Justia Bankruptcy Opinion Summaries

The bankruptcy court denied debtor discharge under the false oath provision of 11 U.S.C. 727(a)(4), after it found that debtor intentionally undervalued his interest in a real estate investment company. The court concluded that the undervaluation of the company constituted a false oath considering the magnitude of the undervaluation debtor's distinguished training and experience. The court further concluded that debtor's misstatement was material, and denial of discharge was appropriate in this case. Accordingly, the court affirmed the judgment. View "Robinson v. Worley" on Justia Law

Plaintiff Jared Trent Cowen’s 2000 Peterbilt 379, a commercial truck, was in need of repair. To cover the cost, Cowen borrowed money from Defendant WD Equipment, which is owned and managed by Defendant Aaron Williams, in exchange for a lien on the truck and the promise of repayment. After the Peterbilt broke down again only a few weeks after the repairs, it was towed to a local repair company, which estimated that fixing the truck again would cost more than Cowen could afford. Because his Peterbilt was in the shop, Cowen could not make installment payments to WD Equipment. So, in early August, 2013, Cowen began taking steps to refinance the loan. Williams gave Cowen several, contradictory responses as to how much Cowen would need to pay to settle the debt, and he accelerated the payoff date several times, before ultimately setting a deadline. Around the same time, Cowen defaulted on another loan secured by another one of his trucks, a 2006 Kenworth T600. This loan was owed to Defendant Bert Dring, the father-in-law of Williams, who held a purchase-money security interest in the truck. Dring lured Cowen under false pretenses to his place of business to repossess the Kenworth. Cowen filed a voluntary petition for relief under Chapter 13 of the Bankruptcy Code on the day of the deadline for paying off the Peterbilt, and which was within the ten-day cure period for the Kenworth. He notified Defendants of the filing and requested the immediate return of both trucks. But Defendants refused. Cowen moved the bankruptcy court for orders to show cause why Defendants should not be held in contempt for willful violations of the automatic stay. The bankruptcy court granted the motions and ordered Defendants to “immediately turn over” the trucks to Cowen. When Defendants did not comply with the bankruptcy court’s turnover order, Cowen filed an adversary proceeding for violations of the automatic stay. A few months later, the bankruptcy court dismissed the underlying bankruptcy case because, without the trucks, Cowen had no regular income, which rendered him ineligible for Chapter 13 relief. However, the bankruptcy court expressly retained jurisdiction over the adversary proceeding. During the adversary proceeding, Defendants again asserted that Cowen’s rights in the trucks had been properly terminated by Defendants before the bankruptcy petition was filed, and so they could not have violated the automatic stay. The court disagreed, and Defendants timely appealed this decision to the district court, which reversed on the calculation of damages but otherwise affirmed the bankruptcy court’s order. Defendants then appealed to the Tenth Circuit, arguing, among other things, that the bankruptcy court exceeded its jurisdiction, that it lacked constitutional authority to enter a final judgment in this adversary proceeding, and that the bankruptcy court misinterpreted section 362 (the automatic stay provision). The Tenth Circuit agreed, reversed and remanded. View "WD Equipment v. Cowen" on Justia Law

Leigh Murphy d/b/a Murphy Cattle Co. appealed the bankruptcy court's orders holding that Sweetwater's lien in certain cattle was superior to Murphy's rights as an unpaid seller of the cattle. The panel concluded that the result in this case would be the same under either Colorado or Nebraska law and thus relied on cases from both states interpreting the relevant provisions of the UCC; Murphy signed a document transferring ownership of the cattle to Debtor Leonard, such that others could reasonably rely on Leonard's claim of ownership; Moffat County State Bank v. Producers Livestock Marketing Assoc. does not stand for the proposition that Article 2 is inapplicable here as to the passage of title, and the bankruptcy court did not err in turning to Article 2 of the UCC; pursuant to section 2-401, title passed to Leonard at the moment the cattle were shipped; Murphy's right to have title re-vest in him when the checks were dishonored was limited to his reclamation rights; under section 2-403, when Leonard received title from Murphy at the time of shipping, he received all the title Murphy had, as well as the power to transfer good title to a good faith purchaser for value (Sweetwater in this case); the panel denied Sweetwater's request to strike Murphy's electronic record filing; and the panel denied Sweetwater's oral request for sanctions. Accordingly, the court affirmed the judgment. View "Sweetwater Cattle Co. v. Murphy" on Justia Law

