4 ABR 1: Constructive trust, unjust enrichment, equitable lien, reliance, reclamation claim, mechanic's lien
(BAP).
4 ABR 1: Constructive trust, unjust enrichment, equitable lien, reliance, reclamation claim, mechanic's lien
(BAP).
Judge Ross correctly denied Airwork an interest in insurance proceeds payable to Debtor for a damaged engine, concluding that it had not established any basis for an advantage over other unsecured creditors.
Airwork's theories were: constructive trust, payment to Safeco (which had a security interest in the aircraft and any insurance proceeds) would result in unjust enrichment, equitable lien, it had repaired the engine in reliance on the proceeds, it had a valid reclamation claim as to installed parts, and mechanic's lien.
Airwork Corp. v. Markair Express et al [In re Markair], 8/29/94.
Harvey Strickon (Paul, Hastings, Janossky & Walker), NYC, for Airwork; William Bankston (Bankston & McCollum), Anchorage, for Markair; Steven Shamburek (Farleigh & Shamburek), Anchorage, for Safeco.
4 ABR 13: Ch. 11, fraudulent transfer, statute of limitations (Ninth Circuit).
Judge Singleton's affirmance (3 ABR 158) of Judge Ross's order (2 ABR 269) setting aside a fraudulent transfer after equitably tolling the statute by reason of the petitioner's conduct affirmed.
Olsen v. Zerbetz (Trustee) [In re Olsen], 9/19/94.
John Olsen, Petersburg, pro se; Berndt Guetschow, Anchorage, for Zerbetz; Joseph Moran & Deirdre Ford (Staley, DeLisio & Cook), Anchorage, for First Bank.
4 ABR 16: Ch. 7, frozen bank accounts (Ninth Circuit, unpublished).
Judge Singleton's affirmance of Judge Ross's summary judgment for First Bank on Debtors' interpleader counterclaims affirmed.
The bank froze Debtors' accounts at the request of the Ch. 7 Trustee, and the bank filed an interpleader when Debtors threatened action if it gave the funds to the Trustee. They alleged that it failed to exercise ordinary care in freezing the accounts, acted with gross negligence and reckless indifference by consenting to the request for the freeze, and converted the balances.
Olsen v. Zerbetz (Trustee), First Bank, et al [In re Olsen], 9/19/94.
Raymond Olsen, pro se; Berndt Guetschow, Anchorage, for Zerbetz; Staley, DeLisio & Cook, Anchorage, for First Bank.
4 ABR 29: newly discovered evidence (Ninth Circuit, unpublished).
Judge Singleton's affirmance of Judge Ross's refusal to reopen judgment against Debtors based on "newly discovered evidence of fraud" affirmed.
Debtors brought their motion after they had appealed to this Court, at which time neither Singleton nor Ross had jurisdiction.
Olsen v. Zerbetz (Trustee) [In re Olsen], 11/22/94.
Raymond Olsen, pro se; Berndt Guetschow, Anchorage, for Zerbetz; Staley, DeLisio & Cook, Anchorage, for First Bank.
4 ABR 33: Ch. 7, default (BAP).
Default judgment by Judge Ross vacated; remanded for reconsideration.
A complaint to deny discharge under §727 that recites only statutory language fails to state a claim and cannot support a default judgment with no further examination by the court.
Kubick v. FDIC [In re Kubick], 9/9/94.
Paul Koval (Koval & Featherly), Anchorage, for Kubick; Richard Ullstrom (Routh & Crabtree), Anchorage, for FDIC.
4 ABR 43: Ch. 11/7 conversion, confirmation, settlement (MacDonald).
Confirmation of Martech and NBA's Third Amended Plan of Reorganization denied. NBA's motion for approval of claims and security interests denied. Sureties' motion for conversion to Ch. 7 granted.
The Court converted from Ch. 11 to Ch. 7. After negotiation of a plan sponsored by Martech and NBA, its largest secured creditor, the Court reversed the conversion and let them present a plan for confirmation. Debtor's release of NBA is the cornerstone of the liquidating plan. However, the Court cannot conclude that settlement of Debtor's claims is fair & equitable. The only possible claim that has received any attention is a preference which has no value. Neither party has analyzed other potential claims. The record is insufficient for the Court to compare terms of the compromise with likely rewards of litigation. With continuing losses to the estate and no reasonable likelihood of rehabilitation, conversion is appropriate.
Michael Mills & Robert Moore (Bankston & McCollum), Anchorage, for Debtor; David Bundy (Bundy & Christianson), Anchorage, for NBA; Peter Giannini & Scott Leo (Giannini & Associates), Anchorage,for sureties; Paul Koval & Rebecca Copeland (Koval & Featherly), Anchorage, for UCC.
4 ABR 51: Ch. 11, reference withdrawal (MacDonald).
Recommended that the US' motion to withdraw the reference of this case to US District Court be denied.
The motion was not properly noticed and is untimely, and in any event the issues pending in Bankruptcy Court do not require consideration of nonbankruptcy federal laws affecting interstate commerce.
AUSA Elizabeth O'Leary.
4 ABR 58: Ch. 7, reopen, dischargeability (sales tax trust fund) (Ross).
Debtor's motion to reopen denied without prejudice to raising any dischargeability defense in state court.
Debtor guaranteed Palmer payment of a claim for sales taxes incurred by a corporation in which she had subsequently obtained an interest. Palmer was not listed in her schedule; she claims to have forgotten the debt. The City has filed a state court action to recover on her guaranty. It appears that the debt may not be dischargeable.
Jeff Carney, Wasilla, for Debtor; Patricia Hefferan for Palmer.
4 ABR 61: Attorney fees (Ross).
Trustee/Plaintiff's motion for fees pursuant to ACR 82, involving a postpetition settlement with a third party regarding estate property, denied.
Barstow (Trustee) v. Barnes, 1/24/95.
Michael Mills (Bankston & McCollum), Anchorage, for Barstow.
4 ABR 63: Ch. 7, abandonment (MacDonald).
Trustee's motion to abandon property to Debtors denied except as to uncontested Palmer property.
