A creditor objected that the chapter 13 plan could not be confirmed because it proposed to modify the creditor's rights as the holder of a claim secured only by a security interest in the debtors' principal residence, in violation of 11 U.S.C. §1322(b)(2). The debtors responded that the proposed modification of the creditor's rights was permissible under §1322(c)(2) because the last payment on the original payment schedule for the claim was due before the final payment under the plan was due. The creditor replied that the debtors had agreed to extend the original payment schedule for the claim to a date past when the final payment under the plan was due, making §1322(c)(2) inapplicable. The court sustained the creditor's objection to confirmation of the plan because, under Wisconsin law, the debtors' agreement to a new payment schedule on the debt, in exchange for being deemed current on payments, resulted in a new contract; that new contract gave rise to the creditor's "claim", defined in the Bankruptcy Code as a "right to payment"; and the original (and only) payment schedule for that claim ends after the final payment under the plan is due.
George v. Anderson (In re Anderson), Case No. 17-29971-beh, Adv. No. 19-02165-beh, 2020 WL 4463055 (Bankr. E.D. Wis. July 31, 2020) (July 2020) -- Judge B.E. Hanan
The Chapter 7 trustee moved for summary judgment in her adversary proceeding against debtor’s brother, the recipient of an alleged fraudulent transfer. The Court weighed the facts of the case against both actual fraud under sec. 548(a)(1)(A) and constructive fraud under sec. 548(a)(1)(B), and found that the trustee had not met her burden on summary judgment to show entitlement to judgment as a matter of law.
In re Luedke, Case No. 20-20729-beh, 2020 WL 4342242 (July 2020) -- Judge B.E. Hanan
The Chapter 7 debtors claimed federal homestead exemptions in their primary residence, which was held by a living revocable trust of which they were the settlors, beneficiaries, and trustees. The Chapter 7 trustee objected to the claimed exemptions, asserting that the trust was a separate legal entity, and therefore the debtors had no interest in the residence that they could claim as exempt. Looking to Wisconsin trust law, the Court concluded that the debtors’ living trust—unlike a corporation or an LLC—was not a separate legal entity, and that the debtors maintained equitable ownership of their residence. Because that equitable ownership, coupled with the debtors’ present possessory interest, was an “aggregate interest” in the residence that could be exempted under 11 U.S.C. section 522(d)(1), the Court overruled the trustee’s objection.
In re Hefty, Case No. 19-31232-beh, 2020 WL 4289367 (July 2020) -- Judge B.E. Hanan
The trustee objected to confirmation of the above-median debtor's proposed Chapter 13 plan, asserting that it failed to provide for all of the debtor's disposable income. Because the debtor had obtained a new and higher-paying job shortly before filing his case, the trustee and the debtor agreed that the means test—using its six-month look-back period—did not accurately reflect the debtor’s “projected disposable income” under 11 U.S.C. section 1325(b)(1). But the parties disagreed on the proper method for accurately calculating projected disposable income. The trustee argued that the amount should be calculated with an amended means test, using the debtor’s new income, while the debtor asserted that only Schedules I and J mattered. The Court concluded that the means test (adjusted to reflect the upward increase in the debtor’s income), and not Schedules I and J, should be used to calculate the debtor’s projected disposable income, and sustained the trustee’s objection.
In re H2D Motorcycle Ventures, LLC and JHD Holdings, Inc., Case Nos. 19-26914-beh, 19-26915-beh, 617 B.R. 625 (Bankr. E.D. Wis. 2020) (June 2020) -- Judge B.E. Hanan
The jointly-administered Chapter 11 debtors had proposed and been approved for two significant asset sales, and now ask the Court to use the proceeds of the sales to pay select administrative claimants. Simultaneously, the U.S. Trustee filed a motion to convert the Chapter 11 cases to separate Chapter 7 proceedings, and the largest secured creditor filed a motion for relief from the automatic stay. The Court considered the best sequence and means of handling the various motions against the debtors' admission that the Chapter 11 process is no longer an option for them, as well as other facts of record. Based on the best interests of the creditors and the estates under Sec. 1112(b), the Court converted the two cases to Chapter 7, and held the remaining motions in abeyance.
In re Saul Limon, Case No. 20-23368 (June 2020) -- Chief Judge G.M. Halfenger
A creditor objected to confirmation of the chapter 13 plan because the plan does not provide for the creditor's allowed secured claim. The court overruled the objection because no provision of the Bankruptcy Code requires that a chapter 13 plan provide for all allowed secured claims.
Cloud I Q LLC v. RADAR_Apps, Inc. (In re Cloud I Q LLC), Adv. Proc. No. 19-02110 (May 2020) -- Chief Judge G.M. Halfenger
The chapter 11 debtor brought this adversary proceeding against several individuals and entities seeking the payment of a matured debt that is property of the estate under 11 U.S.C. §542(b) and damages under Puerto Rico common law on a variety of legal theories. The defendants moved to dismiss certain of the claims against them for failure to state a claim upon which relief can be granted, based on forum-selection clauses in pertinent contracts, and for failure to join one or more required parties; for mandatory abstention under 28 U.S.C. §1334(c)(2); and for a change of venue to the U.S. District Court for the District of Puerto Rico. The court granted the defendants' motions in part, concluding that the operative complaint does not plausibly allege that defendant MIGO IQ Inc. is an alter ego of defendant Synergy, LLC, or that defendants Jonathan Kotthoff and Alan Debolin are liable to the debtor under the doctrine of culpa in contrahendo. The court otherwise denied the defendants' motions.
Schuessler, et al. v. SBA, et al., Adv. No. 20-2065 (May 2020) -- Judge B.H. Ludwig
Chapter 12 debtors filed adversary proceedings against the SBA and its administrator after their Paycheck Protection Program loan applications were denied because of their pending bankruptcy cases. The debtors argued the denial of their applications ran afoul of the non-discrimination provision in 11 U.S.C. §525(a) and the Administrative Procedure Act, 5 U.S.C. §§701 et seq. The court denied the debtors’ request for injunctive relief. The ruling was final as to the debtors’ core claims and served as recommended findings of fact and conclusions of law to the district court on the non-core claims.
Verde Environmental Technologies, Inc. v. C2R Global Manufacturing, Inc. (In re C2R Global Manufacturing, Inc.), Case No. 1830182-beh, Adv. Proc. No. 20-02028-beh, 2020 WL 2529335 (Bankr. E.D. Wis. May 18, 2020) (May 2020) -- Judge B.E. Hanan
Verde filed an adversary proceeding, seeking preliminary and permanent injunctive relief related to its claims for false advertising under federal and state law. C2R responded with a motion to dismiss Verde’s Count II, relating to claims for false advertising under Wisconsin Statute section 100.18—the Deceptive Trade Practices Act (DTPA). The Court concluded that Verde, as a competitor of C2R, is not a member of “the public” and, therefore, not eligible to bring a sec. 100.18 claim. The Court also ruled that Verde was not induced to act based on any statements or representations by C2R, a second element of a claim under sec. 100.18. Accordingly, the Court granted C2R’s motion to dismiss Count II of the adversary complaint with prejudice.
In re C2R Global Manufacturing, Inc., Case No. 18-30182-beh, -- WL -- (May 2020) -- Judge B.E. Hanan
In approving the parties’ settlement of their patent infringement lawsuit (waged as a claim objection proceeding) the Court vacated its February 20, 2020 decision construing the parties’ disputed patent claim terms.