Justia Bankruptcy Opinion Summaries

Articles Posted in US Court of Appeals for the Ninth Circuit
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The Ninth Circuit reversed the district court's grant of summary judgment in favor of the 732 Hardy Way trust, the denial of summary judgment to the Bank, and the dismissal of the Bank's claims against the HOA in a quiet title action brought by the Bank, concerning title to real property in Nevada that was subject to a HOA nonjudicial foreclosure sale. At issue is whether the Bank, as the first deed of trust lienholder, may set aside a completed superpriority lien foreclosure sale on the grounds that the sale occurred in violation of the automatic stay in bankruptcy proceedings.The panel concluded that the Bank may raise the HOA's violation of the automatic stay provision and that the Bank has superior title. The panel explained that the Bank has standing under Nevada's quiet title statute, Nevada Revised Statute 40.010, and established case authority confirms that any HOA foreclosure sale made in violation of the bankruptcy stay—like the foreclosure sale here—is void, not merely voidable, Schwartz v. United States, 954 F.2d 569, 571–72 (9th Cir. 1992). Therefore, the district court erred in holding that the Bank lacked standing to pursue its quiet title claim in federal court. The panel remanded for further proceedings. View "Bank of New York Mellon v. Enchantment at Sunset Bay Condominium Ass'n" on Justia Law

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The Ninth Circuit affirmed the Bankruptcy Appellate Panel's decision affirming the bankruptcy court's rejection of debtor's attempt to exempt two assets from her estate. The panel clarified that a bankruptcy court's prior rejection of claimed exemptions carries preclusive weight, even after Law v. Siegel, 571 U.S. 415 (2014). The panel explained that Law does not bar courts from denying exemptions on the judicially created doctrines of issue and claim preclusion where, as here, the debtor is not statutorily entitled to the exemptions.The panel also held that the bankruptcy court properly deemed debtor's claims precluded. In this case, debtor's initial and amended exemptions are legally identical where her amended schedule sought to exempt the same assets as her earlier one; the bankruptcy court's initial, unappealed orders denying debtor's exemptions were final orders establishing the parties' rights as to the assets in question; and debtor was obviously a party to the proceeding in which her claims had originally been rejected. The panel noted that, regardless of whether the claims remained contingent or had been reduced to a settlement post-petition, debtor's interest in them remained the same. View "Albert v. Golden" on Justia Law

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The Ninth Circuit affirmed the Bankruptcy Appellate Panel's judgment affirming the bankruptcy court's determination that a debtor was entitled to a homestead exemption under Washington law. The panel adopted in full the BAP's well-reasoned opinion on March 23, 2020 and attached it as an appendix. The BAP concluded that the debtor, who occupied the homestead on the petition date, was entitled to her homestead exemption despite the fact that she moved out shortly thereafter and neither re-occupied the property nor filed a declaration of non-abandonment within six months of moving out. View "Klein v. Anderson" on Justia Law

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The Ninth Circuit reversed the district court's grant of summary judgment for defendants in an action brought by plaintiff under the Fair Debt Collection Practices Act (FDCPA). Plaintiff alleged that P&F violated the FDCPA by attempting to collect a debt that was no longer owed and that P&F's agent, AAS, violated the FDCPA in attempting to collect the debt.Walls v. Wells Fargo Bank, N.A., 276 F.3d 502 (9th Cir. 2002), precludes claims under the FDCPA. The panel held that Walls does not extend to this circumstance because plaintiff's FDCPA claims are based on the wholly independent ground of full payment, rather than being premised on a violation of the discharge order. View "Manikan v. Peters & Freedman, LLP" on Justia Law

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On remand from the Supreme Court, the Ninth Circuit affirmed the Bankruptcy Appellate Panel's decision reversing the bankruptcy court's finding of civil contempt and vacating its award of civil contempt sanctions against a debtor's former business partners for violation of the discharge injunction.The Supreme Court explained that an objective, rather than subjective, standard is more appropriate in determining whether the Creditors could be held in civil contempt for violating the bankruptcy discharge injunction. Furthermore, "a court may hold a creditor in civil contempt for violating a discharge order if there is no fair ground of doubt as to whether the order barred the creditor's conduct." Applying this standard, the panel held that the Creditors had an objectively reasonable basis to conclude that debtor might have "returned to the fray" in the Oregon state court to obtain some economic benefit from a higher evaluation of the sale of his ownership stake in SPBC and in the amount of interest that had accrued after the date payment was due for the forced sale. View "Lorenzen v. Taggart" on Justia Law

