Case Summaries

(debtors, married couple, operate farm with son and married couple filed Chapter 12 and son filed separate Chapter 12; parties form LLC in 2008 for which a loss was reported in 2008 and 2009; wife worked off-farm as a school teacher and LLC projected to have income in 2010 and 2011 based on wife's off-farm income and husband's receipt of retirement income; eligibility for Chapter 12 challenged for failure to have more than 50 percent of income from farming during applicable measuring period; farm income flows through to debtors for purposes of 50 percent test and debtors determined to have sufficient farm income from which to pay debts under Chapter 12 plan; debtors qualify for Chapter 12; in later case in which bankruptcy trustee filed objections to debtors' amended Chapter 12 plan, court determined that debtors' plan did not meet confirmation requirements of 11 U.S.C. Sec. 1225 in that debtors did not commit all disposable income to their plan as required by Sec. 1225(b)(1)(B); In re Sandifer, No. 11-00095, 2011 Bankr. LEXIS 1926 (Bankr. D. S.C. May 25, 2011)). 

(debtors, married couple, operate farm with son and married couple filed Chapter 12 and son filed separate Chapter 12; parties form LLC in 2008 for which a loss was reported in 2008 and 2009; wife worked off-farm as a school teacher and LLC projected to have income in 2010 and 2011 based on wife's off-farm income and husband's receipt of retirement income; eligibility for Chapter 12 challenged for failure to have more than 50 percent of income from farming during applicable measuring period; farm income flows through to debtors for purposes of 50 percent test and debtors determined to have sufficient farm income from which to pay debts under Chapter 12 plan; debtors qualify for Chapter 12). 

(reduction in creditor's equity is not sufficient to satisfy the requirement of 11 U.S.C. Sec. 523(a)(2)(A) to have a debt declared non-dischargeable; debtor procured financing from creditor, but creditor did not record mortgage; subsequent lender did record mortgage and was not advised by debtor of creditor's prior, unrecorded mortgage; debtor did not fraudulently obtain creditor's equity). 

(case involves Chapter 12 debtors' motion to avoid liens in farm machinery and equipment (tools of the trade) in accordance with 11 U.S.C. Sec. 522(f)(1)(B); debtors (married couple) owned all farm equipment jointly and claimed exemption if farm equipment to extent of $20,000 allowed under Iowa law for tools of the trade of joint debtors engaged in farming (Iowa Code Sec. 627.6 (11) - now Sec. 627.6(12); lien avoidance motioned object to with respect to wife, who was middle school principal at Sioux Center middle school two hours away from farming operation; issue was whether debtor engaged in farming for purposes of Iowa exemption is the same as whether debtor is engaged in farming for lien avoidance purposes and whether wife was engaged in farming trade; wife paid approximately $60,000 annually (plus benefits) as middle school principal under 210-day contract (pro-rates to $104,285 plus benefits for full-year contract); court noted that Iowa has not adopted a "percentage of income" test or "percentage of time worked" test for claiming tools of trade exemption, but work must contribute to debtors' support; despite wife's substantial income from off-farm employment, teacher contract provides wife with substantial time to perform significant farm work, and not every activity of wife attributable to farm need generate revenue to be legitimate part of farming operation; wife engaged in farming and motion to avoid liens granted; while court noted, in dicta, that intent to farm in the future need be shown, no creditor challenged filing of debtors' Chapter 12 petition on the basis that debtors did not intend to farm in the future even though wife's personal website now indicates that "We moved off the farm in Kossuth County and never had some of the opportunities we now have available to us.  We love our new home and community...".). 

