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Opinions
| Case Title | Date & Status | Case Number(s) | Judge & PDF | Summary | |
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N. Park Credit v. Harmer (In re Harmer), 61 B.R. 1 (Bankr.D.Utah) (Internal Ref: Opinion 142) |
Oct-24-1984 PUBLISHED |
82PC-0158 |
Judge Clark |
Creditor filed an adversary complaint against debtor asserting that a loan was obtained by debtor based on written, materially false, statements regarding his financial condition, and that the debt was therefore non-dischargeable pursuant to 11 U.S.C. § 523(a)(2)(B). After a trial, the court considered three issues, which were whether: (1) financing statements provided by debtor were "materially false," (2) creditor's predecessor "reasonably relied" on the statements, and (3) debtor had submitted the statements with the intent to deceive. The court found that debtor's financial statements were examples of extreme material falsity, that lender had reasonably relied on one of the financial statements in making the loan, and that debtor's uncorroborated denial of intent to deceive was insufficient to overcome the presumption of intent that arose from creditor's evidence on the first two issues. Creditor's claim against debtor was determined to be non-dischargeable. | |
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In re Lambert, 43 B.R. 913 (Bankr.D.Utah) (Internal Ref: Opinion 141) |
Oct-22-1984 PUBLISHED See 138.pdf |
82C-2143 |
Judge Clark |
Creditors moved to dismiss or convert debtors' chapter 13 petition, claiming that their debts exceeded the $100,000 limit for "noncontingent, liquidated, unsecured debts" for chapter 13 eligibility under 11 U.S.C. § 109(e). After defining all of the relevant terms in § 109(e), the court concluded that both "liquidated" and "noncontingent" debts may also be "disputed," and that a bona fide dispute regarding either debtor's liability for, or the amount of, a debt renders it "unliquidated," and therefore not includable in the § 109(e) eligibility calculation. The court further held that, where there is a question regarding a debt's inclusion in the chapter 13 debt limit, § 109(e) requires a hearing to determine debtor's qualification for chapter 13 relief, unless that issue cannot be resolved expeditiously. In cases where resolution cannot be accomplished expeditiously, the court will rely on the debtor's characterization of the debt in its schedules over the creditor's version of the facts. Because an adversary proceeding between creditors and debtors regarding the validity of creditors' claims was already pending in the district court, the court relied on debtors' characterization of the debt as disputed, and denied creditor's motion to dismiss in order to allow the adversary to proceed. The court acknowledged that its ruling, which largely adopted the position taken in In re King, 9 B.R. 376 (Bankr. D. Ore. 1981), was not in line with the majority view. | |
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In re Schofield Greenhouse (Internal Ref: Opinion 140) |
Oct-19-1984 UNPUBLISHED |
82A-3165 |
Judge Allen |
Attorney appointed to represent debtor partnership filed an interim application for fees. There were no objections, and no complaints regarding attorney's work on behalf of debtor. Attorney also represented two general partners of debtor in connection with their personal bankruptcies, and all three cases were under joint administration. The court concluded that attorney was not a "disinterested person," as required by 11 U.S.C. § 327(a) and defined by 11 U.S.C. § 101(13)(E), based on his representation of both a partnership and its partners, even though such interests will generally be the same, due to the potential for conflicts to arise, especially as between the two partners. Attorney's application was denied. | |
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In re Wasatch Factoring, Inc. (Internal Ref: Opinion 139) |
Sep-28-1984 UNPUBLISHED |
83A-0134 |
Judge Allen |
Attorney appointed to represent corporate chapter 11 debtor filed an application for fees. There were no objections, and no complaints regarding attorney's work on behalf of debtor. However, the court concluded that attorney was not a "disinterested person," as required by 11 U.S.C. § 327(a) and defined by 11 U.S.C. § 101(13)(E), because he represented both debtor and its principals, which could result in conflicts of interest, especially in a bankruptcy. In addition, the court found counsel to have a conflict in fact, as the principals and debtor were defendants in litigation, in which principals were seeking indemnification from debtor. The court denied attorney's current application and set aside its prior order granting interim compensation. | |
