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Breaking Down the IndexSo many cases, too long an index - so we broke it up into three more manageable parts. On this page you'll find cases arranged in alphabetic order beginning with the letters R-Z. Looking for something else? Try: |
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Case Summaries R-ZTo view a short summary of the decision, click on the "view summary" link beside the case name. To view the full text of the decision, together with citation as appropriate, click on "view case" beside the case name. RADANDT (9/3/93) (160 B.R. 323)
RAMEKER V. FARMERS STATE BANK
(7/27/04) (Unpublished)
RAMEKER V. HOLDEN (12/4/07) (383 BR 727) RAPRAEGER (7/16/15) (534 BR 778) REDDICK (11/13/91) (Unpublished)
REED (10/29/13) (500 B.R. 564) Debtors filed a Chapter 13 petition in November, 2011. The IRS sought to offset the debtors' 2012 income tax refund against the debtors’ 2011 tax liability. Debtors argued that the 2011 tax liability was attributable to a 401(k) distribution that was received during the tax year and could not be offset by their post-petition tax refund for a later year. The court allowed the setoff and held that the 2011 tax liability arose postpetition because “all events” necessary for that liability to accrue took place on the last day of the tax period, after the debtors had filed their Chapter 13 petition. REESE (5/15/87) (Unpublished)
RENEW ENERGIES, LLC v. OLSEN'S MILL INC (7/12/10) (436 BR 112) In an adversary proceeding to avoid certain transfers as preferential, the court found that all the elements of a preference had been proven. However, the creditor had a compete defense. First, many of the transfers were made in the ordinary course as between the two parties. Although the parties’ payment history was sui generis, they established a pattern where the debtor would pay the creditor in irregular amounts, by check or wire transfers, whenever it had funds available. Those payments that fell outside the ordinary course were shielded by the new value defense, in that after the debtor made the payments, the creditor delivered at least as much grain on an unsecured basis. RESOP v. F & M BANK (in re McClearn) (5/15/07) (372 B.R. 471) Noncompliance with Wisconsin's homestead joinder requirement was not grounds for avoidance by a chapter 7 trustee, even though the mortgage was "invalid." The protections for bona fide purchasers of real estate in Wisconsin provide no protection against the spouse of a prior transferor of real estate for five years after the prior transfer. Section 544(a)(3) of the Bankruptcy Code only grants the trustee the rights of a bona fide purchaser of real estate. Section 544, Wis. Stats. 706.02(1)(f), 706.09(1)(e). REIGLE (7/31/01) (Unpublished) Debtors challenged claim of First American Credit Union (“FACU”). At issue is whether a car pledged as security for a direct loan also secured a credit card debt by virtue of a dragnet clause in the loan contract. Both parties moved for summary judgment based on stipulated facts. Debtors made three arguments: that FACU never explained the meaning of the dragnet clause in the contract; that they did not read the dragnet clauses and had no intention of pledging the car as security for the credit card debt, and that the dragnet clauses in the Rules and car loan contract "were in boilerplate fine print." FACU countered that the dragnet clauses were customary and ordinary provisions and that debtors’ intent to pledge the car as security interest for the credit card debt is evident from the fact that debtors received the Rules and signed the car loan contract, both of which included dragnet clauses. FACU further argued that it had no obligation to explain the meaning or effect of the dragnet clauses to debtors. It was determined that the intent of debtors to grant FACU a security interest in the car for other debts is evident from the clear language of the dragnet clauses in the Rules and the car loan contract. RIECK (10/28/10) (439 BR 698) Debtor sought summary judgment in a nondischargeability adversary proceeding that alleged a violation of Wisconsin’s theft by contractor statute, Wis. Stat. § 779.02(5). The debtor contended that the plaintiffs’ previous state court settlement with the other principal in their limited liability company constituted a release of any claim against him as well. The Wisconsin trust fund statute makes a contractor the trustee of the funds received from a property owner until various claims are paid. Under Wisconsin law, there are certain instances in which the release of one tortfeasor may lead to the release of a non-settling tortfeasor’s liability as well because the non-settling party’s right to contribution or indemnification is imputed against the plaintiff. However, only a negligent tortfeasor is entitled to contribution or indemnification from an intentional tortfeasor. In this case there was a dispute as to which of the contractors was the “intentional” tortfeasor. This dispute precluded the granting of summary judgment as there was a genuine issue of material fact as to a main component of the debtor’s defense. RISLER (12/2/10) (443 B.R. 508) The chapter 7 trustee sought authority to sell property the debtor co-owned with his son. The son had purchased the property and had made all the payments on it; the father had not paid anything toward the purchase and he had never lived in the home. The defendants argued that the father’s name was on the deed largely as an accommodation because the son believed he might need someone’s help managing the property because of his health problems. The trustee contended that he was entitled to rely upon the face of the deed in determining ownership, and that the debtor’s 50% titled interest in the home was property of the estate. The court agreed with the trustee, finding that where a deed is unambiguous, it is conclusive proof of ownership. On the face of the deed, the father was a coequal owner of the property and the trustee was entitled to sell the property in order to realize the value of his interest for the benefit of creditors. ROEN/DORSHAK (8/26/16) (556 B.R. 401) Debtors Julie Roen and Robert Dorshak filed a voluntary chapter 7 petition. Both Debtors claimed a $75,000 exemption in real property as homestead property under Wis. Stat. § 815.20. The Chapter 7 Trustee objected to Debtor Dorshak’s $75,000 exemption claim, but conceded to Debtor Roen’s homestead exemption. Prior to their marriage, Debtor Roen owned the homestead free and clear with no liens as of 2007. There was no mortgage on the homestead throughout the Debtors’ marriage. Debtor Dorshak claimed that his payment of real estate taxes, home insurance, and necessary maintenance repairs constituted a mixing of marital property with individual property converting the homestead into marital property. The Court found Dorshak’s payments did not constitute a mixing under Chapter 766 because such payments were not applied to the mortgage nor did the payments substantially increase the property’s value. The Court sustained the Trustee’s objection and denied the exemption. ROLL & CURRIE (11/10/08) (400 B.R. 674) The debtors were housemates and filed separate Chapter 7 petitions. Together, their incomes exceeded the median income; separately, their incomes were below the median income. The U.S. Trustee filed a motion to dismiss pursuant to § 707(b)(2) and (3). The Court denied the U.S. Trustee’s motions without prejudice. The Court found that the U.S. Trustee had not carried its burden of demonstrating that some or all of each debtor’s income was used to pay household expenses of the other debtor and should have been included as “income” for purposes of the means test. The Court concluded that ability to pay, standing alone, is not sufficient to serve as the basis of a finding of abuse under the totality of the circumstances inquiry of § 707(b)(3). The Court also found that the U.S. Trustee had not carried its burden to demonstrate that the totality of the circumstances supported a finding of abuse pursuant to § 707(b)(3). RONDEAU (11/4/87) (Unpublished) Creditor's motion to convert case from chapter 11 to chapter 7 for failure to file plan and disclosure statement is denied. Decision whether to dismiss or convert is within discretion of court. Continuation of case would not result in any substantial benefit to creditors or to the estate; case will therefore be dismissed. Moving creditor can pursue its remedies in state court. ROYAL PLASTICS, INC. (11/30/94) (Unpublished) Creditors of chapter 11 debtor contended that they were entitled to the revenues generated by the debtor's use of certain plastic molds. These revenues were generated by the debtor prior