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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.

Judge Thomas S. Utschig

In re Wofford, Case No. 10-12848-13 (05/23/2011) (449 B.R. 362) – Judge Thomas S. Utschig 05/23/2011

Case Summary:
Chapter 13 debtors entered into loan modification agreement with creditor, and creditor moved for court approval of the agreement. The Court first noted various deficiencies in the loan modification documents. Under § 1322(b)(2), a chapter 13 debtor cannot unilaterally rewrite the terms of a home loan, although the creditor can agree to different treatment. Although that agreement could be reviewed (and approved) in the context of plan confirmation or as the resolution of an actual dispute, there is no statute or rule which requires judicial approval of the terms of such a loan modification. Even if it was construed to constitute a reaffirmation agreement, the debtors’ reaffirmation of a debt secured by real property does not require court approval. The creditor’s request essentially acted as a petition for an advisory opinion or comfort order. The bank’s motion was denied.

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

Key Terms:
Loan Modification

Opportunity Bank, N.A. v. Henry Conrad Martinsen (In re Martinsen), Adv. No. 11-0011, Case No. 10-15990-7 (05/10/2011) (449 B.R. 917) – Judge Thomas S. Utschig 05/10/2011

Case Summary:
Debtor moved to dismiss adversary proceeding contesting discharge as being untimely filed. The plaintiff argued that the complaint should be regarded as timely because the U.S. Trustee had sought an extension of time. Alternatively, the plaintiff argued that the complaint should not be dismissed due to doctrines of equitable estoppel or equitable tolling. The Court determined that although the U.S. Trustee initially sought to extend the deadline for objecting to discharge as to “all parties in interest,” the order entered by the court (after an objection by the debtor) only extended the deadline as to the U.S. Trustee and the chapter 7 trustee. The plaintiff had plenty of time to seek an extension and did not do so. In addition, there was no contention that the debtor attempted to prevent the plaintiff from filing the adversary, and the plaintiff was not diligent in pursuing its possible claims. The complaint was untimely and the narrow equitable defenses to the rule did not apply. The debtor’s motion to dismiss was granted.

Statute/Rule References:
Fed. R. Bankr. P. Rule 4007(b) -- Time for Commencing Proceeding Other Than Under § 523(c) of the Code
Fed. R. Bankr. P. Rule 4007(c) -- Time for Filing Nondischargeability Complaint

Key Terms:
Complaints - Nondischargeability (Late Filed)

Randi L. Osberg, Trustee v. Gregory D. Halling (In re Halling), Adv. No. 10-0303, Case No. 10-14488-7 (05/09/2011) (449 B.R. 911) – Judge Thomas S. Utschig 05/09/2011

Case Summary:
The trustee sought to avoid certain payments as preferential. The debtor had made monthly payments on an obligation guaranteed by her son. The trustee argued that the payments were made “on behalf” of the son because they reduced his obligation on the guarantee. The defendant argued that he was not a “creditor” of his mother because he would never have sought to collect from her even if he had been forced to honor the guarantee. The Court concluded that the payments were made “on behalf of a creditor” because the son’s status was determined by the contractual relationship, not his statement about whether he would actually pursue his “contingent” right to payment (which constitutes a “claim” in bankruptcy and rendered him a “creditor” of his mother). Under § 550, the trustee could collect the avoided preference from either the initial transferee or the entity benefitted by the transfer. The defendant did not offer any evidence which supported the defense that the transaction had occurred in the ordinary course of business between the parties. As such, the trustee was entitled to judgment for the amount of the preference.

