All posts in Case Briefs

CCP 1717 – Getting Attorneys Fees (In re Penrod, 9th Circuit)

There was a recent published Ninth Circuit opinion re: the hanging paragraph in 1325(a).   In re Marlene A. Penrod, 13-16097, Ninth Circuit (2015)(Published).

However, to me, what was more interesting was the fight over whether the auto loan lender should pay debtor’s attorneys fees (about $250,000).   Court said yes.

The contract between the debtor-borrower and the lender said ‘in the event of a default, the borrower (debtor) was to pay the lender to collect what it was owed plus attorneys fees.”

Read more…

Ninth Circuit: Ch. 20′s Keep Stripping (In re Blendheim)

Ninth Circuit cleared it up:  In a “Chapter 20,” ineligibility for a discharge in a subsequent Ch. 13 does not preclude a debtor from permanently voiding a lien.  In short, strip away.

Debtors got Ch. 7 discharged, and next day filed Ch. 13.  Debtors home was encumbered by 2 liens.  The first lienholder, a Bank, filed a claim and it is their lien that is at issue on this appeal.

Debtors objected to the Bank’s POC arguing that it failed to attach the promissory note as required by FRBP 3001 (Bank only attached the deed of trust).  The Bank simply ignored the objection.   Court entered a default order disallowing their claim.  Next, Debtors filed an adversary to void Bank’s first lien since their claim was no longer an allowed secured claim.  Court agreed and said the lien would be void upon completion of their chapter 13 bankruptcy.

Debtor’s reached plan confirmation, and the Bank woke up…..

Read more…

Trust Beneficiary Has Limited Standing To Object in Chapter 11 says Ninth Circuit (IN THE MATTER OF: TOWER PARK PROPERTIES, LLC)

This Opinion interested me because a few weeks earlier I read about this infamous Beverly Hills property battle in the Hollywood Reporter.

For those interested in the juicy Hollywood fight about the property mentioned in this Opinion, see here:  http://www.hollywoodreporter.com/features/beverly-hills-1-billion-vineyard-819299

For those interested in the Ninth Circuit Opinion, please see my brief below.

In re: Tower Park Properties LLC, Ninth Circuit. 

To have standing in federal court – you must satisfy three requirements:  (1) statutory standing (i.e. one afforded under the Bankruptcy Code), (2) constitutional standing under Article III, and (3) prudential standing.  In re Thorpe Insulation Co., 677 F.3d 869, 883–84 (9th Cir. 2012).

In this case, a Trust Beneficiary was objecting to the settlement agreement between the debtor, the Trust (as a creditor) and former trustees.   The Ninth Circuit held that the Trust Beneficiary did not have statutory standing under §1109(b), and as such, the Court did not even consider the two other standing requirements.

As a rule, to have standing to be heard in Chapter 11 proceedings, you must be a “party in interest,” which includes, but not exclusive of, the debtor, trustee, creditors (or committee), equity security holder (or its committee), indenture trustee.  Section 1109(b).    The word “party in interest” is not defined.

Ninth Circuit has said that a “party in interest” is one who has a “legally protected interest that could be affected by a bankruptcy proceeding.”  In re Thorpe.   But, an entity “that may suffer collateral damage” but does not have a legally protected interest does not have standing under § 1109(b).  Id.

Read more…

Thursday, September 24, 2015 – OCBA – Exemptions Case Law and Statutory Update

ORANGE COUNTY BAR ASSOCIATION
COMMERCIAL LAW & BANKRUPTCY SECTION

September Meeting

Exemptions Case Law and Statutory Update
 Learn about 2014-2015 developments regarding exemptions including recent case law imposing the burden of proof on the Debtor and allowed surcharges after Law v. Siegel;
 Discover best practices for maximizing exemptions without risking denial of discharge; and
 The panelists will also discuss proposed Senate Bill 308 increasing the homestead exemption to $300,000 across the board and eliminating the requirement to reinvest exemption proceeds.

D. Edward Hays, Esq., Partner, Marshack Hays LLP
Jeffrey I. Golden, Esq., Partner, Lobel Weiland Golden Friedman LLP Read more…

Pop Quiz! How Long After Entry Of Order Confirming A Plan Can The Order Be Revoked? Hint: It’s Not What You Thought!

