Justia Bankruptcy Opinion Summaries

Articles Posted in US Court of Appeals for the Eighth Circuit
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Defendant and her then-husband bought a condo for $525,000 with the intention of making it their primary residence. To finance the purchase, the couple took out a mortgage with the Plaintiff bank. Defendant did not sign the note but consented to her husband doing so. The mortgage contained a "future advances" clause, which granted Plaintiff a security interest in the Mortgage covering future funds Defendant's husband might borrow.Four years later, Defendant's husband borrowed additional funds from Plaintiff to keep his business afloat. Defendant did not sign the note. A few months later, Defendant's husband filed for Chapter 7 bankruptcy and the condo was sold for $650,000, approximately $250,000 of which was deposited in escrow. The couple divorced and Defendant moved out of the state.In Defendant's husband's bankruptcy case, the court held a portion of the escrowed sale proceeds must pay down his business notes pursuant to the mortgage’s future advances clause and that he could not claim a homestead exemption. Plaintiff was granted summary judgment on its claims that Defendant's proceeds were also subject to the future advances clause and that Plaintiff could apply those proceeds to Defendant's husband's business note.Defendant appealed on several grounds, including unconscionability, contract formation, and public policy, all of which the court rejected, affirming the district court's granting of summary judgment to Plaintiff. View "Sanborn Savings Bank v. Connie Freed" on Justia Law

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Appellees were the sole owners of an electrical company. Appellant is a general contractor and hired Appellee’s company to do electrical work on various projects. Appellee’s company contracted with suppliers and submitted periodic pay applications to Appellant requesting payment for work completed and supplies purchased. When Appellee’s company went out of business its suppliers filed construction liens against the properties relating to the projects for amounts the company owed them and brought lawsuits against the owners of the projects to foreclose upon their liens. Appellant was required to defend the lawsuits and indemnify the project owners and alleges that these lawsuits resulted in damages due to misrepresentations Appellee’s company made about whether its suppliers were being paid. Appellant obtained a default judgment against the company, however, the bankruptcy court granted the Appellee's motion to dismiss concluding that Appellant did not have a valid claim for a debt owed by the Appellee’s personally.   The Eighth Circuit reversed the bankruptcy court’s grant of summary judgment to the Appellees. The court found that summary judgment was inappropriate on the ground that Appellant has not shown that it has a claim against the Appellees personally because it cannot pierce the corporate veil. Because Appellees do not argue that there is no genuine dispute of material fact about whether Appellant can prove that Appellees committed a Nebraska tort, such as fraudulent misrepresentation, the bankruptcy court improperly granted summary judgment. View "Lund-Ross Constructors, Inc. v. Jay Buchanan" on Justia Law

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After Xurex filed for Chapter 7 bankruptcy, the trustee filed suit against defendant and others for breach of fiduciary duty and civil conspiracy. The jury returned a verdict for the trustee against defendant for conspiracy to breach fiduciary duties.The Eighth Circuit affirmed the jury's verdict and the district court's denial of defendant's motions for judgment as a matter of law, a new jury trial, the entries of judgment, and all adverse rulings. The court concluded that the evidence was sufficient to support the jury's verdict finding that defendant breached a fiduciary duty and there was no error in denying defendant's Federal Rule of Civil Procedure 50(d) motion; defendant waived several arguments he now raises about the language of the verdict director and the inconsistency of the verdict; because plaintiff's damage theories for civil conspiracy and breach of fiduciary duty were the same, the district court properly entered judgment on the larger of the two amounts; and the district court did not plainly err as to the jury instructions. View "Olsen v. Kraus" on Justia Law

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Debtor, licensed under North Dakota’s pari-mutuel wagering system, filed for bankruptcy in 2004. Ten years later, the district court ruled that the state was not authorized to collect certain taxes from the Debtor. North Dakota agreed to pay the estate $15 million. Creditors asserted claims. Although the state constitution provides that “the entire net proceeds of such games of chance are to be devoted to educational, charitable, patriotic, fraternal, religious, or other public-spirited uses,” North Dakota did not raise the rights of any charities.In 2018, the bankruptcy court ruled on the claims. North Dakota filed a new proof of claim. The court concluded that the state lacked parens patriae authority to assert claims on behalf of charities. The Eighth Circuit Bankruptcy Appellate Panel (BAP) remanded. On remand, the state attempted to add a breach of contract claim. The bankruptcy court denied that motion and concluded that the contract claim had no merit. The court also rejected a constitutional-statutory claim.The BAP affirmed, rejecting arguments that North Dakota law requires that charities, not Debtor, recover the remaining tax settlement funds and that the court erred when it disallowed the contract claim. The state constitution concerns the legislature and does not govern the actions of private parties such as Debtor. Debtor paid the taxes originally; the reimbursement of those improperly-paid taxes should inure to the benefit of Debtor after distribution under the bankruptcy priority scheme. View "North Dakota v. Bala" on Justia Law

