Gold in Grain, Inc. v. Mark A. Faulkner (In re Gold in Grain, Inc.); Adv. No. 04-5100; Case No. 04-10202-11 (Nugent) (February 16, 2005)
MEMORANDUM OPINION
Facts:
Gold in Grain, Inc. (“debtor”) is a farming corporation whose shareholders include Charlotte Gottlob, and her brother and sister-in-law, Darren and Gerri Wilkey. Darren and Gerri Wilkey (“Directors”) served as the board of directors. The Directors convened a meeting to authorize the sale of essentially all of the assets of the debtor. Charlotte Gottlob was not provided notice of the meeting. Ms. Gottlob received the sale notice through a newspaper advertisement, retained counsel and gave notice that the Directors failed to follow the by-laws to sell corporate assets. The auctioneer Faulkner (“Auctioneer”) had knowledge of the disputed authority.
The Directors commenced the sale, with the condition that any sale was subject to corporate approval. Certain personal property sold at the auction without the condition, and $3,650.00 was held in escrow by the Auctioneer for commission. In January 2004, the debtor filed its Chapter 11 bankruptcy petition, and filed an adversary action to cause the Auctioneer to turnover the $3,650.00 in commission. The Court held in favor of the debtor.
Holding:
The Directors did not have actual authority to liquidate the personal property and were not acting within the scope of their authority to sell corporate assets. Further, the Auctioneer had knowledge of the disputed authority. Any sale proceeds in the Auctioneer’s possession should be turned over to the estate.
In re Terry Monroe Pike and Dana Kristine Pike; Case No. 03-16382-13 (Nugent) (March 10, 2005)
MEMORANDUM OPINION
Facts:
The debtors Terry and Dana Pike (“debtors”) filed a Chapter 13 bankruptcy petition and subsequently filed a plan. Wesley Medical Credit Union (“Bank”) held a security claim, in the amount of approximately $8,700.00, secured by the debtors’ van. The debtors and the Bank agreed that the Bank was oversecured, and agreed to increase the interest rate from the contract rate of interest, 6.9 to 7.9% to compensate for depreciation of the collateral. The Trustee objected to the agreed 7.9% interest rate. The Court held in favor of the Trustee.
Holding:
Where a creditor is oversecured and a party in interest objects to the interest rate, the Court may determine the appropriate rate by applying Till’s formulaic approach: enhancing the national prime rate by a risk factor. The prime rate was approximately 5.5%, and 1.4% is a reasonable risk enhancement. There is no cause for the agreed rate of 7.9%.
Redie B. Lewis v. BNC Mortgage, Inc. et al. (In re Redie B. Lewis); Adv. No. 03-7068; Case No. 03-41515 (Karlin) (March 11, 2005)
Several decisions were entered in the above-referenced case, and are summarized below.
Facts (common to all):
The plaintiff Redie R. Lewis (“Plaintiff”) purchased her home in 2000. The date she entered into the contract is unknown; however, the closing date was February 18, 2000. In September 2000, a foreclosure action was filed against Plaintiff in state court.
The Plaintiff filed a Chapter 13 bankruptcy on May 20, 2003, and filed an adversary complaint against various defendants alleging: negligent filing of foreclosure action, engaging in illegal enterprise in violation of the Racketeer Influenced and Corrupt Organizations Act (“RICO”), fraud, Truth in Lending Act violations, and discrimination in violation of Equal Credit Opportunity Act. The defendants brought motions to dismiss and/or motions for summary judgment. The Court dismissed the allegations, with the exception of the RICO cause of action. [See July 2004 TABC Case Summaries for earlier decisions and discussion.]
MEMORANDUM AND ORDER
Holdings:
1. The claim against First Union is barred by res judicata and issue preclusion. First Union brought a state court foreclosure action against the Plaintiff in September 2000, seeking to foreclose its mortgage. Plaintiff had the opportunity to raise the RICO defense but failed to do so.
2. The complaint is insufficient to state a claim for relief under RICO against the remaining defendants. The Plaintiff must allege 1) conduct, 2) of an enterprise, 3) to a pattern, and 4) for racketeering activity. The Plaintiff has failed to properly plead “an enterprise” within the meaning of RICO; that the defendants engaged in sufficient “conduct;” and that the defendants engaged in a pattern of racketeering activity.
MEMORANDUM AND ORDER DENYING OPTION ONE MORTGAGE CORP.’S MOTION FOR SANCTIONS, AND GRANTING IN PART AND DENYING IN PART KOZENY & MCCUBBIN’S MOTION FOR SANCTIONS
Holdings:
1. Sanctions against the Plaintiff are not warranted for defendant Option One. There is no indication that the Plaintiff misrepresented the facts to his attorney or was in any other way part of the decision to file a First Amended Complaint that contained allegations barred by the Statute of Limitations. As for the Plaintiff’s attorney, sanctions are not appropriate. There is no evidence that Plaintiff’s counsel had any improper motive in bringing the claims against Option One.
2. Counsel for the Plaintiff was negligent in bringing the claim against a defendant, because the claim was not warranted by existing law. Counsel for the Plaintiff attempts to litigate the basic issue that the state court clearly held that First Union was the holder of the note and mortgage. To re-litigate this issue in the bankruptcy adversary proceeding is simply improper. Counsel for Plaintiff was required to pay a portion of the Defendant’s fees, in the amount of $1,000.00.
