In May 2000, the defendant loaned $25,000 to an LLC, of which the debtors were the sole members. A key loan provision stated that if the loan was not paid in full, on demand, the defendant had to option to acquire a 99% equity interest in the LLC. In June 2000, the defendant demanded payment in full. Because the debtors were unable to pay in full, the defendant acquired a 99% equity interest in the LLC. Over a year later, the debtors filed chapter 7 and the trustee sought to recover the interest as a preferential or fraudulent transfer. The defendant moved for summary judgment, arguing the loans were made to the LLC, not the debtors. The court denied the motion, finding genuine issues of material fact existed; namely, when the transfer was made, whether the debtors were insolvent at the time of transfer, whether the transfer could be avoided as a preference, the intent of the debtors, and the fair market value of the interest.
Chapter 7 debtor, who owned a home in Wisconsin with his wife, filed his case in the Southern District of Florida, where he resided. Divorce commenced post-bankruptcy filing. The debtor claimed no exemptions in the Wisconsin home in which his wife and children still lived. The trustee filed an adversary proceeding to obtain approval to sell the interests of both the estate and spouse. The adversary proceeding was transferred to Wisconsin and the court found the trustee was authorized to sell the former Wisconsin community property of the debtor and non-filing spouse, as well as administer proceeds. The court further held that any transfer of the property pursuant to a decree of dissolution was void.
Because the chapter 13 trustee was unable to return funds to the debtor after his case was dismissed without confirmation of a plan, the funds were paid to the Clerk of Bankruptcy Court. Over two years later, an entity filed a petition for payment of the unclaimed monies on behalf of the debtor. The IRS opposed the release of the funds to the debtor, asserting it was entitled to turnover of the funds due to the debtor's outstanding tax liens. The court agreed and directed payment of the unclaimed funds to the IRS.
Prior to the filing of an involuntary chapter 7, debtor and its affiliate had entered into an agreement to sell the debtor's assets as a going concern. As a result of the involuntary petition, the purchaser refused to close the sale. The court suspended the case to allow the debtor to convey substantially all of its assets to the purchaser. Upon completion of the sale, the order for relief was entered. During the gap period, the claimant entered into a retainer agreement with the debtor for the purpose of conducting negotiations for the sale. The trustee opposed the claimant's priority claim, arguing the debt was not incurred in the ordinary course. The court found because the debtor was not in the business of selling substantially all of its assets, the sale of assets was not in the ordinary course and the claimant was not entitled to priority under sec. 502(f).
Plaintiff filed a motion for summary judgment, arguing res judicata and collateral estoppel prevented litigation in the sec. 523(a)(2)(A) proceeding of the issues raised in prior actions. With respect to collateral estoppel, the court determined the debtor had been provided an adequate opportunity to obtain full and fair adjudication of the merits in the state court actions, thereby giving the prior judgments preclusive effect. The court further found prior litigation had established the debtor made a representation to the plaintiff and the plaintiff justifiably relief on the representation to its detriment. Whether or not the representation was false or that the debtor intended to deceive the plaintiff were not subject to issue preclusion and had to be litigated.
The chapter 11 debtor commenced an adversary proceeding against the City, seeking a declaratory judgment that certain prepetition obligations of the debtor for the payment of water and sewer charges were unsecured claims pursuant to sec. 545(2). The City asserted the prepetition charges were a lien upon the debtor's property at the time the services were incurred under state law. The court determined the prepetition charges were not a lien on the date of filing, and any purported lien on the real estate sold by the debtor could be avoided.
Defendant was hired to tear down and replace debtor's garage. Debtor never paid for the work and the defendant obtained an unsecured construction lien. After the debtor filed a chapter 7 petition, he commenced an adversary proceeding to declare the lien void under sec. 506(d). On summary judgment, the debtor argued he was not seeking avoidance of the lien, but rather wanted the lien declared void as a matter of law. The court dismissed the adversary proceeding, finding under Dewnup v. Timm, the lien passed through bankruptcy unaffected.
The chapter 7 trustee filed an adversary proceeding seeking to avoid an alleged preferential payment to an insider pursuant to sec. 547(b). The defendant filed for summary judgment on the issue of whether the doctrine of earmarking applied to defeat avoidance by the trustee, as a matter of law. Prepetition, the defendant had loaned the debtor $50,000, to be repaid with the proceeds from the sale of coffee shop business. Two months later, the sale closed and the defendant was repaid. The defendant argued the loan payment did not constitute a preferential transfer due to the equitable doctrine of earmarking. The trustee argued earmarking was not application because the sale proceeds were paid to the president and majority shareholder of the debtor in his individual capacity, who in turn deposited the proceeds into the debtor's account before paying the defendant. The trustee also argued the payment to the defendant diminished the estate. The court found the estate was not diminished by payment of the debt as the money would never have come into the estate had it not been targeted for the debt to the defendant. Because the trustee failed to meet his burden that there was a transfer of the debtor's interest in property to the creditor, the adversary proceeding was dismissed.
In this sec. 523(a)(4) action, the plaintiff, a material supplier, alleged the debtor, a general contractor, diverted funds due the plaintiff for goods and services rendered for a construction project, in violation of the theft by contractor statute, sec. 799.02(5), Wis. Stats. The court was satisfied that a relationship between the contractor and supplier existed and that funds for improvements passed from the owners to the contractor and did not reach the plaintiff. The plaintiff was entitled to the same percentage of its claim as the percentage of the contract that the debtor received from the owners and was granted a nondischargeable judgment for that amount.
The plaintiff, an owner of a shopping center, alleged the debtor, a real estate developer, participated in intentional acts of conspiracy and antitrust violations to deprive it of its property or to cause great damage to its property, resulting in a nondischargeable obligation under sec. 523(a)(6). The debtor contended the plaintiff's per se analysis of the parties' business arrangement should be rejected in favor of a "rule of reason" analysis of antitrust violations and an analysis of competition enhancing factors. Based on the debtor's own statements, the court deemed his actions against the plaintiff were willful and showed clear malice. The court was also satisfied that the debtor's deliberate side deal with the plaintiff's anchor tenant to leave the space but retain the lease, and the resulting reduction of value of the satellite space, constituted price fixing and a per se violation of antitrust laws; therefore, the debtor's liability to the plaintiff was excepted from discharge.