Chapter 7 Trustee sought to avoid a pre-petition use of a credit card to pay the Defendant Creditor. The Trustee alleged that the Debtor's use of credit pre-petition was avoidable as either a preference under § 547 or a fraudulent transfer under § 548. At issue in this case was whether use of credit, on its own, constitutes "a transfer of an interest of the debtor in property."The Court held that credit is not an interest of the debtor in property because credit is not property of the estate under § 541(a)(1). Citing to Begier v. IRS, 496 U.S. 53 (1990), the Court held that an interest of the debtor in property follows the standard for deciding whether credit is property of the estate. The Court held that credit is not property of the estate because it does not reduce to liquidity for creditors. Accordingly, the Court granted summary judgment in favor of the defendant and dismissed the complaint.
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Title: Loveridge v. The Ark of Little Cottonwood (In re Perry) | Date: Sep-26-2005 | Status: PUBLISHED (Judge Thurman) | Case(s): 05-2183
Title: In re Hopkins | Date: Jul-19-2005 | Status: UNPUBLISHED (Judge Thurman) | Case(s): 03-40481
In a contested matter, the Court considered the application of Utah's anti-deficiency statute, §57-1-32 Utah Code, the scope of issues presented in a pre-trial order and the qualifications of a creditor corporate officer to render opinion testimony on real property. The Court ordered the matter to proceed as an adversary proceeding and overruled the multiple objections of the Debtor to the creditor's proof of claim asserting a secured claim on two parcels of real property. The Debtor's son owned a construction company and convinced his mother, the Debtor, to take out a loan to finance a Model Home for the business. To secure the loan, the Debtor pledged both the Model Home and her personal residence. The son's business failed and neither he nor his business paid the Creditor on the loan. As a result, the Creditor commenced foreclosure actions on both the Model Home and the Debtor's residence. In response, the Debtor filed for chapter 13 relief. Among other claims, the Debtor alleged that the Creditor failed to properly advise her as to the consequences of signing the trust deed on her residence. The creditor obtained relief from stay as to the Model home early in the case. While the sale resulted in a loss, the Creditor did not amend its proof of claim or commence other action to assert a deficiency. The Debtor then argued that Utah's Anti-Deficiency Statute (§57-1-32) prevented the Creditor from asserting a deficiency.The Court found that the Debtor had been properly apprised of the terms of the trust deeds, that she voluntarily and knowingly signed the trust deed on her home and found no inappropriate conduct on the part of the Creditor in closing on the loan with the Debtor or that the Creditor committed any other improper act. In addition, the Court determined as a matter of law that §57-1-32 did not require the Creditor to amend its proof of claim or commence other action following the foreclosure on the Model Home to allow it to assert a deficiency, and as such, the Creditor maintained a security interest in the Debtor's residence. In addition to affecting jurisdiction, §57-1-32 requires that the Court determine the fair market value of a property at the date of its sale before a judgment for any deficiency may be rendered. The Debtor argued that the pre-trial order did not specifically preserve this issue for trial and thus the Court could not take evidence of the fair market value of the Model Home. The Court overruled this objection, finding that parties had stipulated in the pre-trial order that there was a question as to whether the Creditor was "prevented from enforcing its rights against the Debtor because of...'anti-deficiency law.'" In so doing, the Court determined that such issue was broad enough to allow the Court's inquiry into the fair market value of the Model Home. Finally, the Court found that the vice-president of the corporate Creditor was sufficiently qualified as an owner to give an opinion of value of the Model Home.
Title: Love v. Norman (In re Norman) | Date: Jun-6-2005 | Status: UNPUBLISHED (Judge Thurman) | Case(s): 03-2092
After a three day trial, the Court ruled that the Defendant was liable for damages in excess of $1.0 million which were determined to be non-dischargeable pursuant to 11 U.S.C. 523(a)(4), where the Defendant defalcated while acting as a fiduciary and embezzled assets in a trust. The Court also awarded sanctions against the Defendant for improper delay of trial. The Plaintiff, who is the Defendant's brother, commenced an adversary proceeding against his sister while acting as successor trustee of their father's estate. The Defendant had taken physical control of her aged father, moved him from California to Utah, and convinced him to sign documents naming her as trustee of his estate. Thereupon, the Defendant spent virtually all of the cash and securities in the trust for her own benefit, except some modest living expenses for her father, over a period of approximately two years. In addition, she encumbered and or sold all of the real properties of the father for substantially her own benefit to the exclusion of her father. In so ruling the Court followed the Tenth Circuit BAP's definition of embezzlement in Cousatte v. Lucas , 300 B.R. 526 (10th Cir. BAP 2003).The Court declined to find fraud pursuant to 11 U.S.C. 523(a)(2) because there was no evidence of the Plaintiff's reliance on statements by the Defendant. The Court also declined to find willful and malicious injury pursuant to §523(a)(6) because adequate evidence of maliciousness was not presented.. Finally, the Court sanctioned the Defendant for attorneys fees for improperly seeking a continuance on the eve of trial when she purportedly needed additional time for discovery, and, once given that time, she undertook no further discovery.
