Justia Bankruptcy Opinion Summaries

Debtors challenged the district court’s judgment that adopted in part the bankruptcy court’s proposed findings of fact and conclusions of law. The court concluded that the district court need not sustain debtors’ objections merely because they are unopposed; it may overrule the objections if they lack merit, as the district court indeed found. In this case, the district court overruled debtors’ objection to the bankruptcy court’s proposed finding that they must have realized there was no equity in the Thoroughbred Property. Under the circumstances, the court could not say that the district court clearly erred in concluding that debtors knew or should have known, by the closing date, that defendants would receive no equity in the Thoroughbred Property. Accordingly, the court affirmed the district court's adoption of the bankruptcy court's finding. The court also concluded that debtors' claim that the district court erred in overruling their objection to the bankruptcy court’s proposed finding that defendants did not misrepresent to debtors that defendants expected to make their rental payments solely from the equity received through the sale of the Thoroughbred Property was both meritless and waived. The court rejected debtors' remaining claims and affirmed the judgment. View "Monge v. Rojas" on Justia Law

The adversary action comprises the claims, counterclaims, and affirmative defenses between two sides of a business scheme to buy, renovate, and operate a Days Inn. This appeal stems from the district court’s order affirming a bankruptcy court judgment rendered after trial in the adversary action. Appellant and his brother formed the plan to buy the hotel, and appellees are the investors that the brothers convinced to buy a fifty-percent stake in the scheme and the company that the three investors formed to hold their membership interest. The court concluded that appellant's res judicata argument fails where the release claim at issue was filed in the original action while summary judgment was still interlocutory. Thus, the claim was properly preserved through the severance order for later adjudication, and res judicata does not bar it. The court also concluded that the district court did not err in affirming the bankruptcy court judgment that appellant breached the settlement agreement. Further, the district court properly affirmed the bankruptcy court's dismissal of appellant's breach-of-guaranty claim against the investors, but not as to the company. The court affirmed in part and vacated in part, remanding for additional proceedings, including a determination of what percentage of the attorney’s fees were attributable to the breach-of-contract claim. View "Pirani v. Baharia" on Justia Law

Plaintiffs filed a health care liability suit against defendants in federal court under the court’s bankruptcy jurisdiction. Section 74.351 of the Texas Civil Practice and Remedies Code requires plaintiffs in health care liability cases to serve an expert report within 120 days after the filing of a defendant’s original answer. Following limited discovery, defendants moved to dismiss because plaintiffs had failed to serve an expert report in accordance with section 74.351’s requirements. The district court ultimately dismissed the case with prejudice. The court held that section 74.351 answers the same question as Federal Rules of Civil Procedure 26 and 37, and these Rules represent a valid exercise of Congress’ rulemaking authority. Accordingly, a federal court entertaining state law claims may not apply section 74.351. The court reversed and remanded for further proceedings. View "Passmore v. Baylor Health Care" on Justia Law

The Partnership and Beher (the Lenders) loaned Community $16 million. Defendant is Community's founder, president and CEO. Defendant signed the identical loan agreements on behalf of Community and as a personal guarantor. On appeal, defendant argued primarily that summary judgment on his guarantor liability was premature because, in the bankruptcy proceedings at issue, he and Community were challenging the extent and validity of the underlying obligations. The court concluded that defendant personally guaranteed the Lenders that he would satisfy the obligations represented by the promissory notes no matter what. In this case, the Lenders presented sufficient evidence to establish defendant's liability as guarantor and they met their burden to recover on the guaranties. Furthermore, defendant has failed to present sufficient evidence to survive summary judgment on the amount of his obligation under the guaranty contracts. Accordingly, the court affirmed the judgment. View "Edwards Family P'ship v. Dickson" on Justia Law

Judgment Factor filed an adversary proceeding to prevent the entry of a Chapter 7 discharge order for defendant. The bankruptcy court granted summary judgment to defendant, holding that he did not act in any way that merited the denial of a discharge under 11 U.S.C. 727(a) and dismissing alter ego claims. The district court affirmed. The court concluded that Judgment Factors failed to obtain leave from the bankruptcy court to pursue alter ego and reverse veil piercing claims on behalf of the estate, so it may not pursue these claims. The court also concluded that Judgment Factors failed establish that defendant concealed or transferred any assets, destroyed or failed to keep financial records, or made any false oaths. Therefore, the court agreed with the lower courts that defendant did not act in any way meriting denial of a discharge under section 727(a). Accordingly, the court affirmed the judgment. View "Judgment Factors, LLC v. Athol Packer" on Justia Law

