Month: November 2013

Bankr. E.D.N.C.: McGinnis v. Fantone- Bankruptcy Following Settlement Agreement does not Constitute Fraud or False Written Statement

Summary:

McGinnis brought suit in state court against Fantone for two notes that Fantone had guaranteed with MSC. Following court ordered mediation, the parties agreed that Fantone would execute a modification of loan agreement for $200,000.00 with interest at six percent (6%) per year, would substitute himself as the obligor debts owed by executed by MSC, and would sign a Confession of Judgment for $200,000. Less than three weeks later, Pantone filed a voluntary Chapter 13 bankruptcy. McGinnis brought an adversary proceeding seeking a determination that Fantone’s representations, actions and/or conduct in the mediation constituted false pretenses, false representations, or actual fraud and that his Agreement to the settlement terms was a materially false written statement, due to his lack of ability to pay, and should be non-dischargeable pursuant to 11 U.S.C.… Read More

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Bankr. E.D.N.C.: Mitchell v. Keesee- Permissive Abstention

Summary:

Prior to her bankruptcy, Ms. Mitchell and the defendant, Mr. Keesee, were involved in divorce litigation in the District Court for New Hanover County, North Carolina, wherein they agreed to an equitable distribution of their property which provided that Ms. Mitchell transfered her interest in specific property to Mr. Keesee, who agreed to pay Ms. Mitchell $750,000 from any future sale of that property. Following filing her Chapter 11 bankruptcy, Ms. Mitchell brought an adversary proceeding against Mr. Keesee alleging he failed to make payment to her following the sale of a portion of the property and also purchased the mortgage note securing the property, in an attempt to preclude her from obtaining any proceeds and unjustly enriching himself.… Read More

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Bankr. E.D.N.C.: Camp Flintlock v. Stephenson- Denial of Discharge and Non-Dischargability of Claim

Summary:

Prior to the Stephenson’s bankruptcy filing, Camp Flintlock filed an action in state court against
asserting claims of fraud, constructive fraud, conversion, and unfair trade practices. The bankruptcy court granted a motion for relief from stay to allow entry of a judgment reflecting the previously rendered jury verdict, but reserved the enforcement of any monetary judgment. Subsequently, judgment was entered against the Stephenson for $635,685.00 and Camp Flintlock brought an adversary proceeding seeking to revoke their discharge and a determination that the judgment was nondischargeable. Judge Leonard dismissed the claims for relief under 11 U.S.C. §§ 727(a)(4) and 523(a)(4), but not as to 11 U.S.C.… Read More

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Bankr. E.D.N.C.: Angell v. Open Ground Farm- Amendment of Complaint

Summary:

Trustee brought an adversary proceeding seeking to avoid two payments to Open Grounds Farm allegedly made by the debtor for land rent owed by the debtor’s president, James H. Winslow. Defendants answered and the Trustee sought leave to amend his complaint in two regards.

The first was to correct a misstated date in the complaint, which was an obvious and harmless error, to which the Defendant did not oppose correction.

The second amendment sought by the Trustee was to include of additional payments potential subject to avoidance under 11 U.S.C. § 548, which were identified following discovery. The court found that the amendment was not sought as a product of bad faith or undue delay and that the Defendant was on notice that such payments were susceptible to avoidance as preferences and accordingly allowed this amendment.… Read More

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Bankr. E.D.N.C.: Edward v. Vanderbilt- Mandatory Arbitration of State Law Claims

Summary:

The debtor brought adversary proceeding against Vanderbilt and its agent Mr. Gibson, alleging that they had violated N.C.G.S. §§ 75-51 through 54, by making harassing phone calls that caused an employment demotion and loss of pay, mental and emotional distress, panic attacks, and medical expenses and were, under N.C.G.S. § 75-1.1, unfair and deceptive trade practices, subjecting Vanderbilt to treble damages. Vanderbilt contends that, pursuant to its contract, the Debtor the must pursue this claim through arbitration, requesting that the adversary proceeding be stayed to allow for arbitration.

The bankruptcy court held that mandatory arbitration is not appropriate when “a core proceeding is at issue, the policy in favor of centralized determination in the bankruptcy court generally prevails.” TP, Inc.… Read More

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4th Circuit: Ballard v. Bank of America- Equal Credit Opportunity Act

Summary:

Kellie Ballard co-signed a loan agreement for her husband, Michael Ballard, for a loan (and three subsequent restructuring) from Bank of America (“BoA”) for his business, FoodSwing, even though she has neither an ownership or operating interest in the business. The couple owns, among other assets, a home in Maryland (presumably as Tenants by the Entireties) and a winery in California. In November 2012, Ms. Ballard brought suit against BoA, seeking equitable and injunctive relief under federal and state Equal Credit Opportunity Acts (“ECOA”), alleging that BoA improperly required her to serve as a guarantor.

ECOA makes it unlawful for “any creditor to discriminate against any applicant, with respect to any aspect of a credit transaction on the basis of .… Read More

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E.D.N.C.: McKinny v. Allison- Denial of Summary Judgment for Securities Fraud based on Consent Judgment

Summary:

In 2005, David Allison approached Elizabeth McKinny with an investment opportunity in Venture Capital In Motion (“VCIM”), wherein McKinny would, as an “approved investor”, obtain irrevocable bank guarantees for her $500,000 investment. When VCIM failed and the funds were lost, McKinny brought suit against Allison alleging claims for breach of the promissory note, common law fraud, and securities fraud, alleging violation of 15 U.S.C. § 78j(b) and 17 C.F.R. § 240.10b- 5. In November 2009, the action was settled with Allison agreeing to may six installment payments totaling $650,000. The Settlement specifically stipulated both that it would “not be deemed an admission of any wrongdoing or liability” by Allison and that, if Allison filed bankruptcy, the Settlement would be void ab initio, reviving all of McKinny’s claims.… Read More

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Bankr. E.D.N.C.: In re Bergeron- Appointment of Chapter 11 Trustee

Summary:

The Debtor was the manager and majority member of IYB Properties (“IYB”), where he executed and personally guaranteed a promissory note in favor of Prestige Wealth Management (“Prestige”) for $1.5 million. The Debtor owned an 85% interest in IYB, with Prestige holding 15%, with the purpose of acquiring and developing specific real property to expand the recycling operation owned by the Debtor. The operating agreement provided that IYB could not engage in other business ventures, without the unanimous consent of all owners and all funds were to be held in bank accounts to which IYB, the Debtor and Prestige had access.… Read More

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