Henson v. Bank of America, N.A. (In re Henson), 477 B.R. 786 (Bankr. D. Colo. 2012) –
In Henson a foreclosure sale was stayed by the debtors’ filing of a chapter 13 bankruptcy. The bank allowed the sale date to be automatically continued from week-to-week during the bankruptcy, including after a chapter 13 plan of reorganization was confirmed. The debtors contended that this constituted a violation of the automatic stay entitling them to damages. Continue reading
Thomas v. Citimortgage (In re Thomas), 476 B.R. 691 (Bankr. D. Mass. 2012) –
Massachusetts has enacted a Predatory Home Loan Practices Act (Chapter 183C), which among other things requires that lenders making “high-cost” mortgage loans must (i) obtain a certification that the borrower has received counseling and (ii) reasonably believe that the borrower has the ability to make the scheduled loan payments. Otherwise the loan is unenforceable. Thomas turned on whether the Massachusetts statute was preempted, which in turn depended on who was considered the original lender in a table‑funded loan. Continue reading
Green v. HSBC Mortgage Services, Inc. (In Re Green), 474 B.R. 790 (Bankr. D. Md. 2012) –
In Green, a lender refinanced a first priority deed of trust loan that had been made by IndyMac Bank, F.S.B. For some unknown reason the new deed of trust of the refinancing lender was not recorded. IndyMac Bank also had made a second priority deed of trust loan that was transferred to a third lender, HSBC Mortgage Services, Inc.
Chase Home Finance LLC, as servicer for the refinance loan, filed a complaint in state court seeking declaratory relief that it had a valid first priority lien based on an equitable mortgage or equitable subrogation. According to the court, equitable subrogation allows a lender that pays a debt to an existing lien holder and takes a new lien to step into the shoes of the original lien holder against intervening liens (including pre-existing subordinate liens). Continue reading
Reshetar Systems, Inc. v. Thompson, 686 F.3d 940 (8th Cir. 2012) –
Scott Thompson, the owner and manager of a construction company, signed a confession of judgment accepting liability for the company’s failure to pay its subcontractor sums received from an owner for a construction job. After Thompson filed bankruptcy, the subcontractor sought to have its debt declared non-dischargeable on several grounds, including for “fraud or defalcation while acting in the fiduciary capacity.” The 8th Circuit considered this issue in light of a Minnesota statute requiring that payments be held in trust for the benefit of subcontractors. Continue reading
Boyer v. Gildea, 475 B.R. 647 (N.D. Ind. 2012) –
In Gildea, the bankruptcy trustee claimed that a group of insiders colluded with the purchaser of the debtor’s assets at a Section 363 auction to control the sale price. Consequently it sought to recover the difference between the bid price and the true value of the assets from the defendants. In this opinion the court denied the defendants’ motions for summary judgment.
Section 363(n) of the Bankruptcy Code provides:
The trustee may void a sale under this section if the sale price was controlled by an agreement among potential bidders at such sale, or may recover from the party to such agreement any amount by which the value of property sold exceeds the price at which such sale was consummated, and may recover any costs, attorneys’ fees, or expenses incurred in avoiding such sale or recovering such amount. In addition to any recovery under the preceding sentence, the court may grant judgment for punitive damages in favor of the estate and against any such party that entered into such an agreement in willful disregard of this subsection. Continue reading
The trustee of a liquidating trust under a general contractor’s confirmed chapter 11 plan tried to recover pre-petition payments made to a subcontractor as either a preference or a fraudulent conveyance. The court’s decision turned on whether the payments were trust funds under the Illinois Mechanics Lien Act.
On February 11, 2009, the subcontractor submitted an application to the general contractor which certified that the subcontract work was finished and requested payment of the contract amount less a 10% retainage. The subcontractor recorded a lien after the general contractor failed to pay. On June 30 the subcontractor provided an invoice for the remaining 10% balance, and the general contractor paid both invoices on July 17 by check. The subcontractor released its lien on July 22, which was before the checks cleared on July 23. Continue reading
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