Bratt filed for Chapter 13 bankruptcy, proposing to pay overdue taxes to Nashville, which held a $5,136 over-secured lien on Bratt’s real property. Under 11 U.S.C. 511(a), the interest rate for tax claims should “enable a creditor to receive the present value of the allowed amount of a tax claim” and be “determined under applicable nonbankruptcy law.” The Code does not allow assessment of post-petition penalties. Tennessee Code 67-5-2010 set an interest rate of 12% per year for overdue taxes, with a 6% per year penalty. A Tennessee bankruptcy court held that only the post-petition interest and not the penalty portion could be collected for over-secured claims in bankruptcy proceedings. In response, the Tennessee legislature added subsection (d): For purposes of any claim in a bankruptcy proceeding pertaining to delinquent property taxes, the assessment of penalties pursuant to this section constitutes the assessment of interest. Bratt argued that the amendment should not apply. Tennessee admitted that the 18% rate exceeded what was required to maintain the tax claim's present value. The bankruptcy court held that subsection (d) violated the Supremacy Clause. The Bankruptcy Appellate Panel affirmed that 12% was the appropriate interest rate, reasoning that subsection (d) is not a “nonbankruptcy law” and is not applicable for determining the interest rate under section 511(a). The Sixth Circuit affirmed, adopting the BAP’s reasoning. View "Tennessee v. Corrin" on Justia Law

Charles Breland was a developer of real property, with properties in Alabama and Florida. In 2002, Breland hired David Hudgens to provide legal services for him and his companies. According to Hudgens, Breland informed him early during their professional relationship that he "was suffering significant cash flow problems." As a result, Hudgens says, the various law firms with which Hudgens worked while providing Breland and his companies with legal services delayed billing "a significant portion of the attorneys' fees and costs" for those services. Breland disputed that, claiming that he and/or his companies paid Hudgens more than $2.7 million for Hudgens's legal services between 2004 and 2010. In 2009, Breland filed a Chapter 11 bankruptcy petition. Breland filed the required schedules, required disclosure statement, and a proposed plan of reorganization that identified Hudgens & Associates, LLC ("H&A") as an unsecured creditor holding a $1 million claim and identified ETC as an unsecured creditor holding a $390,000 claim. Hudgens filed a proof of claim in the Breland bankruptcy on behalf of H&A for "legal fees" in the amount of $2,334,987.08 and filed proofs of claim on behalf of ETC for "guaranty of note" in the amounts of $879,929.55. Breland did not make payments according to the bankruptcy reorganization plan. Breland conveyed property to Gulf Beach Investment Company of Perdido, LLC which Hudgens alleged was in violation of the reorganization plan. Hudgens filed suit against Breland and Gulf Beach seeking enforcement of the plan, monies owed under the plan, and to void transfer of the property to Gulf Beach. The trial court entered a judgment on the parties' motions for a partial summary judgment, noting that it was not addressing the plaintiffs' "mortgage claim" because it had denied that claim in a September 2015 order. After setting forth extensive findings of fact and conclusions of law, the trial court awarded the plaintiffs $2,189,342.96 (consisting of $1.5 million in principal, plus interest); "denied and dismissed" the defendants' fraud, breach-of-contract, and slander-of-title claims; and certified the judgment as final pursuant to Rule 54(b). The trial court denied the defendants' postjudgment motion, and the defendants appealed. That case was assigned case no. 1150876, and the Alabama Supreme Court consolidated case nos. 1150302 and 1150876 for the purpose of writing one opinion. After review, the Court dismissed both appeals, finding the trial court exceeded its discretion in certifying as final the underlying appeals. View "Equity Trust Co. v. Breland" on Justia Law

