Bankruptcy Year In Review - 2003
San Diego County Bar Association
January 20, 2003
I. U.S. Supreme Court Decisions
Archer v. Warner
538 U.S. 314 (2003) Promissory note arising from settlement of claim for fraud is not dischargeable (assuming creditor proves fraud).
FCC v. Nextwave Communications
537 U.S. 293 (2003)
11 U.S.C. section 525 prohibits the FCC from revoking licenses held by a bankruptcy debtor due to the debtor’s failure to make timely payments to the FCC for purchase of the licenses. A “regulatory condition” for the payment of money is a debt.
II. Ninth Circuit Court of Appeals
40235 Washington Street Corp. v. Lusardi
329 F.3d 1076 (9th Cir. 2003)
BFP who purchased property at a tax sale conducted in violation of automatic stay may not invoke 11 U.S.C. section 549(c) in post-dismissal action by debtor to declare transfer void.
Balser v. Dept of Justice (US Trustee)
327 F.3d 903
Sovereign immunity bars claims against US Trustee for acts done in official capacity and Federal Tort Claim Act does not apply for discretionary functions.
In re BCE West L.P.
2003 US APP Lexis 2718 (9th Cir. 2003)
Sublessee was not entitled to administrative expense under section 365(d)(3) for damages when sublessor rejected lease.
In re Bevan
327 F. 3d 994 (9th Cir. 2003)
Secured creditor who satisfied priority IRS lien was not entitled to be equitably subrogated to priority of IRS, or to be treated as the assignee of the IRS.
In re Cady
315 F.3d 1121 (9th Cir. 2003)
Automatic stay does not prevent collection of non-dischargeable debt against property of the debtor.
In re Cantrell
329 F.3d. 1119 (9th Cir. 2003)
Default judgment is entitled to collateral estoppel effect where debtor knew of judgment and failed to timely move to set aside judgment. Nevertheless, fraud by a corporate officer is not defalcation while acting in a fiduciary capacity (”[T]he fiduciary relationship must be one arising from an express or technical trust that was imposed before and without reference to the wrongdoing that caused the debt.”)
In re Dyer
322 F.3d 1178 (9th Cir. 2003)
Where creditor willfully violates automatic stay, Chapter 7 Trustee may recover attorney’s fees, but not punitive damages.
In re Harleston
331 F.3d 699 (9th Cir. 2003)
State waives sovereign immunity by filing proof of claim and bankruptcy court may enjoin collection action on tax held to be discharged.
In re Kolb
326 F.3d 1030 (9th Cir. 2003)
Listing contingent interest in trust on personal financial statement was “acceptance” of interest, and was property of the estate despite prepetition disclaimer.
In re Lopez
345 F.3d 701 (9th Cir. 2003)
Secured creditor’s post-discharge “Asset Retention Agreement” was invalid reaffirmation agreement, and, absent new consideration, could be rescinded by debtor.
In re Mantz
343 F.3d 1207 (9th Cir. 2003)
Bankruptcy court had jurisdiction to determine tax liability because administrative decision was not final as of the petition.
In re Saxman
325 F.3d 1168 (9th Cir. 2003)
Rejecting an “all or nothing” approach, a student loan may be partially discharged based upon undue hardship.
In re Silberkraus
336 F.3d 864 (9th Cir. 2003)
Where solvent Chapter 11 case was filed solely to delay state court order for specific performance from sale of property, sanctions properly imposed upon attorney for debtor for bad faith filing of petition.
In re Stern
345 F.3d 1036 (9th Cir. 2003)
Conversion of non-exempt IRA to exempt assets on eve of bankruptcy does not as a matter of law establish a fraudulent transfer.
In re Jan Weilert RV, Inc.
315 F.3d 1192 (9th Cir. 2003)
For purpose of preferences, “ordinary business terms” requires consideration of non-industry debtors and creditors facing similar problems.
Internal Revenue Service v. Snyder
343 F.3d 1171 (9th Cir. 2003).
Chapter 13 debtor’s interest in ERISA pension plan was not property of the bankruptcy estate and, thus, it could not be used to secure the IRS’s claim for delinquent taxes. (even though IRS held lien under nonbankruptcy law).
III. Selected 9th Circuit BAP Decisions
In Re Condor Systems, Inc.
296 B.R. 5 (9th Cir. BAP 2003)
Cap on employee claims under section 507(b)(7) is not reduced by prepetition payments.
In re Incomnet, Inc.
299 B.R. 574 (9th Cir. BAP 2003)
An entity that received payments from the debtor was a transferee even though federal law regulated its use of most of the funds.
In re M Capital
290 B.R. 743 (9th Cir. BAP 2003)
Good faith purchaser status under section 363(m) is not available where there is no evidence in the record of good faith.
In re Metro Fulfillment, Inc.
294 B.R. 306 (9th Cir. BAP 2003)
Penalty wages for failure to timely pay post-petition wages are entitled to administrative priority.
In re Mickey Thompson Entertainment Group, Inc.
292 B.R. 415 (9th Cir. BAP 2003)
Where a compromise of a Trustee’s avoidance action included a transfer of the estate’s interest in property, it functioned like a sale of assets, and the court must consider whether others were willing to bid more.
IV. Bankruptcy S.D. Cal. Decisions
In re Gaona
290 B.R. 381 (SD Cal.2003) (Hargrove)
Local rule requiring objection to Chapter 13 plan before conclusion of meeting of creditors upheld (despite FRBP 3015(f), which requires objection before confirmation.)
In re Greenfield
289 B.R. 146 (SD Cal.2003) (Bowie)
41 year old debtor could not claim as exempt IRA inherited from father and for which distributions were being received because funds were not used primarily for retirement purposes.
V. California State Court Decisions
In re Marriage of Sprague
105 Cal.App.4th 215 (2003)
Attorney’s failure to obtain stay relief precludes state court action to recover unpaid attorneys fees.
