Kim v. Wolkowitz (In re Kim)

Case Type:
Case Status:
Reversed and Remanded
BAP No. CC-16-11130TaLN (9th Circuit, Feb 15,2017) Not Published
Based on the Bankruptcy Appellate Panel's ("BAP") recent ruling in a related case; Hooshim v. Wolkowitz (In re Kim), BAP No. CC-15-1273-TaKuF, 2016 WL 2654350 (9th Cir. BAP May 2, 2016). The bankruptcy court's ruling dismissing Chonghee J. Kim ("Debtor") adversary against Edward M. Wolkowitz, Chapter 7 Trustee ("Trustee") was based on the theory of quiet title.
Procedural context:
Debtor appealed from the bankruptcy court's ruling dismissing the Debtor's adversary against Trustee on the basis of quiet title.
Before the entry of a judgment against the Debtor in favor of a law firm, the Debtor transferred investment property in California to an entity the Debtor controlled. In conjunction with this transfer the entity encumbered the property with two Deeds of Trust for the benefit of two of the Debtor's individual creditors. The law firm discovered the transfer and pursued setting the transfer aside. As a result, the Debtor caused the property to be transferred from the entity back into the Debtor's individual name; and, Debtor commenced a Chapter 7 bankruptcy. Trustee promptly pursued the sale of property. At the auction of the property, the Debtor was the successful bidder subject to any existing liens (e.g. prior Deeds of Trust recorded when property was in the name of the Debtor's entity). As the BAP noted, the sale order was final. Next, the Trustee commenced an adversary against the two beneficiaries of the Deeds of Trust recorded when the property was titled in the name of the Debtor's entity. The Trustee avoided the lien by and through the entry of default. The bankruptcy court denied the Trustee's request for recovery of title; therefore, the property remaining in Debtor's name as the prior successful bidder. This ruling was appealed. Trustee retained and pursued foreclosure of the successfully avoided liens. As a result the Debtor commenced the adversary at issue seeking to quiet title to the property. Trustee filed a motion to dismiss, the Debtor did not formally file a response; however, attended the hearing to contest the dismissal. At this point in time, the related BAP ruling had not been entered. Therefore, based on prior orders of the bankruptcy court, it held that the issues raised by the Debtor had already been adjudicated (i.e. Debtor did not buy the fraudulent transfer claim(s)). The bankruptcy court acknowledge the related adversary was on appeal and noted that the Debtor could renew her claims if the bankruptcy court was reversed. Thus, based on the BAP reversal of the bankruptcy court's ruling related to the avoidance of the Deeds of Trust; it reversed and remanded the dismissal of the Debtor's adversary v. the Trustee. The BAP also noted, that the ruling in the above related case is also on appeal to the Ninth Circuit; therefore, deferring to the bankruptcy court whether to stay the Debtor's adversary pending further consideration by the Ninth Circuit.

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