(debtor engaged in business of growing seed corn and seed beans for sale to farmers for planting; debtor contracted with farmer to grow seed beans for sale to debtor who would then sell seed beans to other farmers to produce soybean crops; plaintiff had been contracting with debtor for five years before controversy at issue arose in this case; debtor then changed its financing arrangement and notified growers of change in payment arrangements for payments to them; plaintiff, as one of affected contract growers did not object to delay in payment, did not try to recover seed beans or sue for contract price; debtor paid plaintiff approximately $160,000 during June 2003 and filed Chapter 11 bankruptcy on September 4, 2003 (which was later converted to Chapter 7 in March of 2004); trustee brought adversary proceeding against plaintiff under 11 U.S.C. §547(b) alleging that the June 2003 payments were preferential transfers that were recoverable by the trustee; plaintiff argued that payments involved contemporaneous exchange for new value or were entered into in the normal course of business and were, therefore, not preferential transfers; bankruptcy court ruled that payments were preferential transfers and that plaintiff failed to carry burden of proof on asserted defenses; amounts ordered by bankruptcy court to be paid back to trustee with interest; only issue on appeal is whether payments were in ordinary course of business under 11 U.S.C. §547(c)(2), and whether interest should have been applied;  district court determined that while payments made (debt incurred) in ordinary course of debtor’s business, buy payments not ordinary in relation to parties’ previous dealings (e.g., prior payments were substantially on time and without interest); facts indicated that debtor intended to prefer growers over other creditors; lack of evidence concerning credit arrangements in relevant industry). 

(court affirms water court's dismissal of plaintiffs' inverse condemnation claim; well owners' claim is water matter that water court has exclusive jurisdiction over and state engineer's orders curtailing well owners' use of water in their wells was not a taking).  

(trial court's decision that debtors did not give reasonably equivalent value for a mortgage and that, thus, mortgage was fraudulent under 11 U.S.C. Sec. 548(a)(1)(B) and underlying lien should be avoided reversed; bankruptcy court focused on wrong factors; court is to consider any value that debtors received in exchange for the mortgage, and they did receive value in collateralization of their antecedent debt which avoided acceleration, value for securing their direct debt, value in the form of bank's forbearance of repayment of debt and value in form of bank's forbearance of debtors' guarantor obligations). 

(Kansas Judicial Review Act confers standing on participant in agency review of Chief Engineer's determination with respect to application for water right; plaintiffs have standing to challenge determinations of Chief Engineer of Department of Water Resources, and have established facts about potential injury or impairment by Chief Engineer's granting of permit to city of Wichita to divert groundwater from diversion points close to plaintiffs' prior authorized points of diversion - plaintiffs have no other source of water for multi-million dollar home, the value of which could be impacted by grant of permit to divert water to city). 

(debtor's motion for judgment on partial findings granted; debtor did not violate Sec. 192(a) of the Packers and Stockyards Act when, after acquiring Gold Kist, it offered contract growers (one year after acquisition) new contracts containing language allowing debtor to terminate a grower's contract for "economic necessity"; contract provision in writing with terms and conditions identical in contracts offered to all growers, and grower had opportunity to review contracts and take them to legal counsel before signing; to establish violation of Sec. 192(a), growers must establish that debtor engaged in misrepresentation or other unfair practice with the result of producing an anticompetitive effect; if those two elements established, debtor excused from violating Sec. 192(a) by showing evidence of independent, legitimate business reason beneficial to competition; growers not able to show any unfair or deceptive act; "economic necessity" language in contract is valid and enforceable and gave debtor greater flexibility to respond to changes in highly competitive market; in any event, debtor had independent legitimate business reason for having growers enter into new contracts - to improve efficiency and provide growers with a pay raise).

(trial court's determination that landowner had unilateral right to pipe portion of ditch onto neighbor's property affirmed; neighbor did not own portion of ditch on neighbor's land, but was only owner of servient estate and had no independent ditch rights under state (Idaho) law; state law allows the owner of the ditch (landowner) to unilaterally pipe the ditch; neighbor's full water right adequately protected).  

(stream determined to run adjacent to river and qualified as a natural, perennial-flowing stream, and that stream subject to stream access and public recreation under state (MT) law; appeal involves award of attorney fees).  

