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In re: Saeid Ghaemi, BK Case Number 12-29295, ADV Number 12-1783 EEB
Debtor sought dismissal of plaintiff's claim under 11 U.S.C. § 523(a)(4), arguing plaintiff had failed to adequately plead fraudulent intent for an embezzlement claim. The Court denied the motion, holding that the requisite mental state required to establish a claim for embezzlement is "animus furandi" or intention to steal. An embezzlement claim does not require use of the word "fraud," nor allegations that a debtor made an intentional misrepresentation, as is the case for a claim under § 523(a)(2). Rather, as demonstrated by the historical development of embezzlement, such claim requires misappropriation of property accompanied by the intent to permanently deprive.
Posted: 6/11/2013 1:37:57 PM
In re McDonald, Case No. 11-35762 MER; Order entered May 13, 2013 (Procedure for Marrama conversion dispute - shifting burden of proof).
Former Chapter 7 trustee and his counsel filed a motion to reconsider the Court's order converting the debtors' case from Chapter 7 to Chapter 13. In the alternative, the trustee sought reconversion of the case to Chapter 7 pursuant to § 1307(c). The issue of bad faith is a question of fact determined by the totality of the circumstances, and this includes both pre-petition conduct and post-petition conduct during the Chapter 7 case. This Division adopted a shifting burden of proof for Marrama bad faith conversion hearings consistent with the conversion procedures set forth in L.B.R. 1017 1. The Court determined the initial burden should be on the debtor seeking to convert a case from Chapter 7 to demonstrate (1) the case has not been previously converted, and (2) the debtor is eligible to be a debtor under the new chapter. If the debtor establishes these requirements, the burden shifts to the objecting party to establish the debtor is seeking the conversion in bad faith. Based on the evidence presented in this case, the Court concluded the debtors satisfied their initial burden of proof, and the trustee did not satisfy his burden of proving the debtors sought conversion in bad faith. Therefore, the Court denied the motion to reconsider.
Posted: 5/31/2013 11:15:46 AM
In re Donald Harry Allen, Case No. 12-24413 ABC (trusteee's objection to debtor'Â€s claim of exemptions).
Trustee's allegations concerning debtor's conduct in failing to turnover non-exempt property did not demonstrate "bad faith" in claiming exemptions such that exemptions would be denied.
Posted: 5/16/2013 7:52:38 AM
LAR MHP Holdings, LP v. Robert D. Mordini, Jr., et al (In re Robert D. Mordini, Jr.), Adv. Pro. No. 11-1920 ABC ("related to" jurisdiction under 28 U.S.C. § 1334(b)).
The Court dismissed non-debtor plaintiff's state-law claims against other non-debtor entities for lack of subject matter jurisdiction. The Court ruled that the economic effect of litigation on the value of a separate non-debtor entity in which a debtor owns an equity interest is not sufficient to confer "related to" jurisdiction under 28 U.S.C. § 1334(b) on the bankruptcy court.
Posted: 5/3/2013 8:02:32 AM
In re Sharp, Bankruptcy Case No. 12-21611-SBB
The Bankruptcy Court considered the question of whether a debtor could claim a "tools of trade" exemption for a non-primary occupation, which despite 3 years of existence, had not been profitable. The matter was originally submitted to the Court on stipulated facts. However, the Court determined that it must conduct a final evidentiary hearing to address certain non-exclusive factors for determining the validity of the claimed exemption..
The Court determined that this matter involved two questions: (1) Whether a debtor may claim assets exempt under the "tools of trade" exemption with respect to an occupation that is not his or her principal occupation at the time of filing bankruptcy and (2) whether a debtor's "gainful occupation" must be "profitable."
The Court determined that the "tools of the trade" exemption could be claimed with respect to a valid secondary occupation. Nevertheless, the Court determined that consideration of the claimed exemption required testimony and evidence. Specifically, the Court determined that certain questions must be considered in examining the "tools of trade" exemption. These questions include, but are not limited to:
(1) What is the length of time the alleged non-principal occupation has been undertaken and what is the debtor's intensity and extent of commitment to the non-principal occupation for which the exemption is claimed?
(2) Is the asserted non-principal occupation profitable or at least capable of being profitable in the foreseeable future?
(3) Is the asserted non-principal occupation more than a mere hobby or pastime?
(4) Are the "tools of the trade" claimed as exempt essential to the alleged non-principal occupation and customary to the non-principal occupation?
(5) Does the evidence support that there is indeed a valid non-principal occupation being pursued by the debtor?
(6) Is the debtor credible and is debtor's testimony consistent with an intention of pursuing a valid non-principal occupation?
The Court also established questions to be considered with respect to whether an occupation was a "gainful occupation." These questions include, but are not limited to:
(1) What is the debtor's occupation in which he or she intends to exempt assets as "tools of trade?"
