In re: Imagine Fulfillment Services, LLC

• Court: United States Bankruptcy Appellate Panel for the Ninth Circuit
• Decided: August 6, 2014
• Docket: CC-13-1483-TaDKi
• Status: Unpublished

Opinion

FILED AUG 06 2014 1 NO FO PUBL A IO T R IC T N SUSAN M. SPRAUL, CLERK 2 U.S. BKCY. APP. PANEL OF THE NINTH CIRCUIT 3 UNITED STATES BANKRUPTCY APPELLATE PANEL 4 OF THE NINTH CIRCUIT 5 In re: ) BAP No. CC-13-1483-TaDKi ) 6 IMAGINE FULFILLMENT SERVICES, ) Bk. No. 12-20544-WB LLC, ) 7 ) Adv. Pro. No. 12-1514-WB Debtor. ) 8 ______________________________) ) 9 DC MEDIA CAPITAL, LLC, ) ) 10 Appellant, ) ) 11 v. ) MEMORANDUM* ) 12 IMAGINE FULFILLMENT SERVICES, ) LLC; UNITED STATES TRUSTEE, ) 13 ) Appellees. ) 14 ______________________________) 15 Argued and Submitted on June 26, 2014 at Pasadena, California 16 Filed - August 6, 2014 17 Appeal from the United States Bankruptcy Court 18 for the Central District of California 19 Honorable Mark D. Houle,** Bankruptcy Judge, Presiding ________________________________ 20 21 * This disposition is not appropriate for publication. 22 Although it may be cited for whatever persuasive value it may have (see Fed. R. App. P. 32.1), it has no precedential value. 23 See 9th Cir. BAP Rule 8013-1. 24 ** Judge Houle entered the judgment in the adversary proceeding from which appellant appeals. Judge Julia W. Brand, 25 however, entered the Amended Memorandum Decision (for publication) and order on partial summary judgment that 26 determined, prior to entry of the Judgment, the specific narrow issue as to which appellant D.C. Media Capital, LLC seeks review. 27 See Imagine Fulfillment Servs., LLC v. DC Media Capital, LLC (In re Imagine Fulfillment Servs., LLC), 489 B.R. 136 (Bankr. 28 C.D. Cal. 2013). 1 Appearances: Jeffrey J. Williams of the Law Offices of Jon A. Kodani argued for Appellant DC Media Capital, LLC; 2 Aram Ordubegian of Arent Fox LLP argued for Appellee Imagine Fulfillment Services, LLC. 3 __________________________________ 4 Before: TAYLOR, DUNN, and KIRSCHER, Bankruptcy Judges. 5 6 INTRODUCTION 7 Judgment creditor D.C. Media Capital, LLC (“DC Media”) 8 appeals from the bankruptcy court’s judgment in favor of 9 chapter 111 debtor Imagine Fulfillment Services, LLC (the 10 “Judgment”). Pursuant to §§ 547 and 550, the Judgment avoids and 11 allows the Debtor to recover as a preferential transfer a 12 prepetition judgment lien filed by DC Media. DC Media argues 13 that the bankruptcy court erred when it determined on summary 14 judgment that DC Media’s prepetition state court judgment against 15 Debtor was not a contingent debt for purposes of its insolvency 16 analysis. We determine that the bankruptcy court did not commit 17 error and, thus, we AFFIRM. 18 PROCEDURAL AND FACTUAL BACKGROUND2 19 Debtor filed its voluntary chapter 11 petition in March 20 2012. Eighty-nine days before the filing, DC Media filed a 21 Notice of Judgment Lien with the California Secretary of State 22 23 1 Unless specified otherwise, all chapter and section references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and 24 all “Rule” references are to the Federal Rules of Bankruptcy Procedure, Rules 1001-9037. All “Civil Rule” references are to 25 the Federal Rules of Civil Procedure. 