Opinions

Case Title	Date & Status	Case Number(s)	Judge & PDF	Summary
Wasatch Bank of Lehi v. Hunter (In re Hunter) (Internal Ref: Opinion 202)	Sep-4-1986 APPEAL Unpublished	85PA-0581	U.S. District Court, Utah 202.pdf	Bank filed an adversary complaint seeking non-dischargeability of its claim against chapter 7 debtors, pursuant to 11 U.S.C. § 523(a)(2)(A). Debtors obtained loan from bank secured by a trust deed on their property, and bank alleged they had intentionally withheld information regarding a zoning violation on the property. The bankruptcy court dismissed the complaint, and bank appealed. The district court agreed with the bankruptcy court's conclusion that bank had failed to establish, by clear and convincing evidence, that debtors obtained the loan by false pretenses, misrepresentation, or actual fraud. Dismissal of bank's complaint was affirmed.
I.F.S., Inc. v. Nat'l Credit Unions Admin. Bd. (In re I.F.S., Inc.) (Internal Ref: Opinion 201)	Aug-27-1986 UNPUBLISHED See 221.pdf	86PC-0334	Judge Clark 201.pdf	Debtor pledged stock in one of its companies to secure its guaranty of obligations owing to credit union. The pledge agreement provided that, in the event of debtor's default, credit union would have all rights with respect to the shares "as if it were the absolute owner" of them. Debtor defaulted on a payment, and credit union demanded immediate payment of all principal and interest. As payment was not made, credit union notified debtor that it would begin efforts to sell the pledged stocks. Credit Union, representing itself to be the lawful owner of the stock, ultimately entered into a sale agreement with a third party buyer, subject to some conditions. Debtor filed a chapter 11 bankruptcy petition and, shortly thereafter, credit union and buyer closed the sale. Debtor filed an adversary complaint, seeking to avoid the sale of the stock under 11 U.S.C. § 549, as an unauthorized transfer of estate property in violation of 11 U.S.C. § 362(a). On competing motions for summary judgment, the court held that "title" to the stock was irrelevant under the Missouri version of the Uniform Commercial Code. Because credit union perfected its security interest in the stock by possession and gave debtor notice of its intent to sell, the court determined that debtor's only right with respect to the stock was a right of redemption under U.C.C. § 9-504, which terminated when credit union entered into the sale contract with third party. The court determined that the fact that conditions for purchaser's performance under the sale contract were only available to purchaser and, at most, gave debtor a redemption right that was contingent on purchaser's non-performance, and it would be improvident to grant debtor any relief under § 549 based on such a contingency. For similar reasons, the court ruled that closing of the sale to purchaser was not a violation of the automatic stay that would entitle debtor to relief. Debtor's motion for summary judgment was denied, and the motions by credit union and purchaser for summary judgment were granted. This decision was affirmed by the district court in 221.pdf.
Stuart v. Pingree (In re Afco Dev. Corp.), 65 B.R. 781 (Bankr.D.Utah) (Internal Ref: Opinion 199)	Aug-22-1986 PUBLISHED	85PC-0795	Judge Clark 199.pdf	Chapter 7 trustee filed preference action, which defendants moved to dismiss as untimely under 11 U.S.C. § 546(a). Noting that the roles of chapter 11 and chapter 7 trustees are very different, the court held that trustee had two years after the date of his appointment as chapter 7 trustee within which to file his preference complaint, even though he had served as chapter 11 trustee prior to conversion of debtor's case.
Tradex, Inc. v. United States (In re IML Freight, Inc.), 65 B.R. 788 (Bankr.D.Utah) (Internal Ref: Opinion 200)	Aug-22-1986 PUBLISHED	83PC-3254	Judge Clark 200.pdf	In an action filed against it for shipping fees owed to debtor, the government counterclaimed to offset its claim against debtor for fees and penalties incurred due to insufficient funds tax payments. The parties stipulated to the facts and requested that the court decide the matter on summary judgment. Noting that, under certain circumstances, 11 U.S.C. § 553 allows a creditor to offset a debt owed to debtor against debtor's claim against it, the court emphasized that the availability of offset is left to the court's discretion. The court concluded that § 553 requires that the two debts be "mutual," which does not mean they must arise from the same transaction, and that both debts arise prepetition and are owed directly to each party. Under the stipulated facts, the court determined that offset should be allowed in the case before it.
