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United States Courts Opinions

United States Courts Opinions (USCOURTS) collection is a collaborative effort between the U.S. Government Publishing Office (GPO) and the Administrative Office of the United States Courts (AOUSC) to provide public access to opinions from selected United States appellate, district, and bankruptcy courts.

The District of Nebraska offers a database of opinions for the years 1997 to current, listed by year and judge. For a more detailed search, enter the keyword or case number in the search box above.

The court sustained the objection to confirmation filed by the Subchapter V trustee regarding the plan provisions for payment of a secured creditor’s § 1111(b) claim. The court found that the plan proposes to pay to the secured creditor “far more than it is entitled to receive as a result of its election under 11 U.S.C. § 1111(b), [so] there is less money available to pay to unsecured creditors. Accordingly, the plan discriminates unfairly and is not fair and equitable to the class of unsecured creditors.”

In this case, the bank was under-secured. It elected under § 1111(b)(2) to waive its unsecured deficiency claim and have the entire debt treated as a secured claim. The practical application of § 1111(b)(2) is a two-part test, derived from § 1129(b)(2)(A)(i)(II), where the debtor must pay the electing creditor a stream of payments that has a present value equal to the value of the creditor’s collateral and the total amount of the stream of payments must equal the amount of the creditor’s debt.

The majority of courts permit interest payments on the allowed secured portion of the claim to apply to both parts of the § 1111(b)(2) calculation, which is the better-reasoned approach and “gives effect to the plain language of § 1129(b)(2)(A)(i) which merely requires that in a cram down, the creditor making the § 1111(b)(2) election receive a stream of payments equal to its total claim and with a present value equal to the value of the collateral. Requiring anything more would be an unwarranted and unsupportable extension of the statutory requirements of § 1129(b)(2)(A).”

Because the plan as proposed contemplated overly generous payments on the bank’s § 1111(b) claim at the expense of unsecured creditors, confirmation was denied. 

After a trial on objections to discharge, the court ruled in favor of the plaintiffs and denied the debtors a discharge under § 727(a)(2) (transfer or concealment of property with intent to hinder, delay, or defraud a creditor) and § 727(a)(4)(A) (false oaths or accounts).

The court found that the debtors intentionally failed to disclose (1) their interest in two bank accounts they used for personal and business expenses, (2) their ownership of a parcel of real estate; and (3) the pre-petition transfer of personal property valued at more than $42,000 to the debtor’s mother. Contrary to the debtors’ assertion that the fault for failing to include such information on the bankruptcy schedules lies with their bankruptcy attorney, the court found that the debtors had not bothered to disclose most of the omitted information to the attorney.

In denying the discharge, the court said:

Here, the sheer volume and materiality of the misstatements and omissions demonstrates, at a minimum, reckless indifference to the truth. In fact, the schedules and SOFA appear to be intentionally false, even after two prior amendments.

        Defendants’ schedules and SOFA were and are not accurate or reliable. This is not a situation where there were only one or two innocent omissions; instead, they were numerous. Many were corrected, but only after a creditor went through the effort to dig them out and the trustee re-convened the meeting of creditors. A debtor’s “petition, including schedules and statements, must be accurate and reliable, without the necessity of digging out and conducting independent examinations to get the facts.” In re Sears, 246 B.R. at 347 (citing Mertz v. Rott, 955 F.2d 596, 598 (8th Cir. 1992)). Some omissions have not been corrected at all.
        Accordingly, the Court finds that the elements for denial of discharge under 11 U.S.C. § 727(a)(2) and 11 U.S.C. § 727(a)(4)(A) have been met, and it is not necessary to address the causes of action under § 727(a)(5) or § 523.

After an evidentiary hearing, the court denied a creditor’s complaint objecting to discharge and dischargeability. The debtors are the only two members in an LLC that once owned and operated golf equipment retailer with five locations in Nebraska and Iowa. The plaintiff and his business loaned money to the LLC because the plaintiff was close friends with the debtors’ family. Regular payments were made on the loan until the LLC’s cash-flow issues intensified. The debtor provided financial documentation to the plaintiff and kept him informed about store closings and liquidations. As store locations were sold, the LLC paid operating expenses, a sales tax debt, and some unsecured debts. The plaintiff thereafter filed a state-court replevin and collection action and the LLC turned over the assets remaining after the store liquidations. The debtors then filed this Chapter 7 petition.

