Justia Bankruptcy Opinion Summaries

Hub Partners XXVI, Ltd. filed a foreclosure action against Thomas Barnett. The district court granted Hub a money and foreclosure judgment. Barnett filed for bankruptcy. During the bankruptcy, Barnett made court-approved payments to Hub. Barnett failed to pay the debt in full, and the bankruptcy court dismissed his bankruptcy. Over a month after the dismissal, Hub issued an execution on the pre-bankruptcy judgment. Barnett objected to the execution arguing the judgment was dormant pursuant to 12 O.S. 735, since more than five years had passed and Hub had not renewed the judgment. The district court agreed and granted Barnett's motion to release the dormant judgment and vacate the execution and sale order. Hub appealed, and the Court of Civil Appeals affirmed the district court's judgment. The Oklahoma Supreme Court granted certiorari to resolve: (1) whether Hub's foreclosure judgment was dormant; and (2) whether the mortgage at issue merged with the foreclosure judgment. The Supreme Court held the 2011 foreclosure judgment was dormant, but the mortgage lien did not merge into the foreclosure judgment and continues to secure Barnett's obligation owed to Hub. View "Hub Partners XXVI, Ltd. v. Barnett" on Justia Law

Denby-Peterson purchased a Chevrolet Corvette. Several months later, the Corvette was repossessed by creditors after Denby-Peterson defaulted on her car payments. Denby-Peterson subsequently filed an emergency voluntary Chapter 13 petition, notified the creditors of the bankruptcy filing, and demanded that they return the Corvette to her. They did not comply with her demand. Denby-Peterson filed a motion in the Bankruptcy Court, seeking to require the creditors to return the Corvette and sanctions for alleged violation of the Bankruptcy Code’s automatic stay. The court ordered turnover of the Corvette to Denby-Peterson but denied her request for sanctions. The district court and Third Circuit affirmed. As a matter of first impression, the Third Circuit held that a secured creditor’s failure to return collateral that was repossessed pre-bankruptcy petition upon notice of the debtor’s bankruptcy is not a violation of the automatic stay. A secured creditor does not have an affirmative obligation under the automatic stay to return a debtor’s collateral to the bankruptcy estate immediately upon notice of the debtor’s bankruptcy because failure to return the collateral received pre-petition does not constitute “an[] act . . . to exercise control over property of the estate,” 11 U.S.C. 362(a)(3). View "In re: Denby-Peterson" on Justia Law

Healthcare managed investment funds. Investors filed an involuntary bankruptcy petition with the intention of seeking Healthcare's removal as the fund manager. Healthcare was not served with process; the petition was uncontested. The bankruptcy court entered an order for relief. Healthcare was removed as the fund manager. The investors installed Summit as the new manager. Summit then dissolved the funds. About a month later, having learned what had transpired, Healthcare successfully moved to vacate the order for relief. Healthcare opposed dismissal asserting that it had claims for damages under 11 U.S.C. 303(i) because the investors filed the petition in bad faith. The bankruptcy court granted the investors’ motion for voluntary dismissal but retained jurisdiction, stating that “nothing herein shall limit [Healthcare’s] right to seek damages, including without limitation, fees and costs.” Healthcare sought section 303(i) damages and instituted an adversary proceeding against the investors asserting section 362(k) claims for violation of the automatic stay by the removal of Healthcare as the fund manager and the installation of Summit without court orders. The district court affirmed the dismissal of the 362(k) action. The Third Circuit reversed and remanded for reinstatement of the claim. The bankruptcy court had jurisdiction over Healthcare’s 362(k) adversary action. A section 362(k) action, no matter when instituted, is a case under title 11. The bankruptcy court lacked authority to limit what claims Healthcare could bring in the bankruptcy court after the dismissal of the bankruptcy petition. View "In re: Healthcare Real Estate Partners LLC" on Justia Law

A bankruptcy court does not have authority to enforce the discharge injunctions entered in other districts. Plaintiffs sought to certify a nationwide class of those who claim their education-loan debts were validly discharged but from whom the lender continues to demand payment.The Fifth Circuit held that the bankruptcy court erred in holding that it could address contempt for violations of injunctions arising from discharges by bankruptcy courts in other districts. Therefore, the court held that, as to Shahbazi and at least those debtors whose discharges were entered by courts in other districts, the bankruptcy court in these proceedings has no authority to enforce the resulting injunction. However, the court agreed with the bankruptcy court that the particular education loans involved here, although they were obtained in order to pay expenses of education, did not qualify as an obligation to repay funds received as an educational benefit, scholarship, or stipend because their repayment was unconditional. Therefore, they were dischargeable. The court remanded for further proceedings. View "Crocker v. Navient Solutions, LLC" on Justia Law

Debtor filed an adversary proceeding in bankruptcy court raising the issue of whether her bankruptcy discharge applied to a student loan. The Fifth Circuit affirmed the bankruptcy court's denial of Wells Fargo's motion to compel arbitration.The court held that its holding In re Nat'l Gypsum Co., 118 F.3d 1059, 1069 (5th Cir. 1997), -- that bankruptcy courts have discretion to refuse to compel arbitration in proceedings seeking enforcement of a discharge injunction -- remains good law following the Supreme Court's decision in Epic Systems Corp. v. Lewis, 138 S. Ct. 1612 (2018). The court held that Epic Systems shows that National Gypsum's doctrinal foundation remains sound. View "Henry v. Educational Financial Service" on Justia Law

