FILED APR 3 2023 NOT FOR PUBLICATION SUSAN M. SPRAUL, CLERK U.S. BKCY. APP. PANEL OF THE NINTH CIRCUIT UNITED STATES BANKRUPTCY APPELLATE PANEL OF THE NINTH CIRCUIT

In re: BAP No. CC-22-1205-SCL ALEX A. KHADAVI, Debtor. Bk. No. 2:21-bk-14449-BB

GREEN COIN, Adv. No. 2:21-ap-01262-BB Appellant, v. MEMORANDUM* ALEX A. KHADAVI; JASON M. RUND, Chapter 7 Trustee, Appellees.

Appeal from the United States Bankruptcy Court for the Central District of California Sheri Bluebond, Bankruptcy Judge, Presiding

Before: SPRAKER, CORBIT, and LAFFERTY, Bankruptcy Judges.

INTRODUCTION

Appellant Green Coin challenges the bankruptcy court’s summary

judgment declaring that its $900,000 deposit in furtherance of a sale that

never closed is property of the chapter 7 1 bankruptcy estate administered

* This disposition is not appropriate for publication. Although it may be cited for whatever persuasive value it may have, see Fed. R. App. P. 32.1, it has no precedential value, see 9th Cir. BAP Rule 8024-1. Unless specified otherwise, all chapter and section references are to the 1

Bankruptcy Code, 11 U.S.C. §§ 101–1532, all “Rule” references are to the Federal Rules by appellee Jason Rund, trustee. The bankruptcy court held, pursuant to

the purchase agreement it had approved, that the estate was entitled to

retain the deposit because Green Coin had defaulted. The bankruptcy court

also determined that debtor never relinquished the estate’s rights under the

purchase agreement. Because we discern no error, we AFFIRM.

FACTS2

A. The debtor files bankruptcy and moves to sell real property to Green Coin.

The debtor, Alex Khadavi, is a dermatologist and facial surgeon who

practices in Southern California. Green Coin is a cryptocurrency company

allegedly owned by a man commonly known as Mr. Pink.3

In May 2021, Khadavi commenced his bankruptcy case by filing a

chapter 11 petition. Khadavi’s assets included a single-family residence he

owned as an investment property on Sarbonne Road in Los Angeles

(“Property”). He valued the Property at $80 million. But he also scheduled

numerous deeds of trust and liens against the Property totaling over $31

million.

of Bankruptcy Procedure, and all “Civil Rule” references are to the Federal Rules of Civil Procedure. 2 We exercise our discretion to take judicial notice of documents electronically filed in the underlying bankruptcy case and adversary proceeding. See Atwood v. Chase Manhattan Mortg. Co. (In re Atwood),

, 233 n.9 (9th Cir. BAP 2003). 3 Although nothing in the record definitively identifies the full name of Mr. Pink,

the public records filings of which we can take judicial notice suggest he is Pink Qiuying Wang Suo. 2 On September 23, 2021, Khadavi moved for authority to sell the

Property for $85 million to Green Coin. He attached to the sale motion a

copy of the purchase agreement (“Purchase Agreement”), which consisted

of an offer to purchase the Property set forth on a form California

Residential Purchase Agreement and Joint Escrow Instructions dated

August 18, 2021, and a form Seller Counter Offer No. 1 dated September 8,

2021. Khadavi stated that Green Coin accepted his counter offer on

September 9, 2021. In relevant part, the counter offer required Green Coin

to pay a deposit of 3% of the purchase price, or $2.55 million. The motion

further advised that Green Coin had deposited into escrow $900,000 of the

$2.55 million deposit. The motion also specified that the Purchase

Agreement was “subject to court approval” but was not contingent on an

appraisal of the property. Additionally, Khadavi was selling the Property

“as is, where is” with no representations or warranties. Of particular

importance to this appeal, paragraph 21B of the Purchase Agreement

included a liquidated damages clause entitling the seller to keep the

deposit as liquidated damages in the event of a default by buyer

(“Liquidated Damages Clause”).

Khadavi served the sale motion on two real estate agents who were

representing Green Coin as the Buyer in the Purchase Agreement:

(1) George Kahwaji of Platinum Triangle Group Rodeo Realty Fine Estates;

and (2) Brianna Bebd of Keller Williams. But Green Coin did not participate

in the bankruptcy court sale proceedings. Nor did either real estate agent

3 appear for the sale hearing held on October 14, 2021. At the sale hearing the

court focused on the mechanics of the sale, timing issues, and procedures

for holding and eventually distributing the sale proceeds, but it did ask

whether Green Coin had paid the full deposit. Counsel for Khadavi

advised the court that it had not, that it was a matter of grave concern, and

that he had heard “a variety of stories about how it’s not just the rest of the

deposit but all the money that will be deposited.” Counsel further advised

the court that if the sale did not close within a month, “then it’s never

going to close.”

On November 16, 2021, the bankruptcy court entered an order

approving the sale. The sale order specified that Khadavi “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.

