United States Bankruptcy Court - District of Colorado
721 19th StDenver, CO 80202-2508
(720) 904-7300
Bradford L. Bolton, Clerk of Court | Honorable Howard R. Tallman, Chief Judge
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Sender v. Love Funeral Home, Case No. 07-01125.
Shortly after filing bankruptcy, one of the debtors died. His spouse paid for his burial expenses by executing an assignment of a portion of the proceeds of a life insurance policy that was property of the estate to the defendant funeral home. The remainder of the policy was paid to her and deposited into her pre-petition bank account, which she continued to use post-petition. She commingled the account with post-petition income and exempt property. From this account, she paid the funeral home for the headstone. The trustee sued the funeral home to recover both the proceeds it had received directly from the insurance company and the subsequent payments from the widow under 11 U.S.C. § § 549 and 550. The court held that the trustee had the burden to trace the funds from this commingled bank account in order to recover the headstone payments and, having failed to do so, the trustee had not established these payments were from property of the estate. As to the direct payment from the insurer to the funeral home, the court held that the widow was the initial transferee, having converted estate property to her own use by executing the assignment. The funeral home, as the subsequent transferee, satisfied the good faith exception under § 550(b)(1).
Posted 04/16/2008In re Dagen, case number 05-19733EEB.
Following confirmation of the debtor's chapter 13 plan, his ex-spouse garnished his post-confirmation income in order to collect on both pre- and post-petition support obligations. The debtor sought sanctions for violation of the automatic stay. Acknowledging a split of authority, the court adopted the more restrictive view, known as the "estate termination approach," that holds all property of the estate vests in the debtor on confirmation, unless otherwise expressly stated. 11 U.S.C. § 1327(b). Despite this vesting, most pre-petition creditors continue to be stayed by § 362(c)(2). Support creditors, however, are excluded from this coverage by § 362(b)(2) once the property ceases to be "property of the estate." Thus, post-confirmation, it was the plan, not the automatic stay, that prevented the ex-spouse from collecting pre-petition support other than from plan distributions. But neither the plan nor the stay prevented her efforts to collect post-petition obligations.
Posted 04/16/2008In re Michael W. Disney; Case No. 06-16712 HRT; Order entered March 18, 2008 (§§ 502(j) & 1329).
The issue in this case was whether a debtor may make a post-petition chapter 13 plan modification under § 1329 that reclassifies a secured claim to unsecured following the foreclosure of the underlying collateral. The Sixth Circuit cases of In re Adkins, 425 F.3d 296, 302-303 (6th Cir. 2005) and In re Nolan, 232 F.3d 528, 529-35 (6th Cir. 2000), and their progeny, hold that secured claims are fixed in the confirmed plan and that recharacterizing a secured claim under those circumstances is not one of the permissible reasons to approve a modification under § 1329. This Court came to a contrary conclusion and held that recharacterization of a secured claim to an unsecured claim following surrender or foreclosure of the collateral is permitted under §§ 502(j) & 1329.
Posted 04/09/2008In re Turner and Morrison, Bankruptcy Case No. 07-21467 ABC, (Docket # 45, March 24, 2008); 11 U.S.C. §§ 521(a)(1)(B)(ii) and (v) and 521(i)(1).
Court interprets sections 521(a)(1)(B)(ii) and (v) and concludes that a Chapter 13 debtor must file Official Form B22C to meet the requirement of section 521(a)(1)(B)(v) that a debtor file a "statement of the amount of monthly net income, itemized to show how the amount is calculated" to avoid automatic dismissal by operation of section 521(i)(1).
Posted 03/31/2008First Assured Warranty Corporation, Bankruptcy Case No. 06-13669 MER
In this case, the Insurance Commissioner of the State of Hawaii (the "Commissioner") filed motions requesting dismissal of the case, relief from the automatic stay, excuse of turnover under § 543(d) and a motion to prohibit the use of cash collateral. The Commissioner's motion to dismiss challenged among other things whether: 1) there was "cause" for dismissal under § 1112(b)(4); 2) whether the Debtor was eligible to be a Chapter 11 debtor under § 109(b); whether the Court was reverse preempted under the McCarren-Ferguson Act; 4) whether discretionary abstention as explained in Burford v. Sun Oil was appropriate; and 5) whether the application of Rooker-Feldman, collateral estoppel, res judicata or abstention under § 305 were warranted. In a 42 page opinion the Court addressed each of the motions and ultimately determined, inter alia, the debtor was eligible to be a debtor-in-possession and the Court was not reverse preempted from exercising its jurisdiction over the Debtor by the McCarren-Ferguson Act.
Posted 03/17/2008In re PETITION OF ERNST & YOUNG, INC., as Receiver of Klytie's Developments, Inc., Klytie's Developments, LLC, Efrat Friedman, and Hidai Friedman, Case No. 07-22719 MER
The Court granted the petition of Ernst & Young, Inc., the receiver in a Canadian proceeding, to be considered a foreign representative in a foreign proceeding for purposes of 11 U.S.C. sections 1504 and 1515 . In addition, the Court found Canada constituted the "center of main operations" of the Debtors for purposes of determining the Canadian proceeding was a "foreign main proceeding" under 11 U.S.C. section 1502(4). Specifically, the Court noted the primary assets of the Debtors were controlled by a Canadian-based company. Further, the Court found recognition of the proceeding as a foreign main proceeding would not be manifestly contrary to United States public policy under 11 U.S.C. section 1506.
