Justia Contracts Opinion Summaries

Appellants and the company they own filed suit against David Fisher and other defendants, alleging claims arising from an unfulfilled real estate purchase agreement. Fisher filed an answer and counterclaim. Three years later, Fisher filed for Chapter 7 bankruptcy. Appellants filed an adversary proceeding in the bankruptcy case, requesting a determination that their claims against Fisher were not dischargeable in bankruptcy. The district court subsequently dismissed Appellants’ claims. Thereafter, the bankruptcy court ruled that Appellants’ claims against Fisher were dischargeable in bankruptcy. Appellants then filed a motion to modify the district court’s order dismissing the action and a renewed motion for summary judgment. The district court denied both post-dismissal motions, noting that the matter had already been dismissed. On appeal, the Supreme Court treated Appellants’ motions as motions for relief from the dismissal order pursuant to Wyo. R. Civ. P. 60(b) and affirmed, holding that, under the circumstances of this case, the district court did not abuse its discretion in denying Appellants’ motions. View "Bartel v. West" on Justia Law

MERV, an LLC formed to purchase and operate an antique mall, encountered difficulties paying its mortgage loan and entered into a forbearance agreement with the Bank. MERV later defaulted and filed a Chapter 11 Bankruptcy Petition. Although a plan of reorganization was confirmed, MERV again defaulted. The Bank foreclosed its mortgage on the property. Before the bankruptcy case closed, MERV retained special counsel and filed an adversary proceeding against some of its founders and the Bank. The claims against the Bank alleged breach of contract, “facilitation of fraud and theft”, and equitable subordination of the Bank’s claim. MERV sought punitive damages. The bankruptcy court granted summary judgment, agreeing with the Bank that MERV had executed a release of all of the claims as part of the forbearance agreement. The Sixth Circuit Bankruptcy Appellate Panel affirmed, finding that the Bank offered prima facie evidence of a complete affirmative defense to the complaint by showing that MERV executed a Release of all claims. MERV did not demonstrate a genuine issue of material fact as to the validity of that Release. MERV did not file a motion or a Rule 56(d) affidavit or declaration with the bankruptcy court requesting more time for discovery. View "In re: MERV Props., LLC" on Justia Law

The Lapideses renewed a loan from Venture Bank secured by a third mortgage on their home. Howard subsequently filed for Chapter 7 bankruptcy. After Howard’s personal debts were discharged, the Lapideses executed two “Change in Terms Agreements,” each of which extended the maturity date of the loan for six months. When Howard ceased making payments under these agreements, Venture Bank sought a declaratory judgment that the agreements were valid and enforceable. Howard counterclaimed that Venture Bank’s efforts to obtain payments after his discharge violated the discharge injunction under 11 U.S.C. 524(a)(2). The bankruptcy court denied Venture Bank’s claim for a declaratory judgment and awarded Howard damages and attorney’s fees. The district court and Eighth Circuit affirmed, upholding a finding that Howard’s payments were not voluntary within the meaning of section 524(f) and did not comply with the requirements of a reaffirmation agreement under section 524(c). The post-discharge agreements served no purpose other than reaffirmation agreements in which Howard agreed to repay all of his discharged personal debt and lacked consideration. View "Venture Bank v. Lapides" on Justia Law

The Richers filed for bankruptcy. Morehead, who had invested in commercial real estate owned by a trust controlled by Richer, filed an unsecured claim for $945,000 in the proceeding. The Richers filed an adversary action claiming that Morehead’s only lawful interest in the property was to receive a share of the net proceeds of the property if and when it was sold. The bankruptcy judge, the district court, and the Seventh Circuit upheld Morehead’s claim. The 2005 “Equity Participation Agreement” provided no security for Morehead, but did give him “the sole and exclusive option to convert his Participation Interest to a Demand Note payable within one hundred eighty (180) days of conversion.” Four years later, Morehead sent Richer by certified mail, a letter purporting to convert Morehead’s participation interest to a demand note for $700,000 (plus interest), effective the day after the letter was mailed, November 25, 2009—the anniversary date. The court rejected an argument that the letter had to be mailed or otherwise communicated to them on November 25, the anniversary date, neither before nor after. The Agreement provides that “the Conversion Option is exercised on the … anniversary date,” not that communication must occur on that date. View "Richer v. Morehead" on Justia Law

