Brooks-Hamilton v. City of Oakland et al

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UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
In re 	No. 03-44829
Chapter 7
RALBERT BROOKS-HAMILTON,
Debtor
____________________________/
RALBERT BROOKS-HAMILTON 	A.P. No. 05-4345 AT
Plaintiff,
vs.
CITY OF OAKLAND, et al.
Defendants.
____________________________/
TEVIS THOMPSON, JR.
Cross-Plaintiff,
vs.
RALBERT BROOKS-HAMILTON,
et al.
Cross-Defendants
____________________________/
Signed: August 25, 2006
________________________________________
LESLIE TCHAIKOVSKY
U.S. Bankruptcy Judge
________________________________________
Entered on Docket
August 28, 2006
GLORIA L. FRANKLIN, CLERK
U.S BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
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MEMORANDUM OF DECISION
The motion of defendant/cross-complainant Tevis Thompson, Jr.
(the “Trustee”), seeking summary judgment on the claims asserted
against him in the complaint filed in the above-captioned adversary
proceeding and on his cross-claims against the plaintiff/cross-
defendant Ralbert Brooks-Hamilton (the “Debtor”) and others came on
for hearing before the above-captioned Court on July 20, 2006. 	At
the conclusion of the hearing, the Court took the motions under
submission. 	The Court’s decision and the basis for that decision
are set forth below.
BACKGROUND
The Court takes judicial notice of the following background
facts which are a matter of public record or have been finally
determined in this case or in related proceedings in the bankruptcy
court:
The Debtor was a participant in a government program entitled
the Enhanced Enterprise Community Flagship Project Loan Program
(the “EEC Program”). 	Pursuant to this program, between 1996 and
1998, the Debtor borrowed $500,000 from the City of Oakland
(“Oakland”) and the Bank of Oakland (the “Bank”) to develop a
business located in an area of Oakland, California designated by
the EEC Program as an “enterprise zone.”
With the proceeds of these loans, the Debtor purchased real
property located at 880 27th Street in Oakland, California (the
“Warehouse”). 	On March 4, 1996, the Bank recorded a deed of trust
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1 When a bankruptcy petition is filed, an automatic stay goes
into effect. 	The automatic stay renders void any act to
collect a pre-petition debt from the debtor or to exercise any
control over property of the bankruptcy estate. 	See 11 U.S.C.
§ 362(a). 	With limited exceptions, not relevant here, the
bankruptcy estate consists of “all legal or equitable
interests of the debtor in property as of the commencement of
the case.” 	See 11 U.S.C. § 541(a)(1).
2 Chapter 13 of the Bankruptcy Code permits the debtor to
retain possession of his property and to propose a plan for
repayment of his debts. 	See 11 U.S.C. §§ 1321, 1322. 	Chapter
7 requires the debtor to turn over all nonexempt property to
the chapter 7 trustee who is required to liquidate the
property and distribute the proceeds to creditors. 	See 11
U.S.C. § 704.
3
against the Warehouse to secure repayment of the loans. 	Oakland
recorded deeds of trust for the same purpose on July 1, 1997 and
July 21, 1998.
The Debtor failed to repay the loans. 	After a period of
forbearance, Oakland and/or the Bank commenced foreclosure
proceedings against the Warehouse. 	The Debtor attempted to stop
the foreclosure proceedings by various means, including by filing
the above-captioned bankruptcy case on August 21, 2003. 1 	The case
was initially filed as a chapter 13 case but was converted to
chapter 7 on May 12, 2004. 2 	The Trustee was appointed as the
chapter 7 trustee.
On June 10, 2005, the Trustee filed a motion to approve the
sale of the Warehouse free and clear of liens (the “Sale Motion”)
through a negotiated sale subject to overbidding. 	The Debtor
opposed the sale on various grounds. 	His written opposition did
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3 In his bankruptcy schedules, the Debtor had listed a fee
simple interest in the Warehouse.
4The Warehouse was sold at auction to Ken Sherman and San Manh
(the “Buyers”) for $590,000.
4
not include the contention that he did not own the Warehouse. 3
However, at the hearing, he made the oral assertion that the
Warehouse was not property of the estate and therefore could not be
sold because he had transferred it to an irrevocable trust for the
benefit of his children before filing the bankruptcy case.
The Court overruled the Debtor’s objections, including this
belatedly asserted oral objection. 	At a hearing conducted on July
7, 2005, the Court approved the sale of the Warehouse free and
clear of certain specified liens and interests, including the
claimed interest of the trust. 	An order approving the sale was
entered on July 22, 2005. 4
After the order was entered, the Trustee discovered that,
post-petition, the Debtor had recorded two grant deeds purporting
to transfer title to the Warehouse and had also recorded a lis
pendens (the “Lis Pendens”). 	An amended order was entered on
August 8, 2005, providing that the sale was also free and clear of
any liens and interests created by the recordation of these
documents.
