United States Bankruptcy Appellate Panel

FOR THE EIGHTH CIRCUIT

_____________

No. 97-6066SI

_____________

In re: *

 *

Robert Hatcher, Ruth Ann Hatcher, *

 *

Debtors. *

 *

Robert Hatcher, Ruth Ann Hatcher, *

 *

Debtors - Appellants, * Appeal from the

United States

 * Bankruptcy Court for

the

v. * Southern District of

Iowa

 *

U.S. Trustee, *

 *

Trustee - Appellee, *

 *

Allison Financial Corporation, *

 *

Creditor - Appellee. *

_____________

Submitted: February 12, 1998

Filed: March 6, 1998

_____________

Before WILLIAM A. HILL, SCHERMER, and SCOTT, Bankruptcy

Judges.

_____________

WILLIAM A. HILL, Bankruptcy Judge.
The Honorable Russell J. Hill, Chief Judge, United States Bankruptcy Judge for 1

the Southern District of Iowa.

2

The appellants, Robert and Ruth Ann Hatcher (“Hatchers”),

appeal from the order of the bankruptcy court dismissing their 1

Chapter 11 case for cause pursuant to the United States

Bankruptcy Code (“Code”), 11 U.S.C. § 1112(b). For the

following reasons, we affirm the order of the bankruptcy court.

 

I. BACKGROUND

The Hatchers are Iowa farmers. Prior to 1994, they owned

farmland which was partly encumbered by a mortgage on which

they fell delinquent. As a result, approximately one-half of

their farmland became the subject of a mortgage foreclosure

proceeding. A sheriff’s sale was set for January 6, 1994. The

Hatchers sought a loan in order to save their property;

however, their efforts failed. They then determined to sell

their entire property, which consisted of 46 acres of land on

which their residence and another building were situated. In

preparation for its sale, they platted the land into separate

parcels with an aggregate list price of $316,000.00. 

Several months prior to the sheriff’s sale, the Hatchers

located a buyer for their property. The parties agreed upon

a sale price of $69,300.00, with an option for the Hatchers to

repurchase the property within a specified period of time. The

sale collapsed, however, upon the buyer’s inability to obtain

financing for the transaction. Nevertheless, the Hatchers were

able to locate yet another buyer, Allison Financial

Corporation (“Allison”), with which they entered into a similar

sale agreement. 

On January 3, 1994, Allison signed a purchase agreement

with the Hatchers to purchase their entire property for
As the Court of Appeals of Iowa found, “[t]he lower price was due to a variety of 2

factors, including the need to remove an old ethanol plant tower, potential environmental

concerns, zoning changes, and the buy-back provision.”

3

$69,300.00. The parties’ agreement provided the Hatchers with 2

the option to repurchase the property by March 30, 1994. On

January 6, 1994, the
4

Hatchers executed a warranty deed in favor of Allison conveying

their entire real estate. The Hatchers did not exercise the

repurchase option. 

Subsequently, the Hatchers filed suit against Allison in

Iowa state district court seeking reformation of the sale

agreement by claiming the sale was intended to be a loan

transaction, and also seeking damages from Allison and several

other defendants for breach of fiduciary duty and for

fraudulent misrepresentation. The district court entered

judgment against the Hatchers in January 1995. Included among

its findings were the following: the Hatchers had attempted

to sell various portions of their farmland since at least 1988;

Mr. Hatcher himself negotiated the terms of the sale of his

property with its first potential buyer, including its sale

price, a repurchase option, and the closing date; Mr.

Hatcher’s real estate agent reduced the sale agreement to

writing, explained it to Mr. Hatcher, and also advised him

against entering into it; and, when the first deal fell

through, the Hatchers expressed to their real estate agent

their desire to locate another buyer. Finally, concerning the

Hatchers’ ultimate sale of their property to Allison, the court

found that:

The terms and conditions of the sale . . . [were]

explained fully in the written real estate sales

agreements. It was explained orally [as well]. It

is without question that [the Hatchers] freely and of

their own accord executed a warranty deed in the

presence of a notary public transferring title of the

real estate to Allison . . . . [The real estate

brokers] made no material misrepresentations so as to

mislead the Hatchers into selling their land.

