Collier Bankruptcy Case Update October-20-03
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Bankruptcy Newsletter
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 20, 2003
CASES IN
THIS ISSUE
(scroll down to read the full
summary)
§ 362 Threat made by creditor during settlement discussions to initiate action to deny debtor’s discharge violated stay.
Diamond v. Premier Capital, Inc. (In re Diamond) (1st Cir.)
§ 1102(a)(1) Conversion to chapter 7 dissolved chapter 11 committee and chapter 7 trustee could not substitute self for committee in appeal of sale order.
Official Comm. of Unsecured Creditors v. Belgravia Paper Co., Inc. (In re Great N. Paper, Inc.) (D. Me.)
2nd Cir.
§ 541 Debtor’s interest in
rent-stabilized lease of apartment occupied with nondebtor significant
other was property of the estate.
Toledano v. Kittay (In re Toledano) (Bankr. S.D.N.Y.)
3th Cir.
§ 362(b) Police power exception to automatic stay applied to state action to enforce consumer protection laws.
Consumer Prot. Div. v. Nanticoke Homes, Inc. (In re Nanticoke Homes, Inc.) (D. Del.)
§ 506(b) Bankruptcy Code requirement that postpetition attorneys’ fees and costs be approved by the bankruptcy court did not give rise to a cause of action for its violation.
Henthorn v. GMAC Mortg. Corp. (In re Henthorn) (E.D. Pa.)
4th Cir.
§ 523(d) Dismissal of chapter 7 bankruptcy with prejudice and denial of debtor’s attorneys’ fees and costs upheld.
Walker v. Star USA Fed. Credit Union (In re Walker) (S.D. W. Va.)
§ 544(b) Bankruptcy court properly set aside deeds of trust affecting property held by debtor and spouse as tenants by the entirety.
Coleman v. Community Trust Bank (In re Coleman) (W.D. Va.)
5th Cir.
§ 547(b)(4)(B) Preference action against employee of debtor’s parent company dismissed due to failure to show that employee was an insider.
Brown v. Sontheimer (In re Promedco of New England, Inc.) (Bankr. N.D. Tex.)
6th Cir.
§ 327(a) Bankruptcy court properly denied fees to trustee who was not disinterested.
Schilling v. Smith (In re Schilling) (W.D. Ky.)
§ 328(c) Chapter 7 trustee’s legal representation of creditor in another bankruptcy represented a sanctionable conflict of interest.
In re Grieb Printing Co. (Bankr. W.D. Ky.)
§ 329(b) Bankruptcy court properly ordered disgorgement of attorney’s fee on grounds of inaccurate filings, excessive amount, lack of benefit to debtor and harm to creditors.
Cotner v. United States Trustee (In re Wilson) (W.D. Mich.)
8th Cir.
28 U.S.C. § 1930(a)(6) Quarterly fees due United States trustee are not costs and were proper basis for monetary judgment upon chapter 11 dismissal.
Adams v. Rendlen (In re Adams) (B.A.P. 8th Cir.)
9th Cir.
§ 330 Chapter 13 bankruptcy of debtors who ran day care business was not sufficiently complex to justify increased attorneys’ fees.
In re Dorsett (Bankr. E.D. Cal.)
10th Cir.
§ 365 Bankruptcy court judgment that lease settlement agreement was not an executory contract was entitled to full credit in district court.
T&W Funding Co. XII, LLC v. Pennant Rent-A-Car Midwest, Inc. (D. Kan.)
11th Cir.
§ 109(g)(2) Bankruptcy court had no discretion but to dismiss chapter 7 case filed after debtor sought voluntary dismissal of chapter 13 case while motion for relief from stay was pending.
In re Stuart (Bankr. S.D. Ga.)
§ 522(f) Judgment lien could not be avoided as impairing homestead exemption in a state where the exemption was unlimited.
In re Epstein (Bankr. S.D. Fla.)
§ 523(a)(2) Debtor who signed standard credit card agreement and made minimum monthly payments even while unemployed did not act fraudulently.
Compass Bank v. Meyer (In re Meyer) (Bankr. N.D. Ala.)
Collier Bankruptcy Case Summaries
1st Cir.
