Justia U.S. 10th Circuit Court of Appeals Opinion Summaries

The United States Court of Appeals for the Tenth Circuit decided in favor of a debtor, Chuza Oil Company, and its related parties, who were alleged to have made fraudulent transfers during bankruptcy proceedings. The court affirmed the bankruptcy court's decision that the transfers were not fraudulent, rejecting the trustee's argument that the transfers depleted the bankruptcy estate by replacing subordinated debt with unsubordinated debt. The court held that Chuza Oil Company did not have an interest in the transferred funds as they were earmarked for a specific creditor and were not part of the bankruptcy estate. The court further held that the earmarked funds did not diminish the estate, finding that the bankruptcy court's conclusion that the estate was not diminished by the combination of payments into and out of Chuza Oil Company was not clearly erroneous. The court also found that the statutory exceptions to the trustee's preferential transfer and constructive fraudulent transfer claims were satisfied, as Chuza Oil Company received much more in loans from the defendants than it paid to the specific creditor. View "Montoya v. Goldstein" on Justia Law

This appeal arose from a converted Chapter 7 bankruptcy filed in 2017. In 2014, the debtor, All Resorts Group, Inc., paid personal tax debts of two of its principals totaling $145,138.78 to the Internal Revenue Service. Plaintiff, the United States Trustee, brought an adversary proceeding in bankruptcy court against the United States pursuant to Code 11 U.S.C. § 544(b)(1) to avoid these transfers. The “applicable law” on which the Trustee relied was now-former § 25-6-6(1) of Utah’s Uniform Fraudulent Transfer Act (amended 2017) as part of Utah’s Uniform Voidable Transactions Act. The United States (Government) did not contest the substantive elements required for the actual creditor (in this case, an individual with an employment discrimination claim against the debtor) to establish a voidable transfer under § 25-6-6(1). The Government acknowledged: (1) the debtor had made the transfers; (2) an actual creditor had an unsecured claim against the debtor arising before the transfers; (3) the debtor did not receive a reasonably equivalent value in exchange for the transfers; and (4) the debtor was insolvent at the time of the transfers. The Government further acknowledged that the sovereign immunity waiver contained in 11 U.S.C. § 106(a)(1) made it amenable to the Trustee’s § 544(b)(1) action. The Government contested § 544(b)(1)’s “actual creditor requirement,” arguing the actual creditor could not avoid the debtor’s tax payments made on behalf of its principals to the IRS because sovereign immunity would bar such creditor’s action against the Government outside of bankruptcy. According to the Trustee, the waiver contained in Code § 106(a) abrogated sovereign immunity not only as to his § 544(b)(1) adversary proceeding against the Government, but also as to the underlying Utah state law cause of action he invoked under subsection (b)(1) to avoid the transfers. On cross-motions for summary judgment, the bankruptcy court ruled in favor of the Trustee and avoided the transfers. The Government appealed. Finding no reversible error in the bankruptcy court's judgment, the Tenth Circuit affirmed. View "Miller v. United States" on Justia Law

A Chapter 13 debtor makes payments to a trustee who then disburses those payments to creditors according to a confirmed reorganization plan. A Chapter 13 standing trustee is compensated through fees he collects by taking a percentage of these payments the trustee receives from the debtor. The question presented in this appeal was: If a plan is not confirmed, can the standing trustee deduct and keep his fee before returning the rest of the pre-confirmation payments to the debtor or must the trustee instead return the entire amount of pre-confirmation payments to the debtor without deducting his fee? The Tenth Circuit concluded that, read together, 28 U.S.C. § 586(e)(2) and 11 U.S.C. § 1326(a)(2) unambiguously require the trustee to return the pre-confirmation payments to the debtor without deducting the trustee’s fee when a plan is not confirmed. View "Doll, et al. v. Goodman" on Justia Law

Bear Creek Trail, LLC, filed for Chapter 11 reorganization. The bankruptcy court granted a motion to convert the proceeding to a Chapter 7 liquidation and appointed a trustee. Bear Creek’s attorney in the bankruptcy proceedings asked the district court to review the bankruptcy court’s conversion order. The district court dismissed, holding that only the trustee could seek review. The Tenth Circuit concluded Bear Creek's former management and the attorney lacked authority to challenge the conversion order in district court on behalf of the Debtor. Accordingly, the district court's judgment dismissing the appeal was affirmed. View "Bear Creek Trail, et al. v. BOKF, et al." on Justia Law

Debtors Julio Barrera and Maria de La Luz Moro filed for bankruptcy under Chapter 13 of the Bankruptcy Code hoping to reorganize their assets and finances. Instead of selling most of their assets to obtain an immediate discharge of their debts, they opted to keep their assets, try a reorganization plan to repay creditors, and receive a discharge later. For some time they continued to meet the terms of their reorganization plan. But they changed their minds following the sale of their home, which had appreciated in value significantly since they filed for bankruptcy. Barrera and Moro converted their Chapter 13 bankruptcy to a liquidation of their estate under Chapter 7. The Chapter 7 trustee (Trustee) claimed a right to a portion of the proceeds from the sale of the home, including the appreciation that occurred after their Chapter 13 petition was filed. The issue this case presented for the Tenth Circuit Court of Appeals' review centered on who was entitled to the proceeds from the sale of the home. Specifically, did the sale proceeds from the real property of the estate belong to the Chapter 7 estate or to the debtors? The Court concluded that under 11 U.S.C. 348(f)(1)(A), the sale proceeds from the home belonged to the debtors. View "Rodriguez v. Barrera, et al." on Justia Law

