Chapter 13 Debtors commenced adversary proceeding to immediately and permanently void U.S. Bank's wholly underwater junior mortgage lien on their primary residence based on both § 1322(b)(2) of the Bankruptcy Code and slander of title under Utah state law, without regard to either full payment of U.S. Bank's claim or completion of the chapter 13 case. As for the slander of title theory, the Debtors argued that no valid lien exists under Utah law when such lien is unsupported by any present economic value. Based on the trial court and Tenth Circuit decisions in In re Woolsey and a slander of title analysis under Utah law, the Court held that wholly underwater junior mortgage liens may ultimately be removed from the property but only after full payment or completion of the chapter 13 case in accordance with § 1325(a)(5)(B) of the Bankruptcy Code.
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Title: Stott v. U.S. Bank (In re Stott) | Date: Nov-13-2012 | Status: UNPUBLISHED (Judge Marker) | Case(s): 12-2315
Title: In the Paint, LLC v. Archibald (In re Archibald) | Date: Sep-28-2012 | Status: UNPUBLISHED (Judge Mosier) | Case(s): 10-3057
Creditors filed and adversary proceeding against the Debtor under § 523(a)(2)(A) and § 727(a)(2). Creditors asserted that their debt should be excepted from discharge because the Debtor failed to disclose that he had violated his noncompete agreement when the parties were negotiating a separation agreement. The Creditors also asserted that the Debtor should be denied a discharge because he transferred his equity interest in a business within one year of filing for bankruptcy.Creditors' § 523(a)(2)(A) claim. Held: To prevail on a claim for nondisclosure, the plaintiff must establish that the debtor had a duty to disclose a fact, that the undisclosed fact was material and that the debtor knew the undisclosed fact was material. In addition, the plaintiff must establish that the debtor failed to disclose the fact with intent to deceive the creditor, that the creditor relied on the nonexistence on the fact and that the creditor's reliance was justified. Creditors failed to establish any of the elements under § 523(a)(2)(A) and their debt was therefore dischargeable. Creditors' § 727(a)(2) & (5) claims. Held: To prevail on a § 727(a)(2) claim the plaintiff must establish that a transfer was made with actual intent to hinder, delay or defraud creditors. To prevail on a § 727(a)(5) claim the plaintiff must establish that there was a loss or deficiency of debtor's assets. Absent any evidence that a transfer hindered or delayed a creditor, the transfer of an asset with little or no value did not give rise to a § 727(a)(2) or (5) claim. Debtor was granted a discharge.
Title: Blackstone Financial Group Business Trust v. Myler (In re Myler) | Date: Aug-31-2012 | Status: PUBLISHED (Judge Marker) | Case(s): 12-02231
Creditor in a closed chapter 7 case filed an untimely complaint under § 727 seeking to revoke the debtors' discharge, or alternatively to obtain a determination that its particular claim was not subject to discharge under § 523. The Debtors moved to dismiss the complaint as impermissibly late, and the creditor asserted that its claims remained viable under the doctrine of equitable tolling because it did not discover the facts alleged in the complaint until well after the debtors received their discharge. Based on the clear language in § 727(e)(1) and (2) and the case law concerning Rule 4007(c), the Court held that the doctrine of equitable tolling did not apply and the motion to dismiss was granted.
Title: In re Fehrenbacker | Date: Jun-13-2012 | Status: UNPUBLISHED (Judge Thurman) | Case(s): 12-20883
In this chapter 7 case, the Creditor filed a motion for relief from stay on the Debtor's real property. The Debtor alleged that the Creditor did not have standing as a party in interest to request relief from stay because the Creditor did not provide evidence that the original promissory note was in the Creditor's possession. The Court relied on In re Thomas, No. 10-17039, 2012 WL 1574418, at *1 (10th Cir. B.A.P. May 7, 2012), which held that while the original note is not required to be placed into evidence, “the bankruptcy court must make a cognizable determination of standing in a contested matter . . . which requires some review of the standing documents, whether they be admitted into evidence or proffered to the court without objection.” In re Thomas, 2012 WL 1574418, at *5 n.32. In this case, the Creditor's attorney represented that the original note was on its way to his office, but could not provide evidence that the Creditor was otherwise in possession of the original note. Moreover, the Court determined that under 11 U.S.C. § 362(c)(1) the motion for relief from the automatic stay was not moot as to property of the estate when the Debtor received a discharge. The Court continued the Creditor's motion without date and ordered the stay remain in place pending further order of the Court.
Title: Richins v. Bank of America Home Loans (In re Richins) | Date: Mar-13-2012 | Status: UNPUBLISHED (Judge Thurman) | Case(s): 10-02754
The Court denied a Debtors' motion for judgment against a creditor who held a wholly unsecured mortgage against their primary residence in a chapter 7 case under 11 U.S.C. § 506(a) and (d). In its examination of Dewsnup v. Timm, 502 U.S. 410 (1992), which disallowed the strip down of a partially unsecured junior lien on a chapter 7 debtor's real property, the Court discerned no reason that the analysis underlying the Dewsnup decision should differ depending on whether the chapter 7 debtor is attempting to strip a partially secured or wholly unsecured lien. Morever, the Court found Nobelman v. American Savings Bank, 508 U.S. 324 (1993) inapplicable, as it was a chapter 13 case dealing with § 1322 that is inapplicable to a chapter 7 case. The Court concluded that while strip off of a wholly unsecured junior lien in a chapter 13 case is generally permissible, the differing purposes and intent of chapter 7 make it distinguishable from a chapter 13 case such that strip off of wholly unsecured junior lien is inappropriate in chapter 7 cases.
