Judge Timothy A. Barnes - Opinions

Judge Timothy A. Barnes

Upon the vacation, in part, and remand by the District Court of this court’s order granting a motion seeking enforcement of this court’s confirmation order and damages arising from the alleged violation committed by the debtors’ prepetition surety, filed by successor to the purchaser of assets in the above-captioned bankruptcy cases, the District Court having confirmed that this court’s determination that the surety violated the injunction and release set forth in the court’s confirmation order and the debtors’ plan, but remanding for a determination of whether damages are appropriate under the standard set forth by the Supreme Court in the since determined Taggart v. Lorenzen, 139 S. Ct. 1795 (2019), held: The evidence presented by the parties and undisturbed on appeal demonstrates that the surety’s actions were “persistent violations” and “persistent contumacy” of this court’s orders, shifting the burden to the surety to demonstrate that the surety’s belief that its pursuit of the purchaser was lawful is objectively reasonable. The surety has failed to demonstrate such. A finding of civil contempt is appropriate under Taggart and that the previously awarded actual damages for reduced property value, legal costs, consulting costs and project management costs remain supported. The motion remains GRANTED and this decision concludes the issues on remand.

19bk31162, 20ap00074
Upon the debtor’s motion to dismiss a single-count adversary complaint brought under 11 U.S.C. § 523(a)(2)(A) for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6), held:  As is required, the court draws all reasonable inferences in the favor of the plaintiff.  As a result, the complaint states a claim for relief, though only just.  Were it not for the liberal pleading standards for intent set forth in Federal Rule of Civil Procedure 9(b), the complaint would fail to rise above mere speculation.  But for the plaintiff’s speculation as to the debtor’s intent, the plaintiff pleads a case that is merely breach of contract, not false pretenses, false representation, or actual fraud.  Given the sophistication of the plaintiff and the plaintiff’s extensive experience bringing matters such as this to this court, the court would otherwise expect more so as to demonstrate that the complaint is not being brought for improper purposes.  As it stands, however, despite the narrowness of this ruling, the motion to dismiss must be denied.

In re Rosebud Farm, Inc.
August 25, 2020

On the chapter 7 trustee’s objection to the secured status and amount of a claim for fees and costs of counsel for the plaintiff in a prepetition action against the debtor, held: The claim for attorney’s fees and costs is unsecured as the order awarding such fees and costs in the underlying prepetition action was not recorded and the amount of such claim is limited to amount of fees awarded in the prepetition lawsuit. The trustee’s objection is, therefore, SUSTAINED.

Upon the motion for relief from the automatic stay brought by certain asbestos claimants, alleging cause exists for relief from the automatic stay to pursue only available insurance coverage, held: The movants have met the cause requirement under 11 U.S.C. § 362(d)(1). Though the Seventh Circuit’s Fernstrom factors are not clearly applicable, they are instructive nonetheless. All three factors thereunder weigh in favor of the claimants. The movants have also established that the debtor lacks equity in the subject property under 11 U.S.C. § 362(d)(2), the sole showing required for such relief in a chapter 7 case. The motion is, therefore, GRANTED as set forth in the attached Memorandum Decision.

14bk41230, 16ap00465
On the defendant’s motion for summary judgment, seeking judgment in its favor on its good faith transferee for value defense under 11 U.S.C. § 548(c) to the trustee’s fraudulent transfer claims, held:  The defendant has established grounds for summary judgment under Federal Rule of Civil Procedure 56 as to the first element of its defense, that the transfers were received in good faith, but has failed establish grounds for summary judgment as to the second element of its defense, that the debtor received value in exchange for the transfers.  The defendant’s motion is, therefore, GRANTED IN PART and DENIED IN PART.

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.