Source: http://www.iasb.uscourts.gov/honorable-chief-anita-l-shodeen-decisions
Timestamp: 2017-12-14 18:57:10
Document Index: 50695870

Matched Legal Cases: ['§ 523', '§ 523', '§ 523', '§ 523', '§ 727', '§ 727', '§ 524', '§ 523', '§ 523', '§ 523', '§ 523', '§ 510', '§ 727', '§ 561', '§ 561', '§ 727', '§ 727', '§ 727', '§ 727', '§ 523', '§ 727', '§ 727', '§ 523', '§ 523', '§ 523', '§ 523']

Honorable Chief Anita L. Shodeen - Decisions | SOUTHERN DISTRICT OF IOWA | United States Bankruptcy Court
Honorable Chief Anita L. Shodeen - Decisions
Grundy Mutual Insurance Association v. Babcock (Case No. 16-02260, Adv. Pro. 17-30005)
Debtors filed for chapter 7 bankruptcy and included counsel for Grundy Mutual Insurance (Grundy) on Schedule E/F as an unsecured creditor in the amount of a default judgment against the Debtor from a civil action. In the civil action Grundy was seeking to recoup insurance costs from Debtor who was charged with Second Degree Arson, but pled guilty to reckless use of fire. Debtor alleged he never received notice of the civil suit, and the matter therefore resulted in a default judgment. Grundy filed an adversarial proceeding objecting to discharge pursuant to 11 U.S.C. § 523(a)(6) and sought summary judgment.
In its analysis the Court reasoned that the default judgment does not meet the ‘actually litigated’ standard such that it cannot be relied upon as the sole evidence to establish the elements of § 523(a)(6). Additionally, the Court found that the plea to a lesser charge of reckless use of fire did not establish the element of intent therefore the criminal charge did not satisfy the elements of § 523(a)(6). Based on this reasoning, the Court denied Grundy’s Motion for Summary Judgment, and denied the Defendant’s request to defer the adversary proceeding pending resolution of the civil matter.
In the Matter of LBI (Case No. 16-01125), Charles Smith v. RDD Accounting Services, LLC, Timothy Hogan (Adv. Pro. 17-30033)
Defendant RDD filed a Motion for Summary Judgment in this adversary proceeding commenced by Trustee Smith. LBI is the sole shareholder of Liberty Bank and in 2009, LBI entered into a Secured Loan Agreement. These loans were collateralized under a Stock Pledge Agreement providing that an administrative agent would hold LBI’s bank shares on behalf of the lenders. In 2013 the Bank proposed a voluntary dissolution plan, creating a liquidating trust to satisfy Bank’s obligations. LBI then filed for chapter 7 bankruptcy in 2016 listing their beneficial interest in the trust on its schedules. Trustee Smith’s complaint requests a determination as to the validity, priority, and extent of the security interest granted by the Stock Pledge in LBI’s beneficial interest in the trust.
Upon review, the Court determined the trust had two purposes: 1) to provide payment for liabilities of the Bank, and 2) upon termination to distribute remainder to the Shareholder, LBI. RDD argued that their interest in the trust stemmed from a security interest in proceeds of the stock, however the Court was not persuaded by this. Additionally, RDD’s legal authorities were unpersuasive as they indicated RDD would be entitled to a lien, and not a security interest in a similar situation. Ultimately the Court determined RDD failed to establish it was entitled to judgment as a matter of law and therefore the Motion was denied.
Vesey v. FedLoan Servicing et al. (Case No. 16-02268, Adv. Pro. 16-30131)
Vesey ("Debtor") owed $251,779.70 in student loans after acquiring her undergraduate, law and masters degrees. Debtor sought to discharge her student loans under 11 U.S.C. § 523(a)(8), which allows discharge if it can be shown that repayment would constitute an undue hardship on the debtor or the debtor’s dependents. In determining whether undue hardship exists, the Court considered the totality of the circumstances. Being only 5 years out of law school, the Court found Debtor’s assertions that she would be unable to pay any or all of her student loans back with future earnings premature. Additionally, despite arguing her expenses would increase, the Debtor provided no amended schedules or evidence. Finally, the Court analyzed the Debtor’s self-imposed restrictions, her ability to make income based repayment payments, and the Debtor’s predominant purpose of filing being student loan discharge. Because the Debtor did not meet her burden to establish undue hardship, the Court determined that the Debtor’s student loans are not subject to discharge.