Threat made by creditor during
settlement discussions to initiate action to deny debtor’s
discharge violated stay. 1st Cir. PROCEDURAL
POSTURE: Plaintiff debtor filed a complaint, in bankruptcy
court, against defendants, a creditor and an attorney, alleging an
improper attempt to collect, assess, or recover a debt by using coercive
negotiation tactics in violation of the Bankruptcy Code’s
automatic stay. The bankruptcy court granted defendants’ motion to
dismiss. The district court affirmed the bankruptcy court. The debtor
appealed. OVERVIEW: The debtor was a 17-year veteran of
the real estate industry. The creditor filed an adversary proceeding to
deny the debtor a discharge pursuant to 11 U.S.C. § 727. During
negotiation settlement the creditor’s attorney told the
debtor’s attorney that if the dischargeability issue was not
resolved in the creditor’s favor, he would take action at the New
Hampshire Real Estate Commission to revoke the debtor’s real
estate broker’s license. The debtor agreed to the creditor’s
proposed settlement, but the bankruptcy court rejected the settlement
and denied the creditor’s complaint on all grounds. The court of
appeals found that although negotiations regarding discharge were not
per se violations of the automatic stay, the statement by defendants
could “reasonably be deemed tantamount to a threat” of
immediate action against the debtor. Where an unsecured creditor’s
statement functionally forced the debtor to treat a professional license
as collateral, a dismissal on the pleadings was unacceptable because the
statement could be found to be coercive by a trier of fact. Because the
debtor’s damages were unclear, the district court needed to
examine the issue closely on remand. Diamond v. Premier
Capital, Inc. (In re Diamond), 2003 U.S. App. LEXIS
20615, — F.3d — (1st Cir. October 9, 2003) (Torruella,
C.J.).
Collier on Bankruptcy, 15th Ed. Revised 3:362.01 [back to top]
ABI Members, click here to get the full opinion.
Conversion to chapter 7
dissolved chapter 11 committee and chapter 7 trustee could not
substitute self for committee in appeal of sale order. D.
Me. PROCEDURAL POSTURE: Appellant committee of
unsecured creditors appealed a bankruptcy court’s order approving
the sale of a corporation. While that appeal was pending, the
corporation filed a motion to dismiss and/or convert its action under
chapter 11, and the bankruptcy court converted the case to an action
under chapter 7, and appointed a trustee. The trustee filed a motion to
substitute himself as a party to the committee’s appeal.
OVERVIEW: A corporation filed a petition under chapter
11, and a committee of unsecured creditors was appointed to protect
creditors’ interests. The bankruptcy court entered an order which
established a timeline for accepting a stalking horse bid and the
acceptance of competing bids, and a company submitted a stalking horse
bid but demanded reimbursement of expenses related to its stalking horse
functions and a break-up fee of $5 million in the event of a successful
counter-bid that displaced it. The corporation accepted the
company’s bid and the bankruptcy court found that the decision was
proper. The committee of unsecured creditor’s appealed the
bankruptcy court’s judgment and, while that appeal was pending,
the bankruptcy court converted the corporation’s action into an
action under chapter 7. The federal district court held that the trustee
who was appointed when the action was converted to a chapter 7 action
would not be allowed to pursue the committee’s appeal because it
was bound by decisions the corporation made as a debtor-in-possession,
including the decision to accept the stalking horse bid.
Official Comm. of Unsecured Creditors v. Belgravia Paper
Co., Inc. (In re Great N. Paper, Inc.), 2003 U.S. Dist. LEXIS
16852, — B.R. — (D. Me. September 19, 2003) (Hornby,
D.J.).
Collier on Bankruptcy, 15th Ed. Revised 7:1102.02, .03 [back to top]
ABI Members, click here to get the full opinion.
Debtor’s interest in
rent-stabilized lease of apartment occupied with nondebtor significant
other was property of the estate. Bankr. S.D.N.Y.
PROCEDURAL POSTURE: Plaintiffs, a debtor and her
significant other who lived with the debtor in her rent-stabilized
apartment, objected to defendant chapter 7 trustee seeking an order to
assume and assign the lease for the apartment. The debtor also moved for
abandonment of certain legal claims. The trustee, along with the other
defendant, the landlord, moved for summary judgment.