Title: In re South Station, LLC | Date: Dec-13-2011 | Status: UNPUBLISHED (Judge Thurman) | Case(s): 08-27583
The Court denied the fee application for the attorneys who represented the Debtor while it was in chapter 11 bankruptcy. The Court found that the attorneys had failed to disclose a significant amount of payments and who had paid them until the fee application hearing that occurred many months after the services were provided. Further, the Court found that the attorneys had received money directly from the principals of the owner of the Debtor. The Court concluded that without proper and complete disclosure, the application could not be approved under the mandates of § 328, § 329, and Fed. R. Bankr. P. 2016. As an additional and alternative basis to its denial of the fee application, the Court concluded that the attorneys were not disinterested due to their acceptance of payments directly from the principals of the owner of the Debtor who were also the principals of the largest unsecured creditors of the estate.
Title: In re Colon | Date: Oct-5-2011 | Status: UNPUBLISHED (Judge Thurman) | Case(s): 10-25669
The Court denied a homeowner's association's (“HOA”) motion for relief from the automatic stay in a chapter 13 case, finding that postpetition HOA assessments were dischargeable under § 1328(a) where the debtors had vacated the property more than one year prior to filing bankruptcy and surrendered the property to the secured lienholder who failed to foreclose after relief from stay was granted. Despite the fact that the debtors were listed on the title to the property, the Court found that they had no consequential interest in the property that measured up to rights to exercise ownership and control. The Court held that postpetition HOA assessments meet the definition of “claim” under § 101(5) and “claims” can be provided for in chapter 13 plans. See In re Turner, 101 B.R. 751 (Bankr. D. Utah 1989). Furthermore, § 523(a)(16), which excepts HOA postpetition assessments from discharge, does not apply to a discharge under § 1328(a).
Title: Rushton v. Bank of Utah (In re C.W. Mining Company) | Date: Sep-30-2011 | Status: UNPUBLISHED (Judge Mosier) | Case(s): 10-2712
Pre-petition, Bank of Utah entered into a letter of credit transaction with the Debtor wherein the Bank issued a letter of credit in the amount of $362,000 secured by funds in the amount of $362,000 deposited with the Bank by the Debtor. In addition to being secured by the funds on deposit, the letter of credit was cross collateralized to other assets of the Debtor. Post-petition, and knowing that the Debtor was in bankruptcy, the Bank declined to renew the letter of credit and applied the proceeds from the certificate of deposit to payoff the indebtedness. The Trustee commenced an adversary proceeding to recover the entire $362,000 plus interest free and clear of any encumbrance in favor of Bank arguing that by avoiding the transfer under § 549, the Trustee could recover the transfer free and clear of the Bank's security interest and that the transfer was void as a violation of the automatic stay and that the Trustee was entitled to turnover of the $362,000 plus interest under § 542. In doing so, the Trustee did not allege that the post-petition actions of the Bank caused any damage to the Debtor. The Court held that a transfer to a fully secured creditor may not be avoided under § 549 without reviving the secured creditor's lien, that the remedies available to a non-individual debtor are subject to the limitations of the Court's § 105 powers, that § 362(a) does not permit the Court to strip a bank's lien, and that although an act committed in violation of the automatic stay is “void,” some acts cannot be undone. The law does not recognize a void act, and that judicial machinery is not available for use to one that acted in violation of the automatic stay.
Title: In re Harward | Date: Aug-26-2011 | Status: UNPUBLISHED (Judge Thurman) | Case(s): 11-20649
The Court denied a motion for sanctions against Key Bank however, the Court did award sanctions against the Debtors for bringing this frivolous motion. The Debtors had alleged that the bank had violated the stay by sending a notice to them after a lift of stay order was entered. The order gave permission to the bank to take appropriate action to insure its rights to a deficiency claim. The Court noted that every notice that is sent by a creditor after a bankruptcy is filed is not a per se violation of the stay. Some degree of reasonableness is needed. Sanctions against the debtors in the amount of the attorneys fees incurred by the bank for defending against the motion were awarded to the bank.
Title: In re JL Building | Date: Jun-24-2011 | Status: UNPUBLISHED (Judge Thurman) | Case(s): 08-27671
On the trustee's motion for a § 363 sale of the debtor's principal asset, the Court reviewed the factors established in In re Medical Software Solutions, 286 B.R. 431 (Bankr. D. Utah 2002), and approved the sale as being an appropriate use of the trustee's business judgment and in the best interest of creditors. Further, the value obtained by the sale was consistent with listing agreements and offers the debtor had made while operating as a debtor in possession, so the former-debtor-in-possession management's objection was overruled. The Court also discussed the ability of former management and/or equity holders to object to a sale. In applying C.W. Mining v. Aquila (In re C.W. Mining), 636 F.3d 1257 (10th Cir. 2011), the Court determined that the trustee was the only party who could cause the debtor to object to the sale and thus former management or equity holders must independently establish their standing to object.