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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

In re Krus, Case No. 17-12413-13 (02/21/2018) (582 B.R. 218) -- Judge Catherine J. Furay 02/21/2018

Case Summary:
Creditor Dells Land & Cattle Company, LLC ("DLCC"), filed an objection to Debtor's plan claiming that confirmation should be denied because the Plan modified the rights of claimholders whose interest was secured by a principal residence in violation of section 1322(b). The property at issue was a duplex, where Debtors occupied one unit and rented out the other unit. The Plan provided payment of $120,000 plus interest and a final balloon payment to DLCC. The Court addressed whether DLCC's claim could be modified through the Plan and whether the Plan was feasible. The Court held that the anti-modification provision did not apply, reasoning section 1322(b) controls only property that is exclusively a debtor's principal residence and not that merely includes or contains a principal residence. The Court noted that even if a balancing test was used under section 1322(b), the property would still be characterized as commercial. Debtors formed an LLC with the sole purpose of starting a commercial housing rental service at the time they acquired the duplex. Still, the Plan could not be confirmed because it was not feasible. Debtors had no room in their budget for savings and did not provide evidence of their ability to make the end-of-plan balloon payment.

Statute/Rule References:
11 U.S.C. § 1322(b)(2) -- Modification of Rights of Secured Claimants
11 U.S.C. § 1325 -- Confirmation of Plan

Key Terms:
Balloon Payment
Feasibility
Mixed Property
Principal Residence

Belinda Georgeson v. Nelson T. Rodriguez (In re Rodriguez), Adv. No. 17-0049, Case No. 17-10782-7 (01/31/2018) -- Judge Catherine J. Furay 01/31/2018

Case Summary:
Plaintiff filed an adversary proceeding seeking to have a debt declared nondischargeable pursuant to section 523(a)(6) for willful and malicious conduct. Plaintiff and Defendant at one time resided in the same home and have a daughter together. Plaintiff fled the home after Defendant became physically abusive, leaving behind various pieces of her personal property. Two months later, Defendant discarded the items Plaintiff left behind. A judgment in the amount of $7,800 was issued by a state court in favor of Plaintiff. The Court held that while Defendant's actions may have been motivated by ill feelings, he had a valid excuse. The Court denied Plaintiff's motion on the section 523(a)(6) claim on the grounds that: (1) Plaintiff failed to produce extrinsic evidence that Defendant acted maliciously in disposing of Plaintiff's abandoned items that were left in the house, and (2) Plaintiff failed to articulate any theory under which Defendant would have a duty to keep the property.

Statute/Rule References:
11 U.S.C. § 523(a)(6) -- Nondischargeability – Willful and Malicious Injury

Key Terms:
Disposal of Property
Judgment
Nondischargeable Debt
Willful and Malicious - Defined

U.S. Bank Trust, N.A., as Trustee for LSF8 Master Participation Trust v. Vincent G. Hamilton, Linda L. Hamilton, and Park Bank (In re Hamilton), Adv. No. 17-0011, Case No. 15-12496-11 (01/25/2018) -- Judge Catherine J. Furay 01/25/2018

Case Summary:
U.S. Bank Trust and Park Bank each held an interest in Debtors' homestead. Debtors took out three loans to finance the construction of their home. The original loans were refinanced with The Money Store on November 20, 1998, but not recorded until May 12, 1999. After the loan was refinanced but before it was recorded, Park Bank executed and recorded a Real Estate Security Agreement on the homestead. The sole issue before the Court was whether The Money Store's successor, U.S. Bank, held a priority interest over Park Bank. Though Wisconsin is a race notice state, the Court ruled U.S. Bank had priority because Park Bank had actual notice of The Money Store's pre-existing interest when it executed its loan. U.S. Bank also argued that the Court should apply the doctrine of marshaling. Because U.S. Bank failed to show Park Bank would not be prejudiced by such a ruling, the Court declined to marshal the collateral.

Statute/Rule References:
Wis. Stat. § 706.08(1)(a) -- Race Notice

Key Terms:
Actual Notice
Marshaling
Priority
Race Notice

Susan M. Rowe v. J. David Krekeler and Mary Krekeler (In re Rowe), Adv. No. 17-0017, Case No. 17-10305-13 (01/23/2018) -- Judge Catherine J. Furay 01/23/2018

Case Summary:
Plaintiff filed this adversary seeking to avoid a second mortgage on her residence. Plaintiff argued the value of her home was so low that it would not satisfy the first mortgage, and therefore there was no value to which Defendants' second mortgage could attach. Defendants disagreed with Plaintiff's valuation. The Court ruled the value of the house was high enough to satisfy the first mortgage with some left over for the second. In reaching that conclusion, the Court noted the Defendants' appraiser was more persuasive because he had experience in selling houses, rather than simply appraising them. Having found the claim was partially secured, the Court determined the lien was unavoidable.