In re Tri-L Corp., 65 B.R. 774 (Bankr.D.Utah) (Internal Ref: Opinion 198)	Aug-21-1986 PUBLISHED	81C-2084	Judge Clark 198.pdf	Chapter 7 trustee objected to administrative expense claim by debtor's attorney for fees incurred after debtor's chapter 11 plan was confirmed, but before case was converted to chapter 7. Because the court had retained post-confirmation jurisdiction in the plan, it held that the fees were entitled to administrative priority under 11 U.S.C. §330(a), 503(b)(2), and 507(a).
In re Jeppson, 66 B.R. 269 (Bankr.D.Utah) (Internal Ref: Opinion 197)	Aug-15-1986 PUBLISHED	84C-0380	Judge Clark 197.pdf	Bank, chapter 11 debtors' largest secured creditor, sought confirmation of a plan it submitted to the court without having obtained approval of a disclosure statement and without soliciting votes on its plan from all parties in interest. Bank argued it could "cram down" its liquidating plan and, therefore, voting would be meaningless. The court held that submission of an approved disclosure statement and ballots with a proposed plan is a prerequisite to commencement of a confirmation hearing. Therefore, bank's failure to obtain approval of a disclosure statement and to solicit votes on its proposed plan rendered the plan not confirmable, even if creditor could cram down a liquidating plan over dissenting votes.
In re J.R. Research, Inc., 65 B.R. 747 (Bankr.D.Utah) (Internal Ref: Opinion 196)	Aug-7-1986 PUBLISHED	86C-1501	U.S. District Court, Utah 196.pdf	Former chapter 11 trustee sought to recover expenses from secured creditor, relying on 11 U.S.C. § 506(c). The court held that only the current, chapter 7, trustee had standing to assert a § 506(c) claim, and that any recovery under that provision would belong to the estate, rather than the trustee. Former trustee's expenses must be recovered pursuant to 11 U.S.C. § 726(b).
In re Kerr, 65 B.R. 739 (Bankr.D.Utah)In re McClean, Sr.In re McClean, Jr. (Internal Ref: Opinion 195)	Aug-1-1986 PUBLISHED	84C-3028 84C-1280 84C-1279	Judge Clark 195.pdf	Debtors, all self-employed professionals, listed ERISA-qualified pension plan funds as assets in their bankruptcies, but claimed them as exempt under Utah law. Trustee objected to the exemptions. Debtors offered three rationales for either excluding or exempting the pension funds: (1) the funds are excluded from estate property under 11 U.S.C. § 541(c)(2); (2) ERISA-qualified pension plans are exempt under 11 U.S.C. § 522(b)(2)(A); and (3) the funds are exempt under Utah law. The court concluded that, since debtors' pension plans did not constitute spendthrift trusts under Utah law, they were not excluded from debtors' estates by § 541(c)(2). The court also concluded that the funds were not exempt under § 522(a)(2)(A), which allows debtors to exempt both property subject to state exemptions and property that is exempt under federal law, except under the alternative federal exemptions in § 522(d), because a majority of courts have held that ERISA plans are not so included. Finally, the court concluded that debtors' plans were exempt under Utah Code Ann. § 78-23-6(3), but only to the extent the funds were "reasonably necessary" for the support of debtors and their dependents.
