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Case Title Date & Status Case Number(s) Judge & PDF Summary

Cmty. First Bank v. Quinlan (In re Quinlan)

(Internal Ref: Opinion 250)




Judge Boulden

PDF icon 250.pdf

Plaintiff's non-dischargeability action was dismissed for failure to file the pretrial order, and plaintiff moved for reconsideration of the dismissal, arguing excusable neglect under Bankruptcy Rule 9024. In finding no excusable neglect, the court noted that cumulative procedural and substantive deficiencies in the case were evidence of, at best, failure to attend to detail and, at worst, a cavalier attitude toward the court. Therefore, plaintiff's motion was denied with respect to its 11 U.S.C. § 523 cause of action. The court considered the problems with plaintiff's 11 U.S.C. § 727 action to be much more serious, noting that plaintiff's counsel had obtained the information in support of the claims against debtor by virtue of his previous role as trustee of debtor's estate. Counsel resigned as the trustee and filed plaintiff's complaint against debtor on the same day, which was also the last day for filing objections to discharge. The court found that acting as the trustee and representing a creditor of the estate was clearly a conflict of interest, and that the conflict was not cured by counsel's withdrawal as trustee. The court granted the motion to reinstate the § 727 cause of action, directed the US Trustee to take steps to ensure proper administration of the estate, and directed the chapter 7 trustee that had been appointed after plaintiff's counsel resigned to either schedule a pre-trial conference on the § 727 claim, or move to dismiss the adversary proceeding, within twenty days.

In re The Weber Clinic

(Internal Ref: Opinion 249)




Judge Allen

PDF icon 249.pdf

A lender to non-debtors filed a claim in debtor's bankruptcy based on a trust deed to debtor's property that was executed by debtor's president as security for the loan. The court chose not to determine whether the trust deed was enforceable and, instead, considered whether it had been released by lender's settlement with, and release of, one of the loan obligors. The court held that, under Utah law, a lender's release of one of several obligors, made without express written reservation of lender's rights against the other obligors, acts as a release of all obligors from the agreement. Therefore, lender's claim against debtor's estate was denied.

Am. Cmty. Serv., Inc. v. Wright Mktg., Inc. (In re Am. Cmty. Serv., Inc.)

(Internal Ref: Opinion 248)




U.S. District Court, Utah

PDF icon 248.pdf

The district court found "cause" under 28 U.S.C. § 157(d) to permissively withdraw the reference of a non-core adversary proceeding from the bankruptcy court. In so doing, the district court held that cause for permissive withdrawal of the reference is limited to a narrow set of circumstances, the existence of which is determined on the facts presented by each particular case, and withdrawal is generally appropriate when either judicial economy would be served or a party has a right to a jury trial. In the case before it, the non-debtor defendant had a seventh amendment right to a jury trial, which it had timely demanded, and it had not consented to the bankruptcy court's jurisdiction. Reference was therefore withdrawn.

Bowen v. Internal Revenue Serv. (In re Bowen), 84 B.R. 214 (Bankr.D.Utah)

(Internal Ref: Opinion 247)




Judge Boulden

PDF icon 247.pdf

The court considered the proper method of calculating penalties under Internal Revenue Code § 6700, which was enacted as part of an effort to eliminate abusive tax shelters. Having considered the arguments of both the IRS and the chapter 11 debtor subject to such penalties, the court determined that a transactional assessment of the penalty was not supportable, and that the penalty should be assessed on a one-time basis, rather than annually.

In re Terracor, 86 B.R. 671 (Bankr.D.Utah)

(Internal Ref: Opinion 246)



81B-0599 through -0602, and 81B-0689 through -0696

Judge Boulden

PDF icon 246.pdf

The court determined that it had subject matter jurisdiction to consider a dispute between non-debtors that related to a chapter 11 plan confirmed more than five years prior to the dispute. However, the court concluded, based on the facts before it, that permissive abstention pursuant to 28 U.S.C. § 1334(c)(1) was appropriate. The court recommended to the district court that, in cases involving confirmed chapter 11 plans that are largely completed and resolution of the dispute will have little or no effect on the bankruptcy case, disputes between third parties should not be determined in the bankruptcy court and permissive abstention should be used to transfer such cases back to jurisdictions statutorily designated to handle them.

