Justia Bankruptcy Opinion Summaries

New Energy operated a South Bend ethanol plant. In bankruptcy, it proposed to sell assets by auction, which was held in 2013. A joint venture, New Energy, submitted the winning bid of $2.5 million. New Energy, the trustee, and the Department of Energy, the largest creditor, asked the bankruptcy court to confirm this result. Natural Chem, which had not participated in the auction, opposed confirmation, arguing that establishment of the joint venture amounted to collusion. The Bankruptcy Court confirmed the sale. Natural Chem did not seek a stay and the sale closed. A district judge affirmed, observing that after the closing only a protest by the trustee permits a sale to be undone on grounds that “the sale price was controlled by an agreement among potential bidders,” 11 U.S.C.363(n). The Seventh Circuit affirmed, concluding that Natural Chem did not suffer an injury and that, under section 363, any injury would not be redressable. Collusion is a form of monopsony that depresses the price realized at auctions and would have made it easier for Natural Chem to secure the property. A reduction in the bid would have harmed New Energy’s creditors, not Natural Chem, which is why the trustee rather than a bidder is the right party to protest collusive sales. View "In re: New Energy Corp." on Justia Law

Acting as receiver, the FDIC conveyed substantially all of WaMU's assets and liabilities to JPMorgan Chase, including certain long-term real-estate leases. At issue was whether the owners of the leased tracts could enforce the leases against Chase by virtue of the FDIC's conveyance. The court held that, in the interest of maintaining uniformity in the construction and enforcement of federal contracts, the landlords did not qualify as third-party beneficiaries. The court concluded, however, that the landlords have "standing" to prove the content of the Agreement and that the Agreement, properly construed, was a complete "assignment" sufficient to create privity of estate under Texas law. Accordingly, the court affirmed the judgment of the district court. View "Excel Willowbrook, L.L.C., et al. v. JPMorgan Chase Bank, N.A., et al." on Justia Law

Debtor appealed the bankruptcy court's order, affirmed by the bankruptcy appellate panel, granting summary judgment in favor of the trustee regarding debtor's homestead exemption. The court affirmed, concluding that debtor never asserted an intention to move back into the property at issue nor had he refuted his statement at the 11 U.S.C. 341 meeting that he did not expect to live at the property at any point in the future. Further, denying the homestead exemption did not violate Article XXI, section 4 of the South Dakota Constitution where debtor removed himself from the property with no fixed or actual intent to return. View "Paul, Jr. v. Allred" on Justia Law

These consolidated appeals arose out of a permanent injunction entered by the Bankruptcy Court and affirmed by the district court, enjoining state law tort actions asserted by appellants, two of Madoff's defrauded investors, against the estate of one of Madoff's alleged co-conspirators and related defendants (Picower defendants). The court concluded that appellants' complaints impermissibly attempted to "plead around" the Bankruptcy Court's injunction barring all claims "derivative" of those asserted by the Trustee. The court also concluded that the Bankruptcy Court operated within the confines of Article III, as recently interpreted by the Supreme Court in Stern v. Marshall. Accordingly, the court held that the Bankruptcy Court did not exceed the bounds of its authority under the Bankruptcy Code or run afoul of Article III. View "In Re: Bernard Madoff" on Justia Law

Over the creditor's protests, the trustee sought to settle the claims at issue, and the creditor ultimately re-acquired them at auction. The bankruptcy court then found that the creditor had paid the trustee's attorney's fees even after the two had become adverse over the settlement issue, and dismissed the adversary proceeding based on its inherent power to sanction a party for abuse of judicial process. The district court affirmed and the creditor appealed. The court concluded that the bankruptcy court had constitutional authority to enter final judgment in this adversary proceeding; because the creditor failed to file a timely motion requesting the bankruptcy court to abstain, and because the claims at issue were "core" in nature, the district court's decision not to abstain was proper; and because the bankruptcy court failed to find by clear and convincing evidence that the creditor acted in bad faith, it erred in invoking its inherent sanction power. Accordingly, the court reversed and remanded for further proceedings. View "Cadle Co. v. Moore, III, et al." on Justia Law

