FILED MAY 20 2025

NOT FOR PUBLICATION SUSAN M. SPRAUL, CLERK U.S. BKCY.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 Nos. EC-24-1122-SGC ARMIDA CASTANEDA RAMIREZ, EC-24-1123-SGC Debtor. (Related Appeals)

FERMIN CASTANEDA, Bk. No. 19-23509 Appellant, v. Adv. Nos. 19-02075 J. MICHAEL HOPPER, Chapter 7 23-02057 Trustee, Appellee. MEMORANDUM*

Appeal from the United States Bankruptcy Court for the Eastern District of California Christopher M. Klein, Bankruptcy Judge, Presiding

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

Memorandum by Judge Spraker.

Concurrence by Judge Gan.

INTRODUCTION

Fermin Castaneda appeals two judgments entered in separate

adversary proceedings. The first appeal challenges the entry of a corrected judgment that avoided chapter 7 1 debtor Armida Castaneda Ramirez’s

transfer of her interest in real property in Springfield, Virginia

(“Property”), to Castaneda. The second appeal arises from a trial in a

subsequent adversary proceeding where the chapter 7 trustee sued

Castaneda for a breach of a prepetition Property Settlement and Support

Agreement (“Marital Settlement”) executed with Ramirez. The trustee also

sought turnover of the Property and authority to sell the Property.

Castaneda raises the same central issue in both appeals: the scope of

relief the court originally awarded in 2020, when it avoided the debtor’s

prepetition transfer of the Property. In the first appeal, Castaneda contends

that the court erred by entering the corrected judgment years after the

avoidance action to clarify that the estate had recovered Ramirez’s interest

subject to the avoided transfer. He argues that the court did not—and

legally could not—provide for the trustee’s “recovery” of the transferred

interest. The record, however, amply demonstrates that the trustee sought,

and the court intended, to avoid and recover the transferred interest for the

benefit of the estate. Because the court was well within its discretion to

correct the judgment in the first adversary to make plain that the estate not

only avoided but also recovered the debtor’s interest in the Property, we

1 Unless specified otherwise, all chapter and section references are to the Bankruptcy Code, 11 U.S.C. §§ 101–1532, all “Rule” references are to the Federal Rules of Bankruptcy Procedure, and all “Civil Rule” references are to the Federal Rules of Civil Procedure.

2 AFFIRM the Corrected Judgment.

As for Castaneda’s appeal from the judgment entered in the

subsequent adversary proceeding, the bankruptcy court found that the

trustee had failed to prove any of his claims. Though the court found that

Castenda had defaulted on his obligation under the Marital Settlement to

timely pay the mortgage on the Property, it also concluded that no

damages resulted. The court effectively entered judgment for Castaneda on

that claim because he cured the default before trial. Because Castaneda

prevailed at trial, there is no relief available to him on appeal. Though he

disagrees with various findings made by the bankruptcy court, none of the

challenged findings appear to be a necessary or conclusive part of the

judgment. As a result, nothing he has raised would affect the judgment

entered in the second adversary proceeding even if he were to prevail as to

the challenged findings. Accordingly, the second appeal must be

DISMISSED as moot.

FACTS2

A. The first adversary proceeding.

Ramirez and Castaneda were married and owned the Property as

tenants by the entirety. In December 2018, they entered into the Marital

Settlement, which addressed child custody and support, the division of

2 We exercise our discretion, when appropriate, 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 assets, the debts of the parties and other terms of their separation. The

Marital Settlement provided that the parties would incorporate its terms

into any divorce action that might be later filed. The record is unclear

whether a divorce was ever filed; no judicial records have been provided to

establish any divorce proceeding.

Pertinent to these appeals, Castaneda agreed to give Ramirez sole

custody of the couple’s minor children, and not to challenge her relocation

to California with the children. In turn, Ramirez agreed that Castaneda

would have exclusive, but temporary, possession of the Property.

Paragraph 9 of the Marital Settlement provided for the eventual sale of the

Property when “the parties mutually agree to sell their marital residence.”

Upon any sale, the Marital Settlement required that Ramirez and

Castaneda split the net sale proceeds evenly without restriction. However,

so long as Castaneda continued to occupy the Property,

Husband shall be responsible and liable for the principal, interest, taxes, and insurance on any mortgages or Deeds of Trust relating to the ownership of said property, in their entireties, including any deficiency judgments pertaining thereto, and shall indemnify and hold Wife harmless thereon. Furthermore, Husband shall be solely responsible for all utility expenses, maintenance costs, and repairs of the property, and shall indemnify and hold Wife harmless thereon.

Despite the Marital Settlement, in February 2019, Ramirez signed a

General Warranty Deed conveying her 50% interest in the Property to 4 Castaneda (“2019 Deed”). Castaneda gave no consideration for the transfer

of Ramirez’s interest in the Property.