(2) How long has the debtor been involved in the occupation?
(3) Is there evidence of "actual use" of the "tools of trade" by the debtor for his or her occupation?
(4) Are the "tools of trade" consistent with the occupation?"
(5) Is a "fresh start" attainable without the "tools of trade?"
The Court concluded that, as the questions presented require a determination of intent and credibility and are fact intensive, a final evidentiary hearing was required to address the questions presented by this Court.
Posted: 3/21/2013 1:24:43 PM
In re Andrew and Pamela Jaussi, Case No. 12-34062 ABC
Chapter 7 Trustee filed motion to sell real property free and clear of liens under 11 U.S.C. § 363(f)(1) and/or (3). Trustee proposed to sell property to holder of first deed of trust for less than the aggregate face amount of the first deed of trust plus two junior judgment liens. The Court denied the Trustee's Motion because neither § 363(f)(1) or (3) applied.
Posted: 3/19/2013 2:30:51 PM
In re Rozinski, Case No. 12 24085 MER; Order entered February 12, 2013 (Determination of Value under 11 U.S.C. § 506(a)(1) - shifting burden of proof)
The Debtors filed a Verified Motion Valuation of Collateral and Determination of Secured Status under 11 U.S.C. § 506(a)(1), and the junior lienholder objected to the Debtors' valuation. The sole issue presented was a determination of the value of the Debtors' Residence. Following a recent opinion from the United States Court of Appeals for the Third Circuit, the Court revisited and examined the requisite burden of proof for determinations of value under § 506(a) in the context of Chapter 13 plan confirmation. In departing from its previous practice, placing the entire burden of proof on the debtor by preponderance of the evidence, the Court adopted a burden-shifting analysis. The Court reasoned the initial burden should be on the party challenging a presumptively valid amount of a secured claim. If the movant establishes with sufficient evidence that the proof of claim overvalues a creditor's secured claim because the collateral is of insufficient value, the burden shifts. The creditor thereafter bears the ultimate burden of persuasion to demonstrate by a preponderance of the evidence both the extent of its lien and the value of the collateral securing its claim. Based on the evidence presented in this case, the Court concluded the Debtors satisfied their initial burden of proof, the ultimate burden of persuasion shifted to the creditor, and the creditor did not satisfy its burden. Therefore, the Court granted the Debtors' Motion.
Posted: 3/4/2013 3:35:41 PM
In re Toxvard, Chapter 13 Case No. 11-17876 MER; Order entered January 9, 2013 (Calculations under § 1325(b) and the Line 19 Marital Adjustment Deduction).
The Chapter 13 trustee objected to confirmation of the debtor's amended Chapter 13 plan, primarily alleging: 1) the debtor overstated her marital adjustment deduction on Form B22C; 2) her household income is actually above the median; and 3) the debtor should calculate her disposable income under 11 U.S.C. § 1325(b)(3) rather than § 1325(b)(2). As a matter of first impression in this district, the Court examined the Line 19 marital adjustment deduction on Form B22C to determine whether the debtor's calculation of disposable income, which includes the deduction, complied with § 1325(b)(1)(B). The Court articulated the calculations for current monthly income and projected disposable income, and discussed the impact of the marital adjustment deduction on projected disposable income. The Court also interpreted the term "household expenses" as applied to each deducted expense of the debtor's non-filing spouse. Although the Court determined the debtor understated the deductions for the portion of her non-filing spouseeÃ¢Â€s income not regularly paid for the household expenses of the debtor, the Court denied confirmation of the proposed plan with leave to file an amended From B22C and Amended Schedule I to accurately reflect the Court's factual findings.
Posted: 2/4/2013 10:02:33 AM
Leonor Hilda Jimenez; Case No. 12-26282 HRT; Order entered February 1, 2013, (Rule 3001(c)(2)(D) sanctions).
Pre-petition, the creditor had commenced three separate foreclosure proceedings. Debtor had cured delinquent payments prior to the sale in each case. However, attorney fees and expenses incurred by the creditor remained outstanding. Upon the Creditor's fourth delinquency she filed her chapter 13 bankruptcy proceeding in order to cure the delinquency. Debtor objected to the reasonableness of attorney fees reflected in the creditor's mortgage claim. Following disclosure of hearing exhibits, Debtor objected to admission of the creditor's evidence under Fed. R. Bankr. P. 3001(c)(2)(D) because the creditor had failed to itemize expenses on its proof of claim in violation of Rule 3001(c)(2)(A). The Court found that the attorney fees incurred by the creditor in connection with its commencement of foreclosure proceedings were reasonable. The Court also found that the creditor had failed to comply with Rule 3001(c)(2)(A)'s itemization requirement and that sanctions for that failure are appropriate. The Court considered it to harsh under the circumstances to exclude all of the creditor's evidence under Rule 3001(c)(2)(D)(i). However, the Court did exclude approximately $4,000.00 of appraisal fees and miscellaneous expenses that were not separately itemized as required under Rule 3001(a)(2)(A). In addition, the Court assessed attorney fees under Rule 3001(c)(2)(D)(ii) for the Debtor's expense in filing the objection and participating in the hearing.
