FRANK ALLEY, Bankruptcy Judge
This matter came on for hearing on March 11, 1999 on the motions of the United States and the State of Oregon for an order dismissing the above-captioned case.
The Court heard and considered the evidence, testimony and argument of the parties, announced its findings of fact and conclusions of law from the bench, and directed that the case be dismissed. On further consideration the Court has determined that a written memorandum setting out its findings of fact and conclusions of law in more detail would be appropriate. The Court therefore issues this memorandum opinion in lieu of its findings and conclusions announced from the bench.
I. FACTS
On October 11, 1996 Amos A. Valdez and Peggy Valdez filed a joint petition for relief under Chapter 13 of the Bankruptcy Code in this Court, under Case No. 696-65158-fra13. The only creditors in the case were the United States, by and through the Internal Revenue Service (hereinafter "IRS"), and the State of Oregon, by and through the Oregon Department of Revenue (hereinafter "ODR"). The IRS and ODR each filed proofs of claim, each of which was objected to by the Debtors. Mr. Michael Redden, the petitioning creditor in this case, was employed with the Court's permission to act as Debtors' counsel with respect to the tax dispute. As it happens, Mr. Redden became the principal counsel for Debtors in all the proceedings that followed in the first case.
The ODR, joined by the IRS, filed a motion seeking dismissal of the first case under 11 U.S.C. § 1307(c). The specific grounds advanced were that the Debtors had unlawfully concealed and disposed of assets of the estate. In addition, each of the taxing agencies filed motions for partial summary judgment seeking determination of certain aspects of the tax dispute between the agencies and the Debtors.
This Court determined that the case should be dismissed on the grounds raised by the ODR and IRS. In addition, the Court found that the Debtors' principal motivation in filing their bankruptcy was not reorganization of their debt, but use of the Bankruptcy Court as a form in which to litigate their disputes with the taxing agencies. The Court further held that, since the Bankruptcy Court was established to deal with insolvency and the reorganization of debt, and not to serve as an alternative form for tax litigation, good cause existed for the dismissal.
The Debtors did not appeal the order of dismissal. On March 13, 1998, thirteen days after the first case was dismissed, Mr. Redden filed an involuntary petition under 11 U.S.C. § 303.
The Debtors filed answers to the petition which admitted the material allegations of the petition. It was revealed at the hearing in this case that the answers were prepared by the petitioning creditor. Later on, the petitioning creditor gave the Debtors further assistance by preparing their bankruptcy schedules. The draft answer was accompanied by a letter advising the Debtors that the petitioning creditor was not acting as "their" attorney, and advising them to seek independent legal counsel.
The petitioning creditor's attorney of record is an associate in his law firm. For the purposes of this opinion I draw no distinction between the petitioning creditor and his associate.
The Debtors did not seek any independent advice, but simply signed the answers and caused them to be filed with the Court.
In due course an order for relief was entered. Proofs of claim were filed by the IRS and ODR, and by the petitioning creditor. No other claims have been filed, and no other creditors are included in the schedules.
The Debtors and the petitioning creditor filed objections to the taxing authorities claims. Thereafter both the ODR and IRS moved to dismiss the case. The Trustee has objected to dismissal, on the grounds that he has made certain expenditures which he should be permitted to refund from the liquidation of estate assets.
II. CAUSE FOR DISMISSAL
A case under Chapter 7 of the Bankruptcy Code may be dismissed for cause. 11 U.S.C. § 707. Cause exists because the involuntary petition, and the Debtors' acquiescence, were intended to establish relief under the Bankruptcy Code for improper purposes, and by improper means. The bankruptcy was commenced and continued for two reasons: to assist in the collection of a claim of a single creditor, and to circumvent the Court's order in the prior case. Neither purpose provides an appropriate basis for relief.
A. Petitioning Creditor is Not Entitled to Relief
To begin with a procedural observation: it might be said that the entry of the order for relief under Code § 303(h) precludes consideration of whether the petition was well founded. However, non-petitioning creditors and other interested parties are not ordinarily given notice of commencement of involuntary cases. There is nothing in the record here that reflects that the taxing authorities had notice of the commencement of the case. Moreover, Code § 303(d) suggests that creditors have no standing to answer or controvert a petition under Code § 303. 15 Collier on Bankruptcy, ¶ 303.10[2][b]. A motion to dismiss a case under Code § 707 is an appropriate means for a creditor to challenge a case commenced by way of an involuntary petition.
An order for relief may be entered in an involuntary case only if the debtor is generally not paying his or her debts as they become due unless the debts are a subject of a bona fide dispute, or for reasons not pertinent here. The evidence is clear that the Debtors were paying their undisputed obligations as they became due, with the exception of the petitioning creditors. It is undeniable that the debts owed to the IRS and ODR were disputed, in light of their objections filed in both bankruptcies. The petitioning creditor's evidence at the hearing eloquently demonstrated that the dispute was, whatever its ultimate merits, bona fide.
