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NOTFOR PUBLICATION

UNITED STATES BANKRUPTCY APPELLATE PANEL

OF THE NINTH CIRCUIT

In re: ) BAP No. EC-14-1382-JuKuPa

)

BUN AUYEUNG and SOO HAN TSE, ) Bk. No. 13-30919

)

Debtors. )

______________________________)

)

BUN AUYEUNG; SOO HAN TSE, )

)

Appellants, )

)

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

)

PAULA CHRISTENSEN; BARTON )

CHRISTENSEN; DAVID CUSICK, )

Chapter 13 Trustee, )

)

Appellees. )

______________________________)

Argued and Submitted on May 14, 2015

at Sacramento, California 

Filed - June 9, 2015

Appeal from the United States Bankruptcy Court

for the Eastern District of California

Honorable Ronald H. Sargis, Bankruptcy Judge, Presiding

_________________________

Appearances: Peter G. Macaluso argued for appellants Bun

Auyeung and Soo Han Tse; John D. Maxey of

Dudugjian & Maxey argued for appellees Barton and

Paula Christensen.**

FILED

JUN 09 2015

SUSAN M. SPRAUL, CLERK

U.S. BKCY. APP. PANEL

OF THE NINTH CIRCUIT

* 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.

** Appellee David Cusick was the chapter 13 trustee in

Debtors’ first chapter 13 bankruptcy case and was appointed the

(continued...)

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Before: JURY, KURTZ, and PAPPAS, Bankruptcy Judges.

Memorandum by Judge Jury

Dissent by Judge Kurtz

Chapter 131 debtors, Bun Auyeung and Soo Han Tse (Debtors),

moved under § 522(f)(1)(A) to avoid the judicial lien held by 

Barton and Paula Christensen (Creditors) against Debtors’

homestead property. The bankruptcy court avoided the lien in

part. Thereafter, the court confirmed Debtors’ fourth amended

chapter 13 plan which required Debtors to sell the property

encumbered by Creditors’ lien and use a portion of the proceeds

to satisfy the remaining lien. Debtors never took any steps to

sell the property and defaulted under the terms of the plan. 

The bankruptcy court subsequently denied Debtors’ motion to

voluntarily dismiss their case and converted it to chapter 7. 

After Debtors received their § 727 discharge, they moved to

avoid Creditors’ judicial lien in its entirety, arguing that the

value of the property encumbered by the lien had decreased and

that the amount of their homestead exemption had increased. The

bankruptcy court denied their motion on the grounds that Debtors

were barred from relitigating the value of the property by the

**(...continued)

successor trustee in Debtors’ second chapter 13 bankruptcy case.

He has not participated in this appeal.

1 Unless otherwise indicated, all chapter and section

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

“Rule” references are to the Federal Rules of Bankruptcy

Procedure and “Civil Rule” references are to the Federal Rules of

Civil Procedure.

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doctrines of claim preclusion and merger and bar, and that their

exemption was determined as of the petition date and not the

date of conversion. A final decree was entered and Debtors’

chapter 7 bankruptcy case was closed. 

Debtors then filed this chapter 13 case and again moved to

avoid Creditors’ judicial lien on the same grounds asserted in

their chapter 7 case. The bankruptcy court summarily denied

their motion, finding that Debtors were ineligible for a

discharge. Debtors moved for reconsideration, which the

bankruptcy court granted in part by finding that the denial of

the motion should have been without prejudice since Debtors were

eligible for a discharge. Debtors filed another motion to avoid

Creditors’ judicial lien, which the bankruptcy court denied on

the basis of judicial estoppel. Debtors appeal from that ruling

and order. We AFFIRM. 

I. FACTS2

In September 2008, the California state court entered a 

judgment in the amount of $300,000 against Debtors and in favor

of Creditors and other parties not before us in this appeal. 

The judgment allocated $144,000 of the $300,000 to Creditors. 

Creditors recorded an abstract of judgment in the Sacramento

County Recorder’s Office which perfected their lien against

Debtors’ homestead property located in Elk Grove, California

2 The following facts have been taken from the record of

this chapter 13 case and Debtors’ first bankruptcy case (Bankr.

Case. No. 09-35065). To the extent needed, we take judicial

notice of various pleadings which were docketed and imaged by the

bankruptcy court in the underlying bankruptcy cases. Atwood v.

Chase Manhattan Mortg. Co. (In re Atwood), 293 B.R. 227, 233 n.9

(9th Cir. BAP 2003).

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(Property). 

A. Debtors’ First Bankruptcy Case: Bankr. Case No. 09-35065

Debtors filed a chapter 13 petition on July 21, 2009.3 In

Schedule A, Debtors listed the fair market value (FMV) of the

Property as $130,000.4 In Schedule D, Debtors listed the

$300,000 judgment lien as the only lien against the Property. 

In December 2009, Debtors filed an amended Schedule C to claim a

homestead exemption in the Property under Cal. Code Civ. Proc.

(CCP) § 704.730(a)(3) for $150,000.

On November 25, 2009, Creditors filed a proof of claim

(POC) asserting a secured claim for $158,854.60 based on their

state court judgment and accrued interest as of the petition

date.

On December 15, 2009, Debtors filed a motion to avoid

Creditors’ judgment lien under § 522(f)(1)(A) (First Lien

Avoidance Motion). Consistent with their Schedules, Debtors

claimed a $150,000 homestead exemption and asserted that the FMV

of the Property was $130,000.

