Monday, December 3, 2012

Recent Decisions from the New Hampshire, Rhode Island, and Maine Bankruptcy Courts.

Court reviews factors to determine appropriate rate of interest at cramdown; 
Court reviews factors to determine approval of a settlement.

In re Moultonborough Hotel Group, LLC, 2012 BNH 006 (Bankr. D.N.H. 2012)(Deasy).
Before the court were two issues: 
(1) Where the interest rate paid on the secured creditor’s claim was sufficient to satisfy cramdown (it was not), reviewing that cramdown requires the creditor retain its lien and receive deferred cash payments equal to the present value of its claim.  The correct rate of interest assures present value is received; and here, the Court used the Till approach concluding that using the prime rate without an upward adjustment to account for some risk was not acceptable; 
(2) Whether the debtor’s settlement of a contempt claim against an individual satisfied Bankruptcy Rule 9019 (it did).

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Motion to dismiss Adversary Proceeding for Stay Relief violations denied:

(In re Lambregtse) Lambregtse v. IndyMac Mortgage Services, 2012 BNH 005 (Bankr. D.N.H. 2012)(Kornreich, sitting by designation).
Debtor filed an adversary proceeding for stay relief violations, seeking damages, and asserting its causes of action under 11 U.S.C. 362, the NH Consumer Protection Act at R.S.A. 358-C.  Defendant filed a 12(b)(6) motion to dismiss on grounds of laches, res judicata, preemption, non-applicability of statute, all of which were denied.

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Debtors' objection to IRS POC sustained and Chapter 13 plan confirmed:

In re Paradis, Ch. 13 Debtors (Bankr. D. Maine 2012)(Haines).

Success of debtors' chapter 13 plan hinged on their objection to the IRS proof of claim.  The objection was sustained and the plan confirmed. IRS argued its unsecured claim was entitled to full payment as a priority claim under 11 U.S.C. Section 507(a)(8)(A).  Court examined tolling periods, effect of offer in compromise (OIC), tax assessment dates and exceptions to discharge concluding that the taxes at issue were NOT excepted from discharged and constituted a non-priority claim.

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523(a)(6) exception to discharge satisfied by proofs relevant to workplace claims of sexual harassment, hostile work environment and discrimination at the state court level:

(In re Rines) Greenman v. Rines, (Bankr. D. Maine 2012)(Haines).
Creditor objected to Debtor's discharge or that it was not excepted under 523(a)(2),(4) or (6).  Court ruled debt debt was excepted from discharged under 523(a)(6) due to state court judgment relevant to workplace claims of harassment, discrimination and hostile work environment in New Hampshire.

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Post-discharge letters sent to debtor with generic wording as to the loan and foreclosure alternatives violated the discharge where debtor surrendered the property and it was foreclosed:

(In re Collins) Collins v. Wealthbridge Mortgage Corp. and Marix Servicing,LLC, (Bankr. D. Maine 2012)(Haines).

Chapter 7 debtor surrendered property under its petition and schedules. Post-bankruptcy the loan servicer continued to send letters advising of assignment, foreclosure, property insurance, alternatives to foreclosure etc., with generic disclaimer that they were not trying to collect a debt if bankruptcy applied - eight letters were sent. Court determined that these letters violated the discharge injunction. A hearing to determine sanctions will follow.

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Debtors' objection to POC overruled as no evidence presented:

In re Perron, (Bankr. D. Maine 2012)(Haines).
Chapter 13 debtors' objection to lender's proof of claim overruled.  Lender filed two amended POC's.  Debtors initial challenge to lender's standing to enforce claim was overruled as their own plan provided for payment of it and Debtors conceded some amount was due it.  Secondly, the lender's second amended POC provided sufficient evidence of its claims.  The fact that its prior two POC's had errors did not support the debtors' challenge of the second amended POC. Debtors offered no evidence to challenge the second amended POC, and it was not sufficient for debtors to argue that since the prior POC's had errors, this one must be wrong as well.

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Equitable mortgage versus absolute conveyance;
lender was on constructive notice title problems sufficient to warrant investigation and further inquiry, its mortgage was void and to entitled to BFP status.

(In re Lima) Lima v. Conlon, Jeannetti, Wban Mortgage Company, LLC, (Bankr. D.R.I. 2012)(Votolato).

Chapter 13 debtor sought to undue conveyances relevant to her home. She had hired the individual co-defendants to aid in preventing foreclosure, but they took advantage of her, skimming the equity form her home; the mortgage company had sufficient notice of these activities and its mortgage is void. The transfers were not absolute conveyances but rather equitable mortgages" where debtor retained her ownership interest.  Further, the Waban mortgage was void as it was on constructive notice of debtor's adverse claims in its (1) knowledge that one of the two individual co-defendants did not live at the mortgaged premises but possibly the debtor did, but rather the debtor did; and (2) the deed from debtor to the individual con-defendant was so deficient as to consideration as to raise questions of its bona fides, as the property was worth at least 4 times what the consideration recited.
Thus, although Waban was a bona fide purchaser, who purchased for value and in good faith, it was on constructive notice of the debtor's adverse claim to ownership of the property.

