Justia Bankruptcy Opinion Summaries

The First Circuit held that the district court correctly denied the Commonwealth of Puerto Rico's motions for reconsideration at issue in this appeal insofar as they might be construed as motions to apply an automatic stay under the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) to either dismiss a 42 U.S.C. 1983 action or a settlement agreement that had not yet been enforced, holding that the circuit court did not err.This case stemmed from a settlement following a section 1983 suit against a Commonwealth officer in the officer's individual capacity. After the settlement agreement was filed under seal and the district court had dismissed the case with prejudice, and before the first installment of the agreed settlement payments was due, the Financial Oversight and Management Board filed a petition for bankruptcy relief on behalf of the Commonwealth under Title III of PROMESA. Appellant filed a motion in opposition, arguing that the automatic stay was not applicable in his case. The district court granted the opposition. The Commonwealth filed a motions for reconsideration, which the district court denied. The First Circuit affirmed, holding that the district court did not err in denying the Commonwealth's motions for reconsideration insofar as they may be construed as motions to apply PROMESA's automatic stay to either the dismiss section 1983 action or the settlement agreement. View "Diaz-Morales v. Rubio-Paredes" on Justia Law

The First Circuit vacated the order of the district court requiring immediate payment of a $10,000 settlement sum by Defendant, the Secretary of Corrections to Puerto Rico, and remanded with instructions to stay Plaintiff's effort to recover on the settlement, holding that the automatic stay provision of the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) applied.Plaintiff brought this suit under 42 U.S.C. 1983 against Defendant and others, alleging that the defendants had been deliberately indifferent to his medical needs while he was an inmate at the Baymon Correctional Facility. The parties eventually settled for $50,000. At issue was who was responsible to pay the remaining $10,000 of that sum. The district court ordered Defendant, and not the Commonwealth, to pay the balance of the settlement amount. Defendant appealed, arguing that Plaintiff's effort to collect the $10,000 should have been stayed under the automatic stay provision of PROMESA. The First Circuit agreed, holding that, given the manner in which Plaintiff styled his effort to recover, the automatic stay properly applied. View "Colon-Torres v. Negron-Fernandez" on Justia Law

After the Circuit City Trustee sought a ruling in 2019 on his liability for quarterly fees assessed under a 2017 Amendment to the bankruptcy fees provisions of the United States Code (28 U.S.C. 1930(a)(6)(B)), the Bankruptcy Court for the Eastern District of Virginia ruled that the fees aspect of the 2017 Amendment is unconstitutional. The U.S. Trustee appealed and the Circuit City Trustee cross-appealed, jointly certifying these appeals to the Fourth Circuit, which the court granted and consolidated.The Fourth Circuit ruled in favor of the U.S. Trustee in both appeals, reversing the Bankruptcy Opinion's uniformity decision challenged by the U.S. Trustee, and affirming the Opinion's retroactivity decision challenged by the Circuit City Trustee. The court concluded that the 2017 Amendment does not contravene the uniformity mandate of either the Uniformity Clause or the Bankruptcy Clause. The court also concluded that Congress clearly intended for the 2017 Amendment to apply to all disbursements made after its effective date, and it intended for the Amendment to be prospective. Accordingly, the court remanded to the bankruptcy court for further proceedings. View "Siegel v. Fitzgerald" on Justia Law

The First Circuit affirmed the decision of the Bankruptcy Appellate Panel for the First Circuit (BAP) affirming the judgment of the bankruptcy court finding that Debtor defaulted on his obligation and refusing to grant him a discharge, holding that Debtor's assignments of error were unavailing.Debtor filed a petition for Chapter 13 bankruptcy in the District of Massachusetts. The case was subsequently converted to a Chapter 7 case. After Debtor failed to file any of the documents mandated by court orders the court entered a further order requiring Debtor to file the overdue documents by a certain date. Debtor did not heed the order. After a show cause hearing, the bankruptcy court denied Debtor a discharge and dismissed his petition for failing to ignore the court's orders. The BAP affirmed. The First Circuit affirmed, holding that Debtor received the constitutional protections to which he was entitled and that, due to Debtor's conduct, the bankruptcy court's denial of a discharge was within its discretion. View "Francis v. Desmond" on Justia Law

