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https://www.courtlistener.com/api/rest/v3/opinions/8489416/ | OPINION
WILLIAM A. KING, JR., Bankruptcy Judge.
This case comes before the Court on the objection of the Pennsylvania Higher Education Assistance Agency (hereinafter referred to as PHEAA) to confirmation of the debtors’ Chapter 13 plan. The basis for this objection is that the plan is not proposed in good faith as required by § 1325(a)(3) of the Bankruptcy Code. There is no factual dispute whatsoever in this matter. The sole issue sub judice is whether a Chapter 13 plan which provides for a repayment of only 8% of unsecured obligations is filed in good faith. After hearing held on August 17, 1982, and consideration of the memoranda of law filed by counsel, the Court finds that confirmation must be denied. An Order will be entered denying confirmation of the plan and allowr ing the debtors ten (10) days to file an amended plan in accordance with this Opinion.1
The Bankruptcy Code establishes certain minimum standards for confirmation of Chapter 13 repayment plans. 11 U.S.C. § 1325(a). One of these requirements is that the plan be “... proposed in good faith.. .” 11 U.S.C. § 1325(a)(3). PHEAA maintains that this plan, by proposing only an 8% dividend, fails to meet the standard imposed by the Code.
This Court has previously held that a plan which proposes no payment to unsecured creditors lacks good faith and cannot be confirmed. In re Weissinger, 14 B.R. 737 (Bkrtcy.E.D.Pa.1981). This Court has also held that:
*123“At the very least, good faith requires the debtor to make meaningful payments to holders of unsecured claims. It is possible that a plan proposing a very low payment to unsecured creditors could be found to lack good faith even without the motive to avoid a non-dischargeable debt.”
In re Scott, 1 B.R. 692 (Bkrtcy.E.D.Pa.1980).
Our colleague, the Honorable Emil P. Goldhaber, expressed a similar viewpoint in a recent case, wherein it was stated:
.. . One should not have any difficulty in finding lack of “good faith” if the payment offered by the debtor under the plan is obviously a mere token and does not represent a meaningful economic benefit to creditors. For example, there is certainly no sincere effort to treat creditors fairly in cases where the payment proposed by the debtor amounts to nothing more than a disguised liquidation chapter 7 case filed only for the sole purpose of taking advantage of the more liberal and broadening discharge provisions available to debtors under chapter 13, § 1328(c), because the debtor is tainted and his general right to a discharge, or the dischargeability of a specific debt, would likely be subject to challenge either under § 523 or § 727 of the Bankruptcy Code.
In re Mitruka, 19 B.R. 516 (Bkrtcy.E.D.Pa.1982) at p. 518, quoting In re Aalto, 8 B.R. 157 (Bkrtcy.M.D.Fla.1981) at p. 161.
In this case the debtors have a combined income in excess of $28,000 per an-num. A payment of only 8% of unsecured claims, at the rate of $50 per month for 29 months, does not provide a meaningful payment to creditors when balanced against the debtors’ income. Unless a debtor’s Chapter 13 plan provides a meaningful repayment to the creditors, in view of the circumstances of the particular case, the plan cannot be confirmed. In the case at bench, confirmation must be denied.
. This Opinion constitutes the findings of fact and conclusions of law required by Bankruptcy Rule 752 of the Rules of Bankruptcy Procedure. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489417/ | ORDER
WALTER J. KRASNIEWSKI, Bankruptcy Judge.
This matter is before the Court upon Plaintiff’s Motion for Judgment on the Pleadings on Defendants’ Counterclaim. The Motion is not well taken and should be denied.
On June 8, 1982 the Plain tiff/Debtor, Ruth Ann Owen, filed a voluntary petition under Chapter 7 of the Bankruptcy Code. Prior to the filing of the petition on April 20, 1982, Plaintiff and Defendants entered into a consent judgment in settlement of litigation commenced in the Municipal Court of Toledo, Lucas County, Ohio, wherein Defendants were granted a judgment against Plaintiff for a sum totaling approximately $916.00. Subsequently, Plaintiff’s bank account in the amount of $350.00 was attached. The present action was filed by Plaintiff on June 11, 1982 to avoid the lien of Defendants on Plaintiff’s bank account pursuant to 11 U.S.C. Section 522(f)(1) on the grounds that it impaired exemptions to which the Debtor was otherwise entitled to under Ohio law.
On August 25, 1982 Defendants filed an answer to Plaintiff’s complaint and also counterclaimed that the judgment entered in the municipal court was nondischargeable under 11 U.S.C. Section 523(a)(6) being the result of an alleged willful and malicious injury inflicted upon Defendants by Plaintiff. In the present Motion for Judgment on the Pleadings Plaintiff urges that Defendants’ counterclaim is barred under the doctrine of Res Judicata since the consent entry settling the litigation in state court made no mention of any willful and malicious conduct on Plaintiff’s part. Defendants urge that the consent entry resulting from the state court proceedings is no bar to a subsequent determination in this Court that the debt in question is nondis-chargeable. This Court agrees.
In Brown v. Felsen, 442 U.S. 127, 138-139, 99 S.Ct. 2205, 2212-2213, 60 L.Ed.2d 767, 776 (1979) the Supreme Court of the United States held that a bankruptcy court was “not confined to a review of the judgment and record in the prior state-court proceedings when considering the dis-chargeability of [a] debt” under Sections 17a(2) and 17a(4) of the Bankruptcy Act, 11 U.S.C. Sections 35(a)(2) and 35(a)(4), thus rejecting a claim that a prior state court adjudication was Res Judicata. Although the Court in Brown v. Felsen, supra, dealt with Section 17 of the Bankruptcy Act, 11 U.S.C. Section 35, the language of U.S.C. Section 523, under which the present suit was brought, effects no substantial change from the established law relating to dis-chargeability, thereby rendering the decision applicable to a case under the Bankruptcy Code, Allis-Chalmers Corp. v. Huff, 16 B.R. 823, 825 (Bkrtcy.W.D.Ky.1982).
The Supreme Court’s decision in Brown v. Felsen, supra, is controlling in the present case and thus the consent entry in state court in the present proceeding is no bar to Defendants’ counterclaim that the debt in question is nondischargeable under 11 U.S.C. Section 523(a)(6). Furthermore, although the question has not been raised in the present motion, it appearing that none of the factual issues involved in the prior state court proceeding were actually litigated, it appears that the prior state court proceeding should not preclude litigation of any factual issues involved in this lawsuit. See Spilman v. Harley, 656 F.2d 224 (6th Cir.1981).
For the foregoing reasons, it is hereby,
ORDERED that Plaintiff’s Motion for Judgment on the Pleadings on Defendants’ Counterclaim be, and it hereby is, overruled. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489419/ | *349MEMORANDUM OF DECISION
JAMES A. GOODMAN, Bankruptcy Judge.
The trustee filed on April 2,1982 a “Complaint for Turnover Orders,” seeking to recover from defendants certain property (and pertinent documents) allegedly owned by Burley Herget and concealed from the trustee. Defendants moved for a change of venue to the District of Colorado. Pursuant to this Court’s Order of August 2,1982, the defendants have provided an offer of proof naming expected witnesses, the nature of each witness’s testimony, and other necessary, relevant evidence pertaining to the issue of changing venue.1
The Court finds that pursuant to 28 U.S.C. §§ 1472,1473(a), venue of this chapter 7 case and related adversary proceedings properly lies in the District of Maine. Defendants argue, however, that the interest of justice and the convenience of the parties warrant transfer of this particular adversary proceeding to Colorado. See 28 U.S.C. § 1475 (Supp.1982); Bankruptcy Rule 782.
The party requesting a change of venue must carry the burden of proof by a preponderance of the evidence. In re Advent Corp., 20 B.R. 561, 562 (Bkrtcy.D.Mass. 1982); In re AT of Maine, Inc., 20 B.R. 117, 118 (Bkrtcy.D.Me.1982). “ ‘Where a transfer would merely shift the inconvenience from one party to the other or where after balancing all the factors, the equities lean but slightly in favor of the movant, the plaintiff’s choice of forum should not be disturbed.’ ” In re Advent Corp., 20 B.R. at 562 quoting Moore’s Federal Practice ¶ 0.145(5) at 1616 n. 5 (2d ed. 1979); see In re AT of Maine, Inc., 20 B.R. at 118-19.
Defendants, who are situated in Colorado, note that the deceased debtor’s books and records are located in Colorado, the site of the deceased debtor’s probate proceedings. Defendants list no witnesses other than themselves as necessary witnesses. They state that they might be required to call certain bank or trust officers from Colorado in order to identify certain documents.
The trustee contends that the estate is without sufficient funds to prosecute this action in Colorado.
Relevant factors for determining whether to change venue include:
the relative ease of access to the sources of proof; the availability of compulsory process for attendance of unwilling witnesses and the cost of obtaining the attendance of willing witnesses; the enforceability of a judgment if obtained; the applicability of a particular state law and the local interest in applying that law through courts within the state; the responsibilities and difficulties of court administration; the relative advantages and obstacles to fair trial; and other practical matters which encourage the efficient and inexpensive trial of the case.
In re Cole Associates, Inc., 7 B.R. 154, 156-57, 6 B.C.D. 565,-, 2 C.B.C.2d 582,-(Bkrtcy.D.Utah 1980). The Court is not persuaded that any of these factors weigh strongly in favor of changing venue. The only necessary witnesses named by the defendants are the defendants themselves. While numerous documents are located in Colorado, nothing in the record indicates that transporting them to Maine for trial would be unduly burdensome. Moreover, it would appear that the deceased debtor may well have commenced his bankruptcy proceedings in Maine partly in an attempt to conceal assets in Colorado. It would not be in the interest of justice in such circumstances to burden the estate with the expense of litigating this matter in Colorado. Finally, the Court notes that the property' *350which the trustee seeks is worth far in excess of $1,000. See 28 U.S.C. § 1473(b) (Supp.1982); In re AT of Maine, Inc., 20 B.R. 117, 119 (Bkrtcy.D.Me.1982). Because the Court concludes that the defendants have failed to show that the equities balance strongly in their favor, the motion for change of venue is denied.
Enter Order.
. The trustee was also ordered to provide an offer of proof, but failed to do so within the time permitted by the order. After the time had expired, the trustee moved for an extension of time in which to file his offer of proof. See Bankruptcy Rule 906(b). The defendants opposed that motion. Because the Court finds in favor of the trustee without reference to his offer of proof, the Court denies his motion for extension as moot. The Court has taken into consideration the trustee’s July 1, 1982 memorandum in opposition to the change of venue motion. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489420/ | DECISION AND ORDER ON MOTION TO CONVERT AND APPLICATIONS FOR APPOINTMENT OF EXAMINER AND APPOINTMENT OF TRUSTEE.
BURTON PERLMAN, Bankruptcy Judge.
Debtor herein filed a voluntary Chapter 11 petition. Ryland Mortgage Company and Chicago Title Insurance Company, creditors of the debtor, filed a joint application for appointment of examiner. (Chicago Title had earlier filed an application for appointment of a trustee, but withdrew that application in conjunction with its application for appointment of examiner.) Subsequently Terrence R. Monnie representing himself to be a creditor of debtor, filed a separate application seeking the appointment of a trustee. By agreement, these matters were heard on September 28, 1982 at the same time as certain other matters, which are the subject of a separate decision in connection with this case, came on for hearing. At the hearing, counsel for Monnie moved for conversion of this case to one under Chapter 7.
Those supporting the appointment of an examiner, opposed appointment of a trustee. It was represented by them that the debtor would shortly be out of any business he had theretofore conducted. Further, they stated that the debtor had displayed complete cooperation in dealing with these creditors, and the appointment of a trustee would be an unwarranted expense for the estate.
Those seeking appointment of a trustee pointed out that there was no denial by the debtor of his defalcation, and that at a § 341 meeting, debtor had refused to answer questions on Fifth Amendment grounds. It was argued as well that some entity was going to have to pursue funds which may have been wrongfully transferred by the debtor, and this should be done by a trustee, not the debtor.
At the hearing, in response to the assertion that debtor had claimed a Fifth Amendment privilege, counsel for debtor stated that debtor had had a change of heart and debtor was now willing to testify fully and would make no claim for immunity. Finally, at the hearing counsel for debtor remarked that the plan which would be filed in the Chapter 11 case would be a liquidating plan.
After careful consideration of the factors involved here, we have concluded that the circumstances present require conversion of this case to Chapter 7. Conversion is appropriate pursuant to 11 U.S.C. § 1112(b)(1) and (2), because this is clearly not an effort at rehabilitation, and in view of the past conduct of debtor further diminution of the estate is not unlikely, and we do not believe that creditors will accede to any plan. Furthermore, appointment of a trustee will occur upon conversion because this is a normal incident of a Chapter 7 case. The application for appointment of a trustee is therefore mooted. We note parenthetically that in view of the admissions made by counsel for debtor in open court regarding the prior fraudulent conduct of debtor and his misapplication of funds, that it would be unsound to leave the affairs of the debtor in debtor’s own hands. We therefore believe that cause has been made out under 11 U.S.C. § 1104(a)(1) for the appointment of a trustee.
The case will be converted to Chapter 7.
SO ORDERED. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489421/ | ORDER OVERRULING OBJECTIONS - TO DEBTOR’S CLAIM OF EXEMPTIONS
GEORGE L. PROCTOR, Bankruptcy Judge.
Creditors, Michael F. and Sharon Lee McGee, object to claim of exemptions of the debtor on the basis that she does not qualify as a “surviving spouse” under Article X, Section 4(b) of the Florida Constitution and Section 222.19(2) Florida Statutes.
The undisputed facts show that the debt- or has been married on two occasions. The first marriage resulted in issue and was of lengthy duration. The husband of the first marriage died leaving the debtor and children as survivors. The second marriage was childless, lasted only a few months, and ended with divorce.
Article X, Section 4(b) grants exemption rights in homestead and personalty to the head of the family and surviving spouse in the following manner:
(a) There shall be exempt from forced sale under process of any court, and no judgment, decree or execution shall be a lien thereon . .. the following property owned by the head of a family:
*427(1) a homestead, if located outside a municipality, to the extent of one hundred sixty acres of contiguous land and improvements thereon ... or if located within a municipality, to the extent of one-half acre of contiguous land, upon which the exemption shall be limited to the residence of the owner or his family;
(2) personal property to the value of one thousand dollars.
(b) These exemptions shall inure to the surviving spouse or heirs of the owner.
Courts dealing with these provisions have held without exception that they should be liberally construed in the interest of protecting the family, e.g., Milam v. Davis, 97 Fla. 916, 123 So. 668 (1929) certiorari denied 50 S.Ct. 82, 280 U.S. 601, 74 L.Ed. 646.
Section 222.19(2) Florida Statutes carries out this liberal intent in the following language:
(1) It is the declared intention of the Legislature that the purpose of the constitutional exemption of the homestead is to shelter the family and the surviving spouse, and such purpose should be carried out in a liberal spirit and in favor of those entitled to the exemption.
(2) The head-of-family status required to qualify the owner’s property for homestead exemption, permitting such property to be exempt from forced sale under process of any court as set forth in s. 4, Art. X of the State Constitution, shall inure to the benefit of the surviving tenant by the entirety or spouse of the owner. The acquisition of this status shall inure to the surviving spouse irrespective of the fact that there are not two persons living together as one family under the direction of one of them who is recognized as the head of the family.
This Court has previously held that the surviving spouse who has not remarried is entitled to the privileges of Article X, Section 4(b). In re Hinebaugh, 5 B.R. 66 (Bkrtcy.M.D.Fla.1980). Our sister Court has held:
There is no limitation as to the time that the surviving spouse shall continue to have this legal benefit.
In re Hochman, 2 B.R. 104 (Bkrtcy.S.D.Fla. 1979).
The crucial and overriding issue is whether the debtor is a “surviving spouse” in view of her short-lived second marriage. Neither party has cited nor has the Court’s independent research revealed authority on this question.
However, in view of the stated purpose of the constitutional and statutory provisions cited above to protect the family, this Court finds that no disqualification has occurred and that the debtor is a “surviving spouse.” She is entitled to the exemptions claimed by her in this case and the creditors’ objection is overruled. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489422/ | MEMORANDUM OPINION
EUGENE J. RAPHAEL, Bankruptcy Judge.
The debtor, CLYTEE SMITH UNDERWOOD, filed a petition under Chapter 7 of the 1978 Bankruptcy Code on February 8, 1980. On March 5, 1981, the trustee, as plaintiff, filed a complaint denominated “Objection to Claim and Counterclaim” against Defendant, a judgment creditor, seeking an order disallowing the judgment claim of said defendant as a lien claim upon the inventory of the debtor or the proceeds upon the sale thereof, or as a priority claim, but allowing such claim as an unsecured claim.
Defendant herein, as Plaintiff in the state court, was awarded a judgment against Debtor herein on January 15, 1980. Said judgment was enrolled in Tishomingo County, Mississippi, on the same day of its rendition, January 15, 1980. Both the rendition and the enrollment of said judgment occurred within ninety days before the date of the filing of the petition herein.
The debtor owned and operated a ladies’ ready-to-wear retail operation at the time she filed her petition under Chapter 7. Debtor had an inventory which was sold by the trustee for the sum of $12,250.00 by order of this court dated June 27, 1980. Under said order the aforesaid proceeds were substituted in the place and stead of the inventory pending determination by the court of the rights of the parties to the proceeds.
Defendant herein timely filed a claim in the amount of the aforementioned judgment, but said claim has neither been allowed nor disallowed.
It is clear that said judgment was obtained for the benefit of the creditor; that said judgment was obtained for or on account of an antecedent debt owed by Debtor before such judgment was rendered; that said judgment was rendered and enrolled while Debtor was insolvent; that if the rendition and enrolling of said judgment constitutes a transfer within the meaning of definition section 101(40) of the Bankruptcy Code, such transfer was made on or within ninety days before the date of the filing of the petition; that the judgment lien provided by state law enables the judgment creditor to receive more than such judgment creditor would receive if Defendant’s claim were allowed as an unsecured claim under Chapter 7, the judgment lien had not been obtained, and such judgment creditor received payment of such debt to the extent provided by the provisions of Title 11.
The sole question in this case is a legal question: Does Defendant’s judicial lien constitute a transfer which may be avoided under section 547 of the Bankruptcy Code?
Inasmuch as Debtor’s Chapter 7 petition was filed herein after October 1, 1979, the effective date of the 1978 Bankruptcy Code, the provisions of said Bankruptcy Code govern herein. The definition section of the 1978 Bankruptcy Code is section 101 (11 U.S.C. section 101). Subsection (40) thereof statutorily defines transfer as follows:
Transfer means every mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting with property or with an interest in property, including retention of title as a security interest. (Emphasis supplied)
This new statutory definition is discussed by Collier in 4 Collier on Bankruptcy, para. 547.08, commencing at Page 547-28 (15th Edition 1982), which reads as follows:
Streamlining the language of its forerunner, section 547(b) now provides that the trustee may avoid “any transfer of property” of the debtor meeting its six requirements. Section 101(40), in turn, now comprehensively states that
“ ‘Transfer’ means very mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting with property or with an interest *505in property, including retention of title as a security interest.”
... Many of the potentially limiting words from prior law have been deleted ... It was held under the former Act that the method of transfer was immaterial, as long as the other elements of a preference existed. The courts pierced the form or method of «transfer, resting their final determination upon the effect thereof. Accordingly a transfer could be effected by ... the voluntary confession of judgment to a creditor whenever a lien upon the debtor’s property resulted ... or any other device by means of which the debtor disposed of any portion of his estate. It should be noted that the present definition of transfer in section 101(40) covers ... both a voluntary and an involuntary disposal of property . .. (Emphasis supplied)
Although there is not an abundance of authority construing said recently adopted statutory redefinition of a transfer within the meaning of section 547, the well-reasoned opinion of the Bankruptcy Court for the District of New Jersey in In the Matter of Jordan, 5 B.R. 59, 6 B.C.D. 630, 631, (Bkrtcy.D.N.J.1980), reinforces Collier’s rationale, whereunder it is logical to infer that not only is a voluntary confession of judgment a transfer, but also that a judgment lien involuntarily obtained against a debtor constitutes a transfer. In re Jordan dealt with a factual situation involving a judgment which was entered outside the ninety day period, but the logic of the New Jersey Bankruptcy Court’s opinion would call for a different holding had the judgment been obtained within the ninety-day period prior to the filing of the Bankruptcy petition. The pertinent questions posed by the court in the Jordan ease were: “May the levy be avoided under section 547 of the Code? Does Borda’s judgment and levy constitute a judicial lien which may be avoided under section 522(f) of the Code?”
The court in said case answered said questions as follows:
A docketed judgment in the Superior Court ... constitutes a lien ... from the date of entry ... accordingly, within the meaning of section 547(e)(1) and (2), the transfer in question occurred at the time the judgment was entered which was outside the 90 day period.
Notwithstanding the limited number of cases decided on this point since the effective date of the 1978 Bankruptcy Code, said quoted authorities are persuasive in the instant case.
This court holds that the judgment lien created by the rendition and enrollment of said state court judgment on January 15, 1980, constituted a preferential transfer and that said preferential transfer should be avoided pursuant to section 547(b) of the 1978 Bankruptcy Code.
An order will be entered accordingly. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489930/ | MEMORANDUM OPINION
DAVID W. HOUSTON, III, Bankruptcy Judge.
CAME ON for consideration the motion to dismiss or, in the alternative, to convert to a case under Chapter 7, filed in the *492above referenced proceeding by Fred’s Finance Company, Inc., hereinafter referred to as Fred’s Finance Company and/or Mov-ant; as well as, the motion for authorization to sell property free and clear of lien, and for authorization to use cash collateral filed by the Debtor herein, Fred’s Dollar Store of Hernando, Inc., hereinafter referred to as Fred’s Dollar Store and/or Debtor; all parties being represented by their respective attorneys of record; on proof in Open Court; and the Court having heard and considered same, finds as follows, to-wit:
I.
On July 14, 1983, Fred’s Dollar Store executed a promissory note in favor of Fred’s Finance Company in the original principal sum of $200,000.00, payable on demand, or absent demand, payable on May 31, 1988. The promissory note was secured by all merchandise inventory, all store fixtures, furniture and equipment plus any additions, replacements, or substitutions owned by Fred’s Dollar Store. The lien encumbering the aforementioned items was perfected by the filing of a Uniform Commercial Code Financing Statement. (The promissory note, security agreement, and financing statement were introduced collectively as Debtor’s Exhibit 1.)
On July 20, 1983, Fred’s Dollar Store entered into a franchise agreement with Baddour, Inc., the parent corporation of Fred’s Finance Company, which permitted the use of the trade name, “Fred’s”, as well as, encompassed the general plan of management for the business operations. (See Movant’s Exhibit 8.)
Fred’s Dollar Store was incorporated in 1969 and its directors and officers throughout the course of its existence were Fred T. “Tommy” Smith, Julian E. Smith, and Bobby J. Lakey, each owning a one-third interest in the corporate stock. Both the Smiths, who are brothers, were long time employees of Baddour, Inc., or were affiliated with that corporation or a related entity in some capacity.
In February, 1984, an offer was made by a representative of Baddour, Inc., to purchase the corporate stock of Fred’s Dollar Store, owned by Julian E. Smith and Bobby J. Lakey, for the sum of $100,000.00, to be paid to each. Apparently, no such offer was tendered to Fred T. Smith for his stock or that owned by members of his family which aggregated the remaining one-third interest. When Julian Smith refused the offer on February 27, 1984, his employment with Baddour, Inc., which had extended for thirty-five years, was promptly terminated.
On March 1, 1984, Paul M. Baddour, representing both Baddour, Inc., and Fred’s Finance Company, made written demand on Fred’s Dollar Store for full payment within thirty days of the balance due under the aforementioned $200,000.00 promissory note. (See Movant’s Exhibit 2.) Shortly thereafter, Baddour, Inc., informed Fred’s Dollar Store that its franchise agreement was to be cancelled effective December 31, 1984. The original thirty day repayment period was extended on at least one occasion by Fred’s Finance Company for an additional thirty days to permit the principals in Fred’s Dollar Store an opportunity to secure substitute financing. Although Fred’s Dollar Store owns substantial assets, i.e., land and a store building, having an unencumbered fair market value of approximately $470,000.00 (See Debtor’s Exhibit 2), the refinancing transaction could not be consummated.
Subsequently, a complaint for replevin was filed in the Circuit Court of Desoto County, Mississippi, under Cause No. 9069, styled Fred’s Finance Company v. Fred’s Dollar Store of Hernando, Inc. In this case, an agreed judgment was entered on July 27, 1984, which purported to adjudicate several matters, at least two of which are now critical issues in this bankruptcy litigation, to-wit:
a. The agreed judgment provided that the plaintiff have judgment against the defendant in the sum of $213,317.02, representing the aforementioned promissory *493note indebtedness of $200,000.00, plus interest through August 13, 1984.
b. The judgment recited that the plaintiff was entitled on or after August 13, 1984, to take possession of all merchandise inventory, and all store fixtures, furniture and equipment necessary to satisfy the judgment. These particular items of property, which served as collateral for the note indebtedness, were to be left on the premises of Fred’s Dollar Store until August 13, 1984, conceivably so that an appraisal could be made by both parties.
c. The judgment recited “that the plaintiff shall have title and the parties herein shall have reasonable access to all merchandise, inventory, and all store fixtures, furniture and equipment to conduct inventory on or before August 13, 1984,”. (emphasis added)
d. The judgment provided that Fred’s Dollar Store would not subject the property to any other liens or encumbrances, as well as, that it would not remove the property from the premises.
II.
A replevin action brought pursuant to § 11-37-101, et seq., Mississippi Code of 1972, as amended, is a statutory proceeding which is purely a possessory action and not a suit for monetary damages. Robinson v. Friendly Finance Co. of Biloxi, Inc., 241 Miss. 239, 130 So.2d 256 (1961), General Motors Acceptance Corp. v. Fairley, 359 So.2d 1386 (Miss.-1978), Scarborough v. Lucus, 119 Miss. 128, 80 So. 521 (1919), and Moore v. Cunningham, 124 Miss. 537, 87 So. 112 (1921).
In Associates Discount Corp. v. Slayton, 226 Miss. 778, 86 So.2d 509 (1956), the Court reiterated the premise that an action of replevin is possessory only, and stated that- the lienholder was required to deal with the property only as security for the payment of the related indebtedness. The general theory applicable to a judgment in a replevin action is that the judgment should be for the return or possession of the property or the value of the interest or lien. Road Material and Equipment Company, Inc. v. McGowan, 229 Miss. 611, 91 So.2d 554 (1956).
However, as noted hereinabove, the De-soto County Circuit Court judgment was entered by the consent of both parties. Road Material and Equipment Company, Inc., supra, speaks to this particular issue, as follows:
“Because the gist of a replevin action is possessory and damages are only incidental, it is well established that, in the absence of a consent judgment agreed upon by both parties, a judgment in replevin cannot be for debt, but must be in the alternative. Citing cases.” (emphasis added)
“In summary, the 1951 judgment of the circuit court is void on its face insofar as it purports to give appellant, plaintiff below, a personal judgment for debt against appellee. That part of the judgment was beyond the power of the circuit court to render in a replevin suit, in the absence of an agreement of the parties, which the 1951 judgment by default affirmatively shows did not exist.”
Road Material Company, Inc. v. McGowan, supra, 91 So.2d at pages 556 and 557.
A subsequent case, Deposit Guaranty National Bank v. Ellzey, 222 So.2d 680 (Miss.-1969), quotes precisely the language of Road Material and Equipment Company, Inc., to the effect that in the absence of a consent judgment, agreed to by both parties, a judgment in replevin cannot be for debt. The following language is pertinent:
“The judgment in a replevin action must be in the alternative: either for possession of the property replevied and damages for a wrongful detention; or the value of the property if possession cannot be restored....”
Deposit Guaranty National Bank v. Ellzey, supra, at pages 681 and 682.
From reading the above referenced cases, this Court is satisfied that since the agreed judgment was entered by consent, the fixing of the indebtedness therein is *494appropriate. However, this Court is not convinced that the language “that the plaintiff shall have title”, without further explanation or words of conveyance, effectively passes title to the collateral from Fred’s Dollar Store to Fred’s Finance Company. The agreed judgment also leaves the implication that not necessarily all of the merchandise, etc., was to be replevied by Fred’s Finance Company — only that necessary to satisfy the judgment. Additionally, while there is a faint inference that ownership of the collateral passed to Fred’s Finance Company, the Debtor is admonished at the same time not to subject this property to any other liens. To say the least, this language represents a legal contradiction which cannot be easily reconciled.
Consequently, this Court finds that, because of the ambiguity in the language found in the agreed judgment, there was no effective consent by the Debtor to the conveyance of title to Fred’s Finance Company.
The jurisdiction of the circuit court is obviously limited in a replevin cause of action, and as such, there can be no passage of title absent a clear agreement between the parties. The words in the judgment, although placed there by consent, are insufficient to convey title to anything, and this Court will not engraft remedies in this judgment which are not precisely intended.
Concerning this same issue, the Court is compelled to review the temporary restraining order issued subsequently by the Circuit Court of Desoto County. In the temporary restraining order, there is language to the effect that Fred’s Dollar Store would lose its statutory right of redemption, granted by § 75-9-506, Mississippi Code of 1972, as amended, as to the merchandise inventory, etc., should the order not be entered. This Code section provides as follows, to-wit:
§ 75-9-506. Debtor's rights to redeem collateral.
At any time before the secured party has disposed of collateral or entered into a contract for its disposition under Section 9-504 [§ 75-9-504] or before the obligation has been discharged under Section 9-505(2) [§ 75-9-505(2)] the debtor or any other secured party may after default redeem the collateral by tendering fulfillment of all obligations secured by the collateral then due or past due (excluding any sums that would not then be due except for an acceleration provision) as well as the expenses reasonably incurred by the secured party in retaking, holding and preparing the collateral for disposition, in arranging for the sale, and to the extent provided in the agreement and not prohibited by law, his reasonable attorneys’ fees and legal expenses.
If Fred’s Dollar Store had contemplated that title had passed by virtue of the agreed judgment, there would have been no reason to be concerned about the statutory right of redemption granted by the above quoted Code section. Had the Circuit Judge considered that title had passed earlier, he likely would not have entered the temporary restraining order protecting the right of redemption. Simply stated, had title passed by virtue of the first judgment, there would have been no right of redemption remaining in Fred’s Dollar Store.
Therefore, the Court finds that title to the merchandise inventory, furniture, fixtures, and equipment remains at this time in the Debtor, Fred’s Dollar Store, and constitutes property of the bankrupt estate as contemplated by 11 U.S.C. § 541.
III.
The uncontradicted testimony at the hearing on the motions was to the effect that the retail value of the merchandise, which was calculated following inventories by both parties, exceeded the sum of $400,-000.00. The pleadings filed by Fred’s Dollar Store indicated that the furniture, fixtures, and equipment had a value of between $50,000.00, and $75,000.00. As mentioned hereinabove, the appraisal of the *495land and building prepared by Barry W. Bridgforth indicated a value of $470,000.00. The summary of debts and property filed by Fred’s Dollar Store in its bankruptcy schedules indicated total assets in the sum of $957,252.45, and total debts in the sum of $277,151.21. Based on the testimony of Fred T. Smith, who indicated that he hoped to realize approximately $235,000.00, from a liquidation sale of the merchandise, the Court is of the opinion that the value of the total assets is somewhat overstated, but there is no doubt in the Court’s mind that the amount of total assets substantially exceed the amount of total liabilities. See Cissell v. First National Bank of Cincinnati, 476 F.Supp. 474 (D.C.Ohio-1979), In Re Camp Rockhill, Inc., 12 B.R. 829 (Bkrtcy.Pa.-1981), and In Re National Buy-Rite, Inc., 7 B.R. 407 (Bkrtcy.Ga.-1980).
At the hearing, the Court inquired as to whether the judgment rendered on July 27, 1984, afforded Fred’s Finance Company additional security for the promissory note indebtedness, which as discussed herein-above, has legitimately been reduced to a judgment lien by the consent of the parties in the sum of $213,217.02. The initial response by Debtor’s counsel was that any lien created by the agreed judgment would constitute a preferential transfer as contemplated by 11 U.S.C. § 547(b). This section provides as follows, to-wit:
(b) Except as provided in subsection (c) of this section, the trustee may avoid any transfer of property of the debtor—
(1) to or for the benefit of a creditor;
(2) for or on account of an antecedent debt owed by the debtor before such transfer was made;
(3) made while the debtor was insolvent;
(4) made;
(A) on or within 90 days before the date of the filing of the petition; or
(B) between 90 days and one year before the date of the filing of the petition, if such creditor, at the time of such transfer—
(i) was an insider; and
(ii) had reasonable cause to believe the debtor was insolvent at the time of such transfer; and
(5)that enables such creditor to receive more than such creditor would receive if—
(A) the case were a case under chapter 7 of this title;
(B) the transfer had not been made; and
(C) such creditor received payment of such debt to the extent provided by the provisions of this title.
Under most circumstances, a judgment lien, enrolled within the ninety day preference period, which encumbers properties in which the debtor owns an equity interest, would constitute a preferential transfer. However, in this case the Debtor is not insolvent as clearly evidenced by the various appraisals and the bankruptcy schedules. Consequently, the test of § 547(b)(3), cannot be met, and this Court concludes that insofar as the judgment is concerned that no preferential transfer has occurred. This conclusion is inevitable even though Fred’s Finance Company, through the entry of the consent judgment, will conceivably receive more than if this case were a liquidation proceeding under Chapter 7. If all elements of § 547(b) cannot be met, the judgment lien, which has attached to the equity of Fred’s Dollar Store in the land and building, cannot be avoided by this Code section.
IV.
Due to the fact that Fred’s Finance Company is more than adequately protected for the full amount of its claim against Fred’s Dollar Store, considering the judgment lien which now encumbers the land and building, and which cannot be avoided, as a preferential transfer, this Court is of the opinion that Fred’s Dollar Store should be permitted to conduct the liquidation sale of its inventory. The Court feels that such a sale by the Debtor will produce more favorable results at less expense. Having reached the decision that the judgment lien *496extends to the land and building, the conclusion becomes inescapable that Fred’s Dollar Store will have everything to gain by obtaining the greatest sales proceeds at the least cost. Fred’s Finance Company has no reason to complain in view of the fact that its interest is reasonably protected regardless. However, this Court will permit Fred’s Finance Company to closely monitor the sale and would direct that the officers, directors, and employees of Fred’s Dollar Store cooperate to the fullest extent necessary so that this monitoring activity might be undertaken. At the same time, any persons affiliated in any capacity with Fred’s Finance Company are directed not to interfere with the conduct of the sale or impede the sale in any manner whatsoever.
An Order will be entered consistent with this Opinion. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489931/ | OPINION
WILLIAM A. KING, Jr., Bankruptcy Judge.
This adversary proceeding was instituted by the Trustee of Art Shirt Ltd., Inc., to recover two alleged preferential payments from Manufacturers Hanover Trust Company (“defendant”). The defendant has filed a motion for summary judgment contending that it is entitled to judgment as a matter of law because the debtor was solvent on the dates of the alleged preferential transfers. See 11 U.S.C. § 547(b)(3). The Trustee opposes the motion and has produced an affidavit by an accountant stating that the debtor was insolvent on at least one of the relevant dates. Furthermore, the Trustee contends he has been denied an opportunity to conduct discovery.
Upon review of the various papers submitted in connection with the defendant’s motion for summary judgment, we find that summary judgment is inappropriate because a genuine issue of material fact exists as to whether the debtor was insolvent on the dates of the transfers. We will also decide the discovery issue by denying the defendant’s motion for a protective order and directing the defendant to comply with the Trustee’s discovery request.
The facts as revealed by the papers are as follows:1
A voluntary petition under Chapter 11 of the Bankruptcy Code (“Code”) was filed by Art Shirt Ltd., Inc. (“debtor”) on December 24, 1980. Louis W. Fryman, Esquire, was appointed Trustee of the estate on January 27, 1981.
The Trustee commenced the instant adversary proceeding against Manufacturers Hanover Trust Company on September 28, 1982. The complaint seeks recovery from the defendant of two (2) payments, each in the amount of $650,000.00, on the basis that the payments are avoidable preferences under section 547(b) of the Code.2 According to the allegations in the complaint, the first payment was made on September 30, 1980 and the second payment was made on October 14, 1980. Thus, both transfers occurred within the ninety (90) day period prior to the filing of the petition.
On October 28, 1982, the defendant answered the Trustee’s complaint generally denying the allegations therein and raising various affirmative defenses, including the defense of solvency of the debtor.
On December 6, 1982, the defendant propounded its first discovery request to the Trustee. The Trustee answered the defendant’s interrogatories and request for production of documents on December 30, 1982.
Interrogatory No. 8 specifically requested the Trustee to “state each and every fact which you claim supports the allegation ... that Art Shirt was insolvent on *525October 14, 1982 The Trustee responded to the interrogatory “See section 547(f) of the Bankruptcy Code.”3
Several months later, a discovery dispute arose when the Trustee sought to depose an officer of the defendant and to obtain certain documents in the possession of the defendant. When counsel for the defendant refused to respond to the Trustee’s notice of deposition4 and motion for production of documents,5 the Trustee filed a motion to compel discovery pursuant to Fed.R.Civ.P. 37 and Bankruptcy Rule 7037.
In the defendant’s motion for a protective order filed with the Court on December 6, 1983, the defendant gives the following reason for opposing the Trustee’s discovery request. Because insolvency of the debtor on the date of transfer is one of the requisites of a successful preference action, the Trustee will have to show that the debtor was insolvent on the dates of the transfers in order to prevail. The defendant claims that the evidence produced so far establishes the debtor’s solvency on the relevant dates. Therefore, the defendant contends that:
“Unless and until the trustee produces an accountant’s report purporting to demonstrate the debtor’s insolvency as of the date of the alleged preferential payment to defendant, it is fundamentally unfair to require defendant to disrupt its business and incur the costs in connection with producing a designated representative for deposition.” Paragraph 6, Defendant’s Motion for a Protective Order.
The defendant’s motion for summary judgment filed on January 17, 1984, is also premised on the assertion that the Trustee will not have any evidence available at trial to demonstrate the debtor’s insolvency.
The standard of review for a summary judgment motion is set forth in Rule 56 of the Federal Rules of Civil Procedure which is applicable to this proceeding under Bankruptcy Rule 7056. Fed.R.Civ.P. 56 allows the Court to grant summary judgment if it determines from examination of the pleadings, depositions, answers to interrogatories, admissions on file, and affidavits, if any, that no genuine issue as to a material fact remains for trial and that the moving party is entitled to judgment as a matter of law. The purpose of the rule is to eliminate a trial in cases where it is unnecessary and would only cause delay and expense. Goodman v. Mead Johnson & Co., 534 F.2d 566, 573 (3d Cir.1976), cert. denied, 429 U.S. 1038, 97 S.Ct. 732, 50 L.Ed.2d 748 (1977). Inferences to be drawn from the underlying facts contained in the evidential sources submitted to the trial court must be viewed in the light most favorable to the party opposing the motion. The non-movant’s allegations must be taken as true and, when these assertions conflict with those of the movant, the former must receive the benefit of the doubt. Id.
The United States Court of Appeals for the Third Circuit has characterized summary judgment as a “drastic remedy”, and has stated that courts are to resolve any doubts as to the existence of genuine issues of fact against the moving parties. Hollinger v. Wagner Mining Equipment Co., 667 F.2d 402, 405 (3d Cir.1981).
In opposing a motion for summary judgment, an adverse party may not rest upon the mere allegations or denials of his pleading, but his response, by affidavit or as *526otherwise provided in this rule, must set forth specific facts showing there is a genuine issue for trial. Fed.R.Civ.P. 56(e).
“[W]hen the party opposing the motion has not been dilatory in seeking discovery, summary judgment should not be granted when he is denied reasonable access to potentially favorable information.” Quinn v. Syracuse Model Neighborhood Corp., 613 F.2d 438 (2d Cir.1980).
Both of the parties in the case at bench have submitted affidavits in support of their respective positions. An affidavit of the Chief Executive Officer of the debtor, Richard B. Schiro, was submitted in support of the defendant’s motion for summary judgment. The affidavit of Mr. Schiro states that the assets of the debtor exceeded its liabilities on September 30, 1980 and on October 31, 1980. The factual information used by Mr. Schiro to support this conclusion was derived from financial worksheets prepared by the corporation’s independent certified public accountants and the corporation’s Controller.
An affidavit of Dennis J. Shusman of the accounting firm of Alan I. Levitt & Co. was submitted with the Trustee’s answer to the motion for summary judgment. Levitt & Co. was employed by the Trustee specifically for the purpose of investigating the financial condition of the debtor on the dates of the payments to the defendant. The affidavit of Mr. Shusman states that as a result of the firm’s examination of the information available to date, it is the opinion of the firm that the debtor was insolvent on October 14, 1980; however, the firm has not ascertained the solvency or insolvency of the debtor on September 30, 1980. The affidavit also states that the firm is in the process of preparing a final draft of a report which will include an in-depth analysis of the financial condition of the debtor immediately prior to the bankruptcy filing. No figures or financial analysis are provided in the affidavit, nor does the affidavit describe the standard applied to determine the solvency or insolvency of the debtor.
The defendant contends that expert opinion evidence without specific facts to show how the opinion was arrived at is insufficient to defeat a motion for summary judgment. The case law on this issue, however, appears to hold otherwise.
In the case of Paton v. LaPrade, 524 F.2d 862 (3d Cir.1975), the defendant moved for summary judgment on the basis that the plaintiff was unable to demonstrate any compensable harm. In response to the motion, the plaintiff submitted affidavits containing the opinions of three (3) social scientists that the plaintiff had suffered or might suffer in the future the type of injury alleged in the complaint. The Court held that the affidavits could not be disregarded on a motion for summary judgment:
“These affidavits may not have much substantive weight but they may not be disregarded on a motion for summary judgment ... Defendants attack the experts’ affidavits as worthless because not based on personal knowledge ... The policy behind Rule 56(e) is ‘to allow the affidavit to contain all evidentiary matters which, if the affiant were in court and testifying on the witness stand, would be admissible as part of his testimony.’ _ Opinion testimony that would be admissible at the actual trial may be submitted in an affidavit .... The opinion of Paton’s experts based on relevant hypothetical facts supplied by her counsel would be admissible at trial if the facts were supported by the evidence ... More importantly, where, as here, the affidavits are submitted to oppose the grant of summary judgment, opinion evidence is appropriately considered to support the existence of a disputed issue of fact.” (citations omitted)
Id. at 871.
The United States Court of Appeal for the Eighth Circuit has also addressed the issue of the weight to be accorded to expert opinion when offered in opposition to a summary judgment motion. In Hughes v. American Jawa, Ltd., 529 F.2d 21 (8th Cir.1976), the plaintiff relied on the testimony of an expert in opposing a motion for *527summary judgment. The defendant argued that the opinion was speculative. In reversing the District Court’s decision on appeal, the Court of Appeals stated:
“Defendant contends that the purely conjectural nature of plaintiffs proof mandates that it be disregarded. However, we do not think this conclusive characterization of Dr. Gatley’s testimony can be made in a summary judgment proceeding. Dr. Gatley had adequate qualifications to testify as an expert. His opinion and the basis or reasons therefor were for the consideration of the trier of fact, be it court or jury, and did not present a proper issue to be resolved by means of the summary judgment procedure.”
Id. at 25.
In the matter before us, the Trustee’s expert has stated that he will testify as to the debtor’s insolvency on October 14, 1980. Even though the defendant may question the basis for the conclusion of the accountant, a genuine issue of material fact has been raised by the Trustee. The Trustee’s accountant has set forth his qualifications to testify as an expert in the first paragraph of the affidavit. Whether the expert’s opinion can be substantiated by facts is a matter for the consideration of the trier of fact and is not a proper issue to be resolved by means of a summary judgment motion. We conclude that summary judgment must be denied because the inferences to be drawn from the affidavits, when viewed in the light most favorable to the Trustee, who is the party opposing the motion, demonstrate the existence of a genuine issue of material fact as to the debt- or’s insolvency on the dates of the transfers.
In deciding the motion for summary judgment against the defendant and in' favor of the Trustee, the discovery issue is once again before the Court. The Trustee’s accountant seeks to include in the final report on the financial condition of the debtor prior to the bankruptcy any relevant information that can be obtained from the files of the defendant. The accountant has been precluded from doing so by the discovery dispute between the parties.
The defendant’s stated reason for opposing the Trustee’s discovery request and seeking a protective order is that the Trustee had not come forward with any evidence concerning the insolvency of the debtor. The motion to compel discovery and the motion for a protective order were both filed prior to the motion for summary judgment and the affidavits in connection with the summary judgment motion.
Pursuant to Fed.R.Civ.P. 26(c), the court may grant a protective order for good cause shown and in order to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense. If the motion for a protective order is denied in whole or in part, the court may, on such terms and conditions as are just, order that any party or person provide or permit discovery. Fed.R.Civ.P. 26(c).
In the case at bench, the defendant’s basis for opposing discovery has been largely obviated by the affidavit of the Trustee’s accountant. Although the Trustee’s accountant has not made available a final report, he has testified that the information currently available to him has enabled him to form an opinion that the debt- or was not solvent on October 14, 1980. No other basis for granting a protective order has been set forth by the defendant. Moreover, in the interests of fairness, we find the Trustee should be granted access to all information in the possession of the defendant regarding the solvency or insolvency of the debtor. Therefore, we will grant the motion to compel discovery and deny the motion for a protective order.
. This Opinion constitutes the findings of fact and conclusions of law as required by Bankruptcy Rule 7052 of the Rules of Bankruptcy Procedure.
. Section 547(b) is the operative provision of the section, authorizing the trustee to avoid a transfer if five (5) conditions are met. These are the five (5) elements of a preference action. Subsection (b) provides:
(b) Except as provided in subsection (c) of this section, the trustee may avoid any transfer of property of the debtor—
(1) to or for the benefit of a creditor;
(2) for or on account of an antecedent debt owed by the debtor before such transfer was made;
(3) made while the debtor was insolvent;
(4) made—
(A) on or within 90 days before the date of the filing of the petition; or
(B) between 90 days and one year before the date of the filing of the petition, if such creditor, at the time of such transfer—
(i) was an insider; and
(ii) had reasonable cause to believe the debtor was involvent at the time of such transfer; and
(5)that enables such creditor to receive more than such creditor would receive if—
(A) the case were a case under chapter 7 of this title;
(B) the transfer had not been made; and
(C) such creditor received payment of such debt to the extent provided by the provisions of this title.
. Subsection (f) of section 547 creates a presumption of insolvency for the 90 days preceding the bankruptcy case. The presumption is as defined in Rule 301 of the Federal Rules of Evidence (Title 28, Judiciary and Judicial Procedure) made applicable in bankruptcy cases by sections 224 and 225 of the bill. The presumption requires the party against whom the presumption exists to come forward with some evidence to rebut the presumption, but the burden of proof remains on the party in whose favor the presumption exists. Notes of Committee on the Judiciary, Senate Report No. 95-989, U.S.Code Cong. & Admin.News 1978, p. 5787.
. Fed.R.Civ.P. 30 "Depositions Upon Oral Examination” applies to adversary proceedings through Bankruptcy Rule 7030.
. Fed.R.Civ.P. 34 "Production of Documents ...” applies to adversary proceedings through Bankruptcy Rule 7034. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489423/ | DECISION AND ORDER ON OBJECTION TO CONFIRMATION.
BURTON PERLMAN, Bankruptcy Judge.
Debtors in this Chapter 13 case filed a plan which came on for confirmation at an appropriate hearing. An objection to confirmation was timely filed by an unsecured creditor, First National Bank of Cincinnati. A hearing was held on the objection and subsequent thereto memoranda were filed by the First National Bank and by the Debtors.
The essence of the position of the Bank is that the plan ought not to be confirmed because there is not compliance with 11 U.S.C. § 1325(a)(4), a statutory statement embodying the “best interests of creditors” test. That is, it is there provided that:
“The court shall confirm a plan if—
***:}:**
(4) the value, as of the effective date of the plan, of property to be distributed under the plan on account of each allowed unsecured claim is not less than the amount that would be paid on such claim if the estate of the debtor were liquidated under Chapter 7 of this title on such date;”
At the hearing, counsel for the Bank represented that Debtors own equity in two parcels of real estate in an amount which, upon liquidation, would fully satisfy all unsecured creditors. This position was not contested by debtors.
The plan proposes that unsecured creditors be paid 100% of their claims over a five year period. Manifestly, notwithstanding this provision of plan, the best interest test is not met. Payment of an amount over a five year period is of less value than payment in full today.
*533In a recent case, In re Hardy, Case No. 1-82-02246 (B.J.S.D., Oh. Oct. 22, 1982) unreported, we had occasion to consider the same question and denied confirmation of the plan. The Bank in this case, however, requests not denial of confirmation, but rather that it be granted such interest as would, over the period of the plan, pay it not less than the amount which it would receive upon a present liquidation. We do not conceive it properly to be the role of the court to mandate amendment of a plan submitted by a debtor. Our role is to confirm or deny confirmation.
Confirmation is denied. Debtors shall have twenty days to.file an amended plan in the absence of which the case will be dismissed.
SO ORDERED. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489424/ | ORDER GRANTING PLAINTIFF’S MOTION TO DISMISS DEFENDANT’S COUNTERCLAIM.
BURTON PERLMAN, Bankruptcy Judge.
In the above identified Chapter 7 case, plaintiff filed a complaint to determine dis-chargeability of a debt and an objection to the discharge of the debtor pursuant to 11 U.S.C. § 727(a)(3). Defendant/debtor answered and filed a counterclaim for money damages alleging that creditor’s claim is in bad faith and without merit. Thereafter plaintiff responded and filed a motion to dismiss defendant’s counterclaim for failure to state a claim for relief. The matter came on for hearing. After oral argument, it was agreed that the question be submitted upon briefs to the Court.
Defendant contends that he is entitled to maintenance of his counterclaim in that plaintiff’s objection to discharge is frivolous, vexatious and constitutes willful and wanton misconduct towards the defendant. Damages sought by defendant are in the amount of $10,000.00 for compensatory and $2,000,000.00 in punitive damages. Plaintiff, on the other hand, contends that defendant’s counterclaim is premature and fails to state a cause of action in that it is in *534the nature of a claim for malicious prosecution or abuse of process, and should be dismissed. We agree with the latter contention.
Defendant’s counterclaim is in the nature of an action in tort for malicious prosecution which under Ohio law arises from the institution of proceedings against another with malice and without probable cause. See: Malicious Prosecution, 35 O.Jur.2d § 5-35. But whether such action can be maintained depends upon establishing that the original proceeding which gave rise to the claim terminated in favor of the party bringing the action for malicious prosecution. Otherwise, the counterclaim is premature and warrants dismissal. Sorin v. Board of Ed., Etc., 464 F.Supp. 50 (N.D., Ohio, 1978); Goodyear Tire and Rubber Co. v. Marbon Corp. 32 F.Supp. 279 (D.Del., 1940).
Defendant’s counterclaim is premature and will be dismissed.
SO ORDERED. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489425/ | ORDER
Appellee has petitioned for rehearing of the panel’s decision on two grounds. Both grounds were fully addressed in the decision, 22 B.R. 60. However, in view of the fact that subsequent authorities have been cited and that appellant apparently perceives little difference — for purposes of this case — between the two leading cases, we comment further.
We read In re Davidoff, 351 F.Supp. 440, 443 (S.D.N.Y.1972) as holding that if all of *587the information a creditor would obtain from reading a copy of the misfiled financing statement had actually been obtained by the creditor, i.e., if he had actual knowledge of this information, the misfiling would be excused even though the creditor did not see the financing statement.
The critical information stated in Davi-doff is not the security interest but the debtor’s name and address, the secured party’s name and address and the type of collateral. Knowledge of the security interest is incidental.
In re County Green, 438 F.Supp. 693, 698 (W.D.Va.1977) stands for the rule that “knowledge of the security agreement ... [is not] the same as knowledge of the contents of the financing statement.” As we have demonstrated above, Davidoff is not squarely in conflict with this.
To the extent that our reference to Grandview Farm Center, Inc. v. First State Bank of Grandview, 596 S.W.2d 190 (Tex.Ct.App.1980) suggests that Davidoff is satisfied with knowledge of the security interest alone, rather than knowledge of the contents of the financing statement, our statement is misleading.
For the foregoing reasons, we do not believe that additional cases standing for the proposition that “knowledge of its security interest ... was not equivalent to knowledge of the contents of the financing statement,” p. 4 of petition for rehearing, conflict with Davidoff.
For the same reasons, appellants’ citation to the transcript for evidence that appellee knew of the security agreement does not meet the Davidoff requirement that there be evidence of the three criteria it sets out at page 443 and which are mentioned in our third paragraph above. Knowledge of the security interest alone is not knowledge of the contents of the financing statement.
The petition for rehearing is denied. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489426/ | OPINION
Before VOLINN, HUGHES and KATZ, Bankruptcy Judges.
PER CURIAM:
I.
BACKGROUND
On August 29, 1979, the appellees were stayed from foreclosing a deed of trust on motel property of the debtor, GSM-78A, LTD. (hereinafter “GSM”) when GSM filed a Chapter XII petition under the Bankruptcy Act. The petition was dismissed after GSM, with the cooperation of the appellees, arranged for a sale of the property to International Leisure and Casino (hereinafter “International”), subject to appellees’ deed of trust. Thereafter, GSM and International failed to make payments to the appellees on the promissory note secured by the deed of trust. The appellees again commenced foreclosure proceedings which were again stayed, this time by 11 U.S.C. § 362, on June 3, 1980, when GSM filed its present petition under Chapter 11 of the Bankruptcy Code.
On July 22, 1980, the appellees commenced an adversary proceeding for relief from the stay and for leave to foreclose on their’deed of trust. On September 30,1980, the bankruptcy court permitted the debtor until December 2, 1980, to cure all defaults failing which, the stay would be lifted. The defaults were not cured and appellees again commenced foreclosure proceedings. The bankruptcy court reimposed the stay pursuant to motion by GSM but reconsidered its decision and vacated the stay on July 17, 1981, on the basis that the debtor was unable to pay the motel’s utility bills and that the business was in peril of being closed down. The property was purchased by the appellees at a foreclosure sale on July 2, 1981.
On July 13,1981, GSM moved to have the property placed in a constructive trust, or in the alternative, to set aside the foreclosure sale on the basis that it had a buyer for the property, whereby the estate could benefit from net proceeds of the sale. The motion was denied on July 24, 1981, with written findings of fact and conclusions of law entered on August 17, 1981. A motion for rehearing and reconsideration was heard on September 15, 1981, at which the court refused to consider an offer of proof by GSM that it had a buyer for the property. A written memorandum of decision and order denying the motion for reconsideration and rehearing was entered on October 2, 1981. GSM has appealed the August 17, 1981 and October 2, 1981 determinations. We agree with the bankruptcy court below and, therefore, AFFIRM.
II.
DISCUSSION
At the outset, we should note that GSM did not appeal the June 17,1981, order allowing the foreclosure to proceed to sale nor does it argue in its brief any basis for this Court to. set aside the foreclosure sale. As a result, we consider only the issue of whether the bankruptcy court abused its discretion in declining to place the property in a constructive trust. Both parties agree that the bankruptcy courts have the power to impose constructive trusts where appropriate. GSM asserts that there is sufficient equity in the property to pay off the debt of the appellees and leave a substantial amount for the bankrupt estate. Therefore, “[t]he debtor is, in good conscience, entitled to the benefits a constructive trust would provide.”
*589GSM has twice deferred appellees’ attempts to foreclose on the property by filing bankruptcy petitions. It does not contend that the December 2, 1981, date cutting off its right to cure the defaulted agreement was inequitable. There is nothing in the record indicating or suggesting that the bankruptcy court abused its discretion in declining to impose a constructive trust even if such a remedy were available to GSM.
A constructive trust may be imposed where property has been obtained through actual fraud, violation of a confidential relationship or breach of trust. Day v. Greene, 59 Cal.2d 404, 29 Cal.Rptr. 785, 380 P.2d 385 (1963). GSM relies on the case of Smith v. Merriweather, 82 Nev. 372, 418 P.2d 991 (1966), which required that a confidential relationship exists before a constructive trust would be imposed. See also, Randono v. Turk, 86 Nev. 123, 466 P.2d 218 (1970). Assuming, arguendo, that the facts before us permit consideration of this argument, none of the foregoing criteria are applicable here.
AFFIRMED. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489427/ | ORDER
The appellant petitions for rehearing of our dismissal of his appeal. Our dismissal was based upon appellant’s failure to comply with Rule 9 of the Ninth Circuit Appellate Panel Rules, specifically his failure to include in the excerpts of the trial record the complaint and answer, the pre-trial order, if any, the judgment or order from *609which the appeal is taken, any supporting opinion or findings of fact and conclusions of law, etc.
Appellant claims to have been mislead by A Manual For Litigants and Their Attorneys, furnished by the clerk’s office of the Appellate Panel. At Page 5 of the Manual, it is pointed out that counsel, in lieu of the clerk of the trial court, is required to prepare and furnish excerpts of the record that are relevant to appellant’s case. The statement is made in the Manual that “You decide what is needed by the appellate panel judges to understand your position and to rule in your favor.” Examples are given on the same page. “Four copies of all relevant pleadings, memoranda, findings, orders, judgments and other documents that you want the panel to consider must be filed.”
We are mystified by counsel’s apparent belief that the appellate panel can review an order or judgment of the ■ trial court without having before it, at a minimum, the trial judge’s findings of fact and conclusions of law and the judgment and order appealed from.
In any event, at Page 8 of the Manual the parties and their attorneys are advised that appeals to the Bankruptcy Appellate Panels are governed by:
a. Federal Rules of Bankruptcy Procedure, R801-814.
b. Interim Bankruptcy Rules, R 8001-8007.
c. Local Rules of the U.S. Bankruptcy Appellate Panels of the Ninth Circuit.
Rule 9 of the Ninth Circuit Bankruptcy Appellate Panel Rules states that the appellant shall include the following documents, among others, in appellant’s excerpts of the record: complaint and answer, the judgment or order appealed from, any supporting opinion, findings of fact and conclusions of law. The specific requirements of rules of court control over any generalized description of practice and procedure. It is
ORDERED that the petition for rehearing is DENIED. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489428/ | MEMORANDUM OF DECISION
ROBERT L. KRECHEVSKY, Bankruptcy Judge.
I.
Health Systems, Inc. (debtor), a supplier of x-ray equipment, filed a chapter 11 petition on May 14, 1982. On August 5, 1982, the debtor converted the case to one under chapter 7 and Martin W. Hoffman was appointed trustee. The trustee thereafter purported to reject two insurance contracts with the Travelers Insurance Company. The return unearned premiums thereby resulting in the amount of $1,820.00 are the subject of the present proceeding.
II.
Afeo Credit Corporation (Afeo), a New York Corporation engaged in the business of advancing funds for the payment of insurance premiums, filed a complaint asserting its right to the return premiums. Afeo claims a security interest in these premiums pursuant to the following described premium finance agreement (agreement) dated June 13, 1981. This form agreement, prepared by Afeo, designates the “insured” as Health Systems, Inc. and the insurance agent or broker as “Smith Brothers Ins., Inc.”. The agreement lists two Travelers Insurance Company contracts whose premiums are being financed by Afeo with payments totaling $9,293.27 to be made by the debtor in nine monthly installments.1 The agreement also contains the following pertinent provisions:
The undersigned on behalf of the insured named herein requests Afeo Credit Corporation hereinafter referred to as Afeo to pay the premiums on the policies described above. The insured promises to pay to the order of Afeo at the address shown above, the amount stated in Block E in accordance with the Payment Schedule and subject to the provisions hereinafter set forth.
The named insured:
1. Assigns to Afeo as security for the total amount payable hereunder any and all unearned premiums and dividends which may become payable under the policies listed above, and loss payments which reduce the unearned premiums, subject, to any mortgagee or loss payee interests.
7. Agrees in the event of a default in payment of any installment due hereunder, or upon failure to comply with any of the terms or conditions hereof, or a proceeding in bankruptcy, receivership or insolvency be instituted by or against the insured, or if any of said insurance companies shall become insolvent, suspend business or cease to be qualified to do business, the unpaid balance due hereunder shall be immediately payable. In such event Afeo may terminate the agreement and the unearned premiums on the policies shall be payable by the insurance companies to Afeo upon Afco’s request. Any payments received subsequent to the termination of this agreement may be credited against the indebtedness without affecting the acceleration of this note or any rights set forth herein and without any obligation on the part of payee or Afeo to reinstate this agreement or request reinstatement of the policies in the event of cancellation. Any sum received from an insurance company shall be credited to the unpaid balance; any surplus shall be paid to the party entitled to same; in case of a deficiency, the insured shall pay the same with interest.
9. Agrees that the insurance agent or broker through whom the policies were issued is not the agent of Afeo.
*726
There then appears a blank line below which is printed in bold type:
THE INSURED AGREES TO THE PROVISIONS ABOVE AND ON THE REVERSE SIDE
NOTICE: 1. DO NOT SIGN THIS AGREEMENT BEFORE YOU READ IT OR IF IT CONTAINS ANY BLANK SPACE. 2. YOU ARE ENTITLED TO A COPY OF THIS AGREEMENT AT THE TIME YOU SIGN. 3. KEEP YOUR COPY OF THIS AGREEMENT TO PROTECT YOUR LEGAL RIGHTS.
Below this paragraph appears another paragraph entitled “PRODUCER’S REPRESENTATIONS”, which, in pertinent part, reads as follows:
The undersigned warrants and agrees: (1) the insured has received a copy of this agreement, (2) the policies are in full force and effect and the information in the schedule of policies and the premiums are correct, (3) the insured has authorized this transaction and recognizes the security interests assigned herein, (4) upon termination of this agreement or cancellation of any policies to pay the unearned premiums, dividends, and unearned commissions to Afeo, unless he is obligated to pay the same to an insurance company or its agent. ...
The signature of “Robert J. Smith” appears beneath this paragraph and over a line entitled “SIGNATURE OF AGENT OR BROKER”. No other signature appears on the agreement.
III.
The trustee denies that Afeo has a valid security interest in the unearned premiums because the agreement was not signed by the debtor as the named insured. Afeo contends that the agreement “was signed on behalf of the insured by the insurance agent.” (Plaintiffs Reply Brief, p. 2).
Both parties agree that the transaction between the debtor and Afeo is governed by the provisions of the Connecticut General Statutes concerning Insurance Premium Finance Companies, Conn.Gen.Stat. §§ 38-290 to 300 (1981). These provisions, in general, regulate and license foreign corporations which engage in the business of financing insurance premiums in Connecticut. Conn.Gen.Stat. § 38-291(2) defines an “insurance premium finance agreement” as
an agreement by which an insured or prospective insured promises to pay an insurance premium finance company the amount advanced or to be advanced under the agreement to an insurer or to an insurance agent or broker in payment of premiums on an insurance contract together with a service charge as authorized and limited by this chapter ....
The statutory requirements for such agreements are set forth in Conn.Gen.Stat. § 38-297 and include the following:
Every insurance premium finance agreement shall (1) be dated, signed by or on behalf of the insured ... (2) contain the name and place of business of the insurance agent negotiating the related insurance contract ....
IV.
The only testimony received in this proceeding was from John Flannery, an employee of Afeo. He stated that it was Afco’s practice to have the insurance agent sign the agreements in the manner done in this instance. He testified that the blank line providing for a signature by the insured had no purpose. Afeo thus asserts that the signature by the insurance agent or broker satisfies the statutory requirement of a signature by or in behalf of the insured.
V.
Based upon the evidence offered, I conclude that the plaintiff has not borne its burden of proof of showing compliance with the statute. Conn.Gen.Stat. § 38-297 specifically requires a signature on any insurance premium finance agreement by or on behalf of the insured. The form document prepared by'Afeo apparently contains space *727for such a signature, and the notice section clearly contemplates one. The signature of the insurance agent following the section entitled, “PRODUCER’S REPRESENTATIONS”, obviously governs the relationship between the agent and the finance company and does not, absent credible evidence to the contrary, constitute a signature on behalf of the insured. Despite the testimony as to Afco’s practice of having these forms signed by insurance agents, Afeo has not proven that the insurance agent here did, in fact, sign the agreement on behalf of the debtor.
Although the statute does not specify the consequences of a premium insurance financing agreement not being signed by or on behalf of the insured, it is clear that without a signature no written agreement to grant Afeo a security interest in the unearned insurance premiums resulted. Afeo cites to the court a number of district and bankruptcy court decisions which recognize that security interests in unearned insurance premiums may be created by premium finance agreements and no additional requirements for perfection pursuant to the Uniform Commercial Code exist.2 However that may be, the only issue in this proceeding is whether the parties validly executed such an agreement, and I conclude that Afeo has not borne its burden of proof on that issue. Judgment may enter denying Afco’s request for a relief from stay for the purpose of cancelling insurance contracts and receiving the unearned insurance premiums due.
. This Memorandum shall constitute Findings of Fact and Conclusions of Law pursuant to Rule 752 of the Rules of Bankruptcy Procedure. It is
SO ORDERED.
. The debtor made seven of these payments and does not dispute it owes Afeo the two remaining installments of $1,847.86.
. Premium Financing Specialists, Inc. v. Lindsey, 11 B.R. 135 (D.Ct., E.D.Ark.1981); In re Auto-Train Corp., 9 B.R. 159 (Bkrtcy.Ct., D.D. C.1981); In re Maplewood Poultry Co., 2 B.R. 550 (Bkrtcy.Ct., D.Me.1980); In re Redfeather Fast Freight, Inc., 1 B.R. 446 (Bkrtcy.Ct., D.Neb.1979). | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489429/ | ORDER DENYING TRUSTEE’S OBJECTION TO CLAIMED EXEMPTIONS
(Memorandum Opinion)
C.E. LUCKEY, Bankruptcy Judge.
The debtors, Barbara Ann Harvey and Charles Edward Harvey, Jr., filed a joint voluntary petition in bankruptcy on February 23, 1982. At the time of the filing of the petition, the debtors were married but living separately. The respective addresses of the debtors’ residences were set forth in their petition and their statement of affairs. In their schedule B-4 each debtor claimed $400 in miscellaneous specified cash equivalents, specifying § 23.160(l)(k) [sic], of the Oregon Revised Statutes as the statute creating the exemption. On March 30, 1982, the trustee filed an objection to the claimed exemptions stating the reasons for the objection as follows: “Two ‘pourover’ claims have been made in a joint petition, whereas only one is allowed per ORS 23.-160(3). Trustee has no objection to one such claim”.
ORS 23.160(3) provides:
“(3) If two or more members of a household are judgment debtors, each judgment debtor shall be entitled to claim the exemptions in paragraphs (a), (b), (c), (d) and (j) of subsection (1) of this section in the same or different properties. The exemptions when claimed for the same *22property shall be combined at the option of the debtors.”
Construing the absence of the paragraph (k) exemption of ORS 23.160(1) from the exemptions of the enumerated paragraphs in ORS 23.160(3) for which each debtor in a household of two or more debtors is entitled to claim the exemption, as precluding more than one debtor per household from claiming the exemption provided in ORS 23.-160(l)(k) is necessary for meaningful interpretation of the trustee’s reason for objection. However, even this construction does not preclude joint petitioners who are members of different households from each claiming the ORS 23.160(l)(k) exemption. The trustee cites no authority for application of the ORS 23.160(3) limitation to joint petitioners living separately, nor has any evidence or legal authority been offered to indicate whether the debtors living at separate residences could be considered as members of the same household. Review of the cases treating the meaning of the term “household” reveals the common requirement that persons comprising a “household” must dwell under the same roof. Waller v. Rocky Mountain Fire and Casualty Co., 535 P.2d 530, 533, 272 Or. 69 (1975); 41 C.J.S. Household p. 367 and cases cited therein. The Waller case involved definition of the term “household” for purposes of insurance coverage and at 535 P.2d page 533 the Oregon Supreme Court quoted language from Schehen v. Northwest Insurance, 484 P.2d 836, 838, 258 Or. 559, 562 (1971) where the Court stated:
“ ‘Although the term “household” may be somewhat elastic, all of the definitions seem to have a common factor. They require that the members of the “household” dwell or live together. We believe the term was intended to be so used in the present context.’ ”
The trustee’s objection to the claimed exemptions of the debtors herein is denied and under the facts of this case each debtor will be allowed to claim $400 exempt pursuant to ORS 23.160(l)(k). | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489430/ | ORDER DETERMINING TRUSTEE ENTITLED TO ASSETS OF ESTATE
GEORGE S. WRIGHT, Bankruptcy Judge.
L.W. Turner was the President, Director and principal stockholder of the debtor, Turner Ready Mix Co., Inc., who operated a concrete plant in Sumiton, Walker County, Alabama. L.W. Turner, individually, filed a complaint to recover two pieces of equipment claimed to be owned by him, and claimed not to be assets of the corporation. L.W. Turner claimed that he, individually, leased this loader and plant to the corporation. This question is of fact in that Milton G. Garrett, as Trustee, had possession of the equipment, namely: One Ross Rustler Model 110 Concrete Plant and One Fiat Allis Model 545-B Loader. The Trustee sold the loader on June 16, 1981 to Sumiton Motors and Mobile Homes for $23,500.00 and the concrete plant to Wright Contracting Company for $55,000.00 on July 27, 1981; total proceeds $78,500.00 — L.W. Turner now claims such proceeds. The issue before the Court is whether or not such loader and concrete plant is property of the estate under § 541(a) of the Bankruptcy Code.
Various discovery motions and motions for summary judgment were filed by the plaintiff and the defendant.
FINDINGS OF FACT
1. Initial Purchase. On December 21, 1979, L.W. Turner “Firm name to be decided later” purchased the loader and plant from George Freeman and assumed the balance due under such contract to Crocker National Bank for the loader and Joe Money Machinery Company, Inc. for the concrete plant.
2. Incorporation and Operation. On February 13,1980, Turner Ready Mix Company, Inc. was incorporated by filing incorporation papers with the Judge of Probate of Jefferson County, Alabama, Real Book 1879, Page 854. Turner Ready Mix Company, Inc. operated the concrete plant and used the loader in its concrete manufacturing business until it closed the plant on January 31, 1981.
3. Payments on Concrete Plant. (Defendant’s Exhibit # 5) Corporate checks, signed by “L.W. Turner,” were drawn on the corporate account of Turner Ready Mix Company, Inc., on the drawee, First Alabama Bank of Birmingham, payable to: Joe Money Machinery Company, Inc., totaling $30,564.79.1
4. Payments on Loader. (Defendant’s Exhibit # 6) Corporate checks of Turner *41Ready Mix Company, Inc. were drawn on the First Alabama Bank of Birmingham payable to the Crocker National Bank for a total of $25,645.50.2
5. Corporate U.S. Income Tax Return. Turner Ready Mix Company, Inc. — 1980 Income Tax Return was due on November 15, 1980 and covered the fiscal year February 13, 1980 to August 31, 1980, Form 1120. This corporate income tax return shows that both the plant and loader were depreciated,3 an investment tax credit was taken *42for this equipment,4 the equipment was shown on the balance sheet of the corporation,5 and further, there was shown only an indebtedness of $25,000.00 for a promissory note due to L.W. Turner, individually, and no indebtedness was shown for any lease obligations.6
*41DATE CHECK # AMOUNT NOTATION ON CHECK “For"
7/30/80 559 3,171.88
9/17/80 692 3,171.88 R-6193
10/23/80 778 2,689.75 Paid in full Final Payment Inv. No. R-6290
12/16/80 891 2,500.00 Down Payment V2 Plant
Total $30,564.79
It is to be noted that Check # 778 has “Paid in full — Final Payment” and that Check #891 has noted “Down Payment V2 Plant,” which indicate that this is a corporate payment rather than payment on the lease. Further, it is to be noted that if this was owned by L. W. Turner, individually, then there should have been a lease payment for January 18, 1981, for which there was no evidence of such a payment.
*426. Amended Corporate U.S. Income Tax Return. Turner Ready Mix Company, Inc. filed an amended 1980 U.S. Corporate In- ■ come Tax Return, Form 1120-X (Defend- ; ant’s Exhibit # 4) (Amendment not dated but prepared November 21, 1980) which ] amended the depreciation on the plant to ] show an overstatement.7 ¡
7. Alabama Domestic Corporation Income Tax Return. Turner Ready Mix Company, Inc. filed an Amended Domestic Corporation Income Tax Return — 2/13/80 to 8/31/80, prepared November 21, 1980, which shows a loss of ($6,369.00) (which shows the same loss as on the amended U.S. Corporate Income Tax Return 1120-X).
■ ; ] ] ¡ 8. Personal Property Tax Return for Turner Ready Mix Company, Inc. L.W. Turner made a sworn return on December 29, 1980 that the loader and plant belonged to the corporation, Turner Ready Mix Company, Inc. in an assessment made personally, signed and sworn before the Tax Assessor, Walker County, Alabama.8
*439. U.S. Individual Income Tax Return. Due April 15, 1981, Bill and Mary Jane Turner, filed a U.S. Individual Income Tax Return — 1980, which did not include depreciation, investment tax credit, lease income or any other indication of ownership of the plant and loader but only included interest income on a loan from stockholder of $25,-000.00 from Turner Ready Mix, Inc.9
10. Alabama Individual Income Tax Return. On March 2, 1981, Ricky Brown of Brown & Associates, CPA, forwarded the Alabama Individual Income Tax Returns for 1980, Form 40-S, for Lonnie W. & Mary S. Turner, which did not include any depreciation on the plant and loader, no investment tax credit, and no lease income from the loader and plant from Turner Ready Mix Company, Inc.
11. Chapter 7 Petition. On April 21, 1981, Turner Ready Mix Company, Inc. filed a Chapter 7 petition wherein it did not list in its schedules a plant and loader, which is inconsistent with the evidence as set out above.
12.Evidence. The only documentary evidence to support the contention of L.W. Turner that he and not the corporation is the owner of the Ross Concrete Plant and Fiat Loader is a purported Lease Agreement (Exhibit B to Motion for Summary Judgment) between L.W. Turner as Lessor and Turner Ready Mix Co., Inc. as Lessee for a three-year lease of the Plant for $3,171.88 per month or a total of $114,187.68 and of the loader for $2,132.68 per month or a total of $76,776.48 — a grand total of $190,-964.16. It is to be noted that the lease has two deficiencies:
(a) It is undated.
L.W. Turner testified that the lease was executed between the time of the purchase of the Plant and Loader on December 21, 1979 and the date of incorporation on February 13, 1980.
