Andrew T. Cook

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1At the hearing on the motion, the Debtor asked the Court
to convert the case to chapter 7 rather than dismissing it if it
concluded that the Debtor was ineligible for chapter 13. A
UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
In re No. 05-43228 TG
Chapter 13
ANDREW T. COOK,
Debtor.
_____________________________/
MEMORANDUM OF DECISION
Creditors Mark D. Shapiro and GoGuys, Inc. (the “Creditors”)
move to dismiss the above-captioned chapter 13 case. They contend
that the above-captioned debtor (the “Debtor”) is not eligible to
be in chapter 13 because his noncontingent, liquidated unsecured
debts exceed the debt limits established by 11 U.S.C. § 109(e).
For the reasons discussed below, the Court agrees with the
Creditors that the Debtor is ineligible to be a chapter 13 debtor.
The Court will dismiss the case unless the debtor files a request
for conversion to chapter 7 within the time period specified
below.1
Signed: October 03, 2005
________________________________________
LESLIE TCHAIKOVSKY
U.S. Bankruptcy Judge
________________________________________
Entered on Docket
October 03, 2005
GLORIA L. FRANKLIN, CLERK
U.S BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
Case: 05-43228 Doc# 32 Filed: 10/03/05 Entered: 10/03/05 15:48:08 Page 1 of 8

