# F IL ED

MAY31 2019
SUSAN M . SPRAUL, CLERK U

. S. BKCY

. APP. PANEL O F T HE NI NT H CI RCUI T 

### ORD ERED PU BLISHED U NIT E D ST A T E S BA NK RU PT CYA PPE L L A T E PA N E L

OF T HE NINT H CIRCU IT In re: C A RLO S C A RR IO N, JR .,

Deb to r. U .S. DEPA RTMEN T O F EDU C A TIO N,

A p pellant,

v. C A RLO S C A RR IO N, JR .,

A p pellee. BA P N o . SC -18-1234-FBK u Bk. N o . 11-10508-MM7 A dv. Pro

. 17-90089-MM

OPINION

Sub m itted witho ut argum ent o n May 23, 2019

Filed – May 31, 2019 A ppeal fro m the U nited States Bankruptcy C o urt fo r the So uthern Distric t o f C alifo rnia Ho no rab le Margaret M. Mann, Bankruptcy Judge, Presiding

A ppearanc es: A d amL. Braverm an, R ob ert S. Brewer, Jr., and Glen F.

Do r gan o n the b rief fo r appellant U .S. Departm ent o fEduc atio n; Jake A . W a lto n o n the b rief fo r appellee C arlo s C arrio n, Jr.

Befo r e: FA R IS, BRA N D, and KU RTZ, Bankruptcy Judges. FA R IS, Bankruptcy Judge: INT ROD U CT I ON C hapter 7 1 deb to r C arlo s C a rrio n, Jr. wanted to elim inate his
ob ligatio n to repay an educ a tio nal lo an. He did no t c o ntend that the lo an was dischargeab le under § 523(a)(8). Instead, he argued that the lo an was unenfo rc eab le against him, c o ntending that he was a vic timo f fraud and identity theft and did no t autho rize the lo an. The b ankruptcy c o urt rejec ted these c o ntentio ns, and Mr. C arrio n did no t appeal. But the c o urt alsoheld that Mr. C arrio n is liab le fo r o nly o ne-half o f the educ atio nal lo a n, b a sed o n C alifo rnia Fam ily C o de (“C FC ”) sec tio n 916 and a m arital settlem ent agreem ent (“MSA ”) with his ex-wife. The educ atio nal lo an c redito r, U .S. Departm ent o f Educ atio n (the “Departm ent”), appeals this aspec t o f the b ankruptcy c o urt’s dec isio n. It argues that the b ankruptcy c o urt m isapplied C FC sec t io n 916 and that the entire deb t sho uld b e no ndischargeab le as to Mr. C arrio n. W e agree with the Departm ent. A c c o rdingly, we R E VER SE and R EMA N D.

1 Unless specifi ed other wi se, all chapterand secti on r efer ences ar e to the Bankr uptcy Code, 11 U.S

. C. §§ 101-1532. 2FA CT U A L BA CK GROU ND 2

A . T he educ ational loan Mr. C arrio n was m arried to Laura Barajas. In 2010, Mr. Carrio n’s and Ms. Barajas’ son Mikel intended to enro ll at Bio la University. To fund his educ atio n, Mr. C arrio n and Ms. Barajas c o nsidered vario us financ ing
o ptio ns. In A ugust 2010, the Departm ent rec eived an applic atio n fo r a Federal Direc t PLU S Lo an purpo rtedly o n b ehalf o f Mr. C arrio n and c o ntaining Mr. C arrio n’s typed, elec t ro nicsignature. The applic a tio n also served as a pro m isso ry no te. The Departm ent pro c essed the lo an and disb ursed $21,894 toBio la University to c o ver Mikel’s tuitio n c o sts. Mr. C arrio n and Ms. Barajas separated in Feb ruary 2011. Ms. Barajas filed a petitio n fo rdisso lutio n o f m arriage in June 2011. B. T he joint c hapter 7 bankruptcy A lso in June 2011, Mr. C arrio n and Ms. Barajas filed a jo int chapter 7 b ankruptcy petitio n. They scheduled the $21,894 educ atio nal lo an deb t
o wed to the Departm ent and indic ated that the deb t b elo nged to Mr. C arrio n b y designating it with an “H” (fo r “husb and”). Bo th Mr. C arrio n and Ms. Barajas electro nic ally signed the petitio n and

2 We bor row fr om the bankr uptcy cour t’s findings of fact (none of whi ch was challenged on appeal) and conclusions of law. We also exer ci s e our di scr eti on to r ev i ew the bankr uptcy cour t’s docket, as appr opr i ate. See Woods & Erickson, LLP v. Leonard (In re AVI, Inc.) , 389 B.R. 721, 725 n.2 (9th Ci r . BAP 2008). 3schedules under penalty o f perjury.