Statute/Rule References:
11 U.S.C. § 547 -- Preference
11 U.S.C. § 550 -- Recovery of Preferences

Key Terms:
Preferences

In re Griffith, Case No. 10-16201-7 (04/15/2011) (449 B.R. 909) – Judge Thomas S. Utschig 04/15/2011

Case Summary:
The chapter 7 trustee objected to the debtor’s exemptions, arguing that the debtor could not claim an exemption in the portion of various assets which were technically owned by the debtor’s non-filing spouse. The debtor sought to exempt all of the equity in these assets notwithstanding the fact that half of the equity belonged to the spouse. The court noted that a debtor’s interest in property is defined by state law, and under Wisconsin marital property law both the debtor and the spouse have an “undivided one-half interest in marital property.” Under the bankruptcy code, both spouses’ interests in property become property of the estate. The court rejected the idea that the debtor could assert an exemption only as to the portion of the equity which she personally owned. Instead, because each spouse had an undivided interest in the whole and the assets could not be easily divided, it was reasonable to allow the debtor to claim an exemption in the whole up to the dollar limits afforded to one debtor under applicable law.

Statute/Rule References:
11 U.S.C. § 522(d) -- Exemptions - Federal

Key Terms:
Exemptions (Marital Property)

In re Vanderhei, Case No. 10-14944-7 (04/15/2011) (449 B.R. 359) – Judge Thomas S. Utschig 04/15/2011

Case Summary:
The chapter 7 trustee objected to the debtor’s exemptions, arguing that the debtor could not claim an exemption in the portion of various assets which were technically owned by the debtor’s non-filing spouse. The debtor sought to exempt all of the equity in these assets notwithstanding the fact that half of the equity belonged to the spouse. The court noted that a debtor’s interest in property is defined by state law, and under Wisconsin marital property law both the debtor and the spouse have an “undivided one-half interest in marital property.” Under the bankruptcy code, both spouses’ interests in property become property of the estate. The court rejected the idea that the debtor could assert an exemption only as to the portion of the equity which he personally owned. Instead, because each spouse had an undivided interest in the whole and the assets could not be easily divided, it was reasonable to allow the debtor to claim an exemption in the whole up to the dollar limits afforded to one debtor under applicable law.

Statute/Rule References:
Wis. Stat. § 815.18 -- Exemptions

Key Terms:
Exemptions (Marital Property)

In re Elsemore, Case No. 10-15229-7 (04/14/2011) – Judge Thomas S. Utschig 04/14/2011

Case Summary:
The chapter 7 trustee sought to revoke a report of no distribution in order to pursue certain fraudulent transfer claims. A creditor objected, arguing that the abandonment was irrevocable. Following the same rules as articulated in Bartels, the court concluded that the trustee’s no asset report was an “inadvertent” error. The question was whether the creditor could claim to be unduly prejudiced by the revocation. If the bank were the beneficiary of a transfer, the delay was not itself prejudicial. The creditor did not significantly alter its position in reliance upon the abandonment order, and as such the objection was overruled.

Statute/Rule References:
11 U.S.C. § 554(a) -- Abandonment

Key Terms:
Abandonment

Randi L. Osberg, Trustee v. Jason P. Bartels, Jennifer L. Bartels, and Bank of New York as Trustee for the Certificate Holders of CWALT 2005-06CB (In re Bartels), Adv. No. 09-0344, Case No. 07-14779-7 (03/02/2011) (449 B.R. 355) – Judge Thomas S. Utschig 03/02/2011

Case Summary:
Bartels Trustee sought to revoke abandonment of property and to sell real estate upon discovery that the creditor’s mortgage did not cover all of the property in question. The creditor moved to dismiss the adversary proceeding on the grounds that the trustee’s request to revoke the abandonment was untimely. The court concluded that while abandonment orders are ordinarily irrevocable, in the Seventh Circuit an exception may be made for instances in which the abandonment was the result of an inadvertent error and the parties were not “unduly prejudiced.” See In re Lintz West Side Lumber, Inc., 655 F. 2d 786 (7th Cir. 1981). The fact that the trustee’s request came almost 18 months after the initial abandonment was not controlling as the creditor was not unduly prejudiced by the request. The motion to dismiss the adversary proceeding was denied.

