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Opinions
| Case Title | Date & Status | Case Number(s) | Judge & PDF | Summary | |
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Cottage Farms, Ltd. v. Sloan (In re Larsen) (Internal Ref: Opinion 346) |
Jan-29-1992 UNPUBLISHED (District Court) |
90PC-0720 |
U.S. District Court, Utah |
Debtor previously held a percentage interest in a limited partnership that owned real property, which it sold on an installment basis. Debtor transferred all of his interest in the partnership to a third party, who subsequently transferred half of that interest to debtor's wife. When the first installment payment was made on the sale of the property, the limited partnership received conflicting claims to the amount that would have been paid on debtor's previous percentage interest. The trustee in debtor's bankruptcy claimed that debtor's transfer of his interest in the partnership had been fraudulent, under 11 U.S.C. § 548(a)(2)(A), and demanded that the partnership pay the full value attributable to debtor's prior interest to the estate, while the third party and debtor's wife each claimed a one-half interest in that share. The limited partnership filed an interpleader action in the bankruptcy court and deposited the full percentage payment with the bankruptcy court clerk. The third party filed a motion in district court to withdraw the reference to the bankruptcy court, claiming she was entitled to a jury trial on the interpleader issues. That motion was supported by debtor's wife and opposed by the trustee. Holding that interpleader is an equitable remedy that does not give rise to a right to a jury trial, the district court denied the motion to withdraw the reference. | |
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Billings v. Richards Woodbury Mortg. Corp. (In re Granada, Inc.) (Internal Ref: Opinion 345) |
Jan-17-1992 APPEAL Unpublished See 314.pdf |
89PC-0401 |
U.S. District Court, Utah |
Relying on 11 U.S.C. §547(b) and 550(a), chapter 11 trustee sought to avoid and recover loan payments made by debtor during the one-year period preceding the filing of its petition. The bankruptcy court ruled that, as the transfers did not satisfy the criteria of § 547(b)(5), they were not preferential, and trustee appealed. The parties stipulated that the debt on which the payments were made was over-secured during the preference period and, therefore, the lien-holder had not received more from the payments than it would have received from liquidation of the collateral, as is required for avoidance under § 547(b)(5). However, the district court relied on a case law exception to the over-secured rule, which is that payments on an over-secured property may still be preferential if the payments are not accompanied by the release of an equivalent value to the estate. The district court then found that the loan payments had not been accompanied by release of an equivalent value, since the loan had been made to a joint venture, of which debtor was only a 50% owner. Therefore, the benefit to debtor was only 50% of the amount of the payments made. The district court rejected lender's argument that it could impose a junior lien on the property for the 50% of the payments that debtor had made on behalf of the other joint-venturer, concluding that such a lien was potentially valueless. Accordingly, the payments were held to have been preferential, and the bankruptcy court's order denying trustee's avoidance claim was reversed. | |
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First Am. Sav. Bank v. Iron County (In re United Constr. & Dev. Co.), 135 B.R. 904 (Bankr.D.Utah) (Internal Ref: Opinion 344) |
Jan-7-1992 PUBLISHED |
90PC-0744 |
Judge Clark |
The court considered whether the automatic bankruptcy stay (11 U.S.C. § 362) precludes postpetition creation, perfection, and enforcement of tax liens, under Utah law, for real property taxes that are assessed postpetition. Section 362(b)(3)'s exception to the stay allows postpetition perfection of an interest in property to the extent that such perfection is allowed by 11 U.S.C. § 546(b). However, the court ruled that the exception was inapplicable, concluding that it allows postpetition perfection of a property interest only when a "generally applicable law" provides that perfection will be effective against one who acquired rights in the property prior to the date of perfection. The court found nothing in the Utah tax laws that allows tax liens to take priority over those whose interests attached to real property after taxes were assessed but before the tax lien was perfected. Therefore, the automatic stay precluded postpetition creation, perfection, and enforcement of tax liens created by Utah law. | |
