The bankruptcy court considered debtor's adversary claims against defendants and concluded that defendants had not properly perfected their equitable lien on debtor's property, but dismissed the remaining allegations of the complaint for lack of subject matter jurisdiction. On appeal, the district court held that, pursuant to 11 U.S.C. § 1142(b), bankruptcy courts retain post-confirmation jurisdiction to resolve issues that are necessary to the plan's success, including the promotion of justice and fair play. The court then concluded that resolution of debtor's adversary claims was necessary for the plan's completion, as the issues related to priority of claims. The district court remanded the case, on the ground that the bankruptcy court had subject matter jurisdiction to decide all of the issues raised in debtor's post-confirmation adversary proceeding.
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Title: Cascade Energy & Metals Corp. v. Banks (In re Cascade Energy & Metals Corp.) | Date: Apr-23-1991 | Status: APPEAL Unpublished (U.S. District Court, Utah) | Case(s): 88PC-0861
Title: In re TS Indus., Inc., 125 B.R. 638 (Bankr.D.Utah) | Date: Apr-9-1991 | Status: PUBLISHED (Judge Clark) | Case(s): 89C-4920 & -4221
Counsel for debtors in a chapter 11 proceeding submitted an application for payment of legal fees that were incurred both before and after a trustee had been appointed. Applying 11 U.S.C. §330(a) and 503(b)(2), the court concluded that reasonable and necessary fees and costs of a chapter 11 debtor's attorney were compensable as administrative expenses, and that applicant's pre-trustee fees were largely compensable. The court then rejected the holding of In re NRG Res., Inc., 64 B.R. 643 (W.D. La. 1986), to the effect that debtor's counsel may not be compensated for services rendered after a trustee was appointed, even for services that both benefitted the estate and were requested by the trustee, unless counsel was first approved to act as special counsel for the trustee under 11 U.S.C. § 327(e). Instead, the court slightly lessened the NRG standard based on the facts before it, which were that the post-trustee services rendered by debtor's counsel largely benefitted the estate, the fee application was "not hotly contested," trustee had proffered that no duplicative work had been performed, and the absence of case law in this district, at the time services were performed, on the issue of post-trustee services performed by debtor's counsel. However, the court emphasized that, in the future, if debtor's counsel performs any services that are duties of the trustee after one has been appointed, approval to act as special counsel for the trustee under 11 U.S.C. § 327(e) should be obtained first. The court then considered the application and eliminated post-trustee fees that were for services it determined to be either unreasonable or unnecessary.
Title: In re Powell | Date: Apr-9-1991 | Status: UNPUBLISHED (Judge Boulden) | Case(s): 90B-1412
Debtors sought sanctions from a worker's compensation insurer for violating the automatic stay provisions of 11 U.S.C. § 362. Insurer was paying benefits to debtor husband when the bankruptcy petition was filed. Prior to the filing, insurer had determined that it had overpaid some of debtor's previous benefits, and thereafter began deducting set amounts from debtor's benefit payments in order to recoup the overpayments. Although insurer received actual notice of debtors' bankruptcy filing, it continued to reduce the benefit payments post-petition, and the parties stipulated that insurer had deducted a total of $1,300 from debtor's post-petition benefit payments. In defense of the stay violation claim, insurer asserted the doctrine of "recoupment." Although § 362(a)(7) prohibits setoff of a prepetition debt owed to the debtor against a claim against the debtor, the equitable doctrine of recoupment allows a creditor to make such an offset when both the creditor's and the debtor's claims arose from the same transaction. The court determined that the automatic stay does not prohibit such recoupment in this jurisdiction. Adopting the view that the "same transaction" prong of recoupment was controlled, in the case before it, by the source of the injury, the court found that insurer had proven that both its claim and debtor's arose from the same transaction. However, the court concluded that the recoupment doctrine was not applicable because a right to recoupment must be created by contract, and there were no contracts between insurer and debtor. The court granted debtors' motion, and awarded them their actual damages based on insurer's willful violation of the stay.
Title: ln re Concept Clubs, Inc., 125 B.R. 634 (Bankr.D.Utah) | Date: Apr-5-1991 | Status: PUBLISHED (Judge Allen) | Case(s): 89A-2750 through -2754
Debtor's broker sought approval, as an administrative expense, of a 10% sales commission for brokering a $1 million property sale. Several creditors and the U.S. Trustee objected, contending that the commission for such sales should be no more than 5%. Applying a "reasonable compensation" standard, and considering the factors for determining a reasonable broker's commission delineated in Matter of Womack, Inc., 1 B.R. 95 (Bankr. D. Nev. 1979), the court concluded that a reasonable award was $50,000.
Title: In re CF&I Fabricators of Utah, Inc.In re The Colorado & Wyoming Ry. Co. | Date: Apr-2-1991 | Status: UNPUBLISHED (Judge Boulden) | Case(s): 90B-6721 90B-6730
Chapter 11 trustee filed an unopposed motion for an order allowing payment of various unsecured prepetition claims prior to plan confirmation, relying on 11 U.S.C. § 1122(b). The court held that, although § 1122(b) allows creation of an administrative convenience class of claims, it does not authorize payment of those claims prior to confirmation of a plan. The court further rejected trustee's assertion that the small service creditors' claims should be paid pursuant to the Necessity of Payment Rule, finding no evidence that payment of the creditors prior to implementation of a plan was necessary to debtor's rehabilitation. Finally, the court rejected trustee's argument that the proposed payments could be made under 11 U.S.C. § 1171(b), which incorporates the Six Months Rule applicable to railroad reorganization and allows certain prepetition debts to be paid from postpetition operating income. The court concluded that the claims at issue did not satisfy the rule's criteria, both because the creditors that trustee sought to pay had not relied on anything other than debtor's general credit for repayment, and because tax claims are not debts for labor, equipment, supplies, or improvements.
