In re C.W. Mining Company, Case No. 08-20105 (Bankr.Utah 9/17/2008)
| Decision Date | 17 September 2008 |
| Docket Number | Case No. 08-20105. |
| Parties | In re: C.W. MINING COMPANY, a Utah corporation, Chapter 11, Putative Debtor. |
| Court | United States Bankruptcy Courts. Tenth Circuit. U.S. Bankruptcy Court — District of Utah |
Paul James Toscano, Salt Lake City, UT, Debtor's Counsel.
Russell S. Walker, Woodbury & Kesler, Salt Lake City, UT, Debtor's Counsel
Keith A. Kelly, Steven W. Call, Steve Strong Ray Quinney & Nebeker, P.C., Salt Lake City, UT, Counsel for Aquila, Inc.
Conrad H. Johansen, Tyler Foutz, Olsen Skoubye & Nielson, Salt Lake City, UT, Counsel for Owell Precast LLC.
John T. Morgan, US Trustees Office, David E. Leta, Snell & Wilmer, F. Mark Hansen, F. Mark Hansen, P.C., Salt Lake City, UT, Counsel for Standard Industries, Inc.
Before the Court is Aquila, Inc.'s (Aquila) Motion for Partial Summary Judgment Regarding Eligibility of Petitioning Creditors to Commence This Involuntary Bankruptcy Case (Aquila's Motion). Aquila's Motion asks the Court to determine whether the three petitioning creditors, Aquila, Owell Precast L.L.C. (Owell), and House of Pumps, Inc. (House of Pumps), were eligible to commence this involuntary case and whether the three petitioning creditors held qualifying claims against the putative Debtor, C.W. Mining Company (Debtor) as of the petition date.
Aquila's Motion has been fully briefed by the parties. Additionally, Standard Industries Inc. (Standard)1 has filed a Motion to Dismiss the Involuntary Petition (docket no. 73) (Standard's Motion to Dismiss) and a Motion for Summary Judgment to Dismiss the Petition (docket no. 132) (Standard's Motion for Summary Judgment). The Debtor has joined in Standard's motions. Aquila has responded to both motions and neither has been set for hearing. Some of the legal issues in these motions and Aquila's Motion overlap, and the Court will resolve any of the overlapping issues that are included in Aquila's Motion. Any remaining issues raised in Standard's motions or in Aquila's responsive pleadings will be addressed at a later date. The Court has considered the facts properly before it, the written and oral arguments presented, has conducted an independent review of applicable law, and finds that notice was properly given to all parties in interest. Based on the foregoing, the Court makes the following ruling.
This Court has jurisdiction under 28 U.S.C. §§ 1334 and 157(a).2 This is a core proceeding under 28 U.S.C. § 157(b)(2)(A) and (O), and the Court may enter a final order.
Federal Rule of Bankruptcy Procedure 7056 makes summary judgment appropriate when, after consideration of the record, the Court determines that "there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law."3 In applying this standard, the Court examines the factual record in the light most favorable to the nonmoving party.4 The party opposing summary judgment may not rely on mere allegations or denials in its pleadings or briefs, but must identify specific and material facts for trial and significant probative evidence supporting the alleged facts.5 There is no genuine issue of fact "[w]here the record taken as a whole could not lead a rational trier of fact to find for the non-moving party."6 The moving party has the burden of establishing that it is entitled to summary judgment.7
The Court finds that the following material facts are undisputed:
1. Aquila, Owell, and House of Pumps filed an involuntary bankruptcy petition against the Debtor on January 8, 2008 seeking entry of an order for relief under chapter 11.
2. Aquila signed the involuntary petition as a creditor holding a claim against the Debtor in the amount of $24,891,988 pursuant to a judgment entered against the Debtor and in favor of Aquila that was issued by the United States District Court for the District of Utah (District Court) on October 30, 2007.
3. The Debtor is appealing the judgment but did not post a supersedeas bond or obtain a stay pending appeal.
4. House of Pumps signed the involuntary petition as a creditor holding a claim against the Debtor in the amount of $19,255.62 based on trade debt owing.
5. The unsecured amount of House of Pumps' claim ($19,255.62) alone exceeds the aggregate unsecured claim threshold that is required as a minimum total of the claims of all petitioning creditors in order to qualify under § 303(b).
