My Daily Journal Article Small Business Chapter 11 update: Where are we eight months in? was published on October 26, 2020. You can access it here. DJ 10-26-20 SBRA 8 months in Let me know what you think.
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All things In Twyne’s Case
I have seen this case cited here and there, supposedly the genesis of the now familiar concept that a transfer of property with actual intent to delay, hinder or defraud creditors may be avoided. But yesterday I stumbled on Prof. Bob Lawless’s post on Credit Slips about this fascinating new law review article by Northwestern Law Professor Emily Kadens, entitled New Light on Twyne’s Case. The article is here. She writes, “Twyne’s Case today stands for the point that even transfers made for good consideration can be fraudulent if they were made with the intent to defraud other creditors. ”
The facts are surprisingly familiar. In 1600, the undersheriff of Hampshire, Brian Chamberlain, is instructed by a creditor to execute a writ and seize property of one John Pearce. When he gets to Pearce’s farm, he is told the sheep, the cattle, grains, “leases,” and everything else is owned by John Twyne, not John Pearce. Twyne was a cousin of Pearce and a man of some stature and wealth. There is a confrontation over the next two-three days (called a “riot” in the legal papers of the time) but when the dust settles, nothing is removed from the farm. It seems that months earlier, Twyne agreed in writing to pay certain of Pearce’s debts in exchange for a transfer of Pearce’s property to Twyne. Possession of the property remained with Pearce, apparently not unusual since it wasn’t that easy to move sheep, cattle and grain and the arrangement provided that if Pearce came up with the money, he would get his property back. The paperwork of course was confusing, contradictory in places, incomplete and the “deeds” may have been back-dated. But the court later agreed that “Twyne gave greater consideration than the total worth of Pearce’s property.” Read more…
Wherein my 1111(b) article is cited by a Judge!
A thanks and tip of the hat to Bankruptcy Judge Eric Frank, Eastern District of Pennsylvania, for citing my article The Section 1111(b) Election: A Primer, 31 Cal. Bankr. J. 755 (2011), written with Roksana Moradi-Brovia. You can access the case here, In re Body Transit, Inc. Pretty fun to be called a “commentator.” Judge Frank writes, “One commentator explained it concisely as follows:” and goes on to quote two paragraphs from the article.
The issue to Judge Frank was whether the the bank’s “interest on account [of its claim] in [property of the estate] is of inconsequential value,” because if so, the bank cannot make the 1111(b) election. The court said it was “inconsequential” under the facts of the case and pitched out the election. Apparently here the value of the property was around $80,000 and the debt was $917,000 so the property was 8.2% of the debt. Judge Frank rules that that is inconsequential, although comments that it is a close call. I do not see it as a close call. To force the debtor to pay the bank $917,000, certainly money taken away from other unsecured creditors, because its collateral is worth $80,000 is not a close call to me.
Judge Frank states astutely:
“[W]hile ‘the numbers’ provide an important starting point in deciding how much value is ‘inconsequential,’ the court also must consider other relevant circumstances presented in the case and make a holistic determination that takes into account the purpose and policy of the statutory provisions that govern the reorganization case.”
Here the bank was simply trying to scuttle the plan, in a subchapter V case by the way. Judge Frank is absolutely correct here.
Student Loan Guru Austin Smith Writes on Private Student Loans
Austin Smith is a force nationwide championing issues for student loan debtors. You can get his excellent article, Why So Many Get It So Wrong That a Private Student Loan is Uniquely Protected in Bankruptcy, here.
The common belief that all student loans are protected from discharge in bankruptcy is based on a misunderstanding of 11 U.S.C. § 523(a)(8). Since 1990, bankruptcy courts have been misreading the statute to prevent any student debt that could be construed as providing educational benefits or advantages from discharge. The flawed logic in student bankruptcy cases has thus become (1) all debts that confer educational benefits are protected from discharge; (2) the debt in question facilitated the debtor’s education and as such, conferred educational benefits; and (3) the debt is not dischargeable. Do you need a credit, follow https://blog.achievefinance.com/do-payday-loans-affect-your-credit-rating and find payday loans.
First, subsection (A)(i) only protects federally insured or nonprofit student loans. Second, subsection (A) (ii) only protects debts resulting from noncompliance in contractual service scholarships and grants. Third, subsection (B) only protects private student loans that meet narrow Internal Revenue Code qualifications. A sizeable portion of private student loan debt falls outside all three of these categories, and must be treated as non-qualified private student loans that have no protection from discharge.
