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Opinions
| Case Title | Date & Status | Case Number(s) | Judge & PDF | Summary | |
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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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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 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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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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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 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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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 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. | |
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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 John Clay & Co., Inc. (Internal Ref: Opinion 112) |
Jan-23-1984 UNPUBLISHED See 131.pdf |
83A-1323 |
Judge Clark |
Debtor, as a buyer and seller of sheep, was considered a "market agency" under the Packers and Stockyards Act, which provides that payments by livestock buyers to market agencies on commission be held in trust for the livestock producers. As such, while debtor may hold legal title to payments it receives for sales, the beneficial interest in those payments belongs to the sheep producers, and is therefore not estate property. The court ordered that any such payments being held by trustee must be disbursed to the sheep producers who had not yet been paid. This decision was withdrawn by the court in 131.pdf. | |
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In re United Roberts Corp.In re Panelera Corp.In re Panelera Utah, Inc.In re Panelera Mfg. Corp. (Internal Ref: Opinion 111) |
Jan-21-1984 UNPUBLISHED |
82C-2454, -2456, -2457, and -2548 |
Judge Clark |
Secured creditor asserted a security interest in debtors' postpetition accounts receivable, based on both its prepetition security interest in debtors' inventory and a previous court order allowing debtors' use of cash collateral upon certain conditions. The court ruled that its cash collateral order had not granted creditor a security interest in postpetition accounts receivable, and that creditor's lien only extended to postpetition accounts receivable that were proceeds from sale of prepetition inventory. Specifically, creditor's lien did not extend to proceeds from sales of inventory that debtors had acquired postpetition. | |
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Davies v. Rosenberg (In re Practical Concepts Inc.) (Internal Ref: Opinion 110) |
Jan-10-1984 UNPUBLISHED |
83-0659 83P-0659 |
Judge Allen |
Defendant in a removed civil action filed a motion for change of venue, seeking transfer of the removed case to the jurisdiction where the chapter 11 case was pending. The court considered Bankruptcy Rule 5005(a), which requires that all papers in a chapter 11 case, including adversary complaints, be filed in the district where the bankruptcy case is pending, unless filing in another district is authorized by 28 U.S.C. § 1473. The court considered the factors applicable to venue determinations, as outlined in In re Cole Assoc., 7 B.R. 154 (Bankr. D. Utah 1980), and concluded that economic administration of the estate required transfer to the jurisdiction where the chapter 11 case was located. Defendant's motion was granted. | |
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In re Siebert (Internal Ref: Opinion 109) |
Dec-27-1983 UNPUBLISHED |
83A-0736 and -0810 |
Judge Allen |
Chapter 7 trustee moved the court for a change of venue based on the interests of justice and the convenience of the parties. The court held that the party seeking to change venue bears the burden of establishing grounds for such change by a preponderance of the evidence. The court further held that a debtor's choice of forum, though a factor to consider, does not control the decision, and that economic and efficient administrative of the estate is the most important factor. Given that these debtors' only potential asset, the majority of their creditors, and their major business ventures were all located in Oregon, the court granted trustee's motion and transferred debtors' cases to that forum. | |
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In re Ayala, 35 B.R. 651 (Bankr.D.Utah) (Internal Ref: Opinion 108) |
Dec-13-1983 PUBLISHED |
82C-0198 |
Judge Clark |
County filed proof of claim for garbage fees in debtor's chapter 7 bankruptcy, asserting unsecured tax priority under 11 U.S.C. § 507(a)(6) for the period prior to the claim's certification to the County Assessor, and treatment as a secured claim thereafter. By state statute, the provider service-district may certify unpaid fees to the assessor, which then become liens on real property. County did not specify when its claim was certified. The court held that § 507(a)(6) only extends priority status to "taxes" that fall within one of its subsections. Concluding that the fees portion of County's claim was "in the nature of a property tax," the court held that the fees were entitled to priority treatment under § 507(a)(6)(B). However, the "penalty," "fee rate," and "interest" portions of County's claim did not satisfy § 507(a)(6)(G), and were therefore unsecured, non-priority claims. | |
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In re Loveridge Mach. & Tool Co., Inc., 36 B.R. 159 (Bankr.D.Utah) (Internal Ref: Opinion 107) |
