- Michael's Enterprises of Virginia, Inc. v. Branch Bank and Trust Company (In re Michael's Enterprises of Virginia, Inc.), Case no. 15-1807 (4th Cir. Apr. 6, 2016) (unpublished) (per curiam)
- The decision of the bankruptcy court awarding sanctions against the corporate debtor and its sole shareholder on the grounds that the chapter 11 petition had been filed for the improper purpose of collaterally attacking a state court's pre-petition ruling on a foreclosure action was affirmed. The bankruptcy court's award of sanctions against the debtor's attorney on the grounds that his legal argument was not warranted by existing law or by a nonfrivolous argument for the extension, modification or reversal of existing law was also affirmed.
- Procedural context:
- Appeal from the order of the district court for the Eastern District of Virginia affirming the order of the bankruptcy court awarding sanctions under Bankruptcy Rule 9011(b).
- Prior to its chapter 11 bankruptcy filing the debtor had sought state court relief to enjoin a bank's scheduled foreclosure sale. The state court declined to enjoin the sale, the property securing the bank's debt was sold and a Trustee's deed conveying the property was recorded in the county records. After refusing to relinquish possession of the property, the debtor filed a chapter 11 petition, listing the foreclosed property as an estate asset and the bank as a secured creditor. The bank sought sanctions under Bankruptcy Rule 9011 on the grounds that the petition was filed for an improper purpose--namely to relitigate issues decided by the state court. The bankruptcy court found that the debtor's attempt to set aside a regularly conducted foreclosure sale by filing the bankruptcy case supported a determination that the case was filed for an improper purpose under Rule 9011(b)(1). The court further found that the debtor's attorney had violated Rule 9011(b)(2) by arguing that the sale should be set aside as a preferential transfer on grounds contrary to the established rule that value received at a regularly conducted foreclosure sale is reasonably equivalent value. Sanctions were awarded jointly and severally in favor of the bank against the debtor, its principal and and its attorney in an amount that the court determined were reasonable costs of attorney fees.
- Before Wilkinson and Floyd, Circuit Judges, and Davis, Senior Circuit Judge.
Thelma McCoy v. USA
Summarizing by Craig Geno
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