Court Opinion

ID: 4192991
Source: CourtListenerOpinion
Date Created: 2017-08-03 17:03:39.735855+00
Date Added: 2024-06-11T14:40:25.044712
License: Public Domain

FILED
                                                                 AUG 28 2014
 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.     NC-13-1455-KuDJu
                                   )
 6   PAUL DUNCAN GILLESPIE,        )      Bk. No.     09-55224
                                   )
 7                  Debtor.        )      Adv. No.    09-05208
     ______________________________)
 8                                 )
     RAYMOND A. BECHTOLD,          )
 9                                 )
                    Appellant,     )
10                                 )
     v.                            )      OPINION
11                                 )
     PAUL DUNCAN GILLESPIE,        )
12                                 )
                    Appellee.      )
13   ______________________________)
14
15                   Argued and Submitted on July 24, 2014
                          at San Francisco, California
16
                            Filed – August 28, 2014
17                            ____________________
18             Appeal from the United States Bankruptcy Court
                   for the Northern District of California
19
        Honorable Arthur S. Weissbrodt, Bankruptcy Judge, Presiding
20
21
22   Appearances:     Marc L. Shea of Shea & McIntyre, A.P.C argued for
                      appellant Raymond A. Bechtold; Wayne A. Silver
23                    argued for appellee Paul Duncan Gillespie.
24
25   Before:   KURTZ, DUNN and JURY, Bankruptcy Judges.
26
27
28
 1   KURTZ, Bankruptcy Judge:
 2
 3                              INTRODUCTION
 4        For purposes of the discharge injunction, when does an
 5   attorney’s fees claim arise?   When the fees are incurred or when
 6   the underlying claim arises?   The bankruptcy court held that,
 7   because the debtor’s participation in postpetition litigation was
 8   “not entirely voluntary,” the creditor’s fees claim arose
 9   prepetition and hence was subject to the debtor’s chapter 71
10   discharge.   In so holding, the bankruptcy court distinguished
11   Boeing N. Am., Inc. v. Ybarra (In re Ybarra), 424 F.3d 1018,
12   1026-27 (9th Cir. 2005).
13        We disagree with the bankruptcy court.    The bankruptcy court
14   misconstrued the meaning of voluntariness as used in Ybarra and
15   did not identify any meaningful distinction between Ybarra and
16   the instant case.   Accordingly, we REVERSE AND REMAND.
17                                  FACTS
18        The debtor, Paul Duncan Gillespie, owned and controlled
19   several companies, including Dymatix, Inc.    At the time of
20   Gillespie’s chapter 7 bankruptcy filing, Gillespie and his
21   companies were parties to a lawsuit commenced by Raymond Bechtold
22   in the Santa Clara County Superior Court (Case No. 08-CV-119735).
23   The state court lawsuit arose from Gillespie’s default on a loan,
24   which in turn led the lender, Giga-tronics, Inc., to sell all of
25   its interest in the collateral securing the loan to Bechtold.
26
27
          1
             Unless specified otherwise, all chapter and section
28   references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532.

                                      2
 1   This collateral apparently consisted of much of Dymatix’s assets
 2   including its general intangibles and its intellectual property.
 3   Bechtold then attempted to enforce his right to possession of the
 4   collateral, which right Gillespie and Dymatix disputed.     Among
 5   other things, Gillespie and Dymatix asserted that Giga-tronics’
 6   sale of the collateral to Bechtold constituted a wrongful
 7   foreclosure because Giga-tronics failed to obtain possession of
 8   the collateral before conducting the sale.   In addition,
 9   Gillespie and Dymatix filed a number of cross-claims against
10   Bechtold for breach of contract, conversion, breach of fiduciary
11   duty and tortious interference with contractual relations.
12        On June 22, 2009, several days before Gillespie’s bankruptcy
13   filing, the state court issued an order providing for Gillespie’s
14   incarceration based on the failure of Gillespie and Dymatix to
15   fully comply with the state court’s prior prejudgment writ of
16   possession, which had directed Gillespie and Dymatix to turn over
17   all of the collateral to Bechtold.   Dymatix filed its chapter 7
18   bankruptcy at the same time as Gillespie (Bk. No. 09–55233).
19        The commencement of the bankruptcy cases on July 1, 2009,
20   did not result in the cessation of the litigation between the
21   parties.   To the contrary, the litigation expanded into the
22   bankruptcy court forum.   Among other things, Bechtold filed a
23   series of relief from stay motions seeking permission to pursue
24   his state law remedies in the state court.   Bechtold also filed
25   adversary proceedings against Dymatix and Gillespie seeking a
26   bankruptcy court determination of his ownership of and
27   entitlement to the collateral.   In addition, Bechtold’s adversary
28   complaint against Gillespie initially contained claims for relief

