In re: Anna Stahl

FILED
APR 7 2021
NOT FOR PUBLICATION SUSAN M. SPRAUL, CLERK
U.S. BKCY. APP. PANEL
OF THE NINTH CIRCUIT
UNITED STATES BANKRUPTCY APPELLATE PANEL
OF THE NINTH CIRCUIT
In re: BAP No. CC-20-1254-SGF
ANNA STAHL,
Debtor. Bk. No. 2:20-bk-11739-WB
EMCYTE CORP.,
Appellant,
v. MEMORANDUM1
ANNA STAHL,
Appellee.
Appeal from the United States Bankruptcy Court
for the Central District of California
Julia Wagner Brand, Bankruptcy Judge, Presiding
Before: SPRAKER, GAN, and FARIS, Bankruptcy Judges.
INTRODUCTION
Appellant EmCyte Corp. appeals the bankruptcy court’s order
confirming debtor Anna Stahl’s chapter 132 plan over its objection that
Stahl’s unsecured debt exceeded the limits allowed under § 109(e). Emcyte
1
This disposition is not appropriate for publication. Although it may be cited for
whatever persuasive value it may have, see Fed. R. App. P. 32.1, it has no precedential
value, see 9th Cir. BAP Rule 8024-1.
2 Unless specified otherwise, all chapter and section references are to the
Bankruptcy Code, 11 U.S.C. §§ 101–1532, and all “Rule” references are to the Federal
Rules of Bankruptcy Procedure.
argues that the bankruptcy court erred by not including the stated amount
of its proof of claim when calculating Stahl’s unsecured debt for eligibility
purposes.
On the record before us, the bankruptcy court did not abuse its
discretion by relying exclusively on the schedules to calculate Stahl’s
chapter 13 eligibility. Similarly, we reject EmCyte’s argument that the
bankruptcy court was bound to include the stated amount of its proof of
claim in determining Stahl’s chapter 13 eligibility because Stahl did not
object to its claim.
Accordingly, we AFFIRM.
FACTS
A. Stahl’s initial schedules, statement of financial affairs, and plan.
Stahl commenced her chapter 13 bankruptcy in February 2020. In her
schedules and statement of financial affairs, she disclosed that she was the
principal of two companies – XLmedica, Inc. (“XLmedica”) and Lifeform
Healing Research LLC (“Lifeform”).
In her initial schedules, Stahl listed $47,975.80 in priority unsecured
debt and $127,714.79 in nonpriority unsecured debt for a grand total of
$175,690.59 in unsecured debt. None of this amount was listed as
contingent or unliquidated. Also, none of this amount was attributable to
anything she might owe to EmCyte. Stahl listed EmCyte in three different
entries in her schedule E/F, but she stated no specific fixed amount of debt
in any of these entries. In the first entry, she listed the amount of EmCyte’s
2
claim as “$0.00” and provided the following additional information: “Debt
of $135,000 owed exclusively by [Lifeform], Debtor’s now defunct business
(closed 2018); notice only” (the “Notice Only Claim”). Stahl listed the
Notice Only Claim as disputed, but she did not check the boxes for
contingent or unliquidated.
In the second entry naming EmCyte as a creditor, she listed the
amount owed as “unknown” and further stated as the basis of the claim:
“EmCyte Corp. v. Apex Bilogix, et al; Case No. 2:19-cv-00769-JES-NPM;
trademark infringement allegations” (the “Trademark Claim”). Stahl listed
the Trademark Claim as disputed, but she did not check the boxes for
contingent or unliquidated.
In the third entry naming EmCyte as a creditor, she listed the amount
owed as “unknown” and further stated as the basis of the claim: “EmCyte
Corp. v. Lifeform Healing Research, LLC et al; Case No. 19-CA-005819;
breach of contract allegations” (the “Breach of Contract Claim”). Stahl
listed the Breach of Contract Claim as disputed, but again she did not
check the boxes for contingent or unliquidated.
Stahl filed her initial chapter 13 plan in March 2020. She proposed a
five-year plan, with monthly payments of $1,091.00 per month. She
estimated that this would result in payment of $1,868.70 on account of
$127,714.79 in general unsecured claims, for a distribution of roughly 1.4%.
The remaining balance of plan payments of $63,591.30 would be used to
pay trustee’s fees and administrative and priority creditors.