The court additionally ruled that the Hatchers failed to prove

any breach of fiduciary duties or fraudulent misrepresentation

by the defendants. The court concluded by stating that:
5

[The Hatchers’] current status is due to the elusive

and unrealistic dream of Robert E. Hatcher. At all

times Robert Hatcher maintained a dream or wish that

someone with unlimited finances would pay an

exorbitant price for his farm. Upon receiving this

unreasonable sum, Robert E. Hatcher further

fantasizes of paying all his debts and purchasing a

different and better farm. This delusion was the

reason the [Hatchers] attempted at any cost to

purchase additional periods of time to allow Robert

E. Hatcher to locate his imaginary buyer.

Ultimately, the cost of this fantasy was the

[Hatchers’] home.
6

In a subsequent order entered on February 8, 1995, the

district court reaffirmed its earlier findings as to the

Hatchers’ and Allison’s agreement by ruling that, “It is clear

that the purchase agreement entered between [the Hatchers] and

Allison was intended as an absolute sale of the subject

property for fair and adequate consideration. The relationship

between [the Hatchers] and Allison was as seller and buyer

only.”

The Hatchers appealed the orders of the district court. 

In July 1996, the Court of Appeals of Iowa, after undertaking

a de novo review of the complete record, affirmed the entirety

of the district court’s rulings in pertinent part as follows:

[T]he Hatchers’ claim [that] they did not understand

the consequences of the [real estate] transaction was

not supported by the record. Robert Hatcher was

experienced and knowledgeable in real estate matters.

We also give weight to the finding of the trial court

that Hatcher’s expectations were not based on actions

or representations of others, but his own false hope.

. . . 

We have carefully reviewed the record and agree

with the trial court [that] Allison [and other

defendants] made no false representations to the

Hatchers which would support the claim for fraudulent

misrepresentation. In particular, no evidence

indicated any of the defendants expressed or implied

the real estate transaction was a loan. The relevant

documents clearly indicate the parties entered into

a sales agreement and any contrary understanding by

the Hatchers was not due to any false representations

made by [Allison]. In fact, the Hatchers had

attempted to sell their farm to another person prior

to the Allison sale, with terms nearly identical to

the Allison transaction. Their claim they didn’t

understand the transaction was a sale was not

reasonable under the circumstances.
7

. . . 

We agree the evidence is insufficient to support

reformation. Our goal is to ascertain the intent of

the parties. The evidence clearly shows the parties

intended the transaction to be a sales agreement. 

[F]rom the inception the Hatchers knew a sales

transaction was contemplated. The Hatchers and

Allison never maintained a debtor-creditor,

mortgagor-mortgagee relationship. In fact, it was

necessary for Allison to obtain a loan to purchase

the farmland from the Hatchers.

Furthermore, the purchase price was adequate

considering all the circumstances and risks,

associated with the farmland, as well as the buy-back
In their proposed Chapter 11 plan, Allison is listed as a creditor in the amount of 3

$69,000.00, and is treated as holding a disputed secured claim constituting an impaired

class.

8

provision. The Hatchers did retain possession of the

farm after the agreement was executed, but only

during the option period. We also observe the

language of the agreement leaves little doubt the

transaction was a conditional sale.

On October 4, 1996, the Supreme Court of Iowa, after an en banc

consideration, denied further review of the matter. 

Despite the unfavorable resolution of their appeals in the

Iowa state courts, the Hatchers refused to relinquish their

former real estate. Allison then commenced eviction

proceedings against them. However, on October 21, 1996, just

two hours before a hearing was to be held on the matter, the

Hatchers filed for Chapter 11 protection under the Code. 