The b ankruptcy c o urt granted Mr. C arrio n and Ms. Barajas their discharges in Septemb er 2011. C. T he m arital s ettlem e n t ag reem ent In 2013, Mr. C arrio n and Ms. Barajas finalized their divo rc e and
exec u ted the MSA . The MSAlisted their liab ilities in Exhib it D to the agreem ent and pro vided that “[t]he parties’ ob ligatio ns have b een divided equally b etween the parties pursuant to their agreem ent.” It further stated that “[w]ith the exc eptio n o f the parties’ so n’s student lo a n, each party shall
assum e the deb t inc u rred in his o r her nam e after the date o f separatio n as their so le and separate pro perty.” They initialed Exhib it D, which
c o nfirm ed that they wo uld each b e liab le fo r “1/2” o f the “Student Lo an (So n).” D . M r. Carrion’sc laimof identity theft The educ atio nal lo an b ec am e due in January 2016, when the deferm ent perio d ended. The Departm ent sent Mr. C arrio n a b illing statem ent indic a ting a $32,124.42 b alanc e. Mr. C a rrio n denied that he o wed the deb t and filed a po lic e repo rt, c laim ing that he was a vic timo f identity theft and fraud. He alsofilled o ut an affidavit stating that Ms. Barajas perpetrated the fraud and sub m itted the lo an applic atio n witho ut his kno wledge. The lo an servic er rejec ted his c laimo f identity theft.

4E . T he adv ers a ry proc eeding

Mr. C arrio n initiated an adversary pro c eeding against the Departm ent, seeking a determ inatio n that the deb t was vo id b ec ause the pro m isso ry no te was executed as a result o f identity theft and that the educ atio nal lo a n deb t was discharged. He stated that he “had no kno wledge o f the Deb t” and that Ms. Barajas “misappro priated Plaintiff’s identity in o rder to exec ute the N o te witho ut Plaintiff’s kno wledge o r
c o nsent” and “c o nc ealed the existenc e o f the Deb t fro m Plaintiff.” The Departm ent asserted that the educ atio nal lo an deb t was
no ndischargeab le under § 523(a)(8) ab sent a sho wing o f undue hardship. F. T rial and dec is ion The b ankruptcy c o urt held a trial o n Mr. C arrio n’s c o m plaint. 3 A t the
c o nc lusio n o f trial, the b ankruptc y c o urt o rdered additio nal b riefing o n the issue o f the applic atio n o f the C alifo rnia Fam ily C o de, apparently
c o nc erning the effec t o f the MSA o n Mr. C arrio n’s liab ility fo r the educ atio nal lo a n deb t. The Departm ent c o ntended that C FC sec tio n 916(a)(1) pro vides that a perso n is perso nally liab le fo r deb tthat he inc urred b efo re o rduring

3 Nei ther par ty or der ed a copy of the tr i al tr anscr i pt. We may pr esume that nothi ng in the tr anscr i pt would help the par ti es’ r especti v e posi ti ons. See Gionis v. Wayne (In re Gionis) , 170 B.R. 675, 680-81 (9th Ci r. BAP 1994) (“We ar e enti tled to pr esume that [an appellant who does not pr ov i de a tr anscr i pt] does not thi nk the tr i al tr a nscr i pt helpful in that r egar d .”). 5m arriage, regardless whether the deb t was assigned tothe perso n’s spo use