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In re Spanton (Internal Ref: Opinion 343) |
Dec-17-1991 UNPUBLISHED |
91B-0661 |
Judge Boulden |
Chapter 7 debtor listed an automobile personal injury claim, which he valued at $25,000, as an asset of his estate and claimed it as exempt under Utah law. The court identified three Issues: 1) whether debtor was bound by a subrogation agreement executed by his mother in favor of the health plan that covered both her and debtor; 2) whether the asset that debtor claimed to be exempt constituted "compensatory damages," as provided by the Utah exemption statute; and 3) whether the claimed exemption was preempted by the subrogation provisions of an ERISA-qualified plan. The court concluded that the subrogation provisions were binding upon the debtor, who ratified the subrogation terms by knowingly accepting benefit payments under the plan and failing to take any action in four years to disaffirm his mother's execution of the agreement. The court also determined that proceeds from debtor's personal injury claim would be considered "compensatory damages," which were exempt under the Utah Exemptions Act (Utah Code Ann. § 78-23-5(1)(i)). However, relying on In re Martin, 115 B.R. 311 (Bankr. D. Utah 1990) aff'd sub nom. In re Fullmer, 127 B.R. 55 (D. Utah 1991), the court concluded that, because the exemption statute "related" to an ERISA-qualified plan, it was preempted by the provisions of that plan. Therefore, debtor's exemption was allowed, over the trustee's objection, but only to the extent that the recovery exceeded the amount of the ERISA plan's subrogation claim. | |
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Performance Inv. Corp. of Utah v. Folsom (In re Folsom) (Internal Ref: Opinion 341) |
Nov-27-1991 UNPUBLISHED |
91PC-2296 |
Judge Clark |
Defendants in a state court action removed that action to the bankruptcy court and sought to have venue transferred to Oregon, where they had a pending bankruptcy. Plaintiffs did not appear at the motion to change venue. Nonetheless, the court considered equitable grounds for remand, including duplication of judicial resources, uneconomical use of judicial resources, effect of remand on the administration of the estate, questions of state law better addressed by a state court, comity considerations, prejudice to involuntarily removed parties, lessened possibility of inconsistent result, and expertise of the court where the action originated, concluding that those considerations supported remand to Utah's state courts. The court particularly found the facts that the state court action had been proceeding for ten years, final judgment had been rendered by the state trial court, and the matter was on appeal in the state appellate court for the second time, coupled with the existence of unique state law issues, supported remand. Further, the court concluded that the removal statute, 28 U.S.C. § 1452, should not be applied where doing so would result in the bankruptcy court functioning as an appellate court. | |
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Thomas Am. Stone Bldg., Inc. v. White (In re White) (Internal Ref: Opinion 342) |
Nov-27-1991 UNPUBLISHED |
91PC-0178 |
Judge Clark |
Creditor filed a state court action seeking to foreclose its interest in defendant's Utah real property. Defendant removed the case to Utah federal district court and, approximately two years later, filed a chapter 11 petition in California. Creditor moved for relief of stay in California, in order to proceed with the foreclosure action in Utah, and that motion had been granted by the California bankruptcy court. After the stay relief order was signed, but before it was entered, defendant/debtor obtained the Utah district court's referral of the Utah foreclosure action, as an ancillary action, to the Utah bankruptcy court. Creditor moved the Utah bankruptcy court to remand the case back to the district court, while defendant/debtor moved to transfer venue from the Utah bankruptcy court to the California bankruptcy court. Considering the equities of the case, the court concluded, based in large part on the California bankruptcy court's order allowing creditor to proceed with the Utah foreclosure action, that the case would more appropriately be decided by the Utah district court than by the California bankruptcy court. Creditor's case was remanded to the district court, with a recommendation that the district court deny the motion for change of venue. | |
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Haymond v. Grant (In re Grant) (Internal Ref: Opinion 340) |
Nov-18-1991 APPEAL Unpublished See 309.pdf |
88PB-0972 |
U.S. District Court, Utah |
