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UNITED STATES BANKRUPTCY APPELLATE PANEL

OF THE NINTH CIRCUIT

In re: ) BAP No. NC-12-1385-DJuPa

)

MICHAEL THOMAS FALK, ) Bk. No. 08-12561-AJ

)

Debtor. )

______________________________)

)

SHANNON FALK, )

)

Appellant, )

)

v. ) M E M O R A N D U M1

)

MICHAEL THOMAS FALK, )

)

Appellee. )

______________________________)

Submitted without Oral Argument

September 20, 2013

Filed - September 26, 2013

Appeal from the United States Bankruptcy Court

for the Northern District of California

Honorable Alan Jaroslovsky, Chief Bankruptcy Judge, Presiding 

Appearances: Merle C. Meyers, Esq. and Kathy Quon Bryant, Esq.

of Meyers Law Group, P.C. on brief for Appellant

Shannon Falk; Craig A. Burnett, Esq. on brief for

Appellee Michael Thomas Falk. 

Before: DUNN, JURY and PAPPAS, Bankruptcy Judges.

FILED

SEP 26 2013

SUSAN M. SPRAUL, CLERK

U.S. BKCY. APP. PANEL

OF THE NINTH CIRCUIT

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 8013-1.
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The appellant, Shannon Falk (“Shannon”), appeals the

bankruptcy court’s order (1) estimating one of her proofs of

claim at zero for distribution purposes in the chapter 72

bankruptcy case of her former spouse, the appellee, Michael

Thomas Falk (“Michael”), and (2) abstaining from adjudicating her

claims under 28 U.S.C. § 1334(c)(1) and (2).3 We AFFIRM.

FACTS

Shannon and Michael’s marital trust and divorce

Shannon and Michael married in 1989. While married, they

established a marital trust by an agreement (“Marital Trust

Agreement”). Under the Marital Trust Agreement, Shannon and

Michael transferred various assets into a trust and transmuted

them into community property (“Community Property Assets”). The

Community Property Assets included the following:4 1) a rental

property located in Santa Rosa, California (“Santa Rosa

property”); 2) a promissory note and trust deed relating to a

2 Unless otherwise indicated, all chapter, section and rule

references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and

to the Federal Rules of Bankruptcy Procedure, Rules 1001-9037.

3

 The bankruptcy court decided to abstain under both

28 U.S.C. § 1334(c)(1), permissive abstention, and 28 U.S.C. 

§ 1334(c)(2), mandatory abstention. Because we may affirm on any

ground supported by the record, see Shanks v. Dressel, 540 F.3d

1082, 1086 (9th Cir. 2008), and have determined that the

bankruptcy court did not abuse its discretion in permissively

abstaining from adjudicating the claims, we need not address its

mandatory abstention decision.

4 The Community Property Assets included other assets that

are not the subject of this appeal.

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73-acre parcel of real property located in Healdsburg,

California;5

 3) a life insurance policy;6 4) interests in three

limited partnerships, two of which were located in New York

(“New York Partnership Interests”); and 5) a general partnership

interest.7

Two years after Shannon and Michael separated in 2005, the

state court entered an order dissolving their marriage. It also

entered an order requiring Michael to pay Shannon $969 per month

in spousal support (“Spousal Support Order”). However, the state

court did not make any determinations as to the division of

property or any other domestic support obligations (“Dissolution

Issues”).

5

 Shannon described the real property located in Healdsburg,

California as consisting of 83 acres. Christopher Johnson

purchased the real property from Michael. (Michael financed

Christopher’s purchase of the real property in the form of a

promissory note secured by a trust deed.) In a declaration,

Christopher described the real property as consisting of 73

acres.

6

 It is unclear whether only one life insurance policy or

various life insurance policies were placed into the marital

trust. Exhibit A to the Marital Trust Agreement appears to list

only one life insurance policy with a $75,000 face value. 

However, in her trial brief for the evidentiary hearing on

Michael’s objections to her proofs of claim, Shannon indicates

that “various life insurance policies having an aggregate cash

surrender value in excess of $30,000 . . .” were placed in the

marital trust.

