Collier Bankruptcy Case Update October-1-01
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A Weekly Update of Bankruptcy and Debtor/Creditor Matters
Collier Bankruptcy Case Update
The following case summaries appear in the Collier Bankruptcy Case Update, which is published by Matthew Bender & Company Inc., one of the LEXIS Publishing Companies.
October 1, 2001
CASES IN THIS ISSUE
(scroll down to read the full
summary)
- 1st Cir.
§ 523(a)(2)(A) Debt resulting from a state court judgment was not excepted from discharge.
McCrory v. Spigel (In re Spigel) (1st Cir.)28 U.S.C. § 1412 Motion to transfer venue was denied.
In re Indian Motocycle Co. (Bankr. D. Mass.)
2d Cir.
§ 365(d)(3) Lessor of terminated lease was entitled to lease rent, not fair market value.
In re P.J. Clarke’s Rest. Corp. (Bankr. S.D.N.Y.)§ 548(a)(1)(B) Conveyance was not fraudulent.
Kittay v. Peter D. Leibowits Co. (In re Duke & Benedict, Inc.) (Bankr. S.D.N.Y.)§ 1103(c)(5) Creditors’ committee lacked standing to sue.
Commodore Int’l Ltd. v. Gould (In re Commodore Int’l Ltd.) (2d Cir.)
3d Cir.
§ 330(a)(1) Award of fees for counsel of the creditors’ committee was affirmed.
In re S.W.G. Realty Assocs. (E.D. Pa.)§ 362(h) Debtor was granted a preliminary injunction.
Diamond Indus. Corp. v. Alakrah (In re Diamond Indus. Corp.) (Bankr. D.V.I.)28 U.S.C. § 1452(b) Only trustee had standing to remove lawsuit.
Reardon v. Hahn Yelena Corp. (In re Reardon) (E.D. Pa.)
4th Cir.
28 U.S.C. § 157(a) Motion was referred to bankruptcy court.
Value Am., Inc. v. Kamena (W.D. Va.)
6th Cir.
§ 329(a) Fees were disgorged.
Vergos v. Mendes & Gonzales, PLLC (In re McCrary & Dunlap Constr. Co.) (M.D. Tenn.)§ 547(b) Avoidance of transfer was reversed on appeal.
Poss v. Morris (In re Morris) (6th Cir.)§ 547(c)(1) Forty-five days between purchase and perfection was not a contemporaneous exchange.
Baumgart v. Farmers Nat’l Bank of Canfield (In re Lopez) (Bankr. N.D. Ohio)
7th Cir.
§ 101(5) Former wife possessed interest in pension, not a claim.
Cullen v. Cullen (N.D. Ill.)
8th Cir.
Rule 7037 Motion for sanctions was denied.
Brown v. Spears (In re Spears) (Bankr. W.D. Mo.)
9th Cir.
§ 523(a)(6) Debt for conversion was dischargeable.
Peklar v. Ikerd (In re Peklar) (9th Cir.)§ 548(a)(1)(B) Transfer of real property was presumed fraudulent.
Salven v. Munday (In re Kemmer) (Bankr. E.D. Cal.)
10th Cir.
§ 523(a)(4) Oral partnership agreement did not establish fiduciary relationship.
Gould v. Schmanke (In re Schmanke) (Bankr. D. Colo.)Rule 9019(a) Global settlement was approved.
In re Armstrong (Bankr. D. Utah)
11th Cir.
§ 362(h) Willful violation of stay resulted in punitive damages award.
Davis v. Gatorwheel, Inc. (In re Davis) (Bankr. N.D. Fla.)§ 522(d)(1) Debtor was not entitled to homestead exemption.
In re Klaiber (Bankr. M.D. Fla.)§ 523(a)(2)(A) Creditor failed to establish nondischargeability of debt.
Overly v. Guthrie (In re Guthrie) (Bankr. M.D. Ala.)§ 523(a)(6) Portion of debt was nondischargeable.
