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Interesting Cases That I Didn't Get Around To This Year

By Steve Sather

As we reach the end of another year, I have a few cases that I meant to blog about, but never quite found the time. Many of these cases are every bit as important as the ones that I did write about. Here are the best of the rest in capsule form. Maybe I will find time to write some more about them next year.

The National Benevolent Association of the Christian Church vs. Weil, Gotshal & Manges, LLP, No. 05-5134 (Bankr. W.D. Tex. 2/6/07). Debtor sued its former attorneys for actions taken during the bankruptcy case. Judge King ruled that where the Court approved the Debtors' motion to sell property free and clear of liens and approved the Debtors' plan of reorganization, res judicata prevented the Debtors from suing their lawyers based on their successful representation of the Debtors. Additionally, failure to disclose the claims in the disclosure statement barred the claims under the doctrine of judicial estoppel. (Note: Although Weil, Gotshal prepared the disclosure statement which did not disclose the claims against it, the Debtors did have a second law firm which could have insisted that the claims be included).

Mahoney v. Washington Mutual, Inc., No. 06-5187 (Bankr. W.D. Tex. 4/23/07). Judge Clark ruled that reporting debt to credit bureau standing alone did not violate the debtor's discharge. Discharge did not make debt go away. Therefore, creditor could continue to report debt as delinquent despite discharge so long as creditor did not steps to try to collect. Excellent discussion on the relationship between sacrificing goats to Mercury and the discharge.

In re Spillman Development Group, Ltd., No. 05-14415 (Bankr. W.D. Tex. 9/20/07). Two determined parties battle intensely. "The parties were in full combat mode sparing no expense." The secured creditor ultimately purchased the property by exercising a credit bid. Did Debtor's counsel achieve a tangible, identifiable benefit which would allow it to be compensated under Pro-Snax? Judge Monroe said yes, although he reduced the fees in some respects. This opinion has an interesting discussion of how the debtor can achieve a positive benefit while acting in opposition to the wishes of the major creditor. The opinion is also full of Judge Monroe's no-holds barred commentary on the no-holds barred tactics of the litigants.

In re Sanders, No. 07-50783 (Bankr. W.D. Tex. 10/18/07). Debtors purchased a new vehicle but could not afford to pay off the old one. Depending on how you analyze the transaction, the negative equity was either financed as part of the new purchase or paid off with a rebate on the new vehicle. Debtor proposed to cram-down the vehicle even though it was purchased 846 days before bankruptcy (which was less than 910 days) and creditor objected. Judge Clark ruled that where the deficiency from the prior vehicle was included in the amount financed, that the loan did not qualify as a PMSI loan which was protected from cram-down under Sec. 1325(a)(*). Judge Clark ruled that PMSI status was an all or nothing proposition so that the entire debt was subject to cram-down even though the majority of the debt was purchase money in character.

Full post as published by A Texas Bankruptcy Lawyer's Blog on December 21, 2007 (boomark / email).