Justia U.S. 6th Circuit Court of Appeals Opinion Summaries

Debtor had significant financial problems. Morris, Debtor's principal, formed ECM on January 1, 2010, had the Debtor grant him a security interest in its assets, and recorded the financing statement on January 5. On January 10, Morris executed a bill of sale transferring his security interest to ECM. On July 27, 2010, the Debtor, through Morris, voluntarily surrendered its assets to ECM. Before the bankruptcy, the creditors filed state court actions, alleging successor liability, fraudulent transfer, fraud, and breach of fiduciary duty. The Debtor filed a voluntary Chapter 7 petition in 2012. The Chapter 7 Trustee filed an adversary proceeding to avoid fraudulent transfers. The Bankruptcy Court approved a settlement and dismissed “without prejudice.” The Trustee filed his Final Account and Distribution Report. The Debtor, as a corporation, did not receive a discharge. After the bankruptcy proceedings were completed, creditors reactivated their state court litigation. The Bankruptcy Court declined to enjoin the state proceedings. The Sixth Circuit Bankruptcy Appellate Panel affirmed. There is no reason the state court should not determine the preclusive effect of the Bankruptcy Court’s order, just as bankruptcy courts are regularly called upon to determine the preclusive effect of state court judgments in bankruptcy. View "In re: E.C. Morris Corp.." on Justia Law

Debtors filed their bankruptcy petition on July 30, 2013. The first date set for the meeting of creditors was August 29, 2013. Under 11 U.S.C. 523(c), the deadline for objecting to discharge was October 28. On October 29, Creditor filed an Extension Motion, alleging that his counsel had suffered a disabling brain injury in a car wreck on September 4 and had hired a newparalegal “on or about” the week of the deadline. Following a hearing, the bankruptcy court “agreed” that it “does not have the discretion to grant the requested extension” but also stated that “the deadline governing the filing of dischargeability complaints is not jurisdictional in nature, but rather, is subject to the court’s equitable authority.” In denying the Extension Motion, it found that there was “no allegation that the Debtor engaged in any conduct which prevented the Creditor from filing a timely motion to extend the time within which to file a dischargeability complaint.” After the Creditor filed deficient briefing, the Bankruptcy Appellate Panel affirmed denial of the Extension Motion. The court noted that Creditor’s counsel had not provided any facts to support his claims. View "In re: Doyne" on Justia Law

Bavelis sought Chapter 11 bankruptcy relief in 2010, based on debts that he had accumulated from numerous business ventures. Bavelis subsequently brought an adversary proceeding against his friend and business associate Doukas, and businesses owned and controlled by Doukas. One Doukas company responded by filing a proof of claim against the Bavelis bankruptcy estate. The Doukas defendants argued that Doukas had a claim for rescission against Bavelis based on purported violations of Florida’s securities laws related to stock that Doukas had purchased from a Bavelis-run bank holding company. The bankruptcy court concluded that Doukas did not have a viable claim against Bavelis under Florida law. The Bankruptcy Appellate Panel affirmed. The Sixth Circuit affirmed, rejecting an argument that the bankruptcy court acted beyond its constitutional authority in interpreting Florida law and that the interpretations by the bankruptcy court and the BAP were in error. View "Bavelis v. Doukas" on Justia Law

The bankruptcy court avoided a the transfer of real property to Blackwell pursuant to 11 U.S.C. 548 and ordered recovery of the transferred property from Blackwell pursuant to 11 U.S.C. 550; the court denied Blackwell a claim pursuant to 11 U.S.C. 550(e). The Bankruptcy Appellate Panel affirmed.View "in re: Lineback" on Justia Law