The Trustee filed suit against Knoll, seeking to avoid transfers from Tusa Office, the debtor, to Knoll, its creditor as preferences under section 547 of the Bankruptcy Code, 11 U.S.C. 547(b). The court concluded that, because the Trustee did not satisfy the source aspect of the El Paso Refinery analysis, testing under the hypothetical Chapter 7 liquidation analysis is unnecessary. The court held that the Trustee failed to establish the requirement of section 547(b)(5) because the source aspect of the El Paso Refinery analysis demonstrates that the transfer from Tusa Office to Knoll was made from the proceeds of Knoll’s own collateral. Further, the exception to avoidance under section 547(c)(5) is inapplicable in this case. Accordingly, the court affirmed the judgment. View "Garner v. Knoll, Inc." on Justia Law

After debtor flagrantly and repeatedly abused bankruptcy and court processes to retain assets for himself and defeat the legitimate claims of his business partners, the bankruptcy and district courts dismissed the bankruptcy case under 11 U.S.C. 707(a). The court concluded that the bankruptcy rules permitted this matter to be pursued as a contested motion, and the bankruptcy court conducted the proceeding appropriately. Moreover, any error by the bankruptcy court in hearing this matter as a contested motion was harmless. The court also concluded that debtor's right to due process was more than vindicated by the court’s processes. Further, this circuit joins those courts that have held a debtor’s bad faith in the bankruptcy process can serve as the basis of a dismissal “for cause,” even if the bad faith conduct is arguably encompassed by other provisions of the Code. In this case, there is no clear error in the bankruptcy court's findings. The record is replete with evidence that debtor filed bankruptcy for illegitimate purposes, misled the court and other parties, and engaged in bare-knuckle litigation practices, including lying under oath and threatening witnesses. Accordingly, the court affirmed the judgment. View "Krueger v. Torres" on Justia Law

Debtor owned a candle factory with three outstanding mortgages. Southwest had the largest security interest. After the trustee unsuccessfully attempted to sell the property and realize the equity for the estate, the trustee abandoned the property to Southwest. At issue on appeal is whether the estate or the secured creditor should pay the property’s maintenance expenses incurred while the trustee was trying to sell the property. The bankruptcy court granted a surcharge against the property for those expenses in the form of a priming lien. The court concluded that, to the extent that a trustee holds an asset longer than necessary to determine and realize its value, and the value turns out to be less than the creditor’s secured interest, the creditor can challenge the necessity of the costs incurred by the trustee. In this case, the bankruptcy court did not clearly err in finding that Southwest received a direct and quantifiable benefit from the trustee’s stewardship of the property. Accordingly, the court affirmed the judgment. View "Southwest Securities, FSB v. Segner, Jr." on Justia Law

Plaintiffs filed a personal injury suit against defendants for alleged workplace injuries to Helen Allen. Defendants argued that the suit should be barred by judicial estoppel because plaintiffs failed to disclose the personal injury claim during their concurrent Chapter 13 bankruptcy proceeding.The district court granted defendants' motion for summary judgment. The court concluded that its precedent clearly establishes that the district court did not abuse its discretion when it dismissed plaintiffs’ claims based on judicial estoppel and provided a trustee with the opportunity to “pursue for the benefit of creditors a judgment or cause of action that the debtor fails to disclose in bankruptcy.” The court modified the district court’s judgment to clarify that the district court may reopen the present case and substitute a Chapter 7 trustee for plaintiffs if the trustee decides to pursue the claim within a reasonable period of time. Accordingly, the court affirmed the judgment as modified. View "Allen v. C & H Distributors, L.L.C.," on Justia Law

This case arose out of an alleged power of attorney agreement between appellant and KSRP, which was signed by appellee, an officer and 50% owner of PYK, the general partner of KSRP. On appeal, appellant challenged the district court's order and judgment dismissing his claims against appellee, arguing that the bankruptcy court and district court lacked "related to" jurisdiction under 28 U.S.C. 1331 because appellee's cross-claims for indemnity and contribution against KSRP had no possibility of succeeding. The court concluded that the pleadings are sufficient to support "related to" jurisdiction. In this case, appellee's allegations in his notice of removal and the facts alleged in appellant's pleadings in state court sufficiently show that appellee's contractual indemnity claim against KSRP was not immaterial and made solely for the purpose of obtaining jurisdiction or wholly insubstantial and frivolous. Accordingly, the court affirmed the judgment. View "Collins v. Sidharthan" on Justia Law