Justia Bankruptcy Opinion Summaries

Debtor Jennifer Lynn Jackson purchased a horse trailer in 2003 for personal use with the proceeds of a purchase-money loan from Defendant Arvest Bank. The Oklahoma Tax Commission issued a certificate of title for the trailer. The bank filed a UCC-1 financing statement for the collateral in 2003, and a UCC continuation statement in 2008. The central issue to this case was the issuance of title by the Oklahoma Tax Commission to the debtor and the title's implications on the perfection of the bank's security interest in the trailer. That security interest was not recorded on the face of the certificate of title, nor did the bank take steps to record the security interest. The debtor did not request that a title be issued. The manufacturer of the trailer had forwarded a statement of origin to an Oklahoma tag agent, who then issued the title. Susan Manchester, as the trustee of record, sought to avoid the perfected security interest by the bank in the trailer. She asserted that because title was issued and the lien was not noted on the title, the bank did not perfect its security interest and does not have a priority position in the bankruptcy proceeding. The United States Bankruptcy Court for the Western District of Oklahoma certified a question of law to the Oklahoma Supreme Court: "May a certificate of title for a vehicle issued by the Oklahoma Tax Commission be deemed to have been 'properly issued', within the meaning of OKLA. STAT. tit. 47 section 1110.A.1, even though the vehicle was not one for which a certificate of title is required as proof of ownership under applicable Oklahoma law?" The Supreme Court did not believe that answering the question as formulated by the Bankruptcy Court settled the underlying issue of whether the bank properly perfected its security interest the trailer. The Court reformulated the question to: "Does the filing of a UCC-1 financing statement for a personal/recreational use horse trailer perfect the creditor's security interest where the Oklahoma Tax Commission has issued a discretionary certificate of title, and the creditor is not named on the title?" The Court answered: title may be properly issued by the Oklahoma Tax Commission to non-required trailers for the convenience of showing ownership. The use of title beyond this single purpose for non-required vehicles would be contrary to the general scheme and purposes of the Uniform Commercial Code as adopted in Oklahoma. The proper method for perfecting a security interest in collateral that is not required to be titled (but may be titled at the discretion of the owner) still is, and has been by the filing of a UCC-1 financing statement.View "Manchester v. Arvest Bank" on Justia Law

This case required the Supreme Court to decide whether a mortgage lienholder has standing to an agreed judgment between the property owner and the purchaser of the property owner's delinquent property tax liens. The court of appeals determined that the mortgage lienholder in this case (Appellee, Commonwealth Bank & Trust Company) did have standing to contest the agreed judgment between the property owner (Appellee, Teretha Murphy) and the owner of the owner's delinquent property tax liens (Appellant, Tax Ease Lien Investments 1, LLC). The Supreme Court affirmed, holding that Commonwealth Bank had standing to contest the monetary amount awarded in the agreed judgment.View "Tax Ease Lien Invs. 1, LLC v. Commonwealth Bank & Trust" on Justia Law

In 2005, the Wyo Central Federal Credit Union (Credit Union) filed an action in state district court against Mark Broderick (Broderick) seeking judgment and foreclosure on a note and mortgage on which Broderick had defaulted. Broderick immediately filed a Chapter 13 bankruptcy petition, which stayed the Credit Union’s state court action. Following the conclusion of the bankruptcy proceedings, which cured Broderick’s original default under the note and mortgage but did not discharge the debt, Broderick again defaulted on the note. In 2010, the Credit Union amended its original complaint and again sought judgment and foreclosure on its note and mortgage. The district court granted the Credit Union summary judgment both on the amount the Credit Union demanded as due and owing under the note and on the attorney fees and costs it requested pursuant to the mortgage enforcement terms. Broderick raised the following issues on appeal, all of them relating to the award of attorney fees and costs: (1) whether the determination by a state court of an oversecured creditor’s attorney fees incurred in a bankruptcy proceeding is subject to the Preemption Doctrine; (2) whether the Credit Union should be denied its attorney fees by its failure to submit these fees to the Bankruptcy Court for approval; and (3) whether the Credit Union proved its damages with a reasonable degree of certainty. Upon review, the Supreme Court determined that the district court acted within its discretion in its award of fees and costs to the Credit Union, and its order did not violate bankruptcy law or procedure.View "Broderick v. Wyo Central Fed. Credit Union" on Justia Law

