Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca8-14-02816/USCOURTS-ca8-14-02816-0/pdf.json

Parties Involved:
Marilyn R. Boellner
Appellant
Samuel W. Boellner
Appellant
James F. Dowden
Appellee

Document Text:

United States Court of Appeals

For the Eighth Circuit

___________________________

No. 14-2816

___________________________

Samuel W. Boellner; Marilyn R. Boellner

lllllllllllllllllllllAppellants

v.

James F. Dowden, Chapter 7 Trustee

lllllllllllllllllllllAppellee

____________

Appeal from United States District Court 

for the Eastern District of Arkansas - Little Rock

____________

 Submitted: April 17, 2015

 Filed: May 12, 2015

[Unpublished]

____________

Before WOLLMAN and GRUENDER, Circuit Judges, and GRITZNER,1

 District

Judge.

____________

PER CURIAM.

1

The Honorable James E. Gritzner, United States District Judge for the Southern

District of Iowa, sitting by designation.

Appellate Case: 14-2816 Page: 1 Date Filed: 05/12/2015 Entry ID: 4274157 
Samuel W. Boellner and Marilyn R. Boellner are a married couple who filed

separate petitions for Chapter 7 bankruptcy. The bankruptcy court2

 granted the

trustee’s motion for joint administration and substantive consolidation. We affirm. 

When the Boellners filed their bankruptcy petitions on September 25, 2013,

they shared a checking account, several credit cards, and a leased car. Their

statements of financial affairs indicated that they had jointly withdrawn funds from

IRAs—$240,519.00 in 2011 and $210,399.16 in 2012. Together they also owed state

and federal taxes, as well as attorney’s fees they had incurred defending a civil case. 

In that case, Clinical Study Centers, John Giblin, Gordon Gibson, and Anthony

Johnson obtained a $571,303.96 judgment against the Boellners, a sum for which they

were jointly and severally liable. John Giblin also obtained a $325,600.00 judgment

against Samuel. 

The Boellners lived separately. Marilyn’s home was unencumbered and valued

at $450,000.00. Samuel’s home was subject to a mortgage and in the process of being

surrendered to the mortgage holder. The Boellners had separate insurance policies,

separate interests in businesses, separate annuities, and separate IRAs, with Samuel

owning annuities and IRAs valued at more than $700,000.00. Both had individual

credit card debt.

At the hearing on the trustee’s motion, the bankruptcy court received in

evidence the statements of financial affairs and the original and amended bankruptcy

schedules filed by each of the Boellners. The trustee argued that the Boellners’ assets,

liabilities, and handling of financial affairs were substantially the same. According

to the trustee, allowing the Boellners to maintain separate bankruptcy estates would

prejudice the creditors because the Boellners could then stack federal and state

2

The Honorable James G. Mixon, late a United States Bankruptcy Judge for the

Eastern District of Arkansas.

-2-

Appellate Case: 14-2816 Page: 2 Date Filed: 05/12/2015 Entry ID: 4274157 
exemptions, something they could not do if their cases were consolidated. Clinical

Studies Center and John Giblin adopted the trustee’s position. The Boellners argued

that substantive consolidation was not warranted because they had separate assets,

separate liabilities, separate IRAs and annuities, and separate monthly expenses. 

In response to the bankruptcy court’s inquiry why the Boellners had filed

separate rather than joint petitions for bankruptcy, their counsel replied that

maintaining separate bankruptcy estates would allow Samuel to claim exemptions

under federal law and Marilyn to claim exemptions under state law. Substantive

consolidation would require the Boellners to choose either federal exemptions or state

exemptions. See 12 Collier on Bankruptcy Intro.02 (Alan N. Resnick & Henry J.

Sommer eds., 16th ed. 2015) (“The general rule under the Bankruptcy Code is that a

debtor is permitted to choose between (a) the scheme of federal exemptions prescribed

in section 522(d) of the Code or (b) the exemptions available under other federal law

and the law of the state in which the debtor is domiciled.”). A comparison of the

schedules each spouse filed revealed that Samuel claimed his annuities and IRAs as

exempt from the bankruptcy estate, see 11 U.S.C. § 522(d), and that Marilyn claimed

her home as exempt from the bankruptcy estate, see Ark. Const. art. IX, § 3. 