                                      3
 1   under §§ 523(a)(2) and (4), but Bechtold later abandoned his
 2   exception to discharge claims by omitting them from his third
 3   amended complaint filed in February 2010.
 4        In response to the third amended complaint, Gillespie filed
 5   in March 2010 an answer and roughly a dozen counterclaims against
 6   Bechtold.   The counterclaims largely mirrored the cross-claims
 7   Gillespie had filed in the state court.   Whereas Gillespie has
 8   characterized his cross-claims and counterclaims as merely
 9   defensive in nature, the pleadings themselves tell a different
10   story.   Both his state court cross-claims and his bankruptcy
11   court counterclaims requested compensatory damages, punitive
12   damages, costs and attorney’s fees.
13        In May 2010, the bankruptcy court granted Bechtold limited
14   relief from the automatic stay to permit him to proceed with some
15   aspects of the state court litigation.    The relief from stay
16   order explicitly prohibited Bechtold from enforcing any judgment
17   he might obtain in the state court against Gillespie or Dymatix,
18   or from seeking any damages for prepetition events.   But the
19   order explicitly permitted Bechtold to proceed to trial on the
20   issue of his rights in the collateral.    The order also stayed the
21   two adversary proceedings Bechtold had filed against Gillespie
22   and Dymatix, inasmuch as they sought essentially the same relief
23   as Bechtold was seeking from the state court.   Eventually, after
24   Bechtold obtained the relief he was seeking from the state court,
25   the bankruptcy court dismissed his adversary proceedings.
26        In October 2010, the state court held trial and in March
27   2011 issued a final judgment in favor of Bechtold.    Among other
28   things, the state court determined that, since July 2008,

                                      4
 1   Bechtold had been the owner of the collateral and was entitled to
 2   possession of the collateral.   Based on that determination, the
 3   state court directed Dymatix and Gillespie to turn over any
 4   collateral still in their possession.   The judgment furthermore
 5   enjoined Dymatix and Gillespie from any further use of the
 6   collateral.   Additionally, the judgment ruled against Dymatix and
 7   Gillespie on all of their cross-claims.   In a post-judgment
 8   order, the state court awarded against both Dymatix and Gillespie
 9   $134,573 in fees that Bechtold had incurred postpetition in
10   litigating the dispute both in the state court and in the
11   bankruptcy court.
12        Bechtold then filed two motions in the bankruptcy court
13   seeking, among other things, permission to enforce both the non-
14   monetary relief granted by the state court and its fee award.
15   Between May 2011 and September 2013, a period of well over two
16   years, Bechtold and Gillespie both filed numerous papers in the
17   bankruptcy court regarding whether Bechtold should be permitted
18   to enforce his right to possession and exclusive use of the
19   collateral as well as his fee award.
20        In fact, by September 2011, the bankruptcy court by oral
21   tentative ruling seemingly had resolved the fee issue.   More
22   specifically, the bankruptcy court orally ruled at a hearing held
23   on September 23, 2011, that Ybarra applied to Bechtold’s
24   attorney’s fee claim.   According to the bankruptcy court, the
25   fees incurred postpetition would be treated as a postpetition
26   claim for purposes of the discharge injunction because Gillespie
27   voluntarily returned to the fray and continued to litigate with
28   Bechtold in the state court after Gillespie commenced his

                                      5
 1   bankruptcy case and even after Bechtold had abandoned his
 2   nondischargeability claims.    After Bechtold abandoned his
 3   nondischargeability claims, the bankruptcy court reasoned,
 4   Gillespie could have exited the state court litigation without
 5   any concern of continuing exposure for prepetition debts in light
 6   of his bankruptcy discharge.
 7        Instead of walking away from the state court litigation, the
 8   bankruptcy court noted, Gillespie took affirmative steps to
 9   resume that litigation.   In particular, Gillespie objected to the
10   chapter 7 trustee’s proposed sale to Bechtold of the estate’s
11   interest in the state court lawsuit and in the collateral in
12   exchange for a cash payment of $14,000.    Then, Gillespie
13   successfully overbid for the same property, agreeing to pay the
14   chapter 7 trustee $32,000 to purchase essentially the same assets
15   from the trustee.   The court entered an order approving the sale
16   to Gillespie in February 2010, shortly after Bechtold abandoned
17   his nondischargeability claims against Gillespie.
18        In essence, the bankruptcy court determined that Gillespie
19   affirmatively and voluntarily acted postpetition by purchasing
20   the estate’s interest in his disputed claims against Bechtold and
21   the collateral and by voluntarily returning to the state court
22   litigation to press those claims.     But after the state court
23   completely rejected all of Gillespie’s claims, the bankruptcy
24   court explained, Gillespie sought to characterize all of these
25   claims as purely defensive in nature.    Under these circumstances,
26   the bankruptcy court concluded, Ybarra was apposite and its rule
27   regarding the discharge of attorney’s fees incurred postpetition
28   should be followed.

