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FILED

JUL 14 2017

SUSAN M. SPRAUL, CLERK

U.S. BKCY. APP. PANEL

OF THE NINTH CIRCUIT

NOT FOR PUBLICATION

UNITED STATES BANKRUPTCY APPELLATE PANEL

OF THE NINTH CIRCUIT

In re: ) BAP No. NC-16-1018-FBJu

)

MONICA HUJAZI, ) Bk. No. 13-30477

)

Debtor. )

______________________________)

)

MONICA HUJAZI, )

)

Appellant, )

)

v. ) MEMORANDUM*

)

RECOVEREX CORPORATION; )

MICHAEL E. GRODSKY; ANDREW )

KIM; BIANKA McGUIGAN; ALLEN )

HYMAN; HAROLD GREENBERG, )

)

Appellees. )

______________________________)

Argued and Submitted on June 22, 2017

at San Francisco, California

Filed – July 14, 2017

Appeal from the United States Bankruptcy Court

for the Northern District of California

Honorable Hannah L. Blumenstiel, Bankruptcy Judge, Presiding

 

Appearances: Bradley Kass of Kass & Kass Law Offices argued on

behalf of appellant Monica Hujazi; Sidney A.

Luscutoff of Luscutoff, Lendormy & Assoc. argued

on behalf of appellee Recoverex Corporation; Geoff

Wiggs argued on behalf of appellees Michael

Grodsky, Bianka McGuigan, and Andrew Kim; appellee

Allen Hyman, pro se, on brief; appellee Harold

Greenberg, pro se, on brief.

 

* This disposition is not appropriate for publication. 

Although it may be cited for whatever persuasive value it may

have, see Fed. R. App. P. 32.1, it has no precedential value, see

9th Cir. BAP Rule 8024-1.
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Before: FARIS, BRAND, and JURY, Bankruptcy Judges.

INTRODUCTION

In an involuntary chapter 71 bankruptcy case against debtor

Monica Hujazi, the bankruptcy court granted summary judgment in

favor of the petitioning creditors and entered an order for

relief. Ms. Hujazi appeals on numerous grounds. We AFFIRM.

FACTUAL BACKGROUND

A. The involuntary petition

On March 1, 2013, four creditors (“the Original Petitioning

Creditors”) filed a chapter 7 involuntary petition against

Ms. Hujazi. The Original Petitioning Creditors are:

• Appellee Recoverex Corporation, which asserts that it is the

assignee of the claims of attorney Sidney Luscutoff against

Ms. Hujazi for legal fees. As of the petition date,

Ms. Hujazi allegedly owed Recoverex $634,000.

• Appellee Allen Hyman, an attorney who represented

Ms. Hujazi. As of the petition date, Ms. Hujazi allegedly

owed him $144,936.86.2

• Appellee Michael E. Grodsky, another attorney who provided

legal services to Ms. Hujazi. As of the petition date,

1 Unless specified otherwise, all chapter and section

references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, 

all “Rule” references are to the Federal Rules of Bankruptcy

Procedure, and all “Civil Rule” references are to the Federal

Rules of Civil Procedure.

2 Mr. Hyman filed a request for judicial notice asking that

we take judicial notice of two exhibits that purport to show

Ms. Hujazi’s criminal case history. These documents do not

appear to be directly related to this proceeding (nor are they

authenticated in any way), and we accordingly deny the request.

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Ms. Hujazi allegedly owed him $312,940.

• Appellee Harold Greenberg, yet another attorney with a claim

against Ms. Hujazi for legal fees as well as a judgment. As

of the petition date, Ms. Hujazi allegedly owed him

$642,023.14. 

The Original Petitioning Creditors alleged that they were

qualified under § 303(b) to file an involuntary petition against

Ms. Hujazi because their claims were not contingent and not the

subject of a bona fide dispute as to liability or amount.

The involuntary petition identified Ms. Hujazi as the

individual debtor. It also listed other trade names that she had

used in the prior eight years: “Zuercher Trust Family Trust, The

Zuercher Trust of 1999, Bay Cities Financial, Alexandria

Apartments, Brownstone Lofts, Peninsula Commons, Emerald Square

Apartments, SF Corners.”

B. The motion to dismiss

Ms. Hujazi filed a motion to dismiss the involuntary

petition. She argued that the Original Petitioning Creditors

were not qualified under § 303(b) because the debts were “the

subject of a bona fide dispute as to liability or amount.” 

After Ms. Hujazi filed her motion to dismiss, but before the

court decided it, three groups of creditors joined in the

involuntary petition. These are:

• The Los Angeles Housing Department and the Los Angeles Fire

Department (“Los Angeles Creditors”), which held combined

claims for $62,858.58 for penalties related to misdemeanor

convictions;

• Blanca Valdovinos and Mirian Gonzalez, representatives of a

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putative class of tenants in a building owned or controlled

by Ms. Hujazi (“Class Action Creditors”); and

• Bitalino Sanchez Trieles, Gregorio Centeno Flores, Rodolfo

Rivera Cabrera, and Tomas Cux, who are some of Ms. Hujazi’s

tenants (“Tenant Creditors”).

