Justia Bankruptcy Opinion Summaries

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

The Trustee of the Vallecito bankruptcy estate appealed the district court's affirmance of the bankruptcy court's judgment in favor of various owners of overriding royalty interests (appellees) to a lease that the trustee seeks to sell on behalf of the bankruptcy estate. The court concluded that the bankruptcy court did not abuse its discretion in excluding a letter submitted by an attorney in the Navajo Nation Department of Justice, stating that any "purported overriding royalty interest is invalid under the applicable provisions of the Navajo Nation Code and is completely void." The court agreed with the district court that the letter was untrustworthy, in large part because it was drafted by the trustee's counsel and was prepared after the trustee's counsel provided the Navajo Nation official with only one side of the story; the court concluded that the bankruptcy court properly held that the trustee could not raise the lack of approval by the Navajo Nation to void the contracts between Appellees and Briggs-Cockerham; and the court found no error in the district court's disposition of the trustee's additional arguments in a lis pendens filing. Accordingly, the court affirmed the judgment. View "Morton v. Yonkers, et al." on Justia Law

Katsman, represented by an attorney, filed for Chapter 7 bankruptcy. After she filed Schedule F, on which the debtor is required to list all entities holding unsecured claims, the trustee reported that no assets were available for distribution. Before discharge was ordered, Skavysh, the son of Katsman’s ex-husband, filed an adversary proceeding invoking 11 U.S.C. 727(a)(4)(A). The bankruptcy judge conducted a trial of Skavysh’s objection to discharge and concluded that although there were omissions in Katsman’s schedules, they were not fraudulent. The only witness was Katsman; the judge decided that her testimony was truthful. The district judge reversed. The Seventh Circuit affirmed, noting that Katsman admitted that she had deliberately omitted creditors from her Schedule F: friends and family members who had lent her money during her acrimonious divorce from Skavysh’s father. She also failed to list property that she owned jointly with her ex-husband, including her home in Indiana and a time share in Las Vegas and alimony payments. The court found that “her many false statements bespeak a pattern of reckless indifference to the truth, implying fraudulent intent,” noting that despite her claims of ignorance of the law, she knows English and had competent counsel. View "Skavysh v. Katsman" on Justia Law

In a consolidated appeal, Aviva Life & Annuity challenged identical orders of the U.S. District Court for the Western District of Oklahoma sitting in its capacity as a bankruptcy appellate court. The district court entered the orders in two directly related cases brought by Aviva in the nature of interpleader pursuant to the Federal Interpleader Act, and Federal Rule of Civil Procedure 22. Aviva argued the court erred by limiting the scope of the interpleader relief granted. This case stemmed from the Chapter 11 bankruptcy proceedings of the Millennium Multiple Employer Welfare Benefit Plan. Prior to seeking the protection of the bankruptcy court, the Millennium Plan was an employee welfare benefit plan providing medical, disability, long term care, severance, and death benefits. Participants made contributions to the Millennium Plan, which then purchased life insurance policies (Policies) on the lives of the participants from Aviva and other insurance companies. Finding no reversible error in the district court's decision, the Tenth Circuit Court of Appeals affirmed. View "Aviva Life & Annuity v. Millennium Multiple Employer" on Justia Law

Mortgages Ltd. filed for Chapter 11 bankruptcy and ML Manager subsequently managed and operated the loans left in Mortgages Ltd.'s portfolio. After confirmation of the plan, Rev Op Group, a group of pass-through investors, moved for an order in the bankruptcy court ruling that ML Manager could not act as agent for their interests, and that objecting investors like Rev Op Group should not be obligated to pay any share of the exit financing loan. The bankruptcy court rejected these arguments in its Clarification Order and Rev Op Group appealed. ML Manager subsequently filed a notice of its intent to distribute proceeds according to an allocation model and a motion to approve distributions. Rev Op Group objected, but the bankruptcy court issued a Distribution Order overruling the objections and granting ML Manager's motion to approve the distributions. The district court affirmed both orders and Rev Op Group appealed. The court concluded, pursuant to In re Roberts Farms, that Rev Op Group's appeals are moot because it never moved to stay the appealed orders before the bankruptcy court or district courts. Even if the court were to extend its analysis beyond Roberts Farms, Rev Op Group would still not prevail. Any relief the court granted to Rev Op Group would require overturning previous distributions and allocations to third parties not before this court. Further, Rev Op Group's appeals must be dismissed under the four considerations from In re Thorpe Insulation Co. Accordingly, the court dismissed the appeals. View "In the Matter of: Mortgages Ltd." on Justia Law

