6 ABR 1: Ch. 11-7, dismissal order, discharge order, clerical mistake, due process rights, recusal, attorney fees & costs (9th Circuit) (unpublished).
Appeal of Dismissal Order dismissed as moot. Bankruptcy Court's entry of Vacation Order, Order re Documents and denial of Motion to Recuse affirmed. Request for attorney fees & costs denied.
Debtor Alex Bolt, owner & operator of Alaska Drilling Inc., appeals Bankruptcy Court's Order setting aside discharge, Order dismissing his Ch. 7 case, Order regarding filing of documents and Order denying motion to recuse. He requests costs and attorney fees. See related 3 ABR 285.
The appeal of the Dismissal Order is moot as it only prevented Bolt from refiling a petition for 180 days after which he may refile a new petition and discharge all dischargeable debts if he qualifies. The 180-day period has passed.
Bankruptcy Court did not abuse its discretion when it vacated the Discharge Order because it was entered erroneously by the clerk of court. A discharge that is entered by clerical mistake is not a proper discharge.
Bolt failed to demonstrate the Order re Documents violated his due process rights. He had proper notice and was heard on all pertinent issues.
Bolt also failed to meet his burden of demonstrating that Bankruptcy Court abused its discretion when it denied the Motion to Recuse. There are no allegations that demonstrate partiality, personal bias or prejudice as required. Disagreement over a judge's ruling is appropriately handled through the appellate process, not through recusal.
Bolt's request for costs and attorney fees is denied.
Bolt v. SBA, Battley (Trustee), UST and Ptarmigan Co. Inc., [In re Bolt], 11/17/98.
William Artus (Artus & Choquette), Anchorage, for Battley (Trustee); John Patterson (Kelly & Patterson), Anchorage, for Ptarmigan; AUSA Jon DeVore, Anchorage, for SBA; Alex Bolt, Anchorage, pro se.
6 ABR 29: Ch. 7, attorney for trustee, special counsel, attorney fees & costs, sanctions (MacDonald).
Application for attorney fees & costs partially granted.
William Artus was employed as attorney for the Trustee on a contingent fee basis. He was later hired as special counsel for the Trustee, for which he was to receive hourly compensation. He has received $412,286 from the estate without prior court authorization. Because of failure to comply with §330, the sum of $9750 is disallowed, representing sanctions of $250 per violation.
In re Martech, 12/1/98.
William Artus (Artus & Choquette), Anchorage, for Battley (Trustee); AUST Barbara Franklin, Anchorage; Rebecca Copeland (Koval & Featherly), Anchorage, for Battley (Trustee).
6 ABR 36: Ch. 13, foreclosure (residential), deed of trust lien (default & cure) (MacDonald).
Motion for relief from stay denied.
City Mortgage Co. has commenced foreclosure proceedings against Debtor Kil Ja Zong 3 times. Debtor cured the defaults twice and filed for Ch. 13 after CMC recorded its third notice of default. A.S. 34.20.070(b) provides that after two notices of default & cures, the trustee of a deed of trust may refuse further payment and proceed to sale. CMC seeks relief from stay so it may enforce its deed of trust lien.
Cures of residential mortgages are permitted in Ch. 13 cases notwithstanding state law provisions.
In re Zong, 12/9/98.
Thomas Yerbich, Anchorage, for Zong; Richard Ullstrom (Routh & Crabtree), Anchorage, for CMC.
6 ABR 40: Ch. 7, discharge revocation, estate property (failure to turn over) (Ross).
Discharge revoked. See 5 ABR 471.
The proceeding to revoke a discharge for failure to turn over estate property can be brought whether the property was received before or after discharge. The Trustee must prove Debtor had acquired property of the estate, and both knowingly & fraudulently failed to deliver the property to the Trustee.
Battley (Trustee) v. Schmitz & Sliney; Battley v. Schmitz [In re Schmitz], 12/15/98.
William Artus (Artus & Choquette), Anchorage, for Trustee; Cabot Christianson (Bundy & Christianson), Anchorage, for Schmitz; Robert Crowther, Anchorage, for Sliney.
6 ABR 43: Ch. 7, omitted creditor, insurance proceeds, fraudulent conduct (Ross).
Motion for summary judgment denied.
Betty Adams was sued by Nationwide Insurance Co. for collecting insurance proceeds for an auto accident while collecting insurance benefits from another company at the same time. Nationwide obtained a default judgment against Adams and she agreed to and did start making repayment. Adams filed Ch. 7 and listed Nationwide's name but not its address and failed to disclose a prior Ch. 13 case. Nationwide did not have notice of the bankruptcy and seeks summary judgment that Debtor's discharge be revoked. Nationwide will be treated as an omitted creditor.
Nationwide has not established that Debtor destroyed, hid or falsified recorded documentation. Fraudulent conduct has not been proved. Any material misrepresentation or false oath has not been established.
Adams v. Nationwide [In re Adams], 12/23/98.
Gregory Oczkus, Anchorage, for Adams; Peter Aschenbrenner, Fairbanks, for Nationwide.
6 ABR 49: Ch. 7, proofs of claim (withdrawal of), jury trial (Ross).
Motion to withdraw proofs of claim granted.
Approximately 200 Defendants in the Bonham Recovery Actions filed motions to withdraw their proofs of claim and obtain a jury trial in U.S. District Court on the Trustee's fraudulent transfer and preference avoidance action. See 5 ABR 521. They will begiving up their present claims to buy the right to a jury trial.
In re Bonham Recovery Actions [In re Bonham], 12/23/98.
Cabot Christianson (Bundy & Christianson), Anchorage, for Trustee; Brad Ambarian (Lane, Powell, Spears, Lubersky), Anchorage; Ronald Goss (Shulkin, Hutton), Seattle; William Satterberg, Fairbanks; Michael MacDonald (Downes, MacDonald & Levengood), Fairbanks; Gregory Oczkus, Anchorage; Mark Davis (Davis & Davis), Anchorage; George Goerig (Goerig & Associates), Anchorage; Christopher Zimmerman (McConahy, Zimmerman & Wallace), Fairbanks; Gary Sleeper (Jermain, Dunnagan & Owens), Anchorage; Barbara Schuhmann (Cook, Schuhmann & Groseclose), Fairbanks, for Defendants; David Parry (Birch, Horton, Bittner & Cherot), Fairbanks, and Rebecca Copeland (Koval & Featherly), Anchorage, for Joint Defense Committee; RaeJean Bonham, Fairbanks, pro se.
6 ABR 53: Ch. 13, interest calculations, plan payments (Ross).
National Bank of Alaska is holding $9,940 in plan payments in a non-interest bearing account, the principle sum for plan payments made on NBA's "unsecured" claim. Payments resulted from Debtor's strip down of NBA's secured claim under 9th Circuit law which was subsequently reversed. See 5 ABR 359. NBA has neither applied these funds to its secured claim nor put them in an interest bearing account. Debtor wants his money back, plus interest, after deducting the amount due. NBA doesn't want to pay interest because the proper allocation of the funds was under appeal for a number of years.
NBA is to provide figures for a hypothetical passbook savings account with hypothetical deposits akin to the plan payments for calculation of interest.
In re Dunlap, 1/6/99.
Johnny Gibbons (Dickerson & Gibbons), Anchorage, for Dunlap; Richard Ullstrom (Routh & Crabtree), Anchorage, for NBA.
6 ABR 62: Ch. 7, child support, post-secondary education (MacDonald).
Motion for summary judgment denied.
Debtor Jay Kennelty's separation agreement and divorce decree states he "shall pay 50% of the cost of sending the children to a state college or university for an undergraduate education." Debtor contends this provision is dischargeable as a court cannot order a parent to pay child support after a child attains the age of majority or order a parent to pay for post majority college expenses and this agreement is nothing more than a contractual obligation.
If the Parties or State Court intended this provision to function as child support, it is nondischargeable. However a genuine issue of material fact exists because the nature of the obligation cannot be determined by looking solely to the separation agreement and divorce decree.
