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.
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The court granted a creditor’s unopposed motion for summary judgment and determined it was entitled to the principal balance of its unsecured claim plus interest and legal fees arising from the debtor’s default under the confirmed plan. The plan and confirmation order provided for interest and post-petition fees, and a confirmed plan serves as a contractual agreement which binds the parties.
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.
The court granted summary judgment to the debtors, ordering that a wholly unsecured junior lien on the debtors’ residential real estate may be avoided after the debtors complete Chapter 13 plan payments.
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.
The debtor purchased cattle from the defendant pre-petition, and his payment checks were dishonored. The seller filed a replevin action and obtained possession of the cattle pursuant to an order from the state court. Shortly after that replevin order was entered, the debtor filed a Chapter 11 petition. The debtor in possession then filed this adversary proceeding to exercise his avoidance powers and set aside the seller’s successful reclamation of the cattle.
On cross-motions for summary judgment, the bankruptcy court denied the debtor in possession's motion because the transaction was a cash sale; the seller had successfully exercised his U.C.C. rights pre-petition; and the Bankruptcy Code’s reclamation section was inapplicable here. The court granted the seller’s motion because the exercise of reclamation rights is not a preferential transfer.
The court granted summary judgment to a debtor seeking to remove a purported lien from the title to her car. She had borrowed money from the defendant and signed a promissory note, but did not grant the defendant a security interest in the vehicle. The defendant nevertheless recorded a lien on the vehicle’s title. The court avoided the lien and ruled that the debt was unsecured.
After a trial on a creditor’s motion to appoint a Chapter 11 trustee, with a joinder by the U.S. Trustee, the court granted the motion, finding clear and convincing evidence that such an appointment is warranted under subsections (1) and (2) of 11 U.S.C. § 1104(a). The court identified the debtor’s “vendetta” against family members who were more interested in protecting their own financial interests than in helping him reorganize as an obstacle to the debtor in possession’s ability to exercise his fiduciary duties and to act in the estate’s best interests. For that reason, the court ruled that an independent trustee should be appointed under § 1104(a)(2). In addition, the debtor’s trial testimony demonstrated incompetence and gross mismanagement of the case, as well as possible fraud and dishonesty, leading the court to also find cause for appointment of a trustee under § 1104(a)(1).
In this order denying the debtors’ motion to avoid a judgment lien, the court reiterated the paramount importance of providing proper notice to a defendant whose rights may be altered, and set out some guidelines for ensuring the achievement of proper service under the procedural rules. First, the defendant must be properly identified. Then, the plaintiff must figure out which method of service is appropriate, e.g., on a registered agent, by first-class mail to an officer or agent at the defendant’s street address, or on a named officer of an insured depository institution. “Achieving proper service of process takes time and effort. To get it right, one needs to know the proper legal name of the entity, where it is organized, its registered address, and its registered agent or officer names and addresses.”
The court granted the defendants’ motion to dismiss an adversary proceeding resulting from a long-running family dispute. In doing so, the court recognized that the plaintiffs were attempting to relitigate previously discounted and disallowed causes of action under new theories of recovery and new legal articulations. The court pointed out that res judicata precluded the plaintiffs’ breach of contract allegations, which were simply a reiteration of the plaintiffs’ previously overruled objections to the defendants’ proofs of claims, as well as the breach of fiduciary duty claim that was merely the breach of contract claim in a different guise. The court also disposed of the plaintiffs’ breach of loyalty claim by noting that only the debtor corporation has standing to pursue it under the shareholder standing rule. Finally, the court reminded litigants of the importance of the bankruptcy process and the dim view taken of those who try to attack the integrity of the system.