Opinion
NOT FOR PUBLICATION
Argued and Submitted at San Francisco, California: January 22, 2009
Appeal from the United States Bankruptcy Court for the Northern District of California. Honorable Thomas E. Carlson, Bankruptcy Judge, presiding. Bk. No. 08-30154. Adv. No. 08-03040.
Before: HOLLOWELL, JURY and MARKELL, Bankruptcy Judges.
MEMORANDUM
Jennifer Moore (" Moore") appeals an order of the bankruptcy court granting summary judgment in favor of the chapter 7 trustee (" Trustee"), authorizing the Trustee to sell real property coowned by the debtor and his ex-domestic partner, Moore. Moore asserts the bankruptcy court erred in granting summary judgment to the Trustee because (1) before a sale can be authorized free of her co-owner interest, the Trustee must demonstrate there is equity in the co-owned property for the bankruptcy estate; and (2) the bankruptcy court wrongly determined that the equity issue could be deferred until the Trustee brought a motion to sell the property under § 363(b) and (f). We find no error and therefore AFFIRM.
I. FACTS
Richard Hatfield (" Debtor") filed a chapter 11 bankruptcy case on January 31, 2008 which was subsequently converted to chapter 7. Debtor's primary assets are real property (single family residences) at 35 Echo Lane in Woodside, California (" Echo") and 351 Arbor Avenue in South San Francisco, California (" Arbor"). Debtor currently resides at Echo. Arbor has been sold by the Trustee and is not a subject of this appeal.
Unless otherwise indicated, all chapter, " Code, " and section references are to the Bankruptcy Code, 11 U.S.C. § § 101-1532 and to the Federal Rules of Bankruptcy Procedure, Rules 1001-9037.
Debtor and Moore began living together in 1990. They never legally married, but continued their domestic relationship until September 2001. Debtor and Moore purchased Arbor in 1990, taking title as husband and wife, tenants in common. Echo, on the other hand, was purchased in 1993 by Debtor as an " unmarried man." When the relationship between Debtor and Moore ended, Moore undertook litigation to obtain a share of all the assets they acquired during their thirteen year relationship, including Echo.
Hatfield and Moore did have a wedding ceremony, but no marriage license was filed.
A. Moore's Interest in Echo.
On December 17, 2001, Moore filed a petition for dissolution of marriage in the San Mateo Superior Court of California, seeking one-half community property interest in all of Debtor's assets (" Dissolution Action"). Marriage of Hatfield, Case No. FL-068286. On June 2, 2002, Moore recorded a lis pendens in order to provide constructive notice of her purported community property claim (" 2002 Lis Pendens").
In January, 2003, the Superior Court concluded that Moore and Debtor were not legally married and ordered Moore's petition dismissed. An order expunging the 2002 Lis Pendens on Echo was entered January 3, 2003 (" Expungement Order"). The Expungement Order was not recorded.
Moore subsequently filed a second action in the San Mateo Superior Court of California on August 21, 2003, a Complaint for Breach of Agreement, For Constructive Trust, Accounting and Breach of Agreement for Support. Moore v. Hatfield, Case No. CIV 433625. In the complaint, Moore asserted an equitable ownership of one-half of Debtor's property under the principles set forth in Marvin v. Marvin, 18 Cal.3d 660, 134 Cal.Rptr. 815, 557 P.2d 106 (1976) (we refer to Moore's August 21, 2003 complaint as the " Marvin Action").
Moore filed a second lis pendens related to the Marvin Action on February 1, 2006 (" Marvin Lis Pendens"). On January 22, 2007, the California Superior Court determined that a contractual relationship existed between Debtor and Moore and that Debtor's and Moore's assets, including Echo, should be divided equally, subject to any separate property interest Debtor could establish by contributions of his holdings that existed before 1990.