3
B. EmCyte’s relief from stay motion and its underlying litigation
against Stahl and others.
In April 2020, EmCyte moved for relief from the automatic stay.3
EmCyte sought to modify the stay to permit two lawsuits involving Stahl
to proceed in the non-bankruptcy courts in which they were pending. In
the process of explaining why it needed relief from stay, EmCyte admitted
that its claims arising from the two lawsuits were unliquidated:
EmCyte seeks modification of the automatic stay to adjudicate its
claims against Anna Stahl and XLMedica up to the point of final
judgment in order to liquidate its claim amounts. EmCyte will look
to the respective Estates for any recoveries.
(Emphasis added.)
Of the two lawsuits discussed in the relief from stay motion, one is
the federal trademark and unfair competition action referenced above as
the Trademark Claim. EmCyte attached to its relief from stay motion as
exhibit A its trademark and unfair competition complaint. Generally
speaking, EmCyte alleged that Stahl, her wholly-owned corporation
XLmedica, and others conspired to unfairly compete with EmCyte and to
infringe on its trademark rights by selling blood concentrating products, or
3 EmCyte’s relief from stay motion was not included in the parties’ excerpts of
record. We exercise our discretion to take judicial notice of the relief from stay motion
and all other documents filed in Stahl’s bankruptcy case. See Atwood v. Chase Manhattan
Mortg. Co. (In re Atwood), 293 B.R. 227, 233 n.9 (9th Cir. BAP 2003).
4
similar products, that bear EmCyte’s registered “PURE” trademarks or
similar marks.
The trademark and unfair competition complaint does not specify
what amount Stahl owes EmCyte for her allegedly wrongful acts. Instead,
the complaint contemplates that damages will be determined at trial.
The second lawsuit discussed in EmCyte’s relief from stay motion is
the Florida state court action referenced above as the Breach of Contract
Claim. EmCyte attached to its relief from stay motion as exhibit D a copy of
its state court complaint. In it, EmCyte alleges causes of action against
Stahl, Lifeform, and XLmedica for accounting, fraud, breach of contract,
usurpation of corporate opportunities, alter ego, and misappropriation of
trade secrets. But the heart of that complaint is EmCyte’s contention that
Stahl both individually and through Lifeform and XLmedica breached her
distributorship agreement with EmCyte by competing for direct sales with
EmCyte. The complaint also alleges that Stahl and her affiliated entities
misappropriated EmCyte’s trade secrets and sold to customers products
manufactured by EmCyte’s competitors.
Like its trademark and unfair competition complaint, EmCyte’s state
court breach of contract complaint does not specify an amount of damages
but instead contemplates that the damages amount will be determined at
trial.
EmCyte additionally referenced a third lawsuit. It attached the
findings of fact, conclusions of law, and judgment from this third lawsuit
5
as exhibit E to its relief from stay motion. The lawsuit, however, did not
include Stahl as a party. Rather, EmCyte obtained a Florida state court
judgment against a business associate of Stahl’s named Emery Smith. The
judgment includes findings of fact and conclusions of law regarding
Smith’s misconduct, which overlap with the alleged misconduct of Stahl,
LifeForm, and XLmedica as stated in the breach of contract lawsuit and the
trademark infringement lawsuit.
In the process of rendering judgment against Smith in this third
lawsuit, the state court made a number of findings involving Lifeform. As
best we can discern from the record, Lifeform was not a named party in
this third lawsuit, and no judgment was entered against it. Neither Stahl
nor XLmedica were parties to the action involving Smith. Even so, the state
court stated in its findings that Lifeform owed EmCyte a total of
$312,434.07. That amount is the sum of: (1) $147,739.07 owed based on
Lifeform’s procurement and sale of EmCyte products; and (2) an additional
$164,695.00 owed based on Lifeform’s conversion of EmCyte’s direct sales
customers.
In June 2020, the bankruptcy court entered an order granting
EmCyte’s relief from stay motion.
C. EmCyte’s proof of claim.
Around the same time EmCyte moved for relief from the stay, it also
filed a proof of claim. EmCyte filed an unsecured claim for $312,434.07, the
same amount found – but not adjudged – against Lifeform in the third
6
lawsuit. The exhibits attached to EmCyte’s proof of claim largely mirror
those attached to its relief from stay motion.