Kennelty v. Croyle, Kennelty & Trumble County CSEA [In re Kennelty], 1/6/99.
Ronald Offret, Anchorage, for Kenneltys; Croyle, Kennelty & Trumble County CSEA, Ohio, pro se.
6 ABR 65: Ch. 7, authentication of exhibits (Ross).
An affidavit of one of the Trustee's attorneys is not proper authentication of exhibits.
In re Bonham Recovery Actions [In re Bonham], 1/8/99.
See attorneys listed in 6 ABR 49.
6 ABR 75: Ch. 7, usury, double damages (Ross).
Motion to dismiss claim for double damages granted.
The Trustee sued investors to recover double the usurious interest paid on investment contracts through Debtors' Ponzi scheme.
Recovery is barred because Debtors violated state securities laws when issuing the investment contracts.
In re Bonham Recovery Actions [In re Bonham], 1/20/99.
See attorneys listed in 6 ABR 49.
6 ABR 85: Ch. 7, usury, double damages, default judgments (Ross).
Several default judgments allowing the Trustee's claim for double damages for usury have been entered by the Clerk. Subsequently, there was a global ruling that the usury claims should be dismissed. See 6 ABR 75.
Since the default judgments pertaining to usury were not susceptible to a "sum certain" determination due to the pending global motion, any default judgment required the signature of the Court. Those signed by the Clerk will be set aside, even though the Defendants have not raised individual affirmative defenses.
In re Bonham Recovery Actions [In re Bonham], 2/24/99.
Cabot Christianson (Bundy & Christianson), Anchorage, for Trustee; David Parry (Birch, Horton, Bittner & Cherot), Fairbanks, and Rebecca Copeland (Koval & Featherly), Anchorage, for Joint Defense Committee; Barry Jackson, Fairbanks, for Defendants; RaeJean Bonham, Fairbanks, pro se.
6 ABR 94: Ch. 7, student loan, jurisdiction, sovereign immunity, Eleventh Amendment, Ex Parte Young doctrine (MacDonald).
Motion to dismiss granted.
Debtor Jacqueline Fowler seeks a determination that her student loans to ACPE and USA Funds are discharged pursuant to 11 USC §523(a)(8). ACPE moved for dismissal on grounds the Eleventh Amendment bars suit against it in federal court without its consent. Debtor argues ACPE has contended by virtue of AS 09.50.250 that she should be given leave to amend to name state officials in place of ACPE under the doctrine of Ex Parte Young and that ACPE is not an entity of the State entitled to assert sovereign immunity.
The amendment to AS 09.50.250 broadened the State's consent to be sued in its own state courts, expanding jurisdiction to both the superior and district courts. It was not an express waiver of the State's immunity from suit in federal court.
ACPE and Alaska Student Loan Corporation are agencies of the State which can assert sovereign immunity under the Eleventh Amendment and cannot be sued in Bankruptcy Court unless it so consents.
Persons aggrieved by a state's continuing violation of the Bankruptcy Code may obtain injunctive relief under Ex Parte Young in order to remedy a state officer's ongoing violation of federal law. The Debtor has not alleged ongoing or imminent collection actions by the State or any other action which would constitute a violation of the Bankruptcy Code. Debtor cannot successfully invoke the Court's jurisdiction simply by replacing ACPE with certain state officials. Debtor can seek a determination of the dischargeability of the student loan to ACPE in state court.
Fowler v. ACPE & USA Funds [In re Fowler], 1/13/99.
Robert Spitzfaden, Juneau, for Debtor; AG Teresa Williams, Anchorage, for ACPE; Michael Lindeman, Anchorage, for USA.
6 ABR 99: Ch. 7, automatic stay violation, sanctions, attorney fees & costs, appurtenance (fishing reel) (MacDonald).
Motion for sanctions for violation of automatic stay granted.
Paul Fleenor filed Ch. 7. An Order was entered abandoning the estate's interest in a fishing vessel to creditors Kenneth & Roseleen Moore. A salmon reel was not on the vessel when the appraisal was done or when Moores moved for abandonment. Moores sold the fishing vessel and then removed the salmon reel from storage without Debtor's consent and placed it on the vessel. Debtor contends Moores violated the automatic stay by taking the salmon reel, that it was his separate property and Moores were not entitled to take it by virtue of the Order of Abandonment. Moores argue the salmon reel was encompassed in the Order because it was an appurtenance of the vessel.
The reel belonged to Debtor and was not an appurtenance of the vessel at the time the Moores moved for abandonment. The appraisal did not list the reel. The Order abandoning the vessel did not include the reel.
Moores willfully violated the automatic stay. Their honest belief the reel was an appurtenance does not preclude their liability. Debtor is awarded actual damages of $1,000 plus his costs & actual attorney fees.
In re Fleenor, 3/12/99.
Thomas Yerbich, Anchorage, for Fleenor; Gary Sleeper (Jermain, Dunnagan & Owens), Anchorage, for Moores; Gary Spraker (Bundy & Christianson), Anchorage, for Barstow (Trustee).
6 ABR 106: Ch. 7, IFQ/quota shares, estate property (Ross).
In 5 ABR 471 (1998) it was determined that George Schmitz's IFQ/quota shares were property of the estate. See also 6 ABR 40 (1998). The Supreme Court of Alaska recently supported that conclusion in McGee v. McGee, holding that quota shares are marital property even though the program did not exist when the decree was entered. The program established a right to receive property (the quota shares and IFQs) based on the vessel's activity in the qualifying years.
Battley v. Schmitz and Sliney; Battley v. Schmitz [In re Schmitz]; 3/26/99.
William Artus (Artus & Choquette), Anchorage, for Battley; Cabot Christianson (Bundy & Christianson), Anchorage, for Schmitz; Robert Crowther, Anchorage, for Sliney.
6 ABR 108: Ch. 7, jury trial (right to), rescission, equitable remedy (District Court, Sedwick).
Bankruptcy Court affirmed.
Warren Kellicut had a judgment lien of $66,000 against Eugene Brooks and General Development, Inc. Otto Holta purchased the lien from Kellicut for $500, then filed a proof of claim against the bankruptcy estate of Brooks. Kellicut learned that funds were being held for creditors in the bankruptcy proceeding and intervened, filing a third-party complaint against Holta for breach of contract, misrepresentation and fraud, and seeking rescission of the contract by which he sold the lien to Holta. See 5 ABR 493 (1998). Judge MacDonald denied motions for summary judgment and struck Holta's demand for a jury trial, concluding that Holta had submitted himself to the Court's equity jurisdiction and had no right to a jury trial. After a bench trial, Bankruptcy Court found Holta had committed fraud, disallowed his claim, and ruled in Kellicut's favor, holding he was entitled to rescission of the agreement. Holta appeals the striking of his demand for a jury trial.
Holta is not entitled to a jury trial because Kellicut's claim was for rescission. Rescission is an equitable remedy and no right to a jury trial is recognized for equitable remedies.
Holta v. Kellicut, 5/7/99.
Otto Holta, Cathedral City, CA, pro se; Gary Sleeper (Jermain, Dunnagan & Owens), Anchorage, for Barstow (Trustee); Cabot Christianson (Bundy & Christianson) Anchorage, for Kellicut.
6 ABR 111: Ch. 7, discovery, bad faith, preclusion-establishment order (Ross).
Preclusion-establishment order entered. Motion for extension of time and a stay of sanction order denied.
Certain Bonham Recovery Action defendants in adversary proceedings to avoid fraudulent transfers have refused to grant discovery related to the issue of "good faith." Defendants waited until the last day for compliance and then retained an attorney who filed a motion for extension, not necessarily to comply, but to assess the situation. The Trustee seeks a preclusion order which will establish defendants did not receive the transfers in good faith.
The Wooten Group was granted numerous opportunities to comply. The thwarting of legitimate discovery requests has been willful and in bad faith. A preclusion-establishment order is appropriate.
In re Bonham Recovery Actions [In re Bonham], 5/26/99.
RaeJean Bonham, Fairbanks, pro se; Cabot Christianson (Bundy & Christianson), Anchorage, for Trustee; Pamela Scott, Anchorage, for Defendants.
