Justia Bankruptcy Opinion Summaries

In Jansen’s bankruptcy case, Gleason brought an adversary proceeding, 11 U.S.C. 523(a)(2)(A), regarding a default judgment ($400,000) obtained in a case involving a phony investment scheme. Gleason unsuccessfully argued that Jansen was not entitled to relitigate that judgment. A bench trial revealed that Gleason gave $141,000 to Jansen’s company, Baytree, for closing costs in a business acquisition. The deal never closed and Jansen never fully refunded the money. Gleason’s checks, endorsed by “Talcott Financial … D/B/A Baytree,” were deposited, then disappeared. Jansen later pleaded guilty to unrelated money-skimming charges, involving a bank account in the name of Talcott Financial, which was involuntarily dissolved in 1999. Jansen testified that the “Talcotts” were two different businesses with separate accounts. The bankruptcy court credited Jansen’s story and concluded the debt was dischargeable. Meanwhile, Jansen tried to withdraw his guilty plea. Despite a warning that invoking the privilege against self-incrimination could lead to an adverse inference for bankruptcy purposes, Jansen asserted that privilege repeatedly. Gleason filed the “merits appeal,” then found publicly-available records in previous litigation, including bank statements. The bankruptcy court declined Gleason's motion for relief from the judgment, reasoning the evidence, easily found on PACER, was not new. Gleason then filed a “Rule 60 appeal.” After procedural confusion, during which the merits appeal was dismissed, the district court and Seventh Circuit affirmed. The district court’s mistaken assumption that it could reach the merits of the case in the later-filed Rule 60 appeal is not enough to revive the dismissed merits appeal. View "Gleason v. Jansen" on Justia Law

The Eighth Circuit affirmed the imposition of sanctions on Ross. H. Briggs for contempt of an order and for misleading the bankruptcy court. The court held that the bankruptcy court had authority to enter sanctions for events that occurred while trying to enforce the order compelling turnover and the show-cause orders; the bankruptcy court did not abuse its discretion in holding Briggs in contempt where the bankruptcy court gave Briggs multiple opportunities to comply with the order compelling turnover, specifically outlining methods of compliance; Briggs's contempt was a sufficient basis for the sanctions; not invoking Rule V of the district court's disciplinary-enforcement rules was not a due process violation; and neither Local Rule 2094(B) nor Rule VII provided a basis for the bankruptcy court's chief judge to hear Briggs's reinstatement motion. View "Briggs v. Hon. Charles Rendlen" on Justia Law

The Eleventh Circuit vacated the district court's dismissal of First National's deficiency claims and remanded for the district court to consider, in the first instance, whether the dismissal of defendant's Chapter 11 case without a discharge had any effect on First National's ability to pursue its deficiency claims. After the parties had filed their briefs in this appeal, defendant moved the bankruptcy court to dismiss his Chapter 11 case and the bankruptcy court granted the motion to dismiss. The court explained that, given the dismissal of defendant's underlying bankruptcy petition, none of defendant's debts or liabilities were discharged and the automatic stay was terminated. View "First National Bank of Oneida, N.A. v. Brandt" on Justia Law

The Ninth Circuit affirmed the Bankruptcy Appellate Panel's opinion reversing the bankruptcy court's order entering contempt sanctions against creditors for knowingly violating the discharge injunction in the Chapter 7 case. The panel held that creditors did not knowingly violate the discharge injunction because they had a subjective good faith belief that the discharge injunction did not apply to their state-court claim for post-petition attorneys' fees. The panel explained that creditors' subjective good faith belief, even if unreasonable, insulated them from a finding of contempt. View "In re Taggert" on Justia Law

The Bankruptcy Appellate Panel affirmed the bankruptcy court's orders confirming debtors' chapter 13 plan. In order for the anti-modification provisions of 8 U.S.C. 1322(b)(2) to apply, creditors' claim must both be secured only by an interest in real property and the real property must be the debtor's principal residence. The panel held that debtors could modify creditor's secured plan because debtors' manufactured home was not a fixture under Iowa law. In this case, the panel saw no reason to disturb the bankruptcy court's finding that debtors' testimony was credible and that they did not intend to make the home a permanent accession to the real estate. View "The Paddock, LLC v. Bennett" on Justia Law