Creditors opposed, contending that the FMV of the Property

was $420,000 based on a January 2009 appraisal. Creditors noted

that the difference between the appraised value ($420,000) and

the value assigned by Debtors as of the petition date ($130,000)

was $290,000.

3 The case was reassigned to the Honorable Roger H. Sargis

and transferred to the Sacramento Division on January 15, 2010.

4 Evidently, Debtors asserted that the Property was

uninhabitable and they adjusted the initial FMV of $200,000

downward due to $50,000 in demolition costs and $20,000 for costs

of sale.

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On August 30, 2010, the bankruptcy court conducted an

evidentiary hearing on valuation and found that the FMV of the

Property was $290,000. Subtracting Debtors’ $150,000 homestead

exemption from that amount, the court concluded that Creditors’

lien was avoided as to all amounts over $140,000. The

bankruptcy court entered an order consistent with its ruling on

the same day and that order became final (August 30, 2010

Order).

On November 14, 2011, the bankruptcy court confirmed

Debtors’ fourth amended chapter 13 plan. The plan provided that

proceeds from the sale of the Property would be used to pay all

Class 2 claimants and lien holders in full, which included

Creditors. The order confirming the plan states that “pursuant

to . . . § 1323, the plan is amended as follows: the real

property shall be listed immediately at $290,000 and sell by

September 2012.”

In December 2012, the chapter 13 trustee, David Cusick,

moved to dismiss the case on the grounds that Debtors were not

current in their payments and had failed to sell the Property by

September 2012 as required by the confirmed plan. Debtors

opposed and filed a motion for voluntary dismissal.5

On February 25, 2013, the bankruptcy court converted

5 In its July 22, 2014 findings of fact and conclusions of

law denying Debtors’ fourth lien avoidance motion which is the

subject of this appeal, the bankruptcy court states that “Debtors

pleaded with the court to allow them to dismiss the case so they

could (after having improperly delayed and make [sic] affirmative

misrepresentations to the court) file a new case and manufacture

a larger exemption apparently not satisfied with the substantial

California homestead exemption already afforded them.”

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Debtors’ case to chapter 7. In deciding to convert the case,

the court found that Debtors actively misrepresented that they

would liquidate the Property, but never intended to do so,

instead hoping it would appreciate in value. The bankruptcy

court further found that Debtors had continued in possession of

the Property without making regular monthly payments to

Creditors who had a lien on the Property. Under these

circumstances, the court decided that only an independent

fiduciary could consider whether the estate was properly managed 

and what assets remained for distribution to creditors. The

bankruptcy court denied Debtors’ request for a voluntary

dismissal.

After their case was converted, Debtors amended Schedule A, 

stating that the FMV of the Property was $185,000. Debtors also

amended their Schedule C, listing an exemption in the Property

in the amount of $175,000.6

In May 2013, the chapter 7 trustee filed a report of no

distribution. 

On June 4, 2013, Debtors received their chapter 7

discharge.

On June 5, 2013, Debtors filed a second motion to avoid

Creditors’ lien under § 522(f)(1)(A) (Second Lien Avoidance

Motion). Debtors again asserted that the FMV of the Property

was $185,000 based on an appraisal performed by David LaBella on

March 14, 2013, and claimed a homestead exemption in the amount

6 CCP § 704.730(a)(3) was amended in 2009 to increase the

exemption from $150,000 to $175,000 for persons over the age of

65.

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of $175,000.

Creditors opposed, arguing that the FMV of the Property was

previously determined to be $290,000 at the August 30, 2010

evidentiary hearing, and thus Debtors were barred from

relitigating the value of the Property.

In reply, Debtors argued, without citation to any

authority, that the date of valuation for the Property in the

converted chapter 7 case was the date of conversion,

February 25, 2013. Accordingly, Debtors asserted that they were

not bound by the previous valuation. 

On July 11, 2013, the bankruptcy court issued its findings

of fact and conclusions of law (July 11, 2013 FFCL). The court

found that exemption values are determined as of the petition

date which does not change after a case is converted. The

bankruptcy court further found that the August 30, 2010 Order

granting Debtors’ First Lien Avoidance Motion was a final order

and thus Debtors were barred from relitigating the FMV of the

Property by the doctrines of claim preclusion and merger and

bar:7 

A judgment, when rendered on the merits, constitutes

an absolute bar to a subsequent attempting [sic] to

re-litigate the matters determined by the judgment.

Cromwell v. County of Sacramento, 94 U.S. 351 (1876).

Central to this claims preclusion doctrine or [sic]

the concepts of merger and bar. The concept of merger

holds that when a plaintiff succeeds in litigation and

recovers a valid and final personal judgment, the

plaintiffs [sic] claim is merged into the judgment,

and the original claim and all defenses to it, whether

7 Claim preclusion includes doctrines of merger and bar. 

See Paine v. Griffin (In re Paine), 283 B.R. 33, 38 (9th Cir. BAP

2002).

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asserted or not, are extinguished. The plaintiffs

[sic] rights and the defendants [sic] liabilities are

thereafter determined by the judgment. If the

plaintiff loses the litigation, the resultant judgment

acts as a bar to any further actions by the plaintiff

on the same claim, with certain limited exceptions. 

By definition, merger and bar prohibit claimsplitting. All facts, allegations, and legal theories

which support a particular claim, as well as all

possible remedies and defenses, must be presented in

one action or are lost (see §§ 131.20-131.24). Moores

Federal Practice, Third Edition, § 131.01. The Ninth

Circuit Court of Appeals addressed the application of

this principal [sic] to orders in bankruptcy court (an

order approving the sale of property) in Robertson v.

