Creditor's Corner for March, 2010

by MCM, dated March 2010

(1) Unsecured Creditors May Claim Post-Bankruptcy Attorneys'Fee, (2) Bank Potentially Liable To General Contractor For Breach Of Fiduciary Duty, (3)Court Upholds Mortgage On Homestead Where Wife Signs A Waiver In The Homestead, and (4)Bankruptcy Court Sets Aside Lender's Credit Bid Set Aside As An Avoidable Preference.

Creditor's Corner for February, 2010

by MCM Litigation Department

This month's Creditors' Corner discusses the following issues: (1) Mortgagee permitted to void competing mortgage due to spouse's forged signature, (2) Court of Appeals clarifies redemption time limits on multiple advance loans, (3) Creditor does not lose fraud claim for failure to investigate representations, (4) Andrew Moratzka publishes article regarding Recent cases involving identification of debtors.

The Continually Narrowing View of Name Sufficiency under section 9-503 of the UCC

American Bankruptcy Institute Journal

by Andrew P. Moratzka

As the reader may be well aware, a financing statement must sufficiently provide the name of the debtor to be effective under the Uniform Commercial Code (UCC). UCC §9-503(a).

Creditor's Corner for December, 2009

by MCM Litigation Department

This month's Creditors' Corner discusses the following issues: (1) Bankruptcy Court amends local rule to require more information from residential mortgage lenders on motions to lift the automatic stay, (2) How lenders protect their security interests in goods in-transit, (3) Bankruptcy statistics for the first half of 2009

Creditor's Corner for November, 2009

by MCM Litigation Department

This month's Creditors' Corner discusses the following issues: (1) Deficiency Judgments on Revenue Bond Debt, (2) Federal Preemption on Lawsuits Involving National Banks, (3) Non-Dischargability of Fraud Judgments

News about mechanic's lien rights of surveyors, engineers and architects

by MCM Litigation Department

The Minnesota Court of Appeals very recently issued an opinion that significantly affects the mechanic's lien rights of surveyors, engineers and architects.

Creditor's Corner for October, 2009

by MCM Litigation Department

This month's Creditors' Corner discusses the following issues: 1) Minnesota IRA Exemption is not Limited to Funds Contributed through Employment, 2) Junior Mortgagee Remains Fully Secured in Chapter 13 Regardless of Value of Mortgaged Residence, 3) MERS Complies with Foreclosure by Advertisement Statute, 4) Debtor with 910-Day Loan cannot Bifurcate from Lender’s Secured Claim the Amount of the Loan Attributable to Satisfying a Previous Loan on Trade-In Vehicle

We Proudly Announce Our 2009 Award Winning Attorneys

by MCM

Please join us in congratulating them on their success.

Creditor's Corner for September, 2009

by MCM Litigation Department

This month's Creditors' Corner discusses the following topics: 1) Minnesota Increases Judgment Rate to 10% for Judgments Exceeding $50,000 2) District Court Awards Lender Attorneys Fees Incurred in Defense of Claims Brought by Borrower, as a Cost of Collection 3) Equitable Subordination Requires Harm 4) Enforceability of a Jury Waiver Clause in a Loan Agreement

Creditor's Corner for August 2009

by MCM Litigation Department

This month's Creditors' Corner discusses the following topics: 1. The risk of failing to perfect a security interest by identifying the debtor with the correct legal name and an incorrect trade name. 2. Enforceability of mortgages against homestead where one spouse does not sign the mortgage. 3. Transfers to LLC qualifying as Indirect Gifts.

Creditor's Corner for July, 2009

by MCM Litigation Department

Creditors' Corner for June 2009

by MCM Litigation Department

RESTAURANT INSOLVENCIES LIKELY TO RISE -- ARE LENDERS PREPARED? The number of restaurant insolvencies to date has not been as prevalent as throughout the retail industry, but that is expected to change as consumers remain fearful of their own economic security and seek to reduce or eliminate discretionary eating-out excursions. A recent study by AlixPartners showed that at least 40% of all restaurant chains could experience severe liquidity crises in the next 12 months,particularly fine-dining establishments.

