Filed May 8, 2007. Opinion by Judge Richard D. Bennett.
This case was an appeal from the Order of United States Bankruptcy Judge Robert A. Gordon denying a Motion to Reconsider filed by Appellant-Debtors John S. Breen and Theresa J. Breen ("Appellants").
The Appellants filed a chapter 7 bankruptcy on May 17, 2002. On August 28, 2002, an Order of Discharge was entered and the case was closed on September 15, 2005. In 2003, before the bankruptcy case was closed, Appellant John Breen filed a complaint against his former employer in the Circuit Court for Baltimore County (the "State Court Litigation") alleging numerous causes of action based in large part from the allegation that Mr. Breen was not paid the full value of commissions earned while working as a finance manager for a car dealership.
In response to a motion to dismiss by the defendants in the State Court Litigation, Appellants filed a motion to reopen their bankruptcy case, which was granted "for the limited purpose of permitting the Debtor(s) to determine the estate’s interest in the state court action..." The Bankruptcy Court also ordered that a trustee be appointed in the reopened case (the "Trustee").
On May 31, 2006, the Trustee sought the Bankruptcy Court's approval of a settlement that he reached with the defendants in the State Court Litigation. The Appellants objected to the proposed settlement on the grounds that "'[t]he Debtor, John Breen, has an individual interest, separate and distinct from the estate, in the State Litigation, to which the Trustee’s authority does not extend.'"
The Bankruptcy Court found "'[T]hat (a) but for the amount of $500, the causes of action set forth in the Complaint and Amended Complaint pending in the Circuit Court of Baltimore County, ... are property of the bankruptcy estate, (b) the Trustee has good and sufficient cause for settling the State Litigation ... and (c) John Breen (the "Debtor") is entitled to an exemption in the amount of $5,028.51.'"
The Appellants appealed two issues: "(a) Whether the Bankruptcy Court erred in exercising jurisdiction over debtor’s post-petition wages and other state law claims and by extending the Trustee's authority to administer non-estate property?;" and "(b) Whether the Bankruptcy court erred in concluding that claims based upon post-petition events, during debtor's post-petition employment, and giving rise to post-petition damages, are property of the Chapter 7 bankruptcy estate?"
In rejecting the Appellants' arguments, the Court found that (1) "the Bankruptcy Court possessed 'related to' jurisdiction over the State Court Litigation;" (2) "the Trustee possessed authority to pursue the settlement of the" State Court Litigation; (3) "the Bankruptcy Court provided the Appellants with a full and fair opportunity to present evidence establishing the existence and value of post-petition claims before approving the proposed settlement;" and (4) the Bankruptcy Court's factual findings were not clearly erroneous.
Orders of the United States Bankruptcy Judge Robert A. Gordon are AFFIRMED.
The full opinion is available in PDF format.
Showing posts with label bankruptcy. Show all posts
Showing posts with label bankruptcy. Show all posts
Friday, May 11, 2007
Friday, May 4, 2007
In re: Melvin and Aretha Watson (Maryland U.S. Bankr. Ct.)
Signed April 11, 2007--Opinion by Chief Judge Duncan W. Keir.
Melvin and Aretha Watson ("Debtors") filed their Second Amended Chapter 13 Plan. Debtors' original Chapter 13 plan was met with objection by the agent for five different unsecured creditors, which together represented an alleged 21% of the unsecured claims. Debtors' Second Amended Plan proposed the same payment to the Trustee for the first four months with a slight monthly increase for the remaining 56 months. At a September 2006 hearing ("September Hearing") held upon the Second Amended Plan, the Trustee informed the court that Debtors had agreed to further amend their plan, this time increasing significantly monthly payments for the final 55 months of the plan. At the September Hearing, the parties stipulated that Debtors' income exceeded that of the median family income and that Debtors owned two vehicles, neither of which was collateral for a secured debt requiring monthly installment payments. Further, Debtors listed as an allowable expense both an operating allowance and ownership allowance for each vehicle. Various interested parties disputed Debtors' entitlement to the ownership allowance because Debtors did not have secured payments due as payment for the vehicles. All the parties agreed at the initial hearing that if Debtors were not entitled to claim such expense as part of the analysis required by 11 U.S.C. 707(b), Debtors would be unable to confirm a plan unless the court found that projected disposable income for the purposes of Section 1325(b)(1) was not required to be the disposable income calculated pursuant to Section 707(b). The Debtors' actual expenses on Schedule J differed significantly from those set forth under Section 707(b).
The first issue raised was whether, when applying the means test of Section 707(b), Debtors are entitled to deduct as allowable expenses both ownership and operational vehicle expenses where the subject vehicles are not subject to liens. The second question was whether the court must restrict its confirmation analysis to the final number shown on Form B22C, or whether the court may also take into account other evidence regarding income and expense of Debtors at the time confirmation is considered.
The Bankruptcy Abuse Prevention And Consumer Protection Act of 2005 ("BAPCPA") amended Section 707(b) to include, inter alia, new subparagraph (b)(2). Under this new provision, in certain cases, the court shall presume abuse exists if the debtor's CMI, reduced by amounts determined under clauses (ii), (iii), and (iv) and multiplied by 60, is not less than the lesser of: (A) $10,000.00, or (B) the greater of 25% of the debtor's non-priority unsecured claims in the case, or $6,000.00. This calculation of expenses becomes relevant and applicable to the issue of confirmation of a debtor's plan in a Chapter 13 case by virtue of Section 1325(b), which provides in substance that if the Trustee or holder of an allowed unsecured claim objects to confirmation, the court may approve the plan only if, as of the effective date of the plan, the value of property to be distrubted under the plan on account of such claims is not less than the amount of such claims, or the plan provides that all of the debtor's projected disposable income to be received during the applicable commitment period of the plan will be applied to make payments to unsecured creditors under the plan. The term "disposable income" is defined as CMI received by the debtor (other than child support, foster care payments or disability payments for a dependent child to the extent reasonably necessary to be expended for such child) ("Adjusted CMI"), less amounts reasonably necessary to be expended for the maintenance and support of the debtor or dependent of the debtor, charitable contributions to a qualified religious or charitable entity up to 15% of debtor's gross income, and expenditures necessary for the continuation, preservation, and operation of a debtor's business.