The United States Court of Appeals for the Eleventh Circuit certified to three questions of law to the Georgia Supreme Court relating to a lawsuit brought in federal district court by Fife Whiteside, the trustee of the bankruptcy estate of Bonnie Winslett. Whiteside sued GEICO to recover the value of Winslett’s failure-to-settle tort claim against GEICO so that the bankruptcy estate could pay creditor Terry Guthrie, who was injured in an accident caused by Winslett. The certified questions certified asked the Supreme Court to analyze how Georgia law applied to an unusual set of circumstances that implicated both Winslett’s duty to give GEICO notice of suit and GEICO’s duty to settle the claim brought against Winslett. The Supreme Court was unable to give unqualified “yes” or “no” answers to two of the certified questions as they were posed; rather, the Court answered the questions only in the context of the circumstances of this particular case. "Winslett remains liable to Guthrie, even if her bankruptcy trustee succeeds on the failure-to-settle claim against GEICO; therefore, if the bankruptcy estate does not recover enough from GEICO to satisfy Guthrie’s judgment, the estate would not be fully compensated for Winslett’s damages, and GEICO would escape responsibility for breaching its settlement duty to Winslett. Such an outcome would deny Winslett the full measure of compensatory damages allowed under Georgia law." View "GEICO Indemnity Co. v. Whiteside" on Justia Law

Debtors' claims relate to matters stemming from the 2018 foreclosure sale of their home. Mila Homes, represented by its counsel, purchased the property at the foreclosure sale.The Bankruptcy Appellate Panel affirmed the bankruptcy court's orders denying debtors' motions for sanctions against Mila's counsel; to alter or amend the order denying the request for sanctions and for additional findings of fact and conclusions of law; and seeking to disqualify the bankruptcy judge. The panel concluded that the bankruptcy court did not err by denying debtors' sanctions request based on counsel's statements on behalf of Mila Homes in the Mila Stay Motion. In this case, the bankruptcy court provided debtors with a hearing, listened patiently to their arguments, read methodically through the Bankruptcy Sanctions Motion, and addressed in detail why nothing in the Mila Stay Motion violated Rule 9011. Finally, the panel denied debtors' requests for judicial notice and awarded Mila's counsel $3,000 in sanctions from debtors. The panel concluded that the bankruptcy court did not err in denying debtors' fifth motion for disqualification of recusal and that debtors' appeal is frivolous. View "Scott v. Anderson" on Justia Law

This appeal arose from a final order entered by the bankruptcy court denying debtor's motion for "Revised and Corrected Motion for Relief From Judgment or Order and/or Reopen the Case, Motion for Evidentiary Hearing/Appointment of Counsel." The Bankruptcy Appellate Panel dismissed the appeal as untimely and concluded that debtor's notice of appeal was not timely filed pursuant to Federal Rule of Bankruptcy Procedure 8002(a)(a). In this case, debtor recognized that his appeal was beyond the 14-day limit and debtor did not seek an extension of time to file his appeal from the bankruptcy court pursuant to Rule 8002(d). The panel noted that, to the extent debtor is raising an issue involving service of the order, and any related time period for appeal, it is properly addressed in the first instance by the bankruptcy court not in the Notice of Appeal. View "Reichel v. Snyder" on Justia Law

To finance the purchase of a home in 2008, Wood borrowed $39,739.44. About six years later, Wood defaulted, with an unpaid balance of $23,066.66. The Department of Housing and Urban Development (HUD), which had insured the loan, paid that amount and sent Wood a Notice of Intent to Collect by Treasury Offset, using income tax overpayments. In 2017, Treasury offset Wood's federal tax overpayment of $9,961 toward the debt. In 2018, Wood filed a Chapter 7 bankruptcy petition, opting to exempt any 2017 income tax overpayment. Treasury nonetheless offset a $6,086 overpayment.Wood requested that the bankruptcy court void HUD’s lien and order a return of the $6,086. The court concluded that a debtor’s tax overpayment becomes property of the estate, protected by the stay, and the debtor may exempt the overpayments and defeat a governmental creditor’s right to setoff. The district court agreed, stating that because Treasury had knowingly intercepted the overpayments after the Woods filed for bankruptcy, equity did not favor granting permission to seek relief from the automatic stay.The Fourth Circuit remanded. The protections typically accorded properly exempted property under 11 U.S.C. 522(c) do not prevail over the government’s 26 U.S.C. 6402(d) right to offset mutual debts. Although the government exercised that right before requesting relief from the automatic stay, there is no reason to abridge the government’s 11 U.S.C. 362(d) right to seek the stay’s annulment. View "Wood v. United States Department of Housing and Urban Development" on Justia Law

