A plaintiff who files a nondischargeability action premised on unliquidated tort claims submits to the equitable jurisdiction of the Bankruptcy Court, which will determine issues of fact dispositive of liability and damages inherent to the issue of dischargeability. Plaintiff’s complaint in this case constitutes an informal proof of claim as to which there is no right to a jury trial. Regardless of whether Plaintiff’s tort claims qualify as “personal injury torts,” under the Rules of Bankruptcy Procedure Plaintiff impliedly consented to this Court trying them.  

Debtor sought to strike an amended proof of claim filed after the claims bar date which substituted the named creditor. The Court denied the motion, determining that the claim was properly amended to substitute the name of the correct creditor and related back to the date of the filing of the original claim where 1) the original claim gave Debtor adequate notice of the existence, nature, and amount of  the claim, 2) except for the name of the creditor, the amended claim did not materially change the original claim, 3) the creditor filing the amended claim bore a substantial relationship to the original claimant inasmuch as both creditors where wholly owned by the same two individuals, and the same counsel represented both creditors and filed the proof of claim and the amended claim, 4) the mistaken identity of the claimant in the original claim should have been obvious to the Debtor for a variety of reasons; and 5) the amendment did not prejudice the Debtor or other creditors.

Recognizing a split in the case law, the Court held that under the Uniform Commercial Code a security interest does not attach to rights under an agreement settling a commercial tort claim or in the settlement funds unless the commercial tort claim that was settled, the settlement agreement, or the settlement funds are specifically described original collateral. A general security interest in commercial tort claims, general intangibles, payment intangibles, accounts and contract rights is insufficient. The Court also held that an after-acquired property clause in a security agreement was valid, despite some redundant language. Therefore, the security party has a security interest in the debtor’s after-acquired accounts receivable.

The City of El Paso moved to dismiss Debtor’s bankruptcy case as having been filed in bad faith. The City alleged Debtor filed bankruptcy for the sole purpose of gaining a tactical advantage in a tax dispute. The Court denied the motion, reasoning Debtor filed bankruptcy to obtain the benefit of the automatic stay; to be able to pay any taxes it owes the City over time; and for the Court to determine its tax liability to the City. The Court did not rule on whether it could and/or should determine Debtor’s tax liability to the City.