With regard to the plaintiff’s claim under § 727(a)(2) for transfer or concealment of assets, the court ruled that because the assets at issue belonged to the LLC and not to the debtors, the creditor’s claim had no basis. Even if the assets were property of the estate, the creditor’s claim was based on a difference in value between amounts stated in pre-petition asset summaries provided to the creditor and the amounts actually turned over to the creditor as part of the replevin action. As the bankruptcy court noted, “[t]he plaintiff is not the first creditor secured primarily by inventory and equipment to find itself holding a significant deficiency claim on liquidation.” There also was no evidence of the debtors’ intent to hinder, delay, or defraud when they moved the LLC’s remaining inventory into storage. The creditor did not request that any of the assets be turned over to him; instead, he waited and then filed a replevin action.

With regard to the plaintiff’s claim under § 727(a)(3) for failure to preserve records, he did not establish that he requested any records, any records were destroyed, or existing records were inadequate. The evidence indicated the LLC’s business records were available and accessible.

With regard to the plaintiff’s claim under § 727(a)(4)(A) that the debtors made false oaths of material facts in connection with the bankruptcy case, the plaintiff did not establish a pattern of false statements. Omissions in the bankruptcy schedules were not knowingly and fraudulently made and were subsequently corrected. Discrepancies in asset values were attributable to the passage of time between the preparation of old financial statements and current bankruptcy schedules.

With regard to the plaintiff’s claim under § 727(a)(5) alleging the failure to satisfactorily explain the loss or deficiency of assets, the assets at issue belonged to the LLC, not to the debtors, so the debtors were under no obligation to explain a perceived loss or deficiency. Even if the assets belonged to the debtors, the plaintiff did not establish a loss or deficiency. The LLC’s assets were either turned over to creditors, recovered by third parties, held by landlords, or turned over to the plaintiff.

With regard to the plaintiff’s claim under § 523(a)(2)(A) alleging that the debtors falsely represented he would have a first-position lien on the LLC’s assets in exchange for one of the loans made, the evidence does not establish the necessary elements. First, there is no evidence the debtor represented that he could grant the plaintiff’s request for a first-position lien. Even if he did make such a representation, it is not a misrepresentation simply because the intended result did not happen. The evidence indicates that at the time the security agreement was signed, the debtor believed the plaintiff could be given a first-position lien. Moreover, the plaintiff did not rely on any such representation and made the loan without concern for collateral because he wanted to help the debtor.

With regard to the plaintiff’s claim under § 523(a)(2)(B) alleging that the debtors provided a false financial statement with intent to deceive, he did not establish an intent to deceive. In addition, the plaintiff’s loans were not made in reliance on the financial statements, and there is no evidence the financial statements were materially false. Any discrepancy was due to a flawed comparison of values.

Finally, with regard to the plaintiff’s claim under § 523(a)(6) alleging willful and malicious injury because the debtors paid unsecured creditors instead of the plaintiff, there was no evidence the debtors acted maliciously. Malice is not necessarily inferred from a debtor’s conduct of using proceeds to try to keep a business afloat. Here, the debtors tried to keep the last store open in order to maximize recovery for the plaintiff, among others. The plaintiff was kept apprised of the debtors’ plans and either agreed or acquiesced to them. At most, there was a breach of a security agreement, but it did not rise to the level of a willful and malicious injury. Accordingly, judgment was entered in favor of the defendants on the complaint.

The court granted an unopposed motion for summary judgment to avoid and recover preferential transfers from an unsecured creditor and to disallow the creditor’s claim until the preferences have been repaid.

The court dismissed the debtor’s fourth Chapter 13 case for cause and barred him from refiling for 180 days. In each of the cases, the debtor failed to timely file schedules, the statement of financial affairs, and a plan. His intent in filing bankruptcy is to delay or prevent his former wife from collecting a property equalization judgment awarded to her as part of the marital dissolution. This delay is prejudicial to creditors and is cause for dismissal under § 1307(c).

Cause for dismissal also exists because the debtor filed the bankruptcy petition in bad faith, failing to accurately state his debts and expenses, misrepresenting his assets, failing to comply with court orders, and attempting to manipulate the Bankruptcy Code.

Finally, the debtor is not an eligible Chapter 13 debtor because his only claimed income is a monthly Social Security payment of $1,000, which he does not commit to paying into a plan of reorganization. Even if the debtor were to fund his plan with Social Security income, it is insufficient to pay the $320,000 judgment owed to his former wife and his monthly $1,888 child support payments, so a plan would not meet the requirements of § 1322(a).

