Opinion
NOT TO BE PUBLISHED
Solano County Super. Ct. No. FCS026146.
STEIN, J.
Cecelia Nelson and Candie Nelson filed suit against One Legal, Inc., an attorney services company, seeking damages for breach of contract and negligence. They appeal from the superior court’s order granting summary judgment to One Legal. We affirm.
We have granted One Legal’s request that we take judicial notice of the judgment.
One Legal correctly points out the Nelsons originally appealed from the order granting summary judgment, but not the judgment on that order. The Nelsons later, but well within the time for filing an appeal, appealed from the judgment itself. We consider the matter no further. One Legal also points out the Nelsons’ brief contains few citations to the record and to legal authority. While we agree there is room for improvement, the brief is adequate for our purposes.
Background
It seems Candie Nelson, Cecelia Nelson’s daughter, borrowed substantial sums of money from her mother over the course of several years. Candie Nelson also incurred significant debts in connection with a restaurant she operated out of Santa Rosa. In early October 2001, Candie Nelson transferred title to several properties to Cecelia Nelson for the stated purpose of satisfying her debts to her mother. Slightly less than one year later, three other creditors, Michael Fallon (Candie Nelson’s former attorney), Ralph A. Paige, Jr. (owner of Sonoma County Growers Exchange), and Alfonso Ibarria (as owner of Mexifoods) instituted involuntary bankruptcy proceedings in Santa Rosa against Candie Nelson, doing business as Viva Mexico. One week later, and slightly over one year after she transferred her properties to Cecelia Nelson, Candie Nelson instituted voluntary bankruptcy proceedings in Oakland.
The timing of Candie Nelson’s filing seems to have been an attempt to prevent the Santa Rosa bankruptcy trustee from attempting to void the transfers of real property to Cecelia Nelson. Title 11 United States Code sections 547(b)(4)(B) and 547(b)(5) allow the bankruptcy trustee to void any transfers of property made between 90 days and one year before the date of the filing of the petition if the creditor at the time of transfer was an “insider.” A parent is an “insider” for these purposes. (11 U.S.C. § 101(31)(A)(i).)
Title 11 United States Code section 547(b) provides, in full:
After Candie Nelson instituted the voluntary proceedings, she, through attorney John W. Findley, filed a motion to dismiss the involuntary petition, asserting it had been mooted by the filing of voluntary petition. She also asserted she had more than 12 creditors, so that the involuntary petition would be valid only if it was joined by at least three creditors (11 U.S.C. § 303(b)(1)). Nelson claimed Mexifoods was a corporation that was incompetent to file any legal papers without legal representation, pointing out that although the president of the corporation had signed the petition, the corporation was not represented in those proceedings by an attorney. In her opinion, it followed the involuntary petition had to be dismissed because there were only two competently joined creditors.
Candie Nelson did not provide any support for her claim she had more than 12 creditors, but we accept that the claim is correct. (Contrast, for example, the evidence produced in In re Schiliro (Bankr. E.D. Pa. 1986) 64 B.R. 422, 422-425.)
On February 6, 2003, the bankruptcy court denied the motion to dismiss, ruling, “The debtor’s motives are transparent. In the first few days of October, 2001, she made transfers of real property. Those transfers are within the one-year avoidance period of [sections] 547(b)(4)(B) and . . . 548(a)(1) of the Bankruptcy Code in the involuntary case but not the second case.” The court consolidated the voluntary and involuntary petitions, ordered the voluntary petition be dismissed as moot if an order was entered in the involuntary case, and ordered, further, “The debtor shall file and serve an answer to the involuntary petition on or before February 20, 2003. If she fails to do so, an order for relief shall be entered against her pursuant to § 303(h) of the [Bankruptcy] Code.”
Candie Nelson did not file an answer to the involuntary petition on or before February 20, 2003. Instead, through attorney Findley, on February 21, 2003, she filed a second motion to dismiss. By this time a new creditor had been joined to the petition. Candie Nelson contended, however, the petition was defective because all but one of the creditors named in the proceedings actually were the creditors of Viva Mexico, a limited liability company, and therefore the debts owed to the creditors were not her personal responsibility. She also contended the claims of Michael Fallon, the attorney who had represented her in earlier bankruptcy proceedings, were disputed, arguing he had committed a fraud against her in connection with the earlier proceedings. The bankruptcy court did not rule on the new motion to dismiss, but on February 24, 2003, ordered relief. The court later explained that under the Federal Rules of Civil Procedure, when the debtor files a motion instead of an answer, the answer is due 10 days after notice of the denial of the motion. (See Fed. Rules Civ. Proc., rule 12(a)(4)(A), 28 U.S.C.; 11 U.S.C. appen. rule 1011(c).) “The debtor violated both the express terms of the court’s order and the Federal Rules by not filing a timely answer, and an order for relief was mandated by the Code.”