Synod of S. Atl. Presbyterian Church v. Magpusao (In re Magpusao) (Bankr. M.D. Fla.)
Collier Bankruptcy Case Summaries
1st Cir.
Debt resulting from a state court judgment was not excepted from discharge. 1st Cir. The creditors appealed from a judgment of the B.A.P. reversing the bankruptcy court and holding that the obligation owed to them by the debtor as a result of a state (Rhode Island) court judgment was not excepted from discharge pursuant to section 523(a)(2)(A). The debtor, a car sales agent, had been granted authority by the creditors to use their license to buy and sell cars, provided he did so either at auctions or at the creditors’ lot. After the debtor used the creditors’ license to sell a stolen car, the creditors were ordered by the vehicle dealers commission to reimburse the purchaser’s insurer the price it had paid the debtor for the car. The creditors subsequently sued the debtor in state court and obtained a judgment for equitable indemnification. The bankruptcy court agreed with the creditors that the collateral estoppel effect of the judgment established that the debtor committed fraud in a transaction related to the debt and declared the debt nondischargeable. The B.A.P. reversed, concluding that the state court did not find that the debtor engaged in fraud, thereby precluding reliance on collateral estoppel. The Court of Appeals for the First Circuit affirmed the B.A.P. on other grounds, holding that because the state court did not find any wrongdoing by the debtor directed at the creditors in the creation of his indebtedness to them, the judgment did not establish that the claim was one which arose as a direct result of the debtor’s misrepresentations or malice. Although the debtor committed fraud upon the purchaser of the vehicle, the judgment did not establish a sufficient link between the debtor’s fraudulent conduct and the debt he owed the creditors to allow an exception to discharge under section 523(a)(2)(A). McCrory v. Spigel (In re Spigel), 2001 U.S. App. LEXIS 18189, 260 F.3d 27 (1st Cir. August 13, 2001) (Lipez, C.J.).
Collier on Bankruptcy, 15th Ed. Revised 4:523.08[1]
Motion to transfer venue was denied. Bankr. D. Mass. The receiver of an affiliate of the chapter 7 debtors filed a motion to transfer the venue of the bankruptcy cases to the district court that presided over the receivership, pursuant to 28 U.S.C. section 1412. The receiver argued that it held funds of the estate in escrow, the evidence pertaining to the remaining dispute over estate property was in the receivership district, compulsory process was equally available in either venue and that transferring venue would avoid the risk of inconsistent determinations. The United States, the remaining unsatisfied creditor, opposed the motion. The bankruptcy court denied the receiver’s motion, holding that transfer of venue was not warranted. The receiver had been ordered to return the remaining assets of the estate, and evidence necessary to resolve the disputes was easily obtained in either venue. Although the receiver had experienced counsel in both venues, the court pointed out that the trustee would not be able to serve in the receivership venue.In re Indian Motocycle Co., 2001 Bankr. LEXIS 978, — B.R. — (Bankr. D. Mass. August 3, 2001) (Boroff, B.J.).
Collier on Bankruptcy, 15th Ed. Revised 1:4.04
2nd Cir.
Lessor of terminated lease was entitled to lease rent, not fair market value. Bankr. S.D.N.Y. A well-known New York City tavern fell on hard times and was unable to pay its rent, prompting the landlord to terminate the lease and sue in state (New York) court for possession. Before the judgment was entered and the landlord could obtain a warrant for the premises, the debtor filed a chapter 11 petition. When, despite the existence of the automatic stay, judgment was entered, the debtor sought and obtained permission from the bankruptcy court to appeal the judgment. The landlord sought payment of rent, and the parties disputed whether the lessor was entitled to the rent provided for in the lease or whether the landlord could obtain rent reflecting the fair market value of the leasehold. The landlord argued that section 365(d)(3) was not applicable since the lease had been terminated prepetition and that, since the lease had been terminated, it was entitled to the fair market rental value pursuant to state law. The bankruptcy court held that the landlord was entitled to rent at the rate provided in the lease and not the fair market rental value of the premises. Since there was a possibility that the state court judgment would be reversed on appeal and the lease reinstated, the lease agreement was 'unexpired' for purposes of section 365. The statute applied and, by its terms, the landlord was entitled only to the rent provided for in the lease. The core bankruptcy principles, including the necessity for reorganization and the rights of other creditors overrode, the landlord’s state law arguments. In re P.J. Clarke’s Rest. Corp., 2001 Bankr. LEXIS 961, 265 B.R. 392 (Bankr. S.D.N.Y. July 31, 2001) (Gropper, B.J.).