The court treated the motion to dismiss as a motion for

summary judgment. Following a hearing, the bankruptcy court

granted the motion in part and denied it in part. It found that

Ms. Hujazi had failed to show a genuine dispute of material fact

with regard to the qualifications of the Original Petitioning

Creditors and the Los Angeles Creditors. However, it granted

summary judgment in favor of Ms. Hujazi as to the Class Action

Creditors and Tenant Creditors. 

The bankruptcy court explicitly did not make any finding as

to whether Ms. Hujazi had twelve or more creditors holding claims

not the subject of a bona fide dispute as to liability or amount. 

It ordered her to file an answer to the involuntary petition

within fourteen days; if she intended to assert a defense of too

few petitioning creditors, she must file and serve a list of

creditors in compliance with Rule 1003(b). The court stated that

the failure to assert the lack of qualifying creditors as a

defense or file her list of creditors would constitute a waiver

of that defense.

C. Ms. Hujazi’s answer and list of creditors

On August 15, 2013, Ms. Hujazi filed an answer to the

involuntary petition. She did not assert the defense of too few

qualifying creditors.

Almost two months later, she filed a list of creditors

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holding claims that were not the subject of a bona fide dispute. 

Those creditors (and amounts owed) were:

• American Express ($11,595);

• Town of Hillsborough ($1,230);

• Pacific Gas & Electric ($1,012);

• Recology Sunset Scavenger ($862);

• AT&T ($789); and

• Visa ($23,390).

D. Additional petitioning creditors

After the bankruptcy court decided the motion to dismiss,

three more creditors joined in the involuntary petition:

• Craig Heidig, who held a claim for $685 for constructionrelated work done on real property in San Francisco; 

• Appellee Bianka McGuigan, who held an unpaid judgment; and

• Appellee Andrew Kim, who also held an unpaid judgment.

The bankruptcy court scheduled a trial on the involuntary

petition and set a deadline for filing dispositive motions.

E. The motion for summary judgment

More than two years after the involuntary petition date, and

on the motions cutoff date, Recoverex filed a motion for summary

judgment seeking an order for relief against Ms. Hujazi (“Motion

for Summary Judgment”). It argued that, because Ms. Hujazi had

failed to plead insufficient qualifying creditors as a defense

and had only identified six creditors, she waived that defense. 

There was a creditor with a qualifying claim because the court

had previously determined (in its decision on the motion to

dismiss) that the Los Angeles Creditors held a claim not the

subject of a bona fide dispute as to liability or amount.

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Recoverex argued that, even if three qualifying creditors

were necessary, Mr. Hyman and Mr. Grodsky held claims against

Ms. Hujazi (related to unpaid legal bills) that were not the

subject of a bona fide dispute.

Finally, Recoverex argued that Ms. Hujazi was not generally

paying her debts as they became due. Recoverex showed that

Ms. Hujazi admitted that, as of the involuntary petition date,

she did not possess liquid assets exceeding $350,000. 

After the motions cutoff date, Mr. Hyman, Mr. Grodsky,

Ms. McGuigan, and Mr. Kim joined in the Motion for Summary

Judgment. Only Mr. Hyman offered substantive argument and

evidence; Mr. Grodsky, Ms. McGuigan, and Mr. Kim filed simple

joinders after Ms. Hujazi filed her opposition to the Motion for

Summary Judgment and only incorporated Recoverex’s arguments. 

(We will refer to Recoverex and the creditors that joined in the

motion as the “Moving Creditors.”)

Ms. Hujazi opposed the Motion for Summary Judgment. She

argued that: (1) Recoverex was required to seek relief from stay

before filing the involuntary petition because the petition named

The Zuercher Trust of 1999 as an alias or assumed business name

of Ms. Hujazi, and that entity was already in bankruptcy (“the

Zuercher Trust case”); (2) Recoverex lacked standing to file the

Motion for Summary Judgment because there was no proof that it

was a creditor of Ms. Hujazi; (3) the Motion for Summary Judgment

was filed in bad faith because Recoverex was not a qualified

petitioning creditor; (4) the claims in the involuntary petition

cannot be enforced because they were duplicative of the claims in

the Zuercher Trust bankruptcy case; (5) the attorney creditors’

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claims were barred by state law; and (6) a trial on the merits

was necessary to establish the number of qualifying creditors,

Ms. Hujazi’s financial condition, and whether Ms. Hujazi was

paying her debts as they become due. 

