Justia Bankruptcy Opinion Summaries

In 2005, Crossroads Investors, L.P. borrowed $9 million subject to a promissory note. The note was secured by a deed of trust recorded against an apartment building Crossroads owned in Woodland. Defendant Federal National Mortgage Association (Fannie Mae) was the beneficiary of the deed. The note imposed on Crossroads a prepayment premium should Crossroads pay the unpaid principal before the note’s maturity date or should Crossroads default and Fannie Mae accelerate the loan. Crossroads defaulted on the note in late 2010. Fannie Mae served Crossroads with a notice of default, and accelerated the loan. In February 2011, Fannie Mae initiated nonjudicial foreclosure proceedings. In April 2011, Crossroads entered into a contract to sell the property to Ezralow Company, LLC (Ezralow) for $10.95 million. A few weeks later, Crossroads and Ezralow proposed to Fannie Mae that Ezralow would assume Crossroads’ obligations and pay off the loan on Fannie Mae’s agreeing to waive the prepayment premium. Fannie Mae refused to waive the prepayment premium and rejected the proposal. By June, Fannie Mae recorded a notice of trustee’s sale against the property, stating the total unpaid amount of Crossroad’s obligations was estimated at more than $10.5 million. The day before the property was scheduled to be sold, Crossroads filed for Chapter 11 bankruptcy protection to protect its interest in the property. In its petition, Crossroads asserted it owed Fannie Mae $8.7 million. Fannie Mae sold the property after it was granted relief from the bankruptcy stay. Crossroads then sued Fannie Mae for wrongful foreclosure, breach of contract, fraud, and other tort and contract actions. Fannie Mae filed an anti-SLAPP motion, contending the actions on which Crossroads based its complaint were Fannie Mae’s statements in its papers filed in the bankruptcy proceeding. The trial court disagreed and denied the motion. This appeal challenged the trial court’s denial of Fannie Mae's special motion to strike the complaint under the anti-SLAPP statute. After review, the Court of Appeal affirmed the trial court’s order. "The principal thrust of Crossroads’ action was to recover for violations of state nonjudicial foreclosure law, not for any exercise of speech or petition rights by Fannie Mae. Even if protected activity was not merely incidental to the unprotected activity, Crossroads established a prima facie case showing it was likely to succeed on its causes of action." View "Crossroads Investors v. Federal National Mortgage Assn." on Justia Law

In 2008, Richard and Suzan Collins were divorced. In 2009, the court issued an amended judgment that contained an order of enforcement. In 2014, the court held Richard in contempt for failing to comply with the payment obligations created by the 2009 order. Two months after the court issued the contempt order, Richard filed a petition for Chapter 7 bankruptcy. Later that year, the Bankruptcy Court issued a discharge in bankruptcy. Suzan then filed a request for a show cause hearing, asserting that Richard had not made the payments required by the 2014 contempt order. Richard moved to dismiss Suzan’s request for the show cause hearing on the grounds that, aside from his child support debt, all of his financial obligations had been discharged in the bankruptcy action. After a show cause hearing, the district court denied Richard’s motion to dismiss and confirmed his payment obligations as ordered in the contempt order. The Supreme Judicial Court affirmed, holding that Richard’s obligations under the divorce judgment were statutorily insulated from a post-judgment bankruptcy discharge, and Richard remained liable to Suzan and for payments to a third-party creditor. Therefore, the district court did not err by enforcing the contempt order that pre-dated the bankruptcy discharge. View "Collins v. Collins" on Justia Law

In 2008, Richard and Suzan Collins were divorced. In 2009, the court issued an amended judgment that contained an order of enforcement. In 2014, the court held Richard in contempt for failing to comply with the payment obligations created by the 2009 order. Two months after the court issued the contempt order, Richard filed a petition for Chapter 7 bankruptcy. Later that year, the Bankruptcy Court issued a discharge in bankruptcy. Suzan then filed a request for a show cause hearing, asserting that Richard had not made the payments required by the 2014 contempt order. Richard moved to dismiss Suzan’s request for the show cause hearing on the grounds that, aside from his child support debt, all of his financial obligations had been discharged in the bankruptcy action. After a show cause hearing, the district court denied Richard’s motion to dismiss and confirmed his payment obligations as ordered in the contempt order. The Supreme Judicial Court affirmed, holding that Richard’s obligations under the divorce judgment were statutorily insulated from a post-judgment bankruptcy discharge, and Richard remained liable to Suzan and for payments to a third-party creditor. Therefore, the district court did not err by enforcing the contempt order that pre-dated the bankruptcy discharge. View "Collins v. Collins" on Justia Law

Sunnyslope, as the debtor of a chapter 11 bankruptcy plan, exercised the cram down option pursuant to section 506(a) of the Bankruptcy Code and elected to retain the property at issue. Sunnyslope argued that the value of First Southern’s secured interest should be calculated with the affordable housing restrictions remaining in place. The bankruptcy court and the district court both agreed. First Southern appeals. The court denied Sunnyslope’s motion to dismiss the appeals as equitably moot. The court concluded that valuing First Southern’s secured interest as if the affordable housing restrictions related to subordinated positions still applied was not appropriate under section 506(a). All of the restrictive covenants and other provisions that Sunnyslope seeks to invoke to limit the project to affordable housing and to the reduced rental income that would be collected as a result are derived from positions that were junior and expressly subordinated to First Southern's interest. As a result, the plan of reorganization confirmed by the bankruptcy court and affirmed by the district court must be set aside, because it was based on an improper valuation of First Southern's interest. Accordingly, the court reversed and remanded for further proceedings. View "First Southern Nat'l Bank v. Sunnyslope Housing" on Justia Law

