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Judge Ben T. Barry

In a motion to prohibit the debtors' use of cash collateral, a creditor-bank alleged that the debtors defaulted on eight loans with the bank before filing their chapter 11 petition. The bank argued that the debtors' pre-petition default triggered an absolute assignment of rents that excluded the rents from the debtors' estate. Because the court found that no pre-petition default had occurred, the court denied the bank's motion without prejudice to the filing of an objection to a subsequent motion of the debtors' to use cash collateral under § 362(c).

In this opinion, the court confirmed the debtors’ modified plan that proposed to surrender collateral to a secured creditor and treat any deficiency as an unsecured claim. The court also explained its interpretation of the debtors’ motion for authority to incur a debt in the light of the trustee’s response that he “does not necessarily oppose the motion.”

In this Allens/Veg Liquidation adversary proceeding, the Court granted the defendants’ second motion to dismiss, which addressed what remained of the trustee’s complaint. (The defendants' first motion to dismiss was granted by the Court on September 29, 2016.) The Court found that the doctrine of res judicata and the requirement for finality of a § 363 sale dictated dismissal. For those same reasons, the Court denied the trustee’s incorporated request for leave to file a second amended complaint.

The chapter 7 trustee filed a motion for the imposition of sanctions under Rule 2019 for failure of some of the parties to disclose certain relationships between the parties in this case prior to the authorized § 363 sale when the case was a chapter 11 case. The court dismissed the motion finding that the chapter 7 trustee had not suffered an “injury-in-fact” sufficient to satisfy Article III standing.

In this short order, the Court denies counsel’s claim for the allowance of attorney fees in a chapter 13 case as an administrative expense because the case was dismissed prior to an order allowing the claim was entered.

The creditor filed a motion to dismiss both counts of the debtors’ complaint–first, for lack of standing to challenge the endorsements on an assignment and, second, for failure to state a claim under the FDCPA. The court denied the motion in its entirety. In their first count, the debtors are challenging the signatures that appear on the subject note as a matter of law under the UCC, not the contractual rights of the parties to the assignment. For the second count, the court found that the debtors stated sufficient facts to state a facially plausible claim for relief under a provision of the FDCPA.

This case lays out the required two-step process for obtaining default judgment. The debtor properly served the creditor bank with summons and the complaint. When the bank failed to respond to the complaint, the debtor then properly served a motion for default judgment on the bank, to which the bank did respond. After recognizing the Eighth Circuit’s two-step process, the court treated the motion for default judgment as a motion for entry of default, which would have been entered on the court’s docket when the motion was filed. Based on the lesser standard of “good cause,” the court treated the bank’s response as a motion to set aside the entry of default, granting the motion setting aside the default and allowing the case to proceed.

The debtor objected to the late filed claim of the IRS. The court sustained the objection, finding that although the IRS was not on the initial creditor matrix, it received actual notice with good service at least three times prior to the claims bar date, the last such notice being received at least two months prior to the bar date. The IRS did not file its proof of claim until three years after the bar date.

Chief Judge Phyllis M. Jones

Based on the facts of this case, the Former Chapter 7 Trustee’s Application for Compensation calculated using the highest rates allowed by Section 326(a) is denied. Trustee compensation for the Former Trustee and Successor Trustee shall be calculated under Section 326(a) based on total distributions made in the case, but will be divided pro rata at the end of the case by dividing each trustee’s distributions by the total amount disbursed.

Following Supreme Court precedent in Harris v. Viegelahn, upon conversion of a case from Chapter 13 to Chapter 7, including conversion pre-confirmation, all undistributed funds on hand with the Chapter 13 Trustee paid from the Debtor’s postpetition wages must be returned to the Debtor. Motion for Allowance of Administrative Claim filed by former counsel for the Debtor after conversion was denied.