Case: Leland S. Smith, Jr. v. Maine Bureau of Revenue Services, No. 18-1573 (1st Cir.)
Opinion by: Circuit Judge Sandra Lynch
December 12, 2018

Facts:
The debtor filed three bankruptcy petitions under Chapter 13 of the Bankruptcy Code. In December 2016, he filed his third petition just two months after the dismissal of his second filing. This triggered § 362(c)(3)(A) which provides that when a debtor files a bankruptcy petition within one year after the dismissal of a prior petition, the automatic stay will terminate after 30 days if no extension is granted by the court. 11 U.S.C. § 362(c)(3)(A).

Among his debts, the debtor owed $51,596.53 in state taxes, interest, and penalties to Maine’s Bureau of Revenue Service (“MRS”). There was no request for an extension of the stay, and on January 27, the 30-day period had expired. At a February 2017 bankruptcy court hearing, MRS moved for an order pursuant to § 362(j) to confirm the extent to which the stay had been terminated.

The debtor argued that the phrase “with respect to the debtor” in § 362(c)(3)(A) plainly and unambiguously terminates the stay “only as to actions against the debtor and his property, not as to actions against the property of the bankruptcy estate.” Conversely, MRS argued that the scope of § 362(c)(3)(A) is not limited to just the debtor and his property, but that it terminates the stay for all purposes.

The Bankruptcy Court for the District of Maine ruled that the automatic stay had terminated in full, and the U.S. District Court of Maine affirmed that decision. The U.S. Court of Appeals for the First Circuit then reviewed the bankruptcy court’s decision de novo.

Holding: 
In affirming both lower court rulings, the First Circuit held that “§ 362(c)(3)(A) terminates the entire stay thirty days after the filing of a second petition.”

The Court rejected the debtor’s argument that the language of the statute is plain since “the language at issue could have different meanings.” The Court relied on King v. Burwell, which warns courts against rigorous application of interpretive canons—including the plain meaning rule—where provisions may be “inartfully” drafted. King v. Burwell, 135 S. Ct. 2480, 2492 (2015). The Court applied King because § 362(c)(3)(A) is imprecise in that it is a “collection of ‘with respect to’ phrases, and it is not obvious how the phrases relate to each other, or how the phrases connect to other related provisions.”

Since the text of § 362(c)(3)(A), including the phrase “with respect to the debtor,” did not support or completely dispose of either party’s arguments, the Court looked to the “statutory context, and Congress’s intent in enacting the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) and § 362(c)(3)(A).”

The Court opined that in enacting BAPCPA, Congress intended to discourage bankruptcy abuse, in particular bad faith repeat filings for no valid purpose other than to trigger the automatic stay. This outcome, the Court concluded, can best be achieved by reading § 362(c)(3)(A) to terminate the stay in full.

Summary Prepare By:
Carlos Loredo
Candidate for Juris Doctor, May 2019

Read the Full Case Here: http://media.ca1.uscourts.gov/pdf.opinions/18-1573P-01A.pdf

Case: Ginger Sirikanjanachai v. Town of Hingham (In re Ginger Sirikanjanachai), no. 17-12526-FJB (Bankr. D. Mass.) 

Opinion By: Judge Frank J. Bailey
November 7, 2018

Facts:
The town of Hingham (the “Town”) filed an adversary proceeding seeking to except its state court judgement against debtor, Ginger Sirikanjanachai (the “Debtor”) from her chapter 7 discharge. Count I sought a declaration that this judgment for specific performance against Debtor is not a “claim” within the meaning of the Bankruptcy Code. Count II sought a determination that this judgment and recovery of attorney’s fees should be excepted from discharge based on several misrepresentations under 11 U.S.C. § 523(a)(2)(A) or (B) which governs nondischargeability pertaining to false pretenses and fraud.

The Debtor had participated in a lottery to purchase an available unit with the Hingham Housing Authority. It was required for two residents to occupy the unit and in the Debtor’s application she represented that it would be occupied by herself and Laciga Rachaisi, which was a previous name of the Debtor and also the name of the Debtor’s corporation, Laciga Rachaisi Inc. She represented that her landlord was a realty trust but did not disclose her position of Trustee in that realty trust. She also represented that she had not owed a home in the past or present time by leaving the answer blank when in fact she had. Upon purchasing the unit, the Debtor violated Deed Rider provisions by conveying the unit to herself as Trustee of a realty trust and granting two mortgages on the unit to herself; one to herself in her previous name, Laciga Rachaisi, and the second to herself as Trustee of another realty trust. Lastly, she granted a third mortgage to her second husband’s investment trust. All of this was done against Deed Rider provisions and without notice to the Town.