In re Parkinson (Internal Ref: Opinion 194)	Jul-31-1986 UNPUBLISHED	85C-0545	Judge Clark 194.pdf	Property lessor entered into a prepetition stipulation with debtor in settlement of a state court lawsuit. After filing his chapter 11 petition, debtor moved to assume his lease agreement with lessor, which the court approved, finding that lessor was adequately protected, and ordered debtor to pay lessor the amount determined to be in default. Debtor paid the default amount to lessor. Lessor subsequently requested that the prepetition stipulation be treated as valid and binding or, in the alternative, that debtor be compelled to assume or reject it as an executory contract. Thereafter, debtor filed an objection to lessor's claim. Pursuant to the parties' agreement, the court entered an order finding that the prepetition stipulation was a valid and binding executory contract, and directing debtor to either assume or reject it within 30 days. Debtor untimely filed a rejection of the stipulation/executory contract. At a hearing on debtor's objection to lessor's claim, lessor did not testify and debtor testified that the amounts lessor claimed were unfounded. Shortly thereafter, lessor filed a motion to set aside debtor's rejection of the stipulation. The court considered the pending issues between the parties, concluding that lessor's motion to set aside debtor's rejection should be denied, and that debtor's rejection of the executory contract was justified under any standard applicable to such decisions. Finally, the court found that debtor had sufficiently rebutted lessor's proof of claim, and that lessor's failure to offer any evidence in support of its claim, beyond the proof of claim itself, left the court with no evidence upon which to allow the claim. Lessor's claim was denied, and debtor's rejection of the executory stipulation agreement was approved.
Greenwell v. Greenwell (In re Greenwell) (Internal Ref: Opinion 193)	Jul-28-1986 UNPUBLISHED	85PC-0011	Judge Clark 193.pdf	Debtor's ex-wife filed an adversary complaint alleging that debtor materially misrepresented his own financial condition and that of his two convenience stores in connection with the parties' divorce. After trial, the court found that plaintiff had proven the first four elements of her fraud claim (that debtor made a representation, knowing it to be false, with intent to deceive, which plaintiff reasonably relied on), but that she had failed to establish the fifth element (that her damages were the proximate result of debtor's misrepresentations). Plaintiff's 11 U.S.C. § 523(a)(2)(A) claim was therefore denied.
John Deere Co. v. Iverson (In re Iverson), 66 B.R. 219 (Bankr.D.Utah) (Internal Ref: Opinion 192)	Jun-20-1986 PUBLISHED	83PC-3128	Judge Clark 192.pdf	Plaintiffs argued that their claim, based on sales of farm equipment to debtor on credit, was non-dischargeable under 11 U.S.C. § 523(a)(2)(B) because debtor had provided false financial statements to them. The court found that debtor had intentionally or recklessly made false representations in four financial statements provided to plaintiffs in order to obtain equipment on credit, and that the false statements were intended to deceive plaintiffs. However, plaintiffs' failure to conduct any investigation, despite numerous warning signals contained in the financial statements themselves, resulted in a finding that plaintiffs had not reasonably relied on debtor's financial statements to provide debtor with financing. Plaintiffs' claim was therefore dischargeable.
In re Exec. Air Serv., Inc. (Internal Ref: Opinion 191)	Jun-18-1986 APPEAL Unpublished	83C-0795	U.S. District Court, Utah 191.pdf	Management company sought approval of its management agreement with debtor, which included a provision that debtor would seek an order awarding manager superpriority on its advances, pursuant to 11 U.S.C. § 364(c). Debtor issued a notice of hearing on the priority issue, indicating that manager's advances would be treated as administrative expenses and would be paid as priority claims under 11 U.S.C. § 507. Manager received copies of the notice, but did not object to it or suggest any changes. The bankruptcy court approved the management agreement without addressing the priority issue. More than a year later, manager realized it had not been awarded superpriority and moved to amend the court's approval order to include such priority, nunc pro tunc, to the date of the approval order. The bankruptcy court ruled that the priority notice that had been given was insufficient to allow superpriority. Manager appealed, and the district court held that nunc pro tunc orders may only be granted when an act was actually done but not properly recorded, and that there had not been any grant of superpriority to manager at the previous hearing. The district court also agreed with the bankruptcy court's conclusion that the notice of hearing did not adequately advise other administrative creditors that manager's claims would be paid prior to theirs, as is required by § 364. The district court considered manager's equitable claims, including that other creditors were aware that manager's advances had been made based on its belief that it had superpriority status, but concluded that the record was insufficient to resolve those claims. Since manager had not submitted evidence in support of its claim, and no error had been committed at the trial level, the bankruptcy court's decision was affirmed.