B. Khadavi and Green Coin execute additional agreements that are not noticed or presented for court approval.

The Purchase Agreement contained a section, paragraph 5, for

identifying and incorporating any addenda to the agreement. That section

was left blank by the parties, indicating that there were no addenda.

Though absent from the Purchase Agreement and not mentioned in

Khadavi’s sale motion, Green Coin contends that there were three addenda

that changed the terms of the sale presented to the court.

Green Coin claims that its purchase of the Property was contingent

4 on a valuation of Green Coin of no less than the $85 million sale price for

the Property. According to Green Coin, this contingency was stated in

Addendum No. 1 to its August 18, 2021 purchase offer. Mr. Pink, Green

Coin’s principal, says he signed the Purchase Agreement and Addendum

No. 1 with the understanding that any deposit Green Coin paid would be

fully refundable if the sale did not close for any reason. But the Purchase

Agreement did not say this.

Mr. Pink contends that Khadavi, acting on the advice of counsel,

insisted that they conceal the conditional nature of the sale from the court.

As Mr. Pink later alleged in the subsequent adversary proceeding, he was

tricked into executing a form Contingency Removal No. 1 dated September

26, 2021, stating that all buyer contingencies had been removed from the

Purchase Agreement. As he recounts it, Khadavi and his counsel told him

that formal removal of the contingencies was necessary to move forward

with the court proceedings, but they both reassured him that his deposit

would be fully refundable if escrow did not close.

In Green Coin’s version of events, it signed two more addenda after

the sale hearing but before the sale order was signed. The first of these,

Addendum No. 2 dated October 25, 2021, extended the deadline for paying

the remainder of the deposit to November 2, 2021, and extended the sale

closing date to November 25, 2021. The second, Addendum No. 3 dated

November 12, 2021, further extended the deadline for paying the

remainder of the deposit to December 2, 2021. Addendum No. 3 also

5 extended the sale closing date, this time to January 15, 2022. Both addenda

purported to render the deposit fully refundable if Green Coin failed to

close escrow, notwithstanding the Liquidated Damages Clause, which

indicated otherwise.

None of the three addenda were disclosed or provided to the

bankruptcy court before it entered the order approving the sale.

C. The debtor commences an adversary proceeding after Green Coin fails to pay the remainder of the earnest money deposit.

On December 1, 2021, Khadavi sent Green Coin a Notice to Buyer to

Perform No. 1. The Notice directed Green Coin to perform its contractual

obligation to remit the balance of the 3% deposit into escrow. Green Coin

never paid the remaining portion of the $2.55 million deposit or the

purchase price for the Property. Instead, Green Coin claims that it and

Khadavi mutually agreed to cancel the Purchase Agreement. Alternately,

Green Coin claims that Khadavi unilaterally cancelled the Purchase

Agreement before it defaulted.

The parties dispute the specifics of the alleged cancellation. But the

contemporaneous documentation between the parties reflects that Khadavi

and Green Coin mutually agreed on December 10, 2021, that the Purchase

Agreement would be deemed cancelled. Khadavi and Green Coin executed

a California form—Cancellation of Contract, Release of Deposit and

Cancellation of Escrow (the, “Cancellation Form”). Two versions of the

Cancellation Form were presented in the adversary proceeding. Both

6 versions were signed by Khadavi and Green Coin on December 10, 2021,

though Khadavi’s signature is missing in Section 1 of the Cancellation

Form in Green Coin’s version. Khadavi’s Cancellation Form includes

signatures for both parties in all required areas. Section 1 of the document

is entitled Cancellation of Contract and provides six choices for the buyer

or seller to select the basis for cancellation of the sale. Khadavi and Green

Coin selected “[p]er mutual agreement.”

The Cancellation Form also addressed the release of any deposit and

cancellation of escrow by providing various options for the buyer and

seller to select. In both of their versions, Khadavi and Green Coin selected

“Other,” and wrote “See Addendum #3.” The main difference between the

two versions of the Cancellation Form concerns the attachment identified

as Addendum #3. Green Coin’s version includes an official form

Addendum that states, “Buyer to release $200,000 to Seller. Buyer and

Seller agree this satisfies any and all liquidated damages. $700,000 US

Dollars will be returned to the buyer Green Coin.” This page is signed by

Green Coin but not by Khadavi. Additionally, Green Coin’s version

includes another page titled, “777 Sarbonne Agreement between Green

Coin and Alex Khadavi.” This document stated that Green Coin would

release $200,000 of the escrow deposit to Khadavi while the remaining

$700,000 would be returned to Green Coin. Both Khadavi and Green Coin

signed this page on December 10, 2021. Khadavi’s version omits the official

addendum page but includes a separate page requiring Green Coin to

7 release $200,000 from the escrow deposit to Khadavi while the remaining

$700,000 of the earnest money would be held in escrow pending future

litigation. This page was also signed by both Khadavi and Green Coin on

December 10, 2021.

