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All posts tagged Court of Appeals

Posted:
February 18, 2013
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Bankruptcy Cases in the News

Bankruptcy Cases in the News:

 

     On February 5, 2013 the 6th Circuit Court issued an interesting opinion concerning creditors’ rights after mortgage foreclosures in In re: Richard K. Miller, No.: 11-2357 (unpublished). The question before the court was whether the Bank’s credit bid at a Michigan Sheriff’s sale (after foreclosure by advertisement) extinguished the debtor’s debt to the bank. The bankruptcy court determined that it did and the 6th Circuit Court of Appeals affirmed/agreed with that decision.

 

     After the bank foreclosed against the the debtor’s home it bid the full amount of it’s mortgage at the sheriff’s sale and acquired the title, subject to debtor’s rights of redemption. When debtor did not redeem the  bank subsequently sold the home for less than the amount debtor owed and then claimed the difference against the debtor. The court would not allow this action based upon Michigan cases. Specifically holding:

 

     In Bank of Three Oaks v. Lakefront Properties, 444 N.W. 2d 217, 553 (Mich. Ct. App. 1989)(per curiam), the mortgagee bank bid $147,129.42, constituting the full amount of the debt plus the cost of foreclosure and statutory attorney’s fees, at the foreclosure sale following a Michigan foreclosure by advertisement. When the sheriff’s deed became operative at the conclusion of the redemption period, the bank became the titled owner of the property. Thereafter, the bank sold the property for $150,000.00. The bank filed suit against the mortgagors to collect an alleged deficiency for the interest, taxes, and insurance premiums accrued between the date of the foreclosure sale and the date the redemption period expired. Id. at 554-55. The Michigan Court of Appeals held that “[w]hen property is purchased at a foreclosure sale for an amount equal to the amount due on the mortgage, the debt is satisfied.” Id. at 555 (citing Guardian Depositors Corp. v. Hebb, 287 N.W. 796 (Mich. 1939), and Powers. v. Golden Lumber Co., 5 N.W. 656, 657 (Mich. 1880)). Because the debt was extinguished at the foreclosure sale, the court held that the bank could not pursue any deficiency where the mortgagor did not redeem the property. Id. at 556-557.

 

     The same legal principals have been applied in other Michigan cases. See Smith v. Gen. Mortg. Corp., 261 N.W. 2d 710, 712-13 (Mich. 1978)(per curiam); Kennedy v. Brown, 15 N.W. 498, 499-500 (Mich. 1883); New Freedom Mortg. Corp. v. Globe Mortg. Corp., 761 N.W. 2d 832, 836 (Mich. Ct. App. 2008); Emmons v. Lake States Ins. Co., 484 N.W. 2d 712, 714 (Mich. Ct. App. July 1, 2008) (unpublished per curiam). Similarly, the Second Circuit applied Michigan law in Chrysler Capital Reality, Inc. v. Grella, 942 F.2d 160 (2d Cir. 1991), to hold that a mortgagee who successfully bid the entire amount of the debt at a foreclosure sale could not thereafter maintain an action for damages against the mortgagor, despite the mortgagee’s allegations that the actual value of the property at the time of the foreclosure sale was far less than the debt and that the mortgagee had been fraudulently induced into making the transaction.

 

     If you or a loved one have questions concerning your rights or obligations with creditors you should immediately seek a qualified bankruptcy attorney.

 

[Guy Vining, a bankruptcy attorney, in metro-Detroit, maintains his office in Taylor, Michigan where he serves the downriver communities of Monroe, South Rockwood, Gibraltar, Brownstown Township, Grosse Ile, Woodhaven, Trenton, Southgate, Riverview, Allen Park, Lincoln Park, Dearborn, Dearborn Heights, Westland, Wayne, and Ecorse. If you or a family member of friend would like a no-obligation no cost consultation/financial analysis, just call or E-mail Guy Vining of Vining Law Group, P.L.C to schedule a meeting.]

