Douglas J. Compton v. Marc W. Herrman (In re: Marc Herrman); Adv. Case No. 05-5834; Case No. 05-15429-7 (Somers) (November 28, 2006)
OPINION DENYING PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT
• 11 U.S.C. §727(a)(2)(A)
Facts:
This proceeding was before the Court for resolution of the Plaintiff’s motion for summary judgment. The Plaintiff contends that Debtor should be denied a discharge pursuant to 11 U.S.C. §727(a)(2)(A) because, within one year before filing for bankruptcy, he transferred property with the intent to hinder, delay, or defraud the Plaintiff.
In October 2000, the Plaintiff loaned the Debtor $25,000.00 for a down payment on a house. In return the Debtor agreed the Plaintiff “shall be entitled to one-half of the proceeds from the eventual sale of” the house. In March 2002, the Debtor gave the Plaintiff a promissory note for $80,000.00 in return for a 50% interest in a company called Civil Development, LLC. In November 2004, the Plaintiff’s lawyer sent the debtor a letter about both debts he owed the Plaintiff. A month after receiving the attorney’s letter, the Debtor formed a limited liability company called Gauge, LLC; he was the sole member. The day after forming the LLC, he and his wife signed a quit claim deed transferring their interest in the House to Gauge, LLC. Gauge gave them nothing in return for the exchange. In February 2005, two months after receiving the deed, Gauge sold the House to Belvedere, LC for $300,000.00. The Debtor’s father is the sole owner of Belvedere. Gauge used the sale proceeds to pay off the mortgage on the House, and the $95,000.00 balance was used for the Debtor’s benefit.
On February 8, 2005, the Plaintiff sued the Debtor in State Court for breaching his payment obligations on the promissory note. In August 2005, the Debtor sold a 1949 truck, several guns, and two saws to his father for $15,000.00. After his offer to settle the Plaintiff’s State Court claim was rejected, near the end of August 2005, the Debtor filed a Chapter 7 bankruptcy petition.
The Plaintiff filed a complaint objecting to the Debtor’s discharge. Plaintiff contends that with the intent to hinder, delay, and defraud him, the Debtor transferred (1) the house to Gauge and (2) the truck, guns, and saws to his father, all in violation of §727(a)(2)(A) of the Bankruptcy Code. The Plaintiff moved for summary judgment.
Holding:
The Court denied the Plaintiff’s motion for summary judgment. The Plaintiff cited a number of cases where intent to hinder, delay, or defraud was found, but most of them involved conclusions reached after trial, not a ruling on a summary judgment motion, so they provide little guidance on the question of when summary judgment should be granted under §727(a)(2)(A) on a disputed issue of intent. The Court noted that credibility issues are to be left to the trier of fact except in extreme or exceptional circumstances.
The Court also ruled that the Plaintiff’s evidence of badges of fraud fell short of establishing as a matter of law that the Debtor’s transfer of the House, truck, guns and saws were made with the intent to hinder, delay, or defraud the Plaintiff.
Matthew D. Williams; Case No. 05-17575-7 (Somers) (November 29, 2006)
MEMORANDUM AND ORDER GRANTING MOTION TO CONVERT CASE FROM CHAPTER 7 TO CHAPTER 13
• 11 U.S.C. §706
Facts:
The matter before the Court was the objection of Trio Machine, Inc., to Debtor’s motion to convert his case from a Chapter 7 to Chapter 13. Trio claimed that the motion to convert was filed in bad faith in order to avoid a possible judgment in Trio’s favor in dischargeability litigation.
The question presented was whether the Debtor has an absolute right to convert the case.
Holding:
The Court granted Debtor’s motion to convert.
The Bankruptcy Appellate Panel decision of In re Miller, 303 B.R. 471(10th Cir. BAP 2003), makes clear that “the bankruptcy court does not have discretion to deny conversion on any basis other than the requirements set forth in §706”. Miller goes on to explain that the plain language of §706 and the legislative history of the statute suggest that Congress intended to give a Chapter 7 debtor the right to convert the case once, putting the debtor in the same position he would have been in had he originally filed under Chapter 13 of the Bankruptcy Code.
United States Trustee v. William Jack Keck (In re: William Jack Keck); Adv. Case No. 05-7149; Case No. 05-43269 (Karlin) (December 4, 2006)
MEMORANDUM AND ORDER DENYING MOTION FOR SUMMARY JUDGMENT
• 11 U.S.C. §727(a)(4)
Facts:
The United States Trustee moved for summary judgment on an 11 U.S.C. §727(a)(4) claim. The Trustee’s claim was that the Debtor’s bankruptcy pleadings contained material errors and omissions, that he has failed to correct those erroneous pleadings, and that the errors and omissions were material; and that he also testified falsely, under oath, about material matters at a meeting of creditors, and that the testimony was made with reckless disregard for the truth, equivalent to fraud.
