Recent Bankruptcy Decisions from the Appellate Courts - December 2007/January 2008

Reprinted from the Norton Bankruptcy Law Adviser , with permission of Thomson/West. For more information about this publication please visit http://www.west.thomson.com/.

THIRD CIRCUIT

In re Truong
--- F.3d ----, 2008 WL 141792 (3d Cir. Jan. 16, 2008)
Holding:  Bankruptcy court's order denying hearing on whether cause existed for removal of trustee due to conflict of interest was not a final order under 28 U.S.C. § 158.  Therefore, the appeal was dismissed for lack of appellate jurisdiction.  An order is not a final order unless it ends the litigation on the merits with nothing left but to execute the judgment.  The bankruptcy court's decision was merely interlocutory, as it was solely related to the conduct of litigation and did dispose of any discrete claim or cause of action.

FIFTH CIRCUIT

In re Rogers
--- F.3d ----, 2008 WL 54796 (5th Cir. Jan. 4, 2008)
Holding:  The homestead exemption cap, § 522(p)(1), does not apply to a homestead interest established less than 1,215 days pre-petition if the debtor acquired title to the property more than 1,215 days pre-petition.  Debtor acquired the property more than ten years before filing her bankruptcy petition, but debtor lived elsewhere.  Less than two years pre-petition, debtor moved to the subject property and claimed it as her homestead.  Section 522(p)(1) only applies to a claim of exemption in property acquired during the 1,215 days preceding the filing of the petition.

SIXTH CIRCUIT

In re Davis
--- F.3d ----, 2008 WL 151082 (6th Cir. Jan. 17, 2008)
Holding:  Decision whether to allow a direct appeal under 28 U.S.C. § 157(d)(2) from the bankruptcy court is committed to the discretion of the Circuit Court.  After Chapter 13 plan was confirmed, trustee appealed, questioning whether vehicle ownership expense is allowable when the debtor has no loan or lease payment.  A direct appeal may be justified where a decision would materially advance the litigation, but, here, allowing the case to percolate through the district court would likely facilitate a wise and well-informed decision.

SEVENTH CIRCUIT

In re Teknek, LLC
--- F.3d ----, 2007 WL 4553650 (7th Cir. Dec. 28, 2007)
Holding:  Contempt order against individual who testified at 2004 examination on behalf of corporate debtor was vacated for lack of personal service pursuant to Rule 7004.  The individual was also a party to an adversary proceeding, but this did not make her a party to the bankruptcy case, which is procedurally distinct.  A motion for contempt initiates a contested matter that must be served in compliance with Rule 7004, which requires personal service.  Service in this case was insufficient, so the contempt order had to be vacated.

NINTH CIRCUIT

Weinstein, Eisen & Weiss v. Gill (In re Cooper Commons LLC)
--- F.3d ----, 2008 WL 43713 (9th Cir. Jan. 3, 2008)
Holding:  Debtor-in-possession's counsel was not permitted to be compensated from post-petition loan when there was no provision for such payment in the relevant agreements and an express waiver of any right to surcharge the lender's collateral.  The agreement waived any claim by counsel under § 506(c).   A later loan negotiated by the Trustee specifically provided for payments to the Trustee's professionals, but the earlier loan agreements negotiated by the Debtor-in-possession carried no such carve-out.  The Trustee's later agreement did not "retroactively revive or prioritize" any payments to the counsel representing the Debtor-in-possession.

TENTH CIRCUIT

Mathai v. Warren (In re Warren)
--- F.3d ----, 2008 WL 62557 (10th Cir. Jan. 7, 2008)
Holding:  Bankruptcy court properly denied discharge to debtors under § 727(a)(2)(A).  Debtors engaged in a variety of deceitful pre-petition transactions with intent to prevent creditors from obtaining any money from the estate.  The debtors had made several unusual prepayments before filing, but did not list the prepayments on their original schedules or as assets in amended schedules.  A few months before filing, the debtors purchased a smaller home and returned it to the seller just over five months later.  The debtors possibly embezzled money through their role as executives in a corporation.  They also sold a coin collection for barely half its cost just before filing for bankruptcy, even though they made profits on coins in the immediately preceding years.