Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_14-cv-00871/USCOURTS-cand-3_14-cv-00871-4/pdf.json

Nature of Suit Code: 422
Nature of Suit: Bankruptcy Appeals Rule 28 USC 158
Cause of Action: 28:0158 Notice of Appeal re Bankruptcy Matter (BAP)

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United States District Court

For the Northern District of California

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UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

FRITZ WUTHRICH,

Appellant,

v.

AMER SPORTS WINTER & OUTDOOR

COMPANY,

Appellee.

___________________________________/

No. C-14-0871 EMC

ORDER AFFIRMING BANKRUPTCY

COURT’S SUMMARY JUDGMENT

DECISION

Appellant Fritz Wuthrich appeals the summary judgment decision of a bankruptcy court. 

The bankruptcy court held that a discharge that Mr. Wuthrich had obtained in a Chapter 7

bankruptcy proceeding did not apply to a claim asserted by Appellee Amer Sports Winter &

Outdoor Company (“Amer”). Amer’s claim against Mr. Wuthrich was based on a personal guaranty

that Mr. Wuthrich had signed prior to filing his Chapter 7 petition.

Having considered the parties’ briefs and accompanying submissions, the Court hereby

AFFIRMS the decision of the bankruptcy court.

I. FACTUAL & PROCEDURAL BACKGROUND

During summary judgment proceedings before the bankruptcy court, the parties submitted a

joint stipulation of facts. Those facts are, in relevant part, as follows.

Mr. Wuthrich is the sole shareholder and president of a California corporation known as CIT

Sports, Inc. (“CIT”). CIT operates a specialty sports shop. See Docket No. 21, at 9 (Stip. ¶ 2).

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Amer, a Delaware corporation, is engaged in the sale of sporting goods and apparel. Its

predecessor was Atomic Ski USA, Inc. See Docket No. 21, at 9 (Stip. ¶¶ 1, 3).

On August 15, 2001, Atomic Ski and CIT entered into an agreement. See Docket No. 21, at

9 (Stip. ¶ 3). The agreement basically addressed setting up an account for CIT with Atomic Ski. 

See Docket No. 21, at 5 (agreement). For example, the agreement provided that “Applicant [CIT]

hereby certifies that the tangible personal property purchased from Atomic Ski . . . is purchased for

resale [i.e., to the general public].” Docket No. 21, at 5 (agreement). It also provided that Atomic

Ski was authorized to investigate CIT’s credit history and that, if CIT was accepted as an account of

Atomic Ski, it would be bound by certain terms and conditions. See Docket No. 21, at 5

(agreement).

Mr. Wuthrich signed the CIT/Atomic Ski agreement as CIT’s president. In connection with

the agreement, Mr. Wuthrich also signed a personal guaranty in favor of Atomic Ski, guaranteeing

payment of CIT’s obligations to Atomic Ski. See Docket No. 21, at 10 (Stip. ¶ 4). The personal

guaranty provided: “For Value Received from Atomic Ski . . . (Seller) as inducement to Seller to sell

and deliver merchandise to above Applicant [CIT], the undersigned [Mr. Wuthrich], jointly and

severally guarantee(s) prompt and punctual payment of any account owing from Applicant to

Seller.” Docket No. 21, at 5 (personal guaranty). The personal guaranty further provided: “This

contract of guaranty shall remain in force until revoked by the guarantor by giving 10 days written

notice by registered mail addressed to Seller.” Docket No. 21, at 5 (personal guaranty).

Atomic Ski sold merchandise to CIT and was paid for the merchandise for many years

without incident. See Docket No. 21, at 10 (Stip. ¶ 5).

In May 2010, CIT filed a Chapter 11 bankruptcy petition. Mr. Wuthrich executed the

petition on behalf of CIT. See Docket No. 21, at 10 (Stip. ¶ 6). During the CIT bankruptcy, Atomic

Ski/Amer continued to sell merchandise to CIT. See Docket No. 21, at 10 (Stip. ¶ 9). Atomic

Ski/Amer was never listed as a creditor in the CIT bankruptcy, never received notice of the CIT

bankruptcy, and was not aware of the CIT bankruptcy. See Docket No. 21, at 10 (Stip. ¶ 8).

In July 2010, Mr. Wuthrich and his wife filed a Chapter 7 bankruptcy petition. Atomic

Ski/Amer was never listed as a creditor in the Wuthrich bankruptcy, never received notice of the

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Wuthrich bankruptcy, and was not aware of the Wuthrich bankruptcy. See Docket No. 21, at 10

(Stip. ¶ 12). 