*44(b) It is not signed by the corporation, Turner Ready Mix Co., Inc. § 8-9-2,10 Code of Alabama 1975 is the Alabama Statute of Frauds which requires that the party charged (here Turner Ready Mix Company, Inc.) “subscribe such agreement.” The contract merely had the following:
“Turner Ready Mix Co., Inc.
Lessee”
There is no signature of the corporation in a representative capacity. [E.g. Turner Ready Mix Co., Inc., By: L.W. Turner, as President] so that it is not a sufficient subscription to take the agreement out of the Statute of Frauds. See Bunch v. Garner, 208 Ala. 271, 94 So. 114 (1922); Moss v. Gogle, 267 Ala. 208, 101 So.2d 314 (1958); Hammond v. Winchester, 82 Ala. 470, 2 So. 892 (1887).
L.W. Turner’s testimony is inconsistent with over eight separate sets of documents as set out above11 as well as the testimony of his CPA, who prepared his corporate and individual income tax returns.
The Court finds that L.W. Turner’s testimony is not worthy of belief.
CONCLUSIONS OF LAW
The weight of authority holds that the burden of proof is upon the claimant in a petition for reclamation of property held by the trustee in bankruptcy. Jackson Sound Studios, Inc. v. Travis, 473 F.2d 503, 507, 511 (10th Cir.1979); In re Lux’s Superette, Inc., 206 F.Supp. 368 (E.D.Pa.1962).
In a very similar case, In re Lux’s Superette, supra, the District Court upheld the Referee’s finding based upon similar facts wherein a purchase of certain fixtures was made prior to the formation of a later corporation and where the corporation thereafter treated the fixtures as its 'own. The District Court affirmed the Referee’s finding that the principal stockholders of the bankrupt corporation failed to carry their burden of showing title to the property. See also In re B & P Distributors, Inc., 1 B.R. 426 (Bkrtcy.E.D.Pa.1979).
CONCLUSION
It is the Court’s opinion and the Court so finds that the claimant, L.W. Turner, individually, as principal stockholder of Turner Ready Mix Company, Inc., has failed to carry his burden of proving ownership of the disputed property and that the Trustee is entitled to same under § 541(a)(1). A separate judgment will be entered in accordance with this opinion.
.DATE 1/10/80 2/21/80 3/27/80 5/12/80 5/27/80 6/12/80 CHECK # 111 182 237 352 388 445 AMOUNT NOTATION ON CHECK “For" $3,171.88 3,171.88 3,171.88 3,171.88 3,171.88 3,171.88 Concrete Plant Ross Concrete Plant Plant Plant
. DATE CHECK # AMOUNT NOTATION ON CHECK “For"
1/18/80 120 $2,132.68 December 27 Payment
3/11/80 208 2,132.68 Loader Pay # 14
3/27/80 238 2,132.68 Loader #15
4/11/80 281 2,132.68 Payment No. 16
5/27/80 389 2,132.68 #17
6/9/80 432 2,132.68 #18
7/14/80 521 2,132.68
7/27/80 558 2,186.00 7/27/80 - Payment - $53.32 Late Charges
9/12/80 687 2,132.68 Payment No. 21
10/3/80 729 2,132.68 Loader
10/27/80 785 2,132.68 10/27/80 Payment #23
12/2/80 854 2,132.70 Final Payment - Paid in full (Underlining for emphasis)
Total $25,645.50
On Check #558, it is to be noted that $53.32 late charges were paid by the corporation, reinforcing the conclusion that this was a corporate asset rather than an individual asset in that the purported lease between L. W. Turner and Turner Ready Mix Company, Inc. has no provision for late charges. Further, Check #834 has the notation “Final Payment — Paid in Full” and there is total absence of a purported lease payment of 1/27/81, both of which reinforce the conclusion that this was a corporate asset rather than an individual asset.
. (A) Depreciation Schedule
Description
Date
Cost
Method
Life
This Year
Total
Machinery & Equipment
3,485.70 3,485.70 Plant 2/13/80 59,695.18 150 DB
4,975.73 4,975.73 Loader 2/13/80 45,492.38 150 DB
43.23 43.23 Rebuilt 4/30/80 395.21
8,504.66 8,504.66 Rollers 105,582.77
*42(C) Line 4, Page 2, SCH A - OTHER ASSETS
Loader Depreciation $5,019
Plant Depreciation 3,486
.(B) Form 3466 Investment Tax Credit
Line Life Years Cost or basis Applicable percentage Qualified Investment
(i) 7 or more $ 100,000 100% $100,000
.(D) Schedule L Balance Sheet
9 Buildings and other fixed depreciable assets $114,783
(a) Less accumulated depreciation 9,717
Total $105,066
18 Loans from stockholders 25,000
.(E) Schedule K
(2) Did any individual, partnership, estate or trust at the end of the taxable year own, directly, or indirectly, 50% or more of your voting stock? Yes
x
(d) Enter highest amount owed by you to such owner during the year - $25,000
.“Line 1. Cost of plant overstated - depreciation
(Schedule attached) 393”
.“List of Property Returned by Turner Ready Mix Co., Inc.
Office Equipment $800
Machinery 27,180
*43OATH TO BE ADMINISTERED TO TAXPAYER: “I do solemnly swear that the list of property returned by me_said_
(If not his own property, here state the capacity in which he returns such property for assessment) is a full and complete return of all the property owned by_._ _said_
(Here state “me” if the property returned is his own property, state the name of the person, corporation or estate for whom the property is returned)
or in which_____
(Here designate the owner for whom return is made)
had any interest whatever, the situs of which for taxation, or exemption, from taxation, is in this county. On the first of October of the present tax year, so help me God.”
SIGN
HERE /s/ L. W. Turner_
PERSON GIVING IN RETURN
Subscribed and sworn to before me this the 29 day of Dec, 1980 I hereby certify that before taking the foregoing assessment list, I administered the oath required to be administered under Section 40, Title 51, Revenue Act 1940, to tax payer or agent, making this return and that I interrogated the said party as the law directs in regard to same.
(Officer will sign here) (Give name and style of office here)
/s/ Newman Davis_, TAX ASSESSOR”
. Schedule B - Interest Income
Name of Payer Amount
(H) Turner Ready Mix Co., Inc. $2,688.00
. In the following cases, every agreement is void unless such agreement or some note or memorandum thereof expressing the consideration is in writing and subscribed by the party to be charged therewith or some other person by him thereunto lawfully authorized in writing:
(1) Every agreement which, by its terms, is not to be performed within one year from the making thereof;
. Findings of Fact, Paragraphs 3-10. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489431/ | MEMORANDUM OPINION
C.E. LUCKEY, Bankruptcy Judge.
This matter is before the Court on the application of the debtors’ trustee in the Chapter 11 case to assume a land sale contract as purchaser of real property and a wrecking yard thereon, and to assign the contract in connection with a proposed sale thereof. Michael Chestnut as personal representative of the estate of the vendor, Lawrence Chestnut, deceased, has filed objections to the trustee’s proposals.
*48In the application to assume and assign the contract, the trustee urges that the curing of default required by Section 365(b) of the Bankruptcy Code obligates the debt- or only to bring to date unpaid contract monthly payments, which the debtor urges should be offset by the amount of real property taxes due because of the contract’s provision under which the vendor was to pay the taxes and add the amount to the contract balance. The debtors’ trustee acknowledges the additional obligation to compensate the vendor for actual pecuniary loss consisting of expenses incurred by the vendor in a state court foreclosure action, and although the contract arrearages total a represented $8,907.50, the trustee of the debtors proposes to pay the objector only $6,000.00 within 10 days of an order authorizing the assumption and assignment, with the balance of that amount (after the tax offset) payable by the proposed assignees of the contract at any time before August 1, 1983, such balance to bear interest at 12% and evidenced by a promissory note from the assignees providing that failure to pay such sum when due will constitute a breach of the contract between the contract vendor, Chestnut, and the trustee’s assignees.
The Chapter 11 case was filed July 25, 1980. On July 10, 1980, Chestnut had filed his state court action to foreclose against the debtors and others, alleging failure to pay two contract installments, and other contract breaches by the debtors.
The ownership of the property has a tangled history. November 19, 1969 Lawrence Chestnut sold the property to one Canter for a stated contract price of $40,000.00. Chestnut also thereafter loaned unsecured sums to Canter to operate the wrecking yard, in the approximate amount of $9,700.00. In January, 1977, Canter and Chestnut restructured the contract on the property to provide a new sale price of $48,000.00 which included the existing contract balance and Canter’s unsecured indebtedness to Chestnut. Chestnut and Canter then by a consent and assignment document dated April 12, 1977, assigned their interests to the debtors, which assignment was recorded April 13, 1977.
The trustee in the Chapter 11 proceedings was appointed May 7, 1981.
Chestnut in August of 1981 moved the Court for an order requiring the trustee to accept or reject the land sale contract, which the trustee resisted, and the hearing was adjourned upon request of the parties to permit negotiation on the issue.
In June of 1982, the positions of the parties changed with Chestnut now resisting the trustee’s application to assume the contract. The memoranda of the parties, however, focus the issue not on the right to accept or reject the contract, but rather on the amount required under Section 365 of the Bankruptcy Code to cure the default.
Although the trustee was appointed in May of 1981, no plan has been submitted. The debtor had multiple real property interests and tangled encumbrances. The trustee has attempted by piecemeal treatment of the interests to reduce the number of entities to be dealt with under a constantly postponed proposed plan.
The contract was in default before the filing of the Chapter 11. Under Oregon law the filing of the complaint for foreclosure served to accelerate the balance due. See Kincaid v. Fitzwater, 275 Or. 170 (1970); Lorenzen v. Jackson, 284 Or. 251, 586 P.2d 341 (1978).
These Oregon cases might be inapplicable if overriden by the provisions of the Bankruptcy Code, but such overriding would necessarily be done in the context of a plan of reorganization, to support a right to reversal of acceleration. A reading of the cases shows some liberality of the de-ac-celeration in Chapter 13 cases applying Section 1322(b) of the Bankruptcy Code when a plan has been filed. Application of those cases to Chapter 11 cases is inappropriate.
Section 365(a) of the Bankruptcy Code permits acceptance or rejection of contracts. The right, however, is limited by Section 365(b)(1) that requires action which cures or provides adequate assurance of prompt cure of the default. The default in this case under Oregon law entitles Chestnut to a *49curing of the total contract balance, unless there be a reversal of acceleration pursuant to the provisions of the Bankruptcy Code’s Section 1124(2). See In re Hewitt, 16 B.R. 973 (Bkrtcy.D.Alaska 1982).
Trustee's motion proposes [there is no copy of the proposed assignment if assumption be allowed in the file] only a partial curing of arrearages in default, with a balance to be paid by the intended assignees by August, 1983. The Court concludes that this does not meet the requirements of the Code, certainly in the context of facts in which no plan of reorganization has been submitted.
However, Section 1124(2) of the Code allows for curing of a default other than a kind specified in Section 365(b)(2) (not applicable herein) that occurred before or after the commencement of the case in circumstances in which a plan has been filed.
Therefore, the assumption of the contract is ordered denied unless within 60 days of this memorandum opinion the trustee cures the default by payment of the accelerated amount and compensation for actual pecuniary loss resulting from the default, or submits a plan of reorganization meeting the requirements of Section 1124(2) of the Code relating to Chestnut’s interest.
Compensation for actual pecuniary loss shall include costs of foreclosure report $229.00, filing and service fees $65.00, interest at the rate of 12% on the contract arrearages, together with attorney fees in an amount not to exceed $1,225.00 but with amount of reasonable attorney fees subject to the Court’s determination upon application.
Consideration of the application to assign the contract need not be reached unless and until the conditions of assumption be met. It is noted, however, that the proposed assignment includes payment of only $10,-000.00 cash on a $275,000.00 sale, with the buyers proposing to assume the $52,000.00 balance of the Chestnut contract, which has many years to run if it be subject to reverse acceleration, and second, third and fourth purchase money mortgages which would give questionable or no right to deficiency judgment in event of default, and give rise to undefined tax consequences in the bargain.
This Opinion contains the Court’s Findings of Fact and Conclusions of Law and pursuant to Bankruptcy Rule 752 they will not be separately stated. Separate Order consistent herewith will be entered. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489432/ | MEMORANDUM OPINION
C.E. LUCKEY, Bankruptcy Judge.
Plaintiff, trustee of the debtor in a voluntary Chapter 7 Bankruptcy Code case, Mark C. Tyler, formerly doing business as The Sunshop, has filed his complaint in this adversary proceeding seeking a judgment for declaratory relief declaring that the defend*77ant, FinanceAmerica Private Brands, Inc., has no security interest in property of the debtor; that defendant is an unsecured creditor; and granting plaintiff authority to sell the property of the debtor free and clear of any claim of defendant. Defendant answered with prayer that the Court declare and adjudge that the defendant has a security interest in property of the debtor. Pre-trial Order was entered and trial held.
Debtor was purchasing inventory from Sony for resale and the flooring was financed by the defendant. The security agreement ran to Sony, but the debtor’s payments were made to the defendant and defendant monitored the inventory on behalf of Sony before March, 1978, and after.
On April 6, 1978, Sony and defendant entered into an agreement between themselves to restructure the flooring plan financing procedures relating to Sony’s outlets, including the debtor. The agreement provided for “New Finance Transactions” being defined as those for which defendant made advances to Sony after April 1, 1978.
The treatment given the outstanding security interests held by Sony with reference to property sold by it to the debtor in the agreement is stated in paragraph 6 A, B and C of the agreement:
“6. A. Sony shall assign to FA all security interests held by it against Existing Dealers who have utilized the Sony Floor Plan as of the date of this Agreement, and Sony shall also assign to FA its interest as a chattel mortgagee in the jurisdiction of Louisiana.
“B. Contemporaneously with the assignments to FA as provided in 6.A. above, FA will pay and advance to Sony an amount equal to the outstanding principal balance of all Existing Dealer obligations owing to Sony under Old Finance Transactions plus any accrued and unpaid charges owing thereon; upon receipt of such payment, Sony will assign to FA all of its interest and claim against such Existing Dealers.
“C. For the purpose of enabling FA to enter into New Finance Transactions with Existing Dealers, Sony will cause its Existing Dealers to acknowledge and agree to the substitution of FA for Sony under existing dealer documents utilized in the Sony Floor Plan, and further acknowledge that from and after a date certain, FA will make advances to Sony for and on behalf of those Existing Dealers for Sony Merchandise thereafter purchased by them from Sony.”
The security agreement between Sony and the debtor provided, inter alia:
“FIRST: As security for any and all liabilities and obligations, monetary or otherwise, direct or indirect, absolute or contingent, past, present or future, owed by Debtor to Secured Party for merchandise purchased by Debtor from Secured Party pursuant to the Plan, for service and late charges payable by Debtor to Secured Party pursuant to the Plan and for all attorneys’ fees, court costs and collection expenses incurred in collecting any such liabilities and obligations, whether evidenced by instruments, other evidence of indebtedness, by open account on Secured Party’s books of account or otherwise (hereinafter collectively referred to as the “Obligations”). Debtor hereby grants Secured Party a security interest in the following property and the proceeds thereof (hereinafter collectively referred to as the “Collateral”):
“(A) All of Debtor’s presently owned or hereafter acquired inventory (including, but not limited to, radios, television receivers, high-fidelity components, phonographs, electronic equipment and apparatus of every kind, nature and description bearing the trademark or tradename “SONY”) sold at any time heretofore, now or hereafter by Secured Party to Debtor, whether in the form manufactured or as products or accessories and whether sold pursuant to the Plan or otherwise;
“(B) All accounts receivable, accounts, contract rights, chattel paper, documents and general intangibles which heretofore arose or which shall hereafter arise from sales or other dispositions of the inventory hereinbefore referred to in part (A) above;
*78“(C) All accessions, products, proceeds, replacements, substitutions and additions to any of the items hereinbefore referred to in parts (A) and (B) above.
ifc $ * :jc *
“TENTH: This Agreement shall be binding upon and inure to the benefit of the heirs, executors, administrators, successors and assigns of the parties hereto. “ELEVENTH: This Agreement may not be modified, altered or amended in any manner whatsoever, except by a further agreement in writing signed by all of the parties hereto.
“TWELFTH: This Agreement contains all of the understandings, promises and undertakings of the parties hereto. All prior understandings and agreements, oral or written, heretofore entered into between the parties hereto are merged herein.”
Plaintiff urges that technical defects in the changed procedures between Sony and defendant entitle the trustee to defeat the lien claim of the defendant. The alleged defects relied upon are language in the security agreement with Sony granting the security interest “for any and all obligations ... owed by Debtor to Secured Party for merchandise purchased by Debtor from Secured Party, and the failure of the defendant to obtain an express modification of that language which the plaintiff urges as necessary under the terms of the security agreement and for “future advances” made by the defendant for flooring of the Sony merchandise. It is contended that the language of the security agreement describes as collateral merchandise sold to the debtor by Sony and that the new flooring plan agreement constitutes the defendant as seller instead of Sony and that because there is no security agreement describing the collateral as property sold to the debtor by defendant, the defendant has no defined collateral. The security agreement between Sony and the debtor recited that the “Debt- or desires to make purchases from Secured Party pursuant to Secured Party’s Dealer Floor Plan as in effect from time to time”.
The financing statement filed to perfect the security agreement showed Sony as the secured party “c/o FinanceAmerica Private Brands, P.O. Box 750, Daly City, California 94017”. The security agreement showed Sony’s address at 9 West 57 Street, New York, New York 10019.
Payments made were to the defendant pursuant to invoices sent the debtor pursuant to the flooring plan.
The debtor opened a second location in 1977 and on August 3, 1977 the debtor signed a continuation of the previous financing statement, but the continuation filing showed the Secured Party as being Fi-nanceAmerica Private Brands. On August 8, 1977, Sony recorded an assignment of its security agreement to FinanceAmerica, which referred to the original financing statement filed by Sony. Testimony was undisputed that before the agreement changing the flooring plan, FinanceAmerica had in connection with the financing arrangement monitored the debtor’s inventory.
The debtor also indicated his knowledge of the defendant’s secured status by directing his insurance carrier to send a copy of the insurance policy with loss payable clause favoring the defendant FinanceAm-erica Private Brands.
The plaintiff urges that a registered letter sent by the defendant to the debtor June 20, 1978, notifying the debtor of the assignment of Sony’s interest in the security agreement to the defendant was not signed, and therefore there was no effective modification or assignment of the security agreement according to its terms.
These technical fly specks in the transaction have made difficult determination of the rights of the parties, particularly when it could be expected that a financing concern providing financing on the scale being done by the defendant would touch all bases to remove all doubt of its right to a security interest.
The determination has been made more wrenching because of the exhaustive, able and pursuasive legal memoranda submitted by counsel on both sides.
*79There is clearly enough, however, under a liberal construction concept to show that the defendant is entitled to enforce its security interest. The objective documentary evidence shows treatment of the defendant by the debtor as the secured party, within the interaction of the documents including the reference of the security agreement to the “Secured Party’s Dealer Floor Plan as in effect from time to time”, the debtor’s objective intent with relation to the interests of the parties is clear.
Creditors are entitled to adequate notice of the security interests. The filed documents could have led them only to the assigned security agreement. If by reason of some imperfection of the security arrangement a creditor with notice of the agreement and its assignment is placed in a more favorable position, he has certainly not been injured.
The Court is persuaded that O.R.S. 71.1020(1) and (2)(b) contemplate liberal construction particularly in the complex area of varying flooring plans where the facts of the case do not allow the fraudulent creation of a security interest or prejudice to creditors for lack of notice, and that defendant is entitled to the declaratory relief sought. This concept is fortified in this circuit by the case of In re Amex-Protien Development Corporation, 504 F.2d 1056 (9th Cir.1974); In re Numeric Corp, 485 F.2d 1328 (1st Cir., 1974), and Matter of Bollinger Corp., 614 F.2d 924 (3rd Cir., 1980).
This Opinion contains the Court’s Findings of Fact and Conclusions of Law and they will not be separately stated.
Each party shall bear his or its own costs and attorney fees herein.
Separate Judgment consistent herewith will be entered. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489433/ | MEMORANDUM AND ORDER
BILL H. BRISTER, Bankruptcy Judge.
The debtor, Billy Dean Epps, all times relevant to this memorandum, had conducted a general insurance business in Amarillo, Texas, under the common name and style of Epps Insurance Agency. Between September 11, 1979, and September 4, 1981, the debtors had executed four separate notes to Tascosa National Bank of Amarillo (“Bank”) upon which an accumulated principal balance of $131,360.59 is owed. In connection with the delivery of those notes the debtors had executed assignments and security agreements, containing “other in-debtednesses” or “dragnet” clauses so that the balance on each note was intended to be secured by certificate of title liens against three automobiles, assignments of the debtors’ interest in a retirement plan with Southland Life Insurance Company, assignment of future renewals of Southland Life Insurance Company policies and future renewals of Philadelphia Life Insurance Company policies, assignments of one share of Tascosa Country Club stock, one thousand shares of Naturizer, Inc. common stock, three hundred shares of Amarillo Equity Investment Company common stock and pledges of several items of jewelry and coins, including one ten carat gold diamond ring, one fourteen karat multi-diamond ladies ring, one mounted twenty gold piece necklace, three sets of silver Olympic coins, and ten rolls of various silver coins.
The debtors filed petition for order for relief under Chapter 7 of Title 11, United States Code, on July 15, 1982. The bank filed a complaint for modification of the automatic stay in order that it could foreclose its claimed liens against all of its security. The debtors do not oppose the requested relief concerning the certificate of title liens against the three automobiles and the pledges of the shares of stock and the coins. However, they contend that the bank’s nonpossessory, nonpurchase money lien against the jewelry should be avoided under § 522(f), that the bank has no lien against the retirement plan, and that the bank has not properly perfected a lien against the commission from future renewals of insurance policies. Alternatively, the debtors say that the commissions on future renewals of insurance policies are exempt as current wages under V.A.T.S. art. 3836(a)(7), that the commissions on future renewals are not presently in existence and if the bank ever had a properly perfected lien against the future renewals its debt has been discharged, there can be no lien without a debt, and that when those future renewals come into existence the bank will have no interest in them. The trustee adopts the debtor’s argument concerning the validity of the bank’s lien and the alternate argument that there can be no lien without a debt, but challenges the debtor’s entitlement to an exemption in those commissions on future renewals. The two adversary proceedings and the trustee’s challenge to exemptions were consolidated for nonjury trial. The following summary constitutes the findings of fact.
During the trial the bank acknowledged that it was making no claim of security interest in and to the Southland Life Insurance Company Retirement Thrift Plan and recognized debtor’s exemptions in that retirement plan, free and clear of any claim by the bank. The proof at trial further *117reflected that the jewelry was pledged to the bank and has remained in the possession of the bank since the pledge agreement was executed. Pretermitting consideration of the issue as to whether jewelry of the nature of that pledge to the bank can be exempt under the claim advanced by the debtors it is apparent that while the bank’s lien is a nonpurchase money lien, it is not a nonpossessory lien. Therefore § 522(f) has no application and the bank’s lien against the jewelry has been properly perfected by possession.
The issue between all three parties to be resolved by this memorandum is the status of the future commissions on insurance renewals. The nature of those renewals must be considered.
A life insurance agent who arranges for an insurance contract on the life of his customer receives a commission from the company when the insurance policy is written and the initial premium is paid. Moreover, if the agent’s contract with the insurance company so provides, he is entitled to future commissions each time the policy holder renews the policy and pays the renewal premium. The agent’s right to renewal commissions depends upon the contract existing between the agent and the insurer. The contracts between the debtor as agent and Southland Life Insurance Company and Philadelphia Life Insurance Company were not introduced at the trial, and no issue has been raised as to the debtor’s legal right to renewal premiums. Therefore, it is presumed that there are presently in existence policies of insurance which were produced by the agent and which entitle the agent to receive commissions for renewals. Whether or not the agent, or his assignee, receives renewals commissions in the future depends, of course, upon the decision of the insured to retain the policy in effect for another period of time by paying the requisite renewal premium.
The trustee and the debtor each contends that the bank has not properly filed under Article 9 of the Uniform Commercial Code and thus it has perfected no lien against the future renewals. The bank responds, however, that it has a written assignment of the commissions on future renewals which the debtor, Billy Dean Epps, had executed and delivered to the bank, and that each insurance company has consented to the assignment. It contends that Tex. Bus. & Com.Code § 9.305 provides, in part, that if the collateral is held by a bailee, the secured party is deemed to have possession from the time the bailee receives notification of the secured party’s interest. Under the facts of this case I find that the bank has properly perfected a security interest in the commissions on renewals by the acceptance of the written assignment and by its obtaining the written recognition by each insurance company of the bank’s assignment. See Tigert Printing Company, Inc. v. Comptroller of Public Accounts, 5th Cir. 1981, 648 F.2d 364; Central National Bank v. Latham, 22 S.W.2d 765, 768 (Tex.Civ. App.—Waco 1929, writ ref’d).
The critical issue is the time the bank’s security interest in the commissions from policies to be renewed in the future came into existence. If that security interest against future renewals does not become effective until the insured decides to renew the policy and pays the premium there can be merit to the position advanced by the trustee and by the debtors that a security interest attaches only to property in esse, that when the property comes into existence there will be no debt which would support a lien, and thus that the bank can make no claim against the commissions for future renewals. However, in my opinion the bank has already perfected its security interest in those commissions, if any, on premiums to be paid in the future. The contract between the debtor and each insurance company established the basis for the existence of a property right. That property right then came into existence each time the debtor-agent produced a policy of insurance which could be renewed in the future. As a renewable policy was solicited by the agent and issued by the insurance company the debtor’s property right to renewal commissions each time the policy was renewed came into existence. That property right was assigned to the bank and the bank’s security interest in the commissions became *118perfected each time a policy was written which could be renewed in the future by the insured.
I conclude, therefore, that the bank’s security interest is perfected in the future renewal commissions and that the bank must prevail against the trustee and the debtor as far as those renewal commissions are concerned.
It is, therefore, ORDERED by the Court that:
1. The interest of the debtors, Billy Dean Epps and Geraldine P. Epps, in and to the Southland Life Insurance Company Retirement Thrift Plan be, and it is hereby, recognized and perfected, free and clear of any claim of the bank;
2. The security interest of the bank in and to the automobiles, shares of stock, coins, jewelry, and commissions for future renewals of policies be, and it is hereby, recognized and perfected; and
3. The automatic stay heretofore existing be, and it is hereby, modified to permit the bank to foreclose its liens against the property described in paragraph two above.
LET JUDGMENT BE ENTERED ACCORDINGLY. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489934/ | MEMORANDUM OPINION
THOMAS M. TWARDOWSKI, Bankruptcy Judge.
The Chapter 11 debtor has filed, pursuant to section 363 of the Bankruptcy Code, 11 U.S.C. § 363, a motion to sell all of its assets at a private sale free and clear of all liens and encumbrances against the assets for the sum of $735,000.00 plus payment to be determined at a later date for unused inventory of food and liquor. The debtor later amended its motion by requesting that we allow the debtor to convey the assets to the proposed purchaser “under and subject to the first mortgage”. The debtor amended its motion because the purchaser has agreed that in the event the debtor preserves in place the first mortgage presently encumbering the assets, the purchaser will pay to the debtor, in addition to the aforementioned purchase price, a sum representing one-half of the value of that mortgage as opposed to replacement financing at current market rates. The first mortgagee, Newtown Savings (“New-town”), has objected to this amendment, although it does not oppose the original motion. No other party has objected to either the original motion nor the amended motion. The debtor’s requested sale of the assets under and subject to Newtown’s mortgage is not part of the agreement of sale between the debtor and the purchaser. Also, the proposed sale would take place whether or not the purchaser is able to assume Newtown’s mortgage. The debtor has equity in the assets.
Newtown’s objection to the amended motion is based upon the “due-on-sale” provisions in its mortgage with the debtor, which essentially authorize Newtown to declare immediately due and payable all sums due under the mortgage if the debtor sells the assets encumbered by the mortgage without the written consent of Newtown. Newtown has not consented to the proposed sale because Newtown wishes to be paid in full at settlement, along with the other lienors, rather than having the proposed purchaser assume its mortgage.
It is undisputed that, under Pennsylvania law, the “due-on-sale” provisions of New-town’s mortgage are valid and enforceable. The present issue, however, is whether, under bankruptcy law, the “due-on-sale” provisions prevent the debtor from selling its assets under and subject to Newtown’s mortgage.
*543We first note that Newtown has not'alleged that its interest in the assets would not be adequately protected should we allow the sale under and subject to its mortgage. See 11 U.S.C. § 363(e).
However, in Butner v. United States, 440 U.S. 48, 99 S.Ct. 914, 59 L.Ed.2d 136 (1979), the Supreme Court held that property interests in the assets of a debtor’s estate should be analyzed and determined according to state law unless Congress or some other identifiable federal interest requires otherwise. In the present case, there is simply no such identifiable federal interest that would require us to treat Newtown’s rights pursuant to its mortgage any differently in the bankruptcy context than under Pennsylvania law. In the first place, the debtor has not alleged that the sale would further the debtor’s Chapter 11 reorganization. See United States v. Whiting Pools, Inc., 462 U.S. 198, 103 S.Ct. 2309, 76 L.Ed.2d 515 (1983); In re Attinello, 38 B.R. 609 (Bankr.E.D.Pa.1984). In this regard, we note that the debtor has not filed a plan of reorganization and is selling all of its assets. Secondly, there is no reason to believe that the “fresh start” theory is involved in this matter. The debt- or will not receive any proceeds from the sale whether or not its assets are sold under and subject to the mortgage. At most, selling the assets under and subject to the mortgage could benefit the debtor’s unsecured creditors. However, there is, of course, no identifiable federal interest in per se benefitting unsecured creditors at the expense of a secured creditor. Thirdly, contrary to the debtor’s contention, the “due-on-sale” provisions of the mortgage are of a distinctly different nature than forfeiture or bankruptcy default clauses. Therefore, the debtor’s argument that there is a federal interest in preventing the enforcement of such clauses is inapposite to the present matter. Finally, the debtor’s reliance on Matter of North American Dealer Group, Inc., 16 B.R. 996 (Bankr.E.D.N.Y.1982), is misplaced because that case did not involve “due-on-sale” provisions of a mortgage (but, rather, a bankruptcy default clause) and because it did not involve a sale of property under and subject to a mortgage.
For the foregoing reasons, we shall deny the debtor’s amendment to its motion, thereby not permitting the debtor to sell its assets under and subject to Newtown’s mortgage. However, we shall grant the debtor’s original motion and permit the debtor to sell all of its assets free and clear of all liens and encumbrances against the assets, including Newtown’s mortgage lien. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489935/ | MEMORANDUM OPINION AND ORDER
RICHARD L. SPEER, Bankruptcy Judge.
This cause comes before the Court upon the Motion for Summary Judgment filed by the Plaintiff in this adversary action. The parties have each submitted written argu*681ments regarding the merits of the Motion and the affidavits, documents, and transcripts upon which those arguments rely. They have also had the opportunity to respond to the arguments set forth by opposing counsel. The Court has reviewed these arguments as well as the entire record in this case. Based upon that review and for the following reasons the Court finds that the Motion for Summary Judgment should be DENIED.
FACTS
Prior to the filing of his voluntary Chapter 7 Petition, the Debtor-Defendant was the owner-operator of Pat Keane Motors, a car dealership located in Adrian, Michigan. On or about September 19, 1980, the Debt- or entered into an agreement with the Plaintiff, Adrian State Bank, whereby the Plaintiff would extend to the Debtor a line of credit upon which he could purchase vehicles from the manufacturer for resale. On or about June 16, 1981, through the renewal of an existing capital loan, the Plaintiff extended an additional sum of money to the Debtor for use in the general operations of the business. The Plaintiff also made several other smaller loans to the Debtor in apparently unrelated transactions. In return for these lines of credit the Plaintiff received a security interest in a variety of the Debtor’s assets, including his inventory. The security agreement required that the Debtor submit monthly financial reports to the bank and that the reports include a listing of the vehicles remaining in his inventory. The agreement further called for the Debtor to pay the proceeds generated by each vehicle to the bank immediately upon consumation of a sale.
At some time during the course of the parties’ relationship, the Plaintiff became aware of the fact that the Debtor had not been disclosing the sale of each vehicle in the monthly reports. Instead, the reports reflected as being in his possession vehicles that had, in fact, been sold. As a result of this disclosure and at the request of the Plaintiff, the Debtor voluntarily surrendered all of the vehicles which remained in his inventory, as well as all other assets that were subject to the security agreement. The Plaintiff then proceeded to liquidate those assets and apply the proceeds to the aggregate balance owed by the Debtor. The resulting deficiency amounted to One Hundred Seventeen Thousand Four Hundred Fifty-three and 69/ioo Dollars ($117,453.59).
On or about October 5, 1982, the Debtor was tried and convicted of certain offenses which stemmed from the out-of-trust sale of vehicles. During the course of that trial, testimony was taken as to how the Plaintiff discovered the out-of-trust sales. Testifying in his own behalf, the Debtor admitted that the reports submitted to the bank were false. On July 21, 1982, the Debtor filed his Petition with this Court. In that Petition he listed the Plaintiff as a creditor for the deficiency owing on the loans. Believing the debt to be nondis-chargeable as the result of the Debtor’s previous conduct, the Plaintiff filed this adversary action.
LAW
The Plaintiff’s allegations of nondischargeability are based on the provisions of 11 U.S.C. § 523(a) which state in pertinent part:
“(a) A discharge under section 727, 1141, or 1328(b) of this title does not discharge an individual debtor from any debt— (2) for obtaining money, property, services, or an extension, renewal, or refinance of credit, by—
(B) use of a statement in writing—
(i) that is materially false;
(ii) respecting the debtor’s or an insider’s financial condition;
(iii) on which the creditor to whom the debtor is liable for obtaining such money, property, services, or credit reasonably relied; and
(iv) that the debtor caused to be made or published with intent to deceive ...”
This provision excludes from discharge any debt that was created by or attendant to the use of a fraudulent financial statement. *682In order to prevail in an action based upon this section, the plaintiff must demonstrate that the debtor 1) made a written representation respecting his financial condition, 2) that the representation was materially false, 3) that the document was issued with the intent to deceive, and 4) that the plaintiff reasonably relied on the representation. Thorp Credit Inc. of Ohio v. Saunders (In re Saunders), 37 B.R. 766 (Bkcy.N.D.Ohio 1984), W.C.T.A. Federal Credit Union v. Volpe (In re Volpe), 32 B.R. 314 (Bkcy.W.D.N.Y.1983). Each of the elements of this provision must be shown in order to have the debt held nondischargeable. W.C.T.A. Federal Credit Union v. Volpe, supra.
When ruling on a motion for summary judgment, it is well settled that the moving party has the burden of establishing that there are no issues of material fact and that they are entitled to judgment as a matter of law. Todd v. Heekin, 95 F.R.D. 184 (S.D.Ohio 1982). In doing so the movant may only rely on such evidence as would be admissible at trial. General GMC Trucks, Inc. v. Mercury Freight Lines, Inc., 704 F.2d 1237 (11th Cir.1983), Utility Control Corp. v. Prince William Const. Co., Inc., 558 F.2d 716 (4th Cir.1977). Accordingly, hearsay evidence may not be considered by the Court when ruling on a motion for summary judgment. Daily Press, Inc. v. United Press Intern, 412 F.2d 126 (6th Cir.1969).
In the present case, a review of the record finds that the Plaintiff, in asserting its Motion, relies upon the admissions made by the Debtor in the criminal trial and upon the affidavit of a bank officer. Although the Plaintiff has also attached copies of the notes and other instruments which created the security interests, it has not submitted any of the reports that were filed with it by the Debtor.
In the affidavit the affiant states that he is an employee of the Plaintiff, that his information is based upon his review of the Bank’s records, and that he has personal knowledge of the Bank’s practices and procedures. In addition to recounting the history of the loans and the amounts due thereon, the affiant states that it was Bank policy to require monthly reports in any floor planning arrangement. He indicates that such reports are relied upon by the Bank for the continuation of a dealer’s loan. He also states that a breach of these policies would result in the termination by the Bank of any further lending. The officer further states that in conformance with its policies, the Bank relied upon the Debt- or’s statements during the course of their relationship.
This testimony, while admissable for demonstrating the policies of the Plaintiff in floor planning arrangements, is inadmissible for showing actual reliance on the reports. Federal Rule of Evidence 801(c) states:
“(c) Hearsay. ‘Hearsay’ is a statement, other than one made by the declarant while testifying at the trial or hearing, offered in evidence to prove the truth of the matter asserted.”
This affiant states that the reports reflect the Bank’s actual reliance on the statements, presumably by the fact that the Bank loaned the Debtor money subsequent to his submission of a fraudulent report. However, these statements only reiterate that which is set forth in the documents. These documents are not presently before the Court and are being used by the Plaintiff to demonstrate that the bank did, in fact, rely upon them. Therefore, the statements would be hearsay and, under the provisions of Federal Rule of Evidence 802 which states:
“Hearsay is not admissible except as provided by these rules or by other rules prescribed by the Supreme Court pursuant to statutory authority or by Act of Congress.”
would not be admissable. The only probative value offered by the affidavit is to demonstrate the history of the loans and the policies of the Bank. It should be noted that the records themselves, although hearsay, may qualify for admission under Federal Rule of Evidence 803 in the event they are offered into evidence at a later time. It should also be noted that the *683statements in the affidavit as to reliance, even if admissable, are insufficient evidence of actual reliance upon which to find that that element of 11 U.S.C. § 523(a)(2) existed.
With regards to the testimony that was offered in the criminal trial and presented to this Court by means of a transcript, Federal Rule of Evidence 804(b) states in pertinent part:
“(b) Hearsay exceptions. The following are not excluded by the hearsay rule if the declarant is unavailable as a witness: (1) Former testimony. Testimony given as a witness at another hearing of the same or a different proceeding ... if the party against whom the testimony is now offered ... had an opportunity and similar motive to develop the testimony by direct, cross, or redirect examination. (3) Statement against interest. A statement which was at the time of its making so far contrary to the declarant’s pecuniary or proprietary interest, or so far tended to subject him to civil or criminal liability, or to render invalid a claim by him against another, that a reasonable man in his position would not have made the statement unless he believed it to be true.”
Under this rule, only when a declarant is unavailable is former testimony or admissions against interest admissible. Federal Rule of Evidence 804(a) sets forth the standards by which unavailability is measured. However, there has been no showing that either the Debtor or any of the other witnesses at the previous trial are unavailable to give testimony in this proceeding. In view of the Debtor’s objections as to the nature of evidence offered by the Plaintiff, this Court cannot consider the statements made in the transcript without some showing as to the unavailability of the prior witnesses.
Even if the Court were to hold that the statements made by the Debtor were admissible as an admission by a party opponent in accordance with Federal Rule of Evidence 801(d)(2), the nature and character of what was said in the criminal case is too uncertain for this Court to expose the Debtor to the consequences attendant to a finding of nondischargeability. This uncertainty is exacerbated by the absence of the reports filed by the Debtor and the absence of any testimony which specifically enumerates the discrepancies between the reports and the inventory. In addition, there has been no showing that the vehicles which are claimed to have been sold out-of-trust were, in fact, sold. Without such evidence, there is insufficient grounds upon which this Court can conclude that the reports were false or that the Debtor intended to deceive the Plaintiff.
On the basis of the foregoing analysis, it appears as though the only evidence before the Court is that contained in the affidavit which pertains to the policies of the Plaintiff and the existence of the notes, security agreements, and the obligations thereon. This evidence fails to demonstrate that all the elements of 11 U.S.C. § 523(a)(2) have been fulfilled. Although the Plaintiff may be able to present additional evidence at some later point in this proceeding, the immediate absence of sufficient evidence to support the requirements of this section requires this Court to conclude that the Plaintiff is not entitled to summary judgment.
In reaching this conclusion the Court has considered all the evidence and arguments of counsel, regardless of whether or not they are specifically referred to in this Opinion.
It is ORDERED that the Motion for Summary Judgment be, and is hereby, DENIED. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8493311/ | *178
ORDER DENYING REQUEST FOR SANCTIONS
ARTHUR N. VOTOLATO, Bankruptcy Judge.
Heard on November 27, 2001, on the Debtor’s request for sanctions against Creditor Robert Conrad and his attorney.1 Based on the discussion and the reasons given below, the request is DENIED.
BACKGROUND
On or about April 27, 2001, Creditor Robert Conrad, Andrew Richardson, Esq., the Chapter 7 Trustee, and one other creditor filed separate objections to the Debt- or’s claimed exemptions. The Debtor responded to each objection and on May 4, 2001, propounded interrogatories to Conrad. Conrad’s counsel at that time, Andrew Richardson, Esq., did not respond to the discovery request, but in early July Richardson informed Debtor’s counsel that he would probably be representing the Chapter 7 Trustee, and in that event Conrad would be withdrawing his objection. On July 12, 2001, the Trustee filed an application to employ Richardson as his attorney, to which the Debtor objected. On August 8, 2001, prior to the hearing on the Trustee’s application to employ counsel, the Debtor filed a motion to compel Conrad to comply with his outstanding discovery request. On August 14, 2001, after hearing, the application to employ was approved.
On August 27, 2001, after he was hired as attorney for the Trustee, Richardson withdrew Conrad’s objection to exemption, in accordance with his prior advice to Debtor’s counsel. On August 28, 2001, the Debtor’s Motion to Compel was granted administratively, pursuant to R.I. LBR 9013 — 2(a)(1). The Debtor requests sanctions for filing the motion to compel, and for Conrad’s failure to supply the requested discovery.
DISCUSSION
Rule 37 of the Federal Rules of Civil Procedure, which is incorporated into bankruptcy,2 states in relevant part:
(4) Expenses and Sanctions.
(A) If the motion is granted or if the disclosure or requested discovery is provided after the motion was filed, the court shall, after affording an opportunity to be heard, require the party or deponent whose conduct necessitated the motion or the party or attorney advising such conduct or both of them to pay to the moving party the reasonable expenses incurred in making the motion, including attorney’s fees, unless the court finds that the motion was filed without the movant’s first making a good faith effort to obtain the disclosure or discovery without court action, or that the opposing party’s nondisclosure, response, or objection was substantially justified, or that other circumstances make an award of expenses unjust.
Fed.R.Civ.P. 37(a)(4).
Reviewing the facts in the context of Rule 37, I find that sanctions are not warranted in this instance, based on the guidelines furnished in the Rule. Prior to the Debtor filing the Motion to Compel, Richardson informed Debtor’s counsel that he expected to be employed as Trustee’s counsel, and in that event would be with*179drawing Conrad’s objection. With Conrad’s objection withdrawn, the need for discovery became moot as there was no longer an issue in controversy between Conrad and the Debtor. As he had promised Debtor’s counsel, Richardson withdrew Conrad’s objection shortly after being approved as counsel to the Chapter 7 Trustee. Almost simultaneously, in the absence of any objection, the Debtor’s motion to compel was granted by rule of Court. Administrative approval by the Clerk of the motion to compel was improvident, since the objection had been withdrawn on the previous day, and it is therefore VACATED. Without a showing that Conrad and/or his counsel acted in bad faith or with improper motive in this limited, and now ended, legal skirmish with the Debtor, the Motion for Sanctions is DENIED both as to Conrad and Richardson.
. At the hearing I learned for the first time that Fed. R. Bankr.P. 7037(a)(4) is the basis for the Debtor's motion. The motion itself is devoid of citation to any legal authority, and in hindsight should have been denied on the papers, without a hearing.
. See Fed. R. Bankr.P. 7037. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8493313/ | MEMORANDUM TO THE PARTIES
PAUL MANNES, Bankruptcy Judge.
This case came before the court for a pre-trial conference. First of America Bank, now known as National City Bank, did not file an answer, and the Clerk entered a default as to it. Apparently being ignorant of what counsel did on its behalf in state court, Defendant filed a proof of claim for an unsecured claim without priority.
The effect of the Defendant’s default is that the facts of the complaint, but not conclusions, are assumed by this court to be true for the purposes of this decision. In re Goycochea, 192 B.R. 847 (Bankr.D.Md.1996); In re Carroll, 237 B.R. 872 (Bankr.D.Md.1999). On review, a defaulting party may contest the sufficiency of the complaint, not the sufficiency of the evidence in support of the judgment. Thus, the issue remains as to what relief, if any, Plaintiff is entitled to.
The facts are as follows. On October 28, 1996, a judgment was recorded of $7,775.85 in the Circuit Court for Montgomery County, Maryland, that attached to the interest of the Debtor in certain real property located at 16 Maxim Lane, Rock-*252ville, Maryland. Debtor filed this bankruptcy case under Chapter 7 on November 7, 1996. Upon Debtor’s request, the case was converted to a case under Chapter 13 by Order entered April 21, 1997. Debtor filed this action to avoid the lien as a preferential transfer.
There is no question that pursuant to 11 U.S.C. § 547(b) the Chapter 13 Trustee could avoid the fixing of the lien, as it was accomplished within 90 days before the filing of the petition. But the plaintiff in this adversary proceeding seeking to avoid the preferential transfer is the Debtor and not the Trustee. The statutory authority for Debtor’s ability to avoid a transfer is found in §§ 522(h) and (i) that provide:
§ 522. Exemptions
(h) The debtor may avoid a transfer of property of the debtor or recover a setoff to the extent that the debtor could have exempted such property under subsection (g)(1) of this section if the trustee had avoided such transfer, if—
(1) such transfer is avoidable by the trustee under section 544, 545, 547, 548, 549, or 724(a) of this title or recoverable by the trustee under section 553 of this title; and
(2) the trustee does not attempt to avoid such transfer.
(i) (1) If the debtor avoids a transfer or recovers a setoff under subsection (f) or (h) of this section, the debtor may recover in the manner prescribed by, and subject to the limitations of, section 550 of this title, the same as if the trustee had avoided such transfer, and may exempt any property so recovered under subsection (b) of this section.
(2) Notwithstanding section 551 of this title, a transfer avoided under section 544, 545, 547, 548, 549, or 724(a) of this title, under subsection (f) or (h) of this section, or property recovered under section 553 of this title, may be preserved for the benefit of the debtor to the extent that the debt- or may exempt such property under subsection (g) of this section or paragraph (b) of this subsection.
Given that the Trustee has not sought to avoid the transfer, the issue is whether the Debtor could have exempted the property. Debtor’s power to avoid a lien under this section is limited by 11 U.S.C. § 522(j) that provides:
(j)Notwithstanding subsections (g) and (i) of this section, the debtor may exempt a particular kind of property under subsections (g) and (i) of this section only to the extent that the debtor has exempted less property in value of such kind than that to which the debtor is entitled under subsection (b) of this section.
Debtor’s claim of exemptions amounted to $5,361.00. No party objected to Debtor’s Schedule of exemptions. Therefore, the property claimed by the Debtor as exempt is exempt. 11 U.S.C. § 522(l). Taylor v. Freeland & Kronz, 503 U.S. 638, 112 S.Ct. 1644, 118 L.Ed.2d 280 (1992).
Finally, the court will consider what the result would be if the Debtor were to avail himself of the maximum exemption allowable in the real property subject to § 522(j). Debtor owns a one-half interest in real property as a tenant in common that he values at $151,800.00. The proof of claim filed on behalf of PNC Mortgage Corporation of America, the holder of the only lien on the property, is in the amount of $90,171.24, for an equity of $69,628.76 in the property. Debtor’s one-half share gives him a net equity in the property of $38,814.38. The remaining unused amount of exemption available to him is $1,039.00. *253In re Barnes, 117 B.R. 842, 845 (Bankr.D.Md.1990). The Debtor’s avoidance power is limited to this, the amount of exemption available to him.
An appropriate order will be entered. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8493314/ | MEMORANDUM
DAVID T. STOSBERG, Chief Judge.
The Trustee, Wm. Stephen Reisz, filed this adversary proceeding to recover from Napus Federal Credit Union (“Napus”) a preferential transfer which Napus received within ninety (90) days of the bankruptcy filing. Napus filed a motion to dismiss the Trustee’s complaint on the theory that because Napus paid off the debtor’s credit card account with Fleet Credit Card Services (“Fleet”), no “transfer of an interest of the debtor” occurred and thus the threshold requirement of 11 U.S.C. § 547(b) is lacking. Because we reject Napus’ position, we have overruled Napus’ motion to dismiss the Trustee’s Complaint.
Factual Background
According to the Trustee’s Complaint, in April 2000, the debtor opened a new credit card account with Fleet. The debtor then instructed Fleet to pay a credit card debt she owed to Napus, presumably to obtain a lower interest rate. On April 20, 2000, within ninety (90) days of the filing on June 8, 2000, Fleet transferred $6,494.34 to Napus. The Trustee seeks a judgment avoiding the transfer and recovering the money received by Napus as a preferential transfer.
Legal Discussion
We address the precise question of whether payment by Fleet to Napus qualifies as a “transfer of an interest of the debtor in property.”
11 U.S.C. § 547(b) provides that the trustee “... may avoid any transfer of an interest of the debtor in property ...”. Citing to the case of In re Van Huffel Tube Corp. 74 B.R. 579 (Bankr.N.D.Ohio 1987), Napus argues that the “fundamental inquiry is whether the transfer diminished or depleted the Debtor’s estate.” Napus argues that because the transfer of funds from Fleet to Napus did not diminish the debtor’s estate, but simply substituted one creditor for another, no preferential transfer occurred. Napus’ argument centers upon the “earmarking doctrine” which provides that “a payment to a creditor by a third party is generally not a preference since the payment is not made out of assets of the Debtor.” Id. at 585. But Van Huffel emphasizes that in order *266for the earmarking doctrine to apply as a defense to a preference action, the defendant must demonstrate that “the Debtor had a lack of dispositive control over the funds in question.” Id. (citing Coral Petroleum, 797 F.2d at 1362). In Van Huf-fel, because the Debtor controlled to whom the funds were paid, the earmarking doctrine did not apply as a defense to the preference action. Id. at 586. In other words, if the debtor decides which creditor is paid, the proceeds were not “earmarked” by the new lender for repayment of the existing loan, and thus, the proceeds still constitute “an interest of the debtor in property” avoidable under § 547(b). In re Spitler, 213 B.R. 995, 998 (Bankr.N.D.Ohio 1997).
The Court of Appeals for the Sixth Circuit addressed the “dominion and control” concept of the earmarking defense in a preference case involving an elaborate check kiting scheme. In re Montgomery, 983 F.2d 1389 (6th Cir.1993). In Montgomery, the debtor used the proceeds from unauthorized loans to repay certain debts to the defendant bank. Id. The Court of Appeals held that because the debtor controlled which creditor was paid, the earmarking doctrine did not apply as a defense to the preference action. Id. at 1395.
We adopt the Spitler case as our guide as that case involved the debtor’s use of convenience checks from one credit card company to pay off an existing credit card debt. In re Spitler, 213 B.R. 995 (Bankr.N.D.Ohio 1997). This case is no different. The debtor opened a new credit card account with Fleet and instructed Fleet to pay the credit card debt she owed to Na-pus. See Trustee’s Complaint at *1-2. Napus failed to show that this debtor lacked dispositive control over the payment of the funds she received from Fleet. See Spitler, 213 B.R. 995, 998 (Bankr.N.D.Ohio 1997), In re Safe-T-Brake of South Florida, Inc., 162 B.R. 359, 365-66 (Bankr.S.D.Fla.1993), In re Getman, 218 B.R. 490, 493 (Bankr.W.D.Mo.1998), and In re Hurt, 202 B.R. 611, 612 (Bankr.C.D.Ill.1996) (for cases applying the “dominion and control” test to the application of the earmarking defense).
Our holding also furthers the objectives of the preference provision as the transfer of funds to Napus disturbed the Code’s equitable distribution principles. See, e.g., In re Adams, 240 B.R. 807 (Bankr.D.Maine 1999)(citing, In re Bohlen Enters., Ltd., 859 F.2d 561 (8th Cir.1988)). The debtor’s estate was depleted by the payment to Napus (the preferred creditor) instead of distribution of this money equally among the unsecured creditors. See Spitler, 213 B.R. at 999 (citing, Montgom-ei"y, 983 F.2d at 1396).
Conclusion
Based on the above analysis, the court has entered an order overruling Napus’ motion to dismiss and rescheduling this adversary proceeding for a pre-trial conference. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489434/ | MEMORANDUM OPINION AND ORDER
RICHARD L. SPEER, Bankruptcy Judge.
This cause came before the Court upon Plaintiff’s Complaint to Determine Dis-chargeability of Debt.
Plaintiff states that the issue of the Debtor’s fraudulent conduct was fully adjudicated in the state court. Plaintiff was awarded a Summary Judgment on the allegation of fraud by the Auglaize County Court of Common Pleas on January 10, 1980. The Defendant, Mr. Mader, opposed *119the Motion for Summary Judgment, then appealed the ruling of that Court to the Third District Court of Appeals. Both parties submitted lengthy briefs; the Third District Court of Appeals in a Memorandum Opinion affirmed the judgment of the lower court on May 20, 1980. Plaintiff seeks to have this Court grant judgment upon the doctrine of res judicata.
Defendant argues that because the wording of the state court judgments does not track the same wording of Bankruptcy Code Section 523(a)(2)(A), that res judicata does not apply.
Upon reviewing the state court pleadings and judgments, this Court finds that res judicata will apply, and therefore, the debt to Bank One of Wapakoneta, N.A. is a nondischargeable debt pursuant to Section 523(a)(2)(A).
It is clear that this Court can look behind a state court judgment in its determination of dischargeability. Brown v. Fel-sen, 442 U.S. 127, 99 S.Ct. 2205, 60 L.Ed.2d 767 (1979). However, in studying the pleadings and judgments in this case, it appears clear that those factors which this Court would look to for its judgment are the same as those considered by the state courts. While it is true that the language of the judgments is not identical to the words found in the Bankruptcy Code, the facts underlying those judgments appear to be those contemplated by Congress when drafting Section 523 of the Bankruptcy Code.
In the interests of judicial economy this Court will not require a duplication of effort on a case that was fully adjudicated in the state courts. It is therefore
ORDERED, ADJUDGED and DECREED that the debt of the Defendant, Statford Mader, is nondischargeable in the amount of Eight Thousand Eight Hundred Thirty-seven and 13/100 Dollars ($8,837.13), plus interest at the rate of eighteen percent (18%) per annum from February 8, 1974.
In so reaching these conclusions, the Court has considered all the evidence presented whether or not referred to specifically in the Opinion above.
It is FURTHER ORDERED that service of this Memorandum Opinion and Order shall be made by the Deputy Clerk of this Court mailing copies of same to all parties in interest and counsel of record in the above adversary proceeding. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489435/ | MEMORANDUM OPINION
MARK B. McFEELEY, Bankruptcy Judge.
This matter came before the Court on September 10, 1982, on the Objection to Jurisdiction in Personam filed by the defendant pro se, the Motion to Object to Jurisdiction Over Subject Matter and Motion for More Definite Statement filed by the defendant pro se, and on the Amended Motion to Dismiss, or, in the Alternative, for Change of Venue filed by the defendant through her attorney, Elizabeth Cunningham.
The facts are as follows. James Anthony Ludlow, the plaintiff in this adversary proceeding, is a debtor in a chapter 7 case pending in this district. The debtor filed an adversary proceeding to recover assets, alleging that the parties were formerly husband and wife, that prior to their marriage they had entered into an antenuptial agreement and asking that certain property or its value be turned over to the debtor-plaintiff. Plaintiff and defendant were married on December 31, 1980, in East Baton Rouge Parish in the State of Louisiana. Defendant has continued to reside in East Baton Rouge Parish. The parties separated on March 23, 1981, at which time the debtor left Louisiana. Thereafter, the marriage was terminated by decree of divorce dealing solely with the parties’ marital status, entered by a New Mexico court on February 22,1982. At the time of the hearing in the matter, the debtor was a resident of the State of Oklahoma although plaintiff’s counsel represented that the plaintiff was intending to return to the State of New Mexico in the near future.
It is well settled in this district that although the bankruptcy court has no jurisdiction to deal with the marital status of parties before this court, it clearly retains jurisdiction to determine matters with respect to property in marital disputes. Dirks v. Dirks (In re Dirks), 5 C.B.C.2d 958, 8 B.C.D. 517, 15 B.R. 775 (Bkrtcy.D.N.M.1981). Accordingly, defendant’s objection to subject matter jurisdiction shall be denied. It is equally clear that this Court has jurisdiction over the defendant.
There remains for determination the question of whether the interests of justice and the convenience of the parties would support this Court’s ordering a change of venue. The considerations in making that determination should be substantially the same as those in determining whether to transfer an underlying bankruptcy proceeding. It is the opinion of this Court that a change of venue is warranted in this instance. The only contact with New Mexico seems to be that the debtor chose to move here and stay long enough to file his bankruptcy petition. All witnesses to be called in this proceeding reside, insofar as it is possible to determine, in East Baton Rouge Parish, Louisiana. All of the property which is the subject of this turnover procedure is physically located in Louisiana and the antenuptial agreement will need to be construed in accordance with the laws of the State of Louisiana. At the time of the hearing in this matter, the debtor was residing in Stillwater, Oklahoma, which, according to the representations of plaintiff’s counsel, was only 100 miles closer to the New Mexico court than to the Louisiana court. It is therefore the opinion of this Court that this case should be transferred to the United States Bankruptcy Court for *141the Middle District of Louisiana, sitting in Baton Rouge, Louisiana.
An appropriate order shall enter. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489436/ | MEMORANDUM OPINION
MARK B. McPEELEY, Bankruptcy Judge.
This matter came before the Court on the Motion to Allow Additional Time to File Complaint Objecting to Dischargeability of Debt filed May 28, 1982, by Robert Lewis. This bankruptcy proceeding was filed in this Court on March 4, 1982. A meeting of creditors pursuant to 11 U.S.C. § 341(a) was held on April 15,1982. The date fixed as the last day for filing of a complaint to determine the dischargeability of any debt pursuant to 11 U.S.C. § 523(c) was fixed as May 17, 1982. Those dates were set forth in a notice entitled “Order for Meeting of Creditors and Fixing Times for Filing Objections to Discharge and for Filing Complaints to Determine Dischargeability of Certain Debts, Combined with Notice Thereof and of Automatic Stay,” which was mailed by the Bankruptcy Court Clerk’s office on March 30, 1982.
The movant, Robert Lewis, is the managing partner of a partnership composed of Robert Lewis, George Bunn, and William Benisch. This partnership had instigated a third-party complaint against the debtors in the Circuit Court of Crawford County, Wisconsin. The partnership was represented in that action by Jerry Ott, Esq. According to the affidavit of Jerry Ott, he was informed at a pretrial conference in the Wisconsin state court proceeding on March 10, 1982, by the attorney for the debtors that a bankruptcy petition had been filed.
*142Notice to the partnership was sent to Mr. Ott as its attorney. Thereafter, on May 28, 1982, some eleven days after the date fixed as the last date for the filing of a complaint to determine the dischargeability of a debt, the above motion was filed. It should further be noted that the grounds upon which movant seeks to file a complaint objecting to the dischargeability of a debt are the same grounds set forth in the Wisconsin state court action for which wrong Mr. Ott had been retained to represent the partnership.
There was no showing by movant at the hearing on this motion of excusable neglect. The only issue raised was whether or not the service of notice of the meeting of creditors and last date for filing a complaint to determine the dischargeability of a debt upon counsel for the partnership, and not upon the individual partners, was sufficient notice to the partnership and the partners. In light of the facts of this matter, in that Mr. Ott was retained by the partnership for the purpose of proceeding against these debtors on the identical grounds now sought to be argued in this Court as the basis for finding that the debt to Mr. Lewis is nondischargeable, it seems to this Court that service upon Mr. Ott was sufficient service to put the partnership and the partners on notice of the dates fixed by the Court. That being the case, the Court will find that the motion for extension of time was not timely filed and that there has been no showing of excusable neglect. The motion therefore will be denied.
An appropriate order shall enter. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489437/ | DECISION
BURTON PERLMAN, Bankruptcy Judge.
Defendants, debtors in the related joint Chapter 7 case, are being sued by plaintiff, The New Richmond National Bank, (hereafter “Bank”), a creditor of defendants. The objective of the complaint filed by plaintiff is for a judgment on grounds that the debt owed it by defendants is nondischargeable. The case came on for a bench trial, at the conclusion of which we reserved decision.
Because they are admitted in the answer, the following facts set out in the complaint are to be taken as true. Thus, debtors are obligated to plaintiff on two delinquent accounts in the amount of $2,088.78 and $7,254.25 respectively. These debts arose in connection with the purchase by defendants of a truck and an automobile, plaintiff being secured in its two debts by these two vehicles.
It is the position of plaintiff that their debts should not be discharged, pursuant to 11 U.S.C. § 523(a)(2)(A), because the debts were incurred by false pretenses and repre*147sentations. It would appear that plaintiff is relying also upon § 523(a)(2)(B) because the testimony at the trial centered largely around the circumstances surrounding the completion, to the extent that they were completed, of two loan applications regarding defendants. Particularly in issue is the information contained therein regarding home ownership by these defendants.
The first loan application bears the date January 15, 1981. It is signed only by defendant Paul Blair. This application was filled out in the living room of defendants, the information being taken by one Henderson, who was selling defendants a vehicle. Apart from name, residence, and employer information, the application contains only a description of the vehicle. The application contains an entry that defendants own their home and that there is no mortgage on it. Henderson did not testify at the trial. The Blairs testified that Paul Blair signed the blank form, and Henderson said that he would fill it out later, and evidently he did so.
The second application was attended to at the Bank. Defendants went there and met with John Greer, a vice president of the Bank in January 1982. During the interview, which lasted some 15 or 20 minutes Mrs. Blair left to get her check stubs and unemployment record because Greer indicated that he wanted to see them. Greer spent some time on the telephone on other matters while defendants were there. In addition to the foregoing, we find as a fact that Greer in extending the loan relied upon the fact that defendants had had thirteen or fourteen prior loans with the Bank and these had always been repaid. The loan application contains the number “15,-000.00” along side the word “home”. The second application was not signed by either of the Blairs. At the trial, Greer testified that defendants told him that they owned their home. There is a conflict in the testimony, for the Blairs deny having said this. In fact, at that time defendants did not own their home, having transferred it to their daughter in 1978.
In In re Hospelhorn, 18 B.R. 395, 5 C.B. C.2d 660, 662 (Bkrtcy.S.D.Ohio, 1981) we stated the pertinent law applicable to § 523(a)(2)(A) as follows:
“To establish a claim for obtaining money or property by false representation under Sec. 17(a)(2) of the Bankruptcy Act, plaintiff must prove (1) that the claimed representations were made; (2) that at the time they were made defendant knew they were false; (3) that they were made with the intention and purpose of deceiving plaintiff; (4) that plaintiff relied on such representation; and (5) that the creditor (here plaintiff) sustained the alleged loss and damage as the proximate result of the representations having been made. In re Taylor 514 F.2d 1370, 1373 (9th Cir.1975), citing and approving Sweet v. Ritter Finance Co. 263 F.Supp. 540, 543 (W.D.Va., 1967).”
It should be noted that § 523(aX2)(B) regarding a false statement in writing in the statute itself contains the elements that the statement be materially false, that there be reasonable reliance, and that the statement was made with intent to deceive.
After carefully considering the evidence in this case, we conclude that intent to deceive and reliance were not proved by plaintiff, certainly not sufficiently to meet the standard of clear and convincing evidence which is required of a plaintiff in a case such as this. There is nothing in the record other than the bare statement of a bank officer that he “relied” upon the representation of home ownership in making the loan, to support the proposition that the loan would not have been made in the absence of such a representation. It accords with common experience that the Bank would rely upon the many prior loans that defendants had taken and repaid. Furthermore, we are satisfied that the plaintiff was swayed by the income situation of defendants. We are not persuaded that a misrepresentation on the occasion of the loan in 1982 regarding home ownership was in fact made. The testimony regarding the interview, its brevity, the interruptions on the telephone, the absence of any signature on the loan application by either defendant, *148suggests an atmosphere of haste and inattention. This atmosphere would be enhanced by the knowledge of prior successful loan repayments as well as by the fact that what was being considered was a secured loan, collateralized by the vehicle being purchased by defendants.
In the light of the foregoing review, we find for defendants on the issues raised in the complaint, and will order a dismissal of the complaint.
The foregoing constitutes our findings of fact and conclusions of law. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489438/ | MEMORANDUM OPINION
C.E. LUCKEY, Bankruptcy Judge.
Plaintiff, First Interstate Bank of Oregon, N.A. (Bank), seeks relief from the automatic stay relating to security interest in three parcels of real property securing two notes.
One note relates to an original June, 1981, loan of $57,000 secured only by a first mortgage on property the parties refer to as the Zamarano property consisting of about 45 acres. When purchased by the defendant-debtor for $80,000 about four years ago, the property was timberland from which the timber has been substantially removed by the debtor-defendant, who estimated the cut therefrom at from 350,000 to 400,000 board feet. The balance due Bank on the note is $18,293.82 with interest at 22% from February 5,1982 until paid. As of the date of trial, November 15, 1982, the balance was $21,414.27.
Testimony of plaintiff’s witness Donald W. Michael valued this parcel at a total value of $14,725. The defendant in his testimony placed a possible value of $60,000 on it. The defendant’s value was based upon a good economic times situation for use as a building site which current conditions do not support.
The Court finds a reasonable value of the property to be approximately $20,000. Taxes are approximately two years in arrears and interest is accruing against the equity, if any, at 22% per annum. The property has been logged, and the principal business activity of the debtor is logging, and the *157defendant has not met his burden of showing the necessity of the property for his reorganization nor has any means of adequate protection been offered. As to this parcel the plaintiff may present an order granting relief from the automatic stay.
The second note, in September, 1981, was for $205,000 with a balance testified to by Evelyn Purkey, plaintiff’s employee, being $252,653.46, this sum bearing interest at 22% per annum. Security for the obligation is a first mortgage on property identified by the parties as the Owens Creek property consisting of approximately 100 acres, mostly timberland, with a small portion being agricultural land upon which is located a house and mobile home. This second note is also secured by a second trust deed junior to a land sale contract on property identified by the parties as the Tokatee property.
The defendant testified that the purchase price of the Owens Creek property was $235,000 including the improvements thereon, and that the property when purchased had about 500,000 board feet of merchantable timber thereon, from which he has removed a substantial portion. He testified that he believed the present value to be about $150,000.
Plaintiff’s witness Wayne Haslett testified that the Owens Creek property was about 90% logged off and not rehabilitated. Plaintiff’s memorandum does not seriously challenge the $150,000 value for the Owens Creek property, but contends that the remaining junior security interest in the To-katee property is not sufficient to fully secure the second note. This Court agrees. Furthermore, the Owens Creek property has been substantially logged and the defendant has not met his burden of showing need for the property in support of an effective plan of reorganization, and no plan of reorganization has been submitted although the debtor’s Chapter 11 case was filed February 26, 1982. The plaintiff may submit a proposed order granting relief from the automatic stay relating to the Owens Creek property.
Plaintiff urges only that with reference to the Tokatee property, it be accorded adequate protection as a secured creditor. The first lien holder holding the land sale contract interest in the property holds an outstanding contract balance agreed upon as approximately $116,000.
Defendant testified that the Tokatee property consisting of about 120 acres unimproved forest land has not been logged, and that he purchased it for about $230,000, but that he believed the current depressed stumpage values should make the present worth of the property approximately $200,-000. Taxes are reported to be about two years in arrears. This would result in the plaintiff being inadequately secured on the second note balance but the plaintiff does not oppose in its memorandum the defendant’s continued use of the property if it be accorded adequate protection of its interest. The underlying land sale contract obligates 60% of the proceeds of logging from the Tokatee land to the land sale contract holder until the contract is reduced to $80,000, with the remainder unobligated. Defendant contends that adequate protection may be accorded plaintiff’s interest in the Toka-tee property which the defendant asserts he intends to soon log and which is necessary to any plan of reorganization.
Plaintiff in the pre-trial order and in its memorandum concedes that there is merit to allowing defendant to retain for logging the Tokatee property upon adequate protection of plaintiff’s interest.
Defendant proposes to provide adequate protection by granting to plaintiff a security interest in unobligated proceeds of log sales as further security.
The essence of adequate protection provided under Section 361 of the Bankruptcy Code is the assurance of the maintenance, and thus recoverability of the lien value during the interim between the filing of the petition and confirmation of a plan of reorganization or dismissal, which the automatic stay is designed by the statutory scheme to accomplish in appropriate situations. See In re Pine Lake Village Apartment Co., 19 B.R. 819, 825 (Bkrtcy., S.D.N.Y.1982); In re Alyucan Interstate Corp., 12 B.R. 803, 808 (Bkrtcy., D.Utah 1981).
*158The defendant’s proposal to grant adequate protection by providing an additional security interest from funds which might otherwise be available to unsecured creditors in the event of ultimate liquidation should not be implemented until unsecured creditors have notice and opportunity to be heard relating to such grant.
As to the Tokatee property, therefore, the defendant may submit an order modifying the stay to provide that it shall remain effective for not to exceed 30 days to enable the defendant to accomplish the proposed provision for adequate protection to the plaintiff, or the treatment of the plaintiff’s interest in a plan of reorganization which will make provision therefor. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489439/ | OPINION
EMIL F. GOLDHABER, Bankruptcy Judge:
The issue before us is whether we should grant relief from the automatic stay imposed by section 362(a) of the Bankruptcy Code (“the Code”) to permit the lenders to foreclose upon certain real property of the debtor. We conclude that the lenders are entitled to such relief because we find that the debtor lacks equity in the property in question and because the property is not necessary to the debtor’s reorganization.
The facts of the instant case are as follows: 1 On August 3, 1979, the Fidelity America Mortgage Company (“the debtor”) executed and delivered to Irving Alter, Alvin Lapidus, P.A., and the United Funding Corporation (“the lenders”) a deed of trust to premises located at 412-420 West Redwood Street, Baltimore, Maryland (“the Redwood Street property”) to secure the repayment of a loan made between the aforesaid parties in the principal amount of $300,000.00. On the same day, the Fidelity America Financial Company (“FAFCO”) executed and delivered to the lenders its guarantee of the abovementioned obligation.2 In December, 1980, the lenders declared the deed of trust to be in default and initiated foreclosure proceedings against the Redwood Street property. Those foreclosure proceedings were automatically stayed on February 4,1981 when the debtor filed a petition for reorganization under chapter 11 of the Code. On May 13, 1981, the lenders filed the instant complaint to terminate the automatic stay in order to be able to proceed, once again, with foreclosure on the subject premises. The lenders allege that the debtor has no equity in the property in question and that the debtor continues to use said property without adequate protection of the lenders’ interest therein.
Section 362(d) provides the conditions to be met in order for a party in interest to be entitled to relief from the automatic stay provisions of that section:
(d) On request of a party in interest and after notice and a hearing, the court shall grant relief from the stay provided under subsection (a) of this section, such as by terminating, annulling, modifying, or conditioning such stay.—
(1) for cause, including the lack of adequate protection of an interest in property of such party in interest; or
(2) with respect to a stay of an act against property, if—
(A) the debtor does not have an equity in such property; and
(B) such property is not necessary to an effective reorganization.
11 U.S.C. § 362(d).
Section 362(g) allocates the burden of proof in a complaint for relief from the stay and provides:
(g) In any hearing under subsection (d) or (e) of this section concerning relief from the stay of any act under subsection
(a) of this section—
(1) the party requesting such relief has the burden of proof on the issue of the debtor’s equity in property; and
(2) the party opposing such relief has the burden of proof on all other issues.
11 U.S.C. § 362(g).
As to the value of the real property in question, the chairman of the board of the debtor testified that the fair market value of the premises is, in his opinion, somewhere between $500,000.00 and $800,-000.00 (N.T. 7/8/81 at 24). The lenders’ expert witness, on the other hand, testified that the property has a fair market value between $272,500.00 and $348,000.00 (N.T. 6/23/81 at 17-19). In weighing this conflicting testimony, we accept the appraisal *173of the lenders’ witness as being more reliable in view of the fact that that witness is a qualified and disinterested appraiser (N.T. 6/23/81 at 9-11) while the qualifications of debtor’s chairman amount to his testimony that he financed the owner and principal tenant of the building and that he visited the premises on a number of occasions (N.T. 7/8/81 at 24). See In re Kaufman, 24 B.R. 498, 500 (Bkrtcy.E.D.Pa.1982). We disagree with the debtor’s contention that an accurate resolution of the fair market value can only be obtained by offering the premises for sale for over a reasonable period of time. In determining the fair market value of the subject property, we are bound by the testimony, rather than by what may happen at a future time.
As to whether the debtor has equity in the property in question, we note that all encumbrances against the subject property are to be considered when determining whether an equity cushion exists in that property. In re Kaufman, supra; In re Mikole Developers, Inc., 14 B.R. 524 (Bkrtcy.E.D.Pa.1981). In addition, the costs of foreclosure and sale, including brokerage, escrow and title costs, are also to be taken into consideration in determining whether there is any equity in the encumbered premises. In re Pitts, 2 B.R. 476 (Bkrtcy.C.D.Cal.1979). Having already accepted the lenders’ estimation of the fair market value of the subject property, a conservative analysis of the encumbrances against the property clearly indicates that there is no equity therein regardless of whether the property is valued at $272,500.00 or $348,000.00.3 Moreover, we need not consider whether the property in question is necessary to the debtor’s reorganization since the debtor concedes that if no equity exists in the subject property, that property is of no value to its ultimate reorganization.4 Consequently, since the debtor has no equity in the property in question and since the subject property is not necessary to the debt- or’s reorganization, we conclude that the lenders are entitled to a modification of the automatic stay pursuant to section 362(d)(2) of the Code.5
. This opinion constitutes the findings of fact and conclusions of law required by Rule 752 of the Rules of Bankruptcy Procedure.
. Fidelity America Financial Corporation is the parent company of Fidelity America Mortgage Company (N.T. 7/8/82 at 24).
.Obligations secured by the deed of trust as of 8/3/81:
$300,000.00 (loan principal)
36,000.00 (interest on loan principal, 9/30/80-5/3/81)
7,000.00 (foreclosure expenses)
10,000.00 (renewal fee for deed of trust)
4,000.00 (late charges)
600.00 (ground rent)
22,558.90 (taxes)
3,609.31 (water and sewer charges to 4/1/81)
850.00 (quarterly charges for unpaid water and sewer charges)
$384,618.21 (minimum amount secured by the lenders’ deed of trust)
Even if, as the debtor contends, we subtract from the $384,618.21 the $30,825.25 of rent withheld by the tenant of the premises at the lenders’ instructions (N.T. 6/23/81 at 39; N.T. 7/8/81 at 20), the resulting obligation is still greater than the fair market value of the property.
