Bartmann v. Maverick Tube Corp.

• Decision Date: 15 August 1988
• Docket Number: No. 87-1139,87-1139
• Citation: 853 F.2d 1540
• Parties: 19 Collier Bankr.Cas.2d 940, Bankr. L. Rep. P 72,440 William R. BARTMANN, Debtor-Appellant, v. MAVERICK TUBE CORPORATION and Nucorp Supply, Inc., Creditors-Appellees.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 1540

853 F.2d 1540

19 Collier Bankr.Cas.2d 940, Bankr. L. Rep. P 72,440

William R. BARTMANN, Debtor-Appellant, v. MAVERICK TUBE CORPORATION and Nucorp Supply, Inc Creditors-Appellees.

No. 87-1139.

United States Court of Appeals Tenth Circuit.

Aug. 15, 1988.

Rehearing Denied Sept. 2, 1988.

Edwin L. Gage, Robinson, Locke, Gage, Fite & Williams, Muskogee, Okl., for debtor-appellant.

Stephen E. Schneider (Charles W. Shipley, Stephen J. Greubel and Blake K. Champlin on the brief), Tulsa, Okl., for creditors-appellees.

Before LOGAN, MOORE and BALDOCK, Circuit Judges.

BALDOCK, Circuit Judge.

This is an appeal from the Eastern District of Oklahoma which reversed the bankruptcy court's decision to dismiss an involuntary petition in bankruptcy. The district court directed the bankruptcy court to grant the involuntary petition. ¹

I. Facts

The petition initially was filed against debtor-appellant William R. Bartmann (debtor) by three creditors: Geneva Tube, Inc. (Geneva); creditor-appellee Nucorp Supply, Inc. (Nucorp); and creditor-appellee Maverick Tube Corporation. ² Nucorp petitioned as an unpaid creditor based upon a 1983 personal guaranty signed by debtor, as owner of Hawkeye Pipe Services, Inc., in favor of "Nucorp Supply, Inc. dba Maverick Tubulars-Abilene Supply Division." The guaranty stated that debtor would:

promptly pay to Seller any and all indebtedness (hereinafter referred to as indebtedness, whether arising out of a single or out of more than one transaction) now owing or that may hereafter become owing to it by the Buyer and any and all notes or other instruments when in evidence thereof....

....

The undersigned do further jointly and severally agree that provisions of this agreement shall extend and insure [sic] to the benefit of Seller, its successors and assigns....

Appellees' Addendum to Response Brief.

In January 1986, Geneva withdrew as a petitioning creditor because its debt was subject to a bona fide dispute. One month later, American Express Company (American Express) joined the petition for involuntary bankruptcy. Debtor thereafter paid the American Express debt. In March 1986, American Express filed an unsuccessful motion for leave to withdraw as a petitioning creditor. Thereafter, debtor filed his sixth amended answer, alleging that a bona fide dispute existed as to the American Express debt on the date the petition was filed. He had listed the American Express debt as undisputed in his fourth and fifth amended answers.

The bankruptcy court dismissed the involuntary petition because it determined that the creditors had failed to satisfy 11 U.S.C. Sec. 303(b)(1), which requires at least three petitioning creditors whose claims are not subject to a bona fide dispute to join in filing for involuntary bankruptcy. According to the bankruptcy court, an insufficient number of creditors met the conditions necessary to join in filing an involuntary petition. The bankruptcy court determined that Nucorp's claim resulted from a post-guaranty transaction in which Nucorp, not Maverick Tubulars-Abilene Supply Division (hereinafter referred to as "Abilene Supply Division" for clarity), sold merchandise to debtor. Rec. vol. I, doc. 10 at 1-2. The court then interpreted the guaranty as not extending to either Nucorp or the post-guaranty transaction. In its conclusions of law, the bankruptcy court stated:

The language of the Guaranty, prepared by NUCORP's predecessor, is ambiguous and appears limiting as to identifying what entity or entities are beneficiaries. That is, the "dba" could, in this context, be a term of qualification as NUCORP had numerous subdivisions and business names. The facts surrounding the dealings between the parties do not permit a conclusion that, by the required proof, NUCORP has a bona fide claim--relying on the Guaranty--against Debtor.

Id. at 2.

Regarding the American Express claim, debtor maintained that because the debt was subject to a bona fide dispute, American Express was not a qualifying creditor under Sec. 303(b)(1). The bankruptcy court, however, rejected this argument and held that "Debtor's payment to AMERICAN EXPRESS COMPANY post-Petition and pre-hearing is fatal to his claim of bona fide dispute." Id. at 1.

Certain creditors appealed to the district court, claiming that the bankruptcy court had erred in concluding that (1) the requirement of three petitioning creditors under Sec. 303(b)(1) had not been met, and (2) Nucorp did not have a claim against the debtor pursuant to the guaranty. Debtor cross-appealed, asserting that the bankruptcy court erred in holding that the payment to American Express was fatal to his claim of a bona fide dispute.

