Debtors claimed an exemption for funds held in an individual retirement account (IRA). The Fifth Circuit upheld the bankruptcy court's holding that the funds had lost their exempt status because Texas law provides that funds withdrawn from a retirement account remain exempt only if rolled over into another retirement account within sixty days. In this case, debtors subsequently withdrew the funds from the IRA and did not roll them over into another IRA. Accordingly, the court affirmed the judgment. View "Hawk v. Engelhart" on Justia Law

SemGroup purchased oil from producers and resold it to downstream purchasers. It also traded financial options contracts for the right to buy or sell oil at a fixed price on a future date. At the end of the fiscal year preceding bankruptcy, SemGroup’s revenues were $13.2 billion. SemGroup’s operating companies purchased oil from thousands of wells in several states and from thousands of oil producers, including from Appellants, producers in Texas, Kansas, and Oklahoma. The producers took no actions to protect themselves in case 11 of SemGroup’s insolvency. The downstream purchasers did; in the case of default, they could set off the amount they owed SemGroup for oil by the amount SemGroup would owe them for the value of the outstanding futures trades. When SemGroup filed for bankruptcy, the downstream purchasers were paid in full while the oil producers were paid only in part. The producers argued that local laws gave them automatically perfected security interests or trust rights in the oil that ended up in the hands of the downstream purchasers. The Third Circuit affirmed summary judgment in favor of the downstream purchasers; parties who took precautions against insolvency do not act as insurers to those who took none. View "In re: SemCrude LP" on Justia Law

The Fifth Circuit affirmed the bankruptcy courts' findings that debtor was involved in a scheme designed to deprive mortgage holders of foreclosure sale proceeds, and that the damages flowing from this scheme were nondischargeable debts pursuant to 11 U.S.C. 523(a)(4) and 523(a)(6). The court held that debtor's debts to the Countrywide Plaintiffs (and Bank of America) "arise" from larceny and were nondischargeable in bankruptcy. The court also held that debtor failed to demonstrate that he was prejudiced by the bankruptcy court entering the Countrywide Adversary Judgment without lifting the automatic stay in his Chapter 7 case. View "Cowin v. Countrywide Home Loans, Inc." on Justia Law

Catherine’s parents, Mary and Henry, settled an inter vivos trust with real estate as the trust property. The trust document included a standard spendthrift provision meant to shield the trust’s future benefits from the reach of beneficiaries and their creditors and directed the trustee to evenly divide all remaining principal among their three children at the time of the surviving spouse’s death. Any share belonging to a child who did not survive the surviving spouse by 60 days would go to the child’s successors. The trustee was given the discretion to delay the distribution for six months. Henry survived Mary and died in July 2012. Catherine and her husband filed for Chapter 7 bankruptcy seven months later in February 2013. They claimed $30,000 for “Wife’s Father’s Estate” as property exempt from liquidation under 11 U.S.C. 522. The bankruptcy trustee objected, arguing that her father’s death gave Catherine an immediate and unconditional right to receive her interest in the trust property, which removed the interest from the purview of the trust’s spendthrift provision. The bankruptcy court, district court, and Seventh Circuit agreed. Catherine’s trust interest fully vested before the bankruptcy filing, so the property belongs to the bankruptcy estate. View "Carroll v. Takada" on Justia Law

The Eighth Circuit affirmed an order denying a discharge on the grounds that debtor concealed his property in interest in a fishing boat and trailer, and made a false oath about the boat. The court rejected debtor's several procedural objections to the bankruptcy court's order denying the discharge and held that the bankruptcy court did not clearly err in finding the requisite intent. Therefore, the bankruptcy court properly denied the discharge under 8 U.S.C. 727(a)(2). The court need not address the bankruptcy court's alternative determination. View "Sears v. Sears" on Justia Law

The Eighth Circuit affirmed the grant of summary judgment in favor of several creditors in this Chapter 11 debtor-in-possession case. The court held that the judgment allowed proofs of claim totaling over $5.2 million and there was no merit to debtor's several objections. In this case, the sale agreement was not executory; none of debtor's contractual defenses have merit because all of the challenged conduct occurred after debtor filed for bankruptcy; and the court rejected debtor's procedural arguments. View "Sears v. Sears" on Justia Law

