Commercial Banking, Collections, and Bankruptcy

Bankruptcy Ct. did not err in finding that certain transfers by owner of company to third-party were voidable under 11 USC section 548 on grounds of actual or constructive fraud, under circumstances, where: (1) company had filed Chapter 7 bankruptcy petition; (2) third-party had received $45,400.81 in payments from company during four-year span prior to bankruptcy filing under circumstances that suggested that payments were for personal reasons; (3) company did not receive reasonably equivalent value in exchange for its transfers to third-party; and (4) company was insolvent at time of instant transfers where company’s liabilities exceeded its assets during relevant time period. Also, Bankruptcy Ct. could properly impose sanctions on third-party for attorney fees incurred for third-party’s discovery lapses, even though third-party eventually complied with discovery requests.

Dist. Ct. did not err in granting plaintiff’s motion for summary judgment in action alleging that: (1) defendant-entity breached contract with plaintiff by redirecting to entity’s employees and others funds belonging to plaintiff that entity had collected on behalf of plaintiff who performed medical services in joint medical center; and (2) defendant-principal of entity committed theft and conversion of said funds by instructing third-party to redirect said funds. Record showed that principal told third-party to “help manage the cash” to alleviate entity’s cash flow problems, and principal conceded that third-party, who accomplished said transfers, was his agent. Ct. further rejected principal’s claim that plaintiff did not have ownership interest in funds that had been initially segregated for later distribution to plaintiff, where Ct. noted that applicable agreement entitled plaintiff to specific funds that defendant had collected for services rendered at medical center. Fact that plaintiff had conceded that defendant could grant security interest in said funds to others did not constitute concession that plaintiff did not have ownership interest in said funds. Also, plaintiff could proceed against principal on both contract and tort claims, where tort claims that stemmed from common law were independent from contract claims.

Dist. Ct. did not err in dismissing plaintiff’s breach of contract action for failure to state cause of action, after finding that contract was not in force at time of alleged breach. While plaintiff argued that operative contract allowing it right to exclusively purchase defendant’s surplus sportswear was in force at time defendant allowed others to purchase said surplus sportswear, clear language of contract indicated that renewal provision did not apply to last extension of contract. As such, defendant could properly do business with third-party regarding sale of its surplus sportswear, since said sales to third-party occurred after expiration of contract.

Bankruptcy Ct. did not err in finding that overpayments made to debtors arising out of payments made under Illinois Child Care Assistance Program, as well as Supplemental Nutrition Assistance Program, were not domestic support obligations entitled to certain priority in debtors’ Chapter 7 and 13 bankruptcy petitions. Bankruptcy Ct. could properly find that: (1) said debts were general unsecured dischargeable debts; and (2) said debts were not sufficiently akin to alimony, maintenance or support to spouse or children, even though said payments were intended to be used to support debtors’ children. This is so, Ct. concluded, because debtors did not owe govt. money for support payments, and because instant debts merely represent overpayments that debtors were not entitled to, rather than domestic support obligations that debtors had failed to pay.

Dist. Ct. did not err in entering judgment in favor of defendant-manufacturer after conducting bench trial on plaintiff-purchaser’s claim that defendant breached its sales contract and breached express and implied warranties, where plaintiff asserted that yacht built by defendant had certain mechanical problems and had exhaust system that failed to meet specifications for European Union certification as required by instant contract. Dist. Ct. could properly conclude that plaintiff failed to prove damages to reasonable certainty on either its breach of contract or breach of warranties claims, where plaintiff sought return of $1 million purchase price plus financing costs, rather than cost of specific damage to yacht or current value of yacht. Also, plaintiff failed to rebut defendant’s evidence that yacht could be made European Union compliant for only $2,000.

Dist. Ct. did not err in four consolidated actions in finding that creditor-City of Chicago in instant Chapter 13 bankruptcy petitions violated automatic stay provision contained in section 362(a)(3) of Bankruptcy Code by continuing to hold debtors' vehicles after debtors had filed bankruptcy petitions until debtors paid off accrued parking tickets and impoundment fees. Under Thompson, 566 F.3d 699, creditor must comply with automatic stay provision and return vehicle to debtor upon debtor filing bankruptcy petition. As such, Dist. Ct. could properly order defendant to return vehicles to debtors and then require defendant to seek any protection for their interests in said vehicles within Bankruptcy Code, rather that allow defendant to retain vehicle to pressure debtors to pay off fines and fees to detriment of other creditors. Ct. rejected defendant’s claim that: (1) property seized prior to debtor filing bankruptcy petition is not property of bankruptcy estate; (2) instant stay provision contemplates debtor filing turnover action to retrieve his or her vehicle; (3) under section 363(a)(3), passive retention of vehicle is not “act” of control over vehicle; and (4) without retaining possession of vehicle to protect its interests, defendant was helpless to prevent loss or destruction of vehicle.