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).
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Title: Miller v. Stone (In re Waterford Funding, LLC) | Date: Jun-30-2016 | Status: UNPUBLISHED (Judge Mosier) | Case(s): 11-2093
Title: In re Robertson | Date: Mar-24-2016 | Status: UNPUBLISHED (Judge Mosier) | Case(s): 14-20984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).
Title: Bird v. SKR Credit, Ltd. (In re Digital Bridge Holdings, Inc.) | Date: Sep-30-2015 | Status: UNPUBLISHED (Judge Mosier) | Case(s): 12-02373
Corporate debtor borrowed money from three lenders pre-petition. The promissory notes provided that the debtor would file UCC financing statements to perfect the lenders’ security interests. The debtor filed the statements incorrectly, leaving the lenders’ interests unperfected. Subsequently the debtor borrowed money from a fourth lender, which properly perfected its security interest. After an involuntary chapter 11 petition was filed against the debtor, the case was later converted to chapter 7, where the trustee sought equitable subordination of the fourth lender’s lien under § 510(c). The trustee argued that equitable subordination was proper because the fourth lender had injured the three other lenders. The Court held that § 510(c) only subordinates claims, not liens. In addition, the Court held that the trustee lacked standing to assert equitable subordination claims on behalf of individual creditors. Ordinarily, a trustee can bring a general equitable subordination claim on behalf of the estate as a whole. Lastly, the Court held that § 510(c) was inapplicable by its own terms because the trustee was not proposing to make a distribution to general unsecured creditors.
Title: Hunt v. Steffensen (In re Steffensen) | Date: Jul-23-2015 | Status: PUBLISHED (Judge Thurman) | Case(s): 13-2192
Chapter 7 trustee brought an adversary proceeding to deny debtor a discharge and moved for partial summary judgment under 11 U.S.C. § 727(a)(3) and 727(a)(5). The Court denied the Debtor his discharge and found: (1) the term "keep," as used in discharge exception for debtors who fail to "keep or preserve" adequate financial records, is not synonymous with preserve; (2) debtor-attorney was a sophisticated individual with experience in bankruptcy law and so had no excuse for failing to create and preserve records sufficient to allow trustee and creditors to ascertain his business transactions; and (3) debtor's explanation that he could not keep records because he could not afford a bookkeeper, did not have time to keep records himself, and his computer hard drive crashed was inadequate.
Title: In re Naartjie Custom Kids, Inc. | Date: Jul-13-2015 | Status: PUBLISHED (Judge Thurman) | Case(s): 14-29666
The Debtor, joined by the Official Committee of Unsecured Creditors, moved to dismiss its Chapter 11 case and requested that the Court's orders remain in full force and effect. The United States Trustee objected, arguing that the Court lacked statutory authority to grant a structured dismissal. The Court found that where cause is shown under § 305(a) or § 1112(b), the Bankruptcy Code authorizes structured dismissal pursuant to the plain language of § 349(b). Finding that the Debtor had met its burden under § 305(a), the Court accordingly granted the structured dismissal.
Title: Withers v Trust Funds (In re Withers) | Date: Mar-31-2015 | Status: UNPUBLISHED (Judge Mosier) | Case(s): 13-2096
Debtors brought adversary proceeding seeking declaratory judgment that Creditor had notice or actual knowledge of Debtors' bankruptcy under § 523(a)(3)(A). Although Creditor did not receive formal notice, Debtors argued that Creditor was given notice of the bankruptcy in two ways: 1) by a telephone call to the Creditor's accountant who in turn advised Creditor's attorney, and 2) by a telephone call between the Debtor and the Creditor's attorney. Because the bankruptcy information provided by the Debtors during the telephone calls was within the scope of the agency of the Creditor's attorney, Creditor was put on notice or inquiry notice of the Debtors' bankruptcy. The Creditor was found to have sufficient notice or actual knowledge of the case in time to file a timely proof of claim.
