Defendant brought motion to dismiss complaint alleging turnover and breach of fiduciary claims. Defendant’s motion was granted on both counts. Plaintiff failed to allege a basis upon which certain funds were property of the estate, necessitating dismissal of turnover claim. Plaintiff’s breach of fiduciary claim was barred by the statute of limitations as it was not brought within five years of the date the claim arose and the continuing violation doctrine did not apply.
Chief Judge Pamela S. Hollis - Opinions
Chief Judge Pamela S. Hollis
March 3, 2011
February 24, 2011
Debtor filed a motion pursuant to 11 U.S.C. § 362(k) against secured creditor who refused to accept Chapter 13 plan payments for certain pawned property provided for in the confirmed plan. Debtor sought creditor’s compliance with the plan or, alternatively, damages. Secured creditor responded with a motion to amend the debtor’s Chapter 13 plan pursuant to 11 U.S.C. § 1329, 11 U.S.C. § 362(d), and Federal Rule of Bankruptcy 9024 (incorporating Federal Rule of Civil Procedure 60), stating that the plan had been confirmed in error because the debtor no longer had an interest in certain pawned property because of a failure to comply with 11 U.S.C. § 541(b)(8). The creditor’s motion was denied as the creditor did not have standing under § 1329 and its argument under § 362(d) was barred by res judicata since creditor failed to allege that it had not been provided with notice of the bankruptcy or the plan. The creditor’s Rule 60 arguments were similarly denied as these circumstances were not so exceptional as to warrant relief from judgment post-confirmation.
February 24, 2011
10 B 04352
Debtor filed a motion pursuant to 11 U.S.C. § 362(k) against secured creditor who refused to accept Chapter 13 plan payments for certain pawned property provided for in the confirmed plan. Debtor sought creditor’s compliance with the plan or, alternatively, damages. Secured creditor responded with a motion to amend the debtor’s Chapter 13 plan pursuant to 11 U.S.C. § 1329, 11 U.S.C. § 362(d), and Federal Rule of Bankruptcy 9024 (incorporating Federal Rule of Civil Procedure 60), stating that the plan had been confirmed in error because the debtor no longer had an interest in certain pawned property because of a failure to comply with 11 U.S.C. § 541(b)(8). The creditor’s motion was denied for lack of standing, res judicata, and because exceptional circumstances did not exist. As there was no reason for the court to believe the creditor was not bound by the terms of the Plan, the debtor’s motion was granted.
February 10, 2011
07 B 15979
Debtors objected to IRS proof of claim which asserted a claim based on taxes against them individually and taxes against husband's business, a corporation which had been involuntarily dissolved. Debtors claimed the IRS could not assess the business taxes against them individually because the statute of limitations had expired. The court held that the IRS could not hold the debtors responsible for corporate taxes since no corporation existed at the time, but that debtors were liable as individuals for the taxes since husband was an "employer" under the tax code. Moreover, since debtors had never included income from the operation of husband's business, the statute of limitations period had not begun to run because debtors had not filed sufficient information to constitute a "tax return." Debtors' objection to the entire proof of claim was sustained because the proof of claim did not accurately reflect debtors' tax liability.
December 7, 2010
10 B 22637
Creditor in a single asset real estate case obtained a prepetition state court judgment against Debtor with a judgment interest rate of 9%. As a single asset real estate debtor, Debtor was required to commence monthly payments to Creditor in an amount equal to “interest at the then applicable nondefault contract rate of interest on the value of the creditor’s interest” in the collateral. 11 U.S.C. § 362(d)(3)(B)(ii). The mortgage between Creditor and Debtor specified a nondefault contract rate of interest of 5.990%. Creditor argued that the judgment replaced the contract, making 9% the only applicable interest rate. Furthermore, Creditor argued that the payments must first be applied to interest, even though Creditor was undersecured. The court held that the judgment interest rate does not replace the nondefault contract rate of interest for the purposes of 11 U.S.C. § 362(d)(3)(B)(ii) and that the payments applied to principal because Creditor was undersecured.
December 7, 2010
09 B 29262, 09 A 01132
Creditor obtained a prepetition judgment and served a citation to discover assets on Debtor. While the Citation was in effect, Debtor disposed of certain funds from his bank account for ordinary living expenses. Debtor asserted an exemption in his bank account. Creditor claimed his debt was excepted from discharge under 11 U.S.C. § 523(a)(6) for willfully and maliciously damaging Creditor’s property interest by spending funds in violation of the Citation and objected to Debtor’s claim of exemption because Debtor had exhausted his exemption with respect to Creditor by spending funds prepetition. The court held that there was no evidence Debtor consciously intended to violate the Citation, given its complexity and the fact that Creditor was aware Debtor had been spending funds and failed to object. The court further held that Debtor did not exhaust his exemption by spending funds prepetition as state exemptions and bankruptcy exemptions serve different purposes and Creditor’s debt did not fall within a creditor-specific exception to Debtor’s exemption.
March 30, 2010
09 B 29262
Creditor obtained a prepetition judgment and served a citation to discover assets on Debtor outside the preference period. Less than 90 days prior to Debtor's bankruptcy case filing, Creditor served a third party citation on Debtor's bank. After Debtor filed his bankruptcy case, Creditor moved for relief from the stay in order to pursue his state court remedies with respect to the bank account. The Chapter 7 Trustee objected on the grounds that only the third party citation created a lien on the bank account, so any lien Creditor might have on the funds is avoidable, and thus the estate's claim to the funds in the account is superior. HELD: Service on the Debtor created a lien on all of Debtor's personal property, including his bank account. Motion for relief from stay granted.
December 3, 2008
02 B 10050, 04 A 01575
Chapter 7 trustee alleged that the defendant conspired with an affiliated entity and the affiliate's longtime customer in order to strip the debtor of its assets. Trustee argued that an agreement among these parties caused the debtor to undertake an “obligation” under the Bankruptcy Code and UFTA, and he sought to avoid that obligation as a fraudulent transfer. The court found that the only payments or transfers received by the defendant were for repayment of debts owed by the debtor under a financing arrangement. While payment on an antecedent debt may constitute a preference if sufficiently close in time to the bankruptcy filing, “it is not a fraudulent conveyance if the debtor simply repays a legitimate debt.” The court held that the defendant and its affiliate were independent legal entities, the defendant was not a party to any obligation or agreement, and therefore, the debtor assumed no obligation to the defendant that could be avoided as fraudulent.
November 7, 2008
07 B 15826
Chapter 13 Trustee objected to confirmation of debtor's plan on the grounds that by excluding future earned income tax credits, she failed to commit all projected disposable income to the plan. In sustaining the objection and denying confirmation, the court determined that a rebuttable presumption exists that projected disposable income is calculated from the means test, and is disposable income multiplied by the number of months in the applicable commitment period. However, a party may present evidence to rebut that presumption, and the court can consider the evidence to determine what debtor's actual disposable income might be during the plan period. The Trustee also objected to the debtor's claim of exemption in her earned income tax credit, and the court overruled that objection.
05 B 54630, 06 A 00688
Plaintiff provided credit to patients of Debtor’s dental practice. Plaintiff failed to prove Debtor made fraudulent misrepresentations or perpetrated actual fraud by submitting “pre-billed” charge-slips for payment from Plaintiff and by “pre-billing” dental patients for work not yet performed because Plaintiff did not prohibit pre-billing and Plaintiff knew that charges were being pre-billed. Because Plaintiff failed to establish fraud, court did not reach alter-ego theory as to whether debtor was personally liable for debts of his corporate entities.