Ms. Hujazi objected that Mr. Hyman’s substantive joinder was

untimely because it was filed after the motions cutoff date and

attempted to substantively argue the motion. The bankruptcy

court permitted Mr. Hyman to join in the Motion for Summary

Judgment, but struck his additional argument and evidence as

untimely.

Additionally, Ms. Hujazi objected to Recoverex’s standing to

file the Motion for Summary Judgment. She contended that

Recoverex had failed to prove that the claims had been properly

assigned to it. 

Following a hearing, the bankruptcy court granted the Motion

for Summary Judgment. In a detailed order granting the motion

(“Summary Judgment Order”), the bankruptcy court held that the

Moving Creditors had established the requisite number of

petitioning creditors and that Ms. Hujazi was generally not

paying her debts as they became due.3 

The bankruptcy court held that Ms. Hujazi had waived the

defense of an insufficient number of qualified petitioning

creditors because she did not assert that defense in her answer. 

3 The bankruptcy court issued a separate order on

Ms. Hujazi’s various evidentiary objections. In relevant part,

it overruled her special objection to Recoverex’s standing based

on its alleged lack of evidence regarding proof of assignment of

its claims. The bankruptcy court also denied her request to

strike Recoverex’s request for judicial notice. Ms. Hujazi did

not appeal any of these rulings.

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Additionally, she only identified six creditors holding claims

that are not the subject of a bona fide dispute.

The bankruptcy court further held that, even if Ms. Hujazi

did not waive the defense of an insufficient number of

petitioning creditors, the Moving Creditors had established that

at least three qualifying creditors joined in the involuntary

petition. It stated that Ms. McGuigan and Mr. Kim held valid

judgments against Ms. Hujazi that had not been satisfied.

Moreover, Mr. Hyman and Mr. Grodsky held claims for unpaid

attorneys’ fees that were not the subject of a bona fide dispute

as to liability or amount.

Next, the bankruptcy court found that Ms. Hujazi was

generally not paying her debts as they became due. Applying the

Ninth Circuit’s “totality of the circumstances” test, it began by

considering whether Ms. Hujazi was paying her known creditors, of

which there were fifteen. The court found that she was not

paying ten of them, but that the Moving Creditors did not prove

that she had failed timely to pay the debts of five creditors. 

After evaluating the status of each individual debt, the

bankruptcy court stated that: 

Applying the totality of the circumstances

analysis prescribed by the Ninth Circuit, the Court

concludes that Movants have met their burden of

establishing that Ms. Hujazi has been generally not

paying her debts as they become due, and that

Ms. Hujazi has failed to raise a dispute of material

fact sufficient to warrant a trial on the merits. 

Accordingly, Movants are entitled to summary judgment

on this issue. Ms. Hujazi is the subject of several

unpaid judgments, and has failed to pay several

professionals she has employed over the years. Though

not as severe, Movants have also established that

Ms. Hujazi has an inability to make recurring monthly

payments on a timely basis. While it is true that she

has paid some of her creditors, the question of whether

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an alleged debtor has been generally paying debts as

they become due requires the Court to look at all of

Ms. Hujazi’s debts and the circumstances in which

payments are made. Doing so, it becomes clear that

Ms. Hujazi has made it a common practice to pick and

choose which debts to pay and which not to pay, and to

bounce checks or make excuses when timely payment is

not possible. On this basis, the Court concludes that

entry of an order for relief under section 303 is

warranted.

Finally, the bankruptcy court rejected Ms. Hujazi’s

ancillary arguments. It stated that the Moving Creditors did not

violate the automatic stay in the Zuercher Trust case because the

involuntary petition was directed against Ms. Hujazi, not the

Zuercher Trust. It rejected her argument that Recoverex lacked

standing to file the involuntary petition and the Motion for

Summary Judgment because Mr. Grodsky, Mr. Hyman, Ms. McGuigan,

and Mr. Kim each had standing and joined in the Motion for

Summary Judgment. It also disagreed with her argument that the

Moving Creditors failed to prove her “financial condition and

debt structure.”

The bankruptcy court entered an order for relief (“Order for

Relief”) on November 30, 2015.

F. The motion for reconsideration

Ms. Hujazi filed a motion to alter, vacate, or amend

judgment (“Motion for Reconsideration”). She argued that

Recoverex lacked standing to move for summary judgment because it

did not produce evidence that it held any claim against

Ms. Hujazi and that it was improper to allow the joinder of the

other Moving Creditors.

The bankruptcy court denied the Motion for Reconsideration

and concluded that: (1) Recoverex could move for summary judgment

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because it was a party to the case and did not need to be an

eligible petitioning creditor; (2) Recoverex met its burden to

prove the lack of any genuine dispute as to whether Ms. Hujazi

was paying her debts as they became due; (3) joinder in the

Motion for Summary Judgment was appropriate; (4) the joinders did

not seek any relief different from the Motion for Summary

Judgment; and (5) Ms. Hujazi did not suffer any prejudice.

