|Entry Date||PDF File||Decision Summary|
Grundy Mutual Insurance Association v. Babcock (Case No. 16-02260, Adv. Pro. 17-30005)
Debtors filed for chapter 7 bankruptcy and included counsel for Grundy Mutual Insurance (Grundy) on Schedule E/F as an unsecured creditor in the amount of a default judgment against the Debtor from a civil action. In the civil action Grundy was seeking to recoup insurance costs from Debtor who was charged with Second Degree Arson, but pled guilty to reckless use of fire. Debtor alleged he never received notice of the civil suit, and the matter therefore resulted in a default judgment. Grundy filed an adversarial proceeding objecting to discharge pursuant to 11 U.S.C. § 523(a)(6) and sought summary judgment.
In its analysis the Court reasoned that the default judgment does not meet the ‘actually litigated’ standard such that it cannot be relied upon as the sole evidence to establish the elements of § 523(a)(6). Additionally, the Court found that the plea to a lesser charge of reckless use of fire did not establish the element of intent therefore the criminal charge did not satisfy the elements of § 523(a)(6). Based on this reasoning, the Court denied Grundy’s Motion for Summary Judgment, and denied the Defendant’s request to defer the adversary proceeding pending resolution of the civil matter.
In the Matter of LBI (Case No. 16-01125), Charles Smith v. RDD Accounting Services, LLC, Timothy Hogan (Adv. Pro. 17-30033)
Defendant RDD filed a Motion for Summary Judgment in this adversary proceeding commenced by Trustee Smith. LBI is the sole shareholder of Liberty Bank and in 2009, LBI entered into a Secured Loan Agreement. These loans were collateralized under a Stock Pledge Agreement providing that an administrative agent would hold LBI’s bank shares on behalf of the lenders. In 2013 the Bank proposed a voluntary dissolution plan, creating a liquidating trust to satisfy Bank’s obligations. LBI then filed for chapter 7 bankruptcy in 2016 listing their beneficial interest in the trust on its schedules. Trustee Smith’s complaint requests a determination as to the validity, priority, and extent of the security interest granted by the Stock Pledge in LBI’s beneficial interest in the trust.
Upon review, the Court determined the trust had two purposes: 1) to provide payment for liabilities of the Bank, and 2) upon termination to distribute remainder to the Shareholder, LBI. RDD argued that their interest in the trust stemmed from a security interest in proceeds of the stock, however the Court was not persuaded by this. Additionally, RDD’s legal authorities were unpersuasive as they indicated RDD would be entitled to a lien, and not a security interest in a similar situation. Ultimately the Court determined RDD failed to establish it was entitled to judgment as a matter of law and therefore the Motion was denied.
Vesey v. FedLoan Servicing et al. (Case No. 16-02268, Adv. Pro. 16-30131)
Vesey ("Debtor") owed $251,779.70 in student loans after acquiring her undergraduate, law and masters degrees. Debtor sought to discharge her student loans under 11 U.S.C. § 523(a)(8), which allows discharge if it can be shown that repayment would constitute an undue hardship on the debtor or the debtor’s dependents. In determining whether undue hardship exists, the Court considered the totality of the circumstances. Being only 5 years out of law school, the Court found Debtor’s assertions that she would be unable to pay any or all of her student loans back with future earnings premature. Additionally, despite arguing her expenses would increase, the Debtor provided no amended schedules or evidence. Finally, the Court analyzed the Debtor’s self-imposed restrictions, her ability to make income based repayment payments, and the Debtor’s predominant purpose of filing being student loan discharge. Because the Debtor did not meet her burden to establish undue hardship, the Court determined that the Debtor’s student loans are not subject to discharge.
First American Bank v. Andrews (Case No. 14-00803, Adv. No. 14-30044)
Debtor was the sole officer, shareholder, and employee of C Mac Chambers Company Inc. Debtor went into default on a promissory note that could not be satisfied based on the Debtor’s representations that he only received Social Security benefits. Following a Judgement Debtor Evaluation it was determined that Debtor had been concealing his interest in draws from his company by diverting them to his wife while he continued to use and benefit from those payments. Debtor’s discharge was denied under 11 U.S.C.S. § 727(a)(2)(A), as his concealment of his interest in his draws was accompanied by an intent to hinder, deceive, and defraud his creditors. Discharge was also denied under § 727(a)(4)(A), as debtor made a false oath by failing to disclose payments made on two credit card accounts, and that failure prevented the Chapter 7 trustee from investigating those transactions, which might have resulted in the recovery of assets to pay creditor claims.
Charles L. Smith, Trustee v. JERAA, LLC., Patricia J. Nockels, and Thomas Alan Nockels (Case No. 13-01331, Adv. No. 13-30052, 13-30078)
The Court entered judgment against the Debtor, Thomas Nockels (“Debtor”) to avoid fraudulent transfers by Debtor of real estate parcels to JERAA, LLC, an entity owned by his non-filing spouse, Patricia Nockels. At the hearing both sides eventually stipulated that the expenses stated on JERAA’s filed tax returns would be utilized to determine the one-half amount to be contributed to the bankruptcy estate. The Court ordered the value of one-half interest in the list of identified real estate be paid to the bankruptcy estate, conveyances of real property to the bankruptcy estate by warranty deed, and the bankruptcy estate shall pay JERAA the amount of one-half the proceeds from the sale of a previously liquidated piece of real estate.
In re Embrey (Case No. 12-02385)
Debtors filed bankruptcy in 2012, at which time Debtor owned a townhome subject to Association dues. The Association was notified of the Debtors’ bankruptcy, and prior to the bankruptcy case being closed, Debtors’ counsel requested that the Association remove the Debtor from their rolls for purposes of Association dues. After discharge, Debtor remained in possession of the home until foreclosure sale in May 2015. In June 2015, the Association filed a small claims suit seeking Association dues accruing from April 2012 through November 2014. The Debtors allege the Association was in violation of 11 U.S.C. § 524(a) by attempting to collect the outstanding association fees which were not subject to the discharge injunction. The Court, however, denied the Debtors motion and determined that the statutory language of 11 U.S.C. § 523(a)(16) is clear and unambiguous that the assessment of association fees against the title holder can continue after a bankruptcy filing and entry of discharge whether or not that individual occupies the property.
