Richards v. Rabo AgriFinance, LLC (In re Kip & Andrea Richards Family Farm & Ranch, LLC)
| Decision Date | 04 May 2020 |
| Docket Number | No. 19-6039,19-6039 |
| Parties | In re: Kip and Andrea Richards Family Farm & Ranch, LLC, doing business as Richards Farm & Ranch, LLC Debtor Kip L. Richards; Andrea Richards Interested parties - Appellants v. Rabo AgriFinance, LLC Creditor - Appellee |
| Court | Bankruptcy Appellate Panels. U.S. Bankruptcy Appellate Panel, Eighth Circuit |
Appeal from United States Bankruptcy Court for the District of Nebraska - Lincoln
Before SCHERMER, SHODEEN and SANBERG, Bankruptcy Judges.
SCHERMER, Bankruptcy Judge Kip L. Richards and Andrea Richards appeal the bankruptcy court's1 decision that they were equitably estopped from asserting ownership of machinery and equipment in the bankruptcy case of Kip and Andrea Richards Family Farm Ranch, LLC (Debtor), and its denial of their request for the bankruptcy court to alter or amend its ruling or for a new trial.2 We have jurisdiction over this appeal from the final orders of the bankruptcy court. See 28 U.S.C. § 158(b). For the reasons that follow, we affirm.
The central issue on appeal is whether the bankruptcy court properly held that Kip and Andrea Richards were equitably estopped from claiming ownership of certain machinery and equipment. We hold that it did. We also hold that the bankruptcy court did not abuse its discretion when it denied the request of Kip and Andrea Richards to alter or amend its ruling or for a new trial.
The Debtor filed its Chapter 11 bankruptcy petition in January 2015. Rabo AgriFinance, LLC (Rabo) was a secured creditor and Kip and Andrea Richards were members of the Debtor. At the commencement of the Debtor's bankruptcy case, Kip Richards signed the Debtor's bankruptcy schedules and statement of financial affairs as its managing member. He also authorized the Debtor to file monthly operating reports, which were prepared by Andrea Richards. Kip reviewed the list of property in each operating report and never told Andrea to revise it. In each document filed with the court Kip Richards represented that the Debtor owned the machinery and equipment that is at issue in this appeal.3 The Debtor's post-petitiontax returns, signed by Kip Richards, also claim ownership of many pieces of the machinery and equipment at issue. The 2015 individual tax return of Kip and Andrea Richards included no entry for depreciation. The depreciation listed on their 2016 tax return did not pertain to farm equipment. The Debtor did not abandon any machinery and equipment at issue.
The Debtor confirmed its Third Amended Chapter 11 bankruptcy plan with an addendum (Plan), in February 2017. The Plan required liquidation of substantially all the Debtor's assets including substantially all the Debtor's equipment, in cooperation with Rabo. Unfortunately, no list of equipment was attached to the Plan. The Plan states that (other than specifically provided) Rabo would be entitled to the proceeds of the liquidation. Pursuant to the Plan, the Debtor and Rabo would dismiss a pending appeal and "[i]n exchange, for the dismissal of the appeal, Rabo has agreed to dismiss any and all lawsuits against the individual members of [the Debtor]." The Plan also included injunction, exculpation, and limitation of liability causes.
During plan negotiations, Rabo's attorney and the Debtor's attorney discussed the possibility of Rabo's dismissal of litigation against the Debtor's guarantors (including Kip and Andrea Richards). On November 30, 2016, Rabo's attorney sent an email to the Debtor's attorneys stating that Rabo would need signed and verified balance sheets from the guarantors before it would consider dismissing litigation against them. Shortly thereafter on December 10, 2016, Kip and Andrea Richards signed an individual balance sheet itemizing their fixed assets which did not include the machinery and equipment that is at issue in this appeal. The Third Amended Plan was filed on December 16, 2016. In January 2017, Rabo dismissed its pending state court action against the Richards without prejudice.
Post-confirmation litigation ensued concerning ownership of machinery and equipment. Because the parties are familiar with the history of that litigation, we do not recite it in its entirety.
In an August 2018 order on Rabo's motion to direct the Debtor to comply with the Plan, the bankruptcy court granted Rabo's request to compel the Debtor to sell (or deliver to Rabo) machinery and equipment owned by the Debtor on the confirmation date, conditioned on Rabo's timely filing of a list of machinery and equipment with evidence that the Debtor owned the machinery and equipment at confirmation. At a December 2018 hearing also on Rabo's motion, the court received evidence regarding machinery and equipment owned by the Debtor. It then entered an order requiring the Debtor to deliver to an auction company machinery and equipment identified on an amended list filed on the court docket or turn the machinery and equipment over to Rabo by a date certain.
