OpinionsThe plaintiff, a commercial landlord, sought a determination that the debtor-defendant, a former tenant, owed him a nondischargeable debt based on her failure to turn over funds received from subtenants and damage to and theft of appliances. The debtor-defendant moved to dismiss the claims under 11 U.S.C. § 523(a)(2)(A), § 523(a)(4), and § 523(a)(6) for failure to state a claim upon which relief could be granted. The Court dismissed the plaintiff’s claim that the debtor obtained the funds from the subtenants through larceny. Larceny only occurs if the debtor has wrongfully taken property from its owner with fraudulent intent, and the plaintiff never owned the funds. The Court denied the motion to dismiss the plaintiff’s other claims. Andringa v. Acker (In re Acker), Ch. 7 Case No. 19-21349-kmp, Adv. No. 19-2089, 2021 WL 1346575, 2021 Bankr. LEXIS 848 (Bankr. E.D. Wis. Mar. 31, 2021) (March 2021) -- Judge K.M. Perhach The plaintiffs sought a determination that the debtors owed them a debt in the amount of their investment in a restaurant chain and that the debt was nondischargeable under 11 U.S.C. § 523(a)(2)(A), § 523(a)(2)(B), and/or § 523(a)(4). After a trial, the Court found that the plaintiffs did not meet their burden of proving that their investment was nondischargeable under any of these provisions. Moreover, the plaintiffs presented no evidence that the joint debtor was involved in the restaurant offering at all, so the Court was easily able to dispose of the question of whether the plaintiffs were entitled to a nondischargeable judgment against her. In re Chapman, Case Nos. 18-30442, 19-22820, 19-26731, 2021 WL 1346046 (March 2021) -- Judge B.E. Hanan After the debtor’s daughter filed three bankruptcy cases in her representative capacity under a durable power of attorney, the debtor sought to expunge or seal the records. The Court determined that it did not have authority to equitably expunge the bankruptcy cases. Because the debtor executed a durable power of attorney which authorized her attorney-in-fact to institute bankruptcy proceedings, and because she never formally revoked that authority, the Court found that the filings were authorized, which foreclosed any basis for sealing or annotation of the record. The Court noted, however, that cases initiated by an attorney-in-fact should take extra precautions to make clear the signer’s representative capacity. Branko Prpa, LLC v. Ryan et al. (In re Ryan), 629 B.R. 616, aff’d sub nom. Ryan v. Branko Prpa MD LLC, No. 21-CV-0449-BHL, 2022 WL 613313 (E.D. Wis. Mar. 2, 2022) (on appeal) (March 2021) -- Judge B.E. Hanan Prior to filing for bankruptcy, the debtor entered into a compromise agreement concerning a workers’ compensation claim, which an administrative law judge approved in an order directing that part of the total compromise amount be paid to the debtor, part be paid to the debtor’s workers’ compensation counsel, and the remainder be paid to the debtor’s counsel’s law firm’s trust account “for disbursement to medical providers and lienholders.” The debtor tried to exempt the entire amount of the compromise, and one of the medical-provider creditors objected, asserting that the amount ordered to be set aside for the medical providers and lienholders was not the property of the debtor and therefore could not be exempted. The creditor also requested that the Court declare an express trust or impose a constructive trust on those set-aside funds. The Court granted summary judgment in favor of the creditor, concluding that, under Wisconsin law, the state court administrative order created an express trust, or, in the alternative, imposition of constructive trust was appropriate, meaning the funds ordered to be set aside for disbursement to third parties were not the property of the debtor and could not be exempted. In re Ganske, No. 20-21042-kmp, 2021 WL 1396563, 2021 Bankr. LEXIS 574 (Bankr. E.D. Wis. Mar. 5, 2021) (March 2021) -- Judge K.M. Perhach The Chapter 11 debtors sought to assume a “Handling and Storage Lease Agreement” under which a barge terminal on the Illinois River would furnish equipment, personnel, and facilities necessary to receive, unload, store and load out fertilizer furnished by the debtor. The Court determined that the debtor failed to pay accounts receivable within the time established by the parties’ course of performance. This was a material breach excusing the barge terminal from performance. Because the agreement was terminated before the bankruptcy case was filed, there was no agreement for the debtors to assume. The Court denied the motion. Archer-Daniels-Midland Co. v. Country Visions Coop., 628 B.R. 315 (E.D. Wis. 2021), aff’d, 29 F.4th 956 (7th Cir. 2022) (February 2021) -- District Court Appellant sought the reversal of a bankruptcy court order that denied appellant’s “motion to enforce” an earlier plan confirmation order issued by the same bankruptcy judge. Through its motion, the appellant asked the bankruptcy court to enforce a 2011 confirmation order against the appellee even though the appellee was not a party to the bankruptcy case at confirmation. The appellant also requested an injunction that would have prevented appellee from continuing state court litigation related to a right of first refusal on real property that the appellant purchased pursuant to the confirmation