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    In re Greenpoint Tactical Income Fund LLC, Case No. 19-29613 (February 2024) -- Chief Judge G.M. Halfenger
    The court confirmed the debtor's chapter 11 plan in May 2022. In August 2023 the debtor's former managing members moved the court to compel the reorganized debtor to pay amounts the former managing members asserted they were due under the plan. The court granted the motion in part and denied it in part, declaring that the former managing members had administrative claims that are due and owing but denying other requests for relief, including a request to compel the reorganized debtor to make the required payments.


    In re Arrow Express, Inc., Case No. 95-24187 (February 2024) -- Chief Judge G.M. Halfenger
    Unclaimed Funds Recovery Services VII Inc. ("UFRS") filed a petition under 28 U.S.C. §2042 for the release of unclaimed funds, purportedly as the successor claimant to a creditor in this chapter 7 case. The court denied the petition, and UFRS moved for reconsideration. UFRS then filed another petition under §2042, purportedly as the successor claimant to another creditor in the case. The court denied both UFRS's motion for reconsideration and UFRS's second petition for the release of unclaimed funds because UFRS has not appeared by counsel and corporations are not ordinarily permitted to appear in and seek relief from a federal court except by counsel.


    In re Greenpoint Tactical Income Fund LLC, n/k/a Alluvium Fund LLC, Case No. 19-29613 (December 2023) -- Chief Judge G.M. Halfenger
    1. In a single consolidated request for relief, H Informatics LLC filed an application for allowance of administrative expenses under 11 U.S.C. §503(b)(1)(A) and debtor Greenpoint Tactical Income Fund, n/k/a Alluvium Fund LLC ("Fund") moved for approval under Federal Rule of Bankruptcy Procedure 9019 of the Fund's compromise of H Informatics' administrative expense claim. The United States trustee and the U.S. Securities and Exchange Commission objected.
    The court denied the motion to compromise, determining that the existing record did not afford an adequate basis from which the court could determine whether the compromise bore a reasonable relationship to the amount that H Informatics could be allowed under 11 U.S.C. §503(b)(1)(A). With respect to H Informatics' application for allowance of administrative expenses, the court noted that if H Informatics was required to have its employment approved under 11 U.S.C. §327, then it would not be permitted to apply for compensation under 11 U.S.C. §503(b)(1)(A). The court concluded that an evidentiary hearing was required to determine whether H Informatics was a "professional person", thus required to have its employment approved under 11 U.S.C. §327. The court further reasoned that even if H Informatics is not a professional person under §327, the existing record did not allow the court to determine the "actual, necessary costs and expenses of preserving the estate", necessitating an evidentiary hearing to determine the extent to which the court should allow H Informatics' administrative expense claim under 11 U.S.C. §503(b)(1)(A).
    2. The court denied H Informatics' motion in limine and for summary judgment based on its denial of the motion to compromise.


    In re Higgins, Case No. 23-22024 (December 2023) -- Judge R.M. Blise
    The Court held that Matrix Financial Services Corporation did not have a security interest in property of the bankruptcy estate, and the Court sustained Matrix’s objection to the debtor’s chapter 13 plan and granted its motion for relief from stay. The debtor’s plan proposed to cure and maintain the mortgage on his deceased father’s house. The debtor’s father had died intestate, and his estate was never administered in probate court. The debtor and several siblings were entitled to equal shares of their father’s estate. The court held that a chapter 13 plan can provide for a mortgage under 11 U.S.C. § 1322(b)(5) where the debtor is not personally liable on the debt and is not in contractual privity with the creditor, but only if the underlying collateral is property of the bankruptcy estate. The debtor argued that the debtor’s interest in his parents’ probate estate, which included the house, was sufficient to draw the house into the bankruptcy estate pursuant to the definitions in 11 U.S.C. §§ 101(5) and 102(2). The creditor argued that the debtor’s interest was not in the house itself, but in the probate estate.

