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

In re Campbell

(Internal Ref: Opinion 452)




Judge Thurman

PDF icon 452.pdf

Chapter 13 Debtor filed a Plan proposing payments for thirty-six months to return 16% to non-priority, unsecured creditors. The Plan also provided for monthly payments to be made directly to the Utah Higher Education Assistance Authority ("UHEAA") for outstanding student loans, pursuant to §1322(b)(5). The Chapter 13 Trustee filed an Objection to Confirmation of Plan, alleging that the payments to UHEAA, who would receive 71% of the principal amount of its claim over the projected term of the plan, constituted unfair discrimination as to the Debtor's other unsecured creditors. The Court found that, absent proof of extraordinary or compelling circumstances, the Debtor's Plan "unfairly" discriminated against the other classes of unsecured creditors, pursuant to §1322(b)(1). Accordingly, the Court denied confirmation of the Debtor's Plan.

In re Bushman

(Internal Ref: Opinion 453)




Judge Boulden

PDF icon 453.pdf

The debtors filed a motion for sanctions against a creditor for willful violation of the discharge injunction of 11 U.S.C. §524. Following the debtors' receipt of a chapter 7 discharge in a no asset case, a creditor filed suit against the debtors in state court seeking to collect on a pre-petition guaranty that one of the debtors executed for the benefit of his corporation. The debtors attempted to defend the state court action by claiming the debt received discharge in bankruptcy but the creditor continued to prosecute the case claiming the debtors had continuing liability on the guaranty, the debt did not exist as of the date of filing, and the debtors remained obligated because the creditor was not listed on the debtors' schedules. The court found the creditor acted in violation of the injunction imposed by §524 when it pursued its collection action against the debtors in state court. The court determined the personal guaranty executed by one of the debtor's was an executory contract for financial accommodation which was extinguished as of the date of petition. The court was unable to sanction the creditor because the debtors did not offer any proof of actual damages.

Great American Fidelity Insurance Co. v. Arrow Dynamics (In re Arrow Dynamics)

(Internal Ref: Opinion 450)




Judge Boulden

PDF icon 450.pdf

Plaintiff insurance company filed declaratory judgment action against Debtor and other Claimants involved in state court litigation to resolve insurance coverage questions. The insurance company and Debtor are parties to a policy which the insurance company claims does not provide coverage to the debtor for claims brought in state court litigation. The insurance company filed for summary judgment and certain of the defendants (excluding the debtor) filed cross motions for summary judgment seeking declaratory judgment on whether or not the policy provides coverage for all claims asserted. The Court reached the following conclusions. A declaratory judgment action is not a core proceeding but relates to the bankruptcy because a determination of insurance coverage may increase or decrease the payment to creditors from assets fo the estate. A waiver of claims against the Debtor by the Claimants in an agreed order lifting the automatic stay to pursue state court litigation does not prohibit Claimants from recovering insurance proceeds from the policy. The Court further held that while the general rule under Utah law is that an ambiguous consumer insurance contract should be strictly interpreted against the insurer in favor of coverage, the facts of this case warrant reference to the intent of the parties in agreeing to the bargained for contractual terms of the policy. The intention of the parties to the insurance policy was that the self-insured retention endorsement attached to the policy is applicable despite some confusion by reference to a separate type of policy. However, contrary to the plaintiff's argument, no breach of the self-insured retention has occurred which would void coverage. Finally, the Court was asked to determine whether there is contractual indemnity coverage in the policy under certain contracts between the debtor and one of the claimants. In interpreting the contracts the Court found that the language of the policy included indemnification of another party for the debtor's own negligent acts but excluded indemnification for that parties' negligent acts, and found other indemnification issues unripe.