In their Schedules and Statement of Affairs, the Hatchers

claimed a joint interest in the farmland and buildings which

they had sold to Allison. They listed the value as being

$300,000.00, “subject to a fraudulent conveyance action,” and

additionally claimed a homestead exemption of $150,000.00 in

up to forty acres of the property. The Hatchers scheduled

Allison as a fully secured creditor in the amount of $62,900.00

with the “Debtor’s land” serving as collateral.3

The Hatchers premise the viability of their proposed plan

entirely upon their claim of ownership of the real estate which

they previously sold to Allison. As they stated in Article VII

of their proposed plan, entitled “Means and Execution of the

Plan,” “The Debtor proposes to continue their [sic] farming

business and development business and pay creditors from future

income from this farming business and from the development of

various properties of the Debtors.” Thus, if their plan is to

have any chance of success, the Hatchers must in some way be

found the property’s owners. 
9

Both Allison and the United States Trustee filed motions

to dismiss the Hatchers’ case. Allison also filed a Motion for

Relief from Stay. The debtors resisted these motions,
10

reurging the fraudulent conveyance and loan-versus-sale

arguments which they had presented in the state courts. The

bankruptcy court held an evidentiary hearing on these motions

on December 19, 1996. On July 21, 1997, the court entered an

order dismissing the Hatchers’ case. In reaching this result,

the court stated:

Mr. Hatcher expressed his desire that this Court

find that the transaction with Allison was a loan

rather than a sale of property. This Court cannot

do that. The issue of the validity of the warranty

deed executed by [the Hatchers] was litigated in

state court. The district court decision was

appealed and affirmed by the Court of Appeals of

Iowa. [The Hatchers] were denied further review by

the Supreme Court of Iowa. The issue of the

validity of the transactions has conclusively been

determined; [the Hatchers’] transaction with

Allison was not a loan. This Court finds no

federal statute that provides an exception to the

application of collateral estoppel and therefore

affords full faith and credit to the Iowa state

court judgments in this case.

The court then based its dismissal order upon its determination

that the Hatchers had filed their Chapter 11 petition without

the requisite good faith contemplated under Section 1112(b) of

the Code. In this respect, the court provided the following

analysis:

In this case, Debtors do not own the real property

that is central to their reorganization. Debtors’

plan depends upon them keeping the land. Debtors

were on the brink of being forcibly removed from

Allison’s property. Debtors state they filed

their chapter 11 petition to save the house and

farm and to retain possession of the property. . .

. Even though ownership of the land has been

conclusively decided against them, Debtors continue

to occupy the land and fight efforts to evict them.

The bankruptcy was filed as a litigation tactic
11

after Debtors lost their fight in the Iowa state

courts. Debtors continue to pursue their starryeyed dream that the land is theirs and that they

can develop it. A reorganization without Allison’s

land would be futile; there can be no development

business without the land and Debtors cannot

continue their farming operation on this land.

This Court cannot and will not rewrite the sale of

Debtors’ land to Allison . . . This Court finds

that Debtors’ bankruptcy case and plan of

reorganization were filed in bad faith and are

objectively futile.
12

Lastly, because the court determined that the Hatchers’ case

should be dismissed, it denied as moot Allison’s motion for

relief from the automatic stay.

On appeal, the Hatchers argue, inter alia, that under Iowa

state law the transfer of the farmland to Allison constituted

a “constructive fraud” which they may avoid pursuant to 11

U.S.C. § 544(b). Specifically, they contend that upon filing

their bankruptcy petition, they assumed a new cloak of

identity--that of a trustee succeeding to the rights of a

judgment creditor. In this connection, they contend that they

may bring a fraudulent conveyance action based upon state law

by way of Code Section 544(b) and thereby avoid their prior

real estate transaction, independent from and ignorant of their

actions in the sale transaction and before the Iowa state

courts. Additionally, the Hatchers argue that the bankruptcy

court’s dismissal of their Chapter 11 case on the basis of bad

faith on their part was erroneous and should be reversed.

Allison argues that the Hatchers are presently asserting

the same claims which they previously litigated, and which were

decided, in Iowa state courts. It further contends that this

attempt at relitigation is precluded under the doctrines of res

judicata and collateral estoppel, as well as full faith and

credit, and that the bankruptcy court’s order must accordingly

be affirmed.

