744 F.3d 565
8th Cir.2014Background
- Chester King filed Chapter 13 in Feb 2010, converted to Chapter 7 on April 12, 2010, and did not list creditor Frank Williams or the pre-conversion debt.
- On April 19, 2010 King and Williams executed an "April agreement" purporting to incorporate pre-conversion debt into a new $81,000 loan; they did not obtain bankruptcy-court approval, so any attempted reaffirmation was ineffective.
- King’s bankruptcy was closed (Nov 2010). Williams later sued in state court to collect $76,200 (allegedly pre-conversion) plus two post-discharge loans; Wyse represented Williams.
- King moved to reopen bankruptcy and obtained sanctions in Nov 2011 against Wyse for pursuing the discharged pre-conversion debt and an order dismissing that portion of the state action; Wyse and Williams did not appear at the initial sanctions hearing.
- Wyse and Williams moved for relief (construed as Rule 60(b)); after an evidentiary hearing the bankruptcy court granted relief in part (allowed pursuit of the two post-discharge debts but kept sanctions and dismissal as to the $76,200) and later denied a second motion for rehearing; the BAP affirmed, and Wyse/Williams appealed to this Court.
Issues
| Issue | Plaintiff's Argument (Williams/Wyse) | Defendant's Argument (King) | Held |
|---|---|---|---|
| Whether portion of $76,200 was pre-conversion debt subject to discharge | The entire $76,200 was post-conversion/new funds; bankruptcy court erred in finding any pre-conversion portion | The court credited King’s testimony and found some of the $76,200 derived from pre-conversion debt and thus discharged | Court affirmed: factual finding not clearly erroneous; appellate deference to credibility determinations |
| Whether bankruptcy court erred by enjoining collection of debts incurred Apr 19, 2010 | Wyse/Williams: injunction/sanctions improperly covered post-conversion debt | King: sanctions targeted only the portion seeking pre-conversion debt; court would have allowed pursuit of proven post-conversion portion | Court affirmed: sanctions upheld as to pre-conversion portion; Williams failed to prove amount of post-conversion funds |
| Whether denial of second Rule 60(b) motion (new arguments) was abuse of discretion | Wyse/Williams: court should have granted relief based on notice and excusable neglect theories | King: new theories could have been raised earlier; no exceptional circumstances warranting Rule 60(b) relief | Court affirmed: denial not an abuse of discretion; relief under Rule 60(b) is rare |
| Whether bankruptcy court misarticulated burden of proof at hearing | Wyse/Williams argued burden was misstated | King defended court’s procedure and findings | Court found no merit to this contention and affirmed |
Key Cases Cited
- In re Treadwell, 637 F.3d 855 (8th Cir.) (appellate review standards for bankruptcy court decisions)
- In re Zahn, 526 F.3d 1140 (8th Cir.) (abuse-of-discretion review standard)
- In re Waugh, 95 F.3d 706 (8th Cir.) (clear-error standard and limits on overturning credibility-based findings)
- In re Windle, 653 F.2d 328 (8th Cir.) (deference for factfinders resolving live-witness conflicts)
- Noah v. Bond Cold Storage, 408 F.3d 1043 (8th Cir.) (Rule 60(b) relief is exceptional)