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Case Summaries September 2012

Posted by John Smith | Sep 02, 2014 | 0 Comments

Case Name:

In re Tetrosine, 2012 WL 4070038 (Bankr. D. Alaska)

Case Summary:

On September 15, 2012, the United States Bankruptcy Court for the District of Alaska issued its opinion finding in favor of the Chapter 7 Trustee and one of the major creditors.  The Debtor's claim of exemptions was disallowed as to any and all jewelry for which had been scheduled or discovered or which may be in the future discovered.  The Debtor also forfeited her right to exempt any other property of value which the Trustee may liquidate.

Notable Points to Bankruptcy Practitioner:

Where a major creditor and a trustee have objected to a debtor's amended schedules and having established by a preponderance of evidence that a debtor acted in bad faith by deliberately concealing assets, the debtor's claim of exemptions will be disallowed.  The Court also ordered that the debtor could not claim any other property as exempt because of her attempts to conceal assets.

Case Name:

In re Bond, 2012 WL 3867427 (Bankr.D.Ariz.)

Case Summary:

On September 5, 2012, the United States Bankruptcy Court for the District of Arizona issued its memorandum decision requiring the debtors to amend their schedules in a Chapter 13 Plan to value their 70% ownership interest in a limited liability corporation as a going concern and not its liquidation value and to reflect additional annual income from their interest in a small entity which increased their projected disposable income.

Notable Points to Bankruptcy Practitioner:

As the Court stated, “[d]etermining the going-concern value of a business for the purpose of calculating a Chapter 13 debtor's ownership interest is not a common topic for bankruptcy courts.”  Here, the debtors proposed a liquidation value for their 70% interest in an entity which ignored the fact that the business was a going concern and that the debtors operated the business.  In the Ninth Circuit, this sort of circumstance requires that the debtors calculate a value which reflects what creditors may receive from debtors' continued possession and operation and that valuation should be calculated on a going concern basis.  Furthermore, the entity operated by the debtors had a projected annual profit in addition to the monthly wages the debtors received from the entity and, therefore, the debtors must amend their calculation of disposable income to reflect this additional annual income from the 70% interest of the owned and operated entity.

Case Name:

In re Filby, 2012 WL 3991490 (Bankr.D.Ariz.)

Case Summary:

On September 11, 2012, United States Bankruptcy Court for the District of Arizona entered its memorandum decision denying a secured creditor stay relief for failure of the Chapter 13 trustee to respond to the motion for stay relief based on the issues not being ripe.

Notable Points to Bankruptcy Practitioner:

None.

Case Name:

In re Comercil V.H., S.A. De C.V., 2012 WL 4051882 (Bankr.D.Ariz.)

Case Summary:

On September 13, 2012, the United States Bankruptcy Court for the District of Arizona issued its Memorandum Decision recognizing a Chapter 15 foreign proceeding and its Trustee as a foreign representative to act on behalf of the estate of the insolvent entity and allow the state court to continue to administer and ultimately adjudicate the rights of the parties claiming interest in monies presently held in Custodia Legis in that pending action.

Notable Points to Bankruptcy Practitioner:

None.

Case Name:

In re Hymel, 2012 WL 4062802 (Bankr.D.Ariz.)

Case Summary:

On September 14, 2012, the United States Bankruptcy Court for the District of Arizona issued its Memorandum Decision that all prepetition arrearages on regular mortgage payments must be paid pursuant to 11 U.S.C. §1322(d)(5) and that pursuant to a stipulation between the debtor and secured creditor two months' of post-petition arrearages must be paid however not the additional two months of arrearages plus assorted fees and costs which the secured creditor had failed to address in the  stipulation or before the court and, therefore, the secured creditor was held to the terms of the stipulation.

Notable Points to Bankruptcy Practitioner:

None.

Case Name:

In re Mortgages, Ltd., 2012 WL 4458410 (Bankr.D.Ariz.)

Case Summary:

On September 27, 2012, the United States Bankruptcy Court for the District of Arizona issued its opinion regarding lien priority.  The court held that various mechanics lien claimants had priority over a construction deed of trust recorded after the commencement of construction and work by the various mechanics lien claimants.  The court also held that the secured creditor was not entitled to be equitably subrogated to a prior deed of trust that was paid with some of the proceeds of the Mortgages, Ltd.'s loan.

Notable Points to Bankruptcy Practitioner:

In rejecting Mortgage's Ltd. argument for the application of the separate contract doctrine whereby a mechanics lien has priority only dating from the general contract for which the work was performed, the court held that the facts conclusively established that there is only one improvement undertaken on the property and that all the general contractors were working on the same single renovation project.  Although the construction project significantly evolved over time, there was never more than one single project and, therefore, there was only one date on which the labor commenced.  In rejecting Mortgage, Ltd.'s argument for the application for equitable subrogation, the court recognized that the Arizona Supreme Court had expressly adopted the approach of the Restatement (Third) of Property: Mortgages, Section 7.6 (1997) that there is not a requirement for an agreement as a condition of equitable subrogation.  The court rejected the debtor's arguments for the application of equitable subrogation under an equitable analysis because the contractors were to be paid far less than they were justly entitled to receive for their work and it was entirely just and proper that the debtor should bear a substantial portion of their loss for which the debtor was largely responsible in an equitable sense.

