Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca8-14-06044/USCOURTS-ca8-14-06044-0/pdf.json

Parties Involved:
CHS
Appellee
Kyle Carlson
Appellee
Darin Larry Seifert
Appellant

Document Text:

United States Bankruptcy Appellate Panel

For the Eighth Circuit

___________________________

No. 14-6044

___________________________

In re: Darin Larry Seifert

 Debtor

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Darin Larry Seifert

 Debtor - Appellant

v.

Kyle Carlson

 Trustee - Appellee

CHS

 Objector - Appellee

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Appeal from United States Bankruptcy Court 

for the District of Minnesota - Fergus Falls

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Submitted: April 23, 2015

Filed: May 22, 2015

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Before FEDERMAN, Chief Judge, NAIL and SHODEEN, Bankruptcy Judges.

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SHODEEN, Bankruptcy Judge.

Appellate Case: 14-6044 Page: 1 Date Filed: 05/22/2015 Entry ID: 4277845 
The Debtor, Darin L. Seifert, appeals the order that resulted from the 

bankruptcy court’s bench ruling on November 18, 2014, which held that the 

objection to debtor’s claim of exemption in farm proceeds pursuant to state law was 

moot. We have jurisdiction of this appeal from entry of the bankruptcy court’s final 

order pursuant to 28 U.S.C. section 158(b). For the reasons set forth below, we 

reverse and remand for further proceedings. 

STANDARD OF REVIEW

A bankruptcy court’s findings of facts are reviewed for clear error, and its 

conclusions of law are reviewed de novo. First Nat’l Bank v.Pontow, 111 F.3d 604, 

609 (8th Cir. 1997) (quoting Miller v. Farmers Home Admin. (In re Miller), 16 F.3d 

240, 242 (8th Cir. 1994)). Issues subject to a bankruptcy court’s discretion are 

reviewed for an abuse of that discretion based upon a failure to apply the proper legal 

standard. Sanders v. Clemco Indus., 862 F.2d 161, 169-70 (8th Cir. 1988). The 

conclusion that such an abuse occurred can only be reached if the court’s ruling was 

clearly erroneous as to factual findings or legal conclusions. Yates v. Forker (In re 

Patriot Co.), 303 B.R. 811, 814 (B.A.P. 8th Cir. 2004). 

DISCUSSION

Seifert filed his petition under chapter 12 of the Bankruptcy Code on 

December 23, 2013. In the schedules filed with the court the sale proceeds from the

current year’s crop were described as “farm earnings” valued at $134,661. This asset

consisted of five checks made jointly payable to the Farm Services Agency (FSA), 

CHS, Inc. and Seifert. Seifert claimed $91,258 of these farm earnings as exempt

under Minnesota Statute § 550.37(13). FSA was identified as a secured creditor that 

held equipment, crops, farm earnings and a Kenworth tractor as collateral. CHS, 

Inc. filed a timely objection to Seifert’s exemption claim in the farm earnings, which 

the trustee later joined. 

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Based upon the amount of its claim and the value of the collateral, FSA was 

classified and treated as an oversecured creditor in all of the proposed plans filed by 

Seifert. The FSA did not object to Seifert’s claim of exemptions or to any of the 

filed plans. CHS and the chapter 12 trustee objected to each of the plans on various 

grounds. One of their objections was based upon the best interests of creditors test 

required under 11 U.S.C. section 1225(a)(4) and closely aligned to the exemption 

controversy. Under that code provision, in order to obtain confirmation of a chapter 

12 plan, a debtor must demonstrate that: “the value, as of the effective date of the 

plan, of property to be distributed under the plan on account of each allowed 

unsecured claim is not less than the amount that would be paid on such claim if the 

estate of the debtor were liquidated under chapter 7 of this title on such date.” Both 

CHS and the trustee took the position that because Seifert was not entitled to an 

exemption in the farm earnings the amount to be paid to the unsecured creditors must 

include the value of that asset. 

At a May 28, 2014 hearing the bankruptcy court was informed that Seifert, 

CHS and the trustee had reached an agreement on the objections to confirmation of 

the plan related to 11 U.S.C. section 1225(a)(4). A Third Amended Plan, filed on 

September 24, 2014, included the following language: 

The Debtor’s net equity in his property, after deducting the 

amounts of the secured claims and his exemptions, is set 

by Stipulation. The debtor agrees that no less than 

$32,500.00 shall be paid to the Trustee for payment of cost 

of administration excluding attorney fees and distribution 

to creditors over the life of the Plan as provided for in 

Article VII. However, if the Debtor’s claim of exemption 

of farm earnings is finally disallowed, the Debtor shall pay 

the principal sum of $95,000.00, together with interest, as 

provided in Article VII.

After the parties had reached their agreement, but before the next hearing on plan 

confirmation, CHS filed a pleading with the Court asserting that the pending 

exemption dispute was moot because the checks resulting from the sale of the 2013 

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crop had been turned over to FSA and consequently Seifert retained no interest in 

those funds. 

It is well-settled that jurisdiction of the federal courts is confined to actual 

controversies in which one of the litigants has a “legally cognizable interest.” 

Genesis Healthcare Corp. v. Symczyk, 133 S.Ct. 1523, 1528 (2013) (internal 

citations and quotations omitted). Requests for declaratory relief are equally subject 

to the doctrine of mootness. See Marine Equip. Mgmt. Co. v. United States, 4 F.3d 

643, 646 (8th Cir. 1993); see also Orix Credit Alliance, Inc. v. Wolfe, 212 F.3d 891, 

896 (5th Cir. 2000). An actual controversy must exist at all stages of the proceeding 

which will result in a remedy that can be fashioned to address an interest or injury 

alleged by one of the parties. If subsequent developments in the case preclude such 

a result the issue becomes constitutionally moot. See Genesis Healthcare Corp. v. 

Symczyk, 133 S.Ct. at 1528; Shea v. Esensten, 208 F.3d 712, 716 (8th Cir.2000); 

Missouri v. Craig, 163 F.3d 482, 485 (8th Cir.1998). “A live case or controversy 

exists . . . if the parties have an interest in the outcome of the litigation.” In re PW, 

LLC, 391 B.R. 25, 33 (B.A.P. 9th Cir. 2008). 

There is no doubt that the parties' stipulation, incorporated into the proposed 

plan, reserved the issue of the disputed claim of exemption for later determination. 

Payment to the FSA did not operate to override the parties’ stipulation and did not 

constitute a determination of what amount would be paid to unsecured creditors. 

The issue of whether debtor is entitled to the exemption under state law is not moot.

For the reasons set forth, the decision of the bankruptcy court is reversed and 

remanded for further proceedings consistent with this opinion. 

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