In re Wedemeier
| Decision Date | 04 October 1999 |
| Docket Number | 99-6021NI.,BAP No. 99-6020NI |
| Citation | 239 BR 794 |
| Parties | In re Kevin J. WEDEMEIER and Kenda R. Wedemeier, Debtors. Ernest Reiter and Louise Reiter, Cross Claimants-Appellants, v. Habbo G. Fokkena, Chapter 7 Trustee, Cross Claim Defendant-Appellee. Arnold A. Bartz and Delores J. Bartz, Cross Claimants-Appellants, v. Habbo G. Fokkena, Chapter 7 Trustee, Cross Claim Defendant-Appellee. |
| Court | U.S. Bankruptcy Appellate Panel, Eighth Circuit |
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John W. Hofmeyer, R.L. Van Veldhuizen, Oelwein, IA, for appellants.
Habbo G. Fokkena, Clarksville, IA, for appellee.
Before KRESSEL, WILLIAM A. HILL, and SCHERMER, Bankruptcy Judges.
Landlords Ernest Reiter, Louise Reiter, Arnold Bartz and Delores Bartz appeal from the bankruptcy court's March 4, 1999, summary judgment order which avoided their liens in the debtors' 1998 crops and granted them administrative expense claims for less than the total annual rent due under their respective leases with the debtors. We have jurisdiction over this appeal from the final order of the bankruptcy court. See 28 U.S.C. § 158(b). For the reasons set forth below, we affirm in part, reverse in part, and remand for further proceedings in conformity with this opinion.
The facts are undisputed. Debtors Kevin and Kenda Wedemeier are farmers in Iowa. In 1998, they leased 149.6 acres of farm land from Ernest and Louise Reiter and 183 acres of farm land from Arnold and Delores Bartz. Both lease contracts were for a term of one year, and both lease contracts specifically state that the tenant must "farm said premises in a good and farmlike manner" and "raise the greatest amount of grain thereon, the nature of the soil and season will permit." The Reiter lease ran from January 16, 1998, to January 16, 1999. The total annual rent was $18,000.00 due in equal installments of $9,000,00 on March 1, 1998, and December 1, 1998. The Bartz lease ran from March 1, 1998, to March 1, 1999. The total annual rent was $20,130.00 due in unequal installments of $4,500.00 and $15,630.00 on March 1, 1998, and November 15, 1998, respectively.
The debtors paid the March installment of $4,500 due under the Bartz lease but failed to pay the March installment of $9,000 due under the Reiter lease. Nevertheless, in May, the debtors planted crops on the farm land leased from the landlords. On June 8, 1998, before any of the landlords perfected a contractual lien in the debtors' growing crops, the debtors filed a Chapter 7 bankruptcy petition. The debtors continued to care for the crops during the postpetition period and remained in possession of the leased farm land through harvest. Meanwhile, the trustee neither assumed nor rejected either of the two leases. Therefore, by operation of 11 U.S.C. § 365(d)(4), the leases were deemed rejected on August 7, 1998, 60 days after the debtors filed their bankruptcy petition.
By complaint filed August 25, 1998, the First National Bank of Oelwein commenced an adversary proceeding to determine, inter alia, the priority of interests in the debtors' 1998 growing crops. Subsequently, on October 20, 1998, the debtors, the trustee, and the First National Bank of Oelwein entered a stipulation for settlement of the adversary proceeding initiated by the bank. Pertinent portions of the settlement stipulation provided the following: (1) that the debtors would be employed by the trustee to harvest the growing crops at the standard rate for such work; (2) that $34,538.25 in crop proceeds, representing the cash rent due the landlords, would be deposited in an escrow account; (3) that the debtors and the bank would waive all rights to the escrowed funds; and (4) that the rights of the trustee and the landlords regarding the escrowed funds would be preserved subject to later determination by the court. The landlords subsequently filed cross-claims to recover their rent from the escrowed funds. The trustee responded by filing a motion for summary judgment seeking avoidance of the landlords' liens in the crop proceeds, seeking a determination as to whether the landlords would be allowed administrative claims for rent, and seeking a determination of the value of these claims, if allowed. A hearing on the summary judgment motion was conducted on February 10, 1999.