EmCyte explained that its proof of claim was based on the
complaints from its federal trademark and unfair competition lawsuit and
from its state court breach of contract lawsuit. While there is some overlap
between these two lawsuits and the third lawsuit against Smith, neither the
defendants nor the misconduct alleged completely overlap. More
importantly, there is nothing in these complaints or anywhere else in the
record fixing the amount of damages Stahl might owe EmCyte individually
or as an alter ego of Lifeform and XLmedica.
D. The objections to Stahl’s plan.
In July 2020, the chapter 13 trustee objected to Stahl’s plan. The
trustee raised several concerns, some pertaining to the reasonableness and
necessity of Stahl’s claimed expenses and others pertaining to her reporting
of her taxes, her income, and the finances of XLmedica.
In September 2020, EmCyte objected to Stahl’s plan. EmCyte joined in
the trustee’s objections but also stated a few of its own. According to
EmCyte, Stahl was not allocating all of her disposable income to her
proposed plan and instead was diverting funds from XLmedica to her
sisters, which funds should have been paid instead to Stahl and made
available for a larger distribution to her unsecured creditors.4 EmCyte
4
The bankruptcy court overruled these objections. EmCyte has abandoned them
on appeal, so there is no need to further address them.
7
asserted that Stahl’s handling of XLmedica’s funds amounted to bad faith
for purposes of Stahl’s chapter 13 plan.
But EmCyte mainly argued that Stahl’s unsecured debts exceeded
§ 109(e)’s unsecured debt eligibility limit. According to EmCyte, the
combined unsecured claims reflected in Stahl’s schedules and in the claims
register – including EmCyte’s $312,434.07 proof of claim – demonstrated
that Stahl had total unsecured claims exceeding $500,000.00. EmCyte
pointed out that § 109(e) capped the eligibility limit at $419,275.00 in
noncontingent, liquidated, unsecured debts. In short, EmCyte contended
that its $312,434.07 proof of claim was liquidated – even though it had
sought relief from stay to proceed with its non-bankruptcy litigation for the
specific purpose of liquidating its claim against Stahl.
EmCyte attached to its plan objection a declaration and numerous
pages of exhibits. These exhibits included a copy of its proof of claim and
copies of papers filed in its nonbankruptcy litigation with Stahl, Lifeform,
and XLmedica.5
E. Amendment of Stahl’s schedules and plan, and her reply in
support of her plan.
A week after EmCyte filed its plan objection, Stahl amended her
schedules and her plan. In her amended schedule E/F, Stahl now listed the
5 EmCyte did not argue in its written plan objection that the stated amount of its
proof of claim counted for eligibility purposes because it had not been objected to.
EmCyte raised this argument for the first time at the plan confirmation hearing. The
bankruptcy court implicitly rejected this argument when it overruled EmCyte’s plan
8
Notice Only Claim as contingent, unliquidated, and disputed. She also
changed the stated amount Lifeform owed for that claim from $0.00 to
$312,434.07 – the same amount stated in EmCyte’s proof of claim. Stahl also
amended the Trademark Claim and the Breach of Contract Claim to list
them both as unliquidated and disputed. Otherwise, the listing of these
two claims did not change.
Stahl’s amended schedules listed total unsecured debt of $455,737.85,
of which $312,434.07 consisted of the disputed and unliquidated Notice
Only Claim. Thus, according to Stahl’s amended schedules, her
noncontingent and liquidated unsecured debt amounted to $143,303.78,
which did not materially differ from what she had listed in her initial
schedules.
As for Stahl’s amended plan, she both increased the amount of her
monthly plan payments and decreased the estimated amount of her
priority tax debt. As a result, she projected $61,496.11 in aggregate
payments to general unsecured creditors over the life of the plan.
At the same time Stahl amended her schedules and plan, she filed a
reply responding to EmCyte’s objections. As Stahl explained, the amount
and status of the debts set forth in her schedules was controlling and the
resulting liquidated and noncontingent debts listed in her schedules was
well under the § 109(e) debt eligibility limit. With respect to EmCyte’s
claims, Stahl pointed out that the $312,434.07 Notice Only Claim in her
objection.