In re Lundahl

(Internal Ref: Opinion 449)




Judge Thurman

PDF icon 449.pdf

The Court dismissed the Debtor's Chapter 13 case with prejudice where there was sufficient evidence to support a finding that the Debtor's plan was not proposed in good faith and that the case was filed in bad faith. The Court found that parties who were disputed by the Debtor but who were not scheduled or listed on any mailing matrix filed by the Debtor had standing to object to the Debtor's plan, and could be heard regarding their motion to dismiss or convert. The Court analyzed the Debtor's case in light of the standards adopted by the Tenth Circuit Court of Appeals in the cases of In re Flygare and In re Gier . The Court analyzed four particular areas: 1) the accuracy of the Debtor's income and expenses; 2) the existence of creditors' claims to be paid through the plan; 3) the motivation of the Debtor filing the case solely for the purpose of having a forum for litigation; and 4) the inaccuracy and misleading nature of the Statement of Affairs and Schedules filed by the Debtor. In each instance, the Court found that the Plan had not been proposed in good faith as required by 11 U.S.C. § 1307(e) and that the case had been filed in bad faith.

Marker v. Fullerton (In re Fullerton)

(Internal Ref: Opinion 448)




Judge Thurman

PDF icon 448.pdf

The Court granted partial summary judgment on the Plaintiff Trustee's motion in an adversary proceeding commenced for recovery of property fraudulently transferred pursuant to § 25-6-6 of the Utah Code. In this proceeding, the Trustee relied on state law to reach back a period of 4 years prior to the filing of the Debtor's bankruptcy case to challenge a transfer by the Debtor to a former spouse. The Trustee alleged that the Debtor transferred certain real property to the Defendant for less than reasonably equivalent value. The Court ruled that a conveyance where a substantial portion of the consideration consisted of a promise of reduced future rents valued at approximately $98,550 did not constitute reasonably equivalent value. Other issues of fact remained to be tried.

In re Grogan, 300 B.R. 804 (Bankr.D.Utah)

(Internal Ref: Opinion 447)




Judge Boulden

PDF icon 447.pdf

Debtors failed to disclose settlement proceeds and the bank account into which the funds were deposited on their statements and schedules. The Chapter 7 trustee discovered the undisclosed assets and sought turnover of the settlement proceeds to the estate. After several months of delay, the debtors amended their schedules by listing the settlement proceeds as an asset and also claiming the funds as exempt property. The trustee objected to the amended objection claiming the omission of the settlement proceeds was intentional. The Court found that the debtors acted in bad faith in claiming the exemption on assets belatedly disclosed in amended schedules. The delayed exemption claim was disallowed for both bad faith and prejudice to creditors of the estate and debtors were required to turnover the settlement proceeds to the trustee.

Gillman v. Carson (In re Carson)

(Internal Ref: Opinion 451)




Judge Boulden

PDF icon 451.pdf

Trustee brought a nondischargeability action against the Debtor alleging that the Debtor failed to comply with the requirements of 11 U.S.C. § 727(a)(3) and (a)(4)(A). Court denied the Debtor his discharge and found: (1) that the Debtor, not the Trustee, has the burden of compiling and reconstructing the Debtor's financial history; and (2) that the Debtor knowingly and fraudulently omitted property from his statements and schedules. (Posted 1/26/2003)

Brewer v. Brewer (In re Brewer)

(Internal Ref: Opinion 446)




Judge Thurman

PDF icon 446.pdf

Plaintiff/Debtor filed a declaratory action against Defendant, former husband, seeking sanctions and a determination that his state court proceeding to enforce divorce-ordered payments were in violation of her discharge. The Debtor and the Defendant were divorced prior to the Debtor filing for Chapter 7 relief. The Divorce Decree ordered the Debtor to assume and pay two debts that had been co-signed by the parties. The Debtor ceased paying the debts and subsequently filed her Chapter 7 case. The Defendant began paying and eventually paid off the debts. The Debtor did not schedule the Defendant in her bankruptcy papers, but did list the two debts and the corresponding creditors. The Trustee filed a No Asset Report and the Debtor received a discharge. Three years later, the Defendant sought reimbursement from the Debtor for the amounts he had paid on the debts by filing a Motion for Order to Show Cause in state court. The state court ruled that the payments made by the Defendant on the debts were post petition obligations and ordered the obligations non-dischargeable because the Defendant was not scheduled in the Debtor's bankruptcy papers.At trial, the Bankruptcy Court ruled that the state court order was void ab initio because the state court lacked jurisdiction. The state court order was void under the Ellis v. Consolidated Diesel Electric Corp. decision of the Tenth Circuit. As a result, the Rooker-Feldman doctrine did not apply and the Bankruptcy Court had jurisdiction to considering a collateral attack on the state court's ruling. The Court found that the debts were not in the nature of alimony or support and were incurred by the parties pre-petition. Notwithstanding the lack of scheduling in the bankruptcy papers, the debts were discharged by operation of law because Debtor's case was a no asset case, there was no bar date set for filing proofs of claims, and the claims were not in the nature of otherwise non-dischargeable claims. Sanctions were imposed on the Defendant because he refused to cease his collection efforts, even though he had been placed on notice of the Debtor's bankruptcy and the Tenth Circuit's decision of In re Parker , at least by the time the Order to Show Cause was heard in state court.