The petitioning creditor's acknowledged purpose in filing the petition was the pursuit of his own claim. One-creditor cases are disfavored, and an involuntary petition for the purpose of collecting a single debt will not be approved unless the creditor has been the victim of a fraud, trick or artifice on the part of the debtor or is absolutely bereft of any adequate remedy under nonbankruptcy law. 7H Land Cattle Company, 6 B.R. 29 (Bankr. D. Nev. 1980). The petitioning creditor here claims that he has no remedy available because a federal tax lien against the Debtors has encumbered all of the Debtors' assets, rendering them unable to pay the petitioning creditor. This does not entitle the petitioning creditor to relief under Code § 303 for two reasons. First, the rule articulated in 7H Land Cattle Co. contemplates legal, as opposed to factual, impossibility of collection. The petitioning creditor here has ample legal remedies. They may be impaired by the fact that the Debtors' assets are subject to superior liens: however, that is frequently the case, and a single creditor is not entitled to involuntary relief simply because other creditors are better situated. Second, the commencement of the bankruptcy case does not change the petitioning creditor's position, since the federal tax lien is still in place. The petitioning creditor argues that only the Bankruptcy Court can reduce or remove the lien by determining that the claimed tax is not owed. However, as noted in the prior case, there are remedies in other courts, and this Court is not an appropriate forum purely because the Debtors failed to avail themselves of others in a timely manner. The single creditor rule in involuntary cases arises from the notion that failure to pay a particular creditor does not lead to the conclusion that the debtor is generally not paying his debts as they become due. The facts of this case do not satisfy this test.
B. The Petition and Answers Thereto Were Collusive
The petitioning creditor commenced the case only days after the previous case was dismissed. Acting through his associate, he prepared responses for the Debtors' signature which, as noted above, incorrectly admitted to the material allegations of the petition. Viewed together, the involuntary petition and the Debtors' answers were collusive. In order to reach this conclusion it is not necessary for the Court to find that the parties explicitly discussed their plans, or agreed in advance on this device for reinstituting bankruptcy proceedings. The petitioning creditor, who had served as the Debtors' lawyer in the previous case, filed a petition to put the Debtors back into bankruptcy, and gave the Debtors a form of answer which clearly advanced the process. The lengthy cover letters insisting that the petitioning creditor is pursuing his own interest, and that the Debtors should seek independent counsel, make no difference. After all, what real incentive did the Debtors have to seek independent advice when the action against them sought the very relief they sought in the recently dismissed case?
The Debtors had previously been dismissed from this Court, for the reasons described above. Their was no material change in their circumstances when the involuntary petition was filed. Further bankruptcy proceedings for these Debtors are every bit as inappropriate now as it was when the first case was dismissed. The involuntary petition and subsequent acquiescence of the Debtors were intended by the Debtors, if not the Debtors and petitioning creditor, to circumvent the Court's previous order. This constitutes grounds for dismissal under § 707.
C. The Trustee's Objection
The Trustee has objected to a dismissal, for the reason that he has expended considerable efforts to date in liquidating the estate, including the employment of counsel for the purpose of recovering certain property held in trust by the Debtors.
The property held by the trust is described in the Debtors' schedules as the Debtors' property. Apparently the adversary proceeding was initiated to clear title in order to allow the Trustee to liquidate the property.
The Trustee argues that the taxing authorities should be estopped from seeking dismissal of the case at this late stage. However, as the IRS points out, their was no reason to seek dismissal until the Debtors and petitioning creditor lodged their objections to the government's claims. The Court accepts this reasoning, and finds that the motions to dismiss were not untimely.
In addition, it must be pointed out that the Trustee was on notice of the unusual circumstances of this case at least as of the time of the first meeting of creditors. Having been aware of circumstances justifying dismissal of the case, the Trustee cannot reasonably object to motions for dismissal by parties prejudiced by the proceeding.
At the conclusion of the hearing the Court indicated that the Trustee should have an opportunity to seek reimbursement from secured parties benefitting from his activities. Accordingly, the order dismissing the case should provide such an opportunity.
III. CONCLUSION
The petitioning creditor cannot maintain an involuntary petition for the purpose of collecting his particular debt, where other undisputed debts are generally being paid. The Debtors are not entitled to continuance of this case, in light of the dismissal of their previous case. Given the unusual circumstances of this case, ample grounds exist for its dismissal.
An order will be entered terminating the automatic stay, and provisionally dismissing the case, subject to proceedings by the Trustee respecting any claim he may have for expenses incurred in the preservation of collateral for the benefit of secured creditors. Any such claim should be made within the next two weeks.
The foregoing constitutes the Court's findings of fact and conclusions of law, which will not be separately stated.