7 Shannon described the partnership interest as a 12%

interest in a general partnership, Oroville Associates,

identified in the Marital Trust Agreement as Feather River

Cinemas, LP. Exhibit A to the Marital Trust Agreement simply

lists a “Limited Partnership interest in Feather River Cinemas,

LP.”

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Shannon’s chapter 11 bankruptcy case

On July 20, 2007, Shannon filed a chapter 11 bankruptcy

petition.8 At the time she filed for bankruptcy, the Dissolution

Issues remained pending in state court.

Shannon scheduled the Community Property Assets and $12,000

in past due alimony and child support as part of her bankruptcy

estate. She scheduled Michael as a general unsecured creditor

with an unknown claim amount, characterizing his claim as

unliquidated and disputed.

Shannon referenced the marital trust in her statement of

financial affairs (“SOFA”). She noted that the marital trust

involved “all property.” She also mentioned in her SOFA the

dissolution proceeding pending in state court.

Shannon’s adversary proceeding against Michael

Shannon initiated an adversary proceeding against Michael

seeking a determination that the New York Partnership Interests

were community property under the Marital Trust Agreement and

were part of her bankruptcy estate. She also sought an order

requiring Michael to turn over to her bankruptcy estate all of

the distributions received on account of the New York Partnership

Interests (“New York Partnership Interest Distributions”).

Shannon moved for summary judgment, which the bankruptcy

8 Judge Jaroslovsky presided over the bankruptcy cases of

both Shannon and Michael.

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court granted in an order entered on February 1, 2008.9 In the

memorandum decision issued on January 22, 2008, the bankruptcy

court determined that the New York Partnership Interests had been

transmuted into community property. In the judgment entered on

June 23, 2008 (“Judgment”), the bankruptcy court also determined

that the New York Partnership Interests were property of the

estate under § 541(a)(2). It ordered Michael to turn over to

Shannon’s bankruptcy estate the New York Partnership Interest

Distributions.10

On November 26, 2008, the bankruptcy court entered an order

holding Michael in contempt for failing to comply with the

Judgment (“Contempt Order”).11 Two days later, Michael filed his

9

 Michael filed a cross-motion for summary judgment, which

the bankruptcy court denied.

10 Michael appealed the bankruptcy court’s order granting

summary judgment in favor of Shannon. The district court

affirmed the bankruptcy court. Michael then appealed to the

Ninth Circuit; the Ninth Circuit dismissed the appeal for failure

to file the opening brief.

11 On November 5, 2008, Shannon filed an ex parte motion for

an order to show cause re: contempt (“Ex Parte OSC Motion”),

contending that Michael failed to turn over the New York

Partnership Interest Distributions pursuant to the Judgment. One

day later, the bankruptcy court entered an order granting the

Ex Parte OSC Motion.

After a hearing, the bankruptcy court granted Shannon’s

contempt motion and entered the Contempt Order. Under the

Contempt Order, Michael was required to pay $500 per day

(“penalty”) for each day he failed to comply with the terms of

the Judgment. If he posted a bond or complied with the Judgment,

the penalty would be waived.

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own chapter 7 bankruptcy petition.12

Michael’s chapter 7 bankruptcy case

Michael scheduled the Santa Rosa property, the New York

Partnership Interests and the life insurance policy as part of

his bankruptcy estate. He also scheduled a “claim for

reimbursement against [his] ex-wife[,] Shannon Falk[,] for

separate property contribution and for [the] value of

contribution of all separate property that was subsequently

transmuted at [the] time of transmutation . . . .” He described

the value of this claim as “unknown.”

Michael referenced the marital trust in his SOFA. Like

Shannon, he noted that the marital trust involved “all property.” 

He also listed in his SOFA the dissolution proceeding pending in

state court. He noted that the dissolution proceeding had been

bifurcated, addressing the divorce and the division of assets

separately.

Michael scheduled Shannon as an unsecured priority creditor

with a spousal support claim in the amount of $769. He also

listed in his SOFA the adversary proceeding, noting the Judgment

in Shannon’s favor.

Shannon’s chapter 11 plan

More than a year after she obtained the Judgment, Shannon

12 Michael previously had filed a chapter 13 bankruptcy

petition (07-10860). (Judge Jaroslovsky presided over that

bankruptcy case.) Michael’s chapter 13 case was dismissed on

July 31, 2007 on a motion filed by Michael.