to the petition date, but were in the debtor's possession when the case was filed. The creditors contended that they were entitled to the funds because the debtor did not own the molds. Given the absence of any trust relationship between the parties, however, and the extraordinarily broad definition of "property of the estate" under 11 U.S.C. § 541, the court concluded that the debtor held legal and equitable title to the funds when the bankruptcy was filed. Accordingly, the creditor's adversary proceeding was dismissed. RYE (10/7/91) (Unpublished) Debtor's motion to avoid the lien of Sears in her washer and dryer pursuant to § 522(f)(2)(a) is denied. Issue of whether Sears was required to file a financing statement to perfect its interest pursuant to Wis. Stat. § 409.302(1)(d) is irrelevant for the court's analysis. Even an unperfected security interest remains valid and enforceable as between the parties to it. Fact that a purchase money security interest is unperfected does not destroy its purchase money status. Chapter 7 trustee took no position as to Sears' lien because the debtor claimed the property as exempt. Trustee thus did not take priority over the lien of Sears. RYNEARSON (4/6/92) (Unpublished) Debtor's motion for valuation of the lien of the USA-FmHA at $21,000 is denied. Supreme Court's decision in Dewsnup v. Timm, 116 L. Ed. 2d 903 (1992), prevents chapter 7 debtors from "stripping down" the lien of a creditor to the judicially determined value of the collateral. Debtors' attempts to distinguish Dewsnup on its facts are without merit. SABASKA (2/6/09) (Unpublished) Creditor brought an adversary proceeding seeking to deny the debtors’ discharge, arguing that the debtors had transferred assets with the intent to hinder, delay, or defraud creditors in violation of § 727(a)(2) or that they failed to satisfactorily explain a loss or diminution in assets in violation of § 727(a)(5). The debtor husband had previously operated a trucking business, and the creditor was a former business partner who had obtained a judgment against him. The creditor contended that the assignment of various leases for semi-trailers to a new entity owned by the debtor’s aunt was a transfer of assets, and the debtor intended to hinder, delay, or defraud creditors by doing so. The creditor also contended that the debtor failed to explain the loss of assets, including business revenues associated with the trucking business. The court found that the debtor wife had no involvement in the conduct in question, and consequently there was no evidence to support denial of her discharge. As to the husband, the court acknowledged that the assignment of leases was a “transfer” of property, but the plaintiff failed to demonstrate any subjective intent as the debtor was simply attempting to stay in business. The court also found that debtor’s explanation as to the ultimate surrender or repossession of the trailers by the lessor was satisfactory, and that the creditor did not demonstrate any other loss of assets for which the debtor did not have an adequate explanation. The adversary complaint was dismissed. SALINAS (9/15/99) (240 B.R. 305) Debtor filed adversary proceeding contending student loan debt constituted an "undue hardship" under 11 U.S.C. § 523(a)(8). The Court concluded that the debtor could not maintain a minimal standard of living, especially given the presence of other student loans the debtor conceded were nondischargeable. The debtor had done everything he could to maximize income and minimize expenses. His expenses still exceeded his income by a considerable amount. Accordingly, the debt was an "undue hardship" under § 523(a)(8) and dischargeable. [Reversed on appeal, 262 B.R. 457 (W.D. Wis. 1999)] SALINAS (2/14/01) (258 B.R. 913) On remand of district court’s order reversing prior order granting discharge of student loan debts, the bankruptcy court again considered the debtor’s financial condition. Debtor did not have significant income, and had in fact been employed for a period of time. The Court concluded that the debtor had demonstrated an "undue hardship" within the meaning of U.S.C. § 523(a)(8). The Court also rejected the suggestion that the court could further defer or reduce the debtor’s loan obligations. [Reversed on appeal, Case No. 01-C-234-S (W.D. Wis. 2001)] SANDERSON (4/11/14) (509 B.R. 206) The plaintiff sought a determination that debt for overpaid unemployment benefits was nondischargeable. On summary judgment, the court had an obligation to verify the debts were nondischargeable, even though the defendant conceded the overpayment was nondischargeable and only disputed his liability for the filing fee. The overpayment was excepted from discharge under section 523(a)(2)(A) because the defendant falsely certified he was unemployed and not receiving wages. A penalty assessed for the overpayment was intended to punish fraud, and thus was excepted from discharge under section 523(a)(7). The plaintiff could recover the fee for filing the adversary proceeding, as its recovery was permitted under a state statute. Because the underlying debt was nondischargeable, the filing fee was too. SANDUS (6/3/11) (Unpublisthed) The debtor owed approximately $147,000.00 in student loans. He was 52 years old, single, with no dependants. He had obtained an undergraduate degree and a master’s degree in computer science from Northwestern University. He finished his education in 1999. He worked in his field until 2003, when he lost his job and then worked as a contract computer technician. His last job in the computer science field was in 2007, and he worked as a carpenter for a time until his health prevented him from doing so. He had a heart condition which first manifested in 2004; this condition mandated several surgeries and required medication, regular medical appointments, and physical restrictions which would continue indefinitely. He also suffered from a physical condition which made it difficult to engage in computer keyboarding (and for which he had four unsuccessful surgeries). He began receiving social security disability payments in May of 2008. He had sought employment in the computer field and been unsuccessful. The Court concluded that his financial situation was likely to persist for a significant portion of the repayment period, thus satisfying the “certainty of hopelessness” mandated by the Seventh Circuit in In re Roberson, 999 F.2d 1132 (7th Cir. 1993), and Goulet v. Educ. Credit Mgmt. Corp., 284 F.3d 773 (7th Cir. 2002). SASOPA (3/2/00) (Unpublished) The plaintiff filed a motion for summary judgment claiming that as a matter of law, she is entitled to a judgment finding the debtor's debt to her nondischargeable under 11 U.S.C. § 523(a)(6). The debtor attacked the plaintiff, bit off the plaintiff's second finger at the joint area and was charged in state court with aggravated battery with intent to cause substantial bodily harm. The debtor pled guilty to this crime. The plaintiff argued that because the debtor pled guilty to aggravated assault, she was precluded, under the doctrine of issue preclusion, from re-litigating the issue of whether her actions were willful and malicious for purposes of § 523(a)(6). The court (Judge Martin) denied plaintiff's motion on two grounds: (1) there were issues of material fact regarding the debtor's actions; and (2) this court could not apply the doctrine of issue preclusion because the issue of the debtor's willfulness and maliciousness had not been actually litigated. The court outlined the requirements for issue preclusion and found that the plaintiff did not meet the fourth requirement -- that "the issues in the prior action . . . must have been actually litigated and necessarily determined." See In the Matter of Wagner, 79 B.R. 1016 (Bankr. W.D. Wis. 1987). Looking to Wisconsin law, the court determined that in the absence of a clear statement from the Wisconsin Supreme Court, this court was precluded from finding that a plea of guilty satisfies the requirement that a controversy be "actually litigated" for issue preclusion to apply. SASOPA (8/6/01) (Unpublished) In 1996 debtor physically attacked plaintiff. Debtor was charged with aggravated battery with intent to cause substantial bodily harm and pled guilty. In 1998 plaintiff commenced an intentional tort action against debtor. Prior to judgment being rendered debtor filed her chapter 7 petition staying the tort action. Plaintiff filed this adversary proceeding seeking summary judgment arguing that as a result of the guilty plea in the criminal action, debtor was collaterally estopped from contesting the willful and malicious nature of the injury that gave rise to the debt. The court denied the summary judgment