Isomedix, Inc. (In re International Nutronics),

28 F.3d 965 (9th Cir. 1993), cert. denied 513 U.S.

2016 (1994).

The court having entered a final order avoiding

Creditors [sic] judgment lien, it cannot now be

relitigated by Debtors. There remains no case or

controversy for this court to exercise federal court

jurisdiction, all such claims having been merged into

the prior final order.

In the same ruling, Judge Sargis again commented on Debtors’

conduct throughout the case. On July 15, 2013, the bankruptcy

court entered a Civil Minute Order denying Debtors’ Second Lien

Avoidance Motion. 

On August 19, 2013, the bankruptcy case was closed and a

final decree was entered.

B. Debtors’ Second Bankruptcy Case: Bankr. Case No. 13-30919

On August 19, 2013, Debtors filed a second chapter 13

petition.8 In Schedule A, Debtors valued the Property at

$185,000. In Schedule C, they claimed a homestead exemption in

the Property under CCP § 704.730(a)(3) for $142,220.15.9 

On October 1, 2013, Creditors filed a POC asserting a

8 The case was assigned to the Honorable Michael S. McManus.

9 It is unclear where this amount came from.

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secured claim in the amount of $140,000. 

Meanwhile, Debtors attempted to have their chapter 13 plan

confirmed. Debtors proposed to fund the plan by paying $100 per

month from future earnings and by obtaining a one-time gift of

$13,000 from one of their children on or before November 25,

2013. Debtors reduced Creditors’ claim from $158,854.60 to

$7,000 and proposed to pay them $40 per month. The plan further

provided that when Debtors successfully avoided Creditors’ lien

in their yet to be filed motion, they would pay Creditors in

full by a lump sum distribution on or before December 2013.

The appointed chapter 13 trustee, Jan P. Johnson, objected

to confirmation of the plan on the grounds that Debtors had

failed to provide a copy of their federal tax returns for the

tax year ending before the filing of the petition and the plan

failed to specify a monthly payment for administrative expenses. 

The trustee also maintained that the feasibility of the plan

depended on the granting of Debtors’ motion to avoid Creditors’

lien and they had not yet filed such a motion. According to the

trustee, if their motion was unsuccessful, the court could deny

confirmation.

Creditors also objected to Debtors’ plan, contending that

the plan was not proposed in good faith and did not provide for

their secured claim. Creditors further argued that Debtors had

not filed their petition in good faith.

On October 14, 2013, Debtors filed their third motion to

avoid Creditors’ lien (Third Lien Avoidance Motion). This

motion was virtually identical to the prior motion filed in

their chapter 7 case. Debtors again valued the Property at

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$185,000 and claimed a $175,000 homestead exemption. Creditors

opposed, contending that Debtors’ Third Lien Avoidance Motion

was barred by the doctrines of claim and issue preclusion and

that Debtors had filed their petition in bad faith.

On November 12, 2013, Judge McManus held a hearing on the

chapter 13 trustee’s objections to confirmation of Debtors’

plan.10 The court sustained the chapter 13 trustee’s objections 

and denied confirmation. The bankruptcy court also denied

Debtors’ Third Lien Avoidance Motion finding: 

Because the debtor has received a chapter 7 discharge

within 4 years of this case, they will not receive a

discharge of any debts in this case. See 11 U.S.C. 

§ 1328(f)(1). Therefore, absent payment in full of a

claim, it will survive the completion of the plan. 

The same will be true of any lien securing a claim.

While it might be temporarily stripped off its

collateral, in whole or in part, during the pendency

of this chapter 13 case, because the court will not be

entering a discharge order to conclude the case, the

lien will be revived after completion of the plan

payments. Accord In re Victoro 454 B.R. 759 (Bankr.

S.D. Cal. 2011), affirmed 470 B.R. 545 (S.D. Cal.

2012). This is because, when a chapter 13 case

does not end in a discharge, the only alternative is

dismissal or conversion to another chapter. In this

case, conversion is not an option given the prior

discharge. Dismissal is the only other alternative

method of ending the case. Id. and see 11 U.S.C.

§ 1307(c), 1328. Upon dismissal, any lien avoided

pursuant to section 522(f) will be reinstated. See

11 U.S.C. § 349(b)(1)(B).

Because it is certain that the debtor will not receive

a discharge, that the case will be dismissed when all

payments are completed, that the judicial lien will be

revived upon dismissal, and that the plan does not

provide for payment in full of the Christiensens’

[sic] lien, there is no point in avoiding the lien or

confirming this plan.

10 The next day, Debtors’ bankruptcy case was transferred to

Judge Sargis, the appointed chapter 13 trustee resigned, and

David Cusick was appointed the successor trustee.

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On November 15, 2013, the bankruptcy court entered a Civil

Minute Order denying Debtors’ Third Lien Avoidance Motion.

On November 22, 2013, Debtors filed a motion for

reconsideration of the order sustaining the chapter 13 trustee’s

objection to their plan, the order denying their Third Lien

Avoidance Motion, and the order on objection to confirmation by

Creditors.11 Debtors maintained that they provided their most

recent tax returns to the chapter 13 trustee and that the plan

provided for payment of their attorney not to exceed $5,000. 

Debtors also argued that the time period between their first

chapter 13 case filed on July 21, 2009, and this case filed on

August 19, 2013, was more than four years. Thus, Debtors

maintained that they were entitled to a discharge. 