Holding:
The Court ruled that summary judgment was not proper in this case, and denied the motion.
Summary judgment is appropriate if the moving party demonstrates that that there is “no genuine issue as to any material fact” and that it is “entitled to a judgment as a matter of law.” As a very general rule, questions involving a person’s intent or other state of mind cannot be resolved by summary judgment. At the summary judgment stage, all evidence and reasonable inferences therefrom must be weighed in favor of the non-movant, and because the Court cannot conclude that no rational fact finder would believe the Debtor, the Court finds that there remains a genuine issue of material fact concerning whether Debtor had the requisite intent to defraud when he made admittedly false statements, under oath, in his bankruptcy pleadings and during his §341 meeting of creditors.
Larry Sorensen, Teresa Sorensen, and Jennifer Pritchard v. Johnny
Dean Pritchard (In re: Johnny Dean Pritchard); Adv. Case No. 05-5139; Case No. 05-10608-7
(Nugent) (December 1, 2006)
MEMORANDUM OPINION/JUDGMENT ON DECISION
• 11 U.S.C.§523
Facts:
Plaintiffs seek to except two debts from Debtor’s discharge. Plaintiff Jennifer Pritchard asserts that a $1,000.00 attorney fee award entered against her ex-husband, Debtor, in a post-divorce proceeding is nondischargeable under 11 U.S.C. §523(a)(5). Plaintiffs Larry Sorenson and Teresa Sorensen assert that a loan made by them to their son-in-law, Debtor, to pay an income tax obligation of $9,192.00 is nondischargeable under 11 U.S.C. §523(a)(14) and §523(a)(1)(C).
Holdings:
1. The Court concluded that there was insufficient evidence that the $1,000.00 attorney’s fees awarded in the post-divorce proceeding was intended by the domestic court to be a support obligation or is actually in the nature of support or maintenance, and ruled that the debt was discharged.
2. The Court found that Debtor willfully evaded certain tax obligations by intentionally and consciously not reporting some $123,000.00 inherited upon his father’s death as income. The Court ruled that the debt to the Sorensens was therefore excepted from discharge under §523(a)(14) and §523(a)(1)(C).
Linda S. Parks v. Michael R. Berry, Jr., Snap-On Credit, LLC (In re: Michael r. Berry, Jr.); Adv. Case No. 05-5755; Case No. 05-14423-7 (Nugent) (December 1, 2006)
SUPPLEMENTAL MEMORANDUM OPINION/JUDGMENT OF DECISION
• 11 U.S.C.§544(a)
Facts:
The Trustee filed an adversary proceeding invoking her hypothetical lien creditor avoidance powers under 11 U.S.C. §544(a). The Trustee contends that Snap-On’s security interest in certain property may be avoided because its UCC-1 financing statement listed “Mike Berry” as the debtor’s name, rather than his full legal name of “Michael R. Berry, Jr.”
Holding:
The Court held that a Kansas financing statement must contain the legal name of the Debtor. The Court further concluded that the “individual name” of the debtor must be referenced on the financing statement and that if a filer uses a name other the individual debtor’s legal name, “the measure of whether that name’s use is seriously misleading is whether, using the filing office’s standard search logic, a search under that name would result in the financing statement being found.” The Court concluded that Snap-On’s financing statement listing “Mike Berry” is seriously misleading and that its security interest is subject to the Trustee’s lien creditor status and may be avoided.
Barton S. Blond v. Thomas J. Marsh (In re: Thomas J. Marsh); Adv. Case No. 04-6169; Case No. 04-23844 (Somers) (December 4, 2006)
MEMORANDUM AND ORDER GRANTING OBJECTION TO DISCHARGEABILITY UNDER 11 U.S.C. §523(a)(5)
• 11 U.S.C. §523(a)(5)
Facts:
The question presented was whether a judgment against the Debtor in favor of an attorney, entered by a family court for payment of the Debtor’s ex-spouse’s attorney fees, which fees were incurred by the ex-spouse in defense of a post dissolution motion to modify custody that was filed by the Debtor, is non-dischargeable pursuant to 11 U.S.C. §523(a)(5) as being in the nature of child support.
