Scott and Lisa Cushing v. Household Finance Corporation III (In re Cushing); Adv. No. 03-7120; Case No. 03-42373-7 (Karlin) (March 31, 2005)
MEMORANDUM AND ORDER
· Truth-in-Lending Act: Proper Notice
Facts:
The facts are summarized in the February 2005 TABC Case Summaries. The question before the Court is whether the plaintiffs received the adequate number of copies of the right to rescind, as required by the Truth-in-Lending Act [See Holding #1]; and to the extent an adequate number of copies were received, whether the residence was the principal dwelling of the plaintiff Scott Cushing at the time of refinancing to qualify [See Holding #2].
Holdings:
1. The plaintiffs testified that they had no personal knowledge of the actual number of copies received; only that all the documents received were kept together in a file that was later provided to their attorney who noticed two copies were not included. There is no evidence presented that each plaintiff did not receive at least two copies of the notice, and therefore, the Plaintiffs have failed to rebut the presumption created by their signatures on the notice recognizing receipt of two copies.
2. The issue whether the real property was Scott Cushing’s principal dwelling is moot.
Daniel Herman Stockstill v. A.C.S. (In re Stockstill); Adv. No. 03-7030; Case No. 02-42526-7 (Somers) (April 11, 2005)
MEMORANDUM AND ORDER PARTIALLY GRANTING AND PARTIALLY DENYING DEBTOR’S COMPLAINT FOR DISCHARGE OF STUDENT LOAN
· 11 U.S.C. §523(a)(8): Discharge of Student Loan Debt
Facts:
The debtors Daniel Herman Stockstill and Susan Kay Stockstill sought relief under Chapter 7 of the Bankruptcy Code on September 24, 2002, and the debtor Daniel Stockstill (“debtor) later filed a complaint to discharge certain student loan debt based on undue hardship.
The facts are involved, but in summary, the debtor is 57 years old and has an advanced degree. He was employed as a teacher and later as a school administrator. In 2002, his position was not renewed and he was admitted to an alcohol rehabilitation center. The debtors sold their home and moved to a mobile home close to the wife’s parents. All retirement savings were exhausted, and the debtors have little to no additional assets. The debtor’s wife was previously employed for a minimal wage, and is now taking care of her parents on a full-time basis. The debtor’s student loan obligation is estimated at almost $120,000.00.
The Court held that the student loan debt is dischargeable [see Holding #1], but only as to the amount that causes undue hardship [see Holding #2].
Holdings:
1. The debtor cannot maintain a minimal standard of living while repaying the student loan debt. The debtor’s expenses exceed income, and the debtor’s lifestyle is not extravagant. The debtor’s state of affairs is likely to persist for a significant portion of the repayment period. The only viable employment by the debtor is as a substitute teacher, and his Social Security entitlement is insufficient. The debtor has exercised good faith in that he has made effort to find resolution. His failure to participate in alternative government repayment programs does not evidence the absence of good faith.
2. The Court has the authority to fashion a remedy. In Alderete v. Educ. Credit Mgmt Corp (In re Alderete), 308 B.R. 495, (10th Cir. BAP 2004), the Court did not discuss partial discharge but affirmed an order of partial discharge. The Court holds that the debtor has sufficient means to make a student loan payment of approximately $200.00 per month and that the debtor will be able to make the payments for seven years at an interest rate of 8.25%.
Dave Thomas, d/b/a Thomas Quality Homes & Improvements v. David and Janis Diane Haneke (In re Haneke); Adv. No. 02-5244; Case No. 02-13894-7 (Somers) (April 11, 2005)
· 11 U.S.C. §727(a)(4)(A): Discharge
MEMORANDUM AND ORDER DENYING DEBTORS’ DISCHARGE PURSUANT TO SECTION 727(a)(4)(A)
Facts:
The debtors David and Janis Haneke (“debtors”) filed a bankruptcy petition under Chapter 7 on August 8, 2002 and made certain statements and neglected other information in their Statement of Financial Affairs and Schedules. Certain inquiry was made of the debtors, and the debtors later filed amended schedules to include additional assets, but failed to disclose transfers and other assets. The Court denied the debtors discharge.
Holding:
The debtor’s Statement of Affairs and Schedules were false and material. The original schedules represented that the debtors owned little to no personal property, with later disclosure that there were significant assets. The debtors knowingly and fraudulently made false oaths regarding their personal property. The debtors failed to disclose open and closed accounts at various financial institutions and failed to disclose all payments made to creditors within ninety days of the filing and cash payments made within one year. Furthermore, no disclosure was made of transactions with the debtors’ daughter.
In re Excel Laminates, Inc.; Case No. 01-20190-7 (Somers) (April 12, 2005)
ORDER DENYING TDF ASSOCIATES’ MOTION FOR SUMMARY JUDGMENT IN OPPOSITION TO TRUSTEE’S OBJECTION TO CLAIM NO. 50 FOR RENT
Facts:
Keith Illig was the officer, sole director and sole shareholder of several corporate entities. (collectively, “Illig Companies”), including the debtor, Excel Laminates, Inc. (“debtor”). Some of the Illig Companies entered into a lease agreement with TDF Associates (“Lessor”). The debtor Excel was not a party to the lease and used an insignificant portion of the building for operations. The primary operations of the debtor were in Kentucky.
