Justia U.S. 8th Circuit Court of Appeals Opinion Summaries

The Lapideses renewed a loan from Venture Bank secured by a third mortgage on their home. Howard subsequently filed for Chapter 7 bankruptcy. After Howard’s personal debts were discharged, the Lapideses executed two “Change in Terms Agreements,” each of which extended the maturity date of the loan for six months. When Howard ceased making payments under these agreements, Venture Bank sought a declaratory judgment that the agreements were valid and enforceable. Howard counterclaimed that Venture Bank’s efforts to obtain payments after his discharge violated the discharge injunction under 11 U.S.C. 524(a)(2). The bankruptcy court denied Venture Bank’s claim for a declaratory judgment and awarded Howard damages and attorney’s fees. The district court and Eighth Circuit affirmed, upholding a finding that Howard’s payments were not voluntary within the meaning of section 524(f) and did not comply with the requirements of a reaffirmation agreement under section 524(c). The post-discharge agreements served no purpose other than reaffirmation agreements in which Howard agreed to repay all of his discharged personal debt and lacked consideration. View "Venture Bank v. Lapides" on Justia Law

Debtor, a Grand Island pathologist, filed for Chapter 7 bankruptcy relief in 2011. Heritage holds an allowed, unsecured claim of $270,566.00. In 2012, the Debtor acquired her residence from the Elliotts and signed a $169,900 promissory note and granted a security interest in their favor. The case was converted to a Chapter 11 proceeding in 2012. The Elliotts filed a proof of claim asserting secured status. The Bankruptcy Court overruled Heritage’s objection to timeliness and allowed the claim. Heritage did not appeal, but continued to object to the Elliotts’ voting on the plan as an impaired class, arguing that they had a post-petition claim. The court found that the Elliotts had an allowed claim, that the plan altered the treatment of their claim, and, that the Elliotts were an impaired class entitled to the vote. The Bankruptcy Court confirmed the Debtor's Fifth Amended Plan. The Elliotts, the sole members of their class, voted in favor of the plan. No other impaired classes voted to accept the plan. The Eighth Circuit Bankruptcy Appellate Panel reversed. Although an impaired class of claims accepted the Plan, the absolute priority rule of 11 U.S.C. 1129(b)(2)(B)(ii)' applies to prevent Chapter 11 debtors from retaining property acquired prior to the filing of the petition when not all creditors' claims will be paid in full. View "Heritage Bank v. Woodward" on Justia Law

Needler filed a petition for Chapter 11 relief on behalf of “Miller Chrysler Dodge.” Because Needler is not admitted to practice in the Western District of Missouri, he moved to appear pro hac vice and to be employed as debtor’s attorney. The bankruptcy court agreed, stating that his fees and activities would be closely scrutinized. The Trustee discovered that the named entity did not legally exist and, when the error was not timely corrected, moved to dismiss. Needler filed an amended petition under the proper name. Needler subsequently received several orders to show cause for failure to comply with local filing requirements. Needler was unsuccessful in obtaining authority for the debtor to use cash collateral and to retain a broker to sell the business. Relief from the automatic stay was obtained by the primary creditors. Ultimately, the case was dismissed on the debtor’s motion. The court closed the file. Six months later, the Trustee moved to reopen under 11 U.S.C. 350(b), asserting that she had received a complaint from the debtor: that Needler failed to communicate accurate information, made potentially false and misleading representations, and may have filed documents and taken actions that were not authorized. Needler had filed a state court action for attorney fees of $49,000.00 and sought $63,000.00 more in fees and $3,600.00 in expenses. The Eighth Circuit Bankruptcy Appellate Panel affirmed denial of the fee application and the order of disgorgement. Since Needler was a repeat offender, in many jurisdictions, the bankruptcy court acted within its discretion in imposing the sanction of indefinite suspension from the practice of law and revocation of electronic filing privileges. View "Needler v. Casamatta" on Justia Law

