In re: Paul Richard Cherrett and Colleen Courtney Cherrett, 9th Cir. BAP (2014)

7/25/2019 In re: Paul Richard Cherrett and Colleen Courtney Cherrett, 9th Cir. BAP (2014)

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FILED

NOV 07 2014

SUSAN M. SPRAUL, CLERKU.S. BKCY. APP. PANELOF THE NINTH CIRCUIT

UNITED STATES BANKRUPTCY APPELLATE PANEL

OF THE NINTH CIRCUIT

I n r e: ) BAP No. CC- 14- 1056- DKi Ta)

PAUL RI CHARD CHERRETT AND ) Bk. No. RS 13- 24792- SCCOLLEEN COURTNEY CHERRETT, )

)Debt or s. )

______________________________))

ASPEN SKI I NG COMPANY, ))

Appel l ant , ))

v. ) O P I N I O N)

PAUL RI CHARD CHERRETT; )COLLEEN COURTNEY CHERRETT; )ART CI SNEROS, Chapt er 7 )Tr ust ee, )

)Appel l ees. )

______________________________)

Ar gued and Submi t t ed on Oct ober 23, 2014at Mal i bu, CA

Fi l ed - November 7, 2014

Appeal f r om t he Uni t ed St at es Bankrupt cy Cour tf or t he Cent r al Di str i ct of Cal i f or ni a

Honor abl e Scot t C. Cl ar kson, Bankrupt cy J udge, Pr esi di ng.

Appear ances: Scot t H. Tal kov of Rei d & Hel l yer appear ed andar gued f or appel l ant Aspen Ski i ng Co. ; Kat hl een J .McCar t hy of t he Law Of f i ce of Thomas H. Casey,I nc. appear ed and argued and Lesl i e Kei t h Kauf manof Kauf man & Kauf man appeared f or t he appel l eesPaul and Col l een Cher r et t .

Bef ore: DUNN, KI RSCHER, and TAYLOR, Bankr upt cy J udges.


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DUNN, Bankrupt cy J udge:

Appel l ant Aspen Ski i ng Company ( Aspen) appeal s t he

bankrupt cy cour t s order denyi ng i t s mot i on t o di smi ss Paul and

Col l een Cher r et t s ( t he Cher r et t s) chapt er 7 case under

707( b) ( 1) based on i t s f i ndi ng and concl usi on t hat t he

Cher r et t s debt s wer e not pr i mar i l y consumer debt s. 1 We AFFI RM.

I. FACTUAL BACKGROUND

A. Pre- Bankrupt cy Event s

Paul Cher r et t ( Paul ) 2 wor ks i n t he hospi t al i t y i ndust r y and

has worked f or a number of empl oyers dur i ng hi s career .

Apparent l y, Paul i s good at what he does, and hi s compensat i on

hi st or i cal l y has been hi gh.

Begi nni ng i n 1998, Paul s empl oyment compensat i on packages

have i ncl uded l oans to assi st hi m i n secur i ng housi ng. On

J anuar y 16, 1998, Paul s new empl oyer at t hat t i me, Four Seasons

Hot el - Aust i n, pr ovi ded, t hr ough i t s owner , t wo i nt er est - f r ee

l oans t ot al i ng $150, 000 t o t he Cher r et t s t o assi st t hem i npur chasi ng a r esi dence i n Aust i n, Texas. The Cher r et t s

subsequent l y sol d t hei r Aust i n r esi dence on August 9, 2002, f or a

pr of i t af t er r epayi ng t he seni or secur ed l oan and t he empl oyer -

sponsor ed subordi nate l oans secur ed by t he pr oper t y.

1 Unl ess ot her wi se i ndi cat ed, al l chapt er and sect i onr ef er ences ar e t o t he f eder al Bankrupt cy Code, 11 U. S. C. 101-

1532, and al l Rul e r ef er ences are t o t he Feder al Rul es ofBankrupt cy Pr ocedur e, Rul es 1001- 9037. Al l Ci vi l Rul er ef er ences ar e t o t he Feder al Rul es of Ci vi l Pr ocedur e.

2 We r ef er t o Mr . Cher r et t by hi s f i r st name f orconveni ence. No di sr espect i s i nt ended.

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On August 12, 2002, Paul s new empl oyer , Four Seasons Hotel

- J ackson Hol e, pr ovi ded, t hr ough i t s owner , an i nt er est - f r ee

l oan t o assi st t he Cher r et t s i n acqui r i ng a r esi dence i n J ackson,

Wyomi ng ( t he J ackson Resi dence) . When t he Cherr et t s ul t i matel y

sol d t he J ackson Resi dence i n 2009, t hey real i zed a pr of i t of

appr oxi mat el y $250, 000 af t er payi ng al l l i ens on t he pr oper t y,

i ncl udi ng t he empl oyer - sponsor ed l oan.

Paul f i r st was cont act ed by Aspen i n December 2006 t o

consi der an empl oyment oppor t uni t y, but si nce the open posi t i on

was essent i al l y compar abl e t o hi s cur r ent j ob, he t hanked Aspen s

r epr esent at i ve but i ndi cat ed t hat he was not i nt er est ed.

Appr oxi mat el y thr ee mont hs l at er , Paul r ecei ved an e- mai l f r om a

headhunt er about a posi t i on wi t h Aspen of subst ant i al l y gr eat er

r esponsi bi l i t y. He expr essed i nt er est and went t hr ough t he j ob

i nt er vi ew pr ocess.

Appar ent l y, Aspen l i ked what t hey hear d i n hi s i nt er vi ews,

and Paul ent ered i nt o empl oyment negot i at i ons wi t h Aspen. The

i ni t i al sal ar y pr oposed by Aspen, at l east f r om Paul sper spect i ve, di d not cover t he hi gh cost of l i vi ng/ housi ng i n t he

Aspen, Col or ado ar ea. Ul t i mat el y, Paul accept ed a wr i t t en of f er

of empl oyment f r omAspen t hat i ncl uded a $300, 000 sal ary, a

si gni ng bonus of $75, 000, par t i ci pat i on i n an i ncent i ve pl an

f or pot ent i al addi t i onal compensat i on annual l y, and t he f ol l owi ng

pr ovi si ons f or a housi ng l oan ( Housi ng Loan) :

Your of f er i ncl udes a housi ng l oan of up t o $500, 000,whi ch woul d be second t o your pr i mary mort gage. Thi spr ogr am wi l l i ncl ude an annual bonus guar ant eed t oof f set your t ax l i abi l i t y f or t he i nt er est on t hi sl oan, cal cul at ed at a 35% t ax r at e. You wi l l r ecei ve aguarant eed annual bonus of up t o $33, 750 t o of f set t heannual i nt er est on t hi s l oan, as wel l as your t ax

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l i abi l i t y ( $25, 000 i n i nt er est , $8, 750 f or t axes,assumi ng pr i nci pal of $500, 000) . Thi s bonus wi l l bepai d si mul t aneous t o t he date upon whi ch annuali nt er est on t he l oan i s due, t o ensure you have noannual out of pocket expenses r el at ed t o the f i nanci ngof t hi s l oan. You wi l l not be r equi r ed t o r epay anyaddi t i onal i nt er est on t hi s l oan, i f your empl oyment

wi t h [ Aspen] cont i nues t hr ough 2015.