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Lambert v. Petty Motor Lease, Inc. (In re Lambert) (Internal Ref: Opinion 138) |
Sep-20-1984 UNPUBLISHED See 141.pdf |
83PC-0112 |
Judge Clark |
Debtors filed an adversary proceeding seeking a declaratory judgment that any claims asserted by defendant in debtors' bankruptcy had been settled by contract, in addition to other relief. Defendant filed a motion to dismiss the adversary complaint, asserting the court lacked jurisdiction under N. Pipeline Constr. Co. v. Marathon Pipe Line Co., 458 U.S. 50 (1982). The court held that the district court's interim rule after Marathon, which had been validated by the Tenth Circuit, gave the court jurisdiction over "bankruptcy proceedings," and that debtors' adversary, which dealt with their eligibility to be chapter 13 debtors, was just such a matter. Additionally, the court noted that it continued to have jurisdiction pursuant to 28 U.S.C. § 157, as the adversary was a "core matter." | |
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In re ChristensonIn re EicksIn re CarlgrenIn re WilldenIn re Johnson (Internal Ref: Opinion 137) |
Sep-15-1984 UNPUBLISHED |
82A-1180, -1108, -1128, -1156, and -1157 |
Judge Clark |
Chapter 13 debtors, who were all represented by the same counsel, moved to dismiss their cases, in which no schedules had been filed, pursuant to 11 U.S.C. § 1307(b). After the court's orders dismissing the cases and discharging the trustee had been entered, trustee moved to convert the cases to chapter 7. The court held that, in the absence of an improper motive for filing, debtors have an absolute right to dismiss at any time prior to entry of an order of conversion. Trustee's motion was denied. | |
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In re Snyderville Props., Inc. (Internal Ref: Opinion 136) |
Aug-20-1984 UNPUBLISHED |
84C-0673 |
Judge Mai (WY Bankr. Court, by designation) |
Bank, the first lienholder on property subject to chapter 11 debtor's second lien, began postpetition non-judicial foreclosure proceedings. Bank then filed a motion in the bankruptcy case seeking a determination of the automatic stay's applicability, stay relief, and other alternative relief. The court held that debtor's second trust deed on the property, which was its only asset, was property of the estate and subject to the automatic stay. The court found that debtor had a three-month right to cure under state law, which had been tolled by the stay, and that foreclosure would be injurious to that right. As bank's lien was oversecured by the property, the court denied stay relief, as well as bank's requests for conversion, dismissal, and the shortening of the chapter 11 time periods pursuant to 11 U.S.C. § 1121(d). | |
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In re Flygare (Internal Ref: Opinion 135) |
Aug-20-1984 UNPUBLISHED |
80C-1330 |
Judge Mai (WY Bankr. Court, by designation) |
Chapter 13 trustee objected to debtors' third proposed plan on the ground it had not been proposed in good faith, as required by 11 U.S.C. § 1325(a)(3). The court considered the eleven good faith factors identified by the Tenth Circuit in debtors' previous appeal, Flygare v. Boulden (In re Flygare), 709 F.2d 1344 (10th Cir. 1983), concluding that only 2 of those factors were relevant. The court found that the percentage of debtors' payments to their total monthly surplus was 91%, which weighed in favor of confirmation. The court then found that the 47-month term of debtors' plan, which resulted in a 2% payback to unsecured creditors was, under all of the facts of the case, sufficient to satisfy the § 1325(a)(3) good faith standard. The proposed plan was confirmed. | |
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Merrill v. Abbott (In re Indep. Clearing House Co.), 41 B.R. 985 (Bankr.D.Utah) (Internal Ref: Opinion 134) |
Aug-6-1984 PUBLISHED See 237.pdf |
83PA-0986 |
Judge Allen |
Chapter 11 debtors, the perpetrators of a massive Ponzi scheme, were subject to a confirmed plan of reorganization providing for substantive consolidation of the debtors, liquidation of all assets, and distribution to creditors based on priority. Trustee filed 2,000 adversary complaints against debtors' investors, seeking to recover (1) all payments made to them by debtors within 90 days of the petition filings, as preferences; (2) all payments, to the extent that they exceeded the amount of each investor's deposit with debtors, as fraudulent conveyances; and (3) all payments made by debtors to the investors, as fraudulent conveyances. On trustee's motion for summary judgment, the court found that there were no material issues of fact and proceeded to issue a ruling based on legal issues. Investors asserted that their investments were subject to a constructive trust and, therefore, never became estate property, but the court