OpinionsThe plaintiff, a commercial landlord, sought a determination that the debtor-defendant, a former tenant, owed him a nondischargeable debt based on her failure to turn over funds received from subtenants and damage to and theft of appliances. The debtor-defendant moved to dismiss the claims under 11 U.S.C. § 523(a)(2)(A), § 523(a)(4), and § 523(a)(6) for failure to state a claim upon which relief could be granted. The Court dismissed the plaintiff’s claim that the debtor obtained the funds from the subtenants through larceny. Larceny only occurs if the debtor has wrongfully taken property from its owner with fraudulent intent, and the plaintiff never owned the funds. The Court denied the motion to dismiss the plaintiff’s other claims. Andringa v. Acker (In re Acker), Ch. 7 Case No. 19-21349-kmp, Adv. No. 19-2089, 2021 WL 1346575, 2021 Bankr. LEXIS 848 (Bankr. E.D. Wis. Mar. 31, 2021) (March 2021) -- Judge K.M. Perhach The plaintiffs sought a determination that the debtors owed them a debt in the amount of their investment in a restaurant chain and that the debt was nondischargeable under 11 U.S.C. § 523(a)(2)(A), § 523(a)(2)(B), and/or § 523(a)(4). After a trial, the Court found that the plaintiffs did not meet their burden of proving that their investment was nondischargeable under any of these provisions. Moreover, the plaintiffs presented no evidence that the joint debtor was involved in the restaurant offering at all, so the Court was easily able to dispose of the question of whether the plaintiffs were entitled to a nondischargeable judgment against her. In re Ganske, No. 20-21042-kmp, 2021 WL 1396563, 2021 Bankr. LEXIS 574 (Bankr. E.D. Wis. Mar. 5, 2021) (March 2021) -- Judge K.M. Perhach The Chapter 11 debtors sought to assume a “Handling and Storage Lease Agreement” under which a barge terminal on the Illinois River would furnish equipment, personnel, and facilities necessary to receive, unload, store and load out fertilizer furnished by the debtor. The Court determined that the debtor failed to pay accounts receivable within the time established by the parties’ course of performance. This was a material breach excusing the barge terminal from performance. Because the agreement was terminated before the bankruptcy case was filed, there was no agreement for the debtors to assume. The Court denied the motion. In re Ganske, No. 20-21042-kmp, 2021 WL 316076, 2021 Bankr. LEXIS 203 (Bankr. E.D. Wis. Jan. 29, 2021), aff’d sub nom., Winfield Solutions, LLC v. Ganske, No. 21-cv-134-WCG, 2022 WL 972406, 2022 U.S. Dist. LEXIS 59479 (E.D. Wis. Mar. 31, 2022) (January 2021) -- Judge K.M. Perhach A judgment lien creditor objected to the debtors’ claimed homestead exemption. The debtors acknowledged that they spent time at the home in Door County but also maintained residences in Dane County. Following other Wisconsin bankruptcy decisions, the Court overruled the objection. See In re Carter, 550 B.R. 433 (Bankr. W.D. Wis. 2016) (Martin, J.); In re Lackowski, No. 08-21496-pp, 2008 Bankr. LEXIS 5143 (Bankr. E.D. Wis. Sep. 24, 2008) (Pepper, J.); In re Broesch, 34 B.R. 554 (Bankr. E.D. Wis. 1983) (Clevert, J.). Wisconsin courts liberally construe the homestead exemption statute. The debtors’ part-time occupancy of their Door County property did not defeat the homestead exemption because the debtors’ absence was partially due to the demands of employment. The debtors’ maintenance of the Door County property was consistent with its use as a homestead. Additionally, the debtors’ use of the Dane County address on their tax returns and drivers’ licenses did not defeat their selected homestead. The statute and the case law do not prohibit one from occupying two residences – only from claiming both as homesteads. Because the Court found that the debtors’ homestead exemption was valid, the Court granted their motion to avoid the creditor’s judicial lien. As a result, the debtors had equity in the real estate and the Court denied the creditor’s motion for relief from stay pursuant to 11 U.S.C. § 362(d)(2) without needing to reach the question of whether the property was necessary to an effective reorganization. Finally, the Court denied the creditor’s motion requesting an order requiring the debtors to abandon potential fraudulent transfer claims against two mortgage holders. The debtors