Trustee seeks to abandon the Palmer property because the IRS lien exceeds its value and it believes it can liquidate its interest better outside of bankruptcy. Debtors concur as to the Palmer property but object to abandonment of partnership interests because it will result in increased tax burden to them.
Abandonment considerations should be based on the asset's value to the estate rather than consequences to the debtor. The Grupe partnership interest is outweighed by the resulting tax liability to the estate. However, the estate's assets are insufficient to pay the tax liens; there is no equity in the estate to benefit unsecured creditors. While the Trustee is not "churning" property, a decision to selectively abandon some assets where none has equity for the estate, to enhance a secured creditor's position, is beyond his authority.
Due to the Trustee's delay in administering or abandoning assets and the IRS's failure to promptly move to protect its interests, the estate should administer the assets and bear the adverse tax consequences.
Arona Blachman, Anchorage, for Debtors; J.D. Williams, Anchorage, for Trustee Gordon Zerbetz; Kay Hill (IRS), Anchorage; Gary Sleeper (Jermain, Dunnagan & Owens), Anchorage, for Dr. Sage.
4 ABR 71: Ch. 7, tax liens (Ross).
Debtor's motion to avoid tax liens under §522(f) denied.
The IRS liens are statutory liens, not judicial liens, and are not avoidable under §522(f).
4 ABR 72: Ch. 7, trustee qualifications (MacDonald).
Interim Trustee Kenneth Battley shall serve as trustee. The subdebt's NYC choice is not qualified pursuant to §321(a)(1) residency/office requirements.
4 ABR 76: Ch. 7, disclosure by professional of prior connections (Ross).
Real estate agent Matthew Fink is entitled to a $13,000 commission on a liquor license sale to AMG.
Fink was employed by original Trustee Barstow. In his affidavit disclosing any potential adverse interests, Fink did not note that he had a prior connection with the Debtor (his listing of the business which still had a short time to run when the petition was filed). AMG and the US Trustee protest the commission. The issues are: Did Fink violate FRBP 2014(a) by failing to disclose that he was a broker for the Debtor immediately before the bankruptcy? Did he become "disinterested" because another agent from his brokerage located a prospective buyer and called himself the purchaser's agent? Did he attempt to mislead the Court by calling himself a "broker?" Should he had been denied a fee on a sale to AMG since his listing agreement had an expiration date before AMG made its offer to buy the license?
Fink has done nothing or very little wrong except for some innocuous mistakes in disclosure. Punishing material, undisclosed conflicts is an appropriate goal. But it is also appropriate to foster confidence in professionals who are employed by a trustee after the Court's authorization that their fees will be paid if they have substantially fulfilled their commitments.
Erik LeRoy, Anchorage, for former Trustee William Barstow; Cabot Christianson, Anchorage, for Trustee Larry Compton; Tonja Woelber for Alaska Mortgage Group; David Clark for Fink; US Trustee Barbara Franklin; Dan Coffee for Stuckagain Inc.
4 ABR 89: Ch. 7, tax lien, bona fide purchaser (Ross).
Trustee's motion to avoid federal tax lien pursuant to §545(2) and IRC 6323(b)(1) granted.
While legislative history is blurred and there is no definition for "bona fide purchaser," there are legitimate bankruptcy policies to be served by §545(2), including equitable distribution among the creditors.
Battley (Trustee) v. IRS [In re Berg], 3/24/95.
Gregory Oczkus, Anchorage, for Battley; Robert Branman (Justice Dept.), DC; Thomas Yerbich, Anchorage, for Debtor.
4 ABR 92: Ch. 13, lien priority, fees (MacDonald).
Lien by Debtor not entitled to priority against SBA. SBA entitled to fees & costs as the decision turns on State law.
Judith Sowell sold her motel to her friend Lee Davis, encouraging Davis to apply for an SBA loan. Davis defaulted on the trust deed and Sowell conducted a non-judicial foreclosure without notice to the SBA. She now seeks to establish that the SBA loan is subordinate to her trust deed, alleging a conspiracy by Davis and banker Paul Merrifield to deny her trust deed priority over the SBA's. However, her version of the facts is contrary to the overwhelming weight of evidence and inconsistent with her conduct for 10 years following sale of the property. She engineered the sale to Davis and the accompanying SBA loan. Her lien is not entitled to priority against the SBA under any theory, including fraud and vendor's lien. She is not entitled to either legal or equitable relief
Sowell v. Davis and SBA [In re Sowell], 4/7/95.
Barry Jackson, Fairbanks, for Sowell; James DeWitt, Fairbanks, for SBA, and John DeVore (SBA), Anchorage.
4 ABR 99: Ch. 7, settlement approval (MacDonald).
Settlement of trust claims against Debtor Linda Smith by allowance of an unsecured claim for $2,272,065 approved. Settlement with the estate of Nettie Smith for $150,000 approved.
Irven Smith, suffering from Huntington's Chorea, established an inter vivos trust for him and his wife Nettie, with his daughter Linda as trustee. Linda never provided a true accounting; she was removed and Nettie's son Bernard was substituted. During Linda's tenure $2 million in assets were dissipated. Bernard sued Linda for breach of fiduciary duty and conversion. Judge Zervos granted summary judgment against Linda on a variety of claims and reserved damages for trial. Linda filed bankruptcy just before trial.
There is no defense to the trust's liability claims against Linda. They have a settlement value of $3.8 million, including $1.5 million punitives. Linda robbed her father and stepmother of the security they sought for their retirement. She has lied repeatedly, delayed proceedings with double-talk, and manipulated the court system to her advantage. The settlement is well warranted.
In re Smith; In re Smith Management Corp.; 4/18/95.
Helena Simpson, Anchorage, for Debtor and Diana Smith; Roger Smith, Anchorage, for Debtor; Richard Monkman, Juneau, for Bernard McCoy; Larry Compton, Trustee.
4 ABR 115: Ch. 11, tax lien, notice of intent to levy, automatic stay violation, attorney fees (MacDonald).
The IRS's notice of intent to levy on Camachos' PFD was sent, consistent with general procedure for serving such notices, to their last known address as reflected on their 1989 tax return. Since it was served more than 30 days before the 1992 levy, the levy is valid. The IDRS Certified Mail Listing is similar to Postal Form 3877 sufficient to establish that the notice was served by certified mail.