Falco sold insurance for Farmers, under a 1990 Agent Agreement, which provided that Falco would be paid Contract Value upon termination of the Agreement. As a Farmers agent, Falco was entitled to borrow money from the Credit Union. In 2006, Falco obtained a $28,578.00 business loan and assigned his interest in his Agreement receivables—including Contract Value—as security. The loan document gave the Credit Union authority to demand payments that Farmers owed Falco; it could tender Falco’s resignation to levy on Falco’s Contract Value. Falco failed to make payments and filed a Chapter 7 bankruptcy petition, listing the loan on his schedules. Falco received a discharge in February 2011, covering his liability under his Credit Union loan. In April 2011, the Credit Union notified Farmers that Falco had defaulted and exercised the power of attorney to terminate his Agent Agreement. Farmers notified Falco that the resignation had been accepted, calculated Contract Value as $104,323.30, paid the Credit Union $29,180.92, and paid the balance to Falco. The Eighth Circuit affirmed summary judgment in favor of defendants, finding that the Credit Union’s secured interest survived bankruptcy; it did not tortuously interfere with Falco’s Agreement because it had a legal right to terminate the Agreement; and Falco failed to show an underlying wrongful act or intentional tort as required under civil conspiracy. View "Falco v. Farmers Ins. Grp." on Justia Law

Falco sold insurance for Farmers, under a 1990 Agent Agreement, which provided that Falco would be paid Contract Value upon termination of the Agreement. As a Farmers agent, Falco was entitled to borrow money from the Credit Union. In 2006, Falco obtained a $28,578.00 business loan and assigned his interest in his Agreement receivables—including Contract Value—as security. The loan document gave the Credit Union authority to demand payments that Farmers owed Falco; it could tender Falco’s resignation to levy on Falco’s Contract Value. Falco failed to make payments and filed a Chapter 7 bankruptcy petition, listing the loan on his schedules. Falco received a discharge in February 2011, covering his liability under his Credit Union loan. In April 2011, the Credit Union notified Farmers that Falco had defaulted and exercised the power of attorney to terminate his Agent Agreement. Farmers notified Falco that the resignation had been accepted, calculated Contract Value as $104,323.30, paid the Credit Union $29,180.92, and paid the balance to Falco. The Eighth Circuit affirmed summary judgment in favor of defendants, finding that the Credit Union’s secured interest survived bankruptcy; it did not tortuously interfere with Falco’s Agreement because it had a legal right to terminate the Agreement; and Falco failed to show an underlying wrongful act or intentional tort as required under civil conspiracy. View "Falco v. Farmers Ins. Grp." on Justia Law

Lariat and Tenant entered into a 10-year lease for operation of a restaurant. Debtor personally guaranteed Tenant's performance. Tenant was evicted in 2010 and obtained a judgment of $2,224,237.00, plus interest and attorney fees. In 2011, Lariat filed an involuntary chapter 7 petition against Debtor, which was dismissed by agreement. The same creditors filed suit against Debtor's wife. After the involuntary petition was dismissed, they added Debtor as a codefendant. The court held Debtor and his wife liable for fraudulent transfers ($795,098.00) and awarded interest and costs. In 2013, Debtor sued Lariat; the court dismissed, based on collateral estoppel. Appeal is pending. In 2014 Tenant filed a chapter 11 petition and an adversary proceeding against Lariat. The bankruptcy court dismissed the adversary proceeding. On the Trustee's motion, Tenant’s chapter 11 case was dismissed. Debtor filed his own chapter 11 petition. Lariat filed a proof of claim for $1,734,539.00. Debtor objected on grounds that the amount sought based on Debtor's personal guaranty under the lease exceeded the amount allowable under 11 U.S.C. 502(b)(6) and the amount sought based on fraudulent transfers was duplicative of, and subject to the same limitation as, sought based on thatl guaranty. Lariat filed an amended proof of claim for $1,610,787.00. The court capped Lariat's claim at $445,272.93. The Eighth Circuit Bankruptcy Appellate Panel remanded for recalculation of damages under the lease and of fees and expenses, but agreed that damages for fraudulent transfers were duplicative. View "Lariat Co., Inc. v. Wigley" on Justia Law

Chivalry contracted with Rehtmeyer to develop and manufacture a board game. Chivalry paid Rehtmeyer over $128,000, but the relationship deteriorated. Rehtmeyer never produced the game. Chivalry sued for breach of contract and won a judgment of $168,331.59, plus $621.25 in costs in Illinois state court. Rehtmeyer never paid. Chivalry issued a citation to discover assets. At the citation examination, Rehtmeyer testified that she had no ownership interest in any real estate; securities, stocks, bonds or similar assets; office or electronic equipment; nor a personal checking or savings account. Because Rehtmeryer had not produced required documents, Chivalry continued the citation and filed a motion to compel production, which was granted. She did not comply. The state court twice more ordered her to produce all the documents required by the citation. Months later, Chivalry sought a rule to show cause. The day before the scheduled hearing, Rehtmeyer filed a Chapter 7 bankruptcy petition. Chivalry appeared to object to the discharge of the debt owed to it, claiming that Rehtmeyer had concealed her assets and income during the citation proceedings. The bankruptcy court denied Chivalry’s objection. The district court affirmed. The Seventh Circuit reversed, finding that Rehtmeyer concealed assets with the requisite intent. View "Jacobs v. Marcus-Rehtmeyer" on Justia Law