Title: Troff v. State of Utah (In re Troff) | Date: Jun-6-2005 | Status: UNPUBLISHED (Judge Clark) | Case(s): 04-2491
After granting Debtor's motion for Partial Summary Judgment and denying the State's motion for Summary Judgment, the State appealed and filed a motion for a stay pending appeal. In denying the State's motion for stay pending appeal, the Court pointed out that the factors to be considered in determining a stay pending appeal motion are: (1) the likelihood that the party seeking the stay will prevail on the merits of the appeal; (2) the likelihood that the moving party will suffer irreparable injury unless the stay is granted; (3) whether granting the stay will result in substantial harm to the other parties to the appeal and; (4) the effect of granting the stay upon the public interest. The Court found that the State had not satisfied the requirements for a stay pending appeal even under the more liberal standards announced in Prairie Band of Potawomi Indians v. Pierce, 253 F.3d 1234 (10th Cir. 2001), and that a stay pending appeal would not be granted.
Title: Official Committee of Unsecured Creditors v. Sanchez (In re Simon Transportation Services) | Date: May-16-2005 | Status: UNPUBLISHED (Judge Clark) | Case(s): 04-2255
The Court dismissed defendant's third-party complaint based upon a lack of jurisdiction. Defendant to a preference action under § 547 and brought a third-party complaint against insurance company arguing that if defendant were required to return funds received from the debtor as a preference, then insurance company would be liable to defendant under the uninsured motorist clause of defendant's insurance policy. The court found that the dispute between defendant and insurance company to be outside the Court's "related to" jurisdiction and dismissed without prejudice to refile before a court of competent jurisdiction.
Title: FreeLife International v. Butler (In re Butler) | Date: Apr-15-2005 | Status: UNPUBLISHED (Judge Boulden) | Case(s): 04-3012
The Plaintiff brought a motion for summary judgment on its third claim for relief seeking to have declared nondischargeable contempt judgments issued by a state trial court totaling more than $900,000. The state court contempt judgments encompassed civil penalties assessed against the Debtors for contempt sanctions and attorney fees. The Plaintiff argued that the monetary sanctions imposed upon the Debtors by the state court are nondischargeable under § 523(a)(7) because they were fines or penalties which, even though not payable to a government entity, were for its benefit and in furtherance of vindicating the dignity and authority of the court. The Debtors claimed the contempt judgments fell outside the exception to discharge because they were not payed directly to a governmental unit as the statute requires. The Court acknowledged that there are good policy arguments favoring an exception to discharge which would uphold a court's authority to impose sanctions and not allow a party to circumvent that authority through a bankruptcy filing. However, the Court ultimately decided that the better-reasoned approach is to rely upon the plain meaning of the statute and declined to follow non-controlling case law from other jurisdictions which expands the exception to civil sanctions. The Court found that § 523(a)(7) does not except from discharge the debts arising from a civil penalty payable directly to a creditor imposed on the Debtors by a state court.
