In re Bos
561 B.R. 868
Bankr. N.D. Fla.2016Background
- Peter H. Bos, Jr. (Bos) and Legendary Holding, Inc. (LHI) are affiliated with a large group of operating companies (the "Legendary group") that own/operate significant Florida real-estate assets and employ ~500 people; LHI is a holding company wholly owned by Bos.
- SE Property Holdings, LLC (SEPH) holds a final state-court judgment (successor to Vision Bank) against Bos, LHI and related entities arising from guaranties and defaults; judgment balance exceeded $15 million by trial.
- Prior to SEPH’s involuntary Chapter 7 petitions (filed Sept. 4, 2015), Bos and LHI had restructured or reached forbearance with most lenders except SEPH; Bos and LHI granted charging orders to friendly insiders (SSI Destín and RB Golf) that effectively encumbered membership interests soon before SEPH filed.
- SEPH had some limited security (a mortgage on a vacant lot appraised at $2.9 million) but did not execute on all assets; Bos and LHI contend they were current on debts except SEPH; SEPH contends its under-secured claim greatly exceeded the statutory threshold.
- Extensive evidentiary hearings examined (a) whether SEPH qualified as the sole petitioning creditor, (b) whether Bos and LHI had ≥12 qualifying creditors, (c) whether many listed creditors were insiders, contingent, paid post-petition, or held de minimis recurring claims, and (d) whether the court should abstain under 11 U.S.C. § 305(a).
- The Court found SEPH holds a qualifying under-secured claim, disqualified multiple listed creditors (insiders, contingent, post-petition payments, or no claim), and exercised permissive abstention under § 305(a), dismissing the involuntary petitions.
Issues
| Issue | Plaintiff's Argument (SEPH) | Defendant's Argument (Bos/LHI) | Held |
|---|---|---|---|
| Whether SEPH is a qualified petitioning creditor under §303(b) | SEPH: final judgment exceeds statutory threshold; under-secured portion still >$15,325 after known security. | Bos/LHI: SEPH recorded judgment/JLC so its claim is secured by other assets and under‑secured portion is below statutory threshold. | Court: SEPH made prima facie showing of qualifying unsecured claim; burden shifted to debtors who failed to prove sufficient collateral value to reduce under‑secured portion below threshold; SEPH qualifies. |
| Numerosity — Do Bos and LHI have ≥12 "qualifying" creditors? | SEPH: many listed creditors are insiders, contingent, post‑petition paid, or otherwise not qualifying. | Bos/LHI: their creditor lists show ≥12 creditors each; many are legitimate claims. | Court: disqualified numerous creditors (insiders, contingent guaranties, post‑petition payees, taxing authorities, and non‑existing claims); as a result, numerosity requirement not met for purposes supporting denial of SEPH as sole petitioning creditor but court nonetheless abstained. |
| Status of guaranty claims (contingent or noncontingent) | SEPH argued some guaranties were fixed and countable. | Bos/LHI argued many guaranties made them primary obligors and should count. | Court: examined guaranty language and demands; where no default/demand existed or liability was triggered by future events (including bankruptcy filings), guaranty claims were contingent and do not count for numerosity. |
| Insider / non‑statutory insider status of certain creditors (e.g., SSI Destín, K&L, Wharfside, PVB) | SEPH: these creditors are arms‑length purchasers/creditors and should count. | Bos/LHI: these are independent creditors and documented claims. | Court: SSI Destín, K&L, Wharfside, and PVB were non‑statutory insiders given relationships, timing of charging orders, ownership ties, and long personal/business connections; insiders excluded from numerosity. |
| Post‑petition payments and voidability under §549 (impact on numerosity) | SEPH: some payments were legitimate under §303(f) and creditors still qualify. | Bos/LHI: certain transfers involved exempt TBE funds or "earmarked" loans so payments were permitted. | Court: transfers from Bos’s TBE account and payments by affiliated Legendary entities were avoidable under §549 (and many lacked credible earmarking); creditors paid in the gap period were excluded from numerosity. |
| Whether the Court should abstain under §305(a) | SEPH: bankruptcy forum needed to preserve §547 preference claims and avoid state‑court limitations; dismissal would harm SEPH. | Bos/LHI: this is essentially a two‑party dispute; state‑court remedies suffice and bankruptcy filing unduly harms operations and employees. | Court: exercised permissive abstention under §305(a) — balancing factors (economy, available state forum, lack of creditor body benefit, harm to businesses/employees) favored dismissal; involuntary cases dismissed and claims returned to state court. |
Key Cases Cited
- In re Rimell, 946 F.2d 1363 (8th Cir. 1991) (adopting burden‑shifting approach on bona fide dispute for petitioning creditor claims)
- Bartmann v. Maverick Tube Corp., 853 F.2d 1540 (10th Cir. 1988) (supports burden‑shifting to prevent debtors from defeating petitions by mere assertion of dispute)
- In re Speer, 522 B.R. 1 (Bankr. D. Conn. 2014) (applies burden‑shifting and finds petitioning creditors qualified)
- Farmers & Merchants State Bank v. Turner, 518 B.R. 642 (N.D. Fla. 2014) (discusses prima facie showing and burden shift regarding claimed security reducing petitioning creditor’s unsecured amount)
- Denham v. Shellman Grain Elevator, Inc., 444 F.2d 1376 (5th Cir. 1971) (excludes small, recurring/de minimis claims from numerosity in this circuit)
- In re Mountain Dairies, Inc., 372 B.R. 623 (Bankr. S.D.N.Y. 2007) (articulates multi‑factor test for §305 abstention balancing creditor and debtor interests)