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New Cases For the Week of August 28, 2000 - September 1, 2000
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September 1, 2000
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Case
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Court
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Holding
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| In
re Arnold |
9th Cir. BAP |
A
debtor may amend his schedule of exemptions at any time until the
closing of the case.
If a debtor is guilty of bad faith and/or prejudice to
third parties, an exemption amendment may be denied.
The usual ground for such bad faith is an attempt to
hide assets.
Where a debtor fails to schedule a lawsuit in which he
is a plaintiff, but lists such lawsuit in his Statement of Financial
Affairs, and is questioned about the lawsuit at his creditors' meeting,
he is not guilty of bad faith if, three years later, he amends his
schedules to claim the lawsuit as exempt as the trustee is about to
settle the suit. By itself, claiming an exemption late is not bad faith.
Although costs incurred by a trustee in connection
with an asset should be paid from the asset prior to recognizing an
amended exemption in the asset, such costs should not result in total
disallowance of the amended exemption. |
| In
re Stoll |
9th Cir. BAP |
Individual
beneficiaries of a bankruptcy estate, which include creditors and the
debtor (where the estate is solvent), lack standing to sue professionals
employed by the estate.
Such parties' positions are analogous to that of
beneficiaries of a trust. Under general principles of trust law, a
beneficiary of a trust generally lacks standing to sue third parties on
behalf of the trust. |
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August 31, 2000
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Case
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Court
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Holding
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| In
re Alvarez |
11th Cir. |
A
debtor's malpractice claim against his bankruptcy attorneys for filing a
Chapter 7 instead of a Chapter 11 is property of the Chapter 7
bankruptcy estate. |
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August 30, 2000
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Case
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Court
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Holding
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| In
re Barron |
5th Cir. |
A
professional employed by a bankruptcy estate may seek approval of such
employment under either 11 USC 328 or 330. If employment is
approved under section 328, then the terms of such employment may not be
later modified unless such terms prove to have been improvident in light
of developments "not capable of being anticipated at the time of
the fixing of such terms."
It is not enough that later events were in fact
unforeseen at the time employment was authorized pursuant to section
328. The later events must be incapable of being anticipated
(i.e., unforeseeable) at the time of the order approving section 328
employment.
The bankruptcy court may have erred in reducing a
one-third contingency fee sought by a trustee's special counsel who was
employed pursuant to section 328. The fee was reduced because the
court found that the large size of the fraudulent transfer recovery
achieved by the attorney's summary judgment efforts was unforeseen at
the time employment was approved. Instead of determining that the
large size of the litigation recovery (and the correlatively larger
contingency fee) was "incapable of being foreseen," the court
used an improper legal standard (the fact that the court did not foresee
it), warranting reversal and remand. |
| In
re Grouthes |
5th Cir. |
An
individual debtor who, after a discharge, pleads guilty to willfully
evading the payment of a predischarge tax, and who agrees to pay such
tax as part of a plea bargain, is barred from contending that the tax
was discharged in her bankruptcy.
A postdischarge claim asserted by a taxing agency
against individual debtors in an effort to collect corporate excise
taxes on alter ego grounds is a claim for "taxes" despite the
fact that alter ego and similar principles are remedies rather
than causes of action. |
| In
re Dorholt |
8th Cir. |
Although,
for preference purposes, the perfection of a security interest is deemed
to relate back to the date it took effect between a creditor and the
debtor if the security interest is perfected within 10 days of such
date, perfection of a security interest may nevertheless be
"substantially contemporaneous" (and thus unavoidable as a
preference) even where the interest is perfected more than 10 days after
value is advanced.
A security interest perfected 16 days after value was
advanced due to a mistake by a service bureau is a substantially
contemporaneous transfer, precluding avoidance of the lien. |
| In
re Arzt |
8th Cir. BAP |
When
a debtor voluntarily grants a prepetition preferential lien on exempt
property and such lien is later avoided by a bankruptcy trustee, the
property has lost its exempt character to the extent of such lien, and
the lien is preserved for the benefit of the estate such that the
trustee steps into the shoes of the original owner of the avoided lien.
