The Indiana Lawyer Announced on March 31, 2011, that the Fair Finance Co.’s bankruptcy trustee had reached a $371,000 settlement with an Indianapolis attorney who was accused of defaulting on a 2003 loan from the business. The trustee had sued the Indiana attorney and his wife, saying that the couple failed to pay off a $250,000 loan that matured in 2006. Accrued interest had raised the amount owed to over $370,000.

In its recent decision in Century Services Inc v Canada,1 the Supreme Court of Canada (the “SCC”) held that, in the context of a Companies’Creditors Arrangement Act2 (the “CCAA”) proceeding, the Crown does not have a superpriority claim over the property of a debtor for unremitted goods and services tax (“GST”) amounts. The decision of the SCC majority rejected existing appellate-level case law, and brought the priority of Crown claims in-line with what they are in bankruptcy proceedings.

The case of Canrock Ventures LLC v. Ambercore Software Inc. et al is a cautionary tale for a Receiver and its counsel alike. In this case, the Ontario Superior Court of Justice rejected a Receiver’s application for the approval of an asset purchase agreement because of a failure to take the requisite steps when conducting a sale process and, in the Court’s view, failing to remain a neutral officer of the Court.

In a previous Financial Services Flash, we brought to your attention the decision of the United States Bankruptcy Court for the Southern District of Florida (the “Bankruptcy Court”) in the case ofIn re Tousa. In a decision that raised serious concerns for lenders in the United States, Justice Olson held that the first and second ranking secured lenders of Tousa Inc. (“Tousa”) did not act in good faith and were grossly negligent in providing Tousa with a secured loan less than six months before Tousa filed for bankruptcy.

The 2010 decision of the Ontario Court of Appeal in Murphy v. Sally Creek Environs Corp. (Trustee of) considered the role of a trustee in bankruptcy as an officer of the court and its obligation to act fairly and with integrity throughout bankruptcy proceedings.

A Cuyahoga County, Ohio trial court did not abuse its discretion when it appointed a receiver for a “defunct” foreign corporation that the trial court found “persists for the purpose of winding up its affairs in Ohio.”In re: All Cases against Sager Corporation (2010), 188 Ohio App 3d 796, appeal accepted for review (2011), 127 Ohio St. 3d 1503. The Court of Appeals found it undisputed that corporate assets existed after the foreign corporation had been dissolved, “and that these assets may afford insurance coverage to Ohioans injured by exposure to Sager’s products”.

In April 2010, we reported on the decision of the Ontario Superior Court of Justice (the “Superior Court”) in In the Matter of the Proposal of C.I.F. Furniture Limited (“CIF”) which dealt with the question of circular priorities. This decision was recently upheld by the Ontario Court of Appeal (“Court of Appeal”). The Court of Appeal’s decision will offer some comfort to lenders where intercreditor agreements exist between some but not all of the secured lenders of a borrower.

On December 23, 2010, the Bankruptcy Appellate Panel of the 6th Circuit, upheld the Eastern District of Kentucky’s Bankruptcy Court’s order that post petition rents, revenues or other funds derived from leased real property is property of the estate under 11 U.S.C. §541 and can be used as cash collateral under 11 U.S.C. §363. However, post petition rents can be used as cash collateral only if the debtor can provide adequate protection for the use of those rents through an existing equity cushion in the property.

In the Ontario case of Re Xerium Technologies Inc., the Superior Court of Justice (the “Ontario Court”) was asked to recognize an order made by the U.S. Bankruptcy Court for the District of Delaware (the “U.S. Court”) approving a prepackaged plan of reorganization (the “Plan”) of the debtors, Xerium Technologies Inc. and its subsidiaries (collectively, “Xerium”), made under Chapter 11 of the United States Code (the “U.S. Bankruptcy Code”).

In Ransom v. FIA Card Servs., N.A., --- S.Ct. ----, 2011 WL 66438 (U.S. 2011), the United States Supreme Court took up the question of whether a Chapter 13 debtor who owns his or her vehicle outright (“free and clear”) may claim an allowance for car ownership costs and thereby reduce the amount that he or she will repay creditors. In her first opinion, Justice Kagan answered simply—no. The Ransom opinion has been seen as a victory for not only credit card companies like the one involved but other creditors, as well.