In December 2010, the bankruptcy court issued a discharge of debtor and final decree in the

Wuthrich bankruptcy. See Docket No. 21, at 10 (Stip. ¶¶ 10-11).

In February 2012, the bankruptcy court entered an order in the CIT bankruptcy, confirming

CIT’s plan of reorganization. See Docket No. 21, at 10 (Stip. ¶ 7).

Some time after the discharge in the Wuthrich bankruptcy, CIT, acting through Mr.

Wuthrich, ordered merchandise from Atomic Ski/Amer. Atomic Ski/Amer shipped the goods to CIT

but CIT failed to pay, with the outstanding invoices totaling $74,064.42. See Docket No. 21, at 10

(Stip. ¶¶ 13-14).

Amer filed suit against CIT in state court, based on the outstanding invoices. Subsequently,

Mr. Wuthrich advised Amer of the prior CIT and Wuthrich bankruptcies. Mr. Wuthrich asserted

that Amer could not enforce the personal guaranty that he had signed because of the discharge in the

Wuthrich bankruptcy. See Docket No. 21, at 11 (Stip. ¶¶ 16-17).

Thereafter, Amer brought an action for declaratory relief with the bankruptcy court, seeking

to resolve the dispute. See Docket No. 21, at 2 (complaint for declaratory relief). As indicated

above, at summary judgment, the parties presented a joint stipulation of facts to the bankruptcy court

for its consideration. At the hearing on the summary judgment motions, the bankruptcy court

commented as follows: 

I can’t – I can’t let Mr. Wuthrich off the hook on this one. 

This is a gotcha. . . . This is a situation where Mr. Wuthrich had a

choice. Come clean and inform Amer Sports [before ordering more

merchandise on behalf of CIT] by the way I’m discharged. Even

[though] that might have meant, you know, they’re not going to ship to

my company [CIT]. But it’s a gotcha for him to be in control of the

facts, or the fate, if you will, and Amer Sports to have no knowledge

of anything. And we can speculate on if he had said: By the way, I’m

off the hook on the guaranty, we can assume they probably wouldn’t

have shipped.

But I think whether we call this estoppel or it – “gotcha” is not

a legal term, but it’s a gotcha to say: I’m not going to tell you that I’ve

discharged my liability – and by the way, [the bankruptcy court is] not

getting into the question of whether there was a contingent claim on

the date of bankruptcy or not. It doesn’t matter to [the bankruptcy

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court]. There was no debt. But maybe there was a contingent claim. .

. . 

. . . [S]o my analysis is that Mr. Wuthrich had the ability,

although it may have been not in his company’s best interests, to avoid

any claim of liability. And he declined either to notify Amer of the

bankruptcy or to invoke the termination clause. He did neither. He

said: Please ship.

And certainly under an estoppel and basic-fairness principle he

had an obligation to inform them that he was going to try to disclaim

any liability under the guaranty or he can now claim that he needed

discharge.

So that’s a rambling way of saying there’s no way I can say

that this debt was discharged and that this is a prepetition debt.

Docket No. 21, at 13-15 (bankruptcy court hearing).

Subsequently, the bankruptcy court issued its order granting Amer, and denying Mr.

Wuthrich, summary judgment. See Docket No. 1-2, at 1 (bankruptcy court order).

II. DISCUSSION

This Court reviews the bankruptcy court’s decision granting summary judgment to Amer de

novo. See In re Caneva, 550 F.3d 755, 760 (9th Cir. 2008) (noting that the roles of the circuit and

district courts “‘are essentially the same in the bankruptcy appellate process’” and that the

bankruptcy court’s grant of summary judgment is reviewed de novo); In re Crystal Props., LTD.,

268 F.3d 743, 755 (9th Cir. 2001) (stating that “‘the district court functions as an appellate court in

reviewing a bankruptcy decision and applies the same standards of review as a federal court of

appeals’”).

Under the Bankruptcy Code, where there is a discharge, the debtor is discharged “from all

debts that arose before the date of the order for relief under this chapter [11 U.S.C. § 701 et seq.].” 