A bankruptcy court judgment discharging a debt over creditors' objections was vacated, and the case was remanded for the bankruptcy court to reexamine its ruling in light of the U.S. Supreme Court's Grogan v. Garner, 498 U.S. 279 (1991) decision. Grogan held that the evidentiary standard of proof applicable to 11 U.S.C. § 523(a) discharge exceptions is an ordinary preponderance standard, rather than a clear and convincing standard. The district court found that the bankruptcy court had improperly placed the burden on plaintiffs to prove intent to deceive when, since plaintiffs had established a rebuttable presumption of such intent, it was debtor's burden to rebut it. The district court also concluded that the bankruptcy court had properly denied plaintiff's demand for a jury trial since, although the demand had been both timely and properly made, plaintiffs were not entitled to a jury trial on their dischargeability claim, as it is a claim in equity rather than law. | |
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In re CFI Fabricators of Utah, Inc., 131 B.R. 474 (Bankr.D.Utah) (Internal Ref: Opinion 339) |
Sep-18-1991 PUBLISHED |
90B-6721 |
Judge Boulden |
In a jointly administered case, professionals sought compensation for services from the estates of the chapter 11 debtors-in-possession. The court held that time reasonably spent preparing fee applications is compensable at normal hourly rates, and is neither subject to a percentage limitation nor an across-the-board discount, provided that the estate is billed only for time spent (1) preparing the fee application pleading, including the narrative section, at the lowest applicable hourly rate; (2) exercising billing judgment while reviewing the application; and (3) responding to objections and attending the hearing on allowance of the fee application. Customary overhead charges such as reviewing time records for accuracy, posting accumulated time records, and compiling the billing statement, are non-compensable charges. The court also held that, if services provided to the estate by a paraprofessional are clerical in nature and would traditionally be charged to overhead in a non-bankruptcy case, they are non-compensable. Finally, the court found that telecopier charges should reflect the actual cost to the estate of long distance telephone rates and supplies and should not produce a profit for the applicant. | |
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Gillman v. American Savings & Loan Assoc. (In re CFS Fin. Corp.) (Internal Ref: Opinion 338) |
Aug-27-1991 APPEAL Unpublished |
88PC-0317 |
U.S. District Court, Utah |
The holder of a deed of trust on debtor's real property moved for relief from stay in the bankruptcy court, which was granted when no objections were filed. Trust deed holder thereafter obtained the property by foreclosure sale. More than a year after the foreclosure sale, chapter 7 trustee filed an adversary action in the bankruptcy court, seeking to avoid the trust deed lien pursuant to 11 U.S.C. § 544 and to recover the property pursuant to 11 U.S.C. § 549. The parties filed cross-motions for summary judgment on the issue of the validity of the deed of trust's acknowledgment, which was individual rather than corporate, and the bankruptcy court granted trustee's motion and voided the lien on the property. The district court did not determine the acknowledgement's validity, holding instead that the recording of the trust deed had provided effective notice to trustee. The district court then reversed the bankruptcy court's order on the ground that trustee's lesser interest in the property had been extinguished by the foreclosure sale. | |
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Gillman v. Swire Pac. Holdings, Inc. (In re D-Mart Servs., Inc.) (Internal Ref: Opinion 336) |
Aug-13-1991 UNPUBLISHED See 349.pdf |
90PC-0524 and -0551 |
Judge Clark |
The court addressed the issue of when the two-year limitation period (set forth in 11 U.S.C. § 546(a) and applicable to 11 U.S.C. § 547 avoidance actions) commences, when a case that began in chapter 11 with a debtor-in-possession is subsequently converted to chapter 7. The court held that the limitation period does not begin to run until the chapter 7 trustee has been appointed. Therefore, trustee's avoidance action was not time-barred. On April 7, 1992, the court amended this decision, which at 349.pdf. | |
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In re Green Street, 132 B.R. 460 (Bankr.D.Utah) (Internal Ref: Opinion 337) |
Aug-13-1991 PUBLISHED |
91A-3794 |
Judge Allen |
Before the court were three debtors' motions, pursuant to 11 U.S.C. § 327, to employ the same counsel in separate chapter 11 cases. Due to existing prepetition debts between the debtors, the court found an actual conflict that rendered the attorney an "interested" party within the scope of 11 U.S.C. § 101(13)(E), and thus subject to disqualification under § 327(a). Further, as the conflict was actual with the specific debtors, rather than simply hypothetical or theoretical, disqualification was mandatory and the motions to employ were denied. | |