Holding:
In a case very similar to the matter presented here, the Tenth Circuit Court of Appeals in In re Jones 9 F.3d 878 (10th Cir. 1993), held a judgment for attorneys fees entered in post divorce custody matters to be in the nature of support of the child and nondischargeable under 11 U.S.C. §523(a)(5). In the view of the 10th Circuit, “In all custody actions, the court’s ultimate goal is the welfare of the child.” The Court granted the complaint of the attorney on his claim that the fees awarded to him by judgment against the Debtor for services provided in the custody dispute are in the nature of support and are nondischargeable pursuant to 11 U.S.C. §523(a)(5).
Darcy D. Williamson v. R. Edward Allen (In re: Lawrence James Brungardt,
Jr.); Adv. Case No. 06-7064; Case No. 04-42369 (Somers) (December
4, 2006)
MEMORANDUM AND ORDER DENYING DEFENDANT’S MOTION TO DISMISS
• B.R. 7004(d)
• 11 U.S.C. §544
• 11 U.S.C §548
Facts:
This was an adversary proceeding commenced by the Chapter 7 Trustee to avoid the transfer of real property located in Ellis County, Kansas and to preserve the property for the benefit of the estate. Prior to the filing for bankruptcy, Debtor Brungardt transferred property in Ellis County, Kansas with an estimated value of $72,000.00 to Defendant LaMac Irrevocable Trust for the sum of $1.00. The Chapter 7 Trustee contended that this transfer was a fraudulent conveyance, and sought to avoid the transfer pursuant to 11 U.S.C. §544 and §548.
The Defendant Trust’s Trustee, R. Edward Allen, proceeding pro se, filed a Motion to Dismiss for failure to state a claim on which relief may be granted and lack of jurisdiction of the Bankruptcy Court. R. Edward Allen also objected to the adequacy of service of process.
Holding:
The Court found it had jurisdiction over the Defendant LaMac Irrevocable Trust. The Court also ruled that Bankruptcy Courts have the authority to effectuate nationwide service of process, as provided in Bankruptcy Rule 7004(d). The Court denied the motion to dismiss.
The Court also ruled that pursuant to Bankruptcy Rule 9010 and Local Rule 9010.1, a corporation, partnership, or any entity other than an individual may appear and participate only through an attorney in an adversary proceeding or contested matter. R. Edward Allen did not sign the motion to dismiss or his reply brief as an attorney for the Defendant Trust and had not otherwise informed the Court that he had been admitted to practice law in the State of Kansas. Therefore, R. Edward Allen was not then the proper person to move to dismiss the Complaint against the LaMac Irrevocable Trust.
Charles Mack Wilson and Jonell Elizabeth Wilson; Case No. 06-40637 (Karlin) (December 5, 2006)
MEMORANDUM OPINION AND ORDER SUSTAINING OBJECTIONS TO DEBTORS’ CHAPTER 13 PLAN
• 11 U.S.C. §1325(a)
Facts:
WSF Financial and HSBA Auto Finance filed objections to confirmation of Debtors’ Chapter 13 Plan. Both creditors contended that Debtors’ Chapter 13 Plan did not comply with the requirements of 11 U.S.C. §1325(a) that deal with debts incurred within 910 days of the filing of the bankruptcy petition. Debtors contended that both vehicles were purchased for “business use”, and did not fit within the hanging paragraph in §1325(a). Debtors Chapter 13 Plan proposed to pay only the current value of both vehicles, rather than the full amount of the remaining debt.
Holding:
The Court denied confirmation of the Debtors’ Plan. The Court found that the hanging paragraph in 11 U.S.C. §1325(a) applied to the purchase of both vehicles because each creditor’s claim was secured by a purchase money security interest, each debt was incurred within 910 days of the filing of the bankruptcy case, and the collateral in each case is a motor vehicle, and because upon acquisition, Debtors intended that a significant and material portion of their use of both vehicles would be for the personal use and benefit of both debtors.
J. Michael Morris v. Snap-On Credit, LLC and Christopher Gary Jones (In re: Christopher Gary Jones); Adv. Case No. 06-5015; Case No. 05-16909-7 (Somers) (December 7, 2006)
MEMORANDUM AND ORDER SUSTAINING THE CHAPTER 7 TRUSTEE’S COMPLAINT TO AVOID AND RECOVER UNPERFECTED SECURITY INTEREST
• 11 U.S.C. §544(a)
• 11 U.S.C. §550
• 11 U.S.C. §551
• K.S.A. §84-9-503
• K.S.A. §84-9-506
Facts:
The Trustee filed an adversary complaint pursuant to 11 U.S.C. §544(a), §550, and §551, seeking to avoid and preserve the security interest of Defendant Snap-On in the Debtor’s tools. The Trustee asserted that Snap-On was not properly perfected because Snap-On did not use the debtor’s full name, Christopher Gary Jones on its financing statement and a search using the Kansas Secretary of State filing office’s standard search logic did not disclose the security interest.
