Commercial Banking, Collections, and Bankruptcy

Bankruptcy Judge did not err in refusing to confirm Chapter 11 reorganization plan and then dismissing bankruptcy proceeding. Reorganization plan cannot be confirmed under 11 USC section 1129(d) where, as here, only purpose of plan was to avoid taxes by effectively transferring net operating losses of debtor (shell corporation having no income or assets) to sole creditor. Moreover, instant plan was not proposed in good faith where debtor had originally been solvent, but underwent series of transactions designed to confer tax benefit on creditor.

Bankruptcy Ct. did not err in denying creditor's motion to have Trustee pay his claim where creditor was non-unit partner of defunct debtor-law firm, and where creditor sought return of capital contributions and unpaid compensation pursuant to Chapter 11 plan. Terms of plan specifically required that claims of non-unit partners be subordinated to debts owed to other creditors, and while creditor's position within law firm would not be viewed as partner under Uniform Partnership Act, creditor could not rely on definition of partner in Act to gain priority for his claim. Fact that creditor's claim was allowed did not mean that it was required to be paid where, as here, said claim did not enjoy high enough priority.

Dist. Ct. did not err in granting defendant's motion for summary judgment in action alleging breach of contract and fraudulent and negligent misrepresentation arising out of parties' contract in which defendant agreed to provide business consulting services and where one of defendant's employees who was subsequently hired by plaintiff allegedly stole money from plaintiff after his hire by plaintiff. Record showed that plaintiff itself breached contract by hiring defendant's employee in contravention to contract's no-hire provision. Moreover, although plaintiff claimed that defendant had improperly failed to perform criminal background check on subject employee, there was nothing in record to show that said employee had criminal history.

Dist. Ct. did not err in finding that defendant breached terms of contract giving plaintiff first right of refusal concerning participation in future promotional product/advertising specialties involving defendant, when defendant invited third-party to co-locate trade show with defendant at McCormick Place and failed to offer plaintiff initial opportunity to participate in same trade show. Co-location trade show qualified as covered opportunity as contemplated by contract, and Dist. Ct. could properly reject defendant's argument that third-party's decision to co-locate trade show with defendant was independent act. Moreover, Dist. Ct. did not err in awarding only nominal damages where plaintiff failed to account for diluted demand stemming from participation by plaintiff's members in subject trade show that occurred within four months of another show held by plaintiff, and where plaintiff failed to identify companies that would have attended subject trade show and/or identify actual profits, if any, that third-party generated at subject trade show.

Dist. Ct. did not err in reversing Bankruptcy Ct. order finding that debtors' unpaid loan to creditor was dischargeable, where creditor argued that said debt was nondischargeable due to debtors' fraudulent representations. Bankruptcy Ct. erred in finding that creditor was not justified in relying on debtors' misrepresentations regarding ownership of two McDonald's restaurants. Fact that debtors did not use said restaurants as security for loan was not material where creditor could rely on debtors' representations of ownership in assessing their abilities to satisfy loan obligations. Moreover, instant loan was nondischargeable where record showed that said misrepresentations induced creditor to forbear in collecting on loan, which resulted in collection remedies that had decreased in value..

Law firm, which had filed fee application with Bankruptcy Ct. for services rendered as counsel to creditors’ committee, lacked standing to appeal order dismissing debtors’ involuntary Chapter 11 bankruptcy cases where law firm failed to appear at hearing where dismissal motion was addressed or otherwise object to proposed dismissal prior to Bankruptcy Ct. ruling. Fact that law firm was constituent of creditor committee that was represented at hearing or that law firm filed with Bankruptcy Ct. two motions to reconsider dismissal order did not satisfy appearance and notice requirements for obtaining standing to appeal dismissal order.

Bankruptcy Judge did not err in finding in instant Chapter 13 proceeding that exception to Bankruptcy Ct.’s cramdown authority found under 11 USC section 1325(a) applied to preclude use of said authority to creditor’s purchase money security interest in debtor’s car where said interest was incurred within 910 days prior to filing of instant bankruptcy proceeding. Moreover, Bankruptcy Judge did not err in finding that creditor’s purchase money security interest included not only difference between purchase price of new car and debtor’s down payment, but also negative equity generated when creditor financed and secured difference between amount that debtor still owed on traded-in car and agreed upon value of debtor’s traded-in car.