In the mean time, the Debtor filed two actions related to the
Warehouse in state court:
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5On July 18, 2005, the Debtor amended the complaint to add the
Buyers and Yan Guang Qui (“Qui”) as defendants. 	However, on
December 15, 2005, he voluntarily dismissed Qui who was an
unsuccessful bidder for the Warehouse. 	It does not appear
that the Debtor has ever served the Buyers with a copy of the
Complaint.
5
On June 13, 2005, the Debtor filed an action in state court,
seeking to enjoin the sale and naming Oakland, Oakland’s attorney,
Chris Kuhner (“Kuhner”), the Trustee, and the Trustee’s real estate
agent, Michael Natarro (“Natarro”) as defendants. 	The action (the
“Injunction Proceeding”) was removed to this court by the Trustee
on July 12, 2005 and was designated A.P. No. 05-4314. 	On October
3, 2005, the Court issued an order dismissing Oakland and Kuhner
from the proceeding. 	On July 20, 2006, the Court issued an order
granting the Trustee’s and Natarro’s motion for summary judgment,
dismissing all remaining claims.
On July 12, 2005, the Debtor filed a second action in state
court. 	In this action, the Debtor sought to quiet title to the
Warehouse, naming Oakland and the Trustee as defendants. 5 	The
Debtor filed an amended complaint (the “Complaint”) on July 18,
2005. 	This action (the “Quiet Title Proceeding”) was removed to
the bankruptcy court on August 8, 2005 by Oakland and was
designated A.P. No. 05-4345: i.e., the above-captioned adversary
proceeding. 	On October 3, 2005, the Court issued an order
dismissing Oakland from this proceeding as well.
The Trustee filed an answer to the Complaint and a cross-
complaint against the Debtor and various other individuals and
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entities. 	An amended cross-complaint (the “Cross-Complaint”) was
filed on August 18, 2005. 	The cross-defendants (the “Cross-
Defendants”) all filed answers to the Cross-Complaint.
On June 23, 2006, the Trustee filed a motion for judgment on
the pleadings and/or to dismiss the claims asserted in the
Complaint and for summary judgment on some of the claims asserted
in the Cross-Complaint. 	The Debtor filed an opposition to the
motion. 	The Cross-Defendants other than the Debtor (the “Nondebtor
Cross-Defendants”) filed a separate opposition. 	The motion came on
for hearing on July 20, 2006 and at the conclusion of the hearing
was taken under submission.
APPLICABLE LAW
A motion to dismiss for failure to state claim under Rule
12(b)(6) of the Federal Rules of Civil Procedure (hereinafter
“FRCP”)”, made applicable to this proceeding by Rule 7012(b) of the
Federal Rules of Bankruptcy Procedure (hereinafter “FRBP”), may be
granted if the allegations of the claim, even if true, do not
provide a basis for judgment in the nonmoving party’s favor. 	In
making this determination, all reasonable inferences must be drawn
from the allegations in favor of the nonmoving party. 	Triton
Energy Corp. v. Square D Co., 68 F.3d 1216, 1220 (9 th Cir. 1995).
A motion for judgment on the pleadings under FRCP 12(c), 	made
applicable to this proceeding by FRBP 7012(b), may be granted when
the pleadings show there are no issues of material fact. 	Fed. R.
Civ. Proc. 12(c); Gen. Conf. Corp. of Seventh-Day Adventists v.
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Seventh-Day Adventist Congregational Church, 887 F.2d 228, 230 (9th
Cir. 1989), cert. denied, 493 U.S. 1079 (1990). 	“All allegations
of fact by the party opposing the motion are accepted as true, and
are construed in the light most favorable to that party.” 	Id.
Where, on a motion for judgment on the pleadings, matters outside
the pleadings are presented, the motion shall be treated as one for
summary judgment under FRCP 56. 	Fed. R. Civ. Proc. 12(c).
A motion for summary judgment under FRCP 56 (made applicable
herein by FRBP 7056) may be granted if the pleadings, declarations,
and other discovery on file show that no genuine issue exists as to
any material fact. 	Fed. R. Civ. Proc. 56(c); see In re Rogstad,
126 F.3d 1224, 1227 (9th Cir. 1997). 	A court reviewing a summary
judgment motion must view the evidence in the light most favorable
to the nonmoving party. 	See Triton Energy Corp., 68 F.3d at 1220.
DISCUSSION
The Complaint asserts two claims for relief: (1) for quiet
title and (2) for equitable estoppel. 	The Cross-Complaint asserts
six claims for relief: 	(1) to avoid post-petition transfers under
11 U.S.C. § 549, (2) to avoid unperfected liens or transfers under
11 U.S.C. § 544, (3) to avoid fraudulent transfers under Cal. Civ.
Code § 3439.04, (4) to avoid fraudulent transfers under Cal. Civ.
Code § 3439.05, (5) for declaratory relief, and (6) to declare the
post-petition recordation of a lis pendens against the Warehouse as
a violation of the automatic stay pursuant to 11 U.S.C. § 362 and
therefore void.