Sutherland v. Brown (In re Brown), 66 B.R. 13 (Bankr.D.Utah) (Internal Ref: Opinion 190)	Jun-10-1986 PUBLISHED	84PC-0053	Judge Clark 190.pdf	Pursuant to plaintiff's motion for summary judgment, the court considered whether elements established and the standard of proof applied in a state court action against debtor satisfied the elements of non-dischargeable fraud under 11 U.S.C. § 523(a)(2)(A). The court concluded that the state court common law fraud findings were entitled to collateral estoppel effect, but that § 523 contained no provision that would allow the state court's assessment of punitive damages to become part of a non-dischargeable debt.
Research-Planning, Inc. v. Segal (In re First Capital Mortg. Loan Corp.), 60 B.R. 915 (Bankr.D.Utah) (Internal Ref: Opinion 189)	May-5-1986 PUBLISHED See 226.pdf and 313a.pdf	84PC-0129	Judge Clark 189.pdf	Debtor had agreed to act as escrow agent on a loan from plaintiff to a third party, but improperly used escrowed funds to pay its own debts to a good faith creditor. Chapter 7 trustee recovered the funds from debtor's creditor on the ground that the payments had been preferences, and plaintiff filed an adversary proceeding contending that the recovered amount was subject to a constructive trust in its favor. The bankruptcy court ruled in favor of trustee, concluding that the recovered funds were not subject to a trust, although plaintiff did have an unsecured claim against debtor's estate based on debtor's wrongful disbursement of escrowed funds. This decision was affirmed by the district court in 226.pdf and, ultimately, by the Tenth Circuit, sitting en banc, in 313a.pdf.
Rees v. Emp't Sec. Comm'n of Wyo. (In re Rees), 61 B.R. 114 (Bankr.D.Utah) (Internal Ref: Opinion 188)	May-2-1986 PUBLISHED	85PC-0016	Judge Clark 188.pdf	By statute, Wyoming imposed a higher employment security tax rate on employers that failed to pay their taxes by the due date. Debtor asserted that the higher tax rate imposed on him was impeding his ability to reorganize, and that it thereby violated the non-discrimination mandate of 11 U.S.C. § 525(a). The court considered the extensive history of § 525's enactment, and concluded that many bankruptcy courts had interpreted the statute more broadly than was intended by Congress. Since the Wyoming statute imposed the higher tax rate on anyone who failed to pay taxes timely, and the Wyoming tax commission does not issue licenses, permits, charters, or franchises, the court ruled that the statute did not discriminate against bankruptcy debtors within the parameters of § 525(a).
L. Joel Elliott Anderson Gen. Contractor v. Sorenson (In re Sorenson) (Internal Ref: Opinion 186)	Apr-30-1986 APPEAL Unpublished	84PC-0965	U.S. District Court, Utah 186.pdf	The district court reversed the bankruptcy court's ruling that a mechanic's lien was invalid because the verification block on the back of the notice of lien form had not been signed. The district court concluded that the form, which had been signed and orally verified, satisfied the Utah statutory requirement that the notice be verified by oath.
In re IML Freight, Inc. (Internal Ref: Opinion 187)	Apr-30-1986 APPEAL 789 F.2d 1460 (10th Cir.)	83C-1950	Tenth Circuit Court of Appeals 187.pdf	The bankruptcy court granted chapter 11 debtor's petition to reject its collective bargaining agreements with unions that represented the majority of its employees, which order was affirmed by the district court. The Tenth Circuit reversed and remanded on the ground that the lower courts had failed to make the detailed findings of fact required for rejection of such contracts. Specifically, the Circuit held that a "doomsday" finding, that the collective bargaining agreements were so burdensome that performance of them would result in liquidation of the debtor, should not be controlling. Instead, the bankruptcy court has a special responsibility to make detailed findings, after careful scrutiny of the equities of all parties in interest, that the balance of the equities favors rejection.