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Richard L. Clissold Inv. Co. v. Valley Bank Trust Co. (In re Richard L. Clissold Inv. Co.) (Internal Ref: Opinion 335) |
Aug-7-1991 UNPUBLISHED |
90PC-0323 |
Judge Clark |
Debtor brought this adversary action, claiming that defendant creditor was obligated to apply the fair market value of debtor's properties to its notes, and that its refusal to do so constituted conversion, unjust enrichment, and breach of contract. Creditor counterclaimed, asserting that, since the fair market value of the properties at issue had yet to be determined, it should be allowed three months after any award of money to debtor in which to pursue a deficiency judgment. On cross-motions for summary judgment, the court held that: (1) Debtor/plaintiff asserted a jury demand in its adversary complaint but failed to request a withdrawal of reference, which constituted a waiver of the jury demand. (2) Under Utah law, when a secured creditor sells collateral securing a debt in a non-judicial sale, the creditor must commence a deficiency action, pursuant to Utah Code Ann. § 57-1-32, in order to preserve its claim for a deficiency. (3) However, since creditor's notes were secured by more than one property, creditor was not required to commence a deficiency action until three months after the last property securing that specific debt is sold. On one of creditor's notes, one of the properties securing the note had not yet been sold, and creditor was not precluded by § 57-1-32 from filing a deficiency action. On creditor's other note, however, all properties had been sold and the three-month period had run, which precluded creditor from filing a deficiency action on that note, whether or not the fair market values of those properties had been determined. | |
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In re Smith, 130 B.R. 102 (Bankr.D.Utah) (Internal Ref: Opinion 334) |
Jul-16-1991 PUBLISHED |
88A-2388 |
Judge Allen |
The issue before the court was whether the debtors' 36-month chapter 13 plan satisfied the good faith requirement of 11 U.S.C. § 1325(a)(3), where the plan proposed a 30% return to unsecured creditors on their claims. Both the trustee and the lender on a student loan objected to the proposed plan. The court determined that the student loan debt would not have been dischargeable in a chapter 7 case, but that a chapter 13 discharge is much broader. Because of that, § 1325(a)(3) requires that a chapter 13 plan be proposed in good faith. As the Bankruptcy Code does not define "good faith," the court found it essential to consider the totality of the circumstances surrounding the proposed plan, including debtors' income prospects and the length of the plan. Concluding that debtor husband's education had enabled him to earn an income that was likely to include substantial increases, the court held that a 60-month plan was imperative for the debtors to meet the good faith requirement for confirmation. | |
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In re Swenson, 130 B.R. 99 (Bankr.D.Utah) (Internal Ref: Opinion 333) |
Jul-11-1991 PUBLISHED |
90A-24222 |
Judge Allen |
Debtor's IRA accounts were subject to a prepetition writ of garnishment, but debtor claimed the accounts as exempt property in his chapter 7 bankruptcy. The judgment creditor objected and moved for relief from the automatic stay, asserting it held a perfected lien on the accounts. The court determined that, in order to be exempt under Utah law (Utah Code Ann. § 78-23-6(3)), an account must be "an annuity or other similar plan," and that most courts had ruled that IRA accounts were not exempt under similar statutes. Noting that public policy concerns dictate whether a particular trust fund may be exempted from a bankruptcy estate, the court determined that it would be unjust to allow debtors to frustrate the rights of their creditors by claiming that accounts to which they have easy access are "annuities or other similar plans." Therefore, the court granted creditor's motion for relief from stay, finding it "clear" that IRAs were not exempt property under Utah law. | |
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Placer U.S., Inc. v. Dahlstrom, 129 B.R. 240 (Bankr.D.Utah) (Internal Ref: Opinion 332) |
Jul-3-1991 PUBLISHED |
90PC-0678 |
Judge Clark |