Ebelheiser v. College Assist (Case No. 14-01952, Adv. No. 14-30064)
Debtor incurred subsidized and unsubsidized student loans totaling $181,820.00 over the course of several years of undergraduate and doctoral education. Debtor operated a Chiropractic LLC until he was convicted of a crime in 2010, and sentenced to a 5 year term in a state correctional facility. Debtor sought to discharge his student loans under 11 U.S.C. § 523(a)(8), which allows discharge if it can be shown that repayment would constitute an undue hardship on the debtor or the debtor’s dependents. In determining whether the Debtor met this standard, the Court looked at the totality of the circumstances including: the Debtor’s ability to get job upon release, the reasonableness of the Debtor’s living expenses, whether the Debtor’s inability to pay his student loans arise from a situation outside of his control, and whether there had been a good faith effort to negotiate forbearance. Based on an analysis of the circumstances above, the Court determined that while his criminal history may limit his future employment options, the Debtor showed no proof that he will be unable to earn or that he will face undue hardship, and therefore the Court denied his request to discharge his student loans.
NuScience Corporation v. Henkel (Case No. 15-00347 Adv. No. 15-30023)
Debtor filed bankruptcy and identified Plaintiff NuScience Corporation (“NuScience”) as a creditor with an amount derived from a District Court judgment totaling $539,438.18. The Plaintiff sought to (1) have $54,533.09 of the judgment deemed nondischargeable in accordance with 11 U.S.C. § 523(a)(6), and (2) receive a declaratory judgment that equitable and injunctive relief granted in federal court actions are not subject to discharge. The Court analyzed the facts of the case with the willful and malicious injury standard set forth in 11 U.S.C. § 523(a)(6), and determined that the Debtor’s conduct toward the Plaintiff was targeted at the Plaintiff and was done with intent to cause harm, and therefore the attorney fees and costs are not dischargeable. Additionally, regarding the declaratory judgement, the court determined that the injunctive relief requiring the Debtor’s actions do not meet the definition of a “claim” and therefore are also not subject to discharge in bankruptcy.
In re Diwan, LLC. (Case No. 12-00424)
Diwan, LLC. (“Debtor”) filed a chapter 11 petition, and sought to have the claim by its largest creditor subordinated based upon 11 U.S.C. § 510(c). The Court partially subordinated the claim, but after failing to get an approved Disclosure Statement, an order to dismiss the case was entered. The Debtor then appealed the order dismissing its case to the District Court, where they affirmed the Bankruptcy Court’s determinations. The Debtor appealed the District Court’s Order and Judgment to the Eighth Circuit Court of Appeals, and requested a stay pending this appeal. The Court determined that based on the improbability that the Debtor will succeed on the merits of its appeal, in conjunction with the untimeliness of the motion for stay after the dismissal of the chapter 11 proceeding, the Motion for Stay Pending Appeal was denied.
In re Earlywine (Case No. 15-01359)
A District Court judgment was entered against the Kristine Earlywine (“Debtor”) in 2012. Following this, the Debtor filed bankruptcy in 2015. The Court determined that assignment of a state court judgment did not require the Debtor to provide the assignee with notice of her bankruptcy petition as the assignment did not show service, no docket report reflected service and the assignee did not provide a copy of the assignment to the Debtor. The Debtor later became aware of the assignment through a post-petition letter from law firm two, and she amended Schedule F to reflect the judgment debt and assignee creditors. The assignee creditor was added to the matrix within 22 days of the discharge exception deadline under Fed. R. Bankr. P. 4007(c), which was adequate for the filing of a complaint. The assignee creditor filed a Motion to Extend Time to file a complaint and did not state any grounds for a complaint under 11 U.S.C. §§ 727 or 523 or why additional time was required. Because he failed to meet his burden to establish cause for extension of time, the Motion was denied.
In re Winke (Case No. 15-02080)
The Trustee objected to James Winke’s (“Debtor”) claim of exemption in real property. A Debtor purchased a new homestead after he incurred debts to an energy company and had been sued by the energy company. The Court determined under Iowa Code § 561.20 the full value of the new homestead was not exempt from creditors' claims because the energy company obtained a judgment against the Debtor before he acquired his new homestead. The Debtor was therefore only allowed under Iowa Code § 561.21(1) to exempt only the proceeds he received from the sale of his former homestead which he invested in his new homestead.
In re Sylvester (Case No. 15-01496)
Paula Sylvester (“Debtor”) filed a voluntary petition, on which she reflected that she owned no real estate. Following her 341 Meeting, Debtor amended her schedules and claimed a fractional interest in real estate in David City, NE to be inherited upon Debtor’s mother’s death. Debtor claims the Nebraska real estate under the homestead exemption arguing that she intends to return there at some point in order to take care of her mother and the Trustee objected. The Debtor was currently residing in Iowa with her brother who offered to let her stay as long as she would like. The Court looked to the statutory definition of the homestead, which requires ownership and occupancy. Though her ownership was not in question, the Debtors inability to define the time of her return amongst other inconsistencies were not enough to satisfy the burden of proving occupancy. Additionally, the evidence and testimony by the Debtor did not rebut the presumption of abandonment of the property. The Trustee’s objection to the Debtor’s homestead exemption was granted.
Charles Smith, Trustee v. PGV Properties, LLC (Case No. 12-01757, Adv. No. 14-30031)
Debtor, Harper Brush Works, Inc. filed chapter 11 bankruptcy for which defendant PGV Properties, LLC (“PGV”) was a creditor. PGV filed a proof of claim and asserted their claim was secured based on a Promissory note, a recorded Promissory Note, an unsigned, unrecorded memo entitled “PGV Second Mortgage Term Sheet,” a UCC Financing Statement, an Order from the Court approving Debtor’s Use of Cash Collateral, and an unrecorded Deed of Trust signed by an employee of PGV. The Debtors case was then converted to a chapter 7 proceeding. Charles Smith (“Trustee”) then filed an Adversary Proceeding against PGV to avoid all transfers between PGV and the Debtor. PGV generally denied all allegations and PGV counsel then withdrew from the case and did not respond to discovery. The Trustee then filed a Motion for Summary Judgment in this matter. Because PGV never responded to Trustee’s request for admissions, the essential facts were deemed admitted and therefore undisputed. Because the material facts were undisputed, the Trustee was granted his Motion for Summary Judgment.