Orem Postal Credit Union v. Twitchell (In re Twitchell)

(Internal Ref: Opinion 245)


APPEAL 91 B.R. 961 (D.Utah) See 224.pdf


U.S. District Court, Utah

PDF icon 245.pdf

Chapter 7 debtor, the president and treasurer of plaintiff credit union, appealed a bankruptcy court decision that concluded plaintiff's claim against him was non-dischargeable under 11 U.S.C. § 523(a)(4). The sole issue on appeal was whether debtor was acting in a fiduciary capacity when the proven defalcations took place. The district court noted that the general meaning of "fiduciary" is far too broad for the purposes of § 523(a)(4), which is narrowly construed, and that fiduciary capacity under the statute has been defined as arising only from an express or technical trust. The court rejected the position taken by some courts that debts due to breach of fiduciary duties by corporate or bank officers is sufficient to satisfy § 523(a)(4), finding that interpretation to be overly broad. The court concluded that plaintiff was required to show that all of debtor's defalcations occurred while he was acting as a trustee under a pre-existing express agreement or statute. Finding that no express agreement or statute made debtor a trustee over plaintiff's funds, the court reversed the bankruptcy court's decision.

In re Ret. Inn at Forest Lane, Ltd.

(Internal Ref: Opinion 244)


APPEAL 83 B.R. 795 (D.Utah)


U.S. District Court, Utah (en banc)

PDF icon 244.pdf

The district court considered a creditor's motion for change of venue of a bankruptcy case, en banc. The court concluded that the bankruptcy court's practice of automatically transmitting change of venue cases to the district court for disposition was not in keeping with the spirit and interpretation of various statutes, bankruptcy rules, and Local Rule B-106. The court resolved to amend Rule B-106 to provide that motions for change of venue in bankruptcy cases would thereafter be heard initially by the bankruptcy court, which would then provide a report and recommendation on the motion to the district court. In the case before it, the district court granted the motion to change venue in order to avoid further delay.

The Lockhart Co. v. Multi-Resort Ownership P'ship (In re Sweetwater)

(Internal Ref: Opinion 243a)


APPEAL Unpublished


U.S. District Court, Utah

PDF icon 243a.pdf

Prior to debtor's bankruptcy filing, plaintiff perfected a security interest in several contracts whereby debtor sold interests in recreational property. Under Utah Code Ann. § 70A-9-403(2), a filed financing statement is effective perfection for a period of five years from its filing, but must be re-perfected by filing a continuation statement prior to the end of the perfection period. However, if a security interest is perfected when insolvency proceedings are initiated, the perfection continues until either the perfection period runs, or sixty days after the insolvency proceedings terminate. Debtor's chapter 11 plan was confirmed in June 1984. Approximately five months later, debtor contested plaintiff's secured claim on the ground that plaintiff had not filed a continuation statement in accordance with § 70A-9-403(2). The bankruptcy court ruled in favor of debtor, determining that plaintiff's perfected security interest lapsed sixty days after the effective date of debtor's plan, and plaintiff appealed. The district court affirmed, ruling that a chapter 11 bankruptcy proceeding terminates on the effective date of the confirmed plan, and neither the bankruptcy court's retention of jurisdiction to further litigate the validity or extent of claims, nor a pending objection to the claim in the bankruptcy case, relieved plaintiff of its obligation to file a continuation statement.

Merrill v. Turner (In re Indep. Clearing House Co.)

(Internal Ref: Opinion 243)


APPEAL Unpublished See 237.pdf and 185.pdf


U.S. District Court, Utah

PDF icon 243.pdf

Trustee for Ponzi scheme debtors asserted fraudulent transfer claims, pursuant to 11 U.S.C. § 548 and 544(b), against defendant, an attorney who acted as debtors' coordinating counsel with respect to numerous lawsuits filed against debtors across the country. Defendant argued that he was essentially a conduit from debtors to local counsel, and that he should not be accountable for money he did not retain. After a trial, the bankruptcy court concluded that defendant had failed to account properly for more than $350,000 of funds that had been transferred to him by debtors, and granted trustee a judgment for that amount. The district court agreed with the bankruptcy court's conclusion that trustee had established that debtors had transferred funds to defendant during the one-year period prior to debtors' bankruptcy filing, and that debtors were insolvent at the time of those transfers. The district court rejected defendant's argument that trustee had failed to meet his burden of proving that debtors received less than reasonably equivalent value for those transfers, on the ground that trustee testified that his investigation found no evidence at all of consideration received by debtors, which placed the duty on defendant to produce evidence of value returned to debtors. As defendant's accounting practices were grossly inadequate, he failed to establish that debtors had received value in return for the transfers made to him. However, the district court ruled that the bankruptcy court had failed to credit defendant with a few transfers that were adequately tied to legal services provided to debtors, totaling approximately $37,000, and affirmed the judgment less that amount.

