Justia Bankruptcy Opinion Summaries

This case stemmed from a debt which consisted of claims of tort liability possessed by relatives of people buried in a cemetery called Graceland. Creditors alleged that debtors were liable to them and the members of their class for damages because, due to inadequate record keeping, debtors were unable to locate upon request the grave sites of family members or close relatives buried in Graceland. At issue was whether a bankruptcy court in one federal district had jurisdiction to determine whether a debt was discharged in a bankruptcy case litigated in another federal district. The court held that the court lacked jurisdiction and therefore did not reach the other issues on appeal. View "Alderwoods Group, Inc., et al. v. Garcia, et al." on Justia Law

This bankruptcy appeal involved a transfer of liens by subsidiaries of TOUSA, Inc., to secure the payment of a debt owed only by their parent, TOUSA. This appeal by the Committee of Unsecured Creditors presented two issues: (1) whether the bankruptcy court clearly erred when it found that the Conveying Subsidiaries did not receive reasonably equivalent value in exchange for the liens to secure loans used to pay a debt owed only by TOUSA; and (2) whether the Transeastern Lenders were entities "for whose benefit" the Conveying Subsidiaries transferred the liens. The court held that the bankruptcy court did not clearly err when it found that the Conveying Subsidiaries did not receive reasonably equivalent value for the liens and that the bankruptcy court correctly ruled that the Transeastern Lenders were entities "for whose benefit" the liens were transferred. The court reversed the judgment of the district court, affirmed the liability findings of the bankruptcy court, and remanded for further proceedings. View "Senior Transeastern Lenders, et al. v. Official Committee of Unsecured Creditors" on Justia Law

Debtor appealed from a district court order ruling that her debt from a fraudulent transfer judgment was nondischargeable in bankruptcy under 11 U.S.C. 523(a)(6). At issue was whether a fraudulent transfer of property by a co-conspirator constituted a willful and malicious injury under section 523(a)(6). The court held that the district court properly concluded that the fraudulent transfer was not dischargeable as part of the bankruptcy proceeding because plaintiff satisfied the elements of section 523(a)(6) by showing that debtor willfully and maliciously injured plaintiff's property. View "Maxfield v. Jenning" on Justia Law

Debtor appealed the district court's decision affirming the bankruptcy court's determination that an Illinois judgment debt owed to the Bank was not dischargeable, pursuant to 11 U.S.C. 523(a)(4). The court held that the bankruptcy court's order must be affirmed under section 523(a)(4) as a debt arising from a defalcation while debtor was acting in a fiduciary capacity. The court also held that the district court correctly determined that the propriety of the Bank's actions was not a basis for finding that the Illinois judgment debt should be discharged. Instead, the court agreed with the district court that the issue was not properly before the court, but rather should be brought by debtor in an action in Illinois to consider the malfeasance of the trustee. Accordingly, the court affirmed the judgment of the bankruptcy court. View "Bullock v. BankChampaign NA" on Justia Law

Appellant appealed the district court's affirmation of the bankruptcy court's order that partially overruled appellant's objection to confirmation of the Chapter 13 bankruptcy plan. Appellant contended that under Section 506(b) of the Bankruptcy Code, debtor must pay interest on its claim at the contract rate of 10.5% because appellant was an oversecured creditor. The bankruptcy and district courts found that appellant could only recover post-petition interest at the contract rate from the date of filing until confirmation of the bankruptcy plan. The court affirmed the judgment of the district court affirming the bankruptcy court's order. View "First United Security Bank v. Garner, Sr." on Justia Law

International Management Associates, LLC, and several related entities (Debtors) were operated as the instruments of a Ponzi scheme. A receiver ultimately filed voluntary petitions in the bankruptcy court seeking relief for each of the Debtors under Chapter 11 of the Bankruptcy Code. A consolidated plan of liquidation was approved and a plan trustee appointed. The trustee then instituted a number of adversary proceedings in the bankruptcy court seeking to avoid and to recover distributions that had been made to the investors in the Debtors. The trustee claimed that transfers to the investors prior to the collapse of the Ponzi scheme were fraudulent transfers under 11 U.S.C. 548(a)(1)(A) and applicable state law. The investors asserted an affirmative defense under section 548(c), claiming that the transfers were for value. The trustee moved for partial summary judgment. The bankruptcy court denied the motion, effectively upholding the availability of the investors' affirmative defense. The trustee appealed. The court held that, under In re AFI Holdings, Inc. and the general rule, later transfers from the Debtors up to the amount of the investment satisfied the investor defendants' restitution or fraud claims and provided value to the Debtors. Accordingly, the bankruptcy court's judgment was affirmed.