II. STANDARD OF REVIEW

On appeal, the bankruptcy court’s findings of fact are

reviewed for clear error and its legal determinations are

reviewed de novo. O’Neal v. Southwest Mo. Bank of Carthage (In

re Broadview Lumber Co.), 118 F.3d 1246, 1250 (8th Cir. 1997);
Rule 8013 of the Federal Rules of Bankruptcy Procedure reads, in pertinent part, 4

as follows:

Findings of fact, whether based on oral or documentary evidence, shall

not be set aside unless clearly erroneous, and due regard shall be given

to the opportunity of the bankruptcy court to judge the credibility of the

witnesses.

Fed. R. Bankr. P. 8013. 

13

Natkin & Co. v. Myers (In re Rine & Rine Auctioneers, Inc.),

74 F.3d 848, 851 (8th Cir. 1996); Hartford Cas. Ins. v. Food

Barn Stores, Inc. (In re Food Barn Stores, Inc.), 214 B.R. 197,

199 (B.A.P. 8th Cir. 1997); see also Fed. R. Bankr. P. 8013.4

“A finding is ‘clearly erroneous’ when although
14

there is evidence to support it, the reviewing court on the

entire evidence is left with a definite and firm conviction

that a mistake has been committed.” Anderson v. Bessemer City,

470 U.S. 564, 573, 105 S. Ct. 1504, 1511, 84 L.Ed.2d 518 (1985)

(quoting United States v. United States Gypsum Co., 333 U.S.

364, 395, 68 S. Ct. 525, 542, 92 L.Ed. 746 (1948)); see United

States v. Garrido, 38 F.3d 981, 984 (8th Cir. 1994);

Chamberlain v. Kula (In re Kula), 213 B.R. 729, 735 (B.A.P. 8th

Cir. 1997). This Court may affirm the bankruptcy court upon

any basis supported by the record. Allstate Fin. Corp. v.

United States, 109 F.3d 1331, 1333 (8th Cir. 1997); Dicken v.

Ashcroft, 972 F.2d 231, 233 (8th Cir. 1992); Brown v. Mitchell

(In re Arkansas Communities, Inc.), 827 F.2d 1219, 1222 (8th

Cir. 1987); Turner v. California Dep’t of Real Estate (In re

Turner), 199 B.R. 694, 696 (B.A.P. 9th Cir. 1996).

III. DISCUSSION 

Fraudulent Conveyance Action

The Hatchers contend that, having assumed a new identity

upon the filing of their bankruptcy case, they may proceed anew

under Code Section 544(b) with their claim that the transfer

of their property to Allison constituted a fraudulent

conveyance under Iowa state law. “A fraudulent conveyance is

a ‘transaction by means of which the owner of real or personal

property has sought to place the land or goods beyond the reach

of his creditors, or which operates to the prejudice of their

legal or equitable rights.’” Benson v. Richardson, 537 N.W.2d

748, 756 (Iowa 1995); see Hartford-Carlisle Sav. Bank v.

Shivers, 552 N.W.2d 909, 911 (Iowa Ct. App. 1996). The Supreme

Court of Iowa summarized the principles controlling a

creditor’s claim of fraudulent preferential transfer in First

State Bank v. Kalkwarf, 495 N.W.2d 708 (Iowa 1993), as follows:
15

1. A debtor may lawfully prefer one creditor

over another by way of sale, mortgage, or the

giving of security to others even if the debtor’s

intentions toward the nonpreferred creditor are

spiteful and will delay or prevent them from

obtaining payment.

2. A preferred creditor’s knowledge that the

debtor’s purpose was fraudulent will not defeat his

claim, so long as he acts in good faith for his own

protection.

3. Fraud on the part of the debtor will

affect the rights of only those preferred creditors

who in some way participate in it.

4. When a preferred creditor knows of the

debtor’s fraudulent intent and accepts a mortgage

of security wholly or in part to aid the fraud,

that preferred creditor has participated in the

wrong and the mortgage is fraudulent and will not

be honored.

5. Fraud must be found under the

circumstances considered as a whole. Some indicia

of fraud are: inadequacy of consideration;

insolvency of the transferor; and pendency or

threat of third-party creditor litigation.