OVERVIEW: The bankruptcy court held that the
debtor’s legal interests in her rent-stabilized lease were
property of the estate. Thus, the trustee could assume the lease and
evict the debtor and her significant other without violating New York
City’s rent stabilization regulations because the debtor’s
rights under her rent-stabilized lease were grounded solely in the lease
and were not unique statutory rights. The bankruptcy court also rejected
the argument that the trustee could not transfer the occupancy interest
in the premises pursuant to 11 U.S.C. § 363(f), and 11 U.S.C.
§ 363(1) did not even apply to the debtor’s significant other
because he had no independent possessory interest in the premises.
Further, because only the chapter 7 trustee was authorized to assume the
lease, the debtor was not entitled to notice and hearing on a
stipulation between the landlord and the trustee regarding the lease.
Regarding the abandonment of the legal claims, the debtor argued that
the trustee’s delay in pursuing the claims implied that the
trustee had decided to abandon them. However, any delay was due to the
debtor’s lack of cooperation, and the trustee did begin to pursue
the claims. Toledano v. Kittay (In re Toledano),
2003 Bankr. LEXIS 1173, — B.R. — (Bankr. S.D.N.Y. August 7,
2003) (Lifland, B.J.).
Collier on Bankruptcy, 15th Ed. Revised 5:541.01 [back to top]
ABI Members, click here to get the full opinion.
Police power exception to automatic
stay applied to state action to enforce consumer protection
laws. D. Del. PROCEDURAL POSTURE:
Appellant Consumer Protection Division of the Office of the Attorney
General for the State of Maryland challenged a decision from the
bankruptcy court, which granted appellee debtor’s motion to
enforce the automatic stay of 11 U.S.C. § 362(a) and held the
Division could not pursue restitution in its action against the debtor
to enforce Maryland’s Consumer Protection Act and Custom Home
Protection Act. OVERVIEW: The Division alleged that the
debtor violated Maryland law in the sale of new homes to Maryland
consumers and sought an order against the debtor that provided
injunctive relief, restitution, civil penalties, and costs. After
receiving notice of the enforcement action, the debtor filed a motion,
seeking a determination that the action was subject to the automatic
stay under 11 U.S.C. § 362(a). The bankruptcy court determined that
the Division could pursue the action except that it could not pursue any
restitution. On appeal, the court held that enforcement of actions to
protect the public health and safety merited a higher priority than the
debtor’s rights to an automatic stay. The court concluded that the
Division’s enforcement action was not intended to protect the
government’s interest in the debtor’s property but related
to matters of public safety and welfare and was intended to effectuate
public policy. Therefore, the police and regulatory power exception set
forth in sections 362(b)(4), (5) applied to the enforcement of automatic
stay in the Division’s enforcement action. Consumer
Prot. Div. v. Nanticoke Homes, Inc. (In re Nanticoke Homes,
Inc.), 2003 U.S. Dist. LEXIS 17704, — B.R.
— (D. Del. September 30, 2003) (Robinson, D.J.).
Collier on Bankruptcy, 15th Ed. Revised 3:362.05 [back to top]
ABI Members, click here to get the full opinion.
Bankruptcy Code
requirement that postpetition attorneys’ fees and costs be
approved by the bankruptcy court did not give rise to a cause of action
for its violation. E.D. Pa. PROCEDURAL
POSTURE: Plaintiff debtors brought a class action against
defendant bank, as mortgagee or debt servicer, claiming that the
attorneys’ fees and costs allegedly incurred during bankruptcy
proceedings which were not approved by the bankruptcy court were illegal
under federal and state law and the bankruptcy code. The matter was
transferred to the bankruptcy court as an adversary action. The suit was
dismissed. The debtors appealed. OVERVIEW: The debtors
conceded that their claims for violations of federal and state lending
laws, breach of contract, and for injunctive relief were properly
dismissed. Accordingly, the only issue before the court was whether or
not the debtors stated a viable cause of action for violations of 11
U.S.C. §§ 105 and 506(b). In essence, the debtors interpreted
section 506(b) to mean that any bankruptcy-related attorneys’ fees
and costs assessed by the bank after the bankruptcy petition was filed
were not allowed without application to and approval by the bankruptcy
court. They further interpreted 11 U.S.C. § 105(a) as conferring
upon them the right to bring a private cause of action for a violation
of 11 U.S.C. § 506(b). The court concluded that Congress did not
authorize or intend to authorize a private right of action for a
violation of 11 U.S.C. § 506(b) under either 11 U.S.C. §
105(a) or 11 U.S.C. § 506(b) itself.Henthorn v. GMAC
Mortg. Corp. (In re Henthorn), 2003 U.S. Dist. LEXIS 16893,
— B.R. — (E.D. Pa. September 23, 2003) (Joyner,
D.J.).
