The debtor's mother, who passed away prepetition, borrowed money and promised to repay it on a non-recourse basis from the sale of her home after her death, a transaction commonly known as a "reverse mortgage." The debtor's mother's probate estate has not been administrated. The debtor, who lived in the home for many years with his mother and continues to reside there, filed a chapter 13 bankruptcy petition and a plan proposing to pay the mortgage creditor an amount equal to the home's value. The mortgage creditor, which timely filed a proof of claim alleging it to be secured in full, objected to confirmation, arguing that the debtor did not have an interest in the property that could be provided for in his chapter 13 plan and that the legal owner of the property could not be determined until his mother's probate estate was administered.
The court partially overruled the objection, reserving for an evidentiary hearing the mortgage creditor's contention that the plan understates the property's value. The court concluded that the debtor's plan could, consistent with the plan confirmation requirements of §1325, provide for the creditor's claim against the bankruptcy estate by affording the creditor the value of the property, which is all that the creditor could recover under nonbankruptcy law.
In re Gerstner, No. 19-31628 (March 2023) -- Chief Judge G.M. Halfenger
The debtors moved to reopen this chapter 7 case and amend the schedules to disclose a pre-petition personal-injury claim and exempt a portion of the net proceeds they received in a post-discharge settlement. The court concluded that after a case is closed, even if the case is reopened, a debtor may amend the schedules only if the court enlarges the time to do so, specified by Bankruptcy Rule 1009(a), which the court may do only if the debtor proves that the failure to amend the schedules before the case was closed was the result of excusable neglect, as required by Bankruptcy Rule 9006(b)(1).
In re Charmoli, No. 22-24358 (January 2023) -- Chief Judge G.M. Halfenger
After chapter 11 debtor Scott Charmoli removed state-court litigation to this court, the defendants moved to remand and abstain exercising jurisdiction over claims by and against a non-debtor LLC wholly owned by the debtor. Weeks before the deadline to file proofs of claim expired, two creditors who are parties to the removed litigation also filed a motion to extend the deadline to file proofs of claim until 14 days after they obtained a state-court judgment against the debtor. The creditors sought to postpone filing a proof of claim, recognizing that doing so would waive their right to a jury trial against the debtor. The court denied the motion to extend the deadline, ruling that the loss of a jury trial right that results from filing a proof of claim is not cause to extend the proof of claim filing deadline.
WiscTex, LLC v. Galesky, Adv. Proc. No. 20-02146 (December 2022) -- Chief Judge G.M. Halfenger
WiscTex, LLC, objected to Michael Galesky's discharge in his underlying chapter 7 case under 11 U.S.C.§727(a)(2), (3), (4) & (5). After a bench trial, based on the facts shown by the evidence presented, and considering the arguments for relief that WiscTex properly raised and developed in its post-trial briefs, the court concluded that WiscTex failed to prove that it is entitled to denial of Galesky's discharge under any of the cited paragraphs of §727(a).
In re Greenpoint Tactical Income Fund LLC, Case No. 19-29613 (October 2022) -- Chief Judge G.M. Halfenger
Freeborn & Peters LLP represented the Official Committee of Equity Security Holders for Greenpoint Tactical Income Fund LLC in these jointly-administered case. After plan confirmation Freeborn requested approval of its fees and expenses and the debtors filed a limited objection, which the court overruled.
Greenpoint Asset Management II LLC v. Hallick (In re Greenpoint Asset Management II LLC), 646 B.R. 264 (Bankr. E.D. Wis. 2022) (September 2022) -- Chief Judge G.M. Halfenger
Creditor filed a cross-motion for summary judgment on his claims that charging and levy orders obtained against the debtors pre-petition were not avoidable as preferences under 11 U.S.C. §547, because, as a matter of law, the liens were created outside of the 90-day preference period, based on the holdings in Mann v. Bankruptcy Estate of Badger Lines, Inc. (In re Badger Lines, Inc.), 590 N.W.2d 270 (Wis. 1999), and Associated Bank N.A. v. Collier, 852 N.W.2d 443 (Wis. 2014). The court denied Creditor’s cross-motion, concluding that, by application of §547(e)(1) & (2), the transfers at issue were made within the preference period.
