Jason Mowatt

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UNITED STATES BANKRUPTCY COURT
CENTRAL DISTRICT OF CALIFORNIA
LOS ANGELES DIVISION
In re
Jason Mowatt,
Debtor.
Case No.: 2:26-bk-10379-NB
Chapter 11
MEMORANDUM DECISION OVERRULING
DELA YADOR’S OBJECTION TO DEBTOR’S
ELECTION TO PROCEED UNDER
SUBCHAPTER V OF CHAPTER 11
Hearing:
Date: April 7, 2026
Time: 1:00 p.m.
Place: Courtroom 1545
255 E. Temple Street
Los Angeles, CA 90012
(or via ZoomGov per posted procedures)
At the time and place set forth in the caption above, this Court conducted a hearing on
the objection of Dela Yador (“Creditor”) to Debtor’s election to proceed under Subchapter V
of Chapter 11. At the conclusion of the hearing, this Court took the matter under submission.
For the reasons set forth below, Creditor’s objection is overruled, and Debtor will be allowed
to proceed under Subchapter V.
I. BACKGROUND
On March 11, 2025, in litigation pending in the United States District Court for the
Eastern District of New York (the “District Court”), Creditor obtained a jury verdict in his favor
FILED & ENTERED
MAY 11 2026
CLERK U.S. BANKRUPTCY COURT
Central District of California
BY DEPUTY CLERK	llewis
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and against Debtor, in the amount of $1,981,828.00.1 On September 16, 2025, the District
Court entered judgment against Debtor and in favor of Creditor in the amount awarded by
the jury ($1,981,828.00) (the “Judgment”).2 On October 7, 2025, Creditor filed a motion for
pre- and post-judgment interest,3 which Debtor opposed.4 At the time Debtor sought
bankruptcy protection on January 15, 2026, the District Court had not yet ruled upon
Creditor’s motion for pre- and post-judgment interest.5
Debtor scheduled Creditor’s claim in the amount of $1,981,828.00 – the dollar amount
of the Judgment entered by the District Court on September 16, 2025.6 Creditor asserts that
New York law provides that he is automatically entitled to pre- and post-judgment interest,
and that as a result, Debtor should have scheduled his claim in an amount of no less than
$3,584,318.82.7 If Creditor is correct, Debtor would not be eligible to proceed under
Subchapter V of Chapter 11, which is available only to debtors who have “aggregate
noncontingent liquidated secured and unsecured debts” that are less than $3,424,000.00.
See § 101(51D) (as adjusted under § 104, most recently effective April 1, 2025).8 Debtor’s
position is that the District Court has discretion as to whether to award pre- and post-
judgment interest, and that accordingly it was appropriate for him to schedule Creditor’s
claim at only $1,981,828.00, the amount of the Judgment.9
II. DISCUSSION
Eligibility for Subchapter V “should normally be determined by the debtor’s originally
filed schedules, checking only to see if the schedules were made in good faith.” In re Scovis,
1 Objection to Subchapter V Designation (dkt. 44, the “Subchapter V Designation Objection”) p. 4:7–9
and Ex. 1.
2 Id. at p. 4:10–13 and Ex. 2.
3 Id. at p. 4:14–22 and Ex. 3.
4 Debtor’s Opposition to Objection to Subchapter V Designation (dkt. 52, the “Opposition”) p. 3:17–21
and Ex. B.
5 Id. at p. 3:23–24.
6 Id. at p. 4:8–10.
7 Subchapter V Designation Objection p. 4:14–22.
8 Unless the context suggests otherwise, a “chapter” or “section” (“§”) refers to the United States
Bankruptcy Code, 11 U.S.C. § 101 et seq. (the “Code”), a “Rule” means the Federal Rules of Bankruptcy
Procedure or other federal or local rule, and other terms have the meanings provided in the Code, Rules, and
the parties’ filed papers.
