In re Speer
522 B.R. 1
Bankr. D. Conn.2014Background
- On May 20, 2014 three creditors (Dr. Michael Teiger, SLS Heating LLC, and Clipper Realty Trust) filed an involuntary Chapter 7 petition against Sheri Speer alleging undisputed, noncontingent unsecured claims aggregating over the §303(b) threshold. Trial occurred August 5 and 27, 2014.
- Claimed amounts: Teiger $30,000 (loan secured by second mortgages but effectively unsecured due to lack of equity), SLS $5,137.22 (small‑claims judgment for heating work), Clipper $3,500 (rents and tenant security deposit after foreclosure and transfer of title).
- Speer defended that some claims were contingent or subject to bona fide dispute, that the petition was filed in bad faith to hamstring her state‑court foreclosure counterclaims, and alternatively sought dismissal/suspension under §305(a).
- The court credited evidence that Clipper held $2,476 in unpaid rents/deposit, Teiger held an unpaid loan (≈$34,500 claimed balance) with no equity in collateral, and SLS held an unsatisfied small‑claims judgment.
- The court found petitioning creditors satisfied §303(b)(1) (three creditors with noncontingent, undisputed claims exceeding the statutory net threshold), found Speer generally not paying her debts as they became due, rejected the bad‑faith and §305(a) arguments, and ordered immediate entry of an order for relief under Chapter 7.
Issues
| Issue | Petitioners' Argument | Speer (Defendant) Argument | Held |
|---|---|---|---|
| Whether petitioning creditors hold claims that are noncontingent and not subject to bona fide dispute under §303(b) | Claims are noncontingent and not in bona fide dispute: Teiger loan matured and unpaid; SLS judgment final; Clipper entitled to rents/deposit after title passed | Claims are contingent or disputed as to liability/amount; some services not for Speer; Clipper has no liability | Held for petitioners: Teiger, SLS, and Clipper hold noncontingent, undisputed claims totalling ≥ statutory threshold |
| Whether Speer is "generally not paying" debts as they become due under §303(h)(1) | Numerous foreclosures, receiverships, arrearages, and relief‑from‑stay motions show nonpayment | Speer argued mediations/receivership explain nonpayment and disputed some obligations | Held for petitioners: court found Speer generally not paying debts as due |
| Whether the involuntary petition was filed in bad faith | Filing was legitimate to protect creditors and to permit trustee review of assets; creditors complied with §303(b) | Petition was collusive/for improper purpose (to hinder Speer’s state court defenses; motivated by hostility) | Held for petitioners: presumption of good faith unrebutted; no sufficient evidence of bad faith or collusion |
| Whether the court should dismiss or suspend proceedings under §305(a)(1) in favor of state court | Petitioners: bankruptcy administration and trustee will serve creditors' interests better | Speer: state courts should resolve disputes; bankruptcy is unnecessary and would be burdensome | Held for petitioners: §305(a) dismissal/suspension denied — interests of creditors favor Chapter 7 administration |
Key Cases Cited
- B.D. Int’l Discount Corp. v. Chase Manhattan Bank, N.A., 701 F.2d 1071 (2d Cir.) (definition of a contingent claim)
- Key Mechanical Inc. v. BDC 56 LLC (In re BDC 56 LLC), 330 F.3d 111 (2d Cir.) (objective bona fide dispute test and burden‑shifting framework)
- Rimell v. (In re Rimell), 946 F.2d 1363 (8th Cir.) (court should ascertain existence, not resolve, bona fide dispute)
- Lubow Machine Co., Inc. v. Bayshore Wire Prods. Corp., 209 F.3d 100 (2d Cir.) (analysis of bad‑faith standard for involuntary petitions)
- Pearl‑Phil GMT (Far East) Ltd. v. Caldor Corp., 266 B.R. 575 (S.D.N.Y.) (contingent claim becomes noncontingent on breach/performance)
- In re Kingston Square Assocs., 214 B.R. 713 (Bankr. S.D.N.Y.) (petitioners’ collection efforts not required for status as creditor)
- In re Palace Oriental Rugs, Inc., 193 B.R. 126 (Bankr. D. Conn.) (damages for bad faith only available if petition is dismissed)
- In re EM Equipment, LLC, 504 B.R. 8 (Bankr. D. Conn.) (disputed portion of claim irrelevant if remaining undisputed claims meet §303(b) threshold)