the March 2008
 8   conversion of the case from chapter 7 to chapter 13 was a
 9   circumstance beyond Leslie’s control that prevented him from
10   pursuing the fraudulent transfer claims for a substantial period
11   of time.   However, the case was reconverted to chapter 7 in
12   October 2009, and Leslie was reappointed as trustee shortly
13   thereafter.     Appellants offered no evidence explaining why Leslie
14   could not have timely filed a complaint stating his fraudulent
15   transfer claims between the time of his reappointment and the
16   January 2010 deadline for filing such claims under § 546.11
17        In short, we see no error in the bankruptcy court’s
18   conclusion that equitable tolling would not apply to save the
19   Trustee’s fraudulent transfer claims.
20              b.     Property of the estate and the effect of the
21                     unrecorded Quitclaim Deed
22        Appellants argued in the bankruptcy court, and on appeal,
23
          11
24         In addition to proving reasonable diligence, Appellants
     needed to show that “some extraordinary circumstance stood in
25   [their] way and prevented timely filing.” Holland v. Florida,
26   130 S.Ct. 2549, 2562 (2010)(internal quotations omitted) (quoting
     Pace v. DiGuglielmo, 544 U.S. 408, 418 (2005)). It is doubtful
27   that Appellants could establish the requisite extraordinary
     circumstance given the facts presented here, but in light of our
28   holding on reasonable diligence, we need not reach this issue.

                                       22
 1   that Marv’s January 2010 recording of the Quitclaim Deed (from
 2   Rex to Oboe) constituted a postpetition transfer of estate
 3   property in violation of § 549 and an act against property of the
 4   estate in violation of § 362.   But Appellants’ argument is
 5   founded upon a false premise: that the Property was property of
 6   the Debtor’s that became property of her bankruptcy estate when
 7   Debtor filed bankruptcy in January 2008.   Appellants assert that
 8   the Debtor acquired her interest in the property when Rex died in
 9   July 2005 without a will.   However, that assertion only would be
10   true if we were to ignore the effect of the March 2005 Quitclaim
11   Deed, pursuant to which Rex conveyed the Property to Oboe.
12        In California, an unrecorded deed is effective between the
13   parties to the deed.   5 Harry D. Miller and Marvin B. Starr, CAL.
14   REAL ESTATE § 11:2 & n.14 (3d ed. 2009) (citing numerous cases).
15   Having conveyed the Property to Oboe, Rex had nothing to pass by
16   intestate succession to the Debtor.   See Madden v. Alpha Hardware
17   & Supply Co., 274 P.2d 705, 707 (Cal. App. 1954) (holding that
18   decedent cannot pass title in property to his heirs when he had
19   no title in the subject property at the time of his death).
20        But even if Rex somehow could have passed some interest in
21   the Property to the Debtor by intestate succession, that interest
22   still would have been subject to the unrecorded Quitclaim Deed,
23   because an unrecorded deed “is also valid and enforceable against
24   any party who subsequently acquires an interest in the property,
25   who has notice of the prior unrecorded interest, or who has
26   failed to pay a valuable consideration for the interest.” CAL.
27   REAL ESTATE, supra, at § 11:2 (emphasis added).   Here, Appellants’
28   contention that Debtor inherited the Property is fundamentally

                                     23
 1   inconsistent with any claim that Debtor paid valuable
 2   consideration for that interest.
 3        Appellants assert that Chase Manhattan Bank v. Taxel (In re
 4   Deuel),594 F.3d 1073 (9th Cir. 2010), supports their position.
 5   We disagree.   Citing Deuel, Appellants claim that, because the
 6   Quitclaim Deed was unrecorded at the time of Debtor’s bankruptcy
 7   filing, it was ineffective as against Debtor’s bankruptcy
 8   trustees, who may claim bona fide purchaser status under § 544.
 9   But Deuel is inapposite.    The holding in Deuel is premised in
10   part on the fact that the debtor there held legal title to her
11   residence at the time of her bankruptcy filing.   Based on that
12   interest, the bankruptcy trustee there could assert the status of
13   a hypothetical bona fide purchaser under § 544(a)(3).    On its
14   face, in order to avoid a transfer under § 544(a), the property
15   transferred must have been “property of the debtor” before the
16   transfer.
17        In this case, however, Debtor had no interest in the
18   Property (and never had any interest in the Property).   Under
19   California law, Rex held title to the Property as his sole and
20   separate property until he conveyed it in March 2005 to Oboe.
21   Simply put, there was no transfer of Debtor’s property for a
22   hypothetical bona fide purchaser to avoid.
23        Appellants have not disputed that, in order to prevail
24   either on their § 549 claim or on their claims under § 362, the
25   Property must have been property of the Debtor’s or property of
26   the estate.    As set forth above, neither the debtor nor the
27   estate had any interest in the Property.   Accordingly, these
28   claims lack merit.

