bk blog

5th cir

Kane v. Nat’l Union Fire Ins. Co., 07-30611 (Jul 14)
A finding of summary judgment in a PI suit, as well as judicial estoppal of the plaintiffs/debtors due to their failure to list the suit in their Chapter 7 schedules, and denial of trustee’s motion to be substituted in the case as the real party in interest, are reversed and the case is remanded because

+the PI claim became an asset of the estate upon filing of the petition
+the trustee is the real party in interest and never abandoned his right
+the debtors only benefit if a PI judgment yields a surplus to the estate

The Appellate Court also found that a prior circuit court determination in the case did not control in bankruptcy court, and the district court (which ruled that the circuit court decision controlled as a matter of law) abused its discretion.

6th cir

Phar-Mor, Inc. v. McKesson Corp., 05-4525, 05-4526 (Jul 17)
Vendor’s administrative-expense priority on a reclamation claim is not extinguished when the goods to which that claim applies are sold and the proceeds used to satisfy a secured creditor’s claim. The vendor retains it’s priority in those proceeds of the estate that remain after secured creditors are satisfied.

10th cir

In re Tri-Valley Distrib., Inc., 06-4279, 06-4280 (Jul 15)
In suit alleging state claims for fraudulent transfer and negligent lending, the parties’ motions to dismiss each other’s appeals for lack of jurisdiction are granted where:

+ bankruptcy appellate panel’s order was not final and appealable
+ denial of defendant’s motion to dismiss was not a final collateral order entitled to review
+ bankruptcy appellate panel acted within its authority
+ there was no jurisdiction to review the merits of a section 1334(c)(1) abstention issue

In re: US Med., Inc., 07-1259 (Jul 15)
Creditor is not a non-statutory insider of the debtor for purposes of 547(b)(4)(B) and a transaction between that creditor and the debtor will not be avoided where

+ the transactions at issue were at arm’s length
+ there is no undue influence or control by creditor

In sum, while creditor is only a “non-statutory insider” when its transaction of business with the debtor is not at arm’s length or there is undue influence; no such requirements are needed if the creditor qualifies as an insider per statute (”statutory insider”).

3rd cir

Windt v. Qwest Communications, 06-4662, 06-4808 [June 10, 2008]
In a lawsuit brought by bankruptcy trustees of a Dutch company asserting various claims against defendants who were allegedly responsible for the company’s insolvency, judgment dismissing trustee-plaintiff’s complaint on forum non-conveniens grounds is affirmed where the district court did not abuse its discretion in: 1) affording low deference to plaintiffs’ choice of forum in view of Netherlands’ substantial interest in resolving a dispute concerning alleged mismanagement of a Dutch company by board members and officers of that Dutch company; 2) concluding that avoiding problems in the application of foreign law favored dismissal; 3) balancing the public and private interest factors implicated in the case; and 4) determining that the convenience of litigating the dispute in New Jersey was outweighed by the oppressive or vexatious effect on defendants.

8th cir

US v. Mitchell, 07-3136 [June 10, 2008]
Conviction upon defendant’s retrial for knowingly and fraudulently making a false statement under penalty of perjury in a bankruptcy case is affirmed where the circuit court declines to revisit a double jeopardy issue, and there was sufficient evidence to sustain his conviction.

ND IL ED

In re Weadley, 06-1854
Bibby Financial v. Weadley, 07-683
Issued June 11, 2008
Judge A. Benjamin Goldgar

A Series from the New York Times

GRETCHEN MORGENSON of the NY Times July 20, 2008

The collection agencies call at least 20 times a day. For a little quiet, Diane McLeod stashes her phone in the dishwasher. But right up until she hit the wall financially, Ms. McLeod was a dream customer for lenders. She juggled not one but two mortgages, both with interest rates that rose over time, and a car loan and high-cost credit card debt. Separated and living with her 20-year-old son, she worked two jobs so she could afford her small, two-bedroom ranch house in suburban Philadelphia, the Kia she drove to work, and the handbags and knickknacks she liked.

