Case 8:11-bk-20423-MW

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FILED & ENTERED

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MAY 11 2012

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CLERK U.S. BANKRUPTCY COURT
Central District of California
BY bolte
DEPUTY CLERK

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UNITED STATES BANKRUPTCY COURT

CENTRAL DISTRICT OF CALIFORNIA

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SANTA ANA DIVISION

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In re:

Case No: 8:11-bk-20423-MW

David A. Johnson,

Chapter: 7

MEMORANDUM DECISION AND ORDER

DENYING WITH PREJUDICE CREDITOR
MEDICAL DENTAL DEVELOPMENT LLCS
EX PARTE EMERGENCY MOTION TO
REOPEN THE BANKRUPTCY

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Debtor(s).

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Hearing

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Date:
May 7, 2012
Time:
2:00 PM
Location: Courtroom 6C
411 West Fourth Street
Santa Ana, CA 92701

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This matter comes before the Court on creditor Medical Dental Development LLCs

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Ex Parte Emergency Motion to Reopen the Bankruptcy Due to Lack of Notification of

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Bankruptcy Filing To Major Creditor, Due to Bankruptcy Application Being Filed By Fraud

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Upon This Court and Creditors Committed By Debtor David Johnson, His Attorney and

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Trustee (the Motion), docket number 22. For the reasons stated below, the Court denies the

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Motion with prejudice.

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FINDINGS OF FACT
Medical Dental Development LLC (MDD) leased medical office space to debtor Dr.
David Johnson for use in connection with his chiropractic practice. In 2010 or 2011 MDD

obtained a California Superior Court judgment against Dr. Johnson in the amount of

approximately $290,000 based upon one or more breaches of the lease agreement. Dr.

Johnson filed a chapter 7 petition on July 26, 2011 and scheduled MDDs claim in the amount

of $290,000. The panel trustee filed a Chapter 7 Trustees Report of No Distribution on

September 27, 2011, and Dr. Johnson received a discharge on November 17, 2011. The

Court closed the case on November 22, 2011.

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Schedule F prepared by Dr. Johnson lists MDD as a creditor at its correct address:

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Medical Dental Development LLC, c/o Orly Taitz, Esq., 29839 Santa Margarita Parkway, Suite

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100, Rancho Santa Margarita, CA 92688. However, for reasons unknown, the address of

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MDD that appears in the Court Clerks creditor mailing matrix is incorrectly shown as Medical

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Dental Development LLC, c/o Orly Taitz, Esq., 29839 Santa Margarita Parkway, Suit, Rancho

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Santa Margarita, CA 92688. It is undisputed that the notice of the cases commencement and

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first meeting of creditors that was mailed to creditors did not include MDDs suite number.

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However, the Certificate of Notice by the Bankruptcy Noticing Center pertaining to this notice,

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under the heading Bypassed Recipients, contains the notation NONE.

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MDD alleges in the Motion that (1) it did not receive notice of the pendency of Dr.

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Johnsons bankruptcy case until one day before the discharge was entered, and (2) Dr.

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Johnson, Dr. Johnsons attorney and the panel trustee possibly colluded to defraud creditors in

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the case. Alleging that the panel trustee (Weneta Kosmala) did not do any due diligence in

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this case, MDD contends that Dr. Johnsons chiropractic practice had material and significant

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value and that [t]here was no good attempt by the trustee to ascertain any of the assets and

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income by the debtor and his spouse. Motion at 4.

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Regarding alleged non-delivery of the notice of the commencement of the case and

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the meeting of creditors, MDD argued at oral argument that (a) it did not receive this notice,

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and (2) some other tenant in the building probably received the notice and did not bother to

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MDD filed no declaration in support of its memorandum of points and authorities.

The only witness called by MDD at the evidentiary hearing was Dr. Johnson.

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forward it to MDD.

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Dr. Johnsons Opposition to Creditor Medical Dental Development LLCs Motion to

Reopen Bankruptcy Case (the Opposition) also is not supported by any declaration.
However, attached to the Opposition are various filed pleadings and court documents which
appear to be genuine. The Court takes judicial notice of such pleadings and court documents.
Pointing to the notation NONE in the Certificate of Notice under Bypassed Recipients, the
Opposition argues that this proves that the notice of the commencement of the case and
meeting of creditors was not returned to sender that MDD in fact received notice.

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An evidentiary hearing was held on May 7, 2012 at which Dr. Johnson was called as

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a witness by each side. There were no other witnesses. Several documents and one

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photocopy of a photograph were admitted into evidence. Apart from the pleadings and

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documents judicially noticed, such testimony (on both direct and cross examination) and such

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exhibits represent the entire sum of all the admitted evidence.

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The testimony and exhibits show that a number of medical professionals occupied

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the premises of 29839 Santa Margarita Parkway in a number of different suites. Some of

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these medical professionals subleased space from other tenants. There may have been only

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three numbered suites in the entire complex, one of which was occupied by landlord MDD.

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The mailboxes for the suites did not (on the outside, at least) display the name of the tenant

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using the mailbox. (The outside of the mailbox showed only the number corresponding to the

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suite).

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The testimony and exhibits also show that upon demand of panel trustee Weneta

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Kosmala during the pendency of the bankruptcy case, Dr. Johnson produced the following

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documents for inspection: 2009 tax returns; 2010 tax returns; bank statements from 90 days

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prepetition through the date of the demand; financial statements for all businesses, including

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detailed income statements, balance sheets, disbursement logs, receipts logs, accounts

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receivable aging reports; proof of insurance; and last mortgage statements for all real property.

