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(396) 1-10-97 UNPUBLISHED In re Ricci Investment Company, 93B-23895, Judge Boulden.The proponents of a confirmed chapter 11 plan objected to the fee application filed by the chapter 11 trustee's attorneys and raised issues regarding the chapter 11 trustee's business judgment versus the attorney for the trustee's legal judgment, whether certain tasks performed by the trustee's attorneys were beneficial to the estate, and the impact of a violation of Fed. R. Bankr. P. 3016(a) on the allowance of fees. Relying on In re Curlew Valley Assoc., 14 B.R. 506 (Bankr. D. Utah 1981), the Court found that although in hindsight, some of the trustee's decisions may have appeared improvident or premature, the trustee's decisions were reasonable, made in good faith, and were within the scope of the trustee's authority under the Bankruptcy Code. Applying 11 U.S.C. § 330 as it existed prior to the Bankruptcy Reform Act of 1994, the Court determined benefit under Rubner & Kutner, P.C. v. U.S. Trustee (In re Lederman Enters., Inc.), 997 F.2d 1321 (10th Cir. 1993) by looking at whether services rendered by the trustee's attorneys promoted the bankruptcy process in accordance with the Bankruptcy Code and Rules. The Court concluded that time spent by the trustee's attorneys to draft the trustee's disclosure statement and plan that were filed in violation of Fed. R. Bankr. P. 3016(a) and time spent by the trustee's attorneys on an escrow agreement that allowed a result contrary to that approved by the Court were not beneficial to the estate. The Court denied compensation for these services.
(397) 3-6-97 UNPUBLISHED Republic National Bank of New York vs RSH Ltd., et al. (In re Ben Lomond Suites, Ltd.), 96PC-2270, 96PC-2316, Judge Clark.
Motions for dismissal and remand are before the Court. The fact that a dispute may require an interpretation of a confirmed plan does not necessarily make the dispute a core proceeding. A confirmed plan has characteristics of both a contract and a judgment. State courts are well qualified to adjudicate contract disputes and to enforce judgments. The removed adversary proceeding existed outside of bankruptcy and the adversary proceeding filed in this Court, which is nearly identical to the removed adversary, could exist outside of bankruptcy. The Court finds that the controversy before the Court is in the nature of a contract dispute which can be adjudicated in state court. Accordingly, neither the removed adversary proceeding nor the adversary proceeding is a core proceeding. The Court can find nothing in the adversary proceeding or the removed adversary proceeding that would affect the reorganized debtor's rights, liabilities, options or freedom of action in any way, nor can the Court find that this litigation will affect, in any conceivable way, the handling or administration of the bankruptcy estate. The Court finds that there is no bankruptcy estate to administer. The bankruptcy estate ceased to exist at the point when the transfer of estate property from the reorganized debtor to RSH became effective. The Court orders that adversary proceeding no. 96PC-2270 is dismissed for lack of jurisdiction, and orders that adversary proceeding no. 96PC-2316 is remanded to state court for the reason that this Court lacks jurisdiction to adjudicate the matter.
(398) 7-8-97 UNPUBLISHED In re Ricci Investment Company, Inland Oil Products, Inc., Monrovia Oil Products, Inc., and Salina Investment Company, Inc., Substantively Consolidated Case No. 93B-23895, Judge Boulden.Chapter 11 trustee, his counsel and the trustee's accounting firm submitted their third and final supplemental fee applications seeking reimbursement for fees and costs related to the defense of their second fee applications. The trustee and his counsel had encountered significant opposition to their second fee application and the Court disallowed a portion of the fees requested in their second applications. The determination whether the fees requested in the supplemental fee applications is governed by Section 330 as it existed prior to the Bankruptcy Reform Act of 1994 and the Tenth Circuit case law interpreting Section 330. See Rubner & Kutner, P.C. v. U.S. Trustee (In re Lederman Enters., Inc.), 997 F.2d 1321 (10th Cir. 1991) (benefit to the estate is threshold concern when determining eligibility for reimbursement of fees). The Court determined that trustee's counsel did not exercise reasonable discretion during the course of administering the assets of the estate and the time spent preparing and defending the previous fee application was disproportionate to the amount ultimately in dispute. The reasonableness and necessity of incurring fees to defend a prior fee application in comparison to the benefit to the estate entitled trustee's counsel to 4 percent of the total fee request. The Court awarded a collective 34 percent of the total amount requested by the trustee and the trustee's accounting firm because there was benefit to the estate for the trustee's defense against allegations that the trustee acted negligently because those allegations were subsequently found to be untrue. The Court further disallowed the applicants' request for payment of interest and collection costs on the fees previously approved by the Court.
(399) 10-3-97 UNPUBLISHED In re Hammond Computer, Inc., 96C-24958, Judge Clark.
The matter before the Court is the second and final application for fees filed by the debtor's attorney. Novell, Inc. objected to the application arguing that debtor's attorney's fees and costs associated with defending a motion to appoint a trustee were not beneficial to the estate under § 330 and that, as a professional appointed to represent the debtor-in-possession, debtor's attorney failed in his duty to the estate to see to it that certain avoiding actions were commenced against insiders of the debtor. The Court finds that the time spent on services and rates charged for the services are reasonable and that the services were necessary to the administration of the estate and were beneficial at the time at which the services were rendered.
(400) 2-12-98 In re Bonneville Pacific Corp., 91A-27701 (Case numbers for purposes of appeal: 2:96-CV-572-B and 2:96-CV-573-B), 220 B.R. 434, Judge Thomas R. Brett, United States District Court. APPEAL
See #386. The Court affirms the bankruptcy court's disallowance of fees and costs incurred by S&W while employed as general counsel for the debtor as debtor in possession and reverses the bankruptcy court's disallowance of S&W's fees and costs while employed as special counsel to the trustee. (See Opinion #386.)
(401) 10-1-98 PUBLISHED In re Eleva, Inc., 97C-22299, Judge Clark.
226 B.R. 123 Creditor, Chapter 7 debtor-employer's group health insurance carrier, filed motion for allowance of administrative expense for unpaid premiums for postpetition insurance coverage provided to debtor's employees. The bankruptcy court held that creditor was not entitled to administrative priority for its claim.(402) 10-15-98 UNPUBLISHED Duane H. Gillman, Trustee v. James Van Treese and Jason Van Treese (In re Northwest Publishing, Inc.), 97PB-2036, Judge Boulden.
Chapter 7 trustee brought this action against two of the debtor's officers and directors claiming corporate mismanagement, requesting an accounting, and seeking a determination that the debtor was defendants' alter ego. The court held that the proceeding was non-core but was related to the main case, and that the parties consented to entry of a final judgment. The court applied state law in analyzing the trustee's corporate mismanagement claim, holding that the presumption of good faith contained in the business judgment rule was overcome by the defendants' gross negligence. The debtor was also determined to be the alter ego of the debtor's president.
(403) 12-17-98 PUBLISHED Berdene D. Dennison vs Don L. Hammond (In re Don L. Hammond), 97PB-2227, Judge Boulden. 236 B.R.751 (Bankr. D. Utah 1998)
Debtor's ex-spouse filed a nondischargeability action under 11 U.S.C. § 523(a)(5) and 11 U.S.C. § 523(a)(15). The court found the debt dischargeable under 11 U.S.C. § 523(a)(5) because the ex-spouse failed to prove by a preponderance of the evidence that the parties intended the debt to be in the nature of support at the time of the divorce decree. Because the court did not find that the parties intended the debt to be in the nature of support, it did not reach the issue of whether the substance of the debt was in the nature of support. Sampson v. Sampson (In re Sampson), 997 F.2d 717, 723 (10th Cir. 1993). However, the court found the debt nondischargeable under 11 U.S.C. § 523(a)(15) because the debtor failed to meet his burden of proving either of the exceptions to nondischargeability under 11 U.S.C. § 523(a)(15)(A) or (B). At the time of trial, the debtor had the ability to make payments on the debt from income not reasonably necessary for the maintenance or support of the debtor or a dependent of the debtor. The court excluded contributions to the debtor's 401(k) plan and charitable contributions in making this determination. Reviewing the evidence presented under a totality of the circumstances analysis and as it specifically relates to the eleven factors set forth in Hart v. Molino (In re Molino), 225 B.R. 904, 909 (6th Cir. BAP 1998), the court concluded that the debtor had not shown that discharging the debt would result in a benefit to the debtor that outweighs the detrimental consequences to the ex-spouse.
(404) 1-6-99 UNPUBLISHED In re Richard D. Cummins and Tawna R. Cummins, 97B-26970, Judge Boulden.
Chapter 13 trustee sought clarification of time allowed for responding to his motion to dismiss. The court recognized a conflict between Local Rules 2003-1(a), 2083-1(b), and 5005-1(b)(1) which allow a ten-day response time, and Federal Rules of Bankruptcy Procedure 1017(a) and 2002(a) which allow a twenty-day response time. When there is a conflict between the Local Rules and Federal Rules of Bankruptcy Procedure, the Federal Rules control. Accordingly, the response time to a motion to dismiss is twenty days unless otherwise ordered by the court.
(405) 2-8-99 PUBLISHED America First Credit Union vs Matthew Scott Gagle, et al., (In re Matthew and Lisa Gagle), 97PB-2386, Judge Boulden. 230 B.R.174 (Bankr. D. Utah 1999)
Debtor disassembled and sold off all parts of debtor's truck which was subject to a security interest. Secured creditor brought § 523(a)(2)(A) action alleging fraudulent misrepresentation in obtaining the loan and § 523(a)(6) action alleging willful and malicious injury. The court looked to the Restatement of Torts for guidance on the meaning of both § 523(a)(2)(A) and § 523(a)(6). The creditor failed to establish its § 523(a)(2)(A) claim which was dismissed. The court relied on Kawaauhau v. Geiger (In re Geiger), 118 S.Ct. 974 (1998), and Dorr, Bentley & Pecha, CPA's P.C. v. Pasek (In re Pasek), 983 F.2d 1524 (10th Cir. 1993) in holding that "willful and malicious injury" requires a deliberate or intentional injury that is performed without justification or excuse. In a two part analysis, the court held there was no intent to injure the creditor because the debtor intended to repay the debt. However, the debt was held nondischargeable as the debtor intended to injure the creditor's property consisting of its security interest by disassembling and selling his truck, and did so without justification or excuse. The court based the measure of damages and the disallowance of attorney's fees on a tort analysis, rather than relying upon the underlying contract.
(406) 3-3-99 APPEAL In re Wayne Allen Gamble, 98A-21285 (case number for appeal is 2:98CV497G), Judge Greene, U.S. District Court. 232 B.R. 799
232 B.R. 799 Chapter 7 debtor brought action against towing company hired to repossess his vehicle, alleging violation of automatic stay. The bankruptcy court imposed sanctions for willful violation of automatic stay. Towing company appealed. The district court held that intentional violation of automatic stay was necessary for award of punitive damages. Judgment vacated and case remanded.
(407) 7-20-99 PUBLISHED In re Geneva Steel Company, 99C-21130, Judge Clark, 236 B.R. 770
Debtor’s motion for authorization to implement a employee retention program is before the court. In view of the objection by the United Steelworkers of America, the court finds that to propose this retention program without first having discussed its provisions with the Steelworkers is not an example of good business judgment, especially when the continued existence of the business is in question. Granting the motion may jeopardize the continuing support of the Steelworkers in the reorganization process. To be acceptable to this court, the severance plan must contain a mitigation provision that reduces the amount payable in the event the executive obtains other employment during the six or nine month reimbursement period. The severance plan is unacceptable because of the adverse impact the provision could have on the administration of the case in chapter 7. Further, the court will construe the payment of the emergence bonus only in the event that a plan of reorganization is confirmed and not an chapter 11 liquidating plan. The motion is denied without prejudice. The debtor is granted leave to set a hearing on ten days notice for approval of a retention program consistent with this order.
(408) 7-27-99 PUBLISHED In re WIN Trucking, Inc., 98B-25814, Judge Boulden. 236 B.R. 774
Chapter 11 debtor elected to be treated as a small business but no party filed a plan within the 160-day time limit imposed by 11 U.S.C. § 1121(e). After filing an untimely plan, the debtor filed a withdrawal of its small business election. The court concludes that the debtor’s failure to timely file its plan and its belated attempt to withdraw its small business election preclude confirmation of the plan under 11 U.S.C. § 1129(a)(1) and (2).
(409) 2-4-00 APPEAL Steven R. Bailey, Trustee, v. Big Sky Motor, Ltd. (In re Wayne R. Ogden), 98PA-2198, (case number for appeal is 2:99-CV-270B), Judge Benson, U.S. District Court.
The bankruptcy court held that Big Sky received a $300,000 preferential transfer from debtor, which the trustee was entitled to avoid and recover from Big Sky as the initial transferee. The district court finds that the bankruptcy court correctly determined that the trustee could avoid the $300,000 transfer to Big Sky under § 547(b) and recover the money from Big Sky under § 550(a)(1).
(410) 2-16-00 UNPUBLISHED In re Donnie Lee Amos, 98B-32761, Judge Boulden.
"Gap period" attorneys fees incurred after the filing of a chapter 13 petition but before conversion to chapter 7 which are not allowed under § 330(a)(4)(B) will not be allowed under § 503(b)(1)(A). Applications for allowance of administrative expenses filed prior to conversion to chapter 7 are timely pursuant to Fed R. Bankr. P. 1019(c), and, to the extent allowed by the court, should be paid by the chapter 13 trustee from available § 1306(a)(2) funds. If there are more allowed chapter 13 administrative claims than available § 1306(a)(2) funds, the allowed § 503(b)(2) administrative claims should be prorated and paid from § 541 property after chapter 7 administrative expenses pursuant to § 726.
Procedure change: Parties seeking allowance of any chapter 13 administrative expense must timely file a request for payment of the administrative expense prior to conversion to chapter 7 and have that request resolved by a final order, or other order extending the period, within sixty days of the conversion, or the administrative expense claim will be deemed waived by the applicant.
(411) 4-13-00 APPEAL Steven R. Bailey, Trustee, v. Orlando Nickerson and Rosemary Nickerson (In re Wayne R. Ogden), 98PA-2299 (case number for appeal is 2:00-CV-49K), Judge Kimball, U.S. District Court.
The bankruptcy court awarded summary judgment in favor of the trustee and against the Nickersons for $2ll,237.50 together with interest and held that the Nickersons were thereby the initial transferees pursuant to 11 U.S.C. § 550. The bankruptcy court found that the Nickersons must return the profits they derived from the Ponzi scheme (operated by the debtor) to the debtor’s estate. The district court affirmed the bankruptcy court in its entirety.
(412) 4-14-00 UNPUBLISHED Diane George v. Robert Lee Cevering (In re Robert Lee Cevering), 99PB-2022, Judge Boulden.
Debtor’s ex-spouse filed a nondischargeability action under 11 U.S.C. §§ 523(a)(4), (a)(5), and (a)(15) seeking $50,000, an award of punitive damages and attorney fees. On the day of trial, the debtor stipulated that the $50,000 debt was nondischargeable under 11 U.S.C. § 523(a)(15). The court found that the debt was also nondischargeable under 11 U.S.C. § 523(a)(4) but declined to award punitive damages because the statute of limitations ran on any state law conversion claim prepetition and no provision of the Bankruptcy Code allowed punitive damages under the circumstances of the case. The court declined to award attorney fees finding there was no case law, contractual, or statutory basis. The plaintiff also sought a general denial of the debtor’s discharge under 11 U.S.C. §§ 727(a)(2) and (a)(4)(A). The court denied the debtor’s discharge under § 727(a)(4)(A) finding that the debtor knowingly and fraudulently made a material false oath.
(413) 5-18-00 APPEAL In re Donald E. Armstrong v. Steven R. Bailey and Duane H. Gillman (In re Willow Brook Cottages, LLC), 99PC-2187, (case number for appeal is 2-99-CV-0725K), Judge Kimball, U.S. District Court.
After holding a hearing to show cause, the bankruptcy court held that Armstrong had violated the bankruptcy automatic stay provision, § 362, by filing his adversary proceeding without the court’s permission. The bankruptcy court held him in contempt, awarded the trustee attorney’s fees and punitive damages, and dismissed the adversary proceeding with prejudice. The review of the dismissal with prejudice for the alleged violation of the automatic stay was reviewed de novo. The factual determinations of the bankruptcy court as to the awarding of fees and damages were reviewed under an abuse of discretion standard. The district court ruled that the bankruptcy court properly dismissed Armstrong’s action with prejudice for violating the stay and that it was acting within its discretion in awarding compensatory damages to a corporation. The district court determined that the punitive damage award is an abuse of discretion and that Armstrong’s procedural defect does not merit the awarding of punitive damages based upon criminal contempt. The punitive damages award is reversed and the contempt charges are set aside.
(414) 7-21-00 PUBLISHED In re W. Kerry Jackson, 99-33070, Judge Clark. 251 B.R. 597
The issue before the court is the willful violation of the automatic stay and the failure of the creditor to turn over property of the estate. The court awarded debtor compensation but declined to award punitive damages because it believed that punitive damages were not necessary to deter similar conduct in the future.
(415) 8-24-00 UNPUBLISHED In re Bashar and Ouhoud A. Dabbas, 00-21217, Judge Clark.
The matter before the court is a motion to dismiss a chapter 7 bankruptcy case for substantial abuse under § 707(b). The bankruptcy court relied upon In re Stewart, 175 F.3d 796 (10th Cir. 1999) and its "totality of the circumstances" test to determine if substantial abuse exists. Under the totality of the circumstances test, the debtors can reduce expenses without being deprived of adequate food, clothing, shelter, or other necessities; therefore, unless the case is converted to another chapter within ten days, the case is dismissed for substantial abuse of the bankruptcy laws.
(416) 11-9-00 PUBLISHED In re Michael A. Parks and Theresa L. Parks, 00-27517JAB, Judge Boulden. 255 B.R. 768
Trustee objected to chapter 7 debtor’s exemption of funds accrued while participating in a 401(k) ERISA qualified pension plan where funds were available to debtor as a result of debtor’s employment terminating prepetition. Because the terms of the plan provided that after termination of employment debtor had the absolute right to the funds, trustee argued the funds lost their anti-alienation characteristics as part of an ERISA qualified plan and were not exempt under Utah Code Ann. § 78-23-5(1)(a)(x). Debtor responded by arguing that because the funds remained in the plan until they were deposited into an IRA, postpetition, they remained exempt under either ERISA or state exemption statutes. The court cited Guidry v. Sheet Metal Workers Nat’l Pension Fund, 39 F.3d 1078, 1082-83 (10th Cir. 1994)(en banc), cert. denied, 514 U.S. 1063 (1995), for the proposition that such funds are protected by anti-alienation provisions of ERISA § 206(d)(1), so long as they are within the fiduciary responsibility of private plan managers and not paid to or received by plan participants or beneficiaries. Therefore, the court concluded that the trustee’s objection to exemption was overruled because the debtor’s plan funds were not property of the estate.
(417)11-22-00 PUBLISHED In re Husting Land & Development, Inc., 97B-20309, Judge Boulden. 255 B.R. 772 See opinion #424
Unsecured creditor entered into a postpetition construction agreement with debtor, a land developer, for the purpose of correcting defective work and completing improvements on debtor’s sixty-one acre residential subdivision. Upon creditor’s application for allowance of administrative expense, the trustee and secured creditors objected, arguing that the postpetition debt was not incurred in the ordinary course of the debtor’s business pursuant to 11 U.S.C. § 364(a). The court concluded that the postpetition debt was not incurred in the ordinary course of business and, accordingly, creditor’s claim could not be allowed as an administrative expense. The court first determined that the opinion testimony of creditor’s expert witness was inadmissable because his methodology could not be proved under the test set forth in Kuhmo Tire Company, Ltd. vs. Carmichael, 526 U.S. 137 (1999). The court then applied the well-established "creditor expectation" test to determine that, given its scope and nature, this was not the type of transaction a reasonable creditor would expect the debtor to enter into in the ordinary course of its business. Specifically, when the debtor and creditor entered into the construction agreement, neither had a clear understanding of the amount of corrective work that would be necessary, nor was there any certainty as to the source of funds to repay the debt incurred. As such, this transaction was outside the ordinary course of the debtor’s business, and creditors should have been given notice and an opportunity to be heard.
(418) 1-9-01 PUBLISHED Transworld Telecommunications, Inc. v. Pacific Mezzanine Fund, L.P., (In re Transworld Telecommunications, Inc.), 98PC-2089, Judge Stewart.
The objections to the Bankruptcy Court’s Proposed Findings of Fact, Conclusions of Law, and Judgment Pursuant to 28 U.S.C. § 157(c)(1) (included) came before the district court, Judge Stewart presiding. Affirmed.
(419) 2-7-01 PUBLISHED In re Geneva Steel Company, 99-21130, Judge Clark, 258 B.R.799.
Order Allowing Reduced Fees and Expenses. The fourth fee application of The Blackstone Group, financial advisor to the debtor, came before the Court. Even though the advisor’s appointment provided for a fixed fee, the Court adjusted downward the award of fees because the number of hours spent by the advisor went downward in subsequent fee periods. The advisor was entitled to recover, as part of its allowable expenses, a reasonable fee for legal services of law firm that it hired to defend its fee application, although law firm had never been appointed to serve as a professional in the case.
(420) 8-17-01 UNPUBLISHED In re Horsley, 99-30458, Judge Boulden.
Chapter 7 trustee filed a motion for nunc pro tunc substantive consolidation of the assets and liabilities of debtor and a nondebtor entity pursuant to 11 U.S.C. § 105. Acknowledging that substantive consolidation may be appropriate in some cases, see Fish v. East 114, F.2d 177 (10th Cir. 1940) and Federal Deposit Ins. Corp. v. Hogan (In re Gulfco Invest. Corp.), 593 F.2d 921 (10th Cir. 1979), under the circumstances of this case, the Court determined that the debtor and nondebtor were not so intertwined as to afford the trustee the relief sought. Although the debtor managed and controlled both entities, there was insufficient evidence that the nondebtor lacked an economic existence independent from the debtor. In turn, the Court concluded that because nunc pro tunc relief is predicated upon a finding that a substantial identity exists between the parties, lack of evidence to support such a finding precluded therelief.
(421) 10-10-01 UNPUBLISHED In re Bowen, 98-28722, Judge Thurman.