The Burkes filed a Chapter 7 bankruptcy petition, listing their Chattanooga home as worth $108,000, with a $91,581 mortgage debt. Jahn, the appointed trustee, sought an eviction order, stating that he could not sell the property with the debtors living there and that its value was about $200,000. The Burkes moved to compel the trustee to abandon the property, alleging that their equity would provide little value to creditors. Jahn tendered a check for $7,500, the value of their Tennessee statutory homestead exemption. The Burkes rejected the tender; their first witness estimated that the residence would be worth $171,000 after repairs related to mold and roofing that would cost $63,000, leaving a net value of $108,000. The Burkes’ second appraiser valued the home at $185,000 after making repairs estimated at $60,000, for a final appraisal of $125,000. Jahn’s realtor testified that the Burkes’ residence was worth $204,000, based on his tour of the property. Jahn's home inspector testified that there was no problem with the roof and that the mold issue had been overstated. The bankruptcy court granted the Burkes’ motion to abandon, noting that houses are often sold while occupied by their owners. The district court and Sixth Circuit affirmed. Under these circumstances, the trustee cannot simply tender the homestead exemption and cause the debtors to “skedaddle.” View "Jahn v. Burke" on Justia Law

11 U.S.C. 363(f), which authorizes a trustee to sell a debtor's assets free and clear of third-party interests, applied to the facts of this case, and did not conflict with section 365(h), which protects the rights of lessees, because the trustee did not "reject" the leases. Therefore, the Ninth Circuit affirmed the district court's judgment affirming the bankruptcy court's decision that a bankruptcy trustee's sale of debtor's property was free and clear of unexpired leases. View "Pinnacle Restaurant at Big Sky, LLC v. CH SP Acquisitions, LLC" on Justia Law

The Eighth Circuit affirmed the district court's decision affirming the bankruptcy court's sustaining of debtors' objection to the proof of claim. The court held that 8 U.S.C. 502 does not preempt Arizona Revised Statute section 33-814, which sets a 90-day limit for commencing or continuing a civil action in Arizona state court. In this case, the 90-day limit had not expired before debtors filed their Chapter 11 petition. The court also held that, because creditor's state court action was dismissed shortly after the trustee's sale for failure to perfect service on defendants, it was not "maintained" within the meaning of Valley Nat'l Bank of Ariz. v. Kohlhase, 897 P.2d 738, 741 (Ariz. Ct. App. 1995). In Kohlhase, the court adopted an Arizona district court's holding that an action on the debt qualified as a deficiency action under A.R.S. section 33-814 even though the creditor filed the action before the trustee's sale and did not amend the complaint to allege a deficiency after the trustee's sale. View "Melikian Enterprises, LLLP v. McCormick" on Justia Law

Marty and Cindy Frantz executed a series of commercial guaranties so that Idaho Independent Bank (“Bank”) would lend money to Eagle Ridge on Twin Lakes, Inc. (“Eagle Ridge”), a closely held corporation in which the Frantzes held a majority interest. Bank filed this action against the Frantzes to recover on their commercial guaranties. The Frantzes filed an answer in which they admitted the material allegations in the complaint, but asserted affirmative defenses and counterclaims against Bank. They later amended their answer to include a third-party claim against Eagle Ridge. The Frantzes initially filed a petition under chapter 11 of the bankruptcy code the day before Mr. Frantz’s deposition was to occur; the Frantzes’ bankruptcy was converted to a liquidation case under chapter 7, and a trustee was duly appointed for the estate. Less than two weeks before the trial on Bank’s adversary proceeding in the bankruptcy case, the Frantzes filed a voluntary waiver of discharge, and the bankruptcy court approved the waiver. As a result, the bankruptcy court was deprived of jurisdiction to hear the adversary proceeding, and it dismissed it without prejudice. However, the court did award sanctions in the sum of $49,477.46 against the Frantzes and their attorney, jointly and severally, for their conduct during the course of the adversary proceeding. The court found that their conduct constituted misuse of litigation tactics to cause economic injury to an opponent and its counsel in the form of increased litigation costs. Bank filed a notice in this case that because of the waiver of discharge, the automatic stay from the bankruptcy court was terminated. Bank then moved for summary judgment. The district court entered a judgment against the Frantzes “in the amount of $9,193,546.50, plus pre-judgment interest at the rate of $2,475.02 per diem from September 16, 2015, until the date this Judgment is entered.” Because the Frantzes' third-party claim against Eagle Ridge that was yet unresolved, the court certified the judgment as final pursuant to Rule 54(b) of the Idaho Rules of Civil Procedure. The Frantzes filed a motion for reconsideration, and the court denied that motion. They then timely appealed, arguing the district court erred in denying them affirmative defenses based upon an alleged breach of contract. Finding no reversible error, the Idaho Supreme Court affirmed. View "Idaho Independent Bank v. Frantz" on Justia Law