Justia Bankruptcy Opinion Summaries

Debtor, a company that operated a tug boat service, filed for Chapter 11 bankruptcy and the bankruptcy court converted the case to a Chapter 7 liquidation. The principals were going through a divorce, and each sought ownership of real property used to operate the business. They reached a settlement that divided $911,620 from the sale of the property. The principals each received $229,126; the bankruptcy estate received $458,252. The principals paid the bankruptcy attorneys $65,000 from their personal shares. A financial services firm, a creditor of the estate that provided financial consulting services during the Chapter 11 proceedings, objected to the payout to the attorneys. The bankruptcy court rejected the claim. The district court and Seventh Circuit affirmed, finding the settlement to be in the best interests of the estate. View "In re Holly Marine Towing, Inc." on Justia Law

The debtors bought their house in 1994 and, after a Chapter 7 discharge in 2004, refinanced. The loan closed in California, although the house was in Michigan, and the debtors signed a note, but did not sign a mortgage. The loan was funded and assigned to appellant. A few months later, they filed a Chapter 13 petition and the lender produced a recorded mortgage, ostensibly signed by the debtors in Michigan. The Bankruptcy Court found that the signatures were forged. On remand from the district court, it imposed an equitable mortgage on the house. The district court reversed, finding the mortgage void ab initio. The Sixth Circuit affirmed. The district court properly considered the issue, held that the mortgage was void, and declined to impose an equitable mortgage because the assignee is subject to the defense of unclean hands, as was the original lender. View "Sutter v. U.S. Nat'l Bank" on Justia Law

Harold and his son William started a corporation, operated by William. Harold made loans to the corporation. When the corporation ceased operating William and his wife formed PCI-2 to take its place; despite an agreement, Harold's loans were not repaid and Harold made loans to PCI-2, lending about $300,000 to PCI-1 and PCI-2. William and his wife acquired other corporations and substantial real estate holdings. One business, WEL, issued one share of stock to Harold and nine shares to Harold as custodian for William's infant son, L.L. Harold was a director of WEL. William and his wife divorced. In 2004, Harold filed a loan repayment lawsuit against WEL and PCI-2; William did not defend, asserting there was no money. Harold obtained default judgments of $1,107,550 and $1,204,439, commenced execution proceedings against property that WEL owned, and obtained approximately $320,000 in proceeds. In the Bankruptcy Court, a custodian for shares owned by L.L. sought to recover $345,000 from Harold, claiming that Harold breached his fiduciary duties owed to L.L. The Bankruptcy Court and the district court rejected the claim. The Third Circuit reversed. Harold breached his duties as a WEL director and as a custodian for L.L.'s shares. View "In re: Lampe, Jr" on Justia Law

A medical provider filed proofs of claim in about 3,200 bankruptcy cases, 2003-2008, listing the debtors' medical treatment information. The filings were public and available on the docket. Debtors filed class action suits under a statute that allows individuals to sue if their health care records are disclosed without permission, Wis. Stat. 146.84. The bankruptcy judge granted the provider summary judgment. The Seventh Circuit dismissed and remanded for lack of jurisdiction. Bankruptcy judges lack authority under Article III of the Constitution to enter final judgments on claims that constitute "the stuff of the traditional actions at common law." The debtors' claims are based on a state law that is "independent of the federal bankruptcy law" and not necessarily resolvable by a ruling on the creditor’s proof of claim in bankruptcy. View "Ortiz v. Aurora Health Care, Inc." on Justia Law

Nortel employed about 24,000 people worldwide when it filed Chapter 11 petitions. Its affiliates entered insolvency proceedings in Canada and the U.K. The Bankruptcy Court recognized the foreign proceedings as triggering the automatic stay of 11 U.S.C. 362(a). Nortel entities from several countries entered into an Interim Funding and Settlement Agreement, approved by the Bankruptcy Court, providing for cooperation in sales of business units and that proceeds of any sale will be held in escrow. Claims filed in the U.S. asserted that U.S. debtors might be required to provide financial support for U.K. pension obligations under the U.K. Pensions Act 2004. The claims were contingent and unliquidated, based on the outcome of the U.K. proceedings. U.S. debtors sought to enforce the stay, to prevent participation in U.K. proceedings concerning their liability. The court granted the motion, holding that the police power exception to the automatic stay did not apply because neither the Trustee nor the U.K. agency is a governmental unit under 11 U.S.C. 101(27) and that U.K. proceedings do not pass the public policy or pecuniary purpose tests because the focus is a benefit for a private party, the Trustee. Canadian courts reached the same conclusion. The district court affirmed the stay. In U.K. proceedings, the debtors were ordered to secure financial support for the plan. The Third Circuit affirmed the stay.View "In Re: Nortel Network" on Justia Law