. See debtor’s brief in opposition to complaint to terminate automatic stay at p. 3.
. Section 362(d) permits modification of the automatic stay upon alternative grounds. Relief may be granted under § 362(d)(1) upon a finding that a debtor’s interest in property is not adequately protected or under § 362(d)(2) upon a finding that the debtor has no equity in the property and that that property is not necessary to an effective reorganization. See In re Schramm, 12 B.R. 608 (Bkrtcy.E.D.Pa.1981); In re Heath, 9 B.R. 665 (Bkrtcy.E.D.Pa.1981); In re High Sky, Inc., 15 B.R. 332 (Bkrtcy.E.D.Pa.1981). | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489440/ | MEMORANDUM OPINION AND DECISION
LOREN S. DAHL, Bankruptcy Judge.
The above two adversary proceedings came on for hearing August 20,1982, ROBERT CRAIG ISELEY, ESQ., of Plefka & Iseley appearing for plaintiffs, and MARTIN B. BRIFMAN, ESQ., of Cooper, Brif-man & Cochrane appearing for defendants. The plaintiffs in each case were substituted as trustee on certain deeds of trust on or before April 25, 1982, and bring these proceedings in their capacity as said trustee. Defendants contend that the aforesaid plaintiffs lack standing to bring the actions, urging that the actions should be commenced by the real parties in interest; namely, the beneficiaries of said deeds of trust. The parties have filed memoranda of points and authorities and have submitted the matter for decision.
ISSUE
Is the trustee under a deed of trust a party in interest as defined in Federal Rules of Civil Procedure, Rule 17(a), for the purposes of pursuing relief from the automatic stay.
DISCUSSION
The trustee under a deed of trust is a party in interest in a proceeding seeking relief from the automatic stay. Such a trustee is an indenture trustee under the Code [11 U.S.C. 101(22) and (23)], and has recognized rights expressly detailed in Chapter 11 [11 U.S.C. §§ 1121,1109]. California statutory law [Code of Civ.Proc., § 725a] gives the trustee under a deed of trust the right to bring an action for judicial foreclosure and such provision falls within the expansion of the party in interest definition found in the second sentence of Rule 17(a).
The issue raised by the objections of the trustee for GOLDEN PLAN concerns the standing of a substituted trustee under a deed of trust — is such a trustee a party in *185interest as required by Federal Rules of Civil Procedure, Rule 17(a) [Applicable to the Bankruptcy Court by Bankruptcy Rule 717]. Rule 17(a) provides as follows:
(a) Real Party in Interest. Every action shall be prosecuted in the name of the real party in interest. An executor, administrator, guardian, bailee, trustee of an express trust, a party with whom or in whose name a contract has been made for the benefit of another, or a party authorized by statute may sue in his own name without joining with him the party for whose benefit the action is brought; ...
The real party in interest requirement is an expression of the constitutional requirement of cases and controversies for jurisdiction in Federal Court. This is to insure that the party bringing the action has a sufficient interest in the proceeding to diligently advance the case. With narrow exceptions, there must be a personal interest, financial or otherwise, or stake in the plaintiff for the action to proceed.
The trustee for GOLDEN PLAN has objected that the trustee under a deed of trust is not a real party in interest due to his limited obligations and duties under a deed of trust. Under the Bankruptcy Code, a trustee under a deed of trust is defined as an indenture trustee. “(22) ‘indenture’ means ... deed of trust ... under which there is outstanding a security, ..." 11 U.S.C. Section 101. “(23) ‘indenture trustee’ means trustee under an indenture; ...” 11 U.S.C. Section 101. The indenture trustee has a right to file a plan under Section 1121 and has a right to raise, appear, and be heard on any issue in a case under this chapter. [11 U.S.C. § 1109.] While not having all of the obligations and responsibilities of a trustee of an express trust, the trustee under a deed of trust is to conduct the sale for the beneficiaries and secure their interests upon a breach of the underlying obligation. Seeking relief from the automatic stay is the first step for the trustee under a deed of trust in completing this obligation when the defaulting obligor has become a debtor and the Section 362 stay is in effect.
Additionally, Federal Rules of Civil Procedure, Rule 17(a), provides alternative grounds for determination of party in interest status. This rule provides “[o]r a party authorized by statute may sue in his own name without joining with him the party for whose benefit the action is brought; ...” [Rule 17(a), Fed.R.Civ.P.] California statutes provide for a trustee under a deed of trust to have the right to bring an action in foreclosure.
The beneficiary or trustee named in a deed of trust or mortgagee named in a mortgage with power of sale upon real property or any interest therein to secure a debt or other obligation, or if there be a successor or successors in interest of such beneficiary, trustee or mortgagee, then such successor or successors in interest, shall have the right to bring suit to foreclose the same in the manner and subject to the provisions, rights and remedies relating to the foreclosure of a mortgage upon such property ....
California Code of Civil Procedure, Section 725a. This language would appear to be an authorization for the trustee to bring suit in his own name to exercise the rights accruing under a deed of truste by the means of a judicial foreclosure. The plaintiffs in the instant action are seeking relief from the automatic stay to pursue their rights under the promissory notes and deeds of trust listed in the complaint. This falls within the express statutory authorization of Civil Code of Procedure, Section 725a, allowing the trustee under a deed of trust to bring a foreclosure action, and therefore, good cause appearing, it is
ORDERED that the defendants’ objections to plaintiffs’ standing to commence and maintain the within adversary proceedings are hereby overruled. The Court observes, however, that plaintiffs’ complaint appears to set forth in paragraph 7 three different classifications of payee beneficiaries; presumably the fact pattern is the same for each of the separate classifications denominated as (a), (b), and (c) of paragraph 7, and if so, the Court believes that separation of these classifications into sepa*186rate adversary proceedings will contribute to case management both for counsel involved as well as the Court.
Rule 42, Federal Rules of Civil Procedure, provides:
(b) The court, in furtherance of convenience or to avoid prejudice, or when separate trials will be conducive to expedition and economy, may order a separate trial of any claim, ... or of any separate issue or of any number of claims, . ..
This language has been interpreted to give the trial court broad discretion in determining whether or not a claim should be severed from pending litigation.
A federal trial court in its discretion may upon its own motion properly separate an issue from others and confine the introduction of evidence to that separated issue alone if the court in the exercise of reasonable discretion thinks that course would save trial time or effort or make the trial of other issues unnecessary ... whether there should be severance and separate trial of an issue is primarily a question concerning the court’s trial procedure and convenience, not a question concerning the merits of the whole case,
Richmond v. Weiner, 353 F.2d 41, 44 (9th Cir.1965), cert. denied 384 U.S. 928, 86 S.Ct. 1447, 16 L.Ed.2d 531, rehearing denied 384 U.S. 994, 86 S.Ct. 1885, 16 L.Ed.2d 1011.
It is well within the discretion of this trial court to determine that in order to avoid prejudice to both parties, save trial time and effort while avoiding needless confusion, and to best present the claims for classification, severence of the claims is proper. Accordingly, and for the foregoing reasons, it is
ORDERED that plaintiffs amend their existing complaints so as to set forth only one classification of payee beneficiaries and to file additional adversary complaints for each additional classification and to serve counsel for the defendants with copies thereof. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489441/ | *222DECISION
BURTON PERLMAN, Bankruptcy Judge.
Plaintiff trustee in the above captioned adversary proceeding has filed a complaint in which he seeks a declaratory judgment to determine whether he must pay certain federal income taxes. Defendant has filed a motion to dismiss the complaint.
Plaintiff is the duly appointed trustee of the estate of the corporate debtor in the related case. The debtor was not operating and on February 14, 1980 filed a petition under Chapter 7, Liquidation, of the Bankruptcy Code. During the pendency of the case, plaintiff deposited into interest bearing accounts, pursuant to 11 U.S.C. § 345(a), certain funds which he received in his capacity as trustee from the liquidation of debtor’s assets. During the calendar year 1981, these funds accrued interest in the amount of $3,131.37.
The complaint filed by the plaintiff, trustee of a Chapter 7 corporate debtor which is not operating, seeks a declaration that plaintiff need not pay income taxes to the United States upon interest derived from monies which the trustee has invested during the pendency of the case.
Defendant United States contends in the motion to dismiss pursuant to Bankruptcy Rule 712 and Rule 12 of the FRCP that plaintiff’s complaint does not state a claim upon which relief can be granted since § 6012(b)(3) of the Internal Revenue Code requires the filing of a return on income earned by a trustee who holds title to all the property of a bankrupt corporation. The trustee contends in opposition that since the corporation had already ceased doing business, the monies earned from the placing of liquid assets in an interest bearing account are not corporate income. Therefore the return filed by the trustee was not a return filed on behalf of the corporation, but a return on behalf of the trustee, a separate entity, and not subject to the same determination of tax liability. At hand here are competing considerations. The government contends that the trustee has realized income which in normal and usual course should be subject to tax. The plaintiff trustee asserts that taxation is inappropriate as inconsistent with the objective of maximizing estate funds and thus enhancing the recovery of unsecured creditors without any tax liability. We hold the motion to be well taken, and the trustee obligated to pay the tax in question.
This case arose after the advent of the Bankruptcy Code. The present taxability question arises from the investment by the trustee of the money of the estate pursuant to § 345 of the Code. This authorization in the statute was entirely new and had no antecedent in the Bankruptcy Act of 1898. Section 345(a) provides:
Ҥ 345, Money of Estates.
(a) A trustee in a case under this title may make such deposit or investment of the money of the estate for which such trustee serves as will yield the maximum reasonable net return on such money, taking into account the safety of such deposit or investment.”
The Bankruptcy Code, however, provides no guidance for the tax consequences to a trustee utilizing § 345(a). It seems to us inescapably to follow that the general tax laws of the United States must be applied.
We base our conclusion that the trustee must pay federal income tax on interest directly upon § 6012(b)(3) of the Internal Revenue Code. We are not made aware of any statutory exceptions. That section provides: *223It is clear from the plain language of this statute that the trustee in a case such as that before us is required to file a federal income tax return. With 26 U.S.C. § 6012 must be coupled 26 U.S.C. § 6151 which simply provides that when it is required that a tax return be filed, then the person required to file the return must pay the tax.
*222Ҥ 6012. Persons required to make returns of income.
(b)(3) In a case where a receiver, trustee in a case under title 11 of the United States Code, or assignee, by order of a court of competent jurisdiction, by operation of law or otherwise, has possession of or holds title to all or substantially all of the property or business of a corporation, whether or not such property or business is being operated, such receiver, trustee or assignee shall make the return of income for such corporation in the same manner and form as corporations are required to make such returns.”
*223In arguing for a contrary result the trustee contends, citing In re Samoset Associates, 5 C.B.C.2d 1052, 14 B.R. 408 (B.J.D. Me., 1981), that custodial activities including placing liquid assets in interest bearing accounts constitute activities of the trustee as an entity separate and distinct from those of the debtor, and Samoset holds there is no tax liability to the trustee in such circumstances. This contention of the trustee is without merit. The Samoset ease involved a partnership, not a subject of 26 U.S.C. § 6012, and is thus distinguishable from the case before us.
Accordingly, the motion of defendant United States to dismiss will be granted. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489442/ | MEMORANDUM OPINION AND ORDER
BENJAMIN E. FRANKLIN, Bankruptcy Judge.
This matter came on for confirmation hearing on May 18, 1982. The debtor, Thomas Clifford Duke, appeared by his attorney of record, Maurice B. Soltz of Soltz & Shankland. Missouri Central Credit Union appeared by its attorney of record, Michael H. Berman of Berman, DeLeve, Ku-chan & Chapman. Also appearing was Joseph H. McDowell, Standing Trustee.
The Court sustained an objection to confirmation by Missouri Central Credit Union (Credit Union), and promised a written opinion since the debtor indicated that he would appeal. The parties duly filed suggested findings of fact and conclusions of law. The following constitutes the Court’s written opinion sustaining the Credit Union’s objection to confirmation.
FINDINGS OF FACT
The parties agreed that the facts were virtually undisputed. Based on their suggested findings of fact and conclusions of law, and the file herein, the Court finds as follows:
1.That the Court has jurisdiction over the parties and the subject matter; and that venue is proper.
2. That the debtor, a Missouri resident, and his wife, filed a joint Chapter 7 petition in the Western District of Missouri in September of 1980. The Credit Union filed a Complaint to Determine Dischargeability and Objection to Discharge. After a trial, the Honorable Frank P. Barker, Jr. entered an Order Denying Discharge on January 12, 1980. Judge Barker denied the debtor (but not his wife) a discharge under §§ 727(a)(3) and 727(a)(4); and he did not reach the § 523 issues. The debtor did not appeal that decision.
3. That thereafter, the Credit Union filed a lawsuit against the debtor in the Associate Circuit Court of Jackson County, Missouri; and on March 15,1982, the Credit Union received a judgment for $4,524.86 plus costs.
4. That on that same date, March 15, 1982, the debtor filed the Chapter 13 petition herein. He proposed a plan compromising unsecured debts at ten percent.
CONCLUSIONS OF LAW
I.
Missouri Central Credit Union objected to confirmation on the ground that § 1325(a)(4) had not been complied with. That section states:
Ҥ 1325. Confirmation of plan.
(a) The court shall confirm a plan if—
******
(4) the value, as of the effective date of the plan, of property to be distributed under the plan on account of each allowed unsecured claim is not less than the amount that would be paid on such claim if the estate of the debtor were liquidated under chapter 7 of this title on such date; ”
The Credit Union argued that the value to be distributed through the plan was less than the value that would be received in a Chapter 7, since the debtor would be denied a discharge because of the res judicata effect of the prior denial of discharge. This *243Court previously ruled that § 1325(a)(4) did not prevent the compromise of a debt that would be nondischargeable in a Chapter 7. See In re Syrus, 12 B.R. 605, 4 C.B.C.2d 1172, CCH ¶ 68,310 (Bkrtcy.D.Kan.1981). This Court found that a judgment of non-dischargeability did not insure one hundred percent collectability; and, in fact, that it was impossible to determine the degree of collectability and thus, the value of a non-dischargeable claim.
The facts herein are distinguishable in that the debts were not determined non-dischargeable; rather, the debtor was denied a discharge in toto. However, the Court would face an insurmountable task in determining the collectability of all of the claims listed in the prior Chapter 7. Furthermore, a denial of discharge also does not guarantee collectability of all or even part of the listed debts. Therefore, this Court must deny the Credit Union’s objection with respect to § 1325(a)(4).
II.
The Credit Union argued that the debt- or’s proposal of a Chapter 13 plan within three months after the denial of a Chapter 7 discharge demonstrated that the Plan was not proposed in good faith as required by § 1325(a)(3). The meaning of the good faith requirement has been one of the most litigated issues under the Code. See Cyr, The Chapter IS “Good Faith” Tempest: An Analysis and Proposal for Change, 55 American Bankruptcy L.J. 271 (summer, 1981). The legislative history fails to shed any light on the matter. See H.R. 95-595, 95th Cong., 1st Sess. (1977) 118, U.S.Code Cong. & Admin.News 1978, p. 5787.
Bankruptcy Judge Conrad K. Cyr strongly disagrees with the growing number of courts who construe “good faith” as substantial, meaningful, or at least some minimal amount of repayment to creditors. He contends that good faith has the historical meaning it had under the Bankruptcy Act, that the plan conformed with the provisions, purpose and spirit of Chapter 13.
It appears that the purpose and spirit of Chapter 13 is to give debtors a fresh start with special advantages that a Chapter 7 fresh start does not have. The Chapter 13 debtor retains possession of his property, completely insulates his co-debtors during the life of the plan, and is entitled to compromise certain debts that would be nondis-chargeable in Chapter 7. The price for these advantages is strict compliance with the confirmation requirements of § 1325(a)(3).
Given the liberalness of Chapter 13, this Court held that a lack of good faith would be found in extraordinary circumstances. In re Bixby, 10 B.R. 456, 4 C.B.C.2d 485, CCH ¶ 68,025 (Bkrtcy.D.Kan.1981). There this Court found that the fact that a debtor received a Chapter 7 discharge four years before filing a Chapter 13, alone, was insufficient evidence of a lack of good faith, given the debtor’s current impoverished circumstances.
In In re Syrus, 12 B.R. 605, 4 C.B.C.2d 1172, CCH ¶ 68,310 (Bkrtcy.D.Kan.1981) this Court indicated that when a plan did not provide for substantial or meaningful repayment, that could be an extraordinary circumstance demonstrating a lack of good faith. This Court found that “substantial payment” had to be determined case by case from all the circumstances including: income, minimal living expenses, foreseeable extraordinary expenses, percentage of compromise, and the nature of debts in the plan.
Here the debtor’s plan consists of most of the same debts listed in the prior Chapter 7 plan. Thus, the plan consists of debts previously determined not deserving of discharge because of the debtor’s wrongful conduct. In the interests of comity and full faith and credit, this Court must give credence to Judge Barker’s findings that the debtor committed bad acts under §§ 727(a)(3) and 727(a)(4).
Given the nature of the debts in the plan and the fact that the debtor proposed a low ten percent compromise of unsecured debts, the Court finds that the debtor’s plan fails to provide for substantial or meaningful repayment. Moreover, the Court finds an *244obvious intent to abuse the purpose and spirit of the Code by proposing a Chapter 13 plan just three months after his Chapter 7 discharge was denied. This is not a case where a debt was previously declared non-dischargeable because of the debtor’s misconduct in incurring the debt. The Code allows for the compromise of § 523 debts. Rather, this is a case where the debtor’s misconduct was so pervasive and consuming that he was denied a discharge in toto. The Court concludes that it would be manifestly unjust and inequitable to allow the debtor to compromise the Credit Union’s claim and other unsecured claims at ten (10%) percent just three months later. Accordingly, the Credit Union’s objection to confirmation with respect to § 1325(a)(3) is sustained and confirmation is denied.
IT IS SO ORDERED. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489443/ | MEMORANDUM OPINION AND ORDER
OREN HARRIS, District Judge.
In this cause, the appellant, the United States of America (Appellant), appeals from a ruling of the United States Bankruptcy Court for the Western District of Arkansas, El Dorado Division1, denying the appellant’s objection to the confirmation of the Chapter 13 plan of the debtor-appellees, James H. and Barbara J. Temple (Debtors), and the confirmance of the plan by that court. This Court has jurisdiction of this appeal by virtue of 28 U.S.C. § 1334. All of the records and briefs on this appeal have been filed with this Court. After reviewing the materials and the briefs submitted, the Court is now ready to make a determination on this matter.
STATEMENT OF FACTS
The debtors filed a Chapter 13 bankruptcy petition in the Bankruptcy Court for the Western District of Arkansas, El Dorado Division, Cause No. 81-37, on June 11, 1981. Among the transaction involved in this proceeding are six separate loans that the appellant, acting through the Farmers Home Administration (FHA), made to the debtors, dated October 25, 1977 (when three of the loans were made); May 18,1978; February 7, 1979 and May 18, 1979. The total amount of the loans was $95,000.00, plus interest at rates varying from 3% per an-num to 9V2% per annum. The three notes of October 25, 1977 are partially secured by a first real estate mortgage against a 20-acre tract and a 2-acre tract upon which the dwelling of the debtors is located. Each tract has an agreed fair market value of $20,000.00. All six unpaid notes are secured by a perfected security interest in the farming equipment of the debtors. The fair market value of the farming equipment is $10,860.00.
The unpaid balance of the six FHA loans at the time of the filing of the bankruptcy petition was $89,990.60 principal, plus $19,-396.95 accrued interest. Approximately 90% of this obligation is secured by the first real estate mortgage. No portion of the original debt has been paid by the debtors except for the original sum of $5,500.40 applied against the principal and the sum of $1,010.30 applied against the interest. Four of the six unpaid notes were due prior to the filing of the bankruptcy petition by the debtors.
The appellant has a secured claim in the amount of $50,860.00. This represents the fair market value of the security on the notes, calculated pursuant to 11" U.S.C. § 506(a). This section states that to determine the amount of a secured claim the fair market value of all of the security for a loan is added and applied to the amount of • the indebtedness. The fair market value of the security becomes the secured claim. Any amount in excess of the fair market value becomes the unsecured claim. The *287amount of the unsecured claim in this case is $58,536.55.
The debtors filed with the bankruptcy court their Chapter 13 plan, pursuant to 11 U.S.C. § 1321 et seq. The debtors planned to satisfy the secured claim of the appellant by first surrendering the 20-acre tract and the farm equipment to the appellant, and secondly by paying 60 monthly installments of $406.00 per month. In return, they would retain the 2-acre tract with their residence. These payments would satisfy the $20,000.00 of the secured interest remaining after surrender of the 20-aere tract and the farm equipment. The plan proposed to pay nothing at all on the appellant’s unsecured claims of $58,536.55.
The appellant objected to the plan of the debtors because the debtors proposed to pay nothing on the appellant’s unsecured claim. The appellant pointed out that the plan and the statement of the debtors listed a future monthly gross income of $3,563.00, of which $2,137.80 would be take home pay. Monthly expenses were estimated to be $1,396.00. The debtors planned to pay $600.00 monthly to the trustee. From this, the trustee was to pay $406.00 per month for 60 months on the appellant’s secured claim, the remaining $194.00 was to be used to pay off other secured debts. A secured debt of $3,200.00 owed to the First National Bank of Cros-sett, Arkansas was to be paid in 24 months. At the conclusion of this 24 months, the payments to the trustee are to be reduced to $480.00 per month. This would leave the debtors with an estimated surplus of $261.80 per month. The appellant asserted that some sort of payment against the unsecured debts is required and the failure of the debtors to so provide lacked the “good faith” required by 11 U.S.C. § 1325(a)(3). For this reason the appellant opposed confirm anee of the debtors’ plan.
The Bankruptcy Court, after a hearing on the matter, denied the appellant’s objection and confirmed the plan. The Court found that the requirements of 11 U.S.C. § 1325 for confirmation of the plan were met. The plan was found to have been made in “good faith”. Although the Court recognized that no payments on the unsecured claims were proposed, under the circumstances of the case the Court felt that the plan was proper and confirmed it on October 26, 1981.
The appellant then brought this appeal to this Court, asserting that the ruling of the Bankruptcy Court was erroneous for failing to propose any payment to the unsecured creditors’ claim. Lack of “good faith” is also asserted. The issues before this Court are whether a Chapter 13 plan which does not propose any payments to unsecured claims can be confirmed under 11 U.S.C. § 1325, and whether the plan filed in this case was made in “good faith”. In doing this, the Court will examine the meaning of “good faith” in the context of § 1325(a)(4), and the statutory scheme and purposes of a Chapter 13 plan.
CONCLUSIONS OF LAW
The scheme and purposes of Chapter 13 (of Title 11) of the Bankruptcy Code have been the subject of much litigation. In the case of In re Iacovoni, 2 B.R. 256 (Bkrtcy.D. Utah, C.D.1980), the Bankruptcy Court considered eight Chapter 13 plans. None of the plans proposed payments to the unsecured claimants. That court, like this Court, had to determine whether a plan that proposes no payment to the unsecured claimants meets the “good faith” requirement of 11 U.S.C. § 1325(a)(3). The Utah court found that the plans were not made in “good faith” and refused to confirm them.
In order to determine the objectives and purposes of Chapter 13, the court in Iacovo-ni studied the legislative history surrounding the enactment of Chapter 13 and the provisions for the filing of plans. There, as here, if the proceeding had been a Chapter 7 liquidation, the unsecured claimants would have received nothing. So by making no payments, the debtor would satisfy the requirements of § 1325(a)(4), which minimally requires a payment to unsecured claimants of an amount “not less than the amount that would be paid on such date (the effective date of the plan).” The debtors in the present case, as did the debtors in *288the Iacovoni case, take the position that all § 1325 requires is a payment embodied in § 1325(a)(4), therefore, a plan which provides for no payment to unsecured creditors would be valid and in “good faith” if unsecured creditors would also receive nothing under Chapter 7.
The court in Iacovoni rejected this theory, finding that this rationale would render Chapter 13 meaningless and its purpose would not be met.
“The legislative history (also) reveals that Chapter 13 was devised and promulgated as a vehicle for the voluntary repayment of debts.... in preference to incurring the stigma. and other consequences of Bankruptcy... . ” 2 B.R., at 263.
Also, the court in Iacovoni found, after a review of the House reports and Committee recommendations:
“The payment contemplated by the statute and its proponents are to creditors holding unsecured claims. Holders of secured claims receive similar protection under Chapter 7 and 13.... If the payments referred to in the statute ... meant payments on secured claims, then those payments required would be essentially the same as those required under Chapter 7. Such an interpretation would disregard the premise upon which Chapter 13 is based. It would be anomalous, for example, for proponents to recommend, and for Congress to enact, the incentive which encourage Chapter 13 filings if the payments thereby promoted were similar payments on secured claims as required under Chapter 7. Chapter 13 does not allow the confirmation of a plan which proposes no payments on unsecured claims.... Partial payments of unsecured debts under Chapter 13 is pre-ferrable to almost certain non-payment of those debts in straight bankruptcy.” 2 B.R., at 264, 265.
This Court is pursuaded this is the rationale behind Chapter 13. It protects both the debtor and the unsecured creditor. The debtor is protected from the harshness of a Chapter 7 liquidation. And as a condition for this protection, the debtor is required to make payments to the unsecured creditor. This enables the unsecured creditor to regain some of the money owed and which would not be obtainable in a straight Chapter 7 bankruptcy.
Another court attempted to determine the intent of Congress and the purposes behind a Chapter 13 plan, particularly, 11 U.S.C. § 1325, in In re Seman, 4 B.R. 568 (Bkrtcy.S.D.N.Y., 1980). There, as here, the debtors Chapter 13 plan offered nothing to unsecured creditors. The debtors sought confirmance stating there had been compliance with § 1325(a)(4), which states unsecured creditors will receive “not less than” the amount that would be paid under a Chapter 7 plan. The court in Seman refused to confirm the plan, finding a lack of “good faith”. The court found the purpose of Chapter 13, and especially § 1325, was to afford the debtor a chance to avoid liquidation under Chapter 7, and to allow a chance to pay off some or all of the debts. To do this, Chapter 13 requires payments to be made to unsecured creditors. The debtor’s position however, was that the plan was in compliance with § 1325(a)(4), that is the unsecured claimant would be paid the amount it would have received under a Chapter 7 liquidation.
The court in Seman rejected this theory. It found that the purpose of Chapter 13 required payments to unsecured creditors.
“A debtor who does not propose to make any payments to secured creditors (who) would receive nothing if a petition were filed under Chapter 7, is not given the alternative of avoiding the consequences of non-dischargeability of debts under Chapter 13. A disguised Chapter 7 liquidation under Chapter 13 would subvert the purpose of Chapter 13 expressed in the House Report No. 95-595, 95th Cong., 1st Sess. (1977) 118, U.S.Code Cong, and Admin.News 1978, p. 6079: ‘The purposes of Chapter 13 is to enable an individual, under court supervision and protection, to develop and perform under a plan for the repayment of his debts over an extended period 4 B.R., at 570.
See also In re Heard, 6 B.R. 876 (Bkrtcy.W.D.Ky., 1980); In re Sadler, 3 B.R. 536 *289(Bkrtcy.E.D.Ark., 1980); In re Sehongalla, 4 B.R. 360 (Bkrtcy.D.Md., 1980).
Also, this Court is referred to the case of In re Terry, 630 F.2d 634 (8th Cir., 1980). An appeal was taken to the Eighth Circuit Court of Appeals from the confirmation of a plan by the Bankruptcy Court for the Western District of Arkansas. In this plan there was no provision for payments to unsecured creditors. All of the creditors were unsecured. Further, the debtors did not have sufficient income to make the required payments under a Chapter 13 plan. The Court of Appeals held that for a Chapter 13 plan to be approved, a debtor must be able to and make “regular payments” under the plan. A zero payment plan like the one in Terry is not in “good faith” and is not to be confirmed.
The Court is of the opinion that Chapter 13 requires that the debtor’s plan propose payments to unsecured creditors. Notwithstanding § 1325(a)(4), the § 1325(a)(3) requirement of “good faith” and the statutory scheme and purpose of Chapter 13, read as a whole, requires something other than zero payments on unsecured claims. Therefore, the bankruptcy court’s confirmance of the debtors’ plan was erroneous.
The debtors argue that no payments were proposed to the unsecured creditor to preserve their residence from foreclosure. They cite Matter of Johnson, 6 B.R. 34 (Bkrtcy.N.D.Ill., W.D., 1980) for the proposition that when the purpose and the desire of the debtors is in preserving their residence, then to propose a zero or a minimum payment plan is not erroneous and the plan can be confirmed. The Court does not contend that the debtors goal in preserving their residence should not be considered by the bankruptcy court. And the Court agrees that such, if proven by the circumstances to be an overriding concern, can be a basis for confirmance of a “minimal” payment in a plan. But the Court views it as allowing only a “minimal” payment, and not to allow a zero payment plan. The Court fails to see how such a concern can be the basis for proposing no payments at all, especially where it is shown that there is an immediate surplus of $141.80 per month, and that after 24 months a further surplus of $120.00 a month will be present. As the appellant conceeds in its brief, it does not expect to receive the full amount of its unsecured claim. But when it appears that the debtor is able to pay some of the unsecured claim and still be able to satisfy the goal of preserving their residence, then it is preferable for appellant to receive something. This is especially true since Chapter 13 and § 1325 require some sort of payment to be made to the unsecured claimants as a condition of confirmance. A revised plan might be devised which will satisfy all concerned, or it may be that the bankruptcy court, upon a rehearing, may decide that the case is better handled pursuant to Chapter 7.
In conclusion, it is the opinion of the Court that under Chapter 13, and especially 11 U.S.C.A. § 1325, payments are required to be made to the unsecured creditors in order for a plan to be confirmed.
The Court reverses the decision of the Bankruptcy Court for the Western District of Arkansas confirming the plan of the debtors James H. Temple and Barbara J. Temple and remands the matter back to that court for further proceedings in accordance with this opinion.
. The Honorable Charles W. Baker, United States Bankruptcy Judge, State of Arkansas. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489444/ | MEMORANDUM OPINION AND ORDER
OREN HARRIS, District Judge.
In this case appellant-debtor, James N. McNeeley (Debtor) appeals from a judgment of the Bankruptcy Court for the Western District of Arkansas, El Dorado Division.1 The bankruptcy court refused to discharge the Debtor from a debt owed to the First National Bank of Crossett (Bank) in the Debtor’s Chapter 7 bankruptcy proceeding. The record of the case has been filed, and the parties have briefed the issues.
JURISDICTION
Jurisdiction of this matter is vested in this court by 28 U.S.C. § 1334, which provides the district court with appellate jurisdiction of all final decisions of a bankruptcy court.
STATEMENT OF FACTS
James N. McNeely and his wife, debtors in this bankruptcy proceeding, filed their petition for bankruptcy under Chapter 7 of the Bankruptcy Code on March 13, 1980. On April 8, 1980, the Bank objected to the discharge of the Debtor, pursuant to 11 U.S.C. § 523. The Bank contended Debtor provided fraudulent written statements which induced the Bank to make loans to the Debtor. Further, the Bank cited 11 U.S.C. § 727 and stated the Debtor fraudulently transferred money and equipment from its business and failed to satisfactorily explain the loss of these assets. A hearing was held on this objection and the discharge of Debtor was denied.
The Debtor was the owner of two shirt companies, Crossett Garments, Inc. (CGI), and Shirtmakers, Inc. (SI). Debtor’s wife was also involved in the businesses.
The business of these companies was to take patterns and materials from their customers, piece the goods together and ship the goods as directed by the customer. At first CGI and SI would furnish labor and a *291certain amount of materials, but later began to purchase all of the materials from the customers.
Debtor obtained all of its operating capital from the Bank. The dispute in this case stemmed from an application by CGI and SI for a loan through Farmers Home Administration (FmHA) and the Bank in the amount of $600,000.00 in the spring of 1979. The loan was funded on April 26, 1979, at which time Debtor, as president of CGI, executed a security agreement with the Bank granting the Bank a security interest in the accounts receivable of the company. The security agreement provided that the Bank would advance CGI 90% of the face value of invoices assigned to the Bank as collateral for the loan. The security agreement further provided that the Bank was to mail a copy of any assigned invoice to the customer, notify the customer the invoice was assigned to the Bank and payment was to be made directly to the Bank.
The security agreement of April 26,1979, was a change from prior methods of financing in that it provides “the account shall be a good and valid account representing an undisputed, bona fide indebtedness incurred by the Account Debtor for merchandise theretofore shipped or delivered pursuant to a contract of sale, or for services theretofore performed by the Debtor for its customer.” (Pl.Ex. 2, Par. IV.) Under the agreement, CGI was to notify the Bank of “any happenings or events which would in any way effect (sic) the secured party’s interest in the accounts receivable.” (Pl.Ex. 2, Par. IV.)
The first objection of the Bank pertained to nine invoices assigned to the Bank totall-ing $192,333.74, on which the Bank loaned CGI the sum of $173,098.57. None of the loan was ever repaid. The bankruptcy court found that the nine invoices were fraudulent and were a basis for the finding of non-dischargeability.
Evidence as to these invoices given at the hearing and that given in depositions of the parties involved was contradictory. The Debtor admitted there were indeed nine invoices on which he obtained money. He further admitted that he never told anyone at the Bank the orders in the invoices had been cancelled and he was not going to manufacture any of the goods listed. Debt- or testified that he did not immediately notify the Bank of this fact, although he was obligated to do so. Some of the officers testified that they always relied on the representations of the Debtor that the goods had been manufactured or shipped. There was evidence to show that these loans were gained by the Debtor on the basis of invoices that represented facts which were not true, and known by the Debtor not to be true.
The Debtor pointed out facts and evidence to show it was his understanding he was not obligated to have sold or manufactured the goods set forth in the invoices. Debtor alleged that the Bank certainly had knowledge of the true nature of the transactions, or had ample opportunity to find out that some of the goods were not, in fact, manufactured or sold. If there was a change in the policy of the Bank regarding these loans, Debtor stated he was never aware of such change, and never received a letter from the Bank regarding the change. Debtor stated he always thought the earlier practice of financing was in effect and that he did not need to have the goods either manufactured or sold before he could receive the advance financing. To Debtor, the Bank was as much to blame as Debtor for any improper loans made, and there was never any attempt to commit fraud against the Bank.
The transfer of money, goods and other assets from Debtor’s companies to other companies just prior to Debtor’s filing for bankruptcy was the second point which caused the bankruptcy court to deny the discharge. There was a transfer of approximately $157,000.00 in cash to the Tulane Shirt Company, the absence of nearly $150,-000.00 in inventory, and the transfer of $30,000.00 to $40,000.00 worth of goods to the Tulane Shirt Company. Also, equipment was transferred to Davis Industries. If the Debtor purchased materials from Tulane, there is the question of why Debtor *292allowed Tulane to pick up approximately $40,000.00 worth of goods just before filing for bankruptcy. As to other goods that were transferred, the Bank alleges Debtor never did adequately explain their absence. Debtor attempted to explain these situations either as the purchase of materials, the transfer of goods to the rightful owners, or standard practice among shirt manufacturers. Debtor testified that funds paid by checks to Tulane Shirt Company were for purchase of materials from Tulane. Also, the fact that Tulane and others came and picked up shirts and other materials was due to Debtor’s belief that these materials were not his, but were the property of others. Debtor explained that the loan of machinery to Davis Industries was a standard practice in the industry. Debtor also pointed out that the several pieces of machinery were later returned to the trustee prior to the sale of company assets.
CONCLUSIONS OP LAW
Rule 810 of the Rules of Bankruptcy Procedure provides that: “Upon an appeal the District Court may affirm, modify, or reverse a referee’s judgment or order, or remand with instructions for further proceedings. The Court shall accept a referee’s findings of fact unless they are clearly erroneous, and shall give due regard to the opportunity of the referee to judge the credibility of the witnesses.” Matter of Financial Corporation, 1 B.R. 522 (D.C.Mo. 1979); affirmed 634 F.2d 404 (8th Cir.1980).
After reviewing the record, this court is of the opinion the findings of fact of the bankruptcy judge of fraudulently obtained loans and the transfer of money, goods, and equipment, and the denial of Debtor’s discharge on these grounds were not “clearly erroneous.” Hence, the judgment of the bankruptcy court should be affirmed.
The question of intent to deceive, pursuant to the provisions of 11 U.S.C. §§ 523 and 727, are questions of fact for the bankruptcy judge. Matter of Nelson, 561 F.2d 1342 (9th Cir.1977). In the present case, the facts offered by the parties are conflicting. The Bank argued, and the bankruptcy judge found, the Debtor fraudulently obtained loans, representing to the Bank that goods had been manufactured or shipped. This was in violation of the security agreement between the parties. Despite Debtor’s contention of culpability of the Bank, this Court has determined that the holding of the bankruptcy court is correct. There was sufficient factual basis for the bankruptcy court to find the requirements of § 523 were met and the denial of Debtor’s discharge was proper.
Also, this Court determines the bankruptcy court correctly found Debtor was also to be denied a discharge on the basis of the transfer of goods to Tulane, and the transfer of equipment and other goods to other companies. The Court is of the opinion there is sufficient evidence to allow the bankruptcy court to determine, under 11 U.S.C. § 727, the bankrupt inadequately explained a transfer of assets. Debtor attempted to explain these transactions. This Court will not reverse the bankruptcy court’s ruling on an issue which turns on the credibility of the witnesses. The Court does not find the ruling to be “clearly erroneous.”
IT IS, THEREFORE, THE ORDER of this Court that the judgment of the Bankruptcy Court for the Western District of Arkansas, El Dorado Division, be and the same is affirmed.
. The Honorable Charles W. Baker, Bankruptcy Judge for the State of Arkansas. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489446/ | *369FINDINGS OF FACT, CONCLUSIONS OF LAW AND MEMORANDUM OPINION
ALEXANDER L. PASKAY, Chief Judge.
THIS IS an action for damages based on an alleged breach of contract. The action was originally commenced by George T. Fraine in the Twelfth Judicial Circuit in and for Manatee County, Florida, Civ. Case No. CA-79-1467. On December 8, 1980, George T. Fraine filed a voluntary petition for Relief under Chapter 13, but not having been able to obtain confirmation, filed a notice of conversion of the case to a Chapter 7 liquidation case. In due course, Jary C. Nixon, the Trustee of the estate was substituted as party plaintiff and tried the case on behalf of the estate. The complaint, based on a claim of breach of contract, sought to recover a money judgment from Mildred Cone Elsberry (Elsberry), the Defendant named in the action.
The complaint sets forth a claim for recovery on four different theories. The claim in Count I is based on an alleged breach of contract and seeks to recover lost profits. The claim in Count II, although not very well articulated, appears to seek a recovery on the theory of an alleged injury to the reputation of the Plaintiff. The claim in Count III is based on an alleged breach of contract. The claim in Count IV is based on the theory of quantum meruit and seeks a recovery of the value of the services allegedly rendered by the Plaintiff to the Defendant.
The facts germane and relevant to the resolution of the issues raised by the four Counts of the complaint, as established by the record made at the final evidentiary hearing, can be summarized as follows:
George T. Fraine, (Debtor), was at the time pertinent to this controversy, a citrus broker, commonly known in the trade as a birddogger. A birddogger harvests, buys and sells citrus fruit grown by others. Els-berry was and still is a grower who owns a citrus grove located in Manatee County, Florida.
In February of 1978, the Debtor and Els-berry entered into an agreement whereby Elsberry agreed to sell and Fraine agreed to pick and buy all of her grapefruit and Seedling oranges during the remaining part of the growing season. In April of the same year the Debtor and Elsberry entered into a second similar agreement concerning the harvest and purchase of approximately 3,000 bushels Valencia oranges. The crew which originally had been harvesting the Valencias had another commitment and could not finish picking the oranges. Fearing spoilage, Elsberry agreed to sell the Valencia crop to Fraine provided he would finish the picking.
While picking the Valencias, the Debtor noticed the presence of representatives of Tropicana who were taking down license numbers of the vehicles used by the crew of the Debtor. It appears that in July of 1971 Tropicana had entered into a Participation Agreement with Elsberry, which provided for the sale of all Elsberry’s Early, Mid-season (Hamlin, Pineapple and Seedling), and Valencia oranges to Tropicana. This Agreement was recorded in the Public Records of Manatee County. The Agreement provided that absent written cancellation by either party, the Participation Agreement continued from year to year. Apparently no question or objection was raised by Tropicana with respect to the Debtor harvesting the Valencias and, in fact, Tropicana agreed to allow the Debtor to do so.
On October 15, 1978, the Debtor and Els-berry entered into another agreement. This agreement involved the picking, hauling and purchasing by the Debtor of all of Elsberry’s citrus in the 100 acre grove, known as the Cone Grove, grown during the 1978 — 1979 season. Upon execution of the agreement, the Debtor gave Elsberry a check in the amount of $1,000. Later this check was replaced with a check in the amount of $5,000 as an additional deposit. The Agreement also provided that the price for the Valencias and Mid-season oranges would be $.85 per pound solid, plus canners average rise, less harvesting, picking and hauling. Except for portions which are not important for purposes of this opinion, that *370was the entire Agreement between the parties.
Just after the Debtor began to pick the Valencias and Mid-season oranges, he was notified by Elsberry that Tropicana, through their attorney, had written her a letter asking that she honor her contract with Tropicana and immediately stop the Debtor’s crew from picking the fruit. Els-berry complied with the request of Tropicana and ordered the Debtor to stop picking the fruit and to remove his crew immediately. However, in order to comply with Tropicana’s request for specific performance, Elsberry requested Fraine to continue to pick the fruit, but deliver the same to Tropicana. Shortly thereafter, it appeared that Fraine could not pick the fruit fast enough and the fruit was spoiling on the trailers. In order to save the fruit, Elsber-ry then contacted another crew to complete picking the remaining oranges. There is no dispute that, at that point, Fraine stopped all harvesting activity and removed his crew from the groves of Elsberry.
These are the basic facts against which this Court is called upon to resolve the issues raised by the respective contentions of the parties.
It is the contention of Fraine that he had a valid binding contract with Elsberry for the harvesting and sale of the 1978 citrus crops, and that he was entitled to pick and buy all the grapefruit and seedling oranges of Elsberry and 3,000 bushels of Valencia oranges. Elsberry prevented him from completing the contract and, as a result, he suffered loss of business opportunity and loss of profits. In any event, he contends he is entitled to recover the value of his services on a quantum meruit theory.
In opposition to the claims of the Debtor, Elsberry contends that the Debtor was well aware of Elsberry’s outstanding contract with Tropicana (Participation Agreement); that the Debtor knew that he had to clear his contract with Tropicana; and that he had agreed to contact Tropicana and to proceed only if he received the green light to go ahead from Tropicana. Otherwise, he would tear up his contract with Elsberry. There is no such contingency provision in the Debtor’s written contract with Elsber-ry, but Elsberry sought to establish it by parol evidence. While the Debtor concedes there were some conversations about obtaining clearance from Tropicana, he maintains that such discussions related to the April 1978 agreement and not to this agreement.
The record reveals that the market price of Valencia oranges was $1.06 per pound solid in March and the price stipulated in the Debtor’s contract was $.85 per pound solid. There is evidence in the record that the October contract included a provision for price adjustment based on canner’s average rise, i.e. an increase based on the average price paid by canners for the fruit at any given time, which in this case would have brought the price to be paid for the fruit under the October contract about the same as the market price. Notwithstanding this, it is clear from the record that the canner’s average price still would have brought the price at least a few cents lower than the then prevailing market price.
There is no question that Elsberry entered into the contracts in question well knowing that she already had an outstanding commitment to sell the fruit to Tropicana. While it is not clear whether the Tropicana contract required Tropicana to harvest the fruit, this Court is satisfied that this was not the case and Tropicana had no responsibility for picking the fruit. Thus, it is clear that Elsberry attempted to have the best of two worlds: having the fruit picked and then selling the fruit to the highest bidder, in this case to Tropicana. Under this set of facts one is justified in assuming that the Debtor entered into the contract with Elsberry only because of his expectation of being able to purchase the fruit, resell it and recoup his harvesting expenses and to earn a profit on the sale of the fruit harvested by him.
The contention of Elsberry that the Debt- or was aware of the Participation Agreement and entered into the contract with the understanding that his contract was contingent on the Debtor’s ability to obtain a *371clearance from Tropicana cannot be accepted first, as a matter of law and second, as a matter of fact.
The contract of the Debtor with Els-berry is totally silent on this point and does not contain any contingency at all. It would be a gross violation of the parol evidence rule to consider the testimony of Elsberry that there was an understanding about this contingency which would have materially impaired the right of the Debtor if it was not removed. There is no contingency in the contract and its terms cannot be altered and changed by parol evidence. Next, it is hardly conceivable that the Debt- or would have entered into the performance of a service contract of some consequence had he known that he would not reap the benefit of the bargain he sought, unless he obtained a consent from Tropicana. The fact that the Participation Agreement was placed on the Public Records of Manatee County is of no great consequence for the following reasons:
First, this Court has serious doubt that such a “recordation” is sufficient to serve a notice to the world, especially of the existence and terms of any outstanding agreement to purchase citrus fruit from growers. Second, even assuming that the Debtor might have known about the Participation Agreement, the record is clear that such agreement did not compel Tropicana to buy any fruit, but merely gave Tropicana an option to purchase which option did not prevent Elsberry from contracting with others, which she had indeed done.
In sum, it is clear that Elsberry breached her contract with the Debtor and shall be held liable for all damages flowing directly from such breach. Whether the Trustee is able to establish the precise amount of all elements of consequential damages suffered by the Debtor remains to be seen. In any event, it is clear that the Debtor shall be entitled to recover at least the value of his services and also possibly the loss of possible profits that he could have realized had he been permitted to complete the contract.
A separate final judgment on the issue of liability will be entered in accordance with the foregoing. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489447/ | *376MEMORANDUM
CLIVE W. BARE, Bankruptcy Judge.
This controversy involves the respective rights of the Hamilton Bank of Morristown (Hamilton Bank) and the First State Bank of Pineville, Kentucky (First State Bank), in a 1980 Lincoln Towne Car. Both Hamilton Bank and First State Bank concede that Howard W. Sullivan purchased the vehicle in the ordinary course of business from the debtor, Morristown Lincoln-Mercury, Inc. Tenn.Code Ann. § 47-9-307 (1979).1
The plaintiff Hamilton Bank filed this adversary proceeding against the First State Bank of Pineville, Kentucky, Morris-town Lincoln-Mercury, Inc. (the debtor), Richard Stair, Jr. (Trustee), and Howard W. Sullivan, seeking to have this court determine the rights of the parties in and to the 1980 Lincoln Towne Car. The defendant Morristown Lincoln-Mercury, Inc. and the defendant Howard W. Sullivan did not file answers; however, Mr. Sullivan did appear and testify at the trial of this cause on the merits held on July 13, 1982.2
On August 6, 1981, Mr. Sullivan purchased the 1980 Lincoln Towne Car which is the subject of this dispute from Morristown Lincoln-Mercury, Inc. Mr. Sullivan testified that he was in need of a new car and that he contacted Ronald Johnson, Vice-President of the debtor, who showed him the vehicle which he decided to buy. The terms of the transaction were the trade-in of a Chrysler New Yorker valued at $7,037.50, a down payment of $4,000.00 cash, and the balance financed through a retail installment contract amounting to $4,247.00. A copy of Mr. Sullivan’s personal check in the amount of $4,000.00 for the down payment was introduced at the hearing along with the retail installment contract dated August 6, 1981. Mr. Sullivan testified that he had never had any dealings with the debtor prior to that transaction, that he had no knowledge of any security interest in the vehicle, and that he had never received a certificate of title to the vehicle, although he had applied for title on October 26,1981, at the Office of the County Court Clerk of Hamblen County (Ex. # 3). This application shows the Hamilton Bank as the first lienholder. Sullivan further testified that he had been making payments to the Hamilton Bank pursuant to the retail installment contract and that he had made all payments except two. He also testified that he desired to keep the vehicle.
Mr. Louis Jarvis, Installment Loan Officer of the Hamilton Bank, testified that the Bank purchased the Sullivan retail installment contract from the debtor, Morristown Lincoln-Mercury, Inc., that the Bank had advanced monies to the debtor pursuant thereto, that the transaction was carried out in the normal course of business in that a credit check had been conducted on Mr. Sullivan, that his credit had been approved, and that the retail installment contract had been purchased by the Bank without any personal contact with Mr. Sullivan. Mr. Jarvis also testified that the Bank was unaware of any problem concerning the certificate of title to the vehicle until several months had passed. Hamilton Bank did not receive the certificate of title as it normally did when similar transactions were involved.
The defendant First State Bank introduced into evidence a copy of a retail installment contract (Ex. # 4) dated February 22, 1980, executed by Morristown Lincoln-Mercury, Inc., indicating that Morris-town Lincoln-Mercury, Inc. had sold the vehicle to itself, Morristown Lincoln-Mercury, Inc., and had financed the vehicle with the First State Bank in the amount of $16,200.00. This retail installment contract, dated February 22,1980, was executed prior to the time Mr. Sullivan purchased the vehicle and executed the retail installment con*377tract purchased by the Hamilton Bank. A certificate of title showing Morristown Lincoln-Mercury, Inc. as the owner and the First State Bank of Pineville, Kentucky, as the first lienholder on the vehicle (Ex. # 5) was also introduced into evidence.
A “buyer in the ordinary course of business,”3 as a general rule, purchases “free of a security interest created by his seller even though the security interest is perfected and even though the buyer knows of its existence.” Tenn.Code Ann. § 47-9-307 (1979); Correria v. Orlando Bank and Trust Co., 235 So.2d 20, 7 U.C.C.Rep.Serv. (Callaghan) 937 (Fla.Dist.Ct.App.1970). The competing banks have conceded that Sullivan purchased the 1980 Lincoln Towne Car in the ordinary course of business from the debtor, which was irrefragably in the business of selling automobiles. The express terms of the statute mandate a finding that Sullivan purchased the vehicle free of any interest of First State Bank even though that bank’s lien was noted on the certificate of title covering the used automobile. The fact that Sullivan did not receive a certificate of title at the time of the purchase of the used automobile does not require the court to find that his purchase of the vehicle was in bad faith or that he is not entitled to the protection of a buyer in the ordinary course. Couch v. Cockroft, 490 S.W.2d 713 (Tenn.Ct.App.1972), cert. denied. Sullivan purchased the vehicle free of the security interest of First State Bank since that security interest had been created by “his seller,” namely, Morristown Lincoln-Mercury, Inc.
The financing by First State Bank of the transfer of the 1980 Lincoln Towne Car by the debtor to itself is analogous to an entrustment of goods to a merchant dealing in goods of like kind. Tenn.Code Ann. § 47-2-403(2) (1979) enacts: “Any entrusting of possession of goods to a merchant who deals in goods of that kind gives him power to transfer all rights of the entruster to a buyer in ordinary course of business.” First State Bank certainly realized that its secured debtor might very likely sell the vehicle since the debtor was a merchant who sold automobiles.
First State Bank is charged with the knowledge of the protection afforded by Tenn.Code Ann. § 47-9-307 (1979). The ■ Bank must release its lien and surrender the certificate of title on the disputed vehicle to the purchaser, Mr. Sullivan.4
This Memorandum constitutes findings of fact and conclusions of law, Bankruptcy Rule 752.
. Protection of buyers of goods. — A buyer in ordinary course of business . . . other than a person buying farm products from a person engaged in farming operations takes free of a security interest created by his seller even though the security interest is perfected and even though the buyer knows of its existence.
. The Trustee, Richard Stair, Jr., asserts no interest in the vehicle.
. This term is statutorily defined to mean “a person who in good faith and without knowledge that the sale to him is in violation of the ownership rights or security interest of a third party in the goods buys in ordinary course from a person in the business of selling goods of that kind ... . ” Tenn.Code Ann. § 47-1-201(9) (1979).
. The release of the lien of the First State Bank leaves in full force and effect the lien of the plaintiff the Hamilton Bank of Morristown. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489448/ | MEMORANDUM
CLIVE W. BARE, Bankruptcy Judge.
The dispute in this proceeding in-, volves a 1982 Lincoln Mark VI automobile. The contestants1 are J & D Coal Company (J & D), and Bank of Commerce. J & D contends that it purchased the vehicle in the ordinary course of business, paid the purchase price in full, received a manufacturer’s certificate of origin and bill of sale, and is therefore the owner of the vehicle. The Bank of Commerce avers that it holds a perfected security interest in the vehicle and that it is entitled to possession. The court finds that the Bank of Commerce does not have a security interest against the controverted vehicle because Morristown Lincoln-Mercury, Inc. (MLM), the debtor, sold the car to and received payment from J & D previous to execution of a trust receipt in favor of the Bank.
Joe Hubbs, President of J & D, testified that Ron Johnson, Vice-President of MLM, came to his home to sell him a car. In July 1981, Hubbs decided to purchase a 1982 Lincoln Mark VI from MLM. A check dated August 3, 1981, in the amount of $10,-000.00 drawn on the account of J & D and payable to MLM was duly executed by Hubbs. Hubbs took possession of the automobile on behalf of J & D during October 1981. A manufacturer’s certificate of origin and a bill of sale, both notarized on October 31, 1981, reflect that the automobile was sold to J & D. The balance due on the purchase price was satisfied by the trade-in of a 1980 Thunderbird and a check dated November 9, 1981, from J & D pay-, able to MLM in the amount of $3,111.00.
A second bill of sale (Ex. 4) dated October 14, 1981, and notarized on November 14, 1981, by Sandy Huskey, a former employee of MLM, purportedly reflects the sale of the automobile in question by J & D to MLM. This second bill of sale is signed “J & D *392Coal Co. By Joe Hubbs,” but Hubbs denies that the signature is his. The signature is indeed a forgery.2 There is little resemblance, if any, between the signature on this second bill of sale and Hubbs’ actual signature. See Ex. 4 and Ex. 7.
The forged bill of sale, a duplicate certificate of origin (Ex. 3) dated November 9, 1981, on the reverse of which is a statement of transfer to J & D, a trust receipt granting a security interest in the contested vehicle, and a promissory note were delivered to Bank of Commerce on or about November 17, 1981, by MLM in exchange for $19,-000.00. The Bank contends that its security interest was perfected by virtue of a previously recorded financing statement covering the debtor’s automobile inventory.
Since MLM had delivered the 1982 Lincoln and received payment in full from J & D prior to November 17, 1981, MLM could not grant an enforceable security interest against the vehicle to the Bank. Furthermore, assuming arguendo that the Bank’s security interest had been legitimate, J & D is entitled to the protection afforded to a buyer in ordinary course by Tenn.Code Ann. § 47-9-307 (1979).3
The Bank of Commerce, although it has no rights in and to the 1982 Lincoln, is entitled to judgment against MLM for such sum as remains unpaid under the terms of the $19,000.00 promissory note dated November 17, 1981.
This Memorandum constitutes findings of fact and conclusions of law pursuant to Bankruptcy Rule 752.
. Neither the debtor nor the Trustee assert any interest in the vehicle.
. In her deposition testimony the notary stated that she did not specifically remember any appearance by Hubbs before her for the purpose of executing the bill of sale. She further testified that she would have notarized the bill of sale if Ron Johnson had brought in the bill of sale and stated that Joe Hubbs had signed it.
. A buyer in ordinary course of business ... other than a person buying farm products from a person engaged in farming operations takes free of a security interest created by his seller even though the security interest is perfected and even though the buyer knows of its existence. Tenn.Code Ann. § 47-9-307 (1979). | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489449/ | MEMORANDUM DECISION
FREDERICK A. JOHNSON, Bankruptcy Judge.
The debtors filed a joint petition under chapter 7 of the Bankruptcy Code on January 15, 1982. In Schedule B-4, the debtors claimed the following exemption: “1944 Aeronaca Airplane claimed to the extent of $1200.00.” The debtors assert that they are entitled to the exemption under 14 M.R.S.A. § 4422(2), which provides an exemption for “[t]he debtor’s interest, not to exceed $1,200 in value, in one motor vehicle.”
On March 23, 1982, the trustee objected to the exemption of the airplane under section 4422(2).
The sole issue is whether or not the debtors are entitled to exempt their 1944 Aero-naca airplane as a motor vehicle. The court concludes that they may not. “Motor vehicle” is not defined in the Maine exemption statute. The debtors argue that since the term is not defined, the court should apply the common definition of the term.
29 M.R.S.A. § 1.7 defines a motor vehicle as “any self-propelled vehicle not operated exclusively on tracks, including motorcycles, but not including snowmobiles.... ”
It must be conceded that the debtors’ aircraft would fit within this definition. It is a self-propelled vehicle which does not operate exclusively on tracks.
*4066 M.R.S.A. § 3.5 defines an aircraft as “any contrivance .. . used or designed for navigation of or flight in the air....”
This definition puts the debtors’ argument back on the ground where it belongs.
The court admires the debtors’ ingenuity. However, they fail to perceive the purpose of the exemption statute. The purpose of the statute is to leave the debtors with property needed for their support and the support of their family. In re Breau, 17 B.R. 697 (Bankr.Me.1982).
The Maine Legislature provided an exemption in a motor vehicle to ensure that a debtor will have the transportation necessary to enable him to work and to perform the other tasks which are necessary if he is to have a true fresh start.
It is difficult to believe that the Maine Legislature intended that a debtor exempt “any contrivance ... used or designed for navigation of or flight in the air ...” or even an antique aircraft, which is defined by 6 M.R.S.A. § 3.10-A as “an aircraft in excess of 30 years of age which is flown only for purposes of demonstration or show.”
The trustee’s objection to the debtors’ claimed exemption under 14 M.R.S.A. § 4422(2) must be sustained.
An appropriate order will be entered. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489450/ | DECISION AND ORDER
CHARLES A. ANDERSON, Bankruptcy Judge.
This matter has been submitted on the pleadings and trial evidence including judicial notice by the court of its own record *423and of the record of the Common Pleas Court of Greene County, Ohio.
On 22 February 1982 Jack D. Lewis, d.b.a. Jack Lewis Realty, d.b.a. Cameo filed a petition pursuant to Chapter 13 of the Bankruptcy Code. Subsequently, numerous adversarial matters were instituted both challenging the legality of the use of Chapter 13 because the debts exceeded statutory limits and as objection to confirmation of the Proposed Plan.
One adversarial filing by one party, Merchants and Mechanics Federal Saving and Loan Association, on 18 March 1982 was consolidated for trial with five other adversarial objections to confirmation. Debtor who is a realtor and real estate investor also doing business as Jack D. Lewis Realty, Inc. (a Corporation never dissolved) had proposed to sell various parcels of real estate to fund his proposed plan within 6 months or to consent to liquidation.
This Court made a finding and decision on 30 June 1982 that the estate showed “a negative cash flow” from rentals, not even sufficient to make regular mortgage payments on the several parcels of real estate involved and that there was “insufficient potential in the estate to justify exercise of court jurisdiction to protect the value of the estate for only 3% distribution to unsecured creditors. Consequently, Merchants and Mechanics was granted relief from the automatic stay to proceed with the foreclosure suit pending in the Common Pleas Court of Greene County, Ohio.
On 24 September 1982 the state court entered judgment in the foreclosure action to Plaintiff in the amount of $70,692.86, with interest thereon at the rate of 10V2% per annum from January 31, 1982. The state court further found that Huntington National Bank, Harry H. Hammond, Third National Bank and Trust Company, and the United States of America had valid liens, to be attached to the proceeds of sale.
An order of sale was duly issued in the state court for sale of the real estate by the Sheriff on December 4, 1982. The Sheriff’s appraisal of subject real estate is $108,-000.00.
On 13 November 1982 the Debtors exercised statutory rights and obtained a voluntary dismissal of the Chapter 13 case.
On 16 November 1982 Joan L. Lewis and Jack D. Lewis “F.D.B.A. Jack Lewis Realty, Inc.” filed a voluntary petition under Chapter 11 of the Bankruptcy Code.
On 17 November 1982 Plaintiff filed a complaint requesting “immediate relief” from the automatic stay.
No payments have been made on any of the liens on subject property since the Chapter 13 petition on February 22, although Jack D. Lewis had contacted the Plaintiff to endeavor to make some arrangement for payments since the property is the residence real estate of Jack D. Lewis and Joan L. Lewis, husband and wife. The Debtors have indicated they are prepared to pay $5,000.00 to Plaintiff. The Plaintiff mortgagee refused any arrangement because the mortgage payments had been in chronic default since its execution on 8 July 1979 in the original amount of $67,500.00. Early in 1978 entire title to the property had been conveyed to Joan L. Lewis. There had been no mortgage payments since August 31, 1981.
Because of the impending sale on December 4 pursuant to the state court order, an emergency hearing was set in this Court on 19 November 1982, and the parties granted leave until November 23 to file citations of legal authorities.
No summons has been issued by the Clerk and Defendant Debtors appeared to contest the complaint before a rule date for answer upon oral notice.
Creditable expert testimony in behalf of Plaintiff fixes a valuation of the property at $93,000.00. Debtors’ equity over liens is problematical.
DECISION AND ORDER
At the trial this Court was constrained to admit evidence only as such pertains to relief from stay under 11 U.S.C. § 362(f). Evidence tendered as to the lack of adequate protection (and Debtors’ equity) and *424whether such property is not necessary to an effective reorganization was deemed premature because the complaint had been filed only three days previously.
The facts are analyzed, therefore, only in terms of whether relief from stay should be granted “as is necessary to prevent irreparable damage to the interest of an entity in property.... ”
The Court is of the opinion that the filing date of the Chapter 13 petition, the subsequent dismissal thereof, and the filing of a Chapter 11 petition after the state court order of sale is more contrived than fortuitous. Such a use of statutory rights conferred by the Congress, nevertheless, is a legislative decision and not ipso facto typified as “bad faith.”
If the detrimental effects of accumulated debt service charges and the expenses of Plaintiff for legal services and court costs suffered from inordinate delinquencies in mortgage payments can be remedied until other factors can be submitted to the court, the apparent procedural maneuvering is only one evidentiary element.
Equitable estoppel stemming from this Court’s decision on 30 June 1982 in the Chapter 13 case, however, dictates that the sale of the premises on December 4 in the state court cannot be stymied by the automatic stay invoked by the Chapter 11 petition despite the good faith intentions of Debtors and despite the possibility of adequate protection to the Plaintiff from its mortgage lien unless all delinquencies and incurred court costs are paid or assured to Plaintiff before December 4. Any other conclusion would make a mockery of the Court’s decision on June 30 and constitute abuse of the judicial process.
Adequate protection must include the necessity of protection not only from contractual economic burden but, also, from the burdens of legal processes. Even though this case properly involves the use of legislated devices which contemplate economic burdens from delayed exercise of contractual rights, if the time delay is ultimately adequately secured, the successive abuse of such legislated tools inflicts irreparable harm by the mere uncertainty of adequate protection.
Since the state foreclosure suit was brought in the state court by leave of the Bankruptcy Court, a two-fold time delay is per se irreparable harm both to the Plaintiff and to the state court. From this context 28 U.S.C. § 1471(d) controls irrespective of any question of adequate economic protection. A bankruptcy court should abstain and let the litigants enforce their rights in the state court, twice delayed.
It is, therefore, ORDERED, ADJUDGED AND DECREED that relief from the automatic stay should be and is hereby granted to Plaintiff to proceed under the foreclosure action unless Defendants-Debtors pay or assure payment to Plaintiff of all delinquent principal and accrued interest due and owing on the note and mortgage, including legal expenses and costs of the permitted foreclosure suit, before December 4, 1982. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489451/ | MEMORANDUM AND ORDER
CHARLES J. MARRO, Bankruptcy Judge.
The Complaint of the Debtor to recover property allegedly converted by the Defendant filed August 11, 1982 came on for hearing, after the issuance of a Summons and Notice of Trial and the filing of an Answer.
The facts appear to be undisputed. The Debtor filed a Petition for Relief under Chapter 13 of the Bankruptcy Code on February 27,1981. Subsequent to the filing of the Petition the Defendant deducted from the wages earned by the Plaintiff certain sums of money and applied them toward an unsecured indebtedness incurred by the Plaintiff-Debtor.
The Defendant contended that since these moneys were earned after the date of the filing of the Petition they did not constitute property of the bankrupt estate. This contention is unfounded.
In a Chapter 13 proceeding property of the estate includes, in addition to the property specified in § 541 of this title — (1) all property of the kind specified in such section that the debtor acquires after the commencement of the case but before the case is closed, dismissed, or converted to a case under Chapter 7 or 11 of this title whichever occurs first. See § 1306 of the Bankruptcy Code.
Therefore, the wages earned by the Debt- or after the filing of the Petition are part of the bankrupt estate.
ORDER
Now, therefore, upon the foregoing,
IT IS ORDERED that the Defendant pay over to the Plaintiff and his attorney, Jerome I. Meyers, Esquire, all sums deducted from the wages of the Debtor earned after the date of the filing of the Petition and withheld by the Defendant. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489452/ | ORDER ON MOTION TO COMPEL AND FOR SANCTIONS, MOTION TO STAY ADVERSARY PROCEEDING AND MOTION TO REMAND
ALEXANDER L. PASKAY, Chief Judge.
THIS IS a business reorganization case and the matters under consideration are a “Motion to Compel and for Sanctions” filed by Mandalay Shores Cooperative Housing Association (MSCHA), the Debtor involved in the above-captioned Chapter 11 reorganization case; a “Motion to Stay Adversary Proceeding” and a “Motion to Dismiss” filed by the Division of Land Sales and Condominiums (Division of Land Sales); and an Application to Remand filed by the above-named Plaintiff.
The above-captioned adversary proceeding is a civil action originally commenced by Marilyn Hosticka Fulton (Fulton), et al. in the Circuit Court in and for the Sixth Judicial Circuit of the State of Florida, Civil Case No. 79-12720-14. By virtue of an Application for Removal filed by MSCHA pursuant to Interim Rule 7004, the suit was removed to this Court on September 6, 1981. Previously on May 19,1980, the Division of Land Sales had intervened as party plaintiff and filed a complaint against MSCHA and requested the seizure of all assets of MSCHA and the appointment of a receiver for the assets of MSCHA.
On March 15,1982, Division of Land Sales filed a Motion to Remand. The Motion to Remand was heard in due course, but denied after notice and hearing. Thereafter, the parties embarked on extensive discovery proceedings.
In the interim, MSCHA filed a counterclaim against the Division of Land Sales, who promptly filed a Motion to Dismiss the counterclaim. The Motion urged a dismissal on the ground that the claim asserted against the State of Florida cannot be maintained without its consent by virtue of the Eleventh Amendment of the United States Constitution. On June 22,1982, this Court entered an order and denied the Motion to Dismiss filed by the Division of Land Sales.
On July 20, 1982, the Supreme Court of the United States announced its decision in the case of Northern Pipeline Construction Co. v. Marathon Pipe Line Co., —- U.S. -, 102 S.Ct. 2858, 73 L.Ed.2d 598 (1982) and held, albeit, only by a plurality, that the jurisdictional grant by § 241(a) of the Bankruptcy Reform Act of 1978, P.L. 95-595, amending 28 U.S.C. was an unconstitutional grant of jurisdiction to bankruptcy judges and in violation of Article III of the United States Constitution. The holding of the plurality seems to indicate that the entire jurisdictional grant set forth in § 1471 et seq., of the Judicial Code of the United States, 28 U.S.C. § 1471 et seq., had imper-missibly removed most, if not all, of “the essential attributes of the judicial power” from the Article III district court and vested those attributes in a non-Article III adjunct, i.e. the newly established Bankruptcy Courts, in violation of Article III of the *535Constitution. The plurality agreed that the effectiveness of the judgment should be stayed until October 4, 1982 and on that date granted a further extension of the effectiveness until December 24, 1982, in order to afford Congress an opportunity to reconstruct the bankruptcy courts or to adopt other valid means of adjudication. In light of the holding of the plurality in Marathon, supra, there is no doubt that the issues involved in this adversary proceeding, i.e. breach of contract, violation of securities law and common law fraud, can be considered by this Court at this time.
The first Motion under consideration is filed by Division of Land Sales, which seeks a dismissal or a stay of this adversary proceeding. The Motion is based on the contention that this law suit involves rights created by state law, rights independent of and antecedent to the reorganization petition, thus, under the holding of Marathon, supra, the proceeding should be dismissed or in the alternative should be suspended pending resolution of the constitutional crisis created by Marathon.
Assuming for the purpose of discussion that this Court still functions as a court with full jurisdiction at least until December 24, 1982, the argument by the Division of Land Sales based on the holding of Marathon misses the mark completely. Unlike the suit involved in Marathon, this suit was not commenced by MSCHA who sought to assert a state created right but was commenced by non-debtor Plaintiffs against MSCHA. It takes no elaborate discussion and citation of supporting authority to demonstrate that jurisdiction to consider the allowance or disallowance of claims against a debtor is exclusively and uniquely within the competency of the Bankruptcy Court where the case is pending. There is nothing in Marathon which even intimates that validity of claims asserted against a debtor must be tried in a non-bankruptcy forum even if the claim asserted is based on a traditionally recognized state created statutory or common law rights.
While it is true that the removed law suit now contains a counterclaim by MSCHA against the Division of Land Sales who intervened in the suit, this would not necessarily compel the dismissal because of the holding in Marathon, supra. The counterclaim filed by MSCHA is a compulsory counterclaim which would be waived and lost unless asserted. Bankruptcy Rule 713, FRCP 13. Thus, it appears from the foregoing that the Motion to Dismiss the above-captioned adversary proceeding based on the contention of lack of jurisdiction is without merit and is not supported by the decision in Marathon.
This leaves for consideration whether or not the Motion to Stay should be treated as a Renewed Motion to Remand the proceeding to the State Court where the action was originally commenced or in the alternative, to abstain pursuant to 28 U.S.C. § 1478 in light of the decision in Marathon.
The power of the bankruptcy courts to accept cases removed pursuant to 28 U.S.C. § 1478 was also held to be an unconstitutional grant of jurisdiction and invalid under Marathon, but only by virtue of the holding of the plurality that the jurisdictional grant of § 241(a) of the Bankruptcy Reform Act set forth in 28 U.S.C. § 1471, et seq, is a unitary scheme and nonseverable. It is clear, however, that the holding of the Supreme Court in Marathon does not have retroactive application and its effectiveness was extended to December 24,1982. Thus, theoretically the power of acceptance and retention of a removed case is unaffected by that decision and the proceeding is properly before this court. The question still remains, however, whether in light of the principles enunciated by the plurality in Marathon, this Court should reconsider the propriety of the removal and upon consideration, remand the proceeding to the state court or whether the Court should retain the case, but suspend all further proceedings pending the resolution of the jurisdictional dilemma created by Marathon, taking into consideration the factors traditionally recognized to guide the courts when considering a motion to remand a removed case.
*536In this case, the parties conducted extensive discovery and have represented that this case is ready to be tried within a short time. The difficulty stems from the fact that there is a demand for jury trial and the ability of this Court to conduct a jury trial at this time, especially prior to December 24, 1982, is problematical, if not well-nigh impossible.
Furthermore, this suit involves numerous non-debtor defendants and the Court is not convinced that it should entertain a controversy between non-debtor plaintiffs and non-debtor defendants, even though the debtor is involved and may be an indispensible party to some counts of the Complaint. This being the case, and in light of the foregoing discussion, the Court is satisfied that the first alternative suggested above, i.e. to remand the proceeding to the state court, is the most just and acceptable resolution of this matter. However, this course of action is with the proviso that all discovery conducted by this Court shall remain an integral part of the case and is binding on all of the litigants involved. In addition, remand of the case is not to be equated with modification of the stay, but the Plaintiffs must seek leave of the Court under Bankruptcy Rule 701 et seq. to proceed in the State Court.
In light of this decision, the Application to Remand filed by the Plaintiffs is moot. That Application also requested that this Court lift the automatic stay. However, modification of the stay is an issue which must be decided within the context of an adversary proceeding. In re Harris, 16 B.R. 371 (Bkrtcy.E.D.Tenn.1982); In re Harvey, 3 B.R. 608 (Bkrtcy.M.D.Fla.1980); In re Hawkins, 8 B.R. 637 (Bkrtcy.N.D.Ga.1981). Such a request by motion is insufficient and this aspect of the Plaintiff’s Application to Remand must also be denied.
This leaves for consideration the Motion to Compel filed by MSCHA. The Court considered this Motion and is satisfied that the Motion is without merit and should be denied.
Accordingly, it is
ORDERED, ADJUDGED AND DECREED that the Motion to Stay Adversary Proceeding, treated as a Renewed Motion to Remand, be, and the same hereby is, granted and the entire adversary proceeding be and the same hereby is, remanded for trial to the Circuit Court in and for the Sixth Judicial Circuit of the State of Florida. It is further
ORDERED, ADJUDGED AND DECREED that all discovery heretofore conducted in this Court shall remain an integral part of the case and is binding on all litigants involved. It is further
ORDERED, ADJUDGED AND DECREED that in light of the foregoing, it is unnecessary to rule on the Motion to Stay and Motion to Dismiss filed by the Division of Land Sales of the State of Florida. It is further
ORDERED, ADJUDGED AND DECREED that the Motion to Compel filed by MSCHA be, and the same hereby is, denied. It is further
ORDERED, ADJUDGED AND DECREED that in light of the foregoing it is unnecessary to rule on the Application to Remand filed by Marilyn Hosticka Fulton, et al., except that to the extent that the Application requests modification of the stay, it is denied. It is further
ORDERED, ADJUDGED AND DECREED that the automatic stay imposed by § 362 of the Code shall remain in full force and effect until further order of this Court and nothing in this Order shall be construed to lift or modify the automatic stay in any manner, provided however, that the entry of this Order is without prejudice to the Plaintiffs to file a complaint seeking relief from the automatic stay if they are so deemed to be advised. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489453/ | BURTON PERLMAN, Bankruptcy Judge.
Before this case was filed, debtor was represented by Charles M. Meyer, Esq. a member of the firm of Santen, Santen and Hughes, Co. L.P.A. William H. Eder, Jr., Esq. was elected trustee for the debtor. The trustee earlier in this case filed an application to require that debtor’s counsel turn over to the trustee his legal files. We granted the relief sought with respect to pre-filing documents.