In an adversary proceeding seeking non-dischargeability, under 11 U.S.C. § 523(a)(6), of a state court award of compensatory and punitive damages against debtor, the court previously ruled that debtor was collaterally estopped from re-litigating both the non-dischargeability of the compensatory damages and that the punitive damage award was based on "willful and malicious injury" of plaintiff. Four minority arguments to the effect that § 523's non-dischargeability provisions are inapplicable to punitive damages were considered and rejected by the court. In doing so, the court noted that it had previously held, along with a minority of other courts, that punitive damage awards were subject to discharge. However, the court felt compelled to reevaluate that position after the U.S. Supreme Court, in Grogan v. Garner, 498 U.S. 279 (1991), included punitive damages in the amount determined to be non-dischargeable under § 523(a)(2). The bankruptcy court concluded that punitive damages may be non-dischargeable under § 523(a)(6), and that the punitive damage award against debtor in the case before it was non-dischargeable. | |
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Alside Supply Ctr. v. Aste (In re Aste), 129 B.R. 1012 (Bankr.D.Utah) (Internal Ref: Opinion 331) |
Jun-11-1991 PUBLISHED |
89PB-0695 |
Judge Boulden |
Creditor brought a non-dischargeability action against the debtor under 11 U.S.C. § 523(b)(2)(B), based on a line of credit that had been granted on the basis of a materially false financial statement. Debtor had signed the financial statement as vice president of a small non-party corporation, and had personally guaranteed the corporation's debt. In response to Grogan v. Garner, 498 U.S. 279 (1991), the court expressed a need to reconcile the newly imposed preponderance of the evidence standard in non-dischargeability cases with its obligation to narrowly construe exceptions to dischargeability in favor of the debtor. The court held that, since strict construction is applicable to statutory interpretation rather than to evidentiary burden, that standard was therefore unaffected by Grogan's change of the evidentiary standard. Applying a preponderance of the evidence standard, the court found that plaintiff had not established either that debtor had actual knowledge that the financial statement he signed, which had been prepared by another corporate employee, was false, or that his signing of the document had been reckless. Without proof of either actual intent to defraud or reckless disregard of the truth, the court concluded that plaintiff had failed to establish that its claim against debtor was non-dischargeable under § 523(b)(2)(B). | |
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In re Fullmer (Internal Ref: Opinion 330) |
May-9-1991 APPEAL Unpublished See 306.pdf |
89B-6063 |
U.S. District Court, Utah |
Debtors appealed a bankruptcy court ruling that an ERISA retirement fund was an asset of debtors' estate and was not exempt under either federal or Utah law, within the meaning of 11 U.S.C. § 522(b)(2)(A). The district court noted, first, that debtors could not avail themselves of the otherwise applicable exemption in § 522(d)(10)(E), both because Utah is an opt-out state, and because § 522(d) exemptions are excluded from the federal exemptions that debtors may claim under § 522(b)(2)(A). The court further determined that the Utah statutory exemptions on which debtors had relied were "related to" ERISA, and therefore preempted by that Act. The bankruptcy court ruling was affirmed. | |
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Bagley v. United States (In re Murdock Mach. & Eng'g Co. of Utah) (Internal Ref: Opinion 329) |
May-1-1991 UNPUBLISHED See 328.pdf & 361.pdf |
90PB-0601 |
Judge Boulden |
The government filed claims against the estate based on government contracts with the debtor. Trustee filed this adversary proceeding objecting to the claims. Finding the case of In re Gary Aircraft Corp., 698 F.2d 775 (5th Cir. 1983) to be instructive, the court discussed primary jurisdiction and discretionary deferral of government contract claims disputes. The court concluded that deferral would unduly delay administration of the estate and denied the government's motion to dismiss or defer. | |
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In re Murdock Mach. Eng'g Co. of Utah (Internal Ref: Opinion 328) |
Apr-30-1991 UNPUBLISHED See 361.pdf |
B-75-484 |
Judge Boulden |
In this Bankruptcy Act Chapter XI case, trustee argued entitlement to partial summary judgment on a claim filed by the United States for unliquidated progress payments. In response to trustee's motion, the government filed a motion to dismiss for lack of jurisdiction, or to defer resolution of the disputes to the Armed Services Board of Contract Appeals or the U.S. Claims Court. Finding that no unliquidated progress payments had survived the ruling in Murdock Mach. & Eng'g Co. v. United States, 873 F.2d 1410 (D.C. Cir. 1989), the court granted trustee's partial summary judgment motion and denied the government's motion. | |