Khadavi did not receive the $200,000 from the earnest money deposit

being held in escrow. Consistent with the court’s scheduling deadlines and

instructions given at a sale status conference held on December 1, 2021,

Khadavi then sued Green Coin in the bankruptcy court seeking declaratory

relief that he was entitled to the entire $900,000 held in escrow. In its

answer to the complaint, Green Coin alleged that its $900,000 deposit

always was fully refundable. It alternately argued that in December 2021, it

and Khadavi mutually agreed to cancel their sale agreement.

D The court grants summary judgment in the adversary proceeding.

Apprised of these allegations during a status conference in the

adversary proceeding, the court issued an order to show cause why a

chapter 11 trustee should not be appointed. On April 14, 2022, the court

directed the United States Trustee to appoint a chapter 11 trustee for

Khadavi’s bankruptcy estate. Ultimately, in July 2022, the case was

converted to chapter 7. Jason Rund has served as both the chapter 11

trustee and the chapter 7 trustee of Khadavi’s bankruptcy estate.

Rund moved for summary judgment in the adversary proceeding. He

asserted that the plain language of the Purchase Agreement, along with

Green Coin’s written release of all contingencies, compelled judgment 8 awarding the estate the $900,000 deposit as liquidated damages for Green

Coin’s breach of the Purchase Agreement. Rund further argued that even if

Addenda 1-3 or either of the conflicting versions of the December 10, 2021

Cancellation Form were authentic and actually executed by Khadavi, they

were invalid because the bankruptcy court had not approved them.

In its opposition to the summary judgment motion, Green Coin

contended that there were several disputed issues of material fact that

prevented entry of summary judgment. These included: (1) whether and

when the seller’s contingency of “court approval” was satisfied; (2) the

deadline for Green Coin to close escrow; (3) which event or events (if any)

qualified as a default triggering the liquidated damages clause; (4) whether

Khadavi’s admission that he “mutually cancelled” the Purchase Agreement

triggered paragraphs 14D(2) and 14H of the Purchase Agreement requiring

refund of the deposit; and (5) the validity of Addenda Nos. 2 and 3,

notwithstanding Khadavi’s concealment of them from the court. 4

Green Coin further argued that the liquidated damages clause was

unreasonable and unenforceable.5

In reply, Rund maintained that any purported agreement to cancel

the Purchase Agreement was invalid because the bankruptcy court did not

4 Whereas Green Coin characterizes these as questions of fact, they actually are issues of bankruptcy law, contract law, and contract interpretation that do not require resolution of any genuinely disputed issue of material fact. 5 Green Coin has abandoned this argument on appeal. It is not addressed in its

opening brief. 9 approve it. Rund reasoned that any cancellation of the Purchase

Agreement was tantamount to a compromise of a dispute governed by

Rule 9019 that required notice and court approval.

As for Green Coin’s arguments questioning whether and when a

default occurred, Rund relied on the terms of the Purchase Agreement as

approved by the court. He argued that under the ordinary meaning of the

term “default,” Green Coin had defaulted because it failed to pay the full

purchase price into escrow as required under the Purchase Agreement’s

plain language within 28 days of acceptance of the Purchase Agreement.

Rund further contended that the liquidated damages clause was both

reasonable and enforceable.

At the first hearing on the summary judgment motion, the

bankruptcy court granted the motion in part and reserved the remainder

for further consideration. The court held that the Purchase Agreement did

not include any of the addenda Green Coin subsequently presented

because none of them were proffered at the time the bankruptcy court

considered and granted the sale motion. As the court reasoned, if Green

Coin thought the addenda were part of the Purchase Agreement, it was

incumbent on it to advise the court in response to the sale motion. The

court ruled that Green Coin had actual or constructive notice of the

contents of the sale motion because both of its real estate agents received

service copies of the motion at the time it was filed. The agents also

received notice of the initial sale hearing date. Accordingly, the court

10 concluded that the Purchase Agreement was not contingent upon any

valuation of Green Coin, nor was the deposit refundable. The court also

rejected Green Coin’s liquidated damages argument, holding that under

the circumstances the $900,000 deposited was a reasonable amount of

liquidated damages.

The court declined to decide which of the various versions of the

December 10, 2021 cancellation agreement was controlling. Rather, it held

that any agreement to dispose of the escrow deposit was invalid. It

reasoned that each of the agreements constituted a compromise under Rule

9019 that required prior notice and court approval to become effective.

Alternately, the court reasoned they constituted an improper attempt at

abandonment of an estate asset without court approval.

As for the buyer’s default, the court held that Green Coin had

unequivocally defaulted because it was uncontroverted that it never paid

the balance of the deposit. The court noted that this was true whether

measured by the time specified in the Purchase Agreement or within three

days of Khadavi’s December 1, 2021 written notice to buyer to perform.

The court also ordered supplemental briefing on whether Khadavi had

cancelled the Purchase Agreement and if so, whether prior court approval

was required.

