FILED
                                                        United States Court of Appeals
                                                                Tenth Circuit

                                                            November 25, 2013
                                     PUBLISH                Elisabeth A. Shumaker
                                                                Clerk of Court
                      UNITED STATES COURT OF APPEALS

                                  TENTH CIRCUIT


 In re: UTE MESA LOT 1, LLC, a
 Colorado limited liability company,

        Debtor,                                       No. 12-1134
 --------------------------

 UTE MESA LOT 1, LLC,

        Plaintiff - Appellant,

 v.

 FIRST-CITIZENS BANK & TRUST
 COMPANY; UNITED WESTERN
 BANK,

        Defendants - Appellees.


          APPEAL FROM THE UNITED STATES DISTRICT COURT
                  FOR THE DISTRICT OF COLORADO
                    (D.C. No. 1:11-CV-01786-WYD)


Duncan E, Barber, (Julie Trent and Steven T. Mulligan of Bieging, Shapiro &
Barber, L.L.P., on the briefs), Denver, Colorado, for Plaintiff - Appellant.

Craig A. Christensen of Lindquist & Vennum, P.L.L.P., Denver, Colorado, for
Defendants - Appellees.


Before KELLY, LUCERO, and MATHESON, Circuit Judges.


KELLY, Circuit Judge.
      Plaintiff-Appellant Ute Mesa Lot 1, LLC, (“Ute Mesa”) appeals from a

bankruptcy court order denying it relief under 11 U.S.C. § 547(b). The narrow

issue is whether a notice of lis pendens filed in Colorado can constitute a

preferential transfer under 11 U.S.C. § 547(b). Both the bankruptcy and district

courts held that a lis pendens is not a transfer because it merely serves as notice

of pending litigation. Exercising jurisdiction under 28 U.S.C. § 158(d)(1), we

affirm.



                                    Background

      Ute Mesa is a real estate developer in Colorado. In October 2007, it

received a $12 million loan from Defendant-Appellee United Western Bank

(“Bank”) 1 to finance the construction of a single family home on property it

owned in Aspen (“property”). To secure the loan, the Bank prepared a deed of

trust incorrectly identifying Ute Mesa’s sole member (Leathem Stern) as the

owner rather than Ute Mesa. Because the grantor under the deed of trust was not

the owner of the property, the deed of trust was ineffective in giving the Bank a

lien on the property.


      1
         In January 2011, Defendant-Appellee First-Citizens Bank & Trust
Company acquired United Western Bank’s interest in the construction loan and
state-court claims. For convenience, we use the term “Bank” to refer to United
Western and First-Citizens collectively.

                                        -2-
      On May 19, 2010, the Bank filed suit in Colorado state court seeking

reformation of the deed of trust and a declaration that it had a first priority lien on

the property. Two days later, the Bank filed a notice of lis pendens in the Pitkin

County real property records.

      On August 13, 2010, Ute Mesa petitioned for Chapter 11 bankruptcy relief.

Ute Mesa continues as debtor in possession of the property. In April 2011, Ute

Mesa filed an adversary proceeding against the Bank seeking to avoid the lis

pendens as a preferential transfer. The bankruptcy court granted the Bank’s

motion to dismiss, and the federal district court affirmed.

      Relying upon the bankruptcy court’s analysis, the district court recognized

that a “lis pendens does not create a lien, retain title as a security interest, or

foreclose on a debtor’s equity of redemption.” Ute Mesa Lot 1, LLC v. First

Citizens Bank (In re Ute Mesa), No. 11-cv-01786, 

, at *3 (D.

Colo. Mar. 23, 2012) (internal quotation omitted). It agreed with the bankruptcy

court that, “since a lis pendens only serves the limited purpose of notice, the

filing of a lis pendens is not a transfer disposing of or parting with an interest in

the property within the meaning of § 101(54)(D)(ii).” 

(internal

quotation omitted). Thus, no preferential transfer occurred, and Ute Mesa could

not avoid the lis pendens.




                                           -3-
                                      Discussion

      We review the bankruptcy court’s decision de novo, as it involves only

legal questions. Valley Bank & Trust Co. v. Spectrum Scan, LLC (In re Tracy

Broad. Corp.), 

, 1053 (10th Cir. 2012).