First American Bank v. Andrews (Case No. 14-00803, Adv. No. 14-30044)
Debtor was the sole officer, shareholder, and employee of C Mac Chambers Company Inc. Debtor went into default on a promissory note that could not be satisfied based on the Debtor’s representations that he only received Social Security benefits. Following a Judgement Debtor Evaluation it was determined that Debtor had been concealing his interest in draws from his company by diverting them to his wife while he continued to use and benefit from those payments. Debtor’s discharge was denied under 11 U.S.C.S. § 727(a)(2)(A), as his concealment of his interest in his draws was accompanied by an intent to hinder, deceive, and defraud his creditors. Discharge was also denied under § 727(a)(4)(A), as debtor made a false oath by failing to disclose payments made on two credit card accounts, and that failure prevented the Chapter 7 trustee from investigating those transactions, which might have resulted in the recovery of assets to pay creditor claims.
Charles L. Smith, Trustee v. JERAA, LLC., Patricia J. Nockels, and Thomas Alan Nockels (Case No. 13-01331, Adv. No. 13-30052, 13-30078)
The Court entered judgment against the Debtor, Thomas Nockels (“Debtor”) to avoid fraudulent transfers by Debtor of real estate parcels to JERAA, LLC, an entity owned by his non-filing spouse, Patricia Nockels. At the hearing both sides eventually stipulated that the expenses stated on JERAA’s filed tax returns would be utilized to determine the one-half amount to be contributed to the bankruptcy estate. The Court ordered the value of one-half interest in the list of identified real estate be paid to the bankruptcy estate, conveyances of real property to the bankruptcy estate by warranty deed, and the bankruptcy estate shall pay JERAA the amount of one-half the proceeds from the sale of a previously liquidated piece of real estate.
In re Embrey (Case No. 12-02385)
Debtors filed bankruptcy in 2012, at which time Debtor owned a townhome subject to Association dues. The Association was notified of the Debtors’ bankruptcy, and prior to the bankruptcy case being closed, Debtors’ counsel requested that the Association remove the Debtor from their rolls for purposes of Association dues. After discharge, Debtor remained in possession of the home until foreclosure sale in May 2015. In June 2015, the Association filed a small claims suit seeking Association dues accruing from April 2012 through November 2014. The Debtors allege the Association was in violation of 11 U.S.C. § 524(a) by attempting to collect the outstanding association fees which were not subject to the discharge injunction. The Court, however, denied the Debtors motion and determined that the statutory language of 11 U.S.C. § 523(a)(16) is clear and unambiguous that the assessment of association fees against the title holder can continue after a bankruptcy filing and entry of discharge whether or not that individual occupies the property.
Ebelheiser v. College Assist (Case No. 14-01952, Adv. No. 14-30064)
Debtor incurred subsidized and unsubsidized student loans totaling $181,820.00 over the course of several years of undergraduate and doctoral education. Debtor operated a Chiropractic LLC until he was convicted of a crime in 2010, and sentenced to a 5 year term in a state correctional facility. Debtor sought to discharge his student loans under 11 U.S.C. § 523(a)(8), which allows discharge if it can be shown that repayment would constitute an undue hardship on the debtor or the debtor’s dependents. In determining whether the Debtor met this standard, the Court looked at the totality of the circumstances including: the Debtor’s ability to get job upon release, the reasonableness of the Debtor’s living expenses, whether the Debtor’s inability to pay his student loans arise from a situation outside of his control, and whether there had been a good faith effort to negotiate forbearance. Based on an analysis of the circumstances above, the Court determined that while his criminal history may limit his future employment options, the Debtor showed no proof that he will be unable to earn or that he will face undue hardship, and therefore the Court denied his request to discharge his student loans.
NuScience Corporation v. Henkel (Case No. 15-00347 Adv. No. 15-30023)
Debtor filed bankruptcy and identified Plaintiff NuScience Corporation (“NuScience”) as a creditor with an amount derived from a District Court judgment totaling $539,438.18. The Plaintiff sought to (1) have $54,533.09 of the judgment deemed nondischargeable in accordance with 11 U.S.C. § 523(a)(6), and (2) receive a declaratory judgment that equitable and injunctive relief granted in federal court actions are not subject to discharge. The Court analyzed the facts of the case with the willful and malicious injury standard set forth in 11 U.S.C. § 523(a)(6), and determined that the Debtor’s conduct toward the Plaintiff was targeted at the Plaintiff and was done with intent to cause harm, and therefore the attorney fees and costs are not dischargeable. Additionally, regarding the declaratory judgement, the court determined that the injunctive relief requiring the Debtor’s actions do not meet the definition of a “claim” and therefore are also not subject to discharge in bankruptcy.
