Carolyn Davis v. U.S. Bank
778 F.3d 809
| 9th Cir. | 2015Background
- Carolyn L. Davis filed chapter 7 in July 2010 and received a discharge that eliminated her personal liability on certain unsecured claims, but left creditors' liens on her real property intact.
- In March 2011 Davis filed a chapter 12 petition for family farmers; chapter 12 eligibility required aggregate debts below $3,792,650 at that time.
- Davis scheduled three encumbered California properties with appraised value ≈ $1.6M and total liens ≈ $4.1M; she listed $2.5M as the unsecured portion.
- Bankruptcy court dismissed the chapter 12 petition as Davis’s "aggregate debts" exceeded the statutory cap; BAP affirmed.
- Davis argued the unsecured portions discharged in chapter 7 should not count toward chapter 12’s aggregate-debt limit; the BAP and Ninth Circuit disagreed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether "aggregate debts" under 11 U.S.C. §101(18)(A) excludes unsecured portions of claims discharged in a prior Chapter 7 | Davis: Discharged in personam liability means unsecured portions should be excluded from aggregate debt | Government/BAP: "Claim" includes rights enforceable against property; discharged personal liability does not eliminate the claim for eligibility purposes | Held: Aggregate debts include claims enforceable in rem; discharged personal liability does not remove those amounts from the aggregate-debt calculation |
| Whether debtor’s filed schedules control eligibility when they list total claim amounts | Davis: Schedules show secured debts equal collateral value, implying eligibility | BAP/Govt: Schedules may be used but must be read with statutory definitions of "claim" and "debt" | Held: Schedules show $4.1M liabilities; court relies on schedules and statutory definitions to find ineligibility |
Key Cases Cited
- Davenport v. Pennsylvania Department of Public Welfare, 495 U.S. 552 (1990) (defines "debt" as coextensive with "claim")
- Johnson v. Home State Bank, 501 U.S. 78 (1991) (mortgage interest surviving discharge is a "claim")
- Quintana v. Commissioner, 915 F.2d 513 (9th Cir. 1990) (creditor’s right to payment counts toward aggregate debt despite practical limitations)
- Scovis v. Henrichsen, 249 F.3d 975 (9th Cir. 2001) (schedules normally determine chapter eligibility when filed in good faith)
- In re Plant Insulation Co., 734 F.3d 900 (9th Cir. 2013) (textual analysis of Bankruptcy Code language)