Prudential Fed. Sav. v. Dana (In re Dana)

(Internal Ref: Opinion 242a)


APPEAL Unpublished


U.S. District Court, Utah

PDF icon 242a.pdf

The district court tentatively ruled that appellants' attempt to file a chapter 13 bankruptcy petition while another chapter 13 petition was still pending was void from its inception. Given the opportunity to argue otherwise, appellants agreed with the court and requested dismissal. Their bankruptcy case was dismissed.

In re CFS Fox River, Ltd.

(Internal Ref: Opinion 242)




Judge Clark

PDF icon 242.pdf

Debtor filed its chapter 11 petition on the eve of a scheduled foreclosure sale of an apartment complex it operated. Secured creditor sought relief from stay or dismissal, but postponed the hearing on its motions and entered into a stipulation with debtor that essentially granted it superpriority administrative expense status over funds debtor would deposit into a segregated account. The court executed an order approving the stipulation, which included a provision regarding how a dismissal of debtor's petition would affect the agreement. Five days later, pursuant to a previous order, the court dismissed the case due to debtor's failure to file its schedules and statement of affairs. Thereafter, creditor sought post-dismissal relief from the court, alleging that debtor had violated the parties' stipulation. The court ruled, first, that superpriority status and collateral management are inherently bankruptcy functions, and are not "ancillary matters" over which the court would have continuing jurisdiction. Creditor's argument that the court retained inherent power to enforce its own orders was also rejected by the court, noting that a motion to dismiss supersedes prior orders and returns the parties to the remedies available to them under non-bankruptcy law. Concluding that it may have jurisdiction to consider creditor's motion, the court ruled that it would be inappropriate to do so.

Rushton v. Nell Inv. Co. (In re Nell)

(Internal Ref: Opinion 241)




Judge Clark

PDF icon 241.pdf

Trustee filed fraudulent conveyance claims against a limited partnership that debtor created and controlled, and its limited partners, who were all family members of debtor. The court determined that all of the transfers made by debtor to the partnership were fraudulent under 11 U.S.C. §548 and 544, and that none of the defenses to those claims were available. Trustee was entitled to judgments against the transferees, either for the value of the transferred property or declaring the transfers null and void.

In re Larson

(Internal Ref: Opinion 240)


APPEAL Unpublished


U.S. District Court, Utah

PDF icon 240.pdf

Debtor, an individual guarantor of the debts of his failed corporation, filed a chapter 11 petition on the day of a scheduled foreclosure sale of his home, which creditor moved to dismiss. Debtor moved to disqualify the assigned bankruptcy judge and, at the hearing on that motion, moved to disqualify the bankruptcy judge hearing the motion as well. Debtor's disqualification motions were denied and, at a later hearing, creditor's motion to dismiss was granted. On appeal, the district court held that the bankruptcy court had not abused its discretion, either in the handling of debtor's motions to recuse, or by granting the motion to dismiss.

Merrill v. Allen (In re Universal Clearing House Co.)

(Internal Ref: Opinion 239)


APPEAL Unpublished See 157.pdf and 185.pdf


U.S. District Court, Utah

PDF icon 239.pdf

The bankruptcy court granted summary judgment to trustee on his claims that commission payments made by Ponzi scheme debtor to its salespeople were fraudulent conveyances. Nine salespeople appealed that ruling, and the district court reversed the judgment against them and remanded for factual determination of whether they had given value for their commission payments. One defendant, who had not appealed, filed a motion to set aside the judgment against him in the bankruptcy court, pursuant to Fed. R. Civ. P. 60(b) and Bankruptcy Rule 9024, after the district court's ruling. The bankruptcy court denied that motion, and defendant appealed. On appeal, the district court ruled that the bankruptcy court had not abused its discretion by denying defendant's Rule 60(b) motion, notwithstanding defendant's claim that he did not appeal the final order because he could not afford to hire a lawyer, since such a motion is not intended to provide a substitute for appeal.