The bankruptcy court entered an order denying the Motion for

Reconsideration (“Reconsideration Order”). Ms. Hujazi timely

filed her notice of appeal from the Summary Judgment Order, Order

for Relief, and Reconsideration Order.

JURISDICTION

The bankruptcy court had jurisdiction pursuant to 28 U.S.C.

§§ 1334 and 157(b)(1). We have jurisdiction under 28 U.S.C.

§ 158.

ISSUES

(1) Whether the bankruptcy court erred in granting the

Motion for Summary Judgment and entering the Order for Relief.

(2) Whether the bankruptcy court erred in denying the Motion

for Reconsideration. 

STANDARDS OF REVIEW

“[W]e review de novo a bankruptcy court’s decision to grant

summary judgment.” See Marciano v. Fahs (In re Marciano),

459 B.R. 27, 35 (9th Cir. BAP 2011), aff’d, 708 F.3d 1123 (9th

Cir. 2013). “De novo review requires that we consider a matter

anew, as if no decision had been made previously.” Francis v.

Wallace (In re Francis), 505 B.R. 914, 917 (9th Cir. BAP 2014).

We review for abuse of discretion the denial of a motion for

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reconsideration. N. Alaska Envtl. Ctr. v. Lujan, 961 F.2d 886,

889 (9th Cir. 1992). To determine whether the bankruptcy court

has abused its discretion, we conduct a two-step inquiry: (1) we

review de novo whether the bankruptcy court “identified the

correct legal rule to apply to the relief requested” and (2) if

it did, whether the bankruptcy court’s application of the legal

standard was illogical, implausible, or “without support in

inferences that may be drawn from the facts in the record.” 

United States v. Hinkson, 585 F.3d 1247, 1262–63 & n.21 (9th Cir.

2009) (en banc). “If the bankruptcy court did not identify the

correct legal rule, or its application of the correct legal

standard to the facts was illogical, implausible, or without

support in inferences that may be drawn from the facts in the

record, then the bankruptcy court has abused its discretion.” 

USAA Fed. Sav. Bank v. Thacker (In re Taylor), 599 F.3d 880,

887–88 (9th Cir. 2010) (citing Hinkson, 585 F.3d at 1261–62).

DISCUSSION

A. The bankruptcy court properly granted summary judgment. 

We agree with the bankruptcy court that summary judgment and

an order for relief were appropriate.

1. Petitioning creditors must establish the requisite

number of petitioning creditors and that Ms. Hujazi was

generally not paying her debts as they came due.

“Section 303 requires that creditors filing a petition for

involuntary bankruptcy against a debtor have claims that are not

subject to a bona fide dispute.” Liberty Tool & Mfg. v. Vortex

Fishing Sys., Inc. (In re Vortex Fishing Sys., Inc.), 277 F.3d

1057, 1064 (9th Cir. 2002). It provides: 

(b) An involuntary case against a person is commenced

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by the filing with the bankruptcy court of a petition

under chapter 7 or 11 of this title--

(1) by three or more entities, each of which is

either a holder of a claim against such person

that is not contingent as to liability or the

subject of a bona fide dispute as to liability or

amount, or an indenture trustee representing such

a holder, if such noncontingent, undisputed claims

aggregate at least $15,775 more than the value of

any lien on property of the debtor securing such

claims held by the holders of such claims;

(2) if there are fewer than 12 such holders, . . .

by one or more of such holders that hold in the

aggregate at least $15,775 of such claims[.]

§ 303(b)(1)-(2).

In addition, § 303 articulates the requirements for an order

for relief: 

(h) If the petition is not timely controverted, the

court shall order relief against the debtor in an

involuntary case under the chapter under which the

petition was filed. Otherwise, after trial, the court

shall order relief against the debtor in an involuntary

case under the chapter under which the petition was

filed, only if--

(1) the debtor is generally not paying such

debtor’s debts as such debts become due unless

such debts are the subject of a bona fide dispute

as to liability or amount. . . .

§ 303(h).

In order to prevail on summary judgment where twelve or more

creditors are present, the petitioning creditors “must establish

that (1) three or more creditors (2) hold claims against the

alleged debtor that are not contingent as to liability and

(3) are not the subject of a bona fide dispute as to liability or

amount (4) in the aggregate amount of at least [$15,775], and

(5) that the alleged debtor is generally not paying such debtor’s

debts as such debts become due.” In re Marciano, 446 B.R. 407,

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420 (Bankr. C.D. Cal. 2010), aff’d, 459 B.R. 27 (9th Cir. BAP

2011), aff’d, 708 F.3d 1123 (9th Cir. 2013) (citing § 303). If

an alleged debtor has less than twelve such creditors, only one

petitioning creditor is necessary. § 303(b)(2).