I n addi t i on, Paul agr eed wi t h Aspen t hat i f hi s empl oyment wi t h

Aspen t er mi nat ed ( ot her t han as a resul t of deat h or di sabi l i t y)

or he ceased to resi de at t he pr oper t y pur chased wi t h the Housi ng

Loan ( ei t her al t er nat i ve desi gnat ed as a Repayment Event ) pr i or

t o December 31, 2015, Paul woul d be requi r ed t o pay t he f ol l owi ng

amount s i n addi t i on t o repayment of t he Housi ng Loan:

I f t he Repayment Event occur s i n year s 1- 2, t her ei mbur sement amount wi l l be $140, 000[ ; ] I f t heRepayment Event occur s i n years 3- 4, t he r ei mbur sementamount wi l l be $120, 000; I f t he Repayment Event occur si n years 5- 6, t he r ei mbur sement amount wi l l be$100, 000; I f t he Repayment Event occur s i n years 7- 8,t he r ei mbur sement amount wi l l be $80, 000.

An aspect of Paul s pr ospect i ve empl oyment wi t h Aspen that

par t i cul ar l y i nt er est ed hi m was t he pot ent i al f or par t i ci pat i ng

i n expandi ng t he Li t t l e Nel l Hot el brand beyond t he Aspen,Col or ado ar ea. Aspen owned one Li t t l e Nel l Hot el , but t her e was

a pr oj ect al r eady under way t o bui l d a new Li t t l e Nel l Hot el i n

J ackson Hol e, Wyomi ng. One of Paul s r ol es wi t h Aspen was t o

gr ow t he [ Li t t l e Nel l ] br and.

Paul went t o work f or Aspen i n t he spr i ng of 2007. When he

accept ed t he j ob, he r eal i zed t hat he woul d have t o l i ve i n t he

Aspen, Col or ado ar ea, at l east f or a whi l e.I n J une 2007, t he Cher r et t s pur chased a condomi ni um i n

Basal t , Col or ado ( Col or ado Resi dence) f or $995, 000, and Paul

began l i vi ng i n i t . The Cher r et t s cont r i but ed cash, bor r owed

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$417, 000 secur ed by a f i r st t r ust deed on t he Col orado Resi dence,

and bor r owed $500, 000, t he Housi ng Loan, f r om Aspen secured by a

second t r ust deed, t o f und t he pur chase of t he Col or ado

Resi dence. When he bought t he Col orado Resi dence, Paul hoped

t hat i t woul d appr eci at e i n val ue so t hat when i t was sol d, t he

Cher r et t s woul d r eal i ze a pr of i t . I ni t i al l y, at l east, Paul

consi der ed t he Col or ado Resi dence to be a pl ace hol der unt i l we

got set t l ed. The Cher r et t s pur chased t he Col or ado Resi dence at

t he ver y peak of t he r eal est at e bubbl e.

When t he Cherr et t s bought t he Col orado Resi dence, Mr s.

Cher r et t ( Col l een) 3 cont i nued t o r esi de i n t he J ackson

Resi dence. The Col orado Resi dence was a 1400 square f eet , t wo

bedroom condomi ni um. The J ackson Resi dence was a 4, 000 square

f eet , f our bedr oom house. The Cher r et t s have t wo chi l dr en. At

t he t i me t hat t hey bought t he Col orado Resi dence, t hei r son was

gr aduat i ng f r om hi gh school and woul d be of f t o col l ege i n t he

f al l . However , t hei r daught er had t wo year s mor e i n hi gh school ,

and Col l een st ayed wi t h her at t he J ackson Resi dence unt i l shegr aduat ed f r om hi gh school , by whi ch t i me, t he J ackson Resi dence

was sol d. Col l een di d not move t o t he Col orado Resi dence unt i l

J une or J ul y 2009.

I n t he meant i me, 2008 brought t he recess i on, and Aspen

pul l ed t he pl ug on expandi ng t he Li t t l e Nel l Hot el br and t o

J ackson Hol e. I n addi t i on, t he val ue of t he Col or ado Resi dence

pl ummet ed, and t he Cher r et t s hopes of r eal i zi ng a pr of i t on

3 Agai n, we r ef er t o Mr s. Cher r et t by her f i r st name f orconveni ence. No di sr espect i s i nt ended.

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r esal e evaporated. Paul r emai ned wi t h Aspen unt i l 2011, when he

r esi gned f r omAspen t o go to work f or Tal i sker Mount ai n Company

( Tal i sker ) i n Par k Ci t y, Ut ah, at a hi gher l evel of

compensat i on. He worked f or Tal i sker f or a year and t hen

at t empt ed t o st ar t hi s own busi ness. I n Apr i l 2013, he accept ed

empl oyment wi t h a Hi l t on company and moved t o Cal i f orni a.

B. The Cher r et t s Bankrupt cy Proceedi ngs

The Cher r et t s f i l ed t hei r chapt er 7 pet i t i on i n t he

bankrupt cy cour t f or t he Cent r al Di st r i ct of Cal i f or ni a on August

30, 2013. I n t hei r pet i t i on, t he Cher r et t s st at ed t hat t hei r

debt s wer e pr i mar i l y consumer debt s, as def i ned i n 101( 8) .

The onl y r eal proper t y l i st ed on t hei r Schedul e A was t he

Col or ado Resi dence, and on t hei r Schedul e D, t he Cher r et t s val ued

t he Col orado Resi dence at $420, 000 and l i st ed t wo undi sput ed

debt s: a $417, 000 f ul l y secur ed f i r st mor t gage debt t o Ever home

Mor t gage, and a $550, 000 debt t o Aspen, of whi ch $547, 000 was

l i st ed as unsecur ed. The onl y ot her debt s i ncl uded i n t he

Cherr et t s schedul es were two unsecur ed debt s on Schedul e F: a$25, 444 st udent l oan debt t o Sal l i e Mae, and a $4, 200 debt f or

homeowner s associ at i on dues. I n t hei r schedul es, t he Cher r et t s

i ndi cat ed t hat t hey i nt ended t o surr ender t he Col or ado Resi dence.

On November 27, 2013, Aspen f i l ed a mot i on t o di smi ss

( Mot i on t o Di smi ss) t he Cherr et t s chapt er 7 case as an abuse

under 707( b) ( 1) and Rul e 1017, ar gui ng t hat t he Cher r et t s had

suf f i ci ent pr oj ect ed di sposabl e i ncome t o pay al l orsubst ant i al l y al l of t hei r credi t or s i n f ul l t hr ough a chapt er 13

pl an. Aspen r el i ed on t he Cher r et t s admi ssi on i n t hei r pet i t i on

t hat t hei r debt s wer e pr i mar i l y consumer debt s but al so ci t ed t he

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Ni nt h Ci r cui t s deci si on i n Zol g v. Kel l y ( I n r e Kel l y) , 841 F. 2d

908, 913 ( 9t h Ci r . 1988) , f or t he pr oposi t i on t hat , [ i ] t i s

di f f i cul t t o concei ve of any expendi t ur e t hat ser ves a f ami l y

. . . or househol d pur pose mor e di r ect l y t han does t he pur chase

of a home.

