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2008 NORTON BANKRUPTCY LAW SEMINAR MATERIALS

Appellate Court Decisions Related
To Bankruptcy Cases

By William Norton, III

post-petition.)

61. 545 Statutory Liens

In re Globe Building Materials, Inc., 463 F.3d 631 (7th Cir. Sept. 8, 2006) (Trustee could avoid State of Wisconsin's employee wages lien, because applicable Wisconsin lien statute did not specifically give the lien priority status over a bona fide purchaser.)

62. 546 Avoidance -- Time Limitations

American Pad and Paper Co., 478 F.3d 546 (3rd Cir. Mar. 2, 2007) (Chapter 7 Trustee was time-barred from initiating avoidance actions more than two years after the petition date pursuant to S 546(a). The appointment of an interim trustee pursuant to S 701 within the two-year period is not one of the triggers for a one-year extension of the limitations period pursuant to S 546(a)(1)(B).)

63. 547(b) Preference

Cadle Co. v. Mangan (In re Flanagan), 503 F.3d 171 (2d Cir. Oct. 9, 2007) ((1) Pre-petition judgment creditor was not entitled to constructive trust or equitable lien encompassing debtor's interest in certain stock. Creditor argued the trust or lien should be imposed based on debtor's pre-petition conduct concealing the stock so creditor could not execute against it. Prepetition, debtor was found in contempt for refusing to produce information concerning the stock. In a bankruptcy case, a constructive trust burdens creditors since a constructive trust takes property out of the estate. Trust was inappropriate because creditor failed to prove that other creditors would be unjustly enriched by the estate's continued ownership of the stock. (2) During preference period, family member loaned debtor funds to satisfy creditor's judgment. This loan was secured by the stock. Debtor's payment of the proceeds of the family loan to satisfy the judgment was subject to the earmarking doctrine and, thus, not a voidable preference except to the extent that the debtor encumbered previously unencumbered property by granting a security interest in the stock.)

Triad Int'l Maint. Corp. v. Southern Air Trainsp. (In re Southern Air Transp.), ---F.3d ----, 2007 WL 4355168 (6th Cir. Dec. 14, 2007) (Prepetition payment to aircraft maintenance firm was not an avoidable preference because the recipient of the payment held an artisan's lien on the aircraft perfected by possession of the aircraft. As a result of the lien, the trustee was unable to establish, as required by S 547(b)(5), that the payment exceeded what the recipient would have received from the debtor under a

 

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