After further briefing the court held that Khadavi had not cancelled

the Purchase Agreement under paragraph 14(D), which was the only

Purchase Agreement provision that might have entitled Green Coin to a

11 refund of its deposit. The court further ruled that even if he had attempted

to do so, this attempt was invalid absent prior notice and court approval

either as an abandonment of estate property under § 554 or as a

compromise under Rule 9019.

The bankruptcy court entered summary judgment in favor of Rund

on September 28, 2022. Green Coin timely appealed.

JURISDICTION

The bankruptcy court had jurisdiction under

and

157(b)(2)(A). We have jurisdiction under

.

ISSUE

Whether the bankruptcy court erred when it granted summary

judgment in favor of Rund.

STANDARD OF REVIEW

We review de novo the bankruptcy court’s grant of summary

judgment. Boyajian v. New Falls Corp. (In re Boyajian),

(9th Cir. 2009). When we review a matter de novo, we give no deference to

the bankruptcy court’s decision. Francis v. Wallace (In re Francis),

(9th Cir. BAP 2014).

DISCUSSION

A. Summary judgment.

Civil Rule 56(a) is made applicable in adversary proceedings by Rule

7056. Under this rule, courts grant summary judgment when the record

demonstrates “that there is no genuine issue as to any material fact and

12 that the moving party is entitled to a judgment as a matter of law.” Celotex

Corp. v. Catrett,

(1986). Only genuine disputes of material

fact will preclude summary judgment. See

. “An issue is

‘genuine’ only if there is sufficient evidence for a reasonable fact finder to

find for the non-moving party.” Far Out Prods., Inc. v. Oskar,

,

992 (9th Cir. 2001) (citing Anderson v. Liberty Lobby, Inc.,

(1986)). A fact is “material” if it may affect the outcome of the case under

the substantive law. Anderson,

.

In assessing the merits of a summary judgment motion, all facts

genuinely in dispute must be viewed and all reasonable inferences must be

made, “in the light most favorable to the nonmoving party.” Scott v. Harris,

(2007). However, when the nonmovant’s uncorroborated

declaration testimony is conclusively refuted by other evidence in the

record, the nonmovant has not demonstrated a genuine issue of material

fact that requires denial of summary judgment.

.

B. Rules of contract construction.

Because the rules of contract interpretation address many of Green

Coin’s arguments, we offer a brief recitation of relevant contract

interpretation rules. Under California law, real property sales contracts are

interpreted in the same manner as other contracts. See Ram's Gate Winery,

LLC v. Roche,

(2015) (stating in the context of a

dispute over a real property sale that the court would ascertain the

contracting parties’ intent “in the same manner as in the case of any other

13 contract.”); see also

(“All contracts, whether public or

private, are to be interpreted by the same rules, except as otherwise

provided by this Code.”).

“California recognizes the objective theory of contracts, under which

it is the objective intent, as evidenced by the words of the contract, rather

than the subjective intent of one of the parties, that controls interpretation.”

Founding Members of the Newport Beach Country Club v. Newport Beach

Country Club, Inc.,

(2003) (cleaned up). In other

words, “[t]he language of a contract is to govern its interpretation, if the

language is clear and explicit, and does not involve an absurdity.”

. Furthermore, “[w]hen a contract is reduced to writing, this

intent ‘is to be ascertained from the writing alone, if possible.’” U.S. Cellular

Inv. Co. v. GTE Mobilnet, Inc.,

, 934 (9th Cir. 2002) (citing

; and Brinton v. Bankers Pension Servs., Inc.,

, 559, (1999)).

When the contract language is unambiguous or the relevant extrinsic

evidence is undisputed, the court’s interpretation of the contract is a

question of law. L.K. Comstock & Co. v. United Eng'rs & Constructors Inc.,

, 221 (9th Cir. 1989); see also Founding Members of the Newport Beach

Country Club,

(“When no extrinsic evidence is

introduced, or when the competent extrinsic evidence is not in conflict, the

14 appellate court independently construes the contract.”).

C. Green Coin defaulted on the Purchase Agreement.

This appeal hinges on a single sentence from the Liquidated

Damages Clause: “If Buyer fails to complete this purchase because of

Buyer’s default, Seller shall retain, as liquidated damages, the deposit

actually paid.” The bankruptcy court applied the Liquidated Damages

Clause to hold that the estate was entitled to the $900,000 deposit. It

determined that Green Coin defaulted by failing to pay the full deposit at

or before the time it was due, and this resulted in Green Coin not being

able to complete the purchase.

