After a trial, the court sustained the debtor's objection to the claim of an over-secured lender and reduced the fees and expenses included in the claim to a reasonable amount. The claim included fees for late charges, appraisals of collateral, and environmental assessments. The evidence indicated the late charges were improperly calculated, so they were reduced. The lender's standard operating procedures require appraisals and environmental assessments, but the court noted those requirements are not unrestricted. The court found the loan servicer's decision to order formal appraisals and reports at will, especially while the debtor was attempting to work out a loan modification, was unreasonable. Neither party was entitled to attorneys' fees in connection with the claim objection and its defense.
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After a trial, the court denied a discharge to a debtor who omitted assets and pre-petition asset sales and payments from his bankruptcy schedules and statement of financial affairs. The court found these omissions and misstatements to constitute false oaths and to be material. The court also found intent based on "the sheer volume of misstatements and omissions [which] demonstrates, at a minimum, reckless indifference to the truth." Because the debtor's omissions and misstatements were numerous and were corrected only after a creditor made the effort to dig them out, they rendered the schedules unreliable and the court accordingly denied the debtor a discharge under 11 U.S.C. § 727(a)(4)(A).
The court ruled on summary judgment in a preference action that a "payment rights purchase and sale agreement" executed between the debtor and a funding company during the preference period was a sale of receivables and not a loan. After analyzing U.C.C. law on general intangibles and payment intangibles, the court determined the assets sold were in fact accounts and not intangibles, and the creditor's interest was unperfected, so the assets were property of the bankruptcy estate. The funding company's argument that the transfers were in the ordinary course of business required an inquiry into the facts, so the matter was set for trial.
The court granted summary judgment to a creditor owed a debt arising from damages and injuries resulting from an assault committed by the debtor. The state court judgment established the elements of willfulness and maliciousness under § 523(a)(6), so the debt is excepted from discharge.
The court, applying New York law, ruled on summary judgment in a preference action that a merchant cash advance ("MCA") agreement executed between the debtor and a funding company during the preference period was a true sale of receivables and not a disguised financing arrangement. The funding company's argument that the transfers were in the ordinary course of business required an inquiry into the facts, so the matter was set for trial.
This case presents what appears to be an issue of first impression for this court. That is, what effect, if any, does the conversion of a bankruptcy case from a Chapter 11 case to a Chapter 7 case have on the 11 U.S.C. § 364(c)(l) "super-priority" administrative claim of a Chapter 11 debtor in possession lender. Specifically, the court must decide if conversion to Chapter 7 subjects the "superpriority" status granted to the lender pursuant to § 364(c)(1) to the priority provisions of 11 U.S.C. § 726(b), thereby placing the administrative claims of the Chapter 7 Trustee above the lender's § 364(c)(1) claim. For the reasons that follow, the court finds that conversion does not impact the priority of a Chapter 11 super-priority claim granted under § 364(c)(1).
The debtor in a confirmed Chapter 11 case filed a lawsuit in state court concerning his former and current mortgage loan servicers' handling of his mortgage, particularly with regard to the post-confirmation interest rates and the amounts collected for property taxes. A defendant removed the case to federal district court, which then referred it to the bankruptcy court as a core proceeding because a cause of action dealt with the application of the terms of the confirmed plan and confirmation order.
When a defendant filed a motion for summary judgment, the bankruptcy court determined it did not have subject-matter jurisdiction over the adversary proceeding and recommended to the district court that it withdraw the reference of the case. The bankruptcy court found that the core proceeding on which the district court based its referral – the applicable interest rate under the confirmation order – was no longer an issue. The parties agreed on the proper contractual rate of interest – but they disagree on whether the defendants actually charged that rate. That is not a core proceeding, because it can exist outside of the bankruptcy context, and it does not fall under the court's "related-to" jurisdiction as it would have no conceivable effect on the bankruptcy estate because the underlying bankruptcy case has been dismissed and there no longer is an estate.
The bankruptcy court also discussed the defendants' estoppel argument, in which they argued that the debtor failed to disclose these causes of action in the bankruptcy case and should not be able to raise them now. The bankruptcy court pointed out that the interest rate cause of action did not exist until after the plan was confirmed and could not have been disclosed during the pendency of the case. The court said the estoppel argument was "insufficient to somehow vest jurisdiction in the bankruptcy court where jurisdiction does not otherwise exist."
The bankruptcy court recommended to the district court that it deny the pending summary judgment motion because disputed issues of material fact exist.
The court granted summary judgment against one defendant in favor of the Chapter 7 trustee, permitting him to recover unauthorized post-petition transfers made by the debtor. The evidence established (1) the funds were property of the bankruptcy estate; (2) the property was transferred; (3) the transfer was made post-petition; and (4) the transfer was not authorized by the Bankruptcy Code or the bankruptcy court. The court declined to enter summary judgment as to the remaining defendants because the evidence did not support an alter ego theory.
The court denied summary judgment in a preference action after determining that the affirmative defenses of contemporaneous exchange for new value, transfers in the ordinary course of business, and new value require factual findings as to the parties' intent.
An unsecured creditor in a Chapter 7 case may include post-petition attorneys' fees in its proof of claim, but it may not recover post-petition interest.