NOT FOR PUBLICATION

MEMORANDUM*

INTRODUCTION

Debtor Carolyn Davis ("Davis") appeals from the bankruptcy court's order determining that she was ineligible to be a debtor in a chapter 121 bankruptcy case and dismissing her case. We AFFIRM.

FACTS

The controlling facts are undisputed. This is Davis's second bankruptcy case. In July 2010, she filed a no-asset chapter 7 bankruptcy case,2 and she was granted a discharge in November 2010. Davis commenced her current bankruptcy case by filing a chapter 12 bankruptcy petition in March 2011. Elizabeth Rojas ("Trustee") was appointed to serve as chapter 12 trustee.

In her schedules accompanying her chapter 12 petition, Davis listed over $4.1 million in secured debt.3 According to her schedules, Davis owned three parcels of real property of significant value:4 (1) a ranch located in Paso Robles, California ("Ranch"), (2) a residence located in Cayucos, California ("Residence") and (3) a triplex located in Paso Robles, California ("Triplex"). According to Davis, at the time of her chapter 12 filing, the Ranch was worth $614,000 and was encumbered by a first trust deed in the amount of $2,663,190 and an equity line of credit in the amount of $254,911. Meanwhile, Davis valued the Residence at $670,000, and stated that it was encumbered by a first trust deed in the amount of $784,793 and an equity line of credit of $90,086. As for the Triplex, Davis valued it at $350,000 and listed a first trust deed encumbering it in the amount of $369,630. In addition to these secured debts, Davis listed property tax liens in the aggregate amount of roughly $9,500.

On its face, the total amount of debt Davis scheduled — $4,172,116 — exceeds the aggregate debt limit for chapter 12 cases set forth in § 101(18). That section provides in relevant part that the term "family farmer" means an "individual . . . whose aggregate debts do not exceed $3,792,650 . . . ."5 In turn, only "family farmers" and "family fisherman" (as those terms are defined in § 101(18) and 101(19A)) are eligible to be debtors under chapter 12. See § 109(f).

In June 2011, Davis filed her chapter 12 plan, in which she proposed to pay the allowed amount of her secured debt over a period of 30 years. Each creditor holding an allowed secured claim would be paid interest only for the first three years at a rate of 3.35%, with both interest and principal payments thereafter, amortized over the next 27 years. All undersecured portions of these encumberances were to be paid nothing.6 Shortly thereafter, Davis amended her plan to provide for interest only payments for seven years, with the full amount of each allowed secured claim due immediately thereafter. Davis's amended plan also increased the interest rate to be paid on the claims secured by the Ranch and the Residence to 5.25% and the claim secured by the Triplex to 4.75%.

The Trustee and some of Davis's secured creditors filed objections to Davis's chapter 12 plan. Bank of America, one of the objecting secured creditors,7 argued among other things that Davis was ineligible to be a debtor under chapter 12 because the aggregate amount of her debt exceeded the debt limit set forth in § 101(18).8

In response to Bank of America's ineligibility argument, Davis asserted that the undersecured portion of each secured creditor's claim should not be counted in determining her eligibility for chapter 12 because her personal liability had been discharged in her prior chapter 7 case. Based on this argument, Davis calculated the aggregate amount of her debt for eligibility purposes as $1,835,000 — equal to the value of the collateral securing all of the secured creditors' claims.

Ultimately, the bankruptcy court agreed that Davis was ineligible to be a chapter 12 debtor. It relied upon Quintana v. IRS (In re Quintana) ("Quintana I"), 107 B.R. 234, 239 (9th Cir. BAP 1989), aff'd ("Quintana II "), 915 F.2d 513 (9th Cir. 1990), which held that the undersecured portion of an essentially nonrecourse secured debt should be counted for purposes of determining chapter 12 eligibility.

On November 23, 2011, the bankruptcy court entered its order dismissing the chapter 12 bankruptcy case, stating that the $4.1 million in debt listed in Davis's schedules exceeded the debt limit set forth in § 101(18) and hence Davis was ineligible under § 109(f) to file a chapter 12 case. Davis timely filed her notice of appeal on December 7, 2011.

JURISDICTION

The bankruptcy court had jurisdiction under 28 U.S.C. § 157(b)(2)(A) and (L), and we have jurisdiction under 28 U.S.C. § 158.

