LorCon LLC #1 v. Heyl (In re Heyl)

Summarized by Lars Fuller , BakerHostetler
12 years 2 months ago

Citation:

Lorcon LLC #1 & Conway v. Heyl (In re Heyl), Case No. 13-6022 (B.A.P. 8th Cir. December 12, 2013)

Tag(s):

Ruling:

The BAP affirmed the bankruptcy court's denial of creditors'/plaintiffs' Rule 60(b)/FRBP 9024 motion to vacate judgment following the bankruptcy court's entry of judgment in favor of Chapter 7 debtor on creditors'/plaintiffs' 523(a)(2)(A) dischargeability suit. The BAP ruled that sole appellant lacked standing to prosecute appeal because appellant lacked a financial stake in the bankruptcy court's denial of the Rule 60 motion under the "person aggrieved doctrine" of bankruptcy appellate standing. The BAP ruled that appellant, who was the member of co-plaintiff LLC, who was dismissed from appeal after its counsel withdrew, did not possess a financial stake in the bankruptcy court's denial of the Rule 60 motion. While appellant was a co-plaintiff in the dischargeability suit, the suit sought damages and a declaration of nondischargeability on co-plaintiff LLC's claim only. Member-appellant did not assert a claim in the bankruptcy. BAP ruled that member appellant could not assert interest of LLC on appeal, and lacked any pecuniary interest, since member appellant had not asserted claim in bankruptcy or dischargebility suit.

Procedural context:

Creditors'/plaintiffs' appealed to 8th Circuit BAP bankruptcy court's denial of their Rule 60(b)/FRBP 9024 motion to vacate judgment following the bankruptcy court's entry of judgment in favor of debtor on creditors'/plaintiffs' 523(a)(2)(A) dischargeability suit.

Facts:

Debtor promoted various real estate ventures to LLC, and LLC's member. LLC invested funds in venture. When initial venture became distressed, debtor convinced LLC to transfer its investment to another project. Member managed LLC and negotiated a commitment from debtor to personally obtain passive losses from project. Second project required two additional capital calls from LLC. Second project also failed, and debtor filed bankruptcy under Chapter 7. LLC filed proof of claim based on original investment and capital calls; member did not file claim. LLC and member commenced suit under 523(a)(2) to except LLC's losses in project--i.e., initial investment and capital calls--from dischargeability. Co-plaintiffs did not include claim related to debtor's promise to transfer passive losses to member individually. Following trial, bankruptcy court entered judgment in favor of debtor, dismissing co-plaintiffs' claims, and finding that co-plaintiffs failed to prove damages. Co-plaintiffs subsequently filed a motion under Rule 60(b)/FRBP 9024 to vacate the judgment based on allegedly newly discovered evidence. Bankruptcy court ruled that co-plaintiffs failed to demonstrate that newly discovered evidence could not have been discovered prior to trial.

Judge(s):

Kressel, Saladino, Nail (Nail authoring)

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