JAMES S. STARZYNSKI, Bankruptcy Judge.
This matter is before the Court on Rombauer Vineyards, Inc.'s ("Rombauer") Motion for Summary Judgment (doc 66) on the Motion to Dismiss (doc 26) filed by creditor Associated Winery Systems, Inc. ("AWS") to which Rombauer filed a Joinder (doc 52). Debtors filed a Response to the Motion to Dismiss (doc 35). AWS filed a Joinder in Rombauer's Motion for Summary Judgment (doc 67). AWS also filed a Supplemental Joinder in the Motion for Summary Judgment (doc 69). Debtors filed a Response to Rombauer's Motion for Summary Judgment (doc 74). Debtors also filed a Response to AWS's Joinder in the Motion for Summary Judgment and Supplemental Joinder in the Motion for Summary Judgment (doc 75). Rombauer filed a Reply to Debtor's Response to the Motion for Summary Judgment (doc 79).
Debtors appear through their attorney Don Provencio. Rombauer appears through its attorneys Thuma & Walker, A Professional Corporation (David T. Thuma and Stephanie L. Schaeffer). AWS appears through its attorney Modrall Sperling Roehl Harris & Sisk, P.A. (Paul M. Fish). This is a core proceeding concerning the administration of the estate. 28 U.S.C. § 157(b)(2)(A). For the reasons set forth below, the Court finds that the Motion for Summary Judgment and Joinder should be denied because Debtors are eligible for Chapter 13 relief.
AWS's Motion to Dismiss (doc 26) is based on three grounds. First, it alleges that Debtor's noncontingent, liquidated, unsecured debts exceed the statutory maximum permitted by 11 U.S.C. § 109(e). Second, it alleges that the plan is filed in bad faith and that the proposed distribution under the plan is so nominal as to be in bad faith. Third, it alleges that this case is an "abusive filing" because it was a refiling after an earlier Chapter 13 case was voluntarily dismissed by the Debtors, and both filings were filed to stop litigation pending in a California state court.
Debtors, in response to the Motion to Dismiss, deny their ineligibility, deny the bad faith allegations, admit their involvement in the California state case, admit they have filed two Chapter 13 cases, and deny that this filing is abusive. Doc 35. In response to Rombauer's Joinder in the Motion to Dismiss, Debtors filed an Objection to Allowance of Rombauer's Proof of Claim (doc 47)
Summary judgment is proper when there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law. Bankruptcy Rule 7056(c). In determining the facts for summary judgment purposes, the Court may rely on affidavits made with personal knowledge that set forth specific facts otherwise admissible in evidence and sworn or certified copies of papers attached to the affidavits. Fed.R.Civ.P. 56(e). When a motion for summary judgment is made and supported by affidavits or other evidence, an adverse party may not rest upon mere allegations or denials. Id. Rather, "Rule 56(e) ... requires the nonmoving party to go beyond the pleadings and by her own affidavits, or by the `depositions, answers to interrogatories, and admissions on file,' designate `specific facts showing that there is a genuine issue for trial.'" Celotex Corp. v. Catrett, 477 U.S. 317, 324, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). "Rule 56(e) permits a proper summary judgment motion to be opposed by any of the kinds of evidentiary materials listed in Rule 56(c), except the mere pleadings themselves." Id. The court does not try the case on competing affidavits or depositions; the court's function is only to determine if there is a genuine issue for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).
In ruling on a motion for summary judgment, the trial court views the evidence and draws reasonable inferences therefrom in the light most favorable to the nonmoving party. Mountain Highlands, LLC v. Hendricks, 616 F.3d 1167, 1169-70 (10th Cir.2010)(citing Garrison v. Gambro, Inc., 428 F.3d 933, 935 (10th Cir.2005)). On those issues for which it bears the burden of proof at trial, the nonmovant "must go beyond the pleadings and designate specific facts so as to make a showing sufficient to establish the existence of an element essential to [its] case in order to survive summary judgment." Id. at 1170 (quoting Cardoso v. Calbone, 490 F.3d 1194, 1197 (10th Cir.2007)) (internal quotation marks omitted). "[F]ailure of proof of an essential element renders all other facts immaterial." Id. (quoting Koch v. Koch Indus., Inc., 203 F.3d 1202, 1212 (10th Cir.), cert. denied, 531 U.S. 926, 121 S.Ct. 302, 148 L.Ed.2d 242 (2000)).