Title: Mathai v. Warren (In re Warren) | Date: Mar-29-2005 | Status: UNPUBLISHED (Judge Boulden) | Case(s): 04-2671
Plaintiff creditors filed a complaint against the Debtors seeking denial of discharge under 11 U.S.C. §727(a)(2)(A) and (4)(A) for the Debtors' conduct prior to filing bankruptcy. In anticipation of filing a chapter 7 petition, the Debtors generated $90,000 in cash by selling many of their assets, some at fire-sale prices. The Debtors then utilized the funds to purchase exempt assets and prepay future living expenses. Upon completion of all the pre-bankruptcy transactions, the Debtors had no realizable assets that could be liquidated to repay their over 6,000 creditors. When the Debtors filed their bankruptcy papers, they did not list some of the sales and expenditures, and only added some of the omitted transactions after they were discovered by the Plaintiffs. The Debtors excused their conduct by describing it as their desperate attempt to provide post-petition food and housing for themselves and their five children, and justified their failure to list the various transactions merely as an unfortunate, unintentional oversight. The Plaintiffs asserted in their complaint that the pre-bankruptcy activity was a calculated scheme by the Debtors to engage in an extraordinary, deliberate, and sustained selling frenzy and spending spree designed to hinder, delay, or defraud their creditors and then hide their actions through a false oath on their bankruptcy papers. The Court was struck by the Debtors' animosity toward the Plaintiffs and determined that the Debtors would do just about anything to prevent their assets from falling into the Plaintiffs' possession. The Debtors abused pre-bankruptcy planning because their purpose was to place assets out of reach of the Plaintiffs. The Court rejected the excuse, under § 727(a)(4)(A), that the Debtors were too busy, did not understand, were forgetful, or simply were inadvertently mistaken in their answers submitted in their Statement of Financial Affairs and Schedules. Instead, the Court concluded that the Debtors attempted to use up all their assets so that the Plaintiffs would receive nothing, and they intended to hide the transactions in their bankruptcy papers. The Court found that the Plaintiffs carried their burden of proof and denied the Debtors' discharge under both §727(a)(2)(A) and (4)(A).
Title: Chase Manhattan Mortgage Corporation v. Bird (In re Hiseman) | Date: Mar-23-2005 | Status: PUBLISHED (Judge Thurman) | Case(s): 04-2515
This proceeding involved interpretation of Utah's constructive and inquiry notice law regarding the recording of a bank's trust deed in the tract and grantor/grantee indices. The Court was called upon to determine whether the bank's trust deed was avoidable pursuant to 11 U.S.C. § 544(a)(3) and whether there were facts that gave rise to placing the chapter 7 Trustee on constructive or inquiry notice of the same.The Court ruled on cross motions for summary judgment that the Trustee lacked constructive and inquiry notice of the Plaintiff's trust deed because it incorrectly described the location of the Debtors property. Under Utah law, liens must be accurately described in recorded instruments and placed in the tract index maintained by each county recorder to give constructive notice. Here, although the trust deed was recorded, the legal description referred to property miles away from the Debtor's property and was recorded against another tract of land. Although the county recorder maintained a grantor/grantee index, the Court determined that the recording of the trust deed in that index did not constitute constructive notice of the existence of the Plaintiff's trust deed in furtherance of the legislative intent to interpret land titles strictly. Further, there were no facts that suggested that anyone should investigate further regarding the existence of the Plaintiff's trust deed and accordingly, the Trustee was not on any inquiry notice regarding the existence of the trust deed.
Title: In re Shaw | Date: Mar-4-2005 | Status: UNPUBLISHED (Judge Boulden) | Case(s): 03-30305
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 damages resulting from the post-petition destruction of a leased vehicle the debtors failed to surrender as specified in their statement of intent. Despite the debtors' efforts to raise discharge in bankruptcy as a defense in the state court action, the creditor continued to prosecute the debtors because, it asserted, the damages to the vehicle occurred post-petition and were not discharged in the debtors' bankruptcy. As a result, the debtors filed a motion for sanctions against the creditor for willful violation of the discharge injunction imposed by 11 U.S.C. § 524. The Court found that a debt arising from a lease of personal property which is rejected by the Chapter 7 trustee but the personal property is retained by the debtors, despite material default, is nonetheless discharged under the Code. The creditor's state court action is therefore a violation of the discharge injunction. The Court found that the debtors are entitled to recover compensatory damages of actual attorney fees and costs incurred in answering the creditor's complaint in the state court action and in bringing this motion before the Court but was not entitled to punitive damages as there was no evidence supporting the request.
Title: In re Olson | Date: Mar-1-2005 | Status: UNPUBLISHED (Judge Thurman) | Case(s): 04-23551
United States Trustee brought a Motion to Dismiss Case Pursuant to § 707(b). The Court denied the motion, finding that the U.S. Trustee had not met the burden of showing substantial abuse. Specifically, the Court held that expenses incurred in caring for 1) a daughter who had become unexpectedly pregnant and 2) a puppy with severe medical conditions that were unknown at the time of acquiring the dog did not constitute abuse or bad faith.