In re: Leiann Toni Fountain
NOT FOR PUBLICATION
FILED
MAR 10 2020
SUSAN M. SPRAUL, CLERK
U.S. BKCY. APP. PANEL
OF THE NINTH CIRCUIT
MEMORANDUM*
Appeal from the United States Bankruptcy Court for the District of Hawaii
Honorable Robert J. Faris, Chief Bankruptcy Judge, Presiding
Appearances: Lars Peterson of Abelmann Peterson LLLC argued for Appellant; David A. Nakashima argued for Appellee.
Before: GAN, LAFFERTY, and BRAND,
INTRODUCTION
Appellant Leiann Fountain (“Debtor“) appeals from an order dismissing her chapter 131 case on the basis that hеr unsecured claims exceeded the limit imposed by
FACTS2
A. Prepetition Events
In 2006, Debtor borrowed $1,092,000 to refinance a mortgage on her home in Waianae, HI. Debtor signed a promissory note payable to lender American Broker Conduit. The note was seсured by a mortgage serviced by American Home Mortgage Assets, LLC (“AHMA“). American Broker Conduit subsequently sold the loan to AHMA.
In 2007, AHMA created American Home Mortgage Assets Trust 2007-2, Mortgage Backed Pass-Through Certificates Series 2007-2 and appointed Deutsche Bank as trustee. American Broker Conduit indorsed the promissory note in blank, but it
In 2015, Debtor sold the property without paying off the loan. After the sale, the title insurance company filed a quiet title action in state court naming all parties to the sale, including Debtor and Deutsche Bank. Deutsche Bank cross-claimed against Debtor for payment of the note and moved for summary judgment. Debtor opposed summary judgment and argued that Deutsche Bank failed to establish that it had standing to enforce the note, and that enforcement was barred by the statute of limitations. Prior to oral argument on the motion for summary judgment, Debtor filed her bankruptcy case.
B. The Bankruptcy Case
In January 2019, Debtor filed her chapter 13 petition and plan. Debtor scheduled total unsecured claims of $30,443. Debtor listed Deutsche Bank‘s unsecured claim, but only in the amount of $1,000, and marked it contingent, unliquidated, and disputed.
Deutsche Bank filed a proof of claim evidencing an unsecured claim for $1,751,326.06 and attached the note. Deutsche Bank also filed an objection to Debtor‘s plan and a motion to dismiss, arguing that Debtor exceeded the unsecured debt limit of
The bankruptcy court granted the motion to dismiss and determined that the debt was not contingent because there was “no external real world event that has to happen before liability is incurred,“and it was not unliquidated because although there were complicated issues litigated in the state court action, those issues were not about determining the amount of the debt, which could be calculated from the note. The court entered a written order dismissing the case and Debtor timely appealed.
JURISDICTION
The bankruptcy court had jurisdiction under
ISSUE
Did the bankruptcy court err by including Deutsche Bank‘s unsecured claim for purposes of eligibility under
STANDARD OF REVIEW
The question of whether a debt is contingent or unliquidated involves interpretation of the Bankruptcy Code and we review such determinations de novo. Nicholes v. Johnny Appleseed of Wash. (In re Nicholes), 184 B.R. 82, 86 (9th Cir. BAP 1995). De novo review requires that we consider the matter as if no decision had been previously rendered. Kashikar v. Turnstile Capital Mgmt., LLC (In re Kashikar), 567 B.R. 160, 164 (9th Cir. BAP 2017).
DISCUSSION
The term “debt” is defined in
Debtor argues that the bankruptcy сourt erred by including the Deutsche Bank claim in the eligibility calculation because: (1) Deutsche Bank did not have an enforceable claim against Debtor; (2) there was no basis to look beyond Debtor‘s schedules to determine total unsecured debts; and (3) even if Deutsche Bank had a claim, it was contingent and unliquidated.