Green Coin’s relevant arguments challenge the bankruptcy court’s

application of the Liquidated Damages Clause. Though Green Coin never

paid the full deposit as required under the Purchase Agreement, it claims

that it never defaulted before cancellation of the contract. It asserts that its

duty to perform never matured because notice of various events was a

condition to its performance. It next contends the parties agreed that the

deposit under any and all circumstances was fully refundable, thereby

negating the Liquidated Damages Clause. Alternately, it insists that by the

time its performance was due, Khadavi had cancelled the contract. Finally,

it argues that regardless of any default that occurred, Khadavi elected to

proceed and did proceed under paragraph 14D of the Purchase Agreement,

which provides for return of the deposit to the prospective purchaser upon

cancellation. As discussed below, none of Green Coin’s theories justify

15 reversal.6

1. The due date of the deposit.

As the bankruptcy court duly recognized, the plain language of the

Purchase Agreement required the buyer to pay the full deposit amount

“within 3 business days after Acceptance.” In turn, the Purchase

Agreement specifically defined “Acceptance” as “the time the offer or final

counter offer is accepted in writing by a Party and is delivered to and

personally received by the other Party or that Party’s authorized agent in

accordance with the terms of this offer or a final counter offer.” It is

undisputed that “Acceptance” occurred here on September 9, 2021, when

Green Coin executed and returned the counter offer to Khadavi. Thus, the

full $2.55 million deposit was due on September 12, 2021 (or the next

business day thereafter).

Evidently aware of this deadline, the parties negotiated for two

Purchase Agreement addenda, which extended the due date for the

6 In addition to its other arguments, Green Coin contends that its failure to timely pay the full deposit as the Purchase Agreement required did not constitute a default under the agreement. Though it acknowledges that the Purchase Agreement did not define the term “default,” Green Coin makes no attempt to define the word—other than to baldly assert that its nonpayment of the deposit would not fall within the definition. This assertion lacks merit. Ordinarily, “words of a contract are to be understood in their ordinary and popular sense,” unless the surrounding circumstances indicate otherwise.

; accord, AIU Ins. Co. v. Super. Ct.,

(1990). “Default” commonly means “[t]he omission or failure to perform a legal or contractual duty; esp., the failure to pay a debt when due.” Black’s Law Dictionary (11th ed. 2019). As discussed below, the Purchase Agreement required Green Coin to pay the deposit, and it defaulted by not timely paying the full deposit amount required. 16 deposit. Addendum No. 2 extended the deposit deadline to November 2,

2021, and Addendum No. 3 further extended the deposit deadline to

December 2, 2021. There are disputes regarding the execution of these

addenda and whether they are valid in the absence of court approval.

These disputes are not material. Consistent with the bankruptcy court’s

decision, we assume for purposes of summary judgment that the addenda

duly extended the deposit deadline.

This means that, at the latest, Green Coin’s full deposit was due no

later than December 2, 2021. Therefore, Green Coin was in default under

the Purchase Agreement as of December 3, 2021, when it failed to pay the

full amount of the required deposit. By that date even the contingency

handwritten into the Purchase Agreement at paragraph 6—“Subject to

Court Approval”—had been satisfied. The bankruptcy court had entered

its order authorizing the sale on November 16, 2021.

Green Coin argues that the Notice of Buyer to Perform No. 1 (“NBP”)

Khadavi executed and sent to Green Coin on December 1, 2021, constituted

a further extension of the deposit deadline. Green Coin suggests that the

NBP extended the deposit deadline to December 6, 2021. It is mistaken. The

NBP identifies full payment of the “Initial Deposit” as a required

“contractual action” and then specifies that the buyer has three days from

delivery of the NBP to perform or else “Seller may cancel the Agreement.”

(Emphasis added.) It is beyond genuine dispute that the performance

period given in the NBP was to cure an existing default. Such a reading is

17 compelled by Purchase Agreement paragraphs 3A (governing the deposit)

and 14D (governing buyer rescission). In relevant part, paragraph 14D(2)

permits the seller to rescind and return the portion of deposit paid “after

first delivering to Buyer a NBP” if the full deposit is not paid in accordance

with paragraph 3A. Because Khadavi gave the NBP to permit Green Coin

to cure its failure to fund the full deposit, the NBP does not alter the

uncontroverted fact that Green Coin already was in default as of December

3, 2021.

2. Alleged notice conditions.

Green Coin next claims that its failure to pay the full deposit did not

constitute a default because its duty to pay the full deposit amount never

matured. It broadly complains that it was not aware of what specifically

occurred in the bankruptcy court. This was largely a self-inflicted wound.

Yet, Green Coin insists that before the full earnest money deposit was due,

Khadavi was required to give it notice: (1) of the bankruptcy court’s order

approving the contract; (2) that it might forfeit the $900,000 deposit paid if

it did not pay the remainder of the deposit; and (3) that it was obliged to

perform this duty by a date certain.

We have found no per se rule that such notice is a compulsory

condition precedent to performance under a contract. To the contrary,

unless the parties agree to a notice condition or one of the parties

persuades the court that the notice condition is implicit in the contract or is

necessary as a matter of good faith and fair dealing, no such condition

18 exists. See Restatement (Second) of Contracts § 226, cmts. a & c, and illus. 7

& 8 (1981); see also JMR Constr. Corp. v. Env't Assessment & Remediation

Mgmt., Inc.,

(2015), as modified on denial of reh'g

(Jan. 28, 2016) (holding that under California’s rules of contract

construction, obligee under surety contract was not required to give notice

to surety of principal’s default as a condition precedent to surety’s liability

on performance bonds).