Falco sold insurance for Farmers, under a 1990 Agent Agreement, which provided that Falco would be paid Contract Value upon termination of the Agreement. As a Farmers agent, Falco was entitled to borrow money from the Credit Union. In 2006, Falco obtained a $28,578.00 business loan and assigned his interest in his Agreement receivables—including Contract Value—as security. The loan document gave the Credit Union authority to demand payments that Farmers owed Falco; it could tender Falco’s resignation to levy on Falco’s Contract Value. Falco failed to make payments and filed a Chapter 7 bankruptcy petition, listing the loan on his schedules. Falco received a discharge in February 2011, covering his liability under his Credit Union loan. In April 2011, the Credit Union notified Farmers that Falco had defaulted and exercised the power of attorney to terminate his Agent Agreement. Farmers notified Falco that the resignation had been accepted, calculated Contract Value as $104,323.30, paid the Credit Union $29,180.92, and paid the balance to Falco. The Eighth Circuit affirmed summary judgment in favor of defendants, finding that the Credit Union’s secured interest survived bankruptcy; it did not tortuously interfere with Falco’s Agreement because it had a legal right to terminate the Agreement; and Falco failed to show an underlying wrongful act or intentional tort as required under civil conspiracy. View "Falco v. Farmers Ins. Grp." on Justia Law

Robb filed a Chapter 7 petition. Harder, the trustee, discovered a defect in the deed of trust securing the debt on Robb’s home. Robb converted her case to Chapter 13. Harder filed proof of claim ($450), describing an unsecured priority claim for “time spent by trustee in examining documents regarding avoidance of lien, preparing objection to homestead exemption, and filing objection to conversion to Chapter 13 case, and tracking debtors’ [sic] conversion to chapter 13.” Robb objected, arguing that trustee compensation is subject to 11 U.S.C. 326 and, because Harder did not disburse any moneys before conversion, she was not entitled to payment. The bankruptcy court allowed the claim, holding that section 326(a) is not the only method of trustee compensation and that allowing the claim when no money was distributed encourages trustees to be diligent in looking for assets and discourages debtors from concealing assets. The Eighth Circuit Bankruptcy Appellate Panel dismissed for lack standing. Robb did not plead any facts establishing that the order diminished her property, increased her burdens, or impaired her rights. If she had shown that all creditors would be paid in full and the length of the plan could have been shortened, it is possible that she would have been an aggrieved party. View "Robb v. Harder" on Justia Law

The Debtors sought Chapter 7 bankruptcy relief. On their schedules, they listed the IRS as an unsecured creditor holding a claim in the amount of $249,085. They received a discharge in October 2009. Following the close of their Chapter 7 case, several IRS employees issued IRS levies and filed Notices of Federal Tax Liens with respect to the Debtors’ federal tax debt. The Debtors filed an adversary proceeding, naming each IRS employee as a defendant, alleging that the IRS employees violated 26 U.S.C. 7433 by issuing levies and filing the Notices of Federal Tax Liens, and seeking actual and punitive damages. The Bankruptcy Court entered an order substituting the United States as the sole defendant, denying the Debtors’ request for default judgment, and dismissing the Debtors’ complaint. The Eighth Circuit Bankruptcy Appellate Panel affirmed. The Debtors did not file an administrative claim for damages with the IRS and, therefore, may not bring an action for damages under section 7433. If the Debtors wish to sue the government for violations of the bankruptcy discharge under 11 U.S.C. 524, they must first exhaust their administrative remedies. View "Broos v. United States" on Justia Law

Debtors filed a Chapter 13 bankruptcy petition. CP Medical’s collection agent timely filed a proof of claim. The Chapter 13 plan, proposing monthly payments of $124.00 over 36 months and pro rata distribution to unsecured creditors, was confirmed. Debtors fell behind on payments and converted to a Chapter 7. After confirmation, but during the Chapter 13 case, Debtors filed an adversary proceeding against CP, seeking damages For violation of the Fair Debt Collection Practices Act, 15 U.S.C. 1692. The complaint indicated that CP's proof of claim was for medical services provided in February 2011, that the bankruptcy and proof of claim filings were beyond Arkansas’ two-year statute of limitations for medical debt collection, and that by filing a claim on a debt that is time-barred, CP engaged in a “false, deceptive, misleading, unfair and unconscionable” debt collection practice. The bankruptcy court granted CP summary judgment, holding that no FDCPA violation occurs when a debt collector attempts to collect a potentially time-barred debt that is otherwise valid unless there is actual litigation or the threat of litigation. The Eighth Circuit Bankruptcy Appellate panel affirmed. CP's proof of claim was a simple attempt to share in any distribution made to listed creditors in bankruptcy, not actual or threatened litigation. View "Gatewood v. CP Medical, LLC" on Justia Law