The IRS did not willfully violate the automatic stay; its conduct does not entitle Camachos to damages. It conducted a valid levy before Camachos filed bankruptcy. The State remitted the PFD to the IRS postpetition in response to the levy.
Camachos also seek refund of amounts paid on account of the Sente Equipment audit. This Court cannot determine their right to a refund until they have made a proper request to the IRS.
Although Camachos prevailed on the significant issues, they have failed to establish that the IRS's position was not substantially justified; they are not entitled to fees under §7430.
Camacho v. US [In re Camacho], 5/1/95.
George Lyle, Anchorage, for Camachos; Robert Branman (Justice Dept. Tax Div.), DC.
4 ABR 126, 134: Ch. 7, tax settlement, accord & satisfaction, equitable estoppel (Ross).
Talford Bray entered into a written settlement with the IRS: for $4,000 the IRS would release $57,000 of tax liens which were exempt in his bankruptcy and discharge and release all tax claims for years before 1986. It subsequently discovered that it had not yet assessed some taxes arising from shelters which affected pre-86 tax years. This proceeding was brought to determine if the IRS can renege on the settlement.
Even though Bray acted in good faith, the agreement is not an enforceable accord & satisfaction, at least absent court approval of the compromise.
Nor is equitable estoppel applicable. There is no unconscionability or affirmative misrepresentation, and no serious injustice. Bray claims that he would not have incurred $200,000 debt on a home and boat had he known that he had these tax claims outstanding. This is not sufficient to raise a "serious injustice" for a pilot earning $250,000/yr. Judgment for the IRS.
Bray v. IRS [In re Bray], 5/5/95, 5/22/95.
William Artus (Artus, Choquette & Williams), Anchorage, for Bray; Special AUSA Stephen Baker.
4 ABR 137: Ch. 13, confirmation (denied), character of claims, rules/forms, cramdown, interest (MacDonald).
Ch. 13 confirmation denied with leave to amend.
The plan has several problems. Debtor should first determine through litigation or negotiation the amount and character of all contested claims. Then an amended plan which follows the local rules and forms should be filed. Where Debtor intends to cramdown secured creditors he should indicate the amount of the claim, the portion that may be unsecured under §506(b), and thetreatment of the secured claim. The plan must specify the interest rate, term, and payment amount.
In re Rogers (Crazy Loon Saloon, Black & White Co.), 6/23/95.
James DeWitt (Guess & Rudd), Fairbanks, for Debtor.
4 ABR 144: Ch. 7, marital judgment lien (MacDonald).
Debtor's motion to avoid his ex-wife's judgment lien denied.
The parties held the property in a tenancy by the entirety during their marriage. Upon entry of the divorce decree that tenancy ceased. He received a new interest as sole owner and she received a judgment lien for her interest. Her lien did not affix to a prior interest of the Debtor. Rather, the prior interest was abolished and replaced by a new interest concurrent with the decree.
Robert McFarlane, Anchorage, for Debtor; Mitchell Joyner, Anchorage, for ex-wife.
4 ABR 148: Ch. 11, proof of claim, fraudulent transfer (Ross).
Proofs of claim against McLane Women disallowed.
If the McLane Women prevail in a fraudulent transfer proceeding brought by Kenai, the claims would be negated because they are not based on any personal liability of the McLane Women, and if they do not prevail the property will be available only to the estate.
In re 4M 2B Investors et al, 9/22/95.
Spencer Sneed & Brenda Rhoades, Anchorage, for the McLane Women and 4M 2B; Cabot Christianson, Anchorage, for the McLane Men; Richard Haggart & Robert Gunther (Maloney & Haggart), Anchorage, for Kenai; John Beard (Beard & Lawer), Anchorage, for FNB Anchorage; Steven Shamburek (Farleigh & Shamburek), Anchorage, for Stengas.
4 ABR 150: Ch. 11, attorney fees, costs (Ross).
Stengas' request for attorney fees for their defense of this adversary proceeding denied, since the issue of whether the ground lease was a lease or executory contract involved principally interpretation of federal bankruptcy law. Costs are allowed pursuant to Rules 54(d) and 7054.
Stenga v. 4M 2B Investors [In re 4M 2B Investors et al], 10/4/95.
4 ABR 152: Ch. 7, preliminary injunction (Ross).
Preliminary injunction granted preventing transfers of title or income from royalty interest without further court order. The balance of hardships is a close question and will be largely resolved by requiring an early trial pursuant to Rule 65(a)(2).
Battley (Trustee) v. Boyko, Breeze, Stewart, Stewart Petroleum, and Breeze (Trustee of Robert Breeze Irrevocable Trust) [In re Boyko & Flansburg], 10/5/95.
Cabot Christianson, Anchorage, for Battley; John Fitzgerald for Boyko; Bernd Guetschow, Anchorage, for Robert & Virginia Breeze; Michael Mills & Chris Gronning (Bankston & McCollum), Anchorage, for Stewart and Stewart Petroleum.
4 ABR 163: Ch. 7, homestead exemption (Ross).
Although prior trust deeds and homestead exemption exceed the value of the property, SBA's judgment lien is nonetheless non-avoidable under §522(f) given Chabot (9th Cir. 1993).
Chabot cannot be distinguished because of differences in Alaska and California exemption statutes. Although Alaska shows a concern for the debtor's interest in a specific residence, the residence can be lost in a judicial sale in which the debtor must take cash in lieu of keeping the residence, just as in California. Nor is the fact that Alaska grants a right of first refusal a sufficient difference to distinguish Chabot.
Douglas Williams II (Artus, Choquette & Williams), Anchorage, for Debtors; Jon DeVore (SBA), Anchorage; Kenneth Battley, Trustee.
4 ABR 173: Ch. 13, lease termination (MacDonald).
Hearing granted on Debtor's motion for reconsideration from order granting relief from stay to landlord.
Assuming Debtor has cured all defects, there are still issues of termination of the lease and forfeiture.
