Collier Bankruptcy Case Update October-21-02

Collier Bankruptcy Case Update October-21-02

 


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 21, 2002

CASES IN THIS ISSUE
(scroll down to read the full summary)

 

1d Cir.

§ 109(e) Debtor’s chapter 13 case was dismissed because his unsecured claims were in excess of 109(e) limit.
In re Vaughn (Bankr. D.N.H.)


2d Cir.

Rule 2004 Purchasers of debtor’s notes and stocks could not compel production of material in bankruptcy court for use in separate securities fraud action.
In re Enron (Bankr. S.D.N.Y.)


3d Cir.

§ 523(a)(2)(A) Debt resulting from actual fraud against creditor excepted from discharge.
K-B Bldg. Co. v. Barber (In re Barber) (Bankr. W.D. Pa.)


4th Cir.

§ 362 Relief from stay properly granted to allow secured creditor to enforce security interest, despite minor error in financing statement.
Callaway v. Hudson United Bank (E.D.N.C.)


5th Cir.

§ 327 Counsel for debtor in possession owes no fiduciary duty to any particular creditor.
ICM Notes, Ltd. v. Andrews & Kurth (S.D. Tex.)


6th Cir.

§ 523(a)(5) Hold harmless clause in separation agreement did not create a nondischargeable support obligation.
Hanjora v. Hanjora (In re Hanjora) (Bankr. N.D. Ohio)

§ 523(a)(6) Conversion of creditor’s collateral resulted in nondischargeable obligation.
J & A Brelage, Inc. v. Jones (In re Jones) (Bankr. N.D. Ohio)

Rule 5005(a)(1) Timeliness of proof of claim is determined by actual receipt by clerk, not date of mailing.
In re Wallace (Bankr. N.D. Ohio)


7th Cir.

§ 363(f) Debtor not entitled to setoff against creditor who purchased accounts receivable postpetition.
Schneider Nat’l, Inc. v. Bridgestone/Firestone, Inc. (E.D. Wis.)


9th Cir.

§ 362(c)(1) Stipulated relief from stay allowed creditor to proceed with foreclosure only until confirmation of chapter 11 plan.
Atalanta Corp. v. Allen (In re Allen) (9th Cir.)


10th Cir.

§ 522(b)(2)(A) Homestead sale proceeds were no longer exempt after being taken out of filing state which did not recognize extraterritorial homestead.
In re Ginther (Bankr. D. Kan.)

§ 726(a)(1) Bankruptcy court erred by concluding that trustee had 'commenced distribution' prior to claims filed by taxing authorities.
Anderson v. Baer (In re Anderson) (B.A.P. 10th Cir.)


11th Cir.

§ 522 Homestead exemption in motor home allowed.
In re McClain (Bankr. M.D. Fla.)

§ 523(a)(2)(A) Obligation to creditor farmer was nondischargeable due to misrepresentations by debtor developer.
Ozburn v. Moore (In re Moore) (Bankr. M.D. Ga.)

§ 523(a)(5) Debtor’s obligation to pay ex-spouse’s student loan, which state court ruled was in nature of support, was excepted from discharge.
Milford v. Milford (In re Milford) (Bankr. M.D. Fla.)



Collier Bankruptcy Case Summaries

1st Cir.

Debtor’s chapter 13 case was dismissed because his unsecured claims were in excess of 109(e) limit. Bankr. D.N.H. PROCEDURAL POSTURE: The chapter 13 trustee filed a motion to dismiss or convert the debtor’s bankruptcy to a chapter 7, arguing that the debtor’s unsecured debt exceeded the $290,525 limit as set forth in 11 U.S.C. § 109(e). The debtor objected, arguing that the trustee erroneously included unliquidated amounts in his section 109(e) eligibility calculation. OVERVIEW: The debtor listed unsecured claims of $615,313, plus two claims with unknown value. Two lawsuits sought damages over $600,000, plus treble damages and costs. A third lawsuit was listed as unknown in value, but was based on fraud, to recover of the purchase price of rare coins, costs, and fees. The court found the debtor was able to value the claims, and, since the underlying matter involved a contract, there was a readily determinable figure relating to the value of what was delivered to the creditors in the litigation and what they should have received under the contract. The creditors were collectively alleging violations of the Racketeer Influenced and Corrupt Organization Act, fraud and conspiracy. The difference between the bargain and what was received were the amounts listed in the schedules. There was also evidence that the figure, which substantially exceeded the debt limitation in section 109(e), was actually higher than set forth in the schedules because, at the hearing, the debtor’s counsel indicated that the two lawsuit amounts that were stated were derived from a calculation of single damages, and not the potential treble damages that could be awarded. In re Vaughn, 2002 Bankr. LEXIS 419, 276 B.R. 323 (Bankr. D.N.H. April 5, 2002) (Vaughn, C.B.J.).