A claim is subject to a “bona fide dispute” if “there is an

objective basis for either a factual or a legal dispute as to the

validity of the debt.” In re Vortex Fishing Sys., Inc., 277 F.3d

at 1064 (citation omitted). In other words, “if there is either

a genuine issue of material fact that bears upon the debtor's

liability,4 or a meritorious contention as to the application of

law to undisputed facts, then the petition must be dismissed.” 

Id. (citation omitted).

The petitioning creditors bear the burden of proving all

statutory requirements of § 303. The burden then shifts to the

alleged debtor to show that there is a dispute as to a material

fact. Id.

2. The joinders in the Motion for Summary Judgment were

proper.

Ms. Hujazi argues that the bankruptcy court erred in

granting the Motion for Summary Judgment because the joinders

were improper and Recoverex lacked standing to file the initial

motion. We disagree. 

Ms. Hujazi argues that federal law does not recognize

joinders in substantive motions and, therefore, state law

4 After the Ninth Circuit decided Vortex Fishing, Congress

amended § 303(b)(1) to provide that a qualifying creditor’s claim

must not be the subject of a bona fide dispute “as to liability

or amount . . . .” (Emphasis added.)

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controls. Accordingly, she urges us to rely on California case

law that holds that a California state court may not grant

summary judgment in favor of a party that did not file its own

motion for summary judgment but rather joined in another party’s

motion. Ms. Hujazi’s argument is not persuasive.

The Federal Rules of Civil Procedure neither permit nor

forbid joinders in summary judgment motions. Ms. Hujazi contends

that, when the federal rules are silent, a federal court should

(or perhaps must) follow the procedural rules of state courts in

the forum state. She offers no authority for this proposition,

and we reject it.

Rule 9029(b) tells bankruptcy courts what they can do when

the rules are silent. Bankruptcy courts have broad authority to

“regulate practice in any manner consistent with [the applicable

procedural rules], Official Forms, and local rules of the

district.” Rule 9029(b). Relying on this power, federal courts

routinely permit parties to join in motions. See, e.g., Thompson

v. Hartley, Case no. 1:10-cv-02260-MJS, 2014 U.S. Dist. LEXIS

158786 (E.D. Cal. Nov. 7, 2014).

While a federal judge might choose to follow state rules of

procedure when the federal rules are silent, we see no reason to

require a federal court to follow state court procedure. This

would be particularly inappropriate in this case. The California

state court cases cited by Ms. Hujazi rest on a California

statute, California Code of Civil Procedure 437c(b). See Vill.

Nurseries, L.P. v. Greenbaum, 101 Cal. App. 4th 26, 46-47 (2002). 

Under basic principles of federalism, a state legislature cannot

dictate practice and procedure in a federal court.

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Ms. Hujazi argues that consideration of the joinders denied

her due process. We disagree.

Generally speaking, a court must give sufficient notice of

an adverse action and the opportunity for interested parties to

be heard. See Tennant v. Rojas (In re Tennant), 318 B.R. 860,

870 (9th Cir. BAP 2004) (“the concept of procedural due process

requires a notice and an opportunity to be heard”). According to

the United States Supreme Court:

An elementary and fundamental requirement of due

process in any proceeding which is to be accorded

finality is notice reasonably calculated, under all the

circumstances, to apprise interested parties of the

pendency of the action and to afford them an

opportunity to present their objections. The notice

must be of such nature as reasonably to convey the

required information . . . and it must afford a

reasonable time for those interested to make their

appearance.

Mullane v. Cent. Hanover Bank & Tr. Co., 339 U.S. 306, 314 (1950)

(citations omitted).

Ms. Hujazi was not deprived of due process. She had notice

of the Motion for Summary Judgment and an opportunity to file a

written response and argue orally in court. All of the joinders

except for Mr. Hyman’s were simple “me too” statements that did

not add any argument or evidence to Recoverex’s initial motion;

the bankruptcy court properly excluded Mr. Hyman’s supplemental

argument and evidence as untimely. Ms. Hujazi was not deprived

of notice or an opportunity to be heard. 

Additionally, she did not suffer any prejudice. Even in

cases where a bankruptcy court errs by failing to provide

adequate notice and hearing, the debtor must show prejudice from

the procedural deficiencies. See Rosson v. Fitzgerald

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(In re Rosson), 545 F.3d 764, 776-77 (9th Cir. 2008) (“Because

there is no reason to think that, given appropriate notice and a

hearing, Rosson would have said anything that could have made a

difference, Rosson was not prejudiced by any procedural

deficiency.”); see also City Equities Anaheim, Ltd. v. Lincoln

Plaza Dev. Co. (In re City Equities Anaheim, Ltd.), 22 F.3d 954,

959 (9th Cir. 1994) (rejecting due process claim for lack of

prejudice where debtor could not show that any different or

additional arguments would have been presented if bankruptcy

court had timely approved petition for new counsel).

