Commercial Banking, Collections, and Bankruptcy

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.

Dist. Ct. did not err in dismissing for failure to state cause of action plaintiffs’ complaints alleging that defendant’s wage-garnishment actions violated Fair Debt Collection Practices Act (FDCPA) because they were filed in wrong venue. Ct. of Appeals found that instant wage-garnishment actions are actually proceedings against employer, as opposed to debtor, and thus are not covered proceedings under FDCPA.