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In re Montano BAP Opinion

By | December 18, 2013 | Case Briefs | No comments

Hi,

I have attached a recent ruling from the BAP which includes a great discussion on the one-action rule and anti-deficiency statutes in California. The court’s analysis can be found on pages 16-20 and walks someone new to this area of law through the process by examining the interplay between Section 726 and Section 580b. The court granted the debtor’s motion for summary judgment on this basis without doing a fraud analysis pursuant to 11 USC Section 523(a)(2).

The court also granted attorney’s fees to the debtor pursuant to 11 USC Section 523(d) because no evidence was demonstrated that the creditor met the burden of demonstrating “substantial justification” in bringing the action when the creditor could not demonstrate actual reliance on the alleged fraudulent misrepresentations. Moreover, the court further recognized that a creditor must be substantially justified at all times through trial to be insulated from paying attorney’s fee under Section 523(d).

Happy Holidays and Happy New Year!
Warmest regards,
Maggie

Magdalena Reyes Bordeaux
Supervising Attorney
Public Counsel
Consumer Law Project &
Debtor Assistance Project

Ph: 213.385.2977 ext. 105
Fx: 213.385.9089
Em: mbordeaux@publiccounsel.org

In re MaGee “BAP upheld sanctions against Chapter 13 debtor’s attorney for advising debtor not to disclose a post-confirmation accident claim”

By | December 17, 2013 | Case Briefs, Chapter 13 | 1 Comment

December 17, 2013

Dear constituency list members of the Insolvency Law Committee:

SUMMARY:

The Ninth Circuit Bankruptcy Appellate Panel (“BAP”) recently upheld sanctions of $2,685 against a chapter 13 debtor’s attorney for advising the debtor (“Debtor”) not to disclose a post-confirmation auto accident claim.  To read the opinion, click here:

http://cdn.ca9.uscourts.gov/datastore/bap/2013/11/21/Carlson%20memo%2012-1522.pdf

In re MaGee, 2013 Westlaw  5310472 (9th Cir. BAP unpublished).

Basic Facts:  Debtor, represented by counsel (“Counsel”), confirmed her chapter 13 plan.  In relevant part, the confirmation order provided that “the debtor shall inform the Trustee of any changes in circumstances or receipt of additional income. . . .”

Read more…

First Circuit Affirms Power of Trustee to Surcharge Exempt Property

By | October 7, 2012 | Case Briefs | 1 Comment

In Malley v. Agin, — F.3d —(1st Cir. Aug. 2012), the debtor hid property from the trustee, here cash proceeds from the sale of the home.  By the time the trustee figured it out, the funds were gone.  The bankruptcy court permitted a surcharge under section 105 against the debtor’s exempt truck.   The debtor argued “the ostensible inviolability of exempt property under the terms of 11 U.S.C. § 522(c), in its provision that ‘[u]nless the case is dismissed, property exempted under this section is not liable during or after the case for any debt of the debtor that arose before [its] commencement.’”  “But we think [the debtor’s] point begs the question.  Should [the debtor]’s interest in the truck be recognized as ‘exempted under this section’ when its exemption would consummate a fraud on creditors by giving the debtor a greater exemption in fact than the code entitles him to claim in law?”

“Accordingly, we endorse the Ninth Circuit’s conclusion in Latman v. Burdette, 366 F.3d 774 (9th Cir.2004), that a debtor’s fraudulent concealment of non-exempt assets is an exceptional circumstance in which an offsetting surcharge against otherwise exempt property interests is reasonably necessary ‘both to protect the integrity of the bankruptcy process and to ensure that a debtor exempts an amount no greater than the Bankruptcy Code [permits].’”

9th Circuit BAP Rules that Bankruptcy Court may Consider Postpetition Events as Part of the Totality of the Circumstances

By | September 16, 2012 | Abuse - Sec 707, Case Briefs, Cases | 1 Comment

In re Ng may be accessed here.  The Debtor’s income increased after he filed.  The BAP says that the bankruptcy court may condsider that as part of the totality of the circumstances when deciding whether to dismiss a chapter 7 under section 707(b)(3).  By the way, the lower court also ruled that a debtor may deduct mortgage payments on the means test, even if he intends to surrender or abandon the home.  Since that ruling was irrelevant, the BAP did not discuss it.