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submitted a chapter 11 plan in her bankruptcy case.13 She

proposed to pay all allowed general unsecured claims in cash in

full, plus interest, in quarterly installments over sixty months,

“upon satisfaction of the [J]udgment.”14 She also proposed to

retain “such interests subject to division as community property

consistent with [the Judgment].” Shannon reserved “the right to

adjudicate the transmutation of the [Community Property Assets]

described in the [Marital Trust Agreement] as between such

interest holders, including, but not limited to . . . division 

. . . and remedies to collect sums found due.”

Shannon also mentioned in her Chapter 11 Plan her intent to

“compel division of the [Community Property Assets] as determined

by [the bankruptcy] court and any other Court of competent

jurisdiction.” She also indicated that she would initiate

another adversary proceeding “to determine the character of all

assets described in the [Marital Trust Agreement] . . . .” Upon

confirmation of her Chapter 11 Plan, Shannon asserted “standing

to enforce community property rights, collect property of the

estate, [and] litigate the rights of the estate and [the] debtor

in property . . . .”

She further provided in her Chapter 11 Plan that for five

13 Shannon submitted a total of five chapter 11 plans. She

filed the last amended chapter 11 plan titled, “Fourth Amended

Chapter 11 Plan of Reorganization” (“Chapter 11 Plan”), on

July 17, 2009.

14 Shannon proposed to pay the general unsecured claims also

with “capital accounts, liquidation proceeds of [the] movie

theater interest, [and] proceeds of [the] sale of [the real

property located in Santa Rosa, California].”

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years or until “all allowed non-subordinated claims are paid

pursuant to the chapter 11 plan,” the chapter 11 trustee was to

remain in possession of the bankruptcy estate assets. When that

time expired, the bankruptcy court was to approve an inter vivos

trust, naming a successor trustee to oversee the remaining

assets. Upon payment in full of allowed administrative expenses

and allowed priority and general unsecured non-subordinated

claims, the successor trustee was to continue to collect the New

York Partnership Interest Distributions. The successor trustee

was to apply such distributions as follows: 1) to any approved

settlement agreement; 2) for a living allowance for Shannon; and

3) to payment of subordinated claims.15

The bankruptcy court entered an order conditionally

confirming Shannon’s Chapter 11 Plan on August 7, 2009. 

Following a final hearing, the bankruptcy court entered an order

confirming the Chapter 11 Plan on October 20, 2009.

On May 6, 2011, Shannon filed a motion seeking the

bankruptcy court’s approval of a living allowance and an inter

vivos trust pursuant to the confirmed Chapter 11 Plan. She

reported that the chapter 11 trustee had paid all allowed

non-subordinated claims in full as of January 31, 2011. On

August 10, 2011, the bankruptcy court entered an order approving

the inter vivos trust and directing the successor trustee to pay

Shannon $5,000 per month as a living allowance.

Shannon later moved for entry of a final decree,

15 The subordinated claims consisted of the postpetition

fees of Shannon’s former bankruptcy counsel, David Chandler, and

her former special counsel, Richard Sax.

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representing that all allowed non-subordinated claims and

subordinated claims had been paid in full. On August 19, 2012,

the bankruptcy court entered a final decree and closed her

bankruptcy case.

Shannon’s proofs of claim in Michael’s chapter 7 bankruptcy case

Meanwhile, on January 27, 2011, Michael filed objections

(“claim objections”) to three proofs of claim (collectively,

“Claims”) filed by Shannon in his bankruptcy case. She filed her

first proof of claim on December 24, 2008 (“Claim #1”), her

second proof of claim on June 17, 2009 (“Claim #21”), and her

third proof of claim on June 18, 2009 (“Claim #24”). Shannon did

not attach any documents in support of her Claims.

Claim #1 was in the amount of $11,628, all of which was

allegedly entitled to priority as a domestic support obligation

under § 507(a)(1)(A) or (a)(1)(B). Claim #1 was based on

“dissolution of marriage.”