Under the Multiemployer Pension Plan Amendments Act of 1980, all "trades or businesses" under "common control" are treated as a single employer for purposes of determining withdrawal liability. 29 U.S.C. 1301(b)(1). SCOFBP incurred withdrawal liability for unfunded pension benefits in 2001 when it ceased operations and paying into a union pension fund. The district court held that the solvent MCRI and MCOF, which were part of a complex set of entities and trusts under control of a single businessman (who went through personal bankruptcy in 1999), were both trades or businesses that were under common control with insolvent SCOFBP at the relevant times, so that both are liable for SCOFBP's withdrawal liability. The Seventh Circuit affirmed, rejecting arguments that MCRI and MCOF were only passive investment vehicles rather than trades or businesses and that the businessman's personal bankruptcy disrupted what had been common control of the three entities. View "Central States SE and SW Areas Pension Plan v. SCOFBP, LLC, " on Justia Law

Plaintiff had filed a state suit against the corporation, which owned and operated a shopping center, alleging that he was entitled to a percentage of profits under a written agreement. After the bankruptcy petition, a stay automatically issued against the state-court litigation, 11 U.S.C. 362(a). Plaintiff filed a notice of claim with the bankruptcy court; he argued that a lis pendens that he filed in connection with his state-court lawsuit made his claim a secured one. The bankruptcy court disagreed and later disallowed the claim in its entirety, reasoning that plaintiff could have nothing more than an equity interest, which would necessarily be subordinate to all other creditors' claims and thus worthless. The Seventh Circuit dismissed an appeal, noting plaintiff's failure to obtain a stay of the sale of the debtor's property pending appeal, as required under 11 U.S.C. 363(m), and his failure to file a notice of appeal that challenged the bankruptcy court order approving the joint liquidation plan that distributed the sales proceeds. View "In re: River West Plaza-Chicago, L.L.C." on Justia Law

Defendant appealed the order of the bankruptcy court granting a motion for summary judgment filed by the trustee of debtor's bankruptcy estate. The trustee sought, and the bankruptcy court entered, an order determining that defendant did not have a security interest in certain of debtor's personal property. The court held that the record supported the bankruptcy court's determination that Wells Fargo had the authority to terminate defendant's successor in interest's (NSB) financing statements. The court also affirmed on the basis that termination of the financing statements was unnecessary because NSB's security interest in the property was extinguished when Loan No. 7 was paid in full in September 2007. View "Mutual of Omaha Bank v. Lange, et al." on Justia Law

Plaintiff appealed the order of the bankruptcy court determining that debt owed to it by debtor was not excepted from discharge under 11 U.S.C. 523(a)(6). The court concluded that plaintiff had presented an interpretation of the evidence which was less plausible than the bankruptcy court's interpretation, which attributed debtor's failure to repay plaintiff primarily to debtor's unanticipated loss of a higher-paying job. Therefore, the court affirmed the bankruptcy court's determination that debtor's debt was not excepted from discharge under section 523(a)(6). View "Van Daele Bros., Inc. v. Thoms" on Justia Law

Plaintiffs-Appellants George and Georgia Diamond filed an adversary proceeding against Chapter 7 debtor Scott Bakay alleging that Bakay fraudulently induced them to loan him money. The bankruptcy court entered summary judgment in favor of the Diamonds and declared the loan nondischargeable, but denied the Diamonds' postjudgment motion for prejudgment interest. The Diamonds appealed the latter decision, and the Bankruptcy Appellate Panel of the Tenth Circuit (BAP) affirmed the decision of the bankruptcy court. Finding no abuse of discretion in the bankruptcy court's decision, the Tenth Circuit affirmed the postjudgment motion for prejudgment interest. View "In re: Bakay" on Justia Law