The parties were in default on the lease, and a certain amount was due and owing. The debtor Excel filed a Chapter 7 bankruptcy petition, and the Lessor filed a proof of claim to recover past-due rent. The Trustee objected to the proof of claim, and the Lessor filed its motion for summary judgment, asserting: 1) the assignment clause of the lease caused the debtor Excel to be liable [see Holding #1]; 2) the lease caused related corporate entities to be liable [see Holding #2]; 3) K.S.A. 58-2501 causes the debtor Excel to be liable [see Holding #3]; and 4) K.S.A. 58-2520 causes the debtor Excel to be liable [see Holding #4].
Holdings:
1. The assignment clause of the lease is subject to an earlier consent lease provision; therefore, the lease only imposed liability for the rent on those parties to the lease.
2. The related entities clause in the lease is applicable only to an assignment of a lease or sublease of the leased premises. The debtor Excel arguably only used a small portion of the premises, and would only be liable for that portion.
3. K.S.A. 58-2501 may be applicable to the portion used by the debtor Excel, but it does not hold the debtor Excel liable for the entire past-due rent amount.
4. Occupancy is a prerequisite for recovery under K.S.A. 58-2523, and the debtor Excel was not the occupant of the entire premises, and there was no expectation for rent.
B&F Cattle, Inc. v. Lori Lynn Bair (In re Bair); Adv. No. 02-5129; Case No. 02-10076-7 (Somers) (April 14, 2005)
MEMORANDUM OF DECISION
Facts:
Dwight Bair (“Husband”) and Don Fulton formed B&F Cattle, Inc. (“Corporation”) through which they engaged in the cattle business. The Corporation owned certain real estate, which included a home which the Corporation leased to the debtor Lori Bair (“debtor”) and Husband (the “Ranch”). The debtor and Husband made certain improvements to the Ranch, including fences and waterers for cattle. It is unknown from what source the debtor and Husband acquired the funds to improve the Ranch. The debtor and Husband encountered financial difficulties and began to remove some of the improvements. The debtor bought a new home with new money and installed some of the improvements on the new home. The Husband filed a Chapter 12 bankruptcy petition, which was later converted to a Chapter 7, on which discharge was later denied. The debtor filed a Chapter 13 bankruptcy petition, which was later converted to a Chapter 7.
The Corporation later sold the Ranch at a reduced rate, in part, because the improvements were removed. The Corporation filed an adversary complaint to find the debtor financially liable for the reduced value of the Ranch and to find the debt nondischargeable.
Holdings:
1. The debtor is not liable to the Corporation for the reduced value of the Ranch, but is liable for the value of the affixed fencing that was wrongly removed.
2. The Corporation is entitled to a constructive trust against the debtor’s interest in the new homestead, to the extent of the value of the improvements taken from the Ranch and affixed to the new homestead.
J. Michael Morris v. Emprise Bank (In re Jones Storage and Moving, Inc.); Adv. No. 04-5106; Case No. 00-14862-7 (Somers) (April 14, 2005)
MEMORANDUM AND ORDER GRANTING DEFENDANT’S MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM
Facts:
In May 1999, Richard Jones (“Principal”) entered into a home equity note with Emprise Bank (“Bank”), in the approximate amount of $48,000.00. Richard Jones was the principal of the debtor Jones Storage and Moving, Inc. (“debtor”). Within a year of filing, the debtor paid approximately $43,000.00 to the Bank for the benefit of its Principal; including approximately $27,000.00 paid to the Bank within ninety days of filing.
In December 2000, the debtor filed a Chapter 7 bankruptcy petition; then, in December 2002, the trustee filed a fraudulent transfer adversary action against the Bank under §548 (“548 Adversary”). The 548 Adversary was later dismissed. In March 2004, the trustee filed an adversary action against the Principal for the preferential payment under a §547 (“547 Adversary). The trustee and Principal entered into an agreed journal entry that awarded judgment in favor of the trustee, in the amount of approximately $27,000.00. In May 2004, the trustee filed an adversary action against the Bank under §550 to recover the $27,000.00 awarded to it in the §547 Adversary (“550 Adversary”).
The Bank filed a motion to dismiss on the basis that the §547 Adversary was not binding against the Bank and that any preferential action under §547 was barred by the statute of limitations. The trustee responded by arguing that the journal entry entered into the §547 Adversary satisfied the requirement of §550 and allowed the trustee to recover against the transferee bank. The Court agreed with the Bank.
Holding:
To recover under §550, the trustee must establish that the transfer may be avoided under §547 and that the person for whom such transferred property is to be covered is the initial transferee. The journal entry entered into the §547 adversary is not binding against the Bank. There was no relationship between the Principal and the Bank sufficient to hold that judgment against the Principal binding upon the Bank. Furthermore, to prevail under §547, an action must have had to commence within two years of filing for bankruptcy protection.
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