                                       6
 1        Even so, the bankruptcy court’s initial written order on the
 2   subject matter of Bechtold’s motions, an order entered in October
 3   2011, explicitly reserved all issues regarding the effect of the
 4   discharge injunction on Bechtold’s entitlement to enforce the
 5   state court judgment.
 6        At the conclusion of the September 23, 2011 hearing, the
 7   court indicated that there were two small lingering issues that
 8   still needed deciding.   One concerned whether the state court
 9   properly included fees incurred by Bechtold in prosecuting his
10   nondischargeability claims (before Bechtold abandoned those
11   claims).   The other concerned whether the bankruptcy court should
12   forbear from issuing its final order on the matter until after
13   Gillespie’s state court appeal had run its course.   The court
14   continued the hearing so that it could ponder these issues.
15        In the ensuing months, the parties filed a seemingly endless
16   series of supplemental papers, and the bankruptcy court held a
17   number of continued hearings.   Some of the papers and hearings
18   addressed issues that already had been addressed by the court
19   while others raised new issues.   Nonetheless, on several
20   occasions, the court orally re-confirmed or “finalized” its prior
21   tentative ruling regarding the fee issue.   For instance, in March
22   2012, the court stated as follows:
23        At the last hearing held December 8th, 2011, the Court
          finalized the previous tentative ruling from September
24        2011 that Defendant, quote: “. . . returned to the fray
          by purchasing the bankruptcy estate’s litigation rights
25        and pursuing those rights in the State Court
          litigation.” As a result the Chapter 7 discharge does
26        not discharge Defendant’s debt for post-petition
          attorney’s fees and costs awarded by the State Court.
27
28   Hr’g Tr. (March 6, 2012) at 3:25-4:9.   The court once again

                                       7
 1   orally re-confirmed its fee ruling at a hearing held in November
 2   2012.
 3           Nonetheless, in its final written decision on the fee issue,
 4   the court reversed itself and held that In re Ybarra did not
 5   apply and that the postpetition fees had been discharged.     In so
 6   holding, the court primarily relied on the fact that Gillespie
 7   was a defendant in the state court litigation, whereas the debtor
 8   in Ybarra was the plaintiff.     The bankruptcy court acknowledged
 9   that Gillespie affirmatively pursued its cross-claims in the
10   state court litigation postpetition, but still concluded that
11   Gillespie had not “voluntarily borne the risk of incurring
12   attorneys’ fees in pursuing the litigation” postpetition because
13   Bechtold had initiated the litigation as plaintiff.
14           The bankruptcy court further reasoned that Gillespie’s
15   postpetition participation in the state court litigation “was not
16   entirely voluntary” because, if he had not purchased the estate’s
17   interest in the collateral and in the state court litigation and
18   had not thereafter pressed his claims in the state court, he
19   would have forfeited any interest he had in the collateral, in
20   his cross-claims and in his defenses against Bechtold’s claims.
21           On September 9, 2013, the bankuptcy court entered its final
22   memorandum decision and order, and Bechtold timely appealed.
23                                JURISDICTION
24           The bankruptcy court had jurisdiction pursuant to 28 U.S.C.
25   §§ 1334 and 157(b)(2)(A) and (O).      We have jurisdiction under 28
26   U.S.C. § 158.
27                                    ISSUE
28           Did the bankruptcy court correctly interpret In re Ybarra