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chapter 13 debtor has a right to convert the case to chapter 7
at any time. See 11 U.S.C. § 1307(a).
2There is no evidence that the Creditors ever levied the
writ of attachment on the Debtor’s property.
2
DISCUSSION
On February 8, 2005, the Creditors filed a lawsuit against the
Debtor in state court. Shortly thereafter, the Creditors filed an
application for a writ of attachment which was granted over the
Debtor’s opposition. The amount of the Creditors’ Claim included
in the right to attach order was $345,561.35 (the “Creditors’
Claim”). At present, an individual is ineligible for chapter 13
under 11 U.S.C. § 109(e) if his noncontingent, unsecured,
liquidated debts exceed $307,675. Thus, if the Creditors’ Claim
is noncontingent, unsecured, and liquidated, the Debtor is
ineligible for chapter 13. There is no contention that the
Creditors’ Claim is contingent or secured,2 or the amount of the
Creditors’ Claim is liquidated. However, the Debtor disputes that
he is personally liable for the Creditors’ Claim. He contends
that the Creditors’ Claim is the debt of a corporation in which he
was a shareholder, Tax Advantage, Inc. (the “Corporation”).
The leading Ninth Circuit Court of Appeals case on whether and
to what extent a dispute as to liability can render a claim
unliquidated under 11 U.S.C. § 109(e) is In re Slack, 187 F.3d
1070 (9th Cir. 1999). In Slack, a state court issued a tentative
decision against the debtor based on claims of fraud and negligent
misrepresentation in an amount in excess of the chapter 13 debt
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3After the bankruptcy court dismissed the chapter case on
eligibility grounds and while that decision was on appeal, the
state court entered a final judgment in a somewhat lesser
amount, thus eliminating the dispute concerning liability.
However, the Ninth Circuit concluded that, because eligibility
had to be determined as of the petition date, this subsequent
event could not be considered.
4The Slack court does not make it clear whether this
stipulation occurred before or after the bankruptcy petition was
filed. However, given the Slack court’s holding that post-
petition events may not be considered, the Court infers that the
stipulation was made first in state court, pre-petition.
3
limits. Thereafter, the debtor filed a chapter 13 petition.3 The
creditor filed a proof of claim in the bankruptcy case for the
amount stated in the tentative decision. The debtor objected to
the proof of claim. He disputed liability but stipulated that
the amount of the claim was $255,954.4 At that time, the unsecured
debt limits were only $250,000. The bankruptcy court dismissed
the case, holding that the debtor’s dispute as to liability did
not render the claim unliquidated. The district court affirmed.
On appeal, the Slack court observed that the majority of
courts have held that “a debt is liquidated if the amount of the
debt is readily ascertainable” and that “a dispute regarding
liability does not necessarily render a debt unliquidated.”
Slack, 187 F.3d at 1074. Other courts have held that a dispute
as to liability may render a debt unliquidated if the “dispute is
too great[.]” Id. It also acknowledged one case--In re Pearson,
773 F.2d 751, 756 (6th Cir. 1985)–-taking a third approach: i.e,
holding that the court should look only “at the face of the
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5It does not appear that the first two approaches actually
differ. The first line of cases state that a dispute as to
liability will not “necessarily” render a claim unliquidated.
The second line of cases is simply more specific about when a
dispute as to liability will not render a claim unliquidated:
i.e., when an extensive hearing would not be required to
determine liability.
6A subsequent Ninth Circuit panel, in a case decided two
years after Slack, appears to have misread the Slack court’s
holding. It recited as the applicable rule the third approach
taken in Pearson. See In re Scovis, 249 F.3d 975, 982 (9th Cir.
2001)(J. Nelson dissenting). However, Ninth Circuit precedent may
only be overruled by the court sitting en banc; it may not be overrule
by a subsequent panel. See In re Osborne, 76 F.3d 306, 309 (9th Cir.
1996).
4
petition and calculate the debts based on what the debtor alleged
in good faith.” Id.
The Slack court adopted either the first or second approach
as follows:
We are persuaded that under this circuit’s
“readily determinable” standard, if the amount
of the creditor’s claim at the time of the
filing the petition is ascertainable with
certainty, a dispute regarding liability will
not necessarily render a debt unliquidated.
Whether the debt is subject to “ready
determination” will depend on whether the
amount is easily calculable or whether an
extensive hearing will be needed to determine
the amount of the debt, or the liability of
the debtor. See In re Wenberg, 94 B.R. at
634. Therefore, the mere assertion by the
debtor that he is not liable for the claim
will not render the debt unliquidated for the
purposes of calculating eligibility under §
109(e).
Id. See also In re Ho, 274 B.R. 867, 873-75 (Bankr. 9th Cir.
2002).5 This is the rule of law that the Court must apply in
evaluating the Debtor’s eligibility for chapter 13.6
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5
In support of the Creditors’ motion to dismiss, the Creditors
submit documents filed with the state court in support of the
application for the writ. In the declaration of Mark Shapiro (the
“Shapiro Declaration”), Shapiro states that he first became
acquainted with the Debtor in early 2002 when he contacted him and
his partner for financial advice. At that time, the Debtor and
his partner were operating under the name of the Corporation.
Shapiro stated that he informed the Debtor that any investments he
made had to be extremely low risk.
Over the next few years, the Debtor encouraged him to make a
series of loans. Initially, the loans were in small amounts and
were repaid on a timely basis. Thereafter, he was induced to make
more substantial loans. At the Debtor’s urging, he refinanced his
home mortgage and obtained a home equity loan for this purpose.
The Debtor assured him that the money would be invested in low
risk ventures and that he could get the money back at any time on
60 days’ notice.
At some point, repayments on the loans ceased. The Debtor’s
partner left the state without prior notice. When he pressed the
Debtor for repayment, the Debtor contended that the funds had been
lost in an unsuccessful real estate venture. Shapiro later
learned that the venture in question had been highly speculative.
The Debtor attempts to blame his partner for any
misrepresentations. He concedes that the Creditors have a claim
against the Corporation and that the amount of the claim is
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6
liquidated. However, he denies any personal liability. He notes
that the promissory notes and investment agreement signed by the
Creditors and the Debtor identified the borrower as the
Corporation and that he signed them only on the Corporation’s
behalf. He asserts that the state court based its issuance of the
writ of attachment on the contention that the Corporation was his
alter ego. He contends that it would take an extensive hearing to
litigate this alter ego theory.
The Debtor relies heavily on Ho for his contention that his
dispute as to liability renders the Creditors’ Claim unliquidated.
In Ho, the debtor included in his personal bankruptcy schedules
a contract claim against a corporation in which she was a minority
shareholder. The debtor was not a party to the contract. The Ho
court held that Ho’s dispute as to any personal liability for the
debt rendered the debt unliquidated and that the debt should not
be included in the eligibility calculation.
The Debtor’s reliance on Ho is misplaced. In Ho, unlike here,
not only was the debtor not a party to the contract, she was not
named as a defendant in the state court lawsuit. There were no
allegations of fraud nor were there allegations that the corporate
debtor was not a bona fide corporation. See Ho, 274 B.R. at 872.
In the instant case, the Debtor has conceded that he has no
personal knowledge of whether the Corporation was ever
incorporated. He claims that he left that responsibility to his
partner. The Creditors have provided substantial evidence that
the Corporation was never formed.
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7
Based on the foregoing, the Court concludes that the Debtor’s
liability for the Creditors’ Claims would not require an extensive
hearing and that the Creditors’ Claims are liquidated. Thus, the
Debtor is ineligible to be a chapter 13 debtor.
CONCLUSION
The Debtor is ineligible to be a chapter 13 debtor. The Court
will grant the Creditors’ motion to dismiss unless the Debtor
files a request for conversion to chapter 7 within 15 days from
the date of this Memorandum. If the request is timely filed, the
case will be converted to chapter 7 without further notice or
hearing.
END OF DOCUMENT
Case: 05-43228 Doc# 32 Filed: 10/03/05 Entered: 10/03/05 15:48:08 Page 7 of 8

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8
COURT SERVICE LIST
Richard A. Kutche
46 S. First St.
San Jose, CA 95113-2406
Stanley A. Zlotoff
300 S. First St., Ste. 215
San Jose, CA 95113
Case: 05-43228 Doc# 32 Filed: 10/03/05 Entered: 10/03/05 15:48:08 Page 8 of 8