Town Center Flats, LLC v. ECP Commercial II LLC (In re Town Center Flats, LLC)

(6th Cir. May 2, 2017)

The Sixth Circuit reverses the bankruptcy court, finding that the assignment of rents acted as a complete transfer of ownership and the assignor did not retain any interest in the rents. The court analyzes Michigan law on such assignments and concludes that because the debtor/assignor had no rights in the rents assigned, they were not property of the bankruptcy estate. Opinion below.

Judge: Stranch

Attorney for Appellant: Robert N. Bassel

Attorney for Appellee: Jeremy S. Friedberg

2017-05-02 – in re town center flats

Author: Matt Lindblom

Spradlin v. Khouri (In re Bruner)

(6th Cir. B.A.P. Jan. 4, 2017)

The Sixth Circuit B.A.P. affirms the bankruptcy court’s decision and order denying the trustee’s request for turnover of funds paid to the debtor’s criminal defense attorney. The debtor’s mother had made the transfer from a bank account held jointly with the debtor. The trustee failed to meet the burden of proving by a preponderance of the evidence that the attorney fee was property of the estate, and thus turnover was inappropriate. Because the debtor had no claim to the fee, the trustee had no claim for turnover. Opinion below.

Judge: Humphrey

Attorneys for Defendants: Khouri Law Firm, Yelena Bakman, Edward P. Kerns, Michael John Khouri, Wai Brenda Tso

Attorneys for Trustee: Bingham Greenebaum LLP, Richard Boydston

2017-01-04-in-re-bruner

Author: Matt Lindblom

Phi Air Medical, LLC v. Westenhoefer (In re White)

(Bankr. E.D. Ky. Nov. 11, 2016)

The bankruptcy court grants summary judgment in favor of the trustee in this declaratory judgment action, in which the plaintiff sought a judgment that certain health insurance proceeds were not property of the estate. The plaintiff argued that the debtor had assigned the proceeds to it prior to the bankruptcy, but the court holds that the evidence presented did not establish such assignment. The debtor’s spouse had signed the document for him, but the debtor’s spouse did not have the requisite agency authority to do so. Opinion below.

Judge: Schaaf

Attorney for Plaintiff: Stites & Harbison PLLC, Chrisandrea L. Turner

Attorney for Defendant: Barber Law PLLC, T. Kent Barber

Author: Matt Lindblom

2016-11-11-in-re-white

In re Bullitt Utilities, Inc.

(Bankr. W.D. Ky. Sep. 1, 2016)

The bankruptcy court addresses the issue of whether the debtor’s prepetition claim for a surcharge before the Public Service Commission is property of the estate. The pre-petition receiver for the debtor argued that it was not, because the debtor abandoned its assets prepetition in the PSC action. The court disagrees, finding that legal title was not severed in the prepetition proceedings, and thus the bankruptcy trustee has control and authority over the surcharge claim. Opinion below.

Judge: Lloyd

Attorneys for trustee: James R. Irving, Robert W. Keats

Attorneys for Receiver: Kaplan & Partners LLP, Charity B. Neukomm, James E. McGhee, Christopher B. Rambicure

2016-09-01 – in re bullitt utilities

Author: Matt Lindblom

In re Licking River Mining, LLC

(Bankr. E.D. Ky. June 6, 2016)

In these jointly administered cases converted to chapter 7, the bankruptcy court modifies the stay for the limited purpose of paying defense costs from the debtor’s D&O insurance policy to the two individual creditors. The creditors were directors and shareholders of one of the debtors and were named defendants in the trustee’s adversary complaint, which alleged the debtors breached their fiduciary duties to the debtor. The court holds it is premature to make a determination as to whether the policy proceeds are property of the estate. Opinion below.

Judge: Wise

Attorneys for creditors: Fowler Bell PLLC, Taft A. McKinstry, Matthew D. Ellison

Trustee: Phaedra Spradlin

2016-06-06 – in re licking river mining

Author: Matt Lindblom

Camofi Master LDC v. U.S. Coal Corp. (In re Licking River Mining, LLC)

(Bankr. E.D. Ky. May 9, 2016)

The bankruptcy court grants the trustee’s motion to dismiss the creditors’ adversary proceeding. The claims asserted by the creditors were property of the estate and thus the trustee has the exclusive right to assert the claims. Opinion below.

