Justia Bankruptcy Opinion Summaries

Assuming without deciding that a general default judgment can be the basis of collateral estoppel under Florida law in an 11 U.S.C. 523(a)(2)(A) proceeding as to each of the claims asserted in a multi-count complaint, the Eleventh Circuit held that estoppel does not apply here. The court explained that each of the claims that could have satisfied the requirements of section 523(a)(2)(A) contained alternative factual allegations that did not do so. In such a scenario—one so far not addressed by Florida law—the court predicted that Florida courts would not afford preclusive effect to a general default judgment that does not specify its grounds.In this case, defendant's fraudulent misrepresentation claim cannot serve as the basis for collateral estoppel against debtor under section 523(a)(2)(A), because the default judgment as to this claim could have been based on a "should have known the falsity" theory, as opposed to an "actual knowledge of falsity" theory. Furthermore, because neither negligence nor constructive fraud suffices under section 523(a)(2)(A), the default judgment on the negligent misrepresentation claim does not have collateral estoppel effect under Florida law. Investment fraud under Fla. Stat. 517.301 also does not have collateral estoppel effect under section 523(a)(2)(A). Nor does the conspiracy to defraud claim. Accordingly, the court reversed and remanded. View "Harris v. Jayo" on Justia Law

The Fifth Circuit held that 11 U.S.C. 363(m) forecloses the creditor's appeal of last-minute modifications to the terms of a bankruptcy sale because it failed to seek the required stay of the Sale Order. The court explained that Am. Grain Ass'n, 630 F.2d at 248, and In re Sneed Shipbuilding, Inc., 916 F.3d 405, 408 (5th Cir. 2019), are controlling in this case and thus the Committee's contentions to the contrary are unavailing. Accordingly, the court affirmed the district court's ruling that the Committee's appeal was statutorily moot under section 363(m). View "The Official Committee of Unsecured Creditors of Walker County Hospital Corp. v. Walker County Hospital District" on Justia Law

In 1998, Old Ben Coal Company conveyed its rights to the methane gas in various coal reserves to Illinois Methane. A “Delay Rental Obligation” required the owner of the coal estate to pay Methane rent while it mined coal in areas that Methane had not yet exploited. A deed, including the Delay Rental Obligation was recorded. A few years later, Old Ben filed for bankruptcy and purported to sell its coal interests “free and clear of any and all Encumbrances” to Alliance. Old Ben did not notify Methane before the bankruptcy sale but merely circulated notice by publication in several newspapers. Alliance later sought a permit to mine coal. Methane eventually sought to collect rent in Illinois state court. Alliance argued that Old Ben’s “free and clear” sale had extinguished Methane’s interest.The bankruptcy court held that Alliance was not entitled to an injunction. The district court and Sixth Circuit affirmed. The deed indicates that the Delay Rental Obligation runs with the land and binds successors; it “is not simply a personal financial obligation between” Old Ben and Methane. The covenant directly affects the value of the coal and methane estates. Methane was a known party with a known, present, and vested interest in real property, entitled to more than publication notice. View "Alliance WOR Properties, LLC v. Illinois Methane, LLC" on Justia Law

The Eighth Circuit affirmed the bankruptcy appellate panel's decision upholding the bankruptcy court's order that fully voided Waltrip's judicial lien on debtor's homestead. In this case, after Waltrip filed suit against debtor in October 2016 for breach of contract in Missouri state court, a fire damaged debtor's home. The homeowner's insurance policy paid debtor for damages and Waltrip obtained a consent judgment that gave Waltrip a judicial lien against the homestead property. The parties do not dispute that Waltrip had a valid, avoidable lien that was affixed to debtor's property before she filed her bankruptcy petition. At issue is the extent to which Waltrip's lien impairs debtor's claimed homestead exemption.The court concluded, under Missouri law, that when property is properly exempted under 11 U.S.C. 522, a debtor is the sole owner of the insurance proceeds covering the property. Without any precedent to support Waltrip's position, the court declined to include the amount of the insurance payout when calculating the fair market value of debtor's home on the petition date, and thus the court affirmed the bankruptcy court's ruling using the $3,000 to $6,000 valuation of the unrepaired, fire-damaged property as determined on the petition date. The court also concluded that, because Waltrip's lien is smaller than the extent of the impairment, the entirety of Waltrip's lien can be avoided. Finally, the court concluded that the bankruptcy court did not abuse its discretion in reopening the case to avoid the lien or in denying Waltrip's requests for attorneys' fees and costs related to the reopening. View "David G. Waltrip, LLC v. Sawyers" on Justia Law

The Ninth Circuit reversed the district court's grant of summary judgment in favor of the 732 Hardy Way trust, the denial of summary judgment to the Bank, and the dismissal of the Bank's claims against the HOA in a quiet title action brought by the Bank, concerning title to real property in Nevada that was subject to a HOA nonjudicial foreclosure sale. At issue is whether the Bank, as the first deed of trust lienholder, may set aside a completed superpriority lien foreclosure sale on the grounds that the sale occurred in violation of the automatic stay in bankruptcy proceedings.The panel concluded that the Bank may raise the HOA's violation of the automatic stay provision and that the Bank has superior title. The panel explained that the Bank has standing under Nevada's quiet title statute, Nevada Revised Statute 40.010, and established case authority confirms that any HOA foreclosure sale made in violation of the bankruptcy stay—like the foreclosure sale here—is void, not merely voidable, Schwartz v. United States, 954 F.2d 569, 571–72 (9th Cir. 1992). Therefore, the district court erred in holding that the Bank lacked standing to pursue its quiet title claim in federal court. The panel remanded for further proceedings. View "Bank of New York Mellon v. Enchantment at Sunset Bay Condominium Ass'n" on Justia Law