(court affirms trial court's affirmance of curtailment orders issued against junior groundwater users; groundwater withdrawals by junior users caused material injury to surface water rights of senior appropriators).

(inherited IRA is exempt asset in bankruptcy; court reasons that inherited IRA holds "retirement funds" in accordance with meaning of 11 U.S.C. Sec. 522(d)(12), and that inherited IRA is tax exempt by virtue of I.R.C. Sec. 408(e)). 

(debtors, married couple, filed Chapter 12 and a subsequent amended plan and sought court permission to use funds that trustee held for use in farming operation; before bankruptcy filing, debtors had borrowed almost $1 million from creditor and gave creditor security interest in debtors chicken farm; amended plan proposed repaying debt into 20-year obligation and 30-year obligation which would ultimately pay creditor $700,000 at 5 percent interest; expert testimony revealed that secured property worth at least $700,000; debtors had obtained from chick supplier that supply contract would be reinstated if farm improvements made and financing secured to make necessary improvements; amended plan confirmed and debtors allowed to use funds held by trustee). 

(capital gain taxes incurred as result of post-confirmation of Chapter 12 plan for debtors' dairy operation remain a secured claim - 11 U.S.C. Sec. 1222(a)(2)(A) inapplicable to post-confirmation sale of farm assets; confirmed plan in place before any sale of farm assets contemplated and debtor cannot modify plan to change such result; court noted that Ninth Circuit decision in Hall adopted "plain meaning" approach to applying 11 U.S.C. Sec. 1222(a)(2)(A) and determined it to persuasively control the issue; court noted that Chapter 12 bankruptcy estate is not treated as a separate taxable entity from the debtor, thus "incurred by the estate" cannot mean "incurred post-petition"; while court not entirely persuaded by either Hall or Knudsen approach, court would side with Hall, but noted that this case involved post-confirmation sale rather than post-petition). 

(debtors entitled to homestead exemption even though exemption claimed in a year after the year of sale and debtors had no intention to reinvest proceeds in new homestead at time bankruptcy petition filed, which was before the statutory one-year requirement; state law did not require reinvestment or intent to reinvest in new homestead). 

(debtors were in cattle business and plaintiff bought 2,610 head of cattle for specified amount from debtors; some cows were noted as having "extra value" and would be sold again to third parties; dispute arose over how proceeds of sale to be divided and computation of formula for dividing sales proceeds; buyer couldn't prove entitlement to set number of calves under contract). 

(state tax debt non-dischargeable due to debtor's failure to report changes to federal tax liability caused by audit; change required to be disclosed under state law, and 11 U.S.C. Sec. 523(a)(1)(B) does not support debtor's position).

(debtor's motion to use cash collateral of creditor to fund expenses of growing crops in the future (in accordance with 11 U.S.C. Sec. 363(c)(2)-(3) and 11 U.S.C. Sec. 1205) denied; lien would not provide adequate protection and debtors' computations showed they would be left in worse position and cash flow problems made worse because of proposal to make higher payments under Chapter 12 reorganization plan; debtors' crop insurance could not be considered a guaranteed payment because it only guaranteed revenue and not profit; while debtors offered creditor third position on vehicles and equipment, debtors did not have sufficient equity in such items to amount to adequate protection). 

(bank's claim against debtor flowing from financing arrangement where cattle and farm equipment served as collateral determined to be non-dischargeable under 11 U.S.C. Sec. 523(a)(6); no intent to deceive present, but failure to remit $47,010 of sale proceeds violated Sec. 523(a)(6)). 

(court consolidated three separate Chapter 12 petitions and confirmed reorganization plan; trustee filed motion to modify plan to include 16 unsecured creditors (none of whom objected to plan) that had been excluded before confirmation; trustee bound by confirmed plan - lack of evidence of unforeseen circumstances or unforeseen difficulties after date of original confirmation). 