6 ABR 126: Ch. 7, exemption (escrow proceeds), due process rights, jurisdiction, procedure, timely filing (Ninth Circuit).
District Court affirmed in part, vacated in part.
Evalyn Preblich was engaged in buying, selling & financing real estate. She filed Ch. 11 in 1987 which was converted to Ch. 7 in 1988 and discharged in 1991. In 1993 Preblich moved Bankruptcy Court for a return of payments that had been received by the Trustee on escrow accounts, claiming the proceeds were exempt. The Trustee objected and Bankruptcy Court denied Preblich's motion. The Trustee then filed a motion objecting to certain creditors' claims. After hearing, Bankruptcy Court sustained the Trustee's objections. Preblich again moved Bankruptcy Court for return of the escrow proceeds, then moved Bankruptcy Court to vacate its order sustaining Trustee's objections to the creditors' claims, alleging she had not been notified of Trustee's objections or the hearing and that her due process rights had been violated. Bankruptcy Court denied both motions and District Court affirmed Bankruptcy Courts denial. Preblich appealed.
The Trustee was required to give Preblich notice of his objections to the creditors' claims and the hearing, which he failed to do. In this case, the failure was harmless and did not violate Preblich's due process rights as she cannot show she was deprived of life, liberty or property as the stay on a piece of property had not been lifted. Also, Rule 70 does not provide the relief Preblich seeks.
Preblich argues her claim of exemption in the escrow proceeds should be allowed because the Trustee failed to timely object and has therefore waived any argument the proceeds are not exempt. Preblich's schedule of exemptions was insufficient to put the Trustee on notice that she was claiming an exemption in the proceeds. Thus, the 30-day objection period was triggered only upon the Trustee receiving actual notice of the claim of exemption, which he did not receive until 1993. Within 30 days of that time, the Trustee filed an objection to Preblich's claim of exemption. Trustee argues, for the first time, that Preblich failed to timely appeal Bankruptcy Court's denial of her motion for return of the escrow proceeds and District Court therefore had no jurisdiction of Preblich's appeal. The denial of a claim of exemption is a "final" order under §158(a)(1) and appeal from an order denying an exemption must be taken within the time allowed or the right to appeal will be waived. Preblich filed notice of appeal 17 months after Bankruptcy Court's Order. Failure to timely file deprived District Court of jurisdiction to consider whether the escrow proceeds were exempt.
Preblich v. Battley, 6/15/99.
Evalyn Preblich, Anchorage, pro per; Michelle Boutin (Bundy & Christianson), Anchorage, for Battley (Trustee); William Bates and Kevin Epstein (McCutchen, Doyle, Brown & Enersen), San Francisco, pro bono amicus curiae.
6 ABR 137: Ch. 7, fraud (as exception to discharge), justifiable reliance, credit card debt, Dougherty test, attorney fees & costs (MacDonald).
Claim for fraud dismissed. Defendant awarded attorney fees & costs.
Charles Raney received an unsolicited offer for a pre-approved credit line from US Bank. He accepted and had USB pay 3 credit cards. He attempted to refinance his home, which failed due to a $36,000 judgment against him. He filed Ch. 7. USB contends Raney's failure to inform it of his intention not to repay his charges constitute fraud, and seeks exception to discharge.
Applying the 12 factor test from Dougherty and the circumstances of this case, Raney did not intend to deceive USB. He made no false representations nor did USB justifiably rely on any representation of Raney's. USB failed to submit any evidence to substantiate this element of fraud. Reliance or "justifiable reliance'' fails when credit has been pre-approved. Raney is entitled to attorney fees & costs.
US Bank v. Raney [In re Raney], 8/5/99.
Roy Longacre (Longacre & Associates), Anchorage, for US Bank; Jeff Carney, Wasilla, for Raney.
6 ABR 144: Ch. 7, antecedent debt, security agreement, lease, rent, preference, "claim,'' "debt'' (Ross).
Rent and maintenance reserve payments made, and the security agreement granted, are antecedent debt.
GPA collected monthly rental and maintenance reserve payment from Debtor MarkAir under existing leases for use of aircraft within 90 days of filing, and obtained a security agreement on most of MarkAir's unencumbered assets. The Trustee seeks to recover the rent and maintenance reserve payments and avoid the security interest as preferential and maintains the payments and security interest were for antecedent debt. GPA argues the rent and reserve payments were not preferential since they were for current rent and not for antecedent debt and that the unpaid rent and maintenance reserve payments which accrued after receiving the security agreement were not antecedent debt with respect to the security agreement.
Based upon the expansive definition of "claim'' and "debt'' under the Code, the payments and security interest were for antecedent debt. The grant of the security interest was preferential.
Aerfi Group, Aerfi Jetprop Limited, Aerfi Corp. and Air Tara Limited v. Barstow (Trustee) [In re MarkAir], 9/24/99.
Spencer Sneed (Dorsey & Whitney), Anchorage, for Plaintiffs; Michael Mills (Bankston & McCollum), Anchorage, for Defendant; John Siemers (Burr, Pease & Kurtz), Anchorage, for Trustee.
6 ABR 202: Ch. 11, fraudulent disclosures, automatic stay violation, turn over, disgorgement, sanctions, attorney fees & costs, (MacDonald).
Application for fees & costs denied. Orders appointing William Artus as attorney vacated. $10,952 to be turned over. $4,048 to be disgorged. Motions for sanctions granted. Artus not to be employed in bankruptcy cases without certification from US Trustee.
William Artus worked for Wayne Browning (Browning Timber of Alaska). By 1/99 Browning owed Artus $4,048. On 2/1/99 Artus received a $15,000 retainer from Browning and filed Ch. 11 for the corporation. Artus also filed an application for authority to be employed as attorney for the estate, not mentioning his prepetition bill or the $15,000 retainer. His firm was not listed as a creditor in Schedules and Statements and the $15,000 payment was buried in attachments to Statement of Financial Affairs. Bankruptcy Court issued an order to show cause for various filing infractions, including failure to file an attorney disclosure statement. Artus transferred $4,048 from his trust account to apply to prepetition fees. One day later he executed an attorney disclosure statement, which failed to list the $15,000 and instead showed a payment of $10,952, not disclosing the $4,048 or an earlier payment of $158 paid by Browning. After questioning from the US Trustee, Artus filed an amended application disclosing the full $15,000 retainer and his application of a portion of the retainer to Debtor's prepetition bill. Artus represented he would waive his prepetition claim and apply the $15,000 solely to postpetition services. The US Trustee objected and moved for sanctions.
Artus engaged in a pattern of misrepresentation and deceit. He obtained an order authorizing employment knowing he was a creditor of the estate. When forced to file a disclosure statement he knowingly violated the automatic stay, paid his prepetition bill and then covered it up in fraudulent Rule 2016(b) disclosures. Severe sanctions are warranted.
In re Browning Timber of Alaska, 10/13/99.
William Artus (Artus & Choquette), Anchorage, for Debtor; UST Barbara Franklin, Anchorage.
6 ABR 211: Ch. 13, nunc pro tunc relief from stay, dismissal of petition, vested title (MacDonald).
Motion for relief from stay nunc pro tunc granted. Motion to dismiss granted. Title to vest with State.
Donna Barr filed Ch. 13 3 times in 3 years in an effort to save a 12-plex financed by the State from foreclosure. Twice she defaulted on plan payments and 2 cases were dismissed. The State scheduled a foreclosure sale and Barr moved for a TRO in Superior Court. The Parties reached a settlement agreement in which the State would postpone foreclosure to allow Barr to refinance. She was unable to close and again filed Ch. 13 on 3/1/99. The State purchased the property at a foreclosure sale on 3/2/99, unaware of the Ch. 13 filing. Upon discovery of the filing the State moved for relief from stay nunc pro tunc, and to dismiss. Barr indicated she had a firm offer for sale of the 12-plex. The State's motions were continued without date. The sale failed. The State brought its motions back on for hearing. Just prior to hearing, Barr requested voluntary dismissal.