Creditor in Chapter 7 case filed a motion for relief from this Court’s sanctions order pursuant to Fed. R. Bankr. P. 9024 and Fed. R. Civ. P. 60(b) or, alternatively, to alter or amend the order or grant a new hearing pursuant to Fed. R. Bankr. P. 9023 and Fed. R. Civ. P. 59. Although creditor’s motion was timely filed under Rule 59, the facts germane to the motion, the arguments of counsel and the testimony at the hearing on the motion first required analysis under Rule 60. Creditor argued that its paralegal mishandled debtors’ motion for sanctions and, as a result, the matter was not given the attention it required. Balancing the circumstances surrounding creditor’s failure to respond to debtors’ sanctions motion, the Court concluded that this mishandling constituted excusable neglect for the purpose of Rule 60(b). The Court also concluded that creditor’s timely filed Rule 59 motion raised concerns requiring a new hearing on debtors’ motion.
(422) 12-5-01 PUBLISHED Rushton v. Williams (In re Williams), 00P-2023, Judge Cornish.271 B.R. 663
Proceeding was brought to determine spouse’s interest in real property that chapter 7 trustee sought to sell. The bankruptcy court, Judge Tom R. Cornish, held that: (1) even if debtor’s spouse was entitled to equitable lien in real property that trustee sought to sell, based upon fact that property was acquired with funds in which spouse had one-half interest, and that debtor had allegedly instructed real estate agent to prepare deed naming both himself and spouse as grantees, this lien would merely give spouse the right to recoup her contribution out of proceeds of sale and would not give her joint interest in property, within meaning of bankruptcy statute restricting trustee’s right to sell jointly owned property; and (2) equitable lien claim was barred by laches.
(423) 1-17-02 UNPUBLISHED In re Northington, 00-34258, Judge Thurman.
Debtors filed an objection to claim 4 of Household Finance Corp. and motion to avoid security interest as an undersecured second mortgage under 11 U.S.C. § 506(a) and (b). The Court overruled the objection and denied the motion to avoid the mortgage holding that it was improper to attempt to avoid a mortgage pursuant to Bankruptcy Rule 3007 instead of utilizing the correct procedure of an adversarial proceeding according to Bankruptcy Rule 7001. Rule 7001(2) specifically states that "a proceeding to determine the validity, priority, or extent of a lien" is an adversary proceeding and a lien should not be avoided through an otherwise properly noticed hearing on objection to claim.
(424) 1-30-02 APPEAL In re Husting Land & Development, Inc., 97B-20309 (case number on appeal 2:01-CV-24B), Chief Judge Benson, U.S. District Court. See #417.
Determining first that the testimony of creditor’s expert was inadmissable, and second, that the "creditor expectation" test was not satisfied, the bankruptcy court concluded that creditor’s postpetition debt was not incurred in the ordinary course of business and, accordingly, creditor’s claim could not be allowed as an administrative expense. The district court affirmed, basing its decision on the reasons set forth in the bankruptcy court’s opinion and with these additional comments: (1) that the creditor expectation test is well supported and in furtherance of the purpose of chapter 11; (2) that the bankruptcy court’s rulings were within its discretion and supported by the reasons articulated in its decision; and (3) that the proffered expert testimony concerning "ordinary course of business" was inadmissable because the opinion was based on the meaning of the law and the witness was not a legal expert and, in any event, testimony by a legal expert is neither common, nor proper in these proceedings.
(425) 2-25-02 PUBLISHED Pierce v. Beneficial Mortgage Co. of Utah (In re Pierce), 01P-2367, Judge Thurman 282 B.R. 26.
The debtors filed a complaint, arguing that the second mortgage holder's trust deed on the debtors' personal residence was completely unsecured and should be voided or "stripped" pursuant to 11 U.S.C. § 506(a) and (d) and that the claim filed by the creditor should be treated as an unsecured claim under the debtors' chapter 13 plan. The debtors argued that because the value of the collateral was only $66,000.00 and the first mortgage holder's claim exceeded that value, any remaining claim holder must be entirely unsecured and, therefore, the lien on the property held by the creditor may be voided. The Court held that under § 506(a), a completely unsecured mortgage holder does not have a secured claim, and is therefore not protected by the antimodification statute under § 1322(b)(2) and its lien can be stripped. The Court determined that a party should first look to § 506(a) for a valuation of the collateral and if the collateral has no remaining value after giving credit for senior secured debt, the claim is unsecured. Once it is determined that a claim is not "secured only by a security interest in real property that is the debtor's principal residence," § 1322(b)(2), then the lien is void under § 506(d).
(426) 4-9-02 PUBLISHED Skull Valley Band of Goshute Indians v. Chivers (In re Chivers), 99P-2573, Judge Boulden. 275 B.R. 606
Creditor sought nondischargeability of certain debts under 11 U.S.C. §§ 523(a)(2)(A) and (B) and sought a determination thereof pursuant to its motion for summary judgment. Debtor filed a cross motion for summary judgment seeking dismissal of claims. The decision required a determination of the meaning of the term "financial condition" under § 523(a)(2)(B) and the interplay of Field v. Mans, 516 U.S. 59 (1995) and the tort of fraudulent misrepresentation with § 523(a)(2)(A). The Court adopted a narrow reading of "financial condition"which requires that a false written statement describe the debtor's net worth, overall financial health, or ability to generate income. The Court also recognized the Supreme Court's reference in Field to the Restatement (Second) of Torts and adopted the analysis set forth in the Restatement in analyzing fraudulent misrepresentations under § 523(a)(2)(A). Judgment in favor of creditor.
(427) 6-4-02 UNPUBLISHED In re Tae Sun Hong and Bok R. Hong, 01-35072, Judge Boulden.
Upon the chapter 7 trustee's objection to exemption, the debtors sought a determination that funds rolled over prepetition from an ERISA qualified plan into an IRA annuity were either not property of the chapter 7 estate under 11 U.S.C. §541(c)(2), or were exempt under Utah Code Ann.§§ 78-23-5(1)(a)(x) or 79-23-6. The Court determined that the funds in the IRA annuity lost their ERISA anti-alienation characteristics prepetition and were therefore property of the estate. Once property of the estate, the funds were exempt pursuant to Utah Code Ann. §§ 78-23-5(1)(a)(x) because they were held in an arrangement described in Section 408 of the Internal Revenue Code, unless the funds constituted a "contribution" made to the IRA annuity within one year of filing for bankruptcy. The Court found that the statute did not restrict "contribution" to exclude rollover funds, and therefore Utah Code Ann. §§ 78-23-5(1)(b) applied, and the funds were not exempt. Further, Utah Code Ann. § 78-23-6 was inapplicable to exempt the funds as a matter of fact.
(428) 7-30-02 PUBLISHED In re JD Services, Inc., 00-29460, Judge Clark, 284 B.R. 292.
This dispute involves a transfer that resulted in $725,000.00 being credited to debtor's bank account instead of $7,250.00 because of a bank encoding error. The encoding error and transfer of disputed funds took place postpetition. The Court finds that the debtor was unjustly enriched in the amount of $717,750.00. Unjust enrichment will support a constructive trust. The funds were commingled with other funds to which general creditors have a claim. Therefore, the bank must trace its funds held in constructive trust utilizing the lowest intermediate balance rule. Because the funds held in constructive trust have always belonged to the bank, it is entitled to the interest actually earned by the $394,460.53 in constructive trust funds held. The bank is entitled to a postpetition administrative priority claim in the amount of $323,289.53 which represents the difference between the $717,750.00 originally transferred by mistake and the amount successfully traced using the lowest intermediate balance method. Because the $323,289.53 is unsecured, it is not entitled to the accrual of interest.
(429) 9-3-02 UNPUBLISHED General Motors Acceptance Corporation v. Staples (In re Staples), 01P-2084, Judge Boulden.
GMAC brought a nondischargeability action against the debtor seeking to have a deficiency debt resulting from the sale of a repossessed vehicle declared nondischargeable under 11 U.S.C. § 523(a)(2)(C). The Court found, under all the facts of the case, that the 2000 GMC Jimmy SLC 4x4 4-door sport utility vehicle was not a "luxury good" as used in the statute, and the debt was discharged.
(430) 9-26-02 UNPUBLISHED In re Linda Marie Mount, 02-29694, Judge Clark.
The debtor filed a Chapter 7 petition in bankruptcy less than one year after she transferred her 401(K) plan into an IRA. The trustee objected to the debtor's claimed exemption. It is the opinion of this Court that Tae Sun Hong (see opinion #427) correctly interprets the effect of U.C.A. § 78-23-5(1)(b)(ii) on debtor's claimed exemption. The trustee's objection to the claimed exemption is sustained.
(431) 10-21-02 UNPUBLISHED In re Mountaineer Development Corp., 00-28590, Judge Boulden.
The high bidder at a trustee’s auction moved to set aside the sale of the estate’s interest in a note, alleging that false or misleading information induced his bid. Following the failed sale, the chapter 7 trustee moved for authority to sell the asset to a third party. The original high bidder also objected to sale of the estate’s interest in the note to a third party. The original sale was authorized by the court, made regularly and with notice. The terms of the sale were as is, where is, if is, with no warranties or representations. To set aside such a sale, a party must show fraud, accident, mistake, or some other equitable cause for avoiding a like sale between private parties. See Golfland Entertainment Centers, Inc. v. Peak Investment, Inc. (Ir re BCD Corp.), 119 F.3d 852, 859-60 (10th Cir. 1997) (citations omitted). The trustee had passed along some, but not all, information in her possession regarding the status of the asset to the bidder. The trustee lacked independent knowledge of the accuracy of the information in issue, and the bidder made no specific request for this information. The court denied bidder’s motion, finding the evidence insufficient to show any of the required elements. The court further held that the trustee owed no heightened fiduciary duty to disclose information to a bidder at auction where the bidder is also a creditor of the estate. The trustee’s duty to a bidder-creditor is the duty of due care, diligence, and skill as measured by a reasonable person standard. See United States of America v. Aldrich (In re Rigden), 795 F.2d 727, 731 (9th Cir. 1986). There was no evidence in this case that the trustee had failed to fulfill her duty. Relying on the factors set forth in In re Anchor Exploration Co., 30 B.R. 802 (N.D. Okla. 1983), the court found the trustee’s proposed second sale to a non-bidding third party appropriate under the terms of the original Sale Order. See In re Anchor, 30 B.R. at 808.
432 11/6/2002 Published In re Sorrell; 02-28611, Judge Thurman 286 B.R. 798.
The Debtors filed a bankruptcy petition under Chapter 12 of the Bankruptcy Code and moved for confirmation of their plan of reorganization. The Debtors proposed a plan wherein they surrendered one piece of real property to the secured creditor but kept another piece, providing for a twenty-year amortization of the remaining amount due under the secured claim. In addition, certain additional obligations were secured by personal property and were treated in the plan. The secured creditor objected on several grounds including that the Debtors did not meet the definition of family farmer as contemplated by Congress when drafting Chapter 12 and that the Debtors’ plan was not proposed in good faith. The Court concluded the Flygare Chapter 13 factors of good faith are equally applicable in Chapter 12 cases and determined that if certain conditions were met, the plan met the good faith test as required under 11 U.S.C. § 1225(a)(3). See Flygare v. Boulden 709 F.2d 1344, 1347-48 (10th Cir.1983). In addition, the Court held that because the Debtors satisfied the criteria of the family farmer definition in the previous year that they could go forward under Chapter 12 despite evidence that the Debtors’ current farming operations were minimal.
(433) 11/14/2002 Published In re Medical Software Solutions, dba PerfectPractice.MD; 02-32330, Judge Thurman 286 B.R 431.
The issue before the Court was whether the Debtor’s proposed sale of substantially all of its assets outside the ordinary course of business, and before a Chapter 11 Plan of Reorganization and Disclosure Statement had been proposed, should be approved by the Court. Complicating matters further, the proposed buyers were insiders as that term is defined within the Bankruptcy Code. The Court concluded that in order to approve a sale of substantially all the Debtor’s assets outside the ordinary course of business, the following elements must be met. The Debtor must show (1) that a sound business reason exists for the sale; (2) there has been adequate and reasonable notice to interested parties, including full disclosure of the sale terms and the Debtor’s relationship with the buyer; (3) that the sale price is fair and reasonable; and (4) that the proposed buyer is proceeding in good faith. See e.g., In re Delaware & Hudson Ry. Co., 124 B.R. 169, 176 (D. Del. 1991); WBQ Partnership v. Virginia Dep’t of Med. Assistance Serv. (In re WBQ Partnership), 189 B.R. 97, 102 (Bankr. E.D. Va. 1995). The Court specifically found that because of the proposed purchaser’s insider status that the purchaser has a heightened responsibility to show that the sale is proposed in good faith and for fair value. Relying upon the court-appointed examiner’s reports in this case, the Court found no evidence of fraud or collusion or other actions indicative of bad faith and approved the sale free and clear of all liabilities including possible successor liability claims by the former president of the company.
(499) 2/14/2003 UNPUBLISHED, In re Craig M. Blansett and Jennifer R. Blansett, 00-21397, Judge Thurman. (opinion posted out of date and number sequence, also in the year 2006)
(434) 2/28/2003 UNPUBLISHED In Re In re Alice M. Sink, aka Alice M. Phillips, 02-40042; In re Hipolito D. Valenzuela, 02-32504; In re Clay Petersen, 02-38843, Judge Boulden
Creditors filed motions to dismiss with prejudice, pursuant to 11 U.S.C. § 109(g)(1). In each case, the debtor had failed to make plan payments, failed to appear at the first meeting of creditors, or failed to file required statements and schedules. To prevail on a § 109(g)(1) motion, the movant must prove either that the debtor willfully failed to abide by an order of the court or that the debtor willfully failed to appear before the court in proper prosecution of the case.
The first clause of § 109(g)(1) relates to the debtor’s failure to abide by a specific order that may be issued in the case. The Court distinguished In re Fulton, 52 B.R. 627 (Bankr. D. Utah 1985) which stated that failure to appear at a meeting of creditors may be a violation of a court order, because the standing order then in effect governing dismissal procedures has been superceded by Local Rules 2003-1(a) and 2083-1(a) and (b). The Court determined it was unnecessary to consider whether statutory requirements and local rules of practice are equivalent to court orders. Turning to the second clause of § 109(g)(1), the Court stated that an "appearance" encompasses a broad range of conduct in addition to physical presence at a hearing. An appearance was determined to include, among other things, being represented at non-court hearings related to a case and filing papers required by rule or statute. The Court further determined that a debtor’s conduct is willful within the meaning of § 109(g)(1) when the debtor has notice of the responsibility to act and intentionally engages in conduct that results in a failure to fulfill that responsibility.
The Court held that failure to file required papers, failure to appear at the first meeting of creditors, and failure to make Chapter 13 plan payments were failures to appear before the court in proper prosecution of the case. Failure to defend against dismissal proceedings was also held to be a failure to appear in proper prosecution. Evidence of repeated filings allowed an inference in each case that the debtor knew his or her responsibilities under the Bankruptcy Code and knew the consequences of failing to fulfill those responsibilities. Therefore, the Court determined that the debtor’s conduct in each case was willful. Each case was dismissed with prejudice to refiling a bankruptcy petition for 180 days.
(435) 4/25/2003 PUBLISHED, In re Simon Transportation Services, INC. 02-22906, Dick Simon Trucking, INC., and Simon Terminal, LLC, [Jointly Administered], Judge Clark. Citation: 292 B.R. 207
Following entry of order confirming sale of Chapter 11 debtors' assets to insider used as stalking horse, debtors filed supplemental motion for assumption and assignment of trade-back agreements allegedly included in assets sold. The court held that (1) insider used as stalking horse in connection with sale of debtors' assets did not pay anything for trade-back agreements which it later claimed to have purchased as part of its total bid of $51 million, so that motion to assume and assign such agreements to insider would not be approved as not being in best interests of estate; and (2) options which debtors had pursuant to terms of trade-back agreements with company from which they acquired refrigerated trucks, to require company to buy trucks back at price equal to 55 percent of original purchase price, were in nature of "executory contracts," that debtors could assume and assign.
(436) 5/8/2003 UNPUBLISHED In re Amy Williamson, 02-40943, Judge Boulden.
The United States trustee objected to dismissal and filed a motion to disgorge fees under 11 U.S.C. § 329 due to unusual circumstances that led to two cases being open for the debtor simultaneously. Due to serious violations of the Bankruptcy Code and rules, counsel’s services were found to have been performed so poorly and negligently as to be of no value.
The Court’s ruling was based on several factors, including counsel’s failure to provide any legal advice to the debtor prior to filing the bankruptcy petition, failure to file a list of creditors and their addresses with the petition, failure to notify the debtor of important deadlines affecting the case, and counsel’s action in filing a second bankruptcy petition without the debtor’s knowledge or consent. Counsel also collected a fee exceeding the amount disclosed on the Fed. R. Bankr. P. 2016(b) statement in violation of 11 U.S.C. § 329. The Court condemned counsel’s office procedures which result in the routine filing of defective chapter 7 petitions absent a schedule of liabilities or list of creditors in violation of Fed. R. Bankr. P. 1007(a)(1) and (c). The Court further condemned counsel’s practice of filing an incomplete list of creditors in a practice calculated to deprive creditors of proper notice of the first meeting of creditors under Fed. R. Bankr. P. 2002(a)(1) and circumvent the debtor’s statutory duties under 11 U.S.C. § 521(1).
The Court overruled the objection to dismissal, but ordered debtor’s counsel to disgorge fees in full.
(437) 6/10/2003 UNPUBLISHED In re Jim Tilson, 03-22735, Judge Boulden.
A creditor filed a motion to dismiss the case with prejudice pursuant to 11 U.S.C. § 109(g)(1). Based upon the debtor’s failure to file required papers or attend the first meeting of creditors, combined with his admission that the debtor had no intent to prosecute the case, the Court granted the motion.
The debtor filed a chapter 13 petition in order to stave off a pending foreclosure and allow time to consummate a sale of the property. The debtor failed to file a list of creditors and their addresses, failed to file any statements or schedules and failed to file a plan of reorganization in violation of 11 U.S.C. § 521, Fed. R. Bankr. P. 1007, LR 2002-1(d) and LR 5005-1. These failures are also failures to appear before the court in proper prosecution of the case within the meaning of 11 U.S.C. § 109(g)(1).
The debtor offered several explanations for his conduct, but the Court found only one explanation to be credible. The debtor intended to satisfy all of his creditors through a sale of the property on which foreclosure was pending, and had no intent to pursue reorganization under the Bankruptcy Code. On that basis, the Court concluded that the debtor’s failures to appear noted above were willful and dismissed the case with prejudice.
(438) 7/23/2003 UNPUBLISHED In re C AND M PROPERTIES, L.L.C. v. RICHARD D. BURBIDGE, et al., Judge Clark.
A Chapter 11 plan was confirmed with no mention or treatment of a claim that debtor asserted against the defendant in this adversary proceeding. There was also no specific disclosure of the claim or its value in the debtor's schedules, statements or monthly financial reports. Post confirmation, debtor commenced a lawsuit against defendant. Defendant removed the matter to this Court and filed a motion to dismiss based upon res judicata and judicial estoppel arguing that because the claim had not been disclosed, the debtor is barred by res judicata and judicial estoppel from suing on the claim. Because affidavits were submitted by both parties, the Court treated the motion as a motion for summary judgment and ruled that res judicata did not apply because the plan relied solely on the sale of debtor's real property to pay all claimants in full plus interest. As such, it never became necessary to consider the existence and value of the claim at confirmation. The Court denied defendant's motion based upon the judicial estoppel argument because the Tenth Circuit Court of Appeals has repeatedly stated that the doctrine of judicial estoppel is not recognized in this Circuit.
(439)7/23/2003 UNPUBLISHED In re Snow, 03-20144, Judge Thurman
The United States Trustee brought a motion to dismiss the Debtors' case for substantial abuse of the bankruptcy system as provided by 11 U.S.C. § 707(b). The Debtors had filed a Chapter 7 case but their household income was greater than $150,000 per year. Applying the "totality of the circumstances" test set forth by the Tenth Circuit Court of Appeals in the case of Stewart v. United States Trustee (In re Stewart), 175 F.3d 796, 809 (10th Cir. 1999), the Court granted the Trustee's motion but stayed the effectiveness of the order for ten days to allow the Debtors to convert their case to one under Chapter 11 or Chapter 13. Although the Court determined that the Debtors' ability to repay debt was the primary factor in its analysis, the Court considered other factors as well including whether the Debtors suffered any unique hardships, whether cash advances and purchases exceeded the Debtors' ability to pay at the time they were incurred, whether the Debtors had a stable source of future income, whether the Debtors current expenses could be reduced without deprivation of necessities, whether the Debtors qualify for Chapter 13 relief, and the Debtors' good faith. The Court determined, based on an analysis of each factor, that the case should be dismissed primarily due to the amount of surplus income that the Debtors should have under a plan of reorganization and the Debtors' failure to provide accurate information regarding their household income and expenses on their bankruptcy schedules at the time the case was filed or in any written amendments.
(440) 7/29/2003 UNPUBLISHED In re Gregory Marshall, 01-36611, Judge Boulden
Chapter 12 Trustee objected to allowance of debtors' counsel's fee applications in a case originally filed as a Chapter 11 case. The Trustee objected on the grounds that while counsel did file an Application to Employ while the debtor was in possession in the Chapter 11 case, the law firm was never appointed under 11 U.S.C. § 327 and was thus never employed as a professional person entitled to compensation under 11 U.S.C. § 330. Counsel for the debtors argued appointment by the court under 11 U.S.C. § 327 is not necessary for debtors counsel to receive compensation when representing individual debtors under Chapter 12.
The Court found that 11 U.S.C. § 330(a)(4)(B), added to the Code by The Bankruptcy Reform Act of 1994, Pub.L.No. 103-394, 108 Stat. 4106 (1994), obviates the need for court appointment of debtor's counsel in a Chapter 12 case in which the debtor is an individual. However, while the Court held fees and costs were allowed, it also discovered that no payment of fees is authorized under the express terms of the confirmed Plan which only allows payment to professionals appointed under 11 U.S.C. § 327.