motion. The parties agreed to lifting the stay to permit the state tort action to proceed to judgment, which was subsequently entered. Plaintiff then moved for summary judgment for a second time contending that the tort judgment supports collateral estoppel and bars debtor from contesting the willful and malicious nature of her debt for purposes of § 523(a)(6). This court determined that she was correct and granted her motion for summary judgment. SASSE (8/13/10) (438 BR 631) Attorney who had represented the debtor in a pre-petition state court action filed an adversary proceeding, contending that his law firm’s claim for attorney’s fees was nondischargeable under § 523(a)(2)(A). The attorney argued that he had relied upon the debtor’s fraudulent representation, made approximately two years prior to the petition date, that he would not file for bankruptcy protection. The creditor also argued that the debtor had improperly prepared his means test form, and that the case should be dismissed under § 707(b)(2). The Court first considered the request that the case be dismissed for “presumed abuse” under § 707(b)(2) and concluded that the motion was untimely. Even had it been filed in a timely fashion, there was no substantive basis for dismissal of the case. The plaintiff argued that the debtor should have included his girlfriend’s income in the calculation of his current monthly income for purposes of the means test, but even if the debtor had done so, he would have been entitled to increase his household size, which would still mean that the debtor was below-median income and the case could not be presumed abusive. As for the fraud claims, the Court concluded that even if the debtor did promise not to file bankruptcy, the plaintiff did not demonstrate that the debtor acted with fraudulent intent or that the plaintiff justifiably relied upon the promise. Consequently, the Court granted judgment in favor of the debtor and awarded attorney’s fees to the debtor as the complaint was not “substantially justified.” SAXE (3/22/13) (491 B.R. 244) SCHMID (1/14/13) (Unpublished) Debtor sought an indefinite stay of her adversary proceeding. Debtor’s counsel argued that she had discovered new evidence of defects in the transfer of her client’s mortgage and note that amounted to fraud. She asserted that a stay was required to allow her to investigate the evidence, and to reconsider her posture in the adversary proceeding and the underlying bankruptcy case. After reviewing the lengthy procedural history, and evaluating counsel’s description of the evidence, the court concluded that the motion to stay failed to show adequate cause under Fed. R. Bankr. P. 9006(b)(1) to grant a stay. SCHMID 2 (4/23/13) (494 B.R. 737) The Debtor filed an adversary proceeding against Bank of America, the holder of her mortgage and note, seeking a determination that the bank lacked standing to foreclose. The bank filed a motion to dismiss under Fed. R. Civ. P. 12(b)(6). Noting a final judgment of the Portage County Circuit Court on the issue of the ownership of the mortgage and note, the Court concluded that it lacked jurisdiction to hear the Debtor's claims under the Rooker-Feldman doctrine. In the alternative, the Court ruled that the Debtor's claims were barred by the doctrine of claim preclusion. It also found that the Debtor's complaint should be dismissed under Rule 12(b)(6). The Debtor's motion to amend her complaint was therefore denied, and Bank of America's motion to dismiss was granted. SCHMID 3 (9/5/13) (Unpublished) The debtor persistently sought, from a variety of procedural angles in state and federal court, a finding that the mortgage on her home was invalid. After the court entered an order dismissing her adversary proceeding and denying her claim objection concerning her mortgage, the debtor sought Rule 60 relief from the court’s judgment. The court found that the debtor had failed to show the relevance of allegedly “newly discovered evidence,” the existence of any evidence of “fraud, misrepresentation, or misconduct," or the merit of her position that the court’s judgment was void. In light of these findings, and after concluding that the debtor appeared to be using her motion for relief as a substitute for an appeal, the court denied the motion. SCHMITZ (6/24/10) (436 BR 110) The debtors appealed a decision of the bankruptcy court to the district court, and the opposing party moved to strike certain items from the appellate record. The motion also objected to the debtors’ designation of issues on appeal. The court held that it had jurisdiction to decide issues relating to the record on appeal, and denied the two motions. Federal Rule of Bankruptcy Procedure 8006 does not permit an appellee to strike items from the record on appeal, although the court agreed to transmit the disputed items to the district court separately. Further, Rule 8006 only permits an appellee to file a statement of issues on appeal if he has filed a cross-appeal. Since no cross-appeal had been filed, the objection was denied. SCHRANK (7/9/92) (Unpublished) Abstention is appropriate in what is essentially an action grounded on various state law fraud claims. Factors supporting abstention in this matter are: 1) the effect or lack thereof on the efficient administration of the estate; 2) the extent to which state law issues predominate over bankruptcy issues; 3) the difficulty or unsettled nature of the applicable law; 4) the degree of relatedness or remoteness of the proceeding to the main bankruptcy case; 5) the substance rather than the form of an asserted "core" proceeding; 6) the feasibility of severing state law claims from core bankruptcy matters to allow judgments to be entered in state court with enforcement left to the bankruptcy court; 7) the existence of a right to a jury trial; 8) the presence in the proceeding of a nondebtor party. Citing Republic Reader's Service, Inc. v. Magazine Service Bureau, Inc. (In re Republic Reader's Service, Inc.), 81 B.R. 422, 429 (Bankr. S.D. Tex. 1987). SEAWAY INTERNATIONAL TRANSPORT, INC. (3/8/06) (S.D. Florida) (341 B.R. 333) Trustee sought to avoid certain alleged fraudulent transfers under 11 U.S.C. §§ 544 and 548. The corporate debtor made payments on the home mortgage of its sole principal and officer totaling some $14,000 over the four years prior to bankruptcy. The trustee contended that the debtor did not receive “reasonably equivalent value” for the transfers. The debtor’s principal argued that the payments were a portion of his compensation. In general, payments on behalf of a third party can be avoided in bankruptcy unless there was a clear benefit (or “value”) to the debtor. The principal took no salary or compensation from the debtor companies; the court concluded that the payments constituted a pattern of compensation and that the debtor received an “indirect benefit” from the payments. SHAFER (6/9/08) (393 B.R. 655) Chapter 13 plan confirmation. The debtors’ case was dismissed for lack of good faith under the totality-of-the-circumstances test. The debtors’ income, expenses, assets, occupation, a prior voluntary dismissal and refiling to avoid preference payments, and the likelihood that the debtors were abusing chapter 13 to parlay into an early retirement demonstrated an effort not to pay creditors. SHAKER (1/15/92) (137 B.R. 930)
SHEPLER (8/20/87) (78 B.R. 217) Debtor's motion to avoid the lien of Bank of Holmen on certain office equipment pursuant to 11 U.S.C. § 522(f) is denied. Bank legally took possession of collateral upon default of debtor prior to bankruptcy filing. In so doing, bank's security interest became "possessory." Bank's security interest, therefore, is no longer voidable, due to "nonpossessory, nonpurchase-money security interest" requirement of § 522(f). SIMON BROTHERS/WALTER BOWE (11/25/91) (Unpublished)
