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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
In re Briones-Coroy (United States Trustee v. Assaf), Adversary Proceeding No. 11-01311-SBB (Bankr. No. 10-40900-SBB).
The court declined to approve a stipulation between the United States Trustee and Emmanuel Assaf which was submitted to resolve and provide for payment by Mr. Assaf of prior judgments in the total amount of $501,925.98 for multiple violations of 11 U.S.C. Section 110 as a bankruptcy petition preparer. The United States Trustee obtained the judgments for and on behalf of 280 debtors.
The proposed stipulation to which the United States Trustee agreed, would have allowed Mr. Assaf to pay on the judgments at a rate of $250.00 to $2,000 per month until January 1, 2042, twenty-seven years and eight months from now.
The court declined to accept the stipulated agreement because (a) Mr. Assaf and his wife, to whom he had transferred real property shortly before and during the bankruptcy court litigation, owned real property with equity estimated at $1.5 to $2.0 million; (b) the United States Trustee had done nothing, nothing whatsoever, to execute on the judgments it obtained in October and December 2012; (c) the United States Trustee failed to file any lis pendens, transcripts of judgment, judgment liens, or similar encumbrances on the Debtor's real property for two and one-half years during litigation and after judgments entered; (d) the delay, cost and likely failure to recover and pay the 280 debtors over 27 years was shocking and unconscionable.
Posted: 8/12/2014 3:09:48 PM
MacArthur Co. v. Cupit, 13-1185 EEB
Creditor who supplied roofing materials to debtor's roofing company brought action under 11 U.S.C. § 523(a)(4), alleging that debtor's misapplication of funds under the Colorado Mechanic's Lien Trust Fund Statute amounted to either defalcation, as that term has been recently defined by the Supreme Court in Bullock v. BankChampaign, 133 S.Ct. 1754 (2013), or embezzlement. The Court held that under the new Bullock standard, to establish a debtor's "reckless disregard," a creditor must provide evidence that the debtor was subjectively aware that his conduct might violate a fiduciary duty. It was not enough that the debtor objectively should have been aware of the risk. Thus, the Court found the debtor did not commit a defalcation during the time period in which he was unaware of his statutory fiduciary duty under the Colorado Trust Fund Statute. However, after debtor had been sued by other suppliers for violations of that statute, the Court held that the debtor either consciously disregarded or was willfully blind to a substantial and unjustifiable risk that his conduct would violate a fiduciary duty. The Court further held that, although the creditor was entitled to treble damages under the Colorado theft statute for debtor's conduct, the creditor failed to prove that debtor acted with animus furandi or intention to steal, as required for an embezzlement claim under § 523(a)(4).
Posted: 8/6/2014 7:42:42 AM
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