The chapter 7 debtor filed an adversary proceeding against a medical service provider, alleging violations of the automatic stay. The provider mailed invoices to the debtor’s deceased husband, requesting payment of a $12.61 balance due for medical services provided to him. Because the record showed that the defendant's collection efforts were not directed against the debtor or her bankruptcy estate, the court found there was no violation of the automatic stay and dismissed the complaint.
In re Judith Engelman, Case No. 18-26174 (March 2020) -- Chief Judge G.M. Halfenger
York Investment LLC filed a proof of claim for nearly $1.4 million owed on a note and fully secured by a mortgage on the chapter 13 debtor's real property and moved to dismiss the case under 11 U.S.C. §109(e), which provides that only an individual with prepetition debts below specified limits is eligible to proceed under chapter 13. The debtor objected that her signature was forged on the note and mortgage, so neither is valid or enforceable against her. After an evidentiary hearing, the court found that the debtor's now-deceased husband signed the note and mortgage on her behalf pursuant to a valid power of attorney for finances. The court concluded that the debtor is liable on the debt to York but that the mortgage is void under state law because it does not state that an authorized agent signed the mortgage on the debtor's behalf. Due to the debt to York, the debtor's unsecured prepetition debts exceed the limit specified for such debts in §109(e), and the debtor is not eligible to proceed under chapter 13.
Jacobson v. Wells Fargo Bank, N.A. (In re Jacobson), Adv. Proc. No. 19-02094 (March 2020) -- Chief Judge G.M. Halfenger
The debtor brought an adversary proceeding seeking to disallow a claim secured by a mortgage on her residence and to void the note and mortgage under state law alleging that her ex-husband obtained them by defrauding the U.S. Department of Veterans Affairs. The creditor moved to dismiss asserting that the debtor's claims are barred by the Rooker-Feldman doctrine and claim preclusion because the parties litigated or could have litigated the claims in prior proceedings in state court. The court granted the motion and dismissed the proceeding: Rooker-Feldman bars the bankruptcy court's consideration of the debtor's claims to the extent she seeks to set aside the state court's judgments, including her attempt to avoid the preclusive effect of a state-court foreclosure judgment in the creditor's favor by arguing that it was procured by fraud, and claim preclusion otherwise bars litigation of the debtor's claims because they arose from the same common nucleus of operative facts as the claims that were litigated in state court.
In re Greenpoint Tactical Income Fund LLC, Case No. 19-29613 (February 2020) -- Chief Judge G.M. Halfenger
The debtors in two jointly administered chapter 11 cases moved to reject a settlement agreement with Erick Hallick under 11 U.S.C. §365(a). Hallick objected that the agreement cannot be rejected under §365(a) because it is not an executory contract. The court concluded that the settlement agreement is an executory contract and granted the debtors' motion to reject it, concluding that significant unperformed obligations remain on both sides. The court also rejected Hallick's argument that the state-law doctrine of equitable conversion compels a different result, concluding that the doctrine does not apply because there was no transfer or attempted transfer of real property, the agreement is not substantially similar in structure to those to which Wisconsin's courts have applied the doctrine, and the equities do not favor applying it.
Thompson v. Roberts (In re Thompson), Case No. 19-2092 (February 2020) -- Chief Judge G.M. Halfenger
Plaintiff, a chapter 13 debtor, filed an adversary proceeding against his ex-wife who had filed a claim purporting to be fully secured by the debtor’s homestead. The plaintiff-debtor alleged that the defendant’s claim was secured only to the extent that the value of the homestead exceeded other liens on the property and his Wisconsin-law homestead exemption. The defendant contended that the divorce court had awarded her a mortgage on the residence to secure the debtor’s payment of an equalization payment and that the mortgage was not limited by the debtor’s homestead exemption.
The court ruled that the divorce judgment by its terms did not award the defendant any lien on plaintiff-debtor’s residence because the judgment awarded the residence to the debtor without a suggestion that the homestead was to serve as a means of paying the equalization amount. The court further ruled that the divorce court’s ruling on the judgment supported the conclusion that the divorce court had not awarded a lien on the debtor’s homestead.
As a result, the bankruptcy court ruled, the defendant’s only lien on the property arose as a matter of law under Wis. Stat. §806.15(1) when the defendant recorded the divorce judgment on the county judgment and lien docket. Under Wisconsin law, however, that lien does not attach to an exempt homestead up to the exemption limit. The court thus concluded that, under Wis. Stat. §815.20, the defendant’s claim is only secured to the extent that the value of the residence exceeds the sum of the higher-priority liens and $75,000 homestead exemption. The court granted the debtor-plaintiff’s motion for summary judgment in part and allowed the defendant’s claim as a partially secured claim.
