Thursday, December 16, 2010

First Circuit: 12/16/2010 Recent Decisions in the First Circuit on Bankruptcy Law

First Circuit: Recent Decisions in the First Circuit on the Issue of Bankruptcy
Banco Bilbao v. Wiscovitch-Rentas (In re  Net-Velazquez), 2010 U.S. App. Lexis 22678 (1rst Cir. 11/2/2010)(Opinion by Appellate Judge Lipez).
Chapter 7 Trustee filed an adversary proceeding challenging defendant's garnishment of funds in the bank account of a corporation wholly owned by the debtor and his wife which the Bankruptcy Court found was a preferential transfer; the District Court affirmed the Bankruptcy Court on appeal, which the First Circuit affirmed as well.  Defendant sought to argue on appeal, inter alia, that ownership of the garnished funds was properly vested in the bank and thus not property of the estate, which argument was not squarely presented or litigated below and thus waived on appeal.

Parker v. Handy (In re Handy), 624 F. 3d 19 (1rst Circuit 10/22/2010)(Opinion by Appellate Judge Lynch).
Parker appealed from the BAP's decision affirming the Bankruptcy Court's order denying his motion for relief from stay.  Parker wanted to reopen a Maine state court proceeding against the debtor to pursue an alleged fraudulent transfer. The debtor received her discharge during the pendency of Parker's hearing, which precluded Parker's motion.  At the time of the debtor's discharge, Parker had not obtained a favorable judgment from the state court nor a lien against the debtor's property. As such,  the Bankruptcy Court properly held that 11 U.S.C. §524(a)(2) precluded Parker from pursuing his action against the debtor.

Guay v. Burack, 2010 U.S. Dist. Lexis 117248 (D.N.H. 10/29/2010)[unpublished].
Judicial estoppel was justified to bar a debtor from pursuing a cause of action in the District Court (debtor asserting claim against a detective and city police department for malicious abuse of process and violation of the Fourth amendment) where the debtor deliberately failed to disclose the pending suit in a prior bankruptcy case.

In re Roy, 210 BNH 31 (Bankr. D.N.H. 11/30/2010)(J. Michael Deasy, Bankruptcy Judge)[unreported cases on Court's web site].
Debtor sought to avoid, in his Chapter 13 case, the wholly unsecured liens of two attachments and two mortgages on a tenanted commercial property. With over $700,000 in liens, the debtor valued the property at only $120,000, due in large part for the need of asbestos remediation.  Mortgagee's appraisal of $525,000 did not account for the environmental factors.  Because the property would be used by the debtor post-confirmation, the Court looked to its replacement value or fair market value consistent with its proposed use.  Valuation would not account for the costs of sale but would account for the expenses necessary for the property to hold or realize its highest and best use.  While the Court found the best use for the land was raw, the debtor intended to continue using the building post-confirmation; as such, a value of $265,000 was determined based on a comparable sale of a wood structure in below-average condition similar to the debtor’s building.  The raw land value was almost identical, at $265,500.

In re Education Resources Institute, Inc., Chapter 11 Case No. 09-12540(Bankr. D. Mass. 12/14/2010)(Henry J. Boroff, Chief Bankruptcy Judge)[unreported cases on Court's web site].
Creditor's motion to interpret a court order, post confirmation (a) did not require an adversary proceeding, (b) presented a ripe controversy and (c) was properly before the court due to a retention of jurisdiction clause in the Chapter 11 plan.

In re R&G Financial Corporation, 2010 Bankr. Lexis 4008 (Bankr. D.P.R. 11/17/2010)(Enrique S. Lamoutte, Bankruptcy Judge).
Court granted debtor's motion to extend the automatic stay under 11 U.S. §362(a) and §105(a), to the debtor's dissolved subsidiary precluding arbitration proceedings against the subsidiary. The dissolved "sub" was the sole shareholder of the debtor, and essentially claims against the sub were claims against the debtor.

Diorio v. Allidri (In re M&L Service, Inc.), Chapter 7 Case No. 08-12745, Adv. Pro. 09-1002 (Bankr. D.R.I. 8/18/2010)(Arthur N. Votolato, Bankruptcy Judge)[unreported cases on Court's web site].
Court dismissed debtor’s objection to summary judgment affidavit referencing unaudited financial statements, because such statements are admissible if “best evidence” of the debtor’s financial condition, where, as here, the debtor did not have audited financials.

In re Carlucci, 2010 BNH 30 (Bankr. D.N.H. 9/28/2010)(Mark W. Vaughn, Chief Bankruptcy Judge (retired)[unreported cases on Court's web site].
Court in this Chapter 7 case determined that a judicial lien impaired the debtor’s exemptions in the property pursuant to 11 U.S.C.  §522(f).  Here, the creditor held a $209,000 judicial lien due to a pre-petition writ of execution, which when added to choate tax liens (excluding inchoate tax liens) against the property plus the debtor’s maximum exemption in the property absent the presence of liens totaled $323,000.  The property was appraised at $200,000.  Thus, $323,000 minus the $200,000 value totaled a $123,000 “impairment”.  Subtracting the $123,000 impairment from the creditor’s $209,000 lien, left the creditor with an $86,000 judicial lien. Lien creditor was also awarded reasonable costs for having its appraiser appear twice, due to the debtor's lack of preparedness at the first hearing.

Smith v. Wardwell (In re Wardwell), Chapter 7 Case No. 09-11362, Adv. Pro. 10-1001(Bankr. D. Maine 12/8/2010)(Louis H. Kornreich, Chief Bankruptcy Judge)[unreported].
Finding in favor of the Chapter 7 debtor, the Court examined the extent to which a state court default judgment relevant to an alleged fraud claim and given “full faith and credit” will establish a non-dischargeable debt under 11 U.S.C. § 523(a)(2). Since the matter was not litigated, claim preclusion against the debtor would not apply.  As for issue preclusion, the facts alleged in the state court complaint were not sufficient to establish a non-dischargeable debt.

Bettano v. Wells Fargo Bank, N.A,, (In re Bettano),Chapter 13 Case No. 10-42872, Adv. Pro. 10-4114 (Bankr. D. Mass. 12/14/2010)(Melvin S. Hoffman, Bankruptcy Judge)[unreported cases on Court's web site].
Court granted Wells Fargo's motion to dismiss the adversary proceeding as the debtor's action was untimely and failed to satisfy the statutory amount. Debtor sought to rescind a loan under the Massachusetts counterpart to TILA due to the plaintiff's alleged failure to disclose a $300 finance charge.

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