(Bankr. W.D. Ky. Sep. 24, 2014)
The bankruptcy court declines to recommend that the Sixth Circuit authorize a direct appeal of the court’s decision finding KERS is not a governmental unit and finding that the debtor may reject its executory contract with KERS. The court recognizes that this is a matter of public importance, but a direct appeal will not advance the progress of the bankruptcy case. Thus, the court does not recommend authorization of the direct appeals. Opinion below.
(Bankr. E.D. Ky. Sep. 22, 2014)
The bankruptcy court denies the plaintiff’s motion for default judgment in this nondischargeability action. The debtor failed to timely respond to the complaint and was thus in default. However, the court determines that the affirmative evidence presented by the plaintiff to establish his claim was insufficient, and thus the claim is dismissed. The plaintiff established only that the debtor had made a promise to repay a loan and then failed to do so, which does not warrant a nondischargeability judgment. The court also declines to allow the plaintiff another evidentiary hearing to establish the claim. Opinion below.
(Bankr. W.D. Ky. Sep. 17, 2014)
The bankruptcy court denies approval of the debtor hotel operator’s chapter 11 disclosure statement and grants in part the secured creditor’s motion to dismiss the case pursuant to 11 U.S.C.§ 1112(b). The debtor’s proposed plan was not feasible, but the court concludes that immediate conversion or dismissal is not in the best interest of the estate creditors. Instead, the court orders that the debtor has 21 days to file a § 363 motion proposing a sale of the hotel properties. Opinion below.
(Bankr. S.D. Ind. Sep. 17, 2014)
The bankruptcy court limits discovery to post-confirmation matters in this adversary proceeding commenced by the chapter 11 debtor. The defendant had been taking steps to collect on a judgment against the debtor’s sole member obtained in state court. The defendant had obtained a charging order against the judgment debtor, but the court discusses applicable state law that limits a charging order only to the economic interest in the subject limited liability company. The confirmed plan released any claim to assets of the debtor held by the judgment debtor—the equity interest holder. Thus, only post-confirmation activities of the debtor should be relevant to the charging order. The court ultimately concludes that discovery related to pre-confirmation matters is inappropriate, and any discovery involving post confirmation issues should be sought in the state court action. Opinion below.
(S.D. Ind. Sep. 15, 2014)
The district court affirms the bankruptcy court’s judgment in favor of the debtor in a non-dischargeability action. The plaintiff hired the debtor to perform work on her vehicle and placed the debtor’s name on the title as a lienholder. The debtor was then somehow placed on the title as the owner, and the debtor sold the vehicle to a third party. The plaintiff sued the debtor in state court and obtained a judgment against him for $5,000. The debtor then paid the plaintiff $800 on the judgment, which was the amount she had paid on the purchase price for the vehicle. The bankruptcy court found that there was therefore no debt remaining that was non-dischargeable. The district court affirmed, finding the plaintiff failed to satisfy her burden of proving a non-dischargeable debt. Opinion below.
(6th Cir. Sep, 15, 2014)
The Sixth Circuit affirms the district court’s dismissal of the plaintiff’s claims against the lender, asserted in his complaint filed after the foreclosure sale, after the statutory right of redemption lapsed, and after filing a chapter 13 bankruptcy petition. The alleged acts supporting the claim occurred prior to the bankruptcy filing and thus any claims would have to have been brought by the bankruptcy trustee. Opinion below.
(6th Cir. B.A.P. Sep. 15, 2014)
The Sixth Circuit B.A.P. affirms the bankruptcy court’s denial of a motion for relief from judgment. The movants were shareholders of the debtor corporation, which had asserted malpractice claims against the debtor’s bankruptcy attorneys. Those claims had been dismissed based on the movants’ lack of standing. One year later, the movants filed the motion for relief from that judgment, asserting new evidence of a conflict of interest in support of the motion. The court finds that the movant’s lack of standing is still dispositive, even if new evidence had surfaced, because the movant failed to appeal the earlier judgment. Opinion below.
(6th Cir. B.A.P. Sep. 15, 2014)
The Sixth Circuit B.A.P. affirms the bankruptcy court’s summary judgment in favor of the plaintiffs in a non-dischargeability action. The plaintiffs had obtained a penalty default judgment in Tennessee state court against the debtors on claims including fraud and misrepresentation. Discussing its earlier Calvert and Spilman decisions and the Supreme Court’s Marrese decision, the court holds that the default judgment should be given preclusive effect and thus affirms the non-dischargeability judgment. Opinion below.
(6th Cir. Sep. 10, 2014)
The Sixth Circuit reverses the B.A.P.’s and the bankruptcy court’s decisions finding the debtor’s tortious interference claim against a competitor was property of the estate. The competitor’s improper acts that led to the supplier breaching its contract with the debtor began before the debtor’s bankruptcy petition was filed. However, the supplier did not breach the contract with the debtor until after the petition date. Because the actual injury to the debtor did not occur prepetition (i.e., the tortious interference claim was not established until the contract was breached), the cause of action was not property of the estate. Judge Donald dissents. Opinion below.
(Bankr. E.D. Ky. Sep. 9, 2014)
The bankruptcy court finds that the bank’s three mortgages were not in recordable form when they were accepted by the county clerk, and thus the trustee can avoid them. KRS § 382.330 requires the date and maturity date of the underlying obligation to be included in recordable instruments. The three mortgages only contained the maturity date for the underlying promissory notes. Under Kentucky case law, the trustee, as a hypothetical lien creditor or bona fide purchaser, did not have constructive notice even though the county clerk accepted and recorded the noncompliant mortgages. Opinion below.
Kentuckiana Bankruptcy Opinions 