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.
Gral v. Gral (In re Gral), Adv. Proc. No. 17-02277 (March 2020) -- Chief Judge G.M. Halfenger
Individuals and entities related to or associated with the chapter 7 debtor brought this adversary proceeding against the estate seeking declaratory relief. The chapter 7 trustee asserted various counterclaims, which the plaintiffs moved to dismiss for failure to state a claim upon which relief can be granted. The court dismissed the counterclaims as supported by merely conclusory allegations. The court denied the trustee leave to replead the counterclaims because the estate--represented first by a committee of unsecured creditors, when the case was a case under chapter 11, and then by the chapter 7 trustee--tried and failed multiple times to plead any cognizable claims against the plaintiffs. The court also dismissed the plaintiffs' claims as supported by merely conclusory allegations and because the relief sought by the plaintiffs appears unnecessary given the dismissal with prejudice of the trustee's counterclaims.
Wiseman v. Milwaukee Radiologists Ltd, Adv. No. 19-2153 (March 2020) -- Judge B.H. Ludwig
The chapter 7 debtor filed an adversary proceeding against a medical service provider, alleging violations of the automatic stay. The provider mailed invoices to the debtor’s deceased husband, requesting payment of a $12.61 balance due for medical services provided to him. Because the record showed that the defendant's collection efforts were not directed against the debtor or her bankruptcy estate, the court found there was no violation of the automatic stay and dismissed the complaint.
In re Judith Engelman, Case No. 18-26174 (March 2020) -- Chief Judge G.M. Halfenger
York Investment LLC filed a proof of claim for nearly $1.4 million owed on a note and fully secured by a mortgage on the chapter 13 debtor's real property and moved to dismiss the case under 11 U.S.C. §109(e), which provides that only an individual with prepetition debts below specified limits is eligible to proceed under chapter 13. The debtor objected that her signature was forged on the note and mortgage, so neither is valid or enforceable against her. After an evidentiary hearing, the court found that the debtor's now-deceased husband signed the note and mortgage on her behalf pursuant to a valid power of attorney for finances. The court concluded that the debtor is liable on the debt to York but that the mortgage is void under state law because it does not state that an authorized agent signed the mortgage on the debtor's behalf. Due to the debt to York, the debtor's unsecured prepetition debts exceed the limit specified for such debts in §109(e), and the debtor is not eligible to proceed under chapter 13.
Jacobson v. Wells Fargo Bank, N.A. (In re Jacobson), Adv. Proc. No. 19-02094 (March 2020) -- Chief Judge G.M. Halfenger
The debtor brought an adversary proceeding seeking to disallow a claim secured by a mortgage on her residence and to void the note and mortgage under state law alleging that her ex-husband obtained them by defrauding the U.S. Department of Veterans Affairs. The creditor moved to dismiss asserting that the debtor's claims are barred by the Rooker-Feldman doctrine and claim preclusion because the parties litigated or could have litigated the claims in prior proceedings in state court. The court granted the motion and dismissed the proceeding: Rooker-Feldman bars the bankruptcy court's consideration of the debtor's claims to the extent she seeks to set aside the state court's judgments, including her attempt to avoid the preclusive effect of a state-court foreclosure judgment in the creditor's favor by arguing that it was procured by fraud, and claim preclusion otherwise bars litigation of the debtor's claims because they arose from the same common nucleus of operative facts as the claims that were litigated in state court.
In re Greenpoint Tactical Income Fund LLC, Case No. 19-29613 (February 2020) -- Chief Judge G.M. Halfenger
The debtors in two jointly administered chapter 11 cases moved to reject a settlement agreement with Erick Hallick under 11 U.S.C. §365(a). Hallick objected that the agreement cannot be rejected under §365(a) because it is not an executory contract. The court concluded that the settlement agreement is an executory contract and granted the debtors' motion to reject it, concluding that significant unperformed obligations remain on both sides. The court also rejected Hallick's argument that the state-law doctrine of equitable conversion compels a different result, concluding that the doctrine does not apply because there was no transfer or attempted transfer of real property, the agreement is not substantially similar in structure to those to which Wisconsin's courts have applied the doctrine, and the equities do not favor applying it.
Thompson v. Roberts (In re Thompson), Case No. 19-2092 (February 2020) -- Chief Judge G.M. Halfenger
Plaintiff, a chapter 13 debtor, filed an adversary proceeding against his ex-wife who had filed a claim purporting to be fully secured by the debtor’s homestead. The plaintiff-debtor alleged that the defendant’s claim was secured only to the extent that the value of the homestead exceeded other liens on the property and his Wisconsin-law homestead exemption. The defendant contended that the divorce court had awarded her a mortgage on the residence to secure the debtor’s payment of an equalization payment and that the mortgage was not limited by the debtor’s homestead exemption.
The court ruled that the divorce judgment by its terms did not award the defendant any lien on plaintiff-debtor’s residence because the judgment awarded the residence to the debtor without a suggestion that the homestead was to serve as a means of paying the equalization amount. The court further ruled that the divorce court’s ruling on the judgment supported the conclusion that the divorce court had not awarded a lien on the debtor’s homestead.
As a result, the bankruptcy court ruled, the defendant’s only lien on the property arose as a matter of law under Wis. Stat. §806.15(1) when the defendant recorded the divorce judgment on the county judgment and lien docket. Under Wisconsin law, however, that lien does not attach to an exempt homestead up to the exemption limit. The court thus concluded that, under Wis. Stat. §815.20, the defendant’s claim is only secured to the extent that the value of the residence exceeds the sum of the higher-priority liens and $75,000 homestead exemption. The court granted the debtor-plaintiff’s motion for summary judgment in part and allowed the defendant’s claim as a partially secured claim.
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).
DeWitt v. Jacob (In re Jacob), Case No. 18-26186-beh, Adv. No. 18-02217-beh, 2020 WL 696795 (February 2020) -- Judge B.E. Hanan
A creditor sought a determination that a portion of the state court money judgment against both the debtors and a non-debtor was non-dischargeable under 11 U.S.C. § 523(a)(6), based on the debtors’ conduct during their tenancy in the creditor’s home. The Court disregarded the debtors’ attempt to deny the existence of the debt as well as their inapplicable affirmative defenses. Where the creditor established by a preponderance of the evidence that the debtors caused willful and malicious injury, the Court determined that the damages flowing therefrom were non-dischargeable. The damages ranging from routine wear and tear to gross uncleanliness are dischargeable.
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).