Collier on Bankruptcy, 15th Ed. Revised 3:365.05
Conveyance was not fraudulent. Bankr. S.D.N.Y. The chapter 11 trustee brought a fraudulent conveyance action against purchasers of the debtor’s real estate to recover the full value of the land. The debtor and the purchaser had entered into a prepetition joint venture whereby the purchaser agreed to obtain the architectural design and site-plan approvals for the construction of a golf course. The debtor, in turn, agreed to convey clear title to a limited liability company in exchange for a 25 percent interest in the venture. Although the purchasers performed under the agreement, the debtor did not have sufficient funds to convey clear title so the property was sold to the purchasers outright. The trustee contended that the price paid for the undeveloped land was insufficient. The purchasers moved for summary judgment, contending that the trustee sought to appropriate for the debtor the value of improvements which they made on the land at the time of the conveyance. The bankruptcy court granted the purchasers’ motion for summary judgment, holding that because the debtor received reasonably equivalent value for the property, the conveyance was not avoidable. The trustee incorrectly assessed the full value of the property transferred, rather than the debtor’s interest in the property (citing Collier on Bankruptcy, 15th Ed. Revised).Kittay v. Peter D. Leibowits Co. (In re Duke & Benedict, Inc.), 2001 Bankr. LEXIS 950, 265 B.R. 524 (Bankr. S.D.N.Y. February 6, 2001) (Hardin, Jr., B.J.).
Collier on Bankruptcy, 15th Ed. Revised 5:548.05
Creditors’ committee lacked standing to sue. 2d Cir. The unsecured creditors’ committee appealed a judgment of the district court that dismissed its suit for fraud, waste and mismanagement against various directors and officers of the chapter 11 debtors. The bankruptcy court held that an identical suit filed by foreign liquidators in a jointly administered case divested the committee of standing to pursue the claims, and the district court affirmed. The officers and directors contended on appeal that the committee had an implied right to initiate the adversary proceeding only in the event the debtors in possession unjustifiably failed to bring suit or abused their discretion in bringing suit. The Court of Appeals affirmed the dismissal, holding that the creditors’ committee had not gained standing and that the suit was neither necessary nor beneficial in light of the foreign liquidators’ having filed an identical suit. The court held that the committee could have sued on behalf of the debtors, with the approval and supervision of the bankruptcy court, not only if the debtors unreasonably failed to bring suit on their claims, but also if the debtors consented. In the latter situation, suit by the committee would have had to have been necessary and beneficial to the resolution of the bankruptcy proceedings, and neither the bankruptcy court nor the district court had considered that issue (citing Collier on Bankruptcy, 15th Ed. Revised).Commodore Int’l Ltd. v. Gould (In re Commodore Int’l Ltd.), 2001 U.S. App. LEXIS 17880, — F.3d — (2d Cir. August 9, 2001) (Walker, Jr., C.J.).
Collier on Bankruptcy, 15th Ed. Revised 7:1103.05[6]
3d Cir.
Award of fees for counsel of the creditors’ committee was affirmed. E.D. Pa. The chapter 11 debtor appealed the bankruptcy court order approving the application of the creditors’ committee’s counsel for allowance of compensation. Counsel had filed an involuntary petition against the debtor on behalf of the creditors, and the case was later converted to chapter 11. The debtor argued that a portion of the fees requested was not for services rendered to the committee, but was for services rendered to the individual creditors prior to the conversion date. The district court affirmed, holding that reasonable compensation for the actual, necessary services rendered by the committee’s counsel was appropriate under section 330. All of the approved fees were for services which benefited the estate as a whole and were necessary to the administration of the estate.In re S.W.G. Realty Assocs., 2001 U.S. Dist. LEXIS 11515, 265 B.R. 534 (E.D. Pa. August 8, 2001) (Kelly, D.J.).
