Opinions

Order granting motion to annul the automatic stay nunc pro tunc pursuant to § 362(d) of the Bankruptcy Code. Community & Southern Bank (“CSB”) evicted Debtor from leased property postpetition in violation of the automatic stay. Afterward, CSB sought to have the Court lift the stay retroactively. Balancing the equities, the Court found cause to annul the stay nunc pro tunc as to CSB. First, the Court asked whether Debtor provided sufficient notice to CSB and found that Debtor failed to provide notice of their bankruptcy filing to CSB or CSB’s predecessor in interest. Second, the Court looked at Debtor’s conduct and found that Debtor’s conduct weighed in favor of granting CSB relief from the stay noting that Debtor: twice failed to attend their meeting of creditors, failed to fund their Chapter 13 plan, failed to separately disclose certain income, and failed to schedule certain equity securities and inventory. Third, the Court looked to the time that had passed since CSB’s violation of the stay—about three years—and found Debtor guilty of laches for having waited to bring an action for violation of the stay.

Order (1) denying Debtor’s motion to strip lien, (2) denying Debtor’s motion for reconsideration of claim, (3) denying confirmation of plan, and (4) dismissing Chapter 13 case. After the Court held that Wells Fargo holds a secured claim (Doc. 38), Debtor’s Chapter 13 came on for confirmation. Debtor’s plan failed to treat Wells Fargo’s secured claim, rendering it subject to denial of confirmation. Debtor filed a motion to strip Wells Fargo’s lien, alleging it was second priority and thus could validly be treated as an unsecured claim by her Chapter 13 plan. The Court denied the motion to strip lien, noting that even if it accepted the allegation that Wells Fargo’s lien was second priority, Debtor failed to allege that there was no equity in the secured property to which Wells Fargo’s lien could attach. Accordingly, confirmation was denied and the case was dismissed.

The Court entered an order denying the Debtor’s motion to dismiss, concluding that a dischargeability complaint was timely filed on the date on which the Clerk received it, even though the full filing fee was not paid.

Order on Motion for Partial Summary Judgment and Motion Regarding Allocation of Damages. This Order follows the Court’s prior order granting summary judgment in part to the Plaintiffs. In this Order, the Court grants summary judgment on additional counts, concluding the Debtor converted various sums of money under Michigan law. The Court also awarded treble damages under Michigan law. The Court concluded all of the claims established by the Movants were non-dischargeable under Section 523(a)(4) or Section 523(a)(6).

Order granting motion to dismiss the Chapter 13 case and barring Debtor from filing any case under Title 11 of the U.S. Code for twelve months. First, the Court dismissed the case pursuant to § 1307(c) of the Bankruptcy Code for unreasonable delay and prejudice to Creditor. Creditor, the most substantial creditor in the case, experienced 20 months of delays without any payment on its claims. If Debtor’s sixth and most recent proposed plan were confirmed, Creditor may not have received any substantial distribution for more than 22 months. Second, the Court, for cause, barred the debtor from filing any case under Title 11 of the U.S. Code for twelve months pursuant to § 349(a) of the Bankruptcy Code. Because Debtor’s need for financial restructuring was solely related to their debt to Creditor and Debtor unreasonably delayed and prejudiced Creditor, Creditor needed sufficient time to pursue his claim.

Involuntary Petitioner filed a purported Chapter 11 case against 18 individuals, including government employees in their official capacity. The Court, on its own motion, directed Petitioner to show cause why the case should not be dismissed, citing its authority under Bankruptcy Code Section 105 to issue any order that is necessary to prevent an abuse of process. Having heard Petitioner’s response to the show cause order, the Court dismissed the case with prejudice for two primary reasons. First, because Petitioner failed to pay the $1,717 filing fee, which the Court held could not be waived in an involuntary Chapter 11 case. Second, because the petition failed to meet the requirements of Code Section 303—Petitioner’s asserted debt was not undisputed where a state court had held no debt existed and no appellate court had overturned the state court’s ruling. The Court also held that an involuntary petition could not be filed against multiple individuals. After having concluded dismissal of the case with prejudice was appropriate, the Court also entered an order striking the petition and annulling the automatic stay as of the filing date. Finally, to prevent adverse financial consequences to the alleged debtors, the Court sealed the record of the case except for the Court’s opinion. NOT INTENDED FOR PUBLICATION

