Justia Bankruptcy Opinion Summaries

The Fifth Circuit affirmed the district court's affirmance of the bankruptcy court's judgment, holding appellants liable for a non-dischargeable judgment stemming from appellee's fraudulent misrepresentation, breach of contract, and common law fraud claims. Determining that it had jurisdiction over the appeal, the court held that there was no error in the bankruptcy court's conclusion that appellee's injuries were not only foreseeable, but directly attributable and proximately caused by Appellant Saenz's misrepresentations. Furthermore, the court could not say that the bankruptcy court clearly erred in rendering its non-dischargeable judgment or that the district court erred in affirming the bankruptcy court. View "Saenz v. Gomez" on Justia Law

Both the text of the bankruptcy statute and precedent support the conclusion that homestead proceeds that debtors acquire post-petition generally revest in them upon voluntary dismissal of their Chapter 13 case. The Fifth Circuit reversed the district court's judgment as to the disbursement of proceeds from the sale of a homestead. In this case, debtors sold their Texas homestead and did not use the sale proceeds to purchase another home. The bankruptcy court determined that debtors were entitled to the return of the homestead proceeds because they voluntarily dismissed their case, but the district court concluded that the proceeds should remain with the trustee for distribution to creditors in the dismissed bankruptcy proceeding. The court affirmed the district court's judgment regarding debtors' motion to dismiss and the trustee's motion to modify. Finally, the court reinstated the bankruptcy court's order directing the trustee to return the homestead proceeds to debtors. View "Viegelahn v. Lopez" on Justia Law

The Fifth Circuit affirmed the district court's judgment in favor of Fifth Third in an action brought by plaintiffs, alleging that the bank foreclosed on a property in violation of the automatic stay imposed during Plaintiff Ricardo's Chapter 13 bankruptcy. The court held that plaintiffs were judicially estopped from claiming a stay violation because Ricardo failed to amend his bankruptcy schedules to disclose the quitclaim deed or his putative claims against Fifth Third. Likewise, the district court did not abuse its discretion in denying plaintiffs' motion for a new trial. Finally, plaintiffs failed to show that the district court abused its discretion in excluding several of their exhibits. View "Fornesa v. Fifth Third Mortgage Co." on Justia Law

The Fifth Circuit treated appellant's motion to amend its opinion as a petition for panel rehearing and granted the petition. The court withdrew the prior opinion and substituted the following opinion.This appeal stemmed from a bankruptcy court order approving a trustee's application to employ special counsel. The court held that appellant lacked standing to object to the trustee's application to employ SBPC because his indirect interest in the order failed to meet the strict requirements for a "person aggrieved" under the exacting test for bankruptcy standing or a creditor under 11 U.S.C. 327(c). Accordingly, the court affirmed the judgment. View "Furlough v. Cage" on Justia Law

Fallon Family, as part of a settlement agreement with Goodrich, executed a ratification of a previously disputed mineral lease in favor of Goodrich. Goodrich then filed a Chapter 11 bankruptcy proceeding. The Fallon Family argued that because the bankrupt Goodrich failed to make payments under the promissory note made part of the settlement agreement, the Fallon Family had the right to dissolve the settlement agreement on grounds of non-payment, thus divesting Goodrich of its interest in the lease. The Fifth Circuit affirmed the bankruptcy court's holding that when Goodrich filed for bankruptcy, the debtor-in-possession became vested under 11 U.S.C. 544(a) with all the rights and powers of a bona fide purchaser of the real property rights of Goodrich, including the ratified lease. The court held that the lease as ratified may not be dissolved for nonpayment of the obligations in the settlement agreement because the public record reflects that consideration had been fully paid, and a third party was not placed on notice of the remaining payments. View "Fallon Family, L.P. v. Goodrich Petroleum Corp." on Justia Law

