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Opinions

The Western District of Wisconsin offers a database of opinions for the years 1986 to present, listed by year and judge. For a more detailed search, enter a keyword, statute, rule or case number in the search box above.

Opinions are also available on the Government Printing Office website for Appellate, District and Bankruptcy cases. The content of this collection dates back to April 2004, though searchable electronic holdings for some courts may be incomplete for this earlier time period.

For a direct link to the Western Wisconsin Bankruptcy Court on-line opinions, visit this link.

Chief Judge Catherine J. Furay

Michael Erwin Acuna v. Illinois Department of Revenue and Internal Revenue Service (In re Acuna), Adv. No. 21-00034, Case No. 21-11517-7 (10/11/2022) -- Judge Catherine J. Furay 10/11/2022

Case Summary:
Debtor filed a motion under Rule 59(e) to amend or alter the Court's summary judgment decision in favor of the Illinois Department of Revenue (“IDOR”). The Debtor sought to overturn the judgment on grounds that the Court did not properly consider the Debtor's argument under section 506(d). The Debtor did not present new evidence or argument in support of his motion, but merely reiterated arguments that he had previously presented. Accordingly, the Court denied the motion because the Debtor failed to clearly establish that the Court had made a manifest error of law or fact.

Statute/Rule References:
Fed. R. Civ. P. 59(e) -- Motion to Alter or Amend a Judgment
11 U.S.C. § 506(d) – Determination of Secure Status

Key Terms:
Dischargeability (taxes)
Motion to Alter or Amend a Judgment
Reconsideration

Thomas G. Smith v. SoFi Lending Corp. and Mohela (In re Smith), Adv. No. 22-00011, Case No. 21-11453-7 (08/05/2022) -- Judge Catherine J. Furay) 08/05/2022

Case Summary:
Debtor sued student loan creditor seeking to discharge his student loans, arguing that they were private student loan debts not described under 11 U.S.C. § 523(a)(8). In response, creditor sought to dismiss the claim under Rule 12(b)(6) for failure to state a claim. The Court agreed with creditor that Debtor's Amended Complaint failed to contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face under section 523(a)(8)(A)(ii). The Debtor did not include sufficient factual allegations about how the loans failed to provide any educational benefit, as required under 523(a)(8)(A)(ii). Similarly, the Court agreed with creditor that the Amended Complaint failed to state a claim for a cause of action under section 523(a)(8)(B) because it only contained a threadbare recitation that the debts were not qualified educational loans, without more. Finding for Debtor, however, the Court ruled that the allegations in the Amended Complaint were sufficient for Debtor to make a plausible undue hardship claim under section 523(a)(8).

Statute/Rule References:
11 U.S.C. § 523(a)(8) -- Nondischargeability - Student Loans
Fed. R. Civ. P. 12(b)(6) -- Failure to State a Claim

Key Terms:
Dischargeability
Qualified Educational Loan
Student Loan

Michael Erwin Acuna v. Illinois Department of Revenue and Internal Revenue Service (In re Acuna), Adv. No. 21-00034, Case No. 21-11517-7 (07/29/2022) (643 B.R. 583) -- Judge Catherine J. Furay 07/29/2022