Collier on Bankruptcy, 15th Ed. Revised 3:330.04
Debtor was granted a preliminary injunction. Bankr. D.V.I. The debtor was a real estate developer that acquired real property by way of a secured transaction. The debtor then obtained a loan to finance development on the property. The debtor defaulted on its mortgage and ultimately consented to a judgment in foreclosure, hoping to garner funds from purchasers who had entered land installment contracts. When the debtor failed to do so, it filed a chapter 11 petition. As a result, an attorney notified the debtor that the purchasers had ceased making payments to the debtor under the installment contracts and would instead be remitting payments to an account under the attorney’s control. The debtor filed this adversary proceeding, alleging that the conduct of various purchasers and their counsel was a willful violation of the automatic stay. In addition, the debtor sought a preliminary injunction prohibiting the purchasers from further interfering with its accounts receivable and directing that all amounts owed to the debtor be turned over. In addition, the debtor sought to recover damages pursuant to section 362(h). The bankruptcy court ruled for the debtor, holding that, because the debtor was reasonably likely to succeed on the merits under section 362(h), and because the debtor would likely suffer irreparable harm, the debtor had sufficiently demonstrated entitlement to a preliminary injunction. Specifically, the court found that the debtor was likely to succeed on the merits because the knowing postpetition retention of property of the estate violated the stay, and because the absence of the payments would prevent the debtor from successfully reorganizing.Diamond Indus. Corp. v. Alakrah (In re Diamond Indus. Corp.), 2001 Bankr. LEXIS 976, 265 B.R. 707 (Bankr. D.V.I. August 2, 2001) (Markovitz, B.J.).
Collier on Bankruptcy, 15th Ed. Revised 3.362.11[3]
Only trustee had standing to remove lawsuit. E.D. Pa. The chapter 7 debtor appealed a bankruptcy court order remanding his personal injury cause of action to the state (Pennsylvania) court. After he filed his petition, the debtor removed the lawsuit he had filed in state court prepetition to the bankruptcy court. The district court affirmed, holding that because the debtor lacked standing to remove the prepetition personal injury action to the bankruptcy court, the bankruptcy court properly remanded the action to the state court pursuant to 28 U.S.C. section 1452(b). Once the debtor filed his petition, his interest in the personal injury litigation became the property of the estate, and the trustee succeeded to the debtor’s interest in the pending litigation. Only the trustee had standing to remove the litigation to the bankruptcy court.Reardon v. Hahn Yelena Corp. (In re Reardon), 2001 U.S. Dist. LEXIS 11592, 265 B.R. 533 (E.D. Pa. April 30, 2001) (Weiner, D.J.).
Collier on Bankruptcy, 15th Ed. Revised 1:3.07
4th Cir.
Motion was referred to bankruptcy court. W.D. Va. The chapter 11 debtor filed a motion for a temporary restraining order and preliminary injunction, asking the district court to enjoin the defendant, a district attorney in California, from proceeding with a consumer protection enforcement action in state (California) court. The debtor had previously moved before the bankruptcy court to have the claim filed by the district attorney subordinated. The debtor argued that enjoining the action until a ruling on the subordination motion by the bankruptcy court would make the state court case moot because no funds would be available to satisfy the claim. The district court referred the debtor’s motion, holding that the bankruptcy court was the more appropriate forum to determine whether the state court proceeding would interfere with the proper administration of the estate. The issues raised by the preliminary injunction motion were inextricably intertwined with the issues before the bankruptcy court. Value Am., Inc. v. Kamena, 2001 U.S. Dist. LEXIS 11406, 265 B.R. 717 (W.D. Va. August 2, 2001) (Michael, Jr., D.J.).
