Commercial Banking, Collections, and Bankruptcy

Dist. Ct. did not abuse discretion in denying creditor’s motion to reopen Chapter 7 bankruptcy proceedings where Bankruptcy Ct. had issued discharge order with respect to debt owed to creditor, even though creditor argued that he was never given proper notice of instant bankruptcy proceeding. Record showed that creditor had been listed as creditor in bankruptcy schedule, and that notice of bankruptcy petition had been served on creditor’s attorney, who had recently represented creditor in series of lawsuits against debtor in attempt to collect on debt. As such, service on attorney constituted proper and timely notice that could be imputed to creditor. Moreover, instant request was untimely, where attorney notified creditor of existence of bankruptcy petition 24 days prior to entry of discharge order, and creditor waited 13 months after he learned of bankruptcy petition to file instant action.

Dist. Ct. did not err in granting defendant’s motion for summary judgment in action by plaintiff alleging that defendant breached parties’ contract by refusing to pay amount owed to plaintiff for goods delivered to defendant, where Dist. Ct. found that instant action was filed beyond 4-year limitation period set forth in section 2-725 of Uniform Commercial Code. Both parties had invoices indicating that payment was due sixty days from date of invoice, and instant lawsuit was filed more than four years after applicable payment date contained in last invoice between parties. Fact that parties’ Uniform Terms and Conditions (UTC) agreement did not contain 60-day provision set forth in invoices did not require different result, where UTC did not specify when payments on invoices became due, such that Dist. Ct. could look to parties’ conduct to supply payment due date for purposes of triggering any limitations period.

Dist. Ct. did not err in denying plaintiff’s request for preliminary injunction in action under Petroleum Marketing Practices Act (PMPA) seeking to enjoin defendant’s termination of plaintiff’s gas station franchise, where defendant terminated said franchise after plaintiff had tendered three $22,000 checks to defendant that were returned to plaintiff due to insufficient funds (NSF) in plaintiff’s bank account. Franchise agreement allowed for termination, where plaintiff failed to timely pay defendant for debts owed to defendant, and Dist. Ct. could properly conclude that two of three NSF checks were within plaintiff’s control, and thus counted as “failures” under PMPA that justified termination of franchise.

In instant Chapter 11 bankruptcy proceeding, Dist. Ct. did not err in finding that creditor’s second mortgage that was secured by lien on debtor’s shopping center was valid claim, even though said mortgage was non-recourse loan, and there was no equity in shopping center available to creditor at time of bankruptcy filing. While debtor argued that said mortgage should have been disallowed as claim against estate under these circumstances, 11 USC section 1111(b)(1)(A) provides that instant second mortgage should be treated as if creditor had recourse against debtor since only precondition to statute’s application was that creditor have claim secured by lien on property of estate. Thus, creditor’s second mortgage should be treated as unsecured deficiency claim against estate.

Dist. Ct. did not err in dismissing plaintiff’s lawsuit seeking damages under Fair Debt Collection Practices Act (FDCPA), where plaintiff alleged that defendant-collector violated venue provisions of FDCPA by bringing collection action in different township than where either plaintiff was located or debt arose. Under Indiana court system, township/small claims court within Marion County, where instant collection action was filed, has countywide jurisdiction, such that there was no violation of venue provision of FDCPA, even though defendant filed collection action in different township within Marion County than where contract was signed, since: (1) debt arose in and instant township court was located within Marion County; and (2) township courts within Marion County are not separate, freestanding FDCPA judicial districts. (Dissent filed.)

Dist. Ct. erred in granting plaintiff-lender’s motion for summary judgment in action alleging that defendant breached loan subordination agreement calling for plaintiff to be paid by third-party corporation on plaintiff’s loan with corporation before corporation could pay defendant on his loan with corporation, where record showed that defendant had attempted to loan money to corporation and where corporation returned said funds to defendant, but only after said funds had appeared on corporation’s financial records. Record contained triable issue as to whether corporation had accepted any “loan” from defendant so as to constitute violation of subordination agreement when corporation returned defendant’s funds, where individual at corporation who accepted defendant’s funds lacked authority to do so. Ct. noted though that issue remained as to whether corporation actually accepted defendant’s loan through its actions, where said funds appeared on its daily collateral report that was sent to plaintiff, and where there was some evidence that, prior to returning funds to defendant, corporation used defendant’s funds to pay down line of credit and to take subsequent money advances.

In action alleging that defendant breached master contract that gave plaintiff first right of refusal to provide lease financing for defendant’s customers arising out of clause in contract that expressly warranted that “all lease transactions presented to [plaintiff] are valid,” Ct. of Appeals certified question to Minnesota Supreme Court where: (1) record showed that 6-year lease presented to plaintiff from defendant’s Illinois municipal customer was invalid under Illinois law; and (2) defendant argued that there could be no breach of contract since subject matter of warranty was representation of law as opposed to fact. While Dist. Ct. granted defendant’s motion to dismiss based on defendant’s argument, Ct. of Appeals certified question where it was uncertain as to Minnesota Supreme Court’s resolution as to whether representations of law are ever enforceable under contract or warranty law.