Retroactive relief from stay is appropriate. Barr has engaged in a string of lengthy, unsuccessful Ch. 13's and state court litigation to thwart foreclosure efforts. He conduct is cause for revesting the property in the State.
In re Barr, 10/19/99.
Ralph Petty (Weiss, Berrett, Petty), Salt Lake City, UT, for Barr; AAG Mary Ellen Beardsley, Anchorage.
6 ABR 217: Ch. 11, right of first refusal, executory contract (Ross).
Right of first refusal not executory contract.
§ 365(a) not an avoiding power.
Debtors want to sell several lots, acquired prepetition, subject to a right of first refusal in favor of adjoining lot owners. (See related 5 ABR 167 & 5 ABR 172.) They move to reject the RFR as an executory contract and impliedly avoid the RFR. An adjoining lot owner opposes on grounds the RFR is not an executory contract subject to rejection.
The right of first refusal is not an executory contract and therefore not subject to rejection under § 365(a). §365(a) is not an avoiding power which repudiates, cancels or terminates the RFR.
In re Bergt, Alaska International Properties, Viewpoint Ventures Partnership, Alaska International Industries, and Alaska Diversified Properties, 11/8/99.
Ronald Goss (Shulkin, Hutton), Seattle, for Debtors; Jeffrey Stark (Delaney, Wiles, Hayes, Gerety, Ellis & Young), Anchorage, for Wood River Ltd.; Patrick McCabe (Owens & Turner), Anchorage, for GCI.
6 ABR 256: Ch. 7, nonrecourse claims, third-party beneficiaries, parol evidence (Ross).
Four couples, the McLanes, were in a partnership which leased land from Stengas. Stengas had no recourse against the partnership or its partners for defaults, but could only recover land. For unrelated financial reasons, the husbands withdrew from the partnership, but the wives continued and agreed to pay the partnership debts. Stengas filed claims against the women's bankruptcy estates as third-party beneficiaries of their agreement to pay the partnership debts. The Trustee objects on the ground the debts are nonrecourse.
The claims are disallowed. Parol evidence, which is admissable, shows the four couples did not intend to gratuitously turn nonrecourse claims into large liabilities against the women.
In re McLane, 12/2/99.
Steve Shamburek, Anchorage, for Stengas; Spencer Sneed (Dorsey & Whitney), Anchorage, for McLane Women; Cabot Christianson (Bundy & Christianson), Anchorage, for McLane Men; Rebecca Copeland (Koval & Featherly), Anchorage, for Trustee Larry Compton; John Siemers (Burr, Pease & Kurtz), Anchorage, for Trustee Ken Battley; John Beard, Anchorage, for FNBA; Richard Haggart, Anchorage, for City of Kenai.
6 ABR 265: Ch. 11, remand, abstention, venue(MacDonald).
Motion to remand granted. Motion for abstention denied. Motion for change of venue denied.
Pacserve Corp. dba Raven Shipping leased a warehouse from Charlotte Davis. Raven installed cooler and freezer components in Davis's property. Raven filed Ch. 11. American Fast Freight bought most of the assets including the cooler and freezer components. Bankruptcy Court approved the sale subject to Davis's landlord rights. AFF rejected the lease and removed the components to a new location. Davis sued AFF in Superior Court. AFF removed the action to Bankruptcy Court and moved to change venue. Davis moved for remand and abstention. AFF contends Bankruptcy Court must rule on its motion for change of venue prior to considering the motion to remand and abstain.
Remand is appropriate and will streamline the claims resolution and distribution process of the bankrupt estate.
Davis v. American Fast Freight [In re Pacserve Corp.], 12/8/99.
Erling Johansen (Davison & Davison), Anchorage, and Krista White (Bishop, Lynch & White), Seattle, for Davis; Mark Bledsoe, Anchorage, Robert Gunther, Anchorage, and Shelly Crocker (Crocker, Kuno), Seattle, for American Fast Freight; James Day (Bush, Strout & Kornfeld), Seattle, for Pacserve Corp. dba Raven Shipping.
6 ABR 269: Ch. 7, bankruptcy fraud, concealment of assets, tax fraud, Mandatory Victim Restitution Act (Ninth Circuit).
Sentences affirmed. Orders of restitution reversed; remanded to District Court.
Robert Kubick was a real estate developer who experienced financial difficulties after collapse of the Alaska oil market. He conceived a plan to conceal assets while discharging his substantial debt in bankruptcy, enlisting family members, friends, accountants and Fort Worth attorneys William Herron and Carol Birdwell. Kubick transferred assets to shell corporations, placed assets in the names of friends and family, directed his co-conspirators to conceal assets for him and buried cash and diamonds to conceal them from creditors. Herron created and ran the shell corporations. Kubick filed Ch. 7 failing to disclose over $4.6 million in assets. Kubick, Herron and Birdwell were indicted. Kubick went to Mexico. Mexico revoked his passport and he was returned to Alaska for trial. Kubick and Herron pled guilty to conspiracy to commit bankruptcy fraud and conspiracy to impede and impair the IRS. Birdwell pled guilty to conspiracy to impede and impair the IRS. District Court sentenced Kubick to 58 months in prison and initially ordered him to pay $600,000 in restitution pursuant to the Mandatory Victim Restitution Act (MVRA). His sentence was enhanced by four levels for his leadership role and enhanced two levels for fraud upon the Bankruptcy Court.
Herron was sentenced to 36 months in custody and ordered to pay $150,000 pursuant to MVRA. The Court increased his offense level by two levels for violation of judicial process and by another two levels for "use of a special skill" in concealing Kubick's assets.
The illegal acts upon which restitution were ordered occurred prior to MVRA's effective date. Accordingly, Kubick was resentenced to make restitution of $24,000 and Herron $6,000. Both appeal their sentences (except restitution), contending the adjustments should not be applied to concealment of assets in a bankruptcy fraud. The government cross-appealed the orders of restitution.
Adjustment is applicable in bankruptcy proceedings and it may be used to increase the offense level of a defendant who conceals assets in violation of the bankruptcy process.
Kubick and Herron admitted that the conspiracy continued beyond the effective date of the MVRA. Accordingly, the orders of restitution are reversed and remanded to District Court to apply the MVRA.
USA v. Kubick and Herron, 12/10/99.
Michael Taggart, Deputy Federal Public Defender, Anchorage, for Herron; Alan Ellis, Peter Goldberger and Pamela Wilk (Law Offices of Alan Ellis), Sausalito, CA, for Kubick; AUSA's James Barkeley and Joseph Bottini, Anchorage.
6 ABR 288: Ch. 7, constructions loan draws, fiduciary duty, trust obligation (Ross).
A.F. Scott, Inc., a home building company owned by Aaron Scott, received construction loan draws from Key Bank, but did not pay a supplier for some of the materials included in the draw estimate. Key Bank allowed the draws without requiring the prime contractors and the amounts to be paid them identified as provided by A.S. §34.35.062(f),(g). Scott filed Ch. 7. Spenard Builders Supply seeks to avoid discharge of its claim based on §524(a) for Scott's defalcation while acting as a fiduciary.
Although state statutes may impose a trust obligation, where the prime contractors are not identified no trust obligation to them exists.
Spenard Builders Supply, Inc. v. Scott and Haverfield [In re Scott and Haverfield], 1/12/00.
Calvin Jones (Hoge & Lekisch), Anchorage, for SBSI; Rebecca Copeland (Koval & Featherly), Anchorage, for Scott and Haverfield.
6 ABR 302: Ch. 7, vessel (sailboat), security interest(MacDonald).
Motion for relief from stay granted.
Frederick Woelkers purchased a sailboat from Dyanne Bestry pursuant to a purchase agreement and an additional agreement pertaining to insurance, taxes, utilities and moorage. Woelkers defaulted under the purchase agreement. Bestry sued in State Court for breach of contract and was granted summary judgment. Woelkers filed Ch. 7, indicating he would reaffirm the debt with Bestry and avoid the lien. Bestry is scheduled as a general, unsecured creditor with a disputed claim, amount unstated, and the purchase agreement is listed as an executory contract. Bestry seeks relief from stay so she can recover the vessel. Woelkers and the Trustee object contending Bestry's interest in the vessel is avoidable because she does not hold a perfected lien or security interest.