In re Uthe (Case No. 15-02259)
Tom and Jodie Uthe, husband and wife and owners of Uthe Farms, Inc. (Debtors) purchased a home after Todd Shelton of Red Haw Realty, LLC (Red Haw) offered to loan the money to buy the land (“Parcel B”). The Debtors titled the land as joint tenants and signed in the personal or corporate capacities in accordance with the instruction of Red Haw’s attorney. The Debtors entered into a promissory note in their individual capacities and their corporate capacity, a mortgage in their corporate capacity only, and a security agreement in their personal capacity only. The Debtors then took these documents to the closing. No Red Haw representative was present at the closing and Red Haw did not request a final title opinion. In 2014, Red Haw began foreclosure proceedings, which were resolved by settlement. Second foreclosure proceedings were later commenced, where the Debtor’s alleged the Red Haw Mortgage was invalid. The Debtors then filed bankruptcy and claimed Parcel B under the homestead exemption. Red Haw asked the Court to reform the Mortgage to include as mortgagors the Uthes in their individual capacities.
The Court emphasized the necessity of expressing intentions in written contract, and the inability of a court to create a contract when a dispute over terms arises. Following this, Red Haw made multiple arguments for nullification of the contract. Red Haw argued that the mortgage was subject to reformation under theories of mutual mistake, scrivener’s error, fraud, and unjust enrichment. The Court did not find any of these arguments persuasive. Red Haw’s final argument was for a homestead waiver, which the court deemed unenforceable as to the Debtors personally and irrelevant as to the Debtors in their corporate capacity. Because Red Haw was unsuccessful in arguing the need to reform the mortgage, Parcel B was allowed as exempted to the Debtors.
In re Mavinga (Case No. 15-01330, Adv. No. 15-30041)
Emmanuel Mavinga (“Debtor”) was a native of West Africa who moved to the United States and acquired an Associate Degree before starting a sole proprietorship (“Merchants”). Merchants was sued multiple times, causing Debtor to file a chapter 7 bankruptcy petition. There were significant errors in bankruptcy schedules completed by Debtor and his attorney. The Trustee filed a complaint objecting to Debtor’s discharge under 11 U.S.C. §§ 727(a)(3) and (a)(4)(A). The Trustee’s claim for denial of discharge based on 11 U.S.C. §§ 727(a)(3), or insufficient maintaining of records necessary to explain financial transactions, was denied despite Debtor’s haphazard record keeping based on the rationalization that Merchant was a small sole proprietorship. The Trustee’s claim for denial of discharge based on 11 U.S.C. §§ 727(a)(4)(A) stating that Debtor made a false oath in connection with his bankruptcy was upheld based on Debtor’s testimony of his knowledge of the errors prior to filing, and the substantial amendments to his income. Additionally the Court found that a language barrier was not an excuse when no evidence was presented to show Debtor did not understand the forms he was asked to complete. Based on the determination that Debtor had knowledge and access to the information needed to complete his bankruptcy schedules, Debtors discharge was denied pursuant to 11 U.S.C. § 727(a)(4)(A).
American National Bank v. Lewis (Case No. 15-02519, Adv. No. 16-30011)
Craig and Mary Lewis (“Debtors) established a $1,000.00 “Ready Reserve” unsecured line of credit (“line of credit”) at People’s National Bank, now ANB (“ANB”). Mary met with a personal banker to open a new deposit account, to be attached to the line of credit. Craig was later joined as an account owner. A month after opening this new account, ANB mailed the Debtors a statement which indicated the line of credit was $101,091.00. This mistake by ANB was due to decimal point misplacement, and went unnoticed by ANB. Mary, aware of the mistake transferred $62,340.00 from the line of credit into her checking account over 15 months. Craig used the account as normal, unaware of the increase. Two years later, ANB noticed the error, and discontinued the line of credit. After failing to set up a payment plan with ANB, the Debtors filed bankruptcy.
ANB sought to have its debt excepted from discharge pursuant to 11 U.S.C. §§ 523(a)(2)(A), and (a)(6) and to deny the Debtors discharge pursuant to 11 U.S.C. § 727(a)(2). The Court dismissed the causes of action under 11 U.S.C. §§ 727(a)(2) and 523(a)(6) as to both debtors. The 11 U.S.C. § 523(a)(2)(A) claim as to Craig Lewis was also dismissed. In its analysis of the 523(a)(2)(A) claim as to Mary Lewis however, the Court determined that Mary had knowledge of the inaccuracy and yet continued to exploit the banks error to her benefit. Because ANB reasonably relied on the representation of the Debtor’s entitlement to the funds, the Court found the debt owed by Mary Lewis to ANB excepted from her discharge.
Sterling v. Lanum (Case No. 15-01807, Adv. No. 15-30050)
Rebecca Sterling (“Sterling”) was employed as a sales representative for Russell Communications, LLC. Following her termination, Sterling filed suit in state court and Russell Communications and Jeffrey Lanum (“Lanum”) were held jointly liable for damages and attorney fees. Lanum filed bankruptcy and Sterling sought to have the amount of her state court judgments and attorney fees excepted from Lanum’s discharge. Sterling argued that her award is nondischargeable under 11 U.S.C. § 523(a)(6), however the Court found this injury was founded in a breach of contract and therefore did not meet the burden necessary for willful and malicious injury. Additionally, Sterling contended the debt was nondischargeable based on false pretenses, however the Court dismissed this 11 U.S.C. § 523(a)(2)(A) claim as well as there was no evidence of misrepresentation. Lastly, Sterling argued that her debt was subject to 11 U.S.C. § 523(a)(4), which excepts discharge of a debt arising from larceny. The Court dismissed this argument as well, as the wages were the original property of the debtor, and therefore could not be obtained by larceny. No separate arguments were made to except the attorney fees and therefore the request to except them from discharge was also dismissed.