SIMPSON (9/23/15) (Unpublished) The Court overruled the Trustee’s objection to the debtor’s claim of exemptions. The debtor claimed an exemption in a personal injury claim 10 months after filing the bankruptcy petition, even though the claim arose pre-petition and the Trustee gave the debtor repeated reminders to claim the exemption on his schedules. The Trustee argued that the exemption was not timely filed under Wis. Stat. § 815.18(6)(a). Section 815.18(6)(a) states an exemption may be claimed within a reasonable time after seizure, but shall be claimed prior to disposition of the property. Harmonizing Wis. Stat. § 815.18(6)(a) with Rule 1009, the closure of the case is a reasonable time after seizure. Therefore, § 815.18(6)(a) is to be read broadly, in conjunction with Rule 1009, to allow a debtor to amend his exemptions to add additional claims up until the time the case is closed. SINGER (3/15/12) (469 B.R. 293) The debtors and their mortgage lender negotiated a forbearance agreement which contemplated that they would make reduced mortgage payments for a six-month period pending consideration of a loan modification. After the forbearance period, the lender denied the modification request and informed the debtors that they were obligated to pay the balance of the previously reduced payments. The debtors contended that those payments had been deferred to the end of the mortgage. The court found that a forbearance agreement is a contract and must be interpreted in accordance with its terms. As the agreement was drafted by the lender and was ambiguous as to the final treatment of the deferred payments, it would be construed in favor of the debtors. As such, they were entitled to treat the deferred payments as part of the unpaid balance due on the maturity date of the loan rather than as mortgage arrears which would need to be paid through the chapter 13 plan. SLATON (4/6/12) (469 B.R. 814) The plaintiffs alleged that the debtors fraudulently induced them to invest in an auction business. The parties had become friends after a chance meeting at a rummage sale, and their shared interests made them believe that they could operate a business together. The court found that the debtors did not make any false representations to the plaintiffs. The debtors used the plaintiffs’ investment in their partnership to pay down the secured debts of the business, but the plaintiffs were informed of this plan. There was no fiduciary relationship between the parties and the debtors’ conduct did not amount to a willful and malicious injury. However, the court found in the plaintiffs’ favor on their unjust enrichment claim, as the proceeds from the sale of the business real estate were the direct result of the plaintiffs’ investment in the business. Under the circumstances, it would be inequitable for the debtors to retain that benefit without payment to the plaintiffs. SMITHEY (9/7/00) (Unpublished) Creditor mailed claim prior to claims bar date but it was not received until after the bar date expired. The trustee objected and sought to classify the claim as a "tardily filed claim" under 11 U.S.C. § 726(a)(3). The Court rejected use of the "mailbox rule" and held that there was no issue as to receipt of the claim. Since filing constitutes delivery and receipt by the proper party, the proof of claim was filed after the bar date. The trustee’s objection to the claim was sustained. SPENCER (2/12/13) (unpublished) After receiving a discharge, the Debtor sought to reopen her bankruptcy case in order to administer assets, amend her schedules, and have her case administered “on the basis of true facts.” She had been contesting the foreclosure of the mortgage on her home in Wood County Circuit Court for nearly four years, and had recently filed a Notice of Removal of that action to the United States District Court for the Western District of Wisconsin. The Debtor’s motion to reopen her bankruptcy case alleged that she expected a recovery against PNC Bank for fraud and violations of several state and federal laws related to the foreclosure proceeding. She believed that these assets should be made available to her creditors. Citing Redmond v. Fifth Third Bank, 624 F.3d 793 (7th Cir. 2010), the court held that the Debtor’s motion was untimely, that it appeared highly unlikely she was entitled to bankruptcy relief, and that either the state court or the district court were the appropriate fora for her action. SPENCER 2 (5/15/15) (531 B.R. 208) The Court found a bank demonstrated it had standing to seek relief from stay. Its foreclosure judgment demonstrated it had a “colorable claim” to property. The debtor did not meet her burden of showing making a payment in the amount of the regular monthly mortgage payment to the debtor’s attorney’s trust fund adequately protected the bank’s interest. Thus, the bank was entitled to relief from stay for cause under section 362(d)(1). It was also entitled to relief under section 362(d)(2). The debtor stipulated she had no equity in the property, and she failed to meet her burden of proving it was necessary for an effective reorganization. Her proposed sale of the property would not result in proceeds available for any other creditor, nor would it generate exempt proceeds for purchase of a new home. Her personal liability for the debt had previously been discharged. The court also granted in rem relief from stay as to the property, finding the filing of the petition was part of a scheme to hinder, delay, or defraud creditors involving multiple bankruptcy filings affecting the property. SPENCER 3 (5/15/15) (532 B.R. 303) At the time this adversary proceeding was filed, a motion for relief from stay was pending in the main case. The debtor’s arguments in opposition appeared to require the conclusion that until a determination was reached in the adversary proceeding, it was impossible to determine whether the movant had standing to seek relief from stay. Thus, the Court reviewed the adversary complaint. Because the review suggested the debtor was challenging the validity of a foreclosure judgment, the Court ordered the debtor to explain why the Rooker-Feldman doctrine would not bar the claims. After considering her response and other submissions, the Court determined it lacked subject-matter jurisdiction and dismissed the complaint. SPORE (6/30/89) (105 B.R. 476) Parties sought Court determination regarding validity and extent of judgment lien on nonexempt real estate of debtors who had received chapter 7 discharge. Court holds that bankruptcy court discharge voided judgment against debtors. Further, state court's subsequent order of satisfaction -- granted pursuant to Wisconsin Stat. § 806.19(4) providing for satisfaction of judgments upon showing of bankruptcy discharge -- voided judgment lien on nonexempt real estate. Judgment lien is voided pursuant to Wisconsin Stat. § 806.21, which provides for voiding of lien upon satisfaction of judgment. STANIFORTH (4/24/90) (116 B.R. 127)
STARFIRE INC. (5/2/11) (Unpublished) The defendant appealed this case to the district court after this court determined that the debt owed to Starfire was nondischargeable. The district court then remanded this case to this court to make a finding on whether the defendant acted with the intent necessary to support defalcation under § 523(a)(4). On remand, this court found that the defendant’s conduct was “something more than negligence.” The defendant was an experienced and sophisticated contractor, who received payment on 42 jobs, yet failed to remit a significant portion of the proceeds to the subcontractor, Starfire, as required under Wis.Stat. § 779.02(5). Because Wisconsin’s theft by contractor creates an express trust, and the court concluded that the defendant possessed the requisite intent, Starfire’s claim was rendered nondischargeable under § 523(a)(4). STELZER (6/10/93) (Unpublished)
STEVENS POINT ASSOCIATED (12/24/91) (Unpublished)
STINCIC (9/29/16) (Unpublished) Johnson Bank held two mortgages against Debtor’s real property, and began foreclosure proceedings in state court. In state court, Debtor unsuccessfully attempted to rescind the first mortgage by raising a Truth in Lending Act defense. Debtor then filed a Chapter 13 petition. Johnson Bank moved for relief from stay. Debtor once again sought to rescind the first mortgage. Johnson Bank argued Debtor’s opposition to relief from stay was a disguised attempt for the Bankruptcy Court to review a state court judgement, and therefore, barred by Rooker-Feldman. Relying on the Seventh Circuit’s reasoning in Taylor v. Fannie Mae, 374 F.3d 529 (7th Cir. 2004), the Court found that the Debtor had a reasonable opportunity to raise the Truth in Lending Act defense in state court. As a result, by asking the Court to rule the first mortgage was rescinded, Debtor sought to overturn the state court judgment. Thus, the Court found his federal remedy was “inextricably intertwined” with the state court judgment. Success in the Bankruptcy Court would have allowed the Debtor to avoid the state court’s judgment. Accordingly, Rooker-Feldman doctrine barred review. STOLP (5/23/90) (116 B.R. 131) Plaintiff Joan Stolp's motion for declaratory judgment excluding her interest in debtor's (plaintiff's former husband) military pension from the bankruptcy estate is granted. Any existing interest which the debtor had in that portion of his pension was dissolved by the state court divorce decree which granted portion of pension to debtor's wife. Decree entitled debtor's former wife to receive her portion of pension benefits directly from the government. Former wife's share was thus not