Dayton v. Newman (In re Dayton)

(Internal Ref: Opinion 445)




Judge Clark

PDF icon 445.pdf

Issue: subject matter jurisdiction.

Lundahl v. Telford (In re Telford)

(Internal Ref: Opinion 444)




Judge Clark

PDF icon 444.pdf

The matter before the court is on plaintiff's application to proceed without prepayment of fees which seeks waiver of the fees under 28 U.S.C. §1915 (proceedings in forma pauperis). Because the United States Bankruptcy Court is an Article I Court and not an Article III Court, it has no authority to waive filing fees under 28 U.S.C. §1915.

The William W. Barney, M.D. P.C. Retirement Fund v. Perkins (In re Perkins), 298 BR 778 (Bankr.D.Utah)

(Internal Ref: Opinion 443)




Judge Boulden

PDF icon 443.pdf

Creditor, a retirement fund, filed a nondischargeability action against Debtor under 11 U.S.C. §523(a)(2)(A) alleging the Debtor's omissions and misrepresentations to Creditor were material and thus nondischargeable. The Debtor previously operated an investment firm in which Creditor placed funds for retirement. The Debtor failed to disclose personal ties and interests to a company to which the investment firm extended a loan that was funded by the Creditor. In analyzing whether the Debtor incurred a debt to the Creditor by soliciting, receiving and refusing to account for assets through false representations and material omissions, the Court looked to the Restatement (Second) of Torts §551(2). The Court concluded that the parties' relationship was one of trust and confidence which triggered the Debtor's duty to exercise reasonable care to disclose material information. The Debtor failed to uphold this duty to disclose by omitting and misrepresenting significant information that was material to the Creditor's investment decisions. The Creditor justifiably relied on the Debtor's representations and omissions in making investment decisions and was harmed as a result.

In re Marshall

(Internal Ref: Opinion 440)




Judge Boulden

PDF icon 440.pdf

Chapter 12 Trustee objected to allowance of debtors' counsel's fee applications in a case originally filed as a Chapter 11 case. The Trustee objected on the grounds that while counsel did file an Application to Employ while the debtor was in possession in the Chapter 11 case, the law firm was never appointed under 11 U.S.C. § 327 and was thus never employed as a professional person entitled to compensation under 11 U.S.C. § 330. Counsel for the debtors argued appointment by the court under 11 U.S.C. § 327 is not necessary for debtors counsel to receive compensation when representing individual debtors under Chapter 12.The Court found that 11 U.S.C. § 330(a)(4)(B), added to the Code by The Bankruptcy Reform Act of 1994, Pub.L.No. 103-394, 108 Stat. 4106 (1994), obviates the need for court appointment of debtor's counsel in a Chapter 12 case in which the debtor is an individual. However, while the Court held fees and costs were allowed, it also discovered that no payment of fees is authorized under the express terms of the confirmed Plan which only allows payment to professionals appointed under 11 U.S.C. § 327.