B. Liens and Judgments Encumbering Echo.
1. WaMu Deed of Trust
Debtor purchased Echo for $950,000 using purchase money financing in the amount of $665,000. In April 2001 (prior to the Dissolution Action), the property was refinanced. In conjunction with that refinancing, a new $985,000 first deed of trust with Indymac Bank was recorded. At the same time, a $205,000 line of credit was obtained and secured by a second deed of trust in favor of Greenpoint Mortgage Funding. In February 2004, Debtor refinanced the Indymac Bank and Greenpoint Mortgage Funding obligations and executed a $1,210,000 deed of trust in favor of Preferred Financial Group. That deed of trust is still secured by Echo and is now held by Washington Mutual Bank (" WaMu") (" WaMu Deed of Trust").
According to the Trustee, the Debtor is not paying on the WaMu Deed of Trust and as a result, the " carrying costs" for Echo are about $10,000 per month.
Even though the WaMu Deed of Trust was recorded after the Expungement Order of the 2002 Lis Pendens and prior to the filing of the Marvin Lis Pendens, WaMu stipulated with Moore, in December 2007 (after Moore's victory in the Marvin Action), that the WaMu Deed of Trust only encumbered Debtor's one-half interest in Echo (" WaMu Stipulation"). The WaMu Stipulation was submitted in a separate civil partition action, brought by Moore in May 2007, against Hatfield and other lienholders on Echo (" Partition Action").Moore v. Hatfield, et.al., Case No. CIV 463382. The WaMu Stipulation was not signed by all the parties to the litigation. There is no record of an order approving the WaMu Stipulation either in the record on appeal or on the Partition Action docket.
The WaMu Stipulation states, in part. " On June 19, 2002, [Moore] filed a Lis Pendens on the Property [Echo]. The Lis Pendens is prior to WAMU's Deed, and by way of this stipulation, it is acknowledged by WAMU that [Moore] holds a 1/2 (one-half) interest in the Property that is not subject to WAMU's Deed."
Moore recorded a third lis pendens May 30, 2007, against Echo in conjunction with the Partition Action (the " Partition Lis Pendens").
Because the parties presented scant information as to the context or effect of the WaMu Stipulation, we have taken judicial notice of the docket in the Partition Action, Moore v. Hatfield, et. al., Case No. CIV 463382 filed in San Mateo Superior Court. O'Rourke v. Seabord Sur. Co. (In re E.R. Fegert, Inc.), 887 F.2d 955, 957-58 (9th Cir. 1989).
Besides the WaMu Deed of Trust, there were two other major encumbrances on Echo that grew out of Debtor's businesses.
2. Sand Hill Deed of Trust
A second position deed of trust was recorded against Echo in February 2004 to secure loans in the amount of $1,509,984.92 in favor of Sand Hill Venture Group (" Sand Hill") (" Sand Hill Deed of Trust"). Sand Hill's address in the Sand Hill Deed of Trust is the same as the address of one of Debtor's companies. Sand Hill was controlled by Melvin Slager, an employee of the Debtor. The Sand Hill Deed of Trust also secures obligations in favor of other entities controlled by Slager, which we refer to as the " Sand Hill and IP Entities."
The Sand Hill and IP Entities brought suit to enforce their contractual rights in the United States District Court, Eastern District of Michigan, on March 16, 2006. I.P. Enterprises Pension Fund, et. al. v. Hatfield et. al., Case No. 06-11162. The action did not include a cause of action for judicial foreclosure but sought a judgment on eight different notes. A settlement was reached in December 2006, giving the Sand Hill and IP Entities a money judgment in the amount of $2,375,836.44.
3. Judgment Liens
In addition to the WaMu and Sand Hill Deeds of Trust, two judgment liens against Debtor as judgment debtor were recorded against Echo in favor of individual investors for prepetition debts in the approximate amount of $2,000,000 (" Judgment Liens"). The Judgment Liens were recorded in November and December 2007, within 90 days of Debtor's bankruptcy filing.
On July 11, 2008, the Trustee filed an adversary proceeding against the Sand Hill and IP Entities, Moore, and the Judgment Lienholders, seeking: (1) a determination that the WaMu Deed of Trust is secured by the entire fee of Echo; (2) the avoidance of the Sand Hill Deed of Trust under California's " one form of action" law and as a fraudulent transfer; and (3) the avoidance of the Judgment Liens as preferences (" Sand Hill Adversary"). The Sand Hill Adversary was still pending at the time the Trustee sought authorization to sell Arbor and Echo free of Moore's interest.