Then last year, back-to-back medical emergencies helped push her over the edge. She could no longer afford either her home payments or her credit card bills. Then she lost her job. Now her home is in foreclosure and her credit profile in ruins.

Ms. McLeod, who is 47, readily admits her money problems are largely of her own making. But as surely as it takes two to tango, she had partners in her financial demise. In recent years, those partners, including the financial giants Citigroup, Capital One and GE Capital, were collecting interest payments totaling more than 40 percent of her pretax income and thousands more in fees. [read more]

In re Fred S. Weiner, 05-54630

HC Processing Center v. Weiner, 06-00688

Issued July 03, 2008

Judge Pamela S. Hollis

View and download the opinion in PDF format here

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In re Oscarson, 05-52582

Green Bay Packaging v. Oscarson, 06-00511

Issued July 02, 2008

Judge Pamela S. Hollis

View and download the opinion in PDF format here

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In Re Casa de Cambio Majapara, 08-05230

Casa de Cambio v. Wachovia Bank, 08-00177

Issued July 09, 2008

Judge Bruce W. Black

View and download the opinion in PDF format here

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In re Carter, 05-31646

Structured Asset Services v. Carter, 05-02602

Issued June 4, 2008

Judge Susan Pierson Sonderby

View and download the opinion in PDF format here

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9^th cir

Donell v. Kowell, 06-55544 [July 1, 2008]

District court required investor to disgorge profits from a Ponzi scheme pursuant to requirements of the UFTA. The judgment was affirmed by court of appeals, which:

1) adopted the standard 2-step analysis for determining liability;

2) found no error in the district court’s application of the analysis;

3) determined court could require innocent investors to disgorge net profits; and

4) declined to permit good faith investors to claim offsets for expenses.

GE Capital v. Future Media, 07-55694 [July 3, 2008]

Bankruptcy court’s order denying default interest and attorney’s fees to a creditor is reversed and remanded where the appellate court found that

1) the bankruptcy court had improperly applied In re Entz-White Lumber and Supply, 850 F.2d 1338 (cir 9, 1988); and

2) the default rate is presumptively valid unless its application would violate non-bankruptcy law.

11^th cir

In Re: Donovan, 07-13046 [July 2, 2008]

The circuit court lacks jurisdiction to review a bankruptcy court’s order denying an unsecured creditor’s motion to dismiss a Chapter 7 case when the bankruptcy court neither conclusively resolved the bankruptcy case as a whole nor resolved any adversary proceeding or claim.

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3^rd cir

In Re: Mansaray-Ruffin, No. 05-4790 [June 24, 2008]

A debtor in a Chapter 13 bankruptcy case did not invalidate a lien on her property by providing for it as an unsecured claim in her confirmed plan, without initiating an adversary proceeding as required by the Federal Rules of Bankruptcy Procedure.

4^th cir

Tidewater Fin. Co. v. Kenney, No. 07-1664 [June 25, 2008]

In a Chapter 13 bankruptcy proceeding, an order confirming the debtor’s Chapter 13 bankruptcy plan is reversed and the case remanded for further proceedings where: 1) the parties are left to their contractual rights and obligations and a creditor may pursue an unsecured deficiency claim under state law after a debtor satisfies the requirements for plan confirmation under section 1325(a)(5)(C) by surrendering his 910 vehicle; and 2) the circuit court joints the Seventh Circuit Court of Appeals in further recognizing that such unsecured debt need not be paid in full any more than other unsecured debts, but it cannot be written off in toto while other unsecured creditors are paid some fraction of their entitlements.

6^th cir

Chase Manhattan Mortgage Corp. v. Shapiro, No. 06-1538 [June 26, 2008]

In bankruptcy proceedings, judgment rejecting a bankruptcy court’s decision that the earmarking doctrine did not apply to a new mortgage as a preferential transfer and that the estate was diminished by the perfection of the new mortgage is reversed where: 1) the trustee established the elements of an avoidable preference set forth in section 547; 2) plaintiff was not a “new creditor” which precluded it from invoking the earmarking doctrine since it refinanced its own loan with debtor; and 3) the lapsed perfection of the original mortgage and plaintiff’s late perfection of the new mortgage diminished debtor’s estate.