Liens granted by debtors on their exempt homestead
within 90 days of bankruptcy to secure antecedent debts were avoidable
as preferences. Once such liens were avoided, the portion of the
homestead subject to such liens did not reacquire its exempt character
since the liens were preserved as charges against the homestead for the
benefit of the estate.
A Circuit Court rule declaring that unpublished
decisions have no precedential value is unconstitutional. The
precedential effect of judicial opinions derives from the nature of
judicial power, and the limitation place thereon by Article III of the
United States Constitution. Any attempt to avoid the precedential
effect of a prior decision merely because of a decision to not publish
same would expand judicial power beyond the bounds envisioned by the
Framers of the Constitution. |
| In
re Crysen/Montenay Energy Co. |
2d Cir. |
A
bankruptcy court lacks discretion to deny enforcement of an arbitration
clause in noncore matters.
The presumption in favor of arbitration generally will
trump the lesser interest of bankruptcy courts in adjudicating non-core
proceedings that could otherwise be arbitrated. Even in core
proceedings, in which the interest of the bankruptcy court is greater,
the bankruptcy court nonetheless might lack discretion to decline to
stay in favor of arbitration.
A party does not waive the affirmative defense of
arbitrability by failing to replead it in amended answers filed it after
the affirmative defense has been rejected by the court.
Although an implied waiver of the affirmative defense
of arbitration can occur where a defendant engages in substantial
litigation in the bankruptcy court before raising the defense, such a
waiver does not occur where a defendant raises the defense, but it is
rejected by the bankruptcy court. A defendant's failure to seek an
interlocutory appeal of the trial court's rejection of arbitration is
not an implied waiver of the defense even where eight years of
litigation follow. |
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August 29, 2000
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Case
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Court
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Holding
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| Christo
v. Padgett |
11th Cir. |
Mandatory
abstention applies to State court actions removed to bankruptcy court
even though the removal arguably eliminates the requirement that a State
court action is pending.
In 11 USC 1334(d) the word "case" refers to
the main case, not a removed civil action. Consequently, for main
cases commenced prior to the 1994 Bankruptcy Code amendments, the older
version of section 1334 applies.
Under the pre-1994 version of 11 USC 1334, the Court
of Appeals lacks jurisdiction to consider an appeal of the trial court's
decision not to abstain from adjudicating a removed case. |
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August 28, 2000
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Case
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Court
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Holding
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| Adair
v. Sherman & Sherman |
7th Cir. |
When
a proof of claim is filed prior to confirmation, and the debtor does not
object prior to confirmation, the debtor may not file a
post-confirmation collateral action that calls into question the proof
of claim.
As a general rule, the failure to raise an objection
at the confirmation hearing or to appeal from the order of confirmation
should preclude attack on the plan or any provision therein as illegal
in a subsequent proceeding.
Debtor was barred by collateral estoppel from pursuing
postconfirmation FDCPA action against creditor's attorneys (based on
creditor's attorneys alleged pattern of filing overstated proofs of
claims in order to obtain treatment of their clients' claims as fully
secured) because debtor had failed to object to the creditor's
proof of claim prior to confirmation.
The FDCPA is inappropriate vehicle to challenge the
amount of a debt established by the bankruptcy court. |
| In
re Gregory |
5th Cir |
When
a Chapter 13 case is converted to Chapter 7, any plan payments held by
the Chapter 13 trustee at the time of conversion are not property of the
Chapter 7 estate and must be returned to the debtor. |
| In
re Poole |
9th Cir. |
A
federal court may admit attorneys to practice before it without regard
to the State law applicable to practice of law where the federal court
is located.
The bankruptcy court erred by denying fees to an
attorney who was not licensed in the State where the bankruptcy court
was located, but who was admitted to practice before the bankruptcy
court pursuant to local rules. |
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