Daniel William Cook and Yolanda T. Cook

UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF NEW MEXICO
In re:
Daniel William Cook
and Yolanda T. Cook,
Debtors. 	No. 11 - 04-17704 - SA
MEMORANDUM OPINION ON JOINT MOTION
TO STRIKE DEBTORS’ OBJECTIONS TO CLAIMS
This matter is before the Court on the Joint Motion to
Strike Debtors’ Objections to Claims (doc 407) filed by Wells
Fargo Bank, N.A., Scott Garrett and the Garrett Family Trust, and
Spica Properties, Inc. (“Movants”), the Debtors’ Response (doc
411) and briefs in support of the various positions (docs 429,
459 and 462). 	Debtors are represented by Daniel J. Behles.
Wells Fargo Bank is represented by Sutin, Thayer & Browne, P.C.
(Jay D. Hertz). 	Scott Garrett and the Garrett Family Trust are
represented by Hunt & Davis, P.C. (Catherine F. Davis). 	Spica
Properties, Inc. is represented by Modrall Sperling Roehl Harris
& Sisk, P.A. (William R. Keleher).
A brief history of the case will put this dispute in
context. 	Debtors filed a voluntary chapter 11 petition on
October 21, 2004. 	On July 19, 2006, the Court granted Wells
Fargo Bank’s Motion to Appoint a Chapter 11 Trustee. 	Linda S.
Bloom was appointed and continues to act as Chapter 11 Trustee.
On October 25, 2006 Debtors filed a combined claims objection
against the claims of Movants (doc 405). 	Debtors’ objection to
the Wells Fargo claim is not the amount of the claim, but rather
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that it should be treated as unsecured rather than priority.
Debtors’ objection to the Garrett claims are that the Garretts
are creditors of Hydroscope, Inc. (a corporation related to and
partly owned by Debtors and now their bankruptcy estate), not of
the Debtors individually. 	Debtors’ objection to the Spica claim
is that its claim was extinguished with the foreclosure of the
Debtors’ personal residence. 	The record at this point does not
conclusively establish whether the estate is solvent or
insolvent; Debtors claim that there is excess equity, Movants
claim that the estate is hopelessly insolvent.
Movants’ Motion to Strike is based on the argument that,
once a Chapter 11 Trustee was appointed, Debtors lost all
standing to object to their claims. 	Movants cite In re Weeks,
Thomas & Lysaught, Chartered, 97 B.R. 46, 47 (D. Kan. 1988) in
support of their position.
Debtors’ Response cites Code Section 1109(b), which states:
“A party in interest, including the debtor, the trustee, a
creditors' committee, an equity security holders' committee, a
creditor, an equity security holder, or any indenture trustee,
may raise and may appear and be heard on any issue in a case
under this chapter.”
The Court has reviewed the papers submitted and conducted
its own research, and finds that the Motion to Strike cannot be
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granted at this time. 	Further evidence will be required on the
solvency of the estate.
First, the Court acknowledges that in Weeks, the Court
stated as a general rule that a debtor not-in-possession had no
standing to object to a proof of claim. 	97 B.R. at 47. 	However,
that Court did not address section 1109 or the solvency of the
estate, and this Court disagrees with the reasoning, although the
correct result may have been obtained. 	Furthermore, the Weeks
court cited Silverman v. Leucadia, Inc. (In re Silverman), 37
B.R. 200 (S.D. N.Y. 1982) as support for its ruling, but the rule
in Silverman is that a debtor lacks standing to object to a proof
of claim absent a showing that the disallowance of the claim
would produce a surplus in the estate.
On the other hand, Section 1109 is not as broad-reaching as
Debtor suggests. 	Although Section 1109 clearly states that a
Debtor is a party in interest, that section is subject to Article
III limitations. 	See Sentinel Trust Co. v. Newcare Health Corp.
(In re Newcare Health Corp.), 244 B.R. 167, 171 (1 st Cir. B.A.P.
2000)(“[A] party claiming to be a ‘party in interest’ must still
satisfy the general requirements of the standing doctrine.”)
(Citation omitted.); Nintendo Co., Ltd. v. Patten (In re Alpex
Computer Corp.), 71 F.3d 353, 356 (10 th Cir. 1995)
(Notwithstanding an expansive view of section 1109(b), cases
limit the concept to those with a particular and direct stake in
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the subject matter of the action.); Cult Awareness Network, Inc.
V. Martino (In re Cult Awareness Network, Inc.), 151 F.3d 605,
607 (7 th Cir. 1998)(To have standing, a person must have a
pecuniary interest in the outcome of the proceeding.) 	See
generally Simon v. Eastern Kentucky Welfare Rights Organization,
426 U.S. 26, 39 (1976)(“The necessity that the plaintiff who
seeks to invoke judicial power stand to profit in some personal
interest remains an Art. III requirement.”)
Therefore, the Court finds that, in order to have standing
to object to Movants’ proofs of claim, the Debtors need to
establish that if they were successful there would be a surplus
in the estate. 	The Court currently has a continued preliminary
hearing set on this matter for January 18, 2007 at 1:30 p.m. 	The
Court will conduct a pretrial conference at that time on the
standing issue. 	The Joint Motion to Strike will be taken under
advisement pending a trial on the potential solvency of the
estate.
Honorable James S. Starzynski
United States Bankruptcy Judge
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copies to:
Daniel J Behles
226-A Cynthia Loop NW
Albuquerque, NM 87114-1100
Linda S. Bloom
Trustee
PO Box 218
Albuquerque, NM 87103-0218
Catherine F Davis
PO Box 30088
Albuquerque, NM 87190-0088
Jay D Hertz
PO Box 1945
Albuquerque, NM 87103-1945
William R Keleher
PO Box 2168
Albuquerque, NM 87103-2168
Leonard K Martinez-Metzgar
PO Box 608
Albuquerque, NM 87103-0608
Julie J Vargas
PO Box 30088
Albuquerque, NM 87190-0088
Michelle Ostrye
PO Box 1945
Albuquerque, NM 87103-1945
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