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.
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Title: In re Hong | Date: Jun-4-2002 | Status: UNPUBLISHED (Judge Boulden) | Case(s): 01-35072
Title: Skull Valley Band of Goshute Indians v. Chivers (In re Chivers), 275 B.R. 606 (Bankr.D.Utah) | Date: Apr-9-2002 | Status: PUBLISHED (Judge Boulden) | Case(s): 99P-2573
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.
Title: Pierce v. Beneficial Mortgage Co. of Utah (In re Pierce), 282 B.R. 26 (Bankr.D.Utah) | Date: Feb-25-2002 | Status: PUBLISHED (Judge Thurman) | Case(s): 01P-2367
The debtors filed a complaint, arguing that the second mortgage holder's trust deed on the debtors' personal residence was completely unsecured and should be voided or "stripped" pursuant to 11 U.S.C. § 506(a) and (d) and that the claim filed by the creditor should be treated as an unsecured claim under the debtors' chapter 13 plan. The debtors argued that because the value of the collateral was only $66,000.00 and the first mortgage holder's claim exceeded that value, any remaining claim holder must be entirely unsecured and, therefore, the lien on the property held by the creditor may be voided. The Court held that under § 506(a), a completely unsecured mortgage holder does not have a secured claim, and is therefore not protected by the antimodification statute under § 1322(b)(2) and its lien can be stripped. The Court determined that a party should first look to § 506(a) for a valuation of the collateral and if the collateral has no remaining value after giving credit for senior secured debt, the claim is unsecured. Once it is determined that a claim is not "secured only by a security interest in real property that is the debtor's principal residence," § 1322(b)(2), then the lien is void under § 506(d).
Title: In re Husting Land & Development | Date: Jan-30-2002 | Status: APPEAL (Judge Benson, U.S. District Court) | Case(s): 97B-20309
Determining first that the testimony of creditor's expert was inadmissable, and second, that the "creditor expectation" test was not satisfied, the bankruptcy court concluded that creditor's postpetition debt was not incurred in the ordinary course of business and, accordingly, creditor's claim could not be allowed as an administrative expense. The district court affirmed, basing its decision on the reasons set forth in the bankruptcy court's opinion and with these additional comments: (1) that the creditor expectation test is well supported and in furtherance of the purpose of chapter 11; (2) that the bankruptcy court's rulings were within its discretion and supported by the reasons articulated in its decision; and (3) that the proffered expert testimony concerning "ordinary course of business" was inadmissable because the opinion was based on the meaning of the law and the witness was not a legal expert and, in any event, testimony by a legal expert is neither common, nor proper in these proceedings.
Title: In re Northington | Date: Jan-17-2002 | Status: UNPUBLISHED (Judge Thurman) | Case(s): 00-34258
Debtors filed an objection to claim 4 of Household Finance Corp. and motion to avoid security interest as an undersecured second mortgage under 11 U.S.C. § 506(a) and (b). The Court overruled the objection and denied the motion to avoid the mortgage holding that it was improper to attempt to avoid a mortgage pursuant to Bankruptcy Rule 3007 instead of utilizing the correct procedure of an adversarial proceeding according to Bankruptcy Rule 7001. Rule 7001(2) specifically states that "a proceeding to determine the validity, priority, or extent of a lien" is an adversary proceeding and a lien should not be avoided through an otherwise properly noticed hearing on objection to claim.
Title: Rushton v. Williams (In re Williams) | Date: Dec-5-2001 | Status: PUBLISHED 271 B.R. 663 (Bankr.D.Utah) (Judge Cornish, E.D. OK Bankr. Court, by designation) | Case(s): 00P-2023
Proceeding was brought to determine spouse's interest in real property that chapter 7 trustee sought to sell. The bankruptcy court held that: (1) even if debtor's spouse was entitled to an equitable lien in real property that trustee sought to sell, based on fact that property was acquired with funds in which spouse had a one-half interest, as to which debtor allegedly instructed real estate agent to prepare deed naming both himself and spouse as grantees, that equitable lien would merely give spouse the right to recoup her contribution from sale proceeds. It would not give her a joint interest in the property within the meaning of 11 U.S.C. § 363, which restricts trustee's right to sell jointly owned property; and (2) in any event, spouse's equitable lien claim was barred by laches.