Bestry has an enforceable interest in the vessel. Title and registration has remained with her. The Trustee's avoidance powers cannot defeat her interest in the vessel.
In re Woelkers, 12/22/99.
Linda Webb (Hagans, Ahearn, McLaughlin & Webb), Anchorage, for Bestry; William Artus (Artus & Choquette), Anchorage, for Trustee Kenneth Battley; Woelkers, Seward, pro se.
6 ABR 306: Ch. 7, Transalaska Pipeline Liability Fund, Exxon Valdez oil spill, abandoned claims (MacDonald).
Motion to close case denied. Motion to revoke technical abandonment denied as moot.
Thomas and Sonja Redmond are members of the class action against Exxon for the Exxon Valdez oil spill. Redmonds filed Ch. 7 and on Schedule B-2 listed Transalaska Pipeline Liability Fund claims. The Trustee filed a report of no distribution and a final decree closing the case was entered. The US Trustee moved to reopen the case on grounds there were potential assets to distribute to creditors, including claims related to the "Exxon Valdez Oil Spill Litiga tion." The case was reopened and Debtors move to close the estate on grounds there are no assets to administer.
Redmonds properly scheduled their TAPLF claims and they have been abandoned to them. However the claims against Exxon were not scheduled and have not been abandoned. Only scheduled claims may be abandoned.
In re Redmond, 1/4/00.
Thomas Yerbich, Anchorage, for Redmonds; Gary Spraker (Bundy & Christianson), Anchorage, for Trustee William Barstow.
6 ABR 310: Ch. 7, exemption (notes receivable), liquid assets(MacDonald).
Objections to Debtor's claim of exemption overruled.
Dorismae Melin filed Ch. 7. She has monthly income of $525 social security, $550 from notes and $440 contributed by family members. She claims an exemption in the proceeds from the notes. The Trustee objects contending Debtor is entitled to a one-time exemption and cannot exempt future income from the notes.
Debtors who are not receiving earnings may exempt a similar amount as a working debtor for the necessities of life from available cash or other liquid assets. There is no restriction on the number of months that the exemption may be claimed. It is a continuing exemption which allows a debtor to retain sufficient funds to provide for basic needs.
In re Melin, 1/5/00.
Jeff Carney, Wasilla, for Melin; Thomas Yerbich, Anchorage, for Trustee Larry Compton; Grant Watts (Wade & DeYoung), Anchorage, for Alaska Pipe & Supply.
6 ABR 316: Ch. 13, sanctions, frivolous filing(MacDonald).
Motion for sanctions granted.
Donald and Parris Reynolds obtained a judgment for over $500,000 against Eldridge Sisson and his defunct corporation The Sisco Group Inc. Reynolds took virtually all of Sisson's personal property leaving him with clothes, a mattress and a lamp. Sisson filed Ch. 13 the next day. Attorney James Hill demanded the return of Sisson's property. Sisson passed away. Hill attempted to continue the bankruptcy proceedings. The case was dismissed as an estate cannot filed Ch. 13. Reynolds moved for sanctions contending the bankruptcy proceeding was presented to harass creditors and cause unnecessary delay and that the petition was a frivolous filing.
Nonmonetary and monetary sanctions are appropriate. Hill will only be allowed to file Ch. 13 petitions with completed schedules, statements and plans in the future. A monetary sanction of $1,000 is assessed.
In re Sisson, 1/24/00.
James Hill, Anchorage, for Sisson; Barton Tiernan, Anchorage, for Reynolds.
6 ABR 321: Ch. 7, sanctions, attorney fees & costs, punitive damages, willful violation of stay(MacDonald).
Gary and Tammy Smith moved to Fairbanks and stayed at AAAA Care Bed & Breakfast, a facility operated by Patricia Obrist. Smiths performed some services for Obrist and later moved on base. Obrist contends Smiths owe her rent, Smiths contend any debt for their stay was offset by services they performed. Obrist sued Smiths, obtaining a judgment for $634 and filed an involuntary allotment against Smith's military pay. Smiths filed Ch. 7.
Obrist attended the §341 meeting and was advised of the automatic stay and told not to pursue her judgment in any manner. Obrist wrote to her congressmen complaining of "fraud and abuse" and then called the Better Business Bureau to report Debtors for their alleged fraudulent business practices.
In the meantime, Smith's check was garnished twice.
Creditors have an affirmative obligation to stop all prepetition garnishment actions initiated on their behalf after the debtors have filed bankruptcy. Smiths are entitled to actual damages, including attorney fees and costs. In addition, due to the extreme and outrageous conduct of Obrist, punitive damages of $500 are imposed against her.
In re Smith, 1/28/00.
Valerie Therrien, Fairbanks, for Smiths; Pat Obrist, Fairbanks, pro se.
6 ABR 327: Ch. 7, tax liens, preferred priority creditors, (Ross).
Trustee's motion for reconsideration denied.
The Trustee has sold various properties subject to priority tax liens for amounts which exceed those tax liens and any other unavoidable liens. There is a balance which taxing authorities argue should be returned to them to the extent payment of their liens was postponed under §724(b)(2). The Trustee argues the balance should continue to be applied to priority claims instead of being returned to the unpaid tax lienor.
§724(b)(5) indicates that the tax lienor is to be reimbursed for the amount of its postponed tax lien if there is enough money available after paying the preferred priority creditors and senior and junior liens.
In re Markair, Inc., 2/7/00.
Erik LeRoy, Anchorage, and John Siemers (Burr, Pease & Kurtz), Anchorage, for Trustee; AMA Peter Hallgrimson, Anchorage, for Municipality of Anchorage; David Clark, Anchorage, for North Slope Borough.
6 ABR 334: Ch. 7, default judgment, revocation of discharge (Ross).
Default judgment denied. Revocation denied.
3 months after Steven Kirschbaum's discharge the Trustee entered into a court-approved settlement requiring among other things that Kirschbaum pay $12,000. He never paid and the Trustee seeks to revoke discharge for Debtor knowingly and fraudulently obtaining property of the estate or an advantage in connection with the case and failing to obey a court order. Kirschbaum failed to answer and the Trustee has defaulted him.
Default judgment is denied because revocation for fraudulently obtaining property or advantage is time barred. The Trustee has not identified any property or advantage that the Debtor obtained and the Complaint cites no court order which the Debtor failed to obey.
Battley v. Kirschbaum [In re Kirschbaum fdba Kirschbaum Corporate Marketing], 2/14/00.
Ch. 7 Trustee Kenneth Battley, Anchorage; William Artus, Anchorage, for Trustee; Steven Kirschbaum, pro se.
6 ABR 343: Ch. 7, tax protestor, pension fund, tax levy, collateral estoppel (Ross).
Partial summary judgment granted to IRS.
In 1/91 the IRS levied on tax protestor Lawrence McCubbins' pension fund for $970,000 back taxes. McCubbins filed Ch. 7 and was discharged in 1993. In 1997 he retired and the IRS began collecting monthly pension benefits based on the 1991 levy. McCubbins filed an adversary proceeding for a declaration that the taxes involved were discharged and the pension fund proceeds are exempt, to recover the amounts paid to the IRS pursuant to the levy, and to hold the IRS in contempt for violating the discharge injunction. The IRS contends Debtor filed fraudulent tax returns for 1 year and failed to file returns for other years, making the taxes nondischargeable and that the levy was valid despite the bankruptcy.
The penalties are dischargeable because they were more than 3 years old at the time of filing. The taxes and interest are not dischargeable because McCubbins filed a fraudulent return and failed to file other returns.
Dischargeability of the penalties does not abrogate the IRS prepetition levy for the full amount of the levy (including penalties) against the pension rights of Debtor, which are not subject to an exemption under the Tax Code.
It is unclear as to the degree the pension was vested at the time of the levy. A levy only applies to the property owned by a tax debtor when the levy is served, and not after-acquired property.