Collier on Bankruptcy, 15th Ed. Revised 4:506.04 [back to top]
ABI Members, click here to get the full opinion.
4th Cir.
Dismissal of chapter 7 bankruptcy with
prejudice and denial of debtor’s attorneys’ fees and costs
upheld. S.D. W. Va. PROCEDURAL
POSTURE: Appellant debtor filed for chapter 7 protection in the
bankruptcy court. The bankruptcy court granted appellee creditor’s
motion to dismiss an adversary proceeding with prejudice and granted the
debtor’s motion requesting an evidentiary hearing. The debtor
appealed the order dismissing the case. OVERVIEW: The
debtor argued that the bankruptcy court erred in refusing to give him an
evidentiary hearing on his 11 U.S.C. § 523(d) request for
attorneys’ fees and its decision that the creditor’s
complaint was substantially justified. Since the bankruptcy court fully
entertained the parties’ respective position on the issue of
attorneys’ fees, the district court rejected the debtor’s
contention that it failed to conduct a hearing under section 523(d).
Moreover, the creditor was substantially justified in filing the
complaint in the adversary proceeding because at the time the complaint
was filed, the creditor relied on the discrepancy between the
debtor’s financial information as provided in two loan
applications and the bankruptcy filings. Once it obtained the
debtor’s financial information for the year in question and
understood the debtor’s intent to include his wife’s income
with his as part of the stated monthly income, the creditor moved to
dismiss the adversary proceeding. Thus, the debtor was not entitled to
an award of attorneys’ fees and costs. Walker v. Star
USA Fed. Credit Union (In re Walker), 2003 U.S. Dist.
LEXIS 16787, — B.R. — (S.D. W. Va. September 24, 2003)
(Hallanan, Sr. D.J.).
Collier on Bankruptcy, 15th Ed. Revised 4:523.27 [back to top]
ABI Members, click here to get the full opinion.
Bankruptcy court properly
set aside deeds of trust affecting property held by debtor and spouse as
tenants by the entirety. W.D. Va. PROCEDURAL
POSTURE: On appeal, appellant/cross appellee debtor contended
that the bankruptcy court erred in finding that two deeds of trust could
be avoided but only to the extent necessary to pay the creditors and
otherwise to remain in effect. Cross appellant bank contended that the
bankruptcy court erred in denying the bank’s motion to dismiss the
chapter 11 case for lack of good faith and improper purpose.
OVERVIEW: The bank also argued that it was error for
the bankruptcy court to fail to address or sustain its contention that
the debtor was estopped to assert or recover upon the causes of action
set forth in the adversary proceeding, that the determination that the
debtor met her burden of proof under Va. Code § 55-80 and Tenn.
Code § 66-3-101 was clearly erroneous, and that it was error to set
aside the deeds of trust with respect to the interest of the
debtor’s husband, a nondebtor, non-plaintiff. The court rejected
the parties’ arguments. The property held by the debtor and her
husband as tenants by the entirety was to be included in the bankruptcy
estate, therefore, the bankruptcy court had jurisdiction over the
property and properly set aside the deeds of trust affecting the
properties to the extent necessary to benefit the creditors but
otherwise to remain in effect. Even though it appeared that the
debtor’s purpose in filing for chapter 11 protection was to
preserve her home for her own use and benefit, that motivation did not
necessarily preclude her from utilizing the bankruptcy process. The fact
that her petition was not objectively futile defeated a bad faith filing
claim. Coleman v. Community Trust Bank (In re
Coleman), 2003 U.S. Dist. LEXIS 17628, — B.R.
— (W.D. Va. September 30, 2003) (Williams, Sr.
D.J.).
Collier on Bankruptcy, 15th Ed. Revised 5:544.09 [back to top]
ABI Members, click here to get the full opinion.
