Court Opinion

ID: 3029064
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:42:11.684094+00
Date Added: 2024-06-11T09:09:54.959841
License: Public Domain

United States Court of Appeals
                            FOR THE EIGHTH CIRCUIT
                                    ___________

                                    No. 01-3202
                                    ___________

In Re: W. Farrell McGinnis;                      *
       Susan J. McGinnis,                        *
                                                 *
               Debtors.                          *
------------------------------------------------ *
W. Farrell McGinnis; Susan J.                    * Appeal from the United States
McGinnis,                                        * District Court for the
                                                 * Western District of Missouri.
        Debtors - Appellants,                    *
                                                 *   [TO BE PUBLISHED]
        v.                                       *
                                                 *
Jenkins & Associates, Inc.; Building             *
Construction Enterprises, Inc.; DiCarlo *
Construction Company; Ferguson                   *
Enterprises, Inc.; J.R. Electrical Supply, *
                                                 *
        Creditors - Appellees.                   *
                                          ___________

                              Submitted: April 19, 2002

                                   Filed: July 26, 2002
                                    ___________

Before WOLLMAN, BEAM and LOKEN, Circuit Judges.
                          ___________

PER CURIAM.
       The Bankruptcy Code provides that an involuntary Chapter 7 proceeding may
be commenced by “three or more entities, each of which is . . . a holder of a claim
against such person that is not contingent as to liability or the subject of a bona fide
dispute.” 11 U.S.C. § 303(b)(1). In this case, general contractors Jenkins &
Associates, Inc., Building Construction Enterprises, Inc., and DiCarlo Construction
Company (“DiCarlo”) filed involuntary petitions against Farrell and Susan McGinnis
(collectively, “Debtors”), who had served as an electrical subcontractor on various
construction projects doing business as McGinnis Electric. Subsequently, two
McGinnis Electric vendors, Ferguson Enterprises, Inc. (“Ferguson”), and J.R.
Electrical Supply (“J.R.”), filed joinder involuntary petitions, as authorized by 11
U.S.C. § 303(c). Debtors contested the involuntary proceeding, asserting that the
petitions were improperly served and that each claim is “the subject of a bona fide
dispute.” After a trial, the bankruptcy court1 sustained the petitions of DiCarlo,
Ferguson, and J.R. and entered an order for Chapter 7 relief. On appeal, the district
court2 affirmed. Debtors appeal the district court’s order to this court. We affirm.

       The most difficult issue raised by this appeal is one not addressed in Debtors’
lengthy briefs -- whether a Chapter 7 order for relief is a final order for purposes of
our jurisdiction under 28 U.S.C. § 158(d). After ordering Chapter 7 relief, the
bankruptcy court’s order provides that “Schedules, Statements and Mailing Matrix
are due within 15 days of the date of this Order.” Clearly, the order is not final in the
conventional sense of that concept because substantial further proceedings are
contemplated before the Chapter 7 proceeding comes to an end. However, finality
in bankruptcy cases is a flexible concept. In the one case we have found discussing
this issue in detail, the Ninth Circuit analyzed the Chapter 7 order for relief both

      1
        The HONORABLE JERRY W. VENTERS, United States Bankruptcy Judge
for the Western District of Missouri.
      2
       The HONORABLE DEAN WHIPPLE, Chief Judge of the United States
District Court for the Western District of Missouri.

                                          -2-
procedurally and from the standpoint of its practical impact and concluded it should
be appealable under § 158(d) because it is a final adjudication of the debtor’s
bankruptcy status that subjects the debtor’s assets to involuntary liquidation. In re
Mason, 709 F.2d 1313, 1315-18 (9th Cir. 1983). We agree with the Ninth Circuit’s
analysis of the issue. Focusing on the practical aspect of the analysis, this case may
be distinguishable from Mason because Debtors have filed a competing voluntary
petition in the United States Bankruptcy Court for the District of Kansas. But
appellees have the burden to present facts needed to challenge jurisdiction, and they
have not done so. Accordingly, applying the analysis in Mason, we conclude we have
jurisdiction over the appeal.

       Turning to the merits, Debtors argue the bankruptcy court erred in finding the
DiCarlo claim not subject to a bona fide dispute because the court improperly drew
an adverse inference from Debtors’ failing to call a DiCarlo employee to support their
contrary assertion. We reject this contention for the reasons stated by the bankruptcy
court and the district court, who properly applied the burden-shifting analysis for
determining the existence of a bona fide dispute adopted by this court in In re Rimell,
946 F.2d 1363, 1365-66 (8th Cir. 1991). Debtors next argue the bankruptcy court
erred in admitting without proper foundation invoices from J.R. to McGinnis Electric
as evidence of the amount Debtors owed J.R. on account. Like the district court, we
find no abuse of discretion in the bankruptcy court’s evidentiary ruling.

       Debtors next argue the bankruptcy court erred in weighing the testimony and
making findings of fact to determine whether the claims of DiCarlo, J.R., and
Ferguson were the subject of bona fide disputes, rather than resolving the issue
applying summary judgment standards, which would require the court to accept as
true Farrell McGinnis’s testimony as to the existence of bona fide disputes. The
district court did not discuss this issue. Assuming it was properly preserved for
appeal, it is without merit. See 11 U.S.C. § 303(h) (order for relief to be entered
“after trial”); In re Rimell, 946 F.2d at 1365 (bankruptcy court’s determination “is a

                                         -3-
factual finding that may be overturned on appeal only if it is clearly erroneous”);
Bankruptcy Rule 1018 (incorporating Bankruptcy Rule 7052).

        Finally, Debtors argue the bankruptcy court erred in treating Ferguson and J.R.
as qualifying creditors because their joinder involuntary petitions were served upon
Debtors’ attorney, not on Debtors personally. We agree with the district court’s
analysis of this issue, which concluded that a late-joining petitioner, like a party
seeking to intervene under Rule 24 of the Federal Rules of Civil Procedure, may serve
its initial pleading on a debtor’s attorney.

        The order of the district court affirming the judgment of the bankruptcy court
is affirmed.

      A true copy.

             Attest:

                CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.

                                         -4-