Earl Schwartz Company and the co-personal representatives of the Estate of Earl N. Schwartz (amongst others, together “ESCO”) and SunBehm Gas, Inc. appealed a judgment quieting title to oil and gas interests in Great Plains Royalty Corporation. Great Plains cross appealed, arguing the district court erred when it denied its claims for damages. Great Plains’ creditors filed an involuntary petition for bankruptcy under Chapter 11 of the Bankruptcy Code in 1968. The case was converted to a Chapter 7 liquidation proceeding. The bankruptcy trustee prepared an inventory and published a notice of sale that listed various assets, including oil and gas interests. Earl Schwartz was the highest bidder. Schwartz entered into an agreement with SunBehm to sell certain interests described in the notice, and the district court order approved the transfer of those interests directly from the bankruptcy estate to SunBehm. The bankruptcy case was closed in 1974. Great Plains’ creditors were not initially paid in full; the bankruptcy case was reopened in 2013, Great Plains’ creditors were paid in full with interest, and adversary proceedings were brought to determine ownership of various oil and gas interests, to which ESCO was a party. ESCO argued the bankruptcy sale transferred all of the interests owned by Great Plains, regardless of whether they were listed in the notice of sale. The bankruptcy court rejected ESCO’s argument and determined title to various properties (not the subject of the present appeal). Then in 2016, Great Plains brought this quiet title action against ESCO and SunBehm; ESCO and SunBehm brought quiet title cross claims. The district court held a bench trial and found the bankruptcy trustee intended to sell “100%” of all of the oil and gas interests Great Plains owned at the time of the bankruptcy. But the North Dakota Supreme Court reversed, finding the district court erred when it determined the bankruptcy trustee intended to sell all of Great Plains’ interests, including those not listed in the notice of sale. On remand, ESCO and SunBehm claimed they held equitable title to oil and gas interests in various tracts identified in the notice of sale, interest which were confirmed by the bankruptcy court. The Supreme Court reversed the district court’s ruling on collateral estoppel as a misapplication of the law, and vacated the court’s title determination and its denial of Great Plains’ conversion claim. The case was remanded for the court to determine whether ownership of any interests in the tracts identified in the notice of sale passed to ESCO or SunBehm by virtue of the bankruptcy sale and confirmation order. View "Great Plains Royalty Corp. v. Earl Schwartz Co., et al." on Justia Law

The Eighth Circuit affirmed the bankruptcy court's grant of summary judgment in favor of debtors in an action brought by Lund-Ross, seeking to determine the dischargeability of a debt it alleges debtors owe. The court concluded that Lund-Ross's legal theory for the recovery of a debt from debtors personally and the probative evidence Lund-Ross would offer in support of that theory were absent from the summary judgment record before the bankruptcy court. In this case, there is no dispute Lund-Ross did not plead that the corporate veil should be pierced, and it did not argue the corporate veil should be pierced when contesting debtors' motion for summary judgment; Lund-Ross did not allege specific facts that demonstrate debtors used Signature Electric or D & J Electric to commit fraud, violate a legal duty, or perpetrate a dishonest or unjust act in contravention of the rights of another; and Lund-Ross did not identify any state statute or other nonbankruptcy law that would govern debtors' actions as principals of Signature Electric and create a personal debt to Lund-Ross.Because Lund-Ross did not first demonstrate for the bankruptcy court how it could establish a personal debt owed by debtors under nonbankruptcy law, the court, like the bankruptcy court, did not reach the issue of whether such a debt would be nondischargeable under 11 U.S.C. 523(a)(2)(A). View "Lund-Ross Constructors, Inc. v. Buchanan" on Justia Law