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26 	6The Trustee’s motion for summary judgment did not address the
third claim for relief in the Cross-Complaint.
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The principal issue raised by these pleadings is set forth in
both the first claim for relief in the Complaint and the fifth
claim for relief in the Cross-Complaint: i.e., whether the Debtor
effectively transferred his interest in the Warehouse to an
irrevocable trust prior to filing for bankruptcy so that the
Warehouse was not property of his bankruptcy estate and could not
effectively be sold by the Trustee. 	The Court addresses this issue
in section A below. 	The Court addresses the second claim for
relief in the Complaint and the first, second, fourth, and sixth
claims for relief in the Cross-Complaint in section B below. 6
A. 	WAS WAREHOUSE PROPERTY OF DEBTOR’S BANKRUPTCY ESTATE?
In the Complaint, the Debtor identifies himself as the settlor
of the B.H. & Associates Unincorporated Business Organization
Family Holding Trust (the “B.H. & Associates Trust”). 	He alleges
that the Trustee claims an interest adverse to him and the
beneficiaries of the B.H. & Associates Trust. 	He seeks judgment
quieting title to the Warehouse in favor of the B.H. & Associates
Trust.
In support of these allegations, the Debtor attaches a series
of exhibits. 	Exhibit A consists of two grant deeds, purporting to
transfer title to the Warehouse to the B.H. & Associates Trust.
The first grant deed bears a signature date for the Debtor of
August 23, 1999 (the “August 23 Grant Deed”). 	The second grant
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7The name of the trust on August 20 Grant Deed does not
include the phrase “& Associates.” 	However, the Court assumes
that this was a scrivener’s error. 	There is no evidence that
there was more than one trust created by the Debtor.
8 The integrity of these documents is highly suspect. 	First,
it is questionable whether the Debtor actually signed these
two grant deeds in 1999. 	The Debtor’s signature on August 23
Grant Deed was not notarized until September 14, 2004, the day
before the August 23 Grant Deed was recorded. 	The Debtor’s
signature on the August 20 Grant Deed appears to have been
notarized on July 8, 2005, the same day it was recorded.
However, the notary provision is crossed out. 	Second, the
first page of the August 23 Grant Deed, which purports to be a
two page document, states that it is page 1 of 1. 	The second
page of both grant deeds appears to be a copy of the same
document, a legal description, which is identified as page 4
of 5. 	However, the Court will assume for purposes of this
decision that the Grant Deeds were signed on August 20 and 23,
1999 respectively.
9A copy of this document (the “Exhibit D Declaration of
Trust”) is attached as Exhibit D to the Declaration of Miriam
Khatiblou in support of the Trustee’s motion for summary
judgment (the “Khatiblou Declaration”). 	This document is also
entitled Declaration of Trust and is the same form of document
as Exhibits B and C to the Complaint. 	The Debtor’s signature
on the Exhibit D Declaration of Trust is dated August 5, 1999.
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deed bears two signature dates for the debtor: i.e., August 20,
1999 and July 8, 2005 (the “August 20 Grant Deed”). 7 	Both grant
deeds (collectively the “Grant Deeds”) were recorded after the
Debtor filed his bankruptcy petition. 8
Exhibits B and C appear to be copies of the same document.
The document is entitled Declaration of Trust. 	In it, the Debtor
declares that, on the date of his death, he will hold the Warehouse
in trust for the use and benefit of his children. 	The first page
of the document identifies the document as an Amendment to a
recorded document numbered #99323112. 9 	Both Exhibit B and C bear a
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However, his signature was not notarized until August 23,
1999. 	According to a preliminary title report attached as
Exhibit B to the Khatiblou Declaration, the Exhibit D
Declaration of Trust was recorded on August 23, 1999. The
principal difference between the Exhibit D Declaration of
Trust and Exhibit B and C Declarations of Trust is that, in
the former, the Debtor declares that he holds the Warehouse
for the use and benefit, upon his death, of Ralbert Brooks
Hamilton. 	Thus, the need for the amendment.
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recordation date of March 21, 2000 and the same recordation number:
#2000082861.
Exhibit C bears a March 21, 2000 date for the Debtor’s
signature and attaches a notary form notarizing the Debtor’s
signature on the same date. 	Paragraph 5 of the Exhibit C
Declaration of Trust contains the following language:
5. 	I reserve unto myself the power and right
at any time during my lifetime to amend or
revoke in whole or in part the trust hereby
created without the necessity of obtaining the
consent of the beneficiary and without giving
notice to the beneficiary. 	The sale or other
disposition by me of the whole or any part of
the property held hereunder shall constitute as
to such whole or part a revocation of this
trust.
The B.H. & Associates Trust is named as the successor trustee, to
serve as trustee in the event of the Debtor’s incapacity.
