Justia Bankruptcy Opinion Summaries

Debtor had significant financial problems. Morris, Debtor's principal, formed ECM on January 1, 2010, had the Debtor grant him a security interest in its assets, and recorded the financing statement on January 5. On January 10, Morris executed a bill of sale transferring his security interest to ECM. On July 27, 2010, the Debtor, through Morris, voluntarily surrendered its assets to ECM. Before the bankruptcy, the creditors filed state court actions, alleging successor liability, fraudulent transfer, fraud, and breach of fiduciary duty. The Debtor filed a voluntary Chapter 7 petition in 2012. The Chapter 7 Trustee filed an adversary proceeding to avoid fraudulent transfers. The Bankruptcy Court approved a settlement and dismissed “without prejudice.” The Trustee filed his Final Account and Distribution Report. The Debtor, as a corporation, did not receive a discharge. After the bankruptcy proceedings were completed, creditors reactivated their state court litigation. The Bankruptcy Court declined to enjoin the state proceedings. The Sixth Circuit Bankruptcy Appellate Panel affirmed. There is no reason the state court should not determine the preclusive effect of the Bankruptcy Court’s order, just as bankruptcy courts are regularly called upon to determine the preclusive effect of state court judgments in bankruptcy. View "In re: E.C. Morris Corp.." on Justia Law

The Trustee for the Bernard L. Madoff Investment Securities LLC (BLMIS) under the Securities Investor Protection Act (SIPA), 15 U.S.C. 78aaa et seq., filed suit against hundreds of BLMIS customers who withdrew more from their accounts than they had invested and profited from Madoff's scheme. Defendants moved to dismiss the actions on the ground that the payments received by BLMIS customers were securities-related payments that cannot be avoided under 11 U.S.C. 546(e). Section 546(e) establishes an important exception to a trustee's clawback powers and provides that certain securities-related payments, such as transfers made by a stockbroker in connection with a securities contract, or settlement payments cannot be avoided in bankruptcy. The court affirmed the district court's conclusion that the payments were shielded by section 546(e) and dismissal of the relevant claims under Rule 12(b)(6). View "In re: Bernard L. Madoff Investment Securities LLC" on Justia Law

Mano appealed the district court's holding, under 11 U.S.C. 550, that Mano was the initial transferee of $311,065.25 paid by debtor in connection with the sale of a six-acre shopping plaza in Raymondville, Texas. Applying the proper standard in the In re Incomnet dominion test, the court concluded that the district court did not err in determining that Mano was the initial transferee of the disputed funds and in declining to address Mano's alternative argument because it was waived. The court held that In re Presidential is no longer good law in this Circuit insofar as it conflicts with the pure dominion test articulated in In re Incomnet. Accordingly, the court affirmed the judgment of the district court. View "MANO-Y&M, Ltd. v. Field" on Justia Law

Debtors filed their bankruptcy petition on July 30, 2013. The first date set for the meeting of creditors was August 29, 2013. Under 11 U.S.C. 523(c), the deadline for objecting to discharge was October 28. On October 29, Creditor filed an Extension Motion, alleging that his counsel had suffered a disabling brain injury in a car wreck on September 4 and had hired a newparalegal “on or about” the week of the deadline. Following a hearing, the bankruptcy court “agreed” that it “does not have the discretion to grant the requested extension” but also stated that “the deadline governing the filing of dischargeability complaints is not jurisdictional in nature, but rather, is subject to the court’s equitable authority.” In denying the Extension Motion, it found that there was “no allegation that the Debtor engaged in any conduct which prevented the Creditor from filing a timely motion to extend the time within which to file a dischargeability complaint.” After the Creditor filed deficient briefing, the Bankruptcy Appellate Panel affirmed denial of the Extension Motion. The court noted that Creditor’s counsel had not provided any facts to support his claims. View "In re: Doyne" on Justia Law

In 2004, Paint Rock Turn, LLC purchased a sod farm and related farm equipment. To partially finance the purchase, Paint Rock borrowed $1,706,250 from First Jackson Bank. The loan was secured by a mortgage on the sod farm and a security interest in the equipment used on the farm. By February 2009, reflecting in part a drop in demand for sod caused by the collapsing market for new homes, Paint Rock had defaulted on the loan. In early 2009, Paint Rock filed a Chapter 11 bankruptcy petition. The filing of the petition operated as an automatic stay and precluded First Jackson from foreclosing on the sod farm or retaking the equipment. The bankruptcy petition was dismissed later that year, and a few months later, First Jackson moved forward with its intent to foreclose by publishing the first of three notices of a foreclosure sale on the Paint Rock property. On the morning of the scheduled sale, Paint Rock filed a second bankruptcy petition, which stayed the sale. This second petition was dismissed a month later for failure to file the proper schedules and statements. First Jackson published another notice that the foreclosure sale was rescheduled for December 30, 2009. December 26, Paint Rock filed a third bankruptcy petition. Four days later, the bankruptcy court lifted the automatic stay, expressly finding that Paint Rock misused the bankruptcy process to "hinder and delay First Jackson's efforts to foreclose its mortgage and security agreement." First Jackson was the high bidder at the sale, purchased the property, and sent Paint Rock a letter demanding possession of the sod farm. In early 2010, First Jackson filed an ejectment action. The same day, Paint Rock demanded access to the farm to recover "emblements in the form of sod which is being grown on the real property recently foreclosed upon ...." Paint Rock also requested the return of its equipment. First Jackson denied Paint Rock's request. Paint Rock, relying on a section of the Alabama Code that permits a tenant at will to harvest its crop, counterclaimed for damages for harm suffered as the result of being unable to harvest the sod. Paint Rock also sought damages for conversion of "plats of sod" contained on the sod farm. First Jackson sold the sod farm to Mrs. Goodson, subject to any claim Paint Rock may have to the emblements growing on the property. Paint Rock filed a joint third-party complaint against First Jackson and Mr. and Mrs. Goodson, alleging conversion and detinue, as well as the emblements claim. After the trial court denied motions for a summary judgment filed by First Jackson and the Goodsons, the case proceeded to trial. At the close of Paint Rock and Jones's case, the trial court granted a motion for a JML filed by First Jackson and the Goodsons on Paint Rock's counterclaim for emblements on the ground that Paint Rock was not an at-will tenant. After Paint Rock withdrew its detinue claims and the trial court granted a JML on the wantonness claims, leaving only the conversion and negligence claims. The jury awarded Paint Rock damages against First Jackson for conversion of a sod cutter and cut sod that had been loaded on a tractor-trailer when First Jackson took possession of the property. The jury also awarded Paint Rock damages against the Goodsons for conversion of business property and equipment. Paint Rock appealed the JML in favor of the defendants on the emblements claim; First Jackson cross-appealed the judgment awarding Paint Rock damages for conversion of the cut sod. The Supreme Court affirmed with regard to Paint Rock's emblements claim, but reversed on the conversion of the cut sod claim. View "Paint Rock Turf, LLC v. First Jackson Bank et al. " on Justia Law

