United Surety & Indemnity Co. v. Lopez-Munoz

United Surety & Indemnity Co. v. Lopez-Munoz, ___ B.R. ___ (B.A.P. 1st Cir. 2016)
The Bankruptcy Appellate Panel for the First Circuit affirms the bankruptcy court's determination to deny the request for appointment of a chapter 11 trustee.
Procedural context:
Creditor, United Surety and Indemnity Company (USIC) appeals the denial of a request for appointment of a Chapter 11 Trustee arguing that the bankruptcy court's committed reversible error or abused its discretion that the appointment was not warranted under section 1104(a)(1) and 1104(a)(2) of the bankruptcy code. The bankruptcy court's order denying the appointment of a chapter 11 trustee is a final appealable order. The bankruptcy Appellate Panel concluded that the bankruptcy court did not abuse its discretion in determining that USIC meets its burden of demonstrating that the appointment of a trustee was in the best interests of creditors and the estate.
USIC requested the appointment of a chapter 11 trustee considering the transfers of shares and interests over gas stations made by the Debtor to a family trust within six months before the filing of the petition and Debtor's failure to disclose material and correct information of such transfers (and the income generated by the transfers) in his schedules, statement of financial affairs, the 341 meeting of creditors and the disclosure statement. Debtor rescinded the transfers, opposed USIC's request and amended his schedules and disclosure statement. For the appointment of a chapter 11 trustee a court must find either fraud, incompetence and the like or that such appointment is in the best interests of the creditors and the estate.The court concluded that debtor rebutted the presumption that the asset transfer was done in fraud of creditors as was convinced by debtor's expert witness testimony that the transfers had no material effect on the bankruptcy estate because all funds were received by the estate and paid to the Debtor's secured creditors. Therefore, the court concluded that USIC did not meet its burden of proof.
Bailey, Finkle and Fagone

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