In re Diwan, LLC. (Case No. 12-00424)
Diwan, LLC. (“Debtor”) filed a chapter 11 petition, and sought to have the claim by its largest creditor subordinated based upon 11 U.S.C. § 510(c). The Court partially subordinated the claim, but after failing to get an approved Disclosure Statement, an order to dismiss the case was entered. The Debtor then appealed the order dismissing its case to the District Court, where they affirmed the Bankruptcy Court’s determinations. The Debtor appealed the District Court’s Order and Judgment to the Eighth Circuit Court of Appeals, and requested a stay pending this appeal. The Court determined that based on the improbability that the Debtor will succeed on the merits of its appeal, in conjunction with the untimeliness of the motion for stay after the dismissal of the chapter 11 proceeding, the Motion for Stay Pending Appeal was denied.
In re Earlywine (Case No. 15-01359)
A District Court judgment was entered against the Kristine Earlywine (“Debtor”) in 2012. Following this, the Debtor filed bankruptcy in 2015. The Court determined that assignment of a state court judgment did not require the Debtor to provide the assignee with notice of her bankruptcy petition as the assignment did not show service, no docket report reflected service and the assignee did not provide a copy of the assignment to the Debtor. The Debtor later became aware of the assignment through a post-petition letter from law firm two, and she amended Schedule F to reflect the judgment debt and assignee creditors. The assignee creditor was added to the matrix within 22 days of the discharge exception deadline under Fed. R. Bankr. P. 4007(c), which was adequate for the filing of a complaint. The assignee creditor filed a Motion to Extend Time to file a complaint and did not state any grounds for a complaint under 11 U.S.C. §§ 727 or 523 or why additional time was required. Because he failed to meet his burden to establish cause for extension of time, the Motion was denied.
In re Winke (Case No. 15-02080)
The Trustee objected to James Winke’s (“Debtor”) claim of exemption in real property. A Debtor purchased a new homestead after he incurred debts to an energy company and had been sued by the energy company. The Court determined under Iowa Code § 561.20 the full value of the new homestead was not exempt from creditors' claims because the energy company obtained a judgment against the Debtor before he acquired his new homestead. The Debtor was therefore only allowed under Iowa Code § 561.21(1) to exempt only the proceeds he received from the sale of his former homestead which he invested in his new homestead.
In re Sylvester (Case No. 15-01496)
Paula Sylvester (“Debtor”) filed a voluntary petition, on which she reflected that she owned no real estate. Following her 341 Meeting, Debtor amended her schedules and claimed a fractional interest in real estate in David City, NE to be inherited upon Debtor’s mother’s death. Debtor claims the Nebraska real estate under the homestead exemption arguing that she intends to return there at some point in order to take care of her mother and the Trustee objected. The Debtor was currently residing in Iowa with her brother who offered to let her stay as long as she would like. The Court looked to the statutory definition of the homestead, which requires ownership and occupancy. Though her ownership was not in question, the Debtors inability to define the time of her return amongst other inconsistencies were not enough to satisfy the burden of proving occupancy. Additionally, the evidence and testimony by the Debtor did not rebut the presumption of abandonment of the property. The Trustee’s objection to the Debtor’s homestead exemption was granted.
Charles Smith, Trustee v. PGV Properties, LLC (Case No. 12-01757, Adv. No. 14-30031)
Debtor, Harper Brush Works, Inc. filed chapter 11 bankruptcy for which defendant PGV Properties, LLC (“PGV”) was a creditor. PGV filed a proof of claim and asserted their claim was secured based on a Promissory note, a recorded Promissory Note, an unsigned, unrecorded memo entitled “PGV Second Mortgage Term Sheet,” a UCC Financing Statement, an Order from the Court approving Debtor’s Use of Cash Collateral, and an unrecorded Deed of Trust signed by an employee of PGV. The Debtors case was then converted to a chapter 7 proceeding. Charles Smith (“Trustee”) then filed an Adversary Proceeding against PGV to avoid all transfers between PGV and the Debtor. PGV generally denied all allegations and PGV counsel then withdrew from the case and did not respond to discovery. The Trustee then filed a Motion for Summary Judgment in this matter. Because PGV never responded to Trustee’s request for admissions, the essential facts were deemed admitted and therefore undisputed. Because the material facts were undisputed, the Trustee was granted his Motion for Summary Judgment.
