Kaler v. Slominski (In re Keeley and Grabanski Land Partnership)

2015 WL 2237147
The bankruptcy court erred in calculating damages and offset under Section 550. The bankruptcy court incorrectly gave defendant an offset for costs of improvements after finding that he did not increase the value of the property. Section 550(e) states that the offset is for the lesser of increase in value or costs, so that when the increase is zero, the offset is zero. Bankruptcy court also erred by not awarding defendant value of crops he planted during time he occupied the land. If he pays fair market rent, he is entitled to the value of the crops.
Procedural context:
Appeal from the United States Bankruptcy Court for the District of North Dakota
Debtor and defendant entered into lease for farmland at rent of 20% of proceeds from the land, with minimum payment of $300,000. Trustee brought action to avoid lease as a fraudulent conveyance. Bankruptcy court found that the fair market rent was $490,845 and avoided the lease. Bankruptcy court gave defendant offset for value of his improvements even though the improvements did not increase the value of the property. Bankruptcy court also refused to give defendant the value of the crops that he planted. Both trustee and defendant appealed.
Federman, Nail, and Shodeen

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