Claim #21 was in the amount of $10,100,000. Of this amount,

$100,000 was allegedly entitled to priority as a domestic support

obligation under § 507(a)(1)(A) or (a)(1)(B). Claim #21 was

based on “support, property division, [and] undisclosed

property.”

Claim #24 was in the amount of $17,442, all of which was

allegedly entitled to priority as a domestic support obligation

under § 507(a)(1)(A) or (a)(1)(B). Claim #24 was based on

“support arrears.”

Michael objected to each claim on the same grounds. He

contended that there was no way to determine the validity of the

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Claims because Shannon did not submit or produce any documents or

proof in support of them. He also argued that the Claims

involved non-bankruptcy law issues – child and spousal support

and division of property – that should be resolved in state

court. Michael further asserted that Claim #1 and Claim #24 were

duplicates of Claim #21. He asked that the bankruptcy court

abstain from adjudicating the Claims.

Shannon responded to Michael’s objections, asserting that

she had valid Claims based on the spousal support order, the

Marital Trust Agreement and the Judgment.

She argued that she had a valid claim for spousal support

under the spousal support order, which required Michael to pay

her $969 per month. She alleged that Michael owed her

approximately $11,000 in spousal support as of the petition date.

Shannon also contended that she had a valid general

unsecured claim of $1,059,283.04, arising from Michael’s failure

to turn over the Community Property Assets and the distributions

therefrom pursuant to the Marital Trust Agreement and the

Judgment. She moreover alleged that Michael had “a fiduciary

duty” to turn over to her any distributions he received from the

Community Property Assets. Because he violated his fiduciary

duty, Shannon was “entitled to an award of the value of the

concealed assets, the income, profits and income from such

assets[,] as well as punitive and exemplary damages [under] the

Family Code.”

Following a preliminary hearing, the bankruptcy court set an

evidentiary hearing on Michael’s claim objections for July 24,

2012. At the evidentiary hearing, Michael withdrew his objection

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to Claim #1, as it was “the only claim that had any support at

all.” Tr. of July 24, 2012 hr’g, 9:11. The bankruptcy court

therefore allowed Claim #1 in the amount filed.

With respect to Claim #21 and Claim #24, the bankruptcy

court decided to abstain from adjudicating them and estimated

them at zero for distribution purposes. It believed that, in

filing Claim #21 and Claim #24, Shannon was “trying to turn

community property arguments into money claims” and “trying to

transmute Family Law issues into money claims.” Tr. of July 24,

2012 hr’g, 3:20-21, 7:1-2. The bankruptcy court refused “to be a

substitute for the Family Law Court,” pointing out that Claim #21

and Claim #24 involved family law issues that should be

determined by the state court. Tr. of July 24, 2012 hr’g, 4:6-7.

The bankruptcy court went on to say that “all [it] cared

about [was] making sure the third parties [i.e., creditors] got

paid” and “all [the bankruptcy court] ever wanted to do was clear

out the bankruptcy issues so it’s strictly a Family Law issue and

then send it back to State Court.” Tr. of July 24, 2012 hr’g,

6:4-5, 6:21-23.

A day after the evidentiary hearing, the bankruptcy court

issued a memorandum decision (“Memorandum”). In the Memorandum,

it determined that Claim #1 and Claim #24 were for spousal

support. It also found Claim #24 to be a duplicate of Claim #1.

The bankruptcy court then analyzed Claim #21, finding it to

be “a trumped-up affair cobbled together largely or entirely by

Shannon calling her community property distribution rights a

claim for money.” Memorandum, 1:26, 2:1-2. It determined that

Claim #21 included “about $180,000 in other claims, some of which

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may have already been allowed and paid in Shannon’s bankruptcy.” 

Memorandum, 2:2-3. It concluded that “most that really remains

is the ugly dispute between Michael and Shannon.” Memorandum,

2:3-4.

The bankruptcy court explained that it was abstaining from

adjudicating Claim #21 and Claim #24 under § 1334(c)(1) because

it did not “deem it appropriate . . . to decide how marital

property ought to be divided after creditors [were] paid.” 

