612 B.R. 743
9th Cir. BAP2020Background
- Debtor Leiann Fountain signed a promissory note in 2006 to refinance her Waianae, HI home; the loan was later associated with a trust for which Deutsche Bank is trustee.
- Debtor sold the property in 2015 without paying the loan; a title company quiet-title action followed and Deutsche Bank cross-claimed for payment.
- Before state-court resolution, Debtor filed Chapter 13 in Jan. 2019, scheduling unsecured debts of $30,443 and listing Deutsche Bank as an unsecured, contingent, unliquidated, disputed claim for $1,000.
- Deutsche Bank filed a proof of claim for $1,751,326.06 attaching the note and moved to dismiss under 11 U.S.C. § 109(e) (unsecured debt limit).
- The bankruptcy court reviewed the proof of claim, concluded Deutsche Bank’s claim was a noncontingent, liquidated unsecured debt determinable from the note, and dismissed the case for exceeding § 109(e).
- Debtor appealed, arguing Deutsche Bank lacked an enforceable claim, the claim was contingent/unliquidated, and the court should not have looked beyond schedules; the BAP affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a disputed claim counts as a "claim" for § 109(e) eligibility | Fountain: Deutsche Bank had no enforceable claim; dispute in state court means it shouldn’t count | Deutsche Bank: A disputed claim still constitutes a "claim" under § 101(5) and may count unless contingent or unliquidated | Held: Disputed claims count for § 109(e); no judicial determination precluded inclusion and the note evidenced a right to payment |
| Whether court may look beyond debtor’s schedules to determine eligibility | Fountain: Court should rely on schedules and not consider proof of claim absent bad faith | Deutsche Bank: A good-faith objection permits limited inquiry beyond schedules to test good-faith estimation | Held: Bankruptcy court may examine proof of claim when a party in interest in good faith objects; schedules here were not made in good faith as to amount |
| Whether the claim was contingent | Fountain: Liability depends on future state-court resolution, so claim is contingent | Deutsche Bank: All events giving rise to liability occurred pre-petition (note signed) | Held: Claim is not contingent; liability arose when the note was signed pre-petition |
| Whether the claim was liquidated | Fountain: Liability unresolved makes the debt unliquidated | Deutsche Bank: Amount due is readily calculable from the note | Held: Claim is liquidated because the amount is determinable by reference to the note, so it is included in § 109(e) calculation |
Key Cases Cited
- Scovis v. Henrichsen, 249 F.3d 975 (9th Cir.) (eligibility under § 109(e) is determined as of the petition date and normally from schedules)
- Fostvedt v. Dow, 823 F.2d 305 (9th Cir.) (definition of contingent debt for § 109(e) purposes)
- Slack v. Wilshire Ins. Co., 187 F.3d 1070 (9th Cir.) (dispute over liability does not necessarily render a debt unliquidated)
- Nicholes v. Johnny Appleseed of Wash. (In re Nicholes), 184 B.R. 82 (9th Cir. BAP) (disputed claims are still "claims"; liquidated vs. unliquidated analysis)
- Guastella v. Hampton (In re Guastella), 341 B.R. 908 (9th Cir. BAP) (court may look beyond schedules when a good-faith objection to eligibility is filed)
- Sylvester v. Dow Jones & Co., Inc. (In re Sylvester), 19 B.R. 671 (9th Cir. BAP) (disputed contractual claims generally liquidated)