On December 4, 2013, t he Cher r et t s amended t hei r bankrupt cy

pet i t i on t o st at e t hat t hei r debt s wer e pr i mar i l y busi ness debt s.

On t he same day, t he Cher r et t s f i l ed t hei r opposi t i on t o the

Mot i on t o Di smi ss, ar gui ng t hat t hei r debt s ( f ocusi ng on t he

Housi ng Loan debt ) were pr i mar i l y Non- Consumer debt s.

Consequent l y, 707( b) ( 1) di d not appl y, and t hei r chapt er 7 case

was not an abuse. They argued t hat i f second mort gage debt ,

such as t he Housi ng Loan, was i ncur r ed f or a busi ness pur pose or

wi t h a pr of i t mot i ve, i t was not consumer debt .

Aspen f i l ed a r epl y on December 11, 2013, chal l engi ng t he

Cher r et t s credi bi l i t y and r ei t er at i ng i t s posi t i on, based on I n

r e Kel l y, t hat debt s i ncur r ed f or t he pur chase of a per sonal

r esi dence are consumer debt s.The bankrupt cy cour t schedul ed an evi dent i ar y hear i ng

( Hear i ng) f or J anuar y 22, 2014 on t he Mot i on t o Di smi ss,

l i mi t ed t o the i ssue of whet her t he debt owed t o [Aspen] i s a

consumer debt or non- consumer debt . The par t i es subsequent l y

exchanged di scover y; Aspen s counsel t ook the deposi t i on of Paul ;

and t he par t i es f i l ed t r i al br i ef s and evi dent i ar y submi ssi ons.

At t he Hear i ng, Paul t est i f i ed and was exami ned at l engt h bycounsel f or both Aspen and t he Cherr et t s. The bankr upt cy cour t

t hen hear d argument and engaged i n ext ensi ve col l oquy wi t h

counsel . At t he concl usi on of t he Hear i ng, t he bankrupt cy cour t

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announced i t s f i ndi ngs and concl usi ons or al l y. Speci f i cal l y, t he

bankrupt cy cour t f ound t hat Paul s pur poses i n secur i ng t he

Housi ng Loan were pr i mar i l y empl oyment and busi ness pur poses.

Accor di ngl y, t he bankrupt cy cour t det er mi ned t hat t he Housi ng

Loan was not consumer debt and deni ed t he Mot i on t o Di smi ss.

On Febr uary 3, 2014, t he bankr upt cy cour t ent ered an order

( Or der ) denyi ng t he Mot i on t o Di smi ss f or t he r easons st at ed on

t he r ecor d at t he Hear i ng. Aspen f i l ed a t i mel y Not i ce of

Appeal .

II. JURISDICTION

The bankrupt cy cour t had j ur i sdi ct i on under 28 U. S. C.

1334 and 157( b) ( 2) ( A) and ( O) . However , bef ore we can r evi ew

t hi s appeal , we must consi der our own j ur i sdi ct i on t o hear i t .

We have j ur i sdi ct i on t o hear bankrupt cy appeal s f r om f i nal

orders, j udgment s and decrees. See 28 U. S. C. 158. Gi ven t he

uni que natur e of bankr upt cy pr oceedi ngs, we appl y a pr agmat i c

appr oach t o det er mi ne t he f i nal i t y of or der s. Congr ej o I nvs. ,

LLC v. Mann ( I n r e Bender ) , 586 F. 3d 1159, 1163 ( 9t h Ci r . 2009) .A bankrupt cy cour t or der i s f i nal and t hus appeal abl e wher e i t

1) r esol ves and ser i ousl y af f ect s subst ant i ve r i ght s and 2)

f i nal l y det er mi nes t he di scret e i ssue t o whi ch i t i s addr essed.

SS Far ms, LLC v. Shar p ( I n r e SK Foods, L. P. ) , 676 F. 3d 798, 802

( 9t h Ci r . 2012) ( quot i ng Dye v. Br own ( I n r e AFI Hol di ng, I nc. ) ,

530 F. 3d 832, 836 ( 9t h Ci r . 2008) ) .

Gener al l y, an or der denyi ng a mot i on t o di smi ss i si nt er l ocut or y. Hi ckman v. Hana ( I n r e Hi ckman) , 384 B. R. 832,

836 ( 9t h Ci r . BAP 2008) ( ci t i ng Sherman v. SEC ( I n r e Sherman) ,

491 F. 3d 948, 967 n. 24 ( 9t h Ci r . 2007) ( r evi ewi ng 707( a) mot i on

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t o di smi ss) ; and Dunkl ey v. Rega Pr ops. , Lt d. ( I n r e Rega Pr ops. ,

Lt d. ) , 894 F. 2d 1136, 1137- 39 ( 9t h Ci r . 1990) ( r evi ewi ng 1112( b)

mot i on t o di smi ss) ) . But t he new pr ovi si ons added t o 707( b)

under t he Bankr upt cy Abuse Pr event i on and Consumer Protect i on Act

of 2005, Pub. L. 109- 8, 119 St at . 23 ( 2005) ( BAPCPA) , mani f est

a congr essi onal pol i cy t o pol i ce al l Chapt er 7 cases f or abuse at

t he out set of a Chapt er 7 pr oceedi ng, and . . . r ai se pr agmat i c

consi der at i ons t hat i ndi cat e t hat t he deni al of a 707( b) mot i on

t o di smi ss i s di f f er ent f r om t he deni al of ot her mot i ons t o

di smi ss [ e. g. , Ci vi l Rul e 12( b) or 1112( b) ( 1) - ( 4) mot i ons] .

McDow v. Dudl ey, 662 F. 3d 284, 288 ( 4t h Ci r . 2011) . Sect i on

707( b) cr eat es a st atut ory gateway based on whether t he case i s

abusi ve, and an order denyi ng t hat mot i on t o di smi ss as abusi ve,

i n ef f ect, f i nal l y and concl usi vel y r esol ves t he i ssue. I f t he

deni al of a 707( b) mot i on t o di smi ss cannot be appeal ed

i mmedi at el y t o t he di st r i ct cour t , t he Chapt er 7 pr oceedi ngs

woul d have t o be compl eted bef ore i t coul d be det ermi ned whether

t he pr oceedi ngs wer e abusi ve i n t he f i r st pl ace. I d. at 289- 90( ci t at i on omi t t ed) .

