The court combined five objections to claims in three different cases in this opinion and explains burden of proof for claims litigation, the application of judicial estoppel, and the three step process required to determine the rights of creditors holding secured claims.
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Judge Ben T. Barry
The debtor entered into an agreement to lease a portable storage building from the creditor approximately four months prior to filing his chapter 13 voluntary petition. The debtor's plan proposed to classify the creditor's claim as a secured claim rather than as a lease, to which the creditor objected, arguing that the agreement was a true lease that the debtor had to assume or reject in his plan. Applying Oklahoma law, the court held that the agreement was a true lease and sustained the creditor's objection to confirmation of the debtor's plan.
The court granted partial summary judgment against one of the debtors based on the doctrine of collateral estoppel and under § 523(a)(2)(A) for fraud. The court denied summary judgment against the other debtor because the state court made no specific findings against that debtor relating to a false representation made with the intent to deceive the plaintiffs.
The court denied the chapter 7 debtors their discharge under 727(a)(2) and (a)(4)(A) because the debtors failed to disclose numerous assets and a significant amount of income in their original schedules and statements and their four subsequent amendments.
James G. Mixon
The two liens in the Chapter 13 Debtor's Toyota automobile were unperfected upon the filing of the bankruptcy petition, with the first lien to attach having priority over the second lien to attach. The Debtor was not allowed to avoid either lien using the trustee avoidance powers as set out in Section 544 of the Bankruptcy Code. Neither creditor was entitled to equitable relief.
The Court found that a tax lien, once assessed and properly filed, attaches to a debtor's personal property regardless of where the debtor moves to.
Audrey R. Evans
Court denied the Debtors’ Motion for Summary Judgment on a cause of action seeking to avoid a creditor’s lien. As part of that ruling, the Court found that the statutory language of 11 U.S.C. § 544(a)(3) grants authority to avoid a lien to the trustee, but not to the debtor. Following Eighth Circuit precedent construing that statutory language narrowly, the Court held that the Debtors lacked standing to avoid the creditor’s lien under § 544(a)(3). The Court also found that the Debtors’ other claims, which were not based on § 544(a)(3), required a trial. Huskey v. Citimortgage, Inc. (In re Huskey), 479 B.R. 827 (Bankr. E.D. Ark. 2012).
Order Approving in Part Application to Employ Attorney. Court found that Chapter 11 Debtor's proposed counsel Chip Welch and Ashley Hudson were disinterested and neither held nor represented an adverse interest to the Debtor's estate, and accordingly, they could be hired to represent the Debtor-in-possession under 11 U.S.C. § 327(a). Court did not grant application to hire applicants nunc pro tunc to the date of Debtor's Chapter 11 filing where an objection was filed and no explanation was provided for the tardiness of the application to employ. In re Living Hope Se., LLC, 495 B.R. 424 (Bankr. E.D. Ark. 2012).
In an Order sustaining an Objection to Confirmation, the Court held that 11 U.S.C. § 1225(a)(5)(B)(i) requires that a secured creditor be allowed to retain a lien on cross-collateralized property, and that the Debtor could not sever cross-collateralization through the Chapter 12 plan without the secured creditor’s consent. In re Heath, 483 B.R. 708 (Bankr. E.D. Ark. 2012).
Court found that a joint venture created by individual husband and wife debtors did not constitute a separate legal entity, specifically a general partnership, based on evidence presented, and that accordingly, the debtors' bankruptcy estate included property held in the name of the joint venture. The Court also granted a permanent injunction in favor of the Trustee to prevent the Bank of England from exercising control over and selling certain grain held in the name of the joint venture. Rice v. Carlton Farms, LLC (In re Webb), 474 B.R. 891 (Bankr. E.D. Ark. 2012), aff’d, 742 F.3d 824 (8th Cir. 2014).