David Cusick, the successor chapter 13 trustee, opposed,

contending, among other things, that Debtors had defaulted under

the proposed plan.

On December 10, 2013, the Honorable Christopher M. Klein

heard Debtors’ motion for reconsideration. Judge Klein noted

the history in the case and ruled that there were no grounds to

vacate the prior orders under Civil Rule 60(b). However, the

court opined that it appeared the motions should have been

denied without prejudice: 

The grounds for denying the motions appears to have

been based substantially on the findings of this court

concerning the conduct of the Debtors in the prior

11 The order sustaining Creditors’ objection to confirmation

of the plan was not entered until November 27, 2013. The

appointed chapter 13 trustee, Jan P. Johnson, resigned prior to

submitting an order. Therefore, Debtors’ motion for

reconsideration of the various orders was premature.

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case. The prior judge in this case correctly

understood those rulings. However, it appears that

the denials [sic] were summarily denied and may be

based on a less than complete record presented by the

Debtors. The court concludes that if this judge had

been ruling on the substance of the motions, the

denials would have been without prejudice. 

In a footnote, Judge Klein further observed:

It also appears that the rationale for the prior

rulings was based on that judges [sic] conclusions

that there can be no Chapter 20 bankruptcy cases

(Chapter 7 followed by a Chapter 13, in which no

discharge can be granted). First, this judge

disagrees with that conclusion. See In re Frazier,

448 B.R. 803 (Bankr. ED Cal. 2011), affd., 469 B.R.

803 (ED Cal. 2012) (discussion of lien striping in

Chapter 13 case), and Martin v. CitiFinancial

Services, Inc. (In re Martin), Adv. No. 12-2596, 2013

LEXIS 1622 (Bankr. E.D. CA 2013). Secondly, it

appears that while the prior judge correctly

understood the less than stellar conduct of the

Debtors in the prior case, the computation of time

between the first bankruptcy case being filed,

July 21, 2009 and the filing of the current case,

August 19, 2013, is more than four years.

The bankruptcy court stated that it would issue an amended order

on the lien avoidance, correcting it to state that the denial of

the motion was without prejudice. The court denied the balance

of the motion and noted that if Debtors wanted to proceed with

confirmation of their chapter 13 plan they could file an amended

plan, motion to confirm, and supporting evidence. On

December 13, 2013, the bankruptcy court entered a Civil Minute

Order granting Debtors’ motion for reconsideration in part.

Meanwhile, the chapter 13 trustee filed a motion to dismiss

Debtors’ case for failure to make plan payments. The bankruptcy

court heard the motion on January 8, 2014, and denied it without

prejudice because the trustee confirmed at the hearing that the

$13,000 lump-sum payment as required under the plan had been

made. 

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Creditors also objected to Debtors’ homestead exemption in

the amount of $175,000. On January 28, 2014, the bankruptcy

court overruled the objection without prejudice on the grounds

that neither issue nor claim preclusion barred Debtors from

claiming the higher exemption amount since the amount of the

exemption was not at issue in the First Lien Avoidance Motion or

evidentiary hearing that resulted in the August 30, 2010 Order. 

The court noted, however, that other theories may exist as to

why Debtors should not be asserting the higher exemption amount,

but those theories were not before the court.

On January 29, 2014, Debtors filed a motion seeking

confirmation of their plan and also filed their fourth motion to

avoid Creditors’ lien under § 522(f)(1)(A) (Fourth Lien

Avoidance Motion). Thereafter, Debtors’ Fourth Lien Avoidance

Motion tracked with the confirmation process.

Debtors’ Fourth Lien Avoidance Motion was virtually

identical to their prior two motions. They again asserted the

FMV of the Property was $185,000, claimed a homestead exemption

in the amount of $175,000, and asserted that the equity in the

Property was no more than $7,000 for purposes of lien avoidance.

Creditors opposed, arguing that Debtors must be barred from

obtaining any further avoidance of their lien because the claim

had been merged into judgment and the doctrines of claim and

issue preclusion, double recovery and judicial estoppel barred

their request. On all these bases, Creditors maintained that

Debtors’ Fourth Lien Avoidance Motion should be denied in its

entirety and with prejudice.

In reply, Debtors argued that claim preclusion did not

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apply because the evidence presented was based on an entirely

different target date, value date, exemption date, and type of

discharge and, therefore, was not the same claim. Debtors

further argued that Creditors’ double recovery theory did not

apply between a chapter 7 case and a chapter 13. Finally,

Debtors asserted that equitable considerations were inapplicable

to the formula under § 522(f). Debtors noted that they were

eligible for a discharge and for the exemption claimed, and they

provided evidence of the Property’s value, which was undisputed.

Judge Sargis held an initial hearing on plan confirmation

and Debtors’ Fourth Lien Avoidance Motion on March 4, 2014. The

matters were continued several times to allow time for

discovery, if any, related to plan confirmation, and to allow

the parties to brief the issue whether judicial estoppel applied

to Debtors’ Fourth Lien Avoidance Motion. 

On July 22, 2014, Judge Sargis issued Civil Minutes denying

confirmation of Debtors’ plan. On the same day, the court

issued Civil Minutes denying Debtors’ Fourth Lien Avoidance

Motion. There, the bankruptcy court stated:

The court has denied the Debtors’ motion to confirm a

plan in this case, determining that (1) the Debtors do

not qualify as Chapter 13 Debtors, (2) the bankruptcy

case has not been filed in good faith, (3) the

bankruptcy plan has not been proposed in good faith,

and (4) the Debtors have not prosecuted the

bankruptcy case in good faith. Therefore, there is no

reason for the court to proceed with causing the

Creditor, Debtors, and the court to conduct further

hearings on this Motion, as there appears to be no

legal reason for doing so.

