Court Opinion

ID: 3029819
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:43:26.49522+00
Date Added: 2024-06-11T11:48:04.531174
License: Public Domain

United States Bankruptcy Appellate Panel
                              FOR THE EIGHTH CIRCUIT

                                     No. 02-6037SI

In re:                                     *
                                           *
Christopher David Loudon,                  *
                                           *
         Debtor.                           *
                                           *
                                           *
Christopher David Loudon,                  *
                                           *   Appeal from the United
         Debtor - Appellant                *   States Bankruptcy Court
                                           *   for the Southern District of
               v.                          *   Iowa
                                           *
Amogio Foods, Inc.; Pat Morris;            *
Robert Tursi; Robert B. Garver;            *
Steven R. Gates; Metro Meats, Inc.;        *
West Des Moines State Bank,                *
                                           *
         Movants - Appellees.              *

                               Submitted: October 8, 2002
                                Filed: October 16, 2002

Before Chief Judge KOGER, DREHER and FEDERMAN, Bankruptcy Judges.

DREHER, Bankruptcy Judge.
       This is an appeal from an order of the bankruptcy court1 dated June 14, 2002,
which granted Appellees (collectively “Amogio Foods”) relief from the automatic
stay to proceed against Appellant Christopher D. Loudon (“Loudon”) for the limited
purpose of determining Loudon’s liability and resulting damages, if any, arising out
of a civil state court action. For the reasons stated below, we affirm.

                      FACTS and PROCEDURAL HISTORY

       Amogio Foods sought relief from the automatic stay to continue a state court
action in which Loudon and Amogio Foods are co-defendants. The lawsuit asserts
claims against Amogio Foods and Loudon for conversion, breach of contract,
interference with contract, interference with prospective business advantage and
common law trademark infringement. Amogio Foods sought relief from the
automatic stay in anticipation of filing counter-claims against Loudon.

       At the hearing, the bankruptcy court orally stated its findings and conclusions
on the record as provided by Fed. R. Bank. P. 7052. The bankruptcy court
determined that the claims in state court were being made by several plaintiffs against
several defendants, that cross-claims and counter-claims were probable, and that
some of the various theories being pursued by the plaintiffs would include matters
better left to the jurisdiction and expertise of the state court. The bankruptcy court
also determined that judicial ecomony would best be served by allowing the state
court to determine issues of liability and damages as to Loudon, but limited the grant
of relief to only those issues. The bankruptcy court did not grant relief from the stay
to Amogio Foods to enforce any judgment against Loudon or property of the estate
without a further order of the court.

      1
       The Honorable Russell J. Hill, United States Bankruptcy Court for the
Southern District of Iowa.
                                          2
       After the court granted Amogio Foods relief from the automatic stay, Loudon
filed a motion for stay pending appeal. The bankruptcy court denied this motion and
made detailed findings as to why its intial decision to grant relief was proper. Loudon
then sought a stay pending appeal from the Bankruptcy Appellate Panel and that
motion was also denied. Loudon filed a timely appeal.

                             STANDARD OF REVIEW

       “A decision to grant or deny a motion for relief from the automatic stay is
within the discretion of the bankruptcy court and is reviewed for an abuse of
discretion.” Bergman v. Wintroub (In re Wintroub), _ B.R. _, 2002 WL 31205768,
*2 (B.A.P. 8th Cir. 2002)(citing Kirwan v. Vanderwerf (In re Kirwan), 164 F.3d
1175, 1178 (8th Cir.1999)). “An abuse of discretion will only be found if the lower
court's judgment was based on clearly erroneous factual findings or erroneous legal
conclusions.” Bowman v. Bond ( In re Bowman), 253 B.R. 233, 237 (B.A.P. 8th Cir.
2000). "A finding is 'clearly erroneous' when although there is evidence to support
it, the reviewing court, on the entire evidence is left with the definite and firm
conviction that a mistake has been committed." Barger v. Hayes County Non-Stock
Co-op (In re Barger), 219 B.R. 238, 243 (B.A.P. 8th Cir. 1998). (quoting Anderson
v. City of Bessemer City, 470 U.S. 564, 573(1985)).

                                     DECISION

       The bankruptcy court granted Amogio Foods limited relief from the automatic
stay for cause. 11 U.S.C. § 362(d)(1). Although the Bankruptcy Code does not define
cause, it is clear that cause includes such relief to allow the litigation involving
Loudon to proceed in state court under appropriate circumstances. See Wintroub,
2002 WL 31205768, *2; In re United Imports, Inc., 203 B.R. 162, 166 (Bankr. D.
Neb. 1996); Blan v. Nachogdoches County Hosp. (In re Blan), 237 B.R. 737, 739
(citing H.R.Rep No. 95-595, at 341 (1977); S. Rep. No. 95-989, at 50 (1978) ("It will

                                          3
often be more appropriate to permit proceedings to continue in their place of origin,
when no great prejudice to the bankruptcy estate would result, in order to leave the
parties to their chosen forum and to relieve the bankruptcy court from duties that may
be handled elsewhere.")).

       These circumstances include: “(1) judicial economy; (2) trial readiness; (3) the
resolution of preliminary bankruptcy issues; (4) the creditor's chance of success on
the merits; and (5) the cost of defense or other potential burden to the bankruptcy
estate and the impact of the litigation on other creditors.” Blan, 237 B.R. at 739. In
this case, the bankruptcy court properly balanced the potential prejudice to Loudon
and the bankruptcy estate against the hardship to Amogio Foods and the other parties
if they were not allowed to proceed in state court. By allowing the state court to
determine liability and damages, a determination that would otherwise require a trial
in the bankruptcy court, but limiting the ability of Amogio Foods to enforce the
judgment, the bankruptcy court substantially reduced the potential harm to Loudon.
As a result, we find that the bankruptcy court did not err in its factual findings or
legal conclusions and did not abuse its discretion in granting Amogio Foods relief.

      Accordingly, we affirm the decision of the bankruptcy court.

      A true copy.

             Attest:

                     CLERK, U.S. BANKRUPTCY APPELLATE PANEL
                     FOR THE EIGHTH CIRCUIT