In re Henry, Bankruptcy No. 1-84-02993.

• Decision Date: 15 April 1985
• Docket Number: Bankruptcy No. 1-84-02993.
• Citation: 52 BR 8
• Parties: In re George HENRY, Debtor.
• Court: U.S. Bankruptcy Court — Southern District of Ohio

52 B.R. 8 (1985)

In re George HENRY, Debtor.

Bankruptcy No. 1-84-02993.

United States Bankruptcy Court, S.D. Ohio, W.D.

April 15, 1985.

Mark E. Combs, Cincinnati, Ohio, for George Henry.

Mitchell B. Goldberg, Cincinnati, Ohio, for BancOhio.

DECISION AND ORDER ON DEBTOR'S MOTION TO DISMISS

BURTON PERLMAN, Bankruptcy Judge.

On November 29, 1984 an involuntary petition under chapter 7 was filed against the above identified debtor by three creditors, BancOhio National Bank, (hereafter BancOhio), P.R. Duke Co., Park 50 Corporation, (hereafter Duke), and Mr. Earl Burt (hereafter Burt). The foregoing three entities hereafter will be referred to collectively as "petitioners". The petition alleges that the petitioners hold claims against the debtor, not contingent as to liability aggregating more than $5,000.00.

Debtor filed an answer generally denying the allegations of the petition and setting forth as an affirmative defense that the petition was filed in bad faith. The grounds constituting bad faith are said to be that there was at the time of filing of the subject petition a suit pending in the state court to which BancOhio was a party, and in which BancOhio was subject to a cross claim in large amount. The answer states that at the time of the filing the state court matter had been scheduled for trial, and the bankruptcy filing amounted to an attempt "to deprive said debtor of the opportunity to litigate his cross claim."

A hearing was held on the issues framed by the petition and answer on January 9, 1985. On that day debtor filed Supplemental Answer. In the Supplemental Answer, debtor alleges further that petitioner Burt is a judgment creditor of debtor, and that as consideration for the entry, which was an agreed entry, Burt agreed to withhold execution upon the judgment pending final disposition of the claims of debtor in another suit pending in the state court. Said other suit was scheduled for trial on the merits of debtor's claims against BancOhio and others. Debtor in his Supplemental Answer sets up a defense of estoppel, contending that the agreement to withhold execution pending conclusion of the additional state court litigation estops Burt from bringing the subject involuntary petition.

At the hearing it was understood that there were two issues requiring attention, first, the adequacy of the petitioning creditors, and, second, whether debtor is paying his bills as they come due. Inadequate time had been allowed for a full hearing on the issues in question, and it was agreed that the matter would proceed as on a motion to dismiss confined to the issue of whether Burt and BancOhio are valid petitioning creditors. A briefing schedule dealing with this issue was set, and the parties filed memoranda.

The statutory language involved on this motion is the following:

§ 303 Involuntary Cases.

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(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, . . . if such claims aggregate at least $5,000 more than the value of any lien on property of the debtor securing such claims held by the holders of such claims;

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It is the contention of debtor that the claims of two of the petitioners, Burt and BancOhio, are subjects of bona fide dispute. Petitioners contest this position. They assert that Burt holds a confessed judgment against debtor. Further, petitioners say that BancOhio was granted a summary judgment against debtor. Petitioners contend that the existence of these judgments settles the matter that they are qualified petitioners under § 303(b)(1).

Debtor, to the contrary, points out that with respect to the Burt judgment, the Entry relied upon itself recites that execution is to be withheld pending final disposition of the claims of debtor in a certain...