In re Clark Tanklines Co.

(Internal Ref: Opinion 238)


APPEAL Unpublished


U.S. District Court, Utah

PDF icon 238.pdf

The bankruptcy court denied lenders' motion for relief from stay, but granted them adequate protection payments under 11 U.S.C. § 361, to begin 30 days after the hearing. On appeal, the district court held that: (1) in the absence of statutory time mandates, the bankruptcy court had some discretion regarding when protection payments would begin; (2) allowing debtor to purchase certain collateral for fair market value was appropriate protection under § 361, as the "indubitable equivalent" of lenders' interest in that collateral; (3) the bankruptcy court properly concluded that lenders failed to perfect a security interest in vehicles debtor leased from third parties by filing a financing statement that did not appear on the vehicles' titles; and (4) adequate protection does not include compensation for delay in enforcing lenders' right against the collateral. Bankruptcy court's order was affirmed.

Merrill v. Abbott (In re Indep. Clearing House Co.)

(Internal Ref: Opinion 237)


APPEAL 77 B.R. 843 (D.Utah)


U.S. District Court, Utah (en banc)

PDF icon 237.pdf

Trustee brought adversary proceeding to recover payments made to investors by debtor clearinghouses in connection with debtors' Ponzi scheme, and investors counterclaimed. The bankruptcy court entered default judgment on trustee's claims against some investors and denied those investors' motion to set aside the default. The defaulted investors appealed. The bankruptcy court subsequently granted trustee's motion for summary judgment on his 11 U.S.C. § 547 preference claim, and his 11 U.S.C. § 548 fraudulent transfer claim, but granted investors' motion for summary judgment on his third claim, and both sides appealed. The district court consolidated the appeals and held that: (1) trust that held investors' money in furtherance of a Ponzi scheme was a "business trust" eligible for chapter 11 relief; (2) debtors did not receive "reasonably equivalent value" for payments made to investors that exceeded their investments; (3) whether investors acted in good faith in accepting payments that did not exceed their investments was an issue of fact that precluded summary judgment for either party on trustee's third claim; (4) mere fact that debtors did not have legitimate or "ordinary" business did not mean that debtors' payments to investors were other than in "ordinary course of business" for purposes of a preference claim; and (5) denial of investors' motion to set aside default judgment and granting trustee's claims against them was an abuse of discretion.

In re Lawn Care Corp.

(Internal Ref: Opinion 235)




Judge Clark

PDF icon 235.pdf

Trustee proposed to sell certain property in debtor's possession, free and clear of liens, pursuant to 11 U.S.C. § 363(f). Several objections to the proposed sale were made, alleging that certain assets did not belong to the estate. Relying on Mosier v. Schwenke (In re Dennis L. Carlson, Inc.), (D. Utah November 12, 1986) [213.pdf], the court ruled that trustee could not sell the assets under § 363(f) unless they were property of the estate under 11 U.S.C. § 541. Therefore, trustee could not sell assets subject to an objection until all ownership disputes were resolved.

John Deere Co. v. Iverson (In re Iverson)

(Internal Ref: Opinion 234)




Judge Clark

PDF icon 234.pdf

In an adversary proceeding involving a farm equipment seller and two banks, the court sifted through the parties' arguments based on stipulated facts in order to resolve the priority of their conflicting security interests in various farm equipment.

Wilkins v. Union Bank (In re Irving Fin. Corp.)

(Internal Ref: Opinion 236)




Judge Clark

PDF icon 236.pdf

Chapter 11 debtor pledged collateral to defendant bank based on bank's loan to debtor's subsidiary. Later, debtor sold the collateral and used the proceeds to pay off the loan. Chapter 11 trustee filed adversary complaint against bank, claiming the fund transfer from debtor was either a preference under 11 U.S.C. § 547 or a fraudulent conveyance under 11 U.S.C. § 548(a)(2). The court held that the payment was not a preference because bank had a perfected security interest in the collateral that was sold, and granted bank's motion for summary judgment on that issue. With respect to the fraudulent transfer claim, the court noted that transfers that solely benefit third parties generally are not considered supported by reasonably equivalent value, but that the indirect benefit exception precludes avoidance when debtor received the benefit of the transaction, despite third party participation. The court concluded that debtor's 80% ownership of the borrower raised issues of fact with respect to the quantity and nature of any indirect benefit debtor received from the transactions with bank. Accordingly, bank's motion for summary judgment was denied with respect to trustee's § 548 claim.