The Court concluded that a lump sum severance payment equal to one year of salary for an otherwise unemployed debtor does not render a debtor ineligible to be a debtor under chapter 13 because the severance payment qualifies her as an individual with regular income pursuant to § 109(e) for the time period that the severance covers. In addition the Court will require that a disputed claim for attorney’s fees to be resolved before determining whether the debtor meets the debt limitations for eligibility to be a debtor in a chapter 13 case. INTENDED FOR PUBLICATION

The Court concluded that Federal Rule of Bankruptcy Procedure 3002(c)(4) does not require the Court to set a separate bar date for lease and contract rejection claims in chapter 7, 12, or 13 cases. The rule permits the Court to fix such a bar date in the Court’s discretion as necessary according to the facts of the case. INTENDED FOR PUBLICATION

Order approving Chapter 7 Trustee's final report over Debtors' objection. Trustee proposed to distribute funds from a carve-out negotiated with the holder of the second- and third-priority liens on Debtors' real property -- although the value of the property was entirely eclipsed by secured claims on the property, the junior lienholders agreed to carve out funds for the estate in exchange for Trustee's liquidation of the property. Debtors argued that the funds must be applied to payment of Debtors' exemptions in the real property. Court determined that Debtors' exemptions could not attach to wholly-underwater real property; the carve-out represented payment to the estate for the benefit received by creditors, not equity in the property after satisfaction of all liens.

Order denying Plaintiff’s Motion for Attorney’s Fees. Prepetition, Plaintiff received a Florida foreclosure judgment against Defendant which included an award of attorney’s fees under the governing security agreement. Defendant filed a voluntary Chapter 7 case, and Plaintiff successfully obtained a nondischargeability judgment against Defendant. Plaintiff later filed a Motion for Attorney’s Fees, seeking a further award of attorney’s fees for the litigation of the nondischargeability proceeding. The Court noted that this motion was untimely, filed 29 days after entry of judgement, in excess of the 14 day window prescribed by Fed. R. Civ. P. 54(d)(2)(B)(i), but proceeded to consider the motion anyway. As to whether Plaintiff was entitled to contractual attorney’s fees, the Court held that Florida law governed the enforceability of contractual post-judgment awards for additional attorney’s fees, and found that under Florida law the security agreement merged into the foreclosure judgement absent a specific provision for post-judgment attorney’s fees within the agreement. The Court next turned to statutory post-judgment attorney’s fees under a Florida statute that provided for fees incurred in connection with execution on the judgment. The Court held that litigating a complaint to determine dischargeability is a matter of bankruptcy law, existing independently of execution of the original foreclosure judgment, and thus is not a basis for statutory attorney’s fees under Florida law.

Plaintiff asserted claims against Debtors under sections 523(a)(2)(A), (a)(2)(B), (a)(4), and (a)(6) related to the dissipation of funds invested by Plaintiff. Debtor-wife sought judgment on the pleadings. With respect to all claims against the wife, the Court found Plaintiff failed to allege facts sufficient to state a claim for relief and instead relied on conclusory statements that did little more than recite the elements of the causes of action. Therefore, the Court entered judgment for Debtor-wife on all claims against Debtor-wife. NOT INTENDED FOR PUBLICATION

Order granting Motion for Relief from Stay of Moe's Franchisor, LLC. Moe's sought relief from stay because Debtors cannot assume or assign their franchise agreement with Moe's pursuant to 11 U.S.C. § 365(c)(1), which states, \The trustee may not assume or assign any exeuctory contract ... if (1)(A) aplicable law excuses a party, other than the debtor, to such contract or lease from accepting performance from or rendering performance to an entity other than the debtor...; and (B) such party does not consent to such assumption or assignment[.]\" A circuit split exists as to whether 11 U.S.C. § 365(c)(1) prohibits a debtor in possession from assuming an executory contract if applicable law would excuse the contract counterparty from accepting performance from someone other than the debtor; however, the 11th Circuit's stance on this issue is determined by In re James Cable Partners, L.P., 27 F.3d 534 (11th Cir. 1994), which states that the restriction of § 365(c)(1) does apply to debtors in possession. Debtors argument that James Cable's application of § 365(c)(1) is dicta is incorrect. Because Debtor could not assume the executory contract, cause existed to grant Moe's relief from the automatic stay."

