# U ni te d S ta te s B an kr up tc y A pp el la te P an el For the Eig hth Circu it

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No. 1 8- 60 04

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In re: Barb ara A. Wigl ey

ll ll ll ll ll ll ll ll ll ll l Deb to r

----- ----- ----- ----- ----- -----

Lari at Co m

pa ni es , Inc

.
ll ll ll ll ll ll ll ll ll ll l Cr ed it or

- App el la nt

v.

Barb ara A. Wigl ey

ll ll ll ll ll ll ll ll ll ll l Deb to r - Ap pe ll ee

__ __ __ __ __ __ App eal fro m

Uni te d S ta te s B an kr up tc y Co ur t fo r th e Dis tri ct of M in ne so ta - Mi nn eap ol is

__ __ __ __ __ __
Su bm it te d: Sep te m

be r 21 , 20 18 Fi le d: Nov em

be r 9, 2 01 8

__ __ __ __ __ __ Befo re SC HERMER, NAIL, an d S HODEEN, Ban kr up tc y Ju dg es

.

__ __ __ __ __ __NAIL, Ban kr up tc y Ju dg e.

Lari at Co mpan ie s, In c. ("Lar ia t" ) ap pe al s th e Feb ru ary 9, 20 18 or de r of th e ba nk ru pt cy co ur t al lo win g it s cl ai m ag ai ns t Deb to r Barb ara A. W ig le y ("De bt or ") in th e red uc ed am ou nt of $3 08 ,80 5.0 0. W e ha ve juri sd ic ti on ov er th is ap pe al pu rs ua nt
to 28 U.S.C. § 1 58 (b ). W e v acat e an d re m an d.

BACKGROUND

Thi s cas e co m es to us fo ll owi ng a de cad e of l i t i g a t i o n be twee n an d am on g Lari at , Deb to r, an d Deb to r's sp ou se th at ha s ge ne rat ed –b y ou r co un t– th ree la wsu it s, fo ur ba nk ru pt cy

cas es , and twel ve ap pe al s.

In 20 08
, Lari at , as le ss or , an d Ba ja So l Can ti na EP, LLC ("B aja So l" ), as le ss ee, en te red in to a te n- y ear le as e of co m m erci al real pr op ert y in Hen ne pi n Co un ty, Mi nn es ot a. Deb to r's sp ou se , who ha d fo rm ed Baja So l to op erat e a res ta ur an t on th e
pr em is es , per so na ll y

gu aran te ed Baja So l's pe rfo rm an ce u nd er t he lea se

.

Baja So l de fau lt ed un de r th e le as e, an d Lari at ev ic te d i t i n Ju ly 2 01 0. Lari at th en su ed Baja So l an d Deb to r's sp ou se in st at e co ur t t o reco ve r da m ag es un de r th e l e a s e a n d th e gu aran ty. The Hen ne pi n Co un ty di st ric t co ur t award ed Lari at $2 ,22 4,2 37 .00 in da m ag es , pl us pr e

- a n d p os t-ju dg m en t in te res t an d at to rn ey fees ("t he gu aran ty jud gm en t" ). Deb to r's sp ou se a p p eal ed
, an d th e Mi nn es ot a co ur t of
ap pe al s af

fir m ed th e d is tri ct co ur t's jud gm en t.

I n Nov em

be r 20 11
, Lari at an d two ot he r cred it or s fil ed an in vo lu nt a r y ch ap te r 7 pe ti ti on ag ai ns t Deb to r's sp ou se

. On Deb to r's sp ou se 's m ot io n an d wit h th e

co ns en t o f th e cre di to rs , th e b an kr up tc y co ur t d is m is se d t ha t ca se

.