When the Debtor failed to comply with the court's order to deliver the machinery and equipment to the auction company or Rabo, Rabo filed a Motion for civil contempt and sanctions (Civil Contempt and Sanctions Motion). In a separate filing allowed by the bankruptcy court, Rabo sought as its remedy a "writ of execution [] forcing the debtor to divest its title in . . . equipment previously ordered to be conveyed and/or sold and vest that title in the creditor Rabo." After hearings, the bankruptcy court granted Rabo's Civil Contempt and Sanctions Motion (Civil Contempt and Sanctions Order) and entered a writ of execution (Writ of Execution) granting authority to repossess and sell the machinery and equipment on the amended list filed with the court by Rabo as a sanction for the Debtor's failure to either turn the machinery and equipment over to Rabo or sell the machinery and equipment and submit the proceeds to Rabo.
Kip and Andrea Richards filed a motion to amend the Civil Contempt and Sanctions Order (Motion to Amend), to which Rabo objected. It is the order disposing of the Motion to Amend that is the focus of this appeal.
The bankruptcy court held two hearings on the Motion to Amend. At the first hearing, the court stated that it determined at the December 2018 hearing on Rabo's motion to direct compliance with the Plan that the Debtor owned the property listed on the Writ of Execution. The bankruptcy court recognized that Nebraska lawallows a third party to contest ownership after a writ is executed. Neither party objected to the court's determination of the issue of ownership before the writ was executed and in the context of the Motion to Amend. Pursuant to the court's instructions, Kip and Andrea Richards then submitted a list of equipment they claimed to own. They claim ownership of numerous pieces of equipment on the Writ of Execution. After a second hearing, the court determined that Kip and Andrea Richards were equitably estopped from asserting ownership to most of the equipment.4 The court also denied the relief they requested in their motion to amend or for a new trial brought under Federal Rule of Bankruptcy Procedure 9023, which makes Federal Rule of Civil Procedure 59 applicable in bankruptcy proceedings (Rule 59 Motion).
We review "the bankruptcy court's factual findings for clear error and its legal conclusions de novo." Snyder v. Dykes (In re Dykes), 954 F.3d 1157, 1159 (8th Cir. 2020). A ruling on a motion to alter or amend a judgment under Rule 59(e) or for a new trial under Rule 59(a) is reviewed for an abuse of discretion. Ryan v. Ryan, 889 F.3d 499, 508-09 (8th Cir. 2018); Larson v. Farmers Co-op. Elevator of Buffalo Ctr., 211 F.3d 1089, 1095 (8th Cir. 2000).
We reject Rabo's argument that we lack jurisdiction to hear this appeal because it was untimely filed. According to Rabo, the issue of ownership of the machinery and equipment was before the bankruptcy court on multiple occasions and the failure by Kip and Andrea Richards to appeal any of the court's prior rulings prevents them from filing this appeal. The two bankruptcy court orders appealed are the: (1) September 30, 2019 order on the Motion to Amend; and (2) November 14,2019 order on the Rule 59 Motion. Rabo may not recast the orders being appealed. Kip and Andrea Richards timely filed their notice of appeal on November 27, 2019. See FED. R. BANKR. P. 8002 ().
Equitable estoppel
At the hearings on their Motion to Amend, Kip and Andrea Richards claimed ownership of several pieces of equipment listed on the Writ of Execution. Kip Richards testified that he transferred machinery and equipment he now claims to own to the Debtor at its formation in 2010 when other members of the Debtor also transferred property into the Debtor in exchange for membership units. He believed the property was transferred to the Debtor because a prior lender "needed the equipment to operate us." Kip and Andrea Richards claim that the collateral for the Debtor's loan from Rabo included only real estate and cattle, not machinery and equipment. They also maintain that based on a document they offered into evidence and the understanding that Rabo did not need equipment as collateral for its loan, in July 2012 the members of the Debtor transferred the property back to Kip Richards. To the contrary, the list of equipment in the Debtor's annual balance sheet submitted to Rabo at the end of 2012 included equipment that the Richards now claim to own.
The Debtor's bankruptcy schedules, operating reports, and corporate tax returns include items in the Writ of Execution and at issue in this appeal as property owned by the Debtor. Kip and Andrea Richards maintain that these documents are inaccurate. We hold that the bankruptcy court properly applied equitable estoppel to disallow Kip...
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