All items from Florida Banking Law Blog

Authored by J. Ellsworth Summers, Jr. and Scott St. Amand of Rogers TowersOne of the primary roles of a Chapter 7 trustee is to ensure that the bankruptcy estate is preserved prior to liquidation. It is no wonder, then, that the Trustee’s avoidance powers are well defined by the Bankruptcy Code. Nevertheless, a string of recent cases out of the Middle District of Florida has illustrated that a trustee is not given carte blanche to avoid all transfers that diminish the estate without first establishing that it has standing to bring the avoidance action.
Under § 549 of the Bankruptcy Code, a trustee may avoid a postpetition transfer that is authorized by the Bankruptcy Code or Court. To do so, the trustee must establish that the transfer actually injured or diminished the bankruptcy estate. Establishing a causal relationship between an unauthorized postpetition transfer and a diminution of the estate does not, at first blush, seem too onerous of a task. However, a string of recent decisions out of the Middle District of Florida in the Wood Treaters case have illustrated that even if the trustee can establish that the transfer was unauthorized, it still bears a significant burden to connect the individual transfer to a direct depletion of the estate.

Authored by Douglas L. Waldorf of Rogers TowersI have recently encountered several situations in which local governments are claiming, under ordinances they have enacted, that their liens and fines have “superpriority” status over existing mortgages, regardless of when the liens were recorded and whether or not the mortgage holder ever was given notice of the liens. It seems that these claims are being made more frequently as municipalities explore all possible sources for increased revenue.
Municipalities generally have authority to enact liens under Florida Statute Chapter 162 which, in itself, does not provide for priority of the municipal enforcement liens. However, many municipalities have enacted ordinances purporting to give their liens superpriority, or, the same priority as is afforded liens for unpaid real estate taxes. Until recently, there has been little case law on the subject of whether a municipality can create its own superpriority lien status. As a result, title insurers would not insure over these liens and this frequently resulted in mortgagees simply paying the liens off to allow subsequent sale of foreclosed property.

Authored by Scott J. Kennelly and Susan Novak of Rogers TowersUsury under Florida law is largely a matter of intent. It is not fully determined by the fact that the lender actually received more than law permits but by the existence of a corrupt purpose in the lender’s mind to charge more than the legal interest permitted by law for the money lent. In cases where the rate of interest charged was higher than the Florida statutes allow, Florida courts routinely find the issue of “intent” to be a determination for the trier of fact. This would reduce the likelihood of a lender obtaining summary judgment, at least in the early stages of litigation, prior to engaging in discovery.
In usury cases, Florida courts analyze the element of intent on the basis of good faith. Evidence of other loan agreements involving the lender can be used to prove whether the lender had the requisite intent. Most importantly, courts have held that the element of intent is lacking if the lender can prove that the usurious interest rate was demanded, or in some cases even collected, through inadvertent error.

Authored by J. Ellsworth Summers, Jr. and Scott St. Amand of Rogers TowersWhen the time comes to collect a debt, few organizations are as accomplished as the Internal Revenue Service. The IRS showed just such guile in the case of In re Williams, a recent Chapter 7 proceeding in the Middle District of Georgia, in which the creditor raised an interesting, and more importantly, successful defense to a McNeal motion.
As in McNeal, the debtor was upside down on its mortgages, and it moved to strip off a second priority tax lien which was wholly unsecured by the debtor’s residence. In doing so, the debtor made a standard McNeal argument.
Not to be dissuaded by the McNeal motion, the IRS argued that although the tax lien was indeed unsecured with regard to the residence, a tax lien, by statute, attached “to all property and rights to property, whether real or personal, belonging to such [debtor].”  Thus, the court held that because the debtor’s personal property retained unencumbered value, a component of the IRS’s lien is partially secured by the debtor’s personal property – even if another component of the lien is wholly unsecured.  Because the lien remained partially secured, Dewsnup applied, not McNeal.