The bankruptcy court’s explanation was contained in a memorandum that responded to a motion to allow a late appeal, filed by Mr. Findley on Candie Nelson’s behalf. The bankruptcy court denied the motion to allow a late appeal, but the appellate court later found the appeal to have been timely.
On October 14, 2003, the court voided Candie Nelson’s transfers of the three parcels of real property to Cecelia Nelson, and voided Cecelia Nelson’s later transfers of those properties to the 1997 Nelson Trust, vesting all right, title and interest in the properties in the bankruptcy trustee.
Candie Nelson appealed the bankruptcy court’s February 24, 2003, order granting relief under Chapter 7. On February 4, 2004, the Bankruptcy Appellate Panel affirmed the bankruptcy court’s order, “for a different reason than that relied on by the trial court.” The panel noted that the Federal Rules of Court allow a debtor 20 days from the date summons is served in which to file either an answer or a motion to dismiss. When the debtor, like Candie Nelson, files a motion to dismiss, “the rules provide that, unless a different time is set by the court, a pleading responsive to the petition shall be filed within 10 days of the date the court . . . denies the motion . . . . In this case, the bankruptcy court denied [Candie Nelson’s first motion to dismiss] and allowed debtor more than ten days, until February 20, 2003, to file an answer. . . . [¶] Debtor did not timely file any responsive pleading. Instead, a day after the deadline to respond had passed, she filed a second motion to dismiss. She did not ask the court to accept a late filing or to extend the time for filing a responsive pleading; she simply filed her motion to dismiss late. Thus, even if debtor’s motion were considered to be an answer, it was not timely filed. In the absence of a timely response to the petition, and absent a request for an extension of time to file the response, the bankruptcy court did not err in entering the order for relief.”
See Federal Rules of Civil Procedure, rule 12(a)(4)(A) (28 U.S.C.), providing that if the court denies a motion to dismiss and unless the court fixes a different time, the responsive pleading shall be served within 10 days after notice of the court’s action.
The case at issue here was commenced on June 8, 2005, when the Nelsons filed a complaint against One Legal in the superior court, stating claims for breach of written and/or oral contract and negligence. Their theory was that attorney Findley, as the Nelsons’ agent, had retained One Legal to file the second motion to dismiss the involuntary petition. One Legal guaranteed same-day filing, but filed the motion a day late, and therefore breached its contract with the Nelsons (through Findley) and also committed negligence. Cecelia Nelson sought $60,000, representing an amount paid to the bankruptcy trustee, plus attorney fees incurred in the bankruptcy proceedings after the bankruptcy appellate panel affirmed the bankruptcy court’s order. Candie Nelson sought all costs incurred in connection with “the subsequent [bankruptcy proceedings.]”
One Legal moved for summary judgment. It pointed out the bankruptcy court had ordered Candie Nelson to file an answer to the bankruptcy petition. The second motion to dismiss was not an answer as required by the court’s order, and also was not a responsive pleading as required by the Bankruptcy Code and Federal Rules of Civil Procedure. One Legal pointed out, further, that although the bankruptcy appellate panel found the second motion to dismiss had been untimely, it also seemed to acknowledge it was not a responsive pleading. As an alternative argument, One Legal pointed out that the filing of an appropriate responsive pleading would not have altered the outcome of the bankruptcy proceedings. A responsive pleading sends the matter to trial, where it will be determined whether the debtor can pay debts as they become due, and if so, the liquidation process begins. If no responsive pleading is filed, the liquidation process begins immediately. As Candie Nelson admitted she could not pay her debts as they became due, her responsive pleading, if valid and timely filed, could only have delayed matters and would not have prevented the proceedings. For the same reason, Cecelia Nelson suffered no harm as a result of the delayed filing as it had no effect on the ultimate decision to set aside the transfers of real property.