      Ute Mesa argues that the bankruptcy and district courts erred by beginning

and ending their analyses with §§ 547(b) and 101(54) of the Bankruptcy Code and

Colorado law. Relying on § 547(e)(1)(A), Ute Mesa asserts that a “transfer of an

interest in property” occurs when a bona fide purchaser cannot acquire an interest

superior to that of a creditor. According to Ute Mesa, because the lis pendens

prevents a bona fide purchaser from acquiring an interest in the property superior

to the Bank’s interest, the lis pendens qualifies as a transfer of an interest in the

property.

      The Bank argues that the first and only step of the analysis is to determine

whether an underlying property interest exists under state law. Because a lis

pendens is merely a notice and does not constitute a lien, no transfer occurred.

We agree.

I.    Transfer of an Interest in Property

      Under § 547 of the Bankruptcy Code, a debtor in possession 2 “may avoid

any transfer of an interest of the debtor in property, to or for the benefit of a

      2
        In a Chapter 11 case, a debtor in possession has all the rights and powers
of a bankruptcy trustee, including the power of avoidance under § 547. 11 U.S.C.
§ 1107(a).

                                         -4-
creditor,” if that transfer occurs within 90 days prior to the filing of the

bankruptcy petition. 11 U.S.C. §§ 547(b)(1), (4). To be an avoidable

“preferential transfer,” that transfer must meet certain statutory requirements (§

547 (b)(1)–(5)). Fundamentally, however, the “keystone of a preference is a

transfer of the debtor’s property.” 5 Collier on Bankruptcy ¶ 547.05 (Alan N.

Resnick & Henry J. Sommer eds., 16th ed.). In pertinent part, the Bankruptcy

Code defines a “transfer” as:

             each mode, direct or indirect, absolute or conditional,
             voluntary or involuntary, of disposing of or parting with—
                   (i) property; or
                   (ii) an interest in property.

11 U.S.C. § 101(54)(D). The Bankruptcy Code, however, does not define

“property” or “interest in property.” Given this lacuna, “‘property’ and ‘interests

in property’ are creatures of state law.” Barnhill v. Johnson, 

, 398

(1992). See also Bailey v. Big Sky Motors, Ltd. (In re Ogden), 

,

1197 (10th Cir. 2002). Thus we must look to the property rights attendant to the

filing of a lis pendens under Colorado law.

A.    Colorado Lis Pendens

      In Colorado, a party may record a notice of lis pendens against real

property after initiating an action “wherein relief is claimed affecting the title to

real property.” Colo. Rev. Stat. § 38-35-110(1). Recording a lis pendens

provides “notice to any person thereafter acquiring, by, through, or under any


                                          -5-
party named in such notice, an interest in the real property . . . that the interest so

acquired may be affected by the action described in the notice.” 

applying the doctrine of lis pendens make clear that a “lis

pendens does not constitute a lien against real property.” Hewitt v. Rice, 

, 412 (Colo. 2007). A judgment lien does not arise against real property

until a “transcript of the judgment” is recorded. Colo. Rev. Stat. § 13-52-102(1).

Until judgment is recorded, “no new interest is created by the existence of a lis

pendens notice.” Kerns v. Kerns, 

, 1164 n.6 (Colo. 2002).

Nonetheless, the recordation of a lis pendens does have a very real legal effect:

“Once a lis pendens is filed, it renders title unmarketable and therefor effectively

prevents the property’s transfer until the litigation is resolved or the lis pendens is

expunged.” 

“the judgment of the court [so that it] cannot be

frustrated by alienation of the property to a third party not bound by the outcome

of the litigation.” 

Despite a lis pendens’s attendant consequences,

“[h]owever, it is still only a notice.” 

n.6.

      Ute Mesa argues that the bankruptcy and district courts erred by narrowing

their analyses to these statements of Colorado law. We disagree. While federal

law answers “[w]hat constitutes a transfer” for purposes of § 547, that answer

turns on the definitions of “property” and “interests in property,” which are

unique creatures of state law. 

