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The District of Colorado offers a database of opinions listed by year and judge. For a more detailed search, enter the keyword or case number in the search box above.

Judge Thomas B. McNamara (TBM)

After the Debtor, Touchstone Home Health, LLC, terminated its pre-petition representation by the Santangelo Law Offices, P.C. (the “Law Firm”), the Law Firm continued to assert that it was owed substantial attorneys’ fees, costs, and interest for its work; but the Debtor contested such obligation.  In 2015, as a result of the parties’ impasse, the Law Firm initiated an arbitration proceeding under its fee agreement with the Debtor.   

Before the arbitration was scheduled to proceed to a final evidentiary hearing, and just one day prior to an important deadline in the arbitration, the Debtor filed for relief under Chapter 11 of the Bankruptcy Code.   The Law Firm moved for relief from the automatic stay pursuant to 11 U.S.C. § 362(d)(1) to proceed with liquidation of its claims against the Debtor through arbitration.

After a preliminary hearing at which the Court received oral offers of proof and exhibits and heard legal arguments from the parties, the Court determined that relief from stay “for cause” was warranted and the parties must be compelled to liquidate the Law Firm’s claim by arbitration.  Finding no inherent conflict between arbitration and bankruptcy law in the context of the case, the Court concluded that it was required to enforce the arbitration agreement.  The Court further concluded that, even if it had discretion to refuse to compel arbitration, it would exercise such discretion in favor of allowing the arbitration to proceed.  Under the circumstances, bankruptcy did not eclipse the right to continue the arbitration.

Public utility creditor, PacifiCorp d/b/a Rocky Mountain Power (“PacifiCorp”), supplied electrical energy to the Debtor, Escalera Resources Co. (“Escalera”), before and after the Debtor sought protection under Chapter 11 of the Bankruptcy Code.  PacifiCorp filed an Application under 11 U.S.C. § 503(b)(9) seeking approval of an administrative expense priority claim for the value of the electrical energy supplied by PacifiCorp to the Debtor during the 20-day period prior to the bankruptcy petition date.  The Debtor opposed the Application arguing that electrical energy does not constitute “goods” under Section 503(b)(9).  The issue is of first impression for federal courts within the geographical bounds of the U.S. Court of Appeals for the Tenth Circuit.

The Court focused on the plain meaning of the word “goods” within the statutory framework.  Since the term is not defined in the Bankruptcy Code, the Court analyzed the ordinary and legal meaning of the word “goods” in dictionaries and under a variety of legal regimes including the Uniform Commercial Code, federal antitrust law, federal labor law, federal energy regulatory law, state tort law, tax law, and international treaties.  Informed by those sources, the Court ultimately adopts the definition of “goods” in the UCC Section 2-105 for purposes of Section 503(b)(9) and determines that electrical energy constitutes “goods” within the ambit of Section 503(b)(9).  Accordingly, the Court granted administrative expense priority status for the value of electrical energy supplied by PacifiCorp to the Debtor during the 20-day period prior to the bankruptcy petition date.  

The Unsecured Creditors’ Committee served subpoenas to produce documents (subpoenas duces tecum) on two non-parties pursuant to Fed. R. Bankr. P. 2004 and 9016, as well as Fed. R. Civ. P. 45. The subpoenas properly were issued by the United States Bankruptcy Court for the District of Colorado (and signed by counsel for the Committee) but required that the entities produce documents in New York, New York. The targets of the subpoenas contested the subpoenas by filing a motion to quash in the United States Bankruptcy Court for the District of Colorado. But, the new version of Fed. R. Civ. P. 45(d)(3) mandates that attacks on subpoenas initially must be prosecuted in “the court for the district where compliance is required.” Since the subpoenas unequivocally required compliance in New York, the Court held that it lacked authority to adjudicate the motion to quash and that the non-parties must seek relief in the United States District Court for the Southern District of New York (or possibly the United States Bankruptcy Court for the Southern District of New York).

The State of Colorado filed a Complaint under 11 U.S.C. § 523(a)(2)(A) seeking to determine the nondischargeability of a debt owed to it by the Debtor/Defendant for overpayments of unemployment compensation, plus statutory penalties and collection fees, on the ground that the Debtor/Defendant had fraudulently and under false pretenses obtained overpayments of unemployment to which he was not entitled.   

The Defendant moved to dismiss the claim to the extent that the State sought to establish the nondischargeability of the statutory penalties and collection fees, arguing that pursuant to 11 U.S.C. § 1328(a), those components of the debt were not barred from a discharge entered in a Chapter 13 case.  Based on the plain reading of Section 523 and the Colorado Employment Security Act, the Court concluded that the State had adequately alleged a claim against the Defendant.  The Court further held that the Supreme Court’s decision in Cohen v. de la Cruz, 523 U.S. 213 (1998) dictates that penalties and collection fees arising from overpaid unemployment compensation obtained by “false pretenses, a fraudulent representation, or actual fraud” are nondischargeable under Section 523(a)(2)(A) to the same extent as the restitutionary debt for overpaid unemployment compensation.   Such penalties do not become dischargeable under Section 523(a)(7).