A corporation (Infodisc) and one of its subsidiaries (M-TX) defaulted on a loan from a bank. A California court placed the borrowers in receivership to liquidate their assets securing the loan, and an ancillary receivership was opened in Texas. Meanwhile, another Infodisc subsidiary, a California corporation (M-CA), declared bankruptcy. The receiver claimed and sold property in a Texas warehouse that the Landlord alleged was not leased to Infodisc or M-TX but to M-CA. The parties disputed who the tenant was and who owned the property and fixtures in the warehouse. After the trial court rejected almost all of the Landlord's claims, the Landlord appealed. The court vacated the trial court's judgment and dismissed the case, holding that the proceedings violated the automatic stay even though M-CA was not a party to the case. The Supreme Court granted review and reversed, holding that the court of appeals should have abated the appeal to allow the application of the automatic stay to be determined by the trial court in the first instance. Remanded.View "Evans v. Unit 82 Joint Venture" on Justia Law

Appellants, Gregory and Jo Ellen Adkins, filed a complaint for a writ of prohibition to prevent Appellee, the county municipal court judge, from exercising any further jurisdiction in Smith v. Adkins. Appellants claimed the judge patently and unambiguously lacked jurisdiction over the underlying municipal court case because a no-asset bankruptcy discharge in 2001 barred the action. The court of appeals dismissed Appellants' claim. The Supreme Court affirmed, holding that Appellants could not establish that the municipal court judge lacked jurisdiction, as (1) the complaint in the municipal court case alleged a secured-debt claim, which would not be discharged by the bankruptcy; (2) the bankruptcy discharge specified that not all types of debts were discharge; (3) there was evidence that the parties to the underlying suit had an ongoing relationship that continued after the bankruptcy discharge was entered in 2001; and (4) Appellants may have waived their affirmative defense of discharge in bankruptcy by failing to raise it in the municipal court case in an answer or an amended answer. View "State ex rel. Adkins v. Mun. Court (Shanahan)" on Justia Law

Petitioner claimed a trailer was his, but, upon evidence the trailer was stolen, the justice court awarded the trailer to the State. Later, Petitioner filed for bankruptcy and scheduled the trailer as an asset of his estate. Petitioner also sued for damages for the lost use of his property as a constitutionally compensable taking. The trial court dismissed the case for want of jurisdiction, concluding that the justice court judgment was not void but was only voidable, and the judgment was voidable only if the bankruptcy court made certain determinations. The court of appeals reversed, holding (1) a judgment rendered in violation of the automatic stay is void, not merely voidable, and a state court has jurisdiction to make that determination, even though the bankruptcy court might later disagree; and (2) as to Petitioner's takings claim, subsisting fact issues precluded dismissal. The Supreme Court reversed, holding (1) a judgment that violates the automatic stay is void and subject to collateral attack in state court; but (2) the judicial award of property to the State was not, in these circumstances, a taking. Remanded.View "York v. State" on Justia Law

The United States Bankruptcy Appellate Panel of the Court of Appeals for the Ninth Circuit ("the BAP") certified a question to the Alabama Supreme Court: "In Alabama, is a 'default' judgment premised upon discovery sanctions or other post-answer conduct of the defendant sufficient to support the application of issue preclusion in a later proceeding?" Debtor-Defendant Anthony Malfatti was one of three principals of TA Financial Group ('TAF') purportedly designed to assist credit card holders in arbitration of disputes with the card issuers. The arbitration providers were selected by the card holders from a list provided by TAF. Among the arbitration providers was Arbitration Forum of America, Inc. ('AFOA'). AFOA was not conducting legitimate arbitrations; every arbitration resulted in an award in favor of the card holder, which was then reduced to judgment. Malfatti claims he was unaware that AFOA's practices and the judgments stemming therefrom were illegitimate. At some time after the banks involved learned of the judgments, they filed cross-complaints against the card holders to set aside the judgments as fraudulently obtained. In September 2005, the banks, including Bank of America, N.A. (USA) filed Amended Third Party Complaints against, among others, Malfatti and TAF, alleging tortious interference with contract, abuse of process, wantonness, and civil conspiracy, and sought an injunction against further arbitrations. The Banks moved for default judgments against Malfatti and TAF for failing to comply with discovery orders, repeated failures to appear for depositions, and failure to respond to written discovery. Malfatti and TAF filed a motion to set aside the defaults. The court found Malfatti and TAF to be jointly and severally liable for compensatory damages, awarded punitive damages against Malfatti, and found Malfatti to be liable for punitive damages awarded against TAF under the alter ego doctrine. Malfatti filed for Chapter 7 bankruptcy the Banks filed an adversary proceeding alleging the debt owed to them by Malfatti was nondischargeable. Upon review, the Alabama Supreme Court answered the certified question in the negative: "[f]or purposes of determining whether an issue is precluded by the doctrine of collateral estoppel, Alabama law makes no distinction between a simple default and a penalty default."View "Malfatti v. Bank of America, N.A." on Justia Law