In 1996, Robinson pleaded guilty to mail fraud and aiding and abetting. The district court sentenced Robinson to 97.5 months of imprisonment and ordered him to pay criminal restitution of $286,875. A year later, Robinson pleaded guilty to a second set of criminal violations, resulting in convictions of wire fraud and aiding and abetting. The district court imposed a 24-month term of imprisonment and again ordered Robinson to pay restitution, this time $100,000. Robinson paid only $7,779.44 of the first judgment and $200 of the second before filing for bankruptcy under Chapter 13. The government, under the criminal restitution judgments, is a lien creditor. Filing for bankruptcy triggered the automatic stay, which suspends all activities related to the collection and enforcement of prepetition debts, 11 U.S.C. 362(a). The bankruptcy court denied the government’s motion to bypass the stay under 18 U.S.C. 3613(a), which provides that the government may enforce a judgment imposing restitution “notwithstanding any other Federal law.” The district court reversed, reasoning that it did not matter whether the debtor or the bankruptcy estate holds nominal title to the property because section 3613(a) allows the government to enforce a restitution order against all property of the person ordered to pay. The Sixth Circuit affirmed; section 3613 supersedes the automatic stay and allows the government to enforce restitution orders against property included in the bankruptcy estate. View "Robinson. v. United States" on Justia Law

Between 2009 and 2012, Sunshine and Purdy, a Kentucky dairy farmer, entered into “Dairy Cow Leases.” Purdy received 435 cows to milk, and, in exchange, paid monthly rent to Sunshine. Purdy’s business faltered in 2012, and he sought bankruptcy protection. Sunshine moved to retake possession of the cattle. Citizens First Bank had a perfected purchase money security interest in Purdy’s equipment, farm products, and livestock, and claimed that its perfected security interest gave Citizens First priority over Sunshine with regard to the cattle. Citizens argued that the “leases” were disguised security agreements, that Purdy actually owned the cattle, and that the subsequently-acquired livestock were covered by the bank’s security interest. The bankruptcy court ruled in favor of Citizens, finding that the leases were per se security agreements. The Sixth Circuit reversed, noting that the terms of the agreements expressly preserve Sunshine’s ability to recover the cattle. Whether the parties strictly adhered to the terms of these leases is irrelevant to determining whether the agreements were true leases or disguised security agreements. Neither the bankruptcy court nor the parties sufficiently explained the legal import of Purdy’s culling practices or put forward any evidence that the parties altered the terms of the leases making them anything but leases.View "In re: Purdy" on Justia Law

Debtors developed and sold property in “The Village of Arcadian Springs,” in Anderson, Tennessee. Plaintiffs alleged that they were fraudulently induced to purchase waterfront lots by misrepresentations concerning construction of a lake and other amenities which were never completed. After a hearing on noncompliance with discovery orders, the state court entered default judgment, stating: Plaintiffs are entitled to a Judgment pursuant to ... their Complaint including ... violation of the Tennessee Consumer Protection Act ... negligence; misrepresentation; fraud; conversion; negligent and intentional infliction of emotional distress; outrageous conduct; and deceit. The Debtors filed a Chapter 7 bankruptcy petition before a scheduled state court hearing on damages. In an adversary proceeding, the bankruptcy court compared the elements of 11 U.S.C. 523(a)(2)(A) to those of a cause of action for fraud in Tennessee, found that the fraud claims were actually litigated in the state court, that the finding of fraud was necessary to support the state judgment, and that collateral estoppel applied to the state court fraud claims, rendering them non-dischargeable under 11 U.S.C. 523(a)(2)(A). The Bankruptcy Appellate Panel affirmed, noting that the Debtors retained an attorney, filed an answer, and participated in discovery so that their repeated failures to respond properly resulted in default judgment. The fraud issues were, therefore, actually litigated. View "In re: Anderson" on Justia Law