The present application seeks relief directed at Mr. Meyer which goes a step further. That is, here the trustee seeks an order prohibiting Meyer from discussing the contents of those files with any person without the consent of the trustee. The concern of the trustee arises because the files in question include information concerning various transactions between debt- or and another entity which information might be used adversely to the interest of the trustee. Trustee says that Meyer is also counsel to such adverse interests.
At the time that the present application was filed we granted a temporary order restraining Meyer from discussing or disclosing the contents of his legal files until our final determination upon this application. In such order we stated the following:
“At the hearing, we will expect the record to reveal with specificity the pertinent facts. Among these will be the identity of the parties represented by counsel; the dates of representation, and whether still continuing; the relationship of any individuals involved and their relationships to any involved corporation, as well as the dates of such relationship. The foregoing is not meant to be an exclusive itemization of facts which ought to be in the record.”
The matter came on for hearing. Notwithstanding the above quoted express admonition, trustee presented no testimony or other evidence v/hatever to support his position. Mr. Meyer was also present and made a professional statement that he represented and continued to represent the debtor. At the conclusion of the hearing we reserved decision.
Trustee asks us on this application to infer, notwithstanding Mr. Meyer’s statement, that Meyer does not represent the debtor corporation, but in fact is representing the individuals who control or are influential in the affairs of the debtor. We decline to make this inference in the absence of a factual record. The record before us, then, contains only Mr. Meyer’s statement that he represents the debtor.
Since the trustee is the one seeking relief, he has the burden of establishing his en*538titlement to the relief sought. He has failed to carry that burden since, so far as this record is concerned, Mr. Meyer is the attorney for debtor. There is no reason presented to us why he should not be able to engage in the normal intercourse between an attorney and the individuals active in his corporate client.
Trustee’s motion is denied. The stay contained in our Order entered October 13, 1982 is vacated.
SO ORDERED. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489454/ | MEMORANDUM OPINION AND ORDER
EDWARD B. TOLES, Bankruptcy Judge.
This matter coming on to be heard upon the petition for rule to show cause for contempt of the Debtors, JERRY E. DAWSON and TERESA C. DAWSON (Debtors), represented by JOHN K. KNEAFSEY, Attorney at Law, against the Creditor, LIBERTY LOAN CORPORATION (Creditor), represented by RICHARD N. GOLDING, Attorney at Law; and
The Court having examined the pleadings filed in this matter, having received and examined memoranda of law submitted by the parties in support of their respective positions, having heard the arguments of counsel, and the Court being fully advised in the premises;
The Court Finds:
*5421. The Debtors own a home located at 3511 Condit, Highland, Lake County, Indiana, upon which American Savings & Loan Association holds a first mortgage in the amount of $27,030.20 and the Creditor, Liberty Loan Corporation, holds a second mortgage in the amount of $19,233.74. On March 6,1980, the Debtors filed a voluntary petition in bankruptcy under Chapter 7 of the Bankruptcy Code and scheduled the Creditor as secured on Schedule A-2 as follows:
Liberty Loan, 6936 Indianapolis $14,-933
Blvd. Hammond, IN Account # 03914 — lien against house 2nd mortgage
A real estate appraisal of the subject property was rendered, and the property as of March 6, 1980 was valued in the sum of $44,700.00. Based on this value, the Debtors’ exemption of $15,000.00 and the first and second mortgages detailed above, the Interim Trustee, Allen R. Cohen, filed a no asset report on April 17,1980. On April 17, 1980, this Court entered an order approving said no asset report. On June 12, 1980, an order of discharge was entered, and the Debtors executed a reaffirmation agreement on the above described first mortgage with American Savings & Loan Association but did not execute a reaffirmation agreement with reference to the second mortgage.
2. On September 14, 1981, the Creditor filed a mortgage foreclosure proceeding in Lake Superior Court in Hammond, Indiana, Case Number 1811164, and sought the sum of $19,233.75, in addition to costs and interest as a judgment against the Debtors. On September 28, 1981, the Creditor filed an amended complaint in the Lake Superior Court which seeks foreclosure on the mortgage but seeks no money judgment against the Debtors. On October 5,1981, the Debtors filed the instant petition for a rule to show cause, and on October 7, 1981, the Creditor filed its response.
The Court Concludes and Further Finds:
1. It is a basic principal of bankruptcy law that the rights of creditors with duly perfected security interests are not altered by the bankruptcy laws or the order of discharge. The Debtors argue, however, that since the $15,000.00 homestead exemption claimed is less than the indebtedness owed to the Creditor, Liberty Loan Corporation, the second mortgage lien is void because the exemption is impaired by the lien. Under Section 522(f) of the Bankruptcy Code judicial liens or non-purchase money liens which impair exemptions may be avoided by the Trustee or debtor. However, this power is limited. The first limitation is that in order to avoid a lien a complaint must be filed and a hearing held. Second, this avoiding power is limited to judicial liens based upon judgments or legal proceedings not security interests which are liens created by conveyance or contract. In re Lowell, 20 B.R. 464, 466 (Bkrtcy.D.Mass. 1982). In re Jones, 13 B.R. 945, 947 (Bkrtcy.E.D.Pa.1981), In re Smith, 16 B.R. Ill, 112 (Bkrtcy.E.D.Wisc.1981); In re Lamping, 8 B.R. 709, 711 (Bkrtcy.E.D.Wisc.1981). It has been held that:
A lien created by a security agreement is not a judicial lien. It is a consensual lien and not voidable by the debtor who was a party to the agreement.... A security agreement does not create a judicial lien and is therefore not voidable by the debtor under Section 522(f)(1).
In the instant case the Debtors or interim trustee did not file a complaint to avoid the lien of the Creditor, and the claim of Creditor is one for foreclosure to regain possession of the home rather than a money judgment which would constitute a judicial lien. Since the claim of Creditor is not voidable, it would remain standing and valid, and the Creditor would be well within its right to recover the property after discharge and conclusion of the automatic stay.
IT IS THEREFORE ORDERED, ADJUDGED AND DECREED that the petition for rule to show cause of the Debtors, JERRY E. DAWSON and TERESA C. DAWSON, be, and the same is hereby denied. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489455/ | ORDER
EDWARD B. TOLES, Bankruptcy Judge.
This matter coming on to be heard upon motion for a judgment of the Plaintiff, NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY (Plaintiff), represented by ROBERT R. TEPPER, Attorney at Law, on Plaintiff’s motion filed on December 10, 1981, to delineate the scope of the automatic stay to proceed against the principals of the Debtor Partnership, and
The Court having examined the pleadings filed in the matter, having heard the arguments of counsel and the Court being fully advised in the premises;
The Court Finds:
1. The above captioned reorganization proceeding was filed on October 5, 1981, by the Debtor, NORTHLAKE BUILDING PARTNERS, an Illinois Limited Partnership (Defendant), represented by DAVID N. MISSNER, Attorney at Law. On December 3, 1981, Plaintiff filed a complaint to lift or modify the automatic stay to proceed with a two count foreclosure action pending in the U.S. District Court for the Northern District of Illinois, Case Number 81 C 2913. Under Count I Plaintiff sought to recover its security, the Northlake Hotel, operated under an Illinois Limited Partnership as a retirement facility. Under Count II Plaintiff sought a money judgment on *544the personal guarantees of KENNETH NASLUND (Naslund), who was the principal manager of the Hotel and one of the principals of the limited partnership. On December 10, 1981, Plaintiff filed a motion to delineate the scope of the stay so as to proceed on Count II for a money judgment against Naslund and other principals of the Debtor. On December 21, 1981, Defendant filed an application to remove the District Court action, and on December 30, 1981, Plaintiff filed a motion to remand. On June 22, 1982, this Court entered a memorandum opinion and order ruling that the stay should remain in effect and denied Plaintiff’s complaint to lift or modify the stay filed on December 3, 1981. On June 22, 1982, the Court entered an order denying Plaintiff’s motion to remand filed on December 30, 1981.
2. In its order denying the complaint to lift or modify the automatic stay this Court held in relevant part as follows:
10. In the instant case, the Court must conclude that the Plaintiff has not met its burden of proof. The testimony and exhibits presented show that the Defendant does have an equity in the property. The evidence shows that while interest does continue to accrue, Defendant is making current mortgage payments and payments on taxes. The testimony shows that the Defendant has paid the Plaintiff the sum of $95,000.00 subsequent to the filing of the reorganization proceeding. Under these circumstances, the Defendant, under the Court’s protection, should be given further opportunity to seek funding, file and consummate a plan of arrangement. In view of the Defendant’s payments towards its obligation, Plaintiff is adequately protected pending the final disposition of the reorganization proceeding, (emphasis supplied.)
In its order denying Plaintiff’s motion to remand this Court held in relevant part as follows:
2. On May 26, 1981, Plaintiff filed a two count complaint in the United States District Court against the Defendants seeking to foreclose on a mortgage on the Debtor’s single asset, Northlake Hotel under Count I, and seeking a money judgment against the Debtor and Debtor’s principal KENNETH NASLUND on guarantees on a note securing the above described mortgage under Count II. On July 27, 1981, Plaintiff and Defendants entered into an agreed order for curing a default with the provision that non-compliance would result in a judgment pro confesso with execution to be stayed for 60 days. On October 5,1981, Debtor filed a voluntary petition for reorganization under Chapter 11 of the Bankruptcy code, and on December 10, 1982, Plaintiff filed a motion for clarification of the automatic stay to proceed against Defendants on Count II. On December 21, 1981, the Debtor removed the cause of action to this Court.
3. Upon review of the proceedings before the District Court, the application of Plaintiff to remand and the application of the Debtor for removal, it appears that since the Debtor and its principals are defendants in the suit, any judgment on Count I or Count II will affect their ability to reorganize under Chapter 11. The state law questions raised in the District Court suit are questions of Illinois law, with which the Bankruptcy Court is well versed. Moreover, a bifurcation of jurisdiction over the property of the estate will only hinder their reorganization proceeding, (emphasis supplied)
3. On July 2, 1982, Plaintiff filed a notice of appeal from this Court’s order of June 22,1982, denying the complaint to lift or modify the automatic stay, and the designation of record was due on July 12,1982, pursuant to Rule 806 of the Bankruptcy Rules of Procedure. On July 19, 1982, the Clerk of the Court ceased work on the appeal pursuant to Rule 802 of the Bankruptcy Rules of Procedure, for Plaintiff’s failure to timely file the designation of record. On October 7, 1982, three months after the Court’s orders of June 22, 1982, Plaintiff filed the instant motion for judgment on its December 10, 1981, motion to delineate the scope of the stay.
*545The Court Concludes and Further Finds:
1. From review of the proceeding it must be concluded that, Plaintiff’s motion to delineate the scope of the automatic stay of December 10, 1981, must be denied as being improperly filed as a motion rather than a complaint and as being moot in view of this Court’s two orders entered on June 22, 1982. Pursuant to Section 362 of the Bankruptcy Code, Rules 701 and 703 of the Bankruptcy Rules of Procedure and Interim Rule 4001(b) a complaint and not a motion must be filed to modify the automatic stay provisions. In re Holtkamp, 669 F.2d 505, 509 (7th Cir.1982). As set forth previously, this Court held on June 22, 1982, in its two orders, that Defendant has an equity in the property, and that proceeding to judgment against the Debtor or its principals on Counts I or II would severely effect the Debtor’s ability to rehabilitate. These decisions were reached after extensive hearings and presentation of convincing evidence that Plaintiff is adequately protected during the pendency of this proceeding. The issues raised in the December 10, 1981, motion have been tried and ruled upon, and at no time before October 7, 1982 (three months after this Court’s order of June 22, 1982, and two months after the time for appeal had elapsed, July 20,1982) did Plaintiff orally or in writing make any representations to the contrary.
IT IS THEREFORE ORDERED, ADJUDGED AND DECREED that the motion to delineate the scope of the automatic stay filed December 10,1981, be, and the same is hereby denied. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489457/ | ORDER ON MOTION TO STRIKE SECOND AFFIRMATIVE DEFENSE AND ORDER ON MOTION REQUESTING COURT TO RELINQUISH JURISDICTION
ALEXANDER L. PASKAY, Chief Judge.
THIS IS a pre-Code Chapter XI case and the matter under consideration involves two motions both filed by Park Isles, Inc. (Park Isles), the Plaintiff who instituted this adversary proceeding. The complaint contains two counts:
In Count I, Park Isles seeks an order evicting Alfran Corporation (Alfran) from the premises owned by Park Isles which Alfran currently occupies. It also seeks a money judgment for attorney fees and costs. In Count II, Park Isles seeks money damages for past due rent plus attorney fees and costs.
In due course, Alfran filed its answer which basically sets forth some admissions and some denials. In addition, Alfran also pleaded two Affirmative Defenses. In the first, Alfran claims a waiver and also asserts the defense of estoppel. The defense of estoppel is based on an alleged violation of a certain covenant by Park Isles in the lease relating to the erection of a large sign. In the second, Alfran claims a right to a set-off of a claim of its own against any claims Park Isles might have against it.
In due course, the parties filed their trial statement. The pre-trial conference was concluded and the matter was set for trial to commence on October 25, 1982. Pursuant to the Order entered at the pre-trial conference, the parties undertook extensive discovery and it appeared that the matter was ripe for resolution when on October 22, 1982, or three days before the scheduled trial date, Park Isles filed the Motions under consideration. The first relates to the request by Park Isles that this Court should relinquish jurisdiction of this controversy; the second relates to the Second Affirmative Defense asserted by Alfran, i.e. the defense of off-set, which Park Isles seeks to have stricken.
On the date of the trial, October 25,1982, Alfran filed a Motion to Amend Answer. At the scheduled trial date the Court considered the two Motions filed by Park Isles and on October 27, 1982, entered an order continuing the trial pending the resolution of the issues raised by the Motions of Park Isles.
In order to put the matter under consideration into proper focus, a brief recitation of certain matters as they appear from the record is helpful.
On November 1, 1979, Alfran filed its Plan of Arrangement which provided, inter alia, “that the Court shall retain jurisdiction for the purposes provided for in § 387 of *578the Bankruptcy Act and pursuant to § 368 of the Bankruptcy Act.” In due course the Plan was accepted by the requisite majority of creditors in number and in amount, and on December 8, 1981 this Court entered an Order and confirmed the Plan. Notwithstanding the provision in the Plan dealing with retention of jurisdiction, the Order of Confirmation found it appropriate to retain jurisdiction to resolve any disputes that might arise between Alfran and its landlord, Park Isles. Accordingly, the order of confirmation provided that the Court retain jurisdiction to resolve any disputes which might arise between the landlord and the Debtor for two years from the date of the order of confirmation.
/"^During the pendency of the arrangement proceeding, there was an adversary proceeding commenced by Alfran in which Al-fran sought declaratory relief concerning the validity and the continuing effectiveness of a certain lease between Alfran and Park Isles. Although that adversary proceeding was concluded in favor of Alfran, apparently it did not resolve all issues between the parties, hence the institution of j^this adversary proceeding.
The record fails to disclose the entry of a final decree. Thus, this Court theoretically still has jurisdiction over the entire case, subject of course, to the specific limitations of the Bankruptcy Act relating to the retention of the jurisdiction. This is the crux of the present controversy and calls for interpretation of certain inter-relating provisions of the Bankruptcy Act, i.e.: j §§ 57(d), 368, 369 and 387.
It is the contention of Park Isles that in the absence of a specific provision for retention of jurisdiction for a specific purpose in the plan of arrangement, the Court has no power to entertain any other matters and if a plan of arrangement does not provide for continuing jurisdiction and the Court finds the plan to be feasible and in the best interest of creditors and proposed in good faith, the Court must approve the Plan without retention of jurisdiction, citing In re: Patton Manufacturing Company, 413 F.2d 1258 (6th Cir.1969). In the present instance, it is without dispute that the Plan did not provide for the retention of jurisdiction for the purpose of considering the resolution of any dispute which may arise between Alfran and Park Isles, but that in spite of the absence of such a provision in the Plan, the Order of Confirmation did specifically provide for the retention of jurisdiction for this purpose.
On the other hand, Alfran contends first that Park Isles has no standing to challenge jurisdiction because it was Park Isles itself who invoked the jurisdiction of this Court in the first instance by filing this complaint. Therefore, it should not now be permitted to challenge the jurisdiction of this Court which admittedly has subject matter jurisdiction. In addition it is the contention of Alfran that this jurisdictional challenge is late in light of the fact that this case was fully prepared and ready for trial when the motions under consideration were filed three days before the trial date. Alfran also contends, as a matter of procedural defect, that the automatic stay imposed by Bankruptcy Rule 11-44 is still in full force and effect and Park Isles cannot obtain relief from the stay by motion but only by filing a complaint.
Considering the respective contentions of the parties, this Court is of the opinion that both Motions are without merit and should be denied for the following reasons:
First, it is true that Patton Manufacturing, supra, at first blush appears to furnish persuasive authority for the proposition urged by Park Isles. However, contrary to the contention of the counsel for Park Isles, Patton Manufacturing, supra did not overrule the case of Ohio Builders & Milling, 128 F.2d 165 (6th Cir.1942) in which the Sixth Circuit Court of Appeals held that the provisions of the Bankruptcy Act dealing with arrangements contemplate that the retention of jurisdiction, either general or limited, may be stated in the arrangement plan, or in the alternative in the order confirming the plan. The Sixth Circuit expressly stated in Patton Manufacturing, supra that notwithstanding certain criticism of the language of Ohio Builders, supra, the Court *579was bound by its ruling set forth in Ohio Builders and, therefore, expressly refused to overrule the holding of Ohio Builders. Even assuming, but not admitting, that this Court should not follow Ohio Builders, supra, but should adopt the holding in Patton Manufacturing, supra, it is clear that since no final decree has been entered, the Debt- or would have a right to seek a modification of the plan and insert a retention provision in the plan of arrangement without any difficulty. It is equally clear that the Debt- or still can file objections to any claims including a potential claim of Park Isles and this Court has jurisdiction to consider allowance or disallowance of claims, specifically the claim set forth in Count II of the complaint. § 361 of the Bankruptcy Act.
Lastly, it is clear that it ill behooves this Plaintiff to seek an abstention and dismissal now when it was itself who originally invoked the jurisdiction of this Court and sought the relief in this Court.
This leaves for consideration the Motion to Strike Second Affirmative Defense. The Court considered the Motion and the arguments of counsel and is satisfied that it is without merit and should be denied.
In accordance with the foregoing, it is
ORDERED, ADJUDGED AND DECREED that the Motion to Strike Second Affirmative Defense be, and the same hereby is, denied. It is further
ORDERED, ADJUDGED AND DECREED that the Motion Requesting the Court to Relinquish Jurisdiction be, and the same hereby is, denied. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489458/ | MEMORANDUM OPINION
MARK B. McFEELEY, Bankruptcy Judge.
This matter came before the Court on the Complaints for Declaratory Judgment filed by Color World TV Rental, Inc. (Color World), against Robert White (White), Henry Allen Flowers (Flowers), a debtor before this Court in case number 81-00999, Town and Country Color TV, Inc. (T & C), a debtor before this Court in case number 81-01000, and Donald D. Becker, trustee for the estate of Henry Allen Flowers. These complaints are the result of an action filed by White in Bernalillo County District Court to collect the balance due on a promissory note. White’s claim in the suit, No. CV-81-07189, pled by him as a counterclaim in this case, is based on the allegation that, as successor in interest to Town & Country TV Rental, Inc. (T & C Rental), Color World is responsible for payments made by White as guarantor to the holder of a note executed by T & C and T & C Rental. Color World alleges that it is not responsible to White for reimbursement or, if they are found to be so liable, that Flowers and T & C are liable to them for any amount which they are found to owe to White.
The facts, based on the evidence presented at trial, are these:
On April 1, 1978, Janice Scheid (Scheid) entered into an agreement with White and Flowers under the terms of which she was to sell them all outstanding stock of T & C and T & C Rental for $40,000.00. $10,000.00 of the purchase price was paid in cash, with the balance to be paid in 60 monthly payments of $500.00 each. As evidence of this agreement there were four simultaneously executed documents. They include (1) a purchase agreement outlining the terms and conditions of the stock purchase, which names White and Flowers as “Buyers,” (2) an addendum to that agreement, dealing with interest to be paid on the purchase agreement, also listing White and Flowers as “Buyers,” (3) a note in the amount of $30,000.00 as evidence of the balance due Scheid under the stock purchase agreement signed by T & C and T & C Rental which shows White and Flowers as guarantors, and (4) a security agreement giving Scheid *654a security interest in all inventory and personal property of T & C and T & C Rental as collateral for the $30,000.00 note and which lists T & C and T & C Rental as “Debtor,” and shows Flowers and White to be personal guarantors. It was the intention of the parties that as a result of the stock transaction, White would own 51% of the T & C and T & C Rental stock and Flowers would own the remaining 49% of each. Prior to default, the amounts paid by T & C and T & C Rental to Scheid on the note for White’s stock were shown on the books as amounts otherwise due White as personal income from the corporations and were also shown on White’s income taxes as personal income.
The note went into default after the first of January, 1981, and Scheid, after contacting Flowers, made demand upon White. Scheid and White made an agreement whereby, upon payment of a discounted sum of $10,400.00, Scheid delivered the note to White. On October 15,1981, White filed suit in Bernalillo County District Court against Color World as the party responsible to him for reimbursement. Color World, in that suit, admitted that it was the successor in interest to T & C Rental and then filed its Complaints for Declaratory Judgment in this court.
Discussion of Law
The issues presented to the Court for decision are: (1) Who were the makers of the promissory note delivered to Scheid, and, (2) based on the identity of the makers, whether Color World is liable to White for the $10,400.00 paid by White to Scheid.
The evidence requires the conclusion that the makers of the note were White and Flowers. The money paid by T & C or T & C Rental was money which, according to all records, would otherwise have been personal income and not company funds. The stock was the personal property of White and Flowers, not having been bought back by the two companies. It is understandable that Scheid should require the security of all the inventories and personal property of T & C and T & C Rental to secure the note delivered to her. However, the result is that T & C and T & C Rental were accomo-dation parties to the note. N.M.Stat.Ann. § 55-3-415(1) (1978). This conclusion is inescapable when all four documents executed as part of the stock transfer agreement are considered, as is required by New Mexico law. N.M.Stat.Ann. § 55-3-119 (1978); see also Wright v. Sumruld, 78 N.M. 576, 434 P.2d 695 (1967). Since the terms of all such documents are binding upon even a holder in due course with notice of them, Id., and White had such notice since he was a party to each, the Court does not reach the question of whether he is a holder in due course. The Court finds only that, based upon all the evidence, the makers of the promissory note were White and Flowers. Based upon that finding, the Court further finds that White has no right of contribution or reimbursement from Color World. N.M.Stat.Ann. § 55-3-415(5) (1978). The issue of whether any other party is so obligated to White is not before the Court.
An appropriate order shall enter. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489459/ | MEMORANDUM
CLIVE W. BARE, Bankruptcy Judge.
This proceeding involves the discharge-ability of a debt owing to the Ducktown Banking Company (Bank), the Bank alleging that the debtor obtained a loan of money by the use of a materially false statement in writing. 11 U.S.C.A. § 523(a)(2)(B).1 Trial was held November 15, 1982.
I
On or about October 21, 1980, and January 18, 1981, the debtor negotiated two loans at the Bank totaling $23,830.00. On December 21, 1981, the debt had been reduced to $7,559.95 as the result of payments made by the debtor and the sale of a trailer with the purchaser assuming part of the debt. The present balance owing to the Bank is $8,681.78.
*658On October 21, 1980, when the debtor applied for the first loan, he furnished the Bank a financial statement showing total assets of $89,900.00, total liabilities of $4,308.25, and a net worth of $85,591.75. Included in the schedule of assets is 30 acres of unimproved and unencumbered real estate located in Gaston County, North Carolina, “assessed value $15,000.00,” and debt- or’s “conservative estimate” of $15,000.00. It is this real estate that is the basis of the allegation of a false statement.
The debtor concedes that he owned no real estate in Gaston County, North Carolina. He was the owner with his father of two small parcels of land in Cherokee County, South Carolina, purchased at tax sales in 1958 for a total of $470.00. The debtor paid some $210.00 for his one-half interest in the property. The property is located on a dirt road in a rural area. It is steep and rocky.
The financial statement was filled out by the debtor’s wife. The debtor testified that he signed the statement without reading it. He is a graduate of Duke University Law School and has served as a trust officer with various banks for fourteen years.
The Bank officers, Mrs. Long and Mr. Panter, both testified that they relied upon the statement in making the loans to the debtor.
II
There can be no doubt but that the statement is materially false. The debtor owned no real estate in Gaston County, North Carolina, and certainly owned no real estate anywhere of a “conservative” value of $15,-000.00. His testimony that he signed the statement which was prepared by his wife “without reading it” cannot excuse him from furnishing the Bank with a materially false statement. The totality of the circumstances surrounding the loan presents a picture of deceptive conduct on the part of the debtor. He is a .law school graduate and has many years’ banking experience. He is thoroughly familiar with the use of financial statements by banking officials. The statement was furnished to the Bank with an intent to deceive. The Bank’s reliance upon the statement was reasonable.
The debt is nondischargeable.
This Memorandum constitutes findings of fact and conclusions of law, Bankruptcy Rule 752.
. “(a) A discharge ... does not discharge an individual debtor from any debt—
(2) for obtaining money, property, services, or an extension renewal, or refinance of credit, by—
(B) use of a statement in writing—
(i) that is materially false;
(ii) respecting the debtor’s or an insider’s financial condition;
(iii) on which the creditor to whom the debt- or is liable for obtaining such money, property, services, or credit reasonably relied; and
(iv) that the debtor caused to be made or published with intent to deceive; 11 U.S.C.A. 523(a)(2)(B). | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489461/ | FINDINGS OF FACT, CONCLUSIONS OF LAW, MEMORANDUM OPINION AND FINAL JUDGMENT
ALEXANDER L. PASKAY, Chief Judge.
THIS IS an adversary proceeding and the matter under consideration is a Complaint seeking to recover funds allegedly belonging to Oid’s Crane Service, Inc. (the Debt- or), and a Counterclaim and Crossclaim for Declaratory Judgment filed by Power Equipment Leasing Co., Inc. (Power Equipment).
The facts relevant and germane to the resolution of this controversy are without serious dispute and may be summarized as follows:
On July 1, 1980, Power Equipment and the Debtor entered into a written Equipment Lease Agreement (the Agreement) whereby Power Equipment agreed to lease to Oid’s a used Linia Truck Crane Model 550TC. The Agreement required Oid’s to insure the crane, to name Power Equipment the loss payee on the insurance and to repair any damage to the crane. Accordingly, the Debtor insured the crane with Maine Office of America Corp. (MOAC) and Fidelity Casualty Co. of New York (Fidelity). In November of 1980, the crane was involved in an accident and the boom and jib were damaged. Within the month, the Debtor repaired the crane at its own expense and continued to use it until April of 1982. The Debtor demanded reimbursement of the cost of repair from the insurors, but they refused.
Defendant Thomas F. Woods (Woods) was retained by the Debtor to bring suit against the insuror which suit was brought, in due course, in the Circuit Court in and for Hillsborough County, Florida. Power Equipment was not involved in that suit. The suit was ultimately settled in February of 1982, and as a result of the settlement, Woods received a check from the insurors in the amount of $60,000. The check was made payable to the Debtor, Power Equipment and Woods jointly. The check was endorsed by all parties and placed in Woods’ escrow account from which Woods deducted $16,935.73 for agreed attorney’s fees and costs. A dispute arose between the Debtor and Power Equipment as to who was entitled to the remaining funds and Woods declined to disburse any funds until the parties reached an agreement or obtained a court order directing disbursement of the funds.
On March 12, 1982, the Debtor filed a Petition for Relief under Chapter 11 of the *661Bankruptcy Code and then on April 28, 1982, instituted this adversary proceeding to recover the settlement funds. Originally, the sole Defendant was Woods. However, a Motion to Intervene filed by Power Equipment was granted whereupon Power Equipment became a party Defendant and filed its Counterclaim and Crosselaim against the Debtor and Woods. By order of the Court, the funds have been transferred to an escrow account of Joseph C. Farrell, attorney for the Debtor.
It further appears that the lease for the crane was terminated in April of 1982 due to the Debtor’s default in lease payments. Although use of the crane was discontinued at that time, it remained at the Debtor’s premises until July when it was moved to another location unassociated with the Debtor for storage. The crane was ultimately sold by Power Equipment in October.
The Debtor contends that it is entitled to the remaining balance of the settlement funds. Power Equipment contends that it is entitled to the insurance proceeds by virtue of a provision in the Equipment Lease Agreement as a coinsured under the policy. Power Equipment asserts that the crane was never restored to its original condition and does not have the same value it had prior to the accident. In addition, Power Equipment contends that parts were missing from the crane when Power Equipment took possession of the crane. Basically, these are the facts relevant and germane to the resolution of the matter under consideration.
The provision of the lease on which Power Equipment bases its claim states that:
18. Lessee shall, during the term of this lease ...
(2) Insure said equipment in the amount of value against loss or damage by fire, flood, explosion, theft and such other risks as Lessor may require, including collision.
All insurance, as above provided, shall contain a loss payable clause in the name and for the benefit of Lessor ...
Endorsement No. 3 to the Debtor s insurance policy stated that any loss under the policy shall be payable to the insured and the loss payee scheduled opposite each item on the scheduled of property, “as their respective interests may appear.” Endorsement No. 6 added Power Equipment as a loss payee for the coverage on the crane and again stated “as their interests may appear.”
The burden of proof in this instance was on Power Equipment to prove that it is entitled to settlement proceeds. The provisions of the lease and the insurance policy do not grant to Power Equipment an absolute right to receive the monies and Power Equipment has failed to carry its burden of proof that it is entitled to the funds on any basis or ground. There is evidence that the Debtor expressed to Power Equipment an intention to use the proceeds to pay arrear-ages in rent due on the crane. However, this does not give Power Equipment an enforceable claim to those funds. In addition, the Debtor retained possession and continued to use the equipment after the accident, and Power Equipment did not make a claim for the proceeds but endorsed the check upon Woods’ request, allowing it to be cashed. Although Power Equipment contends that the crane was missing parts when it was returned, the record does not establish that those parts were missing pri- or to the termination of the lease nor that the parts were missing due to actions by the Debtor. Furthermore, although there is evidence that the crane may have diminished in value, the evidence is not conclusive that the diminution in value was due to the accident of November, 1980 or that the crane has suffered irreparable damage. To allow Power Equipment to recover the proceeds at this point would essentially allow double recovery in view of the fact that Power Equipment has since repossessed and sold the crane, and in view of the fact that the Debtor was the party that paid for all repairs to the crane.
' In light of the foregoing, the Court is satisfied that the Debtor is entitled to the insurance funds.
*662Accordingly, it is
ORDERED, ADJUDGED AND DECREED that judgment be, and the same hereby is, entered in favor of the Debtor and against the Defendants without prejudice to Power Equipment to file a Proof of Claim. It is further
ORDERED, ADJUDGED AND DECREED that Joseph C. Farrell be, and the same hereby is, directed to disburse the escrowed monies in the amount of $43,-064.27 to the Debtor. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489462/ | DECISION AND ORDER
ELLIS W. KERR, Bankruptcy Judge.
FACTS
Plaintiffs, Dwight A. Wells and Vikki A. Wells, filed this adversary proceeding in which they object to the confirmation of Defendant-Debtor’s, Charlene Edwina Stevens, Chapter 13 plan in bankruptcy. The complaint alleges that Debtor committed certain acts constituting fraud or defalcation while acting in a fiduciary capacity, embezzlement or larceny and that therefore the debt to Plaintiffs is nondischargeable under 11 U.S.C. § 523(a)(4).
Defendant’s answer denies Plaintiffs’ allegations and asserts that even if Plaintiffs’ allegations are true, the debt is founded simply on contract and not a debt while acting in a fiduciary capacity.
Defendant then moved for a summary judgment under Fed.R. Civ.P. 56 and attached to said motion an affidavit of Defendant. Plaintiffs filed a “Memorandum in Opposition to Debtor’s Motion for Summary Judgment.”
*665CONCLUSIONS OF LAW
The relevant portion of Fed.R.Civ.P. 56(c) reads as follows:
The judgment sought shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” (Emphasis Supplied)
Based on a review of the pleadings and Defendant’s affidavit, it is clear that genuine issues as to material facts do in fact exist and that therefore a grant of summary judgment is inappropriate.
Plaintiffs’ complaint alleges that upon a discovery of Defendant’s breach of fiduciary responsibilities, Plaintiffs obtained a signed note from Defendant for $1,000.00 plus interest and that said note was a partial “payment” for the funds diverted by Defendant. Plaintiffs also maintain that Defendant subsequently agreed in a letter to sign a second note payable to Plaintiffs for $2,058.62 plus interest as total payment of the money diverted by Defendant and that the total debt is $2,223.31.
Neither Defendant’s answer nor affidavit refers to a note. However, Defendant did list Plaintiffs in her bankruptcy schedules as unsecured creditors in the amount of $2,223.31. Plaintiffs filed a proof of claim for $2,223.31 and attached a promissory note in the amount of $1,000.00 alleged to be signed by the Defendant.
Initially, then, it is somewhat uncertain whether Defendant even concedes that a debt exists. Assuming that a debt does exist, the material facts surrounding the creation of the debt and the subsequent note are not merely unclear, they are in fact unknown to the Court at this time. (As mentioned, Defendant’s affidavit is devoid of reference to a note.) The Court is unable on the basis of the record before it to determine the operative facts of the transactions between Plaintiffs and Defendant and, therefore, obviously unable to state that no genuine issues as to material facts exist.
Defendant briefly raises the point in her memorandum that even if Plaintiffs could prove that there was a breach of the agreement by Defendant, the debt could still be discharged under the discharge provisions of Chapter 13 of the Bankruptcy Code, 11 U.S.C. § 1328. It appears that Defendant is requesting a Judgment on the Pleadings, based on the proposition that even if Plaintiffs could prove the debt to be nondischargeable under 11 U.S.C. § 523(a)(4), it is nevertheless as a matter of law dischargeable under 11 U.S.C. § 1328.
The case law concerning the applicability of § 523 to § 1328 of the Bankruptcy Code is both extensive and sharply divided. We must note, however, a recent case of our Court of Appeals, Memphis Bank & Trust Co. v. Whitman, 692 F.2d 427 (6th Cir.1982), in which the Court addressed the question of whether a debt fraudulently obtained and placed in a Chapter 13 plan constitutes bad faith:
“The ‘good faith’ requirement is neither defined in the Bankruptcy Code nor discussed in the legislative history. The phrase should, therefore, be interpreted in light of the structure and general purpose of Chapter 13. Obviously the liberal provisions of the new Chapter 13 are subject to abuse, and courts must look closely at the debtor’s conduct before confirming a plan. We should not allow a debtor to obtain money, services or products from a seller by larceny, fraud or other forms of dishonesty and then keep his gain by filing a Chapter 13 petition within a few days of the wrong. To allow the debtor to profit from his own wrong in this way through the Chapter 13 process runs the risk of turning otherwise honest consumers and shopkeepers into knaves. The view that the Bankruptcy Court should not consider the debtor’s pre-plan conduct in incurring the debt appears to give too narrow an interpretation to the good faith requirement. See, e.g., Matter of Kull, 12 B.R. 654, 659 (S.D.Ga.1981) (among the facts a court should consider to determine whether a debtor has acted *666in good faith are ‘the circumstances under which the debtor contracted his debts and his demonstrated bona fides, or lack of same in dealing with his creditors.’)
One way to refuse to sanction the use of the bankruptcy court to carry out a basically dishonest scheme under Chapter 13 is to deny confirmation to the proposed plan. When the debtor’s conduct is dishonest, the plan simply should not be confirmed. Unless courts enforce this requirement, the debtor will be able to thwart the statutory policy denying discharge in Chapter 7 cases for dishonesty.
Another way to deal with the problem when the conduct is questionable but is not shown to be dishonest, as the Bankruptcy Court found it to be in the instant case, is to require full payment in accordance with the contract.” Id. at 431-32.
It is apparent from the foregoing that we may not state unequivocally and as a matter of law that Plaintiffs’ allegations, if proven true, would not preclude the confirmation of Defendant’s Chapter 13 plan. An evidentiary hearing (or stipulations in lieu of such hearing) is necessary in order for the Court to determine the circumstances surrounding the creation of Defendant’s debt and the dealings between the parties.
It is, therefore, ORDERED that Defendant’s motion for summary judgment be denied.
It is further ORDERED that this matter be set for Conference in the Law Library Conference Room, 8th Floor, Federal Building, U.S. Courthouse, 200 West Second Street, Dayton, Ohio, 45402 at 9:00 a.m. on January 19, 1983. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489463/ | FINDINGS OF FACT, CONCLUSIONS OF LAW AND MEMORANDUM OPINION
ALEXANDER L. PASKAY, Chief Judge.
THIS IS a Chapter 11 case and the immediate matter under consideration is a complaint filed by SJA Enterprises, Inc. (SJA) suing the First National Bank of Clear-water (the Bank). SJA seeks an order directing an immediate turnover of certain promissory notes which are claimed to be properties of the estate. It also seeks an order permitting the use of cash collateral, to wit: the collection of payments by the makers of these notes.
The matter was presented on a basis of great emergency, therefore, it was set down for hearing on short notice at which time the record established largely by stipulation reveals the following relevant facts:
On March 18, 1982, SJA executed two promissory notes, one in the amount of $209,629.88 on which there is a principal balance of $204,629.88 plus accrued interest; the second in the amount of $13,559.99 with a principal balance of $10,059.29 plus accrued interest. Both notes were 90 day notes and became due on June 14,1982. As part of the transaction, SJA executed a *700security agreement and granted to the Bank a security interest in its inventory, fixtures, equipment, contract rights and accounts receivables. In addition, as additional collateral, SJA delivered to the Bank three promissory notes held by SJA. The first is a note executed by Robert Collins and his wife Maureen dated January 1,1982 made in the principal amount of $90,000 and called for a monthly payment of $1,500.
The second is a note also executed by Mr. and Mrs. Collins on December 2,1980 in the principal amount of $160,000 and called for a monthly debt service in the amount of $1,500.
The third note was executed by one Byron Cook on February 2, 1979 in the principal amount of $213,000 and called for a monthly debt service of $3,000.
Prior to the pledge, Mr. and Mrs. Collins made several payments to SJA, although it is not clear from the record in what amount. What is clear, however, is that with the exception of $4,000, no payments have been made to the Bank since the pledge of the notes. It further appears that SJA is in negotiations at this time with Mr. and Mrs. Collins and proposed a settlement of the two notes by reducing the principal and restructuring the monthly debt service. This transaction is not finalized and there is no evidence in this record that the Bank agreed to the restructuring of the obligations represented by the two notes. It further appears that Mr. Cook made all monthly payments to the Bank since the pledge with the exception of the month of November payment at which time he only paid one half of the payment and so far has paid nothing for the month of December.
The total outstanding indebtedness owed by SJA to the Bank is $214,689.17 plus accrued interest. It further appears that at least the face amount of the notes pledged as collateral represents an indebtedness of the makers in the amount of $320,000. According to the testimony of the president of SJA, its equipment has a value of $55,000, its furniture $22,000 and receivables from the franchise located in Houston, Texas, $200,000, although it appears that this matter is currently in litigation, but according to the president of SJA will be settled shortly. This franchise is supposed to represent by way of franchise fees $5,000 in monthly income to SJA.
It is the contention of SJA that the three promissory notes are properties of the estate within the meaning of § 541 of the Code thus subject to the turnover by virtue of § 542 of the Code. In addition SJA contends that it is entitled to use the cash collateral to be derived from the collections on these notes by providing adequate protection on the following terms:
Payment of debt service according to the terms of the notes executed by SJA in favor of the Bank commencing 90 days from date granting a security interest on all post-petition contract rights and receivables.
It is the contention of the Bank that the notes, while initially pledged as additional collateral were endorsed by SJA to the Bank and became the absolute property of the Bank upon SJA’s default on the underlying obligation. Thus, it is the Bank’s position that the pledged notes no longer represent the properties of the estate, therefore, they are not subject to turnover.
It is also the contention of the Bank that in the event this Court finds the notes to be properties of the estate, the adequate protection offered by the Debtor is, in fact, not adequate and the Debtor should not be permitted to use the cash collateral.
The Court considered the respective contentions of the parties and is satisfied that the Bank’s position is not supported by logic or by any controlling text or decisional law for the following reasons: First, the fact that SJA endorsed the three notes pledged as collateral for their obligation to the Bank, is without legal significance. “The general property in the pledge remains in the pledgor after default as well as prior thereto. The failure of the pledgor to pay his debt at maturity in no way affects the nature of the pledgee’s rights concerning the property pledged, except that he be*701comes entitled to proceed to make the security available in the manner prescribed by law or by the terms of the contract, ...” 68 Am.Jur.2d Secured Transactions, § 62 (1973).
It is further noted that “such property rights generally exist in the pledgor, even where a negotiable instrument or commercial paper has been pledged.” 68 Am.Jur., supra.
These propositions are further supported by the holding of Bankruptcy Court in and for the Western District of Kentucky, which held that assignment for security does not divest the debtor of all interest in accounts receivable. First National Bank of Louisville v. Hurricane Elkhom Coal Corp. II, 8 B.C.D. 1243,19 B.R. 609 (Bkrtcy.W.D.Ky.1982).
By way of analogy, the Bank contends that the interest of a mortgagor is extinguished after a foreclosure sale when the Clerk of the Court issues a Certificate of Title and that this event is legally equivalent to the endorsement of the notes in question and when coupled with the event of default on the underlying obligation, this effectively divested any interest of the Debtor in the pledged notes. Reliance on this analogy is misplaced because, as noted earlier, the collateral pledged retains the character of collateral in which the pledgor holds an interest even after default which cannot be extinguished unless the pledgee resorts to either legally or contractually based remedies provided for by applicable law or by agreement of the parties.
A separate final judgment will be entered in accordance with the foregoing. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489464/ | MEMORANDUM
CLIVE W. BARE, Bankruptcy Judge.
Alleging violations of §§ 727(a)(2)(A) and 727(a)(4)(A) of Title 11 of the United States Code,1 plaintiff seeks denial of the debtor’s discharge.
According to the plaintiff,2 the debtor concealed from the trustee and the estate a 1945 Ford pickup truck, a 1963 Falcon automobile, a 1946 pickup truck, a stock car racing automobile, and some tools and parts formerly used by the debtor in an automobile repair business.
Schedule B-2 filed by the debtor on June 4, 1982, indicated that he owned two vehicles — a 1979 Ford encumbered by a lien in the amount of $5,663.76, with a market *708value of $2,200.00, and a 1965 Ford with a market value of $800.00. The debtor claimed personal property exemptions under T.C.A. § 26-2-102 of the value of $1,225.00.
On July 13, 1982, following the § 341 examination of the debtor on July 2, 1982, he filed a motion to amend Schedule B-2 by including a 1945 Ford pickup truck (inoperable) with a value of $1,500.00.
The debtor testified that he did not initially schedule any ownership rights in the pickup truck because in December 1980 he had given the truck to his sons. He did not execute a bill of sale, however, and upon learning at the hearing that the vehicle was still titled in his name, he caused the amended schedule to be filed.
The proof indicates that the 1963 Ford Falcon belongs to the debtor’s adult daughter who lives with him. The debtor drives the vehicle at various times but has no ownership interest in the vehicle.
The proof also indicates that the 1946 pickup truck is not the property of the debtor but belongs to his sons. The vehicle is a “scrapped” vehicle and has value only for parts.
The proof also indicates that the tools and parts formerly used by the debtor at a filling station and repair shop were for the most part transferred in May 1980 to the debtor’s successor in business. A welder and a few small tools were given to his sons, who, although young, work on junker automobiles.
The debtor at one time owned an interest in a stock car racing automobile by virtue of his supplying and furnishing the frame and motor. Two other individuals also had interests in the automobile by virtue of furnishing all other parts. The frame and engine were destroyed in a wreck which occurred more than a year before the debt- or’s bankruptcy petition was filed. Thereafter, he had no ownership interest in the vehicle.
The debtor is presently employed as a foreman at one of the University of Tennessee farms. In his statement of affairs he stated that he had not been engaged in business during the past six years. On July 13, 1982, he amended the statement of affairs to reflect that he had operated a gasoline service station from December 1978 through February 1980 known as Farrport 76, Alcoa Highway, Alcoa, Tennessee. In April and May 1980 he operated the car repair portion of the business in a vacant building known as the Ole Oaken Bucket, Highway 33, Rockford, Tennessee. The debtor’s attorney stated that it was due to his inadvertance that the statement had not initially reflected the operation of the business. The court accepts this explanation and rejects plaintiff’s contention that the debtor’s failure to disclose the past operation of the business in the statement constitutes a “knowingly and fraudulently false oath.” There simply was no reason to falsify the statement concerning a business which the debtor formerly operated. He profited nothing from the initial failure to disclose and, when this omission was called to his attention, he immediately moved to amend.
Nor did the debtor have any reason to conceal an ownership interest in the automobiles, even assuming that he had an interest. The debtor claimed only $3,075.00 in exempt property, in the amended schedule, including the value of the Ford truck which he initially failed to schedule. Even this figure leaves the debtor and his wife more than $4,000.00 short of exemptions which he could have claimed. See T.C.A. § 26-2-102. Again, there simply was no reason to conceal property.
“The false oath [necessary to sustain an objection to discharge] must have been knowingly and fraudulently made. That is, the statement must contain matter which the debtor knew to be false and he must have included them willfully with intent to defraud.” Vol. 4, Collier on Bankruptcy, (1982) § 727.04. (Citations omitted)
Bankruptcy Rule 407 provides that, at the trial on a complaint objecting to discharge, the plaintiff has the burden of proving the facts essential to his objection. In the case *709before this court the plaintiff has not carried that burden. The objections to discharge will be overruled. The discharge will be granted.
This Memorandum constitutes findings of fact and conclusions of law, Bankruptcy Rule 752.
. “(a) The court shall grant the debtor a discharge, unless—
(2) the debtor, with intent to hinder, delay, or defraud a creditor or an officer of the estate charged with custody of property under this title, has transferred, removed, destroyed, mutilated, or concealed, or has permitted to be transferred, removed, destroyed, mutilated, or concealed—
(A) property of the debtor, within one year before the date of the filing of the petition; or
(4) the debtor knowingly and fraudulently, in or in connection with the case—
(A) made a false oath or account;
. The debtor owes the plaintiff some $6,800.00 resulting from the purchase of merchandise (oil, gas, et cetera) while he was operating a service station and automobile repair shop. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489467/ | PER CURIAM:
The facts and legal arguments are adequately presented in the briefs and record. The law is well established. We adopt and affirm the findings of fact and conclusions of law of the Bankruptcy Court. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489468/ | MEMORANDUM AND ORDER ON THE APPLICATION OF CODY MANAGEMENT ASSOCIATION, INC. FOR AN ORDER DIRECTING PAYMENT AND SATISFACTION OF THE LIEN OF THE CITY OF MONTPELIER
CHARLES J. MARRO, Bankruptcy Judge.
The Debtor filed for Relief under Chapter 11 on February 16, 1982.
Cody Management Association, Inc., as lessor of property to the Debtor, has applied to the Court for an Order directing the Debtor to pay and satisfy the lien of the City of Montpelier. The basis for the lien was for expenses incurred for the removal of a dangerous building from the leasehold premises. The City of Montpelier incurred these expenses when the Debtor-in-possession failed to remove the building, although such removal had been ordered by the City. The Court in making its ruling has reviewed the facts of the case, the lien, and the applicable law, and finds that these costs should be treated as administrative expenses of the estate under 11 U.S.C. § 503(b)(1)(A).
On October 15, 1982, a hearing was held on the instant Application. As set forth in the application, the Debtor entered into a lease with Cody Enterprises, Inc., the Applicant’s predecessor in interest, on March 30, 1981. The lease covered the land and building situated at the northeasternly corner of East State and Main Streets in the City of Montpelier, Vermont.
Subsequent to the execution of the lease, the Debtor filed its petition for reorganization. However, since the commencement of the reorganization, the Debtor has kept and retained the lease and the leasehold, despite the filing and later withdrawal of a petition to reject the unexpired lease.
On March 12,1982, a part of the leasehold premises collapsed due to the weight of accumulated snow, and such collapse created a dangerous condition. By written notice, the City of Montpelier ordered the Debtor in possession to make the situation safe on March 17, 1982, which the Debtor proceeded to do. Thereafter, the Debtor was ordered to demolish the remainder of the collapsed building; remove the debris; and fill the remaining cellar hole. Bids were sought to complete the ordered work, which resulted in the lowest bid of $8,500.00.
At a hearing on May 3, 1982, on the petition to reject, which was at that time pending, the matter of compliance with the City of Montpelier’s order and the payment of $8,500.00 was raised. This Court, after due inquiry, instructed the Debtor, through *806its Counsel, to comply with the order and make the necessary payment. On July 7, 1982, the City of Montpelier proceeded with the work due to the Debtor’s failure to comply. The City then notified the Debtor and Cody Management Association, Inc. of the lien it asserted against the leasehold premises, to secure the $8,500.00 payment.
Section 503(b)(1)(A) of the Code states:
(b) After notice and a hearing, there shall be allowed, administrative expenses . . . including—
(1)(A) the actual, necessary costs and expenses of preserving the estate, including wages, salaries, or commissions for services rendered after the com-mencment of the case.. .
While there is no doubt that the $8,500.00 in question is not a wage, salary or commission, there should further be no doubt that it was an actual, necessary cost and expense of preserving the estate. As discussed in 3 Collier on Bankruptcy, ¶ 503.04[l][a] (15th ed. 1981);
“It follows, therefore, that while wages, salaries or commissions for services rendered after the commencement of the case are expressly included within the phrase ‘actual, necessary costs and expenses of preserving the estate,’ it does not mean that there are not allowable as administrative expenses within section 503(b)(1)(A), other costs and expenses.” See also 3 Collier 15th Ed. at page 503-
16:
“Proper rules of preservation might require approval of outlays for repairs, upkeep, freight and many other kinds of expenses. Their recognition, however, as administrative expenses, depends upon their necessity and while views may differ in this respect, it might be necessary that the trustee first ascertain whether a contemplated expenditure is actually necessary.”
The debtor in possession has the same rights and duties as a trustee. Section 1107 of the Bankruptcy Code.
In the instant case the work ordered and subsequently performed by the City of Montpelier was not only necessary for the preservation of the leasehold as part of the debtor’s estate but it was also a matter of necessity for the safety and welfare of the public in general. Therefore, the expenditure of the $8,500.00 for the work ordered by the City of Montpelier is a proper administrative expense of the estate.
ORDER
Now, therefore, upon the foregoing,
IT IS ORDERED as follows:
1. That the application of Cody Management Association, Inc. for an order directing payment and satisfaction of the lien of the City of Montpelier is GRANTED.
2. The debtor shall make payment of the sum of $8,500.00 in satisfaction of the City of Montpelier lien within 10 days from the date of this order. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489469/ | MEMORANDUM AND ORDER ON APPLICATION OF DEBTOR FOR AUTHORIZATION TO PROCEED WITH CASH PAYMENTS TO SETTLE CLAIMS FOR GOODS AND SERVICES
CHARLES J. MARRO, Bankruptcy Judge.
The Debtor seeks authorization to proceed with cash payments on its proposal to liquidate miscellaneous claims listed in its bankruptcy schedules. In presenting its proposal at the hearing on October 14,1982, the Debtor, represented by Wyman Smith, indicated that it would seek to settle approximately $23,000.00 of claims for $7000.00.
Mr. Smith stated that the proposal would in effect pay the miscellaneous unsecured creditors 30% of their claims, and would correspondingly eliminate administrative expense that would subsequently be incurred. Counsel for the Shareholders’ Committee; Counsel for Margaret Baird; and Julian Goodrich, as the Debtor’s Counsel of record, stated their support for the proposal. Mr. Goodrich stressed that the proposal would avoid substantial administrative expense.
Opposition to the proposal was made by not only Counsel for Cody Management Association, Inc., and that of the Sawyer Estate, but also by the Creditors’ Committee. Mr. Wolinsky, as Counsel for the Creditors’ Committee, indicated his preference for treating all of the creditors simultaneously in the plan for reorganization. He further suggested that at this point in the case, it would not be proper to pay certain miscellaneous creditors.
The Court agrees with the arguments of the Creditors’ Committee. The goals of reorganization are not served by the piecemeal administration of the estate prior to the development of a plan. While it may appear in the short run that certain administrative expenses would be reduced by random payments made prior to the filing of a plan, consideration should also be given to whether such payments will produce untold repercussions that will subsequently prevent a successful reorganization.
In the instant application it is simply not equitable to settle certain claims prior to the filing of a plan. A premature settlement will only result in a detriment to the settling creditors if the reorganization succeeds and a greater value is available for distribution. In addition the proposed pay*808ments may also be detrimental to the other creditors if the reorganization fails and the estate has to be liquidated.
ORDER
Now, therefore, upon the foregoing,
IT IS ORDERED that the application of the Debtor for authorization to proceed with cash payments of 30% to settle certain claims for goods and services is DENIED. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489470/ | MEMORANDUM AND ORDER ON APPLICATION OF DEBTOR TO APPLY CASH ON HAND TOWARD THE INDEBTEDNESS TO THE MERCHANTS BANK FOR DELINQUENT MORTGAGE INSTALLMENTS
CHARLES J. MARRO, Bankruptcy Judge.
The Debtor filed an Application to apply cash on hand toward delinquent mortgage installments owed to the Merchants Bank. At a hearing on October 14,1982, the Debt- or, represented by Wyman Smith, submitted to the Court the basic premises for the application.
*809In support of the application, Mr. Smith advised that the Debtor was currently four months delinquent in its mortgage installments to the Merchants Bank, such mortgage being on the 32-unit Colchester property. He further advised that the delinquency amounted to approximately $25,-000.00. Mr. Smith indicated that if the Court allowed the payment of $25,000.00, the reduced mortgage principal would also result in the reduction of mortgage interest, and a corresponding savings for the Debtor. Mr. Smith further indicated that although the property was in need of repairs for cosmetic reasons and for compliance with the fire code, the property if prepared for market could net the Debtor approximately $200,000.00. Counsel for the Merchants Bank indicated its support for the application, noting that the Debtor’s mortgage interest rate exceeded that found currently in the market; and that if the delinquencies were not paid, the Bank would seek relief from the stay.
Various objections were made to the application by Counsel for Cody Management Association, Inc. and Dr. Felix Sommer. However, the most notable objection was made by the Committee of Unsecured Creditors. Mr. Wolinsky, as Counsel for the Creditors’ Committee, advocated that any payments made prior to the development of a plan would result in the estate being handled in a piecemeal fashion. The Court finds this argument to be the most persuasive.
It should be noted that the plan for reorganization should provide a proper distribution of the values represented by the reorganized debtor among the parties entitled to participate, in accordance to their respective entitlements. And it is further noted that the debtor has the duty to formulate a reorganization plan. 11 U.S.C. § 1121. And this duty was considered by the Court in the Matter of K.C. March Co., Inc., 12 B.R. 401 (Bkrtcy.1981) at 403:
“. .. This is the job of the debtor in reorganization. He must demonstrate that there is a reasonable posibility of a successful reorganization. In re Bermec Corp., 445 F.2d 367 (2nd Cir.1971) The plan for reorganization must be more than a nebulous speculative venture. It must have a realistic chance of success which would lead to rehabilitation, ...”
Allowance of the payment as requested by the Debtor would not only frustrate the goals of reorganization as enumerated above but it would also initiate the piecemeal administration of the estate as indicated by the Creditors’ Committee. There was more than an adequate showing that the Debtor has substantial equity in the property, and if required, the Debtor could provide assurances to the Bank for the delinquencies from that equity. As such, there is neither a compelling circumstance nor an overwhelming inequity which would prevent the holding of the payment to the Merchants Bank in abeyance pending the filing of the plan.
ORDER
Now, therefore, upon the foregoing,
IT IS ORDERED as follows:
1. That the application of the Debtor to apply cash on hand toward the indebtedness to the Merchants Bank for delinquent mortgage installments is DENIED. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489471/ | OPINION
WILLIAM LIPKIN, Bankruptcy Judge.
The Debtor herein, Jefferson Mortgage Co., Inc., filed a voluntary Petition for Relief under the provisions of Chapter 7 of the Bankruptcy Code on September 22, 1981.
Plaintiff David H. Markowitz, the Trustee for Debtor Jefferson Mortgage Co., Inc., filed a complaint against the Heritage Bank (Bank) seeking a judgment against the Bank for 2 sums of money which were allegedly improperly transferred during the 90-day preference period contrary to section 547 of the Bankruptcy Code. One sum was a tax refund owed to the debtor in the amount of $101,219.99; the other was in the amount of $28,193.17 held in an account in the Bank and was set off by the Bank on the day the debtor’s petition was filed. Although the parties have not stipulated any facts in this case, both have moved for summary judgment. The Trustee also argues, in the alternative, that there is a material question of fact as to at least one aspect of this litigation which would preclude summary judgment.
The following facts appear in the record as set forth in affidavits or exhibits submitted by the parties. Jefferson Mortgage and the Bank executed a Repurchase Agreement and a Warehouse Agreement on September 30, 1980 whereby Jefferson obtained financing from the Bank and pledged assignments of mortgages as security. Jefferson subsequently defaulted on its payments. As a result of the default, they entered into an agreement dated March 13,1981 whereby Jefferson acknowledged its indebtedness to the Bank in the amount of $6,826,019.69. In partial satisfaction of this debt, Jefferson Mortgage assigned or transferred certain mortgage loans to the Bank. Jefferson Mortgage also signed a promissory note payable to the Bank for the remaining amount due, in the amount of $1,001,891.77.
To secure payment of this promissory note Jefferson Mortgage granted the Bank a security interest in the following assets:
all assets owned by Jefferson, including furniture, office equipment, cash, accounts receivable, contract rights, franchises and agency rights, income tax and other tax refunds, refunds of unpaid insurance premiums, mortgages, rights under agreements to service mortgage loans, and all other property of every kind and description, together with all accessories, substitutions, additions, replacements, parts and accessions affixed to or used in connection with such collateral, and proceeds thereof, (underlining added).
A financing statement covering all this collateral was filed in the Office of the New Jersey Secretary of State on March 24, 1981. A box on this statement was checked indicating that proceeds of the collateral were also covered. The Trustee does not appear to challenge the technical requirements for perfection of this collateral, such as the place of filing or the debtor’s name, address and signature. N.J.S.A. 12A:9-401. Thus, the Bank’s debt was perfected as to the collateral listed in the security agreement and financing statement at all times here relevant.
*965The Bank’s agent admitted that ninety days prior to the filing of the Petition, which date would be June 24, 1981, Jefferson Mortgage owed the Bank the sum of $1,001,891.77. It is also agreed that one day after the filing of the Petition, Jefferson Mortgage owed the Bank the sum of $448,-169.60. On September 18, 1981, which was four days before the filing of its Petition, Jefferson Mortgage received a federal income tax refund in the amount of $101,-219.00 and immediately transferred this refund to the Bank. As stated above, the debtor then filed its Petition under Chapter 7 of the Bankruptcy Code on September 22, 1982 at 11:53 a.m. Also on September 22, 1982 at 10:35 a.m. the Bank set off the sum of $28,193.17 which was being held in the debtor’s account at the Bank. Bank records indicate that this amount was list posted on September 23, 1981.
It is not clear from the record what other transfers during the 90-day period before the filing caused the reduction in the indebtedness of Jefferson Mortgage to the Bank in the sum of $553,722.17. However, these other payments or transfers are not at issue here.
The Trustee claims that the $100,219.00 tax refund and $28,193.17 should be returned to the estate. As to the tax refund, the Trustee claims that: 1) the debtor’s payment of the tax refund to the Bank on September 18, 1981 was a “transfer” within the 90-day preference period under Section 547(e)(3) of the Bankruptcy Code; 2) the receipt of the tax refund by the Bank enabled it to receive more than it would have otherwise received under the Bankruptcy Code; 3) there was no valid assignment of the debtor’s tax refund because the federal statute, 31 U.S.C.A. § 203, requiring such written assignment was not complied with, and 4) the protections of Section 547(c)(5) are not available to the Bank because the Bank could not obtain a floating lien in the tax refund. As to the setoff, the Trustee argues that the Bank had no perfected security interest in the debtor’s bank account and received more by setting off the sum than it would have under the applicable Bankruptcy Code provisions. The Trustee agrees that none of the above questions raise an issue of fact which would preclude summary judgment.
In the alternative, the Trustee argues that there is an issue of material fact precluding summary judgment, as to whether the Bank is an “insider” under the terms of Section 547(b)(4)(B). However, he does not specify as to why this would be relevant.
Bankruptcy Rule 756 provides: “Rule 56 of the Federal Rules of Civil Procedure applies in adversary proceedings.” F.R.C.P. 56(c), concerning the standard for a summary judgment, provides in part:
The judgment sought shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.
The only facts which are in dispute concern the Bank’s status as an “insider”, and those will be discussed later.
The Trustee’s initial arguments are based on the following portions of Section 547(b) of the Bankruptcy Code:
(b) Except as provided in subsection (c) of this section, the trustee may avoid any transfer of property of the debtor—
(1) to or for the benefit of a creditor;
(2) for or on account of an antecedent debt owed by the debtor before such transfer was made;
(3) made while the debtor was insolvent;
(4) made—
(A) on or within 90 days before the date of the filing of the petition; or
(B) between 90 days and one year before the date of the filing of the petition, if such creditor, at the time of such transfer—
(i) was an insider; and
(ii) had reasonable cause to believe the debtor was insolvent at the time of such transfer; and
*966(5) that enables such creditor to receive more than such creditor would receive if—
(A) the case were a case under chapter 7 of this title;
(B) the transfer had not been made; and
(C) such creditor received payment of such debt to the extent provided by the provisions of this title.
The application of this statute is explained in the Legislative History as follows:
Subsection (b) is the operative provision of the section. It authorizes the trustee to avoid a transfer if five conditions are met. These are the five elements of a preference action. First, the transfer must be to or for the benefit of a creditor. Second, the transfer must be for or on account of an antecedent debt owed by the debtor 'before the transfer was made. Third, the transfer must have been made when the debtor was insolvent. Fourth, the transfer must have been made during the 90 days immediately preceding the commencement of the case. If the transfer was to an insider, the trustee may avoid the transfer if it was during the period that begins one year before the filing of the petition and ends 90 days before the filing, if the insider to whom the transfer was made had reasonable cause to believe the debt- or was insolvent at the time the transfer was made.
Finally, the transfer must enable the creditor to or for whose benefit it was made to receive a greater percentage of his claim than he would receive under the distributive provisions of the bankruptcy code. Specifically, the creditor must receive more than he would if the case were a liquidation case, if the transfer had not been made, and if the creditor received payment of the debt to the extent provided by the provisions of the code.
The phrasing of the final element changes the application of the greater percentage test from that employed under current law. Under this language, the court must focus on the relative distribution between classes as well as the amount that will be received by the members of the class of which the preferee is a member. ...
[House Report No. 95-595, 95th Cong., 1st Sess. 372 (1977); Senate Report No. 95-989, 95th Cong., 2d Sess. 87 (1978), U.S.Code Cong. & Admin.News 1978, pp. 5787, 5873, 6328.]
In making his argument that payment of the tax refund was a preferential transfer, the Trustee has the burden of proof that all elements of the statute have been satisfied. In Re K. Pritchard Co., 17 B.R. 508 (Bkrtcy.S.D.Ala.1981); In Re Pur-beck & Associates, Ltd., 12 B.R. 406 (Bkrtcy.Conn.1981). It appears that the parties agree that the following requirements of Section 547 are present here, because they have not been raised as disputed issues: 1) the payment of the tax refund was a transfer to the creditor-bank;1 2) it was made on account of an antecedent debt owed by the debtor; 3) it was made while the debtor was insolvent, and 4) it was made during the 90-day period prior to filing.
However, not all transfers made within this period are preferential. In order to be a preference, a “transfer” within the 90-day period before filing for bankruptcy must “enable the creditor to or for whose benefit it was made to receive a greater percentage of his claim than he would receive under the distributive provisions of the bankruptcy code.” 11 U.S.C. § 547(b)(5); see Legislative History cited above.
Although the Trustee claims that the receipt of the tax refund by the Bank enabled it to receive more than it would have otherwise received under the Bankruptcy Code, *967the basis for this argument is not clear given the perfected status of the Bank’s security interest in any tax refunds owing to the debtor. The Trustee does not attack the financing statement but argues that the Bank’s interest in the tax refund was impaired under Section 547(c)(5). That section does not allow a Trustee to avoid a transfer of a perfected security interest in inventory or a receivable or the proceeds of either except to the extent there is an improvement in position as a result of the floating liens.
However, it is clear that Section 547(c)(5) does not apply in the present ease. That provision in the statute concerns a security interest in inventory or accounts receivable, neither of which is at issue here. The collateral here is a tax refund, which was specifically listed as such on the security agreement and financing statement and, as will be discussed, infra, can be categorized as a “general intangible” chattel. In addition, there is no need to even reach a discussion of § 547(c) because the requirements of § 547(b) must be met as a prerequisite for the application of this statute. If the Trustee cannot prove that a transfer within the 90-day period was “preferential” in that it enabled a creditor of a certain class to receive more than he would otherwise, the transfer cannot be avoided and § 547(c) is not relevant. The only logical way to read § 547(c) is that it is an additional reason for avoiding a transfer given that all the requirements of § 547(c) have occurred. Section 547(c)(5) concerns itself with the floating lien associated with accounts receivable that fluctuate during the 90-day period whereby creditors could benefit during the 90-day period at the expense of other creditors if the creditor improved its position during that period of time. Thus, there has been no demonstration that the pledge of the tax refunds falls within the type of activity which calls for application of Section 547(c)(5).
If the Bank has properly perfected its security interest in the tax refund, the transfer of the refund to it during the 90-day period was not preferential because the requirements of § 547(b)(5) have not been met. The case of In Re Kendrick & King Lumber, Inc., 14 B.R. 764 (Bkrtcy.W. D.Okl.1981), has facts very similar to the present case. A creditor-bank loaned the debtor money and filed a financing statement covering accounts receivable, contract rights, general intangibles and proceeds thereof in 1977. The debtor borrowed additional money in December 1980 and executed a security agreement covering all general intangibles, now existing or hereafter arising, which was properly perfected. On June 10, 1981 the debtor executed a promissory note to renew its prior indebtedness and the bank filed a financing statement on June 12, 1981 covering inventory, contract rights, accounts receivable, general intangibles, instruments, documents of title, insurance policies, and securities now owned or arising in the future. On July 27, 1981 the debtor filed a petition under Chapter 7 of the Bankruptcy Code. Thereafter, the Internal Revenue Service issued tax refund checks to the debtor as the result of amended income tax returns filed in February 1981 relating to the taxable years 1974 through 1979.
The Bank claimed that it had a valid perfected security interest in the tax refund as a “general intangible,” and thus was entitled to the amount of the tax refund. The court held that the right to an income tax refund is a “general intangible” within the meaning of the Uniform Commercial Code and was properly perfected as against the Trustee. The court also held that there was no preferential transfer because the debtor had a transferable right in the income tax refunds prior to the commencement of the 90-day prepetition period.
Thus, the Bank was entitled to the income tax refund because it had a perfected security interest covering general intangibles under state law prior to the preference period specified under federal law. The Bank was awarded the tax refund because it was getting only that to which it was otherwise entitled under the Bankruptcy Code as a creditor with a secured claim. As long as a creditor properly perfects its se*968curity interest before the 90-day preference period, the date of mailing or receipt of the tax refund is not a preferential transfer, even if it can be termed a “transfer”. In the instant case the security agreement and perfecting instruments went further and specifically mentioned “tax refunds”.
The case of In Re Certified Packaging, Inc., 8 U.C.C.R.S. 95 (D.Utah 1970), also held that the proper way to perfect a security interest in an income tax refund is as a “general intangible”. In that case the creditor did not properly perfect its security interest in a tax refund because its financing statement did not cover “general intangibles” or “tax refunds”.
Thus, that case is distinguishable from the present one because the Bank here filed its financing statement specifically covering tax refunds. Under the New Jersey Uniform Commercial Code, a tax refund is also in the category of a general intangible. N.J.S.A. 12A:9-106. The financing statement was properly filed in the office of the New Jersey Secretary of State. N.J.S.A. 12A:9-401(l)(c). The Trustee does not challenge any of the formal requisites of the financing statement, and this court finds that the formal requisites have been met. N.J.S.A. 12A:9-402. Since the Bank took all the necessary steps for perfection of its security interest and filed its financing statement on March 24, 1981, which was more than 90 days before the debtor filed its Petition, the Bank did not receive more than it otherwise would have, to the detriment of any unsecured creditors. This court agrees with the holding in In Re Kendrick & King Lumber, Inc., supra, that the mere receipt of the income tax refund is irrelevant as long as the security interest in the tax refund is perfected before the 90-day preference period. Therefore, the mere payment of a tax refund within the preference period is not a preferential transfer by itself. It would only be preferential if a secured party had not perfected its interest more than 90 days before the filing of the petition.
The Trustee argues that there was no valid assignment of the tax refund to the Bank because the federal statute requiring such an assignment, 31 U.S.C. § 203, was not complied with. The Bank concedes that it has no written assignment and even attempted to obtain such an assignment before the filing of the debtor’s Petition.
However, the claim at issue here is a dispute between the Trustee and a creditor and does not involve the United States Government. This court finds very persuasive those Circuit Court opinions which hold that the assignment statute was enacted for the benefit of the United States Government and is not applicable in cases in which the Government is not involved. King v. Gilbert, 569 F.2d 398 (5 Cir.1978); In Re Freeman, 489 F.2d 431 (9 Cir.1973). This issue is not necessary for determination here, because an assignment or lack thereof will not change the result here. The Bank’s right to the tax refund arose as a result of its perfected security interest and not from an assignment of the refund. Even if the debtor had refused to “assign” the tax refund by handing it over to the Bank when received, the Bank would have had a right to payment by virtue of its perfected security interest. There is no exception in the Uniform Commercial Code for the assignment of federal claims; nor is there any indication in the federal statute that it is controlling to the exclusion of state law, because there is no reason for the federal law to apply when the United States Government is not involved in a claim and when the claim deals solely with the state-law issue of perfection of a security interest between private parties.
The final argument raised by the Trustee in opposition to a grant of summary judgment in favor of the Bank on the tax refund is that there is a factual dispute as to whether the Bank is an “insider” under section 547(b)(4)(B). Although the Trustee’s discussion of this issue is vague, it appears that he is attempting to avoid the perfection of the Bank’s security interest by the filing of its financing statement on March 24, 1981. If this perfection is avoided, the Bank would only have the status of a creditor with an unsecured claim and the *969Trustee would have a superior right to the refund. 11 U.S.C. § 544(a).
However, the Trustee presents no affidavits or other evidentiary material to support its position but merely states: “Clearly, the depositions of James A. Smedley and Richard Gallaudet raise factual issues with regard to issues of the insider status of the defendant.” The Trustee presents no itemization of which of their statements raise a factual question. This failure raises an issue specified in F.R.C.P. 56(e), which reads in part:
When a motion for summary judgment is made and supported as provided in this rule, an adverse party may not rest upon the mere allegations or denials of his pleading, but his response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial. If he does not so respond, summary judgment, if appropriate, shall be entered against him.
This paragraph was added to the Rule by an amendment promulgated in 1963, which • is explained in the comment following the rule as follows:
The last two sentences are added to overcome a line of cases, chiefly in the Third Circuit, which has impaired the utility of the summary judgment device. A typical case is as follows: A party supports his motion for summary judgment by affidavits or other evidentiary matter sufficient to show that there is no genuine issue as to a material fact. The adverse party, in opposing the motion, does not produce any evidentiary matter, or produces some but not enough to establish that there is a genuine issue for trial. Instead, the adverse party rests on averments of his pleadings which on their face present an issue. In this situation Third Circuit cases have taken the view that summary judgment must be denied, at least if the averments are “well-pleaded,” and not supposititious, conclusory, or ultimate.. .. [citations omitted]
The very mission of the summary judgment procedure is to pierce the pleadings and to assess the proof in order to see whether there is a genuine need for trial. The Third Circuit doctrine, which permits the pleadings themselves to stand in the way of granting an otherwise justified summary judgment, is incompatible with the basic purpose of the rule. See 6 Moore’s Federal Practice 2069 (2d ed. 1953); 3 Barron & Holtzoff, supra, § 1235.1.
It is hoped that the amendment will contribute to the more effective utilization of the salutary device of summary judgment.
The amendment is not intended to derogate from the solemnity of the pleadings. Rather it recognizes that, despite the best efforts of counsel to make his pleadings accurate, they may be overwhelmingly contradicted by the proof available to his adversary.
With the adoption of this Rule amendment it seems clear that allegations in pleadings may not be sufficient to withstand a summary judgment motion, especially where the pleadings themselves are not specific. The Third Count of the Trustee’s Amended Complaint provides only the following reference to “insider” status: “12. Between 90 days and one year before the date of the filing of the petition, the defendant was an insider.”
This court’s task was made unnecessarily more difficult by the Trustee’s failure to provide its own affidavits and failure to specify, even in its briefs, precisely what factual disputes it is relying upon for this argument. After a careful perusal of the depositions of Smedley and Gallaudet, as well as all the other material in this file, I must conclude that there is no issue of fact in dispute which is material to the issues before this court. This involves a mixed question of law and fact because not only must there be a factual dispute as to the Bank’s status as an “insider” but the facts presented must also demonstrate that the issue of insider status is relevant and material as to whether a preferential transfer occurred.
The term “insider” is defined in Section 101(25) of the Bankruptcy Code as follows:
*970(25) “insider” includes—
(B) if the debtor is a corporation—
(i) director of the debtor;
(ii) officer of the debtor;
(iii) person in control of the debtor;
(iv) partnership in which the debtor is
a general partner;
(v) general partner of the debtor; or
(vi) relative of a general partner, director, officer, or person in control of the debtor;
Although this list is not all-inclusive, it has been held to refer to someone who has a sufficiently close relationship with a debtor whereby his conduct is subject to closer scrutiny than those who deal at arms length with the debtor. Matter of Montanino, 15 B.R. 307 (Bkrtcy.N.J.1981); 4 Collier on Bankruptcy 547-17, note 4 (15th ed. 1982).
The Trustee has not cited any cases, nor can this court find any, in which a creditor was held to be an “insider” for purposes of Section 547 of the Bankruptcy Code merely by reason of being a creditor. Perhaps § 101(25)(B)(iii) might apply if the creditor was a “person in control of the debtor,” but that fact has not been established in this case to the point where it satisfies Rule 56, as raising a material fact.
