FILED OCT 29 2024 ORDERED PUBLISHED 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. CC-24-1007-LFS JOHN E. KING, Debtor. Bk. No. 9:22-bk-10674-RC WOLVERINE ENDEAVORS VIII, LLC, Appellant, v. OPINION EAST WEST BANK; INSURANCE COMPANY OF THE WEST; FENCE FACTORY, INC.; JOHN E. KING, Appellees.

Appeal from the United States Bankruptcy Court for the Central District of California Ronald A. Clifford, Bankruptcy Judge, Presiding

APPEARANCES Myron Moskovitz argued for appellant; William Charles Beall of Beall & Burkhardt argued for appellee John E. King.

Before: LAFFERTY, FARIS, and SPRAKER, Bankruptcy Judges.

LAFFERTY, Bankruptcy Judge:

1 INTRODUCTION

Wolverine Endeavors VIII, LLC (“Wolverine”) appeals the

bankruptcy court’s order dismissing the involuntary chapter 7 1 petition it

filed against John E. King.

After Wolverine filed a petition against Mr. King, certain creditors

filed joinders to the involuntary petition pursuant to § 303(c). Fence

Factory, Inc. (“Fence Factory”), a small trade creditor to which Mr. King

owes a monthly debt, was one of those joining creditors.

There is no dispute that Fence Factory was owed money as of the

petition date based on an unpaid invoice. However, shortly after the

petition date, a third party satisfied the invoice. As such, by the time Fence

Factory joined the involuntary petition, the invoice pending on the petition

date had been paid.

Section 303(c) allows creditors “holding” a claim and meeting certain

requirements to join an involuntary petition with the same effect as if they

were an original petitioning creditor. The bankruptcy court, relying largely

on the fact that the word “holding” is in the present tense, ultimately

concluded that Fence Factory could not join the petition because it was no

longer “holding” a claim on the date it filed its joinder. Wolverine

1 Unless specified otherwise, all chapter and section references are to the Bankruptcy Code, 11 U.S.C. §§ 101–1532 and “Civil Rule” references are to the Federal Rules of Civil Procedure. 2 disagrees with this interpretation, arguing that creditors should be able to

join a petition if they held a claim on the petition date.

This appeal presents a difficult question of first impression. The

parties have not presented, and the Panel could not find, any authorities

directly addressing the issues raised in this appeal. In fact, cases discussing

involuntary petitions are sparse because the “vast bulk” of bankruptcy

cases are voluntarily commenced by a debtor. Wechsler v. Macke Int’l Trade,

Inc. (In re Macke Int’l Trade, Inc.),

(9th Cir. BAP 2007); see

also Voluntary and Involuntary Bankruptcy Cases Filed by Chapter of the

Bankruptcy Code,

https://www.uscourts.gov/sites/default/files/data_tables/jff_7.2_0930.2023.pdf

(last visited October 28, 2024) (aggregating numbers showing that in 2023,

of the 433,658 bankruptcy cases that were filed, only 266 were involuntary

cases). As a result, case law only tangentially guides our opinion herein.

Although the bankruptcy court’s construction of the word “holding”

is relevant, we believe other statutory provisions compel a different

interpretation than the one reached by the bankruptcy court. A holistic

review of the statutory scheme governing involuntary petitions and

important policy considerations lead us to the conclusion that Fence

Factory qualified as a joining creditor under § 303(c).

We REVERSE the portion of the bankruptcy court’s order that is

inconsistent with this opinion and REMAND for the bankruptcy court to

rule on Fence Factory’s request to withdraw its joinder.

3 FACTS 2

On August 31, 2022, Wolverine filed an involuntary chapter 7

petition against Mr. King. 3 In the petition, Wolverine asserted that it had a

claim of $7,077,693.78 against Mr. King stemming from a judgment entered

in 2011 and renewed in 2021. At the time, Mr. King also had several other

outstanding judgments against him. Combined with Wolverine’s claim,

Mr. King owed over $29 million in unpaid judgments.4

Mr. King filed a motion to dismiss the involuntary petition. Among

other things, Mr. King argued that he had more than twelve countable

creditors and, as a result, a viable involuntary case required at least three

petitioning creditors pursuant to § 303(b)(1).