New Mexico LBR 7056-1 governs summary judgment motions. It provides, in part:
While the Motion to Dismiss cites three grounds, the Motion for Summary Judgment and Joinder focus only on Debtors' eligibility to be Chapter 13 debtors. Because the Court finds the Debtors eligible, the remaining issues regarding bad faith and abusive filing will be dealt with later, either at confirmation or earlier at a hearing if requested by the creditors.
Bankruptcy Code section 109 deals with eligibility requirements for debtors. Section 109(e) deals specifically with eligibility to be a Chapter 13 debtor:
11 U.S.C. § 109(e) (amounts adjusted effective April 1, 2010). The sole issue in this Motion for Summary Judgment is whether Debtors owed, on April 22, 2010, noncontingent, liquidated, unsecured debts that aggregate less than $360,475.
Rombauer proposes 8 Undisputed Material Facts. Doc 66, p. 2. ("Facts R1-R8"). Debtors contested only Fact 3. The others are deemed admitted under NM LBR 7056-1. And, Debtors' objection to Fact R3 is not really a statement that the Fact is disputed or a citation to a contrary fact in the record; rather, it asks the Court to read the language of a document carefully to determine the true parties. Therefore, Fact 3 is deemed admitted also. So, the Court adopts the following as undisputed:
In Debtors' Response (doc 74, pp. 3-7) they submit their version of 32 additional Undisputed Material Facts, ("Facts D1-D32") to which Rombauer responded (doc 79). Rombauer's responses (if any) will be dealt with in footnotes to those facts. The
Rombauer admits that it generally agrees with this Fact (as restated by the Court), but disagrees as to amounts owed and supports the disagreement with the affidavit of John Cochennette.
Debtors have no priority debts on Schedule E. (Doc 11). Schedule F lists $77,101 of unsecured non-priority debts. Schedule F also lists AWS as contingent-in litigation, unliquidated and disputed in an unknown amount and Rombauer as a contingent liability-business debt in the amount of $25,115.20. Id.
Eleven proofs of claim are filed in this case. Numbers 1, 2, 5, 9 and 10 are filed as secured claims. The other claims are unsecured non-priority claims:
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Claim Creditor Amount
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3 PRA Receivables
Management $ 3,908.57
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4 Chase Bank USA, N.A. $ 10,798.37
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6 American Express Bank $ 193.49
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7 CR Evergreen, LLC $ 30,052.99
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subtotal $ 44,953.42
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8 AWS $1,052,878.76
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9 Rombauer $1,598,656.20
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total $2,696,488.38
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The total of all claims other than AWS and Rombauer is $44,953.42. If either of AWS or Rombauer's claim count toward the eligibility requirement, Debtors are ineligible.
The Court finds that both AWS's and Rombauer's claims are unliquidated and do not count toward eligibility.
Kanke v. Adams (In re Adams), 373 B.R. 116, 119-20 (10th Cir. BAP 2007). The BAP's concept of unliquidated is identical to that in other jurisdictions. See, e.g., In re Doyle, 340 B.R. 381, 384 (Bankr.D.Or. 2006):
See also In re Knight, 55 F.3d 231, 235 (7th Cir.1995) ("[T]he cases uniformly provide the method for determining whether a debt is liquidated: If the amount of a claim has been ascertained or can readily be calculated, it is liquidated.") (Citation and internal punctuation omitted.)
Debtors do dispute that they have any liability on either Rombauer's claim or AWS's claim. However, whether a claim is disputed is not relevant as to eligibility.
Adams, 373 B.R. at 120.
Adams further discusses the procedure the Court should apply in making the eligibility determination.
Id.