The district court upheld the bankruptcy court's factual determination that the American Express debt was not subject to a bona fide dispute. Rec. vol. 1, doc. 1 at 3. It did conclude, however, that:

[t]he Bankruptcy Court's conclusion that the language of the guaranty is 'ambiguous and appears limiting as to identifying what entity or entities are beneficiaries' is not supported by the record and is clearly erroneous....

... The Bankruptcy Court committed clear error by allowing such [parol] evidence to determine the confines of the guaranty.

Id. at 5. Deeming the guaranty unambiguous as to duration and scope, the district court stated that because the guaranty explicitly applied to Nucorp, "as the successor of the principal party to the guaranty, Maverick Tubular-Abilene Supply Division," Nucorp was entitled to enforce the guaranty against debtor. Id. Because the court interpreted the guaranty to be continuing in nature and not limited to a single credit transaction, it concluded that the bankruptcy court had erred in finding that the guaranty was executed in consideration of a single transaction. Id. Due to Nucorp's status as a proper petitioning creditor and the presence of the two other petitioning creditors (Maverick Tube and American Express), the district court ordered the bankruptcy court to grant the involuntary petition. Id.

Debtor appeals on several grounds. First, he argues that his post-petition, pre-hearing payment to American Express did not affect whether the debt was considered subject to a bona fide dispute on the petition filing date. He alternatively contends that American Express is precluded from acting as a petitioning creditor because the statute of limitations had run on its debt prior to the filing date. Second, he maintains that the district court erred in affirming the bankruptcy court's decision on the American Express claim because the claim was subject to a bona fide dispute. Third, he claims that the guaranty upon which Nucorp relied was not continuing and did not transfer to its successors and assigns, but rather applied only to the indebtedness owed to Abilene Supply Division on a single transaction. Fourth, he alleges that the district court erred in directing the bankruptcy court to grant the petition for involuntary bankruptcy in the absence of a finding by the bankruptcy court that the debtor was "not paying such debtor's debts as such debts become due" pursuant to 11 U.S.C. Sec. 303(h)(1). Finally, he maintains that the district court erred in directing the bankruptcy court to grant the petition for involuntary bankruptcy when unresolved issues remained before the bankruptcy court. We affirm in part, reverse in part and remand.

II. Standards of Review

In reviewing a bankruptcy court's decision, the district court functions as an appellate court and is authorized to affirm, reverse or modify the bankruptcy court's ruling or to remand the case for further proceedings. Bankr.R. 8013. It is bound to accept the bankruptcy court's findings of fact unless they are clearly erroneous, but may examine its conclusions of law de novo. In re Branding Iron Motel, Inc., 798 F.2d 396, 399-400 (10th Cir.1986); see also In re Reid, 773 F.2d 945, 946 (7th Cir.1985) (recognizing that courts should carefully scrutinize the creditors' filing of the involuntary petition because "the filing of an involuntary petition is an extreme remedy with serious consequences to the alleged debtor, such as loss of credit standing, inability to transfer assets and carry on business affairs, and public embarrassment").

We likewise review the bankruptcy court's factual findings under the clearly erroneous standard, while its conclusions of law are reviewable de novo. In re Mullet, 817 F.2d 677, 678-79 (10th Cir.1987); In re Branding Iron Motel, Inc., 798 F.2d at 399-400. A factual finding is clearly erroneous " 'when although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed.' " Anderson v. City of Bessemer City, 470 U.S. 564, 573, 105 S.Ct. 1504, 1511, 84 L.Ed.2d 518 (1985) (quoting United States v. United States Gypsum Co., 333 U.S. 364, 395, 68 S.Ct. 525, 542, 92 L.Ed. 746 (1948)). In reviewing the factual findings, an appellate court may not weigh the evidence or reverse a finding because it would have decided the case differently. Id. A bankruptcy court's factual determinations will not be disturbed on appeal absent "the most cogent reasons appearing in the record." Kansas Federal Credit Union v. Niemeier, 227 F.2d 287, 291 (10th Cir.1955).

III. Status of American Express as a Petitioning Creditor

A. Potential Disqualification of American Express Because Its Debt was Subject to a Bona Fide Dispute under Sec. 303(b)(1)

For creditors to successfully petition for involuntary bankruptcy, the bankruptcy court must determine that the creditors have standing and that the debtor generally has not been paying his debts as they become due. In re Johnston Hawks, Ltd., 49 B.R. 823, 828 (Bankr.D.Hawaii 1985). Pursuant to 11 U.S.C. Sec. 303(b)(1) ³, a petitioning creditor does not have standing when its debt is subject to a bona fide dispute. See In re Nordbrock, 772 F.2d 397, 399 (8th Cir.1985) (...