Justia Bankruptcy Opinion Summaries

Debtors filed their Chapter 7 bankruptcy petition in Ohio. They had homes in Ohio and Maryland and listed the Ohio Home as their residence, claiming a $265,800 homestead exemption (Ohio Revised Code 2329.66(A)(1)). They asserted their intent surrender their Maryland Home. During the 11 U.S.C. 341 Meeting of Creditors the debtors told the Trustee they wanted to move to Maryland, stating they had been commuting between Ohio and Maryland. They gave confusing responses about where they lived and where they intended to live. Ohio law permits each debtor to claim a $132,9001 exemption in a primary residence, while Maryland limits the exemption to $6,000, which may not be claimed by both spouses in the same proceeding. The bankruptcy court sustained the Trustee’s objection to the homestead exemption because the Ohio home was not their domicile during the 730 days immediately preceding their Chapter 7 filing, as required by 11 U.S.C. 522(b)(3)(A). The Bankruptcy Appellate Panel affirmed. In deciding that the debtors’ domicile was Maryland, the bankruptcy court applied the correct legal standards, noting "the tardy disclosure of an intricate organization that defies all explanation of necessity” and that the “Debtors’ credibility in providing complete and candid answers suffers” and that their “change in heart is a tactic to shield a valuable asset, rather than a valid assertion of domicile.” View "In re Felix" on Justia Law

Appellees filed a state court action, alleging that Peace caused property damage when he interfered with the water flow to the Appellees' Cleves, Ohio property. That lawsuit was stayed when Peace filed a chapter 7 bankruptcy petition. Appellees had already hired Abercrombie to provide an expert report, which was filed in the state litigation. After Peace’s bankruptcy filing, Appellees filed an adversary proceeding under 11 U.S.C. 523(a)(6), alleging that Peace owed them a non-dischargeable debt. The bankruptcy court agreed. Peace filed an untimely notice of appeal. The Bankruptcy Appellate Panel dismissed. Peace filed a Rule 60(b) motion for relief from judgment, asserting that Appellees’ expert witness, Abercrombie, committed fraud by giving false testimony and that Peace’s discovery that Abercrombie’s data sources were nonexistent was “new evidence.” The bankruptcy court denied the motion as untimely and stated that Peace failed to show that his evidence could not have been discovered with reasonable diligence and there was no clear proof that Abercrombie’s testimony was false. The Bankruptcy Appellate Panel affirmed. Peace made substantially similar arguments to the bankruptcy court in his initial post-trial brief. The bankruptcy court acted within its discretion in treating the motion as an attempt to relitigate issues previously decided and as an improper substitute for an appeal. View "In re Peace" on Justia Law

Fulson was the indirect equity owner of the Chapter 7 Debtor, based on his ownership of Nicole Gas, the Debtor’s sole owner. While Debtor’s bankruptcy was pending Fulson filed a state court complaint against the Columbia Gas entities under the Ohio Corrupt Practices Act (OCPA), alleging that the companies caused him indirect injury by harming Debtor; the only damages Fulson pled were those Debtor suffered—he did not claim any unique individual damages. Ransier, as Bankruptcy Trustee, eventually settled those claims on behalf of Debtor’s estate. Appellants, representing Fulson's probate estate, unsuccessfully objected. Ransier moved for contempt against Appellants, arguing that Fulson had merely a derivative claim based on Debtor’s injury, for damages that duplicated Debtor’s damages, that the claim became the property of Debtor’s bankruptcy estate, and that Appellants violated Debtor’s automatic stay. The Bankruptcy Court agreed, rejecting an argument that the claim was for “indirect” injury that fell within OCPA’s “directly or indirectly injured” language. The Bankruptcy Court held Appellants in contempt for violating 11 U.S.C. 362(a)(3) and awarded Ransier $91,068.00. The Ohio Supreme Court declined to answer the certified question: Whether a shareholder of a corporation has standing to bring a claim individually (as opposed to merely derivatively) under OCPA. The Bankruptcy Appellate Panel Judge then affirmed the contempt order and sanction award. OCPA did not provide Fulson an individual claim against the Columbia Gas entities. View "In re: Nicole Gas Production, Ltd." on Justia Law

