Chapter 11 trustee obtained a default judgment on an avoidance action and assigned the judgment to a third party. Subsequent to the assignment, the defendant successfully set aside the default judgment. The assignee then filed an amended complaint and a motion to substitute as the plaintiff, while the defendant filed a motion to dismiss the amended complaint, and the trustee filed a motion to approve settlement of the adversary proceeding with the defendant. The assignee took the position that it had the ability to substitute as plaintiff because the trustee had assigned the underlying claims to it. The Court concluded that the assignee could not substitute as plaintiff and pursue the claims because even if the trustee had intended to assign those claims, he was legally precluded from doing so. While noting certain limited circumstances in which parties can exercise a trustee’s avoidance powers, the Court held that such circumstances were not present in this case and distinguished them from an outright sale of avoidance claims. The Court then approved the trustee’s settlement of the adversary proceeding.
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The District of Utah offers a database of opinions for the years 1979 to Current, listed by year and judge. For a more detailed search, enter the keyword or case number in the search box above.
Title: Miller v. Stone (In re Waterford Funding, LLC) | Date: Feb-1-2017 | Status: UNPUBLISHED (Judge Mosier) | Case(s): 11-2093
Title: In re Christensen | Date: Dec-14-2016 | Status: PUBLISHED (Judge Mosier) | Case(s): 15-29773, 15-29783
Former chapter 7 trustee and his firm filed applications for compensation in two cases after they were converted to chapter 13. The applications sought fees and costs incurred in furtherance of sales of the debtors’ homes, which were encumbered by substantial federal tax liens. The trustee had reached stipulations with the IRS whereby a $10,000 carve-out would go to each estate from proceeds that otherwise would have gone to the IRS. The Court disallowed the fee applications in their entirety, concluding that the services therein were not necessary to the administration of the case and were not reasonably likely to benefit the estate. The Court held that the sales could not go forward unless the debtors’ homestead exemptions were paid in full. The trustee had objected to the exemptions because there was no equity in the property, but the Court concluded that was not a valid basis to disallow a homestead exemption. The Court also held that the asserted basis for the sales—that the carve-outs would be distributed to unsecured creditors—could not occur because the debtors were entitled to exempt the carve-outs as proceeds from the sales of their homes. Because the sales would not have provided a benefit to unsecured creditors, the Court held that the services performed in furtherance of those sales were not compensable under § 330(a).
Title: Ray Klein, Inc. v. Daniel Jeff Webb (In re Call and Webb) | Date: Nov-14-2016 | Status: PUBLISHED (Judge Anderson) | Case(s): 15-02119
Debtor made false representations to lender regarding his financial condition in connection with the purchase of a commercial boat (debtor stated he had the backing of Kraft Foods and the LDS church). The Court excepted the debt from discharge for false pretenses, false representation, or actual fraud, but denied cause of action for willful and malicious injury.
Title: In re Castle Service, LLC | Date: Nov-9-2016 | Status: PUBLISHED (Judge Anderson) | Case(s): 16-26302
The Court denied creditor's motion for relief from stay holding that the real property at issue was an asset of the estate, and the creditor did not establish sufficient cause to grant relief from the automatic stay.
Title: In re Petersen | Date: Nov-8-2016 | Status: PUBLISHED (Judge Thurman) | Case(s): 16-20042
Chapter 13 debtors filed a motion to avoid a judicial lien impairing their homestead exemption per 11 U.S.C. § 522(f). The Debtors sought to avoid the lien immediately and argued that the Code allowed for the same. The Chapter 13 Trustee objected to the motion and argued that the lien should only be avoided after debtors' completion of their chapter 13 plan and a discharge relying on §105(a) and 349(b)(1)(B). The Trustee urged the Court to follow its line of reasoning in In re Woolsey, 438 B.R. 432 (Bankr. D. Utah 2010), aff'd, 696 F.3d 1266 (10th Cir. 2012), which analyzed lien avoidance under § 506(d), because of the potential harm to creditors if the property is sold without the lien attached and the case is thereafter dismissed without a discharge. The Court granted the motion and created a two-step process for avoiding a judicial lien. In ruling, the Court explained that the lien may be avoided immediately for plan consummation purposes and once the debtors complete their plan, the lien could be completely avoided by the recordation of an order and discharge with the county recorder's office.