9^th cir

Espinosa v. United Student Aid Funds, Inc., No. 06-16421 [June 24, 2008]

In a case arising from bankruptcy proceedings in which plaintiff-debtor obtained a discharge order, but was later pursued by defendant-creditor for a student loan debt that debtor argued had been discharged, the matter is remanded for consideration of whether the bankruptcy court’s discharge order in the case was entered as a result of a clerical error and, if so, whether to correct it so as to conform to debtor’s Chapter 13 plan.

Cent. Valley AG Enters. v. US, No. 05-16177 [June 25, 2008]

In a bankruptcy appeal involving debtor’s objection to a government tax claim, dismissal of the action is reversed where: 1) the district court erred in ruling that the statutory res judicata provision in 11 U.S.C. section 505(a)(2)(A) deprived it of subject matter jurisdiction to review the tax treatment of any partnership item that has been administratively determined by the IRS and has become final pursuant to the Tax Equity And Fiscal Responsibility Act of 1982 (TEFRA); and 2) 11 U.S.C. section 505(a)(1) grants the district court subject matter jurisdiction to review the tax treatment of debtor’s partnership items, notwithstanding TEFRA.

NY court of appeals

AG Capital Funding Partners v. State Street Bank and Trust Co., No. 114 [June 25, 2008]

In an action alleging breach of contract, violation of federal Trust Indenture Act, breach of fiduciary duty, and negligence based on defendant’s alleged failure to deliver debt transaction registration statements required to secure a debt, the court of appeals finds that: 1) plaintiffs’ contract and Trust Indenture Act claims were barred by a release previously executed by plaintiffs as part of a bankruptcy settlement and that no fiduciary duties existed; however; 2) because negligence claims were not barred by the release and there were issues of fact as to whether defendant owed and violated a duty of care, plaintiffs’ cause of action for negligence is reinstated.

By J. Aversa, AP Economics Writer (via Yahoo!)

WASHINGTON - First the good news: The worst of the painful housing slump and the credit crunch might come to an end this year. Now the bad: The economy will weaken further and unemployment will rise.

cir 2

In re: Penn Traffic Co. , No. 07-1854  [April 29, 2008]

A party (other than the debtor) to an executory contract cannot make the contract non-executory (hence beyond rejection) by tendering performance after the debtor has filed. The debtor retains its right to reject the contract if it is not in the best interest of the estate to honor it.

cir 5

In the Matter of: Babcock & Wilcox Co., No. 07-30377 [May 1, 2008]

An award of Attorneys’ Fees is affirmed on an appeal from a bankruptcy case. It was not an abuse of discretion for the bankruptcy court to award fees at half the normal hourly rate for travel time not spent working.

In re API, 07-06720
Ch. 11 Trustee and Committee of Unsecured Creditors v.
Marathon Financial Insurance Co., Inc., RRG 08-00089
Issued June 17, 2008
Judge Carol A. Doyle
Read and download the opinion in PDF format here

Effective June 27, Judge Squires will be sitting in RM 4016 at the DuPage County Courthouse located at 505 North County Farm Road, Wheaton, Illinois. Hearings should be noticed for the new room, but all times remain the same. 341 Meetings have also changed location to RM 2017 of the courthouse.

Read more about scheduling here  || Get directions and view locations here

In re Orseno, 06-002497 [June 10, 2008]

View and download here

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Trustee v. Rowland Machinery, 07-000917 [June 10, 2008]

View and download here

Technorati Tags: opinion,case,adversary,chapter 11,chapter 7,chapter 13,bankruptcy,nd il ed,northern district,illinois,eastern division,judge,schmetterer

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Fearing Foreclosure, Debtors Sue Lenders Over Excessive Mortgages By Martha Neil

A group of struggling borrowers in Miami and Ft. Lauderdale has filed 25 suits in Federal Court. According to the Miami Herald

They have beaten their lender to the courthouse by filing lawsuits that allege the institutions committed fraud and violated federal lending laws by overstating the borrowers’ incomes to qualify them for loans, changing the loan terms just before closing, and failing to disclose the loan costs

Apparently similar lawsuits are being filed by borrowers throughout the United States.