Posted:
February 13, 2013
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Business Cases in the News: Minority Shareholder Oppression

Business Cases in the News:

 

Minority Shareholder Oppression

 

     In our blogs we have on occasion discussed cases of minority shareholder oppression. Recently, in writing a brief to be filed in the Wayne County Circuit Court, on the issue of the proper valuation standard, Guy Vining ran across the following quote from the William Mitchell Law Review in 1996:

 

     “Close corporations typically are formed by friends, relatives, or other business associates who choose to combine their capital, skills, labor and experience in a new business. Shareholders in a close corporation generally plan to be employed by the corporation and to have an active role in management. As a result, shareholders usually expect to receive a salary, bonus and additional benefits consistent with their roles as employees, officers, and directors.

 

      While those corporations begin as friendly ventures, the balance of power in the close corporation often lends itself to oppression of those shareholders who do not control the corporation and usually own only a small percentage of shares — the minority shareholders. Minority shareholders may be subjected to a “freeze out,” (sometimes known as a “squeeze out”) by the majority shareholders. Typical “freeze out” techniques include terminating the minority shareholder’s employment with the corporation or terminating dividends and the minority shareholder’s returns on his or her investment.

 

      Although minority shareholders in any corporation are in a difficult position due to their lack of control, minority shareholders in closely held corporations have uniquely difficult positions because their shares are not readily marketable. In other words, when minority shareholders in a large, publicly-traded corporation become dissatisfied with corporate operations, they can “vote with their feet” — sell their shares and discontinue their involvement with the corporation. Minority shareholders in the closely held corporation, on the other hand, often cannot easily sell their shares.

 

      The lack of a market for close corporation shares owned by a minority shareholder means that a non-controlling investor may be locked into a business that is providing little return on investment, or at least is failing to fulfill the owner’s non-monetary expectation. Left without a meaningful return on his or her investment, the minority shareholder may have little choice but to sell for less than a fair price, usually to the majority shareholders.”

 

The above is a succinct summary of the problems encountered by minority shareholders in such small corporations. As the author notes many times, what starts as a friendly venture turns very ugly when the money starts rolling in.

 

Guy Vining of the Vining Law Group, PLC, would be happy to perform a no charge analysis of your case if you find yourself in such a situation. You may be entitled to significant relief from shareholder oppression under MCL 450.1489. Under this statute a judge is empowered to examine the circumstances and afford relief, such as advising the Defendants to buy your interest out at “fair value,” consistent with equity.

 

Guy Vining has practiced business law throughout the state of Michigan. His office is located in the downriver city of Taylor where he primarily serves the Metro-Detroit area. He serves the Metro-Detroit and Downriver communities, including Rockwood,  Gibraltar, Brownstown, Woodhaven, Grosse Ile, Trenton, Riverview, Romulus, Wyandotte, Ecorse, Lincoln Park, Alan Park, Dearborn, and Dearborn Heights.

Posted:
August 29, 2012
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Bankruptcy Cases in the News: State Exemptions #2

Bankruptcy Cases in the News

State Exemptions #2

In a recent blog which discussed that in the Schafer case (6th Cir., 11-1340) that the Michigan bankruptcy statute was approved by the appellate court as passing constitutional muster. Their decision not only is of assistance to Michigan debtors but was a blessing to the local bankruptcy attorneys and judges as it clarifies the law and resolves conflicting opinions. Now bankruptcy attorneys can give their client more definitive advice on exemption planning. It also assists the debtors and bankruptcy attorneys by avoiding litigation within the Bankruptcy Court, in relation to exemptions saving financial and judicial resources.

 

All of this, however, begs the question of what the important distinctions are with respect to exemption planning. This is a deep subject and well beyond the scope of a blog posting. However, there are some immediately apparent benefits for Michigan debtors that they can discuss with their bankruptcy attorney. First, across the board it appears that for unmarried Michigan debtors, who have home equity to be sheltered/exempted, that more can be accomplished under the Michigan Statute. See: MCL 600.5451 and compare to 11 USC § 522(d)(1). In addition, if the Michigan debtor is also a handicapped or elderly individual, the exemptions increase even higher.

