Bank of England v. Rice (In re Webb)

Summarized by Dean Langdon , DelCotto Law Group PLLC
12 years 3 weeks ago

Citation:

Eighth Circuit Court of Appeals Docket No. 13-1495

Tag(s):

Ruling:

Affirming the decision of the District Court for the Eastern District of Arkansas, which had affirmed the ruling of the Bankruptcy Court for the Eastern District of Arkansas, the Eighth Circuit Court of Appeals held that rice and farming equipment was property of the Debtors' estate which could be sold by their trustee free and clear of a claimed lien by the Bank of England, and that a joint venture created by the Debtors was not a separate entity under Arkansas law.

Procedural context:

After lender Bank of England (England, Arkansas) sought relief from the stay, the Debtors' trustee filed an adversary seeking to enjoin the bank from exercising possession or control over rice and farming equipment in which the bank claimed a security interest. The bankruptcy court granted a permanent injunction finding the property was property of the Debtors' estate, which the trustee could sell free and clear of the bank's lien. The bank appealed to the District Court, which affirmed. The bank then appealed to the Eighth Circuit Court of Appeals.

Facts:

Dudley R. Webb and Peggy J. Webb sought Chapter 7 relief in February 2012. Their schedules listed substantial amounts of rice and farming equipment owned with the "Dudley R. Webb, Jr. Farms Joint Venture". Loans were obtained from the Bank of England in the name of the joint venture, and the rice and farming equipment were pledged as collateral. The Debtors executed a joint venture agreement which provided that each Debtor owned 50% of the business, but that nothing in the agreement was intended to create a partnership. The bankruptcy court considered testimony of Mr. Webb, a bank representative and the trustee, as well as multiple exhibits. Mr. Webb testified that he treated the property as his own, and the evidence established that the Webbs reported income and expenses on Schedule F of their tax return, as opposed to a Form 1065 partnership return. There were no bills of sale transferring property, nor was the joint venture registered with the Arkansas Secretary of State. Relying on Arkansas law, the bankruptcy court determined that the rice and farming equipment were property of the Webbs (and thus, their estate), and not property of a separate entity.

Judge(s):

Loken, Murphy and Smith; Opinion by Murphy.

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