Reuter v. Cutcliff (In re Reuter)
- Summarized by Anthony Bisconti , Bienert Katzman Littrell Williams LLP
- 12 years 5 months ago
- Citation:
- Case Nos. 10-6043 and 10-6069 (B.A.P. 8th Cir., Jan. 31, 2011)
- Tag(s):
-
- Ruling:
- AFFIRMING the bankruptcy court's orders (1) denying confirmation of the debtor's chapter 11 plan, (2) granting creditors' motion to convert case to chapter 7, and (3) entering judgment in favor of creditors on certain dischargeability claims raised in an adversary proceeding, the Bankruptcy Appellate Panel for the Eight Circuit held that (a) because none of the debtor's arguments on appeal went to the merits of denial of confirmation of the plan or conversion of the case, the debtor had abandoned those issues on appeal and (b) the bankruptcy court properly held that the creditors validly asserted claims under both false pretenses and false representations prongs of 11 U.S.C. 523(a)(2)(A), fraudulent intent could be inferred to the debtor under applicable law, that under applicable law a private right of action existed for the debtor's sale of unregistered securities, and that the debtor could be held vicariously liable for the fraud of his partner.
- Procedural context:
- Debtor appeals from orders denying confirmation of his chapter 11 plan, granting creditors' motion to convert case to chapter 7, and entering judgment in favor of creditors on certain dischargeability claims raised in an adversary proceeding.
- Facts:
- The debtor filed his chapter 11 petition in part to stay certain lawsuits filed against him related to a investment scheme. The plaintiffs then filed an adversary proceeding alleging that the debtor operated a Ponzi scheme, objecting to dischargeability. The creditors objected to the debtor's chapter 11 plan, raising many of the same issues as in the adversary proceeding. The creditors additionally moved to convert the case to chapter 7. In addition to his own fraud, the bankruptcy court held the debtor vicariously liable for the fraud of his former business partner. In denying confirmation of the debtor's proposed plan, the bankruptcy court held that bad faith was evident because under the totality of the circumstances, the purpose of the bankruptcy was to lessen the effects of the litigation against the debtor rather than to reorganize his finances, as the debtor had no debt other than the litigation claims. The bankruptcy court also found the plan was not feasible because the debtor was expected to only have $100 in disposable income per month, which was insufficient to cover all expenses and payments. Moreover, the bankruptcy court found that the debtor's pre-petition transfers of property, which was not included in the plan, rendered that property non-exempt, and accordingly it could be distributed to creditors upon conversion to chapter 7.
- Judge(s):
- Kressel, Saladino, and Nail.
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