The Ni nth Ci r cui t has not yet speci f i cal l y addressed t he

f i nal i t y of or der s denyi ng mot i ons t o di smi ss chapt er 7 cases f or

abuse under 707( b) af t er BAPCPA. However , t he Fi r st , Thi r d,

Four t h, Fi f t h, Sevent h and Ei ght h Ci r cui t s consi der such or der s

t o be f i nal based on pr act i cal i t y, j udi ci al ef f i ci ency and ot her

pr agmat i c consi der at i ons. See Mor se v. Rudl er ( I n r e Rudl er ) ,576 F. 3d 37, 43- 44 ( 1st Ci r . 2009) ( hol di ng t hat an or der denyi ng

a mot i on t o di smi ss under 707( b) , wher e t he di sput e at i ssue

t ur ns on a quest i on of l aw, i s f i nal because del ayi ng

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consi der at i on of t he l egal quest i on i n such an or der may

f r ust r at e bot h pr i nci pl es of j udi ci al economy and Congr ess s goal

of ensur i ng t hat debt or s al l ocat e as much of t hei r r esour ces as

possi bl e t owar d r epayi ng t hei r debt s. . . . [ M] ot i ons t o di smi ss

f or abuse under sect i on 707( b) ar e subj ect t o st at ut or y

deadl i nes, pr esumabl y f or ecl osi ng r enewed r equest s f or di smi ssal

as t he Chapt er 7 case pr oceeds. ) ; I n r e Chr i st i an, 804 F. 2d 46,

48 ( 3d Ci r . 1986) ( det er mi ni ng i t had j ur i sdi ct i on t o r evi ew an

order denyi ng a mot i on t o di smi ss a chapt er 7 case under

707( b) , based on j udi ci al ef f i ci ency and pr acti cal i t y, f or , i f

such an order was not now appeal abl e t he ent i r e bankr upt cy

proceedi ngs must be compl et ed bef ore i t can be det ermi ned whet her

t hey wer e pr oper i n t he f i r st pl ace) ; McDow v. Dudl ey, 662 F. 3d

at 290 ( hol di ng t hat pr agmat i c consi der at i ons of pr eservi ng

r esour ces f or cr edi t or s i n bankrupt cy and pr omot i ng j udi ci al

economy wei gh heavi l y i n f avor of r ecogni zi ng t he f i nal i t y of an

or der denyi ng a 707( b) mot i on t o di smi ss) ; U. S. Tr ust ee v.

Cor t ez ( I n r e Cor t ez) , 457 F. 3d 448, 453- 54 ( 5t h Ci r .2006) ( det er mi ni ng t hat a di st r i ct cour t s or der r emandi ng a

bankrupt cy cour t s order denyi ng t he t r ust ee s mot i on t o di smi ss

under 707( b) i s a f i nal or der because the r emand or der l ef t

onl y mi ni st er i al t asks f or t he bankrupt cy cour t ) ; Ross- Tousey v.

Near y ( I n r e Ross- Tousey) , 549 F. 3d 1148, 1152- 54 ( 7t h Ci r .

2008) ( det er mi ni ng t hat t he di st r i ct cour t s r emand or der and t he

bankrupt cy cour t s order denyi ng t he U. S. Tr ust ee s mot i on t odi smi ss under 707( b) ( 2) and ( b) ( 3) ( B) wer e f i nal ) , abr ogat ed on

ot her gr ounds by Ransomv. FI A Car d Ser vs. , N. A. , 562 U. S. 61

( 2011) ; St uar t v. Koch ( I n r e Koch) , 109 F. 3d 1285, 1288 ( 8t h

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Ci r . 1997) :

I f [ or der s denyi ng di smi ssal f or subst ant i al abuse]cannot be appeal ed, bankr upt cy pr oceedi ngs must becompl eted bef ore i t can be determi ned whether t hey werepr oper i n t he f i r st pl ace. I n r e Chr i st i an, 804 F. 2d[ 46, ] 48 [ ( 3r d Ci r . 1986) ] . Requi r i ng t r ust ees t o

compl ete Chapt er 7 pr oceedi ngs bef ore appeal i ng deni alof t hei r 707( b) mot i ons wast es debt or r esour ces t hatshoul d be used t o pay credi t or s, and f or ces t r ust eesand bankrupt cy cour t s t o expend t hei r scarcei nst i t ut i onal r esour ces on abusi ve Chapt er 7pet i t i oner s. Thus t he pol i ci es of j udi ci al ef f i ci encyand f i nal i t y ar e best served by al l owi ng pr omptappel l at e r evi ew of 707( b) deni al s. Zol g v. Kel l y( I n r e Kel l y) , 841 F. 2d at 911.

We agr ee wi t h t he reasoni ng of t he ci r cui t s t hat have

addr essed t he i ssue r egar di ng t he f i nal i t y of or der s denyi ng

707( b) mot i ons to di smi ss. I f such an or der i s not consi der ed

f i nal , t he movi ng par t y and t he debt or wi l l have to wai t unt i l

t he case i s compl et ed, whi ch wast es debt or r esour ces t hat shoul d

be used t o pay credi t or s, and f or ces t r ust ees and bankrupt cy

cour t s t o expend t hei r scar ce i nst i t ut i onal r esour ces on abusi ve

Chapt er 7 pet i t i oners. McDow, 662 F. 3d at 290 ( quot i ng Koch,

109 F. 3d at 1288) ( i nt er nal quot at i on mar ks omi t t ed) . Mor eover ,post poni ng t he appeal unt i l t he end of t he bankrupt cy case coul d

r esul t i n t he need t o unwi nd var i ous admi ni st r at i ve act i ons,

l i kel y wi t h some di f f i cul t y ( e. g. , havi ng t o r evoke t he debt or s

di schar ge, pot ent i al l y compel l i ng credi t or s t o di sgor ge

di st r i but i ons made by t he t r ust ee) .

Al t er nat i vel y, even i f t he Or der i s i nt er l ocut or y, we have

j ur i sdi ct i on t o r evi ew i t because we ear l i er granted l eave t oappeal t o t he extent necessar y under 28 U. S. C. 158( a) ( 3) based

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on t he pr agmat i c consi derat i ons di scussed above. 4

III. ISSUE

When denyi ng the Mot i on t o Di smi ss f or abuse under

707( b) ( 1) , di d t he bankr upt cy cour t er r i n f i ndi ng t hat t he

Housi ng Loan was non- consumer debt ?

IV. STANDARDS OF REVIEW

We revi ew de novo i ssues of st at ut or y const r uct i on and

concl usi ons of l aw, i ncl udi ng a bankr upt cy cour t s i nt er pr et at i on

of t he Bankrupt cy Code. Samson v. W. Capi t al Par t ner s, LLC ( I n

r e Bl i xset h) , 684 F. 3d 865, 869 ( 9t h Ci r . 2012) ( per cur i am) .

