In re: Maggie Liu, 611 B.R. 864

Background

Maggie Liu filed a chapter 13 in March 2017, voluntarily dismissed it in May 2017, then filed chapter 7 on July 17, 2017 (within 180 days of her prior dismissal).
Creditors Vincent Jue and Yu Huo pursued pre‑bankruptcy state litigation against Liu; Jue obtained a right‑to‑attach order and later recorded an attachment lien on Liu’s residence on June 5, 2017 (within 90 days before the chapter 7 filing).
Huo moved to dismiss Liu’s chapter 7 under 11 U.S.C. § 109(g)(2); Jue joined. The U.S. Trustee and chapter 7 trustee opposed dismissal; the bankruptcy court denied the dismissal on September 26, 2017.
The chapter 7 trustee filed an adversary proceeding seeking to avoid Jue’s attachment lien as a preference under § 547; the bankruptcy court granted summary judgment for the trustee avoiding the lien.
Jue appealed both the denial of the § 109(g)(2) dismissal order and the preference summary judgment; the BAP dismissed the appeal of the denial of dismissal for lack of jurisdiction (untimely) and affirmed the summary judgment.

Issues

Issue	Plaintiff's Argument (Jue)	Defendant's Argument (Trustee/Respondents)	Held
1) Was the appeal from the order denying dismissal under § 109(g)(2) timely (i.e., was that order interlocutory)?	Denial was interlocutory; finality only arises later (e.g., on judgment in an adversary), so appeal was timely after preference judgment.	Denial of § 109(g)(2) dismissal is final and immediately appealable under Ninth Circuit precedent (In re Cherrett); Jue’s failure to appeal immediately renders his appeal untimely.	The BAP held the denial was final when entered; Jue’s later appeal was untimely and the appeal was dismissed for lack of jurisdiction.
2) Can Jue assert equitable defenses (unclean hands, estoppel, breach of fiduciary duty) to defeat trustee’s § 547 preference claim?	Trustee’s opposition to dismissal and the bankruptcy court’s denial were wrongful; equity should bar avoidance and permit Jue to keep lien.	Substantive defenses to preference actions are limited to those listed in § 547(c); equitable defenses are not available and, here, amount to a collateral attack on a final order.	The BAP held equitable defenses are unavailable to defeat a § 547 preference action and that Jue’s claims impermissibly collateral attacked the final § 109(g)(2) order; summary judgment for trustee affirmed.
3) Did Jue’s attachment lien “relate back” to pre‑preference dates (lis pendens or right‑to‑attach order) so it falls outside the 90‑day preference window?	The lien should relate back to (a) an earlier lis pendens in a fraudulent transfer action or (b) the state court right‑to‑attach order, both predating the 90‑day window.	California law does not permit relation‑back here: lis pendens relation‑back requires a later judgment in that action (none here), and a right‑to‑attach order is not equivalent to a temporary protective order that creates a lien.	The BAP rejected both relation‑back theories under California law; attachment was obtained within 90 days and was avoidable.

Key Cases Cited

Aspen Skiing Co. v. Cherrett, 873 F.3d 1060 (9th Cir. 2017) (denial of a § 707(b) motion to dismiss is final and immediately appealable; applied analogously to § 109(g)(2)).
Bullard v. Blue Hills Bank, 575 U.S. 496 (2015) (bankruptcy finality analysis recognizes discrete, appealable proceedings within a case; denial of plan confirmation not final).
Union Bank v. Wolas, 502 U.S. 151 (1991) (§ 547 preference elements and trustee’s broad avoidance authority).
Law v. Siegel, 571 U.S. 415 (2014) (bankruptcy courts’ equitable powers must be exercised within Bankruptcy Code limits).
Wind Power Systems, Inc. v. Cannon Fin. Grp., Inc., 841 F.2d 288 (9th Cir. 1988) (relation‑back of overlapping attachment liens where earlier temporary protective order created a lien).
Mason v. Integrity Ins. Co. (In re Mason), 709 F.2d 1313 (9th Cir. 1983) (order for relief in involuntary bankruptcy can cause irreparable harm warranting immediate appeal).
In re 405 N. Bedford Dr. Corp., 778 F.2d 1374 (9th Cir. 1985) (denial of dismissal for bad faith ordinarily interlocutory; contrasted with other finality rulings).