Schwab filed a chapter 11 bankruptcy petition in 2010. HLP was appointed as bankruptcy counsel. Schwab’s individual directors/shareholders filed an adversary proceeding against Attorney Oscar and HLP, asserting malpractice arising from an allegedly undisclosed conflict of interest with Bank of America. The bankruptcy court dismissed, holding that the directors lacked standing to bring the claim directly or derivatively and that the claim was barred by res judicata. They did not appeal. One year after the dismissal, the directors sought to reopen the adversary proceeding on the basis of asserted newly discovered evidence of failure to disclose a conflict with Huntington National Bank. The bankruptcy court denied the motion for relief from judgment, reasoning that the directors had not challenged the prior ruling that they lacked standing and that, although other arguments were immaterial in light of lack of standing, the proffered evidence was neither new nor newly discovered. The directors “had knowledge of the specific conflict at least three years earlier than they’ve claimed in their motion for relief.” The Sixth Circuit Bankruptcy Appellate Panel affirmed. Because the directors lacked standing to be a party in the underlying complaint, they lack standing to bring a motion for relief from judgment. View "In re: SII Liquidation Co." on Justia Law

Circuit affirmed. When real estate taxes are not paid, a tax lien attaches to the property, annually, including interest, penalties, and fees accrued until paid, O.R.C. 323.11. Summit and other Ohio counties sell tax lien certificates that entitle the certificate holder to the first lien on the property. Property owners may redeem and remove the lien by paying the holder the purchase price plus interest, penalties, and costs, O.R.C. 5721.32. The certificate holder may initiate foreclosure proceedings after one year. Plymouth Park purchased Certificate 1, showing a purchase price of $4,083.73 with a negotiated interest rate of 0.25%, and Certificate 2, showing a purchase price of $2,045.44 with a negotiated interest rate of 18.00%. Summit County filed a foreclosure complaint following a request by Plymouth Park. The complaint stated that “as provided by Section 5721.38(b) of the Ohio Revised Code” the “redemption price” calculated was $10,585.82. A month later, the Debtors filed their Chapter 13 plan and petition; they did not file any notice to “redeem” their property during the bankruptcy action. The Chapter 13 payment plan (11 U.S.C. 1321) proposed to pay the interest rates listed on the certificates. , Plymouth Park filed a proof of claim based on both certificates for $10,521.46, including $2,120.00 in fees and the principal balance of $7,781.19 plus 18% interest. The Bankruptcy Court agreed that Plymouth Park’s claim was a tax claim under 11 U.S.C. 511 and that state law governed the interest rate, but rejected a claim that the 18% statutory rate, rather than the negotiated rate, should apply. The Bankruptcy Appellate Panel and Sixth View "Plymouth Park Tax Servs, LLC v. Bowers" on Justia Law

Debtors filed a Chapter 7 petition and received a discharge in February 2008. On July 3, 2008, Debtors filed a Chapter 13 case to pay an auto loan and tax obligations, to cure the default on a first mortgage, and to avoid a wholly unsecured second home mortgage. The Amended Chapter 13 Plan was confirmed in September 2008 and provided: Debtors will avoid the mortgage and/or judgment liens of Amerifirst Finance, Squires Construction, and the Ohio Department of Taxation, which are wholly unsecured under 11 U.S.C. 506(a), 1322(b)(2) and 1325(a)(5)(B), and which impair Debtors’ exemption in their home (11 U.S.C. 522(f)); those unsecured claim shall be disallowed as discharged in Debtors’ Chapter 7 Bankruptcy unless otherwise allowed by separate order. Because Debtors had received a Chapter 7 discharge within the preceding four years, they were ineligible for discharge under Chapter 13, 11 U.S.C. 1328(f)(1). Upon completion of plan payments, the Chapter 13 Trustee sought an Order Releasing Wages and Closing Case Without Discharge, which was granted on May 6, 2013. The Debtors sought to avoid Amerifirst’s lien to effectuate the confirmed Chapter 13 Plan. The residence was valued at not more than $100,800 and was encumbered by a first mortgage of $106,306.38 and by Amerifirst’s second mortgage of $9,415.28. No party objected, but the Bankruptcy Court denied the motion, stating that the lien stripping power of 11 U.S.C. 506 was unavailable. The Sixth Circuit Bankruptcy Appellate Panel reversed and remanded, holding that the wholly unsecured status of Amerifirst’s claim, rather than eligibility for a discharge is determinative. View "In re: Cain" on Justia Law