Bank filed a motion for relief from stay in chapter 11 debtor's bankruptcy case in order to foreclose a lien it had on property either formerly or currently owned by debtor. Debtor then filed an adversary complaint against bank, asserting causes of action that arose from the parties' dealings with respect to the property. Bank raised a number of defenses to the adversary complaint by motion. The court concluded that, because debtor's claims primarily involved adjudication of rights under state law, the adversary action was not a "core" bankruptcy proceeding. The court then rejected bank's argument that debtor was precluded by collateral estoppel from re-litigating issues decided in a state court restraining order proceeding, on the ground that the state court record had not been provided. The court also refused to dismiss the complaint based on bank's argument that the claims stated were compulsory counterclaims in its foreclosure action, concluding that no foreclosure action had been filed. Finally, bank's requests, (1) to dismiss for failure to plead jurisdiction, (2) to strike portions of debtor's complaint, and (3) to abstain, were all denied.

Debtor purchased a residence that was subject to an outstanding trust deed. Although debtor made payments on the trust deed loan, she never assumed that obligation. When debtor allowed the loan to default, lender foreclosed, and the house was purchased at the foreclosure sale by the loan guarantor for the outstanding loan amount. One day later, debtor filed a chapter 13 petition. Debtor's attempt to avoid the foreclosure sale pursuant to 11 U.S.C. § 547 was rejected by the court, which first assumed without deciding that guarantor was a "creditor" of the debtor. The court ruled that debtor's § 547 claim would still fail because the outstanding loan was fully secured and, therefore, debtor could not establish that defendant received more than it would have in a chapter 7 liquidation. However, because evidence of the property's value established that it was worth more than the amount defendant had paid for it, the court determined that defendant had given less than reasonably equivalent value for the transfer, and the foreclosure sale was declared null and void as a fraudulent transfer under 11 U.S.C. § 548(a).

Trustee asserted adversary claims against salesmen for Ponzi scheme debtors, claiming that commissions defendants had received from debtors were fraudulent under 11 U.S.C. § 548(a)(2). The court determined that the first three elements of a § 548(a)(2) fraudulent conveyance were not in question and, therefore, the only issue before it was whether defendants had given less than reasonably equivalent value in exchange for debtors' payments. The court held, as a matter of law, that services rendered on behalf of a Ponzi scheme, even if performed in good faith and without any knowledge of fraud, are without legally cognizable value, and awarded judgment to trustee. On appeal, in 185.pdf, this decision was remanded by the district court for a factual determination of the value of defendants' services, and whether they were "reasonably equivalent" to the payments defendants received.

Bank, which held a significantly undersecured claim in virtually all of chapter 11 debtor's assets, obtained relief from stay to foreclose its interests in those assets. Subsequently, bank agreed, pursuant to stipulations approved by the court, to provide a set amount of funds per month for debtor's operating expenses. The stipulations further required that all administrative expenses would be paid first from assets not subject to bank's security and, if available funds were insufficient to pay them, payment of trustee's and creditors committee's attorney and accounting fees would be paid from bank's cash collateral, up to a specified amount. Bank's advances were to be treated as superpriority claims. At a hearing to consider interim professional compensation, the court allowed the attorney and accountant applications for fees in full, but restricted trustee's payments to one-half of each amount authorized. On rehearing, the court explained that secured creditors are protected in bankruptcy up to the value of their collateral, and only surplus proceeds are available to pay estate creditors and administrative expenses. Therefore, unless debtor has equity in encumbered property, administrative expenses may not be paid from collateral. The court found that the stipulations were reasonably designed to allow debtor to continue its business and, without bank's advances, there would be no surplus with which to pay administrative expenses, and bank could not be forced to pay more administrative expenses than it had agreed to pay.