Justia Civil Procedure Opinion Summaries

Plaintiffs-appellees Byron and Laura McDaniel claimed they discharged some private student loans in their Chapter 13 bankruptcy. Defendant-Appellant Navient Solutions, LLC (“Navient”), the loans’ creditor, moved to dismiss the McDaniels’ claim under Federal Rule of Civil Procedure 12(b)(6), contending that the loans were excepted from discharge under 11 U.S.C. 523(a)(8)(A)(ii). This case raised a question of first impression to the Tenth Circuit of whether an educational loan constituted “an obligation to repay funds received as an educational benefit,” within the meaning of section 523(a)(8)(A)(ii). The Court concluded that it did not, therefore, the Court affirmed the bankruptcy court’s interlocutory order denying Navient’s motion, and remanded the case for further proceedings. View "McDaniel v. Navient Solutions" on Justia Law

Eric Wagenknecht and his wife, Susan Colbert, filed for relief under Chapter 13 of the Bankruptcy Code in January 2016 (the “Petition Date”). The case was converted to Chapter 7 in April 2017. Jared Walters was appointed as the Chapter 7 trustee for the estate (the “Trustee”). Prior to the Petition Date, the Law Firm provided legal services to Eric. By the end of 2015, Eric owed the law firm of Stevens, Littman, Biddison, Tharp & Weinberg, LLC (the “Law Firm”) over $20,000. Eric borrowed money from his mother to pay the Law Firm, and executed a promissory note to repay her. In January 2018, the Trustee initiated an adversary proceeding against the Law Firm. The Trustee alleged that the payment to the Law Firm was a preferential transfer under 11 U.S.C. 547. The Trustee therefore sought to avoid and recover the payment under 11 U.S.C. sections 547 and 550. The parties cross-moved for summary judgment, and the bankruptcy court entered an order denying the Law Firm’s motion for summary judgment and granting the Trustee’s cross-motion for summary judgment. The Tenth Circuit reversed, finding that because Eric did not exercise control or dominion over the payment to the Law Firm, and because the payment did not diminish Eric’s bankruptcy estate, the payment did not constitute a “transfer of an interest of the debtor in property” under section 547(b). Therefore, the bankruptcy court erred in entering summary judgment in favor of the Trustee. View "Walters v. Stevens, Littman, Biddison" on Justia Law

In 2005, U.S. Home Corporation entered into a contract to purchase two contiguous tracts of land, one of which was owned by West Pleasant-CPGT, Inc. Under the contract, West Pleasant and the other landowner were to gain certain approvals permitting development of the properties. Pursuant to the contract, U.S. Home paid advances to the landowners totaling over $1.5 million. As security for the advances, West Pleasant executed a mortgage and note on its property; the other landowner did not. When a contract dispute arose in 2006, U.S. Home sought to terminate the contract and get a return of its total advance. U.S. Home prevailed in arbitration and was awarded a judgment in the full amount of the advance, plus interest. The Appellate Division affirmed the judgment in 2009. When the judgment was not satisfied, U.S. Home commenced foreclosure actions against the properties. The foreclosure proceedings were stayed when West Pleasant and the other property owner filed for bankruptcy. In West Pleasant’s bankruptcy action, U.S. Home moved to dismiss and for relief from the automatic stay. West Pleasant and U.S. Home executed a Consent Order, in which West Pleasant dismissed its bankruptcy proceeding, waived a fair market valuation and its right to object to a sheriff’s sale of its property, and released U.S. Home from any claims in law or equity. U.S. Home never proceeded with any deficiency action against either landowner. Nonetheless, the landowners commenced the affirmative litigation that gave rise to this appeal, seeking a declaration that the arbitration award was fully satisfied, as well as compensation “in the amount of the excess fair market value of the properties obtained by defendant[] U.S. Home over the amount of its outstanding judgment.” The second property owner then assigned its rights to West Pleasant. After trial, the court valued the second property as worth almost $2.4 million and West Pleasant’s property as worth almost $2 million. The court ordered U.S. Home to pay the fair market value of the West Pleasant property, plus interest, and extinguished the arbitration award on the second property. On appeal, the Appellate Division determined that West Pleasant had waived its right to a fair market valuation on its property but that it was owed a fair market value credit for the second property. The Appellate Division remanded the matter to the trial court for recalculation of damages. The New Jersey Supreme Court reversed, finding use of fair market value credit by this debtor to obtain a money judgment against a creditor, in the absence of a deficiency claim threatened or pursued or any objection being raised at the time of the sheriff’s sales, was "inconsistent with sound foreclosure processes and, moreover, inequitable in the circumstances presented." The judgment of the Appellate Division was reversed and the matter remanded for further proceedings. View "West Pleasant-CPGT, Inc. v. U.S. Home Corporation" on Justia Law

