Business Law Insolvency Law Committee

In In re Dao, __ B.R. __, No. 20-20742, 2020 Bankr. LEXIS 1260 (Bankr. E.D. Cal., May 11, 2020), Judge Christopher Klein published a decision joining the majority view that the termination of the automatic stay under Section 362(c)(3) is only with respect to the debtor and does not terminate as to estate property. Read more

In a relatively short period of time, the United States Court of Appeals for the Ninth Circuit decided two reorganization cases involving the growing and sales of marijuana in very different manners, and for very different reasons. Read more

A District Court vacated and remanded a Bankruptcy Court order authorizing the assumption and assignment of a lease between Sears and Mall of America, because the District Court found that the Bankruptcy Court had improperly allowed a provision in the lease to override the statutory mandate of Bankruptcy Code section 365(b)(3)(A) requiring similar financial condition. MOAC Mall Holdings LLC v. Transform Holdco LLC (In re Sears Holdings Corporation), 2020 WL 953528 (S.D.N.Y. 2/27/20). Read more

Relying on the strong Texas principle of freedom to contract, the Texas Supreme Court held recently that although emails are writings, an exchange of emails and documents which demonstrate that parties have reached a meeting of the minds is not sufficient to form a definitive agreement to create an enforceable contract. Chalker Energy Partners III, LLC v. Le Norman Operating LLC, 2020 WL 976930 (Tex. 2/28/20). Read more

The Fifth Circuit Court of Appeals took the unusual route of ruling that a bankruptcy court’s factual findings were clearly erroneous when it reversed the finding that, when renewing a business loan guaranteed by the debtor, a creditor did not reasonably rely on the debtor’s false financial statement, the reversal resulting in the debt being nondischargeable under 11 U.S.C. Section 523(a)(2)(B). The Circuit Court’s reversal was founded on its perception that the reasonable reliance requirement of the statute is intended to target creditors acting in bad faith to prevent debtors from discharging debts. Veritex Community Bank v Osborne, 2020 WL 1140845 (5th Cir. 3/10/20). Read more

he common law contract principle of unilateral mistake of fact will not save a trust deed buyer at a nonjudicial foreclosure sale from grossly overpaying for the property because he mistakenly thought the trust deed he was purchasing was in the first priority position based on information in a private software application when public records and a title report he had ordered both showed the trust deed was junior to a first trust deed. Matson v. S.B.S. Trust Deed Network, 2020 WL 1060245 (Cal. Court of Appeal, 4th Dist. 3/5/20). Read more

Even though the ownership of a first trust deed by Federal Home Loan Mortgage Corporation (Freddie Mac) was undisclosed, the loan’s servicer Bayview Loan Servicing holding the beneficial interest of record, Freddie Mac was still entitled to the non-extinguishment protection of the Federal Foreclosure Bar of the Housing and Economic Recovery Act (HERA) against a nonjudicial foreclosure by a superpriority homeowners association (HOA) in Nevada, which was designed by statute to extinguish liens junior to the HOA’s position. Bayview Loan Servicing, LLC v. Shadow Spring Community Association, 2019 WL 6219525 (D. Nev. Nov. 21, 2019). Read more

According to the United States Court of Appeals for the Eighth Circuit, a Chapter 7 debtor who was awarded part of his ex-wife’s Individual Retirement Account (IRA) and her 401(k) account in their prepetition dissolution proceeding may not claim those funds as exempt “retirement funds” under Section 522(b)(3)(C). Lerbakken v. Sieloff & Assoc., P.A. (In re Lerbakken), 949 F. 3d 432 (8th Cir. 2020). Read more

The Ninth Circuit Court of Appeals adopted the D.C. Court of Appeals’ responses to questions which it had certified to it, holding that hourly-billed matters are not property of a law firm; that after a partner leaves a law firm, the partner does not have a duty to account to the prior firm for profits on hourly-billed matters; and that a dissolved law firm has no interest in hourly fees earned post-dissolution. Diamond v. Hogan Lovells US LLP, 2020 WL 946025 (9th Cir., Feb. 27, 2020). Read more

A California bankruptcy court has held that a state court judgment previously entered against the Chapter 7 debtor, for secretly selling real property in which creditor had an unrecorded beneficial interest and diverting sales proceeds to her own use, is preclusive in creditor’s adversary proceeding to determine his debt nondischargeable. Read more