 

If you are a Michigan resident contemplating a bankruptcy you should discuss these matters in detail with your bankruptcy attorney. Exemption planning is essential for you to receive the very best outcome in your case. As noted in the Schafer case (citing Grogan v. Garner, 589 U.S. 279 (1991)), the so-called Michigan bankruptcy exemptions statute’s broader exemptions will allow “bankruptcy debtors in Michigan…(to be better met) to achieve a fresh start and to obtain a new opportunity in life with a clear field… unhampered by the pressure and discouragement of preexisting debt.”

 

If you have any questions about exemption planning please feel free to call Guy Vining for a free consultation or another qualified bankruptcy attorney.

[Guy Vining, a bankruptcy attorney, in metro-Detroit, maintains his office in Taylor, Michigan, where he serves the downriver communities of Monroe, South Rockwood, Gibraltar, Brownstown Township, Grosse Ile, Woodhaven, Trenton, Southgate, Riverview, Allen Park, Lincoln Park, Dearborn, Dearborn Heights, Westland, Wayne, and Ecorse. If you or a family member of friend would like a no-obligation no cost consultation/financial analysis, just call or E-mail Guy Vining of Vining Law Group, P.L.C to schedule a meeting.]

Posted:
August 29, 2012
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Bankruptcy Cases in the News: State Exemptions #1

Bankruptcy Cases in the News
State Exemptions #1

The 6th Circuit Court of Appeals decided a very interesting and debtor friendly case recently. In re: Steven M. Schafer, Case No.: 11-13401387, the 6th Circuit Court reversed lower court holdings that had determined that Michigan’s so-called “bankruptcy exemptions” were unconstitutional.

This is pretty esoteric stuff, but the bottom line is that Michigan has a general exemption statute and the so-called bankruptcy exemptions statute, the latter of which provide more generous exemptions for debtors. In filing a case a debtor in a state like Michigan (which has it’s own statute) must elect to proceed under federal or state exemptions. Earlier rulings struck down the so-called state bankruptcy statute holding in essence that it was an impermissible conflict of state and federal law for Michigan to have “bankruptcy” exemptions because only the U.S. Congress could create these laws as it is to do so under the U.S. Constitution and controls the entire bankruptcy field. One of the main arguments advanced for federal control was to give uniformity and not create conflicts from state to state.

The 6th Circuit disagreed, holding:

    Indeed, on an as-applied basis, the Michigan statute actually furthers, rather than frustrates, national bankruptcy policy. As the Supreme Court has repeatedly noted, the goal of the Bankruptcy Code is to provide debtors in bankruptcy with a fresh start. Marrama v. Citizens Bank of Mass., 549 U.S. 365, 367 (2007) (“The principal purpose of the Bankruptcy Code is to grant a fresh start to the honest but unfortunate debtor.”) By permitting debtors in bankruptcy a higher homestead exemption than either the general state exemption statute or the federal exemption statute allow, bankruptcy debtors in Michigan are better able to achieve a fresh start and to obtain “a new opportunity in life with a clear field for future effort, unhampered by the pressure and discouragement of preexisting debt.” Grogan v. Garner, 498 U.S. 279, 286 (1991). Accordingly, Michigan’s bankruptcy-specific exemption statute frustrates the full effectiveness of national bankruptcy policy no more than other statutory frameworks that have survived our scrutiny.

As noted in Schafer the so-called bankruptcy exemptions under MCL 600.5451 are substantially more generous to the debtor than it’s federal counterpart in 11 USC 522 (d)(1) or the general exemption statute MCL 600.6023. Indeed, with respect to home equity for an individual debtor (or homestead) it is double the federal statute for a 65 year old debtor or handicapped debtor. This is pretty good news for the debtor but makes things more difficult for the Trustee whose compensation is largely contingent upon the amount of money collected.

