Justia Bankruptcy Opinion Summaries

The Eighth Circuit affirmed the grant of summary judgment in favor of several creditors in this Chapter 11 debtor-in-possession case. The court held that the judgment allowed proofs of claim totaling over $5.2 million and there was no merit to debtor's several objections. In this case, the sale agreement was not executory; none of debtor's contractual defenses have merit because all of the challenged conduct occurred after debtor filed for bankruptcy; and the court rejected debtor's procedural arguments. View "Sears v. Sears" on Justia Law

The Burkes filed a Chapter 7 bankruptcy petition, listing their Chattanooga home as worth $108,000, with a $91,581 mortgage debt. Jahn, the appointed trustee, sought an eviction order, stating that he could not sell the property with the debtors living there and that its value was about $200,000. The Burkes moved to compel the trustee to abandon the property, alleging that their equity would provide little value to creditors. Jahn tendered a check for $7,500, the value of their Tennessee statutory homestead exemption. The Burkes rejected the tender; their first witness estimated that the residence would be worth $171,000 after repairs related to mold and roofing that would cost $63,000, leaving a net value of $108,000. The Burkes’ second appraiser valued the home at $185,000 after making repairs estimated at $60,000, for a final appraisal of $125,000. Jahn’s realtor testified that the Burkes’ residence was worth $204,000, based on his tour of the property. Jahn's home inspector testified that there was no problem with the roof and that the mold issue had been overstated. The bankruptcy court granted the Burkes’ motion to abandon, noting that houses are often sold while occupied by their owners. The district court and Sixth Circuit affirmed. Under these circumstances, the trustee cannot simply tender the homestead exemption and cause the debtors to “skedaddle.” View "Jahn v. Burke" on Justia Law

11 U.S.C. 363(f), which authorizes a trustee to sell a debtor's assets free and clear of third-party interests, applied to the facts of this case, and did not conflict with section 365(h), which protects the rights of lessees, because the trustee did not "reject" the leases. Therefore, the Ninth Circuit affirmed the district court's judgment affirming the bankruptcy court's decision that a bankruptcy trustee's sale of debtor's property was free and clear of unexpired leases. View "Pinnacle Restaurant at Big Sky, LLC v. CH SP Acquisitions, LLC" on Justia Law

The Eighth Circuit affirmed the district court's decision affirming the bankruptcy court's sustaining of debtors' objection to the proof of claim. The court held that 8 U.S.C. 502 does not preempt Arizona Revised Statute section 33-814, which sets a 90-day limit for commencing or continuing a civil action in Arizona state court. In this case, the 90-day limit had not expired before debtors filed their Chapter 11 petition. The court also held that, because creditor's state court action was dismissed shortly after the trustee's sale for failure to perfect service on defendants, it was not "maintained" within the meaning of Valley Nat'l Bank of Ariz. v. Kohlhase, 897 P.2d 738, 741 (Ariz. Ct. App. 1995). In Kohlhase, the court adopted an Arizona district court's holding that an action on the debt qualified as a deficiency action under A.R.S. section 33-814 even though the creditor filed the action before the trustee's sale and did not amend the complaint to allege a deficiency after the trustee's sale. View "Melikian Enterprises, LLLP v. McCormick" on Justia Law

Marty and Cindy Frantz executed a series of commercial guaranties so that Idaho Independent Bank (“Bank”) would lend money to Eagle Ridge on Twin Lakes, Inc. (“Eagle Ridge”), a closely held corporation in which the Frantzes held a majority interest. Bank filed this action against the Frantzes to recover on their commercial guaranties. The Frantzes filed an answer in which they admitted the material allegations in the complaint, but asserted affirmative defenses and counterclaims against Bank. They later amended their answer to include a third-party claim against Eagle Ridge. The Frantzes initially filed a petition under chapter 11 of the bankruptcy code the day before Mr. Frantz’s deposition was to occur; the Frantzes’ bankruptcy was converted to a liquidation case under chapter 7, and a trustee was duly appointed for the estate. Less than two weeks before the trial on Bank’s adversary proceeding in the bankruptcy case, the Frantzes filed a voluntary waiver of discharge, and the bankruptcy court approved the waiver. As a result, the bankruptcy court was deprived of jurisdiction to hear the adversary proceeding, and it dismissed it without prejudice. However, the court did award sanctions in the sum of $49,477.46 against the Frantzes and their attorney, jointly and severally, for their conduct during the course of the adversary proceeding. The court found that their conduct constituted misuse of litigation tactics to cause economic injury to an opponent and its counsel in the form of increased litigation costs. Bank filed a notice in this case that because of the waiver of discharge, the automatic stay from the bankruptcy court was terminated. Bank then moved for summary judgment. The district court entered a judgment against the Frantzes “in the amount of $9,193,546.50, plus pre-judgment interest at the rate of $2,475.02 per diem from September 16, 2015, until the date this Judgment is entered.” Because the Frantzes' third-party claim against Eagle Ridge that was yet unresolved, the court certified the judgment as final pursuant to Rule 54(b) of the Idaho Rules of Civil Procedure. The Frantzes filed a motion for reconsideration, and the court denied that motion. They then timely appealed, arguing the district court erred in denying them affirmative defenses based upon an alleged breach of contract. Finding no reversible error, the Idaho Supreme Court affirmed. View "Idaho Independent Bank v. Frantz" on Justia Law