On January 12, 2007, the superior court granted summary judgment to One Legal. It explained, “The court will assume, arguendo, that Candie’s appeal of the order for relief was denied on the sole ground that Candie’s second motion to dismiss was not timely filed. [¶] . . . There is no disputing that defendant filed the papers late. Defendant contends Candie has not suffered any damage as a result. Candie admits she has not suffered any financial loss due to Fax & File’s omission [the original entity was “Fax & File,” which changed its name to “One Legal” in April 2003 ], but contends she did not receive a discharge and was forced to negotiate an unfavorable settlement as a result of the order for relief. [¶] To survive this motion, plaintiffs must demonstrate compensable damage. The declaratory evidence offered by plaintiffs is insufficient to raise a genuine triable issue of material fact. Negligence without proximately caused harm is not actionable. The court cannot speculate as to plaintiff’s damages. [¶] Plaintiff, Cecelia Nelson, has raised no triable issues of material fact to support claims against defendant, One Legal, Inc.”
Discussion
Summary judgment is appropriate if all the papers submitted show there is no triable issue as to any material fact and that the moving party is entitled to judgment as a matter of law. (Code Civ. Proc., § 437c, subd. (c).) “A defendant seeking summary judgment has met the burden of showing that a cause of action has no merit if that party has shown that one or more elements of the cause of action cannot be established. [Citations.] Once the defendant’s burden is met, the burden shifts to the plaintiff to show that a triable issue of fact exists as to that cause of action. [Citation.] In reviewing the propriety of a summary judgment, the appellate court independently reviews the record that was before the trial court. [Citation.] We must determine whether the facts as shown by the parties give rise to a triable issue of material fact. [Citation.] In making this determination, the moving party’s affidavits are strictly construed while those of the opposing party are liberally construed. [Citation.]” (Hanooka v. Pivko (1994) 22 Cal.App.4th 1553, 1558.)
The Nelsons point out Cecelia Nelson paid $60,000 to the bankruptcy trustee to settle the trustee’s claims and Candie Nelson incurred expenses in litigating the bankruptcy proceedings. They contend the superior court therefore erred by granting summary judgment on the basis the Nelsons suffered no damage as a result of One Legal’s failure to file the second motion to dismiss on time. The contention reflects a misunderstanding of One Legal’s theory in seeking summary judgment and of the superior court’s ruling. The Nelsons construe the superior court’s finding that they suffered no damages as a finding they suffered no out-of-pocket loss. The court actually found the Nelsons failed to counter One Legal’s argument that they would have incurred the same out-of-pocket loss had the filing been timely. In other words, to prevail on their complaint, the Nelsons would have to show not only that One Legal breached the contract and/or acted negligently, but that their second motion to dismiss, if timely filed, would have allowed them to avoid the bankruptcy court’s order for relief and also to have avoided the ultimate settlement and expenses of litigation. After conducting an independent review of the record, we find the Nelsons did not and could not make that showing. Summary judgment, therefore, properly was granted.
Involuntary bankruptcies are governed by title 11 United States Code section 303. It provides that an involuntary case may be commenced by three or more entities, “each of which is . . . a holder of a claim against [the debtor] that is not contingent as to liability or the subject of a bona fide dispute as to liability.” (11 U.S.C. § 303(b)(1).) The case may be commenced by a single entity if there are fewer than 12 such holders. (11 U.S.C. § 303(b)(2).) Other qualified creditors are entitled to join in the petition after it is filed. (11 U.S.C. § 303(c).) The debtor is entitled to file an answer. (11 U.S.C. § 303(d).) If the petition is not timely controverted, the court shall order relief against the debtor. (11 U.S.C. § 303(h).) If the petition is timely controverted, and the case is tried, the court shall order relief if the debtor is generally not paying the debtor’s debts as they become due unless such debts are the subject of a bona fide dispute. (11 U.S.C. § 303(h)(1).)
In moving to dismiss, Candie Nelson contended the involuntary petition had not been filed by a sufficient number of qualified creditors, ultimately claiming most of those who had filed were not her personal creditors. However, Candie Nelson listed the same creditors in her voluntary bankruptcy petition. Candie Nelson also asserted that at least one creditor, Mexifoods, could not join in the petition because the person representing Mexifoods was its president but not an attorney. She cited no authority, and we have found none, to support the proposition that although an attorney is not required for an individual creditor, one is required when the creditor is a corporate entity. A corporate officer is entitled to represent the corporation in commencing an involuntary bankruptcy. (See generally In re Winston (W.D. Tenn. 1903) 122 F. 187, 188-189, recognizing that the president of a corporation, who is authorized to transact the corporation’s business, is entitled to institute bankruptcy proceedings against the corporation’s debtor.) Candie Nelson asserted another creditor, Michael Fallon, was disqualified because his claim against her was disputed. We need not address that question because, by the time of Candie Nelson’s second motion to dismiss, there were sufficient qualified creditors even without Fallon. The evidence, therefore, is that Candie Nelson’s motion to dismiss would have been denied even if the bankruptcy court had considered its merits.