2 We have taken judicial notice of the bankruptcy court docket and various documents filed through the electronic docketing system. See O'Rourke v. Seaboard Sur. Co. (In re E.R. Fegert, Inc.),

(9th Cir. 1989); Atwood v. Chase Manhattan Mortg. Co. (In re Atwood),

, 233 n.9 (9th Cir. BAP 2003). 3 Concurrently, Wolverine filed a separate involuntary chapter 7 petition against

Mr. King’s wife, Carole D. King. 4 In its briefs, Wolverine contends that the bankruptcy court erred by sustaining

Mr. King’s objection to admission of his judgment debtor examination. However, Wolverine references this transcript for the purpose of discussing background facts that are not relevant to the issues on appeal. “[W]ith respect to erroneous evidentiary rulings, such rulings do not constitute reversible error unless it is more likely than not that the rulings changed the outcome of the lawsuit.” Van Zandt v. Mbunda (In re Mbunda),

(9th Cir. BAP 2012), aff'd,

(9th Cir. 2015). Because Wolverine has not articulated how this evidentiary ruling would impact the outcome of this matter, the ruling does not constitute reversible error. 4 In May 2023, Fence Factory filed a joinder to the involuntary petition

against Mr. King. 5 In its joinder, Fence Factory indicated that it had a claim

against Mr. King based on an “[o]ngoing trade debt” in the amount of

$44.55. This ongoing debt stemmed from an arrangement between Fence

Factory and King Ventures (Mr. King’s sole proprietorship) through which

King Ventures rented a fence from Fence Factory in return for monthly

payments of $44.55. Although the record does not include details about the

parties’ prepetition arrangement, the record reflects that the monthly rental

arrangement between the parties began before the petition date and

continued intact through the date Fence Factory joined the petition.

The parties do not dispute that, as of the petition date, King Ventures

owed Fence Factory $44.55 based on an invoice dated August 19, 2022. The

parties also do not dispute that, two days after the petition date, a third

party paid Fence Factory $44.55 and satisfied the outstanding invoice.

Notwithstanding the joinders, Mr. King continued to assert that the

involuntary petition should be dismissed, arguing, among other things,

that Fence Factory did not qualify as a petitioning creditor under § 303(b).

Concluding that Mr. King’s motion to dismiss and the responses thereto

presented matters outside the pleadings, the bankruptcy court treated the

motion as a motion for summary judgment. Thereafter, the court set an

evidentiary hearing to adjudicate the issues raised in the motion to dismiss.

5 Insurance Company of the West and East West Bank also filed joinders to the involuntary petition. 5 Prior to the evidentiary hearing, the parties were given the

opportunity to: (i) obtain discovery and file discovery related motions;

(ii) issue subpoenas and file motions to quash the subpoenas; (iii) file a

pretrial stipulation outlining the issues of law and fact to be tried and

designating witnesses and exhibits; (iv) file motions in limine in

preparation for the evidentiary hearing; and (v) file trial briefs.

Shortly before the evidentiary hearing, Fence Factory filed a

withdrawal of its joinder to the involuntary petition. Although Wolverine

opposed the request, the bankruptcy court never ruled on Fence Factory’s

request to withdraw.

On October 3, 2023, over one year after Wolverine initially filed the

involuntary petition, the bankruptcy court held an evidentiary hearing.

After the evidentiary hearing, the court entered an order dismissing the

involuntary petition against Mr. King. As relevant to this appeal, the court

held that Fence Factory was not qualified to act as a petitioning creditor.

In support of this holding, the bankruptcy court noted that § 303(c),

the statute allowing joinders to involuntary petitions, provides that only

creditors “holding” certain types of claims may join an involuntary

petition. Reasoning that the term “holding” is in the present tense, the

bankruptcy court concluded that creditors who join an involuntary petition

must hold a claim at the time they file their joinder, even if they held a

claim on the petition date and would have otherwise qualified as a

petitioning creditor on that date. Because Fence Factory’s petition date

6 claim had been satisfied by the time Fence Factory joined the petition, the

bankruptcy court held that Fence Factory did not qualify as a petitioning

creditor under § 303(c). Consequently, because only two petitioning

creditors remained,6 the bankruptcy court dismissed the involuntary

petition for failure to comply with § 303(b)(1). Wolverine timely appealed.