under the MSA . It ac kno wledged that sub sec tio n (a)(3) ho lds the no ndeb to r spo u se perso nally liab le fo r the deb t if it was assigned fo r paym ent b y the
no ndeb to r spo use in the divisio n o f pro perty. It argued that the MSA “allo c a ted to Plaintiff o ne-half o f the ob ligatio n to repay the student lo an at issue in this c ase. A c c o rdingly, sho uld this C o urt rejec t Plaintiff’s identity theft c laim s, Plaintiff will rem ain perso nally liab le to the Departm ent fo r the full am o unt o f the student lo an pursuant to[C FC ] Sec tio n 916(a)(1).” Mr. C arrio n m aintained that he did no t o w e any o f the educ atio nal lo an deb t. He denied that the student lo an referred to in the MSAwas the Federal Direc t PLU S Lo an at issue. The b ankruptcy c o urt fo und Mr. C arrio n’s identity theft c laim unpersuasive, particularly given his statem ents in his 2011 b ankruptcy
schedules that he was liab le fo r the lo an and the 2013 MSA , which allo c ated the liab ility fo r the deb t equally b etween him self and Ms. Barajas. It ruled that, even if the educ atio nal lo an was ob tained witho ut his c o nsent, he ratified the lo an. The b ankruptcy c o urt held that the Departm ent had m et its b urden o f pro ving that the educ atio nal lo an deb t was exc epted fro mdischarge under § 523(a)(8). O f relevanc e to this appeal, the c o u rt held that, even tho ugh Mr. C arrio n ratified the lo a n and is liab le fo r it, “the allo c atio n o f liab ility in the MSAis nevertheless b inding upo n the Departm ent, m eaning that Barajas

6and C arrio n are each liab le fo r o ne/half o f the lo an.” The c o urt c o nc luded,

“O ne half o f the unpaid lo an b a lanc e o f $36,071.91, o r $18,035.96, is nondischargeab le as to C arrio n.” The Departm ent tim ely appealed. JU RISD ICT ION The b ankruptcy c o urt had jurisdic tio n pursuant to28 U .S.C . §§ 1334 and 157(b )(2)(I). W e have jurisdic tio n under 28 U .S.C . § 158. ISSU E Whether the b a nkruptcy c o urt erred in ho lding that Mr. C arrio n
o wed o nly half o f the student lo an deb t. ST A ND A RD OF RE V I E W W e review the b a nkruptc y c o urt’s c o nc lusio ns o f law de no vo . S ee Litto n Lo a n S ervicing v. Ga rvida(In re Ga rvida ) , 347 B.R . 697, 703 (9th C ir. BA P 2006). “De no vo review requires that we c o nsider a m atter anew, as if
no dec isio n had b een m ade previo usly.” F ra ncis v. W a l la ce (In re Fra ncis) , 505 B.R . 914, 917 (9th C ir. BA P 2014) (c itatio ns o m itted). D ISCU SSION A . T he bankruptcy c ourt erred in holding that M r. Carrion wasliable for only half of the educ ational loan debt. The so le issue o n appeal is the b ankruptc y c o urt’s interpretatio n o f
sec tio n 916 o f the C alifo rnia Fam ily C o de. The Departm ent essentially argues that the b ankruptcy c o urt m isc o nstrued sec tio n 916 b y reading

7sub sec t io n (a)(2) in iso latio n witho ut referenc e to sub sec tio n (a)(1). W e

agree. Sec tio n 916 pro vides, in its entirety: (a) N o twithstanding any o ther pro visio n o f this chapter, after divisio n o f c o m m unity and quasi-c o m m unity pro perty pursuant toDivisio n 7 (c o m m enc ing with Sec tio n 2500): (1) The separate pro perty o wned b y a m arried perso n at the tim e o f the divisio n and the pro p erty rec eived b y the perso n in the divisio n is liab le fo r a deb tinc urred b y the perso n b efo r e o r during m arriage and the perso n is perso nally liab le fo r the deb t, whether o r no t the deb t was assigned fo r paym ent b y the perso n’s spo use in the divisio n. (2) The separate pro perty o wned b y a m arried perso n at the tim e o f the divisio n and the pro p erty rec eived b y the perso n in the divisio n is no t liab le fo r a deb t inc urred b y the perso n’s spo use b efo re o rduring m arriage, and the perso n is no t perso nally liab le fo r the deb t, unless the deb t was assigned fo r paym ent b y the perso n in the divisio n o f the pro perty. N o thing in this paragraph affec ts the liab ility o f pro perty fo r the satisfac tio n o f a lien o n the pro perty. (3) The separate pro perty o wned b y a m arried perso n at the tim e o f the divisio n and the pro p erty rec eived b y the perso n in the divisio n is liab le fo r a deb tinc urred b y the perso n’s spo use b efo re o r during m arriage, and the perso n is perso nally liab le fo r the deb t, if the deb t was assigned fo r paym ent b y the perso n in the divisio n o f the