A creditor and debtor relationship, such as was present here, requires that an obligation or debt be owing. Under the normal connotation, this relationship is an arms-length transaction. Even though the Bank may have obtained some concessions from the debtor based on the loan transaction between them, there is not a scintilla of evidence in the depositions that these concessions rose to the level of a special relationship which would characterize the Bank as an “insider” for purposes of § 547. The Trustee’s allusion to the Bank’s “control” of the debtor is not sufficient under the facts of this case. The Bank may have exercised some measure of control over the debtor financially in order to protect its collateral. However, this control was merely incident to their creditor-debtor relationship. The creditor had only financial power over the debtor, and the debtor could have terminated the relationship at any time and looked for another creditor.
There have been no facts presented to this court which demonstrate a dispute of a material or relevant fact concerning the Bank’s insider status. As a matter of law, the parties’ relationship was one of an arms’ length debtor-creditor relationship.
The remaining sum of money sought by the Trustee is the sum of $28,193.17 which was set-off by the Bank on the date the debtor filed its Petition. The Trustee claims that this set-off violated Section 553 of the Code, as an improvement in position, because the debtor owed the Bank the sum of $1,001,891.77 90 days before the filing and the sum of $448,169.60 as of the date after the filing of the Petition. The Bank counters that this reduction in the debt owed by Jefferson Mortgage resulted from the sale of properties on which the Bank had a previous lien and thus, did not improve its position but merely obtained what it would have anyway. The Trustee does not discuss the improvement in position test as applied to the sum of money on deposit at the Bank 90 days before the filing as compared with the day of filing.2
The relevant provisions of Section 553 provide as follows:
(b)(1) Except with respect to a setoff of a kind described in section 362(b)(6) or 365(h)(1) of this title, if a creditor offsets a mutual debt owing to the debtor against a claim against the debtor on or within 90 days before the date of the filing of the petition, then the trustee may recover from such creditor the amount so offset to the extent that any insufficiency on the date of such setoff is less than the insufficiency on the later of—
(A) 90 days before the date of the filing of the petition; and
*971(B) the first date during the 90 days immediately preceding the date of the filing of the petition on which there is an insufficiency.
(2) In this subsection, “insufficiency” means amount, if any, by which a claim against the debtor exceeds a mutual debt owing to the debtor by the holder of such claim.
A practical example of the application of this statute is given in 4 Collier, supra, at 553-46:
As another example suppose that on the 90th day prior to bankruptcy the debtor comes to the bank and receives a $12,000 loan to be repaid in 3 monthly installations of $4,000. The debtor opens ' a bank account on the 90th day before bankruptcy with a balance of $2,000. Thus the insufficiency on the 90th day before bankruptcy is $10,000. On the 60th day before bankruptcy the debtor pays $4,000 on the loan reducing the debt owed to the bank to $8,000. (Assume the repayment falls within 547(c)(2) and is not preferential). On the 30th day before bankruptcy the debtor pays only $3,000 on the loan due to cash flow problems. On the 29th day before bankruptcy the bank declares an event of default, accelerates the debt and set off the $2,000 in the bank account. The insufficiency on the date of setoff was $3,000 ($5,000-$2,-000). The improvement in position is $7,000 ($10,000-$3,000). But the trustee may also recover $2,000 which was the amount offset; section 553(b)(1) does not authorize recovery in excess of the amount offset. Of course the trustee may recover the $3,000 paid on the 30th day before bankruptcy as a preference if the requirements of section 547 are met.
See also Ohio-Erie Corp. v. Bancohio National Bank, 22 B.R. 340, 9 B.C.D. 430 (Bkrtcy.N.D.Ohio 1982); Donato v. Dominion National Bank, 17 B.R. 708 (Bkrtcy.E.D.Va.1982), and Duncan v. First Heritage Bank, 10 B.R. 13, 6 B.C.D. 1310 (Bkrtcy. Tenn.1980), where the “improvement in position” test was applied to bank set-offs.
In the present case, there is no question that the Bank and the debtor each had mutual claims against the other which arose pre-petition. The Bank’s set-off occurred pre-petition, and therefore was not subject to the automatic stay of Section 362 of the Code.
Ninety days before the filing of the debt- or’s petition, there was an “insufficiency” of $913,891.77, because this is the amount by which the claim against the debtor (which was $1,001,891.77) exceeded the mutual debt owing to the debtor by the Bank (which was “in excess of $88,000”). The insufficiency on the date of set-off by the Bank was $448,169.60, which the parties agreed was the sum owed to the Bank after the date of the set-off. Thus, the insufficiency on the date of set-off was $465,722.17 less than the insufficiency on the date 90 days before the date of the filing of the petition (i.e. $913,891.77-$448,169.60). Thus, the Trustee would be entitled to recover the amount of any offset made within this 90-day period up to the amount of $465,722.17. Since the off-set made was only in the amount of $28,193.17, the Trustee can only recover this amount.
The Bank’s argument that the decline in the debt owed by Jefferson Mortgage was reduced from $1,001,891.77 to $448,169.60 only because of the collection of other obligations on which the Bank had a lien, has no relevance to the analysis under Section 553(b) of the Code. There is no exception under the statute for the collection of secured claims, and the Bank cites no authority for this proposition. Thus, this argument is meritless.
Nor is there any basis to hold that the Bank had a perfected security interest in the money on deposit in the debtor’s account, which would allow it to keep the money set-off regardless of § 553(b). A bank cannot obtain a perfected security interest over money on deposit merely by maintaining “possession” of it. Cissell v. First National Bank of Cincinnati, 476 F.Supp. 474, 491 (S.D.Ohio 1979). The filing of a financing statement under Article 9 of the Uniform Commercial Code which *972lists “cash as collateral also does not reach money in a bank account, because N.J.S.A. 12A:9-104(k) specifically excludes “any deposit, savings, passbook or like account maintained with a bank, savings and loan association, credit union or like organization.” The Bank makes no argument that it had a perfected security interest in the money on deposit because it could be “traced” as proceeds of accounts receivable, or proceeds of some other collateral in which the Bank had a perfected security interest. Thus, the Bank did not have a perfected security interest in the funds on deposit in the debtor’s account, and improved its position by setting off the sum within 90 days of the filing of the Petition.
In conclusion, the Bank’s motion for summary judgment is granted in part as to the sum of $101,219.99 and denied in part as to the remaining sum. The motion of Jefferson Mortgage for summary judgment shall be granted in part in the sum of $28,193.17, and denied as to the tax refund and the question of the Bank’s insider status. As a matter of law, there is no issue of material fact which would require further proceedings to determine an “insider” relationship. An order shall be submitted in accordance with this opinion.
. Although there appears to be a facial dispute as to whether a “transfer” occurred on March 24, 1981, when the security interest was perfected, or on September 18, 1981, when the debtor turned over the tax refund to the Bank, the real dispute appears to be only whether any transfer which occurred was preferential under § 547. In view of this, the court will assume that the events on both March 24, 1981 and September 18, 1981 were transfers.
. See 4 Collier on Bankruptcy 553-45 (15th ed. 1982), for a discussion of set-offs concerning bank deposits. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489472/ | MEMORANDUM AND ORDER ON MOTION TO DISMISS VOLUNTARY PETITION OR IN THE ALTERNATIVE TO REMAND TO THE KNOX COUNTY CHANCERY COURT
CLIVE W. BARE, Bankruptcy Judge.
This Memorandum addresses a motion to dismiss the voluntary chapter 11 petition of the debtor corporation. The movants, James W. White and James R. Lones, describe themselves as “the majority shareholders” in their motion. The voluntary petition filed October 22, 1982, is signed by *30Prank Farner as president of the debtor. The movants insist that the filing of the petition was unauthorized by the debtor’s directors and shareholders. In opposition to the movants, the attorney for the debtor contends that Farner is the sole shareholder of the debtor corporation and that denial of the motion is in the best interest of creditors and of the corporation itself.
I
The corporate charter of the debtor was filed with the Secretary of State on May 16, 1979, according to the minutes of the first meeting of the corporation, held on May 28, 1979. These minutes reflect that the following individuals were named as officers of the corporation and that they owned shares of stock in the percentages stated:
Franklin D. Farner President 51.0%
James W. Lones Vice-President 24.5%
James R. White Secretary-Treasurer 24.5%
These three shareholders also declared themselves to be the directors of the corporation. A proposed set of by-laws was unanimously adopted.
The minutes of a special meeting held on June 9,1980, reflect that the three directors were present and that they mutually agreed to modify the number of shares each owned in the corporation. Under the modification, Farner’s ownership interest was reduced to 42.5% and White’s was increased to 42.5%. The ownership interest of Lones was accordingly reduced to 15%. The minutes further recite:
By their signature to these minutes each of the above stockholders ratifies and affirms this modification ... and the secretary is hereby instructed to issue the certificates in accordance herewith.
The only signature to the minutes is that of James R. White. Furthermore, the certificates of stock ownership were never executed.
On April 2, 1982, an agreement was reached among Farner, Lones, and White. The agreement, evidenced by a document entitled “Contract For Sale of Stock and Real Estate,” provides in part that Farner will pay $75,000.00 to White and $25,000.00 to Lones for their respective shares of stock in the corporation. The purchase price was to be paid on or before May 1, 1982, and White and Lones were to hold the stock certificates in trust until the purchase price had been paid in full. This contract recites that Farner and White each own 42!/2% of the shares of stock of the corporation and that Lones owns 15%. No payment toward the purchase price has been made by Far-ner.
A complaint naming Lones and White as defendants was filed by Farner on August 23, 1982, in the Knox County Chancery Court. Farner requested rescission of the April 2, 1982, Contract For Sale of Stock and Real Estate on the basis of mutual mistake. He also requested that the corporate assets be sold and corporate debts be paid upon completion of two outstanding jobs undertaken by the corporation. He further requested that Lones and White be restrained from interfering with the utilization of corporate assets being used in performance of the two outstanding projects or with any corporate agents or employees. At a show cause hearing, the chancellor announced his decision to issue a temporary injunction against Lones and White and to allow the corporation to complete the two unfinished projects. A written order issuing the injunction was never prepared for the chancellor’s signature. However, the parties conducted themselves just as if the order had been prepared and entered. Lones and White did not learn until October 22, 1982, when they were informed by the chancellor, that no injunction was in force against them as of that date.
By letter dated October 14, 1982, Farner sent the following notice to Lones and White:
As President of Farner Boring and Tunneling, Inc., a special meeting of Stockholders and Directors is called for the purpose of determining the method of liquidation of assets belonging to the corporation so as to obtain best possible price and the application of the proceeds to the obligations of the company.
*31The meeting will be held on Thursday, October 21, 1982, at 4:00 p.m. in the offices of Child, O’Connor and Petty, Attorneys, on the 15th Floor of the Bank of Knoxville Building, located at the corner of Market and Church in Knoxville, Tennessee.
An attorney for Lones and White gave written notice on or about October 19,1982, to Farner’s attorney that his clients did not intend to attend the October 21st meeting. Their attorney further stated that the attendance of Lones or White would violate the chancellor’s order restraining them from interfering with the operation of the corporation.
The minutes of the October 21st meeting state that Farner, “the only certain shareholder of said corporation,” declared the positions of the corporate directors vacated and elected himself and two other individuals as directors. These minutes further reflect that counsel was retained to file a chapter 11 petition on behalf of the corporation pursuant to a corporate resolution.
On October 22, 1982, notice of a special meeting to be held on October 28th was sent to Farner by the attorney for Lones and White, pursuant to Article II, Section 3, of the corporate by-laws.1 The stated purpose of the special meeting was to elect new directors, to discharge Farner as president of the corporation, and to consider withdrawal of the chapter 11 petition.
Farner, Lones, White, and their attorneys attended the October 28th meeting. Farner questioned the validity of the call of the meeting, the authority of those who called it, and whether either Lones or White was a shareholder of the debtor. Lones and White announced that they were nominating and voting for themselves and Irene B. Reed as directors of the corporation. The “new directors” voted to retain counsel to petition the bankruptcy court to dismiss the voluntary chapter 11 petition previously filed October 22, 1982.
II
The only issue presently before the court is whether the voluntary petition was filed pursuant to a valid corporate resolution. This issue must be decided in favor of the movants in this case.
Article IV, Section 2 of the corporation’s by-laws does authorize the president of the corporation to sign certificates, contracts, and other instruments “as authorized by the Board of Directors and stockholders.” However, the corporate resolution authorizing the filing of the debtor’s petition is not a resolution of the legitimate directors of the corporation.
Article II, Section 3 of the debtor’s bylaws recites in part: “Business transacted at all special meetings shall be confined to the objects in the call.” The stated purpose in the call for the special meeting of October 21st was to determine how to maximize proceeds from the liquidation of corporate assets and appropriate those proceeds against corporate debts. The election to replace Lones and White as directors of the corporation violated the corporate by-laws and is invalid. Clearly, Farner could not have been authorized to file the chapter 11 petition on behalf of the corporation by the resolution of directors who were elected illegally.
Tenn.Code Ann. § 48-808(4) (1979) enacts:
The vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the board, unless the vote of a greater number is required by chapter 1 through 14 of this title, the charter or the bylaws.
According to Article III,-Section 6 of the by-laws, “[a] quorum at all meetings of the Board of Directors shall consist of a majority of the whole Board .... ” There were three members of the board of directors for the corporation when the special meeting was commenced on October 21st, but only one of them, Farner, was present. In the *32absence of a quorum of the board of directors, no action could be taken. Farner could not have singularly enacted a valid corporate resolution. In re Autumn Press, Inc., 20 B.R. 60 (Bkrtcy.D.Mass.1982).
The motion to dismiss the October 22, 1982, chapter 11 voluntary petition is granted.2
IT IS SO ORDERED.
. This provision authorizes a majority of the board of directors to call a special meeting in the absence of the president of the corporation.
. On November 11, 1982, an involuntary petition under chapter 7 of title 11 of the United States Code was filed against the debtor. The dismissal of this chapter 11 case will in no way affect the chapter 7 case. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489491/ | PER CURIAM:
Appellee, Precon, Inc., has moved to dismiss this appeal for lack of jurisdiction. Appellant timely filed its notice of appeal with the United States District Court rather than the First Circuit Bankruptcy Appel*656late Panel. Appellee filed a motion with the district court to dismiss the appeal for lack of jurisdiction. Upon being advised that Appellant proposed to file Notice of Appeal in the bankruptcy court for the appellate panel and that counsel agreed that no hearing was necessary on the motion to dismiss, the district court dismissed the appeal after the 10-day appeal period had expired. Appellant amended the Notice of Appeal and requested an extension of time to file the appeal from the bankruptcy court. The bankruptcy court granted the extension of time to file the appeal. Appel-lee has not appealed the bankruptcy court’s extension of time but instead argues that the original appeal was not timely filed because the correct designation was made after the 10-day appeal period had run.
The Motion to Dismiss the Appeal is denied. The Notice of Appeal was timely filed with the district court and effectively informed the appellee that an appeal was being taken which, after all, is one of the major purposes of the notice of appeal. Markham v. Holt, 369 F.2d 940, 942 (5th Cir.1966). The Supreme Court has noted that during the transition period it appears that appeals could properly be filed with the district court even though an appellate panel is in place. Northern Pipeline Construction Co. v. Marathon Pipe Line Co., - U.S. -, 102 S.Ct. 2858, 2864 n. 7, 73 L.Ed.2d 598 (1982).
While not directly on point, certain rules indicate a liberal approach to this type of problem. Bankruptcy Rule 509(c) recognizes that even where papers are misfiled in the district court instead of the bankruptcy court, the papers will be considered properly filed as of the date filed with the district court. First Circuit Appellate Rule 4(a)(1) in Appendix A of the First Circuit Rules Governing Appeals (March 1, 1980), similarly provides for redirecting appeals misfiled with the Court of Appeals rather than the District Court. The cases cited by the mov-ant are not on point since they deal with notices of appeal that were not timely filed initially.
Accordingly, the Motion to Dismiss is denied. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489492/ | OPINION
EMIL F. GOLDHABER, Bankruptcy Judge:
The case at bench involves a motion for summary judgment based on an exculpatory clause. We conclude that there are genuine issues of material fact as to the validity of the exculpatory clause and that, consequently, the issue is inappropriate for summary judgment.
*658The facts of the instant case are as follows: 1 On October 12, 1972, Republic Realty Mortgage Corporation (“Republic”) loaned $400,000 to Eagson Corporation (“Eagson”). On that same date, Westinghouse Electric Corporation (“Westinghouse”) loaned $400,000 to Eagson. These loans were evidenced by promissory notes and secured by a mortgage on property of Eagson known as the Argal Building. At that time a written agreement was also entered into by Republic, Westinghouse and Eagson wherein, among other things, it was agreed that the money loaned by Republic and Westinghouse was to be used to complete renovation work being done on the Argal Building. That renovation work had been commenced pursuant to a lease agreement between Eagson (as lessor of the Ar-gal Building) and Westinghouse (as lessee) dated September 1,1971. In the agreement dated October 12, 1972, it was agreed by Eagson, Westinghouse and Republic that the renovation work would be completed by the Abrióla Company (“Abrióla”) as general contractor.
On October 19, 1976, Eagson filed a petition for an arrangement under Chapter XI of the Bankruptcy Act (“the Act”),2 and Myron Harris was appointed as receiver on October 21, 1976. On November 18, 1977, Republic and Westinghouse filed a complaint against Eagson and the receiver, seeking to recover liened rents. On October 24, 1978, Republic and Westinghouse filed an amended complaint for recovery of liened rents and various damages. In response to the amended complaint, Eagson filed an answer and counterclaim, the third count of which asserts that the renovation work on the Argal Building, which Eagson avers was under the control of Republic and Westinghouse, was “performed in a poor, improper, and unworkmanlike manner, contrary to the form and effect of [the agreement of October 12, 1972].”3 Eagson thereby sought damages in excess of $10,-000. Republic and Westinghouse filed answers to the counterclaim. In its answer Republic raised the affirmative defense that it was not liable for any damages allegedly caused by the “poor, improper, and workmanlike” renovation work, since by a clause of the agreement dated October 12,1972, Republic, Westinghouse and Abrió-la were not to be liable for any action taken or omitted with respect to the renovation work unless caused by their gross negligence or willful misconduct. Based on that defense, Republic filed a motion for summary judgment, in which Westinghouse joined, on that count of Eagson’s counterclaim.
The question before us is whether the issue of the validity and effect of the exculpatory clause herein is appropriate for summary judgment. Summary judgment is governed by Rule 56 of the Federal Rules of Civil Procedure, made applicable to adversary proceedings in bankruptcy by Rule 756 of the Rules of Bankruptcy Procedure. Rule 56 provides that a motion for summary judgment shall be granted if there is “no genuine issue as to any material fact and ... the moving party is entitled to a judgment as a matter of law.”
The clause in the October 12,1972, agreement, under which Republic and Westinghouse assert that they are immune from liability for the damages asserted by Eag-son in the third count of its counterclaim, provides:
Neither Republic, Abrióla or Tenant [Westinghouse] or any of their Officers, Directors, employees or agents shall be liable to Owner [Eagson] for any action taken or omitted hereunder, or in connec*659tion herewith, unless caused by its or their gross negligence or willful misconduct, nor shall any of them be responsible for any recitals, statements, representations or warranties herein or be required to make any inquiry concerning the performance or observance of any of the terms, provisions or conditions of this Agreement.4
To determine the validity and effect of such an exculpatory clause, we must look to Pennsylvania law. According to the relevant case law, several factors must be considered in deciding that issue: (1) the clause may not contravene any public policy; (2) the contract must be between private parties relating to their private affairs; (3) each party must be a free agent, that is, the contract cannot be an adhesion contract; (4) the contract must spell out with clarity and particularity the intention of the parties to exculpate one or more of them from liability; (5) the exculpatory clause must be construed strictly; (6) the clause must be construed against the party seeking immunity thereunder; and (7) the burden of establishing immunity from liability is on the party who seeks such immunity.5
Applying that test to the facts of the instant case, it does not appear that the clause in question contravenes any public policy. Nor does there appear to be any question that the contract between Republic, Westinghouse and Eagson is a contract between private parties which relates solely to their own private affairs. Further, even construing the exculpatory clause strictly against Republic and Westinghouse, the clause does clearly and with sufficient particularity evidence the intent of the parties to exculpate Republic and Westinghouse from any liability except that due to their gross negligence or willful misconduct.
In addition, it is clear that, if the clause is determined to be valid, it would effectively exculpate Republic and Westinghouse from any liability for the damages sought by Eagson in the third count of its counterclaim. As we read that count Eagson is seeking damages only for work done in a negligent manner, not for work done in a grossly negligent manner. The third count seeks damages only for the allegedly “poor, improper, and unworkmanlike” renovation work. This cannot be interpreted to be an allegation of gross negligence or willful misconduct. And, although the third count does contain the phrase “contrary to the form and effect of [the October 12, 1972, agreement]”, we do not interpret that to be an allegation of gross negligence or willful misconduct, particularly when that phrase is used in connection with the specific conduct that Eagson cites in its third count as creating the liability of Republic and Westinghouse. The alleged conduct on which Eagson bases its claim for relief does not amount to gross negligence or willful misconduct.
However, Eagson asserts that the contract in question was an adhesion contract, thereby making the exculpatory clause invalid under Pennsylvania law. Eagson asserts that it was in such a poor and unequal bargaining position with respect to Republic and Westinghouse during the negotiation and signing of that contract that it effectively had no choice but to sign the contract or have Republic call a default on its March 24, 1972, mortgage and have Westinghouse call a default on the September 1, 1971, lease. Such economic duress, Eagson asserts, caused it to sign the contract and, if proven, would make that contract an adhe*660sion contract. In reply, Republic and Westinghouse assert that the agreement was not an adhesion contract but an agreement among business corporations, all of whom were adequately represented by counsel at the time.
We conclude that the assertion by Eagson that the contract was an adhesion contract creates a genuine issue of material fact, since, if Eagson is correct, the exculpatory clause would be invalid under Pennsylvania law and Republic and Westinghouse would not be entitled to summary judgment as a matter of law.6 Therefore, we will deny the motion of Republic and Westinghouse for summary judgment on the third count of Eagson’s counterclaim. At the trial to be held on that count, we will hear evidence on the circumstances surrounding the negotiation and signing of the October 12, 1972, agreement as well as evidence of the specific conduct alleged by Eagson as a basis for its claim for damages.
. This opinion constitutes the findings of fact and conclusions of law required by Rule 752 of the Rules of Bankruptcy Procedure.
. The Bankruptcy Act has been superceded by the Bankruptcy Code as of October 1, 1979. However, for petitions filed before that date, the provisions of the Act still govern. The Bankruptcy Reform Act of 1978, Pub.L. No. 95-598, § 403, 92 Stat. 2683 (1978).
Eagson was unable to fund its proposed plan-of arrangement and was duly adjudicated a bankrupt on November 16, 1979.
.See the Third Count of the Counterclaim of Eagson against Republic and Westinghouse contained in Eagson’s Answer filed on November 28, 1978.
. Paragraph 17 of the Agreement dated October 12, 1972, between Republic, Westinghouse and Eagson. That agreement is attached as Exhibit D to the amended complaint of Republic and Westinghouse against the receiver and Eagson filed October 24, 1978.
. Employers Liability Assurance Corp. v. Greenville Business Men’s Ass’n, 423 Pa. 288, 224 A.2d 620 (1966). See also, Keystone Aeronautics Corp. v. R.J. Enstrom Corp., 499 F.2d 146 (3d Cir.1974); Neville Chemical Co. v. Union Carbide Corp., 422 F.2d 1205 (3d Cir.1970); Dilks v. Flohr Chevrolet, 411 Pa. 425, 192 A.2d 682 (1963); Bogutz v. Margolin, 392 Pa. 151, 139 A.2d 649 (1958); Cannon v. Bresch, 307 Pa. 31, 160 A. 595 (1932); Perry v. Payne, 217 Pa. 252, 66 A. 553 (1907); Crew v. Bradstreet Co., 134 Pa. 161, 19 A. 500 (1890); Zimmer v. Mitchell & Ness, 253 Pa.Super.Ct. 474, 385 A.2d 437 (1978); Leidy v. Deseret Enterprises, Inc., 252 Pa.Super.Ct. 162, 381 A.2d 164 (1977).
. Ordinarily it is not enough for a party to rest on mere allegations in opposing a motion for summary judgment but must present opposing affidavits. See Rule 56(e) & (f) of the Federal Rules of Civil Procedure. However, since under Pennsylvania law the party seeking immunity under an exculpatory clause has the burden of proving that that clause is valid and effective, we conclude that Republic and Westinghouse have not met that burden of proof on the issue of whether the contract was an adhesion contract. Therefore, Eagson’s allegation is enough to create a genuine issue of fact on that question. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489493/ | OPINION
EMIL F. GOLDHABER, Bankruptcy Judge:
The case at bench involves a motion for summary judgment by the plaintiffs based on an exculpatory clause which the bankrupt alleges is invalid because it was induced to agree to said clause under economic duress. We will grant summary judgment because we find that there is no genuine issue of fact to be resolved by the court and because the plaintiffs, the movants herein, are entitled to judgment on the law on the basis of the testimony presented.
The facts of the instant case are as follows: 1 On October 12, 1972, Republic Realty Mortgage Corporation (“Republic”) loaned $400,000 to Eagson Corporation (“Eagson”). On that same date, Westinghouse Electric Corporation (“Westinghouse”) also loaned $400,000 to Eagson. These loans were evidenced by promissory notes and secured by a mortgage on property of Eagson, known as the Argal Building. At that time a written agreement was also entered into by Republic, Westinghouse and Eagson wherein, among other things, it was agreed that the money loaned by Republic and Westinghouse was to be used to com-píete renovation work being done on the Argal Building. That renovation work had been commenced pursuant to a lease agreement between Eagson (as lessor of the Ar-gal Building) and Westinghouse (as lessee) dated September 1, 1971, and a lease amendment dated March 24, 1972. In the agreement dated October 12, 1972, it was agreed by Eagson, Westinghouse and Republic that the renovation work would be completed by the Abrióla Company (“Abrió-la”) as general contractor.
On October 19, 1976, Eagson filed a petition for an arrangement under Chapter XI of the Bankruptcy Act (“the Act”),2 and Myron Harris was appointed as receiver on October 21, 1976. On November 18, 1977, Republic and Westinghouse filed a complaint against Eagson and the receiver, seeking to recover liened rents. On October 24, 1978, Republic and Westinghouse filed an amended complaint for recovery of liened rents and various damages. In response to the amended complaint, Eagson filed an answer and counterclaim, the third count of which asserts that the renovation work on the Argal Building, which Eagson avers was under the control of Republic and Westinghouse, was “performed in a poor, improper, and unworkmanlike manner, contrary to the form and effect of [the agreement of October 12, 1972]”3 Eagson thereby sought damages in excess of $10,000. Republic and Westinghouse filed answers to the counterclaim. In its answer Republic raised the affirmative defense that it was not liable for any damages allegedly caused by the “poor, improper, and unworkman-like” renovation work, since by a clause of the agreement dated October 12, 1972, Republic, Westinghouse and Abrióla were not to be liable for any action taken or omitted with respect to the renovation work unless *662caused by their gross negligence or willful misconduct. Based on that defense, Republic filed a motion for summary judgment, in which Westinghouse joined, on that count of Eagson’s counterclaim.
The clause in the October 12,1972, agreement, under which Republic and Westinghouse asserted that they were immune from liability for the damages asserted by Eag-son in the third count of its counterclaim, provided:
Neither Republic, Abrióla or Tenant [Westinghouse] or any of their Officers, Directors, employees or agents shall be liable to Owner [Eagson] for any action taken or omitted hereunder, or in connection herewith, unless caused by its or their gross negligence or willful misconduct, nor shall any of them be responsible for any recitals, statements, representations or warranties herein or be required to make any inquiry concerning the performance or observance of any of the terms, provisions or conditions of this Agreement.4
On July 2, 1980, 26 B.R. 657, in an opinion involving the same parties, after stating the law of Pennsylvania governing the validity of exculpatory clauses, we held:
sjc :}: * * sj:
Applying that test to the facts of the instant case, it does not appear that the clause in question contravenes any public policy. Nor does it appear to be any question that the contract between Republic, Westinghouse and Eagson is a contract between private parties which relates solely to their own private affairs. Further, even construing the exculpatory clause strictly against Republic and Westinghouse, the clause does clearly and with sufficient particularity evidence the intent of the parties to exculpate Republic and Westinghouse from any liability except that due to their gross negligence or willful misconduct.
In addition, it is clear that, if the clause is determined to be valid, it would effectively exculpate Republic and Westinghouse from any liability for the damages sought by Eagson in the third count of its counterclaim.
* * * * * *
(Opinion, dated July 2, 1980, at page 659.)
With respect to the validity of the exculpatory clause, we left open only Eagson’s contention that it signed the agreement in question under economic duress, which would, if true, make said agreement an adhesion contract, thereby making the exculpatory clause invalid under Pennsylvania .law. (Opinion of July 2, 1980 at page 659). On December 28, 1982, testimony was taken on the economic duress issue and at the close of said testimony, Republic and Westinghouse both moved for summary judgment on that issue.5 Summary judgment is governed by Rule 56 of the Federal Rules of Civil Procedure, made applicable to adversary proceedings in bankruptcy by Rule 756 of the Rules of Bankruptcy Procedure.6 Rule 56 provides that a motion for summary judgment shall be granted if there is “no genuine issue as to any material fact and ... the moving party is entitled to a judgment as a matter of law.”
In Levin v. Garfinkle, 492 F.Supp. 781 (E.D.Pa.1980), aff'd, 667 F.2d 381 (3rd Cir.1981), Chief Judge Luongo of the Eastern District of Pennsylvania enumerated the elements necessary to establish a cause of action for economic duress.
In order to establish duress, it is necessary to prove that (1) serious economic injury was imminent, (2) exerting such *663pressure that the party involuntarily executed an agreement leading to economic loss, and (3) there was no immediate legal remedy available as an alternative to executing the agreement. [citing National Auto Brokers Corp. v. Aleeda Development Corp., 243 Pa.Super. 101, 105, 364 A.2d 470, 474 (1976) ]. The pressure exerted on the party purportedly under duress must be so severe as to ‘overcome the mind of a person of ordinary firmness’ and where ‘persons deal with each other on equal terms at arm’s length, there is a presumption that the person alleging duress possesses ordinary firmness’. [citing Carrier v. William Penn Broadcasting Co., 426 Pa. 427, 431, 233 A.2d 519, 521 (1967).] Where a party is free to consult with counsel, the presumption against duress is even stronger, and only physical restraint preventing consultation with counsel will establish duress. Id. (emphasis added).
Applying that test to the facts of the case sub judice, we conclude that Eagson did not sign the October 12, 1972, contract under economic duress. First and foremost, Arthur Gallagher (“Gallagher”), the president of Eagson, testified that he was at all times represented by counsel during the contract negotiations and that, at the advice of his attorney, he signed the contract in question. In this regard, we take further note that the Supreme Court of Pennsylvania has held that “in the absence of threats of actual bodily harm there can be no duress where the contracting party is free to consult with counsel (citations omitted) (emphasis added).” Carrier v. William Penn Broadcasting Co., supra, at 430-31, 233 A.2d at 521. In addition, the record is completely devoid of any evidence which indicates that Gallagher was at any time threatened with bodily harm by Westinghouse or Republic. Moreover, Gallagher testified he did not have to deal exclusively "with Westinghouse or Republic in attempting to finance the renovation work being done on the Argal Building and that he could have arranged the appropriate financing with other parties. Finally, we can find no evidence indicating that Eagson, through its principal Gallagher, was in such a poor and unequal bargaining position with respect to Westinghouse and Republic that it effectively had no choice but to sign the contract. On the contrary, the present record indicates that Gallagher, the president of Eagson, was an individual of considerable and widespread business experience having been in the trucking and other businesses since 1941 and the real estate business since 1956.
Consequently, in light of the fact that we previously denied Westinghouse’s and Republic’s motion for summary judgment on the basis that there was a genuine issue of fact as to whether the October 12, 1972, agreement was an adhesion contract, we will now grant that motion based on our determination that, as a matter of law, the aforesaid agreement was not induced by economic duress and, therefore, not an adhesion contract. Therefore, we conclude that the exculpatory clause contained in the agreement of October 12, 1972, is valid and binding.
. This opinion constitutes the findings of fact and conclusions of law required by Rule 752 of the Rules of Bankruptcy Procedure.
. The Bankruptcy Act has been superceded by the Bankruptcy Code as of October 1, 1979. However, for petitions filed before that date, -the provisions of the Act still govern. The Bankruptcy Reform Act of 1978, Pub.L. No. 95-598, § 403, 92 Stat. 2683 (1978).
Eagson was unable to fund its proposed plan of arrangement and was duly adjudicated a bankrupt on November 16, 1979.
.See the Third Count of the Counterclaim of Eagson against Republic and Westinghouse contained in Eagson’s Answer filed on November 28, 1978.
. Paragraph 17 of the Agreement dated October 12, 1972, between Republic, Westinghouse and Eagson. That agreement is attached as Exhibit D to the amended complaint of Republic and Westinghouse against the receiver and Eagson filed October 24, 1978.
. We may properly accept and consider oral testimony in a summary judgment proceeding. See Moore’s Federal Practice, ¶ 56.11 [8] at 56-293 (2nd ed.1982).
.Rule 756 of the Rules of Bankruptcy Procedure provides that Rule 56 of the Federal Rules of Civil Procedure applies in adversary proceedings. See Rules of Bankruptcy Procedure, Rule 756, 11 U.S.C. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489494/ | PARTIAL FINDINGS OF FACT AND CONCLUSIONS OF LAW
JOSEPH A. GASSEN, Bankruptcy Judge.
I. INTRODUCTION.
This Adversary Proceeding came on for trial before the Court, sitting without a jury, at Fort Lauderdale, Florida, on Tuesday, February 16, 1982. The Court has carefully considered the evidence presented at trial as well as the post-trial motions and memoranda of law submitted by counsel for the parties. Although the Court has determined that a further evidentiary hearing will be required in order to dispose of this Adversary Proceeding, the Court believes that it is now appropriate to enter the following partial findings of fact and conclusions of law.
II. THE PROCEDURAL BACKGROUND.
Plaintiff A. Jay Cristol (Cristol) is the Trustee in Bankruptcy for Winters & Company, Inc., (W & C) and Winters Government Securities Corporation (WGSC), Bankrupts. This Adversary Proceeding was commenced on July 30,1980, with the filing of a complaint naming as Defendants Ger-*721aid Beyer (Beyer), Charles D. Franken (Franken), and Allan M. Lerner (Lerner), individually and as partners of Beyer & Lerner and as members of Beyer & Lerner, P.A. At trial, Cristol moved to dismiss Franken as a Defendant, which motion was granted by means of an order entered on February 17, 1982.
Cristol’s original Complaint in this Adversary Proceeding was couched in eight (8) counts. Counts I and II of the Complaint sought to recover from Defendants the value of alleged voidable preferences within the meaning of § 60 of the Bankruptcy Act, 11 U.S.C. § 96.1 In Counts III, IV and V of his Complaint in this Adversary Proceeding, Cristol sought recovery from Defendants under § 67(d) of the Bankruptcy Act, 11 U.S.C. § 107(d), pertaining to fraudulent transfers. Count VI of Cristol’s Complaint sought recovery from Defendants pursuant to §§ 70(c) and 70(e) of the Bankruptcy Act, 11 U.S.C. § 110(c) and 110(e), and § 726.01, Florida Statutes, also dealing with fraudulent conveyances. In Count VII of his Complaint, Cristol sought to recover from Defendants under § 70(d) of the Bankruptcy Act, 11 U.S.C. § 110(d), dealing with post-petition, pre-adjudication transfers by a debtor.2 Finally, in Count VII of his Complaint, Cristol sought to recover from Defendants under § 60(d) of the Bankruptcy Act, 11 U.S.C. § 96(d), dealing with excessive legal fees and expenses paid by a debtor in contemplation of bankruptcy.3
*722Defendants answered Cristol’s Complaint on August 21, 1980, and this Adversary Proceeding entered the pretrial discovery phase, which phase ended with a pretrial conference on January 13, 1982. An extensive Pretrial Order was entered on January 20, 1982,4 which, among other things, noted *723the voluntary dismissal by Cristol of Counts III, IV, V and VI of the Complaint.
Counsel for Cristol and Defendants, on February 11, 1982, entered into a written Stipulation of Fact which was thereafter filed with the Court. That written Stipulation of Fact recited the following:
“Plaintiff A. JAY CRISTOL, Trustee in Bankruptcy, and Defendants GERALD BEYER, CHARLES D. FRANKEN, and ALLAN M. LERNER, individually and as partners of BEYER & LERNER and as members of BEYER & LERNER, P.A., by and through their respective undersigned attorneys, hereby stipulate that the Bankrupts, Winters & Company, Inc., and Winters Government Securities Corporation, were insolvent within the meaning of § 1(19) of the Bankruptcy Act, 11 U.S.C. § 1(19), throughout the four (4) month period prior to August 15, 1978.”
Prior to the trial held on February 16, 1982, Defendants Beyer and Lerner asserted a counterclaim and set-off against Cris-tol for legal services allegedly rendered to the Bankrupts in 1977 and 1978 for which they had not been paid.
At the start of the February 16, 1982, trial in this Adversary Proceeding, counsel for Cristol moved to dismiss the Complaint as to Defendant Charles D. Franken. The Court orally granted that motion and entered a written order to that effect on February 17, 1982.
During the course of the trial held on February 16, 1982, in this Adversary Proceeding, Beyer testified that Beyer & Lerner, P.A., was formed in either August or September, 1978, and that all payments made thereafter by the Bankrupts for legal services rendered were to Beyer & Lerner, P.A. Thereafter, counsel for Cristol orally moved for leave to file and serve an Amended Complaint naming Beyer & Lerner, P.A., as a party Defendant. The Court, on February 17, 1982, entered an order granting that motion.5 Cristol’s Amended Complaint was filed on February 18, 1982.6
At the conclusion of the presentation of Cristol’s evidence during the trial of February 16, 1982, counsel for Defendants moved for the involuntary dismissal of Cristol’s claim under § 60(d) of the Bankruptcy Act, 11 U.S.C. § 96(d). That motion was taken *724under advisement by the Court and no evidence was presented at that trial on the issue of the reasonableness of the legal fees received by Beyer & Lerner prior to August 15, 1978.
Defendant Beyer & Lerner, P.A., on March 30, 1982, moved to dismiss Count II of Cristol’s Amended Complaint in this Adversary Proceeding as being barred by the Bankruptcy Act’s two (2) year statute of limitations, § 11(e), 11 U.S.C. § 29(e). By separate order dated August 23, 1982, the Court has granted that motion.
Now before the Court for decision are the following questions:
1. Should Cristol be awarded judgment against Beyer and Lerner under Count I of Cristol’s Amended Complaint, which asserts a claim under § 60(b) of the Bankruptcy Act, 11 U.S.C. § 96(b)?
2. Should the motion of Beyer and Lerner for the involuntary dismissal of Count III of Cristol’s Amended Complaint in this Adversary Proceeding, which asserts a claim under § 60(d) of the Bankruptcy Act, 11 U.S.C. § 96(d), be granted?
III. CRISTOL’S PREFERENCE CLAIM.
A. Findings of Fact.
The Court, having considered the pleadings, stipulations of the parties, and the evidence admitted at the trial of February 16, 1982, makes the following findings of fact:
1. Cristol is the duly appointed, qualified and acting Trustee in Bankruptcy for WGSC and W & C, both Florida corporations.
2. Beyer is a citizen and resident of Bro-ward County, Southern District, Florida, and a member of The Florida Bar.
3. Lerner is a citizen and resident of Broward County, Southern District, Florida, and a member of The Florida Bar.
4. WGSC was organized in November, 1974, and until on or about March 17, 1977, was engaged in the business of buying and selling United States Government securities.
5. W & C was organized in September, 1974, and until on or about April 15, 1977, was engaged in the business of buying and selling municipal and corporate securities.
6. From its inception, WGSC was a wholly owned subsidiary of W & C. Mr. Kenneth Winters was at all pertinent times the President of both companies. At all pertinent times, WGSC and W & C occupied the same leased premises at One Financial Plaza, Fort Lauderdale, Broward County, Florida. At all pertinent times, the officers and directors of WGSC and W & C were substantially identical.
7. Between January, 1977, and May, 1978, Beyer engaged in the private practice of law in Fort Lauderdale, Florida, under the firm name “Law Offices of Gerald Beyer” and served as General Counsel to WGSC and W & C.
8. Between May, 1978, and August 31, 1978, Beyer and Lerner together engaged in the private practice of law in Fort Lauder-dale, Florida, under the firm name of “Beyer & Lerner” and served as General Counsel to WGSC and W & C. During that period, Beyer and Lerner held themselves out to the public as partners in the private practice of law.
9. In January, 1977, the market prices of United States Government securities sold by WGSC fell dramatically. Consequently, many customers of WGSC refused to take delivery and pay for securities which they had previously contracted to purchase from WGSC. Those refusals on the parts of the Bankrupts’ customers had severely adverse effects upon the financial conditions of WGSC and W & C. Stated simply, WGSC and W & C found themselves without sufficient cash funds to pay their operating expenses and to pay for the securities which they had contracted to purchase from major brokerage concerns.
10. WGSC referred its customer defaults to Beyer, General Counsel to WGSC and W & C, who began to institute breach of contract lawsuits against the customers. In March, 1977, Lerner was brought into Beyer’s law office for the principal purpose *725of supervising the default litigation against the customers of WGSC.
11. The weakened financial conditions of WGSC and W & C came to the attention of the Securities and Exchange Commission (SEC), as a consequence of which the SEC instituted a civil proceeding to terminate the sales operations of WGSC and W & C. In addition, the SEC undertook an investigation into the activities of WGSC and W & C. Beyer and Lerner represented WGSC and W & C, as well as Mr. Kenneth Winters, in those SEC matters.
12. Between January, 1977, and July, 1977, Beyer rendered periodic billings to WGSC for legal services rendered and expenses incurred for the “default” litigation and for representation in the SEC matters, which billings were based upon hourly time charges. WGSC, during that period, was able to pay the billings rendered by Beyer.
13. WGSC terminated its sales operations in March, 1977, and W & C terminated its sales operations in April, 1977. With the cessation of their sales operations, WGSC and W & C had a single potential source of income: the “default” lawsuits against former customers. By July, 1977, it became clear that WGSC and W & C would be able to pay Beyer for legal services rendered and expenses incurred only when and if settlements were achieved or judgments obtained in one or more of those actions.
14. Commencing in July, 1977, the following procedure came to be used for the payment of legal fees and expenses to Beyer and later Beyer and Lerner: (a) a settlement would be reached with a former customer, pursuant to which the former customer would agree to make a cash payment to WGSC; (b) the former customer would deliver the settlement check to Beyer or Beyer and Lerner, which check would be made payable either to WGSC or the Defendants’ trust account; (c) Beyer and Beyer and Lerner would prepare a statement for legal services rendered and expenses incurred during the preceding several weeks or months; (d) the settlement check and the statement for legal services and expenses would be delivered to WGSC, in return for which W & C would issue and deliver to the Defendants a check in the amount of the billing. At the February 16, 1982, trial, Beyer testified that during the four months prior to August 15, 1978, he knew that his law firm’s legal fees and expenses were being paid entirely out of the proceeds of settlements with former customers of WGSC.
15. On August 15, 1978, an involuntary bankruptcy petition was filed against WGSC by three major securities concerns. Beyer & Lerner, P.A., was formed on September 1,1978, and undertook the representation of WGSC in the ensuing bankruptcy proceeding. A settlement was achieved in the bankruptcy proceeding on January 10, 1979, whereby WGSC was adjudicated a bankrupt and W & C filed a voluntary petition, pursuant to which W & C was also adjudicated a bankrupt.
16. During the four months prior to August 15,1978, WGSC, either directly or indirectly through W & C, made the following payments to Beyer and Lerner for legal services rendered and expenses incurred prior to the dates of payment:
DATE OF CHECK AMOUNT
July 14,1978 $108,000.00
July 17,1978 33,078.81
August 7,1978 5,937.00
TOTAL $147,015.81
17. WGSC and W & C were individually and collectively insolvent during the four months prior to August 15, 1978, the date upon which an involuntary bankruptcy petition was filed against WGSC.
18. At the trial of this case on February 16,1982, Cristol testified, without contradiction, that the payments received by Beyer and Lerner during the four months prior to August 15, 1978, enabled Beyer and Lerner to obtain a greater percentage of their debt than some other creditor of the same class. Specifically, Cristol testified that the major securities brokerage firms which filed the involuntary bankruptcy petition against WGSC were owed several millions of dollars for securities sold to WGSC, none of which had been paid.
*72619. During the four months prior to August 15,1978, Beyer and Lerner had reasonable cause to believe that WGSC was insolvent. Indeed, Beyer testified at the February 16,1982, trial that during the statutory voidable preference period he knew that WGSC was without sufficient assets to pay its liabilities, a fact dramatically evidenced by the manner in which Beyer and Lerner were paid for legal services rendered and expenses incurred — they were paid solely out of the proceeds of settlements reached with former customers of WGSC in the “default” lawsuits.
20. The payments received by Beyer and Lerner during the four months prior to August 15, 1978, were in satisfaction of antecedent indebtednesses. Beyer’s deposition testimony of December 17, 1981, and his trial testimony of February 16, 1982, confirmed that the payments received by Beyer and Lerner during the four months prior to August 15, 1978, were for legal services rendered and expenses incurred prior to the dates of payment.
B. Conclusions of Law.
Based upon the foregoing findings of fact and upon the Court’s consideration of the applicable legal principles, the Court has arrived at the following conclusions of law:
1. Beyer and Lerner, as lawyers for WGSC during the four months prior to August 15, 1978, enjoy no special immunity from liability to Cristol under § 60(b) of the Bankruptcy Act, 11 U.S.C. § 96(b). See, Mills v. Cohen, S.D.N.Y., 1951, 102 F.Supp. 726; Seligson v. Roth, 9 Cir., 1968, 402 F.2d 883; In re Ira Haupt & Co., 2 Cir., 1970, 424 F.2d 722; and In Re Pacific Far East Line, Inc., 9 Cir., 1980, 644 F.2d 1290, 1293-1294.
2. Cristol, at the February 16,1982, trial in this Adversary Proceeding, established by a preponderance of the evidence that Beyer and Lerner, during the four months prior to August 15, 1978, received three payments totalling $147,015.81, either directly or indirectly from WGSC, which payments constituted voidable preferences within the meaning of § 60 of the Bankruptcy Act, 11 U.S.C. § 96. Cristol, as the Trustee in Bankruptcy for WGSC, is entitled to recover those three payments.
3. Beyer and Lerner, at the trial of this Adversary Proceeding, resisted Cristol’s claim under § 60(b) of the Bankruptcy Act, 11 U.S.C. § 96(b), on the theory that the three payments received by them during the four months prior to August 15, 1978, constituted the satisfaction of their secured claims and, consequently, could not be considered preferential. Specifically, Beyer and Lerner claimed that they held valid attorneys’ charging liens, presumably against the settlement proceeds of the “default” lawsuits, which liens were discharged when the three payments were made by WGSC. The Court disagrees with Beyer and Lerner because: (a) at the February 16, 1982, trial of this Adversary Proceeding, Beyer and Lerner presented no evidence whatever to establish the perfection of their asserted attorneys’ charging liens in accordance with the requirements of Florida law; and (b) under § 60(a)(2) of the Bankruptcy Act, 11 U.S.C. § 96(a)(2), such liens are conclusively presumed to be preferential.
4. In Baucom v. Baucom, Fla.App. 3, 1981, 397 So.2d 347, the Florida Third District Court of Appeal stated:
“With respect to the wife’s former attorneys Stabinski, Funt, Levine & Vega, the order dismissing the instant action with prejudice and denying said attorneys’ motion to enforce their charging lien is reversed and the cause is remanded to the trial court with directions to grant said motion upon a holding that said attorneys, in our view properly perfected a charging lien upon the settlement proceeds in this cause through the notice of lien for attorneys’ fees and costs and the motion to enforce attorneys’ fee and lien filed herein ...” (citation omitted) 397 So.2d at 348.
Beyer and Lerner, at the February 16,1982, trial of this Adversary Proceeding, presented no evidence whatever to establish that they had filed the requisite notices of attorneys’ lien in the “default” lawsuits which they were prosecuting on behalf of WGSC *727against WGSC’s former customers. Absent such proof, this Court is compelled to conclude that Beyer and Lerner never perfected their claimed attorneys’ charging liens against the settlement proceeds.
5.Section 60(a)(2) of the Bankruptcy Act, 11 U.S.C. § 96(a)(2), provided:
“For the purposes of subdivisions a and b of this section, a transfer of property other than real property shall be deemed to have been made or suffered at the time when it became so far perfected that no subsequent lien upon such property obtainable by legal or equitable proceedings on a simple contract could become superior to the rights of the transferee ... If ... any transfer of other property is not so perfected against such liens by legal or equitable proceedings prior to the filing of a petition initiating a proceeding under this Act, it shall be deemed to have been made immediately before the filing of the petition.” (emphasis supplied)
As previously noted, a preference is a “transfer, as defined in this Act, of any of the property of a debtor to or for the benefit of a creditor for or on account of an antecedent debt, made or suffered by such debtor while insolvent and within four months before the filing by or against him of the petition initiating a proceeding under this Act, the effect of which transfer will be to enable such creditor to obtain a greater percentage of his debt than some other creditor of the same class.” The term “transfer” was defined by § 1(30) of the Bankruptcy Act, 11 U.S.C. § 1(30), as follows:
“ ‘Transfer’ shall include the sale and every other and different mode, direct or indirect, of disposing of or of parting with property or with an interest therein or with the possession thereof or of fixing a lien upon property or upon an interest therein, absolutely or conditionally, voluntarily or involuntarily, by or without judicial proceedings, as a conveyance, sale, assignment, payment, pledge, mortgage, lien, encumbrance, gift, security, or otherwise; the retention of a security title to property delivered to a debtor shall be deemed a transfer suffered by such debtor.” (emphasis supplied)
6. Because Beyer and Lerner failed to perfect their claimed attorneys’ charging liens against the settlement proceeds, the last sentence of § 60(a)(2) of the Bankruptcy Act, 11 U.S.C, § 96(a)(2), operates to cause constructive perfection immediately prior to the filing of the August 15, 1978, involuntary bankruptcy petition against WGSC, within the statutory preference period. Stated differently, the claimed attorneys’ charging liens must be deemed to have been voidably preferential transfers within the meaning of § 60 of the Bankruptcy Act, 11 U.S.C. § 96.
7. The Court adopts the rationale of United States Bankruptcy Judge David E. Nims, Jr., in the case of In Re Peninsula Roofing & Sheet Metal, Inc., Bkrtcy.W.D.Mich., 1981, 9 B.R. 257, where on or about August 6, 1979, the debtor turned over a check in the amount of $3,250.00, received from a customer, to the debtor’s attorney, Mr. Wallace H. Tuttle, which check was deposited into Mr. Tuttle’s trust account. From that trust account, Mr. Tuttle withdrew amounts for legal services rendered and expenses incurred by him in the representation of the debtor. On October 18, 1979, an involuntary bankruptcy petition was filed against the debtor, which resulted in an order for relief on November 26,1979. The Trustee in Bankruptcy attacked several disbursements from the trust account as voidably preferential within the meaning of § 547 of the Bankruptcy Code, the successor to § 60 of the Bankruptcy Act, 11 U.S.C. § 96. Rejecting Mr. Tuttle’s argument that his Michigan-based lien for attorneys’ fees rendered the challenged disbursements not voidably preferential, Judge Nimms stated:
“But, the attorneys retaining lien depends upon possession ... Thus, in our case, the transfer which created the attorney’s lien was the transfer of the funds to the attorney to hold in trust for the debtor. Thus, although I would find that Tuttle obtained an attorney’s lien at *728that time to the extent of the antecedent debt, this does not improve his position for the transfer which created that lien was itself a preferential transfer. To hold to the contrary would eliminate any payment on an antecedent debt as a preferential transfer, if it is to an attorney. The debtor could always turn over the required funds to his attorney on the eve of bankruptcy and the attorney would then seize the funds under his attorneys’ lien to apply on antecedent debts. As was stated in Senate Report No. 95-989..:
‘Payments to a debtor’s attorney provide serious potential for evasion of creditor protection provisions of the bankruptcy laws, and serious potential for overreaching by the debtor’s attorney, and should be subject to careful scrutiny’.
“Therefore, I would find that the payment by Tuttle of the sum of $1,946.96 to himself to apply on the antecedent debt was a voidable preferential transfer and must be returned to the trustee.” (citations omitted) 9 B.R. at 262.
8. The three payments which were made by WGSC, either directly or indirectly through W & C, to Beyer and Lerner during the four months prior to August 15, 1978, were voidably preferential within the meaning of § 60(b) of the Bankruptcy Act, 11 U.S.C. § 96(b). See, also, Matter of KMM Corp., Bkrtcy., S.D.Fla., 1981, 14 B.R. 348 (voidability of landlord’s lien for rent under Chapter 83, Florida Statutes); In re Hall, Bkrtcy., S.D.Fla., 1981, 14 B.R. 186 (voidability of bank’s security interest under Chapter 679, Florida Statutes); In re Belize Airways Limited, Bkrtcy., S.D.Fla., 1982, 18 B.R. 485 (voidability of lien obtained through execution of writ of attachment).
9. During the four months prior to August 15, 1978, Beyer and Lerner held themselves out to the general public as partners in the private practice of law. Consequently, they are now estopped to deny that such a partnership existed during the statutory preference period and each will be held liable to Cristol for the total amount of the voidably preferential transfers received during the period. See, Matter of Ward, Bkrtcy., M.D.Fla., 1980, 6 B.R. 93, 95.
10. Judgment will be entered in favor of Cristol and against Beyer and Lerner, jointly and severally, under Count I of Cristol’s Amended Complaint in this Adversary Proceeding, in the principle amount of $147,-015.81, plus interest at the Florida statutory rate from August 15, 1978, and Cristol’s costs of this action.7
IV. CRISTOL’S CLAIM UNDER § 60d.
At the February 16, 1982, trial of this Adversary Proceeding, Cristol established that WGSC settled many of its “default” lawsuits against former customers for between ten and fifteen cents on the dollar. From this fact, Cristol argues that the bankrupt, WGSC, contemplated the filing of a bankruptcy petition either by or against it within the meaning of § 60(d) of the Bankruptcy Act, 11 U.S.C. § 96(d). Beyer and Lerner, on the other hand, have moved for the involuntary dismissal of Count III of Cristol’s Amended Complaint in this Adversary Proceeding on the basis *729that Cristol, at the trial of February 16, 1982, failed to make a prima facie case on the critical question of the debtor’s intent. See, Conrad, Rubin & Lesser v. Pender, 1933, 289 U.S. 472, 474-475, 53 S.Ct. 703, 704, 77 L.Ed. 1327.
The Court is not prepared, at this time, to rule upon Defendants’ motion to involuntarily dismiss Count III of Cristol’s Amended Complaint in this Adversary Proceeding. Before ruling on that motion, the Court will consider the oral arguments of counsel for the parties at a hearing to be held on Tuesday, October 26,1982, at 2:30 P.M., in Room 1410, Federal Building, 51 Southwest First Avenue, Miami, Florida.
Counsel for the parties to this Adversary Proceeding should be prepared, at the hearing scheduled for October 26, 1982, to present evidence bearing upon the reasonableness of the attorneys’ fees received by Defendants within the period specified by Count III of Cristol’s Amended Complaint.
.This Adversary Proceeding is governed by the substantive provisions of the Bankruptcy Act of 1898, as amended, because: (1) an involuntary bankruptcy petition was filed against WGSC on August 15, 1978; and (2) W & C and WGSC were adjudicated bankrupts on January 11, 1979. The relevant provisions of the Bankruptcy Reform Act of 1978, which enacted the Bankruptcy Code, did not take effect until October 1, 1979. See, § 402, Public Law 95-598, November 6, 1978, 92 Stat. 2549.
Section 60 of the Bankruptcy Act, 11 U.S.C. § 96, in pertinent part provided:
“(a)(1) A preference is a transfer, as defined in this title, of any of the property of a debtor to or for the benefit of a creditor for or on account of an antecedent debt, made or suffered by such debtor while insolvent and within four months before the filing by or against him of the petition initiating a proceeding under this title, the effect of which transfer will be to enable such creditor to obtain a greater percentage of his debt than some other creditor of the same class.” ******
“(b) Any such preference may be avoided by the trustee if the creditor receiving it to be benefited thereby or his agent acting with reference thereto has, at the time when the transfer is made, reasonable cause to believe that the debtor is insolvent. Where the preference is voidable, the trustee may recover the property or, if it has been converted, its value from any person who has received or converted such property, except a bona-fide purchaser from or lienor of the debtor’s transferee for a present fair equivalent value:.."
.Section 70(d) of the Bankruptcy Act, 11 U.S.C. § 110(d), in pertinent part provided:
“After bankruptcy and either before adjudication or before a receiver takes possession of the property of the bankrupt, whichever occurs first—
“(1) A transfer of any of the property of the bankrupt, other than real estate, made to a person acting in good faith shall be valid against the trustee if made for a present fair equivalent value or, if not made for a present fair equivalent value, then to the extent of the present consideration actually paid therefore, for which amount the transferee shall have a lien upon the property so transferred; “(2) A person indebted to the bankrupt or holding property of the bankrupt may, if acting in good faith, pay such indebtedness or deliver such property, or any part thereof, to the bankrupt, or upon his order, with the same effect as if the bankruptcy were not pending;
“(3) A person having actual knowledge of such pending bankruptcy shall be deemed not to act in good faith unless he has reasonable cause to believe that the petition in bankruptcy is not well founded.
“(5) A person asserting the validity of a transfer under this subdivision shall have the burden of proof. Except as otherwise provided in this subdivision and in subdivision (g) of section 44 of this title, no transfer by or in behalf of the bankrupt after the date of bankruptcy shall be valid against the trustee. .
.Section 60(d) of the Bankruptcy Act, 11 U.S.C. § 96(d), provided:
“If a debtor shall, directly or indirectly, in contemplation of the filing of a petition by or against him, pay money or transfer property *722to an attorney at law, for services rendered or to be rendered, the transaction may be examined by the court on its own motion or shall be examined by the court on petition of the trustee or any creditor and shall be held valid only to the extent of a reasonable amount to be determined by the court, and the excess may be recovered by the trustee for the benefit of the estate.”
. The Court’s Pretrial Order of January 20, 1982, in this Adversary Proceeding provided: “This Adversary Proceeding came on for Pretrial Conference before the undersigned United States Bankruptcy Judge on Wednesday, January 13, 1982, at the Federal Building, 51 S.W. 1st Avenue, Miami, Florida. Plaintiff A. JAY CRISTOL, Trustee in Bankruptcy, was represented at the Pretrial Conference by Mr. Lawrence R. Metsch and Ms. Naomi Hass-Perlman of the law firm of Paul, Landy, Beiley, Harper & Metsch, P.A., Miami, Florida. Defendants GERALD BEYER, CHARLES D. FRANKEN, and ALAN M. LERNER, were represented at the Pretrial Conference by Mr. Stan L. Riskin of Riskin and Dishowitz, Hollywood, Florida. “1. Counsel for Plaintiff, at the Pretrial Conference, orally moved to dismiss Counts III, IV, V, and VI of the Complaint in this Adversary Proceeding. There was no objection on the parts of Defendants to that motion. Accordingly, the Court being fully advised in the premises, it is hereby ORDERED and ADJUDGED that Plaintiffs motion to dismiss Counts III, IV, V, and VI of the Complaint in this Adversary Proceeding be and the same hereby is GRANTED and that Counts III, IV, V, and VI of the same hereby are DISMISSED, WITH PREJUDICE.
“2. It is undisputed that an involuntary bankruptcy petition was filed against the above named Bankrupts on August 15, 1978. Further, it is undisputed that the following payments by the Bankrupts to Defendants are in controversy in this Adversary Proceeding:
DATE OF CHECK AMOUNT
January 31, 1977 $ 9,621.30
March 18, 1977 21,155.00
March 18, 1977 17,725.00
April 12, 1977 17,211.00
May 10,1977 17,193.00
June 24,1977 17,170.25
July 22, 1977 17,329.70
September3, 1977 9,888.50
September 3, 1977 13,376.55
December 12, 1977 5,000.00
December 28, 1977 15,000.00
January 11, 1978 50,000.00
April 6, 1978 5,290.00
July 14, 1978 108,000.00
DATE OF CHECK AMOUNT
July 17, 1978 33,078.81
August 7, 1978 5,937.00
September , 1978 11,609.14
October 3, 1978 6,927.31
October 17,1978 13,623.80
“3. Plaintiff seeks to recover, under Counts I and II of the Complaint in this Adversary Proceeding, the following payments by the Bankrupts to Defendants as voidable preferences within the meaning of § 60b of the Bankruptcy Act:
DATE OF CHECK AMOUNT
July 14, 1978 $108,000.00
July 17, 1978 33,078.81
August 7, 1978 5,937.00
“4. Plaintiff seeks to recover, under Count VII of the Complaint in this Adversary Proceeding, the following payments by the Bankrupts to Defendants as post-petition transfers within the meaning of § 70d of the Bankruptcy Act:
DATE OF CHECK AMOUNT
September , 1978 $11,609.14
September 3, 1978 6,927.31
October 17, 1978 13,623.80
“5. Plaintiff seeks to recover, under Count VII of the Complaint in this Adversary Proceeding, the following payments by the Bankrupts to Defendants as legal fees paid in contemplation of the filing of a bankruptcy petition within the meaning of § 60d of the Bankruptcy Act:
DATE OF CHECK AMOUNT
January 31, 1977 $ 9,621.30
March 18, 1977 21,155.00
March 18, 1977 17,725.00
April 12,1977 17,221.00
May 10, 1977 17,193.00
June 24,1977 17,170.25
July 22, 1977 17,329.70
September 3, 1977 9,888.50
September3, 1977 13,376.55
December 12, 1977 5,000.00
December 28, 1977 15,000.00
January 11, 1978 50,000.00
April 6, 1978 5,290.00
July 14, 1978 108,000.00
July 17, 1978 33,078.81
August 7, 1978 5,937.00
“6. Plaintiff has attacked the payments by the Bankrupts to Defendants of July 14, 1978, July 17, 1978, and August 7, 1978, under both § 60b and § 60d of the Bankruptcy Act. At the trial hereafter scheduled, Plaintiff will be permitted to attack those payments only under § 60b of the Bankruptcy Act. Should Plaintiffs attack *723on those payments under § 60b of the Bankruptcy Act prove unsuccessful, he will be permitted, at a later time, to attack those payments under § 60d of the Bankruptcy Act.
“7. It is ORDERED and ADJUDGED that a trial be held in this Adversary Proceeding before the undersigned United States Bankruptcy Judge at 9:30 A.M., Tuesday, February 16, 1982, in Room 203-C, United States Courthouse, 299 East Broward Boulevard, Fort Laud-erdale, Florida.
“DONE AND ORDERED this 20th day of January, 1982, at Miami, Southern District, Florida.
. The Court’s order of February 17, 1982, in this Adversary Proceeding provided:
“This cause came on to be heard upon the motion of Plaintiff A. JAY CRISTOL, Trustee in Bankruptcy, for leave to file an amended complaint asserting a claim under § 70d of the Bankruptcy Act against Beyer & Lerner, P.A. The Court having considered the arguments of counsel and being fully advised in the premises, it is hereby—
“ORDERED and ADJUDGED that Plaintiffs motion for leave to file an amended complaint asserting a claim under § 70d of the Bankruptcy Act against Beyer & Lerner, P.A., be and the same hereby is GRANTED. It is further ORDERED and ADJUDGED that Plaintiff shall file and serve his amended complaint within five (5) days of the date of this order. It is further ORDERED and ADJUDGED that Defendant BEYER & LERNER, P.A., shall file and serve its response to the amended complaint within ten (10) days thereafter. Pursuant to the stipulation, in open court, on the part of counsel for- Defendants, service of process as to the amended complaint shall be accomplished upon Defendant BEYER & LERNER, P.A., through registered mail service upon Attorney Stan L. Riskin, Box 7328, Hollywood, Florida 33021.”
. Count I of Cristol’s Amended Complaint sought to recover the value of alleged voidable preferences within the meaning of § 60(b) of the Bankruptcy Act, 11 U.S.C. § 96(b), from Beyer and Lerner. Count II of Cristol’s Amended Complaint sought to recover the value of post-petition payments made by the debtors to Beyer & Lerner, P.A., which claim was asserted pursuant to § 70(d) of the Bankruptcy Act, 11 U.S.C. § 110(d). Finally, Count III of Cristol’s Amended Complaint sought to recover allegedly excessive legal fees from Beyer and Lerner pursuant to § 60(d) of the Bankruptcy Act, 11 U.S.C. § 96(d).
. Section 57(g) of the Bankruptcy Act, 11 U.S.C. § 93(g), provided:
“The claims of creditors who have received or acquired preferences, liens, conveyances, transfers, assignments or encumbrances, void or voidable under this title, shall not be allowed unless such creditors shall surrender such preferences, liens, conveyances, transfers, assignments, or encumbrances.”
The Court has determined that Beyer and Lerner received voidable preferences from WGSC during the four months prior to August 15, 1978, the date upon which an involuntary bankruptcy petition was filed against WGSC. Beyer and Lerner have counter-claimed against Cristol in this Adversary Proceeding for legal services rendered to the Bankrupts prior to and after the filing of the August 15, 1978, involuntary bankruptcy petition against WGSC. The Court views the counterclaim in this Adversary Proceeding as a claim within the meaning of § 57(g) of the Bankruptcy Act, 11 U.S.C. § 93(g), and will defer ruling thereon until Beyer and Lerner surrender their voidable preferences to Cristol. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489495/ | MEMORANDUM OPINION
HENRY L. HESS, Jr., Bankruptcy Judge.
On October 12, 1982 the plaintiffs filed a complaint in Adversary No. 82-0782 and a complaint in Adversary No. 82-0778. In 82-0782 the complaint is entitled “Complaint Por 1. Relief From Automatic Stay 2. Modification of Automatic Stay.” In 82-0778 the complaint is entitled “Complaint For Order Denying Dischargeability and Vacating Stay.” The defendant thereafter filed motions to dismiss each of the complaints. The plaintiffs waived the time restrictions imposed by 11 U.S.C. § 362(e).
AUTOMATIC STAY
A long history of litigation in several courts in this state and in the state of California precedes this bankruptcy case. Only a part of this history is relevant to the present bankruptcy case.
On September 7, 1973 a judgment was entered in action No. 62826 in the Superior Court of California for Marin County in favor of the plaintiff class and against Robert W. Pollock, the United Financial Group, and a number of parties defendant both individual and corporate in the amount of $66,900,000. The debtor herein was not a party to this action.
On March 23,1976 an action was filed by the plaintiff class, judgment creditors in action number 62826, in the Superior Court for the State of California for Marin County which is designated as No. 79255. The debtor herein was not named as a defendant in the complaint filed in No. 79255 but the complaint did name a number of John Does. About November 6, 1980 a second amended and supplemental complaint was filed which named the debtor herein as a defendant. Along with the debtor this second amended complaint specifically names over 50 individual and corporate defendants. The second amended complaint recites the entry of the judgment in number 62826 and that the judgment was based upon schemes of Robert Pollock, of corporations controlled by him, and certain of the defendants, to defraud prospective investors made up of the plaintiff class. It alleges that the defendants in number 79255 conspired with Robert Pollock to collaborate in certain fraudulent distribution and sale schemes, to conceal from the plaintiffs facts and evidence of transactions with funds placed by the plaintiffs with Robert Pollock and other defendants, and to avoid payment of the judgment entered in number 62826. In paragraph 64 there are 16 separate sub-paragraphs each naming specifically one or more of the defendants and alleging actions taken in furtherance of the conspiracy. Subparagraph m alleges:
“m. Robert Palmer was employed by Standard Investment Company as a stock broker, in 1968, 1969, and 1970, and as a construction superintendent in 1971; and by Royal Real Estate, during the period from 1972 to the present date. He has assisted in the conversion of stocks, real estate and other property, from the beneficial ownership of the plaintiffs to the personal profit and use of Robert Pollock and the other defendants herein and to conceal such property, so it would not be subject to execution, to satisfy the Judgment entered in Action 62826.”
These allegations appear to assert not that Palmer was a part of the conspiracy upon which the judgment in 62826 was based, but that Palmer, subsequent to the entry of the judgment, assisted in the conversion and concealment of property to pre*748vent collection of the judgment. The allegations concerning Palmer are different from the allegations contained in the other 15 subparagraphs of paragraph 64.
11 U.S.C. § 362(d), in so far as relevant to this bankruptcy case, provides that relief from the stay shall be granted “for cause”.
The plaintiffs assert that relief from the stay should be granted in order to permit them to proceed against the debtor in number 79255 along with the other defendants in that action when it is tried. The plaintiffs recognize that the determination of the dischargeability of any debt owing to them by the debtor which might be established by a judgment in number 79255 is within the exclusive jurisdiction of this bankruptcy court. They assert that the liability of the debtor should be established in the case pending in California and that this court could then determine whether or not any liability established in that case is or is not dischargeable. They contend that the expenses of the plaintiff would be increased if the matters of both liability and dischargeability were to be tried in this court. On the other hand the debtor asserts that his expenses would be greatly increased were he required to first defend the case in California and then defend the complaint for dischargeability in this court.
From the allegations of the second amended complaint in the California case it appears that Robert Pollock owned or controlled the various corporations involved in the fraudulent investment schemes. The complaint does not allege what connection Palmer may have had to Pollock or his corporations other than that Palmer is Pollock’s brother in law. Nor does the complaint allege any reason why Palmer was involved in any scheme to prevent collection of the Judgment in number 62826 or in what manner Palmer was to benefit from such an alleged scheme. If Palmer did convert or assist in the conversion of property of the plaintiffs or of property of the defendants in number 62826 which could have been reached to satisfy the judgment, the measure of damages would not be the amount of the judgment but rather the value of the property converted. The claims against other defendants in number 79255 are not similar to the claim made against Palmer. To require that Palmer defend the California case would be to require him to attend a trial that could involve weeks or months in which the evidence for and against other defendants would not be related to the claim against him.
The California case has now been pending for over 7 years. A trial date has not been set and will not be set until a conference scheduled for January 1983. There is no assurance that at that time all of the parties will be ready for trial.
One of the major purposes of bankruptcy is to provide the debtor with a fresh start. The law contemplates that a discharge be promptly granted if no objections to discharge are filed. In this ease a discharge was entered on November 8,1982. It is also important for the debtor’s fresh start that he know promptly what debts will be excepted from the effect of a discharge.
Were relief from the stay granted and the plaintiffs permitted to proceed against Palmer in the California case it would still be possible that this court might determine that the debt was dischargeable. Economy of judicial effort and expense to the parties would be served by trying both issues of liability and dischargeability in this court.
The court finds that the plaintiffs have failed to show cause for relief from the stay provided by 11 U.S.C. § 362. An order will be entered herein denying such relief.
DISCHARGEABILITY
In response to the plaintiffs’ complaint for an order denying dischargeability and vacating stay, the defendant filed a motion to dismiss upon the ground that the complaint fails to state grounds for relief under 11 U.S.C. § 523. In order to rule upon the motion to dismiss, it is necessary to analyze the allegations of the complaint.
The complaint first alleges that the court has jurisdiction under 11 U.S.C. §§ 362, 363 *749and 523(a)(6). Section 362 relates to the automatic stay and relief therefrom. The court has above dealt with the request for relief from stay. Section 363 relates to the use, sale or lease of property by a trustee or a debtor. There are no allegations in the complaint which would make this section applicable to the case. Section 523(a)(6) renders nondischargeable a debt “for willful and malicious injury by the debtor to another entity or to the property of another entity.”
In paragraph 1 plaintiff asserts that a judgment was obtained on September 27, 1973 in the Superior Court of the State of California for the County of Marin against one Robert W. Pollock, and others in Action No. 62826. Neither in paragraph 1 nor in any other paragraph is there an allegation that Palmer was a party to that action or that a judgment was rendered against him.
Paragraph 2 of plaintiffs’ complaint alleges the institution of action No. 79255 in the Superior Court of the State of California for the County of Marin on March 23, 1976. In paragraph 2 the plaintiff alleges that, in said action, plaintiff alleged a collaboration scheme and a conspiracy by defendant with Robert W. Pollock. At no point in paragraph 2 is there an allegation of a conspiracy by defendant with Robert W. Pollock. Rather, there is merely an allegation that, in another legal proceeding, such an allegation appears.
In paragraph 3 of the complaint plaintiff alleges that, in action No. 79255, certain default judgments have been taken, including a default judgment against Sandra Pollock. Nowhere in paragraph 3 is there an allegation that such a judgment was taken against this defendant.
In paragraph 4 plaintiff alleges that action No. 79255 had been the subject of an amended complaint. Paragraph 4 goes on to allege the relief requested in that action, including the imposition of a constructive trust. There is no allegation within paragraph 4 of any wrong doing on the part of this defendant nor of any assets of this defendant upon which a constructive trust could be imposed. Rather, there is merely an allegation that the amended complaint contains allegations against the defendant.
Paragraph 5 of plaintiffs’ complaint merely asserts the existence of a claim but fails to set forth any actions taken by this defendant which are willful or malicious or which have affected plaintiffs in any way.
In paragraph 6 plaintiff alleges that he has previously filed a complaint in this court to avoid the stay relative to action No. 79255.
In paragraph 7 plaintiff alleges that Sandra Pollock and Robert Pollock have filed a Petition for Bankruptcy in the Northern District of California. Apparently, in said action the Pollocks listed the indebtedness to plaintiffs referred to in this proceeding. It also alleges that the receiver in action No. 62826 has authorized the plaintiffs to file action in this court to collect the judgment in action No. 62826. It further alleges that the receiver and trustee has a lien on all property of Robert Pollock, Sandra Pollock and named companies transferred in payment of fees or commissions to the debtor herein.
