In re: Martin Musonge

FILED
JUN 1 2021
NOT FOR PUBLICATION SUSAN M. SPRAUL, CLERK
U.S. BKCY. APP. PANEL
OF THE NINTH CIRCUIT
UNITED STATES BANKRUPTCY APPELLATE PANEL
OF THE NINTH CIRCUIT
In re: BAP No. NC-20-1184-SGB
MARTIN MUSONGE,
Debtor. Bk. No. 19-42596
NATHANIEL BASOLA SOBAYO,
Appellant,
v. MEMORANDUM*
HIEN THI NGUYEN; ROBERT K. LANE;
DANIEL BUTT; KHIEM NGUYEN;
AVALON NGUYEN GARDNER LIVING
TRUST; HONG JACQUELINE
GARDNER; MARTIN MUSONGE,
Appellees.
Appeal from the United States Bankruptcy Court
for the Northern District of California
Charles D. Novack, Chief Bankruptcy Judge, Presiding
Before: SPRAKER, GAN, and BRAND, Bankruptcy Judges.
*
This disposition is not appropriate for publication. Although it may be cited for
whatever persuasive value it may have, see Fed. R. App. P. 32.1, it has no precedential
value, see 9th Cir. BAP Rule 8024-1.
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INTRODUCTION
Nathaniel Basola Sobayo filed an involuntary chapter 7 1 petition
against Martin Musonge. The bankruptcy court granted summary
judgment in favor of Musonge and dismissed the case. Sobayo appeals.
Sobayo is no stranger to litigation. The focus of most of this litigation
is a residence formerly owned by Musonge. According to Sobayo, multiple
injustices have occurred that wrongfully have deprived him of his interest
in the residence. The same property is at the forefront of this appeal as
well. Sobayo again asks this Panel to fix these perceived injustices. But
most of his grievances are beyond the limited scope of this appeal.
Here, the bankruptcy court granted summary judgment and
dismissed the involuntary petition. It did so because Sobayo’s claim was
subject to bona fide dispute and, therefore, Sobayo did not qualify under
§ 303(b) as a petitioning creditor.
We agree, so we AFFIRM.
FACTS 2
Unless otherwise indicated, the following facts are undisputed. Many
of them are drawn from our prior decision in Sobayo v. Musonge (In re
Musonge), BAP No. NC-20-1060-BKT, 2021 WL 799688 (9th Cir. BAP Mar. 1,
1
Unless specified otherwise, chapter and section references are to the Bankruptcy
Code, 11 U.S.C. §§ 101-1532, “Rule” references are to the Federal Rules of Bankruptcy
Procedure, and “Civil Rule” references are to the Federal Rules of Civil Procedure.
2 We exercise our discretion to take judicial notice of documents electronically
filed in the underlying bankruptcy case. See Atwood v. Chase Manhattan Mortg. Co. (In re
2
2021). On May 12, 2017, Sobayo’s wholly-owned limited liability company
Kingsway Capital Partners, LLC (“Kingsway”) purchased Musonge’s
residence located in Richmond, California. Kingsway financed its purchase
by borrowing $580,000 from Hien Thi Nguyen. The $580,000 note was
secured by a deed of trust against the residence.
After Kingsway’s purchase, Musonge continued to occupy the
residence. But he never paid any rent to Kingsway.
Sobayo maintains that he initially made roughly eight payments on
the loan secured by the residence. But he soon stopped making payments.
In turn, Nguyen initiated foreclosure proceedings. In an apparent effort to
forestall Nguyen’s foreclosure proceedings, Sobayo initiated both state
court litigation and a series of bankruptcy filings on behalf Kingsway and
himself. The first of these filings was the chapter 11 petition he filed on
behalf of Kingsway on October 31, 2018. Shortly after the bankruptcy court
dismissed the Kingsway bankruptcy, Sobayo purported to transfer a 95%
interest in the residence from Kingsway to himself.