Posted: 2/1/2013 3:09:30 PM
In re: Johnson; Bankruptcy Case No. 11-27660EEB.
After plaintiff dismissed claims under 11 U.S.C. § 523 against debtor-wife on eve of trial and lost on all claims against debtor-husband at trial, debtors moved for attorney's fees under Colo. Rev. Stat. § 13-17-102, a state statute which imposes fees for the assertion of a claim or defense that lacks "substantial justification." Applying principles from Erie R. Co. v. Tompkins, 304 U.S. 64 (1938), the Court held that when fees are requested as a sanction based upon misconduct of an attorney or party in the litigation itself, rather than upon a matter of substantive law, the matter is procedural and controlled by federal law and not state law. Further, the Court held that Colo. Rev. Stat. § 13-17-102 is preempted by Fed. R. Bank. P. 9011. Accordingly, the Court denied the debtors' request for fees under the state statute. The Court had previously denied the debtors' request for fees under Fed. R. Bankr. P. 9011, due to the debtors' failure to provide plaintiff a safe harbor letter.
Posted: 1/30/2013 10:42:27 AM
Springs East Land Company, LLC, and Ellicott Springs Land Company, LLC v. Audra Goss, David Dean Goss, and Matthew Goss (In re Ellicott Springs Resources, LLC), Adversary Proceeding No. 12-01518-SBB, Bankruptcy Case No. 10-13116-SBB (Bankr. D.Colo. January 9, 2013): Standing; Dismissal under Fed.R.Civ.P. 12(b)(1), Discretionary Abstention
A Chapter 7 Trustee is liquidating the assets of the debtor. Among the assets of the debtor are two valuable water wells, the rights to which the Trustee intends to sell to an entity called Springs Land Company. During the course of the underlying bankruptcy case, surface rights landowners had been utilizing the wells without authorization from the bankruptcy court or the estate.
Springs Land Company, the intended purchaser, filed an adversary proceeding seeking to enjoin the surface land owners from utilizing the water in the wells. Initially, Spring Land Company filed the adversary proceeding without the express consent of the Chapter 7 Trustee.
The surface rights landowners, the Defendants in the adversary proceeding, moved to dismiss the adversary proceeding asserting that Springs Land Company did not have standing to pursue the adversary proceeding. Instead, it was argued by the Defendants, that only the Chapter 7 Trustee could bring the adversary proceeding. Thereafter Springs Land Company filed a Motion for Authority and Standing to Prosecute the adversary proceeding. Springs Land Company, by its Motion for Authority and Standing to Prosecute the adversary proceeding, stated that it now had now obtained the approval and joinder of the Trustee in seeking injunctive relief against the Defendants (the surface rights land owners) for their unauthorized use of water from the estate's water wells.
Springs Land Company and the Trustee both seek the injunctive relief against the Defendants barring them from further wrongful use of the water wells on a temporary and permanent basis. Defendants, by way of challenging standing of Springs Land Company to bring this action, oppose the granting of the permanent injunction.
The Court concluded that it has subject matter jurisdiction to hear and decide the within matter as long as the water wells are property of the bankruptcy estate. But, the Court abstained and refrained from entering a permanent injunction against the Defendants because that would extend beyond the existence of this case and inappropriately control the relationship and rights of two non-debtor parties, the purchaser Springs Land Company and the Defendants, the surface rights land owners, after the wells are no longer property of the bankruptcy estate.
Posted: 1/25/2013 8:49:05 AM
In re: Trujillo. Bankruptcy Case No.11-29274 EEB
Chapter 7 debtor's wages were subject to a prepetition garnishment by a creditor. When the law firm representing the garnishing creditor refused to turn over wages garnished prepetition but received by the law firm postpetition, debtor sued for damages under § 362(k). The law firm argued it had no obligation to return these funds because its client held a valid garnishment lien on them. The Court held that the law firm violated both the turnover statute and the automatic stay by retaining the garnished funds. The Court also concluded that the debtor had standing to seek sanctions attributable to the stay violation. Even though debtor was not legally entitled to use the garnished funds, this fact bore only on the damages he may claim. It did not deprive him of standing to bring a stay violation to the attention of the Court.
Posted: 1/9/2013 9:39:18 AM
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