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Chapter 7 debtor and his wife (collectively, "appellants") appealed the bankruptcy appellate panel's order affirming the bankruptcy court's judgment in an adversary proceeding brought by the Chapter 7 trustee. At issue is the characterization of two properties acquired by appellants during their marriage but before debtor individually filed for bankruptcy protection.The panel certified to the Supreme Court of California the question whether, in Chapter 7 bankruptcy proceedings, Cal. Evid. Code 662, which affords a presumption based on the property's form of title, supersedes Cal. Fam. Code 760, which applies a presumption in favor of community property for property purchased during the marriage with community property. The California Supreme Court determined that for joint tenancy property acquired during marriage before 1975, each spouse's interest is presumptively separate in character. For such property acquired with community funds on or after January 1, 1975, the property is presumptively community in character. For property acquired before 1985, the parties can show a transmutation from community property to separate property by oral or written agreement or a common understanding. For joint tenancy property acquired with community funds on or after January 1, 1985, a written declaration is required.In light of the Supreme Court of California's opinion answering the panel's certified question, the panel held that the bankruptcy courts properly applied California law to the characterization of the Redlands Property. In this case, the community property presumption applied because the property was acquired with community funds on or after January 1, 1975. However, the panel held that the bankruptcy courts did not make the necessary factual finding regarding when the San Bernardino Property was purchased to apply the proper presumptions when characterizing that property. Finally, the panel saw no clear error in the bankruptcy courts' finding that appellants failed to meet the requirements for a transmutation of either property. Accordingly, the panel affirmed in part and vacated and remanded in part. View "Brace v. Speier" on Justia Law

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After Gardens Regional filed for bankruptcy, the State deducted certain "fees"—which Gardens Regional had failed to pay to the State—from various payments that the State was obligated to make to Gardens Regional under its Medicaid program. The bankruptcy court and the Ninth Circuit Bankruptcy Appellate Panel (BAP) both agreed that the deductions were permissible recoupments rather than impermissible setoffs.Although the bankruptcy court and the BAP held that all of the State's withholdings of unpaid Hospital Quality Assurance Fee (HQAF) amounts constituted legitimate instances of equitable recoupment rather than setoff, the Ninth Circuit held that the bankruptcy court and BAP's holding rested on an overly generous conception of what qualifies as "the same transaction or occurrence" for purposes of recoupment. The test remains whether the relevant rights being asserted against the debtor are sufficiently logically connected to the debtor's countervailing obligations such that they may be fairly said to constitute part of the same transaction.The panel affirmed the judgment of the BAP insofar as it holds that California's deduction of unpaid HQAF assessments from the supplemental payments made to Gardens Regional was permissible under the doctrine of equitable recoupment, but the panel reversed its judgment as to the fee-for-service payments. The panel remanded to the BAP with instructions to remand to the bankruptcy court for further proceedings. View "Gardens Regional Hospital & Medical Center Liquidating Trust v. California" on Justia Law

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Pena filed for Chapter 11 bankruptcy in 2012, then owning 30 parcels of real estate. After Pena used cash collateral in an unauthorized manner, the bankruptcy court converted his case to a Chapter 7 bankruptcy and appointed a trustee, who managed Pena’s California rental properties. The trustee tendered the rents as cash collateral to the security holders of the respective security interests. The security holders did not accept the funds. In 2014, the trustee abandoned the rental parcels as part of her administration of the bankruptcy estate; her unsuccessful efforts to distribute the rents ended in 2016. She deposited $52,000 in unclaimed funds in the bankruptcy court registry and closed Pena’s bankruptcy case, listing the unclaimed funds (and their rightful owners) in her final account. Pena did not object to the court’s decree approving the trustee’s actions.In 2018, Pena unsuccessfully sought to recover the funds without reopening the bankruptcy. The bankruptcy court noted that when the bankruptcy closed, Pena still had $411,000 in unpaid, unsecured debt. The Bankruptcy Appellate Panel affirmed. The Ninth Circuit affirmed, finding that Pena had prudential standing and was a “person aggrieved” and that the absence of an opposing party, due to the trustee’s dismissal did not prevent it from exercising jurisdiction. The trustee did not abandon the rents by abandoning the properties from which they were collected; the funds remained the property of the bankruptcy estate and did not constitute an estate surplus. View "In re: Pena" on Justia Law

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The Ninth Circuit previously reversed, in part, bankruptcy appellate panel decisions. The court subsequently denied the debtors’ applications, as prevailing parties, for attorney fees under the Equal Access to Justice Act, 28 U.S.C. 2412(d). The EAJA did not authorize attorney fees because a bankruptcy court does not fall within the EAJA’s definition of “United States,” and uncontested Chapter 13 bankruptcy cases are not “civil actions brought by or against the United States.” The EAJA is a limited waiver of the government’s sovereign immunity; it must be strictly construed in favor of maintaining immunity not specifically and clearly waived. View "In re: Sisk" on Justia Law

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The Ninth Circuit affirmed the district court's judgment affirming the bankruptcy court's dismissal of a chapter 7 debtor's adversary proceeding seeking to exempt retirement funds from the bankruptcy estate. In dismissing the adversary complaint for failure to state a claim, the bankruptcy court held that debtor could not reclaim his retirement funds because he filed the bankruptcy petition after the execution lien had been satisfied.The panel held that debtor failed to state a claim under 11 U.S.C. 522(h), which allows a debtor to step into the role of the bankruptcy trustee and avoid certain transfers of exempt property made before the filing of the bankruptcy petition. The panel also held that, because the judicial lien was satisfied prior to the petition date, it was not voidable under section 522(f). Therefore, because it was not voidable, debtor could not succeed on his separate section 522(f) claim nor establish that the transfer of his IRA funds was a preferential transfer under section 547. Having failed to allege the elements of a section 547 preferential transfer, the panel held that the bankruptcy court correctly concluded that debtor failed to state a claim under section 522(h). View "Elliott v. Pacific Western Bank" on Justia Law