(441) 7/10/2003 UNPUBLISHED In re David, 02-21500, Judge Thurman
The Chapter 7 Trustee brought a motion to require the Debtors to turnover property of the estate to the Trustee. The property consisted of $825.74 that existed in the Debtors' bank checking account at the time the case was filed. The Debtors originally filed the case as a Chapter 7 case, but following their 341 meeting, the Debtors converted their case to one under Chapter 13. Approximately four months after the case was converted, the Debtors reconverted the case back to one under Chapter 7. Several months after the conversion back to Chapter 7, the Chapter 7 Trustee brought his motion for turnover seeking the money that existed in the checking account at the time the case was originally initiated. During the course of their case, the Debtors had spent the money in their checking account on moving expenses and on other ordinary living expenses. The Debtors were never put on notice that the Trustee would seek turnover of those funds until nearly sixteen months after the case was filed. The Court held that under 11 U.S.C. § 348(f) property of the Debtors' Chapter 7 estate after conversion from Chapter 13 consisted of property that remains in possession of the debtor or is under the control of the debtor on the date of the conversion and, therefore, did not include the checking account funds that had been subsequently consumed before the conversion back to Chapter 7. The Court also concluded that it may not rule the same in a case where a debtor converted to another chapter in bad faith.
(442) 6/16/2003, UNPUBLISHED In re Scarbrough, 02-32949, Judge Thurman
Goldenwest Credit Union filed a motion to extend the time to file a proof of claim in the case. The Debtors case was filed on August 5, 2002. When the Debtors filed their bankruptcy petition, they also filed a creditor matrix. For some unknown reason, an error occurred in the bankruptcy clerk's office and the matrix was not entered into the system. Subsequently, on August 21, 2002, notice of the meeting of creditors, as well as notice of the last day to file proofs of claim was sent to all parties in the case, but due to the error in failing to correctly enter the matrix, only one creditor, the Chapter 13 Trustee, the Debtors and Debtors' counsel received notice of the filing and of the claims bar date. The claims bar date was set for December 12, 2002. On April 2, 2003, Goldenwest Credit Union filed its motion to extend the time to file proofs of claim alleging that the failure to receive notice was cause to extend the deadline. The Court denied the motion under Bankruptcy Rules 9006(b)(3) and 3002(c) as interpreted by the Tenth Circuit Court of Appeals in Jones v. Arros, 9 F.3d 79 (10th Cir. 1993). While Jones was a case under Chapter 12, the Bankruptcy Court held that its holding was equally applicable to Chapter 13 cases and, therefore, held that, despite a creditor not receiving notice of a case, that the claims bar date is absolute and may not be extended. However, recognizing that a creditor may be deprived of due process if never given notice of the claims bar date, the Bankruptcy Court held a Debtor may be able to enlarge the time to file proofs of claim on behalf of creditors under Bankruptcy Rule 3004. The Bankruptcy Court held that the deadline for debtors filing proofs of claim on behalf of creditors may be enlarged upon a showing of "excusable neglect" on the part of the Debtors in not filing a proof of claim prior to the deadline set forth in Bankruptcy Rule 3004.
(443) 9/16/2003 PUBLISHED 298 BR 778, In re Perkins, Barney Retirement Fund v. Perkins 02-2163, Judge Boulden
Creditor, a retirement fund, filed a nondischargeability action against Debtor under 11 U.S.C. § 523(a)(2)(A) alleging the Debtor’s omissions and misrepresentations to Creditor were material and thus nondischargeable. The Debtor previously operated an investment firm in which Creditor placed funds for retirement. The Debtor failed to disclose personal ties and interests to a company to which the investment firm extended a loan that was funded by the Creditor. In analyzing whether the Debtor incurred a debt to the Creditor by soliciting, receiving and refusing to account for assets through false representations and material omissions, the Court looked to the Restatement (Second) of Torts § 551(2). The Court concluded that the parties’ relationship was one of trust and confidence which triggered the Debtor’s duty to exercise reasonable care to disclose material information. The Debtor failed to uphold this duty to disclose by omitting and misrepresenting significant information that was material to the Creditor’s investment decisions. The Creditor justifiably relied on the Debtor’s representations and omissions in making investment decisions and was harmed as a result.
(444) 9/22/2003, UNPUBLISHED, Lundahl v. Telford (In re Telford), 03-2381, Judge Clark
The matter before the court is on plaintiff’s application to proceed without prepayment of fees which seeks waiver of the fees under 28 U.S.C. § 1915 (proceedings in forma pauperis). Because the United States Bankruptcy Court is an Article I Court and not an Article III Court, it has no authority to waive filing fees under 28 U.S.C. § 1915.
(445) 9/24/2003 UNPUBLISHED, Dayton v. Newman (In re Dayton), 03P-2034, Judge Clark
Issue: subject matter jurisdiction.
(446)10/7/2003 UNPUBLISHED, In re Brewer v. Brewer, 02-2465, Judge Thurman
Plaintiff/Debtor filed a declaratory action against Defendant, former husband, seeking sanctions and a determination that his state court proceeding to enforce divorce-ordered payments were in violation of her discharge. The Debtor and the Defendant were divorced prior to the Debtor filing for Chapter 7 relief. The Divorce Decree ordered the Debtor to assume and pay two debts that had been co-signed by the parties. The Debtor ceased paying the debts and subsequently filed her Chapter 7 case. The Defendant began paying and eventually paid off the debts. The Debtor did not schedule the Defendant in her bankruptcy papers, but did list the two debts and the corresponding creditors. The Trustee filed a No Asset Report and the Debtor received a discharge. Three years later, the Defendant sought reimbursement from the Debtor for the amounts he had paid on the debts by filing a Motion for Order to Show Cause in state court. The state court ruled that the payments made by the Defendant on the debts were post petition obligations and ordered the obligations non-dischargeable because the Defendant was not scheduled in the Debtor’s bankruptcy papers.
At trial, the Bankruptcy Court ruled that the state court order was void ab initio because the state court lacked jurisdiction. The state court order was void under the Ellis v. Consolidated Diesel Electric Corp. decision of the Tenth Circuit. As a result, the Rooker-Feldman doctrine did not apply and the Bankruptcy Court had jurisdiction to considering a collateral attack on the state court’s ruling. The Court found that the debts were not in the nature of alimony or support and were incurred by the parties pre-petition. Notwithstanding the lack of scheduling in the bankruptcy papers, the debts were discharged by operation of law because Debtor’s case was a no asset case, there was no bar date set for filing proofs of claims, and the claims were not in the nature of otherwise non-dischargeable claims. Sanctions were imposed on the Defendant because he refused to cease his collection efforts, even though he had been placed on notice of the Debtor’s bankruptcy and the Tenth Circuit’s decision of In re Parker, at least by the time the Order to Show Cause was heard in state court.
(447) 10/27/2003 PUBLISHED, In re Mark James Grogan and Jan Grogan, 02-36231, Judge Boulden, 300 B.R.804.
Debtors failed to disclose settlement proceeds and the bank account into which the funds were deposited on their statements and schedules. The Chapter 7 trustee discovered the undisclosed assets and sought turnover of the settlement proceeds to the estate. After several months of delay, the debtors amended their schedules by listing the settlement proceeds as an asset and also claiming the funds as exempt property. The trustee objected to the amended objection claiming the omission of the settlement proceeds was intentional. The Court found that the debtors acted in bad faith in claiming the exemption on assets belatedly disclosed in amended schedules. The delayed exemption claim was disallowed for both bad faith and prejudice to creditors of the estate and debtors were required to turnover the settlement proceeds to the trustee.
(448)12/18/2003 UNPUBLISHED, In re Marker, Trustee v. Robert H. Fullerton, 03-2301, Judge Thurman
The Court granted partial summary judgment on the Plaintiff Trustee’s motion in an adversary proceeding commenced for recovery of property fraudulently transferred pursuant to § 25-6-6 of the Utah Code. In this proceeding, the Trustee relied on state law to reach back a period of 4 years prior to the filing of the Debtor’s bankruptcy case to challenge a transfer by the Debtor to a former spouse. The Trustee alleged that the Debtor transferred certain real property to the Defendant for less than reasonably equivalent value. The Court ruled that a conveyance where a substantial portion of the consideration consisted of a promise of reduced future rents valued at approximately $98,550 did not constitute reasonably equivalent value. Other issues of fact remained to be tried.(449) 12/19/2003 PUBLISHED In re Holli Lundahl, 03-21660, Judge Thurman
The Court dismissed the Debtor’s Chapter 13 case with prejudice where there was sufficient evidence to support a finding that the Debtor’s plan was not proposed in good faith and that the case was filed in bad faith. The Court found that parties who were disputed by the Debtor but who were not scheduled or listed on any mailing matrix filed by the Debtor had standing to object to the Debtor’s plan, and could be heard regarding their motion to dismiss or convert. The Court analyzed the Debtor’s case in light of the standards adopted by the Tenth Circuit Court of Appeals in the cases of In re Flygare and In re Gier. The Court analyzed four particular areas: 1) the accuracy of the Debtor’s income and expenses; 2) the existence of creditors’ claims to be paid through the plan; 3) the motivation of the Debtor filing the case solely for the purpose of having a forum for litigation; and 4) the inaccuracy and misleading nature of the Statement of Affairs and Schedules filed by the Debtor. In each instance, the Court found that the Plan had not been proposed in good faith as required by 11 U.S.C. § 1307(e) and that the case had been filed in bad faith.
(451) 10/24/03 UNPUBLISHED, Gillman v. Carson, 01-2326, Judge Boulden
Trustee brought a nondischargeability action against the Debtor alleging that the Debtor failed to comply with the requirements of 11 U.S.C. § 727(a)(3) and (a)(4)(A). Court denied the Debtor his discharge and found: (1) that the Debtor, not the Trustee, has the burden of compiling and reconstructing the Debtor’s financial history; and (2) that the Debtor knowingly and fraudulently omitted property from his statements and schedules. (Posted 1/26/2003)
(450) 1/20/04 UNPUBLISHED, Great American Fidelity Insur. Co., f/k/a American Dynasty Surplus Lines Insur. v. Arrow Dynamics, Inc., Kathy Walker, Paul Walker, and Universal City Property Management Company II, et al. (In re Arrow Dynamics Inc.), 02-2441, Judge Boulden
Plaintiff insurance company filed declaratory judgment action against Debtor and other Claimants involved in state court litigation to resolve insurance coverage questions. The insurance company and Debtor are parties to a policy which the insurance company claims does not provide coverage to the debtor for claims brought in state court litigation. The insurance company filed for summary judgment and certain of the defendants (excluding the debtor) filed cross motions for summary judgment seeking declaratory judgment on whether or not the policy provides coverage for all claims asserted. The Court reached the following conclusions. A declaratory judgment action is not a core proceeding but relates to the bankruptcy because a determination of insurance coverage may increase or decrease the payment to creditors from assets fo the estate. A waiver of claims against the Debtor by the Claimants in an agreed order lifting the automatic stay to pursue state court litigation does not prohibit Claimants from recovering insurance proceeds from the policy. The Court further held that while the general rule under Utah law is that an ambiguous consumer insurance contract should be strictly interpreted against the insurer in favor of coverage, the facts of this case warrant reference to the intent of the parties in agreeing to the bargained for contractual terms of the policy. The intention of the parties to the insurance policy was that the self-insured retention endorsement attached to the policy is applicable despite some confusion by reference to a separate type of policy. However, contrary to the plaintiff's argument, no breach of the self-insured retention has occurred which would void coverage. Finally, the Court was asked to determine whether there is contractual indemnity coverage in the policy under certain contracts between the debtor and one of the claimants. In interpreting the contracts the Court found that the language of the policy included indemnification of another party for the debtor's own negligent acts but excluded indemnification for that parties' negligent acts, and found other indemnification issues unripe.
(452) 3/5/2004 UNPUBLISHED Jared W. Campbell 03-23673, Judge Thurman
Chapter 13 Debtor filed a Plan proposing payments for thirty-six months to return 16% to non-priority, unsecured creditors. The Plan also provided for monthly payments to be made directly to the Utah Higher Education Assistance Authority ("UHEAA") for outstanding student loans, pursuant to §1322(b)(5). The Chapter 13 Trustee filed an Objection to Confirmation of Plan, alleging that the payments to UHEAA, who would receive 71% of the principal amount of its claim over the projected term of the plan, constituted unfair discrimination as to the Debtor’s other unsecured creditors. The Court found that, absent proof of extraordinary or compelling circumstances, the Debtor’s Plan "unfairly" discriminated against the other classes of unsecured creditors, pursuant to §1322(b)(1). Accordingly, the Court denied confirmation of the Debtor’s Plan.
(453) 2/17/04 UNPUBLISHED, In re Frank Bushman and Heather Bushman, 01-26116, Judge Boulden.
The debtors filed a motion for sanctions against a creditor for willful violation of the discharge injunction of 11 U.S.C. § 524. Following the debtors’ receipt of a chapter 7 discharge in a no asset case, a creditor filed suit against the debtors in state court seeking to collect on a pre-petition guaranty that one of the debtors executed for the benefit of his corporation. The debtors attempted to defend the state court action by claiming the debt received discharge in bankruptcy but the creditor continued to prosecute the case claiming the debtors had continuing liability on the guaranty, the debt did not exist as of the date of filing, and the debtors remained obligated because the creditor was not listed on the debtors’ schedules. The court found the creditor acted in violation of the injunction imposed by § 524 when it pursued its collection action against the debtors in state court. The court determined the personal guaranty executed by one of the debtor’s was an executory contract for financial accommodation which was extinguished as of the date of petition. The court was unable to sanction the creditor because the debtors did not offer any proof of actual damages.
(454) 4/13/04 UNPUBLISHED, In re Stephen M. Harmsen, 03-33637, Judge Boulden.
One of the debtor’s creditors filed an involuntary chapter 7 petition against him as a single petitioning creditor under 11 U.S.C. § 303(b)(2) seeking adjudication in an attempt to collect upon a foreign judgment. The debtor responded to the involuntary petition claiming he had more than eleven holders of claims and the involuntary petition filed by a single petitioner was therefore improper. The petitioning creditor challenged whether the alleged debtor’s listed holders of claims were eligible under § 303, asserting some entities could not be counted because they were insiders or subject to voidable transfers under §§ 547, 548, or 549. The court found it unnecessary to reach the determination of the required number of qualifying petitioners because the petitioner could not prove that the alleged debtor was not generally paying his debts as they became due and dismissed the petition.
(477) 4/27/04, UNPUBLISHED, Alan Leigh and Tanya Lynn Leigh, 03-33764, Judge Thurman. (see opinion # 477 below)
(455) 4/28/04 UNPUBLISHED, Quality Press, Inc.v. Heidelberg Print Finance Americas, Inc., Judge Thurman.
The Court granted summary judgment in favor of creditor Heidelberg against the Debtor, Quality Press. A Chapter 11 Plan had been confirmed for the same Debtor in 1994, granting Heidelberg secured creditor status. Heidelberg's financing statement lapsed years later and subsequently it filed a new financing statement. Thereafter, the Debtor filed the current bankruptcy case. The Debtor challenged the effectiveness of Heidelberg's lien under several theories. The Court determined that the filing of the new financing statement without the signature of the Debtor following the lapse was allowed under 70A-9a-509 of the Revised Utah Article 9. The Court next determined that the description of the collateral in the new financing statement as "All of Debtor's Equipment" adequately described the several pieces of printing equipment secured in favor of the creditor and that such was not seriously misleading or overbroad. The Court also determined that the "plain meaning" of the 1994 Plan did not enjoin Heidelberg from filing the financing statement after the earlier statement had lapsed. Finally, the Court determined that the Heidelberg's §1111(b) election in the prior bankruptcy did not bar it from the possibility of seeking a deficiency in the current case.
(456) 6/10/04 UNPUBLISHED, In re Frank Bushman and Heather Bushman, 01-26116, Judge Boulden.
The debtors filed a motion for partial reconsideration to reopen a sanctions hearing to present evidence regarding actual and punitive damages that was not presented in a prior sanctions hearing. The court determined that the debtors’ failure to present evidence regarding damages at the sanctions hearing was not due to mistake or inadvertence or any other reason allowed under Federal Rule Civil Procedure 60(b) but was part of counsel’s calculated litigation strategy and the motion for reconsideration was denied.
(457) 8/18/04 UNPUBLISHED, In re GloBill.com, 04-26754, Judge Boulden.
A motion to dismiss or suspend case under 11 U.S.C. § 305(a)(1) was filed by parties claiming ownership and/or control of the debtor. The moving parties raised the question of whether or not the filing of the debtor’s petition by the person allegedly in control of the debtor at the time of filing, was authorized. The questions of control and ownership of the debtor were the subject of extensive litigation which was being pursued prior to filing in California litigation. The court determined it was in the best interest of the creditors of the estate and the debtor to dismiss the case pursuant to § 305.
(458) 8/23/04 PUBLISHED, In re JAMES CRAIG CLUFF and KATHLEEN CLARK CLUFF, 03-32779, In re TOMAS MEDINA, 03-39152, Judge Boulden.
The Debtors sought disallowance of certain unsecured claims because creditors failed to attach sufficient documentation under Bankruptcy Rule 3001(c). The Court overruled the Debtors’ objections because (1) Bankruptcy Rule 3001(c) does not create an independent ground to disallow claims; (2) failure to comply with the documentation requirements in Bankruptcy Rule 3001(c) is an evidentiary defect that only deprives a claim of its prima facie validity; and (3) failure to comply with Bankruptcy Rule 3001(c) merely results in the claimant having the burden of proof if an objection to the claim is filed, but that objection must meet or surpass the evidence set forth in the claim. The Debtors’ objections were found insufficient because many of the claims were entitled to prima facie validity and the Debtors did not rebut that presumption with sufficient evidence. The Debtors’ objections to proofs of claim not entitled to prima facie validity were overruled because the Debtors did not come forward with any evidence that was of equal force to that contained in the claim to rebut the allegations made in the proofs of claim.
(459) 9/7/04 PUBLISHED, State Farm Fire and Casualty Company v. Deborah K. Edie (In re Deborah K. Edie), 03-2449, Judge Boulden.
Plaintiff insurance company filed a nondischargeability action under 11 U.S.C. § 523(a)(6) to except a California state court default judgment from the debtor’s discharge. The debtor admitted she intentionally started a fire in the home of the plaintiff’s insured but claimed her intent was limited to a desire to burn shirts hanging in a closet, not to destroy the entire home. The debtor further defended her actions by claiming she was not able to foresee the potential and likely consequences of her conduct due to a mental defect or illness from which she suffered at the time she started the fire. The plaintiff filed a summary judgment motion claiming the debtor’s admission of intent to start the fire and application of collateral estoppel to the previously obtained default judgment left no material issue of fact to be determined at trial. The court granted summary judgment and determined California’s collateral estoppel doctrine applies to default judgments and barred the debtor from presenting new defenses not raised in the state court litigation. The court also found that even absent the application of collateral estoppel, the debtor’s admission of intentionally igniting a fire to the plaintiff’s insured’s property amounts to a willful and malicious injury to the plaintiff and the defendant did not offer any evidence to support a defense of mental impairment.
(460) 10/5/2004 UNPUBLISHED, Francisco Villegas and Elsa P. Villegas, 03-40485, Judge Thurman.
The Court was presented with the issue of whether private school tuition was a reasonably necessary expense for chapter 13 Debtors where they were not paying their creditors 100% in their plan. The Court analyzed section 1325(b) of the Bankruptcy Code which requires that all income, less expenses that are reasonably necessary for the maintenance or support of the Debtors or their dependents be contributed to the plan. The Court determined that private school expenses are presumptively not reasonably necessary, but that such presumption can be rebutted by a showing of compelling circumstances. Such circumstances in this case included evidence that the children of the Debtors had always attended private schools, that the Debtors perceived that such education was superior to the local public schools, that the Debtors had voluntarily reduced expenses in other areas, that the vehicles of the Debtors were at least ten years old and that the Debtors were living with relatives to reduce living expenses. Finally, the Debtors had proposed a 55 month plan rather than a minimum 36 month plan, returning 32% to their creditors. Under these specific circumstances, the Court determined that the Debtors had shown compelling circumstances and the Court confirmed the Debtors' plan.
(461) 11/22/04 UNPUBLISHED, Gregory A. Smith and Allison D. Smith, 03-36469, Judge Thurman.
Upon a motion brought by the United States Trustee, the Court ruled on dismissing a chapter 13 case with prejudice to the Debtors receiving any discharge on their scheduled debts pursuant to §349(a) of the Bankruptcy Code. The Court ruled that Debtors who had filed eight bankruptcy petitions over the preceeding nine years including chapter 7 petitions in 1995 and 2001 where discharges were obtained and had filed chapter 13 petitions in 1996, 1997, 1998, 2000, 2002 and 2003 where no significant activity or confirmation of plan had occurred; who had failed to make any pre-confirmation plan payments except for the initial payment to the Trustee in the present case and were otherwise delinquent a total of five pre-confirmation payments to the Trustee in the present case, should have their case dismissed with prejudice from receiving any discharge for the debts listed on their schedules.
The Court reviewed the history of §349(a) of the code going back to the Chandler Act of 1898 and determined that such history coupled with the plain meaning of that section all direct that a case may be dismissed with this type of prejudice under egregious facts. The Court adopted the Flygare (In re Flygare, 709 F.2d 1344 (10th Cir. 1983) for badges of bad faith as a beginning point of analysis. The Court further concluded that this type of dismissal with prejudice was consistent with the Tenth Circuit's decision in Frieouf (In re Frieouf, 938 F. 2d 1099, (10th Cir. (1991) which forbade denial to bankruptcy court access for more than 180 days, but authorized denial of discharge of scheduled debts for cause.
(462) 11/18/04 PUBLISHED, Jason Boyce, 04-24409, Judge Clark.
No case summary available at this posting.
(463) 12/10/2004, UNPUBLISHED, Deaine Burningham, 04-24586, Judge Boulden.
The United States Trustee brought a motion seeking disgorgement of fees and fines against petition preparer for assisting a pro se chapter 7 debtor to complete her petition, schedules and statement of financial affairs. The following issues were determined: First, it is a violation of § 110(g) for a petition preparer to collect a debtor’s filing fee even if made payable to the U.S. Bankruptcy Court; however, in this case, the violation was sufficiently remedied and only a nominal sanction of $1 was issued. Second, the fee charged by the petition preparer is reasonable for the services rendered pursuant to § 110(h)(2). Third, there is insufficient evidence that the petition preparer received an additional $100 cash paid by the debtor as alleged by the United States Trustee and although the petition preparer did not report the courier fee on his Disclosure of Compensation, he remedied the problem by discontinuing the practice of using a courier and no fraud was perpetrated against the Court for either omission; however, the Court required disgorgement of the $20 courier fee to the debtor as required by the Code. Finally, based on the facts presented, no violation for the prohibition of practicing law without a licence for the petition preparer’s explanation of the chapters of bankruptcy and no violation for filling out the schedules and statement of financial affairs. However, the Court did find that allowing a software program to select state exemptions for a debtor constitutes the unauthorized practice of law in violation of § 110(k).