Debtors, limited liability companies, own pools of commercial and industrial real estate, subject to mortgages held by the Trust. The promissory notes for the loans provided that upon default, the interest rate on the remaining principal would be 5% in addition to the non-default rate of 5.04%. Debtors defaulted and later filed for Chapter 11 bankruptcy relief. The Trust filed proof of claim for $1,516,739.80 in default interest. The assigned asset manager for the loans testified about expenses associated with default and said that the 5% rate was consistent with the rate for similar loans. According to the Debtors’ chief manager, the additional interest duplicated costs associated with default that Debtors were already paying, including attorneys’ fees, late fees, and costs of administration and enforcement. The bankruptcy court allowed the claim, finding that Debtors failed to rebut the Minnesota law presumption that the default-interest provision was a valid liquidated-damages provision. The district court and the Eighth Circuit affirmed, rejecting arguments that the bankruptcy court misapplied Minnesota law because it did not require the Trust to prove actual damages; that actual damages for breach of a promissory note are always ascertainable; and that many of the costs the default rate purportedly covers are otherwise covered. View "Bowles Sub Parcel A, LLC v. CW Capital Asset Mgmt. LLC" on Justia Law

Plaintiffs claimed they were lured into making investments from which their money was “appropriated” and sued Nathan and Vertical Group. The district court entered an order of default against Vertical, but did not award damages at that time. Nathan filed for Chapter 11 bankruptcy. The district court closed the matter during the bankruptcy. Nathan proposed a Chapter 11 plan. The plaintiffs objected and brought an adversary proceeding, restating their allegations and asserting that their claims were non-dischargeable. The bankruptcy court agreed, rejected Nathan’s plan, awarded actual and punitive damages, and determined that Nathan’s bankruptcy estate acquired his interest in the Kathleen Trust, into which Nathan and his wife had transferred assets before his bankruptcy, but did not identify a specific value of Nathan’s interest. The court converted Nathan’s bankruptcy to a Chapter 7 bankruptcy. The trustee tried to reach Trust assets. The court concluded that Nathan’s powers as a co-trustee were property of his bankruptcy estate, but Nathan lacked authority to act as trustee without Kathleen’s consent and only Kathleen could revoke the trust. Plaintiffs reopened the original action to determine damages and to collect the Vertical judgment from Trust assets. The district court referred the matter to the bankruptcy court, which recommended awarding actual damages, punitive damages, and attorneys’ fees in the amount awarded in the bankruptcy adversary proceeding. The district court adopted the findings and entered a default judgment against Vertical. The Eighth Circuit dismissed Nathan’s appeal for lack of standing and affirmed as to Kathleen. View "Cutcliff v. Reuter" on Justia Law

Lariat and Tenant entered into a 10-year lease for operation of a restaurant. Debtor personally guaranteed Tenant's performance. Tenant was evicted in 2010 and obtained a judgment of $2,224,237.00, plus interest and attorney fees. In 2011, Lariat filed an involuntary chapter 7 petition against Debtor, which was dismissed by agreement. The same creditors filed suit against Debtor's wife. After the involuntary petition was dismissed, they added Debtor as a codefendant. The court held Debtor and his wife liable for fraudulent transfers ($795,098.00) and awarded interest and costs. In 2013, Debtor sued Lariat; the court dismissed, based on collateral estoppel. Appeal is pending. In 2014 Tenant filed a chapter 11 petition and an adversary proceeding against Lariat. The bankruptcy court dismissed the adversary proceeding. On the Trustee's motion, Tenant’s chapter 11 case was dismissed. Debtor filed his own chapter 11 petition. Lariat filed a proof of claim for $1,734,539.00. Debtor objected on grounds that the amount sought based on Debtor's personal guaranty under the lease exceeded the amount allowable under 11 U.S.C. 502(b)(6) and the amount sought based on fraudulent transfers was duplicative of, and subject to the same limitation as, sought based on thatl guaranty. Lariat filed an amended proof of claim for $1,610,787.00. The court capped Lariat's claim at $445,272.93. The Eighth Circuit Bankruptcy Appellate Panel remanded for recalculation of damages under the lease and of fees and expenses, but agreed that damages for fraudulent transfers were duplicative. View "Lariat Co., Inc. v. Wigley" on Justia Law