While these findings related to Debtors’ motion for confirmation

of their plan, at another point, the court said:

The Debtors are attempting to pick the best from all

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worlds. They get their prior Chapter 13 case

converted to Chapter 7 due to their misconduct. They

file a new Chapter 13 case, providing a di minimis

[sic] payment, premised on having obtained a discharge

in the prior case. Then they seek to take away the

lien of Christensen, paying them nothing as an

unsecured claim. The Debtors [sic] failure of good

faith has continued to the present case.

The court also referred to its July 11, 2013 FFCL issued in

Debtors’ prior case and then discussed application of judicial

estoppel:

The court finds that the equitable doctrine of

judicial estoppel encompasses this very situation. 

The court must preserve the integrity of the judicial

process, and Debtors clearly are attempting to abuse

the process by filing a sham Chapter 13 plan and

avoiding the lien of the Christensen [sic]. Debtors

filed this bankruptcy after the dismissal12 of the

prior bankruptcy, admitting that they would be able to

reap the benefit of a higher homestead exemption if

they were to refile. Bankr. E.D. No. 09-35065, Civil

Minutes, Dkt. 214. The Debtors are not entitled to

reap the benefits of an increased exemption and

therefore avoiding more of the Creditors[‘] lien based

on their prior bad faith.

While the Debtor [sic] attempt to disengage the

current bankruptcy filing from their prior case, and

their conduct in that case, the federal courts are not

so nearsighted. The Debtors intentionally and

willfully misrepresented to this court the terms of

their Chapter 13 Plan. The court relied on their

statements under penalty of perjury in confirming the

Chapter 13 Plan in the prior case. Through their

misrepresentations, the Debtors managed to confirm a

plan and exhaust four years of judicial time and

resources. This Chapter 13 case is one more step by

the Debtors in their plan to delay, abuse (both the

Creditors and the court), avoid performing, not

following through with the obligations of a Chapter 13

debtor, and taking what they want, when they want it.

These Debtors willfully and intentionally abused the

Bankruptcy Code in the prior case, breached the order

confirming the Chapter 13 Plan and failed to comply

12 The chapter 13 case was converted, not dismissed, and

Debtors received their chapter 7 discharge.

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with the Chapter 13 Plan for the marketing and sale of

the property which secures the Christensen claim. 

Through misrepresentation and intentional delay, while

having committed to pay Christensen several years ago,

the Debtors have hung on to the property gambling on a

rising real estate market. It further appears, and

the court so concludes, that the Debtors intentionally

misrepresented the plan in the prior case,

misrepresented that they would prosecute the plan to

sell this Property that secures the Christensen claim,

and then sought to dismiss the prior case as part of

of a strategy to not only gamble on the real estate

market, but obtain a higher exemption due to the

passage of time. 

The Debtors[‘] strategy was to not perform the

Chapter 13 Plan in the prior case, going as far (or

doing so little) as not engaging an active real estate

broker to market and sell the property necessary to

fund their Chapter 13 Plan. When caught in their

deception, the Debtor[s] and their counsel feigned

ignorance that they were required to hire a broker and

sell the property notwithstanding the express term

stated in the order confirming the Plan which was

prepared by Debtors’ counsel.

The Debtors, now are not satisfied with the arguments

they made, the positions they took, the rulings made

by the court after an evidentiary hearing, and the

relief they obtained in the prior evidentiary hearing

and bankruptcy case. They want to relitigate the

issues, putting the court and Creditor to more cost

and expense. Quite likely, if they do not like the

result from a new evidentiary hearing, the Debtors

will just file another case and re-relitigate the

matter. 

It is proper for the court to apply judicial estoppel

to the Debtors in their repeated quest to abuse the

Bankruptcy Code and federal judicial process. The

Debtors[‘] strategy of repeatedly litigating the issue

in a series of bankruptcy cases, changing what they

want puts the Debtors at an unfair advantage to the

Christensen [sic].

The bankruptcy court entered a Civil Minute Order denying

Debtors’ Fourth Lien Avoidance Motion without prejudice on

July 28, 2014. Debtors filed a timely notice of appeal. 

On December 22, 2014, the Panel issued an Order Re: 

Finality since the bankruptcy court had entered the order

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appealed from without prejudice. Debtors responded by filing a

motion for leave to appeal, which the Panel granted to the

extent it was necessary. 

II. JURISDICTION

The bankruptcy court had jurisdiction pursuant to 28 U.S.C.

§§ 1334 and 157(b)(2)(K). We have jurisdiction under 28 U.S.C.

§ 158.

III. ISSUE

Whether the bankruptcy court erred by denying Debtors’

Fourth Lien Avoidance Motion.

IV. STANDARD OF REVIEW

We review the bankruptcy court’s application of the

doctrine of judicial estoppel to the facts of this case for an

abuse of discretion. Hamilton v. State Farm Fire & Cas. Ins.

Co., 270 F.3d 778, 782 (9th Cir. 2001). The bankruptcy court

abuses its discretion when it fails to identify and apply “the

correct legal rule to the relief requested,” United States v.

Hinkson, 585 F.3d 1247, 1263 (9th Cir.2009) (en banc), or if its

application of the correct legal standard was “(1) ‘illogical,’

(2) ‘implausible,’ or (3) without ‘support in inferences that

may be drawn from the facts in the record.’” Id. at 1262.