McCubbins v. USA, IRS [In re McCubbins], 3/6/00.
Keith Blair, Anchorage, and Stephen Baker, Anchorage, for IRS; Lawrence McCubbins, Homer, pro se.
6 ABR 355: Ch. 7, Ponzi scheme, fraudulent conveyance (Ross).
Final judgment to be vacated if Defendants stipulate to vacate pending appeal.
Randy Maag and Alene Maag received $20,000 and $63,500 respectively from a Ponzi scheme operated by RaeJean Bonham dba World Plus Inc. and Atlantic Pacific Funding Corp. Bankruptcy Court entered final judgment against Maags for their net gain from Debtors as fraudulent conveyances. Defendants appealed contending the Trustee failed to plead and prove Defendants participated in Bonham's fraudulent schemes and that Alaska law does not prohibit the fraudulent conveyance of money. The Trustee opposed Defendants' motion to vacate Bankruptcy Court's final judgment. At hearing the Parties agreed Maags would withdraw their appeal and Bankruptcy Court would vacate entry of final judgment to allow the Court to enter a written decision on a number of motions which there has previously been tentative oral decisions.
Under Alaska law it is the actual intent of the transferor, the Debtors in this case, that alone determines whether the transfer was fraudulent.
The Trustee has stated a valid claim for fraudulent conveyance of money under AS 34.40.010 for payments made within 6 years of the petition date. Bankruptcy Court intends to issue a more extensive brief on the "money" issue at a later date.
Compton [Trustee] v. Maag [In re Bonham], 3/13/00.
Cabot Christianson (Bundy & Christianson), Anchorage, for Trustee; Gregory Oczkus, Anchorage, for Defendants.
6 ABR 365: Ch. 7, tax fraud, collateral estoppel (Ross).
In 6 ABR 343 Bankruptcy Court granted partial summary judgment to the IRS based on a prior Tax Court ruling. Thereafter the 9th Circuit decided In re Palmer, which may make the granting of collateral estoppel in 6 ABR 343 error.
Palmer did not participate in any Tax Court proceedings after he initially petitioned for redetermination. Tax Court found Palmer engaged in tax fraud. He filed Ch. 7. The IRS contended Palmer was collaterally estopped from denying fraud and nondischargeability because of the prior Tax Court judgment against him involving the same taxes he was seeking to discharge. BAP reversed on grounds fraud had never been litigated. The 9th Circuit affirmed holding that Palmer's nonparticipation in the Tax Court proceeding, except for his original petition, was akin to a default. Therefore, the Tax Court judgment could not be used as a basis for collateral estoppel.
IRS is ordered to show McCubbins participated in the 1989 Tax Court case to a greater degree than Palmer did.
McCubbins v. IRS [In re McCubbins], 3/22/00.
Keith Blair, Anchorage, and Stephen Baker, Anchorage, for IRS; Lawrence McCubbins, Homer, pro se.
6 ABR 369: Ch. 7, Ponzi scheme, Trustee (standing), (avoiding powers),substantive consolidation (non-debtors with debtor). . . Ross affirmed (US District Court, Singleton).
Defendants' motion to dismiss Trustee's complaints for lack of standing denied.
Bonham Recovery Action Defendants claim that Trustee Larry Compton lacks standing to avoid and recover payments of the non-debtor corporations owned and operated by RaeJean Bonham to investors. Defendants argue that (a) trustees do not have standing to prosecute causes of action that are not property of the estate or do not arise under the bankruptcy code; (b) substantive consolidation does not transform a non-debtor into a debtor; (c) substantive consolidation is improper unless the Trustee can establish that investors of World Plus, Inc. and Atlantic Pacific Funding Corp. were knowing participants in Bonham's fraudulent scheme; (d) nunc pro tunc substantive consolidation cannot be granted; and that (e); an adversary proceeding is required for substantive consolidation.
Judge Ross committed no clear error in granting the substantive consolidation of Bonham with non-debtor corporations WPI and APFC. No injustice to creditors has been found. The substantive consolidation necessarily afforded the Trustee standing with regard to the non-debtor corporations. The substantive consolidation was not affected by withdrawal of the reference.
In re Bonham, 2/22/00.
Cabot Christianson (Bundy & Christianson), Anchorage, for Trustee; Gregory Oczkus, Anchorage, for Defendants.
6 ABR 412: Ch. 7, Ponzi scheme, expert qualifications (Ross).
Summary judgment for Trustee that Debtors operated Ponzi scheme since 1989.
RaeJean Bonham d/b/a World Plus Inc. and Atlan-tic Pacific Funding Corp. operated a business selling airline tickets procured by Debtors using frequent flier miles purchased from brokers. From 1988 the business never generated a profit and Debtors procured numerous investors at an increasing rate, ostensibly to finance the ticket business, but whose investments were used almost exclusively to pay off earlier investors at exorbitant interest rates. The Trustee filed a number of fraudulent transfer actions seeking to recover money paid by Debtors to investors and has now moved for summary judgment to establish that Debtors operated a Ponzi scheme from 12/89. Some Defendants oppose, arguing that losses suffered by Debtors may have resulted from Debtors having bled the funds from operations of a profitable business.
The Trustee and his expert witness E. Jayne MacPhee meticulously reconstructed Debtors' disar-rayed records to establish the existence of a Ponzi scheme. The Defendants expert, F. Wayne Elggren, points to a number of alleged fallacies in the Trustee's analysis.
The Trustee does not challenge Elggren's qualifications as an expert in forensic fraud investigation. However, Elggren's report is based on substantial factual mistakes, speculation, innuendo and inferences not supported by full explanations and analysis. Under the Court's Daubert gatekeeper function, his expert testimony is excluded.
Defendants challenge the expertise of both MacPhee and the Trustee. They criticize MacPhee's lack of a CPA degree or certification in certain groups of accounting fraud detection professionals. However, her experience and training qualify her to render an expert opinion on accounting matters related to reconstruction or analysis of business records. Likewise the Trustee, even though he is a party, may qualify as an expert even though his bias can be challenged. He is a CPA and a panel trustee which has given him on-the-job experience in understanding and reconstructing finan-cial transactions.
Given the increasing portfolio of investment con-tracts marketed by Debtors from 1988 and the decreas-ing income and profitability from ticket sales, Debtors have operated a Ponzi scheme for at least 6 years before the petition date.
In re Bonham Recovery Actions [In re Bonham d/b/a World Plus Inc. and Atlantic Pacific Funding Corp. 4/7/00.
Cabot Christianson (Bundy & Christiamon), Anchorage, for Trustee; Brad Arabarian (Lane, Powell, Spears & Lubersky), Anchorage; Grant Courtney (Lane, Powell, Spears & Lubersky) Seattle; Ronald Goss (Ellis & Goss), Seattle; Pamela Scott, Anchorage, for Defendants; John Burns (Borgeson & Burns), Fairbanks, and Rebecca Copeland (Koval & Featherby), Anchorage, for Joint Defense Committee.
6 ABR 461: Ch. 7, venue, priority claim (import/export duties), sovereign immunity (MacDonald).
Motion to dismiss granted.
Kyong Ae Matthieu married a civilian employee of the Army Corps of Engineers and became a US citizen in 1966. They were stationed in Korea since 1983. In 7/99 Mr. Matthieu was reassigned to Anchorage and moved, taking most of their possessions with him. Kyong Ae Matthieu owed the Korean government $310,000 for import-export duties in conjunction with a business she operated and the Korean government refused to allow her to leave the country without first paying the duties. She filed Ch. 7 in Alaska. The U.S. Trustee moves to dismiss on grounds of improper venue and that Bankruptcy Court cannot grant Debtor any meaningful relief.
Even though the Debtor has resided in Korea over the 180-day period preceding filing, her principal assets have been located in Alaska. Therefore, Alaska is an appropriate venue.
Debtor contends that 90% of her $310,000 debt is for penalty rather than duty and is simply a general unsecured claim. However, neither the duty nor the penalty are dischargeable. As Korea is the sole creditor, bankruptcy will not afford Debtor any meaningful relief.
