Court Opinion

ID: 2757075
Source: CourtListenerOpinion
Date Created: 2014-12-03 19:08:27.373751+00
Date Added: 2024-06-11T11:26:53.627373
License: Public Domain

FILED
                                                            AUG 03 2012
 1                                                      SUSAN M SPRAUL, CLERK
                                                          U.S. BKCY. APP. PANEL
 2                                                        OF THE NINTH CIRCUIT

 3                  UNITED STATES BANKRUPTCY APPELLATE PANEL
 4                            OF THE NINTH CIRCUIT
 5   In re:                        )      BAP No.     CC-11-1692-MkDKi
                                   )
 6   CAROLYN L. DAVIS,             )      Bk. No.     ND 11-10994-RR
                                   )
 7                  Debtor.        )
     ______________________________)
 8                                 )
     CAROLYN L. DAVIS,             )
 9                                 )
                    Appellant,     )
10                                 )
     v.                            )      MEMORANDUM*
11                                 )
     BANK OF AMERICA, N.A.; ONEWEST)
12   BANK; ELIZABETH F. ROJAS,     )
     Chapter 12 Trustee,           )
13                                 )
                    Appellees.     )
14   ______________________________)
15                   Argued and Submitted on July 19, 2012
                            at Pasadena, California
16
                             Filed – August 3, 2012
17
               Appeal from the United States Bankruptcy Court
18                 for the Central District of California
19        Honorable Robin L. Riblet, Bankruptcy Judge, Presiding
20
     Appearances:     Jerry Namba of the Law Office of Jerry Namba
21                    argued on behalf of Appellant Carolyn L. Davis;
                      Ellen Cha of Pite Duncan, LLP argued on behalf of
22                    Appellee Bank of America, N.A.; Mark D. Estle of
                      the Estle Law Firm argued on behalf of Appellee
23                    OneWest Bank.
24
     Before:   MARKELL, DUNN and KIRSCHER, Bankruptcy Judges.
25
26
          *
27         This disposition is not appropriate for publication.
     Although it may be cited for whatever persuasive value it may
28   have (see Fed. R. App. P. 32.1), it has no precedential value.
     See 9th Cir. BAP Rule 8013-1.
 1                              INTRODUCTION
 2        Debtor Carolyn Davis (“Davis”) appeals from the bankruptcy
 3   court’s order determining that she was ineligible to be a debtor
 4   in a chapter 121 bankruptcy case and dismissing her case.    We
 5   AFFIRM.
 6                                  FACTS
 7        The controlling facts are undisputed.   This is Davis’s
 8   second bankruptcy case.   In July 2010, she filed a no-asset
 9   chapter 7 bankruptcy case,2 and she was granted a discharge in
10   November 2010.   Davis commenced her current bankruptcy case by
11   filing a chapter 12 bankruptcy petition in March 2011.    Elizabeth
12   Rojas (“Trustee”) was appointed to serve as chapter 12 trustee.
13        In her schedules accompanying her chapter 12 petition, Davis
14   listed over $4.1 million in secured debt.3   According to her
15   schedules, Davis owned three parcels of real property of
16   significant value:4 (1) a ranch located in Paso Robles,
17   California (“Ranch”), (2) a residence located in Cayucos,
18   California (“Residence”) and (3) a triplex located in Paso
19
          1
           Unless specified otherwise, all chapter and section
20   references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and
21   all “Rule” references are to the Federal Rules of Bankruptcy
     Procedure, Rules 1001-9037.
22        2
           United States Bankruptcy Court for the Central District of
23   California, chapter 7 case no. ND 10-13744-RR.
24        3
           Davis listed no unsecured debt in her schedules because she
     had obtained her chapter 7 discharge only a few months earlier.
25
          4
26         There was a fourth parcel of real property that Davis
     listed, located in Atascadero, California. Davis represented
27   that the Atascadero parcel was essentially worthless. In any
     event, the Atascadero parcel is not relevant to our analysis,
28   inasmuch as it was not encumbered by any liens.