11 U.S.C. § 727(b) (emphasis added). Based on this statute, courts commonly make reference to

discharge of “pre-petition” debts. As for the term “debt,” it is defined by the Bankruptcy Code as

“liability on a claim.” Id. § 101(12). “Claim,” in turn, means a “right to payment, whether or not

such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured,

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 “[W]hen the Bankruptcy Code uses the word ‘claim’ – which the Code itself defines as a

‘right to payment’ – it is usually referring to a right to payment recognized under state law.” 

Travelers Cas. & Sur. Co. of Am. v. PG&E, 549 U.S. 443, 451 (2007).

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 There appears to be no dispute that the Wuthrich bankruptcy was a no-assets case. 

3 Mendiola was cited approvingly in the Beezley concurrence.

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disputed, undisputed, legal, equitable, secured or unsecured.”1 Id. § 101(5)(A). Thus, under the

Bankruptcy Code, even a contingent claim – i.e., a claim “which the debtor will be called upon to

pay only upon the occurrence or happening of an extrinsic event which will trigger the liability of

the debtor to the alleged creditor,” Siegel v. Fed. Home Loan Mortg. Corp., 143 F.3d 525, 532 (9th

Cir. 1998) (internal quotation marks omitted) – can be a pre-petition claim subject to discharge. The

broad definition of “claim” is intended “to ensure that all legal obligations of the debtor, no matter

how remote or contingent, will be able to be dealt with in the bankruptcy case.” Siegel, 143 F.3d at

532 (internal quotation marks and emphasis omitted).

In his papers, Mr. Wuthrich argues that Amer’s claim against him for the outstanding

invoices is a claim subject to discharge because he entered into the personal guaranty before he filed

for bankruptcy – i.e., it is a pre-petition claim. According to Mr. Wuthrich, the fact that the

outstanding invoices are based on debt incurred by CIT and failed payments by CIT after he was

discharged does not matter; that simply means that Amer had a contingent claim at the time of his

bankruptcy proceedings. While Mr. Wuthrich did not identify Amer on any of his bankruptcy

schedules as having a contingent claim, he contends that is immaterial because, under Ninth Circuit

law, “‘dischargeability is unaffected by scheduling’ in a Chapter 7 no-assets, no-bar-date

bankruptcy.”2

 In re Nielsen, 383 F.3d 922, 926-27 (9th Cir. 2004) (quoting In re Beezley, 994 F.2d

1433, 1434 (9th Cir. 1993); explaining that “filing of a claim [by a creditor] is meaningless and

worthless in a no-assets case”); In re Mendiola, 99 B.R. 864, 867 (N.D. Ill. 1989)3

 (noting that, “[i]n

a case without assets to distribute the right to file a proof of claim is meaningless and worthless” as

“‘[t]he unlisted creditor is not prejudiced by the debtor’s failure to list him because he would not

have received a distribution anyway’”). 

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 “BAP decisions cannot bind the district courts themselves. As article III courts, the district

courts must always be free to decline to follow BAP decisions and to formulate their own rules

within their jurisdiction.” Bank of Maui v. Estate Analysis, 904 F.2d 470, 472 (9th Cir. 1990).

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The Court is not persuaded by Mr. Wuthrich’s arguments. As a preliminary matter, the

Court notes that, although a “contingent” claim may be broadly defined, “logic dictates that the

concept cannot be limitless. At some point, a right to payment becomes so contingent that it cannot

fairly be deemed a right to payment at all.” In re Thomas, No. 09-33212 HCD, 2013 Bankr. LEXIS

3675, at *13 (N.D. Ill. Apr. 30, 2013) (internal quotation marks omitted). The Ninth Circuit has

confirmed as much by noting that “[n]o doubt the future is always contingent, but that does not mean

that a bankrupt is discharged regarding everything he might do in the future.” Siegel, 143 F.3d at

532.

Here, Amer’s claim on the outstanding invoices was too remote to be fairly deemed a right to

payment for several reasons. First, at the time of the bankruptcy proceedings, no debt had actually

been incurred by CIT. 

Second, there is nothing in the record to suggest that CIT made fixed or regular purchases

from Amer such that Amer – or even CIT – would have reasonably expected more purchases or,

even if they had expected more purchases, that the purchases would be of any ascertainable size or

amount. See Thomas, 2013 Bankr. LEXIS 3675, at *17 (advocating application of a “fair

contemplation” test to determine whether a claim is a contingent claim – i.e., whether “‘the

possibility of the event triggering the right to payment is within the fair contemplation of the creditor

at the time the petition is filed’”). In this regard, the case on which Mr. Wuthrich primarily relies, In

re Motley, 268 B.R. 237 (C.D. Cal. 2001), is distinguishable. There, the debt of the principal obligor

that had yet to be incurred was rent – something that is relatively predictable as becoming due both

in terms of timing and amount. Cf. In re Getzhoff, 180 B.R. 572, 572-74 (9th Cir. Bankr. App. Panel

1995)4

 (involving a personal guaranty for a loan that a company obtained from a bank).