Ramirez filed bankruptcy shortly thereafter in May 2019. Hopper was

appointed to serve as chapter 7 trustee (“Trustee”). Within weeks of the

bankruptcy filing, Trustee sued Castaneda under § 548 for avoidance of the

fraudulent transfer arising from the 2019 Deed and under § 550(a)(1) for

recovery of the transferred interest, or the value of such transferred interest

(the “2019 Action”).

The 2019 action was tried by the bankruptcy court in October 2020.

Castaneda claimed that the 2019 Deed was not avoidable because Ramirez

did not transfer anything of meaningful value to him. Castaneda reasoned

that the Marital Settlement continued to remain in full force and effect, and

governed the parties’ rights, interests, and duties with respect to the

Property. According to Castaneda, Ramirez’s Marital Settlement rights

were property of the estate, thus the 2019 Deed to Castaneda did not

transfer any property to him.

In its oral findings of fact and conclusions of law following trial, the

bankruptcy court discussed the Marital Settlement, including the parties’

rights and the agreement to sell the Property at a mutually agreeable time.

The court noted Castaneda’s arguments that there was no evidence at trial

to establish the estate would ultimately recover sufficient value to warrant

a sale of the Property. Citing Hyman v. Plotkin (In re Hyman),

(9th Cir. 1992), the court held that the trustee did not have to establish what

5 benefit the estate would ultimately receive from avoiding the transfer to

prevail on his constructive fraudulent transfer claim when Castaneda

conceded he had provided no consideration. While such evidence would

be necessary under § 363(h)(2) if Trustee wanted to sell all interests in the

Property, the court left that question for another day. In response to a

question from Castaneda’ counsel, the court clarified that it was the

debtor’s interest as conveyed by the 2019 Deed that was being avoided.

Counsel then proceeded to discuss the exact nature of the debtor’s interest

and the estate’s ability to sell that interest under § 363(h), ultimately

agreeing that such matters could be addressed in a later, new adversary

proceeding or contested matter.

The bankruptcy court entered judgment granting relief to Trustee on

the first count of his complaint to avoid the transfer and recover the

property interest transferred under §§ 548 and 550 (“2020 Judgment”). The

judgment specified that Ramirez’s transfer of interest in the residence to

Castaneda was “avoided pursuant to

(a)(1)(B) and ordered

preserved for the benefit of the estate pursuant 11 U.S.C. 550.” There was

no specific mention in the 2020 Judgment of the transferred interest being

“recovered.” The other counts of Trustee’s complaint—turnover of

possession of the residence under § 542, sale under § 363(h), and avoidance

of the 2019 Deed under other avoidance statutes—were ordered dismissed.

No party appealed the 2020 Judgment.

6 B. Trustee commences the second adversary proceeding.

In 2023, Trustee filed a new adversary proceeding against Castaneda

(“2023 Action”). This lawsuit arose from Castaneda’s alleged breach of the

Marital Settlement. Trustee alleged that Castaneda had failed to timely

make all the mortgage payments for the residence. Trustee sought relief for

breach of contract, for authority to sell the residence under § 363(h), and,

again, for turnover of possession of the residence under § 542(a). Castaneda

answered the complaint and moved for judgment on the pleadings,

arguing that: (1) the 2020 Judgment did not “recover” Ramirez’s 50%

interest in the residence—or the right to occupy the residence; (2) the

claims in the 2023 Action to recover those interests were time-barred; and

(3) Trustee had no contract rights to enforce under the Marital Settlement.

After full briefing and a hearing, the bankruptcy court denied this motion,

without prejudice and the case proceeded to trial.

C. The court corrects the 2020 Judgment in the 2019 Action.

During closing arguments in the 2023 Action, Castaneda renewed his

argument that the 2020 Judgment entered in the 2019 Action did not grant

the bankruptcy estate recovery of the interest transferred. Rather, he

argued, the 2020 Judgment merely provided that the transfer was avoided

and preserved. In response, the bankruptcy court announced that it was

considering using its authority under Civil Rule 60(a) to sua sponte correct

and clarify the 2020 Judgment. The bankruptcy court then took both the

2023 Action and the Civil Rule 60(a) issue arising from the 2019 Action 7 under submission.

Roughly three months later, the bankruptcy court entered in the 2019

Action both a corrected judgment (“Corrected Judgment”) and a

memorandum in support of the Corrected Judgment (“Memorandum”).

The Memorandum stated that the 2020 Judgment was imprecise and

confusing regarding the parties’ respective rights despite the relief the

court had intended to grant to Trustee at the time of entry of that

judgment. As the bankruptcy court explained, its oral ruling in the 2019

Action reflected its clear intent to grant Trustee’s first cause of action in

full. That claim had sought both avoidance of the February 2019 Deed

under § 548 and recovery of the interest transferred by that deed under

§ 550. According to the court, in its ruling it had spelled out: (1) that the

trustee was “owner of an undivided interest in the residence as a tenant in

common”; and (2) “that the contractual terms of the [Marital Settlement]

with respect to the residence were valid and remain in effect . . . .” As the

court put it, these two items were left out of the 2020 Judgment as a result

of the court’s inadvertent oversight or omission. After elaborating on the

legal effect of its ruling, the court held that it would enter a corrected

judgment to address the oversight.

