Justia Bankruptcy Opinion Summaries

The principal issue in this case was whether, after an automatic stay in bankruptcy has been lifted and a creditor was permitted to foreclose on real property, federal or state law governed an oversecured creditor's recovery of attorneys' and other fees from the sale proceeds. A corollary issue was whether the bankruptcy court has jurisdiction over the sale proceedings for purposes of determining the creditor's right to recover attorneys' fees and the Deed of Trust trustee's right to recover a contractually specified commission for conducting the non-judicial foreclosure sale. The bankruptcy court held that it had jurisdiction but the district court reversed. The court reversed, concluding that federal law governs what is to be distributed to a secured claimant that is oversecured. The court discerned no intent from 11 U.S.C. 506(b) that oversecured creditors who are permitted to foreclose are to be treated differently from oversecured creditors whose claims are satisfied within the bankruptcy proceeding. In this instance, the bankruptcy court's order lifting the stay allowed Wells Fargo to foreclose on the property in accordance with state law foreclosure procedures. It did not give the Deed of Trust any further authority and did not have the effect of insulating the debtor or any of the creditors from the reach of section 506(b). Lifting the automatic stay to allow Wells Fargo to foreclose was not tantamount to an abandonment of the property. The court concluded that the bankruptcy court was within its discretion in finding that there was no documentation of the time that was spent and no testimony as to what was a reasonable fee. Based on this record, the court could not say that the bankruptcy court erred in finding under section 506(b) that the amount of attorneys' fees Wells Fargo sought was not substantiated and therefore was not shown to be reasonable. Even under Texas law, Wells Fargo would bear the burden of demonstrating that the fees it requested were reasonable. The court remanded for further proceedings.View "Wells Fargo Bank, N.A., et al. v. 804 Congress, L.L.C." on Justia Law

The issues on appeal to the Tenth Circuit in this case stem from pollution at a four-square-mile area in Denver where Debtor-ASARCO, Union Pacific Railroad Company, and Pepsi-Cola Metropolitan Bottling Company., Inc. all operated facilities. All companies allegedly contributed to the release of hazardous substances at the site. The Environmental Protection Agency brought a Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) action against debtor-ASARCO which was pending when the company filed for Chapter 11 bankruptcy protection. The EPA filed proofs of claim in the bankruptcy case seeking recovery of ASARCO's portion of the cleaning expenses. ASARCO moved to settle the claims to resolve its CERCLA liabilities. ASARCO sought contribution from Union Pacific and Pepsi. The district court ruled: (1) that ASARCO's direct contribution claim was time-barred under CERCLA section 113 (42 U.S.C. ß 9613); (2) that post-bankruptcy ASARCO was not a subrogee of pre-bankruptcy ASARCO; (3) and that ASARCO could not bring a subrogation claim. ASARCO appealed all three of these rulings. Finding no reversible error, the Tenth Circuit affirmed the district court.View "Asarco LLC v. Union Pacific, et al" on Justia Law

Jack Irwin owed a warehouse that Shade rented to store personal property. West Gate Bank held notes payable from Shade that were secured by Shade’s personal property. Shade later defaulted on the notes. Irwin and West Gate subsequently agreed to move Shade’s personal property pursuant to an “Abandonment” document. When Shade filed for bankruptcy, the bankruptcy court approved distribution of the proceeds in Shade’s personal property to West Gate, concluding that the Abandonment document was not an assignment or release of West Gate’s perfected security interest. Thereafter, Irwin filed this action against West Bank in district court alleging that West Gate breached its obligations under the Abandonment document by failing to pay the proceeds to Irwin. The district curt entered judgment in favor of West Gate. The Supreme Court affirmed, holding (1) the district court’s determination regarding the preclusive effect of the bankruptcy court’s ruling with respect to an assignment or release of West Gate’s security interest in Shade’s property was not relevant to this appeal; and (2) the district court did not err in concluding that the Abandonment document was not an enforceable contract or a warranty.View "Irwin v. West Gate Bank" on Justia Law

Debtor filed a voluntary petition for relief under Chapter 13 of the Bankruptcy Code, seeking to determine the secured status of the second and third mortgages held by Wells Fargo on debtor's principal residence. At issue was whether debtor can "strip off" a wholly unsecured junior mortgage in a Chapter 20 case. The court concluded that the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) did not prohibit this result. Accordingly, the court affirmed the Bankruptcy Court's determination that debtor could strip off Wells Fargo's second and third liens on the residence because they were wholly unsecured.View "Wells Fargo Bank, N.A. v. Scantling" on Justia Law

Plaintiff appealed from an order of the bankruptcy court holding that a mistakenly filed UCC-3 termination statement was unauthorized and therefore not effective to terminate a secured lender's interest in a debtor's property. The court certified to the Delaware Supreme Court the following question: Under UCC Article 9, as adopted into Delaware law by Del. Code Ann. tit. 6, art. 9, for a UCC-3 termination statement to effectively extinguish the perfected nature of a UCC-1 financing statement, is it enough that the secured lender review and knowingly approve for filing a UCC-3 purporting to extinguish the perfected security interest, or must the secured lender intend to terminate the particular security interest that is listed on the UCC-3?View "In Re: Motors Liquidation Co." on Justia Law

