UNITED STATES BANKRUPTCY COURT

Transcription

1 Cynthia R. Flahive - SBN 0 CINDER LAW GROUP 0 E. Bidwell Street, Suite 0 Folsom, CA 0 Ph: () - UNITED STATES BANKRUPTCY COURT EASTERN DISTRICT OF CALIFORNIA 0 In Re: Robert Matthew Langfield Julie Leigh Langfield Debtors' Case No. 0- Hearing Date: 0//0 Hearing Time: 0:00 AM Location: 0 I Street, Sacrament, CA Sixth Floor, Courtroom Honorable Judge Robert. S. Bardwill Docket Control No.: DCN- 0 OPPOSITION OF MOTION TO APPROVE COMPROMISE Attorney Cynthia R. Flahive of Cinder Law Group, on behalf of Robert Matthew Langfield and Julie Leigh Langfield, the Debtors herein, hereby oppose the Motion to Approve Compromise for the issue concerning Debtors' Real Property, located at County Road B and County Road B, Dunnigan, California. ARGUMENT The burden of persuading the court that the compromise should be approved is on the parties proposing the compromise. In re Trism, Inc., B.R., (Bankr. W.D. Mo. 00). As a proponent of the proposed compromise, the trustee has the burden of persuading the court that the settlement is in the best interests of the estate and should be approved. In re Tennol Energy Co., B.R. 0.- (Bankr. E.D. Tenn. ) quoting In re Lawrence & Erausquin, Inc., B.R., (Bankr. N.D. Ohio 0). The court should review the issues and determine whether the Opposition of Motion to Approve Compromise

2 0 0 settlement falls below the lowest point in the range of reasonableness. Id., quoting In re Teltronics Services, Inc., F.d, (d Cir. ). It is essential that every important determination in reorganization proceedings receive the informed, independent judgment of the bankruptcy court. National Surety Co. v. Coriell, U.S., (). The fact that courts do not ordinarily scrutinize the merits of compromises involved in suits between individual litigants cannot affect the duty of a bankruptcy court to determine that a proposed compromise forming part of a reorganization plan is fair and equitable. Protective Committee for Independent Stockholders of TMT Trailer Ferry, Inc. v. Anderson, 0 U.S., (). There can be no informed and independent judgment as to whether a proposed compromise is fair and equitable until the bankruptcy judge has apprised himself of all facts necessary for an intelligent and objective opinion of the probabilities of ultimate success should the claim be litigated. Id. Further, the judge should form an educated estimate of the complexity, expense, and likely duration of such litigation, the possible difficulties of collecting on any judgment which might be obtained, and all other factors relevant to a full and fair assessment of the wisdom of the proposed compromise. Id. Basic to this process in every instance, of course, is the need to compare the terms of the compromise with the likely rewards of litigation. Id. at -. Trustee cannot demonstrate that the compromise is fair and equitable, therefore, his motion to approve compromise must be denied. Pettit s claim is still unknown, uncertain, and premature so she has no determined viable claim today. As such, she has no basis or grounds to compromise and a compromise would not be fair and equitable. Additionally, Trustee states he wants to hurry up and compromise her claim to avoid litigation and get Pettit s claim out of the way so he can sell the Dunnigan property while the exemption claim is pending. However, if Trustee did that, Mr. and Mrs. Langfield would need to object to the sale, thus creating more work and expense in court as Mr. and Mrs. Langfield s claimed exemption is presumed valid until proven otherwise. Any such motion Opposition of Motion to Approve Compromise

