Thomas D. Stalnaker v. George Allison ( 2014 )


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  •       United States Bankruptcy Appellate Panel
    For the Eighth Circuit
    ___________________________
    No. 13-6030
    ___________________________
    In re: Tri-State Financial, LLC, doing business as North Country Ethanol
    lllllllllllllllllllllDebtor
    ------------------------------
    Thomas D. Stalnaker, Trustee
    lllllllllllllllllllll Plaintiff - Appellant
    v.
    George Allison; Frank Cernik; Phyllis Cernik; Chris Daniel; Amy Daniel;
    Distefano Family LTD Partnership; Mark E. Ehrhart; Robert G. Griffin; John
    Hoich; Denise Hoich; James G. Jandrain; American Interstate Bank; George
    Kramer; Bernie Marquardt; Radio Engineering Industries, Inc.; Joseph Vacanti,
    Trustee of The Joseph and Cynthia Vacanti Trust;
    lllllllllllllllllllll Defendants - Appellees
    Centris Federal Credit Union
    lllllllllllllllllllll Defendant - Appellant
    ------------------------------
    Centris Federal Credit Union
    lllllllllllllllllllllCounterclaim and Cross-Claim Plaintiff - Appellant
    v.
    Thomas D. Stalnaker
    lllllllllllllllllllllCounterclaim Defendant - Appellant
    and
    George Allison; Frank Cernik; Phyllis Cernik; Chris Daniel; Amy Daniel;
    Distefano Family LTD Partnership; Mark E. Ehrhart; Robert G. Griffin; John
    Hoich; Denise Hoich; James G. Jandrain; American Interstate Bank; Timothy
    Jackes; George Kramer; Bernie Marquardt; Radio Engineering Industries, Inc.;
    Joseph Vacanti, Trustee of The Joseph and Cynthia Vacanti Trust
    lllllllllllllllllllllCross-Claim Defendants - Appellees
    ___________________________
    No. 13-6036
    ___________________________
    In re: Tri-State Financial, LLC, doing business as North Country Ethanol
    lllllllllllllllllllllDebtor
    ------------------------------
    Thomas D. Stalnaker, Trustee
    lllllllllllllllllllll Plaintiff - Appellee
    v.
    George Allison; Frank Cernik; Phyllis Cernik; Chris Daniel; Amy Daniel;
    Distefano Family LTD Partnership
    lllllllllllllllllllll Defendants - Appellants
    Mark E. Ehrhart; Robert G. Griffin; John Hoich; Denise Hoich
    lllllllllllllllllllll Defendants
    James G. Jandrain; George Kramer; Bernie Marquardt
    lllllllllllllllllllll Defendants - Appellants
    Radio Engineering Industries, Inc.; Joseph Vacanti, Trustee of The Joseph and
    Cynthia Vacanti Trust; American Interstate Bank
    lllllllllllllllllllll Defendants
    Centris Federal Credit Union
    lllllllllllllllllllll Defendant - Appellee
    ------------------------------
    Centris Federal Credit Union
    lllllllllllllllllllllCounterclaim and Cross-Claim Plaintiff - Appellee
    v.
    Thomas D. Stalnaker
    lllllllllllllllllllllCounterclaim Defendant - Appellee
    ------------------------------
    George Allison; Frank Cernik; Phyllis Cernik; Chris Daniel; Amy Daniel;
    Distefano Family LTD Partnership
    lllllllllllllllllllllCross-Claim Defendants - Appellants
    Mark E. Ehrhart; Robert G. Griffin; John Hoich; Denise Hoich
    lllllllllllllllllllllCross-Claim Defendants
    James G. Jandrain
    lllllllllllllllllllllCross-Claim Defendant - Appellant
    American Interstate Bank
    lllllllllllllllllllllCross-Claim Defendant
    Timothy Jackes; George Kramer; Bernie Marquardt
    lllllllllllllllllllllCross-Claim Defendants - Appellants
    Radio Engineering Industries, Inc.; Joseph Vacanti, Trustee of The Joseph and
    Cynthia Vacanti Trust
    lllllllllllllllllllllCross-Claim Defendants
    ____________
    Appeal from United States Bankruptcy Court
    for the District of Nebraska - Omaha
    ____________
    Submitted: December 10, 2013
    Filed: February 5, 2014
    ____________
    Before KRESSEL, SCHERMER and NAIL, Bankruptcy Judges.
    ____________
    NAIL, Bankruptcy Judge.
    Trustee Thomas Stalnaker and Centris Federal Credit Union appeal the May 21,
    2013 judgment of the bankruptcy court to the extent it determined certain funds were
    not property of the bankruptcy estate. James G. Jandrain, Distefano Family Ltd.
    Partnership, George Allison, Jr., Frank and Phyllis Cernik, Chris and Amy Daniel,
    Timothy Jackes, George Kramer, and Bernie Marquardt appeal the same judgment to
    the extent it awarded Stalnaker certain fees and expenses and surcharged those fees
    -4-
    and expenses against the funds the bankruptcy court determined were not property of
    the bankruptcy estate. We reverse and remand for further proceedings consistent with
    this opinion.
    BACKGROUND
    In June and July 2003, a group of investors referred to as "the Omaha Group"
    transferred $2,000,000.00 to Tri-State Financial, LLC. Over the following year, Tri-
    State Financial transferred $793,654.42 of those funds to Tri-State Ethanol Company,
    LLC, which was in chapter 11 bankruptcy in the District of South Dakota, and
    $1,190,000.00 of those funds to one of Tri-State Ethanol's vendors.
    In July 2004, Tri-State Ethanol's case was converted to chapter 7, and John
