Nordbrock, In re, s. 84-2376
| Decision Date | 24 July 1985 |
| Docket Number | Nos. 84-2376,84-2377,s. 84-2376 |
| Citation | 772 F.2d 397 |
| Parties | Bankr. L. Rep. P 70,651 In re Gerald L. NORDBROCK, Debtor. BANKERS TRUST COMPANY BT SERVICE COMPANY, Assignee of Bankers Trust Company, Appellant, v. Gerald L. NORDBROCK, Appellee. In re Gerald L. NORDBROCK, Debtor. BANKERS TRUST COMPANY BT SERVICE COMPANY, Assignee of Bankers Trust Company, Appellee, v. Gerald L. NORDBROCK, Appellant. |
| Court | U.S. Court of Appeals — Eighth Circuit |
William W. Graham, Des Moines, Iowa, for appellant.
William Jay Riley, Omaha, Neb., for appellee.
Before BRIGHT, Senior Circuit Judge, and ROSS and JOHN R. GIBSON, Circuit Judges.
This case presents consolidated appeals arising out of an involuntary bankruptcy proceeding instituted pursuant to 11 U.S.C. Sec. 303 (1982) against Gerald Nordbrock by Bankers Trust Company (Bankers Trust). Bankers Trust appeals from an order of the district court 1 affirming the bankruptcy court's dismissal of the proceedings. It asserts that the district court erred in (1) determining that Nordbrock's debt to Bankers Trust should not be considered in determining whether Nordbrock was generally paying his debts as they became due, and (2) concluding as a matter of law that funds transferred by Nordbrock to his wife's checking account did not constitute property of the estate. Nordbrock cross-appeals, asserting that the district court erred in denying him reasonable attorneys' fees. We affirm the order of the district court. In addition, we view this appeal, requiring a third court to consider the issues, as frivolous at this stage of the proceedings. Therefore we award Nordbrock his costs and attorneys' fees incurred in appeal No. 84-2376.
Bankers Trust, the creditor, brought an action in state court against Gerald L. Nordbrock, the debtor, to recover a debt of approximately three million dollars arising from Nordbrock's personal guarantee of a debt owed to Bankers Trust by a bank holding company. Subsequently, Bankers Trust 2 filed an involuntary bankruptcy petition against Nordbrock pursuant to 11 U.S.C. Sec. 303 (1982), alleging that Nordbrock owed it a noncontingent debt in excess of three million dollars and that Nordbrock was generally not paying his debts as they became due.
Nordbrock objected to the petition, arguing that the debt asserted by Bankers Trust constituted a contingent liability. He also argued that the bankruptcy court lacked jurisdiction because only one creditor had filed the petition in violation of the jurisdictional requirement of 11 U.S.C. Sec. 303(b) which provides that three or more entities must participate in an involuntary petition unless there are fewer than twelve holders of claims against the debtor. Finally, Nordbrock contended that Bankers Trust had filed the petition in bad faith.
Nordbrock asserted his right to a jury trial on the disputed debt and the bankruptcy court transferred the case to the district court. The district court, in turn, remanded the threshold jurisdictional issues to the bankruptcy court for initial consideration. These issues were (1) whether Nordbrock was generally paying his debts as they became due, and (2) whether, because Bankers Trust was the only petitioning creditor, Nordbrock had fewer than twelve creditors. The bankruptcy court found in Nordbrock's favor on both issues and dismissed the petition, awarding Nordbrock attorneys' fees.
The district court, in a well-reasoned opinion, affirmed the dismissal of the petition. In light of the disputed nature of this debt, the court rejected Bankers Trust's contention that Nordbrock was generally not paying his debts, stating in part:
Appellant relies on Matter of Covey, 650 F.2d 877, 882-84 (7th Cir.1981) which sets forth a complicated procedure for determining when disputed debts should be excluded from the "generally paying debts" analysis in an involuntary bankruptcy proceeding. However, the two other Circuit Courts which have considered the question have criticized and declined to adopt the Covey approach as overly intricate and elaborate, In re B.D. Int'l Discount Corp., 701 F.2d 1071, 1077 (2nd Cir.), cert. denied, --- U.S. ----, 104 S.Ct. 108, 78 L.Ed.2d 110 (1983), and as weighted too heavily in favor of creditors, In re Dill, 731 F.2d 629 (9th Cir.1984). In addition, the Fifth Circuit has summarily affirmed a decision in which disputed debts were excluded from the section 303(h)(1) calculation:
[T]he Court believes that where a debtor fails to pay a debt which is subject to a bona fide dispute, that debt should not be considered a debt which has not been paid as it became due. There is no apparent reason why a debtor should have to pay disputed debts to avoid the entry of an order of relief.