The bottom line is that elderly and handicapped debtors are really aided by this decision. These honest but unfortunate individuals will get a larger nest egg to embark on their fresh start with.

[Guy Vining, a bankruptcy attorney, in metro-Detroit, maintains his office in Taylor, Michigan, where he serves the downriver communities of Monroe, South Rockwood, Gibraltar, Brownstown Township, Grosse Ile, Woodhaven, Trenton, Southgate, Riverview, Allen Park, Lincoln Park, Dearborn, Dearborn Heights, Westland, Wayne, and Ecorse. If you or a family member of friend would like a no-obligation no cost consultation/financial analysis, just call or E-mail Guy Vining of Vining Law Group, P.L.C to schedule a meeting.]

Posted:
June 15, 2012
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Bankruptcy Cases in the News

Bankruptcy Cases in the News

In recent blogs we have discussed the necessity to scrupulous honesty in preparing all schedules with respect to a bankruptcy petition. It all goes back to the basic concept that it is only the honest debtor that is entitled to a discharge and a fresh start. In that regard, this post has to examine some federal cases which dealt with the concept of judicial estoppel.

Judicial estoppel is a common law concept for the protection of the Courts from a party seeking and obtaining a certain determination in one Court and then taking the opposite position in another Court.

Recently, the Michigan Court of Appeals, in Spohn v. Van Dyke Schools, examined such a case and affirmed (agreed with) the decision of a trial court judge, which dismissed the Plaintiff’s claim for employment discrimination. Specifically, the trial court judge determined that the Plaintiff had filed an earlier bankruptcy and failed to disclose in her Schedule B, statement of personal property, that she had a potential claim for an employment discrimination suit. When the Plaintiff received her discharge, it was based upon the representation that she did not have such a claim and that constituted a binding determination.

Plaintiff should have disclosed the claim. The bankruptcy trustee would then determine whether to bring the claims for the benefit of all the creditors or to abandon the claim, if it was weak. Clearly the Plaintiff knew she had a claim, failed to disclose it to the Bankruptcy Court, trustee or creditors and then filed the same later in another court.

The Michigan Court of Appeals stated the rationale as follows:

 The rationale for… decisions [invoking judicial estoppel to prevent a party who failed to disclose a claim in bankruptcy proceedings from asserting that claim after emerging from bankruptcy] is that the integrity of the bankruptcy system depends on full and honest disclosure by debtors of all of their assets. The courts will not permit a debtor to obtain relief from the bankruptcy court by representing that no claims exist and then subsequently to assert those claims for his own benefit in a separate proceeding. The interests of both the creditors, who plan their actions in the bankruptcy proceeding on the basis of information supplied in the disclosure statements, and the bankruptcy court, which must decide whether to approve the plan of reorganization on the same basis, are impaired when the disclosure provided by the debtors in incomplete.

 

*****

 

The debtor signed her bankruptcy petition under penalty of perjury. By doing so, she certified that she had no claims against the Defendants. It was the Debtor’s responsibility to verify the accuracy of the information contained in her schedules and statement of financial affairs and she “had the duty to carefully consider all of the questions posted and to see that they [were] completely and correctly answered.”

 

It is therefore a cardinal rule to always disclose. Making unnecessary disclosure will never hurt the honest debtor, but failure to disclose may very well be a source of trouble, including denial of discharge, judicial estoppel, and even criminal charges.
If you have a question about the Bankruptcy Laws, please feel free to call Guy Vining of the Vining Law Group for a no charge and confidential consultation.

