Case Summaries

(Chapter 13 debtor  appealed from denial of plan confirmation for debtor’s failure to include social security benefits in projected disposable income; on appeal, district court held that social security benefits are expressly excluded from the calculation of disposable income; failure to include entire amount of social security benefits from debtor and non-filing spouse does not constitute bad faith; bankruptcy court Order of Dismissal reversed).

(debtor filed Chapter 12 petition; case converted to Chapter 11 and then Chapter 7; debtor asserts wrongful termination of Sow Contract Grower Agreement, and breach and anticipatory repudiation of Nursery Contract Grower Agreement as well as breach and anticipatory repudiation of unwritten lease of pig finishing floor space at debtor’s farming operation; defendants moved to compel arbitration which court dismissed; court initially held that debtor’s claims for post-petition breach of pre-petition Nursery Agreement and Finishing Agreement were “core” proceedings under 28 U.S.C. Sec. 157(b)(2) and, as a result, arbitration clause in Nursery agreement was unenforceable; court also determined that enforcing arbitration provision in Sow Agreement was inappropriate because it would be counter to Chapter 11’s goal of rehabilitating debtor; in this opinion, court holds that debtor’s claims are non-core, but are related to underlying bankruptcy case and that court can hear claims and submit proposed findings of fact and conclusions of law to district court on unwritten finishing agreement; Nursery Agreement and Sow Agreement contain arbitration provisions and must be submitted to arbitration; further proceedings stayed pending conclusion of arbitration). 

(Chapter 12 case involving issue of distribution of proceeds of equipment sale on which bank, as senior creditor, had lien and supplier had junior lien; bank held debtor's land as security for loan and was oversecured; reorganization plan proposed retention of real estate that secured senior creditor's debt; bank motioned to receive all proceeds of equipment sale, and supplier proposed marshaling with proceeds from equipment sale going to junior creditor; court rejected junior creditor's proposal because senior creditor had right to cash out it's position first and not have to rely on real estate for payment under long term-loan as proposed in reorganization plan; supplier's alternative proposal to take second lien on real estate rejected). 

(Beacon Power, located in Massachusetts and recipient of federal government loan guarantees in excess of $43 million has filed for bankruptcy; company had proposed to build storage devices for intermittent power produced by wind and solar power facilities, but failed to attract investors).

(holder of servient estate did not establish that actions of holder of dominant estate caused additional water (substantial increase in volume) to flow onto servient estate; trial court decision affirmed on appeal). 

(plaintiffs, farmers, sued public officials claiming violation of their due process rights when state officials ordered them to stop withdrawing water from the Niobrara Watershed without providing the farmers a pre-deprivation hearing; trial court determined there was no deprivation of a property right and granted summary judgment for defendants; appellate court affirmed on basis that issuance of closing notices does not impact the property right bestowed by the permit to use the surface water when water supply is inadequate).  

(plaintiff sought permission of state Division of Water Resources (DWR) to change certain aspects of water right; DWR approved requested changes, but put limitation on quantity of water under plaintiff's water rights; plaintiff challenged limitation and court held that DWR properly limited plaintiff's consumptive use of water in accordance with Kansas Water Appropriation Act, but did not have authority to order abandonment of portion of water right). 

(trustee in Chapter 7 bankruptcy sought to recover payments made by ethanol plant to corn producers within 90 days before bankruptcy; corn producers filed summary judgment motion contending payments based on forward contracts, which are protected from recovery by 11 U.S.C. § 546(e); issue is whether contracts with delivery dates ranging from date of contract until a later date are forward contracts; forward contracts require a maturity date more than two days after contract is entered into; court adopts financial market definition of maturity date, which is “the future date at which the commodity must be bought or sold” and when the benefit or detriment is realized because ownership and risk of loss passes to the buyer and the buyer is obligated to pay to determine maturity date; reviewing contracts at issue, court found shipments were not delivered within two days of contract formation; all contracts were determined to be forward contracts protected by 11 U.S.C. § 546(e)).