We revi ew a bankrupt cy cour t s f i ndi ngs of f act f or cl ear

er r or . Decker v. Tr ami el ( I n r e J TS Cor p. ) , 617 F. 3d 1102, 1109

( 9t h Ci r . 2010) ( quot i ng Lei cht y v. Near y ( I n r e St r and) , 375 F. 3d

854, 857 ( 9t h Ci r . 2004) ) . We wi l l af f i r m a [ bankr upt cy

cour t s] f act ual f i ndi ng unl ess t hat f i ndi ng i s i l l ogi cal ,

i mpl ausi bl e, or wi t hout support i n i nf er ences t hat may be dr awn

f r om t he r ecor d. U. S. v. Hi nkson, 585 F. 3d 1247, 1263 ( 9t h Ci r .

2009) ( en banc) . See al so Ander son v. Ci t y of Bessemer Ci t y,N. C. , 470 U. S. 564, 574 ( 1985) ( Wher e ther e ar e t wo per mi ssi bl e

vi ews of t he evi dence, t he f act f i nder s choi ce bet ween t hem

cannot be cl ear l y err oneous. ) . We must accept a bankr upt cy

4 Aspen f i l ed i t s openi ng br i ef on Mar ch 24, 2014. I n i t sopeni ng br i ef , Aspen ar gued t hat t he Or der was f i nal .Al t er nat i vel y, Aspen sought l eave t o appeal .

On Mar ch 26, 2014, a cl er k s order was i ssued ( Cl er k sOr der Re: Fi nal i t y) , aski ng t he Cher r et t s t o r espond t o t hequest i on of whet her t he Or der was f i nal . Af t er r evi ewi ng t heCher r et t s and Aspen s r esponses t o t he Cl er k s Or der Re:Fi nal i t y, an or der was i ssued on May 12, 2014, gr ant i ng l eave t oappeal t o the extent necessar y under 28 U. S. C. 158( a) ( 3) .

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cour t s f i ndi ngs of f act unl ess we have a def i ni t e and f i r m

convi ct i on t hat a mi st ake has been commi t t ed. I n r e J TS Cor p. ,

617 F. 3d at 1109.

We r evi ew de novo mi xed quest i ons of l aw and f act . I d.

V. DISCUSSION

Under 707( b) ( 1) , af t er not i ce and a hear i ng on a mot i on by

a par t y i n i nt er est , t he bankrupt cy cour t may di smi ss a chapt er 7

case when an i ndi vi dual debt or has pr i mar i l y consumer debt s and

i f t he bankrupt cy cour t f i nds t hat gr ant i ng r el i ef woul d be an

abuse of t he pr ovi si ons of chapt er 7. 5 Rest at ed, t her e ar e t wo

pr er equi si t es t o di smi ssal under 707( b) ( 1) : 1) t he debt or has

pr i mar i l y consumer debt ; and 2) t he bankrupt cy cour t f i nds t hat

gr ant i ng t he debt or s pet i t i on woul d be an abuse of chapt er 7.

Pr i ce v. U. S. Tr ust ee ( I n r e Pr i ce) , 353 F. 3d 1135, 1138 ( 9t h

Ci r . 2004) . The movi ng par t y bear s t he bur den of pr oof t o

support a 707( b) ( 1) mot i on by a pr eponderance of t he evi dence.

I n r e Baker , 400 B. R. 594, 597 ( Bankr . N. D. Ohi o 2009) .

Onl y t he f i r st 707( b) ( 1) pr er equi si t e i s at i ssue i n t hi sappeal . The bankr upt cy cour t deni ed t he Mot i on t o Di smi ss

5 Sect i on 707( b) ( 1) pr ovi des, i n r el evant par t :

Af t er not i ce and a hear i ng, t he cour t , on i t s ownmot i on or on a mot i on by the Uni t ed St ates t r ust ee,t r ust ee ( or bankr upt cy admi ni st r at or , i f any) , or anypar t y i n i nt er est , may di smi ss a case f i l ed by ani ndi vi dual debt or under t hi s chapt er whose debt s ar epr i mar i l y consumer debt s, or , wi t h t he debt or sconsent , conver t such a case t o a case under chapt er 11or 13 of t hi s t i t l e, i f i t f i nds that t he gr ant i ng ofr el i ef woul d be an abuse of t he pr ovi si ons of t hi schapt er . . . .

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because i t f ound t hat t he Cher r et t s di d not have pr i mar i l y

consumer debt , as t he Housi ng Loan, whi ch f ormed t he bul k of

t hei r debt , was non- consumer debt . Aspen chal l enges thi s f act

f i ndi ng on two gr ounds: 1) t he Housi ng Loan i s consumer debt as a

mat t er of l aw under 101( 8) , as i nt er pr et ed by Zol g v. Kel l y ( I n

r e Kel l y) , 841 F. 2d 908 ( 9t h Ci r . 1988) ( Kel l y) ; and 2) t he f act

t hat t he Housi ng Loan was empl oyer - sponsored i s i r r el evant

because t he det er mi nat i on of whet her t he Housi ng Loan qual i f i es

as consumer debt t ur ns on Paul s pur pose. I f Paul s pur pose f or

i ncur r i ng t he Housi ng Loan was pr i mar i l y f or per sonal , f ami l y or

househol d use, t hen t he Housi ng Loan woul d qual i f y as consumer

debt . Aspen cont ends t hat Paul obt ai ned t he Housi ng Loan

speci f i cal l y t o pur chase the Col or ado Resi dence as hi s per sonal

r esi dence. The Housi ng Loan t hus qual i f i es as consumer debt . 6

Gi ven Aspen s cont ent i ons, t hi s appeal t ur ns on whet her we

agr ee wi t h t he bankrupt cy cour t s char act er i zat i on of t he Housi ng

Loan as non- consumer debt . We t heref ore begi n our anal ysi s by

exami ni ng the def i ni t i on of consumer debt under 101( 8) .Sect i on 101( 8) def i nes consumer debt as debt i ncur r ed by

an i ndi vi dual pr i mar i l y f or a per sonal , f ami l y, or househol d

pur pose. Consumer debt i ncl udes both unsecured and secured

6 I n i t s mot i on t o di smi ss, Aspen cl ai med t hat t heCher r et t s had suf f i ci ent di sposabl e i ncome t o pay thei r unsecur edcr edi t or s t hr ough a chapt er 13 pl an. However , t he Cher r et t sschedul es, whi ch were si gned under penal t y of per j ur y and weret he sol e evi dence bef or e the bankrupt cy cour t on t hi s poi nt ,i ndi cat ed that t hei r unsecur ed debt exceeded t he st at ut or ymaxi mum under 109( e) . The Cher r et t s t her ef or e wer e pot ent i al l yi nel i gi bl e f or r el i ef under chapt er 13, as not ed by t hebankrupt cy cour t at t he Hear i ng.