Deferring ruling on putative landlord's motion to compel rejection or assumption of lease and granting in part landlord's motion for relief from the automatic stay regarding premises used by chapter 11 debtors to operate senior long-term care facilities.

Order denying confirmation of Debtor’s Chapter 13 plan. Debtor’s previous case was dismissed for failure to comply with his own confirmed plan. That plan directed Debtor to auction a “Lake House” to pay judgment creditor Dwayne Richardson’s (“Creditor”) secured claim. In his second case, Debtor filed a plan that proposed to “pay” the secured claim of Creditor by surrendering the Lake House—only one of the properties encumbered by Creditor’s judgment lien. The plan proposed to judicially value the Lake House and pay any deficiency in monthly installments. Debtor repeatedly fell behind on his pre-confirmation plan payments and did not reliably keep Richardson’s collateral insured. Richardson filed several objections noting insurance deficiencies and Debtor’s failure to disclose several pieces of property. After a trial, the Court denied confirmation on two grounds: First, good faith based in part on Debtor’s failure to maintain insurance (the Lake House was uninsured as of the trial date) and lack of disclosure in the case. Second, the Court held that a plan cannot propose to give an objecting secured creditor only some of his collateral. This result is the same whether the plan couches the treatment as a “partial surrender” or as a “payment.” The surrender provision of Section 1325(a)(5) requires surrender of all property securing the secured creditor’s claim, and the word “payment” as used in the bankruptcy code does not contemplate a transfer of real property to an objecting judgment creditor.

Order overruling Debtor’s objection to claim of Wells Fargo Bank, N.A. Debtor objected to Wells Fargo’s secured proof of claim based on a mortgage loan, asserting that she did not owe it a debt. At the hearing on the objection, Debtor asserted that the endorsements on the note to Wells Fargo were invalid and that the assignment of Debtor’s security deed was by fraudulent “robo-signing.” The Court overruled Debtor’s objection for three reasons. First, because Debtor failed to produce adequate evidence to overcome Wells Fargo’s sworn proof of claim’s prima facie evidence of the validity and amount of its claim. Second, because Debtor entered into a loan modification with Wells Fargo which the court held estopped Debtor from denying that Wells Fargo received an assignment of her mortgage loan. Third, because under Georgia law Debtor lacked standing to challenge the assignment as a nonparty to the assignment agreement.

The Court denied Defendant's Motion for Partial Summary Judgment, finding that the liberal pleading standards of Rule 8, incorporated into the Bankruptcy Code, do not require that the Plaintiff specifically reference the applicable state law. The Court also found that statutes of limitations are procedureal, and the applicable law concerning statute of limitations is that of the forum state, which is in this case Georgia. The Court reserved judgment as to what laws govern the substance of the fraudulent transfer claims, as classification of a fraudulent transfer claim as one resounding in tort or contract may require the Court to examine the facts of the case, and the rules regarding choice-of-law under both are factual inquiries that should not be undertaken until the conclusion of discovery.

The Court sustained the debtor's objection to a creditor's claim as having been filed after the claims bar date and denied the Chapter 13 Trustee's motion to dismiss the case or modify the debtor's confirmed plan to increase the plan payments, finding that the debtor did not have an increase in income.

IRS assessed income tax liability on Debtor in excess of $200,000 after certain partnership losses allocated to Debtor were disallowed. The Court determined Debtor had not willfully attempted to evade or defeat the tax, and therefore the tax debt was dischargeable. Although Debtor maintained an affluent lifestyle after the assessment, he made significant payments on the assessment through both voluntary and involuntary transfers and he took no action to remove his assets from the reach of the IRS.

In an earlier opinion on the Trustee's motion for partial summary judgment on his objections to a proof of claim, the Court reserved ruling on certain issues to permit the claimant to supplement the record to show a dispute of material fact. Court concludes that the claimant's Supplemental Brief does not establish any such dispute and grants Trustee's motion on those issues. This Supplemental Memorandum Opinion and Order has not been prepared for publication and is not intended for publication.