Authority to File Bankruptcy: When Is a Veto Void as Against Public Policy?

Squire Court Partners L.P. v. Credit Enhanced Partners LP Series J (In re Squire Court Partners L.P.), 574 B.R. 701 (E.D. Ark. 2017)

A general partner filed a bankruptcy petition on behalf of a limited partnership without consent of the limited partners. The limited partners objected and moved to dismiss. The bankruptcy court granted the motion on the grounds that the general partner did not have authority to file, and various parties appealed to the district court. Continue reading

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The Nonexistent Debtor and Indefinite Contract Terms: Better to Dot the I’s and Spell Out the Agreed Upon Terms

In re Delaware Sports Complex, LLC, 573 B.R. 543 (Bankr. D. Del. 2017) –

The debtor, a limited liability company, purportedly entered into a ground lease before it was formed. The bankruptcy court considered the validity of the lease, whether the lease was properly terminated due to uncured defaults, and the effect of an agreement to subordinate the lessor’s interests to the interests of debtor’s lender. Continue reading

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Sovereign Immunity: Still Plenty of Room for Argument When You Try to Recover From the Government

Zazzali v. United States (In re DBSI, Inc.), 869 F.3d 1004 (9th Cir. 2017) –

A chapter 11 trustee sought to recover a debtor’s prepetition tax payments to the federal government on the grounds that they were fraudulent transfers. The government moved to dismiss based on an argument involving sovereign immunity. The bankruptcy court denied the government’s motion; the district court affirmed; and the IRS appealed to the Ninth Circuit. Continue reading

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Non-Dischargeability: Shuffling Assets Among Entities May Lead To Non-Dischargeability No Matter How Indirect and Difficult to Follow

Dz Bank Ag Deutsche Zentral-Genossenschaft Bank v. Meyer, 869 F.3d 939 (9th Cir. 2017)

The debtors caused assets to be transferred out of a closely-held corporation. A bank creditor alleged that the indirect transfer constituted a fraudulent transfer, and as a result the creditor’s debt was non-dischargeable. The bankruptcy court agreed but limited the amount of non-dischargeable debt to the value of assets attributable to the creditor’s security interest. The district court took a different approach that precluded consideration of assets titled in the corporation absent a showing that the corporation was an alter ego of the debtors. The creditor appealed to the 9th Circuit. Continue reading

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Statutory Liens: May Not Necessarily Be Unassailable

Los Angeles County Treasurer v. Mainline Equipment, Inc. (In re Mainline Equipment, Inc.), 865 F.3d 1179 (9th Cir. 2017) –

A Chapter 11 debtor sought to avoid a county’s prepetition personal property tax liens pursuant to section 545 of the Bankruptcy Code. The bankruptcy court ruled in favor of the debtor; the Bankruptcy Appellate Panel (BAP) affirmed; and the county appealed to the Ninth Circuit. Continue reading

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Nondischarge for Fraud and the Like: Going After the Debtor May be Harder Than You Would Expect

Cowin v. Countrywide Home Loans, Inc. (In re Cowin), 864 F.3d 344 (5th Cir. 2017) –

Deed of trust holders sought to except debts from discharge in a debtor’s individual chapter 11 case on the grounds of debtor’s larceny, embezzlement, or willful and malicious injury. This was based on an alleged conspiracy to (1) strip their liens from property through tax lien foreclosure sales and (2) misappropriate excess foreclosure sale proceeds. The bankruptcy court found in favor of the deed of trust holders; the district court affirmed; and the debtor appealed to the Fifth Circuit. Continue reading

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Deficiency Claims: State Law Procedures Can Safely Be Ignored … Or Not

Melikian Enterprises, LLLP v. McCormick, 863 F.3d 802 (8th Circuit 2017)

Individual chapter 11 debtors objected to a proof of claim filed by a deed of trust creditor for the deficiency remaining after a trustee’s sale of their property. The debtors contended that the creditor was not entitled to a deficiency claim because it did not comply with state law, while the creditor argued that the state requirements were not applicable. The bankruptcy court sustained the debtors’ objection; the district court affirmed; and the creditor appealed to the Eighth Circuit. Continue reading

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