While the Court determined that the petition preparer violated some portions of § 110, it pointed out that the petition preparer made a tremendous effort to bring his company into compliance with the Bankruptcy Code and local practice which was a mitigating factor in issuing sanctions.
(464) 1/4/05 UNPUBLISHED, OLSEN PROPERTIES, LLC v. GENEVA STEEL, LLC, UNIVERSAL SCRAP METALS, INC., and ARCH INSURANCE CO.(GENEVA STEEL LLC), 04-2804, Judge Clark.
No case summary available at this posting.
(465) 1/4/05 UNPUBLISHED, TEXAS IRON & METALS CO. v. GENEVA STEEL, LLC, UNIVERSAL SCRAP METALS, INC., (GENEVA STEEL LLC), 04-2803, Judge Clark.
No case summary available at this posting.
(466) 1/4/05 UNPUBLISHED, OLSEN PROPERTIES, LLC v. GENEVA STEEL, LLC, UNIVERSAL SCRAP METALS, INC., and ARCH INSURANCE CO.(GENEVA STEEL LLC), 04-2804, Judge Clark.
No case summary available at this posting.
(467) 1/21/2005, PUBLISHED, Pamela J. Norton, 04-22581, Westlaw Citation: 2005 WL 150641 (Bankr.D.Utah Jan. 20, 2005), Judge Boulden.
Debtor’s case was dismissed with prejudice barring the discharge of the Debtor’s current debts in any future bankruptcy case under § 349(a) after the Debtor filed nine unsuccessful Chapter 13 petitions. The Court found that the Debtor’s defiant and abusive conduct established “cause” under § 349(a). The opinion also distinguishes § 349(a) from other Bankruptcy Code provisions that allow for dismissal, and specifically examines what type of debtor misconduct warrants a “for cause” dismissal with prejudice under § 349(a) as allowed under Frieouf v. United States (In re Frieouf), 938 F.2d 1099 (10th Cir. 1991), cert denied, 502 U.S. 1091 (1992).
(468) 1/24/2005, UNPUBLISHED, Jones v. Homecomings Financial Network and Residential Funding Corporation 04-2636, Judge Thurman
Defendants sought an order dismissing Counts 3-12 and 14 in the Plaintiff’s Complaint for failure to state a claim upon which relief can be granted because, Defendants argued, the applicable statutes of limitation created a complete bar to Plaintiffs’ recovery on those claims. Defendants further argued that the Wrongful Foreclosure claim was not ripe because Defendants had not conducted a foreclosure sale, and that the Objection to the Proof of Claim was not ripe because Defendants had not filed a proof of claim in this case. The Court found that 1) Debtor’s wife could not utilize § 108(a) because she is not a debtor in this bankruptcy case; 2) Debtor himself could not utilize § 108(a) because that section was meant to benefit solely trustees or debtors in possession; 3) Debtor is not afforded the benefits of § 1640(e) because it is inapplicable to this case; and 4) Debtor’s objection to proof of claim is unripe because neither Defendant had filed a proof of claim in this case. Accordingly, the Defendants’ Motion to Dismiss Counts 3 through 12 and Count 14 of Plaintiffs’ Complaint was granted.
(469) 1/28/2005, UNPUBLISHED, EQUITY TRADER-1, LLC V. DAN COX, BRIAN CANNELL, HILLYARD ANDERSON & OLSEN, EMCC, INC, (EQUITY TRADER-1, LLC), 02-2472, Judge Clark.
The Court was faced with competing motions for summary judgment regarding issues of whether assignments or the sale of certain consumer accounts owned by the debtor and purported to be assigned or sold to one of the principal creditors in debtor's Ponzi scheme were effective. The Court ruled that as a matter of law, a document that does not identify specific accounts and refers to the creditor as an investor and not as a purchaser does not effectively assign an account and does not transfer ownership. A facsimile transmission that is labeled "For information only - Not a Legal Document" has no legal force or effect.
(470) 3/1/05, UNPUBLISHED, In re Wayne E. Olson and Debra E. Olson, 04-23551, Judge Thurman.
United States Trustee brought a Motion to Dismiss Case Pursuant to § 707(b). The Court denied the motion, finding that the U.S. Trustee had not met the burden of showing substantial abuse. Specifically, the Court held that expenses incurred in caring for 1) a daughter who had become unexpectedly pregnant and 2) a puppy with severe medical conditions that were unknown at the time of acquiring the dog did not constitute abuse or bad faith.
(471) 3/4/05, UNPUBLISHED, In re MARK JAMES SHAW and KIMBERLY SHAW, 03-30305, Judge Boulden.
Following the debtors’ receipt of a Chapter 7 discharge in a no-asset case, a creditor filed suit against the debtors in state court seeking to collect damages resulting from the post-petition destruction of a leased vehicle the debtors failed to surrender as specified in their statement of intent. Despite the debtors’ efforts to raise discharge in bankruptcy as a defense in the state court action, the creditor continued to prosecute the debtors because, it asserted, the damages to the vehicle occurred post-petition and were not discharged in the debtors’ bankruptcy. As a result, the debtors filed a motion for sanctions against the creditor for willful violation of the discharge injunction imposed by 11 U.S.C. § 524. The Court found that a debt arising from a lease of personal property which is rejected by the Chapter 7 trustee but the personal property is retained by the debtors, despite material default, is nonetheless discharged under the Code. The creditor’s state court action is therefore a violation of the discharge injunction. The Court found that the debtors are entitled to recover compensatory damages of actual attorney fees and costs incurred in answering the creditor’s complaint in the state court action and in bringing this motion before the Court but was not entitled to punitive damages as there was no evidence supporting the request.
(472) 3/23/05, PUBLISHED, Chase Manhattan Mortgage Corporation vs. J. Kevin Bird, Chapter 7 Trustee, 04-2515, Judge Thurman.
This proceeding involved interpretation of Utah’s constructive and inquiry notice law regarding the recording of a bank’s trust deed in the tract and grantor/grantee indices. The Court was called upon to determine whether the bank’s trust deed was avoidable pursuant to 11 U.S.C. § 544(a)(3) and whether there were facts that gave rise to placing the chapter 7 Trustee on constructive or inquiry notice of the same.
The Court ruled on cross motions for summary judgment that the Trustee lacked constructive and inquiry notice of the Plaintiff’s trust deed because it incorrectly described the location of the Debtors property. Under Utah law, liens must be accurately described in recorded instruments and placed in the tract index maintained by each county recorder to give constructive notice. Here, although the trust deed was recorded, the legal description referred to property miles away from the Debtor’s property and was recorded against another tract of land. Although the county recorder maintained a grantor/grantee index, the Court determined that the recording of the trust deed in that index did not constitute constructive notice of the existence of the Plaintiff’s trust deed in furtherance of the legislative intent to interpret land titles strictly. Further, there were no facts that suggested that anyone should investigate further regarding the existence of the Plaintiff’s trust deed and accordingly, the Trustee was not on any inquiry notice regarding the existence of the trust deed.
(473) 3/29/05, UNPULISHED, Adrian Mathai, Zubin Mathai, OTE Development U.S.A., Inc., 9056-0566 Quebec, Inc., dba OTE Canada vs. Daniel David Warren and Kathleen Ann Warren, 04-2671, Judge Boulden.
Plaintiff creditors filed a complaint against the Debtors seeking denial of discharge under 11 U.S.C. §§ 727(a)(2)(A) and (4)(A) for the Debtors’ conduct prior to filing bankruptcy. In anticipation of filing a chapter 7 petition, the Debtors generated $90,000 in cash by selling many of their assets, some at fire-sale prices. The Debtors then utilized the funds to purchase exempt assets and prepay future living expenses. Upon completion of all the pre-bankruptcy transactions, the Debtors had no realizable assets that could be liquidated to repay their over 6,000 creditors. When the Debtors filed their bankruptcy papers, they did not list some of the sales and expenditures, and only added some of the omitted transactions after they were discovered by the Plaintiffs. The Debtors excused their conduct by describing it as their desperate attempt to provide post-petition food and housing for themselves and their five children, and justified their failure to list the various transactions merely as an unfortunate, unintentional oversight. The Plaintiffs asserted in their complaint that the pre-bankruptcy activity was a calculated scheme by the Debtors to engage in an extraordinary, deliberate, and sustained selling frenzy and spending spree designed to hinder, delay, or defraud their creditors and then hide their actions through a false oath on their bankruptcy papers. The Court was struck by the Debtors’ animosity toward the Plaintiffs and determined that the Debtors would do just about anything to prevent their assets from falling into the Plaintiffs’ possession. The Debtors abused pre-bankruptcy planning because their purpose was to place assets out of reach of the Plaintiffs. The Court rejected the excuse, under § 727(a)(4)(A), that the Debtors were too busy, did not understand, were forgetful, or simply were inadvertently mistaken in their answers submitted in their Statement of Financial Affairs and Schedules. Instead, the Court concluded that the Debtors attempted to use up all their assets so that the Plaintiffs would receive nothing, and they intended to hide the transactions in their bankruptcy papers. The Court found that the Plaintiffs carried their burden of proof and denied the Debtors’ discharge under both §§ 727(a)(2)(A) and (4)(A).
(474) 4/15/05 UNPUBLISHED, FreeLife International, Inc. v. David F. Butler and Colleen A. Butler, 04-3012, Judge Boulden.
The Plaintiff brought a motion for summary judgment on its third claim for relief seeking to have declared nondischargeable contempt judgments issued by a state trial court totaling more than $900,000. The state court contempt judgments encompassed civil penalties assessed against the Debtors for contempt sanctions and attorney fees. The Plaintiff argued that the monetary sanctions imposed upon the Debtors by the state court are nondischargeable under § 523(a)(7) because they were fines or penalties which, even though not payable to a government entity, were for its benefit and in furtherance of vindicating the dignity and authority of the court. The Debtors claimed the contempt judgments fell outside the exception to discharge because they were not payed directly to a governmental unit as the statute requires. The Court acknowledged that there are good policy arguments favoring an exception to discharge which would uphold a court’s authority to impose sanctions and not allow a party to circumvent that authority through a bankruptcy filing. However, the Court ultimately decided that the better-reasoned approach is to rely upon the plain meaning of the statute and declined to follow non-controlling case law from other jurisdictions which expands the exception to civil sanctions. The Court found that § 523(a)(7) does not except from discharge the debts arising from a civil penalty payable directly to a creditor imposed on the Debtors by a state court.
(475) 5/16/05, UNPUBLISHED, Official Committee of Unsecured Creditors v. Benjamin Sanchez & his Attorney Merit Bennett, In re SIMON TRANSPORTATION SERVICES, 04-2255, Judge Clark.
The Court dismissed defendant's third-party complaint based upon a lack of jurisdiction. Defendant to a preference action under § 547 and brought a third-party complaint against insurance company arguing that if defendant were required to return funds received from the debtor as a preference, then insurance company would be liable to defendant under the uninsured motorist clause of defendant's insurance policy. The court found that the dispute between defendant and insurance company to be outside the Court's "related to" jurisdiction and dismissed without prejudice to refile before a court of competent jurisdiction.
(476) 3/8/04, UNPUBLISHED, JASON DEREK TROFF v. STATE OF UTAH, CAMILLE ANTHONY, in her official capacity as Executive Director of the Utah Department of Administrative Services, and GWEN ANDERSON, in her official capacity as Director of the Office of State Debt Collection, 04-2491, Judge Clark.
Debtor brought an adversary seeking a ruling that a state court restitution order was discharged in the debtor's Chapter 7 bankruptcy proceeding. In 1997, the Debtor was ordered to pay $239,969 in restitution by the Third District Court for the State of Utah. When debtor filed for Chapter 7 relief, the debtor properly listed the State of Utah in his schedules and statements and received a Chapter 7 discharge. It was uncontested that all restitution payments received by the State were turned over to the victim of the crime. The Court found that under § 523(a)(7), because the restitution payments were turned over to the victim, the restitution payments were not to and for the benefit of a governmental unit and because the restitution payments were compensatory for actual pecuniary loss, the state ordered restitution was discharged in debtor's Chapter 7 bankruptcy.
(477) 4/27/04, UNPUBLISHED, Alan Leigh and Tanya Lynn Leigh, 03-33764, Judge Thurman. (Opinion posted out of date sequence)
(478) 6/6/2005, UNPUBLISHED, Jason Derek Troff, Troff v. State of Utah, Camille Anthony and Gwen Anderson, 04-2491, Judge Clark.
After granting Debtor's motion for Partial Summary Judgment and denying the State's motion for Summary Judgment, the State appealed and filed a motion for a stay pending appeal. In denying the State's motion for stay pending appeal, the Court pointed out that the factors to be considered in determining a stay pending appeal motion are: (1) the likelihood that the party seeking the stay will prevail on the merits of the appeal; (2) the likelihood that the moving party will suffer irreparable injury unless the stay is granted; (3) whether granting the stay will result in substantial harm to the other parties to the appeal and; (4) the effect of granting the stay upon the public interest. The Court found that the State had not satisfied the requirements for a stay pending appeal even under the more liberal standards announced in Prairie Band of Potawomi Indians v. Pierce, 253 F.3d 1234 (10th Cir. 2001), and that a stay pending appeal would not be granted.
(479) 6/6/2005, UNPUBLISHED, James E. Love, successor trustee of the Chaille M. Love 1989 Revocable Trust v. Constance Love Norman; 03-2092, Judge Thurman.
After a three day trial, the Court ruled that the Defendant was liable for damages in excess of $1.0 million which were determined to be non-dischargeable pursuant to 11 U.S.C. 523(a)(4), where the Defendant defalcated while acting as a fiduciary and embezzled assets in a trust. The Court also awarded sanctions against the Defendant for improper delay of trial. The Plaintiff, who is the Defendant’s brother, commenced an adversary proceeding against his sister while acting as successor trustee of their father’s estate. The Defendant had taken physical control of her aged father, moved him from California to Utah, and convinced him to sign documents naming her as trustee of his estate. Thereupon, the Defendant spent virtually all of the cash and securities in the trust for her own benefit, except some modest living expenses for her father, over a period of approximately two years. In addition, she encumbered and or sold all of the real properties of the father for substantially her own benefit to the exclusion of her father. In so ruling the Court followed the Tenth Circuit BAP’s definition of embezzlement in Cousatte v. Lucas, 300 B.R. 526 (10th Cir. BAP 2003).
The Court declined to find fraud pursuant to 11 U.S.C. 523(a)(2) because there was no evidence of the Plaintiff’s reliance on statements by the Defendant. The Court also declined to find willful and malicious injury pursuant to §523(a)(6) because adequate evidence of maliciousness was not presented.. Finally, the Court sanctioned the Defendant for attorneys fees for improperly seeking a continuance on the eve of trial when she purportedly needed additional time for discovery, and, once given that time, she undertook no further discovery.
(480) 7/19/2005, UNPUBLISHED, In re Alaina Hopkins, 03-40481, Judge Thurman.
In a contested matter, the Court considered the application of Utah’s anti-deficiency statute, §57-1-32 Utah Code, the scope of issues presented in a pre-trial order and the qualifications of a creditor corporate officer to render opinion testimony on real property. The Court ordered the matter to proceed as an adversary proceeding and overruled the multiple objections of the Debtor to the creditor’s proof of claim asserting a secured claim on two parcels of real property. The Debtor’s son owned a construction company and convinced his mother, the Debtor, to take out a loan to finance a Model Home for the business. To secure the loan, the Debtor pledged both the Model Home and her personal residence. The son’s business failed and neither he nor his business paid the Creditor on the loan. As a result, the Creditor commenced foreclosure actions on both the Model Home and the Debtor’s residence. In response, the Debtor filed for chapter 13 relief. Among other claims, the Debtor alleged that the Creditor failed to properly advise her as to the consequences of signing the trust deed on her residence. The creditor obtained relief from stay as to the Model home early in the case. While the sale resulted in a loss, the Creditor did not amend its proof of claim or commence other action to assert a deficiency. The Debtor then argued that Utah’s Anti-Deficiency Statute (§57-1-32) prevented the Creditor from asserting a deficiency.
The Court found that the Debtor had been properly apprised of the terms of the trust deeds, that she voluntarily and knowingly signed the trust deed on her home and found no inappropriate conduct on the part of the Creditor in closing on the loan with the Debtor or that the Creditor committed any other improper act. In addition, the Court determined as a matter of law that §57-1-32 did not require the Creditor to amend its proof of claim or commence other action following the foreclosure on the Model Home to allow it to assert a deficiency, and as such, the Creditor maintained a security interest in the Debtor’s residence. In addition to affecting jurisdiction, §57-1-32 requires that the Court determine the fair market value of a property at the date of its sale before a judgment for any deficiency may be rendered. The Debtor argued that the pre-trial order did not specifically preserve this issue for trial and thus the Court could not take evidence of the fair market value of the Model Home. The Court overruled this objection, finding that parties had stipulated in the pre-trial order that there was a question as to whether the Creditor was "prevented from enforcing its rights against the Debtor because of...’anti-deficiency law.’" In so doing, the Court determined that such issue was broad enough to allow the Court’s inquiry into the fair market value of the Model Home. Finally, the Court found that the vice-president of the corporate Creditor was sufficiently qualified as an owner to give an opinion of value of the Model Home.
(481) 9/26/2005, PUBLISHED, In re Kenneth L. Perry, Loveridge v. The Ark of Little Cottonwood, 05-2183, Judge Thurman.
Chapter 7 Trustee sought to avoid a pre-petition use of a credit card to pay the Defendant Creditor. The Trustee alleged that the Debtor's use of credit pre-petition was avoidable as either a preference under § 547 or a fraudulent transfer under § 548. At issue in this case was whether use of credit, on its own, constitutes “a transfer of an interest of the debtor in property.”
The Court held that credit is not an interest of the debtor in property because credit is not property of the estate under § 541(a)(1). Citing to Begier v. IRS, 496 U.S. 53 (1990), the Court held that an interest of the debtor in property follows the standard for deciding whether credit is property of the estate. The Court held that credit is not property of the estate because it does not reduce to liquidity for creditors. Accordingly, the Court granted summary judgment in favor of the defendant and dismissed the complaint.
(482) 9/27/2005, UNPUBLISHED. In re Thomas Michael Tuttle and Heather Lee Tuttle, 05-26753, Judge Thurman.
Chapter 7 Trustee challenged the validity of the Debtors’ claimed exemptions for various wood-working tools and machines. The Trustee alleged that the tools were, in fact, property of a closely-held corporation, founded and operated by the Debtors. The Debtors argued that they owned the tools personally, pointing to evidence that they purchased the tools before forming the corporation.
The Court held that the Debtors may not claim exemptions for the tools. First, the Court held that under the alter ego theory, the Debtors had commingled corporate assets with individual assets to the extent that the fiction of corporate formalities should be disregarded to better reflect reality. Alternatively, the Court held that Debtors were equitably estopped from arguing that they owned the tools. The Court emphasized that the Debtors allowed the tools to stay at the corporation’s place of business throughout the life of the corporation. A creditor of the corporation could rationally believe that the corporation owned the tools.
The Debtors also argued that the tools were encumbered by a security interest orally granted to the father of one of the Debtors. The Court held that a valid security interest was not created. The Court noted that even where there is a judicial admission satisfying the statute of frauds, the admission is not sufficient to disregard the requirement under the UCC that a security agreement be in a writing.
(483) 10/19/2005, UNPUBLISHED, In re Mark R. Scott, 05-26202, Judge Thurman.
In this chapter 7 case, the court considered whether the debtor’s involuntary absence from his home barred him from asserting a $20,000 homestead exemption as his primary personal residence. The Chapter 7 Trustee objected to the Debtor’s claimed homestead exemption of $20,000, arguing that the Debtor had not lived in the home for the past two and a half years and that it wasn’t his primary personal residence as of the petition date. The Debtor argued that he did not leave the home wilfully, but was ordered out by a Protective Order of a Utah State Court.
The Court held that the Debtor could only claim a homestead exemption of $5,000 because the home was not his primary personal residence under Utah Code § 78-23-3. The Court determined that a Debtor must reside in a home as of the petition date to assert a homestead exemption of $20,000. Because the Debtor did not live in the home at the time of filing, he could not claim the home as a primary personal residence. The Court determined that under Utah law, it made no difference that the Debtor left the home involuntarily.
(484) 11/15/05, PUBLISHED, In re Green, 04-2889, Judge Thurman.
The Chapter 7 Trustee sought to revoke the debtor's discharge because she failed to obey a lawful order of the Court to turn over tax refunds. The Court determined that 11 U.S.C. 727(a)(6) required the Trustee to show more than a failure to comply with an order. Under section 727(a)(6), the Trustee must show that the debtor willfully disobeyed the Court's order. Because the Trustee did not initially direct the debtor to turn over her tax return, the debtor spent the money believing she had no obligation to turn it over. The Court ordered the debtor to turn over the money only after the debtor had spent it. Because the debtor did not have notice of her obligation to turn over the money before she spent it, the Court found that the debtor's failure to comply with its order was not willful, and entered judgment for the debtor.
(485) 11/23/05, PUBLISHED, In re Montoya, 05-80022, Judge Boulden, 333 B.R. 449 (Bankr. D. Utah 2005).
Individual debtor asked the Court to extend the automatic stay beyond the 30-day period provided for in § 362(c)(3)(A). The debtor had a Chapter 13 pending within the preceding one year period and that case was dismissed because the debtor failed to make her ongoing plan payments. Because the debtor’s prior case had been dismissed for failing to perform the terms of a plan confirmed by this Court, a presumption arose under § 362(c)(3)(C) that the debtor had "filed not in good faith." After finding that § 362(c)(3)(B) notice was proper, the Court found that the debtor had not met her burden of proving by clear and convincing evidence that the case had been filed in good faith as to the creditors to be stayed, and the Court denied the debtor’s motion. In so doing, the Court examined whether the debtor had filed in good faith as to the creditors to be stayed by employing the good faith filing factors articulated in Gier. The Court found that even though some of the Gier factors were less applicable in this context, they still gave the Court guidance in examining whether the present case was filed in good faith as to the creditors to be stayed.
(486) 11/23/2005, PUBLISHED, In re Sukmungsa, 05-80029, Judge Boulden, 2005 WL 3160607.
