In re Clignett
567 B.R. 583
Bankr. C.D. Cal.2017Background
- On October 3, 2016 Victor Salinas filed a Chapter 7 involuntary petition against Roderick Clignett; service executed October 13, 2016. Debtor moved to dismiss on November 2, 2016.
- State-court history: original judgment against Debtor (San Angelo plaintiff) entered in 2011; San Angelo allegedly transferred/sold the judgment to Salinas in 2013; San Angelo later filed bankruptcy in 2014 and received a discharge.
- Debtor disputes that Salinas was the holder of the judgment at filing and notes petition did not check the transfer box or include required transfer documentation.
- Salinas filed an “addendum” (amendment) on November 28, 2016 attempting to document transfer and cure the defect.
- Court found either Salinas lacked standing or failed to comply with Fed. R. Bankr. P. 1003(a) (no written evidence of transfer) and concluded the attempted amendment was untimely under the applicable rules.
- Court dismissed the involuntary petition and retained jurisdiction to entertain a §303(i) fee/damages motion by Debtor after dismissal.
Issues
| Issue | Plaintiff's Argument (Salinas) | Defendant's Argument (Clignett) | Held |
|---|---|---|---|
| Standing / transfer of claim | Salinas is transferee and later filed addendum documenting transfer | Salinas was not original judgment holder; petition failed to disclose transfer and lacked required written proof under Rule 1003(a) | Petition dismissed for lack of standing or failure to comply with Rule 1003(a); Salinas’s late addendum not permitted as automatic Rule 15 amendment under bankruptcy rules |
| Amendment / timeliness (Rule 15 / Rule 1011) | Addendum filed Nov. 28 was timely as an amendment (21 days + service-extension rules) | Federal bankruptcy rules governing involuntary petitions do not make an answer obligatory; Rule 15(a)(1)(B) inapplicable; amendment required court leave which was not sought | Court held Salinas could not rely on Rule 15 automatic amendment; amendment was untimely/unauthorized and dismissal was appropriate |
| Number of petitioning creditors (§303(b) count) | N/A (Salinas proceeds as single petitioner under §303(b)(2)) | Debtor asserted he has 12+ creditors so single-petitioner exception does not apply; but Debtor failed to file the creditor list required by Rule 1003(b) | Court rejected Debtor’s unsupported claim of 12+ creditors because he did not comply with Rule 1003(b) requirements |
| Amount / bona fide dispute (§303(b) & §303 bona fide dispute) | Salinas’s claimed judgment amount suffices; any dispute as to amount is not material because undisputed portion meets statutory threshold | Debtor argued dispute as to amount (and questioned $336,179 figure) makes the claim subject to bona fide dispute | Court adopted the view that a bona fide dispute disqualifies a petition only if it affects whether the undisputed amount meets the statutory threshold; dismissal was on other grounds but court addressed the split in authority and favored counting undisputed portion toward threshold |
Key Cases Cited
- Fustolo v. 50 Thomas Patton Drive, LLC, 816 F.3d 1 (1st Cir. 2016) (discussing whether a bona fide dispute as to any portion of a claim defeats the petitioning creditor’s ability to meet §303(b) thresholds)
- In re S. California Sunbelt Developers, Inc., 608 F.3d 456 (9th Cir. 2010) (fees under §303(i) may not be awarded unless the petition is dismissed)
- Higgins v. Vortex Fishing Sys., Inc., 379 F.3d 701 (9th Cir. 2004) (plain-language reading that dismissal is prerequisite to awards under §303(i))
- In re Corn-Pro Nonstock Co-op., Inc., 317 B.R. 56 (8th Cir. BAP 2004) (holding §303(i) remedies follow dismissal)