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Margaret Kinney v. HSBC Bank USA

Summarizing by Lars Fuller

Rankin v. Brian Lavan and Associates, P.C. (In re Rankin)

File Name: 11a0606n.06; Sixth Circuit Court of Appeals Case no. 09-1087; Not Recommended for Full-Text Publication
The Sixth Circuit Court of Appeals affirmed the bankruptcy court rulings on the Title Claim, the Woods Claim and the Sanctions Award (all defined below). The Court of Appeals held that the Rankins had no standing to bring the Title Claim because the Trustee had that right under Section 323. The Court of Appeals held that the Woods Claim was property of the estate under Section 541 and that the bankruptcy court had the relevant facts needed to evaluate the settlement of the Woods Claim, thus there was no clear error. Finally, the Court of Appeals found the bankruptcy court's award of sanctions was not an abuse of discretion and was in an amount intended to deter repetitive violations of Rule 9011.
Procedural context:
The Sixth Circuit Court of Appeals reviewed three distinct rulings of the bankruptcy court, which were consolidated and affirmed on appeal by the U.S. District Court for the Eastern District of Michigan.
The Rankins were purchasers of a home in Whitmore Lake, Michigan under a land contract with the Woods. The Rankins defaulted in 1999, but ultimately negotiated a purchase of the home from the Woods. The parties attempted to close the sale in February, 2002, but the Rankins were unable to fully fund the closing costs and no sale occurred. The Rankins filed a Chapter 7 shortly thereafter, but did not list any interest in the Whitmore Lake home, or any claims against the Woods or other parties associated with the aborted closing. In January, 2004 the Rankins filed a state court lawsuit against the title insurance company and closing agent (the "Title Claim") which was removed to bankruptcy court by the Trustee and resolved by a summary judgment in favor of the defendants. The Rankins then filed a state court lawsuit against the Woods (the "Woods Claim"), which was settled by the Trustee once she learned of it, with the settlement being approved by the bankruptcy court under Bankruptcy Rule 9019. Finally, the bankruptcy court issued an injunction in March, 2006 prohibiting the Rankins from further filings without court approval. The Rankins violated the injunction and the bankruptcy court awarded over $9,000 in sanctions under Bankruptcy Rule 9011 (the "Sanctions Award"). The Rankins appealed the bankruptcy court rulings on the Title Claim, the Woods Claim and the Sanctions Award.
Opinion by Judge Lesley Wells, District Judge for the Northern District of Ohio, sitting by designation.

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