Further, Korea has immunity under the Foreign Sovereign Immunity Act. Thc Debtor could not obtain any relief through a Ch. 7 discharge.
In re Matthieu, 5/8/00.
Frank Cahill, Anchorage, for Debtor;, AUST John Ruebelmann, Anchorage.
6 ABR 464: Ch. 7, transfer of claim (Ross).
Trustee's motion for reconsideration of "Order of Substitution of Creditor" and trustee's standing objection to assignment of claims to Argo Partners denied.
Argo Partners has recently filed several notices of claim transfers, which are being transferred for ll˘ on the dollar. The Trustee is about to make an interim distribution of 20˘ on the dollar, a fact known to Argo but not being disclosed by Argo to the claims transferors. The Trustee objects to the claims transfers on grounds no disclosurce of the 20˘ on the dollar distribution has been made by Argo to the claims transferors.
Based on Olson there is insufficient reason for the Court to become involved in this matter, absent any timely objections by thc transferors.
In re Bonham, 6/7/00.
Cabot Christianson (Bundy & Christianson), Anchorage, for Trustee.
6 ABR 468: Ch. 7, Ponzi scheme, fraudulent conveyance (Payments of money), right of recoupment, right of rescission, certification, jury trial (District Court, Singleton).
Motions for reconsideration and clarification denied. Motion for certification denied.
Motion for entry of final judgment denied.
Plaintiff Larry Compton seeks to recoup payments made to investors in RaeJean Bonham's Ponzi scheme. Defendants have moved for reconsideration and clarification in addition to requesting certain issues be certified to the Alaska Supreme Court. Plaintiff has moved for entry of final judgment as to an individual Defendant, Diana Evans, which she has Opposed.
Defendants maintain Plaintiff is attempting to use state law to reach further back into Bonham's scheme than is possible under federal law, arguing that the money at issue is not expressly covered by AS 34.40.010 and that Plaintiff is attempting to incorporate money into the fraudulent conveyance statute's understanding of goods. The Alaska Supreme Court is likely to conclude that AS 34A0.010 covers fraudulent transfers of money to defraud creditors or to adopt under its common law power a parallel proceeding to address fraudulent transfers of money.
Defendants will be permitted to present evidence as to whether or not an investment was rolled over unilaterally by Debtor without any action or consent on the part of Defendants. If lack of knowledge is found by the trier of fact Defendants may assert their right to recoupment. Recoupment is not available to those who knew of the high risk of their investment and gambled on that knowledge.
Defendants cite AS 45.55.930 for the proposition that each Defendant has the right to rescind each and every contract with Bonham or her corporations. Unless a Defendant can prove at trial that he acted in good faith in his dealing with Bonham he is precluded from basing rescission on AS 45.55.930. Any right a Defendant would have to rescind her contract to avoid Plaintiff's claim would collapse into her good faith defense. There is only one defense, not two.
There may be merit to the certification suggestion, but only after the evidence is in and a final judgment rendered as to each investor Entry of final judgment would be premature at this time. Each Defendant is entitled to a jury trial as to his participation in the Ponzi scheme.
The motions for reconsideration and clarification are denied as prior Orders are sufficiently clear and address the issues raised in the motions.
Compton v. Beadle, et al., [in re Bonham], 5/31/00.
Cabot Christianson (Bundy & Chrlstianon), Anchorage, for Trustee; For Defendants: Brad Arabarian (Lane, Powell, Spears, Lubersky), Anchorage; Ronald Goss (Shulkint Hutton}, Seattle; William Satterberg, Fairbanks; Michael MacDonald (Downes, Mac Donald & Levengood), Fairbanks; Gregory Oczkus, Anchorage; Mark Davis (Davis & Davis), Anchorage;George Goerig , Anchorage (Goerig & Associates);Christopher Zimmerman, (McConahy, Zimmerman & Wallace), Fairbanks; Gary Sleaper (Jermain, Dunnagan & Owens}, Anchorage; Barbara Schuhmann (Cook, Schuhmann & Groseclose), Fairbanks; David Parry (Birch, Horton, Bittner & Cherot), Fairbanks, and Rebecca Copeland (Koval & Featherly}, Anchorage, for Joint Defense Committee; RaeJean Bonharn, Fairbanks, pro se.
6 ABR 473 Ch. 7, abandoned claims, Exxon Valdez oil spill, Trans-A!aska Pipeline Liability Fund (District Court, Sedwick).
Bankruptcy Court (MacDonald) affirmed.
Thomas & Sonja Redmond are commercial fishermen with class action suits filed against Exxon for the Exxon Valdez oil spill. They also have four claims against the Trans-Alaska Pipeline Liability Fund arising from the oil spill. Redmonds filed Ch. 7 (See 6 ABR 306) scheduling their TAPLF claims but not their potential interest in the action against Exxon. The bankruptcy case was closed after the Trustee filed a report of no assets and Bankruptcy Court discharged. The US. Trustee moved to reopen to administer potential settlement proceeds from the Exxon class action judgment. Bankruptcy Court reopened the case. Redmonds moved to close arguing the Exxon claims were abandoned when the case closed in 1992. The US. Trustee opposed the motion and moved to revoke any abandonment of the Exxon claims. Bankruptcy Court denied both motions. Redmonds appeal.
Redmonds contend that their disclosure of the TAPLF claims should have put the Trustee on notice of all their Exxon Valdez claims. Therefore their claims were scheduled and hence abandoned when the case closed.
Appellants did not explicitly schedule their claims against Exxon. Scheduling of an asset is a mandatory prerequisite to abandonment because that is the only way an intent to abandon can be inferred at the close of the estate. There is no evidence to conclude the Trustee made an informed decision to abandon.
Redmond v. Barstow (Trustee) [in re Redmond], 6/7/2000.
Thomas Yerbich, Anchorage, for Redmonds; Cabot Chrlstianson (Bundy & Chistianson), Anchorage, for Barstow.
6 ABR 481: Ch. 7, exemption (notes receivable), liquid assets (District Court, Sedwick).
Bankruptcy Court (MacDonald) affirmed.
Dorismae Melin is an elderly widow who lives alone. She is unemployed and does not receive earnings from any source. She filed Ch. 7 claiming an exemption in the "right to receive up to of $2,530/month in liquid assets from notes receivable" under AS 09.38.030-(b). (See 6 ABR 310). She receives $550/month income from the notes. Trustee Larry Compton objected to the exemption of the income stream from the notes contending Debtor should be entitled to a one-time exemption and should not be permitted to exempt future income from notes because permitting debtors to exempt future streams of income from notes receivable will encourage unscrupulous individuals to finance notes and then file for bankruptcy. Bankruptcy Court determined that the phrase "liquid assets available in any month" should be interpreted and applied to permit Melin to exempt the income stream she receives from the notes. Compton appeals.
Bankruptcy Court's conclusion considered: 1) Alaska's exemption laws are intended to allow debtors to provide for the basic necessities of life; 2) AS 09.38.030(b) was intended to ensure that debtors without a monthly income were not deprived of the ability to provide for the basic necessities of life; 3) AS 09.38.030(b) places no restriction on the number of months that a debtor may claim an exemption under its provisions; 4) unless payable in full, notes are not available in any month for the full face amount of the note; 5) exemption laws are remedial in nature and should be broadly construed in favor of debtors.
Bankruptcy Court's analysis is well-reasoned and is affirmed.
Compton v. Melin [in re Melin], 6/9/2000.
Thornaz Yerbich, Anchorage, for Compton (Trustee); Jeff Carney, Wasilia, for Melin.
6 ABR 485:Ch. 7, attorney status, attorney obligation, Exxon Valdez oil spill litigation (Ross). Bankruptcy Court's comments on attorney responsibility.
