US Trustee moved to dismiss chapter 7 debtors' case pursuant to section 707(b), arguing the debtors' expenses, including tuition for parochial school, were excessive. Debtors countered that section 707(b)(2)(A)(ii)(IV), which limits deductions for education expenses on the means test, was unconstitutional because it suppressed their right to practice religion. The court found section 707(b)(2)(A)(ii)(IV) was not unconstitutional and granted the motion to dismiss.
11-2102, Villalobos v. BAC Home Loans Servicing, LP (March 2012) -- Judge P. Pepper
Bankrupcty court found no justification for imposing an equitable lien in favor of the creditor on the debtors' rental property, when the reason that the creditor did not have a lien on that property was because it had erroneously applied the loan proceeds to a different property. The district court adopted the findings and conclusions in their entirety.
In re Archdiocese of Milwaukee, 470 B.R. 495 (February 2012) -- Judge S.V. Kelley
Negligence claims against the Archdiocese were derivative of the original abuse claims and shared the same statute of limitations; a question of fact for trial remained on when the fraud claims were or should have been discovered.
In re Archdiocese of Milwaukee, 2012 Bankr. LEXIS 634 (February 2012) -- Judge S.V. Kelley
Claimant who settled and released his claims against the Archdiocese prior to the petition was bound by the release, and failed to prove the required elements for fraudulent inducement into settlement.
In re Wolverine Fire Apparatus Co., Case No. 09-32985, Larry Liebzeit, Trustee v. FVTS Acquisition Co., Inc., Adv. No. 11-2080 (January 2012) -- Judge M.D. McGarity
Chapter 7 Trustee was granted summary judgment against seller of truck due to transaction with debtor being construed as a "consignment for security" and subject to avoidance by the trustee.
Zimmerman v. Debtor (In re Hying) (January 2012) -- Judge J.E. Shapiro
Plaintiff represented the defendant-debtor's ex-wife throughout various state court proceedings in connection with a divorce, and post-divorce custody disputes. During such proceedings, defendant-debtor was sanctioned and ordered to pay his ex-wife's attorney fees directly to the plaintiff. The court found such debts nondischargeable under 11 U.S.C. § 523(a)(5), finding the debts to be a domestic support obligation within BAPCPA's expanded definition. Further, the court found that even if the debt was not a domestic support obligation, it was nonetheless nondischargeable under 11 U.S.C. § 523(a)(15), as a debt incurred in the course of a divorce.
In re John and Christine Wilson (January 2012) -- Judge J.E. Shapiro
Creditor objected to debtor-Christine Wilson's claimed homestead exemption based on an “Agreement to Keep Property Separate” entered into between debtors John and Christine before their marriage. The court found that the subsequent marriage of the debtors did not terminate the agreement and therefore the homestead was the sole property of John. The court disallowed debtor-Christine's claimed exemption
In re Darrell Edwards, Case No. 11-23195, Debtor v. Deutsche Bank National Trust Co., Adv. No. 11-2505 (December 2011) -- Judge M.D. McGarity
Secured creditor's motion to dismiss complaint for failure to state a claim was granted. Bank had standing to enforce the Note and Mortgage.
Wells Fargo Bank, N.S. v. Glenda Carter (December 2011) -- Judge P. Pepper
The Court denied the plaintiff credit card company's motion for default judgment. The Court held that, even taking together the complaint, the brief in support of the motion for default judgment, and the affidavit in support of the motion, the plaintiff had not alleged sufficient facts to demonstrate that it was entitled to the presumption of nondischargeability, nor had it alleged sufficient facts to prove a prima facie case of actual fraud.
11-2467, AnchorBank, fsb v. BT Mokler Properties, LLC (November 2011) -- Judge P. Pepper
Court Minutes and Order from hearing held on 11/28/11 -- Both parties presented oral arguments. The plaintiff first argued that the rent assignment was a separate document, and a separate agreement, from the loan agreement, and should be treated as such. If one viewed the rent assignment separate and apart from the loan agreement, the plaintiff argued, one then would have to consider what that assignment agreement accomplished. The plaintiff argued that it had enforced the assignment prior to the defendant filing bankruptcy, and that the assignment transferred all of the defendant's rights to receive the rents to the plaintiff. Because the defendant transferred all of its rights prior to the petition date, the plaintiff argued, the rents never became property of the estate. The plaintiff argued that if the Court were to construe the rent assignment merely as security for the loan, as the defendant had urged it to do, the Court would render the rent assignment superfluous.