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In re Packham, 126 B.R. 603 (Bankr.D.Utah) (Internal Ref: Opinion 327) |
Apr-26-1991 PUBLISHED |
90C-4129 |
Judge Clark |
Upon objections by trustee and an unsecured creditor, the court refused to confirm debtors' proposed Chapter 13 plan, and dismissed their case, on the ground that debtors had not devoted all of their disposable income to plan payments, as is required by 11 U.S.C. § 1325(b)(1)(B). After debtors testified regarding their expenses, the court concluded that all of the listed expenses were reasonably necessary for the support of debtors or their dependents, with the exception of a monthly tithing payment to the Church of Jesus Christ of Latter-day Saints. The court adopted the view that, although church donations may be a source of strength and comfort to some debtors, they do not satisfy the reasonably necessary for maintenance or support requirement of § 1325(b)(2)(A). | |
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Cascade Energy & Metals Corp. v. Banks (In re Cascade Energy & Metals Corp.) (Internal Ref: Opinion 326) |
Apr-23-1991 APPEAL Unpublished |
88PC-0861 |
U.S. District Court, Utah |
The bankruptcy court considered debtor's adversary claims against defendants and concluded that defendants had not properly perfected their equitable lien on debtor's property, but dismissed the remaining allegations of the complaint for lack of subject matter jurisdiction. On appeal, the district court held that, pursuant to 11 U.S.C. § 1142(b), bankruptcy courts retain post-confirmation jurisdiction to resolve issues that are necessary to the plan's success, including the promotion of justice and fair play. The court then concluded that resolution of debtor's adversary claims was necessary for the plan's completion, as the issues related to priority of claims. The district court remanded the case, on the ground that the bankruptcy court had subject matter jurisdiction to decide all of the issues raised in debtor's post-confirmation adversary proceeding. | |
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In re Powell (Internal Ref: Opinion 324) |
Apr-9-1991 UNPUBLISHED |
90B-1412 |
Judge Boulden |
Debtors sought sanctions from a worker's compensation insurer for violating the automatic stay provisions of 11 U.S.C. § 362. Insurer was paying benefits to debtor husband when the bankruptcy petition was filed. Prior to the filing, insurer had determined that it had overpaid some of debtor's previous benefits, and thereafter began deducting set amounts from debtor's benefit payments in order to recoup the overpayments. Although insurer received actual notice of debtors' bankruptcy filing, it continued to reduce the benefit payments post-petition, and the parties stipulated that insurer had deducted a total of $1,300 from debtor's post-petition benefit payments. In defense of the stay violation claim, insurer asserted the doctrine of "recoupment." Although § 362(a)(7) prohibits setoff of a prepetition debt owed to the debtor against a claim against the debtor, the equitable doctrine of recoupment allows a creditor to make such an offset when both the creditor's and the debtor's claims arose from the same transaction. The court determined that the automatic stay does not prohibit such recoupment in this jurisdiction. Adopting the view that the "same transaction" prong of recoupment was controlled, in the case before it, by the source of the injury, the court found that insurer had proven that both its claim and debtor's arose from the same transaction. However, the court concluded that the recoupment doctrine was not applicable because a right to recoupment must be created by contract, and there were no contracts between insurer and debtor. The court granted debtors' motion, and awarded them their actual damages based on insurer's willful violation of the stay. | |
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In re TS Indus., Inc., 125 B.R. 638 (Bankr.D.Utah) (Internal Ref: Opinion 325) |
Apr-9-1991 PUBLISHED |
89C-4920 & -4221 |
Judge Clark |
