Case Number: 15-10857-7
The Plaintiff, Chapter 7 Trustee Michael E. Kepler, filed an adversary complaint against Defendant, Thomas P. Maiers as Executor of the Estate of Shirley A. Maiers, seeking inter alia an order requiring the Defendant to turn over Debtor Ruth A. Hinzmann’s one-sixth beneficiary interest. In lieu of filing an answer, Defendant moved the Court for a change of venue pursuant to 28 U.S.C. § 1412. The Court denied the Defendant’s Motion for a Change of Venue concluding the Defendant failed to establish by a preponderance of the evidence that a change of venue was warranted.
11 U.S.C. § 541(a)(5)
28 U.S.C. § 1409 -- Venue of proceedings
28 U.S.C. § 1412 -- Change of Venue
Iowa Code § 633.471 -- Right of Retainer
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- Chief Judge Catherine J. Furay--2013-present
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Chief Judge Catherine J. Furay
Case Number: 15-10857-7
Case No. 16-11860-12
Debtor filed a voluntary Chapter 12 petition on May 24, 2016. According to 11 U.S.C. § 1221, the Chapter 12 Plan was due on August 22, 2016. At a telephonic hearing, the United States Trustee raised a conflict of interest with respect to the Debtor’s attorneys. Accordingly, Debtor retained new counsel, but only after the prescribed time under § 1221 had lapsed. Debtor’s new counsel immediately moved for an extension to file a Plan. No party in interest moved to dismiss. The Court concluded Debtor clearly demonstrated that the need for an extension was attributable to circumstances beyond the Debtor’s control. Debtor could not file a plan in good faith due to a pending valuation hearing which was critical to the formulation of a plan. Debtor’s failure to file a timely plan was due to her prior counsel’s conflict of interest in representing her parents, which also affected her ability to formulate a plan. Finally, Debtor did not act in bad faith in the delay to file a plan as she retained substitute counsel once the apparent conflict was brought to light.
11 U.S.C. § 1208(c)(3) -- Dismissal for failure to file a plan timely
Case No. 16-10129-13
Johnson Bank held two mortgages against Debtor’s real property, and began foreclosure proceedings in state court. In state court, Debtor unsuccessfully attempted to rescind the first mortgage by raising a Truth in Lending Act defense. Debtor then filed a Chapter 13 petition. Johnson Bank moved for relief from stay. Debtor once again sought to rescind the first mortgage. Johnson Bank argued Debtor’s opposition to relief from stay was a disguised attempt for the Bankruptcy Court to review a state court judgement, and therefore, barred by Rooker-Feldman. Relying on the Seventh Circuit’s reasoning in Taylor v. Fannie Mae, 374 F.3d 529 (7th Cir. 2004), the Court found that the Debtor had a reasonable opportunity to raise the Truth in Lending Act defense in state court. As a result, by asking the Court to rule the first mortgage was rescinded, Debtor sought to overturn the state court judgment. Thus, the Court found his federal remedy was “inextricably intertwined” with the state court judgment. Success in the Bankruptcy Court would have allowed the Debtor to avoid the state court’s judgment. Accordingly, Rooker-Feldman doctrine barred review.
11 U.S.C.§ 362(d) -- Relief from stay
11 U.S.C. § 362(g)(1)
Case No. 16-10037-7
Debtors Julie Roen and Robert Dorshak filed a voluntary chapter 7 petition. Both Debtors claimed a $75,000 exemption in real property as homestead property under Wis. Stat. § 815.20. The Chapter 7 Trustee objected to Debtor Dorshak’s $75,000 exemption claim, but conceded to Debtor Roen’s homestead exemption. Prior to their marriage, Debtor Roen owned the homestead free and clear with no liens as of 2007. There was no mortgage on the homestead throughout the Debtors’ marriage. Debtor Dorshak claimed that his payment of real estate taxes, home insurance, and necessary maintenance repairs constituted a mixing of marital property with individual property converting the homestead into marital property. The Court found Dorshak’s payments did not constitute a mixing under Chapter 766 because such payments were not applied to the mortgage nor did the payments substantially increase the property’s value. The Court sustained the Trustee’s objection and denied the exemption.
Wis. Stat. § 766.01 -- Marital property
Wis. Stat. § 766.63 -- Mixed property
Wis. Stat. § 815.20 -- Homestead exemption
Case No. 15-13725-13
Both Defendants hold mortgages against Plaintiff’s property. Plaintiff seeks to determine priority of the liens. Associated Bank had a first mortgage on the property from 1982. This mortgage contained a future advance clause with specific requirements. United FCS received a mortgage on the property in 1993. In 2000, Associated Bank refinanced their loan by giving the Plaintiff a line of credit and received a new mortgage in return. They then satisfied the 1982 mortgage. In 2001, Associated modified the 2000 loan to extend the credit line. The property is worth significantly less than the sum of the debts. Associated filed a cross-claim against United to assert a theory of subrogation to place its 2000 mortgage in first priority ahead of United’s mortgage.
The Court found that Associated was entitled to subrogation in the amount of $5,965.49, but no more. That is the amount of the 1982 loan that Associated refinanced. All other amounts of Associate’s claim were placed behind United’s lien. Associated did not satisfy the specific requirements of the future advance clause, so it cannot rely on that to secure its 2000 loan. It also did not order a title report before granting that loan to reveal the existence of United’s lien. Subrogation under Wisconsin law is based upon equitable factors. Granting subrogation to Associated beyond the refinanced amount would place it in a position it would not have enjoyed if it had not satisfied and released the 1982 mortgage. Further, it would place United in a worse position than it otherwise would have enjoyed. Therefore, the balance of the equities on the remaining amounts of Associated’s claim beyond the refinanced amount of $5,965.49 favor United and subrogation for those amounts is denied.