                                      2
 1   Robles, California (“Triplex”).   According to Davis, at the time
 2   of her chapter 12 filing, the Ranch was worth $614,000 and was
 3   encumbered by a first trust deed in the amount of $2,663,190 and
 4   an equity line of credit in the amount of $254,911.   Meanwhile,
 5   Davis valued the Residence at $670,000, and stated that it was
 6   encumbered by a first trust deed in the amount of $784,793 and
 7   an equity line of credit of $90,086.   As for the Triplex, Davis
 8   valued it at $350,000 and listed a first trust deed encumbering
 9   it in the amount of $369,630.   In addition to these secured
10   debts, Davis listed property tax liens in the aggregate amount of
11   roughly $9,500.
12        On its face, the total amount of debt Davis scheduled –
13   $4,172,116 – exceeds the aggregate debt limit for chapter 12
14   cases set forth in § 101(18).   That section provides in relevant
15   part that the term “family farmer” means an “individual . . .
16   whose aggregate debts do not exceed $3,792,650 . . . .”5   In
17   turn, only “family farmers” and “family fisherman” (as those
18   terms are defined in § 101(18) and 101(19A)) are eligible to be
19   debtors under chapter 12.   See § 109(f).
20        In June 2011, Davis filed her chapter 12 plan, in which she
21   proposed to pay the allowed amount of her secured debt over a
22   period of 30 years.   Each creditor holding an allowed secured
23   claim would be paid interest only for the first three years at a
24   rate of 3.35%, with both interest and principal payments
25   thereafter, amortized over the next 27 years.   All undersecured
26
          5
27         This debt limit is periodically adjusted pursuant to § 104.
     It was last adjusted, from $3,544,525 to $3,792,650, effective
28   April 1, 2010.

                                       3
 1   portions of these encumberances were to be paid nothing.6
 2   Shortly thereafter, Davis amended her plan to provide for
 3   interest only payments for seven years, with the full amount of
 4   each allowed secured claim due immediately thereafter.   Davis’s
 5   amended plan also increased the interest rate to be paid on the
 6   claims secured by the Ranch and the Residence to 5.25% and the
 7   claim secured by the Triplex to 4.75%.
 8        The Trustee and some of Davis’s secured creditors filed
 9   objections to Davis’s chapter 12 plan.   Bank of America, one of
10   the objecting secured creditors,7 argued among other things that
11   Davis was ineligible to be a debtor under chapter 12 because the
12   aggregate amount of her debt exceeded the debt limit set forth in
13   § 101(18).8
14        In response to Bank of America’s ineligibility argument,
15   Davis asserted that the undersecured portion of each secured
16   creditor’s claim should not be counted in determining her
17   eligibility for chapter 12 because her personal liability had
18
          6
19         In conjunction with her plan, Davis commenced an adversary
     proceeding (1) seeking to strip down each undersecured lien to
20   the value of the collateral securing it, (2) seeking to strip off
     each wholly unsecured lien and (3) seeking to determine the
21
     allowed amount of each secured claim as equal to the value of the
22   collateral securing it.
          7
23         Bank of America, National Association as successor by
     merger to LaSalle Bank NA as trustee for WaMu Mortgage
24   Pass-Through Certificate Series 2006-AR13 Trust (“Bank of
     America”) claims to hold all right, title and interest to the
25   loans secured by the first trust deed on the Ranch and the first
26   trust deed on the Residence.
          8
27         The Trustee also questioned Davis’s eligibility, but the
     Trustee did not elaborate on this point beyond raising the
28   concern in her objection.

