In re Miller

• Decision Date: 09 January 2013
• Docket Number: No. 12–33942.,12–33942.
• Citation: 489 B.R. 74
• Parties: In re Gerald L. MILLER, Debtor.
• Court: U.S. Bankruptcy Court — Eastern District of Tennessee

489 B.R. 74

In re Gerald L. MILLER, Debtor.

No. 12–33942.

United States Bankruptcy Court, E.D. Tennessee.

Jan. 9, 2013.

Gentry, Tipton & McLemore, P.C., Maurice K. Guinn, Esq., Knoxville, TN, Tyler C. Huskey, Esq., Pigeon Forge, TN, for Petitioning Creditors Tennessee State Bank, Housholder Family Trust, and Charles A. and Melanie McGinnis.

Thomas E. Ray, Esq., Samples, Jennings, Ray & Clem, PLLC, Chattanooga, TN, for Debtor.

Patricia C. Foster, Esq., Howard H. Baker, Jr., Samuel K. Crocker, Esq. Knoxville, TN, for United States Trustee.

MEMORANDUM ON CONTESTED INVOLUNTARY PETITION, MOTION TO DETERMINE VENUE, AND MOTION TO ALTER OR AMEND ORDER DENYING MOTION FOR SUMMARY JUDGMENT

RICHARD STAIR, JR., Bankruptcy Judge.

Before the court are the following: (1) the contested Involuntary Petition commenced by Tennessee State Bank on September 28, 2012; (2) the Motion of Tennessee State Bank to Determine Venue for the Administration of the Debtor's Estate (Motion to Determine Venue) filed by Tennessee State Bank on October 11, 2012; and (3) the Respondent's Motion to Alter or Amend Order Denying Motion for Summary Judgment (Motion to Alter or Amend) filed by the Debtor on December 13, 2012.

The trial on the contested Involuntary Petition and Motion to Determine Venue was held on December 21, 2012. The record before the court consists of Stipulations filed by the parties on December 14, 2012, twenty-six stipulated exhibits that were introduced into evidence, and the testimony of four witnesses, James Housholder and Julia Housholder by deposition, Shelly Spurgeon, and Gerald L. Miller. Because the Motion to Alter or Amend filed by the Debtor did not allow sufficient time for a response and ruling prior to the trial, the court will dispose of it within this post-trial memorandum.

This is a core proceeding. 28 U.S.C. § 157(b)(2)(A) and (O) (2006).

I

This bankruptcy case was commenced on September 28, 2012, by the filing of an Involuntary Petition against Gerald L. Miller under Chapter 7 of the Bankruptcy Code by Tennessee State Bank, alleging that the Debtor is a person against whom relief may be granted, that he is generally not paying his debts as they become due, and that it is eligible to file the petition because, as of September 28, 2012, the Debtor owes $7,394,727.11 to Tennessee State Bank pursuant to thirteen loans between it and the Debtor, either individually or as co-maker. On October 19, 2012, the Debtor filed his Answer to the Involuntary Petition, which he amended on October 24, 2012, contesting the Involuntary Petition and attaching a List of Creditors that, as amended, included twelve or more creditors. On November 8, 2012, four additional creditors, Housholder Family Trust, Sevier County Bank, Melanie McGinnis, and Charles A. McGinnis, filed notices of joinder or intervention as additional petitioning creditors. Because it did not qualify to be a petitioning creditor under 11 U.S.C. § 303(c), Sevier County Bank was subsequently dismissed as a qualifying petitioning creditor by an Order entered on December 6, 2012. By a separate Order entered on December 6, 2012, the court determined that because of the nature of their claim, Charles and Melanie McGinnis were to be considered as one petitioning creditor. The Debtor filed an Amended List of Creditors on December 7, 2012.

Notwithstanding the filing of the Involuntary Petition, the Debtor filed a Voluntary Petition commencing a Chapter 11 bankruptcy case, No. 12–06567, in the Middle District of Florida on October 5, 2012. Tennessee State Bank filed the Motion to Determine Venue on October 11, 2012, to which the Debtor filed the Debtor's Response to Tennessee State Bank's Motion to Determine Venue for Administration of the Debtor's Estate on October 24, 2012. Thereafter, on November 9, 2012, the Debtor filed a Motion for Summary Judgment That Tennessee State is Not Qualified as a Petitioning Creditor (Motion for Summary Judgment). Following the filing of the Response of Tennessee State Bank to Debtor's Motion for Summary Judgment on November 29, 2012, the court filed an Order and accompanying Memorandum on Motion For Summary Judgment That Tennessee State Bank is Not Qualified as a Petitioning Creditor (Memorandum Opinion) on December 7, 2012, denying the Motion for Summary Judgment. The Debtor filed his Motion to Alter or Amend on December 13, 2012, arguing that the language of 11 U.S.C. § 303(b)(1), post-BAPCPA, precludes creditors from being petitioning creditors in an involuntary case when there is any factual or legal dispute as to any amount owed by the debtor on the creditors' claims.