Memorandum, 2:8-9. It “[saw] no reason to hold up distributions

to other creditors while Shannon and Michael play[ed] out their

drama.” Memorandum, 2:8. It estimated both Claim #21 and

Claim #24 at zero for distribution purposes under § 502(c)(1)

“without prejudice to all rights and defenses” in the dissolution

proceeding.

The bankruptcy court lifted all stays against the

dissolution proceeding. It provided that no order involving the

disposition of Michael’s bankruptcy estate assets could be

enforced until his chapter 7 bankruptcy case was closed, without

the chapter 7 trustee’s consent or court order.

On the same day, the bankruptcy court entered an order

consistent with its Memorandum. Shannon timely appealed the

bankruptcy court’s determination as to Claim #21 only.16

///

///

16 Shannon notes in her opening brief that she only

challenges the bankruptcy court’s determination as to Claim #21,

as Claim #24 is a duplicate of Claim #21. Appellant’s Opening

Brief at 16 n.2.

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JURISDICTION

The bankruptcy court had jurisdiction under 28 U.S.C.

§§ 157(b)(2)(B) and 1334(b). We have jurisdiction under

28 U.S.C. § 158.17

ISSUES

1) Did the bankruptcy court err in applying § 502(c)(1) in 

estimating Claim #21?

2) Did the bankruptcy court err in estimating Claim #21 at

zero for distribution purposes?

3) Did the bankruptcy court err in permissively abstaining

from adjudicating Claim #21?

STANDARDS OF REVIEW

We review de novo a bankruptcy court’s interpretation of the

Bankruptcy Code. Meruelo Maddux Props.-760 S. Hill Street LLC v.

Bank of Am., N.A. (In re Meruelo Maddux Props., Inc.), 667 F.3d

1072, 1076 (9th Cir. 2012). We review the bankruptcy court’s

factual findings for clear error. Id.

We review for abuse of discretion a bankruptcy court’s

decision to permissively abstain from adjudicating state law

issues. Arizona Bankruptcy Petition Preparers, 307 B.R. at 140. 

17 28 U.S.C. § 1334(d) prohibits a court of appeal or the

Supreme Court from reviewing a bankruptcy court’s permissive or

mandatory abstention decision. The statute does not apply to

this Panel because we are a bankruptcy appellate panel under

28 U.S.C. § 158(c). See also In re Bankruptcy Petition Preparers

Who Are Not Certified Pursuant to Requirements of the Arizona

Supreme Court, 307 B.R. 134, 140, n.6 (9th Cir. BAP 2004)

(“Arizona Bankruptcy Petition Preparers”).

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We apply the same standard of review to its estimation of claims

under § 502(c)(1). See In re Corey, 892 F.2d 829, 834 (9th Cir.

1989)(“A court has broad discretion when estimating the value of

an unliquidated claim”)(citation omitted); First City Beaumont v.

Durkay (In re Ford), 967 F.2d 1047, 1049 n.3 (5th Cir. 1992)

(“‘Estimation’ for the purposes of section 502(c)(1) simply means

that the bankruptcy court may exercise its discretionary powers

to determine the allowability of claims in bankruptcy in

accordance with the principles of equity.”).

We apply a two-part test to determine objectively whether

the bankruptcy court abused its discretion. United States v.

Hinkson, 585 F.3d 1247, 1261-62 (9th Cir. 2009)(en banc). First,

we “determine de novo whether the bankruptcy court identified the

correct legal rule to apply to the relief requested.” Id.

Second, we examine the bankruptcy court’s factual findings under

the clearly erroneous standard. Id. at 1262 & n.20. A

bankruptcy court abuses its discretion if it applied the wrong

legal standard or its factual findings were illogical,

implausible or without support in the record. TrafficSchool.com

v. Edriver Inc., 653 F.3d 820, 832 (9th Cir. 2011).

We may affirm on any ground supported by the record. Shanks

v. Dressel, 540 F.3d 1082, 1086 (9th Cir. 2008).

///

///

///

///

///

///

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DISCUSSION

A. Estimation of Claim #21 under § 502(c)

1. Application of § 502(c)(1)18

Section 502(c)(1) establishes a procedure for the estimation

of contingent or unliquidated claims against the bankruptcy

estate, if the fixing or liquidation of such claims would unduly

delay the administration of the bankruptcy estate. Corey,

892 F.2d at 834. “Estimation” simply means that the bankruptcy

court may use its discretion in determining the allowability of

claims in bankruptcy. Ford, 967 F.2d at 1049 n.3.