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-The da y aft er th ey fil ed th e in vo lu n t ary ch ap te r 7 pe ti ti on , th e sa m e th ree

cred i t or s fil ed a la wsu it ag ai ns t Deb to r in st at e co ur t to av oi d cert ai n al le ge dl y frau du le nt tra ns fers fro m Deb to r's sp ou se to Deb to r. Afte r th e in vo lu nt ary p et it io n

was di sm is se d, th ey ad de d Deb to r's sp ou se as a co -d efen da nt

. The Hen ne pi n Co un ty di s t r i c t co ur t he ld Deb to r an d Deb to r's sp ou se joi nt ly an d se ve ral ly li ab le fo r th e frau du le nt tra ns fers an d a ward ed Laria t $7 95 ,09 8.0 0, p lu s s ta tu to ry in te res t, co st s, 1

an d d is bu rs em en ts ("t he frau du le nt tra ns fer ju dg m en t" ).

In Mar ch 20 13
, Deb to r's sp ou se fil ed a la wsu it ag ai ns t Lari a t i n s t at e co ur t. Fi nd in g it m irr or ed an earl ie r un su cces sf ul at te m pt by Deb to r's sp ou se to va cat e th e
gu aran ty jud gm en t, t he Hen ne pi n Co un ty di st ric t co ur t co nc lu de d th e la wsu it was ba rred by co ll at eral es to pp el an d d i s mi s se d th e co m pl ai nt

. Deb to r's sp ou se 's

su bs eq ue nt ap pe al to th e Mi nn es ot a co ur t o f ap pe al s i s s ti ll pe nd in g.

In Ja nu ary 2 01 4, Baja So l fi le d a pe ti ti on for rel ie f un de r ch ap te r 11 . On th e Uni te d S ta te s Tru st ee's m ot io n, t he ba nk ru pt cy co ur t d is m is se d t ha t ca se

.

In Feb ru ary 20 14
, Deb to r's sp ou se fil ed hi s own pe ti ti on f or rel ie f un de r ch ap te r 11

. Lari at fil ed a pr oo f of cl ai m fo r $1 ,73 4,5 39 .00
, co m pr is in g $2 27 ,08 7.0 0 fo r un pa id ren t, co m

m on area m ai nt en an ce, an d la te fees
, $3 79 ,11 1.0 0 fo r fu tu re

ren ts , $1 85 ,82 9.0 0 fo r at to rn ey fees
, $1 23 ,75 0.0 0 fo r un reco ve red am or ti zed ob li ga ti on s, an d $8 16 ,76 1.0 0 for th e frau du le nt tra ns fer judg m en t. Deb to r's sp ou se ob jecte d to Lari at 's cl ai m , an d fo ll owi ng an ap pe al fro m th e ba nk ru pt cy co ur t's in it ia l de te rm in at io n th at Lari at 's cl ai m sh ou ld be cap pe d at $4 45 ,2 7 2

. 9 3 u nd er

The ot he r two cred it or s h ad set tl ed th ei r cl ai m s. 1

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-11 U.S.C. § 50 2( b) (6 ), th e ba nk ru pt cy co ur t de te rm in ed Lari at 's cl ai m sh ou ld in st ead 2
be cap pe d a t $ 55 3,2 71 .00 un de r th at sec ti on

.

In Feb ru ary 20 16
, ov er Lari at 's an d Deb to r's ob jecti on s, th e ba nk ru pt cy co ur t

co nf irmed Deb to r's s p o u s e 's pl an of reo rg an iz at io n. Bo th Lari at an d Deb to r 3

ap pe al ed
, an d in se pa rat e op in io ns , we affi rm ed th e ba nk ru pt cy co ur t's de ci si on an d di sm is se d Deb to r's ap pe al fo r la ck of st an di n g

. D e bt or ag ai n ap pe al ed
, an d th e Eig ht h C irc ui t co ur t o f ap pe al s d is m is se d h er ap pe al for th e sa m e rea so n.

In A u g us t 20 16
, Deb to r's sp ou se pa id Lari at $6 37 ,58 1.0 7, rep res en ti ng th e al lo wed am ou nt of Lari at 's c la im ag ai ns t hi m , pl us accr ue d in te res t. In Sep te m

be r 20 16 , Debt or 's s po us e was gra nt ed a ba nk ru pt cy di sc ha rg e.

