A debtor proposed a Chapter 13 plan providing for payment of 12% interest on tax principal amounts included in the proof of claim filed by the Racine County Treasurer, but providing for payment of 3.25% interest on accrued interest and penalties. The County objected to confirmation of the plan, asserting that the debtor should pay 12% interest on the entire amount of its claim. The court overruled the objection. Section 511 of the Bankruptcy Code establishes the rate of interest to be paid on tax claims and requires courts to look to “applicable nonbankruptcy law” to determine the appropriate interest rate. In Wisconsin, interest accrues at the rate of 12% per year on “delinquent general property taxes, special charges, special assessments and special taxes.” Wis. Stat. § 74.47(1). The statute does not provide for 12% interest on accrued interest or 12% interest on accrued tax penalties. Notably, the court’s reading of the Wisconsin statute corresponded to the method the County used to calculate interest before the debtor filed the bankruptcy case.
In re Harris, No. 21-23864 (Bankr. E.D. Wis. Sept. 22, 2022) (September 2022) -- Judge K.M. Perhach
Chapter 13 debtors objected to the proof of claim filed by the City of Milwaukee. The City failed to meet its burden of proving by a preponderance of the evidence that charges for delinquent municipal services, delinquent storm water services, delinquent water services, “other special” services, and interest and penalties were a “property tax” entitled to priority status under 11 U.S.C. § 507(a)(8)(B). The court sustained the claim objection and also overruled the City’s objection to the debtors’ Chapter 13 plan which proposed to pay the 2020 net property tax owed to the City as an unsecured priority claim under § 507(a)(8)(B) and the remaining balance of the claim as a general unsecured claim. Accord In re Peete, 642 B.R. 299 (Bankr. E.D. Wis. 2022).
Bach v. Milwaukee County et al. (In re Bach), Ch. 7 Case No. 20-23343, Adv. No. 21-2020 (Bankr. E.D. Wis. July 1, 2022), aff’d, No. 22-CV-0806-BHL (E.D. Wis. Jan. 24, 2023) (July 2022) -- Judge K.M. Perhach
A debtor claimed that Milwaukee County and various county officials violated the discharge injunction. The County and officials had two judgment liens on the debtor’s property. The debtor argued that they violated the discharge injunction because they were named by the mortgage creditor as additional defendants in a foreclosure lawsuit against her. She further claimed that one of the officials violated the discharge injunction because an attorney filed a notice of appearance on the official’s behalf in a separate foreclosure lawsuit and filed letters in that case stating that the attorney did not intend to appear at scheduled motion hearings. The attorney also filed a notice of demand for surplus, asserting a claim to any surplus funds remaining after the proceeds of any sheriff’s sale were applied to the foreclosure judgment. The court granted the motion for summary judgment filed by Milwaukee County and the related defendants and dismissed all the claims asserted against them. The district court affirmed this decision on appeal.
Bach v. Office of Lawyer Regulation (In re Bach), Ch. 7 Case No. 20-23343, Adv. No. 21-2020 (Bankr. E.D. Wis. June 8, 2022), aff’d, No. 22-CV-0866-BHL (E.D. Wis. Jan. 24, 2023) (June 2022) -- Judge K.M. Perhach
A debtor sought a determination that her Chapter 7 bankruptcy discharged debt she owed to the State of Wisconsin Office of Lawyer Regulation for the costs associated with her attorney disciplinary proceeding. Finding Osicka v. Office of Lawyer Regulation, 25 F.4th 501 (7th Cir. 2022) directly on point, the court determined the debt was excepted from discharge under 11 U.S.C. § 523(a)(7). The court granted the Office of Lawyer Regulation's motion for summary judgment. The district court affirmed the decision on appeal.
In re Neitzel, No. 21-25185 (Bankr. E.D. Wis. May 10, 2022) (May 2022) -- Judge K.M. Perhach
The court denied a debtor’s motion for an order finding a creditor in contempt for violation of the automatic stay. The creditor filed a summons and complaint with a Minnesota state court after the debtor had filed the bankruptcy case. In Minnesota, a civil action is commenced when the summons is served on the defendant. The Minnesota rules further provide that the lawsuit is deemed dismissed with prejudice if the plaintiff fails to file the summons and complaint with the court within one year of service of the summons. The creditor commenced the litigation by serving the summons and complaint on the debtor before the debtor filed the bankruptcy case. Under the facts of the case, the creditor’s filing of the summons and complaint with the Minnesota state court after the debtor filed the bankruptcy case did not constitute a continuation of the litigation in violation of the automatic stay. The creditor only sought a judgment against a non-debtor defendant. Simultaneously with the filing of the summons and complaint, the creditor filed a notice in which it sought to dismiss its claims against the debtor due to his bankruptcy filing as well as a proposed order dismissing the claims against the debtor. When the Minnesota state court did not docket the dismissal as it expected, the creditor followed up to have the claims against the debtor dismissed. Accord In re Neitzel, No. 21-25186-rmb (Bankr. E.D. Wis. April 1, 2022).
