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The Security National Bank of Sioux City, IA v. Vera T. Welte Testamentary Trust

Summarizing by Amir Shachmurove


Case Type:
Case Status:
22-1205 (9th Circuit, Apr 03,2023) Not Published
U.S. Bankruptcy Appellate Panel of the Ninth Circuit (BAP) affirmed the grant of summary judgment by the U.S. Bankruptcy Court for the Central District of California (BC), declaring that the $900,000 deposit of appellant Green Coin (Green Coin) towards a sale that never closed is property of the chapter 7 bankruptcy estate of Alex A. Khadvai (DR) being administered by trustee Jason M. Run (TR), because, per the purchase agreement that it had approved, Green Coin's default entitled the estate to the deposit's retention.
Procedural context:
At a hearing on the proposed sale of the single-family residence owned by the DR as an investment property on Sarbonne Road in Los Angeles (Property), the BC focused on the mechanics of the sale, timing issues, and procedures for holding and eventually distributing the sale proceeds. It did ask whether Green Coin had paid the full deposit, and the DR's counsel said it had not. Regardless, on November 16, 2021, the BC entered an order approving the sale, which specified that the DR "shall sell" and Green Coin "shall buy" the Property in accordance with the terms and conditions of the Purchase Agreement attached to the sale motion as Exhibit 1. Notably, the Purchase Agreement contained a section, paragraph 5, for identifying and incorporating any addenda to the agreement; though blank when approved, Green Coin contended there were three subsequent addenda. On December 1, 2021, the DR sent Green Coin a Notice to Buyer to Perform No. 1, directing Green Coin to perform its contractual obligation to remit the balance of the 3% deposit into escrow. Over the ensuing months, the parties would contest the specifics of this accord's "alleged cancellation." When advised of these allegations, the BC issued an order to show cause why a chapter 11 trustee should not be appointed. Months later, the case was converted to a chapter 7 one. Once conversion took place, the TR moved for summary judgment in the adversary proceeding. The TR asserted that the plain language of the Purchase Agreement, along with Green Coin’s written release of all contingencies, compelled judgment awarding the estate the $900,000 deposit as liquidated damages for Green Coin’s breach of the Purchase Agreement. Green Point vociferously countered, and Rund riposted. At an initial hearing, and after further briefing, the BC entered summary judgment in favor of the TR on September 28, 2022, and Green Coin timely appealed.
This case featured an overlap of doctor and cryptocurrency. The DR is a dermatologist and facial surgeon based in Southern California; Green Coin is a cryptocurrency company allegedly owned by a man "commonly known as Mr. Pink." In May 2021, the DR filed a chapter 11 petition. Among his assets was the Property, an asset that, though valued by him at $80 million, was encumbered by numerous deeds of trust and liens totaling over $31 million, at least according to the DR's schedules. On September 23, 2021, the DR sought judicial permission to sell the Property for $85 million to Green Coin. He attached to the sale motion a copy of the purchase agreement, and served the sale motion on two real estate agents who were representing Green Coin as the Buyer in the Purchase Agreement.
Gary A. Spraker; Frederick P. Corbit; and William J. Lafferty III

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