6. A valid preexisting debt is ordinarily

sufficient consideration for any conveyance or

giving of security, so long as the amount of the

antecedent debt is not materially less than the

value of the property conveyed or encumbered.

7. A nonpreferred creditor bringing suit has

the burden of showing the preferred creditor’s

intentional participation in the fraudulent

preferential transfer by clear and convincing

evidence. 

Id. at 712; see, e.g., Benson, 537 N.W.2d at 756-58; Shivers,

522 N.W.2d at 911-912 ; Textron Fin. Corp. v. Kruger, 545

N.W.2d 880, 883-885 (Iowa Ct. App. 1996). 

The elements of this action are identical to many which

were previously analyzed by the Iowa state courts in this

matter. Indeed, in their brief to this Court, arguing under

the banner of “fraudulent conveyance,” the Hatchers have raised

precisely those claims which proved unsuccessful for them in

Iowa state courts. They argue, inter alia, that their

transaction with Allison was a loan and not a sale; that

“[u]nrefuted testimony at the trial in the Bankruptcy Court
16

[sic] . . . established clearly that these lands were worth in

excess of $268,000"; that “[t]he $63,000 paid [to the

Hatchers] was not fair consideration for 46 acres of the

[Hatchers’] farm lands.”
17

In this connection, the Iowa state courts determined that

the Hatchers initiated the search for a buyer of their

farmland; that Mr. Hatcher was experienced and knowledgeable

in real estate matters; that he negotiated the terms of the

sale of their farmland; that terms of the sale were fully

explained to him both in writing and orally; that the Hatchers

executed the sale of their farmland freely and of their own

accord; and, that no misrepresentations or false

representations which would support a claim for fraudulent

misrepresentation occurred in the course of the sale

transaction. Significantly, the courts found the purchase

price of $63,000.00 to be adequate consideration for the sale.

Thus, these prior decisions speak directly to the

Hatchers’ renamed action in these bankruptcy proceedings, that

is, to their fraudulent conveyance claim. While the Hatchers

are correct in their arguments that Code Section 544(b)

provides them with a new status and identity in bankruptcy--

that of a trustee with super-avoidance powers, their reliance

on that section is misplaced when they argue, in essence, that

it also provides them with an opportunity to collaterally

attack and disregard prior state court decisions. Section

544(b) does not provide the Hatchers with an opportunity to

relitigate in a federal forum those claims which have

previously been resolved in state courts. We may not, as a

lower federal appellate court, review the orders of those

courts. Only the United States Supreme Court may review state

court decisions.

Rooker-Feldman Doctrine

We note that preclusion, as relied upon by the bankruptcy

court, and the Rooker -Feldman doctrine “are closely related

legal concepts.” Goetzman v. Agribank, FCB (In re Goetzman),

91 F.3d 1173, 1177 (8th Cir.), cert. denied, --- U.S. ----, 117

S. Ct. 612, 136 L.Ed.2d 537 (1996); see Charchenko v. City of

Stillwater, 47 F.3d 981, 983 n. 1 (8th Cir. 1995). The

Rooker-Feldman doctrine “derives from the prohibition on

federal appellate review of state court proceedings,” Bechtold

v. City of Rosemount,104 F.3d 1062, 1065 (8th Cir. 1997), and
18

provides that “lower federal courts do not have subject matter

jurisdiction over challenges to state court decisions in

judicial proceedings,” Neal v. Wilson, 112 F.3d 351, 356 (8th

Cir. 1997). The doctrine “commands that the United States

Supreme Court is
19

the only federal court which may review state court decisions.”

First Commercial Trust Co. v. Colt’s Mfg. Co., Inc., 77 F.3d

1081, 1083 (8th Cir. 1996); Neal, 112 at 356. 

“Although the state and federal claims may not be

identical, impermissible appellate review may occur when a

federal court is asked to entertain a claim that is

‘inextricably intertwined’ with the state court judgment.” In

re Goetzman, 91 F.3d at 1177; see Neal, 112 at 356. “In order

to determine whether a claim is ‘inextricably intertwined’ with

a state court claim, the federal court must analyze whether the

relief requested in the federal action would effectively

reverse the state court decision or void its ruling.”