9
schedules was listed as only owing by Lifeform and not by her. As for the
Trademark Claim and the Breach of Contract Claim, Stahl pointed out that
the amount of both was listed as unknown, and that both were
unliquidated and the subject of pending litigation in which the amount
owed by Stahl, if any, would need to be determined. According to Stahl,
the bankruptcy court needed to rely on her schedules to determine her
§ 109(e) eligibility because there were no allegations or evidence suggesting
that her schedules were filed in bad faith.
As for EmCyte’s bad faith allegations, Stahl noted that XLmedica was
a debtor in its own chapter 11 case. She pointed out that its insider
payments to her sisters had been duly noticed and no one had objected to
those payments. She also contended that the insider payments were both
reasonable and necessary under the circumstances. In any event, she
maintained that any issue regarding the propriety of the insider payments
should be taken up in XLmedica’s chapter 11 case.
F. The confirmation hearing and the order confirming Stahl’s plan.
The bankruptcy court held a plan confirmation hearing on September
23, 2020. The court overruled EmCyte’s objections.6 The court stated that,
unless it was apparent on the face of the schedules that they were not filed
in good faith, the court should and would rely on the schedules to
determine Stahl’s eligibility under § 109(e). As the court observed, the
6
At the confirmation hearing, the trustee acknowledged that Stahl effectively
had resolved all of the trustee’s plan objections.
10
schedules reflected that Stahl did not exceed the unsecured debt eligibility
limit set forth in the statute. In addition, the bankruptcy court rejected
EmCyte’s bad faith contention. The bankruptcy court essentially adopted
Stahl’s position on good faith, for the reasons stated in her reply brief in
support of plan confirmation.
On October 15, 2020, the bankruptcy court entered its order
confirming Stahl’s plan. EmCyte timely appealed on October 29, 2020.
JURISDICTION
The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334 and
157(b)(2)(L). We have jurisdiction under 28 U.S.C. § 158.
ISSUES
1. Did the bankruptcy court abuse its discretion by basing its § 109(e)
eligibility determination solely on Stahl’s schedules?
2. Even if the bankruptcy court had considered EmCyte’s proof of claim,
would that have demonstrated that Stahl’s unsecured debt exceeded
§ 109(e)’s eligibility limit?
STANDARDS OF REVIEW
We review for an abuse of discretion the bankruptcy court’s decision
whether or not to look beyond the debtor’s schedules for purposes of
§ 109(e) eligibility. See Guastella v. Hampton (In re Guastella), 341 B.R. 908,
918 (9th Cir. BAP 2006) (holding that “it was properly within the
discretion of the bankruptcy court to make a limited inquiry outside of the
schedules to determine first whether Guastella estimated her debts in good
11
faith and, if not, whether Guastella was in fact eligible for chapter 13
relief.” (emphasis added)).
The bankruptcy court abused its discretion if it applied an incorrect
legal standard or made factual findings that were illogical, implausible, or
without support in the record. See TrafficSchool.com, Inc. v. Edriver Inc., 653
F.3d 820, 832 (9th Cir. 2011) (citing United States v. Hinkson, 585 F.3d 1247,
1262 (9th Cir. 2009) (en banc)).
The effect of EmCyte’s proof of claim on Stahl’s eligibility turns on
whether or not the claim was liquidated at the time of her bankruptcy
filing. Answering that question requires interpretation of the Bankruptcy
Code, which we review de novo. Fountain v. Deutsche Bank Nat’l Tr. Co. (In
re Fountain), 612 B.R. 743, 747 (9th Cir. BAP 2020) (citing Nicholes v. Johnny
Appleseed of Wash. (In re Nicholes), 184 B.R. 82, 86 (9th Cir. BAP 1995)).
DISCUSSION
A. General legal standards applicable to chapter 13 eligibility.
Section 109(e) governs who is eligible to be a chapter 13 debtor. It
provides in relevant part: “Only an individual with regular income that
owes, on the date of the filing of the petition, noncontingent, liquidated,
unsecured debts of less than $419,275 . . . and noncontingent, liquidated,
secured debts of less than $1,257,850 . . . may be a debtor under chapter 13
of this title.” 7
7
Though the dollar amounts of the debt limits under the statute are adjusted
periodically, the amounts effective at the time of Stahl’s chapter 13 filing were the same
12
The statute specifically excludes contingent and unliquidated debts
from the eligibility calculation. Ho v. Dowell (In re Ho), 274 B.R. 867, 871 (9th
Cir. BAP 2002). A debt is contingent if one or more extrinsic events must
occur before the debtor will be liable for it. In re Fountain, 612 B.R. at 749
(citing Fostvedt v. Dow (In re Fostvedt), 823 F.2d 305, 306 (9th Cir. 1987)).
