Brian J. Kelly v. Peter Herrell

Case Type:
Case Status:
21-2442, 21-2443 (7th Circuit, Dec 22,2022) Not Published
By withdrawing a motion to dismiss the involuntary petition that, in essence, alleged fraud in the proceedings and by failing to argue in the appeal to the district court an argument raised in the Court of Appeals, the debtor waived all substantive arguments that had been or could have been made in support of his appeal. Even though the debtor appeared pro se, the debtor bears responsibility for crafting and preserving legal arguments.
Procedural context:
The debtor appealed orders of the bankruptcy court that had been affirmed by the district court. The bankruptcy court orders, among other things, denied the debtor's recusal motion and dismissed the debtor's adversary proceeding against the alter ego of a petitioning creditor.
Three creditors initiated an involuntary bankruptcy case against Brian J. Kelly in 2002. In 2003, Kelly moved to dismiss the involuntary petition and alleged that one of the three petitioning creditors had a false claim that was acquired in bad faith (the alter-ego of this creditor, Bernard Seidling ("Seidling") was convicted of fraud). The bankruptcy court denied the motion. About ten years later, the Court of Appeals affirmed the bankruptcy court and noted that only one valid claim was needed to initiate an involuntary bankruptcy case. The bankruptcy court then ordered the sale of Kelly's farmland, subject to liens and encumbrances, to the Jerry Johnson Revocable Trust ("Johnson"). Kelly appealed, and the Court of Appeals affirmed the bankruptcy court's sale order. The sale, however, failed. The U.S. Trustee requested entry of an order declaring that Johnson had abandoned the sale. Kelly then filed a "motion to dismiss" the case because Johnson failed to close. Kelly then requested that the presiding bankruptcy judge recuse himself. Kelly argued, among other things, that the lawyer who represented Johnson in the bankruptcy court and his wife, who was now the chief bankruptcy judge in the district, had previously represented Kelly in his bankruptcy. The U.S. Trustee withdrew its motion to dismiss when Johnson's attorney appeared in court and represented that Johnson had obtained title commitment. Kelly withdrew his motion to dismiss. The bankruptcy judge rejected all of Kelly's arguments and dismissed an adversary proceeding filed by Kelly and his father that alleged that Seidling and others had violated the Wisconsin Organized Crime Control Act. Kelly appealed to the district court, which affirmed the bankruptcy court.

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