At issue was whether the proceeds of a multi-million-dollar sale of certain railroad lines constituted property of the bankruptcy estate.Debtor purchased the assets of several United States and Canadian railways. Debtor obtained loans from the Federal Railroad Administration (FRA) and Railway and received funds from Investors. Debtor later proposed to sell 233 miles of track to the State of Maine. To make this possible, Debtor and the FRA amended the existing loan agreement so that the FRA provided a limited waiver of its senior lien over the lines in exchange for a replacement lien on certain of Debtor’s property in Canada. The limited waiver was conditioned on Debtor’s agreement that, upon closing of the sale, Debtor was to pay the FRA, Investors, and Railway certain sums in a “waterfall of disbursements.” After Maine purchased the lines, Debtor distributed the proceeds in accordance with the waterfall provision of the amendment. Debtor subsequently filed a voluntary petition for protection under Chapter 11 of the Bankruptcy Code. The Trustee instituted an adversary proceeding against Railway seeking to avoid its waterfall disbursement as constructively fraudulent under section 5(b) of Maine’s Uniform Fraudulent Transfer Act. The bankruptcy court dismissed the complaint with prejudice for failure to state an actionable claim. The First Circuit affirmed, holding that the waterfall disbursement to Railway did not consist of property of Debtor’s estate because this was a case in which a senior lien holder imposed conditions that precluded Debtor from exercising effective control over the sale proceeds. View "Keach v. Wheeling & Lake Erie Railway Co." on Justia Law

Vendors and contractors provided materials and services in connection with an offshore mineral lease. Under the Louisiana Oil Well Lien Act, La. Rev. Stat. 9:4863(A)(1), 9:4864(A)(1), they secured liens on the lessee’s operating interest upon the commencement of labor. They timely recorded the liens. The lessee later sold “term overriding royalty interests” to OHA. In the lessee’s subsequent bankruptcy proceeding, the service providers intervened, seeking to enforce their liens on OHA’s royalty interests. The district court agreed with the bankruptcy court and dismissed their complaints, concluding that the statute that created the liens extinguished them via a safe-harbor provision. The Fifth Circuit affirmed. The safe-harbor question is one of statutory interpretation: Was OHA’s purchase of the overriding royalties a purchase of “hydrocarbons that are sold or otherwise transferred in a bona fide onerous transaction by the lessee or other person who severed or owned them” at severance? The royalties were “sold,” the transaction was “bona fide,” and the seller was a “lessee.” OHA purchased more than an interest in proceeds; it purchased an interest in the to-be-produced hydrocarbons themselves. A purchase of overriding royalties is a purchase of “hydrocarbons” under the statute, so the lienholders’ failure to provide pre-purchase notice renders their liens extinguished. View "OHA Investment Corp. v. Schlumberger Technology Corp." on Justia Law

Debtor, a professional hockey player with the NHL’s Columbus Blue Jackets, filed a voluntary Chapter 11 bankruptcy petition. His Player Contract ends with the 2017–18 NHL season. He had $21,343,723.64 in pre-petition debt. The bankruptcy court denied a subsequent motion to convert to chapter 7 based on Debtor’s bad faith conduct and failure to abide by his fiduciary duties. Debtor and six creditors holding more than $12 million of debt settled. Under the Confirmed Plan, Debtor was required to use post-petition earnings existing as of the Plan's effective date to pay secured creditors the value of their collateral, in kind or in cash payments. Allowed General Unsecured Claims were paid a 35% dividend, bringing them on par with the settling creditors, and claims of $1,000 or less were paid the lesser of their claim or $500. When Debtor’s current Player Contract ends, Debtor must contribute his net earnings (minus living expenses) from any source up to the fifth anniversary of the confirmation order. The Sixth Circuit Bankruptcy Appellate Panel dismissed an appeal as equitably moot. Property has been transferred, a trust has been established and a trustee appointed. Distributions have commenced. That final funding will not occur until future income is received does not alter the fact that all property proposed by the plan to be transferred from debtor’s bankruptcy estate as of the Effective Date was transferred. View "In re Johnson" on Justia Law