Trivia: Oldest Form of Security Arrangement?
Security agreements are made between a lender and a borrower that creates a security interest in property whereby if the borrower does not pay back the loan then the lender can take steps to get the property. We see this in real estate of course. But do you know one of the oldest and simplest security arrangement between two people? It is ….
Real Estate Law To Freshen The Mood
One of my colleagues at the college, Prof. Huber, just came out with a new easy-to-read California real estate law textbook.
I was fortunate to work with Property Corner during my vacations, I also get a free copy and I wanted to share some things I read in this book that you may already know, but like Prof. Hayes — I like the way Prof. Huber explains real estate law. I share the following below from his book. I will post more later as I read more great stuff.
Ethics and Getting Paid – Prof. Nancy Rapoport – July 21, 2018
Prof. Nancy Rapoport is our guest speaker along with Judge Erithe Smith for the cdcbaa Fifth Annual Jim King Bankruptcy Symposium. Below is her top 15 most downloaded articles. They can all be downloaded here.
(Rank)
1.
Lord of the Flies (1963): Development of Rules Within an Adolescent Culture
SCREENING JUSTICE – THE CINEMA OF LAW: SIGNIFICANT FILMS OF LAW, ORDER AND SOCIAL JUSTICE, Rennard Strickland, Teree E. Foster & Taunya Lovell Banks, eds., William S. Hein & Co., 2006, UNLV William S. Boyd School of Law Legal Studies Research Paper No. 08-21
Number of pages: 23 Posted: 05 Dec 2006 Last Revised: 29 May 2008
Nancy B. Rapoport
University of Nevada, Las Vegas, William S. Boyd School of Law
Downloads707(31,176)
2.
Enron, Titanic, and the Perfect Storm
Fordham Law Review, Vol. 71, p. 1373, 2003
Number of pages: 23 Posted: 10 Feb 2004
Nancy B. Rapoport
University of Nevada, Las Vegas, William S. Boyd School of Law
Downloads600(38,868)
Citation2 Read more…
Very Nice Article on Paid Preparers
How to Get Away With Bankruptcy Fraud
This article by Paul Kiel for ProPublica is really nice. We all know it goes on and most of us wish we could help fix the problem. The article shows why Judge Maureen Tighe should be up for canonization.
I sent Paul an email thanking him for the investigative work and the great article. Here is his response:”
Thanks, Jon. I hope it leads to something! Please let me know if you see any evidence of stepped-up enforcement or anything like that, because we publish our stories with the goal that they bring change. There has been some chatter about a kind of task force between the debtor and creditor bar on the CACBA listserv, I think.
Front Row Kids
This is such a great article. I have posted before on how the Supreme Court Justices are basically carbon copies of each other. They come from basically two elitist schools, have not been trial judges, have not been in the trenches with “the people.” A tip of the hat to my Associate David Kritzer for pointing this article out to me.
‘Front Row Kids’ and values have taken over our courts
two mutually hostile camps: a largely coastal, urban party run by educated elites, and a largely rural and suburban “flyover country” party composed of people who did not attend elite schools and who do not see themselves as dependent on those who do. Read more…
Prof. Chemerinsky Explains Goodyear Tire & Rubber Co. v. Haeger
The 9th Circuit was reversed by the Supreme Court on Tuesday in Goodyear Tire & Rubber Co. v. Haeger, — S. Ct. —, 2017 WL 1377379 (2017). The case deals with a court’s inherent powers to sanction parties and attorneys. The rule is pretty clear that a court may sanction a party using its inherent power if the party’s conduct was “bad faith, wanton, vexatious, or oppressive,” i.e., more than reckless or even frivolous. But how much? The unanimous Supreme Court said the sanctions “must be compensatory rather than punitive in nature.” It said that the “fee award may go no further than to redress the wronged party ‘for losses sustained’; it may not impose an additional amount as punishment for the sanctioned party’s misbehavior.” Thus, “a court’s shifting of fees is limited to reimbursing the victim.” That is not to say that the sanctions cannot be punitive but if they are, that is essentially a criminal proceeding and the sanctionee has the same rights as other criminal defendants.
In Goodyear, certain reports favorable to the Plaintiff were not turned over to the Plaintiff. The Plaintiff, not knowing that the reports existed, ultimately settled with Goodyear. A year later, the reports were discovered. How is the district court going to figure out “the losses sustained” because of the failure to turnover the reports? Read more…
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