DISCUSSION

The sole issue presented in this appeal is whether, in light of Davis's prior chapter 7 discharge, chapter 12 eligibility as set forth in § 101(18) counts only the portion of her secured debt up to the value of the collateral. This question of the scope of obligations included within debt limits for eligibility purposes is a question of statutory interpretation subject to de novo review. Quintana I, 107 B.R. at 236 (addressing chapter 12 eligibility); see also Ho v. Dowell (In re Ho), 274 B.R. 867, 870 (9th Cir. BAP 2002) (addressing chapter 13 eligibility). There is a split of authority regarding whether the "aggregate debts" referred to in § 101(18) includes the discharged unsecured deficiency claims of secured creditors. If it does, Davis is ineligible; if it does not, she is. Two reported cases — one of which was reversed — have answered this question in the affirmative. In re Scotto-DiClemente, 463 B.R. 308, 311-14 (Bankr. D.N.J. 2012); In re Cavaliere, 194 B.R. 7, 13 (Bankr. D. Conn. 1996), rev'd, Cavaliere v. Sapir, 208 B.R. 784, 785-86 (D. Conn. 1997). And three reported cases have answered this question in the negative. In re Osborne, 323 B.R. 489, 493 (Bankr. D. Or. 2005); Cavaliere v. Sapir, 208 B.R. at 785-86; In re Winder, 171 B.R. 728, 731 n.5 (Bankr. D. Conn. 1994) (in dicta).9

But before we address any of these decisions, we first must look at Quintana I and Quintana II. As prior precedent of this Panel and the Ninth Circuit, they control the outcome of this appeal unless they are inapposite. In these cases, prior to the debtors' chapter 12 bankruptcy filing, the debtors were in default on secured debt in the original principal amount of $1 million. The secured creditor, Connecticut General Life Insurance Company ("CGLIC"), obtained prepetition a state court judgment on the debt in the amount of $1,527,861.89, plus a decree entitling it to conduct a foreclosure sale of the real property collateral. But before CGLIC could conduct the foreclosure sale, the Quintanas filed their chapter 12 petition. In addition to the judgment in favor of CGLIC, the Quintanas listed debts in their bankruptcy schedules in the approximate amount of $60,000.

Asserting a claim in the amount of $1,527,861.89, CGLIC filed a motion to dismiss the bankruptcy case because the aggregate amount of the Quintanas' debt exceeded the debt limitation for chapter 12 eligibility.10

The Quintanas disputed that the entire $1,527,861.89 should be counted for eligibility purposes. They pointed out that, in the process of obtaining its state court judgment, CGLIC had agreed to waive "any right to seek a deficiency judgment . . . if, after any foreclosure sale of the mortgaged property, the debt was not fully satisfied." Id. at 515. They further asserted that, because this waiver had effectively transformed their debt into a nonrecourse obligation, the amount of the debt for eligibility purposes should be limited to the value of the collateral.

In Quintana I, we rejected the Quintanas' argument. We held that, for eligibility purposes, CGLIC's deficiency waiver did not limit the amount of the debt to the value of the collateral. We reasoned that, unless and until the collateral was sold, the full $1,527,861.89 was still a "claim" or "right to payment" held by CGLIC, and hence still a "debt" of the Quintanas, as those terms are defined in the Bankruptcy Code. Quintana I, 107 B.R. at 237-39. We explained that the statutory definitions of "claim" and "debt" were coextensive and quite broad. As set forth in § 101(5), a "claim" includes any "right to payment" and any "right to an equitable remedy for breach of performance if such breach gives rise to a right to payment." And under § 101(12), the term "debt" means "liability on a claim."

We further reasoned that § 102(2) directly resolved the issue because, for Bankruptcy Code purposes, § 102(2) specified that a "claim against the debtor" means and includes a "claim against property of the debtor." Id. at 238.11 We summed up our reasoning in Quintana I as follows:

Id. (footnote omitted).

The Ninth Circuit affirmed Quintana I in Quintana II. Quintana II, 915 F.2d at 518. Whereas we focused on the relevant Bankruptcy Code provisions, the Ninth Circuit focused on the key provisions under Idaho law establishing that, unless and until the collateral actually was sold, CGLIC continued to hold a claim for $1,527,861.89, and hence the Quintanas continued to owe a debt in that amount at the time of their bankruptcy filing.12

Notwithstanding the difference in emphasis, the reasoning of both Quintana I and Quintana II is essentially the same. Quintana II necessarily decided that CGLIC's continuing right to recover the full amount owed against the collateral or the proceeds of the collateral meant that, for purposes of chapter 12 eligibility, the Quintanas continued to be indebted to CGLIC for the full amount owed. See Quintana II, 915 F.2d at 516-17.