In re Snow

(Internal Ref: Opinion 439)




Judge Thurman

PDF icon 439.pdf

The United States Trustee brought a motion to dismiss the Debtors' case for substantial abuse of the bankruptcy system as provided by 11 U.S.C. § 707(b). The Debtors had filed a Chapter 7 case but their household income was greater than $150,000 per year. Applying the "totality of the circumstances" test set forth by the Tenth Circuit Court of Appeals in the case of Stewart v. United States Trustee (In re Stewart), 175 F.3d 796, 809 (10th Cir. 1999), the Court granted the Trustee's motion but stayed the effectiveness of the order for ten days to allow the Debtors to convert their case to one under Chapter 11 or Chapter 13. Although the Court determined that the Debtors' ability to repay debt was the primary factor in its analysis, the Court considered other factors as well including whether the Debtors suffered any unique hardships, whether cash advances and purchases exceeded the Debtors' ability to pay at the time they were incurred, whether the Debtors had a stable source of future income, whether the Debtors current expenses could be reduced without deprivation of necessities, whether the Debtors qualify for Chapter 13 relief, and the Debtors' good faith. The Court determined, based on an analysis of each factor, that the case should be dismissed primarily due to the amount of surplus income that the Debtors should have under a plan of reorganization and the Debtors' failure to provide accurate information regarding their household income and expenses on their bankruptcy schedules at the time the case was filed or in any written amendments.

C and M Properties v. Burbidge (In re C and M Properties)

(Internal Ref: Opinion 438)




Judge Clark

PDF icon 438.pdf

A Chapter 11 plan was confirmed with no mention or treatment of a claim that debtor asserted against the defendant in this adversary proceeding. There was also no specific disclosure of the claim or its value in the debtor's schedules, statements or monthly financial reports. Post confirmation, debtor commenced a lawsuit against defendant. Defendant removed the matter to this Court and filed a motion to dismiss based upon res judicata and judicial estoppel arguing that because the claim had not been disclosed, the debtor is barred by res judicata and judicial estoppel from suing on the claim. Because affidavits were submitted by both parties, the Court treated the motion as a motion for summary judgment and ruled that res judicata did not apply because the plan relied solely on the sale of debtor's real property to pay all claimants in full plus interest. As such, it never became necessary to consider the existence and value of the claim at confirmation. The Court denied defendant's motion based upon the judicial estoppel argument because the Tenth Circuit Court of Appeals has repeatedly stated that the doctrine of judicial estoppel is not recognized in this Circuit.

In re David

(Internal Ref: Opinion 441)




Judge Thurman

PDF icon 441.pdf

The Chapter 7 Trustee brought a motion to require the Debtors to turnover property of the estate to the Trustee. The property consisted of $825.74 that existed in the Debtors' bank checking account at the time the case was filed. The Debtors originally filed the case as a Chapter 7 case, but following their 341 meeting, the Debtors converted their case to one under Chapter 13. Approximately four months after the case was converted, the Debtors reconverted the case back to one under Chapter 7. Several months after the conversion back to Chapter 7, the Chapter 7 Trustee brought his motion for turnover seeking the money that existed in the checking account at the time the case was originally initiated. During the course of their case, the Debtors had spent the money in their checking account on moving expenses and on other ordinary living expenses. The Debtors were never put on notice that the Trustee would seek turnover of those funds until nearly sixteen months after the case was filed. The Court held that under 11 U.S.C. § 348(f) property of the Debtors' Chapter 7 estate after conversion from Chapter 13 consisted of property that remains in possession of the debtor or is under the control of the debtor on the date of the conversion and, therefore, did not include the checking account funds that had been subsequently consumed before the conversion back to Chapter 7. The Court also concluded that it may not rule the same in a case where a debtor converted to another chapter in bad faith.

In re Scarbrough

(Internal Ref: Opinion 442)




