2011 Judge Lyons - Opinions
Judge Raymond T. Lyons -- Opinions signed in 2011
Debtor objected to a claim filed by her condominium association for common fees, late fees, and attorneys' fees. Debtor argued that the late fees and attorneys’ fees were unreasonable. Because New Jersey state law expressly permits a condominium association to assess late fees, the late fees at issue were presumptively reasonable. As Debtor failed to overcome this presumption of reasonableness, the late fees were allowable in the full amount claimed. Because (1) Creditor was successful in litigating the stay relief motion giving rise to the attorneys' fees and (2) the Third Circuit has rejected fee reductions based solely on lack of proportionality with the underlying recovery, the attorneys' fees were allowed, but adjusted for one duplicative charge.
In this adversary proceeding, Plaintiff alleged violations of the Truth In Lending Act and the New Jersey Consumer Fraud Act, arising from three loans made by Defendant to Debtors in the main bankruptcy case. Plaintiff sought damages as well as rescission of the loans and associated mortgages. Defendant moved for summary judgment on all counts. Because Plaintiff failed to identify any inaccuracies in the required disclosures, and because the alleged inaccuracies were insufficient to exceed the statutory threshold for an actionable inaccuracies under the terms of the Truth in Lending Act, summary judgment was granted for Defendant on all claims arising under that statute.
Because Plaintiff failed to demonstrate the sort of unlawful conduct required to make a prima facie case under the New Jersey Consumer Fraud Act, summary judgment was also granted for Defendant on all claims arising under that statute.
Defendant moved to vacate entry of default regarding his interest in certain stock claimed on behalf of the bankruptcy estate. The motion to vacate default was procedurally defective and could have been denied on that basis alone. Even had the court been inclined to overlook the procedural deficiencies, Defendant's motion to vacate was denied for failure to demonstrate a meritorious defense and failure to demonstrate a lack of culpability. Defendant's challenge to service was rejected because (1) he never denied receipt of the summons and amended complaint and (2) he admitted that he resides occasionally, and receives his mail, at the address where Plaintiff mailed the summons and amended complaint. In addition, Defendant could not show a meritorious defense because he had failed to allege an enforceable security interest in the stock in question either by a written security agreement or possession of the stock certificates.
The Debtor’s former attorneys, as unpaid administrative creditors, filed a motion to reopen this chapter 11 case and to have the order of dismissal vacated because of an alleged fraud on the court regarding a representation that Debtor would continue to operate as a going concern post-dismissal. The court finds that this representation was not fraudulent, and the motion is denied.
Debtor's ex-husband seeks relief from the automatic stay to enforce a Property Settlement Agreement ("PSA") and state court orders requiring the Debtor to contribute to mortgage payments and expenses of the marital residence pending sale. Because the Debtor's obligations under the PSA do not appear to be a domestic support obligation (and are therefore dischargeable), movant has failed to demonstrate cause for relief from the automatic stay.
Plaintiff seeks a determination of nondischargeability of a debt arising from a settlement between it and Debtor because Debtor failed to remit proceeds from sales of lots to Plaintiff in breach of the settlement agreement. Debtor moved to dismiss the complaint. Debtor's actions did not amount to fraud, but merely breach of contract. The debt is dischargeable, and Debtor's motion is granted.
Debtor seeks to re-open this bankruptcy case in order to amend his schedules so that they correctly reflect his assets at the time he filed his petition. He seeks to correct the record in order to eliminate any potential for contradiction between his bankruptcy petition and papers he has filed in a currently pending divorce action. Because the need for his amendments arises as a result of a recent change in applicable law, the motion to re-open is granted.
Debtors propose to strip off as wholly unsecured a second mortgage on their residence. The sole issue is whether the residence had a value as of the petition date that is less than the amount due on the first mortgage. The court holds that the value of the residence is less than the amount due on the first mortgage so the plans may be confirmed over the objection of the second mortgagee.
Hildene Capital Management and Hildene Opportunities Master Fund, LTD, noteholders in a junior tranche, moved to dismiss the involuntary chapter 11 case filed by senior noteholders. ZAIS Group, LLC (the "Collateral Manager") and Babson Capital Management, a senior noteholder, joined the motion. Because the debtor, ZAIS Investment Grade Limited VII, failed to contest the involuntary petition and the order for relief had been entered, Hildene could not challenge the involuntary petition. The debtor had property in the United States and a place of business in the United States through a trustee and the Collateral Manager; therefore, it was found to be eligible to be a debtor under title 11, United States Code. Also, the petitioning creditors established a good faith basis for filing the involuntary petition in that they sought to the value of the debtor's assets by actively managing them freed of the strictures of the trust indenture. Motion denied.
Plaintiff seeks a determination of non-dischargeability of debts arising from a series of loans made by him to Debtor over four years. During most of that time Debtor served as Plaintiff's attorney-in-fact under a power of attorney. The court finds that Debtor never intended to repay these loans, making them non-dischargeable under the fraud exception of 11 U.S.C. § 523(a)(2)(A). The court also finds that the power of attorney in favor of Debtor created a fiduciary relationship for the purposes of 11 U.S.C. § 523(a)(4), and that Debtor's borrowing money from Plaintiff amounted to defalcation, thus establishing a second, independent basis for non-dischargeability. Accordingly, judgment is entered for Plaintiff and the debts are found to be non-dischargeable.
The Debtor moved for reconsideration of an order denying the Debtor's application to retain counsel in the Cayman Islands. The United States Trustee objected to the application because she believed that the Cayman Islands attorneys, Maples and Calder, had a conflict of interest. The court initially denied the application because the need for special counsel was not apparent, but did not rule on the conflict of interest issue. After reconsidering the matter, the court found that Maples and Calder did not have an actual conflict of interest just because MaplesFS, a related company, provided directors for the Debtor. However, the Debtor still failed to demonstrate a need for Cayman Islands counsel in connection with the case and the application remained denied. Nevertheless, the Debtor was permitted to use Maples and Calder for legal services not related to the bankruptcy case such as routine corporate matters related to maintaining corporate registration and the like.
The Plaintiff objected to the discharge of the Debtor under 11 U.S.C. § 727(a)(2) - (5). The Debtor filed a voluntary petition under chapter 7. On his schedule of personal property, the Debtor listed miscellaneous antiques valued at $1,000 and miscellaneous household goods valued at $1,500. Three and a half years earlier, he gave a written personal financial statement for himself and his company to a bank that listed an antique and art collection valued at $180,000. In addition, the Debtor refinanced a mortgage through his wholly owned company and received $300,000 in loan proceeds. He failed to account for the disposition of those loan proceeds despite repeated demands from the plaintiff. The Debtor failed to explain satisfactorily the loss or deficiency of the assets within the meaning of Section 727(a)(5).
Further, there are no financial statements for the Debtor's wholly owned company and no records to determine whether his restaurant business, which was co-owned with the Plaintiff, was profitable. Furthermore, the Debtor failed to file tax returns for himself or his wholly owned company since 2006 and produced no records of his personal loans and extensive collection of art and antiques. The Debtor failed to keep records from which his financial condition or business transactions might be ascertained under Section 727(a)(3). The Court entered judgment denying the Debtor a discharge under Section 727(a)(3) and (5).