Moxley v. Bingham (In re Moxley)

(Internal Ref: Opinion 233)


APPEAL Unpublished


U.S. District Court, Utah

PDF icon 233.pdf

Debtor filed a motion to reopen his no asset chapter 7 bankruptcy to add omitted creditors. The bankruptcy court denied the motion without prejudice, indicating that it would reconsider the motion after liability had been determined in creditors' state court action. Creditors had sued debtor based on his prepetition sale of insurance to them, and their claim appeared to fall within the coverage of debtor's professional malpractice insurance. The district court ruled that the bankruptcy court had not abused its discretion by denying debtor's motion, since the available facts indicated that debtor's malpractice carrier would likely cover any damages award. Denial of the motion to reopen was affirmed.

In re Raines

(Internal Ref: Opinion 232)




Judge Clark

PDF icon 232.pdf

Prior to filing their chapter 7 bankruptcy petition, debtors purchased a mobile home under a sales contract that was immediately assigned to a third party. Debtors made payments on the mobile home for two years, then surrendered it to the assignee. Assignee was listed as an unsecured creditor, with a potential disputed claim for a deficiency, in debtors' schedules. The assignment of the sales contract contained a recourse provision, under which, the sales contract was reassigned to the mobile home seller. Debtors were neither notified nor aware of the reassignment, and seller was not listed as a creditor in their schedules. Debtors' case was administered as a no asset case, and debtors were discharged. Seller later sued debtors in state court on the sales contract, obtained a default judgment, and began collection efforts. Debtors filed a motion to reopen their bankruptcy case in order to add seller as a creditor, and an order reopening the case was entered. Seller objected to reopening, but continued its collection efforts prior to the hearing on that objection, without obtaining relief from the bankruptcy stay. The court determined that the case had been properly reopened under 11 U.S.C. § 350(b) and Bankruptcy Rule 5010, although it would have preferred that seller be given notice of the motion to reopen prior to entry of the order reopening the case. Noting that the decision to reopen is within the bankruptcy court's discretion, the court noted that debtors are generally allowed to amend their schedules to list a previously unknown or inadvertently omitted creditor, as long as the creditor is not unjustifiably prejudiced and there is no evidence of fraud, intentional laches, or reckless disregard for the accuracy of the schedules on debtor's part. Seller's objection was denied.

In re Dondy, Inc.In re Wright

(Internal Ref: Opinion 231)


APPEAL Unpublished

86A-2236 and -2237

U.S. District Court, Utah

PDF icon 231.pdf

Relying on its own decision in In re Roberts [229.pdf], the district court reversed a bankruptcy court order denying law firm's application to represent both an individual debtor and her wholly owned corporation. As these debtors' bankruptcy petitions were filed after 11 U.S.C. § 327(c) was amended, employment of counsel was governed by the amendment, which provides that an attorney is not disqualified from employment as debtor's counsel merely because that attorney also represents a creditor, unless another creditor objects. No creditor objected to the employment of debtors' counsel, and the district court considered whether law firm would be representing an interest adverse to the estate of one debtor by representing both. The district court concluded, based on the Roberts case, that law firm was not precluded from being disinterested by representing both debtors.

In re Tri-L Corp.

(Internal Ref: Opinion 230)




Judge Clark

PDF icon 230.pdf

The court considered a creditor's claim that post-confirmation expenses it incurred in obtaining conversion of debtor's chapter 11 case to chapter 7 were administrative expenses under 11 U.S.C. § 503(b)(3)(D) and (b)(4). The court concluded that whether pre-conversion expenses were entitled to administrative priority depended on the policies that underlie the compensation provisions, rather than whether claimant's actions occurred before or after plan confirmation. In particular, claimant must prove that its actions provided a substantial contribution to debtor's case. As creditor had failed to make such a showing, its application for administrative expense priority was denied.

In re RobertsIn re Roberts, Inc.