The Bankruptcy Code does not define the terms “contingent”

or “unliquidated.” In re Nicholes, 184 B.R. 82, 88 (9th Cir. BAP

1995). However, case law has set forth working definitions of

the terms. A contingent claim is “one 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)(quoting Fostvedt v. Dow

(In re Fostvedt), 823 F.2d 305, 306 (9th Cir. 1987)(internal

quotation marks omitted)). In other words, a contingent claim is

one that has not accrued and depends upon a future event. 

In re Dill, 30 B.R. 546, 548 (9th Cir. BAP 1983). An

unliquidated claim is one that is not “subject to ‘ready

18 Section 502(c)(1) provides: “There shall be estimated for

purpose of allowance under this section . . . any contingent or

unliquidated claim, the fixing or liquidation of which, as the

case may be, would unduly delay the administration of the case

. . . .”

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determination and precision in computation of the amount due.’”

Fostvedt, 823 F.2d at 306 (quoting In re Sylvester, 19 B.R. 671,

673 (9th Cir. BAP 1982)).

Shannon argues that the bankruptcy court should not have

attempted to estimate Claim #21 at all. She contends that the

bankruptcy court erred in estimating Claim #21 under § 502(c)(1)

because § 502(c)(1) did not apply, as Claim #21 was not

contingent or unliquidated. Shannon asserts that she presented

ample evidence demonstrating that Claim #21 already had accrued,

triggering Michael’s liability. We disagree.

Claim #21 was based on “support, property division, [and]

undisclosed property.”19 As she points out, Shannon submitted

numerous documents for the evidentiary hearing in support of

Claim #21. Most of these documents pertain to the Community

Property Assets and the distributions therefrom. 

With respect to that portion of Claim #21 based on

“support,” Shannon submitted her declaration and a copy of the

spousal support order as evidence. The declaration briefly

refers to the spousal support order and calculates the total

amount of spousal support in arrears at $11,724.90. The spousal

support order states that Michael must pay $969 per month in

spousal support, beginning on January 1, 2008.

Clearly, that portion of Claim #21 based on support is not

19 The bankruptcy court noted in its Memorandum that Shannon

had disputed this description of Claim #21, even though she

herself had made it in her motion for entry of final decree in

her chapter 11 bankruptcy case. The bankruptcy court found her

description accurate.

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contingent or unliquidated because the state court already

determined Michael’s liability under the spousal support order. 

(Although the total amount of spousal support due Shannon may be

at issue.) But that portion of Claim #21 simply duplicates

Claim #1, which the bankruptcy court already allowed.

As for the remainder of Claim #21 for “property division,

[and] undisclosed property,” we conclude that it is contingent

and unliquidated. Shannon argues that Claim #21 is not

contingent because “the elements of the claim” were “evident and

easy to quantify.” Appellant’s Opening Brief at 22. She seems

to imply that a contingent claim is one that is not easily

ascertainable. But Shannon misapprehends the meaning of

“contingent.”

A contingent claim is one that has not yet arisen or

developed. A claim is contingent if its existence depends on

events outside of the bankruptcy case that give rise to the

debtor’s liability to the creditor. Here, looking at only the

face sheet of Claim #21, Shannon bases it, in part, on “property

division and undisclosed property.” None of the documents she

submitted at the evidentiary hearing show that a determination

has been made dividing up the Community Property Assets between

her and Michael. The documents also do not establish that

Michael received the alleged amounts in distributions from the

Community Property Assets. And no determination has been made as

to Michael’s liability for alleged “undisclosed property.”

Shannon alleges that the Judgment and the Marital Trust

Agreement require Michael to turn over the Community Property

Assets and/or the distributions therefrom. The Marital Trust

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Agreement simply transmuted various assets into community

property and then placed them into the marital trust. It did not

provide for turnover of these Community Property Assets and any

distributions therefrom to Shannon.

