|
New Cases For the Week of August 13, 2001 - August
17, 2001
Brought to you by BKINFORMATION.COM
- The Source for Business Bankruptcy Information on the Internet
|
August 17, 2001
|
|
Case
|
Court
|
Holding
|
Gilchrist
v. GE Capital
(DBN Subscription Required) |
4th Cir. |
The
federal district court, which had issued an injunction in aid
of an insolvency receivership prohibiting any person from
taking any action against a debtor's assets, erred in refusing
to recognize the automatic stay created when numerous
unsecured creditors commenced an involuntary bankruptcy
against the same debtor in anther district. |
Hoffend
v. Villa
(DBN Subscription Required) |
11th
Cir. |
Supreme
Court nondischargeability precedent requires "positive
fraud," but also permits a finding of nondischargeability
based on imputation of an agent's fraud to a principal.
However, "controlling person" liability imputing the
fraud of a corporation's stockbroker to the owner of the
corporation under section 20(a) of the Securities Exchange Act
is not "agency liability" sufficient to warrant
nondischargeability of the fraud debt imputed to the owner. |
|
|
|
|
August 16, 2001
|
|
Case
|
Court
|
Holding
|
In
re Banks
(DBN Subscription Required) |
9th Cir. |
There are two distinct issues to consider in the dischargeability analysis: first, the establishment of the debt itself, which is subject to the applicable state statute of limitations; and, second, a determination as to the nature of that debt, an issue within the exclusive jurisdiction of the bankruptcy court and thus governed by Bankruptcy Rule 4007.
A debt upon which the state statute of limitations for fraud, breach of fiduciary duty, etc. has run prior to the filing of the bankruptcy case has been `established' pre-petition if the creditor has taken a timely affirmative act which is necessary to the creditor's ability to collect the debt in a manner provided for by law.
Here, although the state statute of limitation for fraud had run by the time
the creditor filed the timely state court contract action, the
creditor is not prevented from raising these issues in a dischargeability proceeding.
Although the attorney-client relationship
per se does not create the "express trust" required
for an action under 11 USC 523(a)(4), when the
creditor/client's nondischargeability allegations are based
upon the debtor/attorney's breaches of fiduciary duty or
defalcations in connection with the client's funds in a client
trust account, a sufficient "express trust" exists
for 523(a)(4) purposes. |
|
|
|
|
August 15, 2001
|
|
Case
|
Court
|
Holding
|
In
re Gelbert
(DBN Subscription Required) |
8th Cir. |
The
debtors, who did not list a contingent qui tam claim on their
schedules, were by judicial estoppel from pursuing such claim
postdischarge. Disclosure of the claim would not have violated
the qui tam statute requiring confidentiality, since the
debtors could have filed that schedule under seal or sought a
protective order. |
|
|
|
|
August 14, 2001
|
|
Case
|
Court
|
Holding
|
In
re Morris
(DBN Subscription Required) |
6th Cir. |
Although
in Omegas Group the Court stated that a constructive trust
does not exist until a plaintiff obtains a judicial decision
finding him to be entitled to a judgment impressing
defendant's property or assets with a constructive trust,
when, as here, State law imposes a constructive trust by
operation of law prior to the rendition of a judgment to that
effect, the trust rights are cognizable in bankruptcy.
Since the constructive trust arose by
operation of law upon the debtor's commitment to convey the
subject property to the creditor, and since such obligation
arose more than 90 days before the bankruptcy, the imposition
of the constructive trust was not a preference, even though
the an order referencing the trust was issued during the
preference period. |
In
re Spigel
(DBN Subscription Required) |
1st Cir. |
Nondischargeability
attaches to any claim other than one which arises as a direct
result of the debtor's misrepresentations or malice. In order
to establish that a debt is non-dischargeable because obtained
by "false pretenses, a false representation, or actual
fraud, a creditor must show that 1) the debtor made a
knowingly false representation or one made in reckless
disregard of the truth, 2) the debtor intended to deceive, 3)
the debtor intended to induce the creditor to rely upon the
false statement, 4) the creditor actually relied upon the
misrepresentation, 5) the creditor's reliance was justifiable,
and 6) the reliance upon the false statement caused damage.
The last four embody the requirement that the claim of the
creditor arguing nondischargeability in an adversary
proceeding must arise as a direct result of the debtor's
fraud.
Although a State court, in a prepetition
judgment, found that the debtor engaged in fraudulent conduct
with respect to a debt, the judgment did not establish a
sufficient link between the fraudulent conduct and the debt,
thereby precluding the application of collateral estoppel to
establish nondischargeability. The requisite elements of
nondischargeability were present with respect to the victim of
the fraud, but the creditor here was a blameless third party
entitled to equitable indemnification from the debtor, and the
requisite elements of nondischargeability were not present as
to that creditor, although the creditor would have prevailed
if it was able to show that it was subrogated to the rights of
the fraud victim under State Law. |
|
|
|
|
|
|
| |