We may affirm on any ground supported in the record.

ASARCO, LLC v. Union Pac. R. Co., 765 F.3d 999, 1004 (9th Cir.

2014).

V. DISCUSSION

A. Scope of the Appeal

Debtors argue in their opening brief that the equitable

remedy of judicial estoppel is not applicable and that they are

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entitled to their fresh start in this new, independent

chapter 13 case. Creditors expand the issues on appeal,

asserting that the doctrine of claim preclusion also bars

Debtors’ Fourth Lien Avoidance Motion and that the bankruptcy

court properly denied Debtors’ motion due to their bad faith. 

Debtors responded to the arguments raised by Creditors in their

reply brief. To the extent Debtors might consider themselves to

be making additional arguments by responding to Creditors’

arguments in their reply brief, they are mistaken. Such

arguments are waived. See Arpin v. Santa Clara Valley Transp.

Agency, 261 F.3d 912, 919 (9th Cir. 2001) (“[I]ssues which are

not specifically and distinctly argued and raised in a party’s

opening brief are waived.”); See Entm’t Research Grp., Inc. v.

Genesis Creative Grp., Inc., 122 F.3d 1211, 1217 (9th Cir. 1997)

(we limit our review to issues argued in a party’s opening

brief). Because the only issue raised by Debtors in their

opening brief concerns the application of judicial estoppel, and

we affirm on this basis, we need not address Creditors’

arguments on claim preclusion. 

B. Judicial Estoppel: Legal Standards

“Judicial estoppel is a flexible equitable doctrine that

encompasses a variety of abuses, one form of which is preclusion

of inconsistent positions that estops a party from gaining an

advantage by taking one position and then seeking another

advantage from an inconsistent position.” Cheng v. K & S

Diversified Invs., Inc. (In re Cheng), 308 B.R. 448, 455 (9th

Cir. BAP 2004), aff’d, 160 Fed.Appx. 644 (9th Cir. 2005). “A

court invokes judicial estoppel not only to prevent a party from

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gaining an advantage by taking inconsistent positions, but also

because of ‘general consideration[s] of the orderly

administration of justice and regard for the dignity of judicial

proceedings,’ and to ‘protect against a litigant playing fast

and loose with the courts.’” Hamilton, 270 F.3d at 782. To

that end, the Ninth Circuit has routinely inquired into the

intent of the party asserting an inconsistent position in cases

outside of the bankruptcy context. “Judicial estoppel applies

when a party’s position is ‘tantamount to a knowing

misrepresentation to or even fraud on the court.’” Johnson v.

State of Or., 141 F.3d 1361, 1369 (9th Cir. 1998). 

“[A] party puts the integrity of the judicial process at

risk not only when it knowingly lies but when it takes a

position in the short term knowing that it may be on the verge

of taking an inconsistent future action.” Adelphia Recovery

Trust v. HSBC Bank USA (In re Adelphia Recovery Trust), 634 F.3d

678, 696 (2d Cir. 2011). “[T]he proper focus is on the

objective conduct of a party or its counsel.” Id. “[I]n

considering whether to apply judicial estoppel a court must

focus on the conduct of the party to be estopped, not the party

seeking estoppel.” Id. at 698. “[A]lthough a court is unlikely

to be asked to apply judicial estoppel when no party has been

prejudiced, it is unfair advantage to the potentially prejudiced

party’s adversary that is the touchstone of the doctrine.” Id.

at 698–99 (emphasis in original).

As an equitable doctrine, judicial estoppel is not easily

defined. However, three factors are relevant to its

application. Hamilton, 270 F.3d at 782-83 (citing N.H. v.

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Maine, 532 U.S. 742, 750 (2001)). First, a party’s position in

the second matter must be “clearly inconsistent” with it’s

position in the first matter. Id. at 782. Second, a court must

have accepted the party’s earlier position. Id. at 782-83. The

third consideration is whether the party asserting an

inconsistent position “would derive an unfair advantage or

impose an unfair detriment on the opposing party if not

estopped. Id. at 783. 

C. Analysis

Debtors assign error to the bankruptcy court’s decision to

apply the doctrine based on Debtors’ bad faith in their prior

bankruptcy case. According to Debtors, their bad faith had

already been redressed by the bankruptcy court’s denial of their

request for a voluntary dismissal, conversion of their case to

chapter 7, and denial of their Second Lien Avoidance Motion in

the converted chapter 7. Apparently, in Debtors’ view, they

already paid the price for their alleged bad faith. Therefore,

Debtors maintain that they are entitled to seek the avoidance of

Creditors’ lien in this case as authorized by the plain language

of the Bankruptcy Code and obtain their fresh start. Debtors

conclude that the remedy of judicial estoppel is not applicable

under these circumstances and especially when the bankruptcy

court brought up the theory sua sponte.

We are not persuaded. First, judicial estoppel not only

bars inconsistent positions taken in the same litigation, but

“bar[s] litigants from making incompatible statements in two

different cases.” Hamilton, 270 F.3d at 783 (9th Cir. 2001). 

Second, the record supports the conclusion that the bankruptcy

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court did not abuse its discretion in applying the doctrine of

judicial estoppel as discussed below.