JURISDICTION

The bankruptcy court had jurisdiction under

and

157(b)(2)(A) and (O). We have jurisdiction over the bankruptcy court’s

determination under

.

ISSUES

1. May a trade creditor with a debt billed monthly join an

involuntary petition under § 303(c) if the debt owed to it on the

petition date was satisfied prior to the filing of the joinder?

2. Did the bankruptcy court’s procedures violate Wolverine’s due

process rights or prejudice Wolverine?

STANDARDS OF REVIEW

The parties dispute the appropriate standard of review. Wolverine

contends that the bankruptcy court’s ruling was on a summary judgment,

6 In its ruling dismissing the involuntary petition, the bankruptcy court also held that East West Bank did not qualify as a petitioning creditor because Wolverine was the purchaser and assignee of all of East West Bank’s rights, title, and interest in the judgment against Mr. King; as a result, the bankruptcy court held that, to the extent East West Bank had any claim against the estate, East West Bank and Wolverine would be counted as a single creditor. Wolverine does not challenge this holding on appeal. 7 such that a de novo standard should be applied. Mr. King asserts that the

bankruptcy court issued a ruling after an evidentiary hearing, such that the

Panel must review the court’s findings of fact under the clearly erroneous

standard and its conclusions of law de novo.

Although the bankruptcy court and the parties may have referred to

the October 3, 2023, hearing by various names, ultimately, the fact remains

that the bankruptcy court held an evidentiary hearing on the issues that are

currently on appeal. The bankruptcy court’s order of dismissal includes

both its findings of fact and conclusions of law as to those issues.

Moreover, the bankruptcy court did not dismiss the petition against

Mr. King as having inadequate allegations for purposes of Civil Rule

12(b)(6). Nor did the bankruptcy court dismiss the petition using a

summary judgment standard, i.e., by assessing whether there were any

genuine issues of material fact. In fact, the bankruptcy court’s decision to

hold an evidentiary hearing demonstrated that there were genuine issues of

material fact necessitating an evidentiary hearing.

As a result, and notwithstanding the court’s or the parties’

characterization of the proceedings before the bankruptcy court, the

bankruptcy court conducted an evidentiary hearing. Where an order is

entered after an evidentiary hearing, “we review the bankruptcy court's

findings of fact for clear error, and its conclusions of law de novo.” Thiara v.

Spycher Bros. (In re Thiara),

(9th Cir. BAP 2002) (citing

Carrillo v. Su (In re Su),

(9th Cir. 2002)).

8 In any event, the facts relevant to this opinion are not disputed by the

parties, and neither party challenges any of the relevant findings of fact

made by the bankruptcy court regarding the pertinent issues on appeal. As

such, the Panel’s review herein is limited to the bankruptcy court’s

conclusions of law, or the bankruptcy court’s application of the law to facts,

both of which are reviewed de novo. Id. at 427; see also Aetna U.S.

Healthcare, Inc. v. Madigan (In re Madigan),

(9th Cir. BAP

2001) (“We review de novo the bankruptcy court’s application of

undisputed facts to the law. . . .”).

“Whether a person’s due process rights have been violated is a mixed

question of law and fact, which is reviewed de novo.” Hasso v. Mozsgai (In

re La Sierra Fin. Servs., Inc.),

(9th Cir. BAP 2002).

Under a de novo review, we look at the matter anew, giving no

deference to the bankruptcy court's determinations. Barnes v. Belice (In re

Belice),

(9th Cir. BAP 2011).

DISCUSSION

On appeal, Wolverine contends that the bankruptcy court erred by

using the date of joinder, as opposed to the petition date, to determine

whether Wolverine was “holding” a claim for purposes of § 303(c). We

agree. As we discuss in section A.1., both relevant statutes and policy

concerns indicate that the petition date is the relevant date to assess

whether a creditor may join a petition.