Barry A. Chatz v. City of Clive (Case No. 14-02689, Adv. No. 16-30052); Barry A. Chatz v. Global Spectrum, L.P., (Case No. 14-02689, Adv. No. 16-30087)
A voluntary chapter 11 committee appointment included Attorney Lauter (“Lauter”) who was admitted pro hac vice. The chapter 11 case later confirmed a plan that created a liquidating trust that replaced the committee, and Lauter filed his appearance on behalf of the trustee of the Trust. Lauter filed dozens of adversary proceedings on behalf of the trustee. Global Spectrum and City of Clive (“Defendants”) filed pre-answer motions to strike complaints stating that Lauter failed to comply with the pro hac vice requirements of the Southern District of Iowa. Lauter then sought pro hac vice admission nunc pro tunc, to which the Defendants objected. The Court looked to the Iowa Supreme Court determination that “substantial compliance” with the requirements of the Iowa Code regarding an absent formal pro hac vice motion does not require the Court to strike the offending attorney’s filing. Additionally the Court found that there was no evidence to establish Lauter intentionally failed to take action in violation of the local rules, or that he delayed in filing his second pro hac vice motion to correct the situation once he was aware. Based on these reasons, the Court denied the Defendant’s Motion to strike and overruled the objections to Lauter’s Motion to Appear Pro Hac Vice.
Rolling Hills Bank and Trust v. Nelson (In re Nelson), (No. 13-00801-als7, Adv. No. 14-30059)
To secure indebtedness on several loans made by the bank, the Debtors assigned two life insurance policies as collateral. The life insurance policies were not disclosed as an asset on the Debtors’ bankruptcy petition. The bank filed an adversary proceeding seeking declaratory judgment regarding the status of its interest in Debtors’ assignment of the life insurance policies. The Court held that the life insurance policies qualify as property of the bankruptcy estate and failure to disclose them on the schedules did not change this outcome. The Court also held that because the right to payment under the assignments is contingent on future events, the determination of the extent to which the assignments may be enforced is premature. The Court held that the assignments were valid and continued to be effective and the bank held a security interest in the life insurance policies.
In re Gretter Autoland, Inc. (No. 14-02831-als11)
The Debtor filed motions to assume and assign its dealership agreements with Ford Motor Company (“Ford”) and GM Motors, LLC (“GM”). Both of these manufacturers filed objections. The Debtor is a dealership that is operated as a dual facility, selling both GM and Ford lines. Ford objected to the assumption because Debtor had moved the dealership to a new location. GM objected because Ford vehicles are being sold at an exclusive GM location and the dealership has inadequate space to sell and service both Ford and GM products. Debtor argued that any defaults have been waived. The Court held that Ford and GM had not waived their right to object to the defaults. In addition, the Court held that Debtor failed to show that it could promptly cure the defaults. Further, Debtor stated that it intended to continue to operate a dual facility, and therefore, could not provide adequate assurance of future performance of the terms of the executory contracts. The Court declined to apply Iowa Code Chapter 322A.
In re Lovan (No. 14-02461-als7)
The Court considered the chapter trustee’s motion to vacate the court’s order granting Debtor’s application to proceed in forma pauperis. The Debtor’s original application to proceed in forma pauperis was granted based on the income and expenses shown on her schedules. The trustee moved to vacate the order based on the Debtor’s anticipated tax refund. The Debtor stated that her schedules included an “unknown” value for her anticipated tax refund because she was unaware of the amount of any refund she might receive. The Court held that the trustee was diligent in attempting to obtain the details of the amount of the anticipated refunds and did not delay in filing this motion. The Court granted the trustee’s motion and the Debtor was required to pay the filing fee.
In re Bottger (No. 14-01165-als7)
Prior to his bankruptcy, Debtor took out a loan against his homestead to purchase a house for his daughter to live in. His daughter did not remain in the home, and Debtor sold the property on contract. Attorney 1 filed a bankruptcy petition for Debtor, after which, the trustee filed a motion to compromise and settle Debtor’s interest in the real estate being sold on contract for the amount of $25,000. No objection was filed, and this action was approved. U.S. Bank filed a motion for relief from stay to proceed with foreclosure on Bottger’s homestead, which was approved. Attorney 1 then withdrew as counsel. Attorney 2 filed an amended schedule B which added a legal malpractice claim against Attorney 1 which was claimed as exempt as a personal injury claim. The trustee objected to the exemption claim and Debtor objected. The trustee agreed to sell the cause of action to Debtor, so Attorney 2 withdrew Debtor’s objection. The objection to exemption was sustained by the Court. Attorney 1 objected to the trustee’s notice of intent to sell the legal malpractice claim and offered a higher amount. Attorney 2 filed an objection to the higher bid and filed another amendment to Schedules B and C claiming a “Personal Injury from Legal Malpractice Claim” exempt in the amount of $60,000. The trustee objected to this exemption. The Court held that res judicata and claim preclusion did not apply to the Court’s prior order sustaining the objection to exemption because entry of that order did not arise from a contested exemption issue that was actually considered by the Court. The Court further held that because the legal malpractice claim does not qualify as a personal injury under Iowa law it cannot be exempt under 11 U.S.C. section 627.6(16). The Court held that the trustee could sell whatever interest the bankruptcy estate holds in the legal malpractice claim.
United Service Credit Union v. Goodrich (In re Goodrich), (No. 14-01022-als7, Adv. No. 14-30043-als)
The credit union filed an adversary proceeding seeking dischargeability of debt pursuant to 11 U.S.C. section 523(a)(2)(A), (B) and (C) because the Debtor used some of his loan proceeds for gambling. The Court held that the credit union did not meet its burden to show that there was a misrepresentation upon which it relied. Debtor represented that he needed to pay his propane bill and make two mortgage payments, and these payments were actually made. The credit union also failed to prove that it justifiably relied on Debtor’s representation that he was able to pay the loan back because the credit union knew Debtor was unemployed when making the loan. The credit union also failed to prove that Debtor made a written misrepresentation to satisfy section 523(a)(2)(B). Finally, the Court held that section 523(a)(2)(C) is inapplicable to Debtor’s situation because the credit union’s loan was made outside the 90 days before filing bankruptcy.
