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In re Paul & Linda Zakowski, Case No. 92-23686 Published: In re Zakowski, 213 B.R. 1003 (September 1997) -- Judge McGarity

A few months prior to the plan's completion, the chapter 13 debtors moved for an order establishing the extent of the bank's secured claim and for a determination that the secured portion of the claim had been paid in full.  The bank objected to the form of the court's subsequent order, which, after finding that the secured claim had been paid in full, implied that the bank was obligated to release the mortgage lien before receiving payment of the unsecured claim under the plan.  The court held that it would not be fair to deprive the bank of its security at such a late date and, thus, the bank was not required to release its lien.


In re Douglas & Ramona Hill, Case No. 96-22423, Paul G. Swanson, Trustee v. Montello State Bank, Adv. No. 96-2615 Published: In re Hill, 210 B.R. 1016 (July 1997) -- Judge McGarity

Chapter 7 trustee brought an adversary proceeding against the mortgagee-bank, seeking to avoid an alleged preference received by the bank when it applied proceeds from the sale of a portion of the debtors' real property to the debtors' other outstanding loans with the bank instead of applying the entire proceeds to their mortgage note.  The bank moved for summary judgment.  The court held that the debtors' credit card debt was not secured by the real estate and thus, the bank's application of the sale proceeds to that debt was an avoidable preference. The debtors' ready reserve accounts were included in the mortgage's dragnet clause, so that the bank's application of the sale proceeds to the reserve accounts was not an avoidable preference.  Finally, the bank's application of the sale proceeds toward the debtors' vehicle loan was not an avoidable preference.


In re Richard & Mary Ellen Waite, Case No. 95-28196, Virfran, Inc. v. Debtors, Adv. No. 96-2326 (May 1997) -- Judge McGarity

A lumber supplier filed an adversary proceeding against the chapter 7 debtors seeking a determination that a stipulated state court judgment was nondischargeable. The debtors used the lumber in construction projects for which the owners had fully paid for, however the debtors failed to remit full payment to the supplier. The court found the amount due for the unpaid invoices was nondischargeable under sec. 523(a)(4).  The attorney's fees and punitive damages portions of the judgment were nondischargeable, as well, under the doctrine of claim preclusion.


In re Carrie E. Elst, Case No. 97-20038 Published: In re Elst, 210 B.R. 790 (May 1997) -- Judge McGarity

Chapter 7 debtor moved to avoid the lien on certain personal goods under section 522(f)(1)(B), and the secured creditor objected.  The court held that the debtor's bicycle was not a "household good" subject to lien avoidance; however, the debtor's extra television set was a "household good" subject to lien avoidance.


In re Timothy Brahm, Case No. 96-22890, Kevin Hibl v. Debtor, Adv. No. 96-2506 (April 1997) -- Judge McGarity

Creditor commenced an adversary proceeding seeking to have a loan made to the chapter 7 debtor declared nondischargeable. The creditor had loaned the funds to the debtor to enable him to purchase a home when sale proceeds of his old home were inadequate. As realtor on both home sales, the creditor made the loan to save the sales. The creditor alleged the debtor misrepresented the amount of the mortgage on his old home and the creditor lent the money because he believed the debtor would realize sufficient proceeds from the sale of the home.  The court found the obligation was dischargeable because the creditor's reliance on the debtor's estimate of the sale proceeds was not justified. The court also granted the debtor's motion for reasonable attorney's fees because the creditor's cause of action was not substantially justified.


In re Concrete Raising Corp., Case No. 95-26272, Debtor v. Tony Zidar, Jr., et al., Adv. No. 96-2028 (April 1997) -- Judge McGarity

Chapter 11 debtor commenced an adversary proceeding to subordinate the defendant's claim, which arose from a guaranteed consulting agreement. After the parties had agreed to sever their business relationship, the debtor agreed to pay the defendant, a former officer of the debtor, for advisory and consulting services. The debtor argued the agreement rendered the debtor insolvent, the defendant's unfair competition after the claim arose led to the debtor's inability to make payments pursuant to the agreement, and the defendant provided no consideration to the debtor in connection with his claim. The court concluded the debtor received no benefit in entering into the consulting agreement with the defendant and subordinated the claim to other general unsecured creditors.


In re Jonathan Stoffregen, Case No. 96-22055, Paul G. Swanson, Trustee v. Gertrude & Nathan Stoffregen, Adv. No. 96-2713 Published: In re Stoffregen, 206 B.R. 939 (March 1997) -- Judge McGarity

Chapter 7 trustee brought an adversary proceeding against the debtor's motion and brother, seeking to avoid a prepetition transfer of title to a one-third undivided interest in the property, given to the debtor when he was still a minor. The court granted the defendants' motion for summary judgment, finding the debtor received only bare legal title to the property as a minor. The estate's interest was therefore subject to the mother's equitable lien.


In re American Toy & Furniture Co., Inc., Case No. 92-27686 (February 1997) -- Judge McGarity

Bank filed a motion for allowance and payment of a superpriority administrative claim under secs. 507(b), 507(a)(1), and 503(b). The chapter 7 trustee objected, arguing the bank was not entitled to superpriority because the claim did not arise under sec. 503(b). The court granted the bank's motion, finding the claim was entitled to priority due to the bank having provided new value to the estate by way of providing cash collateral to the debtor, albeit involuntarily.


In re Matrix Interior Supply, Inc., Case No. 95-21120, Paul G. Swanson, Trustee v. First and Portland Corp,, et al, Adv. No. 95-2516 (January 1997) -- Judge McGarity

Chapter 7 trustee commenced an adversary proceeding against two defendants to recover an account receivable. Because the debtor owed the first defendant certain sums and that defendant owed monies to the second defendant, the second defendant argued the amount it owed the debtor should be set off. The court determined that the second defendant failed to prove that the triangular setoff rights fell under the mutuality requirement of sec. 553. The trustee was granted a judgment for the full amount owed the debtor.


In re Imperial Plants, Inc., Case No. 94-21818 (December 1996) -- Judge McGarity

US Trustee moved for reconsideration of the court's order converting the case from chapter 11 to chapter 7 upon the debtor's motion under sec. 1112(a). The UST argued that, as the debtor was no longer a "debtor in possession" post-confirmation, it no longer had the right to convert  the case under sec. 1112(a). The court found that because the post-confirmation debtor was the same entity as the debtor in possession, the debtor was allowed to convert, post-confirmation, to a chapter 7.


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