Judge Thurman

PDF icon 442.pdf

Goldenwest Credit Union filed a motion to extend the time to file a proof of claim in the case. The Debtors case was filed on August 5, 2002. When the Debtors filed their bankruptcy petition, they also filed a creditor matrix. For some unknown reason, an error occurred in the bankruptcy clerk's office and the matrix was not entered into the system. Subsequently, on August 21, 2002, notice of the meeting of creditors, as well as notice of the last day to file proofs of claim was sent to all parties in the case, but due to the error in failing to correctly enter the matrix, only one creditor, the Chapter 13 Trustee, the Debtors and Debtors' counsel received notice of the filing and of the claims bar date. The claims bar date was set for December 12, 2002. On April 2, 2003, Goldenwest Credit Union filed its motion to extend the time to file proofs of claim alleging that the failure to receive notice was cause to extend the deadline. The Court denied the motion under Bankruptcy Rules 9006(b)(3) and 3002(c) as interpreted by the Tenth Circuit Court of Appeals in Jones v. Arros, 9 F.3d 79 (10th Cir. 1993). While Jones was a case under Chapter 12, the Bankruptcy Court held that its holding was equally applicable to Chapter 13 cases and, therefore, held that, despite a creditor not receiving notice of a case, that the claims bar date is absolute and may not be extended. However, recognizing that a creditor may be deprived of due process if never given notice of the claims bar date, the Bankruptcy Court held a Debtor may be able to enlarge the time to file proofs of claim on behalf of creditors under Bankruptcy Rule 3004. The Bankruptcy Court held that the deadline for debtors filing proofs of claim on behalf of creditors may be enlarged upon a showing of "excusable neglect" on the part of the Debtors in not filing a proof of claim prior to the deadline set forth in Bankruptcy Rule 3004.

In re Tilson

(Internal Ref: Opinion 437)




Judge Boulden

PDF icon 437.pdf

A creditor filed a motion to dismiss the case with prejudice pursuant to 11 U.S.C. § 109(g)(1). Based upon the debtor's failure to file required papers or attend the first meeting of creditors, combined with his admission that the debtor had no intent to prosecute the case, the Court granted the motion.The debtor filed a chapter 13 petition in order to stave off a pending foreclosure and allow time to consummate a sale of the property. The debtor failed to file a list of creditors and their addresses, failed to file any statements or schedules and failed to file a plan of reorganization in violation of 11 U.S.C. § 521, Fed. R. Bankr. P. 1007, LR 2002-1(d) and LR 5005-1. These failures are also failures to appear before the court in proper prosecution of the case within the meaning of 11 U.S.C. § 109(g)(1).The debtor offered several explanations for his conduct, but the Court found only one explanation to be credible. The debtor intended to satisfy all of his creditors through a sale of the property on which foreclosure was pending, and had no intent to pursue reorganization under the Bankruptcy Code. On that basis, the Court concluded that the debtor's failures to appear noted above were willful and dismissed the case with prejudice.

In re Williamson

(Internal Ref: Opinion 436)




Judge Boulden

PDF icon 436.pdf

The United States trustee objected to dismissal and filed a motion to disgorge fees under 11 U.S.C. § 329 due to unusual circumstances that led to two cases being open for the debtor simultaneously. Due to serious violations of the Bankruptcy Code and rules, counsel's services were found to have been performed so poorly and negligently as to be of no value.The Court's ruling was based on several factors, including counsel's failure to provide any legal advice to the debtor prior to filing the bankruptcy petition, failure to file a list of creditors and their addresses with the petition, failure to notify the debtor of important deadlines affecting the case, and counsel's action in filing a second bankruptcy petition without the debtor's knowledge or consent. Counsel also collected a fee exceeding the amount disclosed on the Fed. R. Bankr. P. 2016(b) statement in violation of 11 U.S.C. § 329. The Court condemned counsel's office procedures which result in the routine filing of defective chapter 7 petitions absent a schedule of liabilities or list of creditors in violation of Fed. R. Bankr. P. 1007(a)(1) and (c). The Court further condemned counsel's practice of filing an incomplete list of creditors in a practice calculated to deprive creditors of proper notice of the first meeting of creditors under Fed. R. Bankr. P. 2002(a)(1) and circumvent the debtor's statutory duties under 11 U.S.C. §521(1).The Court overruled the objection to dismissal, but ordered debtor's counsel to disgorge fees in full.

