Secured creditor obtained chapter 7 trustee's and debtor's agreement to relief from stay to foreclose its lien, then prepared an order indicating that trustee would be divested of any interest in the property, even though there had been no abandonment. Trustee objected, and the court held that nothing in the Bankruptcy Code allowed property to be removed from the estate in the manner proposed, and that trustee had sound reasons to object. Some of the interests retained by the estate are redemption rights, the right to purchase the property at the foreclosure sale, the right to recover surplus proceeds, and the right to object to the manner in which the property sale is conducted. In this case, the trustee had indicated an intent to abandon the property, but the time for filing objections to abandonment had not yet run. Until abandonment, an owner's rights are vested in the trustee on behalf of the estate. After abandonment, those rights would automatically return to debtor.
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Title: Commercial Sec. Bank v. Contractors Realty & Dev., Inc. (In re Contractors Realty & Dev., Inc.) | Date: May-13-1983 | Status: UNPUBLISHED (Judge Clark) | Case(s): 83PC-0405
Title: Andersen v. Haycock (In re Haycock) | Date: May-11-1983 | Status: UNPUBLISHED (Judge Clark) | Case(s): 81C-0405
Plaintiffs needed funding for a condominium development project, and went to debtor, in his capacity as president of an escrow company, to obtain "offshore" funding. Ultimately, the expected funding did not come through, and plaintiffs lost their commitment fee, which debtor had paid on their behalf to the lender. Plaintiffs filed an adversary complaint in debtor's bankruptcy, alleging non-dischargeability under 11 U.S.C. § 523(a)(2)(A) and (a)(4). With respect to plaintiffs' fraud claim, the court held that no fraudulent intent had been shown. The court then considered the fiduciary defalcation claims, ruling that only one of plaintiffs' two fiduciary claims involved fiduciary duty, which was debtor's alleged mishandling of plaintiffs' funds. The court concluded that debtor's promise to pledge accounts receivable to cover plaintiffs' funds if their loan was not funded was not fiduciary in nature, despite it being a duty that was imposed by the same contract as debtor's fiduciary duty, since the claim did not involve placement of property into debtor's custody. Rather, promises made by debtor regarding his or his company's money were contractual only. Finally, the court determined that plaintiffs had failed to show a defalcation in debtor's handling of their commitment fee since debtor had, in fact, paid the money to the lender as he was instructed to do in the parties' contract. Judgment was entered in favor of debtor.
Title: Christenson v. Brown (In re Brown) | Date: May-9-1983 | Status: UNPUBLISHED (Judge Clark) | Case(s): 83PC-0100
The court considered two arguably inconsistent state statutes with respect to foreclosure of liens on real property. Creditor held a note from debtors and a non-debtor corporation, which was in default and was secured by trust deeds on two separate properties, one of which was debtors' residence. Debtors filed their chapter 11 petition while creditor was in the process of executing its trust deeds, which stayed any foreclosure of debtors' residence. Creditor proceeded with foreclosure of the property owned by the corporation, applied the sales price to the note obligation, and sought relief from stay to execute on debtors' residence. After revaluing the foreclosed property, and directing creditor to apply the full value to debtors' obligation, the court considered debtors' assertion that, under Utah Code Ann. § 15-1-32, plaintiff had waived any deficiency that might exist from the first property sale because it did not bring a deficiency action within 3 months after execution of the trust deed. Creditor countered that Utah's "one action rule," set forth in Utah Code Ann. § 78-371-1, required it to exhaust the property securing the debt before initiating a deficiency action. The court determined that debtors' position would effectively force creditor to choose between its two remedies, which were foreclosure and deficiency, since foreclosure of one trust deed, followed by a deficiency action, would preclude foreclosure of the other trust deed, while foreclosing both properties would preclude a deficiency judgment. The court held that the 3-month rule did not apply until all of the secured property was foreclosed, after which creditor would be required to initiate a deficiency action within 3 months. However, the court noted that the situation might be different if creditor was shown to be responsible for a delay in foreclosing the secured properties. Since debtor had no equity in their residence, creditor's motion for relief from stay was granted.
Title: In re Johnson | Date: Apr-27-1983 | Status: UNPUBLISHED (Judge Clark) | Case(s): 82C-1948
Chapter 13 debtors moved to disallow creditors' proof of claim, which listed their claim as secured. The court held that chapter 13 debtors do not have 11 U.S.C. § 544 "strong-arm powers," which may only be exercised by chapter 13 trustees. Allowing debtors to exercise such powers, absent a chapter 13 provision that specifically grants them to debtors, as does 11 U.S.C. § 1107(a) in chapter 11 cases, would do violence to the rules of statutory construction.