Ms. Hujazi admits that she would have made the same

arguments if the joinders been filed earlier; she claims that her

emphasis might have been different, but she does not convince us

that this might have changed the outcome. Therefore, the

bankruptcy court’s consideration of the joinders did not

prejudice her.

3. Recoverex could file for summary judgment.

Even if the joinders were improper, Recoverex had standing

to file for summary judgment.

Ms. Hujazi argues that the court erred because Recoverex

“lacked standing since their moving papers did not present any

evidence of a claim which is needed to obtain a summary

judgment.” There are two ways to construe her argument.

First, she may be contending that a party seeking summary

judgment in an involuntary case must show that the moving party

is a qualified petitioning creditor. She offers no authority for

this proposition, and we reject it. 

Civil Rule 56, made applicable in bankruptcy through Rule

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7056, provides: “A party may move for summary judgment . . . .”

There is no dispute that Recoverex is a “party” to this case.5

Therefore, Recoverex was entitled to file a motion for summary

judgment.

In order to prevail on its motion, Recoverex had to prove

that there was a sufficient number of qualified petitioning

creditors. Ms. Hujazi would have us hold that Recoverex also had

to prove that Recoverex itself was one of those creditors. 

Neither the statute nor the rules imposes such a requirement, and

we see no reason to adopt it.6

Second, she may be contending that the movant must show that

it is a creditor – i.e., that it holds a claim against the

debtor, even if that claim is subject to a bona fide dispute. 

She argues that Recoverex failed to prove an actual assignment of

claims to it. This misstates the record.

In Recoverex’s opposition to the motion to dismiss, it

stated that “[t]he receivables of the Luscutoff firm were

5 Ms. Hujazi’s counsel conceded that Recoverex is a party to

this case: 

THE COURT: . . . There’s no question that

Recoverex is a party to this proceeding, right?

MR. KASS: No. No. We don’t question that. It’s

the next part, the next sentence actually, that we’re

relying on.

6 We also reject Ms. Hujazi’s argument that Recoverex acted

in bad faith by filing the Motion for Summary Judgment. 

Ms. Hujazi claims that Recoverex was incorporated for the sole

purpose of filing the involuntary petition. She offers no

evidence for this assertion and gives no reason why it would be

improper even if true.

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assigned to Recoverex for collection in the Spring of 2012

. . . .” Mr. Luscutoff attested that “[i]n March of 2012 our

firm assigned its accounts receivable and fraud claims, as to

Monica Hujazi [individually and as the trustee of the Zuercher

Trust] to Recoverex Corporation.” When deciding the Motion for

Summary Judgment, the bankruptcy court took judicial notice of

Recoverex’s opposition, which incorporated Mr. Luscutoff’s

declaration. 

In objecting to Recoverex’s standing, Ms. Hujazi stated that

“despite an extensive document request from [Ms. Hujazi], no such

assignment document, if any, has been seen.” But the absence of

an assignment document is not fatal to Recoverex’s standing,

because Mr. Luscutoff declared that the assignment had taken

place, Ms. Hujazi offered no evidence to the contrary, and

Ms. Hujazi did not argue that the law required a writing. Thus,

Recoverex was entitled to file a motion for summary judgment.7

4. There were enough qualified petitioning creditors.

Ms. Hujazi claims that there were not enough qualified

petitioning creditors to sustain the Order for Relief. She is

wrong.

In the first place, only one qualified petitioning creditor

was necessary. Ms. Hujazi waived the issue of an insufficient

number of petitioning creditors by not raising it in her answer,

and she stated that she had only six creditors whose claims were

7 We reject Ms. Hujazi’s unsupported argument that a claim

for attorneys’ fees cannot be assigned. Even if it is true that

a client cannot assign his claims against an attorney for

malpractice, it does not follow that an attorney cannot assign

his claims against the client for unpaid fees.

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not subject to a bona fide dispute. She is bound by this waiver

and judicial admission. See Mason v. Integrity Ins. Co.

(In re Mason), 709 F.2d 1313, 1318-19 (9th Cir. 1983) (“[the

alleged debtor] waived his right to present this defense [of too

few creditors] by failing to raise it in an answer to the

petition. The lack of the requisite number of petitioning

creditors did not deprive the bankruptcy court of jurisdiction to

enter a valid order for relief”). This means that only one

petitioning creditor was required.

The Los Angeles Creditors were qualified petitioning

creditors. The bankruptcy court so held in its ruling on the

motion to dismiss. In her response to the Motion for Summary

Judgment, this is all that Ms. Hujazi had to say about the Los

Angeles Creditors: 

The actions of City of Los Angeles relating to the

landlord and tenant issues are in various litigations

currently ongoing in the court in Los Angeles which I

have been in part following. I believe that there have

been rulings that some of their actions are

unconstitutional.