26 2 Most of the relevant undisputed facts are set forth in the bankruptcy court’s published decision. Appellant seeks 27 review of the bankruptcy court’s ruling regarding only one transfer identified in the Amended Memorandum Decision as 28 “Transfer One.” We limit our summary of facts accordingly. - 2 - 1 (“Judgment Lien”) with respect to a state court judgment in the 2 total amount of $3,997,223 against the Debtor. Debtor appealed 3 from the state court judgment after the lien was recorded but 4 before the petition date. 5 In the bankruptcy case, Debtor filed an adversary proceeding 6 against DC Media seeking to avoid three alleged preferential 7 transfers, the first of which was the filing of the Judgment 8 Lien,3 and to recover and preserve the avoided transfers for the 9 benefit of the estate. Debtor then sought partial summary 10 judgment or adjudication of facts as to all three transfers (the 11 “Debtor’s First MSJ”). DC Media filed a cross motion seeking 12 partial summary judgment as to two alleged affirmative defenses 13 (“DC Media’s MSJ”). DC Media also opposed Debtor’s First MSJ. 14 In DC Media’s opposition to Debtor’s First MSJ, it asserted 15 three grounds to support denial: (1) that no transfer was made 16 within the relevant 90-day prepetition window; (2) that its 17 evidence successfully rebutted the presumption of insolvency; and 18 (3) that Debtor failed to show that DC Media would receive more 19 from the transfers than it would receive in a hypothetical 20 chapter 7 liquidation had the transfers not been made. In 21 support of its third argument, DC Media argued that it held a 22 perfected security interest in Debtor’s personal property, not 23 only as a result of the Judgment Lien, but also based on 24 DC Media’s prepetition service on the Debtor of an order to 25 26 3 Debtor identified “Transfer 2" as DC Media's filing of an abstract of the state court judgment with the Los Angeles County 27 Recorder. “Transfer 3" was the seizure of $81,196 via levy by the sheriff from Debtor’s prepetition bank account – DC Media’s 28 partial collection on account of the state court judgment. - 3 - 1 appear for judgment debtor exam (“ORAP lien”). DC Media argued 2 that Debtor never sought to avoid the ORAP lien and asserted that 3 even if all other transfers alleged by Debtor were avoided, 4 DC Media would still remain a secured creditor. 5 Prior to the hearing on the Debtor’s First MSJ, Debtor 6 sought leave to amend the complaint to avoid the ORAP lien. 7 DC Media filed limited opposition. The hearing on the Debtor’s 8 request to amend was to be heard the day after the hearing on 9 Debtor’s First MSJ. 10 The bankruptcy court heard oral argument on Debtor’s First 11 MSJ in November 2012, and took both Debtor’s First MSJ and 12 DC Media’s MSJ under submission. It then discussed scheduling 13 with the parties, including timing of Debtor’s amended complaint 14 and the future hearing on Debtor’s proposed disclosure statement. 15 The parties agreed that Debtor could amend the complaint, but 16 questioned its potential impact if filed before the bankruptcy 17 court’s decision on the two under-submission motions. To avoid 18 confusion, the Court vacated the hearing on the Debtor’s motion 19 for leave to amend and agreed to determine later the appropriate 20 time for Debtor to file the first amended complaint. 21 The bankruptcy court entered its Amended Memorandum Decision 22 on March 12, 2013, and its order on March 14, 2013, granting, in 23 part, and denying, in part, Debtor’s First MSJ (the “First MSJ 24 Order”). As to the Judgment Lien, the bankruptcy court found 25 there to be no dispute that it was a transfer of an interest of 26 the Debtor in property to or for the benefit of Debtor’s 27 creditor, DC Media, on account of the antecedent debt established 28 by the state court judgment. Therefore, the bankruptcy court