Perkins has actively operated a 200-acre Kentucky farm since 1970. Her operation expanded to cultivate approximately 9,500 acres in various partnerships. Perkins encountered financial trouble in 2014. The partnerships filed Chapter 11 bankruptcy cases. Perkins retired from teaching. The Chapter 11 bankruptcies were dismissed after liquidating substantially all of the partnerships’ assets and making over four million dollars of payments to BB&T. In 2016 Perkins sought Chapter 12 bankruptcy protection. Creditors' proofs of claim totaled $4,012,908.79. In the preceding year, Perkins received $279,000 of gross income from her farm, $764,472 from her partnerships, $161,571 of capital gains from equipment sales, and $132,360 from wages, pension, and social security. BB&T objected to her plan, which projected that $18,950 could be paid annually to unsecured creditors over the plan’s five-year life and that a Chapter 7 liquidation would produce no payments to unsecured creditors. The plan proposed to pay BB&T annual installments over 20 years at 4.5% interest. The bankruptcy court rejected BB&T’s objection and confirmed the plan. The Bankruptcy Appellate Panel affirmed. Chapter 12 relief, 11 U.S.C. 109(f), is available to family fishermen and family farmers, defined as an “individual . . . engaged in a farming operation whose aggregate debts do not exceed $4,153,150,” and who receives more than half of her gross income from “such farming operation.” The bankruptcy court properly found Perkins to be a family farmer and confirmed the plan as feasible, providing proper treatment to secured claims, and meeting the best interests of creditors test. View "In re: Perkins" on Justia Law

Debtors filed a Chapter 7 bankruptcy petition. They included their interest in Franklin, Ohio real property with three mortgages. PNC held the first two. The home was “underwater.” The Trustee filed an adversary proceeding to avoid PNC’s alleged first mortgage under 11 U.S.C. 544(a)(1) and 544(a)(3) and Ohio law. The bankruptcy court stayed the proceeding pending resolution of questions of law that had been certified to the Ohio Supreme Court in another matter. The Ohio Supreme Court ultimately responded that O.R.C. 1301.401 applies to all recorded Ohio mortgages and acts to provide constructive notice to the world of a recorded mortgage that was deficiently executed under O.R.C. 5301.01. Although the parties agreed that the mortgage's acknowledgment clause was defective and did not substantially comply with section 5301.01, PNC asserted that section 1301.401 vitiates the Trustee’s power to avoid recorded mortgages based on defects in their execution as either a hypothetical bona fide purchaser under 11 U.S.C. 544(a)(3) or hypothetical judicial lien creditor under 11 U.S.C. 544(a)(1). The bankruptcy court denied a motion to dismiss. The Sixth Circuit Bankruptcy Appellate Panel affirmed, finding the Ohio Supreme Court did not address the Trustee’s avoidance powers as a hypothetical judicial lien creditor, and the Ohio Legislature did not make its amendments retroactive. View "In re Oakes" on Justia Law

The Sixth Circuit affirmed the decision of the district court affirming the bankruptcy court concluding that Mountain Glacier properly reserved its arbitration claim in its dispute with Nestle Waters after Mountain Glacier filed for Chapter 11 bankruptcy. The bankruptcy automatically stayed the companies’ arbitration. After the bankruptcy proceedings ended, Mountain Glacier attempted to resume arbitration, but Nestle Waters objected, arguing that Mountain Glacier failed properly to reserve the arbitration in its reorganization plan. The lower courts disagreed, as did the Sixth Circuit, holding (1) Mountain Glacier’s reservation enabled creditors to identify its claim and evaluate whether additional assets might be available for distribution; and (2) neither Browning v. Levy, 283 F.3d 761, 772 (6th Cir. 2002) nor 11 U.S.C. 1123(b)(3) required Mountain Glacier to provide more information than it did. View "Nestlé Waters North America. Inc. v. Mountain Glacier LLC" on Justia Law

Debtor filed several unsuccessful lawsuits to invalidate Sandlin Farm's Deutsche Bank mortgage. Debtor, d/b/a Sandlin Farms sought Chapter 12 bankruptcy relief but did not propose to pay that mortgage nor a BoA mortgage on other property. Debtor filed adversary complaints to avoid the liens. The Trustee moved to dismiss the case due to inaccurate monthly reports and Debtor’s inability to generate sufficient income to implement his plan if the liens were valid. The Bankruptcy Court dismissed the Deutsche Bank adversary proceeding, citing res judicata. Debtor voluntarily dismissed the BoA proceeding but did not re-notice the confirmation hearing or amend the plan. The court denied Debtor’s motion to stay pending appeal of the Deutsche Bank dismissal and set a hearing on the Trustee's motion. Debtor resisted scheduling depositions and requested time to find new counsel. The Trustee then sought Dismissal as a Sanction for Failure to Cooperate with Discovery. Debtor did not appear at the hearing. The Bankruptcy Court dismissed (11 U.S.C. 1208(c)) based on inability to present a timely confirmable plan; unreasonable delay; and a continuing loss to the estate without reasonable likelihood of rehabilitation. The Bankruptcy Appellate Panel affirmed. Although Debtor had actual notice of the hearing, it was not reasonably calculated to give him sufficient notice of exactly what issues would be addressed nor an opportunity to be heard. Nonetheless, Debtor failed to refute that cause existed to dismiss the case, so the error was not prejudicial. View "In re: Haffey" on Justia Law