Recoupment and Setoff Under State Law

American Bankruptcy Institute Journal

by Andrew P. Moratzka

Relying on Travelers Casualty & Surety Co. of Am. v. Pacific Gas and Electric Co., 127 S.Ct. 1199 (2007), the bankruptcy court in In the Matter of Bill Heard Enter. Inc., 2009 WL 416313 (Bankr. N.D. Ala. 2009), recently determined that state law governed the issue of recoupment. The Heard court provided further state law analysis under setoff.

Creditors' Corner for May 2009

by MCM Litigation Department

RISKS TO CONSIDER IN THE PENDING AUTOMOTIVE INSOLVENCIES Talk of bankruptcies and bailouts in the automotive industry abound at the various water coolers and watering holes. Dealers are filing Chapter 11 or closing their doors. Even Toyota is seeking Japanese bailout money for its financial services arm. Whether the resolution is bankruptcy or bailout, there is a potentially huge disruption lurking behind all of this chatter. The automotive world will go through a wrenching change and some lenders may not realize how deeply they could be impacted.

Creditors' Corner for April 2009

by MCM Litigation Department

Collateral Transfer Agreement between Lenders did not require signature of both parties. In Thomas & Wong General Contractor v. The Lake Bank, (8th Cir. 2009), the Court held that enforcement of a collateral transfer agreement did not require both lenders to sign the agreement. Lake Bank borrowed money to Beardmore Investments, Inc. Thomas & Wong became a subsequent lender to BDV investments, an affiliate of Beardmore, for the purpose of using the proceeds to satisfy indebtedness owed to Lake Bank.

MNCREW Guest Article: Restaurant Space Reinvented

MNCREW News JULY 2008

by Stacy A. Woods

Q&A with Matt Lokowich, owner of The Bulldog Uptown and coowner of The Bulldog N.E., along with Amy and Chris Rowland.

Creditors' Corner for March 2009

by MCM Litigation Department

GENERAL ASSET DESCRIPTION IN FINANCING STATEMENT PROTECTS LIEN ON SPECIFIC COLLATERAL ERRONEOUSLY DESCRIBED The United States Eighth Circuit Court of Appeals recently confirmed the importance of using a “catch-all” description of assets in a financing statement to provide additional protection to secured lenders. The Court also highlighted that when creditors confront prior financing statements with general collateral descriptions, the creditor should further investigate prior security agreements to determine what specific property is subject to a prior lien.

Employment Law Alert - Ledbetter Fair Pay Act Becomes Law

by Shane H. Anderson and Frederick W. Vogt

Ledbetter Fair Pay Act Becomes Law President Obama signed the Lilly Ledbetter Fair Pay Act into law on January 29, 2009. Overturning a 2007 U.S. Supreme Court decision, the new law eases restrictions on employees suing for pay discrimination by changing the calculation of the timeframe within which an employee may file a lawsuit.

Creditors' Corner for February 2009

by MCM Litigation Department

EIGHTH CIRCUIT SLAMS DOOR SHUT ON MALPRACTICE CLAIMS BY PARTICIPANT LENDERS AGAINST LEAD LENDER’S ATTORNEY After several years of litigation over a failed casino loan, the Eighth Circuit Court of Appeals ruled that participant lenders lacked standing to sue the lead lender’s attorney. The attorney failed to obtain necessary regulatory approval before closing the loans, which rendered the notes and security documents unenforceable. The lead lender did not fund any portion of the loans, and therefore the participants suffered the full loss due to the attorney’s negligence. The participants argued that they were third-party beneficiaries that had standing to sue the attorney, even though there was no contact between the attorney and the participants. The court rejected this argument finding that unless the attorney believes its work is entirely intended to benefit the participants, there is no attorney-client relationship upon which to base a malpractice claim. In this case, the attorney believed that its representation would benefit the lead lender.

"First Annual Second Harvest Heartland Food Mania Challenge - Big Success!"

Minneapolis/St. Paul Business Journal

by Second Harvest Heartland

Arbitration: To Do or Not To Do

Mackall, Crounse & Moore, PLC

by Lawrence R. Commers

In a recent U.S. Supreme Court decision, Hall Street Associates, LLC v. Mattel, Inc., the Court imposed certain restrictions on arbitration provisions that businesses had been incorporating into their mandatory arbitration provisions. Business arbitration provisions oftentimes expressly included expanded grounds for judicial review of arbitration awards where the findings of fact were not supported by substantial evidence, or if the arbitrator’s conclusions of law were erroneous.