- 4 - 1 addressed only three disputed issues: (1) whether the transfer 2 was made within the 90-day preference period; (2) whether Debtor 3 was insolvent at the time of the transfer; and (3) whether the 4 Judgment Lien, if not avoided, would allow DC Media to receive 5 more than it would in a hypothetical liquidation. 6 The bankruptcy court granted summary adjudication as to all 7 but one of the elements necessary to avoid the Judgment Lien. 8 Based on the ORAP lien, it denied summary adjudication solely as 9 to whether the Judgment Lien allowed DC Media to receive more 10 than it would in a hypothetical chapter 7 liquidation had the 11 transfer not occurred. Regarding the insolvency element, the 12 bankruptcy court reasoned that the question turned on whether the 13 state court judgment was a contingent liability. If it were not 14 contingent, the full amount must be included in the insolvency 15 analysis – which would conclusively eliminate any genuine issue 16 of material fact on summary judgment based on the balance sheet 17 analysis. The bankruptcy court held, as a matter of law in the 18 Ninth Circuit, that the state court judgment was not a contingent 19 debt and thus, that DC Media failed to show the existence of 20 disputed facts regarding Debtor’s insolvency. 21 The bankruptcy court granted summary judgment as to one of 22 the remaining two transfers, and denied summary judgment as to 23 the other. It denied DC Media’s MSJ in its entirety. 24 DC Media filed a notice of appeal from the First MSJ Order 25 and a motion for leave to appeal, recognizing it as an 26 interlocutory order. The Bankruptcy Appellate Panel entered an 27 order denying leave and dismissing the first appeal on May 21, 28 2013. Thereafter, the bankruptcy court entered its order

- 5 - 1 granting Debtor’s motion for leave to file its amended complaint 2 and Debtor filed its second motion for partial summary judgment 3 or, in the alternative, for summary adjudication of facts 4 (“Debtor’s Second MSJ”). 5 Debtor’s Second MSJ sought resolution in its favor on the 6 remaining preferential transfer element. DC Media did not oppose 7 the Debtor’s Second MSJ. 8 The bankruptcy court thereafter entered its order granting 9 Debtor’s Second MSJ and the separate Judgment thereon. The 10 Judgment provides that: “With respect to [the Judgment Lien] 11 summary judgment is granted as to [Debtor’s] First, Second, and 12 Third Claims for Relief.”4 Judgment, ECF Dkt. 111 at 2:4-5. It 13 further provides that the Judgment Lien is avoided and preserved 14 for the benefit of the estate; and DC Media’s secured claim is 15 disallowed. 16 DC Media timely appealed. 17 JURISDICTION 18 The bankruptcy court had jurisdiction under 28 U.S.C. 19 §§ 1334 and 157(b)(2)(F). 20 We have jurisdiction under 28 U.S.C. § 158(a) and (b) to 21 hear appeals from final judgments, orders, and decrees; and with 22 leave of the Panel, from interlocutory orders and decrees of 23 bankruptcy judges. The burden of demonstrating jurisdiction lies 24 25 4 The First Claim for Relief sought avoidance and recovery of preferential transfers pursuant to §§ 547 and 550; the Second 26 Claim sought to preserve the avoided transfers pursuant to § 551; and the Third Claim sought disallowance of DC Media’s filed 27 secured proof of claim, or reclassification as a general unsecured claim. The amended complaint also contained a Fourth 28 Claim – for recovery of attorney’s fees and costs of suit. - 6 - 1 with the party asserting it. Kokkonen v. Guardian Life Ins. Co. 2 of Am., 511 U.S. 375, 379-80 (1994). Here, DC Media states in 3 its opening brief5 that the Judgment is final for purposes of 4 appellate jurisdiction. It reiterates arguments it made in 5 response to the query from the Clerk of the BAP regarding 6 finality, to the effect that the Fourth Claim contained in the 7 amended complaint but not addressed in the Judgment (which sought 8 attorney’s fees), need not be resolved for purposes of a finality 9 determination pursuant to Budinich v. Becton Dickinson & Co., 10 486 U.S. 196 (1988). Although we agree that the lack of an 11 attorney’s fees determination does not render the Judgment not 12 final for purposes of appeal, we also briefly reviewed the impact 13 on finality of the lack of a separate judgment as to the two 14 other transfers that were resolved by the First MSJ Order. 