The defendant argued that the assignment agreement clearly indicated that it was intended simply to provide additional security for the loan. The assignment document left some of the defendant's “bundle” of property rights with the defendant, including ownership of the real property that generated the rents, as well as the ability to resume collecting the rents once the secured debt had been paid in full. For this reason, the defendant argued–because the assignment did not constitute an “absolute assignment” of all of the defendant's rights to the plaintiff–the rents constituted property of the estate under §541(a)(1). The defendant further argued that the rents constituted property of the estate under § 541(a)(6), because they constituted the proceeds of property of the estate. The defendant pointed to recent cases from other districts supporting that conclusion. The Court first indicated that it did not agree with the plaintiff that it needed to determine whether the assignment document constituted a separate document from the loan agreement. The Court stated that it found the critical issue to be whether the assignment was an “absolute assignment” of all of the defendant's rights to the plaintiff. To determine that, the Court indicated, it looked at the language of the assignment agreement itself, as had the court in In re Guardian Realty Group, LLC, 205 B.R. 1 (Bankr. D.D.C. 1997). The Court found that, upon reviewing all the relevant language of the assignment document, it was clear that the assignment was intended to provide additional security for the loan, and that the right to collect the rents was to revert back to the defendant upon payment of the secured debt. The agreement also provided that title remained with the defendant, so that the defendant retained part of the “bundle” of property rights in the property.Given this conclusion, the Court found that the assignment did not constitute an “absolute assignment.” Accordingly, the Court held the rents did constitute property of the estate under §541(a)(1). The Court further held, however, that even if somehow one could construe the assignment language as creating an absolute assignment, it agreed with those cases which held that the rents were proceeds of estate property under §541(a)(6). The Court found persuasive the reasoning in In re Las Torres Development, LLC, 408 B.R. 876 (Bankr. S.C. Texas 2009) and In re Bryant Manor, 422 B.R. 278 (Bankr. D. Kan. 2010). The Court acknowledged that there were decisions finding otherwise, but indicated that because Wisconsin is a lien theory state, and because it found that the property which produced the rents was property of the estate, it found the Las Torres/Bryant Manor line of cases more persuasive.
For all of these reasons (stated in more detail on the record), the Court concluded that the rents constituted property of the estate under both §541(a)(1) and § 541(a)(6). Accordingly, the Court denied the plaintiff's motion for summary judgment, and awarded summary judgment in favor of the defendant as to the assignment of rents issue.The Court noted that in its counterclaim, the defendant also had requested an award of sanctions against the plaintiff for a willful violation of the automatic stay. The Court declined to sanction the plaintiff. The Court explained that the Code required a sanctionable violation of the stay to be willful and deliberate. The Court acknowledged that the plaintiff deliberately held on to the rents, but the Court also noted that the plaintiff did so relying on a legal position that the plaintiff believed was fully supported by case law. Although there was case law that disagreed with the plaintiff's position, the Court concluded that this was not a situation where a party deliberately chose to act in contravention of well-settled case law. Therefore, the Court denied the defendant's request to impose sanctions for violation of the stay. Counsel for the defendant asked the Court to reconsider its denial of sanctions. He argued that the plaintiff's willful act did not need to be malicious in order to be a willful and deliberate violation of the stay. He stressed that the defendant had had to fight for the rents, and reminded the Court of its comment at the emergency hearing in the underlying case that when in doubt, a creditor ought seek relief from the stay rather than assuming that it was not acting in violation of the stay. Counsel acknowledged, however, that he had not briefed the issue. He indicated that if the Court was not willing to vacate its ruling today, he would file a motion to reconsider. The Court opined that it would be more appropriate for the defendant to file a motion to reconsider, which would allow both sides to fully brief their positions. Accordingly, the Court hereby DENIES Anchor Bank's motion for summary judgment. The Court GRANTS summary judgment in favor of the defendant, and DISMISSES the plaintiff's complaint. The Court DENIES the defendant's request, raised in its counterclaim, to impose sanctions against the plaintiff for a willful violation of the automatic stay. The Court ORDERS the clerk's office to enter judgment accordingly.