                                      24
 1         In sum, we perceive no error in the legal conclusions the
 2   bankruptcy court relied on when it assessed the worth of the
 3   adversary proceeding.   Given that the court properly and
 4   correctly determined that the adversary proceeding was
 5   essentially worthless, it did not err when it dismissed Debtor's
 6   bankruptcy case.
 7   B.   Dismissal of Adversary Proceeding
 8         Having decided that the bankruptcy court did not err in
 9   dismissing the bankruptcy case, we next consider whether the
10   bankruptcy court properly dismissed the adversary proceeding.
11   Appellants, in essence, contend that it was inappropriate for the
12   court to dismiss the adversary proceeding on the merits when the
13   only matter before the bankruptcy court at the time was Marv’s
14   motion to dismiss the underlying bankruptcy case.
15         We agree that the bankruptcy court should not have finally
16   determined and disposed of the merits of the adversary proceeding
17   in the context of the case dismissal motion.   On a number of
18   occasions, we have held that bankruptcy courts should not finally
19   determine issues in contested matters that are properly the
20   subject of adversary proceedings.    Cogliano v. Anderson (In re
21   Cogliano), 355 B.R. 792, 804-05 (9th Cir. BAP 2006) (citing
22   cases); see also GMAC Mortgage Corp. Salisbury (In re Loloee),
23   241 B.R. 655, 660 (9th Cir. BAP 1999).   The Court of Appeals has
24   reached similar conclusions.   See, e.g., Bear v. Coben (In re
25   Golden Plan of Cal., Inc.), 829 F.2d 705, 711-12 (9th Cir. 1986);
26   Brady v. Andrew (In re Commercial W. Fin. Corp.), 761 F.2d 1329,
27   1337-38 (9th Cir. 1985).
28         However, as we mentioned above, we may affirm on any basis

                                     25
 1   supported by the record.   In re E. Airport Dev., LLC, 443 B.R. at
 2   828.   And we already have upheld, above, the bankruptcy court’s
 3   dismissal of the bankruptcy case.    In light of the case
 4   dismissal, dismissal of the adversary proceeding also was
 5   appropriate.   The dismissal of the underlying bankruptcy case
 6   ordinarily leads to the dismissal of pending adversary
 7   proceedings.   See 3 Collier on Bankruptcy ¶ 349.03[2](Alan N.
 8   Resnick and Henry J. Sommer eds., 16th ed. 2011).   While the
 9   court sometimes has discretion to retain jurisdiction over some
10   adversary proceedings, see Carraher v. Morgan Elec., Inc. (In re
11   Carraher), 971 F.2d 327, 328 (9th Cir. 1992), there are other
12   times when the case dismissal leaves the bankruptcy court with no
13   basis for exercising its discretion to retain jurisdiction.     See,
14   e.g., Clift v. Gustafson (In re Gustafson), 316 B.R. 753, 758
15   (Bankr. S.D. Ga. 2004); In re Davison, 186 B.R. 741, 742 (Bankr.
16   N.D. Fla. 1995).   These cases stand for the proposition that the
17   continued survival of bankruptcy avoidance claims depends on the
18   continued existence of the bankruptcy case.   More broadly stated,
19   if any claim for relief depends on the continued existence of the
20   bankruptcy estate and/or the continued service of the bankruptcy
21   trustee, such claim cannot survive the dismissal of the
22   underlying bankruptcy case.   See Pauley v. Bank One Colo. Corp.,
23   205 B.R. 272, 275 (D. Colo. 1997) (“The law does not allow the
24   use of discretion when an adversary proceeding depends upon the
25   bankruptcy case for its existence.”); Roma Grp., Inc. v. Michael
26   Anthony Jewelers (In re Roma Grp., Inc.), 137 B.R. 148, 150–51
27   (Bankr. S.D.N.Y. 1992) (holding that debtor's equitable
28   subordination claim ceased to exist with the dismissal of the

                                     26
 1   underlying bankruptcy case).
 2        This is precisely the situation here.   All of Appellants’
 3   claims for relief are bankruptcy avoidance and recovery claims,
 4   which contemplate the existence of an estate that will benefit
 5   from the avoidance and recovery, and the service of a trustee to
 6   pursue those claims.   In light of the dismissal of the underlying
 7   case, there no longer existed the requisite estate and the former
 8   trustees no longer had standing to continue to pursue the claims
 9   for the benefit of the former estate.    See generally § 349(b)
10   (explaining effect of case dismissal on bankruptcy estate).
11        Consequently, we may affirm the bankruptcy court’s dismissal
12   of the adversary proceeding on this alternate basis.   On the
13   other hand, a dismissal of the adversary proceeding based on
14   dismissal of the underlying bankruptcy case should not have
15   purported to determine the merits of the adversary proceeding.
16   Accordingly, we hereby MODIFY the bankruptcy court’s dismissal of
17   the adversary proceeding to a dismissal without prejudice.    When
18   a court dismisses a lawsuit on jurisdictional or procedural
19   grounds, the court should not determine the merits of the
20   lawsuit.   See Wages v. IRS, 915 F.2d 1230, 1234 (9th Cir. 1990)
21   (“A jurisdictional dismissal is not a judgment on the merits.”).
22                               CONCLUSION
23        For the reasons set forth above, we MODIFY the dismissal of
24   the adversary proceeding to a dismissal without prejudice and, as
25   modified, AFFIRM the bankruptcy court’s dismissal of both the
26   bankruptcy case and the adversary proceeding.
27
28

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