Lauer, In re
| Decision Date | 20 December 1996 |
| Docket Number | No. 95-1012,95-1012 |
| Citation | 98 F.3d 378 |
| Parties | In re Leroy J. LAUER, Debtor. E. Bruce NANGLE; Cele Nangle, Guardian of the Estate of Timothy Nangle; Stephen J. Nangle, Guardian of the Estate of Ellen Nangle; Harriet Nangle-Rose, Appellants, v. Leroy J. LAUER; Mark Twain Bank, N.A., a National Banking Association, Appellees. A. Thomas Dewoskin; James S. Cole, Trustees. |
| Court | U.S. Court of Appeals — Eighth Circuit |
Michael Stokes, St. Louis, MO, argued, for appellants.
Joann M. Tracy, St. Louis, MO, argued, for appellees.
Before FAGG, Circuit Judge, HENLEY, Senior Circuit Judge, and MAGILL, Circuit Judge.
E. Bruce Nangle filed this adversary bankruptcy proceeding on behalf of himself and others (collectively, Nangle) 1 against Leroy J. Lauer (Lauer) and Mark Twain Bank (Mark Twain) 2 to prevent the discharge in bankruptcy of certain claims against Lauer, for compensatory and punitive damages against Mark Twain, and for other relief. The United States Bankruptcy Court granted summary judgment for Mark Twain Bank. Nangle appealed the order of the bankruptcy court to the United States District Court which affirmed. Nangle then filed a timely appeal to this court pursuant to 28 U.S.C. § 158(d). We affirm in part, reverse in part, and remand for further proceedings.
This bankruptcy proceeding is but one part of the litigation among these parties dating back to 1983 and arising from their participation in a real estate partnership. Plaintiff/appellant Nangle and others were limited partners in a Missouri limited partnership named Crossroads U.S.A. Limited II (Crossroads). Defendant/appellee Lauer and Joseph Graves were the general partners of Crossroads. The principal assets of the partnership were two interests in real estate: the Riverheights Retirement Center in Booneville, Missouri and a 32 acre parcel of land near Wentzville, Missouri.
In 1982, general partners Lauer and Graves solicited Nangle and the other limited partners to sell their limited partnership interests to the general partners. The contracts for sale of the partnership interests contained guarantees of payment by the general partners secured by the general partners' own interests in Crossroads and representations that the condition of the assets of the partnership had not changed. Transfer of the partnership interests to Lauer and Graves was completed in November of 1982.
Approximately six months later, general partner Graves died. The former limited partners learned at the time of Graves' death that--contrary to the representations made by Lauer and Graves in the contracts to buy out the interests of the limited partners--general partners Lauer and Graves had previously sold the Riverheights Retirement Center property in return for an interest in an industrial development bond.
In March 1983, the former limited partners filed suit in Missouri state court against Lauer and the representative of Graves' estate. The complaint was later amended to add claims against Mark Twain Bank of St. Charles and Mark Twain Bank of Big Bend which had provided a total of three loans: (1) a loan by Mark Twain (St. Charles) to the Crossroads Partnership, allegedly secured by partnership assets (the March 1981 loan); (2) a loan by Mark Twain (St. Charles) to finance the general partners' purchase of the limited partners' interests, allegedly secured by partnership assets (the November 1982 loan); and (3) a loan by Mark Twain (Big Bend) to Lauer personally, allegedly secured by partnership assets (the December 1985 loan).
In November 1986, Lauer filed a voluntary petition for personal bankruptcy and reported the state court lawsuit as one of the claims against the bankruptcy estate. In order to prevent the discharge in bankruptcy of their claim against Lauer, plaintiffs filed in the bankruptcy court a complaint to hold the debt nondischargeable.
The complaint alleged that the limited partners were induced to sell their interests to the general partners based on misrepresentations concerning the status of the assets of the limited partnership, including the retirement center property. Plaintiffs alleged in the complaint that they would not have sold their limited partnership interests if they had known that the Riverheights property had been sold in exchange for the industrial revenue bond from which earnings were tax free.