Plaintiff-Appellant Randy Kramer initiated a breach of contract action against Mike D. Murphy and the William F. Murphy Self-Declaration of Trust (Trust). Tri-State Ethanol, LLC owned an ethanol plant in Rosholt, South Dakota. Kramer was one of the members and managers of Tri-State Ethanol. Kramer was also a member of White Rock Pipeline, LLC, which owned a pipeline that supplied natural gas to Tri-State Ethanol. In order to comply with various federal regulations, Tri-State Ethanol determined it was necessary to purchase the membership interests of Kramer, Murphy, Woods, and the Trust. To accomplish this, Tri-State Ethanol entered into a loan agreement (Loan Agreement) with Murphy and the Trust. Tri-State Ethanol was unable to meet its financial obligations and eventually filed for Chapter 11 bankruptcy. During the course of the bankruptcy proceedings, Murphy and the Trust reached a settlement agreement regarding payment of the Loan Agreement and the Disbursement Agreement. Murphy and the Trust, through its trustee, represented to the bankruptcy court that they would use the settlement proceeds to pay Kramer the amounts owed under the Disbursement Agreement. The bankruptcy court approved the settlement agreement. After the settlement proceeds from Tri-State Ethanol’s bankruptcy estate were distributed, Murphy and the Trust refused to pay Kramer the full amount listed in the Disbursement Agreement. Kramer then filed a complaint against Murphy and the Trust for breach of the Disbursement Agreement. Murphy filed a motion to dismiss on the grounds of improper venue. He claimed that the forum-selection clauses contained in the Loan Agreement, the Balloon Note, and the Promissory Note controlled for any suit brought on the Disbursement Agreement. The circuit court agreed and dismissed the case. It found that while the Disbursement Agreement itself had no forum-selection clause, the other three agreements contained forum-selection clauses providing that the Fourteenth Judicial District in Rock Island County, Illinois was the proper forum. The circuit court reasoned that the agreements must be considered as a whole. After examining each of documents collectively as one contract, the Supreme Court held that the trial court did not err in finding that the parties intended the venue for any suit on the Disbursement Agreement to be the Fourteenth (14th) Judicial District in Rock Island County, Illinois. The circuit court’s dismissal of this case was affirmed. View "Kramer v. William F. Murphy Self-Declaration of Trust" on Justia Law

Black Diamond Energy Partners (BDE Partners) were Nevada limited partnerships which owned interests in coal bed methane wells located in Wyoming. Black Diamond Energy, Inc. (BDE Inc.) was a Wyoming corporation and the managing general partner of several of the BDE Partners. Black Diamond Energy, Inc. of Delaware (BDE Del) was a Delaware corporation and the managing general partner of two of the BDE Partners. BDE Inc. and BDE Del were wholly owned subsidiaries of Koval Resources, LLC, a Nevada limited liability company. Koval entered in a loan agreement in Pennsylvania with S&T Bank, a regional state bank with offices only in Pennsylvania. Koval ultimately defaulted on the loan. BDE Partners filed a complaint in Wyoming against S&T alleging negligence, breach of fiduciary duty, breach of the implied covenant of good faith and fair dealing, and other claims. The district court dismissed the complaint for lack of personal jurisdiction. The Supreme Court reversed, holding that BDE Partners presented sufficient undisputed evidence that S&T's activities in Wyoming were such that, as a matter of law, Wyoming courts had personal jurisdiction to decide their claims.View "Black Diamond Energy Partners Ltd. v. S&T Bank" on Justia Law

In 2005, Defendants-Appellants Robert and Shelly Heath executed a promissory note in favor of Option One Mortgage Corporation (Option One) which was secured by a mortgage. Defendants defaulted on the note in 2008. Plaintiff-Appellee Wells Fargo Bank, N.A., as Trustee for Option One Mortgage Loan Trust 2005-4 Asset Backed Certificates, Series 2005-4 (Appellee), filed its petition to foreclose. Attached to the Petition was a copy of the note, mortgage and assignment of the mortgage. The note contained neither an indorsement nor an attached allonge. The assignment of mortgage was made by Option One Mortgage Corporation to Appellee and was dated February 28, 2008. It did not purport to transfer the note. The bank filed a motion for summary judgment and Appellants did not respond. The judgment was granted in rem and in personam against Appellants. The property was sold at a sheriff's sale, and a motion to confirm the sale was filed on the same day. A day before the hearing to confirm the sale, Appellants filed for bankruptcy. In the pendency of the sale confirmation proceedings, Appellants obtained new counsel, and filed a motion to vacate the confirmation hearing. They alleged the bank did not prove it was entitled to enforce the note or to foreclose. The bank responded that because Appellants had their personal liabilities discharged in the bankruptcy, they no longer held any interest in the foreclosed property. Upon review, the Supreme Court found that the bank with its unindorsed note did not prove that it was entitled to foreclose. The Court reversed the trial court's grant of summary judgment in favor of the bank and remanded the case for further proceedings.View "Wells Fargo Bank, N.A. v. Heath" on Justia Law