In re All Media Properties, Inc., 5 B.R. 126, 144 (Bankr.S.D.Tex.1980), aff'd, 646 F.2d 193 (5th Cir.1981).
* * *
* * *
This case reflects efforts by a single creditor to use the Bankruptcy Court as a forum for the trial and collection of an isolated disputed claim, a practice condemned in prior decisions. See, e.g., Matter of Goldsmith, 30 B.R. 956, 963 (Bankr.E.D.N.Y.1983); In re R.N. Salem Corp., 29 B.R. 424, 429 (Bankr.S.D.Ohio 1983); In re SBA Factors of Miami, Inc., 13 B.R. 99, 100-101 (Bankr.S.D.Fla.1981); In re Nar-Jor Enterprises Corp., 6 B.R. 584, 586 (Bankr.S.D.Fla.1980). There currently exists, in fact, a pending case in an Iowa District Court in which appellant is attempting to enforce the same claim against Nordbrock as has been asserted in this case. Even in Matter of Covey, on which appellant relies, the Seventh Circuit was not faced with a situation in which the disputed debt at issue was the only obligation of the debtor not being paid in the regular course of the debtor's business. The Bankruptcy Court's denial of an order of relief pursuant to 11 U.S.C. Sec. 303(h)(1) was correct and is therefore affirmed.
In re Gerald L. Nordbrock, 52 B.R. 370, 371-72 (D.Neb. 1984) (footnote omitted).
We affirm the judgment against Bankers Trust on the basis of the district court's opinion. 3
In his cross-appeal, Nordbrock contends that the district court erred in denying him reasonable attorneys' fees in the appeal from the bankruptcy court's order dismissing the involuntary bankruptcy petition. A motion for attorneys' fees under 11 U.S.C. Sec. 303(i) is addressed to the discretion of the court, and we cannot say that the district court abused its discretion in declining to award Nordbrock attorneys' fees on appeal from the bankruptcy court.
Nordbrock also asks this court to award him reasonable attorneys' fees on this appeal pursuant to Rule 38 of the Federal Rules of Appellate Procedure, which authorizes the award of "just damages" for a frivolous appeal. We conclude that such an award is appropriate in this...
To continue reading
Request your trial
-
In re Kelton Motors Inc.
...dismissal of the petition."); Susman v. Schmid (In re Reid), 854 F.2d 156, 159 (7th Cir.1988); Bankers Trust Company BT Service Company v. Nordbrock (In re Nordbrock), 772 F.2d 397 (8th Cir.1985); Semel v. Dill (In re Dill), 731 F.2d 629, 632, 10 CBC.2d 1119 (9th Cir.1984); Bradner v. Coope......
-
In re Caucus Distributors, Inc.
...? 303; court determined that special circumstances such as fraud, trick, and artifice may be considered); see also In re Nordbrock, 772 F.2d 397, 400 (8th Cir.1985) (in absence of fraud or some special need for bankruptcy relief, failure to pay single debt does not establish that debtor is ......
-
In re Norris, Bankruptcy No. 95BK-30087-A7.
...much money "left over" after meeting his living expenses, but his family's standard of living had to change. 29 E.g., In re Nordbrock, 772 F.2d 397 (8th Cir. 1985); In re Smith, 123 B.R. 423 (Bankr. M.D.Fla.1990), aff'd, 129 B.R. 262 (M.D.Fla. 1991); In re Axl Industries, Inc., 127 B.R. 482......
-
In re Murrin, s. 09–38182
...plus Toni Klatt, Peder K. Davisson, Davisson & Associates, P.A., Dennis L. DeSender, and Edina Realty, Inc.). FN12. Cf. In re Nordbrock, 772 F.2d 397, 400 (8th Cir.1985) (applying § 303(b)(1); but observing generally that “[a] creditor does not have a specific need for bankruptcy relief if ......