Collier on Bankruptcy, 15th Ed. Revised 1:3.02[1]
6th Cir.
Fees were disgorged. M.D. Tenn. The United States trustee appealed a decision of the bankruptcy court, claiming that the court erred in failing to properly sanction special counsel to the chapter 11 debtor for violations of section 329 and Rule 2016. More than a year after assuming representation, counsel filed its first application for allowance of compensation and reimbursement of expenses. The application disclosed that counsel had received several postpetition payments from the debtor prior to seeking court approval, including two retainers from the debtor’s principal and largest unsecured creditor. The bankruptcy court, finding that the conduct of counsel was not willful because the attorneys in the firm were relatively new to bankruptcy and were sincere in their apologies, ordered disgorgement of 10 percent of the fees already received. The district court reversed in part, holding that the bankruptcy court abused its discretion in failing to sanction counsel with full disgorgement and a denial of all compensation. The court concluded that counsel’s failure to disclose the payments was a willful disregard of their fiduciary obligations.Vergos v. Mendes & Gonzales, PLLC (In re McCrary & Dunlap Constr. Co.), 2001 U.S. Dist. LEXIS 11397, 263 B.R. 574 (M.D. Tenn. January 8, 2001) (Trauger, D.J.).
Collier on Bankruptcy, 15th Ed. Revised 3:329.03
Avoidance of transfer was reversed on appeal. 6th Cir. The creditor appealed the district court order affirming the bankruptcy court’s ruling that voided a prepetition transfer of property to the creditor. The debtor and creditor had entered into a business relationship whereby the creditor owned the building housing the debtor’s business, and the debtor owned the land on which the building was located, and each leased his or her respective interest to the other. After the debtor defaulted on her lease payments, the creditor secured a judgment against her and proceeded to foreclose on the property. The parties subsequently entered into a settlement agreement, which obligated the debtor to convey a parcel of land to the creditor. The debtor failed to comply with the agreement, and the creditor obtained a state (Ohio) court ex parte order conveying the property to him within 90 days of the debtor’s petition. The bankruptcy court found that because enforcement of the settlement occurred within 90 days of the petition, and the creditor failed to rebut the statutory presumption that the debtor was insolvent during that period, the order was void as a preferential transfer. The Court of Appeals for the Sixth Circuit reversed, holding that because the property had been impressed by operation of state law with a constructive trust more than 90 days prior to the petition, equitable title in the property never became property of the estate, and the debtor held no interest in the property subject to the avoidance power of section 547(b). The constructive trust was created the moment the law imposed an equitable duty on the debtor to convey the property.Poss v. Morris (In re Morris), 2001 U.S. App. LEXIS 18266, — F.3d — (6th Cir. August 13, 2001) (Batchelder, C.J.).
Collier on Bankruptcy, 15th Ed. Revised 5:547.03
Forty-five days between purchase and perfection was not a contemporaneous exchange. Bankr. N.D. Ohio The debtor purchased a vehicle, granting a security interest to a creditor bank, which perfected its security interest 45 days later. When the debtor filed a chapter 7 petition within 90 days thereafter, the chapter 7 trustee sought to avoid the perfection of the security interest as a preference. The parties agreed that the recording of the interest was a preference, but disputed whether it was excepted from avoidance as a contemporaneous exchange for new value. Applying circuit precedent, the bankruptcy court held that as a matter of law, perfection of a security interest in an automobile more than 10 days after creation of the debt is not a contemporaneous exchange for new value within the meaning of section 547(c)(1). Baumgart v. Farmers Nat’l Bank of Canfield (In re Lopez), 2001 Bankr. LEXIS 960, 265 B.R. 570 (Bankr. N.D. Ohio August 6, 2001) (Baxter, B.J.).
Collier on Bankruptcy, 15th Ed. Revised 547.04[1][b]; 547.05[1]
7th Cir.