Merrill v. Allen (In re Universal Clearing House) (Internal Ref: Opinion 185)	Apr-22-1986 APPEAL 60 B.R. 985 (D.Utah) See 157.pdf and 239.pdf	82PA-0253	U.S. District Court, Utah 185.pdf	In the bankruptcy court, trustee for Ponzi scheme debtors avoided transfers made by debtors to their sales agents, as fraudulent transfers under 11 U.S.C. § 548. On appeal, sales agents argued that the bankruptcy court lacked subject matter jurisdiction over the avoidance action because debtors were not "persons" eligible for bankruptcy relief, as defined in 11 U.S.C. § 109. Appellants also argued that debtors could not meet the "good faith" requirement for filing bankruptcy petitions, and had no interest in the transferred funds that could be enforced by the trustee, because all of "debtors' property" had been obtained by fraud. The district court held that debtors qualified as "business trusts," which are within the § 109 definition of "corporations," and rejected appellants' first claim. The district court also rejected appellants' good faith claim, on the ground that it was not raised in the bankruptcy court and was a matter within the bankruptcy court's discretion. Appellants' claim that debtors had no interest in the transferred funds was also rejected, based on the reasoning in 180.pdf. However, the district court determined that the bankruptcy court erred in ruling that appellants had failed to convey "legally cognizable value" for the payments they received, concluding that appellants' services constituted "value" as a matter of law. The case was therefore remanded for factual findings by the bankruptcy court on the issue of whether that value was "reasonably equivalent" to the payments appellants received.
C & C Co. v. Seattle First Nat'l Bank (In re Coal-X Ltd., "76"), 60 B.R. 907 (Bankr.D.Utah) (Internal Ref: Opinion 184)	Apr-7-1986 PUBLISHED See 209.pdf	84PC-1651	Judge Clark 184.pdf	The court considered the priority status of a state law landlord's lien versus a lender's lien, on debtor's personal property, and concluded that the landlord's lien was superior to that of the lender. The court apportioned debtor's annual rent payment from the date it was due until the date on which trustee rejected the lease, and refused to impose prejudgment interest on the apportioned amount. This decision was affirmed in part, and reversed in part, by 209.pdf.
In re Horne (Internal Ref: Opinion 183)	Apr-2-1986 UNPUBLISHED	84A-0403	Judge Allen 183.pdf	The court considered whether attorney's fees and expenses incurred by debtor in defense of non-dischargeability actions could be recovered from the estate as administrative expenses. The court ruled that, since such services are unrelated to estate administration and do not affect the estate either positively or negatively, they are not "necessary services" covered by 11 U.S.C. § 330(a), and debtor's counsel would have to look to debtor for payment.
Artistic Tape & Label Printers v. Coordinated Fin. Servs. (In re Artistic Tape & Label Printers) (Internal Ref: Opinion 181)	Apr-1-1986 UNPUBLISHED	83PA-0458	Judge Allen 181.pdf	Bankruptcy court dismissed plaintiffs/debtors' complaint objecting to defendant's proof of claim, then denied their motion to reinstate the complaint on the grounds that (1) counsel failed to appear at the hearing on the motion, and (2) the complaint failed to state a claim upon which relief could be granted. Plaintiffs' subsequent FRCP 60(b) motion was also denied. The district court dismissed plaintiffs' appeal, and the Tenth Circuit remanded to the district court, which remanded to the bankruptcy court. The bankruptcy court interpreted the remands as a mandate to allow plaintiffs another opportunity to present their Rule 60(b) motion, which it did.
In re Allen (Internal Ref: Opinion 182)	Apr-1-1986 UNPUBLISHED	85A-0372	Judge Allen 182.pdf	Debtors sought to dismiss their chapter 7 bankruptcy in order to immediately refile it and obtain a discharge of both medical expenses incurred postpetition and a student loan. The court denied the motion, concluding that 11 U.S.C. § 707 applies to voluntary dismissals and requires a showing of "cause" for the dismissal. The court found that neither debtors' desire to discharge debts incurred postpetition, nor to time bar a claim of non-dischargeability constituted "cause" for dismissal of their bankruptcy case.
