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Opinions


    Layng v. Sgambati (In re Sgambati), Adv. No 17-02022, Case No. 16-26430 (April 2018) -- Judge B.E. Hanan
    The U.S. Trustee moved to deny the debtor's discharge under 11 U.S.C. section 727(a)(4)(A), based on the debtor’s alleged failure to list all debts, income, business creditors and expenses. The debtor, who operated a pizza business and regularly mixed business and personal expenses and income, admitted some errors on his schedules but denied any fraudulent intent. After a two-day trial, the court found that some of the errors were not intentional or reckless, and that fire loss insurance proceeds and cash advances from credit cards in this case were not income that the debtor should have disclosed. Nonetheless, other omissions and mischaracterizations on the debtor’s schedules were part of a pattern of reckless disregard for the truth. The court denied debtor's discharge.


    Gorokhovsky v. Huron Hudson Condo Assn. (In re Gorokhovsky), Adv. No. 18-2045 (oral ruling) (April 2018) -- Judge B.E. Hanan
    The plaintiff-debtor sought an order declaring that the debt owed to the defendant-creditor, a condominium association, and its corresponding lien were dischargeable. The complaint also asserted state law causes of action for waste and destruction of personal property and trespass. The court granted the defendant’s motion to dismiss, finding that the court lacked subject matter jurisdiction over the debtor’s state law claims, that the debtor’s request for an order declaring his personal liability dischargeable was not justiciable (so the court lacked constitutional jurisdiction), and that the request for a finding that the defendant’s lien was dischargeable failed to state a claim upon which relief could be granted. The court also denied leave to amend the complaint, concluding that amendment would be futile.


    In re House, Case No. 17-30434-beh (March 2018) -- Judge B.E. Hanan
    After a careful consideration of the debtor’s prior filing history, the court granted a secured creditor’s motion for in rem stay relief as to the debtor’s rental property. The fact that the debtor had filed five chapter 13 cases in six-and-a-half years was not dispositive. In deciding whether in rem relief was warranted, the court reviewed the circumstances surrounding each of the debtor’s prior filings, as well as her performance in those cases, including the reasons for their failures and the debtor’s treatment of the creditor.


    In re Gorokhovsky, Case No. 17-28901-beh (March 2018) -- Judge B.E. Hanan
    The United States moved for relief from stay to perfect its secured interest (tax liens) in three of the chapter 7 debtor’s real properties, against certain third parties. Because the debtor lacked equity in any of the properties, they were not necessary for a reorganization, and the United States’ interests would not otherwise be adequately protected in the event of a sale or further encumbrance of any of the properties, the court granted the motion.


    Dubis v. Stebnitz (In re Stebnitz), Case No. 13-32097-beh, Adversary No. 17-02110 (February 2018) -- Judge B.E. Hanan
    Trustee sought a declaratory judgment that an LLC operating agreement required remaining members to purchase the departing member's/Trustee's interest based on an appraisal of property held by the LLC. The remaining members read the agreement to require a valuation of the LLC itself, and not just the property held by it. The court applied principles of contract interpretation to conclude that the agreement text was plain, and because the only purpose of the LLC was to hold property for enjoyment of family members, an appraisal of the property held was all that was required. To read the agreement to require a valuation that included deductions for "lack of control "or "lack of marketability" would give the remaining members a windfall, and be inconsistent with the stated purposes of the LLC.


    Brandt v. Hurley (In re Hurley), Case No. 16-32442-beh, Adversary No. 17-2048, 2018 WL 770364 (February 2018) -- Judge B.E. Hanan
    The chapter 7 debtor’s ex-wife sought a determination that certain obligations assigned to the debtor in the parties’ pre-petition Martial Settlement Agreement (“MSA”) were non-dischargeable under 11 U.S.C. section 523(a)(15)—specifically, the debtor’s obligation to make certain payments toward the parties’ marital debt (the “marital debt payments”), and his obligation to hold his ex-wife harmless for payment of the second mortgage on the parties’ residence. In reviewing the language of the MSA and considering the agreement as a whole, the court concluded that the MSA required the debtor to make the marital debt payments directly to his ex-wife (not to the underlying creditors, as the debtor suggested), and that those debts were nondischargeable under section 523(a)(15). The court also concluded that the debtor’s hold harmless obligation on the second mortgage created a new, nondischargeable debt, and granted the plaintiff’s motion for summary judgment.


    In re Dixon, Case No. 17-31675-beh, 2018 WL 400722 (January 2018) -- Judge B.E. Hanan
    The lessor of the debtor’s vehicle repossessed the debtor’s car prepetition. When the lessor refused to return the vehicle after she filed her petition, the debtor moved to hold the lessor in contempt, for return of the vehicle, and to impose sanctions for willful violation of the automatic stay. After reviewing the language of the parties’ lease, the court concluded that the lessor had terminated the lease prepetition, and therefore the debtor did not possess any interest in the vehicle at the time of filing. The court therefore denied the debtor’s motion.


    In re Green Box NA Green Bay, LLC, Case No. 16-24179 (December 2017) -- Judge B.E. Hanan
    After the failure of the debtor’s confirmed chapter 11 plan, the debtor’s largest secured creditor moved to dismiss the case. Another creditor objected, urging conversion to chapter 7. The debtor conceded that “cause” to dismiss or convert the case existed under 11 U.S.C. section 1112(b), but argued that dismissal was warranted. In deciding between the two options, the court considered whether a chapter 7 trustee in a converted case would be able to administer any assets for the benefit of unsecured creditors. The court found that the debtor had no unencumbered liquid assets to fund a chapter 7 administration, and there was little to no evidence that a chapter 7 trustee would be able to find or recover any “hidden” assets of the debtor (or pay for the necessary investigation), as one creditor had asserted. As a result, dismissal, rather than conversion, was in the best interest of the creditors and the estate.


    Van Eperen v. Baycare Health System, Adversary No. 16-2412 (September 2017) -- Judge B.E. Hanan
    The court concluded that, for purposes of an avoidance action under section 547(b), a transfer of funds garnished under the Wisconsin garnishment statute occurred at the time the funds were conveyed to the creditor, not when they were deducted from the debtor's paycheck.


    In re Sier, Case No. 17-20837 (August 2017) -- Judge B.E. Hanan
    The chapter 7 debtor moved to reopen her case in order to vacate her discharge order and file reaffirmation agreements made after the discharge order was entered. The court denied the motion, questioning first whether the court could vacate the discharge order for such a purpose, and concluding that, in any event, the debtor had failed to demonstrate that she was entitled to relief under Rule 60(b).