                                        8
 1   when it concluded that Bechtold’s fee claim constituted a
 2   prepetition claim and hence was covered by Gillespie’s chapter 7
 3   discharge?
 4                           STANDARDS OF REVIEW
 5        The scope of a chapter 7 discharge is a question of law that
 6   requires use to construe the discharge provisions of the
 7   Bankruptcy Code.   Hassanally v. Republic Bank (In re Hassanally),
 8   208 B.R. 46, 48 (9th Cir. BAP 1997).     We review questions of law
 9   de novo.   Id.
10                               DISCUSSION
11        The only question raised in this appeal is whether the
12   attorney’s fees the state court awarded against Gillespie
13   constitute a prepetition debt or a postpetition debt for purposes
14   of Gillespie’s chapter 7 discharge.
15        A chapter 7 discharge releases the debtor from personal
16   liability for debts arising “before the date of the order for
17   relief under this chapter” and enjoins creditors from enforcing
18   or collecting upon those debts.   See § 727(b); see also
19   § 524(a)(2); Heilman v. Heilman (In re Heilman), 430 B.R. 213,
20   218 (9th Cir. BAP 2010).   Under the Bankruptcy Code, the term
21   “debt” means liability on a claim.    § 101(12).   The existence of
22   such a claim ordinarily is determined by reference to
23   nonbankruptcy law – particularly state law.    In re Hassanally,
24   208 B.R. at 49.
25        But federal law determines when a claim arises for
26   bankruptcy purposes.   SNTL Corp. v. Ctr. Ins. Co. (In re SNTL
27   Corp.), 571 F.3d 826, 839 (9th Cir. 2009); Zilog, Inc. v. Corning
28   (In re Zilog, Inc.), 450 F.3d 996, 1000 (9th Cir. 2006).     To

                                       9
 1   ascertain when a claim arises for purposes of the discharge
 2   injunction, we must first consider the Bankruptcy Code’s broad
 3   definition of the term “claim,” which means a:
 4        (A) right to payment, whether or not such right is
          reduced to judgment, liquidated, unliquidated, fixed,
 5        contingent, matured, unmatured, disputed, undisputed,
          legal, equitable, secured, or unsecured; or [a]
 6
          (B) right to an equitable remedy for breach of
 7        performance if such breach gives rise to a right to
          payment, whether or not such right to an equitable
 8        remedy is reduced to judgment, fixed, contingent,
          matured, unmatured, disputed, undisputed, secured, or
 9        unsecured.
10   § 101(5).
11        The Bankruptcy Code utilizes an exceptionally broad
12   definition of the term “claim” in order to ensure that “all legal
13   obligations of the debtor, no matter how remote or contingent,
14   will be able to be dealt with in the bankruptcy case.”    In re
15   SNTL Corp., 571 F.3d at 838 (quoting Cal. Dep’t of Health Servs.
16   v. Jensen (In re Jensen), 995 F.2d 925, 929-30 (9th Cir. 1993)).
17   This broad definition “is critical in effectuating the bankruptcy
18   code’s policy of giving the debtor a ‘fresh start.’” In re
19   Jensen, 995 F.2d at 930.
20        To facilitate this broad definition and the fresh start
21   policy, the Ninth Circuit ordinarily employs the “fair
22   contemplation” test in determining when a claim arises.    See,
23   e.g., In re SNTL Corp., 571 F.3d at 839; In re Zilog, 450 F.3d at
24   1000; In re Jensen, 995 F.2d at 930.   This test dictates that a
25   claim arises when the claimant “can fairly or reasonably
26   contemplate the claim’s existence even if a cause of action has
27   not yet accrued under nonbankruptcy law.”   In re SNTL Corp., 571
28   F.3d at 839 (citing Cool Fuel, Inc. v. Bd. of Equalization (In re

                                    10
 1   Cool Fuel, Inc.), 210 F.3d 999, 1007 (9th Cir. 2000)).
 2           However, the Ninth Circuit has adopted a different standard
 3   for determining for discharge purposes when an attorney’s fee
 4   claim arises.    Under that standard, even if the underlying claim
 5   arose prepetition, the claim for fees incurred postpetition on
 6   account of that underlying claim is deemed to have arisen
 7   postpetition if the debtor “returned to the fray” postpetition by
 8   voluntarily and affirmatively acting to commence or resume the
 9   litigation with the creditor.    In re Ybarra, 424 F.3d at 1026-
10   1027.    The Ybarra court explained that, “[e]ven if a cause of
11   action arose pre-petition, the discharge shield cannot be used as
12   a sword that enables a debtor to undertake risk-free
13   [postpetition] litigation at others’ expense.”    Id. at 1026.     The
14   Ybarra court further explained that, while Congress intended the
15   discharge to relieve debtors from costs associated with their
16   prepetition acts even if such costs continue to accrue
17   postpetition, it did not intend to insulate debtors from costs
18   associated with postpetition acts.     Id. at 1024 (citing In re
19   Hadden, 57 B.R. 187, 190 (Bankr. W.D. Wis. 1986)).
20           The Ybarra rule applies regardless of whether the litigation
21   begins prepetition or postpetition, regardless of the nature of
22   the underlying claim, and regardless of the forum in which the
23   postpetition litigation takes place.    See, e.g., In re Ybarra,
24   424 F.3d at 1023-24; Siegel v. Fed. Home Loan Mortg. Corp., 143
25   F.3d 525, 533-34 (9th Cir. 1998); Shure v. Vermont (In re
26   Sure-Snap), 983 F.2d 1015, 1017-19 (11th Cir. 1993).
27           The bankruptcy court here acknowledged that Gillespie
28   affirmatively acted to resume his participation in the state

