The court denied the plaintiff’s motion for summary judgment on its § 523(a)(2) claims to except a debt from discharge because factual issues exist as to the debtor’s intent in his statements to the bank and whether the bank justifiably relied on that information.
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The bankruptcy court granted the debtors’ motion to dismiss an adversary proceeding against them, on collateral estoppel and Rooker-Feldman grounds. The adversary complaint sought a determination that debts owed to the plaintiffs, based on a state court judgment, were excepted from discharge under § 523(a)(2). The plaintiffs had filed a lawsuit in state court alleging fraudulent misrepresentation and breach of contract in connection with a lease of real property. The state court ruled against the plaintiffs on the fraudulent misrepresentation claim, specifically finding they did not prove fraudulent intent. Collateral estoppel prevents an issue that was fully and fairly litigated by the parties in state court with a final judgment on the merits from being relitigated in bankruptcy court. Therefore, the § 523(a)(2) claim premised on false representations was barred. In addition, the Rooker-Feldman doctrine bars the bankruptcy court from exercising subject-matter jurisdiction over the fraudulent misrepresentation claims because of the possibility of undermining the state court decision.
The court denied the parties’ cross-motions for summary judgment on the judgment creditor’s complaint that the debt is non-dischargeable under § 523(a)(2)(A) and on the debtor’s counterclaim for breach of the automatic stay based on the creditor’s correspondence with the state court. The state-court default judgment did not establish the necessary elements – in particular, false representation and intent – of § 523(a)(2)(A), so it could not on its own support an exception from discharge for this debt and further fact-finding was necessary. Likewise, while the creditor’s violation of the automatic stay did appear to be willful, the record did not support a summary award of damages.
The debtor filed this adversary proceeding alleging breach of contract and fraud against the seller from whom the debtor bought an affordable housing complex. The court denied the defendant’s motion to dismiss the adversary complaint for failure to state a claim, finding that if the allegations in the complaint are construed in favor of the plaintiff, they are legally sufficient to survive dismissal.
On the debtors' challenge to the claim filed by their mortgage holder and servicer, the court granted summary judgment in favor of the creditor. First, the court determined the debtors had no standing to challenge the assignment of the promissory note to its current holder because they hadn't shown any harm to themselves as a result of the assignment, and because they earlier in the bankruptcy case had conceded that the note holder holds a valid perfected security interest in their residence. Second, the court determined the debtors had not produced sufficient evidence under Rule 3001(f) to rebut the prima facie validity of the claim.
The bankruptcy court granted summary judgment to a creditor in this Chapter 13 case, finding the debt non-dischargeable under 11 U.S.C. § 1328(a)(4). The creditor holds a judgment for actual and punitive damages and attorneys' fees for the debtor's willful, malicious, and reckless violation of the Iowa law against unauthorized interception and disclosure of oral communications. The court determined that the debt constitutes a debt "for . . . damages awarded in a civil action against the debtor as a result of willful or malicious injury by the debtor that caused personal injury to an individual" and is not dischargeable pursuant to § 1328(a)(4).
After a trial on the dischargeability of the debtor's student loan indebtedness, the court ruled that the debt was excepted from discharge because the plaintiff did not meet her burden of proving an undue hardship. Questions remain as to available sources of income for the debtor and her minor children, and whether certain expenses are necessary or likely to exist for the foreseeable future. The debtor is also eligible for an income-based repayment plan and, as an employee of a non-profit agency, may be eligible for a public service loan forgiveness program under which she could discharge her loan obligation after 10 years of payments. The totality of the debtor's circumstances weighed against discharge of this debt.
The holder of a super-priority unsecured administrative expense claim sought disgorgement of all administrative expenses paid during the Chapter 11 and subsequent Chapter 7 phases of this bankruptcy case in order that the funds could be applied to its claim. The court denied the motion due to the unique facts and circumstances of this case.
First, the court ruled, the Chapter 7 administrative expenses were paid from another creditor's collateral, so disgorgement would simply return those funds to the secured creditor rather than make them available for the super-priority claimant. Moreover, the super-priority claimant had notice of and did not object to the arrangement between the lender and the trustee, and there is no basis now for disturbing that arrangement.
Second, the court ruled, disgorgement of the Chapter 11 administrative expenses would be inequitable because they were paid without objection from the super-priority claimant, even though the debtor was not paying the super-priority claimant at the time. "It simply would be inequitable to allow Hansen's to come in at this late stage to seek disgorgement of duly earned fees from estate professionals. Hansen's had the ability to control this outcome. It could have stopped supplying fuel as soon as debtor defaulted on payment terms. That would have greatly reduced the claim of Hansen's. It also could have objected to payment of administrative claims as soon as it knew that the debtor was not in compliance with payment terms. It did not do those things. Hansen's took a risk that the debtor would successfully reorganize. It gambled and lost."
First Nebraska Bank ("Bank") filed a Complaint seeking denial of Debtors/ Defendants Nolan Balfour's and Maegan Balfour's discharge under 11 U.S.C. §§ 727(a)(2) and 727(a)(4). Alternatively, the Bank requests that the Balfours' debt to the Bank be excepted from discharge under 11 U.S.C. §§ 523(a)(2)(A) and 523(a)(2)(B). In its Complaint, the Bank alleges the Balfours sold or transferred collateral that serves as security for debt to the Bank but did not submit the proceeds to the Bank, misrepresented their financial condition and intentionally provided the Bank incorrect financial information on which the Bank relied in making its lending decisions. The Balfours filed an Answer to the Complaint, denying they intentionally provided the Bank false information and denying that the Bank relied on information they provided in making its lending decisions. Defendants denied other allegations as well. They seek an order dismissing the Complaint.
The court found the Bank met its burden of proving Nolan transferred the Balfours' property, within one year of bankruptcy, with intent to hinder, delay, or defraud a creditor. Nolan's discharge is denied under 11 U.S.C. § 727(a)(2).
The Bank did not satisfy its burden of proving Maegan transferred her property, within one year of bankruptcy, with the intent to hinder, delay, or defraud a creditor. Its cause of action against Maegan under 11 U.S.C. § 727(a)(2) is dismissed.
The Bank did not prove that the Balfours knowingly and fraudulently made a false oath in connection with a case under 11 U.S.C. § 727(a)(4). This claim and cause of action against both Nolan and Maegan is dismissed.
Since the Court denied Nolan's discharge under section 727, it is not necessary to analyze the Bank's section 523 claims against Nolan.
The Bank did not meet its burden of showing Maegan's debt to it should be discharged under section 523(a)(2)(A) or (B). These claims and causes of action are dismissed.
A landlord filed a request for payment of an administrative expense claim for the difference between the amount of post-petition rent it claimed it was due and the amount the debtor actually paid. In December 2018, shortly before the debtor filed bankruptcy in January 2019, it asked the landlord to make some rent concessions to allow the debtor to keep its store open and not reject the lease immediately upon filing its petition. The landlord agreed to, and accepted payment of, a reduced rental rate. The debtor then rejected the lease and closed the store in late April 2019. The landlord argued that the lease as modified was not valid because there was no consideration, so the debtor owed the higher amount of rent pursuant to the original lease.
The court denied the request, finding the debtor's promise to not close the store immediately constituted consideration for the landlord's promise to accept reduced rent. The debtor's subsequent closure of the store was not a failure of consideration, but was simply a breach of contract.
The request for payment of the administrative expense claim was denied except for the post-petition rent owed for January at the reduced rate, which the debtor conceded it owed.