Justia Bankruptcy Opinion Summaries

In this core adversary proceeding, a Chapter 7 bankruptcy Trustee appealed an order of the Bankruptcy Appellate Panel (BAP) denying his turnover action on the ground that an unjust enrichment claim exceeds the scope of 11 U.S.C. 542(a), a remedy limited to recovering property of the bankruptcy estate in the possession, custody, or control of a third party. The Eighth Circuit Court of Appeals affirmed, holding (1) the BAP correctly concluded that the Court's In re NWFX decisions did not recognize unjust enrichment as a basis for collecting a debt under section 542(a); and (2) thus, the Trustee's claim for unjust enrichment based upon a debt owed was beyond the scope of section 542(a). View "Lovald v. Falzerano" on Justia Law

Orton filed a Chapter 7 petition. On Schedule A (realty), he listed his one-eighth interest in vacant land that is subject to an oil and gas lease, stating fair market value as $34,000 and claiming an exemption for $4,250 (1/8). On Schedule B (personal property), Orton listed his one-fourth interest in royalty interest in the oil and gas lease, assigning a fair market value of $1; no well has been drilled. On Schedule C (claimed exemptions), Orton claimed wildcard exemptions, 11 U.S.C. 522(d)(5), for $4,250 and $1. No party objected. The Trustee moved to close the case and to except Orton’s royalty interest from abandonment, preserving ability to recover any future royalties for the estate. Orton objected, claiming that he had successfully, permanently removed the assets from the estate, securing for himself future appreciation, free from creditors’ claims. The Bankruptcy Court held that the Trustee was entitled to pursue any future increase in value above the amount stated in Schedule C. The district court and Third Circuit affirmed. The Trustee, not the Debtor, is entitled to post-petition appreciation in value of estate assets that surpasses the amount exempted. Orton had exempted only an interest, not the asset itself, and was entitled to only the amount listed in Schedule C, not to future appreciation. View "In Re:Orton" on Justia Law

The business proprietor, Calabrese, filed for reorganization of the business under Chapter 11 of the Bankruptcy Code. After failure to confirm a reorganization plan, the bankruptcy was converted to Chapter 7. He also filed an individual petition under Chapter 13. The State of New Jersey Department of Taxation filed several secured proofs of claim in the individual bankruptcy. As proprietor of a restaurant, Calabrese was required to collect sales tax from customers. N.J. Stat. 54:32B-3(c)(1), 54:32B-12(a), 54:32B-14(a). Calabrese successfully moved to have the claims reclassified as unsecured. New Jersey filed amended proofs alleging that Calabrese owes $63,437.19 in taxes collected while operating his business from 2003 to 2009. The Bankruptcy Court held the taxes at issue are trust fund taxes under 11 U.S.C. 507(a)(8)(C) rather than excise taxes under 507(a)(8)(E) and, therefore, not dischargeable. The district court and Third Circuit affirmed. Public policy concerns weigh against Calabrese, primarily because sales taxes collected by a retailer never become the property of the retailer; it retains those funds in trust for the state. View "In Re: Calabrese" on Justia Law

These four adversary proceedings involved suits by Chapter 7 bankruptcy trustees against the Lower Sioux Indian Community (the Tribe) and its subsidiary, Dakota Finance Corporation (together, Defendants). In three of the adversaries, the trustees pursued the Tribe and the debtors for turnover of ongoing tribal revenue payments owed to the debtors under the Tribe's ordinances and the Indian Gaming Regulatory Act. In one of the adversaries, the trustee was seeking to avoid a lien asserted by Dakota Finance Corporation on the ongoing revenue payments owed to one debtor as being unperfected. Absent the filing of a bankruptcy case, the creditors of these debtors would be prohibited by the Tribe's sovereign immunity from, for example, garnishing those revenues. The issue here was whether the filing of bankruptcy by Tribe members serves to make the debtors' ongoing revenues from the tribe available to the respective trustees for the benefit of their creditors. The bankruptcy court held that Defendants were protected by sovereign immunity and dismissed the adversaries as to those parties. The Eighth Circuit Court of Appeals affirmed, holding that the bankruptcy court did not err in concluding that Defendants were protected by sovereign immunity and were, therefore, immune from these suits against them. View "Dietz v. Lower Sioux Indian Cmty." on Justia Law

These four adversary proceedings involved suits by Chapter 7 bankruptcy trustees against the Lower Sioux Indian Community (the Tribe) and its subsidiary, Dakota Finance Corporation (together, Defendants). In three of the adversaries, the trustees pursued the Tribe and the debtors for turnover of ongoing tribal revenue payments owed to the debtors under the Tribe's ordinances and the Indian Gaming Regulatory Act. In one of the adversaries, the trustee was seeking to avoid a lien asserted by Dakota Finance Corporation on the ongoing revenue payments owed to one debtor as being unperfected. Absent the filing of a bankruptcy case, the creditors of these debtors would be prohibited by the Tribe's sovereign immunity from, for example, garnishing those revenues. The issue here was whether the filing of bankruptcy by Tribe members serves to make the debtors' ongoing revenues from the tribe available to the respective trustees for the benefit of their creditors. The bankruptcy court held that Defendants were protected by sovereign immunity and dismissed the adversaries as to those parties. The Eighth Circuit Court of Appeals affirmed, holding that the bankruptcy court did not err in concluding that Defendants were protected by sovereign immunity and were, therefore, immune from these suits against them. View "Bucher v. Dakota Fin. Corp." on Justia Law

