2014-2015 Case Law Update - Central Florida Bankruptcy Law

2014-2015 Florida Bankruptcy Case Law Update
March 19, 2015 – Central Florida Bankruptcy Law Association
Presented by
Bradley M. Saxton, Esq.
[email protected] – 407-246-8672
C. Andrew Roy, Esq.
[email protected] – 407-246-8808
Winderweedle, Haines, Ward & Woodman, PA
Executive Benefits Ins. Agency v. Arkison
2014 WL 2560461 (2014).
Proposed findings of fact submitted to district court via an appeal satisfied constitutional requirement
of Article III court exercising the judicial power of the United States.
Law v. Siegel
134 S.Ct. 1188 (2014)
Section 105(a) does not empower bankruptcy court to go beyond the provisions of the code.
In re Fisher Island Investments
--- F.3d ----, 2015 WL 729689 (11th Cir. Feb. 20, 2015)
Bankruptcy court had constitutional authority to render final decision on who owned putative debtor
for purposes of determining whether an involuntary petition was consented to or contested.
JY Creative Holdings v. McHale
2015 WL 541692 (M.D. Fla. Feb. 10, 2015) (Moody, J.)
Receiver appointed by district court in action arising from breach of commercial loan documents had
authority over corporate debtors and had the power to put the corporate debtors into voluntary chapter
11 cases. Owner of the debtors sought dismissal, but was denied. The district court affirmed denial of
the motion to dismiss.
In re Organized Confusion
2015 WL 728223 (M.D. Fla. Feb. 19, 2015) (Bucklew, J.)
After thorough analysis of applicable standard, district court denied motion to withdraw the reference
from the bankruptcy court in seven related adversary proceedings concerning fraudulent transfers
where plaintiff-trustee requested a jury trial. All aspects of the adversary proceedings remained with
the bankruptcy court, and if the jury trial issue arose, the district court would address it at that time.
Atkinson v. Ernie Haire Ford, Inc.
764 F.3d 1321 (11th Cir. Sept. 4, 2014)
Adversary defendant does not have standing to appeal because it was not a “person aggrieved.”
Bar Orders
In re Seaside Engineering & Surveying, Inc.
--- F.3d ----, 2015 WL 1061718 (11th Cir. March. 12, 2015)
Eleventh Circuit affirmed non-debtor releases contained in chapter 11 plan. Bankruptcy court had
authority to enter non-debtor releases or bar orders and did not abuse its discretion in doing so.
Iberiabank v. Geisen
--- F.3d ----, 2015 WL 294269 (11th Cir. Jan. 23, 2015)
Basic release language in confirmed chapter 11 plan was sufficient to eliminate claims against
principal, especially because the plan detailed the contributions of the principal to the plan. Release
affirmed by Eleventh Circuit.
In re Land Resource, LLC
2014 WL 521080 (M.D. Fla. Feb. 10, 2014) (Honeywell, J.)
Bar order allowed as part of chapter 7 trustee settlement; see In re Superior Homes.
Lien Stripping
Bank of America, N.A. v. Caulkett
Bank of America, N.A. v. Toledo-Cardona
In re Lopez, 2014 WL 4346873 (11th Cir. Sept. 3, 2014)
In Nemcik, 2014 WL 4336366 (11th Cir. Sept. 3, 2014)
In re Phillips, 2014 WL 4802755 (11th Cir. Sept. 29, 2014)
 Eleventh Circuit again affirms lien stripping in a chapter 7 case based on McNeal and
In re Steffen
2014170860 (11th Cir. Jan. 16, 2014)
 Sale consummated before objector could obtain stay pending appeal rendered the appeal moot.
In re Scantling
2014 WL 2750349 (11th Cir. 2014).
Eligibility for discharge in chapter 20 has no bearing on debtor’s ability to strip lien.
La Paz at Boca Pointe Phase II Condominium Association v. Bandy
2014 WL 6908431 (S.D. Fla. Dec. 8, 2014) (Rosenberg, R.)
In re Catalano
510 B.R. 654 (Bankr. M.D. Fla. June 5, 2014) (Jennemann, J.)
Entry of a certificate of sale by a state court post-discharge in foreclosure action by junior lienholder
prevents strip off of the junior lien. Under Florida law, once the certificate of sale is entered, the
debtor loses any equitable interest in the property.
In re Meddock
2014 WL 6968772 (Bankr. M.D. Fla. Dec. 10, 2014) (Jennemann, J.)
Proper date of valuation for lien stripping is petition date, not date on which motion to strip lien is
filed or the date of the valuation hearing.
Chapter 11 Plans
In re New River Dry Dock, Inc.
