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The Fourth Circuit affirmed the bankruptcy court's denial of the receiver's motion to dismiss creditor's bankruptcy petition for cause under 11 U.S.C. 707(a). The court held that the bankruptcy court did not abuse its discretion in denying the motion to dismiss where creditor's decision to file for bankruptcy did not arise to the level of bad faith. The court noted that the standard of review was of paramount importance here where the court did not ask whether it necessarily would have reached the same result as the bankruptcy court, but did note the bankruptcy court's greater familiarity with creditor's case and the fact that the bankruptcy court gave good and sound reasons for ruling as it did. View "Janvey v. Romero" on Justia Law

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SPV, the assignee of Optimal Strategic, filed suit against UBS and its affiliated entities and individuals (collectively, Access), alleging that UBS and Access aided and abetted the Bernard L. Madoff Investment Securities LLC and Bernard L. Madoff by sponsoring and providing support for two European-based feeder funds. The district court subsequently denied SPV's motion to remand the matter to state court and then granted separate motions to dismiss the complaint. The Second Circuit held that it had jurisdiction over this appeal; this litigation was "related to" the Madoff/BLMIS bankruptcies; the USB defendants lacked sufficient contacts with the United States to allow the exercise of general jurisdiction; the connections between the USB Defendants, SPV's claims, and its chosen New York forum were too tenuous to support the exercise of specific jurisdiction; and the court rejected SPV's two different theories of proximate cause. View "SPV OSUS Ltd. v. UBS AG" on Justia Law

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Debtors filed a Chapter 7 bankruptcy petition. They included their interest in Franklin, Ohio real property with three mortgages. PNC held the first two. The home was “underwater.” The Trustee filed an adversary proceeding to avoid PNC’s alleged first mortgage under 11 U.S.C. 544(a)(1) and 544(a)(3) and Ohio law. The bankruptcy court stayed the proceeding pending resolution of questions of law that had been certified to the Ohio Supreme Court in another matter. The Ohio Supreme Court ultimately responded that O.R.C. 1301.401 applies to all recorded Ohio mortgages and acts to provide constructive notice to the world of a recorded mortgage that was deficiently executed under O.R.C. 5301.01. Although the parties agreed that the mortgage's acknowledgment clause was defective and did not substantially comply with section 5301.01, PNC asserted that section 1301.401 vitiates the Trustee’s power to avoid recorded mortgages based on defects in their execution as either a hypothetical bona fide purchaser under 11 U.S.C. 544(a)(3) or hypothetical judicial lien creditor under 11 U.S.C. 544(a)(1). The bankruptcy court denied a motion to dismiss. The Sixth Circuit Bankruptcy Appellate Panel affirmed, finding the Ohio Supreme Court did not address the Trustee’s avoidance powers as a hypothetical judicial lien creditor, and the Ohio Legislature did not make its amendments retroactive. View "In re Oakes" on Justia Law

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Timothy and Belva Thorpe bought an Illinois house as joint tenants in 1987. They lived in that home until after Belva filed for divorce in October 2012. Timothy filed for bankruptcy protection in June 2013. A month later, an Illinois divorce court awarded Belva the marital home. At the moment Belva filed for divorce, section 503(e) of the Illinois Marriage and Dissolution of Marriage Act granted Timothy and Belva contingent rights in the entire house. The bankruptcy estate acquired Timothy’s half-interest in the marital home at the moment he declared bankruptcy. The district court held that Timothy’s estate took his half-interest subject to Belva’s contingency so that the divorce court’s award divested the estate of any right to the house. The Seventh Circuit affirmed, rejecting the trustee’s argument based on the second sentence of section 503(e), which provides that contingent interests in marital property “shall not encumber that property so as to restrict its transfer, assignment or conveyance.” The plain statutory text demonstrates that the bankruptcy estate took Timothy’s half-interest in the marital home subject to Belva’s contingent interest. View "Reinbold v. Thorpe" on Justia Law

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The Fifth Circuit affirmed the district court's decision vacating and remanding the bankruptcy court's order calling for a reduction in the trustee's requested fee. Determining that creditors have standing, the court held that the percentage amounts listed in 8 U.S.C. 326 are presumptively reasonable for Chapter 7 trustee awards. The court found the reasoning in Mohns, Inc. v. Lanser, 522 B.R. 594, 601 (E.D. Wis.), persuasive in addressing the statutory provisions at issue. Therefore, the court remanded for redetermination of the award. View "Caillouet v. JFK Capital Holdings, LLC" on Justia Law