C. Trustee's Request to Sell Echo.
On May 8, 2008, the Trustee filed a Complaint to Sell Real Property Free and Clear of Co-Owner's Interest in order to acquire the authority to sell Arbor and Echo free and clear of Moore's co-tenancy interest (the " Adversary Proceeding"). At the same time, in the main bankruptcy case, the Trustee filed an Ex Parte Motion to Employ Real Estate Broker to sell Arbor and Echo (" Motion to Employ").
Moore responded to these actions by filing:
(1) in the main case, on May 21, 2008, an Opposition to the Motion to Employ which included, as exhibits, Debtor's bankruptcy schedules, the statement of decision in the Marvin Action, WaMu's proof of claim, and the WaMu Stipulation, to support her argument there was no equity in the properties, and therefore nothing for a real estate agent to sell;
(2) in both the main case and the Adversary Proceeding, on May 28, 2008, a Motion to Consolidate the Motion to Employ with the Adversary Proceeding (" Motion to Consolidate");
(3) in the main case, on May 30, 2008, an Amended and Restated Motion for Relief from Stay in order to permit Moore to proceed in state court with her Partition Action and an action for child support;
(4) in the Adversary Proceeding on June 10, 2008, a Motion to Dismiss Complaint Pursuant to Rule 7012 along with a request to the bankruptcy court to take judicial notice of Debtor's bankruptcy schedules (included as exhibits), as evidence of the lack of equity in the Echo and Arbor properties (" Motion to Dismiss").
Because Moore included Debtor's schedules in her Motion to Dismiss, the Motion to Dismiss was treated as a motion for summary judgment under Federal Rule of Civil Procedure 12(d) and Rule 7012(b). The Trustee filed a Counter Motion for Summary Judgment on June 27, 2008 (" Counter Motion"). Moore filed a Combined Memorandum in Support of Motions by Jennifer Moore and in Opposition to Motions by the Trustee (" Opposition"). The Opposition reiterated Moore's argument that without establishing equity in Echo the Trustee could not properly sell it under § 363(h). The Trustee did not file a reply to Moore's Opposition.
On July 17, 2008, the day before the hearing on the Motion to Dismiss and the Counter Motion, the bankruptcy court issued a Tentative Ruling Re Defendant's Motion to Dismiss and Plaintiff's Counter-Motion for Summary Judgment (" Tentative Ruling"). The bankruptcy court held, in its Tentative Ruling, that the Trustee had met the requirements of § 363(h) and authorized the Trustee to sell Echo and Arbor free of Moore's interest.
After the Tentative Ruling was issued, Moore filed a supplement to her Opposition addressing the findings made in the Tentative Ruling. The bankruptcy court then amended its Tentative Ruling, reiterating its conclusion that the Trustee was entitled to summary judgment and determining that the Trustee made a " plausible case" for establishing equity in Echo and that final determination of whether the Trustee's interest was overencumbered was not necessary prior to authorization of a sale under § 363(h).
Oral argument was held the following day, on July 18, 2008. It does not appear from the record that oral argument altered the bankruptcy court's Tentative Ruling, as amended. After the hearing, Moore filed an objection to the Trustee's proposed orders on the Motion to Dismiss and Counter Motion on the basis that the bankruptcy court did not explain the grounds for its decision and that the ruling was erroneous because it did not include a finding that a sale would benefit the estate. The bankruptcy court declined to make specific findings of fact beyond those made in its Tentative Ruling and its amended Tentative Ruling and overruled Moore's objections by written order dated July 23, 2008. It entered its order and Judgment Authorizing Sale of Real Property Free and Clear of Co-Owner's Interest on July 24, 2008, granting Trustee's Counter Motion and denying Moore's Motion to Dismiss (" Judgment Authorizing Sale").
No transcript of the July 18, 2008 hearing is available either in the record on appeal or on the bankruptcy case dockets.