Bechtold,104 F.3d at 1065; Keene Corp. v. Cass, 908 F.2d 293,

296-97 (8th Cir. 1990); see also Neal, 112 at 356 (“A claim

is inextricably intertwined if the federal claim succeeds only

to the extent that the state court wrongly decided the issue

before it.”). 

Examination of the Hatchers’ claims on appeal leads us to

conclude that they are inextricably intertwined with the claims

the Hatchers presented in the prior state court proceedings

previously discussed herein. Central to the state court

proceedings were determinations by both the state district

court and the Court of Appeals of Iowa that the real estate

transaction to which the Hatchers object as being a fraudulent

conveyance, and which they claimed and continue to claim was

a loan, was actually a sale. In the state court proceedings,

it was adjudged that the Hatchers voluntarily sold this

property to Allison for fair consideration and under no

misrepresentations, and that Allison is its present owner.

Nevertheless, in the instant matter, the Hatchers continue to

challenge these state court determinations and additionally

premise the viability of their Chapter 11 plan upon their

purported ownership of this farmland, the ownership of which

the state courts have determined lies in Allison. 

Thus, if the Hatchers are to succeed in these bankruptcy

proceedings, this Court must effectively reverse the

determinations of the Iowa state courts. Accordingly, the
20

result the Hatchers currently seek is precisely that which the

Rooker-Feldman doctrine is intended to prevent. “‘Where

federal relief can only be predicated upon a conviction that

the state court was wrong, it is difficult to conceive the

federal proceeding as, in substance, anything other than a

prohibited appeal of the state-court judgment.’” Bechtold,104

F.3d at 1066 (quoting
21

Penzoil Co. v. Texaco, Inc., 481 U.S. 1, 25, 107 S. Ct. 1519,

1533, 95 L.Ed.2d 1 (1987) (Marshall, J., concurring)). We

conclude that the Hatchers’ instant appeal is, in substance,

a prohibited appeal under the Rooker-Feldman doctrine.

Dismissal for Cause

The bankruptcy court has broad discretion in deciding

whether to dismiss or convert a Chapter 11 case, Lumber Exch.

Bldg. Ltd. Partnership v. Mutual Life Ins. Co. (In re Lumber

Exch. Bldg. Ltd. Partnership), 968 F.2d 647, 648 (8th Cir.

1992), and is free to dismiss such a case where the debtor

cannot propose a confirmable plan, Windsor on the River

Assocs., Ltd. v. Balcor Real Estate Fin., Inc. (In re Windsor

on the River Assocs., Ltd.), 7 F.3d 127, 133 (8th Cir. 1993).

Dismissal is appropriate if “cause” exists, and “if it is ‘in

the best interest of creditors and the estate.’” Windsor, 7

F.3d at 133 (quoting 11 U.S.C. § 1112(b)); In re Schriock

Const., Inc., 167 B.R. 569, 574 (Bankr. D. N.D. 1994).

The statutory definition of “cause” includes, “continuing

loss to or diminution of the estate and absence of a reasonable

likelihood of rehabilitation; inability to effectuate a plan;

[and] unreasonable delay by the debtor that is prejudicial to

creditors[.]” 11 U.S.C. § 1112(b)(1-3). “[T]he statutory

list is not exhaustive and . . . a court may consider other

factors and equitable considerations in order to reach an

appropriate result in the individual case.” Schriock, 167 B.R.

at 575; see In re Federal Roofing Co., 205 B.R. 638, 641

(Bankr. N.D. Ala. 1996). 

Such other factors as warrant dismissal under Section

1112(b) may include filings made in bad faith. See Trident

Assocs. Ltd. Partnership v. Metropolitan Life Ins. Co. (In re

Trident Assocs. Ltd. Partnership), 52 F.3d 127, 130 (6th Cir.),

cert. denied, --- U.S. ----, 116 S. Ct. 188, 133 L.Ed.2d 125

(1995); First Nat’l Bank of Sioux City v. Kerr (In re Kerr),

908 F.2d 400, 404 (8th Cir. 1990); St. Paul Shelf Storage Ltd.

Partnership v. Port Auth. of St. Paul (In re St. Paul Self

Storage Ltd. Partnership), 185 B.R. 580, 582 (B.A.P. 9th Cir.