The Corrected Judgment, entered on July 19, 2024, changed the

original language from the 2020 Judgment that the subject transfer “is

hereby avoided pursuant to

(a)(1)(B) and ordered preserved

for the benefit of the estate pursuant

.” The court replaced

8 this language to state that the subject transfer “is hereby avoided pursuant

to

(a)(1)(B), is ordered recovered pursuant to

,

and is preserved for the benefit of the bankruptcy estate pursuant to

. . . .”

The Corrected Judgment also added several new paragraphs,

including one that stated the Marital Settlement is valid and binding on the

parties and that Ramirez’s rights under the Marital Settlement are property

of her bankruptcy estate. It further stated that the terms of the Marital

Settlement “impose certain duties and obligations on Fermin Castaneda

and provide for sale of the residence by agreement, with one-half of net

proceeds to be paid to the bankruptcy estate.”

Castaneda has appealed from the Corrected Judgment.

D. The entry of the Interlocutory Judgment in the 2023 Action.

Also on July 19, 2024, the bankruptcy court entered its self-styled

“Interlocutory Judgment” in the 2023 Action. Based largely on its rulings

from the 2019 Action—as clarified in the Corrected Judgment—the court

held that Castaneda had breached the Marital Settlement by failing to

timely make all required mortgage payments for the residence. Specifically,

it held that Castaneda failed to make the mortgage payments between

February 2023 and June 2023. But the court also found that Castaneda

subsequently had cured this default by bringing the mortgage payments

current. The clear significance of this statement, though not expressly

stated, is that the estate suffered no damage from any breach of contract. 9 The court did not state its ultimate, final ruling on the breach of contract

claim. Instead, the Interlocutory Judgment stated that the adversary

proceeding would be stayed pending “further developments.”

As for the claim seeking authority to conduct a bankruptcy sale of the

Property, the bankruptcy court held that § 363(h) was unavailable because

the debtor did not have the requisite interest in the Property at the time of

commencement of the case. Nor did the court believe that a sale under

§ 363(b) would be appropriate under the circumstances as they existed at

that time. Similarly, the court indicated that it would be premature to

consider turnover as requested in Trustee’s complaint so long as Castaneda

remained compliant with the Marital Settlement.

Finally, the court stated that Trustee likely was entitled to some

award of attorney’s fees under the Marital Settlement “because the trustee

is deemed to be the prevailing party on the issue of breach.” It held,

however, that any determination of the precise fees to be awarded was

premature and subject to further developments regarding the performance

of the [Marital Settlement].”

At the conclusion of the Interlocutory Judgment the bankruptcy court

ordered the 2023 Action indefinitely stayed. The record does not reflect or

explain what additional actions remain in this adversary proceeding after

trial and decision of the court on all claims brought by Trustee.

Castaneda also has appealed from the Interlocutory Judgment.

10 JURISDICTION

The bankruptcy court had jurisdiction under

and

157(b)(1). Subject to the mootness discussion set forth below, we have

jurisdiction under

. A prior motions panel entered an order

granting Castaneda’s motion for leave to appeal from the “Interlocutory

Judgment.” We have examined the motions panel’s ruling and have heard

the parties’ views on leave to appeal at oral argument. Having considered

the issue, we decline to reconsider the motion panel’s order granting leave

to appeal.

ISSUES

1. Whether the bankruptcy court abused its discretion when it entered

the Corrected Judgment under Civil Rule 60(a).

2. Whether Castaneda’s appeal from the Interlocutory Judgment is

moot.

STANDARDS OF REVIEW

We review the bankruptcy court’s decision to correct the 2020

Judgment under Civil Rule 60(a) for an abuse of discretion. See Cohen v.

Cohen (In re Cohen),

, 805 (9th Cir. BAP 2023). The bankruptcy

court abused its discretion if it applied an incorrect legal rule or its factual

findings were illogical, implausible, or without support in the record.

TrafficSchool.com v. Edriver Inc.,

(9th Cir. 2011).

Mootness issues are questions of law that we review de novo. Suter v.

Goedert,

(9th Cir. 2007); Harms v. Bank of N.Y. Mellon

11 (In re Harms),

(9th Cir. BAP 2019).

DISCUSSION

I. Appeal from the judgment entered in the 2019 Action.

Castaneda raises a host of issues challenging the bankruptcy court’s

Corrected Judgment. 3 Each issue relates to the application of § 550 to the

debtor’s avoided transfer, mostly focusing on subsections (a) and (f), which

provide:

(a) Except as otherwise provided in this section, to the extent that a transfer is avoided under section 544, 545, 547, 548, 549, 553(b), or 724(a) of this title, the trustee may recover, for the benefit of the estate, the property transferred, or, if the court so orders, the value of such property, from—

(1) the initial transferee of such transfer or the entity for whose benefit such transfer was made; or (2) any immediate or mediate transferee of such initial transferee.