9 Additionally, as we discuss in section A.2., even under the

bankruptcy court’s interpretation of the word “holding,” Fence Factory’s

status as a trade creditor with an ongoing debt means that Fence Factory

was “holding” a claim on the date it filed its joinder. Finally, as discussed

in section B, Wolverine has not articulated any prejudice it suffered from

the bankruptcy court’s procedures in this case, and we will not disturb the

portions of the court’s order that do not conflict with this opinion.

A. Fence Factory qualified as a petitioning creditor under § 303(c). As always, our interpretation of the Code “starts where all such

inquiries must begin: with the language of the statute itself.” Ransom v. FIA

Card Servs., N.A.,

(2011) (internal quotation marks omitted).

Pursuant to § 303(c):

After the filing of a petition under this section but before the case is dismissed or relief is ordered, a creditor holding an unsecured claim that is not contingent, other than a creditor filing under subsection (b) of this section, may join in the petition with the same effect as if such joining creditor were a petitioning creditor under subsection (b) of this section. “A primary canon of statutory interpretation is that the plain language of a

statute should be enforced according to its terms, in light of its context.”

ASARCO, LLC v. Celanese Chem. Co.,

(9th Cir. 2015)

(citations omitted) (emphasis added). “Thus, we examine the statute as a

whole, including its purpose and various provisions.” Carson Harbor Vill.,

Ltd. v. Unocal Corp.,

(9th Cir. 2001).

10 In its order dismissing the involuntary petition against Mr. King, the

bankruptcy court focused on the tense of the word “holding” to conclude

that Fence Factory was disqualified as a petitioning creditor. Specifically,

the bankruptcy court interpreted the use of the present tense as Congress’s

intention to limit joinders under § 303(c) to creditors who are owed money

at the time of joinder, as opposed to at the time the petition is filed.

The tense of the word “holding” is certainly relevant. After all,

“Congress’ use of a verb tense is significant in construing statutes.” United

States v. Wilson,

(1992). However, to assess properly

Congress’s intent, we must consider the word in the context of the entire

statute. Here, three contextual clues lead us to a different result.

First, § 303(c) itself requires that creditors join “with the same effect

as if such joining creditor were a petitioning creditor under section (b) of

this section.” As discussed below, the qualifications of petitioning creditors

are assessed as of the petition date.

Second, § 303, taken as a whole and as interpreted by courts,

contemplates that the bankruptcy court will make all relevant

determinations related to an involuntary petition on the petition date.

Finally, the word “holding” modifies the word “claim” such that the

two words must be interpreted together. In this case, because Fence Factory

is a trade creditor with an ongoing debt, an undisputed fact that was before

the bankruptcy court, the word “claim” is expansive enough to include the

11 debt owed to Fence Factory. This is so even if we use the construction of

“holding” used by the bankruptcy court.

1. Section 303, including § 303(c), requires assessment of all claims as of the petition date. As noted above, § 303(c) provides that a creditor joining an

involuntary petition joins “with the same effect as if such joining creditor

were a petitioning creditor under subsection (b) of this section.” Congress’s

inclusion of this clause in § 303(c) suggests an intention to relate joinders

back to the petition date and to assess the qualifications of a joining

creditor in the same manner as a petitioning creditor. Because the

qualifications of petitioning creditors are assessed as of the petition date,

§ 303(c) would seem to require that the qualifications of joining creditors be

assessed as of the same date.

This interpretation also makes sense when read in conjunction with

§ 303(h). Under § 303(h)(1), a bankruptcy court shall enter an order for

relief if “the debtor is generally not paying such debtor’s debts as such

debts become due . . . .” “The ‘generally not paying’ test is to be applied as

of the date of filing of the involuntary petition. . . .” Hayes v. Rewald (In re

Bishop, Baldwin, Rewald, Dillingham & Wong, Inc.),

(9th Cir.

1985) (citation omitted). “The authority of the court is triggered and guided

by the totality of the circumstances existing when the petition is filed.”

In light of the above, the snapshot of the alleged debtor’s

relationships with its creditors must be taken on the petition date. As a

12 result, the most harmonious interpretation of § 303(b), (c), and (h) is to use

the petition date to analyze every requirement under § 303, whether such

requirements relate to the qualifications of creditors under § 303(b) and (c)

or the financial affairs of the alleged debtor under § 303(h).

