Case Summary:
When debtors have a post-petition personal injury claim that is exempt, the entire amount is exempt including an amount paid to the attorney out of the settlement funds. Having received payment from the debtors, even though from exempt funds, the debtors' attorney was required by section 329 and Rule 2016(b) to disclose the agreement to receive the fees and receipt of the fees within 15 days. The debtors' attorney failed to comply with the Code and Rule, and was erroneously informed by the trustee that she had to apply for the fees. She did not have to apply for fees, she only had to disclose the fees received. Under the mistaken impression that she needed court approval to receive the fees, the debtors' attorney returned the $2000 payment to her trust account, but when asked by the Court whether she had received the funds misrepresented to the Court that the funds were in her trust account where they had always been. The court ultimately learned that the debtors' attorney had returned the funds from her operating account to her trust account immediately prior to the hearing. While not material to the issue of whether the debtors' attorney had earned the fees under section 330, the attorney's misrepresentation was material to an analysis under section 329. Although the misrepresentation was not ultimately very serious, the court sanctioned the debtors' attorney $1000, forwarded the opinion to the Wisconsin Office of Lawyer Regulation, and published its decision.
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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.
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Judge Robert D. Martin
Case Summary:
Success in a section 523(a)(2)(A) adversary proceeding requires that the Plaintiff prove the five elements of fraud. The Plaintiffs waived their fraud claims for any transaction before July 1999, but the Court examined the merits of those claims nonetheless. The Debtor, who owned a large amount of the subject stock, failed to disclose to the Plaintiffs his relationship with the corporation's insider, and that he was selling the stock away from his employing investment company. Even if the Plaintiffs' pre-1999 claims had not been time barred, those claims would have failed. The Debtor's omissions were immaterial to the plaintiffs, and under the unique facts in this case the Plaintiffs were following the Debtors lead and not his credentials when they bought the stock. The debtor also lacked the intent to deceive. The evidence indicated that the Debtor sincerely believed that he was letting his friends in on a great deal. The Plaintiffs also failed to demonstrate that they justifiably relied on the Debtor's false statements. The Plaintiffs never read the disclosure statements which were accurate assessments of the risk involved. As for the 1999 transaction, the Plaintiffs had all of the information, and received no false information from the Debtor upon which to rely.
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
Wis. Stat. § 893.93
Key Terms:
Fraud
Case Summary:
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.
Statute/Rule References:
11 U.S.C. § 362 -- Automatic Stay
11 U.S.C. § 524(a)
11 U.S.C. § 541 -- Property of the Estate
Wis. Stat. § 766.001
Key Terms:
Automatic Stay
Discharge
Marital Property
Case Summary:
Where secured lender, whose rights were modified by the plan in violation of section 1322(b)(2) failed to object to plan confirmation, and the plan was confirmed without objection, moves to vacate the plan as in violation of section 1325(a)(5), the plan must be vacated. In the 7th Circuit, following Matter of Escobedo, a plan that violates the code is a nullity, and is properly vacated despite the creditor's failure to object, and despite section 1330 apparently allowing vacation of a plan only for fraud.
Statute/Rule References:
11 U.S.C. § 101(51)
11 U.S.C. § 502 -- Allowance of Claims
11 U.S.C. § 1322(a)(2)
11 U.S.C. § 1322(b)(2) -- Modification of Rights of Secured Claimants
11 U.S.C. § 1325 -- Confirmation of Chapter 13 Plan
11 U.S.C. § 1325(a)(5)
11 U.S.C. § 1330
Fed. R. Bankr. P. 3001(f)
Key Terms:
Confirmation - Chapter 13
Case Summary:
In Chapter 13 case where creditor bank failed to record a mortgage, and trustee did not avoid the mortgage, debtor sought to use trustee's section 544(a)(3) avoiding power. Held, the Debtor in Chapter 13 may use only the Trustee's powers as enumerated in section 1303. Because the Trustee's section 544 lien-avoiding power is not one of the enumerated powers available to the Debtor, the Debtor may not avoid a mortgage under section 544. Further held, equitable subrogation is not a remedy available to a lender who fails to record a mortgage even though the loan was used to consolidate previous mortgage loans. The mortgage lender gets security in the form of a recordable mortgage, and the Court will not invoke equitable subrogation to cure a lender's negligence.
