Articles Posted in U.S. 8th Circuit Court of Appeals

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After debtors filed for Chapter 7 bankruptcy protection, GMAC filed this adversary proceeding claiming that it was entitled to a first-priority lien on a home and surrounding twenty-two acres of land by operation of the Arkansas doctrine of equitable subrogation, or to reformation correcting the mutual mistake in its mortgage. The court concluded that, at the time Summit and Southern State made their new loans, knowledge that GMAC made a mistake by describing the wrong property on its earlier mortgage was not knowledge that GMAC had or even claimed to have a superior unrecorded interest, because GMAC had for many months made no attempt to correct the known error, or to reform its mortgage; the principle of Killam v. Tex. Oil & Gas Corp. did not apply to mortgage priority disputes; and the blame for the uncertainty regarding GMAC's lien position lies with GMAC. Had GMAC taken timely action, it would have held the senior recorded lien. Accordingly, the court affirmed the district court's denial of relief for GMAC. View "Owcen Loan Servicing, LLC v. Summit Bank, et al." on Justia Law

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The Trustee appealed from the bankruptcy court's holding that a property tax refund was exempt under Minn. Stat. 550.37, subd. 14, as "government assistance based on need." The property tax refund at issue is authorized by the State of Minnesota Property Tax Refund Act, Minn. Stat. 290A.01-290A.27. The bankruptcy appellate panel concluded that the property tax refund at issue here was not government assistance based on need and was therefore not exempt under section 550.37, subd. 14. Accordingly, the panel reversed the bankruptcy court's order. View "Manty v. Johnson" on Justia Law

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Creditor appealed from the bankruptcy court's order directing the clerk to reject the filing of his dischargeability complaint based on creditor's failure to make a motion to reopen the underlying bankruptcy case. The bankruptcy appellate panel reversed, holding that reopening a case is not a prerequisite to filing a dischargeability complaint. View "Goldstein v. Diamond" on Justia Law

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The trustee filed an adversary proceeding to recover as voidable preferences two payments that Momar received from debtor during the 90 days prior to filing a bankruptcy petition. On appeal, the trustee challenged the district court's grant of summary judgment excepting the second transfer. The court cautioned district courts and parties in future preferential transfer cases that the Seventh Amendment right to jury trial must be respected and therefore, unless a proper demand for jury trial has been waived, the normal rules limiting the grant of summary judgment applied. On the merits, the district court did not clearly err in finding that the preferential transfer at issue, a payment made to a regular supplier 26 days after the supplier's invoice, was made in the ordinary course of business between debtor and Momar. Accordingly, the court affirmed the judgment of the district court. View "Cox v. Momar Inc." on Justia Law

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The Creditor appealed from the bankruptcy court's denial of its motion for relief from the automatic stay in the Chapter 13 bankruptcy case of debtors. At issue was whether the bankruptcy court abused its discretion when it denied the Creditor's motion for relief from the stay. The court concluded that the bankruptcy court abused its discretion by denying the Creditor's request to stay relief in light of the debtors' failure to comply with their obligations under their plan (and therefore, the relevant loan documents), by being significantly behind in their payment to the Creditor. Accordingly, the court reversed and remanded. View "CitiMortgage, Inc. v. Borm, et al." on Justia Law

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LGI's bankruptcy trustee filed suit to recover payments to SDGE and SCE that LGI made for its clients, Buffets and Wendy's restaurants, as avoidable preferences under section 547(b) of the Bankruptcy Code, 11 U.S.C. 547(b). SDGE and SCE asserted the subsequent new value exception to preference liability pursuant to section 547(c)(4). The court held that, in three-party relationships where the debtor's preferential transfer to a third party benefits the debtor's primary creditor, new value could come from the primary creditor, even if the third party was a creditor in its own right and was the only defendant against whom the debtor had asserted a claim of preference liability. As section 547(b) makes voidable a transfer "for the benefit of a creditor," it both served the purposes of section 547 and honored the statute's text to construe "such creditor" in the section 547(c)(4) exception as including a creditor who benefited from the preferential transfer and subsequently replenished the bankruptcy estate with new value. Therefore, the Bankruptcy Appellate Panel correctly concluded that SDGE and SCE could each offset subsequent new value that Buffets or Wendy's paid to LGI for that utility's services, regardless of when those services were provided. The court directed the BAP to enter a modified judgment reducing SCE's preference liability based on the double-counting of two payments. The court otherwise affirmed the judgment. View "Stoebner v. San Diego Gas & Electric Co., et al." on Justia Law