property of the bankruptcy estate. STONE (12/6/99) (243 B.R. 40) The debtors brought an adversary proceeding to determine whether the post-petition maintenance fees that accrued on the debtors' campsite were dischargeable in their bankruptcy, and seeking sanctions against the defendant for violating the automatic stay in attempting to collect a debt. The court (Judge Martin) held that the 11 U.S.C. § 523(a)(16) requirements for an exception to discharge had not been met because (1) the unit is not a dwelling unit; (2) the debtor never physically occupied the unit; and (3) the debtors never rented or received rent from the unit. The court then, following the holding of the Seventh Circuit in In the Matter of Rosteck, 899 F.2d 694 (7th Cir. 1990), held that the post-petition maintenance fees were dischargeable in the debtors' bankruptcy because the debt was for future assessments based on a pre-petition contract to pay, and the debt arose pre-petition. The court refused to impose sanctions on the defendants because if the defendants attempted to collect a debt from the debtors they did so under a good faith belief, supported by case law, that the debt was nondischargeable. STOUGHTON LUMBER v. SVEUM (11/3/14) (Remand Memo) On remand from the district court, the bankruptcy court had to determine if the debtor committed a defalcation as defined by the Supreme Court in Bullock v. BankChampaign, N.A., 133 S. Ct. 1754 (2013). On the facts admitted and proved, it was extremely unlikely that debtor did not have actual knowledge of his construction company’s wrongdoing. His participation in the decision not to pay the creditor demonstrated his knowledge that his company had more debts than money to pay them. Thus, every time he received a commission from the sale of the house, he was alerted to the fact that all the subcontractors were not receiving full payment. Even if debtor did not have actual knowledge, he was consciously disregarding the risk that he was violating his fiduciary duty. Consequently, the court found debtor, as a fiduciary of a trust that existed by operation of Wisconsin's theft by contractors statute, committed a defalcation for purposes of 11 U.S.C. § 523(a)(4) where, even if he was not actively cognizant of wrongdoing, he consciously disregarded the substantial and unjustifiable risk that his conduct violated his fiduciary duty. STRACK (11/8/94) (Unpublished) In wife's action to have certain debts declared non-dischargeable under 11 U.S.C. § 523(a)(5), the court determined that a portion of the debts which the debtor was to have indemnified his former spouse from constituted obligations "actually in the nature of" alimony, maintenance or support. The issue of dischargeability under § 523(a)(5) is a matter of federal law, not state law. The court found that it was not possible to consider the debtor's present financial condition or the changes in circumstance of both parties since the time of the divorce. The purpose of the section was to look at whether the obligation was intended as support at the time of the divorce. As a result, the court found certain obligations to have been contemplated as support, and others, including a debt to the wife's mother, to have been intended as property division. STRAIGHT ARROW CONSTRUCTION (3/13/08) (393 BR 652) Trustee’s objection to claims. Debtor is a general contractor. Two subcontractors filed claims—“secured” by operation of Wisconsin’s theft by contractor statute. Wis. Stat. § 779.16. Wisconsin Dairies v. Citizens Bank & Trust controlled the outcome. 160 Wis. 2d 758 (Wis. 1991). The claims were secured only to the extent that the funds were traceable to specific construction projects on which the creditors worked, and only to the extent that funds from those projects were in the possession of the trustee. The remainder of the creditors’ claims were unsecured. SWENBY (12/22/14) (525 B.R. 89) Prior to this bankruptcy filing, debtor was found liable on claims of unjust enrichment, wrongful conversion and breach of a fiduciary duty in state court. Once debtor filed bankruptcy, creditors from the state court action filed an adversary proceeding seeking to determine the dischargeability of their debt under 11 U.S.C. § 523(a)(2), (a)(4) and (a)(6). Despite the court’s recommendation, creditors relied on a theory of collateral estoppel and chose not to present any testimony. Creditors argued the court should use the state court transcripts, in absence of sufficient findings of fact by the state court, to preclude debtor from defending this action. Finding the creditors’ theory lacked legal support, the court dismissed the complaint. SWENBY 2 (4/23/15) (529 B.R. 705) Creditor filed an adversary proceeding seeking to determine the dischargeability of his debt. After a trial on the merits, the court dismissed the case. Debtor’s counsel filed a motion for attorney fees pursuant to 11 U.S.C. § 523(d). While the legal and factual positions taken by the creditor to litigate the dischargeability (of what the court determined to be a consumer debt) were not substantially justified, special circumstances existed to deny the motion. Attorney fees under § 523(d) are only allowed for defending § 523(a)(2) claims. In this case, the amount of resources devoted to defending the § 523(a)(2) action was likely small and the related fees de minimis and hard to determine. Accordingly, the court found awarding the entire amount requested would be unjust. SYVERSON (9/4/92) (Unpublished)
TAGGATZ (9/29/89) (106 B.R. 983) Trustee's motion for turnover of property of the estate pursuant to 11 U.S.C. § 542(b) against bank which had issued letter of credit in favor of debtor is denied. Agreement between debtor and bank called for bank to fund the unfunded portion of a promissory note upon fulfillment of certain conditions precedent by the debtor. Although agreement is found to constitute an executory contract pursuant to 11 U.S.C. § 365, it is not assumable by the trustee due to the exception contained in 11 U.S.C. § 365(c)(2) -- the agreement constitutes "[a] contract to make a loan, or extend other debt financing or financial accommodations, to or for the benefit of the debtor, or to issue a security of the debtor." TARBELL (4/16/10) (431 B.R. 826) The chapter 13 debtor omitted the IRS as a creditor from his schedules. The creditor got no official notice of the filing before the claims bar date, but filed a late claim once the debtor discovered the omission. The chapter 13 trustee refused to pay the claim. The court held that while late-filed claims are generally not allowed in a chapter 13 case, there may be narrow circumstances where due process or equitable concerns require allowance. The time limits in the Bankruptcy Code implicitly assume that a creditor has been given notice in some form. Since the IRS had no notice before the bar date, its claim would be allowed. TELEMARK MANAGEMENT CO., INC. (12/5/86) (77 B.R. 1022) Motion requesting extension of time to file appeal from bankruptcy court order -- filed more than 20 days after district court dismissed appeal as untimely filed -- is itself untimely and is therefore denied. TESAR (11/7/91) (Unpublished)
THOMPSON, G. (2/1/88) (82 B.R. 985) Debtors' motion to avoid liens pursuant to 11 U.S.C. § 522(f)(2) on various farm tools and implements is granted. Farm implements of substantial value constitute "tools" or "implements" of debtor-farmer. Bankruptcy code provision allowing debtors to avoid nonpurchase money liens which impair exemptions does not provide for unconstitutional taking of creditor's property without just compensation; nor does it violate due process clause of Fifth Amendment. THOMPSON, P. (12/19/13) (Unpublished) After confirmation of her Chapter 13 plan, the debtor objected to the claim of the Wisconsin Department of Revenue, arguing that the claim was not entitled to priority status because her tax obligations for 2007, 2008, and 2009 came due more than three years prior to the filing of the petition. The Department of Revenue contended that the “lookback” period was tolled during the debtor’s first chapter 13 case (filed in 2010). Under 11 U.S.C. § 507(a)(8)(A)(i), the lookback period is tolled for any period in which the stay of proceedings was in effect in a prior case. Because the debtor’s prior case was pending until its dismissal in February of 2013, the lookback period was tolled and Department had a valid priority claim. THUL-THEIS (6/7/10) (431 B.R. 828) The chapter 13 debtor omitted a creditor from her schedules. The creditor got no official notice of the filing before the claims bar date, but did have actual notice of the filing from the debtor. Notwithstanding this actual notice, the creditor filed a claim after the