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Venture Bank v. Lapides

United States District Court, D. Minnesota

August 29, 2014

Venture Bank, Appellant and Cross-Appellee,
v.
Howard L. Lapides and Mary Holter-Lapides, Appellees and Cross-Appellants.

Gregory M. Erickson, Esq., and James R. Magnuson, Esq., Mohrman, Kaardal & Erickson, P.A., counsel for Appellant and Cross-Appellee Venture Bank.

Manly A. Zimmerman, Esq., Zimmerman & Bix, Ltd., and Scott M. Hoffman, Esq., Attorney at Law, counsel for Appellee and Cross-Appellant Howard L. Lapides.

Scott M. Hoffman, Esq., Attorney at Law, counsel for Appellee and Cross-Appellant Mary Holter-Lapides.

MEMORANDUM OPINION AND ORDER

DONOVAN W. FRANK, District Judge.

INTRODUCTION

This matter is before the Court on appeal by Appellant Venture Bank and cross-appeal by Appellees Howard L. Lapides ("Lapides") and Mary Holter-Lapides ("Holter-Lapides") (together, "the Lapideses") from the Bankruptcy Court's October 11, 2013 Order and Judgment. (Doc. No. 1.) For the reasons discussed below, the Court affirms in part and modifies in part the ruling of the Bankruptcy Court.

BACKGROUND

I. Factual Background

On August 30, 2007, Lapides, acting as President of HL Seafood, Inc., executed a $400, 000 promissory note in favor of Venture Bank. (Doc. No. 17, Appellant App. Pt. 1, at 1-3.) The promissory note was secured by a mortgage on the Lapideses's home, which was in third position behind the original two home mortgages held by Bank of America and Citizens Bank. ( Id. at 2.) On March 25, 2008, Lapides and his wife, Holter-Lapides, executed a $400, 000 promissory note in favor of Venture Bank, which paid off the August 30, 2007 promissory note. ( Id. at 4-6.) On September 2, 2008 and November 2, 2008, the parties executed Change in Terms Agreements to extend the maturity date and adjust the credit amount and interest rate of the March 25, 2008 promissory note. ( Id. at 27-29, 30-32.) On February 12, 2009, the Lapideses executed a new $357, 456.35 promissory note in favor of Venture Bank, which was subsequently refinanced in a June 30, 2009 promissory note. ( Id. at 33-35, 36-37.)

Lapides filed for Chapter 7 Bankruptcy on August 11, 2009. ( Id. at 74.) On October 12, 2009, Lapides and his attorney met with Venture Bank President Michael Zenk and Venture Bank Loan Officer Nathan Urfer to discuss Lapides's desire to keep his home and have Venture Bank refinance all three mortgages on his home, including the Bank of America and Citizens Bank mortgages. (Doc. No. 19, Appellant App. Pt. 5, at 618, 804.) On November 9, 2009, the parties signed a debt reaffirmation agreement based on their discussions at the October 12, 2009 meeting, but Venture Bank ultimately did not refinance the three mortgages on the Lapideses's home. (Doc. No. 19, Appellant App. Pt. 4, at 473-74.) On November 16, 2009, Lapides was discharged from bankruptcy. ( Id. at 476.) On May 9, 2010 and November 9, 2010, the parties executed Change in Terms Agreements ("Post-Discharge Agreements") related to the June 30, 2009 promissory note. ( Id. at 491-93, 527-29.) In April 2011, Lapides stopped making payments to Venture Bank under the Post-Discharge Agreements after he lost his job. ( Id. at 547.) On December 15, 2011, Citizens Bank foreclosed on its mortgage and the Lapideses's home was sold at public sale. (Doc. No. 17, Appellant App. Pt. 1, at 51.)

II. Procedural History

On July 15, 2011, Venture Bank sued the Lapideses in Minnesota state court seeking the following relief: (I) judgment against Holter-Lapides for the outstanding balance under the June 30, 2009 promissory note; (II) foreclosure of a mortgage that served as collateral for the promissory note; and (III) declaratory relief related to the Post-Discharge Agreements. (Doc. No. 19, Appellant App. Pt. 5, at 868-78.) The Lapideses counter-claimed that the suit violated the discharge injunction under 11 U.S.C. ยง 524(a)(2) and removed the complaint to Bankruptcy Court. ( Id. at 879-84, 1074-76.) The Bankruptcy Court remanded Counts I and II of the complaint to the state court. (Doc. No. 5.)

On October 11, 2013, the Bankruptcy Court entered judgment in favor of the Lapideses on Count III of the complaint, concluding that there was "[n]o new or different consideration" and no mutual agreement for either of the Post-Discharge Agreements to constitute enforceable contracts. (Doc. No. 5 at 11.) The Bankruptcy Court also determined that all of Lapides's payments after the May 9, 2010 Post-Discharge Agreement were involuntary, but that all payments prior to that date were voluntary. ( Id. at 16-17.) The Bankruptcy Court awarded Lapides $35, 000 in actual damages for violation of the discharge injunction as well as attorney fees. ( Id. at 20.)

On November 26, 2013, Venture Bank appealed to the United States District Court for the District of Minnesota. (Doc. No. 1.) The Lapideses cross-appealed. ( Id. ) On December 4, 2013, Venture Bank sought certification to the Eighth Circuit Court of Appeals. (Doc. No. 9.) In denying Venture Bank's request for certification, the District Court ruled that the issue on appeal-"whether the Bankruptcy Court erred in determining that there was no consideration for the post-discharge agreements between Venture Bank and debtor ...


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