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Defendant appealed from the bankruptcy court's order imposing sanctions and judgment, and an order denying a motion to vacate or alter or amend judgment. The bankruptcy appellate panel affirmed the bankruptcy court's decision that defendant violated Federal Rule of Bankruptcy Procedure 9011, as well as its imposition of sanctions in connection therewith, including suspension of defendant from practice for six months under Local Rule 2090-2; reversed the bankruptcy court's imposition of sanctions against defendant under 11 U.S.C. 105 and its inherent authority because defendant did not receive separate prior notice and an opportunity to be heard regarding such sanctions; and remanded to the bankruptcy court the decision regarding sanctions for alleged misrepresentations by defendant at the Order to Appear and Show Cause hearing. View "Young v. Cruz" on Justia Law

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Debtor moved for sanctions after Stephen Wyse, representing on of debtor's creditors, filed suit in state court seeking in part to recover a debt discharged by debtor in bankruptcy. Wyse and his client, Frank Williams, failed to appear in opposition and the bankruptcy court granted the motion. Wyse and Williams subsequently appealed the orders granting in part their first motion for relief and denying the second motion for rehearing or relief. The court concluded that the bankruptcy court did not err in finding a portion of the debt Williams sought to collect in the state court action was debtor's pre-conversion debt. The bankruptcy court maintained the order of sanctions against Wyse for seeking to collect the portion of the $76,200 derived from debtor's pre-conversion debt to Williams, not for seeking to collect the post-discharge debts in the state court action. The bankruptcy court was perfectly within its discretion to impose the sanction. Given William's failure to introduce any other evidence regarding the specific amount of money he provided to debtor on April 19, 2010, the bankruptcy court did not clearly err in finding Williams had not proven the exact amount of post-conversion debt debtor had incurred on that date. The court also concluded that the bankruptcy court did not abuse its discretion in denying the second motion for relief brought solely to raise neglected arguments in the first motion for relief. Accordingly, the court affirmed the judgment of the bankruptcy court. View "Williams, et al. v. King" on Justia Law

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Appellant appealed the Bankruptcy Appellate Panel's (BAP) judgment holding that the bankruptcy estate of her former employer, Racing Services, was entitled to the liquidation proceeds of a cash-value life insurance policy the employer purchased for her. Because the trustee had presented no evidence demonstrating that appellant could have demonstrated insurability, the court rejected the argument that the purported "equities" of this case required that the court deem appellant's failure to reinstate the policy as an act of surrender. The terms of the agreement between appellant and Racing Services granted Racing Services only the limited right to receive a repayment of policy premiums from the cash value upon surrender of the policy. Accordingly, the court reversed where appellant at no time surrendered the policy and the estate did not possess a right to control the policy or receive its liquidation proceeds. View "Kaler v. Bala" on Justia Law

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Debtor appealed the bankruptcy court's order dismissing his adversary complaint for failure to state a claim. The bankruptcy appellate panel concluded that the bankruptcy court correctly dismissed debtor's adversary complaint where he did not challenge the validity, priority, or extent of the government's lien on any grounds other than his contention that the government's criminal action violated the district court's stay of actions and proceedings against him; debtor did not specifically identify or quantity under 11 U.S.C. 362(k) any damages arising from the government's alleged violation of the automatic stay for the bankruptcy court to consider; and a bankruptcy proceeding may not be used as a forum to mount a collateral attack on a final criminal judgment. Accordingly, the panel affirmed the judgment. View "Behrens v. United States" on Justia Law