(foreclosure action against debtor, owner of condominium; state law provides that condominium associations have "a lien on a unit for any unpaid assessments levied against a unit from the time the assessment is due" and lien need not be recorded to be perfected; lien automatically attached at time assessment is due, and statute provides for judicial and non-judicial methods of foreclosing lien; plaintiff's seeking of judicial foreclosure does not negate fact that plaintiff could have pursued non-judicial foreclosure of lien at any time after lien arose; thus, lien was choate and superior to federal tax lien until time federal tax lien recorded). 

(debtor claims that automatic stay was violated; court holds that sale of subject horses violated automatic stay, but conduct of other parties not violative of stay). 

(announcement that Seahawk would file Chapter 11 bankruptcy and sell its 20 shallow-water rigs to rival Hercules Offshore; Seahawk noted that it was sustaining heavy losses due to the Obama Administration's refusal to issue drilling permits (for which the Administration has been held in contempt by federal court order of Feb. 2, 2011 - court had previously ordered the Administration to cease the drilling moratorium in the Gulf of Mexico which the court had previously struck down as "arbitrary and capricious"); refusal to issue permits resulting in estimated loss of $3.7 million in royalty revenue to the federal government each day according to the Energy Information Administration). 

(loan servicer for bank motioned for relief from automatic stay to foreclose on secured interest in debtor's real estate; debtor claimed that bank only received its interest via assignment from Mortgage Electronic Registration System as original lender's nominee and, thus, had no enforceable right against debtor's property; court held that under Rooker-Feldman doctrine court accepts state court judgment of foreclosure as evidence of bank's secured creditor status which gave servicer standing to seek relief from stay; court granted servicer's motion). 

(plaintiff's claim was dischargeable under 11 U.S.C. Sec. 523(a)(2)(B); debtor's financial statements not materially false and plaintiff did not rely on such statements; debtor did not intend to deceive plaintiff). 

(court held that above-median debtor with positive disposable income (as calculated under 11 U.S.C. §1325(b)(2)) must have a Chapter 13 plan that is for five years in accordance with court’s construction of 11 U.S.C. §1325(b)(1)(B); but, there is a split in the circuits as to whether reorganization plan must last for full five years when above-median-income debtor has negative or zero disposable income; U.S. Supreme Court denied certiorari).

(one-half of tax refund attributable to jointly filed tax return is property of debtor's bankruptcy estate; the other half is attributable to non-debtor spouse; refund resulted from debtor's withholding and tax credits attributable to non-debtor spouse; court adopted presumption that spouses share in equal ownership of tax refund which can be rebutted by evidence of domestic relations court order or written, prepetition contract between spouses designating alternative ownership of tax refunds). 

(Chapter 12 farm debtor borrowed money from co-op to finance crop input costs with co-op taking security interest in crops to be grown; debt excepted from discharge under 11 U.S.C. Sec. 523(a)(2)(B) because debtor submitted materially false documents to co-op for purpose of causing co-op to grant him financing; debtor also failed to tell co-op that he was feeding co-op's collateral to debtor's cattle (silence regarding material fact may constitute actionable false representation under 11 U.S.C. Sec. 523(a)(2)(A)); co-op justifiably relied on debtor's misrepresentations and suffered loss as a result). 

(debtor is a grain farmer that forward contracted grain with a buyer with the contract price to be set in the future on all but one of the contracts; debtor rejected all of the contracts without paying anything to the buyer; buyer claimed it had priority on its contract damages, but court disagreed; price-later contracts did not provide any benefit to the bankruptcy estate, and could not be treated as an administrative claim; because market price exceeded contract price for the contract that set price in advance, the fixed-price contract did not benefit the estate). 

(plaintiff need not provide written notice to account holders before raising credit card interest rates on account holders who defaulted on a payment - unanimously reversing U.S. Circuit Court of Appeals for the Ninth Circuit; Federal Reserve Board regulation at issue amended in 2009 (five years after case filed) to require advance notice of 45 days for higher interest rates; existing cardmember agreement disclosed conditions that had to be complied with to remain eligible for lower interest rates).