Natural Pork Production II, LLP v. IC Committee, et al. (In re Natural Pork Production II, LLP)
Debtor was organized as a Limited Liability Partnership under Iowa law. Among the governing documents for this entity were a Partnership Agreement (“PSA”) and a Buy-Sell Agreement. The PSA required all partners to make a capital contribution to the partnership, and in some instances, required partners to loan Debtor money, which resulted in a subordinated debt under a form promissory note. After Debtor began experiencing financial difficulties a number of partners submitted notice of their dissociation from Debtor which, according to the BSA, triggered Debtor’s obligation to purchase and pay for the partnership units held by these partners. Shortly after receiving these notices Debtor declared an Impairment Circumstance which would relieve Debtor of the immediate obligation to purchase the units from the dissociated partners. At subsequent partnership meetings a resolution was passed that authorized the Managing Partners to undertake restructuring transactions on behalf of Debtor and gave dissociated partners the right to continue voting on partnership business. A state court determined that Debtor was required to issue notes to the partners who dissociated before the Impairment Circumstance was declared. The many partners that dissociated after the Impairment Circumstance were not subject to this same treatment. Eventually, Debtor through its Managing Partners entered into a Settlement and Inter creditor Agreement (“SIA”) which provided for identical treatment of all dissociated partners. Approximately ten million dollars was distributed under the SIA when Debtor received proceeds from the sale of an asset in which it held an interest. Debtor sought declaratory relief regarding the enforceability of the SIA and a determination of the priority of payment among dissociated partners notes and subordinated notes held by both partners and investors. The Court held that the SIA was invalid and unenforceable because it effectively amended portions of the PSA and BSA without the required notice and partner vote. Applying the principles of contract interpretation the Court held that bank debt, trade creditors, operating notes, distribution notes and company notes are senior liabilities that have priority over payment of sub-debt notes and notes issued under the BSA to dissociated partners. The court additionally held that notes issued under the BSA to dissociated partners and the sub-debt notes were of equal priority for payment.
In re Hatch (No. 13-03342-als7)
The chapter trustee objected to the debtor's claim of exemption in the Additional Child Tax Credit ("ACTC") as a public assistance benefit pursuant to Iowa Code section 627.6(8)(a). The trustee argued that Hardy v. Fink was dispositive, but the debtor presented a great deal of evidence as to the effect of the ACTC as a public assistance benefit. The debtor argued that the amendments to the federal statute after its enactment indicated an intent to assist low income individuals and presented evidence that the ACTC is rarely received by tax payers with higher or moderate income levels. The court focused on the distinction between the non-refundable and refundable components of the statute and concluded that the amendment to the statute which created the ACTC was intended to benefit low income families. The Court held that the ACTC is exempt as a public assistance benefit under Iowa Code section 627.6(8)(a).
In re Tedford (No. 14-00008-als7)
The Court granted the U.S. Trustee's motion to dismiss based on 11 U.S.C. section 707(b)(2). The debtors objected to the motion and attempted to prove special circumstances. The debtors claimed the following special circumstances: a decrease in income and a 30 mile commute due to a job change, car repair expenses, storm damage to their home, and two vehicle accidents involving deer. The Court found that the post-filing change to income did not result in a substantially different result from the CMI calculated upon the prior six months of earnings. The debtors failed to provide details as to why the car repair expenses were beyond what was provided for under the IRS Standards, and the home repair expenses and vehicle accidents were isolated circumstances which would not continue on an ongoing monthly basis. The Court held that the U.S. Trustee met his burden of proof in establishing a presumption of abuse based on the means test in Form 22A and the debtors failed to prove any special circumstances that would allow for a deviation from the IRS Standards in the calculation of their monthly expenses.
Petersen v. Hoffman, et al (In re G & R Feed and Grain Co., Inc.) (No. 13-00001-als7, Adv. No. 14-30009-als)
The chapter trustee filed an adversary proceeding against certain defendants and their minor children. The adult defendants requested that they be designated as the guardians ad litem for their respective children while the trustee urged the appointment of an independent advocate. The Court found that a potential conflict of interest existed because the parents were named defendants and appointed an independent third party to serve as guardian ad litem for the minor children.
Ellertson v. Slauson (No. 13-01775-als7, Adv. No. 13-30066-als)
The plaintiff filed an adversary proceeding requesting that the debt owed to her based on a money judgment obtained against the debtor be declared non-dischargeable pursuant to 11 U.S.C. section 523(a)(2)(A). The debtor operated DaPlumberGuy Mechanical LLC and entered into a contract with the plaintiff to install a furnace, air purifier and air conditioner in her home. Approximately a year after the installation, the plaintiff believed her air conditioning was not working properly and contacted other contractors to take a look at her systems. That inquiry led her to discover that the installation was not done correctly, that it posed a safety threat, that no permits were obtained for the work performed and that a HEPA air purifier had not been installed. After attempting to resolve the issue with the debtor and receiving no response, the plaintiff filed suit and obtained a default judgment against the debtor and his company in the amount of $5,000. The Court held that failure to fulfill contract terms does not automatically result in a finding of fraudulent conduct, and the plaintiff must establish that the debtor entered into the contract with the intent of never complying with its terms. The Court concluded that there was no evidence indicating that the debtor entered into the contract with the intent not to perform the work according to industry standards and dismissed the complaint.
Clarke County State Bank v. Scott (Adversary No. 12-30052, Case No. 10-05725-als7)
Plaintiffs filed a complaint to revoke the Debtors' discharge under 11 U.S.C. section 727(d)(1). The defendant argues that the plaintiff's complaint was barred by the time limitations under 11 U.S.C. section 727(e)(1). The Court dismissed the complaint holding that the complaint was not brought within the one-year time limit and the bank's motion to reopen did not suffice as a request to revoke the debtor's discharge.
In re: Martin (Case No. 13-01872)
In an action under 707(b) to dismiss the debtors' case, the Court held that the debtors' student loan debt was not a priority claim that could properly be included in the Means Test calculation. In addition, the Court held that the debtors failed to meet the procedural burden under 11 U.S.C. section 707(b)(2)(B) to rebut the presumption of abuse by special circumstance.
