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

The debtors are limited partnerships that own real estate on which they operate low-income housing. In their Chapter 11 cases, the bankruptcy court concluded that, for purposes of determining the value of the secured portion of the bank’s claims under 11 U.S.C. 506(a), determination of the fair market value of various apartment complexes included consideration of the remaining federal low-income housing tax credits. The court also concluded that various rates and figures used by the bank’s appraiser were more accurate. The Sixth Circuit affirmed. A major component of the value of the bank’s claims was determination was whether the value of the remaining tax credits would influence the price offered by a hypothetical willing purchaser of the property that serves as collateral for the claims. View "In re: Creekside Senior Apts" on Justia Law

Washington Mutual foreclosed on property before receiving assignment and transfer of the promissory note and the delinquent home mortgage and before recording it. The homeowner brought a lawsuit for an allegedly false claim of ownership under the Fair Debt Collection Practices Act, 15 U.S.C. 1692, against the law firm acting for the purported mortgagee. She claimed violation of the Act, the Ohio Consumer Sales Practices Act, and intentionally inflicted emotional distress. The district court dismissed, finding that she did not state a claim under the Act and declining to exercise supplemental jurisdiction. The Sixth Circuit reversed. The filing of foreclosure action by the law firm, claiming ownership of the mortgage by its client, constituted a "false, deceptive or misleading representation" under the Act because the bank had not obtained transfer of the ownership documents. The homeowner adequately alleged that the misidentification caused confusion and delay in trying to contact the proper party concerning payment and resolution of the problem. View "Wallace v. WA Mut. Bank, F.A." on Justia Law

In 2007, Debtor purchased a manufactured home, borrowing the funds from Creditor and granting a security interest. Creditor filed an application for first title and a title lien statement in Whitley County, Kentucky. The seller of the manufactured home is located in Whitley County. Debtor resided at the time in Laurel County, Kentucky. Later, the Kentucky Transportation Cabinet issued a Certificate of Title for the Manufactured Home showing the lien as being filed in Whitley County. In 2010, Debtor filed his voluntary Chapter 7 bankruptcy petition. The Chapter 7 Trustee initiated an adversary proceeding. The Bankruptcy Court avoided the lien, 11 U.S.C. 544. The Sixth Circuit affirmed. The statute requires that title lien statements be filed in the county of the debtor’s residence even if the initial application for certificate of title or registration is filed in another county under KRS 186A.120(2)(a). View "In re: Pierce" on Justia Law

In 2001, the Conservancy sold a 100.10 acre farm in Garrard County, Kentucky to the Sims for $60,084, in addition to a $244,939 charitable pledge from the Sims to the Conservancy. The property appraised at $260,400 without the easement at issue, which requires that the land "be retained forever substantially undisturbed in its natural condition and to prevent any use . . . that will significantly impair or interfere with the Conservation Values of the Protected Property." The Conservancy received an annual right to enter and inspect the property. In January 2005, the Conservancy inspected and documented several violations that concerned excavating and filling a sinkhole. The Sims corrected several other violations. The district court granted summary judgment to the Conservancy, concluding that, although the easement allowed some changes to the topography in conjunction with authorized activities, like plowing for commercial agriculture, the easement specifically prohibited the substantial alteration of filling in a sinkhole with an estimated 6,269 cubic yards of fill. The court awarded the Conservancy $99,796.41 in attorneys’ fees and expenses. The Sixth Circuit affirmed.

Wife serves in the U.S. Air Force and executed a military power of attorney designating husband as her attorney-in-fact during her deployment overseas. Husband presented a photocopy of this instrument to the Fayette County Clerk to recording an original deed and mortgage in the real property index records. The clerk’s office rejected the copy as inauthentic and refused to record the documents. The district court dismissed their suit under 42 U.S.C. 1983, which claimed that rejection of the power of attorney violated 10 U.S.C. 1044b. That statute sets the minimal requirements for executing a military power of attorney and prohibits states from imposing additional requirements. During the pendency of appeal, the couple submitted an original military power of attorney and the documents were recorded. The Sixth Circuit affirmed. The unnotarized copy of the power of attorney lacked an essential element of a military power of attorney and did not qualify for 1044b(a) protections.