BAPCPA added new subsection 1325(b)(3) as to the determination of amounts reasonably necessary to be expended. Where the debtor's Adjusted CMI when multiplied by 12 is greater than the applicable median family income for the State, then amounts reasonably necessary to be expended shall be determined in accordance with subparagraphs (A) and (B) of Section 707(b)(2). In other words, in a Chapter 13 case in which a party-in-interest has objected to confirmation, a plan can only be confirmed if the plan pays 100% of the allowed claims provided for in the plan, or the plan provides that all of the debtor's projected disposable income would be applied to make payments to unsecured creditors for the period of the plan. Projected disposable income is the Adjusted CMI of the debtor minus amounts reasonably necessary to be expended for certain support and maintenance. If the debtor's CMI multiplied by 12 exceeds the median family income applicable to the debtor's household, amounts reasonably necessary to be expended are determined under Section 707(b)(2)(A)(ii). This provision further adds to such expenses the enumerated items set forth in Section 707(b)(2)(A)(ii)(II, III, IV and V), (iii) and (iv). This calculation of expenses is the Allowable Expenses. Although perhaps not clearly stated in the statute, courts (including this Court) have held that a debtor is not entitled to include the aggregate of the Local Ownership Allowance plus the average monthly loan payment for a vehicle in calculating the Allowable Expense.
The remaining issue is the relationship between "disposable income" and the "projected disposable income" that may be required to be applied to payments under the plan pursuant to Section 1325(b)(1)(B). The Court reasoned that § 1325(b)(1)(B)'s requirement that a plan propose to pay projected disposable income means that the number resulting from Form B22C is a starting point for the Court's inquiry only. Section 1325(b)(2) defines Disposable Income but § 1325(b)(1)(B) requires that a debtor propose a plan paying Projected Disposable Income. The word "projected" means to calculate, estimate, or predict [something in the future] based on present data or trends. By placing the word "projected" next to "disposable income," Congress modified the import of "disposable income." The significance of "projected" is that it requires the Court to consider both future and historical finances of a debtor in determining compliance with § 1325(b)(1)(B). Consequently, the Court held that the Local Ownership Allowance is properly included by the debtor in the calculation of "disposable income" on Form B22C. The Court further held that "disposable income" as calculated on Form B22C is the presumptive "projected disposable income" for application of Section 1325(b)(1)(B). However, by evidence a party may demonstrate "a substantial change in circumstances such that the numbers contained in Form B22C are not commensurate with a fair projection of the debtor's budget in the future. If the presumption is rebutted, a projected budget based upon the evidence, reflecting projected earnings and projected reasonable necessary expenses, will govern the determination of "projected disposable income" for purposes of confirmation of the plan.
The full opinion is available in PDF.
Melvin and Aretha Watson ("Debtors") filed their Second Amended Chapter 13 Plan. Debtors' original Chapter 13 plan was met with objection by the agent for five different unsecured creditors, which together represented an alleged 21% of the unsecured claims. Debtors' Second Amended Plan proposed the same payment to the Trustee for the first four months with a slight monthly increase for the remaining 56 months. At a September 2006 hearing ("September Hearing") held upon the Second Amended Plan, the Trustee informed the court that Debtors had agreed to further amend their plan, this time increasing significantly monthly payments for the final 55 months of the plan. At the September Hearing, the parties stipulated that Debtors' income exceeded that of the median family income and that Debtors owned two vehicles, neither of which was collateral for a secured debt requiring monthly installment payments. Further, Debtors listed as an allowable expense both an operating allowance and ownership allowance for each vehicle. Various interested parties disputed Debtors' entitlement to the ownership allowance because Debtors did not have secured payments due as payment for the vehicles. All the parties agreed at the initial hearing that if Debtors were not entitled to claim such expense as part of the analysis required by 11 U.S.C. 707(b), Debtors would be unable to confirm a plan unless the court found that projected disposable income for the purposes of Section 1325(b)(1) was not required to be the disposable income calculated pursuant to Section 707(b). The Debtors' actual expenses on Schedule J differed significantly from those set forth under Section 707(b).
The first issue raised was whether, when applying the means test of Section 707(b), Debtors are entitled to deduct as allowable expenses both ownership and operational vehicle expenses where the subject vehicles are not subject to liens. The second question was whether the court must restrict its confirmation analysis to the final number shown on Form B22C, or whether the court may also take into account other evidence regarding income and expense of Debtors at the time confirmation is considered.