Dawn Reed-Slaten (Powell & Slaten), Anchorage, for Debtor; Rebecca Copeland (Koval & Featherly), Anchorage, for landlord Alan Ma; Larry Compton, Anchorage, Trustee.
4 ABR 176: Ch. 7, taxes (MacDonald).
Debtors' complaint seeking dischargeability of 1980-89 taxes and amount of tax debt 1990-94 dismissed.
Debtors failed to file timely tax returns 1980-89, failed to timely pay taxes, and engaged in a scheme obviously aimed at concealing their income and assets through phony corporations and foreign nationals. They do not qualify as the sort of honest debtor the Code is designed to protect.
Mungle v. US [In re Mungle], 11/8/95.
William Olmstead (Domke & Olmstead), Juneau, for Debtors; Robert Branman (Justice Dept. Tax Div.), DC.
4 ABR 191: Ch. 7, discharge (divorce obligation) (MacDonald).
$29,700 obligation from Debtor to his ex-wife was in the nature of property, not maintenance or support, and is not excepted from discharge under §523(a)(5). Nor is it excepted under §523(a)(15) since he does not have the ability to pay it from income or property not necessary for support of himself and his dependents.
Goodrich v. Gallien, 11/16/95.
Rebecca Copeland (Koval & Featherly), Anchorage, for Goodrich; Gregory Oczkus, Anchorage, for Gallien.
4 ABR 200: Ch. 7, trustee qualifications (BAP).
Judge MacDonald's refusal to appoint a New York resident as trustee (4 ABR 72) affirmed.
Joseph Pardo, who received the majority of creditors' votes, did not have an office in Alaska within the meaning of §321. Drummond (9th Cir. 1969) is on point and should be followed. Congress intended that trustees be physically available on a regular basis in or near the district. Mere payment of rent in Alaska does not assure Pardo's presence and availability in Alaska.
J.P Morgan Investment Management, Smith Barney Shearson, and Grace Bros. v. US Trustee and Battley (Trustee) [In re Martech USA], 10/20/95.
4 ABR 210: Ch. 7, tax lien avoidance (BAP).
Judge Ross's ruling that the trustee may avoid a federal tax lien on a note (4 ABR 89) reversed.
A trustee standing in the shoes of a bona fide purchaser under §545(2) does not fall within the beneficial protection of IRC §6323 for avoidance of a perfected federal tax lien because 6323 requires a higher standard.
US v. Battley (Trustee) [In re Berg], 10/30/95.
Gregory Oczkus, Anchorage, for Battley; Robert Branman (Justice Dept. Tax Div.), DC; Thomas Yerbich, Anchorage, for Debtors.
4 ABR 222: Ch. 13, taxes, interest/penalty (MacDonald).
Debtors' objections to IRS claim on grounds that it contains tax penalties in violation of §507(a)(8)(G) overruled; the claim is allowed.
The IRS assessed $5,814 as part of additional taxes due on partnership tax shelters. Interest assessed under §6621(c) is a tax. It is primarily a burden on individuals without their consent for the purpose of defraying government expenses.
Robert Crowther, Anchorage, for Debtors; Robert Branman (Justice Dept. Tax Div.), DC.
4 ABR 228: Ch. 7, 11-7 conversion, late-filed claim (Ross).
Claim by Cook & Haugeberg cannot be allowed on a parity with general unsecured claims, but must be subordinated as an untimely filed claim.
The case was originally filed as Ch. 11 in 1985. Upon conversion an actual proof of claim was required to be filed by FRBP 1019 (1987), unless one was previously filed in the Ch. 11 case. Although Cook's address had changed between the time the case was originally filed and the bar date in the Ch. 7 case, it knew about the case in time to file a timely proof of claim. Since the amended 1019 had been in effect 5 years at the time of conversion, it is neither unjust nor impracticable to apply it to the Cook claim.
In re Moneymaker Const., 12/12/95.
Kenneth Ringstad, Fairbanks, for Debtor; Mitchel Friday, Trustee.
4 ABR 232: Ch. 7, lease rejection date (Ross).
Absent equitable considerations, the Court adopts the date that an order for rejection of leases has been entered as the date through which contracted rent payments must be made, as opposed to the earlier date when a motion to reject has been filed under §365(a).
John Siemers (Burr, Pease & Kurtz), Anchorage, for Trustee William Barstow; Michael Mills (Bankston & McCollum), Anchorage, for Debtor; Douglas Jessop for City/County of Denver; Alexis Gaby for City of Chicago.
4 ABR 236: Ch. 7, discharge (false financial statement, fraud, willful/malicious injury) (MacDonald).
Debtors utilized false financial statements to obtain loans from the bank. The loans are excepted from discharge pursuant to §523(a)(2)(B). The bank failed to prove fraud or defalcation by a fiduciary or willful & malicious injury pursuant to §§ 523(a)(4) and 523(a)(6).
FNB Anchorage v. O'Neill [In re O'Neill], 1/8/96.
Robert Crowther, Anchorage, for Debtors; John Beard (Beard & Lawer), Anchorage, for the bank.
4 ABR 246: Ch. 13, approval of professionals (Ross).
Application to employ Jack Sherman as accountant denied as unnecessary.
The US Trustee objected because Sherman is not a CPA. However, there is no provision or requirement in Ch. 13 for court approval of professionals.
In re Nesbitt, 1/11/96.
Kenneth Ringstad, Fairbanks, for Debtors; Larry Compton, Anchorage, Trustee; John Ruebelmann, US Trustee attorney-advisor.
4 ABR 252: Ch. 11, approval of accountant (Ross).
Appointment of Jack Sherman as accountant approved on condition that he is licensed under state law to practice public accounting.
The US Trustee objected because Sherman is not a CPA. Sherman's application does not say what type of accountant he is.
In re Nesbitt, DDS, PC, 1/11/96.
Kenneth Ringstad, Fairbanks, for Debtor; John Ruebelmann, US Trustee attorney-advisor.
4 ABR 254: Ch. 13, stay, cram-down, jurisdiction (Ross).
The Court lacks jurisdiction to address the bank's motion for relief from stay to foreclose against Debtor, because of Debtor's pending appeal to the 9th Circuit of the Court's ruling that the confirmed plan was not res judicata with respect to the bank's secured claim.