. Here, Colorado law

delineates that a lis pendens serves the limited purpose of providing potential

                                          -6-
purchasers “notice” of a possible judgment, and it creates “no new interest” for

the filer. 

n.6. While the owner might have lost its right to

convey marketable title, the filing of a lis pendens does not thereby transfer that

right “to or for the benefit” of the filer. 11 U.S.C. § 547(b)(1). Therefore, the

Bank’s lis pendens is not a “transfer of an interest of the debtor in property, to or

for the benefit of a creditor” within the meaning of the Bankruptcy Code.

B.    The Bundle of Rights

      Ute Mesa argues that, although the lis pendens did not transfer its property

per se, the lis pendens did transfer one of its discrete interests in the property—its

right to convey fee simple title free of the interests of the Bank. Aplt. Supp. Br.

2. Because the lis pendens rendered the property unmarketable and subject to the

Bank’s claims, Ute Mesa contends that its rights were diminished upon the

recording of the lis pendens, thus reducing the value of the property to the

detriment of its creditors. 

The Bank, on the other hand, argues that

the lis pendens only affects the rights of potential purchasers vis-a-vis the Bank,

leaving Ute Mesa’s interests unaffected. Aplee. Supp. Br. 4.

      Not only is a disposition of the debtor’s “property” a transfer, a disposition

of any of the debtor’s separate “interests in property” is likewise a transfer under

the Bankruptcy Code. 11 U.S.C. § 101(54)(D)(i)–(ii). We recognize that a lis

pendens in Colorado clouds an owner’s title thereby impairing its marketability.

See 

n.6. However, we do not see how clouding title

                                         -7-
constitutes “disposing of or parting with” an interest of the debtor in property

within the Bankruptcy Code’s definition of a “transfer.” 11 U.S.C. § 101(54)(D).

Certainly, fee simple ownership is the most comprehensive bundle of rights and

includes the right to convey property. That right, however, is not destroyed by a

notice of lis pendens. Although a lis pendens might render title “unmarketable”

under Colorado law, the owner still retains the right to convey that property,

assuming he finds a willing buyer. See 

; 

n.6; Hammersley v. District Court In and For Routt Cnty., 

, 96 n.2 (Colo. 1980).

      In fact, the Colorado Supreme Court has addressed this very argument. In

Hammersley, the property owner sought to have a notice of lis pendens vacated

on the grounds that “the notice of lis pendens [would] cloud his title and [would]

impair its 

n.2. The Colorado Supreme Court flatly

rejected that assertion by stating that a lis pendens “harm[s] no legitimate interest

of the owner.” 

While the marketability of title was tarnished, the court

noted, “[t]his means only that a subsequent purchaser will be bound by the

outcome of the litigation and that purchase may be discouraged until that outcome

is certain.” 

n.2.

      Here, Ute Mesa may find it difficult to locate a purchaser willing to buy the

property at full price, pending the resolution of the Bank’s claims. However, this

does not detract from the fact that the lis pendens itself “harm[s] no legitimate

                                         -8-
interest of the owner,” Ute Mesa. 

Though the right to convey property

may have been devalued, it has not been “disposed of” or “parted with” so to

qualify as a “transfer” under the Bankruptcy Code. Contrary to Ute Mesa’s

argument, a “diminished” interest does not equate to a “transferred” interest. Ute

Mesa has been deprived of no more than its ability to convey the property without

first informing the prospective purchaser of the existence of the Bank’s claim.

Accordingly, under Colorado law, the effect of a lis pendens rendering title

unmarketable is, on its own, not a transfer of an interest of the debtor in property.

II.   Perfection vs. Transfer of an Interest in Property

      Ute Mesa challenges reliance on Colorado law and argues that

§ 547(e)(1)(A) also plays a determinative role in whether a “transfer of an interest

of the debtor in property” has occurred under § 547(b). Aplt. Br. 9. It further

argues that § 547(e)(2)(B) sets the date of the transfer as the date of the filing of

the lis pendens, because the lis pendens was recorded more than thirty days after

the Bank made its loan. Aplt. Br. 8.

      Section 547(e)(1)(A) of the Bankruptcy Code provides that:

             a transfer of real property . . . is perfected when a bona
             fide purchaser of such property from the debtor . . . cannot
             acquire an interest that is superior to the interest of the
             transferee . . . .