Moore's Motion to Consolidate and the Trustee's Motion to Employ were also set for hearing on July 18, 2008. The record does not contain a ruling made on the Motion to Consolidate. However, the bankruptcy court apparently approved the Motion to Employ because Moore made an objection to the form of order proposed by the Trustee. The Trustee then filed an Ex Parte Motion for Modified Order on July 22, 2008. The bankruptcy court approved the Trustee's motion the following day, directing the parties to work together on sale terms prior to marketing the properties (" Modified Employment Order").
On July 25, 2008, the Trustee sought further hearing on the Motion to Employ in order to consider marketing terms (" Amended Motion to Employ"). The hearing was held August 1, 2008. After further declarations were submitted, the bankruptcy court entered its Order Granting Trustee's Amended Motion to Employ, on August 4, 2008, along with an accompanying memorandum concluding that there was no basis to sustain Moore's objection to the employment of the real estate broker and any objection regarding the sale price could be raised if and when the Trustee filed a motion under § 363(b) and (f) (" Order to Employ").
D. Moore's Appeal
Moore filed a notice of appeal on August 2, 2008 which appealed the Judgment Authorizing Sale and the Modified Employment Order entered July 24, 2008.
When Moore appealed the Modified Employment Order, there had just been further hearing on the Amended Motion to Employ and the bankruptcy court had not yet entered the Order to Employ. Moore did not file a notice of appeal of the Modified Employment Order (or the Order to Employ) in the main bankruptcy case.
On August 12, 2008, Moore filed an Amended Notice of Appeal to include the Order to Employ. Moore's Amended Notice of Appeal states she is appealing (1) the Modified Employment Order approving the Trustee's Motion to Employ, entered July 24, 2008; (2) the Judgment Authorizing Sale (along with the Tentative Ruling, the amended Tentative Ruling, and the order overruling Moore's objection to the form of order); and (3) the Order to Employ.
Moore has withdrawn her appeal as far as the Judgment Authorizing Sale relates to the Arbor property which has now been sold with Moore's consent.
II. ISSUE
Did the bankruptcy court err in entering the Judgment Authorizing Sale, as well as the Modified Employment Order and Order to Employ, which allowed the Trustee to market and sell Echo free and clear of Moore's interest?
III. JURISDICTION
The bankruptcy court had jurisdiction pursuant to 28 U.S.C. § 157(b)(2)(B). We have jurisdiction to hear appeals from final judgments, orders, and decrees under 28 U.S.C. § 158(c).
The Judgment Authorizing Sale entered in favor of the Trustee, is " a complete act of adjudication, " that " ends the litigation on its merits and leaves nothing for the court to do but execute a judgment" . Slimick v. Silva (In re Slimick), 928 F.2d 304, 307 (9th Cir. 1990) (quoting Firestone Tire & Rubber Co. v. Risjord, 449 U.S. 368, 373-74, 101 S.Ct. 669, 673-74, 66 L.Ed.2d 571 (1981)).
However, the Modified Employment Order and the Order to Employ are interlocutory orders for which no motion for leave to appeal was filed in the main bankruptcy case. See e.g., Sec. Pac. Bank Wash. v. Steinberg (In re Westwood Shake & Shingle, Inc.), 971 F.2d 387, 389-90 (9th Cir. 1992).
We have discretionary authority to review interlocutory appeals from judgments that are not final. See 28 U.S.C. § 158(a)(3); Wolkowitz v. Beverly (In re Beverly), 374 B.R. 221, 231-32 (9th Cir. BAP 2007). The Panel may treat a timely notice of appeal as a motion for leave to appeal when an order is interlocutory and no motion for leave has been filed. Cutter v. Seror (In re Cutter), 398 B.R. 6, 17 (9th Cir. BAP 2008). Granting leave to appeal is left to the discretion of the Panel and may be appropriate when the appeal would materially advance resolution of the dispute and minimize further litigation expenses. Id . Because we do not find that to be the case here, we decline to exercise such authority with respect to the Modified Employment Order and the Order to Employ. See Id . Therefore, the Panel's jurisdiction extends only over the Judgment Authorizing Sale. 28 U.S.C. § 158(a)(1).