(Chapter 7 case in which debtor had transferred ERISA pension plan from former employer to Sec. 401 plan when debtor become self-employed; debtor used funds in plan to pay living expenses and start franchise businesses; upon filing bankruptcy, debtor claimed amount in plan as exempt asset; court agreed, even though debtor's conduct concerning funds in plan rendered them to be non longer a "tax qualified" plan under I.R.C. Sec. 401(a). 

(debtor created self-settled asset-protection trust under state law on Feb. 1, 2005; trust created for debtor's benefit and benefit of debtor's heirs with the express purpose of shielding assets from creditors; debtor's mother named trust protector; trust funded with $80,000 cash and remote real estate valued at $60,000; debtor accumulates over $250,000 of debt (primarily credit card debt) largely as result of contested divorce, shrinking market for his business and illness, and files Chapter 7 four and one-half years after creating trust; trusts assets not listed as part of bankruptcy estate; bankruptcy trustee claimed that transfers to trust void under 11 U.S.C. Sec. 548(e) - which was added by BAPCPA to close self-settled trust loophole in five states that authorized them, including Alaska; court voided transfers because evidence established that debtor's financial status declining before trust created which led to conclusion that transfers made with intent to hinder, delay and defraud present or future creditors; BAPCPA extended statute of limitations to ten years in cases where it appears a transfer occurred to shield assets from creditors). 

(debtors are married couple and issue was whether wife's debt was nondischargeable; in order to get loan, husband presented creditor with fraudulent statements regarding couple's livestock collateral; court held that wife was business partner whose ignorance (real or not) of husband's provision of false financial information to creditor was reckless with result that husband's fraud imputed to wife under partnership principles and wife's debt also nondischargeable). 

(case involves financing arrangement put together for debtors in which promissory note and security agreement executed under which debtors pledged all livestock presently owned or later acquired; debtor/husband then gave another creditor false information concerning debtors' livestock collateral which induced creditor to make loan; upon debtors' bankruptcy filing, debt declared non-dischargeable; husband and wife determined to be business partners such that wife should have known about false financial information - wife's debt likewise non-dischargeable; NOTE: case raises question as to whether LLC or corporation would have barred husband's fraud from being imputed to wife). 

(debtor bought land from friend under installment contract which allowed friend to make advancements for certain expenses associated with the land with any advancements to be added to the principal due; friend made significant additional loans and debtor later filed bankruptcy and trustee sought to sell the land free and clear of all encumbrances, but friend wanted additional loan amounts to be added to principal on basis that such amounts were advancements; creditor failed to prove that loans were advancements that were secured by the land; trustee entitled to sell land free and clear of all liens). 

(creditor (bank) sought judgment that debt was nondischargeable under 11 U.S.C. Sec. 523(a)(2)(A) on the basis that the loaned funds were fraudulently obtained; debtor's motion to dismiss granted because 11 U.S.C. Sec. 523(a)(2)(A) and (a)(2)(B) are mutually exclusive;. (A) specifically excludes debts obtained via a statement "respecting a financial condition" and (B) requires that a statement "respecting a financial condition must be in writing to be actionable; debtor merely made oral statements via a telephonic loan application process).

(debtor is an LLC formed under Kansas law and two of its managers along with a company member of the LLC, moved to dismiss LLC's Chapter 12 petition on basis that one of the members could not put the LLC in bankruptcy without their consent; under KS LLC Act, LLC's Operating Agreement controls dissolution once LLC becomes insolvent; under insolvency rules filing member had become sole member of LLC and had authority to conduct business). 

(two-horse gooseneck trailer not exempt as a "homestead" because it is not a "dwelling house"; trailer does not meet definition of a "manufactured home" and, thus, not exempt up to $3,000 in value under state law; trailer did not qualify as "mobile home" because it did not meet size requirements of "manufactured home"). 