Sunnyslope, as the debtor of a chapter 11 bankruptcy plan, exercised the cram down option pursuant to section 506(a) of the Bankruptcy Code and elected to retain the property at issue. Sunnyslope argued that the value of First Southern’s secured interest should be calculated with the affordable housing restrictions remaining in place. The bankruptcy court and the district court both agreed. First Southern appeals. The court denied Sunnyslope’s motion to dismiss the appeals as equitably moot. The court concluded that valuing First Southern’s secured interest as if the affordable housing restrictions related to subordinated positions still applied was not appropriate under section 506(a). All of the restrictive covenants and other provisions that Sunnyslope seeks to invoke to limit the project to affordable housing and to the reduced rental income that would be collected as a result are derived from positions that were junior and expressly subordinated to First Southern's interest. As a result, the plan of reorganization confirmed by the bankruptcy court and affirmed by the district court must be set aside, because it was based on an improper valuation of First Southern's interest. Accordingly, the court reversed and remanded for further proceedings. View "First Southern Nat'l Bank v. Sunnyslope Housing" on Justia Law

In entertaining defendants' Fed. R. Civ. P. 50(b) motion for judgment as a matter of law after a jury trial, the district court applied the filing deadline found in the Federal Civil Rules and thus found the motion timely. The court disagreed and held that when trying a case arising under title 11 of the United States Code, a district court (just like a bankruptcy court) must apply the filing deadline found in the Federal Rules of Bankruptcy Procedure when addressing a Rule 50(b) motion. The court vacated the district court's order granting defendants relief and remanded with instructions to reinstate the jury's award because, under the Federal Bankruptcy Rules, defendants' Rule 50(b) post-trial motion was untimely. Fed. R. Bankr. P. 9015 requires that such motions be filed no later than 14 days after entry of judgment. In this case, defendants filed their renewed motion 28 days after the entry of judgment. View "Rosenberg v. DVI Receivables XIV, LLC" on Justia Law

Collazo, a real estate developer, bought apartments for conversion to condominiums and formed LLCs to hold title to the properties. In 2002, Collazo's employee, Julie Siragusa, introduced the developer to her father. The Siragusas began making loans for the developments. Collazo obtained additional financing by transferring properties among the LLCs. According to the Siragusas, the financial institutions did not realize that Collazo was indebted to them. The Siragusas accepted Collazo’s explanations for delays in repayment for many years. In 2012 Collazo petitioned for bankruptcy, seeking to discharge his debts to Siragusa (a physician), Siragusa’s employee benefit trust, and Siragusa’s three adult children. The Siragusas filed an adversary action in the bankruptcy proceeding, contending that Collazo was not entitled to a discharge of his debts to them. The bankruptcy judge and district judge allowed discharge except for Collazo’s debt to Dana and Robert Siragusa, concerning $1 million borrowed for an Arizona development project. The Seventh Circuit remanded Dana’s claim that the transfer of unsold Chicago units to new LLCs was fraudulent, and Dana’s and Robert's claim for a money judgment, but agreed that other claims were time-barred. View "Siragusa v. Collazo" on Justia Law

Debtor declared bankruptcy in 2011 and sought to discharge his federal income tax liability for tax years 2000 through 2003. Debtor had filed Forms 1040 for those tax years many years late, and only after the IRS had issued notices of deficiency and had assessed the amount of taxes he owed. The bankruptcy court determined that debtor's tax debts were nondischargeable and granted the government's motion for summary judgment. The court assumed, without deciding, that Congress did not intend to include filing deadlines when it required, in the hanging paragraph, that tax returns comply with “applicable filing requirements.” Even making that assumption, however, the court held that debtor's late-filed Forms 1040 do not qualify as tax returns under the Beard test because they do not evince an honest and reasonable effort to comply with the tax law. Consequently, debtor's tax debts for tax years 2000 through 2003 are debts for tax obligations with respect to which no return was filed, and they are not dischargeable in bankruptcy pursuant to 11 U.S.C. 23(a)(1)(B)(i). Accordingly, the court affirmed the judgment. View "Justice v. United States" on Justia Law

Appellant filed for Chapter 13 bankruptcy protection, and the bankruptcy court set July 19, 2012 as the deadline for creditors to file unsecured claims. The case was dismissed on June 13, 2012 and reinstated on August 1, 2012. On August 7, 2012, Appellee, Appellant’s creditor, sought leave to file an untimely unsecured claim, explaining that it had assumed the July 19 deadline was no longer operative after the case’s dismissal. The bankruptcy court reset the filing deadline to September 6, 2012 and accepted Appellee’s claim. The district court affirmed. The First Circuit affirmed, holding that because the initial statutory ninety-day deadline for Appellee to file an unsecured claim fell in a period between the case’s dismissal and subsequent reinstatement, the claim was timely. View "Gil-De La Madrid v. Bowles Custom Pools & Spa" on Justia Law

Appellant filed for Chapter 13 bankruptcy protection, and the bankruptcy court set July 19, 2012 as the deadline for creditors to file unsecured claims. The case was dismissed on June 13, 2012 and reinstated on August 1, 2012. On August 7, 2012, Appellee, Appellant’s creditor, sought leave to file an untimely unsecured claim, explaining that it had assumed the July 19 deadline was no longer operative after the case’s dismissal. The bankruptcy court reset the filing deadline to September 6, 2012 and accepted Appellee’s claim. The district court affirmed. The First Circuit affirmed, holding that because the initial statutory ninety-day deadline for Appellee to file an unsecured claim fell in a period between the case’s dismissal and subsequent reinstatement, the claim was timely. View "Gil-De La Madrid v. Bowles Custom Pools & Spa" on Justia Law