# United States Court of Appeals **For the Eighth Circuit**

___________________________ No. 14-2816

___________________________ Samuel W. Boellner; Marilyn R. Boellner

lllllllllllllllllllll Appellant s

v. James F. Dowden, Chapter 7 Trustee

lllllllllllllllllllll Appellee

____________ 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____________ Submitted: April 17, 2015 Filed: May 12, 2015 [Unpublished]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.Samuel W. Boellner and Marilyn R. Bo ellner are a married couple who filed separate petitions for Chapter 7 bankruptcy. The bankruptcy court 2granted 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 Their statements of financial affairs indicated that they had jointly withdrawn funds from IRAs—$240,519.00 in 2011 and $210, 399.16 in 2012.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 unenc umbered 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 separateinsurance policies, separate interests in busine sses, separate annu ities, 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. Th e trustee argued that the Boellners’ assets, liabilities, and handling of financial affairs were substan tially the same. According to the trustee, allowing the Boellners to maintain separate ba nkruptcy estates would prejudice the creditors because the Boelln ers could then stack federal and state

2 The Honorable James G. Mixon, late a Un ited States Bankruptcy Judge for the Eastern District of Arkansas.
-2-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 se parate monthly expenses.

In response to the bankruptcy court’s inquiry why the Boellners had filed separate rather than joint petitions fo r bankruptcy, their counsel replied that maintaining separate bankrupt cy estates would allow Samuel to claim exemptions under federal law and Marilyn to claim exemptions under state law. Substantive consolidation would require th e 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 ru le 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 debt or 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 substan tive 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 es tates. The Boellners appealed to the Bankruptcy Appellate Panel. After the trus tee removed the appeal, the district court 3 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 orderi ng substantive consolidation.

3 The Honorable Brian S. M iller, Chief Judge, United St ates District Court for the Eastern District of Arkansas.
-3-Substantive consolidation of two ba nkruptcy 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 pr opriety of substantive consolidation, a court must determine: (1) whether there is a substantial identity between the assets, liabilities, and handling of fi nancial affair s between the debtor spouses; and (2) whether harm will result fro m permitting or denying conso lidation.” 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 be tween the assets, liabilities, and handling of financial affairs of the de btors. We disagree. Th e bankruptcy court carefully reviewed the statements of financial a ffairs and the bankruptcy schedules—the only evidence submitted by the parties—which allo wed the bankruptcy court to identify the joint assets and joint liab ilities 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 fro m 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 inte rmingled that their respective assets and liabilities could not be separated. To determine substantial identity, the bankruptcy court properly considered “the extent of jo intly held property and the amount of jointowed debt.” In re Reider , 31 F.3d at 1109; see also idat 1108-09 n.8 (“No set of factors should be mechanically applied, and no factors are necessarily dispositive.” (citations omitted)).
-4-The Boellners also argue that the evid ence was insufficient to show that the creditors would be harmed if the cases were allowed to pro ceed 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 significan tly 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 Samu el were permitted to exempt his IRAs and a nnuities 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 fe deral or state exemptions. As it was with respect to the question of substantial iden tity, the evidence presented at the hearing was sufficient to establish the harm to creditors if the tw o cases proceeded separately.

We conclude that the bankruptcy court did not abuse its discretion in ordering joint administration and substantive consolid ation, and thus we affirm its order of consolidation.

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