(Internal Ref: Opinion 229)


APPEAL 75 B.R. 402 (D.Utah) See 148.pdf

82C1037 and -1038

U.S. District Court, Utah (en banc)

PDF icon 229.pdf

Law firm, which had previously represented the corporate and individual debtors, and was still owed fees by the corporation, was approved to represent debtors in their bankruptcy cases. The bankruptcy court raised the issue of conflict of interest for the first time in connection with law firm's fee application for work performed in the bankruptcies. Finding multiple conflicts of interest, the bankruptcy court denied all requested fees. The law firm appealed. The district court found no per se conflict of interest or appearance of impropriety in law firms' simultaneous representation of the individual debtors and their wholly owned business, despite the existence of debts owed between debtors. The court then considered whether law firm was eligible to be employed as debtor's counsel under 11 U.S.C. § 327(a). To be eligible under that provision, the law firm must be "disinterested" under 11 U.S.C. § 101(13). The court determined the existence of a serious issue with respect to law firm's qualification to serve as counsel for the corporation, based on the debt owed to it by that debtor. The court rejected law firm's argument that 11 U.S.C. § 1107(b) allowed its representation of the corporation, concluding that a law firm that is a prepetition creditor of the debtor is not "disinterested," and is therefore ineligible to be employed as counsel for that debtor. However, after considering the statutory history and, in particular, the recent but not applicable amendment of § 327(c), the district court concluded, with respect to law firm's representation of the individual debtors, that the need for attorney discipline was outweighed by the equities of the case, and reversed the bankruptcy court's order denying fees relating to law firm's representation of the individual debtors.

In re Beehive Int'l

(Internal Ref: Opinion 228)




Judge Clark

PDF icon 228.pdf

Prior to filing its bankruptcy petition, chapter 11 debtor had entered into a licensing agreement with Micro Focus, a British software company. Also prior to the petition filing, debtor sent a letter to Micro Focus that essentially attempted to cancel the licensing agreement due to changed circumstances. Debtor listed the licensing agreement as an executory contract in its bankruptcy filings, but did not list Micro Focus as a creditor or its own alleged claim against Micro Focus as an asset. Micro Focus was sent a letter informing it that debtor had filed a bankruptcy petition, but was not officially notified of the pending bankruptcy. While the bankruptcy was pending, debtor filed a lawsuit against Micro Focus in district court, seeking refund of monies debtor had paid under the agreement. Micro Focus filed a motion to stay that action, pending arbitration, as provided in the parties' agreement. In the meantime, debtor's chapter 11 plan was approved. The district court stayed all proceedings before it and certified two bankruptcy-related questions to the bankruptcy court. In response to the certified questions, the bankruptcy court determined that (1) the licensing agreement was an enforceable executory contract; (2) despite debtor's failure to expressly assume or reject the licensing agreement, the agreement was assumed pursuant to a plan provision providing that debtor assumed all executory contracts not expressly rejected; and (3) the Bankruptcy Code impliedly modified the Arbitration Act such that the decision whether to stay a bankruptcy proceeding pursuant to a contractual arbitration provision is left to the sound discretion of the bankruptcy judge. The court then listed the policies and factors that should be considered in making such a decision, and concluded that, since the plan had already been confirmed, no bankruptcy policy would be seriously compromised by allowing arbitration to proceed in the case before it.

Mann v. Duncan (In re Mann)

(Internal Ref: Opinion 227)


APPEAL Unpublished


U.S. District Court, Utah

PDF icon 227.pdf

When debtors' bankruptcy case was converted from chapter 11 to chapter 7, and a trustee was appointed, debtors' adversary proceeding alleging legal malpractice against their former lawyer was pending. Trustee thereafter negotiated a settlement of debtors' claims with the defendant and sought the court's approval of the settlement agreement under Bankruptcy Rule 9019(a). Debtors objected to the settlement and, at the hearing on the motion, offered $300 more than the agreed settlement amount to have the settlement abandoned or the claim against defendant sold to them by the trustee. The bankruptcy court approved trustee's settlement, and debtors appealed, claiming abuse of discretion based on their offer of more than the approved settlement amount. The district court considered the reasons given by the trustee for the settlement and the bankruptcy court's findings in its approval order, and found no clear abuse of discretion. The district court noted that to hold otherwise on the record before it would potentially turn every Rule 9019(a) motion into a bidding contest, in which, the sole determining factor would be the amount offered.