If Green Coin wanted to require notice of court approval, potential

forfeiture, and the specific timing of its performance as contractual

provisions, it could have proposed putting them in the parties’ Purchase

Agreement. But it did not do so. Nor has Green Coin presented any

authority supporting the notion that the conditions should have been

implied as a matter of law. We see nothing unfair, unreasonable, or

impractical in the absence of these notice conditions.

Importantly, the bankruptcy court noted that Green Coin’s real estate

agents were timely served with the sale motion and notice of the sale

hearing. As the bankruptcy court’s decision correctly reflects, their

knowledge is imputed to Green Coin.7 The real estate agents knew the

7 Green Coin’s real estate sales agents had a fiduciary duty to report to their respective brokers all information that they knew or should have known in the course and scope of their agency, and their brokers had an equivalent fiduciary duty to report the same information to Green Coin as the prospective buyer. See Horiike v. Coldwell Banker Residential Brokerage Co.,

(2016). As a result, all knowledge Green Coin’s real estate agents and brokers acquired or reasonably should have learned in the course and scope of their duties is imputed to Green Coin. See 4 19 name and number of the bankruptcy case and that Khadavi was seeking

court approval of the sale. They also knew the contents of the sale motion,

the transaction documents attached, and the date and time of the hearing

on the motion. Thus, it would have been simple and easy for Green Coin’s

agents to track the court’s approval process for an $85 million sale.

Additionally, Green Coin’s agents were in repeated contact with Khadavi

and his bankruptcy counsel about the sale. Indeed, Green Coin and its

agents negotiated for extensions of the due date. Thus, Green Coin’s

professed ignorance of the specific due date and the claimed unfairness of

not being told the specific due date rings hollow and fails to raise a genuine

dispute of material fact to preclude summary judgment.

Green Coin’s argument that it was unaware that its partial deposit

was subject to potential forfeiture is equally unavailing. As the bankruptcy

court found, the Liquidated Damages Clause clearly provides for

liquidated damages if Green Coin defaulted. Also, Green Coin’s repeated

efforts to amend the Purchase Agreement to make the deposit refundable

demonstrate its knowledge that it was subject to forfeiture if it defaulted.

Accordingly, we reject Green Coin’s argument that conditions of

notice regarding court approval, potential forfeiture, and the specific

timing of its performance were part of, or should be implied into, the

parties’ contract.

Miller and Starr, Cal. Real Est. § 10:79 & n.6 (4th ed. 2023) (citing Merchants' Holding Corp. v. Grey,

(1935)). 20 3. Alleged refundability of the $900,000 deposited.

Green Coin next contends that regardless of default, the deposit was

fully refundable if the sale did not close for any reason. Green Coin

attempted to protect the deposit’s refundability in all three addenda.

Addenda No. 1 said: “This sale is based on a valuation of Green Coin for

$85 Million.” 8 Addenda Nos. 2 and 3 were more direct. Each said: “The

Buyer’s deposit is fully refundable if Buyer fails to close.”

For purposes of summary judgment we assume, as the bankruptcy

court did, that the Addenda would have amended the Purchase Agreement

and rendered the $900,000 partial deposit fully refundable as Green Coin

claims. Still, we also agree with the bankruptcy court that the refundability

provisions are invalid. None of the three addenda were presented to the

bankruptcy court for approval. As a result, they could not substantively

amend the Purchase Agreement approved by the bankruptcy court by

removing the Liquidated Damages Clause.

Agreements with a debtor in possession or trustee involving the use

or sale of estate property outside the ordinary course of the debtor’s

business are subject to prior notice under Rule 2002(a)(2) and the statutory

requirements of § 363(b)(1). 240 N. Brand Partners, Ltd. v. Colony GFP

Partners, L.P. (In re 240 N. Brand Partners, Ltd.),

(9th Cir.

8 There is a genuine dispute regarding what this language meant. Green Coin claims it meant that the sale was contingent on Green Coin being valued by some unidentified entity as being worth $85 million. But this dispute is not material as explained below. 21 BAP 1996). The requirements protect the interests of creditors in estate

assets. Debtors and trustees who wish to dispose of estate assets must

demonstrate both good faith and a legitimate business purpose.

This

typically means that sale agreements not approved by the bankruptcy

court are unenforceable. See In re Smith,

(Bankr. N.D.

Ala. 2006) (collecting cases); see also Slaieh v. Simons,

(C.D.

Cal. 2018) (holding that plaintiff could not allege the existence of a binding

sale contract with bankruptcy trustee without allegation of court approval).

These cases stand for the proposition that Khadavi and Green Coin could

not present one version of the Purchase Agreement to the bankruptcy court

for approval but bind each other to a different version of the Purchase

Agreement purporting to omit or negate material terms of the court-

approved version.

In short, we agree with the bankruptcy court that the secret addenda

were invalid and unenforceable for violating Rule 2002 and § 363(b)(1).