***

(f) An action or proceeding under this section may not be commenced after the earlier of—

(1) one year after the avoidance of the transfer on account of which recovery under this section is sought; or

3 Castaneda submitted joint briefing in the two appeals. His briefing obscures the proper scope of each appeal but overwhelmingly focuses on the application of § 550. Castaneda also references the Martial Settlement throughout his briefing. However, having carefully read his briefing, we conclude that he has not raised or developed any arguments on appeal challenging any provision of the Corrected Judgment, other than the amended language relating to recovery under § 550. 12 (2) the time the case is closed or dismissed.

.

Castaneda believes that Trustee failed to sue to recover the debtor’s

interest in the Property in the time provided by § 550(f). He argues that

Trustee’s 2019 Action merely avoided the 2019 Deed. In support of his

argument, he relies on the language of the 2020 Judgment that the debtor’s

transfer of her interest in the Property was “avoided pursuant to

(a)(1)(B) and ordered preserved for the benefit of the estate pursuant

to

.” Castaneda contends that avoidance of the 2019 Deed

and preservation of that avoided transfer were insufficient to bring the

debtor’s interest in the Property into the bankruptcy estate. He contends

that only an avoided lien may be preserved. In contrast, Trustee here

avoided a transfer of debtor’s ownership interest. According to Castaneda,

a transferred ownership interest not only must be avoided under § 547 but

also recovered under § 550(a); only then can it become property of the

bankruptcy estate pursuant to § 541(a)(3)—as opposed to § 541(a)(4) (which

typically brings into the bankruptcy estate liens that have been avoided

and preserved pursuant to § 551).

When Castaneda made these arguments in the 2023 Action, the

bankruptcy court responded that it would consider reopening the 2019

Action for the purpose of invoking Civil Rule 60(a) to correct or clarify the

2020 Judgment. In its Memorandum entered in support of the Corrected

Judgment, the bankruptcy court did exactly that. It reviewed Trustee’s 13 complaint from the 2019 Action, the trial record, its oral ruling, and the

language of the 2020 Judgment. Based thereon, the bankruptcy court

specifically found that it always had intended not only to avoid the 2019

Deed as a constructive fraudulent transfer but also to recover the

transferred ownership interest for the estate’s benefit. It then proceeded to

enter the Corrected Judgment under Civil Rule 60(a) to conform the

judgment to its original intent. The Corrected Judgment thus clarified that

the estate recovered the debtor’s avoided transfer of the Property. As

detailed below, the record amply supports the bankruptcy court’s

application of Civil Rule 60(a) to enter the Corrected Judgment. 4

A. Civil Rule 60(a) and relevant legal standards.

Civil Rule 60 is made applicable in bankruptcy cases and adversary

proceedings by Rule 9024. Under Civil Rule 60(a), “[t]he court may correct

a clerical mistake or a mistake arising from oversight or omission whenever

one is found in a judgment, order, or other part of the record. The court

may do so on motion or on its own, with or without notice.” Whether a

court may invoke Civil Rule 60(a) to correct an omission in its judgment,

4 Because Castaneda failed to appeal the 2020 Judgment, the only issue properly within the scope of Castaneda’s first appeal is whether the bankruptcy court abused its discretion under Civil Rule 60(a) when it entered the Corrected Judgment. If the bankruptcy court did not abuse its discretion under Civil Rule 60(a), all other issues Castaneda attempts to raise pertaining to either the 2020 Judgment or the Corrected Judgment are beyond the proper scope of this appeal. See Garamendi v. Henin,

(9th Cir. 2012) (“If the district court properly acted under [Civil] Rule 60(a), then the correction did not start a new appeal time running.” (quoting Harman v. Harper,

(9th Cir. 1993))). 14 clarify its decision, or describe the necessary implications of its rulings

depends on what it originally intended to do. Where the court’s original

ruling either explicitly or implicitly reflects the court’s actual intent, the

court may use Civil Rule 60(a) to correct its ruling to conform to that intent.

See Tattersalls, Ltd. v. DeHaven,

(9th Cir. 2014);

Garamendi,

; see also Korea Exch. Bank v. Hanil Bank, Ltd.

(In re Jee),

(9th Cir. 1986) (affirming use of Civil Rule 60(a)

to clarify that prior dismissal of cross-complaint was meant to be a

dismissal without prejudice based on court’s evident intent); Robi v. Five

Platters, Inc.,

(9th Cir. 1990) (affirming use of Civil

Rule 60(a) to clarify which specific trademarks the court had intended to

order canceled but failed to identify in its original judgment).

The Ninth Circuit broadly construes Civil Rule 60(a), holding that the

rule “allows a court to clarify a judgment in order to correct a failure to

memorialize part of its decision, to reflect the necessary implications of the

original order, to ensure that the court’s purpose is fully implemented, or

to permit enforcement.” Garamendi,

(cleaned up).

