Keeley and Grabanski Land Partnership v. Keeley (In re Keeley and Grabanski Land Partnership)
- Citation:
- No. 11-6020 (8th Cir. B.A.P. September 6, 2011).
- Tag(s):
-
- Ruling:
- The Eighth Circuit BAP affirmed the appointment of a chapter 11 trustee in the involuntary bankruptcy case of a partnership based on numerous allegations of misconduct and and fraudulent behavior by one of the partners and also based on that partner's conduct in another chapter 11 case in which the partner was the debtor. The involuntary partnership case followed a chapter 11 case filed by one of the the partners, Grabanski, in which Grabanski repeatedly failed to timely or completely comply with court deadlines. There was evidence of self-dealing, and mismanagement of the partnership by Grabanski. Moreover, there were numerous allegations of fraud that had been asserted against and were being defended against by Grabanski. Even if the charges were unfounded, the Grabanski appeared to be fully occupied defending those cases. Following the reasoning of Grogan v. Garner regarding discharge of debt, the Court held that the standard of proof for the appointment of a trustee is the preponderance of evidence. The BAP deferred to the Bankruptcy Court's exercise of its discretion given the totality of the two cases and the conduct of Grabanski prior to and during his chapter 11 case.
- Procedural context:
- Affirmed. Appeal of appointment of a trustee in an involuntary chapter 11 case.
- Facts:
- A land partnership, Kelley and Grabanski Land Partnership (KGLP), was created by two families to own farm properties, including two properties in Texas being purchased on seller-financed mortgages. The partners also created another partnership, G&K, to operate the various farms. The operating partnership, G&K, encumbered all of its assets and gave second mortgages on the Texas properties. Under the direction of one of the partners, Grabanski, the G&K partnership inexplicably lost money from the farming operation, even though the crops had been insured. Moreover, it was asserted that Grabanski was guilty of fraud and self-dealing in the operation of both partnerships. The operating partnership (G&K) failed to pay rent to the land partnership (KGLP), and offers to purchase a lucrative easement on one of the Texas property were ignored, as was a substantial offer to purchase both of the Texas properties. Grabanski farmed the land in Texas on his own behalf and failed to pay rent for it to KGLP. Grabanski eventually filed a personal chapter 11 case to stop a contempt hearing, at literally the last minute. In Grabanski's chapter 11 case, the schedules were filed late and were incomplete, 2004 examinations were dodged, and deadlines to file a plan were not met. Four-and-a-half months after Grabanski's case was filed, an involuntary bankruptcy case was commenced against the land partnership, KGLP, to forestall foreclosure of one the mortgage on one of the two parcels of land in Texas . No answer was interposed to the involuntary petition. The involuntary debtor partnership continued to lose money, but Grabanski contested the appointment of a trustee for KGLP.
- Judge(s):
- Federman, Schermer and Nail
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