Wigley v. Wigley (In re Wigley)
| Decision Date | 21 September 2016 |
| Docket Number | No. 16-6009,16-6009 |
| Citation | 557 B.R. 678 |
| Parties | In re: Michael Robert Wigley, Debtor Barbara Wigley, Interested party-Appellant v. Michael Robert Wigley, Debtor-Appellee Lariat Companies, Inc., Creditor-Appellee |
| Court | U.S. Bankruptcy Appellate Panel, Eighth Circuit |
Mychal A. Bruggeman, Jacqueline J. Williams, Manty & Associates, Minneapolis, MN, for Interested party-Appellant.
Joel David Nesset, Thomas Gregory Wallrich, Cozen & O'Connor, Minneapolis, MN, for Debtor-Appellee.
Kurt Anderson, Minneapolis, MN, for Creditor-Appellee.
Before SCHERMER, NAIL and SHODEEN, Bankruptcy Judges.
Barbara Wigley appeals from the bankruptcy court's1 : (1) November 18, 2015 order denying confirmation of Robert Wigley's (Debtor) second modified Chapter 11 plan, establishing deadlines for the Debtor to file a modified plan, and obtain confirmation of it, and denying Lariat Companies, Inc.'s (Lariat) request to dismiss the Debtor's Chapter 11 case or to convert the case to Chapter 7;2 (2) February 18, 2016 order confirming the Debtor's fourth modified Chapter 11 plan; and (3) order granting relief from the automatic stay to allow Lariat to exercise its rights and remedies against Barbara Wigley in state court litigation. For the reasons that follow, we dismiss this appeal based on lack of standing. To the extent that Barbara Wigley has standing to bring this appeal, we have jurisdiction over this appeal from the final orders of the bankruptcy court and we affirm.3 See 28 U.S.C. § 158(b).
The threshold issue is whether Barbara Wigley has standing to bring this appeal. We hold that she does not and we dismiss this appeal. To the extent that Barbara Wigley has standing to bring this appeal, we address the two remaining issues on appeal, whether the bankruptcy court erred when it: (1) denied approval of a settlement in the Debtor's Chapter 11 plan, resulting in the denial of confirmation of the plan and confirmation of a later plan with a provision stating that the Debtor would not pursue any avoidance actions against his wife; and (2) entered the stay relief order. We find no error by the bankruptcy court.
Extensive litigation preceded the filing of the Debtor's Chapter 11 bankruptcy case, including a lawsuit holding the Debtor liable as the guarantor of a lessee's obligations under a real property lease and related proceedings, an involuntary Chapter 7 bankruptcy of the Debtor, a Chapter 11 bankruptcy of the lessee, and fraudulent transfer proceedings against the Debtor and his wife. The dispute in this appeal focuses on the fraudulent transfer action. As background, we outline the proceedings relating to the guarantee judgment against the Debtor.
Lariat, the lessor under a lease for which the Debtor personally guaranteed the obligations of the lessee (an LLC that he had formed) obtained a state court judgment exceeding $2.2 million against the Debtor and the LLC. Non-bankruptcy attempts by the Debtor to avoid collection of that judgment proved unsuccessful. The Debtor unsuccessfully brought a state court lawsuit seeking relief from the guarantee judgement. The Debtor's lawsuit against Lariat was dismissed but the Debtor appealed the dismissal order, which remains pending due to the Debtor's bankruptcy. A separate attempt by the Debtor in the LLC's bankruptcy case to enjoin Lariat from enforcing the guarantee judgment was also unsuccessful. Ultimately, Lariat obtained a state court order (which was stayed by the Debtor's Chapter 11 filing) allowing it to liquidate the Debtor's non-exempt assets to satisfy the guarantee judgment.