Bankruptcy In re Eckert, 05 B 54618

Adversary Trustee v. Schlossberg, et al., 07 A 00450

Issued June 3, 2008

Judge John H. Squires

View and download the opinion in PDF format here

the upshot: on the question of whether a series of real estate sales made by a debtor-to-be in the years preceding his filing constitute fraudulent transfers avoidable by the trustee, the court answers ‘yes’ on all counts.

ed. note: I believe that this opinion may also find its way into the Journal of the American Bankruptcy Institute. 

Opinion Trustee v. Ulz, 07 A 1047

Issued June 6, 2008

Judge A. Benjamin Goldgar

view and download the opinion in pdf format here

the upshot:  the bankruptcy estate consists of “all legal or equitable interests of the debtor in property as of commencement of the case” 11 U.S.C. § 541(a)(1) - and whether the debtor has an interest in that property to begin with is a matter of state law. In re Okon, 310 B.R. 603, 607 (Bankr. N.D. Ill. 2004). Illinois law looks beyond mere title to property and may even consider the debtor to be the “owner” of property titled in the name of another. 30A Illinois Law & Prac. Property §11 (1994).

The Lake County bankruptcy call scheduled for August 8, 2008, has been reset to August 1, 2008. There will be no Lake County call on August 8.

See the announcement on the court’s website here and download it as a PDF here

U.S. Economy: Confidence Falls as Home Values Decline

By Bob Willis

Confidence among American consumers fell in May to the lowest level since 1992 as the two-year housing slump showed no sign of bottoming.

The Conference Board’s confidence index declined more than forecast to 57.2. The S&P/Case-Shiller home-price index dropped 14.4 percent in March from a year earlier, the most since the figures were first published in 2001. Sales of new homes were the second-lowest since 1991 in April.

The slide in home values, along with gasoline near $4 a gallon and rising unemployment, threatens to hobble consumer spending.

When confidence is as bad as it is on the consumer side, it’s hard to believe we’re going to be buying a lot of homes in the near term,” said Scott Anderson, a senior economist at Wells Fargo & Co. in Minneapolis, Minnesota.

-from Bloomberg

By Jill Michaux, Kansas Bankruptcy Attorney May 9, 2008

The Executive Office of the U.S. Trustee announced today that it will resume auditing debtors in consumer bankruptcy cases starting May 12, 2008. One in 1000 consumer bankruptcy cases in each judicial district will be chosen for random audit, according to the program’s website.

The debtor audits were temporarily halted by the U.S. Trustee program in January 2008 for budgetary reasons. Previously, 1 in 250 consumer bankruptcy cases were selected for random audit by independent accounting firms contracted for by the U.S. Trustee Program.

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In re J.S. II, L.L.C., et al., 07-3856

Issued: May 27, 2008

Judge: Hon. Jacqueline P. Cox

view and download opinion in PDF format here

Beginning June 2008 transcripts of court proceedings in the Northern District of Illinois will be available on the PACER system

IF 90-days or less has passed since the transcript was ordered

THEN only the party that ordered that transcript may view it

IF 90-days or more has passed since the transcript was ordered

THEN any PACER user may view the transcript

Attorneys bear the responsibility for identifying personal information that might need to be redacted from the transcript, and for providing the court reporter with notice of same. The court reporter is responsible to follow up on those instructions.

The fee cap of $2.40 will not apply to transcripts viewed on the PACER system.

For more information see Policy Regarding Availability of Court Proceedings or the Court’s website at www.ilnd.uscourts.gov

Forecasters see weak economy, higher unemployment

By J. Aversa, AP Economics Writer

First the good news: The worst of the painful housing slump and the credit crunch might come to an end this year. Now the bad: The economy will weaken further and unemployment will rise.

– from Yahoo!