Judge Elizabeth E. Brown (EEB)

Non-profit debtor corporation that co-owned real property with its former president, confirmed a chapter 11 plan that vested property of the estate in the Debtor upon confirmation “free and clear” of claims and interests. Following confirmation, the former president sought to partition the property in state court, and the Debtor filed a motion seeking a determination whether the plan’s language extinguished the co-owner’s partition rights. The Court determined that neither 11 U.S.C. § 1141(c) nor the Debtor’s plan eliminated the former president’s co-ownership interest in the property or prevented him from seeking partition in the state court.

Counsel for chapter 11 debtor sought retroactive approval of its employment as counsel for the debtor for the seven-day period between the debtor’s petition date and the date counsel filed its application. The Court denied the request, finding counsel had failed to make the required showing of extraordinary circumstances necessary to obtain nunc pro tunc approval under Tenth Circuit precedent. Even though the delay was relatively short, that factor alone was not an extraordinary circumstance.

Judge Joseph G. Rosania, Jr. (JGR)

The Court considered the issue of whether a mortgage encumbering a debtor’s 50% interest in a home, for which the debtor is not personally liable, is still a “debt” for the purpose of calculating whether the debtor has primarily consumer debts under 11 U.S.C.
§ 707(b).  Debtor argued the mortgage was a “claim” but not a “debt,” because in § 101(12), the Bankruptcy Code defines a “debt” as “liability on a claim,” and the debtor was not personally liable for the mortgage. Therefore, the debtor’s business debt outweighed his consumer debt, making the ‘abuse’ provisions of §707(b) not applicable.
 
In response, the United States Trustee (“UST”) cited established case law holding a home mortgage is a consumer debt, and observed the debtor had not asserted the mortgage was not a consumer debt.  The UST contended the terms “debt” and “claim” were coextensive, citing Tenth Circuit and Supreme Court precedent. The UST also cited cases from other jurisdictions holding a non-recourse mortgage was a debt under the Bankruptcy Code.
 
The Court ultimately agreed with the UST, recognizing it was bound by Supreme Court and Tenth Circuit precedent holding that the terms “debt” and “claim” are “coextensive.” The Court examined Johnson v. Home State Bank, 501 U.S. 78 (1991), where that Court discussed the concepts of in personam liability and in rem liability, and stated that even after in personam liability has been extinguished by a bankruptcy discharge, the creditor still retains a “right to payment” from the proceeds of the sale of the debtor’s property.
 
The Court also found persuasive the Fifth Circuit case of In re Lindsey, 995 F.2d 626 (5th Cir. 1993).  In that case, the court recognized that the Bankruptcy Code defines “debt” as “liability on a claim,” not “personal liability on a claim,” and that “personal liability” is a subcategory of “liability.”  Finally, the Court followed the reasoning of a Kansas bankruptcy court holding that in rem debts are included when applying the condition of § 707(b) that the UST may move to dismiss a case for substantial abuse only if the Debtor’s debts are primarily consumer debts.  In re Bryson, 2007 WL 2219114 (Bankr. D. Kan. 2007).
 
Accordingly, the Court concluded the case was subject to the dismissal provisions of §707(b). Because the UST moved for dismissal on several grounds, and advised the Court an evidentiary hearing would be necessary to resolve the remaining issues, the Court set a status and scheduling conference by separate order.
 
The Court weighed in on the recent trend of lenders objecting to discharge at the conclusion of a Chapter 13 case because a debtor failed to make post-petition mortgage payments.  In this particular case, the mortgage lender initially filed a response to the Trustee’s Notice of Final Cure Payment indicating Debtor had failed to make post-petition mortgage payments, but the parties were in the process of a loan modification.  As a result, the Trustee filed a motion to dismiss under § 1307 for failure to comply with provisions of the Debtor’s Chapter 13 Plan.   Subsequently, the mortgage lender filed a supplemental response indicating the loan had been modified and the Debtor was no longer in default.
 
The Trustee conceded a loan modification may cure deficiencies in post-petition mortgage payments under some circumstances, but questioned the timing of the loan modification, which was not finalized until after the 60-month plan period had ended.  Debtor argued it would be inequitable to deny discharge, when she had made mortgage payments for most of the plan term, but entered a loan modification with her mortgage lender when her income dropped during the last year of her plan, and, pursuant to instructions from her mortgage lender, did not make payments for a certain amount of time. 
 
The Court recognized the holdings of other divisions of this Court that post-petition mortgage payments are “payments under the plan” pursuant to § 1328(a).  However, the Court agreed with the reasoning of In re Binder, 224 B.R. 483, 490 (Bankr.D.Colo. 1998), that, for a creditor holding a “long-term debt secured only by a lien against the debtor’s residence” the debtor is allowed to “cure arrearages over a reasonable period of time” so long as they keep current with regard to other obligations.  In this particular case, the Court held any default was not material under  § 1307(c)(6), because it was technical and temporary, and had since been cured to the mortgage lender’s satisfaction. 
 