A le ss or 's cl ai m fo r da m ag es res ul ti ng fro m th e te rm in at io n of a le as e of real 2
pr op ert y is cap pe d a t:
(A) th e ren t res erv ed by su ch le as e, wit ho u t acce le rat io n, fo r th e gr eat er of on e y ear, or 15 pe rcen t, no t to e x c e e d th ree y ears , of th e rem ai ni ng te rm of su ch le as e, fo ll owi ng th e ear li er o f–

(i) th e d at e o f th e fi li ng of t he pe ti ti on ; an d

(ii ) th e da te on whi ch su ch le ss or rep os se ss ed
, or th e le ss ee s ur ren de red , th e le as ed pro pe rty; pl us
(B) an y un pa id ren t du e u nd er su ch le as e, wit ho ut

acce le rat io n, o n t he earl ie r of su ch da te s[ .]

11 U.S.C. § 5 02 (b )(6 ).

Lari at ob jecte d on ly to pr es erv e it s rig ht to ap pe al th e ba nk ru pt cy co ur t's 3 earl ie r in te rlo cu to ry or de r de nyin g Lari at 's m ot io n to di sm is s or co nv ert to ch ap te r 7 Deb to r's sp ou se 's b an kr up tc y cas e.

-4

-A r ou nd th e sa m e ti m e, Deb to r an d Deb to r's sp ou se as ke d th e st at e co ur t t o

va cat e th e frau du le nt tra ns fer jud gm en t. The Hen ne pi n Co un ty di st ric t co ur t de ni ed th ei r m ot io n to va cat e, bu t am en de d it s fin di ng s of fact to co rrec t an ov erv al ui ng of

a ch ec k in g acco un t by $1 3,8 14 .94
, th ereb y red uc in g th e am ou nt of th e frau du le nt
tra ns fer jud gm en t to $7 88 ,48 7.7 8. Deb to r's su bs eq ue nt ap pe al to th e Mi nn es ot a co ur t of ap pe al s i s s ti ll pe nd in g.

In Decem be r 20 16 , Debt or fil ed a pe ti ti on for rel ie f un de r ch ap te r 11 . Lariat fil ed a pr oo f of cl ai m fo r $1 ,03 0,9 16

. 7 4
, co m pr is in g $7 88 ,48 7.7 8 fo r th e am en de d frau du le nt tra ns fer jud gm en t an d $2 42 ,42 8.9 6 fo r in te res t th ereo n to th e da te Deb to r fil ed he r pe ti ti on

. Deb to r ob jecte d, arg ui ng Lari at 's cl ai m sh ou ld b e d i s a l lo wed
, be cau se Deb to r's sp ou se ha d sa ti sf ie d Deb to r's ob li ga ti on s to L ar ia t in his ba nk ru pt cy , le av in g no th in g for Laria t to co ll ect fro m Deb to r. Bo th pa rti es m ov ed fo r su m m ary jud gm en t. The ba nk ru pt cy co ur t de ni ed Deb to r's m ot io n an d gr an te d Lari at 's m ot io n in pa rt, ho ld in g th e ba nk ru pt cy co ur t's ap pl ic at io n of § 50 2( b) (6 ) in Deb to r's sp ou se 's ba nk ru pt cy

di d n ot eli m in at e Lari at 's c la im in Debt or 's b an kr up tc y

.

Fo ll owi ng a fin al he ari ng , th e ba nk ru pt cy co ur t en te red it s writ te n de ci si on , in whi ch it co nc lu de d, i n p ert in en t p art :

1. [Deb to r's sp ou se 's] u se of 11 U.S.C. § 5 02 (b )(6 ) in hi s ba nk ru pt cy do es no t be ne fit th e Deb t or so as to pr ecl ud e
an y cla im by L ari at . Lariat 's c la im ha s n ot be en sat is fie d.

2. Lari at is no t en ti tl ed t o t h e fu ll am ou nt of it s cl ai m

. Sect io n 50 2( b) (6 ) of th e Ban krupt cy Co de cap s th e al lo wed

am ou nt of Lar ia t's cla im

.