Debtor challenges the district court's affirmance of the dismissal of its small business Chapter 11 bankruptcy. The court explained that the bankruptcy court's feasibility concerns would have existed even had debtor succeeded on its impairment-of-collateral argument. Even giving debtor the benefit of the impairment-of-collateral issue, the court found a sufficient basis in the record to defer to the bankruptcy court's "broad discretion" in determining whether a Chapter 11 case should be dismissed. In this case, the bankruptcy court noted primarily the issue of feasibility, that debtor's case had been pending for three years, and its failure to present a confirmable plan imposed substantial and continuing losses on its creditors. Accordingly, the court affirmed the judgment. View "Diwan, LLC v. Maha-Vishnu Corp." on Justia Law

In February 2012, Sheryl Ricketts was involved in a motor vehicle accident. Ricketts underwent surgery for her injuries. In January 2014, Ricketts filed a complaint alleging that Charlie Strange’s negligence was the direct and proximate cause of the accident. Strange moved to summary judgment, alleging that Ricketts lacked standing to pursue her claim because, in September 2012, she had filed a Chapter 7 bankruptcy petition in the bankruptcy court. Strange argued that because Ricketts failed to properly exempt her negligence claim from the bankruptcy estate, the claim was assertable only by the trustee in bankruptcy. The circuit court agreed and granted summary judgment in favor of Strange. The circuit court subsequently denied Ricketts’s motions to correct a misnomer in her complaint or substitute the bankruptcy trustee as the proper plaintiff. The Supreme Court affirmed, holding that the circuit court (1) properly granted Strange’s motion for summary judgment because Ricketts did not properly exempt her negligence claim from the bankruptcy estate, and therefore, Ricketts lacked standing to pursue it; and (2) did not err by denying Ricketts’s motions for leave to amend her complaint. View "Ricketts v. Strange" on Justia Law

After Process Technologies obtained a judgment in state court against debtor for violations of state securities laws, debtor filed for bankruptcy. Process Technologies then filed an adversary proceeding, arguing that 11 U.S.C. 523(a)(19)(A) barred debtor from discharging the debt. The court concluded that debtor cannot discharge his debt because the bankruptcy court made a finding of fact that debtor violated securities laws and, in the alternative, section 523(a)(19)(A) applies irrespective of whether debtor violated securities laws. The court also concluded that debtor is not entitled to leave to amend his complaint. Accordingly, the court affirmed the bankruptcy court's order that excepted the debt from discharge and denied leave to amend. View "Lunsford, Sr. v. Process Technologies Services" on Justia Law

Debtor made false oral statements to his lawyers, Lamar, Archer & Cofrin, LLP, that he expected a large tax refund that he would use to pay his debt to the firm. Debtor filed for bankruptcy after Lamar obtained a judgment for the debt. Lamar then initiated an adversary proceeding to have the debt ruled nondischargeable. The bankruptcy court and the district court determined that the debt could not be discharged under 11 U.S.C. 523(a)(2)(A) because it was incurred by fraud. The court reversed and remanded, concluding that debtor's debt to Lamar can be discharged in bankruptcy. In this case, because a statement about a single asset can be a "statement respecting the debtor's . . . financial condition," and because debtor's statements were not in writing, his debt can be discharged under section 523(a)(2)(B). View "Appling v. Lamar, Archer & Cofrin, LLP" on Justia Law

Before debtor and his wife received the purchase offer on their home, the couple executed and filed a Partition Agreement, which sought to recharacterize their home from community property to separate property, one half belonging to each spouse. Then debtor filed for bankruptcy under Chapter 7, claiming an exemption for his separate interest in the home under Texas law. Debtor's wife subsequently initiated an adversary proceeding seeking a declaratory judgment recognizing that the Partition Agreement gave her a one-half separate property interest in the net proceeds from the sale. The Trustee counterclaimed to avoid the Partition Agreement and for a declaration that the remaining proceeds from the sale were property of the estate. The bankruptcy court declared the Partition Agreement avoidable as a fraudulent transfer, leaving the amount of the net sale proceeds in excess of debtor's exemption to be nonexempt property of the estate, and determined that debtor's wife had no right or interest in the Homestead Net Sale Proceeds by virtue of the Partition Agreement. The court affirmed the bankruptcy court's judgment. In this case, the court explained that allowing the wife to sidestep the statutory limits for homestead exemptions and obtain approximately $500,000 in proceeds that otherwise are for creditors would lay waste to the provisions of the Bankruptcy Code involved here. View "Wiggains v. Reed" on Justia Law