In the Exhibit B Declaration of Trust, paragraph 5 is
interlineated. 	In addition, the Debtor’s signature appears to bear
a date of August 20, 1999. 	By scrutinizing the document, however,
one can see that this date was written over a March 21, 2000
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10 Again, both Exhibits B and C appear to be incomplete
documents. 	Exhibit B contains only four pages. 	However, the
bottom of each page indicates that the complete document
contains six pages. 	Exhibit C consists of five pages. 	The
last page of this document is a notary form which indicates
that the complete document consists of seven pages.
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date. 10 	Again, for purposes of this decision, the Court will
assume that Exhibit B was interlineated before it was signed or
recorded and was actually signed by the Debtor on August 20, 1999.
The Trustee seeks summary judgment in his favor on the
Debtor’s first claim for relief which presents the same issue as
his fifth claim for relief in the Cross-Complaint, for declaratory
relief. 	He contends that none of the documents attached to the
Complaint were sufficient to prevent the Warehouse from becoming
property of the bankruptcy estate when the Debtor filed his
bankruptcy petition. 	The Court agrees.
The Court will assume for purposes of this decision that the
Grant Deeds were executed prior to the Debtor’s bankruptcy case and
effectively transferred the Warehouse to a trust. 	The question
remains whether the effect of this transfer prevented the Warehouse
from becoming property of the Debtor’s bankruptcy estate when he
filed his bankruptcy petition. 	This depends on the terms of the
trust. 	Neither of the two Declarations of Trust attached to the
Complaint contain terms permitting such a construction.
The Exhibit C Declaration of Trust, in which paragraph 5 was
not interlineated, expressly stated that the Debtor could revoke
the trust. 	Under California law, when the settlor of a trust
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retains the power to revoke a trust, the trust res remains the
settlor’s property subject to his creditor’s claims. 	See Cal.
Prob. Code § 15800; § 18200 (property in revocable trust is subject
to claims of settlor’s creditors during settlor’s lifetime); Empire
Props. v. County of Los Angeles, 44 Cal. App. 4 th 781, 786-87
(1996)(transfer of real property to revocable trust does not change
ownership for property tax reassessment purposes). 	See also In re
Irwin, 338 B.R. 839, 854-53 (E.D. Cal. 2006)(property transferred
to revocable trust was property of the settlor’s bankruptcy
estate); In re Schmitt, 215 B.R. 417, 422, n.1 (Bankr. 9 th Cir.
1997)(under Oregon law, interest of beneficiary of revocable trust
did not become property of beneficiary’s bankruptcy estate).
Although paragraph 5 was interlineated on the Exhibit B Declaration
of Trust, the Exhibit B Declaration of Trust did not expressly
state that the trust was irrevocable. 	Under California law, a
trust is revocable unless it is expressly stated to be irrevocable.
See Cal. Prob. Code § 15400.
However, in his opposition to the Trustee’s motion for summary
judgment, the Debtor produced a new trust document which is
entitled “Irrevocable Pure Trust Agreement August Twentieth Ninteen
[sic] Hundred and Ninty [sic] Nine The Brooks-Hamilton
Unincorporated Family, Business, Pure Trust Organization-Holding
Trust Formation, Establishment and Adoption of” (the “Irrevocable
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11He also attaches a document entitled “Fictitious Long Form
Deed of Trust and Assignment of Rents” (the “Fictitious Deed
of Trust”). The Fictitious Deed of Trust appears to be a copy
of a generic deed of trust document recorded in Alameda
County, California in 1961 by Title Insurance and Trust Co.
It contains no reference to the Debtor, to any trust, or to
the Warehouse. 	Its only relevance to this proceeding is that
paragraph 8 of the Irrevocable Trust Agreement purports to
adopt provisions 1 through 14 of the Fictitious Deed of Trust
into the Amended Deed of Trust. 	No coherent argument is made
as to how this document adds any substance to the Debtor’s
claim.
12The signatures are not notarized, and it does not appear
that the Irrevocable Trust Agreement was ever recorded.
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Trust Agreement”). 11 	The Irrevocable Trust Agreement purports to
have been executed by the Debtor and his three brothers on August
20, 1999. 12 	It provides that the brothers agree to permanently and
irrevocably establish an family trust to hold all of the family’s
assets for the benefit of the Brooks-Hamilton family’s children
(the “Irrevocable Trust”).
The Irrevocable Trust is to be managed by the four brothers,
as trustees, with the Debtor acting as Chairperson. 	The
Irrevocable Trust Agreement names B.H. & Associates Trust as the
successor trustee in case the settlor should become incapacitated
during his lifetime before the beneficiaries reach the age of
twenty-one. 	(See paras. 4 & 7.). 	Paragraph 5 provides that the
trust assets may not be voluntarily or involuntarily assigned.
Para. 6 provides as follows:
6. 	The settlor reserves unto himself the power
and right during his lifetime to: (1) place a
mortgage or other liens upon the property (2)
to collect any rental or other income which may
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26 	13 Copies of the Deeds of Trust are attached to the Khatiblou
Declaration as Exhibits F and G, respectively.