Title: In re Horsley | Date: Aug-17-2001 | Status: UNPUBLISHED (Judge Boulden) | Case(s): 99-30458
Chapter 7 trustee filed a motion for nunc pro tunc substantive consolidation of the assets and liabilities of debtor and a nondebtor entity pursuant to 11 U.S.C. § 105. Acknowledging that substantive consolidation may be appropriate in some cases, see Fish v. East 114, F.2d 177 (10th Cir. 1940) and Federal Deposit Ins. Corp. v. Hogan (In re Gulfco Invest. Corp.) , 593 F.2d 921 (10th Cir. 1979), under the circumstances of this case, the Court determined that the debtor and nondebtor were not so intertwined as to afford the trustee the relief sought. Although the debtor managed and controlled both entities, there was insufficient evidence that the nondebtor lacked an economic existence independent from the debtor. In turn, the Court concluded that because nunc pro tunc relief is predicated upon a finding that a substantial identity exists between the parties, lack of evidence to support such a finding precluded therelief.
Title: In re Geneva Steel, 258 B.R. 799 (Bankr.D.Utah) | Date: Feb-7-2001 | Status: PUBLISHED (Judge Clark) | Case(s): 99-21130
Order Allowing Reduced Fees and Expenses. The fourth fee application of The Blackstone Group, financial advisor to the debtor, came before the Court. Even though the advisor's appointment provided for a fixed fee, the Court adjusted downward the award of fees because the number of hours spent by the advisor went downward in subsequent fee periods. The advisor was entitled to recover, as part of its allowable expenses, a reasonable fee for legal services of law firm that it hired to defend its fee application, although law firm had never been appointed to serve as a professional in the case.
Title: Transworld Telecommunications v. Pacific Mezzanine Fund (In re Transworld Telecommunications) | Date: Jan-9-2001 | Status: PUBLISHED (Judge Stewart) | Case(s): 98PC-2089
The objections to the Bankruptcy Court's Proposed Findings of Fact, Conclusions of Law, and Judgment Pursuant to 28 U.S.C. §157(c)(1) (included) came before the district court, Judge Stewart presiding. Affirmed.
Title: In re Husting Land & Development, 255 B.R. 772 (Bankr.D.Utah) | Date: Nov-22-2000 | Status: PUBLISHED (Judge Boulden) | Case(s): 97B-20309
Unsecured creditor entered into a postpetition construction agreement with debtor, a land developer, for the purpose of correcting defective work and completing improvements on debtor's sixty-one acre residential subdivision. Upon creditor's application for allowance of administrative expense, the trustee and secured creditors objected, arguing that the postpetition debt was not incurred in the ordinary course of the debtor's business pursuant to 11 U.S.C. § 364(a). The court concluded that the postpetition debt was not incurred in the ordinary course of business and, accordingly, creditor's claim could not be allowed as an administrative expense. The court first determined that the opinion testimony of creditor's expert witness was inadmissable because his methodology could not be proved under the test set forth in Kuhmo Tire Company, Ltd. vs. Carmichael , 526 U.S. 137 (1999). The court then applied the well-established "creditor expectation" test to determine that, given its scope and nature, this was not the type of transaction a reasonable creditor would expect the debtor to enter into in the ordinary course of its business. Specifically, when the debtor and creditor entered into the construction agreement, neither had a clear understanding of the amount of corrective work that would be necessary, nor was there any certainty as to the source of funds to repay the debt incurred. As such, this transaction was outside the ordinary course of the debtor's business, and creditors should have been given notice and an opportunity to be heard.