Linda S. Parks vs. Barbara Scott (In re Steele); Case No. 04-10297; Adv. No. 04-5329 (Nugent) (May 11, 2006)
MEMORANDUM OPINION
Facts:
The Trustee sought to avoid the allegedly fraudulent transfer between Steele (“Debtor”) and Barbara Scott. In June 2003, Steel and Scott purchased a boat and trailer. Scott paid for the boat and trailer with funds she borrowed from Centera Bank. Scott insured the boat, made payments on the Centera note, and paid the property taxes. However, title on the boat and trailer were registered in both the Debtor and Scott’s names. Also in June 2003, the Debtor and Scott purchased a Ford F150 pickup. Steele traded in a 1990 Ford F150 with $4,000 trade-in value, and Scott traded in a 1992 Ford Explorer with a $500 trade-in value. The balance of the purchase price was paid by Scott with funds borrowed from Centera. The Ford was then titled in both Debtor and Scott’s names.
In December 2003, the Debtor transferred his interest in the truck, boat and trailer to Scott at a time when the Debtor was insolvent. Then on January 23, 2004, the Debtor filed chapter 7 bankruptcy.
Holding:
Evidence of who paid for property is material, although not a dispositive factor in determining the extent of ownership between co-owners. Because the Debtor only contributed $4,000 to the purchase of the Ford and made no contribution for the boat and trailer, the extent of Debtor’s interest in the property is $4,000 and the Trustee is entitled to recover $4,000 from Scott pursuant to 11 U.S.C. §548(a).
In re Ricky Steele; Case No. 04-10297 (Nugent) (May 11, 2006)
JUDGMENT ON DECISION
Facts:
The Chapter 7 Trustee sought to avoid as fraudulent transfers Ricky Steele’s (“Debtor”) transfers of his interest in a Ford F150 pickup, a boat and a trailer (collectively referred to as “Property”) to Barbara Scott (“Scott”) for less than reasonably equivalent value while debtor was insolvent. The Property was titled in both Steele’s and Scott’s name and before filing his bankruptcy Steele transferred his interest in the Property to Scott, receiving no consideration for the transfer. The Debtor’s interest in the Property was limited to his contribution of $4,000 to the purchase of the pickup. With respect to the boat and trailer, the Debtor made no contributions to the purchase price and thus, held bare legal title.
Holding:
Debtor held only bare legal title in the boat and trailer and therefore he has not received less than reasonably equivalent value in exchange for the boat and trailer. However, Debtor has received less than reasonably equivalent value in exchange for his $4,000 interest in the pickup. Therefore, the Trustee is entitled to recover $4,000 from Scott, together with costs of this action.
In re Dallen Harris and Christie Harris: Case No. 00-14685 (Nugent) (May 16, 2006)
ORDER GRANTING SUMMARY JUDGMENT AND DENYING DEBTORS’ MOTION TO REOPEN CASE
Facts:
Dallen Harris (“Harris”) was involved in a car accident with Nancy Millet (“Millet”). Millet sued Harris and received a default judgment in Millet’s favor. Harris and Christie Harris (“Debtors”) filed chapter 7 bankruptcy. Millet was not scheduled as a creditor. Millet did not receive notice of the Debtor’s bankruptcy until well after the claims bar date, distribution to unsecured creditors and the closing of the bankruptcy case.
After learning of the Debtor’s bankruptcy, Millet filed a motion in state court to determine whether her judgment had been discharged in the Debtor’s bankruptcy. The state court’s order determined that the judgment had not been discharged pursuant to 11 U.S.C. § 523(a)(3)(A). Debtors filed an amendment to their schedules and a motion to reopen their case in order to schedule the Millet debt and have it discharged. Debtors assert that the pre-petition debt was “inadvertently omitted” and that they “did not realize they had this debt.”
Holding:
Debtors filing of a motion to reopen nearly five years after filing of the initial petition, three years after the claims bar date, two years after the case was closed and six months after Harris agreed to the state court’s order that this debt was not discharged, is not a “seasonable and diligent” application under 11 U.S.C. § 350(b). Furthermore, the motion was made well after the claims bar date and complete distribution of assets and therefore would result in inequity and injustice to Millet. Thus, there is no good cause to reopen the case.
Additionally, Debtor’s claim is non-dischargeable under 11 U.S.C. § 523(a)(3)(A) because the Millet debt was neither listed nor scheduled and Millet did not have notice or actual knowledge of the case until after the case had been closed and the assets had been distributed.
