Chapter 11 debtor, the owner and operator of a large farm, disagreed with trustee's decisions regarding farm operation, specifically, trustee's decision to bale hay instead of cubing it. On an emergency basis, the court denied debtor's request for an injunction, in which debtor asked the court to make its own determination regarding the hay dispute. The court held that, under 11 U.S.C. § 1108, the trustee has discretion to operate the debtor's business as a going concern, rather than to liquidate it. The court explained that the "[u]nless the court orders otherwise" language in § 1108, at most, allows the court to direct the trustee to discontinue an enterprise, and does not give the court power to impose conditions on trustee's management of the estate. The court also determined that policy reasons discouraged court supervision of the trustee, and concluded that it would not entertain objections to a trustee's management of an estate where trustee's conduct involved a business judgment made in good faith, that had a reasonable basis, and is within the scope of trustee's authority under the Code. The court also denied debtor's request to terminate trustee's appointment and restore it as debtor-in-possession, pursuant to 11 U.S.C. § 1105, finding that such relief was not warranted under either an "improvident appointment" or a "change in circumstances" test.
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Title: In re Curlew Valley Assocs., 14 B.R. 506 (Bankr.D.Utah) | Date: Oct-8-1981 | Status: PUBLISHED (Judge Mabey) | Case(s): 80-0876
Title: Segal v. Grooms (In re Grooms), 13 B.R. 376 (Bankr.D.Utah) | Date: Aug-24-1981 | Status: PUBLISHED (Judge Mabey) | Case(s): 80-0234
Chapter 7 trustee sought to avoid debtor's transfer of his wholly owned residence to his son and daughter-in-law, claiming the transfer was fraudulent under 11 U.S.C. § 544(b) and Utah Code Ann. § 25-1-4. After losing his case at trial, trustee moved for a new trial, asserting that the court had applied the wrong burden of proof. The court held that the burden of proof had been properly placed on trustee, that trustee's failure to object to the court's jury instruction on that issue constituted a waiver, and that the facts of the case supported not shifting the burden to the defendants.
Title: Summit Land Co. v. Allen (In re Summit Land Co.), 13 B.R. 310 (Bankr.D.Utah) | Date: Aug-18-1981 | Status: PUBLISHED (Judge Mabey) | Case(s): 81-0122
Chapter 11 debtor owned a large property in Utah that was operated as a recreational park for the use of members. Debtor sold perpetual, non-exclusive interests in the property by real estate contract, each of which included one membership. Debtor's goal of selling a certain number of membership interests was not met, which led to its petition and a decision to sell the property. Sale of the property would require termination of members' continuing interests, which some of them opposed. The court ruled that the contracts with members were executory and could be rejected by the debtor or the trustee under 11 U.S.C. § 365(a). The parties agreed that the proposed rejection was subject to court approval, but the court ruled, based on § 365(d), that approval should be granted as a matter of course. The court rejected members' argument that land sale contracts receive special treatment under the Code and should not be rejected unless burdensome, noting that Congress did not grant special treatment to land contracts, as it did to other types of contracts. Finally, the court ruled that members were not "in possession" of the property, as required by § 365(i) and (j), and thus those provisions did not allow them to retain possession.
Title: Bankers Life Ins. Co. v. Alyucan Interstate Corp. (In re Alyucan Interstate Corp.), 12 B.R. 803 (Bankr.D.Utah) | Date: Jul-16-1981 | Status: PUBLISHED (Judge Mabey) | Case(s): 81-0383
Creditor, with a claim wholly secured by chapter 11 debtor's real property, sought relief from stay to foreclose its interest. The debt owed to creditor equaled approximately 93% of the value of the property, and was increasing at the rate of approximately $8,000 per month, in interest. The court found that the property's value was stable, but that creditor's "equity cushion" would dissipate within a year due to the interest. Creditor asserted that these facts left it without the adequate protection that would be provided by an equity cushion. The court, noting that "adequate protection" was not defined in the Code, found it to be dependent on the factual circumstances of each case and, while an equity cushion may be helpful to adequate protection, it does not define it. The facts before the court were that the property was necessary to debtor's reorganization, creditor was a first lien holder, and had ample collateral to cover its debt. Therefore, creditor was adequately protected and was not entitled to relief from stay.
Title: Borg-Warner Acceptance Corp. v. Twelves (In re Utah Agricorp, Inc.), 12 B.R. 573 (Bankr.D.Utah) | Date: Jul-16-1981 | Status: PUBLISHED (Judge Mabey) | Case(s): 79-0037
In a case subject to the Bankruptcy Act, the court considered plaintiff's claim that it held a perfected security interest in a harvester that was repurchased by debtor from a dealer in Idaho. At issue was whether plaintiff's security interest became unperfected under Utah law when the harvester was transported from Idaho to Utah. The court rejected plaintiff's claims of constructive possession and re-perfection, concluding that Utah Code Ann. §70A-9-103(1)(d) and 70A-9-302 required a security agreement to be filed in Utah within four months of the harvester's arrival there, in order for the lien to remain perfected. Plaintiff's failure to file a security agreement in Utah within four months rendered its lien unperfected back to the date of the harvester's arrival in the state.