Appellants, seventy-six Chapter 11 debtors associated with John Q. Hammons Hotels & Resorts (Debtors), argued they incurred more than $2.5 million of quarterly Chapter 11 disbursement fees from January 2018 through December 2020. Debtors faulted the bankruptcy court’s statutory interpretation, arguing that it applied the quarterly fees retroactively to pending cases against Congress’s intent. Alternatively, Debtors faulted Congress, arguing that charging different Chapter 11 disbursement fees depending on the location of the bankruptcy filing violated the uniformity requirement of the Bankruptcy Clause, U.S. Const. art I, sec. 8, cl. 4. The Tenth Circuit concluded the presumption against retroactivity did not apply here, because Congress increased the quarterly bankruptcy fees prospectively. On Debtors' second point, the Court concluded that Debtors had to prevail: the 2017 Amendment’s fee disparities failed under the uniformity requirement of the Bankruptcy Clause. The Amendment imposed higher quarterly fees on large debtors in Trustee districts. Judgment was reversed and the matter remanded for a determination of Debtors' quarterly Chapter 11 fees and a refund of overpayment. View "In re: John Q. Hammons Fall, et al." on Justia Law

This appeal arose because debtor-appellant Margaret Kinney failed to make some of the required mortgage payments within her Chapter 13 bankruptcy plan’s five-year period. Shortly after the five-year period ended, however, she made the back payments and requested a discharge. The bankruptcy court denied the request and dismissed the case. The issue on appeal was whether the bankruptcy court could grant a discharge, and the answer turned on how the Tenth Circuit characterized Kinney’s late payments. She characterized them as a cure for her earlier default; HSBC Bank characterized them as an impermissible effort to modify the plan. The Tenth Circuit agreed with the bank and affirmed dismissal. View "Kinney v. HSBC Bank USA" on Justia Law

Appellant Victor Kearney was the lifetime income beneficiary of two spendthrift trusts when he filed for bankruptcy in 2017. The United States Trustee’s office appointed an unsecured creditors committee (“UCC”) which proposed a reorganization plan contemplating a one-time trust distribution to pay off appellant's debts. After a New Mexico state court modified the trusts to authorize the distribution, the bankruptcy court approved the plan. Appellant appealed. The Bankruptcy Appellate Panel (“BAP”) of the Tenth Circuit concluded that the bankruptcy court did not deny appellant due process, made no errors in its findings of fact, and did not abuse its discretion in settling appellant's claims. On appeal of that decision, appellant argued that using spendthrift trust assets to fund the reorganization plan violated the trusts’ spendthrift provision and the law, and that approving the settlement of his claims amounted to an abuse of the bankruptcy court’s discretion. Finding no reversible error, the Tenth Circuit affirmed the BAP. View "Kearney v. Unsecured Creditors Committee" on Justia Law

This case arose from a bankruptcy filing by Thomas Crow, who owned substantial property and investment accounts in Wyoming. His bankruptcy petition sought an exemption for approximately $2 million contained in a Fidelity account, which he claimed was jointly held with his wife (who did not file for bankruptcy) and therefore was shielded from creditors under Wyoming law. The Trustee and a creditor, Radiance Capital Receivables Nineteen, L.L.C., objected to the claimed exemption. After a hearing, the bankruptcy court upheld the exemption, and a Bankruptcy Appellate Panel (BAP) affirmed. On appeal, Radiance appealed the BAP’s affirmance. Crow argued the Tenth Circuit lacked jurisdiction over this appeal because the BAP’s affirmance of the bankruptcy court’s ruling on the claimed exemption was not “final” within the meaning of 28 U.S.C. 158(d)(1). Radiance also challenged the BAP’s affirmance of the bankruptcy court’s ruling that an adversary proceeding was required to determine the amount of joint debt held by the Crows before any portion of the Fidelity account must be turned over to the Trustee. Finding it had jurisdiction, and deciding on the merits, the Tenth Circuit Court of Appeals affirmed. Applying Wyoming law, Court concluded the Crows jointly held the Fidelity account with a right of survivorship (“tenancy by the entirety” at common law) and was therefore exempt from the bankrupt estate. Furthermore, the tenancy by the entirety was not severed by the Crows’ subsequent conduct. The Court determined Radiance lacked standing to challenge that portion of the BAP’s ruling with regard to the adversary proceeding, and therefore dismissed that aspect of its appeal. View "Radiance Capital v. Crow" on Justia Law

Plaintiffs-appellees Byron and Laura McDaniel claimed they discharged some private student loans in their Chapter 13 bankruptcy. Defendant-Appellant Navient Solutions, LLC (“Navient”), the loans’ creditor, moved to dismiss the McDaniels’ claim under Federal Rule of Civil Procedure 12(b)(6), contending that the loans were excepted from discharge under 11 U.S.C. 523(a)(8)(A)(ii). This case raised a question of first impression to the Tenth Circuit of whether an educational loan constituted “an obligation to repay funds received as an educational benefit,” within the meaning of section 523(a)(8)(A)(ii). The Court concluded that it did not, therefore, the Court affirmed the bankruptcy court’s interlocutory order denying Navient’s motion, and remanded the case for further proceedings. View "McDaniel v. Navient Solutions" on Justia Law