Case No. 09-11460-7
Plaintiff and Defendant are former co-owners of a tavern. The business eventually failed, and the Plaintiff alleged that the Defendant converted funds from the business to pay his personal debts and expenses. Plaintiff sued the Defendant in state court, and the parties settled the matter by submitting it to binding arbitration. The arbitration agreement contained a provision stating that any award would be nondischargeable in bankruptcy. The arbitrators awarded the Plaintiff $310,000, and the Defendant subsequently filed bankruptcy. The Plaintiff brought this adversary and summary judgment motion to declare her debt nondischargeable. Plaintiff argues that the nondischargeability provision from the arbitration agreement is binding upon the Defendant, and even if it is not, promissory or judicial estoppel should prevent him from arguing the debt is dischargeable. The Defendant argues that he did not give his attorney the authority to enter into the agreement, that he understood any award would be dischargeable, and that promissory and judicial estoppel do not apply.
The Court found that although the Defendant did not sign the arbitration agreement himself, he was bound by it because he cloaked his attorney in the authority necessary to settle the case. The Court next found that the nondischargeability provision in the arbitration agreement was not binding on the Defendant. Prepetition waivers of discharge are not allowed. The Code authorizes certain postpetition waivers, but does not authorize prepetition waivers. The Plaintiff also did not satisfy the requirements of promissory or judicial estoppel. The debt may satisfy the elements required for nondischargeability under § 523(a)(2), (4), or (6), but genuine issues of material fact remain, so the Court denied summary judgment. Lastly, the Court found that the Defendant waived the attorney-client privilege by voluntarily disclosing otherwise privileged communications with his attorneys in affidavits submitted to the Court.
11 U.S.C. § 727(a)(10) -- Waiver of discharge
Fed R. Evid. Rule 502 -- Attorney-client privilege
Case No. 13-15635-7
Creditors Thomas and Vicky Kriescher obtained a state court judgment in Minnesota and docketed it in St. Croix County, Wisconsin, just before the Debtor filed for bankruptcy. Trustee Mark Mathias filed a motion for summary judgment seeking to have the judgment set aside as a preferential transfer under 11 U.S.C. § 547. The creditors disputed whether the transfer was made while the Debtor was insolvent and whether the transfer allowed them to receive more than they would have in a chapter 7 distribution had the transfer not been made. The creditors offered amounts of Debtor’s assets and liabilities that would have made Debtor solvent. However, their liability calculation was based only on filed claims, which is not the true extent of a debtor’s liabilities. Their asset values were less than the liabilities the Debtor listed on her schedules, so the Debtor was insolvent at the time of the transfer. Because the Krieschers were unsecured creditors and this was not a 100% distribution case, any transfer would allow them to receive more than they would have without the transfer. The Court found that the elements of a preferential transfer had been satisfied and granted the motion for summary judgment.
Case No. 14-15001-7
Debtors originally filed their case as a chapter 13. Upon realizing they did not qualify for chapter 13 relief, they converted to chapter 11. The U.S. Trustee brought a motion to convert the chapter 11 to a 7 or dismiss the case. The Debtors did not oppose conversion to chapter 7. The U.S. Trustee now brings this motion to dismiss for abuse under 11 U.S.C. § 707(b). Debtors first argued the motion was barred by judicial estoppel. The Court found that judicial estoppel did not apply where the U.S. Trustee had been consistent with his position throughout the proceedings, the Court was not misled, and it would not result in an unfair advantage. Debtors next argued that section 707(b) did not apply to converted cases. The Court followed the majority rule that section 707(b) does apply to converted cases, also citing policy concerns if Debtors were able to file in chapter 13 or 11 and convert to chapter 7 to make themselves immune from section 707(b). Lastly, the Court found there was cause for abuse based upon the totality of the circumstances. The Debtors have a stable source of high income and have engaged in reckless consumer spending. Their expenses are unreasonably high and there are deficiencies with their schedules. The Court dismissed the case.
11 U.S.C. § 707 -- Dismissal
Judge Robert D. Martin
Case No. 01-33567-7
Where spouses are jointly liable for prepetition debt, but only husband files bankruptcy, wife's individual property remains available to satisfy the debt. Actions by creditors against wife to separate wife's individual property from the couple's community property, which is protected by the section 524 discharge injunction, do not violate the discharge injunction.
Case No. 13-15827-7
The debtors filed a Chapter 11 which was later converted to a Chapter 7. At the time of conversion the debtors maintained a DIP account which contained $8,652.43, 100% of which was post-petition earnings of the debtors. Following conversion, the Chapter 7 trustee sought turnover of the account to the estate, while the debtors argued that under 11 U.S.C. §§ 348(a) & (f), and In re Evans, 464 B.R. 429 (Bankr. D. Colo. 2011), and In re Markosian, 506 B.R. 273 (B.A.P. 9th Cir. 2014), assets of an estate at the time of conversion from Chapter 11 to 7 should be treated in the same way as assets of the estate at the time of conversion from Chapter 13 to 7. That is, only property of the estate that would have been includable in the estate at the time of the filing of the petition under the chapter to which the case has been converted would be includible post-conversion. In this
instance, the debtor’s reading of the Code would have prohibited the inclusion of the DIP
account in the Chapter 7 estate. Relying on In re Ford, 61 B.R. 913, 916 (Bankr. W.D. Wis. 1986), In re Lybrook, 951 F.2d 136 (7th Cir. 1991), and In re Meier, 528 B.R. 162 (Bankr. N.D. Ill. 2015), the court held that absent an express statutory directive to apply the § 348(f) rule to Chapter 11 to 7 conversions, Lybrook was still good law as to those conversions and, thus, personal income of a Chapter 11 debtor is property of the Chapter 7 estate following conversion.