Former wife possessed interest in pension, not a claim. N.D. Ill. The chapter 7 debtor appealed a decision of the bankruptcy court, which held that his former wife had a vested interest in his pension plan and he could not discharge her interest. The parties’ prepetition marital property settlement provided that when the debtor began to receive pension benefits, he had an affirmative duty to pay 30 percent of the marital portion of all benefits to his former wife. After the debtor received a discharge and informed his former wife that she was not entitled to any benefits because his obligations to her had been discharged, she moved to reopen the case and filed an adversary proceeding seeking a declaratory judgment that she had a vested interest in the share of the pension previously awarded to her. The bankruptcy court rejected the debtor’s argument that the marital agreement created a debt that was dischargeable in bankruptcy. The district court affirmed, holding that because the former wife’s interest in the pension was vested at the time of the divorce, it was not a dischargeable debt. The former wife’s failure to raise the unnecessary claim within the proper statute of limitations did not affect her property right or affect an otherwise nondischargeable interest.Cullen v. Cullen, 2001 U.S. Dist. LEXIS 11411, — B.R. — (N.D. Ill. August 3, 2001) (Hibbler, D.J.).
Collier on Bankruptcy, 15th Ed. Revised 2:101.05
8th Cir.
Motion for sanctions was denied. Bankr. W.D. Mo. The chapter 7 debtor filed a motion seeking sanctions for the creditor’s failure to answer interrogatory questions. After the creditor failed to answer a first set of interrogatories, the debtor’s counsel sent a letter to creditor’s counsel advising that the answers were due. The creditor’s counsel failed to respond, the debtor filed a motion for sanctions, and the court continued the trial. Although the creditor subsequently provided the answers to the interrogatories, the debtor maintained that the adversary complaint should be stricken, and the court should enter either a default judgment or summary judgment in his favor. The bankruptcy court denied the debtor’s motion, holding that the failure of debtor’s counsel to attach a certification that he in good faith conferred or attempted to confer with counsel for the creditor prior to seeking court intervention prevented the court from considering the imposition of sanctions. The certificate of compliance mandated by Fed. R. Civ. P. 37(d) was required prior to the court’s consideration of the motion. Brown v. Spears (In re Spears), 2001 Bankr. LEXIS 957, 265 B.R. 219 (Bankr. W.D. Mo. July 31, 2001) (Koger, B.J.).
Collier on Bankruptcy, 15th Ed. Revised 10:7037
9th Cir.
Debt for conversion was dischargeable. 9th Cir. The chapter 7 debtor appealed a ruling of the district court that a debt was nondischargeable under section 523(a)(6). The creditor filed an adversary proceeding seeking to have a debt arising out of a state (California) court civil judgment for conversion declared nondischargeable. After the bank foreclosed on property that the creditor had rented to the debtor, the debtor removed all property from the premises, including those items the creditor claimed an ownership interest in. Although the debtor acted on advice of counsel and kept the creditor’s furniture in commercial storage for many years, the creditor obtained a state court judgment for conversion. The bankruptcy court held the debt dischargeable, and the district court reversed based on collateral estoppel. The Court of Appeals for the Ninth Circuit reversed the district court, holding that the debtor presented evidence from which the bankruptcy court appropriately concluded that she did not cause 'willful and malicious injury' to the creditor. The judgment for conversion only established that the debtor engaged in the 'wrongful exercise of dominion' over the property; it did not establish that the debt was nondischargeable under section 523(a)(6).Peklar v. Ikerd (In re Peklar), 2001 U.S. App. LEXIS 17726, — B.R. — (9th Cir. August 9, 2001) (Fletcher, C.J.).