Title: Stewart v. Wynn (In re Wynn) | Date: Mar-26-1991 | Status: UNPUBLISHED (Judge Clark) | Case(s): 90PC-0297
Relying heavily on Job v. Calder (In re Calder), 93 B.R. 734, 735 (Bankr. D. Utah 1988), aff'd, 907 F.2d 953 (10th Cir. 1990), the bankruptcy court denied debtor's discharge under 11 U.S.C. § 727(a)(4)(A) and (a)(5). Applying a clear and convincing standard of proof due to uncertainty regarding the applicable standard, the court found that plaintiffs had established that debtor's statements and schedules contained numerous omissions, in violation of § 727(a)(4), and that debtor's explanations for the omissions were "not proper defenses." The court also denied discharge under § 727(a)(5), based on debtor's inadequate and contradictory responses to questions regarding his assets. The court then awarded plaintiffs only those damages that had been supported by adequate evidence, and denied their claim for punitive damages on the ground that denial of debtor's discharge was sufficiently punitive.
Title: Micoz v. Carter (In re Carter), 125 B.R. 631 (Bankr.D.Utah) | Date: Feb-13-1991 | Status: PUBLISHED (Judge Clark) | Case(s): 90PC-0332
Sellers of a residence to debtors filed an adversary proceeding seeking to deny debtors' discharge under 11 U.S.C. § 727(a)(4). Debtors' previous bankruptcy case, in which they had not listed either the property or the debt to plaintiffs, had been dismissed. In the case before the court, however, debtors listed both the property and the debt. The court rejected plaintiffs' claim that debtors' false oath in their previous bankruptcy case provided grounds for denial of discharge in the pending case, concluding that neither the language of § 727(a)(4), nor a reading of § 727(a) as a whole, led to a conclusion that a false oath in a previous bankruptcy case could be used as grounds for denial of discharge in a subsequent case. The court further concluded that § 727(a)(7) did not provide grounds for denial of debtors' discharge, as that provision only applies to misconduct in a substantially contemporaneous related case, other than the debtor's own.
Title: Cascade Energy & Metals Corp. v. Banks (In re Cascade Energy & Metals Corp.) | Date: Jan-18-1991 | Status: UNPUBLISHED (Judge Clark) | Case(s): 88PC-0861
The court had previously ruled that a judgment lien against real property owned by debtor in California had not been properly perfected. Lien holders appealed that ruling, without providing a supersedeas bond or releasing the lien, although they did file a copy of the bankruptcy court's order regarding the lien in California. In an adversary proceeding against the lien holders, debtor sought an order compelling defendants to either release the lien or provide a $2.6 million bond. Relying on a California statute that it had inaccurately quoted, debtor argued that defendants were statutorily required to release their lien. The court found that, once the portions of the statute omitted by debtor were included, it was clear that the statute had no applicability to the dispute before it. The court further found that debtor had failed to establish a need for a supersedeas bond, and that the status quo was best maintained by allowing the lien to remain recorded, especially since the filing of the court's previous judgment would inform interested parties of the lien's status. Finally, the court determined that debtor's attorney had misquoted the statute with the intent to mislead the court, which warranted sanctions under Fed. R. Bankr. P. 9011.
Title: Zions First Nat'l Bank v. Christiansen Bros., Inc. (In re Davidson Lumber Sales, Inc.) | Date: Jan-9-1991 | Status: UNPUBLISHED (Judge Clark) | Case(s): 90PC-0044
Chapter 7 trustee abandoned the bankruptcy estate's cause of action against third parties after concluding that any recovered funds would belong to bank. After bank replaced trustee as plaintiff in the adversary proceeding, the court raised the issue of its subject matter jurisdiction. Relying on Gardner v. United States (In re Gardner), 913 F.2d 1515 (10th Cir. 1990), the court concluded that it lacked jurisdiction because the adversary proceeding only involved non-debtor parties and non-estate property, and its outcome would not affect administration of the estate. The adversary proceeding was dismissed.
Title: In re Whitelock, 122 B.R. 582 (Bankr.D.Utah) | Date: Dec-26-1990 | Status: PUBLISHED (Judge Boulden) | Case(s): 90B-0844
Chapter 13 trustee objected to debtors' proposed plan on the ground that, by giving specialized classification and treatment to one unsecured debt, the plan was unfairly discriminatory. The specially treated debt had originally been incurred as an unsecured loan that debtors used to pay taxes owed to the IRS, but the initial note was replaced with a new note executed by both debtor husband and his mother. Although the mother provided security for the second note by giving lender a deed of trust on her home, the note was an unsecured claim in the bankruptcy because debtors had no interest in the property that secured it. Under the proposed 60-month plan, all other unsecured creditors would receive payments that totaled 30% of their claims, while the note would be paid in full with interest. The first issue considered by the court was whether the note was a "consumer debt," since 11 U.S.C. § 1322(b)(1) allows consumer debt to be treated differently than other unsecured claims when an individual other than the debtor is also liable. The court rejected the argument that a debt secured by real property is not consumer debt, and determined that the note at issue was in fact consumer debt because it was not business related. However, after applying the four-part fairness test set forth in Amfac Distrib. Corp. v. Wolff (In re Wolff), 22 B.R. 510 (9th Cir. BAP 1982), the court concluded that the proposed discriminatory treatment of the note would be unfair to debtors' other unsecured creditors. The court denied confirmation, finding that the totality of the circumstances before it indicated that the plan had not been proposed in good faith, which is a requirement of 11 U.S.C. § 1325(a)(3).