Northern Califronia Court denies Bankruptcy Appeal in partnership gone bad

663 Chenery St., San Francisco, the center of the dispute.
Photo courtesy of Google Maps.

At the beginning of this month, Judge Richard Seeborg denied a bankruptcy appeal by Tony Fu against debtor Dennis Yan.  This allows Mr. Yan to continue to pursue common law tort claims against Mr. Fu in litigation that began as a business partnership gone bad before Mr. Yan declared bankruptcy.

Judge Seeborg explains:

Fu challenges an order of the Bankruptcy Court declaring various claims raised by the Yans against him to have been abandoned by the bankruptcy estate such that the [Mr. Yan and his father] are free to pursue those claims in state court. The Bankruptcy Court found that the estate had sufficient funds to pay all claims against it in full, and that therefore determination of the abandoned claims would "have no conceivable effect on the estate."

According to court documents, the case arises out of a partnership to build a condominium complex at 663 Chenery St. in San Francisco which is shown in the image above.  Mr. Fu alleges that Mr. Yan initiated a series of lawsuits designed to prevent Mr. Fu from obtaining any of the partnership proceeds.  Once Mr. Yan declared bankruptcy his assets, including his interests in the lawsuits, became property of the bankruptcy estate.  In February 2009, the bankruptcy court enjoined Mr. Yan from pursing his claims related to the Chenery St. project, but Mr. Yan moved for reconsideration alleging that his pre-petition claims should be abandoned since there were plenty of assets in the estate to pay off the creditors without the lawsuits.  On June 12, 2009 the bankruptcy court abandoned the claims to the debtors stating they would have no conceivable effect on the estate.

Mr. Fu appeals that order stating that Mr. Yan and his father were lying about the nature of the claims and their significance, that these claims were resolved by the bankruptcy estate and should be dismissed, and that the bankruptcy trustee failed to properly insert a stipulation about abandoning Mr. Yan's legal claims.  Judge Richard Seeborg stated that even if all of this were true it fails to address the fundamental issue - whether the estate's liabilities could be paid off with existing assets.  Mr. Fu makes no claim to the contrary.

Judge Seeborg ruled for the estate.  The case is Fu v. Yan No. C 09-3930 and the opinion is below the jump.


Fu v. Yan BKA