Justia Bankruptcy Opinion Summaries

Kip Kaler, as trustee of the debtor's bankruptcy estate, brought suit against Louie Slominski to avoid a land lease that Slominski and the debtor had entered. The Bankruptcy Appellate Panel (BAP) held that the bankruptcy court incorrectly calculated the setoff but affirmed its judgment in all other respects. Despite Slominski's failure to raise his double-recovery argument before the bankruptcy court, the BAP considered it. The court, however, will independently review the bankruptcy court's decision and is not bound by the BAP's decision. The court has discretion to consider a new argument in exceptional circumstances but the court is not convinced to do so on this record. The court concluded that the bankruptcy court did not abuse its discretion in refusing to grant the trustee a new trial based on the newly discovered evidence where the newly discovered evidence - consisting primarily of unexecuted lease documents found on a computer not belonging to Slominski - did not undermine its conclusion that Slominski acted in good faith. Accordingly, the court affirmed the judgment of the BAP. View "Kaler v. Slominski" on Justia Law

In these consolidated appeals, debtor filed numerous, frivolous challenges to the settlement and the district court entered a pre-filing injunction barring him from filing any new civil actions in the district court without court permission. At issue is whether the injunction encompasses appeals to the district court from bankruptcy court. The court concluded that, as written, the injunction does not cover those appeals with sufficient clarity, and that the district court thus erred in striking these three appeals for violating the pre-filing injunction. Nonetheless, the court affirmed the district court's dismissal of two of the three appeals (adversary proceeding numbers 14-10024 and 14-10043) for failure to state a claim, and remanded for the district court to resolve the third appeal (number 14-10014). View "US ex rel. Yelverton v. Federal Ins. Co." on Justia Law

Reynal Caldwell appeals the grant of summary judgment in favor of his ex-wife, Theresa Caldwell Lavender, and her attorney Alan E. DeWoskin and his law firm. Caldwell also appeals the denial of his motion for summary judgment. The court concluded that the district court erred in granting summary judgment to DeWoskin and Lavender based on the Rooker-Feldman doctrine because Caldwell's claims challenge the actions taken by DeWoskin and Lavender in seeking and executing state contempt orders, rather than the state court orders themselves. The court remanded to the bankruptcy court to determine whether Caldwell’s claims are precluded based on the state court’s determination that the automatic stay did not bar its contempt proceedings. View "Caldwell v. Dewoskin" on Justia Law

The Chapter 7 trustee appeals from the bankruptcy court’s judgment and order in favor of Sunset Cove on issues of turnover and preference. The bankruptcy appellate panel (BAP) concluded that the posting of the execution application and order on the boat slip at issue was sufficient as a notice of levy and created a valid lien on the boat slip under Missouri law. The sheriff’s failure to give required notice to the debtor did not invalidate the levy or the lien. In this case, the trustee did not present to the bankruptcy court any evidence of prejudice to the debtor or the estate as a result of the lack of notice. Accordingly, the BAP affirmed the bankruptcy court's judgment. View "Rouse v. Sunset Cove Condo." on Justia Law

In 2014, Jackson filed a Chapter 7 Bankruptcy petition. His mortgagee (BOA), sought relief from the stay; abandonment of his residence, a condominium; and in rem relief for two years under 11 U.S.C. 362(d)(4)(B), alleging a substantial arrearage and prior bankruptcy filings that included the Condominium as scheduled property. The court granted the motion. BOA and Jackson entered into a loan modification agreement. The owners’ association (Carlton House) sought a permanent in rem order. The court stated that post-petition amounts were current “and the issue seems to be the desire to move forward with the foreclosure for the outstanding [pre-petition] approximately $5,900.” The court entered a two-year in rem sanction. Jackson received his discharge; the case was closed. Carlton House immediately went to state court to schedule a sheriff’s sale--the final step in a foreclosure action commenced in 2008 by BOA’s predecessor. Carlton House and the lender had obtained a foreclosure decree in 2009. The bankruptcy court reopened the case, concluded that Carlton House violated discharge order by scheduling the sale, awarded monetary sanctions, and enjoined re-scheduling of the sale. The Sixth Circuit Bankruptcy Appellate Panel reversed, noting that Carlton House has statutory obligations to other unit owners. The bankruptcy court effectively imposed an “equity requirement” that is not part of the Ohio foreclosure sale process. View "In re: Jackson" on Justia Law