                                     4
 1   been discharged in her prior chapter 7 case.   Based on this
 2   argument, Davis calculated the aggregate amount of her debt for
 3   eligibility purposes as $1,835,000 – equal to the value of the
 4   collateral securing all of the secured creditors’ claims.
 5        Ultimately, the bankruptcy court agreed that Davis was
 6   ineligible to be a chapter 12 debtor.    It relied upon Quintana v.
 7   IRS (In re Quintana) (“Quintana I”), 107 B.R. 234, 239 (9th Cir.
 8   BAP 1989), aff'd (“Quintana II”), 915 F.2d 513 (9th Cir. 1990),
 9   which held that the undersecured portion of an essentially
10   nonrecourse secured debt should be counted for purposes of
11   determining chapter 12 eligibility.
12        On November 23, 2011, the bankruptcy court entered its order
13   dismissing the chapter 12 bankruptcy case, stating that the
14   $4.1 million in debt listed in Davis’s schedules exceeded the
15   debt limit set forth in § 101(18) and hence Davis was ineligible
16   under § 109(f) to file a chapter 12 case.   Davis timely filed her
17   notice of appeal on December 7, 2011.
18                             JURISDICTION
19        The bankruptcy court had jurisdiction under 28 U.S.C.
20   § 157(b)(2)(A) and (L), and we have jurisdiction under 28 U.S.C.
21   § 158.
22                              DISCUSSION
23        The sole issue presented in this appeal is whether, in light
24   of Davis’s prior chapter 7 discharge, chapter 12 eligibility as
25   set forth in § 101(18) counts only the portion of her secured
26   debt up to the value of the collateral.   This question of the
27   scope of obligations included within debt limits for eligibility
28   purposes is a question of statutory interpretation subject to de

                                     5
 1   novo review.   Quintana I, 107 B.R. at 236 (addressing chapter 12
 2   eligibility); see also Ho v. Dowell (In re Ho), 274 B.R. 867, 870
 3   (9th Cir. BAP 2002) (addressing chapter 13 eligibility).
 4        There is a split of authority regarding whether the
 5   “aggregate debts” referred to in § 101(18) includes the
 6   discharged unsecured deficiency claims of secured creditors.    If
 7   it does, Davis is ineligible; if it does not, she is.   Two
 8   reported cases – one of which was reversed – have answered this
 9   question in the affirmative.   In re Scotto-DiClemente, 463 B.R.
10   308, 311-14 (Bankr. D.N.J. 2012); In re Cavaliere, 194 B.R. 7, 13
11   (Bankr. D. Conn. 1996), rev’d, Cavaliere v. Sapir, 208 B.R. 784,
12   785-86 (D. Conn. 1997).   And three reported cases have answered
13   this question in the negative.   In re Osborne, 323 B.R. 489, 493
14   (Bankr. D. Or. 2005); Cavaliere v. Sapir, 208 B.R. at 785-86; In
15   re Winder, 171 B.R. 728, 731 n.5 (Bankr. D. Conn. 1994) (in
16   dicta).9
17        But before we address any of these decisions, we first must
18   look at Quintana I and Quintana II.    As prior precedent of this
19   Panel and the Ninth Circuit, they control the outcome of this
20   appeal unless they are inapposite.    In these cases, prior to the
21   debtors’ chapter 12 bankruptcy filing, the debtors were in
22   default on secured debt in the original principal amount of
23   $1 million.    The secured creditor, Connecticut General Life
24   Insurance Company (“CGLIC”), obtained prepetition a state court
25   judgment on the debt in the amount of $1,527,861.89, plus a
26
27
          9
           The above-cited cases arise under both chapter 12 and
28   chapter 13.

                                       6
 1   decree entitling it to conduct a foreclosure sale of the real
 2   property collateral.   But before CGLIC could conduct the
 3   foreclosure sale, the Quintanas filed their chapter 12 petition.
 4   In addition to the judgment in favor of CGLIC, the Quintanas
 5   listed debts in their bankruptcy schedules in the approximate
 6   amount of $60,000.
 7        Asserting a claim in the amount of $1,527,861.89, CGLIC
 8   filed a motion to dismiss the bankruptcy case because the
 9   aggregate amount of the Quintanas’ debt exceeded the debt
10   limitation for chapter 12 eligibility.10
11        The Quintanas disputed that the entire $1,527,861.89 should
12   be counted for eligibility purposes.   They pointed out that, in
13   the process of obtaining its state court judgment, CGLIC had
14   agreed to waive “any right to seek a deficiency judgment . . .
15   if, after any foreclosure sale of the mortgaged property, the
16   debt was not fully satisfied.”   Id. at 515.   They further
17   asserted that, because this waiver had effectively transformed
18   their debt into a nonrecourse obligation, the amount of the debt
19   for eligibility purposes should be limited to the value of the
20   collateral.
21        In Quintana I, we rejected the Quintanas’ argument.      We held
22   that, for eligibility purposes, CGLIC’s deficiency waiver did not
23   limit the amount of the debt to the value of the collateral.     We
24   reasoned that, unless and until the collateral was sold, the full
25
          10
26         At the time of the Quintanas’ bankruptcy filing, the debt
     limitation was set forth in § 101(17)(A), and was set at $1.5
27   million. Since that time, § 101(17) has been re-designated as
     § 101(18), and the amount of the debt limitation has been
28   adjusted upward from time to time, pursuant to § 104.