Case Summary (for decision pertaining to IDOR):
Debtor initiated an adversary proceeding against both the IRS and the Illinois Department of Revenue (IDOR), Counts II, III, and IV of which pertain only to the IDOR. Debtor and the IDOR filed cross-motions for summary judgment. The core of the motions was the Debtor's Illinois state income taxes and tax returns for 2016, 2017, and 2018. Count II relates to statutory liens resulting from unpaid income taxes from 2016 and 2017. IDOR filed liens for both years of unpaid taxes in Sangamon County, Illinois. Both parties agree, however, that the Debtor does not have any personal property in the state of Illinois, nor has the Debtor ever owned real property in Sangamon County, Illinois. The Court held that, based on the record as well as the Debtor's current schedules, IDOR had not shown that it has any lien on any property of the estate. There was thus no genuine issue on the question of whether IDOR had a valid lien in any of Debtor's disclosed property. But this determination is confined to the property the Debtor has disclosed as property of the estate. Count III related to Debtor's 2018 Illinois individual income tax liability. Debtor timely filed his original 2018 Illinois Individual Income Tax Return, in which he incorrectly reported his Wisconsin sourced wage income as taxable income. But then the Debtor filed an amended return indicating his tax liability was zero, which IDOR accepted. Indeed, in its answer, IDOR has conceded that it accepted the Debtor's amended return and that Debtor has no tax liability for 2018. The Court reasoned that there was no controversy and thus no dispute that the Court needed to determine. Summary judgment on Count III was therefore denied as moot and for lack of justiciability. Finally, in Count IV, Debtor asked the Court to determine and declare on summary judgment that the 2017 unpaid Illinois income tax claim was not an eighth priority tax claim, did not fall within any section 523 exception to discharge, and was a general unsecured claim that had been discharged. In short, the issue turned on whether a federal change notification is a "return" under applicable provisions of the Illinois Income Tax Act. The Court found that the federal change notification was a return, and therefore, the debt was nondischargeable under section 507(a)(8).

Statute/Rule References:
11 U.S.C. § 506 -- Determination of secured status
11 U.S.C. § 507(a)(8) -- Priority of claims - taxes
11 U.S.C.  523(a)(1) -- Nondischargeability – taxes

Key Terms:
Lien Avoidance
Priority Tax Debt

Michael Erwin Acuna v. Illinois Department of Revenue and Internal Revenue Service (In re Acuna), Adv. No. 21-00034, Case No. 21-11517-7 (07/29/2022) -- Judge Catherine J. Furay 07/29/2022

Case Summary (for decision pertaining to IRS):
Debtor initiated an adversary proceeding against both the IRS and the Illinois Department of Revenue, Count I of which pertains only to the IRS. Debtor filed a Motion for Summary Judgment asking that the Court declare the IRS's federal tax liens against the Debtor's real and personal property were forever void for all purposes under section 506(d) and section 522(h). However, the Court found that the IRS's liens may not be avoided under section 506(d) of the Code. Turning to Section 6323 of the Internal Revenue Code, the Court found the IRS’s failure to file an NFTL only made its liens not perfected or enforceable against third parties. However, an NFTL is not needed to perfect a tax lien against the taxpayer and therefore the IRS had a validly perfected lien at the time the Debtor filed for bankruptcy. Further, the parties agreed that, to the extent the IRS's liens encumbered Debtor's exempt property, they were avoidable under 11 U.S.C. § 522(h). This is because the IRS filed its notice of federal tax lien in the wrong county as required under Wisconsin law. However, the Court held that the Debtor is entitled to summary judgment avoiding his federal tax liens on his exempt property under 11 U.S.C. § 522(h), subject to section 522(c)(1), which renders exempt property liable for taxes that are excepted from discharge under section 523(a)(1) of the Bankruptcy Code. The Court further held the Debtor failed to establish that there is no genuine issue of material fact as to whether the IRS may avail itself of section 522(c)(1), because no nondischargeability action had been brought.

Statute/Rule References:
11 U.S.C. § 506 -- Determination of secured status
11 U.S.C. § 507(a)(8) -- Priority of claims - taxes
11 U.S.C.  523(a)(1) -- Nondischargeability – taxes

Key Terms:
Lien Avoidance
Priority Tax Debt

Michael Schuster v. Dennis Mark Warner (In re Warner), Adv. No. 21-00035, Case No. 21-11039-13 (07/21/2022) -- Judge Catherine J. Furay 07/21/2022

