Friday, December 24, 2010

First Circuit: 12/24/2010 Recent Decisions in the First Circuit on the Issue of Bankruptcy 12/24/2010

First Circuit: Recent Decisions in the First Circuit on the Issue of Bankruptcy

U.S. v. Callahan (In re Callahan), 2010 U.S. Dist. Lexis 130272 (D. Mass. 12/8/2010)(William G. Young, District Judge).
District Court affirmed the Bankruptcy Court’s ruling denying an IRS tax lien on the debtor’s property (wife) due to her husband’s tax debt, while reviewing the respective burdens of proof on the lien and examination of the nominee theory of title and application of resulting trusts with marital presumption.  Government failed to show that the husband made a single payment towards the property at issue with encumbered funds; the government could not trace tax liens on encumbered funds to the real property.

In re Luquillo Plaza Corp., 2010 Bankr. Lexis  4534 (Bankr. D.P.R.  12/8/2010)(Brian K. Tester, Bankruptcy Judge).
Purchaser properly forfeited its $50,000 deposit when it failed to close on sale of the bankruptcy estate assets it contracted for, pursuant to 11 U.S.C. §363(b), the Court finding purchaser's theories under state law non-persuasive.

Am. Fleet Servs. v. Budget Rent-A-Car Sys., 2010 U.S. Dist. Lexis 134434 (D. Mass. 12/20/2010) (Nathaniel M. Gorton, District Judge).
District Court had administratively dismissed, without prejudice, pending litigation before it due to litigant’s bankruptcy petition, with leave to reopen if the matter was not resolved during the bankruptcy case.  During the bankruptcy case, certain liabilities were assumed by another entity, including those of the dismissed District Court litigation, and the bankruptcy case subsequently was closed.  Plaintiff’s motion to reopen the District Court case more than seven years later was denied, the plaintiff having failed to either diligently monitor its claim in the bankruptcy case or timely move to reopen the District case.

Marley v. Bank of Am., 2010 U.S. Dist. Lexis 133202 (D. Mass. 12/16/2010)(George A. O’Toole, Jr., District Judge).
Pro se litigant filed multiple claims, which the defendants argued he could not bring as they were not scheduled in his now-closed Chapter 7 case, or alternatively that the claims were property of the bankruptcy estate.  District Court stayed the matters for 90 days to give the plaintiff the opportunity to move before the Bankruptcy Court to reopen the case to schedule the claims, which would also give the Chapter 7 trustee a chance to either assert or abandon the claims if the case was reopened.

In re Montalvo, 2010 Bankr. Lexis 4536 (Bankr. D.P.R. 12/6/2010)(Enrique S. Lamoutte, Bankruptcy Judge).
Unclaimed funds (un-cashed creditor payments under the confirmed plan)after conclusion of Chapter 13 case do not revert to the debtor; 28 U.S.C. §§2042 and 2042 govern their disposition.

Bueno-Irizarry v. Advanced Cardiology Ctr. Corp.,  2010 U.S. Dist. Lexis 129807 (D.P.R. 12/7/2010)(Jose Antonio Fuste, Chief District Judge).
Court denied defendant's motion for summary judgment finding that diversity in the action was not destroyed when the plaintiff filed for Chapter 7 bankruptcy relief, since the Court looks to the domicile of the bankruptcy petitioner, not his Chapter 7 Trustee, for diversity purposes; and, since the cause of action could now be pursued by the Chapter 7 Trustee, the District Court ordered that the estate show cause why the Trustee should not be substituted as party plaintiff.

Supplies & Servs. V. NACCO Indus. (In re Supplies & Servs.), 2010 Bankr. Lexis 4535 (Bankr. D.P.R. 12/10/210)(Brian K. Tester, Bankruptcy Judge).
Parties filed motions for summary judgment, to determine as a matter of law the creditor’s security interest in the debtor’s assets pursuant to a security agreement, for which the Court determined the creditor was not secured since the creditor failed to file a continuation statement after the expiration of 5-years (contract provision required that the substantive law of North Carolina, not Puerto Rico, apply).

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