Carter et al v. Dinihanian et al

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UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
In re
DAVID BURT, No. 05-11568
Debtor(s).
______________________________________/
SCOTT K. CARTER, et al.,
Plaintiff(s),
v. A.P. No. 06-1058
RICHARD DINIHANIAN,
Defendant(s).
_______________________________________/
Memorandum on Motion for Preliminary Injunction
_________________
Plaintiffs are fundamentally correct in their argument that defendant is not entitled to prosecute
fraudulent conveyance claims against them. Once a bankruptcy is filed, fraudulent conveyance claims
become property of the estate. In re MortgageAmerica Corp., 714 F.2d 1266, 1276 (5th Cir. 1983).
Any attempt by an individual creditor to prosecute such an action is an attempt to exercise control over
estate property and violates § 362(a)(3) of the Bankruptcy Code. Id.
The court has denied a preliminary injunction for two reasons. First, the Chapter 7 trustee is now
Entered on Docket
March 23, 2006
GLORIA L. FRANKLIN, CLERK
U.S BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
Case: 06-01058 Doc# 10 Filed: 03/23/06 Entered: 03/23/06 15:54:55 Page 1 of 2

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aware of the situation and is represented by counsel. The court has every expectation that defendant and
the trustee will quickly reach an accommodation, or the trustee will take action to protect the estate’s
rights, so injunctive relief from the court does not appear necessary. The court notes that defendant and
the trustee have a myriad of ways to deal with the situation, ranging from abandonment to assignment to
stipulation for relief from the automatic stay to stay of the state court claims while the trustee brings his
own fraudulent conveyance action. No doubt there are several other types of arrangements which can
preserve the estate’s rights.
Second, and more important from the court’s point of view, is that counsel for plaintiffs appears
to be trying to use this adversary proceeding to obtain some sort of leverage against defendant beyond
merely establishing who is the proper party plaintiff to seek avoidance of a fraudulent transfer made to
them. The court is entirely unconvinced that plaintiffs have any say whatsoever in what sort of
arrangement the trustee reaches with those parties who have fraudulent conveyance claims pending in
state court. See In re Pecan Groves of Arizona, 951 F.2d 242, 245 (9th Cir. 1991); In re Globe Inv.
and Loan Co., Inc., 867 F.2d 556, 560 (9th Cir. 1989). The court declines to give any credence to this
position by issuing a preliminary injunction.
In the very unlikely event that the trustee fails to reach an agreement with defendant, a permanent
injunction may be appropriate. However, a preliminary injunction appears to be both unwise and
unnecessary at this time.
Dated: March 23, 2006
SAlan Jaroslovsky
U.S. Bankruptcy Judge
Case: 06-01058 Doc# 10 Filed: 03/23/06 Entered: 03/23/06 15:54:55 Page 2 of 2