For purposes of correcting a judgment under Civil Rule 60(a) to

conform the judgment to the court’s original intent, the assessment and

appropriate interpretation of that intent is a question of fact subject to the

clearly erroneous standard. In re Jee,

. Furthermore, the

court’s subsequent statements regarding what it intended are entitled to

considerable deference. See id.; see also Hallett v. Morgan,

, 739-

15 40 (9th Cir. 2002) (stating that appellate court must give deference to the

trial court’s interpretation of its own judgment); Rosales v. Wallace (In re

Wallace),

(9th Cir. BAP 2013) (“We accord substantial

deference to the bankruptcy court's interpretation of its own orders . . . .”).

Reviewing the bankruptcy court’s Memorandum entered in support

of the Corrected Judgment, the court applied the correct legal standards for

application of Civil Rule 60(a). The question thus becomes whether the

record supports the bankruptcy court’s determination that it originally

intended for the estate to recover the debtor’s interest in the Property.

B. The bankruptcy court did not abuse its discretion in entering the Corrected Judgment in the 2019 Action to clarify that Trustee recovered the transferred interest in the Property.

The bankruptcy court cited both the complaint and its oral ruling as

evidence of its original intent to enter judgment for Trustee to recover the

debtor’s transferred interest in the Property. Trustee’s cause of action for

fraudulent conveyance in the 2019 Action specifically requested avoidance

of the debtor’s transfer under § 548(a)(1) and recovery of that transferred

interest under § 550. It also sought a determination that the estate’s title

after avoidance would be superior to Castaneda’s title. Specifically, in the

prayer for relief Trustee requested that judgment be entered “[a]warding

recovery of the Subject Property, or its value, to the Trustee, for the benefit

of the Debtor’s bankruptcy estate, pursuant to

.”

Nowhere in the complaint is there any mention of “preservation” of

16 the avoided transfer. Preservation of an avoided transfer occurs

automatically, by operation of law, pursuant to § 551 of the Bankruptcy

Code. In contrast, § 550(a) specifically deals with “recovery” for the benefit

of the estate, “or, if the court so orders, the value of such property….”

The first reference in the record before us to preservation—as

opposed to recovery—appears to be in Trustee’s Trial Brief submitted in

the 2019 Action. The Trial Brief first stated that “[u]nder

(a)(1), the property transferred is recovered ‘for the benefit of the estate’

if the transfer is avoided under

.” But the Trial Brief

then further stated that any avoided transfer is preserved for the benefit of

the estate under § 551. According to Trustee, the recovered property

interest was to become property of the estate that the debtor could not

exempt. Adv. No. 19-02075, Doc. No. 62, at p. 5.

The parties have not presented a transcript of the trial in the 2019

Action. They have, however, included the court’s oral ruling after trial.

Summarizing Trustee’s complaint, the court noted that the first cause of

action “was for avoidance and recovery of the transfer of the property

pursuant to

(a)(1) and Section 550.” The court ruled that

the debtor transferred her interest in the Property to Castaneda for less

than reasonably equivalent value while insolvent, satisfying the elements

for a constructive fraudulent transfer under § 548(a)(1)(B). The court then

proceeded to address Trustee’s request to sell the Property under § 363(h),

which was necessarily premised on the recovery of the fraudulently

17 transferred interest. The court denied the cause of action seeking to sell the

Property, finding that it was not developed at trial, though it anticipated

that Trustee would pursue the sale of the Property later, in a more

thorough presentation.

At the conclusion of its oral ruling, the court and Castaneda’s counsel

engaged in a discussion regarding the nature of the interest in the Property

the estate would acquire upon avoidance. Counsel noted that the debtor

and Castaneda originally owned the Property jointly as tenants in the

entirety. The court reasoned that the Marital Settlement and the 2019 Deed

likely terminated any tenancy by the entireties and upon avoidance of the

2019 Deed, the estate would become tenants in common with Castaneda.

The court’s oral ruling and subsequent discussions with counsel

clearly anticipated Trustee’s recovery of the debtor’s transferred interest.

This is entirely consistent with Trustee’s complaint and his trial brief. It

defies common sense that the court and counsel would discuss the estate’s

resulting interest under Virginia law and the potential issues relating to the

Trustee’s future sale of the Property if Trustee was not recovering the

debtor’s interest under § 550(a).

On this record, the bankruptcy court’s Civil Rule 60(a) determination

that it intended to include the word “recovered” when it referenced

but inadvertently omitted the word “recovered” from the

original judgment is entirely plausible, logical, and supported by the

record. This determination was not clearly erroneous. As such, the

18 Corrected Judgment did not contravene § 550(f)’s limitations period

because Trustee recovered the transferred interest in the Property at the

same time the transfer was avoided.

C. The bankruptcy court was not required to detail the type of recovery sought or the value of that recovery.

Castaneda next argues that the court could not have intended to

grant Trustee recovery of the debtor’s transferred interest because it never

specified what type of “recovery” Trustee was entitled to under § 550. This

argument is specious. Under the plain language of § 550(a), the plaintiff can

only recover one of two things: (1) the property interest transferred; or

(2) the value of the property interest transferred. When, as here, there is no

determination of the value of the property interest transferred, the recovery

necessarily is limited to recovery of the property interest transferred. See

generally USAA Fed. Sav. Bank v. Thacker (In re Taylor),

(9th

Cir. 2010) (explaining at length the remedies available under § 550); Aalfs v.