Notwithstanding the bankruptcy filings, Nguyen succeeded in
foreclosing on Kingsway’s 5% interest in the residence on May 1, 2019. She
then foreclosed on Sobayo’s 95% interest in the residence on July 3, 2019.
As of July 11, 2019, a trustee’s deed was recorded, thereby giving Nguyen
legal title to a 100% interest in the residence.
Atwood), 293 B.R. 227, 233 n.9 (9th Cir. BAP 2003).
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Nguyen then commenced an unlawful detainer action against
Musonge. On the eve of trial in that matter, Sobayo, proceeding pro se,
filed the involuntary chapter 7 petition against Musonge. In the petition,
Sobayo based his petitioning creditor status on two claims. First, he alleged
that Musonge owed him $770,677 as a “Consumer Debt Owed Value of
Mortgage Liabilities re Conversion and Possession after sale of Property by
Debtor . . . .” (“Mortgage Claim”.) And second, he alleged that Musonge
owed him $105,000 in “Rental Income unpaid 30 months after [Kingsway’s]
purchase of Property @ $3,500.00 [per month]”(“Rent Claim”).
Musonge, also appearing pro se, filed his answer and motion to
dismiss. He noted that he sold the residence to Kingsway — not Sobayo —
in May 2017. He further pointed out that, as a result of Nguyen’s
foreclosure proceedings, neither Kingsway nor Sobayo had any remaining
ownership interest in the residence.
Sobayo responded to the motion to dismiss. In relevant part, he
reiterated his Rent Claim. He also indicated that Nguyen’s and Musonge’s
alleged acts of fraud and conversion were part of a concerted effort by
them to wrongfully deprive him of the residence.
After a hearing on the motion to dismiss the court determined that
the parties’ papers referenced evidence and went beyond the scope of what
was alleged in the pleadings. Consequently, the court treated Musonge’s
motion to dismiss as a summary judgment motion under Civil Rule 12(d)
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and gave the parties the opportunity to present additional argument and
evidence.3
Sobayo filed a supplemental declaration and brief, elaborating on his
Mortgage Claim and his Rent Claim. According to Sobayo, the Mortgage
Claim consisted of all amounts claimed by Nguyen under the $580,000 note
and deed of trust. That amount, claimed Sobayo, was $770,677, exclusive of
punitive damages, sanctions, accruing property taxes, and other charges.
As Sobayo broadly explained, Musonge’s liability for the Mortgage Claim
arose from his “Conversion and Possession” of the residence after he sold it
to Kingsway.
Sobayo acknowledged that Musonge sold the residence to Kingsway
in May 2017. Nonetheless he maintained that he (rather than Kingsway)
was the holder of the Mortgage Claim because, Sobayo reasoned, he and
Kingsway are one and the same under the law.
As for the Rent Claim, Sobayo maintained that it had grown since the
time of the filing of the involuntary petition —at a rate of $3,500 per month
— from $105,000 to $129,000. In stating his Rent Claim, Sobayo did not
account for Kingsway’s 100% ownership of the residence from May 12,
2017 to November 15, 2018. Nor did he account for the fact that, between
November 15, 2018, and July 11, 2019, he only purported to hold a 95%
interest in the residence. And as of July 11, 2019, when the trustee’s deed
3
Rule 1011(b) generally makes Civil Rule 12 applicable to involuntary petitions.
The Rule in part provides that, “[d]efenses and objections to the petition shall be
5
was recorded in Nguyen’s favor, Sobayo ceased to hold any ownership
interest in the property.
Sobayo submitted some exhibits in support of his Rent Claim. These
exhibits include: (1) a “California Residential Lease Agreement” dated July
1, 2019; (2) a “Residential Lease Agreement With Option To Purchase”
dated September 14, 2019, also identified in handwriting as “Addendum
1”; and (3) a “Special Attachment to Written Lease” dated September 14,
2019, also identified as “Addendum 2.” The Special Attachment-
Addendum 2 is entirely handwritten, though the words “Addendum 2”
appear to differ from the rest of the document. Each of these documents
purport to be between Sobayo and Kingsway as landlords and Musonge as
the tenant or occupant. The documents also purport to contain the
signatures of Musonge and his wife, as well as Sobayo’s on behalf of
himself and Kingsway. It is difficult to discern what obligations (if any)
Musonge might have committed himself to, assuming he signed the three
documents.