Collier on Bankruptcy, 15th Ed. Revised
2:109.06[2]

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2d Cir.

Purchasers of debtor’s notes and stocks could not compel production of material in bankruptcy court for use in separate securities fraud action. Bankr. S.D.N.Y. PROCEDURAL POSTURE: Movant purchasers of the bankruptcy debtors’ notes and stocks, who were pursuing a separate securities fraud action, sought to obtain information which the creditors’ committee obtained in discovery, but the objectants who provided such discovery objected to the release of their materials. The purchasers moved for an order requiring the objectants to provide the requested materials pursuant to Fed. R. Bankr. P. 2004. OVERVIEW: The purchasers contended that discovery of the requested materials was related to the bankruptcy since it was necessary to aid the purchasers in obtaining the bankruptcy filings of certain entities for the benefit of the bankruptcy estate. The objectants maintained that the purchasers’ request was a pretext to obtain discovery for use in the securities fraud action against certain of the objectants, since discovery in that action was otherwise stayed by statute pending resolution of motions to dismiss. The bankruptcy court held that the purchasers were not entitled to the requested materials since Rule 2004 could not be used to obtain information for use in the purchasers’ securities fraud action and the purchasers offered no credible bankruptcy purpose for requesting the materials. The purchasers offered no evidence that the bankruptcy fiduciaries would not take any required action, including obtaining bankruptcy filings of other entities, to maximize the estate’s recoveries. Further, the purchasers failed to explain how such action would realistically benefit the purchasers, in view of the unlikelihood of any recovery by the purchasers in the bankruptcy distribution. In re Enron, 2002 Bankr. LEXIS 857, 281 B.R. 836 (Bankr. S.D.N.Y. August 15, 2002) (Gonzalez, B.J.).

Collier on Bankruptcy, 15th Ed. Revised
9:2004.01

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3d Cir.

Debt resulting from actual fraud against creditor excepted from discharge. Bankr. W.D. Pa. PROCEDURAL POSTURE: Defendant debtor filed a voluntary petition under chapter 7 of the Bankruptcy Code and stayed a pending fraudulent transfer action against him. Plaintiff creditor filed an adversary action against the debtor seeking a determination that a debt owed to it by the debtor from a judgment was excepted from discharge pursuant to 11 U.S.C. § 523(a)(2)(A). OVERVIEW: The creditor claimed that the debtor owed a debt from his fraud. The debtor had appealed the judgment. The creditor asserted that collateral estoppel prevented the debtor from denying that the debt was the result of his actual fraud. The bankruptcy court examined and applied Pennsylvania law regarding collateral estoppel. The court found that not all of the requirements for collateral estoppel were met. The question whether the debtor acted with actual intent to defraud was not an issue in the prior case, as it was in the bankruptcy adversary action. The court did not believe that the debtor had a full and fair opportunity to litigate the issue whether he acted with actual intent to defraud the creditor in the state court action. The court believed, from the totality of the evidence presented, that the debtor intended to defraud the creditor. The court concluded that the debtor obtained monetary payments by means of actual fraud and that he knowingly participated in a scheme to divert assets for his own use. The court found that section 523(a)(2)(A) applied to the debt at issue. K-B Bldg. Co. v. Barber (In re Barber), 2002 Bankr. LEXIS 836, 281 B.R. 617 (Bankr. W.D. Pa. August 9, 2002) (Markovitz, B.J.).