Research-Planning, Inc. v. Segal (In re First Capital Mortg. Loan Corp.)

(Internal Ref: Opinion 226)


APPEAL 99 B.R. 462 (D.Utah) See 189.pdf and 313a.pdf


U.S. District Court, Utah

PDF icon 226.pdf

Debtor, who had agreed to act as escrow agent on a loan from plaintiff to a third party, improperly used escrowed funds to pay its own debts to a good faith creditor. After debtor was involuntarily placed in bankruptcy, the chapter 7 trustee recovered the funds from debtor's creditor on the ground that the payments were avoidable preferences. Plaintiff filed an adversary proceeding contending that the recovered amount was subject to a trust in its favor, and was thus not available for distribution to other creditors. The bankruptcy court ruled that the recovered funds were estate property, and that plaintiff simply had an unsecured claim against the estate. The district court affirmed, rejecting plaintiff's claim that the trustee could not recover a greater interest in the funds than debtor would have had. The district court noted that a trustee's avoidance power is an extraordinary power that debtor does not have, which allows the trustee to retrieve property transferred by the debtor that, in equity, all of debtor's creditors should share. This district court order was reversed by a divided decision in 872 F.2d 335 (10th Cir. 1989), and that decision was then vacated on en banc review in 917 F.2d 424 (10th Cir. 1990) [313a.pdf], which affirmed the district court.

World Commc'ns, Inc. v. Direct Mktg. Guar. Trust (In re World Commc'ns, Inc.)

(Internal Ref: Opinion 225)


APPEAL Unpublished


U.S. District Court, Utah

PDF icon 225.pdf

The district court affirmed the bankruptcy court's finding that an escrow account set up by the defendant was property of debtor's estate under 11 U.S.C. § 541(a)(1). However, the court remanded for the bankruptcy court's consideration of two conditions required for turnover under 11 U.S.C. § 542, which are (1) whether defendant has a security interest in the account that warrants adequate protection and, (2) if so, whether that secured interest could be adequately protected by the trustee. The district court also determined it could not affirm the bankruptcy court finding that the parties could not orally modify their written contract, because oral modifications to written contracts can be enforced under certain circumstances. Therefore, the case was also remanded for consideration of whether the parties had made an enforceable oral modification, regarding the amount of proceeds that defendant could withhold in the escrow account, to their agreement.

Orem Postal Credit Union v. Twitchell (In re Twitchell), 72 B.R. 431 (Bankr.D.Utah)

(Internal Ref: Opinion 224)


PUBLISHED See 245.pdf


Judge Allen

PDF icon 224.pdf

Plaintiff credit union filed an adversary complaint against debtor, its former president and treasurer, seeking non-dischargeability of its debt under 11 U.S.C. § 523(a)(2), (a)(4), and (a)(6). After trial, the court dismissed the complaint. Plaintiff filed a motion for new trial, which the court denied, electing instead to amend its previous ruling. The court had previously found that debtor was a fiduciary to plaintiff under state law, and that he owed the amount of the pending claim based on various failures to meet his obligations to plaintiff. However, the court had found that plaintiff's claim was still dischargeable under § 523(a)(4) because plaintiff had not proven that defendant's conduct constituted "fraud or defalcation" under that provision. On the motion for new trial, however, the court concluded that defalcation by a fiduciary under § 523(a)(4) includes failure to account for funds entrusted to the fiduciary, even if only negligent, innocent, or ignorant. Since debtor had breached several of the duties he owed to plaintiff as its president and treasurer, his conduct satisfied the defalcation element of § 523(a)(4), and plaintiff's claim was held to be non-dischargeable under that provision. This decision was reversed by the district court in 245.pdf.

Bank of Utah v. Auto Outlet, Inc. (In re Auto Outlet, Inc.), 71 B.R. 674 (Bankr.D.Utah)

(Internal Ref: Opinion 223)




Judge Clark

PDF icon 223.pdf

The court considered the evidence with respect to bank's claim that its debt was non-dischargeable under 11 U.S.C. § 523(a)(6), based on a clear and convincing standard of proving both an intentional or deliberate act and an intent to injure. Finding that bank had established that debtor willfully failed to remit proceeds of a sale, but failed to establish that the failure was malicious, the court ruled that the debt was dischargeable.