5th Cir.
Preference action against
employee of debtor’s parent company dismissed due to failure to
show that employee was an insider. Bankr. N.D. Tex.
PROCEDURAL POSTURE: Defendant, a former employee of the
chapter 7 debtors’ parent company, moved for partial summary
judgment on the bankruptcy trustee’s preference claim.
OVERVIEW: The parties agreed that the transfers at
issue were made more than 90 days prior to the bankruptcy filings, and
that under 11 U.S.C. § 547(b)(4)(B), the trustee had to show that
the employee was an insider of the debtors at the time of the transfers
in order to prevail. The trustee had no standing to assert claims on
behalf of the parent company. The trustee could only bring the
debtors’ claims. As a result, even if the employee exercised
control over the parent company at the time of the debtors’
transfers to him, the technical requirements of 11 U.S.C. § 547
would not be met. The trustee failed to show the requisite control of
the debtors that was required by section 547(b)(4)(B). While the trustee
raised a genuine issue of material fact regarding the employee’s
status as an insider of the parent company, the trustee failed to do so
regarding the debtors. On the basis of summary judgment record before
the court, the court found that the employee had no relationship,
contractual or otherwise, with the debtors at the time of the payments
in question, and the employee was not a creditor of the debtors when
they paid him $630,500 on behalf of their parent company.
Brown v. Sontheimer (In re Promedco of New England,
Inc.), 2003 Bankr. LEXIS 1266, — B.R. —
(Bankr. N.D. Tex. October 6, 2003) (Houser, B.J.).
Collier on Bankruptcy, 15th Ed. Revised 5:547.04 [back to top]
ABI Members, click here to get the full opinion.
Bankruptcy court properly denied fees
to trustee who was not disinterested. W.D. Ky.
PROCEDURAL POSTURE: Appellant bankruptcy trustee
appealed the decision of the bankruptcy court that determined the
trustee held an adverse position to appellee debtor and denied all fees
and expenses claimed by the trustee. OVERVIEW: The
trustee hired himself as counsel for the purpose of filing adversary
proceedings against the debtor. The trustee objected to the
debtor’s discharge and sought to set aside a fraudulent
conveyance. The trustee sought interim attorney fees and the bankruptcy
court awarded a reduced amount of the requested fees. The trustee and
the debtor entered into a settlement agreement which contained a
condition that the debtor would support the trustee’s request to
reconsider the previously disallowed fees. A year after the bar date for
creditor claims, the trustee filed seven claims on behalf of unsecured
creditors. The bankruptcy court concluded that the trustee had acted in
his own self-interest and denied the trustee’s fees altogether and
ordered that all previously awarded fees and expenses be disgorged. The
district court found that the bankruptcy court’s denial was not an
abuse of discretion as 11 U.S.C. § 327(a) specifically allowed a
court to deny allowance of compensation if the professional seeking
compensation was not disinterested. Having determined that the trustee
was not disinterested, the bankruptcy court did not err in failing to
approve his fee application. Schilling v. Smith (In re
Schilling), 2003 U.S. Dist. LEXIS 16865, — B.R.
— (W.D. Ky. August 5, 2003) (Simpson, D.J.).
Collier on Bankruptcy, 15th Ed. Revised 3:327.02 [back to top]
ABI Members, click here to get the full opinion
Chapter 7
trustee’s legal representation of creditor in another bankruptcy
represented a sanctionable conflict of interest. Bankr.
W.D. Ky. PROCEDURAL POSTURE: Debtor filed a
chapter 7 petition and chapter 7 trustee was appointed. Trustee moved
for the court to resolve an alleged conflict of interest where trustee
represented creditor in another matter as an attorney. United States
trustee moved for a determination on this conflict of interest issue and
to require disgorgement of certain fees if the court found conflict
existed. OVERVIEW: Based on the record of this case,
the bankruptcy court found that trustee’s representation of
creditor in another bankruptcy case while he also acted as attorney for
trustee in this case constituted a conflict of interest that justified
at least partial denial of compensation to him in his capacity as both
trustee and trustee’s attorney, pursuant to 11 U.S.C. §
326(d) and 328(c). Where he represented an interest adverse to the
interest of the estate with respect to the matter on which he was
employed, then he was subject to sanction under 11 U.S.C. § 328(c).