As set forth in the Pretrial Order entered on November 5, 2012, the court was called upon to resolve the following issues as defined by the parties: (1) whether the Debtor had twelve or more creditors on September 28, 2012; (2) if so, whether Tennessee State Bank's claim is contingent as to liability or subject to a bona fide dispute as to liability or amount and is at least $14,425.00 greater than the value of any lien on property securing the claim; (3) if the Debtor had twelve or more creditors on September 28, 2012, whether there are three petitioning creditors whose claims are not contingent as to liability or subject to a bona fide dispute as to liability or amount whose claims aggregate at least $14,425.00 greater than the value of any lien on property securing the claim; (4) whether the Debtor is generally not paying his debts as they become due unless they are the subject of a bona fide dispute as to liability or amount; and (5) whether, in the interests of justice, the Debtor's bankruptcy case should proceed in this court or in the Middle District of Florida.

Pursuant to the Stipulations filed on December 14, 2012, the parties agree that the Debtor had twelve or more creditors on September 28, 2012, and that he was not, on that date, generally paying his debts as they became due. Stipulations at ¶¶ 15–16. The parties also stipulate that Charles and Melanie McGinnis held an unsecured non-contingent claim in the amount of $35,000.00 against the Debtor on September 28, 2012, and that the Debtor does not rely on the counterclaim pending in the Sevier County Chancery Court in the action styled Tennessee State Bank v. Miller, No. 78CHI–2011–CV–407 11–9–407 (State Court Lawsuit) to create a bona fide dispute as to liability or amount as to Tennessee State Bank's eligibility to be a petitioning creditor. Stipulations at ¶¶ 17–18. Prior to trial, the Debtor announced that he no longer disputes venue as being proper in the Eastern District of Tennessee, thus resolving the Motion to Determine Venue. Accordingly, the court finds the only remaining issue to be whether the three petitioning creditors each hold claims that are not contingent as to liability or subject to a bona fide dispute as to liability or amount and whether such claims aggregate at least $14,425.00 more than the value of any lien on property securing such claims.

II

As material to this contested Involuntary Petition, the Bankruptcy Code provides the following concerning the filing of an involuntary petition:

(b) An involuntary case against a person is commenced by the filing ... of a petition under chapter 7 ... of this title—

(1) by three or more entities, each of which is ... 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, ... if such noncontingent, undisputed claims aggregate at least $14,425 more than the value of any lien on property of the debtor securing such claims held by the holders of such claims[.]

....

(h) If the petition is not timely controverted, the court shall order relief against the debtor in an involuntary case under the chapter under which the petition was filed. Otherwise, after trial, the court shall order relief against the debtor in an involuntary case under the chapter under which the petition was filed only if—

(1) the debtor is generally not paying such debtor's debts as such debts become due unless such debts are the subject of a bona fide dispute as to liability or amount[.]

11 U.S.C. § 303. The sole remaining issue with respect to § 303 is whether there are three petitioning creditors whose claims are not contingent as to liability or subject to a bona fide dispute as to liability or amount and whose claims aggregate at least $14,425.00 greater than the value of any lien on property securing such claims. “The initial burden rests on the petitioning creditors to establish a prima facie case that their claims are not contingent and that no bona fide dispute exists regarding such claims.” In re Square at Falling Run, LLC, 472 B.R. 337, 341 (Bankr.N.D.W.Va.2012). The Debtor does not dispute that the McGinnises, collectively, are a qualified creditor with a qualifying claim in the amount of $35,000.00; however, the Debtor asserts that Tennessee State Bank and the Housholder Family Trust are not qualified to be petitioning creditors because there is a bona fide dispute as to the amount of Tennessee State Bank's claim against the Debtor and becausethe Housholder Family Trust's claim is not a pre-petition non-contingent claim.

A

On December 7, 2012, the court filed its Memorandum Opinion and issued an Order denying the Motion for Summary Judgment filed by the Debtor on November 9, 2012. In both the Motion for Summary Judgment and the subsequently filed Motion to Alter or Amend, the Debtor argues that Tennessee State Bank is not a qualifying creditor because its claim is in bona fide dispute as to the amount. Rule 59(e) of the Federal Rules of Civil Procedure, applicable in this bankruptcy case pursuant to Rule 9023 of the Federal Rules of Bankruptcy Procedure, states that “[a] motion to alter or amend a judgment shall be filed ... no later than 14 days after the entry of the judgment.” Fed.R.Civ.P. 59(e). Relief under Rule 59 “is an ‘extraordinary remedy and should be...