And a debt is unliquidated unless the amount of the debt is “readily
determinable.” Slack v. Wilshire Ins. Co. (In re Slack), 187 F.3d 1070, 1073 (9th
Cir. 1999). In turn, “[t]he definition of ‘ready determination’ turns on the
distinction between a simple hearing to determine the amount of a certain
debt, and an extensive and contested evidentiary hearing in which
substantial evidence may be necessary to establish amounts or liability.” In
re Slack, 187 F.3d at 1073-74 (quoting Fed. Deposit Ins. Corp. v. Wenberg (In re
Wenberg), 94 B.R. 631, 633 (9th Cir. BAP 1988), aff'd & adopted, 902 F.2d 768(9th Cir. 1990)); see also In re Nicholes, 184 B.R. at 89 (“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.”).
Under the plain language of the statute, the amount of debt is
determined as of “the date of the filing of the petition.” 11 U.S.C. § 109(e).
Thus, “a bankruptcy court cannot look to post-petition events to determine
the amount of the debt.” In re Slack, 187 F.3d at 1073.
Unlike contingent and unliquidated debts, disputed debts – that is
debts where debtors dispute their liability – should not be excluded from
as stated above.
13
eligibility calculations solely on that basis. In re Fountain, 612 B.R. at 748
(citing In re Nicholes, 184 B.R. at 88). “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.” In re Ho, 274 B.R. at 874 (citing In re Nicholes, 184 B.R. at 891)
(emphasis omitted). 8
B. The bankruptcy court did not abuse its discretion by basing its
eligibility determination solely on Stahl’s schedules.
It is well established in this circuit that § 109(e) eligibility issues
“should normally be determined by the debtor’s originally filed schedules,
checking only to see if the schedules were made in good faith.” In re Scovis,
249 F.3d at 982. However, “where a good faith objection to eligibility has
been filed by a party in interest, the bankruptcy court can make a limited
inquiry outside of the schedules to determine if the Debtor estimated her
debts in good faith, and if not, whether she was eligible for chapter 13
relief.” In re Fountain, 612 B.R. at 748 (citing In re Guastella, 341 B.R. at 918)
(emphasis added).
Neither Fountain nor Guastella specifically defined what it means to
file a “good faith objection to eligibility.” But Guastella gave some
indication what it meant in using this term. In Guastella, the debtor’s
8 As the Ninth Circuit has put it: “if the amount of the creditor’s claim at the time
of the filing the petition is ascertainable with certainty, a dispute regarding liability will
not necessarily render a debt unliquidated.” Scovis v. Henrichsen (In re Scovis), 249 F.3d
975, 983–84 (9th Cir. 2001) (quoting In re Slack, 187 F.3d at 1074) (emphasis added).
14
chapter 13 filing followed on the heels of a state court tentative decision
liquidating a debt against her parents for $495,000.00. 341 B.R. at 912.
Though the state court did not finally determine the debtor’s liability for
that debt, it did tentatively find that “Guastella conspired with her parents
to conceal the proceeds” from the sale of certain real property and
tentatively held that “under California law, Guastella could be civilly liable
for damages resulting from the conspiracy even though she was not a
member of the conspiracy at the time of its inception.” Id. at 917. Guastella
then filed her bankruptcy to prevent the state court from ruling on her
liability. Id. at 912, 917.
We held in Guastella that the bankruptcy court did not err in finding
that the debtor failed to schedule the creditors’ claim in good faith because
the debtor admitted her knowledge of the above-referenced facts, and
based on those facts, “it appeared to a legal certainty . . . that the
[creditors’] claim was not $0.00 as stated on the schedules.” Id. at 921. In the
process of explaining that the bankruptcy court acted within its discretion
in making “a limited inquiry outside of the schedules,” Guastella observed
that: (1) the objecting creditor objected to plan confirmation “on the
grounds that Guastella was not eligible for chapter 13 relief and that the
schedules were ‘knowingly false’”; and (2) the debtor did not argue that the
plan confirmation objection was filed in bad faith. Id. at 918.