Statute/Rule References:
11 U.S.C. § 506(c) -- Recovery of Expenses in Disposing or Preserving Property
11 U.S.C. § 544 -- Trustee as Lien Creditor
11 U.S.C. § 545
11 U.S.C. § 548 -- Fraudulent Conveyance
11 U.S.C. § 1303 -- Rights and Powers of Debtor
Wis. Stat. § 706.08(a)
Wis. Stat. § 708.01
Key Terms:
Lien Avoidance
Equitable Subordination
Summary Judgment
Case Summary:
Plaintiffs, six businesses, filed complaints alleging nondischargeability of debts under section 523(a)(2)(A) for writing checks that bounced. Defendants' attorney failed to appear at the hearing, and the matter was dismissed for want of prosecution. Defendant's attorney moved the Court to reopen the adversary proceeding, and simultaneously moved the Court for a default judgment against the debtor. The Court granted the motion to reopen under the excusable neglect theory. Defendants were less fortunate on their default motion. A check is not a representation, writing a check that bounces is not fraud, and the Court would not default a debtor without proof of specific false representations or fraud. The Court gave the Defendants 30 days from the date of the decision to request a prove-up hearing.
Statute/Rule References:
11 U.S.C. § 523(a)(2)(A) -- Nondischargeability - Fraud
Fed. R. Bankr. P. 9024
Fed. R. Civ. P. 60(b) -- Relief from a Judgment Order
Wis. Stat. § 943.21
Wis. Stat. § 943.24
Key Terms:
Excusable Neglect
Fraud
Non-Dischargeable Debt
Case Summary:
On Defendant's motion for summary judgment following denial of its motion to dismiss, the Court held that there was no contract between the parties. It was incontrovertible that Plaintiff had not paid consideration to defendant for the years 2003 to 2006. Therefore, there was no part performance by Plaintiff to create a contract. Defendant's motion for summary judgment is granted.
Statute/Rule References:
Wis. Stat. § 241.02(1)(a)
Key Terms:
Summary Judgment
Contract
Judge Thomas S. Utschig
Case Summary:
Trustee sought approval of settlement agreement with debtor. The primary creditor objected to the settlement and offered to “fund” ongoing litigation with the debtors. The trustee has the burden of demonstrating that a settlement proposal is both reasonable and in the best interests of the bankruptcy estate. The court must consider four factors when reviewing a proposed settlement: (1) probability of success in the litigation; (2) the difficulties, if any, to be encountered in collection; (3) the complexity of litigation and the expense, inconvenience, and delay associated with it; (4) the paramount interest of creditors and a proper deference to their reasonable views in the premises. The court found that despite the creditor’s promise to “fund” future litigation, all other circumstances supported approval of the settlement and the creditor’s perspective was unreasonable.
Case Summary:
Debtor was entitled to claim Florida homestead exemption over objection of trustee. Trustee contended that the debtor was not a Florida resident and had instead claimed a California property as his residence. Notwithstanding conflicting testimony about the status of the Florida home as a “vacation property,” the court found that the debtor did reside in Florida and had intended to remain in Florida but for marital discord over the issue.
Statute/Rule References:
11 U.S.C. § 522(d) -- Exemptions - Federal
Case Summary:
Debtor acquired homestead property from his mother. At the time of the transfer, the parties contemplated that the mother would have a life estate in the home and that she would be able to live in the home. The debtor subsequently mortgaged the home and in so doing a new deed was recorded which did not contain the “life estate” provision of the old deed. While the debtor indicated he had his mother’s consent to terminate the life estate interest, she denied discussing it with him. The court found that the debtor did not have consent and that the destruction of the life estate interest constituted a “willful and malicious injury” under 11 U.S.C. § 523(a)(6).
Statute/Rule References:
11 U.S.C. § 523(a)(6) -- Nondischargeability - Willful and Malicious Injury