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debt . Kel l y, 841 F. 2d at 912. Whet her a par t i cul ar secur ed debt

i s or i s not char act er i zed as consumer debt under 707( b)

depends on t he pur pose of t he debt . Pr i ce, 353 F. 3d at 1139;

Kel l y, 841 F. 2d at 913. See al so St i ne v. Fl ynn ( I n r e St i ne) ,

254 B. R. 244, 249 ( 9t h Ci r . BAP 2000) ( I t i s t he pur pose f or

whi ch t he debt was i ncur r ed t hat det er mi nes whet her i t i s a

consumer debt . ) ( ci t i ng Kel l y, 841 F. 2d at 913) ( emphasi s added) ) ;

Cypher Chi r opr act i c Ct r . v. Runski ( I n r e Runski ) , 102 F. 3d 744,

747 ( 4t h Ci r . 1996) ( [ C] our t s have concl uded uni f or ml y t hat debt

i ncur r ed f or a busi ness vent ur e or wi t h a pr of i t mot i ve does not

f al l i nt o t he cat egor y of debt i ncur r ed f or per sonal , f ami l y, or

househol d pur poses. ) ( ci t at i ons omi t t ed) ; and A. L. Lee Mem l

Hosp. v. McFadyen ( I n r e McFadyen) , 192 B. R. 328, 333 ( Bankr .

N. D. N. Y. 1995) ( The cour t s gener al l y ascr i be a busi ness pur pose,

r at her t han a per sonal , f ami l y or househol d pur pose t o debt s

whi ch ar e i ncur r ed wi t h an eye t owar d pr of i t and whi ch ar e

mot i vat ed f or ongoi ng busi ness requi r ement s. ) ( ci t at i ons

omi t t ed) ( emphasi s i n or i gi nal ) .

7

Aspen i nsi sts t hat Kel l y def i ni t i vel y cl assi f i ed al l

mor t gage debt as consumer debt . I t poi nt s out t hat t hi s hol di ng

i n Kel l y was r ei nf or ced i n Pr i ce v. U. S. Tr ust ee ( I n r e Pr i ce) ,

353 F. 3d 1135, 1139 ( 9t h Ci r . 2004) . The Kel l y hol di ng t her ef or e

7 I n a home l oan cont ext , an expect at i on of pr of i t al one,i n our vi ew, does not sat i sf y t he Kel l y st andar d f or a non-consumer debt . I t i s a t r ui sm t hat ever y r ed- bl ooded Amer i canwho buys a home expect s a pr of i t when i t i s sol d. I f t hatexpect at i on were enough t o take home l oan debt out si de of t heconsumer debt category, t he except i on woul d swal l ow t he Kel l yr ul e.

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i s t he r ul e of l aw i n t he Ni nt h Ci r cui t .

I n Kel l y, t he debt or s f i l ed a pet i t i on under chapt er 7.

They schedul ed $181, 350 i n asset s, $147, 000 i n debt secur ed by

mor t gages agai nst t hei r home and $25, 000 i n unsecured debt owed

t o cer t ai n def endant s i n a st at e cour t act i on whi ch t he debt or s

l ost . Kel l y, 841 F. 2d at 910. The bankrupt cy cour t sua spont e

f ound that t he debt ors owed pr i mar i l y consumer debt s and that

gr ant i ng t hem chapt er 7 r el i ef woul d be a subst ant i al abuse

because t hey coul d easi l y pay al l of t hei r debt s. I t accor di ngl y

di smi ssed t he debt or s chapt er 7 case. Af t er movi ng f or

r econsi der at i on wi t h the bankrupt cy cour t , whi ch was deni ed, t he

debt ors appeal ed t o t he BAP, whi ch reversed t he bankr upt cy cour t

on t he gr ound t hat t he debt ors di d not have pr i mar i l y consumer

debt s because most of t hei r debt s wer e secur ed by r eal est at e

mor t gages. Kel l y v. Sol ot ( I n r e Kel l y) , 70 B. R. 109, 111- 12

( 9t h Ci r . BAP 1986) .

On appeal , t he debt ors argued t hat debt s secur ed by r eal

pr opert y were never consumer debt s. Because 85% of t hei r debt swas secur ed by t hei r home, t he debt ors mai nt ai ned t hat t hey coul d

not have pr i mar i l y consumer debt s. Di smi ssal under 707( b) was

i nappr opr i at e.

The Ni nth Ci r cui t di sagreed wi t h t hi s cont ent i on because a

l i t er al r eadi ng of 101( 8) and r el at ed st at ut es ( i . e. , 101( 12)

and ( 5) ( A) ) i nexor abl y [ l ed] t o t he concl usi on t hat consumer

debt i ncl udes secur ed debt . 8

Kel l y, 841 F. 2d at 912. I t went on

8 The Ni nt h Ci r cui t i ssued Kel l y year s bef or e BAPCPA.Kel l y ci t ed 101( 7) , 101( 4) ( A) and ( 11) , whi ch, at t he t i me, setf or t h t he def i ni t i on of consumer debt , cl ai m and debt ,

( cont i nued. . . )

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t o not e t hat secur ed debt nei t her was excl uded f r om nor i ncl uded

i n consumer debt aut omat i cal l y. I d. at 913. The Ni nt h Ci r cui t

concl uded t hat i t must l ook t o the pur pose of t he debt i n

det er mi ni ng whet her i t f al l s wi t hi n t he st at ut or y def i ni t i on.

I d.

Upon r evi ew of t he debt ors mort gage debt s, t he Ni nt h

Ci r cui t det er mi ned t hat $95, 000 consi st ed of a l i en t he debt or s

assumed i n purchasi ng t hei r home and $32, 000 r epr esented a home

equi t y l i ne of cr edi t i ncur r ed f or home i mpr ovement s and t he

r epayment of cr edi t car d debt s. I d. I t concl uded t hat al l of

t hose debt s f i t comf or t abl y wi t hi n t he [ Bankrupt cy] Code s

def i ni t i on of consumer debt . I d.

We acknowl edge t hat on i t s f act s, Kel l y char act er i zed

mort gage debt as consumer debt . But Aspen over l ooks one of t he

mai n poi nt s of Kel l y: Kel l y hel d t hat , [ w] hi l e secur ed debt i s

not aut omat i cal l y excl uded f r om consumer debt , i t i s not

aut omat i cal l y i ncl uded ei t her . We must l ook t o t he pur pose of

t he debt i n det er mi ni ng whet her i t f al l s wi t hi n t he st at ut or ydef i ni t i on. I d. ( Emphasi s added. ) Not abl y, t hough Aspen ur ges

us t o appl y Kel l y to t he ci r cumst ances her e wi t hout f ur t her

anal ysi s, i t al so zer oes i n on Paul s pur pose i n obt ai ni ng t he

Housi ng Loan as an al t er nat i ve basi s f or r ever si ng t he bankrupt cy

cour t .

Aspen cont ends t hat t he Cher r et t s base t hei r

8( . . . cont i nued)r espect i vel y. Sect i on 101( 8) , ( 5) ( A) and ( 12) cur r ent l y setf or t h t hese def i ni t i ons. Al t hough t he number i ng of t hesedef i ni t i ons under 101 has changed, t he def i ni t i ons t hemsel veshave not si nce t he Ni nt h Ci r cui t deci ded Kel l y.