rejected this contention due to both the impossibility of tracing the investments, and because imposition of such a trust would nullify trustee's avoidance powers. The court dismissed trustee's third cause of action, concluding that all payments made outside of the preference period, except those that exceeded investors' investments, were not avoidable under any provision of the Bankruptcy Code. The court also held that any payments that exceeded investors' investment were not supported by reasonably equivalent value, and granted judgment in favor of trustee on his second claim for relief. Finally, the court ruled that all payments made within the preference period satisfied the elements of 11 U.S.C. § 547(b), and were not subject to the ordinary course of business exception. Trustee's first claim for relief was granted, including prejudgment interest at the legal rate. This decision was reversed, in part, by the en banc district court decision in 237.pdf. | |
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In re Loveridge Mach. Tool Co., Inc.In re Loveridge (Internal Ref: Opinion 133) |
Jul-18-1984 UNPUBLISHED |
83C-0071, -0238, -0312, -0313, and -0315 |
Judge Mai (WY Bankr. Court, by designation) |
Oversecured creditor sought payment of its attorney's fees under 11 U.S.C. § 506(b), which allows such payment to oversecured creditors, as provided by their agreement with the debtor. The court determined that § 506(b) was an exception to the general "American rule" that parties must bear their own attorney's fees, and that such exceptions must be strictly construed. Creditor failed to provide a copy of its agreement with its proof of claim, as required by Bankruptcy Rule 3001, and again failed to provide it in response to debtor's objection to its attorney's fees claim. Without the agreement in the record, the court found that the application for attorney's fees under § 506(b) must be disallowed. | |
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In re Williamson, 43 B.R. 813 (Bankr.D.Utah) (Internal Ref: Opinion 132) |
Jul-11-1984 PUBLISHED See 186.pdf |
82C-1703 |
Judge Clark |
The court addressed the priority of various liens against debtor's property in order to determine entitlement to proceeds of the property's sale. The court invalidated the majority of mechanic's lien claims on the basis that their claims arose by statute and their lien forms failed to satisfy the requirements of that statute. Furthermore, the statutory time limit for filing mechanic's liens had expired. Therefore, the mechanic's liens were invalidated, and a subsequently filed trust deed was entitled to priority over those claims. The court also found that bank's first trust deed included a subsequent advance of additional funds to debtor because both the note and trust deed contained clear language that the parties intended that result. Finally, the court held that debtor's homestead exemption took priority over all liens and encumbrances on the property, except "security interests," which can only be created voluntarily. The mechanic's lien ruling in this case was, at least arguably, invalidated by the district court's Sorenson opinion at 186.pdf, which found that mechanic's liens needed to be signed and verified, but were not necessarily rendered invalid by failure to sign the verification block on the form's reverse side. | |
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In re John Clay Co., Inc., 43 B.R. 797 (Bankr.D.Utah) (Internal Ref: Opinion 131) |
Jun-15-1984 PUBLISHED See 112.pdf |
83A-1323 |
Judge Clark |
On requests for rehearing, the court withdrew its previous decision in this matter [112.pdf] based on its finding that movants had not technically been accorded procedural due process with respect to the issue of applicability of the Packers and Stockyards Act to the claims of creditor sheep producers. The court first considered whether any of the sheep producers' claims were incurred postpetition, based on its conclusion that payment to the sheep producers became due at the time and place of delivery of the sheep. Under this guideline, the court used the delivery date to separate clearly prepetition deliveries from postpetition deliveries, which were entitled to priority as administrative expenses if they were incurred for the actual and necessary costs of preserving the bankruptcy estate. The court then considered deliveries that occurred on the same day the petition was filed, finding that the sheep were "delivered" when they were weighed in the trailer and a weigh ticket was created. The court then divided the "day of" transactions into those that were incurred prior to and after the filing of the petition at 1:56 p.m. MDT. The court next considered which postpetition claims were "actual and necessary costs," concluding that delivery of goods should be given the same priority as provision of services. Therefore, all postpetition sheep deliveries were entitled to administrative priority. Finally, the court ruled that administrative claimants were not entitled to interest on their claims, but that the unsecured, prepetition claimants might be entitled to interest, under state law, up to the date of the petition filing. | |
