Case No. 14-14757-13
At issue in this case was the debtors’ eligibility for chapter 13. Pursuant to 11 U.S.C. § 109(e), only an individual with unsecured debts of less than $383,175 may be a debtor under chapter 13. The debtors scheduled over $800,000 in unsecured debt due to a deeply underwater mortgage. This unsecured debt also included a judgment lien which was found to be non-dischargeable in a previous bankruptcy. Debtors wanted the court to define secured debt using the Dewsnup v. Timm, 502 U.S. 410 (1992), rationale resulting in the judgment lien as a secured debt and debtors falling below the unsecured debt ceiling in § 109(e). The court declined to extend Dewsnup to chapter 13 eligibility determinations. Furthermore, controlling 7th circuit precedent applied the § 506(a) test. Consequently, a debt is only secured for the purposes of chapter 13 eligibility to the extent of the value of the collateral.
11 U.S.C. § 109(e)
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- Chief Judge Catherine J. Furay--2013-present
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Judge Robert D. Martin
Case No. 14-14757-13
Case No. 13-15958-7
Prior to this bankruptcy filing, debtor was found liable on claims of unjust enrichment, wrongful conversion and breach of a fiduciary duty in state court. Once debtor filed bankruptcy, creditors from the state court action filed an adversary proceeding seeking to determine the dischargeability of their debt under 11 U.S.C. § 523(a)(2), (a)(4) and (a)(6). Despite the court’s recommendation, creditors relied on a theory of collateral estoppel and chose not to present any testimony. Creditors argued the court should use the state court transcripts, in absence of sufficient findings of fact by the state court, to preclude debtor from defending this action. Finding the creditors’ theory lacked legal support, the court dismissed the complaint.
Case No. 12-15486-7
On remand from the district court, the bankruptcy court had to determine if the debtor committed a defalcation as defined by the Supreme Court in Bullock v. BankChampaign, N.A., 133 S. Ct. 1754 (2013). On the facts admitted and proved, it was extremely unlikely that debtor did not have actual knowledge of his construction company’s wrongdoing. His participation in the decision not to pay the creditor demonstrated his knowledge that his company had more debts than money to pay them. Thus, every time he received a commission from the sale of the house, he was alerted to the fact that all the subcontractors were not receiving full payment. Even if debtor did not have actual knowledge, he was consciously disregarding the risk that he was violating his fiduciary duty. Consequently, the court found debtor, as a fiduciary of a trust that existed by operation of Wisconsin's theft by contractors statute, committed a defalcation for purposes of 11 U.S.C. § 523(a)(4) where, even if he was not actively cognizant of wrongdoing, he consciously disregarded the substantial and unjustifiable risk that his conduct violated his fiduciary duty.
Chief Judge Catherine J. Furay
Case No. 14-13002-7
The Court sustained the chapter 7 trustee’s objection to debtors’ claim of exemptions. The debtors claimed an exemption in two non-contiguous lots under Wis. Stat. § 815.20. Each lot was improved with a two-bedroom residence. The debtors argued both lots constituted their homestead because they occupied one or another of the lots, and sometimes separated and occupied both simultaneously. The Court determined the lots taken together did not qualify as one homestead. Although a person may have multiple houses, only one is his home, and thus only one may qualify as a homestead. The debtors also could not exempt the lots under a theory that each debtor had established a separate homestead, even if Wisconsin law permitted such an exemption. The debtors had not separated with the intent to remain apart when they filed their bankruptcy petition.
Case Number: 14-11773-7
The Court sustained the chapter 7 trustee’s objection to debtors’ claim of exemptions. The debtors claimed an exemption in a dairy cooperative equity revolvement account under 11 U.S.C. § 522(d)(10)(E). The cooperative bylaws were clear that redemption of the debtors’ equity was entirely within the discretion of the board of directors. Neither illness, disability, death, nor age would trigger redemption of the debtors’ equity. Although the debtors may have accumulated their patronage equity over time, the Court also determined they did not have a right to receive payment because of their length of service. This term connotes tenure, in the sense of plans conferring benefits based on the number of years of employment.
Case No. 13-15635-7
On summary judgment, collateral estoppel applied to render part of a state court judgment award nondischargeable under section 523(a)(4). The findings leading to the award established the defendant was a fiduciary. They also established she committed defalcation by retaining, commingling, and expending funds. As to whether the amount of the state court awards on the remaining claims were non-dischargeable, issues of fact remained, as necessary findings in the judgment did not satisfy the elements of sections 523(a)(2)(A), 523(a)(4), or 523(a)(6).
Case Nos. 11-11386-11
A chapter 11 debtor’s confirmed plan contained a provision obligating the debtor to execute a deed to specified property in the event of a default and a failure to cure. The court had jurisdiction over a creditor’s motion to compel such a transfer. The motion “arose in” a case under title 11. The court had the authority under section 1142(b) to order the transfer of the deed. It previously found the plan had not been “substantially consummated,” and in any event, section 1142(b) does not reference acts necessary for “substantial consummation” of the plan but rather for “consummation.” The court determined permissive abstention was not warranted and ordered the transfer. Currently on appeal to the district court.
11 U.S.C. § 1142(b) -- Implementation of plan
Case Number: 13-16039-7
The debtor sold property on a land contract and claimed an exemption in the proceeds under the applicable Minnesota homestead exemption statute. The statute provides, “[t]he owner may sell and convey the homestead without subjecting it, or the proceeds of such sale for the period of one year after sale” to any debt from which it was exempt. For the purposes of the statute, the “sale” occurred when the debtor and vendee executed the land contract, not when the debtor received the last payment. Accordingly, the debtor was only entitled to exempt proceeds she received in the year following the execution. She could not exempt proceeds received after that time.
Minn. Stat.§ 510.07 .-- Proceeds from sale of homestead
Case No. 11-16408-7
The court approved a fee application in part and denied it in part. Billing practices like vague descriptions of services, lumping unrelated activities into single entries, and submitting bills with entries that appeared duplicate impeded the court from determining whether certain fees were reasonable or necessary. A number of the services the attorney provided were necessary and calculated to benefit the estate at the time they were performed. However, some services were unusual, like acting as a disbursing agent, and others improper, such as pursuing collections actions in bankruptcy court, and the court denied fees for these services.
11 U.S.C. § 330 -- Compensation of professionals
Case No. 14-11862-13
Permissive abstention and remand was warranted following the debtor’s removal from state court of a dispute concerning a business relationship. The state court action centered around whether the business relationship was a partnership, and the debtor requested an injunction preventing the other party from carrying on business operations, dissolution, and an order of accounting and winding up of partnership affairs. Numerous factors weighed in favor of abstention. The action exclusively featured state law issues, so state law issues predominated over bankruptcy issues. Remand also promoted judicial efficiency, as the action was a non-core, related-to proceeding and the bankruptcy court would only have been able to enter proposed findings of fact and conclusions of law. The state court had jurisdiction to finally adjudicate claims.
28 U.S.C. § 1334(c)