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The summaries on this website are summaries of the opinions issued by the judges of the Bankruptcy Court for the Western District of Virginia from October 2004 to date. The opinions may be searched by year, judge, category and chapter. For a more detailed search, enter a keyword in the search box above. This opinion bank, however, is not an exhaustive list of opinions issued by the judges of the Western District. These summaries are not intended to replace other research methods, but may be used as a starting point for your research. These summaries do not contain information as to whether an opinion has been published, appealed or the disposition of any such appeal, or otherwise overruled or affected by subsequent case law or statute. These summaries have been prepared for the convenience of the researcher and in no way constitute an interpretation by the Court of the opinion summarized. Please rely on the opinion not the summary. Please contact Judge Connelly's chambers or Judge Black's chambers regarding any questions or errors.

Russ v. Absher (In re Absher) (Case No. 10-70636; A.P. No. 10-07039) 10/07/2011

            The plaintiffs, who had purchased a used car from the debtor, sought to obtain a non-dischargeable judgment against him for the loss which they claimed to have suffered by reason of such car’s undisclosed salvage title history.  The Court concluded that the greater weight of the evidence persuaded it that the plaintiffs were induced to purchase the vehicle on the basis of a false representation of a material fact about the car’s damage history made by the debtor’s salesman, which representation caused them to forego making their own investigation of such vehicle’s history, and that as a result they acquired a vehicle which was worth significantly less than the contract price for it.  The Court this entered judgment for the plaintiffs finding the debt non-dischargeable under 11 U.S.C. § 523(a)(2)(A).

In re Russell 150, LC (Case No. 11-51041) 10/03/2011

            The debtor wired funds to its law firm pursuant to a retainer agreement; however, the wire transfer was not received by the firm until the day following the filing of the petition.  The debtor sought to have the Court approve the provisional application of the wired funds to pre-petition fees of the firm as well as approve the application of employment of the same firm.  The United States trustee opposed the application of employment on the grounds that at the time of the petition, the firm was a creditor of the debtor and was not “disinterested” as defined in the Bankruptcy Code.  The Court thus had to consider whether the wire transfer initiated before the petition, but not received until after the petition, constituted full prepetition payment of the claim.  The Court found that the firm had a claim pre-petition, was non-disinterested, and thus could not serve as counsel under 11 U.S.C. § 327(a).  The Court held that the firm must waive its fees for the pre-petition work or be barred from continuing as the debtor’s counsel.

In re Kluge (Case No. 11-61517) 10/03/2011

            The chapter 7 trustee objected to the debtors’ exemption under Virginia Code section 34-29 for “wages due but not received.”  The Court noted that section 34-29 of the Virginia Code only applies to earnings that are subject to garnishment.  The wages were not earnings subject to garnishment and were not the subject of a judicial or equitable proceeding.  Because the wages were not the subject of a garnishment, the Court sustained the chapter 7 trustee’s objection.

In re Askew (Case No. 09-60155) 09/15/2011

            The debtors paid off their plan early and received a discharge; the case was closed.  The debtors filed a motion to reopen and the following day the IRS filed a proof of claim with the Court for post-petition unsecured priority taxes.  The chapter 13 trustee filed an objection to the proof of claim on grounds that it was not timely filed.  The debtors filed a motion to compel the trustee to recover distributed funds from unsecured creditors so that the funds may be paid to the IRS.  The Court disallowed the IRS claim as being untimely filed, because a claim that is filed after a chapter 13 estate is distributed to other creditors and the case is closed constitutes unreasonable delay.  With such disallowance, the chapter 13 trustee had no authority to pay that claim.  Consequently, the Court found no reason to compel the trustee to recover funds from the other unsecured creditors.

In re Osteen (Case No. 09-63551) 09/12/2011

            Prior to filing for bankruptcy, the debtors refinanced their mortgage, but the mortgage company did not record the deed of trust.  In state court, the trustee under the deed of trust filed a complaint against the debtors seeking to have the court enter an order “confirming” that the mortgage company had a perfected first lien security interest in the property.  The parties entered into a settlement agreement under which the debtors signed and delivered a deed of confirmation of the deed of trust and affidavit of lost instrument; the deed of confirmation was recorded.  Less than a year after entering the settlement agreement, the debtors filed for bankruptcy under chapter 13 and initiated an adversary proceeding seeking to avoid the deed of confirmation under section 548(a)(1)(b) as a fraudulent conveyance on the grounds that the debtors never received the consideration that they bargained for.  The parties came to an agreement and filed a motion to approve settlement under which the debtors would receive $6,000 as well as certain mortgage concessions.  Subsequently, the case was converted to chapter 7.  The chapter 7 trustee filed a motion to employ a law firm to investigate and potentially prosecute a cause of action under section 548 against the holder of the note.  The debtors opposed the motion to employ on grounds that the chapter 7 trustee was barred by the doctrine of res judicata from bringing the action under section 548.