Lay v. Douyette (In re Douyette), Ch. 7 Case No. 19-26272-kmp, Adv. No. 19-2128 (Bankr. E.D. Wis. Feb. 11, 2020) (February 2020) -- Judge K.M. Perhach
The Plaintiffs filed a motion for summary judgment seeking a determination that a state court judgment on an intentional misrepresentation claim was preclusive in this 11 U.S.C. § 523(a)(6) nondischargeability action. Finding that the state court judgment did not establish that the Debtor-Defendants acted with an intent to injure the Plaintiffs, the Court denied the motion. Section 523(a)(6) does not encompass all intentional torts, and the Court also noted that debts resulting from fraud are covered in different sections of the Bankruptcy Code, like § 523(a)(2).
DeWitt v. Jacob (In re Jacob), Case No. 18-26186-beh, Adv. No. 18-02217-beh, 2020 WL 696795 (February 2020) -- Judge B.E. Hanan
A creditor sought a determination that a portion of the state court money judgment against both the debtors and a non-debtor was non-dischargeable under 11 U.S.C. § 523(a)(6), based on the debtors’ conduct during their tenancy in the creditor’s home. The Court disregarded the debtors’ attempt to deny the existence of the debt as well as their inapplicable affirmative defenses. Where the creditor established by a preponderance of the evidence that the debtors caused willful and malicious injury, the Court determined that the damages flowing therefrom were non-dischargeable. The damages ranging from routine wear and tear to gross uncleanliness are dischargeable.
In re Dean, No. 19-30112-kmp (Bankr. E.D. Wis. Feb. 10, 2020) (February 2020) -- Judge K.M. Perhach
The Debtor had not filed past-due tax returns by the first date set for the meeting of creditors. She requested that the Trustee hold open the meeting pursuant to 11 U.S.C. § 1308(b)(1)(A) to allow her to file the returns. The Trustee continued the meeting for 35 days and made a docket entry stating, “The Meeting of Creditors has been held open pursuant to 11 U.S.C. §1308(b)(1).” After the continued date passed, the Trustee concluded the meeting. The Debtor still had not filed her tax returns, so she filed a motion requesting that the Court grant an extension of time pursuant to § 1308(b)(2). Because the Debtor did not file her motion until after the deadline established by the Trustee, the Court did not have the authority to enter an order granting a further extension. Since the Debtor had not filed the returns as required by § 1308, she could not satisfy § 1325(a)(9), and cause existed under § 1307(c) for conversion or dismissal of the case because the Court could not confirm a plan. See In re Long, 603 B.R. 812, 819-20 (Bankr. E.D. Wis. 2019).
CQM, Inc. v. Vandenbush (In re Vandenbush), Case No. 18-31066, Adv. No. 19-02041, 2020 WL 609609 (February 2020) -- Judge B.E. Hanan
Creditors holding a large judgment debt against the debtor’s now ex-wife, attributable to the ex-wife’s theft-by-fraud, sought to retain their ability to collect the debt against the marital property the debtor retained in the parties’ subsequent divorce, and filed an action premised on 11 U.S.C. §§ 523(a)(2)(A) and (a)(15). The parties cross-moved for summary judgment. The Court granted summary judgment in favor of the debtor-defendant because (1) the complaint’s allegations under section 523(a)(2)(A) were premised solely on fraud committed by the debtor’s ex-wife, which could not be imputed to the debtor, and (2) the underlying judgment, which was assigned to the debtor’s ex-wife in the divorce, was not a debt owed to a spouse, former spouse or child, nor was it created by the parties’ divorce.
The Court also rejected a new factual theory that the creditors raised for the first time in their brief opposing the debtor’s motion for summary judgment—that the debtor engaged in a post-judgment fraudulent transfer scheme through the parties’ marital property division. First, the Court noted that it is improper for parties to raise new factual, rather than legal, theories in opposition to summary judgment briefing. Then, the Court rejected the new theory on the merits because it did not link the underlying judgment debt that the creditors sought to except from discharge to the later asserted fraudulent conduct. Finally, to the extent the plaintiffs were attempting to invoke their rights under 11 U.S.C. § 524(a)(3) to collect against post-petition martial property, that section of the Code did not apply because the debtors were no longer married and thus there could be no non-exempt post-petition marital property from which to collect.
Layng v. Pansier (In re Pansier), Adv. No. 18-2222, Case No. 18-22297, 2020 WL 268582 (January 2020) -- Judge B.E. Hanan
The U.S. Trustee filed a complaint to deny the discharges of a married debtor couple, based on their conduct in creating several trusts and entities into which they transferred their home, personal property and income, while continuing to live in the home and retaining control over the alleged trust property. The U.S. Trustee asserted causes of action under 11 U.S.C. sections 727(a)(2) (concealment of assets), (a)(3) (failure to maintain adequate books and records), (a)(4)(A) (false oaths), and (a)(5) (failure to explain a loss or diminution of assets), and sought summary judgment on all four causes of action. The Court granted summary judgment on two of those causes of action, denying the debtors’ discharges under sections 727(a)(2) and (a)(4)(A).