                                      7
 1   $1,527,861.89 was still a “claim” or “right to payment” held by
 2   CGLIC, and hence still a “debt” of the Quintanas, as those terms
 3   are defined in the Bankruptcy Code.       Quintana I, 107 B.R. at 237-
 4   39.   We explained that the statutory definitions of “claim” and
 5   “debt” were coextensive and quite broad.       As set forth in
 6   § 101(5), a “claim” includes any “right to payment” and any
 7   “right to an equitable remedy for breach of performance if such
 8   breach gives rise to a right to payment.”       And under § 101(12),
 9   the term “debt” means “liability on a claim.”
10         We further reasoned that § 102(2) directly resolved the
11   issue because, for Bankruptcy Code purposes, § 102(2) specified
12   that a “claim against the debtor” means and includes a “claim
13   against property of the debtor.”       Id. at 238.11   We summed up our
14   reasoning in Quintana I as follows:
15         The obligation at issue in this appeal was personally
           created by the Quintanas. Even though Connecticut
16         General has waived its right to pursue the remedy of a
           deficiency judgment, under section 102(2) the claim
17         against the property is a claim against the debtors.
           Because the term claim is coextensive with the term
18         debt, this obligation is a debt of the debtors which is
           defined by the amount of the claim against the
19         property. Connecticut General's claim against the
           property is approximately $1.528 million because it has
20
21         11
           We further pointed out that the accompanying legislative
     history confirmed our interpretation of § 102(2):
22
23         This paragraph [Section 102(2)] is intended to cover
           nonrecourse loan agreements where the creditor's only
24         rights are against property of the debtor, and not
           against the debtor personally. Thus, such an agreement
25         would give rise to a claim that would be treated as a
26         claim against the debtor personally, for the purposes
           of the Bankruptcy Code.
27
     Id. (quoting H.R.Rep. No. 95–595 at 315; S.Rep. No. 95–989 at 28,
28   U.S. Code Cong. & Admin. News 1978, pp. 5814, 6272).

                                        8
 1        the right to payment of that amount from the property
          or from the proceeds of the sale of the property.
 2        Although, as a practical matter, Connecticut General
          will only be able to collect the value of the property,
 3        it has the right to payment of the entire obligation if
          under some circumstance, the property is sold for more
 4        than its present value. Therefore, although the
          collectability may be limited to the value, the right
 5        to payment is not so limited and consequently neither
          is the claim, nor the debt. Accordingly,
 6        notwithstanding the non-recourse nature of the
          obligation, the entire debt is to be considered in
 7        computing aggregate debts.
 8   Id. (footnote omitted).
 9        The Ninth Circuit affirmed Quintana I in Quintana II.
10   Quintana II, 915 F.2d at 518.   Whereas we focused on the relevant
11   Bankruptcy Code provisions, the Ninth Circuit focused on the key
12   provisions under Idaho law establishing that, unless and until
13   the collateral actually was sold, CGLIC continued to hold a claim
14   for $1,527,861.89, and hence the Quintanas continued to owe a
15   debt in that amount at the time of their bankruptcy filing.12
16        Notwithstanding the difference in emphasis, the reasoning of
17   both Quintana I and Quintana II is essentially the same.
18   Quintana II necessarily decided that CGLIC’s continuing right to
19   recover the full amount owed against the collateral or the
20   proceeds of the collateral meant that, for purposes of chapter 12
21   eligibility, the Quintanas continued to be indebted to CGLIC for
22
          12
23         Davis has not argued that there was any basis under state
     law for counting only the secured debt up to the value of the
24   collateral. Instead, Davis entirely has relied on its claim
     regarding the effect of the prior chapter 7 discharge. To the
25   extent Davis could have made any argument under state law, she
26   has waived it by not raising it either in the bankruptcy court or
     on appeal. See Golden v. Chicago Title Ins. Co. (In re Choo),
27   273 B.R. 608, 613 (9th Cir. BAP 2002); Branam v. Crowder (In re
     Branam), 226 B.R. 45, 55 (9th Cir. BAP 1998), aff'd, 205 F.3d
28   1350 (9th Cir. 1999).