Holding:
1. Lien Avoidance. The Kansas Supreme Court has held that the “name of the debtor” for purposes of a financing statement is the debtor’s legal name; and any error in that name will be seriously misleading and render the financing statement ineffective, unless the name as used can be located by an official search using the debtor’s legal name and the Secretary of State’s standard search logic. An official search of the record of the Secretary of State’s office using the standard search logic did not produce Snap-On’s UCC-1. The Court sustained the Chapter 7 Trustee’s complaint to avoid Snap-On’s security Interest in the Debtor’s tools.
2. Lien Preservation and Turnover. Upon avoidance of a lien, preservation pursuant to §551 for the benefit of the estate is automatic. The rights of the Chapter 7 Trustee upon avoidance and preservation of a lien in an exempt vehicle were addressed by the Tenth Circuit BAP In re Rubia 257 B.R. 324 (10th Cir. BAP). The Court in In re Rubia 257 B.R. 324 (10th Cir. BAP) held that the value of the Trustee’s lien position is measured by the value of the collateral on the date of filing, but is limited by the amount of the debt owed to the lender on the petition date. The application of Rubia to this case requires the Court to hold that the recovery by the Trustee is the value of the collateral on the date of filing, limited by the amount of the claim owed by the Debtor secured by the collateral on the date of filing.
Christopher J. Redmond, Kansas Express International v. Ashraf Fouad Hassan, Bilal Said, International Football Club, Inc., Overland Park Sports Complex, LLC, Terra Sports Group, LLC, Terra Venture, Inc. , Terra Venture Investments, LLC, Analytical Management Laboratories, Inc., Mark Murphy, The Murphy Law Firm, P.A., Final Touch, Inc, Kansas City Limousine, Inc. and Budget Limousine, Al Moser, Diane Moser (In re: Ashraf Fouad Hassan, Irina Hassan); Adv. Case No. 05-6125; Case No. 04-20332-7 (Somers) (December 12, 2006)
RECOMMENDATION TO THE DISTRICT COURT TO GRANT THE MURPHY DEFENDANTS’ MOTION TO WITHDRAW THE REFERENCE OF THIS ADVERSARY PROCEEDING
• Bankruptcy Rule 9015(a)
• Fed. R. Civ. P. 38
Facts:
The reader is encouraged to review the Court’s decision, to obtain a comprehensive review of the facts. In summary, this proceeding is before the Court on two motions to withdraw the reference of the proceeding for purposes of trial on the claims made against two of the defendants, based on their asserted right to a jury trial. Both motions, along with supporting briefs, were filed by defendants Mark Murphy and the Murphy Law Firm, P.A.
The Trustee responded that the Murphy Defendants had no right to a jury trial because: (1) they waited too long to ask for a withdrawal of the reference of this proceeding to this Court; and (2) the Trustee’s claims against the Murphy Defendants concern: (a) conduct that occurred postpetition, (b) their deadlines with the Debtor, and (c) the effect of postpetition transfers on property of the estate. The Trustee added that even if there is a right to a jury trial, the District Court should defer withdrawing the reference until the case is ready for trial.
Holding:
The Court recommended that the District Court: (1) excuse the Murphy Defendants’ inadvertent waiver of their jury trial right by their failure to make a timely motion to withdraw reference; and (2) determine the Murphy Defendants are entitled to a jury trial on four of the claims of the Trustee’s complaint. However, because this Court had the power to handle pretrial matters even if a jury trial would eventually be required, the Court intended to carry on with pretrial matters until the District Court ruled on the motions or directed otherwise.
The Court noted that a jury trial on the Trustee’s claims against the Murphy Defendants must occur before factual issues (if any) that are common to those claims and to the Trustee’s claims against the other defendants could be presented in a bench trial.
Thelma E. Daniel; Case No. 06-20714-7 (Somers) (December 15, 2006)
MEMORANDUM AND ORDER SUSTAINING TRUSTEE’S OBJECTION TO DEBTOR’S PLAN
• 11 U.S.C. §1325
Facts:
The Chapter 13 Trustee objected to the Debtor’s Plan, which the Debtor proposed to complete in 18 months without making payments to unsecured creditors.
Debtor’s proposed Plan provided for payments of attorney fees and payment of a secured car loan. The Trustee contends the plan should be amended to provide for monthly payments for an entire 36 month period, which would result in a dividend to unsecured creditors.
