Yehud-Monosson USA, Inc. v. Habbo Fokkena, U.S. (In Re Yehud-Monosson USA, Inc.)
458 B.R. 750
| 8th Cir. BAP | 2011Background
- Debtor Yehud-Monosson USA, Inc. appeals a bankruptcy court order converting its Chapter 11 case to Chapter 7.
- This is the fifth bankruptcy filing involving essentially the same assets and principals related to Midwest Oil of Minnesota and the Dr. R.C. Samanta Roy Institute of Science & Technology (SIST).
- Multiple prior cases (Delaware and Minnesota) were dismissed as abuse of the bankruptcy process with findings of bad faith and orders barring further filings by Midwest Oil and related entities.
- Yehud filed a Chapter 11 petition in New York (Mar. 23, 2011); UST moved to transfer/convert to Minnesota; transfer was reversed on appeal, then Yehud voluntarily dismissed the appellate stay.
- UST and two of Yehud’s largest secured creditors supported conversion to Chapter 7.
- Yehud argued it was not a moneyed, business, or commercial corporation and that no evidentiary hearing was required; the court ordered conversion at the end of a hearing.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Yehud is a moneyed, business, or commercial corporation under §1112(c). | Yehud contends it is not moneyed or commercial. | Court should treat Yehud as moneyed/business given its primary for-profit activity. | Yes; Yehud is moneyed, business, or commercial, permitting conversion. |
| Whether an evidentiary hearing was required before conversion. | Yehud demanded an evidentiary hearing to contest conversion. | No evidentiary hearing necessary given record and issues. | No evidentiary hearing required. |
| Whether conversion was appropriate due to abuse of the bankruptcy process. | Yehud had not abused the process and should not be converted. | Yehud’s serial filings show abuse; day-in-court four times supports conversion. | Conversion proper based on abuse of process and similarity to prior barred filings. |
Key Cases Cited
- In re Cedar Shore Resort, Inc., 235 F.3d 375 (8th Cir. 2000) (implied good faith requirement to avoid abuse of bankruptcy process in §1112 cases)
- Missco Homestead Ass'n v. U.S., 185 F.2d 280 (8th Cir. 1951) (definition of moneyed, business, or commercial status under early bankruptcy act)
- In re Reagan, 374 F. App'x 683 (8th Cir. BAP 2010) (broad discretion in dismissing or converting Chapter 11; abuse of process considerations)
- In re Farmland Indus., Inc., 397 F.3d 647 (8th Cir. 2005) (broad discretion of bankruptcy courts in conversion/dismissal decisions)
- In re C-TC 9th Avenue Partnership, 113 F.3d 1304 (2d Cir. 1997) (record sufficiency for dismissal without evidentiary hearing; inference-based decision-making)