In re Uthe (Case No. 15-02259)
Tom and Jodie Uthe, husband and wife and owners of Uthe Farms, Inc. (Debtors) purchased a home after Todd Shelton of Red Haw Realty, LLC (Red Haw) offered to loan the money to buy the land (“Parcel B”). The Debtors titled the land as joint tenants and signed in the personal or corporate capacities in accordance with the instruction of Red Haw’s attorney. The Debtors entered into a promissory note in their individual capacities and their corporate capacity, a mortgage in their corporate capacity only, and a security agreement in their personal capacity only. The Debtors then took these documents to the closing. No Red Haw representative was present at the closing and Red Haw did not request a final title opinion. In 2014, Red Haw began foreclosure proceedings, which were resolved by settlement. Second foreclosure proceedings were later commenced, where the Debtor’s alleged the Red Haw Mortgage was invalid. The Debtors then filed bankruptcy and claimed Parcel B under the homestead exemption. Red Haw asked the Court to reform the Mortgage to include as mortgagors the Uthes in their individual capacities.
The Court emphasized the necessity of expressing intentions in written contract, and the inability of a court to create a contract when a dispute over terms arises. Following this, Red Haw made multiple arguments for nullification of the contract. Red Haw argued that the mortgage was subject to reformation under theories of mutual mistake, scrivener’s error, fraud, and unjust enrichment. The Court did not find any of these arguments persuasive. Red Haw’s final argument was for a homestead waiver, which the court deemed unenforceable as to the Debtors personally and irrelevant as to the Debtors in their corporate capacity. Because Red Haw was unsuccessful in arguing the need to reform the mortgage, Parcel B was allowed as exempted to the Debtors.
In re Mavinga (Case No. 15-01330, Adv. No. 15-30041)
Emmanuel Mavinga (“Debtor”) was a native of West Africa who moved to the United States and acquired an Associate Degree before starting a sole proprietorship (“Merchants”). Merchants was sued multiple times, causing Debtor to file a chapter 7 bankruptcy petition. There were significant errors in bankruptcy schedules completed by Debtor and his attorney. The Trustee filed a complaint objecting to Debtor’s discharge under 11 U.S.C. §§ 727(a)(3) and (a)(4)(A). The Trustee’s claim for denial of discharge based on 11 U.S.C. §§ 727(a)(3), or insufficient maintaining of records necessary to explain financial transactions, was denied despite Debtor’s haphazard record keeping based on the rationalization that Merchant was a small sole proprietorship. The Trustee’s claim for denial of discharge based on 11 U.S.C. §§ 727(a)(4)(A) stating that Debtor made a false oath in connection with his bankruptcy was upheld based on Debtor’s testimony of his knowledge of the errors prior to filing, and the substantial amendments to his income. Additionally the Court found that a language barrier was not an excuse when no evidence was presented to show Debtor did not understand the forms he was asked to complete. Based on the determination that Debtor had knowledge and access to the information needed to complete his bankruptcy schedules, Debtors discharge was denied pursuant to 11 U.S.C. § 727(a)(4)(A).
American National Bank v. Lewis (Case No. 15-02519, Adv. No. 16-30011)
Craig and Mary Lewis (“Debtors) established a $1,000.00 “Ready Reserve” unsecured line of credit (“line of credit”) at People’s National Bank, now ANB (“ANB”). Mary met with a personal banker to open a new deposit account, to be attached to the line of credit. Craig was later joined as an account owner. A month after opening this new account, ANB mailed the Debtors a statement which indicated the line of credit was $101,091.00. This mistake by ANB was due to decimal point misplacement, and went unnoticed by ANB. Mary, aware of the mistake transferred $62,340.00 from the line of credit into her checking account over 15 months. Craig used the account as normal, unaware of the increase. Two years later, ANB noticed the error, and discontinued the line of credit. After failing to set up a payment plan with ANB, the Debtors filed bankruptcy.
ANB sought to have its debt excepted from discharge pursuant to 11 U.S.C. §§ 523(a)(2)(A), and (a)(6) and to deny the Debtors discharge pursuant to 11 U.S.C. § 727(a)(2). The Court dismissed the causes of action under 11 U.S.C. §§ 727(a)(2) and 523(a)(6) as to both debtors. The 11 U.S.C. § 523(a)(2)(A) claim as to Craig Lewis was also dismissed. In its analysis of the 523(a)(2)(A) claim as to Mary Lewis however, the Court determined that Mary had knowledge of the inaccuracy and yet continued to exploit the banks error to her benefit. Because ANB reasonably relied on the representation of the Debtor’s entitlement to the funds, the Court found the debt owed by Mary Lewis to ANB excepted from her discharge.