In addition, although the bankruptcy appellate panel found a different basis on which to affirm the bankruptcy court’s refusal to consider the second motion to dismiss, the law supports the bankruptcy court’s decision. The first motion to dismiss was denied on February 6, 2003. Under the applicable Federal Rules of Court, Candie Nelson was required to file a responsive pleading within 10 days after notice the court denied the motion. (Fed. Rules Civ. Proc., rule 12(a)(4)(A) (28 U.S.C.); 11 U.S.C. appen. rule 1011(c).) Candie Nelson had failed to file any responsive pleading within the time limits set forth in the Federal Rules of Court. The bankruptcy court has the power to allow a late filing, and did so here, but it specified that the late filing was to be an answer. The document that was filed was not an answer, nor was it any kind of responsive pleading. It was a motion to dismiss. Candie Nelson’s position, stated by attorney John Findley, was that the court’s order did not require any particular form of responsive pleading; it required only that Candie Nelson respond, i.e., answer, the petition. The bankruptcy court’s order, however, required the filing of an answer. In addition, a motion to dismiss does not in any way answer a petition, it is an attempt to avoid the proceedings altogether. Candie Nelson may have been entitled to file another motion to dismiss, but she would have had to file it within 10 days of February 6. It follows that the bankruptcy court would have been under no obligation to consider the motion even had it been filed on February 20.
The Nelsons’ assertion that the bankruptcy appellate panel found against the bankruptcy court’s reasoning by affirming it on other grounds is not supported by the record. The appellate panel found only that “even if debtor’s motion were considered to be an answer, it was not timely filed,” declining to consider whether the motion somehow might be deemed an answer. We see nothing in this finding, and nothing in the remainder of the appellate panel’s written memorandum of decision, to suggest it found the motion to dismiss to be “an answer” to the petition. Rather, the memorandum emphasized the need to resolve the bankruptcy proceedings expeditiously. It recognized the power of the bankruptcy courts to allow some departures from the rules and to grant relief from untimely filings, suggesting the bankruptcy court could have considered the merits of the second motion to dismiss had the Nelsons sought relief from their untimely filing. We do not read it as in some way holding that the bankruptcy court would have been required to consider the motion had it been filed a day earlier.
In addition, as we have discussed, the motion to dismiss, while asserting the petition for involuntary bankruptcy was defective, did not establish the defect. It was filed against Candie Nelson doing business as Viva Mexico and was filed by the several entities Candie Nelson listed as creditors in the voluntary proceedings. Even if the bankruptcy court considered it, there is no reason to suppose the court would have granted it. And even if the court accepted the motion as a kind of answer, it only would have meant that the bankruptcy court would have to delay ordering relief until it determined whether Candie Nelson was paying her debts as they came due. It was undisputed that Candie Nelson was not paying her debts as they came due. A consideration of the motion, therefore, might have delayed the order for relief but would not have altered the ultimate disposition of the case.
Finally, in order to prevail, the Nelsons would have had to show not only that they would have obtained a dismissal of the involuntary petition, but that the result of the dismissal would have been that Candie Nelson’s creditors would have been wholly unable to reach the properties conveyed to Cecelia Nelson. They also would have had to show Candie Nelson would have avoided some or all of the costs incurred in settling her debts. The Nelsons made no such showing.
Conclusion
Each of the points we have discussed, separately, demonstrates the Nelsons failed to produce evidence from which it could be concluded they suffered actual loss resulting from One Legal’s failure to file the second motion to dismiss on February 20, 2003.
The judgment is affirmed.
We concur: MARCHIANO, P. J., SWAGER, J.
“Except as provided in subsections (c) and (i) of this section, the trustee may avoid any transfer of an interest of the debtor in property
“(1) to or for the benefit of a creditor;
“(2) for or on account of an antecedent debt owed by the debtor before such transfer was made;
“(3) made while the debtor was insolvent;
“(4) made
“(A) on or within 90 days before the date of the filing of the petition; or
“(B) between ninety days and one year before the date of the filing of the petition, if such creditor at the time of such transfer was an insider; and
“(5) that enables such creditor to receive more than such creditor would receive if
“(A) the case were a case under chapter 7 of this title;
“(B) the transfer had not been made; and
“(C) such creditor received payment of such debt to the extent provided by the provisions of this title.”