order. The bankruptcy court denied the motion, concluding that because the appellee had not received proper notice of the bankruptcy proceedings, its rights could not be affected by the confirmation order consistent with due process. The bankruptcy court also rejected appellant’s alternate theory that it was a “good faith” or “bona fide” purchaser of the property. For the reasons stated, the bankruptcy court’s ruling is affirmed. In re Glenn Buettner, Case No. 20-24696 (February 2021) -- Chief Judge G.M. Halfenger The trustee objected to confirmation of the chapter 13 debtor's plan, asserting that 11 U.S.C. §1325(a)(4) requires that a chapter 13 plan must pay at least as much on allowed unsecured claims as would have been paid on those claims if the case had been filed under chapter 7 and the estate had been liquidated (i.e., without regard to any administrative expenses incurred in the chapter 13 case, including attorney's fees, that would not have been incurred in a chapter 7 case). The court disagreed, concluding that, by its plain terms, §1325(a)(4) requires a determination of the amount that would have been paid on each allowed unsecured claim if the estate were liquidated under chapter 7 on the effective date of the plan (the confirmation date), which would necessarily require the payment of all allowed administrative expenses as of that date, including any attorney's fees allowed in the chapter 13 case, before payment on any lower-priority allowed unsecured claims. The court sustained the trustee's objection to confirmation of the chapter 13 plan, however, because the present value of the deferred payments on allowed unsecured claims provided for by the plan was less than the amount that would have been paid on those claims had the estate been liquidated under chapter 7 on the plan's effective date. In re Ganske, No. 20-21042-kmp, 2021 WL 316076, 2021 Bankr. LEXIS 203 (Bankr. E.D. Wis. Jan. 29, 2021), aff’d sub nom., Winfield Solutions, LLC v. Ganske, No. 21-cv-134-WCG, 2022 WL 972406, 2022 U.S. Dist. LEXIS 59479 (E.D. Wis. Mar. 31, 2022) (January 2021) -- Judge K.M. Perhach A judgment lien creditor objected to the debtors’ claimed homestead exemption. The debtors acknowledged that they spent time at the home in Door County but also maintained residences in Dane County. Following other Wisconsin bankruptcy decisions, the Court overruled the objection. See In re Carter, 550 B.R. 433 (Bankr. W.D. Wis. 2016) (Martin, J.); In re Lackowski, No. 08-21496-pp, 2008 Bankr. LEXIS 5143 (Bankr. E.D. Wis. Sep. 24, 2008) (Pepper, J.); In re Broesch, 34 B.R. 554 (Bankr. E.D. Wis. 1983) (Clevert, J.). Wisconsin courts liberally construe the homestead exemption statute. The debtors’ part-time occupancy of their Door County property did not defeat the homestead exemption because the debtors’ absence was partially due to the demands of employment. The debtors’ maintenance of the Door County property was consistent with its use as a homestead. Additionally, the debtors’ use of the Dane County address on their tax returns and drivers’ licenses did not defeat their selected homestead. The statute and the case law do not prohibit one from occupying two residences – only from claiming both as homesteads. Because the Court found that the debtors’ homestead exemption was valid, the Court granted their motion to avoid the creditor’s judicial lien. As a result, the debtors had equity in the real estate and the Court denied the creditor’s motion for relief from stay pursuant to 11 U.S.C. § 362(d)(2) without needing to reach the question of whether the property was necessary to an effective reorganization. Finally, the Court denied the creditor’s motion requesting an order requiring the debtors to abandon potential fraudulent transfer claims against two mortgage holders. The debtors had not elected to pursue the claims, but there was no evidence the claims were burdensome to the estate. Further, if the claims had merit, they were not of inconsequential value and benefit to the estate. Contrary to the creditor’s argument that avoidance of the claims would create non-exempt equity to which the creditor’s judgment lien could attach, the effect of the avoidance would be to preserve value for the estate. This decision was affirmed on appeal. Wisconsin v. Hansen, 624 B.R. 204 (E.D. Wis. 2021) (January 2021) -- District Court Penalty imposed against debtors by the State of Wisconsin Department of Workforce Development for debtor’s company’s failure to maintain workers’ compensation insurance was nondischargeable under 11 U.S.C. § 523(a)(7). Verde Technologies v. C2R Global Manufacturing, Inc. (In re C2R), Case No. 18-30182-beh, Adv. No. 20-2028-beh, 2020 WL 7265867 (December 2020) -- Judge B.E. Hanan Both parties submitted various motions to seal, supplying some evidence to support the motions, namely, declarations of officers within the companies explaining why the information to be protected falls within the scope of 11 U.S.C. § 107(b). The Court reviewed the categories of documents to determine whether they constituted trade secrets or confidential research, development, or commercial information as contemplated under the Code. In instances where the Court determined the information to be subject to public disclosure, the parties were granted 21-days’ leave to supplement the record in favor of protection. |