14
accrue from the trust property and to pay such
income to himself as an individual. 	He shall
be exclusively entitled to all such income
accruing from the trust properties/assets
during his lifetime and no beneficiary named
therein shall have any claims upon such income
and or profits distributed to him.
In the opposition filed by the Nondebtor Cross-Defendants, the
Nondebtor Cross-Defendants note that, a deed of trust (the “Deed of
Trust”) and an amended deed of trust (the “Amended Deed of Trust”)
were recorded on August 23, 1999 and March 21, 2000, respectively,
with respect to the Warehouse (collectively the “Deeds of
Trust”). 13 	They note that the Deeds of Trust contain the word
“grant.” 	They contend that the use of the word “grant” is all that
is required to transfer title to real property, citing Cal. Civ.
Code § 1092.
The Nondebtor Cross-Defendants also note that Deeds of Trust
refer to an agreement executed in August 1999. 	They apparently
reason that, even if the Deeds of Trust were insufficient to
transfer title to real property by themselves, they incorporated
the Irrevocable Trust Agreement into the Deeds of Trust. 	As a
result, the combined documents not only transferred title to the
Warehouse, when the Deeds of Trust were recorded, the transfer
became perfected.
The Trustee responds that, at best, the Deeds of Trust
transferred a security interest in the Warehouse. 	They did not
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14The Court will assume for the purposes of this decision that
the Debtor, with his three brothers, actually signed the
Irrevocable Trust Agreement in 1999.
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transfer title. 	He notes that, under California law, a deed of
trust is comparable to a mortgage. 	A mortgage does not transfer
title to real property. 	It merely imposes a lien upon it. 	In
support of this contention, he cites Monterey S.P. Partnership v.
W.L. Bangham, Inc., 49 Cal. 3d 454, 460 (1989); Bank of Italy Nat.
Trust & Sav. Ass’n v. Bentley, 217 Cal. 644, 656-57 (1933).
Moreover, the Trustee notes that the Deeds of Trust state that the
grant is for purposes of securing an obligation. 	They do not
purport to transfer title to the Warehouse.
The Court agrees that the Deeds of Trust were insufficient to
transfer title to the Warehouse to the Irrevocable Trust. 14 	It is
true that, as the Nondebtor Cross-Defendants note, Cal. Civ. Code §
1092 uses the word “grant” in the language proscribed for
transferring title to real property. 	However, that word may not be
read in isolation. 	The critical phrase stated in § 1092, taken as
a whole, is a “grant...[of] all that real property situated in,”
the property description to be provided.
By contrast, the Deeds of Trust grant an interest in the
Warehouse “with power of sale...to secure performance of a certain
obligation....” 	Cal. Civ. Code § 2872 provides that a transfer of
an interest in real property to secure performance of an act
creates a lien on the real property in question. 	Section 2888
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provides that a lien transfers no title to the property subject to
the lien. 	Moreover, the reference in the Deeds of Trust to the
agreement executed in 1999 did not purport to incorporate the terms
of the agreement into the Deed of Trust. 	The reference indicates
that the Deeds of Trust is to secure obligations under the
referenced agreement.
Thus, the only document capable of transferring title to the
the Warehouse was the Irrevocable Trust Agreement. 	Unlike the
Exhibit B and C Declarations of Trust, as indicated by its title,
the Irrevocable Trust Agreement is irrevocable. 	Therefore, the
authorities cited above, holding that property transferred to a
revocable trust does not change the beneficial ownership of the
property, are inapplicable.
As noted above, the Irrevocable Trust Agreement contains an
anti-alienation provision. 	Pursuant to 11 U.S.C. § 541(c)(2), such
provisions are enforceable in a bankruptcy case to the same extent
that they are enforceable under applicable nonbankruptcy law, in
this case, California law. 	However, under California law, when the
settlor is a beneficiary of the trust, any spendthrift provisions
are invalid. 	See Cal. Prob. Code § 15304(a); In re Schneider’s
Estate, 140 Cal. App. 2d 710, 171 (1956). 	Where the trust
agreement provides that the trustee has the discretion to pay the
income or principal (or both) to the settlor/beneficiary, the
settlor’s beneficial interest in the trust is the maximum amount
that could be paid. 	See Cal. Prob. Code § 15304(b).
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Although the Debtor is not a named beneficiary under the
Irrevocable Trust Agreement, the bulk of the beneficial interest in
the Warehouse belonged to him when he filed his bankruptcy
petition. 	As noted above, paragraph 6 of the Irrevocable Trust
Agreement permitted the Debtor to encumber the Warehouse up to its
full value, leaving his children with an interest of little value.
This beneficial interest in the Warehouse became property of the
Debtor’s bankruptcy estate, capable of being transferred by the
Trustee. 	See In re Barnes, 275 B.R. 889, 895 (Bankr. E.D. Call.
2002); see also In re Neutron, 922 F.2d 1379, 1383 (9 th Cir. 1990
(beneficial interest in trust not protected by spendthrift
provision is property of bankruptcy estate).