Both Quintana I and Quintana II dovetail with the Supreme Court's subsequent decision in Johnson v. Home State Bank, 501 U.S. 78, 111 S.Ct. 2150, 115 L.Ed.2d 66 (1991). Johnson held that mortgage obligations may be restructured in a chapter 13 case even when the debtor previously has obtained a chapter 7 discharge extinguishing his or her personal liability for that debt. Id. at 80, 111 S.Ct. at 2152. Johnson reasoned that, even though the debtor no longer was personally liable for such mortgage obligations, the mortgagor's surviving rights against the collateral fell within the Bankruptcy Code's broad definitions of "debt" and "claim" and hence could be restructured in a chapter 13 case. Id. at 80-85, 111 S.Ct. at 2152-55.

Johnson emphasized that the prior chapter 7 discharge did not wholly terminate the creditor's claim but rather merely extinguished "one mode of enforcing [the] claim — namely, an action against the debtor in personam — while leaving intact another — namely, an action against the debtor in rem." Id. at 84, 111 S.Ct. at 2154.

Johnson further emphasized that Congress intended to include obligations enforceable only against the debtor's property within the Bankruptcy Code's definition of claim (and hence within the coextensive definition of debt.) Id. at 85-87, 111 S.Ct. at 2154-55. In discerning the congressional intent, Johnson in relevant part pointed to the text of and legislative history accompanying § 102(2) — the very same text and legislative history that we relied upon in Quintana I.

Particularly instructive for our purposes, Johnson opined that the mortgagor rights surviving after the debtor's receipt of his chapter 7 discharge were the functional equivalent of a nonrecourse loan for purposes of applying § 102(2):

Id. at 86-87, 111 S.Ct. at 2155 (emphasis added and citations omitted).

In sum, while Quintana I, Quintana II and Johnson emphasize different points, each holds that obligations enforceable against the debtor's property but for which the debtor has no personal liability are nonetheless "claims" and "debts" within the meaning of the Bankruptcy Code. These decisions control the outcome of this appeal. Their reasoning simply cannot be reconciled with Davis's contention that the undersecured portion of the amount owed to her secured creditors does not count as a debt for eligibility purposes. As we explained in Quintana I, the full amount owed continues to be a claim against the collateral, and hence a "debt" under the Bankruptcy Code, unless and until the collateral is sold. Furthermore, as stated in Johnson, a prior chapter 7 discharge only extinguishes one "mode of enforcing" the claim but does not extinguish the claim itself (or any portion thereof).13

We acknowledge the three reported decisions holding that, after a chapter 7 discharge, only the amount of debt owed up to value of the collateral is counted as debt for eligibility purposes. In re Osborne, 323 B.R. 489, Cavaliere v. Sapir, 208 B.R. 784, and In re Winder, 171 B.R. 728. But we don't find any of these three decisions persuasive. None of them effectively distinguished Quintana I, Quintana II or Johnson. Indeed, Cavaliere and Winder — as Connecticut cases out of the Second Circuit — don't even mention the Ninth Circuit precedent of Quintana I or Quintana II.

As for Osborne, its reasoning and efforts to distinguish both Quintana cases do not bear close analysis. In Osborne, after receiving a chapter 7 discharge, the Osbornes filed a chapter 12 petition. Id. at 490-91. The secured creditor, Farm Credit, moved to dismiss the chapter 12 case on eligibility grounds. According to Farm Credit, it was owed over $1.4 million, and that amount when combined with other debts the Osbornes owed exceeded the $1.5 million family farmer eligibility limit set forth in § 101(18) at the time. Id. at 492. But Osborne held that, in light of the effectively nonrecourse nature of the debt owed to Farm Credit as a result of the prior chapter 7 discharge, the amount of debt to be counted for eligibility purposes should be limited to the value of Farm Credit's collateral — $480,500. Id. at 492-93.

In reaching this holding, Osborne imported into its eligibility analysis both § 506(a)(1)14 and § 502(b)(1).15 Osborne pointed out that, under § 506(a), Farm Credit's secured claim in the chapter 12 case would be limited to the value of the collateral. As for any unsecured claim Farm Credit otherwise would have been entitled to under § 506(a)(1) for the remaining, undersecured balance it was owed, Osborne reasoned that, pursuant to § 502(b)(1), the unsecured claim was subject to disallowance because it was unenforceable as a result of the Osbornes' prior chapter 7 discharge. Id. at 493. Thus, according to Osborne, the fact that Farm Credit's unsecured claim was unenforceable and subject to disallowance (as a result of the prior chapter 7 discharge) meant that it had no claim at all for eligibility purposes.