Section 109(h) of the Bankruptcy Code, as enacted by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, provides that individual debtors must either complete a briefing from an approved nonprofit budget and credit counseling agency within 180 days prepetition or request a waiver. In accordance with this statutory bar to bankruptcy relief, Local Rule 1007-2(d)(1) requires the Clerk of Court to dismiss a case if a debtor fails to certify compliance with § 109(h) on the petition. The debtors in this case failed to check either box on the petition certifying such compliance, and an Order of Dismissal was entered. The debtors moved to vacate the Order of Dismissal on grounds of excusable neglect under Fed. R. Civ. P. 60(b) and Fed. R. Bankr. P. 9024. The Court conducted an excusable neglect analysis in accordance with the Supreme Court’s decision in Pioneer Investment Services Company v. Brunswick Associates Limited Partnership et al., 507 U.S. 380 (1993), and found that excusable neglect in failing to certify § 109(h) compliance on the petition had not been shown by either the debtors or debtors’ counsel. Most importantly, the Court found that the reason for the omission and the concomitant delay were within the reasonable control of the debtors and their counsel. The inconsistent testimony and documentary evidence demonstrated counsel’s failure to make reasonable inquiries under Fed. R. Bankr. P. 9011 and established uncertainty as to whether the debtors had even received the prepetition briefing. Although Rule 9011 sanctions were not imposed, the Court did note counsel’s obligations under the Rule to make reasonable inquiries into the underlying factual assertions of filed documents.
(487) 12/07/2005, PUBLISHED, In re Galanis, et al, 05-80037,2005 WL 3454411 (Bankr. D. Utah Dec. 7, 2005), Judge Thurman.
Under § 362(c)(3) of the BAPCPA, a debtor who had a prior case pending within one year of filing the present case receives an automatic stay lasting for thirty days only, unless the debtor shows that he or she filed the present case in good faith. Each debtor in these cases had a prior case pending within one year of filing their present cases. They each argued that the Court should extend the stay because they filed in good faith. The Court determined that a debtor’s good faith under § 362(c)(3) should be governed by a totality of the circumstances test, and looked to some of the factors historically used to determine a debtor’s good faith under § 1307(c), as applied in In re Geir, 986 F.2d 1326 (10th Cir. 1993). The Court also considered three additional factors, not traditionally part of the Gier factors: 1) why the debtor's prior case was dismissed; 2) the likelihood that the debtor will be able to fund a chapter 13 plan; and 3) whether the Trustee or any creditors objected to the motion. Under this analysis, the Court determined that each debtor met their burden under § 362(c)(3) to show they filed in good faith, and accordingly, the Court granted the motions in this case.
(488) 2/21/2006, PUBLISHED, In re Jason Fawson, 05-80224, In re Francis Webster and Diana Webster, 05-80217, 338 B.R. 505, (Bankr. D. Utah 2006), Judge Boulden.
Chapter 7 debtors failed to file their payment advices within 45 days of filing their petitions. The debtors filed motions or requests to enlarge the time to file their payments advices (which are required to be filed within 15 days of filing the petition) but these requests were not made until the 45-day time limit articulated in 11 U.S.C. § 521(i)(1) had expired. The Court found that the belated requests for enlargement of time due to excusable neglect were time barred, and that § 521(i)(1) mandates the dismissal of cases when debtors fail to timely comply with the requirements of § 521(a)(1). In the absence of a § 521(i)(3) or (4) motion, and at the expiration of the 45-day time period, the cases were dismissed by operation of the statute effective the 46th day after filing.
(489) 3/8/2006, PUBLISHED, In re Tomasini, 05-80115, Judge Thurman.
The Court was presented with the issue of whether a Debtor who failed to show that his case was filed in good faith at a hearing on a motion to extend the stay under section 362(c)(3)(B) could obtain confirmation of a chapter 13 plan under 1325(a)(7) by showing good faith for confirmation purposes. The Debtor had a bankruptcy case pending and dismissed within one year of filing the present case. The Debtor moved to extend the automatic stay in this case under section 362(c)(3)(B), arguing that he filed the present case in good faith as to all creditors. The Court denied that motion, finding that the Debtor failed to carry his burden under section 363(c)(3)(B) to show that he filed the present case in good faith as to all creditors by clear and convincing evidence.
At the hearing on confirmation of the debtor's chapter 13 plan, the Chapter 13 Trustee argued that the case could not be confirmed because the Court had already found the case was not filed in good faith. The Court determined that the good faith determinations under sections 362(c)(3)(B) and 1325(a)(7) are both governed by a totality of the circumstances analysis, as discussed by the Court's ruling in In re Galanis, 334 B.R. 658 (Bankr. D. Utah 2005) and that a lack of finding of good faith at a motion to extend does not bar the Court's good faith determination at confirmation. The application and focus of the Galanis factors is different when determining good faith at confirmation. The focus of motion to extend must be on creditors, whereas the focus of the Court's good faith determination for purposes of confirmation must be on the debtor.
In considering good faith under section 1325(a)(7), the Court determined that it will look first to the debtor's stated motivation in filing from the debtor's perspective. If the debtor's motivation is considered a good faith motivation, the Court will then consider the remaining Galanis factors.
(490) 3/16/2006, PUBLISHED, In re Clay, 05-80043, Judge Thurman.
The Chapter 13 Trustee objected to the Debtor's proposed chapter 13 plan because it proposed to pay the Debtor's secured creditors directly. The Trustee argued that the Bankruptcy Code does not generally allow a Debtor to make payments directly to a secured creditor. The Trustee also argued that changes to the Bankruptcy Code under the BAPCPA overruled any caselaw which might have allowed for direct payments.
Citing to In re Case, 11 B.R. 843 (Bankr. D. Utah 1981), the Court held that before the BAPCPA a debtor could choose to pay a secured creditor directly so long as the creditor is paid pursuant to the terms of the underlying contract. The Court analyzed changes to the Bankruptcy Code under the BAPCPA, and concluded that In re Case was not overruled by the BAPCPA. A debtor may propose a chapter 13 plan to pay secured creditors directly so long as the creditor is paid pursuant to the underlying contract.
(491) 3/22/2006, PUBLISHED, In re Jass, 05-80088, Judge Thurman.
Section 1325(b)(1)(B) provides that where a creditor or a chapter 13 trustee objects to a proposed plan, the debtor must provide all of his or her "projected disposable income" to unsecured creditors. Section 1325(b)(2) provides a detailed definition for "disposable income." The BAPCPA did not alter the term "projected disposable income," nor did it alter the defined term, "disposable income." The changes did change the definition of "disposable income" to refer to the number resulting from a debtor's Current Monthly Income Form (Form B22C).
The debtor proposed a plan which provides to unsecured creditors less than the amount resulting from Form B22C. The chapter 13 trustee objected, arguing that the debtors were bound by their Form B22C. The Court held that the word "projected" modifies the defined term, "disposable income." The Court held that Form B22C will always be the starting point for the Court's inquiry under section 1325(b), and the Court will presume that the number resulting from Form B22C is a debtor's "projected disposable income." Nevertheless, if a debtor can show a substantial change in circumstances such that the numbers reflected on Form B22C are not representative of the debtor's projected finances, the Court held that a debtor may propose a plan commensurate with his or her Schedules I and J. Nevertheless, if a debtor can show a substantial change in circumstances such that the calculation reflected on Form B22C is not representative of the debtor's reasonable foreseeable income and expenses, the Court will consider confirming a plan that proposes payment to unsecured creditors commensurate with proper calculations on Schedules I and J. This ruling should not be considered carte blanch authority for approving any changes, but only in rare situations.
(492) 3/29/2006, PUBLISHED, In re Easthope, 06-20366, 2006 WL 851829 (Bankr. D. Utah), Judge Boulden.
A secured creditor moved for an order under § 362(c)(4)(A)(ii) confirming that no stay was in effect arguing that the individual debtor had two cases pending within the previous year. The debtor had one prior Chapter 13 case that was dismissed within the previous year and another prior Chapter 13 case that was closed within the previous year. This earlier Chapter 13 case had been dismissed more than a year prior to the filing of the current case. The secured creditor argued that a case is still “pending” for § 362(c) purposes until it is closed and, therefore, the debtor had two cases pending in the previous year. The Court determined that both the plain meaning of the word “pending” and policy considerations demonstrate that a case is no longer pending once it has been dismissed. Given this definition, the debtor only had one case pending withing the previous year and the 30-day automatic stay did go into effect under § 362(c)(3). The secured creditor’s order seeking confirmation that no stay was in effect was, therefore, denied.
(493) 4/10/2006, PUBLISHED, In re Montoya (Montoya II), 05-80022, ___ B.R. ___, 2006 WL 931562, No. 05-80022 (Bankr.D. Utah April 10, 2006), Judge Boulden.
The Debtor proposed a Chapter 13 plan in which she sought to pay for a car that was purchased within 910 days of filing her petition (910-vehicle claim) by bifurcating the secured claim under 11 U.S.C. § 506(a)(1), paying the secured value of the car in full, and paying only a small percentage of the unsecured balance. Although the hanging paragraph found after § 1325(a)(9) now prohibits bifurcation under § 506(a)(1) in certain instances, the Debtor and the Chapter 13 Trustee argued that bifurcation is still allowed because the creditor secured by the car failed to file an objection to the Debtor’s Chapter 13 plan and, therefore, should be deemed to accept the plan under § 1325(a)(5)(A). The Court found (1) that under the BAPCPA, § 1325(a)(5) can no longer be used to cram down a 910-day vehicle claim; (2) that a creditor’s failure to object to a plan is not deemed implied acceptance of that plan when the plan proposes treatment that is contrary to the statute; and (3) a plan that incorrect bifurcates a 910-day vehicle claim does not comply with the provisions of Chapter 13 and, therefore, cannot be confirmed under § 1325(a)(1).
(494) 4/18/2006, PUBLISHED, In re GENEVA STEEL, LLC, Jamens T. Markus v. Albert Fried Jr. et al, 05P-02578, Judge Clark.
The Chapter 11 trustee brought an adversary proceeding against certain members of Geneva's Board of Directors alleging breach of duty of care, breach of duty of good faith, breach of duty of loyalty and breach of fiduciary duty. Two of the defendants filed a motion with the Court to have the trustee's causes of action declared as "non-core" matters under 28 U.S.C. § 157(b)(3). Both of the moving directors had filed proofs of claim in the Geneva bankruptcy proceeding. An element of the Director's proofs of claim included an indemnity claim asserting claimant's rights to be indemnified, defended, or held harmless by Geneva for any liability that may arise from the Director's service on the Board of Directors. Upon being served with the trustee's complaint, both directors filed a counterclaim in the adversary proceeding asserting their indemnification rights. The Court ruled that the causes of action in the trustee's adversary proceeding against the directors were a compulsory counterclaims to the director's proofs of claim and the Court ruled that the director's counterclaims were compulsory counterclaims to the causes of action brought by the trustee in the adversary proceeding. The Court held that under 28 U.S.C. § 157(b)(2)(C), and 28 U.S.C. § 157(b)(2)(O), the causes of action asserted by the trustee are "core" matters.
(495) 4/26/2006, UNPUBLISHED, In re Beckstead, 05-35213, Judge Thurman.
The Court was called upon to determine whether a real estate commission was property of the estate and if so, whether it was exempt. One of the Debtors in this case was employed as a real estate agent under the supervision of her principal broker. Before filing for chapter 7 bankruptcy relief, the Debtor produced buyers to certain sellers, who were ready, willing and able to purchase the sellers' real property. The Debtor, acting as a real estate agent, performed the bulk of her services before the filing of the Debtor's case. The sale did not close until after the Debtor filed this bankruptcy case. Upon reciept of the commission from the sale, the Debtors amended their statements and schedules to include the commission and claimed an exemption for 75% of the commission under Utah R. Civ. P. 64D. The chapter 7 trustee assigned to the Debtors' case objected to their claimed exemption, arguing that a commission is not subject to an exemption under Rule 64D.
The Court first held that under Utah law the commission is property of the estate because the Debtor had an agreement with her broker that she was entitled to a commission whenever the broker became entitled to its commission. Under Utah law a broker is entitled to a commission when the broker presents a seller with a buyer who is ready, willing and able to purchase the property at issue, regardless of whether the sale actual goes to completion. Because the broker was entitled to collect its commission before the Debtor filed for bankruptcy relief, so too was the Debtor entitled to collect the commission. Thus, the Court concluded that the commission was property of the estate.
The Court also held that under Utah law a commission is subject to an exemption under Rule 64D. The Court reached this conclusion by considering the language and history of Rule 64D, applying Utah rules of statutory construction.
(496) 5/10/06, UNPUBLISHED, In re Belinda Marek, GE Money Bank v. Belinda Marek, 05-02766, Judge Clark.
Creditor filed adversary to have creditor's debt excepted from discharge under § 523(a)(2), but filed the adversary proceeding after debtor had been issued a discharge and after debtor's case had been closed. Creditor served a summons and complaint upon debtor after closure of Debtor's case as well. Debtor did not file an answer to the summons and complaint or otherwise defend. Creditor submitted an application for default judgment and the matter came before the court on hearing. Creditor argues that under Knotrick v. Ryan, 540 U.S. 443 (2004). Creditor is entitled to a default judgment because Debtor failed to assert Creditor's late filing of the adversary proceeding as an affirmative defense. Creditor argued that service upon Debtor was effective because the debtor is an individual and that service upon individuals is governed by F.R.B.P. 7004(b)(1).
he Court held that service of process upon a debtor is governed by Rule 7004(b)(9) rather than Rule 7004(b)(1), that Creditor's service upon the Debtor was ineffective because the Debtor's case was closed at the time that Debtor was served with the summons and complaint, and that Creditor must reopen debtor's case in order to effectuate service of process upon the Debtor under Rule 7004(b)(9).
(497) 5/30/06, UNPUBLISHED, In re Wilkinson, 06-20441, Judge Boulden.
Chapter 13 debtor attempted to comply with 11 U.S.C. § 521(a)(1)(B)(iv) by filing all pay advices received during the 60 days prepetition but erroneously filed one pay advice for the wrong year. The missing pay advice was filed immediately prior to the confirmation hearing but outside the 45-day time limit articulated in § 521(i). The debtor filed a Motion to Find Compliance with 11 U.S.C. § 521 or, in the Alternative, Motion to Vacate Order of Dismissal arguing either that the debtor had “substantially complied” with the requirements of § 521 or that the Court otherwise had discretion to not dismiss the case. Elaborating on the Court’s decision in In re Fawson, 338 B.R. 505 (Bankr. D. Utah 2006), the Court rejected the debtor’s interpretation of the statute and reiterated the holding that automatic dismissals occur on the 46th day after the petition is filed without judicial intervention unless a timely extension motion is filed. The Court also rejected an argument based on substantial compliance in light of the strict statutory scheme of § 521(a)(1) and (i). Finally, the Court held that Federal Rule of Bankruptcy Procedure 9024, incorporating Federal Rule of Civil Procedure 60(b), cannot be used to vacate a dismissal that occurred automatically by operation of statute.
(498) 6/21/06, PUBLISHED, In re Wilbur, 06-20104, Judge Thurman.
In this case, the Court was called upon to determine the scope of the phrase "unsecured creditors" in the context of Section 1325(b)(1)(B) relating to confirmation of a chapter 13 plan. That section provides that upon objection to confirmation by a party in interest, the Court may confirm a debtor's proposed chapter 13 plan only if the debtor proposes to pay unsecured creditors in full, or proposes to pay the debtor's projected disposable income for the applicable commitment period to "unsecured creditors." The Debtors in this case urged the Court to adopt the plain language of §1325(b)(1)(B). They contended that the phrase "unsecured creditors" refers to both priority and non-priority unsecured creditors which resulted in a lower payment to the unsecured creditors. The chapter 13 Trustee disagreed and objected to the plan.
The Court declined to enforce the plain language of section 1325(b)(1)(B) because that interpretation conflicts with manifest Congressional intent, and would bring an absurd result. The Court concluded that the reference in section 1325(b)(1)(B) to "unsecured creditors" refers to non-priority unsecured creditors only, requiring the Debtors' proposed chapter 13 plan to return to non-priority unsecured creditors at least the amount calculated on Form B22C, which in this case would be a much greater amount than proposed. Since the Debtors' proposed plan did not comply with this requirement, the Court held that the Debtors' proposed plan did not meet the requirements of section 1325(b)(1)(B) and was not confirmable.
(499) 2/14/2003 UNPUBLISHED, In re Craig M. Blansett and Jennifer R. Blansett, 00-21397, Judge Thurman. (opinion posted out of date and number sequence, also in the year 2003)
(500) 7/11/2006, PUBLISHED, In re Travis Lane Curtis, 06-20001, Judge Boulden.
The Debtor proposed a Chapter 13 plan in which he sought to bifurcate the secured claims of two different creditors under 11 U.S.C. § 506(a)(1). These creditors had provided financing to the Debtor within the previous year that allowed him to purchase two semi-tractors used in his business. The Debtor argued that the hanging paragraph of § 1325(a) requires that a creditor whose collateral consists of “any other thing of value” purchased within one year of filing can only avoid having its secured claim crammed down under § 506(a)(1) if it has a purchase money interest in the collateral. Furthermore, the Debtor argued that a creditor can never have a purchase money security interest in a motor vehicle in Utah. The Court found that the hanging paragraph does require a creditor whose collateral consists of “any other thing of value” to have a purchase money security interest in the collateral to avoid the cram down of its secured claim. The Court also found that the Utah Uniform Commercial Code regulates the creation of security interests in motor vehicles in Utah meaning that Creditors can have purchase money security interests in motor vehicles. The Debtor’s objections were overruled and his plan was denied confirmation without prejudice.
(501) 6/29/2006, PUBLISHED, In re Fuger, 06-20801, Judge Thurman.
The Court was called upon to determine the meaning of the phrase, “applicable commitment period” found in Section 1325(b)(1)(B) under the Bankruptcy Abuse Prevention and Consumer Protection Act (“BAPCPA”). Through an analysis of plain language of the statute and prior case law, the Court ruled that a chapter 13 Debtor may propose a plan which does not require a set length of time to be in a plan, but which pays a specific amount to unsecured creditors. This amount would normally be calculated and paid over the applicable commitment period. The 'applicable commitment period,’ 3 or 5 years, serves to aid the Debtor in determining the amount he or she must return.
(502) 8/22/2006, PUBLISHED, In re Clemens, 06-20124, Judge Thurman.
The Court interpreted the BAPCPA amendments to section 330(a)(3) and 330(a)(7) regarding allowance of chapter 7 trustees' fees. The Court held that under these amendments, the 10th Circuit's opinion of In re Miniscribe, 309 F.3d 1234 (2002) was not overruled but that section 326 must now be a part of the Court's Lodestar analysis, instead of simply acting as a cap against Trustee's fees.
In reviewing trustee fee requests, the Court will now consider: 1) the time and labor required; 2) the novelty and difficulty of the issues involved; 3) the skill requisite to perform the service properly; 4) the preclusion of other employment by the trustee due to his or her acceptance of the appointment as trustee in the case; 5) the customary charges by other professionals involved in the case and by the field in general; 6) the contingent nature of the fee; 7) time limitations imposed by acceptance of the appointment; 8) the amount generated by the trustee's efforts for creditors and the results obtained; 9) the experience, reputation, and ability of the trustee; 10) the 'undesireability' of the case; 11) awards in similar cases; 12) computation of any multiplier for extraordinary results obtained by the trustee; 13) the amount resulting from the calculations under section 326(a); 14) whether the trustee has engaged in conduct which might justify denial of compensation under section 326(d); 15) whether notice of the trustee's fee request is appropriate, and whether any party in interest objects to the fees; and 16) whether the fees are to be paid from cash collateral and whether the creditor secured by the collateral consents.
In this case, the chapter 7 Trustee's request for fees was not accompanied by any documentation of the hours spent in prosecuting the case. The Court held that without such documentation, it could not undergo the required "Lodestar" analysis discussed above. Accordingly, the Court denied the Trustee's request for fees without prejudice.
(503) 9/12/2006, UNPUBLISHED, In re Landers, 06-22265, Judge Boulden.
As the Court has previously discussed in In re Fawson, 338 B.R. 505 (Bankr. D. Utah 2006) and In re Wilkinson, 346 B.R. 539 (Bankr. D. Utah 2006), § 521(a)(1)(B)(iv) and (i)(1) operate to automatically dismiss individual debtors’ cases 46 days after the petition date if “copies of all payment advices or other evidence of payment received within 60 days before the date of the filing of the petition, by the debtor from any employer of the debtor” are not filed by the 45th day. In this case, it appeared that the Chapter 13 Debtor failed to timely file one payment advice for the pay period ending April 30, 2006 and that the case had potentially been dismissed effective August 9, 2006. At the confirmation hearing, the Debtor testified only that he could not recall whether he received a payment advice for the April 30th pay period although he had no breaks in employment and always received such payment advices from his employer for his bi-weekly paychecks. The Debtor then argued that his belief as to whether all required payment advices were filed was controlling under § 521(a)(1)(B)(iv). The Court ruled that the weight of the evidence contradicted any alleged belief by the Debtor that he had timely filed all required payment advices. The Court also ruled that there is no statutory basis for concluding that a debtor’s subjective belief is controlling rather than the objective facts of whether qualifying payment advices were received and filed.
(504) 12/12/2006 UNPUBLISHED, In re Potter, 06-23025, Judge Thurman.
The Court was called upon to determine whether the Debtors' motor vehicle was subject to a purchase money security interest where they inherited the vehicle and assumed the decedent's debt on the vehicle. The court held that the debt created a security interest, but not a purchase money security interest. Because the security interest at issue was not purchase money, the Court held that the Debtors could cram down the creditor's claim under section 1325(a) even though the debt was incurred within 910 days of filing.
(505) 12/21/2006, PUBLISHED, In re Russell D. Hollingsworth, 06-24498, Judge Clark.
Debtor brought a motion under § 362(c)(3)(B) to extend the automatic stay. The debtor had been a debtor in one previous bankruptcy proceeding within one year of the debtor's present case. The reason for the present bankruptcy proceeding, as stated in the debtor's motion to extend the automatic stay, was to protect the debtor's home from foreclosure. Pursuant to § 1306, the debtor's home is property of the estate. The Court adopts the reasoning set forth in In re Johnson, 335 B.R. 805 (Bankr. W.D. Tenn. 2006) which finds that the plain language of § 362(c)(3)(A) dictates that the 30-day time limit applies only to "debts" or "property of the debtor" and not to "property of the estate". Because the automatic stay continues to protect "property of the estate" after expiration of the 30-day time limit found in § 362(c)(3)(A), relief under § 362(c)(3)(B) is unnecessary. The Court found that debtor's motion did not contain a present controversy and the motion was denied.