15 A motions panel in DC Media’s first appeal (BAP 11-1141) 16 denied leave to appeal the First MSJ Order. When the bankruptcy 17 court entered the Judgment, resolving all remaining issues in the 18 adversary proceeding (but for the attorney’s fees), the First MSJ 19 Order became final and appealable. See Munoz v. Small Bus. 20 Admin., 644 F.2d 1361, 1364 (9th Cir. 1981) (“an appeal from the 21 final judgment draws in question all earlier non-final orders and 22 5 23 In light of the fact that the Judgment was entered in connection with a motion for “partial” summary judgment, and the 24 inclusion of a fourth claim in the amended complaint, which was not addressed in the Judgment, the Clerk of the BAP issued an 25 order requiring the parties to file and serve written responses explaining how the judgment on appeal is final. After review of 26 DC Media’s response, a motions panel found the order on appeal sufficiently final for purposes of appeal. Nonetheless, we have 27 an independent duty to examine jurisdictional issues. Gen. Elec. Capital Auto Lease, Inc. v. Broach (In re Lucas Dallas, Inc.), 28 185 B.R. 801, 804 (9th Cir. BAP 1995). - 7 - 1 all rulings which produced the judgment”). This result is of 2 particular import here because DC Media’s sole issue on appeal 3 was determined by the bankruptcy court when it ruled on the 4 Debtor’s First MSJ.6 5 Based on the foregoing review, we determine that we have 6 jurisdiction under 28 U.S.C. § 158.7 7 ISSUE 8 Whether the bankruptcy court erred in determining, as a 9 matter of law, that the state court judgment was not a contingent 10 debt. 11 STANDARD OF REVIEW 12 We review summary judgment de novo. Bamonte v. City of 13 Mesa, 598 F.3d 1217, 1220 (9th Cir. 2010). The question of 14 whether a debt is contingent is a question of law subject to de 15 novo review. Nicholes v. Johnny Appleseed (In re Nicholes), 16 184 B.R. 82, 86 (9th Cir. BAP 1995). 17 18 19 6 Ordinarily there should be a separate document embodying a final judgment that is distinct from and in addition to an 20 order granting a motion for summary judgment. See Rule 902l. Here, we located no separate judgment entered on the docket as to 21 the two transfers that were resolved by the First MSJ Order. The parties effectively waived that requirement by treating the First 22 MSJ Order as a final judgment coupled with the Judgment. See Casey v. Albertson’s Inc., 362 F.3d 1254, 1256-59 (9th Cir. 23 2004). And in addition, pursuant to Civil Rule 58(c)(2)(B) (made applicable here pursuant to Rule 7058), judgment on the other two 24 transfers was deemed entered, at the latest, 150 days from entry of the First MSJ Order, which was March 14, 2013. 25 7 DC Media also mentions in a footnote in its opening brief 26 that although the Debtor’s chapter 11 plan was confirmed, this appeal was not mooted thereby because the plan expressly 27 “contemplates this appeal, and provides a remedy for the appellant in the event this appeal is successful.” Appellant’s 28 Opening Br. at 3 n.1. We agree. - 8 - 1 DISCUSSION 2 Civil Rule 56(c) (incorporated into the Bankruptcy Rules 3 under Rule 7056) provides that a party may move for summary 4 judgment when there is no genuine issue as to a material fact and 5 the moving party is entitled to a judgment as a matter of law. A 6 "genuine issue" is one where, based on the evidence presented, a 7 fair-minded jury could return a verdict in favor of the nonmoving 8 party on the issue in question. Anderson v. Liberty Lobby, Inc., 9 477 U.S. 242, 249 (1986). All justifiable inferences must be 10 drawn in favor of the non-moving party. Id. at 255. Likewise, 11 all evidence must be viewed in the light most favorable to the 12 non-moving party. Lake Nacimiento Ranch v. San Luis Obispo 13 Cnty., 841 F.2d 872, 875 (9th Cir. 1987). Therefore, viewing the 14 evidence in the light most favorable to the non-moving party, we 15 must determine whether there are any genuine disputes of material 16 fact that remain for trial and whether the prevailing party is 17 entitled to judgment as a matter of law. New Falls Corp. v. 18 Boyajian (In re Boyajian), 367 B.R. 138, 141 (9th Cir. BAP 2007). 