Estate of Michael John Maher vs. John Howard Fittell and Valerie Poidevin Fittell (In re Fittell); Case No. 05-40854; Adv. No. 05-7063 (Karlin) (May 31, 2006)
MEMORANDUM ORDER AND OPINION DENYING DEFENDANT’S MOTION TO DISMISS
Facts:
John and Valerie Fittell (“Debtors”) were appointed co-executors of the Estate of Michael John Maher (“Estate”). Debtors paid themselves $9,203.25 in executor fees without first seeking court approval. Debtors were later replaced by a substitute executor, Jeffery Heeb (“Heeb”). Debtors filed their bankruptcy petition and listed the Estate as a creditor on their bankruptcy schedules as a non-priority, unsecured creditor, listing Heeb’s name under that of the Estate.
The Estate brought suit, with no mention of Heeb or any other executor, claiming that Debtor’s owed $18,406.50 as double damages for Debtor’s failure to obtain court approval for their distribution of executor fees. Debtors’ answer raised an affirmative defense that “Plaintiff has failed to name the real party in interest . . . .” Debtors filed a motion to dismiss on the basis that the Estate failed to name the real party in interest and that the date for amending the complaint had passed. The Estate responded by asserting that it has the capacity to sue, but in the alternative sought to amend the petition to add Heeb as Plaintiff.
Holding:
Allowing the Estate to amend the pleadings, adding Heeb as Plaintiff, will avoid the forfeiture of a valid claim, ensure the Court’s final order has res judicata effect on all proper parties and will not work prejudice on Debtors. Therefore, the Court grants the Estate leave to substitute Heeb pursuant to Fed. R. Civ. P 17(b) and Fed. R. Bank. P. 7017.
In re Glen George Hambleton; Case No. 04-42681 (Karlin) (June 1, 2006)
ORDER SUSTAINING TRUSTEE’S OBJECTION TO DEBTOR’S HOMESTEAD EXEMPTION
Facts:
Glen George Hambleton (“Debtor”) sold his homestead, receiving $31,112.74 in net proceeds (“Proceeds”). Debtor did not purchase another homestead at that time, and as of the date of the hearing, has still not purchased another homestead. Debtor subsequently filed a chapter 13 petition. Currently, Debtor has spent the entire $31,112.74 and has no ownership interest in any real property, and claims the entire amount as exempt. Debtor claims to have intended to use a portion of Proceeds to make improvements on K. Crawford’s (“Crawford”) home, where Debtor has been living since the sale of his homestead.
The evidence shows that Debtor used a portion of the Proceeds to make improvements to Crawford’s house. Debtor also used a portion of the Proceeds to pay utility bills and mortgage payments on Crawford’s house and to purchase items to be used or consumed in the house. Debtor also used a large portion of the Proceeds to pay legal fees, make personal purchases, and repay a $3,000 debt owed to his sister.
Holding:
Although proceeds from the sale of a homestead may be exempt where the owner intends to use the proceeds to purchase another homestead within a reasonable time, and such intent is formed at or before the time of the sale, Debtor’s intent to use the Proceeds to make improvements on Crawford’s house does not fall within this extension of the Kansas homestead exemption. Because Debtor’s use of the Proceeds demonstrates an intent to use the Proceeds to live on, rather than an intent to use the Proceeds to acquire a new homestead, none of the Proceeds are exempt.
In re Ramiro Vega and Janet Ellen Vega; Case No. 06-40010 (Karlin) (June 19, 2006)
MEMORANDUM ORDER AND OPINION
Facts:
Ramiro Vega and Janet Ellen Vega (“Debtors”) executed a loan and security agreement with CarHop on April 8, 2004 and pledged a 2001 Kia as security. On December 28, 2005, Debtors executed a second loan and security agreement with CarHop for $8,789.98 at 22.99% interest. This second loan was made so that Debtors could purchase a 1996 Dodge Intrepid (“Dodge”), and the only collateral pledged as security was the Dodge. The cash price, including tax, for the Dodge was $6,763.98. CarHop and Debtors agreed that CarHop would release the lien on the Kia and the $2,123 that was still due on the first note would be “rolled into” the new note. On December 29, 2005, Universal Acceptance Corporation (“UAC”) deemed the first loan paid by stamping “PAID IN FULL” on the note and mailing it to the Debtors. UAC claims that it released the lien on the Kia on January 11, 2006, the day before the bankruptcy was filed, but Debtors claim that the lien was released on January 29, 2006, after the bankruptcy was filed.
Debtor’s plan proposes to pay $6,764—the agreed purchase price of the Dodge. UAC now objects to confirmation of Debtor’s plan.
