The Chapter 7 trustee objected to the debtor's claimed exemption in three EdVest college savings accounts. The trustee argued (a) that the debtor had transferred money into the accounts in order to hinder, delay or defraud creditors, (b) that pursuant to the reasoning in Judge Utschig's 2011 decision in In re Bronk, a debtor could not use the Wisconsin exemptions to exempt that debtor's interest in college savings plans, and (c) that rather that exempting the "fair market value" of the accounts, the Court should require the debtor to list a dollar value for the exemption. The parties had submitted briefs on the second issue--the question of whether a debtor could use Wisconsin exemptions to exempt the debtor's interest in college savings accounts--and the Court issued an oral ruling on that issue on February 25, 2013. The Court respectfully disagreed with Judge Utschig's decision in In re Bronk, 444 B.R. 902 (Bankr. W.D. Wis. 2011) (affirmed by Judge Conley on appeal, currently on appeal to the Seventh Circuit). In Bronk, Judge Utschig held that one should read Wis. Stat. section 815.18(3)(p) in conjunction with Wis. Stat. section 16.641(7) and Wis. Stat. section 16.64(8), and that to do so mandated the conclusion that only the beneficiary's interest in a college savings plan could be exempted. The Court in the instant case found that the language of section 815.18(3)(p) clearly allowed a debtor to exempt the debtor's interest in a college savings plan. The Court also found that section 16.641(7) did not conflict with 815.18(3)(p)--rather that negate a debtor's ability to exempt his interest in such a plan, it merely supplemented 815.18(3)(p) by also protected a beneficiary's right to qualified withdrawals from garnishment, attachment, execution or other process of law. The Court further concluded that it was not appropriate to look to the language of section 16.64(8)--protection monies deposited in and a beneficiary's interest in tuition and expense programs when interpreting 815.18(3)(p), because 815.18(3)(p) did not incorporate that statute by reference, and the two types of plans--college savings plans and tuition and expense programs--were different in purpose and structure. Accordingly, the Court overruled the trustee's objection to the debtor's claim of exemption to the extent that that objection was based on the In re Bronk reasoning, and held that a debtor could exempt his own interest in EdVest accounts. The Court scheduled a further hearing date on the other grounds stated in the trustee's objection.
Rinaldi v. HSBC Bank USA, N.A. (In re Rinaldi), 487 B.R. 516(February 2013) -- Judge Kelley
Court dismissed Debtors' challenges to mortgage note and mortgage that had been transferred to securitized trust based on Wisconsin law concerning endorsement of negotiable instruments and also denied Debtors' RICO, FDCPA and common law fraud claims. The Decision discusses the procedure for deciding an adversary proceeding that involves core and non-core claims as well as the Rooker Feldman doctrine.
"Chapter 13 debtor had made a series of payments to her uncle during the year prior to filing her bankruptcy petition. The trustee objected to confirmation of the debtor's plan, arguing that it failed the liquidation analysis because if the case were a Chapter 7, the trustee would be able to recover those payments as preferences and distribute them to creditors. At the evidentiary hearing, the debtor conceded that she'd made the payments during the preference period, but argued that they were subject to the ordinary-course-of-business defense under section 547(c)(2). She argued that she had taken three loans from her uncle over a ten-year period, and had repaid each with interest by having regular payments deducted from each of her paychecks. She argued that it was her ordinary course of business to borrow money from her uncle and to pay it back in this way. The trustee argued that a personal loan could not fall under the ordinary-course defense. The debtor responded that in cases such as In re Jackson, 90 B.R. 793 (Bankr. D.S.C. 1988); In re Gawronski, 411 B.R. 139 (Bankr. W.D.N.Y. 2009); and In re Eckman, 447 B.R. 546 (Bankr. N.D. Ohio 2010), courts had left open the possibility that repayment of a personal, family loan could be subject to the ordinary-course defense, although it would be very difficult for the debtor or the creditor to prove the defense. The Court found that, in this case, while the debtor may have presented evidence that it was in her ordinary course of financial affairs to borrow money from her uncle and repay it through wage deductions, she had not presented any evidence that it was in her uncle's ordinary course to make such loans, and that section 547(c)(2) required the debt to be incurred in the ordinary course of the financial affairs of both the debtor and the transferee. The Court nonetheless acknowledged that the cases the debtor had cited indicated that there could exist a set of facts which would make the ordinary course defense applicable to repayments of a personal, family loan."
Fischer v. Bank of America, N.A. (In re Fischer), 483 B.R. 877(December 2012) -- Judge Kelley
Based on Rooker-Feldman doctrine and doctrine of claim preclusion, Chapter 13 Debtors' attempt to strip mortgage lien denied when state court previously determined that mortgage was in first position.
Order denying payment of unclaimed funds
In re Washington, 483 B.R. 871(December 2012) -- Judge Kelley
Court allows late-filed Chapter 13 claim for creditor without notice under three limited conditions.
In re Archdiocese of Milwaukee, 483 B.R. 855(December 2012) -- Judge Kelley
Court denied creditors' committee's request for derivative standing to bring fraudulent transfer claim against Debtor's parishes.
In re Archdiocese of Milwaukee, 483 B.R. 693(December 2012) -- Judge Kelley
Court denied creditors' committee's request to (1) assert alter ego claims against Debtor's parishes; and (2) substantively consolidate the parishes with the Debtor.
McDonald v. Little Limestone, Inc. (In re Powers Lake Constr. Co.), 482 B.R. 803(November 2012) -- Judge Kelley
Trustee could recover preferential payment made by Debtor contractor to subcontractor despite Wisconsin Statute creating trust fund in amounts paid by owners to contractors, because between date that Debtor received payment from owner and check to subcontractor cleared Debtor's bank, Debtor's bank account went into a negative balance. Under the "lowest intermediate balance test," this destroyed the trust fund. Subcontractor's giving of a lien release did not satisfy the contemporaneous exchange defense, but whether payment was in ordinary course of business could not be decided on summary judgment, based on the materials submitted.
Gerard v. Gerard (In re Gerard), 482 B.R. 265(November 2012) -- Judge Kelley
State court jury's determination that debtor committed slander of title was given preclusive effect, and judgment debt was nondischargeable as a willful and malicious injury under § 523(a)(6).