    The Court turned to Wisconsin probate law to determine the extent of the debtor’s interest in the house. The Court acknowledged that before the 1971 enactment of the Wisconsin probate code, legal title to a decedent’s real property passed automatically to the heirs, but since the probate code’s enactment a decedent’s interest in all property, including real property, passes to the personal representative of the decedent’s estate. Relying on Shovers v. Shovers, 2006 WI App 108, 718 N.W.2d 130, the Court held that legal title to a decedent’s property remains suspended until the appointment of a personal representative. Therefore, before property is transferred by an appointed personal representative, the heirs have an interest in the probate estate and at most have an equitable interest in the property that is part of the probate estate. The debtor was adamant the house would ultimately pass to him following probate, but such an outcome was not guaranteed. The Court held that Matrix’s security interest did not attach to whatever equitable interest the debtor may have in the house, so the house itself, as opposed to the debtor’s equitable interest, was not part of the bankruptcy estate for purposes of Matrix’s objection to confirmation and motion for relief from stay.


    In re Solis-Ocon, Case No. 19-27917 (December 2023) -- Judge R.M. Blise
    The Court granted the trustee’s motion to vacate a chapter 13 debtor’s discharge pursuant to Fed. R. Civ. P. 60(b)(1). An error by an employee of the chapter 13 trustee caused an unsecured claim to be incorrectly characterized as secured. The debtor paid the trustee an amount that the trustee represented would be sufficient to pay all unsecured claims. Thereafter, the trustee filed a notice of completion of plan payments and the Court entered an order discharging the debtor. The trustee discovered the error less than a month after the discharge order and filed a motion to vacate the discharge pursuant to Fed. R. Civ. P. 60(a). The debtor objected to the motion and the Court held that the discharge order did not contain the type of clerical error or mistake contemplated by Rule 60(a). The trustee then raised 60(b)(1) as a basis for vacating the discharge order, arguing the order was based on a factual mistake. The Court relied on In re Bethe, No. 11-25388-GMH, 2017 WL 3994813 (Bankr. E.D. Wis. Sept. 8, 2017), in holding that a discharge order could be vacated under Rule 60(b)(1) if it resulted from a mistake and if the equities of the case warranted relief. The Court concluded the discharge order was based on a factual mistake because the debtor had not made “all payments under the plan” as required for discharge pursuant to 11 U.S.C. § 1328(a) and that the equities of the case favored granting the trustee’s motion.


    Behm v. McGill (In re McGill), Adv. Proc. No. 22-02073 (October 2023) -- Chief Judge G.M. Halfenger
    Plaintiffs sued the debtor-defendant seeking a declaration that the debt owed to them by the debtor-defendant is not dischargeable pursuant to 11 U.S.C. section 523(a)(2)(A) or (B). After a trial on the merits, the court concluded that the plaintiffs failed to meet their burden to prove that the debt owed to them was not dischargeable under section 523(a)(2)(A) or (B).
    The court also noted that while the complaint referred to section 727(a)(2)(A), (a)(3), (a)(4)(A) and (a)(5), and further requested an order denying the debtor-defendant’s discharge, none of the complaint’s allegations or the evidence at trial supported a claim for the denial of discharge.


    In re Reeves, No. 19-31949 (September 2023) -- Judge R.M. Blise
    The Court held that the damages arising from the chapter 13 debtors’ post-confirmation breach of a vehicle lease assumed under the plan did not qualify as an administrative expense. The debtors’ plan provided for the assumption of a vehicle lease with Ford. The debtors returned the vehicle to Ford at the end of the lease term, which ended while the debtors were still making payments under their confirmed chapter 13 plan. Ford asserted that there were remaining amounts due under the lease for monthly payment, excess mileage charges, and a disposition fee, and that by not paying those amounts the debtors were in breach of the lease. Ford filed a motion for allowance of administrative expenses for the damages resulting from the breach. The Court concluded that the debtors’ breach of the lease likely was not a rejection of the lease as that term is used in 11 U.S.C. § 365(g), but the Court determined that regardless of whether the breach was a rejection, the breach gave rise to a post-petition claim for damages. The Court held that the damages did not qualify as an administrative expense under 11 U.S.C. § 503(b). To qualify as an administrative expense under that section, an expense must both (1) arise from a transaction with the estate, and (2) benefit the estate in some demonstrable way. The Court held that the damages did not arise from a transaction with the estate. The Court disagreed with other courts that have held that the act of assumption in a chapter 13 plan obligates the bankruptcy estate, and instead concluded that the debtors, in assuming the lease pursuant to a plan only they could propose, were acting on behalf of themselves and not the estate. The Court reasoned that a chapter 13 debtor, unlike a chapter 11 debtor-in-possession, does not act on behalf of the estate and does not have the power to assume leases under 11 U.S.C. § 365.