Nevertheless, an argument could be made that Congress included the

word “holding” in its present tense because the statute requires joining

creditors to hold a claim both on the petition date and continue to hold that

claim on the date they join the petition. The bankruptcy court appears to

have interpreted § 303(c) in this way, expressing concern that an alternative

interpretation would allow “noncreditors” to join a petition.

However, there are two problems with this interpretation. First,

while we acknowledge that the participation of parties without an interest

in the bankruptcy case may be problematic, we do not believe that

postpetition satisfaction of a party’s claim necessarily renders that party a

“noncreditor.” A “creditor” is simply defined as an “entity that has a claim

against the debtor that arose at the time of or before the order for relief

concerning the debtor.” § 101(10). 7 If an order for relief is entered, the Code

requires that courts determine the allowability of a claim “as of the date of

the filing of the petition.” § 502(b).

Even if a claim is paid during the gap period between the petition

date and the order for relief, once an order for relief is entered and unless

7 In involuntary cases where a claim existed as of the petition date, it necessarily also “arose” before entry of any order for relief. 13 an exception applies, 8 the transferee would be obligated to return the

transfer to the estate; thereafter, the transferee could assert a claim against

the estate based on the amount owed to it as of the petition date. § 502(d).

Consequently, we do not agree that parties who are paid during the gap

period automatically transform into “noncreditors,” 9 or that such parties

lose any stake in a bankruptcy case against the alleged debtor.

Second, as discussed above, the plain language of § 303(c) requires

that, except as explicitly set forth in § 303(c) itself, petitioning creditors and

joining creditors must be treated in the same manner. As stated by the

Ninth Circuit, it is a “rather obvious proposition” that alleged debtors

cannot defeat an involuntary petition by paying off petitioning creditors.

Liberty Tool, & Mfg. v. Vortex Fishing Sys., Inc. (In re Vortex Fishing Sys., Inc.)

(“Vortex Fishing”),

(9th Cir. 2002) (quoting Reed v.

Thornton,

(9th Cir. 1930)).10

8 As discussed below, Congress has made exceptions for certain transfers made during this gap period to encourage creditors to continue conducting business with the alleged debtor. See, e.g., § 549(b). 9 In addition, trade creditors such as Fence Factory, also may be “creditors” by

operation of § 502(f), as further discussed below. 10 In Vortex Fishing, the Ninth Circuit concluded that the joining creditor in that

case could withdraw its joinder even though such withdrawal ultimately defeated the involuntary petition. Vortex Fishing,

. Although paying off a petitioning creditor to defeat an involuntary petition was against public policy, the circuit observed that such policy concerns were not implicated when the withdrawal was “based on a misunderstanding or misrepresentation as to the purpose and effect of a joinder.”

(internal quotation omitted). Thus, Vortex Fishing did not involve the policy concerns related to paying off petitioning creditors. (Footnote continues.)

14 Adopting the bankruptcy court’s interpretation would create an

exception to this proposition; specifically, using the bankruptcy court’s

construction, alleged debtors would not be able to defeat an involuntary

petition by paying off petitioning creditors, but could defeat an

involuntary petition by paying off joining creditors. Such an exception

would not only run afoul of the equal treatment mandate of § 303(c), but

would also implicate the same serious policy concerns highlighted in

Vortex Fishing and Reed. To wit, from a policy standpoint, there is little

difference between an alleged debtor paying a petitioning creditor to defeat

a petition and paying a potential petitioning creditor to defeat a petition.

The bankruptcy court did not believe such policy concerns were

implicated in this case because Fence Factory filed its joinder months after

it was paid. That may very well be true. However, for purposes of general

application, holding that creditors whose claims are satisfied postpetition

may not join a petition would pave the way for serious abuse by alleged

debtors and creditors alike. For instance, alleged debtors may pick and

choose which claims to pay to defeat a petition. Alternatively, creditors

may threaten to join a petition unless the alleged debtor satisfies the debt

As noted in the facts section above, Fence Factory did move to withdraw its joinder. Wolverine opposed the motion to withdraw. However, the bankruptcy court did not rule one way or another on Fence Factory’s request to withdraw because it disqualified Fence Factory as a petitioning creditor. As stated below, on remand, the bankruptcy court should address whether Fence Factory may withdraw its joinder to the petition. 15 owed to them. Either scenario would run counter to one of the core goals of

involuntary petitions, namely, to prevent select creditors from “racing to

the courthouse to dismember the debtor.” Marciano v. Chapnick (In re

Marciano),

(9th Cir. 2013) (quoting Danning v. Bozek (In

re Bullion Rsrv. of N. Am.),

(9th Cir. 1988)). A holding

that all claims must be assessed as of the petition date, including claims

held by joining creditors, prevents this type of gamesmanship.