Merrill v. Dietz (In re Universal Clearing House Co.) (Internal Ref: Opinion 180)	Mar-31-1986 APPEAL Unpublished	83PA-3105	U.S. District Court, Utah 180.pdf	Trustee for Ponzi-scheme debtors sought to avoid and recover payments made to defendant, and the bankruptcy court awarded judgment in the amount of all payments, plus interest, to trustee. On appeal, defendant argued that, since all of debtors' funds were obtained through fraud, debtors had acquired no interest in them that could be recovered by trustee. The district court rejected defendant's argument, noting that cases unanimously hold that trustees can recover preferential and fraudulent transfers made by debtors to investors in their Ponzi schemes, because agreements induced by fraud are voidable, rather than void. Thus, where debtor had obtained investments through fraud, mingled them such that they could not be traced, and the investor failed to timely avoid the transaction, the money became property of the estate for avoidance purposes. The district court reviewed the evidence from the parties' trial and determined that, under § 550(a), defendant had been the initial transferee of some of the payments, and a transferee of the initial transferee in others. As a mediate transferee, defendant was entitled to the protection afforded by § 550(b), the elements of which (for value, in good faith, and without knowledge) had been established at trial in defendant's favor. The bankruptcy court's decision was reversed as to transactions determined on appeal to be § 550(a)(2) transactions, and affirmed as to § 550(a)(1) transactions. With respect to the affirmed transactions, the district court concluded that the bankruptcy court had not abused its discretion in awarding prejudgment interest.
Wasatch Factoring, Inc. v. Martin (In re Wasatch Factoring, Inc.) (Internal Ref: Opinion 179)	Mar-31-1986 APPEAL Unpublished	85PA-0687	U.S. District Court, Utah 179.pdf	Debtor issued a check, postpetition, to three of its officers and directors to indemnify them for expenses incurred defending themselves from lawsuits against them in their corporate capacities. The officers transferred the check to their attorney, who placed the check funds into an account, withdrew them in payment of legal fees, and returned the balance to officers. Debtor sought to recover the attorney's fee amount from attorney under 11 U.S.C. § 550(a), alleging the fee payment was a voidable postpetition transfer under 11 U.S.C. § 549(a). The bankruptcy court entered summary judgment in favor of debtor under § 550(a)(1), concluding that attorney was the entity for whose benefit debtor's transfer had been made. The district court disagreed, concluding that the funds were transferred by debtor to the officers for their benefit, and it did not matter if attorney ultimately benefitted as well. However, the district court also concluded that attorney was an immediate transferee of officers, within the meaning of § 550(a)(2), and would therefore be required to relinquish the fee unless he could prove that he gave value for the funds in good faith, as required by § 550(b). Because there were issues of fact regarding attorney's good faith, the case was remanded for further proceedings in the bankruptcy court.
In re Irving Fin. Corp. (Internal Ref: Opinion 178)	Mar-26-1986 APPEAL Unpublished	82C-2706	U.S. District Court, Utah 178.pdf	The bankruptcy court approved trustee's compromise of three secured creditors' claims, and debtor appealed. The district court determined that debtor had no standing to appeal the bankruptcy court orders, because the claims against its estate were approximately ten times the estate's value and debtor would gain nothing from the relief it was seeking on appeal. Therefore, debtor was not an "aggrieved person" entitled to appeal, which standard had been judicially applied to appeals under the Bankruptcy Code.
The Lockhart Co. v. Hansen (In re Hansen) (Internal Ref: Opinion 177)	Feb-26-1986 UNPUBLISHED	83PC-0010	Judge Clark 177.pdf	The court considered several claims to real property asserted by the debtors/record owners, the occupier/improver, and debtors' lender/holder of a trust deed. In the course of untangling the parties' interests, the court considered the impacts of the statute of frauds and its exception for part performance, ratification, good faith purchase for value, Utah's race-notice recording act, constructive/inquiry notice, and fraud under 11 U.S.C. § 523(a). Ultimately, the court concluded that a state court judgment in favor of occupiers made their claim to the property superior to both debtors and lender, but that lender's claim against debtor met the standard for a non-dischargeable debt under § 523(a)(2)(B).