MEMORANDUM AND ORDER DENYING THREE MOTIONS FOR SANCTIONS RELATING TO PLAINTIFF’S SECOND AMENDED COMPLAINT FILED BY FIRST UNION NATIONAL BANK, OPTION ONE MORTGAGE CORP., AND KOZENY & MCCUBBIN, L.C.
Holding:
The defendant failed to comply with the safe harbor provisions of Rule 9011(c)(1)(a) by first serving a copy of the Motion for Sanctions on the Plaintiff twenty-one days prior to filing the motion. The request was denied.
ORDER GRANTING MOTION TO WITHDRAW BY PLAINTIFF’S COUNSEL
Holding:
There was no substantive and continuing need to delay the decision to allow counsel for the Plaintiff to withdraw. The Motion to Withdraw was granted.
Educational Credit Union Management Corporation v. Dean Alan Boyer (In re Boyer); Adv. No. 02-7141; Case No. 96-42993-13 (Somers) (February 16, 2005)
MEMORANDUM AND ORDER AFTER REMAND
Facts:
The debtors owed student loan obligations to Educational Credit Management Corporation (“ECMC”), and filed their Chapter 13 petition discharging all or part of their obligations. ECMC received notice of the plan, and failed to object. The debtors completed the plan and received a discharge. In accordance with the confirmed plan, and relying on Anderson, the Court held the interest or the obligation was dischargeable upon plan completion, and the remaining unpaid principal was not discharged. [See February 2004 TABC Case Summaries for earlier decision and discussion].
After the decision, Anderson was reviewed in Poland v. Educational Credit Management Corp. (In re Poland), 382 F.3d 1185 (10th Cir. 2004), was published, and the case was remanded back to the Court by the BAP.
Holding:
No portion of the student loan obligations is dischargeable.
Steven Speth v. Daniel Eugene Flowers et al (In re Flowers); Adv. No. 04-5102; Case No. 04-10858-7 (Somers) (February 23, 2005)
MEMORANDUM OF DECISION
Facts:
The debtors and a third party came to terms to finance an automobile. The written agreement provided that the debtors would remit regular payments to the third party. The title and lien registration identified the third party as an owner and lien holder.
On February 27, 2004 the debtors filed a Chapter 7 bankruptcy petition, and the trustee sought to avoid the lien [See Holding #1] and recover the $4,000 in post-petition payments under the agreement [See Holding #2].
Holdings:
1. The agreement adequately provided the third party with a security interest in the automobile.
2. Considering the agreement is valid and enforceable, the trustee is not entitled to recover the post-petition payments from the third party.
U.S. Bank v. Barbara D.W. Heck (In re Heck); Adv. No. 03-6107; Case No. 03-21569-7 (Somers) (March 1, 2005)
MEMORANDUM OF DECISION
Facts:
The debtor Barbara Heck (“debtor”) guaranteed certain obligations made by the debtor’s limited liability company (“Company”) to U.S. Bank. The obligation of the Company was secured by the Company’s inventory. The debtor closed the business of the Company, sold the inventory, and used the proceeds to pay other Company debt and herself, rather than the Bank. The factual issue is whether the debtor acted willfully and with malicious injury, or just was absent-minded. The Court held the debtor acted willfully and with malicious injury, and the obligation is non-dischargeable.
Holding:
The debtor recognized the Bank had a security interest in the inventory, and was aware of the injury to Bank when she used the sale proceeds to pay other creditors rather than the Bank.
Robert A. Bustos v. Lori A. Bustos (In re Bustos); Adv. No. 04-5043; Case No. 03-16074-7 (Somers) (March 10, 2005)
MEMORANDUM OF DECISION
Facts:
The debtor Lori Anne Bustos (“debtor”) and her ex-husband, Robert A. Bustos (“ex-husband”) jointly owned a home in Coffeyville, Kansas, and later divorced in July 2002. Through the divorce proceedings, the debtor retained the home and gave a mortgage to the ex-husband to secure payment on an offsetting obligation to the ex-husband. The debtor filed a Chapter 7 bankruptcy petition in November 2003, and claimed the home exempt. The Court held that the debtor cannot avoid the ex-husband’s mortgage on the homestead [See Holding #1]; and any personal obligation to pay the ex-husband outside the offsetting home obligation is dischargeable [See Holding #2].
Holdings:
1. The homestead property and the lien were awarded in the same divorce decree, and the lien is not avoidable.
2. The underlying personal liability provided in the divorce decree is dischargeable.
In re Stephen W. Gray; Case No. 01-14446-7 (Somers) (March 11, 2005)
MEMORANDUM AND ORDER GRANTING MOTION OF KANSAS INVESTIGATIVE SERVICES FOR ADMINISTRATIVE EXPENSE CLAIM
Facts:
In June 2001, judgment was entered in state court against the debtor Stephen W. Gray (“debtor”) and in favor of North American Savings Bank F.S.B. (“Bank”) to recover a 1993 Jayco travel trailer (“Trailer”). The Trailer was seized and was stored by Kansas Investigative Services, Inc. (“Storage Company”).
The debtor filed for Chapter 7 bankruptcy in September 2001, and the Storage Company held the Trailer until March 2002 when it was turned over to the Trustee. The Storage Company seeks an administrative claim for the cost of storage from the filing date to the date the Trailer was turned over, in the amount of $1,267.00. The Trustee objected, and the Court held in favor of the Storage Company.
Holding:
Even though there was no formal agreement with the Trustee to store the trailer, there was an implied transaction and the estate received benefit.
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