Debtor is appealing reamortization of the secured claim to allow the whole claim to be treated as secured, instead of stripped-down. The matter should be taken up with the District Court in connection with a stay pending appeal.
Donald Dunlap, Anchorage, pro se; Richard Ullstrom (Routh & Crabtree), Anchorage, for NBA; Larry Compton, Anchorage, Trustee.
4 ABR 260: Ch. 11, costs (Ross).
Objection by Stengas granted; objection by 4M 2B denied. Costs may be recoverable should they be awarded by an appellate court. The Clerk never intended to bar costs which might be awarded at the appellate level.
Stenga v. 4M 2B Investors [In re 4M 2B Investors et al], 2/27/96.
Brenda Rhoades, Anchorage, for 4M 2B; Steven Shamburek (Farleigh & Shamburek), Anchorage, for Stengas.
4 ABR 263: Ch. 11, taxes, partnerships, notice of intent to levy, turnover of PFD, violation of stay, attorney
fees, punitives, misleading conduct (Singleton).
Judge MacDonald erred in holding that IRS's failure to more expeditiously enact regulations required it to research top-tier partnership returns to discover pass-through partnerships and then research each level of pass-through returns to assure that any indirect partners would be given personal notice of top-tier audits (3 ABR 446).
MacDonald did not err in directing IRS to turn over Debtor's 1992 PFD, which it successfully levied prepetition but did not receive until postpetition, so that any dispute regarding it could be resolved in Bankruptcy Court. Although he concluded that the IRS did not commit a willful violation of the stay, he should reconsider whether Debtors are entitled to damages and attorney fees in light of Pinkstaff (9th Cir. 1992).
MacDonald did not err in finding that notice of intent to levy was properly sent to Debtors' last known address.
MacDonald correctly declined to abate the assessments, finding that while Debtors may have proved misleading conduct by IRS agents, estoppel would injure the public interest and give Debtors a windfall.
George Lyle (Guess & Rudd), Anchorage, for Debtors; Robert Branman (Justice Dept. Tax Div.).
4 ABR 279: Ch. 11, trusts, fraudulent transfers, conflict of law, statute of limitations, standing (MacDonald).
Belizean trusts established & controlled by Debtors were created by fraudulent transfers and are therefore property of the bankruptcy estate.
The driving force behind the bankruptcy is a tort judgment. Since the parties' most significant relationship is with Alaska, and because Alaska provides for invalidation of fraudulent transfers while Belize appears to actively encourage them, Alaska law should apply.
Debtors' Leones Co. trust is simply a sham; avoidance of dram shop liability was a major consideration in its establishment.
This Court adopts the holding of Judge Ross that the 6-year period in AS 09.10.050 is the limitation period for a fraudulent transfer actions. This action was timely filed.
The judgment creditor has standing to file a complaint regarding the trusts even though she may be paid in full under the Plan. It would be unfair, for example, for Debtors to retain all liquid assets while forcing her to accept non-liquid assets.
Higashi v. Brown [In re Brown], 3/11/96.
C.R. Kennelly, Anchorage, for Higashi; Timothy Byrnes, Anchorage, for Debtors.
4 ABR 288: Ch. 7, return of plan payments for unconfirmed plan (Ross).
Debtors' Ch. 13 was converted to Ch. 7 prior to confirmation. They had made plan payments from postconfirmation income and from rental income from property they owned at petition date. The postpetition payments from wages should be returned to Debtors and the rental income should be turned over to the Ch. 7 Trustee.
Thomas Yerbich, Anchorage, for Debtors; Gregory Oczkus, Anchorage, for Trustee Kenneth Battley.
4 ABR 292: Ch. 7, exemptions (household goods, guns, tools, hockey gear) (Ross).
Exemption allowed for a shotgun; it appears to be used in Debtor's household as part of his lifestyle and for protection. Exemption denied as to target rifle and Biathlon rifle, which are of a sporting nature. Exemption in hockey gear denied. Exemption granted as to all tools.
Barry Jackson, Fairbanks, for Debtor; John Ruebelmann, US Trustee attorney-advisor; Larry Compton, Anchorage, Trustee.
4 ABR 296: Ch. 7, sale set-aside (MacDonald).
Sale of Debtors' claims in state court cases to CGCP set aside in part. A new trustee will be appointed to administer the estate.
Various aspects of the sale process were misleading. Notice of the sale did not list any malpractice claims by CGCP against Arthur Robson, who represented Debtors in the suits and their bankruptcy. The $5,000 paid for the malpractice claims shocks the conscience of the Court. CGCP, by virtue of its alleged purchase of the malpractice claims from the estate, has been able to assert malpractice claims against 2 insurers who each extended $1 million coverage to Robson. CGCP is not a "good faith purchaser." Sale & settlement of the claims are an attempt to take grossly unfair advantage of Debtors and other creditors.
William Artus (Artus, Choquette & Williams), Anchorage, for Debtors; Kenneth Ringstad, Fairbanks, for Chatanika Gold Camp Properties; John Connors, Fairbanks, for Okamura/Transalaska.
4 ABR 309: Ch. 7, fraudulent conveyance, statute of limitations, standing (Holland).
Trustee's fraudulent conveyance action was filed 2 years and 4 months after Trustee was appointed, and would appear to be barred by the 2-year statute in §546(a). However, both sides concede that equitable tolling applies. Absent further agreement, a hearing is necessary to determine when the Trustee discovered or should have discovered the claims in question.
Trustee had the rights of creditor Kuskokwim assigned to him, and claims a separate basis on which to bring a §544(b) action, asserting that the only statute on the Kuskokwim claim is the 6-year state statute on fraudulent conveyances. However, the Court holds that an assignment will not give the Trustee an independent source of standing and thereby allow him to bypass the 2-year statute.
Battley (Trustee) v. Kemp et al [In re Kemp and Paulucci Seafoods], 9/8/95.
