Collier Bankruptcy Case Update September-15-03
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.
September 15, 2003
§ 523(a)(4) Debtor’s failure to
follow creditors’ instructions to cancel unauthorized stock trades
was a defalcation of fiduciary duty rendering the resulting debt
Moore v. Murphy (In re Murphy) (Bankr. D. Mass.)
§ 1106 Trustee lacked standing to sue third parties for knowledge of fraud where debtor committed the fraud in question.
Breeden v. Kirkpatrick & Lockhart LLP (In re Bennett Funding Group, Inc.) (2d Cir.)
Rule 9011 Sanctions were not appropriate upon dismissal of preference action where defense was complex and necessary facts were not available at time of filing.
Berger Indus., Inc. v. Artmark Prods. Corp. (In re Berger Indus., Inc.) (Bankr. E.D.N.Y.)
§ 363(c)(2) Bank’s administrative
freeze on debtor’s account did not violate stay.
In re Czyzk (Bankr. D.N.J.)
§ 365 Bankruptcy court properly applied business judgment rule in approving rejection of computer lease agreements.
Computer Sales Int’l, Inc. v. Federal Mogul Global, Inc. (In re Federal Mogul Global, Inc.) (D. Del.)
§ 550(a) Adversary proceedings were not automatically dismissed along with chapter 11 case and were still viable upon reopening and conversion to chapter 7.
Pineo v. CPT Holdings, Inc. (In re J & L Structural, Inc.) (Bankr. W.D. Pa.)
§ 502(f) Fees incurred by debtor’s attorney in defending against involuntary petition denied.
In re Commonwealth Sprinkler Co. (Bankr. E.D. Va.)
§ 1329(a) Vehicle surrendered to creditor and subsequently sold at auction fully satisfied secured claim and any deficiency claim would be treated as unsecured.
In re Taylor (Bankr. E.D. Tex.)
§ 726(b) Bankruptcy court properly ordered debtor’s attorney to disgorge a portion of retainer for pro rata distribution.
Specker Motor Sales Co. v. Eisen (W.D. Mich.)
§ 362 Owners of debtor corporation were not entitled to stay of proceeding to enforce personal guarantees.
Congress Fin. Corp. v. Ballantyne (N.D. Ill.)
§ 363 Creditor, a common carrier of refined petroleum through a pipeline, was not entitled to adequate protection of liens in fuel or proceeds.
In re UAL Corp. (Bankr. N.D. Ill.)
§ 365 Debtor that rejected lease on second day of month was obligated for rent for entire month as postpetition obligation arising on the first day of month.
HA-LO Indus., Inc. v. CenterPoint Props. Trust (7th Cir.)
§ 707(b) Chapter 7 bankruptcy dismissed where debtors’ employment and earning history indicated ability to support chapter 13 plan.
In re Penny (Bankr. C.D. Ill.)
28 U.S.C. § 158 Bankruptcy court’s interpretation that chapter 11 plan fixed priorities despite lapsing of secured creditor’s financing statements affirmed.
General Elec. Capital Corp. v. Dial Bus. Forms, Inc. (In re Dial Bus. Forms, Inc.) (8th Cir.)
§ 1129(a) Insolvency of debtor is not a requirement for filing bankruptcy nor is solvency a bar to plan confirmation.
In re Marshall (Bankr. C.D. Cal.)
§ 330(a) Bankruptcy court acted correctly in granting only partial approval of attorneys’ fee application based on reasonableness analysis.
Houlihan Lokey Howard & Zukin Capital v. Unsecured Creditor’ Liquidating Trust (In re Commercial Fin. Servs., Inc.) (B.A.P. 10th Cir.)
§ 365(d)(3) Although bankruptcy court not prohibited from selecting retroactive date for lease rejection, lessors were entitled to hearing on claim for prerejection rent.
Stonebriar Mall Ltd. P’ship v. CCI Wireless, LLC (In re CCI Wireless, LLC) (D. Colo.)
§ 362(d)(1) Relief from stay granted as debtor’s fourth bankruptcy petition was filed in clear violation of 180 day injunction contained in dismissal of previous petition.
In re Cody (Bankr. M.D. Fla.)
Collier Bankruptcy Case Summaries
Debtor’s failure to follow creditors’ instructions to cancel unauthorized stock trades was a defalcation of fiduciary duty rendering the resulting debt nondischargeable. Bankr. D. Mass. PROCEDURAL POSTURE: Defendant debtor filed a chapter 7 petition. Plaintiffs, married creditors, filed an adversary action against the debtor and sought a determination that a default judgment entered in their favor against the debtor in an arbitration proceeding was nondischargeable, pursuant to 11 U.S.C. § 523(a)(4), as a debt that resulted from the debtor’s defalcation while he acted in a fiduciary capacity. OVERVIEW: The bankruptcy court rejected the creditors’ claim that res judicata barred the court’s independent determination of the dischargeability of the debt owed by the debtor. Alternatively, the creditor’s asserted that the elements required to except the judgment from dischargeability pursuant to 11 U.S.C. § 523(a)(4) were conclusively met by evidence at trial. The court found that although the creditors may have heavily relied on the debtor’s advice and recommendations regarding stock trades, the ultimate decision to buy or sell was strictly theirs. Nothing in the record showed any degree of control by the debtor in matters related to investment decisions of individual stocks. The debtor had a fiduciary duty to the creditors to execute trades only after receiving authorization from the creditors, and that duty was breached in regard to two purchases. The debtor’s failures to act constituted, at the very least, a lack of diligence that reached the level of extreme recklessness. The court found that the debtor’s failure to make a good faith effort to follow the creditors’ instructions to