Kagenveama Still Alive – In re Flores – Congratulations to Nancy Clark

By | September 3, 2012 | Case Briefs, Chapter 13 | No comments

Danielson v. Flores (In re Flores), — F. 3d — 2012 WL ————(9th Cir. August, 2012)

Issue:   May “a debtor with no ‘projected disposable income’ confirm a plan that is shorter in duration than the ‘applicable commitment period’ found in §1325(b)”?

Holding:   Yes, the 9th Circuit ruling in Kagenveama is still binding as to the applicable commitment period.

Appeal from Bankruptcy Court – direct appeal
Bankruptcy Judge Meredith Jury
Attorney for Defendants, Nancy Clark

Judge Chen for the majority and Judge Susan Graber dissenting.

These are above-median chapter 13 debtors whose “monthly ‘disposable income,’ as that term is defined in the Bankruptcy Code, is negative.”  The debtors proposed to pay $148 per month for 36 months.  The trustee objected that the applicable commitment period was 60 months.  The court agreed and confirmed the plan for 60 months.

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Supreme Court Affirms Bank’s Right to Credit Bid in RadLAX Hotel

By | June 14, 2012 | Case Briefs, Chapter 11, Supreme Court | No comments

RadLAX Gateway Hotel, LLC v. Amalgamated Bank, — U.S. —, — S.Ct. — (May, 2012)

Issue:  Where a debtor proposes to sell property of the estate as part of a chapter 11 plan, must the secured creditors be entitled to credit bid?

Holding:  Yes.

Justice Antonin Scalia for 8-0 court, Kennedy did not take part

This chapter 11 debtor owned a hotel valued at roughly $50 million.  Amalgamated Bank was the first priority lienholder and was owed approximately $120 million.  The debtor submitted a chapter 11 which proposed to sell the hotel for $55 million, subject to overbids.  The sale was to be free and clear of liens.  The plan provided that the bank would not be permitted to “credit bid” at the sale.  The debtor filed a Motion to Approve Sale at the same time.  The bank objected to both on the basis that it had the right to credit bid pursuant to section 1129(b)(2)(A)(ii).  The debtor argued that if the bank had no right to credit bid, it was more likely that there would actually be bidders which was good for everyone.   The debtor argued that it was required by section 1129(b)(2)(A)(iii) only to give the bank the indubitable equivalent of its claim and since the bank was to receive all of the net proceeds of the sale, that was the indubitable equivalent of its secured claim.  The bankruptcy court denied the motion.  The Seventh Circuit Court of Appeals affirmed.

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Does a Chapter 13 Debtor have the Absolute Right to Separately Classify “Codebtor Consumer Claims”? We don’t know says the 9th Circuit BAP

By | June 10, 2012 | Case Briefs, Cases, Chapter 13 | 2 Comments

Meyer v. Renteria (In re Renteria), — B.R. — (9th Cir. BAP May, 2012)

Issue:   May a chapter 13 plan, that pays a “codebtor consumer debt” in full and other unsecured creditors 9%, be confirmed without considering whether the discrimination is reasonable?

Holding:   Yes, but only on these facts where the trustee conceded that the plan was filed in good faith.

Judge Richard Lee, Eastern District of California

Opinion by Markell, concurring opinions by Pappas and Dunn

The “majority” opinion said that it appears that there is an absolute right to separately classify “codebtor consumer claims” and pay that claim in full and other unsecured creditors a nominal amount.  The majority did not reach the ultimate issue because the trustee conceded that the plan was filed in good faith.  One concurring opinion said categorically there is no absolute right; the other said categorically there is an absolute right.

Judge Robert Kwan Rules that the Absolute Priority Rule Still Applies in Individual Chapter 11 Cases

By | May 26, 2012 | Absolute Priority Rule, Case Briefs, Chapter 11, Judges Corner | 1 Comment

In re Arnold,  — B.R. — , 2:12-bk-15623 (Bkrtcy, C.D. Ca. May, 2012  Kwan.J.)

Issue:   Does the absolute priority rule still apply in individual chapter 11 cases?

Holding:   Yes.