2014 WL 1155310 (Bankr. M.D. Fla. March 21, 2014) (May, J.)
Deferred surrender of collateral in chapter 11 plan does not satisfy the “indubitable equivalent”
standard for cramdown.
Baggett Bros. Farm, Inc. v. Altha Farmers Co-op, Inc.
2014 WL 503350 (Fla. 1st DCA Oct. 9, 2014)
If confirmed plan does not contain acceleration language, creditor can only sue for damages based on
existing breaches.
Recovery of Assets/Exemptions
In re Bifani
2014 WL 4457144 (11th Cir. Sept. 11, 2014)
Trustee successfully avoided fraudulent transfer and obtained equitable lien against debtor’s
homestead; ill-gotten proceeds.
Kahama VI, LLC v. HJH, LLC
2014 WL 4655741 (M.D. Fla. Sept. 17, 2014)
District court granted summary judgment in favor of law firm defending against fraudulent transfer
action by creditor, distinguishing case from In re Harwell, 628 F.3d 1312 (11th Cir. 2010), and noting
that case was based on Florida’s fraudulent transfer statutes, not bankruptcy law.
In re Espinosa
2014 WL 2696959 (Bankr. M.D. Fla. June 11, 2014) (Jennemann, J.)
Chapter 7 trustee was only entitled to administrative expenses as surcharge against rents collected by
the estate prior to sale of property. Creditor with lien on rents was entitled to its cash collateral, and
no equitable exception existed to allow trustee to retain post-petition rents.
In re Swarup
521 B.R. 382 (Bankr. M.D. Fla. Dec. 15, 2014) (Jennemann, J.)
Court overruled chapter 7 trustee’s objection to exemptions regarding three retirement accounts the
debtor received via a property settlement in her ex-husband’s bankruptcy case. Before the settlement
was approved by order of the other bankruptcy court, the debtor filed this case, and the trustee
disputed the debtor’s ability to exempt an inchoate interest. The broad language of Fla. Stat. 222.21
permitted the exemption, even if the debtor’s interest in the accounts was merely equitable at the time
of filing.
In re Fitzpatrick
521 B.R. 698 (Bankr. M.D. Fla. Dec. 18, 2014) (Jennemann, J.)
Chapter 7 trustee objected to debtor’s claim of the Florida “wildcard” exemption; trustee argued that
debtor was receiving benefit of the homestead exemption because non-debtor co-owner of home can
claim homestead exemption and prevent the administration of the home by the trustee. The court
overruled the objection because the non-debtor co-owner waived his right to claim homestead
protection, although the debtor still claimed the property as exempt via tenancy by the entireties.
Kapila v. SunTrust Mortgage, Inc. (In re Pearlman)
515 B.R. 887 (Bankr. M.D. Fla. Nov. 5, 2014) (Jennemann, J.)
“Single satisfaction” rule prevented trustee from recovering for mortgage lender on fraudulent
transfer claims because the estate, pre-petition, recovered the transferred funds via from the proceeds
of a sale of collateral by a related entity.
In re Simmons
520 B.R. 136 (Bankr. M.D. Fla. Dec. 2, 2014) (Jennemann, J.)
Insurance claim arose from sinkhole damage to debtors’ property, and while claim was being
negotiated with insurer, debtors filed a chapter 13 case. After resolving the claim with the insurer and
their mortgage lender, debtors converted to chapter 7. Bad faith claim against insurer was property of
the estate, and the trustee was proper party to settle bad faith claim with insurer. Although the bad
faith claim was not ripe as of the date the debtors filed their petition because one element
(determination of the amount of liability) had not occurred, the conduct giving rise to the claim
occurred pre-petition to make the claim property of the estate. Court also denied debtors’ attempts to
reconvert chapter 13 case to retake control of the bad faith claim – 2014 WL 6808613
In re Knott
2015 WL 251705 (Bankr. M.D. Fla. Jan. 20, 2015) (Jennemann, J.)
Debtor and other plaintiffs sued defendant in state court regarding a business dispute. Defendant
sought to purchase the bankruptcy estate’s interest in the state court litigation, and trustee sought to
approve the sale for $5,000. The debtor and the other plaintiffs in the state court action objected to the
sale, and the bankruptcy court declined to approve the sale. The bankruptcy court allowed the debtor
to pursue the state court cause of action with any recovery inuring to the benefit of the estate.
Creditors Beware
In re Rosenberg
--- F.3d ----, 2015 WL 845578 (11th Cir. Feb. 27, 2015)
Eleventh Circuit addressing several different aspects of fee awards in the involuntary petition context.
Award of fees and costs following dismissal of an involuntary petition for prosecuting bad faith claim
for damages is within the discretion of the bankruptcy court. Fees could also be awarded for
defending dismissal on appeal.
