In re Jepson

(7th Cir. Mar. 22, 2016)

The Seventh Circuit affirms the lower courts’ decision to grant the mortgagee’s motion to modify the automatic stay to proceed with the state court foreclosure action. The court also affirms the lower courts’ decision to dismiss claims in the debtor’s adversary complaint against the mortgagee based on alleged violations of a pooling and service agreement. The debtor did not have standing on those claims because the debtor was not a third-party beneficiary to that agreement. However, the court remands for reconsideration of the dismissal of two claims that were not based on the pooling and service agreement. Opinion below.

Judge: Ripple

Attorney for Debtor: Kenneth E. Kaiser

Attorneys for Mortgagee: Kluever & Platt, LLC, Matthew Reasor Bowman, Morris Laing Evans Brock & Kennedy, CHTD., Justin F. Carter

2016-03-22 – in re jepson

Author: Matt Lindblom

HIJ Industries, Inc. v. Roy (In re roy)

(Bankr. E.D. Ky. Mar. 21, 2016)

The bankruptcy court denies the debtor’s motion to dismiss the complaint seeking to deny the debtor a discharge under 11 U.S.C. § 727(a)(2)(A) or alternatively to except the creditors claim from discharge under § 523(a)(6). The debtor argued that the creditor failed to state a claim because the complaint only alleged that the debtor caused injury to his own business rather than to the creditor itself. The court disagrees, holding the debtor’s actions to remove property from his business could be the basis for a claim under § 523(a)(6). The debtor also argued that the creditor failed to plead the requisite intent for § 727(a)(2), but the court disagrees and denies the motion to dismiss. Opinion below.

Judge: Wise

Attorney for Debtor: John M. Simms

Attorney for Plaintiff: Tricia A. Shackelford

2016-03-21 – in re roy

Author: Matt Lindblom

Knauer v. Kitchens (In re Eastern Livestock Co., LLC)

(Bankr. S.D. Ind. Mar. 18, 2016)

The bankruptcy court denies the defendant’s motion to dismiss based on Kentucky’s five-year statute of limitations for breach of an oral contract. The trustee brought the claim based on the defendant’s failure to properly care for the debtor’s cattle prior to the bankruptcy filing. The trustee argued that Indiana’s six-year statute applied. The court recognizes the circuit split on the issue of whether a bankruptcy court should apply the choice-of-law rules of the forum state or federal choice-of-law principles. The seventh circuit has not ruled on the issue. The bankruptcy court determines that, absent a significant federal policy or interest (which was absent in this case), a bankruptcy court should apply the choice-of-law rules of the state in which it states. Applying Indiana’s choice-of-law rules, the court determines that the six-year statute of limitations applies, and thus the motion to dismiss is denied. Opinion below.

Judge: Lorch

Attorneys for Trustee: Kroger, Gardis & Regas, LLP, Jay P. Kennedy, Amanda Dalton Stafford

Attorneys for Defendant: Bingham Greenbaum Doll LLP, Natalie Donahue Montell, Ivana B. Shallcross, April A. Wimberg

2016-03-18 – in re eastern livestock

Author: Matt Lindblom

Estate of Stanley Cora v. Jahrling (In re Jahrling)

(7th Cir. Mar. 18, 2016)

The seventh circuit affirms the lower courts’ decisions finding the debt nondischargeable under 11 U.S.C. § 523(a)(4), because the debt arose from the debtor’s “defalcation while acting in a fiduciary capacity.” The debtor was an Illinois attorney that represented the plaintiff when he sold his home. The plaintiff spoke only Polish, and the attorney relied on the buyer’s attorney to translate. The sale price was far below market price and the one term the plaintiff required, a life-estate interest in a portion of the property, was not included. The plaintiff obtained a pre-petition state court judgment for the loss. The seventh circuit explains that defalcation does not require deliberate wrongdoing, but fault greater than negligence is required. In this case, the applicable standard was met. Opinion below.

