Heide v. Juve, (In re David L. Juve and Mona L. Juve), No. 11-6006, (8th Cir. BAP 09/16/2011) (Judges Schermer, Federman, and Nail).
Judge Schermer wrote the opinion for the Eighth Circuit Bankruptcy Appellate Panel that reversed and remanded the finding for summary judgment in favor of creditor in a dischargeability action alleging claims under §§ 523(a)(4), 523(a)(6) and §727. The subject debt arose from an unwritten agreement for the purposes of financing the purchase of vehicles for the debtor’s car dealership. Under this agreement, creditor alleged that it was entitled to a certain fee per vehicle plus ten percent interest that was payable monthly. In examining the factual situation, the BAP held that it was necessary to remand the matter for factual determinations as to who was party to the unwritten financing agreement. Specifically, whether it was the debtor individually or whether his car dealership was actually liable for the indebtedness. A finding of liability of the dealership alone would preclude creditor from meeting its burden in the pending action against the debtor. Moreover, the court noted that it was also necessary to remand the matter for factual determinations as to whether Debtor’s actions constituted fraud within the meaning of § 523(a)(2)(A).
Danduran v. Kaler, (In re Lawrence D. Danduran, Jr.), No. 10-3813, (8th Cir. 09/16/2011 and corrected 09/19/2011) (Judges Colloton, Clevenger, and Benton).
Judge Benton wrote the decision overruling the Chapter 7 trustee’s objection to the claimed exemption that was the product of the debtor’s pre-bankruptcy planning efforts. At issue were the funds in the debtor’s savings account on the petition date from the pre-petition sale of his home. Included in this account was approximately $80,000.00 in proceeds, $4,000.00 for sale related refunds or credits, and approximately $7,700.00 for home furnishings that were sold with the house. The Eighth Circuit noted that the debtor testified that he did not believe there was any value in the furnishings, but that their inclusion was a result of the buyers’ condition to closing. The Court further noted that the trustee failed to provide any evidence tracing the disposition of the funds or any segregation between the real and personal property sales. The Eighth Circuit upheld the exemption claim as proper in noting that the inferences must be drawn favorably to the Debtor. The Court further explained that the trustee’s failure to include this basic factual information was insufficient in this case to carry his burden over the favorable inferences.
Keeley and Grabanski Land Partnership, (In re Keeley and Grabanski Land Partnership),No. 11-6020 (8th Cir. BAP 09/06/2011) (Judges Schermer, Federman, and Nail).
Judge Federmanwrote the BAP decision affirming the appointment of a Chapter 11 trustee in the involuntary bankruptcy case. The involuntary bankruptcy was the sister case to the voluntary Chapter 11 of one of the principals that was mired with allegations of misconduct, mismanagement, fraudulent behavior and perpetual failure to comply with court deadlines. There were also allegations of self-dealing, mismanagement, and fraud by that individual in his capacity with the partnership. Noting the seeming split, the BAP applied the preponderance of evidence standard. In so holding, the Court gave considerable deference to the Bankruptcy Court’s discretion under this standard and ultimately affirmed the trustee’s appointment. The BAP further explained that even if later proven unfounded, the allegations were so prolific in both cases that the individual would be bogged down in defense such that he was clearly unable to meet his obligations making the trustee the superior alternative.
Green Tree Servicing, LLC v. DBSI Landmark Towers, LLC, et. al, No. 10-2757, (8th Cir. 08/30/2011) (Judges Smith, Arnold, and Shepherd).
Judge Shepherd wrote the decision affirming the termination of a subtenants lease in connection with the tenants’ lease rejection. The sublease at issue imposed a requirement that the subtenants become the direct tenants of the landlord under certain circumstances. Subtenant sought and obtained declaratory judgment in state court that it could treat its sublease as terminated and vacate the building as a result of the tenant’s lease rejection in bankruptcy. The Eighth Circuit agreed that tenant’s rejection in bankruptcy removed the subtenant’s obligations to the tenant under the sublease. The court found that the attornment issue was controlled by state law and not §365(h). The court explained that neither subtenant nor tenant was required to continue to perform as they had mutually rescinded the sublease. The Eighth Circuit further held that §365(h) did not extinguish any third party’s rights or obligations under a lease and that the owners could enforce any rights under the sublease. However, the court found that the sublease did not require attornment because (1) none of the triggering events had occurred and they actually could not occur after tenant voluntarily extinguished its rights by virtue of the rejection, and (2) the landowners could not enforce on the subtenant the provision of the tenant’s rejected lease which imposed required all subleases to contain an attornment provision since the subtenant was not a party to the tenant’s lease. Accordingly, the subtenant was free to vacate the premises and to treat the sublease has terminated in absence of a duty to attorn to the landowners.