Collier on Bankruptcy, 15th Ed. Revised
4:523.08

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4th Cir

Relief from stay properly granted to allow secured creditor to enforce security interest, despite minor error in financing statement. E.D.N.C. PROCEDURAL POSTURE: Appellant bankruptcy trustee appealed from an order entered by the bankruptcy court. The trustee sought review of the bankruptcy court’s denial of his motion for sale of property free and clear of liens and granting of appellee creditor’s motion for relief from the automatic stay. OVERVIEW: The creditor moved for relief from the automatic stay, seeking leave to foreclose upon the debtor’s real property collateral and take possession and dispose of all personal property collateral. The trustee sought permission to sell the debtor’s real and personal property, with liens attaching to the proceeds in order of their priority. At the crux of the dispute was whether the signature affixed to the financing statement (UCC # 99-015) was sufficient to render the financing statement valid and enforceable as against the trustee. The trustee maintained that UCC # 99-015 was invalid and thus that the collateral described therein was unperfected. The creditor conceded that the debtor’s signature on the instrument was imperfect, but contended that the defect was a 'minor error' pursuant to N.C. Gen. Stat. § 25-9-402(8). The bankruptcy court properly concluded that the flawed signature was a 'minor error' and suggested agency sufficient to render the financing statement valid. Thus, the creditor was entitled to relief from the automatic stay imposed by 11 U.S.C. § 362 in order to enforce valid security interests and liens against the property described in UCC # 99-015. Callaway v. Hudson United Bank, 2002 U.S. Dist. LEXIS 15114, — F. Supp.2d — (E.D.N.C. March 29, 2002) (Boyle, C.D.J.).

Collier on Bankruptcy, 15th Ed. Revised
3:362.01

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5th Cir.

Counsel for debtor in possession owes no fiduciary duty to any particular creditor. S.D. Tex. PROCEDURAL POSTURE: Plaintiff company filed suit and asserted claims for breach of fiduciary duty and tortious interference against defendant law firm. The law firm worked for a bankrupt corporation whose bank notes the company purchased and were attempting to resell. The firm moved for summary judgment. OVERVIEW: There was a controversy over payment of administrative expenses, specifically attorney fees, which led to the termination of a purchase transaction. After the company purchased the outstanding notes held by a bank, it held the primary lien position on the bankrupt corporation’s assets. When principals of a yet-to-be-formed purchaser terminated a purchase transaction for certain assets, the company foreclosed on its security interests in bankrupt corporation’s assets. If the transaction had been consummated, the yet-to-be-formed company would have assumed the notes owned by the company. The company took the position that a letter demanding the payment of all administrative claims at closing, including the law firm’s fees, was a breach of the fiduciary duty and that this breach caused the transaction to fail. The court held that the cases cited by the company did not support a finding that counsel for the debtor owed particular fiduciary duties to the estate or its creditors. A ruling that counsel of a debtor in possession owed a fiduciary duty to a particular creditor was contrary to the tenet of the bankruptcy law, which mandated that debtor’s counsel be disinterested. ICM Notes, Ltd. v. Andrews & Kurth, 2002 U.S. Dist. LEXIS 7456, 278 F. Supp.2d 117 (S.D. Tex. April 19, 2002) (Hittner, D.J.).

Collier on Bankruptcy, 15th Ed. Revised
3:327.01

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6th Cir.

Hold harmless clause in separation agreement did not create a nondischargeable support obligation. Bankr. N.D. Ohio PROCEDURAL POSTURE: Creditor former husband filed a complaint seeking a determination that obligations arising from a divorce were nondischargeable by the debtor ex-wife under 11 U.S.C. § 523(a)(5). The former husband moved for summary judgment. The debts concerned consumer credit debts that the ex-wife was to assume, and thereafter hold the former husband harmless. OVERVIEW: The court found the parties’ separation agreement did not provide for spousal support. The debtor simply assumed, without any direct obligation to pay the former husband, the debts. The obligations did not terminate upon the remarriage, death, or eligibility for benefits. Since the separation agreement held no spousal support was to be awarded to either party, any obligations contained therein were viewed as a property settlement. It was not shown that it was the intent to create a support obligation. While income and custody concerns could bear on an award of spousal support, it was common for a parent to be awarded custody of the children without also being awarded spousal support. The disparity in the parties’ income, while not insignificant, was not extremely large. The hold harmless clause did not, standing alone, create a support obligation. The debtor filed bankruptcy shortly after the divorce, raising questions of whether the debtor ever actually intended to pay the debts under the separation agreement. Those were serious questions of fraud. But, section 523(a)(5) did not make allowances for a party’s fraud. Hanjora v. Hanjora (In re Hanjora), 2001 Bankr. LEXIS 1882, 276 B.R. 822 (Bankr. N.D. Ohio November 5, 2001) (Speer, B.J.).