                                      9
 1   the full amount owed.    See Quintana II, 915 F.2d at 516-17.
 2           Both Quintana I and Quintana II dovetail with the Supreme
 3   Court’s subsequent decision in Johnson v. Home State Bank,
 4   501 U.S. 78, 111 S.Ct. 2150, 115 L.Ed.2d 66 (1991).      Johnson held
 5   that mortgage obligations may be restructured in a chapter 13
 6   case even when the debtor previously has obtained a chapter 7
 7   discharge extinguishing his or her personal liability for that
 8   debt.    Id. at 80, 111 S.Ct. at 2152.     Johnson reasoned that, even
 9   though the debtor no longer was personally liable for such
10   mortgage obligations, the mortgagor’s surviving rights against
11   the collateral fell within the Bankruptcy Code’s broad
12   definitions of “debt” and “claim” and hence could be restructured
13   in a chapter 13 case.    Id. at 80-85, 111 S.Ct. at 2152-55.
14           Johnson emphasized that the prior chapter 7 discharge did
15   not wholly terminate the creditor’s claim but rather merely
16   extinguished “one mode of enforcing [the] claim – namely, an
17   action against the debtor in personam - while leaving intact
18   another – namely, an action against the debtor in rem.”       Id. at
19   84, 111 S.Ct. at 2154.
20           Johnson further emphasized that Congress intended to include
21   obligations enforceable only against the debtor’s property within
22   the Bankruptcy Code’s definition of claim (and hence within the
23   coextensive definition of debt.)       Id. at 85-87, 111 S.Ct. at
24   2154-55.    In discerning the congressional intent, Johnson in
25   relevant part pointed to the text of and legislative history
26   accompanying § 102(2) – the very same text and legislative
27   history that we relied upon in Quintana I.
28           Particularly instructive for our purposes, Johnson opined

                                       10
 1   that the mortgagor rights surviving after the debtor’s receipt of
 2   his chapter 7 discharge were the functional equivalent of a
 3   nonrecourse loan for purposes of applying § 102(2):
 4        . . . we must infer that Congress fully expected that
          an obligation enforceable only against a debtor's
 5        property would be a “claim” under § 101(5) of the Code.
 6             The legislative history surrounding § 102(2)
          directly corroborates this inference. The Committee
 7        Reports accompanying § 102(2) explain that this rule of
          construction contemplates, inter alia, “nonrecourse
 8        loan agreements where the creditor's only rights are
          against property of the debtor, and not against the
 9        debtor personally.” Insofar as the mortgage interest
          that passes through a Chapter 7 liquidation is
10        enforceable only against the debtor's property, this
          interest has the same properties as a nonrecourse loan.
11        It is true, as the Court of Appeals noted, that the
          debtor and creditor in such a case did not conceive of
12        their credit agreement as a nonrecourse loan when they
          entered it. However, insofar as Congress did not
13        expressly limit § 102(2) to nonrecourse loans but
          rather chose general language broad enough to encompass
14        such obligations, we understand Congress' intent to be
          that § 102(2) extend to all interests having the
15        relevant attributes of nonrecourse obligations
          regardless of how these interests come into existence.
16
17   Id. at 86-87, 111 S.Ct. at 2155 (emphasis added and citations
18   omitted).
19        In sum, while Quintana I, Quintana II and Johnson emphasize
20   different points, each holds that obligations enforceable against
21   the debtor’s property but for which the debtor has no personal
22   liability are nonetheless “claims” and “debts” within the meaning
23   of the Bankruptcy Code.   These decisions control the outcome of
24   this appeal.   Their reasoning simply cannot be reconciled with
25   Davis’s contention that the undersecured portion of the amount
26   owed to her secured creditors does not count as a debt for
27   eligibility purposes.   As we explained in Quintana I, the full
28   amount owed continues to be a claim against the collateral, and