Collier on Bankruptcy, 15th Ed. Revised 4:523.12
Transfer of real property was presumed fraudulent. Bankr. E.D. Cal. The debtors sold a mountain cabin to the purchasers, who were licensed real estate agents. The debtors had encountered financial difficulties, including an imminent foreclosure against their primary residence. The parties agreed that conveyance of the cabin would be a cash only, 'fire sale' of the premises, to allow the debtors to acquire cash proceeds to fund a homestead exemption in a new home as part of their prebankruptcy planning. Shortly after the transfer, the debtors filed their chapter 7 petition. The trustee sought to avoid the transfer, alleging that the transfer was made while the debtors were insolvent and for less than reasonably equivalent value, and with the intent to hinder, delay or defraud creditors. The purchasers argued that they were good faith transferees. The bankruptcy court held that the trustee was entitled to avoidance under section 548(a)(1)(B). Although the court did not find that the transfer was made with actual intent to defraud creditors, it determined that the transfer was for less than reasonably equivalent value because the debtors had no incentive to negotiate for a better price. Instead, they negotiated a price that would enable them to pay their mortgage and fund the homestead exemption, which prevented them from waiting for a normal selling season. For the same reasons, the court rejected the purchasers’ good faith transferee argument (citing Collier on Bankruptcy 15th Ed. Revised).Salven v. Munday (In re Kemmer), 2001 Bankr. LEXIS 973, 265 B.R. 224 (Bankr. E.D. Cal. June 8, 2001) (Lee, B.J.).
Collier on Bankruptcy, 15th Ed. Revised 5:548.05[1][b]
10th Cir.
Oral partnership agreement did not establish fiduciary relationship. Bankr. D. Colo. The debtor and creditor entered into an oral agreement to open an automotive repair business. By November 1998, the parties terminated their business relationship, and the creditor commenced suit against the debtor in state (Colorado) court, which entered judgment against the debtor for approximately $11,700. The court found a breach of the partnership agreement but specifically noted that the acts of neither party were the result of willful conduct. In 2000, the debtor filed a chapter 7 petition. The creditor then filed an adversary proceeding seeking denial of the debtor’s discharge, as well as a determination that the debt was nondischargeable pursuant to section 523(a)(4). Specifically, the creditor alleged that the debt was the result of fraud and defalcation by a fiduciary, embezzlement and larceny. The bankruptcy court held that, for the purposes of section 523(a)(4), there was no fiduciary fraud because the oral agreement between the parties did not establish a fiduciary relationship. The court also held that the claims were barred by collateral estoppel as a result of the state court judgment. Gould v. Schmanke (In re Schmanke), 2001 Bankr. LEXIS 963, 263 B.R. 125 (Bankr. D. Colo. June 1, 2001) (Brooks, B.J.).
Collier on Bankruptcy, 15th Ed. Revised 4:523.10
Global settlement was approved. Bankr. D. Utah The chapter 11 trustee moved for approval of a settlement agreement between him and partners of the debtor. The debtor had filed an adversary proceeding seeking the sale of an apartment complex free and clear of liens of both the interests of the estate and the co-owners. His business partners alleged that the complex was owned by a partnership and could not be sold free and clear of all of the parties’ interests in the property. The parties reached a resolution of the dispute, whereby the property would be sold, the proceeds divided, the parties would exchange mutual releases, and the adversary proceeding would be dismissed. The bankruptcy court approved the settlement, holding that the proposed settlement was fair, equitable and in the best interests of the debtor and his estate. The compromise resolved potentially difficult litigation, provided the estate with substantial sale proceeds without further litigation costs and was in the interest of creditors.In re Armstrong, 2001 Bankr. LEXIS 951, — B.R. — (Bankr. D. Utah July 31, 2001) (Boulden, D.J.).
Collier on Bankruptcy, 15th Ed. Revised 10:9019.02
11th Cir.