Osborne further opined that Quintana II was distinguishable. According to Osborne, Quintana II's holding hinged on the fact that the collateral had not yet been sold, so the full amount of the debt still was collectible against the collateral (unless and until the sale of the collateral actually occurred), whereas the Osbornes' prior chapter 7 discharge already had rendered uncollectible the undersecured portion of the debt owed to Farm Credit. Id.

But Osborne's reasoning and its grounds for distinguishing Quintana II cannot be reconciled with Johnson, which stated that nonrecourse secured debt and undersecured debt subject to a chapter 7 discharge are functional equivalents under the Bankruptcy Code for purposes of the meaning of the terms "claim" and "debt." See Johnson, 501 U.S. at 86-87, 111 S.Ct. at 2155. Osborne also cannot be reconciled with Johnson's statement that the prior chapter 7 discharge only extinguished one mode of collecting the claim and not the claim itself. Id. at 84, 111 S.Ct. at 2154.

In any event, Osborne simply fails to offer any legitimate justification for using § 506(a) and § 502(b)(1) to diminish the amount of the Osbornes' debt for eligibility purposes.16 Osborne claims that Scovis v. Henrichsen (In re Scovis), 249 F.3d 975 (9th Cir. 2001) supports its usage of § 506(a) and § 502(b)(1), but Osborne's reliance on Scovis is misplaced. Scovis held that the entire amount of debt owed to a wholly-undersecured secured creditor should be counted as unsecured for purposes of determining chapter 13 eligibility. Id. at 983-84.17 In so holding, Scovis relied upon the "readily ascertainable" effect § 506(a) and § 522(f) would have on the secured creditor's claim in the chapter 13 bankruptcy case. Id. In short, Scovis stands for the relatively unremarkable proposition that, when determining a debtor's chapter 13 eligibility, the undersecured portion of a secured creditor's claim should be counted as unsecured debt.

Importantly, Scovis did not hold that undersecured nonrecourse claims should not be counted at all for eligibility purposes. Extending Scovis in this manner would bring it into conflict with Quintana I, Quintana II and Johnson. Thus, we decline to so extend Scovis.

Most importantly, there is a fundamental flaw in Osborne's reasoning: it conflates bifurcation of claims into secured and unsecured portions (as addressed in § 506(a)), and the allowability of claims after objection (as addressed in § 502(b)(1)) with whether there is any claim in the first instance to be counted for eligibility purposes. Congress clearly knew how to limit the type and nature of claims counted for eligibility purposes. See § 109(e) (specifying that only noncontingent and liquidated claims should be counted for eligibility purposes). But Congress chose to narrow neither the term "claim" nor the term "debt" in the manner Osborne suggests they should be narrowed — to only cover allowed or allowable claims. Put another way, the statutes Osborne invokes concern the bifurcation and allowance of claims — issues which generally are beyond the scope of the inquiry into the existence of claims for eligibility purposes.18

We will not substitute Osborne's judgment of how eligibility should work in place of Congress's apparent intent. When Congress's intent is clear based on the plain and unambiguous language of the statute, our task of construing the statute is at an end, so long as the statutory scheme appears coherent and consistent. United States v. Ron Pair Enters., Inc., 489 U.S. 235, 240-41, 109 S.Ct. 1026, 103 L.Ed.2d 290 (1989). Here, there is no ambiguity or incoherence in the broad definition of "claims" and "debts" used in the Bankruptcy Code. Nor did Osborne (or Davis) identify any inconsistency in the statutory scheme.

Consequently, we will assume that Congress has said what it meant and meant what it has said. See Conn. Nat'l Bank v. Germain, 503 U.S. 249, 253-54, 112 S.Ct. 1146, 117 L.Ed.2d 391 (1992). If Congress believes that the scope of debts counted for eligibility purposes should be narrower, it will need to amend the statute. See Lamie v. U.S. Trustee, 540 U.S. 526, 542, 124 S.Ct. 1023, 157 L.Ed.2d 1024 (2004).

CONCLUSION

For all of the reasons set forth above, we AFFIRM the bankruptcy court's order dismissing Davis's chapter 12 case.