Pentagon Federal Credit Union ("PenFed") appealed a circuit court judgment entered in favor of Susan McMahan. McMahan and her husband purchased property in Loxley, Alabama in 2005. The purchase mortgage was provided by Wells Fargo bank, and a second mortgage was granted in favor of PenFed. In pertinent part, the PenFed mortgage stated "At no time shall this mortgage, not including sums advanced to protect the security of this mortgage, exceed $55,000.00. ... [PenFed] shall be subrogated to the rights of the holder of any previous lien, security interest, or encumbrance discharged with funds advanced by [PenFed] regardless of whether these liens, security interests or other encumbrances have been released of record." In 2014, the McMahans filed for Chapter 13 bankruptcy protection, listing both the Wells Fargo and PenFed mortgages. Both Wells Fargo and PenFed ultimately foreclosed on the mortgages. The McMahans' bankruptcy case was dismissed in late 2015. The Wells Fargo debt/lien and the PenFed debt were not discharged in the bankruptcy proceedings. PenFed filed suit against Wells Fargo to quiet title as the first lien holder to the McMahan property by virtue of the PenFed mortgage, the foreclosure deed, and the erroneous legal description in the Wells Fargo mortgage. PenFed did not notify or make McMahan a party to that lawsuit. That lawsuit was never tried to conclusion but was settled, and PenFed paid Wells Fargo $91,256.54 to satisfy the [Wells Fargo] note and in exchange for a cancellation and release of the Wells Fargo mortgage. PenFed did not acquire the right to enforce the Wells Fargo note and/or mortgage. Within one year of the foreclosure, PenFed sold the property, leaving the McMahans with a deficiency balance of $14,433.41. PenFed's calculation of the post-foreclosure-sale surplus proceeds excluded the $91,256.54 that PenFed paid to Wells Fargo to satisfy the Wells Fargo note and cancel the Wells Fargo mortgage. In 2018, McMahan sued PenFed, alleging PenFed's sale of the property to third-party purchasers created excess proceeds greater than what PenFed was entitled to received under the original note. The circuit court concluded PenFed could not exclude the surplus proceeds it paid to Wells Fargo to settle the Wells Fargo mortgage. The Alabama Supreme Court concluded the circuit court erred in characterizing the doctrine of unjust enrichment as an affirmative defense. Accordingly, PenFed did not waive the defense of unjust enrichment by failing to plead it in its responsive pleadings. Instead, PenFed raised the argument to the circuit court at trial and in its trial brief; the argument was properly before the circuit court. Judgment was reversed for further consideration of the merits of PenFed's unjust-enrichment argument. View "Pentagon Federal Credit Union v. McMahan" on Justia Law

Plaintiff filed suit against Bay Point in state court and added DCT as a plaintiff in an amended complaint, alleging that Bay Point's foreclosure of two properties caused him to lose the collateral's value exceeding the debt balance, and to suffer mental anguish. After Bay Point removed to bankruptcy court, the district court affirmed the bankruptcy court's order in favor of Bay Point. Plaintiff and DCT appealed, but then the district court granted DCT's motion to dismiss.The Eleventh Circuit held that plaintiff lacked Article III standing, because he failed to allege a particularized, actual injury. Furthermore, plaintiff was not a person aggrieved. Therefore, plaintiff may not appeal the district court's decision affirming the bankruptcy court's order. View "Thakkar v. Bay Point Capital Partners, LP" on Justia Law