Nevertheless, assuming the Irrevocable Trust Agreement was
executed prior to the Debtor’s bankruptcy filing, it did
effectively transfer an interest in the Warehouse to the Debtor’s
children, albeit an interest of little value. 	Thus, the Trustee is
only entitled to partial summary judgment on the first claim for
relief in the Complaint and the fifth claim for relief in the
Cross-Complaint.
B. 	OTHER CLAIMS ASSERTED IN COMPLAINT AND CROSS-COMPLAINT
1. 	Second Claim for Relief in Complaint–-Equitable Estoppel
In the second claim for relief in the Complaint, the Debtor
recites his version of the history of his loan from Oakland,
alleging that Oakland acted wrongfully to his detriment. 	On that
basis, he seeks to estop the Trustee from acquiring any interest in
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15The Trustee also seeks to recover the avoided transfers for
the benefit of the estate pursuant to 11 U.S.C. § 550. 	A
transfer avoided under 11 U.S.C. § 549 may be recovered under
11 U.S.C. § 550. 	However, when the avoided transfer is a lien
on real property, this additional remedy is unnecessary. 	The
value of the real property freed up by the avoidance of the
lien is automatically preserved pursuant to 11 U.S.C. § 551.
18
the Warehouse. 	The Trustee asserts that the second claim for
relief–-for equitable estoppel--should be dismissed pursuant to
FRCP 12(b)(6). 	He notes that the allegations of wrongdoing are all
directed to the Bank’s conduct. 	No basis for estopping the Trustee
is alleged.
The elements of a claim for equitable estoppel are that:
(1) the party to be estopped knows the facts,
(2) he or she intends that his or her conduct
will be acted on or must so act that the party
invoking estoppel has a right to believe it is
so intended, (3) the party invoking estoppel
must be ignorant of the true facts, and (4) he
or she must detrimentally rely on the former's
conduct.
U.S. v. Hemmen, 51 F.3d 883, 892 (9 th Cir. 1995). 	The allegations
fail to satisfy any of the elements of this claim against the
Trustee. 	Therefore, the Trustee is entitled to have this claim
dismissed.
2. 	First Claim for Relief in Cross-Complaint–-Avoidance of
Grant Deeds and Lis Pendens
In the first claim for relief in the Cross-Complaint, the
Trustee seeks to avoid the liens created by recordation of the
Grant Deeds and Lis Pendens under 11 U.S.C. § 549. 15 	Section 549
provides that a trustee may avoid a post-petition transfer of
property of the estate that is not authorized by either the
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16 A transfer of an interest in real property occurs when a
deed is executed and delivered to the buyer, regardless of
whether it is recorded. 	In re Roosevelt, 87 F.3d 311, 316-18
(9th Cir. 1996); Obranovich v. Stiller, 220 Cal. App. 2d 205,
207-08 (1963). 	However, this transfer is only effective
between parties to the transaction and other with notice of
it. 	Cal. Civ. Code. § 1217; In re Weisman, 5 F.3d 417, 420
(9th Cir. 1993). 	A second transfer occurs when the deed is
recorded. 	This transfer gives constructive notice to the
world of the transfer effected earlier pursuant to the deed.
Cal. Civ. Code § 1213; In re Guilino, 779 F.2d 546, 551, n.3
(9 th Cir. 1985).
19
Bankruptcy Code or the bankruptcy court. 	This motion will be
granted with respect to the Grant Deeds and denied with respect to
the Lis Pendens.
The Nondebtor Cross-Defendants do not oppose avoidance of any
liens created by recordation of these documents. 	The Debtor’s
opposition asserts only that he acted innocently, without
fraudulent intent. 	He contends that he recorded the Grant Deeds on
the recommendation of the Alameda County Recorder’s Office. 	He
states that he was not aware that recording the Lis Pendens was
improper.
The recordation of the Grant Deeds may clearly be avoided
under 11 U.S.C. § 549. 	As discussed above, the Court has concluded
that, for the most part, the beneficial interest in the Warehouse
was property of the Debtor’s bankruptcy estate. 	The recordation of
the Grant Deeds constituted a transfer of this beneficial interest
although the transfer was insufficient to prevent the Warehouse
from becoming property of the Debtor’s bankruptcy estate. 16 	The
Debtor’s bankruptcy case was commenced on August 21, 2003. 	The
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Debtor recorded the Grant Deeds on September 14, 2004 and July 8,
2005. 	Thus, the recordation occurred post-petition. 	The Debtor
was not authorized to record these documents by either the
Bankruptcy Code or the bankruptcy court.
The Debtor’s alleged lack fraudulent intent is irrelevant to
this claim. 	“The intent of the parties effecting the transfer is
irrelevant under § 549. 	Likewise, fraud is not an element for a
cause of action by the Trustee under § 549.” 	In re Dreiling, 233
B.R. 848, 876 (Bankr. D. Col. 1999) (citing In re Kingsley, 208
B.R. 918 (8th Cir. 1997) and In re Dartco, Inc., 197 B.R. 860
(Bankr. D. Minn. 1996)). 	As a result, the Trustee’s motion for
summary judgment will be granted with respect to the Grant Deeds.