In re Simon Transportation Services, Dick Simon Trucking, and Simon Terminal [Jointly Administered], 292 B.R. 207 (Bankr.D.Utah)

(Internal Ref: Opinion 435)




Judge Clark

PDF icon 435.pdf

Following entry of order confirming sale of Chapter 11 debtors' assets to insider used as stalking horse, debtors filed supplemental motion for assumption and assignment of trade-back agreements allegedly included in assets sold. The court held that (1) insider used as stalking horse in connection with sale of debtors' assets did not pay anything for trade-back agreements which it later claimed to have purchased as part of its total bid of $51 million, so that motion to assume and assign such agreements to insider would not be approved as not being in best interests of estate; and (2) options which debtors had pursuant to terms of trade-back agreements with company from which they acquired refrigerated trucks, to require company to buy trucks back at price equal to 55 percent of original purchase price, were in nature of "executory contracts," that debtors could assume and assign.

In re Sink; In re Valenzuela; In re Petersen

(Internal Ref: Opinion 434)



02-40042, 02-32504, 02-38843

Judge Boulden

PDF icon 434.pdf

Creditors filed motions to dismiss with prejudice, pursuant to 11 U.S.C. § 109(g)(1). In each case, the debtor had failed to make plan payments, failed to appear at the first meeting of creditors, or failed to file required statements and schedules. To prevail on a § 109(g)(1) motion, the movant must prove either that the debtor willfully failed to abide by an order of the court or that the debtor willfully failed to appear before the court in proper prosecution of the case.The first clause of § 109(g)(1) relates to the debtor's failure to abide by a specific order that may be issued in the case. The Court distinguished In re Fulton , 52 B.R. 627 (Bankr. D. Utah 1985) which stated that failure to appear at a meeting of creditors may be a violation of a court order, because the standing order then in effect governing dismissal procedures has been superceded by Local Rules 2003-1(a) and 2083-1(a) and (b). The Court determined it was unnecessary to consider whether statutory requirements and local rules of practice are equivalent to court orders. Turning to the second clause of § 109(g)(1), the Court stated that an "appearance" encompasses a broad range of conduct in addition to physical presence at a hearing. An appearance was determined to include, among other things, being represented at non-court hearings related to a case and filing papers required by rule or statute. The Court further determined that a debtor's conduct is willful within the meaning of § 109(g)(1) when the debtor has notice of the responsibility to act and intentionally engages in conduct that results in a failure to fulfill that responsibility.The Court held that failure to file required papers, failure to appear at the first meeting of creditors, and failure to make Chapter 13 plan payments were failures to appear before the court in proper prosecution of the case. Failure to defend against dismissal proceedings was also held to be a failure to appear in proper prosecution. Evidence of repeated filings allowed an inference in each case that the debtor knew his or her responsibilities under the Bankruptcy Code and knew the consequences of failing to fulfill those responsibilities. Therefore, the Court determined that the debtor's conduct in each case was willful. Each case was dismissed with prejudice to refiling a bankruptcy petition for 180 days.

In re Blansett

(Internal Ref: Opinion 433a)




Judge Thurman

PDF icon 433a.pdf

On chapter 13 debtors' motion, the court considered whether debtors could surrender collateral, more than two years post-plan confirmation, in full satisfaction of secured creditor's claim. Adopting the reasoning of Chrysler Fin. Corp. v. Nolan (In re Nolan), 232 F.3d 528 (6th Cir. 2000), the court determined that 11 U.S.C. § 1329(a) does not allow the modification sought by debtors. A confirmed plan is a binding contract between the parties, whether or not the creditor participated in plan confirmation or filed a proof of claim. Although § 1329(a) allows modification of plan payments, it does not allow debtors to change the status of a secured claim in the manner suggested. Debtors motion to modify was denied.

In re Blansett

(Internal Ref: Opinion 499)


UNPUBLISHED See 433a.pdf


Judge Thurman

PDF icon 499.pdf

This decision was inadvertantly filed out of order. See 433a.pdf for summary.