(debtors operated cattle ranch where they raised cattle and fed cattle for others; Chapter 11 filed on Jan. 4, 2010; bank holding security interest in debtors' real and personal property (including livestock) moved for relief from automatic stay; debtors failed to file plan by Feb. 9, 2010 deadline and court lifted stay; bank liquidated all cattle located on debtor's farm - 1,017 head by Mar. 10, 2010; case converted to Ch. 7 on Apr. 6, 2010; trustee filed adversary proceeding opposing discharge under 11 U.S.C. Sec. 727 on basis that 117 head of cattle were unaccounted for and debtors could not satisfactorily explain shortage, claiming that debtors got rid of the missing cattle with intent to hinder, delay or defraud creditors; court denied discharge; trustee's evidence with respect to missing cattle more credible than debtors' testimony). 

(case involves adjudication of water rights by state of New Mexico and court rejects challenge to water rights priority determination in the Nambe-Projoaque-Tesque river system; matter has been ongoing since 1966; deadline for priority filing missed by 6-months with no explanation; plaintiff argued denial of motion to vacate was appealable under the collateral order doctrine; doctrines three elements (conclusively determined disputed question, resolved important issue separate from merits of case, and effectively unreviewable on appeal from final judgment) must be shown; plaintiff did not meet the unreviewable requirement; timeliness of a priority objection is a procedural issue; issue can be resolved after final judgment in the case; court held collateral doctrine did not apply).  

(appellees (trustee, nonprofit group, and lake-front property owners) filed complaint against appellants (ODNR) for determination of boundary of property adjacent to Lake Erie; territory of Lake Erie held in trust by state extended to “natural shoreline” which was line at which water usually stands when free from disturbing causes). 

(plaintiff sued state of Oklahoma for right to sell 200,000 acre-feet of water to city of Irving, Texas; OK law required legislative approval before plaintiff could sell water to out-of-state interests; 10th Circuit dismissed case for lack of federal jurisdiction; U.S. Supreme Court declined to hear case). 

(farm partnership comprised of two couples, and one couple assigned their interest to the other couple who then defaulted on partnership debts; couple that assigned their interest then filed involuntary petition against partnership; bankruptcy court determined that cause existed to have trustee appointed because of assertions of fraud and defaulting couple had farmed the partnership land rent-free, and partnership was leasing land for less than fair market value; interests of creditors merited trustee's appointment under 11 U.S.C. Sec. 1104(a)(1)).

(Solyndra Corp., Freemont, CA, solar panel manufacturer that had received $535 million in loan guarantees from federal government as a result of the 2009 "stimulus" legislation (and was the first company selected under the new program), announced on Aug. 31, 2011, that it was filing for bankruptcy and eliminating 1,100 jobs; company officials cited "regulatory and policy uncertainties" in making its decision; in 2009, U.S. Energy Department analysis of Solyndra's business model predicted that firm would run out of money in September of 2011, and Energy Department's credit department unanimously decided not to fund Solyndra in early January of 2010; funding decision changed by new Administration, and in May 2010, President Obama made a speech at the company in which he stated, "Companies like Solyndra are leading the way toward a brighter and more prosperous future"; presently, 20 percent of U.S. solar manufacturing capacity have or will be filing bankruptcy; U.S. share of solar panel manufacturing has fallen from 43 percent in 1995 to 7 percent in 2010; congressional subpoena issued to obtain key governmental documents in matter).

(two creditors filed objections to confirmation of debtors Chapter 12 modified plan proposed by debtors-in-possession (DIPs); court considered DIP's eligibility to proceed in Chapter 12; court held DIP's operations of three LLC’s, including Christmas tree operation, did not constitute farming operation; gross income from two other LLC’s, which did qualify as farming operations, only totaled 31.5% of DIP's gross income for year, thus, entire operation ineligible; DIP's value too low to be confirmable). 