The Ninth Circuit filed an amended opinion affirming the denial of defendant's motion for summary judgment. The panel held that Infinity's attorney, who sued for violation of a bankruptcy automatic stay, was not entitled to quasi-judicial immunity for acts other than drafting the order at the judge's request—an issue the court need not reach because the order was never filed. View "Burton v. Infinity Capital Management" on Justia Law

The creditors shipped goods via common carrier from China to World Imports in the U.S. “free on board” at the port of origin. One shipment left Shanghai on May 26, 2013; World took physical possession of the goods in the U.S. on June 21. Other goods were shipped from Xiamen on May 17, May 31, and June 7, 2013, and were accepted in the U.S. within 20 days of the day on which World filed its Chapter 11 petition. The creditors filed Allowance and Payment of Administrative Expense Claims, 11 U.S.C. 503(b)(9), allowable if: the vendor sold ‘goods’ to the debtor; the goods were "received" by the debtor within 20 days before the bankruptcy filing; and the goods were sold in the ordinary course of business. Section 503(b)(9) does not define "received." The Bankruptcy Court rejected an argument that the UCC should govern and looked to the Convention on Contracts for the International Sale of Goods (CISG). The CISG does not define “received,” so the court looked to international commercial terms (Incoterms) incorporated into the CISG. Although no Incoterm defines “received,” the incoterm governing FOB contracts indicates that the risk transfers to the buyer when the seller delivers the goods to the common carrier. The Bankruptcy Court and the district court found that the goods were “constructively received” when shipped and denied the creditors’ motions. The Third Circuit reversed; the word “received” in 11 U.S.C. 503(b)(9) requires physical possession. View "In re: World Imports Ltd" on Justia Law

The Bankruptcy Code's automatic stay provision, 11 U.S.C. 362, does not operate to prevent the government's collection of criminal restitution under the Mandatory Victims Restitution Act (MVRA). In this case, debtor pleaded guilty to embezzlement and theft of labor union assets, for which she served eighteen months in prison and agreed to pay $193,337.33 in criminal restitution. After debtor's bankruptcy filing, the government offset payments made as income to debtor against the balance of the restitution debt. The Ninth Circuit affirmed the bankruptcy appellate panel's decision affirming the bankruptcy court's denial of debtor's motion to hold the government in contempt for violating the automatic stay through its collection efforts. View "Partida v. DOJ" on Justia Law

The Isaacs executed a mortgage to GMAC encumbering their Kentucky property. It states: “The lien ... will attach on the date this Mortgage is recorded.” The Isaacses filed a Chapter 7 bankruptcy petition in March 2004, listing the GMAC mortgage debt as secured debt. GMAC did not record the Mortgage until June 2004. GMAC did not seek relief from the automatic stay. No party sought to avoid the Mortgage. The Isaacses obtained a discharge; the case closed. Months later, the bankruptcy court reopened the case at the request of the Isaacses, avoided two judgment liens, and closed the case again. About 10 years later, GMAC’s successor obtained a default foreclosure Judgment and Order of Sale. Immediately before the scheduled sale date, wife (without husband) filed a chapter 13 petition, seeking to avoid the GMAC lien (11 U.S.C. 522(f)). In an adversary proceeding, the bankruptcy court found that GMAC was an unsecured creditor in the chapter 7 case, which discharged the debt; the foreclosure judgment was an improper modification of the discharge order, so that the Rooker-Feldman doctrine did not apply. The Sixth Circuit Bankruptcy Appellate Panel reversed. The bankruptcy court lacked subject matter jurisdiction under the Rooker-Feldman doctrine, precluding it from avoiding the state foreclosure judgment because the mortgage was enforceable against the Isaacses’ interests on the chapter 7 petition date. Since unavoided pre-petition liens pass through bankruptcy unaffected, the foreclosure judgment could not violate the chapter 7 discharge. View "In re: Isaacs" on Justia Law

Under Montana law, a debtor may claim an exemption for a health savings account (HSA) within the constraints imposed by Mont. Code Ann. 25-13-608(1)(d) or (f).Debtor in this case filed a Chapter 11 bankruptcy petition. Debtor claimed his HSA exempt in the amount of $14,319.61 pursuant to section 25-13-608(1)(d) or (f). Debtor’s withdrawal of funds from the HSA was applied exclusively to qualified medical expenses. The trustee filed an objection to the claim of exemption. The bankruptcy court certified a question on the issue to the Supreme Court. The Supreme Court held that a debtor may claim an exemption for an HSA to the extent that it is “used or will be used to pay for the care” described in section 25-13-608(1)(f). View "In re John Charles Giacometto" on Justia Law