had not elected to pursue the claims, but there was no evidence the claims were burdensome to the estate. Further, if the claims had merit, they were not of inconsequential value and benefit to the estate. Contrary to the creditor’s argument that avoidance of the claims would create non-exempt equity to which the creditor’s judgment lien could attach, the effect of the avoidance would be to preserve value for the estate. This decision was affirmed on appeal. Dalton v. Navient (In re Dalton), Ch. 7 Case No. 19-26478-kmp, Adv. No. 19-2175 (Bankr. E.D. Wis. Apr. 13, 2020) (April 2020) -- Judge K.M. Perhach The Debtors in a no-asset Chapter 7 case filed a complaint against a private student loan lender seeking reformation of the loan contracts and to void any contract procured through forgery. Because the claim did not affect the allocation of property among creditors and would have no effect on creditors besides the student loan lender, the claim was not "related to" the bankruptcy case. The Court did not have jurisdiction over the complaint, and the Court granted the lender's motion to dismiss. 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). 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). In re Brewer, No. 15-29081-kmp (Bankr. E.D. Wis. Dec. 31, 2019) (December 2019) -- Judge K.M. Perhach The Court overruled the Debtors’ objection to attorneys’ fees itemized on two Notices of Postpetition Mortgage Fees, Expenses, and Charges filed by the Debtors’ mortgage creditor. Bankruptcy Rule 3002.1(e) provides that within one year after service of a Notice, a debtor may request a determination of whether fees are required “by the underlying agreement and applicable nonbankruptcy law to cure a default or maintain payments in accordance with § 1322(b)(5).” The Debtors’ objection to the first Notice was filed more than one year after service of that Notice and as such was untimely. The Debtors’ objection to the second Notice was timely, and the Debtors requested a determination about a $200 charge for attorneys’ fees for the mortgage creditor’s review of a modified plan. The Court determined that these fees were required by the mortgage and applicable nonbankruptcy law and that they were reasonable. Brisk v. Swinehart (In re Swinehart), Ch. 7 Case No. 18-25585-kmp, Adv. No. 18-2200, 2019 WL 5206267, 2019 Bankr. LEXIS 3267 (Bankr. E.D. Wis. Oct. 15, 2019) (October 2019) -- Judge K.M. Perhach The Plaintiffs sought a determination that debt was non-dischargeable pursuant to 11 U.S.C. § 523(a)(4) based on fraud or defalcation by the Debtor as a fiduciary under Wisconsin’s theft by contractor statute. The Court denied the Debtor-Defendant’s motion for summary judgment. There were genuine issues of material fact regarding (1) the amount paid by the Plaintiffs and the amount held in trust for their home improvement project; (2) the amount paid to subcontractors and suppliers on the project; (3) whether the Debtor spent all of the funds that he received from the Plaintiffs on their project or used them for other personal or corporate purposes; (4) whether the Debtor paid the project subcontractors and suppliers proportionally; (5) whether the trust funds could be traced to the payments made to the subcontractors and suppliers; and (6) the Debtor’s state of mind while acting in a fiduciary capacity. Sonnentag v. Swinehart (In re Swinehart), Ch. 7 Case No. 18-25585-kmp, Adv. No. 18-2198, 2019 WL 5204457, 2019 Bankr. LEXIS 3266 (Bankr. E.D. Wis. Oct. 15, 2019) (October 2019) -- Judge K.M. Perhach The Plaintiffs sought a determination that debt was non-dischargeable pursuant to 11 U.S.C. § 523(a)(4) based on fraud or defalcation by the Debtor as a fiduciary under Wisconsin’s theft by contractor statute. The Court denied the Debtor-Defendant’s motion for summary judgment. There were genuine issues of material fact as to whether the Debtor spent the money paid by the Plaintiffs on labor and materials for their home improvement project without using any of it for other personal or corporate purposes. The Debtor implied that if he had used the Plaintiffs funds improperly, he only did so negligently, and this would not be sufficient to establish defalcation under § 523(a)(4). However, the Court could not make a determination about the Debtor’s state of mind from the summary judgment record. |