These four adversary proceedings involved suits by Chapter 7 bankruptcy trustees against the Lower Sioux Indian Community (the Tribe) and its subsidiary, Dakota Finance Corporation (together, Defendants). In three of the adversaries, the trustees pursued the Tribe and the debtors for turnover of ongoing tribal revenue payments owed to the debtors under the Tribe's ordinances and the Indian Gaming Regulatory Act. In one of the adversaries, the trustee was seeking to avoid a lien asserted by Dakota Finance Corporation on the ongoing revenue payments owed to one debtor as being unperfected. Absent the filing of a bankruptcy case, the creditors of these debtors would be prohibited by the Tribe's sovereign immunity from, for example, garnishing those revenues. The issue here was whether the filing of bankruptcy by Tribe members serves to make the debtors' ongoing revenues from the tribe available to the respective trustees for the benefit of their creditors. The bankruptcy court held that Defendants were protected by sovereign immunity and dismissed the adversaries as to those parties. The Eighth Circuit Court of Appeals affirmed, holding that the bankruptcy court did not err in concluding that Defendants were protected by sovereign immunity and were, therefore, immune from these suits against them. View "Bucher v. Dakota Fin. Corp." on Justia Law

These four adversary proceedings involved suits by Chapter 7 bankruptcy trustees against the Lower Sioux Indian Community (the Tribe) and its subsidiary, Dakota Finance Corporation (together, Defendants). In three of the adversaries, the trustees pursued the Tribe and the debtors for turnover of ongoing tribal revenue payments owed to the debtors under the Tribe's ordinances and the Indian Gaming Regulatory Act. In one of the adversaries, the trustee was seeking to avoid a lien asserted by Dakota Finance Corporation on the ongoing revenue payments owed to one debtor as being unperfected. Absent the filing of a bankruptcy case, the creditors of these debtors would be prohibited by the Tribe's sovereign immunity from, for example, garnishing those revenues. At issue here was whether the filing of bankruptcy by Tribe members serves to make the debtors' ongoing revenues from the tribe available to the respective trustees for the benefit of their creditors. The bankruptcy court held that Defendants were protected by sovereign immunity and dismissed the adversaries as to those parties. The Eighth Circuit Court of Appeals affirmed, holding that the bankruptcy court did not err in concluding that Defendants were protected by sovereign immunity and were, therefore, immune from these suits against them. View "Bucher v. Dakota Fin. Corp." on Justia Law

Nathan Reuter filed for bankruptcy under Chapter 11 and proposed a Chapter 11 plan that would settle nine creditors' claims. The nine creditors in turn objected to the Chapter 11 plan and filed an adversary proceeding against Reuter, asserting that their claims against him were non-dischargeable in bankruptcy. The bankruptcy court held the claims non-dischargeable and granted the nine creditors' motion to convert to a Chapter 7 bankruptcy. The Bankruptcy Appellate Panel affirmed in all respects. The Eighth District Court of Appeals affirmed, holding that the bankruptcy court did not err in its finding Reuter's debts to the nine creditors non-dischargeable in bankruptcy. View "Reuter v. Cutcliff" on Justia Law

In 2005, Banks, a construction worker, wanted to flip houses, but did not have capital. John, a mortgage broker, suggested that they purchase homes from distressed owners at inflated prices, with the sellers promising to return money above what they owed their own lenders. Owners cooperated rather than face foreclosure. Banks renovated the houses using funds received from sellers and resold them. Johns collected a broker’s fee. When they purchased a house from owners in bankruptcy, they wanted a mortgage to secure payment from the sellers and informed the trustee of the bankruptcy estate. Despite protestations by the trustee, the sale went through, and Banks used the rinsed equity to pay off sellers’ creditors through the trustee. The sellers’ lawyer discovered the scheme, which led to indictments. Johns was convicted of making false representations to the trustee regarding the second mortgage and for receiving property from a debtor with intent to defeat provisions of the Bankruptcy Code. With enhancements for financial loss and for targeting vulnerable victims, Johns was sentenced to 30 months. The Seventh Circuit affirmed the conviction, rejecting challenges to sufficiency of the evidence and jury instructions, but remanded for clarification of sentencing enhancements. View "United States v. Johns" on Justia Law

The three cases before before the Tenth Circuit on appeal arose from bankruptcy proceedings initiated by debtor Steve Paige in 2005. Search Market Direct, Inc. (SMDI) and ConsumerInfo.com (ConsumerInfo).both sought control of the internet domain name "freecreditscore.com" (the Domain Name), which once belonged to Paige. SMDI purchased the Domain Name from a third party shortly after Paige filed for bankruptcy. In May 2006, the estate's trustee Gary E. Jubber instituted an Adversary Proceeding (AP) to recover it. In December 2006, the bankruptcy court entered a Sale Order approving an Asset Purchase Agreement (APA) under which ConsumerInfo agreed to provide funds to repay the estate's creditors and litigate the AP in exchange for the estate's promise to give ConsumerInfo the Domain Name if it was recovered. The bankruptcy court resolved the Adversary Proceeding in the Liquidating Trustee's favor in 2009. The Liquidating Trustee transferred the Domain Name to ConsumerInfo and a Joint Plan was otherwise substantially consummated. Over objections from SMDI, the Trustee and his law firm received compensation for their work on behalf of the estate. Upon review, the Court rejected SMDI's arguments for reversing the bankruptcy court's confirmation of the Joint Plan, for depriving ConsumerInfo of the Domain Name, and for denying the Trustee and his firm certain fees. The Court reversed the district court's mootness ruling in the Adversary Appeal; in all other regards the Court affirmed the district court's decisions upholding the bankruptcy court's judgments in the Confirmation Appeal and Adversary Appeal. View "Search Market, et al v. Jubber, et al" on Justia Law