The Bankruptcy Abuse Prevention And Consumer Protection Act of 2005 ("BAPCPA") amended Section 707(b) to include, inter alia, new subparagraph (b)(2). Under this new provision, in certain cases, the court shall presume abuse exists if the debtor's CMI, reduced by amounts determined under clauses (ii), (iii), and (iv) and multiplied by 60, is not less than the lesser of: (A) $10,000.00, or (B) the greater of 25% of the debtor's non-priority unsecured claims in the case, or $6,000.00. This calculation of expenses becomes relevant and applicable to the issue of confirmation of a debtor's plan in a Chapter 13 case by virtue of Section 1325(b), which provides in substance that if the Trustee or holder of an allowed unsecured claim objects to confirmation, the court may approve the plan only if, as of the effective date of the plan, the value of property to be distrubted under the plan on account of such claims is not less than the amount of such claims, or the plan provides that all of the debtor's projected disposable income to be received during the applicable commitment period of the plan will be applied to make payments to unsecured creditors under the plan. The term "disposable income" is defined as CMI received by the debtor (other than child support, foster care payments or disability payments for a dependent child to the extent reasonably necessary to be expended for such child) ("Adjusted CMI"), less amounts reasonably necessary to be expended for the maintenance and support of the debtor or dependent of the debtor, charitable contributions to a qualified religious or charitable entity up to 15% of debtor's gross income, and expenditures necessary for the continuation, preservation, and operation of a debtor's business.
BAPCPA added new subsection 1325(b)(3) as to the determination of amounts reasonably necessary to be expended. Where the debtor's Adjusted CMI when multiplied by 12 is greater than the applicable median family income for the State, then amounts reasonably necessary to be expended shall be determined in accordance with subparagraphs (A) and (B) of Section 707(b)(2). In other words, in a Chapter 13 case in which a party-in-interest has objected to confirmation, a plan can only be confirmed if the plan pays 100% of the allowed claims provided for in the plan, or the plan provides that all of the debtor's projected disposable income would be applied to make payments to unsecured creditors for the period of the plan. Projected disposable income is the Adjusted CMI of the debtor minus amounts reasonably necessary to be expended for certain support and maintenance. If the debtor's CMI multiplied by 12 exceeds the median family income applicable to the debtor's household, amounts reasonably necessary to be expended are determined under Section 707(b)(2)(A)(ii). This provision further adds to such expenses the enumerated items set forth in Section 707(b)(2)(A)(ii)(II, III, IV and V), (iii) and (iv). This calculation of expenses is the Allowable Expenses. Although perhaps not clearly stated in the statute, courts (including this Court) have held that a debtor is not entitled to include the aggregate of the Local Ownership Allowance plus the average monthly loan payment for a vehicle in calculating the Allowable Expense.
The remaining issue is the relationship between "disposable income" and the "projected disposable income" that may be required to be applied to payments under the plan pursuant to Section 1325(b)(1)(B). The Court reasoned that § 1325(b)(1)(B)'s requirement that a plan propose to pay projected disposable income means that the number resulting from Form B22C is a starting point for the Court's inquiry only. Section 1325(b)(2) defines Disposable Income but § 1325(b)(1)(B) requires that a debtor propose a plan paying Projected Disposable Income. The word "projected" means to calculate, estimate, or predict [something in the future] based on present data or trends. By placing the word "projected" next to "disposable income," Congress modified the import of "disposable income." The significance of "projected" is that it requires the Court to consider both future and historical finances of a debtor in determining compliance with § 1325(b)(1)(B). Consequently, the Court held that the Local Ownership Allowance is properly included by the debtor in the calculation of "disposable income" on Form B22C. The Court further held that "disposable income" as calculated on Form B22C is the presumptive "projected disposable income" for application of Section 1325(b)(1)(B). However, by evidence a party may demonstrate "a substantial change in circumstances such that the numbers contained in Form B22C are not commensurate with a fair projection of the debtor's budget in the future. If the presumption is rebutted, a projected budget based upon the evidence, reflecting projected earnings and projected reasonable necessary expenses, will govern the determination of "projected disposable income" for purposes of confirmation of the plan.
The full opinion is available in PDF.
Saturday, April 21, 2007
In Re: Van T. Vu (Maryland U.S.D.C.) (Approved for Publication)
Signed April 17, 2007--Memorandum opinion by Judge Deborah K. Chasanow.
This is an appeal by objecting creditors challenging a December 2006 Bankruptcy Court Order Approving Counsel Fees.
Debtor ("Vu") filed a voluntary Chapter 11 in July 2004. As the case progressed, however, it came to light that Vu had participated in a real estate business with her sister, Minh-Vu Hoang ("Hoang"). In June 2006, Vu's primary counsel moved to employ additional counsel ("Regenhardt") when it became clear that the trustee appointed in Hoang's bankruptcy case intended to file a motion for substantive consolidation of Vu's bankruptcy estate into Hoang's bankruptcy estate, which motion was approved by the Bankruptcy Court.
The Hoang trustee filed a motion to substantively consolidate, asserting that many of the assets claimed by Vu as part of her estate were actually titled in the name of other entitities and that Hoang's estate had a superior claim to the ownership of these properties. In August 2006, the U.S. Trustee filed a motion to convert Vu's Chapter 11 to a liquidation proceeding under Chapter 7 based on an assertion that Vu had made unauthorized payments to some of her creditors from her bankruptcy estate.
In October 2006, Vu's counsel applied for payment of their fees for services in connection with Vu's bankruptcy case. Regenhardt's application indicated her services were primarily directed toward defending against the motion for substantive consolidation and the motion to convert to Chapter 7. The creditors argued that Regenhardt's services did not confer a benefit for Vu's bankruptcy estate and that the fees requested were unreasonable. The Bankruptcy Court determined that the services were reasonable and necessary expenses, and that the hours and fees submitted were reasonable.