Accordingly, we reject Green Coin’s argument that the deposit was

refundable under the addenda.

4. Alleged cancellation of the Purchase Agreement and Escrow.

Green Coin’s remaining arguments focus on the alleged cancellation

of the Purchase Agreement and the escrow. Though Green Coin’s

references to cancellation are myriad, its cancellation arguments generally

fall into one of two broad categories: (1) Green Coin never defaulted

because Khadavi cancelled the Purchase Agreement on December 6, 2021,

22 before Green Coin’s duty to pay the full deposit matured; and (2) the

cancellation triggered paragraph 14D(2) of the Purchase Agreement, which

required return of the full deposit to Green Coin.9

a. Green Coin was in default on December 3, 2021.

Our prior analysis of the contractual due date for the full deposit

disposes of Green Coin’s first cancellation argument. Accepting that

Khadavi extended the due date for payment of the balance of the earnest

money deposit, Green Coin was required to deposit an additional

$1,650,000 into escrow by December 2, 2021. It did not and was in default

of the Purchase Agreement at that time. As explained above, the NBP did

not extend the due date for the balance of the deposit. Thus, Green Coin

already was in default when the so-called December 6, 2021 cancellation

allegedly occurred.

b. Khadavi did not unilaterally cancel the Purchase Agreement under ¶ 14D(2).

Green Coin’s second cancellation argument is patently dependent on

its claim that Khadavi unilaterally cancelled the Purchase Agreement on

December 6, 2021. To support this point, Green Coin relies on a single

sentence from Khadavi’s declaration filed on December 6, 2021: “As of

9 As the bankruptcy court aptly pointed out, these two arguments are mutually exclusive. The first denies that default ever occurred, while the second presupposes the existence of a default since paragraph 14D(2) is premised on the buyer’s failure to perform a contractual obligation “by the time specified in this Agreement.” Green Coin cannot have it both ways. 23 December 6, 2021, Green Coin failed to perform, as a result of which I

cancelled the agreement with Green Coin for the sale of the Sarbonne

Property.” Green Coin contends that this declaration testimony constituted

the rescission provided for in paragraph 14D(2). With this statement, Green

Coin believes that Khadavi relinquished any claim his bankruptcy estate

might have had in the deposit.

The California Association of Realtors utilizes its Cancellation of

Contract, Release of Deposit and Cancellation of Escrow (Form CC) for the

cancellation of California Residential Purchase Agreements and other

contracts. The document provides for cancellation of the contract and

instructions for the release of any deposit as well as the cancellation of

escrow. The parties to the contract may select various reasons for

cancellation of the contract, including the failure to take applicable

contractual actions after being given a Notice to Perform. Alternately, the

parties may mutually agree to cancel the contract. Similarly, the parties

may choose from several options how any deposit is to be handled.

Khadavi never executed a Cancellation Form for unilateral rescission

of the Purchase Agreement. As we previously stated, the two versions of

the Cancellation Form in the summary judgment record both provided for

cancellation by mutual agreement. In fact, there is no writing in the record

other than Khadavi’s statement in his declaration even remotely suggesting

a unilateral cancellation. Presumably, Green Coin relies on this declaration

testimony to support its rescission argument because paragraph 14H of the

24 Purchase Agreement requires any party purporting to cancel or rescind the

agreement to do so in writing.

All other evidence in the record demonstrates that Green Coin has

taken this single sentence out of context. Khadavi’s declaration was

submitted in response to the court’s direction that the debtor provide an

update after the December 1, 2021 continued status hearing on the sale

motion. At the status hearing, debtor’s counsel explained that the debtor

had just sent the NBP to Green Coin giving it three days to cure the default:

“This is a real estate form that basically says you’ve got three days to put

up the money or we’re canceling this deal.” When asked by the court if

there was a nonrefundable deposit, counsel responded that the issue was

“a matter of some contention.” But counsel made it clear that “[c]ertainly

the Debtor’s going to seek to retain the deposit” in the event Green Coin

did not cure the default.

After his December 6, 2021 declaration, Khadavi and Green Coin

negotiated a mutually agreed-upon cancellation of both the Purchase

Agreement and the related escrow. The key term the parties negotiated

was whether and how the $900,000 should be split between Khadavi and

Green Coin. As a result of the parties’ efforts, they presented in the

adversary proceeding two different versions of the Cancellation Form, both

dated December 10, 2021, as well as several different versions of their terms

for disposal of the funds in escrow. Nonetheless, it is undisputed that on

both of the competing versions of the Cancellation Form, the parties

25 checked the box stating that the Purchase Agreement was being cancelled

“Per Mutual Agreement” rather than one of the two boxes providing for

unilateral cancelation of the Purchase Agreement.