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Plaintiffs Adrian and Angela Lee asked the bankruptcy court to declare that the automatic stay in Adam and Jennifer Peeples’ bankruptcy case applied to a separate lawsuit Adrian Lee filed in state court against defendant Scott McCardle. The Lees also asserted that the automatic stay prevented McCardle from collecting attorney’s fees levied against Adrian Lee in that state-court lawsuit. The Lees sought damages against McCardle for willfully violating the automatic stay. The bankruptcy court found, and the district court agreed, that the automatic stay didn’t apply to the state-court lawsuit, thus granting summary judgment to McCardle. The Lees appealed, arguing that the district court erred in ruling that the automatic stay didn’t apply. The Tenth Circuit did not reach that question; instead, the Court vacated the district court’s judgment against Angela Lee because she lacked Article III standing to bring this lawsuit, and affirm summary judgment against Adrian Lee because his claims didn’t fall within the Bankruptcy Code’s “zone of interests.” View "Lee v. McCardle" on Justia Law

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An election under 11 U.S.C. 1111(b)(2) does not require that a due-on-sale clause be included in a reorganization plan. 11 U.S.C. 1129(a)(10), which requires that at least one impaired class accept a cramdown plan, applies on a per plan basis, rather than a per debtor basis. In this case, the Ninth Circuit affirmed the district court's decision affirming the bankruptcy court's order that approved the Chapter 11 cramdown reorganization plan of five related entities (debtors). View "In the Matter of Transwest Resort Properties, Inc." on Justia Law

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The First Circuit affirmed the sale of Debtor’s remaining finished goods inventory to Schleicher and Stebbins Hotels LLC (S&S) after Debtor auctioned of its assets pursuant to section 363 of the Bankruptcy Code. Debtor and S&S completed the sale with the bankruptcy court’s approval. Mission Product Holdings, Inc. (Mission), an unsuccessful bidder at the auction, appealed, challenged the inventory sale. The bankruptcy court ultimately approved the sale of the inventory to S&S. The Bankruptcy Appellate Panel (BAP) concluded that the bankruptcy court applied the correct legal standards and that S&S was a good faith purchaser. The First Circuit affirmed, holding (1) S&S was a good faith purchaser entitled to the protection of section 363(m); and (2) Mission’s remaining challenges to the sale order were therefore rendered statutorily moot. View "Mission Product Holdings, Inc. v. Old Cold, LLC" on Justia Law

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The “senior Veluchamys” earned great wealth in business. They acquired two banks in the 1990s and merged them. When the bank suffered financial problems, the senior Veluchamys personally borrowed and guaranteed loans totaling $40 million from a predecessor of Bank of America (BoA). The loans went into default in 2008. BoA obtained a judgment against the senior Veluchamys in 2010 for over $43 million. The senior Veluchamys filed a bankruptcy petition in 2011. BoA filed an adversary proceeding against them and their children, the “junior Veluchamys”, alleging a scheme to hinder, delay, or defraud creditors by attempting to hide tens of millions of dollars from BoA and other creditors. The bankruptcy court determined the evidence established all of BoA’s major allegations. The district court and Seventh Circuit agreed, rejecting an argument that turnover to the Estate under 11 U.S.C. 542 was not the appropriate remedy regarding $5,500,000 they claim they transferred to a company in India, particularly when that company was not joined as a necessary party. The Seventh Circuit upheld the language of the district court’s judgment requiring turnover of specific jewelry; its decision in holding the junior Veluchamys jointly and severally liable; and decisions concerning specific stock holdings. View "Veluchamy v. Bank of America, N.A." on Justia Law

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In 1995, Peoria signed a lease that allowed RTC to construct and operate a gas conversion project at the city’s landfill, providing that when the lease terminated, the city had an absolute right to retain, at no cost, the “structures” and “below‐grade installations and/or improvements” that RTC installed. Years later, RTC entered bankruptcy proceedings. Banco provided RTC with postpetition financing secured with liens and security interests in effectively all of RTC’s assets. RTC defaulted. Litigation ensued. The city notified RTC that it was terminating the lease and would retain the structures and installations. After RTC stopped operating the gas conversion project, Peoria modified the system to comply with environmental regulations for methane and other landfill gasses and continued to use the property. Banco sued, alleging unjust enrichment and arguing that it had a better claim to the property because its loan was secured by a lien on all of RTC’s assets and the bankruptcy court had given its loan “super-priority” status. The Seventh Circuit affirmed summary judgment in favor of the city. No matter the priority of its claim to RTC’s assets, Banco has no claim to Peoria’s assets. By the terms of the lease between RTC and the city, the disputed structures and installations are city property. The lease gave RTC no post‐termination property interest in that property. View "Banco Panamericano, Incorporat v. City of Peoria, Illinois" on Justia Law