Justia Bankruptcy Opinion Summaries

The Lemington Home, established in 1883, was a non-profit nursing home caring for African-American seniors. Causey became its Administrator and CEO in 1997. Shealey became CFO in 2002. The Home had financial trouble for decades, but remained afloat with help from Pittsburgh, Allegheny County, and private foundations. In the early 2000s, the Home was repeatedly cited for deficiencies; two patients died under suspicious circumstances. In 2005, the Directors voted to close the Home and filed a Chapter 11 petition. Residency dropped to 37 patients. The Bankruptcy Court approved the closure. The Home had delayed filing Monthly Operating Reports that would have shown $1.4 million in Nursing Home Assessment Tax payments, which could have increased its chances of finding a buyer. The Committee of Unsecured Creditors filed an adversary proceeding, claiming breach of fiduciary duty, breach of the duty of loyalty, and deepening insolvency. In 2013 a jury awarded: compensatory damages of $2,250,000; punitive damage of $350,000, individually, against five Directors; and punitive damages of $1 million against Shealey and $750,000 against Causey. The Third Circuit affirmed the liability findings and the punitive damages awards against Shealey and Causey, but vacated the award of punitive damages against the Directors, which was not supported by evidence sufficient to establish that they acted with “malice, vindictiveness and a wholly wanton disregard of the rights of others.” View "In re: Lemington Home for the Aged" on Justia Law

Iberiabank appealed the district court's decision affirming the bankruptcy court's order that Iberiabank's claims against Bradford Geisen, president and 100% shareholder of FFS, were released. The court concluded that section 8.13 of the bankruptcy reorganization plan of FFS is a general release of all claims against Geisen which include claims arising out of his personal guaranty of the loan at issue. The court rejected Iberiabank's request for the court to follow cases from the Fifth Circuit to conclude that the release in section 8.13 is not sufficiently specific to have res judicata effect. The court concluded that under principles of contract interpretation, the confirmed plan contained a "general release" that released claims based on Geisen's guaranty of the loan. As in In re Optical, this case is not truly about res judicata, but, rather, the interpretation of a reorganization plan. Even if the court were to apply the Fifth Circuit's test, the court would conclude that the release was sufficiently specific to release Geisen. Accordingly, the court affirmed the judgment of the district court. View "Iberiabank v. Geisen" on Justia Law

Getty Properties Corp. leased certain properties to Getty Petroleum Marketing, Inc. by way of a master lease. Getty Marketing sublet the properties to Green Valley Oil, LLC. Thereafter, Green Valley entered into an individual sub-sublease with each Defendant, the owners of retail gasoline stations. Getty Properties subsequently terminated the master lease. Getty Marketing then filed for bankruptcy. The bankruptcy court rejected the master lease and ordered that Getty Marketing relinquish possession of the properties to Getty Properties. Getty Properties and NECG Holdings Corp. served Defendants with notices to quit, but Defendants refused to vacate the properties. Plaintiffs subsequently commenced summary process actions against Defendants. The trial court rendered judgment of immediate possession for Plaintiffs. The Supreme Court affirmed, holding that the trial court did not err in (1) determining that Plaintiffs’ notices to quit were valid; (2) admitting into evidence the lease between Getty Properties and Getty Marketing, as well as the sublease between Getty Marketing and Green Valley; (3) interpreting the various pleadings in Getty Marketing’s bankruptcy case as terminating the lease and the sublease; (4) finding that Plaintiffs proved a prima facie case for summary process; and (5) failing to dismiss the summary process action as premature. View "Getty Props. Corp. v. ATKR, LLC" on Justia Law

The bankruptcy court imposed sanctions against attorneys stemming from their representation of Debtors in an adversary proceeding in which a creditor and the Trustee sought denial of discharge. The attorney filed notice of appeal regarding the July 16 sanctions order on July 30. On August 1, the bankruptcy court entered an Order Setting Amount of Additional Sanctions. On August 5, the bankruptcy court amended its August 1, order and imposed additional sanctions under 28 U.S.C. 1927, covering attorney fees and expenses incurred by the Trustee and creditor in the adversary proceeding. An August 27 motion to dismiss asserted that the July 16 order was not final and that cause did not exist to allow appeal from an interlocutory order. A September 8 amended motion for leave to appeal and corrected notice of appeal indicated an appeal of all three sanctions orders. In response, a motion to strike asserted failure to timely perfect appeal from the August 1 or August 5 orders. The Sixth Circuit Bankruptcy Appellate panel denied the motions to dismiss and to strike, holding that it had jurisdiction because the amount of sanctions was set forth in a final order. Notice of appeal was timely filed. Resolution of the sanctions issue will have no discernable impact on the pending discharge issue. View "In re: Blasingame" on Justia Law

The law firm represented Raissi in a Chapter 11 bankruptcy case for a year, generating fees and expenses of $329,705.12. The bankruptcy case closed. Raissi failed to pay. The firm sued for breach of contract, account stated, open book account and failure to pay for goods and services rendered.It obtained an order extending the deadline for service and allowing it to serve Raissi via publication. Publication in the San Jose PostRecord generated no response. The firm obtained a default judgment. Its “Declaration of mailing (Code Civ. Proc., 587),” stated that Raissi’s address was “unknown.” Raissi moved to set aside the default, alleging that its counsel made a mistake in changing the address for its registered agent; that the bankruptcy court retained exclusive jurisdiction; and that the request for default was defective because it was not mailed to Raissi’s “last known address.” The firm stated that it had made eight separate attempts to personally serve Raissi at the property, which appeared vacant and had a sign indicating it was available to lease. The court of appeal reversed the ruling in favor of the firm. A mailing address is not “unknown” merely because personal service could not be effected at that address. View "Murray & Murray v. Raissi Real Estate Dev,, LLC" on Justia Law