Creditors' Corner for December 2008

by MCM Litigation Department

FUNDS IN JOINT BANK ACCOUNT AS RESULT OF A WEDDING GIFT ARE NOT AUTOMATICALLY SUBJECT TO FULL LEVY IN COLLECTION EFFORTS AGAINST ONLY ONE SPOUSE Phillips v. Messerli & Kramer, P.A., et al., Case No. 08-4419, District of Minnesota, November 20, 2008, arose under the Fair Debt Collection Practices Act and other claims against a law firm collecting on a judgment. Specifically, a non-debtor plaintiff claims the law firm wrongfully levied on a joint account he held with his judgment debtor spouse.

Law firms compete to help food bank

Star Tribune

by David Phelps, Janet Moore, & Neal St. Anthony

Creative fundraising Law firm Mackall, Crounse & Moore and accounting firm Eide Bailly have tapped the competitive instincts of their professional brethren to raise what they hope will be $150,000 in food, cash and volunteer time for Second Harvest Heartland, Minnesota’s largest hunger-relief organization.

Creditors' Corner for November 2008

by MCM Litigation Department

PROPOSED CHANGES TO MINNESOTA BANKRUPTCY PROCEDURES WILL INCREASE THE COSTS OF LIFTING THE AUTOMATIC STAY The local rules committee for the Bankruptcy District of Minnesota issued a draft proposal for new documentation requirements when a creditor seeks to lift the automatic stay to foreclose a mortgage or repossess personal property. The documentation required under the new rule exceeds prior requirements. It is expected that the changes will increase the costs of lifting the automatic stay in Minnesota.

Creditors' Corner for October 2008

by MCM Litigation Department

Bank Customers Cannot Recover Damages for Usury Interest when Bank President Commits Fraud In Mamot Feed Lot & Trucking v. Hobson, No. 07-3129, (8th Cir. August 26, 2008), the president of Exchange Bank of Gibbon in Nebraska defrauded the bank for over a million dollars. Customers of the bank sued the bank, its holding company, and various shareholders, officers and employees of the bank under federal usury laws.

Negative Equity for "910-Day" Vehicle Purchase Receiving Positive Treatment for Creditors

American Bankruptcy Institute Journal

by Andrew P. Moratzka

Bankruptcy Courts have increasingly been faced with the issue of how to address negative equity in conjunction with the valuation of “910-day” vehicles.

Creditors' Corner for August 2008

by MCM Litigation Department

Correct Address but Wrong Legal Description Avoids Mortgage in Bankruptcy Stradtmann v. Ameriquest Mortgage Co., No. 07-6056, (B.A.P. 8th Cir. June 30, 2008) Identifying the wrong parcel in a legal description on a mortgage allows a bankruptcy trustee to avoid the mortgage in bankruptcy, and eliminate the lender’s secured claim. In Stradtmann, the creditor identified the correct address of the secured property on the mortgage, which it then recorded in Stearns

Eighth Circuit Refuses to Conflate Constitutional Standing Doctrine with In Pari Delicto Defense

American Bankruptcy Institute Journal

by Andrew P. Moratzka

In Moratzka v. Morris, et al. (In re Senior Cottages of America LLC),— F.3d—, 2007 WL 958145 (8th Cir. 2007), the Eighth Circuit aligned itself with the First, Third, Fifth and Eleventh Circuits in holding that a corporate insider’s collusion with third parties to injure the corporation does not deprive the corporation (or a subsequently appointed bankruptcy trustee) of standing to sue third parties. In Moratzka, the chapter 7 trustee, Timothy D. Moratzka, brought an action against the defendants, former attorneys for debtor Senior Cottages of America LLC (SCA), Murray Klane, SCA’s majority shareholder (Klane) and Millennium Properties LLC (MP), alleging claims for malpractice and aiding and abetting a breach of fiduciary duty.

Secured Creditors Note: SARE Analysis Remains the Same under BAPCPA

American Bankruptcy Institute Journal

by Andrew P. Moratzka

For some time, secured creditors have had the ability to expedite a debtor’s bankruptcy proceeding under §362(d)(3) of the Bankruptcy Code. In order to use that section, however, the debtor must qualify as a single-asset real estate debtor (SARE) under §101(51B) of the Code. BAPCPA amended this definition to specifically exclude a family farmer and delete the reference to a $4 million cap. The effect of these edits was recently analyzed by the Fifth Circuit.