                                       11
 1   court litigation with Bechtold.    Gillespie did so by purchasing
 2   the estate’s interest in the collateral and in the state court
 3   lawsuit and by litigating the state court action to its
 4   conclusion.   Nonetheless, the bankruptcy court still held that
 5   Gillespie’s return to the state court litigation was not
 6   voluntary within the meaning of Ybarra.      The bankruptcy court
 7   concluded that Gillespie’s postpetition litigation activity was
 8   not entirely voluntary because Gillespie stood to lose any
 9   interest he otherwise might have had in the collateral and in the
10   cross-claims and defenses he asserted in the state court lawsuit
11   unless he continued to actively assert those interests in the
12   lawsuit.
13        But this cannot be what Ybarra had in mind when it stated
14   that “Ybarra’s actions to revive the state suit were sufficiently
15   voluntary and affirmative to be considered ‘returning to the
16   fray.’”    In re Ybarra, 424 F.3d at 1027.   Any time debtors hold
17   disputed claims or property interests at the time of their
18   bankruptcy filing, those claims or interests are at risk of being
19   forfeited unless they or their estate take postpetition action to
20   preserve them.   This was precisely the state of affairs each of
21   the debtors faced in Ybarra, Siegel and Sure-Snap.      Thus, in
22   determining whether a debtor’s postpetition actions were
23   voluntary, Ybarra could not have meant that bankruptcy courts
24   should assess whether the debtors were compelled to act to
25   prevent the loss of their asserted interests and claims.
26        The bankruptcy court further ruled that Ybarra does not
27   apply when, as here, the debtor is the named defendant in the
28   postpetition litigation.   According to the bankruptcy court,

                                       12
 1   Ybarra only should apply when the debtor is the named plaintiff.
 2   The bankruptcy court offered no explanation for this limitation
 3   of Ybarra, except to note that it had not found any cases in
 4   which the Ybarra rule had been applied to a debtor who engaged in
 5   postpetition litigation nominally as a defendant.
 6        We disagree with the bankruptcy court’s attempt to limit
 7   Ybarra in this manner.   The focus of Ybarra’s inquiry does not
 8   turn upon who is named as plaintiff and who is named as
 9   defendant.   Rather, the focus of the Ybarra inquiry is on the
10   debtor’s motivation for engaging in the postpetition litigation
11   and whether the debtor “returned to the fray” to press his
12   disputed claims and property interests or for some other purpose.
13   See id. at 1023-24; see also In re Sure-Snap Corp., 983 F.2d at
14   1018; In re Hadden, 57 B.R. at 190.
15        We acknowledge that these three decisions do not specify
16   where the line between voluntary and involuntary always should be
17   drawn.   Nonetheless, these three decisions support the conclusion
18   that Gillespie is not entitled to a discharge of Bechtold’s
19   postpetition attorney’s fees given that Gillespie chose to resume
20   his participation in the state court action postpetition in order
21   to preserve his or her asserted interest in the collateral, in
22   his cross-claims, and in his defenses to Bechtold’s claims.
23        The bankruptcy court explicitly found here that Gillespie
24   continued to pursue the state court litigation postpetition for
25   these purposes.   While the bankruptcy court later reversed itself
26   regarding the voluntariness of Gillespie’s postpetition actions,
27   the bankruptcy court never reversed its findings regarding the
28   underlying purposes of Gillespie’s postpetition litigation