Federal tax assessments against husband arose out of his failure to file returns, report income, or pay tax, 1986 through 1993. Unpaid taxes, penalties, and interest totaled $901,052.17 as of January 2010. Wife paid $40,227.30 in full satisfaction of a separate assessment based on an audit of her 2000 return, resulting in dismissal of claims against her personally. The district court granted summary judgment to the government with respect to the assessment against husband and reduced the tax liability to judgment. The government moved for foreclosure of the lien and sale of the entire property. Since the property was held by the couple as tenants by the entirety, husband’s individual tax lien attached to his partial contingent survivorship interest in the property, which would have minimal value if sold separately. The court found that the property would bring $160,000 at a foreclosure sale and was subject to a mortgage of $14,572.36. Wife, age 60, testified to her limited income and sentimental attachment to the home where she had lived for 29 years. The court declined to force a sale (26 U.S.C. 7403). The Sixth Circuit reversed and remanded for reconsideration under the "Rodgers" factors.

Plaintiff's bank, Firstar, erroneously dishonored her check for her April 2002 monthly mortgage payment to Aames. Firstar issued an "official check" to Aames on April 8, 2002 but also failed to honor that check. Aames notified plaintiff of default on April 20 and assessed a late fee. Firstar ultimately honored her personal check as well as one of two official checks, resulting in two mortgage payments received for the month of April. Plaintiff did not submit a payment for May. Aames sent notice that it had assigned the mortgage to Ocwen, which began dunning plaintiff and her husband, who is not a co-borrower, for the May payment, despite proof of the double payment. No assignment was recorded. Ocwen made endless collection calls, despite cease and desist requests and registry on the federal “Do Not Call” directory; threatened foreclosure; assessed late fees; and reported derogatory information to the credit reporting agencies. Plaintiffs alleged violation of the Fair Debt Collection Practices Act, 15 U.S.C. 1692. The district court dismissed, concluding that neither defendant was covered under the Act as neither was a debt collector. The Sixth Circuit reversed, stating that defendants cannot "have it both ways."

In 2009, Debtor filed a chapter 13 petition that was dismissed for failure to file a plan or schedules. Two months later, she filed a pro se chapter 7 petition which was dismissed for failure to produce proper documentation. She soon filed another pro se petition, under chapter 11. Debtor is the owner of 10 parcels of real estate from which she earns $5,340.00 per month in rental income, although she asserts that most of the properties are currently vacant. One of her creditors asserted, and the court agreed, that she was using bankruptcy stays to prevent foreclosure and live rent free. In dismissing the petition the court ordered that: "Debtor, or anyone in contractual privity with the Debtor or anyone having or purporting to have a possessory interest in the real property located at… is permanently barred from ever listing said Property or the debt owed to Creditor in a future bankruptcy petition," 11 U.S.C. 105; 362(d)(4). The Sixth Circuit affirmed dismissal with prejudice for 180 days and the order granting in rem relief against the specific property, insofar as it applies to Debtor and anyone in contractual privity with the Debtor.

In 2006 debtors sublet land from lessees on a 30-year recorded lease and purchased a three-story cottage on the land by bill of sale. The lease refers to removal of the structure upon termination of the lease and requires approval by the lessor of any liens or mortgages. The landowner consented to a mortgage on the cottage and leasehold. Two years later, debtors filed a voluntary Chapter 7 petition and listed the cottage as real property, with a secured claim of $235,000. The Trustee sought to avoid security interests held by the bank and landowner, arguing that the cottage was a chattel so that a lien could only be perfected by filing a financing statement with the Ohio Secretary of State. The bankruptcy court ruled that the mortgage was valid, concluding that the cottage was a fixture. The Sixth Circuit affirmed. To avoid the security interest (11 U.S.C. 544) the trustee had to show that the cottage was chattel. The cottage is highly integrated with the land and unlikely to be moved or dismantled; there was no proof that the parties intended that it be chattel. Security interests in both the cottage and leasehold were properly secured.

In 2006, plaintiffs contracted with defendant to purchase a condominium for $395,900. They made cash deposits of $11,877 and executed a note for $19,795. When notified of a closing date in 2009, plaintiffs' counsel sent defendant a letter rescinding the agreement and requesting return of the deposits. Defendant declined. Plaintiffs' complaint alleged violation of the Interstate Land Sales Full Disclosure Act, 15 U.S.C. 1701, for failing to provide a printed property report, and failure to include a provision notifying plaintiffs that if defendant failed to furnish a property report before execution of the purchase agreement, they had the right to revoke the purchase agreement within two years of its signing. They also asserted a claim under the Michigan Condominium Act, Mich. Comp. Laws 559.184. The district court held that the claim for rescission was untimely, stating that a purchaser must notify the seller of rescission within two years after the signing, but a has an additional third year to bring suit if the seller refused to honor the rescission. The Sixth Circuit affirmed that the claim for automatic rescission was untimely, but reversed dismissal of the state law claim and remanded. Equitable rescission may be available under 15 U.S.C. 1709.