The Town obtained a state court judgment in its favor which declared void the Debtor conveying the unit to herself along with the three mortgages that she had granted on the unit. The Debtor was also ordered to convey fee title to the Town, and the Town was authorized to payoff from the proceeds of mortgage. Lastly, the Town was authorized to recover attorney’s fees and costs from the Debtor.

Holding:
On Count I, the Bankruptcy Court ruled that the Town’s judgment ordering the Debtor to transfer the unit back to the Town is excepted from discharge under 11 U.S.C. § 727(a). Upon reaching this ruling, the Court ruled that this order of specific performance does not require the Debtor to pay the Town, but rather to transfer the unit back. Because of this, the Debtor’s obligation is not a claim giving rise to a right to payment within the meaning of 11 U.S.C. § 101(5)(A) and is in turn not a debt within the meaning of 11 U.S.C. § 727(b).

The Court also ruled that the Debtor’s obligation is not a claim within the meaning of § 101(5)(B) because although the Town has the right to the equitable remedy of having the unit transferred to them, this remedy also does not give right to a rise to payment. The Court ruled that damages would not suffice because there are limited units available in Hingham Housing Authority’s program, the return of Debtor’s unit to the Town is valuable.

On Count II, the Bankruptcy Court ruled that four out of the seven misrepresentations were plead with particularity. The two misrepresentations that were not stated with particularity were regarding the Debtor omitting monthly income and income from the sale of previous real property. The Court ruled that the Town did not specify how and where the Debtor made these misrepresentations and, therefore, did not plead with particularity. The Court deemed these two misrepresentations waived as grounds for nondischargeability under § 523(a)(2).

Regarding the misrepresentation of the Debtor’s lack of answer in her application that she did not have real estate holdings, the Court ruled that the lack of answer was not a basis for discharge under § 523(a)(2)(b) which governs false statements in writing. The Court determined that by leaving this answer blank, it was not a negative answer confirming that she had not owed real estate, but simply a non-answer. The Town had not proved that it relied on this non-answer as a negative and that any reliance it may have placed on it was reasonable which are requirements for nondischargeability under § 523(a)(2)(b).

The Court ruled that the Debtor’s statements regarding the non-existent second resident, not owning a home in the past, that her current landlord was her realty trust, and that she did not presently own a home sounded in fraud under all four requirements of § 523(a)(2)(A). The Debtor had made these representations with the intent to deceive and induce the Town to rely on them in which the Town reasonably did. By relying on these representations, the Town incurred expenses to have the unit transferred back to them which gave rise to a debt for property, including attorney’s fees.

The fourth requirement of § 523(a)(2)(A) requires false representations to not be made in regard to the debtor’s or an insider’s financial condition. In accordance with a previous ruling, the Court applied a narrow interpretation of what constitutes financial condition statements. A narrow interpretation would require income statements, balance sheets, etc. The Court ruled that the Debtor’s statements were not broad enough in scope to constitute a statement respecting her financial condition. Having met all of the requirements of 523(a)(2)(A), the Court excepted the Town’s judgment of specific performance and attorney’s fees from discharge.

Read The Full Case Here: http://www.mab.uscourts.gov/mab/opinions

Summary Prepared By:
Erica James
New Lawyers Section Liaison to Bankruptcy Law Section

Case: In re Robert J. Spenlinhaur, Debtor no. 13-17191-JNF (Bankr. D. Mass.).

Opinion by: Judge Joan N. Feeney

November 2, 2018

Facts:

At an evidentiary hearing, Debtor Robert Spenlinhaur and Respondents Eric Josephson and Jackson Hole Classic Cars, LLC were found to be in contempt of a previous court order to deliver non-exempt assets of the chapter 7 estate. The assets included vehicles, boats, keys, and registration documents. The Bankruptcy Court found no cause or justification for disobeying the order and ordered the Trustee to immediately collect the non-exempt assets.

Debtor subsequently filed a Motion for Partial Relief from Judgment and Request for Emergency Consideration. He represented that the non-exempt assets, which consisted of a camper and a pickup truck, should be carved out from the Court’s order because without the camper he would be homeless and without the truck he would have no transportation. He also sought relief on behalf of respondent Josephson, representing that another pickup truck and a trailer, both already in possession of the Trustee, should also be carved out from the order for the same reasons.

To support these requests, he argued these needs constituted “any other reason that justifies relief” from a final judgment, order, or proceeding under Fed. R. Civ. P. 60(b)(6). The Court denied the motion stating that if the Trustee were not to collect the non-exempt assets it would be expressly contrary to his duties. The Court found that the debtor did not meet the threshold for Fed. R. Civ. P. 60(b)(6) and was ordered to show cause as to why he should not be sanctioned under Fed. R. Bankr. P. 9011(b) for the filing of the motion. Debtor argued that the motion was filed in the appeals period, was not submitted for improper purpose or unnecessary delay, not intended to needlessly increase litigation costs, and not hinder the Trustee’s duties. Debtor argued the motion was not frivolous because an open tax court case may be resolved in his favor and the zealous advocacy did not cross the line into an area where sanctions could be permitted.

