In determining the legal standard for holding a creditor in civil contempt for attempting to collect a debt in violation of a bankruptcy discharge order, the Supreme Court of the United States adopted an “objectively reasonable” standard, and held that a court may hold a creditor in civil contempt if there is “no fair ground of doubt” as to whether the order barred the creditor’s conduct.

Accordingly, the Supreme Court reversed the Ninth Circuit’s ruling, which had applied a subjective standard for civil contempt.

In an agricultural lien contest between three creditors of a bankrupt commercial farm, the U.S. Court of Appeals for the Fifth Circuit recently affirmed the trial court’s award of summary judgment in favor of a bank that provided debtor-in-possession financing, holding that the locale of the farm products determined the applicable lien law and that bank’s lien was superior to the liens of two nurseries that supplied trees and shrubs because the latter were either unperfected or unenforceable.

The Bankruptcy Appellate Panel for the U.S. Court of Appeals for the Sixth Circuit recently affirmed a lower bankruptcy court’s ruling that a refinanced mortgage was enforceable as to the interests of both husband and wife, where the wife did not execute the note and was not defined as a “borrower” in the body of the mortgage, but nonetheless initialed and signed the mortgage document as a “borrower” in the signature block.

The Supreme Court of Missouri recently held that a trial court abused its discretion by certifying an overly broad class with a class representative whose claims against the debt collector defendant were not typical of the class.

In the recent decision of Edmonton (City) v Alvarez & Marsal Canada Inc., 2019 ABCA 109, the Alberta Court of Appeal has concluded that fees and costs incurred by a court-appointed receiver should have priority over all claims by secured creditors, including special liens in favour of municipalities for unpaid property taxes. This is an important decision for the insolvency bar and provides some much needed comfort to receivers that their fees and costs will be protected by the court-ordered charge.

The Decision

The Defendant was a dentist who had executed a personal guarantee on July 7, 2011 in favour of the Plaintiff (the "Bank") in order to secure payment of the indebtedness of the Defendant's professional corporation. The Bank made a demand for payment on the guarantee, and subsequently brought an action against the Defendant (the "First Action").The Bank was successful on a motion for summary judgment and judgment was granted against the Defendant.

The U.S. Court of Appeals for the Sixth Circuit held that a recent change to Ohio law involving notice of a defective lien had no bearing on a bankruptcy trustee’s ability to avoid the defective lien because such notice is irrelevant to a trustee’s status as a judicial lien creditor.

Accordingly, the Sixth Circuit affirmed the Bankruptcy Appellate Panel’s upholding of the bankruptcy court’s denial of the mortgagee’s motion for judgment on the pleadings.

The U.S. Court of Appeals for the Seventh Circuit recently held that a mortgagee’s failure to take a deficiency judgment against a borrower who filed bankruptcy in a concluded state foreclosure action precluded the mortgagee from making a deficiency claim in the borrower’s bankruptcy proceeding.

A copy of the opinion in BMO Harris Bank N.A. v. Anderson is available at: Link to Opinion.

Background

Virginia Hills Oil Corp. was a small publicly traded oil producer with assets in north central Alberta. Some of its assets were held through its subsidiary Dolomite Energy Inc. (collectively the "Debtors"). The Debtors' main secured creditors were the Alberta Treasury Branches and the Bank of Nova Scotia (the "Banks"). The Debtors also owned a pipeline that passed through three municipalities (the "Municipalities").

The U.S. Court of Appeals for the Eighth Circuit recently affirmed a trial court judgment holding a bank and its principal in contempt and sanctioning them for violating a bankruptcy discharge injunction, based on the findings in a parallel state court proceeding.

In so ruling, the Eighth Circuit held that the state court judgment did not preclude the bankruptcy court’s ability to enforce its own orders.