Sears v. Sears (In Re AFY, Inc.)
463 B.R. 483
8th Cir. BAP2012Background
- June 22, 2007 Sears Family Members sold shares to Debtor and Korley; Korley signed promissory notes; 2008 Resolution required redemption by Debtor; Debtor paid down but made no further payments; Feb 2010 petitions filed by Robert and Korley, Debtor files Chapter 11, Trustee appointed then as Chapter 7 trustee; Sears Family Members file Claims Nos. 8, 9, 10 with supporting documents; Korley files Claim No. 26 for ~$5.33M; bankruptcy court denies discovery continuance and holds hearing on affidavits; June 8, 2011 order overruling objections and disallowing Korley’s Claim 26, and allowing Sears Family Members to their claims; Appellants appeal to BAP asserting standing and procedural objections.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Korley’s Claim 26 disallowed | Korley argues a contingent claim based on stock redemption; seeks priority over Sears Family Members' claims | Debtor argues no legal basis for liability under stock sale; claim lacks factual/legal support | Korley’s Claim 26 properly disallowed |
| Sears Family Members’ claims properly allowed | Sears Family Members provide valid proofs of claim under Stock Sale Agreement with promissory notes | Debtor argues defenses (good faith/loyalty, supervening frustration) discharge liability | Bankruptcy court correctly allowed Sears Family Members’ claims and denied Korley’s claim |
| Continuance for discovery and live testimony denied | Robert and Korley needed time for discovery and live testimony | Record adequate; hearing conducted; discovery period long; no need for more hearings | denial of continuance and live testimony upheld |
Key Cases Cited
- In re McDaniel, 264 B.R. 531 (8th Cir. BAP 2001) (claimant must provide evidence to overcome prima facie validity)
- In re Consumer Realty & Dev. Co., Inc., 238 B.R. 418 (8th Cir. BAP 1999) (objection to proof of claim requires substantial evidence to rebut prima facie validity)
- Neb. Pub. Power Dist. v. MidAmerican Energy Co., 234 F.3d 1032 (8th Cir. 2000) (contract interpretation; ambiguity requirement)
- ABC Elec., Inc. v. Neb. Beef Ltd., 249 F.3d 762 (8th Cir. 2001) (unambiguous contract enforced as written; no extrinsic evidence for intent)
- Davenport Ltd. P'ship v. 75th & Dodge I, L.P., 780 N.W.2d 416 (Neb. 2010) (contract interpretation; ambiguity determination)