bar date. The chapter 13 trustee refused to pay the claim. The court held that generally, late-filed claims are not allowed in a chapter 13 case. While there may be narrow circumstances where due process or equitable concerns require allowance, those circumstances were not present here because the creditor had actual notice. THULIS (6/4/12) (474 B.R. 668) Chapter 7 trustee objected to bank’s secured claim on the grounds that its mortgage did not cover the specific parcel previously sold by the trustee. The bank contended that as a hypothetical subsequent purchaser under § 544(a)(3), the trustee would have had constructive notice of its claim. The bankruptcy court found that although Wisconsin law charges prospective purchasers with constructive notice of certain things that might be ascertained by a review of the land or an inquiry of those in possession, nothing about the parcel in question would provide notice of the bank’s mortgage. The mortgage was not in the property’s chain of title and Wisconsin’s doctrine of constructive notice would not require a prospective purchaser to make inquiries about an owner’s financing arrangements. The trustee’s objection was sustained, and the bank’s claim was allowed as unsecured. TOMAS-HAARSTICK (12/7/01) (Unpublished) This case involves hypothetical discharge and its procedural requirements. Plaintiff filed an adversary complaint to determine whether a debt was dischargeable and the debtor answered. But the plaintiff filed the initial complaint thinking it was against debtor’s husband who has a similar first name as debtor. Plaintiff amended the complaint by adding allegations against debtor’s husband and objecting to the hypothetical discharge of his tortious debt. However, plaintiff did not seek the debtor’s or court’s consent before amending the complaint. In addition, the plaintiff did not name debtor’s spouse on the amended complaint. The time limit to object to debtor’s discharge had since passed. Debtor filed a motion to dismiss the adversary proceeding contending that any complaint seeking to deny debtor’s spouse’s hypothetical discharge is now time barred. Plaintiff responded by filing a motion to enlarge the time within which to bring the action under § 523(a)(6), which motion in itself is untimely but which was considered as a motion to further amend the complaint under Fed. R. Civ. P. 15(c). It was determined that the motion to amend the complaint to name debtor’s spouse as a defendant is granted TOZER (6/9/08) (392 BR 758) Chapter 13 plan modification. The debtor’s ex-attorney sought to modify the chapter 13 plan to extend payments and pay attorney’s fees. In the Seventh Circuit, § 1329 imposes no threshold requirement of a change in financial circumstances. The attorney was the “holder of an allowed unsecured claim,” thus he could seek modification to “extend . . . time for such payments.” § 1329(a). Modification of the plan was approved. TRAMPUSH (5/24/16) (552 BR 817) Both Defendants hold mortgages against Plaintiff’s property. Plaintiff seeks to determine priority of the liens. Associated Bank had a first mortgage on the property from 1982. This mortgage contained a future advance clause with specific requirements. United FCS received a mortgage on the property in 1993. In 2000, Associated Bank refinanced their loan by giving the Plaintiff a line of credit and received a new mortgage in return. They then satisfied the 1982 mortgage. In 2001, Associated modified the 2000 loan to extend the credit line. The property is worth significantly less than the sum of the debts. Associated filed a cross-claim against United to assert a theory of subrogation to place its 2000 mortgage in first priority ahead of United’s mortgage. The Court found that Associated was entitled to subrogation in the amount of $5,965.49, but no more. That is the amount of the 1982 loan that Associated refinanced. All other amounts of Associate’s claim were placed behind United’s lien. Associated did not satisfy the specific requirements of the future advance clause, so it cannot rely on that to secure its 2000 loan. It also did not order a title report before granting that loan to reveal the existence of United’s lien. Subrogation under Wisconsin law is based upon equitable factors. Granting subrogation to Associated beyond the refinanced amount would place it in a position it would not have enjoyed if it had not satisfied and released the 1982 mortgage. Further, it would place United in a worse position than it otherwise would have enjoyed. Therefore, the balance of the equities on the remaining amounts of Associated’s claim beyond the refinanced amount of $5,965.49 favor United and subrogation for those amounts is denied. TRI-STATE HOMES, INC. (12/31/86) (Unpublished) Application of debtor's attorney for allowance of fees and costs totaling $62,988.25 as an administrative expense is denied. Debtor's chapter 11 plan was confirmed on November 26, 1984. Case was converted to chapter 7 on March 21, 1986. Debtor's assets were sold at auction on July 16, 1986; auction proceeds totaled $296,718.50. All property sold at auction was subject to valid, unavoided security interests. Security interests attached to proceeds of auction pursuant to 11 U.S.C. § 552(b). 11 U.S.C. §§ 725 and 726 and bankruptcy rule 6007 specify how property of estate is to be distributed. It is unlikely that there is any equity in remaining property above claims of secured creditors. While applicant attorney may well have valid administrative claim pursuant to 11 U.S.C. § 503, there are no assets available for distribution toward such claims. Should unsecured assets later become available, they would be distributed in accordance with 11 U.S.C. § 726. US BANK v. PLAINS MARKETING CANADA LP (8/24/11) (2011 WL 3793157) The trustee brought an adversary proceeding against Plains Marketing Canada under § 547(b) to recover payments the debtor made to Plains for the delivery of gasoline. Plains argued that the payments fell within the safe harbor provision of § 546(e) because they constituted settlement payments pursuant to three forward contracts. The bankruptcy court found that two contracts qualified as “forward contracts” under § 101(25) because they matured more than two days after the contracts were entered into. The third contract did not meet this definition. Because payments related to the forward contracts were protected by § 546(e), the court granted Plains’s motion for summary judgment as to two of the contracts. Plains had also raised defenses under § 547(c)(2) and § 547(c)(4), but Plains failed to establish that the payments were made in the ordinary course of business or that new value had been given. VANDERHAI (4/1511) (449 BR 359) The chapter 7 trustee objected to the debtor’s exemptions, arguing that the debtor could not claim an exemption in the portion of various assets which were technically owned by the debtor’s non-filing spouse. The debtor sought to exempt all of the equity in these assets notwithstanding the fact that half of the equity belonged to the spouse. The court noted that a debtor’s interest in property is defined by state law, and under Wisconsin marital property law both the debtor and the spouse have an “undivided one-half interest in marital property.” Under the bankruptcy code, both spouses’ interests in property become property of the estate. The court rejected the idea that the debtor could assert an exemption only as to the portion of the equity which he personally owned. Instead, because each spouse had an undivided interest in the whole and the assets could not be easily divided, it was reasonable to allow the debtor to claim an exemption in the whole up to the dollar limits afforded to one debtor under applicable law. VANG (4/15/05) (324 B.R. 76) Debtor sought discharge of student loans. According to testimony at trial, the debtor was mildly mentally retarded and had difficulty speaking, reading, and writing the English language. In addition, he lived at or about the poverty level and cared for two preschool age sons, both of whom suffered from developmental delays. Accordingly, the Court discharged the debt as an "undue hardship." VANGEN (11/23/05) (334 B.R. 241) The debtor placed some $136,000.00 into retirement-related annuities immediately prior to her bankruptcy. The debtor’s former husband and the bankruptcy trustee both objected to her exemption claims. They contended that her bankruptcy planning justified denial of her exemption under Wis. Stat. § 815.18(10), which provides that an exemption may be denied if the asset was procured, concealed, or transferred with the intention of defrauding creditors. The court overruled the objections, finding that the debtor’s conduct was