19 Pursuant to § 547(b)(3), for the Debtor to avoid the 20 Judgment Lien as a preference, Debtor was required to establish 21 that it was insolvent when the Judgment Lien was filed. Debtor 22 is presumed to be insolvent 90 days before it filed its petition, 23 pursuant to § 547(f), and it is undisputed that the Judgment Lien 24 was filed 89 days before the petition date. DC Media can 25 overcome the insolvency presumption only with substantial 26 evidence of the Debtor’s solvency on the date the Judgment Lien 27 was filed. The bankruptcy court held that DC Media failed to do 28

- 9 - 1 so.8 As relevant here, it found, as a matter of law, that the 2 state court judgment is a noncontingent liability.9 We agree. 3 The Bankruptcy Code does not define the term “contingent.” 4 See In re Nicholes, 184 B.R. at 88. It is well settled, however, 5 that “a debt is noncontingent if all events giving rise to 6 liability occurred prior to the filing of the bankruptcy 7 petition.” Id. A contingent debt is “one which the debtor will 8 be called upon to pay only upon the occurrence or happening of an 9 extrinsic event which will trigger the liability of the debtor to 10 the alleged creditor.” In re Fostvedt, 823 F.2d 305, 306 (9th 11 Cir. 1987) (quotation and citation omitted). In the context of 12 California state court judgments, it is also well-settled that 13 unstayed judgments, even those on appeal, “are not contingent as 14 to liability or amount.” Marciano v. Chapnick (In re Marciano), 15 708 F.3d 1123, 1127 (9th Cir. 2013); and see In re Keenan, 16 201 B.R. 263, 266 (Bankr. S.D. Cal. 1996). 17 Here, DC Media held a California state court judgment 18 against Debtor. Debtor filed an appeal shortly before filing 19 bankruptcy, but after the Judgment Lien was filed.10 Debtor 20 21 8 The bankruptcy court’s analysis of the insolvency issue is set forth in its extensive, well-reasoned discussion in the 22 published Amended Memorandum Decision. See In re Imagine, 489 B.R. at 144-50. 23 9 Thus, the full amount of the state court judgment, when 24 added to the Debtor’s balance sheet, resulted in DC Media’s failure to overcome the presumption of insolvency and entitled 25 Debtor to summary judgment on the insolvency element. In re Imagine, 489 B.R. at 150. 26 10 On the date of the transfer, which DC Media conceded at 27 oral argument is the critical date for avoidance purposes, the state court judgment was not only not stayed on appeal, it was 28 not even on appeal. - 10 - 1 never sought or obtained a stay, and DC Media commenced 2 collection efforts on the state court judgment before Debtor 3 filed bankruptcy.11 DC Media, nonetheless, argues on appeal that 4 the bankruptcy court erred when it held, as a matter of law, that 5 the state court judgment was not a contingent liability. It 6 argues that for preference analysis purposes the insolvency 7 determination is a factual determination that required the 8 bankruptcy court to determine the fair valuation of not only 9 assets but liabilities. And to do so, it argues, the bankruptcy 10 court had to consider DC Media’s evidence that Debtor excluded 11 the state court judgment from its balance sheets and DC Media’s 12 expert’s opinion that such exclusion was appropriate under 13 generally accepted accounting principles (“GAAP”). Based 14 thereon, DC Media argues that the state court judgment was 15 necessarily a contingent claim that must be discounted to little 16 or no value in the insolvency analysis. Only at trial, it 17 argues, could the bankruptcy court find that relevant GAAP 18 principles were not persuasive. We disagree. 