GE Capital appealed the bankruptcy court's denial of its motion for allowance of an administrative expense claim for unpaid lease obligations against debtor. The court concluded that the written record supports GE Capital's request that its motion be considered under 11 U.S.C. 365. The court also concluded that, by declining to consider GE Capital's motion under section 365(d)(5), the bankruptcy court shifted the burden of proof from the objecting party to the claimant, which is erroneous as a matter of law. Accordingly, the court reversed and remanded for further proceedings. View "GE Capital Commercial, Inc. v. Sylva Corp., Inc." on Justia Law

Bavelis sought Chapter 11 bankruptcy relief in 2010, based on debts that he had accumulated from numerous business ventures. Bavelis subsequently brought an adversary proceeding against his friend and business associate Doukas, and businesses owned and controlled by Doukas. One Doukas company responded by filing a proof of claim against the Bavelis bankruptcy estate. The Doukas defendants argued that Doukas had a claim for rescission against Bavelis based on purported violations of Florida’s securities laws related to stock that Doukas had purchased from a Bavelis-run bank holding company. The bankruptcy court concluded that Doukas did not have a viable claim against Bavelis under Florida law. The Bankruptcy Appellate Panel affirmed. The Sixth Circuit affirmed, rejecting an argument that the bankruptcy court acted beyond its constitutional authority in interpreting Florida law and that the interpretations by the bankruptcy court and the BAP were in error. View "Bavelis v. Doukas" on Justia Law

When debtor filed for bankruptcy, he was living in rental property owned by creditors. Creditors violated an automatic stay and evicted debtor. On appeal, creditors challenged the bankruptcy court's finding that they had willfully violated the automatic stay, and bankruptcy court's award of actual and punitive damages. The court concluded that creditors waived any right they may have had under 11 U.S.C. 362(e); creditors are barred from judicial estoppel from claiming that the stay had expired under section 362(e); the bankruptcy court's findings that creditors willfully violated the automatic stay and of actual damages are not clearly erroneous; but the bankruptcy court abused its discretion in awarding punitive damages where the bankruptcy court did not make specific findings of fact as to motive and egregious conduct in violating the stay and a creditor's failure to appear at trial does not satisfy the Eighth Circuit test of egregious, intentional, misconduct. Accordingly, the court affirmed in part and reversed in part. View "Bugg v. Gray" on Justia Law

Duckworth borrowed $1,100,000 from the State Bank of Toulon. The security agreement said that Duckworth granted the Bank a security interest in crops and farm equipment. The promissory note referred to the security agreement. The security agreement said that it secured a note “dated December 13, 2008.” There was no promissory note dated December 13. Both the December 15 promissory note and the security agreement were prepared by the Bank’s loan officer. Duckworth filed a petition for Chapter 7 bankruptcy. The Bank filed adversary proceedings. The bankruptcy court held that the mistaken date in the security interest did not defeat the security interest and that the security agreement of December 13 secured the note of December 15. The bankruptcy court ruled in favor of the Bank. District courts affirmed. The Seventh Circuit reversed. The Bank was not entitled to use parol evidence against the bankruptcy trustee to correct the mistaken description of the debt to be secured, so the security agreement did not give the lender a security interest in the specified collateral that could be enforced against the trustee. View "Covey v. State Bank of Toulon" on Justia Law

Debtor lived in a rent-stabilized apartment for over forty years. Debtor filed for Chapter 7 bankruptcy and listed the value of her unexpired rent-stabilized lease as personal property exempt from the bankruptcy estate under N.Y. Debt. & Cred. Law 282(2) as a “local public assistance benefit.” The bankruptcy court struck the claimed exemption, concluding that the value of the lease did not qualify as an exempt local public assistance benefit. The district court affirmed. Debtor appealed, arguing that the value of her lease was a local public assistance benefit that was exempted from her bankruptcy estate. The Second Circuit certified a question to the New York Court of Appeals regarding the issue. The Court of Appeals answered that section 282(2) exempts a debtor-tenant’s interest in a rent-stabilized lease. View "Matter of Santiago-Monteverde" on Justia Law