Sunday, May 22, 2011

Recent Decisions in the First Circuit

Thunberg v. Wallick (In re Wallick), 2011 U.S. App. Lexis 8185 (1st  Cir. 4/21/11)(Before Judges Torruella, Boudin, and Lipez, Per Curiam). First Circuit affirmed the District Court’s affirmance of the Bankruptcy Court's finding the debtor’s discharge had been revoked under §727(d)(2) as having been procured by fraud.  Debtor misled Bankruptcy Court in inferring that property settlement payments received from ex-wife were subject to secured creditor’s liens, when the liens were not properly perfected.  Debtor led all to believe that the payments were going to secured creditors, which they were not.

Braunstein v. Dexter, et. als. (In re Aguilar), 2011 Bankr. Lexis 1505 (BAP 1st Cir. 4/25/11)(Before Bankruptcy Judges Haines, Lamoutte and Deasy, Opinion by Haines).  Appellate Panel vacated the Bankruptcy Court’s order that two condominium units conveyed pre-petition were not property of the Chapter 7 Bankruptcy Estate.  It was error for the lower court to apply the common law of trusts (Kaufman decision)to highly regulated condominiums.  Because of equitable defense raised but not considered, the matter was remanded.

Pawtucket Credit Union v. Picchi (In re Picchi), 2011 Bankr. Lexis 1188 (BAP 1st Cir 4/11/11)(Before Bankruptcy Judges DeJesus, Kornreich and Tester, Opinion by Kornreich).  Appellate Panel affirmed the Bankruptcy Court’s finding that the debtor’s chapter 13 plan could bifurcate the second mortgage into a secured claim and unsecured claim under 506(a) without violating the anti-modifications provisions of 11 U.S.C. §1322(b), as this was a two-family home, the debtor residing in one half and renting out the other half.  Previously the First Circuit had allowed (in Lomas) that the anti-modification provision of §1322(b) does not bar modification of a secured claim on a multi-unit property in which one of the units is the debtor’s principal residence and the security interests extends to the other income-producing units.  The Panel’s determination was made under the law that pre-dated the 12/22/10 amendment to the Bankruptcy Code under the BTCA [Bankruptcy Technical Corrections Act]defining the debtor’s primary residence at §101(13A), which now provides that the term ‘debtor’s principal residence’ means a residential structure if used as the principal residence by the debtor, including incidental property, without regard to whether that structure is attached to real property and includes an individual condominium or cooperative unit, a mobile or manufactured home, or trailer if used as the principal residence of the debtor - the Appellate Panel did not determine if the outcome would have been different under the 12/22/10 amendment.

In re Blake, 2011 Bankr. Lexis 1609 (Bankr. D. Mass. 5/2/11)(Henry J. Boroff, Bankruptcy Judge).  Redaction of settlement amount denied:  Creditor contended that it had sound business reasons for keeping the terms of a settlement confidential, which settlement was approved by the bankruptcy court for the creditor's violations of the automatic stay, but the court held that there were no grounds to grant the creditor’s redaction request. The creditor did not assert or show that the settlement amount was a trade secret, scandalous or defamatory, or created an unlawful injury, and there was no indication that the amount implicated any personally identifying information.  Further, public disclosure of the amount was warranted to serve as a deterrent to violations of the stay, especially in view of the repeated and increasing severity of the creditor’s violations even after communications from the debtor’s attorney.

In re Visconti, 2011 BNH 6; 2011 Bankr. Lexis 1687 (Bankr. D.N.H. May 9, 2011)(J. Michael Deasy, Bankruptcy Judge).  Court denied debtor’s motion to convert from a Chapter 7 to 13, as the request was deemed to have been made in bad faith, finding the debtor does not have an absolute right to convert and may forfeit it by fraudulent conduct.

In re McGrahan, 2011 BNH 4; 2011 Bankr. Lexis 1485 (Bankr. D.N.H. 4/22/11)(J. Michael Deasy, Bankruptcy Judge).  Dept. of Health and Human Services Division of Child Support Services (DHHS) could no longer intercept tax refunds to satisfy the pre-petition child support obligations because the confirmed Chapter 13  plan provided for payment in full of the DHHS pre-petition claim for unpaid child support as required by §1322(a)(2) and the confirmed plan did not allow for tax refund interception.  DHHS was bound by the terms of the confirmed plan.

In re Ames, 2011 Bankr. Lexis 1379 (Bankr. D. Mass. 4/15/11)(Melvin S. Hoffman, Bankruptcy Judge).  Although the Chapter 7 debtor acknowledged that the debt for post-petition condominium fees was non-dischargeable under 11 U.S.C. §523(a)(16) as long as the debtor held a legal, equitable, or possessory ownership interest in the unit, the debtor contended that his interest in the condominium unit terminated when he declared his intention to surrender it.  Bankruptcy Court held that the debtor's surrender of the unit only relinquished his possessory interest in the unit, and the debtor retained legal title to the unit. The fact that the debtor stated the intent to surrender the condominium unit and acted on that intent did not alter the debtor's status as the title holder of the unit, and thus the post-petition condominium fees and assessments arising while the debtor remained the record owner of the unit were not dischargeable.  The manager's motion for relief from the stay to hold the debtor personally liable was granted.

Riley v. Tencara, LLC ( In re Wolverine, Proctor & Schwartz LLC), 2011 Bankr. Lexis 1721 (Bankr. D. Mass. May 4, 2011)(Joan N. Feeney, Bankruptcy Judge). Court allowed post-petition interest to over-secured creditor under §506(b), to include  default rate of interest.

In re Lincoln Millwork, Inc., 2011 Bankr. Lexis 1608 (Bankr. D. Maine 4/28/11)(James B. Haines, Jr., Bankruptcy Judge). Debtor’s counsel sought approval of fees incurred in the Chapter 11 case over the objection of a secured creditor.  The hourly rate was reasonable and there was no question the work was done.  However, in light of the little benefit to the estate (Chapter 11 case converted to 7 within twenty-one days), counsel was allowed less than half of the fees sought, with payment to await the conclusion of the Chapter 7 case.

Furlong v. Donarumo, 2011 U.S. Dist. Lexis 36077 ( D. Mass. 4/1/11)(Patti B. Saris, District Judge).  District Court affirmed Bankruptcy Court’s decision to allow the individual debtors to keep scheduled causes of action that were abandoned under 11 U.S.C. §554(c)[no notice of abandonment, it was scheduled property not otherwise administered that reverted to the debtor].