Westlaw Topical Highlights: Bankruptcy, March 17, 2014

March 17, 2014

BankruptcyWestlaw Topical Highlights for Bankruptcy provides summaries of significant federal and state judicial decisions and legislative and administrative activities affecting Bankruptcy law.  A Westlaw subscription is required to access the documents linked from this page.

Discharge: Some culpability is required before agent’s fraud may be imputed to debtor-principal for purposes of § 523(a)(2)(A).  In re Huh, 2014 WL 936803 (9th Cir.BAP (Cal.)) Before an agent’s fraud may be imputed to the debtor-principal, for purposes of 11 U.S.C.A. § 523(a)(2)(A), the discharge exception for debts obtained by actual fraud, proof is required that the debtor is culpable, that is, that the debtor “knew or should have known” of the agent’s fraud, though the debtor need not have participated actively in the fraud, the Ninth Circuit Bankruptcy Appellate Panel (BAP) has held, sitting en banc. While recognizing a split of authority, the BAP expressly adopted the “knew or should have known” standard articulated by the Eighth Circuit in Matter of Walker, 726 F.2d 452. In the present case, the BAP concluded, fraud committed by a sales agent for the real estate and business brokerage business operated by the Chapter 7 debtor, with respect to a market purchased by the judgment creditor, could not be imputed to the debtor, for purposes of § 523(a)(2)(A). Although a state court had held the debtor vicariously liable for the sales agent’s fraud, the debtor never communicated with the judgment creditor or any representative of the judgment creditor’s wholly-owned corporation regarding the sale. Before the sale, the debtor was not even aware of the market, much less whether it was generating profits or contained defects, and he was not aware of the judgment creditor’s purchase of the market until after the sale closed. Accordingly, the record did not establish that the debtor “knew or had reason to know” of any misrepresentations made by the sales agent to the judgment creditor or his corporation. 2014 WL 936803.   (The full-text of the rest of the Topical Highlights is available within Westlaw Next, subscription required). 

Claims: Related bankruptcy estate’s nonpayment of claim based on avoidance provision would not require disallowing debtor’s claim.  In re Saint Catherine Hosp. of Pennsylvania, LLC 2014 WL 132115 (Bkrtcy.M.D.Pa.)

Bankruptcy Estate: Proceeds brief stay in debtors’ account did not affect their exempt character.  In re Arends 2014 WL 846179 (Bkrtcy.N.D.Iowa)

Avoidance: Fraudulent transfer claims sound in tort under Michigan law.  In re Barrocco 2014 WL 790873 (E.D.Mich.)

Attorney Fees: Debtor whose objection resulted in amended proof of claim was not a “prevailing party” entitled to fees.  In re Brosio 2014 WL 901093 (9th Cir.BAP (Cal.))

Bankruptcy Estate: Debtors’ payment of priority, nondischargeable tax debt while case was pending did not give them subrogation rights.  In re Lettieri 2014 WL 904484 (Bkrtcy.W.D.N.Y.)

Discharge: By co-signing student loan application solely as accommodation for debtor, nondebtor provided § 523(a)(8)(A)(ii) “educational benefit.”  In re Corbin 2014 WL 879641 (Bkrtcy.W.D.Wash.)

Claims: Lessor’s claim for remodeling costs was not subject to § 502(b)(6) damages cap.  In re Denali Family Services 2014 WL 843362 (Bkrtcy.D.Alaska)

Debtor Protections: Stay relief was warranted on lack of adequate protection theory absent showing of adequacy of plan payments.  In re Leonard 2014 WL 930871 (Bkrtcy.N.D.Ill.)

Attorney Fees: Bankruptcy court would recommend that debtor be awarded requested attorney fees and costs under the FDCPA.  In re Humes 2013 WL 6671626 (Bkrtcy.E.D.Ark.)

Claims: Senior lienholder’s equitable subordination claim would be dismissed.  In re Watson 2014 WL 308946 (Bkrtcy.M.D.Pa.)

Leases and Contracts: Party opposing reference of claims to the bankruptcy court did not show cause for permissive withdrawal of the reference of claims.

Plans: Language was merely general and descriptive and did not limit release provided by confirmed plan.  Iberiabank v. Geisen 2014 WL 946603 (S.D.Fla.)

Claims: Court rejects cost method as permissible valuation method in determining deed of trust lender’s secured claim.  In re Diamond Beach VP, LP 2014 WL 896784 (Bkrtcy.S.D.Tex.)

Bankruptcy Estate: Remand was required for bankruptcy court to determine whether cattle producer had good claim in restitution against estate.  In re Mississippi Valley Livestock, Inc. 2014 WL 949969 (C.A.7 (Ill.))

Bankruptcy Estate: Debtor’s cash collateral motion to use hotel room revenues would be denied.  In re Hari Ram, Inc. 2014 WL 879645 (Bkrtcy.M.D.Pa.)

Case Administration: Debtor’s ability to pay creditors out of future income warranted dismissal of Chapter 7 case.  In re Pittman 2014 WL 946570 (Bkrtcy.S.D.Ohio)

Discharge: Hold harmless obligation gave rise to nondischargeable debt to ex-wife.  In re Francis 2014 WL 936797 (9th Cir.BAP (Cal.))

Avoidance: Statutory impairment formula had to be applied literally on motion to avoid lien on debtor’s one-half interest in land.  In re Kindall 2014 WL 960794 (Bkrtcy.S.D.Ohio)

Professionals: No exceptional circumstances existed warranting nunc pro tunc approval of employment as special counsel.  In re Grant 2014 WL 957343 (Bkrtcy.E.D.Cal.)

Professionals: Imposition of sanctions against bankruptcy counsel for alleged misrepresentations during OSC hearing was improper.  In re Young 2014 WL 944846 (8th Cir.BAP (Ark.))

Claims: “Rent reserved” did not include landlord’s attorney fees and broker fees.  In re Healthy Hut Inc. 2014 WL 896778 (Bkrtcy.D.Hawai’i)

Attorney Fees: Chapter 13 debtors’ counsel entitled to compensation in case dismissed pre-confirmation.   In re Nales Perez 2014 WL 201173 (Bkrtcy.D.Puerto Rico)

Discharge: Misuse of powers of attorney gave rise to debt nondischargeable for debtor’s fiduciary defalcations.  In re Jouett 2014 WL 948517 (Bkrtcy.N.D.Okla.)

Abstention: Mandatory abstention did not apply to claims asserted in Chapter 11 debtors’ adversary proceeding.   In re Johnson 2014 WL 902851 (Bkrtcy.M.D.La.)