Turning back to the three factors that guide application of

judicial estoppel, we conclude that they are all met. As to the

first factor - inconsistent positions - Debtors’ position in

their Fourth Lien Avoidance Motion was inconsistent with their

earlier position that they would sell the Property to pay off

the remaining balance on Creditors’ lien. By representing that

they would sell the Property, Debtors left the bankruptcy court

and Creditors with the distinct, and false, belief that Debtors

would follow through with the sale.13 Further, it was this

representation that led to confirmation of Debtors’ fourth

amended chapter 13 plan. Yet, the record shows that after

confirmation of their plan, Debtors never took any steps to

market or sell the Property. Debtors’ conduct was thus

inconsistent with their representations to the bankruptcy court

that they would sell the Property by a certain date.

Debtors engaged in a course of conduct inconsistent with

their representation ever since. They defaulted on their

confirmed chapter 13 plan and then sought the voluntary

dismissal of their case. After the bankruptcy court denied

dismissal and converted the case, Debtors received their

discharge and filed another motion to avoid Creditors’ lien

13 At oral argument, Debtors’ counsel explained that Debtors

allegedly “got mad” at Creditors because Creditors had told them

they did not have any personal property of Debtors. But then,

when Debtors threatened Creditors with sanctions for violating

the automatic stay, Creditors returned personal property to

Debtors. However, the reason Debtors intentionally defaulted

under their confirmed plan is not relevant.

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based on a higher exemption and decreased property value, which

the bankruptcy court denied. On the same day they received

their discharge, Debtors initiated this chapter 13 case and

again sought to avoid Creditors’ judicial lien on the same

grounds asserted in their chapter 7. At the same time, Debtors

proposed a chapter 13 plan which would be largely funded by a

gift from one of their children and which did not provide for

Creditors’ unsecured claim. 

Viewed objectively, Debtors’ conduct and position in their

Fourth Lien Avoidance Motion and proposed chapter 13 plan in

this case is clearly inconsistent and cannot be reconciled with

Debtors’ earlier representation that they would sell the

Property by a certain date and pay Creditors $140,000. 

Undoubtedly, both the bankruptcy court and Creditors would have

approached the confirmation process differently in the prior

case had they known Debtors had no intention of listing the

Property for sale or paying Creditors the balance on their lien.

The second criterion for judicial estoppel — that the

earlier position have been adopted in some manner by the court —

is easily satisfied here, as Debtors’ representation that they

would sell the Property and pay off Creditors’ lien was critical

to the bankruptcy court’s willingness to confirm Debtors’ fourth

amended plan. The bankruptcy court adopted Debtors’ former

position and accepted the accuracy of their representation that

they would sell the Property.

The third requirement that is said to be the touchstone of

the judicial estoppel doctrine — the unfair advantage to the

potentially prejudiced party’s adversary — is also met. The

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record shows that Debtors would gain a significant unfair

advantage if allowed to further litigate the lien avoidance

issue in this case after obtaining confirmation of their prior

chapter 13 plan by misrepresenting that they would sell the

Property by a certain date and pay off Creditors’ lien. Debtors

deceived the bankruptcy judge who relied on their

misrepresentation in deciding to confirm a plan which they never

intended to honor. 

Judicial estoppel is concerned with the ability of the

courts to render their decisions based on faithful

representations. Allowing Debtors to proceed with the Fourth

Lien Avoidance Motion in this case would clearly undermine the

integrity of the judicial process, especially when the

bankruptcy court explicitly found that it was misled by Debtors’

misrepresentations in the prior case.

Finally, Debtors complain that the bankruptcy court raised

the theory of judicial estoppel sua sponte. However, it was

Creditors who raised the issue in opposition to Debtors’ Fourth

Lien Avoidance Motion. Even so, “judicial estoppel . . . can be

raised by courts sua sponte, because judicial estoppel concerns

the integrity of the judicial system independent of the interest

of the parties.” See Fed. Commc’ns Comm’n v. Airadigm Commc’ns,

Inc. (In re Airadigm Commc’ns, Inc., 616 F.3d 642, 661 n.14 (7th

Cir. 2010); Kaiser v. Bowlen, 455 F.3d 1197, 1205 (10th Cir.

2006); Grigson v. Creative Artists Agency LLC, 210 F.3d 524, 530

(5th Cir. 2000). The bankruptcy court here gave the parties the

opportunity to brief the issue and the opportunity for oral

argument. Therefore, Debtors had a fair opportunity to argue

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that the doctrine did not apply. Under these circumstances,

even if the bankruptcy court had raised the issue sua sponte,

that would not change the outcome of this case. 

D. The holding in Law v. Siegel does not apply.

While no party had briefed the issue, at the hearing on

this matter we raised the applicability of Law v. Siegel, –––

U.S. ––––, 134 S.Ct. 1188 (2014) to this situation as possibly

deciding the issue in Debtors’ favor as a matter of law. In

Siegel, the validity of the debtor’s claim of exemption was not

directly contested or challenged; rather, the issue was whether

the bankruptcy court had authority under § 105 to “surcharge” an

already allowed exemption because of the debtor’s bad acts. Id.

at 1196. In the end, the Supreme Court held that the general

equitable powers of § 105(a) did not provide authority for

judge-made exceptions to explicit mandates of the Bankruptcy

Code. There, since § 522(k) explicitly prohibited the use of

exempt property to satisfy administrative expenses such as

attorney fees, the bankruptcy court was not authorized under

§ 105(a) to order otherwise.