The bankruptcy court ordered substantive consolidation after considering

whether the debtors were interrelated, whether the benefit of consolidation outweighed

the harm to the creditors, and whether any prejudice would result from allowing the

debtors to maintain separate bankruptcy estates. The Boellners appealed to the

Bankruptcy Appellate Panel. After the trustee removed the appeal, the district court3

affirmed the bankruptcy court’s order and later denied the Boellners’ motion for

reconsideration. The question before us on appeal is whether the bankruptcy court

abused its discretion in ordering substantive consolidation. 

3

The Honorable Brian S. Miller, Chief Judge, United States District Court for

the Eastern District of Arkansas. 

-3-

Appellate Case: 14-2816 Page: 3 Date Filed: 05/12/2015 Entry ID: 4274157 
Substantive consolidation of two bankruptcy estates “means assets and

liabilities of both debtors are pooled.” In re N.S. Garrott & Sons, 48 B.R. 13, 17

(Bankr. E.D. Ark. 1984). “In assessing the propriety of substantive consolidation, a

court must determine: (1) whether there is a substantial identity between the assets,

liabilities, and handling of financial affairs between the debtor spouses; and (2)

whether harm will result from permitting or denying consolidation.” In re Reider, 31

F.3d 1102, 1108 (11th Cir. 1994). “Ultimately, the court must be persuaded that the

creditors will suffer greater prejudice in the absence of consolidation than the debtors

(and any objecting creditors) will suffer from its imposition.” Id. at 1109 (citations

and internal quotation marks omitted); see also In re Giller, 962 F.2d 796, 799 (8th

Cir. 1992); In re N.S. Garrott & Sons, 48 B.R. at 18. 

The Boellners contend that the trustee failed to present evidence sufficient to

show that a substantial identity existed between the assets, liabilities, and handling of

financial affairs of the debtors. We disagree. The bankruptcy court carefully

reviewed the statements of financial affairs and the bankruptcy schedules—the only

evidence submitted by the parties—which allowed the bankruptcy court to identify the

joint assets and joint liabilities set forth above. In reviewing the evidence, the

bankruptcy court remarked on the peculiarity of the claim that Marilyn owned her

home, yet Samuel claimed ownership of the couple’s household goods. It also noted

that the Boellners’ separate statements of financial affairs indicated that they had

jointly withdrawn funds from IRAs. The evidence presented thus was sufficient to

establish substantial identity.4

4

We reject the Boellners’ contention that the trustee was required to establish

that the Boellners’ affairs were so intermingled that their respective assets and

liabilities could not be separated. To determine substantial identity, the bankruptcy

court properly considered “the extent of jointly held property and the amount of jointowed debt.” In re Reider, 31 F.3d at 1109; see also id at 1108-09 n.8 (“No set of

factors should be mechanically applied, and no factors are necessarily dispositive.”

(citations omitted)).

-4-

Appellate Case: 14-2816 Page: 4 Date Filed: 05/12/2015 Entry ID: 4274157 
The Boellners also argue that the evidence was insufficient to show that the

creditors would be harmed if the cases were allowed to proceed separately. Again, the

bankruptcy court relied upon the Boellners’ statements of financial affairs and

bankruptcy schedules. It determined that “the creditors will suffer great prejudice

because if the exemptions were allowed to be stacked . . . [the creditors] would in all

likelihood receive no distribution or significantly less distribution than they would if

this was a joint case.” Stated differently, the bankruptcy court found that if Marilyn

were permitted to exempt her home under Arkansas law and Samuel were permitted

to exempt his IRAs and annuities under federal law, their separate estates would have

significantly less value than if their cases were substantively consolidated and the

Boellners were forced to choose either federal or state exemptions. As it was with

respect to the question of substantial identity, the evidence presented at the hearing

was sufficient to establish the harm to creditors if the two cases proceeded separately. 

We conclude that the bankruptcy court did not abuse its discretion in ordering

joint administration and substantive consolidation, and thus we affirm its order of

consolidation.

______________________________

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Appellate Case: 14-2816 Page: 5 Date Filed: 05/12/2015 Entry ID: 4274157