Holding:
The Court denied confirmation of Debtor’s Plan. The Court reasoned that whether
the Debtor’s Plan could be confirmed depends upon the amount of the Debtor’s
projected disposable income. If that amount was zero or less, the Court would
need to determine whether the Plan must run for 36 months even though no dividend
would be paid to unsecured creditors. However, if that amount is a positive
number, the Plan cannot be confirmed because it does not commit Debtor’s projected
disposable income to the payment of allowed unsecured claims for the 36 month
applicable commitment period, as required by §1325.
Patricia E. Hamilton v. Long McArthur, Inc., Ford Motor Company,
Bank of America, N.A. (In re: Gary Lee Ferguson, Deborah Ann Ferguson); Adv. Case No. 06-7063;
Case No. 06-40125-7 (Somers) (December 29, 2006)
ORDER DENYING MOTION TO ABSTAIN AND REMAND
• 28 U.S.C.A. §1452
Facts:
This proceeding is before the Court on defendant Ford Motor Company’s motion to abstain and to remand the case back to the state court from which it was removed.
In December 2004, the Debtors bought a Ford van from Long McArthur, Inc., a dealership doing a business in Ellsworth County, Kansas. As soon as they bought the van, the Debtors allege they began experiencing serious mechanical problems with it.
The Debtors eventually sued the defendants in Ellsworth County. The Debtors then filed a Chapter 7 bankruptcy petition. The Trustee filed with this Court a notice of removal of the Debtors’ Defective Van lawsuit, and mailed a copy to the clerk of the state court. On the day that she filed the notice of removal, the Trustee also filed a separate adversary complaint against the defendants, seeking a declaration that under Kansas law, the Debtors had properly revoked their acceptance of the van, extinguishing any lien either defendant might claim on the van, or alternatively, seeking to avoid the defendants’ lien on the van under §548(a)(1) of the Bankruptcy Code.
Holding:
The Court denied Ford’s motion to abstain and remand. Removal of cases from state courts to bankruptcy courts is governed by 28 U.S.C.A. §1452. Because the District Court for the District of Kansas has referred bankruptcy matters to the bankruptcy judges for the District, the Trustee’s action under §1452(a) brought the Debtors’ Defective Van lawsuit to this Court.
A number of factors are considered in deciding whether a cause of action should be remanded under §1452(a). These factors include the following:
1. Whether judicial resources will be duplicated;
2. What is the most economical use of judicial resources;
3. What will be the effect of remand on the administration of the bankruptcy
estate;
4. Whether questions of state law, which are better addressed by a state court,
are involved;
5. Whether considerations of comity exist;
6. The degree of prejudice, if any, to the involuntary removed parties;
7. Whether the possibility of an inconsistent result is lessened by remand;
and
8. The expertise of the court where the action originated.
Ford did not suggest that the state law governing three of the four claims was difficult or unsettled. To the extent the Court had received any indication, it appeared the state law dispute would be factual ones about whether the Debtors (and consequently, their bankruptcy estate) qualified for relief under the relevant statutes, not legal ones about what the statutes mean.
Under the circumstances, the Court was not convinced that it should exercise it discretion and send the Defective van claims back to the state court.
Rafter Seven Ranches, L.P.; Case No. 05-40483-12 (Somers) (December 22, 2006)
MEMORANDUM AND ORDER DENYING DEBTOR’S MOTION TO RECONSIDER COURT’S ORDER ENTERED ON NOVEMBER 14, 2006
• Bankruptcy Rule 9023
• Fed. R. Civ. P. 59
Facts:
On October 25, 2006, at the request of Debtor, the Court held an emergency evidentiary hearing on the Debtor’s Motion to Interpret an agreement between a certain WNL Investments and the Debtor. Debtor sought an order of the Court finding that the parties’ agreement prohibited WNL from selling two quarter sections of property on the same day. The Court found that the parties’ agreement was clear and unambiguous, and permitted the sale of two quarter sections on the same day provided that the properties were separately auctioned. Debtor filed a Motion to Reconsider the order of denial based on alleged new evidence.
Holding:
The Court denied the Motion to Reconsider. The Court noted that, under the applicable rules and law, a motion to alter or amend a judgment is appropriate only to “correct manifest error of law or to present newly discovered evidence.” The standard for granting a motion to alter or amend is very strict, and typically motions to reconsider are denied. Such motions cannot be used to relitigate old matters or to raise arguments or present evidence that could have been raised prior to the entry of judgment.
Here, the Debtor claimed in its Motion to Reconsider that it had “new evidence” that the Court should consider, that being the transcript of a hearing that was attended by the parties and their lawyers. The Court found the transcript did not constitute newly discovered evidence, given the parties’ attendance at the subject hearing and because the Debtor did not show any diligence in attempting to obtain the transcript.
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