(plaintiffs sued estate seeking injunctive relief and damages for flooding of farm property allegedly caused by field dike built on defendant’s land; trial court concluded applicable statute of limitations barred plaintiffs' claims; plaintiffs argued on appeal that trial court erred in concluding claims time-barred and should have applied 15-statute of limitations for adverse possession because flooding “seized” plaintiffs of possession and use of land and flooding constituted “continuous trespass”;  on appeal, court held two-year statute of limitations applied because plaintiffs’ claims arise from “defective and unsafe condition” of field dike - complaint time-barred).  

(Chapter 7 case; debtor's income tax liability not dischargeable; return due within three years before debtor filed bankruptcy).

(debtors, married couple, filed bankruptcy and wife claimed exemption for life insurance proceeds under state (KS) law; wife was named as beneficiary on life insurance policy that husband owned and he died within 180 days of filing bankruptcy petition; proceeds included in bankruptcy estate by virtue of 11 U.S.C. Sec. 541(a)(5)(C); bankruptcy court held that wife had separate and distinct interest in policies and proceeds so that she could exempt them; while 11 U.S.C. Sec. 541(a)(5)(C) did not supersede KS exemption statute and brought the proceeds into bankruptcy estate, wife could claim proceeds as exempt under state law). 

(11 U.S.C. Sec. 1222(a)(2)(A) does not apply to income taxes incurred post-petition by the debtor).

(debtor filed voluntary petition for Ch. 7 relief and claimed residence exempt as rural homestead pursuant to Arkansas Constitution in sum of $350,000; trustee objected on grounds that property was urban in nature and limited in size to ¼ acre; trustee also objected to debtor’s issuance of a deed of trust for $353,000 to his mother and father 30 days before filing of petition; trustee found transaction constituted voluntary transfer avoidable by trustee and recoverable for  benefit of bankruptcy estate; court found the property in question had both urban and rural characteristics; court overruled trustee’s objection and found homestead to be rural).

(Evergreen Solar, Inc., a "renewable energy" company and recipient of $58 million in financial aid and $1.5 million in tax breaks, filed for Chapter 11 bankruptcy and announced it would be shedding 800 jobs and moving to China; Evergreen listed $485.6 million in debt on bankruptcy schedules). 

(debtor owned forested real property from which timber cut and sold; creditor moved to dismiss case arguing debtor not eligible for relief under Chapter 12, because debtor does not meet income requirements; court agreed because debtor could not show that he derived at least 50% of gross income from farming operations; occasional sales of timber on land acquired for other purposes did not make him a "family farmer").

(landowners, including plaintiff, successfully petitioned for construction of public drainage ditch; subsequently lower-lying residential landowners complained of flooded basements; county drainage board assessed “reconstruction” fee for all landowners to remedy flooding; plaintiff argued his property was located at high end of watershed and his land would not be benefitted by reconstruction assessment; plaintiff appealed trial court’s order denying petition for judicial review in favor or county drainage board; issue on appeal was whether trial court erred in concluding drainage board decision not arbitrary and capricious; appellate court reversed and remanded with instructions for trial court to reconsider evidence on the record regarding benefit to plaintiff’s land, as defined by statute and case law cited in appellate court opinion).  

(case involves riparian rights of lakefront neighbors disputing where each have right to place respective piers and shore stations; plaintiffs argued trial court erred in concluding “coterminous method” was proper method to determine parties’ riparian rights; coterminous method is where pier is placed in position that goes to most direct point of navigable water if riparian rights of public or other owners would not thereby be jeopardized; plaintiffs contend matter should have gone to jury for determination of appropriate method; appellate court affirmed trial court; court followed general rule applying coterminous method; “nonparties to an action are not bound to a judgment therein based on principle that everyone should have their day in court”; here, court did not order placement of pier, but merely delineated lines of parties’ riparian areas). 

