Justia U.S. 1st Circuit Court of Appeals Opinion Summaries

In this bankruptcy proceeding involving a turnover action and a revocation action, the bankruptcy court ruled (1) Debtor failed to maintain his profit-sharing plan in substantial compliance with applicable tax laws, which meant that assets in the profit-sharing plan and two IRAs funded with the plan assets were part of the bankruptcy estate; and (2) Debtor intentionally failed to disclose the existence of the two IRAs into which he had transferred assets from his profit-sharing plan, which ruling provided alternative grounds for treating the IRAs as nonexempt and provided the basis for the bankruptcy court to revoke Debtor's discharge. The First Circuit Court of Appeals affirmed both rulings, holding (1) the plan assets were not exempt from the bankruptcy estate; (2) Debtor indisputably demonstrated a reckless indifference to the truth of material information during his bankruptcy proceedings; (3) the bankruptcy court did not abuse its discretion in denying Debtor's Fed. R. Civ. P. 60(b) motion for relief on the turnover judgment on the basis of newly discovered evidence and excusable neglect; and (4) the bankruptcy court did not err in granting summary judgment to the U.S. Trustee in the revocation action. View "Daniels v. Agin" on Justia Law

Because Munce's Superior Petroleum Products, Inc. (MSPP) failed to comply with a state court order compelling it to bring its facilities into compliance with New Hampshire environmental law, $194,220 in contempt fines was levied against MSPP. The state court orders were issued after MSPP filed a Chapter 11 bankruptcy petition, although the violations of New Hampshire law began before MSPP filed its Chapter 11 petition. The New Hampshire Department of Environmental Services filed a motion to give the fines administrative expense priority, which the bankruptcy court granted. The district court affirmed. The First Circuit Court of Appeals affirmed, holding that, under the circumstances of this case, the post-petition contempt fine assessed by the New Hampshire state court against MSPP, a debtor-in-possession, was entitled to administrative expense priority. View "Munce's Superior Petroleum Prods., Inc. v. N.H. Dep't of Envtl. Servs." on Justia Law

Appellant, an experienced real estate developer, defaulted on his personal-guaraty obligations after obtaining a loan for his limited liability company with a "materially false" personal financial statement (PFS). Appellee, the lendor, successfully sued O'Donnell in state court on the personal guaranty. Thereafter, Appellant filed for Chapter 7 bankruptcy protection. Appellee responded by initiating this adversary proceeding in the bankruptcy court, alleging that Appellant's debt to him was nondischargeable under 11 U.S.C. 523(a)(2)(B), which makes debts for money procured by use of a written statement nondischargeble if the statement was "materially false" related to the debtor's "financial condition" and the debtor made it with "intent to deceive." The bankruptcy judge refused to discharge Appellant's debt to Appellee, and the bankruptcy appellate panel (BAP) affirmed. The First Circuit Court of Appeals affirmed, holding that the BAP did not clearly err in its finding that Appellant's act of willfully turning "a blind eye" to the accuracy of the PFS proved his intent to deceive. View "Toye v. O'Donnell " on Justia Law

For nearly twenty years, Plaintiff, Condominium Associations, and several IDC development entities disputed the ownership and use of certain property in Rhode Island. IDC Properties constructed and Defendant, IDC Clambakes, operated the Newport Regatta Club on the contested property after Plaintiff asserted that the rights of the IDC entities to own or develop the property had lapsed. The Rhode Island Supreme Court found in favor of Plaintiff. Defendant later declared bankruptcy. This case came to the First Circuit Court of Appeals from a bankruptcy court decision and concerned the question whether Defendant trespassed on Plaintiff's property or whether, through its actions during the pendency of the litigation, Plaintiff impliedly consented to operation of the Club by Defendant while title to the property was in dispute. The First Circuit affirmed the bankruptcy court's decision that Plaintiff impliedly consented to Defendant's operation of the Club, holding that the bankruptcy court's decision was fully reasoned and supported by the evidence. Remanded for a determination whether compensation was owed for Defendant's authorized use and occupancy. View "Goat Island S. Condo., Inc. v. IDC Clambakes, Inc." on Justia Law

ROK Builders LLC (ROK) constructed a hotel for Moultonborough and had a mechanic's lien on the property. 2010-1 SFG Venture LLC (SFG) was the assignee of the construction lender and had a mortgage on the hotel. After Moultonborough filed for bankruptcy, SFG initiated an adversary proceeding against ROK in bankruptcy court, seeking a declaration that its mortgage was senior to ROK's lien to the extent the construction lender had disbursed loan funds to ROK. ROK, in turn, asserted that its lien was senior to SFG's mortgage. The New Hampshire bankruptcy court and district court entered judgment in favor of SFG. The First Circuit Court of Appeals affirmed, holding that the bankruptcy court did not err in concluding that N.H. Rev. Stat. Ann. 447:12-a established the seniority of SFG's mortgage over ROK's mechanic's lien to the extent of the amount of money the construction lender disbursed to ROK. View "ROK Builders, LLC v. 2010-1 SFG Venture, LLC" on Justia Law