            The Court held that the chapter 7 trustee was not barred by res judicata for three main reasons.  First, the debtors did not have authority to bring an action under section 548.  Second, the settlement agreement did not “resolve” the section 548 cause of action.  Finally, the Chapter 13 trustee was not a party to the litigation.  The Court thus granted the trustee’s motion to employ counsel.

In re Vencill (Case No. 10-72956) 09/09/2011

            The United States trustee filed a motion to disqualify debtor’s counsel.  During a hearing on the motion, counsel for the United States trustee questioned the debtor-in-possession and her counsel objected.  The objections were raised on the ground of attorney/client privilege as the questions sought disclosure of the particulars of a conversation which took place prior to the filing of this bankruptcy case, between the debtor and her counsel concerning certain real property which the former wanted to transfer to her son and did in fact transfer to him prior to filing her Chapter 11 bankruptcy petition.

            The United States Trustee asserted that the conversation in question was not subject to a claim of privilege for two reasons: that the debtor waived the privilege by testifying about advice given to her by her counsel concerning other matters without claiming the privilege, and that the communication is excluded from protection by the crime/fraud exception to the attorney/client privilege.  The Court concluded that her testimony did not amount to a waiver of the right but that under the evidence before it the crime/fraud exception to the attorney/client privilege applied.

Reynolds Living Trust v. Wells Fargo Bank, N.A. (In re Reynolds) (Case No. 09-71964; A.P. No. 11-07012) 09/06/2011)

                The debtor filed a complaint pro se (which the Court noted “can hardly be said to be a model of clarity”), both in his capacity as the debtor and the trustee of a living trust, seeking monetary damages and other relief against his former bankruptcy counsel, counsel’s insurance carrier, and Wells Fargo Bank, which held two deeds of trust upon property owned by the trust.  The insurance carrier filed a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), and both former counsel and the bank filed motions for judgment on the pleading under Federal Rule of Civil Procedure 12(c).  The Court granted the motions and dismissed the case with prejudice.

In re Slater (Case No. 10-62521) 09/06/2011

            The debtors’ counsel received $2,500 from the debtors prepetition which was allowed by the Court as the standard “no-look” fee.  The debtors’ counsel subsequently sought an additional $3,950.30 on the basis of the lodestar method.  The Court found that the no-look fee was appropriate given that this was not a case which required significantly more than the average range of legal services.  The Court also determined that even under the lodestar method that the no-look fee was appropriate in this case.  The Court did allow reimbursement of expenses for the filing fee, a title abstract fee, an appraisal fee, the pre-petition credit counseling, a credit report fee, and post-petition credit education.

In re Dunn (Case No. 11-60847) 08/18/2011

            The Court issued an order directing the debtor to cure deficiencies in the petition and schedules.  Counsel failed to do so on behalf of the debtor, and then the Court issued an order directing the debtor to appear and a show cause why the case should not be dismissed.  Counsel appeared and represented she would file the requisite pleadings; she failed to do so.  The Court filed an order directing counsel to appear and show cause why case should not be dismissed; counsel did not receive notice and did not appear.  New counsel replaced this counsel and informed the Court that the debtor had paid the original counsel $6,500.

            The Court then issued a show cause why original counsel should not be ordered to disgorge fees received by her in the amount of $6,500.00 and further show cause why she should not be sanctioned for failing to file pleadings with the Clerk of this Court as she had represented and for otherwise abandoning her client.  The Court found the only benefit to the debtor was the filing of the petition thus stopping a foreclosure.  The Court thus ordered her to disgorge $5,000 of the $6,500 fee.

Helton v. Bank of New York Mellon; Helton v. Wells Fargo Bank; Helton v. Navy Federal Credit Union (In re Helton) (Case No. 11-60126; A.P. Nos. 11-06028, 11-06030, 11-06031) 08/12/2011

            The debtor was not eligible for a discharge in chapter 13 because of a previous discharge in chapter 7.  The debtor filed three adversary proceedings seeking to avoid judicial liens, two against the debtor’s residence and one against a separate parcel of real estate.  No defendant filed a response, but the chapter 13 trustee opposed the three motions.  The Court thus considered whether Section 1328(f)(1) and Section 1325(a)(5) act together to provide an exception to the rule created by Dewsnup, Nobleman, section 506(a) and section 1322(b)(2).  The Court concluded that section 1328(f)(1) does not prohibit a Chapter 13 debtor from stripping off a wholly unsecured lien.

            The trustee also objected to confirmation of the plan as not being proposed in good faith.  The Court applied a totality of the circumstance test considering past bankruptcy filing, the nature and amount of unsecured claims, and the percentage of proposed repayment.  The Court sustained the trustee’s objection to confirmation concluding that purpose of the Plan in this case violates both the intent and the spirit of the Bankruptcy Code in that it is a clear attempt to circumvent the stricture of the holding in Dewsnup.

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