In paragraph 8 it is alleged that a certain action (No. 78544) was brought in the Superior Court of the State of California for the County of Marin in which a judgment was entered in January of 1981. Although not directly alleged, it may be that the plaintiffs are asserting that this judgment enjoined Robert Pollock and his agents from prosecuting lawsuits against the plaintiffs. It is alleged that the present bankruptcy proceeding was filed for the sole purpose of interfering with the collection by plaintiffs of the judgment in action No. 62826 and to delay the trial of action No. 79255. Again, although not directly alleged, the plaintiffs may be contending that the filing of this bankruptcy proceeding was in violation of the injunction entered in No. 78544. One might assume such a contention since the plaintiffs allege that the judgment in No. 78544 is entitled to full faith and credit. However it is not alleged that Palmer was a party to action No. 78544. Full faith and credit does not ren*750der material to the present proceeding a judgment entered in an action to which Palmer was not a party. Palmer’s right to file bankruptcy should properly be attacked by a motion to dismiss the bankruptcy case rather than by an action to determine the dischargeability of a debt.
In paragraph 9 it is alleged that a final judgment of nondischargeability of the debts asserted in actions Nos. 62826, 78544 and 79255 was entered against Sandra L. Pollock and Robert W. Pollock in a bankruptcy case filed by them. Plaintiff then alleges that the judgment of nondischargeability against Robert W. Pollock and Sandra L. Pollock is res judicata as to the dischargeability of the alleged debt of this defendant. At no point is there an allegation that Robert N. Palmer was a party to that proceeding which determined the dischargeability of the debt of Robert W. Pollock and Sandra L. Pollock. There is no allegation that he was in privity with the defendants in said proceeding.
The only exhibit attached to the complaint is a copy of a certification by the Clerk of the United States Bankruptcy Court for the Northern District of California that an annexed instrument is a true and correct copy of an original judgment entered in the bankruptcy case of Robert W. Pollock and Sandra L. Pollock. A copy of the judgment is not attached.
The above analysis of the complaint for dischargeability, taken in great part from the memorandum of law filed by the defendant, has been time consuming on the part of the court. Seldom has this court examined a complaint which was so indirect in its allegations, contained so many allegations which are completely immaterial to the claim for relief, and demonstrated such lack of understanding of basic principles of law.
In summary, the complaint fails to allege that any judgment has been entered in favor of the plaintiffs and against the defendant in any court. The complaint fails to allege that the defendant has caused any injury to the plaintiffs or to any property of the plaintiffs. At most the complaint merely alleges that it has been alleged in other suits or actions that the defendant has caused injury to the plaintiffs. The defendant should not be required to answer such indirect allegations. The complaint should allege directly whatever acts of the defendant the plaintiffs assert have caused them injury. If it is the theory of the plaintiffs that the defendant conspired with others to prevent collection upon a judgment held by them against others and that they have been injured thereby, they should say so directly rather than by stating that in some instrument filed in another court they have so alleged.
There are numerous allegations in the complaint which are immaterial to the questions of whether the defendant has caused injury to the plaintiffs or their property and whether any debt arising therefrom should be held nondischargeable under § 523(a)(6). It is immaterial to these questions that there may have been a default judgment rendered against Sandra Pollock in some other action without some allegation showing a connection between such judgment and the defendant herein. It is immaterial that another bankruptcy court has held that the liability of Robert W. Pollock and Sandra L. Pollock to the plaintiffs is nondischargeable. The rules of res judicata and collateral estoppel do not make this finding of nondischargeability binding upon the defendant herein since he was not a party to and had no duty nor opportunity to defend that case. The allegations of paragraph 8 are not material to the questions of liability and dischargeability. If the filing of this bankruptcy case was in violation of the law, the proper procedure to raise this question would be by a motion to dismiss the bankruptcy case.
An order will be entered herein dismissing the plaintiffs’ dischargeability complaint with leave to file an amended complaint. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489496/ | FINDINGS OF FACT AND CONCLUSIONS OF LAW
SIDNEY M. WEAVER, Bankruptcy Judge.
This Cause having come on to be heard upon a severed Crossclaim and Counterclaim filed in connection with a Complaint to Sell Property Free and Clear of Liens and Claims filed by the original plaintiff (Monroe County Housing Corporation) and the Court having heard the testimony and examined the evidence presented; observed the candor and demeanor of the witnesses; considered the arguments of counsel and being otherwise fully advised in the premises, does hereby make the following findings of fact and conclusions of law:
For clarity, the parties are identified in the following manner: Monroe County Housing Corporation, Inc., (Monroe County) is a building developer responsible for developing the Monroe County Housing Project (the project) at Marathon in the Florida Keys. Cafco Engineers, Inc., (Caf-co) is the contractor that was employed by Monroe County to build the project. Clima-trol Corp., now known as Climatrol Sales, Inc., (Climatrol) is a subcontractor contracted by Cafco to provide and install anodized aluminium railing and gates for the project.
The severed Crossclaim and Counterclaim arose from a Complaint to Sell Property Free and Clear of Liens and Claims filed by Monroe County in which Cafco, Climatrol and others were named defendants. Upon answering Monroe County’s Complaint, Cli-matrol filed a Crossclaim against Cafco to recover the sum of $32,442.44 alleged to be the balance due under the subcontract agreement between Climatrol and Cafco.
When Cafco answered the Crossclaim it admitted the existence of the subcontract but denied that Climatrol had completed all conditions of performance and fulfilled its obligations under the agreement. On this basis, Cafco denied that Climatrol was entitled to any balance alleged to be due under the subcontract. With its answer to Clima-*787trol’s Crossclaim, Cafco filed a Counterclaim against Climatrol (which was later amended) alleging that materials initially supplied by Climatrol were “dimensionly incorrect and not suitable for use on the project” and that Climatrol failed to timely deliver properly dimensioned materials causing delay in completion of the construction project. In response, Climatrol admitted the existence of the subcontract, but denied all other allegations in the Counterclaim.
The issues to be determined by the Court are (1) to what extent, if any, is Climatrol liable for delays in completion of the project and (2) how much, if anything, is due Cli-matrol under the subcontract.
In its Amended Counterclaim, Cafco claimed the following delay damages.
(i) extended insurance;
(ii) extended equipment costs;
(iii) extended job site costs;
(iv) extended home office overhead expenses;
(v) loss of efficiency, and productivity resulting from out-of-sequence work;
(vi) loss of bonding capacity;
(vii) loss of future profits;
(viii) out-of-pocket expenses to rectify Climatrol’s breaches.
At trial Cafco summarized delay damages as follows:
Cafco:
$4,352. Collar + 125. Punch $4,477.
$29,194. Home Office 90,576. Field + 59,000. Profit 41,740. Bond Expense 148,500. Lost Business 3/368,000. Apportioned between 3 (see fn. 3) 122,600. 4,400. $127,000. Total due from Climatrol1
The law requires that a determination of damages must have a reasonable basis. “In a suit between private parties for breach of construction contract by delay, the party who seeks to collect damages has the burden of proving the extra costs it incurred as a result of the breach. If there are factors for which the defendant is responsible and factors for which it is not, the plaintiff must provide a reasonable basis for apportioning damages.” United States, ex. rel. Gray Bar Electric v. J.H. Copeland & Sons Construction, Inc., 568 F.2d 1159 at 1162 (5 Cir.1978).
The “reasonable basis test” has been consistently applied by Florida Courts in cases involving delay damages. See: Gesco, Inc. v. Nezelek, Inc., 414 So.2d 535 (Fla. 4 D.C.A. 1982) citing Gray-Bar, and City of Boca Raton v. Gold Coast Construction, 410 So.2d 174 (Fla. 5 D.C.A. 1982). In the case before the Court the evidence shows that many factors contributed to delay, yet there has been no proof that Climatrol, in and of itself, caused, amplified or actually contributed to the preexisting delay situation.
The law also requires that, “evidence as to the amount of damages cannot be based on speculation or conjecture, but must be proved with certainty.” George Hunt, Inc. v. Dorsey Young Construction, Inc., 385 So.2d 732 at 733 (Fla. 4 D.C.A. 1980) citing Hodges v. Fries, 34 Fla. 63, 15 So. 682 (Fla.1894). See also Travelers In*788demnity Company v. Peacock Construction Company, 423 F.2d 1153 (5 Cir.1970). Comparison of Cafco’s allocation of delay damages in the Amended Counterclaim with that presented at trial demonstrates uncertainty in calculation of delay damages.
The allocation of damages proposed by Cafco is premised on their conclusion that project delay from April, 1981, through August, 1981, was caused by four subcontractors, one of which is Climatrol.2 The delay allegedly caused by these four subcontractors is grouped into three categories,3 each to be assigned responsibility for one third of the delay damages. This assignment is based on the personal opinion of Mr. Carl Fielland, the president of Cafco. The Court finds that this allocation is premised on assumptions that are not adequately supported by the record, and concludes that it is not competent evidence on the issue of damages. This conclusion is supported by the case of Gesco Inc. v. Edward L. Nezelek, Inc. 414 So.2d 535 (Fla. 4 D.C.A. 1982), where the Court in determining liability for construction delay concluded that testimony which was premised on assumptions, which were not adequately supported by the record is not competent evidence on the issue of damages. Similarly, in the case of George Hunt, Inc. v. Dorsey Construction, Inc. 385 So.2d 732 at 733 (Fla. 4 D.C.A. 1980), the Court found that the evidence in the record was “somewhat sketchy, vague and inconclusive” and thus could not be legally sufficient to support an award of damages. The Court concludes that the allocation of delay damages proposed by Cafco does not satisfy the requirement that apportionment of damages have a “reasonable basis”, and further finds that Cafco has been unable to determine with certainty the nature and extent of any delay damages. Cafco has failed to satisfy its burden of proof, and thus can receive no recovery for its alleged delay damages.4
The Court now turns its attention to Cli-matrol’s claim to recover the balance due under the subcontract agreement.
The Court finds that the balance due to Climatrol under the subcontract is $32,-442.44. Since Cafco admitted the existence and content of the subcontract, and its only justification for failure to pay the balance alleged to be due under the subcontract was the deviation and delay alleged to be caused by Climatrol, as to which the Court has found Cafco has failed to meet its burden of proof, Climatrol shall recover the sum of $32,442.44 minus the expense incurred by Cafco in correcting punch list items which are directly attributable to Climatrol. The Court finds the punch list expense to be in the amount of $125.00. The Court further finds that Cafco should be credited the sum of $4,352.28 representing the cost of “collars” deleted from the subcontract.
In summary, Climatrol shall recover from Cafco the sum of $27,965.16 as a result of the following computations:
$32,442.44 Balance Due - 4.477.28 $27,965.16
$4,352.28 Collar + 125.00 Punch List $4,477.28
The Court will enter a separate Final Judgment in conformity with these Findings of Fact and Conclusions of Law.
. The summary at trial was an approximation and “round numbers” were used.
. Although other possible additional causes were mentioned during trial and in the evidence.
. The three catagories are designated as delay attributable to: 1) Climatrol; 2) Alonzo Cothrow, Inc., (paving) and 3) Interior finish: Caswell-Doyle-Jones and DeMarco Tile.
. See City of Boca Raton v. Gold Coast Construction, 410 So.2d 174 (Fla. 5 D.C.A. 1982) which held that when the amount of delay damages can not be ascertained from the record with reasonable certainty, the trial Court should enter a judgment against [the party claiming damages]. See also Travelers Indemnity Company v. Peacock Construction Company, 423 F.2d 1153 at 1157 (5 Cir.1970) wherein the Fifth Circuit Court of Appeals held that an award of no damages was supportable when “because of the many contributing factors shown for the delay ... the Court could not ascertain the amount of damages due ... other than through the process of mere speculation or conjecture.” | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489497/ | MEMORANDUM AND ORDER ON APPLICATION FOR DETERMINATION OF SECURED STATUS
CLIVE W. BARE, Bankruptcy Judge.
The alleged secured status of the claim of the Johnson City Federal Employee’s Credit Union (Credit Union) is challenged by the debtors in this case. The validity of the prepetition assignments by the debtors of security interests in their respective civil service retirement funds is at issue. If these assignments are not prohibited under statutes related to Civil Service Retirement, 5 U.S.C.A. §§ 8331-8348 (1980 & Supp. 1982), the debtors request the court to also consider the effect of: (1) the Credit Union’s failure to file its claim prior to the conclusion of the first meeting of creditors, as required by Rules Bankr.Proc.Rule 13-302(e)(1), 11 U.S.C.A. (1977); (2) this court’s order confirming the debtors’ plan providing for treatment of the Credit Union’s claim on an unsecured basis, from which no appeal was taken, and the effect of confirmation. 11 U.S.C.A. § 1327 (1979).
I
The facts are generally undisputed. The debtors, husband and wife, are Postal Service employees in Johnson City, Tennessee. On or about April 2,1981, the Credit Union extended a $2,500.00 loan to Mr. Keene. His previous note in the amount of $1,000.00 was refinanced and $1,500.00 in loan proceeds were advanced. The purpose for the loan, according to Mr. Keene’s application, was to purchase a new automobile. Approximately eight months later, on or about December 1, 1981, the Credit Union made a $2,500.00 loan to Mrs. Keene to enable her to have repair work performed on her automobile and to meet Christmas expenses. This loan to Mrs. Keene also involved refinancing of her previous note in the amount of $1,000.00 and an advance of $1,500.00. The Credit Union’s consumer credit disclosure form reflects that the collateral for the respective loans is a security interest in “Share Account & retirement fund.”
The debtors filed their joint Chapter 13 petition on June 8, 1982. Their Chapter 13 Statement and proposed plan were filed one week thereafter. In their Chapter 13 Statement, the debtors listed the claim of the Credit Union as an unsecured debt; they expressly indicated they disputed the validity of the Credit Union’s security interest in their retirement funds. Their Chapter 13 plan, which has been confirmed, includes the following provision: “Johnson City Credit Union shall be paid as an unsecured claim. Debtors object to any claim of security in the debtors’ retirement fund.”
An order for meeting of creditors dated June 17, 1982, was mailed to all parties in interest. The final paragraph of the order *819recites: “Bankruptcy Rule 13-302(e)(l) provides that a secured claim must be filed on or before the first date set for the meeting of creditors.” The first meeting of creditors was held on July 26, 1982. The claim of the Credit Union was filed on the same date, but it was filed subsequent to the conclusion of the meeting of creditors. There were no objections to the proposed plan; an order confirming the plan was entered on August 21, 1982.1
On August 9, 1982, prior to the entry of the confirmation order, the debtors filed an application requesting the court to determine the status of the claim of the Credit Union. The debtors advanced a tripartite argument for treating the Credit Union’s claim as unsecured: (1) 5 U.S.C.A. § 8346(a) (1980) prohibits an assignment of any interest in the debtors’ civil service retirement funds; (2) the Credit Union failed to file a proof of claim, as required by Rules Bankr.Proc.Rule 13-302(e)(l), 11 U.S. C.A. (1977), prior to the conclusion of the first meeting of creditors; (3) the confirmed plan provides that the Credit Union’s claim will be paid as an unsecured claim. The Credit Union contends that the assignment of a security interest in the retirement funds is permissible pursuant to an exception stated within 5 U.S.C.A. § 8346(a) (1980). It does not address the two remaining arguments of the debtor.2
II
Chapter 83 of title 5 of the United States Code pertains to retirement of most, but not all, federal employees. Subchapter III of this chapter, entitled Civil Service Retirement, is applicable to officers and employees of the Postal Service. 39 U.S. C.A. § 1005(d) (1980). This subchapter concerns the annuity payable to employees, as statutorily defined in 5 U.S.C.A. § 8331(1) (1980), upon retirement. The statute cited by the debtors as proscribing their assignment of a security interest in their retirement funds, 5 U.S.C.A. § 8346(a) (1980), enacts:
The money mentioned by this subchap-ter is not assignable, either in law or equity, except under the provisions of subsections (h) and (j) of section 8345 of this title, or subject to execution, levy, attachment, garnishment, or other legal process, except as otherwise may be provided by Federal laws.
Subsection (h) of 5 U.S.C.A. § 8345 (1980), provides: “An individual entitled to an annuity from the Fund may make allotments or assignments of amounts from his annuity for such purposes as the Office of Personnel Management in its sole discretion considers appropriate.” The Credit Union asserts that this provision and supplementing regulations permit the assignment of a security interest by the debtors in their retirement funds. The legislative history of this subsection, which was formerly subsection (g) of 5 U.S.C.A. § 8345, is of particular interest:
PURPOSE
The bill H.R. 6642 would permit recipients of Federal civil service annuities to *820make allotments or assignments from their annuity checks for purposes approved by the Civil Service Commission.
BACKGROUND
Federal employees are permitted by law (5 U.S.C. 5525) to make allotments or assignment from their pay for purposes prescribed by regulations of the Civil Service Commission. Such purposes now include charitable contributions, dues to labor unions or employee associations, family support and savings.
Annuitants, however, have been barred by 5 U.S.C. 8346 from the same privilege, except for specifically authorized exceptions covering their employment related life and health insurance premiums and medicare premiums.
The practical reason for the ban against general allotments or assignments has been the lack of sufficient computer capacity to accommodate them. That capacity now exists, however.
STATEMENT
Legislation is required if Federal civil service annuitants are to have the right to make allotments or assignments from their annuities following retirement. (emphasis added)
While the Committee believes the purposes for which such allotments or assignments are to be authorized should generally parallel those applicable to active employees, the designation of appropriate purposes is left to the discretion of the Civil Service Commission, which is in the best position to insure uniformity and also to insure that the program is within its capacity.
SECTIONAL ANALYSIS
Section 1 of H.R. 6642 amends section 8345 of title 5, United States Code, by adding a new subsection (g) at the end thereof. The new subsection (g) authorizes an individual entitled to an annuity from the civil service retirement fund to make allotments or assignments of amounts from his annuity for such purposes as the Civil Service Commission considers appropriate. The Commission has sole discretion to determine the purposes for which allotments or assignments may be made under the authority of subsection (g).
Section 2 of the bill amends section 8346(a) of title 5 to permit allotments or assignments of amounts from annuity payments under the authority of section 8345(g), as amended by the first section of the bill, notwithstanding the general statutory prohibition against assignment, execution, levy or attachment of civil service annuity payments.
S.Rep. No. 537, 94th Cong., 1st Sess. 1-2, reprinted in 1975 U.S.Code Cong. & Ad. News 2064-65.
The proscription of 5 U.S.C.A. § 8346(a) (1980) against assignments protects the employee by assuring the preservation of his annuity rights. See Matter of Dickerson, 300 N.Y.S. 748, 165 Misc. 230 (Sur.Ct.N.Y.1937). The stated purpose for the exception to the prohibition against assignments is to allow annuitants to make assignments “from their annuity checks for purposes approved by the Civil Service Commission.” Clearly, Congress did not intend to authorize employees to assign rights in their retirement fund previous to retirement. Both of the debtors are currently employed; neither of them is presently receiving any retirement annuity from the Office of Personnel Management. Neither the exception under subsection (h) nor subsection (j)3 of 5 U.S.C.A. § 8345 (1980) is applicable. The attempted assignment of a security interest by the debtors in their respective retirement funds is invalid under 5 U.S.C.A. § 8346(a) (1980).
This conclusion eliminates the necessity of considering the remaining arguments advanced by the debtors. However, the court *821does observe that there is a division of authority on the issue whether Rules Bankr. Proc.Rule 13-302(e)(l), 11 U.S.C.A. (1977), is applicable in Bankruptcy Code cases.4
The assignments by the debtors of security interests in their respective retirement funds are invalid; the claim of the Credit Union is an unsecured claim.5
IT IS SO ORDERED.
. No appeal was filed to the order confirming the debtors’ plan. The Credit Union will receive only a pro rata share with other unsecured claimants under the terms of the plan as confirmed if its security interest is invalid.
. The Credit Union also contended that the retirement funds are not property of the estate. This contention is immaterial to a determination of the status of the Credit Union’s claim.
The Credit Union further contended that an employee with less than five years of creditable service, 5 U.S.C.A. § 8332 (Supp.1982), is not entitled to an annuity but to a lump-sum benefit, payable under 5 U.S.C.A. § 8342 (1980), and that Congress did not intend to restrict assignments by employees with less than five years service. Assuming arguendo that the Credit Union is correct, it has failed to establish that either debtor had less than five years creditable service when the security interests were granted. The debtors’ Chapter 13 Statement reflects that the husband has been employed by the Postal Service for eleven years and the wife for five and one-half years. The wife may or may not have had five years creditable service when she assigned the security interest in her retirement fund to the Credit Union. She may be entitled to additional creditable service resulting from previous employment. In any event, the Credit Union has not presented evidence establishing that its theory is relevant to the facts of this case.
. This provision permits payment which would otherwise be made to an annuitant or an employee to be made to another party pursuant to the terms of a court decree in a marital dissolution or separation case.
. Rule 13-302(e) provides that a secured claim, whether or not listed in the Chapter 13 Statement, must be filed on or before the conclusion of the first meeting of creditors in the Chapter 13 case unless the court, on application before the expiration of that time and for cause shown, grants a reasonable, fixed extension of time. Further any claim not properly filed by the creditor within such time shall not be treated as a secured claim for purposes of voting and distribution in the Chapter 13 case.
. This decision in no way determines whether the Credit Union violated the stay provisions of 11 U.S.C.A. § 362(a) (1979) by continuing to make deductions from the debtors’ salaries after the Chapter 13 case was filed and also, without court authority, purportedly set off $1,485.37 allegedly held as a “pledge of shares of Credit Union stock.” See Order entered August 27, 1982, which directed the trustee to make no payment to the Credit Union until all matters in issue had been resolved. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489498/ | FINDINGS AND CONCLUSIONS
JOSEPH A. GASSEN, Bankruptcy Judge.
This proceeding was commenced by an adversary complaint to lift stay filed against Richard A. Casale, which was amended to join the debtors as co-defendants. The debtors in the consolidated bankruptcy case are three related companies, S & R Service, Inc., Sunshine Services, Inc., and Discount Leasing Corporation. The three corporations together are in the business of operating a taxicab service, although S & R is the primary corporation. The three will be referred to collectively as “Debtor” or as “S & R”. Richard A. Casale *866is presently the one-hundred percent shareholder of all three corporations.
Plaintiff seeks a lifting of the stay so he may continue with proceedings in state court to complete a purchase and sale agreement made with the state court receiver of S & R Services. Debtor filed in the main case a motion to reject this same contract, and hearing on debtor’s motion was had simultaneously with the trial of this adversary complaint. Plaintiff argues that the bankruptcy proceeding was brought in bad faith with regard to plaintiff’s contract, and that that is sufficient legal basis to lift the stay. Defendant concedes that bad faith can be a “cause” for lifting the stay under 11 U.S.C. § 362(d)(1) but does not concede that bad faith existed here. Plaintiff did not cite any case law or statutory authority throughout the case and debtor did not cite any other authority as to the adversary proceeding.
Many witnesses testified, some in direct contradiction of each other. It was evident that this court has become the forum for a power struggle between operators of taxicab fleets in Broward County, Florida. The real complaint underlying all plaintiff’s assertions is that the intent of Casale during the period in question was to do whatever was necessary, including putting the debtor into bankruptcy, in order to make debtors’ taxi permits available to Jessie Gaddis, the largest operator of taxis in Broward County. Casale, on the other hand, contends that his state court actions were brought so that he could regain control of his companies; that the state court receiver which was intended to be for his (Casale’s) protection improperly tried to sell the corporate assets to Siedlecki; and that the only “ulterior” motive in the bankruptcy proceeding was to protect his (Casale’s) position in the corporations once the state court proceedings got out of hand. Each individual argues that the corporate creditors will be paid in full if he obtains the assets and that the creditors will be harmed if the other gains control. The detailed facts are as follows.
Casale was originally a fifty percent shareholder of the debtor corporations and one Steven Kaplan was the other shareholder. Disagreements between the two shareholders over control led to litigation in Bro-ward County Circuit Court in which Casale obtained a judgment against Kaplan. The first litigation did not resolve all difficulties and Casale therefore filed another action against the corporations and Steven Kaplan under Florida statutes concerning deadlocked shareholders (Case No. 82-14203 CK-Garrett, in the Circuit Court for Bro-ward County Florida).
To protect his interests from Steven Ka-plan, Casale obtained the appointment of a receiver, Steven Rackmill, a former taxi driver and friend or acquaintance of Casale. Casale’s desire was to emerge from the state court litigation with his own corporation, Broward Checker Cab, Inc., essentially substituted for S & R. To that end, he, as president of Broward Checker entered into a contract with the receiver Steven Rack-mill, by which Broward Checker was to purchase all of the assets of the three debt- or corporations by the assumption of all liabilities of the corporations. (Plaintiff’s Exhibit No. 1). The assets consisted of fixtures, equipment, furniture, automobiles and, most important, approximately thirty taxicab permits, out of five-hundred existing in Broward County. The contract between Rackmill and Casale was entered into on September 14, 1982. On October 30, 1982 Rackmill entered into a similar agreement with Robert Siedlecki, plaintiff in this adversary proceeding. (Plaintiff’s Exhibit No. 2).
Plaintiff argues that Rackmill entered into the contract with him because it was apparent that Casale did not intend to close on his contract, and intended rather to ruin the company. However, the Siedlecki-Rackmill contract was made subject to the non-closing of the Casale-Rackmill contract. Casale argues that, on the contrary, he was prevented from closing on his contract because the receiver imposed additional conditions regarding escrow funds for contingent liabilities of the companies subsequent to execution of the contract, and otherwise *867tried to prevent its closing. The evidence is fairly clear that Casale did not know of the Siedlecki-Rackmill contract until after it had been entered into. However, the evidence was conflicting as to whether there was an insurance crisis which led to the Siedlicki-Casale contract, and if so, whether or not it was contrived, and how much Casale knew about it. Rackmill testified that county authorities were suddenly concerned about the insufficiency of S & R’s liability insurance, that Casale would not address the problem quickly enough, and that Rackmill found he could obtain much cheaper insurance through Siedlecki, which he did, with Siedlecki providing $1,500 for the insurance. While working out the insurance situation over the weekend, Rack-mill also entered into the contract for sale to Siedlecki. The contract itself does not make any reference to insurance or any connection between the two transactions.
Some time during this period, Casale was able to purchase the S & R stock held by Steven Kaplan and Casale became one-hundred percent shareholder of S & R. These funds, as well as litigation funds and escrow funds for the purchase of the assets of the corporations from the receiver, totalling approximately $100,000, were obtained by Casale from Jessie Gaddis, the primary operator of taxis in Broward County. The loans are secured by mortgages on Casale’s home and gas station, and Casale and Gad-dis testified that Gaddis made no agreement to waive repayment under any circumstances.
When Casale perceived what he believed to be Rackmill’s attempt to take the corporations away from him through a sale of the assets to Siedlecki, and now having full ownership of S & R, Casale obtained the removal of Rackmill, and attempted to dismiss the Broward County Circuit Court case which he had brought against his companies. The Broward County Circuit judge refused to permit dismissal of the case and Siedlecki and Casale were appointed co-receivers (Defendant’s Exhibit D). Such an arrangement obviously could not work because the co-receivers were already fierce antagonists. Siedlecki set an emergency hearing (one of several) on his motion for contempt against Casale based on a restraining order which attorney William Blyler testified restrained only Steven Ka-plan. (Few of the pleadings or orders in the circuit court ease were offered into evidence in this proceeding). The motion was denied but Casale agreed to a restraining order preventing him from removing any assets of the corporation.
At that hearing, Siedlecki announced that he, as co-receiver and successor to Rackmill, intended to close on the contract with himself. Casale, as co-receiver, had not previously agreed to co-sign any of the checks signed by Siedlecki, or otherwise cooperate with him, and naturally did not agree to the sale of the assets to Siedlecki. Siedlecki and Rackmill testified that a “closing” was held on November 18, 1982 at which a closing statement was executed by Siedlecki as co-receiver-seller and as purchaser. (Plaintiff’s Exhibit No. 3). No funds for performance of the contract were provided or escrowed, no bill of sale was given, and no delivery of the assets was made. Siedlecki intended to seek court approval of his sale and purchase at a court hearing on November 19, but the voluntary petition in bankruptcy was filed on that date and stayed any further court proceedings.
During the bankruptcy, insurance and dispatch services have been provided by B & L Service, Inc., a corporation owned or controlled by Jessie Gaddis. Casale and Gaddis also testified that they intend to enter into an agreement under which B & L will lease S & R’s taxi permits for a set amount for one year and will provide insurance and dispatch services.
(See Defendant’s Exhibit C). (Casale testified that the debtor also intended to reject the Casale-Rackmill contract if the Sied-lecki-Rackmill rejection was approved.)
For purposes of evaluating Casale’s motives (bad faith being an issue) and the credibility of the witnesses, it should be noted that Rackmill presently does some work for Siedlecki and Casale does some work for Gaddis.
*868Turning first to the motion to reject ex-ecutory contract, the court agrees with defendant that the contract with Siedleeki was clearly still executory. (The Casale-Rackmill contract is not itself at issue; the circumstances surrounding it were offered only on the issue of bad faith.) The so-called closing of the Siedleeki contract was a nullity. Plaintiff gave no evidence of a court order authorizing the sale, which alone would be dispositive, since it was receivership assets which were being sold. (The contract itself also required court approval.) Other reasons the contract was not validly closed are that it was an attempt by one-co-receiver to sell to himself; there was no actual performance by Sied-lecki in his role either as buyer or seller; and the evidence is not clear that the prior contract was incapable of being closed, which was a condition to the closing of the second contract.
A trustee (or debtor-in-possession) may assume or reject any executory contract subject to the court’s approval under 11 U.S.C. § 365. The court agrees with the debtor that the standard to be applied in approving or not approving a debtor’s motion is the business judgment test. In re Jackson Brewing Company, 567 F.2d 618 (5th Cir.1978); In re J.H. Land & Cattle Co., 8 B.R. 237 (Bkrtcy.W.D.Okl.1981). Although Siedleeki testified that he intended to pay all the creditors, the debtor points out that the agreement provides that a newly formed or inactive Florida corporation is to replace Siedleeki as buyer and that Siedleeki is expressly excepted from any personal liability upon the contract. On the other hand, there is no evidence to suggest that Siedleeki actually would not cause, his corporation to pay the general creditors. Although the contract gives the buyer the right to dispute or litigate any of the listed debts, buyer would only be succeeding to S & R’s rights in that regard, and creditors would be no worse off. Most important, under the contract, Siedleeki would obtain all of the assets of the corporations in return for assuming the liabilities and the debtor corporations would be left as mere shells. Given this consideration, the court cannot say that it is not within the sound business judgment of the debtor to reject the executory contract made between Raekmill and Siedleeki.
The court might decline to approve the motion to reject however if it were apparent that the motion was made in bad faith or as part of a larger fraudulent scheme, just as bad faith might be grounds for lifting the stay were that issue not mooted by a rejection of the contract. Most of the actions of Casale which plaintiff complains of either were not as serious as plaintiff argues or were actions which could equally have been motivated by a desire to keep Siedleeki out as a desire to bring Gaddis in. Regarding Casale’s alleged failure to close on his contract with Raekmill, it appears that both sides were about equally at fault in not completing the process of obtaining approval by the Broward County Commission. Likewise, although Casale did not comply with the demands of Rackmill’s attorney as to arrangements for contingent liabilities, plaintiff did not demonstrate that the receiver had any right to make such demands. Plaintiff did not support its allegations that Casale was financially unable to perform with any shred of evidence rebutting the testimony that $125,000 had been placed in escrow with Casale’s attorney. The evidence about Casale refusing to cooperate with the receiver in obtaining insurance at the time of “crisis” was conflicting. Because no documentary evidence from the circuit court file was offered as to pertinent orders and dates, Blyler’s testimony was the best evidence of whether or not Casale violated any restraining order during the receivership, and Blyler’s testimony completely negated that allegation. The single unexplained act which definitely suggests bad faith was Casale’s sabotaging of the operation by transferring the telephone to a different corporation of his and removing the dispatch radio. Although this was not done while a receiver was in possession and did not violate any court order, it is not consistent with the desire to keep the company operating.
*869Another of plaintiff’s allegations to demonstrate bad faith was that the debtor’s financial outlook had not been as bleak as Casale portrayed, and that Casale was really working to kill it off rather than to revive it. The testimony of Siedlecki and Rackmill tended to show that a taxicab operation was viable for these companies themselves, and that it would not be necessary to simply lease the permits to a larger operation. However, there is no question that the companies had financial problems in the past, apart from any “politically” motivated decisions Casale may have made closer to the time of bankruptcy.
If plaintiff had proven that not only were all of Casale’s actions for the purpose of wresting control of the corporation in order to wrongfully give control of the cab permits to Gaddis and that the stated intention of the debtors as to a reorganization is a sham, so that creditors will not actually be paid, there might be grounds for denying rejection of the contract and permitting Siedlecki to proceed in state court. But there was no evidence that the stated intention of the debtors is a sham, and as it stands, there is no more reason' for the bankruptcy court to be the tool'for handing over control to Siedlecki than back to Ca-sale. In the corporate in-fighting of S & R Siedlecki saw an opportunity to increase his operation. His goal had not been achieved prior to this bankruptcy however, and the process did not confer on him such vested rights that he can take precedence over the desires of the original owner of the corporation. While the issue is not resolved by a balancing of “bad faiths”, the evidence did not show all the black hats to be on the Casale gang. Siedlecki admitted that he obtained the benefits of an estate asset in that he continued to receive dispatch fees from at least one driver who was utilizing an S & R cab permit subsequent to the bankruptcy. The vehicle was involved in an accident and it appears it may have been vandalized after being towed to Siedlecki’s premises. Also, no explanation was given as to why certain records were not turned over by Rackmill from the time of his removal up to the date of trial.
While the court is sympathetic to the interest of consumers in having good, reliable taxi service available, decisions in a .bankruptcy proceeding cannot be based on general intentions of improving the public welfare, and the decision in this case could not be made on such a basis even if the evidence had demonstrated that either the Siedlecki or Gaddis operation was superior. If the actions of Casale together with Gad-diss constitute an improper method of transferring taxi permits in violation of county ordinances, this court is likewise not the forum for the aggrieved citizen.
Debtors’ motion to reject executory contract will be granted and plaintiff will be denied relief from the automatic stay. The issue of whether or not plaintiff might suffer damages as a result of the rejection of its contract was not before the court and no determination of that issue is being made.
Pursuant to B.R. 921(a), Final Judgment incorporating these Findings and Conclusions will be entered this date. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489499/ | FINDINGS OF FACT, CONCLUSIONS OF LAW AND MEMORANDUM OPINION
ALEXANDER L. PASKAY, Chief Judge.
THIS IS a Chapter 11 reorganization case. The matters under consideration in the above-styled adversary proceeding are (1) a complaint filed by Jesto Industries, Inc. (the Debtor) alleging fraudulent misrepresentation and inducement to execute a contract and (2) a counterclaim filed by Floyd Slayton, the Defendant-Counter Plaintiff (Slayton) alleging breach of contract.
A brief summary of the procedural background of this proceeding is necessary to place the matters under consideration in a proper perspective. On July 26, 1982, this proceeding was commenced by Jesto Industries, Inc. in the County Court of Pinellas County, Florida. The Defendant (Slayton) filed a counterclaim and on August 24, 1982, the Debtor filed a Voluntary Petition for Relief Under Chapter 11. Slayton then filed an application to remove the County Court action to the Bankruptcy Court and on September 24, 1982, the application was granted.
There is no doubt that the instant proceeding represents a “traditional common law action,” as described by Justice Burger in his dissent in Northern Pipeline Construction Co. v. Marathon Pipe Line Co., - U.S. -, 102 S.Ct. 2858, 73 L.Ed.2d 598 (1982) and as such is subject to the invalidation of the jurisdictional grant of the Bankruptcy Reform Act of 1978, Pub.L. No. 95-598, 28 U.S.C. 1471 et seq. However, the proceeding was removed to this Court while the stay, granted by the plurality in Marathon was yet in force. Further, it progressed to trial prior to the expiration of the second deadline set by the United States Supreme Court, eg. December 24, 1982. However, a final judgment was not rendered within this time period.
Ordinarily, under these circumstances, the failure to enter the final judgment would compel a remand of this related proceeding to the District Court, however, pursuant to the Local Rule promulgated by the Judges of this District (effective December 27, 1982) all related proceedings are automatically referred to the Bankruptcy Judges. Thus, in accordance with the Local Rule, the Bankruptcy Court is directed to submit findings, conclusions and a proposed judgment to the District Judge unless the parties consent to the entry of judgment by the Bankruptcy Judge. Local Rule (d)(3)(B). In light of the foregoing, this matter is properly before the Court for findings, conclusions and a proposed final judgment or final judgment if the parties consent.
The facts relevant to the resolution of this controversy may be summarized as follows:
In April of 1982, Stephen J. Ayoub, President of the Debtor corporation, met with Floyd Slayton, a financial consultant to discuss the procurement of additional financing for the Debtor. Ayoub was primarily interested in obtaining a $500,000 loan guaranteed by the Small Business Administration (SBA loan) and approached Slayton for the purpose of making the necessary arrangements. To that end, the principals of the Debtor prepared and delivered to Slayton, a financial disclosure package for presentation to a commercial lender(s), which Slayton submitted to Commercial Credit Corporation for consideration. While the testimony supports a finding that Commercial Credit was unwilling to approve a SBA loan in the amount of $500,000 based on a review of the corporate “finan-cials,” the lender was willing to consider a *969$100,000 “gap” or “interim” loan if secured by adequate collateral. The underlying theory of the interim financing arrangement was that while the Debtor would be benefited by the immediate influx of $100,-000 into the corp., the secured lender would incur no risk on the interim loan while retaining the option to later approve a $500,000 take out if the financial position of the borrower strengthened during the coming months.
On May 27, 1982, Ayoub, on behalf of the Debtor, and Slayton entered into two agreements. The first, and most significant to this controversy, is an Agreement for Management Services (Pi’s Exh. # 1) wherein the Debtor agreed to pay $6,000 over a period of three months to Slayton for a variety of consulting services, of which procuring new financing was only one. A $2,000 payment was made at the time of execution. The contract also provided that the Debtor was required to provide Slayton with all relevant financial data and to cooperate with Slayton in his efforts on the Debtor’s behalf. It must be pointed out that despite the terms of this agreement, the testimony at trial revealed that Slay-ton’s primary, if not sole, duty was to generate SBA financing and the primary, if not sole, function of the management contract was to provide a vehicle for payment of a broker’s commission on a loan which, by its terms, does not allow for the same.
The Debtor contends that at the time the contract was signed, Slayton represented the SBA loan as “in the bag” and a “sure thing” and failed to disclose that the SBA loan had been rejected by Commercial Credit with only an “interim” loan application yet pending. Ayoub also contends that he executed the contract in reliance upon Slay-ton’s misrepresentations of Commercial Credit’s intent to approve the SBA loan. The Debtor, therefore, seeks damages in the amount of $2,000. (The amount paid by the Debtor at the time the contract was executed) minus the amount actually earned by Slayton.
In his counterclaim, Slayton contends that Debtor, by failing to provide current financial information to Slayton upon request, breached the contract and prevented him from performing the consulting duties outlined in the agreement. He also alleges breach of contract based on the Debtor’s failure to compensate him for services performed.
Considering first the complaint filed by the Debtor seeking damages for fraudulent misrepresentation, it is necessary to determine whether the representations, if any, made by Slayton prior to executing the management contract, rise to the level of actionable fraud. The essential elements of actionable fraud are a false statement concerning a material fact, knowledge that the representation is false, an intent that the representation induce action and consequent injury by the party acting in reliance on the representation. Huffstetler v. Our Home Life Insurance Co., 67 Fla. 324, 65 So. 1 (1914). Further, the party asserting the fraud has the burden of establishing each element. In this connection, there is no evidence in the record to establish that Slayton either affirmatively represented that the SBA loan had been approved by Commercial Credit or that he was aware of a loan rejection by Commercial Credit at the time the Management contract was executed. While there is dispute regarding Slayton’s representation of Commercial Credit’s intent to approve the loan sometime in the future, it is clear that statements or promises of events to occur in futuro are not a proper basis for fraud. Hart v. Marbury, 82 Fla. 317, 90 So. 173 (1921). From a practical standpoint, one who regularly engages in business and is thus familiar with business practice, is aware that substantial lending becomes absolute only upon the execution of the actual credit documents. As revealed by the testimony at trial, Ayoub had been actively seeking financing, although unsuccessfully, prior to engaging Slayton and was, therefore, familiar with the process. In light of the foregoing, it is evident that the Debtor failed to establish the requisite elements of fraud and, therefore, cannot prevail in this action.
The Defendant-Counter Plaintiff urges the Court to award $4,000 in dam*970ages, the amount due under the Management Contract, plus accrued interest, attorney’s fees and costs due to the Debtor’s alleged breach of contract. Slayton contends that the Debtor breached the Management Contract by failing to provide up-to-date financial information which would allow Slayton to complete an internal financial analysis and perform financial consulting services referred to in the contract. Further, the Debtor failed to compensate Slayton in accord with the terms of the contract.
While the Court recognizes that the Debt- or breached this contractual obligation to provide Slayton with current financial data, it is clear that this failure constitutes an immaterial breach in light of the overriding purpose of the contract.
A separate final judgment will be entered in accordance with the foregoing. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489500/ | MEMORANDUM OPINION
THOMAS M. TWARDOWSKI, Bankruptcy Judge.
In this Chapter 7 case, the debtors, pursuant to Section 522(f)(1) of the Bankruptcy Code, 11 U.S.C. § 522(f)(1), seek to avoid two judicial liens held by the defendant, the First National Bank of Allentown.1 There is no factual dispute in this adversary proceeding, the parties having stipulated to all of the relevant facts.
The two judicial liens held by the defendant impair the debtors’ claimed exemption of $15,800.00 in their interest in real property which the debtors own as tenants by the entireties and in which they reside. Both of the judicial liens are confessed judgments which were validly recorded in the Court of Common Pleas of Lehigh County, Pennsylvania in favor of the defendant and against the debtors. One was recorded on March 22, 1979 and the other was recorded on April 3, 1981.
There is no doubt that the judicial lien of April 3,1981 can be avoided to the extent it impairs the debtors’ exemption in that it post-dates the effective date of the Bankruptcy Code, October 1, 1979. The only issue in this proceeding is whether or not the judicial lien of March 22, 1979 can be avoided inasmuch as it post-dates the November 6,1978 enactment date of the Bankruptcy Code yet pre-dates the Code’s October 1,1979 effective date. This judicial lien of March 22, 1979, therefore, falls within the so-called “gap” period.
The only United States Circuit Court of Appeals case to rule on the avoidability of “gap” liens under § 522(f) is In re Webber, 674 F.2d 796 (9th Cir.1982), cert. denied, - U.S. -, 103 S.Ct. 567, 74 L.Ed.2d 931 (1982). Webber held that § 522(f) may constitutionally be applied to “gap” liens. We agree with the reasoning and holding of Webber. Therefore, we hold that the defendant’s judicial lien of March 22, 1979 may constitutionally be avoided, pursuant to § 522(f)(1), to the extent it impairs an exemption of the debtors.
. This memorandum opinion constitutes the findings of fact and conclusions of law as required by Rule 752 of the Rules of Bankruptcy Procedure. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489502/ | ORDER DETERMINING ALLOWANCE OF DEBTORS’ CLAIMED EXEMPTIONS ON PERSONAL PROPERTY
ROBERT G. MOOREMAN, Bankruptcy Judge.
This matter involving debtors’ claimed exemptions comes before the court on the question of allowable exemptions when married debtors file a joint petition in bankruptcy on a severable basis. Both the Trustee and Valley National Bank object to the debtors’ claim of exemptions, and a hearing on this matter inter alia was held on March 2,1982. At that time, the parties stipulated as to the allowable exemption on the real property. The remaining matters were then taken under advisement. Subsequently, the debtors withdrew their concession regarding the real property in a memorandum filed on March 12, 1982, to which *31Valley National has responded. The court has now fully considered all pleadings, exhibits and memoranda pertinent to the issues and holds and concludes as follows:
IT IS HEREBY ORDERED granting the debtors individual or “double” exemptions on items of personal property claimed exempt. With respect to the granting of individual or “double” exemptions on the realty, this court declines to render a decision based on the facts set forth in the latter portion of this order.
In conjunction with the above, the court finds the following facts supported herein by the record and evidence as stipulated and found to be not in dispute by the parties:
Gary A. Smith and Christine E. Smith are husband and wife. They filed their voluntary joint petitions which constitute an order for relief under Chapter 11 on July 29, 1981, and thereafter the matter was converted to a Chapter 7 liquidation by order dated November 17, 1981. On or about August 25, 1981, and within the time prescribed under the rules (Rule 1002(c), Local Bankruptcy Rules for the District of Arizona), debtors filed their Statement of Financial Affairs and Statement of Liability and Assets. The B-4 Schedule (Property Claimed as Exempt) to the Statement of Liability and Assets specifically lists various personal property exemptions and a homestead exemption pursuant to the relevant Arizona statutes. The Schedule reflects: “The above exemptions are being claimed jointly by the debtors and severally by each of them.”
Counsel for the debtors takes the position that the United States Bankruptcy Code mandates that exemptions apply separately with respect to each debtor in a joint case pursuant to 11 U.S.C. § 522(m). The Trustee and Valley National Bank, however, in support of their objections, rely on A.R.S. § 33-1121.1 which states:
“Debtor” means an individual or marital community utilizing property described in this article for personal or family use.
and A.R.S. § 33-1101.C which states:
Only one homestead may be claimed by a married couple or a single person under the provisions of this section. The value as specified in this section refers to the equity of a single person or married couple claiming the homestead.
I. THE PERSONAL PROPERTY EXEMPTIONS
Prior to July 31, 1980, Arizona debtors were allowed to “stack” both federal and state exemptions in a joint petition. See In re Ageton, 14 B.R. 833 (Bkrtcy.App. Panel, 9th Cir., 1981) and In re Morrison, 13 B.R. 815 (Bkrtcy.D.Ariz.1981).
Effective July 31, 1980, and pursuant to 11 U.S.C. § 522(b)(1), Arizona elected to “opt out” of the federal exemptions by enacting A.R.S. § 33-1133.B., which provides as follows:
Notwithstanding subsection A, in accordance with 11 U.S.C. § 522(b) residents of this state are not entitled to the federal exemptions provided by 11 U.S.C. § 522(d). (Emphasis added.)
Two relevant provisions of the Bankruptcy Code, which remain unaffected by the Arizona legislation “opting out” of the “laundry list” of exemptions under 11 U.S.C. § 522(d), are 11 U.S.C. § 522(m) which provides that the section shall apply separately with respect to each debtor in a joint case, and 11 U.S.C. § 101(12) which defines debtor as a person. The Arizona legislature enacted A.R.S. § 33-1133.B. which expressly acknowledges that the only portion of 11 U.S.C. § 522 affected is subsection (d) which enumerates certain kinds of property. Thus Arizona’s specific exemption entitlements are substituted for the § 522(d) exemptions, but no authority beyond that is granted by the federal statute. The court finds and concludes that permitting the states to “opt out,” Congress merely permitted the states to substitute these specific exemption entitlements under state law for those set forth in § 522(d). The permission to substitute state law exemptions for federal is stated in 11 U.S.C. § 522(b) which reads:
*32Notwithstanding section 541 of this title, an individual debtor may exempt from property of the estate either—
(1) property that is specified under subsection (d) of this section, unless the State law that is applicable to the debtor under paragraph (2)(A) of this subsection specifically does not so authorize, or, in the alternative, ... (Emphasis added.)
It is clear that since the enactment of A.R.S. § 33-1133.B. joint debtors may not now “stack” federal and state exemptions by one individual debtor taking the federal exemption while the other individual debtor takes the state exemption; however, there has been no change in either the federal or the state law which prevents each individual debtor from claiming the state personal property exemptions. “It cannot be fairly argued that it was the intent of Congress to discriminate against debtors in community property states, which require joinder in claiming exemptions. ... [Exemption rights are personal to each individual debtor.. .. [N]o congressional intent could be found to justify granting joint petitioners any less than individual petitioners.” In re Morrison, supra, at 817. In addressing the availability of individual personal property exemptions for each debtor in a joint petition, the conclusion is that debtors in states which have “opted out” of the federal exemptions may “stack” personal property state statutory exemption amounts. In re Ferguson, 15 B.R. 439 (Bkrtcy.D.Colo.1981). Since Arizona has “opted out” of the federal exemptions, the court therefore finds and concludes that this record supports the granting of relief sought by debtors and that they each may individually and severally claim the listed personal property exemptions pursuant to the relevant Arizona personal property exemption statutes listed in debtors’ schedules, pursuant to 11 U.S.C. § 522(b)(1), and pursuant to A.R.S. § 33-1133.B.
II. THE REAL PROPERTY
The real property involved is described as:
Lot 19, Coronado Foothills, Unit 1, Book 118 of Maps, page 17, records of Maricopa County, Arizona. Also known as 4702 East Lincoln Drive, Paradise Valley, Arizona 85253.
Valley National Bank and the Trustee object to the debtors’ claim of joint and several exemptions which would result in the doubling of the homestead exemption. However, on July 26,1982, the Trustee filed his Application for Order Authorizing Sale of Property at Court with Proceeds Subject to Liens to the debtors for $25,000, an amount offered for the Trustee’s interest in the said real estate. The court granted the Trustee’s application, and the sale was noticed out to all creditors and interested parties. Western Savings and Loan, one of the lienholders on the realty, filed its response, indicating no objection to the proposed sale to the debtors. At the September 2, 1982, Trustee’s Sale, the debtors bid $25,000 and no higher bids were made. On October 18, 1982, the Trustee made application for order confirming the sale of the above-described real estate sold at court, to the debtors for $25,000 and on the same date, the court confirmed the sale.
In light of the sale of the property to the debtors, this court determined it is unnecessary to rule on the issue of a double homestead exemption claim in this case under the facts as they presently exist unless requested to do so in later proceedings.
Pursuant to F.R.Civ.P. 52, as adopted by Rule 752 of the Rules of Bankruptcy Procedure, this order shall constitute findings of fact and conclusions of law herein, and pursuant to B.R. 921(a), a separate final judgment should be lodged in accordance therewith by the parties. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489937/ | MEMORANDUM DECISION
THOMAS C. BRITTON, Bankruptcy Judge.
The trustee seeks avoidance of a transfer of $69,762 alleged to be fraudulent under 11 U.S.C. § 544(b) and prays for recovery of the proceeds from the debtor’s bank account. The non-deb tor/wife is joined as a defendant solely with respect to any interest she may assert to the account in question. She has asserted none. The debtor has moved for dismissal and has answered. The matter was tried on November 1.
The essential facts are not in dispute. The debtor is an attorney who practiced in Ohio for 16 years before moving to Florida. In 1971, he formed a professional association and a year or two later established a pension plan for the association. The debt- or never had a partner and at all times had and exercised complete control over the association and the pension plan.
Following an unfortunate foray into the stock market, the debtor suffered severe reverses and in February 1977, the Federal *771Deposit Insurance Corporation obtained a judgment against him in the amount of $149,000 which has never been satisfied.
In July 1979, the debtor terminated the pension plan and used his share, $69,762 to purchase an annuity for himself. It is this act which the trustee alleges to be fraudulent. Section 544(b) permits the trustee to:
“avoid any transfer of an interest of the debtor in property or any obligation incurred by the debtor that is voidable under applicable law by a creditor holding an unsecured claim that is allowable under section 502 of this title.”
Plaintiff relies upon § 3911.10 of the Ohio Rev. Code Ann., which provides an exemption from the claims of creditors as to all annuity contracts upon the life of any person, but then provides:
“Subject to the statute of limitations, the amount of any premium upon said contracts, endowments, or annuities, paid in fraud of creditors, with interest thereon, shall inure to their benefit from the proceeds of the contracts.” (Emphasis supplied).
The annuity gradually increased in value until it was withdrawn by the debtor on August 15, 1984, when it then had a value of $102,626. That money is now in the debtor’s personal account.
It is the debtor’s burden to assert and demonstrate that the Ohio pension plan or the proceeds from that plan which were used to purchase the Ohio annuity were exempt from the claims of creditors. The debtor has neither argued nor demonstrated that to be the case. The trustee has attempted through discovery to obtain the pertinent documents in order to determine whether the funds in the pension plan were exempt under Ohio law, but the debtor has failed to produce these documents. I infer from this fact and conclude that the $69,-762 was not then exempt from the claims of creditors.
The conversion in July 1979, two and one-half years after the debtor suffered a $149,000 judgment against him and while that judgment remained unsatisfied, of this substantial sum into an annuity exempt from the claims of Ohio creditors establishes a presumption of fraud under this statute. John Weenink & Sons Co. v. Blahd, 73 Ohio App. 67, 54 N.E.2d 426 (1943). The debtor has offered no convincing argument or explanation that would overcome the presumption created by the foregoing facts. Because the Ohio statute authorizes creditors to recover not only the premium for the annuity, but the interest earned thereon as well, the trustee is entitled to judgment in the amount of $102,626.
The debtor asserts two defenses. He argues first that the money in question is not “property of the Estate”. There is no requirement under § 544(b) or under the applicable Ohio law that the trustee may only avoid a transfer of property of the debtor’s estate (defined by § 541). Collier on Bankruptcy (15th ed.) 11544.03. This contention is without merit.
The debtor next, and more seriously, argues that this court’s Order Denying Objections to Claimed Exemption entered June 8, 1984 in this bankruptcy case bars the trustee’s present action. That order overruled the trustee’s objection to the debtor’s claimed exemption under Florida law of the annuity contract (then worth $98,477), which he subsequently withdrew in cash. That order is presently on appeal by the trustee, but it has not been stayed. Therefore, it is presumptively valid.
The Florida statute, § 222.14 exempts from the claims of creditors not only the proceeds of annuity contracts, but also the cash surrender value. Therefore, the debt- or argues, the cash surrender value of this annuity contract is exempt from the claims of creditors and, therefore, should also be exempt from the claim of the trustee.
The Ohio statute upon which the trustee travels under the power granted him by § 544(b) permits the recovery of the premium paid upon an exempt annuity, when paid in fraud of creditors, together with “interest thereon”. Obviously, the Ohio statute contemplates that the creditor can effect recovery from the annuity created with the fraudulent premium even though *772the annuity would be exempt from the claims of all other creditors. To accept the debtor’s argument in this instance would be to completely nullify the Ohio statute in every instance. I reject the debtor’s argument.
Although the debtor has not expressly argued that the trustee is estopped by his failure to assert this action before or at the time he challenged the debtor’s claimed exemption, I have considered that issue and am satisfied that there is no statutory or procedural requirement that a trustee assert a cause of action under § 544(b) or any other claim that a trustee may have in conjunction with his objections to the debtor’s claim of exemptions under B.R. 4003(b). It is perfectly understandable that the trustee would first contend, as he did, that the proceeds of this annuity are not exempt under Florida law under any circumstances, before he would consider and assert the cause of action asserted here. He is merely required to assert this cause of action within two years after his appointment. § 546(a)(1). He has done so.
As is required by B.R. 9021(a), a separate judgment will be entered in favor of the trustee and against the debtor in the amount of $102,626 as the premium with interest thereon paid by the debtor in fraud of creditors and, therefore, voidable and recoverable under § 544(b). The judgment shall further provide that the defendant Pauline Ebenger has acquired no right or interest in such proceeds superior to that of the plaintiff/trustee. Costs may be taxed on motion. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489938/ | MEMORANDUM OPINION AND ORDER
STEPHEN B. COLEMAN, Bankruptcy Judge.
This controversy arises from a public sale conducted by the Trustee pursuant to the Order of this Court dated April 3, 1984. The subjects of the sale were two parcels of real estate belonging to the Debtor, Thomas Rountree. One parcel of real estate, denominated at the sale as Parcel # 1, consisted of five acres of land upon which is situated a house. Parcel # 1 was encumbered by two liens, namely a first mortgage securing an indebtedness of approximately $118,000 to Phenix Federal Savings and Loan Association, and a second mortgage securing an indebtedness of approximately $33,000 to Farmers Home Administration. The other parcel of real estate, denominated as Parcel # 2 at the sale, consisted of approximately one hundred and fifty-nine acres of land contiguous to Parcel #1. Parcel # 2 was encumbered by three liens, namely, a first mortgage in favor of Federal Land Bank of New Orleans, which secured an indebtedness of approximately $61,000; a second mortgage securing the same indebtedness to Phenix Federal as that secured by Parcel # 1; and a third mortgage to Farmers Home securing the same indebtedness as that secured by Parcel # 1. The terms of the sale were that a first mortgagee would be allowed to bid up to the full amount of its mortgage debt, and, to the extent of the amount of such debt, would not be required to pay cash for the property, if successful. All other parties, including junior lienholders, would be required to pay cash in the full amount of their bid.
The Trustee proposed to offer Parcel # 1 first, Parcel # 2 second, and then to offer both parcels together as a package. Present at the sale were the representatives of all the lienholders described above. The sale transpired as follows: the Trustee first offered Parcel # 1, and received no bids. He then offered Parcel # 2, and received first a bid from Federal Land Bank in the amount of $61,335.66, and next a bid from Farmers Home in the amount of $65,-000. Farmers Home then increased its bid to $90,150, which bid was accepted. The Trustee then offered the combined parcels as one unit and receiving no bids next offered Parcel # 1 which was at that time purchased by Phenix Federal for $95,000.
Farmers Home has refused to pay to the Trustee the amount bid on Parcel # 2 and seeks to withdraw said bid on the grounds of mistake. As a basic premise, a purchaser at a judicial sale may obtain relief if at the time of the sale he was suffering from ignorance or mistake of any material fact through no fault attributable to him. 4B Collier On Bankruptcy, § 70 at p. 1202 (14th Ed.1978). Sturgiss v. Cor-*774bin, 141 F.l (4th Cir.1905). “A Court of Bankruptcy has summary power over a delinquent purchaser ...” I¡.B Collier on Bankruptcy, § 70 at 1202 n. 17 (14th Ed. 1978). Frazier v. Ash, 234 F.2d 320 (5th Cir.1956), cert. den. 352 U.S. 893, 77 S.Ct. 133, 1 L.Ed.2d 87. The representative of Farmers Home who made the bid has testified that his intent was to purchase Parcel #2 only if some equity could be realized from a resale of the property that could be applied toward the extinguishment of the debt to Farmers Home. Phenix Federal was left, after the sale of Parcel # 1, with a balance owing on its indebtedness in the amount of approximately $23,000, with remainder secured by second lien on Parcel # 2. If, therefore, the value of Parcel # 2 as contended by Farmers Home is no more than the sum bid by them, then it is quite obvious that the Farmers Home representative substantially failed to accomplish his stated goal. Farmers Home contends, however, that this rather ridiculous result occurred solely because of its representative’s belief, at the time of the sale, that: (1) Phenix Federal, having not bid on Parcel # 1 the first time it was offered, would not be allowed a second opportunity to bid on that parcel; (2) that since no bid was to be had on Parcel # 1, then Phenix Federal would be relegated to accepting Parcel # 1 in full satisfaction of its indebtedness; (3) therefore, Parcel # 2 would be free of any lien securing the indebtedness of Phenix Federal; and (4) consequently, all money paid for Parcel #2 over and above the indebtedness to Federal Land Bank, less some costs of the sale, would be returned to Farmers Home. His purpose in increasing his bid was apparently to guard against his being out-bid by someone seeking to purchase the combined parcels, and, was based on his understanding of federal regulations that require Farmers Home to resale property purchased at a public sale for the amount bid in at such sale.
No contention is made that the conclusions of the Farmers Home representative were logical, reasonable, or in any way justified under the circumstances. The contention is simply that they were mistaken and therefore this Court should allow withdrawal of the bid. A mistake upon which relief may be granted must be one shared by both parties to the transaction, that is, a mutual mistake. Relief may not be granted where the mistake is on the part of the bidder only and due to his inattention, willfullness, or carelessness. Schaap & Sons Drug Co. v. Rone, 19 F.2d 517 (8th Cir.1927); In Matter of Conestoga Pub. Co., 32 J. of Nat’l Ass’n of Ref. 90 (Ref.E.D.Pa.1957). The mistake of the Farmers Home representative was his alone, and therefore was not a mutual mistake, nor was it induced by any fault of the Trustee conducting the sale. Furthermore, the “mistake” of the Farmers Home representative was not a mistake of fact, but was a misunderstanding of the legal consequences of his actions; that is, he was ignorant of the legal effect of the facts known to him. Burns v. Hamilton’s Administrator, 33 Ala. 210 (1858). He was advised by the Court of the effect of the bid and given an opportunity to withdraw the bid. In fact, the sale was suspended to give him an opportunity to withdraw or amend his bid, which he elected not to do. On that ground, Farmers Home may not obtain relief from the imprudent actions of its representative.
Furthermore, a review of the events that occurred at the sale and the conversations that took place there indicate that the Court and the Trustee questioned the Farmers Home representative numerous times regarding the wisdom of his raising his own bid and gave him ample opportunity to return to his previous lower bid. Furthermore, the Trustee clearly pointed out to him that his raised bid was based on the mistaken assumption that Phenix Federal’s entire indebtedness would somehow be satisfied by the sale of Parcel # 1. The Farmers Home representative was by all accounts dealt with fairly and patiently and may not now, therefore, complain that his misunderstanding was anyone’s fault but his own.
Based on the foregoing, the sale of Parcel #2 to the Farmers Home Administra*775tion is CONFIRMED and Farmers Home Administration is hereby ORDERED to comply with the bid made by its representative in the amount of $90,150 by paying said sum to the Trustee herein within twenty (20). days of this Order. Failing compliance by Farmers Home Administration within the time provided, the Trustee is directed to resell the property which comprised Parcel # 2 at the first public sale. Any deficiency between the amount for which the property sells and the amount bid by Farmers Home Administration plus the costs of the sale and the costs of the previous sale of Parcel # 2 will be charged against Farmers Home Administration. 4B Collier on Bankruptcy, p. 1202, n. 17 and 18. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489940/ | FINDINGS OF FACT, CONCLUSIONS OF LAW, MEMORANDUM OPINION
ALEXANDER L. PASKAY, Chief Judge.
THIS IS an adversary proceeding which was originally commenced by Lia M. Ange-les upon a Complaint to Determine Dis-chargeability of Debt, to Recover a Preferential Transfer and to Avoid a Transfer and to Avoid a Transfer as Fraudulent. *885The original complaint was filed against Milton L. Wade, The Debtor, Lucy K. Wade, and Stephanie Cates-Harmon, as Trustee.
On December 5, 1983, this Court scheduled a hearing to consider several motions including a motion to consolidate, a motion to file an amended answer and application filed by the Defendant, Milton Wade, who sought to remove a certain civil action which was then pending in the Pinellas County Circuit Court. At the conclusion of the hearing, this Court entered an Order and dismissed the original complaint without prejudice and granted leave to file an amended complaint. The Court denied all other motions which were then pending, on the ground they were rendered moot.
On December 30, 1983, and within the time fixed by the Order of Dismissal, the Plaintiff filed an Amended Complaint in which she named only Milton L. Wade as defendant, who was and still is a debtor in a Chapter 7 liquidation case. The Amended Complaint consists of four counts and seeks a determination that the liability of the Defendant to the Plaintiff should be declared to be non-dischargeable by virtue of § 523(a)(6) in that, as alleged in the Complaint, the Defendant did willfully and maliciously injure the person of the Plaintiff. In each Count the Plaintiff sought not only a determination of non-discharge-ability, but also an award of compensatory and punitive damages as well fees and costs against the Defendant. All of the Counts in the Complaint basically reallege the operating facts of a claim of non-dis-chargeability and seek the identical relief set forth in Count I of the Amended Complaint.
In due course, the matter was set for a pre-trial conference at the conclusion of which this Court scheduled this case to be tried on May 16, 1984. On May 16, 1984, the Court issued an Amended Notice of Hearing and rescheduled the Final Eviden-tiary Hearing for August 30, 1984.
The claim of non-dischargeability is based on the allegation of the Plaintiff that the Defendant willfully and maliciously injured her person by beating and assaulting her, thereby causing grievous bodily injuries. In defense, the Defendant asserts that, although he might have attacked her, he attacked in self-defense and in fear of his life. At the commencement of the case it was stated by Counsel for the Plaintiff that they desire to proceed only to determine the character of the liability. Thereafter, the Plaintiff intends to remand the State Court case in order to complete the matter by trying the question of damages before a jury in the State Court. The Court indicated that it is willing to bifurcate the proceeding without ruling on the Motion to Remand or deciding whether to permit the issue of damages to be tried in the State Court in case the Plaintiff prevails on the question of dischargeability.
The facts relevant and germane to the claim of non-dischargeability as developed at the trial and as appear from the record can be briefly summarized as follows:
Lia M. Angeles, the Plaintiff, is a police officer who was at the time relevant and is still employed by the City of Belleair Bluffs, Florida. It appears from the record that on July 28, 1982, at a few minutes before 9:00 p.m., the Plaintiff was patrolling alone in her cruise car near the intersection of Indian Rocks Road and West Bay, which is located in Belleair Bluffs, Florida. As she approached the intersection, she observed a step-up van cross the center line and make an illegal right turn at the intersection which is controlled by a traffic signal. She proceeded to turn on the flashing lights, and directed the operator of the van, who later turned out to be the Defendant, to pull the van over to the side of the road. He did comply, and thereafter, she asked the Defendant to produce his driver’s license and registration. The driver produced the license, and exited from the van with a large dog which the defendant conceded is a German Shepard-Box mix. While they were standing in front of the police cruiser, the Plaintiff went to the cruiser to do a radio check and write a citation. However, because the Defendant followed her to the cruiser, she *886became apprehensive and radioed for assistance in order to obtain a witness to the preparation of the traffic citation.
Of course the evidence is in total conflict as to what happened first, but this Court is satisfied that the Defendant did, without justification, attack the Plaintiff. The Court is further satisfied that in order to prevent the Defendant from grabbing the officer’s service revolver and possible inflicting serious, if not fatal injuries, she fired the gun into the air. While the Defendant was dragging her, they fell to the ground. The Defendant struggled with the Plaintiff and with one hand attempted to get the gun while beating her with the other hand. A bystander who observed the incident, came to the rescue and attempted to pull the Defendant from the Plaintiff, however, because of the size and apparent intensity of the Defendant, the bystander was unsuccessful and it was only after the back-up officer arrived that they were able to restrain the Defendant. The Defendant was thereafter placed under arrest and taken to the police station at which time he was booked, searched and placed into custody.
Based on these facts, it is the contention of the Plaintiff that the Defendant is liable to her as a result of the assault, and since it was done willfully and maliciously, the liability should be declared to be non-dis-chargeable by virtue of § 523(a)(6) of the Bankruptcy Code.
A claim of non-dischargeability based on § 523(a)(6) of the Code excepts a debt from discharge if it is established with competent evidence that the Debtor did in fact willfully and maliciously injure the person or the property of another. While the threshold question is whether or not the Debtor is, in fact, liable to the Plaintiff at all, the evidence in this case is absolutely clear and this Court is satisfied that the Defendant is liable to the Plaintiff for whatever injuries she might have suffered as a result of the attack described earlier. The second question is whether or not this liability shall be declared to be non-dis-chargeable. Again, the evidence is clear and this Court is satisfied that the acts committed against the person of the Plaintiff were done willfully and intentionally with the requisite intent contemplated by § 523(a)(6) of the Code and therefore, the Plaintiff did carry the burden of proof with the competent evidence to establish a claim of non-dischargeability.
A separate final judgment will be entered in accordance with the foregoing. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489941/ | PRELIMINARY INJUNCTION TO DEBTOR
L. CHANDLER WATSON, Jr., Bankruptcy Judge.
Pursuant to the hearing held in the above-styled adversary proceeding before the bankruptcy judge, on December 6, 1984, after due notice to the debtor, Tateco, Inc., and to the defendant, Neal Manufacturing Company, Inc., and in accordance with the findings of fact and conclusions by the Court to be entered herein on the present day, the bankruptcy judge finds that the motion by the defendant for a preliminary injunction to the debtor is well taken and should be granted to the extent and on the terms and conditions herein stated; therefore, it is ORDERED by the Court as follows:
1. The debtor is restrained from and forbidden to proceed further with preparations for the holding of its proposed “trade show”, scheduled to be held at the Holiday Inn, Downtown, Atlanta, Georgia, December 9-12, 1984, or any part thereof or any similar activity and from the holding of said “trade show” or any part thereof or any similar activity, until after December 12, 1984; provided, however, that the debt- or may continue its preparations for and may hold said “trade show” if the debtor fully, effectively, and conscientiously adheres to and carries out the following requirements:
(a) The debtor shall do no act and shall not fail to prevent any act reasonably within its control which will interfere in any way with the defendant’s “annual seminar” to be held at the Marriott Hotel, Downtown, Atlanta, Georgia, December 9-12, 1984, as said “annual seminar” is now advertised and planned, but the holding of said “trade show” by the debtor shall not be deemed to be such interference;
(b) The debtor shall not display or permit to be displayed any sign, legend, or symbol which may be seen from the indoor or outdoor premises of said Marriott Hotel or the outdoor premises of said Holiday Inn and which may be construed as an advertisement or notification of the holding of the “trade show” of the debtor (by direct or indirect reference thereto) or as an invitation to attend same;
(c) At said Holiday Inn, the debtor shall display neat and readily-legible at a distance of twenty feet signs which clearly indicate (without other symbol or legend) that there is no connection between Tateco, Inc., and its “trade show” and Neal Manufacturing Company, Inc., and its “annual seminar,” with the fact that the latter is in progress across the street at the Marriott Hotel — with one of said signs to be prominently displayed in each of two well-frequented public areas and with one of said signs to be prominently displayed in each of two well-frequented areas where debtor maintains or holds its “trade show”;
*8952. The debtor shall cease immediately and is restrained and forbidden from any further advertisement of said “trade show” or solicitation of any entity for attendance at or participate in said “trade show,” except location notices or signs displayed within said Holiday Inn and not out of conformity with any other provisions of this order;
3. All persons, firms, corporations, or other entities having notice or knowledge of this injunction shall be bound by the terms hereof and are restrained and forbidden to act for, in concert with, or separately from the debtor in any act forbidden or contrary to this order;
4. Notwithstanding any other provision of this order, its effect is stayed until the defendant has given security in the sum of ten thousand dollars (United States legal tender) in accordance with the provisions of Federal Rule of Civil Procedure 65(c); and
5. A copy of this order and of said findings of fact and conclusions by the Court shall be furnished by the clerk of the Bankruptcy Court to the attorneys for the debtor, the attorneys for the defendant, said Holiday Inn, and to the United States trustee for this district, which shall be sufficient service and notice hereof.
FINDINGS OF FACT AND CONCLUSIONS CONCERNING REQUEST FOR PRELIMINARY INJUNCTION
Introduction—
The above-styled case is pending before this Court under Chapter 11, Title 11, United States Code. The above-styled adversary proceeding was commenced in this case by a complaint filed by the debtor, Tateeo, Inc., against the defendant, Neal Manufacturing Company, Inc., on December 3, 1984.
The complaint alleges that the debtor manufactures and sells certain machinery and equipment in national markets in competition with the defendant, that the debtor has developed a “trade show” to be conducted in Atlanta, Georgia, and has devoted a substantial amount of money to the advertising and preparations for the proposed “trade show,” and that on November 29,1984, the defendant informed the debtor by letter (made a part of the complaint) that the debtor’s proposed “trade show” would unfairly and unlawfully interfere with the defendant’s “annual seminar” to be held in Atlanta on December 9 through December 12, 1984, and would not be tolerated by the defendant. The complaint seeks to have the Court declare that the debtor’s “trade show” is a proper activity, that the defendant’s attempt to interfere with this activity is improper and illegal, and whether damages should be assessed against the defendant as a result of its conduct. The complaint further seeks to have the Court restrain the defendant generally from any acts or activities which would hamper competition by the debtor with the defendant and to grant general relief.
On December 5,1984, the defendant filed in this adversary proceeding an answer and counterclaim, as well as a motion for a preliminary injunction to forbid the debtor from holding or conducting its “trade show.” On December 5, 1984, the defendant also filed a motion for an expedited or emergency hearing upon its motion for an injunction, together with the affidavit of W. Harold Neal, president and chief executive officer of the defendant. Attached to the affidavit are copies of various fliers issued by the debtor or by the defendant, some of which advertise the debtor’s “trade show” or the defendant’s “seminar,” proposed to be held in Atlanta.
At the request of the defendant, the Court held a hearing upon the defendant’s motion for a preliminary injunction, commencing at 11:00 o’clock a.m. on December 6, 1984, which was concluded during the afternoon of the same day. Here follow the Court’s findings of fact and conclusions.
Findings of Fact—
After undertaking the hearing, it appeared to the Court that there might not be any substantial dispute as to the facts involved in this matter. That this was so *896became apparent after a statement of various facts by counsel for the defendant and references to the affidavit of W. Harold Neal. Counsel for the debtor conceded that the statements made by the defendant’s counsel and made in the affidavit were substantially correct, except for words which represented conclusions or were interpretive or gave coloration to the position of the defendant. Debtor’s counsel, however, objected to the reference in the affidavit to the contents of telephone calls stated to have been received by the defendant, concerning the debtor’s proposed “trade show,” and the Court sustained the objection. Counsel for the debt- or also made a statement concerning the expenses incurred by the debtor in advertising and preparing for its proposed “trade show,” and this statement is not disputed by the defendant. Only one exhibit was offered in evidence, being Debt- or’s Exhibit 1 (a copy of a trade paper containing an advertisement of the debtor's proposed “trade show”), which was received without objection.
From the statements of counsel made during the hearing, which amounted to an informal stipulation of facts and from the exhibit, the Court finds that the relevant facts are undisputed and are as follows:
1. The defendant manufactures and sells portable asphalt seal coating equipment and pavement crack fillers. The coating equipment sprays a viscous sealing fluid, such as coal-tar-pitch emulsions, containing suspended solid matter (such as sand), onto an unprotected asphalt surface. The debtor is a direct competitor with the defendant in this business. The defendant’s place of business is in Villa Rica, Georgia, while that of the debtor is at Anniston, Alabama.
2. About the year 1980, the defendant began to develop a sales-promotional program by which asphalt pavement contractors (who would be potential customers for its equipment), would be invited to attend a trade seminar and equipment showing or demonstration produced by the defendant. This program developed into the defendant’s “annual seminar,” and its seminar last year was held at the Downtown Marriott Hotel in Atlanta, Georgia, December 7-10, 1983. The debtor advertised and held an “open house” at its place of business in Anniston, Alabama, December 5-12, 1983, for its “friends and customers to drop by for refreshments and a chance to browse around and compare [its] equipment.” A flier advertising debtor’s “open house” included a detailed travel map for reaching debtor’s place of business from Interstate 20, which connects, among other places, Atlanta and Anniston.