Facing asbestos-related personal injury lawsuits filed in the 1980s, a group of producers of asbestos and asbestos-containing products formed the Center for Claims Resolution to administer such claims on behalf of its Members. About 20 Members negotiated and signed the Producer Agreement, which established and set forth the mechanics of the Center and the obligations of the Members. After G-I failed to pay its contractually-calculated share of personal injury settlements and Center expenses, U.S. Gypsum and Quigley were obligated to pay additional sums to cover G-I’s payment obligations. G-I filed for bankruptcy and the Center, U.S. Gypsum, and Quigley each filed a proof of claim, seeking to recover for G-I’s nonpayment under the Producer Agreement. The Center settled its claim with G-I. The Bankruptcy Court granted summary judgment in G-I’s favor. The district court affirmed. The Third Circuit vacated, holding that the Producer Agreement permits the Former Members to pursue a breach of contract action against G-I for its failure to pay contractually-obligated sums due to the Center, in light of their payment of G-I’s share. View "In re: G-I Holdings, Inc." on Justia Law

John Zullo paid David Lombardo to perform work in Zullo’s house. Lombardo, however, had misrepresented his credentials, and Zullo incurred additional expense to have the inadequate work fixed. Zullo subsequently obtained a Massachusetts state court judgment against Lombardo, which Lombardo never paid. After Lombardo later filed for Chapter 7 bankruptcy, Zullo began an adversary proceeding in the bankruptcy court, alleging that Lombardo’s debt to him was nondischargeable under 11 U.S.C. 532(a)(6), which excepts from bankruptcy discharge “any debt…for willful and malicious injury by the debtor to…to the property of another entity.” The bankruptcy court ultimately granted summary judgment for Lombardo on the 11 U.S.C. 532(a)(6) claim, and the Bankruptcy Appellate Panel affirmed. At issue before the First Circuit was whether the bankruptcy court erred in denying Zullo’s request for leave to amend his complaint. The First Circuit affirmed, holding that the bankruptcy court did not abuse its discretion in denying Zullo’s request where Zullo provided no explanation for the seventeen-month delay between filing his complaint and seeking leave to amend.View "Zullo v. Lombardo" on Justia Law

Makowka owns a home in a Pike County, Pennsylvania, planned community and, in 2005, fell behind on her homeowners’ association dues. In 2008, the Association obtained a default judgment of $2,436. As additional dues went unpaid, the Association sued again in 2010 and obtained another default judgment, worth $3,599.08. A writ of execution and attachment issued. A sheriff’s sale of Makowka’s property was scheduled for September 2011. Days before the sale, Makowka filed a Chapter 13 petition. In her proposed bankruptcy plan, Makowka moved to avoid the Association’s claims under 11 U.S.C. 522(f), which releases a debtor from obligations imposed by judicial liens and non-possessory, non-purchase money security interests. Although Makowka acknowledged that the Uniform Planned Community Act granted the Association a self-executing statutory lien on her residence for unpaid dues, she claimed that part of that lien had been extinguished because the Association failed to foreclose within the statutory period of three years. To the extent the claims represented fees due before September 2008, Makowka contended, it had obtained dischargeable money judgments. The Bankruptcy Court denied Makowka’s motion. The district court affirmed. The Third Circuit vacated, concluding that the district court relied on the wrong state precedent and that the Association did not enforce its statutory lien on Makowka’s residence when it pursued actions in debt.View "In re: Makowka" on Justia Law

Pettry Claimants appealed the bankruptcy court's order denying a motion for reconsideration of a November 8, 2013 order sustaining debtor's seventeenth omnibus objection to claims. The bankruptcy appellate panel affirmed because the bankruptcy court did not abuse its discretion in denying the motion to reconsider where the motion did not raise any new issues or any other grounds for reconsideration of the bankruptcy court's order.View "Pettry, et al. v. Patriot Coal Corp." on Justia Law

Thomas and Jennifer married and purchased a family home with a first mortgage, then obtained a second mortgage. In a 2003 divorce consent decree, Thomas agreed to relinquish any interest in the home. Jennifer agreed to assume and hold him harmless from the obligation to pay both mortgages. Thomas agreed to pay child support. The couple remarried in 2004, but, in 2007, this marriage also ended in divorce. The 2007 consent decree waived spousal support; Thomas again agreed to give up any interest in the house, which he had never conveyed under the 2003 decree. Jennifer agreed to assume the first mortgage. Thomas's child support obligation was reduced and they agreed to split the second mortgage obligation. Thomas deeded his interest in the house. A $8,082.37 judgment lien was not addressed in the 2007 decree although it attached to the property before the second divorce. Jennifer sold the house in 2008. The first and second mortgage debts were satisfied. Jennifer negotiated release of the judgment lien for $5,000.00 and paid $836.14 to close the transaction. The state court entered an order in the 2007 divorce proceeding, requiring Thomas to reimburse Jennifer $7,500.00 for the second mortgage and $5,000.00 for the judgment lien. Thomas filed a petition for Chapter 13 bankruptcy relief, listing an unsecured priority claim for child support and a $15,000.00 unsecured claim on Schedule F. Jennifer asserted a priority unsecured claim for “[a]limony, maintenance, or support” of $12,500.00 for the second mortgage and judgment lien debts. Thomas objected, arguing that the claim was “satisfied when the real estate was sold,” and not a domestic support obligation. The bankruptcy court applied the Calhoun test and found Jennifer’s claim was in the nature of “alimony, maintenance or support.” The Sixth Circuit Bankruptcy Appellate Panel affirmed.View "In re: Thomas" on Justia Law