11 U.S.C. § 547(e)(1)(A).

      Additionally, § 547(e)(2)(B) provides that:


                                         -9-
             a transfer is made . . . at the time such transfer is
             perfected, if such transfer is perfected after [30 days
             after such transfer takes effect] . . . .

11 U.S.C. § 547(e)(2)(B).

      Ute Mesa’s reliance on § 547(e)(1)(A) in this context conflates perfection

of a transfer with the existence of a transfer. As is clear from its text,

§ 547(e)(1)(A) does not attempt to define a “transfer of real property.” Rather,

§ 547(e)(1)(A) determines whether a transfer of an interest in property—as

defined by § 101(54) and state law—“is perfected” for the purposes of § 547.

Likewise, § 547(e)(2)(B) only determines the timing of a transfer for preference

purposes; it does not purport to establish whether a transfer has in fact taken

effect. The bankruptcy and district courts properly avoided analyzing the effects

of the lis pendens under § 547(e)(1)(A). 3

      Ute Mesa relies on a Ninth Circuit case, Hurst Concrete Prods., Inc. v. Lane

(In re Lane), 

(9th Cir. 1992), to argue that “perfection” of an

interest equates to “transfer” of an interest under § 547. To be sure, the Ninth

Circuit painted in broad strokes when it held “that the filing of a valid lis pendens

is a transfer within the meaning of the Bankruptcy Code.” 

However,

the creditor in In re Lane had already recorded a judgment against the debtors


      3
        Likewise, § 547(e)(2)(B) is inapposite, as the “transfer” that the lis
pendens perfects is the attachment of the judgment lien arising from the
underlying state court action, not the issuance of the loan as Ute Mesa contends.
Aplt. Br. 8.

                                         - 10 -
before the debtors filed their bankruptcy petition. 

The court

addressed whether a transfer relates back in time to a lis pendens, not whether a

lis pendens itself constitutes a transfer. Here, it is uncontroverted that the Bank

did not receive a favorable judgment in the state court action before Ute Mesa

filed its Chapter 11 petition, and In re Lane is inapposite.

      Other decisions support the conclusion that “perfection” and “transfer” are

distinct inquiries for preferential transfer purposes. Perfection is a “preliminary

determination” that must be made to “establish[] the date on which a transfer was

made,” Grover v. Gulino (In re Gulino), 

, 549 (9th Cir. 1985); it

does not control whether a transfer was made. In Saghi v. Walsh (In re Gurs), the

Bankruptcy Appellate Panel of the Ninth Circuit held that:

             The filing of [a] lis pendens cannot be characterized as a
             transfer of the debtor’s property nor can it be characterized
             as a transfer on account of an antecedent debt. To argue
             otherwise confuses avoidance of a transfer of an interest in
             the debtor’s property with avoidance of an act that
             perfects, as against potential bona fide purchasers, a claim
             of ownership. Section 547 permits avoidance of the
             former not the latter.

, 757 (B.A.P. 9th Cir. 1983). The Ninth Circuit did not disturb this

limited holding—that perfection is not itself a transfer—in In re Lane. Simply

put, § 547(b) has no effect where there has been “perfection, but no transfer.”

Freedom Grp., Inc. v. Lapham-Hickey Steel Corp. (In re Freedom Grp.), 50 F.3d




                                         - 11 -
408, 412 (7th Cir. 1995). 4

      Ute Mesa raises an additional argument that, even though the Bank had not

recorded a judgment before Ute Mesa filed its bankruptcy petition, any eventual

judgment is itself a present transfer because it would necessarily “relate back” to

the filing of the lis pendens. Aplt. Br. 10-11. However, Ute Mesa did not raise

this argument in its complaint, response to the Bank’s motion to dismiss, or

opening brief in the district court. We will not permit Ute Mesa to raise it for the

first time here. Katz v. Gerardi, 

, 1217 n.3 (10th Cir. 2011).

      AFFIRMED.




      4
        The prime example of perfection before transfer is pre-filing a UCC
financing statement before the attachment of a security interest. See, e.g., Colo.
Rev. Stat. § 4-9-502(d).

                                       - 12 -