Holding:
§ 1325(a)(5) provides that a plan may be confirmed if it provides for the debtors to retain the collateral while providing the creditor with a stream of payments equal to the present value of the creditor’s allowed secured claim as of the petition date. The BAPCPA has made the value of the collateral irrelevant in determining the allowed amount of a claim secured by a PMSI in a vehicle acquired within 910 days of the bankruptcy filing, and fixes the allowed secured claim at the amount of the underlying debt under non-bankruptcy law. Therefore, because Debtor’s plan provides for full payment of the portion of UAC’s claim representing the PMSI in the Dodge ($6,763.98) with interest, the plan meets the provisions of § 1325(a). UAC’s objection to confirmation of the plan is denied and UAC has a secured claim in the amount of $6,764, plus any pre-petition interest and an unsecured claim in the amount of $2,123, plus any interest on that amount that accrued pre-petition.
Wachovia Bank, N.A. vs. J. Michael Morris (In re Thomas); Case No. 03-11882-7; Adv. No. 04-5232 (Somers) (June 15, 2006)
OPINION DETERMINING THAT TRUSTEE CANNOT AVOID CREDITOR’S LIEN ON MANUFACTURED HOME
Facts:
Matthew and Pamela Thomas (“Debtors”) refinanced the debt on their homestead, which consisted of a manufactured home affixed to a lot in Arkansas City, Kansas, and assigned the note and mortgage to Wachovia Bank (“Bank”). The new mortgage lien was never noted on the certificate of title and the procedure under K.S.A. § 58-4214 for eliminating the title has never been completed. The certificate of title is lost or has been destroyed, and the state’s title record shows a different bank as the only holder of a lien on the manufactured home.
Debtors filed a chapter 7 bankruptcy and the Bank filed a motion for stay relief, seeking to foreclose its mortgage, and the Court granted the motion. In state court, the Bank brought a claim, naming the Trustee and others, and obtained a foreclosure judgment and bought the homestead at the court-ordered sale. The Bank then filed another state court action, seeking to quiet title on the manufactured home. Again, Trustee was named as a defendant in that action. Trustee now asserts that it may avoid the Bank’s lien on the manufactured home pursuant to 11 U.S.C. § 544(a), because the mortgage was never perfected.
Holding:
The Trustee was made a party to the foreclosure action and failed to assert his avoidance claim. Kansas claim preclusion law required him to assert his avoidance claim in that action or be barred from raising it later; and therefore the Bank is entitled to recover all the net proceeds of the sale.
Sunflower Bank, N.A. vs. James Arthur Otte (In re Otte); Case No. 03-23696-7; Adv. No. 04-6007 (Somers) (May 24, 2006)
OPINION CONCLUDING DEBTOR’S OBLIGATION TO SUNFLOWER BANK IS DISCHARGEABLE
Facts:
Sunflower Bank, N.A. (“Bank”) provided Sunflower Services, Inc. (“Company”) financing secured by the Company’s inventory. James Arthur Otte (“Debtor”) is the majority shareholder and president of the Company. The Company began borrowing money from the Bank, and the Debtor signed a guaranty of the Company’s debt. The Company submitted regular reports (“Borrowing Base Certificates”), signed by the Debtor, concerning its inventory, including information such as quantity and cost of inventory, outstanding debts owed to the Company’s distributors, and what portion of inventory, if any, had become unusable. The Bank used these certificates to ensure the Company had sufficient inventory to provide security for its debts to the Bank.
After the Company defaulted on its loans, the bank eventually appointed a receiver to liquidate the Company’s inventory to satisfy the debts. However, much of the inventory had been depleted or rendered unusable and thus was insufficient to satisfy the Company’s debt to the Bank. Debtor has since filed chapter a 7 bankruptcy and the Bank seeks to have the Debtor’s obligation excepted from discharge. The Bank asserts the Debtor’s obligation is excepted from discharge under § 523(a)(2)(B) because the Borrowing Base Certificates (signed by the Debtor) contained materially false statements regarding the inventory which the Bank relied on in making loans to the Company.
Holding:
The Bank has failed to meet its burden under § 523(a)(2)(B). The Bank failed to prove by a preponderance of the evidence that (1) the Debtor supplied false information on the Borrowing Base Certificates, (2) the Bank reasonably relied on the false information, and (3) the Debtor supplied false information with the intent to deceive the bank about the Company’s financial condition. Thus, the Debtor’s obligation on his guaranty of the Company’s debts to the Bank is dischargeable.
