Recent Eighth Circuit Bankruptcy Decisions: February 2011
February 01, 2011
by Kathleen Harrell-Latham
Northland National Bank v. Lindsey, (In re Lindsey), No. 10-6045, (8th Cir. BAP 2/8/11).
Judge Nail wrote the decision for the BAP panel which affirmed the Western District of Missouri judgment in favor of the debtor which denied the 727 and 523 claims involving financial statements that did not fully disclose the ownership of certain personal property. In deferring to the lower court’s fact-finding authority, the BAP affirmed the conclusion that the noted inaccuracies or omissions in the statements were immaterial since the items were effectively controlled de facto by the debtor and could have been used to pay his debts. The BAP further affirmed the lower court's oral findings that the bank could not have primarily relied upon the joint financial statements for a debt that was guaranteed only by the debtor. The court also acknowledged there was evidence in the record which could have permitted a different conclusion, but deferred to the bankruptcy court's fact-finding authority in weighing the evidence and found an absence of clear error.
Mid-City Bank, et. al. v. Skyline Woods Homeowners Assoc., et. al., (In re Skyline Woods Country Club), No. 10-2618, (8th Cir. 2/22/11).
The Eighth Circuit affirmed the BAP’s denial of the motion to reopen a Chapter 7 case to declare void the Supreme Court of Nebraska’s decision that the 363 sale of property did not extinguish equitable interests specifying the continued use of the land. Multiple state actions involving the neighboring land owners and the secured lender commenced shortly after the order approving the 363 sale was entered when the buyer began to change the property use. Buyer elected to withdraw its bankruptcy court motion to enforce the sale order and defend the state action on the merits by arguing that the bankruptcy order precluded the litigation. Ultimately, the Supreme Court of Nebraska agreed with the landowners that the covenants requiring continued use of the property as a golf course ran with the land and could not be extinguished by section 363. Accordingly, the issue before the Eighth Circuit was whether this state court judgment was entitled to full faith and credit which would eliminate the need to reopen the case. The court applied the elements first articulated by the US Supreme Court in Durfee v. Duke and held that the state court judgment was entitled to full faith and credit. The Eighth Circuit also rejected the movant’s argument that the bankruptcy court had exclusive jurisdiction as the property had been sold out of the bankruptcy estate under the 363 order and such sale terminated such jurisdiction of the bankruptcy court. The court also noted that even assuming the bankruptcy court had jurisdiction over the post-bankruptcy dispute between non-debtors, the jurisdiction was non-exclusive and concurrent with that of the state courts. Accordingly, the Eighth Circuit concluded that the state court judgment was entitled to full faith and credit and that such matter was best left to the state.
L. Kathleen Harrell-Latham is a contributing author to the weekly e-news distributed by the Federal Bar Association Bankruptcy Section. The weekly publication highlights current cases, news and trends in the bankruptcy field. Kathy specifically focuses on recent bankruptcy cases in the Eighth Circuit.
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