    In re Burkes, Case No. 21-23813 and In re Hull, Case No. 22-20431 (September 2023) -- Judge R.M. Blise
    The United States Trustee (UST) moved to dismiss two chapter 13 cases pursuant to 11 U.S.C. § 1307(c) for cause on the grounds that the debtors filed their petitions in bad faith by intentionally omitting certain financial information from their schedules. In both cases, the debtor filed a chapter 13 plan, the trustee eventually recommended confirmation, and the Court issued an order confirming the plan that included a finding that the plan met all the requirements of 11 U.S.C. § 1325. The Court held that the confirmation orders necessarily included a finding under 11 U.S.C. § 1325(a)(7) that the debtors had filed their petitions in good faith, and that those findings were res judicata. Granting the UST’s motions to dismiss would require revisiting those findings, and the UST did not provide any basis for doing so. No provision in Federal Rule of Civil Procedure 60(b) warranted relief from the confirmation orders, and the orders could not be revoked for fraud under 11 U.S.C. § 1330 because the UST filed his motions after the 180-day deadline in that statute. The Court rejected the UST’s argument that because § 1307(c) does not include a time limit, a case can be dismissed regardless of whether the basis for dismissal contradicts an earlier order. The Court held that § 1307(c) was not intended to be used as a mechanism to evade the factual findings in prior orders, so the UST could not seek dismissal based on the debtors’ pre-confirmation conduct. The Court also declined to find cause to dismiss under § 1307(c) based on the debtors’ post-confirmation conduct in failing to comply with the Court’s Rule 2004 orders requiring them to produce documents and appear for examination by the UST. The Court held that if the sole purpose of the Rule 2004 examinations was to bring the motions to dismiss based on the debtors’ pre-confirmation conduct, then the Court would not penalize the debtors for failing to comply because such a ruling would allow the UST to evade the res judicata effect of the earlier confirmation orders. The motions to dismiss in both cases were denied without prejudice to the UST’s ability to bring further motions to dismiss based on the debtors’ post-confirmation conduct.


    Cornerstone Pavers, LLC v. Zenith Tech, Inc. (In re Cornerstone Pavers, LLC), Adv. Proc. No. 21-02044 (September 2023) -- Chief Judge G.M. Halfenger
    After denying the plaintiff's motion to compel the defendant to produce communications withheld during discovery as privileged and rejecting a separate and largely unrelated rationale for production of privileged communications introduced by the third-party defendant after the motion to compel was fully briefed, the court ordered the plaintiff and the third-party defendant to explain why they and their attorneys should not be required to pay the defendant's expenses reasonably incurred in opposing their requests to compel production, pursuant to Federal Rule of Civil Procedure 37(a)(5)(B). Based on the record and the parties' responses, the court concluded that the plaintiff was substantially justified in bringing its motion to compel but that the third-party defendant's distinct rationale for an order compelling production lacked a reasonable basis in fact and law such that the third-party defendant (or its attorney), but not the plaintiff, must pay the expenses reasonably incurred by the defendant in responding to the third-party defendant's additional rationale for an order compelling production.


    Ruck v. McGill, 22-02074 (September 2023) -- Chief Judge G.M. Halfenger
    Plaintiff sued the debtor-defendant seeking an award of damages for violation of Wisconsin Statutes section 779.02(5) and a declaration that the award is not dischargeable pursuant to 11 U.S.C. section 523(a)(4). After trial plaintiff argued that debtor-defendant also owed her attorney’s fees pursuant to Wisconsin Statutes section 895.446. The court ruled that debtor-defendant owes plaintiff a debt pursuant to Wisconsin Statutes section 779.02(5) that is not dischargeable under 11 U.S.C. section 523(a)(4), but the plaintiff did not prove a right to relief under Wisconsin Statute section 895.446.