This vague statement, which was not based on personal knowledge,

is not sufficient to create “an objective basis for either a

factual or a legal dispute as to the validity of the debt.” 

In re Vortex Fishing Sys., Inc., 277 F.3d at 1064 

Even if Ms. Hujazi were not bound by her admission that she

had only six creditors, there were at least two other petitioning

creditors whose claims were not the subject of a bona fide

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dispute: Mr. Kim and Ms. McGuigan.8

The bankruptcy court held that Mr. Kim’s judgment against

Ms. Hujazi was not the subject of a bona fide dispute. 

Ms. Hujazi completely failed to offer any evidence contesting

Mr. Kim’s debt. There is no dispute that he was a qualified

petitioner. 

The bankruptcy court determined that Ms. McGuigan’s claim

was based on a judgment and not the subject of a bona fide

dispute. In opposition to the Motion for Summary Judgment,

Ms. Hujazi only stated that the judgment “was by default and I

was not present. In fact, the work performed by Bianka McGuigan

was not primarily for Monica Hujazi individually but other

entities.” But simply stating that a judgment was entered by

default does not create a bona fide dispute; and even if

Ms. McGuigan’s work was not done “primarily” for Ms. Hujazi,

Ms. Hujazi could be liable for a debt based on work done for

other entities. The bankruptcy court correctly determined that

Ms. McGuigan held a qualifying debt. 

Accordingly, even if Ms. Hujazi had twelve or more

creditors, there were at least three petitioning creditors with

claims not the subject of a bona fide dispute.

5. The Zuercher Trust case is a red herring.

Ms. Hujazi makes a number of arguments based on the Zuercher

Trust case. None of those arguments has any merit.

8 The bankruptcy court held that Mr. Hyman and Mr. Grodsky

were also qualified petitioning creditors. We need not consider

those creditors because, even disregarding their claims, there

are three qualified petitioning creditors.

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She argues that the filing of the involuntary petition

violated the automatic stay in the Zuercher Trust case. She

relies on the fact that the involuntary petition against

Ms. Hujazi identified the Zuercher Trust as a name under which

Ms. Hujazi did business. She is wrong on several scores. 

First, the premise of the argument – that the involuntary

petition named the Zuercher Trust as a debtor – is false. The

Original Petitioning Creditors included The Zuercher Trust of

1999 on the involuntary petition in the area designated for “ALL

OTHER NAMES used by debtor in the last 8 years (Include married,

maiden, and trade names.).” But only Ms. Hujazi is identified as

a debtor. 

Second, the Original Petitioning Creditors could not have

added the Zuercher Trust as a debtor even if they wanted to. The

Bankruptcy Code does not permit joint involuntary petitions

against multiple debtors.9

Third, even if the Zuercher Trust were named as a debtor in

the involuntary petition, and even if that violated the automatic

stay in the Zuercher Trust case, that violation would not give

Ms. Hujazi any rights. The automatic stay protects only the

debtor, the debtor’s property, and the property of the debtor’s

bankruptcy estate. § 362(a). It does not protect the debtor’s

owners, affiliates, or co-obligees. Chugach Timber Corp. v. N.

Stevedoring & Handling Corp. (In re Chugach Forest Prods., Inc.),

23 F.3d 241, 246 (9th Cir. 1994) (the automatic stay “protects

9 The Code does permit joint voluntary petitions, but only

when the joint debtors are spouses. § 302(a).

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only the debtor, property of the debtor or property of the estate

. . . [and] does not stay actions against guarantors, sureties,

corporate affiliates, or other non-debtor parties liable on the

debts of the debtor”). Therefore, even if the Zuercher Trust had

been named in the involuntary petition, only the Zuercher Trust

or its trustee would have a right to complain.10 

Ms. Hujazi also contends that the petitioning creditors’

claims are improper because they are almost identical to those in

the earlier-filed Zuercher Trust case. She argues that summary

judgment was not warranted because “being a duplicate was a bona

fide dispute on its face since there cannot be two recoveries on

the same alleged debt.” This argument is nonsense. First,

Ms. Hujazi seems to deny the possibility that two legal entities

might be liable to one creditor on the same debt. Second, if her

argument were correct, a creditor with a claim against multiple

debtors could never file an involuntary bankruptcy petition

against any of them, because its claims would always be the

subject of a bona fide dispute. This would be an absurd result. 

Third, there is no evidence that any of the petitioning creditors

have recovered, or are likely to recover, any monies in the

Zuercher Trust case. The hypothetical possibility of a double

recovery does not give rise to a bona fide dispute where there is

no certainty that the creditor will make even a single recovery. 

Fourth, Ms. McGuigan’s and Mr. Kim’s claims were not duplicative

of those in the Zuercher Trust case and were independently

10 We need not reach the question whether the bankruptcy

court correctly applied the “home court” rule.

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sufficient to satisfy §§ 303(b) and (h). 