Suzette Fejes filed Ch. 7 4/89, less than a month after the Exxon Valdez oil spill litigation was commenced. An ex parte motion to reopen the case was filed by the US. Trustee based on the discovery of a possible asset in the form of a potential recovery related to the Exxon Valdez oil spill litigation. The case was reopened and Trustee Larry Compton sent notices to creditors, but due to the age of the case 29 notices were returned unclaimed. The POC docketing clerk sent form letters to Douglas Williams, Debtor's attorney for the bankruptcy, indicating that the mail had been returned and it was the obligation of the Debtor to keep the matrix accurate. Williams filed an ex parte motion to extend the time to file claims for those creditors whose notices of the bar date were returned and to clarify his status as Debtor's attorney in this case, which has been closed for 11 years.
The Debtor and Debtor's attorney are not required to amend the addresses on the master mailing matrix. The Debtor cannot be responsible for creditors who change their address after the case is filed and especially after the case has been closed.
The scope of an attorney's authority and obligation to his client is generally controlled by the terms of their agreement. In an uncomplicated Ch. 7, it is likely an attorney's obligations (and authority to act for the client) ended when the Debtor received a discharge. Black letter !aw is that a lawyer is relieved of his obligation upon completion of specific legal services for which he was retained. Although a lawyer's authority to act for a client has terminated, the lawyer may nonetheless have residual obligations to the client.
In re Fejes, 6/20/2000.
Douglas Williams, Anchorage, former counsel for Fejes.
6 ABR 492:Ch. 7, discharge injunction violation, attorney fees and costs (Ross).
Judgment for Debtors. Attorney fees and costs awarded.
Ketchikan Credit Bureau recorded a judgment lien against Phil & Mary Nehl. Nehls later filed Ch. 7 in 3/95. They attempted to sell real property they acquired in 1998. To close, they were forced to pay KCBI for the release of its "lien". The KCBI judgment lien was a nullity against the after-acquired property. Because the payment was involuntary and KCBI did not detrimentally rely on any of Nehls' actions, they are not estopped from recovering the money paid to KCBI. KCBI's failure to return the funds constitutes a violation of the discharge injunction. Nehls are entitled to a judgment to recover the amount received by KCBI.
Nehl v. Ketchikan Credit Bureau, Inc. [in re Nehl dba Security Storage & Marine, dba Arctic Madne Supply, 7/13/2000.
David Rosendin, Ketchikan, for Nehls; R.W. Shafter, Ketchikan, for Ketchikan Credit Bureau, Inc.
6 ABR 503: Ch. 7, withdrawal of reference, jury trial, sanctions (Ross).
Report and Recommendation to District Court.
Michael Rowe filed a proof of claim for $52,500 in 2/96. The Trustee sued him in 10/96 to recover allegedly fraudulent transfers to Rowe. Bankruptcy Court set a bench trial date. 8 days before trial Rowe moved to withdraw the reference to District Court and request a jury trial Pursuant to LBR 5011-1 Bankruptcy Court recommends that District Court deny Defendant's motion to withdraw the reference and order Defendant's attorney to show cause why he should not be sanctioned for having filed it.
Rowe is not entitled to a jury trial because he filed a Proof of Claim before the adversary proceeding was commenced which he has not been permitted to withdraw. The right to a jury is waived if a claimant has an existing proof of claim. Denial of the right to withdraw the claim further blocks Rowe's right to a jury. Even if Rowe had never filed a proof of claim, he made no timely demand for a jury trial and thus has waived his right to one.
Compton v. Rowe [In re Bonham], 9/18/00.
Gary Spraker (Bundy & Christianson}, Anchorage, for Trustee Larry Compton; Thomas Sehler,Arlington, VA, for Rowe.
6 ABR 512: Ch. 11-7, tax lien, priority claims (Ross).
Trustee's motion for recovery of § 724(b) claims granted.
The Municipality of Anchorage and the DIP entered into an agreement settling a dispute about various MOA taxes in which it agreed to a reduced amount which would be a paramount lien on the property giving rise to the lien and that it would not be avoidable for any reason in a subsequent Ch. 7. The case converted to Ch. 7 and the Trustee wants to pay the amount of the tax lien attributable to each parcel and all priority claims which exist before paying the MOA. The MOA contends the agreement with DIP bars the Trustee, and if it doesn't, the Trustee is limited to the amount of the tax lien on each parceL In addition, the MOA wants the subordinated portion to be paid ahead of junior lien holders if there ia sufficient excess to get to the junior level.
The agreement between the DIP and MOA is not sufficiently detailed to bar the Trustee's § 724(b) claims. Even if it was, the Trustee should prevail for policy reasons in being able to assert his § 724(b) rights. His is, however, limited to subordinating only the amount equal to the tax lien on each parcel The MOA cannot, however, prime junior lienholders should thc proceeds from property subject to the tax liens be sufficient to reach the level of junior lien creditors, because their rights are not affected by the operation of § 724(b).
In re MarkAir, Inc,. 9/28/00.
John Siemers (Burr, Pease & Kurtz), Anchorage, for Trustee; AMA Peter Hallgrimson, Anchorage.
6 ABR 520:. Ch. 7-13, fraudulent transfer, preferences, post-petition transfers, fiduciary duty, corporate veil piercing (MacDonald).
Trustee to recover $11,615 from Norman Kelly and $60,873 from Midtown Executives, Inc. Complaint dismissed as to Kevin Hines, SRKP, Inc. and Rosa Claypool. Trustee's objection to discharge dismissed.
A jury verdict in favor of Alma Corp. was entered 4/28/98 against Sharon Kelly and S.R. Kelly Professionals Inc. for actual damages of $24,142 and $10,000 punitive damages against Sharon. On 7/28/98 Sharon was served to appear at a judgment debtor's exam and prohibited from transferring any of her non-exempt property pending hearing set for 8/21/98. On 8/20/98 Sharon filed Ch. 7 and on 3/17/00 converted to Ch. 13. Between 6/98 and 8/20/98 Sharon made numerous, sizeable transfers of assets to either her parents or to entities which she controlled. The Trustee seeks to recover fraudulent transfers and preferences.
After state court litigation was initiated against her Sharon systematically and deviously transferred assets to avoid liability to Alma Corp. The Trustee can avoid certain of these transfers as either fraudulent conveyances or as improper post-petition transactions.
The Trustee contends Norman Kelly, aa a director of SRKP ia responsible to creditors on the "trust fund" theory, that he breached his fiduciary duty for improperly transferring $34,724 worth of stock. The Trustee has no standing to assert the trust fund claim against Norman Kelly.
The Trustee also seeks to disregard the corporate form of SRKP and recover transfers under an alter ego or veil piercing theory. He has no standing to assert such theories. Even if he did, these equitable devices are not causes of action, they simply provide a means of obtaining liability against third parties If applied by a creditor, these theories could make SRKP liable for the debts of Sharon Kelly but by no means do they allow the trustee of her individual estate to recover fraudulent transfers made by SRKP.
The Trustee's objection to discharge claim is dismissed without prejudice.
Compton (Trustee) v. Sharon Kelly, Norman Kelly, Rosa A,Claypool, Kevin Hines, Midtown Executives, Inc., and S.R. ProfesSional, Inc. [In re Kelly, aka Midtown Executive Office Suite, H.W. Publishing, AAA+ Tours, & Homestays at Homesteads B & B], 9/15/00.
Erik Leroy, Anchorage, for Compton; Thomas Yerbich, Anchorage, for all Defendants except Sharon Kelly; Gary Sleeper (Jermain, Dunnagan & Owens), Anchorage, for Sharon Kelly.
6 ABR 544: Ch. 7-13, 6 ABR 520 amended (MacDonald)
Order amending decision upon motion for new trial Plaintiff Larry Compton (Trustee) and Defendant Midtown Executives, Inc. have filed a Joint Motion for New Trial in the preceding Memorandum Decision (6 ABR 520). Thc Decision is amended pursuant to stlpulation between Compton and Midtown.
Compton (Trustee) v. Kelly et al [In re Kelly], 10/3/00.
Erik Leroy, Anchorage, for Compton; Thomas Yerbich, Anchorage, for all Defendants except Sharon Kelly; Gary Sleeper (Jermain, Dunnagan & Owens), Anchorage, for Sharon Kelly.