(506) 1/9/2007, PUBLISHED, In re Hanks, 06-22777 , Judge Boulden.
As calculated using historical income figures in their Statement of Current Monthly Income and Calculation of Commitment Period and Disposable Income (Form B22C), the chapter 13 Debtors’ income was above the median for Utah households of the Debtors’ size. But the Debtors’ actual income had decreased prepetition and continued to be lower postpetition than the historical Form B22C numbers suggested. The Debtors proposed a chapter 13 plan that provided for monthly payments to the trustee based on their actual current disposable income rather than the larger payments required by strict adherence to Form B22C, and the chapter 13 trustee filed an objection to confirmation. The Debtors presented evidence and argued that the monthly disposable income amount generated by Form B22C’s income and expense calculations is not dispositive of the return to general unsecured creditors if the Debtors could show a “substantial and material change” in their actual financial circumstances. The Court denied confirmation of the Debtors’ plan without prejudice, holding that the calculations set forth in Form B22C are determinative with respect to the amount that above-median debtors must return to their general unsecured creditors unless “special circumstances” can be shown as set forth in § 707(b)(2)(B) of the Bankruptcy Code.
(507) 1/19/2007, UNPUBLISHED, In re Giles, 06-23988, Judge Thurman.
The debtors in this chapter 13 case obtained credit counseling 182 days before filing for bankruptcy relief. Section 109(h), by its terms, requires debtors to obtain credit counseling 180 days before filing. The Court held that it lacks discretion to waive a debtor's failure to obtain the required credit counseling required by section 109(h). To that end, the Court also held that it lacked discretion to find that the debtors had complied section 109(h) by satisfying the "spirit" of the bankruptcy provision. . The Court granted the Trustee's Motion to Dismiss, finding that it lacked jurisdiction over the case.
(508) 1/25/2007, PUBLISHED, In re Lawson, 06-22766 and In re Boynton, 06-22812, Judge Boulden.
In each of two chapter 13 cases, the Debtors’ income was above the median for Utah households of the Debtors’ size, but the Debtors each had negative monthly disposable income as calculated on their Statements of Current Monthly Income and Calculation of Commitment Period and Disposable Income (Form B22C). The Debtors each proposed a plan providing for regular monthly payments to the trustee but a return of only $500 pro rata to general unsecured creditors. Although both plans would apparently run for more than 36 months, neither plan was expected to run for a full 60 months. The chapter 13 trustee objected to confirmation on two grounds: (1) that the plans for these above-median Debtors must continue for a full five years; and (2) that their plans must provide for the submission to the trustee of postpetition tax refunds received by the Debtors in addition to their monthly plan payments in accordance with pre-BAPCPA practice in the District of Utah. On the second point, the trustee argued in the alternative that if the turnover of postpetition tax refunds was no longer required, then the Debtors must only be allowed to deduct their actual anticipated future tax expense on line 30 of Form B22C rather than whatever amount they had withheld from their paychecks. The Debtors argued both that they do not have to contribute their tax refunds to the plan and that they are entitled to deduct the full amount withheld from their income as the tax expense on line 30 of Form B22C. The Court held that the “applicable commitment period” concept in § 1325(b)(4) is “fundamentally irrelevant” for above-median debtors with negative monthly disposable income. The Court also held that although the submission of postpetition tax refunds was no longer required under § 1325(b)(1)(B), above-median debtors are only permitted to deduct their actually incurred future tax expense on line 30 of Form B22C rather than the full amount of their withholdings.
(509) 2/6/2007, PUBLISHED, In re Tonioli, 06-21049, Judge Thurman.
The Court was called upon to determine whether chapter 13 debtors could modify their plan to abate delinquent payments where the effect of the modification would be unequal monthly payments made to a secured creditor. Section 1329(b)(1) provides that the Court may allow a proposed modification so long as the modified plan would comply with section 1325(a). Section 1325(a)(5) provides that if a debtor pays a secured creditor in periodic payments, those payments must be in equal monthly amounts. The Court held that the proposed modification did not comply with this provision, but was still permissible because the creditor's silence to the proposed modification constitutes implied consent.
(510), 2/22/2007, PUBLISHED, In re Blakeley, 06C-23646, Judge Clark.
Upon filing bankruptcy, the debtor, pro se, indicated an intention to reaffirm debt with Credit Union secured by debtor’s vehicle. Within 30 days of the 341 meeting, Debtor entered into the reaffirmation agreement. Because debtor is pro se, § 524(c)(6)(A) requires that the Court find that the reaffirmation agreement not impose an undue hardship and is in the best interest of creditors. Debtor was under the impression that if the Court did not approve the reaffirmation agreement, Credit Union would be free to repossess the vehicle notwithstanding the fact that Debtor was current on all payments required under the contract and the vehicle was insured. The Court found that because debtor had timely complied with all requirement found under §§ 521(a)(2), 521(a)(6), 362(h)(1) and 521(d), that it was not necessary for the Court to approve the reaffirmation agreement in order for the debtor to “ride through” the bankruptcy and retain possession of the vehicle. Because Debtor complied with the requirements found under § 521(d), the Bankruptcy Code’s limitation on contract ipso facto clauses remain in effect and Credit Union is prevented from declaring the contract in default by virtue of the Debtor’s insolvency or bankruptcy.
(511) 3/19/2007, UNPUBLISHED, In re Stauffer, American General Finance of Utah, Inc. v. Stauffer, Judge Clark.
Creditor filed an adversary proceeding seeking exception to debtor’s discharge under § 523(a)(6) - willful and malicious conduct. Although the complaint sounded in other grounds, no other subsections of § 523 were pled by creditor. The debtor filed a motion to dismiss the adversary proceeding and a motion an award of fees and costs under § 523(d). The Court granted debtor’s motion to dismiss with prejudice, but denied debtor’s motion for fees and costs. Noting that § 523(d) refers only to determinations of dischargeability brought under § 523(a)(2), and does not mention determinations of dischargeability brought under § 523(a)(6), the Court applied the maxim expression unius est exclusio alterius, a canon of statutory construction which holds that to include one thing in a statute implies the exclusion of the other. In so doing, the Court found that the award of fees and costs incurred by a debtor defending an adversary proceeding brought under § 523(a)(6) is beyond the scope of §523(d).
(512) 2/23/2007, UNPUBLISHED, In re Birch, 06-23273, Judge Thurman.
The Court determined that under Utah law, the Debtor who was the purchaser under a real estate purchase contract obtained equitable ownership of the real property under the doctrine of equitable conversion, while the seller retained bare legal title. The Court further determined that forfeiture provisions in real property contracts should be enforced so long as the seller strictly complies with its terms. Where a forfeiture provision is not automatic and gives the seller the right to declare a forfeiture, the buyer retains rights in the property until the seller specifically declares a forfeiture. In this case, the Court determined that the Debtor still held an interest in the property because, although the seller had declared a default, the seller failed to declare a pre-petition forfeiture of the buyer's (Debtor's) interest.
Debtor executed a real estate purchase contract pre-petition to purchase real property in installment payments. The contract contained a forfeiture provision which could be exercised at the election of the seller upon the Debtor's breach. The Debtor breached the contract and the seller sent the Debtor a letter demanding cure. The seller did not declare a forfeiture of the Debtor's interest in the property pre-petition. The Debtor's chapter 13 plan proposed to fund the plan in principle part by selling the real property. The seller objected to confirmation, arguing that he owns the property because of the forfeiture provision and the notice he had sent. The Court overruled the objection and at a later date, confirmed the plan.
(513) 3/23/2007, PUBLISHED, In re George Love Farming, 06-20612, Judge Thurman.
Interpreting In re Marrama, 127 S.Ct. 1105 (2007), the Court held that it has authority to deny a Motion to Convert a case from chapter 7 to 11 where the conversion is sought in bad faith. The Court held that the burden to show bad faith is on the parties objecting to the conversion, and applied the factors considered by the Tenth Circuit Court of Appeals in In re Nursery Land Dev., Inc., 91 F.3d 1414 (10th Cir. 1996) to determine whether bad faith exists in this case. The Court determined that bad faith had been established and denied the Motion to Convert.
(514) 5/9/2007, UNPUBLISHED, In re Martin, 07-20209, Judge Thurman.
In this chapter 13 case, the Court was presented with the issue of whether the Debtors could deduct secured claim payments in calculating their Disposable Income and whether they had proposed their plan in good faith. The Debtors proposed to retain a boat and trailer both of which were unrelated to the debtors' business and were subject to secured claims which were proposed to be paid in full. The chapter 13 Trustee objected.
The Court determined that under post-BAPCPA law, a debtor need not show that a proposed expense is "reasonably necessary" for the debtor's maintenance and support to comply with section 1325(b). The court held that under the terms of sections 707(b) and 1325(b), a debtor may claim deductions in calculating Disposable Income for any secured payments owing, regardless of whether those payments are reasonably necessary for a debtor's maintenance and support. However, the Court also determined that the debtors' proposal to retain the boat and trailer was not made in good faith and denied confirmation.
(515) 7/12/2007, PUBLISHED, In re Miller, 07-20270, Judge Boulden.
Chapter 13 debtor attempted to comply with 11 U.S.C. § 521(a)(1)(B)(iv) by filing three of the four payment advices he received during the 60 days prepetition, arguing that the year-to-date information on the fourth payment advice constituted adequate “other evidence of payment” as to the information that would be contained on the missing third payment advice. The Court rejected the debtor’s interpretation of the statute, holding that the plain language of § 521(a)(1)(B)(iv) is focused on the evidence received from an employer during the 60-day prepetition period rather than the payment received during that period. Further, evidence from the employer must be for the specific pay period, and a non-employer’s extrapolation of what the pay advice might have shown using other data received from the employer is insufficient. The Court also rejected the debtor’s alternative arguments that the automatic dismissal provision in § 521(i)(1) is unconstitutional both facially and as applied in the debtor’s case as a violation of procedural due process. As such, the debtor’s case was automatically dismissed by § 521(i)(1) on the 46th day after the petition was filed.
(516) 7/25/2007, UNPUBLISHED, In re Carrillo, 07-20423, Judge Thurman
The Debtor filed a motion to reopen his case, vacate his discharge as to one creditor and allow the debtor to file a reaffirmation agreement between he and a secured creditor, and then reimpose the discharge. The Court determined that under sec. 524(c)(1), a reaffirmation agreement is not enforceable if it is entered post-discharge and denied the motion to reopen as granting the relief to vacate the discharge would be futile.
(517) 10/24/2007, PUBLISHED, In re Darin L. Burt, 07-23193, Judge Thurman.
In this chapter 13 case, the issue before the Court was whether Ford Motor Credit held a purchase money security interest in the Debtor’s vehicle. Ford Motor Credit filed an objection to the confirmation of the Debtors’ proposed Chapter 13 plan on the basis that the Debtors’ plan improperly crammed down Ford Motor Credit’s secured claim in violation of 11 U.S.C. §1325(a). BAPCPA amended §1325 to give special protection to creditors who finance automobile transactions that occur within 910 prior to the debtors’ filing for chapter 13 relief. This special protection is given to creditors that hold a purchase money security interest in the vehicle. The Court determined that Ford Motor Credit’s entire claim, including the portion of the claim attributable to negative equity and costs associated with the purchase of the vehicle, qualified as a purchase money security interest and must be paid in full as a secured claim. Accordingly, the Court concluded that the hanging paragraph of §1325(a) applied in this case and the Debtor could not “cram down” Ford Motor Credit’s claim pursuant to §506. Therefore, Ford Motor Credit’s objection to confirmation was sustained and confirmation of the Debtor’s plan was denied without prejudice.
(518), 2/12/2008, PUBLUSHED, In re Austin, 07-22771, Judge Clark.
The Debtors purchased a van using Zions Bank to finance the purchase. Debtors traded in an older vehicle receiving a $2,500 trade-in credit and rolling over a $5,500 balance owed on the older vehicle into the financing of new vehicle. The net effect of the trade-in was for Zions to roll $3,000 of negative equity into the financing. After filing Chapt 13, the Debtor's objected to Zions' proof of claim arguing that the negative equity portion of the proof of claim was not entitled to purchase money interest treatment and therefore not protected from bifurcation by the "hanging paragraph" found under § 1325(a)(9). Zions introduced evidence at the hearing to the effect that rolling the negative equity into the financing was a necessary part of the transaction, that Debtors would not have financially qualified for the loan but for the negative equity financing, and that the negative equity financing was in fact used by the Debtors in conjunction with the purchase of the van. The Court found that Zions' financing met the criteria of Utah Code Annotated § 70A-9a-103(1)(b), and ruled that the entire transaction, including the negative equity financing, was entitled to purchase money interest status. Debtors' objection to Zions' proof of claim was denied.
(519) 4/ 21/2008, PUBLISHED, In re Godfrey, 07-24065, Judge Thurman.
The Court in this case clarified the breadth of Utah’s homestead exemption law as it applied to a pre-petition sale of a home. The Chapter 13 Trustee objected to the Debtor’s claimed homestead exemption because the Debtor voluntarily transferred a portion of the proceeds derived from the sale of his home prior to filing, but failed to disclose the transfers on his initial Statement or Schedules. The Chapter 13 Trustee asserted that “proceeds” must be kept in their original form and not used to pay for other items in order to qualify for the homestead exemption under Utah law. The Chapter 13 Trustee further asserted that the Debtor’s homestead exemption should be denied under bankruptcy law because the Debtor’s voluntary transfers were concealed in violation of § 522(g). The Court determined that proceeds from the sale of a home need not be retained in their original form to qualify for the homestead exemption, and sale proceeds may be disbursed for other purposes without jeopardizing the exemption. The Court further determined that the Debtor’s homestead exemption should be allowed because there was no evidence of fraudulent intent and, under the facts of this case, sufficient disclosure was made by the Debtor.
(520) 5/06/2008, PUBLISHED, In re Andrews, 07-22924, Judge Thurman.
The Court determined that the Debtors’ entitlement to payments pursuant to the Economic Stimulus Act of 2008 were not property of the estate where the Debtors filed for bankruptcy on June 28, 2007.
(521) 5/14/2008. PUBLISHED, In re Geneva Steel, Markus v. Fried, 05-2578, Judge Clark.
Defendants sought summary judgment arguing that the adversary proceeding brought to avoid a transfer was commenced more than 3 years after the petition and thereby barred under § 546(a)(1). Plaintiff, a Chapter 11 trustee appointed more than 3 years after the petition date filed a cross motion for summary judgment arguing that because of misleading information filed with the court by the debtor, and because of the lack of accurate information available to creditors of the estate, that equitably tolling should apply. The Court ruled that based upon the undisputed facts, creditors of the estate were never put on inquiry notice that a fraudulent transfer may have taken place, that creditors of the estate had exercised reasonable diligence and that equitable tolling would apply to the adversary proceeding.
(522) 7/29/2008, PUBLISHED, In re Union Square Associates LLC, 25th Street Associates, LLC, APEX Management, Inc. v. Union Square Associates ET. Al. 07-2144, Judge Clark.
On the eve of foreclosure by a third party, Debtor and Creditor entered into an agreement wherein Creditor agreed to acquire the debt secured by Debtor’s real property and bid in the full amount of the debt owed at foreclosure thereby leaving no deficiency claim. In return, Debtor agreed to not file bankruptcy. Shortly after the date of the agreement, another creditor put the Debtor into involuntary bankruptcy. Creditor eventually obtained relief from the automatic stay to proceed with foreclosure, but only after one million dollars worth of the property was sold to various third parties. Approximately $700,000 of the sale proceeds was placed in escrow. At the foreclosure sale, Creditor mistakenly bid-in an incorrect at auction by forgetting to take into account the $700,000 held in escrow. Both Creditor and Debtor claimed entitlement to the $700,000 held in escrow. Creditor filed an adversary proceeding seeking reformation of the foreclosure bid to correct the error. The Court, finding that equitable relief was available to Creditor only if the Court could place the parties in the status quo at the moment of the bid, ruled that: 1) Creditor would be permitted to rescind its incorrect bid and bid-in the correct amount, and 2) Creditor must compensate the Debtor and the insiders for the attorney fees and costs incurred by them as a result of Creditor’s mistaken bid.
(523) 8/8/2008, PUBLISHED, In re Steven L. Distad, Distad v. United States of America, 07-2047, Judge Clark.
Debtor filed a number of bankruptcies. In the Debtor’s most recent bankruptcy, he received a Chapter 7 discharge. After receiving the Chapter 7 discharge, Debtor’s wages continued to be garnished, and tax liens were filed on his property by the IRS. Debtor argued that his tax debts for 1992 and other years had been discharged in the Chapter 7 bankruptcy and that the IRS had violated his discharge injunction under § 524(a). The IRS conceded that Debtor’s tax debts from prior years had been discharged, but argued that Debtor’s 1992 tax debt had not been discharged because equitable tolling (triggered by the automatic stay imposed by the intervening bankruptcies) prevented the 3 year period under § 507(a)(8)(A)(I) from running. The Court ruled that under Young v. United States, 535 U.S. 43 (2002), equitable tolling prevented the 3 year period from running, and that Debtor’s 1992 taxes were not discharged. With respect to the prior year’s tax debts, the Court found that no violation of Debtor’s discharge injunction could be found with respect to the IRS’s efforts to collect discharged tax debts prior to Young v. United States, but after Young v. United States, the IRS efforts to collect the discharged debt was a knowing and willful violation of Debtor’s discharge injunction.
(524) 8/1/2008, PUBLISHED, In re Espinoza, 08-20778, Judge Thurman.
In this chapter 13 case, the Court considered whether a plan that defers the start of equal monthly payments to a secured creditor beyond confirmation and proposes to pay adequate protection payments of lesser amounts in the interim complies with 11 U.S.C. § 1325(a)(5)(B)(iii)(I). CitiFinancial Auto Corporations objected to confirmation of the plan, arguing that it failed to provide for equal monthly payments in an amount sufficient to adequately protect its interests during the term of the plan. Relying on the reasoning of In re Denton, 370 B.R. 441 (Bankr. S.D. Ga. 2007) and In re Sanchez, 384 B.R. 574 (Banrk. D. Or. 2008), the Court concluded that the Debtor’s plan did not comply with chapter 13's equal monthly payment requirement. The Court explained that the term “periodic payments” in § 1325(a)(5)(B)(iii) referred to all regularly-recurring post-confirmation payments to be made to a secured creditor such as CitiFinancial. It follows, then, that unless CitiFinancial agrees otherwise, it must receive equal monthly payments beginning with the first post-confirmation distribution and continuing until its claim is paid in full.
(525) 08/15/2008, PUBLISHED, In re Parker, 99-31207, Judge Thurman.
The court determined that a default judgment entered 7 years ago awarding the debtor sanctions against a corporate creditor was void because the debtor failed to properly serve the creditor with the sanctions motion and notice of hearing. The Court determined that Bankruptcy Rule 7004(b)(3) required the debtor to direct her motion and notice of hearing to an officer or an authorized agent of the creditor. Because the motion and the notice of hearing was only sent to a P.O. Box or a street address, and did not identify an officer or a registered agent of the creditor, service was inadequate. Accordingly, when the creditor moved to reopen the case and vacate the judgment, the court concluded that cause existed to grant both motions.
(526) 1/6/2009, PUBLISHED, In re Garner, 08-24899, Judge Thurman.
In this chapter 13 case, the issue before the Court was whether a plan that proposed to bifurcate a secured claim under 11 U.S.C. § 506(a)(1) for a vehicle purchased within 910 days, and that was not objected to by the creditor, may be confirmed under 11 U.S.C. § 1325(a). The Debtors argued that Citizens Auto Finance’s failure to object to the bifurcation of its claim in their chapter 13 plan constituted acceptance of the plan. The Bankruptcy Abuse Prevention and Consumer Protection Act, however, amended § 1325 to give special protection to creditors who finance automobile transactions that occur within 910 days prior to the debtor’s filing for chapter 13 relief. The Court concluded that the requirements of § 1325(a) are “clearly mandatory,” and where a plan violates the hanging paragraph of § 1325(a), it cannot be confirmed even if the creditor does not object to the plan. Accordingly, the Court concluded that the hanging paragraph of § 1325(a) applied in this case, and the Debtors could not bifurcate Citizens Auto Finance’s claim pursuant to § 506. Therefore, confirmation of the Debtors’ plan was denied.
(527) 3/31/2009, PUBLISHED, In re Christensen, 08-02223, Judge Thurman.
The chapter 7 trustee sought to reopen the Debtors’ case and revoke their discharge under 11 U.S.C. § 727(d)(2). Although the request appeared untimely under § 727(e)(2), the Trustee argued that the case was never properly closed pursuant to § 350, and even it was, there are proper basis for tolling the deadlines in § 727(e)92) because the Debtors had fraudulently concealed assets of the estate. The Court concluded that the case was properly closed pursuant to § 350(a), and equitable tolling did not apply to extend the deadlines in § 727(e). Therefore, the Trustee’s claims under §727(d)(2) were time barred, and the request to revoke the Debtors’ discharge was denied.
(528) 4/27/2009, PUBLISHED, In re Jubber v. Sleater, Case No. 08-02077, Judge Thurman.
This was a hearing on a motion for summary judgment, where the Court considered whether to strike Defendant’s declarations and to grant Plaintiff’s motion for summary judgment based on the Defendant’s default on two promissory notes held by the Debtors. The Court concluded that the majority of the statements contained in declarations constituted inadmissible hearsay, parole evidence, lack of personal knowledge, and inappropriate legal conclusions, and were, therefore, stricken. Relying on sections 70A-3-104 and 70A-3-303 of the Utah Code, the Court concluded that the certain promissory notes were negotiable instruments, that the Defendant was their “maker” under Utah law, and that antecedent debt was sufficient consideration for the notes. Accordingly, the Court granted the Trustee’s motion for summary judgment.
(529) 5/12/2009, UNPUBLISHED, In re Timothy, Case No. 08-28332, Judge Mosier.