Upon review, de novo, this Court found Regenhardt's services were of benefit to the estate. Analysis of the benefit to the estate is whether, at the time at which the services were rendered, a reasonable attorney would have believed they would benefit the estate rather than a subsequent consideration of the practical effects actually acheived by an attorney's services. Creditors further argued that Regenhardt failed to exercise billing judgment. The bankruptcy court found that Regenhardt was presented with an unusually challenging litigation schedule and taught deadlines after starting work in the middle of ongoing litigation. In addition, the litigation regarding the motions for substantive consolidation and the conversion to Chapter 7 were difficult and fact-intensive legal issues and this complexity was compounded by complicated facts associated with convoluted financial transactions which had occurred in the case. In light of these factors, this Court affirmed the Bankruptcy Court's order approving counsel fees, finding the amount of time expended was reasonable and necessary, and Regenhardt's substantial qualifications rendered her fee comparable to or lower than comparable professional fees.
The full opinion is available in PDF.
This is an appeal by objecting creditors challenging a December 2006 Bankruptcy Court Order Approving Counsel Fees.
Debtor ("Vu") filed a voluntary Chapter 11 in July 2004. As the case progressed, however, it came to light that Vu had participated in a real estate business with her sister, Minh-Vu Hoang ("Hoang"). In June 2006, Vu's primary counsel moved to employ additional counsel ("Regenhardt") when it became clear that the trustee appointed in Hoang's bankruptcy case intended to file a motion for substantive consolidation of Vu's bankruptcy estate into Hoang's bankruptcy estate, which motion was approved by the Bankruptcy Court.
The Hoang trustee filed a motion to substantively consolidate, asserting that many of the assets claimed by Vu as part of her estate were actually titled in the name of other entitities and that Hoang's estate had a superior claim to the ownership of these properties. In August 2006, the U.S. Trustee filed a motion to convert Vu's Chapter 11 to a liquidation proceeding under Chapter 7 based on an assertion that Vu had made unauthorized payments to some of her creditors from her bankruptcy estate.
In October 2006, Vu's counsel applied for payment of their fees for services in connection with Vu's bankruptcy case. Regenhardt's application indicated her services were primarily directed toward defending against the motion for substantive consolidation and the motion to convert to Chapter 7. The creditors argued that Regenhardt's services did not confer a benefit for Vu's bankruptcy estate and that the fees requested were unreasonable. The Bankruptcy Court determined that the services were reasonable and necessary expenses, and that the hours and fees submitted were reasonable.
Upon review, de novo, this Court found Regenhardt's services were of benefit to the estate. Analysis of the benefit to the estate is whether, at the time at which the services were rendered, a reasonable attorney would have believed they would benefit the estate rather than a subsequent consideration of the practical effects actually acheived by an attorney's services. Creditors further argued that Regenhardt failed to exercise billing judgment. The bankruptcy court found that Regenhardt was presented with an unusually challenging litigation schedule and taught deadlines after starting work in the middle of ongoing litigation. In addition, the litigation regarding the motions for substantive consolidation and the conversion to Chapter 7 were difficult and fact-intensive legal issues and this complexity was compounded by complicated facts associated with convoluted financial transactions which had occurred in the case. In light of these factors, this Court affirmed the Bankruptcy Court's order approving counsel fees, finding the amount of time expended was reasonable and necessary, and Regenhardt's substantial qualifications rendered her fee comparable to or lower than comparable professional fees.
The full opinion is available in PDF.
Thursday, March 29, 2007
In re Michelle D. Tubman (U.S. Bankruptcy Ct., MD)
Filed March 26, 2007—Opinion by Judge Robert A. Gordon
Debtor, who had a Chapter 13 case dismissed within the preceding 1-year period, moved to extend the automatic stay in her current Chapter 13 case, after the expiration of the 30-day post-petition period. After an initial hearing, the Debtor filed a motion for declaratory judgment as to the extent of the termination of the stay under Section 362(c)(3)(A) and sought imposition of a stay under Section 105(a). A secured creditor, holder of a deed of trust on Debtor’s residence, objected to both motions, arguing that the automatic stay under Section 362(a) had expired in toto by operation of law. The Bankruptcy Court held that: (1) the automatic stay terminated by operation of law on the 30th day post-petition under Section 362(c)(3)(A), (2) an untimely filed motion cannot serve to reimpose the automatic stay under Section 362(c)(3)(B), (3) the termination of the stay under Section 362(c)(3)(A) was limited in scope and the stay, while terminating as to the Debtor, did not terminate as to property of the estate, and (4) the alternative relief requested by Debtor under Section 105(a) appeared unnecessary in light of the Court’s ruling.
The devision is available in PDF.
Debtor, who had a Chapter 13 case dismissed within the preceding 1-year period, moved to extend the automatic stay in her current Chapter 13 case, after the expiration of the 30-day post-petition period. After an initial hearing, the Debtor filed a motion for declaratory judgment as to the extent of the termination of the stay under Section 362(c)(3)(A) and sought imposition of a stay under Section 105(a). A secured creditor, holder of a deed of trust on Debtor’s residence, objected to both motions, arguing that the automatic stay under Section 362(a) had expired in toto by operation of law. The Bankruptcy Court held that: (1) the automatic stay terminated by operation of law on the 30th day post-petition under Section 362(c)(3)(A), (2) an untimely filed motion cannot serve to reimpose the automatic stay under Section 362(c)(3)(B), (3) the termination of the stay under Section 362(c)(3)(A) was limited in scope and the stay, while terminating as to the Debtor, did not terminate as to property of the estate, and (4) the alternative relief requested by Debtor under Section 105(a) appeared unnecessary in light of the Court’s ruling.