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In re Curtis, 40 B.R. 795 (Bankr.D.Utah) (Internal Ref: Opinion 130) |
Jun-11-1984 PUBLISHED |
83A-2417 |
Judge Allen |
Creditors moved for relief from stay "for cause," under 11 U.S.C. § 362(d)(1), in order to join debtors as defendants in a pending state court lawsuit. Noting that the "for cause" provision was intended to be narrowly construed, the court held that the movant has the burden to establish a legally sufficient "cause," which then shifts the burden to debtor to demonstrate entitlement to the stay. The court then found that creditors had failed to make a prima facie case of "cause" and that, even if they had, the relevant factors weighed in favor of not vacating the stay. Creditors' motion for relief was denied. | |
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In re United Roberts Corp.In re Roberts (Internal Ref: Opinion 129) |
Jun-8-1984 UNPUBLISHED |
82C-2454, -3098, -3099, and -3100 |
Judge Clark |
Individual debtor brothers made several transfers to and from jointly owned corporate debtor, including transfer of each of their respective residences to the corporation, and mortgages and promissory notes from the corporation to themselves. The parties also executed leases that allowed each brother to retain their residence, subject to payment of monthly "rent." In bankruptcy, trustee sought determinations of (1) whether brothers' claim that their rent payments were offset by a debt owed to them; and (2) whether brothers were required to assume or reject their leases. The court denied brothers' claimed offset of patent royalties owed them by the corporation, as they had transferred their interests in those royalties to family partnerships and, therefore, there was no mutuality, as required for offset. Brothers were ordered to either assume or reject their leases by a date certain and, if they chose to assume, pay the entire monthly rent accrued since the filing of the corporation's petition in order to cure. | |
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Gillman v. Alpine School Dist. (In re T & D Mgmt. Co.), 40 B.R. 781 (Bankr.D.Utah) (Internal Ref: Opinion 128) |
Jun-8-1984 PUBLISHED |
83PC-0889 |
Judge Clark |
Trustee filed an adversary complaint against school district seeking to recover allegedly preferential transfers by debtors. School district moved to dismiss the complaint, asserting lack of subject matter jurisdiction. The court determined that school district was a subdivision of the State of Utah under the Utah Constitution and state statute and was, therefore, a "governmental unit" within the meaning of 11 U.S.C. § 106(c). Based on an extensive review of legislative history, the court ruled that § 106(c) makes a governmental unit subject to bankruptcy court jurisdiction only with respect to Bankruptcy Code provisions that contain the terms "creditor," "entity," or "governmental unit." The court determined that, as 11 U.S.C. § 548(a)(2) does not contain those terms, it does not provide jurisdiction against a governmental unit unless that unit has waived its sovereign immunity. The motion to dismiss was granted. | |
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In re Sweetwater, 40 B.R. 733 (Bankr.D.Utah) (Internal Ref: Opinion 127) |
Jun-1-1984 PUBLISHED |
83A-2582 |
Judge Allen |
Bank was the assignee of lessor's interest in a variety of rapidly depreciating personal property leased to chapter 11 debtor, which were used in connection with debtor's timeshare business. Bank sought to compel debtor to assume or reject the leases, and to provide bank with adequate protection for the period from the petition filing date to the date debtor either assumed or rejected the leases. The court held that Congress intended to provide adequate protection for secured creditors only, and not for lessors, and denied bank's requested relief. | |
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In re Hinckley, 40 B.R. 679 (Bankr.D.Utah) (Internal Ref: Opinion 126) |
May-17-1984 PUBLISHED |
83C-2026 |
Judge Clark |
Creditor with a claim that was secured by a depreciating vehicle moved for adequate protection in debtors' chapter 13 proceeding, after having made a demand for such at the meeting of creditors, which was ignored. The court ruled that creditor was entitled to payments in the amount the vehicle depreciated each month, beginning from when creditor made its demand at the creditors meeting. | |