(debtor operated horse boarding and training business and converted case from Ch. 11 to Ch. 12; creditors moved to dismiss because debtor not family farmer and ineligible for Ch. 12 relief; debtor argued that since conversion granted by court, creditors were precluded from challenging debtor’s family farmer status; bankruptcy court held that conversion had no preclusive effect since creditors not provided notice and opportunity to object to conversion; debtor’s business did not constitute farming operations even though located in rural area and holding traditional farm assets; debtor only provided services and income based on flat fees; not subject to inherent risks of farming). 

(debtor filed Ch. 12 petition in 2010 but was forced to liquidate farrow-to-finish swine herd due to PRRS outbreak; Ch. 12 filed to save debtor’s homestead; bank objected to debtor’s proposed plan to pay bank $86,000 for homestead and farm real estate amortized over 20 years with interest at 5.75 percent; bank argued acreage worth far more than valued in debtor’s plan; parties asked court to determine value and bankruptcy court ordered that fair market value of homestead and farm real estate for purpose of plan confirmation was $160,355).

(bank filed complaint against Ch. 7 debtors seeking determination that claims were non-dischargeable under 11 U.S.C.S. §523(a)(2)(B) and (a)(6) and seeking denial of debtor’s discharge under 11 U.S.C.S. §727(a)(3) and (a)(5); bank based §523(a)(2)(B) claim in part on financial statement submitted by debtor in connection with loan consolidation; although financial statement materially misleading (omitted a debt) and bank relied on financial statement in assessing debtor’s ability to repay loan, bank did not prove debtor intentionally deceived bank by omission or that financial statement was grossly reckless; bank failed to produce evidence of intentional and malicious injury under §523(a)(6) and failed to produce evidence to prove claim under §723(a)(3); denial of discharge not supported by record; debtor could have kept better records of cattle sales and purchases, but such business not debtor’s primary occupation). 

(Chapter 7 case; trustee objected to some claimed exemptions because properties not held by debtor and wife in tenancy-by entirety form (and, thus, not exempt under 11 U.S.C. Sec. 522(b)(3)(B)); court disallowed exemption because debtor and wife not married at time interest in property conveyed to them jointly; as for bank accounts, state (VA) law created rebuttable presumption that each spouse owned one-half of account even if titled in joint tenancy; stock determined to be held in joint tenancy form; under VA law, auto could not be owned in tenancy-by-entirety form; joint tax refund deemed owned by couple jointly; trustee's objection sustained except with respect to stock and one-half of tax refund was property of bankruptcy estate).

(Ch. 12 debtor objected to creditor claim under farm equipment lease; debtor asserted lease was disguised as purchase agreement and security agreement which was not entitled to preferential treatment as lease; agreement provided debtor would make monthly payments for use of equipment with option to purchase at end of term at 10% fair market value at outset of lease; court held agreement constituted secured transaction under Neb. Rev. Stat. §1-203 and was not a lease; amount to purchase equipment at end of term was nominal, because only economically sensible decision was for debtor to exercise purchase option).

(debtors sought confirmation of Chapter 12 plan; while no creditors objected, court raised issue of whether plan could provide for payment of "crammed-down" mortgage loan secured by debtors' real estate over period exceeding 5-yr plan period that is the maximum in Chapter 12 cases; at issue was property valued at $400,000 but subject to lien of $400,000 and second lien of $100,000; debtors proposed to pay trustee $350 monthly for 36 months (total of $12,600) and trustee would pay $400,000 to creditor with interest at 4.25% per annum over 360 months - so question was whether debtors' plan could provide for payment of restructured mortgage claim over 30 years pursuant to 11 U.S.C. Sec. 1225(a)(5) - which allows a plan to pay a secured creditor the value of the collateral over time as long as the deferred payments have a present value equal to the value of the collateral; court concludes that there is no statutory limit in Chapter 12 on length of time over which secured claims may be paid, thus plan's 30-year amortization of crammed-down mortgage loan consistent permissible; plan confirmed). 