The court held that: (1) the compensation owed as trustee’s
attorney was reduced by the amount of fees paid to him by creditor for
his representation in another case; (2) the compensation owed as trustee
in this case was calculated without reference to the amounts by which
compensation as trustee’s attorney was reduced; and (3) the
disqualification as creditor’s attorney in the other bankruptcy
case and disqualification as trustee’s attorney were warranted.
In re Grieb Printing Co., 2003 Bankr. LEXIS 1186,
297 B.R. 82 (Bankr. W.D. Ky. July 14, 2003) (Fulton, B.J.).
Collier on Bankruptcy, 15th Ed. Revised 3:328.05
[back to
top]
ABI Members, click here to get the full opinion
Bankruptcy court
properly ordered disgorgement of attorney’s fee on grounds of
inaccurate filings, excessive amount, lack of benefit to debtor and harm
to creditors. W.D. Mich. PROCEDURAL
POSTURE: Appellant attorney appealed the bankruptcy
court’s order denying the attorney’s motion for
reconsideration of an order granting appellee United States
Trustee’s motion requesting review and disgorgement of attorney
compensation under 11 U.S.C. § 329(b) and Fed. R. Bankr. P. 2017.
OVERVIEW: Although the debtors were responsible for
providing the correct addresses for their creditors, the attorney was
obligated both ethically and as an officer of the court not to file
schedules and other disclosure documents that the counsel knew were
inaccurate. The attorney did no more than ask his clients for the
addresses, even though he knew at the time he filed the schedules that
they contained inaccurate creditor addresses. The bankruptcy court did
not err in concluding that the attorney should be held responsible for
filing inaccurate schedules where the attorney knew that they contained
inaccurate information. Moreover, the bankruptcy court did not abuse its
discretion in determining that the attorney’s fee exceeded the
reasonable value of the services provided. While the attorney did
actually perform services, those services did not benefit debtors in any
way and could have adversely affected several creditors. Thus, the
debtors did not receive a windfall as a result of the disgorgement.
Cotner v. United States Trustee (In re Wilson),
2003 U.S. Dist. LEXIS 17840, — B.R. — (W.D. Mich. September
30, 2003) (Quist, D.J.).
Collier on Bankruptcy, 15th Ed. Revised 3:329.04
[back to
top]
ABI Members, click here to get the full opinion
8th Cir.
Quarterly fees due United States trustee are not costs and were proper basis for monetary judgment upon chapter 11 dismissal. B.A.P. 8th Cir. PROCEDURAL POSTURE: Appellant debtor filed a chapter 11 petition. Appellee United States trustee moved to dismiss the case and for fees, which the court granted. The debtor challenged the court’s orders that: (1) dismissed the chapter 11 petition; and (2) directed the debtor to pay the United States trustee statutorily mandated quarterly fees. The debtor appealed from the Bankruptcy Court for the Eastern District of Arkansas. OVERVIEW: The bankruptcy appellate panel found that the debtor’s filed notice of appeal failed to effectively appeal from the bankruptcy court’s dismissal order of the chapter 11 case. Nowhere did the notice of appeal ever indicate that the debtor appealed from the court’s order of dismissal. The bankruptcy appellate panel also determined that if, somehow, the notice of appeal could be construed to act as a notice of an appeal from the dismissal order, it was clearly late, pursuant to Fed. R. Bankr. P. 8002(a). The panel also rejected the debtor’s attempt to avoid the problem with the timing of the notice of appeal by the assertion of the doctrine of unique circumstances where the debtor’s argument was both factually and legally insufficient. The court found that the monetary judgment requested by the United States trustee was not for costs, but was for fees provided by statute to which the United States trustee was entitled in every chapter 11 case pursuant to 28 U.S.C. § 1930(a)(6). They were not costs of the action. Adams v. Rendlen (In re Adams), 2003 Bankr. LEXIS 1256, — B.R. — (B.A.P. 8th Cir. October 7, 2003) (Kressel, C.B.J.).
Collier on Bankruptcy, 15th Ed. Revised 1:9.06 [back to top]
ABI Members, click here to get the full opinion
9th Cir.