Additional policy concerns related to trade creditors that transact

with alleged debtors during the gap period between the petition date and

the order for relief (or dismissal) also bolster our conclusion. In an effort to

encourage trade creditors to continue working with the alleged debtor

during this gap period, Congress took great care to protect such creditors.

See § 303(f) (authorizing the continuation of the alleged debtor’s business

during the gap period).

For instance, such creditors may have any claims arising during the

gap period afforded priority if an order for relief is entered, § 502(f), or be

protected from the extensive avoidance and recovery powers of the trustee

or debtor-in-possession. § 549(b). See In re Hanson Indus., Inc.,

(Bankr. D. Minn. 1988) (“Section 502(f) was intended to protect the

creditors who deal with an involuntary debtor during the gap period, such

as lessors, trade creditors and similar parties, consistent with section

303(f)’s specific grant to the involuntary debtor to conduct its business in

ordinary fashion while its status is resolved.”). It would be odd if Congress

16 explicitly drafted multiple statutes to protect such creditors while at the

same time disenfranchising such creditors from joining an involuntary

petition simply because an alleged debtor (or other colluding party) pays

an invoice postpetition.

We recognize that the bankruptcy court engaged in a close analysis of

the statutory language and that the court’s conclusion is hardly irrational.

Nevertheless, it is unlikely that Congress would have used the present

participle of a verb to impliedly exclude certain creditors from joining a

petition – and thus prevent the initiation of an involuntary petition

altogether – instead of explicitly stating that such creditors do not qualify

as joining petitioners under § 303(c).

Ultimately, we must interpret § 303(c) to give effect to the purpose of

involuntary petitions, which is to provide an egalitarian process whereby

legitimate creditors may place an alleged debtor into a system, overseen by

a court, through which creditors’ claims can be contemporaneously

evaluated and the debtor’s assets fairly distributed. A trade creditor joining

a petition between the payment of one invoice and the maturation of

another does not offend either this purpose or any of the policy

considerations above.

In addition, where there is a revolving debt owed to a trade creditor,

the answer to whether an invoice is or is not due changes depending on

17 when the court conducts its analysis.11 Thus, during the volatile

involuntary gap period where circumstances may change on a daily basis,

it makes little sense to waste judicial resources investigating the specific

due dates of invoices.

Instead, to the extent the word “holding” is meant to limit joinder to

creditors who are presently impacted by the alleged debtor’s financial

condition, Congress likely used the word to simply require that courts

assess whether joining creditors are proper parties in interest, i.e., whether

such creditors own claims against the debtor or if such claims have been

transferred to third parties. Whether a joining creditor is a party in interest

has significantly more bearing on the legitimacy of the involuntary petition

than whether a joining creditor holds a matured invoice.

Consequently, the petition date is the relevant date to assess whether

a joining creditor holds a claim. Nevertheless, as discussed below, even if

we construed the word “holding” as the bankruptcy court does, Fence

Factory also held a claim as of the joinder date.

2. Even if we use the bankruptcy court’s construction of the word “holding,” Fence Factory held a claim on the date it joined the petition. Although the bankruptcy court did not give much weight to the

nature of the debt owed to Fence Factory, in this case, the ongoing and

unmatured nature of the debt is crucial. In its order dismissing the

11 We further discuss ongoing and unmatured debts in section A.2. below. 18 involuntary petition, the bankruptcy court evaluated only the invoice that

was due on the petition date. However, the record indicates that Mr. King

owed a continuing obligation to Fence Factory.

