Case Summary:
Creditor filed a proof of claim in the secured amount of $106,448.84 in Debtor’s Chapter 12 bankruptcy. The basis for the claim was a boarding lien. Shortly after the Debtor filed his Chapter 12 plan, a stipulation between Creditor and Debtor providing for the release of livestock was filed (“Stipulation”). The Stipulation also contained an agreement that Creditor would retain its lien rights. The Creditor objected to the Chapter 12 plan shortly thereafter, arguing the plan did not provide for its lien as stipulated or to treat the claim as an administrative expense.  Debtor then filed an amended plan. The amended plan, however, did not change the treatment of Creditor. The Court found that because Wis. Stat. § 779.43(3) (governing the liens of keepers) requires possession for perfection of a lien, Creditor no longer held a secured claim based on its pre-petition or post-petition statutory lien because it surrendered possession of the livestock. Similarly, when possession was relinquished, perfection of Creditor’s lien required a financing statement pursuant to Wis. Stat. § 409.310. Because this requirement was not met, perfection of Creditor’s lien was lost. Further, the Court found that Creditor was entitled to an administrative expense claim for its entire claim because Creditor’s surrender of the livestock to Debtor permitted Debtor to have possession of animals necessary for the operation of his business pursuant to 11 U.S.C. § 503(b)(1)(A).

Statute/Rule References:
11 U.S.C. § 503(b)(1)(A) -- Administrative expenses
Wis. Stat. § 409.310 -- When filing required to perfect security interest or agricultural lien
Wis. Stat. § 779.43(3) -- Liens of keepers

Key Terms:
Administrative Expenses
Perfection (Lien Perfection)

Case Summary:
Debtor was a kombucha producer who filed for bankruptcy under Chapter 11. Debtor concluded it could not make a decision regarding nonresidential real property lease assumption or rejection by the statutory deadline under 11 U.S.C § 365(d0(4)(A)(i). Debtor requested an extension of the deadline to permit Debtor adequate time to complete selling its assets. Debtor argued that if forced to assume within the statutory time, there may be unnecessary burden on the estate in the form of administrative expenses if it was later determined lease assumption is not required. Similarly, Debtor argued that premature rejection of the lease would leave the Debtor without the ability to operate its business and cripple the Debtor’s ability to maximize recovery efforts for the benefit of creditors. Plaintiff, Debtor’s landlord, opposed this request. Plaintiff’s attorneys then filed an Application for Allowance of Administrative Compensation. The Objectors to Application (which included the Debtor and Debtor’s primary secured creditor) argued that under 11 U.S.C. § 502(b)(6), a landlord’s claim for damages is limited to the amounts resulting from termination of a lease. Objectors to the Application also asserted that the requested sums do not qualify as administrative expense claims under § 503(b)(1) because the amounts were not actual or necessary costs and expenses of preserving the estate. The Court allowed the administrative expense claim of Debtor’s landlord. Based on the position taken by the Debtor, failing to extend the deadline to assume or reject the lease would have necessary implications for the sale process, could have impaired continued operation of the business, and would have impaired the ability to maximize the estate. Thus, the Court held that the work related to review of the lease and the motion for extension and its possible termination all align with the goals of preserving the estate by maximizing value for creditors, incentivizing creditors to do business with the Debtor, and preserving value.

Statute/Rule References:
11 U.S.C. § 502 -- Allowance of claims or interests
11 U.S.C. § 503 -- Administrative expenses

Key Terms:
Administrative Expenses

Case Summary:
Plaintiff was a Wisconsin limited liability company that performed auto repairs, body and paint work, detailing of cars, and the buying and selling of used cars. Plaintiff and Defendant entered into a business relationship. The business relationship ended that was followed by litigation in state court. Plaintiff filed an adversary proceeding seeking a determination that various debts owed to Plaintiff are not dischargeable under 11 U.S.C. § 523(a)(2), (4), or (6). Plaintiff moved for summary judgment.

First, the Court granted summary judgment pertaining to unpaid payroll reimbursements that Plaintiff alleged constituted breach of contract because there was no dispute about the amount at issue owed to the Plaintiff. Second, the Court denied Plaintiff's request for summary judgment for a claim of over-reimbursement of checks under a theory of false representation because the Plaintiff presented no evidence that (1) the Defendant knew he was making false representations when the checks were written and that (2) Plaintiff relied on the representations as required by 11 U.S.C. § 523(a)(2)(A). Third, the Court denied Plaintiff's request for summary judgment for a claim that the Defendant kept proceeds from the sale of an automotive hoist purchased using Plaintiff's credit card because there were material disputes of fact pertaining to these claims. Fourth, the Court denied Plaintiff's summary judgment for a claim that Plaintiff suffered damages by paying for a client database stored on a hard drive that was in Defendant's possession because Plaintiff presented no facts to prove either that Plaintiff suffered any actual damages or that Defendant used the data.

The Court also denied Plaintiff's request for summary judgment under 11 U.S.C § 523(a)(4), defalcation while acting in a fiduciary duty, because Plaintiff failed to establish any evidence of a fiduciary duty on the part of the Defendant. The Court held that repeated conclusory assertions that there was a fiduciary duty does not constitute evidence of any difference in power or ascendancy between Plaintiff and the Defendant, nor is it evidence of the imposition of particular duties imposed on Defendant that would arise to the level of a fiduciary capacity. Summary judgment on a 11 U.S.C § 523(a)(4) claim for embezzlement was also denied because Plaintiff did not offer evidence that satisfies the requisite intent of embezzlement; simply alleging that the "only reasonable conclusion" for checks being written for greater amounts than the legitimate expenses is that Defendant did so with fraudulent intent" does not satisfy Plaintiff's burden of proof.

Finally, the Court denied Plaintiff's summary judgment request for claims that over-reimbursed checks are nondischargeable under 11 U.S.C. § 523(a)(6) on the grounds that the drafting of the checks were done willfully and with malice. The Court held that Plaintiff failed to satisfy the requirement that defendant acted willfully because Plaintiff offered no evidence Defendant knew there was an over-reimbursement when the checks were drawn.

Statute/Rule Reference:
11 U.S.C. § 523(a)(2)(A) -- Nondischargeability - false pretenses, false representation, or fraud
11 U.S.C. § 523(a)(4) -- Nondischargeability – fraud or defalcation in fiduciary capacity; embezzlement
11 U.S.C. § 523(a)(6) -- Nondischargeability - willful and malicious injury

Key Terms:
Defalcation While Acting as a Fiduciary
False Representation
Fiduciary Capacity
Summary Judgment
Willful and Malicious

Case Summary:
Debtors dismissed their Chapter 13 case while an adversary proceeding initiated by Plaintiffs was pending. Debtor defendants argued that although the Court had the ability to retain jurisdiction of the adversary proceeding, it should exercise its discretion and dismiss the adversary. The Plaintiffs argued jurisdiction should be retained because of the substantial time the parties had devoted to the issue. The Court found that the considerations of retention (i.e., judicial economy, federal interest, effect of the proceeding on the bankruptcy case) did not weigh in favor of the Court retaining jurisdiction. The Court found that the remaining issues were solely state law claims and the adversary proceeding had not advanced to a point where it would be unfair to the parties to litigate the matter in state court as exhibits had not been filed and a hearing had not yet occurred. The Court exercised its discretion and dismissed the adversary proceeding.

Key Terms:
Federal Interest
Judicial Economy
Jurisdiction of Adversary Proceedings
Retaining Jurisdiction