Chapter 13 bankruptcy of debtors who ran day care business was not sufficiently complex to justify increased attorneys’ fees. Bankr. E.D. Cal. PROCEDURAL POSTURE: Before the court was an ex parte application by the chapter 13 debtors’ counsel requesting a modification (increase) of the court’s prior award of attorneys’ fees. OVERVIEW: Counsel was entitled to request a “Guideline Fee.” The issue before the court was whether counsel was entitled to the Guideline Fee for a “business case.” Among other things, the court stated that its chapter 13 Fee Guidelines did not require it to accept debtors’ (or counsel’s) characterization of the case. The court had an independent duty to review the fees and costs requested. Debtors operated a daycare facility which was their sole source of income. However, the fact that debtors were self-employed in a for-profit enterprise did not necessarily mean that their case had the unique issues and the level of complexity sufficient to warrant a higher level of compensation for their attorney. Based on the court’s review of the schedules, statement of financial affairs, claims filed, and the docket, the case did not appear to have the potential level of complexity to warrant the increased Guideline Fee for legal services. Accordingly, the court concluded that the “business” Guideline Fee was not necessary or reasonable in the case. Even if the case were a “business case,” the facts did not appear to justify the higher fee. In re Dorsett, 2003 Bankr. LEXIS 1194, 297 B.R. 620 (Bankr. E.D. Cal. August 18, 2003) (Lee, B.J.).
Collier on Bankruptcy, 15th Ed. Revised 3:330.01 [back to top]
ABI Members, click here to get the full opinion
Bankruptcy court judgment that lease settlement agreement was
not an executory contract was entitled to full credit in district
court. D. Kan. PROCEDURAL POSTURE: In
a case concerning a settlement agreement arising out of leases, which
case was also affected by a bankruptcy, defendants, who were also
counterclaim plaintiffs, filed a renewed motion to dismiss or for
summary judgment, based on the argument that the settlement agreement
was an executory contract rejected by the bankruptcy plan. Plaintiffs
filed a cross-motion for partial summary judgment.
OVERVIEW: It was undisputed that the bankruptcy
liquidation plan specifically retained jurisdiction to determine any
executory contract issues. Thus, the bankruptcy court had jurisdiction
to determine whether the settlement agreement was an executory contract
under 11 U.S.C. § 365. The bankruptcy court determined that the
agreement was not executory. The district court found that the
principles of collateral estoppel were applicable to the motion to
dismiss. Defendants’ only argument against giving full credit to
the bankruptcy court’s decision was that it was interlocutory and
in error. The bankruptcy court denied defendants’ motion for
reconsideration and the order was appealed. A judgment or order was
final for purposes of collateral estoppel until reversed on appeal,
modified, or set aside in the court of rendition. Defendants were
represented by counsel at a two-day evidentiary hearing on the identical
issue of whether the settlement agreement was an executory contract.
Therefore, the district court gave full credit to the bankruptcy
court’s order, and held that the order had collateral estoppel
effect and precluded defendants from pursing the same argument in the
district court. T&W Funding Co. XII, LLC v. Pennant
Rent-A-Car Midwest, Inc., 2003 U.S. Dist. LEXIS 16859,
— B.R. — (D. Kan. September 24, 2003) (Robinson,
D.J.).
Collier on Bankruptcy, 15th Ed. Revised 3:365.01 [back to top]
Bankruptcy court had no discretion
but to dismiss chapter 7 case filed after debtor sought voluntary
dismissal of chapter 13 case while motion for relief from stay was
pending. Bankr. S.D. Ga. PROCEDURAL
POSTURE: Debtor requested voluntary dismissal of a previous
chapter 13 bankruptcy case. At the time the debtor requested dismissal,
a bank had filed a motion for relief from stay and that motion was
pending at the time that case was dismissed. Shortly thereafter, the
debtor filed a case under chapter 7. Creditor moved to dismiss the
chapter 7 case pursuant to 11 U.S.C. § 109(g)(2).