Lariat (together with other creditors) commenced a pre-petition fraudulent transfer action against the Debtor's wife in state court, and later added the Debtor as a co-defendant. Ultimately, the Debtor and his wife were held jointly and severally liable to Lariat for fraudulent transfers totaling approximately $800,000. The Debtor and his wife later moved in the state court for amended findings in that action. On the petition date of the Debtor's Chapter 11 case, the state court had not ruled on the motion for amended findings and the Debtor believed that the automatic stay applied to the fraudulent transfer proceeding.
The Debtor filed his bankruptcy petition on February 10, 2014. On his schedules, the Debtor listed assets exceeding the amount of his liabilities. Lariat's guarantee judgment was capped under Bankruptcy Code § 502(b)(6).4 The Debtor filed his Second Modified Plan of Reorganization (Second Modified Plan), which proposed to release his wife, Barbara Wigley, from all claims held against her by the Debtor or the estate (eliminating the fraudulent transfer judgment against her) in exchange for her settlement payment (Settlement). Specifically, the Second Modified Plan stated:
The Second Modified Plan proposed to pay Lariat (and all allowed claims in Lariat's class of unsecured creditors) in full with interest. The other classes under the plan were not impaired.
Lariat objected to the Second Modified Plan and filed a motion seeking dismissal or conversion of the Debtor's case to Chapter 7 () for bad faith. On November 18, 2015, the bankruptcy court entered an order denying Lariat's motion to dismiss or covert, denying confirmation of the Second Modified Plan, and establishing deadlines for the Debtor to file a modified plan and obtain confirmation of it (November 18, 2015 Order).
The Debtor proposed a Fourth Modified Plan of Reorganization (Fourth Modified Plan), which again proposed full payment to unsecured creditors, and also included a provision stating that the Debtor will not pursue any avoidance actions against his wife. Specifically, the Fourth Modified Plan states:
Over Barbara Wigley's objection, the Fourth Modified Plan was confirmed.
Following confirmation of the Fourth Modified Plan and upon Lariat's motion, the bankruptcy court granted limited relief from the automatic stay (Stay Order), stating that “[t]he automatic stay, if any, imposed by 11 U.S.C. § 362(a) is terminated such that [Lariat] may exercise its rights and remedies under applicable nonbankruptcy law with respect to continuing the pending fraudulent conveyance action ... against Barbara Wigley based on prepetition events.” We denied a motion by Barbara Wigley for a stay pending appeal of the Stay Order. At oral argument, counsel advised us that she planned to participate in an August state court hearing in the fraudulent transfer action.
The bankruptcy court's findings of fact are reviewed for clear error and its conclusions of law are reviewed de novo . Loop Corp. v. U.S. Trustee (In re Loop Corp.) , 379 F.3d 511, 515 (8th Cir.2004) ). “A bankruptcy court's approval of a settlement will not be set aside unless there is plain error or abuse of discretion.” Tri –S tate Financial, LLC v. Lovald, 525 F.3d 649, 654 (8th Cir.2008) (quoting Martin v. Cox (In re Martin) , 212 B.R. 316, 319 (8th Cir. BAP 1997) (citation omitted)). We review for an abuse of discretion the decision whether to grant or deny relief from the automatic stay under Bankruptcy Code § 362(a). Wiley v. Hartzler (In re Wiley) , 288 B.R. 818, 821 (8th Cir. BAP 2003).
Barbara Wigley characterizes the matter before us as involving issues related to denial of administration of an avoidance action (particularly recovery under § 550) and the rights of Lariat and the Debtor with respect to that action. We disagree. It is nothing more than a matter concerning the propriety of the bankruptcy court's denial of the Settlement proposed in the Second Modified Plan, which led to confirmation of the Fourth Modified Plan. We also review the bankruptcy court's grant to Lariat of relief from the automatic stay to pursue its cause of action against Barbara Wigley in the fraudulent transfer state court action.
Bankruptcy appellate standing is narrower than Article III standing. Opportunity Finance, LLC v. Kelley , 822 F.3d 451, 458 (8th Cir.2016) ...
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