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The Bankruptcy Appellate Panel dismissed debtors' appeal of the bankruptcy court's orders based on lack of standing. In this case, debtors challenged the bankruptcy court's orders (1) granting in part and denying in part the chapter 7 trustee's application to pay her law firm as attorney for the trustee, and (2) denying debtors' motion to remove the trustee, among other findings not at issue here. The court concluded that debtors are not personally aggrieved by the orders and therefore lack standing to appeal them. View "Levitt v. Jacoway" on Justia Law

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The Eighth Circuit affirmed the bankruptcy appellate panel's decision affirming the bankruptcy court's determination that debtor's debt to Lariat is excepted from discharge because it was obtained by actual fraud. The court explained that, although Lariat's claim was partially disallowed against debtor's bankruptcy estate under 11 U.S.C. 502(b)(6), the landlord cap does not foreclose Lariat's argument that the claim should be excepted from discharge under section 523(a)(2)(A). Therefore, Lariat's claim is excepted from discharge under section 523(a)(2)(A) to the extent that it was obtained by actual fraud. In this case, the bankruptcy court did not clearly err in finding that debtor had received a fraudulent transfer from her husband, and the record supports the bankruptcy court's finding that debtor participated in the scheme with the requisite wrongful intent. View "Lariat Companies, Inc. v. Wigley" on Justia Law

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A VeroBlue preferred shareholder, FishDish appeals the district court's order granting appellees' motions to dismiss FishDish's appeal of the bankruptcy court order confirming debtors' Chapter 11 plan of reorganization over FishDish's objections, and certain pre-confirmation orders.After determining that the district court and this court have statutory subject matter jurisdiction, the Eighth Circuit concluded that the district court erred in limiting the mandatory but non-jurisdictional timeliness requirements of Bankruptcy Rule 8002 to appeals from final bankruptcy court orders. Because FishDish has conceded that its appeal from the preconfirmation Claim Objection Order was untimely under Rule 8002, the court affirmed the grant of appellees' Partial Motion to Dismiss Appeal on this alternative ground. In regard to the equitable mootness claim, the court concluded that the district court did not apply a sufficiently rigorous test to determine when bankruptcy equities and pragmatics justify foregoing Article III judicial review of a bankruptcy court order confirming a Chapter 11 plan. Therefore, the court remanded for further district court proceedings. View "FishDish, LLP v. VeroBlue Farms USA, Inc." on Justia Law

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The Bankruptcy Appellate Panel dismissed debtor's appeal as moot where he challenged the bankruptcy court's order denying his motion for relief from a previous order denying his request for a waiver of the Bankruptcy Code's credit counseling requirement. The court concluded that the bankruptcy case was subsequently dismissed, and thus a reversal of the waiver denial order would be of no benefit to debtor. View "Lincoln v. Snyder" on Justia Law

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The Bankruptcy Appellate Panel affirmed the bankruptcy court's decisions that debt owed by each debtor to Madison related to U.S. Bank in the amount of $1,676,162.20, plus interest, costs and any attorney's fees awarded in the matter are nondischargeable pursuant to Bankruptcy Code 523(a)(2)(A).The panel concluded that the bankruptcy court correctly analyzed first, under nonbankruptcy law the existence of a debt to Madison and second, under federal bankruptcy law the issue of dischargeability. In this case, the bankruptcy court appropriately found with respect to damages that debtors misrepresented and concealed material facts from Madison in order to further their conspiracy. View "Madison Resource Funding Corp. v. Marsh" on Justia Law

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The Eighth Circuit affirmed the bankruptcy appellate panel's decision affirming the district court's dismissal of plaintiffs' action based on issue preclusion grounds. Looking to North Dakota preclusion law for the federal common law principles of issue preclusion applicable in this case, the court concluded that its decision in Finstad II that plaintiffs do not have any interest in the property was an issue actually litigated in a prior suit between the parties that is binding on plaintiffs in this lawsuit. View "Finstad v. Gord" on Justia Law