Judge Robert Kwan

The debtors here filed a individual chapter 11.  They own a number of pieces of real property.  They filed a chapter 11 disclosure statement and plan and US Bank objected on the basis that the disclosure statement did not contain adequate information and that the plan was patently unconfirmable because it violates the absolute priority rule.  The US Bank unsecured claim was based on a deficiency on property which the debtors had guaranteed.

Judge Kwan agreed with US Bank and refused to approve the disclosure statement.  As to whether the disclosure statement contained adequate information, the court found that the options given to unsecured creditors were confusing, did not advise creditors which option would apply, and did not advise creditors of the significance of various court rulings on the various options.  The disclosure statement also advised creditors that the debtors would make a new value contribution of $250,000 “at their election” but did not say where that money was going to come from and therefore the feasibility of making the contribution.

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Financial Lawyers Conference: BANKRUPTCY UPDATE

By | May 11, 2012 | Case Briefs, Current Events, Programs | No comments

BANKRUPTCY UPDATE: FLC’s annual review of recent developments in bankruptcy law including discussion of significant judicial opinions from around the country.

This meeting is jointly sponsored by The Financial Lawyers Conference
and The Los Angeles County Bar Association Commercial Law and Bankruptcy Section, Bankruptcy Committee

Speakers:
Jeffrey H. Davidson, Stutman, Treister & Glatt, P.C. 
K. John Shaffer, Stutman, Treister & Glatt, P.C.

Location:
The City Club
333 S. Grand Ave., 54th Floor
Los Angeles, California

Time:    Thursday, June 7, 2012
6:00 pm – 7:00 pm – Registration and Cocktail
Reception with Appetizers & Buffet
7:00 pm – 8:00 pm – Program

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9th Circuit BAP Affirms that Bankruptcy Judges May Enter Final Monetary Judgments in Non-Dischargeability Cases

By | April 30, 2012 | Case Briefs, Chapter 7, Supreme Court | No comments

Dietz v. Ford (In re Deitz), — B.R. — (9th Cir. BAP April, 2012)

Issue:   May the bankruptcy court enter a final judgment for money in a non-dischargeability action given Stern v. Marshall?  Did the bankruptcy court properly find fraud on these facts?

Holding:   Yes on both    Judge Richard Ford, Eastern District of CA

Pappas, Dunn, Markell

Opinion by Pappas, concurring opinion by Markell

The debtor, a contractor, agreed to do work on Fords’ home.  His license was suspended at the time and, in any event, he collected 25% more than the contract price and ultimately did only about 65% of the work.  At trial, the bankruptcy court found fraud under 523(a)(2) as well as under 523(a)(4) and willful and malicious injury under 523(a)(6).  He entered judgment against the debtor for $368,000.  On appeal, the debtor argues that under Stern v. Marshall, the bankruptcy court cannot enter a final judgment either as to the dischargeability of the debt or the amount of the debt.

The BAP affirmed.  As to the court’s power to enter final judgment, the BAP said that non-dischargeability “claims arose under the Bankruptcy Code, subject matter jurisdiction existed in the district court, and by its referral, in the bankruptcy court, as well.  Moreover, “determinations as to the dischargeability of particular debts . . .” are expressly included in the statutory list of core proceedings. 28 U.S.C. § 157(b)(2)(I).  As a result, Congress has provided that the bankruptcy court may enter a final judgment on exception to discharge claims, subject only to appellate review. 28 U.S.C. § 157(b)(2)(I).  Indeed, since 1970, the bankruptcy court, via the reference from the district court, has had the exclusive authority to determine the dischargeability of debts under § 523(a)(2), (4) and (6). See § 523(c)”

As to entry of a monetary judgment, the BAP said, “The Ninth Circuit has also expressly held, pre-Stern, that a bankruptcy court may enter a monetary judgment on a disputed state law fraud claim in the course of determining that the debt is nondischargeable. Cowen v. Kennedy (In re Kennedy), 108 F.3d 1015 (9th Cir. 1997).”  It comments that it must follow the 9th circuit unless the Supreme Court unless it is “clearly irreconcilable.” As to the finding of fraud, the BAP said the court’s findings were not clearly erroneous.

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