However, the recordation of the Lis Pendens may not be avoided
under 11 U.S.C. § 549. 	Section 549 only provides for the avoidance
of a “transfer” of interest in property of the estate. 	The
recordation of a lis pendens does not result in a transfer of an
interest in the property in question. 	Rather, the recordation
gives constructive notice to a prospective buyer of the pendency of
a legal proceeding affecting title to or the right of possession of
the real property. 	In re Lane, 980 F.2d 601, 603 (9 th Cir.
1992)(citing Cal. Civ. Proc. Code § 409(a)); In re Chenich, 87 B.R.
101, 106 (Bankr. 9 th Cir. 1988).
This notice prevents a buyer from claiming bona fide purchaser
status with respect to the claim asserted in the legal proceeding
if the claim proves valid. 	Lane, 980 F.2d at 604-05 (citing Cal.
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17 However, as discussed below, the recordation of the Lis
Pendens violated the automatic stay. 	As a result, it was
void. 	In re Schwartz, 954 F.2d 569, 573–74 (9th Cir. 1992).
The Trustee and/or the current owner of the Warehouse is
entitled to have the Lis Pendens expunged. 	See Cal. Civ.
Proc. Code § 405.30.
21
Civ. Code § 1214). 	Thus, the Trustee’s motion for summary judgment
must be denied to the extent it relates to the Lis Pendens. 17
3. 	Second Claim for Relief–-Avoidance of Grant Deeds
Pursuant to 11 U.S.C. § 544(a)(3)
In the second claim for relief in the Cross-Complaint, the
Trustee seeks to avoid the transfers effected by the execution (as
opposed to the recordation) of the Grant Deeds under 11 U.S.C. §
544(a)(3). 	Having prevailed on his motion for summary judgment on
the first claim for relief as to the Grant Deeds, the Trustee is
also entitled to summary judgment on this claim.
Section 544(a)(3) provides that a trustee may avoid a pre-
petition transfer by the debtor that would be voidable by a bona
fide purchaser of the real property that has perfected its interest
in the real property prior to the filing of the bankruptcy
petition. 	11 U.S.C. § 544(a)(3). 	This enables a trustee to avoid
transfers that could have been avoided under state law by a bona
fide purchaser of real property whose interest was perfected prior
to the filing of the bankruptcy petition. 	See In re Tleel, 876
F.2d 769, 772 (9th Cir. 1989).
Under California law, an unrecorded transfer of real property
is void as against a bona fide purchaser that has perfected his
interest in the real property. 	Cal. Civ. Code § 1214. 	As a result
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18 Had the Trustee anticipated that the Court would conclude
that the Debtor’s children obtained a beneficial interest in
the Warehouse by virtue of the Irrevocable Trust Agreement,
albeit of limited value, he presumably would have sought to
avoid that interest pursuant to 11 U.S.C. § 544(a)(3) as well.
However, to the Cross-Complaint would need to be amended to
assert such a claim before a motion for summary judgment
seeking to avoid this transfer could be entertained.
19Section 3439.05 of the California Civil Code provides that:
A transfer made or obligation incurred by a debtor
is fraudulent as to a creditor whose claim arose
before the transfer was made or the obligation was
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of the avoidance of the recordation of the Grant Deeds, pursuant to
the first claim for relief, the transfers represented by the
execution of the Post-Petition Grant Deeds are rendered unperfected
and thus subject to avoidance under 11 U.S.C. § 544(a)(3). 18
Again, the Nondebtor Cross-Defendants do not oppose the
Trustee’s motion for summary judgment on this claim. 	The Debtor
asserts only that he did not act with fraudulent intent. 	As with
the prior claim, the Debtor’s bad faith is not an element of the
claim, and his good faith is not a defense.
6. 	Fourth Claim for Relief–-Avoidance of Deeds of Trust as
Fraudulent Transfers Pursuant to Cal. Civ. Code § 3439.05
The Trustee’s fourth claim for relief seeks to avoid any
transfers of an interest in the Warehouse created by the Deeds of
Trust as fraudulent transfers under state law. 	The Trustee
contends that the transfers were made without receiving reasonably
equivalent value at a time when the Debtor was insolvent (or
rendered the Debtor insolvent). 	As a result, they were fraudulent
under Cal. Civ. Code § 3439.05. 19
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incurred if the debtor made the transfer or incurred
the obligation without receiving a reasonably
equivalent value in exchange for the transfer or
obligation and the debtor was insolvent at that time
or the debtor became insolvent as a result of the
transfer or obligation.
20 There are other problems with this portion of the motion.
First, it seeks a declaration that the Declarations of Trust
were testamentary devices. 	However, the fourth claim for
relief contains no allegations relating to the Declarations.
Second. It seeks a declaration that the Deeds of Trust were
not monetary liens and have no value. 	This contention
requires the production of evidence. 	No evidence has been
supplied.