Because the debtor is a serial filer who consistently fails to comply with his obligations under the Bankruptcy Code, cause exists to bar the debtor from filing a bankruptcy petition for 180 days.

The court granted default 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.

The court granted the trustee’s motion for turnover of a motor vehicle titled in the debtors’ names but allegedly owned by the debtor’s sister. While the debtors argued that the court should discern a resulting trust in favor of the sister because she paid for the vehicle, the court found that Nebraska statutory law is clear and unambiguous in not recognizing a resulting trust in a motor vehicle.

Unexpected excess funds remain after the sale of farm equipment by the senior secured creditor. The Chapter 12 trustee proposes to pay the funds to unsecured creditors, but another creditor also claims rights to them, and the debtors would like to use them in their farming operation.

The court had granted relief from the automatic stay to sell the equipment because the evidence indicated the debtor sold the equipment to another creditor, so it was no longer property of the estate.

The buyer moved for summary judgment as to the proceeds, claiming superior rights as the owner of the equipment. However, the court denied the motion, finding that factual issues exist as to the terms of the parties’ sale and lease-back agreement. The law-of-the-case doctrine did not apply because the court had not ruled on the scope of the sale-lease agreement or the alleged breach of that contract when it ruled on the motion for relief from the stay. The creditor’s alternative argument regarding unjust enrichment also requires a factual inquiry.

The court denied summary judgment on the United States Trustee’s complaint seeking a denial of discharge under §§ 727(a)(2), (a)(4)(A), and (a)(4)(D). While the plaintiff proved that the debtor failed to disclose several bank accounts, gave incorrect balances for accounts that were disclosed, and failed to disclose a number of cash transfers, under circumstances that lead to a presumption of intent to deceive, the debtor should be given the opportunity to rebut that presumption at trial. Likewise, the plaintiff established that the debtor made false oaths in his bankruptcy schedules and Statement of Financial Affairs, but the question of whether those false oaths were made knowingly and fraudulently should be established at trial.

The bankruptcy court granted the defendant-debtor’s motion to dismiss the amended complaint as untimely, with no leave to further amend because the original complaint did not plausibly set forth a § 523(a)(6) claim or contain a § 727(a)(5) claim, so any additional amendment would not relate back.

The plaintiff obtained a judgment against the defendant’s company for willful retaliation after her employment was terminated. The company subsequently went out of business, and the judgment remained unpaid. The plaintiff sued the defendant and certain related entities to pierce the corporate veil and hold him personally liable for the judgment; she was awarded a judgment after she established that the defendant diverted corporate funds for improper uses, used the company for personal dealings, and committed fraud to contravene the plaintiff’s rights.

The defendant then filed a Chapter 7 bankruptcy petition, and the plaintiff filed an adversary proceeding seeking relief under § 523(a)(2) and (a)(6). The plaintiff amended the complaint, citing §§ 523(a)(6) and 727(a)(5), after the defendant moved to dismiss for failure to state a claim. The defendant again moved to dismiss.

The bankruptcy court granted the defendant’s motion to dismiss the amended complaint, finding that it was time-barred under Rules 4004(a) and 4007(c). The claims in the amended complaint did not “relate back” to the original complaint and therefore were not timely filed.

First, although both complaints referenced § 523(a)(6), the claims did not arise out of the same set of operative facts. The original complaint was based on allegations of fraudulent representations regarding the debtor’s assets, which were not sufficient to put the debtor on notice that the plaintiff was claiming a willful and malicious injury through retaliation for engaging in protected employment activity. One would need to interpret the original complaint broadly to conclude it was based on the plaintiff’s termination, discrimination, or retaliation, but Rules 4004 and 4007 require strict interpretation.

Moreover, the facts in the amended complaint establish that another employee of the company terminated the plaintiff’s employment, so the alleged “willful and malicious injury” was not caused by the debtor. Even though the state court found the debtor liable under an alter ego theory, the actions of another cannot be imputed to the debtor under § 523(a)(6).

Second, while a plaintiff may be allowed to amend a complaint that originally contained only a § 523 claim to include a § 727 claim, the amended pleading must arise out of the same conduct, transaction, or occurrence set forth in the original pleading. Here, the original complaint did not contain any allegations to support the plaintiff’s subsequent § 727(a)(5) claim that the debtor diverted or dissipated assets. As such, the newly pleaded facts were not tied to a common core of operative facts in the original complaint and could not justify relation back.

Accordingly, the amended complaint was dismissed, and the court found that any further amendment would be futile.