In June 2019, Musonge filed his supplemental brief and declaration in
support of his summary judgment motion. He argued that the lease
documents were not authenticated. But he also attacked the lease on other
grounds. According to Musonge, Sobayo’s own briefs and evidence
established that the Mortgage Claim and the Rent Claim were both subject
to bona fide to dispute. More specifically, he claimed that the lease
presented in the manner prescribed by Civil Rule 12.” Fed. R. Bankr. P. 1011(b).
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documents on which Sobayo relied were internally inconsistent and that
the various effective dates stated in the documents made no sense.
Finally, Musonge contended that any rent he might have owed was
owed to Kingsway and not to Sobayo. He described Kingsway as a
“defunct” company. To support this contention, he filed a request for
judicial notice and attached a copy of what he describes as a record from
the California Secretary of State, which describes Kingsway’s status as
“FTB Forfeited.”
On July 20, 2020, after considering all the papers submitted by the
parties, the court entered an order granting summary judgment in favor of
Musonge and dismissed the involuntary petition. Sobayo timely appealed.
JURISDICTION
The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334 and
157(b)(2)(A) and (O). We have jurisdiction under 28 U.S.C. § 158.
ISSUE
Did the bankruptcy court err when it entered summary judgment
dismissing the involuntary petition?
STANDARD OF REVIEW
This appeal hinges on the bankruptcy court’s summary judgment
determination that a bona fide dispute existed as to Musonge’s liability to
Sobayo and the amount of any such liability. Whether a bona fide dispute
exists for purposes of § 303(b) ordinarily is considered a question of fact
reviewed under the clearly erroneous standard. See Marciano v. Fahs (In re
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Marciano), 459 B.R. 27, 35 (9th Cir. BAP 2011), aff'd, 708 F.3d 1123 (9th Cir.
2013) (citing Liberty Tool & Mfg. v. Vortex Fishing Sys., Inc. (In re Vortex
Fishing Sys., Inc.), 277 F.3d 1057, 1064 (9th Cir. 2002)). However, when the
bona fide dispute is determined by summary judgment, we review the
bona dispute determination de novo. Id. When we review a matter de
novo, we give no deference to the bankruptcy court’s decision. Id. at 34
(citing First Ave. W. Bldg., LLC v. James (In re Onecast Media, Inc.), 439 F.3d
558, 561 (9th Cir. 2006)).
DISCUSSION
A. Governing legal standards.
1. Summary judgment.
Summary judgment is appropriate when there are no genuine issues
of material fact and the movant is entitled to judgment as a matter of law.
Civil Rule 56 (made applicable in adversary proceedings by Rule 7056);
Celotex Corp. v. Catrett, 477 U.S. 317, 322–23 (1986). For summary judgment
purposes, material facts are those which may affect the outcome of the case
under applicable substantive law. Anderson v. Liberty Lobby, Inc., 477 U.S.
242, 248 (1986). Thus, substantive law determines which facts are material.
Id. An issue is considered genuine and will bar entry of summary judgment
if a reasonable factfinder could find in favor of the non-moving party. Id.;
Far Out Prods., Inc. v. Oskar, 247 F.3d 986, 992 (9th Cir. 2001).
Civil Rule 56 requires courts to enter summary judgment if the non-
moving party fails to present evidence in response to the summary
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judgment motion sufficient to support the existence of an essential element
of that party’s case, on which that party would bear the burden of proof at
trial. Celotex, 477 U.S. at 322-23. As the Celotex court observed: “In such a
situation, there can be ‘no genuine issue as to any material fact,’ since a
complete failure of proof concerning an essential element of the
nonmoving party's case necessarily renders all other facts immaterial.” Id.
at 322–23; see also Havens v. Leong (In re Leong P'ship), Case Nos. NC–17–
1015–STaB & NC-17-1034-StaB, 2018 WL 1463852, at *7 (9th Cir. BAP Mar.