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CONCLUSIONS OF LAW
A court may reopen a closed bankruptcy case to accord relief to the debtor or for
other cause. 11 U.S.C. 350(b); Fed. R. Bankr. P. 5010. A reopening of a case lies soundly
in the courts discretion, based upon the circumstances and the equitable nature of the
bankruptcy proceeding. Curry v. Castillo (In re Castillo), 297 F.3d 940, 945 (9th Cir. 2002);
Elias v. Lisowski Law Firm, CHTD. (In re Elias), 215 B.R. 600, 604 (B.A.P. 9th Cir. 1997). The
moving party bears the burden of demonstrating sufficient cause to reopen. In re Winburn,
196 B.R. 894, 897 (Bankr. N.D. Fla. 1996). Additionally, a court must consider whether the
underlying cause of action to the motion to reopen is likely to be sustained when considered on
its merits. See In re Carter, 156 B.R. 768, 770-71 (Bankr. E.D. Va. 1993).
MDD has failed to make a sufficient showing that there is cause to reopen this case.

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Although the MDD address used on the Courts notice of the cases commencement and

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meeting of creditors does not show a suite number, it does not necessarily follow from this that

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MDD did not in fact receive the notice. First, the postal carrier may have had other mail for

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MDD that day that correctly showed MDDs suite number and may have included the courts

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notice with this other mail when placing it in MDDs mailbox notwithstanding the absence of a

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suite number on the envelope. Second, even if the notice had been delivered to another suite,

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the recipient may have seen MDDs name on the envelope and hand carried it to MDDs suite.

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Although there is no significant evidence that either of these events occurred, neither is there

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any significant evidence that MDD did not receive the notice. MDDs allegations of non-receipt

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are not supported by any testimony or declaration. The burden of proof is on MDD, and MDD

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has failed to meet its burden of proving non-receipt of the notice.

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With respect to the second issue in a motion to reopen, namely, the merits of the

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underlying cause of action, the Court determines that MDD has failed to meet its burden to

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show that a cause of action against Dr. Johnson, Dr. Johnsons attorney and the panel trustee

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for a conspiracy to defraud creditors has any merit. In MDDs view, panel trustee Weneta

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Kosmala either colluded with Dr. Johnson and his attorney to defraud MDD and the other

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creditors or, alternatively, failed to conduct any due diligence and let a valuable asset (namely,

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the alleged value of Dr. Johnsons chiropractic practice) slip away without appropriating its
value for the estates benefit. However, the evidence shows that the panel trustee demanded
and obtained production of important tax and financial records. There is no evidence of
collusion or malfeasance of the panel trustee other than MDDs allegations, and these
allegations are not supported by any material evidence.
For the foregoing reasons, it is ORDERED that the Motion is denied with prejudice.

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DATED: May 11, 2012

United States Bankruptcy Judge

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NOTE TO USERS OF THIS FORM:

1) Attach this form to the last page of a proposed Order or Judgment. Do not file as a separate document.
2) The title of the judgment or order and all service information must be filled in by the party lodging the order.
3) Category I. below: The United States trustee and case trustee (if any) will always be in this category.
4) Category II. below: List ONLY addresses for debtor (and attorney), movant (or attorney) and person/entity (or
attorney) who filed an opposition to the requested relief. DO NOT list an address if person/entity is listed in category I.

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NOTICE OF ENTERED ORDER AND SERVICE LIST

Notice is given by the court that a judgment or order entitled (specify) MEMORANDUM DECISION AND
ORDER DENYING WITH PREJUDICE CREDITOR MEDICAL DENTAL DEVELOPMENT LLCS EX PARTE
EMERGENCY MOTION TO REOPEN THE BANKRUPTCY was entered on the date indicated as AEntered@
on the first page of this judgment or order and will be served in the manner indicated below:

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I. SERVED BY THE COURT VIA NOTICE OF ELECTRONIC FILING (ANEF@) B Pursuant to controlling
General Order(s) and Local Bankruptcy Rule(s), the foregoing document was served on the following
person(s) by the court via NEF and hyperlink to the judgment or order. As of May 10, 2012, the following
person(s) are currently on the Electronic Mail Notice List for this bankruptcy case or adversary proceeding to
receive NEF transmission at the email address(es) indicated below.
Weneta M Kosmala (TR)
Weneta.Kosmala@7trustee.net,
ca15@ecfcbis.com;wkosmala@kosmalalaw.com;dfitzger@kosmalalaw.com;kgeorge@kosmalalaw.com
United States Trustee (SA)
ustpregion16.sa.ecf@usdoj.gov
Bruce D White on behalf of Debtor David Johnson
whiteandroseman@aol.com
Service information continued on attached page

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II. SERVED BY THE COURT VIA U.S. MAIL: A copy of this notice and a true copy of this judgment or order
was sent by U.S. Mail to the following person(s) and/or entity(ies) at the address(es) indicated below:
David A. Johnson
6 Thorn Oak
Dove Canyon, CA 92679

Orly Taitz
Law Offices of Orly Taitz
29839 Santa Margarita Parkway, Suite 100
Rancho Santa Margarita, CA 92688

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Service information continued on attached page

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III. TO BE SERVED BY THE LODGING PARTY: Within 72 hours after receipt of a copy of this judgment or
order which bears an AEntered@ stamp, the party lodging the judgment or order will serve a complete copy
bearing an AEntered@ stamp by U.S. Mail, overnight mail, facsimile transmission or email and file a proof of
service of the entered order on the following person(s) and/or entity(ies) at the address(es), facsimile
transmission number(s) and/or email address(es) indicated below:

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Service information continued on attached page

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