Wirum (In re Straightline Invs., Inc.),

(9th Cir. 2008) (same).

The recovery here necessarily was limited to the debtor’s interest in the

Property she transferred to Castaneda by the challenged 2019 Deed.

Accordingly, there was no need for the bankruptcy court to be more

specific about the nature of the recovery it was granting under § 550.

Interspersed within Castaneda’s arguments on appeal is the notion

that Trustee failed to prove any value in the interest Ramirez transferred to

him. He argues that Trustee needed to prove that the recovery will result in

19 a “benefit to the estate” under § 550(a). But Castaneda misreads the statute,

which simply provides that any such recovery will be “for the benefit of

the estate.” There is no requirement to quantify such benefit for purposes

of § 550(a) where one merely seeks to recover what was conveyed and has

been avoided. Here, the interest recovered by Trustee was merely the

interest conveyed by Ramirez.

A valuation of the interest to be avoided might be material to the

underlying avoidance of the transfer, especially when the plaintiff must

prove it was made for less than reasonably equivalent value under

§ 548(a)(1)(B)(i), as in this instance. But Castaneda did not appeal the

court’s 2020 Judgment avoiding the 2019 Deed. He cannot now collaterally

attack the avoidance of that transfer. See Jue v. Liu (In re Liu),

,

881 (9th Cir. BAP 2020).

D. Castaneda was not a good faith transferee under § 550(a)(2).

Castaneda further contends that the bankruptcy court should have,

but failed to, assess whether he was a good faith transferee as part of its

analysis under § 550. Section 550(b) precludes a trustee from recovering

under § 550(a)(2) any transfer taken by the transferee in good faith and for

value without knowledge of the voidability of the transfer. Castaneda

posits that the absence of any such findings on the good faith issue

indicates that the bankruptcy court did not really intend to grant § 550(a)

recovery when it entered the 2020 Judgment. Again, this argument lacks

merit. Castaneda was not a transferee potentially covered by the § 550(b) 20 defense. This is because § 550(b) is specifically limited to subsequent

transferees of the initial transferee as defined in § 550(a)(2); the defense

does not apply to initial transferees liable under § 550(a)(1). See Schafer v.

Las Vegas Hilton Corp. (In re Video Depot, Ltd.),

(9th

Cir. 1997) (describing § 550(a) liability of initial transferees as “absolute”

whereas a “subsequent transferee” may assert the good faith defense under

§ 550(b)). In short, Castaneda was an “initial transferee” covered instead by

§ 550(a)(1), so § 550(b) was not applicable.

We note that even if applicable, Castaneda would not qualify as a

good faith transferee under § 550(b) because he admitted in his answer that

he gave no value for the 2019 Deed. See generally Woods & Erickson, LLP v.

Leonard (In re AVI, Inc.),

(9th Cir. BAP 2008) (identifying

elements of § 550(b) defense as: “(1) good faith, (2) for value, and (3)

without knowledge of the voidability of the transfer.” (cleaned up)). As

indicated in Avi, Inc., § 550(b) is an affirmative defense that defendant

Castaneda was obligated to plead and prove. On this record, he

unequivocally failed to prove all the requisite elements.

In summary, none of Castaneda’s arguments that the court erred in

entering the Corrected Judgment have any merit. The record demonstrates

that the bankruptcy court intended to award recovery under § 550 but

inadvertently omitted the reference to “recovery” from the 2020 Judgment.

II. Appeal from the judgment entered in the 2023 Action.

Castaneda’s appeal of the Interlocutory Judgment rests primarily on

21 his argument that the court did not provide for the estate’s recovery of the

debtor’s transferred interest when it avoided the fraudulent transfer in the

2019 Action. Absent recovery of the transferred interest, the estate would

have no interest in the Property. Having concluded that the bankruptcy

court did not err in correcting its judgment in the 2019 Action to clarify the

estate’s recovery of the transferred interest, the appeal of the Interlocutory

Judgment entered in the 2023 Action also fails in this regard.

More importantly, the judgment entered in the 2023 Action ruled

against Trustee on all his claims—his claim for breach of contract, his

turnover claim, and his claim for authority to sell the Property under

§ 363(h). Castaneda thus prevailed in the 2023 Action. True, the court

stated that Trustee could recover under the Marital Settlement some

amount of attorney’s fees because he prevailed on the issue of default. But

neither the default issue nor the fees issue is properly before us. The

bankruptcy court did not actually award any attorney’s fees based on the

purported default. To the contrary, the court has reserved the fees issue

and stated that it remains subject to further determination based on future

events. Trustee’s right to attorney fees thus remains unresolved and

beyond the proper scope of this appeal.