                                     11
 1   hence a “debt” under the Bankruptcy Code, unless and until the
 2   collateral is sold.    Furthermore, as stated in Johnson, a prior
 3   chapter 7 discharge only extinguishes one “mode of enforcing” the
 4   claim but does not extinguish the claim itself (or any portion
 5   thereof).13
 6        We acknowledge the three reported decisions holding that,
 7   after a chapter 7 discharge, only the amount of debt owed up to
 8   value of the collateral is counted as debt for eligibility
 9   purposes.     In re Osborne, 323 B.R. 489, Cavaliere v. Sapir,
10   208 B.R. 784, and In re Winder, 171 B.R. 728.     But we don’t find
11   any of these three decisions persuasive.    None of them
12   effectively distinguished Quintana I, Quintana II or Johnson.
13   Indeed, Cavaliere and Winder – as Connecticut cases out of the
14   Second Circuit – don’t even mention the Ninth Circuit precedent
15   of Quintana I or Quintana II.
16        As for Osborne, its reasoning and efforts to distinguish
17   both Quintana cases do not bear close analysis.    In Osborne,
18   after receiving a chapter 7 discharge, the Osbornes filed a
19   chapter 12 petition.    Id. at 490-91.   The secured creditor, Farm
20
21        13
           The discharge also did not extinguish the secured
     creditors’ rights to assert the discharged debt as a setoff
22
     against any prepetition claim that Davis ultimately might have
23   attempted to assert against the secured creditors. See
     Davidovich v. Welton (In re Welton), 901 F.2d 1533, 1538-39 (10th
24   Cir. 1990); Camelback Hosp., Inc. v. Buckenmaier (In re
     Buckenmaier), 127 B.R. 233, 236-37 (9th Cir. BAP 1991); see also
25   Carolco Television Inc. v. Nat’l Broad. Co. (In re De Laurentiis
26   Entm’t Group Inc.), 963 F.2d 1269, 1276-77 (9th Cir. 1992)
     (chapter 11 discharge did not prohibit creditor from asserting
27   setoff in defense to claims asserted by reorganized debtor). In
     that sense as well, the secured creditors’ deficiency claims
28   would have survived Davis’s chapter 7 discharge.

                                       12
 1   Credit, moved to dismiss the chapter 12 case on eligibility
 2   grounds.     According to Farm Credit, it was owed over $1.4
 3   million, and that amount when combined with other debts the
 4   Osbornes owed exceeded the $1.5 million family farmer eligibility
 5   limit set forth in § 101(18) at the time.       Id. at 492.   But
 6   Osborne held that, in light of the effectively nonrecourse nature
 7   of the debt owed to Farm Credit as a result of the prior
 8   chapter 7 discharge, the amount of debt to be counted for
 9   eligibility purposes should be limited to the value of Farm
10   Credit’s collateral – $480,500.         Id. at 492-93.
11        In reaching this holding, Osborne imported into its
12   eligibility analysis both § 506(a)(1)14 and § 502(b)(1).15
13   Osborne pointed out that, under § 506(a), Farm Credit’s secured
14   claim in the chapter 12 case would be limited to the value of the
15
          14
16             Section 506(a)(1) provides in relevant part:
17        An allowed claim of a creditor secured by a lien on
          property in which the estate has an interest . . . is a
18
          secured claim to the extent of the value of such
19        creditor's interest in the estate's interest in such
          property, . . . and is an unsecured claim to the extent
20        that the value of such creditor's interest . . . is
          less than the amount of such allowed claim.
21
          15
           Section 502(b)(1) provides in relevant part that, if an
22
     objection to claim is filed:
23
          the court, after notice and a hearing, shall determine
24        the amount of such claim . . . , and shall allow such
          claim in such amount, except to the extent that –
25
26                (1) such claim is unenforceable against the
                  debtor and property of the debtor, under any
27                agreement or applicable law for a reason
                  other than because such claim is contingent
28                or unmatured; . . . .

