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In re Scrubs Car Wash, Inc., No. 12-31204 ABC, slip op. (Bankr.D.Colo. March 20, 2015) (oral ruling given on February 13, 2014; judgment entered on February 18, 2014). 11 U.S.C. §§ 1111(b)(2) and 1129(b)(2)(A)(i).
In the context of a Chapter 11 reorganization, Judge Campbell denied confirmation of a plan. Among the grounds for denial, the Court found that the debtor's treatment of an undersecured creditor which had elected treatment under section 1111(b) of the Code and which objected to confirmation of the plan, did not comply with section 1129(b)(2)(A) of the Code. The opinion includes a detailed analysis of the interplay of the two sections of the Bankruptcy Code.
Posted: 3/23/2015 10:01:22 AM
Sender v. Golden (In re Golden); Case No. 14-1523 HRT; Order entered March 16, 2015 (11 U.S.C. §§ 549(a) & 1327(b)).
The Chapter 7 Trustee, in a case converted from Chapter 13, filed this adversary proceeding under 11 U.S.C. § 549(a) to recover Debtor's post-confirmation, pre-conversion, transfer of proceeds from the sale of Debtor's homestead to Debtor's non-filing spouse. Under 11 U.S.C. § 1327(b) and the terms of Debtor's Chapter 13 plan, the home revested in the Debtor upon confirmation. The Court followed the reasoning of U.S. v. Richman (In re Talbot), 124 F.3d 1201 (10th Cir. 1997) to determine that revesting had the effect of returning full ownership and control of the property to the Debtor. Therefore, because the property had revested in the Debtor at the time of the transfer, it was not of "property of the estate." The Chapter 7 Trustee's claim was dismissed.
Posted: 3/17/2015 2:07:11 PM
In re Western Capital Partners LLC, Case No. 13-15760 MER; Order entered January 28, 2015 (Post-Confirmation Modification of Chapter 11 Plan and Substantial Consummation)
The reorganized debtor requested the post-confirmation modification of its Chapter 11 plan of reorganization under 11 U.S.C. § 1127(b), and a creditor objected. Section 1127(b) provides a fixed time period for a reorganized debtor to modify a confirmed Chapter 11 plan after confirmation and before substantial consummation of the confirmed plan. "Substantial consummation" is defined in 11 U.S.C. § 1101(2). Even if the proposed modification is sought within this narrow window, a plan may be modified only if circumstances warrant such modification, and the Court confirms the proposed modified plan after notice and a hearing.
The Tenth Circuit has not addressed the issue of substantial consummation in the context of a proposed Chapter 11 plan modification, but has applied "substantial consummation" as a factor in the equitable mootness doctrine. The Court followed the Tenth Circuit's prior application of § 1101(2) to address whether the reorganized debtor's confirmed plan was substantially consummated, and further analyzed whether circumstances warranted the requested confirmation. In this matter, the Court concluded the confirmed plan had been substantially consummated thereby barring the requested modification, and even if the modification was requested within the statutory window, circumstances did not warrant the requested modification.
Posted: 2/13/2015 8:46:25 AM
In re SRKO Family Limited Partnership, Case No. 10-13186-SBB
The Court confirmed a Chapter 11 Plan of Reorganization proposed by a Committee of lien-holding creditors of the Debtor entity but reserved approval of two provisions under the Plan for later determination. The case was commenced by a Jannie Richardson as the pre-petition managing member of the Debtor entity. The lien-holders' Committee proposed that a post-confirmation permanent injunction be placed against Ms. Richardson, barring her from holding herself out as an agent of the newly reorganized Debtor and prohibiting her from entering the property of the reorganized Debtor. The lien-holders' Committee also proposed that this Court retain jurisdiction post-confirmation over any claims asserted by the lien-holders' Committee or the reorganized Debtor against Ms. Richardson or any other of her affiliates.
The Court applied the test for permanent injunctions set forth by the United States Supreme Court in eBay Inc. v. MercExhange, LLC and found that based on the testimonies provided by the Trustee appointed in the personal Chapter 11 bankruptcy case of Ms. Richardson and the chief executive officer of the newly reorganized Debtor, and based on this Court's own observations of Ms. Richardson's conduct over a period of two and a half years, an injunction spanning eighteen months was proper to allow the Debtor reasonable time to undertake the Plan. The Court also opted to retain jurisdiction of matters post-confirmation, concurrent with the jurisdiction of other courts of competent jurisdiction.
Posted: 1/12/2015 7:42:15 AM
In re: Steinke; Case No. 14-18283 HRT; Order entered December 23, 2014 (11 U.S.C. § 522(f)).
