Court Opinion

ID: 4371015
Source: CourtListenerOpinion
Date Created: 2019-02-25 21:00:50.952061+00
Date Added: 2024-06-11T14:21:44.510532
License: Public Domain

NOT FOR PUBLICATION                             FILED
                    UNITED STATES COURT OF APPEALS                         FEB 25 2019
                                                                      MOLLY C. DWYER, CLERK
                                                                       U.S. COURT OF APPEALS
                           FOR THE NINTH CIRCUIT

In re: ALELI A. HERNANDEZ,                      No.    17-60044

     Debtor,                                    BAP No. 16-1228
______________________________

ASSET MANAGEMENT HOLDINGS,                      MEMORANDUM*
LLC,

      Appellant,

v.

ALELI A. HERNANDEZ,

      Appellee.

                           Appeal from the Ninth Circuit
                            Bankruptcy Appellate Panel
            Kurtz, Faris, and Lafferty III, Bankruptcy Judges, Presiding

                      Argued and Submitted February 7, 2019
                               Pasadena, California

Before: WARDLAW and BEA, Circuit Judges, and MURPHY,** District Judge.

      *
             This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
      **
             The Honorable Stephen Joseph Murphy III, United States District
Judge for the Eastern District of Michigan, sitting by designation.
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      Asset Management Holdings (AMH) appeals the decision of the Bankruptcy

Appellate Panel (BAP) affirming the bankruptcy court’s denial of AMH’s motion

to dismiss Debtor’s Chapter 13 petition on eligibility grounds. We have

jurisdiction pursuant to 28 U.S.C. § 158(d). We affirm.

      1. AMH argues that the bankruptcy court erred by not counting AMH’s lien

against Debtor for the purposes of determining eligibility under 11 U.S.C.

§ 109(e). AMH is mistaken.

      In In re Scovis, the plaintiffs listed a $100,000 homestead exemption on their

filing schedules. 249 F.3d 975, 979 (9th Cir. 2001). Although that exemption

enabled them to avoid a portion of their creditor’s lien at some time in the future—

i.e., after filing for Chapter 13 proceedings—the court held that the bankruptcy

court could consider it, because the effect of the exemption was “readily

ascertainable.” Id. at 984. Here, Debtor valued AMH’s unsecured junior lien at $0

in her schedules and stated that she planned on filing a motion to avoid it. The

parties do not contest that the value of Debtor’s property was eclipsed by the first

priority lien, nor do they contest that AMH’s lien could be modified pursuant to 11

U.S.C. § 1322(b)(2). See In re Zimmer, 313 F.3d 1220, 1222 (9th Cir. 2002).

Therefore, the bankruptcy court was correct to conclude that Debtor was eligible

for Chapter 13 bankruptcy because lien avoidance was “readily ascertainable.” See

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also In re Groh, 405 B.R. 674, 678 (Bankr. S.D. Cal. 2009) (“Scovis makes very

clear that events like obvious lien avoidance should be considered in determining a

debtor’s eligibility.”).

       AMH’s arguments to the contrary are unpersuasive. AMH’s assertion that

the plain language of 11 U.S.C. § 109(e) counsels otherwise is, at bottom, a plea to

overrule Scovis. AMH’s claim that this case is controlled by Johnson v. Home

State Bank, 501 U.S. 78 (1991), ignores that Johnson had nothing to do with

eligibility. See also In re Sandrin, 536 B.R. 309, 318 (Bankr. D. Colo. 2015)

(“[T]he Johnson holding . . . gives no guidance as to proper valuation of the

allowed claim . . . for purposes of 11 U.S.C. § 109(e) eligibility . . . .”). And

AMH’s attempt to analogize this case to In re Quintana (Quintana II), 915 F.2d
513 (9th Cir. 1990), and In re Davis (Davis II), 778 F.3d 809 (9th Cir. 2015),

ignores that those cases arose from Chapter 12 bankruptcy proceedings, not

Chapter 13.

       2. AMH also argues that the bankruptcy court erred in concluding that

Debtor filed her petition in good faith. AMH is wrong.

       The relevant factors for determining bad faith are:

       (1) whether the debtor misrepresented facts in his petition or plan,
       unfairly manipulated the Bankruptcy Code, or otherwise filed his
       Chapter 13 petition or plan in an inequitable manner;

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      (2) the debtor’s history of filings and dismissals;

      (3) whether the debtor [intended only] to defeat state court litigation;
      and

      (4) whether egregious behavior is present.

In re Blendheim, 803 F.3d 477, 499 (9th Cir. 2015) (internal citations and

quotation and alteration marks omitted). To determine bad faith, “a bankruptcy

judge must review” these factors according to the “totality of the circumstances.”

In re Eisen, 14 F.3d 469, 470 (9th Cir. 1994) (citation omitted).

      None of the relevant factors are present here. There is no evidence in the

record of misrepresentation, serial bankruptcy filings, filings to defeat state court

litigation, or egregious behavior. And while AMH urges the court to find that filing

for Chapter 13 bankruptcy after a prior Chapter 7 discharge is bad faith per se, that

conclusion is unsupported by the Bankruptcy Code and the case law. As the

Supreme Court said in Johnson, “Congress has expressly prohibited various forms

of serial filings.” 501 U.S. at 87. The “absence of a like prohibition on serial filings

of Chapter 7 and Chapter 13 petitions, combined with the evident care with which

Congress fashioned these express prohibitions, convinces us that Congress did not

intend categorically to foreclose the benefit of Chapter 13 reorganization to a

debtor who previously has filed for Chapter 7 relief.” Id.

      AFFIRMED.
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