                                        13
 1   collateral.     As for any unsecured claim Farm Credit otherwise
 2   would have been entitled to under § 506(a)(1) for the remaining,
 3   undersecured balance it was owed, Osborne reasoned that, pursuant
 4   to § 502(b)(1), the unsecured claim was subject to disallowance
 5   because it was unenforceable as a result of the Osbornes’ prior
 6   chapter 7 discharge.    Id. at 493.    Thus, according to Osborne,
 7   the fact that Farm Credit’s unsecured claim was unenforceable and
 8   subject to disallowance (as a result of the prior chapter 7
 9   discharge) meant that it had no claim at all for eligibility
10   purposes.
11        Osborne further opined that Quintana II was distinguishable.
12   According to Osborne, Quintana II’s holding hinged on the fact
13   that the collateral had not yet been sold, so the full amount of
14   the debt still was collectible against the collateral (unless and
15   until the sale of the collateral actually occurred), whereas the
16   Osbornes’ prior chapter 7 discharge already had rendered
17   uncollectible the undersecured portion of the debt owed to Farm
18   Credit.   Id.
19        But Osborne’s reasoning and its grounds for distinguishing
20   Quintana II cannot be reconciled with Johnson, which stated that
21   nonrecourse secured debt and undersecured debt subject to a
22   chapter 7 discharge are functional equivalents under the
23   Bankruptcy Code for purposes of the meaning of the terms “claim”
24   and “debt.”     See Johnson, 501 U.S. at 86-87, 111 S.Ct. at 2155.
25   Osborne also cannot be reconciled with Johnson’s statement that
26   the prior chapter 7 discharge only extinguished one mode of
27   collecting the claim and not the claim itself.     Id. at 84, 111
28   S.Ct. at 2154.

                                       14
 1        In any event, Osborne simply fails to offer any legitimate
 2   justification for using § 506(a) and § 502(b)(1) to diminish the
 3   amount of the Osbornes’ debt for eligibility purposes.16    Osborne
 4   claims that Scovis v. Henrichsen (In re Scovis), 249 F.3d 975
 5   (9th Cir. 2001) supports its usage of § 506(a) and § 502(b)(1),
 6   but Osborne’s reliance on Scovis is misplaced.    Scovis held
 7   that the entire amount of debt owed to a wholly-undersecured
 8   secured creditor should be counted as unsecured for purposes of
 9   determining chapter 13 eligibility.   Id. at 983-84.17   In so
10   holding, Scovis relied upon the “readily ascertainable” effect
11   § 506(a) and § 522(f) would have on the secured creditor’s claim
12   in the chapter 13 bankruptcy case.    Id.   In short, Scovis stands
13   for the relatively unremarkable proposition that, when
14   determining a debtor’s chapter 13 eligibility, the undersecured
15   portion of a secured creditor’s claim should be counted as
16   unsecured debt.
17        Importantly, Scovis did not hold that undersecured
18   nonrecourse claims should not be counted at all for eligibility
19   purposes.   Extending Scovis in this manner would bring it into
20
21        16
           Cavaliere similarly relies on § 506(a) and § 502(b)(1) to
22   reach the same result as Osborne. Accordingly, we reject
     Cavaliere as well. As for Winder’s dictum, it is unclear how
23   Winder reached its conclusion. Ironically, Winder cites to
     Johnson, but Winder does not explain how Johnson supports
24   Winder’s dictum. As we have explained above, Johnson supports
     the opposite conclusion.
25
          17
26         Section 109(e), which governs eligibility for chapter 13,
     sets separate limits for secured debt and unsecured debt. In
27   contrast, § 109(f), which governs eligibility for chapter 12,
     refers to the definition of “family farmer” in § 101(18) for its
28   aggregate debt limits.