Although not specifically stated in Adams, the above quotation suggests that the Court should not conduct a full blown trial that authenticates each and every debt listed on a debtor's schedules and the proofs of claim filed. This is the summary approach suggested by other courts also. See In re Odette, 347 B.R. 60, 62-63 (Bankr.E.D.Mich.2006):
See also In re Arcella-Coffman, 318 B.R. 463, 476-77 (Bankr.N.D.Ind.2004):
In Rombauer's Motion for Summary Judgment (doc 66) it argues that its claim against the Debtors is a contract claim that is subject to ready determination and can be easily ascertained or calculated. It contrasts its contract claim with a tort or quantum meruit claim, which it correctly argues are generally unliquidated. Arcella-Coffman, 318 B.R. at 473. Rombauer states that its claim consists of four categories: 1) $833,301 loss sustained; 2) $217,080 for the difference between price paid to the Debtors and the amount recouped when some of the equipment was sold, 3) $523,160 as a refund for returning the remaining equipment, and 4) $25,115.20 paid to the Debtors to purchase parts that it never received. The Court finds that the first three categories are not liquidated.
First, the Proposal, dated June 20, 2007, limits warranty coverage to one year and requires proper maintenance of the equipment. Doc 52-1, p. 11. Rombauer's Proof of Claim includes a letter from its attorney that shows the issue of warranty coverage has been raised:
A trier of fact will need to determine if this is a warranty case and apply warranty law.
Second, the date on that letter is June 24, 2009, well after the one year period set out in the proposal. A trier of fact would need to determine if the claims were timely.
Third, the Adams case teaches that lost business claims are not to be considered as liquidated. Adams, 373 B.R. at 122.
Fourth, a purchaser of equipment is not automatically entitled to recoup the difference between what it paid for an item and what it sold it for after several years of use. A trier of fact would at least need to determine the value derived from the equipment before disposal, if this remedy were even available after a warranty period. Similarly, a purchaser does not automatically get to return used equipment for the purchase price.
The fourth category of damages, the $25,115.20 paid to the Debtors is liquidated. Even though this amount would not bring the Debtors over the eligibility limit, the Court will not include the $25,115.20. That is because this claim against the Debtors is contingent
In summary, the Court finds that the entire Rombauer claim is not included in the eligibility total. Next, the Court turns to the AWS claim.
AWS's claim consists of a proof of claim and the attached affidavit of Antonio Prospero, a principal in Prospero Equipment Corporation of California, d/b/a AWS. His affidavit states that Mr. Rottiers was a senior vice president of AWS and attended trade shows to meet buyers. Because Mr. Prospero lives in New York, Debtor took charge of the California operations. At a January 2007 trade show a number of sales leads developed. Mr. Prospsero made many inquiries to Debtor after the trade show, but was told nothing was happening with the leads. Then, in May 2007, Debtor left AWS's employment. Mr. Prospero and his son found papers and computer records that Debtor had been soliciting AWS's prospects and existing customers to enter contracts with a new business that Debtor was forming. Mr. Prospero also asserts that Debtor took assets of AWS and sold them, keeping the money.
Mr. Prospero further states that in his business there is a 40% markup on equipment he sells. Therefore, there would be $400,000 profit on a $1,000,000 sale. He alleges that the information he has shows that AWS lost $1,036,701.76 of profit.
This is a tort claim. It could be based on conversion, interference with contractual relations, interference with prospective contractual relations, even possibly prima facie tort. It is not, however, a liquidated claim for bankruptcy purposes.
Debtor did not file a cross-motion for summary judgment on the issue of eligibility under section 109(e). However,
Doña Ana Mutual Water Consumers Ass'n v. City of Las Cruces, New Mexico, 516 F.3d 900, 912 (10th Cir.2008) (quoting Dickeson v. Quarberg, 844 F.2d 1435, 1444 n. 8 (10th Cir.1988)).
In this case, the Court finds that there is no genuine issue of material fact that both moving creditors' claims are unliquidated and excludable from the section 109(e) eligibility calculation. The Court finds that both parties asked the Court to dismiss on this ground (AWS's motion and Rombauer's joinder), and that both parties sought summary judgment (Rombauer's motion and AWS's joinder), so they knew or should have known that all evidence to eligibility was ripe for review. The Court will therefore enter summary judgment for Debtors and against Rombauer and AWS on the issue of eligibility. A separate Order will enter.