On March 4, 1999, the bankruptcy court issued an order which granted summary judgment to the trustee, avoided the landlords' liens, and granted the landlords' administrative claims for rent. The bankruptcy court calculated the landlords' administrative claims on a per diem basis by dividing the total annual rent due under each lease by 365 and multiplying that figure by the number of postpetition days (142) the leased farm land was used by the estate to grow crops. Accordingly, the Bartzes were awarded an administrative rent claim totalling $7,003.44, and the Reiters were awarded an administrative rent claim totalling $7,831.30. The Bartzes appeal from the bankruptcy court's March 4, 1999, order and assert that their administrative claim should equal $15,630.00, the full amount of rent remaining due under their lease with the debtors. The Reiters appeal from the same order and similarly assert that their administrative claim should equal $18,000.00, the full annual rent due under their lease with the debtors. Further, the Reiters assert that the trustee should be equitably or judicially estopped from avoiding their liens. We will first dispose of the lien avoidance issue before moving on to the principal basis for the appeal.
On appeal, we review the bankruptcy court's findings of fact for clear error and its conclusions of law de novo. Fed.R.Bankr.P. 8013; In re Usery, 123 F.3d 1089, 1093 (8th Cir.1997); O'Neal v. Southwest Mo. Bank (In re Broadview Lumber Co.), 118 F.3d 1246, 1250 (8th Cir.1997) (citing First National Bank of Olathe v. Pontow, 111 F.3d 604, 609 (8th Cir.1997)). Mixed questions of law and fact are subject to plenary review. Loehrer v. McDonnell Douglas Corp., 98 F.3d 1056, 1061 (8th Cir.1996).
The Reiters seek to equitably or judicially estop the trustee from avoiding their liens, asserting that the trustee is taking inconsistent positions regarding their lease with the debtors by obtaining the benefits of the lease without assuming its obligations. Generally, the doctrine of equitable estoppel based on inconsistent positions will not permit a party to "maintain inconsistent positions or to take a position in regard to a matter which is directly contrary to, or inconsistent with, one previously assumed by him, at least where he had, or was chargeable with, full knowledge of the facts, and another will be prejudiced by his action." 28 Am.Jur.2d Estoppel and Waiver § 68 (1966). The related doctrine of judicial estoppel "prohibits a party from taking inconsistent positions in the same or related litigation." Hossaini v. Western Missouri Medical Center, 140 F.3d 1140, 1142 (8th Cir.1998) (citations omitted). The underlying purpose of the doctrine is to protect the integrity of the judicial process. Id. at 1143 (citations omitted).
However, the facts of this case do not indicate that the trustee has taken inconsistent positions with respect to the Reiter lease. The trustee neither assumed nor rejected the Reiter lease, and after 60 days, it was deemed rejected. The trustee also sought to avoid any liens the Reiters had in the debtors' crops. The Bankruptcy Code specifically permits a trustee to take precisely these actions. See 11 U.S.C. §§ 365, 545. The trustee never asserted that the lease was valid. Likewise, the trustee never asserted that the lease was invalid. Therefore, neither judicial estoppel nor equitable estoppel based on inconsistent positions applies here.
Moreover, the bankruptcy court was correct in approving the trustee's avoidance of the liens claimed by the landlords in this case. On this issue, the bankruptcy court engaged in the following analysis:
See Bankruptcy Court Order of March 4, 1999, at 3-4. We agree with the bankruptcy court's analysis. In addition, we observe that the trustee could also have avoided unperfected security interests in the debtors' crops pursuant to 11 U.S.C. § 544(a)(1), as no security interest was perfected in the debtors' crops by any of the landlords before the debtors filed their bankruptcy petition. Therefore, we affirm the bankruptcy court's decision on the lien avoidance issue.
The pivotal issue deals with the landlords' administrative claims for...
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