Unh ap py wit h th e ba nk ru pt cy co ur t's se co nd ho ld in g, Lari at ti m el y ap pe al ed
, an d

un ha pp y wit h t he ba nk ru pt cy

co ur t's fir st ho ld in g, Deb to r ti m el y cro ss -ap pe al ed

.

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-STANDARD OF REVIEW

The rel ev an t fact s are un di sp ut ed

. W e rev ie w de no vo th e ba nk ru pt cy co ur t's

co nc lu si on s o f la w. Pier ce v. Co ll ect io n As so cs ., Inc

. ( In re Pi er ce ), 77 9 F .3d 81 4, 81 7 (8 th Cir . 20 15 ). The i ss ue s p res en te d a pp ear t o b e m at te rs of f irs t i m pr es si on

.

DISCUSS ION

A ba nk ru pt cy c o u r t m ay no t al lo w a cl ai m th at is un en fo rcea bl e ag ai ns t th e de bt or , un le ss th e cl ai m is on ly un en fo rcea bl e be cau se it is co nt in ge nt or un m at ur ed

. 11 U.S.C. § 5 02 (b )(1 ). W it h res pe ct to th e ba nk ru pt cy co ur t's fir st ho ld in g, Deb to r

a r g u e s La r i at 's cl ai m ag ai ns t Deb to r's sp ou se ha s be en pa id in fu ll an d is th eref or e

un en fo rcea bl e ag ai ns t Deb to r. W e ag ree.

The ba nk ru pt cy co ur t co rrec tl y no te d D e b to r's li ab il it y to Lari at ari se s un de r th e Mi nn es ot a Uni fo rm Fra u d u l e nt Tran sf er Act, M IN N

. S T A T

. §§ 51 3.4 1- 51 3.5 1. 4
And Deb to r's li ab il it y to Lari at ari se s on ly u n d e r th os e pr ov is io ns : Deb to r was

ne it he r a pa rty to th e le as e be twee n Lari at an d Baja So l no r a gu aran to r of Baja So l's
pe rfo rm an ce u nd er t he lea se

.

Howev er, as we he ld in Lari at 's ap pe al fro m th e ba nk ru pt cy co ur t's i n i ti al de te rm in at io n th at Lari at 's cl ai m ag ai ns t Deb to r's s po us e sh ou ld be cap pe d at $4 4 5 , 2 7 2

. 9 3
, M IN N

. S T A T

. §§ 51 3.4 1- 51 3.5 1 do no t crea te a "n ew" cl ai m

. La ri at Co s., In c. v. W

ig le y ( In re W ig le y ), 53 3 B.R. 26 7, 27 2- 73 ( B

. A

. P

. 8 t h Ci r. 20 15 ). A pre di cat e cl ai m

is req ui red

.

On Aug us t 1, 20 15
, th e na m e of th is act was ch an ge d to th e M i n n e s o ta 4 Uni fo rm Voi da bl e Tran sa ct io ns Act, an d m an y of it s pr ov is io ns were am en de d. 20 15 Mi nn . Ses s. Laws Serv . Ch. 1 7 (S .F. 18 16 ) (West ).

-6

-The Mi nn es o t a Uni fo rm Frau du le nt Tran sf er Act is no t

su bs ta nt iv e in na tu r e, bu t in st ead mer el y co nf er s an al te rn at e re med

y fo r pr ote ct in g pr eexi st in g cr ed it or ri gh ts

. The cred it o r rig ht s a pa rty se ek s to en fo rce m us t ex is t

un de r in de pe nd en t la w, su ch as co nt ract la w. The pu rp os e
o f th e st at ut e is to gr an t cred it or s ad di ti on al en fo rcem en t po ss ib il it ie s whe n a de bt or tra ns fers hi s as se ts to a th ird pa rty.

Defo rd v. So o Li ne R. Co

. , 86 7 F.2 d 10 80
, 10 87 (8 th Ci r. 19 89 ) (ci ta t io ns om it te d) (em ph as is ad de d)

.