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In re Abeyta (Internal Ref: Opinion 125) |
May-14-1984 UNPUBLISHED |
83C-2657 |
Judge Clark |
Debtors sought an ex parte order to compel the Utah Office of Recovery Services to show cause why it should not be held in contempt for garnishing debtor's wages and attaching a tax refund, post-filing of their chapter 7 petition, as well as post-discharge. Debtors claimed that the ORS debt was for "child support," but that the debt was not "in connection with a separation agreement, divorce decree, or property settlement agreement," as required by 11 U.S.C. § 523(a)(5), and was therefore dischargeable. The court denied debtors' motion, without ruling on the § 523(a)(5) issue, on the ground that postpetition earnings are not property of a chapter 7 estate. In addition, as the stay was lifted upon discharge, there was no basis to hold ORS in contempt for violating the automatic stay, and debtors had not sought relief based on violation of the post-discharge injunction pursuant to 11 U.S.C. § 524(a)(2). The court noted that the dischargeability provisions of the Bankruptcy Code are not self-executing, and that the proper procedure for determining whether a debt was discharged is the filing of a complaint pursuant to Bankr. Rule 4007. However, in order to do so, debtors would first have to file a motion to reopen their case. | |
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Copper State Thrift & Loan v. United Roberts Corp. (In re United Roberts Corp.) (Internal Ref: Opinion 124) |
Apr-11-1984 UNPUBLISHED |
83PC-0837 |
Judge Clark |
Bank loaned money to corporate debtors, guaranteed by individual debtors, who were owners and principals of the corporations. In connection with the loans, debtors provided bank with promissory notes and trust deeds to real property. Debtors failed to pay the notes when they came due six months later, but the parties entered into a sale and leaseback arrangement, under which, bank would be given a new note in the amount of accrued interest owed on the loans, bank would "buy" equipment from debtors, on which they would make "lease" payments to bank, in repayment of the original notes. This arrangement was based on bank's policy that notes must be paid within one year, whereas lease obligations could be paid over five years. The promissory notes were never marked "paid," and the trust deeds were not reconveyed. After debtors filed chapter 11 petitions, bank moved for relief from stay. In response, debtors argued that the sale and leaseback agreement was a "novation," which meant bank was an unsecured creditor. Bank, however, argued that the leaseback was merely a modification or extension of the original loans. The court ruled that the leaseback agreement was not a novation because bank clearly did not intend to release debtors from the original notes, which is required under state law, and debtors had not presented any evidence regarding their own intent. Therefore, bank's claim remained secured by the trust deeds. | |
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In re Lettuce Entertain You, Inc. (Internal Ref: Opinion 123) |
Apr-9-1984 UNPUBLISHED See 151.pdf |
83C-3014 |
Judge Clark |
Creditor, the lessor of commercial mall space to chapter 11 debtor, filed a prepetition state court action against debtor seeking unpaid rent and recovery of the leased property. Over a period of more than a year, debtor made a number of payments to the clerk of the state court, in order to retain possession of the property during the lawsuit. When debtor filed its petition in bankruptcy, the amount being held by the state court was approximately $33,000, which was significantly less than the amount creditor was entitled to under the lease. Creditor filed a motion for relief from the automatic stay and to set a date by which debtor must assume or reject its lease, and debtor moved for turnover of the funds. Creditor argued that debtor had no interest in the funds, while debtor argued that the funds were estate property and that creditor's claim was unsecured. The court held that debtor's interest in the funds, although disputed, was part of debtor's estate, and that debtor had a right to use the funds for rehabilitation purposes under 11 U.S.C. §1107 and 1108, unless otherwise ordered. The court denied creditor's motion, granted debtor's motion for turnover, and set a date by which debtor must either assume or reject the lease. This order was vacated, with respect to debtor's motion for turnover, by the bankruptcy court's own order in 151.pdf. | |
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In re Zuspan (Internal Ref: Opinion 122) |
Mar-31-1984 UNPUBLISHED |
83C-2216 |
Judge Clark |