OVERVIEW: The bankruptcy court rejected the
debtor’s argument that it had discretionary authority in its
application of 11 U.S.C. § 109(g)(2). The bankruptcy court
concluded from the language of 11 U.S.C. § 109(g)(2) that Congress
intended to make debtors who dismissed and refiled in the face of a
motion for relief ineligible, regardless of their subjective state of
mind or intent, and did not intend for the bankruptcy court to condition
the application of 11 U.S.C. § 109(g)(2) on a determination of the
debtor’s intent. Further, applying the statute as it was written
would not have lead to an absurd or unconstitutional result. While the
consequences were unfortunate for the debtor, the debtor was aware that
the motion for relief had been filed and that it was still pending when
he voluntarily requested dismissal of the prior case. Finally, the
bankruptcy court determined that 11 U.S.C. § 109(g)(2) was a
provision governing only the debtor’s eligibility for relief and
not the power of the bankruptcy court to afford such relief; any relief
received prior to the creditor’s challenge under 11 U.S.C. §
109(g)(2) could not be challenged for lack of jurisdiction.
In re Stuart, 2003 Bankr. LEXIS 1203, 297
B.R. 665 (Bankr. S.D. Ga. July 25, 2003) (Davis, B.J.).
Collier on Bankruptcy, 15th Ed. Revised 2:109.08 [back to top]
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Judgment lien could not
be avoided as impairing homestead exemption in a state where the
exemption was unlimited. Bankr. S.D. Fla.
PROCEDURAL POSTURE: Movant debtor filed a motion under
11 U.S.C. § 522(f) to avoid a judicial lien with regard to the
alleged lien of respondent judgment creditor. OVERVIEW:
The creditor obtained a foreign judgment against the debtor prior to the
time the debtor filed her chapter 7 bankruptcy. Prior to the bankruptcy
filing, the judgment was domesticated in Florida by the filing of a
certified copy of the judgment. The debtor asserted that by filing the
certified copy of the judgment, the creditor obtained a lien on the
debtor’s homestead property, which impaired the debtor’s
homestead exemption and constituted a cloud upon the debtor’s
title. The court denied the motion. In Florida, the debtor could claim
an unlimited exemption value for her homestead property. 11 U.S.C.
§ 522(f) could only be used to avoid a lien where the real property
exemption amount was limited by either the federal exemptions or state
exemptions. Section 522(f) did not apply to the debtor’s
situation. Also, while Fla. Stat. ch. 55.10 provided that the recording
of a certified copy of a judgment created a lien against real property,
Fla. Const. art. 10, section 4(a)(1) provided that homestead property
was exempt from forced sales and that no judgment could represent a lien
on the property. Thus, the judgment did not impair the debtor’s
homestead exemption. In re Epstein, 2003
Bankr. LEXIS 1179, — B.R. — (Bankr. S.D. Fla. July 29, 2003)
(Friedman, B.J.).
Collier on Bankruptcy, 15th Ed. Revised 4:522.11 [back to top]
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Debtor who signed
standard credit card agreement and made minimum monthly payments even
while unemployed did not act fraudulently. Bankr. N.D.
Ala. PROCEDURAL POSTURE: Defendant debtor filed a
chapter 7 petition. Plaintiff creditor filed an adversary action against
the debtor and sought a determination that certain credit card debt was
nondischargeable pursuant to 11 U.S.C. § 523(a)(2). The creditor
also requested attorneys’ fees and costs.
OVERVIEW: The court disagreed that the debtor acted in
a fraudulent manner when she used the creditor issued credit card. The
only representation she made when she used the card was that she would
abide by the credit card agreement and would make her minimum monthly
payments. The court did not find that these representations were false,
as her testimony established that she did intend to make the monthly
payments at the time she made the charges. The court could not conclude
that the debtor acted with reckless disregard for her financial
situation, where she somehow managed to make her minimum monthly
payments even during her period of unemployment. The creditor extended
more and more credit to the debtor throughout the years, yet apparently
never checked her credit history after the account was initially opened.
The creditor failed on the 11 U.S.C. § 523(a)(2)(A) fraud assertion
and it was also not entitled to the presumption of nondischargeability
in 11 U.S.C. § 523(a)(2)(C) where it failed to show that the debtor
incurred more than $1,150 of consumer debt for luxury items within the
60-day period preceding the bankruptcy filing. Compass Bank
v. Meyer (In re Meyer), 2003 Bankr. LEXIS 1195, 296 B.R. 849
(Bankr. N.D. Ala. February 25, 2003) (Mitchell, B.J.).
Collier on Bankruptcy, 15th Ed. Revised 4:523.08
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