A. Deutsche Bank Had An Unsecured Claim For Eligibility Purposes
Debtor argues that the state court litigation had not resolved disputed issues about whether Deutsche Bank had possession of the note and a right to enforce it, and whether the statute of limitations had expired. She asserts that the bankruptcy court never determined that Deutsche Bank had a claim, which is necessary for the
However, a disputed claim is still a “claim” under
As of the petition date, there was no judiciаl determination that Deutsche Bank could not enforce the note. Deutsche Bank‘s right to payment is evidenced by the signed promissory note attached to its proof of claim. Debtor acknowledged Dеutsche Bank‘s claim by listing it in her schedules as an unsecured claim. The fact that Debtor disputes the claim is not a sufficient basis to exclude the claim for purposes of
B. The Bankruptcy Court Properly Considered Thе Proof of Claim
Although Debtor listed the Deutsche Bank claim in her schedules, she listed the amount of the debt as $1,000. She argues that the bankruptcy court impermissibly looked to Deutsche Bank‘s proof of claim to detеrmine the amount of the debt because Deutsche Bank did not allege bad faith and there was no indicia of bad faith.
Eligibility under
The phrase “checking only to see if the schedules were made in good faith” does not require the bankruptcy court to find bad faith or that a debtor intentionally misrepresented her debts. Id. at 920. If it appears to be a legal certainty from the record that the claim is not as
Here, Deutsche Bank made a good faith objection to eligibility and asked the court to review its proof of claim. Debtor did not dispute that she signed the promissory note for $1,092,000. Given this acknowledgment, it appeared to a legal certainty that Deutsche Bank‘s claim was not $1,000 as stated in Debtor‘s schedules. The nature of Debtor‘s dispute in the state court litigation related to Deutsche Bank‘s ability to enforсe the note, not to the amounts due under the note. The court was therefore justified in looking past the schedules and considering the note as evidence of Debtor‘s unsecured debts.
C. The Debt Is Not Contingent
A debt is contingent when “the dеbtor will be called upon to pay [it] only upon the occurrence or happening of an extrinsic event which will trigger the liability of the debtor to the alleged creditor.” Fostvedt v. Dow (In re Fostvedt), 823 F.2d 305, 306 (9th Cir. 1987). If “all events giving rise to liability occurrеd prior to the filing of the bankruptcy petition,” the claim is not contingent. In re Nicholes, 184 B.R. at 88. A dispute over liability for a claim does not make the debt contingent. Id. at 89 (citing In re Dill, 30 B.R. 546, 549 (9th Cir. BAP 1983)).
Debtor argues that the debt is contingent because liability is dependent on a final ruling in the state court action, which had not yet occurred. However, all of the events giving rise to Debtor‘s liability on the note arose pre-petition. Debtor‘s liability for the debt was created when she signed the promissory note in 2006. The fact that she now disputes liability does not render the contractual obligation contingent.
D. The Debt Is Liquidated
A debt is liquidated if it is capable of “ready determination and precision in computation of the amount due.” In re Fostvedt, 823 F.2d 305, 306 (9th Cir. 1987). “The test for ‘ready determination’ is whether the amount due is fixed or certain or otherwise ascertainable by reference to an agreement or by a simple computation.” In re Nicholes, 184 B.R. at 89.
A disрute about liability does not “necessarily render a debt unliquidated.” Slack v. Wilshire Ins. Co. (In re Slack), 187 F.3d 1070, 1074 (9th Cir. 1999). As we stated in Nicholes:
So long as a debt is subject to ready determination and precision in computation of the amount due, then it is considered liquidated and included for eligibility purposes under
§ 109(e) , regardless of any dispute. On the other hand, if the dispute itself makes the claim difficult to ascertain or prevents the ready determination of the amount due, the debt is unliquidated and excluded from the§ 109(e) computation.
Under this test, disputed contractual claims are generally liquidated. Id. (citing Sylvester v. Dow Jones & Co., Inc. (In re Sylvester), 19 B.R. 671, 673 (9th Cir. BAP 1982)). Regardless of whether a debtor disputes liability, “if the amount of the debt is calculable with certainty, then it is liquidated for the purposes of
Debtor argues that the Deutsche Bank claim is unliquidated because the ultimate question of her liability to Deutsche Bank has not been determined. But, as the bankruptcy court correctly observed,
The amount of the debt is readily determinable by reference to the note. The Deutsche Bank debt is liquidated and was properly included by the bankruptcy court in the
CONCLUSION
For the reasons set forth above, we AFFIRM the bankruptcy court‘s order dismissing Debtor‘s chapter 13 case.