In 2008, Purdy borrowed from Citizens First, using his dairy cattle as collateral. Purdy refinanced in 2009, executing an “Agricultural Security Agreement" that granted Citizens a purchase money security interest in “all . . . Equipment, Farm Products, [and] Livestock (including all increase and supplies) . . . currently owned [or] hereafter acquired.” Citizens perfected this security interest by filing with the Kentucky Secretary of State. Purdy and Citizens executed two similar security agreements in 2010 and 2012, which were perfected. After the 2009 refinancing, Purdy increased the size of his herd, entering into “Dairy Cow Lease” agreements with Sunshine. The parties also executed security agreements and Sunshine filed financing statements. In 2012, milk production became less profitable. Purdy sold off cattle, including many bearing Sunshine’s brand, and filed a voluntary Chapter 12 bankruptcy petition. Both Citizens and Sunshine sought relief from the stay preventing the removal of the livestock. In 2014, the Sixth Circuit held that Citizens failed to demonstrate that the "Leases” were actually security agreements in disguise. On remand, the bankruptcy court determined that all cattle sold at a 2014 auction were subject to Citizens’ security interest. The district court affirmed, awarding Citzens $402,354.54. The Sixth Circuit affirmed; the bankruptcy court did not contravene its mandate by holding a hearing on the question of ownership. View "Sunshine Heifers, LLC v. Citizens First Bank" on Justia Law

The Burkes filed a Chapter 7 bankruptcy petition, listing their Chattanooga home as worth $108,000, with a $91,581 mortgage debt. Jahn, the appointed trustee, sought an eviction order, stating that he could not sell the property with the debtors living there and that its value was about $200,000. The Burkes moved to compel the trustee to abandon the property, alleging that their equity would provide little value to creditors. Jahn tendered a check for $7,500, the value of their Tennessee statutory homestead exemption. The Burkes rejected the tender; their first witness estimated that the residence would be worth $171,000 after repairs related to mold and roofing that would cost $63,000, leaving a net value of $108,000. The Burkes’ second appraiser valued the home at $185,000 after making repairs estimated at $60,000, for a final appraisal of $125,000. Jahn’s realtor testified that the Burkes’ residence was worth $204,000, based on his tour of the property. Jahn's home inspector testified that there was no problem with the roof and that the mold issue had been overstated. The bankruptcy court granted the Burkes’ motion to abandon, noting that houses are often sold while occupied by their owners. The district court and Sixth Circuit affirmed. Under these circumstances, the trustee cannot simply tender the homestead exemption and cause the debtors to “skedaddle.” View "Jahn v. Burke" on Justia Law

The Isaacs executed a mortgage to GMAC encumbering their Kentucky property. It states: “The lien ... will attach on the date this Mortgage is recorded.” The Isaacses filed a Chapter 7 bankruptcy petition in March 2004, listing the GMAC mortgage debt as secured debt. GMAC did not record the Mortgage until June 2004. GMAC did not seek relief from the automatic stay. No party sought to avoid the Mortgage. The Isaacses obtained a discharge; the case closed. Months later, the bankruptcy court reopened the case at the request of the Isaacses, avoided two judgment liens, and closed the case again. About 10 years later, GMAC’s successor obtained a default foreclosure Judgment and Order of Sale. Immediately before the scheduled sale date, wife (without husband) filed a chapter 13 petition, seeking to avoid the GMAC lien (11 U.S.C. 522(f)). In an adversary proceeding, the bankruptcy court found that GMAC was an unsecured creditor in the chapter 7 case, which discharged the debt; the foreclosure judgment was an improper modification of the discharge order, so that the Rooker-Feldman doctrine did not apply. The Sixth Circuit Bankruptcy Appellate Panel reversed. The bankruptcy court lacked subject matter jurisdiction under the Rooker-Feldman doctrine, precluding it from avoiding the state foreclosure judgment because the mortgage was enforceable against the Isaacses’ interests on the chapter 7 petition date. Since unavoided pre-petition liens pass through bankruptcy unaffected, the foreclosure judgment could not violate the chapter 7 discharge. View "In re: Isaacs" on Justia Law