Michael Bradley Burghart vs. Douglas County District Court; The Honorable Paula B. Martin, District Court Judge; Kelly Shoemake, District Court Services Officer; and Douglas County District Court Trustee (In re Burghart); Case No. 05-21595; Adv. No. 06-6038 (Somers) (May 25, 2006)
MEMORANDUM AND ORDER DENYING PLAINTIFF’S COMPLAINT FOR DISCHARGE OF RESTITUTION DEBT
Facts:
Micheal Bradley Burghart (“Debtor”) pled guilty to conspiracy to give a worthless check in violation of K.S.A. § 21-3770. The Debtor signed an Order of Probation which stated the probation conditions, including the payment of restitution. The Debtor then filed a voluntary petition under chapter 7, and the Debtor’s schedules referred to the pendency of the hearing for determination of the restitution amount. Douglas County District Court entered a Restitution Order determining that the Debtor owed $22,868.99 in restitution to the corporate victim, Micro Tech Computers, to be paid as a condition of probation. The Debtor filed a complaint to determine dischargeability of the restitution amount.
The Defendants responded to the complaint by moving to dismiss, contending 1) that bankruptcy courts may not invalidate a restitution order in criminal proceedings; 2) that the Court does not have subject matter jurisdiction; 3) that the 11th Amendment bars Debtor’s action against the state agency defendants; and 4) that judicial immunity bars Debtor’s claims.
Holdings:
In re Kelly James Torline; Case No. 05-12251 (Somers) (June 14, 2006)
MEMORANDUM AND ORDER ADDRESSING IN PART DEBTOR’S OBJECTION TO CLAIM NO. 6 FILED BY REBECCA L. BARNHART
Facts:
As part of the property distribution judgment between Kelly James Torline (“Debtor”) and his ex-wife (“Creditor”), the Debtor was required to refinance outstanding purchase money indebtedness to allow the release of the Creditor’s assets as collateral. The Debtor failed to follow the provisions of the judgment and the court ordered the sale of the Debtor’s assets to allow the release of the Creditor’s assets. However, prior to the sale, Debtor filed bankruptcy. Since the filing, the Creditor has borrowed money from Gordon Barnhardt (“Barnhardt”) to pay a Bank of America loan secured by her assets.
The Creditor asserts a claim against the Debtor for reimbursement from the payment of the Bank of America loan and a claim for indemnification resulting from her taking the Barnhardt loan. The Debtor asserts that the Creditor’s claim for the amount paid to Bank of America is contingent and therefore, disallowed under § 502(e). Barnhardt also asserts a claim against Debtor for the money loaned to the Creditor and the Debtor asserts that the claim is also disallowed under § 502(e).
Holdings:
In re Cheryl Ruth Yapp; Case No. 04-40891 (Somers) (June 21, 2006)
MEMORANDUM AND ORDER SUSTAINING TRUSTEE’S OBJECTION TO EXEMPTION OF VEHICLE
Facts:
Cheryl Ruth Yapp (“Debtor”) originally filed a chapter 7 petition pro se. None of the Debtor’s schedules, nor her statement of affairs listed a PT Cruiser vehicle as being owned or transferred by the Debtor. At the 341 meeting, the Trustee requested additional information. The Debtor responded by providing a list of payments to family members, including a $12,000 payment to James Bath (Debtor’s ex-husband) made prior to the filing of the chapter 7 petition. The Trustee issued a preference demand letter to Bath and Bath responded by explaining that he had not been paid in cash, but had been given a PT Cruiser to sell to repay a loan made by Bath to the Debtor. Bath further explained that since receiving the Trustee’s letter, he has returned the vehicle to the Debtor. The Debtor has since obtained legal counsel and has amended her schedules to reflect the existence of the PT Cruiser. The Debtor now claims an exemption for the PT Cruiser and the Trustee has moved to disallow the Debtor’s amendment on the basis of bad faith and prejudice to the estate.
Holdings:
In re Jahn Eldredge Roedemeier; Case No. 06-20292 (Somers) (June 22, 2006)
MEMORANDUM AND ORDER SUSTAINING OBJECTION TO EXEMPTION OF DENTAL EQUIPMENT
Facts:
The Debtor practiced dentistry as an employee/shareholder of Roedemeier-Quattrocchi PC (“R-Q”). Debtor later became the sole shareholder of R-Q. Thereafter, R-Q ceased doing business and the articles of incorporation were forfeited. However, R-Q was not dissolved, nor did it convey its dental equipment. Debtor retained the dental equipment of R-Q and now claims exemption under Missouri law because he uses it in his current practice. Bankers Healthcare Group, Inc. objects to the exemption on the basis that the dental equipment belongs to R-Q.
Holding:
Although the articles of incorporation have been forfeited, the corporation retains legal title to its assets until a proper conveyance is made. No such conveyance of the property has been made by the corporation to Debtor, and therefore, Debtor does not own the equipment and may not claim the property as exempt
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