1995); In re Wentworth, 83 B.R. 705, 707 (Bankr. D. N.D.
22

1988). The following factors are among those which have been

recognized as evidence of a bad faith filing:
23

(1) the debtor has only one asset, the property, in

which it does not hold legal title; (2) the case is

essentially a two-party dispute capable of prompt adjudication

in state court;

(3) there are only a few unsecured creditors;

(4) the debtor’s property has been posted for

foreclosure, and the debtor has been unsuccessful in

defending against the foreclosure in state court;

(5) the filing of the petition effectively allows the

debtor to evade court orders;

(6) the debtor has no ongoing business to reorganize; 

(7) the debtor has few employees;

(8) the timing of the debtor’s filing evidences an intent

to delay or frustrate the legitimate efforts of the

debtor’s secured creditor to enforce their rights.

See In re Trident Assocs. Ltd. Partnership, 52 F.3d at 131;

Y.J. Sons & Co., Inc. v. Anemone, Inc. (In re Y.J. Sons & Co.),

212 B.R. 793, 802 (D. N.J. 1997); In re St. Paul Self Storage

Ltd. Partnership, 185 B.R. at 582-83; In re Wentworth, 83 B.R.

at 707. 

In concluding that the Hatchers’ case should be dismissed

for cause pursuant to 11 U.S.C. § 1112(b), the bankruptcy court

made the following determinations:

In this case, [the Hatchers] do not own the

property that is central to their reorganization.

[Their] plan depends upon them keeping the land.

[They] were on the brink of being forcibly removed

from Allison’s property. [They] state they filed

their chapter 11 petition to save the house and farm

and to retain possession of the property. [The

Hatchers], operating as the debtor-in-possession,

employ no non-insider employees. While the report of

operations through November 30, 1996, shows a net

income, a significant portion of the income was from

the sale of assets (sixteen percent of the hay and

straw, and ten percent of the cattle scheduled).

[They] scheduled nine unsecured creditors with

relatively small claims, with the exception of the

debt owed [their] former counsel. Even though

ownership of the land has been conclusively decided
24

against them, [the Hatchers] continue to occupy the

land and fight efforts to evict them. The bankruptcy

was filed as a litigation tactic after [they] lost

their fight in the Iowa state courts. [They]

continue to pursue their starry-eyed dream that the

land is theirs and that they can develop it. A

reorganization without Allison’s land would be

futile; there can be no
25

development business without the land and [the

Hatchers] cannot continue their farming operation on

this land. This Court cannot and will not rewrite

the sale of [their] land to Allison, in essence

mandating Allison’s assets be placed in involuntary

servitude for the exclusive use of [the Hatchers].

This Court finds that [the Hatchers] case and plan of

reorganization were filed in bad faith and are

objectively futile.

The record and the case law discussed above fully support the

court’s conclusion. The Hatchers’ appeal amounts to a renewed

effort to adjudicate matters which have already been laid to

rest in state courts; the question of ownership of the

property they sold to Allison cannot be resurrected here.

Thus, it was not error for the bankruptcy court to dismiss the

Hatchers’ Chapter 11 case for cause by finding that their

petition was filed in bad faith. 

IV. CONCLUSION

The bankruptcy court did not err in affording full faith

and credit to the state court determinations in this matter.

It would be improper for this Court to revisit for the purpose

of reconsideration the judgments of the Iowa courts.

Furthermore, the bankruptcy court did not err, under its broad

discretion, in dismissing the Hatchers’ case for cause pursuant

to 11 U.S.C. § 1112(b). Accordingly, the order of the

bankruptcy court dismissing this case for cause, and denying

as moot Allison Financial’s Motion for Relief from Stay, is

AFFIRMED.

A true copy.

Attest:

CLERK, U.S. BANKRUPTCY APPELLATE PANEL, EIGHTH

CIRCUIT.