In re Brown
2014 WL 983532 (Bankr. M.D. Fla. Feb. 11, 2014) (McEwen, J.)
Failure to pursue legal action within five years of acceleration of mortgage renders the mortgage lien
expired as a matter of law.
In re Plummer
2014 WL 1248039 (Bankr. M.D. Fla. March 25, 2014) (Jennemann, J.)
When debtor surrenders property, the debtor cannot interfere with the secured creditor’s ability to
take possession. Nevertheless, secured creditor seeking attorneys’ fees from debtor in foreclosure
action is a violation of discharge injunction.
Crawford v. LVNV Funding, LLC
2014 WL 3361226 (11th Cir. July 10, 2014)
Proof of claim based on time-barred debt violates FDCPA
In re Trussel
2015 WL 1058253 (Bankr. M.D. Fla. March 5, 2015) (Jennemann, J.)
Secured creditor was not entitled to injunctive relief compelling debtor to surrender property and
cease asserting affirmative defenses in the foreclosure action. Evidence presented did not support
argument that debtor failed to comply with his duties under section 521 regarding statement of
intentions. Debtor attempted to reaffirm the debt, but could not reach an agreement with the creditor.
The creditor’s desire to “short-circuit” the debtor’s legitimate defenses was not grounds for the relief
the creditor requested.
In re Baltzer
2014 WL 7149724 (Bankr. M.D. Fla. Dec. 11, 2014) (Jennemann, J.)
 Creditor’s numerous violations of the discharge injunction by continuing to send correspondence to
debtor resulted in the imposition of an award of actual damages in the amount of $112,465.90. The
court also awarded punitive damages in the same amount.
In re Able Body Temporary Services
2015 WL 791281 (M.D. Fla. Feb. 25, 2015) (Merryday, J.)
Creditor, Regions Bank, objected to a 9019 motion to approve a compromise between the trustee and
litigants concerning a business dispute. Regions argued that it was entitled to discovery and an
evidentiary hearing on the 9019 motion. The record established that the bankruptcy court carefully
evaluated the Justice Oaks factors and apprised itself of the facts presented by the trustee. Regions
had sufficient time to request discovery, but did not. The bankruptcy court otherwise properly
approved the settlement.
In re Roberts-Dude
--- Fed. Appx. -----, 2015 WL 545463 (11th Cir. Feb. 11, 2015)
Discusses in some detail the “justifiable reliance” element of a fraud claim under §523(a)(2)(A). The
Court concludes that a title company with a title company’s reliance upon the debtor’s
misrepresentations when it issued a title insurance policy on property which had liens which were not
In re Faidengold
 Eleventh circuit analyzed non-dischargeability under section 523(a)(2)(A) and under the facts
of the case finds that the debt was as a simple loan with no intent to defraud.
In re Tobkin
2014 WL 4233368 (11th Cir. Aug. 28, 2014)
 Florida Bar disciplinary fine not dischargeable in bankruptcy.
In re Garner
515 B.R. 643 (Bankr. M.D. Fla. Sept. 5, 2014) (Jennemann, J.)
Before debtor filed his bankruptcy case, Texas Attorney General sued debtor in Texas claiming
debtor violated Texas consumer protection laws. The debtor then sought relief under chapter 7. The
Attorney General filed a complaint to except its claims from the debtor’s discharge, and the
bankruptcy court abated the adversary proceeding to allow the Texas proceedings to conclude. The
Attorney General and the bankruptcy trustee reached a settlement that resulted in a final judgment.
The bankruptcy court declined to provide collateral estoppel effect to the final judgment, but
nevertheless entered summary judgment against the debtor because he failed to respond to the
dischargeability complaint. Non-dischargeable judgment for $12,100,000 in restitution, $640,000 in
attorney fees, and $24,000,000 in civil penalties.
In re Soderstrom
524 B.R. 835 (Bankr. M.D. Fla. Jan. 22, 2015) (Jennemann, J.)
Investor in failed real estate development sought to have investment claim against debtor deemed
non-dischargeable pursuant to section 523(a)(2)(A). The court found that the debtor made a false
representation to the investor when he stated his investment of $800,000 would be used to complete a
build-out when, in fact, the debtor really wanted the investment monies to immediately repay himself
and to divest himself of any meaningful interest in the development project. The court further found
that the investor justifiably relied on the debtor’s statement concerning the use of the investment
funds, despite warning from attorney regarding peculiar provisions in investment agreements. The
court determined the investor’s loss attributable to the debtor’s false representations in the amount of
$811,000 was non-dischargeable.
In re Vaughn
2014 WL 2507439 (Bankr. M.D. Fla. June 4, 2014) (Jennemann, J.)
Chapter 7 trustee sought to deny the debtors their discharge because the debtors failed to comply with
a turnover order issued by the court. The turnover order stemmed from the debtors selling nonexempt property of the estate post-petition and concealing that fact from the trustee and the court. The
court granted the trustee’s motion for summary judgment and denied the debtors’ discharge.