(debtor’s attempted transfer of ownership units in LLC to third party in exchange for release from a note forbidden by LLC Operating Agreement; thus no transfer occurred and there was no preferential transfer under 11 U.S.C. §547 or fraudulent transfer under 11 U.S.C. §548). 

(landowner's water loss claim associated with two springs on their property as an alleged result of plaintiff's conduct untimely; statutory procedure for landowners to follow when alleging impact on water supply by mine operator must be strictly followed).  

(plaintiff proved that debtor intentionally or recklessly made false statements under oath concerning financial information; discharge denied; debtor included no income from hog business even though he had grossed $2 million in sales; debtor also failed to disclose $25,000 in income and transfers of two ATVs, bobcat, tractor and co-ownership of wife’s vehicle). 

(Chapter 12 bankruptcy case; taxes incurred post-petition on sale of farm assets not entitled to non-priority treatment under 11 U.S.C. Sec. 1222(a)(2)(A)); court reverses bankruptcy court and follows rationale of 9th Circuit). 

(bankrupt debtor not allowed to claim additional $200 vehicle operating expense (or pro rata portion thereof) for unencumbered vehicle over six years old simultaneously with deduction for IRS standard owning and operating expense; debt retired before completion of Chapter 13 plan payments; case involves question left unresolved by Ransom v. FIA Card Services, 131 S. Ct. 716 (2011) in which Court held that debtor not entitled to take vehicle ownership expense deduction if debtor did not have secured debt payment on a vehicle, but where Court did not address situation where debtor has secured debt payment that is less than IRS National and Local Standards). 

Petition for writ of certiorari to the United States Court of Appeals for the Ninth Circuit granted.

(debtors, potato farmers, borrowed money from bank with bank securing lien in debtors crops and equipment; debtors unable to repay 2009 crop loan due to crop disaster, and bank did not foreclose lien; debtors planted 2010 crop after getting input financing from other lenders and executed agreement that bank's forbearance did not constitute a new loan; proceeds from 2010 crop used to pay input loan suppliers with debtors then filing Chapter 12; debtors sought finding that bank did not have lien on remaining crop proceeds from 2010 crop, wanting to use those proceeds to plant 2011 crop; court found that bank's financing statements remained valid and effective under state statute that contemplated a crop "to be grown" in the future; thus, bank had lien in remaining proceeds from debtors' 2010 sweet potato crop; unless bank consented, debtor's proposal to "roll-over" 2010 proceeds to 2011 crop was not adequate protection for bank's interest in proceeds of 2010 crop).

(debtors entered into lease of cropland and hay ground with landlord’s conservator with annual rent payable in April and December; debtors filed bankruptcy in November, and the following March rejected the lease; conservator requested full amount of December rent be treated as administrative expense and court held that rent due post-petition and pre-rejection could be allowed as an administrative expense only for the time of the debtor’s post-petition use of the premises with interest at 12 percent per annum (as provided for in lease for unpaid rent)).

(debtor defaulted on a purchase-and-lease-back transaction for cows and yearlings; creditor  brought proceeding to except debt from discharge based on “willful and malicious injury” alleging debtor and his father conspired to trick creditor out of his money; court held that the improprieties of the transaction upon which the creditor based his allegations were apparently due to failure to address the specifics in the original agreement, lack of adequate recordkeeping by the debtor, and poor communications between the parties following the default rather than a willful intent to harm the plaintiff.)

(Chapter 12 debtors filed motion for valuation of collateral of secured creditors which would then allow determination of secured status of claims against the properties being valued; court tried to determine what debtors intended to do with the properties and then considered valuation evidence; with respect to one property, court made findings as to both liquidation and fair market value and discounted an appraiser's approach because it did not use consider the debtors' intended use of the property and there was insufficient comparable sale data; court established value of three tracts of real estate and entered order). 