23, 2018), aff'd, 788 F. App’x 539 (9th Cir. 2019) (“When, as here, the non-
moving party would bear the burden of proof at trial to establish an
essential element of his or her case, the moving party can meet his or her
summary judgment burden by pointing to the absence of evidence to
support an essential element of the non-moving party's claim.”).
2. Bona fide dispute.
As § 303(b)(1) specifies, the claim of each petitioning creditor must be
neither contingent as to liability nor subject to “bona fide dispute as to
liability or amount.” Imposing this burden on petitioning creditors protects
debtors by preventing creditors whose claims are subject to legitimate
dispute from filing spurious involuntary petitions for the purpose of
coercing a favorable resolution of their claims. See Chicago Title Ins. Co. v.
Seko Inv., Inc. (In re Seko Inv., Inc.), 156 F.3d 1005, 1007-08 (9th Cir. 1998); 2
Collier on Bankruptcy ¶ 303.11 (16th ed. 2021).
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The Ninth Circuit has held that the absence of a bona fide dispute is
an affirmative element that each petitioning creditor must demonstrate in
order to sustain their involuntary petition. Rubin v. Belo Broad. Corp. (In re
Rubin), 769 F.2d 611, 615 (9th Cir. 1985). Accordingly, the petitioning
creditor(s) bear the burden of proof to establish that no bona fide dispute
exists. In re Vortex Fishing Sys., Inc., 277 F.3d at 1064; see also In re Rubin, 769
F.2d at 615 (“Petitioning creditors cannot prevail unless they show that
their claims are not subject to bona fide disputes.”).
A claim is subject to bona fide dispute when “there is an objective
basis for either a factual or a legal dispute as to the validity of the debt.” In
re Vortex Fishing Sys., Inc., 277 F.3d at 1064 (citing In re Busick, 831 F.2d 745,
750 (7th Cir. 1987)). In other words, “if there is either a genuine issue of
material fact that bears upon the debtor’s liability, or a meritorious
contention as to the application of law to undisputed facts, then the
petition must be dismissed.” Id. (quoting In re Lough, 57 B.R. 993, 997
(Bankr. E.D. Mich. 1986)). Importantly, “[a] bankruptcy court is not asked
to evaluate the potential outcome of a dispute, but merely to determine
whether there are facts that give rise to a legitimate disagreement over
whether money is owed, or, in certain cases, how much.” Id.B. Sobayo’s arguments.
Sobayo’s appeal brief is difficult to comprehend. Much of it is
devoted to his historical account of his years of interaction with, and
litigation against, Musonge and Nguyen. Most of his discussion has little or
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no relevance to the controlling issue presented by his current appeal:
whether his claims against Musonge are subject to bona fide dispute. Given
the limited scope of this appeal, our review is constrained to whether his
Mortgage Claim and his Rent Claim are subject to bona fide dispute. We
will address each claim in turn.
1. The Mortgage Claim is subject to bona fide dispute.
Sobayo’s Mortgage Claim is founded on his allegation that, at the
time Kingsway purchased the residence, Musonge “converted” it by
continuing to occupy the premises. Consequently, Sobayo maintains that at
the time he filed the involuntary petition, Musonge was liable for at least
$770,677, comprised of all costs, expenses, and damages Kingsway
incurred as a result of its purchase of the residence, including the mortgage
obligations owed to Nguyen.
There are a number of very basic problems with Sobayo’s Mortgage
Claim. The most problematic of these is that the California tort of
conversion only applies to personal property and not to real property.
Salma v. Capon, 161 Cal. App. 4th 1275, 1295 (2008). In addition, even if a
claim for conversion was available, nothing in the record establishes any
causal link between the alleged “conversion” and the mortgage-related
costs and expenses Kingsway incurred to purchase the property.