Farmers State Bank v. Pille (Adv. Pro. 12-30047-als, Case No. 12-01008-als7)
Debt was excepted from discharge under section 523(a)(6) because the Plaintiff met its burden of proving that the Defendant's conduct was willful and malicious. To determine whether these elements are met, courts look at whether the debtor attempted to conceal the disposition of collateral. Here, the Defendant did attempt to conceal the disposition of collateral when he breached the Plaintiff's security agreement and offered various and contradictory explanations for the missing collateral. Also, the Defendant's sale of livestock, which the Plaintiff had a security interest in, was conducted with an intentional disregard of the Plaintiff's rights. The Court held this conduct equated to willful and malicious conduct.
Petersen v. Cargill Incorporated (Adv. Pro. 13-30024-als, Case No. 13-00001-als7)
The Defendant brought a Motion to Dismiss the complaint by the Trustee for turnover of grain proceeds, injunctive relief, and violation of automatic stay. The Court granted the Motion to Dismiss as to the injunctive relief as moot in a telephonic hearing. The Court denied the Motion to Dismiss the complaint by the Trustee for turnover of grain proceeds and violation of automatic stay. The Defendant argued that its interpretation of the statutory provisions is equivalent to an affirmative defense that requires dismissal of the Trustee's complaint under Rule 12(b)(6). The Court disagreed and did not find the Defendant's arguments to rise to the level of dismissal. The Trustee is required to plead only enough facts to state a claim for relief that is plausible on its face and the Court found that the Trustee met this standard. The Defendant did not make a showing that the Trustee failed to allege a claim upon which relief can be granted.
In re: Auxier (Case No. 11-04871-als7)
The Debtor was listed as the sole beneficiary on his mother's IPERS account and received a lump sum death payment upon the death of his mother. The Debtor claimed as exempt the benefit paid under the IPERS account pursuant to Iowa Code section 97B.39 and the Trustee objected to the Debtor's claim of exemption. Based on statutory interpretation, the Court held Iowa Code section 97B.39 protects the IPERS retirement payments from attachment, execution, garnishment, or administration in bankruptcy. The statutory language of the section does not identify similar protection for a death benefit payable to a beneficiary. Therefore, the Trustee's objection to exemption was sustained and the Debtor's claim of exemption was denied.
Peoples State Bank v. Robinson (Adv. Pro. 12-30058-als, Case No. 12-01523-als7)
The Plaintiff claimed that a debt the Debtors owed the Plaintiff was non-dischargeable pursuant to section 11 U.S.C. section 523(a)(2). The Court held that the Plaintiff's objection to the Debtors' motion for summary judgment raised an entirely new set of facts and was an attempt to amend its complaint after the pleadings closed and after the expiration of the complaint deadline, deeming it untimely. The Court held that granting leave to amend the original complaint is not justified. The Plaintiff bears the burden of proving the elements of section 523(a)(2), which could not be accomplished under the Plaintiff's original complaint. Therefore, the Plaintiff's objection was overruled and the Defendant's motion for summary judgment was granted.
In re: Diwan, L.L.C. (Case No. 12-00424-als11)
The Debtor entered into a contract with the Claimant to purchase the Claimant's motel, with the Debtor's real estate used as collateral under the contract. The motel had previous damage, which was stated in the contract, but the Debtor chose not to read the contract fully nor obtain an attorney. After the Debtor filed his Bankruptcy Petition, the Claimant filed a proof of claim stating it was owed an amount secured by the mortgage. The Debtor requested that the claim filed by the Claimant be equitably subordinated pursuant to 11 U.S.C. section 510(c). The Court held that there was no evidence of fraudulent misrepresentation by the Claimant nor any undue influence or control in the sale and operation of the motel. However, the Court found that the Claimant had a duty to mitigate the damages caused by the Debtor's breach. The Claimant's bid at the sale of the property ignored any reasonable recognition of value for the motel and failed to demonstrate any effort to mitigate its loss. Absent this conduct, the amount the Debtor would have been required to pay under its guarantee would have been substantially smaller. For these reasons, the Court held the Claimant's secured claim was partially subordinated.
Nielsen v. ACS (Adv. Nos. 10-30016-als & 10-30018-als, Case No. 09-04888-als7)
A request made by the Debtor for discharge of her student loans based upon 11 U.S.C. section 523(8) for undue hardship was denied. The Court held that the Debtor failed to meet her burden to establish an undue hardship under a totality of her circumstances. The Court found that the Debtor had not engaged in meaningful employment for the past 17 years and had the ability to do so. She did not put forth her best efforts in attempting to find employment or in making payments to her student loans. The Court also found that, based on the Debtor's age, the possibility of future economic improvement and job opportunities would increase. Also, the Debtor's option to participate in the ICRP program and have a zero payment plan imposed no additional burden on the Debtor's current finances and afforded her an opportunity to repay the loans if her financial situation improved. For these reasons, the Court held the request for discharge was denied.
In re: Gary E. Burton (Case No. 12-00676-als7)
The issue in this case was whether the Debtors tax liability was properly characterized as "consumer" debt for purposes of 11 U.S.C. section 707(b). The Court stated that if a credit transaction involves a profit motive, then it is not consumer debt. The Debtors in this case believed that business losses could be used to offset personal income tax obligations, which would result in them retaining more of their earnings. The Court held this is closer to profit motive than a consumer transaction. Therefore, the Court held the Debtors' tax debt was not consumer debt.
In re: Natural Pork Production, II, LLP (Case No. 12-02872-als11)
The Court allowed $133,203.35 of the $202,405.50 fees requested in the First Interim Fee Application for employment as counsel to the Official Unsecured Creditors Committee. The Court relied on the principles stated in In re Pothoven in its evaluation of the services. It held that SFGH did not demonstrate that its services were reasonable and necessary to the extent and amount provided. The rates charged by SFGH were higher than local practitioners' rates, but the blended hourly rate after the courtesy reduction was within reasonable limits.