Dec-13-1983 PUBLISHED |
83C-0071, -0238, -0312, -0313, and -0315 |
Judge Clark |
Chapter 11 debtors sought confirmation of their plan, which proposed applying the statutory interest rate provided by 28 U.S.C. § 1961(a) (which was 8.75% when the petition was filed) on deferred cash payments to oversecured creditor, rather than the parties' contract rate of 19%. Creditor objected. The court held that, under 11 U.S.C. § 506(b), the contract rate applies when there is a contract, from the petition filing date to the effective date of debtors' plan. Therefore, creditor was entitled to 19% annual interest on its claim during that period. With respect to post-effective date interest, the court found that the statutory rate, which changes on a monthly basis, would be impossible to determine, especially since the "effective date" of an as-yet unconfirmed plan is also uncertain. The court concluded that use of the statutory rate to determine present value under 11 U.S.C. § 1129(b)(2)(A)(i)(2) "would be ill advised and erroneous as a matter of law" since, although the statutory rate may be helpful in determining a risk-free interest rate for a one-year loan, a chapter 11 plan is neither risk-free nor limited to a period of one year. Interest rates that satisfy § 1129(b) should compensate for risks imposed on secured creditors by the plan. Since debtors' proposed interest rate did not do so, the plan would not be confirmed over creditor's objection. The court refused to determine an appropriate post-effective date interest rate, concluding that such a determination would be dictum. | |
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In re Johnson, 36 B.R. 958 (Bankr.D.Utah) (Internal Ref: Opinion 106) |
Dec-12-1983 PUBLISHED |
80A-2416 |
Judge Clark |
In 1981, debtors' chapter 13 plan, which did not provide for husband's post-petition child support, was confirmed. Subsequently, ORS obtained a judgment against husband for post-petition child support and, in June 1983, attached debtors' IRS refund, from overpayment of their 1982 taxes, in payment of that judgment. At debtors' request, the court issued an order to show cause to the IRS and ORS for possibly violating the automatic stay. However, the court held that, under 11 U.S.C. § 1327(b), all property of debtors' estate that was not dedicated to their plan became debtors' property upon confirmation. Therefore, debtors' tax refund belonged solely to them when it was attached by ORS, even though debtors' case remained open. Therefore, the order to show cause was dismissed. | |
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In re AFCO Enters., Inc., 35 B.R. 512 (Bankr.D.Utah) (Internal Ref: Opinion 104) |
Nov-16-1983 PUBLISHED |
82C-0577, -0578, -0579, and -1411 |
Judge Clark |
For a ten-month period prior to bank's foreclosure of the property, chapter 11 trustee operated debtor's principal asset, a resort. Trustee sought to recover his expenses of operating the resort under 11 U.S.C. § 506(c), and bank, which then owned the property by virtue of a foreclosure sale, objected, arguing that trustee's expenses were only allowed under § 506(c) when there is equity in the property. The court rejected bank's position, concluding that § 506(c) may apply in the absence of equity in the property. The court identified the elements of § 506(c) applicability as: (1) the costs and expenses sought must be reasonable and necessary; (2) they must have been incurred in preserving or disposing of the property; and (3) recovery is limited to the benefit that was provided to the secured lienholder. The court rejected bank's argument that a decrease in the property's assessed value establishes that no benefit was provided by trustee's operation of the business, finding that interpretation to be "too narrow." Based on the testimony of expert witnesses, the court found that trustee's operation of the resort preserved the property itself, as well as its value as a going concern, and that the benefit conferred was equal to trustee's claimed expenses. Pursuant to § 506(c), trustee was entitled to recover those expenses from the property, but trustee's claim was inferior to bank's superpriority lien for advancing operating expenses during the bankruptcy. | |
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In re Sweetwater (Internal Ref: Opinion 105) |
Nov-16-1983 UNPUBLISHED |
83A-2582 |
Judge Allen |
Purchaser's committee, officially appointed under 11 U.S.C. § 1102, sought approval to employ an investigator for the committee. The court determined that, in making such a request, the committee must explain the necessity for the employment, among other things. Since 11 U.S.C. § 1103(d) requires a meeting between the committee and the trustee/debtor-in-possession "as soon as practicable" after the committee's appointment, and the committee had not shown that debtor was unwilling to cooperate with it, the court denied the application on the ground that the information the committee wanted might very well be provided by debtor at that meeting. | |
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In re Heiner (Internal Ref: Opinion 103) |
Oct-30-1983 UNPUBLISHED |
80C-0025 |
Judge Clark |
Taxing authority that voted in favor of chapter 11 debtor's proposed plan was bound by the terms of the confirmed plan. Any objections to its treatment under the plan should have been preserved by voting against the plan and objecting to confirmation. Having failed to do so, taxing authority must abide the consequences. |
