The Bankruptcy Law Firm, Prof. Corp.
US Supreme Court decision, Bullock v. BankChampaign
Bullock v. BankChampaign (United States Supreme Court, decided 5/13/13), decision on nondischargeability of debt pursuant to 11 USC 523(a)(4), which is nondischargeability of debt based on debt arising from debtor committing “fraud or defalcation while acting in a fiduciary capacity, embezzlement, or larceny”. Unanimous United States Supreme Court decision, holding that "defalcation" under 11 USC 523(a)(4) of the Bankruptcy Code requires that the debtor, at time of the debtor’s defalcation, had “scienter”. “Scienter” element requires knowledge of, or gross recklessness in respect to, the improper nature of the fiduciary behavior. Bullock was decided in the context of a proceeding commenced…
The U.S. Bankruptcy Appellate Panel of the Ninth Circuit (BAP) has held that a recorded abstract of judgment attached to the proceeds from the sale of a debtor’s residence even though the abstract was recorded after the debtor’s fraudulent transfer of her interest in the residence to her daughter. Daff v. Wallace (In re Cass), BAP No. CC-12-1513-KiPaTa (9th Cir. BAP, Apr. 11, 2013)(unpublished).
Facts and Procedural Background Creditors sued the Debtor for nuisance and defamation. To prevent the potential seizure of her half million dollar home, the Debtor transferred her residence to her daughter for no consideration and reserved a life estate therein. The Debtor and her daughter then entered into a separate agreement where the daughter promised to reconvey the home ("Residence") back to the Debtor upon the Debtor’s request (the "Fraudulent Transfer"). The Fraudulent Transfer gave rise to further litigation, as Creditors then filed a second action alleging that the Debtor fraudulent transferred the Residence to her daughter. Creditors obtained a…
Quasi-judicial Immunity of Bankruptcy Trustees
Quasi-judicial Immunity of Bankruptcy Trustees: A bankruptcy court in Eastern District of Tennessee has held that a chapter 7 trustee and his auctioneer enjoy quasi-judicial immunity against allegations of theft, embezzlement, conversion and fraud when selling property pursuant to a court order. Lunan v. Jones (In re Lunan), In re Lunan, 2012 WL 77491912 (Bankr. E.D. Tenn. Mar. 22, 2013). Factual Background and Procedural History The chapter 7 trustee ("Trustee") moved to sell the debtor’s million dollar home, luxury vehicles and artwork. Insisting that the sale price was too low, the debtor opposed the sale motion. After losing in the…
In re Stockton municipal bankruptcy case, 4/1/13 Ruling of Bankruptcy Judge Christopher Klein, ruling that City of Stockton Is Eligible to be in Chapter 9 (Municipal) Bankruptcy
On Monday, April 1, 2013, U.S. Bankruptcy Judge Christopher Klein of the Eastern District of California ruled the City of Stockton to be eligible for chapter 9 bankruptcy protection and issued the Order for Relief necessary for the case to proceed pursuant to Bankruptcy Code §921(d). The decision came nine months after the city initially filed for bankruptcy and followed a three-day evidentiary hearing pitting the city against the Capital Markets Creditors who represent the holders of tens of millions of dollars in municipal bonds. The bondholders had argued, among other things, that the city was not eligible for bankruptcy…
The U.S. Court of Appeals for the Ninth Circuit has held that: (1) a motor vehicle, including a luxury vehicle, may fall within California’s wildcard or grubstake exemption; and (2) if an exempt vehicle is a tool of the debtor’s trade, the debtor can avoid a non-possessory, non-purchase money lien against it under 11 U.S.C. 522(f)(1)(B). Orange County’s Credit Union v. Angie M. Garcia (In re Garcia) ___ F. 3d ___ (9th Cir. 2013). To read the full opinion, click here (Garcia)