Accel Motorsports Inc. v. Rosario (In re Rosario)
2015 WL 232427 (Bankr. M.D. Fla. Jan. 13, 2015) (Jennemann, J.)
Car dealer sought entry of a default judgment against the debtor/defendant determining that its
$124,400 state court default judgment was nondischargeable under §§ 523(a)(2)(A) and (a)(6). Court
afforded collateral estoppel effect to state court judgment with respect to the fraud and conversion
portion of the state court judgment. However, the court also held car dealer failed to establish a basis
for determining the portion of the judgment related to $75,300 of worthless checks transferred after
the defendant took possession of the related vehicles was nondischargeable because plaintiff failed to
show its justifiable reliance on the worthless checks.
In re Rathel
514 B.R. 694 (Bankr. M.D. Fla. Aug. 19, 2014) (Briskman, J.)
The debtor (an attorney with self-proclaimed bankruptcy experience) bought a home from the
plaintiff, which in part was secured by a second mortgage held by the plaintiff. During the
negotiations to purchase the home, the debtor made certain representations that he would repay the
loan, including that the loan could not be discharged in a bankruptcy, foreclosure, or any other type of
insolvency proceeding, which representations were then later put in writing. The debtor further
represented that if he failed to pay the loan, the loan would be repaid through the sale of other
property that the debtor owned. The bankruptcy court found that the statements made by debtor were
knowingly false regarding the ability to discharge a loan in bankruptcy. In addition, the debtor failed
to disclose the sale of the other property to the plaintiff when the parties negotiated a loan extension.
Thus, the court found that the debtor’s silence as to the falseness of the representation when
negotiating the loan extension constituted false pretenses within the context of section 523(a)(2)(A) of
the Bankruptcy Code.
In re Johnson
2014 WL 1356600 (Bankr. M.D. Fla. April 2, 2014) (Briskman, J.)
Debtor, who had net disposable income of $800 per month, did not satisfy requirements of Brunner
test to discharge student loans.
In re Bumps
2014 WL 185336 (Bankr. M.D. Fla. Jan. 15, 2014) (Briskman, J.)
Debtor, who had net disposable income of $208.40 per month, who has minimized expenditures, and
who proved that she is unlikely to obtain employment to sustain minimal living standards and the
student loan payments, was entitled to partial discharge of her guaranty of her daughter’s student
loans pursuant to the Brunner test.
Attorneys in Trouble
Wortley v. Chrispus Venture Capital, LLC (In re Global Energies, LLC)
Eleventh Circuit remanded with directions to bankruptcy court to determine sanctions against party
and attorney for sanctions for withholding evidence and permitting false testimony.
In re Whitehill
2014 WL 3955063 (Bankr. M.D. Fla. Aug. 12, 2014) (Jennemann, J.)
Attorney failed to comply with local rule that required the retention of original signature documents
for at least four years after the closing of a case.
In re Demarea
--- B.R. ----, 2015 WL 738668 (Bankr. S.D. Fla. Feb. 18, 2015) (Olson, J.)
In re The Sanibel Diamond Store, LLC
2014 WL 8878156 (Bankr. M.D. Fla. March 5, 2014) (Delano, J.)
City’s failure to object to sale order effectively prohibited City from strictly enforcing permitting of
“sign walkers.”
Sportmans's Link v. Overstreet
2014 WL 6910676 (11th Cir. Dec. 10, 2014)
Owner of chapter 11 debtor personally paid for bankruptcy attorney retainer before filing. Case
converted to chapter 7 and the owner sought to disgorge the retainer. Owner lacked standing.
In re Ruiz
515 B.R. 362 (Bankr. M.D. Fla. Sept. 5, 2014) (Jennemann, J.)
Law firm representing debtor cannot “unbundle” services to limit scope of representation to preparing
the petition, but not signing the petition or attending the 341 meeting or any hearings, effectively
leaving the debtor to proceed pro se. The firm was obligated to sign the petition and provide the
representation required by Local Rule 9011-1. The court ordered the law firm’s fee disgorged.
In re Bailly
522 B.R. 711 (Bankr. M.D. Fla. Dec. 11, 2014) (Jennemann, J.)
Section 365(p) permits a debtor to assume a lease without having to also follow the reaffirmation
procedure under section 524(c) and without the bankruptcy court playing a role in the assumption of
the lease. The court stated: “Parties do not need to file any motion or stipulation seeking approval
for any lease assumption. Let me restate, parties do not need my permission for a debtor to
assume a lease or for a creditor to enforce the assumed lease.”