Opinion ID: 718701
Heading Depth: 2
Heading Rank: 1

Heading: Mr. Sender's Standing

Text: 13 We begin our analysis of Mr. Sender's appeal with an evaluation of his standing to bring the claims he asserts. Mr. Sender, in his capacity as trustee in bankruptcy for the debtor estates, must draw his authority to assert a particular cause of action from some provision within Title 11 of the United States Code. Causes of action commenced by a trustee on behalf of a debtor estate fall into two broad categories: (1) actions brought by the trustee as successor to the debtor's interests included as property of the estate under 11 U.S.C. § 541, and (2) actions brought under one of the trustee's avoidance powers. 2 Collier on Bankruptcy p 323.02, at 323-10. Though Mr. Sender's complaints against the defendants did not address the issue of his capacity to bring his state law claims, his brief to this court asserts, the actions ... are brought by [the] bankruptcy trustee utilizing his statutory powers under 11 U.S.C. § 544. Because § 544 gives a trustee certain avoidance powers, actions brought under the section fall within the second category of types of trustee actions. To the extent Mr. Sender relies on § 544 for his authority to bring the claims he asserts, his reliance is misplaced. 14 Section 544 is divided into two subsections: 544(a) and 544(b). Mr. Sender has not indicated which of these subsections he attempts to invoke. Section 544(a) gives the trustee the power, as of the commencement of the bankruptcy case, to avoid transfers and obligations of the debtor to the same extent as certain hypothetical ideal creditors. See 11 U.S.C. § 544(a) (giving the trustee the same avoidance powers as (1) a judicial lien creditor, (2) a creditor holding an execution returned unsatisfied, or (3) a bona fide purchaser of real property, whether or not such creditors or purchaser exist). Mr. Sender makes no claims against the defendants available under 544(a). We therefore construe his invocation of § 544 as a reference to subsection (b). 15 Under § 544(b), a trustee may avoid any transfer of an interest of the debtor ... that is voidable under applicable law by a[n] [unsecured] creditor. 11 U.S.C. § 544(b). Subsection (b) contains no substantive provisions indicating what transfers or obligations are avoidable. The trustee's powers under the section are predicated on the non-bankruptcy law, usually state law, applicable to the transaction sought to be avoided. See Dicello v. Jenkins (In re International Loan Network, Inc.), 160 B.R. 1, 17-18 (Bankr.D.D.C.1993). Before asserting applicable state law, however, the trustee must first show that there is an actual creditor holding an allowable unsecured claim ... who, under [state] law, could avoid the transfers in question. Id. at 18; see also Merrill v. Abbott (In re Independent Clearing House Co.), 77 B.R. 843, 863 n. 30 (D.Utah 1987). See generally 4 Collier on Bankruptcy p 544.03. In other words, [i]f there are not creditors within the terms of section 544(b) against whom the transfer is voidable under the applicable law, the trustee is powerless to act so far as section 544(b) is concerned. 4 Collier on Bankruptcy p 544.03, at 544-18. 16 Mr. Sender has not met § 544(b)'s requirements. Mr. Sender's brief repeatedly emphasizes he is pursuing claims of the partnership itself, not claims that belong to creditors of the partnership. Indeed, it does not seem the state law on which he relies would allow it any other way. The partnership law under which Mr. Sender is proceeding provides that when a partner receives the return of any part of his contribution in violation of the partnership agreement or this article, he is liable to the limited partnership. Colo.Rev.Stat. § 7-62-608(2) (emphasis added). If Mr. Sender is bringing claims belonging to HSA L.P. itself, we fail to see how he can satisfy § 544(b)'s requirements that he establish the existence of an actual unsecured creditor who could avoid the challenged transactions under the applicable law. The applicable law in this case is, by Mr. Sender's own decision, a certain section of CULPA, and Mr. Sender has not pointed to any creditors of HSA L.P. who would have causes of action against Mr. Simon or the Baker Partnership under that section. The cause of action he pursues belongs to the debtor partnership itself, not the partnership's creditors. 17 That Mr. Sender asserts a cause of action not authorized by § 544(b) does not necessarily render him powerless to bring it. Under 11 U.S.C. § 541(a)(1), the bankruptcy estate includes, except as otherwise provided, all legal or equitable interests of the debtor in property as of the commencement of the case. This definition includes causes of action belonging to the debtor at the commencement of the bankruptcy case. Mixon v. Anderson (In re Ozark Restaurant Equip. Co.), 816 F.2d 1222, 1225 (8th Cir.), cert. denied, 484 U.S. 848, 108 S.Ct. 147, 98 L.Ed.2d 102 (1987); see Delgado Oil Co. v. Torres, 785 F.2d 857, 860 (10th Cir.1986) (debtor corporation's estate includes any right of action debtor corporation has against corporate officers or directors); H.R.Rep. No. 595, 95th Cong., 1st Sess. 367, reprinted in 1978 U.S.C.C.A.N. 5963, 6323 (under § 541 debtor estate will include choses in action and claims by the debtor against others). Importantly, to satisfy the requirements of § 541, the cause of action asserted by the trustee must belong to the debtor entity itself, not the debtor's creditors individually. 5 Mixon, 816 F.2d at 1225; see Pierson & Gaylen v. Creel & Atwood (In re Consolidated Bancshares, Inc.), 785 F.2d 1249, 1254 (5th Cir.1986); 4 Collier on Bankruptcy p 541.10. State law provides the guidelines for determining whether a cause of action belongs to the debtor and therefore becomes property of the estate. Mixon, 816 F.2d at 1225; Zimmerman v. Starnes, 35 B.R. 1018, 1020 (D.Colo.1984) (citing Butner v. United States, 440 U.S. 48, 55, 99 S.Ct. 914, 918, 59 L.Ed.2d 136 (1979)). Mr. Sender's claims against Mr. Simon and the Baker Partnership satisfy these requirements. As noted in the previous discussion of 11 U.S.C. § 544(b), the section of CULPA on which Mr. Sender relies makes limited partners liable to the limited partnership. Colo.Rev.Stat. § 7-62-608(2). Under Colorado law, it seems clear Mr. Sender's cause of action belongs to the partnership itself and is therefore included as property of the debtor estate within the meaning of 11 U.S.C. § 541. Because the cause of action is property of the estate, Mr. Sender, as trustee of the estate, has standing to pursue it on the estate's behalf. Mixon, 816 F.2d at 1225. 18 When asserting claims under the authority of 11 U.S.C. § 541, as Mr. Sender does in this case, the trustee stands in the shoes of the debtor and can take no greater rights than the debtor himself had. H.R.Rep. No. 595, 95th Cong., 1st Sess. 368, reprinted in 1978 U.S.C.C.A.N. 5963, 6323. This means the trustee is  'subject to the same defenses as could have been asserted by the defendant had the action been instituted by the debtor.'  Hays & Co. v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 885 F.2d 1149, 1154 (3d Cir.1989) (quoting 2 Collier on Bankruptcy p 323.02 ); see also W.F. Pigg & Son, Inc. v. United States, 81 F.2d 334, 335 (10th Cir.1936) (The trustee takes subject to all valid claims, liens, and equities which might have been asserted against the bankrupt.) (interpreting Section 70a of the Bankruptcy Act, the predecessor of 11 U.S.C. § 541). In other words, though this case is brought by a bankruptcy trustee who gains his authority to sue from the United States Bankruptcy Code, Mr. Sender's success or failure on the merits is determined as if the debtor entity itself brought the claims at issue under the applicable law. Accordingly, we now turn to Mr. Sender's contentions under CULPA.