19 “There is no generally accepted accounting principle for 20 analyzing the insolvency of a company.” Arrow Elecs., Inc. v. 21 Justus (In re Kaypro), 218 F.3d 1070, 1076 (9th Cir. 2000) 22 (citing Sierra Steel, Inc. v. Totten Tubes, Inc. (In re Sierra 23 Steel, Inc.), 96 B.R. 275, 278 (9th Cir. BAP 1989)). And as 24 DC Media concedes, GAAP are not controlling. See In re Sierra 25 Steel, Inc., 96 B.R. at 278. In particular, “[w]ith regard to 26 11 In fact, one of the two other transfers was based on 27 DC Media’s levy on one of Debtor’s bank accounts as part of DC Media’s collection efforts on the unstayed state court 28 judgment. - 11 - 1 the sum of [a debtor’s] debts, GAAP are . . . inapposite because 2 they do not report liabilities in accordance with the right to 3 payment standard of 11 U.S.C. § 101(5) and (12).” Devan v. 4 The CIT Group/Commercial Servs., Inc. (In re Merry-Go-Round 5 Enters., Inc.), 229 B.R. 337, 343 (Bankr. D. Md. 1999). 6 A debtor is insolvent when its debts exceed its assets – the 7 “traditional bankruptcy balance sheet test.” In re Koubourlis, 8 869 F.2d 1319, 1321 (9th Cir. 1989). This test is codified at 9 § 101(32)(A), which defines insolvency to mean: “with reference 10 to an entity other than a partnership and a municipality, 11 financial conditions such that the sum of such entity’s debts is 12 greater than all of such entity’s property, at a fair valuation” 13 exclusive of certain exempted or fraudulently transferred 14 property. Under the Code, the term debt “means liability on a 15 claim.” 11 U.S.C. § 101(12). And the term “claim” is defined 16 under the Code to include “right to payment, whether or not such 17 right is reduced to judgment, liquidated, unliquidated, fixed, 18 contingent, matured, unmatured, disputed, undisputed, legal, 19 equitable, secured, or unsecured; . . . .” 20 Based on the foregoing statutory provisions, to the extent 21 GAAP financial reporting omits any type of collectible debt from 22 a debtor’s balance sheet – whether contingent or noncontingent – 23 the resulting financial statement is not dispositive as to the 24 debtor’s solvency or insolvency. Thus, the omission of the state 25 court judgment from such a financial statement does not require a 26 conclusion that the omitted debt is a contingent debt for 27 insolvency analysis purposes. As set forth in depth in the 28 bankruptcy court’s published Amended Memorandum Decision,

- 12 - 1 substantial decisional authority supports the conclusion that the 2 unstayed state court judgment is a noncontingent liability, and 3 thus, its full amount must be included in the insolvency 4 analysis. See In re Imagine, 489 B.R. at 149-50. DC Media cites 5 none to the contrary. 6 DC Media, however, criticizes the test utilized by the 7 bankruptcy court to determine that the state court judgment was 8 not “contingent” – whether all events giving rise to the 9 liability had occurred. DC Media argues that this test is 10 inappropriate because it was developed in statutory contexts 11 outside an insolvency determination; statutes that specifically 12 refer to contingent or noncontingent claims.12 And, because the 13 Code definition of “insolvent” refers to “fair valuation,” 14 DC Media reasons that “Congress intended the insolvency analysis 15 to be based on a consideration of all relevant and admissible 16 evidence.” Appellant’s Opening Brief at 14. DC Media argues 17 that the bankruptcy court, thus, was required to value the state 18 court claim13 at less than its face amount based on Debtor’s 19 12 In particular, such analysis arises in the context of 20 chapter 13 eligibility (§ 109(e)); eligibility as petitioning creditors in involuntary bankruptcy petitions (§ 303); and the 21 claims estimation process(§ 502(c)). 