The Hazeltons sought sanctions against the University for collecting an educational debt after their debts were discharged in a Chapter 7 bankruptcy. The district court reversed a bankruptcy court holding that the debt was nondischargeable and remanded. The Seventh Circuit dismissed an appeal, citing its jurisdiction in bankruptcy cases under 28 U.S.C. 158(d)(1), which is limited to orders that resolve “discrete disputes” within the bankruptcy case. The district court did not resolve the dispute regarding sanctions but decided a subsidiary legal issue. View "Hazelton v. Board of Regents for the University of Wisconsin System" on Justia Law

The IRS allows affiliated corporations to file a consolidated federal return, 26 U.S.C. 1501, and issues any refund as a single payment to the group’s designated agent. If a dispute arises, federal courts normally turn to state law to resolve the question of distribution of the refund. Some courts follow the “Bob Richards Rule,” which initially provided that, absent an agreement, a refund belongs to the group member responsible for the losses that led to it. The Rule has evolved, in some jurisdictions, into a general rule that is always followed unless an agreement unambiguously specifies a different result. Soon after the bank suffered huge losses, its parent, Bancorp, was forced into bankruptcy. When the IRS issued a $4 million tax refund, the bank’s receiver, the FDIC, and Bancorp’s bankruptcy trustee each claimed it. The Tenth Circuit examined the parties’ allocation agreement, applied the more expansive version of Bob Richards, and ruled for the FDIC.The Supreme Court vacated. The Rule is not a legitimate exercise of federal common lawmaking. Federal judges may appropriately craft the rule of decision in only limited areas; claiming a new area is subject to strict conditions. Federal common lawmaking must be necessary to protect uniquely federal interests. The federal courts applying and extending Bob Richards have not pointed to any significant federal interest sufficient to support the rule, nor have these parties. State law is well-equipped to handle disputes involving corporate property rights, even in cases involving bankruptcy and a tax dispute. Whether this case might yield a different result without Bob Richards is a matter for the court of appeals on remand. View "Rodriguez v. Federal Deposit Insurance Corp." on Justia Law

Ritzen sued Jackson in Tennessee state court for breach of contract. Jackson filed for Chapter 11 bankruptcy. Under 11 U.S.C. 362(a), filing a bankruptcy petition automatically “operates as a stay” of creditors’ debt-collection efforts outside the bankruptcy case. The Bankruptcy Court denied Ritzen’s motion for relief from the automatic stay. Ritzen did not appeal but filed a proof of claim, which was disallowed. Ritzen then challenged the denial of relief from the automatic stay. The district court rejected Ritzen’s appeal as untimely under 28 U.S.C. 158(c)(2) and Federal Rule of Bankruptcy Procedure 8002(a), which require appeals from a bankruptcy court order to be filed “within 14 days after entry of [that] order.”The Sixth Circuit and a unanimous Supreme Court affirmed. A bankruptcy court’s order unreservedly denying relief from the automatic stay constitutes a final, immediately appealable order under section 158(a). Adjudication of a creditor’s motion for relief from the stay is a discrete “proceeding” that disposes of a procedural unit anterior to, and separate from, claim-resolution proceedings. The order can have large practical consequences, including whether a creditor can isolate its claim from those of other creditors and proceed outside bankruptcy. Rather than disrupting the efficiency of the bankruptcy process, an immediate appeal may permit creditors to establish their rights expeditiously outside the bankruptcy process, affecting the relief awarded later in the bankruptcy case. View "Ritzen Group, Inc. v. Jackson Masonry, LLC" on Justia Law