Lari at 's pr ed ic at e cl ai m was t h e gu aran ty jud gm en t. Bu t fo r M IN N

. S T A T

. §§ 51 3.4 1- 51 3.5 1
, i t wou ld ha ve ha d no cl ai m ag ai ns t Deb to r. Lari at 's pr eex is ti ng cred it or rig ht s were t h u s th os e th at le d to an d flo wed fro m th e gu aran ty jud gm en t,
pr im ari ly–if no t ex cl us iv el y –t he rig ht to co ll ect on th at jud gm en t. Tho se cred it or rig ht s are th e on ly cred it or rig ht s p r o te ct ed by th e al te rn at e rem ed y co nf erre d by
M IN N

. S T A T . §§ 51 3.4 1- 51 3.5 1. An d t ho se cred it or rig ht s h av e b een ex ti ng ui sh ed

.

The ba nk ru pt cy co ur t ul ti m at el y cap pe d Deb to r's sp ou se 's li ab il it y un de r th e
gu aran ty jud gm en t at $5 53 ,27 1.0 0. Deb to r's sp ou se ha s pa id Lari at th at am ou nt , pl us in te res t. L ari at 's p red ic at e cl ai m ha s t hu s b een sat is fie d: Lari at can no t reco ve r an y ad di ti on al am ou nt fro m Deb to r's sp o u s e

. Th at be in g so , th ere are no pr eex is ti ng cred it or rig h t s l e f

t f or M IN N

. S T A T

. §§ 51 3.4 1- 51 3.5 1 to pr ot ect in th is cas e. Co ns eq ue nt ly, Lari at no lo ng er h as a cl ai m ag ai ns t Deb to r.

Thi s co nc lu si on is en ti rel y in ke ep in g wit h bo th th e la ng ua ge an d th e sp iri t of
M IN N

. S T A T

. §§ 51 3.4 1- 51 3.5 1, whi ch li m it a cred it or 's reco ve ry to "t he va lu e of th e

as se t tra ns ferr ed

. . . or th e am ou nt ne ces sa ry to sa ti sf y th e cred it or 's cl ai m , wh ic he ver is le ss ." M IN N

. S T A T

. § 51 3.4 8( b) (1 ) (em ph as i s ad de d)

. If Lari at were al lo wed to

-7

-r e c o v e r an

y am ou nt fro m Deb to r, Lari at 's reco ve ry un de r th e gu aran ty jud gm en t

wou ld be m or e th an th e am ou nt ne ces sa ry to sat is fy it s p red ic at e cl ai m

. 5

CONCLUSION

Fo r th e reas on s st at ed
, we va cat e th e ba nk ru pt cy co ur t's Feb ru ary 9, 20 18 or de r al lo win g Lari at 's cl ai m ag ai ns t Deb to r in th e r e d u c e d am ou nt of $3 08 ,80 5.0 0 an d

rem an d fo r en try of an ord er d is al lo win g Lar ia t's cla im in it s en ti ret y

. 6

At or al arg um en t, Lari at 's co un se l co nc ed ed if, i ns te ad of f il in g ba nk ru pt cy , 5 Deb to r's sp ou se ha d pa id Lari at th e fu ll am ou nt it w a s owe d un de r th e gu aran ty jud gm en t, Lari at wou ld no lo ng er be en ti tl ed to en fo rce th e frau du le nt tra ns fer jud gm en t ag ai ns t Deb t o r

. Bec au se th e ba nk ru pt cy co ur t cap pe d th e am ou nt Lari at

co ul d re c o v er un de r th e gu aran ty jud gm en t, an d be cau se Lari at ha s be en pa id th at cap pe d a m ou nt , th e res ul t h ere i s t he same.

In li gh t of ou r co nc lu si on th at Lari at no lo ng er ha s a cl ai m ag ai ns t Deb to r, we 6 do no t reac h th e qu es ti on of whe th er th e b an kr up tc y co ur t co rrec tl y co nc lu de d § 5 02 (b )(6 ) cap pe d t he all owe d a m ou nt of Lar ia t's cla im ag ai ns t Deb to r.

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