Justia Bankruptcy Opinion Summaries

Petitioners executed a promissory note and mortgage in favor of Mortgage Electronic Registrations Systems, Inc. The notary acknowledgment on the mortgage was left blank. The mortgage was subsequently recorded with the county recorder. The interest in the mortgage was later assigned to Bank. Thereafter, Petitioners initiated a Chapter 13 bankruptcy and commenced an adversary proceeding seeking to avoid the mortgage as defectively executed. The bankruptcy court determined that its interpretation of Ohio Rev. Code 1301.401 would be dispositive in this case and certified to the Supreme Court questions of state law concerning whether section 1301.401 has an effect on the case. The Supreme Court answered that section 1301.401 applies to all recorded mortgages in Ohio and acts to provide constructive notice to the world of the existence and contents of a recorded mortgage that was deficiently executed under Ohio Rev. Code 5301.01. View "In re Messer" on Justia Law

This appeal concerns whether a Georgia statute exempts the assets in a health savings account (HSA) from inclusion in a bankruptcy estate. The court certified the following questions to the Supreme Court of Georgia: (1) Does a debtor’s health savings account constitute a right to receive a “disability, illness, or unemployment benefit” for the purposes of O.C.G.A. 44-13-100(a)(2)(C)? (2) Does a debtor’s health savings account constitute a right to receive a “payment under a pension, annuity, or similar plan or contract” for the purposes of O.C.G.A. 44-13-100(a)(2)(E)? (3) Is a debtor’s right to receive a payment from a health savings account “on account of illness [or] disability” for the purposes of O.C.G.A. 44-13-100(a)(2)(E)? View "Mooney v. Webster" on Justia Law

Plaintiff filed suit against defendants, alleging employment discrimination and retaliation in violation of federal laws. The district court granted summary judgment in favor of defendants. The court agreed with the district court that plaintiff's failure to disclose her claims in her Chapter 13 bankruptcy proceedings judicially estopped her from pursuing them. Accordingly, the court affirmed the judgment. View "Van Horn v. Martin" on Justia Law

Redondo Construction Corporation filed for Chapter 11 bankruptcy. Through the proceedings, Redondo filed three complaints against the Puerto Rico Highway and Transportation Authority for money owed under construction contracts, alleging that it was entitled to damages and prejudgment interest. The bankruptcy court ruled in Redondo’s favor and found that Redondo was entitled to prejudgment interest. The First Circuit vacated the award of prejudgment interest and remanded. On remand, the bankruptcy court awarded Redondo prejudgment interest on its contract claims under Article 1061 of the Puerto Rico Civil Code, accruing through the payment of principal. The Authority moved to amend the judgment. The bankruptcy court denied the Authority’s motion, and the district court affirmed. The First Circuit vacated the judgment, holding (1) Redondo did not forfeit its claim to prejudgment interest under Article 1061; but (2) 28 U.S.C. 1961 exclusively controls awards of postjudgment interest in federal court, and therefore, the bankruptcy court should not have extended the prejudgment interest accrual period past the entry of judgment. Remanded for a calculation of section 1961 interest and a recalculation of Article 1061 interest. View "P.R. Highway & Transp. v. Redondo Constr. Corp." on Justia Law

Lakeridge has one member, MBP. MBP is managed by a board of five members, one of whom is Kathie Bartlett. Bartlett shares a close business and personal relationship with Dr. Robert Rabkin. Lakeridge filed for bankruptcy and US Bank held a fully secured claim worth about $10 million and MBP held an unsecured claim worth $2.76 million. After MBP's board decided to sell its unsecured claim, Rabkin purchased the claim for $5000. US Bank subsequently moved to designate Rabkin's claim and disallow it for plan voting purposes. The bankruptcy court held Rabkin was not a non-statutory insider and that Rabkin did not purchase MBP's claim in bad faith. However, the bankruptcy court designated Rabkin’s claim and disallowed it for plan voting, because it determined Rabkin had become a statutory insider by acquiring a claim from MBP. Lakeridge and Rabkin both appealed, and US Bank cross-appealed. The BAP reversed the finding that Rabkin had become a statutory insider as a matter of law by acquiring MBP’s claim and affirmed the findings that Rabkin was not a non-statutory insider and that the claim assignment was not made in bad faith. The BAP held that insider status cannot be assigned and must be determined for each individual “on a case-by-case basis, after the consideration of various factors.” Finally, the BAP held Rabkin could vote to accept the Lakeridge plan under 11 U.S.C. 1129(a)(10), because he was an impaired creditor who was not an insider. The court affirmed the BAP's decision. View "US Bank v. The Village at Lakeridge, LLC" on Justia Law

