Judge Timothy A. Barnes - Opinions

Judge Timothy A. Barnes

18bk04521, 18ap00185
On a plaintiff-debtor’s adversary complaint, seeking a discharge of presumptively nondischargeable student loan debt pursuant to 11 U.S.C. § 523(a)(8)(A), held: the plaintiff-debtor has failed to show by a preponderance of the evidence that he would suffer an undue hardship if forced to repay his student loans.  As a result, the plaintiff-debtor’s request to include such debt in his discharge fails.  Judgment will be entered in favor of the answering defendants.

On a motion for relief from the order approving the sale of the debtor’s real property, including a church, filed by the parishioners of the church, held:  The court concludes that the movants have failed to establish the requirements to vacate the sale order under Federal Rule of Civil Procedure 60.  While the movants have limited standing to challenge the debtor’s lack of authority, such challenge rests on ecclesiastical and not secular rules.  Such a challenge must be brought in the appropriate, church forum.  As the movants have suffered no harm cognizable under secular law and have failed to show that the entry of the sale order was in error in any other way, for the reasons set forth in the Memorandum Decision, the motion must be denied.

19bk06272, 19ap00587
On a motion for a preliminary injunction by the plaintiff, a former franchisor of a business owned and operated by the debtor-defendant, to prohibit the debtor-defendant from operating such business in alleged violation of a covenant not to compete entered into in connection with the now-terminated franchise, where the covenant not to compete provides for liquidated damages designed to fully compensate the plaintiff as an alternative remedy to injunctive relief, held:  The plaintiff’s rights under the covenant not to compete, including to injunctive relief, constitute a “claim” within the meaning of 11 U.S.C. § 101(5), which claim will be treated in accordance with bankruptcy law.  The plaintiff is therefore unlikely to succeed on the merits of its claims for a permanent injunction, the only relief sought in the adversary proceeding, and the preliminary injunction motion is therefore not well taken.

In re LLC 1 07CH12487
September 30, 2019

Upon the chapter 7 debtor’s motion to dismiss its bankruptcy case, which was remanded to this court for further findings that would permit dismissal or further proceedings in the case following an uncontested appeal by a creditor opposing dismissal, the court having entered an order to show cause calling for all interested parties to appear and be heard with respect to whether any cause to dismiss the case under 11 U.S.C. § 707 currently existed, held:  In light of the compelling observations of the United States Trustee and the failure of the debtor to prosecute the motion following the district court’s remand, there exists a limited bankruptcy purpose to allowing the debtor’s case to continue provided that proper safeguards and limitations are maintained.  The debtor’s motion is, therefore, DENIED without prejudice.

On a chapter 13 debtor’s claim objection seeking a determination from the court of the nature, validity and amount of a tax purchaser’s claim in a chapter 13 case where the deadline to redeem the property taxes in question expired prepetition but no tax deed has been issued or recorded and also upon the tax purchaser’s objection to the confirmation of the debtor’s chapter 13 plan, held:
The tax purchaser has a perfected in rem claim for the statutory redemption amount that exists irrespective of whether the redemption period has passed.  That claim is allowed as a secured claim in the amount asserted by the tax purchaser.  The tax purchaser also has a contingent, unperfected in rem claim for the fair market value of the property in question that exists irrespective of whether the redemption period has passed.  The court estimates for the purpose of allowance that this unperfected in rem claim is in the amount asserted by the tax purchaser, the property’s full fair market value as of the petition date, less that amount of perfected in rem claim for the redemption amount.  Such unperfected in rem interest is, however, unsecured, by operation of 11 U.S.C. § 506(a) and because it is subject to the trustee’s avoidance power as a hypothetical lien creditor.  The resulting allowed unsecured claim must be treated in the debtor’s plan.  The debtor’s objection is, therefore, SUSTAINED IN PART AND OVERRULED IN PART.
The confirmation objection fails in its attempt to have this court change its prior published legal conclusions regarding the treatment of tax purchaser claims after the passing of the redemption period but before the issuance of a tax deed.  However, as the tax purchaser’s claim as determined and allowed by the court is not fully addressed in the debtor’s plan, the confirmation objection is SUSTAINED in that limited respect only.

Upon the motion to dismiss brought by a creditor, alleging that the debtor filed a second petition for bankruptcy in violation of a court order that dismissed the debtor’s first bankruptcy case with prejudice, held: The dismissal of the debtor’s first case under bad faith grounds precluded the debtor from filing for relief at the time it filed its second petition. The motion is, therefore, GRANTED.


Upon a motion seeking enforcement of this court’s confirmation order and damages arising from the alleged violation by the debtors’ prepetition surety, filed by successor to the purchaser of assets in the above-captioned bankruptcy cases, the court having previously determined that the surety violated the injunction and release set forth in the court’s confirmation order and the debtors’ plan, and after a trial to determine damages, held: The movant has established that it is entitled to damages stemming from the surety’s repeated pursuit of claims against the movant in the state court.  The court, therefore, awards actual damages for reduced property value, legal costs, consulting costs and project management costs.  The court declines to award punitive damages.  The motion remains GRANTED and this decision concludes the motion.

Upon the Motion for Entry of an Order (I) Enforcing Confirmation Order; (II) Awarding Damages; and (III) Granting Related Relief, brought by assignee of personal property administered by the liquidating trust in the above-captioned bankruptcy cases, held: The movant has established that it is a party protected by the release in the confirmation order entered in the case and that the claims brought in the state court actions are attempts by the surety to recapture losses stemming from the debtors’ released liability.  The motion is, therefore, GRANTED in part, as set forth in the attached Memorandum Decision.  A separate hearing on damages will follow.

16bk01335, 16ap00141
On cross motions for summary judgment concerning the validity as a matter of law of the debtor/defendant’s lack of authority defense, wherein the debtor/defendant alleged that the plaintiff LLC lacked standing as the authority of the plaintiff’s lender to manage and thus cause the plaintiff to file its complaint had expired under the applicable statute of limitations, held: Statutes of limitations bar specific legal remedies by creating an affirmative defense to a time-barred action, but statutes of limitation are neither self-executing nor dispositive of the parties’ underlying rights.
Further, a security agreement or mortgage is incident to the underlying debt for limitations purposes and the security remains enforceable so long as the debt remains unpaid and enforceable. As such, the lender’s authority to manage the LLC was unaffected and the debtor/defendant’s affirmative defense fails as a matter of law. The debtor/defendant’s motion is, therefore, DENIED and the plaintiff’s motion is GRANTED.

In re Larry Shelton
September 14, 2018

Upon an objection to a chapter 13 plan brought by the standing chapter 13 trustee assigned to the matter, wherein the trustee asserted that the plan’s reduction of payments to secured creditors in order to allow debtor’s counsel fees to be paid earlier in the case both violated the express requirements of the Bankruptcy Code and was not proposed in good faith, held: The plan’s treatment of secured creditors violates the express prohibition in the Bankruptcy Code against such treatment. As a result, the plan is not confirmable. Further, such improper treatment benefits counsel alone and does not treat the debtor or the debtor’s other creditors fairly. As a result, the plan has not been proposed in good faith and is not confirmable. The trustee’s objection is sustained and confirmation of the plan is denied.