Month: June 2012

Bankr. E.D.N.C.: In re TP, Inc.- Modification of Consent Order Terminating the Automatic Stay

Summary:

The Court had previously entered a Consent Order that allowed Bank of America to proceed with foreclosure against some of the property of the estate and also appointed a Chapter 11 Trustee. TP subsequently filed a Motion to Set Aside or Modify the Consent Order allowing foreclosure. Shortly after his appointment, the Trustee also sought to amend the Consent Order on the basis that an adversary proceeding initiated by TP against BOA had merit and would be pursued by him; that if BOA were permitted to foreclose on property of the estate, it would be unjustly enriched and profit from illegal conduct; and that a discrepancy in platting for a certain property subject to the Consent Order would, if not resolved prior to sale, cause the property to be sold at a deflated price.… Read More

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Bankr. E.D.N.C.: In re Taproot Systems, Inc.- Joint Client Privilege

Summary:

Three venture capital firms (“the Movants”) provided secured debt financing to Taproot and owned a controlling interest in Taproot. In December of 2009, Taproot entered into a contract to sell its assets to Neusoft, with The Hina Group (“THG”) acting as a broker. In May 2010, THG brought suit against Taproot and the Movants, seeking to recover the unpaid broker fees. Taproot was represented by both Wyrick Robbins and Sheppard Mullin and the Movants were represented by DLA Piper. The lawsuit was dismissed as to the Movants for lack of personal jurisdiction, but remained active until stayed by the voluntary Chapter 7 bankruptcy filed by Taproot on July 7, 2011.… Read More

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Bankr. W.D.N.C.: In re Sweetenburg- Automatic Stay and Residential Rental Property

Summary:

The Debtor leased a town home from Brett Mestel for $1,395/month, with a term running from August 2009 until September 2011 and month-to-month thereafter. In February 2012, Mestel commenced an eviction action after the Debtor fell behind in rent payments. Summary Ejectment was granted on April 16, 2012, and the ten-day appeal period ran on April 27, 2012. The Debtor filed Chapter 13 bankruptcy on April 30, 2012. Thereafter, the Mecklenburg Sheriff served the Debtor with a Writ of Possession, requiring her to vacate prior to May 9, 2012. The Sheriff and Mestel first learned of the Chapter 13 bankruptcy on May 9, 2012, when seeking to evict the Debtor.… Read More

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Bankr. E.D.N.C.: Sparkman v. American Residential Services, L.L.C.- Inchoate and Hypothetical Mechanic’s Lien does not Equate with a Security Interest for 11 U.S.C. § 547(b)(5).

Summary:

American Residential Services, L.L.C (“American”) received $186,419.35 from the Debtor in the 90-days preceding its bankruptcy and the Trustee sought to avoid such payments as a preference under 11 U.S.C. § 547. The parties agreed that the Trustee had met his burden regarding the first four requirements of § 547(b), but that he had failed to show that American had received more than it would have under Chapter 7, as American “could and would have filed appropriate claims of lien … and been paid in full in the hypothetical Chapter 7.”

First the Bankruptcy Court held that the amount of assets of the estate would result in a dividend to unsecured creditors of significantly less than 100%.… Read More

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Bankr. E.D.N.C.: In re Smith- Appointment of Chapter 11 Trustee following Criminal Conviction

Summary:

The U.S. Attorney filed a Criminal Information against the Male Debtor on March 24, 2011, alleging that he had conspired to defraud a federal crop insurance program by making over $60,000 in false claims for tobacco crops he had sold under false names to hide production. The Debtors filed Chapter 11 bankruptcy on November 19, 2011. On February 22, 2012, the Male Debtor plead guilty to one count of conspiracy to make false statements, to make materially false statements and to commit mail fraud and wire fraud in violation of 18 U.S.C. § 371 and was sentenced to five years of probation, excluded from participation in federal crop insurance programs for two years starting in the 2013 crop year, and ordered to make restitution to the United States Department of Agriculture (“USDA”) in the amount of $66,142.… Read More

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Bankr. E.D.N.C.: In re McGarry- Requirements for Setoff

Summary:

The Debtor was entitled to one-half of her ex-husband’s military retirement, but was also liable for one of their children’s student loan debts. The Debtor was in default on such payments and her ex-husband paid $4,183.07 on that debt. The property settlement required the Debtor to indemnify her ex-husband for payments on the student loan debt.

