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.
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Title: The William W. Barney, M.D. P.C. Retirement Fund v. Perkins (In re Perkins), 298 BR 778 (Bankr.D.Utah) | Date: Sep-16-2003 | Status: PUBLISHED (Judge Boulden) | Case(s): 02-2163
Title: In re Marshall | Date: Jul-29-2003 | Status: UNPUBLISHED (Judge Boulden) | Case(s): 01-36611
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.
Title: In re Snow | Date: Jul-23-2003 | Status: UNPUBLISHED (Judge Thurman) | Case(s): 03-20144
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.
Title: C and M Properties v. Burbidge (In re C and M Properties) | Date: Jul-23-2003 | Status: UNPUBLISHED (Judge Clark) | Case(s): 03P-2024
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.
Title: In re David | Date: Jul-10-2003 | Status: UNPUBLISHED (Judge Thurman) | Case(s): 02-21500
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.
Title: In re Scarbrough | Date: Jun-16-2003 | Status: UNPUBLISHED (Judge Thurman) | Case(s): 02-32949
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.
Title: In re Tilson | Date: Jun-10-2003 | Status: UNPUBLISHED (Judge Boulden) | Case(s): 03-22735
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.
Title: In re Williamson | Date: May-8-2003 | Status: UNPUBLISHED (Judge Boulden) | Case(s): 02-40943
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.
Title: In re Simon Transportation Services, Dick Simon Trucking, and Simon Terminal [Jointly Administered], 292 B.R. 207 (Bankr.D.Utah) | Date: Apr-25-2003 | Status: PUBLISHED (Judge Clark) | Case(s): 02-22906
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.
Title: In re Sink; In re Valenzuela; In re Petersen | Date: Feb-28-2003 | Status: UNPUBLISHED (Judge Boulden) | Case(s): 02-40042, 02-32504, 02-38843
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.