Chapter 13 Debtors’ Official Form 22C reflected Current Monthly Income of $6,181.31 which exceeded the median family income for a household of the same size in Utah. The Debtors’ monthly Disposable Income reflected on Form 22C was -$188.70 (negative $188.70). Trustee objected to confirmation arguing that because this is an above-median income case, the applicable commitment period requires 60 monthly payments under § 1325(b)(4)(A)(ii)(II). Debtors’ Schedules I and J disclosed total monthly income of $4,910.00 and total monthly expenses of $4,780.00, resulting in Schedule J monthly net income of $130.00. Debtors’ plan proposed payments of $130.00 per month for so long as necessary to return $1,750.00 to non-priority unsecured creditors. The court held; (1) when a debtor’s Form 22C Disposable Income is negative, in order for the debtor to propose a confirmable chapter 13 plan, projected disposable income under § 1325(b)(1)(B) may be calculated using Schedules I and J, and (2) when a debtor’s Current Monthly Income is above the applicable state median income the "applicable commitment period" is defined by § 1325(b)(4) and is 60 months in all instances. The Court also held that when debtors include social security income to calculate a positive projected disposable income, all of the debtors’ projected disposable income, including any amount attributable to social security income, to be received in the applicable commitment period must be applied to make payments under the chapter 13 plan.
(530) 5/27/2009, PUBLISHED, In re Wilburgene v. Kwon et. al., Case No. 08-02101, Judge Thurman.
In this adversary proceeding, the Plaintiff Wilburgene LLC (the “LLC”) and certain defendants filed cross-motions for summary judgement seeking the determination of whether those defendants held a valid trust deed on the Plaintiff’s property that was granted by a purported member of the Plaintiff to secure a personal loan. The Plaintiff argued that the grantor was not a member of the LLC, and could not encumber the its property. It further claimed that even if the grantor were considered a member, his actions could not bind the Plaintiff because they were not in the “ordinary course of the company business” as required by § 48-2c-802(1) of the Utah Code. The Court concluded that the grantor was a member of the LLC at the time the trust deed was granted, he had authority to sign the trust deed, and the exception contained subsection (3) rather than the general rule in subsection (1) of § 48-2c-802 governed. The Court held that under § 48-2c-802(3), the trust deed would be conclusive in favor of the defendants if they gave value without knowledge of the grantor’s lack of authority. Although the Court determined that the defendants did give value in exchange for the trust deed, it held that there was a genuine dispute of material fact as to whether they had knowledge of the grantor’s lack of authority. That issue was, therefore, reserved for trial.
(531) 6/8/2009, UNPUBLISHED, In re 3H River Turf Farm LLC, Case No. 08-22543, Judge Thurman.
In this chapter 7 case, the issue before the Court was whether the Court should take into account all of the liens and encumbrances against real property when considering a motion for relief from stay under 11 U.S.C. § 362(d)(2), or just those liens and encumbrances of the moving party and any senior lienholders. The Court held that the word “equity” in section 362(d)(2) meant that the Court must consider all liens and encumbrances against real property, not just those of the movant and the senior lienholders. The Court granted relief from stay because after subtracting the total amount of the secured encumbrances from the total value of the real property as calculated in the Trustee’s Appraisal, there was no equity in the property.
(532) 7/6/2009, UNPUBLISHED, In re Lazerus, Case No. 05-34150, Judge Thurman.
In this chapter 7 case, the Court ruled on the appropriate manner to object to the form of order submitted for the Court's signature, and in what instances a Trustee may surcharge exemptions pursuant to 11 U.S.C. § 522(k). The Trustee filed several motions attempting to modify the substance of a prior ruling by this Court, and to compel the turnover of additional records and funds, all after having submitted the Trustee’s Final Report. The Court concluded that an objection as to the form of the order is not the mechanism by which the substance of the Court’s prior ruling should be challenged. Additionally, the Court held that the Trustee could not surcharge the Debtor’s exempted wages under § 522(k) after collecting those unpaid wages from the Debtor’s employer, without a showing that there has been an avoidable transfer. The Court finally concluded that it had appropriately ruled on the surcharge issue at a prior hearing, where albeit the Trustee had not formally pled the issue it had nevertheless argued the issue at a hearing on the Debtor’s objection to the Trustee’s final report.
(533) 7/17/2009, UNPUBLISHED, In re Hughes, Case No. 08-24736, In re Ulloa, Case No. 08-29072, Judge Mosier.
Chapter 13 debtors’ confirmed chapter 13 plans required debtors to pay their tax refunds into their plan. Debtors sought to modify their plans to permit them to retain their tax refunds. Held: Prepetition tax refunds are property of the bankruptcy estate and should be considered in §1325(a)(4) liquidation analysis. Agreement to pay tax refunds into plan eliminates need for §1325(a)(4) liquidation analysis of tax refunds for confirmation. Debtors must demonstrate a legitimate reason to modify their confirmed chapter 13 plan and any modification must satisfy §1325(a)(4) liquidation analysis, including value of prepetition tax refunds.
(534) 7/29/2009, PUBLISHED, In re Rupp v. Ayres, Case No. 07-2002, Judge Thurman.
In this adversary proceeding, the Court considered allegations of fraud asserted by the Chapter 7 Trustee against a number of defendants who participated pre-petition in an alleged short sale of the Debtor’s residence. A realtor who specializes in short sales convinced the Debtor to proceed with a listing by producing a sham buyer for the residence and convincing the Debtor’s lenders to discount their claims. All the while, and without the knowledge of the Debtor or her lenders, the realtor and his business associates were marketing the property to a third party who had money and financing to buy the home for approximately $100,000 more than the short sale offer. After the sale to the third party closed, the Debtor was induced to sign the documents necessary for the alleged short sale. The Court found fraud, fraudulent transfer under both state and federal law, and negligence, and allowed for an additional hearing for determination of punitive damages.
(535) 8/19/2009, PUBLISHED, In re Jubber v. Search Market Direct, Case No. 06-02299, Judge Thurman.
In this adversary proceeding, the chapter 11 Trustee sued multiple defendants seeking to recover and/or quiet title to an Internet domain name, <freecreditscore.com> (the “Domain Name”). The Court found that the Trustee was entitled to recover the domain name from a third party under 11 U.S.C. § 362 where yet another third party surreptitiously acquired the rights to the Domain Name, and purportedly sold it while the Debtor clandestinely and without Trustee’s or Court’s approval tried to sell the same post petition. The Court concluded that the post-petition transfers of the Domain Name violated the automatic stay under § 362 and, as such, §549 was inapplicable. The Court also determined that the Trustee and a co-plaintiff had standing to prosecute the adversary proceeding under the terms of a confirmed plan, and that the same conferred a benefit on the estate.
(536) 3/1/2010, PUBLISHED, In re Underhill, Case No. 09-30745, Judge Mosier.
Chapter 13 debtor filed three bankruptcy petitions within a one year period and the automatic stay did not go into effect in the third case. The debtor proposed a plan that would cure his prepetition default on a secured claim. The secured creditor objected to confirmation arguing: (1) the presumption under § 362(c)(4)(D) establishes that the debtor’s petition was not filed in good faith and the plan can not be confirmed, and (2) confirming the chapter 13 plan that proposes to cure the debtor’s prepetition default with the debtor is a de facto reinstatement of the automatic stay and impermissibly circumvents the statutory scheme established by Congress to reinstate the automatic stay. The court held; (1) the presumption under § 362(c)(4)(D) is limited in application to § 362(c)(4)(B), (2) even if there is no automatic stay in effect the court may confirm a chapter 13 plan that cures a prepetition default on a secured claim, and (3) if a secured creditor objects to confirmation the chapter 13 debtor has the burden to establish that his petition was filed in good faith and the plan is proposed in good faith. The debtor failed to carry his burden on these issues and confirmation was denied.
(537) 3/10/2010, UNPUBLISHED, In re Roger Bryner, Case No. 08-26804, Judge Thurman.
The Court ruled that in a chapter 13 case, the mother of two minor children has standing to represent their interests with respect to a proof of claim filed by the putative trustee of a trust for their benefit. The Court further ruled that on a motion to reconsider a ruling on a proof of claim, the Court will consider factors outlined in a rule 60(b) type motion, i.e. mistake, inadvertence, surprise or excusable neglect, reiterating the holding of the U.S. Supreme Court in Pioneer Investment Services v. Brunswick 507 U.S. 380 that excusable neglect is a somewhat elastic concept. Finally, the Court ruled that a trustee of a trust may only be represented by an attorney with respect to contested matters before the Court.
(538) 6/29/2010, PUBLISHED, In re Cranmer, Case No. 10-22994, Judge Thurman.
In this chapter 13 case, the Court held that social security income must be included in calculation of projected disposable income under § 1325(b)(1)(B) even though social security income is not included in the calculation for the means test on Official Form 22C and any calculations using that form. In addition, the Court held the Debtor could not exclude part of the social security income by creating a line item expense on Schedule J. Furthermore, the Debtor did not propose the plan in good faith when he excluded part of his social security income from the projected disposable income calculation. Accordingly, the Court denied confirmation of the plan.
(539) 10/12/2010, PUBLISHED, In re Woolsey, Case No. 10-25893, Judge Thurman.
A plan proposed by chapter 13 debtors did not contain language permitting the retention of a wholly unsecured creditor’s lien or requiring the reinstatement of the lien in the event of dismissal or conversion to a chapter 7 case. The Court found that Dewsnup v. Timm, 502 U.S. 410 (1992), prohibited avoiding the lien under 11 U.S.C. § 506(d) as argued by the debtors. Although the only collateral for the loan was the debtors’ principal residence, because the loan was wholly unsecured, modification was not prohibited by 11 U.S.C. § 1322(b)(2). See Griffey v. U.S. Bank (In re Griffey), 335 B.R. 166 (10th Cir. B.A.P. 2005); Pierce v. Beneficial Mortgage Co. (In re Pierce), 282 B.R. 26 (Bankr. D. Utah 2002). Thus the rights of the creditor could be modified under 11 U.S.C. § 1322(b)(2) as long as the debtors’ plan complied with the provisions of 11 U.S.C. § 1325(a)(5). The Court found further support for its position in the statistics showing the number of cases commenced under chapter 13 that are either dismissed or converted that could become a source of easily disguised bad faith filings.
(540 ) 4/12/10, PUBLISHED, In re Duffin, Case No. 09-28879, Judge Mosier.
Under U.C.A. § 78B-5-505(1)(a)(xiii) in the absence of a creditor’s levy or execution, proceeds or avails of insurance policies are exempt. Because the Trustee’s rights and powers as a hypothetical creditor under § 544 are based on hypothetical events Section 544(a)(2) is inapplicable to U.C.A. § 78B-5-505(1)(a)(xiii). In the absence of express Congressional intent the Trustee’s rights and powers as a hypothetical creditor under § 544 may not be used to limit state law exemptions provided for and allowed by Congress in § 522.
(541 ) 10/1/2010, PUBLISHED, Rushton v. Woodbury & Kelser, P.C., 09-2382, Judge Mosier.
Attorneys representing the debtor in an involuntary chapter 11 case during the "gap" period may not be compensated if they are not employed under § 327. If attorneys representing the debtor in an involuntary chapter 11 case during the "gap" period represent an interest adverse to the estate or are not disinterested they may be denied compensation under § 328 and/or § 330. If attorneys representing a debtor in an involuntary chapter 11 case during the "gap"period fail to comply with § 329 they may be denied compensation and may be ordered to disgorge fees they have been paid.
(542) 10/1/2010, UNPUBLISHED, Rupp v. Wood, 09-2482, Judge Mosier.
A chapter 7 trustee is not entitled to a default judgment on his complaint objecting to debtor’s discharge under § 727 and seeking a money judgment against the debtor unless his complaint contains specific factual allegations which constitute a legitimate cause of action. Mere conclusory allegations without supporting factual averments are insufficient to state a claim upon which relief may be granted.
(543) 10/1/2010, PUBLISHED, In re Ruiz, Case No. 10-25368, Judge Mosier.
Chapter 7 debtors are not obligated to turnover to chapter 7 trustee funds that debtor’s bank paid postpetition to honor checks debtors wrote prepetition.
(544) 10/1/2010 UNPUBLISHED, Carroll v. Key Bank and John Does 1-3 10-02259, Judge Mosier.
Section 506(d) does not allow a debtor to "strip off" a creditor’s lien of the creditor has a claim that is allowed pursuant to § 502.
(545) 12/9/2010, UNPUBLISHED, In re Childs, 09-33970, Judge Thurman.
Under the BAPCPA, chapter 11 debtors may be categorized as small business debtors depending on their type of business and amount of debt. Debtors may not voluntarily elect to be a small business, but must disclose their existence as a small business if they qualify. In this case, a designation by Debtors to be considered small business debtors was erroneous because Debtors did not qualify under 11 U.S.C. § 101(51D)(A). Upon a subsequent objection by Debtors to their designation as small business debtors under Federal Rule of Bankruptcy Procedure 1020(b), the Court entered an order finding the original designation incorrect. Such a finding and order made the designation void ab initio. Thus, although Debtors had failed to present and confirm a plan within the deadlines that pertain to a small business debtor, because Debtors were not small business debtors, those deadlines no longer applied and Debtors could continue their efforts toward confirmation.
(546) 10/27/2010, PUBLISHED, In re Skougard, 10-26950, Judge Thurman.
Yearly tax refunds are property of the chapter 13 estate. However, refunds up to $2,000 may be retained by below median chapter 13 debtors in Utah if the debtors are receiving Earned Income Credit or Additional Child Tax Credit. The principles of In re Lawson previously decided by this Court still apply and factor into the determination of the amount of refund allowed to be retained.
(547) 3/31/11, PUBLISHED, Cyprus Credit Union v. Dehlin, 09-2176, Judge Mosier.
In deciding the dischargeability of a debt arising from a "stated income loan" under 11 U.S.C. § 523(a)(2)(B), the Court found that the evidence presented confirmed the Debtors’ statements that their income listed on the loan application was correct and the creditor failed to carry its burden of proof. Further, an inadvertent mistake on a confusing form was not sufficient to prove the Debtors had an intent to deceive the creditor. Finally, a debtor’s representation cannot be the sole basis upon which a creditor can reasonably rely because a creditor has a duty to ensure some basis exists for relying upon the debtor’s representations. Self-developed procedures that excuse reasonable reliance cannot insulate a creditor’s claim from discharge.
(548) 3/31/11, PUBLISHED, Rushton v. Bevan, 09-2082, Judge Mosier.
In defending a fraudulent transfer action, the defendants attempted to rely on 11 U.S.C. § 546(e), but adopting the proposed reading would have produced an absurd result. The protection of § 546(e) cannot be extended to include transactions related to a purchase or sale of securities simply because the parties utilize the banking industry to effect the transaction. The Court looked to congressional intent as explained in Kaiser Steel Corp. v. Charles Schwab & Co., Inc. (Kaiser I), 913 F.2d 846 (10th Cir. 1990) and Kaiser Steel Corp. v. Pearl Brewing Co. (In re Kaiser) (Kaiser II), 952 F.2d 1230 (10th Cir. 1991) to grant summary judgment for the trustee and deny summary judgment for the defendants as to this defense.
(549) 3/8/11, PUBLISHED, In re Dennett, 10-21685, Judge Thurman.
The Court ruled upon the requirements for a Trustee to meet in connection with a contested motion to approve a compromise and settlement under Federal Rule of Bankruptcy Procedure 9019. Here, the Trustee sought to compromise the claims that the Debtor had initiated in state court by settling with the Defendants for $25,000. The Debtor sought an order of abandonment so he could pursue the claims. The Court ruled that the Trustee had met the standard of Kopp v. All Am. Life Ins. Co. (In re Kopexa Realty Venture Co.), 213 B.R. 1020 (10th Cir. B.A.P. 1997), and thus approved the compromise. The Court commented on whether an auction procedure was required as held in the 5th Circuit case of Cadle Co. v. Mims (In re Moore), 608 F.3d 253 (5th Cir. 2010), where the trustee in that case attempted to compromise a claim in litigation with the defendants and a creditor offered more than the proposed settlement. In the appropriate case, an auction procedure under § 363 may be required for settlements but not here.
(550) 5/3/11, PUBLISHED, In re Hargis, 10-36861, Judge Marker.
Chapter 13 Debtors with above-median income attempted to deduct $200 in “additional operating expenses” on Line 27A of Form 22C for each of two older and high-mileage vehicles, which would have reduced the return to general unsecured creditors by $24,000 over the 60-month duration of the plan. The Debtors argued that the claimed additional operating expenses, which arise from a section of the Internal Revenue Manual dealing with offers in compromise, should be allowed as standardized deductions under § 707(b)(2)(A)(ii)(I) and the IRS Local Standards. The Chapter 13 Trustee and the Assistant U.S. Trustee argued that additional operating expenses may be allowed in appropriate circumstances but that parties in interest should be able to review the claimed expenses and object to them if appropriate. Based on the language of the statute and the Supreme Court’s recent guidance in Hamilton v. Lanning and Ransom v. FIA Card Services, N.A., the Court held that above-median chapter 13 debtors are not automatically entitled to a $200 additional operating expense deduction on Line 27A of Form 22C for each vehicle over six years old or with more than 75,000 miles. But above-median chapter 13 debtors may claim additional operating expenses that they actually incur on Line 60 of Form 22C up to $200 per vehicle subject to review and objection by the Chapter 13 Trustee and holders of allowed unsecured claims.
(551) 6/16/2011, UNPUBLISHED, Strong v. Western United Life Assurance Co., 04-2453, Judge Thurman.
The Court dealt with multiple claims of the Examiner seeking to reclaim property transferred from the Debtor’s estate, including claims under 11 U.S.C. §§ 362, 363, and 549, and Utah law. The Court determined that real property transferred by the Debtor postpetition to an affiliate which then transferred a security interest in that property to the Defendant could not be brought back into the estate because the Defendant successfully invoked the good faith defense under Utah law and under the Bankruptcy Code. In addition, the Examiner could not establish that the Defendant had not given reasonably equivalent value under Utah law or present fair equivalent value under § 549 for the transfer because the Court did not see it proper to collapse two separate loans into one. Finally, insufficient evidence prevented the Court from finding that the transferor (the Debtor’s affiliate) was insolvent at the time of the transfer. On the other causes of action, the Court found that § 549 was the proper mechanism to attempt to avoid the initial transfer from the Debtor, rather than §§ 362 or 363.
(552) 6/24/2011, UNPUBLISHED, In re JL Building, LLC, 08-27671, Judge Thurman.
On the trustee’s motion for a § 363 sale of the debtor’s principal asset, the Court reviewed the factors established in In re Medical Software Solutions, 286 B.R. 431 (Bankr. D. Utah 2002), and approved the sale as being an appropriate use of the trustee’s business judgment and in the best interest of creditors. Further, the value obtained by the sale was consistent with listing agreements and offers the debtor had made while operating as a debtor in possession, so the former-debtor-in-possession management’s objection was overruled. The Court also discussed the ability of former management and/or equity holders to object to a sale. In applying C.W. Mining v. Aquila (In re C.W. Mining), 636 F.3d 1257 (10th Cir. 2011), the Court determined that the trustee was the only party who could cause the debtor to object to the sale and thus former management or equity holders must independently establish their standing to object.
(553) 8/26/2011, UNPUBLISHED, In re Nathan D. Harward and Katie C. Harward, 11-20649, Judge Thurman.
The Court denied a motion for sanctions against Key Bank however, the Court did award sanctions against the Debtors for bringing this frivolous motion. The Debtors had alleged that the bank had violated the stay by sending a notice to them after a lift of stay order was entered. The order gave permission to the bank to take appropriate action to insure its rights to a deficiency claim. The Court noted that every notice that is sent by a creditor after a bankruptcy is filed is not a per se violation of the stay. Some degree of reasonableness is needed. Sanctions against the debtors in the amount of the attorneys fees incurred by the bank for defending against the motion were awarded to the bank.
(554) 9/30/2011, UNPUBLISHED, In re Rushton v. Bank of Utah, 10-2712, Judge Mosier.
Pre-petition, Bank of Utah entered into a letter of credit transaction with the Debtor wherein the Bank issued a letter of credit in the amount of $362,000 secured by funds in the amount of $362,000 deposited with the Bank by the Debtor. In addition to being secured by the funds on deposit, the letter of credit was cross collateralized to other assets of the Debtor. Post-petition, and knowing that the Debtor was in bankruptcy, the Bank declined to renew the letter of credit and applied the proceeds from the certificate of deposit to payoff the indebtedness. The Trustee commenced an adversary proceeding to recover the entire $362,000 plus interest free and clear of any encumbrance in favor of Bank arguing that by avoiding the transfer under § 549, the Trustee could recover the transfer free and clear of the Bank’s security interest and that the transfer was void as a violation of the automatic stay and that the Trustee was entitled to turnover of the $362,000 plus interest under § 542. In doing so, the Trustee did not allege that the post-petition actions of the Bank caused any damage to the Debtor. The Court held that a transfer to a fully secured creditor may not be avoided under § 549 without reviving the secured creditor’s lien, that the remedies available to a non-individual debtor are subject to the limitations of the Court’s § 105 powers, that § 362(a) does not permit the Court to strip a bank’s lien, and that although an act committed in violation of the automatic stay is “void,” some acts cannot be undone. The law does not recognize a void act, and that judicial machinery is not available for use to one that acted in violation of the automatic stay.
(555) 10/5/2011, UNPUBLISHED, In re Colon, 10-25669, Judge Thurman.
The Court denied a homeowner’s association’s (“HOA”) motion for relief from the automatic stay in a chapter 13 case, finding that postpetition HOA assessments were dischargeable under § 1328(a) where the debtors had vacated the property more than one year prior to filing bankruptcy and surrendered the property to the secured lienholder who failed to foreclose after relief from stay was granted. Despite the fact that the debtors were listed on the title to the property, the Court found that they had no consequential interest in the property that measured up to rights to exercise ownership and control. The Court held that postpetition HOA assessments meet the definition of “claim” under § 101(5) and “claims” can be provided for in chapter 13 plans. See In re Turner, 101 B.R. 751 (Bankr. D. Utah 1989). Furthermore, § 523(a)(16), which excepts HOA postpetition assessments from discharge, does not apply to a discharge under § 1328(a).
(556) 12/13/11, UNPUBLISHED, In re South Station, LLC, 08-27583, Judge Thurman.
The Court denied the fee application for the attorneys who represented the Debtor while it was in chapter 11 bankruptcy. The Court found that the attorneys had failed to disclose a significant amount of payments and who had paid them until the fee application hearing that occurred many months after the services were provided. Further, the Court found that the attorneys had received money directly from the principals of the owner of the Debtor. The Court concluded that without proper and complete disclosure, the application could not be approved under the mandates of § 328, § 329, and Fed. R. Bankr. P. 2016. As an additional and alternative basis to its denial of the fee application, the Court concluded that the attorneys were not disinterested due to their acceptance of payments directly from the principals of the owner of the Debtor who were also the principals of the largest unsecured creditors of the estate.