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character i zat i on of t he Housi ng Loan as non- consumer debt on

Aspen s pur pose i n pr ovi di ng t he Housi ng Loan. Accor di ng t o

Aspen, t he Cherr et t s argue t hat t he pur pose of t he Housi ng Loan

was t o augment Paul s compensat i on. I n maki ng such an argument ,

t he Cher r et t s f ocus on t he l ender s mot i ve. But , Aspen asser t s,

t he debt or s pur pose, not t he l ender s pur pose, i s t he

cont r ol l i ng det er mi nant under 101( 8) . Sect i on 101( 8)

speci f i cal l y st at es t hat consumer debt i s debt i ncur r ed by an

i ndi vi dual debt or f or a per sonal , f ami l y or househol d pur pose.

The l ender s mot i ve t hus i s i r r el evant t o det er mi ni ng whet her a

secur ed debt qual i f i es as a consumer debt . Moreover , Aspen

cont ends, i f t he l ender s mot i ve was t he det er mi ni ng f act or ,

every mor t gage l oan woul d be non- consumer debt because ever y

l ender has a pr of i t mot i ve when i t ext ends a mort gage l oan.

Aspen f ur t her ar gues t hat t he Cher r et t s di d not i ncur t he

Housi ng Loan f or a busi ness pur pose. The Housi ng Loan di d not

become a non- consumer debt si mpl y because i t was par t of Paul s

compensat i on. Al so, Aspen cl ai ms, t he Housi ng Loan was not acondi t i on f or hi s empl oyment .

At t he Hear i ng, t he bankrupt cy cour t f ound t hat [ Paul s]

pur pose of secur i ng t hat debt , or i ncur r i ng t hat debt , was f or

empl oyment purposes. The man needed t o make money. He want ed t o

t ake t he j ob. He knew he t o l eave a [ secur e] posi t i on, he

want ed t o make more money. Tr . of J an. 22, 2014 hr g, 103: 15-

19. I t concl uded t hat Paul i ncur r ed t he Housi ng Loan f or abusi ness pur pose; he di d i t so he coul d wor k at a ver y

pr est i gi ous, t op of t he l i ne, equal t o t he Four Seasons, equal t o

t he best hot el s i n t he wor l d [ empl oyer ] . . . . Tr . of J an. 22,

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2014 hr g, 104: 5- 7. The bankrupt cy cour t t her ef or e r ul ed t hat

pr i mar i l y t hi s l oan was i ncur r ed f or a busi ness pur pose. Tr .

of J an. 22, 2014 hr g, 103: 20. Based on t he r ecord bef or e us, we

per cei ve no er r or i n t he bankrupt cy cour t s concl usi on t hat

Paul s pr i mar y pur pose i n obt ai ni ng the Housi ng Loan was f or

busi ness ( i . e. , empl oyment ) .

As Aspen recogni zes, t he key f act or i n det ermi ni ng whet her

secur ed debt i s consumer debt l i es i n t he debt or s pur pose i n

i ncur r i ng t he secur ed debt . Where t he debt was i ncur r ed f or more

t han one pur pose, t he pr i mar y pur pose of t he debt wi l l det er mi ne

i t s nat ur e. See, e. g. , Pr i ce, 353 F. 3d at 1139; Swar t z v.

St r ausbaugh ( I n r e St r ausbaugh) , 376 B. R. 631, 639 ( Bankr . S. D.

Ohi o 2007) ( quot i ng 2 Col l i er on Bankrupt cy 101. 08, at 101- 47

( Lawr ence P. Ki ng ed. , 15t h ed. r ev. 2004) ( I f a debt i s i ncur r ed

par t l y f or busi ness pur poses and par t l y f or per sonal , f ami l y or

househol d pur poses, t he t er m pr i mar i l y i n t he def i ni t i on

suggest s t hat whether t he debt i s a consumer debt shoul d depend

upon whi ch pur pose pr edomi nates. Presumabl y, t hi s determi nat i onwoul d normal l y t ur n on t he pur pose f or whi ch most of t he f unds

wer e obt ai ned. ) ) . Based on t he r ecor d bef or e us, t he bankrupt cy

cour t di d not er r i n f i ndi ng t hat Paul s pr i mar y pur pose i n

obt ai ni ng t he Housi ng Loan was empl oyment r el ated.

Paul r epeat edl y asser t ed t hat he obt ai ned the Housi ng Loan

t o pur chase t he Col orado Resi dence, not onl y i n hopes of

r eal i zi ng a pr of i t on r esal e, but al so because i t was an i nt egr alpar t of hi s ent er i ng i nt o empl oyment wi t h Aspen. He t est i f i ed at

t he Hear i ng that he bel i eved t he Housi ng Loan was bot h

compensat i on and [ he] cer t ai nl y expect ed t o pr of i t f r om

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appr eci at i on. Tr . of J an. 22, 2014 hr g, 15: 16- 18.

When he deci ded t o accept empl oyment wi t h Aspen, Paul

l ook[ ed] at ever yt hi ng i n t ot al i t y[ . ] Tr . of J an. 22, 2014

hr g, 53: 13. He consi der ed t he sal ar y of f er ed by Aspen, al ong

wi t h t he Housi ng Loan; t oget her , t he sal ar y and t he pot ent i al f or

appr eci at i on i n t he Col or ado Resi dence [ wer e] consi der abl y mor e

t han [ he] was maki ng wi t h hi s pr evi ous empl oyer . Tr . of J an.

22, 2014 hr g, 53: 14.

I n hi s decl ar at i on at t ached t o t he Cher r et t s opposi t i on t o

t he Mot i on t o Di smi ss, Paul asser t ed t hat accept i ng t he posi t i on

wi t h Aspen r equi r ed t hat he move f r om J ackson, Wyomi ng t o Aspen,

Col orado. Because r eal est ate was expensi ve i n Aspen, Col orado,

and hi s i ncome wi t h Aspen woul d not al l ow hi m t o buy real est at e

t her e, Aspen of f er ed t o hel p Paul i n t he pur chase of housi ng.

Speci f i cal l y, he st at ed t hat i n l i eu of a hi gher sal ar y,

extended i n t he of f er of empl oyment , [ Aspen of f er ed] an i nt er est -

f r ee l oan t i ed t o [hi s] empl oyment and t o be secur ed by a t r ust

deed agai nst t he [ r eal est at e] he was t o pur chase. Paul f ur t herasser t ed t hat , gi ven t he i ni t i al sal ar y of f er ed, and i n l i eu of

a hi gher sal ar y, and speci f i cal l y t o compensat e f or t he hi gher

cost of housi ng i n [ Aspen, Col or ado] , Aspen of f er ed t o pay the

di f f erence between t he pur chase pr i ce and t he amount [ he and

Col l een] coul d af f or d t o pay.

At hi s December 6, 2013 deposi t i on, Paul expl ai ned t hat ,

when di scuss i ng t he t erms of Aspen s empl oyment of f er , heexpr essed concer n over t he cost of l i vi ng i n Aspen, Col or ado. He

t heref ore asked Aspen, [ W] hat other ways coul d [ he] be

compensat ed, f or i nst ance, t o al l ow [ hi m] t o l i ve i n t he ar ea[ ?]