During Appellee's chapter 13 bankruptcy, Educational Credit Management Corporation (ECMC) filed a proof of claim based on Appellee's allegedly unpaid student loans. Appellee objected to the claim because she believed her loans had been repaid. The bankruptcy court sustained Appellee's objection. After the bankruptcy concluded, ECMC resumed collection efforts. Appellee reopened her case and filed an adversary complaint against ECMC, alleging that it had violated the order sustaining her objection. The bankruptcy court concluded the order reflected the prior judge's determination that the obligation remaining on ECMC's claim was zero and therefore sanctioned ECMC for attempting to collect on the debt. The bankruptcy appellate panel affirmed. ECMC appealed, arguing that the bankruptcy court never adjudicated the amount outstanding on Appellee's student loans. The First Circuit Court of Appeals affirmed, holding (1) during bankruptcy proceedings, the issue of the amount ECMC would get from Appellee's estate was resolved by way of the subsidiary factual issue of whether the debt had already been repaid; and (2) the bankruptcy court did not err in imposing sanctions, as ECMC's conduct was an abuse of the bankruptcy process. View "Hann v. Educ. Credit Mgmt. Corp." on Justia Law

Plaintiffs filed a Chapter 7 bankruptcy petition and sought to surrender their home. When Plaintiffs' mortgage lenders (collectively, Beneficial) refused to foreclose or otherwise take title to the residence, Plaintiffs demanded that the mortgage lien be released. After Beneficial also refused to release the mortgage lien, Plaintiffs began an adversary proceeding claiming a discharge injunction violation. The bankruptcy court found Beneficial did not violate the discharge injunction. The bankruptcy appellate panel affirmed. Plaintiffs appealed, arguing that because the facts of this case so closely mirrored those in Pratt v. General Motors Acceptance Corp., the same result should follow. The First Circuit Court of Appeals affirmed the bankruptcy court's judgment, holding that the bankruptcy court's legal conclusions were correct and that the court did not err in its judgment. View "Canning v. Beneficial Me., Inc." on Justia Law

Chapter 11 debtor Redondo Construction Corporation brought an adversary proceeding against the Puerto Rico Highway and Transportation Authority (Authority) in the United States Bankruptcy Court for the District of Puerto Rico, claiming amounts due for work performed on five construction projects. Following a lengthy trial, the bankruptcy court awarded Redondo a total of nearly $10,250,000 in damages, plus interest at six percent per annum from the "payment due" date for each project. The district court affirmed the judgment in all respects. The Authority appealed the award of interest. The First Circuit Court of Appeals vacated the district court's judgment primarily with regard to the interest and (1) remanded for assessment of postjudgment interest for the period between the entry of judgment and the date of deposit; (2) vacated the award of prejudgment interest and remanded for a determination of whether an award of prejudgment interest was appropriate; and (3) remanded for modification of the judgment awarding Redondo an excess amount for one claim. View "Redondo Constr. Corp. v. P.R. Highway and Transp." on Justia Law

Defendant filed for bankruptcy. Defendant was later charged with bankruptcy fraud on the basis that she failed to include in the bankruptcy petition information related to her past fraudulent use of credit cards that she obtained under the names of two acquaintances, one of whom was Susan Blake. Defendant was subsequently convicted of two counts of bankruptcy fraud. The First Circuit Court of Appeals reversed the conviction as to Count One, which alleged that Debtor had knowingly and fraudulently failed and refused to disclose debts to three card issuers. The First Circuit held that Count One failed for lack of proof because the prosecution failed to establish that at the time the bankruptcy petition was filed, there were still extant claims held by the issuers against Defendant for merchandise or services Defendant secured through her use of the cards she procured using Blake's name. View "United States v. Marston" on Justia Law

Malley’s former marital house sold shortly before filing his Chapter 7 bankruptcy petition and netted more than $250,000, from which he declared under oath that he had received nothing. The trustee believed that $27,000, allegedly going to the ex-wife, were to be used to discharge Malley’s credit card debt. In taking action against Malley's ex-wife to avoid that disposition, the trustee determined that Malley had hidden his secret receipt of $25,000. Malley claimed he was unable to turn over the money to the trustee when ordered to do so. Malley’s willful concealment of the funds violated 11 U.S.C. 521. When the trustee moved for sanctions, the court denied discharge, under 11 U.S.C. 727, and charged the concealed amount, plus the cost of untangling the fraud, against the value of an asset claimed as exempt, Malley’s truck. The First Circuit affirmed. Fraudulent concealment of non-exempt assets is an exceptional circumstance in which an offsetting surcharge against otherwise exempt property interests is reasonably necessary to protect the integrity of the bankruptcy process and to ensure that a debtor exempts an amount no greater than the Code permits.View "Malley v. Agin" on Justia Law