Guastella generally acknowledged the Scovis rule – that § 109(e)
eligibility issues normally are determined by the initial version of the
15
debtor’s schedules, checking only to see if those schedules were made in
good faith. Id. at 917. But Guastella reasoned that the Scovis rule did not
apply because the creditors objected “based on eligibility and lack of good
faith.” Id. at 918. Guastella ultimately held that it was not an abuse of
discretion for the bankruptcy court to look beyond the debtor’s schedules
and consider other facts in the record where the debtor had acted in bad
faith in scheduling the debt owed to the creditor at “$0.00.” Id.
Meanwhile, Fountain involved a debtor who scheduled a debt arising
from a promissory note for $1,000.00. The creditor in Fountain filed a proof
of claim establishing that the promissory note on which this claim was
based was for a principal amount exceeding $1,000,000.00. In re Fountain,
612 B.R. at 747. Further, Fountain admitted that she signed the note. Id. at
747, 749. As the BAP in Fountain further pointed out, the debtor’s dispute
regarding the debt concerned the bank’s right to enforce the note and not
the amount owed under the note. Id. at 749. Fountain ultimately held that
the bankruptcy court was justified in looking beyond debtor’s schedules on
these facts because the creditor “made a good faith objection to eligibility
and asked the court to review its proof of claim” and because the proof of
claim, when combined with the debtor’s concession that she signed the
note demonstrated “to a legal certainty that [the creditor’s] claim was not
$1,000 as stated in Debtor's schedules.” Id.9
9
EmCyte also relies on Soderlund v. Cohen (In re Soderlund), 236 B.R. 271, 273 (9th
Cir. BAP 1999). Soderlund pre-dates Scovis and seems to reject Comprehensive Accounting
16
Neither Fountain nor Guastella stands for the proposition that a
bankruptcy court must consider facts outside the schedules in the absence
of specific, concrete allegations that the debtor has, in bad faith, scheduled
her debts in order to fall within § 109(e)’s eligibility limits, and without
presenting some evidence to support those allegations. Nor are we aware
of any such cases from this Panel or the Ninth Circuit.
As a practical matter, prohibiting the bankruptcy court from
exercising its discretion, when appropriate, to curtail the eligibility inquiry
would fly in the face of the principle that chapter 13 eligibility
determinations need to be made expeditiously and should not be permitted
Corp. v. Pearson (In re Pearson), 773 F.2d 751, 757 (6th Cir. 1985) -- the primary case on
which Scovis based its rule regarding how chapter 13 eligibility should be determined.
See In re Scovis, 249 F.3d at 981-82. In any event, the rule Soderlund ultimately followed
did not materially differ from the rule as articulated in Fountain and Guastella: “a
bankruptcy court may look past the schedules to other evidence submitted when a
good faith objection to the debtor’s eligibility under § 109(e) is raised.” In re Soderlund,
236 B.R. at 273 (emphasis added). Furthermore, the debtors in Soderlund filed multiple
versions of their schedules, stating drastically different amounts of non-contingent,
liquidated unsecured debt. In fact, in the initial version of their schedules, the debtors in
Soderlund listed their aggregate unsecured debt at $500,000.00, none of which was listed
as contingent or unliquidated. Id. at 272. This amount was well beyond the § 109(e)
eligibility limit. Though the debtors later amended their schedules to reduce their
contingent and unliquidated debt to $30,000.00, the initial scheduling of their debt
above the § 109(e) eligibility level, by itself, would seem to provide sufficient indicia
that subsequent amendments of the debtor’s schedules might have been filed in bad
faith as to permit the bankruptcy court to conduct a limited inquiry beyond the debtor’s
schedules for purposes of determining chapter 13 eligibility. See In re Smith, 419 B.R.
826, 829 (Bankr. C.D. Cal. 2009), aff'd sub nom., Smith v. Rojas (In re Smith) 435 B.R. 637(9th Cir. BAP 2010) (citing Soderlund and stating that a bankruptcy court “may look
beyond the schedules if there are allegations or indicia that the schedules were not
filled out in good faith” (emphasis added)).