Mortgages Ltd. filed for Chapter 11 bankruptcy and ML Manager subsequently managed and operated the loans left in Mortgages Ltd.'s portfolio. After the bankruptcy court confirmed the bankruptcy plan, ML Manager sought to sell some of the loans in Mortgages Ltd.'s portfolio. Rev Op Group, pass-through investors, objected to the sales. The bankruptcy court ruled that Rev Op Group's denials of allegations in ML Manager's complaint were implausible and held that Rev Op Group investors had executed the agency agreement at issue with ML Manager. The bankruptcy court denied Rev Op Group's motion for partial summary judgment, ruling that ML Manager had an agency coupled with an interest and that ML Manager was properly assigned the agency agreements at issue. ML Manager subsequently moved to sell two other properties and the bankruptcy court overruled Rev Op Group's objections, approving the property sales. Rev Op Group appealed and the district court affirmed. The court concluded that the Declaratory Judgment is not equitably moot where Rev Op Group diligently pursued its rights by seeking a stay of the Declaratory Judgment Order, even though it was unable to obtain the stay. Modification of the order would not inequitably affect innocent third parties although substantial consummation of the bankruptcy plan has occurred. The court also concluded that both the bankruptcy and district court erred by effectively resolving factual allegations in Rev Op Group's denials on the merits, instead of reviewing them for legal sufficiency. Accordingly, absent bad faith, the court reversed the bankruptcy court's determination in its Declaratory Judgment that each member of the Rev Op Group had executed the agency agreements, and was to be bound to those agreements. View "In the Matter of: Mortgages Ltd." on Justia Law

Joanne Anderson sued Jackson Hospital and Clinic, Inc., Dr. Stephen K. Kwan, and Dr. Kwan's practice group, Capital Cardio-Thoracic, P.C. asserting medical-malpractice claims against them. The trial court granted a motion to substitute bankruptcy trustee Daniel Hamm for Anderson as the real party in interest because Anderson had filed a petition for Chapter 7 bankruptcy after her medical malpractice claim had accrued. The Jackson Hospital defendants subsequently petitioned the Alabama Supreme Court for permission to file an interlocutory appeal, arguing that Hamm's attempt to be substituted as the real party in interest was untimely. Anderson filed a separate Rule 5 petition for permission to appeal challenging the trial court's decision to remove her as the plaintiff in this case. The Supreme Court granted both petitions; however, treated the parties' petitions for permissive appeals as petitions for writs of mandamus, found that neither were entitle to mandamus relief, and denied the petitions. View "Anderson v. Jackson Hospital & Clinic" on Justia Law

Doe settled his sexual abuse claims against the Archdiocese of Milwaukee for $80,000 after participating in a voluntary mediation program. He later filed a claim against the Archdiocese in its bankruptcy proceedings for the same sexual abuse. Doe responded to the Archdiocese’s motion for summary judgment by contending that his settlement was fraudulently induced. The argument depends upon statements made during the mediation, but Wisconsin law prohibits the admission in judicial proceedings of nearly all communications made during mediation. Doe argued that an exception applies here because the later action is “distinct from the dispute whose settlement is attempted through mediation,” Wis. Stat. 904.085(4)(e). The Seventh Circuit affirmed summary judgment in favor of the Archdiocese. Doe’s bankruptcy claim is not distinct from the dispute settled in mediation. The issue in both proceedings, which involved the same parties, is the Archdiocese’s responsibility for the sexual abuse Doe suffered. Doe sought damages in both the mediation and bankruptcy for the same sexual abuse; he did not seek separate or additional damages for the alleged fraudulent inducement. View "Doe v. Archdiocese of Milwaukee" on Justia Law