Justia Bankruptcy Opinion Summaries

Trustee appealed a summary judgment order from the bankruptcy court in favor of Judgment Holders. The court held that the bankruptcy court correctly concluded the subject liens were not avoidable under 11 U.S.C. 547. The court held, however, that the district court erred in concluding Judgment Holders' post-petition registration of their judgments and the attendant creation of judgment liens against Northridge were not avoidable post-petition transfers of property of the bankruptcy estate under Section 549(a), and it did not fully assess whether the bankruptcy estate was entitled to a recovery under section 550(a) because section 551's automatic preservation of the avoidable judgment liens would not restore the bankruptcy estate's financial condition to what it was before Judgment Holders' judgments were registered on Northridge's certificate of title. Accordingly, the court affirmed in part, reversed in part, and remanded for further proceedings.

The Chapter 7 Trustee appealed from the Bankruptcy Court's judgment in favor of debtor's parents on a fraudulent transfer action, holding that debtor could not fraudulently transfer property that would have been exempt. Because the court concluded that the Bankruptcy Court erred in applying Minnesota fraudulent transfer law to the count seeking relief under section 548(a)(1)(B) of the Bankruptcy Code, the court reversed and remanded for further findings.

Debtors, owners and operators of a farm and ranch, appealed from the judgment of the bankruptcy court denying their discharge pursuant to 11 U.S.C. 727(a)(5). The court held that the bankruptcy court did not clearly err in finding that debtors failed to adequately explain the loss of cattle. Accordingly, the judgment denying debtors' discharge was affirmed.

Debtors appealed the bankruptcy court's entry of summary judgment in favor of defendant in debtors' adversary action seeking, inter alia, to avoid defendant's mortgage lien on debtors' residence. The court held that summary judgment was improper in this case because there was a material issue of fact regarding whether defendant had possession of the original promissory note.

Debtor appealed the bankruptcy court's order converting its Chapter 11 bankruptcy case to one under Chapter 7. The court affirmed the order of the bankruptcy court and held that an abuse of process was an appropriate ground for conversion under 11 U.S.C. 1112(b). Moreover, debtor had had its day in court four times where debtor was substantially the same entity as Midwest Oil, an entity that the judge barred from filing pleadings or a petition in the bankruptcy court. Therefore, the bankruptcy court's finding was not erroneous.

Reshetar Systems, Inc. appealed a judgment of the bankruptcy court determining that the debt owed to Reshetar by debtor was not excepted from discharge. The court held that the debt was not excepted from discharge as the trustee of a constructive trust was not a fiduciary within the meaning of Code. Sec. 523(a)(4) and Minnesota law did not create the fiduciary relationship required by the section. The court also held that nothing in the statute, the contract, or the subcontract gave Reshetar specific property rights in the payments Construction 70 received from Applebee's. Those payments belonged to Construction 70, and Construction 70's use of its own property did not amount to embezzlement. The court also held that Construction 70's use of its own property did not amount to larceny where the payments from Applebee's to Construction 70 belonged to Construction 70. The court finally held that, giving due regard to the bankruptcy court's opportunity to judge debtor's credibility, the court could not say that the bankruptcy court's finding was clearly erroneous.

Debtor appealed from the bankruptcy court's grant of summary judgment to creditor, holding a debt in the amount of $400,000, nondischargeable pursuant to section 523(a)(2)(A) of Title 11 of the United States Code (Bankruptcy Code). The court held that summary judgment was improper because there existed fact issues regarding whether (1) the financing arrangement should be treated as if it was between the debtor and creditor, or between Imports Plus, Inc. and the creditor; and (2) whether the debtor obtained the majority of funds from the creditor at the time of the alleged misrepresentation.

The Chapter 7 trustee appealed from the decision of the Bankruptcy Appellate Panel (BAP) reversing the bankruptcy court's judgment that the proceeds of personal property sold with a homestead were not proceeds of the homestead. The court held that the BAP committed two errors: first, the BAP required only "sufficient indicia" of an intent to convert non-exempt personal property into exempt homestead property where, as a matter of law, there must not only be an intent to convert non-exempt assets, but also an actual conversion; and second, in reversing the bankruptcy court, the BAP said "we find" an intent by debtor to convert non-exempt property into exempt property where findings of fact were the sole province of the bankruptcy court. The court reversed and remanded for further proceedings.

Debtor appealed from the Order of the Bankruptcy Court appointing a trustee in its involuntary Chapter 11 case. The court held that since the record supported a finding of cause under 11 U.S.C. 1104(a)(1), and that the appointment of a trustee was in the interest of creditors and the estate under section 1104(a)(2), the appointment of the trustee was mandatory. Therefore, the Bankruptcy Court's order was affirmed.

This case involved a fallout of a $3.65 billion Ponzi scheme perpetrated by Minnesota businessman Thomas J. Petters. Appellants, investment funds (collectively, Ritchie), incurred substantial losses as a result of participating in Petters' investment scheme. Ritchie subsequently sued two officers of Petters' companies, alleging that they assisted Petters in getting Ritchie to loan over $100 million to Petters' company. Ritchie's five-count complaint alleged violations of the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. 1962(a), (c)-(d), common law fraud, and tortious inference with the contract. The court held that the district court erred in concluding that Ritchie's action was barred by a Receivership Order. The court also rejected arguments challenging the sufficiency of Ritchie's pleadings in the common law fraud count and did not to address other arguments related to abstention, lack of causation, and absolute privilege. Accordingly, the court reversed the judgment of the district court and remanded for further proceedings.