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Tr . of Dec. 6, 2013 deposi t i on, 10: 14- 16. Paul expl ai ned t hat he

had r ecei ved benef i t s f r om hi s pr i or empl oyer i n J ackson,

Wyomi ng, t hat he was not r ecei vi ng f r om Aspen. He t hen went on

t o st at e t hat Aspen of f er ed t he [ Housi ng Loan] and t he pot ent i al

f or appr eci at i on i n bal ance and bonus pl an. So, you know, [ he]

was l ooki ng f or a gr eat er net r et ur n i n t i me, and one of t hose

par t of t hat was appr eci at i on of t he home. Tr . of Dec. 6, 2013

deposi t i on, 37: 22- 25, 38: 1.

At t he Hear i ng, Paul t est i f i ed t hat t he Housi ng Loan was

made part of t he negot i at i ons f or hi s empl oyment wi t h Aspen. He

st ated t hat he assume[d] i t was because [ he] had t o wei gh t he

t ot al compensat i on package, and i t ei t her [ came] i n t he f or m of a

sal ar y or ot her t hi ngs that convey[ ed] wi t h t hat . Tr . of J an.

22, 2014 hr g, 6: 3- 5. He emphasi zed l at er at t he Hear i ng t hat

t he sol ut i on t o l et s say t he i ncome that [ he] needed t o accept

t he posi t i on i n Aspen [ Col or ado] and l i ve i n Aspen [ Col or ado]

r equi r ed t hat [ Aspen] come up wi t h a compensat i on package t hat

i ncl uded sal ar y and somet hi ng el se. So, t hat s wher e t he[ H] ousi ng [ L] oan came i n i n t he f or m of a bonus. Tr . of J an.

22, 2014 hr g, 9: 12- 16. Paul t est i f i ed t hat t he Housi ng Loan was

of f er ed i nst ead of a hi gher sal ar y. He al so t est i f i ed t hat Aspen

even had character i zed t he Housi ng Loan as a def err ed

compensat i on bonus pl an. Tr . of J an. 22, 2014 hr g, 40: 21- 22.

The wr i t t en of f er present ed by Aspen suppor t s Paul s vi ew of

t he Housi ng Loan as par t of hi s empl oyment wi t h Aspen. Thewr i t t en of f er pr ovi ded t hat i t i ncl ude[ d] a housi ng l oan of up

t o $500, 000. I t f ur t her pr ovi ded hi m an annual bonus t o of f set

annual i nt er est on t he Housi ng Loan and hi s t ax l i abi l i t y f or t he

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i nt er est on t he Housi ng Loan.

Paul f ur t her expl ai ned t hat he f el t he had no choi ce but t o

pur chase t he Col orado Resi dence based on hi s compensat i on f r om

Aspen. He t est i f i ed t hat i f he want ed t hat compensat i on pl an

and [ he] want ed t hat i nt er est f r ee l oan, [ he] needed t o buy a

home wi t h t hat money. Tr . of J an. 22, 2014 hr g, 11: 18- 20. He

bel i eved t hat [ Aspen] sai d i f [ he] want [ ed] t o wor k her e [ i n

Aspen, Col or ado] , her e s [hi s] compensat i on pl an. Thi s i s what

[ he coul d] do wi t h t he money. So, [ he] had t o buy a home wi t h

i t . Ther e was no ot her way [ t he of f er ] was wr i t t en. Tr . of

J an. 22, 2014 hr g, 11: 22- 24. Paul expl ai ned t hat i t made mor e

economi c sense t o [ Aspen] t o gi ve [ hi m] a housi ng l oan and pay

[ hi m] a cer t ai n wage, gi ven t he hi gh cost of r ent and t he amount

of compensat i on of f er ed by Aspen. Tr . of J an. 22, 2014 hr g,

38: 25, 39: 1- 2. He t hus pur chased t he Col orado Resi dence because

i t j ust seemed l i ke i t was t he most cost ef f ect i ve and . . . a

f i nanci al l y advant ageous r out e t o t ake. Tr . of J an. 22, 2014

hr g, 39: 2- 4.At hi s deposi t i on, Paul st r essed t hat t he onl y t hi ng [ he]

coul d have benef i t t ed f r om was t he appr eci at i on of t he [ Col or ado

Resi dence] . Tr . of Dec. 6, 2013 deposi t i on, 39: 5- 6. [ T] he

benef i t t o [ hi m] woul d have been at t he end when t he [ Col orado

Resi dence] was sol d t hat [ he] had some t ype of appr eci at i on.

Tr . of Dec. 6, 2013 deposi t i on, 39: 8- 10. He f ur t her expl ai ned

t hat he had a pr of i t mot i ve i n pur chasi ng t he Col or ado Resi dencebecause at t he t i me housi ng pr i ces wer e skyr ocket i ng, and so t he

oppor t uni t y t her e was t o benef i t f r om t hat i ncr easi ng mar ket .

Tr . of Dec. 6, 2013 deposi t i on, 91: 19- 21.

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Paul pr ovi ded ampl e evi dence t hat he obt ai ned t he Housi ng

Loan f or a busi ness pur pose wi t h r espect t o hi s empl oyment wi t h

Aspen. Gi ven hi s t est i mony at t he Hear i ng, hi s deposi t i on and

hi s decl ar at i on, as wel l as t he wr i t t en of f er of empl oyment f r om

Aspen, t he bankrupt cy cour t had suf f i ci ent evi dence t o f i nd t hat

Paul s pur pose i n obt ai ni ng t he Housi ng Loan was pr i mar i l y

r el at ed t o hi s empl oyment . We di scern no cl ear err or by t he

bankrupt cy cour t i n maki ng that det er mi nat i on.

VI. CONCLUSION

To di smi ss a chapt er 7 case f or abuse under 707(b) ( 1) , t he

bankrupt cy cour t must f i nd t hat : 1) t he debt or had pr i mar i l y

consumer debt and 2) gr ant i ng hi s pet i t i on woul d be an abuse of

chapt er 7. Onl y t he f i r st pr er equi si t e i s at i ssue on appeal .

Her e, t he Cher r et t s provi ded ampl e evi dence thr ough Paul s

t est i mony at t he Hear i ng, at hi s deposi t i on and i n hi s

decl ar at i on, t hat t hei r pur pose i n obt ai ni ng t he Housi ng Loan was

pr i mar i l y busi ness/ empl oyment - or i ent ed. Based on t he evi dence

bef or e i t , t he bankr upt cy cour t di d not cl ear l y er r i n f i ndi ngt hat t he Housi ng Loan was not consumer debt wi t hi n t he meani ng of

101( 8) . The bankrupt cy cour t pr oper l y deni ed t he Mot i on t o

Di smi ss when i t det er mi ned t hat t he f i r st pr er equi si t e of

707(b) ( 1) was not met . We AFFI RM.

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Documents

In re: Paul Richard Cherrett and Colleen Courtney Cherrett, 9th Cir. BAP (2014)