Finally, any cause of action for conversion accrued when Musonge
remained on the property after Kingsway purchased it. New Amsterdam
Project Mgmt. Humanitarian Found. v. Laughrin, Case No. C 07-935 JF (HRL),
11
2009 WL 1513390, at *3 (N.D. Cal. May 29, 2009), aff'd, 400 F. App’x 250 (9th
Cir. 2010) (“[I]t is well-settled that a property owner’s claim for conversion
ordinarily accrues when the conversion occurs, even if the owner is
ignorant of the wrong committed.” (citing Naftzger v. Am. Numismatic Soc’y,
42 Cal. App. 4th 421, 429 (1996))). Any such cause of action, therefore,
would belong to Kingsway. Nothing in the record demonstrates that
Sobayo had any claim for conversion against Musonge when he filed the
involuntary petition.
Sobayo attempts to overcome this obstacle by arguing that there is no
legal difference between him and Kingsway. He is mistaken. As we have
held, “a limited liability company is a separate and distinct legal entity
from its owners or members. Consequently, limited liability company
members have no interest in the company’s assets.” Schaefers v. Blizzard
Energy, Inc. (In re Schaefers), 623 B.R. 777, 783 (9th Cir. BAP 2020) (citations
omitted). In effect, Sobayo is asking us to recognize his Mortgage Claim by
disregarding Kingsway’s separate legal existence. However, “[a]lter ego
principles almost never enable ‘the persons who actually control the
corporation to disregard the corporate form.’” Id. at 785 (quoting Capon v.
Monopoly Game LLC, 193 Cal. App. 4th 344, 357 (2011)). Nor did Sobayo
make any showing in the bankruptcy court that would implicate any of the
narrow exceptions to this rule. See id.At bottom, there is no genuine issue that Sobayo’s Mortgage Claim is
subject to bona fide dispute.
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2. The Rent Claim is subject to bona fide dispute.
Sobayo also contends that, at the time he filed the involuntary
petition, Musonge was liable to him for 30 months of rent at $3,500 per
month, or $105,000. In support of this Rent Claim, Sobayo submitted three
lease documents from July 1, 2019 and September 14, 2019, listing
Kingsway and himself as the landlord. The bankruptcy court determined
that Musonge disputed both his liability and the amount of the Rent Claim.
The record demonstrates numerous bona fide disputes as to both.
a. Sobayo’s authority to enter any lease agreement.
Significantly, it was Kingsway that purchased Musonge’s residence
in May 2017. Sobayo had no interest in the real property until Kingsway
purportedly transferred 95% of its interest to Sobayo on November 15,
2018. But even then, Sobayo’s interest in the property is disputed.
As an initial matter Musonge submitted evidence that the California
Franchise Tax Board (“FTB”) revoked Kingsway’s status as an active
limited liability company in good standing because it failed to pay taxes.
Among other consequences, a suspended or forfeited limited liability
company “shall not be entitled to sell, transfer, or exchange real property in
California during the period of forfeiture or suspension.” Cal. Rev. & Tax.
Code § 23302(d). Sobayo has admitted that he currently lacks the financial
means to revive Kingsway. Consequently, as of filing of the involuntary
petition, Musonge contests Kingsway’s transfer to Sobayo of a 95%
ownership interest in the residence.
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Musonge also challenged the lease documents submitted by Sobayo.
Musonge pointed out that the earliest document was dated after Nguyen
had foreclosed on Kingsway’s interest in the residence and two days
before she foreclosed on Sobayo’s interest. Musonge disputed Kingsway’s
ability to participate in any agreement concerning the lease of the residence
after its interest had been foreclosed. The same question applies equally to
Sobayo’s interest, which was foreclosed well before the additional
documents were purportedly signed on September 14, 2019.