permissible. VAZQUEZ (3/3/05) (325 B.R. 30) Trustee sought approval of settlement agreement with debtor. The primary creditor objected to the settlement and offered to “fund” ongoing litigation with the debtors. The trustee has the burden of demonstrating that a settlement proposal is both reasonable and in the best interests of the bankruptcy estate. The court must consider four factors when reviewing a proposed settlement: (1) probability of success in the litigation; (2) the difficulties, if any, to be encountered in collection; (3) the complexity of litigation and the expense, inconvenience, and delay associated with it; (4) the paramount interest of creditors and a proper deference to their reasonable views in the premises. The court found that despite the creditor’s promise to “fund” future litigation, all other circumstances supported approval of the settlement and the creditor’s perspective was unreasonable. VINER (8/5/14) (Unpublished) The court approved a fee application in part and denied it in part. Billing practices like vague descriptions of services, lumping unrelated activities into single entries, and submitting bills with entries that appeared duplicate impeded the court from determining whether certain fees were reasonable or necessary. A number of the services the attorney provided were necessary and calculated to benefit the estate at the time they were performed. However, some services were unusual, like acting as a disbursing agent, and others improper, such as pursuing collections actions in bankruptcy court, and the court denied fees for these services. VOELKER (12/23/93) (164 B.R. 308) Bankruptcy court found that federal tax lien does not attach to items claimed exempt by debtor under 26 U.S.C. § 6334(a). Exemption statutes are to be liberally construed in favor of debtors. Enumerated items in § 6334(a) are not only exempt from levy, but from reach of federal tax lien as well. 26 U.S.C. § 6331(b) defines "levy" as "the power of distraint and seizure by any means." District court reversed the bankruptcy court ruling and remanded for further proceedings. The Seventh Circuit affirmed the district court's decision, concluding that the tax lien did indeed attach to exempt property. VOSEPKA v. GEIGER (11/9/05) (Unpublished) This court received a complaint objecting to the dischargeability of a debt on the last day to file such complaints. The filing fee accompanying the complaint was paid by the creditor’s personal check. Court staff returned the complaint and filing fee to the creditor under the belief that the fee could not be paid by personal check. However, only personal checks of debtors cannot be accepted. By the time the creditor re-submitted his complaint and filing fee, it was 10 days past the deadline for filing and the debtor objected to the complaint as untimely. The court found for the creditor, holding that there is no authority for disallowing personal checks of non-debtors, therefore, the filing fee and the complaint should have been accepted by the court. The creditor met the requirements for timely filing, and the complaint was allowed. WAGNER (2/4/87) (Unpublished)
WEDEWARD (9/29/04) (316 B.R. 705) WEIHERT v. JOHNSON (2/6/13) (489 B.R. 558) WEIHERT v. JOHNSON (2) (5/31/13) (493 B.R. 61) WEINER (8/22/13) (Unpublished) The Chapter 12 standing trustee objected to confirmation of the debtor’s amended plan on the grounds that it impermissibly provided for direct payment of an impaired secured claim. The court recognized a split of authority among the circuits, and no Seventh Circuit authority directly on point. After evaluating the two most prominent approaches—one which categorically prohibited the direct payment of impaired secured claims and the other that permitted direct payments under certain circumstances—the court overruled the Trustee’s objection and confirmed the amended plan. The court endorsed the thirteen-factor test set forth in In re Pianowski, 92 B.R. 225 (Bankr. W.D. Mich. 1988), and concluded that proposals to make direct payments should be evaluated on a case-by-case basis. WELLS FARGO BANK v. TRANSCONTINENTAL (1/24/11) (Unpublished) The defendant removed the proceeding from state court on the grounds that the action was related to a bankruptcy proceeding in Texas, and requested that the matter be transferred to the Texas bankruptcy court. The plaintiff objected to the transfer request and moved to remand the matter back to state court. The court first ruled that the matter had been properly removed to the bankruptcy court rather than the district court for the district in which the civil action is pending. The court also rejected the idea that the court to which the action is removed must in all cases act as a “gatekeeper,” and instead adopted the rationale that a court may, in proper cases, transfer a removed case to another forum and allow that court to consider whether the matter should be remanded. In this case, transfer was the appropriate course of action, and the Texas bankruptcy court could consider whether the case should be remanded to state court. WHITEFEATHER v. WIESE (9/8/10) (431 B.R. 456) WINDESHAUSEN (2/29/16) (546 B.R. 798) The Court found that although the Defendant did not sign the arbitration agreement himself, he was bound by it because he cloaked his attorney in the authority necessary to settle the case. The Court next found that the nondischargeability provision in the arbitration agreement was not binding on the Defendant. Prepetition waivers of discharge are not allowed. The Code authorizes certain postpetition waivers, but does not authorize prepetition waivers. The Plaintiff also did not satisfy the requirements of promissory or judicial estoppel. The debt may satisfy the elements required for nondischargeability under § 523(a)(2), (4), or (6), but genuine issues of material fact remain, so the Court denied summary judgment. Lastly, the Court found that the Defendant waived the attorney-client privilege by voluntarily disclosing otherwise privileged communications with his attorneys in affidavits submitted to the Court. WINK (1/15/92) (137 B.R. 297)
WIRTH, DENNIS & MARY
(6/28/10) (431 B.R. 209)
WIRTH, SHERRI (10/29/13) (503 B.R. 800) WLODYGA (11/25/13) (Unpublished) Chapter 7 debtors brought an adversary proceeding seeking a determination that the junior mortgage on their home was invalid. The debtors argued that although they both signed the promissory note—and although they acknowledge they received and spent the loan proceeds—one of the debtors did not remember signing the mortgage and, as a result, either the signature that appeared on the mortgage was a forgery or the result of misrepresentation and fraud. Despite its skepticism of the debtors’ “obviously self-serving” representations, the court concluded that the ultimate factual question turned on a credibility assessment that could only be made in person. Accordingly, it denied summary judgment and set the matter for trial. WOFFORD (5/23/11) (449 BR 362) Chapter 13 debtors entered into loan modification agreement with creditor, and creditor moved for court approval of the agreement. The Court first noted various deficiencies in the loan modification documents. Under § 1322(b)(2), a chapter 13 debtor cannot unilaterally rewrite the terms of a home loan, although the creditor can agree to different treatment. Although that agreement could be reviewed (and approved) in the context of plan confirmation or as the resolution of an actual dispute, there is no statute or rule which requires judicial approval of the terms of such a loan modification. Even if it was construed to constitute a reaffirmation agreement, the debtors’ reaffirmation of a debt secured by real property does not require court approval. The creditor’s request essentially acted as a petition for an advisory opinion or comfort order. The bank’s motion was denied. WOLLER (8/16/12) (483 B.R. 886) The chapter 7 trustee objected to various exemptions, including a semi-tractor which the debtors claimed as “business property,” a bank account, revenues from the husband’s trucking business which had been claimed under an exemption for 75% of a debtor’s weekly “net income,” and an annuity purchased on the eve of bankruptcy with funds from the sale of real estate inherited from the wife’s father. The court found that while the semi-tractor was a “motor vehicle,” the debtors were still entitled to claim it as “business property” as it qualified as equipment within the meaning of that exemption. The trucking revenue also qualified as “net income” and the debtors’ exemption planning as to the purchase of the annuity did not rise to the level of “extrinsic” conduct which would justify the denial of the exemption. However, the debtors were