11 U.S.C. § 553(a) of the Bankruptcy Code recognizes a creditor’s right to “offset a mutual
debt owing by such creditor to the debtor that arose before the commencement of the case under
this title against a claim of such creditor against the debtor that arose before the commencement
of the case”, recognizing setoff rights existing under applicable state or federal law, without creating new setoff rights.… Read More

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N.C. Court of Appeals: Miller v. Orcutt- Damages as Result of Preference

Miller v. Orcutt- Damages as Result of Preference.pdfSummary:

The Plaintiffs purchased a home with Countrywide Home Loans providing first mortgage. In addition, the Plaintiffs borrowed the down payment of $56,000 from the Female Plaintiff’s father, Stephen Barnwell (“Barnwell”). Barnwell, a real estate attorney, drafted a deed of trust (“the Barnwell deed of trust”) which the Plaintiffs were instructed to execute but failed to execute and file the Barnwell deed of trust for six months, ultimately filing it with the Wake County Register of Deeds on May 30, 2007. Defendants failed to recognize that the Barnwell Deed of Trust, being tardily recorded and a transfer to an insider, was vulnerable to being set aside as a preferential transfer.… Read More

Bankr. E.D.N.C.: In re Mangum- Fraudulent Identity in Filing Bankruptcy

Summary:

This case involves two bankruptcy cases putatively filed by Melanie Mangum. At a hearing in November 2011, the Trustee raised several concerns regarding that case- First, no Power of Attorney had ever been presented authorizing Ms. Mangum’s husband, Donald Mangum, to represent his wife. The two parties also had several previous bankruptcies. Third, the Trustee had discovered (while reviewing Ms. Mangum’s Facebook statement that she enjoyed spending time at her beach house) that Ms. Mangum had unscheduled real property located at Carolina Beach. Further, Ms. Mangum had never appeared in her prior case, which Mr. Mangum had explained by claiming that she was terminally ill with only a days to live.… Read More

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Bankr. E.D.N.C.: In re Hamilton & In re Mitchell- Appointment of Chapter 11 Trustee/Disqualification of Attorney for the Debtor

Summary:

Creditor sought the appointment of a Trustee(s) in these related Chapter 11 cases. The Bankruptcy Court held pursuant to 11 U.S.C. § 1104, that it was required, upon the request of a party, to appoint a trustee any time after the case commences and before the confirmation of the plan for cause, but that cause includes, “fraud, dishonesty, incompetence, or gross mismanagement of the affairs of the debtor by the current management, either before or after the commencement of the case, or similar cause.” That notwithstanding, the appointment of a trustee in a chapter 11 case is “an extraordinary remedy,” and there is strong presumption in favor of allowing the debtor to remain in possession.… Read More

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Bankr. E.D.N.C.: In re Croatan Surf Club, L.L.C.- Objection to Claim regarding Attorneys’ Fees and Default Interest Rate

Summary:

The Debtor granted Royal Bank America (“RBA”) a first Deed of Trust against a 36-unit condominium complex, in the amount of $17,000,000 and also a “Put Agreement”, which obliged the guarantors of the Deed of Trust, to obtain permanent financing for 10 of the units. At the same time, the Edwards Family Partnership, L.P. (“EFP”) was granted a junior Deed of Trust for $3,000,000.

The RBA loan originally matured on July 1, 2009, but the Debtor exercised its right to extend the loan to January 1, 2010. In December 2009, RBA declared the loan in default for failure to comply with the Put Agreement.… Read More

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