Rabo Agrifinance, Inc. v. Veigel Farm Partners ( 2009 )

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
May 15, 2009
No. 08-10817 Charles R. Fulbruge III
Summary Calendar Clerk
RABO AGRIFINANCE, INC, an Iowa Corporation.
Plaintiff-Appellee
v.
VEIGEL FARM PARTNERS D/B/A VEIGEL PARTNERS, VEIGEL FARMS,
INC., TERRA XXI, LTD., GRAIN CENTRAL STATION, INC., D/B/A VEIGEL
GRAIN COMPANY, VEIGEL-KIRK, INC., BOB VEIGEL, INC., BOB
VEIGEL, INDIVIDUALLY A/K/A ROBERT WAYNE VEIGEL, STEVE
VEIGEL, INC., STEVE VEIGEL, INDIVIDUALLY, VICKI VEIGEL, INC.,
AND VEIGEL CATTLE CO.
Defendants-Appellants
Appeal from the United States District Court
for the Northern District of Texas
USDC No. 2:05-CV-00243
Before KING, DENNIS, and OWEN, Circuit Judges.
PER CURIAM:*
Between 1997 and 1998 Ag Services of America, Inc. (“ASA), Appellee’s
predecessor-in-interest, made a series of loans totalling $1.8 million to entities
run by members of the Veigel family (which entities and individuals are
*
Pursuant to 5TH CIR . R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR .
R. 47.5.4.
No. 08-10817
Appellants in this case) (“the Veigels”). All of the Veigels named as defendants
signed as makers or guarantors of these loans. The debt was secured by, inter
alia, a second lien on certain property in Deaf Smith County, Texas: this “Second
Lien Debt” is the loan at issue in this case.
In August 2000 two of the Veigel entities filed for Chapter 11 bankruptcy,
and bankruptcy plans (“the Bankruptcy Plans”) were confirmed in December
2001. The Bankruptcy Plans specifically preserved the Second Lien Debt, in the
amount of $1,621,550.00. Further litigation produced a 2002 settlement (“the
Settlement Agreement”), which was clarified in August 2003 and which reduced
the Second Lien Debt to $1.5 million. But the Veigels failed to repay the Second
Lien Debt, and Appellee foreclosed on the property in Deaf Smith County on
September 2, 2003. The property was at that time still encumbered by a first lien
for $3 million, and so the foreclosure on the property produced only $20,000
towards the Second Lien Debt.
The Veigels filed suit in state court challenging the foreclosure, but were
denied relief. While that case was pending, Appellee filed suit in federal district
court to recover the remaining balance due under the Second Lien Debt. The
district court stayed the proceedings until the state court case was resolved;
after the state court upheld the foreclosure, the district court granted summary
judgment for Appellee and found the Veigels liable for the deficiency on the loan.
The Veigels failed to file a timely appeal, and instead brought an F.R.C.P.
60(b)(4) motion arguing that the judgment was void because it allowed recovery
based on “promissory notes” that were discharged in bankruptcy. The district
court denied the motion on the grounds that the Second Lien Debt was
specifically preserved in the Bankruptcy Plans and that res judicata barred the
extinguishment defense because the state court had denied relief on this ground.
Our review of a 60(b)(4) motion is effectively de novo. Jackson v. Fie Corp.,
302 F.3d 515, 521-22 (5th Cir. 2002). On appeal, the Veigels argue, as they did
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below, that the Second Lien Debt was extinguished by the Bankruptcy
Plans/Settlement Agreement and that the $1.5 million owed under the
Settlement Agreement is a new obligation, making any judgment upholding a
foreclosure based on the Second Lien Debt void. We disagree.
Section 1141(d)(1)(A) of the Bankruptcy code, on which the Veigels rely,
provides that “[e]xcept as otherwise provided in this subsection, in the plan, or
in the order confirming the plan, the confirmation of a plan discharges the
debtor from any debt that arose before the date of such confirmation.” 11 U.S.C.
§ 1141(d)(1)(A). The Veigels strenuously insist that pre-confirmation debts are
not enforceable under a Chapter 11 bankruptcy plan. In re Page, 118 B.R. 456,
460 (Bankr. N.D. Tex. 1990). This is clearly true as a general matter. But the
statute explicitly allows for the preservation of obligations in such a plan, and
those obligations are not replaced or discharged. 11 U.S.C. § 1141(d)(1)(A). As
the district court correctly noted, the Bankruptcy Plans in this case specifically
provided for the preservation of the Second Lien Debt. See also Rabo Agrifinance
v. Terra XXI, Ltd., 257 Fed. Appx. 732 (5th Cir. 2007) (rejecting a similar
extinguishment argument by the Veigels in a related case between the same
parties arising out of another set of debts covered by the same Bankruptcy Plans
and Settlement Agreement). The Settlement Agreement reduced the amount of
the Second Lien Debt to $1.5 million but specified that “[a]ll terms and
covenants of [the Bankruptcy Plans and Agreed Orders] . . . are hereby
confirmed in all respects, and shall remain in force and effect, save and except
for” modifications including the reduction to $1.5 million. There is no support for
the argument that these modifications constituted a new obligation as opposed
to a clarified or modified existing obligation. The Veigels have cited no case law
to support this interpretation and no language in the documents that supports
it either. Because the Bankruptcy Plans and the Settlement Agreement clearly
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preserve the Second Lien Debt, we need not reach the res judicata claim. The
judgment of the district court is AFFIRMED.
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