Court Opinion

ID: 9516270
Source: CourtListenerOpinion
Date Created: 2023-08-06 23:39:34.400827+00
Date Added: 2024-06-11T09:19:17.864196
License: Public Domain

VOLINN, Bankruptcy Judge,
concurring and dissenting:
I concur in those portions of the court’s ruling holding that the filing of the bankruptcy petition was sanctionable conduct under Bankruptcy Rule 9011 and remanding for reconsideration of the amount of the sanction award to the bankruptcy court. I am constrained to dissent, however, from that portion of the court’s ruling reversing imposition of sanctions against the appellant, Craig E. Caldwell, and imposing Rule 9011 sanctions only against the debtor.
The trial court filed a thirty-six page memorandum decision setting forth in great detail its findings and conclusions. These findings address themselves extensively to Mr. Caldwell’s complete dominance of the debtor and manipulation of all other parties who had ostensible responsibility for institution of the bankruptcy proceedings. Thus, the attorney for the debt- or, William N. Lobel, has, as yet, not been subject to a claim for sanctions; as stated by the trial court, “The parties have agreed that the motion for sanctions against RM’s attorneys will be held in abeyance.” As to the party who actually signed the debtor’s petition, who also has not been subject to any claim for sanctions, the court stated: “The corporation is wholly owned by Mr. Caldwell ... Reverend Steel testified that he considered Mr. Caldwell a great benefactor of South Central Los Angeles, but the corporate president knew little else about RM.”
The memorandum further stated:
Mr. Caldwell certified the corporate resolution authorizing a petition under Chapter XI [sic] of the Bankruptcy Code on March 13,1989. He also signed the false statement of affairs. Reverend Steel can be charitably described as a figurehead in the actual signing of the petition. Mr. Caldwell is still subject to Rule 9011 for his actions as the sole owner and director of RM in ordering the filing of the bankruptcy.
The record shows further that Caldwell has had extensive bankruptcy experience in a number of bankruptcy cases. While he did not sign the bankruptcy petition in this case, he certified the corporate resolution authorizing the petition and signed a false statement of affairs which accompanied the bankruptcy petition. Thus, in addition to having been the impelling force behind the filing of the petition, he participated in its formulation.
While the language of Rule 9011 adverts to a signature, it is important to note that, functionally, it requires a certification. It is clear that Mr. Caldwell was responsible for the filing of the bankruptcy petition and its attendant certification as required by Rule 9011. The trial court recognized *557this in the form of specific findings which are set forth in the Memorandum Decision. In the light of the record, it can hardly be argued that these findings are clearly erroneous.
. As stated by Justice Douglas in Bank of Marin v. England, 385 U.S. 99, 103, 87 S.Ct. 274, 277, 17 L.Ed.2d 197, 201 (1966): “Yet we do not read these statutory words with the ease of a computer.” A statute or rule is enacted in order to accomplish a purpose. While, hopefully, the purpose is expressed in plain language, the statute or rule should not be read so as to accomplish a result which runs counter to its purpose. The rule requires a certification that:
“... the attorney or party has read the [petition]; that to the best of the attorney’s or party’s knowledge, information and belief formed after reasonable inquiry it is well grounded in fact and is warranted by existing law ... and that it is not interposed for any improper purpose, such as to harass, to cause delay, or to increase the cost of litigation....”
The debtor is a corporation which was manipulated by Caldwell, its sole stockholder, in order to frustrate, delay, and cause great expense to Unified Capital Corp. and any other pre- or post-bankruptcy creditors it may have. These creditors are the victims of Caldwell’s actions. The debtor is a hollow shell and probably has no assets with which to compensate the creditors who are being awarded sanctions against it; or, if it does have assets then it will be paying the creditors from an asset pool which should be available to them for distribution on their claims. To put it otherwise, the only way in which the debtor will be answerable for payment of sanctions without hurt to its victims would be if it were solvent, a prospect which remains to be demonstrated.
Caldwell, as the party who was the principal and dominant force in perpetrating the bad faith litigation, should not be allowed absolution from Rule 9011 sanctions simply because his unwitting proxy, at his instance, held the pen which signed the document initiating the bad faith proceedings.
I respectfully dissent.