Title: In re Brundle | Date: Apr-19-1983 | Status: UNPUBLISHED (Judge Clark) | Case(s): 81C-1793
In her prepetition divorce action, debtor was awarded a $7,000 judgment against her ex-husband. Credit union, which held a judgment against debtor, obtained a garnishment judgment against debtor's ex-husband for the amount he owed to her. Debtor then filed a chapter 7 petition, in which she claimed the divorce award to be exempt. Postpetition, the state court reinstated credit union's garnishment judgment, which had previously been stayed, after ex-husband's appeal of the divorce award was denied. Debtor, who did not attempt to avoid credit union's lien on her divorce award, received a discharge in her bankruptcy. The court held that the garnishment lien survived debtor's bankruptcy, as it was still valid under the state court's prepetition stay order, which order allowed credit union to take action on the garnishment order after disposition of the appeal. However, the state court's postpetition reentry of the garnishment judgment violated the automatic stay, and was therefore void. The court held that credit union was free to enforce its lien, despite debtor's claim in bankruptcy that the divorce award was exempt, because 11 U.S.C. § 522(c)(2) permits enforcement of valid liens against exempt property. Debtor could still seek to avoid the lien under § 522(f), even post-discharge, but might be required to reimburse credit union's expenses as a condition of lien avoidance.
Title: In re Vasilacopulos | Date: Apr-19-1983 | Status: UNPUBLISHED (Judge Clark) | Case(s): 82C-1031
The bankruptcy court certified facts regarding trustee's application for criminal contempt against debtor, and transferred the proceeding to the district court pursuant to the district court's interim rule governing bankruptcy matters post-Marathon (N. Pipeline Constr. Co. v. Marathon Pipe Line Co., 458 U.S. 50 (1982)).
Title: Semi-Serv., Inc. v. W.R. Hurst, Inc. (In re W.R. Hurst, Inc.) | Date: Apr-8-1983 | Status: UNPUBLISHED (Judge Clark) | Case(s): 82PC-1470
Creditor's non-dischargeability claim under 11 U.S.C. § 523(a) against corporate chapter 11 debtor was dismissed because that provision does not apply to corporate debtors. Plaintiff's other claims against debtor were dependent upon a right to adequate protection, which creditor was not entitled to because it was an unsecured creditor. Finally, creditor's claimed right to offset $4,500 it owed to debtor failed for lack of mutuality, as well as because the debt arose postpetition. Debtor's counterclaim for the $4,500 was granted on the pleadings.
Title: Intermountain Constr., Inc. v. Munro (In re Munro) | Date: Apr-4-1983 | Status: UNPUBLISHED (Judge Clark) | Case(s): 82PC-0287
By asserting that its counsel did not see an order to show cause, which had been delivered, until after the action had been dismissed, plaintiff failed to establish excusable neglect that would justify relief from the order of dismissal. Where failure to comply with legal requirements results from a litigant's own procedures, the failure is not due to "excusable neglect." Nonetheless, since defendant's counsel did not object to setting aside the dismissal, the motion for relief was granted, but on condition that plaintiff's counsel pay $100.00 to defendant's counsel and that, should defendant prevail at trial or on a motion for summary judgment, defendant's attorney's fees would be assessed against both plaintiff and its counsel.
Title: In re Career Concepts, Inc., 76 B.R. 830 (Bankr.D.Utah) | Date: Mar-30-1983 | Status: PUBLISHED See 86.pdf (Judge Clark) | Case(s): 81C-1939
The court denied all compensation sought by attorneys acting as counsel for corporate chapter 11 debtor-in-possession under 11 U.S.C. § 327(a), based on fact that attorneys were not disinterested. As the father and brother of debtor's principal officer, attorneys were relatives, insiders, and interested parties, and could not be disinterested, as is required. Attorneys' assertion that they relied on the court's appointment of them was rejected on the ground that it was their duty to acquaint themselves of the legal requirements for representation of debtors, and it was not up to the court to discover their relationship with a corporate employee. Nonetheless, there is no disinterest requirement for attorneys representing chapter 7 debtors, and attorneys would be allowed to submit applications for services they rendered after conversion of debtor's case to chapter 7, which application would be subject to all requirements of law.
Title: In re Envirowest, Inc. | Date: Mar-30-1983 | Status: UNPUBLISHED (Judge Clark) | Case(s): 81C-2203
With respect to an untimely claim received by letter in a chapter 7 case, the court indicated that the claim could be treated as, and receive the priority of, one of three subsections of 11 U.S.C. § 726(a), which were (a)(2)(A), (a)(2)(C), or (a)(3), depending on the circumstances. Claimant could file a proof of claim with a motion for extension of the time for filing, supported by an affidavit showing good reason why his neglect in failing to timely file should be excused. If such a motion were granted, claimant's claim would be treated as a timely filed claim under subparagraph (a)(2)(A). There are also two ways the claim could be treated as an untimely claim: (1) if claimant could establish that he did not receive notice of the filing deadline in time to file a timely proof of claim, and his claim was filed prior to distribution, his claim would satisfy subparagraph (a)(2)(C); or (2) claimant could simply file a tardy proof of claim and it would be treated in accordance subparagraph (a)(3).