Ex-wife filed suit against her ex-husband, a Chapter 7 debtor, in bankruptcy court over a debt of $32,500 plus interest. The Fifth Circuit affirmed the district court's decision reversing the bankruptcy court's ruling in favor of the ex-husband. The court held that the ex-husband's payment to the ex-wife's former attorney did not terminate his obligation to the ex-wife because the attorney was no longer authorized to transact on the ex-wife's behalf. In this case, the attorney did not have actual or apparent authority to collect on the ex-wife's behalf. View "Russell v. Russell" on Justia Law

The Eleventh Circuit affirmed the bankruptcy court's order revoking the discharge of debtors' debt. Debtors claimed that the trustee had pre-discharge knowledge of the alleged conduct that resulted in the revocation.The court held that the "lack-of-knowledge" requirement that is explicitly contained in one subsection of the bankruptcy statute, 11 U.S.C. 727(d)(1), cannot be read into the adjacent subsection of the same statute, 11 U.S.C. 727(d)(2), thereby barring revocation. The court need not reach the factual determination of whether the trustee had prior knowledge of the fraud issue, because it would be inappropriate to rewrite section 727(d)(2) to include that requirement. Therefore, the court held that the bankruptcy court and district court correctly interpreted section 727(d)(2). View "Thompson v. Gargula" on Justia Law

In this homeowners' association (HOA) foreclosure case, the Supreme Court reversed the district court's grant of summary judgment to U.S. Bank, N.A. and remanded for entry of summary judgment for SFR Investments Pool 1, LLC, holding that the mere fact that a foreclosure sale was held in violation of a bankruptcy stay is not by itself evidence of unfairness.The homeowner filed for bankruptcy under Chapter 11, which imposed an automatic stay on actions against her real property. In violation of the stay, the HOA sold the property at a foreclosure sale. SFR, the purchaser, sought to quiet title. The bankruptcy court issued a limited order retroactively annulling the bankruptcy stay of the stay, which has the legal effect of validating the sale. The district court, however, set aside the sale and granted summary judgment for U.S. Bank finding that the HOA's foreclosure sale being conducted in violation of the bankruptcy stay was evidence of unfairness and that the sale price was inadequate. The Supreme Court reversed, holding that U.S. Bank failed to produce any evidence showing how the sale's violation of the automatic stay constituted unfairness and that SFR met its burden of showing that the HOA foreclosure sale complied with the procedures in Nev. Rev. Stat. Chapter 116. View "SFR Investments Pool 1 v. U.S. Bank, N.A." on Justia Law

Appellant, Joseph Petrick, contracted with a homeowner, Donna Sabia, to perform remodeling work. Sabia paid Appellant a deposit of $1,750.00 plus $300.00 to cover the cost of city permits. Appellant began some of the contracted work at which time Sabia paid an additional $1,750.00 to Appellant. That same day, Appellant and Sabia’s son, Carmen Fazio, who also resided in the home, entered into a second contract for Appellant to do some painting in the home. As consideration, Fazio purchased a $600.00 saw for Appellant. Appellant and Fazio entered into a third contract to install siding on the exterior of the home. Fazio paid Appellant $2,300.00 to purchase materials. Appellant did not finish the work; Appellant eventually advised Sabia and Fazio that he could not complete the jobs but would refund $4,950.00 within a week. Appellant never refunded any money or the saw, nor did he ever purchase the siding materials or obtain the permits from the city. Appellant filed for Chapter 7 bankruptcy. In his petition, Appellant listed Sabia and Fazio as creditors. The bankruptcy court issued a discharge order in March 2016. In October 2015, a City of Scranton Police Detective filed a criminal complaint charging Appellant with theft by deception and deceptive business practices. After a bench trial, the court found Appellant guilty of theft by deception and not guilty of deceptive business practices. The court sentenced Appellant to a term of incarceration of three to eighteen months. Appellant was also ordered to pay $6,700.00 in restitution. Appellant filed a motion for reconsideration of his sentence, which the trial court denied. On appeal, the Superior Court affirmed the trial court’s judgment of sentence. On appeal to the Pennsylvania Supreme Court, Appellant argued that the portion of his sentencing order requiring him to pay restitution was illegal because the debt was discharged in bankruptcy. Appellant argued that the Bankruptcy Code specified that the filing of a petition operated as an automatic stay of any action to recover a debt that preceded the filing. The Supreme Court found the mandatory restitution order served criminal justice goals, and were distinct from civil debt liability with respect to discharge in bankruptcy. “This distinction is unaffected by the temporal relationship between the proceedings in the bankruptcy court and the criminal prosecution. Additionally, it is unaffected by a creditor’s participation in the bankruptcy proceedings.” The Court determined there was no indication in this case the restitution award was improperly sought by the prosecutor or awarded by the sentencing court. Accordingly, it affirmed the Superior Court. View "Pennsylvania v. Petrick" on Justia Law

The First Circuit affirmed the judgment of the Title III court refusing to lift the automatic stay in PROMESA to allow the Municipality of Ponce to secure specific performance by the Commonwealth of Puerto Rico of public works projects required under a Puerto Rico Commonwealth court judgment, holding that the Title III court did not plainly abuse its discretion.In 2017, the Commonwealth filed a petition for debt adjustment relief under Title III of the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA), 48 U.S.C. 2101-2241. In 2018, Ponce moved for relief from the automatic stay to secure specific performance by the Commonwealth of public works projects required under a Puerto Rico Commonwealth court judgment. The Title III court refused to lift the automatic stay. The First Circuit affirmed, holding that where Ponce essentially sought priority over the claims of other communities and creditors of the Commonwealth, the Title III court clearly did not abuse its discretion in declining to give Ponce this priority. View "Autonomous Municipality of Ponce v. Commonwealth of Puerto Rico" on Justia Law