Creditor met with debtors, prepetition, at their home and sold them vinyl siding pursuant to a payment plan that was apparently secured by a mortgage. After debtors' petition was filed, creditor filed a motion seeking a declaration that its claim was secured and requesting relief from stay, which debtors opposed. The court held that the rescission notice given by creditor to debtors at the time of the sale did not comply with the notice required by 15 U.S.C. § 1635(a) and 12 C.F.R. § 226.23(b), which govern rescission of consumer credit transactions. Because the notice was defective, the court held that, pursuant to the express wording of § 1635(a), debtors' rescission right had never expired. The court considered debtors' response to creditor's motion to be a sufficient written notice of the exercise of their right to rescind the sale agreement. Finally, the court held that, although creditor had violated § 226.23(c) by showing up to install the siding on the day after the contract was signed. that subparagraph of the regulation did not provide a basis upon which the transaction could be rescinded. Since return of the siding would be impractical, the court ordered that creditor held an unsecured claim for the reasonable value of the siding, less any payments already made by debtors. | |
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Catmull v. Van Orden (In re Catmull) (Internal Ref: Opinion 121) |
Mar-31-1984 UNPUBLISHED |
83PC-0961 |
Judge Clark |
Debtors filed an adversary complaint seeking relief from defendant's Idaho state court judgment against them, alleging errors and fraud in the Idaho trial proceedings. Defendants' judgment had been affirmed on appeal, and debtors' federal district court lawsuit alleging breach of the parties' contract by defendants was resolved in defendants' favor, based on the principle of res judicata. The bankruptcy court ruled that some of debtors' claims merely alleged errors that could have been corrected on appeal, which did not provide a sufficient basis for a fraud claim that would justify the relief they sought. The court also ruled that debtors' single fraud claim was not sufficiently specific to form a basis for relief and that, even if it had been specific, the claim made was in the nature of intrinsic fraud, while the relief sought required extrinsic fraud. | |
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In re Cook, 38 B.R. 870 (Bankr.D.Utah) (Internal Ref: Opinion 120) |
Mar-30-1984 PUBLISHED |
83C-0198 |
Judge Clark |
Bank held a perfected security interest in a car purchased by debtors less than 6 months prior to filing their chapter 13 petition. Debtors' plan provided for payment of bank's claim and fixed its value at $6,975. The court approved the plan, but reserved the issues of how, and on what date, the car should be valued. The court held that the car should be valued "as of or close to the effective date of the plan," noting that the proper date will ordinarily be the date of the confirmation hearing in a chapter 13 case. The court further held that the car should be valued in the amount creditor would receive if they were allowed to sell the collateral, which in this case was best represented by the NADA wholesale/average trade-in value as of the date of confirmation. The court specifically rejected the assertion by both parties that the car be valued at debtors' replacement cost. | |
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In re Flygare (Internal Ref: Opinion 119) |
Mar-22-1984 UNPUBLISHED |
80C-1330 |
Judge Clark |
The court considered debtors' objections, asserting untimeliness under former Rule 13-302(e)(2), to three secured claims and one unsecured claim. The court denied debtors' objections to the secured claims because the rule used in the objection related only to unsecured claims, and the claims were timely under Rule 13-302(e)(1), which applies to secured claims. The court granted debtors' objection to the unsecured claim, which had been filed on the day of the fourth meeting of creditors, as the rule required it to be filed within 6 months of the date of the first meeting of creditors. | |
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In re Friendly Valley Condos. Shopping Ctrs., Inc. (Internal Ref: Opinion 118) |
Mar-12-1984 UNPUBLISHED |
83C-0598 |
Judge Clark |
In considering numerous requests for protective orders, the court indicated that the policy of the federal and bankruptcy rules with respect to discovery is to allow as wide a scope as possible for obtaining germane facts, unless a clear legal argument is made to the contrary. Although the court denied most of the requests for protection, it allowed one creditor to withhold production of a "secret document" until sometime during an upcoming deposition, quashed two subpoenas served on potential deponents, and ordered the parties to allow 30 days to produce documents in response to a request for production that was served with a notice of deposition. | |