Once again, Sobayo’s briefing, both in the bankruptcy court and on
appeal, fails to address these issues. Under California law, upon
foreclosure Nguyen stepped into the shoes of Sobayo and Kingsway and
became the successor landlord under the lease. See Nativi v. Deutsche Bank
Nat'l Tr. Co., 223 Cal. App. 4th 261, 284-85 (2014) (holding that, under
California law, a subordinate bona fide lease survives foreclosure, and the
successor by foreclosure becomes the landlord).
The above issues call into question how Sobayo could enter into any
lease of the residence. Indeed, this is why the bankruptcy court rhetorically
asked:
How can Sobayo therefore demand 100% of the unpaid rent when
Kingsway and Nguyen had ownership interests during this period,
or seek to collect any rent after Nguyen foreclosed on his 95% fee
interest on July 3, 2019?
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This question remains unanswered. Accordingly, there is no genuine
dispute that Sobayo’s authority to enter into any agreement with Musonge
concerning the rental of the residence remains in bona fide dispute.
b. The meaning of the lease documents.
The significance and meaning of the three lease documents submitted
by Sobayo also remain in dispute. As the bankruptcy court recognized, the
lease dated July 1, 2019, referenced certain obligations related to Musonge’s
occupancy of the residence that were to be “deferred effective June 30,
2019.” But the document envisioned that a separate agreement was
necessary and would be executed by August 31, 2019. The July 1, 2019 lease
also provided that “this settlement offer” was final and non-negotiable,
and “WILL BE CONSIDERED NULL AND VOID, IF NOT AGREED TO
BY MARTIN MUSSONGE et al; and payment of July 1st received by or
before Tuesday July 23rd, 2019.” The record does show that Musonge later
made some payments to Sobayo, but the earliest payment was dated
September 1, 2019, well after the stated deadline. There is nothing in the
record to indicate that Musonge timely made any payments required under
the July 1, 2019 lease. Nor did the parties execute a separate payment
agreement by the stated deadline. Significantly, there is nothing additional
that indicates that Musonge specifically accepted the “settlement offer”
contemplated by the July 1, 2019 lease.
The handwritten document dated September 14, 2019 further
complicates any interpretation of these documents. The top of the
15
document is entitled “Addendum 2,” though it appears different from the
balance of the handwriting in the rest of the document. This document
references “all payments and provisions of the drafted lease [presumably
the July 1, 2019 lease].” It purports to incorporate them into the lease and
defer all payments, giving Musonge “30 days to make a Satisfactory
Arrangements in writing, of all amounts deferred and owing, in order to
reconcile the drafted lease of July 1, 2019 with the addendum to lease offer
of 9/14/2019.” (The last reference in the quote presumably is to
“Addendum 1.”) The document also appears to give Sobayo the sole
discretion to declare the agreement “of the 1st and 2nd Addendum lease”
null and void. Still, nothing in Addendum 2 addresses when retroactive
rent payments — those due through June 30, 2019 — might be due. There is
no evidence that any such agreement was ever reached.
The other document dated September 14, 2019, is entitled
“Residential Lease Agreement with Option to Purchase.” This typed
document includes a handwritten notation designating it as “Addendum
1.” This notation suggests that the document somehow amends the July 1,
2019 lease, but there is no evidence as to when or why the handwritten
notation was added. More importantly, there are material differences in the
terms of the three documents. These included the duration of the leases,
when the monthly rent was due, and the amount of the security deposit.
Once again, Addendum 1 did not reference any terms for paying the
accrued back rent. It did, however, warrant that the “landlord” was the
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legal owner of the residence and had the legal right to sell the property
under an option to purchase contained in the lease. But Nguyen already
had foreclosed Kingsway’s and Sobayo’s interests. As noted above, by the
time Sobayo signed the September documents, neither Kingsway nor
Sobayo held any interest in the residence that they could lease, which calls
into question the validity of the September documents.
Setting aside the questions surrounding Sobayo’s authority to enter
into the lease documents, it is unclear what, if any, agreement could have
resulted from the documents Sobayo submitted into evidence. The July 1,
2019 document stated that it was null and void if certain things did not
happen, and the record established that those things did not occur.