Gilman filed a voluntary Chapter 7 bankruptcy petition. Phillips was a creditor. Gilman identified properties in Van Nuys and Northridge, describing the Northridge property as “in escrow” and claiming a household exemption for the Van Nuys property, and stating “Debtor has Cancer and has not been able to work.” He did not list any contracts relating to the sale of the Van Nuys property. Gilman would later admit that escrow was open on that property when he filed for bankruptcy. Phillips filed an adversary proceeding, alleging fraud, and objected to Gilman’s homestead exemption. Gilman did not oppose the objection and did not appear at the hearing. The bankruptcy court sustained Phillips’ objections. Gilman filed an amended Schedule C, claiming a reduced exemption and obtained Rule 60(b) relief, based on his counsel’s mistaken failure to oppose Phillips’ objections. The bankruptcy court held that escrow did not eliminate Gilman’s right to a homestead exemption. The Ninth Circuit held that it had jurisdiction to review the district court’s order affirming the grant of the homestead exemption; that the bankruptcy court did not abuse its discretion in granting Rule 60(b) relief from judgment on the ground of excusable neglect; and that the bankruptcy court erred in concluding that the debtor established his claim to a homestead exemption under California law without determining whether the debtor intended to continue to reside in the property. View "Phillips v. Gilman" on Justia Law

At issue in this case was whether substantial evidence was presented in support of the objection as a matter of law sufficient to rebut the Internal Revenue Service’s (“IRS”) proof of claim. Debtors-appellees Scott and Anna Austin filed a voluntary petition under Chapter 13 of the Bankruptcy Code with the Bankruptcy Court for the Eastern District of Missouri in 2014. In their schedules, the Austins listed two pending worker’s compensation claims as contingent and unliquidated exempt property. These claims were valued at $0.00 or an “unknown value.” The Austins listed the IRS as a secured creditor. The IRS filed proof of claim no. 5-1, asserting in part a secured claim as a result of a tax lien. The Austins objected to the amount of the IRS’s priority claim (“January Objection”), arguing that no value should be attributable to their worker’s compensation claims in determining the secured portion of the IRS’s claim. They also argued, in the alternative, that since there were neither settlement offers nor a basis to determine the value of the worker’s compensation claims, the present value of the worker’s compensation claims should be $0. The Bankruptcy Court overruled the Austins’ January Objection, finding they failed to meet their burden to produce substantial evidence to rebut the IRS’s claim. The Bankruptcy Court disagreed the worker’s compensation claims had no value. In the meantime, the Austins negotiated a settlement of the worker’s compensation claims for $21,448.80. After attorneys’ fees, the Austins received a net settlement of $15,661.60. The IRS learned of the settlement, and filed an amended claim, No. 5-3, which included as part of its secured claim the amount of $15,661.60 for the value of the settlement. The Austins again objected to the IRS’s claim, filing an affidavit their worker’s compensation attorney, who opined that the worker’s compensation claims had a “nuisance” value of $3,000.00 on the petition date. The IRS argued that the affidavit was not substantial evidence sufficient to overcome the prima facie validity of the IRS’s claim. The Bankruptcy Court ruled that the affidavit was “substantial evidence” of the value of the claims, sufficient to rebut the prima facie validity of the IRS’ claim. The Bankruptcy Court therefore sustained the Austins’ objection and valued the worker’s compensation claims at $3,000, and reduced the IRS’s secured claim by $12,661.00. Based on its de novo review of the record, the Bankruptcy Appellate Panel found the Austins failed to present substantial evidence sufficient to overcome the presumption of the validity and amount of the IRS’s proof of claim. Therefore, their objection to claim should have been overruled. View "United States v. Austin" on Justia Law