Statute/Rule References:
11 U.S.C. § 554(a) -- Abandonment
Fed. R. Civ. P. 60 Relief From a Judgment Order

Key Terms:
Abandonment
Motion to Dismiss

Judge Robert D. Martin

In re Heffron-Clark, Case No. 10-18035-7 (05/10/2011) (450 B.R. 858) -- Judge Robert D. Martin 05/10/2011

Case Summary:
Chapter 7 debtors claimed wife’s interest in a beneficiary individual retirement account as exempt under both 11 U.S.C. § 522(b)(3)(C) and Wis. Stat. § 815.18(3)(j). Wife had received the account funds as a beneficiary after her mother, the owner of the IRA, died. The trustee filed a timely objection to the exemption, which was ultimately sustained by the bankruptcy court. In its ruling, the court held that funds contained in the “inherited IRA” were not “retirement funds” within the meaning of federal and state exemption law. The court reasoned that the funds in the inherited account were neither designated for the debtors’ retirement, nor were they currently held for wife’s deceased mother’s retirement. Additionally, the court found no persuasive legal source that concluded that inherited IRAs were indeed exempt from taxation under the internal revenue code.

Statute/Rule References:
11 U.S.C. § 522(b)(3)(C)
11 U.S.C. § 522(b)(4)(C)
26 U.S.C. § 408
Wis. Stat. § 815.18 -- Exemptions

Key Terms:
Federal and State Exemption Law
Inherited IRA
Taxes - Exempt

Starfire, Inc. v. John M. Steiner (In re Steiner), Adv. No. 09-0030, Case No. 08-15859-7 (05/02/2011) -- Judge Robert D. Martin 05/02/2011

Case Summary:
The Defendant appealed this case to the District Court after this court determined that the debt owed to Starfire was nondischargeable. The District Court then remanded this case to this court to make a finding on whether the Defendant acted with the intent necessary to support defalcation under § 523(a)(4). On remand, this court found that the Defendant’s conduct was “something more than negligence.” The Defendant was an experienced and sophisticated contractor, who received payment on 42 jobs, yet failed to remit a significant portion of the proceeds to the subcontractor, Starfire, as required under Wis. Stat. § 779.02(5). Because Wisconsin’s theft by contractor creates an express trust, and the Court concluded that the Defendant possessed the requisite intent, Starfire’s claim was rendered nondischargeable under § 523(a)(4).

Statute/Rule References:
11 U.S.C. § 523(a)(4) -- Nondischargeability - Fraud in Fiduciary Capacity
Wis. Stat. § 779.02(5) -- Theft by Contractor

Key Terms:
Defalcation while Acting as a Fiduciary
Express Trust
Statutory Trust
Theft by Contractor

Dealer Services Corporation v. Dennis E. Erb d/b/a Glendale Motorsports (In re Erb), Adv. No. 10-0195, Case No. 10-13068-7 (04/08/2011) (453 B.R. 914) -- Judge Robert D. Martin 04/08/2011

Case Summary:
Dealer Services Corporation (“DSC”) filed this adversary action to determine the nondischargeability of its claim under § 523(a)(2), § 523(a)(4) and § 523(a)(6). At trial, DSC established that the Defendant, owner of a used car dealership, purchased his inventory under a “flooring planning” agreement whereby DSC financed the purchase of all inventory in exchange for a security interest in the vehicles. Under the agreement, all proceeds that the Defendant received from the sale of his inventory were to be held “in trust” for DSC. When the Defendant stopped making payments to DSC on the loan, a DSC representative performed a field audit and determined that the inventory had inexplicably “disappeared.” The Debtor denied all wrongdoing, and at trial was asked no questions by DSC’s counsel relating to the vehicles’ whereabouts. Accordingly, the Court found that DSC did not meet its burden of proof under either § 523(a)(2), or § 523(a)(6) as there was no proof that the defendant acted with any “negative intent” or “scienter.” The Court also found that while the floor planning agreement did constitute an express trust, DSC failed to establish that the Debtor committed defalcation. The Court dismissed DSC’s complaint.

Statute/Rule References:
11 U.S.C. § 523(a)(2)(A) -- Nondischargeability - Fraud
11 U.S.C. § 523(a)(4) -- Nondischargeability - Fraud in Fiduciary Capacity
11 U.S.C. § 523(a)(6) -- Nondischargeability - Willful and Malicious Injury

Key Terms:
Actual Fraud
Defalcation while Acting as a Fiduciary
Express Trust

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