Willful violation of stay resulted in punitive damages award. Bankr. N.D. Fla. After the chapter 13 debtor filed a petition, the creditor repossessed her vehicle without actual knowledge of the pending case. The debtor’s counsel requested turnover of the vehicle, and the debtor attempted on several occasions to pick up the vehicle. Only after debtor’s counsel filed a motion for turnover did the creditor release the vehicle to the debtor, 29 days after she had filed her petition. The bankruptcy court entered judgment for the debtor, holding that the creditor willfully violated the automatic stay, and his egregious actions justified an award of punitive damages pursuant to section 362(h). The court noted that the creditor only technically violated the stay by repossessing the vehicle; however, he willfully violated the stay by refusing to deliver the vehicle to the debtor.Davis v. Gatorwheel, Inc. (In re Davis), 2001 Bankr. LEXIS 983, 265 B.R. 453 (Bankr. N.D. Fla. June 21, 2001) (Killian, Jr., B.J.).
Collier on Bankruptcy, 15th Ed. Revised 3:362.11[3]
Debtor was not entitled to homestead exemption. Bankr. M.D. Fla. The chapter 7 debtor claimed a residence located in Florida as an exemption. The trustee objected, alleging that neither the debtor nor his spouse resided in the home on the filing date. In response, the debtor contended that he relocated to another state for financial reasons, that his wife and family remained in the Florida residence and that he never intended to abandon his homestead. It developed, however, that prior to the petition date, the debtor and his wife executed a right to sell agreement and then a contract of sale. Four days prior to the petition date, the debtor executed a warranty deed, which was recorded seven days after the petition date. The bankruptcy court held that the permanent abandonment of the homestead as a bona fide place of permanent abode stripped the property of its homestead character, thus disentitling the debtor from claiming the exemption. In re Klaiber, 2001 Bankr. LEXIS 965, 265 B.R. 290 (Bankr. M.D. Fla. May 4, 2001) (Paskay, B.J.).
Collier on Bankruptcy, 15th Ed. Revised 4:522.09[1]
Creditor failed to establish nondischargeability of debt. Bankr. M.D. Ala. The creditor brought an adversary proceeding against the chapter 7 debtors, asserting that the indebtedness owed him should be excepted from discharge pursuant to section 523(a)(2)(A). The creditor, as minority shareholder and employee of the former business of the debtor husband, loaned funds to the company for the purpose of paying the rent at the corporation’s place of business. After the debtors were unable to repay the creditor and sought to discharge the debt, the creditor asserted that the debtor husband fraudulently enticed him to make the loan to the corporation by failing to make him vice president. Although the company’s annual reports did not list the creditor as a vice president, both debtors often referred to the creditor as a vice president. The bankruptcy court dismissed the complaint, holding that because the debtor never made a false statement to the creditor, the debt was not excepted from discharge. The court noted that the debtor husband was forthright and credible and never intended to harm the creditor.Overly v. Guthrie (In re Guthrie), 2001 Bankr. LEXIS 984, 265 B.R. 253 (Bankr. M.D. Ala. August 2, 2001) (Sawyer, B.J.).
Collier on Bankruptcy, 15th Ed. Revised 4:523.08[1]
Portion of debt was nondischargeable. Bankr. M.D. Fla. The creditor filed a complaint against the chapter 7 debtors seeking an order excepting its debt from discharge pursuant to section 523(a)(6). The debtor wife, as the primary bookkeeper of the creditor, misappropriated substantial funds by issuing unauthorized checks to herself, her personal creditors and other individuals. After the debtor wife was convicted of grand theft and sentenced to prison, the creditor sought to except the debt from the debtor husband’s discharge. Because the debtors’ expenses were clearly in excess of their limited after-tax income, the creditor argued that the debtor wife’s fraudulent intent should be imputed to her husband. The bankruptcy court granted partial judgment to the creditor, holding that only the portion of the debt for items that the debtor husband knew were acquired illegally by his wife and which he nevertheless accepted, was nondischargeable. The court noted that the debtor husband did not know the degree to which his wife was stealing from her employer because she concealed her crime from him and had primary control over their joint account.Synod of S. Atl. Presbyterian Church v. Magpusao (In re Magpusao), 2001 Bankr. LEXIS 982, 265 B.R. 492 (Bankr. M.D. Fla. August 6, 2001) (Proctor, B.J.).
Collier on Bankruptcy, 15th Ed. Revised 4:523.12