FOR THE NORTHERN DISTRICT OF CALIFORNIA
WILLIAM C. HAAS CONSTRUCTION CO.,
INC. No. 1-87-01681
Memorandum of Decision
The debtor in this Chapter 7 proceeding is a corporation with one shareholder. It has no assets. It has
not conducted business since 1975. There are no avoidable transfers. It has no priority or secured debts.
Its only unsecured debts are those arising out of a lawsuit which was pending when the debtor filed
itspetition; all are scheduled as disputed, in an unknown amount.
The moving party, Santa Rosa Highlands Homeowners Association, is the plaintiff in the lawsuit. It
seeks dismissal of this proceeding on grounds that it is pointless, and intended to benefit only the debtor's
sole shareholder who is not himself in bankruptcy. The Court agrees, and grants the motion to dismiss.
Pursuant to section 727(a)(1) of the Bankruptcy Code the debtor in this case, a corporation, cannot
receive a discharge. Since there are no assets or avoidable transfers, there is no estate to administer. A
Chapter 7 proceeding for this debtor is therefore completely meaningless. The only possible effect of the
filing is the chance that, due to an unusual set of circumstances surrounding the litigation pending in state
court, the debtor's sole shareholder might escape liability for a defectively constructed condominium
project. Only the debtor opposes dismissal; neither the trustee nor any "creditor" expresses an objection.
Section 707(a) of the Code provides that after notice and a hearing the Court may dismiss a Chapter
7 case for cause. The Code does not define "cause," and the three examples listed in that section are examples only, and not exclusive.
What constitutes cause is left to the court's soundly exercised discretion. In re Blanchette
(Bkrtcy.D.R.I.1985) 54 B.R. 890, 891-92; In re Charles George Land Reclamation Trust
(Bkrtcy.D.Mass.1983) 30 B.R. 918. Cause for dismissal may exist where an abuse of the purpose or spirit
of the bankruptcy laws is found, or where the debtor
does not honestly require bankruptcy protection.
See In re Bingham
(Bkrtcy.M.D.Pa.1987) 68 B.R. 933, 935, and cases cited therein.
There is clearly no legitimate purpose for this proceeding. There is no possible benefit to either the
debtor or its creditors. The only possible benefit is to the debtor's sole shareholder, and this benefit is not
within the purpose of the bankruptcy laws. Therefore, cause exists to dismiss this proceeding.
This Chapter 7 proceeding will accordingly be dismissed, with prejudice. The Court declines to award
A separate order will be entered pursuant to Bankruptcy Rule 9021.
Dated: January 10, 1987 ________________________