Rumsey Land Company, LLC (“Rumsey”) owned a property subject to a first deed of trust held by Pueblo Bank & Trust Company, LLC (“PBT”). In 2010, Rumsey filed for bankruptcy. Resource Land Holdings, LLC (“RLH”) offered to purchase the property, but the bankruptcy court did not approve the sale. Shortly thereafter, PBT purchased the property at a bankruptcy auction. PBT then transferred the land to RLH. In 2015, Rumsey discovered that during the bankruptcy proceedings, RLH had entered a loan purchase agreement to purchase PBT’s interest in the property. The agreement eventually led to litigation in state court between RLH and PBT, which culminated with a settlement agreement allowing RLH to purchase Rumsey’s property from PBT for $4.75 million. Rumsey believed the loan agreement, lawsuit, and settlement influenced the price at its bankruptcy auction. It initiated this adversarial proceeding in bankruptcy court against RLH and PBT (collectively “Defendants”), alleging: (1) fraudulent concealment in violation of state law; and (2) collusive bidding activities in violation of 11 U.S.C. 363(n). The case was transferred to federal district court, which granted summary judgment to defendants on both claims. The Tenth Circuit affirmed finding: (1) Rumsey forfeited its arguments about PBT’s duty to disclose its transaction with RLH and did not argue plain error on appeal; and (2) in the section 363(n) collusive bidding claim, it was time-barred by a one-year limitations period in Federal Rule of Civil Procedure 60(c)(1), and Rumsey failed to demonstrate a genuine dispute of material face as to whether Defendants intended to control the sale price at the bankruptcy auction. View "Rumsey Land Company v. Resource Land Holdings" on Justia Law

Appellant, Joseph Petrick, contracted with a homeowner, Donna Sabia, to perform remodeling work. Sabia paid Appellant a deposit of $1,750.00 plus $300.00 to cover the cost of city permits. Appellant began some of the contracted work at which time Sabia paid an additional $1,750.00 to Appellant. That same day, Appellant and Sabia’s son, Carmen Fazio, who also resided in the home, entered into a second contract for Appellant to do some painting in the home. As consideration, Fazio purchased a $600.00 saw for Appellant. Appellant and Fazio entered into a third contract to install siding on the exterior of the home. Fazio paid Appellant $2,300.00 to purchase materials. Appellant did not finish the work; Appellant eventually advised Sabia and Fazio that he could not complete the jobs but would refund $4,950.00 within a week. Appellant never refunded any money or the saw, nor did he ever purchase the siding materials or obtain the permits from the city. Appellant filed for Chapter 7 bankruptcy. In his petition, Appellant listed Sabia and Fazio as creditors. The bankruptcy court issued a discharge order in March 2016. In October 2015, a City of Scranton Police Detective filed a criminal complaint charging Appellant with theft by deception and deceptive business practices. After a bench trial, the court found Appellant guilty of theft by deception and not guilty of deceptive business practices. The court sentenced Appellant to a term of incarceration of three to eighteen months. Appellant was also ordered to pay $6,700.00 in restitution. Appellant filed a motion for reconsideration of his sentence, which the trial court denied. On appeal, the Superior Court affirmed the trial court’s judgment of sentence. On appeal to the Pennsylvania Supreme Court, Appellant argued that the portion of his sentencing order requiring him to pay restitution was illegal because the debt was discharged in bankruptcy. Appellant argued that the Bankruptcy Code specified that the filing of a petition operated as an automatic stay of any action to recover a debt that preceded the filing. The Supreme Court found the mandatory restitution order served criminal justice goals, and were distinct from civil debt liability with respect to discharge in bankruptcy. “This distinction is unaffected by the temporal relationship between the proceedings in the bankruptcy court and the criminal prosecution. Additionally, it is unaffected by a creditor’s participation in the bankruptcy proceedings.” The Court determined there was no indication in this case the restitution award was improperly sought by the prosecutor or awarded by the sentencing court. Accordingly, it affirmed the Superior Court. View "Pennsylvania v. Petrick" on Justia Law