Statute/Rule References:
11 U.S.C. § 1322(b)(2) -- Modification of Rights of Secured Claimants
Fed. R. Bankr. P. 3012 -- Valuation

Key Terms:
Valuation

In re Johnson, Case No. 17-11448-12 (01/12/2018) (581 B.R. 289) -- Judge Catherine J. Furay 01/12/2018

Case Summary:
This matter came before the Court on the confirmation of a Chapter 12 plan. Debtor is a farmer dealing primarily in corn and soy beans. His plan sought to assume several leases and Debtor would have been liable for over $60,000 immediately upon confirmation. The Court found the plan lacked feasibility. Debtor's projections on his crop yields and expenses were unrealistic. The Court concluded, based on Debtor's historic income, that he would be unable to make plan payments. The Court also concluded that the proposed interest rate to Hiawatha National Bank, a creditor, was inadequate to compensate it for risk. The Court denied confirmation and dismissed the case, reasoning the interests of the estate and creditors would be better served by dismissal.

Statute/Rule References:
11 U.S.C. §305(a) -- Dismissal
11 U.S.C. §1225(a)(6) -- Feasibility

Key Terms:
Feasibility
Interest Rate
Plan Confirmation

In re Spin City EC, LLC, Case No. 16-13179-11 (11/30/2017) (578 B.R. 635) -- Judge Catherine J. Furay 11/30/2017

Case Summary:
Creditor JJC of Eau Claire, LLC, filed an objection to Debtor’s third amended plan of reorganization on the grounds of unfair discrimination. Debtor has two creditors: JJC and Royal Credit Union. Under the proposed plan, each creditor is placed in its own class. Royal Credit Union’s under-secured claim of $100,0000 would be paid in full, but JJC’s unsecured $75,000 claim would only be paid 13.3% of the full amount. The Court addressed whether the plan unfairly discriminated against JJC and determined the plan violated 11 U.S.C. §§ 1122 and 1129. The Court found the claims held by JJC and Royal Credit Union were substantially similar, but debtor failed to articulate a sufficient business reason for separating them. The Court stated that Debtor attempted to gerrymander its way into confirmation of the plan and unfairly and improperly preferred one creditor over the other. Additionally, the Court found that the proposed plan violated the absolute priority rule because Fuerbringer, an equity holder, would retain his interest in the LLC. Debtor argued that Fuerbringer’s interest had minimal value, but the Court determined that was immaterial. While Fuerbringer may only retain a minimal amount of property through his continued equity interest in the LLC, it is enough to be cognizable as property under the Code. As such, Debtor’s plan could not be confirmed. Finally, under 11 U.S.C. § 1129, the 45-day period for confirmation had long passed and the Court could not conclude that a plan would be confirmed within a reasonable period of time. The Court declined to permit Debtor to file another Plan and the case was dismissed.

Statute/Rule References:
11 U.S.C. § 1122 -- Classification of Claims or Interest
11 U.S.C. § 1126(c) -- Acceptance of Plan
11 U.S.C. § 1129(b)(2)(B) -- Absolute Priority Rule

Key Terms:
Absolute Priority Rule
Classification of Claims
Gerrymander
Sweat Equity
Unfair Discrimination

Aaron Holzhueter v. David J. Groth, et al. (In re Holzhueter), Adv. No. 16-0079, Case No. 16-13134-11 (10/18/2017) (575 B.R. 444) -- Judge Catherine J. Furay 10/18/2017

Case Summary:
The Debtor filed this adversary proceeding seeking a declaratory judgment that he was not liable to the Defendants and that the Defendants' claims were disallowed against him and the bankruptcy estate. The Debtor's father ran a Ponzi scheme through his insurance business, where Debtor had been an employee and director. The Defendants represent a small portion of the total number of individuals and families who were defrauded in that Ponzi scheme. The Defendants filed a counterclaim for a determination that their claims were nondischargeable on the ground that the Debtor was involved in the Ponzi scheme and therefore owed them a nondischargeable debt under 11 U.S.C. §§ 523(a)(2)(A) and 523(a)(6). The court granted summary judgment to the Debtor on the section 523(a)(2)(A) claim on the grounds that: (1) the Defendants failed to allege the Debtor "obtained" money through fraud, and (2) the Defendants failed to produce evidence that would show that the Debtor made any false representations, intended to commit fraud, or committed "actual fraud." The Court granted summary judgment to the Debtor on the section 523(a)(6) claim on the ground that Defendants failed to produce evidence that the Debtor acted willfully and maliciously.