3. Continuing its promotional program, the defendant has advertised and scheduled, at an estimated financial commitment of $50,000.00, an “annual seminar” to be held December 9-12, 1984, and, again, at the Downtown Marriott Hotel in Atlanta. Defendant has advised potential attendees that a $75.00 per person registration fee is required, that the last day to register was November 23,1984, that the Marriott Hotel was offering attendees a special rate of $66.00 per night, and that valuable prizes would be given away.
4. The debtor has advertised and proposes to hold a “trade show,” called a “1985 Live Operation Pavement Maintenance Expo.” The debtor proposes to hold its “trade show” at the Downtown Holiday Inn, located across the street from the Downtown Marriott Hotel, in Atlanta, December 9-12, 1984, with the hours being from 6:00 a.m. to midnight each day. In some of its advertising, debtor has stated that its 1984 “free Pavement Maintenance Expo” will be held at the “Holiday Inn in beautiful Downtown Atlanta (adjacent to the Marriott).” The debtor has incurred in excess of $9,000.00 in expenses in advertising and preparing for its “trade show.” The debtor has made arrangements with one of its customers and possible arrangements with two others to attend and take delivery there of equipment sold by the debtor.
5. In about the year 1977 defendant adopted the trade name of “Seal-Mor” for its line of equipment, and about the year *8971981, the debtor adopted the trade name of “Seal Mate” for the debtor’s line of equipment. After defendant adopted its trade name, it began to use in its advertising a cartoon-like character called “Sammy Seal Mor.” Later, debtor began to use in its advertising a cartoon-like character which it called “Sandy Seal-Mate.”
6. In some of debtor’s advertising in the year 1982, “Sandy Seal-Mate” displays a cartoon which depicts “Acme Co.” as getting rich while a customer (presumably) is plagued and distressed with machine “breakdowns.” In March of 1984, the debtor’s advertising material was similar except that “Acme Co.” had evolved to “Heel Mfg.” The 1984 advertising material of the debtor also contained a reference to “one of the on-the-road” Seminars “sponsored by another popular manufacturer.”
7. It is totally impractical for the debt- or, on December 7, 1984, to reschedule the location or the time frame for its proposed “trade show” and still have the potential for receiving any substantial business benefit from such show, and such a rescheduling probably would have a negative impact upon debtor’s business. The defendant, however, stands to suffer an irreparable and substantial injury if those attending its “annual seminar” are distracted or confused as to the true identities of the parties and their products, or are siphoned away from the seminar because of the past acts of the debtor or those which might reasonably be forecast by the prior acts of the debtor.
Conclusions by the Court—
Notwithstanding the several other issues raised by the litigation in this adversary proceeding, the sole issue before the Bankruptcy Court is whether to enjoin the debt- or from holding its proposed “trade show” and, if so, on what terms and conditions, if any.
The defendant takes its stand upon the ground of unfair trade practices or competition. Unfair competition can most often and most clearly be seen in the activities of a business entity which mislead the public into a belief that the products or services offered for sale by it are those of another business entity. This generally involves the use of confusingly-similar trade names or descriptions for products and services. Less often seen and less easily discerned are improper trade practices where one business entity attempts to reap the profit or a substantial portion of the profit from the activities of another business entity in producing and offering for sale a product or service. The defendant contends that the latter type of business practice is demonstrated by the ease before the Court, but it also makes reference to acts of the debt- or which it claims tend to confuse the public as to the separate identities of the equipment manufactured and sold by each.
As to the latter, the debtor has adopted a trade name for its equipment which bears a substantial similarity to that of the defendant, but it seems apparent that some similarity might be inevitable. The word “seal” is used in each trade name, but each company manufactures and sells sealing equipment. It would, however, have been possible for the debtor to have adopted a trade name using the word “seal” and yet easily distinguished from the trade name used by the defendant, i.e., “Seal-Best.” Also, the debtor has used a cartoon in some of its advertising with a name (Sandy Seal-Mate) similar to the one used by the defendant (Sammy Seal-Mor).
There are differences, however, for “Sandy” is depicted as a woman, while “Sammy” is understood by the bankruptcy judge to be a boy or man. Although the defendant complains strongly against the advertising cartoons of the debtor which, presumably, attempt to depict one of debt- or’s competitors as getting rich while its customer is victimized by machinery breakdowns, the part most strongly complained about is that, from the advertising in 1982 to the advertising in 1984, the debtor has changed the name of the competition from “Acme Co.” to “Heel Mfg.,” which obviously rhymes with “Neal” in the defendant’s name. While this change may or may not be legally impermissible — a question not *898now under consideration by the Court — it has the opposite effect of confusing the two companies and their products in the minds of potential customers.
Thus, it appears that the advertising activities of the debtor have been ambivalent — sometimes contributing to a possible confusion of the two companies and their products and sometimes making a sharp distinction between them. To the extent that the debtor has laid the groundwork for possible confusion of its identity and products with those of the defendant in the minds of potential customers of the defendant who will be attending the “annual seminar,” the injurious effect upon the defendant’s business could be substantial but difficult, if not impossible, to measure in monetary terms; therefore, the debtor should be required to take reasonable steps to undo any such confusion and to refrain from contributing any further confusion.
The debtor’s advertising activities and its trade-show promotional activities indicate a substantial insensitivity to the niceties of good relations with its business competitors, particularly in the area of attempting to convert to its benefit the ideas and sales-promotion activities of the defendant. To draw the line between legally permissible and legally impermissible activities in this area involves more discretion on the part of the Court than the application of legal principles. In a free society, one may wonder whether or not a business entity may not park its trailer alongside that of a competitor advertising trade information and refreshments and display its own sign that it offers the same and even, perhaps, better drinks. One must wonder, however, whether an equipment vendor may do this at a location where the potential customers have been lured there from far and wide by the activities and at the expense of the competitor.
Where the events must be considered by the Court at the eleventh hour, consideration of the harmful effect from the cancellation of the debtor’s “trade show” must be given considerable weight by the Court. Aside from the issue of confusion of the identities and products of the two parties, the bankruptcy judge concludes that the debtor has edged across the line of propriety and legality in scheduling its “trade show” at the time and location selected by it, if one goes further and considers what the debtor might reasonably be expected to do in addition to entice across the street those potential customers in attendance at the defendant’s “annual seminar.” Further, considering the adverse effect upon the debtor of a change in the time or location of the “trade show”, two days before its scheduled opening, the bankruptcy judge is of the opinion that its Order should not prohibit outright the holding of the debtor’s “trade show” but that the debtor should be permitted to hold the “trade show” only if it takes affirmative steps to avoid or to unravel confusion of its identity and products with those of the defendant in the minds of people attending its show and if it refrains from any significant interference with the defendant’s “annual seminar.” The bankruptcy judge has prepared and issued an Order in accordance with the foregoing.
A request by the defendant for haste in the issuance of said Order has been heeded by the Court, and the need for the preparation and filing of these findings of fact and conclusions by the Court do not permit time for the citation of legal authorities to which the Court has been directed by the parties and which have been considered by the Court. A bibliography of these authorities will be prepared by the law clerk of the bankruptcy judge and attached hereto as an addendum.
Addendum of Authorities
The following authorities were provided to, and considered by, the Court in reaching its decision in the case of Tateco, Inc. v. Neal Manufacturing Company, Inc., AP84-0605.
United States v. Topco Associates, Inc., 405 U.S. 596, 92 S.Ct. 1126, 31 L.Ed.2d 515 (1972);
*899International News Service v. The Associated Press, 248 U.S. 215, 39 S.Ct. 68, 63 L.Ed. 211 (1918);
Data Cash Systems, Inc. v. JS & A Group, Inc., 480 F.Supp. 1063 (N.D.Ill.1979);
Traditional Living, Inc. v. Energy Log Homes, Inc., 464 F.Supp. 1024 (N.D.Ala.1978);
Boston Shoe Shop v. McBroom Shoe Shop, 196 Ala. 262, 72 So. 102 (S.Ct.Ala.1916). | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489942/ | ORDER ON MOTION FOR REHEARING AND CLARIFICATION
ALEXANDER L. PASKAY, Chief Judge.
THIS IS a Chapter 11 case and the matter under consideration is a Motion for Rehearing and Clarification filed by Mandalay Shores Cooperative Housing Association, Inc., (Association), the Debtor, who seeks relief under Chapter 11 of the Bankruptcy Code. Inasmuch as this Motion came before the Court after a variety of motions and objections, some related, some not, it should be helpful to summarize the extremely complex and confusing procedural history of not only the case itself, but also the particular matter under consideration.
On July 13, 1983, the Association filed an amended objection to the claims filed by several members of the Association. The claims were challenged by the Association on the ground that the claimants did not hold a “claim” within the meaning of § 101(4) of the Bankruptcy Code. After a duly noticed hearing, this Court ruled that the claimants were in fact “creditors” within the meaning of the Code, thus entitled to assert their claims. Based on the foregoing, on February 2, 1984, this Court en*1018tered an order, overruled the objections and allowed the claims under challenge.
On February 21, 1984, the Association requested this Court to reconsider the order overruling its objection and allowing the claims. The Association’s Motion was based on § 502(j) of the Bankruptcy Code which permits reconsideration of a claim previously allowed.'
The Motion was based on the contention urged by the Association, that the funds held by the Association are not property of the estate and, therefore, not subject to the jurisdiction of this Court, therefore, this Court is without power to recognize and allow any claims to the monies held by the Association. The Motion was heard in due course and the Court having found the Motion to be without merit, on April 24, 1984, entered an Order and denied the Debtor’s Motion. The matter presently under consideration is a Motion for Rehearing filed by the Association.
As noted earlier, the original Motion was based on § 502(j) of the Bankruptcy Code. The present Motion for Rehearing, the Association contends again that the funds are not properties of the estate and not subject to the claims of parties claiming a right to share in the funds. This contention is based on § 541(c)(2) of the Bankruptcy Code which excludes from the estate properties which are subject to transfer restrictions enforceable under non-bankruptcy law. In support of this proposition the Association points out the undisputed fact that, in this instance, the IRS granted the Association tax exempt status pursuant to § 502(c) of the Internal Revenue Code based on the alleged charitable non-profit status claimed by the Association. Consequently, so claims the Association, the assets of the Association are subject to charitable trust provisions, enforceable under Florida law, 617.01(2) F.S., a statute which prohibits the distribution of the corpus to members but permits distribution of funds contributed only for charitable purposes. Therefore, the Debtor contends that the fund, the sole asset of the Debtor, is not property of the estate thus not subject to claims of the members of the association. In addition, the Association contends that it holds only a bare legal title to the fund as trustee of a charitable trust, therefore, by virtue of § 541(a) the fund is not property of the estate.
This approach advanced by the Association is not only novel, but is also highly ironic. For over three years the Association has used this Court to protect its sole asset, i.e., the fund in question claimed to be the property of the estate. Now, for the first time The Association contends that the fund is not to be property of the estate and not subject to the jurisdiction of this Court.
Moreover, it is clear from the record that the Association was not formed to serve a public charity and was never intended to be a charitable corporation. On the contrary, it is clear that it was formed as a non-profit corporation pursuant to Chapter 719 of the Florida Statutes for the sole purpose of acquiring an apartment complex known as Mandalay Shores, in order to assure the members of the Association a continued right to reside in the complex with an assurance of the low rent they have been paying. The fact that the IRS accorded the Debtor tax exempt status is of no consequence and is not determinative of the question as to whether or not the funds of estate. This being the case, the Court finds that neither §§ 541(d) nor 541(c)(2) are applicable and the funds held by the Association are property of the estate subject to claims of creditors. Accordingly, it is
ORDERED, ADJUDGED AND DECREED that the Motion for Rehearing and Clarification filed by the Debtor, Mandalay Shores Cooperative Housing Association, Inc., be, and the same is hereby denied. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489504/ | *61ORDER DENYING CONFIRMATION AND DISMISSING CASE
THOMAS C. BRITTON, Bankruptcy Judge.
A confirmation hearing was held on the debtor’s chapter 13 plan on January 12. The plan simply provides:
“On or before six months from the confirmation of bankruptcy, the debtor will have sold his horses and will pay all the creditors in full, plus the trustee’s fees.”
The debtor has been a jockey since 1969. He owns a half-interest, with another owner, in two race horses which he believes are worth $200,000. He reports secured and unsecured debts totalling $281,000. It is obvious, therefore, that he will not be able to comply with his plan unless some of the information he has given us is erroneous.
The bankruptcy is obviously prompted by the pending foreclosure of an IRS lien. The debtor, who reports variable income of approximately $18,000 last year and monthly expenses of almost double that rate of income, owns a $140,000 home (of which $51,000 is his present equity) and a Mercedes as well as his interest in the horses. I conclude that this bankruptcy filing is nothing more than a hasty effort to block the IRS collection proceedings. I find that the plan does not comply with the requirements of § 1325(a)(3), (5) and (6). Confirmation is denied.
Notice was given (C.P. No. 4) that dismissal or conversion would be considered if confirmation is denied. At the hearing the debtor’s counsel (who has been paid $865) did not appear, but instead sent an associate with a motion for continuance filed at the hearing advising that the debtor would not appear. The motion merely states:
“... that he will ill (sic) and could not appear at said Meeting and Confirmation.”
The debtor did not appear either at the creditors meeting nor at confirmation. No confirmation of the illness was offered. The motion was denied. The debtor won a race at Gulfstream that day.
I see no purpose to be achieved by permitting amendment of this plan. If the horses can be sold by the debtor to recover his interest in them, this would appear to be the best time to sell them and he could accomplish that purpose without the assistance of this court and without the benefit of the automatic stay. The debtor’s circumstances do not present the possibility of any income supported plan. It also appears unlikely that any possible plan could meet the requirement of § 1325(a)(4).
Accordingly, this case is dismissed and dismissal is with prejudice to the filing of any bankruptcy proceeding earlier than August 1,1983, other than an involuntary proceeding against the debtor. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489505/ | ORDER ON MOTION TO DISMISS AND MOTIONS FOR SUMMARY JUDGMENT
ALEXANDER L. PASKAY, Chief Judge.
THIS IS a Chapter 11 reorganization ease. The matters under consideration are a Motion to Dismiss the above-captioned adversary proceeding and Motions for Summary Judgment filed by both the Defendant, American Cyamid (American) and the Plaintiff, B.J. Thomas (the Debtor) who commenced this adversary proceeding.
In order to put the Motions under consideration in proper prospective, a brief recital of the procedural background of the matters in controversy would be helpful.
On March 3, 1981, the Debtor filed its Petition for Relief under Chapter 11 of the Bankruptcy Code. It became apparent *65from the beginning of the ease that the Debtor’s ability to survive and its chances to reorganize will depend in large measure on the successful and immediate prosecution of its claim against American. For this reason, on June 23, 1982 (5 days before the Supreme Court handed down its decision in Northern Pipeline Construction Co. v. Marathon Pipe Line Co., - U.S. -, 102 S.Ct. 2858, 73 L.Ed.2d 598 [1982]), the Debtor filed the present complaint against American.
The complaint sets forth four claims in four separate counts. While there is a slight and almost imperceptible difference between the claims set forth in the respective Counts it is evident that the Debtor’s claims against American are, as described by Justice Burger in his dissent in Marathon, a “traditional common law action, claims which related only peripherally to an adjudication of bankruptcy of federal law.” Marathon, supra.
It is not surprising that the Debtor’s right to utilize this Court to obtain an adjudication of its claims against American was immediately challenged by American who moved to dismiss the complaint for lack of subject matter jurisdiction and for lack of personal jurisdiction over American. In due course, the motion was heard, but based on the stay granted by the Supreme Court in its original decision of June 28,1982, this Court took the position that while the Supreme Court invalidated the jurisdictional grant of the Bankruptcy Reform Act of 1978, P.L. 95-598, 28 U.S.C. § 1471 et seq., the decision operated only prospectively and had no impact on any adversary proceedings which were pending prior to the date of the decision in Marathon or while the stay granted by the plurality was still in force and effect.
In light of the court’s ruling, the parties commenced extensive discovery in preparation for the trial. The discovery convinced both sides that the issues raised by the pleadings can be resolved as a matter of law in light of the fact that according to both the Plaintiff and the Defendant, there remain no genuine issues of material fact to be tried.
In light of this development, it was hoped that this controversy could be resolved prior to the expiration of the second deadline set by the Supreme Court, that is, prior to December 24, 1982. Unfortunately, this turned out not to be the case in spite of a concentrated effort by counsel for the respective parties and by the Court. This turn of events is even more unfortunate because this case was scheduled for trial on January 13, 1983, after the expiration of the last day of the stay. Therefore, the parties were obviously entitled to an immediate ruling on the motions under consideration, especially on the renewed motion to dismiss for lack of jurisdiction based on the holding of Marathon.
It appears that ordinarily this Court would have no choice but to grant the renewed motion to dismiss the complaint for lack of jurisdiction. However, in anticipation of failure of Congress to act or lack of any further stay by the Supreme Court, the Judges of this District promulgated an emergency resolution and some additional local rules on December 17, 1982. These Local Rules became operative on December 27, 1982, the first business day after the expiration of the stay granted by the Supreme Court. These Emergency Rules, now Local Rules of this District, provide, inter alia, in subclause (c)(1) “that all cases under Title 11 and all civil proceedings arising under Title 11 will be referred to the Bankruptcy Judges of this District.” In addition, subclause (3)(A) of these Rules define “related proceedings.” There is no question that the claims involved in this civil proceeding come within the definition of “related proceedings.” In subclause (B), the Rules provide that in a related proceeding, the Bankruptcy Judge may not enter a judgment or dispositive order, but shall submit findings, conclusions and a proposed judgment or order to the District Judge, unless the parties to the proceeding consent to the entry of the judgment or order of the Bankruptcy Judge.
Thus, it appears that by virtue of the Emergency Rules promulgated as a Local *66Rule, the matter is still properly before this Court and this Court has, at least, the power to hear and to consider the issues raised by the complaint and answer and the Motions under consideration although the Court may not enter a dispositive order or judgment without the parties’ consent. Neither the Debtor nor American indicated a willingness to accept a dispositive order from this Court. Without indicating or taking a position on the constitutionality of the Emergency Rule, a question yet to be resolved and which is subject to serious doubt (see statement of Jonathan C. Rose, Assistant Attorney General before the Subcommittee on Courts Committee on the Judiciary United States Senate, November 10, 1982), it is clear that this Court shall not consider sua sponte the validity vel non of the Emergency Rule. Accordingly, it is constrained to follow the mandate of the Local Rules and be governed by their provisions.
Accordingly, this leaves for consideration the findings and conclusions and a possible judgment to be prepared and submitted to the District Court, if required, under the Rule on the two Motions for Summary Judgment.
As noted earlier, the claim of the Debtor against American is based on a breach of an alleged oral contract. This is the claim set forth in Count I of the complaint. The claims set forth in Counts II, III and IV do not specifically rely on oral contracts, but are based on the contention that the Debtor was terminated without reasonable notice. It is American’s contention that this oral contract is not enforceable simply because it is barred by the Statute of Frauds because it was not to be performed within one year. It is without dispute and admitted that the Debtor was to clear land for American in connection with American’s phosphate mining operation, that the agreement was of indefinite duration and that the Debtor was to be paid as the work was performed. In relying on the Statute of Frauds, American points out that it was contemplated by both parties that the work would continue for at least four to five years; thus, it was not the type of contract which was to be performed within one year. In response to this affirmative defense asserted by American, the Debtor urges that this contract could have been performed within one year and that the intent of the parties as to the duration of the contract is irrelevant. Accordingly, it would not come within the statute. In addition, the Debtor contends that this was an executory contract and the Statute of Frauds does not apply to executory contracts. Finally, the Debtor urges that partial performance removes the contract from the reach of the Statute of Frauds.
It is clear that the applicability, vel non, of the Statute of Frauds would ordinarily be dispositive of the Debtor’s right of recovery.
It might appear at first blush that because both American and the Debtor filed Motions for Summary Judgment, denial of one would automatically compel granting the other. However, this is not necessarily the case, especially in this instance where, as in this case, the true nature of the relationship of the parties is not revealed by the record, and such is essential to the resolution of the entire controversy. Therefore, this Court is of the opinion that it would not be appropriate to make a final disposition of the claims asserted by the Debtor against American as a matter of law and that an evidentiary hearing is necessary for the proper disposition of the issues involved.
In accordance with the foregoing, it is
ORDERED, ADJUDGED AND DECREED that the Motion to Dismiss for lack of jurisdiction based on Northern Pipeline Construction Co. v. Marathon Pipe Line Co., - U.S. -, 102 S.Ct. 2858, 73 L.Ed.2d 598 (1982) be, and the same hereby is, denied. It is further
ORDERED, ADJUDGED AND DECREED that the Motions for Summary Judgment filed by both the Debtor and American be, and the same hereby are, denied. It is further
ORDERED, ADJUDGED AND DECREED that the final evidentiary hearing *67in this adversary proceeding be, and the same hereby is, scheduled to be heard by the undersigned on April 5, 6 & 7th at 9:00 a.m. in Room 703, 700 Twiggs St., Tampa, Florida. It is further
ORDERED, ADJUDGED AND DECREED that the proceeding is deemed to be a related civil proceeding within the meaning of the definition of subclause (C) of the Emergency Local Rule effective as of December 27, 1982 and as such is governed by subclause (B) of the same. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489506/ | ORDER ON REHEARING
THOMAS C. BRITTON, Bankruptcy Judge.
Confirmation was denied on this debtor’s chapter 13 plan by an order entered December 20 (C.P. No. 6), which also dismissed this case. The debtor’s motion for rehearing (C.P. No. 8) was heard on January 10.
*68As the Order of December 20 reflects, confirmation was denied on four independent grounds.
The debtor has persuaded me that, with respect to the first two grounds the debtor could remedy the deficiencies in the plan he originally presented for confirmation which was the subject of the order of December 20. Although that plan was plainly deficient, if these were the only defects in the plan, I would permit amendment.
With respect to the fourth ground, the debtor’s proposal to discharge four student loans which would not be dischargea-ble in any other bankruptcy proceeding, the debtor has persuaded me that he has the right to discharge these loans in this manner. Section 523(a), upon which this portion of the order of December 20 was based, becomes applicable only if a chapter 13 debtor fails to perform his plan. That event cannot now be assumed.
The third and remaining basis for the order of December 20 was that it did not comply with § 1325(a)(5) with respect to the debtor’s only secured debt. That section requires either that the creditor accept the plan (which it did not in this case) or that the debtor surrender the property securing the claim to the creditor (which this debtor is unwilling to do) or that the plan provide that the holder of the claim retain the lien securing its claim (which this plan did) and:
“... the value, as of the effective date of the plan, of property to be distributed under the plan on account of such claim is not less than the allowed amount of such claim.”
The debtor’s plan does not comply with the quoted requirement nor has the debtor ever proposed to meet this requirement. The debtor concedes that this secured claim must be allowed at least in the amount of $3,300. The plan proposes to pay this creditor $100 a month outside the plan on account of this secured claim. It proposes no distribution under the plan on account of the secured claim.
For the foregoing reason, this plan cannot be confirmed under § 1325(a)(5).
Furthermore, as was also said in the order of December 20, the plan asks that over half ($3,815) of the sum owed this secured creditor ($7,115) be treated as unsecured and that this creditor be paid 28% of that sum over the next three years. Section 1325(a)(4) requires that:
“... the value, as of the effective date of the plan, of property to be distributed under the plan on account of each allowed unsecured claim is not less than the amount that would be paid on such claim if the estate of the debtor were liquidated under chapter 7 of this title on such date.”
If the estate of this debtor were liquidated under chapter 7 at this time, this creditor would either receive the security pledged to it, an automobile, or it would receive the monthly payments of $187, which this debtor contracted to pay that creditor. In either event, that creditor would receive more under a chapter 7 liquidation now than it would receive under this plan.
For the additional reason, therefore, that this plan does not comply with § 1325(a)(4), confirmation must be denied and the debtor has proposed no amendment to satisfy this requirement.
For each of the foregoing two reasons, (which were stated together as the third ground for denial of confirmation in the order of December 20), confirmation is denied and no purpose would be served in allowing further time to consider possible amendment of this case which has now been pending nearly three months, during which the debtor has enjoyed the benefit of the statutory stay provided by § 362(a). | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489509/ | SIDNEY M. WEAVER, Bankruptcy Judge.
The Trustee in the above captioned case has objected to the allowance of claims filed by Joseph M. Feldman and Hyman S. Glass. Each claim is in the amount of $342,000.00. At trial, however, both claimants agreed that the claims are duplicative of each other, and that the total amount due both claimants does not exceed $342,000.00.
In support of their claims, claimants have attached to their Proofs of Claim an Agreement dated March 16, 1971, which purports to evidence a joint venture “by and between A.W. SLOBUSKY, JOHN W. BECK, HYMAN S. GLASS and JOSEPH M. FELDMAN.” The apparent purpose of the venture was to purchase a controlling interest in the University City Bank of Gains-ville, Florida. This interest was to be purchased with the proceeds of a $900,000.00 loan from the Depositors Trust Company of Augusta, Maine to Mr. Feldman. The purpose of the Agreement was to delineate the respective interests and liabilities of the joint venturers. Paragraph 6 of the Agreement provided that the “parties hereto agree that their interests and obligations with regard to this transaction are in the nature of a joint venture and are respectively equal in all respects.” Notwithstanding that provision, only Mr. Feldman executed the $900,000.00 promissory note in favor of Depositors Trust Company. In addition, although there is a signature line for each joint venturer, only the Debtor’s signature appears on the Agreement attached to the proofs of claim filed.
For reasons unrelated to the resolution of these objections, Mr. Feldman defaulted on the note to Depositors Trust. Thereafter, Depositors Trust sued not only Mr. Feld-man, but also Mr. Glass and the Debtor. (Mr. Beck had previously sold his interest in the joint venture to the other joint ventur-ers). In its Complaint, Depositors Trust alleged that the Debtor’s liability stemmed from his execution of the joint venture Agreement, upon which it allegedly relied in lending the $900,000.00 to Mr. Feldman. The Debtor filed his voluntary bankruptcy *101petition prior to the conclusion of that lawsuit, and Messrs. Feldman and Glass eventually settled with the Depositors Trust Company. The instant claim for $342,-000.00 is based on the Debtor’s alleged one-third liability to Messrs. Feldman and Glass arising from the Agreement.
At trial, the Debtor testified that he never intended to become involved in this joint venture, and that he so informed Mr. Feld-man prior to the date of the Agreement. He contends that it was not uncommon.for him to execute documents placed in front of him by Mr. Feldman, his friend and frequent business partner at that time, without carefully reviewing them (although in hindsight he admits that it was not the most prudent thing to do). In this case, however, he realized what he signed shortly after having signed it. He again informed Mr. Feldman that he was not taking part in this venture, and questioned the latter as to why he was being asked to sign. According to the Debtor, Mr. Feldman then acknowledged the Debtor’s refusal to participate in the venture; he wrote the words “Void and Incomplete” on the last page of the Agreement, and then signed his name below those words. This second version of the joint venture Agreement was produced by the Trustee.
Although Mr. Feldman admitted that he did write those words, he contends that he did so in order to evidence the fact that Mr. Beck was no longer part of the joint venture.
The Court having reviewed the documentary evidence and heard the testimony presented, observed the candor and demeanor of the witnesses, considered the pleadings and arguments of counsel, and being otherwise fully advised in the premises, does hereby find and conclude the following:
First, the “unvoided” Agreement submitted by the claimants in support of their claims was not actually executed by them, and, therefore, was not a binding agreement between the parties. See Rork v. Las Olas Company, 156 Fla. 510, 23 So.2d 839 (1945); Biber v. City of Miami, 82 So.2d 747 (Fla.1955).
Second, even if, as a matter of law, the Debtor could have been liable on the Agreement without Messrs. Feldman and Glass having signed it, the Court finds convincing the Debtor’s testimony that he never intended to be part of the joint venture, and that Mr. Feldman voided the entire Agreement after having been reminded of this by the Debtor. The Court recognizes the rule of construction that ambiguous language in a contract or agreement must be strictly construed against the party drafting it. Hurt v. Leatherby Insurance Company, 380 So.2d 432 (Fla.1980). Notwithstanding that principle, the Court finds implausible Mr. Feldman’s explanation for having written those words, especially since his alleged intention could have been more clearly expressed simply by striking Mr. Beck’s name from the Agreement. Moreover, it is curious that neither claimant attached to their Proofs of Claim a copy of the voided Agreement.
In conclusion with the findings herein stated above, the Court hereby sustains the objections of the Trustee to the claims filed by Joseph M. Feldman and Hyman S. Glass. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489511/ | FINDINGS OF FACT, CONCLUSIONS OF LAW AND MEMORANDUM' OPINION
ALEXANDER L. PASKAY, Chief Judge.
THIS IS a Chapter 11 reorganization case and the immediate matters under consideration are (1) a Complaint on Account Receivable filed by Fashion Mills of Florida, Inc. (Debtor) against Geromes, Inc. of Florida (Geromes, Inc.) and Michael Gerome; and (2), a counterclaim for breach of oral contract. The Debtor seeks recovery of $2,925.80, an amount allegedly due and owing as the result of a failure by either Geromes, Inc. or Michael Gerome to pay the balance on a promissory note signed by Michael Gerome in his individual capacity. Geromes, Inc. seeks by way of counterclaim, damages in excess of $5,000 for breach of an oral contract whereby the Debtor allegedly agreed to supply a specific line of floor covering to Geromes, Inc. and to accept a return on items not sold by Geromes, Inc.
This is a civil proceeding related to a case arising under Title 11 and the matters before the Court constitute a “related proceeding,” which under the Local Rule is defined as “a civil proceeding that, in the absence of a petition in bankruptcy, could have been brought in state court.” Northern Pipeline Construction Co. v. Marathon Pipe Line Co., - U.S. -, 102 S.Ct. 2858, 73 L.Ed.2d 598 (1982); L.R. (d)(3)(A). Thus, in accordance with Local Rule (d)(3)(B), the parties to the proceeding consented to the entry of a final judgment by the Bankruptcy Judge, thereby eliminating the need to submit findings, conclusions and a proposed judgment- to the District Judge. Accordingly, this matter is properly before this Court for resolution.
The Court having received evidence, heard testimony of witnesses and being otherwise duly advised in the premises, finds the following facts:
Late in 1980, the Debtor, a Tampa wholesale carpet distributor, commenced a business relationship with Geromes, Inc., a floor covering and carpet retailer whose principal place of business is in Sarasota, Florida. Due to an expansion of the Sarasota business into a new and larger facility, Michael Gerome and Jerry Goldstein, President of the Debtor met in April 1980 to discuss Geromes need for an increased inventory. As a result, they reached an oral agreement whereby the Debtor was to deliver certain carpets and floor coverings to the warehouse of Geromes, Inc. During the course of the negotiations, Mr. Goldstein and Michael Gerome discussed payment arrangements and Michael Gerome did not object to personally guaranteeing payment for the merchandise. The amount of indebtedness resulting from this transaction totaled $12,-025.80.
The record reveals that although financial arrangements were discussed at the April meeting and the inventory was subsequently delivered to Geromes, no papers were signed until May 20, 1981 when Michael Gerome signed a promissory note in the amount of $12,025.80. The Note called for six equal payments of $2,004.30 each to commence on June 20, 1981 and terminate on November 11, 1981. Michael Gerome at no time objected to signing a promissory note in his individual capacity.
Although the payment schedule as prescribed on the face of the note was not followed, it is undisputed that Geromes made continuous monthly payments in varying amounts which were accepted by the Debtor. Apparently concerned about the arrearages, however, Mr. Goldstein met with Michael Gerome in Sarasota in November. On this occasion, Mr. Goldstein agreed to take back four rolls of carpet *114which Michael Gerome had been unable to sell. It was further agreed that the Debtor would credit Geromes’ account in the amount of $1,800 for the returned carpet and Geromes would tender a payment of $1,000. Although the check was written by Geromes and delivered to the Debtor, the carpet was never retrieved by the Debtor and Geromes’ account was not credited.
Despite the Debtor’s failure to pick up the carpet and credit Geromes’ account, Geromes continued to make payments to the Debtor until March of 1982. Although a March payment in the amount of $400 was mailed to the Debtor, Michael Gerome directed a stop payment upon learning that the Debtor had filed a Chapter 11 Petition.
It is the Debtor’s contention that Ger-omes remains indebted to the Debtor in the amount of $2,925.80 or the total amount remaining on the note. Michael Geromes, on the other hand, contends that as a result of Goldstein’s agreement to take back the unsold carpet and credit Geromes account, the true amount owing is $1,125.80.
The Court considered the evidence and finds that the weight of the evidence supports a finding of the existence of a second oral agreement; that is, an agreement by the Debtor to credit Geromes account with $1,800, while retrieving the unsold carpet. Consequently, the true indebtedness, upon return of the carpet now held in Geromes’ warehouse, is $1,125.80.
In addition, there was no evidence presented at trial to support or dispute the counterclaims filed by Geromes, Inc. and, therefore, the counterclaim must be dismissed.
A separate final judgment will be entered in accordance with the foregoing. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489512/ | FINDINGS OF FACT, CONCLUSIONS OF LAW AND MEMORANDUM OPINION
ALEXANDER L. PASKAY, Chief Judge.
THIS IS a Chapter 7 case and the matter under consideration is a proceeding arising under Title 11, U.S.C. The jurisdiction of this Court is based on Emergency Local Rule (c)(1) and (d)(2). This adversary proceeding came on for final evidentiary hearing to determine the dischargeability, vel non, of the debt owed to First Bank of Pinellas County (the Bank) by Thomas Patrick Nacol, the Debtor in the above-styled Chapter 7 case. The Bank seeks an exception to discharge of the debt owed it by the Debtor pursuant to 11 U.S.C. § 523(a)(2)(B) which excepts from general discharge money obtained by use of a written statement that is materially false respecting the Debt- or’s financial condition that the Debtor caused to be made with intent to deceive and upon which the creditor reasonably relied.
The record as established at the final evidentiary hearing reveals the following:
Prior to August 8, 1980, the Defendant applied for a $20,000 loan at the Plaintiff Bank and furnished a financial statement signed by the Defendant and dated August 7, 1980. The Defendant testified that he prepared the statement. The statement was false in several respects, but it was most materially false in the Defendant’s claim of $550,000 partial interest in real estate equities which was, in fact, nothing more than an optimistic expectation of income from gas reserves. On or about August 8, 1980, the Bank approved the loan and the Defendant executed a promissory note in favor of the Bank for $20,000. The loan was renewed by subsequent promissory notes dated February 4, 1981, May 5, 1981, and June 4, 1981. No new financial statement was requested by the Bank prior to any renewal. It is the final renewal note dated June 4, 1981 which is the subject of this controversy. When the Defendant filed his Petition for Relief Under Chapter 7 of the Bankruptcy Code, he listed his debt to First Bank. The Plaintiff Bank now seeks to except this debt from the Defendant’s general discharge pursuant to 11 U.S.C. § 523(a)(2)(B) which provides:
(a) A discharge under section 727 ... of this title does not discharge an individual debtor from any debt—
(2) for obtaining money ... by—
(B) use of a statement in writing—
(i) that is materially false;
(ii) respecting the debtor’s or an insider’s financial condition;
(iii) on which the creditor to whom the debtor is liable for obtaining such money .. . reasonably relied; and
(iv) that the debtor caused to be made or published with intent to deceive.
There was no doubt that the Debtor’s financial statement was “materially false” within the meaning of 11 U.S.C. § 523(a)(2)(B)(i). The Debtor is an experienced businessman who should know the purpose and significance of a financial statement as it relates to the loan application process. However, for Plaintiff to *118meet its burden of proof under this Section, it must not only prove that the Debtor made a materially false financial statement with the intent to deceive the creditor, the creditor must also establish that he reasonably relied on the false statement in approving the loan.
In determining whether or not the Plaintiff has established reasonable reliance with the required degree of proof, this Court may look to case law construing § 17(a)(2) of the now repealed Bankruptcy Act because 11 U.S.C. § 523(a)(2) continues most of the substance of former § 17(a)(2). 3 Collier on Bankruptcy, ¶ 523.08 (15th ed. 1982). In the case of The Exchange Bank of Westshore v. Gibbs (In re Gibbs), 9 C.B.C. 608 (Bankr.M.D.Fla.1976), this Court construing § 17(a)(2) of the Bankruptcy Act, determined that the Plaintiff failed to prove the element of reliance where the Plaintiff Bank, albeit relying on the false financial statement when originally loaning money to the Debtor, renewed the loan without obtaining an updated financial statement and where the renewed loan was the debt the Plaintiff sought to have excepted from general discharge. Id. at 613.
In the present case, the debt in question was renewed three times. The Bank never requested an updated financial statement, but repeatedly and routinely renewed the note as a matter of course. Accordingly, this Court is satisfied that the Plaintiff failed to establish that it reasonably relied on a false financial statement when executing the note dated June 4, 1981, and, absent the essential element of reasonable reliance, the evidence presented does not justify granting an exception to discharge.
The Debtor also asserted an eleventh hour defense of usury. However, since the debt has been determined to be dischargea-ble, the Court need not address the usury issue.
A separate final judgment will be entered in accordance with the foregoing. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489513/ | MEMORANDUM DECISION
, SIDNEY M. WEAVER, Bankruptcy Judge.
Plaintiff seeks recovery of a preferential transfer which purportedly was effected through payments received by the Defendant during the 90-day period preceding December 17, 1981, the date upon which the petition was filed herein. The Defendant has failed to answer or otherwise respond to the Complaint filed herein, but counsel for the Trustee advised this Court that the Defendant, through conversations with said counsel for Plaintiff, has acknowledged the preferential nature of the payments received, except to the extent of $245.00 for which there was a contemporaneous exchange of consideration within the 90-day period preceding the filing of the Chapter 7 Petition in this matter. Accordingly, the Defendant, in effect, has acknowledged its liability to the Plaintiff to the extent of $2,255.00. The Trustee, by and through his counsel, has acknowledged that $245.00 of the $2,500.00 paid to the Defendant by the Debtor represents a contemporaneous exchange effected in the ordinary course of the Debtor’s business.
Based upon the foregoing, this Court holds that the Defendant is indebted to the Plaintiff in the sum of $2,255.00. As is required by B.R. 921(a), a separate judg*121ment will be entered in favor of the Plaintiff in the sum of $2,255.00. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489514/ | OPINION
WILLIAM A. KING, Jr., Bankruptcy Judge.
This case comes before the Court on a complaint for relief from the automatic stay imposed by § 362 of the Bankruptcy Code. After reviewing the evidence produced at trial, the Court concludes that relief from the stay must be denied. An appropriate Order will be entered.1
On August 16, 1976, the plaintiff recorded a mortgage against the debtors’ property in the gross amount of $392,112.2 The property securing the mortgage is a parcel of approximately two (2) acres along Route 202 in Concord Township, Pennsylvania. A restaurant known as Lionti’s Villa was located on the property at the time the loan was made. Subsequently, the restaurant was destroyed by fire.
As a result of the loss, First Mortgage Company received a payment of $180,000 *127from the insurance carrier in April of 1978.3 The debtors have commenced rebuilding a restaurant-nightclub on the site. In an attempt to avoid foreclosure and reorganize their finances, a Chapter 11 petition was filed on April 16,1982. The mortgage company thereupon filed a complaint for relief from the stay and trial was commenced on July 13, 1982. After hearing a substantial amount of testimony, the Court continued the trial until August 12, 1982. On that date, the testimony was concluded.
The plaintiff asserts that the debtors have not provided the mortgage interest with adequate protection. The plaintiff further alleges that the debtors’ retain no equity in the property. Therefore, it is argued, the Court must grant relief from the stay. See 11 U.S.C. § 362(d).
The evidence, however, does not support this conclusion. The parties stipulated that the amount due under the note was $331,-795 as of August 12, 1982.4 Furthermore, there are late charges of $5,154.90 and un-billed attorney’s fees to be added to this total.
The value of the property is a hotly contested issue. Both plaintiff and defendants placed into evidence testimony from expert real estate appraisers. The values which the witnesses placed upon the property, however, are greatly disparate. The defendants’ appraiser estimated the property to be worth $450,000.5 The plaintiff’s appraiser, on the other hand, found the property to be worth only $213,400.6 After due consideration, the Court finds the plaintiff’s appraiser to be more credible and, therefore, the Court finds the value of the property to be approximately $215,000.
Based upon the foregoing figures, it would seem that relief should be granted. The defendants, however, argued that the actual obligation to the mortgage company must be reduced by the amount paid by the insurance company. Subtracting $180,000 from the approximately $350,000 due and owing to the plaintiff, leaves only a round figure of $170,000 to be paid on the mortgage.
No evidence was introduced concerning the existence of other liens on the property. Therefore, the Court finds that an equity cushion of approximately $45,000 is present to protect the plaintiff. In re Schlichter, 22 B.R. 666 (Bkrtcy.E.D.Pa.1982). In addition, the plaintiff holds second mortgages on two (2) residential homes in Delaware. Although the testimony as to the value of these properties was uncertain, the Court finds that they comprise additional adequate protection for the plaintiff’s interest. 11 U.S.C. § 361(2).
In conclusion, the Court finds that the interest of the mortgagee is adequately protected by the existence of an equity cushion of $45,000 and by the second mortgages on the Delaware properties. An Order will be entered denying the requested relief.
The Court, however, is not unaware of the mortgagee’s concerns. It is uncontested that the mortgagors are not making the regular payments required under the mortgage instrument. The Court will, therefore, hold a hearing in approximately ninety (90) days to review the matter and determine if the mortgagee’s secured position has been diminished.
. This Opinion constitutes Findings of Fact and Conclusions of Law as required by Bankruptcy Rule 752 of the Rules of Bankruptcy Procedure.
. Notes of Testimony, p. 25.
. Notes of Testimony, p. 27.
. Notes of Testimony, p. 56.
. Notes of Testimony, p. 81.
. Notes of Testimony, p. 13. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489517/ | MEMORANDUM OPINION
HENRY L. HESS, Jr., Bankruptcy Judge.
On October 22, 1982 the plaintiff filed herein his complaint for relief from automatic stay. In response the debtor filed a motion to dismiss. A hearing was held on December 6, 1982. Plaintiff appeared personally and the defendant appeared in person and by his attorney Donald H. Hartvig.
This chapter 13 case was filed on November 11,1981. At that time there was pending in the Circuit Court of the State of Oregon for Multnomah County a case filed by the plaintiff herein naming Jack C. Barnes as the defendant. The chapter 13 statement filed by the debtor, who is the defendant herein, did not list the plaintiff as a creditor. On April 19, 1982, an order confirming the debtor’s plan was entered in this case. On August 2, 1982 an order was entered in the state court action permitting the plaintiff to change the name of the defendant from Jack C. Barnes to Tom Lengyel, the debtor herein. The plaintiff then caused a summons to be served on the debtor herein. The plaintiff on or about August 28, 1982 learned of the pendency of the chapter 13 case by receipt of a letter of that date addressed to him by the attorney for the debtor. The time for filing of proofs of claim in this case expired September 18, 1982. The plaintiff’s complaint for relief from the automatic stay was filed on October 22, 1982. No proof of claim has been filed by the plaintiff.
The plaintiff’s complaint alleges facts which, if sustained by evidence, might establish grounds for a judgment of the bankruptcy court that such damages as may have been sustained by the plaintiff would represent a debt which would not be dis-chargeable under 11 U.S.C. § 523(a)(2)(A).
11 U.S.C. § 1327(a) provides that the provisions of a confirmed plan bind the debtor and each creditor, whether or not the claim of such creditor is provided for by the plan, and whether or not such creditor has objected to, has accepted, or has rejected the plan.
The confirmed plan herein provides that unsecured creditors shall be paid V-k%. Any debt owing to the plaintiff would be an unsecured debt. Had the plaintiff filed a proof of claim herein prior to the expiration of the time for filing of claims he could have shared in the payments to be made to unsecured creditors.
11 U.S.C. § 1328 provides for two types of discharges in a chapter 13 case. Subsection (a) provides that after the debtor has made all of the payments provided in the plan, the court shall enter a discharge which will discharge all debts except those debts provided under § 1322(b)(5) [debts upon which the last payment is due after the final payment under the plan.is due] and those debts of the kind specified in § 523(a)(5) [debts for alimony or support of a spouse or child]. Subsection (b) provides for entry of a discharge where the debtor has not completed payments under the plan. This latter type of discharge is often referred to as a hardship discharge. Subsec*241tion (c) provides that a discharge under subsection (b) discharges the debtor of all debts except any debt provided under § 1322(b)(5) or of a kind specified in § 523(a). Thus while a discharge under subsection (a) would discharge a debt of the kind provided for under § 523(a)(2)(A), a discharge under subsection (b) would not.
It would result in a waste of judicial effort and unnecessary expense to the debt- or for this court to permit the action in the state court to proceed if, in the future, the debtor completes the payments under his plan and receives a discharge under § 1328(a) since any judgment rendered in the state court action against the debtor would be discharged. As a result the plaintiffs complaint for relief from stay comes too soon. If the debtor fails to complete the payments under his plan and seeks a hardship discharge, the allegations of plaintiff’s complaint would then become relevant under § 523(a)(2)(A).
An order will be entered denying relief from the automatic stay provided in 11 U.S.C. § 362 at this time and dismissing the plaintiffs complaint. If the debtor later requests the entry of a discharge under § 1328(b), the plaintiff may renew his request for relief by the filing of a motion herein. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489518/ | MEMORANDUM AND ORDER
KEITH M. LUNDIN, Bankruptcy Judge.
This matter is before the court on the debtor Marlene Rhoten’s motion to amend schedule B-4 to reallocate her claim of exemptions. For the reasons stated below, the debtor’s motion is granted.
The debtors filed a joint petition under Chapter 7 on June 21, 1982. The debtors’ meeting of creditors was held on July 26, 1982. On July 29, 1982, Marlene Rhoten filed her first application to amend schedule B^i to exempt a one-half interest in a 1979 Cadillac. The $3,500 exemption was claimed pursuant to §§ 522(d)(2), (1) and 522(d)(2), (5) of the Bankruptcy Code. The trustee and a creditor, Third National Bank, filed objections to the amendment. A hearing on the objections was held on September 14, 1982, at which time the court determined that the title of the automobile was held exclusively in the name of Charles Rhoten. The court rejected Marlene Rho-ten’s claimed exemption in the automobile. The debtor filed a second application to amend her exemption schedules on September 29, 1982 seeking to reallocate to other property the lost $3,500 exemption in the automobile.
This matter is controlled by this court’s recent decision in In re Williams, 26 B.R. 741 (Bkrtcy.M.D.Tenn.1982). In Williams the court emphasized that the order and notice issued for each debtor’s meeting of creditors requires the debtor to file any amendment to the exemption schedule within 15 days after the meeting of creditors. The debtor’s second motion to amend is clearly outside the 15 day deadline. We have noted, however, that the 15 day limitation is not absolute:
The debtor in this case could make a motion to extend this time pursuant to Rule 906(b)(2) of the Federal Rules of Bankruptcy Procedure ... Rule 906(b)(2) *495permits the court to grant such an extension after the deadline for filing has passed if the requesting party’s failure to timely file was the result of ‘excusable neglect.’ ...
The decision whether to allow an extension of time under Rule 906(b)(2) is a matter vested within the sound discretion of the court ... Such an extension should only be granted in exceptional circumstances. The court must consider all relevant criteria in determining whether to grant an extension of time, including (1) the length of the delay in requesting an amendment, (2) any actual prejudice to the trustee or creditors caused by the debtor’s failure to timely claim an exemption, (3) the debtor’s perception of the claimed exemption at the time of the filing of his original schedules, (4) if the debtor was represented by counsel, whether an attorney experienced in the practice of bankruptcy law would have claimed the exemption at the time of filing of the petition, (5) the detrimental effect on the debtor’s fresh start if the amendment is disallowed and (6) whether any party in interest raises an objection to the debtor’s motion for an extension of time ... The debtor bears the ultimate burden of proof to demonstrate that the circumstances merit an extension of the 15 day time period, (citations and footnotes omitted).
In re Williams, at 744-745.
The court finds that the debtor has satisfied the standards delineated in Williams.1 The debtor promptly filed the second motion to amend her exemption schedule and to reallocate her disallowed exemption. No interested party has demonstrated detrimental reliance on the debtor’s original exemption schedule. The trustee has not objected to the debtor’s second application for an amendment. Third National Bank has raised the sole objection. In a sometimes venomous memorandum, counsel for Third National argues that the second amendment should be denied because Mrs. Rhoten has not acted in good faith during the pend-ency of her bankruptcy case. Counsel suggests that the debtor is careless and indifferent towards her creditors which is tantamount to the concealment of assets and, therefore, should be denied the benefit of an exemption claim. The court is not now persuaded that any creditor has been prejudiced in this case in any way that would justify the forfeiture of the debtor’s exemptions. The trustee and all creditors are protected from any fraud or concealment by the constraint imposed by the court at the hearing on September 14, 1982. The court ruled that the debtor may reallocate her exemption only to property listed on her original schedules. None of the property discovered by the trustee’s investigation is eligible for exemption. This court does not condone the haphazard claiming of exemptions nor sanction attempts to defraud creditors by exempting property to which the debtor is not entitled. The court is not persuaded, however, that this debtor is perpetrating a fraud on the court or any creditor.
The explanation offered by the debtor is palatable and sufficient to constitute excusable neglect within the guidelines established by this court. The court finds that the debtor’s misperception concerning the legitimacy of the exemption was reasonable in that the automobile in which the exemption was claimed was the debtors’ sole means of transportation and was principally maintained and utilized by Mrs. Rhoten. Therefore, although the automobile was not legally titled in her name, it constituted a valuable asset to the debtor and was reasonably, albeit incorrectly, perceived to be exemptable property.
Accordingly, debtor’s motion to amend her exemption claim and to reallocate her exemptions is GRANTED.
IT IS SO ORDERED.
. For the purpose of this decision, the court will treat debtors’ application as a motion for an extension of time pursuant to Rule 906(b)(2) of the Federal Rules of Bankruptcy Procedure. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489519/ | OPINION
VOLINN, Bankruptcy Judge.
This is an appeal from an order allowing a claim of exemption. The trial court held that the debtor-appellee had effectively abandoned a prior homestead and was therefore free to acquire a new homestead which he was entitled to claim exempt in his bankruptcy proceeding. We affirm.
I.
The debtor and his wife separated in November, 1976 and filed a petition for dissolution of their marriage January 6, 1977. On March 11,1977, the debtor’s spouse filed a declaration of homestead for a head of household pursuant to California Civil Code § 1260, for the benefit of herself and the debtor on their home in La Canada. The dissolution hearing was held and the debtor, pursuant to a property settlement agreement, executed a quit claim deed for the La *625Canada house to his spouse on August 10, 1977. The deed was recorded the following day. A final decree dissolving the marriage and approving the property settlement agreement was entered on April 19, 1978.
The debtor thereafter purchased a home in Tustin, on which he declared a homestead in March, 1981. The following month the appellant, Western Craft Paper Group, obtained a judgment against him.
Debtor and his former spouse remarried on July 3, 1981. The debtor filed an individual petition in bankruptcy on September 16, 1981. He claimed a homestead exemption on the Tustin property in the bankruptcy case.
Appellant objected, contending debtor’s homestead in the Tustin property was invalid because he continued to have a homestead in the La Canada property. The trial court overruled the objection, holding that after delivery of the deed and entry of the divorce decree, the husband had no homestead in La Canada. The basic issue presented by appellant to the court below waá that “The quitclaim deed ... did not extinguish or cause an abandonment of debtor’s homestead rights in said La Canada residence” under California Civil Code § 1243(3) enacted in 1979, which provides that
“a homestead can be abandoned only by:
A declaration of abandonment or a conveyance by which one spouse conveys the homestead to the other spouse without expressly reserving his or her homestead rights.”
Appellant contends that the debtor, not having properly abandoned the La Canada homestead, is debarred from claiming another homestead by virtue of C.C.P. 690.--31(b)(1) which, in effect, precludes claims to a second homestead where one already exists.
II.
This appeal raises the question of whether a married person may abandon or otherwise terminate a homestead by conveying his or her entire interest in the property to the other spouse during a marriage that is subsequently dissolved.
At the outset, we note that the remarriage-does not affect the problem. The trial court concluded that an issue involving the remarriage was not presented and made no ruling with respect thereto. In any event, the debtor has filed bankruptcy in his separate capacity. His claim to the Tustin homestead was the only one before the court. It is this claim which was contested by the creditor. The debtor has not claimed a homestead in the La Canada property. The spouse’s claim thereto, whether as a present or former wife, was not before the court.
III.
The principles set forth in the case of In re Teel’s Estate, 34 Cal.2d 349, 210 P.2d 1 (1949) are applicable to the issue before us. In re Teel involved the claim of a husband, who had been divorced shortly before the death of his former wife, to a homestead in the former home despite his having signed a property settlement agreement wherein he quit claimed his interest in the home to her. He expressly abandoned any claim for family allowance or homestead therein. (She filed a homestead declaration unbeknownst to him.) The interlocutory decree approved the agreement. The husband prayed for vacation of the interlocutory decree alleging a reconciliation and an oral agreement to cancel the deed. The court, denying the husband’s application, held that while the deed was not the equivalent of a declaration of abandonment, it was a transfer of all the husband’s interest in the property including any interest by way of homestead.
Such is the case here. As stated by the court below:
“Certainly the combination of the deed to the former spouse plus the interlocutory and final decree of divorce operated to convey to the former spouse all interest of the husband in the subject property and also operated to terminate whatever homestead interest the former husband *626may have had in what then became the separate property of the former wife.”1
The foregoing language is consistent with In re Winslow, 121 Cal. 92, 53 P. 362 (1898), which holds that given sufficient evidence of intent, a homestead can be abandoned by deed pursuant to a dissolution.
IV.
Appellant’s position, if accepted, would mean § 1243 prescribes that abandonment must be accomplished by the grantee spouse. Such a result would create a paradox whereby the transferor, having been divested of any interest in the property homesteaded during the former marriage, is nevertheless precluded from claiming a homestead to which he would be otherwise entitled, so long as the former spouse chooses not to terminate a homestead right in property which is exclusively hers. This interpretation disregards case law and statutes based in the realities of divorce and attendant distribution of property of the parties.
There is little functional difference between total divestiture of an interest in property by virtue of a court decree and a deed given pursuant thereto, and abandonment of all interest in the same property. Cases such as California Bank v. Schlesinger, 159 Cal.App.2d Supp. 854, 324 P.2d 119, 122 (1958), and Bonner v. Superior Court, 63 Cal.App.3d 156, 133 Cal.Rptr. 592 (1976), are consistent with this perspective.
In Schlesinger, supra, the wife, in a divorce proceeding, was awarded the family home, on which a homestead was declared during the marriage. The husband, pursuant to the decree, quit-claimed the property to her. Subsequently, certain judgment creditors levied on proceeds of a foreclosure sale. The wife contended that her homestead attached to the proceeds. The judgment creditors contended that the divorce, ipso facto, terminated the homestead exemption. The court stated:
“(p. 122) In a case, such as this, the homestead of the ex-wife continued after the divorce and after the ex-husband’s relinquishment of his property interest to her.. . ”
“(p. 128) We are satisfied that Civil Code §§ 146 and 1265 continued the homestead protection to defendant . .. and in her alone after quitclaim from her husband ...” Emphasis Added.
In Bonner, supra the wife, similarly was awarded the homesteaded property. The husband was to receive approximately one-half the equity in the home or $5,000 payable over three years. Not having been paid, he levied on the homestead contending that the divorce decree awarding her the property made no provision for a homestead.
The court, citing Sehlesinger, upheld the validity of a wife’s homestead rights in joint tenancy property which had been quit-claimed by a husband after a divorce in which no disposition was made of the property. It also stated that the portions of the Civil Code dealing with distribution of property in divorce proceedings (e.g., relinquishment of interests in property) “to the extent there is an apparent conflict” must control over general provisions of the Civil Code relating to force sale of property (e.g., requirements as to abandonment). The reasoning was stated at 133 Cal.Rptr. p. 598:
“It is apparent, however, that Civil Code section 4800 is more specific than Civil Code section 1240, because the former deals expressly with homesteads in the context of dissolution proceedings, whereas the latter deals with homesteads in relation to judgments in general.”
*627CONCLUSION
While the language of California Civil Code § 1243(3) is somewhat ambiguous, it may be read consistently with the purpose of the exemption statutes and its relationship to inter-spousal transfers; that where there is a conveyance from one spouse to another “without expressly reserving his or her homestead rights” the transferee spouse becomes the sole beneficiary of the homestead interest. The' transferring spouse, having relinquished all interest in the property, has nothing to abandon and is therefore not precluded, by virtue of the prior homestead, from selecting another.
AFFIRMED.
. The court further cited the following:
“I find no California case precisely upon the point, but in 37 Cal.Jur.3d 454 the statement is made:
‘Accordingly, in the absence of such an express reservation of rights, the homestead would appear to terminate as to the spouse conveying, and to vest in the other spouse as though he were the survivor, being freely alienable in his hands and retaining as a homestead characteristic only the exemption from forced sale.’ ” | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489520/ | HUGHES, Bankruptcy Judge,
dissenting:
I respectfully dissent.
I
The question presented by this appeal is whether, under California law, a valid homestead may be declared by one who has relinquished all interest in a prior, unaban-doned homestead.
The validity of the Tustin homestead declared by Mr. Donner is before us because of the principle enunciated in Waggle v. Worthy, 74 Cal. 266, 268, 15 P. 831 (1887):
A party cannot have two homesteads; and if he attempts to acquire a second while the first is in force, the second is void.
That principle was reiterated in Towers v. Curry, 247 F.2d 738, 739-740 (9th Cir.1957):
There can be no more than one valid declaration of homestead by a claimant.
It is related to the principle that a husband and wife cannot have two homesteads. Gambette v. Brock, 41 Cal. 78, 84 (1871); Strangman v. Duke, 140 Cal.App.2d 185, 295 P.2d 12 (1956).
The problem does not solve itself because “[t]he filing of a second homestead does not effectuate an abandonment of the first homestead.” Towers v. Curry, supra, at 739. Calif.Civil Code § 1261.1.
Thus, we need to determine whether, in the words of the California Supreme Court, Mr. Donner attempted “to acquire a second [homestead] while the first [was] in force,” i.e., whether he still had a homestead in La Canada when he declared the Tustin homestead.
The conventional inquiry, followed in the cases cited, is whether the first homestead had been abandoned. Under this analysis, a homestead is either in force or it is not.
The inquiry followed by the trial court was different; it decided that Mr. Donner retained no interest in the first homestead after he deeded the property to Mrs. Donner and their marriage terminated.
I conclude that, given the evidence before the trial court, the prior homestead had not been abandoned and that, notwithstanding relinquishment of all interest in the first home, Mr. Donner had an existing- homestead as the term was used in Waggle v. Worthy, supra, when the Tustin declaration was filed.
II
The joint homestead in La Canada was not abandoned, on the evidence.
A
The statutory methods of abandoning a homestead are found in Calif.Civ.Code § 1243 and are by the express terms of the statute exclusive. They all require either a declaration of abandonment or a conveyance. An abandonment must be executed and acknowledged because it is effective only when “recorded in the office in which the homestead was recorded.” Calif.Civ. Code § 1244.
If the original claimant is married, the husband and wife must execute and acknowledge the abandonment (§ 1243(1)) or conveyance (§ 1243(4)) except in the case of a married person’s separate homestead (§ 1243(5)). However, an alternative method is provided by section 1243(3):
3. A declaration of abandonment or a conveyance by the grantee named in a conveyance by which one spouse conveys the homestead to the other spouse with*628out expressly reserving his or her homestead rights.
Subsection 3 thus contemplates inter-spousal deeds that reserve homestead rights to the grantor and those that do not. As to the former, abandonment depends on compliance with other provisions. As to the latter, abandonment is accomplished only by the grantee’s abandonment or conveyance.
Applying the facts of this case to the statute, it is clear that the homestead was not abandoned because Mr. Donner did not join Mrs. Donner in a declaration of abandonment (§ 1243(1)) or a conveyance (§ 1243(4)) and there is no evidence that Mrs. Donner (as grantee) recorded a conveyance or a declaration of abandonment (§ 1243(3)).
B
I have found no modern cases holding that a California homestead can be abandoned except through strict compliance with those statutory procedures. None of the cases cited in the majority opinion are to the contrary.
Estate of Teel, 34 Cal.2d 349, 210 P.2d 1 (1949) expressly held that the homestead was not abandoned. It so held because the marital settlement agreement was not acknowledged or recorded as required by statute. Calif.Civ.Code § 1244.
On the other hand, the court found a statutory abandonment in Estate of Winslow, 121 Cal. 92, 53 P. 362 (1898) on similar facts because the parties’ separation agreement — construed as a declaration of abandonment-had been duly acknowledged and recorded.
The other two cases—Bonner v. Superior Ct. for Cty. of L.A., 63 Cal.App.3d 156, 133 Cal.Rptr. 592 (1976); California Bank v. Schlesinger, 159 Cal.App.2d Supp. 854, 324 P.2d 119 (1958) — hold that termination of the marriage does not terminate the homestead, even when coupled with an inter-spousal deed or a court award of the property to one spouse.
C
There was no evidence before the trial court that the Donner’s marital settlement agreement (if it could be read as a declaration of abandonment) was acknowledged by the parties and recorded. Accordingly, on this issue, Estate of Teel rather than Estate of Winslow controls.
Further, neither the divorce nor the conveyance to Mrs. Donner, or the combination, caused an abandonment of the existing homestead, this on the authority of Bonner and Schlesinger.
I conclude that the Donners’ joint homestead in La Canada was not abandoned.
Ill
The question remains: did Mr. Donner continue to have a homestead in La Canada notwithstanding his relinquishment of all interest in the property and his failure to “reserve his ... homestead rights”? Calif. Civ.Code § 1243(3). The quest for an answer is aided by a review of the California homestead in general and the La Canada homestead in particular.
A
A California homestead has until recently had several characteristics. Primarily, it serves to exempt property to which it attaches (the homestead; Calif.Civ.Code § 1269) from execution by creditors. Calif. Civ.Code § 1240. An altogether different characteristic was the right of survivorship it confered on married persons’ property until January 1, 1981. Calif.Civ.Code § 1265 (1873-4) amended by Calif.Civ.Code § 1265 (1980). It continues to restrict third-party conveyances by a married person. Calif.Civ.Code § 1242.
An understanding of the reported cases (all of which predate the 1980 amendment to Calif.Civ.Code § 1265) follows an understanding of these different characteristics. Thus, it was noted that in a particular decision “the term ‘homestead’ is used in the sense of a property right imposed by the homestead upon the legal title, rather than as the homestead exemption from *629claims of creditors.” California Bank v. Schlesinger, supra, at 864, 324 P.2d 119.
Recognition of the different characteristics also helps define what occurs when, as in this case, an interspousal conveyance that does not reserve homestead rights is executed: the grantor relinquishes his power to restrict third-party conveyances by the grantee and, prior to 1981, relinquished sur-vivorship rights in the homesteaded property. This is precisely what happened in Estate of Teel, supra, where the Supreme Court denied the husband the right of sur-vivorship after expressly holding that the homestead had not been abandoned.
From this I conclude that such a conveyance strips the homestead of all characteristics save one: exemption from creditor claims. This, of course, is the only characteristic we are concerned with because Mr. Donner is not asserting any interest in the La Canada home by way of survivorship or otherwise.
B
The homestead declaration recorded by Mrs. Donner on March 11, 1977 states that she was married to Isadore Donner and that
(4) ... I make this declaration for the joint benefit of myself and my husband. This is the so-called married-persons or head-of-family homestead. Calif.Civ.Code § 1262. In legal effect, it is the act of the husband as well as the wife. See, Johnson v. Brauner, 131 Cal.App.2d 713, 281 P.2d 50 (1955). The amount of this exemption is $45,000, over and above all liens and encumbrances. Calif.Civ.Code § 1260(a)l.
This homestead has not been abandoned (on the authority of Calif.Civ.Code § 1243 and Teel, supra) and continues in existence as an exemption from creditor claims (Bonner, supra; Schlesinger, supra). It remains a homestead for the joint benefit of both Mr. and Mrs. Donner, although it protects only property in which Mrs. Donner has an interest.
C
Given the California homestead law as a whole and the alternatives available to the Donners, I think it reasonable to conclude that the California courts would hold that Mr. Donner had a homestead in La Canada within the meaning of Waggle v. Worthy that was in force when he declared the Tustin homestead.
First, it is understandable that California law permits Mr. Donner to assign his homestead to Mrs. Donner because the same body of law permits Mr. Donner’s creditors to levy upon and sell community property transferred to her. Bank of America v. Mantz, 4 Cal.2d 322, 49 P.2d 279 (1935); Harley v. Whitmore, 242 Cal.App.2d 461; 51 Cal.Rptr. 468 (1966). Indeed, one of the purposes of the probate homestead is to protect the widow “against the creditors of her deceased husband...” Walton v. Walton, 59 Cal.App.2d 26, 32, 138 P.2d 54 (1943).
Unless the grantee is permitted to preserve the married persons homestead exemption of $45,000, she would be limited to an exemption of $30,000. Calif.Civ.Code § 1260(a)3.
Furthermore, preservation of the existing joint homestead may be necessary if a judgment against the grantor spouse has been recorded. A judgment lien does not attach to an existing homestead, Engleman v. Gordon, 82 Cal.App.3d 174, 146 Cal.Rptr. 835 (1979), but would attach if the grantee spouse substitutes a new homestead following the divorce.
Second, the California legislature has evidenced a policy that strictly limits homesteads of individuals to $30,000 and of married persons/heads of family to $45,000. This is illustrated by provisions of the Civil Code governing homesteads acquired in the period between the interlocutory and final judgment dissolving a marriage. Calif.Civ. Code §§ 1300 et seq.-
Although either spouse may claim a “married person’s separate homestead,” the amount of the homestead is that of either a single person or head of family (e.g., one who has custody of minor children). Civ. Code § 1302. Any married person declaring such a homestead “who is not head of a family” is limited to the single person’s *630exemption. Civ.Code § 1302. Should the parties reconcile after each party had selected such a homestead, one of the homesteads must be abandoned or the exemption under each is reduced by one-half. Civ. Code § 1304.
Failure to recognize that Mr. Donner continued to have a homestead (although bene-fitting Mrs. Donner) and to apply the principle of Waggle v. Worthy gives Mr. and Mrs. Donner greater combined homestead rights than are afforded by Civ.Code § 1300 et seq. merely because the declaration was recorded prior to, rather than after, the interlocutory judgment. I perceive no reason why the California courts or legislature would countenance this.
D
It is pointed out in the majority opinion, however, that this result creates a paradox whereby Mr. Donner is “precluded from claiming a homestead ... so long as the former spouse chooses not to terminate a homestead right in property which is exclusively hers”. The point is well taken, but in the end it is unpersuasive.
Mr. Donner was not without options under Calif.Civ.Code § 1243 when he negotiated the marital settlement agreement with Mrs. Donner. He chose to perpetuate the joint homestead for Mrs. Donner’s benefit rather than bargain for its joint abandonment prior to conveying the property to Mrs. Donner. As noted above, there are reasons for this option.
I therefore conclude that Mr. Donner was precluded from declaring a valid homestead on the Tustin property notwithstanding his relinquishment of interest in the property in La Canada.
I would reverse the judgment appealed. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489521/ | ORDER DENYING DEBTOR’S PETITION FOR PERMISSION TO SUE TRUSTEE
ROBERT E. WOODWARD, Bankruptcy Judge.
On December 31, 1975, petitions to proceed under the provisions of Chapter XIII of the Bankruptcy Act were filed by William H. Laws and Helen M. Laws (hereinafter referred to as Helen M. Laws-Gipson). Each debtor filed his and her own petition and were numbered as set forth above. The debtors were husband and wife.
The plans were consolidated for administrative purposes as the plans and schedules were identical.
The list of real and other property filed by each of the above-named debtors wás identical.
Exemptions were waived by each debtor for the purposes of the Chapter XIII case.
*654The debtors listed among their assets their home.
Each of the debtors was employed and their combined income was to be used for living expenses and to make payments to the trustee for repayment of their obligations pursuant to their Chapter XIII plan.
For some time, the payments were made by the debtors pursuant to their plans.
Marital problems arose with the ultimate separation of the debtors. On or about October 19, 1978, pursuant to a Stipulated Interlocutory Judgment of Dissolution of Marriage, the Superior Court of the State of California awarded the home to the wife.
Ultimately the home was 'sold and the debtors’ equity was turned over by the escrow company to the Chapter XIII trustee. Since exemptions had been waived by the debtor, the trustee used the proceeds, in the sum of $5,215.00, to pay off the remaining creditors under the Chapter XIII plan.
There was some residue after payment to the creditors, in the amount of $914.93.
The trustee calculated the proportion of the plan that had been paid directly by each of the debtors. William H. Laws contributed 75.23% in payments and Helen M. Laws-Gipson contributed 24.77% in payments. He then used the same percentage to divide the sum remaining from the sale of the home. $226.63 was turned over to Helen M. Laws-Gipson, and $688.30 was turned over to William H. Laws.
A final meeting was held and a final decree discharging debtor and discharging trustee and trustee’s surety was filed September 18, 1980.
Sometime thereafter, Helen M. Laws-Gipson filed an action in the Superior Court in the State of California, in and for the County of Sacramento, seeking $5,215.00 on the grounds that the distribution of assets was improper by the trustee and that the trustee had breached his fiduciary duties.
The trustee contends that the funds received by him from Safeco Title Company were non-exempt assets to the extent required to pay the creditors of the debtors and that the refund of the balance to the debtors was in proper proportion to the amounts contributed by them.
June 24, 1981, Lawrence J. Loheit, the Chapter 13 trustee, filed an application to reopen the case of Helen M. Laws-Gipson, BK-S-75-4588-W.
After hearing, the Court granted the application to reopen the case on October 8, 1981.
October 21, 1981, the Court enjoined Helen M. Laws-Gipson, her agents and attorneys from taking any further action in the law suit wherein Helen M. Laws-Gipson is the plaintiff and Lawrence J. Loheit is the defendant, in the Superior Court of California, in and for the County of Sacramento, Case No. 294773.
On December 1, 1981, Lawrence J. Loheit as trustee, filed an application to determine title to personal property, to-wit, the sum of $5,215.00 delivered to him by Safeco Title Company being the proceeds of the sale by Helen M. Laws-Gipson of the home.
Under the Act, the Bankruptcy Court had exclusive jurisdiction in Chapter XIII cases over the property of the petitioning debtor, including future acquisitions and earnings.
In California, it is presumed that all property acquired during a marriage is community property of the husband and wife and is liable for their obligations.
The trustee acting for the Court under the Bankruptcy Act had dominion of the debtors’ property and was granted the authority to use such property and earnings to pay off the creditors in conformity with the plan.
By filing their petitions to pay off their creditors under the provisions of Chapter XIII, Helen M. Laws-Gipson and William H. Laws agreed to pay their creditors from their community assets. The Bankruptcy Court, at the moment of the filing of the petitions, had exclusive jurisdiction of the present and future property and income of the above-named parties:
The trustee, in effect, was granted permission to pay their creditors pursuant to the Plan from their property and future income.
*655The sole question remaining is whether the trustee abused his discretion in using the funds derived from the sale of the real property herein.
The answer is no. At the time of the filing of the petitions, the Court had exclusive jurisdiction of the existing property. This jurisdiction continued until the case was either dismissed or completed.
The Superior Court in handling the dissolution matter could not divest the Bankruptcy Court of its jurisdiction, nor that of its agent, the Chapter XIII trustee.
The disposition of the $5,215.00 in question, insofar as using such funds necessary to pay off the creditors pursuant to the plan of each debtor, namely $4,800.07, was a proper exercise of the Chapter XIII trustee pursuant to the debtors’ plans. As to the remainder, the disbursement of the balance in turning over to William H. Laws, $688.30, and $226.63 to Helen M. Laws-Gipson, was merely a mathematical disposition of the funds in proportion to that paid in by each debtor to complete the plan. The Court finds no abuse of discretion by the Chapter XIII trustee.
The trustee having acted properly with respect to the disposition of the assets of the debtors and with respect to the payment of their creditors, administrative costs and disposition of the residue; the Court finds that Helen M. Laws-Gipson should recover nothing from the trustee, Lawrence J. Loheit.
IT IS THEREFORE ORDERED that the above-entitled case be reclosed and that Helen M. Laws-Gipson be, and she is, permanently restrained from taking any further action or proceeding against the trustee, Lawrence J. Loheit, in the case entitled Helen M. Laws-Gipson, plaintiff v. Lawrence J. Loheit, defendant, in the Superior Court of the State of California, in and for the County of Sacramento, Case No. 294773.
This Order is intended to include and to serve as Findings of Fact and Conclusions of Law. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489522/ | MEMORANDUM OPINION
GEORGE S. WRIGHT, Bankruptcy Judge.
This cause coming on to be heard upon the debtor-defendant’s objection to the taking of said debtor-defendant’s deposition by the plaintiff’s attorney based upon an alleged conflict of interest. This court, after having heard the parties’ arguments and having reviewed their briefs, is of the opinion that the plaintiff’s attorney does have a conflict of interest and, therefore, shall be disqualified in this adversary proceeding.
FINDINGS OF FACT
(1) On or about January 21, 1982, Russell Carothers, president of Citizens Bank of Winfield issued a warrant for the arrest of Robert Eric Peiffer for theft of property in the first degree.
(2) Sometime thereafter, Jerry Guyton, assistant district attorney, prosecuted Robert Eric Peiffer for theft of property in the first degree in a preliminary hearing in Marion County, Alabama.
(3) On April 29,1982, Robert Eric Peiffer filed a chapter 7 bankruptcy petition.
(4) On July 28, 1982, Jerry Guyton, as attorney for plaintiff Citizens Bank of Win-field, filed a complaint to determine the dischargeability of a debt against Robert Eric Peiffer, the debtor-defendant.
*676(5) The factual-basis of the plaintiff’s bankruptcy adversary proceeding is exactly the same as the factual-basis for the aforementioned criminal prosecution in Marion County.
(6) The criminal prosecution and the bankruptcy proceeding have been concurrently pending.
CONCLUSIONS OF LAW
The issue presented by these facts is whether it is improper for an assistant district attorney, acting in his capacity as a public employee, to prosecute a defendant criminally and simultaneously represent the victim in a civil action against the same defendant based on the identical underlying occurrence.
