Timothy G. Fowle and Myong H. Fowle; Case No. 03-13383 (Nugent) (April 20, 2006)
MEMORANDUM OPINION AND ORDER
· Striping Mortgage Lien in Chapter 13: Failure to Act/Consent
Facts:
The debtors Timothy G. Fowle and Myong H. Fowle (“debtors”) plan bifurcated the claim of the second mortgage holder Homecoming Financial (“Homecoming”), with the claim amount exceeding the value of the real estate being an unsecured claim. Homecoming did not object and the plan was confirmed. The plan was later amended and confirmed without objection.
The debtors have satisfied the secured claim, and filed a motion to strip off the lien of Homecoming. Homecoming did not object, and has never presented itself in this case.
Holding:
The failure of Homecoming to take an active role to protect its claim is conclusive that Homecoming has consented to the treatment proposed in the plan and reaffirmed by motion.
In re LJSC, LTD.; Case No. 05-16216 (Nugent) (May 4, 2006)
ORDER ON DEBTOR’S OBJECTION TO CLAIM OF AEROMECH, INC. AND ESTIMATION OF AEROMECH CLAIM
· 11 U.S.C. §502(c)
· Federal Rule of Bankruptcy Procedure 3018
Facts:
Aeromech, Inc. (“Aeromech”) filed a timely proof of lcaim in debtor’s Chapter 11 bankruptcy. Debtor objects to Aeromech’s claim and requests that the Court estimate the claim for voting purposes. Aeromech and debtor entered into a contract in 2002 in which Aeromech agreed to provide certain services to debtor in order to certify debtor’s product to retrofit Learjet L24s and L25s to meet FAA guidelines. Before the Contract was completed, debtor terminated the agreement. Litigation ensued in the United State District Court for the Western District of Washington. During the litigation debtor filed for protection under Chapter 11, leaving the amount of Aeromech’s claim, if any, unresolved.
Holding:
Applying Washington law, the Court reviewed extrinsic evidence to determine what the parties intended to be the “full value” of the contract. In reviewing the extrinsic evidence, the Court concluded that Aeromech was entitled to an allowed claim for what it would have received had the contract been performed in order to give Aeromech the benefit of the bargain.
Thomas C. Revell, Sr. v. Earl C. Mills; (In re Mills); Adv. No. 04-7027; Case No. 03-43341-7 (Karlin) (May 2, 2006)
MEMORANDUM AND ORDER GRANTING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT
Facts:
The debtor Earl C. Mills (“debtor”), a neurosurgeon, performed spinal surgery on Thomas Revell (“plaintiff”) in December 1996, at a time the plaintiff did not have professional liability insurance. The plaintiff brought a civil action and, and through settlement, the debtor agreed to pay $2,000 per month for two years, with a lump sum payment of $454,000 due after two years. Furthermore, the debtor agreed not to file for bankruptcy in an effort to discharge the judgment. Failure comply would allow the plaintiff to file a consent judgment for $500,000. The debtor failed to comply, and the judgment was entered.
The debtor filed a Chapter 7 bankruptcy petition, and the plaintiff filed an adversary complaint to find the judgment non-dischargeable.
Holding:
The failure to keep a promise is not a misrepresentation for purposes of 523(a). The plaintiff has the burden to show that the debtor had no intention of paying against the settlement when he signed the agreement. The bankruptcy was file to deal with IRS issues, and not to discharge the remaining judgment.
Linda S. Parks, Trustee v. Gorges Motor Company, Inc.; Gorges Motor Company, Inc. v. Timothy Johnson, Susan Johnson and Credit Union of America; (In re Johnson; Adv. No. 04-5239; Case No. 03-16979-7 (Somers) (April 24, 2006)
MEMORANDUM AND ORDER DENYING AVOIDANCE AND TURNOVER
Facts:
The debtors Timothy and Susan Johnson (“debtors”) purchased a vehicle from Gorges Motor Company (“Dealer”). Credit Union of America (“Credit Union”) made a loan to the father of the debtor, and the funds were deposited into the debtors account with the Credit Union to cover the cost of the vehicle. The next day the debtors’ attorney filed a Chapter 7 bankruptcy petition (even though the debtors were told the bankruptcy was filed prior to the acquisition of the vehicle).
The trustee argued that the transfer to the Dealer was unauthorized, and the trustee may recover. The Dealer relies on the Earmarking Doctrine; and that the transfer can not be avoided because it was never property of the estate. The Court held the Earmarking Doctrine is not applicable (see Holding #1), but that the funds were never property of the estate (see Holding #2); and therefore, is not avoidable.
Holdings:
1. The Earmarking Doctrine does not constitute a defense to a 549 action. In In re Moses, 256 BR 641 (10th Cir. 2000), the Tenth Circuit parted from the broader view that applied the doctrine outside a preference action.