3 0 0 to approve a compromise in spite of Mr. and Mrs. Langfield s presumptively valid claim would not be fair or equitable and must be denied.. TRUSTEE S PROBABILITY OF SUCCESS IN THE LITIGATION FALLS BELOW THE LOWEST POINT IN THE RANGE OF REASONABLENESS BECAUSE NO TRANSFER OF ANY INTEREST IN TITLE WAS MADE. Trustee cannot meet his burden to show that the compromise is fair and equitable and his motion to approve compromise must be denied. Mr. and Mrs. Langfield own the whole of the Dunnigan property in fee simple title subject to liens of $0, held by Robert and Alicia Larsen and $,0.00 held by Yolo County. Mr. and Mrs. Langfield s Schedule A shows a value of $0,000 less the lien amount total of $,0.00 such that the non-exempt equity in the Dunnigan Property is $0. Trustee s objection to this exemption is unlikely to prevail. Trustee s contention is unlikely to prevail in her pending Adversarial complaint because Pettit was never granted a life estate in the Dunnigan property. The owner of a life estate may use the land in the same manner as the owner of a fee simple, except that he must do no act to the injury of the inheritance. Cal.Civ.Code (West 0). Property of any kind may be transferred, except as otherwise provided. Cal.Civ.Code 0 (West 0). An estate in real property, other than an estate at will or for a term not exceeding one year, can be transferred only by operation of law, or by an instrument in writing, subscribed by the party disposing of the same, or by his agent thereunto authorized by writing. Cal.Civ.Code 0 (West 0). A mere possibility, not coupled with an interest, cannot be transferred. Cal.Civ.Code 0 (West 0). Mr. and Mrs. Langfield merely said orally that Pettit would be allowed to live on the property. Furthermore, Pettit was never given any ownership interest. No deed was created. Pettit was not given the right to transfer an ownership interest in the estate to another person. She was only given the right to live on the property. Trustee refers to money spent in reliance and substantial improvements. However, such language distracts from the real issue that Pettit never received via promise, gift, contract or Opposition of Motion to Approve Compromise

4 0 0 otherwise any ownership interest in the Dunnigan property. Her interest was only to live there. Her interest is not alienable, descendible, or devisable. Since she cannot transfer any interest in the property, she does not have an ownership interest in the property. Even if Pettit had acted in reliance on a promise of lifetime care, such reliance does not amount to a transfer of real estate. A fee simple is presumed to be intended to pass by a grant of real property, unless it appears from the grant that a lesser estate was intended. Cal.Civ.Code. 0 (West 0). Here, no words to the effect of in life estate were used when promising Pettit a gift to live on the property. In fact, no words of transfer were used at all. She was given a gift of an ability to use the property for her lifetime but without any transfer or ownership interest. At most, if the gift is to be enforced, Pettit would only be allowed to live on the property without any alienable, devisable, or descendible rights. With regards to this promise, Mr. and Mrs. Langfield have remained true to their promise by continuing to allow Pettit to live on the Dunnigan property. However, because she was not transferred any ownership rights and cannot transfer her possession of the property to another she was not given a life estate. Therefore, the Trustee s argument that a life estate was created must fail. Trustee also suggests that there may be support for a claim of financial abuse of an elder, yet because he does not present any facts in support of such a claim, Trustee cannot succeed on this claim. The alleged basis for elder abuse rests on a contract between Pettit and Mr. and Mrs. Langfield existing. However, as explained above, their gift to Pettit to live on the property was offered without consideration in return. Moral obligation will not support an express promise in absence of prior legal obligation founded on good and valuable consideration. Foltz v. First Trust & Savings Bank of Pasadena, Cal.App.d (Cal.App., ). In generosity after receiving her gift, Pettit then offered her own gift to Mr. and Mrs. Langfield. However, because there was no meeting of the minds or a bargained Opposition of Motion to Approve Compromise

5 0 0 for legal detriment, Pettit s gift was only done out of moral obligation and does not serve as consideration for a contract. Therefore, there can be no claim for financial abuse of an elder. In alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake. FRCP (b) (West 0). Trustee simply throws out the words that it is possible for him to make a fraud claim but he never goes so far as to actually state the facts which would support such a claim nor does he say that there actually is such a claim. Therefore, such an argument has no probability of success for Trustee because he has provided no facts, no particularity, and no claim to begin with. For the preceding reasons, Trustee s proposed settlement falls below the lowest point in the range of reasonableness and he has no likelihood of success; therefore, his motion to approve compromise must be denied.. CREDITORS SHOULD HAVE NO DIFFICULTIES COLLECTING A JUDGEMENT, IF ANY, BECAUSE THERE IS A SUFFICIENT ASSET BASE FROM WHICH TO COLLECT A JUDGEMENT, IF ANY. There will not be any difficulty in collection. First, as explained above, all property at issue is exempted and not subject to collection. Second, the property is located in California and would have been easily reached, therefore there would have been no difficulty encountered during collection. Consequently, this argument falls below the lowest point in the range of reasonableness and Trustee s motion to approve compromise must be denied.. THE COMPLEXITY, EXPENSE, AND INCONVENIENCE LITIGATION DOES NOT WEIGH IN FAVOR OF APPROVING A MOTION TO COMPROMISE AND IT SHOULD BE DENIED. Considering the contested value of the Dunnigan property, Trustee cannot successfully argue that this issue is unnecessarily complex, expensive, or inconvenient. The purpose of a compromise agreement is to allow the trustee and the creditors to avoid the expenses and burdens associated with litigating sharply contested and dubious claims. Matter of Walsh, F.d at (citing In re California Associated Products Co., F.d, 0 (th Cir.0)). Considering the Opposition of Motion to Approve Compromise