Title: In re Adams, 12 B.R. 540 (Bankr.D.Utah) | Date: Jul-15-1981 | Status: PUBLISHED (Judge Mabey) | Case(s): 80-0970
The court considered a claim for alimony and child support by chapter 13 debtor's ex-wife, which is non-dischargeable under 11 U.S.C. § 523(a)(5), and is excepted from the automatic stay pursuant to 11 U.S.C. § 363(b)(2) to the extent that recovery is sought from non-estate property. After confirmation of debtor's plan, ex-wife obtained a judgment in state court for past alimony and child support, which she sought to collect. Debtor moved for an order to show cause, and the court identified the issue before it as what property was not estate property that could be executed on by ex-wife while the stay was in place. The court concluded that virtually no property remains property of the debtor in a chapter 13 proceeding, prior to confirmation, since even property within debtor's possession and control and exempt property are considered to be estate property in a chapter 13. However, unless the plan or confirmation order provides otherwise, plan confirmation re-vests all of the estate property in the debtor. The court suggested that chapter 13 debtors might want to include full payment of non-dischargeable debts to ex-spouses in their plans, thereby relieving the ex-spouses from pursuing collection outside of the bankruptcy, and providing monitoring of their payments by the trustee.
Title: In re Case, 11 B.R. 843 (Bankr.D.Utah) | Date: Jun-10-1981 | Status: PUBLISHED (Judge Mabey) | Case(s): 80-0294
In a chapter 13 case, the court established the value of the secured and unsecured portions of two creditors' claims. Debtors then agreed with those creditors to make payments on the secured portions directly, rather than having trustee make the payments, in order to avoid paying the trustee's fee under 11 U.S.C. § 1302(e)(2) on "all payments under the plan." The court ruled that, since it had limited creditors' secured claims under 11 U.S.C. § 1325(a)(5), those claims were "provided for by the plan," and trustee was entitled to a fee on each payment made on those claims, whether they were made by trustee or debtor directly. However, some secured creditors may be "handled wholly outside of the plan," and those payments would not be subject to a trustee's fee. The court indicated, however, that its view regarding such outside-of-plan handling would not necessarily apply to an unsecured claim. Based on the facts before it, including that a trustee's fee would be charged on any payments made on the secured obligations, debtors were ordered to amend their plan to include the payments to the creditors at issue, which would be paid by the trustee.
Title: Alpa Corp. v. Internal Revenue Serv. (In re Alpa Corp.), 11 B.R. 281 (Bankr.D.Utah) | Date: May-15-1981 | Status: PUBLISHED (Judge Mabey) | Case(s): 80-0445
The IRS seized all of debtor's inventory, equipment, and other property from its business, causing debtor to cease its operations. Debtor filed a chapter 11 petition while the property was still in possession of the IRS and had not been sold, and filed an adversary complaint for turnover. The court held that a debtor's interest in property that was seized by the IRS prepetition is property of the estate, subject to turnover under 11 U.S.C. § 542. The court rejected the IRS' argument, based on pre-Code case law, that a levy on property under 26 U.S.C. § 6331 divests the debtor of any interest in the property, concluding that the IRS levy gave it a perfected lien, and therefore a substantial interest in the property, but not one that equals absolute ownership. Since all of the property seized was necessary to debtor's business, turnover was appropriate, subject to adequate protection of the IRS' interest.
Title: In re Reed, 11 B.R. 258 (Bankr.D.Utah)In re Hubbard | Date: May-15-1981 | Status: PUBLISHED (Judge Mabey) | Case(s): 80-1785, -0082
In two cases involving orders to show cause for stay violations, the court explained the difference between criminal and civil contempt, as well as what constitutes sufficient knowledge of the automatic stay for imposition of civil contempt. Sellers of a restaurant to debtors were found in violation of the stay due to having spread garbage taken from debtors' closed restaurant around debtors' home. The court ordered them to pay $500 in damages, and $300 for attorney's fees. Another debtor's boss was found in violation of the stay based on his demand that debtor pay a phone bill or risk losing his job. He was ordered to repay the money debtor had paid to him due to that demand, and to pay trustee's attorney's fees. However, a previously imposed $500 fine against respondent was withdrawn.
Title: In re Cruseturner, 8 B.R. 581 (Bankr.D.Utah)In re ReidIn re Nelson | Date: Jan-29-1981 | Status: PUBLISHED (Judge Mabey) | Case(s): 80-0133, -0598, -0800
The court considered two issues common to three chapter 7 bankruptcies, which were: (1) whether debtors may redeem property pursuant to 11 U.S.C. § 722 by paying the redemption amount in installments, over creditors' objections; and (2) does the automatic stay under 11 U.S.C. § 362(a)(5) continue to prevent action against property that reverts to debtor, either by abandonment or exemption? The court determined that debtors must pay their redemption payment in full in order to impose a redemption right on an unwilling creditor, but courts may allow debtors up to 30 days from the determination of the redemption amount within which to make that payment. Installment payments may be negotiated with a creditor, but an enforceable agreement is required, subject to the provisions of 11 U.S.C. § 524(c) for reaffirmation agreements. The court further concluded that the automatic stay continues to cover property that reverts to debtors, or that is acquired postpetition, until one of three acts set forth in § 362(c)(2) occurs. Debtors' requests to redeem property in installments were denied, and debtors were given 10 days in which to redeem in full. However, creditors could not repossess their collateral until either they obtained relief from stay, their debtors' case was closed or dismissed, or a discharge decision was entered.