The complaint also alleged that Lauer and Graves had improperly used partnership assets to secure the personal loan they obtained from Mark Twain to finance the buy out of the limited partners. The complaint further alleged that Mark Twain Bank violated Missouri law by granting the loan to the general partners and taking a security interest in partnership property for the personal loan. According to the complaint, the actions of the general partners were in contravention of the terms of the limited partnership agreement and thus a breach of the general partners' fiduciary obligations. By lending money to Lauer and Graves, knowing that they were breaching fiduciary duties owed to the limited partners, the complaint asserted that Mark Twain Bank violated the Uniform Fiduciaries Law of Missouri. Three counts of the complaint for nondischarge in bankruptcy (Counts II, III and IV) named Mark Twain and are the subject of the present appeal. 3
The bankruptcy complaint requested the following relief: nondischarge in bankruptcy of the debt of Lauer to plaintiffs, compensatory and punitive damages against Mark Twain, 4 avoidance of Mark Twain's security interest, an injunction against Mark Twain's enforcement of its security interest, and relief under Section 548 of the Bankruptcy Code regarding voidable preferences.
Mark Twain Bank first moved to dismiss the counts of the complaint against Mark Twain, but the bankruptcy court overruled the motion. After discovery, Mark Twain moved for summary judgment on Counts II, III and IV of the complaint. The bankruptcy court granted the motion for summary judgment in March, 1989. The bankruptcy court ruled that Count II was barred by the statute of limitations; Count III failed to state a claim for relief; and plaintiffs lacked standing to sue on the issues presented in Count IV.
Plaintiffs appealed the order of the bankruptcy court to the United States District Court as provided in 28 U.S.C. § 158(a). In October 1994, the district court affirmed the grant of summary judgment for Mark Twain. Nangle then brought this appeal from the order of the district court pursuant to 28 U.S.C. § 158(d).
On a motion for summary judgment, the bankruptcy court views the evidence, and inferences from the evidence, in the light most favorable to the non-moving party. Matsushita Electric Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986). Summary judgment is granted only if there is no dispute as to any issue of material fact and if the moving party is entitled to judgment as a matter of law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 2511, 91 L.Ed.2d 202 (1986); Fed.R.Civ.P. 56(c); Fed. R. Bkr. P. 7056.
On appeal of the bankruptcy court's judgment to the district court, the district court acts as an appellate court and reviews the bankruptcy court's legal determinations de novo and findings of fact for clear error. Rine & Rine Auctioneers, Inc. v. Douglas County Bank & Trust Co., 74 F.3d 854, 857 (8th Cir.1996); Wegner v. Grunewaldt, 821 F.2d 1317, 1320 (8th Cir.1987). Thus, when reviewing a grant of summary judgment by the bankruptcy court, the district court must determine de novo whether the moving party was entitled to judgment as a matter of law. In re Euerle Farms, Inc., 861 F.2d 1089, 1090 (8th Cir.1988).
As the second court of appellate review, we conduct an independent review of the bankruptcy court's judgment and apply the same legal standards as the district court. Affeldt v. Westbrooke Condominium Assoc., 60 F.3d 1292, 1294 (8th Cir.1995). We must determine whether there were disputed issues of material fact and whether Mark Twain was entitled to judgment as a matter of law. Southern Technical College, Inc. v. Hood, 89 F.3d 1381, 1383 (8th Cir.1996).
The issues raised by this appeal all concern matters of law rather than fact. In general, the parties have not presented substantial disputes over matters of fact but rather have contested what legal conclusion should follow from the unchallenged facts. The bankruptcy court granted summary judgment for Mark Twain on each of three counts of the complaint on grounds that Mark Twain was entitled to judgment as a matter of law.
In this contested bankruptcy matter, the validity of the plaintiffs' claim for nondischarge in bankruptcy is determined by state law and the federal bankruptcy code. Because all relevant events occurred in Missouri, the bankruptcy and district courts based their rulings on Missouri law. We agree that Missouri law is applicable. As required by the Supreme Court, we review the lower courts' determinations of state law de novo. Salve Regina College v. Russell, 499 U.S. 225, 231, 111 S.Ct. 1217, 1221, 113 L.Ed.2d 190 (1991).
The three counts of the complaint involving Mark Twain Bank asserted the following violations of law. Count II alleged that Mark Twain Bank (St. Charles) violated the Missouri codification of the Uniform Fiduciaries Law (sometimes "UFL"), Mo.Rev.Stat. §§ 456.240 to 456.350, through the bank's actual knowledge that Lauer and Graves were violating their fiduciary duties to the limited partners by misrepresenting the condition of the assets of the partnership.
Count III alleged that Mark Twain Bank (Big Bend) violated the Missouri Uniform Fiduciaries Law by making the December 1985 loan to Lauer and taking a security interest in partnership assets as collateral. Count III also...
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