Even if we construe the word “holding” as the bankruptcy court did,

i.e., as requiring joining creditors to hold a claim as of the joinder date,

creditors owed an unmatured debt would qualify as joining creditors

under § 303(c). This analysis requires a closer look not at the word

“holding,” but at the word “claim.”

We need not guess what Congress meant by using the word “claim”

because the Code defines it. Pursuant to § 101(5), a “claim” is a “right to

payment, whether or not such right is reduced to judgment, liquidated,

unliquidated, fixed, contingent, matured, unmatured, disputed,

undisputed, legal, equitable, secured, or unsecured.” (Emphasis added).

“Congress intended by [the language in § 101(5)] to adopt the

broadest available definition of ‘claim.’” Johnson v. Home State Bank,

(1991) (citations omitted). In fact, the legislative history

regarding the definition of the word “claim” explicitly says as much. H.R.

REP. No. 95-595, at 309 (1977) (“By this broadest possible definition . . . the

bill contemplates that all legal obligations of the debtor, no matter how

remote or contingent, will be able to be dealt with in the bankruptcy case. It

permits the broadest possible relief in the bankruptcy court.”).

Thus, in interpreting § 303(c), we start by applying this “broadest

available definition” of the word “claim.” From there, we assess the explicit

19 limitations set forth by Congress that might serve to narrow this “broadest

available definition” for purposes of § 303(c). First, although § 101(5) is

clear that the word “claim” encompasses both secured and contingent

claims, Congress explicitly limited the ability to join an involuntary

petition to creditors holding unsecured and noncontingent claims. In

addition, to the extent the explicit limitations of § 303(b)(1) also apply to

creditors who join a petition under § 303(c), 12 the broad definition of

“claim” would further be narrowed to exclude certain disputed claims.

Absent entirely from § 303, however, is any mention of unmatured

claims. Although it can be difficult to distinguish between contingent and

unmatured claims, and the Code does not define either term, several cases

have drawn a distinction between contingent and unmatured claims.

In the Ninth Circuit, “[a] claim is contingent when the debtor will be

called upon to pay it only upon the occurrence or happening of an extrinsic

event which will trigger the liability of the debtor to the alleged creditor.”

Picerne Constr. Corp. v. Castellino Villas, A.K.F. LLC (In re Castellino Villas,

12 Section 303(c) does not explicitly state that only creditors with claims that are not the subject of a bona fide dispute may join a petition. Nevertheless, some courts have held that creditors who join a petition under § 303(c) also must qualify as petitioning creditors under § 303(b). See In re Kujawa,

(Bankr. E.D. Mo. 1990); In re Braten,

(Bankr. S.D.N.Y. 1988); but see In re Blixseth,

, *25-26 (Bankr. D. Nev. July 10, 2013) (noting that Braten and Kujawa predate the 2005 amendments to the Code and that Congress’s lack of amendments to § 303(c) despite the existence of these authorities signals Congress’s disagreement with Braten and Kujawa). We need not take a stance on this issue because Mr. King did not dispute Fence Factory’s claim as to liability or amount. 20 A.K.F. LLC),

(9th Cir. 2016) (cleaned up); see also Chi.

Title Ins. Co. v. Seko Inv., Inc. (In re Seko Inv., Inc.),

(9th

Cir. 1998) (“Claims are contingent as to liability when the debtor’s duty to

pay arises only upon the occurrence of a future event that was

contemplated by the parties at the time of the contract’s execution.”). “The

classic example is a wager between two parties; until the wagered-on event

comes to pass, both have contingent liabilities in the amount of the bet.”

Seko Inv. Inc.,

. Rental obligations that arose from a

prepetition agreement, for example, are not contingent. In re Miller,

(Bankr. E.D. Tenn. 2013); see also 2 COLLIER ON BANKRUPTCY,

¶ 303.10[1] (Alan N. Resnick and Henry J. Sommer, eds., 16th ed. 2024)

(future rental payments are not contingent).

Unmatured claims, on the other hand, simply refer to obligations

where “the right to payment exists from the outset, but the time of

payment is deferred.” In re Lambert,

(Bankr. D. Utah 1984).

“The maturation occurs with the mere passage of time as the date of

payment draws nearer. But no outside, future occurrence in the

contemplation of the parties is necessary to trigger the underlying

obligation to pay.” Id.; see also CLAIM, BLACK’S LAW DICTIONARY (12th ed.