Third, the fact that CIT and Mr. Wuthrich failed to identify any future claim by Amer in their

bankruptcies also supports the current claim on the outstanding invoices being too remote to fairly

constitute a right to payment. See Thomas, 2013 Bankr. LEXIS 3675, at *13 (noting that “the debtor

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 The Court acknowledges that Mr. Wuthrich did not stipulate to Amer’s having relied on the

ongoing enforceability of the personal guaranty in making sales to CIT after the bankruptcy

proceedings had concluded. See Docket No. 21, at 11 (Stip. ¶ 15). But Mr. Wuthrich’s refusal to

stipulate does not detract from the fact that the personal guaranty was clearly a material part of the

contract between Atomic Ski/Amer and CIT.

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himself did not consider his obligation as guarantor to be a ripe pre-petition contingent debt” as he

did not list the company as a potential creditor). To the extent Mr. Wuthrich suggests that the only

reason he did not identify a claim by Amer is because such action would have been meaningless –

his case being a no-assets case – the Court has its doubts as to the veracity of such a claim. There is

no good reason not to have listed the Amer claim (unless it was too remote to be even a contingent

claim). 

In any event, the failure to give Amer notice (by not listing Amer as a creditor) gives rise to a

fourth reason why Amer’s claim should not be treated as a pre-petition claim. Had Mr. Wuthrich

given notice of a potential claim by Amer, then Amer would have been on notice of the Wuthrich

bankruptcy, and that fact clearly would have been material to Amer’s decision to make future sales

to CIT because the contract that Atomic Ski/Amer had with CIT included the personal guaranty by

Mr. Wuthrich.5

 Failure to afford notice to permit creditors an opportunity to protect themselves is an

equitable consideration appropriate for the Court to take into account in evaluating whether Amer’s

claim for the outstanding invoices is a pre-petition contingent claim subject to discharge. See id. at

*22 (noting that, because of the lack of notice to the company, the bankruptcy court would “weigh

the debtor’s right to a fresh start along with the creditor’s right to due process”). 

Finally, it is significant that the contingency of the claim in this case did not turn on events

or actions of a third party; here, it turned on Mr. Wuthrich’s volitional conduct through CIT to incur

liability to CIT after the bankruptcies. In this regard, the Ninth Circuit’s analysis in Siegel is

instructive. In Siegel, the plaintiff and another individual (his partner) executed two notes in which

they promised to pay a mortgage company the principal sums of $840,000 and $900,000,

respectively, in monthly installments. Each note was secured by a deed of trust. Subsequently, the

mortgage company sold and assigned the notes and deeds of trust to Freddie Mac. See Siegel, 143

F.3d at 527.

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In December 1992, the plaintiff and his partner defaulted on one note, after which Freddie

Mac foreclosed on the property. Subsequently, the plaintiff declared bankruptcy, and the plaintiff

and his partner defaulted on the second note. See id. at 528. Freddie Mac then filed two proofs of

claim against the plaintiff in the bankruptcy proceeding. Neither the plaintiff nor the trustee

objected to the proofs of claim. In March 1994, the bankruptcy court allowed Freddie Mac to

proceed with foreclosure on the second property. See id. In April 1994, the plaintiff brought a tort

and breach-of-contract action against Freddie Mac regarding the foreclosures. See id. at 527-28. 

Subsequently, the plaintiff was discharged from bankruptcy, and, in August 1994, Freddie Mac

foreclosed on the second property. See id. at 528.

Thereafter, in the lawsuit that the plaintiff had filed, Freddie Mac moved for summary

judgment, arguing that the action was barred by the res judicata effect of the bankruptcy proceeding. 

The district court granted the motion, and Freddie Mac then moved to recover attorney’s fees

incurred in defending against the plaintiff’s claims. The district court granted that motion as well. 

See id.