An appeal is moot and must be dismissed if we cannot grant the

appellant any meaningful relief. Motor Vehicle Cas. Co. v. Thorpe Insulation

Co. (In re Thorpe Insulation Co.),

(9th Cir. 2012); see also

United States v. Gould (In re Gould),

(9th Cir. BAP 2009)

22 (stating that an appeal becomes moot when circumstances occur during the

course of the appeal that render it impossible for us to grant effective

relief), aff'd,

(9th Cir. 2010). Generally, the prevailing party

cannot appeal from a favorable judgment. Env't Prot. Info. Ctr., Inc. v. Pac.

Lumber Co.,

, 1075-1077 (9th Cir. 2001) (examining rule and its

exceptions); 15A Charles Alan Wright & Arthur R. Miller, Fed. Prac. &

Proc. Juris. § 3902 (3d ed. 2024) (same). Because he prevailed, the issues

Castaneda can raise on appeal are limited to those decided against him. See

Deposit Guar. Nat’l Bank v. Roper,

, 333–35 & n.7 (1980).

Though Castaneda defeated all of Trustee’s claims in the 2023 Action,

he discusses the Marital Settlement at length. First, he believes that the 2019

Deed merged and extinguished his obligations under the Marital

Settlement. Second, he denies owing any contractual obligation under the

Marital Settlement to make monthly mortgage payments. Rather, he reads

the Marital Settlement as requiring only that he indemnify the debtor for

any losses related to the Property. As a result, he argues that the failure to

make mortgage payments cannot constitute a breach of contract requiring

the sale of the Property under the Marital Settlement.5 Finally, Castaneda

states that the Marital Settlement is not an executory contract, but if it is,

5 The bankruptcy court did not explain how it construed the Marital Settlement to conclude that it imposed on Castaneda an affirmative obligation to timely pay the mortgage as opposed to merely obligating him to indemnify and hold Ramirez harmless from any losses or potential liability she might incur from nonpayment of the mortgage. 23 the bankruptcy estate failed to assume it.

Trustee based his claim for breach of contract on the Marital

Settlement. Under governing Virginia law, Trustee was required to prove

“(1) a legally enforceable obligation of a defendant to a plaintiff; (2) the

defendant’s violation or breach of that obligation; and (3) injury or damage

to the plaintiff caused by the breach of obligation.” Ulloa v. QSP, Inc.,

(Va. 2006) (cleaned up). The bankruptcy court did find that

Castaneda breached the Marital Settlement by failing to make several

monthly mortgage payments thereby satisfying two of the three elements

of Trustee’s contract claim. Castaneda disagrees with those findings. But

we need not reach those issues. The court held that Castaneda cured the

missed payments. Though not expressly stated, the cure of the missed

payments precluded any finding of damages based on the claim as

presented at trial. Absent damages, Trustee failed to prove the third

element of his breach of contract claim. A failure of proof as to any

essential element of a cause of action requires that judgment be entered for

the defendant on that claim.6 See Celotex Corp. v. Catrett,

, 322–

6 It is unclear how the court concluded that Trustee might be entitled to an award of attorney’s fees under the Marital Settlement when it provided for fees to the party who “substantially prevails in said action.” As the bankruptcy court has stayed the second adversary proceeding rather than entering a final judgment, it has the discretion upon issuance of our mandate in these appeals to further examine and comment on this and any other issues properly raised in the second adversary proceeding as it sees fit. See generally Rigby v. Mastro (In re Mastro),

, 599 n.17 (9th Cir. BAP 2018) (stating that bankruptcy courts “have inherent power to modify their interlocutory orders before entering a final judgment.” (quoting Balla v. Idaho State Bd. of Corr., 869 24 23 (1986); see also Beech Aircraft Corp. v. United States,

, 840 & n.7

(9th Cir. 1995) (affirming judgment for defendant because trial court’s

findings that plaintiffs failed to prove essential elements of their negligence

claim were not clearly erroneous).

Because of Trustee’s failure of proof on the damages element, we do

not need to examine the court’s determination that Castaneda was

contractually obligated to the debtor to make the monthly mortgage

payments, or whether a default of such obligation warranted the sale of the

Property under the Martial Settlement. Our consideration of these issues

would not affect or alter the relief awarded by the bankruptcy court.

Accordingly, the portion of Castaneda’s appeal challenging these issues is

moot. 7

We are aware that the potential preclusive effect of an adverse

collateral ruling can sometimes afford an otherwise prevailing party with

standing to appeal. Env't Prot. Info. Ctr., Inc., 257 F.3d at 1076. But there

could be no preclusive effect here because the “Interlocutory Judgment” is

not sufficiently final. See generally Delannoy v. Woodlawn Colonial, L.P. (In re

Delannoy),

, 586–87 (9th Cir. BAP 2020) (examining California’s

F.2d 461, 465 (9th Cir. 1989))). 7 Castaneda also has included arguments pertaining to Trustee’s claims for

turnover of the Property and for authorization to sell the Property under § 363(h). We dismiss as moot these issues as well, because Castaneda defeated these claims at trial. There is no additional relief we can provide on appeal to Castaneda on these claims either. 25 issue preclusion requirement of finality). Similarly, Castaneda’s potential

future liability for attorney’s fees is not sufficiently final for review or

preclusion purposes until the court enters an order on fees, determining the

amount to be awarded and clarifying the basis for that award despite the

denial of the breach of contract claim.