(Worker, Homeownership and Business Assistance Act of 2009, enacted post-petition, allows net operating losses (NOLs for up to five years rather than the usual two years; court holds that provision allowed debtors to carryback NOLs and that resulting refunds are property of the bankruptcy estate; refunds are the result of pre-petition taxes that had been paid).

(New Mexico's domestic well statute that requires State Engineer to issue domestic well permits to draw groundwater for domestic use upon filing of an application without notice or evaluation by State Engineer of any effect on anticipated domestic water use on senior water rights in fully appropriated basin held to be constitutional). 

(court affirms bankruptcy court's judgment revoking defendant's discharge; debtor failed to disclose interests in a Colorado LLC and a Minnesota LLC, and promissory note payments were deposited into debtor's bank accounts via accounts of the LLCs; LLCs sufficiently tied to debtor's solely-owned corporation). 

(proceeds of sale of homestead deposited into debtor's savings account held to be exempt via homestead exemption as proceeds of sale of homestead under ND law, including amounts representing proceeds of non-exempt personal property included in sale of homestead; personal property included in sale only at buyers' request and no value attributed to it; no evidence present of debtor's intent to hinder, delay or defraud creditors).

(creditor’s motion for relief from imposition of automatic stay denied; property at issue transferred for estate planning purposes and was property of estate, and liens on property were claims against estate that could be dealt with in Chapter 12 plan). 

(plaintiffs are riparian owners on one side of stream at issue across from a business engaged in wood-preserving activities resulting in the emission of hazardous chemicals into the water; EPA asserted jurisdiction and ordered the construction of a log boom which did not touch plaintiffs' property, but did interfere to some degree with plaintiffs' navigation activities; plaintiffs sued for a physical taking, but dismissal of claim affirmed on appeal; defendant did not physically appropriate plaintiffs' water rights and no water actually taken from its source; regulatory taking claim not ripe because plaintiffs lacked standing to bring claim due to non-ownership of subject property at time regulatory taking occurred).  

(debtor properly denied discharge and transfers properly avoided as fraudulent transfers; order authorizing trustee to sell debtor's homestead affirmed - homestead not exempt agricultural property under state (MN) law; debtor's animals, farm equipment and supplies not exempt under MN law because debtor not primarily engaged in farming, but rather was primarily engaged in manufacturing and equipment sales).

(plaintiff's ordinance regulating a township and a conservancy district's ability to remove and sell groundwater located in a local park held to be invalid; plaintiff lacks the express authority to regulate groundwater in aquifers under the Watercourse Statutes, and Home Rule Act does not grant plaintiff the authority to regulate in accordance with its inherent police powers, and plaintiff lacks authority to review, regulate, or impose duties on the defendants' exercise of its power to sell the groundwater under the Park Resources Statute; ordinance's limitation on the defendants' right to sell water is inconsistent with the DNR's regulation of groundwater and there is no statute expressly authorizing plaintiff to regulate the defendants' sale of groundwater;  plaintiff may not interfere with the defendants' common law right to use the groundwater in its aquifers as it deems appropriate).

(defendant law firm did not violate plaintiff's rights under Fair Debt Collection Practices Act in its attempts to foreclose on mortgage on which plaintiff was in arrears; defendant commenced non-judicial foreclosure action against homeowner by filing notice and claim required by state (Utah) law).

(trustee's motion to abandon farm owned by debtors denied; case originally filed as Chapter 12, but voluntarily converted to Chapter 7; after receiving discharge, debtors refinanced debt on farm and made substantial improvements without telling trustee or court of such events; creditor objected to trustee's motion to abandon farm and court denied motion; farm was property of bankruptcy estate and all appreciation in farm's value that occurred post-petition belonged to estate and was available to pay creditors; equity appeared to be present in farm that exceeded homestead exemption that debtors claimed; trustee directed to determine value of farm and consider impact of avoiding debtors' pre-petition mortgage; trustee could file another motion for abandonment).