Title: Jubber v. Defendants re C.W. Mining Company Coal Proceeds (In re C.W. Mining Company) | Date: Mar-31-2015 | Status: PUBLISHED (Judge Mosier) | Case(s): 11-8002
The Court consolidated various adversary proceedings to resolve the question of who was entitled to the coal mined by the Debtor and the accounts created by the Debtor's contracts with coal purchasers, which were subsequently assigned or sold to the Debtor's agent. On summary judgment, the Court held that the Uniform Commercial Code governs the assignment or sale of the accounts. But the Court also held that the accounts were, for purposes of the trustee's motion, not property of the Debtor or the bankruptcy estate. The trustee's motion assumed that the Debtor sold the accounts to its agent, and a seller of accounts does not retain a legal or equitable interest in them pursuant to Utah Code Ann. § 70A-9a-318(1). The Court further held that, because the Debtor's agent had not perfected its security interests in the accounts, the trustee could avoid those interests using his power as a hypothetical lien creditor under § 544(a)(1). But because § 544(a)(1) does not provide a basis to avoid a prepetition transfer of property, the trustee did not have the ability to recover the payments made to the Debtor's agent before the petition date.
Title: Jubber v. Defendants re C.W. Mining Co. Coal Proceeds (In re C.W. Mining Co.) | Date: Mar-31-2015 | Status: PUBLISHED (Judge Mosier) | Case(s): 11-8002
Pre-petition, the debtor entered into two contracts to supply coal to two coal purchasers. Subsequently, the debtor assigned the right to receive payment under these contracts to a related party, but it did not assign the underlying contracts themselves. Post-petition, the trustee sought a determination that the accounts created by these assignments were property of the debtor or the estate, that the trustee could avoid any security interest in the accounts, and that the trustee could recover pre-petition payments made on the accounts under § 544(a)(1). On summary judgment, the Court held that the assignment of the accounts was subject to the perfection rules of Article 9 of the UCC, and that because the related party’s security interest in the accounts was unperfected, the trustee could avoid that interest. On the issue of ownership, the trustee conceded the debtor had sold the accounts to the related party. Accordingly, under § 318 of Article 9, the Court concluded that the debtor held no legal or equitable interest in the accounts, which were therefore not property of the debtor or the estate. Lastly, the Court held that § 544(a)(1) did not give the trustee the power to avoid pre-petition payments that had been made on the accounts to the related party.
Title: Zions v Taylor (In re Taylor) | Date: Mar-26-2015 | Status: UNPUBLISHED (Judge Mosier) | Case(s): 13-2186
Debtor financed the purchase of six luxury automobiles at the urging of an auto rental company who told the Debtor that the various banks used to finance the automobiles were aware of Debtor's intent to lease the vehicles to the rental company notwithstanding Debtor's representations contained in the loan documents that the vehicles were for the Debtor's personal use only. Debtor defended the § 523(a)(2)(A) complaint arguing that because he believed the auto rental company's representations, he therefore lacked the necessary intent to defraud. The Court held that the auto rental company's fraud upon the Debtor does not absolve the Debtor of his fraud upon the bank. The Debtor's failure to verify that the Bank was aware of the Debtor's true intention to lease the vehicle amounted to willful blindness. The Court did not countenance a "pure heart, empty head" defense, and the Debtor's intent to deceive can be inferred from the totality of the circumstances.
Title: In re Monson | Date: Nov-24-2014 | Status: PUBLISHED (Judge Thurman) | Case(s): 12-31811, 12-02354
The U.S. Trustee filed motions in two cases to assess fines against a bankruptcy petition preparer as well as require him to disgorge his fees and pay damages to the Debtors. The U.S. Trustee alleged that the bankruptcy petition preparer had violated 11 U.S.C. § 110 by failing to disclose his identity on certain documents and by providing legal advice to the Debtors. After an evidentiary hearing, the Court concluded that the bankruptcy petition preparer had violated § 110 24 separate times, warranting $8,080 in fines, disgorgement of fees, payment of $6,681 in damages to the Debtors in each case, and submission of biannual disclosures to the U.S. Trustee.