On appeal, the Ninth Circuit affirmed. Of particular relevance here was the attorney’s fee

decision. The court noted that, even though “Freddie Mac’s rights under the notes and deeds of trust

had been decided in the bankruptcy court and Freddie Mac’s claims had been discharged there, [the

plaintiff] chose to sue on the theory that Freddie Mac had breached the deeds of trust’s promises,”

and, “[u]nfortunately for him, the deeds of trust provide for attorney’s fees.” Id. at 531. The court

then concluded that the fee provision was not affected by the bankruptcy proceedings, explaining as

follows:

In the first place, the mere fact that [the plaintiff] obtained a

bankruptcy discharge did not eliminate the provision. That is, it

cannot be said that the whole contract merged into that judgment. As

the Supreme Court pointed out in Johnson v. Home State Bank, 501

U.S. 78, 83 (1991), a discharge in bankruptcy “extinguishes only ‘the

personal liability of the debtor.’” Thus, the Court found that a

“creditor’s right to foreclose on the mortgage survives or passes

through bankruptcy.” Similarly, . . . a discharge in bankruptcy does

not end a party’s obligation, but merely prevents one method of

collection. Thus, [the plaintiff’s] discharge in bankruptcy did not

extinguish the contractual attorney’s fee provision. The provision

itself may have fallen dormant, but it was reviviscible.

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Id. (emphasis in original).

The Ninth Circuit acknowledged that the bankruptcy discharge did get rid of all of the

plaintiff’s pre-petition debts but the question was “when the attorney’s fee debt arose” – i.e., prepetition or post-discharge. Id. at 532. This issue, of course, was complicated by the fact that the

contracts containing the attorney fee provision were executed pre-petition but the plaintiff’s acts

which gave rise to the fee award occurred post-discharge. See id. According to the Ninth Circuit, if

the attorney fee’s claim were a contingent claim, then it would be a pre-petition claim subject to

discharge. But the attorney’s fee claim was not such a claim. 

The Ninth Circuit explained that, although “[a]ny doubts regarding the dischargeability of a

claim ‘should be resolved in favor of finding that a contingent claim existed,’” it should not read that

principle “in an unreflective way.” Id. “No doubt the future is always contingent, but that does not

mean that a bankrupt is discharged regarding everything he might do in the future.” Id. The court

then noted that, in other cases, it had focused on when the contractual agreement had been executed

and not when the contingency took place, but those cases involved

situations where the possibility of a claim against the debtor was fixed

and entirely out of his hands before he entered bankruptcy. In other

words, he had a possible liability, and whether actual liability would

attach to him was contingent upon what others might do. Were he not

discharged, that very real threat would stay with him and remain a

millstone around his economic neck as he attempted a fresh start. The

very purpose of bankruptcy proceedings would be cut away. Indeed, a

person with enormous possible indemnification liability could never

effectively obtain a fresh start. That is decidedly not a proper result,

but it is also not the case at hand.

This is a case where the debtor . . . had been freed from the

untoward effects of contracts he had entered into. Freddie Mac could

not pursue him further, nor could anyone else. He, however, chose to

return to the fray and to use the contract as a weapon. It is perfectly

just, and within the purposes of bankruptcy, to allow the same weapon

to be used against him.

Id. at 533.

In the case at bar, the possibility of a claim by Amer against Mr. Wuthrich was entirely

within his control, and he made the choice to have CIT continue to engage with Amer post-discharge

without informing Amer about the bankruptcy proceedings. Moreover, Mr. Wuthrich had additional

control here as he had the right to revoke his personal guaranty, see Docket No. 21, at 5 (personal

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guaranty) (providing that “[t]his contract of guaranty shall remain in force until revoked by the

guarantor by giving 10 days written notice”), but he never did. See In re Weeks, 400 B.R. 117, 124

(W.D. Mich. 2009) (in concluding that yet-to-be-incurred debts were not a contingent claim but

rather at most were an expectancy, taking note that “the debtor clearly had the contractual right

under all of his pre-petition guaranties to at any time avoid that future exposure by revoking those

guaranties.).

Taking into account all of the above, the Court concludes that Amer’s claim for the

outstanding invoices does not constitute a pre-petition contingent claim subject to the bankruptcy

discharge. 

III. CONCLUSION

Accordingly, the decision of the bankruptcy court is affirmed.

The Clerk of the Court is instructed to enter judgment in accordance with the above and

close the file in this case.

IT IS SO ORDERED.

Dated: April 1, 2015

_________________________

EDWARD M. CHEN

United States District Judge

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