Recent Bankruptcy Decisions from the Appellate Courts - April 2005
as published in the Norton Bankruptcy Law Advisor
SUPREME COURT
Rousey v. Jacoway
--- S.Ct. ---, 2005 WL 742304, U.S., Apr. 4, 2005Holding: Assets held in IRAs may be claimed as exempt under § 522(d)(10)(E). Although the debtors could withdraw the assets of the IRA at any time, the tax penalty imposed on withdrawals made before the accountholder turns 59½ constitutes a substantial penalty that renders payment from the IRA "on account of age."
THIRD CIRCUIT
In re American Classic Voyages Co.
--- F.3d ----, 2005 WL 957124, 3rd Cir.(Del.), Apr 27, 2005Holding: Attorney's letter to claims agent which requested proof of claim form and advised that his client had a claim and had been injured while he was an employee of the debtor, did not constitute informal proof of claim, because the letter did not state the nature of the injury or the amount of the claim. Debtor was not allowed to file a late claim based on excusable neglect, when the failure to file a timely, formal proof of claim was due to the attorney's failure to review the notice of the claims bar date.
In re Zinchiak
--- F.3d ----, 2005 WL 976936, 3rd Cir.(Pa.), Apr 28, 2005Holding: Bankruptcy Court's decision to reopen bankruptcy case was not abuse of discretion, when secured creditor's rights in debtor's real estate hinged on creditor's satisfaction of conditions imposed by Bankruptcy Court order granting relief from automatic stay, and resolution of creditor's claim would impact the distribution to unsecured creditors.
FOURTH CIRCUIT
In re White Mountain Mining Co.
--- F.3d ----, 2005 WL 736803, 4th Cir.(W.Va.), Apr. 1, 2005Holding: As part of adversary proceeding to determine whether advances to debtor were debt or equity, Bankruptcy Court properly enjoined foreign arbitration of the same issue. Although the debtor's operating agreement required arbitration, the inherent conflict between arbitration and the underlying purposes of the bankruptcy laws prevented its enforcement.
In re J.G. Furniture Group, Inc.
--- F.3d ----, 2005 WL 902038, 4th Cir.(Va.), Apr 20, 2005Holding: Claim for unpaid workers compensation premiums was a priority claim pursuant to § 507(a)(4) because provision of workers compensation insurance constituted "services rendered within 180 days before the date of filing of the petition," without regard to whether debtor's employees worked during that period.
FIFTH CIRCUIT
In re Reed
--- F.3d ----, 2005 WL 737514, 5th Cir.(Tex.), Apr. 1, 2005Holding: Chapter 7 trustee was not entitled to interest on administrative fees and expenses in a surplus case. The fees and expenses were not claims paid under § 726(a)(1), because a trustee does not file a proof of claim under § 501. The trustee was allowed administrative expenses under §§ 330 and 503(b)(2).
In re Acosta
--- F.3d ----, 2005 WL 803863, 5th Cir.(La.), Apr. 8, 2005Holding: Debtor's personal guaranty was dischargeable under § 523(a)(2)(A). A "dumb but honest" debtor does not have intent to deceive when he honestly, though perhaps unreasonably, believes his representations made to obtain credit are true. In action by second lender seeking nondischargeability of personal guaranty, Debtor's false representation that first ship mortgage had been extinguished did not evidence intent to deceive, because Debtor honestly, though perhaps unreasonably, believed that the first ship mortgage had been extinguished.
SIXTH CIRCUIT
In re Computrex, Inc.
--- F.3d ----, 2005 WL 857016, 2005 Fed.App. 0177P, 6th Cir.(Ky.), Apr 15, 2005Holding: The debtor, a freight payment processor, made pre-petition payments to satisfy its client's freight liabilities, and the trustee sought to recover the payments as preferences pursuant to § 547(b). Because the client's money had been entrusted to the debtor as bailee for payment of the client's freight liabilities, the payments did not constitute property of the estate that could give rise to a preference claim.
In re M.T.G., Inc.
--- F.3d ----, 2005 WL 783082, 6th Cir.(Mich.), Apr. 8, 2005Holding: Court of Appeals does not have jurisdiction to review an interlocutory order approving or denying the employment of counsel to a trustee. District Courts have discretion to hear interlocutory appeals from the Bankruptcy Courts, but Courts of Appeals only have jurisdiction to hear bankruptcy appeals when both the Bankruptcy and District Courts' orders are "final."
Rittenhouse v. Eisen
--- F.3d ----, 2005 WL 774306, 6th Cir.(Mich.), Apr. 7, 2005Holding: Unpaid fees owed to attorney for legal services performed in preparation for filing of Chapter 7 petition are dischargeable. A debt for prepetition legal services is not one of the non-dischargeable debts listed in § 523(a).
SEVENTH CIRCUIT
Eden v. Robert A. Chapski, Ltd.
--- F.3d ----, 2005 WL 949041, 7th Cir.(Ill.), Apr 22, 2005Holding: State court had jurisdiction to rule that attorney's fees arising from debtor/husband's divorce proceeding were not dischargeable in his pending Chapter 13 bankruptcy. Broad wording of Bankruptcy Court's orders did not reserve issues regarding dischargeability for litigation exclusively before the Bankruptcy Court.
EIGHTH CIRCUIT
In re Apex Oil Co., Inc.
--- F.3d ----, 2005 WL 991624, 8th Cir.(Mo.), Apr 29, 2005Holding: Denial of class action plaintiffs' motion to reopen bankruptcy case was not an abuse of discretion. Section 350(b) provides discretion to reopen based upon the equities, and the denial in this case was based on four legitimate factors, including the availability of a discharge determination in the pending state court litigation, the presence of defendants in the state court litigation who were not subject to the bankruptcy court's jurisdiction, the seven-year lapse since the closing of the case and the distribution and/or revesting of the debtor's assets, and the litigation's lack of impact on the bankruptcy estate.
ELEVENTH CIRCUIT
Meadows v. Commissioner of Internal Revenue
--- F.3d ----, 2005 WL 768131, 11th Cir.(T.C.), Apr. 6, 2005Holding: Tax Court did not abuse discretion in declining to exercise jurisdiction over dispute whether IRS had violated automatic stay by applying payment from debtor's wife to discharged tax liabilities. When faced with complex bankruptcy issues, Tax Court may defer to Bankruptcy Court based upon considerations of comity and judicial efficiency.
