Banco Popular de Puerto Rico v. Reyes-Colon

Case Type:
Case Status:
17-1971, 17-1972 (1st Circuit, Apr 24,2019) Published
The Court of Appeals affirms the dismissal of the involuntary petition, as determined by the Bankruptcy Court. for want of a third petitioner.
Procedural context:
In a Second round appeal, the Court of Appeals reversed the determination of the District Court and affirmed the second dismissal of the involuntary petition, as determined by the Bankruptcy Court since the petitioner banks failed to prove that the Debtor had less than twelve creditors. Debtor presented a Rule 1003 list which was later amended by its expert report and reduced to 22 creditors. The Banks failed to establish that Debtor had less than twelve qualified creditors as needed under Section 303 of the Bankruptcy Code.
Banco Popular de Puerto Rico and Popular Auto (the banks) brought an involuntary petition against Mr. Edgar Reyes, a licensed plastic surgeon claiming that the Debtor had less than twelve creditors, therefore the petition can be filed by less than three creditors, and because Debtor schemed to defraud its creditors by misrepresenting his finances. The Bankruptcy Court dismissed the petition when found that the Debtor had more than twelve creditors. the bankruptcy appellate panel reversed and remanded because all the creditors must have notified. Back in the bankruptcy court, the Debtor filed a motion for summary judgment. After allowing discovery, the bankruptcy court dismissed on the same grounds. the Debtor relied on the bankruptcy court's opinion and order when filed its brief before the District Court, which reversed the determination regarding the twelve creditors. On appeal to the First Circuit the banks argued that Debtor waived its arguments regarding the number of creditors before the district court. The Court of Appeals determined that the argument was not waived and that allowing the petition to proceed with only two creditors, relying on creditors argument of equitable exception doctrine, would have flown the statutorily numerosity requirement imposed specifically by the Code. Following Law v.Siegel, 571 US 415 (2014), the court pointed that the bankruptcy court cannot override explicit mandates of other sections of the Bankruptcy Code..
Howard, Thompson and Kayatta

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