not entitled to exempt a bank account used solely for the purpose of depositing the husband’s trucking receipts, as it was not used for the debtor’s “personal” use. The objection was granted in part and denied in part. WRIGHT (12/1/95) (196 B.R. 97) Dispute between two creditors over purchase money status of one creditor's lien on a tractor. Creditor claimed to have perfected its PMSI by mailing the UCC-1 financing statement to the appropriate office for filing. However, there was no record of the financing statement having been filed, or even received by the filing office. Creditor contended that the common law "presumption of receipt" mandated that it be deemed to have filed the financing statement when it was mailed. Court held that the creditor had to demonstrate actual receipt of the financing statement by the filing office. Although Wis. Stat. § 409.403(1) relieves the creditor of any responsibility for the filing officer's failure to properly docket the financing statement, the creditor still must prove that the item was actually presented for filing. The "presumption of receipt" is insufficient to do so given the need to prove not only the fact of receipt but the time of filing for priority purposes. The court also rejected the creditor's argument that the second lienholder's claim to the tractor should be subordinated under either unjust enrichment or the principles of equitable subordination. WUNDROW (1/24/92) (Unpublished)
WYSS (9/27/06) (355 B.R. 130) Creditor sought determination that its claims against the debtors were nondischargeable. The creditor alleged that the debtors had misrepresented the existence of certain accounts receivable which served as the borrowing base of a line of credit. The court found that, under the facts of the case, the debtors’ loan obligation was not a factoring arrangement but a capital loan. The debtors did not “obtain” an extension of credit from the plaintiff through the use of the allegedly fraudulent borrowing base certificates. At most, the certificates induced the creditor to forbear collection activities, but it did not surrender or lose any legal rights as a result of its reliance on the documents. The debtors also did not engage in fraud in a fiduciary capacity or harm any property interest of the plaintiff. The plaintiff’s claim was discharged. YERGES (12/17/13) (2013 WL 6665729) A creditor brought an adversary proceeding seeking a determination that the debtor was personally liable under PACA for unpaid produce bills and that the debt was nondischargeable under 11 U.S.C. § 523(a)(4). The court denied the debtor’s motion to dismiss, finding that PACA imposed fiduciary duties on the debtor the alleged breach of which gave rise to a claim for relief under section 523(a)(4). YERGES 2 (5/6/14) (2014 WL 1803395) In prior proceedings, the district court determined the defendant’s produce LLC had violated its Perishable Agricultural Commodities Act (“PACA”) trust obligations to the plaintiff. It made no findings about whether the defendant was individually liable. The defendant then filed an individual chapter 7 petition, and the plaintiff sought to except the PACA debt from discharge under section 523(a)(4). In denying a motion to dismiss the adversary complaint, the court determined the defendant-owner was personally liable for the dissipation of the PACA trust assets. The court also ruled that a PACA trust imposed fiduciary duties within the meaning of section 523(a)(4). The plaintiff then filed a motion for summary judgment, and the only question remaining was whether the debtor’s conduct constituted fraud or defalcation within the meaning of section 523(a)(4). The court rejected the plaintiff’s arguments that the Supreme Court’s interpretation of “defalcation” in Bullock v. BankChampaign, N.A., 133 S. Ct. 1754 (2013), did not apply to statutory breaches of fiduciary duty and that a breach of fiduciary duty imposed by PACA constituted per se defalcation within the meaning of section 523(a)(4). Instead, applying Bullock, the court looked to the facts available and could not conclude whether or not the debtor had knowledge of, or acted with gross recklessness in respect to, the improper nature of the behavior that resulted in a breach of his fiduciary duties. Accordingly, the court denied summary judgment. YERGES 3 (7/2/14) (512 B.R. 916) After the court denied the plaintiff’s motion for summary judgment in the decision issued May 6, 2014, the court held a trial to determine whether the defendant committed defalcation under section 523(a)(4), that is, whether he acted knowing his conduct would violate his Perishable Agricultural Commodities Act (“PACA”) duties. The court found he had. Although the defendant testified he did not know what PACA required of him, this testimony was not credible given his long experience in the grocery business. Additionally, every invoice the defendant received from the plaintiff stated the listed items were subject to a statutory trust pending receipt of full payment, putting him on notice of his duties. YORK (7/20/09) (415 B.R. 377) The chapter 13 trustee objected to the above-median income debtors’ 60-month plan. The plan proposed monthly payments of $750. Application of the means test resulted in negative disposable income, but Schedules I & J disclosed disposable income of $1,563.98. The chapter 13 trustee contended that the debtors should be required to commit all of the disposable income identified on Schedules I & J to a plan of less than 60 months, resulting in a 100% dividend to unsecured creditors. The Court overruled the objection, holding that § 1325(b)(4) does not permit the Court to approve a plan of less than 60 months for an above-median income debtor. The Court also rejected the chapter 13 trustee’s argument that the confirmed plan should be modified under § 1329 immediately following plan confirmation. The Court noted that § 1329 permitted modification, but that under the specific facts of the case, modification was not warranted. Specifically, the Court cited a total lack of any changed circumstances following confirmation and the lack of good faith inherent in attempting to circumvent the requirements of In re Mancl, 381 B.R. 537, 541 (W.D. Wis. 2008). ZAJA (12/12/13) (Unpublished) The plaintiffs obtained a state court judgment against the debtor for stealing a trailer and two automotive hoists and sought a finding that the consequent debt was nondischargeable as larceny under 11 U.S.C. § 532(a)(4). On summary judgment, the court found that the terms of the state court judgment conclusively established that the debtor committed larceny for purposes of section 523(a)(4). Accordingly, summary judgment was granted in favor of the plaintiffs and the debt was rendered nondischargeable. ZERSEN (9/29/95) (189 B.R. 732) Bank objected to confirmation of chapter 13 plan where the debtors proposed to pay the bank only what was owed on a mortgage loan on their home. The bank contended that the home constituted collateral for a business note as well, and that the home loan was secured by the guaranty of certain third parties. The court found that the effect of the co-debtor stay of 11 U.S.C. § 1301 permitted the debtors to pay obligations guaranteed by third parties under a chapter 13 plan; it was only if the plan did not provide for full payment of the guaranteed obligation that the creditor would be permitted to pursue the guarantor. Furthermore, given the bank's lack of documentation, the only secured obligation was the home loan. The business debt was not secured by the home, as the documents were ambiguous and those ambiguities would be construed against the bank as the drafter of the documents. Accordingly, the bank's objections to confirmation were overruled, and the plan was confirmed. ZOGLMAN (12/5/86) (Unpublished) Debtor's motion to dismiss plaintiff's Section 523 adversary proceeding is denied for failure to timely file supportive legal memorandum. ZOGLMAN (6/26/87) (78 B.R. 213) Obligation to debtor's former wife, stemming from wife's payment of tax assessment for which she and debtor were jointly liable, is excepted from discharge. Former wife did not act as "volunteer" when she paid tax assessments; wife can therefore invoke equitable doctrine of subrogation to assert nondischargeability claim against debtor's bankruptcy estate. Persons who have interests of their own to protect are not "volunteers" for subrogation purposes. Former wife is therefore subrogated to the claim of the IRS. Since debtor's obligation to IRS would have been excepted from discharge had it not been paid, debt owed to former wife stemming from that obligation is excepted from discharge. |
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