Collier on Bankruptcy, 15th Ed. Revised
4:523.11

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Conversion of creditor’s collateral resulted in nondischargeable obligation. Bankr. N.D. Ohio PROCEDURAL POSTURE: Plaintiff bankruptcy creditor brought an adversary proceeding against defendant debtor, alleging that the creditor’s judgment debt was not dischargeable under 11 U.S.C. § 523(a)(6) based on the debtor’s willful and malicious conduct in retaining the proceeds from the sale of collateral in which the creditor had a security interest. The bankruptcy court conducted a trial. OVERVIEW: The debtor contended that he was unaware that the creditor held a first and best security interest in collateral which the debtor sold, and that the debtor erroneously thought that his father’s prior security interest did not lapse. The bankruptcy court held that the creditor’s judgment debt was not dischargeable, since the debtor failed to rebut the presumption that the debtor acted willfully and maliciously in failing to protect the creditor’s security interest in the collateral despite having knowledge of the implications of the security agreement. Even if the debtor’s father maintained his security interest, such fact only implicated the priority of the creditor’s interest and did not negate it. Further, the debtor’s knowledge that his sale of the collateral would potentially injure the creditor’s lien rights was sufficient to support the conclusion that the debtor’s conduct was willful and malicious. J & A Brelage, Inc. v. Jones (In re Jones), 2001 Bankr. LEXIS 1892, 276 B.R. 797 (Bankr. N.D. Ohio September 25, 2001) (Speer, B.J.).

Collier on Bankruptcy, 15th Ed. Revised
4:523.12

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Timeliness of proof of claim is determined by actual receipt by clerk, not date of mailing. Bankr. N.D. Ohio PROCEDURAL POSTURE: In a bankruptcy action, creditor bank moved to have its proof of claim deemed timely filed under the mailbox rule, Fed. R. Bankr. P. 9006(e). OVERVIEW: The court sent the parties notice of the deadline for filing a proof of claim. One day prior to the deadline, the bank placed in the mail its proof of claim to the court. The claim, however, was not actually received by the clerk of the court until four days after the deadline. The bank argued that its proof of claim should have been deemed timely filed because it was mailed prior to the deadline. The court, however, rejected the applicability of the mailbox rule as it pertained to the timeliness of a proof of claim. The court found that Fed. R. Bankr. P. 5005(a)(1) provided that a proof of claim could not be considered filed until it was received by the court. Since no dispute existed that the proof of claim filed by the bank was received after the deadline set by the court, the proof of claim could not be considered timely filed. In re Wallace, 2001 Bankr. LEXIS 1885, — B.R. — (Bankr. N.D. Ohio November 5, 2001) (Speer, B.J.).

Collier on Bankruptcy, 15th Ed. Revised
9:5005.02; 10:9006.11

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7th Cir.

Debtor not entitled to setoff against creditor who purchased accounts receivable postpetition. E.D. Wis. PROCEDURAL POSTURE: Plaintiff creditor sued defendant debtor to collect unpaid balances allegedly owed on accounts receivable that the creditor acquired pursuant to a bankruptcy court order which authorized the sale of another company’s assets to the creditor. Both sides consented to proceed before a magistrate judge. The creditor and the debtor each moved for summary judgment. OVERVIEW: When the other company filed for bankruptcy it owed the debtor a certain amount of money for tires sold on credit to the company by the debtor. The debtor used the company for certain transportation services and as a result the debtor owed the company money for those services. The creditor, pursuant to the bankruptcy order, purchased the company’s accounts receivable. The debtor sought a setoff regarding the amount it was owed by the company against its debt with the company for transportation services. The court held that the debtor could only obtain a setoff following a free and clear sale if the setoff was actually obtained prior to the bankruptcy filing. The debtor did not present facts which indicated that it had actually obtained a setoff prior to the filing of the voluntary petition for bankruptcy. As such, there was no factual basis for finding that the debtor was entitled to a setoff for the money owed to it by the company. Schneider Nat’l, Inc. v. Bridgestone/Firestone, Inc., 2001 U.S. Dist. LEXIS 23709, 200 F. Supp.2d 1006 (E.D. Wis. August 22, 2001) (Gorence, M.J.).

Collier on Bankruptcy, 15th Ed. Revised
3:363.06

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9th Cir.