http://cdn.ca9.uscourts.gov/datastore/opinions/2013/03/05/11-56076.pdf Factual Background In November 2006, real estate agent Angie Garcia ("Debtor") borrowed $22,160 from Orange County’s Credit Union ("OCCU"), using her Mercedes Benz automobile as collateral. OCCU properly perfected its non-possessory, non-purchase money lien on the Mercedes. When the Debtor later filed for Chapter 7 relief, she listed the car’s value at $5,350, with an outstanding balance of $12,715.50 owed to OCCU. The Debtor claimed that the car was exempt from her bankruptcy estate under California Code of Civil Procedure section 703.140(b)(5), known as California’s "wildcard" exemption. The bankruptcy court ruled that the Debtor could not exempt her Mercedes…
In re Welsh, ___F.3d___ , 2013 U.S. App. LEXIS 5880 (9th Cir. 3/25/2013)
Ninth Circuit Court of Appeals joined the Fifth and Tenth Circuits in holding that it was not bad faith for a debtor to decline to devote social security income to paying unsecured creditors in a chapter 13 plan. The court rejected the trustee’s argument that this allowed the debtor to have money left over that could be used to pay creditors, stating that: Congress chose to remove from the bankruptcy court’s discretion the determination of what is or is not "reasonably necessary." It substituted a calculation that allows debtors to deduct payments on secured debts in determining disposable income. That…
New Bankruptcy Court Decision about law firm that filed bankruptcy
New Bankruptcy Court Decision about law firm that filed bankruptcy: Heller Ehrman LLP, Liquidating Debtor v. Jones Day (In re Heller Ehrman, LLP), Bankr. Case No. 08-32514DM, Adv. No. 10-3221DM (Bankr. N.D. Cal. March 11, 2013). Summary: Judge Dennis Montali, of the Bankruptcy Court for the Northern District of California, recently granted partial summary judgment in favor of the plaintiff debtor, a dissolved law firm, on the basis that the debtor’s waiver of rights under Jewell v. Boxer, 156 Cal. App. 3d 171 (1994) constituted an avoidable transfer under 11 U.S.C. section 548 and the California Uniform Fraudulent Transfer Act,…
Samuels vs. Midland Funding, LLC, 2013 Westlaw 466386 (S.D. Ala. 2013)
A United States District court in Alabama has held that a consumer debtor may bring a suit against a debt collector for malicious prosecution after the debt collector showed up for trial with no witnesses and no evidence. Facts: An individual debtor was sued by a debt collector. The debtor appeared at trial, but the debt collector had no evidence to prove the creation of the alleged debt, the date of the default, the amount due, or any other crucial fact. The debt collector also had no witnesses at trial. After the trial court entered judgment for the individual debtor,…
O’Donnell, et. al. v. Tristar Esperanza Properties, LLC (In re Tristar Esperanza Properties, LLC)
The U.S. Bankruptcy Appellate Panel of the Ninth Circuit ("BAP") held that a judgment awarding the value of a withdrawing member’s interest in an LLC constitutes “damages arising from the purchase or sale of… a security” under 11 U.S.C. § 510(b), and therefore is vulnerable to mandatory subordination. O’Donnell, et. al. v. Tristar Esperanza Properties, LLC (In re Tristar Esperanza Properties, LLC), BAP No. CC-12-1340-KlPaDu (9th Cir. BAP Mar. 8, 2013). To read the opinion, click here: (Tristar) http://cdn.ca9.uscourts.gov/datastore/bap/2013/03/08/Tristar12-1340.pdf
Black v. Bonnie Sptrings Family Ltd. partnership (In re Black), 9th Circuit
BAP, ___BR___, 2013 Daily Appellate Reports 2041 (2/13/12): debts arising from satate court judgment against debtor for abuse of process (judgment against debtors for 1.6 million, for abuse of process, and nuisance) were NOT dischargeable in debtor’s Chapter 7 bankruptcy case, because debtors’ conduct had caused “wilful and malicious injury” to plaintiffs, as those terms are used in 11 USC 523(a)(6) definition of