Judge: Hamilton

Attorneys for Plaintiff: Bert J. Zaczek

Attorneys for Debtor: Golan & Christie, LLP, Robert R. Benjamin, Beverly A. Berneman, Anthony J D’Agostino

2016-03-18 – in re jahrling

Author: Matt Lindblom

Irvin v. Faller (In re Faller)

Irvin v. Faller (In re Faller)

(Bankr. W.D. Ky. Mar. 17, 2016)

In this nondischargeability action, the bankruptcy court denies the plaintiff’s motion for summary judgment as to the 11 U.S.C. § 523(a)(6) claim based on defamation and grants the motion as to the § 523(a)(6) claim based on abuse of process. The court analyzes the prepetition state court judgment to determine whether the requisite willful and malicious injury for § 523(a)(6) was established such that collateral estoppel prevented the defendant from defending against the claims in this action. Because the defamation judgment was not clear as to whether the false information was published with knowledge of it being false or published with a reckless disregard for the truth, the defendant was not collaterally estopped from arguing 523(a)(6) did not apply to this claim. On the other hand, the judgment as to the abuse of process was clear that the defendant acted with the requisite intent for § 523(a)(6). Opinion below.

Judge: Lloyd

Attorney for Plaintiffs: Kerrick Bachert PSC, Scott A. Bachert

Attorney for Defendant: McClain Dewees, PLLC, Michael W. McClain

2016-03-17 – in re faller

Author: Matt Lindblom

Indiana Department of Workforce Development v. Burge (In re Burge)

(Bankr. S.D. Ind. Mar 15, 2016)

The bankruptcy court denies the department’s motion to reconsider the judgment finding the debtor was entitled to a discharge of the debt to the department. Opinion below.

Judge: Carr

Attorneys for Department: Office of the Indiana Attorney General, Heather M. Crockett, Maricel E.V. Skiles, Spencer W. Tanner

Attorneys for Debtor: Redman Lugwig, Keith Eirik Gifford

2016-03-15 – in re burge

Opinion reconsidered: 2015-12-18 – In re Burge

Official Committee of Unsecured Creditors v. T.D. Investments, LLP (In re Great Lakes Quick Lube LP)

(7th Cir. Mar. 11, 2016)

The Seventh Circuit reverses the bankruptcy court’s judgment dismissing the committee’s fraudulent and preferential transfer claims. The committee brought the claims against the debtor’s landlord. The basis of the claims was the debtor’s termination of the leases 52 days before declaring bankruptcy. The court holds that there could have been value available to creditors if the leases remained in effect on the petition date. The committee was not seeking to evict the new tenant, but was merely seeking the value that was allegedly lost. The court remands to the bankruptcy court to determine the value of the transfer and any defenses of the landlord. Opinion below.

Judge: Posner

Attorneys for Committee: Kerkman & Dunn, Evan P. Schmit, Gregory M. Schrieber

Attorneys for Landlord: Hudec Law Offices, S.C., Patrick J. Hudec

2016-03-11 – in re great lakes quick lube

Author: Matt Lindblom

In re Mik

(Bankr. W.D. Ky. Mar. 8, 2016)

The bankruptcy court sustains the debtors’ objection to the creditor’s claim. The court determines that the creditor failed to establish that the transaction with the debtors was intended as a loan. Instead, the parties had formed a partnership with the creditor making capital contributions, rather than loans. Opinion below.

2016-03-08 – in re mik

Author: Matt Lindblom

Spradlin v. Khouri (In re Bruner)

(Bankr. E.D. Ky. Mar. 7, 2016)

The bankruptcy court grants the defendants’ motion to dismiss the trustee’s action to avoid the transfer of $50,000 to the defendant law firm. The trustee had previously brought an action seeking turnover of the funds and lost. That decision was appealed to the B.A.P. The bankruptcy court here holds that res judicata bars the avoidance action because the prior action resulted in a final decision on the merits, the current case was between the same parties, the issues in the current action were litigated or should have been litigated in the prior action, and there was an identify of the causes of action. Opinion below.

2016-03-07 – in re bruner

Author: Matt Lindblom

Schaumburg Bank & Trust Co., N.A. v. Alsterda

(7th Cir. Mar. 4, 2016)

The Seventh Circuit dismisses the appeal because the order appealed from was not a final order. The bankruptcy court overruled the creditor’s objection to the trustee’s motion to approve a settlement of a fraudulent transfer claim. The creditor had obtained a state court judgment on the same claim after obtaining stay relief (although not expressly for pursuing that claim). The court holds that the order addressed a discrete issue rather than a discrete dispute and thus was not a final and appealable order. The creditor could still receive the bulk of the bankruptcy estate’s assets due to its secured claim, and thus the fact that it would not do so through the fraudulent transfer claim did not constitute resolution of a discrete dispute. Opinion below.

2016-03-04 – schaumburg bank and trust v alsterda

Author: Matt Lindblom