The Bankruptcy Law Firm, Prof. Corp.
The Bankruptcy Appellate Panel of the 10th Circuit has held that a trustee in bankruptcy cannot avoid a mortgage lien, even though the underlying note was held by a lender, while the mortgage was recorded in the name of MERS, a separate entity. In re Trierweiler, 2012 Westlaw 6725589 (10th Cir. BAP (Wyo.)
Facts: Following a home mortgage transaction, the underlying promissory note was sold to a new lender. However, the mortgage was recorded in the name of Mortgage Electronic Registration Systems (“MERS”), as agent for the holder of the note. When the borrowers filed a bankruptcy petition, their trustee in bankruptcy filed an adversary complaint against the new lender and MERS, seeking to avoid the mortgage. The trustee claimed that the mortgage was unenforceable because of the separation between the promissory note and the mortgage. The trial court ruled in favor of the new lender, and the trustee appealed. Reasoning: The Bankruptcy…
Newman v. Schwartzer (In re Newman) 2013 DJDAR 1609 (9th Cir. BAP 2/4/2013)
Newman v. Schwartzer (In re Newman) 2013 DJDAR 1609 (9th Cir. BAP 2/4/2013): held debtor’s tax refund, which debtor received during the bankruptcy case, and which was for tax year before debtor’s bankruptcy case was filed (ie was refund for pre-petition tax period), was subject to being turned over to the Chapter 7 bankruptcy trustee, even if the debtor had already spent the tax refund. Tax refund was subject to turnover, even if debtor had already spent the refund, because debtor had possession, custody or control of the tax refund during the bankruptcy case.
In re Rowe, 2013 U.S. Dist. LEXIS 11970
In In re Rowe, 2013 U.S. Dist. LEXIS 11970 (E.D. Va., January 29, 2013), the United States District Court for the Eastern District of Virginia (the “District Court”) affirmed the decision of the United States Bankruptcy Court for the Eastern District of Virginia (the “Bankruptcy Court”), wherein the Bankruptcy Court reduced the requested compensation of the chapter 7 trustee significantly below the amount requested, which was calculated in accordance with Bankruptcy Code section 326 (a). the Bankruptcy Court concluded that the trustee had failed to “properly or timely complete his duties as trustee.” In re Rowe, 484 B.R. 667 (Bankr.…
Split Among Court Decisions re whether or not the absolute priority rule applies in an individual Chapter 11 case and individual Chapter 11 plan
The United States Court of Appeals for the Tenth Circuit (the "10th Circuit") has held that, notwithstanding the BAPCPA’s amendments to the Bankruptcy Code, individual chapter 11 debtors must still comply with the absolute priority rule (adopting the so-called "narrow view"). Dill Oil Company, LLC v. Arvin E. Stephens (In re Stephens), 704 F.3d 1279 (10th Cir., Jan. 15, 2013). To view the full decision, click: https://www.ca10.uscourts.gov/sites/ca10/files/opinions/01018983694.pdf. Facts The debtors, Mr. and Mrs. Stephens (the "Stephens"), owned a chain of convenience stores and filed a voluntary individual chapter 11 case because the stores were operating at a loss. The Stephens…
Wells Fargo Bank, N.A. v. Texas Grand Prairie Hotel Realty, LLC (In the Matter of Texas Grand Prairie Hotel Realty, LLC), No. 11-11109 (5th Cir. Mar. 1, 2013)
Fifth Circuit Court of Appeals rules contra to how 9th Circuit Court of Appeals determines “cram down” interest rate to be used in Chapter 11 bankruptcy cases, to “cram down” Chapter 11 plan on objecting secured creditor. “Cram down” means that the Bankruptcy Judge confirms (approves) Chapter 11 plan over objection of secured creditor)The U.S. Court of Appeals for the Fifth Circuit has held that, in chapter 11 cases, the bankruptcy court decides the formula to use to determine the appropriate “cram down” rate under a plan, and the bankruptcy court’s decision is reviewed for clear error rather than de…
In re Blixseth, 484 B.R. 360 (9th Cir. BAP Dec. 17, 2012)