                                     15
 1   conflict with Quintana I, Quintana II and Johnson.     Thus, we
 2   decline to so extend Scovis.
 3        Most importantly, there is a fundamental flaw in Osborne’s
 4   reasoning: it conflates bifurcation of claims into secured and
 5   unsecured portions (as addressed in § 506(a)), and the
 6   allowability of claims after objection (as addressed in
 7   § 502(b)(1)) with whether there is any claim in the first
 8   instance to be counted for eligibility purposes.    Congress
 9   clearly knew how to limit the type and nature of claims counted
10   for eligibility purposes.     See § 109(e) (specifying that only
11   noncontingent and liquidated claims should be counted for
12   eligibility purposes).   But Congress chose to narrow neither the
13   term “claim” nor the term “debt” in the manner Osborne suggests
14   they should be narrowed – to only cover allowed or allowable
15   claims.   Put another way, the statutes Osborne invokes concern
16   the bifurcation and allowance of claims – issues which generally
17   are beyond the scope of the inquiry into the existence of claims
18   for eligibility purposes.18
19
          18
20         We also note that giving the chapter 7 discharge the
     effect Osborne urges would be the functional equivalent of
21   enabling chapter 7 debtors to strip the liens of partially and
     wholly undersecured creditors. But the Supreme Court has held
22
     that, notwithstanding § 506(d), chapter 7 debtors are not
23   permitted under the Bankruptcy Code to engage in lien stripping.
     See Dewsnup v. Timm, 502 U.S. 410, 417, 112 S.Ct. 773, 116
24   L.Ed.2d 903 (1992) (holding that chapter 7 debtor is not
     permitted to “strip down” an undersecured lien); see also Laskin
25   v. First Nat'l Bank of Keystone (In re Laskin), 222 B.R. 872, 876
26   (9th Cir. BAP 1998) (extending Dewsnup to hold that chapter 7
     debtor not permitted to “strip off” wholly unsecured lien).
27   Indeed, if Davis’s chapter 7 discharge effectively had stripped
     down the secured creditors’ liens to the value of their
28                                                      (continued...)

                                       16
 1        We will not substitute Osborne’s judgment of how eligibility
 2   should work in place of Congress’s apparent intent.    When
 3   Congress’s intent is clear based on the plain and unambiguous
 4   language of the statute, our task of construing the statute is at
 5   an end, so long as the statutory scheme appears coherent and
 6   consistent.    United States v. Ron Pair Enters., Inc., 489 U.S.
 7   235, 240–41, 109 S.Ct. 1026, 103 L.Ed.2d 290 (1989).    Here, there
 8   is no ambiguity or incoherence in the broad definition of
 9   “claims” and “debts” used in the Bankruptcy Code.    Nor did
10   Osborne (or Davis) identify any inconsistency in the statutory
11   scheme.
12        Consequently, we will assume that Congress has said what it
13   meant and meant what it has said.     See Conn. Nat'l Bank v.
14   Germain, 503 U.S. 249, 253-54, 112 S.Ct. 1146, 117 L.Ed.2d 391
15   (1992).   If Congress believes that the scope of debts counted for
16   eligibility purposes should be narrower, it will need to amend
17   the statute.   See Lamie v. U.S. Trustee, 540 U.S. 526, 542, 124
18   S.Ct. 1023, 157 L.Ed.2d 1024 (2004).
19                                CONCLUSION
20        For all of the reasons set forth above, we AFFIRM the
21   bankruptcy court’s order dismissing Davis’s chapter 12 case.
22
23
24
25
26
          18
27         (...continued)
     collateral, it would have been unnecessary for her to file, as
28   she did, a lien-stripping complaint in her chapter 12 case.

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