17
to dominate the chapter 13 case. We have followed this principle where it
appeared “to a legal certainty” that the debtor had manipulated the
amounts listed in her schedules in order to fall within § 109(e)’s eligibility
limits. See In re Guastella, 341 B.R. at 921.
Similarly, we also have stated:
When a party challenges a debtor’s eligibility for Chapter 13
relief, the bankruptcy court needs to make a prompt and effective
determination of a debtor’s eligibility. Failure to promptly and
effectively determine the debtor’s eligibility results in a waste of
judicial resources and inefficient administration of a case—
contravening the legislative intent for expedient resolution of
Chapter 13 cases.
In re Nicholes, 184 B.R. at 87.
These same types of concerns led the Sixth Circuit in Pearson to adopt
for § 109(e) eligibility purposes the approach utilized in diversity cases to
resolve disputes regarding whether the amount claimed by the plaintiff
met or exceeded the floor for federal diversity jurisdiction: “the amount
claimed in good faith by the plaintiff controls unless it appears to a legal
certainty that the claim is for less than the jurisdictional amount or the
amount claimed is merely colorable.” In re Pearson, 773 F.2d at 757 (citing
St. Paul Indem. Co. v. Red Cab Co., 303 U.S. 283, 288-90 (1938)).
At bottom, the exigencies of chapter 13 practice and the strong need
for prompt and efficient § 109(e) eligibility determinations militate in favor
of a rule that affords the bankruptcy court with broad discretion to rely
exclusively on the debtor’s schedules. Based on our analysis of the
18
decisions discussed above, such exclusive reliance does not constitute an
abuse of discretion unless a creditor (or the trustee): (1) objects on eligibility
grounds; (2) alleges in good faith that the debtor’s schedules were filed in
bad faith; and (3) points to or presents concrete, specific evidence
indicating that the debtor manipulated the scheduled debt amounts in
order to fall within § 109(e)’s debt limits.
Here, EmCyte failed to make the requisite allegations and failed to
point to or present the requisite evidence. In fact, the evidence in the record
supports the view that Stahl did not overreach in the way she characterized
EmCyte’s claims in her schedules. If any party is overreaching in this
matter, it is EmCyte. It sought and obtained relief from the automatic stay
based on its contention that its claims against Stahl were unliquidated.
Then, it objected to Stahl’s plan on eligibility grounds based on the exact
opposite contention – that its claims against Stahl were liquidated. The
bankruptcy court did not abuse its discretion by relying on Stahl’s
schedules to determine her eligibility to be a chapter 13 debtor.
C. Consideration of EmCyte’s claim does not establish that Stahl’s
unsecured debts exceeded § 109(e)’s eligibility limits.
Even if we were to consider EmCyte’s proof of claim, the claim does
not establish that Stahl’s liquidated, noncontingent, unsecured debts
exceeded § 109(e)’s eligibility limits. Indeed, EmCyte’s argument to the
contrary fails as a matter of binding BAP precedent.
19
In its appeal brief, EmCyte argues that its claim should have been
treated as liquidated in the amount of $312,434.07 solely because it filed a
proof of claim for that amount and Stahl had not objected to its claim as of
the time of plan confirmation. As EmCyte notes, Rule 3001(f) governs the
evidentiary effect of duly-filed proofs of claim. Under this rule, EmCyte
points out that its proof of claim constitutes prima facie evidence of the
validity and amount of its claim. Therefore, EmCyte concludes that under
Rule 3001(f) its claim was liquidated for eligibility purposes in the amount
stated in the proof of claim.
That a proof of claim filed in accordance with the Rules constitutes
prima facie evidence of the validity and amount of the claim is well
established. See Lundell v. Anchor Constr. Specialists, Inc., 223 F.3d 1035, 1039
(9th Cir. 2000). Moreover, “[a] proof of claim is deemed allowed unless a
party in interest objects.” Id. (citing § 502(a)). But Rule 3001(f) solely
pertains to the claims filing process. There generally is no deadline for
filing claim objections in bankruptcy cases. Ashford v. Consol. Pioneer Mortg.
(In re Consol. Pioneer Mortg.), 178 B.R. 222, 225 (9th Cir. BAP 1995), aff’d, 91
F.3d 151 (9th Cir. 1996) (table) (stating that “an objection to a proof of claim
may be filed at any time”); see also Morton v. Morton (In re Morton), 298 B.R.
