Business Law Insolvency Law Committee

In Vincent Jue v. Maggie Liu, et al. (In re Liu), 611 B.R. 864 (9th Cir. BAP 2020), the U.S. Bankruptcy Appellate Panel of the Ninth Circuit ruled that: (1) an order denying a 11 U.S.C. § 109(g)(2) dismissal motion is final and immediately appealable; (2) non-statutory, equitable defenses are not available to a recipient of a preferential transfer; and (3) a California attachment lien obtained within the 90-day preference period automatically terminates upon the filing of a bankruptcy petition by operation of law. Read more

In Sterling-Pacific Lending, Inc. v. Moser (In re Moser), 613 B.R. 721 (9th Cir. BAP 2020), the Bankruptcy Appellate Panel for the Ninth Circuit held that the bankruptcy court abused its discretion in declining to rule on a lender’s adversary proceeding seeking a declaratory judgment that the lender’s attempt to collect fees awarded to it in state court litigation did not violate the debtor’s chapter 7 discharge injunction. The BAP directed judgment in favor of the lender on remand because the debtor had repeatedly conceded that there was no discharge violation. Read more

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