Minnesota Lawyer names MCM Attorney Up & Coming

MINNESOTA LAWYER

by Jane Pribek

When people see news about a local utility’s rate hike,they often feel powerless to stop it. Not Andrew P.Moratzka, an energy law attorney with Mackall, Crounse & Moore in Minneapolis, who devotes a fair amount of his time to this type of complex litigation.

Creditors' Corner for July 2008

by MCM Litigation Department

INTELLECTUAL PROPERTY AS COLLATERAL Intellectual property (“IP”) consists of trademarks, patents, trade secrets, copyrights and a variety of ancillary property rights. These can comprise a significant portion of a borrower’s balance sheet. UCC and FASB rules were modified in the 1990’s in recognition of this. Lending transactions now place value directly on IP and the lending documents must contain representations and warranties about IP and covenants relating to IP.

Creditors' Corner for June 2008

by MCM Litigation Department

BANK CANNOT SET OFF AGAINST SPECIAL DEPOSIT ACCOUNT In the case of In re K.. D. Builders, Inc., (Bankr. D. Mass. 2008) the bank had made a loan to the debtor which was secured by land on which the debtor was going to develop a subdivision. In return for the town's approval of a subdivision plan, the debtor and the bank obligated themselves to pay the city $209,000 for sewer and water installation. This obligation was to be secured by a portion of the mortgage proceeds held in a special deposit account.

Creditors' Corner for May 2008

by MCM Litigation Department

Court Permits Lenders to Resuscitate Note Inadvertently Satisfied by an Improper Disbursement from a TILA-Rescinded Refinancing Transaction In In re Thayer, __ B.R. ___, 2008 WL 833970, (8th Cir. BAP, March 31, 2008), Debtors attempted to refinance a mortgage held by TCF with American Residential Mortgage. American transferred the refinancing proceeds to the closing agent the same day Debtors executed the refinancing note.

Creditors' Corner for April 2008

by MCM Litigation Department

Preferential Mortgage Not Cured by Refinancing; Judgment Entered Against Lenders for Amount of Mortgage. In re Schwartz, __ B.R. ___, 2008 WL 613113 (8th Cir. BAP (Minn.)). Lenders recording a preferential mortgage cannot defeat a preference action when the debtor refinances the mortgage with a new lender after filing bankruptcy. To remedy the preference, the court may enter judgment against lenders in the amount of the mortgage.

Creditors' Corner for March 2008

by MCM Litigation Department

Deficiency Claim Allowed Under “Hanging Paragraph.” Capital One Auto Finance v. Osborn, No. 07-1726, 2008 WL 304750, 8th Cir. February 5, 2008 (Benton, CJ); AmeriCredit Financial Services, Inc. v. Moore, No. 07-1315, 2008 WL 304743, 8th Cir. February 5, 2008, (Benton, CJ). In these two cases the 8th Circuit addressed whether the “hanging paragraph” eliminates an under-secured creditor’s claim on a vehicle purchased within the 910-day period preceding the bankruptcy petition and turned over pursuant to a Chapter 13 plan. The decision overruled Eighth Circuit Bankruptcy Appellate Panel precedent and adopted the “minority” position.

Creditors' Corner for February 2008

by MCM Litigation Department

Creditor Loses Priority Because of Failure to Observe Reasonable Commercial Standards in Searching for Debtor’s Incorrect Name Priority is always critical because the first Lender in line gets paid in full before competing Lenders get anything. Obviously you need to use the Debtor's correct name. But Courts are also not kind to lenders who fail to make a diligent search of incorrect names.

Creditors' Corner for January 2008

by MCM Litigation Department

Judgment Superior to Later Recorded Mortgage Simons v. Schiltz, A-06-1999, (Minn.Ct.App. December 4, 2007), involved a priority dispute between a mortgage held by Sterling State Bank and a judgment in a dissolution decree. The January 2002 dissolution decree declared that the homestead was security for payment of property settlement to Ann Marie Simons. Former spouse Bryan Schiltz obtained a loan from Sterling in March 2002, secured by a mortgage recorded on April 16, 2002. Sterling took a second mortgage on the homestead a month later.