IV. STANDARDS OF REVIEW
We review de novo the bankruptcy court's ruling on a motion for summary judgment. Woodworking Enters., Inc. v. Baird (In re Baird), 114 B.R. 198, 201 (9th Cir. BAP 1990). In conducting a de novo review, we view the evidence, in the light most favorable to the non-moving party, to determine whether the bankruptcy court correctly found that there were no genuine issues of material fact and that the moving party was entitled to judgment as a matter of law. Id.
V. DISCUSSION
A bankruptcy trustee is required to collect and reduce to money property of the estate as expeditiously as is compatible with the best interests of the parties involved. 11 U.S.C. § 704(a)(1); Cmty. Nat'l Bank & Trust Co. of N.Y. v. Persky (In re Persky), 893 F.2d 15, 19 (2d Cir. 1989). Here, the Trustee sought a declaratory judgment under § 363(h) to allow her to realize the value of Debtor's property through a sale of Echo free and clear of Moore's interest. Rule 7001(3). Section 363(h) was enacted by Congress to " facilitate the bankruptcy goal of effective distribution of the property of the bankruptcy estate by the trustee." Coan v. Bernier (In re Bernier), 176 B.R. 976, 985-86 (Bankr. D.Conn. 1995). It " makes significant changes in what constitutes property of the estate. . . . These changes will bring anything of value that the debtors have into the estate . . . for a coherent valuation of its value and transferability, and then to dispose of it for the benefit of debtor's creditors." Id . (citing H.R. Rep. No. 595, 95th Cong. 2d Sess. 175-75 (1977) reprinted in 1978 U.S.C.C.A.N. 5963, 6136-37 (1977)). Section 363(h) provides:
Notwithstanding subsection (f) of this section, the trustee may sell both the estate's interest, . . . and the interest of any co-owner in property in which the debtor had, at the time of the commencement of the case, an undivided interest as a tenant in common, joint tenant, or tenant by the entirety, only if-
(1) partition in kind of such property among the estate and such co-owners is impracticable;
(2) sale of the estate's undivided interest in such property would realize significantly less for the estate than sale of such property free of the interests of such co-owners;
(3) the benefit to the estate of a sale of such property free of the interests of co-owners outweighs the detriment, if any, to such coowners; and
(4) such property is not used in the production, transmission, or distribution, for sale, of electric energy or of natural or synthetic gas for heat, light, or power.
11 U.S.C. § 363(h).
Moore contends the Trustee must demonstrate equity in Echo before a sale free of Moore's co-ownership interest can be authorized under § 363(h). Moore bases this argument on her interpretation of the introductory language of § 363(h), which grants a bankruptcy trustee the right to sell co-owned property " notwithstanding" § 363(f). According to Moore, the use of the word " notwithstanding" in subsection (h) means that courts must " forget" about subsection (f) in considering sales of co-owned property under § 363(h).
Moore's contention that § 363(h) effectively " writes out" or supplants § 363(f) when a trustee is attempting to sell co-owned property is based upon the mistaken premise that § 363(h) is a limitation of a trustee's powers to sell under § 363(f). However, § 363(h) is actually an expansion of those rights. Section 363(f) permits a trustee " to maximize the recovery from an asset without being unduly entangled at an early stage of the proceedings in controversies concerning the existence, validity and priority of liens and other interests in the property sought to be sold." In re Takeout Taxi Holdings, Inc., 307 B.R. 525, 528 (Bankr. E.D. Va. 2004); see also, Moldo v. Clark ( In re Clark, 266 B.R. 163, 171 (9th Cir. BAP 2001).
A trustee must be able to satisfy one of the conditions specified in § 363(f) in order to proceed with a sale. In re Takeout Taxi Holdings, Inc., 307 B.R. at 529. In cases where there is no bona fide dispute about a co-owner's interest in property, the co-owner does not consent to the sale, and, state law will not permit a " money partition" of the property, § 363(f) will not provide a trustee with the power to sell the co-owned property.