301, 309–10 (6th Cir. BAP 2003) (“Neither the Bankruptcy Code nor
Bankruptcy Rules contain a bar date or deadline for filing objections to
claims in a chapter 13 case and we will not read one into the law where
none exists.”).
20
More importantly, the claims filing process necessarily occurs
postpetition. It, therefore, has nothing to do with chapter 13 eligibility
which is measured as of the date of the filing of the petition. In re Slack, 187
F.3d at 1073. For this very reason, this Panel previously rejected a virtually
identical argument in a prior case. See In re Ho, 274 B.R. at 871 n.5 (stating
that court could not look at postpetition events and hence rejecting the
argument that debt must be counted for eligibility purposes when it is
deemed allowed under § 502(a) (citing In re Slack, 187 F.3d at 1073)).
Fundamentally, EmCyte’s position is unsound. Determining
eligibility based on proofs of claim filed “would be a dangerous practice
and improperly puts eligibility in control of the creditor.” Lantzy v. Rojas
(In re Lantzy), BAP No.CC-10-1057-KiLPa, 2010 WL 6259984, at *6 (9th Cir.
BAP Dec. 7, 2010). As Lantzy further observed, had Congress intended that
proofs of claim be the determinative factor in whether an individual could
proceed under chapter 13, it would have so specified. Id. (citing In re
Edwards, 51 B.R. 790, 791 (Bankr. D.N.M. 1985)).
At oral argument before this panel, EmCyte attempted to argue for
the first time that the exhibits attached to its proof of claim demonstrated
that its claim was liquidated. EmCyte never made this argument in the
bankruptcy court, nor did it do so in its appeal brief. Instead, EmCyte
specified in its appeal brief that it was relying exclusively on the
evidentiary effect of its proof of claim under Rule 3001(f) to establish its
21
liquidated claim. Indeed, EmCyte unreasonably inferred Stahl’s bad faith
from her decision not to object to its claim prior to confirmation.10
Because its appeal brief relied exclusively on Rule 3001(f) to support
its liquidation argument, EmCyte effectively forfeited its belated argument
that the exhibits attached to its proof of claim established that its claim was
liquidated. See Christian Legal Soc'y v. Wu, 626 F.3d 483, 487–88 (9th Cir.
2010) (declining to address matters not specifically and distinctly argued in
the appellant's opening brief); Brownfield v. City of Yakima, 612 F.3d 1140,
1149 n.4 (9th Cir. 2010) (same). Still, we have carefully examined the
exhibits attached to EmCyte’s proof of claim. They do not establish “to a
legal certainty” that Stahl in bad faith mis-scheduled EmCyte’s claims in
order to fall within § 109(e)’s eligibility limits. See In re Fountain, 612 B.R. at
748–49; In re Guastella, 341 B.R. at 920-21. To the contrary, EmCyte’s
exhibits actually support Stahl’s description of the amount of the claims as
“unknown” and her listing of the claims as unliquidated. Far from fixing
the amount of damages EmCyte allegedly incurred as a result of Stahl’s
conduct, the exhibits reflect that the liquidation of damages was an issue
reserved for trial.
10 Stahl has pointed out that no purpose would have been served by prematurely
objecting to EmCyte’s proof of claim when litigation was proceeding on EmCyte’s
complaints in nonbankruptcy courts as a result of EmCyte’s relief from stay motion
granted for the very purpose of liquidating its claims outside of the bankruptcy court.
22
Accordingly, EmCyte’s proof of claim does not support reversal of
the bankruptcy court’s determination that Stahl’s unsecured debt fell
within § 109(e)’s eligibility limits.
CONCLUSION
For the reasons set forth above, we AFFIRM the bankruptcy court’s
plan confirmation order. 11
11
In her appeal brief, Stahl argued that EmCyte’s appeal is frivolous and that she
should be awarded her fees and costs pursuant to Rule 8020. We decline to consider
Stahl’s request because she did not file a separately-noticed motion as required by the
Rule. See Simpson v. Burkart (In re Simpson), 366 B.R. 64, 77 (9th Cir. BAP 2007) (citing
Tanzi v. Comerica Bank–Cal. (In re Tanzi), 297 B.R. 607, 613 (9th Cir. BAP 2003)).
23