(court upholds trial court's denial of injunctive relief and damages to plaintiff associated with drainage and diversion of excess surface water by defendant; defendant's repairs to terrace in accordance with Iowa Code Sec. 468.621 and even if defendant could be found liable for altering natural flow of water, evidence did not support plaintiff's damage claim).  

(FSA financed debtors' pheasant farm and took security interest in all equipment and brood stock; upon farm's failure, FSA foreclosed and also got deficiency judgment of $217,715 against debtors; Chapter 7 filed and court granted relief to extent of $7,000 of sale proceeds used for moving expenses; FSA failed to exercise vigilance to protect its security, debtors' conduct in killing remaining pheasants so that they wouldn't starve to death not willful nor malicious, but $7,000 amount excepted from discharge). 

(issue initially concerned priority of creditors in proceeds of milk produced on debtor's farm; after issue decided, this case involves request for attorney fees and costs). 

(in Chapter 7 case, federal income tax refunds associated with refunded withheld  taxes on unemployment income not exempt under Wyoming exemption law). 

(Article V(A) of the Yellowstone River Compact of 1951 incorporates ordinary doctrine of appropriation without significant qualification; as doctrine applied in Montana and Wyoming appropriators can improve their irrigation systems to detriment of downstream appropriators; Montana's challenge to Wyoming's more efficient sprinkler irrigation process (to which pre-1950 users may switch) not challengeable even though increased consumption in Wyoming deprived Montana of typical water allotment; Compact did not guarantee Montana set amount of water). 

(debtors filed Chapter 12 and claimed TX farmland as exempt homestead property; trustee objected on basis that debtors domicile was in LA and, thus, TX exemption inapplicable; under 11 U.S.C. Sec. 522(b)(1), debtors not domiciled in a single state for the 730 days immediately preceding bankruptcy filing, but domiciled in LA for the 180-day period immediately preceding the 730-day period based on objective evidence). 

(debtor's three IRAs not exempt from bankruptcy estate and are reachable by creditors; debtor had previously (and many years in the past) engaged in prohibited transactions with the IRAs related to borrowing from the IRA and improper distributions and contributions). 

(defendant, public water authority, took plaintiffs' riparian rights entitling plaintiffs to compensation; defendant used power of eminent domain to acquire land and divert by inter-basin transfer up to 30.5 million gallons of water daily from Deep River Basin to Haw and Yadkin River Basins; dam constructed and lake filled with diverted water to create public water supply; water flow in Deep River diminished as result of project which impaired plaintiffs' ability to produce electricity; plaintiffs have sufficiently defined interest in rate of water flow in Deep River and riparian rights are vested property rights in natural flow of water arising out of land ownership of land bounded or traversed by navigable water; reduction of flow is compensable taking; capitalization of income approach appropriate method to calculate plaintiffs' compensation owed). 

(bankruptcy trustee motioned for additional time to decide whether to assume or reject executory contract - coal operating agreement; motion granted by bankruptcy court and concluded that agreement was property of bankruptcy estate (meaning that trustee could assume or reject it); 10th B.A.P. affirmed and debtor appealed and trustee moved to dismiss appeal as moot; appeal not moot because trustee had not established that coal development company did not have alternative relief available; motion to dismiss appeal denied). 

(Chapter 12 case; individual hog farmers owned and controlled debtor, an LLC; hog farmers filed bankruptcy on same day that LLC filed; 9,320 hogs sold by LLC to hog farmers over 10-month period; at time farmers filed bankruptcy, all hogs not yet paid for; at issue was 5,002 hogs that lender claimed were sold to farmers and not subject to statutory ag lien; court agreed on basis that affidavit supported sale along with invoices; lack of sufficient documentation of sale along with close relationship of parties not sufficient to negate purported sale).