However, § 363(h) " provides a method by which the estate may realize on the value of a debtor's interest in [co-owned] property" by permitting the bankruptcy trustee to sell such property without obtaining the consent of the co-owner as otherwise may be required under applicable state law. H.R. Rep. No. 95-595, 95th Cong., 1st Sess. 1977, 175-177, reprinted in 1978 U.S.C.C.A.N. 5963, 6136-38 (1977). Section 363(h), therefore, does not supplant § 363(f) when co-owned property is being sold, but rather permits a sale which might not otherwise be possible under § 363(f). If the trustee satisfies the requirements of § 363(h), then a sale can be pursued under § § 363(b) and (f).
A. The Trustee May Sell Echo Because it is Property of the Estate.
Moore asserts that under accountings which are to take place in the Marvin and Partition Actions, she will be granted such a large interest in Echo that the Trustee will be left with either no interest in Echo or an interest which is completely encumbered. Moore contends that the Trustee is subject to her to-be-determined larger interest because she filed lis pendens in the Marvin and Partition Actions.
To the extent that Moore is asserting equitable claims, such as a constructive trust, such claims can generally be avoided by the Trustee. 11 U.S.C. § 544. A constructive trust is " not the same kind of interest in property as a joint tenancy or a remainder. It is a remedy, flexibly fashioned in equity to provide relief where a balancing of interests in the context of a particular case seems to call for it." Chbat v. Tleel (In re Chbat), 876 F.2d 769, 771 (9th Cir. 1989).
Moore relies on Warwick w. Yassian (In re Rodeo Canon Dev. Corp.), 362 F.3d 603 (9th Cir. 2004) and Darby v. Zimmerman (In re Popp), 323 B.R. 260 (9th Cir. BAP 2005) to support her contention that the Trustee has no interest to sell. Those cases are not applicable here. In both In re Rodeo Canon Dev. Corp. and In re Popp there was a pending adversary proceeding regarding whether the bankruptcy estate held any title to the property at the time the motion to sell was filed. In this case, it is undisputed that, as of the commencement of the bankruptcy case, the state court had awarded Moore 50% of the Debtor's undivided interest in Echo, leaving the Debtor with the other 50% interest which the Trustee now owns.
Property of the estate is broadly defined and not limited to property that may have equity value for creditors. 11 U.S.C. § 541(a). It encompasses all property in which the debtor has an interest at the time the debtor files bankruptcy. Id . Accordingly, we agree with the bankruptcy court that the Trustee is the co-owner of Echo and may sell it free of Moore's interest if she can meet the requirements of § 363(h).
The parties agree that partition of Echo as a single family residence is impracticable. Further, the parties agree that Echo is not used in the production, transmission, distribution or sale, of electric energy or of natural or synthetic gas for heat, light, or power. Therefore, the only issues in this dispute are whether the second and third conditions for a sale under § 363(h) have been satisfied.
B. Selling Moore's and Debtor's Interest in Echo Will Realize More Value than Selling the Debtor's Interest Alone.
Moore argues the Trustee failed to meet the requirement of § 363(h)(2), that a sale of the estate's partial interest in Echo would realize significantly less than a sale of all of Echo, because the Trustee did not demonstrate there was equity for the estate in Echo.
However, in order to satisfy § 363(h)(2), the Trustee must only demonstrate that selling Debtor's and Moore's interests together will realize more value from a sale than selling the Debtor's interest alone. Yoppolo v. Schwenker (In re Zeigler), 396 B.R. 1, 4 (Bankr.N.D.Ohio 2008). Echo is a single family residence. It is " generally accepted" that a sale of only the debtor's undivided interest in a single family residence would significantly diminish the value of the property. Id .; Brown v. Phillips (In re Phillips), 379 B.R. 765, 796 (Bankr. N.D.Ill. 2007) (citations omitted).
Both parties submitted declarations from real estate brokers who evaluated the fair market value of Echo if it were sold in its entirety. Moore presented detailed listing information and market analysis for single family homes (without any co-owner's interest attached to the property). The Trustee's and Moore's real estate brokers determined Echo could sell at a price between $1,900,000 and $2,225,000. Neither party submitted any evidence or argued that Echo could fetch more than that amount if only the Debtor's interest was sold.
Therefore, we find there is no genuine issue of fact about whether the sale of the entire property would provide more value than selling Echo with Moore's interest attached and agree with the bankruptcy court's determination that the Trustee satisfied § 363(h)(2).