                                     13
 1   activity, and neither party appealed the bankruptcy court’s
 2   findings in this regard.    Consequently, we accept those findings
 3   as true.   See Sachan v. Huh (In re Huh), 506 B.R. 257, 272 (9th
 4   Cir. BAP 2014) (en banc).
 5        Moreover, we agree with these findings.      The state court
 6   litigation was, at bottom, a dispute over ownership of the
 7   collateral, with each side using the litigation as an opportunity
 8   to assert their respective interests in the collateral and to
 9   assert claims for damages to the extent their respective property
10   interests were interfered with.2      Simply put, whichever side was
11   nominally designated as the plaintiff and whichever was nominally
12   designated as the defendant did not, in this instance, change the
13   fundamental nature and purpose of the litigation.
14        The only other ground the bankruptcy court offered for
15   distinguishing Ybarra was that the debtor there was offered a
16   monetary settlement as an alternative to continued postpetition
17   litigation, whereas Gillespie here was not offered any money in
18   lieu of continuing to assert his interests in the collateral and
19   the state court lawsuit.    However, as we already have explained
20   above, the focus of the Ybarra test is on the purpose of the
21   postpetition litigation.    Thus, any distinction regarding what,
22   if anything, the debtor was offered to not pursue his or her
23
          2
24           Of course, as a result of Gillespie’s bankruptcy
     discharge, by the time Gillespie resumed his participation in the
25   state court action, Gillespie no longer had any exposure on
26   account of Bechtold’s damages claims arising from Gillespie’s
     prepetition interference with Bechtold’s property interests in
27   the collateral. See generally In re Hassanally, 208 B.R. at 54-
     55 (holding that construction defects claims arose prepetition
28   when the tortious conduct occurred and hence were discharged).

                                      14
 1   asserted interests and claims is immaterial, except to the extent
 2   it tends to demonstrate the underlying purpose of the
 3   postpetition litigation.
 4        Aside from the bankruptcy court’s reasoning, Gillespie
 5   similarly argues that he had no choice but to return to the fray,
 6   so the bankruptcy court correctly determined that his return to
 7   the fray was not voluntary.   As Gillespie puts it, he “never had
 8   the option of enjoying his fresh start, because Bechtold
 9   contended that Gillespie was wrongfully in possession of [the
10   collateral], and that Gillespie’s continued wrongful possession
11   was actionable despite Gillespie’s [c]hapter 7 discharge.”    Aple.
12   Resp. Brief (Jan 27, 2014) at p. 25.
13        Gillespie’s argument is fallacious.     It improperly equates
14   Gillespie’s entitlement to a fresh start and his entitlement to
15   the benefit of his chapter 7 discharge with an entitlement to
16   indefinitely impede Bechtold’s right as owner to exclusive use
17   and possession of the collateral.     In other words, Gillespie’s
18   chapter 7 discharge rights did not alter or entitle him to alter
19   Bechtold’s property interests.   Bechtold’s property interests
20   passed through Gillespie’s bankruptcy proceedings unaffected.
21   See Dewsnup v. Timm, 502 U.S. 410, 418 (1992).     “[A] bankruptcy
22   discharge extinguishes only one mode of enforcing a claim –
23   namely, an action against the debtor in personam – while leaving
24   intact another – namely, an action against the debtor in rem.”
25   Johnson v. Home State Bank, 501 U.S. 78, 84 (1991).
26        Moreover, Gillespie’s argument is inconsistent with Ybarra’s
27   teaching that, “[i]f the debtor chooses to enjoy his fresh start
28   by pursuing pre-petition claims . . ., he must do so at the risk

                                      15
 1   of incurring the post-petition costs involved in his acts.”       In
 2   re Ybarra, 424 F.3d at 1024 (quoting In re Hadden, 57 B.R. at
 3   190).
 4           In sum, the bankruptcy court committed reversible error
 5   because it misconstrued Ybarra.     In addition to reversing the
 6   bankruptcy court’s ruling, we must remand this matter for further
 7   findings.    The record indicates that a portion of the attorney’s
 8   fees Bechtold incurred postpetition were incurred while Gillespie
 9   was still under the cloud of Bechtold’s nondischargeability
10   claims.    The bankruptcy court must determine whether and to what
11   extent, before Bechtold abandoned his nondischargeability claims,
12   Gillespie engaged in his postpetition litigation activity for the
13   purpose of limiting or preventing his exposure on account of the
14   nondischargeability claims.    To that extent, under Ybarra,
15   Bechtold’s postpetition fees should be considered discharged.      We
16   express no opinion regarding how the bankruptcy court should
17   apportion Bechtold’s postpetition fees between those that are
18   discharged and those that are not discharged.    Instead, we leave
19   it to the bankruptcy court to address that issue in the first
20   instance.
21                                 CONCLUSION
22           For the reasons set forth above, we REVERSE AND REMAND.
23
24
25
26
27
28

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