8pro perty. If a m o ney judgm ent fo rthe deb t is entered after the divisio n, the pro p erty is no t subjec t to enfo r c em ent o f the judgm ent and the judgm ent m ay no t b e enfo rc ed against the m arried perso n, unless the perso n is m a de a party to the judgm ent fo r the purpo s e o f this paragraph. (b ) If pro perty o f a m arried perso n is applied to the satisfac tio n o f a m o ney judgm ent pursuant to sub d ivisio n (a) fo r a deb t inc urred b y the perso n that is assigned fo r paym ent b y the perso n’s spo use, the perso n has a right o f reimb u rsem ent fro m the perso n’s spo use to the extent o f the pro perty applied, with interest at the legal rate, and m ay rec o ver reaso nab le atto rney’s fees inc urred in enfo rc ing the right o f reimb ursem ent. C al. Fam . C o de § 916. In plain english, sec tio n 916 m eans that, if Spo use A and Spo use B divo rc e: (1) Spo u se Arem ains liab le fo r Spo use A ’s o wn deb ts, even if an MSArequires Spo use B topay so m e o r all o f tho se deb ts; (2) Spo u se Ais no t liab le fo r any o f Spo use B’s deb ts, exc ept fo r any
o f Spo use B’s deb t s that the MSArequires Spo use A to pay; (3) Spo u se Ais liab le fo r any o f Spo use B’s deb ts that the MSA requires Spo use Ato pay; (4) If Spo use Apays any deb ts that the MSArequires Spo use B to pay, Spo use B must reimb u r se Spo use A ; and (5) Vic e versa.
9The Departm ent argues o n appeal that the b ankruptc y c o urt

im pro perly lim ited Mr. C arrio n’s liab ility fo r the educ atio nal lo an deb t b y
o nly applying C FC sec tio n 916(a)(2) o r (a)(3) and igno ring sec t io n 916(a)(1). 4 It c o ntends that, under sec tio n 916(a), “a deb to rspo use rem ains perso nally liab le fo rhis o r her deb ts incurred during m a rriage, regardless
o f the term s o f any m arital settlem ent agreem ent[,]” and the b ankruptcy
c o u rt c o rrec tly c o nc luded that Mr. C a rrio n is the deb t o r spo u se. A c c o rdingly, Mr. C arrio n “rem ains perso nally liab le fo r his student lo an with the Departm ent no twithstanding the 50-50 divisio n o f his deb t in the parties’ MSA .” W e agree with the Departm ent. A ltho ugh we have no tfo und any
c ase direc tly o n po int with regard to student lo an deb t, the language o f the statute (while hard to read) is no t amb iguo us. S ee R o b inso n v. S hell O il Co . , 519 U .S. 337, 340 (1997) (The “first step in interpreting a statute is to determ ine whether the language at issue has a plain and unam b iguo us
m eaning with regard to the partic ular dispute in the c ase.”); H erita ge Pa c. F in. LLC v. Mo nta no (In re Mo nta no ) , 501 B.R . 96, 106 (9th C ir. BA P2013)

4 The Depar tment appear s to mi sappr ehend par t of the bankr u ptcy cour t’s r uling. It complai ns that the bankr uptcy cour t “enter ed j udgment di s char gi ng one-half of the S tudent Loan, leav ing a total of $18,035.96, plus i n ter est, for whi ch Appellee r emains li able.” The bankr uptcy cour t di d not di s char ge any par t of the debt under § 523(a)(8); to the contr ar y, i t held that the educati onal loan was cov er ed by that secti on and that Mr . Car ri on di d not demonstr ate undue har dshi p. It held that Mr

