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In Re Marciano

November 13, 2012

IN RE MARCIANO


Bk. Case No. 1:11-BK-10426-VK

The opinion of the court was delivered by: Honorable A. Howard Matz, U.S. District Judge

O; JS-6

CIVIL MINUTES - GENERAL

Present: The Honorable A. HOWARD MATZ, U.S. DISTRICT JUDGE

Stephen Montes Not Reported Deputy Clerk Court Reporter / Recorder Tape No. Attorneys NOT Present for Plaintiffs: Attorneys NOT Present for Defendants: Proceedings: IN CHAMBERS (No Proceedings Held)

Appellant-Debtor Georges Marciano appeals from a bankruptcy court order allowing Bankruptcy Trustee David K. Gottlieb (" the Bankruptcy Trustee") to revoke a revocable trust.*fn1 Because the Bankruptcy Court's actions were proper, this Court AFFIRMS its order.

BACKGROUND

Because the parties are well aware of the factual background of this case, the Court will therefore recite only the salient facts relevant to this appeal. Through discovery obtained from a law firm believed to have provided legal services to Marciano, the Bankruptcy Trustee obtained a copy of a California revocable trust (the "Marciano Trust"), of which Marciano was the grantor, the sole trustee, and a beneficiary. Appellant's Excerpts of Record at 19 (Dkt. 14). The Marciano Trust gave Marciano, as the grantor, the power to revoke the trust at any time. Id. at 28.

In April 2011, the Bankruptcy Trustee filed a complaint in an adversary proceeding in bankruptcy court seeking, inter alia, a declaratory judgment stating that the Bankruptcy Trustee had the authority to revoke the trust. Id. at 119. While that action was pending, the Bankruptcy Trustee also sought to achieve the same objective in the underlying, ongoing Chapter 11 bankruptcy case by filing a motion under 11 U.S.C. § 363(b). After full briefing and a hearing, the bankruptcy court granted the § 363(b) motion. Id. at 226.

STANDARD OF REVIEW

The Court reviews the bankruptcy court's findings of fact for clear error. In re Palmdale Hills Property, LLC, 457 B.R. 29, 40 (9th Cir. BAP 2011); In re PW, LLC, 391 B.R. 25, 32 (9th Cir. BAP 2008). For a finding to be clearly erroneous, it must be illogical, implausible, or without support in the record. United States v. Hinkson, 585 F.3d 1247, 1261 (9th Cir. 2009) (en banc). A bankruptcy court's conclusions of law are reviewed de novo. In re Reynoso, 315 B.R. 544, 549 (9th Cir. BAP 2004). Finally, a bankruptcy court's evidentiary rulings are reviewed for abuse of discretion. Latman v. Burdette, 366 F.3d 774, 786 (9th Cir. 2004).

ANALYSIS

As an initial matter, the Bankruptcy Trustee argues that Marciano lacks standing to appeal because the bankruptcy court's order authorizing the revocation of the Marciano Trust did not negatively affect Marciano, but rather eased his financial burdens by enlarging the size of the estate. The Court disagrees. As a practical matter, revocation of the trust facilitates the process of reorganizing Marciano's assets to pay creditors. If this Court were to reverse the order authorizing the revocation, the Marciano Trust assets would be less available to the claims of creditors and Marciano would tangibly benefit. Therefore, Marciano has standing to pursue this appeal. See In re Fondiller, 707 F.2d 441, 442 (9th Cir. 1983) ("Only those persons who are directly and adversely affected pecuniarily by an order of the bankruptcy court have been held to have standing to appeal that order.").

Turning to the merits, Marciano points to several alleged errors in the bankruptcy court's order. First, he argues that an adversary proceeding is the only way to revoke a trust in bankruptcy. But he offers almost no support for this proposition. To the contrary, the Bankruptcy Trustee persuasively ...


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