Notwithstanding Siegel, we conclude there is a material and

decisive difference between the bankruptcy court not having the

authority under § 105(a) to surcharge a previously allowed and

unobjected-to exemption, and not having the authority to deny

Debtors another bite at the apple in avoiding Creditors’

judicial lien based on the equitable doctrine of judicial

estoppel. As noted, Debtors intentionally defaulted under their

confirmed plan by not taking any steps to sell the Property,

followed by further attempts to virtually eliminate the

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remainder of Creditors’ judicial lien, while at the same time

foregoing any payments to Creditors. Applying Siegel in this

situation would undermine the very basic need of the bankruptcy

court to maintain and enforce the integrity of the bankruptcy

system by protecting against litigants who play fast and loose

with the courts under circumstances such as this. To apply

Siegel to this situation would render the bankruptcy court

virtually powerless to deny any motion tangentially related to a

debtor’s exemption. Accordingly, the reach of the holding in

Siegel cannot be construed to be that broad.

VI. CONCLUSION

For the reasons stated above, we AFFIRM.

DISSENT BEGINS ON NEXT PAGE

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KURTZ, Bankruptcy Judge, Dissenting:

In upholding the bankruptcy court’s judicial estoppel

ruling, the majority unnecessarily ventures into the perilous

world of bankruptcy court equitable powers. In Law v. Siegel,

134 S. Ct. 1188, 1194-95 (2014), the United States Supreme Court

held that the bankruptcy court exceeded the limits of its

statutory and inherent authority when it surcharged the debtor’s

allowed homestead exemption to pay for attorney fees incurred by

the estate as a result of the debtor’s dishonesty. Here, the

bankruptcy court employed the equitable doctrine of judicial

estoppel to deny the debtors’ statutory entitlement to avoid

liens that impaired their exemption rights. The majority

decision deftly limits the scope of Siegel by identifying it as

a case dealing solely with the bankruptcy court’s equitable

powers under § 105, as opposed to the case at bar, which deals

with a specific equitable doctrine presumably available to all

courts in the interest of protecting the integrity of the

judicial process. While I understand my colleagues desire to

limit Siegel, I do not believe the appropriate case for that

decision is before us.

In the debtors’ first chapter 13 case, the bankruptcy court

confirmed a chapter 13 plan that provided for the sale of the

debtors’ residence, after partially granting the debtors’ motion

to avoid the creditors’ judgment lien. Based upon the value of

the debtors’ residence, the court ruled that the lien only

partially impaired their homestead exemption. After some time,

the chapter 13 trustee moved to dismiss or convert the case

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because the debtors had defaulted on the plan by missing

payments and failing to list their residence for sale. The

bankruptcy court converted the case, emphasizing the debtors’

failure to list the residence and questioning whether the

debtors ever intended to comply with their plan. In the chapter

7 case, the debtors renewed their motion to avoid the creditors’

lien but the court denied the motion. The debtors received a

chapter 7 discharge.

Shortly thereafter, the debtors filed a second chapter 13

case, which included a plan providing for the retention of their

residence. See, e.g., In re Frazier, 448 B.R. 803, 808-10

(Bankr. E.D. Cal. 2011), aff’d, 469 B.R. 889 (E.D. Cal. 2012);

In re Okosisi, 451 B.R. 90, 97-100 (Bankr. D. Nevada 2011). 

They again moved to avoid the creditors’ judgment lien, arguing

that based upon current values and an increased homestead

exemption, the lien impaired their homestead exemption. This

second chapter 13 case raised an issue of bad faith –

specifically, whether it was filed for a legitimate bankruptcy

purpose or merely to avoid the creditors’ judgment lien. See

Leavitt v. Soto (In re Leavitt), 171 F.3d 1219, 1225 (9th Cir.

1999); In re Tran, 431 B.R. 230, 237-38 (Bankr. N.D. Cal. 2010),

aff'd, 814 F.Supp.2d 946 (N.D. Cal. 2011). When the case came

on for confirmation, the bankruptcy court considered the motion

to confirm the chapter 13 plan and the motion to avoid the

judgment lien at the same time. Denying the motion to confirm,

the court ruled that the case had not been filed in good faith,

the plan had not been proposed in good faith, and the debtors

had not prosecuted the case in good faith. Denying the motion

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to avoid the lien without prejudice, the court ruled that

judicial estoppel barred the motion – which was premised on

their retention rather than their sale of the residence. The

debtors appealed the order denying the motion to avoid lien,

which required an order from this court granting leave to

appeal.

A bankruptcy court’s finding that a case has been filed for

an improper purpose inexorably leads to dismissal or conversion. 

Marsch v. Marsch (In re Marsch), 36 F.3d 825, 829 (9th Cir.

1994). In Marsch, the bankruptcy court found that the debtor’s

chapter 11 case had been filed in bad faith and ordered that it

be dismissed, but delayed the effective date of the order for

sixty days so that the debtor could liquidate assets to pay

creditors. Id. at 827. On appeal, the Ninth Circuit

characterized the order allowing the case to continue for sixty

days as error, stating that “immediate dismissal was the only

appropriate course once the court found that the petition was

filed without a legitimate purpose.” Id. at 829. Likewise,

once the bankruptcy court here decided that the debtors’ second

chapter 13 case had been filed in bad faith, the court was

required to enter an order under § 1307(c) dismissing or

converting the case. There was no reason or purpose for the

court to decide whether the equitable doctrine of judicial

estoppel barred debtors’ motion to avoid the creditors’ judgment

lien.

I understand that the issue before us is not whether the

bankruptcy court was required to grant relief under § 1307(c). 

Rather, the issue before us is judicial estoppel. But that is

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an issue the bankruptcy court should not have reached and for

which we should not have granted review. Accordingly, I

respectfully dissent. I would vacate the order of this court

granting review and dismiss this appeal.

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