In re Medical Software Solutions, 286 B.R. 431 (Bankr.D.Utah)

(Internal Ref: Opinion 433)




Judge Thurman

PDF icon 433.pdf

The issue before the Court was whether the Debtor's proposed sale of substantially all of its assets outside the ordinary course of business, and before a Chapter 11 Plan of Reorganization and Disclosure Statement had been proposed, should be approved by the Court. Complicating matters further, the proposed buyers were insiders as that term is defined within the Bankruptcy Code. The Court concluded that in order to approve a sale of substantially all the Debtor's assets outside the ordinary course of business, the following elements must be met. The Debtor must show (1) that a sound business reason exists for the sale; (2) there has been adequate and reasonable notice to interested parties, including full disclosure of the sale terms and the Debtor's relationship with the buyer; (3) that the sale price is fair and reasonable; and (4) that the proposed buyer is proceeding in good faith. See e.g. , In re Delaware & Hudson Ry. Co., 124 B.R. 169, 176 (D. Del. 1991); WBQ Partnership v. Virginia Dep't of Med. Assistance Serv. (In re WBQ Partnership) , 189 B.R. 97, 102 (Bankr. E.D. Va. 1995). The Court specifically found that because of the proposed purchaser's insider status that the purchaser has a heightened responsibility to show that the sale is proposed in good faith and for fair value. Relying upon the court-appointed examiner's reports in this case, the Court found no evidence of fraud or collusion or other actions indicative of bad faith and approved the sale free and clear of all liabilities including possible successor liability claims by the former president of the company.

In re Sorrell, 286 B.R. 798 (Bankr.D.Utah)

(Internal Ref: Opinion 432)




Judge Thurman

PDF icon 432.pdf

The Debtors filed a bankruptcy petition under Chapter 12 of the Bankruptcy Code and moved for confirmation of their plan of reorganization. The Debtors proposed a plan wherein they surrendered one piece of real property to the secured creditor but kept another piece, providing for a twenty-year amortization of the remaining amount due under the secured claim. In addition, certain additional obligations were secured by personal property and were treated in the plan. The secured creditor objected on several grounds including that the Debtors did not meet the definition of family farmer as contemplated by Congress when drafting Chapter 12 and that the Debtors' plan was not proposed in good faith. The Court concluded the Flygare Chapter 13 factors of good faith are equally applicable in Chapter 12 cases and determined that if certain conditions were met, the plan met the good faith test as required under 11 U.S.C. § 1225(a)(3). See Flygare v. Boulden 709 F.2d 1344, 1347-48 (10th Cir.1983). In addition, the Court held that because the Debtors satisfied the criteria of the family farmer definition in the previous year that they could go forward under Chapter 12 despite evidence that the Debtors' current farming operations were minimal.

In re Mountaineer Development Corp.

(Internal Ref: Opinion 431)




Judge Boulden

PDF icon 431.pdf

The high bidder at a trustee's auction moved to set aside the sale of the estate's interest in a note, alleging that false or misleading information induced his bid. Following the failed sale, the chapter 7 trustee moved for authority to sell the asset to a third party. The original high bidder also objected to sale of the estate's interest in the note to a third party. The original sale was authorized by the court, made regularly and with notice. The terms of the sale were as is, where is, if is, with no warranties or representations. To set aside such a sale, a party must show fraud, accident, mistake, or some other equitable cause for avoiding a like sale between private parties. See Golfland Entertainment Centers, Inc. v. Peak Investment, Inc. ( Ir re BCD Corp. ), 119 F.3d 852, 859-60 (10th Cir. 1997) (citations omitted). The trustee had passed along some, but not all, information in her possession regarding the status of the asset to the bidder. The trustee lacked independent knowledge of the accuracy of the information in issue, and the bidder made no specific request for this information. The court denied bidder's motion, finding the evidence insufficient to show any of the required elements. The court further held that the trustee owed no heightened fiduciary duty to disclose information to a bidder at auction where the bidder is also a creditor of the estate. The trustee's duty to a bidder-creditor is the duty of due care, diligence, and skill as measured by a reasonable person standard. See United States of America v. Aldrich ( In re Rigden ), 795 F.2d 727, 731 (9th Cir. 1986). There was no evidence in this case that the trustee had failed to fulfill her duty. Relying on the factors set forth in In re Anchor Exploration Co. , 30 B.R. 802 (N.D. Okla. 1983), the court found the trustee's proposed second sale to a non-bidding third party appropriate under the terms of the original Sale Order. See In re Anchor , 30 B.R. at 808

In re Mount

(Internal Ref: Opinion 430)




Judge Clark

PDF icon 430.pdf

The debtor filed a Chapter 7 petition in bankruptcy less than one year after she transferred her 401(K) plan into an IRA. The trustee objected to the debtor's claimed exemption. It is the opinion of this Court that Tae Sun Hong (see opinion #427) correctly interprets the effect of U.C.A. § 78-23-5(1)(b)(ii) on debtor's claimed exemption. The trustee's objection to the claimed exemption is sustained.