C. Benefit to the EstateFrom a Sale of Echo Outweighs Detriment to Moore.
The third condition for a § 363(h) sale is that the benefit to the estate of selling the property as a whole outweighs any detriment to the co-owner. 11 U.S.C. § 363(h)(3); see e.g., Gazes v. Roswick (In re Roswick), 231 B.R. 843, 859-64 (S.D.N.Y. 1999) (balancing the non-consenting co-owner's detriment, economic and non-economic, against the benefit to the estate); Bakst v. Griffin (In re Griffin), 123 B.R. 933, 936-37 (Bankr. S.D. Fla. 1991) (applying the benefit/detriment balancing test of § 363(h)(3)). The detriment to a co-owner can be composed of psychological or emotional injury to the person who is forced to give up his or her interest in property. See In re Persky, 893 F.2d 15, 20-21 (2d Cir. 1989). Moore does not have a possessory interest in Echo; therefore, a sale of Echo would not displace her or uproot her from her community. See In re Roswick, 231 B.R. at 859-64; In re Griffin, 123 B.R. at 936.
Moore provided no evidence, and did not argue, that a sale of Echo would be detrimental to her. At oral argument, the Panel asked Moore what the detriment would be if Echo were sold free of her interest. Moore answered the detriment was a concern that the Trustee's valuation of Echo was too low. But Moore's financial interests are protected by other subsections of § 363, including the right to obtain her share of the net proceeds under § 363(j) and a right of first refusal to purchase Echo at the sale price under § 363(i).
Rather than demonstrating that a sale of Echo would be detrimental to her, Moore argues that the phrase " benefit to the estate" in § 363(h)(3) requires the Trustee to demonstrate the existence of equity in the property to be sold. However, because the question of equity is considered when a sale motion is brought under § § 363(b) and (f), the Trustee is not required to demonstrate equity to satisfy § 363(h). Further, even if we were to agree with Moore's interpretation of § 363(h)(3), we find the Trustee presented sufficient evidence to demonstrate that she could create equity in Echo through the pursuit of litigation to avoid certain liens and to establish that the WaMu Deed of Trust encumbers all of Echo.
The Trustee asserts the Sand Hill Deed of Trust can be avoided because the Sand Hill and IP Entities sought a money judgment on the underlying notes and not a judicial foreclosure, which bars them from enforcing their deed of trust under California's " one form of action rule." See CAL. CODE CIV. P. § 726. Further, the Trustee argues the transfer of the Sand Hill Deed of Trust was a fraudulent transfer. See e.g., Pajaro Dunes Rental Agency, Inc. v. Spitters (In re Pajaro Dunes Rental Agency, Inc.), 174 B.R. 557, 572-73 (Bankr. N.D. Cal. 1994); 11 U.S.C. § 548.
In support of her contention that the Sand Hill Deed of Trust can be avoided, the Trustee provided the underlying documentation for, and recordation of, the Sand Hill Deed of Trust which shows the address of Sand Hill to be the same as that of one of Debtor's companies. She submitted deposition testimony evidencing Slager's position as an employee of the Debtor. Further, the Trustee provided evidence of the action the Sand Hill and IP Entities brought in the Eastern District of Michigan for a money judgment instead of judicial foreclosure.
The Trustee argues the Judgment Liens are avoidable as preferences because they were recorded within 90 days of the Debtor filing bankruptcy and are to " insiders" of the Debtor. See 11 U.S.C. § 547(b). In support of this argument, the Trustee provided the documentation of the underlying obligations giving rise to the Judgment Liens and the recording of them in November and December 2007.
To support her assertion that the WaMu Deed of Trust encumbers all of Echo, the Trustee provided the statement of decision in the Dissolution Action denying Moore marital community property rights, the Expungement Order of the 2002 Lis Pendens, and the statement of decision in the Marvin Action entitling Moore to 50% interest in Echo, as well as the underlying obligations supporting all prior deeds of trust which were replaced by the WaMu Deed of Trust in 2004. The Trustee further requested the bankruptcy court take judicial notice of all pleadings, orders, and papers filed in the Debtor's main bankruptcy case.
