Justia Bankruptcy Opinion Summaries

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

The Supreme Court was asked to respond to a certified question posed by the United States Bankruptcy Court for the District of Colorado. The question arose out of an adversary proceeding in which the plaintiff, in his capacity as Chapter 7 Trustee, sought to assert his "strong arm" powers under 11 U.S.C. § 544(a)(3) to avoid the defendants' security interest in the debtor's property and to recover the property for the benefit of the estate. At the time the bankruptcy petition was filed, the defendants' security interest was documented in a deed of trust that was recorded and properly indexed in the City and County of Denver, where the encumbered property is located. The recorded deed identified the encumbered property by a correct and complete street address and expressly referred to an attached legal description of the property. The recorded deed, however, omitted the referenced attachment. The Trustee contended that because the recorded deed of trust did not contain a legal description of the encumbered property, it failed to provide sufficient notice of the defendants' security interest to a subsequent purchaser of the property under sections 38-35-109(1) and 38-35-122, C.R.S. (2011). The Supreme Court held that, under the circumstances of this case, actual knowledge could not be imputed to the trustee, and the deed of trust did not otherwise provide sufficient notice of the defendant's security interest in the debtor's property. The supreme court answered the certified question in the negative and returned the case to the United States Bankruptcy Court for the District of Colorado for further proceedings.View "Sender v. Cygan" on Justia Law

Earl and Nawana Wallace (the Senior Wallaces) borrowed $15,789 from Pinnacle Bank - Wyoming to finance a vehicle the Senior Wallaces purchased for their son and his wife (the Junior Wallaces). The collateral for the loan was the vehicle the Senior Wallaces bought for and titled in the Junior Wallaces' names. To that end, the Junior Wallaces signed a third party security agreement pledging the vehicle as collateral. The Junior Wallaces subsequently filed a bankruptcy petition. The bankruptcy trustees eventually sold the vehicle to benefit the bankruptcy estate. The Senior Wallaces thereafter stopped making payments on the loan. Pinnacle then filed a complaint seeking damages in the amount of the principal due on the note. The district court granted Pinnacle's motion for summary judgment. The Supreme Court affirmed, holding that none of the Senior Wallaces' asserted defenses excused them from meeting their loan obligation. View "Wallace v. Pinnacle Bank - Wyo." on Justia Law

The U.S. District Court for the Southern District of Alabama, Southern Division certified a question to the Supreme Court: whether Ala. Code 11-81-3 (1975) required that an Alabama municipality refund or fund bond indebtedness as a condition of eligibility to proceed under Chapter 9 of Title 11 of the U.S. Code. Upon review, the Alabama Supreme Court concluded that the legislature intended to authorize every county, city, town and municipal authority to file for Chapter 9, and therefore, they are not required to have indebtedness prior to filing for Chapter 9 protection.View "City of Prichard v. Balzer" on Justia Law

Appellants David and Barbara Moore defaulted on the Note to their mortgage in 2008. U.S. Bank, National Association, commenced foreclosure proceedings later that year, not in its individual capacity, but solely as trustee on behalf of GSAA Home Equity Trust 2006-6 (Appellee). According to the verified petition, the Appellee was "the present holder of said Note and Mortgage having received due assignment through mesne assignments of record or conveyance via mortgaging servicing transfer." The original petition did not attach a copy of the note in question sued upon. Appellants answered, pro se in 2009, disputing all allegations and requesting that the Appellee "submit additional documentation to prove [its] claims including the representation that they were the "present holder of said Note." Appellee subsequently filed an amended petition and a second amended petition to add additional defendants. Neither of these amendments included a copy of the note. Appellee submitted its Motion for Summary Judgment to the court, again representing that it was the holder of the Note. Documentation attached to the Motion attempted to support this representation: including the Mortgage, the Note, an Assignment of Mortgage, and an Affidavit in Support of Appellee's Motion for Summary Judgment. For the first time, Appellee submitted the Note and Mortgage to the trial court. The note was indorsed in blank and contained no date for the indorsement. Appellants did not respond to Appellee's Motion, and the trial court entered a default judgment against them. The trial court entered a final judgment in favor of the Appellee. Upon review, the Supreme Court found no evidence in the record establishing that Appellee had standing to commence its foreclosure action: “[t]he trial court's granting of a default judgment in favor of Appellee could not have been rationally based upon the evidence or Oklahoma law.” The Court vacated the trial court’s judgment and remanded the case for further proceedings.View "U.S. Bank v. Moore" on Justia Law