Cornerstone Pavers LLC v. Zenith Tech Inc., Adv. Proc. No. 21-2044 (July 2022) -- Chief Judge G.M. Halfenger
After Cornerstone Pavers LLC and Zenith Tech Inc. sued each other for breach of a highway construction subcontract and the duty of good faith and fair dealing, Zenith sued West Bend Mutual Insurance Company on a bond allegedly insuring the performance of that subcontract. West Bend moved for summary judgment asserting that the bond it issued does not insure the subcontract at issue and, even if it does, Zenith failed to satisfy the conditions precedent to West Bend's obligations and liability under the bond. The court denied West Bend's motion because genuine disputes of material fact remain as to whether the bond insures the performance of the relevant subcontract and, construing the bond as a matter of law against West Bend, the undisputed facts show that Zenith did satisfy the conditions precedent to West Bend's obligations and liability under the bond.
In re Antonio and Angel Terrell, Case No. 18-28674 (July 2022) -- Chief Judge G.M. Halfenger
The State of Wisconsin filed a motion to vacate two orders of this court because they are based on an earlier order recently reversed by the Court of Appeals for the Seventh Circuit. The court stayed consideration of the state's motion to await the issuance of the mandate, after the expiration of the time for the filing of a petition for rehearing in the court of appeals.
U.S. Securities and Exchange Commission v. Greenpoint Tactical Income Fund LLC (In re Greenpoint Tactical Income Fund LLC), Adv. Proc. No. 20-2005 (July 2022) -- Chief Judge G.M. Halfenger
The defendants were debtors in a chapter 11 bankruptcy case and the court confirmed their chapter 11 plan in May 2022. Before confirmation, the plaintiff sued defendants and others in the United States District Court for the Western District of Wisconsin alleging that the debtor-defendants violated certain federal securities laws that give rise to claims for disgorgement, prejudgment interest, and civil penalties. The plaintiff filed this adversary proceeding against the debtor-defendants seeking a determination that those debts are not dischargeable pursuant to 11 U.S.C. §1141(d)(6).
Before confirmation, the defendants objected to plaintiff's proofs of claim in their bankruptcy cases. After the court allowed the plaintiff's claims in the amount of $0 the defendants confirmed chapter 11 plans that provided for payment of the plaintiff's allowed $0 claim in full on the plan's effective date. Once the debtors' chapter 11 plans became effective, the defendants moved to dismiss this adversary proceeding pursuant to Federal Rule of Civil Procedure 12(b)(1) for lack of subject matter jurisdiction, arguing that this proceeding was moot because the debtor-defendants' confirmed plan satisfied the SEC's claim, and the preclusive effect of the claims-allowance order prevented any future adjudication by the Western District that disgorgement or civil penalties should be awarded in an amount greater than $0.
The court ultimately concluded that the Western District of Wisconsin is the appropriate court to determine the preclusive effect of the bankruptcy court's claims-allowance order, and it denied the debtor-defendants' motion to dismiss but stayed the remainder of the adversary proceeding until the Western District adjudicates the SEC's claims in that case.
In re Juan Sandoval, Case No. 21-24190 (March 2022) -- Chief Judge G.M. Halfenger
The chapter 13 debtor filed a plan proposing to modify a claim secured by a reverse mortgage on a duplex that he inherited from his mother. The claim holder objected to confirmation, asserting that 11 U.S.C. §1322(b)(2) bars the proposed modification of the claim because it is "secured only by a security interest in real property that is the debtor's principal residence" and that §1322(c)(2), which provides an exception to §1322(b)(2)'s bar on claim modification, does not apply because "the last payment on the original payment schedule" for the claim is not due until the note's stated maturity date, December 9, 2081, long after "the final payment under the plan is due". The debtor responded that the real property includes but is not only his principal residence (his sister rents the duplex's other unit), so §1322(b)(2) does not bar the proposed modification of the claim, and that, even if it does, §1322(c)(2) applies because the debt matured when his mother died, before the petition was filed. The court concluded that §1322(b)(2)'s anti-modification provision applies because the claim is secured only by a security interest in real property that is the debtor's principal residence (even if it is also an income-generating rental property) but that §1322(c)(2) nevertheless permits the proposed modification because the parties to the note and mortgage intended that the borrower's death would fix (but not accelerate) the contingent maturity of the debt and, as a result, the last payment on the original payment schedule for the claim has been due since the prepetition death of the debtor's mother (the borrower), which occurred "before the date on which the final payment under the plan is due". The court also considered but found unconvincing the claim holder's remaining arguments, including that permitting modification of the claim would impermissibly undermine a federal mortgage insurance program designed to increase the use of reverse mortgages, and overruled the objection to confirmation.