Financial

Hackler v. Arianna Holdings Co., LLC (In re Hackler), 938 F.3d 473 (3d Cir. 2019) – Chapter 13 debtors sought to avoid a prepetition delinquent property tax sale. The bankruptcy court agreed with the debtors that the transfer of title to the property could be avoided as a preference. The district court affirmed, and the purchaser appealed to the Third Circuit. Under applicable state law, after an owner fails to pay property taxes, the taxing authority holds a public auction of the unpaid tax lien. The parties bid only on the rate of interest on the unpaid taxes, and the…
Rouse v. U.S. Bank, N.A. (In re Lolley), 607 B.R. 673 (Bankr. W.D. Mo. 2019) – A chapter 7 trustee sought to avoid a deed of trust lien on the grounds that it did not comply with statutory requirements. Specifically, the deed of trust did not identify the correct face amount of the loan. The bank responded that the stated amount was sufficient, and in any event the deed of trust could not be avoided because it was valid and perfected and the trustee has constructive notice of the lien. Under applicable state law, if a deed of trust (1)…
First Midwest Bank v. Reinbold (In re I80 Equipment, LLC), 938 F.3d 866 (7th Cir. 2019) – In connection with a lawsuit to recover a loan secured by substantially all of a debtor’s assets, a lender sought a declaration that its security interest was a properly perfected senior lien. The chapter 7 trustee countered that the security interest was avoidable based on an inadequate description of collateral in the financing statement. The bankruptcy court ruled in favor of the trustee, and the lender appealed to the Seventh Circuit. The issue was whether the financing statement could incorporate a collateral description…
In re George, 606 B.R. 236 (Bankr. E.D. Pa. 2019) – A chapter 13 debtor objected to the proof of claim filed by a lender asserting an unsecured claim based on the debtor’s guaranty. The debtor contended that the guaranty was unenforceable because the statute of limitations expired. The bankruptcy court noted that claims objections usually involve a burden-shifting framework. Under FRBP 3001(f) a properly filed a proof of claim provides prima facie evidence of the validity and amount of the claim. An objection must undercut at least one necessary element of the claim (described by the court as “bubble-bursting”…
In re Woodbridge Group of Companies, LLC, 608 B.R. 201 (D. Del. 2019) – The debtor objected to a creditor’s proof of claim on the grounds that transfer of the claim to the creditor was unenforceable against the debtor because it violated anti-assignment provisions in the applicable promissory notes and loan agreements. The bankruptcy court rejected the creditor’s argument that the anti-assignment provisions were unenforceable and sustained the objection (without prejudice to the right of the assignor to file a proof of claim). The creditor appealed to the district court. The debtor was one of hundreds of affiliated debtors used…
In re Tevoortwis Dairy, LLC, 605 B.R. 833 (E.D. Mich. 2019) – A Chapter 11 debtor filed a motion to use cash collateral. The key question was whether there was adequate protection of the lender’s interest in the cash collateral. The court introduced its opinion as follows: At first blush, this case presents a straightforward issue – can a debtor, who offers its major secured creditor adequate protection in the form of a post petition lien on assets that will increase in value at least $1 million and monthly payments, as well as usual conditions, use that creditor’s cash collateral?…
Roth v. Nationstar Mortgage, LLC (In re Roth), 935 F.3d 1270 (11th Cir. 2019) – A chapter 13 debtor sought to reopen her case so that she could move for imposition of contempt sanctions against a mortgagee based on its willful violation of the discharge injunction. The bankruptcy court denied the motion. The debtor appealed and the district court affirmed. The debtor then further appealed to the 11th Circuit. The debtor identified the relevant mortgage on non-homestead property in her schedules, indicating that she would surrender the property. The plan provided that secured creditors would retain the liens securing their…
Rajala v. Husch Blackwell LLP (In re Generation Resources Holding Co., LLC), 604 B.R. 896 (Bankr. Kan. 2019) – After a consent decree avoiding the transfer of property from the debtor to a second entity, a chapter 7 trustee sought to recover from law firms paid by the second entity from proceeds of sale of the transferred property. Recovery turned on the meaning of “immediate transferee” under section 550(a)(2) of the Bankruptcy Code. As background, the debtor developed wind-power projects, including one referred to as Lookout. Insiders of the debtor formed a new company called Lookout Windpower Holding Company (LWHC).…
Ivy v. U.S. Bank N.A. as Legal Title Trustee for Truman 2016 SC6 Title Trust (In re Ivy), 604 B.R. 540 (Bankr. W.D. Ark. 2019) – A chapter 7 debtor brought an adversary proceeding against a foreclosing lender seeking a bankruptcy court determination that the lender’s mortgage lien was void due to an incomplete legal description, or alternatively that it was voidable as a cloud on his superior title. This case turned on state law and exemption impairment rather than a typical trustee’s exercise of strong arm powers. The debtor’s property was a 10 acre rectangle properly described as: beginning…
In re Winters, 604 B.R. 54 (Bankr. D. Utah 2019) – A chapter 7 debtor contended that a mortgage creditor’s postponement of a scheduled nonjudicial foreclosure sale after receiving notice of the debtor’s bankruptcy constituted a violation of the automatic stay. Accordingly, it sought an order for contempt and sanctions against the trustee and beneficiary under a deed of trust and a law firm involved in the foreclosure. The trustee and law firm moved for summary judgment, requesting that the bankruptcy court deny the debtor’s motion. The debtor owned certain real property that was subject to a deed of trust:…
Durr Mechanical Constr., Inc. v. I.K. Constr. Inc. (In re Durr Mechanical Constr., Inc.), 604 B.R. 131 (S.D.N.Y. 2019) – A general contractor debtor filed an adversary proceeding against a subcontractor seeking various relief. It then filed a motion seeking to extend the automatic stay to protect nondebtor insurers that had issued a surety bond relating to the debtor’s contract with the subcontractor. The debtor was seeking monetary and injunctive relief and objecting to the proof of claim filed by the subcontractor. In the meantime, certain non-debtors had issued a surety bond that covered the debtor’s purported breach of the…
Port of Corpus Christi Auth. v. Sherwin Alumina Co., L.L.C. (In re Sherwin Alumina Co., L.L.C.), 932 F.2d 404 (5th Cir. 2019) – A state port authority (1) challenged sale of property free and clear of its road easement on Eleventh Amendment grounds and (2) sought revocation of a Chapter 11 plan confirmation order arguing that it was obtained by fraud. The bankruptcy court rejected these claims; the district court affirmed; and the port authority appealed to the Fifth Circuit. Originally the port authority bought property adjacent to the debtor’s land, together with an easement granting use and access to…