Anderson Tooling, Inc. v. Anderson (In re Anderson), Ch. 7 Case No. 16-28979, Adv. No. 16-2465 (Bankr. E.D. Wis. Apr. 1, 2022) (April 2022) -- Judge K.M. Perhach
The court previously denied the plaintiff’s motion for summary judgment against the joint debtor, determining that it could not apply issue preclusion to find that the state court conspiracy judgment entered in favor of the plaintiff was excepted from discharge under 11 U.S.C. § 523(a)(4) and/or § 523(a)(6). The court then held a trial and found that the plaintiff did not prove its claims against the joint debtor for fraud or defalcation while acting in a fiduciary capacity, embezzlement, or larceny or that there was a willful and malicious injury by the joint debtor or that the joint debtor acted with malice, wickedness, or a deliberate intent to injure the plaintiff. The court rejected the plaintiff’s contention that the evidence it presented at trial supplemented the record on summary judgment in such a way that the court could apply issue preclusion following the trial and rule in its favor.
In re Gregory, No. 21-20607 (Bankr. E.D. Wis. Dec. 23, 2021) (December 2021) -- Judge K.M. Perhach
A mortgage creditor objected that its claim was secured only by a security interest in real property that was the Chapter 13 debtors’ principal residence and 11 U.S.C. § 1322(b)(2)’s anti-modification provision prohibited the debtors’ proposed modification of its claim. After conducting an evidentiary hearing, the Court sustained the objection to confirmation. Based on the testimony and evidence presented at the hearing, the Court found that at the time the petition was filed, the debtors were living in the property at issue as their principal residence. Section 1322(b)(2) prohibited the debtors’ proposed cramdown of the mortgage creditor’s claim.
In re Eatertainment Milwaukee, LLC, No. 21-25733 (Bankr. E.D. Wis. Nov. 19, 2021) (November 2021) -- Judge K.M. Perhach
The Chapter 11 debtor was the successor to a former tenant of the Punch Bowl Social bar and restaurant in downtown Milwaukee. The new tenant of the Punch Bowl Social location filed an “Emergency Motion for Relief from the Automatic Stay, to the Extent it May Apply,” asking the Court to determine whether the debtor had abandoned property at the leased premises and, if not, what property was property of the bankruptcy estate. The new tenant argued that much of the property was a fixture, the stay did not apply to those fixtures, and the fixtures should remain at the premises. The debtor argued that almost none of the property was a fixture and that the property was property of the estate and could easily be removed. After conducting an evidentiary hearing, the Court concluded that the debtor had not abandoned any of the property at issue at the premises. The Court determined that certain property was a fixture and therefore not property of the debtor/bankruptcy estate, determined that certain other property was property of the debtor/bankruptcy estate, and found that it could not determine the status of the remaining property at issue given the evidence presented at the evidentiary hearing.
Meadows v. Ledesma (In re Ledesma), Ch. 7 Case No. 20-22941-kmp, Adv. No. 20-2129, 2021 WL 4514678, 2021 Bankr. LEXIS 2712 (Bankr. E.D. Wis. Oct. 1, 2021) (October 2021) -- Judge K.M. Perhach
The plaintiff filed a motion for summary judgment on his claims to deny the debtor’s discharge pursuant to 11 U.S.C. § 727(a)(3) based on the debtor’s failure to keep records about his financial condition and business transactions and pursuant to § 727(a)(4) based on knowing and fraudulent false oaths made by the debtor. The plaintiff established that the debtor failed to keep records from which his financial condition might be ascertained, and the debtor did not offer any compelling argument or evidence that this failure was justified. Most problematically, the Debtor failed to provide any record accounting for almost $35,000 that he received through services like Cash App and Venmo.
The plaintiff also established that the debtor “knowingly and fraudulently, in or in connection with the case made a false oath or account.” Although determinations about a person’s intent are often ill-suited for summary judgment, the plaintiff demonstrated a pattern of omissions and conflicting statements that led to the conclusion that the debtor acted with an intent to defraud. At the summary judgment stage, a “put up or shut up moment,” the debtor failed to file affidavits or exhibits to assert that facts were genuinely disputed as contemplated by Fed. R. Civ. P. 56(c)(1), instead relying on unsupported representations in counsel’s brief. The representations did not constitute evidence and could not defeat summary judgment.
Bach v. JPMorgan Chase Bank N.A. (In re Bach), Ch. 7 Case No 20-23343-kmp, Adv. No. 21-2020 (Bankr. E.D. Wis. Oct. 1, 2021), aff’d, No. 21-CV-1394-BHL (E.D. Wis. Jan. 19, 2023) (October 2021) -- Judge K.M. Perhach
Defendants JPMorgan Chase Bank, N.A. and Federal National Mortgage Association filed a motion to dismiss the debtor-plaintiff’s claims against them based on lack of subject-matter jurisdiction under the Rooker-Feldman doctrine. Because the claims had already been considered and rejected in foreclosure cases in state court, the Court granted the motion and dismissed the claims. Even if the Court had subject-matter jurisdiction, issue preclusion or claim preclusion barred the debtor-plaintiff from relitigating the claims. The district court affirmed this court’s decision and held that the doctrine of res judicata (a/k/a claim preclusion) barred the debtor-plaintiff’s claims. The district court noted that the Rooker-Feldman doctrine did not apply because the debtor did not cite state court defeats as the source of her injury and instead merely restated her losing state court arguments and sought to relitigate them.