The Company was organized as a limited liability company in 2007; its sole managing member was another LLC, whose sole members were the Ngs, who controlled and managed the Company. Defendant was one of the Company’s lawyers. The Company’s stated purpose was to serve as an investment company making secured loans to real estate developers. The Managers actually created the Company to perpetrate “a fraudulent scheme” by which the Company transferred the money invested in it to another entity the Managers controlled. Defendant knew that the Managers intended to and did use the Company for this fraudulent purpose and, working with the Managers, helped the Company conceal the nature of its asset transfers. The Company was eventually rendered insolvent and its investors filed an involuntary bankruptcy petition. The bankruptcy trustee filed suit against Defendant, alleging tort claims based on Defendant’s involvement in the Company’s fraud. Defendant argued that the claims are barred by the in pari delicto doctrine. The court of appeal affirmed dismissal, finding that the in pari delicto applies to the trustee and rejecting an argument that the doctrine should not bar her claims because the wrongful acts of the Managers should not be imputed to the Company. View "Uecker v. Zentil" on Justia Law

Robinson filed a Chapter 7 bankruptcy petition, seeking to discharge unsecured debt of $23,834.00. Among her scheduled personal property, Robinson listed an “old Morm[o]n bible.” At the creditors’ meeting, the trustee inquired about the Book of Mormon. Robinson confirmed that it was an 1830 first edition and that she possessed several additional copies in print or digital form. In 2003, while employed at the local library, she made an agreement with the director that, if she cleaned out a storage area, she could use the area as an office and keep any books she found. She found the Book of Mormon and had it authenticated one of only 5,000 copies printed by Joseph Smith, then valued at $10,000.00. The trustee objected to the claimed exemption, acknowledging an exemption in 735 ILCS 5/12-1001(a) for a “bible,” but arguing that, given that Robinson owned many copies, the valuable edition should be used for the benefit of the creditors. The bankruptcy court believed that allowing the exemption would violate the statutory purpose, “to protect a bible of ordinary value so as not to deprive a debtor of a worship aid.” The district court vacated. The Seventh Circuit affirmed, finding that the statute's plain language allows the exemption without respect to value. View "Robinson v. Hagan" on Justia Law

Debtors appealed the Bankruptcy Appellate Panel's (BAP) holding that Starion Financial is entitled to recover the attorney's fees it incurred while collecting on its secured debt in the course of debtors' proceedings. The BAP remanded to the bankruptcy court. The court dismissed the appeal for lack of jurisdiction because resolution of the timeliness and reasonableness of the fee application affect the merits of the underlying dispute over the fee request and thus the bankruptcy court on remand is left with more than a "purely mechanical or ministerial task." View "Starion Fin. v. McCormick" on Justia Law

Debtors filed a joint voluntary individual chapter 11 petition and debtors' operative plan of reorganization placed their largest unsecured creditor, California Bank, into its own class of unsecured creditors and proposed to pay it $5,000 on its claim of nearly $2,000,000. California Bank objected because its claim was thus “impaired under the plan.” The court overruled In re Friedman and joined its sister circuits in adopting the "narrow view", holding that the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), 11 U.S.C. 541(a)(, (a)(1), 1115(a), 1129(b)(2)(B)(ii), amendments merely have the effect of allowing individual Chapter 11 debtors to retain property and earnings acquired after the commencement of the case that would otherwise be excluded under section 541(a)(6) & (7). The court further concluded that, under this view, an individual debtor may not cram down a plan that would permit the debtor to retain prepetition property that is not excluded from the estate by section 541, but may cram down a plan that permits the debtor to retain only postpetition property. Accordingly, the court affirmed the bankruptcy court's order. View "Zachary v. California Bank & Trust" on Justia Law

The Trustee filed suit against Knoll, seeking to avoid transfers from Tusa Office, the debtor, to Knoll, its creditor as preferences under section 547 of the Bankruptcy Code, 11 U.S.C. 547(b). The court concluded that, because the Trustee did not satisfy the source aspect of the El Paso Refinery analysis, testing under the hypothetical Chapter 7 liquidation analysis is unnecessary. The court held that the Trustee failed to establish the requirement of section 547(b)(5) because the source aspect of the El Paso Refinery analysis demonstrates that the transfer from Tusa Office to Knoll was made from the proceeds of Knoll’s own collateral. Further, the exception to avoidance under section 547(c)(5) is inapplicable in this case. Accordingly, the court affirmed the judgment. View "Garner v. Knoll, Inc." on Justia Law