Saturday, January 15, 2011

Recent Bankruptcy Decisions in the First Circuit

SJ and RESPA claims; denial of appellate costs and fees:

Knowles v. Bayview Loan Servicing LLC (In re Knowles, Chapter 13),  2011 Bankr. Lexis 2 (BAP 1st Cir. 1/3/11)( Before Bankruptcy Judges Feeney, Tester, Bailey, Opinion by Judge Bailey).
Applying de novo review, Bankruptcy Appellate Panel affirmed the Maine Bankruptcy Court’s grant of summary judgment to defendant, and denied defendant’s request for fees and costs.  Plaintiff/debtor filed a complaint against the loan servicer/defendant alleging violation of RESPA, and of the automatic stay, which the court below denied.  Bankruptcy Court held that summary judgment as to the RESPA claim was proper because the loan was not a federally related mortgage loan under 12 U.S.C. §2602 (loan was initially between private parties, thereafter sold), that the eight-day turnaround time within which the loan was sold could not by itself demonstrate intent to sell to the entities named within Section 2602(1)(B)(iii); and, defendant had not violated the automatic stay by filing a proof claim or sending an annual tax statement or providing payoff statements (documents were informative, not an attempt to collect).  Defendant’s attempt to recover certain pre- and post-petition costs and fees was not a unilateral effort to modify the plan, since the confirmed plan had reserved determination of claims for which the bank asserted it was over secured and entitled to costs and fees per §506(b).  Since the Plaintiff/debtor had advanced legitimate arguments upon appeal and provided support for them, defendant’s separate motion requesting costs and fees was denied.

Sanctions lifted upon reconsideration:

McMullen v. Schultz, 2011 U.S. Dist. Lexis 2175 (D. Mass. 1/6/11)(Nathaniel M. Gorton, District Judge).
On appeal, District Court initially affirmed Bankruptcy Court’s reduction of debtor’s counsel fees, as sanction for failure to comply with Fed. R. Bankr. P. 2016(a) and finding that the client was not fully apprised of the potential for large fees in certain circumstances relevant to the case.  Upon motion for rehearing and request to supplement the record, the District Court granted the motion in part in that the District Court reduced the amount of sanction by 50% upon supplementation of the appellate record with correspondence that evidenced the client was apprised.  Also, the attorney had attempted twice to withdraw from the debtor’s representation, but the Bankruptcy Court had refused both requests.

Amending denied as  too late:

Giza v. AMCAP Mortgage Inc., (In re Giza), 2011 Bankr. Lexis 16 (Bankr. D. Mass. 1/4/11)(Henry J. Boroff, Bankruptcy Judge).
Bankruptcy Court granted in part, denied in part, debtors' motion to amend adversary proceeding complaint.  Plaintiff/debtors sought to (a) correct several factual errors involving dates, to correct the number of notices of right to cancel they had received, and (b) to assert additional claims. Court stated that the delay in filing the motion, approximately 13 months after the first complaint was filed, was considerable. Plaintiffs knew or should have known about the changes at the time they filed their original complaint. There would unquestionably be undue prejudice to defendants if the motion to amend was allowed, as it would add an additional defendant, force one defendant back into the case, and compel another defendant to defend against several new claims. Moreover, allowance of the motion would also prejudice the Chapter 13 trustee and plaintiffs' other creditors by delaying the resolution of the adversary proceeding and thus distribution payments to creditors. Thus, plaintiffs could file a complaint (a) correcting factual errors as to dates and the number of notices plaintiffs received, (b) but the court would deny them leave to make the remaining proposed amendments to assert additional claims.

Realtor's commission denied under NH law:

In re KS Realty Inc., and Pointe Luck LLC, 2011 BNH 01 (Bankr. D.N.H. 1/5/11)(J. Michael Deasy, Bankruptcy Judge)[unreported decision].
Bankruptcy Court held that the Realtor/creditor had no right to a commission.  Jointly administered debtors objected to Realtor’s proof of claim, asserting it was untimely, and substantively that Realtor was not due the commission on this post-confirmation sale.  Purchaser terminated the 2008 P&S relevant to the Realtor, but two years later under a different agreement (2010 P&S) did purchase the property at issue.  Applying NH state law to the exclusive listing agreement, because the purchase and sale agreement (“P&S”) did not close by the date forth in the listing agreement nor close under the six-month protection period under the listing agreement, Realtor was not entitled to commission as Purchaser was not “ready, willing and able” to close under the 2008 P&S. 

Judicial lien avoided as impairing homestead:

In re Davenport (Chapter 7)(Bankr. D. Maine 1/12/11)(Louis H. Kornreich, Chief Bankruptcy Judge) [unreported].
Judicial lien avoided that impaired state homestead exemption.  Applying Maine state exemptions, a debtor is entitled to a $47,500 exemption in his residence enhanced to $95,000 if debtor is over age 60; but a another provision would preclude the age enhancement if the debtor was subject to a tort-based judgment other than from ordinary negligence.  Debtor who was over age 60, consented to a judgment, pre-petition, due to intentional torts. Debtor sought to avoid that lien, under §522(f), claiming it impaired his exemption.  Case law supports that state law limits to the homestead exemption are preempted. Even if the lien were determined to be non-dischargeable, it would not change this decision:  Property exempted under §522 is not liable for any debt arising before or after a bankruptcy case except debts for certain tax liabilities, domestic support obligations, debt secured by a lien that is not avoided, debt for fraud/defalcation or malicious injury by certain financial institutions, and debt in connection with fraud related to financing a higher education, per §522(c).

Foreclosure and sua sponte abstention:

Boudreau v. Option Mortgage Corp. ( In re Boudreau, Chapter 7) (Bankr. D. R. I. 12/21/10)(Arthur N. Votolato, Bankruptcy Judge) [unreported].
While addressing bank’s stay relief motion to proceed with eviction proceedings against the debtor in his residence which the bank purchased at its foreclosure sale, Court sua sponte abstained from adjudicating the pending adversary proceeding filed by the debtor to invalidate the foreclosure and determine the bank’s claim, since parallel litigation in the state court had been filed and substantially completed.

Failure to file tax returns leads to Chapter 13 dismissal:

In re Chassie , Chapter 13, (Bankr. D. Mass 1/14/11)( Melvin S. Hoffman, Bankruptcy Judge)[unreported].
Court granted IRS motion to dismiss Chapter 13 case under Section 1308(a) for debtors failing to file tax returns prior to the first meeting of creditors.

Guardian ad litem debt not discharged:

O’Brine v. Gove (In re Gove, Chapter 7)(Bankr. D. Mass. 1/13/11)(Joan N. Feeney, Bankruptcy Judge)[unreported].
Court granted plaintiff’s (pre-petition Guardian Ad Litem to divorced couple's child) motion for summary judgment to determine his debt was non-dischargeable under §523(a)(5), and stay relief to pursue contempt proceedings in state court related to it, but denied the award of attorney fees.

Discharge challenge under 523(a)(2)(A) fails:

Kapolis v. Heidenrich (In re Heidenrich), Chapter 7, (Bankr. D. Mass. 12/20/10)(Frank J. Bailey, Chief Bankruptcy Judge).
Debtor was not denied discharge under §523(a)(2)(A) because creditors failed to prove by a preponderance of evidence that (1) Debtor made a false representation, (2) knowingly or with reckless disregard for the truth, (3) with the intent to deceive and induce them to rely upon it and (4) they did rely, (5) their reliance was justifiable and (6) their reliance caused them pecuniary harm regarding the debtor's failed home renovations.


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