Moreover, if Khadavi was cancelling the Purchase Agreement under

paragraph 14D, the partial deposit should have been returned to Green

Coin and the appropriate box checked on the form. Yet on both versions of

the Cancellation Form, the parties checked the box for “other” disposition

of the funds held in escrow. And they wrote “See Addendum 3” to

reference their specific terms for disposition of the escrow funds. Rather

than returning the deposit to Green Coin as required under paragraph 14D,

all versions of this addendum dispose of the deposit by sending some

amount to Khadavi in a split of the monies in one fashion or another.10

Initially, there was no dispute that the parties sought to mutually

cancel the Purchase Agreement on December 10, 2021, and split the

monies. Indeed, it was Green Coin that brought this matter to light when it

disclosed one version of the Cancellation Form and addendum in its

answer to Khadavi’s complaint. In its opposition to the trustee’s summary

10 To be clear, there is a genuine dispute as to which version of the attachment to the Cancellation Form providing for disposal of the escrowed funds accurately reflects the parties’ agreement. But this dispute is not material. Indeed, Green Coin states in its reply brief on appeal that it does not seek to enforce any of the Cancellation Forms. The only material fact for purposes of summary judgment and this appeal is undisputed: by mutual agreement the parties attempted to split disposition of the deposit. This is wholly inconsistent with Green Coin’s claim that Khadavi intended to relinquish the estate’s rights in the deposit by unilaterally cancelling the Purchase Agreement in his December 6, 2021 declaration. 26 judgment motion, Green Coin also repeatedly referred to the parties’

mutual agreement to cancel the Purchase Agreement. However, in its

supplemental papers opposing the summary judgment motion, Green Coin

claimed for the first time that Khadavi unilaterally cancelled the Purchase

Agreement and that its prior statements regarding cancellation by mutual

agreement only were meant to refer to the cancellation of escrow.

Green Coin argues that the facts and circumstances surrounding the

putative cancellation efforts demonstrated disputed questions of fact that

required the bankruptcy court to deny summary judgment. We disagree.

“When opposing parties tell two different stories, one of which is blatantly

contradicted by the record, so that no reasonable jury could believe it, a

court should not adopt that version of the facts for purposes of ruling on a

motion for summary judgment.” Scott,

.

Green Coin seizes on one sentence from Khadavi’s declaration made

in a status report required by the court. From this, Green Coin attempts to

raise a genuine dispute as to what Khadavi intended to do. All other

evidence in the record, including the parties’ actions, are directed towards

a formal mutual agreement to cancel the Purchase Agreement and divide

the deposit. The contemporaneous transaction documents are flatly

inconsistent with a unilateral cancellation that would have triggered Green

Coin’s right under paragraph 14D to reclaim the full deposit. Under these

circumstances we will follow Scott. The record demonstrates that the

parties attempted to mutually cancel the Purchase Agreement and split the

27 deposit. Green Coin’s reliance on Khadavi’s statement fails to raise a

genuine dispute that he unilaterally canceled the Purchase Agreement and

relinquished the estate’s interest in the deposit.

c. None of the versions of the cancellation agreement were approved by the bankruptcy court and hence all were invalid and unenforceable.

As for the various versions of the parties’ mutual agreement to cancel

the Purchase Agreement and to split and dispose of the deposit funds held

in escrow, any dispute regarding the actual contents of the cancellation

agreement is immaterial. We agree with the bankruptcy court that

whatever agreement may have been reached, regardless of version, it

constituted an attempted compromise of the parties’ dispute over the

deposit. As such, the compromise was subject to notice and the

requirements of Rule 9019. Again, the parties failed to present the mutual

cancellation to the court for approval. See generally Goodwin v. Mickey

Thompson Ent. Grp., Inc. (In re Mickey Thompson Ent. Grp., Inc.),

(9th Cir. BAP 2003) (describing prerequisites to compromise).

Put differently, the cancellation agreement is analogous to the

refundability provisions we rejected earlier. It qualified as an unauthorized

agreement to use or sell an estate asset: the right to dispose of the deposit

under the Liquidated Damages Clause. Without court approval, the

parties’ attempted agreement to cancel the Purchase Agreement and

dispose of the deposit was invalid and unenforceable against the

28 bankruptcy estate. See Slaieh,

; In re Smith,

.

In sum, the bankruptcy court correctly determined on summary

judgment that there was no unilateral cancellation of the Purchase

Agreement or relinquishment of the estate’s interest in the deposit under

the Liquidated Damages Clause. Nor was the parties’ mutual cancellation

agreement—whatever its actual terms—effective to bind the estate to a

disposition of the deposited funds. 11

CONCLUSION

For the reasons set forth above, we AFFIRM.

11 For the first time on appeal, Green Coin asserted that the bankruptcy court should have rewritten the Purchase Agreement to mirror the standard terms typically set forth in form contracts for the sale of real property subject to probate proceedings. In essence, Green Coin is asking for reformation of the Purchase Agreement. But reformation requires the proponent to bring a cause of action for reformation, as well as plead and prove the elements for the requested relief. See Pascoe v. Morrison,

, 55–56 (1933) (citing

). Because Green Coin failed to do so, we decline its belated invitation to rewrite the parties’ contract. 29