Stipulated relief from stay allowed creditor to proceed with foreclosure only until confirmation of chapter 11 plan. 9th Cir. PROCEDURAL POSTURE: Appellant creditors challenged a decision of the district court, which affirmed a bankruptcy court’s confirmation of a plan reorganizing the assets of appellee debtor. OVERVIEW: Before the bankruptcy court confirmed the debtor’s reorganization plan, the debtor entered into a stipulation with the creditors, approved in a formal order by the bankruptcy court, that permitted one creditor to foreclose on several of its liens. The bankruptcy court, however, confirmed the reorganization plan before the creditor completed foreclosure on the property and the plan did not permit the creditor to continue with the foreclosures. The creditors contended that the bankruptcy court erred by confirming a reorganization plan that did not incorporate either the terms of the stipulation between the parties or the bankruptcy court’s order approving it. The appellate court held that the bankruptcy court did not err in confirming without a finding of 'special circumstances' a reorganization plan that did not incorporate the terms of the stipulation or the stay relief order because neither document clearly indicated that it bound either the parties or the court in any subsequent reorganization plan. Atalanta Corp. v. Allen (In re Allen), 2002 U.S. App. LEXIS 16532, 300 F.3d 1055 (9th Cir. August 16, 2002) (Sneed, C.J.).

Collier on Bankruptcy, 15th Ed. Revised
3:362.06[1]

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10th Cir.

Homestead sale proceeds were no longer exempt after being taken out of filing state which did not recognize extraterritorial homestead. Bankr. D. Kan. PROCEDURAL POSTURE: Debtors filed chapter 7 bankruptcy in Kansas. They sought to claim the proceeds of the sale of their Kansas homestead as exempt, under 11 U.S.C. § 522(b)(2)(A), intending to reinvest in Colorado real estate. The trustee objected to the claim of exemption on the grounds that Kansas did not recognize an extraterritorial homestead. OVERVIEW: The debtors sold their Kansas homestead and received the sale proceeds prior to filing in bankruptcy. The debtors obtained employment in Colorado, establishing a domicile there, and intended to purchase a home in Colorado. They then filed under chapter 7 in Kansas at a time that they had been domiciled in Kansas for the greater part of the previous 180 days. The bankruptcy court agreed with the trustee that the proceeds of sale of the debtors’ Kansas homestead were not exempt under applicable Kansas law. Though Kansas homestead laws were to be liberally construed in favor of the exemption, Kansas Supreme Court holdings were to the effect that Kansas exemption laws were without effect beyond the territorial boundaries of the state. The court noted that, had the debtors waited a few more days and filed their chapter 7 petition in Colorado, they could have claimed Colorado’s homestead exemption. In re Ginther, 2002 Bankr. LEXIS 849, 282 B.R. 16 (Bankr. D. Kan. August 7, 2002) (Nugent, B.J.).

Collier on Bankruptcy, 15th Ed. Revised
3:348.02[5]; 4:522.01

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Bankruptcy court erred by concluding that trustee had 'commenced distribution' prior to claims filed by taxing authorities. B.A.P. 10th Cir. PROCEDURAL POSTURE: The debtor and creditor state taxing authority appealed from a bankruptcy court order that approved the chapter 7 trustee’s final report and concluded that the trustee had commenced distribution under 11 U.S.C. § 726(a)(1) before several taxing authorities filed their claims. They argued that distribution had not commenced when the final report was filed, thus, the claims qualified for distribution. OVERVIEW: The appellate panel found that because 'commences distribution,' as used in 11 U.S.C. § 726(a)(1) was not defined in the Bankruptcy Code, and the language in section 726(a)(1) was unambiguous, the plain meaning of the term was to be used. After reviewing the definitions of 'commence' and 'distribution,' the panel found that the appropriate time was the time at which the bankruptcy court approved the final report. Up until that time, distribution was 'proposed.' The trustee, in his final report, stated that he had examined all claims filed in the case, and that the proposed distribution was proper. After the filing of the trustee’s final report, parties in interest were given a time in which to object, and therefore, distribution could change. The time the trustee 'commenced distribution' was the date on which the final report was approved, not when the final report was filed with the court. Anderson v. Baer (In re Anderson), 2002 Bankr. LEXIS 431, 275 B.R. 922 (B.A.P. 10th Cir. April 16, 2002) (McFeeley, C.B.J.).

Collier on Bankruptcy, 15th Ed. Revised
6:726.02[1]

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11th Cir.