Jan Ostrovsky, Anchorage, for Anne Renson; Cabot Christianson (Bundy & Christianson), Anchorage, for Trustee Kenneth Battley; Gary Sleeper (Jermain, Dunnagan & Owens), Anchorage, for Republic Bank; Greg Youngmun (Delisio, Moran & Geraghty), Anchorage, for Monarch Life Ins.; Robert McFarlane, Anchorage, for Norwest Card Services; Dep. City Atty. Susan Lopez for LA Water & Power; Bonnie Stratton (Hartig, Rhodes), Anchorage, for American Express.
4 ABR 322: Ch. 11, choice of fish processing lien laws, attorney/professional fees (Ross).
Summary judgment for State Street Bank.
The bank claimed that its security interest in flat fish caught on the high seas relatively close to Alaska and owned by Cold Sea International and in the proceeds primed a Washington processor lien under Washington law. Tracy Anne Inc. and Muir Milach Inc. (the Fishermen) alleged that the Washington processor lien primes State Street's UCC interest. CIT moved for a declaration that the seamen aboard the Atlas have maritime liens for wages etc. that attached to the flat fish or proceeds which are superior to both the bank and the Fishermen.
Washington fish processor liens claimed by the Fishermen under Washington law did not attach to flat fish aboard the Atlas on 5/3/95. Thus they have no interest which would prime a security interest of the bank. Alternatively, between Alaska and Washington fish processing lien laws it is more rational to apply AS 34.35.020 et seq.
There are no maritime liens in favor of the seamen which attach to the fish.
The bank had allowed Debtors' attorneys and professionals to carve out some of the cash collateral from use of the flat fish proceeds for fees. The Fishermen opposed this, and the attorneys were to disgorge if the Fishermen prevailed. Since the bank prevails, the disgorgement will not be ordered.
In re Cold Sea International, In re Midas Asset Management, In re Atlas Asset Management, 5/10/96.
Thomas Bucknell for Debtors; Spencer Sneed, Brenda Rhoades, and Charles Glerum for State Street Bank; Lawrence Ream & Whitney Leibow for Tracy Anne and Muir Milach; John Casperson & Suzanne Ishii-Regan for Fierce Allegiance Ent. & Pequod; Jon Dawson for CIT Group and NC Machinery; Steve Shamburek for Petro Marine and Data Contractors; Kenneth Jarvi for Patricia Duttry; John Siemers and Robert Crowther for the UCC; Lanning Trueb for Pat Lawson & Jeff Caiola; Joan Travostino for City of Cold Bay/Aleutians East Borough; William LaBahn for Richard Shingleton; Michael Holmes for Sphere Drake.
4 ABR 335: Ch. 7, Fikes damages, rent, vendee's lien, punitives (Ross).
Quigley Enterprises negotiated with Kennedys to build a home on a cost-plus basis, but did not complete the contract and instead filed Ch. 7. The Trustee tried to salvage as many of the properties which Quigley had completed or partially completed as he could, including the Sampson property, which he negotiated to sell to Kennedys for $183,000. The deal never materialized. Columbia Investments feels that it is entitled to buy the property at some reduced figure because of its "Fikes" rights.
Fikes will not entitle Columbia to a windfall. It will have to pay equivalent value of about $183,990. If it does not want to buy, it is entitled to a vendee's lien of $5,645-$17,000.
NBA is entitled to $750/mo rent from the date the deal was made with the Trustee to the end of 1994.
Punitives claimed by Columbia are not recoverable.
Joseph Moran (Delisio, Moran & Geraghty), Anchorage, for NBA; J.L. McCarrey III (McCarrey & McCarrey), Anchorage, for Columbia/ Kennedys; Cabot Christianson & Gary Spraker (Bundy & Christianson), Anchorage, Barstow.
4 ABR 358: Ch. 11, confirmation, tort judgment, classification of unsecured creditors, homestead exemption,
good faith, best interest of creditors, feasibility, interest, dismissal (MacDonald).
Confirmation denied for failure to meet §1129 requirements. Higashi's motion to dismiss because of bad faith denied.
Debtors filed Ch. 11 after Vicki Higashi obtained a $1.46 million tort judgment against them. NBA also obtained an $86,000 tort judgment which was vacated. Appeals are pending in both cases.
There is no apparent reason for placing the NBA and Higashi claims in separate classes as they are substantially similar.
The plan provides for a homestead exemption on Browns' Nome commercial property, but they never listed it as exempt in their schedules.
The filings were warranted to prevent severe disruption of Debtors' businesses.
The plan meets the best interest of creditors test; present value paid to Higashi equals what she would receive in a liquidation. Since 2 classes have rejected the plan, cramdown conditions apply. The plan violates cramdown requirements. While it states that a liquidating trustee could "move for authority for payment" of post-petition interest, by its terms payment of interest to creditors is not mandatory and Browns could end up with liquidation proceeds prior to payment of interest. An amended plan providing for payment of such interest may be feasible based on further evidence.
In re Nome Commercial Co.; In re Brown; 5/29/96.
Frederick Odsen & Timothy Byrnes (Hughes, Thorsness, Powell, Huddleston & Bauman), Anchorage, for Debtors; C.R. Kennelly, Anchorage, for Higashi; Gregory Youngmun (DeLisio, Moran & Geraghty), Anchorage, for NBA; Michelle Boutin (Bundy & Christianson), Anchorage, for UCC.
4 ABR 372: Ch. 11, mining claims, adverse possession (Ross).
Ownership of 15 mining claims in Denali Park is apportioned among the Trustee and Marianne Pilant and Lisa Rogers.
The Trustee has not been able to establish adverse possession against Pilant and Rogers because many of the events occurred so long ago and/or the heavy burden of proving adverse possession against co-owners of a remote mining claim. Alternatively, a large percentage of the Trustee's adverse possession claim cannot be established because §108(c) extends the time for Pilant and Rogers to sue.
Pilant and Rogers are not entitled to an enhanced interest in the claims that they might otherwise have inherited but for an alleged fraud on Alaska Superior Court in a probate case because the Trustee qualifies as a bona fide purchaser under §544(a)(3) and rises above the fraud argument.