Zions First Nat'l Bank v. Sanders Livestock Co., Inc. (In re L.W. Gardner Co.) (Internal Ref: Opinion 176)	Feb-19-1986 APPEAL Unpublished	84PC-1032	U.S. District Court, Utah 176.pdf	In an adversary proceeding, various parties asserted interests in real property that was owned by, and the sole asset of, a corporation owned by another corporation, which was owned by the debtor partnership. Debtor listed the property as an asset in its bankruptcy filings, noting that it was subject to a contract with original sellers of the property to the corporation it remotely owned. Debtor claimed that the property had been designated to it by the corporate buyer, but no record of such a transaction existed. The bankruptcy court allowed the property to be transferred to bank, debtor's principal creditor and only apparent lienholder on the property. Sellers received no notice of debtor's chapter 11 filing or of the subsequent transfer of the property. On appeal, the district court found the inclusion of the property in debtor's estate to have been a de facto substantive consolidation of debtor and its related corporation, which deprived sellers of due process by denying them any opportunity to have their claim heard on its merits. The case was remanded for further proceedings.
Styler v. Aztec Copy, Inc. (In re Gleed Inv. Corp.) (Internal Ref: Opinion 175)	Feb-3-1986 UNPUBLISHED	83PC-0152	Judge Clark 175.pdf	Chapter 11 trustee filed an adversary complaint against defendant alleging that numerous payments to it by debtor, its franchisee, were preferential under 11 U.S.C. § 547(b). The court considered the elements required for a preference, as well as the preference exceptions, with respect to all of the payments at issue. The court concluded that one of those payments, although satisfying the elements of a preference, fell within the new value exception set forth in § 547(c)(4), and was therefore not avoidable. All of the other payments trustee sought to avoid fell within the general preference rule, did not satisfy any exception to that rule, and were avoided.
In re Colvin, 57 B.R. 299 (Bankr.D.Utah) (Internal Ref: Opinion 174)	Jan-29-1986 PUBLISHED	82A-0429	Judge Allen 174.pdf	Second lienholder on debtors' primary residence moved for relief from stay because debtors' confirmed chapter 13 plan did not include payment of creditor's postpetition attorney's fees. The bankruptcy court had initially denied all postpetition fees, which decision was reversed by the district court's holding that an oversecured chapter 13 creditor is entitled to postpetition fees under 11 U.S.C. § 506(b). On remand, the bankruptcy court allowed all of creditor's claimed fees and costs. However, debtors failed either to pay that amount or to amend their plan, which caused creditor to file its motion for relief. The court held that 11 U.S.C. § 1322(b)(2) allows debtors to cure defaults, but also requires that the rights of mortgage lienholders be preserved. Therefore, chapter 13 debtors must pay creditor's arrearage claim, plus attorney's fees, under their plan in order to return the parties to their pre-default condition. Debtor's were given an opportunity to amend the plan, or the court would grant creditor's motion for relief.
In re Pacheco (Internal Ref: Opinion 173)	Jan-21-1986 APPEAL Unpublished	81C-1246	U.S. District Court, Utah 173.pdf	Discharged chapter 7 debtors asserted in the bankruptcy court that prepetition judgment creditors had violated the discharge injunction of 11 U.S.C. § 524(a), because their judgment remained on debtors' post-discharge credit report, and allegedly caused them to be refused credit. The bankruptcy court denied the claim and awarded attorney's fees to creditors, on the ground that debtors' claim had been filed in bad faith by their attorney. On debtors' motion for rehearing, the bankruptcy court again awarded fees to creditors. On appeal, the district court agreed with the bankruptcy court's denial of the claim and its award of fees in connection with the motion. However, the award of fees on rehearing was reversed, based on debtor's counsel's assertion that he had done more research on the issue and had found no law on either side. Noting that the research performed may not have been "brilliant," the district court held that, under the circumstances, sanctions could have a chilling effect on legitimate rehearing motions.

United States Bankruptcy Court

District of Utah

Honorable Peggy Hunt, Chief Judge • David A. Sime, Clerk of Court

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