2. A resulting trust arose when the funds were deposited in the account, and the debtors never had any legal or equitable interest in the funds when the case was filed. There was never a transfer of estate property.
In re Paul Douglas Rowe; Case No. 05-27589 (Somers) (May 10, 2006)
MEMORANDUM AND ORDER DENYING MOTION OF FIRST NATIONAL BANK OF KANSAS TO COMPEL TURNOVER OF VEHICLE
Facts:
On October 9, 2001, Paul Douglas Rowe (“debtor”) executed a retail installment agreement to purchase a 2000 Dodge Stratus (“Stratus”). The Dealer assigned the paper to First National Bank of Kansas (“FNB”). The obligation was secured by a perfected security interest in the Stratus. Debtor filed a voluntary petition under Chapter 7 on November 2, 2005. The debtor claimed the Stratus as exempt, which s the debtor’s only means of transportation which he uses primarily for personal purposes. Debtor was current on his payments at the time of filing. Debtor’s Statement of Intentions indicated “debtor will retain collateral and continue to make regular payments.” Debtor failed to surrender, reaffirm or redeem the Stratus , i.e. perform his intention, within thirty (30) days following the 341 hearing.
Holding:
The Court is without authority to compel turnover of the Stratus under 11 U.S.C. §521(a)(6) for failure to surrender, redeem or reaffirm. The only remedy available to the creditor is termination of the stay.
Cheryl Ruth Yapp vs. Ernest Pugh (In re Yapp); Adv. No. 06-7012; Case No. 04-40891 (Somers) (May 12, 2006)
MEMORANDUM AND ORDER granting motion to remand case to state court and making related findings
Facts:
The debtor Cheryl Ruth Yapp (“debtor”) filed a petition under Chapter 7 on April 13, 2004, subsequent to the entry of a November 14, 2003 decision in her divorce proceedings addressing property division. The debtor received a discharge in her Chapter 7 on August 11, 2005. On August 12, 2005 defendant filed a motion to enforce divorce decree in the state court divorce proceedings, after having been granted stay relief on March 17, 2005. The State Court held that defendant was entitled to a judgment and that debtor’s defense that a judgment against her was barred by her bankruptcy discharge was without merit. On January 17, 2006 the debtor removed the action to the Bankruptcy Court to obtain an adjudication as to whether her obligations to defendant in the November 14, 2003 decision were discharged. On February 5, 2006 after notice of removal, the State Court entered judgment in the amount of $7,000.00 against the debtor and in favor of defendant Ernest Pugh.
Holdings:
1. The State Court was without jurisdiction to enter the judgment against the debtor after removal as the State Court lost jurisdiction on the same day the Bankruptcy Court received jurisdiction, and therefore said judgment entered February 5, 2006 is void.
2. Despite the fact that the February 5, 2006 judgment is void, the action is remanded to the State Court because the notice of removal was not timely filed.
Joseph R. Swanson vs. Internal Revenue Service (In re Swanson); Adv. No. 06-5111; Case No. 05-16825-12 (Somers) (May 15, 2006)
ORDER ON DEFENDANT’S MOTION TO DISMISS
Facts:
The debtor Joseph R. Swanson (“debtor”) filed a Chapter 12 petition on October 4, 2005. At the time of filing debtor reported priority debt to the IRS for income taxes and civil penalties of about $156,000. The IRS filed a proof of claim showing it was owed a secured claim of $23,000, a priority claim of $13,900 and a general unsecured claim of $127,4000. At the time of filing debtor only had one other general unsecured debt.
In February 2006, debtor filed an adversary proceeding asking the Court to determine that his debts to the IRS are dischargeable pursuant to 11 U.S.C.§507(a)(8)(A)(i). The only other unsecured claimant filed a complaint seeking a determination that he owes them a debt that is nondischargeable and that they are entitled to a constructive trust against certain property.
The IRS filed a motion to dismiss alleging the adversary proceeding was premature as debtor had not yet filed or confirmed a Chapter 12 plan and is not yet entitled to a discharge under §1228. The IRS also suggest that debtor has not properly served his complaint on the United States Attorney for the District of Kansas or on the Attorney General of the United States in Washington, D.C. as required by Bankruptcy Rule 7004 and Federal Rule of Civil Procedure 4.
Holdings:
1. The debtor is simply seeking a declaratory judgment that all or some of his debt will be discharged upon completion of a Chapter 12 plan. Therefore, dischargeability of tax debts is now ripe for decision because facts that control their dishcargeability have already occurred and the dischargeability of debts will probably affect how the debtor chooses to structure his Chapter 12 plan.
2. The motion to dismiss for insufficiency of service of process is denied because the IRS appeared and filed a motion to dismiss within the 120 day time limit fixed by Federal Rule of Civil Procedure 4(m), and therefore a 30 day extension for debtor to mail copies or otherwise properly serve copies of the complain upon the proper parties is allowed.
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