If an order confirming a Plan of Reorganization is procured by fraud, how many days from entry of order does one have to ask the court to revoke the order?

The answer depends on which chapter of the Bankruptcy Code we’re talking about! In a Chapter 12 or Chapter 13 case, one would have up to the 180th day after the date the order was entered to seek revocation of the discharge. In a Chapter 11 case, one would have up to the 179th day after the date the order was entered to seek revocation. That is a pretty tough lesson to learn the hard way.

Read more…

Sometimes Complete Disclosure, Disinterestedness and an Approved Employment Application are Not Good Enough!

On August 24, 2015, Judge Lee, a Bankruptcy Judge in the Eastern District of California, disqualified the Estate’s general bankruptcy counsel even though counsel was properly employed under § 327(a). The Court found that counsel was a disinterested person within the meaning of the code and did not hold or represent an interest adverse to the estate. This is a wild (but proper) result because under California law, a client’s waiver or consent can cure these types of deficiencies and under Bankruptcy law, those defects cannot be cured!

So how is it that under Bankruptcy law, counsel was properly employed but had to be disqualified under California law?

Read more…

9th Circuit Applies California Law to Contract Where Parties Agreed to Apply Georgian Law

The basic facts of the case are an individual entered into an agreement with a bank located in Georgia to borrow money to purchase her home. It is not clear whether the individual even signed the contract or where the contract was signed but it ends up not mattering because the bank sued in California District Court under diversity jurisdiction. Note: in California, if a contract contains an attorney fees clause provision, both sides of the dispute get to use it. That’s not the law in Georgia. The Bank wanted to be able to enforce its attorney fee clause against litigants but to not allow other litigants to use that clause against the bank!

California law was applied to this contract in two instances.

Read more…

Landlords Are Entitled To Priority Treatment of Lease Payments Which First Come Due During the Gap Period of an Involuntary Bankruptcy

In a case of first impression, Judge Montali had to decide whether a landlord’s claim for payment of rent during the gap period of an involuntary bankruptcy is entitled to priority.

Before delving into the facts of the case, a quick primer is appropriate. The treatment of a commercial landlord’s claims in bankruptcy is too complicated and will be discussed in more depth in a future article so this “quick primer” is very limited.

When a company files for bankruptcy, the landlord in a nonresidential context is usually the most powerful player in the scene. The landlord is entitled to be paid contract rate lease payments until the Debtor decides to either reject or assume the lease. This is provided for under § 365(d)(3) which states that “The trustee shall timely perform all the obligations of the debtor … arising from and after the order for relief under any unexpired lease of nonresidential real property … until such lease is assumed or rejected, notwithstanding section 503 (b)(1) of this title….” Read more…

Not All Expenses Of A Professional May Be Compensable By The Estate, Even In The Face Of A Clear Retainer Agreement And An Approved Employment Application!

The facts of the situation are not in dispute. The Debtor in a Chapter 11 case needed to hire a forensic accountant. The Debtor applied for permission to hire the accountant under § 327(a) of the Bankruptcy Code. The employment application did not contain any special provisions but the engagement letter contained the following clause:

In the event we are requested or authorized by Debtor or are required by government regulation, subpoena, court order, or other legal process to produce our documents or our personnel as witnesses with respect to our engagements for Debtor, Debtor will, so long as we are not a party to the proceeding in which the information is sought, reimburse us for our professional time and expenses, as well as the fees and expenses of our counsel, incurred in responding to such requests.

No objection to employment was filed and the Court entered an order approving the application. Read more…

Judge Bauer Reversed, Trustee Clawback Power Strengthened

In this case, the sole shareholder, director and president of a company (all the same Individual) transferred about $8,000,000 into a secret bank account which he then used to pay personal debts. The question before the Court was whether the transfers to the bank account made the Individual, in his personal capacity, an initial transferee within the meaning of § 550.

The surprising answer (although not stated in this way) is that it depends on whether the secret bank account was opened in the name of the company or individual. In this case, the secret account was completely under the dominion and control of the Individual; the Individual’s wife was a signatory on the account and the only purpose it served was to pay personal expenses. None of that mattered. The account was opened under the company’s name. The District Court held that the Individual was not an initial transferee since the account was a company account.

Read more…