Title: In re Bench | Date: Aug-26-2016 | Status: PUBLISHED (Judge Anderson) | Case(s): 12-26827
Debtor failed to comply with the trustee's requests that ultimately resulted in the entry of a default judgment denying his discharge. Some 2.5 years later, the Debtor moved to set aside the judgment because he was now willing to cooperate with the trustee and to pay in $2,793 for creditors. Based on the circumstances and the passage of time, the Court denied the Debtor's request to set aside the default judgment under Rule 60.
Title: Lee v. McCardle (In re Peeples) | Date: Jul-14-2016 | Status: PUBLISHED (Judge Mosier) | Case(s): 14-2159
Creditor filed a pre-petition state court lawsuit against the trustee of a trust of which the debtor at one time had been a beneficiary. The creditor lost the suit and, after the debtor filed bankruptcy, the trustee obtained a judgment against the creditor. The creditor then filed a declaratory judgment action in bankruptcy court against the trustee, arguing that the automatic stay of § 362(a) had stayed the state court lawsuit because the creditor sued the trustee with the subjective intent to recover against the debtor. On cross-motions for summary judgment, the Court denied the creditor’s motion because the state court lawsuit had not been an action to recover a claim against the debtor. The Court held that the automatic stay does not stay an action whose basis is independent of a claim against the debtor. The Court also held that whether the automatic stay applies to an action is not determined by a party’s subjective intent in undertaking that action. Accordingly, the Court denied the creditor’s request for stay violation damages under § 362(k).
Title: In re Wareham | Date: Jul-6-2016 | Status: PUBLISHED (Judge Thurman) | Case(s): 15-30297
In this business chapter 13 case, the trustee and creditor objected to confirmation of debtors' plan and the creditor also moved to dismiss or convert the case to chapter 7. The creditor argued that the debtors lacked good faith in filing their petition and plan because the debtors took inappropriate deductions in calculating their net disposable income, which left Debtors' business budget inaccurate. The Court looked at the Flygare and Gier cases from the 10th Circuit as compared to the Debtors' case and concluded the petition and plan were filed in good faith. Debtors' miscalculation of net disposable income was not indicia of lack of good faith. However, since the debtors' calculation of their net disposable income was incorrect, confirmation of the plan was denied with leave to amend.
Title: Miller v. Stone (In re Waterford Funding, LLC) | Date: Jun-30-2016 | Status: UNPUBLISHED (Judge Mosier) | Case(s): 11-2093
Defendant moved to set aside a default judgment because he was not properly served with the summons and complaint. The plaintiff had mailed the summons and complaint to the address the defendant had vacated about eight months before. Even though the U.S. Postal Service was forwarding the defendant’s mail to his new address and his wife signed a certified mail receipt for the summons and complaint, the Court held that service did not comply with Rule 7004(b). That rule requires that notice be sent to “the individual’s dwelling house or usual place of abode or to the place where the individual regularly conducts a business or profession,” which was not accomplished in this case. The Court also held that Rule 7004(b) requires that a plaintiff make a reasonable inquiry to determine the defendant’s dwelling house or usual place of abode, which the plaintiff did not do. Because proper service of process is necessary to obtain personal jurisdiction over a defendant, and a default judgment obtained without personal jurisdiction is void, the Court granted the defendant’s motion and set aside the default judgment under Rule 60(b)(4).
Title: In re Robertson | Date: Mar-24-2016 | Status: UNPUBLISHED (Judge Mosier) | Case(s): 14-20984
Chapter 7 debtor sought a determination that a claim against a creditor had been abandoned to him. The debtor had scheduled the claim, which arose as a result of pre-petition state court litigation between the debtor and the creditor. The chapter 7 trustee communicated with debtor’s and creditor’s counsel regarding the claim, but the creditor declined to purchase or settle the claim. Thereafter, the trustee filed a report of no distribution, the case was closed, and the parties resumed the state court litigation. The state court of appeals then stayed the litigation pending a determination that the debtor’s claim was abandoned to him. The Court determined that because the claim was scheduled and not administered at the time the case was closed, it was abandoned to the debtor under § 554(c). The Court further held that a trustee is not required to give notice of a final report in cases where there is no distribution in order for abandonment to be effected under § 544(c).