Leave to appeal the Interlocutory Judgment was given to address the

issues raised under § 550(a). We find no error in the bankruptcy court’s

entry of the Corrected Judgment and the estate’s recovery of the debtor’s

transferred interest in the Property. Because Castaneda prevailed on the

claims litigated in the 2023 Action, no relief can be provided. The issues he

raises are moot, especially given the interlocutory nature of this appeal.

Accordingly, this appeal will be DISMISSED as moot.

CONCLUSION

For the reasons set forth above, we AFFIRM the Corrected Judgment,

and we DISMISS as moot the appeal from the Interlocutory Judgment.

Concurrence begins on next page.

26 GAN, Bankruptcy Judge, concurring.

I agree with the majority’s decision to affirm the appeal of the Civil

Rule 60(a) judgment. And because Castaneda prevailed on Trustee’s claims

for breach of contract and to sell the Property under § 363(h)—and Trustee

did not appeal—I agree that the second appeal is moot. I write separately

to address an apparent error in the bankruptcy court’s decision which

warrants further discussion.

In my view, the bankruptcy court erred by denying relief under

§ 363(h). That section authorizes a trustee to sell 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,” if certain conditions are

satisfied. The court concluded that § 363(h) was unavailable because Debtor

did not own her interest in the Property on the petition date.

But § 363(h) does not require a debtor to have a legal title interest on

the petition date. Debtor’s transfer was fraudulent and avoidable. When

she filed the case, she had at least an undivided equitable interest in the

Property. See Daff v. Wallace (In re Cass),

(9th Cir. May

11, 2015) (holding that a debtor who fraudulently transferred real property

retained an equitable interest).

The purpose of § 363(h) is to enhance not restrict a trustee’s power to

collect and sell estate property. See Zoltanski v. Brown (In re Brown),

(Bankr. N.D. Ohio 1983) (citing legislative history of § 363(h)).

Virtually every bankruptcy court confronting the issue has held that, where

a prepetition fraudulent transfer has been avoided, the debtor had an

interest in property “at the time of the commencement of the case.” See

Weinman v. Feshaye (In re Sbahtu), Case No. 22-14103 TBM,

,

at *16 n.68 (Bankr. D. Colo. Jan. 18, 2024) (collecting cases). Besides the

present case, I am unaware of any decision in which a court denied relief

under § 363(h) after the estate recovered a fraudulently transferred joint

ownership interest. See also id. (“Against the wealth of precedent, the Court

has located no authority barring Section 363(h) sales of property avoided

and recovered post-petition as fraudulent transfers.”)

The consensus view—that § 363(h) applies where the estate recovers

a fraudulently transferred joint interest—is aligned with the purpose of

§ 363(h). But the contrary view encourages debtors to fraudulently transfer

jointly owned interests to curb a trustee’s ability to utilize § 363(h). Had

Trustee appealed the bankruptcy court’s denial of the claim to sell the

Property under § 363(h), I would have reversed.

The bankruptcy court also erred by ruling that the second adversary

proceeding was “subject to further developments regarding performance of

the [Marital Settlement].” The judgment resolved all of Trustee’s claims; it

should be considered final. Section 363(b) authorizes a trustee to sell only

property of the estate. Debtor’s transferred interest in the Property was

recovered for the estate pursuant to § 550(a), and Trustee may seek

2 approval to sell that interest under § 363(b). But Castaneda retained his

interest in the Property and there is nothing in the Code or the Marital

Settlement that could cause his interest to become property of the estate.

The Marital Settlement was made in anticipation of a divorce, which

never occurred. If it had been incorporated into a dissolution order, that

order would have governed the division of property. Presumably, such an

order would have included a requirement for Castaneda to “buy out”

Debtor’s interest or to sell the Property and split the proceeds. But standing

alone, the Marital Settlement provides no mechanism by which Debtor, or

the estate, could acquire Castaneda’s interest or force a sale of the Property

absent his consent. If Castaneda stops paying the mortgage, the Marital

Settlement provides at best a right of indemnification—a right which

became meaningless after Debtor’s personal liability was discharged in the

bankruptcy. Thus, Castaneda’s failure to perform under the terms of the

Marital Settlement cannot result in an award of damages to the estate and it

cannot form the basis for the estate to acquire Castaneda’s interest in the

Property or compel a sale.

I question whether the Marital Settlement is an enforceable contract,

and if so, whether it is executory and deemed rejected. Regardless, if

Castaneda had clearly argued that the Marital Settlement was not valid or

enforceable by the estate, I would have reversed that portion of the

decision.

3