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In re IML Freight, Inc., 37 B.R. 556 (Bankr.D.Utah) (Internal Ref: Opinion 117) |
Mar-7-1984 PUBLISHED |
83C-1950, -1951, -1952 |
Judge Clark |
Rejection of chapter 11 debtor's collective bargaining agreements with various unions was approved by the court, after which trustee, in his discretion, entered into new collective bargaining agreements with the unions. Trustee subsequently sought to reject those postpetition agreements, pursuant to 11 U.S.C. § 365. The court held that trustee's postpetition agreements were not "executory contracts" subject to § 365, and denied trustee's motion. | |
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In re Dalby, 38 B.R. 107 (Bankr.D.Utah) (Internal Ref: Opinion 116) |
Feb-20-1984 PUBLISHED |
82C-2533 |
Judge Clark |
On creditor's objection to chapter 13 debtor's proposed plan, the court weighed the good faith factors identified in Flygare v. Boulden (In re Flygare), 709 F.2d 1344 (10th Cir. 1983), and concluded that the 35-month plan, which allocated only 40% of debtor's monthly surplus to repaying 30% of unsecured debt, 96% of which consisted of student loans that would be nondischargeable in a chapter 7, had not been proposed in good faith. | |
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In re Warden, 36 B.R. 968 (Bankr.D.Utah) (Internal Ref: Opinion 113) |
Jan-25-1984 PUBLISHED See 114.pdf |
82C-3089 |
Judge Clark |
Chapter 13 debtors listed the IRS as a priority creditor for prepetition taxes, and IRS received notice of debtors' filing from the court. The IRS froze debtors' account. Debtors filed a tax return for the year in which their petition was filed, which showed an overpayment of their taxes. Shortly thereafter, the court confirmed debtors' plan, of which the IRS had notice and did not object. The confirmation order provided that the IRS tax claim listed by debtors would be paid in full, and that debtors would pay some of the proceeds from their tax return to trustee for the benefit of creditors. When debtors did not receive their refund from the IRS, they obtained an order to show cause from the court. The IRS objected to the order, indicating that it had not violated the automatic stay, and that it had authorized payment to debtors of all but approximately $92 of the refund that had been frozen. Debtors received that payment from the IRS, and the IRS requested that the stay be modified to allow it to offset its claims against debtors' refund. The court issued a new show cause order, after which it held that, even if the IRS could have met the requirements for offset, its right to offset had been extinguished by confirmation of debtors' plan. As such, the IRS violated the stay under 11 U.S.C. § 362(a)(6) by retaining debtors' refund, and could be held in civil contempt for that violation. The court ordered the IRS to pay debtors the remainder of their refund, as well as the costs and attorney's fees that debtors incurred in their attempts to obtain the IRS' release of it. | |
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In re Ashby, 36 B.R. 976 (Bankr.D.Utah) (Internal Ref: Opinion 115) |
Jan-25-1984 PUBLISHED |
83C-1156 |
Judge Clark |
Chapter 13 debtor filed his state tax return, which indicated a refund owed, prior to filing his petition. While awaiting his tax refund, debtor signed a wage assignment with ORS to cover his child support debt. ORS later received debtor's tax refund from the state and applied it to debtor's support debt, and debtor applied for an order to show cause against it. In response, ORS admitted that it had violated the automatic stay by accepting and offsetting debtor's tax refund, and tendered a check to debtor for the full amount of the refund. The court then deemed the turnover issue to be moot, and considered only the issues of civil contempt and recovery. ORS asserted it was not in contempt, as its actions did not involve gross misconduct, bad faith, or willful and malicious intent, The court rejected that assertion, explaining that civil contempt is remedial and, therefore, the defendant's intent is irrelevant. ORS was found in contempt and was ordered to pay debtor's costs and attorney's fees. | |
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In re Burrow, 36 B.R. 960 (Bankr.D.Utah) (Internal Ref: Opinion 114) |
Jan-25-1984 PUBLISHED See 113.pdf |
81A-2636 |
Judge Clark |
The court held here, as it did in 113.pdf, that the IRS violated the automatic stay in debtors' chapter 13 case by freezing their account, and that it was liable for that violation as civil contempt. The court ordered the IRS to release debtors' tax refund and to pay the costs and fees debtors incurred in attempting to obtain that refund from the IRS. |