Hackert v. De Ronde (Adv. Pro. 10-30138-als, Case No. 10-03202-als7)
The Plaintiffs objected to the Debtor's discharge based upon the Debtor's accumulation of assets during a time period not too remote from her bankruptcy filing, and then on the date she filed her petition, she no longer had the assets. The Court held that the Plaintiffs met their initial burden under 11 U.S.C. section 727(a)(5). Due to the Debtor's non-appearance at trial, the Debtor failed to meet her burden to explain her loss of assets and the Court determined the exhibits were insufficient to explain the loss. Based on these findings, the Court held the Debtor's discharge was denied.
Richard J. Cobb, Celeste L. Cobb (Case No. 12-01273-als7)
The Court overruled the trustee's objection to the debtors' claim of exemption in a tractor. The debtors claimed that the tractor was exempt as a household good. The Court allowed the exemption because the tractor was not used for any commercial purpose and it allowed them to maintain their long driveway, access their property and reach their jobs. The tractor was necessary to the debtors' fresh start.
Lehm's Omaha LLC v. Thomas J. Stanley (Case No. 11-30083), Thomas J. Stanley and Kristen R. Stanley (Case No. 11-02508-als7)
The defendant sold a skid loader and trailer to the plaintiff. The skid loader was subject to a purchase money lien, and the defendant did not inform the plaintiff of the lien or pay the lien off from the proceeds of the sale. The plaintiff was forced to make a payment to the lien-holder in order to keep the equipment that he purchased. The Court held that the amount that the plaintiff was forced to pay to the lien-holder was a non-dischargeable debt in the defendant's bankruptcy pursuant to 11 U.S.C. section 523(a)(2)(A). The Court held that the defendant's silence as to the existence of a lien met the element of misrepresentation under the statute, which resulted in the defendant knowing that the representation was false at the time he made it and making it with the intent to deceive. The plaintiff justifiably relied on the defendant's misrepresentation, and as a result, sustained damages.
High Plains Investment, Inc. (Case No. 12-00829-als7)
The Creditors of the Debtor initiated this involuntary bankruptcy petition when the Debtor ceased operations. The Debtor asked the Court to dismiss the petition at the conclusion of the Creditors' case. The issue is whether the requisite amount of creditors - three - holds claims that are not the subject of a bona fide dispute. The petition creditors bear the initial burden that no bona fide dispute exists, then the burden shifts to the debtor to prove that a bona fide dispute does exist. The Court found that the minimum number of three creditors did not exist as required under section 303(b)(1). Therefore, the Court held that the involuntary petition was dismissed without prejudice.
Julilath Kouangvan, Minh Kouangvan (Case No. 10-05009-als), United States Trustee v. Julilath Kouangvan (Case No. 10-30170-als)
The debtor's discharge was denied pursuant to 11 U.S.C. section 727(a)(3) and 727(a)(5) for her failure to keep records and failure to explain the dissipation of substantial amounts of money. She took out many sizable loans, dealt primarily in cash and kept minimal records. Her insufficient records were not justified under the circumstances. Additionally, the debtor offered only vague explanations about how she used the loan amounts that she received from her lenders.
Julie O. Waterman (Case No. 10-01849-als), Waterman v. IRS (Case No. 10-30073-als)
Debtor's tax debt was discharged because the IRS failed to prove that the Debtor willfully evaded paying her taxes. While Debtor was aware that she had the obligation to pay the taxes, she did not have the wherewithal to pay them and her use of divorce settlement funds on discretionary expenses was not sufficient to show that she took steps to avoid paying the taxes.
Jerry R. McKeever (Case No. 11-04187-als)
The Court denied creditor's motion to reconsider the ruling denying approval of a reaffirmation agreement. The Court held that the reaffirmation agreement was made after the debtor's discharge had entered and was, therefore, untimely and could not meet the requirements of 11 U.S.C. section 524(c).
Jasper vs. Hussain (Case No. 10-30090-als)
The debt owed to Plaintiff by the Debtor under a state court judgment for the intentional tort of wrongful discharge from employment in violation of public policy was held to be nondischargeable pursuant to 11 U.S.C. section 523(a)(6). The Court found that collateral estoppel applied to the Plaintiff's claim because the state court's decision had already determined that the Debtor's conduct was both willful and malicious sufficient to satisfy the requirements under the Bankruptcy Code.
In re: Steven Robert Gates (Case No. 11-03226-als7)
Trustee's Objection to Debtor's claimed exemption in life insurance policies was overruled because the $10,000 limit on interest acquired within two years found in Iowa Code § 627.10 applied to the increase in the net cash value of the policies rather than the gross cash value.
Bank Iowa v. Villalobos (Case No. 10-30071-als7)
Plaintiff filed an adversary proceeding objecting to the dischargeability of a debt pursuant to 11 U.S.C. §§ 523(a)(2)(A) and (B). Defendant had ownership interests in several businesses and had signed personal guaranties for loans taken out by many of these businesses. Plaintiff argued that the Defendant was responsible for the amounts due on two separate loans and that these loans were not dischargeable because Defendant has fraudulently failed to disclose his other personal guaranties when filling out two financial statements he submitted before obtaining the loans. The Court held that the debts were not excepted from discharge because Plaintiff failed to prove that Defendant intended to deceive in making the representation and that Plaintiff reasonably relied on the representation under the reliance standard for either subsection.
In re Dunkin, (Case No. 11-00168-als7)
Trustee filed an objection to Debtor's claim of exemptions of accrued wages, garnished funds and bank accounts pursuant to Iowa Code sections 642.21 and 537.5105. Debtor argued that she was entitled to a percentage of pre-petition garnished funds as disposable earnings pursuant to Iowa Code sections 642.21 and 537.5105. The Court held that this expansion of In re Irish was not permissible, and the amounts she received after her garnished wages were taken out represented the amount available to her under these Iowa Code provisions. The Court applied In re Irish to the accrued wages that were not subject to the pre-petition garnishment.