Disciplinary Rule 9-101 (DR 9-101) of the Rules Governing the Conduct of Lawyers in Alabama is titled “Avoiding Even the Appearance of Impropriety”. DR' 9-101(A) provides, “A lawyer shall not accept private employment in a matter upon the merits of which he has acted in a judicial capacity.” Additionally, DR 9-101(B) states: “A lawyer shall not accept private employment in a matter in which he had substantial responsibility while he was a public employee.” These two subsections of DR 9-101 appearing in the Alabama Rules of Conduct are identical to the corresponding American Bar Association Code of Professional Responsibility Disciplinary Rules 9-101(A) and (B).
Numerous courts and commentators have addressed and denounced the propriety of a district attorney prosecuting the defendant and then representing the victim in a civil proceeding. Furthermore, district attorneys have been disciplined for accepting employment in a civil case arising from the same facts as those involved in the criminal proceeding before them. Annot., 17 A.L.R.3d § 16 at 852 (1968): Commonwealth of Pennsylvania v. Dunlap, 474 Pa. 155, 377 A.2d 975, n. 5 (1977). “A prosecuting attorney who appears against accused in a criminal proceeding is disqualified from appearing in a civil case against the same individual, regardless of any question whether such attorney makes use of information gained in the criminal action to force a settlement in the civil action.” 27 C.J.S. District & Prosecuting Attorneys § 12(9) at 669 (1959) [citing In re Wilmarth, 42 S.D. 76, 172 N.W. 921 (1919) ].
In the case of State v. Tate, 185 La. 1006, 171 So. 108 (1936), the Supreme Court of Louisiana examined this problem and stated:
“The district attorney is a quasi judicial officer. He represents the State and the State demands no victims. It seeks justice only, equal and impartial justice, and it is as much the duty of the district attorney to see that no innocent man suffers as it is to see that no guilty man escapes. Therefore he should not be involved or interested in extrinsic matters which might, consciously, impair or destroy his power to conduct the accused’s trial fairly and impartially.”
at 171 So. 112. Likewise, the Maryland Court of Appeals determined: “[t]he prosecuting officer cannot perform this function — he cannot discharge his public obligation — -if his personal interests are involved. And his representation of the [victim] at once gives him a personal interest in the matter that disables him from the proper performance of his official duty.” Sinclair v. State, 278 Md. 243, 363 A.2d 468, 477 (Md.Ct.App.1976) [quoting from In re Ridgely, 48 Del. 464, 106 A.2d 527, 530-31 (1954)]. See also State v. Detroit Motors, 62 N.J.Super. 386, 163 A.2d 227 (L.Div.1960).
In a recent disciplinary proceeding the Supreme Court of Illinois emphasized the “serious impropriety” of an attorney accepting private employment in a matter in which he had substantial responsibility as a public employee. (See DR 9-101(b)). The Court held that “an attorney may not represent both a governmental body and a private client even if disclosure is made and the parties agree to such dual representation.” In re Lapinska, 72 Ill.2d 461, 21 Ill.Dec. 373, 381 N.E.2d 700 at 704 (1978).
*677In response to this problem several states have enacted statutes that limit the private practice of a prosecuting attorney. See Annot., 82 A.L.R.2d 774 (1962). Apparently, the legislature of Alabama has not approached this issue.1 There are, nonetheless, certain restraints placed on a prosecuting or district attorney which arise from the public nature of the office. See 27 C.J.S. District & Prosecuting Attorneys § 12(9) at 668 (1959). The Supreme Court of New Mexico disciplined a district attorney and his assistant for accepting a civil suit to prosecute the accused based on the same facts giving rise to the criminal prosecution even in the absence of a statute restricting such action by district attorneys. The court established:
“Attorneys are officers of the courts. It is the inherent duty of any court to hold its officers to their duty. The Legislature has not forbidden district attorneys to continue in civil practice. The fact does not affect the case. This is not to deny, it is to assume, the duty of the courts to supervise such civil practice and limit it, to prevent such situations as this, the reproach of which must fall upon the courts themselves and upon the administration of justice. If, for lack of a statute, we should hesitate to stop, or to punish when necessary, such violations of the high standards and the ethics of the legal profession, we should exhibit lack of comprehension of our inherent power and highest duty; we should invite legislative aid and interference where such are not required, and may do harm.”
In re Truder, 37 N.M. 69, 17 P.2d 951 at 952 (1932).
The assistant district attorney contends that he doesn’t fall within the language of DR 9-101(B) (e.g. a lawyer shall not accept private employment in a matter in which he had substantial responsibility while he was a public employee) as he had been employed on retainer by the Citizens Bank of Winfield prior to participating in the criminal prosecution of Mr. Peiffer as assistant district attorney. This is an argument in semantics and is not well taken by this court. A district attorney’s conduct in prosecuting a criminal case as a public employee and later representing a third party in a civil suit against the same criminal defendant arising from the same set of facts is a breach of his public duty regardless of whether the civil client was a new or retained employer.
The court finds that there is a conflict of interest and potential DR 9-101(B) infraction presented by these facts. It is improper for Jerry Guyton, as assistant district attorney to participate in the prosecution of the criminal case against Robert Eric Peiffer (the accused) and at the same time represent the Citizens Bank of Win-field (the victim in the criminal case) as plaintiff in a Bankruptcy adversary proceeding against the same Mr. Peiffer (debt- or) wherein both cases arise from the same series of facts.
This court adopts the admonition of the Supreme Court of Colorado: “To you, and to any others in the profession . .. who have labored under this misconception that there is nothing wrong when a district attorney acts as counsel for a litigant in a civil case, and prosecutes a criminal case based upon the facts giving rise to the civil action, we give warning: This court will not countenance or tolerate such conduct. We condemn it.” People v. , 162 Colo. 174, 427 P.2d 330 at 331 (1967).
This shall constitute the findings of fact and conclusions of law pursuant to Rule 752 of the Rules of Bankruptcy Procedure. A separate order will be entered consistent with this opinion.
. Alabama does have a related statute which provides: “No public official or employee shall use an official position or office to obtain direct financial gain for himself, or his family, or any business with which he or a member of his family is associated unless such use and gain are specifically authorized by law.” Ala.Code § 36-25~5(a) (1975). | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489523/ | MEMORANDUM AND ORDER ON MOTIONS FOR SUMMARY JUDGMENT
CHARLES J. MARRO, Bankruptcy Judge.
The instant Motions for Summary Judgment stem from adversary proceedings for relief from stay filed by the Plaintiff, William S. Lyons, on June 13, 1980. Preliminary hearings were scheduled for July 14, 1980, but were continued on the request of Plaintiff’s counsel. Subsequently, the Plaintiff filed Amended Petitions for Relief and Complaints on September 30, 1980, to which party Defendant Heims answered and counterclaimed on October 8, 1980; Defendants Kenney answered and counterclaimed on October 10, 1980; Defendants V & V, Inc., and Hospitality of Vermont, Inc., answered October 16, 1980; to which the Plaintiff answered the respective counterclaims on October 22, 1980.
On September 16, 1982, Defendants Heims filed Motions for Summary Judgment, accompanied by Affidavits. On September 21, 1982 Defendants Kenneys filed objections to Heims’ Motion and requested an entry of summary judgment against Heims. On November 16, 1982, Plaintiff Lyons also filed Motions for Summary Judgment with supporting Affidavits.
On November 23,1982 a hearing was held on the Motions for Summary Judgment of Heims as well as the Motions of Kenneys, at which time the matters were taken under advisement. The subject matter of the actions and the counterclaims stem from a security agreement executed on December 30, 1976 from the Kenneys to the Heims *739covering “. . . [f]urnishings, furniture and equipment ... located in the Bardwell Hotel premises;” a security agreement executed on November 2, 1978, from V & V, Inc., to the Kenneys covering “.. . [f]urni-ture, furnishings, equipment and fixtures . .. now located at 132-142 Merchants Row,” and a subsequent sale and lease-back arrangement between V & V, Inc., and William S. Lyons.
The parties, while asserting that there are no genuine issues of material fact, have failed to submit evidence to sustain their burden of showing no such fact. It is on this basis that the Motions for Summary Judgment should be denied.
LAW
Summary judgment should be generally granted when “there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(c), as applicable to Bankruptcy Rule 756. However, even in cases where the party making the motion for summary judgment has met the technical requirements for the granting of the motion, the Court may in its discretion deny the motion in favor of a full hearing on the merits. Flores v. Kelley, 61 F.R.D. 442 (D.Ind.1973).
In the instant case, the Court concludes that the moving parties have not met their burden. Defendant Heims has submitted an Affidavit to support his Motion and argument that the Plaintiff Lyons never filed certain documents. As stated in the Affidavit of Victor Segale, “. .. [i]t is my opinion, that William S. Lyons never filed . . . any notice of transfer . . . any lease .. . any UCC Financing Statement to perfect any security interest ...” The Affidavit further states “.. . [Tjhis information is based upon my own knowledge, information and belief, and experience, and I believe the same to be the true state of facts ...” Affidavits in this nature, prefaced by phrases such as “I believe” or “upon information and belief” or those made upon an “understanding” are properly the subject of a motion to strike. This was found to be true in affidavits opposing a motion for summary judgment, Cary v. Beans, 500 F.Supp. 580 (E.D.Pa.1980) and should similarly be held to be improper when made in support of such a motion.
On the other side, Lyon’s Counsel has submitted his own Affidavit in support of Lyons’ Motion. While it is permissible, it is not advisable for an attorney to present his own affidavit in connection with a motion for summary judgment. Lowell v. Wantz, 85 F.R.D. 290 (E.D.Pa.1980).
Even if it were assumed that the instant parties had satisfied the criteria for summary judgment, “the Court may deny summary judgment as a matter of discretion.” Fine v. City of New York, 71 F.R.D. 374, 375 (S.D.N.Y.1976). As stated in Flores v. Kelley, 61 F.R.D. 442, 445, (D.Ind.1973):
It has been repeatedly held that a District Court has broad discretion in the denial of motions for summary judgment in favor of a full hearing on the merits. Such a court has discretion to deny an otherwise justified motion for summary judgment if arguments of parties have failed to clarify the underlying facts. See George R. Whitten, Jr., Inc., v. Paddock Pool Builders, Inc., 424 F.2d 25 (1st Cir.1970). See also, Wimberly v. Clark Controller Co., 364 F.2d 225 (6th Cir.1966). See also Associated Hardware Supply Co. v. Big Wheel Distribution Co. 355 F.2d 114 (3rd Cir.1965).
In the instant case, such a clarification is needed.
Filing cross-motions for summary judgment does not alter the Court’s inquiry as to satisfying the burden nor is the Court’s discretion altered. As stated in Rypkema v. Bowers, 66 F.R.D. 564 (1974):
At the outset, it must be noted that cross-motions for summary judgment alone do not as such establish that either of the movants is entitled to relief. Both motions must be denied if there exists a genuine issue of fact. American Fid. & Cas. v. London & Edinburgh Ins. Co., 354 F.2d 214 (4th Cir.1965). In addition, sum*740mary judgment is not proper where inquiry into the facts is deemed desirable by the Court to clarify the application of the law. Kirkpatrick v. Consolidated Underwriters, 227 F.2d 228 (4th Cir.1955); Molinaro v. Watkins-Johnson CEI Division, 359 F.Supp. 467 (D.Md.1973); Batchelor v. Legg & Co., 55 F.R.D. 557 (D.Md.1972).
This is especially true and particularly desirable where the case presents complex questions or ones which may be of first impression. Fine v. City of New York, 71 F.R.D. 374 (D.C.N.Y.1976). In the instant case, the after-acquired property question has yet to be considered in this jurisdiction.
As suggested by the Court in Flores v. Kelley, supra, “. .. summary judgment is a lethal weapon and District Courts must be mindful of its aims and targets and beware of overkill in its use. See Brunswick Corp. v. Vineberg, 370 F.2d 605 (5th Cir.1967).”
In applying the above principles to the instant case, it appears that granting of the motions requested by the parties at this time and under the present posture of the case would be improvident.
Although there has not been a full hearing on the cross motion of William S. Lyons for summary judgment the foregoing legal principles are equally applicable to him.
It is also noted that the issue has been raised by Kenney that the security interest of Heims has been satisfied by the Decree of Foreclosure as to the real estate and this is a matter which may not be resolved by summary judgment.
ORDER
Now, upon the foregoing,
IT IS ORDERED:
1. That the Motion for Summary Judgment by Michael Heims, Harold Heims, and Ruth Heims is DENIED.
2. That the Motion for Summary Judgment of Walter L. Kenney, Jr., and Elfried Kenney against Defendant Heims is DENIED.
3. The Cross Motion of William S. Lyons for summary judgment is DENIED. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489524/ | MEMORANDUM DECISION
THOMAS C. BRITTON, Bankruptcy Judge.
The trustee seeks avoidance under 11 U.S.C. § 547 of the debtors’ transfer of $100,000 to the defendant. The matter was tried on February 10. The facts are undisputed.
Defendant concedes four of the five elements which the trustee must establish. The only issue is whether this transfer was made after March 25, 1982, that is to say within 90 days before bankruptcy, which occurred on June 24, 1983. § 547(b)(4)(A).
In 1981, the debtors contracted to buy five apartment buildings from the defendant for $3.5 million and deposited $100,000 earnest money in escrow. The contract provided that if:
“. . . the Buyer shall fail or refuse to close this transaction . . . then, at the written election of Seller, Seller shall receive the deposit made hereunder by the Buyer, together with all interest accrued thereon, which is to be immediately paid over by the escrow agent to the Seller. Seller shall also have the right to seek any other remedies afforded by law.”
The debtors failed to close. It is stipulated that:
“On July 30, 1982, the Defendant’s attorney wrote to the Debtors’ attorneys and declared a default under the purchase and sale agreement. The debtors were also advised that the escrow agent had been contacted to release and transfer the deposit monies to the Defendant.”
Sometime later, but well before March 25, 1982, the escrowed funds were released to defendant.
Defendant argues that the $100,000 transfer to him was perfected by the foregoing events and, therefore, it did not occur within 90 days before bankruptcy. The trustee argues that because of the subsequent events, related below, the transfer had not yet been perfected.
Less than two weeks after defendant’s written declaration of default, defendant sued the debtors for specific performance of the contract or, alternatively, for:
“. . . damages sustained above and beyond the deposit which had already been forfeited.”
That action resulted in a judgment for specific performance, requiring the debtors to buy the property at the contract price:
“. .. less the ONE HUNDRED THOUSAND DOLLARS ($100,000.00) earnest money deposit plus accrued interest.”
The judgment further provided:
“upon failing to close within thirty (30) days of the date of this Order all of the Defendants’ right, title and interest to the property shall be forfeited, the contract of purchase and sale shall be void and of no force and effect.”
Judgment was affirmed on appeal.
The trustee argues that the transfer of the $100,000 to defendant was not perfected until March 28, the 31st day after the date of the judgment. This date is within 90 days before bankruptcy.
Section 547(e)(2) provides that for the purposes of § 547(b), a transfer is made when it is perfected, and § 547(e)(1)(B) provides that:
. a transfer of a fixture or property other than real property is perfected when a creditor on a simple contract cannot acquire a judicial lien that is superior to the interest of the transferee.”
The decisive question, then, is whether under Florida law a judgment creditor of the debtors could have acquired a lien superior to defendant’s interest in the $100,000 between March 25 and 28 because of the foregoing provision in the judgment and the events that preceded it. I conclude that he *748could not and, therefore, that the transfer was perfected more than 90 days before bankruptcy.
The trustee has argued that defendant’s rights to forfeiture of the deposit and to enforce the contract were in the disjunctive, not the conjunctive. He could do one or the other, but not both and since he elected to sue for specific performance, he waived his right to treat the deposit as forfeited in July. This argument must wilt, however, in the face of Backus v. Smith, Fla.App. 1978, 364 So.2d 786, which held that where the contract so provides, the right to the deposit and for specific performance are conjunctive, not disjunctive. The contract provision there and here are indistinguishable. In Backus, the Buyer exercised both options. Here, it was the Seller who did so. I see no reason to assume that this fact should require a contrary holding.
Waiver is the intentional and voluntary relinquishment of a known right, or conduct which warrants an inference of such relinquishment. 22 Fla.Jur.2d, Estoppel and Waiver, § 86. In this instance, defendant's letter of July 30 and the allegation in his complaint that the deposit had “already been forfeited” completely negates any inference that he intended to waive that right.
The lien of a judgment creditor of the debtors between March 25 and 28 (when the closing directed by the judgment was still executory) would have reached the debtors’ contractual right to purchase the five apartments for the contract price, less the forfeited deposit. Puzzo v. Ray, Fla.App. 1980, 386 So.2d 49, 50. But it would not have reached the deposit. The deposit had then ceased to be the debtors’ property and the debtors’ no longer had any interest in the deposit.
It follows that the trustee has'not and cannot establish a preferential transfer to defendant under § 547(b). As is required by B.R. 921(a), a separate judgment will be entered dismissing the complaint with prejudice. Costs may be taxed on motion. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489525/ | MEMORANDUM AND ORDER
CHARLES J. MARRO, Bankruptcy Judge.
The Application of Victor P. Jarvis, one of the petitioning creditors, filed by his attorney, Jerome I. Meyers, Esquire, on December 20, 1982, to have Oliver Tucker, Jr., and Barbara Johnston adjudged in contempt of this Court for failure to produce certain documents at a deposition of them held November 30, 1982 came on for hearing, after notice, with the following appearances:
Jerome I. Meyers, Esquire, for Victor P. Jarvis;
*858Oliver F. Tucker, Jr., President of the Debtor, and Melvin D. Fink, Esquire, its attorney.
The Petition for Contempt is predicated upon the failure of Oliver Tucker, Jr., and Barbara Johnston to produce certain records in response to a subpoena deuces tecum at their deposition taken at the offices of Jerome I. Meyers, Esquire, Springfield, Vermont, on November 30, 1982. In addition, it is alleged that they failed to produce the records at the first meeting of creditors held on December 6, 1982 as they had promised to do at the deposition taken November 30, 1982.
The original deposition of Oliver Tucker, Jr., has been furnished to the Court and it was filed on January 18, 1983. Although Witness Tucker did testify in this deposition that he would produce these records at the first meeting of creditors the deposition was modified in writing under oath by Tucker by indicating that it was the intent of his testimony that he would undertake to locate the documents in the boxes which were then and there available and search any other papers to locate those items. This sworn written statement by Tucker was filed on January 18,1983 and it further contains a statement under oath that he has searched the records and produced all of the items that Tucker Construction Corporation has or had turned over to the Trustee who has been appointed by the Court in this proceeding.
This Court has read the entire deposition of Oliver Tucker, Jr., taken by the Attorney for the Petitioning Creditors and it has no reason to doubt any of the responses made by him to the questions propounded by Attorney Meyers and also by Lawrin P. Crispe, Esquire, who represented Blue Rock Industries, a creditor, at the taking of this deposition.
There may have been some delay in the furnishing of the records and documents requested by the Attorney for the Petitioning Creditors but it seems clear that these records were contained in boxes and they could not be readily identified without some time spent in searching out the particular papers requested. The Court is also satisfied that none of the records demanded by the Petitioning Creditors, if in fact they were in the possession of the Debtor or of either Oliver Tucker, Jr., or Barbara Johnston, have been intentionally withheld. Witness Tucker also seems to have responded to all questions asked in a forthright manner.
It is not unusual that the financial records of an insolvent corporation become disarrayed, especially when funds are not available with which to hire competent bookkeepers or accountants. The testimony of Tucker bears out the fact that the Debt- or was hopelessly insolvent so much so that it could not repay loans to the debtor made by him or by other corporations in which he was a principal.
Generally failure to comply with a subpoena to produce books, papers or documents can constitute contempt. Thus, a corporation officer who unjustifiably refuses to comply with a subpoena calling for corporation records in his control commits a contempt. Underscoring supplied. 17 Am. Jur.2d 44 § 39. As noted, the key word is “unjustifiably”. And the inability of an alleged contemnor, without fault on his part, to render obedience to an order or decree is a good defense to a charge of contempt. 17 Am.Jur.2d 53 § 51.
Tucker and Johnston may not have produced the records as rapidly as the petitioner may have desired them because of their inability to do so but the Court is satisfied that they were not guilty of such contumacious conduct as to warrant punishment or sanction.
ORDER
Upon the foregoing,
IT IS ORDERED that application of Victor P. Jarvis, petitioning creditor, that Oliver Tucker, Jr. and Barbara Johnston be adjudged in contempt is hereby DENIED. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489526/ | FINDINGS OF FACT AND CONCLUSIONS BY THE COURT UPON MOTION OF FURNISHER OF UTILITY SERVICE
L. CHANDLER WATSON, Jr., Bankruptcy Judge.
Introduction —
The above-styled case was commenced by a voluntary petition filed under Chapter 11, *869Title 11, United States Code, and is pending before this Court under said chapter. The debtor is in possession of the property of the estate, no trustee having been appointed. After due notice to parties in interest, this case came before the Court on February 25, 1983, for a hearing upon a motion filed by Water Works, Gas and Sewer Board of the City of Piedmont [Alabama] (hereinafter referred to as the utility). This motion “requests the Court to permit the said utility to terminate all utility services” to Dandi-line Plants, Inc. (hereinafter referred to as the debtor) or, if the Court refuses, “to provide some modification of deposit paid by the [debtor] or to provide some other security to this [utility] in order to provide adequate assurance of payment.” The basis of the motion is alleged to be the failure of the debtor to pay the weekly amounts due for gas services supplied to the debtor.
Findings of Fact —
At the hearing, the utility and the debtor were represented not only by counsel of record but also by representative executive officers, and no sworn testimony or other evidence was presented to the Court. By acquiescence of the utility, the debtor, and the Court, the hearing proceeded on an informal basis, with statements of the facts and a discussion of the problems and issues involved. The bankruptcy judge finds therefrom that the following facts are not in substantial dispute, and they are adopted as the findings of fact in this contested matter:
1. The utility is related to the City of Piedmont, Alabama, but is a separate entity therefrom. It furnishes a supply of flammable gas for heating and similar purposes to customers in the area of said city, including the debtor.
2. The debtor is engaged in the business of growing living plants for the commercial horticultural market and holds an inventory which cost in excess of $300,000.00.
3. The debtor’s inventory of horticultural products is subject to a security interest held by Coosa Valley Production Credit Association, a creditor.
4. Maintenance of a suitably warm climate for the continued life of the horticultural inventory of the debtor, at this time of year and for the next four to six weeks, requires the debtor to burn enormous quantities of the gas furnished to it by the utility, at a price to the debtor of $3,000.00 to $4,000.00 per week, assuming seasonable temperatures. At the commencement of this case, on November 29, 1982, the debtor was indebted to the utility for gas and possibly other utility services in the sum of approximately $35,000.00, after credit for a utility-service deposit of $4,000.00. The net indebtedness figure has now risen to approximately $65,000.00.
5. Most of the debtor’s horticultural products are marketed through cash sales, which market is practically non-existent at this particular season. Little activity in this market will occur until the Easter season, with Easter day being April 3, 1983. The debtor expects its sales during the Easter season to exceed a quarter of a million dollars, but how much of this would be due to be paid the secured creditors and how much, if any, would be available for payment to the utility was not suggested to the Court.
6. The debtor offered a payment of $2,000.00 to the utility by Monday, February 28, 1983. It also offered to seek the creation of a security interest in its inventory — to be superior to that of the present secured creditor — in order to insure payment to the utility of the debtor’s bills for continuance of the gas service to its greenhouses, if the utility would indicate that this would be an acceptable solution to the problem between these parties.
Conclusions by the Court —
This contested matter is governed by 11 U.S.C. § 366(b).1 Among other things, this *870subsection provides that the utility may discontinue service to the debtor if it does not furnish “adequate assurance of payment ... for service,” within 20 days after the date of the order for relief. The commencement of this voluntary case constituted the order for relief,2 and, as noted, that occurred November 29, 1982. The debtor has not furnished such “adequate assurance of payment,” within the nearly three months for which this case has been pending. The statutory provision which permits the utility to discontinue service to the debtor under these circumstances appears to be self-executing; however, the Court presumes that the utility may, as here, apply to the Court for an adjudication of the existence of the condition-precedent facts rather than to run the risk of an unwanted adventure into the land of claims of the debtor for damages and for sanctions against the utility.
Since no avenue has been suggested to the Court by which it might proceed to order a modification of the utility deposit or other security, so as to provide adequate assurance of payment, the Court has no access to the remaining provisions of the subsection in question, and the alternative relief sought by the utility does not require consideration by the Court.
The Court concludes that the utility is entitled to the primary relief sought, having established its right to terminate the gas service which it provides to the debtor. In the exercise of its equitable powers, however, the Court will stay the effect of this order through Friday, March 4, 1983, because the Court cannot be unmindful of the devastating effect upon the debtor’s inventory, the debtor, and its other creditors, by a loss of the debtor’s source of artificial heat for its greenhouses during this winter season. As an aside, the Court notes the possibility that the secured creditor may come forward with additional financial resources, to protect its security interest in the debtor’s inventory. An order in accordance with the foregoing will be entered.
. § 366. Utility service.
(a) ... (b) Such utility may alter, refuse, or discontinue service if neither the trustee nor the debtor, within 20 days after the date of the order for *870relief, furnishes adequate assurance of payment, in the form of a deposit or other security, for service after such date. On request of a party in interest and after notice and a hearing, the court may order reasonable modification of the amount of the deposit or other security necessary to provide adequate assurance of payment.
. 11 U.S.C. § 301. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489529/ | MEMORANDUM AND ORDER ON THE RE-ARGUMENT OF THOMAS GOR-SKY OF HIS MOTION FOR SUMMARY JUDGMENT
CHARLES J. MARRO, Bankruptcy Judge.
MEMORANDUM
On December 6, 1982, the Plaintiff, Thomas Gorsky, by his attorney, filed a Motion for Re-Argument of his Motion for Summary Judgment of June 11, 1982. The basis for the Plaintiff’s motion is his belief that “the Court has misconstrued several undisputed facts” in the Court’s Memorandum and Order of November 24, 1982. 25 B.R. 838 (Bkrtcy). The facts which the *92Plaintiff asserts are undisputed concern the accounting of assets of the Debtor. The two areas which the Plaintiff asserts that the Court misconstrued the “undisputed facts” are; 1) the Plaintiff’s charging the Defendant with proceeds of sales of corn to Jim Minor, but improperly crediting the Defendant for the resale proceeds thereof; and 2), the misapprehension that a number of truckloads of corn transported by Pierre Page never entered the Defendant’s records, and therefore, the Defendant never had those assets.
In reaching the instant decision on the Plaintiff’s re-argument, the Court will review the two areas of asserted “undisputed facts.”
I. THE SALES OF CORN TO JAMES MINOR
In support of its motion for re-argument, the Plaintiff asserts that the Court erred in its statement that the corn sold to James Minor was obtained from the Plaintiff.
As stated in the Memorandum and Order of the Court:
A second weakness in the plaintiff’s conclusions arises from the unrecorded resale by the debtor to Jim Minor. The debtor stated that the transactions of November 12, 1980 and November 13, 1980, being the purchases of three truckloads of corn from the plaintiff were to complete the resale to Jim Minor. (D.D. 106-107) These three purchases were reflected in the plaintiff’s records, however they were not recorded in the debtor’s check register. (D.D. 45)
As stated by the Plaintiff in its Motion for re-argument:
By the defendant’s own testimony however the corn which the defendant resold to James Minor was purchased from a Mr. Lathrop, a New York farmer. The truckloads of corn involved in the Latrop (SIC)-D’Avignon-Minor transactions were strictly “off the books.” For those loads of corn, D’Avignon, by his own testimony paid Mr. Lathrop by cashier’s check from the resale proceeds. Mr. Lathrop for these loads of corn, was not paid by a check drawn on defendant’s business account. (Deposition of Leonard D’Avignon, pages 45-46)
While the Plaintiff has contended that the facts concerning the above sale are “undisputed,” a review of the deposition of Leonard D’Avignon seems to contradict this alleged lack of dispute. Plaintiff relies on pages 45-46 of D’Avignon’s deposition where it states:
Witness: After — As you know, after everybody got a hold of my checkbook here, it was a total disaster. I couldn’t put — Anyways, I took a check — I did not deposit it in my account, I directly cashed it at the bank.
Q. Who was the cheek from?
A. It was from James Minor.
Q. And you cashed the check directly?
A. Yes, and I got — I believe I got two certified checks.
Q. Or cashier’s checks, maybe?
A. Yes.
Q. And who did you give those to?
A. One of them I had to pay for corn.
Q. To which farmer?
A. Lathrop.
However, as “undisputed” as the Plaintiff asserts the “wash” sale to be, the Plaintiff has failed to consider or direct the Court’s attention to the disputing testimony found at pages 105 through 107 of the deposition.
On pages 106-107 of the deposition, the Plaintiff was questioning Mr. D’Avignon regarding purchases from the Plaintiff, reflected in Plaintiff’s exhibit 5. As stated in the deposition:
Q. A load that you took out on November 11th, fifty-thousand three hundred pounds. Do you know where that went?
A. I took our myself. That went to Leo.
Q. Leo Bean? Another load on November 11th, Pierre Page. Do you know where that went?
A. No I can’t — I don’t know where it went.
*93Q. Three loads on November — two on November 12th and one on November 13th, Harold Manning. Do you know where they would have gone?
A. Two on the 12th.
Q. Right.
A. One on the 13th.
Q. All by Harold Manning
A. I think I had one or two to bring to Brandon to finish him up, and it probably went there
Q. Who was in Brandon?
A. Minor. I could ask him and find out and — I think he would remember.
While the above statements from the Defendant tend to show that some of the corn sales to James Minor were from the corn purchased from the Plaintiff; it is more important to note that the facts are not as clearly “undisputed” as alleged by the Plaintiff. As such, there still appears a genuine issue of fact as to warrant the denial of the motion for summary judgment. As such, the Court’s Memorandum and Order of November 24, 1982 should stand.
II. LEO BEAN PURCHASES
The Plaintiff, again, asserts that the Court was under a misapprehension regarding certain “undisputed facts” regarding six truckloads of corn handled by Marcel Page and his son, Pierre.
The Plaintiff has asserted that the facts regarding the deliveries to Leo Bean are “undisputed.” These facts being that:
“1. Of the six truckloads of corn referred to by the court, four, not one were sold to Leo Bean
2. And the Defendant received the full sale proceeds therefor and deposited them to his business checking, account.
3. The undisputed depositions and documentary evidence in the form of weight slips disclose that at least the following loads were delivered to Mr. Leo Bean.
DATE WEIGHT DRIVER
11/5/80 48180 lbs. Pierre Page
11/6/80 48500 “ Pierre Page
WEIGHT DRIVER DATE
48660 “ Pierre Page 11/7/80
54920 “ Harold Manning 11/10/80
50300 “ Leonard D’Avignon 11/11/80
50380 “ Pierre Page 11/11/80
There is no question that the weight slips for the dates listed above for Pierre Page, indicate delivery to Leo Bean. However, the deposition of Leonard D’Avignon directly disputes those slips as well as a portion of D’Avignon’s affidavit. As found in the deposition regarding the sales to Leo Bean, the Defendant stated:
105 A. No, Bean is who I sold corn to. He is the last customer here.
Q. I’m sorry. Now, that was deposited on November 13th?
A. Yes.
Q. All right. So that would have been corn that was delivered to Mr. Beam.—
A. Yes.
Q. —Before the 13th, on or before the 13th?
A. It had to be before the 13th.
Q. All right, Do you know which one of those loads on my Plaintiff’s exhibit 5 it would have been, if at all?
A. Page brought one load there. He Had a bad time getting it to the farm, and I believe Harold Manning dropped two, and I dropped four.
Q. And what time span would those loads have been picked up?
106 A. Directly
Q. So Mr. Bean’s check was for about four loads?
A. It would have been seven
Q. Seven?
A. Yes, One hundred and seventy five ton maybe six loads it would have been. I brought either three or four there myself.
Q. Referring to Plaintiff’s 5, three loads of corn November 5th, 6th, and 7th drawn out by Pierre Page. Do you know what farmer that would have been sold to?
A. No, one load went to Bean, Could have been in that area.
*94Q. Load on November 10th, Harold Manning. Do you know where that would have gone?
A. That would have went to Bean.
Q. Two more on November 10th by Pierre Page. Do you know where that would have gone?
A. Definitely. He can’t pick up two loads in one day and continue to St. Johnsbury, so one of them had to go somewhere else.
Q. But you don’t know where?
A. No, I can’t say off hand.
Q. A load you took out on November 11th, fifty thousand three hundred pounds. Do you know where that went?
A. I took out myself, that went to Leo.
Q. Leo Bean? Another load on November 11th, Pierre Page. Do you know where that went?
A. No I can’t — I don’t know where it went.
The Defendant further asserted in his affidavit at page 3:
An further, it is my suspicion and indeed my opinion that at least six of the loads in question were drawn by Pierre Page and done so for his own profit or the profit of his father Marcel Page (my deposition page 62). And further, Marcel Page drew two loads for himself, which I know nothing about (my deposition 64).
While the statements of the Defendant, as made above, are self serving, they should not merely be disregarded as has been done by the Plaintiff in order to make the facts “undisputed.” The Defendant’s statements are not merely “fanciful” and a genuine issue of fact appears to remain. This becomes especially apparent when consideration is made of the Plaintiff’s supplemental documentary evidence and memorandum submitted on January 4, 1983.
In the supplementary evidence, the Plaintiff sets forth evidence brought out in a proceeding entitled Gorsky v. Page, conducted in Vermont Superior Court for Addison County, Docket No. S40-81Ac. In that proceeding it was established that Marcel Page obtained two truckloads which he appropriated the proceeds for his own benefit.
The Plaintiff, prior to the Addison County case, had asserted that Page had not appropriated any proceeds for himself, and that this fact was “undisputed.” However, the Addison County proceeding, in fact, proved that there was some dispute as to Page’s appropriations. It is facts in the nature of those set forth above, which led this Court to its finding that a genuine issue of fact remained. It is hard to imagine a clearer example of a genuine issue of fact than that in the instant case.
This Court recognizes that summary judgment is a drastic remedy and that it should resolve all doubts as to the existence of genuine issues of fact against the moving party. The Court will further view all inferences from the facts in a light most favorable to the parties opposing the motion. Mid-South Grizzlies v. National Football League, 550 F.Supp. 558 (E.D.Pa.1982); United States v. Diebold, 369 U.S. 654, 82 S.Ct. 993, 8 L.Ed.2d 176 (1964).
As stated in In re Rineer, 22 B.R. 447 (Bkrtcy.N.D.Ill.E.D.1982);
The movant bears the burden of proving that no genuine issue of material fact exists. Adickes v. S.H. Kress & Co., 398 U.S. 144, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970). Thus, summary judgment may be denied even where the opposing party offers no evidence, if the movant fails to meet his burden. Garza v. Chicago Health Clubs, Inc., 347 F.Supp. 955, 965 (N.D.Ill.1972). Doubts as to the existence of an issue of fact are resolved in favor of the party opposing the motion. If different inferences and conclusions can reasonably be drawn from the facts offered, summary judgment should be denied. Harvey v. Great Atlantic and Pacific Tea Co., 388 F.2d 123, 124-25 (5th Cir.1968). See also, In re Chong, 16 B.R. 1, 5 (Bkrtcy.Hawaii 1980).
In the instant case, the Court believes that the standards set forth herein and those stated in the Court’s opinion of November 24, 1982, preclude the granting of *95the motion for summary judgment. For summary judgment must be denied where there remains the slightest doubt as to any material fact. United States v. Del Monte De Puerto Rico, Inc., 586 F.2d 870, 872 (1st Cir., 1978). There is no question that doubt remains regarding certain material facts in this case.
ORDER
Upon the foregoing the Plaintiff’s Motion for Summary Judgment on re-argument is DENIED. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489530/ | FINDINGS OF FACT CONCLUSIONS OF LAW
SIDNEY M. WEAVER, Bankruptcy Judge.
THIS MATTER came on before the Court on the _ day of _, 1983, for trial of the issues raised by the Complaint of the Plaintiffs, ROBERT A. SCHATZ-MAN and JUSTIN P. HAVEE, Co-Trustees of KING MEMORIAL HOSPITAL, INC. and FLORIDA HOSPITAL GROUP, INC. (Co-Trustees), the Counterclaim of the Defendant, MIAMI CAPITAL DEVELOPMENT, INC. (Miami Capital) and the responsive pleadings of the Defendants, THOMAS L. JAMES and DORA JAMES (Jameses). The other Defendants have failed to timely respond and a default has accordingly been entered against them.
Miami Capital having failed to serve its Crossclaim upon the Napiers, this Court is without jurisdiction over said Defendants as to the Crossclaim.
The Co-Trustees, in a multi-count Complaint, have sought to foreclose their mortgage and security agreement against the real and personal property of the Defendant, NOVA HOSPITAL GROUP, INC. (Nova), and to recover under the terms of their promissory note executed by Nova in favor of the Co-Trustees. The Co-Trustees have also sought to establish the liability of the Jameses and Defendants, DAVID NAPIER and SARAH NAPIER (Napiers), as guarantors of the promissory note.
In additional counts, the Co-Trustees seek the Court: to enter declaratory judgment as to the Co-Trustees’ entitlement to the existing exemption from the Certificate of Need laws of the State of Florida to commence construction of a 126-bed replacement facility; to determine that the Agreement For Purchase and Sale of Assets, As Amended (Agreement), between the Co-Trustees and Nova has been breached by Nova and, thereupon, to determine that the Co-Trustees are entitled to rescission thereof; to award possession of the personal property subject to the Co-Trustees’ security interest; and to enter judgment for money damages and attorney’s fees against Nova.
Miami Capital, who claims a mortgage and security interest in and to the subject real and personal property, crossclaimed against the other Defendants to foreclose its mortgage and security interest as against the real and personal property owned by Nova to recover under the terms *117of its promissory note executed by Nova. Miami Capital also sought to establish the liability of the Napiers as guarantors of the promissory note and to recover money damages and attorney’s fees as against Nova.
Miami Capital counterclaimed against the Co-Trustees to determine the relative priorities as to each’s mortgage and security interest.
This Court notes that, subsequent to the transactions at issue, on or about May 5, 1982, Nova changed its name to Peninsula Community Hospital, Inc. This name change does not alter or affect this Court’s Findings and Conclusions.
At the time of Trial, the Co-Trustees and Miami Capital joined in an ore tenus motion to determine that each’s mortgage and security interest were perfected simultaneously with the other and were, therefore, pari passu each to the other. The motion resolved the issue raised by Miami Capital’s Counterclaim. This Court does hereby grant the ore tenus joint motion and does hereby find that said interests are pari pas-su each with the same dignity and priority as the other.
FINDINGS OF FACT
1. The Plaintiffs, duly qualified and acting in their capacity as Co-Trustees, filed this Adversary Proceeding within the meaning of Bankruptcy Rule 701.
2. Nova is a Florida corporation organized under the laws of the State of Florida with its principal place of business located in Dade County, Florida.
3. The Napiers and the Jameses are residents of Dade County, Florida, and in all respects are sui juris.
4. On September 30, 1981, Nova executed and delivered a promissory note, mortgage and security agreement to Plaintiffs. The mortgage was recorded on October 23,1981, in Official Records Book 11250 at Page 833 of the Public Records of Dade County, Florida. Plaintiffs duly perfected their security interest under the security agreement by the timely filing of a Financing Statement. Plaintiffs own and hold the promissory note, mortgage and security agreement, and the property is now owned by Nova, who holds possession. Nova has failed to make the payment due on December 30, 1981, under the promissory note, mortgage and security agreement.
5. The property which served as collateral under the security agreement is located at 14310 N.W. 22nd Avenue, Opa Locka, Florida 33054, and is detained by Nova, who came into possession of the property by the purchase thereof and detains the property because it is income producing. The property has not been taken for any tax, assessment or fine pursuant to law, or under an execution or attachment against Plaintiffs’ property. Nova refuses to permit Plaintiffs to take possession of said collateral, although Plaintiffs have demanded possession thereof.
6. Defendant, FIRE TECH, INC., filed a Claim of Lien on March 22, 1982, recorded in Official Records Book 11386 at Page 1052 of the Public Records of Dade County, Florida, in the amount of $2,216.97 against Nova.
7. Defendant, MACK AIR CONDITIONING, INC., filed a Lis Pendens on June 28, 1982, recorded in Official Records Book 11482 at Page 2032, and a Final Judgment on October 19, 1982, recorded in Official Records Book 11584 at Page 2880, County Court Case No. 82-12228, in the amount of $1,450.05, both of the Public Records of Dade County, Florida, against Nova.
8. Nova, the Napiers and the Jameses executed the Plaintiffs’ Guaranty of Note. After Nova defaulted on the promissory note, demand for payment was made by Plaintiffs, and Nova, the Napiers and the Jameses have refused to make payment.
9. On or about the 8th day of October, 1980, Plaintiffs entered into the agreement, which was subsequently approved by this Court on or about the 17th day of November, 1980. Plaintiffs have performed all conditions precedent under the Agreement, which provided, inter alia, that, if the Plaintiffs were successful in their then pending litigation with the Department of Health and Rehabilitative Services, State of Florida, in upholding the hospital’s exemption *118from Certificate of Need laws of the State of Florida to build an approximately 126-bed replacement facility, then Nova agreed to pay the Plaintiffs additional consideration in the sum of One Thousand Five Hundred Dollars ($1,500.00) per licensed bed acquired. These monies were to be paid in three (3) equal annual installments, with the first installment due and payable six (6) months from the date acquired.
10. Plaintiffs commenced an Adversary Proceeding, Case No. 80-0129-BKC-SMW-A, against the Department of Health and Rehabilitative Services, State of Florida, to determine Plaintiffs’ rights to an exemption from Certificate of Need laws to enable the Plaintiffs to commence construction of a 127-bed replacement facility for KING MEMORIAL HOSPITAL, INC. Pursuant to Order of this Court dated April 30, 1982, it was determined that Plaintiffs were, in fact, entitled to the exemption from Certificate of Need to commence construction of a 126-bed replacement facility. The Order of the Court and the litigation were brought in the name of KING MEMORIAL HOSPITAL, INC. and FLORIDA HOSPITAL GROUP, INC. by the Plaintiffs.
11. On September 30, 1981, Nova executed and delivered a promissory note, mortgage and security agreement to Miami Capital. The mortgage was recorded on October 1, 1981, in Official Records Book 11241, at Page 742, of the Public Records of Dade County, Florida. Miami Capital owns and holds the note, mortgage and security agreement. The security interest was duly perfected by the timely filing of a Financing Statement. Nova has failed to make the payment due February, 1982, under the note, mortgage and security agreement and all subsequent payments, and is in default thereof.
CONCLUSIONS OF LAW
12. This Court has jurisdiction over the subject matter of this Adversary Proceeding and over the parties pursuant to 28 U.S.C. § 1471. The Debtors, having filed a Petition on October 2, 1979, this case is subject to the United States Bankruptcy Code.
13. Defendant, RICHARD J. POTASH, has no claim or interest in the subject property and is not a proper party to this action and is dismissed as a Defendant in this cause.
14. Nova is in default on the Plaintiffs’ and Miami Capital’s notes, mortgages and security agreements. The Plaintiffs and Miami Capital are entitled to a final judgment of foreclosure on their respective mortgages and security agreements, a judgment on their respective notes, and to take joint possession of the collateral under the security agreements. Plaintiffs and Miami Capital hold a lien for the total sum due superior to any claim or estate of Nova, the Napiers, the Jameses, FIRE TECH, INC. or MACK AIR CONDITIONING, INC. on the real property located in Dade County, Florida, as described in the Complaint.
15. Nova, the Napiers and the Jameses are in default on the Plaintiffs’ Guaranty of Note, and Plaintiffs are entitled to a judgment on the Guaranty of Note.
16. The Plaintiffs seek a determination as to their rights to the exemption from Certificate of Need laws. As a predicate to that determination, this Court would first state that the current 27-bed hospital facility is closed and shall remain closed pursuant to a Final Order of the Secretary of the Department of Health and Rehabilitative Services, State of Florida, (Secretary) and that such action by the Secretary would not impinge upon the jurisdiction of this Court as' to the exemption from the Certificate of Need to construct a 126-bed replacement facility. See In Re: King Memorial Hospital, Inc. and Florida Hospital Group, Inc., Debtors, Robert A. Schatzman, as Co-Trustee of King Memorial Hospital, Inc. and Florida Hospital Group, Inc. vs. Department of Health and Rehabilitative Services, State of Florida, Case No. 82-0972-BKC-SMW-A (Southern District of Florida, order dated 12/7/82).
It is this Court’s determination that the Plaintiffs shall have the right to proceed to construct or otherwise dispose of the right to build the 126-bed replacement facility, subject to the jurisdiction of this *119Court. In view of the fact that this adversary proceeding was necessitated by the failure of Nova to proceed to construct the 126-bed hospital facility pursuant to the schedule submitted to the Court, it will be necessary for the Plaintiffs, with notice to the Department of Health and Rehabilitative Services, to advise the Court of any revisions to the schedule.
17. The Plaintiffs also seek money damages for the default by Nova of the Agreement. This Court concludes that the Plaintiffs may elect either to utilize the exemption by building a hospital or disposing of the exemption, or, in the alternative, recover money damages from Nova.
18. The Plaintiffs and Miami Capital are entitled to attorney fees, and the Court will reserve ruling as to the amount pending further hearings on this matter.
19. A judgment will be entered in accordance with these Findings of Fact and Conclusions of Law. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489532/ | L. CHANDLER WATSON, Jr., Bankruptcy Judge.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
Introduction —
The above-styled case was commenced by a voluntary petition filed November 29, 1982, under Chapter 11, Title 11, United States Code, and this case is still pending before this Court under said chapter. No trustee has been appointed. The above-styled adversary proceeding was filed in this case on December 10, 1982; whereby, the plaintiff seeks relief from the stay provided for by 11 U.S.C. § 362(a). The plaintiff seeks this relief in order to be able to proceed with the foreclosure of a mortgage which the defendant concedes covers a large tract of the defendant’s real property, given by the defendant to the plaintiff as security for the debt owed by it to the plaintiff. On January 5, 1983, the plaintiff filed herein a waiver of the time constraints which, otherwise, would control the Court’s disposition of this type of proceeding, and a hearing on this matter was continued once at the request of the plaintiff and once because of a conflicting obligation of the Court.
On February 16, 1983, this proceeding came before the Court for a hearing at Gadsden, Alabama; whereupon, it was tried to a conclusion before the bankruptcy judge, without the intervention of a jury.
Findings of Fact—
From the Court’s having taken judicial knowledge of the debtor’s schedules which were required to be filed with its petition, from the uncontradicted statements of counsel during the discussion of “adequate protection” had in open court, and from the evidence presented, the bankruptcy judge finds as follows:
1. The debtor is a corporation which has the principal place of business and its business activities at or near Gadsden, Alabama.
2. The debtor’s principal asset is a tract of land consisting or approximately 312 acres, and its principal business activity is a real estate development on this property. Some comparatively small parts of the property in the debtor’s real estate development have been sold by it or have been condemned for highway or other purposes, leaving the 312 acres.
3. The plaintiff holds a mortgage from the debtor on the real property as security for the debtor’s payment to it of a loan indebtedness of approximately $465,000.00. The mortgage note is in default by virtue of the failure by the debtor to pay an interest installment of approximately $17,000.00 which was due in October, 1982. Similar interest payments fall due at the end of each quarter thereafter, with the entire principal debt maturing in August, 1983. The plaintiff’s mortgage constitutes a first mortgage as to approximately 75 acres and a second mortgage as to the remaining part of the debtor’s approximately 312 acre-tract.
4. The debtor is the recipient of a land-condemnation award which is now pending in the appellate courts of this State and has under contract proposed sales of relatively small parcels from the remaining 312 acres. When the debtor has in hand the proceeds from these matters, part must be applied to debts secured by other liens, and the remainder, which will go to the plaintiff, probably will approximate two-thirds of the October interest installment of about $17,-000.00.
5. The plaintiff had the real property evaluated by an appraiser, who testified as an expert witness that the property had a value of about $3,500.00 per acre or a gross value of some $1,100,000.00 to $1,137,500.00. These figures contemplated an outright cash sale of the entire tract in its present condition. The witness testified that such a sale constituted the “highest and best use” of the property; however, his instructions from the plaintiff were to appraise the property “for a sale.” This witness described the property as having a frontage along paved State Highway No. 77, as having water and sewerage facilities, as having certain paved streets constructed upon it, and as having electrical service available on *135it. This witness expressed the opinion that an alleged cost figure to the debtor for the property of $1,400,000.00 was a reasonable figure.
6. The debtor’s president testified that late in the year 1977 discussions were had and plans made for the development of the property in question and that the debtor purchased the property in the year 1978 pursuant to these development plans. These plans called for a twenty-year development program, whereby various portions of the tract of land would be committed to light industrial development, general distribution with warehouse facilities, a shopping mall, a restaurant, and other uses, all of which contemplate individual sales of relatively small parcels of the tract. In early 1981, these development plans were first discussed with the officials of the plaintiff bank. It may be inferred that the plaintiff then provided the financial resources for most of the development which thus far has occurred under those plans. The debtor’s president testified that the “highest and best use” of the property was its development according to those plans, as portrayed in the debtor’s brochure, which is debtor’s Exhibit “4”.
7. The purchase of the tract of land in the year 1978 was at a price of $600,000.00, and it is the vendors who now hold a “first” mortgage on a portion of the tract of land. The development which occurred after the plaintiff’s involvement in the year 1981 cost about $600,000.00 and included the installation of the water system, the sewer system, the streets, and the electric-service facilities. The debtor has invested in excess of 1.4 million dollars in the project, but as indicated a small portion has been or will be recovered from the condemnation proceedings and past and contracted-for sales.
8. The debtor’s president testified that the 75 acres against which the plaintiff has a “first” mortgage have a value of $750,-000.00, and that the entire tract has a value in excess of $3,000,000.00 for purposes of the development contemplated by the debt- or’s plan.
9.The debts owed by the debtor and secured by interest in part or all of the tract of real property and the extent and rank of the interest are approximately as set forth below:
Vendors’ mortgage — first lien or interest as to approximately 237 acres $156,718.
Plaintiff’s mortgage — first lien or interest as to 75 acres and second as to balance 465,000.
Guaranty Realty Company — second lien or interest on 25 acres 40,881.
Pinkel Mortgage — second lien or interest on 25 acres 22,158.
City of Gadsden — improvement assessments — rank and acreage not established 399,417.
Accrued interest on last three debts $ ? ,
Total [plus accrued interest] $1,084,174.
NOTE: Some discrepancy exists in the rank and extent of these creditors’ liens or interests.
10. Accrued, but undetermined interest mentioned in the preceding paragraph is probably not less than $50,000.00 and probably not more than $100,000.00.
11. The real property in question has a value in excess of the debts secured by interests of creditors in said property, giving the defendant an equity therein which the Court does not specifically determine at this time. The plaintiff’s interest in the debtor’s interest in said real property is adequately protected by such equity and the related circumstances for the present and at least for the next sixty days.
Conclusions by the Court—
Some light will be cast on the situation between these parties by affording the debtor an opportunity to file its plan of reorganization and attempt to obtain the proceeds from the land condemnation and the sales of land now under contract. Also, a reasonable delay in this proceeding will afford the debtor'an opportunity to explore the possibility of abandoning its plans to develop this property and sell it to a purchaser who may have tl)e financial resources available for whatever development may seem appropriate to the purchaser. Such a delay will not expose the plaintiff to any substantial financial harm, but the failure of the debtor to pay interest install*136ments to the plaintiff cannot be ignored as a ripening cause for lifting of the stay imposed pursuant to 11 U.S.C. § 362(a).
The bankruptcy judge concludes that relief to the plaintiff should be granted by way of conditioning the continuance in effect of the stay by a further and supplemental hearing on these matters to be held before this Court on March 30,1983, and an appropriate order will be entered. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489693/ | MEMORANDUM OPINION
C.E. LUCKEY, Bankruptcy Judge.
The debtor, Jack Moss, in his amended Schedule B-4 claimed as exempt, inter alia, “Motor Vehicles-1979 Toyota” in the amount of $1,200.00, specifying O.R.S. 23.-160(l)(d) as the statute creating the exemption, and “Tools of the Trade-Misc., 1979 Toyota” in the respective amounts of $200.00 and $550.00, specifying O.R.S. 23.-160(l)(c) as the statute creating the exemption. The trustee filed objections to the claimed exemptions and the only objection remaining to be resolved relates to the claim of exemption in the 1979 Toyota vehicle as a tool of trade. Hearing on the objection was' held at the debtor’s request.
This Court treated a claim of exemption in a vehicle as a tool of trade under O.R.S. 23.160(1)(c) in In Re Lindsay, 29 B.R. 25 (1983, Bkrtcy.Or.) where the debtor sought to avoid a non-purchase money lien under Section 522(f)(2)(B) of the Bankruptcy Code. The Court stated at page 26 of the Lindsay opinion:
“This Court is not prepared to say that in no circumstances can a vehicle not [sic.] be treated as a tool of trade, but is of the opinion that the Oregon legislature did not intend a vehicle as described in O.R.S. 23.160(1)(d) to be allowable under O.R.S. 23.160(1)(c) unless it is uniquely suited for and principally used in connec*396tion with a principal business activity. See In re Langley, 21 B.R. 772 (Bkrtcy.Me.1982); Matter of Curry, 18 B.R. 358 (Bkrtcy.Ga.1982).”
The debtor herein has not established in this case that the 1979 Toyota is uniquely suited for and principally used in connection with a principal business activity. The trustee’s objection to the debtor’s claim of exemption in the 1979 Toyota as a tool of trade in the amount of $550.00 is sustained. The debtor’s claim of exemption in the 1979 Toyota is limited to the amount of $1,200.00 as a vehicle under O.R.S. 23.160(l)(d).' The parties have not presented evidence of the amount of encumbrances, if any, nor of the value of the 1979 Toyota. A separate Order consistent herewith will be entered with each party to bear his own costs and attorney fees in these proceedings. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489533/ | FINDINGS OF FACT AND CONCLUSIONS OF LAW
SIDNEY M. WEAVER, Bankruptcy Judge.
THIS CAUSE having come on to be heard upon a Complaint seeking determination of the validity, priority and extent of lien and relief from stay, and the Court, having heard the testimony and examined the evidence presented; observed the candor and demeanor of the witnesses; considered the argument of counsel and being otherwise fully advised in the premises, does hereby make the following findings of fact and conclusions of law:
Defendant is engaged in the business of computer sales and services. It is presently in default of certain loans extended by Plaintiff. Plaintiff claims a general lien on all the inventory of Defendant as well as various other assets. Defendant brings a Counterclaim against Plaintiff, alleging preferential transfers.
The evidence establishes that Plaintiff holds a lien on assets of Defendant in the amount of $64,597.76, plus interest. Defendant challenges the validity of Plaintiff’s lien, by asserting that Plaintiff failed to affix the necessary documentary stamps *158on the promissory notes in evidence as required by Florida law. Upon review of the instruments and of the testimony of the bank’s witness, the Court finds that the requisite documentary stamp taxes were paid on all advances made by the bank to Defendant in compliance with state law. The Court therefore concludes that Plaintiff has a valid, first priority lien on assets of Defendant in the total amount of $64,-597.76, plus interest.
Defendant’s Counterclaim alleges that transfers of funds from Defendant’s bank account prior to bankruptcy constitute preferential transfers. Defendant did not offer proof of improvement of position of Plaintiff, and thus has failed to sustain its burden of proof so as to warrant any finding by the Court that such transfers were preferential. The Court finds that Plaintiff is undersecured by collateral presently held by Defendant, and that Plaintiff’s general lien extends to property of Defendant which is in the possession or custody of Plaintiff. The Court thus concludes that the transfers of funds from the Defendant’s account prior to bankruptcy do not constitute preferences voidable by Defendant, and that Plaintiff is entitled to retain those funds as collateral securing Plaintiff’s lien.
The Court further finds that Plaintiff is not being adequately protected and is entitled to relief in the form of monthly interest payments, to begin immediately and to be calculated on the full amount of the debt of $64,597.76 principal, with interest to be calculated at the contractual rate of 15%.
The Court denies Plaintiff’s Motion to Strike Defendant’s Amendment to Answer. Plaintiff is deemed to have answered the Counterclaim by general denial. The Court allows the Defendant until March 15, 1983 to file a plan of reorganization so long as Defendant continues to provide Plaintiff with the adequate protection described hereinabove. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489534/ | DECISION
BURTON PERLMAN, Bankruptcy Judge.
This adversary proceeding arises in a related Chapter 7 case, defendant herein be*159ing debtor in the related case. Defendant’s former spouse, plaintiff in this adversary-proceeding, seeks declaratory relief with respect to the dischargeability of a certain debt owed by defendant to plaintiff, plaintiff contending that the debt is non-dis-chargeable because within the provisions of 11 U.S.C. § 523(a)(5) which bars discharge-ability of certain marital debts. The matter came on for trial to the court. After hearing the testimony we reserved decision.
The facts were these. The parties were married August 28, 1965. They separated at the beginning of May 1980, and a divorce decree was entered December 29, 1980 in the Court of Common Pleas of Hamilton County, Ohio. One child was born of the marriage. He was thirteen years old at the time of the divorce decree. At the time that the parties got married, defendant was in the Coast Guard where he received training as an electrician. After leaving the Coast Guard in 1967 he was employed in electrical work for Westinghouse, and subsequently for a local Cincinnati contractor. At the time of the divorce, defendant’s take home pay was $300.00 per week. (His gross at that time does not appear, but there was testimony that in June 1980 his gross pay was $612.00 per week.) During the marriage, plaintiff was not employed outside the home to any significant extent. She had various employments sporadically over the years of the marriage. At the time of their separation, plaintiff borrowed $1,000.00 to support herself. In September 1980 she secured employment, taking home $167.00 per week. She had a $10.00 raise by the time of the divorce decree.
The divorce decree provided that defendant was to pay child support at $60.00 per week. The court found that defendant had cash and cash equivalents for a total of $10,045.99. This was stated in the decree as a predicate to an order by the court that defendant pay to plaintiff the sum of $5,300.00 together with interest at the rate of 10% per annum one year after the date of the journalization of the divorce decree. Plaintiff was also given two cemetery plots. There was testimony by John Issenman, the attorney who represented defendant during the divorce proceedings, that the $5,300.00 amount was derived at a hearing by a referee who found that a total of some $10,-000.00 was property accumulated during the marriage. He said that the idea w;as to apportion the property equally, and there was no mention of alimony. He testified that in accordance with the usual practice, defendant allowed plaintiff to take an uncontested divorce. Plaintiff had no independent resources at the time of the divorce.
What is at issue here is whether the award of $5,300.00 in the divorce decree is a non-dischargeable debt within the meaning of § 523(a)(5), because it is “for alimony to, maintenance for, or support of such spouse... ”. Defendant’s principal argument in favor of dischargeability is that the provision of an obligation by defendant to plaintiff in the amount of $5,300.00 was by way of a property settlement or division of property and therefore not alimony. In a recent case, In re Hill, 26 B.R. 156, Bkrtcy., S.D.Ohio, Western Div., 1983, we said the following:
While the parties have cast the argument before us, and it is common in these controversies to do so, as whether certain property was awarded as alimony or as property settlement, such a characterization is not particularly constructive. The reason for this approach probably lies in O.R.C. § 3105.63 where, in regard to separation agreements, the statute says that:
‘The separation agreement shall provide for a division of all property, alimony, and (custody matters).’
The statute thus appears to distinguish division of property from alimony. The two terms are not, however, mutually exclusive. Under the law of Ohio the parties may, upon a divorce, agree to how they will divide up their property, and such an award of property to a spouse may be regarded as alimony. In Cherry v. Cherry, 66 O.St.2d 348, 20 O.O.3d 318 [421 N.E.2d 1293] (1976), the Supreme Court of Ohio in commenting upon its earlier Wolfe decision said the following at 66 O.St.2d 352 [421 N.E.2d 1293]:
*160‘The issue before this court in Wolfe v. Wolfe, 46 Ohio St.2d 399, 75 O.O.2d 474 [350 N.E.2d 413] (1976), was whether a court of common pleas had power to modify the terms of a decree of divorce previously issued by it, which related to an allowance of “alimony.” Before addressing the issue, this court reexamined the basis and method upon which alimony is awarded in Ohio. In its reexamination the court pointed out that “alimony” is composed of two separate elements — alimony which constitutes a division of the marital assets and liabilities, and alimony consisting of periodic payments for sustenance and support’
The significance of the quoted observations for present purposes is to make it clear that it is not dispositive that a debt arose by way of a setting off of property to a spouse in a divorce decree. It is to other factors that we must look in order to ascertain whether the debt is for alimony, maintenance, or support.
We have defined alimony as “an allowance for support and maintenance”, and as “a substitute for marital support.” In re Diers, 7 B.R. 18 (Bkrtcy., S.D.Ohio, 1980). As in the Hill case, supra, the marriage in the case now before us had lasted for a significant period of time, fifteen years, and there was a child born of the marriage. Further, plaintiff had not regularly been employed up until the time that she and defendant separated, nor is there any indication that she had any independent resources at the time of the divorce. Indeed, the indications are to the contrary, for she was obliged to borrow some money in order to carry on at that time. These facts persuade us that the $5,300.00 amount set off to her in the divorce decree was intended to provide her a substitute for marital support.
In the light of all of the foregoing, we find the issues in favor of plaintiff and hold the debt of $5,300.00 plus 10% interest per annum as provided in the divorce decree, commencing one year after the date thereof, to be a non-dischargeable debt, and that plaintiff may have judgment in that amount.
The foregoing constitutes our findings of fact and conclusions of law. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489537/ | BURTON PERLMAN, Bankruptcy Judge.
Defendant is the debtor in the related Chapter 11 case. That case is one of four linked Chapter 11 cases filed by entities controlled by Richard Johnson. Johnson owns all of the stock of the instant debt- or/defendant. It is here significant that there are associated Chapter 11 cases with that filed by this debtor, because, while this debtor’s sole asset was the real estate which is the subject of this proceeding, the related entities were responsible for the operation of a welding school at the subject premises. In the complaint now before us, plaintiff, mortgagee of the premises, seeks relief from the automatic stay of 11 U.S.C. § 362 so that it may proceed to conduct a public sale of the premises. The complaint alleges. that the grounds required by § 362(d) are present and justify the relief which is sought in the complaint. That is, plaintiff alleges that it is not adequately protected, that defendant has no equity in the real property and that the property is not necessary to reorganization. The matter came on for trial, at the conclusion of which we reserved decision.
The testimony adduced at the trial showed that there was no serious dispute that the amount of the indebtedness of defendant to plaintiff was $259,000.00, consisting of approximately $219,000.00 in principal, and the balance interest. As part of the arrangement between the parties, defendant was to maintain insurance on the building and also key man insurance on the life of Johnson. Defendant defaulted on both obligations. Plaintiff has been insuring the building since June 1982, though defendant says that it has attempted to secure insurance coverage, but has been refused because of the existing coverage by plaintiff. Defendant purchased the building in 1980 for $290,000.00. At that time officers of plaintiff had appraised the building at $297,000.00. Defendant thereafter spent approximately $138,000.00 remodel-ling the building, installing heating, rest rooms, wiring for lighting, as well as such wiring as is appropriate for a welding school. Of the wiring expenditures, $55,-000.00 was devoted to bringing the wiring up to state standards.
Johnson’s welding school is in trouble and it is this which has led to the present Chapter 11 filing. The reason for the trouble is that there is a federal investigation into the affairs of the welding school, and the school cannot get contracts because of this investigation. The investigation has been in progress since 1979 and it is not known when it will be concluded. The last time that the welding school operated classes was in January 1982. While Johnson expects to resume operation of the welding school when his problems are resolved, there is no way of knowing when that will be. Meanwhile defendant has made no payments to plaintiff on its mortgage since January 1982.
The central testimony presented at the trial consisted of competing expert testimony as to valuation. The purpose of the valuation testimony from defendant’s point of view, was to show that plaintiff was adequately protected, as required by § 362(d)(1), by an equity cushion, that is, a value of the property well in excess of secured claims against it. From plaintiff’s point of view, valuation testimony was vital to carry its burden, as required by § 362(g), of showing that defendant had no equity on the subject property.
Plaintiff called Leland Fred Bunch, Jr. as its expert appraiser. Bunch testified that he had considered each of the three traditional bases for appraisal in doing the work requested of him by plaintiff. These are the cost, market, and income basis for valu*359ation. As to the cost approach he valued the land upon which the building stands at $65,000.00. His opinion was that it would cost $740,000.00 to build the building anew, and he depreciated that by $592,000.00. Using this technique, he arrived at a valuation on a cost basis of $213,000.00. Applying the market approach, he arrived at a valuation of $215,000.00. This approach depends upon the valuation of comparable sales. As to the income approach, Bunch arrived at a valuation of $197,000.00. This was based upon expected income less expenses. It will be seen thus that Bunch in his report and in his testimony arrived at a maximum valuation of $215,000.00. We are not persuaded as to the validity of this appraisal.
Bunch had not visited the premises at the time the appraisal was made. He had visited the premises two years prior when defendant had purchased it. Indeed, his firm was the brokerage firm which handled the property. It advertised the property for sale at $315,000.00. He admitted that installation of heating and air conditioning may increase value of property yet he did not take into account the fact that defendant had made substantial expenditures on this account since acquiring the property. Of greatest significance in causing reservations about his appraisal is our view as to his approach to valuation. Bunch listed six prior sales, including the subject property, yet chose, for reasons which we do not find persuasive, to select the two lowest values on a square foot basis to arrive at his market valuation of the subject premises. He disregarded the actual sale of the subject premises themselves. It seems to us that the comparable sales shown by Bunch in his report suggest that the price paid by defendant upon acquisition in 1980 did not so depart from other valuations that that price could not be regarded as having some validity. It was not disputed that defendant spent $138,000.00 in improving the property. While it is true that a substantial portion of that was for a specialized purpose and therefore must be discounted from the point of view of a different prospective purchaser, some of the expenditure was for improvements which ought to be added in. Particularly, the evidence was that some $55,000.00 was spent for wiring to bring the building up to state standard. Thus, we find that the appraisal by Bunch is not persuasive.
We reach the same conclusion with respect to the appraisal by Taylor, defendant’s expert. He merely added the price paid by defendant in 1980 to the expenditure made by defendant subsequently for a total valuation of $428,300.00. This is not an unreasonable starting point for an appraisal, but it is not an acceptable present valuation. Taylor admitted that the economic climate in Huntington had in the intervening two years since defendant acquired the building substantially declined. Nor he did not take into account that a substantial portion of the expenditure made by defendant would not be of value to an occupier of the premises other than defendant. It is clear to us that a realistic value would be well below that of the Taylor appraisal, and well above that of the Bunch appraisal.
In this posture of the evidence on valuation, the allocation of the burden of proof made by § 362(g) becomes of crucial importance. There it is provided that plaintiff has the burden of proof on the issue of the debtor’s equity in property, while the debt- or has the burden of proof on all other issues. Here debtor/defendant has failed to carry its burden of proof as to the provision of adequate protection to plaintiff. While there may be some equity in the property, the evidence does not enable us to evaluate whether it is sufficient to provide adequate protection to this plaintiff. Moreover, there is ongoing attrition of any equity cushion and there is no suggestion by defendant of the provision of adequate protection by, for example, the means suggested at 11 U.S.C. § 361(1) against such attrition. Since § 362(d)(1) and § 362(d)(2) are stated in the disjunctive, all that is necessary in order that plaintiff be entitled to the relief which it seeks is that we find that defendant has not proved that plaintiff is adequately protected. See In re Anderson, 9 B.R. 248, 250 (Bkrtcy.E.D.Pa.1981). We so find.
*360Accordingly, a judgment will issue lifting the stay. | 01-04-2023 | 11-22-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/8489538/ | RANDALL J. NEWSOME, Bankruptcy Judge.
This is a Chapter 7 case in which debtor filed an application for redemption of items of personal property pursuant to 11 U.S.C. § 722. The parties have stipulated that the value of the property involved is approximately $600.00. Debtor alleges, however, that the sales contract for such property is void pursuant to Ohio Revised Code § 1317.06 of the Retail Installment Sales Act (RISA), thereby rendering the security interest and debt owed to creditor, Capital Savings & Loan Co., unenforceable pursuant to O.R.C. § 1317.08 and entitling the debtors to retain such property without payment thereon.
The question presented in this proceeding is whether under Ohio law, sales tax may be included in the indebtedness financed in a retail installment sales contract, where such taxes are fully disclosed in the contract.
The resolution of this issue requires an examination of the legislative purpose and substantive provisions of RISA. As was noted in Teegardin v. Foley, 166 Ohio St. 449, 143 N.E.2d 824 (1957), the purpose for enacting RISA was to prevent the inclusion of hidden charges in retail installment contracts, to compel full disclosure to consumers of all pertinent provisions of such contracts, and to control the rate of finance charges.
One of the principal mechanisms for achieving these legislative goals is found in § 1317.04, which requires all retail installment sales contracts to set forth a) the “cash price”, b) the amount of the buyer’s cash downpayment, c) the difference between the cash price and downpayment, d) the amount of any insurance subject to finance charges, e) the “principal balance”, which consists of the sum total of (c) and (d) above, f) the applicable finance charges, and g) the “time balance”, which consists of the total amount owed after adding the finance charge to the principal balance. The finance charge may not exceed the rates prescribed by §§ 1317.06 and 1317.061. With the exception of a nominal service charge, no other charges may be added to the retail installment contract in excess of the time balance, but the contract
“. .. may evidence in addition any agreements of the parties for the payment of delinquent charges ... taxes, and any lawful fee actually paid out, or to be paid out, by the retail seller to any public officer for filing, recording, or releasing any instrument... ”
The debtors argue that a retail seller contracts for an illegal charge in violation of § 1317.06, where it includes in the principal balance a charge — in this case, state sales tax — other than one specified in § 1317.04(E), and imposes a finance charge on such additional charge. In other words, while § 1317.07 allows a seller to set forth in the contract the amount of sales tax incurred on the purchase, debtors contend that § 1317.06 forbids the seller from including the tax in the amount subject to *419finance charges. They rely principally upon Levine v. M. Baldwin, 23 O.O.3d 436 (Ham.Cty.Mun.Ct., 1981) and Levine v. J. Baldwin, Case No. 81 CV 06359, (Ham.Cty.Mun. Ct., 1982) as support for their argument. Those cases hold that the principal balance in a contract may include only the cash price of the goods purchased and the cost of any insurance the retail buyer has agreed to procure. The judges in both Levine decisions viewed sales tax as a charge not encompassed by the definition of principal balance, and accordingly ruled that finance charges could not legally be charged on sales tax.
Because neither of the Levine decisions addressed the issue of whether sales tax is a part of the “cash price”, and because we view this as the dispositive issue in this case, we respectfully decline to follow the Levine decisions.1 Our analysis of this issue begins with the specific language of § 1317.01(E):
“Cash price” means the price measured in dollars, agreed upon in good faith by the parties as the price at which the specific goods which are the subject matter of any retail installment sale would be sold if such sale were a sale for cash to be paid upon delivery instead of a retail installment sale.
While this statute speaks only of the price of the “goods being purchased”, we believe that it was intended to encompass the sales tax which a cash buyer would be required to pay on the purchase. Thus, since sales tax is a part of the “cash price”, it is also a part of the “principal balance” and may be subject to a finance charge by the seller.
The language of § 1317.07 provides ample support for this conclusion, since it permits agreements for the payment of “... taxes, and fees payable to public officers for filing...” to be set forth in the contract. This section has been interpreted as permitting any lawful charge to be included in the agreement so long as it is not specifically prohibited by the statute. In Re Walters, 17 B.R. 644 (Bkrtcy.S.D.Ohio 1982) (Perlman, J.) (potential charge for attorneys’ fees permissible under § 1317.07). The holding of In Re Walters, supra, is entirely consistent with the Ohio Supreme Court’s decision in Domestic Credit Corp. v. Vazquez, 69 Ohio St.2d 527, 433 N.E.2d 190 (1982), in which the Court found that a retail installment agreement which provided for the acceleration of principal and interest upon default did not violate § 1317.-06:
Clearly, this section does not preclude acceleration of interest as well as principal in the event of default. Nor should we imply such a preclusion into the Act, by an act of judicial legislation, ... In determining legislative intent of a statute a court must not insert words not used.... To find for appellees would be to write a substantive amendment into the Act which is solely within the province of the General Assembly.
69 Ohio St.2d at 530-531, 433 N.E.2d 190.
In the absence of any statutory prohibition against levying a finance charge upon sales tax, the above-quoted language applies with equal force to this case.
Finally, the debtors argue that by charging a finance charge on sales tax, the creditor violated Ohio Revised Code § 5739.-01(H), which states in pertinent part that, “. .. no person other than the state ... shall derive any benefit from the collection or payment of such tax.” The debtors have failed to cite any citations of authority in support of their argument, and we have found none.
From our review of the statute, we conclude that § 5739.01(H) was not intended to provide a cause of action to the debt*420ors under these circumstances. Indeed, the statute appears to be aimed at preventing the wrongful retention of taxes lawfully due the state which a vendor has actually collected from consumers. See, Decor Carpet Mills, Inc. v. Lindley, 64 Ohio St.2d 152, 413 N.E.2d 833 (1980); Russo v. Donahue, 10 Ohio St.2d 201, 226 N.E.2d 747 (1967). Since nothing in the statute or case law authorizes this Court to afford debtors the remedy they seek, their argument must be rejected.
For all of the reasons stated above, debtors’ motion to redeem property without paying the amount of the creditor’s allowed secured claim is hereby DENIED. Pursuant to 11 U.S.C. § 722, the debtors shall have 60 days from the date of this order in which to redeem the property by way of appropriate payment to the creditor.
IT IS SO ORDERED.
. Contrary to debtors’ assertions, we are not bound to follow the Levine decisions in our determination of this case. While those decisions certainly should be accorded some weight, a federal court in a nondiversity case is not bound by a ruling of a state trial court “where the highest court of the state has not spoken on the point.” Commissioner v. Bosch, 387 U.S. 456, 465, 87 S.Ct. 1776, 1782, 18 L.Ed.2d 886 (1967); See also, San Francisco Real Estate v. J.A. Jones Const. Co., 524 F.Supp. 768 (S.D.Ohio 1981); Olivera v. State Farm Mut. Auto Ins. Co., 451 F.Supp. 889 (E.D. Mich.1978). | 01-04-2023 | 11-22-2022 |
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