General Motors Acceptance Corporation v. Staples (In re Staples)

(Internal Ref: Opinion 429)




Judge Boulden

PDF icon 429.pdf

GMAC brought a nondischargeability action against the debtor seeking to have a deficiency debt resulting from the sale of a repossessed vehicle declared nondischargeable under 11 U.S.C. § 523(a)(2)(C). The Court found, under all the facts of the case, that the 2000 GMC Jimmy SLC 4x4 4-door sport utility vehicle was not a "luxury good" as used in the statute, and the debt was discharged.

In re JD Services, 284 B.R. 292 (Bankr.D.Utah)

(Internal Ref: Opinion 428)




Judge Clark

PDF icon 428.pdf

This dispute involves a transfer that resulted in $725,000.00 being credited to debtor's bank account instead of $7,250.00 because of a bank encoding error. The encoding error and transfer of disputed funds took place postpetition. The Court finds that the debtor was unjustly enriched in the amount of $717,750.00. Unjust enrichment will support a constructive trust. The funds were commingled with other funds to which general creditors have a claim. Therefore, the bank must trace its funds held in constructive trust utilizing the lowest intermediate balance rule. Because the funds held in constructive trust have always belonged to the bank, it is entitled to the interest actually earned by the $394,460.53 in constructive trust funds held. The bank is entitled to a postpetition administrative priority claim in the amount of $323,289.53 which represents the difference between the $717,750.00 originally transferred by mistake and the amount successfully traced using the lowest intermediate balance method. Because the $323,289.53 is unsecured, it is not entitled to the accrual of interest.

In re Hong

(Internal Ref: Opinion 427)




Judge Boulden

PDF icon 427.pdf

Upon the chapter 7 trustee's objection to exemption, the debtors sought a determination that funds rolled over prepetition from an ERISA qualified plan into an IRA annuity were either not property of the chapter 7 estate under 11 U.S.C. §541(c)(2), or were exempt under Utah Code Ann.§78-23-5(1)(a)(x) or 79-23-6. The Court determined that the funds in the IRA annuity lost their ERISA anti-alienation characteristics prepetition and were therefore property of the estate. Once property of the estate, the funds were exempt pursuant to Utah Code Ann. §78-23-5(1)(a)(x) because they were held in an arrangement described in Section 408 of the Internal Revenue Code, unless the funds constituted a "contribution" made to the IRA annuity within one year of filing for bankruptcy. The Court found that the statute did not restrict "contribution" to exclude rollover funds, and therefore Utah Code Ann. §78-23-5(1)(b) applied, and the funds were not exempt. Further, Utah Code Ann. § 78-23-6 was inapplicable to exempt the funds as a matter of fact.

Skull Valley Band of Goshute Indians v. Chivers (In re Chivers), 275 B.R. 606 (Bankr.D.Utah)

(Internal Ref: Opinion 426)




Judge Boulden

PDF icon 426.pdf

Creditor sought nondischargeability of certain debts under 11 U.S.C. §523(a)(2)(A) and (B) and sought a determination thereof pursuant to its motion for summary judgment. Debtor filed a cross motion for summary judgment seeking dismissal of claims. The decision required a determination of the meaning of the term "financial condition" under § 523(a)(2)(B) and the interplay of Field v. Mans, 516 U.S. 59 (1995) and the tort of fraudulent misrepresentation with § 523(a)(2)(A). The Court adopted a narrow reading of "financial condition"which requires that a false written statement describe the debtor's net worth, overall financial health, or ability to generate income. The Court also recognized the Supreme Court's reference in Field to the Restatement (Second) of Torts and adopted the analysis set forth in the Restatement in analyzing fraudulent misrepresentations under § 523(a)(2)(A). Judgment in favor of creditor.