6. Owell signed the involuntary petition as a creditor holding a claim against the Debtor in the amount of $3,440.
7. The involuntary petition was served personally on the Debtor's registered agent on January 9, 2008.
8. The Debtor filed an answer to the involuntary petition on January 30, 2008 and an amended answer on February 13, 2008.
9. In the amended answer, the Debtor challenged the qualifications and eligibility of Aquila and Owell to sign and file the involuntary petition.
10. The Debtor has not and does not challenge the qualifications and eligibility of House of Pumps to sign and file the involuntary petition.
11. The Debtor has more than 12 creditors.
12. Before the involuntary petition was filed, Owell did business with the Debtor providing precast concrete products. Owell invoiced the Debtor for these goods on two invoices: (a) invoice no. 8355 for $13,440 dated September 12, 2007; and (b) invoice no. 8583 for $2,850 dated October 31, 2007.
13. The Debtor paid the $2,850 amount owed on invoice no. 8583 by check dated December 20, 2007.
14. Owell has no record of the Debtor disputing the $13,440 amount owed for the goods provided as shown on invoice no. 8355.
15. On January 5, 2008, the Debtor, through its accounts payable secretary Dolly Stephens, mailed a check for $3,440 to Owell.
16. The $3,440 check was drawn from a Far West Bank account in the name of B.W. Stoddard.
17. Accompanying the check was a note stating:
18. On January 7, 2008, Owell received a call from Ken Kingston, the Debtor's purchasing manager, who gave a credit card number to employees at Owell and authorized a credit card payment in the amount of $10,000 for partial payment of invoice no. 8355.
19. Owell processed the credit card on January 7, 2008 leaving a balance due and owing from the Debtor of $3,440.
20. The Debtor and Owell, through their representatives, agreed prior to the involuntary petition being filed that Owell would accept the $10,000 credit card payment and the check for $3,440 as payment in full.
21. On January 11, 2008, Owell received the $3,440 check drawn on the account of B.W. Stoddard.
22. Owell has not deposited this check, and it remains in Owell's possession.
II. DISCUSSION
Aquila has asked this Court to grant partial summary judgment in its favor and conclude that it, Owell, and House of Pumps held qualifying claims and were eligible under § 303(b) to file the involuntary petition. Section 303(b)(1) provides:
(b) An involuntary case against a person is commenced by the filing with the bankruptcy court of a petition under chapter 7 or 11 of this title — (1) by three or more entities, each of which is either a holder of a claim against such person that is not contingent as to liability or the subject of a bona fide dispute as to liability or amount, or an indenture trustee representing such a holder, if such noncontingent, undisputed claims aggregate at least $13,475 more than the value of any lien on property of the debtor securing such claims held by the holders of such claims.8
Under § 303(b), petitioning creditors must have standing to file an involuntary petition.9 "[A] petitioning creditor does not have standing when its debt is subject to a bona fide dispute"10 as to liability or amount or when the claim is contingent. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) amended the criteria for commencing an involuntary bankruptcy case. The legislative history summarizes the change:
Current law renders a creditor ineligible if its claim is contingent as to liability or the subject of a bona fide dispute. This provision amends section 303(b)(1) to specify that a creditor would be ineligible to file an involuntary petition if the creditor's claim was the subject of a bona fide dispute as to liability or amount.11
Taking into consideration the BAPCPA amendment, the standard adopted by the Tenth Circuit in Bartmann is still instructive to this Court's analysis. In Bartmann, the court held that when reviewing whether a bona fide dispute exists, a 12 Incorporating the BAPCPA's amendments into this standard, § 303(b)(1) now specifies that this Court must determine whether there is an objective basis for either a factual or legal dispute as the amount or the liability of the petitioning creditors' claims.13
The parties do not dispute that House of Pumps was eligible to act as a petitioning creditor when the involuntary petition was filed. The subsequent assignment of House of Pumps' claim to Standard and Standard's desire to withdraw as a petitioning creditor does not change that fact.14 As a result, the Court finds that the material undisputed facts establish that House of Pumps had a claim valued at $19,255.62 that was not contingent as to liability or the subject of a bona fide dispute as to liability or amount when the involuntary petition was filed. Therefore, as a matter of law, House of Pumps was eligible to act as a petitioning creditor.
The facts relevant to determining whether Aquila had standing...
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