In a priority dispute between the man who sold cattle to the debtor but didn’t receive payment for them and the lender and  feedlot that financed and fed the cattle for the debtor, the court granted summary judgment to the lender and the feedlot. The seller sent a valid bill of sale with the cattle, which transferred title to the debtor. The seller relied on the debtor’s word and took no steps to protect himself against the risk of non-payment. Title did not revest in the seller when the debtor failed to pay. Even if the seller were to have a security interest in the cattle, the perfected security interest of the lender took priority over the seller’s unperfected interest because, under U.C.C. § 2-403, the debtor was able to transfer greater title rights to the lender as a good-faith purchaser than he could claim himself.

The court found that counsel for the debtor violated the standard of care owed to his client because he failed to advise the debtor of the legal consequences, risks and benefits of the abandonment of assets, as well as other legal alternatives. Counsel’s negligence was the proximate cause of financial losses by the debtor, and the court awarded the debtor $1.8 million for the lost market value of the abandoned assets.

The court granted a secured creditor’s motions for sanctions and disgorgement of fees against counsel for a debtor whose case was dismissed for acting in bad faith. The debtor was a successor entity to a previous Chapter 11 debtor. The prior debtor defaulted on its plan payments and the secured creditor obtained relief from the automatic stay. The debtor’s principal transferred the assets of the prior debtor in which this secured creditor held an interest to a newly created entity and had counsel file a new Chapter 11 petition on the eve of the secured creditor’s scheduled foreclosure sales. The court agreed with the secured creditor that the new case was filed solely to hinder, delay, and harass the secured creditor, and sanctioned the debtor and its principal for the secured creditor’s fees and expenses.

The court also determined that counsel’s conduct violated Rule 9011 and well-established legal standards, in that some of the problems with creditors in the prior case could have and should have been dealt with via motions to enforce the confirmation order instead of by filing a new case. In addition, the transfer of assets was done without the secured creditor’s knowledge or permission, the new debtor had no realistic chance of a successful reorganization, and the actions taken by the debtor and its counsel hindered and delayed the secured creditor and caused it to incur additional costs. Because an attorney who should have known the second reorganization effort was futile provides no service to the bankruptcy estate, he is not entitled to compensation for such service.  As a result, counsel was ordered to disgorge the full amount of the retainer received and his fees for the case were denied.

In a case to determine the extent, validity, and priority of certain judgment liens against the debtors’ residential real estate, the judgments had either been satisfied or the liens had ceased to exist because the judgments were dormant, so summary judgment was granted in favor of the debtors.