The Court also determined that, while §§ 1322 and 1325 prohibit a debtor and a bankruptcy court from knowingly extending a plan that extends beyond five years, these sections do not mandate dismissal of a bankruptcy case if a debtor needs a reasonable period of time to cure an unanticipated arrearage incurred during the sixty-month period.  (Citing In re Handy, 557 B.R. 625, 628 (Bankr. N.D. Ill. 2016)). 
 
Ultimately, the Court denied the Trustee’s motion to dismiss,  determined it would be inequitable in this circumstances to deny discharge, and ordered the Clerk to enter Debtor’s discharge and close the case.
The issue before the Court was whether an innocent mistake by a grandmother in titling property in her name and the names of her daughter and son-in-law is reached by the law of constructively fraudulent transfers when the son-in-law transferred his interest in the property back to the grandmother immediately upon her request almost two years before the son-in-law filed bankruptcy.
 
Trustee filed a complaint against Debtor’s mother-in-law, Mrs. Nelabovige (“Nelabovige”), for recovery of a constructive fraudulent transfer under 11 U.S.C. §§ 548(a)(1)(B) and 550(a)(1). Trustee alleged that when Nelabovige purchased property in Fairplay, and titled the property in her name and the names of Debtor and his wife, Nelabovige gifted a one-third interest in the property to Debtor. Trustee further contended that when Debtor quit-claimed his interest in the property to Nelabovige, he made a transfer of his property to her and received less than a reasonably equivalent value in exchange for the transfer, and was either insolvent on the date of the transfer or rendered insolvent by the transfer. The Trustee requested a judgment against Nelabovige for one-third of the amount the property sold for in December 2014. The Court held a full-day evidentiary hearing on the complaint and Nelabovige’s answer, and took the matter under advisement.
 
In its written opinion, the Court cited Davis v. Pham (In re Nguyen) 783 F.3d 769, 776 (10th Cir. 2015), for the proposition that an interest in property consisting of bare legal title holds no tangible economic value; accordingly, the transfer of bare legal title does not constitute a fraudulent transfer. Therefore, the question before the Court was whether under Colorado law, Nelabovige made a gift of a one-third interest in the property to Debtor. If there was no gift, since she paid for the property and did not receive any consideration from Debtor, a resulting trust would arise in Nelabovige’s favor, making the transfers to and from Debtor of bare legal title only.
 
The Court found by strong and convincing evidence that Nelabovige did not intend to make a gift to Debtor. Thus, Debtor only had bare legal title subject to a resulting trust in favor of Nelabovige, who held equitable title. Accordingly, the reconveyance of Debtor’s bare legal title was not a fraudulent transfer. The Court entered judgment in favor of Nelabovige and against the Trustee, and dismissed the complaint with prejudice.

Judge Howard R. Tallman (HRT)

Debtor filed for Chapter 13 and made multiple misrepresentations in her petitions and proposed plans during the subsequent nine-month period. Several creditors moved to convert Debtor’s case to Chapter 7, citing 11 U.S.C. § 1307(c), on the grounds of bad faith. Debtor then moved to voluntarily dismiss her case under § 1307(b), arguing she had an absolute right to dismissal, despite the pending motions to convert.

Noting the lack of Tenth Circuit authority on this issue, the Court ordered briefing and held an evidentiary hearing on the pending motions. Two creditors cited cases holding a bad faith exception to the absolute right to dismiss should allow the Court to determine whether dismissal or conversion was in the best interests of creditors. Another creditor, and the Trustee, sided with Debtor, citing cases holding the plain language of § 1307(b) mandated the Court to dismiss, rather than convert, the case notwithstanding Debtor’s bad faith conduct.

The Court examined the split of authority on this issue, as well as the implications of Marrama v. Citizens Bank of Mass., 549 U.S. 365 (2007) and Law v. Siegel, 134 S.Ct. 1188 (2014). The Court ultimately determined the statutory language of the Code, and the conflicting case law addressing the issue, compelled dismissal, rather than conversion, of Debtor’s case. Importantly, the Court agreed with cases determining the right to dismissal was not “self executing”; that is, after a debtor’s motion under § 1307(b) is filed, a court can hold a hearing on the motion to determine whether conditions should be placed on dismissal if it finds them appropriate.

Therefore, the Court dismissed the case with sanctions for Debtor’s bad faith conduct, pursuant to § 109(g) (180-day filing bar) and § 349(a) (barring discharge of debts in future bankruptcy cases). Additionally, the Court held that, should Debtor file a bankruptcy case after 180 days, but within three years, Debtor was required to provide notice to all creditors, including those in the current case, giving them an opportunity to object. Finally, the Court noted that nothing in its Order prohibited the filing of an involuntary bankruptcy case against Debtor under § 303.

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