23
Section 544(b) of the Bankruptcy Code permits a trustee to
assert a claim to avoid a fraudulent transfer pursuant to state law
to the extent there is an actual creditor with an allowable claim
against the estate that could have asserted such a claim. 	See 11
U.S.C. § 544(b). 	The fourth claim for relief does not allege the
existence of such a creditor. 	Therefore, the motion for summary
judgment with respect to this claim must be denied. 20
5. 	Sixth Claim for Relief–-Invalidation of Lis Pendens
Pursuant to 11 U.S.C. § 362
The Trustee’s sixth claim for relief seeks a declaration that
the Lis Pendens is void as a violation of the automatic stay. 	See
11 U.S.C. § 362(a). 	Again, the Debtor opposes the motion for
summary judgment on this claim on the ground that any stay
violation was unintentional. 	He asserts that he was not
represented by counsel at the time he recorded the Lis Pendens and
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26 	21This claim is not asserted against the Nondebtor Cross-
Defendants.
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was unaware of the prohibition. 21
As noted above, when a bankruptcy case is filed, a stay of
various acts against the debtor or property of the bankruptcy
estate automatically arises. 	Actions taken in violation of the
automatic stay are void. 	See 40235 Washington St. Corp. v.
Lusardi, 329 F.3d 1076, 1080 (9 th Cir. 2003); Schwartz, 954 F.2d at
573-74.
The Ninth Circuit Bankruptcy Appellate Panel has held that the
recordation of a lis pendens against property of the estate is a
violation of 11 U.S.C. § 362(a)(6)(prohibiting an act to collect,
assess, or recover a claim against the debtor). 	See In re Edwards,
214 B.R. 613, 619 (Bankr. 9 th Cir. 1997). 	However, Edwards
involved the recordation of a lis pendens relating to an action
against the debtor. 	Section 362(a)(6) would not apply to an action
filed and a lis pendens recorded by the debtor.
However, the Court concludes that 11 U.S.C. § 362(a)(3) does
apply. 	This subsection provides that the automatic stay prohibits
“any act to...exercise control over property of the estate....”
See 11 U.S.C. § 362(a)(3). 	It may apply to debtors as well as to
creditors. 	See In re BNT Terminals, Inc., 125 B.R. 963, 971
(Bankr. N.D. Ill. 1990) (“The court will not tolerate unauthorized
acts by debtors or creditors by allowing possession of, or
facilitating the exercise of control over, or permitting the
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dismemberment of property of the estate outside the provisions of
the Code.” [Emphasis added.])
As noted above, under California law, the recordation of a lis
pendens prevents a buyer of the real property from claiming bona
fide purchaser status with respect to the asserted claim. 	Thus, it
creates a cloud on title and interferes with a bankruptcy trustee’s
attempt to sell the real property, perhaps, even reducing the sale
price. 	This qualifies as the exercise of control over the real
property. 	Consequently, because the Court concludes that the
recordation of the Lis Pendens violated 11 U.S.C. § 362(a)(3) was
therefore void, the Trustee is entitled to summary judgment on the
sixth claim for relief.
CONCLUSION
The Trustee’s motion to dismiss or for summary judgment is
granted in part and denied in part with respect to the first claim
for relief in the Complaint and the fifth claim for relief in the
Cross-Complaint. 	None of the documents attached as exhibits to the
Complaint were sufficient to prevent the Warehouse from becoming
property of the Debtor’s bankruptcy estate, nor were the Deeds of
Trust. 	The Irrevocable Trust Agreement, if bona fide, did
effectively transfer to the named beneficiaries an interest in the
Warehouse of limited value. 	However, pursuant to the Irrevocable
Trust Agreement, the Debtor retained a substantial beneficial
interest in the Warehouse, which became property of his bankruptcy
estate.
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The Trustee’s motion to dismiss the second claim for relief in
the Complaint is granted in its entirety pursuant to FRCP 12(b)(6).
With respect to the Trustee’s motion for summary judgment on
the first claim for relief in the Cross-Complaint, the motion is
granted with respect to the recordation of the Grant Deeds and
denied with respect to the Lis Pendens.
With respect to the second claim for relief in the Cross-
Complaint, the Trustee’s motion for summary judgment is granted in
its entirety.
With respect to the fourth claim for relief in the Cross-
Complaint, the Trustee’s motion for summary judgment is denied.
With respect to the sixth claim for relief in the Cross-
Complaint, the Trustee’s motion for summary judgment is granted in
its entirety.
Counsel for Trustee is directed to submit a proposed form of
order in accordance with this decision.
END OF DOCUMENT
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COURT SERVICE LIST
Miriam Khatiblou
Goldberg, Stinnett, Meyers, and Davis
44 Montgomery Street, #2900
San Francisco, CA 94104
Marc Voisenat
Law Offices of Marc Voisenat
1330 Broadway, #1035
Oakland, CA 94612
Ralbert Brooks-Hamilton
5552 Fremont Street
Oakland, CA 94608
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