The devision is available in PDF.
Wednesday, March 21, 2007
In Re: Marnitta L. King (King v. Wells Fargo Bank, N.A.) (U.S. Bankruptcy Court)
Filed March 20, 2007. Memorandum Opinion by Judge Thomas J. Catliota.
Marnitta L. King (the "Debtor") is a joint owner of the real property located at 5015 Cumberland Street, Capitol Heights, Maryland (the "Property"). Wells Fargo Bank, N.A. ("Wells Fargo") is a secured creditor by virtue of a promissory note, repayment of which is secured by a deed of trust duly recorded among the land records of Prince George's County. There was no dispute that both the note and the deed of trust were executed by the Debtor and the other joint owner (the "Codebtor").
The Debtor filed the instant bankruptcy case seeking relief under chapter 13 of the United States Bankruptcy Code (the "Code") on September 15, 2006, intending to stop a foreclosure sale of the Property scheduled for later that same day. The Debtor alerted Wells Fargo of the bankruptcy filing but Wells Fargo indicated that they would not stop the foreclosure sale because the Debtor had filed two previous bankruptcy cases within a one year period (both cases having been dismissed) and, consequently, there was no automatic stay by virtue of Section 362(c)(4)(A)(i) of the Code. The foreclosure sale was held, at which Wells Fargo was the successful bidder.
The Debtor subsequently filed a Motion to Set Aside Sell [sic], asserting that the foreclosure sale was held in violation of the codebtor stay of Section 1301(a) of the Code, which barred Wells Fargo from proceeding with a post-petition foreclosure sale even though the automatic stay did not arise as to the Debtor pursuant to Section 362(c)(4)(A)(i). Wells Fargo argued that the "vitality of the codebtor stay is at the mercy of the status of the automatic stay."
The Court held that the terms of Section 362(c)(4)(A) are unambiguous in that only the automatic stay of Section 362(a) is prevented from going into effect "when the factual predicate enumerated in Section 362(c)(4) exists. Section 362(c)(4)(A)(i) does not address the applicability of the codebtor stay that arises under Section 1301(a), and it certainly does not provide that the codebtor stay of Section 1301 does not come into effect if the circumstances of Section 362(c)(4) are met." Further, the Court found that, "Nowhere in Section 1301(a) is the codebtor stay limited, qualified, or effected by Section 362(c)(4)." The Court concluded that Wells Fargo's "foreclosure sale was in violation of the codebtor stay and is void."
This opinion is available in PDF.
Marnitta L. King (the "Debtor") is a joint owner of the real property located at 5015 Cumberland Street, Capitol Heights, Maryland (the "Property"). Wells Fargo Bank, N.A. ("Wells Fargo") is a secured creditor by virtue of a promissory note, repayment of which is secured by a deed of trust duly recorded among the land records of Prince George's County. There was no dispute that both the note and the deed of trust were executed by the Debtor and the other joint owner (the "Codebtor").
The Debtor filed the instant bankruptcy case seeking relief under chapter 13 of the United States Bankruptcy Code (the "Code") on September 15, 2006, intending to stop a foreclosure sale of the Property scheduled for later that same day. The Debtor alerted Wells Fargo of the bankruptcy filing but Wells Fargo indicated that they would not stop the foreclosure sale because the Debtor had filed two previous bankruptcy cases within a one year period (both cases having been dismissed) and, consequently, there was no automatic stay by virtue of Section 362(c)(4)(A)(i) of the Code. The foreclosure sale was held, at which Wells Fargo was the successful bidder.
The Debtor subsequently filed a Motion to Set Aside Sell [sic], asserting that the foreclosure sale was held in violation of the codebtor stay of Section 1301(a) of the Code, which barred Wells Fargo from proceeding with a post-petition foreclosure sale even though the automatic stay did not arise as to the Debtor pursuant to Section 362(c)(4)(A)(i). Wells Fargo argued that the "vitality of the codebtor stay is at the mercy of the status of the automatic stay."
The Court held that the terms of Section 362(c)(4)(A) are unambiguous in that only the automatic stay of Section 362(a) is prevented from going into effect "when the factual predicate enumerated in Section 362(c)(4) exists. Section 362(c)(4)(A)(i) does not address the applicability of the codebtor stay that arises under Section 1301(a), and it certainly does not provide that the codebtor stay of Section 1301 does not come into effect if the circumstances of Section 362(c)(4) are met." Further, the Court found that, "Nowhere in Section 1301(a) is the codebtor stay limited, qualified, or effected by Section 362(c)(4)." The Court concluded that Wells Fargo's "foreclosure sale was in violation of the codebtor stay and is void."
This opinion is available in PDF.
Tuesday, January 23, 2007
Halkas v. Grigsby (Maryland U.S.D.C.)(not approved for publication)
Decided January 22, 2007--Memorandum Opinion by Judge Deborah K. Chasanow (not approved for publication)
Debtor initially filed Chapter 7 bankruptcy petition in 2001 which was ultimately converted to Chapter 13 in 2002. At the time the Chapter 13 plan was confirmed, Debtor owned two residential properties. The plan called for Debtor to retain both properties while making payments to her creditors; however, in 2003, Debtor consented to sell one of the properties, the proceeds of which would be partially retained by Debtor, partially paid to Trustee for the benefit of the creditors, and partially remitted to Debtor’s former spouse who had been co-owner before the sale. In August 2005, a motion to dismiss by Trustee was pending because Debtor did not stay current on payments agreed to in a modified plan from 2004 reducing her monthly payment. Debtor moved to sell the second residential property and in October 2005 the bankruptcy court ordered that all net sale proceeds be paid directly to Trustee and disbursed to pay creditors, up to the amount required to pay all claims against Debtor’s bankruptcy estate.