Holding:

After noting that a movant pursuing a Rule 60(b)(6) claim “faces formidable hurdles,” and that “Rule 60(b)(6) motions should be granted only where exceptional circumstances justifying extraordinary relief exist…” Ross v. Garcia (In re Garcia), 532 B.R. 173 (B.A.P. 1st Cir. 2015), citing Simon v. Navon, 116 F.3d 1, 5 (1st Cir. 1997), the Bankruptcy Court observed that the Rule 60(b)(6) request of the Debtor and his counsel was a merely a reiteration of prior arguments made at the evidentiary hearing, was not supported by any legal authority, and therefore did not meet the required threshold for relief. The Court further held that motion was frivolous and therefore violated Fed. R. Bankr. P. 9011(b)(2). In reaching this conclusion, the Court noted that neither the Debtor nor the Respondents made any offer to pay the Trustee for the use of or insurance for the property, nor did they cite any case law or legal authority to support the proposed use.

The Court explained that since the Trustee is a fiduciary to creditors and is required to uphold his duties of collecting and reducing to money property of the estate (citing In re Feinstein Family Partnership, 247 B.R. 502 (Bankr. M.D. Fla. 2000)), granting the requested relief would effectively authorize a breach of the Trustee’s fiduciary duties under 11 U.S.C. § 704(a). Accordingly, the Court issued a monetary sanction against the Debtor and his counsel in the amount of $1,500 for filing a frivolous pleading.

Summary Prepared By:

Erica James

New Lawyers Section Liaison to Bankruptcy Law Section

Read The Full Case Here: http://www.mab.uscourts.gov/mab/opinions

Case: John O. Desmond, Chapter 7 Trustee v. Marsha S. Green (In re Warren I. Green), no. 13-10204-MSH (Bankr. D. Mass.).

Opinion By:

Chief Judge Melvin S. Hoffman

October 11, 2018

Facts:

The Chapter 7 Trustee filed an action pursuant to 11 U.S.C. § 363(h) for authority to sell a condominium held by the debtor and his non-debtor spouse as tenants by the entirety. The defendant non-debtor spouse, Ms. Green, moved for summary judgment objecting to the sale on the ground that the Trustee could not meet the balancing test of § 363(h)(3). That section requires the court to determine if the proposed sale will confer upon the estate a benefit that outweighs any detriment to the non-debtor. Relying on Butner v. United States, 440 U.S. 48 (1979), Ms. Green argued that such a determination could not be made because: (i) under Massachusetts tenancy by the entirety law, each owner enjoys equal rights to the entire ownership and proceeds and, as a result any distribution to the estate would result in Ms. Green not receiving her full interest as required by § 363(j); and (ii) Massachusetts law precluded the Trustee from distributing any funds until termination of the tenancy, meaning that neither she nor the bankruptcy estate would receive a benefit from the sale so long as the tenancy remained intact.

Holding:

The Bankruptcy Court held that strict compliance with Massachusetts tenancy by the entirety law would run counter to the policies of the Bankruptcy Code and was therefore preempted to the extent it was inconsistent with Bankruptcy Code § 363(h) and (j). The Court noted that although the Butner decision holds that, “property interests are created and defined by state law,” Ms. Green – like many other litigants – had glossed over the qualifier in the next sentence of that decision, which is that courts must also look to whether “some federal interest requires a different result.”

In Green, the Bankruptcy Court determined that federal bankruptcy law did indeed require a different result, a conclusion reinforced by the Bankruptcy Code’s legislative history, which explicitly states that a trustee should be permitted to sell entireties property.  Further, the Court observed that requiring a trustee to hoard the proceeds of such a sale would be incompatible with the dictates of § 704, which requires the trustee to administer the bankruptcy case expeditiously and consistent with the best interest of the parties. Finally, the Court rejected the notion that § 363(j) should be incorporated into the balancing test of § 363(h). Rather, § 363(j) simply governs what happens after a sale vis-à-vis the non-debtor spouse and does not create a condition precedent to a sale by the Trustee under § 363(h). Interestingly, one question the Court did not decide was the appropriate formula for dividing the sale proceeds, in light of Massachusetts law entitling each party to ownership rights in the entirety of those proceeds. The Court did note, however, that a 50-50 distribution would appear to be a reasonable approach.

Find The Full Case Here:

http://www.mab.uscourts.gov/mab/opinions

Summary Prepared By:

Erica James

New Lawyers Section Liaison to Bankruptcy Law Section