DVI Receivables XIV, LLC; DVI Receivables XVI, LLC; DVI Receivables XVII, LLC; DVI Receivables XVIII, LLC; DVI Receivables XIX, LLC; DVI Funding, LLC (collectively, the "DVI Entities"); Lyon Financial Services, Inc. d/b/a U.S. Bank Portfolio Services ("Lyon"); and U.S. Bank, N.A. ("USB") (collectively, "Appellants") appealed a district court decision to affirm a bankruptcy court's final order awarding appellee Maury Rosenberg attorney's fees and costs. The DVI Entities filed an involuntary bankruptcy petition against appellee Rosenberg. After the bankruptcy court dismissed the petition, the court awarded attorney's fees and costs to appellee Rosenberg. The bankruptcy court granted Rosenberg's motion and dismissed the involuntary petition with prejudice. The bankruptcy court found, inter alia, that the DVI Entities were not eligible creditors of Rosenberg because his 2005 guaranty did not run to the DVI Entities. The DVI Entities therefore lacked standing as a matter of law to file an involuntary petition against Rosenberg. In his adversary complaint, Rosenberg asserted federal claims to recover attorney's fees, costs, and damages he incurred because of the filing of the involuntary petition, which the bankruptcy court had dismissed. After careful review of the record and the parties' briefs, and following oral argument, the Eleventh Circuit affirmed in part, vacated in part, and remanded for further proceedings. The Court affirmed the district court's affirmance of the bankruptcy court's award of the following three categories of attorney's fees and costs: (1) fees to obtain the dismissal, (2) appellate fees, and (3) fees on fees. The Eleventh Circuit vacated the district court's affirmance of the bankruptcy court's award of the fourth category of fees and costs, those incurred to prosecute Rosenberg's bad-faith claims for damages, as prematurely entered. The case was remanded back to the district court: (1) to deduct from the total award the limited amount of fees and costs that were incurred solely for the legal work done to prosecute Rosenberg's bad-faith claims for damages; and (2) to reconsider that deducted fee and cost amount along with the motion to supplement. View "DVI Receivables XIV, LLC, et al. v. Rosenberg" on Justia Law

Sterling Development Group Three, LLC, and Sterling Development Group Eight, LLC, appealed a judgment dismissing their action against James Carlson to collect on two personal guarantees, and an order awarding Carlson costs and disbursements. In 1983, Carlson founded PRACS Institute, Ltd., a medical research facility which began operating in East Grand Forks, Minnesota. In 1999, Sterling Development Group Three entered into a 15-year lease agreement with PRACS for a building located in East Grand Forks. Carlson signed the lease agreement as the president of PRACS. Carlson also signed a personal guaranty. When PRACS expanded in 2004, Sterling Development Group Eight built an expansion to the Sterling Three building, and PRACS entered into a lease agreement with Sterling Eight for a term running simultaneously with the Sterling Three lease. Carlson signed a similar personal guaranty for the Sterling Eight lease. In January 2006, Carlson sold PRACS to Contract Research Solutions, Inc., which the parties refer to as Cetero. The Sterling companies consented to this "change of control." Carlson's daily involvement in PRACS ceased at that point. Carlson received Cetero stock in the sale and became a member of Cetero's seven-member board of directors. In 2010, Cetero suspended its East Grand Forks operations, but continued to pay rent to the Sterling companies. In the spring of 2012, Cetero filed for bankruptcy. The bankruptcy trustee eventually rejected the East Grand Forks Cetero leases with the Sterling companies and stopped paying rent. The Sterling companies then brought this action against Carlson to collect more than $600,000 for unpaid rent under his personal guarantees. Following a bench trial, the district court dismissed the action. The court found Carlson was exonerated from liability under the personal guarantees because the original lease agreements had been altered in three respects by the Sterling companies and Cetero or PRACS without Carlson's knowledge or consent. The Sterling companies argued on appeal to the Supreme Court that the district court erred in finding the original lease agreements were contractually altered without Carlson's knowledge or consent, resulting in exoneration of his personal guaranty obligations. Because the district court's finding that the principal's contractual obligations were altered without Carlson's knowledge or consent was not clearly erroneous, and the court did not abuse its discretion in awarding costs and disbursements, the Supreme Court affirmed the judgment and order. View "Sterling Development Group Three, LLC v. Carlson" on Justia Law