Rhett R. Sears; Rhett Sears Revocable Trust; Ronald H. Sears; Ron H. Sears Trust; Dane Sears, Appellees,
Korley B. Sears, Appellant, U.S. Trustee, U.S. Trustee.
Submitted: November 15, 2016
from United States District Court for the District of
Nebraska - Lincoln
COLLOTON, BEAM, and GRUENDER, Circuit Judges.
COLLOTON, CIRCUIT JUDGE.
Sears, a Chapter 11 debtor-in-possession, filed for
bankruptcy in 2010. In 2012, several creditors initiated an
adversary proceeding against Korley in bankruptcy court. The
creditors argued that the court should not discharge Korley
from his debts when confirming a plan of reorganization.
Following a bench trial, the bankruptcy court denied a
discharge on the grounds that Korley concealed his property
interest in a fishing boat and trailer, and made a false oath
about the boat. The district court affirmed the order. In this
appeal, Korley raises several procedural arguments and also
disputes the denial of a discharge on the merits. We affirm.
2007, a group of relatives and related entities owned a
significant portion of the shares of a company called AFY,
Inc. We refer to these parties-Rhett Sears, the Rhett R.
Sears Revocable Trust, Ronald Sears, the Ron H. Sears Trust,
and Dane Sears-collectively as "the Searses." The
Searses sold their shares of AFY to the company and Korley
Sears. In return, Korley signed promissory notes payable to
February 2010, Korley filed for bankruptcy under Chapter 11
of the Bankruptcy Code. A principal issue in the bankruptcy
case was whether claims filed by the Searses, which totaled
over $5.2 million, should be allowed. The bankruptcy court
allowed the claims in an order filed in August 2014, and we
address Korley's appeal of that order in another decision
appeal concerns a separate order of the bankruptcy court,
filed in September 2014, that denied Korley a discharge of
his debts. Discharge is governed by 11 U.S.C. §§
727, made applicable in this Chapter 11 bankruptcy case by 11
U.S.C. § 1141(d)(3)(C). The dispute over discharge arose
from a transaction in May 2009 when Korley transferred title
to a fishing boat and trailer to business associate April
Good. The statement of financial affairs that Korley filed
with his bankruptcy petition stated that he had transferred
the boat to April Good and her husband Jason, in exchange for
the cancellation of an $18, 000 debt. In truth, the Searses
now contend, Korley had retained possession of the boat and
trailer, but he did not reveal this information in the
statement of financial affairs or on a bankruptcy schedule
for personal property.
February 2012, the Official Committee of Unsecured Creditors
in Korley's bankruptcy filed a complaint to avoid and
recover certain transfers of property from Korley to the
Goods. This adversary action sought to avoid the transfer of
the boat on the grounds that the transfer was
"preferential" under 11 U.S.C. § 547 and
fraudulent under § 548. The Searses contend that after
they filed the avoidance action, they learned that Korley had
never physically transferred the boat and trailer to the
Goods. Instead, they say, he had retained possession of the
property and used it for his own enjoyment.
in May 2012, the Searses initiated the adversary proceeding
at issue in this appeal, arguing that the court should not
grant Korley a discharge of his debts along with confirmation
of a plan of reorganization. The Searses asserted that Korley
concealed property by failing to disclose a possessory and
beneficial interest in the boat and trailer on his statement
of financial affairs. See 11 U.S.C. §
727(a)(2). They claimed alternatively that Korley made a
"false oath" relating to the property in his
statement of financial affairs and a bankruptcy schedule.
See 11 U.S.C. § 727(a)(4)(A).
a bench trial in September 2014, the bankruptcy court denied
Korley a discharge on both grounds asserted by the creditors.
The court relied in part on the absence of testimony from
Jason Good that Korley owed him or April Good $18, 000, and
the court did not find credible Korley's testimony about
the boat. The district court affirmed the denial of
discharge, and Korley appeals. As a second court of review,
we review the bankruptcy court's findings of fact for
clear error and its conclusions of law de novo.
In re Bowles Sub Parcel A, LLC, 792 F.3d 897, 901
(8th Cir. 2015).
raises several procedural objections to the bankruptcy
court's judgment denying a discharge. Korley first argues
that the bankruptcy court did not have jurisdiction to
determine that the Searses were "creditors" who had
statutory standing to object to his discharge. Korley's
theory is that when he appealed (in the main bankruptcy case)
the bankruptcy court's order allowing the claims asserted
by the Searses, the bankruptcy court was divested of
jurisdiction to decide in this adversary action whether the
Searses were creditors. An appeal, however, only divests the
bankruptcy court "of its control over those aspects of
the case involved in the appeal." In re
Fisette, 695 F.3d 803, 806 (8th Cir. 2012) (quotation
omitted). Whether the Searses' claims should have been
allowed is distinct from whether the Searses were creditors.
A creditor is an entity ...