In this case, the Court was required to apply the lien avoidance formula set out in § 522(f)(2)(A) in a case where the homestead property at issue is jointly owned by the Debtor and his non-debtor spouse. In 1997, the B.A.P. in In re Cozad, 208 B.R. 495 (B.A.P. 10th Cir. 1997), held that the literal language of § 522(f)(2)(A) required it to use only the debtor's proportional interest in the property when applying the formula but, at the same time, required it to use the full amounts of the liens encumbering the property. In the intervening 17 years, the First Circuit, Third Circuit and Eleventh Circuit have addressed similar issues but have rejected the Cozad style literal language approach as producing a result that is absurd and at odds with Congressional intent. In this case, the Court followed those circuit courts of appeal and applied the § 522(f)(2)(A) formula by using the Debtor's proportional share of the value of the homestead property and also using the proportional amounts of the homestead exemption and the liens only to the extent applicable to his interest in the property.
Posted: 12/24/2014 7:24:05 AM
Rocky Mountain High LLC v. Lofstedt, et al., Adversary Proceeding No. 13-1025 ABC, October 16, 2014 11 U.S.C. §§ 544(a)(3); C.R.S. §§ 38-35-122, 38-35-108, and 38-22-101, et seq.
This adversary proceeding concerned the adjudication of the respective rights of the holder of a deed of trust, a purported mechanics lienor, and the Chapter 7 bankruptcy trustee in the bankruptcy estate's principal asset. The Court determined that the trustee prevailed over the claims of the deed of trust holder because of an insufficient legal description in the deed of trust and because the doctrine of equitable subrogation was not applicable against the trustee exercising her powers as a bona fide purchaser for value. The trustee prevailed over the mechanics lien because the lienor did not comply with requirements of the mechanics lien statute.
Posted: 10/23/2014 7:32:39 AM
In re SYMKA, Inc.; Case No. 11-32598 HRT; Order entered October 17, 2014 (Fed. R. Civ. P. 7; orders to show cause).
The Court dismissed the Debtor's motion for an order to show cause as procedurally and substantively deficient. Presumably unhappy with the results of the chapter 7 trustee's administration of the estate, the Debtor sought an order to show cause "as to why the Bankruptcy Trustee did not recover equipment . . . and accounts receivable . . . in an amount of several hundred thousand dollars and breached his fiduciary responsibility to the court, the Estate and the Debtor." The Court disfavors motions for orders to show cause requested by a private litigant that seek substantive relief against another private party. Where such motions are filed to vindicate private rights, as opposed to prompting compliance with Court orders or procedures, they create the appearance of the Court taking sides in a private dispute and, under those circumstances, an order to show cause improperly shifts the burden of going forward from the applicant to the target of the show cause order. In this case, the Court chose to deny the relief without prejudice instead of construing the Debtorâ€™s motion in a more procedurally appropriate manner because of other more substantive shortcomings.
Posted: 10/21/2014 9:58:40 AM
In re Arenas; Case No. 14-11406 HRT; Order entered August 28, 2014, (The Controlled Substances Act, 21 U.S.C. § 801 et seq. & 11 U.S.C. §§ 706(a) & (d); 707(a); 1307(c); 1325(a)(3)).
The Debtors own a commercial building that contains two units. The Debtors lease one of the units to a marijuana dispensary. In the other unit, Mr. Arenas carries on his business of growing marijuana for medical marijuana patients. The Debtors originally filed their case under chapter 7 and the United States Trustee moved to dismiss for cause under § 707(a). Subsequently, the Debtors moved to convert to a case under chapter 13. The Debtors' activities constitute crimes under the federal Controlled Substances Act ("CSA") but those same activities do not violate Colorado law. The Court found cause to dismiss the Debtors' chapter 7 case under § 707(a) because the Court found that the Debtors' chapter 7 trustee would be unable to administer their case without committing crimes under the CSA. The Court also found the Debtors are ineligible to be debtors under chapter 13 because they could not satisfy the requirement that their plan be "proposed . . . not by any means forbidden by law" under § 1325(a)(3). Under Marrama, because the Debtors are ineligible to be chapter 13 debtors, their motion to convert was denied and their case was dismissed.
Posted: 10/21/2014 9:56:33 AM
In re: Flanders v. Lawrence, et al., Adv. Pro. No. 13-1456 ABC. 11 U.S.C. §§ 524(a)(1) and 362; Rooker-Feldman; issue preclusion.
Debtor sought sanctions against ex-wife and her attorneys for alleged violation of his discharge injunction and/or the automatic stay for actions taken in post-petition divorce case. The Court granted Defendants' motion for summary judgment, ruling that: (1) as determined by the Supreme Court's Rooker-Feldman doctrine, the Bankruptcy Court is without subject matter jurisdiction to review or reverse the divorce court's orders regarding property division; (2) Debtor was precluded from relitigating issues raised and decided against him in the divorce case; (3) Debtor had no standing to litigate whether a divorce court order violated the automatic stay of actions against property of his bankruptcy estate; and (4) the automatic stay as to actions against the Debtor terminated upon entry of Debtor's discharge.
Posted: 10/9/2014 4:11:10 PM
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