The Bankruptcy Appellate Panel affirmed the bankruptcy court's grant of the trustee's motion to determine the reasonableness of respondent's attorney's fees. At issue in this case is the reasonableness of fees charged by a consumer bankruptcy attorney, respondent, for all work associated with filing a chapter 7 case using a bifurcated arrangement. The panel found no clear error in any of the findings of fact made by the bankruptcy court, concluding that it was well within its authority to reduce respondent's fees by $500 and did not abuse its discretion in doing so. In this case, respondent failed to present evidence that would enable the court to conduct a lodestar analysis. View "Ridings v. Casamatta" on Justia Law

The Ninth Circuit affirmed the Bankruptcy Appellate Panel's decision affirming the bankruptcy court's rejection of debtor's attempt to exempt two assets from her estate. The panel clarified that a bankruptcy court's prior rejection of claimed exemptions carries preclusive weight, even after Law v. Siegel, 571 U.S. 415 (2014). The panel explained that Law does not bar courts from denying exemptions on the judicially created doctrines of issue and claim preclusion where, as here, the debtor is not statutorily entitled to the exemptions.The panel also held that the bankruptcy court properly deemed debtor's claims precluded. In this case, debtor's initial and amended exemptions are legally identical where her amended schedule sought to exempt the same assets as her earlier one; the bankruptcy court's initial, unappealed orders denying debtor's exemptions were final orders establishing the parties' rights as to the assets in question; and debtor was obviously a party to the proceeding in which her claims had originally been rejected. The panel noted that, regardless of whether the claims remained contingent or had been reduced to a settlement post-petition, debtor's interest in them remained the same. View "Albert v. Golden" on Justia Law

On three separate occasions, Smith filed a Chapter 13 bankruptcy petition shortly before a scheduled foreclosure sale of his home, thereby preventing the sale, then moved for the dismissal of his bankruptcy case shortly afterward. The bankruptcy court dismissed Smith’s cases, notwithstanding his bad faith, because 11 U.S.C. 1307(b) plainly commanded the court to dismiss them. The bankruptcy court apparently did not exercise its power to sanction Smith for filing the petitions in patent bad faith, nor did the lender promptly seek relief from the stay on the ground that “the filing of the petition was part of a scheme to delay, hinder, or defraud creditors” 11 U.S.C. 362(d)(4)(B). A few months after the third filing, however, the bankruptcy court invoked its putative equitable powers and reinstated Smith’s most recent bankruptcy case, and lifted the automatic stay for a period of two years.The Sixth Circuit reversed. A court may exercise its equitable powers only in furtherance of the Bankruptcy Code’s provisions, not in circumvention of them. Nothing in section 1307 renders dismissal discretionary in cases where the debtor filed the bankruptcy petition in bad faith. View "Smith v. U.S. Bank National Association" on Justia Law

In 2007, plaintiffs-respondents Jason Rubin and Cira Ross, as cotrustees of the Cira Ross Qualified Domestic Trust (judgment creditors) obtained a civil judgment against defendant-appellant David Ross (judgment debtor). In 2009, Ross filed for voluntary Chapter 7 bankruptcy. In April 2019, following an order denying judgment debtor a discharge in bankruptcy, judgment creditors filed for renewal of their judgment pursuant to Code of Civil Procedure sections 683.120 and 683.130. Ross moved to vacate the judgment on the ground that judgment creditors failed to seek renewal within the 10-year time period proscribed in Code of Civil Procedure section 683.130. The trial court denied the motion, concluding that judgment creditor’s renewal was timely because title 11 United States Code section 108(c) provided for an extension of time within which to seek renewal. Ross appealed, arguing that judgment creditors were not precluded from seeking renewal by his bankruptcy proceeding and, therefore, section 108(c) 2 did not apply to provide an extension of time to seek renewal of their judgment. The Court of Appeal agreed that judgment creditors were not barred from seeking statutory renewal of their judgment during the pendency of judgment debtor’s bankruptcy proceeding, but concluded that the extension provided for in section 108(c) applied regardless. Thus, the Court affirmed the trial court’s order. View "Rubin v. Ross" on Justia Law

The First Circuit dismissed Plaintiffs' appeal for want of jurisdiction, holding that the Federal Rules of Bankruptcy Procedure (the bankruptcy rules), and not the Federal Rules of Civil Procedure (the civil rules), govern cases that have come within the federal district court's jurisdiction as cases "related to" a pending bankruptcy proceeding. 28 U.S.C. 1334(b).In this case arising from the derailment and explosion in Lac-Megantic, Canada, Plaintiffs brought thirty-nine separate suits against several defendants. The derailment occurred on the watch of Montreal, Maine and Atlantic Railway (MMA). MMA sought the protection of the bankruptcy court. Plaintiffs' suits were removed to federal district court. Plaintiffs subsequently joined Canadian Pacific Railway Company as an additional defendant. The suits were centralized in the District of Maine. The district court later granted Plaintiffs' request to dismiss their claims against all defendants except Canadian Pacific pursuant to a settlement agreement that was part of MMA's plan of liquidation. The district court entered judgment for Canadian Pacific. Plaintiffs moved for reconsideration of their motion to file an amended complaint. The district court denied the motion as untimely. The First Circuit dismissed Plaintiffs' appeal, holding that the Bankruptcy Rules governed the procedural aspects of this case, Plaintiffs' motion to reconsider was untimely, and the attempted appeal was untimely. View "Roy v. Canadian Pacific Railway Co." on Justia Law