Moreover, that document contemplated an additional agreement to
address back rent owed through June 30, 2019. There is no evidence that
the parties ever reached any such agreement. The very lease documents on
which Sobayo relies reflect that the timing and manner of payment was a
material term to the parties. See Peterson Dev. Co. v. Torrey Pines Bank, 233
Cal.App.3d 103, 115 (1991) (holding that a loan commitment letter is not a
binding agreement unless it contains all material terms of the loan —
including the terms of repayment); see also Hines v. Lukes, 167 Cal. App. 4th
1174, 1182 (“A settlement is enforceable under section 664.6 only if the
parties agreed to all material settlement terms.”). Yet, there was never
agreement on that material term.
17
The clear failure of the parties to reach agreement as to all material
terms regarding Musonge’s alleged promise to pay back rent to Sobayo
reflects the existence of another bona fide dispute. Given that back rent was
by far the most significant component of Sobayo’s Rent Claim, there is no
genuine issue that Musonge asserted bona fide disputes regarding
Sobayo’s Rent Claim.
c. The amount of the Rent Claim.
Even assuming that Sobayo has some personal claim against
Musonge, the amount of such claim also is subject to bona fide dispute. As
explained above, the parties never agreed to the material terms by which
Musonge would pay to Sobayo back rent for the period he continued to
live at the residence after Kingsway purchased it. We acknowledge that
Musonge may well owe Kingsway some amount for his continued use of
the residence after Kingsway purchased the property. But there is a
genuine dispute as to what amount might be owed and to whom. Indeed, it
is unclear why negotiations regarding rent continued on the cusp of and
after Nguyen’s foreclosure.
As for Musonge’s obligation to pay Sobayo rent for his occupancy of
the residence on and after July 1, 2019, Sobayo ostensibly held a contractual
right to receive rent from Musonge for only ten days — from July 1, 2019
through July 11, 2019, when Nguyen recorded the trustee’s deed after she
foreclosed Sobayo’s interest. That amount, even if for the entire month of
July 2019, would fall well short of the amount needed to support an
18
involuntary petition under § 303(b)(2). Arguably, Sobayo may have some
claim against Musonge from and after November 2018, when Kingsway
assigned to Sobayo 95% of its ownership interest. But even then, there is no
evidence in the record establishing Sobayo’s ownership of the Rent Claim
based on his partial ownership. On the record presented, any attempt to
assess or allocate the Rent Claim as between Kingsway and Sobayo would
be pure speculation.
Sobayo assumes that he holds Kingsway’s interest in any and all
claims against Musonge because, in his mind, he and Kingsway are one in
the same. For the reasons discussed above, that simply is not the case.
Kingsway is a separate entity and there is nothing in the record to suggest
that Sobayo has the right to assert Kingsway’s claims against Musonge. As
a result, even if Sobayo has a claim against Musonge for rent, the amount
of such claim is subject to a bona fide dispute.
CONCLUSION
In sum, the bankruptcy court was not charged with the task of
“evaluat[ing] the potential outcome” of any disputes regarding Sobayo’s
claims. See In re Vortex Fishing Sys., Inc., 277 F.3d at 1064. Rather, it was
required to determine whether a genuine question existed whether
Sobayo’s claims against Musonge were subject to bona fide dispute as to
liability or amount. Musonge raised substantial and serious issues
challenging his liability and the amount of any claim. Sobayo’s evidence
failed to provide any clarity on these issues. To the contrary, Sobayo’s
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evidence was highly equivocal and itself demonstrated the bona fides of
the disputes Musonge raised.
On this record, summary judgment was proper as no reasonable
factfinder could have found an absence of “legitimate disagreement over
whether money is owed, or … how much.” Id. Accordingly, we AFFIRM
the bankruptcy court’s order granting summary judgment in favor of
Musonge and dismissing Sobayo’s involuntary petition.
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