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Trustee avoids debtor's transfer back to mom of mom's gratuitous gift:

(In re Hill) Ferrara, Trustee v. Socia, (Bankr. D.R.I. 2012)(Votolato).
Ch. 7 trustee's avoided debtor's transfer of interest to her mother under Section 548. Mother had transferred an interest in mom's property to debtor for no consideration; and, then where debtor had financial difficulties, debtor deeded it back to mom.  At minimum, mom had created a survivorship interest in the property that should have been declared on debtor's schedules.  Thus, trustee entitled under Section 548 to avoid the transfer and recover the value of the interest transferred under Section 550.

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Transfer of sale of house proceeds from debtor parents to children found to be fraudulent; Court did not find Stern v. Marshall a bar to adjudicating the controversy:

(In re Cabrera) Ferrara, Trustee, v. Carera et als., (Bankr. D.R.I. 2012)(Votolato).
Debtors' sale of their home, then giving proceeds of the sale to their children was a fraudulent transfer per Section 544(b) and Rhode Island's fraudulent transfer law, with the proceeds to be recovered under Section 550.  Parties did not raise, and the Court was not troubled by the Stern v. Marshall issue.

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Broker's opinion as to value, carries weight, as does certified appraiser when deciding whether lender's secured claim can be modified:

In re Espinal, (Bankr. D.R.I. 2012)(Votolato).
In seeking to modify the lender's claim, the court reviewed value of the property including personally viewing it himself.  Court gave short shrift to lender's argument that the lender's certified appraiser carried more weight than a broker's opinion as to value.  Court allowed modification of the secured claim.

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Bank assessed $15,000 plus attorney fees for stay relief violations; Debtor's testimony of her emotional distress and medical condition did not require expert testimony:

In re Tine (versus RBS Citizens Bank, N.A.(Bankr. D.R.I. 2012)(Votolato).
Bank assessed $15,000 plus attorney fees for stay relief violations; Debtor's testimony of her emotional distress and medical condition did not require expert testimony.

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Stay not imposed in serial 13 filings, barred by laches, anti-injunction act and debtor's laches:

In re Blanchard,(Bankr. D.R.I. 2012)(Votolato).
Motion to impose or enforce imposition of the automatic stay is denied; and stay is vacated retroactively to the extent applicable regarding a tax sale deed. Further, the anti-injunction act would apply.  Debtor had filed multiple Chapter 13 cases and the property and mortgage at issue was not listed in the prior case and thus none could have been aware that the stay was in effect having no actual or constructive notice of it, and any violation would be technical rather than willful.  Further, to the extent applicable, debtor slept on his rights.

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Chapter 7 debtor's Motion to reopen case denied as procedurally defective;
even if merits decided, debts at issue were not discharged as under 523(a)(7) as government fines:

In re Manzi, (Bankr. D.R.I. 2012)(Votolato).
Pre-petition, debtor was convicted and ordered to pay restitution. Related to that were fines ordered paid to a board. This would not be discharged under 523(a)(7). Thus, it would be a waste of time to reopen the case to add these debts.

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Court does not appreciate windy complaints:

(In re Ahlborg) Tiverton, LLC v. Ahlborg, (Bankr. D.R.I. 2012)(Votolato).
In ruling on motions ti dismiss, granting in part and denying in part, counts relevant to a complaint challenging discharge, Court clearly evinced that it does not appreciate redundant or overly lengthy pleadings which cause a waste of time in review.

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Plaintiff's counsel in discharge action sanctioned $7500 to deter delay and promote expeditious litigation:

(In re Cortellesso) Benson v. Cortellesso, (Bankr. D.R.I. 2012)(Votolato).
Debtors requested sanctions upon dismissal of multiple adversary proceedings challenging discharge. Seven cases raises 727 were dismissed. The first phase dragged out longer than needed, the court prodding plaintiff's counsel to get to the point.The second phase was to try their 523 claims, but all decided at some point not go forward on them.  Discovery plans were not complied with on the plaintiffs' end. Plaintiffs could not afford to go forward on the 523 claims. Sanctions were appropriate to deter promulgation of unreasonable delay and to foster the expeditious management of litigation. Thus, plaintiff's counsel was sanctioned $7500.

State law causes of action against non-debtor defendants dismissed by application of Stern v. Marshall:

In re West M2M Multihul, LLC v. West et als, (Bankr. D.R.I. 2012)(Votolato).
Garden variety state law causes of action against the non-debtor defendants dismissed; concern of jurisdiction raised by Stern v. Marshall.

Mere recitation of cause of action will not defeat dismissal:

(In re Debaene) Adoni Outreach Ministry v. Debaene, (Bankr. D.R.I. 2012)(Votolato).
Mere recitation of allegations will not defeat summary judgment.

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