    Lovald was appointed chapter 7 trustee. Tri-State Financial filed a request for
    payment of an administrative expense and a proof of claim seeking recovery of both
    the $793,654.42 and the $1,190,000.00. In July 2006, Lovald paid Tri-State Financial
    the $793,654.42. Tri-State Financial distributed the entire sum to the Omaha Group.
    In November 2008, Tri-State Financial filed a petition for relief under
    chapter 11 of the bankruptcy code. In January 2009, Stalnaker was appointed chapter
    11 trustee. Sometime thereafter, Lovald paid Stalnaker the $1,190,000.00.
    In September 2010, Stalnaker filed an adversary proceeding to determine
    ownership of the $1,190,000.00. Stalnaker claimed the funds were property of the
    bankruptcy estate. Centris agreed the funds were property of the bankruptcy estate,
    but it claimed the funds were subject to its blanket security interest in Tri-State
    Financial's assets. James G. Jandrain, Distefano Family Ltd. Partnership, George
    Allison, Jr., Frank and Phyllis Cernik, Chris and Amy Daniel, Timothy Jackes,
    George Kramer, and Bernie Marquardt (collectively, "Jandrain, et al.") claimed the
    funds were held in trust by Tri-State Financial and were thus not property of the
    -5-
    estate. The matter was tried, and on February 13, 2013, the bankruptcy court entered
    an order: (1) determining the funds were not property of the bankruptcy estate; (2)
    determining the bankruptcy estate was entitled to be reimbursed both for the legal
    fees and expenses it incurred in litigating and eventually settling with Lovald and for
    the attorney fees, costs, and expenses it incurred in the adversary proceeding; and (3)
    outlining the procedure for Stalnaker to request reimbursement for those fees, costs,
    and expenses.
    Stalnaker requested $35,944.45 for the legal fees and expenses the bankruptcy
    estate incurred in litigating and eventually settling with Lovald and $61,886.90 for
    the attorney fees, costs, and expenses the bankruptcy estate incurred in the adversary
    proceeding. No party in interest objected to the amounts requested or to the
    $35,944.45 being surcharged against the $1,190,000.00. However, several parties in
    interest, including Jandrain, et al., objected to the $61,886.90 being surcharged
    against the $1,190,000.00. The matter was heard, and on May 21, 2013, the
    bankruptcy court entered an order allowing the amounts requested and surcharging
    both the $35,944.45 and the $61,886.90 against the $1,190,000.00.
    On May 21, 2013, the bankruptcy court entered a judgment incorporating the
    terms of its February 13, 2013 and May 21, 2013 orders. Stalnaker and Centris timely
    filed a notice of appeal. Jandrain, et al., timely filed a notice of cross appeal.
    STANDARD OF REVIEW
    We review the bankruptcy court's findings of fact for clear error and its legal
    conclusions de novo. Islamov v. Ungar (In re Ungar), 
    633 F.3d 675
    , 678-79 (8th Cir.
    2011).
    -6-
    DISCUSSION
    Stalnaker and Centris identify fifteen issues presented on appeal. Jandrain, et
    al., identify an additional fifteen issues presented on appeal and identify three issues
    presented on cross-appeal. These issues may all be boiled down to two: (1) whether
    the bankruptcy court erred in concluding the $1,190,000.00 was not property of the
    bankruptcy estate; and (2) whether the bankruptcy court erred in surcharging
    Stalnaker's attorney fees, costs, and expenses against the $1,190,000.00. Having
    reviewed the record and having considered the arguments of the parties, we believe
    any consideration of either issue is premature.
    In their post-trial brief, Stalnaker and Centris argued, inter alia, "[Tri-State
    Financial] is judicially estopped from having any intent or position imputed upon it
    other than the [$1,190,000.00] belong[s] to [Tri-State Financial]." Stalnaker and
    Centris also argued a "sweeping release" executed in August 2006 by all but two
    members of the Omaha Group–Jandrain and Radio Engineering Industries,
    Inc.–"includes any claimed obligation of [Tri-State Financial] to turn over the
    [$1,190,000.00] to [those parties.]" Finally, Stalnaker and Centris argued the Omaha
    Group "should be estopped from asserting ownership to the [$1,190,000.00]." Both
    the bankruptcy court's February 13, 2013 order and its May 21, 2013 order are silent
    with respect to these arguments.
    We could, perhaps, interpret the bankruptcy court's silence as an implicit
    rejection of Stalnaker and Centris's arguments and render an opinion on that basis.
    However, we believe the better course is to afford the bankruptcy court an
    opportunity to consider those arguments, if it did not in fact do so, and explain its
    reasoning for accepting or rejecting them.
    -7-
    CONCLUSION
    For the foregoing reasons, we reverse and remand for further proceedings
    consistent with this opinion.
    -8-
    

Document Info

Docket Number: 13-6030

Filed Date: 2/5/2014

Precedential Status: Precedential

Modified Date: 10/30/2014