Sweport’s judgment creditors, represented by attorney Wolf, petitioned to place Sweports in Chapter 11 bankruptcy. Sweports became the debtor in possession. Wolf was counsel to the Official Committee of Unsecured Creditors. The court rejected plans submitted by Sweports and the Official Committee. The U.S. Trustee moved that Sweports’ bankruptcy either be converted to Chapter 7 liquidation or dismissed. Neither Sweports nor the creditors favored conversion. The court dismissed. Weeks later Wolf sought attorney’s fees and expenses of $780,000 for his work for the Official Committee. An interim request for fees and expenses of $410,000 had been granted while Sweports was in bankruptcy, but little had been paid. Wolf’s final request sought $1.13 million. The bankruptcy judge denied awards on the ground that he lacked jurisdiction, reasoning that the awards could be paid only out of the assets of the debtor’s estate, and there were no such assets after the bankruptcy was dismissed. The Seventh Circuit reversed, reasoning that while the bankruptcy court could no longer disburse estate assets, it could determine that Wolf had a valid claim in the amount he was seeking. Such a ruling would create a debt and, if Sweports refused to pay, Wolf could sue in state court. View "Sweports, Ltd. v. Much Shelist, P.C." on Justia Law

Bronk incurred debts providing his wife’s medical care before her 2007 death. He suffered a stroke in 2009. With medical debts exceeding $345,000, his assets included his home, without a mortgage, and a $42,000 certificate of deposit. On advice of counsel, Bronk borrowed $95,000, mortgaging his home, to establish college savings accounts for his grandchildren under IRC 529. Account owners control the funds in such accounts, may change beneficiaries, and may, at any time, request a 100% distribution. Bronk converted the $42,000 c.d. into an annuity, to begin making payments in 2035, including a death benefit. Bronk filed for Chapter 7 bankruptcy. The trustee objected to the college-fund and annuity transactions, citing 11 U.S.C. 727(a)(2)(A).The bankruptcy judge found no evidence that Bronk had acted with intent to hinder, delay, or defraud creditors, but interpreted section 815.18(3)(p) (exemption for college accounts) as applying only to the beneficiary’s interest, not the owner’s interest, and disallowed exemptions. The judge held that the annuity was a fully exempt retirement benefit under section 815.18(3)(j). The Seventh Circuit held that the college accounts are exempt and that the annuity satisfies the basic definition of an exempt “retirement benefit.” To qualify as a fully exempt retirement benefit, however, the plan must be either employer sponsored or comply with IRC 815.18(3)(j)2; the trustee waived that issue. View "In re: Bronk" on Justia Law

Under a 2007 “Purchase Agreement – Public Sale” Eagle agreed to pay $4,812,874.65 to purchase Louisville property owned by the Kentucky Transportation Cabinet. Eagle paid a good faith deposit of $962,574.93 to “KY STATE TREASURER.” The Agreement was assigned by Eagle to Shelbyville Road Shoppes, the debtor. Two days before the expiration of an 18-month extension to close the transaction, the debtor filed a voluntary Chapter 7 petition. The bankruptcy trustee unsuccessfully sought return of the good faith deposit from the Cabinet. The bankruptcy court found that neither the Agreement nor state law granted the debtor the right to have the deposit returned. The district court affirmed, finding: that the debtor had no right to possess or use the deposit prior to filing for relief, so the trustee had no right to request turnover under section 542; that the deposit was not held in escrow; that the transaction was not a contract for deed; and that the debtor did not retain an equitable right to the deposit as a vendee. The Sixth Circuit affirmed. The debtor did not possess either a legal or an equitable property interest in the deposit at the time of the Chapter 7 petition. View "Lawrence v. Kentucky" on Justia Law

Debtors and Starion entered into loan transactions. The promissory notes and mortgages provided that the Debtors were liable for Starion’s attorney fees and costs of collections. The Debtors also executed personal guarantees. Defaults resulted in a 2012 Workout Agreement between Starion and the Debtors, who consented to entry of judgments against them to secure their personal guarantees. Based upon properly filed confessions of judgment, executed under the Agreement, a North Dakota state court entered judgments against Debtors for $2,078,034.26 and $1,000,000.00, plus interest. Debtors filed a voluntary chapter 11 petition. The Debtors’ Second Amended Plan of Reorganization stated: Debtors agree to pay Starion’s allowable attorney’s fees and costs associated with both Debtors’ bankruptcy proceedings including but not limited to reasonable attorneys’ fees, consulting, appraisal, filing fees, late fees … as provided in the Plan. The Plan was confirmed. Later the Debtors refused to pay requested appraisal and engineering costs and attorneys’ fees. Starion requested that the bankruptcy court compel payment of $125,014.64 based upon the Plan and 11 U.S.C. 506(b). The bankruptcy court ruled in favor of the Debtors. The Eighth Circuit Bankruptcy Appellate Panel reversed, noting that the obligation has appeared throughout the long documented history of the relationship. View "Starion Fin. v. McCormick" on Justia Law

The trustee of Firstpay's bankruptcy estate sought a judgment against the United States for an amount of payroll tax payments the firm made on behalf of its employer-clients to the IRS. At issue on appeal was whether the trustee may reclaim as property of Firstpay the approximately $28 million transferred by the firm to the IRS during the 90 days preceding the filing of the bankruptcy petition. The court agreed with the bankruptcy court and the district court that, as a matter of law, Firstpay lacked an equitable interest in the funds paid over to the IRS. Accordingly, the court affirmed the judgment. View "Wolff v. United States" on Justia Law