Recent Cases
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…
In re Flores (9th Cir. 8/31/2012)— F.3d —-, 2012 WL 3803936
In re Flores is a pro debtor decision by the 9th Circuit Court of Appeals. In Flores, the 9th Circuit Court of Appeals held that it was proper for bankruptcy judge to confirm a 3 year Chapter 13 plan, instead of a 5 year Chapter 13 plan, because, though the debtors had above-median income, they had no projected disposable income on Form 22C. Form 22C (Chapter 13 Statement of Current Monthly Income and Calculation of Commitment Period and Disposable Income)–which was added by the BAPCPA 2005 amendments to the Bankruptcy Code–is required to be filled out and filed in every…
Divorce attorney and bankruptcy debtor each convicted of federal crimes related to bankruptcy case in which debtor, assisted by an attorney, concealed assets
US v. Stern, F.Supp.3d___, 2012 WL 843637 (US District Ct, ED Wis 2012): Attorney was divorce attorney for his girlfriend. Girlfriend filed bankruptcy, using another attorney as her counsel. Debtor received $95,000 marital settlement in debtor’s divorce, but did not disclose that asset (the $95,000) in her bankruptcy case. To help debtor hide the $95,000, the divorce lawyer put $60,000 of the $95,000 divorce settlement into certificates of deposit, held in the name of the divorce attorney. Debtor was indicted and convicted of bankruptcy fraud, but then was granted immunity, to testify against her divorce lawyer who had hidden the…
Pfeifer vs. Countrywide Home Loans, 2012 Westlaw 6216039 (Cal.App.)
A California appellate court has held that a nonjudicial foreclosure could be enjoined due to the lender’s failure to conduct a face-to-face interview with the borrower prior to the sale, pursuant to HUD regulations. [Pfeifer vs. Countrywide Home Loans, 2012 Westlaw 6216039 (Cal.App.).] Summary of facts, and Court’s reasoning: Facts: After two homeowners defaulted on their mortgage, the lender commenced a nonjudicial foreclosure. Prior to the sale, the borrowers sought injunctive relief on the ground that the lender had failed to conduct a face-to-face interview prior to foreclosure, as required by HUD regulations. The trial court sustained the lender’s demurrer,…
In re Deitz (9th Cir BAP 042312)
BAP holds bky court can liquidate the amount of debt, as part of ruling whether the debt is nondischargeable or not The United States Bankruptcy Appellate Panel of the Ninth Circuit has held that Stern v. Marshall does not limit the bankruptcy court’s jurisdiction to enter a final nondischargeable money judgment. In re Deitz (9th Circuit BAP Docket No. EC-11-1427, April 23, 2012). Facts and Procedural History. Creditors hired the Debtor to build a handicap-assisted home for $444,105. After change orders, Creditors paid the Debtor a total of $511,800, but the house was still only 65% complete. The Debtor’s contractor’s…
In a case of first impression in the Ninth Circuit, the U.S. Bankruptcy Appellate Panel has ruled that a debtor is not entitled to avoid a creditor’s judicial lien under 11 U.S.C. section 522(f)(for impairing the debtor’s homestead exemption) when the debtor didn’t maintain a continuous ownership interest in the property after the judicial lien had fixed. McCoy v. Kuiken, Jr. (In re Kuiken, Jr.), BAP No. SC-12-1218-JuMkPa (B.A.P. 9th Cir. Jan. 4, 2012)
Factual Background: In 2003, Conrad Kuiken, Jr. purchased certain real property ("Property"). In 2009, one of Kuiken’s creditors, Daniel McCoy ("Creditor"), obtained a judgment against Kuiken in the amount of $16,838, and recorded an Abstract of Judgment. Thereafter, on July 5, 2011, Kuiken transferred title in the Property to Bayview Resources, LLC ("Bayview") "for valuable consideration." Kuiken held a membership interest in this entity at the time of the transfer. Bayview recorded the grant deed from Kuiken on July 15, but re-conveyed title to Kuiken as a gift on September 28, 2011. This grant deed was duly recorded on October…