The Trustee argues that the evidence supports her contention that a potential sale of Echo in the amount of approximately $1,900,000 would realize a significant benefit to the estate once the Sand Hill Deed of Trust and the Judgment Liens are avoided, and a determination is made that the WaMu Deed of Trust encumbers both Moore and Debtor's interest in Echo.
Moore did not dispute the evidence submitted by the Trustee regarding the avoidability of the Sand Hill Deed of Trust and Judgment Liens under § § 548 and 544. Moore suggested the judgment in the District Court Action may be enforceable despite California's " one action rule, " but she did not counter the Trustee's allegation that the Sand Hill Deed of Trust is avoidable as a fraudulent transfer. Therefore, we find that Moore failed to demonstrate the existence of an issue of material fact regarding the Trustee's ability to avoid the Sand Hill Deed of Trust and Judgment Liens.
Moore did contest the Trustee's assertions regarding the scope of the WaMu Deed of Trust, but the only evidence she submitted to counter the Trustee's assertion was the WaMu Stipulation, which was not given effect; her 2002 Lis Pendens, which was expunged; along with reference to the Marvin Lis Pendens and the Partition Lis Pendens recorded after the WaMu Deed of Trust. We do not find this evidence is sufficient to create a genuine issue of material fact regarding the extent of the WaMu Deed of Trust.
Nevertheless, to the extent Moore is correct in her contention that the WaMu Deed of Trust only attaches to the estate's interest, a sale of Echo may still result in the satisfaction of WaMu's claim. That, in and of itself, is beneficial to the estate. " The satisfaction of a claim against the estate clearly confers a benefit on the estate." Spear v. Crow Canyon Office Park Partners (In re Haley), 100 B.R. 13, 17 (Bankr. N.D. Cal. 1989); Behm v. Bell (In re Bell), 80 B.R. 104, 107 (Bankr. M.D. Tenn. 1987); In re Roswick, 231 B.R. 843, 860 (Bankr. S.D.N.Y. 1999).
The complete determination of the extent of the encumbrances and the amount of equity available in Echo is not a determination that needs to be made here. Section § 363(h)(3) only requires that a sale of the property free of the co-owner's interest offer a benefit to the estate that is not outweighed by any detriment to a co-owner. In this case, the Trustee demonstrated the benefit to the estate is that Echo will bring a higher price if sold in its entirety rather than if the Debtor's interest alone were sold. Additionally, the Trustee demonstrated she can realize a benefit from the sale of Echo as successor to any avoided liens and by paying off claims against the estate. See 11 U.S.C. § 544. Moore presented no evidence that a sale of Echo was detrimental to her, so there is nothing against which to balance these benefits to the estate. See e.g., In re Roswick, 231 B.R. at 859-64.
Moore's " stated objective, " as articulated in her briefs on appeal, is " to assure the maximum value is obtained by the sale of Echo." However, Moore may raise this issue if and when the Trustee brings a motion to sell under § § 363(b) and (f). Accordingly, we agree with the bankruptcy court that a final determination of whether the Trustee's interest in Echo is over encumbered is not necessary to a § 363(h) determination and that the Trustee was entitled to judgment as a matter of law under § 363(h).
VI. CONCLUSION
Moore failed to demonstrate the existence of a material fact under either § § 363(h)(2) or (h)(3) to bar granting summary judgment to the Trustee. Moore's assertion that § § 363(h)(2) and (h)(3) require a showing of equity for the estate in co-owned property before it can be sold is simply incorrect. Because we conclude the Trustee satisfied the conditions of § 363(h), we AFFIRM the bankruptcy court's Judgment Authorizing Sale.
The WaMu Stipulation was filed on December 17, 2007 for the judge's signature but " sent back with note form [sic] Judge Freeman." Counsel for Moore admits the judge refused to sign the WaMu Stipulation because not all parties were signatories. We note that at paragraph 1 of the WaMu Stipulation, the parties agreed WaMu would not be required to appear or file a responsive pleading in the action. We see from the docket that WaMu's counsel filed an answer to the complaint. Therefore, we assume the WaMu Stipulation was not effective or binding on the parties.