After completion of sale and Trustee’s distribution of proceeds, Debtor filed a motion contesting whether Trustee had the right to retain all proceeds of the sale. The bankruptcy court denied this motion in September 2006. Debtor filed a notice of appeal and filed an emergency motion in the bankruptcy court to stay the disbursement of the sale proceeds, which motion was denied September 29, 2006. On or about September 30, 2006, Trustee disbursed all remaining funds in the bankruptcy estate pursuant to the bankruptcy court’s Orders. Trustee filed a notice of plan completion in the bankruptcy court on October 5, 2006, and the bankruptcy court granted Debtor a discharge the next day.
On Debtor’s appeal, Trustee argued for dismissal pursuant to the doctrine of equitable mootness, definining mootness as when the issues presented are no longer ‘live’ or the parties lack a legally cognizable interest in the outcome. To survive an assertion that a claim is moot, a party must have suffered an actual injury that can be redressed by favorable judicial decision. Even the availability of a partial remedy is sufficient to prevent a case from being moot. Since Trustee paid out all the proceeds of the sale pursuant to the bankruptcy court’s Orders, and no creditors were parties to the appeal, it would be impossible to fashion any relief for Debtor even if she prevailed in the appeal because the nonparty creditors could not be ordered to return funds they had received. Consequently, the action was moot.
Debtor argued that the case was not moot because if she were to prevail on appeal, she could attempt to enforce a money judgment against Trustee for the distributed funds. The Court found that Debtor could not recover funds from Trustee personally because Trustee never held the proceeds from the sale for her own use and Trustee indicated that the funds were distributed pursuant to the bankruptcy court’s Orders.
Debtor relied on an unpublished opinion, Walker v. Grigsby, No. AW-06-62, slip op. at 4 (D.Md. April 11, 2006), in which the court concluded that an appeal by a debtor’s attorney contesting an order granting him only part of his requested fee was not constitutionally moot. Because the Debtor and Trustee remained parties to the case and at least one creditor continued to be subject to the bankruptcy court’s jurisdiction, the court reasoned that the attorney might have the ability to seek payment, if he succeeded on appeal, from the Debtor, the Trustee, or other creditors. The instant case, however, differs in that the Trustee alleged she had paid out all available funds to nonparty creditors pursuant to the bankruptcy court’s Orders.
The full opinion is available in PDF
Debtor initially filed Chapter 7 bankruptcy petition in 2001 which was ultimately converted to Chapter 13 in 2002. At the time the Chapter 13 plan was confirmed, Debtor owned two residential properties. The plan called for Debtor to retain both properties while making payments to her creditors; however, in 2003, Debtor consented to sell one of the properties, the proceeds of which would be partially retained by Debtor, partially paid to Trustee for the benefit of the creditors, and partially remitted to Debtor’s former spouse who had been co-owner before the sale. In August 2005, a motion to dismiss by Trustee was pending because Debtor did not stay current on payments agreed to in a modified plan from 2004 reducing her monthly payment. Debtor moved to sell the second residential property and in October 2005 the bankruptcy court ordered that all net sale proceeds be paid directly to Trustee and disbursed to pay creditors, up to the amount required to pay all claims against Debtor’s bankruptcy estate.
After completion of sale and Trustee’s distribution of proceeds, Debtor filed a motion contesting whether Trustee had the right to retain all proceeds of the sale. The bankruptcy court denied this motion in September 2006. Debtor filed a notice of appeal and filed an emergency motion in the bankruptcy court to stay the disbursement of the sale proceeds, which motion was denied September 29, 2006. On or about September 30, 2006, Trustee disbursed all remaining funds in the bankruptcy estate pursuant to the bankruptcy court’s Orders. Trustee filed a notice of plan completion in the bankruptcy court on October 5, 2006, and the bankruptcy court granted Debtor a discharge the next day.
On Debtor’s appeal, Trustee argued for dismissal pursuant to the doctrine of equitable mootness, definining mootness as when the issues presented are no longer ‘live’ or the parties lack a legally cognizable interest in the outcome. To survive an assertion that a claim is moot, a party must have suffered an actual injury that can be redressed by favorable judicial decision. Even the availability of a partial remedy is sufficient to prevent a case from being moot. Since Trustee paid out all the proceeds of the sale pursuant to the bankruptcy court’s Orders, and no creditors were parties to the appeal, it would be impossible to fashion any relief for Debtor even if she prevailed in the appeal because the nonparty creditors could not be ordered to return funds they had received. Consequently, the action was moot.
Debtor argued that the case was not moot because if she were to prevail on appeal, she could attempt to enforce a money judgment against Trustee for the distributed funds. The Court found that Debtor could not recover funds from Trustee personally because Trustee never held the proceeds from the sale for her own use and Trustee indicated that the funds were distributed pursuant to the bankruptcy court’s Orders.
Debtor relied on an unpublished opinion, Walker v. Grigsby, No. AW-06-62, slip op. at 4 (D.Md. April 11, 2006), in which the court concluded that an appeal by a debtor’s attorney contesting an order granting him only part of his requested fee was not constitutionally moot. Because the Debtor and Trustee remained parties to the case and at least one creditor continued to be subject to the bankruptcy court’s jurisdiction, the court reasoned that the attorney might have the ability to seek payment, if he succeeded on appeal, from the Debtor, the Trustee, or other creditors. The instant case, however, differs in that the Trustee alleged she had paid out all available funds to nonparty creditors pursuant to the bankruptcy court’s Orders.
