Articles Posted in US Court of Appeals for the Ninth Circuit

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The Ninth Circuit dismissed objector's appeal of the bankruptcy court's order denying his objection to confirmation of a Chapter 9 petition, by the City of Stockton, as equitably moot. In this case, objector filed an inverse condemnation claim against the City in state court and the plan classified the claim as a general unsecured claim. The panel held that objector did not seek a stay of confirmation at any stage; the plan has been substantially consummated; the relief of undoing plan confirmation would bear unduly on innocent third parties; and the bankruptcy court could not fashion relief without undoing the confirmed plan. On the merits, the panel held that the Takings Clause exempted objector's unsecured claim from reorganization. In reality, objector's purported property interest was a claim for monetary relief. View "Cobb v. City of Stockton" on Justia Law

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Wilson filed her voluntary Chapter 7 bankruptcy petition in December 2013, electing to take the federal exemptions and listing the “wildcard” exemption. Wilson’s condominium was valued at $250,000 and was subject to a $246,440 mortgage. Wilson listed her exemption as $3,560, the equity in her home as of the petition date. The value of the property increased. In July 2016, Wilson amended her Schedule C, claiming “100% of fair market value, up to any applicable statutory limit,” stating the value of the property at $412,500, and listing Washington’s homestead exemption as the basis for the amended exemption. The bankruptcy court held that an amendment to update the value of an exemption in light of post-petition changes in value was not permitted. The district court and the Ninth Circuit affirmed. Declining to decide whether the definition of the value of exemptions in 11 U.S.C. 522(a)(2) applies to state law exemptions as well as to federal ones, the court concluded that under section 541(a)(1) the debtor’s interests in property transfer to the bankruptcy estate as of the commencement of the bankruptcy action. Following this transfer, any appreciation enures to the bankruptcy estate. The debtor’s exemption was limited to her equity in the property as of the date of her bankruptcy petition. View "Wilson v. Rigby" on Justia Law

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The Ninth Circuit certified the following question of bankruptcy law to the Supreme Court of California: Does the form of title presumption set forth in section 662 of the California Evidence Code overcome the community property presumption set forth in section 760 of the California Family Code in Chapter 7 bankruptcy cases where: (1) the debtor husband and non-debtor wife acquire property from a third party as joint tenants; (2) the deed to that property conveys the property at issue to the debtor husband and non-debtor wife as joint tenants; and (3) the interests of the debtor and non-debtor spouse are aligned against the trustee of the bankruptcy estate? View "Brace v. Speier" on Justia Law

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The period in which a creditor may execute on a lien constitutes the continuation of the original action that resulted in the judgment and is thus tolled during the automatic stay. The Ninth Circuit affirmed the bankruptcy appellate panel's decision reversing the bankruptcy court's grant of summary judgment for the trustee in an adversary proceeding brought by a judgment creditor. Before debtor filed for bankruptcy, creditor obtained an Order of Appearance and Examination (ORAP) lien encumbering debtor's personal property under California law. In this case, the creditor was unable to execute on her lien and she failed to renew it under state law. View "Daff v. Good" on Justia Law

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The Ninth Circuit affirmed the district court's decision affirming the bankruptcy court's summary judgment denying discharge of two individual Chapter 11 debtors' debt arising from a state-court judgment for fraud and misrepresentation. The panel held that the Chapter 11 plan provided for the liquidation of all or substantially all of the property of the bankruptcy estate under 11 U.S.C. 1141(d)(3)(A); debtors did not engage in business after consummation of the Chapter 11 plan, because they were simply employees in businesses owned or operated by others; and, assuming that section 1141(d)(3) does not require that the debtor engage in a pre-petition business, the statute was not satisfied by mere employment in someone else's business after consummation of a Chapter 11 plan. View "Hyun J. Um v. Spokane Rock I, LLC" on Justia Law

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Sovereign immunity does not preclude an award of emotional distress damages against the United States for willful violation of an automatic stay. The Ninth Circuit reversed the district court's judgment reversing the bankruptcy court's award of damages to debtors for the IRS's violation of the Bankruptcy Code's automatic stay. The panel held that Congress waived sovereign immunity for a "money recovery" under certain bankruptcy provisions, including 11 U.S.C. 362(k), which allows an individual to recover "actual damages" for a willful violation of the automatic stay. The panel remanded with instructions to consider the government's challenges on the merits. View "Hunsaker v. United States" on Justia Law

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The Ninth Circuit affirmed the district court's decision affirming the bankruptcy court's dismissal of a Chapter 11 petition filed by the former board members of Sino. The panel held that the bankruptcy court properly dismissed the action because plaintiffs lacked corporate authority under Nevada law when they filed the petition where a receiver appointed by the Nevada state court already had removed them from the corporation's board of directors. Therefore, plaintiffs were not authorized to file the petition on behalf of the corporation. View "Sino Clean Energy, Inc. v. Seiden" on Justia Law

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In this consolidated bankruptcy appeal, two law firms challenged the bankruptcy court's order approving a settlement for an involuntary Chapter 11 bankruptcy. The Ninth Circuit affirmed the district court's dismissal of the appeals, holding that the firms forfeited their objection to the settlement agreement because neither firm explicitly objected to the settlement or entered an appearance. Furthermore, the evidence on the record regarding the bankruptcy court and trustee's understanding that the firms were implicitly objecting was not clear enough to overcome such failures. The panel assumed without deciding that the law firms' challenge should be reviewed for plain error, rather than dismissed without reaching the merits, and found that the bankruptcy court did not err in approving the settlement agreement. View "Reid and Hellyer, APC v. Laski" on Justia Law

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The Ninth Circuit reversed the district court's decision affirming the bankruptcy court's summary judgment in favor of a condominium association. The panel held that condominium association assessments that become due after a debtor has filed for bankruptcy under Chapter 13 were dischargeable under 11 U.S.C. 1328(a). In this case, debtor's personal obligation to pay the assessments was not the result of a separate, post-petition transaction but was created when she took title to the condominium unit. Therefore, the debt for the assessments arose pre-petition and was dischargeable under section 1328(a), unless the Bankruptcy Code provided an exception to discharge. The panel held that the personal debt arising from the assessments was not excepted from discharge under section 1328(a). Finally, the Takings Clause was not implicated and equitable arguments did not override the express provisions of the Bankruptcy Code. View "Goudelock v. Sixty-01 Association of Apartment Owners" on Justia Law

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Under 11 U.S.C. 1126(e), a bankruptcy court may not designate claims for bad faith simply because (1) a creditor offers to purchase only a subset of available claims in order to block a plan of reorganization, and/or (2) blocking the plan will adversely impact the remaining creditors. At a minimum, there must be some evidence that a creditor is seeking "to secure some untoward advantage over other creditors for some ulterior motive." In this case, the Ninth Circuit reversed the district court's order affirming the bankruptcy court and vacated the bankruptcy court's order granting a chapter 11 debtor's motion to designate claims for bad faith and preclude the claims from being voted against a plan of reorganization. The panel held that the bankruptcy court erred when it refused to analyze whether Pacific Western acted under an "ulterior motive," beyond its "mere enlightened self interest" in protecting its secured claim. The panel remanded for further proceedings. View "Pacific Western Bank v. Fagerdala USA" on Justia Law