. Car ri on si mply di d not owe the other half of the debt and confi r med that “hi s” half of the debt was “non-di schar geable as to Car r i on.” 10(sam e, applying C alifo rnia law). Mr. C arrio n rem ained perso nally liab le fo r

his o wn educ atio nal lo an deb t, even tho ugh the MSAallo c ated half o f that deb t to Ms. Barajas. S ee Huskey v. Huskey (In re Huskey) , 183 B.R
. 218, 221 (Bankr. S.D. C al. 1995) (“The C alifo rnia Fam ily C o de rec o gnizes that perso nal liab ility rem ains fo r c o m m unity ob ligatio ns assigned tothe o ther spo u se. The rem edy is to pay the deb t and seek reimb ursem ent fro mthe spo u se assigned the deb t.” (c iting C al. Fam . C o de §§ 916(a)(1) and (b )). The b ankruptcy c o urt erred when it dec ided that sub sec tio n (a)(2) relieved Mr. C a r rio n o f half o f the deb t. Pursuant to sub sec tio n (a)(2), Ms. Barajas b ec am e liab le fo rthe half o f Mr. C arrio n’s educ atio nal lo an deb t that the MSAassigned to her. S ee In re Ma r ria ge o f Bra endle, 46 C al. A pp. 4th 1037, 1042 (1996) (“Sub divisio n (a)(2) m a kes c lear that fo rm er
c o m munity estate pro perty rec eived b y the no ndeb to r spo use at divisio n is liab le o nly if the no ndeb to r spo use is assigned the deb t in divisio n.”). But sub sec t io n (a)(1) m akes c lear that Ms. Barajas’ assum ptio n o f half o f the deb t did no t relieve Mr. C a rrio n o f liab ility fo r the entire deb t. A c c o rdingly, the b ankruptcy c o urt erred when it failed to apply sub sec t io n (a)(1) and fo c used exc lusively o n sub sec tio ns (a)(2) and (a)(3). O n rem and, the b ankruptcy c o urt is direc t ed to enter judgm ent that Mr. C arrio n is liab le fo r the entire am o u nt o f the deb t and that the deb t is
no ndischargeab le as toMr. C arrio n.

11B. M r. Carrion’sjudic ial es toppel argum ent is m eritles s .

Mr. C arrio n do es no taddress the Departm ent’s po ints o n appeal. He
o nly c o ntends that the Departm ent is judic ially esto pped fro marguing that the MSAis no t c o ntro lling, b ec ause it relied o n the MSAin the b ankruptcy
c o u rt. His po sitio n is m eritless. Judic ial esto ppel is an equitab le do c trine that “prec ludes a party fro m gaining an advantage b y taking o ne po sitio n, and then seeking a sec o nd advantage b y taking an inc o m patib le po sitio n.” W ilco x v. Pa rker (In re Pa rker) , 471 B.R . 570, 576 (9th C ir. BA P2012), a ff’d , 533 F. A pp’x 740 (9th C ir. 2013) (quo ting W

ha ley v. Belleque

, 520 F.3d 997, 1002 (9th Cir. 2008)). W e
c o nsider three elem ents when applying judic ial esto ppel: “(1) whether a party’s later po sitio n is ‘c learly inc o nsistent’ with its o riginal po sitio n; (2) whether the party has suc c essfully persuaded the c o urt o f the earlier po sitio n, and (3) whether allo wing the inc o nsistent po s itio n wo uld allo w the party to ‘derive an unfair advantage o r im po se an unfair detrim ent o n the o ppo sing party.’” Id. (quo ting United S ta tes v. Ibra him , 522 F.3d 1003, 1009 (9th C ir. 2008)). The Departm ent is no t raising inc o nsistent argum ents. It argued b efo r e the b a nkruptc y c o urt that the MSAwas pro o f that Mr. C arrio n ratified the educ atio nal lo an deb t. It alsoraised the issue o f liab ility fo r the deb t under C FC sec tio n 916(a)(1), c laim ing that Mr. C arrio n was liab le fo r the entire am o unt o f the deb t. It further argued that, even if Mr. C a rrio n
12was the vic timo f identity theft, he was nevertheless liab le fo r half o f the

deb t pursuant tothe MSAunder sec t io n 916(a)(3) . O n appeal, the Departm ent do es no t argue that the MSAis invalid o r
m ust b e igno red; it o nly c o ntends that, even c o nsidering the term s o f the MSA, Mr. C a rrio n is still liab le fo r the entire deb t under C FC sec t io n 916(a)(1). These po sitio ns are no t inc o nsistent, and there is no indic atio n that the Departm ent is seeking an unfair advantage in thi s litigatio n. CONCL U SION The b ankruptcy c o urt erred in ho lding that Mr. C arrio n was liab le fo r
o nly half o f the educ atio nal lo an deb t. A c c o rdingly, we R EVER SE and R EMA N D fo r entry o f judgm ent in ac c o rdanc e with this dec isio n.

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