Counsel for debtors in a chapter 11 proceeding submitted an application for payment of legal fees that were incurred both before and after a trustee had been appointed. Applying 11 U.S.C. §330(a) and 503(b)(2), the court concluded that reasonable and necessary fees and costs of a chapter 11 debtor's attorney were compensable as administrative expenses, and that applicant's pre-trustee fees were largely compensable. The court then rejected the holding of In re NRG Res., Inc., 64 B.R. 643 (W.D. La. 1986), to the effect that debtor's counsel may not be compensated for services rendered after a trustee was appointed, even for services that both benefitted the estate and were requested by the trustee, unless counsel was first approved to act as special counsel for the trustee under 11 U.S.C. § 327(e). Instead, the court slightly lessened the NRG standard based on the facts before it, which were that the post-trustee services rendered by debtor's counsel largely benefitted the estate, the fee application was "not hotly contested," trustee had proffered that no duplicative work had been performed, and the absence of case law in this district, at the time services were performed, on the issue of post-trustee services performed by debtor's counsel. However, the court emphasized that, in the future, if debtor's counsel performs any services that are duties of the trustee after one has been appointed, approval to act as special counsel for the trustee under 11 U.S.C. § 327(e) should be obtained first. The court then considered the application and eliminated post-trustee fees that were for services it determined to be either unreasonable or unnecessary. | |
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ln re Concept Clubs, Inc., 125 B.R. 634 (Bankr.D.Utah) (Internal Ref: Opinion 323) |
Apr-5-1991 PUBLISHED |
89A-2750 through -2754 |
Judge Allen |
Debtor's broker sought approval, as an administrative expense, of a 10% sales commission for brokering a $1 million property sale. Several creditors and the U.S. Trustee objected, contending that the commission for such sales should be no more than 5%. Applying a "reasonable compensation" standard, and considering the factors for determining a reasonable broker's commission delineated in Matter of Womack, Inc., 1 B.R. 95 (Bankr. D. Nev. 1979), the court concluded that a reasonable award was $50,000. | |
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In re CFI Fabricators of Utah, Inc.In re The Colorado Wyoming Ry. Co. (Internal Ref: Opinion 322) |
Apr-2-1991 UNPUBLISHED |
90B-6721 90B-6730 |
Judge Boulden |
Chapter 11 trustee filed an unopposed motion for an order allowing payment of various unsecured prepetition claims prior to plan confirmation, relying on 11 U.S.C. § 1122(b). The court held that, although § 1122(b) allows creation of an administrative convenience class of claims, it does not authorize payment of those claims prior to confirmation of a plan. The court further rejected trustee's assertion that the small service creditors' claims should be paid pursuant to the Necessity of Payment Rule, finding no evidence that payment of the creditors prior to implementation of a plan was necessary to debtor's rehabilitation. Finally, the court rejected trustee's argument that the proposed payments could be made under 11 U.S.C. § 1171(b), which incorporates the Six Months Rule applicable to railroad reorganization and allows certain prepetition debts to be paid from postpetition operating income. The court concluded that the claims at issue did not satisfy the rule's criteria, both because the creditors that trustee sought to pay had not relied on anything other than debtor's general credit for repayment, and because tax claims are not debts for labor, equipment, supplies, or improvements. | |
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Stewart v. Wynn (In re Wynn) (Internal Ref: Opinion 321) |
Mar-26-1991 UNPUBLISHED |
90PC-0297 |
Judge Clark |
Relying heavily on Job v. Calder (In re Calder), 93 B.R. 734, 735 (Bankr. D. Utah 1988), aff'd, 907 F.2d 953 (10th Cir. 1990), the bankruptcy court denied debtor's discharge under 11 U.S.C. § 727(a)(4)(A) and (a)(5). Applying a clear and convincing standard of proof due to uncertainty regarding the applicable standard, the court found that plaintiffs had established that debtor's statements and schedules contained numerous omissions, in violation of § 727(a)(4), and that debtor's explanations for the omissions were "not proper defenses." The court also denied discharge under § 727(a)(5), based on debtor's inadequate and contradictory responses to questions regarding his assets. The court then awarded plaintiffs only those damages that had been supported by adequate evidence, and denied their claim for punitive damages on the ground that denial of debtor's discharge was sufficiently punitive. | |
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Micoz v. Carter (In re Carter), 125 B.R. 631 (Bankr.D.Utah) (Internal Ref: Opinion 320) |
Feb-13-1991 PUBLISHED |
90PC-0332 |
Judge Clark |
