New Cases For the Week of May 3, 2004 - May 7, 2004

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May 6, 2004

Case

Court

Holding

Taub v. Weber
(DBN Subscription Required)
9th Cir. A bankruptcy petition preparer engaged in the unauthorized practice of law by interpreting the terms "market value" and "secured claim or exemption" in connection with completion of bankruptcy forms.
In re Mitchem
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Bankr. W.D. Mo. The future right to maintenance is not an asset of the bankruptcy estate, therefore, section 541(a)(5) in inapplicable.

May 5, 2004

Case

Court

Holding

In re North Star Management, LP
(DBN Subscription Required)
8th Cir. BAP Although a professional owes a fiduciary duty to the estate, it is not a guarantor.  Where a management company hired to run the debtor's business took reasonable steps to safeguard the debtor's cash collateral bank accounts, the bankruptcy court erred in holding the company liable for breach of fiduciary duty when the debtor's principal wrongfully withdrew funds from the account by misleading the debtor's bank.
In re W.R. Grace & Co.
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Bankr. De. The fact that a lawsuit does not name the debtor as a party is not dispositive of whether the automatic stay applies to the action.  If the debtor's assets would be adversely affected by the outcome of the action, or if the action would result in the losing party asserting an indemnity claim against the debtor, the automatic stay applies to the action.
In re M Group, Inc.
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Bankr. De. Where the payment aging between a debtor and a creditor were altered as bankruptcy became a possibility, the payments were not in the ordinary course of business.

May 4, 2004

Case

Court

Holding

In re Pittsburgh-Canfield Corp.
(DBN Subscription Required)
6th Cir. BAP A reclamation claimant is entitled to an administrative claim only to the extent, if any, that its claim is not trumped by the lien rights of secured creditors. Although the debtor's secured creditor was significantly oversecured on the petition date, the Court approved (and the reclamation claimants did not appeal) a DIP financing order that authorized borrowing that rendered the secured creditor undersecured and thus eliminated any reclamation rights.

Reclamation claimants are not entitled to require the debtor to marshal the use of their goods to preserve reclamation rights.  Marshaling only applies to secured creditors. 

In re Portwood
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8th Cir. BAP The bankruptcy court did not err in finding that the debtor had sustained her burden of proving that a debt was for "alimony" for dischargeability purposes even though the debtor failed to appear for or participate in the hearing. 
In re Renaud
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8th Cir. BAP Under Arkansas law, the sole method of perfecting a security interest in an ATV is through a notation on the certificate of title.

Likewise, the only method for perfecting a security interest on a mobile home if through a notation on the certificate of title, even when the mobile has become affixed to real estate.

In re Buracker
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Bankr. C.D. Ill. HEAL loans of 61 year old Debtor discharged as unconscionable.

May 3, 2004

Case

Court

Holding

In re DVI, Inc.
(DBN Subscription Required)
Bankr. De. Stub rent (rent conceptually allocable to the postpetition portion of the month in which a petition is filed) is not entitled to priority payment under 11 USC 365(d)(3) where the rent is due on the first of the month.  However, stub rent, at the prorated contract rate, is owed as an administrative expense under 11 USC 503(b) where the debtor fails to rebut the presumption that the contract rate is appropriate.

Moreover, where the debtor rejects a lease, but keeps its personal property at the leased premises, and fails to return the keys, the landlord is entitled to an administrative expense under 11 USC 503(b) for such period, payable at the contract rate. The claim is not limited by the monetary benefit the debtor receives from the sale of its personal property, since the value of such property is irrelevant to the analysis of the landlord's entitlement.

Sun Healthcare Group, Inc., et al. v. Mead Johnson Nutritional
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Bankr. De. A default judgment based upon service to a corporation that was not addressed to the attention of an officer or director is void ab initio.
In re Channel Master Holdings, Inc., et al.
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Bankr. De. The existence of a cap on Committee counsel's fees in a DIP carve out is not dispositive as to counsel's right to payment from carved out funds.  A court has inherent power to direct disgorgement of by any professional and to redistribute those disgorged fees among all professionals.
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