9 Opposition (dkt. 52) p. 5:12–20.
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249 F.3d 975, 982 (9th Cir. 2001). A debt is liquidated if “if the amount of the debt is readily
determinable…. The definition of ‘ready determination’ turns on the distinction between a
simple hearing to determine the amount of a certain debt, and an extensive and contested
evidentiary hearing in which substantial evidence may be necessary to establish amounts or
liability.” In re Slack, 187 F.3d 1070, 1073–74 (9th Cir. 1999), as amended (Sept. 9, 1999)
(internal citations and quotation marks omitted).
To determine Debtor’s eligibility for Subchapter V, the task facing this Court is not to
determine whether Creditor is entitled, under New York law, to pre- and post-judgment
interest on the Judgment. Instead, this Court must assess whether deciding that question
would require the District Court to conduct only a simple hearing, or instead to conduct more
extensive proceedings.
This Court’s brief survey of New York law quickly demonstrated that whether Creditor
is entitled to interest on its Judgment, and if so how much interest, is far from a
straightforward question. The statute upon which Creditor relies provides:
Interest shall be recovered upon a sum awarded because of a breach of
performance of a contract, … except that in an action of an equitable nature,
interest and the rate and date from which it shall be computed shall be in the
court's discretion. [N.Y. C.P.L.R. § 5001(a) (McKinney) (emphasis added).]
The jury verdict giving rise to the Judgment found that the partnership between Debtor
and Creditor terminated on September 18, 2017; that Debtor and Creditor each held a 50%
share of the partnership; that the value of Creditor’s share of the partnership assets as of the
date of the partnership termination was $1,824,328.00; and that Creditor’s share of the
partnership’s net historical profits was $157,500.00.10
Creditor characterizes the litigation that produced the Judgment as arising solely from
a breach of contract claim. But as Debtor points out, it is possible to characterize claims
under New York law in which one partner seeks partnership assets as being of an equitable
nature – or at least containing an equitable component. See Bank of St. Louis v. Morrissey,
10 Subchapter V Designation Objection (dkt. 44) at Ex. 1.
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597 F.2d 1131, 1138 (8th Cir. 1979) (characterizing the recovery obtained in a breach of
contract action as “equitable in nature” because the court was required to assess the value
of partnership assets). In other words, both Debtor and Creditor have asserted plausible
arguments in support of their positions regarding how interest should be calculated on the
Judgment.
Creditor’s contention that the amount of interest properly awarded in connection with
the Judgment is readily ascertainable is belied by the fact that before Debtor sought
bankruptcy protection, Debtor and Creditor submitted a total of 27 pages’ worth of briefing on
the issue to the District Court,11 and more than two months after that briefing had closed, the
District Court had still not rendered a decision.12 To reiterate, this Court’s role is not to
determine to what extent interest on the Judgment is available under New York law; it is only
to evaluate whether the answer to that question is readily ascertainable. It is not.
Accordingly, Debtor did not act improperly in scheduling Creditor’s claim at only the amount
of the Judgment and omitting any amount for interest.
//
11 See Subchapter V Designation Objection (dkt. 44) at Ex. 3 (Creditor’s motion for pre- and post-
judgment interest) and Opposition (dkt. 52) at Exs. B and C (Debtor’s opposition and Creditor’s reply).
12 Creditor’s reply in support of its motion for pre- and post-judgment interest is dated October 28, 2025.
See Debtor’s Opposition (dkt. 52) Ex. C. As noted above, at the time Debtor sought bankruptcy protection on
January 15, 2026, the District Court had not yet determined whether Creditor was entitled to pre- and post-
judgment interest.
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III. CONCLUSION
For the reasons set forth above, this Court determines that Debtor’s decision to
schedule Creditor’s claim at the amount of the Judgment – $1,981,828.00 – was not
inappropriate and that accordingly Debtor is eligible to proceed under Subchapter V. This
Court will prepare and issue an appropriate order implementing this Memorandum Decision.
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Date: May 11, 2026
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