(557) 3/13/12, PUBLISHED, Richins v. Bank of America Home Loans, Case No. 10-02754, Judge Thurman.
The Court denied a Debtors’ motion for judgment against a creditor who held a wholly unsecured mortgage against their primary residence in a chapter 7 case under 11 U.S.C. § 506(a) and (d). In its examination of Dewsnup v. Timm, 502 U.S. 410 (1992), which disallowed the strip down of a partially unsecured junior lien on a chapter 7 debtor’s real property, the Court discerned no reason that the analysis underlying the Dewsnup decision should differ depending on whether the chapter 7 debtor is attempting to strip a partially secured or wholly unsecured lien. Morever, the Court found Nobelman v. American Savings Bank, 508 U.S. 324 (1993) inapplicable, as it was a chapter 13 case dealing with § 1322 that is inapplicable to a chapter 7 case. The Court concluded that while strip off of a wholly unsecured junior lien in a chapter 13 case is generally permissible, the differing purposes and intent of chapter 7 make it distinguishable from a chapter 13 case such that strip off of wholly unsecured junior lien is inappropriate in chapter 7 cases.
(558) 6/13/12, UNPUBLISHED, In re Fehrenbacker, 12-20883, Judge Thurman.
In this chapter 7 case, the Creditor filed a motion for relief from stay on the Debtor’s real property. The Debtor alleged that the Creditor did not have standing as a party in interest to request relief from stay because the Creditor did not provide evidence that the original promissory note was in the Creditor’s possession. The Court relied on In re Thomas, No. 10-17039, 2012 WL 1574418, at *1 (10th Cir. B.A.P. May 7, 2012), which held that while the original note is not required to be placed into evidence, “the bankruptcy court must make a cognizable determination of standing in a contested matter . . . which requires some review of the standing documents, whether they be admitted into evidence or proffered to the court without objection.” In re Thomas, 2012 WL 1574418, at *5 n.32. In this case, the Creditor’s attorney represented that the original note was on its way to his office, but could not provide evidence that the Creditor was otherwise in possession of the original note. Moreover, the Court determined that under 11 U.S.C. § 362(c)(1) the motion for relief from the automatic stay was not moot as to property of the estate when the Debtor received a discharge. The Court continued the Creditor’s motion without date and ordered the stay remain in place pending further order of the Court.
(559) 8/31/2012, PUBLISHED, In re Blackstone Financial Group Business Trust vs Myler, 12-02231 , Judge Marker.
Creditor in a closed chapter 7 case filed an untimely complaint under § 727 seeking to revoke the debtors’ discharge, or alternatively to obtain a determination that its particular claim was not subject to discharge under § 523. The Debtors moved to dismiss the complaint as impermissibly late, and the creditor asserted that its claims remained viable under the doctrine of equitable tolling because it did not discover the facts alleged in the complaint until well after the debtors received their discharge. Based on the clear language in § 727(e)(1) and (2) and the case law concerning Rule 4007(c), the Court held that the doctrine of equitable tolling did not apply and the motion to dismiss was granted.
(560) 9/28/2012, UNPUBLISHED, In re In the Paint, LLC v. Archibald, 10-3057, Judge Mosier.
Creditors filed and adversary proceeding against the Debtor under § 523(a)(2)(A) and § 727(a)(2). Creditors asserted that their debt should be excepted from discharge because the Debtor failed to disclose that he had violated his noncompete agreement when the parties were negotiating a separation agreement. The Creditors also asserted that the Debtor should be denied a discharge because he transferred his equity interest in a business within one year of filing for bankruptcy.
Creditors’ § 523(a)(2)(A) claim. Held: To prevail on a claim for nondisclosure, the plaintiff must establish that the debtor had a duty to disclose a fact, that the undisclosed fact was material and that the debtor knew the undisclosed fact was material. In addition, the plaintiff must establish that the debtor failed to disclose the fact with intent to deceive the creditor, that the creditor relied on the nonexistence on the fact and that the creditor’s reliance was justified. Creditors failed to establish any of the elements under § 523(a)(2)(A) and their debt was therefore dischargeable. Creditors’ § 727(a)(2) & (5) claims. Held: To prevail on a § 727(a)(2) claim the plaintiff must establish that a transfer was made with actual intent to hinder, delay or defraud creditors. To prevail on a § 727(a)(5) claim the plaintiff must establish that there was a loss or deficiency of debtor’s assets. Absent any evidence that a transfer hindered or delayed a creditor, the transfer of an asset with little or no value did not give rise to a § 727(a)(2) or (5) claim. Debtor was granted a discharge.
(561) 11/13/2012, UNPUBLISHED, In Re Stott v. U.S. Bank, 12-2315, Judge Marker.
Chapter 13 Debtors commenced adversary proceeding to immediately and permanently void U.S. Bank’s wholly underwater junior mortgage lien on their primary residence based on both § 1322(b)(2) of the Bankruptcy Code and slander of title under Utah state law, without regard to either full payment of U.S. Bank’s claim or completion of the chapter 13 case. As for the slander of title theory, the Debtors argued that no valid lien exists under Utah law when such lien is unsupported by any present economic value. Based on the trial court and Tenth Circuit decisions in In re Woolsey and a slander of title analysis under Utah law, the Court held that wholly underwater junior mortgage liens may ultimately be removed from the property but only after full payment or completion of the chapter 13 case in accordance with § 1325(a)(5)(B) of the Bankruptcy Code.
(562) 12/4/2012, UNPUBLISHED, In re Kathy Lynn Kofford, 12-29134, Judge Thurman.
The Court concluded that a chapter 13 plan could not be confirmed where the Debtor was proposing to deduct on Line 55 of the Form 22C the actual contractual monthly amounts due under 401(k) repayment loans where the repayments would conclude before the end of the 60-month plan. The Court found that requiring the Debtor to prorate the amount of her retirement loan payments over the 60-month plan term for the purposes of Line 55 of the Form 22C “is the only way to ensure that the amount required to repay the loan (and only the amount required to repay the loan) will be excluded from the disposable income calculation.” In re Novak, 379 B.R. 908, 911 (Bankr. D. Neb. 2007). In addition, the Court found that the Debtor should provide for step-increases in plan payments at the maturity of each of the Debtor’s retirement loans.
(563) 11/29/2012, UNPUBLISHED, In re Randall and Susan Krantz , 10-28557, Judge Thurman.
The chapter 7 debtors brought a motion to avoid a creditor’s judgment lien 19 months after their petition date, after the property to which the judgment lien was fixed had been transferred out of and back into the debtors’ possession, and after the creditor had obtained unopposed relief from stay. The Court found that the debtors had standing to avoid the lien as § 522(f) serves to undo the “fixing” of a lien, and so a court looks to the time period the lien fixed to determine a debtor’s interest in the property. The Court determined that the date of the filing of the § 522(f) motion is irrelevant to the standing analysis, and postpetition transfers have no bearing on the debtor’s standing to avoid a judgment lien. The Court declined the creditor’s request to abstain from ruling on the § 522(f) motion. The Court also declined to deny the Debtors’ motion on the basis of laches. The Court found that the debtors lacked diligence in bringing their § 522(f) motion and that the creditor suffered some prejudice when its motion for relief from stay went unopposed and it pursued state court action. The Court determined that an appropriate equitable remedy would be to require the Debtors to compensate the creditor for reasonable attorneys fees and costs the creditor incurred in pursuing state court relief.
(564) 12/12/12, UNPUBLISHED, In re Tejal Investment, LLC, 12-28606, Judge Thurman.
The Court granted a creditor’s motion for relief from stay on the debtor’s real property pursuant to 11 U.S.C. § 362(d)(2) and (d)(4)(B). The parties stipulated that debtor did not have equity in the property. Under the second prong of § 362(d)(2), the Court found that the debtor failed to meet its burden of proof in establishing that the property was necessary to an effective reorganization because the proposed plan was “essential for an effective reorganization that is in prospect” given the debtor’s financial circumstances. United Sav. Ass’n of Tex. v. Timbers of Inwood Forest Assocs., Ltd., 484 U.S. 365, 375-76 (1988). The Court also granted relief under § 362(d)(4)(B), concluding that the Debtor’s filing of two cases – one on the eve of receivership and one of the eve of foreclosure – was enough to constitute a “scheme” to delay or hinder creditors that involved multiple bankruptcy filings affecting such property, especially where the Debtor did not show a change in financial circumstances between the filings.
(565) 4/5/2013, UNPUBLISHED, In re Wensel, 12-30207, Judge Thurman.
The debtors’ proposed plan failed to provide for all projected disposable income as required by § 1325(b)(1)(B), particularly tax refunds received during the applicable commitment period. Pursuant to Skougard, 438 B.R. 738 (Bankr. D. Utah 2010), tax refunds in excess of $1,000 or up to $2,000, if a debtor receives certain tax credits, are surrendered to the Trustee. The debtors proposed to include an annualized amount on Schedule I for tax refunds and retain all refunds over the course of the plan. However, the Court noted the debtors’ employment had changed prior to filing and the annualization of tax refunds skewed the refund amount. Additionally, because of the difficulty in predicting actual tax liabilities the Court found that the current practice was more accurate and fairer to all parties and did not allow annualization of tax refunds.
(566) 4/29/2013, UNPUBLISHED, In re Allan James Cornia, 13-22364, Judge Marker.
A creditor in a chapter 13 case moved to lift the automatic stay on a parcel of real property held in trust. The creditor argued that cause existed to lift the stay under § 362(d)(1) because the property was not part of the debtor’s estate and because the debtor had no contractual relationship with the creditor with respect to the property. The Court denied the creditor’s motion, holding that under Utah law the debtor was a beneficiary of the trust and had an equitable interest in the property, which was included in the estate by § 541(a)(1). The Court then concluded that an equitable interest in the property was sufficient to claim a homestead exemption in the property, and that a lack of a contractual relationship between the debtor and the creditor was not cause to lift the stay.
(567) 7/9/2013, UNPUBLISHED, In re Kealamakia, 12-31822, Judge Thurman.
As a matter of first impression, the Court considered a creditor's motion to dismiss a chapter 7 case for bad faith under § 707(a). The creditor argued that "cause" for dismissal under § 707(a) encompassed a debtor's bad faith, and that the Court should dismiss this case because the facts showed that the debtor was not acting in good faith. In support of its position, the creditor pointed to the three bankruptcy cases the debtor had been in during a period of under four years, inconsistencies in information placed on the various Statements of Financial Affairs and Schedules and what it considered a dearth of creditors. The Court determined that a chapter 7 case may be dismissed for lack of good faith. However, applying the factors found in In re O'Brien, from the bankruptcy court of the W.D.N.Y., the Court found under a totality of circumstances that the evidence did not support dismissal.
(568) 7/26/2013, PUBLISHED, In re Jensen, 12-33826 , Judge Thurman.
Chapter 13 Debtors commenced voluntary contributions to wife’s retirement plan less than three months prior to the date of petition and deducted such contributions as an expense on their Form 22C. The Chapter 13 Trustee objected to confirmation of Debtors’ Plan, arguing that Debtors were not contributing all of their projected disposable income to the repayment of unsecured creditors as required by § 1325(b). The Trustee also objected on the grounds that beginning voluntary retirement contributions so close to the petition date showed that the Debtors were not proceeding in good faith. The Court concluded that voluntary contributions to qualified retirement plans are not disposable income as long as they are being made as of the date of petition, adopting the reasoning of the Sixth Circuit Bankruptcy Appellate Panel in Burden v. Seafort (In re Seafort), 437 B.R. 204 (B.A.P. 6th Cir. 2010). Turning to the issue of good faith, the Court held that this and other cases involving voluntary contributions to qualified retirement plans must be subjected to a good faith analysis. The Court applied the totality of the circumstances test and found that, on the facts of the case, the Debtors were not proceeding in bad faith.
(569) 08/23/2013, UNPUBLISHED, In re Patrick Evans, 11-35963 Judge Mosier.
Debtor filed a chapter 13 plan, which was neither novel or complex. The plan provided for payment of a prepetition arrearage to an oversecured creditor. A dispute arose between debtor and creditor over the amount of the prepetition arrearage and, at the court's urging, the parties negotiated a settlement. After reaching the settlement, creditor filed a motion under § 506(b) for allowance of postpetition attorney's fees in the amount of $24,647.50. Debtor objected arguing that the fees sought by creditor were unnecessary, that creditor did not act reasonably or prudently and the time expended by creditor"s counsel was excessive, not adequately described, and that many services were duplicative. The Court found that § 506(b) awards were controlled by federal law and that a lodestar approach to allowance of a § 506(b) claims should be followed using a two step approach: 1) were the services were necessary to protect the creditor's legitimate interests ?; and 2) were the fees sought for the legal services reasonable? The Court allowed some, but not all of the fees requested and applied nine factors to weigh the necessity and the reasonableness of the fee request.
(570) 12/11/2013, UNPUBLISHED, In re Cannon, 13-24366, Judge Thurman.
The Chapter 13 Trustee and PNC Bank moved to dismiss the Debtor’s Chapter 13 case because his secured debts exceeded the $1,149,525 limit imposed by § 109(e). The Court found, despite the Debtor’s objections, that the motions were timely, PNC had standing to file proofs of claim, and those claims were prima facie valid. Following the § 109(e) analysis prescribed by Kanke v. Adams (In re Adams), 373 B.R. 116 (B.A.P. 10th Cir. 2007), the Court reviewed the Debtor’s schedules and PNC’s proofs of claim and found that the facial amount of his debts surpassed the statutory threshold. The Court held that neither a dispute over liability on the debts nor the Debtor’s assertion of offsets against PNC rendered his debts unliquidated, and the Court ruled that the debt limit of § 109(e) did not violate the Debtor’s due process rights. The Court therefore dismissed the Debtor’s case.
(571) 12/19/2013, UNPUBLISHED, In re Akbarian , 12-21670, Judge Thurman.
The Court denied the Debtor’s motion to dismiss her chapter 7 case under § 707(a). The Court applied the factors enumerated by the Tenth Circuit BAP in Isho v. Loveridge, 2013 WL 1386208 (B.A.P. 10th Cir. Apr. 5, 2013), and concluded that the Debtor had not demonstrated cause to dismiss. In addition, the Court found that the objecting creditors would be prejudiced by dismissal because, after twenty months in bankruptcy court, they would be required to return to state court to litigate their claims, which would deny them the possibility of a return through the Trustee’s pending avoidance actions. The Court also held that the presence of denial of discharge proceedings and the potential that dismissal would reorder the payment priority established by bankruptcy law were factors favoring denial of the motion. While not present here, the Court opined that there could be circumstances that would permit dismissal, such as where all parties consented, or where the debtor demonstrated a precise mechanism to satisfy all creditors.
(572) 02/5/2014, PUBLISHED, In re Akbarian , 12-21670, Judge Thurman.
The Court approved the Debtor’s waiver of her chapter 7 discharge, concluding that it met the statutory requirements of § 727(a)(10) and was voluntary, knowing, informed, and made with awareness of the consequences of foregoing a discharge in bankruptcy. As a consequence, the Court granted the Debtor’s request to dismiss two consolidated denial of discharge adversary proceedings, which were rendered moot by the waiver. In approving the waiver and dismissing the adversary proceedings, the Court overruled the objections of the Chapter 7 Trustee and two creditors, who had filed the adversary proceedings. The Court concluded that the objecting parties had not raised concerns sufficient to deny approval of the Debtor’s waiver.
(573) 03/31/2014, PUBLISHED, Rushton v. Tennessee Valley Authority (In re C. W. Mining Co.), 10-2816, Judge Mosier.
Postpetition, a garnishee and customer of the Debtor paid to the Debtor’s agent funds that were garnished prepetition. After conversion from chapter 11 to chapter 7, the trustee commenced an adversary proceeding to recover the garnished funds from the garnishee and alleged custodian of those funds. Relying on its prior determination that the Debtor’s agent had authority to receive payments from purchasers during the time between the filing of the bankruptcy petition and the order for relief, the Court held that the bankruptcy estate was not injured by the payment to the Debtor’s agent because payment to the agent was equivalent to payment to the then Debtor in possession. The Court also held that the garnishee was not a custodian under § 101(11) and therefore did not have the duties of a custodian under § 543. Even if the garnishee did have those duties, however, the Court held that it fulfilled them by delivering the garnished funds to the Debtor’s agent. Because the Debtor received, through its agent, what it was entitled to receive, and the estate was not entitled to receive more from the garnishee, the Court granted the garnishee’s motion for summary judgment.
(574) 03/31/2014, PUBLISHED, Rushton v. Standard Industries, Inc. (In re C. W. Mining Co.), 09-2047, Judge Mosier.
One of the Debtor’s customers interpleaded funds resulting from payments withheld on certain invoices into the Court. After conversion from chapter 11 to chapter 7, the trustee commenced an adversary proceeding to recover the interpleaded funds for the benefit of the estate. The Court initially granted the trustee’s motion for summary judgment in part and ordered that the interpleaded funds be paid to the trustee. After the Court’s decision was appealed and the case was remanded from the District Court, a creditor moved for summary judgment on the issue of whether the estate was entitled to the interpleaded funds. The Court granted the creditor’s motion, holding that because the Debtor only assigned its interest in contract proceeds to its agent, but not the contract itself, and because the agent did not perfect its interest in the proceeds under the UCC, the trustee’s interest in the interpleaded funds was superior to that of the agent. The Court also held that the invoices, though generated in the agent’s name, did not create a genuine dispute regarding the ownership of the account with the customer or the interpleaded funds.
(575) 05/08/2014, UNPUBLISHED, West v. Christensen (In re Christensen), 13-2248, Judge Thurman.
In this adversary proceeding, the Court addressed the parties’ compliance with new Local Rule 7056-1. It ruled that the Plaintiff’s opposition to the Defendant’s motion for summary judgment was not untimely because the Defendant had not filed a Notice of Summary Judgment Motion and Notice of Hearing. Nor did the Defendant set an opposition deadline as required by Local Rule 7056-1(c). The Court also ruled that the Defendant’s motion for summary judgment was not in compliance with Local Rule 7056-1(b) as it was not contained in one document and was not organized as required by that rule. The Court cautioned the parties to hew to the rule in the future. As to the merits, the Court held that a debtor’s spouse is related to the debtor by affinity and therefore an insider of the debtor under § 101(31) for this avoidance action.
(576) 5/23/2014, PUBLISHED, Hunt v. Steffensen (In re Steffensen), 13-2192, Judge Thurman.
The Defendant filed a motion to dismiss the Plaintiff’s complaint, which the Court treated as a motion for summary judgment pursuant to Fed. R. Civ. P. 12(d), yet permitting the Defendant to argue his motion merged with a motion for summary judgment. After the parties submitted additional briefing, the Court examined the Defendant’s revised motion separately under Fed. R. Civ. P. 12(b)(6) and 56. The Defendant provided sworn statements of fact with his revised motion, which he argued contradicted the factual allegations in the complaint, requiring it to be dismissed. The Court held to the contrary, reasoning that all well-pleaded factual allegations in a complaint are assumed true on a motion to dismiss, which is not a proper means to contest the truthfulness of the allegations.
(577) 6/20/2014) PUBLISHED, Gary E. Jubber, Chapter 7 Trustee v. Hiawatha Coal Proceeds, et al., 11-08001, Judge Mosier.
The Debtor was party to a contract that gave the Debtor the exclusive right to mine coal. An involuntary chapter 11 petition was filed against the Debtor. During the GAP period, the Debtor transferred its rights in the mine to a third party, which mined coal until an order for relief was entered and the case was converted to chapter 7. The Chapter 7 Trustee brought an adversary proceeding against the third party and others seeking avoidance of the mine’s transfer and recovery of the mined coal under §§ 542, 549 and 550, arguing, inter alia, that the coal mined post-petition, as well as any proceeds of the coal, was property of the estate. The Court denied the Trustee’s claims to the mined coal and the Trustee appealed to the District Court. The District Court affirmed that the mined coal, while it was in situ, was not property of the estate but remanded the case to address the Trustee’s additional arguments. On remand, the Court found that, under the terms of the contract and Utah law, the Debtor’s property interest was an incorporeal hereditament, a future right to possession of the coal, which was contingent on the Debtor mining the coal. While the Trustee may have a claim for damages, the Debtor had no possessory interest in the mined coal because the third party, not the Debtor, mined the coal. The Court also held that none of the Trustee’s alternative arguments – (1) the third party was not authorized to mine the coal; (2) the Debtor had expenditure significant sums preparing the coal for extraction; (3) the estate was liable for royalties on the coal it did not mine; (4) the transfer of the mine was a violation of the automatic stay; and (5) equity supported finding the coal to be property of the estate – were sufficient to create a possessory interest in the mined coal. The Court therefore denied the Trustee’s §§ 542, 549 and 550 causes of action with respect to the mined coal.
(578) 8/11/2014, PUBLISHED, Hofmann v. Drabner (In re Baldwin) , 13-2515, Judge Thurman.
Less than a month before the Debtor filed bankruptcy, her mother transferred funds to the trust account of the Debtor’s criminal defense attorney, who in turn transferred the money to the Defendants to settle criminal charges against the Debtor. The Trustee sought to avoid the transfer to the Defendants as a preferential or fraudulent transfer, and both parties moved for summary judgment. Applying the dominion or control and diminution of the estate tests found in Parks v. FIA Card Services, N.A. (In re Marshall), 550 F.3d 1251 (10th Cir. 2008), the Court granted summary judgment to the Defendants, concluding that the transfer was not of “an interest of the debtor in property” under 11 U.S.C. § 547 or § 548.
(579) 8/13/2014, UNPUBLISHED, Gillman, Chapter 7 Trustee v. Geis (in re TWIN PEAKS FINANCIAL SERVICES, INC.), 09-02574, Judge Mosier.
The Trustee brought an avoidance action against the defendants under § 548 to recover payments they received in excess of their investment in the debtor’s ponzi scheme. The defendants argued that they were entitled to offset their potential claim for securities fraud under Utah state law or retain the payments under § 548(c). Held: Defendant’s may not offset a pre-petition claim against the Trustee’s avoidance claim. The defendant’s potential statutory claim does not constitute value for purposes of § 548(c) and the payments the defendants received were not in satisfaction of the potential statutory claim.