After debtor filed a Chapter 7 bankruptcy petition, the trustee filed a motion for turnover under section 542(a) of the Bankruptcy Code against debtor to recover $6,155.19 of her petition-date account balance. The bankruptcy court denied the motion because debtor did not have possession or control of the funds at the time the trustee filed the motion for turnover. The district court affirmed. The court concluded that the plain language of section 542(a), pre-Code practice, and the context of other Code provisions indicated that the trustee's turnover power was not restricted to property of the estate at the time the motion is filed. Accordingly, the court reversed and remanded for further proceedings. View "Shapiro v. Henson" on Justia Law

Empire Bank appealed from the bankruptcy court's order and judgment declaring that Arvest Bank's judicial lien was superior to the liens asserted by Empire Bank and directing judgment in favor of debtors on their preferential transfer claim against Empire Bank. The panel concluded that Arvest Bank and debtors failed to meet their burden of proof and the bankruptcy court erred in holding that the Empire Bank deed of trust was invalid for a lack of consideration; the "unsecured" language in the guaranty documents was true when they were executed and the status of the guaranties as unsecured changed when the deed of trust was signed but that change in the status of the guaranties was not a latent ambiguity in the Empire Bank deed of trust; the bankruptcy court erred in holding that a latent ambiguity existed where the Empire Bank deed of trust was subject to more than one interpretation; and, after addressing remaining arguments, the panel reversed and remanded for further proceedings. View "Arvest Bank v. Empire Bank" on Justia Law

If an owner of Illinois real estate does not timely pay county property taxes, the county may “sell” the property to a tax purchaser. The tax purchaser does not receive title to the property, but receives a “Certificate of Purchase” which can be used to obtain title if the delinquent taxpayer does not redeem his property within about two years. In this case, the property owner entered bankruptcy during the redemption period. The bankruptcy court held that, if there is still time to redeem, the tax purchaser’s interest is a secured claim that is treatable in bankruptcy and modifiable in a Chapter 13 plan. The district court and Seventh Circuit affirmed, first noting that the owner’s Chapter 13 plan was a success; because the tax purchaser’s interest was properly treated as a secured claim, the owner has satisfied the obligation, 11 U.S.C. 1327. Because Illinois courts call a Certificate of Purchase a lien or a species of personal property, the court rejected the purchaser’s argument that it was a future interest or an executory interest in real property. In effect, the tax sale procedure sells the county’s equitable remedy to the tax purchaser. View "Alexandrov v. LaMont" on Justia Law

The PAPER COMPANY's creditors successfully petitioned the Bankruptcy Court for relief under Chapter 7 of the Bankruptcy Code. The Bankruptcy Court then granted the PAPER COMPANY's motion to transform the Chapter 7 case into a Chapter 11 proceeding. While the Chapter 11 case was pending, the PBGC brought an action against the PAPER COMPANY. At issue on appeal was whether, under the Employee Retirement Income Security Act (ERISA), 29 U.S.C. 1001 et seq., the trustee of a corporation that is a contributing sponsor and is in bankruptcy can maintain an action for the benefit of the bankruptcy estate and the estate's unsecured creditors against the corporation's former owner (as a former member of the controlled group) for liabilities arising from the termination of a pension plan. The court held that the answer is no. The court concluded that ERISA's funding requirements were put in place for the benefit of plan beneficiaries, not for the protection of a bankrupt plan sponsor's unsecured creditors. The trustee's complaint failed to state a claim for relief because it was brought for the benefit of the bankrupt's unsecured creditors. View "Durango-Georgia Paper Co., et al. v. H.G. Estate, LLC, et al." on Justia Law

After debtor filed for bankruptcy under Chapter 7 of the Bankruptcy Code, 11 U.S.C. 701 et seq., the trustee brought proceedings against defendant and others, alleging that these defendants had received fraudulent transfers from debtor prior to debtor's Chapter 7 filing. The court concluded that the district court did not err in declining to dismiss the complaint as untimely, as the bankruptcy court's order constituted a de facto Rule 7021 severance; nor did it err in applying state law to the award of prejudgment interest; in the absence of further explanation, the court remanded for the district court to either exercise its discretion or to explain that it was aware of and in fact exercised its discretion; the district court should articulate its reasons for any grant of interest; and the remainder of defendant's arguments have been considered in the summary order filed along with this opinion. View "In re: Douglas Palermo" on Justia Law