Case Name:

In re Day, 2012 WL 4627484 (Bankr.D.Ariz.)

Case Summary:

On September 29, 2012, the United States Bankruptcy Court for the District of Arizona issued its Memorandum Decision holding the debtors liable in the amount of $1,396,410.65 under 11 U.S.C. §§523(a)(4) and (a)(6) as a result of embezzlement.  The court denied relief under Section 11 U.S.C. §523(a)(2)(A).

Notable Points to Bankruptcy Practitioner:

None.

Case Name:

In re Lee, 2012 WL 4482385 (Bankr.S.D.Cal.)

Case Summary:

On September 26, 2012, the United States Bankruptcy Court for the Southern District of California issued its Memorandum Decision determining that a portion of a pre-petition state court judgment was nondischargeable under 11 U.S.C. §§523(a)(2) and (a)(6) for acts of conversion done with willfulness and malice.

Notable Points to Bankruptcy Practitioner:

None.

Case Name:

In re Deuel, 2012 WL 4660285 (Bankr.S.D.Cal.)

Case Summary:

On September 28, 2012, the United States Bankruptcy Court for the Southern District of California issued its Memorandum Decision ordering that the trustee was not entitled to recover attorneys' fees.

Notable Points to Bankruptcy Practitioner:

Here, Chase Bank had initiated an adversary proceeding to quiet title to property and to obtain a declaratory judgment that a new trust deed that was not perfected through recordation constituted a senior lien enforceable against the debtor, as well as a junior lien holder, and the trustee.  The trustee defended the action based on 11 U.S.C. §544 and its strong-arm powers.  The trustee argued that the new trust deed was to be set aside as a result of its unperfected status and the trustee was successful with this argument before the Bankruptcy Appellate Panel and the Ninth Circuit.  Before this court was the trustee's request for attorneys' fees.  The trustee was unsuccessful on its request for attorneys' fees based on theories of estoppel and that they did not fall under or within the scope of the contract as required by state law.

Case Name:

In re Zapata, 2012 WL 44662383 (Ninth Cir. BAP (Cal.))

Case Summary:

On September 28, 2012, the U.S. Bankruptcy Appellate Panel of the Ninth Circuit affirmed the orders of the Bankruptcy Court granting the relief from stay in order for a creditor to evict the debtors from their property, dismissing the Chapter 13 case, denying recusal of the Bankruptcy Judge, and denying removal of the Chapter 13 Trustee.

Notable Points to Bankruptcy Practitioner:

None.

Case Name:

In re Willis Enterprises, Inc., 2012 WL 3988062 (Bankr.D.Idaho)

Case Summary:

On September 10, 2012, United States Bankruptcy Court for the District of Idaho held that the creditors' asserted bankers lien as against the trustee in funds was too tenuous upon which to base a request for abandonment of those funds; and the creditor failed to show that the funds were part of the collateral and thus were of inconsequential value to the estate in the support of its motion for abandonment.

Notable Points to Bankruptcy Practitioner:

The creditor had voluntarily and unconditionally turned funds over to the  trustee and did not promptly take action to preserve its statutory banker's lien.  The creditor had waited over five months to take any action and, therefore, the court held that the creditor had likely waived the lien.  It was possible that some of the funds may have constituted proceeds of the collateral pursuant to a description of collateral in the security agreement and pursuant to Idaho's Uniform Commercial Code; however, the creditor failed to trace the proceeds and failed to establish its rights in those funds.

Case Name:

In re Wisdom, 2012 WL 3987990 (Bankr.D.Idaho)

Case Summary:

On September 11, 2012, the United States Bankruptcy Court for the District of Idaho overruled the debtor's objection to the Chapter 7 Trustee's final report and application for compensation based on the trustee's alleged breach of fiduciary duty related to the debtor's exemption claims.

Notable Points to Bankruptcy Practitioner:

None.

Case Name:

In re Merrill, 2012 WL 4435122 (Bankr.D.Idaho)

Case Summary:

On September 24, 2012, the United States Bankruptcy Court for the District of Idaho issued its Memorandum of Decision sustaining the trustee's objection to the debtor's claim of exemption in a boat as an heirloom pursuant to Idaho Code.

Notable Points to Bankruptcy Practitioner:

In this case, the boat had not passed through more than one generation before it became the property of debtor and, therefore, failed the test laid out in In re Hearn and In re Collins whereby the debtor must show the property had been the subject of multigenerational transfers.

Case Name:

In re Ricks, 2012 WL 4017952 (Bankr.D.Idaho)

Case Summary:

On September 12, 2012, the United States Bankruptcy Court for the District of Idaho issued its Memorandum of Decision denying the request by several creditors for the specific assignment of a judge in a situation governed by random assignment.  The request was based on terms of familiarity and efficiency of the prior judge and did not address the governing procedures or policies as required by the Rules and, therefore, the motion was denied by separate order.

Notable Points to Bankruptcy Practitioner:

None.

About the Author

John Smith

Law Offices of Gerald K. Smith and John C. Smith, PLLC, Tucson, ArizonaPartner (Sept 2008 – Present)Smith & Smith focuses primarily on civil and commercial litigation, secured transactions, bankruptcy and corporate reorganization.  In addition to their bankruptcy and commercial litigation practice, John has developed considerable expertise opposing wrongful foreclosure by large banking institutions against homeowners, a persistent problem in Arizona.

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