6 0 0 contested value of the property at state along with Trustee s unlikelihood of success in litigation, this is nothing near a dubious claim raised by Mr. and Mrs. Langfield, nor is it excessively expensive or complex. While the litigation involved in the instant case is complex, the only risk to the debtor is the incurring of legal expenses. In re Tidewater Group, Inc. B.R. (Bankr. N.D. Ga. ). Trustee quotes In re Blair as though its quote naturally points to compromise in a situation from the outset. Law favors compromise and not litigation for its own sake. In re Blair, F.d ( th Cir. ). However, quoting this language from Blair alone takes the sentence out of context. In that case, several compromise hearings had already been held, the trustee had been under oath and subject to cross-examination, and the Blair court considered its role as an appellate court to not be one of fact finding and considered further litigation after appeal a possible example of asset wasting. Mr. and Mrs. Langfield should be afforded the opportunity to present their own argument. An objecting party should be allowed the right to cross-examine and call its own witnesses. In re Grant Broadcasting of Philadelphia, Inc., B.R. 0, (Bankr. E.D. Pa. ). Considering that Mr. and Mrs. Langfield have not been provided with an opportunity to exercise these rights, Trustee s motion to approve compromise must be denied particularly so early on in the litigation. Trustee s motion to approve compromise is premature as Mr. and Mrs. Langfield have not had an opportunity to present an argument or cross-examine witnesses. Therefore, it falls below the lowest point in the range of reasonableness and must be denied.. THE INTEREST OF THE CREDITORS IS NOT MET AS THEIR POTENTIAL INTERESTS IN THE PROPERTY HAS NOT BEEN VALUED; THEREFORE IT DOES NOT WEIGH IN FAVOR OF COMPROMISE AND SHOULD BE DENIED. The compromise is not in the best interest of the creditors of the estate because their range of recovery has not yet been determined and that amount could be determined through litigation. Until an audit is completed, the deficiency in capital and surplus will remain unknown; and therefore, the purchase price to have been paid by (the creditors) will also remain subject to conjecture. In re Tidewater Group, Inc., B.R.. In this case, before a purchase price of the Dunnigan property Opposition of Motion to Approve Compromise

7 0 0 can be set, studies need to be done. In the meantime, no dollar amount can be set. Therefore, the creditors potential interest in any value they potentially have in the property cannot be set. Consequently, it is not in the creditors interest to approve a compromise rather than litigate. Furthermore, the creditor s interest is protected as it is currently part of the bankruptcy estate so the creditors and debtors do not have any risk of loss except for the exposure of legal expense. Yet, if Trustee sells the property and then loses on the exemption and Pettit loses on her Adversary motion, then Mr. and Mrs. Langfield are forever harmed because their property would have been sold for naught. This would forever injure them, especially due to the uniqueness of their property. The settlement falls below the lowest point in the range of reasonableness for the creditors as well and Trustee s motion to approve compromise must be denied. Last the motion to compromise completely ignores the interest of Willard Rollins wherein according to his attached declaration his divorce attorney has informed him that he has an interest in all property acquired during the marriage. At the present time Mr. Rollins and Pettit are still married. Thus a motion to compromise would ignore his interest and would be detrimental to his legal rights. CONCLUSION Trustee s motion to approve compromise must be denied because the settlement falls below the lowest point in the range of reasonableness for all arguments and is therefore not fair and equitable. Additionally, Pettit s basis for a claim is still not decided and she is merely an unsecured creditor at this point. Also any compromise at this point in time would injure Mr. Rollins potential interest as well. DATED: Cinder Law Group, Attorneys for the Debtor by Cynthia Flahive Opposition of Motion to Approve Compromise