Case Summary:
Creditor filed an adversary proceeding against Debtor alleging that he was the sole owner to a piece of property the Debtor listed as “jointly owned” in his schedules. Despite what was listed on the Debtor’s schedules, Debtor responded by alleging creditor was merely a lienholder on the property. Both parties asked the Court for a declaratory judgment determining who owned the Property. Further, each party believed that they were a 100 percent owner of the Property and asked the Court to order the property be put in either party’s name alone. As a preliminary matter, the Court held that a just disposition of the case would be best achieved by considering the Debtor’s late-filed answer to the Complaint. The Court found that deciding dispositive issues against a party because of a delay in responding to requests to admit where the defendant was an elderly, ill, and unrepresented party does not strike a balance between the diligence in litigation and the interest of justice. Rather, justice was best served by deeming proffered facts not admitted and considering the Debtor’s responses. Additionally, Plaintiff did not assert how the delay would prejudice his litigation of the case. Turning to the merits of the cross-motions for summary judgment, the Court found that the warranty deed was clear that both parties were joint tenants on the property and that there was no genuine issue of material fact about the issue of which party owns the property. Therefore, the Court granted the motion and cross-motion for summary judgment to the extent that each party requested a declaratory judgment of who owned the property, holding that the parties jointly owned the property. The Court, however, denied both the motion and cross-motion for summary judgment to the extent that the parties asked the Court to determine either party was a 100 percent owner of the property and that the Court order the property be put in either party’s name alone.

Statute/Rule References:
11 U.S.C. § 541 -- Property of the Estate

Key Terms:
Joint Tenancy

Maple Leaf Cheese Cooperative v. Maple Leaf Cheesemakers, Inc., (In re Maple Leaf Cheese Cooperative), Adv. No. 21-00039, Case No. 20-13006-11 (06/14/2022) -- Judge Catherine Furray 06/14/2022

Case Summary:
Defendant moved to dismiss Plaintiff’s adversary proceeding regarding property damage and breach of contract. Defendant argued that Plaintiff lacked standing to assert such claims because it transferred the real property and equipment to its primary secured lender after it failed to find a suitable buyer within the time limit imposed by its confirmed plan. The Plaintiff objected, stating that the Plan expressly reserved its right to prosecute claims, including property damage, against Defendant. The Court found that Plaintiff had standing to assert the claims against Defendant because the language in the confirmed plan expressly contemplated the Plaintiff pursuing claims against Defendant for property damage. Defendant was aware that the claims were not transferred, and the basis for the claims accrued before any surrender or transfer of the property to the primary secured lender. Further, the Court held that the Plaintiff had constitutional standing to bring the claims because the Plaintiff suffered “injury-in-fact,” and the damage was “concrete and particularized.”

Statute/Rule References:
11 U.S.C. § 541 -- Property of the Estate
11 U.S.C. § 1123 -- Contents of Plan
Fed. R. Civ. P. 12(b)(1) -- Lack of Subject-Matter Jurisdiction

Key Terms:
Jurisdiction
Standing

In re Leaver, Case No. 21-10905-12 (05/26/2022) (641 B.R. 197) -- Judge Catherine J. Furay 05/26/2022

Case Summary:
Creditor argued its administrative expense priority claim from the Debtor's previously dismissed bankruptcy proceeding carried over to a Debtor's subsequently filed bankruptcy, entitling the creditor to an administrative expense priority claim in the second bankruptcy. The Court found that administrative expense claims under section 503 of the Bankruptcy Code are tied to the estate in a particular bankruptcy case, and so the creditor must show that its administrative claims asserted in the second bankruptcy case relate solely to the estate in that second bankruptcy. Because the creditor could not do so, its claims against the Debtor must be treated as general unsecured claims.

Statute/Rule References:
11 U.S.C. § 503 -- Administrative expenses

Key Terms:
Administrative Expenses
Administrative Priority Claim

Velocity Capital Group, LLC v. Jared T. Trapp (In re Trapp), Adv. No. 21-00019, Case No. 21-10140-7 (05/05/2022) -- Judge Catherine J. Furay) 05/05/2022

