Commercial Banking, Collections, and Bankruptcy

Dist. Ct. did not err in finding in instant Chapter 13 bankruptcy proceeding that debtor could properly designate as exempt her interest in marital home that was originally purchased as “tenants by the entirety” with her husband, but was subsequently conveyed to trust of debtor’s husband, with language in trust stating that “beneficial interest” in trust was held by debtor and husband as “tenants by the entirety.” While creditor argued that transfer of home to trust effectively destroyed tenancy in the entirety status of said home, relevant Illinois statute (Joint Tenancy Act, 765 ILCS 1005/1c) allowed debtor and her husband to transfer their interest in home to trust without destroying home’s tenancy in the entirety status. Moreover, creditor conceded that home was exempt property in bankruptcy proceeding as long as it retained tenancy by entirety status.

Dist. Ct. did not err in granting defendant’s motion for summary judgment in action alleging that defendant violated Texas law when it terminated its dealership agreement with plaintiff without good cause. Record showed that plaintiff purchased assets of entity that had dealership agreement with defendant, and relevant Texas statute allowed defendant to terminate dealership agreement, where, as here, there was “sale or other closeout of substantial part of dealer’s assets related to [its] business.” As such, instant termination meant that defendant had no further business relations with prior entity, and plaintiff had no “shoes” to step into so as to support its claim that it was authorized dealer of defendant’s products. Fact that defendant had initially filled orders made by plaintiff did not require different result.

Dist. Ct. erred in granting defendant’s motion for summary judgment in action by plaintiff seeking to recover $1.6 million in payments owed to it under contract that also required plaintiff to pay defendant $900,000. While Dist. Ct. found that plaintiff could not prevail in instant action since it had failed to fulfill its own payment obligations under subject contract, Ct. of Appeals found that defendant could not point to plaintiff’s lack of performance, when it too had failed to perform on said contract. Ct. further noted that plaintiff was entitled to some recovery under relevant New York state law, where defendant had continued to use plaintiff’s railroad cars pursuant to terms of contract while insisting that instant contract could not be enforced. As such, Ct. directed Dist. Ct. on remand to net out difference in amount of money owed to each party under terms of contract and to award balance to party to whom it was due.

Dist. Ct. did not err in dismissing plaintiff-bank’s claim seeking to recoup $486,750.33 from defendants that plaintiff had paid to its customer, where customer had been defrauded by same amount when defendant-lawyer deposited fraudulent check drawn on customer’s bank account. Record showed that lawyer had cashed into his client’s fund what he believed was check representing settlement proceeds of divorce dispute. Plaintiff could not establish any breach of warranty claim under U.C.C. based on certain missing information on electronic image of original check, where missing information would not have motivated plaintiff into refusing to send customer’s money to lawyer’s bank. Moreover, plaintiff could not have established any “restitution by mistake” claim under section 5/13-418 of U.C.C., where defendants-lawyer and two banks reasonably believed they were engaged in innocent banking activity of forwarding check to its final recipient on behalf of their clients. Also, plaintiff had no claim against defendant-lawyer for professional negligence in failing to discover counterfeit nature of check, where defendant was liable under professional negligence theory only to his own client and not to any third-party.

Dist. Ct. did not err in affirming Bankruptcy Ct.’s order that overruled debtor’s objection to creditor’s designation of her $25,000 claim as non-dischargeable domestic support obligation in instant Chapter 13 bankruptcy proceeding. Record showed that state court had ordered debtor to pay his ex-wife’s attorney $25,000 of $50,000 in legal fees that ex-wife had incurred during protracted litigation over custody and child support issues, after finding that debtor had engaged in overly litigious conduct during said litigation. Bankruptcy Ct. could properly find that state court’s order was essentially domestic support obligation that was exempt from discharge in bankruptcy under 11 USC sections 1328(c)(2) and 523(a), where clear intent of state court order was to compensate ex-wife for incurring additional attorney fees as result of debtor’s conduct and to ensure that debtor’s children had adequate financial support. Ct. rejected debtor’s argument that instant debt was dischargeable because state court order was meant to merely punish him, and debtor otherwise waived potential winning argument that instant debt was dischargeable because he was directed to pay $25,000 debt directly to ex-wife’s attorney as opposed to ex-wife.

Ct. of Appeals lacked jurisdiction to consider Dist. Ct.’s order reversing Bankruptcy Ct.’s order that had essentially granted request by junior secured creditor to marshal debtor’s assets in such fashion that would allow both senior and junior creditors to be paid in full at expense of unsecured creditors. Record showed that Dist. Ct. had remanded matter back to Bankruptcy Ct. with instructions to make new distribution that did not marshal debtor’s assets, and Ct. of Appeals found that said order was not final and appealable, even though issue of marshaling assets had been resolved, since: (1) no party could assure Ct. of Appeals that subsequent action taken by Bankruptcy Ct. would concern only ministerial acts; and (2) all parties would be free in Bankruptcy Ct. to object to new proposed distribution of debtor’s assets.