NOV purchased industrial-strength "desert-proof" air conditioners from Technicool for use on specialty oil-and-gas rigs, for more than $3 million. After multiple units failed, NOV, represented by SBPC, sued Technicool in Texas state court. Technicool filed for Chapter 7 bankruptcy. NOV sought relief from the automatic stay and was allowed to join Technicool’s owner, Furlough, to its state suit. NOV, again represented by SBPC, filed a claim in the bankruptcy case, representing 93 percent of the total claims. After learning that Furlough had formed other companies, the Trustee sought to consolidate the businesses and pierce the corporate veil and to employ SBPC as special counsel under 11 U.S.C. 327(a). Furlough objected, arguing that SBPC’s representation of NOV was a disqualifying “interest adverse to the estate.” In an engagement letter, signed by SBPC, NOV agreed to transfer to the bankruptcy estate funds it recovered from Furlough in state court. The bankruptcy court, district court, and Fifth Circuit held that Furlough lacked standing to object. Furlough cannot show that he was “directly and adversely affected pecuniarily by the order of the bankruptcy court.” SBPC’s appointment does not directly affect whether the bankruptcy court approves NOV’s claim. Under section 327(c), “a person is not disqualified for employment . . . solely because of such person’s employment by or representation of a creditor, unless there is objection by another creditor or the United States trustee, [and] an actual conflict of interest.” View "Furlough v. Cage" on Justia Law

Federal law does not prevent a bona fide shareholder from exercising its right to vote against a bankruptcy petition just because it is also an unsecured creditor. The Fifth Circuit affirmed the bankruptcy court's dismissal of the bankruptcy petition as unauthorized. The court held that, under these circumstances, the issue of corporate authority to file a bankruptcy petition was left to state law. In this case, the debtor was a Delaware corporation, governed by that state's General Corporation Law, and the court found nothing that would nullify the shareholder's right to vote against the bankruptcy petition. View "Franchise Services of North America, Inc. v. United States Trustee" on Justia Law

Vendors and contractors provided materials and services in connection with an offshore mineral lease. Under the Louisiana Oil Well Lien Act, La. Rev. Stat. 9:4863(A)(1), 9:4864(A)(1), they secured liens on the lessee’s operating interest upon the commencement of labor. They timely recorded the liens. The lessee later sold “term overriding royalty interests” to OHA. In the lessee’s subsequent bankruptcy proceeding, the service providers intervened, seeking to enforce their liens on OHA’s royalty interests. The district court agreed with the bankruptcy court and dismissed their complaints, concluding that the statute that created the liens extinguished them via a safe-harbor provision. The Fifth Circuit affirmed. The safe-harbor question is one of statutory interpretation: Was OHA’s purchase of the overriding royalties a purchase of “hydrocarbons that are sold or otherwise transferred in a bona fide onerous transaction by the lessee or other person who severed or owned them” at severance? The royalties were “sold,” the transaction was “bona fide,” and the seller was a “lessee.” OHA purchased more than an interest in proceeds; it purchased an interest in the to-be-produced hydrocarbons themselves. A purchase of overriding royalties is a purchase of “hydrocarbons” under the statute, so the lienholders’ failure to provide pre-purchase notice renders their liens extinguished. View "OHA Investment Corp. v. Schlumberger Technology Corp." on Justia Law

Comcast loaned the Network $100 million, secured by a lien on substantially all of the Network's tangible and intangible assets, including an Affiliation Agreement. Pursuant to the Agreement, a Comcast subsidiary agreed to pay the Network to carry the Network's content on its cable systems. The Network involuntarily entered into bankruptcy; Comcast elected to treat its entire claim as secured before a plan or reorganization was confirmed; and then the bankruptcy court conducted a valuation of the Network's assets, including the Agreement. The bankruptcy court concluded that the Agreement had no value and the district court affirmed. The Fifth Circuit held, however, that the district court did not consider the value of Comcast's collateral in light of the reality of the plan of reorganization and accordingly deducted waived Network liabilities from the Agreement's value. Accordingly, the court remanded for further proceedings. View "Houston SportsNet Finance, LLC v. Houston Astros, LLC" on Justia Law

In this consolidated appeal stemming from the bankruptcy of nineteen companies that were tenants-in-common of a student housing development called the Reserve, the Fifth Circuit reversed in part and affirmed in part the bankruptcy court's judgment. The court reversed the bankruptcy court's reduction of UTSA's share of net proceeds from 21.17% to 3.14%, based on serious procedural deficiencies, the lack of notice to UTSA regarding the imposition of a constructive trust, and the remedy's violation of the terms of the Code. The court held, however, that the bankruptcy court did not err in reducing Woodlark's proof of claims from $510,475,98 to $410,097.78. The court remanded for further proceedings. View "UTSA Apartments, LLC v. UTSA Apartments 8 LLC" on Justia Law