In 2003, Valley View and, Bedford Downs, wanted to operate “racinos,” combination horse tracks and casinos. Each would need the last harness-racing license available in Pennsylvania to do so. Valley View agreed to acquire Bedford for $55 million, with Citizens Bank acting as escrow agent. Valley View borrowed money from Credit Suisse. Valley View then obtained the harness-racing license, but failed to secure the needed gambling license and filed for Chapter 11 bankruptcy. The Trustee sued Merit, a 30% shareholder in Bedford, alleging that Bedford’s transfer to Valley View was avoidable under 11 U.S.C. 544, 548(a)(1)(b), and 550, and the money was properly part of the bankruptcy estate. Merit maintained that the transfer was protected under the safe harbor, 11 U.S.C. 546(e), which protects transfers that are “margin payment[s]” or “settlement payment[s]” “made by or to (or for the benefit of)” certain entities including commodity brokers, securities clearing agencies, and “financial institutions” and transfers “made by or to (or for the benefit of)” the same types of entities “in connection with a securities contract.” Merit relied on the involvement of Citizens Bank and Credit Suisse. The district court agreed with Merit. The Seventh Circuit reversed; section 546(e) does not protect transfers that are simply conducted through financial institutions (or the other section 546(e) entities), where the entity is neither the debtor nor the transferee but only the conduit. View "FTI Consulting, Inc. v. Merit Mgmt. Group, LP" on Justia Law

Wierzbicki owned a 40‐acre Wisconsin farm, where she lived for a time with her three minor children and their father, Griswold. In 2012 Wierzbicki gave Griswold a quitclaim deed to the farm. Fourteen months later she filed for Chapter 7 bankruptcy. The bankruptcy trustee brought an adversary proceeding to avoid the transfer as fraudulent, alleging that Wierzbicki was insolvent at the time of the transfer and that she had not received reasonably equivalent value, 11 U.S.C. 548(a)(1)(B). Wierzbicki and Griswold had been engaged in state court litigation, 2009-2012. Although a state court had dismissed Griswold’s principal appeal, Wierzbicki claims that the quitclaim deed was given in exchange for an end to the litigation. Griswold accepted liability for about $149,000 in debt secured by the property. The bankruptcy judge avoided the transfer. The district court and Seventh Circuit affirmed. The fair market value of the farm was $300,000, so Wierzbicki had equity of approximately $151,000 at the time of the transfer. Griswold’s promise to cease his “meritless appeals” in exchange for that interest had no material value. The benefit of avoiding further family conflict was too “nebulous” to “support a finding of reasonable equivalence” in the bankruptcy context, View "Griswold v. Zeddun" on Justia Law

The Koenigs filed for Chapter 7 bankruptcy protection in 2014, claiming exemptions under Wisconsin’s bankruptcy exemption statute for three annuities then worth a total of $292,185.97. The annuities had been purchased in the approximately 18 months before their bankruptcy petition. Wis. Stat. 815.18(3)(j) fully exempts retirement assets, including annuities, that meet certain requirements. Paragraph (3)(f) protects a broader category of annuities, but the exemption is limited to $150,000, except that the cap is just $4,000 for annuities issued less than 24 months before the debtor claims the exemption. The trustee argued that an annuity, to qualify for the exemption, must comply with 26 U.S.C. 401–09, which generally deal with tax‐deferred “qualified” retirement plans. The Koenigs argued that an annuity is exempt under section 815.18(3)(j) as long as the annuity qualifies for favorable tax treatment under 26 U.S.C. 72, which deals with annuities more generally. The Seventh Circuit affirmed the judgment of the bankruptcy court, in favor of the Koenigs, stating that the key statutory text is ambiguous on the decisive point, and citing the statute’s structure and purpose, along with the legislature’s instruction to construe exemptions in favor of debtors, View "Wittman v. Koenig" on Justia Law

Blake Roussel and LuAnne Deere formed Clear Sky, LLC d/b/a Exit First Choice Realty - an Exit Realty brokerage franchise - in Conway, Arkansas. Deere and Clear Sky subsequently filed suit against Roussel for breach of fiduciary duty, fraud, breach of contract, and violations of Arkansas law. A jury found in favor of plaintiffs and awarded plaintiffs money judgments. Roussel then filed for Chapter 7 bankruptcy, and Clear Sky and Deere filed an adversary proceeding against Roussel, requesting that the bankruptcy court declare the entire state court judgment nondischargeable under 11 U.S.C. 523(a)(4) and 523(a)(6). The court concluded that the district court did not err in concluding that the Judgment Debt is nondischargeable under section 523(a)(6) where the facts show that Roussel acted willfully and he knew that consequences were certain, or substantially certain, to result from his conduct. The court also concluded that apportionment is inappropriate here because Deere’s breach-of contract-claim is deeply intertwined with the breach-of-fiduciary-duties claim by Deere and Clear Sky. Accordingly, the court affirmed the judgment. View "Roussel v. Clear Sky Properties, LLC" on Justia Law

Debtor appealed the bankruptcy court's order denying her request to discharge her student loan for undue hardship pursuant to 11 U.S.C. 523(a)(8). The BAP concluded that, under the totality of the circumstances, the record demonstrates that debtor has sufficient income to make the $42 student loan payment and the bankruptcy court did not clearly err in so finding. The BAP also considered other relevant facts and circumstances, concluding that debtor failed to prove that she lacks the present ability to make payments on her student loans and her claim of undue hardship must fail. Accordingly, the BAP affirmed the judgment. View "Hurst v. Southern Arkansas Univ." on Justia Law