Court determined that Chapter 7 Debtors, whose assets were levied on post-discharge by the IRS, were not entitled to reimbursement from the bankruptcy estate for non-dischargeable, pre-petition taxes that were not paid by the Trustee. The Court found that under 11 U.S.C. § 507(d), Debtors were statutorily precluded from obtaining the IRS’ priority status which Congress specifically reserved for the taxing authority. The Court further found that the Trustee paid claims in a timely manner, and that because Debtors remained personally liable for the non-dischargeable taxes they paid, they were not entitled to subrogation under either statutory or equitable grounds. In re Frankum, 399 B.R. 498 (Bankr. E.D. Ark. 2009).
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Opinions
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Audrey R. Evans
Court disgorged fees paid by Debtor to Debtor's counsel in connection with her five-year chapter 13 plan finding that counsel failed to adequately represent her client, billed for services not rendered, and failed to communicate with her client. Counsel's inadequate representation harmed the Debtor, preventing her from receiving the benefits from her Chapter 13 bankruptcy that she would have received if she had been adequately represented. In re West, 398 B.R. 629 (Bankr. E.D. Ark. 2009).
Court granted preliminary injunction where Plaintiffs demonstrated that injunction was necessary to prevent Defendant from continuing its efforts to collect payments from the Plaintiffs which they did not owe. Defendant, a mortgage servicing institution, ignored communication from, and refused to provide accurate information to, the Plaintiffs about their home mortgage. Defendant did not accurately apply the payments it received from the Plaintiffs or the Chapter 13 Trustee, did not accurately process information vital to the servicing of the Plaintiffs loan, did not send the Plaintiffs accurate mortgage statements, did not provide an accurate payment history, and did not discover the mistakes it made, yet continued its collection efforts against Plaintiffs. The Court enjoined the Defendant from (1) contacting the Plaintiffs except by regular monthly mortgage statements showing only true and accurate information as to what is owed by the Plaintiffs on their mortgage; and (2) attempting to collect any arrearages, late fees, or any other amounts exceeding the Plaintiffs monthly mortgage payments; the injunction is to remain in effect until a trial on the merits is concluded. Moffitt v. America's Servicing Company(In re Moffitt), 390 B.R. 368 (Bankr. E.D. Ark. 2008).
Court denied Defendant's Motion to Set Aside Entry of Default and granted Plaintiffs' Motion to Strike Answer where Defendant failed to show good cause for setting aside the entry of default. The Court specifically found the Defendant's arguments raised in defense of its failure to file a timely answer to be evidence of culpable behavior, and also that the Defendant's behavior in the lawsuit thus far would prejudice the Plaintiffs if the case were allowed to proceed. The Court further found that the Defendant had failed to present a meritorious defense in its untimely Answer. Price v. America's Servicing Company (In re Price), 388 B.R. 901 (Bankr. E.D. Ark. 2008).
Pro se individual (Petitioner), while incarcerated in federal prison, mailed 74 involuntary bankruptcy petitions and other miscellaneous documents to clerk of court in attempt to file such petitions against various individuals and entities, including federal judges. Court found there was not proper venue in Arkansas and that Petitioner was not eligible under Section 303 of the Code to file these involuntary petitions. Court further found that such petitions were frivolous and submitted for filing merely to harass and without any basis in fact or law. In light of the adverse effects which could be caused by simply docketing the abusive involuntary petitions, Court found there was cause to withhold docketing petitions and to withhold public disclosure of names contained therein under Section 107(c) of the Code. Court found appropriate sanctions were to (1) direct clerk of court to reject and not docket these involuntary petitions and submissions, (2) prohibit Petitioner from filing any additional involuntary petitions, and (3) refer matters to US Attorney for possible further investigation. In re Risby, 2008 WL 116701 (Bankr. E.D. Ark. 2008).
Court adopted Judge James G. Mixon's ruling in In re Wilson, 373 B.R. 638 (Bankr. W.D. Ark. 2007), holding that debtors were entitled to deduct the standard vehicle ownership expense for purposes of the means test notwithstanding that the debtors owned their vehicles outright, and thus, had no "actual" ownership payments. Not selected for publication. Affirmed on appeal to 8th Circuit. See In re Washburn, 579 F.3d 934 (8th Cir. 2009).
In deciding that collateral estoppel applied to a state court judgment awarding compensatory, treble and punitive damages for trespass and conversion involving the cutting of trees on plaintiff's property, the Court determined that while the jury instructions established willfulness for purposes of the exception to discharge under 11 U.S.C. s. 523(a)(6) for a debt resulting from a wilful and malicious injury, the jury instructions did not establish maliciousness. However, the jury instructions and questionnaire with respect to punitive damages made it clear that the jury also made a finding of maliciousness, and therefore, the state court judgment, in its entirety, is nondischargeable in debtor's bankruptcy case.Quadrangle v. Harper (In re Harper), 378 B.R. 836 (Bankr. E.D. Ark. 2007).
Court entered default against Defendant who failed to answer complaint served on Defendant's attorney. Defendant's attorney had filed a Request for Service in the bankruptcy case-in-chief, which asked Debtors to serve a copy of each notice of any proceeding, hearing, and/or report in this matter on her. The signature block under her name also read Authorized Agent for America's Servicing Company. Because an adversary proceeding is a proceeding stemming from and related to the main bankruptcy case, the Court determined that the Request for Service expressly authorized Defendant's attorney as an agent to receive process for Defendant under both Bankruptcy Rules 7004(b)(3) and 7004(b)(8). The Court gave Defendant an additional time period in which to respond to the Debtors' request for a default judgment. The Court will then determine whether a hearing is necessary before entering default judgment, if appropriate. Price v. America's Servicing Company (In re Price), 377 B.R. 224 (Bankr. E.D. Ark. 2007)
Court determined that summary judgment was not appropriate on collateral estoppel grounds where the State Court judgment was entered following the Debtor's failure to participate in the lawsuit. Under Missouri law, a default judgment is not considered a judgment on the merits for collateral estoppel purposes. Furthermore, the issues crucial to a § 523(a)(2) or § 523(a)(4) case were neither presented nor ruled upon by the Missouri State Court, and therefore, the State Court case and the creditor's adversary proceeding were not based on the same issue(s). Finally, the State Court case and the adversary proceeding in bankruptcy were predicated upon a contract alleged to be between the debtor and creditor, when it was in fact between the creditor and an unrelated third party. Accordingly, the creditor's attorney would be ordered to show cause why inaccurate evidence was presented to the court. Ebco Construction Group, LLC v. Garretson (In re Garretson), 377 B.R. 214 (Bankr. E.D. Ark. 2007).
The Court granted Debtor's motion for more time to pay the filing fee in installments. Specifically, the Court held that while Bankruptcy Rule 1006(b)(2) allows for more time to pay installments of the filing fee than General Order 26, II.I., General Order 26, II.I. is not invalid. It is permissible for a court to set deadlines that are more restrictive than those provided by the Code or Rules unless prohibited from doing so under Fed. Rule Bankr. Proc. 9006. However, after hearing arguments in opposition to General Order 26, II.1., the Court found that in Debtor's case, the requirement that the Debtor make the regular plan payment and also pay the $274 filing fee within thirty days of filing her petition created an undue hardship for this Debtor given her monthly income. Not selected for publication.