The full opinion is available in PDF
Tuesday, January 9, 2007
Drummond v. Freeland (In re Wilbert H. Freeland, Sr. and Christine E. Freeland) (Maryland U.S. Bankr. Ct.)
Decision entered December 21, 2006--Opinion by Judge James F. Schneider.
The Court summarized its opinion as follows:
The Court summarized its opinion as follows:
This opinion stands for the following propositions: (1) that certain debts that arose as a result of undue influence are nondischargeable pursuant to 11 U.S.C. §523(a)(2)(A), where the plaintiff proves by a preponderance of evidence that undue influence was exerted fraudulently; and (2) that in an adversary proceeding brought in the bankruptcy court to determine a debt to be nondischargeable, where no prior judgment has been awarded in a nonbankruptcy forum, the bankruptcy court may liquidate the damages, enter a nondischargeable judgment, and may also, where appropriate, award punitive damages as part of the nondischargeable judgment, where the plaintiff also proves actual malice in the commission of fraud by clear and convincing evidence. For the reasons stated, the instant complaint will be granted and a nondischargeable judgment in the amount of $200,000, will be entered jointly against both defendants, and the Court will enter an additional nondischargeable judgment for punitive damages against one of the defendants in the amount of $500,000.The case involved a caretaker of a very elderly woman suffering from Alzheimer's disease and dementia. The caretaker and her husband stripped the elderly woman in her care of all of her financial assets and, perhaps, actually hastened her death. The following passaged gives one a flavor of the facts of the case:
It is obvious that between the two defendants, Mrs. Freeland was the most culpable as the leading force in the perpetration of the fraud in this case. She was the better educated of the two, and despite her advanced degree in ethics, the overwhelming evidence presented demonstrates that she was guilty of the following unethical and atrocious misconduct that was so malicious, shocking, evil, vile and reprehensible that it justifies the imposition of significant punitive damages against her individually:
(1) Mrs. Freeland isolated Mrs. Drummond from family members and friends and told Mrs. Drummond that they had abandoned her, in breach of her duty as a caregiver of the elderly to treat Mrs. Drummond with compassion.
(2) Mrs. Freeland denied Mrs. Drummond's family members and friends access to her, preventing them from socializing with her and from assessing her condition and from verifying that she was receiving proper care, in violation of her duty as a caregiver of an elderly and mentally-disabled person to communicate with her family members and friends.
(3) Mrs. Freeland denied medical treatment to Mrs. Drummond to alleviate her mental condition by not taking her to appointments, in violation of her duty to Mrs. Drummond as a care giver to an elderly and mentally-disabled person who was in need of continuing medical supervision, as required by the After Care Plan prepared by Bon Secours Hospital. The Court finds that Mrs. Freeland lied in her testimony at trial when she stated that the reason she did not take Mrs. Drummond to her appointment at Brighter Visions was because Mrs. Drummond refused to go. This directly contradicted her testimony in the Orphans Court to the effect that she had never heard of Brighter Visions at the time Mrs. Drummond was in her care.
(4) Mrs. Freeland removed Mrs. Drummond, an aged, infirm, mentally deficient person from the nursing home to which the hospital released her without any notice to or authorization from family members or trained medical personnel, which this Court finds was ultimately detrimental to Mrs. Drummond's well-being.
(5) Mrs. Freeland forged Mrs. Drummond's signature on a will and a power of attorney, whereby Mrs. Freeland fraudulently made herself a fiduciary in fact of Mrs. Drummond. She then abused her fiduciary position as personal representative and attorney in fact by transferring Mrs. Drummond's property to herself for her own benefit and that of her husband, Mr. Freeland, thereby depriving the plaintiff of her rights as the natural object of Mrs. Drummond's bounty.
(6) Mrs. Freeland obtained possession of Mrs. Drummond's house by use of the forged and fraudulent will, which she and her husband only returned to Taryn Drummond as personal representative of Mrs. Drummond's estate after the will was invalidated by the Orphans Court of Anne Arundel County, at great expense to Mrs. Drummond's estate and Ms. Taryn Drummond personally.
(7) Mrs. Freeland obtained possession of Mrs. Drummond's money in her bank accounts by having Mrs. Drummond make her the joint owner, in violation of her duty of trust to the disabled person and to her family and heirs.
(8) Mrs. Freeland dispossessed Mrs. Drummond's heirs by taking possession of Mrs. Drummond's house and money. She cheated Taryn Drummond, Mrs. Drummond's granddaughter, out of her rights to the money in Mrs. Drummond’s bank accounts by having Mrs. Drummond remove Taryn Drummond as joint owner of the accounts.
(9) Mrs. Freeland made false and misleading statements to Mrs. Drummond's attending physician who completed the death certificate when she told him that she was Mrs. Drummond's "foster daughter."
(10) Mrs. Freeland's misrepresentation to the physician that she was Mrs. Drummond’s "foster daughter" placed her in a false position as a member of the family to decline the performance of an autopsy on the body of Mrs. Drummond. This is highly relevant in light of the next finding.
(11) This Court views as highly suspicious the death of Mrs. Drummond just days after she was stripped of all of her assets by Mr. and Mrs. Freeland, while they kept her incommunicado in a childlike state in their personal residence, outside of the nursing facility and in their exclusive custody and control, away from her family and friends, who were completely ignorant of her whereabouts until Mrs. Freeland advised them of her death.