As for the Judgment, it required Michael to turn over to

Shannon the New York Partnership Interest Distributions. But

Claim #21 does not indicate that it is based on the Judgment. It

simply asserts that it is based on “support, property division,

[and] undisclosed property” – none of which comprise the grounds

for the Judgment. Also, the Judgment only required Michael to

turn over the New York Partnership Interest Distributions, not

the other Community Property Assets.

Moreover, as the bankruptcy court emphasized, Claim #21

involves non-bankruptcy law issues best left to determination by

the state court. The division of community property assets is

not within the bankruptcy court’s purview.

Because Claim #21 is contingent and unliquidated, we

determine that the bankruptcy court did not abuse its discretion

in applying § 502(c)(1) to estimate Claim #21.

2. Estimation of Claim #21 at zero for distribution 

purposes

“An estimation under section 502(c) may be for broad or

narrow purposes.” In re Pac. Gas & Elec. Co., 295 B.R. 635, 642

(Bankr. N.D. Cal. 2003). The bankruptcy court must follow “the

substantive law governing the nature of the claim (such as

following contract law when estimating a breach of contract

claim).” Id. (citation omitted). “Otherwise, neither the

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Bankruptcy Code nor the Bankruptcy Rules set forth a procedure

for estimating claims; instead, the court may use ‘whatever

method is best suited to the particular contingencies at issue.’” 

Id. (quoting Bittner v. Borne Chem. Co., Inc., 691 F.2d 134,

135-36 (3d Cir. 1982)). The bankruptcy court therefore has broad

discretion to determine the appropriate method of estimation. 

See id.

The bankruptcy court “only needs to reasonably estimate the

probable value of the claim.” Id. (quoting Matter of Fed. Press

Co., 116 B.R. 650, 653 (Bankr. N.D. Ind. 1989)(internal quotation

marks omitted)). “Such an estimate necessarily implies no

certainty and is not a finding or fixing of an exact amount. It

is merely the court’s best estimate for the purpose of permitting

the case to go forward . . . .” Id. (quoting Fed. Press Co.,

116 B.R. at 653)(internal quotation marks omitted)).

Shannon argues that, even though she proffered sufficient

evidence demonstrating the allowability of the entire amount of

Claim #21, the bankruptcy court estimated it at zero. She

further argues that the bankruptcy court provided no methodology

or analysis for arriving at that amount.

Claim #21 was based on “support, property division, [and]

undisclosed property.” As we earlier explained, no determination

had been made as to the division of property and as to the

alleged undisclosed assets.20 Aside from the Spousal Support

Order, the state court had made no determinations relevant to

20 Shannon describes these “undisclosed assets” as the

distributions from the Community Property Assets that Michael

failed to turn over to her.

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Claim #21.

Because no determinations had been made on the bases for

Claim #21, the bankruptcy court gave its best estimate – zero –

in order to permit the bankruptcy case to move forward. Contrary

to Shannon’s assertion, the bankruptcy court did in fact explain

its methodology: it estimated Claim #21 at zero because it

believed it was inappropriate for it to decide how the Community

Property Assets should be divided and saw no reason to hold up

distributions to other creditors. The bankruptcy court exercised

its broad discretion in estimating Claim #21. We see nothing in

the record indicating that the bankruptcy court abused its

discretion.

B. Permissive abstention under 28 U.S.C. § 1334(c)(1)

“Section 1334(c)(1) provides for permissive abstention in

both core and non-core proceedings.” Sec. Farms v. Int’l Bhd. of

Teamsters, Chauffers, Warehouseman & Helpers, 124 F.3d 999, 1009

(9th Cir. 1997). A bankruptcy court should consider the

following factors when deciding whether to abstain: 

(1) the effect or lack thereof on the efficient

administration of the estate if a Court recommends

abstention, (2) the extent to which state law issues

predominate over bankruptcy issues, (3) the difficulty

or unsettled nature of the applicable law, (4) the

presence of a related proceeding commenced in state

court or other nonbankruptcy court, (5) the

jurisdictional basis, if any, other than 28 U.S.C.