6. Ms. Hujazi was generally not paying her debts as they

came due.

Having determined that there was a sufficient number of

qualified petitioning creditors, the bankruptcy court then found

that Ms. Hujazi was generally not paying her debts as they came

due. We discern no error. 

The Ninth Circuit has “adopted a ‘totality of the

circumstances’ test for determining whether a debtor is generally

not paying its debts under 11 U.S.C. § 303(h).” In re Vortex

Fishing Sys., Inc., 277 F.3d at 1072 (quoting Hayes v. Rewald

(In re Bishop, Baldwin, Rewald, Dillingham & Wong, Inc.),

779 F.2d 471, 475 (9th Cir. 1985)). “A finding that a debtor is

generally not paying its debts ‘requires a more general showing

of the debtor’s financial condition and debt structure than

merely establishing the existence of a few unpaid debts.’” Id.

(quoting Semel v. Dill (In re Dill), 731 F.2d 629, 632 (9th Cir.

1984)). 

The “totality of the circumstances test” is not a rigid,

mathematic analysis: “The authority of the court is triggered and

guided by the totality of the circumstances existing when the

petition is filed. Congress intended to provide a flexibility

which is not reducible to a simplistic formula.” In re Bishop,

Baldwin, Rewald, Dillingham & Wong, Inc., 779 F.2d at 475. “[I]t

is not possible to lay down guidelines that fit all cases . . . . 

It is intended that the court consider both the number and amount

[of debts] in determining whether the inability or failure is

general.” 2 Collier on Bankruptcy ¶ 303.31 (16th ed.) (internal

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citations omitted).

Ms. Hujazi argues that the bankruptcy court erred because

the Moving Creditors failed to establish her financial condition

and debt structure. She cites Vortex Fishing for the proposition

that the correct inquiry involves a “totality of the

circumstances” test that requires a “general showing of the

debtor’s financial condition and debt structure.”

The bankruptcy court explicitly stated that it was

considering the totality of the circumstances and that it looked

at the entirety of Ms. Hujazi’s fiscal health, not just “a few

unpaid debts.” The court applied the correct legal standard. 

Ms. Hujazi argues that the Moving Creditors failed to prove

that she was not paying her debts as they became due. She

distorts the facts and fails to address the bankruptcy court’s

factual findings. 

She cites the court’s order on the motion to dismiss and

claims that the bankruptcy court “has already made a finding that

disputed material facts existed as to the Petitioning Creditor

attorneys, and therefore the motion for summary judgment should

have been denied . . . .” This ignores the fact that the

bankruptcy court had a much fuller record before it over two

years later when it considered the Motion for Summary Judgment. 

It is absurd to say that, after a court decides a motion to

dismiss, the court can never make a different decision on a

motion for summary judgment based on a more extensive record.

Ms. Hujazi argues that the bankruptcy court erred in its

factual findings as to Otto Miller, Bank of America,

Ms. McGuigan, and Wells Fargo Bank. The bankruptcy court

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carefully and exhaustively considered the claims of the fifteen

alleged creditors. It determined that Ms. Hujazi was generally

not paying the debts owed to ten of the creditors and explained

its reasoning supporting each determination. The bankruptcy

court did not err.11

B. The bankruptcy court properly denied the Motion for

Reconsideration.

Regarding a motion for reconsideration under Civil Rule 59,

the Ninth Circuit has stated:

Although Rule 59(e) permits a district court to

reconsider and amend a previous order, the rule offers

an “extraordinary remedy, to be used sparingly in the

interests of finality and conservation of judicial

resources.” Indeed, “a motion for reconsideration

should not be granted, absent highly unusual

circumstances, unless the district court is presented

with newly discovered evidence, committed clear error,

or if there is an intervening change in the controlling

law.” A Rule 59(e) motion may not be used to raise

arguments or present evidence for the first time when

they could reasonably have been raised earlier in the

litigation.

Kona Enters., Inc. v. Estate of Bishop, 229 F.3d 877, 890 (9th

Cir. 2000) (internal citations omitted).

In her Motion for Reconsideration, Ms. Hujazi essentially

restated the same arguments she made in response to the Motion

for Summary Judgment. Repetition did not make those arguments

any more correct or persuasive. 

Accordingly, the bankruptcy court did not abuse its

11 In his answering brief, Mr. Greenberg urges us to reverse

the bankruptcy court’s finding that the Moving Creditors had not

met their burden to prove that the Lloyds of London debt was not

the subject of a bona fide dispute. None of the Appellees crossappealed on any alleged error, so this issue is not properly

before us on appeal, and we will not consider it. See Ball v.

Rodgers, 492 F.3d 1094, 1118 (9th Cir. 2007).

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discretion in denying the Motion for Reconsideration. 

CONCLUSION

The bankruptcy court did not err. Accordingly, we AFFIRM.

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