Case Summary:
Creditor filed an adversary proceeding seeking a determination that a Chapter 7 Debtor's debt to creditor is nondischargeable under 11 U.S.C. § 523(a)(2)(B) and 523(a)(6). Following the close of evidence at trial, the creditor moved to amend to include a claim under 11 U.S.C. § 523(a)(2)(A) to conform to the evidence. As a preliminary matter, the Court permitted the creditor to amend its complaint to conform to the evidence and add a claim against the Debtor under section 523(a)(2)(A) because the Debtor had a full and fair opportunity to defend against this potential claim and there was nothing on the record that suggests the Debtor would have presented additional evidence had he known sooner the substance of the amendment. Further, the Court found the debt owed to the creditor was nondischargeable under both sections 523(a)(2)(A) and (a)(6). Specifically, the Court found the debt was nondischargeable under 523(a)(2)(A) because the Debtor intentionally misrepresented to the creditor that funds loaned to Debtor by creditor would be used to expand the Debtor's business, purchase new equipment, and upgrade catering equipment, when in actuality Debtor's bank records and testimony showed that the money was used to pay payroll, vendors, and other operating expenses including tax liabilities that were not disclosed to the creditor. The Court also found the Debtor's intentional failure to make daily required payments to the creditor, instead using the funds to make payments to other creditors, constituted willful and malicious behavior making the debt nondischargeable under section 523(a)(6) as well. But, the Court ruled for Trapp on the section 523(a)(2)(B) count, finding that the written materials provided to creditor were not materially false or that the statements about prior months' earnings were made with intent to deceive.

Statute/Rule References:
11 U.S.C. § 523(a)(2)(A) -- Nondischargeability - false pretenses, false representation, or fraud
11 U.S.C. § 523(a)(2)(B) -- Use of a statement in writing
11 U.S.C. § 523(a)(6) -- Nondischargeability - willful and malicious injury

Key Terms:
Intent
Materiality

Susan Jackson v. Thomas James Meyers (In re Meyers), Adv. No. 21-00027, Case No. 21-10493-7 (04/29/2022) -- Judge Catherine J. Furay) 04/29/2022

Case Summary:
Plaintiff won summary judgment in a state court lawsuit against Debtor/Defendant based on breach of contract, misrepresentation, and theft by contractor. State court judgment awarded Plaintiff treble damages under statute, but did not include substantive analysis for doing so. Debtor filed bankruptcy, and Plaintiff sought nondischargeability determination under Code section 523(a)(4). The Court found that elements for defalcation while acting in fiduciary capacity under section 523(a)(4) were actually litigated and determined in state court suit, and therefore ruled in favor of the Plaintiff. The Court declined to rule that the treble damages award was nondischargeable, however, because the factors supporting such an award were not presented by Plaintiff, responded to by the Debtor, or analyzed and applied to the facts by the state court.

Statute/Rule References:
11 U.S.C § 523(a)(4) -- Nondischargeability – fraud or defalcation in fiduciary capacity
Fed. R. Civ. P. 56 -- Summary Judgment

Key Terms:
Claim Preclusion
Collateral Estoppel
Res Judicata

Judge Rachel M. Blise

In re Palace Theater, LLC, Case No. 21-11714-11 (03/31/2022) -- Judge Rachel M. Blise 03/31/2022

Case Summary:
The court addressed the novel question of whether a debtor whose primary activity was once the business of owning single asset real estate can change the nature of its single asset real estate property by purchasing assets of its lessee and assuming the lessee’s business operations mere hours before filing its bankruptcy petition.  Prior to the petition date, the debtor owned the real estate and building where a dinner theater was operated, and a separate LLC owned by the same persons as the debtor operated the theater business and leased the real estate from the debtor.  On the petition date, but before the petition was filed, the debtor and the related LLC entered into an agreement whereby the debtor purchased the production and hospitality assets and operations of the related LLC.  A secured creditor filed an objection to the debtor proceeding under subchapter V on the grounds that 11 U.S.C. § 1182(1)(A) requires that the debtor’s primary activity must be something other than the business of owning single asset real estate.  After an evidentiary hearing, the court held that the debtor had not carried its burden to prove that its primary activity on the petition date was not the business of owning single asset real estate.  The court found the real property constituted a single property; the property generated substantially all the gross income of the debtor; and the debtor conducted no substantial business other than operating the real property and activities incidental thereto.  Accordingly, the debtor was not eligible to be a debtor under subchapter V.  

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