Statute/Rule References:
11 U.S.C. § 523(a)(2)(A) -- Nondischargeability – Fraud Pretenses, False Representation or Fraud
11 U.S.C. § 523(a)(6) -- Nondischargeability – Willful and Malicious Injury

Key Terms:
Actual Fraud
Civil Theft
Conversion
False Representation
Nondischargeable Debt
Ponzi Scheme

In re First Phoenix-Weston, LLC, and FPG & LCD, LLC, Case No. 16-12820-11 and 16-12821-11 (Jointly Administered) (08/14/2017) (575 B.R. 828) -- Judge Catherine J. Furay 08/14/2017

Case Summary:
Prior to filing this Chapter 11, Debtor entered into a Loan Agreement with Sabra Phoenix Wisconsin, LLC. The loan provided the Debtor with financing necessary for the completion of a construction project. Simultaneously with the Loan Agreement, Debtor and Sabra Phoenix entered into an Option Agreement. Debtor subsequently filed in bankruptcy and Sabra filed a proof of claim for $17,773,438.77, which included damages for Debtor's alleged breach of the Option Agreement. The Debtor objected to the claim insofar as it sought damages related to the Option. The Court granted Debtor's objection and determined that Sabra was not entitled to a claim for breach of the Option Agreement. In so holding, the Court found that the Option served as additional security for the Loan Agreement, that there was insufficient consideration in the transaction, that the Option impermissibly clogged Weston's right of redemption of its mortgage, and that the Option Agreement was unconscionable.

Statute/Rule References:
11 U.S.C. § 502 -- Allowance of Claims or Interests

Key Terms:
Additional Security
Clogging the Right of Redemption
Consideration
Unconscionability

C. Brate Bryant, Elizabeth A. Bryant Living Trust, and C. Brate Bryant 1990 Revocable Trust v. Paul L. Clements and Tina M. Clements (In re Clements), Adv. No. 17-0012, Case No. 16-13848-7 (07/27/2017) (570 B.R. 803) -- Judge Catherine J. Furay 07/27/2017

Case Summary:
Plaintiffs filed an action against the Debtor in state court on May 13, 2009. The state court found Debtors had obtained money in violation of state securities law and issued a default judgement against them for $974,104.46. The Plaintiffs then brought this adversary seeking a determination that the state court judgment is nondischargeable under 11 U.S.C. § 523(a)(19). Defendants responded that the state court judgment was invalid. The Court held the state court judgment was valid and enforceable against Debtors and nondischargeable.

Statute/Rule References:
11 U.S.C. § 523(a)(19) -- Nondischargeability - Violation of Securities Laws

Key Terms:
Nondischargeable Debt

Aaron Holzhueter v. David J. Groth, et al. (In re Holzueter), Adv. No. 16-0079, Case No. 16-13134-11 (07/18/2017) (571 B.R. 812) -- Judge Catherine J. Furay 07/18/2017

Case Summary:
Debtor filed a voluntary Chapter 11 petition on September 12, 2016. He filed an adversary complaint on September 14, 2016, against Defendants David J. and Gale I. Groth, David J. and Judith A. Heinecke, James G. Pritchard, John W. and Patricia Tesch, and Barbara L. Wegner (collectively as the "State Court Plaintiffs") seeking a declaratory judgment that he is not liable to these individuals, that their claims be disallowed, and that any debt owed to them is dischargeable. The State Court Plaintiffs filed an Answer and Counterclaim to the Debtor's Complaint. They seek a determination that under 11 U.S.C. §§ 523(a)(2), (a)(6), and (a)(19) that certain debts are nondischargeable. The State Court Plaintiffs filed a motion requesting that the Court abstain from determining issues related to liability under 11 U.S.C. § 523(a)(19), or in the alternative that a non-bankruptcy tribunal must determine liability under 11 U.S.C. § 523(a)(19). The Court denied the State Court Plaintiffs' motion for permissive abstention. In addition, the Court sided with the growing number of bankruptcy courts that reason section 523(a)(19)'s plain language does not divest the Court from fully adjudicating liability, damages, and exception to discharge in a section 523(a)(19)-based adversary proceeding.

Statute/Rule References:
11 U.S.C. § 523(a)(19) -- Nondischargeability - Violation of Securities Laws
28 U.S.C. § 1334 -- Abstention

Key Terms:
Abstention

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