2024) (defining a “matured claim” as a “claim based on a debt that is due

for payment”).

21 In viewing debts of this type through this lens, the claim held by

Fence Factory is not contingent. 13 Where the alleged debtor and creditor

have an existing arrangement with set terms as of the petition date, and the

obligation to pay a monthly fee is not triggered by the occurrence of any

event other than the passing of time, the claim is not “contingent” under

the definitions above. Rather, any monthly obligations that are not yet due

are simply unmatured.

Such ongoing obligations also do not generate a separate claim based

on each monthly invoice; instead, the monthly invoices are part and parcel

of one prepetition claim. Thus, the “claim” held by a trade creditor like

Fence Factory refers to the overall prepetition arrangement between the

creditor and alleged debtor, with future monthly invoices constituting

unmatured portions of a single claim.

Here, the bankruptcy court referred to Fence Factory’s “claim” as the

August 2022 invoice. However, that invoice represented only one

installment of the matured portion of the continuing debt owed to Fence

Factory. Thus, any monthly obligations incurred but not yet due at the time

Fence Factory filed its joinder would simply be unmatured portions of the

single prepetition claim held by Fence Factory. And, given Mr. King’s

continuous use of the fencing, some debt was always incurred but not yet

13 Although the parties stipulated, and the bankruptcy court held, that Fence Factory’s “claim” was noncontingent, both the parties and the bankruptcy court were referring only to the August 2022 invoice. The stipulation and the bankruptcy court’s order are silent with respect to the nature of any postpetition rental obligations. 22 matured. Because § 303(c) does not explicitly restrict creditors holding

unmatured claims from joining a petition, a creditor owed a continuing

obligation at the time it joins a petition presently holds a claim, even if a

particular invoice is not due at the time the creditor files its joinder.

For all the reasons stated above, we reverse the bankruptcy court’s

holding that Fence Factory did not qualify as a joining creditor for

purposes of § 303(c).

As previously noted, Fence Factory filed a motion to withdraw its

joinder, which Wolverine opposed. The bankruptcy court did not reach the

issue of withdrawal because it disqualified Fence Factory as a petitioning

creditor. On remand, the bankruptcy court should consider whether Fence

Factory may withdraw its joinder.

B. Wolverine has not articulated how it was prejudiced by the bankruptcy court’s procedures. At various points in its briefing, Wolverine suggests that the

bankruptcy court should have required that Mr. King file an answer before

holding an evidentiary hearing on certain issues.

Where an appellant contends that the bankruptcy court’s procedures

were deficient, or that the court erred by failing to provide adequate notice

and opportunity, the appellant must show prejudice from the procedural

deficiencies. Rosson v. Fitzgerald (In re Rosson),

(9th Cir.

2008), partially overruled on other grounds by Law v. Siegel,

(2014),

as recognized by Nichols v. Marana Stockyard & Livestock Mkt., Inc. (In re

23 Nichols),

, 961 (9th Cir. 2021); see also City Equities Anaheim, Ltd.

v. Lincoln Plaza Dev. Co. (In re City Equities Anaheim, Ltd.),

(9th Cir. 1994) (rejecting due process claim for lack of prejudice where

debtor could not show that any different or additional arguments would

have been presented if procedural deficiency had not occurred).

Wolverine has not articulated any prejudice flowing from the

bankruptcy court’s procedures in this case. As highlighted above, before

the bankruptcy court held an evidentiary hearing, the parties were able to

conduct discovery, file pretrial evidentiary motions, complete a

comprehensive pretrial stipulation and file motions in limine. In addition,

the bankruptcy court held the evidentiary hearing over a year after

Wolverine initiated the involuntary case. On these facts, and because

Wolverine has not presented any facts demonstrating prejudice, there is no

need to disturb the remainder of the bankruptcy court’s order based on any

procedural defect.

CONCLUSION

Based on the foregoing, we REVERSE the portion of the bankruptcy

court’s order dismissing the petition that is inconsistent with this opinion

and REMAND for the bankruptcy court to assess whether Fence Factory

may withdraw its joinder.

24