In re: Brown v. Iowa Department of Revenue (Adv. Pro. 10-30088-als, Case No. 10-03083-als7)
The Court held that Debtor's tax debts were not discharged pursuant to 11 U.S.C. § 523(a)(1)(C) because Debtor willfully evaded his tax obligation. In so finding, the Court relied on the Debtor's consistent late filing of tax returns, which often contained inaccurate information, the Debtor's failure to keep records of his business expenses, Debtor's failure to cooperate in reducing his tax obligation, and Debtor's apparent ability to pay at least some amount to reduce his tax obligation.
In re: Chay Linette Williams (Case No. 10-03620-als7, Adv. Pro. 10-30088-als)
The Court granted United States Trustee's motion to dismiss pursuant to 11 U.S.C. § 707(b)(3). The Court held that the totality of the circumstances demonstrated abuse and the petition was filed in bad faith because of inflated expenses listed on schedule B.
In re: Chambers (Case No. 10-00856-als7)
The Court granted the United States Trustee's motion to dismiss pursuant to 11 U.S.C. § 707(b) because the presumption of abuse arose under the Means Test and Debtors failed to show special circumstances. Further, the totality of the circumstances demonstrated abuse.
In re: Vest v. United States Department of Education (Adv. Pro. 10-30106-als, Case No. 10-01950-als7)
The Court granted Defendant's unopposed motion for summary judgment because Defendant met its burden to show that no genuine issue of material fact existed for trial and because Plaintiff had not demonstrated any ability to sustain her burden of proof related to the discharge of her student loan obligation.
In re: Riverbend Leasing LLC (Case No. 10-00428-als11)
The Court denied confirmation of Debtor's second amended plan for failure to satisfy the factors set forth at 11 U.S.C. § 1129(a).
In re: Bank Iowa v. Torres (Adv. Pro. 10-30048-als, Case No. 09-06195-als7)
The Court held that part of the debt owed by Defendant to Plaintiff was excepted from discharge pursuant to 11 U.S.C. § 523(a)(2)(A) because Defendant intentionally misrepresented the purpose of the draw requests he made on a line of credit and because Plaintiff justifiably relied on Defendant's misrepresentations. The remainder of the amounts owed to Plaintiff were not excepted from discharge pursuant to 11 U.S.C. § 523(a)(2)(B) because Plaintiff failed to prove that Defendant intended to deceive and that Plaintiff reasonably relied. None of the claims were excepted from discharge pursuant to 11 U.S.C. § 523(a)(6) because Plaintiff did not act willfully and maliciously.
In re: MP Investments, L.L.C, dba Vito's on the Plaza (Case No. 10-02659-als7)
The Court denied Debtor in Possession's Motion to Assume Executory Contract seeking to assume a lease pursuant to 11 U.S.C. § 365. The Court held that notwithstanding the importance of the Lease to DIP's reorganization, because of DIP's failure to meet the standards in § 365, the Motion to Assume was denied.
In re: Randy Dean Tritch, Debora Jean Tritch (Case No. 10-02695-als7),
Court held that Debtor/Defendant could not strip down a fully unsecured lien on real property in a chapter 7 proceeding using 11 U.S.C. sections 506(a) and 506(d).
In re: Phillip L. Vlieger, fdba Byblos Coporation, dba PineApple Homes (Case No. 09-03290-lmj7),
The court granted Plaintiff's motion for summary judgment. Pro se Defendant did not attend the hearing nor did he file a response to Plaintiff's motion for summary judgment. Defendant filed a post-hearing response which did not raise genuine issues of material fact for trial. Based on the undisputed facts in Plaintiff's motion, summary judgment was granted for the claims asserted pursuant to 11 U.S.C. sections 523(a)(2)(A), 523(a)(4) and 523(a)(6).
In re: John A. Dittmer (Case No. 09-04669-als7), Bonny K. Dittmer (Case No. 09-04862-als7)
Objection to Debtors' claims of homestead exemption was overruled. Although Debtors sold their home and the land adjacent to it on two different dates, Debtors sold their entire homestead to one purchaser and intended to apply the proceeds to a new homestead. The funds were segregated and properly used to purchase exempt homestead.
In re: Sharon A. Arthur (Case No. 10-00463-als7), Corey L. McKillip and Jamie L. McKillip (Case No. 09-04332-als7)
Trustee objected to Debtor's claims of exemption in tax refunds and tax credits. The Court ruled that tax refunds do not qualify for the protections afforded by the garnishment provisions identified in Iowa Code section 627.6(10). The Making Work Pay and the Hope Scholarship tax credits are not exempt as public assistance benefits under Iowa Code section 627.6(8)(a).
In re: Jody May Walters (Case No. 10-00003, Filed 01/03/2010)
Objection to homestead exemption by antecedent claim holder sustained. Under Iowa Code sections 561.16, 561.20 and 561.21, the debtor's current property was not acquired with proceeds of a prior homestead and is liable for those debts contracted prior to its acquisition.
In re: Kathleen Lobdell vs. Todd A. Rodruck (Case No. 07-30134, Filed 09/21/2007)
Creditor failed to sustain its burden under 11 U.S.C. § 523(a)(2)(A) and (a)(6) for damages based upon allegations of improper construction of a home. Creditor did, however, sustain its burden for payment of costs arising after the initial contract which were personally guaranteed by Debtor, and the Court found that those debts were nondischargeable pursuant to 11 U.S.C. § 523(a)(2)(A).
In re: Richard Timothy Anderson and Ethel M Anderson (Case No. 09-04486, Filed 09/16/2009)
The Court granted Debtors' Motion for Sanctions for violation of 11 U.S.C. section 362(a). The Court found that Creditor violated the automatic stay by continuing contact directly with the Debtor in an attempt to collect on a credit card account despite having received notice of Debtor's bankruptcy filing and correspondence from his counsel. In awarding punitive damages, the Court took into consideration the nature of Creditor's actions, Creditor's size and Creditor's sophistication in the credit industry.
In re: Michael Dean Larsen and Kimberly Kay Larsen (Case No. 09-00219, Filed 01/26/2009)
Creditor's security interest was not superior to the interest of the chapter 7 trustee. The court found that one loan was unsecured, a second loan was not properly perfected because no financing statement was filed under the name of the borrower or the individual executing the note, and a third loan was secured, but the financing statement was seriously misleading under Iowa Code §554.9506.