Reversing the Bankruptcy Court, the U.S. Bankruptcy Appellate Panel of the Ninth Circuit Court of Appeals (the "BAP") has ruled that even though the law generally provides that intangible assets have no physical location or are located where their owner resides, for purposes of determining the proper venue of an involuntary chapter 7 petition against a Washington resident whose principal assets were intangibles comprising interests in Nevada entities, those assets were located in Nevada. Facts and Procedural Background The debtor, a Washington state resident, held his principal assets through a Nevada limited liability company and a Nevada limited partnership (the…
A Bankruptcy Court in Hawaii has issued a decision that the defense of in pari delicto (equal fault) cannot be asserted against a bankruptcy Trustee, where the Trustee is the Plaintiff in an avoiding power (e.g. fraudulent transfer suit), even where the defense of in pari delicto could have been asserted against the bankruptcy debtor, in a tort suit, outside of bankruptcy, brought by the debtor as plaintiff
In re Hawaiian Telcom Communications, Inc., 2012 Westlaw 6019094 (Bankr. D. Hawai’i): Facts: A litigation trust, acting on behalf of a Chapter 11 estate, brought statutorily-based avoidance claims against an insider of the prepetition debtor. He asserted the defense of in pari delicto (“equal fault”), arguing that the prepetition debtor actively participated in the alleged wrongdoing. The litigation trust brought a motion to strike that defense, on the theory that it was inapplicable to avoidance claims arising under the Bankruptcy Code. Reasoning: The court ruled in favor of the litigation trust, reasoning that although the defense of in pari delicto…
Ninth Circuit Rules Only Article III Judge Can Rule on Fraudulent Transfer Claims; Bankruptcy Judges Cannot Rule on Fraudulent Transfer Claims, Because They Are Not Article III Judges
In re Bellingham Insurance Agency, Inc. (Executive Benefits Insurance Agency v. Peter H. Arkinson), ___F.3d ___, 2012 WL 6013836 (9th Circuit Court of Appeals, 12/4/12) Ninth Circuit Court of Appeals holds that only an Article III Judge, such as a US District Judge, or a Circuit Judge, or a US Supreme Court Justice, can adjudicate (rule on) fraudulent transfer claims, and holds that Bankruptcy Judges (which are NOT Article III Judges, they are only ARticle I Judges, appointed for 14 year terms, instead of being appointed for life, as Article III judges are) CANNOT rule on fraudulent transfer claims. Decision…
In re Patriot Coal Corp., No. 12-12900, — B.R. — (Bankr. S.D.N.Y. Nov. 29, 2012)
Patriot Coal Corporation and its ninety-eight subsidiaries (collectively, "Patriot") is one of the largest coal companies in the nation. Patriot has its headquarters in Missouri, and most of its entities are domiciled in West Virginia and Missouri. Prior to its chapter 11 bankruptcy, Patriot had no contacts in New York. On the eve of bankruptcy, Patriot formed two entities in New York for the sole purpose of establishing venue—a fact that to which Patriot stipulated. These New York entities conducted no business operations, had no substantial assets in New York, and the other entities had no meaningful contacts with New…
In re Sundance Self-Storage El Dorado LP, ___ B.R. ___, 2012 WL 5471141 (Bankr. E.D. Cal. Nov. 6, 2012)
Summary: After finding that counsel for the chapter 11 debtor in possession had failed to disclose a lack of disinterestedness and disqualifying conflicts as required by Rule 2014(a) of the Federal Rules of Bankruptcy Procedure, the U.S. Bankruptcy Court for the Eastern District of California ordered counsel to disgorge all postpetition fees previously awarded in the present case, as well as prepetition fees the debtor had paid him in connection with this case and even fees the court had awarded counsel in the debtor’s prior bankruptcy case. To read the full Sundance decision, click (Sundance) http://www.caeb.uscourts.gov/documents/Judges/Opinions/Published/Sundance(OSCHughes-Memo).pdf Factual Background: Sundance filed…