The facts regarding Eric & Paul Wieler's playing "fast & loose" with the Court have been all too apparent. They will be judicially estopped from claiming that any portion of the claims traceable to any legal or equitable ownership interest they may have had as an individual or partner on the petition date are now instead owned by the bankruptcy estate.
Leonard (Trustee) v. Wieler et al [In re Gold King Mines], 7/22/96.
Cabot Christianson (Bundy & Christianson), Anchorage, for Trustee Bennie Leonard; C.R. Kennelly, Anchorage, for Eric & Paul Wieler; Carl Bauman (Hughes, Thorsness, Powell, Huddleston & Bauman), Anchorage, for Rogers and Pilant; Mark Nunn, Anchorage, for Harvey Wieler.
4 ABR 413: Ch. 7, settlement approval (Branson).
Recommended that Judge MacDonald's approval of settlement of trust claims against Debtor Linda Smith by allowance of an unsecured claim for $2,272,065 and settlement with the estate of Nettie Smith for $150,000 (4 ABR 99) be affirmed.
Smith v. Compton (Trustee), 7/9/96.
Helen Simpson (Simpson Law Office), Anchorage, for Linda Smith; Richard Monkman (Dillon & Findley), Juneau, for Bernard McCoy; Paul Koval (Koval & Featherly), Anchorage, for Trustee Larry Compton.
4 ABR 439: Ch. 7, reaffirmation/rescission, dischargeability complaint filing time (Ross).
Alaska USA's motion to file late dischargeability complaint denied.
Debtor reaffirmed a debt secured by a boat, then rescinded because it had been stolen. Alaska USA seeks to file a dischargeability action based on fraud. However, more than 60 days has passed since the creditors meeting and thus the time for filing a dischargeability complaint has expired.
Karen Marsh, pro se; Marshall Coryell (Coryell & Associates), Anchorage, for Alaska USA.
4 ABR 441: Ch. 7, fraud (Ross).
Airport Rentals' motion for summary judgment denied.
AR generally reiterates that the Court determined that Debtor appeared to have been engaged in a Ponzi scheme and had misused corporate funds. However, it has shown no facts why its specific claim is nondischargeable.
Airport Rentals v. Bonham (World Plus) [In re Bonham], 8/12/96.
Kenneth Ringstad, Fairbanks, for AR; RaeJean Bonham, pro se.
4 ABR 443: Ch. 13, attorney fees (Ross).
$4,800 requested fees denied as exorbitant, $2,500 granted.
In re Carey (Alpine Portable Toilets), 9/12/96.
Brock Weidner, Juneau, for Debtor; Larry Compton, Anchorage, Trustee.
4 ABR 446: Ch. 7, trustee qualifications (9th Circuit).
BAP's affirmation (4 ABR 200) of Judge MacDonald's refusal to appoint a New York resident as trustee (4 ABR 72) affirmed.
Donna Willard (Willoughby & Willard), Anchorage, and Arnon Siegel (Davis, Polk & Wardwell), DC, for Plaintiffs; Rebecca Copeland (Koval & Featherly), Anchorage, and AUST Barbara Franklin, Anchorage, for Defendants.
4 ABR 447: Ch. 7, preferential transfers, cash collateral agreement, notice, due process, implied covenant,
tortious interference with corporate governance, dominance of borrower, banking practices, fraud, breach
of lending contract, preferences, fraudulent transfers, postpetition transfer of security interest, equitable
subordination, costs, jury (MacDonald).
Trustee's motion for partial summary judgment to avoid transfer of security interests in vessels given to NBA 1 month before Martech's bankruptcy filing denied. The cash collateral agreement is binding on the Trustee and precludes his attack on NBA's security interests. It is not void due to defective notice; statutory/rule requirements were met, and in any event due process requirements for notice were satisfied. The Trustee does not stand in the shoes of the unsecured creditors for purposes of the preference claim, but is bound by acts of the DIP. There is no support for his contention that NBA made misrepresentations in acquiring approval of the agreement.
NBA's motion for partial summary judgment will be granted as follows: the Trustee's claims of breach of the implied covenant of good faith, tortious interference with corporate governance and dominance and control of borrower, violation of banking practices, and common-law fraud are dismissed; that portion of his claims seeking to avoid NBA's security interests in vessels and a jet aircraft are dismissed with prejudice; his claim of equitable subordination to subordinated debenture holders is dismissed without prejudice. His claims of breach of contract to loan money, equitable subordination as to general creditors, and recovery of his costs & expenses in connection with disposition of NBA's collateral remain at issue. Also remaining at issue are claims relating to certain transfers, including postpetition transfers occurring after expiration of the cash collateral agreement. NBA's motion to strike the jury demand is granted.
Battley (Trustee) v. National Bank of Alaska [In re Martech USA], 11/25/96.
Paul Koval (Koval & Featherly), Anchorage, and Thomas Bucknell (Bucknell & Stehlik), Seattle, for Trustee; Patrick Gilmore (Atkinson, Conway & Gagnon), Anchorage, for NBA.
4 ABR 474: Ch. 7, abstention, core proceeding (MacDonald).
Motion by Plaintiff for remand to Alaska Superior Court of his civil action against Debtor granted.
The state court action is not a core proceeding. Trustee's state-law claims for breach of contract, misrepresentation, and duress are identical to claims asserted in Northern Pipeline (US 1982). Mandatory abstention applies.
Studnek v. Mulhauser et al [In re Mulhauser], 10/7/96.
J.L. McCarrey III (McCarrey & McCarrey), Anchorage, for Studnek; Michael Mills (Bankston & McCollum), Anchorage, for Trustee Larry Compton; Mitchel Schapira, Anchorage, for Steven Geczy.
4 ABR 480: Ch. 7, reconsideration, cash
collateral agreement, preference, waiver, relation-back, substitution of plaintiffs
(MacDonald).
Trustee's motion for reconsideration of the Court's 11/25/96 order (4 ABR 447) denied. Trustee's motion to substitute unsecured creditor as plaintiff to prosecute the preference claim denied without prejudice; motion may be renewed upon identification of creditor.