Sterling v. Lanum (Case No. 15-01807, Adv. No. 15-30050)
Rebecca Sterling (“Sterling”) was employed as a sales representative for Russell Communications, LLC. Following her termination, Sterling filed suit in state court and Russell Communications and Jeffrey Lanum (“Lanum”) were held jointly liable for damages and attorney fees. Lanum filed bankruptcy and Sterling sought to have the amount of her state court judgments and attorney fees excepted from Lanum’s discharge. Sterling argued that her award is nondischargeable under 11 U.S.C. § 523(a)(6), however the Court found this injury was founded in a breach of contract and therefore did not meet the burden necessary for willful and malicious injury. Additionally, Sterling contended the debt was nondischargeable based on false pretenses, however the Court dismissed this 11 U.S.C. § 523(a)(2)(A) claim as well as there was no evidence of misrepresentation. Lastly, Sterling argued that her debt was subject to 11 U.S.C. § 523(a)(4), which excepts discharge of a debt arising from larceny. The Court dismissed this argument as well, as the wages were the original property of the debtor, and therefore could not be obtained by larceny. No separate arguments were made to except the attorney fees and therefore the request to except them from discharge was also dismissed.
Barry A. Chatz v. City of Clive (Case No. 14-02689, Adv. No. 16-30052); Barry A. Chatz v. Global Spectrum, L.P., (Case No. 14-02689, Adv. No. 16-30087)
A voluntary chapter 11 committee appointment included Attorney Lauter (“Lauter”) who was admitted pro hac vice. The chapter 11 case later confirmed a plan that created a liquidating trust that replaced the committee, and Lauter filed his appearance on behalf of the trustee of the Trust. Lauter filed dozens of adversary proceedings on behalf of the trustee. Global Spectrum and City of Clive (“Defendants”) filed pre-answer motions to strike complaints stating that Lauter failed to comply with the pro hac vice requirements of the Southern District of Iowa. Lauter then sought pro hac vice admission nunc pro tunc, to which the Defendants objected. The Court looked to the Iowa Supreme Court determination that “substantial compliance” with the requirements of the Iowa Code regarding an absent formal pro hac vice motion does not require the Court to strike the offending attorney’s filing. Additionally the Court found that there was no evidence to establish Lauter intentionally failed to take action in violation of the local rules, or that he delayed in filing his second pro hac vice motion to correct the situation once he was aware. Based on these reasons, the Court denied the Defendant’s Motion to strike and overruled the objections to Lauter’s Motion to Appear Pro Hac Vice.
Natural Pork Production II, LLP v. IC Committee, et al. (In re Natural Pork Production II, LLP)
(No. 12-02872-als11, Adv. No. 12-30098-als)
The Defendant brought a Motion to Dismiss the complaint by the Trustee for turnover of grain proceeds, injunctive relief, and violation of automatic stay. The Court granted the Motion to Dismiss as to the injunctive relief as moot in a telephonic hearing. The Court denied the Motion to Dismiss the complaint by the Trustee for turnover of grain proceeds and violation of automatic stay. The Defendant argued that its interpretation of the statutory provisions is equivalent to an affirmative defense that requires dismissal of the Trustee's complaint under Rule 12(b)(6). The Court disagreed and did not find the Defendant's arguments to rise to the level of dismissal. The Trustee is required to plead only enough facts to state a claim for relief that is plausible on its face and the Court found that the Trustee met this standard. The Defendant did not make a showing that the Trustee failed to allege a claim upon which relief can be granted.
The Debtor entered into a contract with the Claimant to purchase the Claimant's motel, with the Debtor's real estate used as collateral under the contract. The motel had previous damage, which was stated in the contract, but the Debtor chose not to read the contract fully nor obtain an attorney. After the Debtor filed his Bankruptcy Petition, the Claimant filed a proof of claim stating it was owed an amount secured by the mortgage. The Debtor requested that the claim filed by the Claimant be equitably subordinated pursuant to 11 U.S.C. section 510(c). The Court held that there was no evidence of fraudulent misrepresentation by the Claimant nor any undue influence or control in the sale and operation of the motel. However, the Court found that the Claimant had a duty to mitigate the damages caused by the Debtor's breach. The Claimant's bid at the sale of the property ignored any reasonable recognition of value for the motel and failed to demonstrate any effort to mitigate its loss. Absent this conduct, the amount the Debtor would have been required to pay under its guarantee would have been substantially smaller. For these reasons, the Court held the Claimant's secured claim was partially subordinated.
In re: Randy Dean Tritch, Debora Jean Tritch (Case No. 10-02695-als7),
Randy and Debora Tritch vs. BAC Home Loans Servicing LP, fka Countrywide Home Loans Servicing LP (Case No. 10-30097-als)
In re: Phillip L. Vlieger, fdba Byblos Coporation, dba PineApple Homes (Case No. 09-03290-lmj7),
Louis and Peggy Mayfield vs. Phillip L. Vlieger (Case No. 09-30111-als)