Judge: Wise

Attorneys for Trustee: Foley & Lardner LLP, Geoffrey S. Goodman, David B. Goroff

Attorneys for Plaintiffs: Akin Gump Strauss  Hauer & Feld LLP, Robert J. Boller, Douglas A. Rappaport, Taft, Stettinius & Hollister LLP, Casey M. Cantrell Swartz, W. Timothy Miller

Attorneys for Defendants: Nixon Peabody LLP, Dennis J. Drebsky, Bingham Greenebaum Doll LLP, Daniel J. Donnellon, James R. Irving, Luskin Stern & Eisler LLP, Michael Luskin

2016-05-09 – in re licking river mining

Author: Matt Lindblom

Spradlin v. Khouri (In re Bruner)

(Bankr. E.D. Ky. Aug. 10, 2015)

The bankruptcy court grants judgment in favor of the defendants in this turnover action brought by the Chapter 7 trustee. After the petition was filed, the debtor’s mother transferred $50,000 to the debtor’s criminal defense attorney for legal representation. The trustee argued and presented evidence at trial that the funds were actually the debtor’s funds and sought a judgment directing that the $50,000 be turned over to the estate. The bankruptcy court holds that even if the funds originated with the debtor, because the transfer had not been avoided, the funds were no longer property of the estate and thus not subject to turnover under 11 U.S.C. § 542. Opinion below.

2015-08-10 – spradlin v khouri

Author: Matt Lindblom

Lee Group Holding Company, LLC v. Walro (In re Lee)

(S.D. Ind. Aug. 10, 2015)

The district court affirms the bankruptcy court’s order granting the trustee’s motion for summary judgment and finding that the debtor’s voting rights in the non-debtor Indiana limited liability company were property of the estate. The other members of the LLC argued that the debtor did not hold an interest that could be property of the estate, because his voting rights derived from his role as manager rather than a membership interest in the LLC. Applying Indiana law and interpreting the language of the operating agreement, the court disagrees and affirms. Opinion below.

2015-08-10 – lee group holding company v walro

Author: Matt Lindblom

Arlington Capital LLC v. Bainton McCarthy LLC

(N.D. Ind. June 26, 2015)

The district court affirms the bankruptcy court’s approval of the attorney fee application. The law firm was retained by the trustee to pursue a 11 U.S.C. § 363(n) claim against the purchaser of the chapter 11 debtor’s assets for colluding with bidders to set the sale price. The defendant argued the award of attorney fees was inappropriate because they were not incurred for services “reasonably likely to benefit the debtor’s estate,” as a secured creditor had a lien on the property sold and thus should have recovered any difference between the sale price and the actual value of the property sold. The court holds that the recovery would be “after acquired property” under § 552(a) and thus property of the estate. As such, the attorney fees were incurred to benefit the debtor’s estate. Opinion below.

2015-06-26 – arlington capital llc v bainton mccarthy llc

Author: Matt Lindblom

Schlarman v. Nageleisen (In re Nageleisen)

(Bankr. E.D. Ky. Mar. 6, 2015)

The bankruptcy court holds that the debtor’s right of redemption, following a postpetition foreclosure sale, is property of the estate. The debtor filed bankruptcy prior to the foreclosure sale of her real property. The court then granted stay relief (but not abandonment) to allow the foreclosure sale to proceed. No lienholders bid at the sale, and the property sold for $5,000, which was far less than the appraised value. The debtor than transferred the right of redemption to an entity she controlled. The trustee filed an adversary proceeding seeking a judgment declaring the right of redemption property of the estate. The court first determined under Kentucky law that the right of redemption did not arise prepetition but instead arose at the time of the foreclosure sale. Thus, it was not property of the estate at the time the petition was filed. The court then concluded that the right of redemption constituted proceeds of property of the estate (the real property) and thus under § 541(a)(6) it was now property of the estate. Opinion below.

2015-03-06 – schlaman v nageleisen

Author: Matt Lindblom