Business Law Insolvency Law Committee

Summary: In McCann v. Wichot (In re Patmont Motor Werks, Inc.) BAP Case Nos. NV-17-1221-BTaL, NV-17-1288 (Consolidated Appeals) (9th Cir. BAP 2018), the Bankruptcy Appellate Panel for the Ninth Circuit affirmed the bankruptcy court’s order denying litigation counsel employed by debtor’s insiders relief from a sanctions order as untimely pursuant to Civil Rule 60(b), but found that the bankruptcy court abused its discretion in granting the responding party’s request for attorney’s fees incurred in opposing Civil Rule 60(b) motion. Read more

Summary: In In Jones v. Machado-Powell, 2018 WL 4925214 (9th Cir. BAP 2018), the Bankruptcy Appellate Panel held, in an unpublished opinion, that Appellees had not violated the automatic stay when they removed and sold debtor’s personal property and then listed the real property for sale as debtor had neither an ownership interest, nor a possessory interest in said real property, when debtor filed for chapter 13 bankruptcy relief. Read more

Summary: The California Court of Appeal reversed the trial court’s judgment and held that the Uniform Voidable Transactions Act (Cal. Civ. Code. § 3439 et seq., formerly known as the Uniform Fraudulent Transfer Act, or UFTA) can apply to a premarital agreement in which the prospective spouses agree that upon marriage each spouse’s earnings, income, and other property acquired during marriage will be that spouse’s separate property. Robert Sturm v. Todd Andrew Moyer et al., No. B284553 (Cal. Ct. App. Feb. 15, 2019). The Court held that the application of the UFTA to a premarital agreement depends on whether there was actual or constructive fraud under Civil Code section 3439.04, and remanded to the trial court to make that determination. Read more

Summary: The California Supreme Court has held that an assignee holding both the senior and junior notes secured by the same parcel of real property may foreclose non-judicially on the senior lien and then recover from the borrower on the junior note. The holding overturns nearly 30 years of precedent. [Black Sky Capital, LLC vs. Cobb, 7 Cal. 5th 156, 439 P.3d 1149 (2019)] Read more

Summary: The Eighth Circuit has held that a guarantor's financial advisor had the implied actual authority to deliver the guarantee to a lender, even though the lender failed to make inquiry concerning the scope of the advisor's authority to act on behalf of the guarantor. [Radiance Capital Receivables Eighteen, LLC vs. Concannon, 920 F.3d 552 (8th Cir. 2019).] Read more

Summary: A bankruptcy court in Florida has held that a trustee asserting an "unreasonably small assets" fraudulent transfer claim must show that the transfer in question was the event that caused the debtor to have unreasonably small assets; if the debtor was already in distress, then the transfer was not the cause of the debtor's financial demise. [In re Palm Beach Finance Partners, LP, 2019 Westlaw 1301899 (Bankr. S.D. Fla.).] Read more

Summary: A bankruptcy court in Virginia has held that two adjacent retail parcels did not constitute a "shopping center" despite their common ownership; thus, a bankrupt tenant could assign its lease to a neighboring tenant's competitor, in violation of the existing tenant’s exclusivity clause. [In re Toys "R" Us Property Co. I, LLC, 2019 Westlaw 1075434 (Bankr. E.D. Va.).] Read more

Summary: An individual borrower obtained a $3 million punitive damage award, on top of almost $600,000 in total compensatory damages, against a loan servicer that falsely declared that her mortgage was delinquent. In calculating the permissible ratio of punitive damages, the court aggregated all of the borrower's cumulative damage awards, rather than looking solely to her tort claim. [Saccameno vs. Ocwen Loan Servicing, LLC, 2019 Westlaw 1098930 (N.D. Ill.).] Read more

Summary: The Wyoming Supreme Court has held that the members of an insolvent LLC do not owe fiduciary duties to its creditors, unlike the principals of an insolvent corporation. [Mantle vs. North Star Energy & Construction LLC, 437 P.3d 758 (Wyo. 2019).] Read more

Summary: A bankruptcy court in New York has held that a group of term lenders who received payment under a debtor-in-possession order could not invoke an earmarking defense to the estate's avoidance claims because the order itself authorized the estate to prosecute those claims. [In re Motors Liquidation Co., 2019 Westlaw 367170 (Bankr. S.D.N.Y.).] Read more