Sellers of a residence to debtors filed an adversary proceeding seeking to deny debtors' discharge under 11 U.S.C. § 727(a)(4). Debtors' previous bankruptcy case, in which they had not listed either the property or the debt to plaintiffs, had been dismissed. In the case before the court, however, debtors listed both the property and the debt. The court rejected plaintiffs' claim that debtors' false oath in their previous bankruptcy case provided grounds for denial of discharge in the pending case, concluding that neither the language of § 727(a)(4), nor a reading of § 727(a) as a whole, led to a conclusion that a false oath in a previous bankruptcy case could be used as grounds for denial of discharge in a subsequent case. The court further concluded that § 727(a)(7) did not provide grounds for denial of debtors' discharge, as that provision only applies to misconduct in a substantially contemporaneous related case, other than the debtor's own. | |
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Cascade Energy & Metals Corp. v. Banks (In re Cascade Energy & Metals Corp.) (Internal Ref: Opinion 319) |
Jan-18-1991 UNPUBLISHED |
88PC-0861 |
Judge Clark |
The court had previously ruled that a judgment lien against real property owned by debtor in California had not been properly perfected. Lien holders appealed that ruling, without providing a supersedeas bond or releasing the lien, although they did file a copy of the bankruptcy court's order regarding the lien in California. In an adversary proceeding against the lien holders, debtor sought an order compelling defendants to either release the lien or provide a $2.6 million bond. Relying on a California statute that it had inaccurately quoted, debtor argued that defendants were statutorily required to release their lien. The court found that, once the portions of the statute omitted by debtor were included, it was clear that the statute had no applicability to the dispute before it. The court further found that debtor had failed to establish a need for a supersedeas bond, and that the status quo was best maintained by allowing the lien to remain recorded, especially since the filing of the court's previous judgment would inform interested parties of the lien's status. Finally, the court determined that debtor's attorney had misquoted the statute with the intent to mislead the court, which warranted sanctions under Fed. R. Bankr. P. 9011. | |
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Zions First Nat'l Bank v. Christiansen Bros., Inc. (In re Davidson Lumber Sales, Inc.) (Internal Ref: Opinion 318) |
Jan-9-1991 UNPUBLISHED |
90PC-0044 |
Judge Clark |
Chapter 7 trustee abandoned the bankruptcy estate's cause of action against third parties after concluding that any recovered funds would belong to bank. After bank replaced trustee as plaintiff in the adversary proceeding, the court raised the issue of its subject matter jurisdiction. Relying on Gardner v. United States (In re Gardner), 913 F.2d 1515 (10th Cir. 1990), the court concluded that it lacked jurisdiction because the adversary proceeding only involved non-debtor parties and non-estate property, and its outcome would not affect administration of the estate. The adversary proceeding was dismissed. | |
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In re Whitelock, 122 B.R. 582 (Bankr.D.Utah) (Internal Ref: Opinion 317) |
Dec-26-1990 PUBLISHED |
90B-0844 |
Judge Boulden |
Chapter 13 trustee objected to debtors' proposed plan on the ground that, by giving specialized classification and treatment to one unsecured debt, the plan was unfairly discriminatory. The specially treated debt had originally been incurred as an unsecured loan that debtors used to pay taxes owed to the IRS, but the initial note was replaced with a new note executed by both debtor husband and his mother. Although the mother provided security for the second note by giving lender a deed of trust on her home, the note was an unsecured claim in the bankruptcy because debtors had no interest in the property that secured it. Under the proposed 60-month plan, all other unsecured creditors would receive payments that totaled 30% of their claims, while the note would be paid in full with interest. The first issue considered by the court was whether the note was a "consumer debt," since 11 U.S.C. § 1322(b)(1) allows consumer debt to be treated differently than other unsecured claims when an individual other than the debtor is also liable. The court rejected the argument that a debt secured by real property is not consumer debt, and determined that the note at issue was in fact consumer debt because it was not business related. However, after applying the four-part fairness test set forth in Amfac Distrib. Corp. v. Wolff (In re Wolff), 22 B.R. 510 (9th Cir. BAP 1982), the court concluded that the proposed discriminatory treatment of the note would be unfair to debtors' other unsecured creditors. The court denied confirmation, finding that the totality of the circumstances before it indicated that the plan had not been proposed in good faith, which is a requirement of 11 U.S.C. § 1325(a)(3). |