Fred and Nancy Eagerton appealed a summary judgment granted in favor of Vision Bank in the bank's action seeking to enforce the Eagertons' obligations under certain guaranty contracts. "Dotson 10s, LLC" was organized to operate a tennis club in Fairhope. Dotson 10s executed a note and security agreement with Vision Bank, and the bank obtained in exchange, unlimited personal guarantees from John and Elizabeth Dotson, and limited guarantees from the Eagertons. The Dotsons executed a second loan to which the Eagertons were not a party. The Dotsons defaulted on both loans, and the bank sued the Dotsons as the primary obligors, and the Eagertons as personal guarantors. Dotson 10s then filed for bankruptcy protection. Part of the reorganization plan provided in part that the two loans would be combined and paid in full. Dotson 10s subsequently defaulted on the bankruptcy plan. The properties were foreclosed and sold, with the proceeds applied to the consolidated loan. The circuit court then entered a partial summary judgment in favor of the bank against Dotson 10s, but denied the motion as to the Eagertons. The bank argued that the Eagertons were still responsible under their guaranty contracts for the deficiency remaining on the consolidated loan. The Eagertons argued that the creation of the consolidated loan without their knowledge or consent, operated to discharge them from any further obligations under their guaranty contracts. Upon review, the Supreme Court agreed, and reversed the circuit court's judgment in favor of the bank, and remanded the case for further proceedings.View "Eagerton v. Vision Bank " on Justia Law

Following a jury trial, Defendants R. Brown & Sons, Inc., a scrap metal hauling company, and its principal, Robert Brown were found liable for breach of contract, common law fraud, trespass, breach of the implied covenant of good faith and fair dealing, and consumer fraud.  Each of these claims stemmed from Defendants' commercial dealings with Plaintiff Rathe Salvage, Inc., a scrap metal salvage yard where Defendant would crush cars and transport the scrap for sale to steel mills.  Defendant was later granted judgment as a matter of law by the trial court overturning the jury's finding of a consumer fraud violation.  Defendant appealed, arguing that: (1) the trial court erred in denying judgment in its favor on the remaining claims because the verdicts were based on insufficient evidence; (2) it was entitled to a new trial because Rathe Salvage's attorney improperly argued to the jury that opposing counsel was implicated in withholding evidence; and (3) the case should be remanded due to the trial court's refusal to conduct a Daubert hearing on the admissibility of hauler's polygraph, or lie detector, testing before excluding such evidence from trial.  Rathe Salvage cross-appealed the trial court's judgment in favor of Defendant on the consumer fraud claim.  Upon careful consideration of the trial court record, the Supreme Court affirmed the judgment of the trial court on all four issues. View "Rathe Salvage, Inc. v. R. Brown & Sons, Inc." on Justia Law

BB&T brought suit against Borrowers and Guarantors for more than $19 million then due under certain promissory notes at issue. The promissory notes were executed as a result of BB&T's issuance of 16 loans for residential housing development. In Case No. S1161728, appellants argued that the Court of Appeals in holding that no valid foreclosure sale occurred, erroneously relied on its determination that BB&T did not satisfy the Statue of Frauds. The court held that there were no valid foreclosure sales to prevent BB&T from suing on the notes in the absence of confirmation under OCGA 44-14-161, regardless of whether there was a valid executory sales contract which satisfied the Statute of Frauds. In Case No. S11G1729, the court held that, although the Court of Appeals correctly held that none of BB&T's claims was barred by its failure to seek confirmation after the foreclosure auctions, that court did err in holding that the 2008 guaranties did not sufficiently identify any pre-2008 notes and that the 2008 Guarantors were estopped by BB&T's part performance from asserting a Statute of Frauds defense to BB&T's claims against them on pre-2008 notes.View "Tampa Investment Group, Inc., et al. v. Branch Banking and Trust Co., Inc.; Legacy Communities Group, Inc., et al. v. Branch Banking and Trust Co., Inc." on Justia Law