(12) After becoming Mrs. Drummond's fiduciary by fraud and deception, Mrs. Freeland misappropriated her funds, shared them with Mr. Freeland, and failed to account for their disposition or to remit them to Mrs. Drummond's rightful heirs.
The full opinion is available in PDF.
Friday, December 15, 2006
Barsh v. State of Maryland Central Collection Unit (In re David V. Barsh, Sr.) (Maryland U.S. Bankr. Ct.)
Decided December 12, 2006--Opinion by Chief Judge Duncan W. Keir.
Where the issue of non-dischargeability is presented by application of 11 U.S.C. §523(a)(2),(4), (6), and (15) and for cases commenced prior to October 17, 2005, the federal court having jurisdiction over the bankruptcy case has exclusive jurisdiction to determine the dischargeability issue. The exclusive jurisdiction arises by operation of the effect of 11 U.S.C. §523(c) and Federal Rule of Bankruptcy Procedure 4007. If a complaint is not timely filed, the debt is discharged. After the closing of the bankruptcy case, the state court having jurisdiction over an action for the affected debt, has concurrent jurisdiction to determine whether or not that debt was dischargeable, or non-dischargeable and consequently was, or was not discharged by the discharge injunction granted in the bankruptcy case.
A debtor, faced with a post-discharge collection action by a creditor can seek to remove that state action to the bankruptcy court pursuant to 28 U.S.C. §1452 and/or commence an adversary proceeding before the bankruptcy court seeking a restraining order against the creditor on the basis that the actions being taken by the creditor violate the discharge injunction. If the debtor does neither but instead permits the state court to determine the dischargeability other than pursuant to 11 U.S.C. §523(a)(2), (4), (6), and for pre-BAPCPA cases (15), the question may be preclusively determined by final order of the state court.
The full opinion is available in PDF.
Where the issue of non-dischargeability is presented by application of 11 U.S.C. §523(a)(2),(4), (6), and (15) and for cases commenced prior to October 17, 2005, the federal court having jurisdiction over the bankruptcy case has exclusive jurisdiction to determine the dischargeability issue. The exclusive jurisdiction arises by operation of the effect of 11 U.S.C. §523(c) and Federal Rule of Bankruptcy Procedure 4007. If a complaint is not timely filed, the debt is discharged. After the closing of the bankruptcy case, the state court having jurisdiction over an action for the affected debt, has concurrent jurisdiction to determine whether or not that debt was dischargeable, or non-dischargeable and consequently was, or was not discharged by the discharge injunction granted in the bankruptcy case.
A debtor, faced with a post-discharge collection action by a creditor can seek to remove that state action to the bankruptcy court pursuant to 28 U.S.C. §1452 and/or commence an adversary proceeding before the bankruptcy court seeking a restraining order against the creditor on the basis that the actions being taken by the creditor violate the discharge injunction. If the debtor does neither but instead permits the state court to determine the dischargeability other than pursuant to 11 U.S.C. §523(a)(2), (4), (6), and for pre-BAPCPA cases (15), the question may be preclusively determined by final order of the state court.
The full opinion is available in PDF.
Branigan v. Kahn & Kranigan v. Bateman (Maryland U.S.D.C.)(not approved for publication)
Filed December 14, 2006--Opinion by Judge Deborah K. Chasanow (not approved for publication)
Chapter 13 Trustee appealed orders of the bankruptcy court denying his motions to dismiss and confirming the plans of the debtors. Where each debtor obtained a discharge in bankruptcy within a certain interval of filing and as a result, each is ineligible to obtain a discharge, the sole issue is whether 11 U.S.C. §1328(f), which prohibits a second discharge under certain circumstances, also prohibits the filing of a chapter 13 petition.
In rejecting the Trustee's contention that the ineligibility to obtain a discharge should mean that the debtor is also ineligible to file the petition at all and that the filing is, ipso facto, in bad faith the court held:
While there are some limitations on that general grant of eligibility, see, e.g., §109(g), there is no prohibition based on the inability to be granted a discharge or the fact that the debtor is a serial filer. Indeed, the Supreme Court long ago found that serial filing was not necessarily barred.
Congress has expressly prohibited various forms of serial filings. The absence of a like prohibition on serial filings of Chapter 7 and Chapter 13 petitions, combined with the evident care with which Congress fashioned these express prohibitions, shows that Congress did not intend categorically to foreclose the benefit of Chapter 13 reorganization to a debtor who previously has filed for Chapter 7 relief.
The full opinion is available in PDF.
Chapter 13 Trustee appealed orders of the bankruptcy court denying his motions to dismiss and confirming the plans of the debtors. Where each debtor obtained a discharge in bankruptcy within a certain interval of filing and as a result, each is ineligible to obtain a discharge, the sole issue is whether 11 U.S.C. §1328(f), which prohibits a second discharge under certain circumstances, also prohibits the filing of a chapter 13 petition.
In rejecting the Trustee's contention that the ineligibility to obtain a discharge should mean that the debtor is also ineligible to file the petition at all and that the filing is, ipso facto, in bad faith the court held:
While there are some limitations on that general grant of eligibility, see, e.g., §109(g), there is no prohibition based on the inability to be granted a discharge or the fact that the debtor is a serial filer. Indeed, the Supreme Court long ago found that serial filing was not necessarily barred.
Congress has expressly prohibited various forms of serial filings. The absence of a like prohibition on serial filings of Chapter 7 and Chapter 13 petitions, combined with the evident care with which Congress fashioned these express prohibitions, shows that Congress did not intend categorically to foreclose the benefit of Chapter 13 reorganization to a debtor who previously has filed for Chapter 7 relief.
The full opinion is available in PDF.
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