Homestead exemption in motor home allowed. Bankr. M.D. Fla. PROCEDURAL POSTURE: Husband and wife debtors filed a chapter 13 bankruptcy. Creditors and the chapter 13 trustee (collectively, creditors) objected to the debtors’ claim of homestead exemption. The creditors contended that the real property could not be exempt because there was no permanent residence on the property, only a motor home. Alternatively, the creditors contended that the debtors did not intend to permanently reside in the motor home. OVERVIEW: The bankruptcy court found the nexus between the motor home and the real property sufficient to satisfy the physical permanency requirement of the homestead exemption with respect to the real property. The debtors testified that the motor home had a permanent sewer and water hookup, underground electricity, and was on a permanent concrete pad. It was irrelevant that the motor home could have been driven away. What was important was that the debtors actually lived on the real property being claimed as exempt; a tent could have established the requisite degree of permanency. The remaining issue was whether the debtors intended to permanently reside on the property on the petition date. The debtors indicated on their bankruptcy filings that they had lived on the real property for about one year prior to their bankruptcy filing. The debtors applied for an ad valorem property tax exemption well before the filing of their bankruptcy petition. The status of property as homestead for ad valorem tax exemption purposes was persuasive as to the debtors’ intent. In re McClain, 2002 Bankr. LEXIS 832, 281 B.R. 769 (Bankr. M.D. Fla. June 13, 2002) (Funk, B.J.).

Collier on Bankruptcy, 15th Ed. Revised 4:544.01

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Obligation to creditor farmer was nondischargeable due to misrepresentations by debtor developer. Bankr. M.D. Ga. PROCEDURAL POSTURE: Defendant, a former real estate developer, filed a petition under chapter 7 of the Bankruptcy Code. Plaintiff, a farmer who had sold the developer land, filed a complaint alleging the debt on the underlying sale was nondischargeable under 11 U.S.C. § 523(a)(2)(A), (4), (6) (West 1993 & Supp. 2001). Plaintiff died prior to trial and the court substituted plaintiff’s son (hereinafter plaintiff) as the administrator of his father’s estate. OVERVIEW: The farmer contended he was persuaded to sell part of his farm by the developer’s false representation that he would sign and record a deed to secure debt in favor of the farmer, and, that as a result of the developer not recording the deed, he had sustained a loss. The farmer contended further that the developer’s debt was therefore nondischargeable under section 523(a)(2)(A), (4), and (6). The developer denied that he agreed to record the deed to secure debt. The court concluded from the developer’s failure to obtain releases from the farmer when he sold individual lots in the developed parcel, as called for under the terms of the original sales contract between the parties, that the developer knew that the farmer’s deed to secure debt had not been filed for record. The court found that the developer made a false representation that he would record the farmer’s deed to secure debt, and intentionally failed to record the deed to secure debt, that the farmer’s reliance was justified, and that the farmer suffered a loss because his deed to secure debt, if recorded, would have had priority over subsequent liens, including the liens of the banks that foreclosed. Ozburn v. Moore (In re Moore), 2002 Bankr. LEXIS 420, 277 B.R. 141 (Bankr. M.D. Ga. April 16, 2002) (Hershner, C.B.J.).

Collier on Bankruptcy, 15th Ed. Revised
4:523.08[1]

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Debtor’s obligation to pay ex-spouse’s student loan, which state court ruled was in nature of support, was excepted from discharge. Bankr. M.D. Fla. PROCEDURAL POSTURE: Plaintiff was debtor’s former wife. Their divorce decree provided that debtor would pay plaintiff’s student loan. Debtor filed chapter 7. Plaintiff filed a motion for contempt in state court to enforce the divorce decree. Plaintiff later filed an adversary proceeding seeking to except the student loan debt from the discharge. The state court found contempt and deemed debtor’s obligation was a more of a support financial obligation. OVERVIEW: The issue was whether debtor’s obligation to pay plaintiff’s student loan was excepted from discharge under 11 U.S.C. § 523(a)(5) which provided that, if a marital obligation was in the nature of alimony or support, it was nondischargeable. The bankruptcy court noted that state courts had concurrent jurisdiction with bankruptcy courts to determine whether an obligation was in the nature of alimony or support for section 523(a)(5) purposes. In the instant action, the state court had already determined that debtor’s obligation to pay plaintiff’s student loan was in the nature of support and should not be discharged in debtor’s bankruptcy. The bankruptcy court found that, because all of the elements of collateral estoppel were satisfied, the debtor was estopped from arguing that his obligation to pay plaintiff’s student loan debt was not in the nature of support. The obligation was therefore nondischargeable pursuant to section 523(a)(5). Milford v. Milford (In re Milford), 2002 Bankr. LEXIS 831, 281 B.R. 742 (Bankr. M.D. Fla. March 5, 2002) (Funk, B.J.).

Collier on Bankruptcy, 15th Ed. Revised
4:523.11

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