 

[Guy Vining, a bankruptcy attorney, in metro-Detroit, maintains his office in Taylor, Michigan, where he serves the downriver communities of Monroe, South Rockwood, Gibraltar, Brownstown Township, Grosse Ile, Woodhaven, Trenton, Southgate, Riverview, Allen Park, Lincoln Park, Dearborn, Dearborn Heights, Westland, Wayne, and Ecorse. If you or a family member of friend would like a no-obligation no cost consultation/financial analysis, just call or E-mail Guy Vining of Vining Law Group, P.L.C to schedule a meeting.]

Posted:
April 9, 2012
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Bankruptcy Cases in the News

Bankruptcy Cases in the News


A recent 6th Circuit Court of Appeals Case (unpublished), in re: Tammy Martin, No. 11-8052 revisited and highlighted several important aspects of bankruptcy protections for debtors. In this interesting case the debtor was awarded significant attorney fees for creditor collection actions which continued post filing and post discharge. The Court began it’s analysis by discussing 11 USC 524(a)(2) and stating:

 

    “Section 524(a)(2) of the Bankruptcy Code provides that a discharge “operates as an injunction against the commencement or continuation of an action, the employment of process, or an act, to collect, recover or offset… debt [discharge under section 727… of this title] as a personal liability of the debtor, whether or not discharge of such debt is waived.” 11 USC § 524(a) (2). The subsection, along with 11 USC § 524(a) (3), is commonly referred to as the “discharge injunction.” As the Ninth Circuit recognized,

 

        The discharge injunction [comes] into force by operation of law upon entry of the discharge. A discharge injunction …is … an equitable remedy precluding the creditor, on pain of contempt, from taking any actions to enforce the discharged debt.

Espinosa v. United Student Aid Funds, Inc., 553 F.3d 1193, 1200 (9th Cir. 2008), aff’d, 130 S. Ct. 1367 (2010) (internal citations omitted). Once a discharge issued, § 524(a) (2) and (3) makes permanent the protections afforded by § 362’s automatic stay and prohibits a creditor from pursuing collection efforts against the debtor personally for debts that were discharged in the bankruptcy proceeding. Gunter v. O’Brien & Assoc. Co., LPA (In re Gunter), 389 B.R. 67, 71 (Bankr. S.D. Ohio 2008). “The purpose of § 524(a) is to afford a debtor a ‘fresh start’ by ensuring that a debtor will not be pressured in any way to repay a debt after it has been discharged.” Paglia v. Sky Bank (In re Paglia), 302 B.R. 162, 166 (Bankr. W.D. Pa. 2003).”

The Court noted that the creditor’s post discharge actions were willful. In other words, the creditor deliberately acted with [actual] knowledge of the bankruptcy case. It noted that a creditor does not have a defense of ‘mistake’ or ‘good faith belief’ that its actions were lawful. Although the creditor would have a defense if the debt was properly reaffirmed or negotiated in a valid, and new post discharge contract.

Since the creditor did not have a viable defense the Court of Appeals affirmed (upheld) the decision of the Bankruptcy Court in determining the creditor was in contempt of court and subject to sanctions of money damages. The debtor was therefore entitled to have her incidental expenses and all reasonable attorney fees paid.

The case illustrates the protection of the Bankruptcy Court through its automatic stay provisions, 11 USC 362, during pendency of a case; and, the power of the Court to protect the debtor’s fresh start. If a creditor has harassed you during the pendency of your case or post discharge you should contact a bankruptcy attorney so that the action may be reviewed as to whether it constitutes contempt of the court.

[Guy Vining, a bankruptcy attorney, in metro-Detroit, maintains his office is in Taylor, Michigan, where he serves the downriver communities of Monroe, South Rockwood, Gibraltar, Brownstown Township, Grosse Ile, Woodhaven, Trenton, Southgate, Riverview, Allen Park, Lincoln Park, Dearborn, Dearborn Heights, Westland, Wayne, and Ecorse. If you or a family member of friend would like a no-obligation no cost consultation/financial analysis, just call or E-mail Guy Vining of Vining Law Group, P.L.C to schedule a meeting.]