The Florida Department of Revenue (Florida DOR) and the Virginia Department of Social Services (Virginia DSS) appealed the district court's decision affirming an order of the bankruptcy court holding the agencies in contempt and awarding debtor compensatory and punitive damages for the agencies' alleged violations of the automatic stay and discharge injunction issued by the bankruptcy court. The court held that state sovereign immunity shields the the Florida DOR and the Virginia DSS from debtor's claims for violations of the automatic stay. The court also held that, although sovereign immunity did not bar debtor's claims for violations of the discharge injunction, neither the Florida DOR nor the Virginia DSS violated the discharge injunction. Accordingly, the court reversed the judgment of the district court and remanded with instructions to vacate the bankruptcy court's order and dismiss the action.

This case stemmed from defendant's Chapter 7 bankruptcy proceeding where he sought to discharge a personal injury judgment debt that he had owed plaintiff since 1985. Plaintiff filed a complaint objecting to the discharge of defendant's debt to him on the ground that defendant had fraudulently avoided satisfying that debt since the judgment underlying it was entered 22 years before. Plaintiff subsequently appealed the district court's order affirming the bankruptcy court's order overruling plaintiff's objections and discharging plaintiff's debt to him. Plaintiff also appealed the district court's order affirming the bankruptcy court's award of attorney's fees to plaintiff as a sanction against defendant for filing the objections. The court held that it lacked jurisdiction to review the district court's judgment affirming the bankruptcy court's order denying plaintiff's objections on the merits where plaintiff's notice of appeal was time-barred. The court held, however, that it must remand the case to the bankruptcy court so that it could either flesh out its reasons for sanctioning plaintiff or decide that he was not to be sanctioned where that court did not make specific factual findings as to what constituted bad faith on plaintiff's part. The court also held that plaintiff's appeal to the district court of the denial of his objections to the discharge was colorable, non-frivolous enough, to prevent the district court's denial of sanctions against plaintiff from being an abuse of discretion. Accordingly, the court affirmed in part and reversed in part, remanding for further proceedings.

Plaintiffs filed a purported class action as an adversary proceeding before the bankruptcy court alleging that their mortgage lender, Wells Fargo Bank N.A. ("Wells Fargo"), violated various provisions of the Bankruptcy Code and Bankruptcy Rules by failing to disclose certain fees on the proof of claim it filed in plaintiffs' Chapter 13 bankruptcy case. At issue was whether the district court erred in affirming the bankruptcy court's grant of summary judgment in favor of Wells Fargo on plaintiffs' claims that Wells Fargo violated the automatic stay provisions in 11 U.S.C. 362; their claims that Wells Fargo violated 11 U.S.C 506(b) and Bankruptcy Rule 2016 by failing to disclose the fees; and their objection to the proof of claim. The court considered each of plaintiffs' automatic stay violations under section 362 and held that Wells Fargo was entitled to summary judgment on each claim. The court concluded that bankruptcy courts have not uniformly reached a conclusion supporting the proposition that pursuant to section 506(b), Rule 2016, or both of these provisions, a secured creditor must disclose and obtain court approval of post-petition legal expenses. Therefore, the court held that these provisions were not violated when a creditor merely recorded costs it had incurred in association with a mortgagee's bankruptcy for internal bookkeeping purposes and made no attempt to collect the fees or otherwise add them to the debtor's balance. Accordingly, to the extent plaintiffs' disclosure claims relied on events that have occurred during the course of their Chapter 13 case, the district court did not err in affirming the bankruptcy court's order granting summary judgment. The court further held that Wells Fargo's failure to include the proof of claim fees on the proof of claim did not provide a valid basis for an objection; and as to this amount, plaintiffs have identified no reason why such amount was unenforceable. Therefore, Wells Fargo was entitled to summary judgment on this claim.

Plaintiff filed a lawsuit against defendant alleging that defendant had discriminated against him because of his bankruptcy, in violation of 11 U.S.C. 525(b), by refusing to hire him and alternatively, by terminating him from the job after it had hired him. The primary issue was whether section 525(b) prohibited a private employer from denying employment to an individual on the ground that he was or has been in bankruptcy. The court applied elementary principles of statutory construction and common sense, holding that section 525(b) did not prohibit private employers from denying employment to persons because of their status as a bankruptcy debtor. The court also held that the evidence was more than enough for the jury to discredit appellant's contrary testimony and found that no employment relationship was formed. Accordingly, the court held that the district court did not err in denying plaintiff's renewed motion for judgment as a matter of law and in denying plaintiff's motion for a new trial where the jury's verdict was not against the great weight of the evidence.