22 13 In part, DC Media bases this argument on its interpretation of § 101(32A) as requiring “fair valuation” of 23 debts as well as property to determine insolvency. At oral argument in this appeal, DC Media’s counsel argued that the Ninth 24 Circuit supported this interpretation in Merkel (no citation provided). The question at issue in Merkel, was “the standard 25 for determining when a contingent obligation to pay is a ‘liability’ for purposes of determining insolvency under 26 26 U.S.C. § 108(d)(3).” Merkel v. Comm’r of Internal Revenue, 192 F.3d 844, 846 (9th Cir. 1999). In its comparison of 27 insolvency analysis under the Internal Revenue Code section at issue and § 101(32A), the Ninth Circuit stated that in 28 continue... - 13 - 1 opinion that it would prevail on appeal, the contingency 2 identified by DC Media. Again, we disagree. 3 It is well-settled that the amount of a contingent claim 4 should be “determined in accordance with the probability that the 5 contingency will occur.” In re Merry-Go-Round Enters, Inc., 6 229 B.R. at 342 (citing Covey v. Commercial Nat’l Bank of Peoria, 7 960 F.2d 657, 659-61 (7th Cir. 1992)). The amount of a 8 noncontingent debt, however, is the amount of the claim itself. 9 Id. DC Media’s argument that the state court judgment must be 10 discounted based on the Debtor’s opinion of success on appeal in 11 effect presumes that the debt is a contingent debt in the first 12 instance. 13 DC Media’s arguments against the established test for 14 determining a debt to be contingent are not persuasive. We see 15 no reasoned or statutorily supported purpose to deviate, for 16 insolvency determination purposes, from the definition of 17 “contingent debt” as “one which the debtor will be called upon to 18 pay only upon the occurrence or happening of an extrinsic event 19 which will trigger the liability of the debtor to the alleged 20 creditor.” In re Fostvedt, 823 F.2d at 306 (quotation omitted). 21 The Debtor’s liability for the state court judgment did not rely 22 “on some future extrinsic event to trigger liability.” See 23 In re Nicholes, 184 B.R. at 88. In the 90 days before the Debtor 24 filed its bankruptcy petition, the unstayed state court judgment 25 26 13 ...continue § 101(32A), the “phrase ‘at a fair valuation’ may be read to 27 modify both ‘debts’ and ‘property,’ . . . .” 192 F.3d at 851. Nothing in the Merkel decision, however, supports discounting a 28 noncontingent claim. - 14 - 1 was subject to collection by DC Media, and DC Media partially 2 collected on the debt, via levy.14 The question is not whether 3 the Debtor could ever pay the debt. The question is whether 4 Debtor was liable for the debt. As of the filing of the Judgment 5 Lien, Debtor was liable for the full amount of the Judgment, and 6 the bankruptcy court, therefore, did not err when it determined, 7 as a matter of law, that the Judgment was not contingent. 8 CONCLUSION 9 Based on the foregoing, we AFFIRM. 10 11 12 13 14 15 16 17 18 19 20 21 22 23 14 As set forth in the Amended Memorandum Decision, by DC Media’s calculations, which it based on the discounting 24 theory, the Judgment should be valued at $7,394.70, in part because Debtor had insufficient assets from which to pay it. 25 In re Imagine, 489 B.R. at 146. The logic of this argument is facially unsound, as its application would make a finding of 26 insolvency never possible - a liability could never exceed a debtor's assets. It is also inconsistent with the facts here, 27 considering that DC Media actually collected over $80,000 by prepetition levy and actively defended against the Debtor’s 28 appeal in the state appellate court. - 15 -