Trustee takes issue with the Court's findings that the cash collateral agreement encompassed a waiver by Martech, as DIP, of the right to attack NBA's security interests in vessels as preferences, and that this waiver is binding on the Trustee. However, his motion presents no new evidence and does not make the required showing for Rule 60(b) relief.
Battley (Trustee) v. NBA [In re Martech USA], 2/3/97.
Thomas Bucknell (Bucknell & Stehlik), Seattle, and Paul Koval (Koval & Featherly), Anchorage, for Battley; Patrick Gilmore, Anchorage, for NBA.
4 ABR 492: Ch. 11, administrative expense (Ross).
FNBA's motion to allow part of its claim as an administrative expense denied.
FNBA, a substantially oversecured creditor, was acting for its own interest in protecting the Pump House property in anticipation of a smooth foreclosure sale, rather than agent for a group of creditors. As such it is not entitled to the status of custodian under §543, nor an administrative expense claim under §503(b)(3) (E). It is also not entitled to administrative expenses for postpetition expenditures for security, utilities, and insurance for Verb. While its payments may have benefitted the estate, they were principally to protect its own security interest.
Robert Crowther, Anchorage, for Debtor; John Beard, Anchorage, for FNBA; Walter Featherly (Koval & Featherly), Anchorage, for J.L. Properties; Jesse Bell, Anchorage, for Sherron Perry; Regional SBA Counsel Jon DeVore, Anchorage.
4 ABR 496: Ch. 7, post-discharge conversion to Ch. 13 (Ross).
Debtor's motion to convert to Ch. 13 will be approved if the motion to set aside the Ch. 7 discharge is not opposed.
Debtor indicates that he made a big mistake in filing his pro se Ch. 7 and that Ch. 13 will preserve a significant property which was not exempt and he had sufficient income for a Ch. 13 plan.
Chris Johansen, Anchorage, for Debtor; Kenneth Battley, Anchorage, Ch. 7 Trustee; Larry Compton, Anchorage, Ch. 13 Trustee.
4 ABR 500: Ch. 7, PI settlement proceeds, amended schedules, bad faith (MacDonald).
Because the estate has suffered prejudice from Debtor's failure to file timely exemption schedules following receipt of settlement proceeds from an auto accident claim, her amended claim of exemptions insofar as they seek to exempt the $90,000 settlement proceeds is disallowed and stricken.
Debtor did not act in bad faith. She relied on her lawyers in the PI and bankruptcy proceedings and candidly discussed the PI action at the creditors' meeting.
Nor were the actions of her bankruptcy lawyer Mitchell Joyner and PI lawyer Michael Patterson in bad faith. While Joyner was negligent in failing to properly schedule the PI suit and timely file Debtor's claim of exemptions, he did list the PI action in the statement of financial affairs, discuss it with the Trustee at the §341 meeting, and submit a proposed application for her employment after the meeting. He improperly advised Patterson that Debtor could accept the settlement and that the proceeds could be disbursed, and conveniently ignored the Trustee's requests for information until it became apparent that the Trustee knew of the settlement. Nevertheless, Joyner was simply negligent. Patterson is not a bankruptcy practitioner and relied on Joyner to advise him regarding bankruptcy issues. He did not intentionally conceal assets or defraud the estate.
However, the Trustee and estate have suffered substantial prejudice due to Debtor's failure to promptly file amended schedules. Patterson's contingent fee has been paid, Debtor and her husband somehow spent the $56,000+ balance, and the estate has incurred inordinate and unnecessary fees & costs. Only $7,500 could be claimed exempt under the version of §522(d) (11)(D) in effect when Debtor filed her petition. Had she promptly filed amended schedules after her surgery and before returning to work, a substantial portion of the settlement would have been exempt under §522(d) (11)(E) as loss of future earnings. However, at least 30% of the proceeds could be allocated to non-exempt portions of her claim, and very little could be allocated to loss of future earnings at this time.
Mitchell Joyner, Anchorage, for Hall; Walter Featherly (Koval & Featherly), Anchorage, for Trustee Larry Compton.
4 ABR 510: Ch. 7, stay violation, lien avoidance (MacDonald).
KCB's postpetition receipt of estate property (Debtor's PFD) and subsequent state court exemption litigation violated the automatic stay. However, whether Debtor is entitled to damages depends on whether the violation was willful; a hearing must be held to determine when KCB became aware of Debtor's Ch. 7 petition.
Debtor also seeks to avoid KCB's execution lien on his PFD. He scheduled his property as exempt under state rather than federal exemption statutes. A PFD is exempt only to the extent of 45% of its value under state law. However, Debtor may amend his schedule at any time.
John Jousma, pro se; R.W. Shaffer, Ketchikan, for KCB.
4 ABR 515: Ch. 11, responsible person (air transportation excise taxes) (Ross).
Neil Bergt was a "responsible person" for payment of transportation excise taxes collected from MarkAir customers during the first half of 1992 because he had significant control over which creditors were paid. He was "willful" because he either knew that the taxes were not being paid or that there was a grave risk that they would not be paid.
Ronald Goss, Seattle, and Mark Davis, Anchorage, for Bergt; Robert Branman & Arthur Yoon (Justice Dept. Tax Div.), DC; John Siemers, Anchorage, for Trustee William Barstow; Stephen Baker, Anchorage (IRS).
4 ABR 525: Ch. 7, accounting fees (Ross).
Fees for Trustee's accountant Russell Minkemann are allowed in the amount of $69,978 and disallowed in the amount of $17,330 which may represent clerical work.
John Siemers, Anchorage, for Trustee.
4 ABR 529: Ch. 11, sale of property (oil wells) (MacDonald).
Debtor's motion for sale of its interest in oil wellsto Forcenergy is granted.
While it is unusual in a Ch. 11 case for a sale of this magnitude to be consummated outside the context of confirmation, the court can authorize such a sale under §363(b) under the proper circumstances. There are good & sufficient reasons justifying a sale out of the ordinary course of business and the sale is in the best interests of the estate and creditors.
In re Stewart Petroleum, 5/12/97.
Erik LeRoy, Anchorage, for Debtor; Robert Hume, Anchorage, for Forcenergy.