Justia Bankruptcy Opinion Summaries

WI buys furniture wholesale. OEC provided WI with non-vessel-operating common carrier transportation services. WI signed an Application for Credit that granted a security interest in WI property in OEC’s possession, custody or control or en route. As required by federal law, OEC also publishes a tariff with the Federal Maritime Commission, which provides for a Carrier’s lien. WI filed voluntary Chapter 11 bankruptcy petitions. OEC sought relief from the automatic stay, arguing that it was a secured creditor with a possessory maritime lien. OEC documented debts of $458,251 for freight and related charges due on containers in OEC’s possession and $994,705 for freight and related charges on goods for which OEC had previously provided services. The estimated value of WIs’ goods in OEC’s possession was $1,926,363. WI filed an adversary proceeding, seeking release of the goods. The bankruptcy court ruled in favor of WI, citing 11 U.S.C. 542. The district court affirmed, holding that OEC did not possess a valid maritime lien on Pre-petition Goods. The Third Circuit reversed, noting the strong presumption that OEC did not waive its maritime liens on the Prepetition Goods, the clear documentation that the parties intended such liens to survive delivery, the familiar principle that a maritime lien may attach to property substituted for the original object of the lien, and the parties’ general freedom to modify or extend existing liens by contract. View "In re: World Imports LTD" on Justia Law

Plaintiff filed suit alleging that the Florida Supreme Court unlawfully denied her application to become a member of the Florida Bar in violation of federal bankruptcy law and her right to due process. The district court dismissed the complaint. The Florida Supreme Court denied plaintiff admission to the Bar based on her lack of candor and refusal to repay her financial obligations. The court concluded that the district court lacks subject matter jurisdiction over plaintiff's 11 U.S.C. 525(a) claim; sovereign immunity bars plaintiff's due process claim because the Florida Supreme Court is a department of the State of Florida; and the Ex Parte Young exception is not applicable in this case. Accordingly, the court affirmed the judgment. View "Uberoi v. Supreme Court of Florida" on Justia Law

Marilyn Scheer, an attorney with a suspended California law license, contends that the district court erred when it held that her debt to a former client was nondischargeable under 11 U.S.C. 523(a)(7). In this case, there were no costs or fees assessed for disciplinary reasons. Rather, the debt at issue was effectively the amount that Scheer improperly received from a client, but did not pay back. At its core, the $5775 at issue is not a fine or penalty, but compensation for actual loss. The court concluded that the the debt to her client does not fall within the section 523(a)(7) nondischargeability exception. Accordingly, the court reversed and remanded. View "Scheer v. State Bar of CA" on Justia Law

The Blanchards agreed to sell Marathon County property to the Hoffmans, who paid $30,000 up front. The land contract balance was due in 2015, with an option to close early by paying off the Blanchards’ new $142,000 mortgage, obtained as part of the agreement. The parties signed a separate “rental agreement,” under which the Hoffmans paid $500 per month. The land contract was not recorded. The lender obtained an Assignment of Leases and Rents as collateral, but did not obtain an Assignment of Land Contract. The bank recorded its mortgage and the Assignment. In 2014, the Blanchards filed a bankruptcy petition. The trustee filed an adversary proceeding against the lender under 11 U.S.C. 544(a)(3), which grants him the position of a bona fide purchaser of property as of the date of the bankruptcy, to step ahead of the mortgage and use the Blanchards’ interest in the land contract for the benefit of unsecured creditors. The trustee argued that a mortgage can attach a lien only to real property and that the Blanchards' interest under the land contract was personal property. The district court affirmed summary judgment in favor of the bank. The Seventh Circuit affirmed. A mortgage can attach a lien to a vendor’s interest in a land contract under Wisconsin law; this lender perfected its lien by recording in county land records rather than under UCC Article 9. View "Liebzeit v. Intercity State Bank, FSB" on Justia Law

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