§ 1334, (6) the degree of relatedness or remoteness of

the proceeding to the main bankruptcy case, (7) the

substance rather than form of an asserted ‘core’

proceeding, (8) the feasibility of severing state law

claims from core bankruptcy matters to allow judgments

to be entered in state court with enforcement left to

the bankruptcy court, (9) the burden of [the bankruptcy

court’s] docket, (10) the likelihood that the

commencement of the proceeding in bankruptcy court

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involves forum shopping by one of the parties, (11) the

existence of a right to a jury trial, and (12) the

presence in the proceeding of nondebtor parties.

Christensen v. Tucson Estates, Inc. (In re Tucson Estates, Inc.),

912 F.2d 1162, 1166-67 (9th Cir. 1990)(quoting In re Republic

Reader’s Serv., Inc., 81 B.R. 422, 429 (Bankr. S.D. Tex. 1987)

(internal quotation marks omitted)).

Shannon contends that the bankruptcy court erred in

permissively abstaining from adjudicating Claim #21 because

“deciding the merits of Claim No. 21” did not involve state law. 

Rather, Claim #21 involved a determination as to Michael’s

alleged failure to turn over Community Property Assets belonging

to her bankruptcy estate. Such a determination, she averred,

involved the application of §§ 541(a)(2) and 542(a).21

21 Section 541(a) provides, in relevant part: 

The commencement of a case under section 301, 302, or 303 of

this title creates an estate. Such an estate is comprised of all

the following property, wherever located and by whomever held:

. . . 

(2) All interests of the debtor and the debtor’s spouse in 

community property as of the commencement of the case that 

is –

(A) under the sole, equal, or joint management and 

control of the debtor; or

(B) liable for an allowable claim against the debtor, 

or for both an allowable claim against the debtor and 

an allowable claim against the debtor’s spouse, to the 

extent that such interest is so liable.

Section 542(a) provides: Except as provided in subsection

(c) or (d) of this section, an entity, other than a custodian, in

possession, custody, or control, during the case, of property

that the trustee may use, sell, or lease under section 363 of

this title, or that the debtor may exempt under section 522 of

(continued...)

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We acknowledge that “[f]or purposes of § 541(a)(2), all

community property not yet divided by a state court at the time

of the bankruptcy filing is property of the bankruptcy estate.” 

Dumas v. Mantle (In re Mantle), 153 F.3d 1082, 1085 (9th Cir.

1998). See also Keller v. Keller (In re Keller), 185 B.R. 796,

799-800 (9th Cir. BAP 1995)(“When a bankruptcy petition is filed

prior to the final disposition of property between divorcing

spouses, the community property comes within the jurisdiction of

the bankruptcy court to assure fairness to the creditors of the

individual spouses and the marital estate.”). However, we

nonetheless conclude that the bankruptcy court did not abuse its

discretion in abstaining from determining the division of the

Community Property Assets. 

As we mentioned earlier, one factor in favor of permissive

abstention is the effect on the efficient administration of the

bankruptcy estate. Here, the bankruptcy court based its decision

to abstain on the fact that the creditors in Shannon’s chapter 11

bankruptcy case already had been paid and there was “no reason to

hold up distributions to other creditors” in Michael’s chapter 7

bankruptcy case. Had the bankruptcy court decided to address the

issues of community property division, Michael’s chapter 7

bankruptcy case could have dragged on to the detriment of other

creditors (e.g., litigation costs, possible depreciating value of

certain Community Property Assets). Moreover, Shannon’s

21(...continued)

this title, shall deliver to the trustee, and account for such

property or the value of such property, unless such property is

of inconsequential value or benefit to the estate.

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chapter 11 case was completed; all of her creditors (other than

possibly Michael) had been paid, and her chapter 11 case was

closed. There was no need to make any determinations on

community property division when they would not have added any

value or given any benefit to her chapter 11 bankruptcy estate. 

Further, the situation is confused because when Michael filed for

chapter 7 bankruptcy, all of the Falks’ Community Property Assets

became property of his bankruptcy estate as well. There needs to

be a division of the Community Property Assets to determine the

allocation of those assets between the two battling ex-spouses –

and that should be done by the state court. The bankruptcy court

did not abuse its discretion in declining to inject itself into

resolving the state law issues concerned in Michael and Shannon’s

personal marital dissolution disputes.

CONCLUSION

For the foregoing reasons, we AFFIRM.

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