Posted 03/17/2008In re Ricky Donovan Van Vleet
An owner of nonresidential real property ("Landlord") sought an order for the Court under 11 U.S.C. section 365(d)(3) requiring a Chapter 11 trustee to pay postpetition rent and damages. The Landlord asserted that the debtor in possession occupied the nonresidential real property owned by the Landlord as a holdover tenant after the pre-petition expiration of the commercial lease. The trustee, appointed after removal of the debtor in possession, asserted that because the lease term expired prior to the bankruptcy filing, the lease had terminated and therefore the landlord was not entitled to the protections and rights afforded to lessors by section 365(d)(3). Moreover, the Chapter 11 trustee argued that, because the lease was in the name of a corporation, the lease was not an obligation of the debtor in possession and, thus, the estate. Finally, the trustee contended that, even if the Court concluded that it was an unexpired lease and an obligation of the debtor in possession, the Court should use the "performance date" to fix the lease payment amount, an approach utilized by this Court previously in In re CCI Wireless, LLC, 279 B.R. 590 (Bankr. D.Colo. 2002).
The Court held that, although the lease term had expired, the provisions of the lease and the case law in Colorado permitted a month-to-month lease to continue. Thus, the lease had not expired at the time of the bankruptcy filing. The Court further held that, because the debtor in possession ignored corporate formalities and that the lease was executed in his individual capacity, that the lease was an obligation of the debtor.
The Court further examined its own ruling in CCI Wireless and a more recent decision of the Tenth Circuit BAP in In re Furr's Supermarkets, Inc., 283 B.R. 60 (10th Cir. BAP 2002) and the application of the "performance date rule" and the "proration rule" in determining obligations under a lease post-petition. Under the "performance date rule," lessors are entitled to lease payments under section 365(d)(3) for any payment that becomes due under the lease after the order for relief, even if the lease payments due are attributable to periods prior to the order for relief. Under the "proration rule" the lessors are entitled to lease payments under section 365(d)(3) arising during and attributable to the period after the order for relief. The Court concluded that the "proration rule" was the proper approach in light of the Tenth Circuit BAP decision and the trend in the law.
Posted 03/13/2008Lynn H. Martinez, Chapter 7 Trustee v. Steven D. Hutton and Steven D. Hutton, P.L., Adversary Proceeding No. 07-1723 ABC, In re: Billy Jason Harwell, Case No. 05-41744 ABC; Fed. R. Civ. P. 12(b)(2); 28 U.S.C. §§ 1334(b), 157(a), 1404, and 1412.
A Colorado Chapter 7 bankruptcy trustee sued Florida residents in Colorado Bankruptcy Court to avoid transfers of a Colorado debtor's property in Florida. The bankruptcy court denied Defendants' motion to dismiss an adversary proceeding on due process grounds, rejecting the "national contacts" test for personal jurisdiction and extending the reasoning of Peay v. BellSouth Medical Assistance Plan, 205 F.3d 1206, 1211 (10th Cir. 2000) to a "related to" adversary proceeding. The court granted Defendants' motion for change of venue, applying 28 U.S.C. § 1412, rather than 28 U.S.C. § 1404(a).
Posted 02/14/2008In re: Jeffrey Gerard Lindstrom, Bankruptcy Case No. 06-10686 EEB
The court considered whether, under 11 U.S.C. § 707(b)(2)(A)(iii)(I), a debtor can deduct, as an allowable expense, monthly payments on a car loan when the car was repossessed during the bankruptcy case. The court followed the majority position and determined that the debtor need not retain the collateral securing a particular debt in order to claim the § 707(b)(2)(A)(iii)(I) deduction for the payments on that secured debt. The language of § 707(b)(2)(A)(iii)(I) covers payments owed under a contract at the time of filing of the petition, whether or not they are actually paid. This interpretation is in accord with the structure of the Means Test as a backward-looking, "snapshot" test, designed to determine whether a debtor is in need of bankruptcy relief on the petition date.
Posted 01/25/2008Telluride Global Development, LLC, et al., v. Dennis Bullock, et al., Adversary Proceeding No. 06-1588 MER, Case No. 06-12720 MER
In its opinion the Court initially addressed whether Colorado's "rule of exclusive jurisdiction" and its federal counterpart, the "prior pending action doctrine" should preclude it from resolving the pending issues in this case. After determining these doctrines had no application to the case at hand, the Court then determined whether certain limited partners of Telluride Income Growth Limited Partnership (an involuntary Chapter 7 debtor in another division of this Court) were third-party beneficiaries of an equity participation agreement and a purchase money deed of trust (collectively, the "Contracts") and whether the limited partners should be granted an equitable lien upon certain property of this Debtor's estate.
In determining the limited partners were not third party beneficiaries of the underlying Contracts, the Court, pursuant to Colorado law, found the original parties to the Contracts did not ever intend the limited partners to be third parties beneficiaries. In addition, the Court determined the limited partners did not sign the Contracts, were not named parties to the Contracts, furnished no consideration for the Contracts and were otherwise not mentioned in the Contracts.
The Court also determined the imposition of an equitable lien under Colorado law was inappropriate where the limited partners could not present any evidence during the four-day trial that the Debtor or the principals of the Debtor had conspired to deprive the limited partners of their initial investment. Finally, the Court declined the Debtor's request to dissolve a state court preliminary injunction based on 28 U.S.C. § 1334(c)(1) (permissive abstention) and based on comity with the state court. The Court's opinion was recently affirmed. See In re Telluride Global Development, LLC, 2007 WL 4553669 (B.A.P. 10th Cir. Dec. 28, 2007).
Posted 01/09/2008In re: Dustin Michael Muth, Claudine Lee Nelson, Bankruptcy Case 06-12797EEB
The court follows the line of cases that interpret § 706(a) to allow a debtor the right to convert from chapter 7 to chapter 13 only if the case has not already been converted, and bars the debtor from seeking any further reconversion. The court denied the debtors' request to convert from chapter 7 to chapter 13, because they had already converted once from chapter 13 to chapter 7.
Posted 12/03/2007
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