Creditors' Corner for December 2007

by MCM Litigation Department

“Non-Recourse” Does Not Mean “Without Recourse” In the recent case of Blue Hills Office Park v. J.P.Morgan Chase Bank, 477 F. Supp. 2d 366 (D.Mass. 2007), the U.S. District Court in Massachusetts found that the terms of the non-recourse mortgage loan were stated broadly enough to allow the lender to declare an immediate default, without notice, without opportunity to cure, and with the right to a deficiency against the borrowers.

Creditors' Corner for November 2007

by MCM Litigation Department

Right to Redeem Arises After Docketing of Judgment Establishing Lien At issue in C & M Real Estate Services, Inc. v. Ganesh Thondikulam, No. A06-1459 (Minn. App. 2007) was the timeliness of a judgment lien creditor’s filing of a notice of intent to redeem.

Creditors' Corner for October 2007

by MCM Litigation Department

Exemption in Farm Equipment Allowed Despite “Off-Farm” Job In In re Miller, 370 B.R. 914 (Bankr.D.Minn. 2007), the bankruptcy trustee objected to debtors’ claimed exemptions. Of particular concern were the joint debtors’ claimed exemptions in five insurance policies and certain farm equipment. The trustee objected to the number of insurance policies included in the debtors’ claimed exemptions. The court held that Minnesota law only permits one policy to be exempted by each debtor.

Creditors' Corner for September 2007

by MCM Litigation Department

Service By Publication Effective in Action to Renew Judgment At issue in Shamrock Development, Inc. v. Denison Smith and Dakota Turkey Farms, L.P., A06-1647 (Minn. App., August 21, 2007) was service on the debtor. There, Farm Credit Leasing Services Corp. leased agricultural facilities and equipment to Smith and Dakota Turkey Farms.

Employment Law Alert - NEW MINNESOTA LAW REQUIRES NOTIFICATION

by Shane H. Anderson and Frederick W. Vogt

A new Minnesota law going into effect January 1, 2008 requires all Minnesota employers with 20 or more employees to provide written notice to new hires, of their “rights and remedies” under Minnesota’s Review of Personnel Record statute (Minnesota Statutes Sections 181.960 to 181.965).

Creditors' Corner for August 2007

by MCM Litigation Department

Bank Denied Guarantee Because of Negligent Loan Servicing At issue in Farmers Bank of Hamburg v. U.S.D.A., -- F.3d --, 2007 WL 2050842 (8th Cir., July 19, 2007), were three loans to the Hermitage Tomato Co-operative Association (“Co-op”) guaranteed by the Rural Business-Cooperative Service (the “Agency”). The Phase I loan closed in March of 1998, and Phase II closed in March of 1999. The Agency guaranteed 90% of the value of the Phase I and Phase II loans.

Creditors' Corner for July 2007

by MCM Litigation Department

8th Circuit Finds Tribal Court Properly Exercised Jurisdiction Over Bank - Plains Commerce Bank v. Long Family Land and Cattle Co., Inc., et al., ___ F.3d ___, Eighth Circuit File No. 06-3093 (Filed June 26, 2007). This case involved a claim brought in the Cheyenne River Sioux Tribal Court against lender Plains Commerce Bank (the “Bank”). Borrower Long Family Land and Cattle Co., Inc. (“Long”) defaulted on a number of loans to the Bank.

Creditors' Corner for June 2007

by MCM Litigation Department

Recent Changes to the Minnesota Homestead Exemption Law On the final day of the 2006 Legislative Session, a number of significant changes to the homestead exemption were passed and signed into law. Notably, the legislature increased the amount of equity in a homestead that could be claimed exempt.

Creditors' Corner for May 2007

by MCM Litigation Department

Attorneys at Mackall, Crounse & Moore, PLC, Successfully Argue Appeal Before United States Court of Appeals, 8th Circuit In Moratzka v. Morris, et al., -- F.3d --, 2007 WL 958145, Andrew P. Moratzka and Shane H. Anderson successfully argued that claims for malpractice and aiding and abetting a breach of fiduciary duty accruing prior to a debtor’s bankruptcy filing are properly asserted by the bankruptcy trustee.