United States Bankruptcy Appellate Panel of the Eighth Circuit
In re: AFY, INC., also known as Ainsworth Feed Yards Company, Inc. Debtor
Rhett R. Sears; Rhett Sears Revocable Trust; Ronald H. Sears; Ronald H. Sears Trust; Dane Sears Defendants - Appellees Robert A. Sears, individually and as testamentary trustee under the will of Redmond Sears, deceased; Korley B. Sears Plaintiffs - Appellants
Submitted: July 27, 2017
from United States Bankruptcy Court for the District of
Nebraska - Lincoln
KRESSEL, FEDERMAN and SHODEEN, Bankruptcy Judges.
KRESSEL, BANKRUPTCY JUDGE.
Robert A. Sears, individually and as the testamentary trustee
under the will of Redmond Sears, deceased, and Korley B.
Sears, appeal from the bankruptcy court's order granting defendants', Rhett R.
Sears, Rhett Sears Revocable Trust, Ronald H. Sears, Ronald
H. Sears Trust, and Dane Sears, motion to dismiss the
plaintiffs' complaint. For the reasons below, we affirm.
adversary proceeding is the latest in a series of bankruptcy
cases and adversary proceedings in those cases. The
individuals in these cases are family members. Rhett, Ron,
Robert and Dan Sears are Redmond Sears's sons. Korley
Sears is Robert's son. Dane is Ron's son. Redmond
Sears owned and operated AFY, Inc., also known as Ainsworth
Feed Yards Company, Inc. He transferred all of his interest
in AFY to Rhett, Ron, Robert and Dan Sears. On approximately
June 20, 2007, AFY and Korley bought back all of Rhett, Ron
and Dan's interest in the company in exchange for
promissory notes in accordance with their shares. Robert and
Korley Sears then became the only two shareholders of AFY.
The following are the pertinent histories of the various
cases and adversary proceedings.
re AFY, Inc. (Case No. 10-40875)
March 25, 2010, AFY filed a Chapter 11 petition. Rhett, Ron
and Dane filed proofs of claims in the case and also filed a
motion to appoint a trustee. Robert and Korley Sears objected
to the motion. The bankruptcy court granted the motion and
that order was not appealed.
case was later converted to a chapter 7 case by the trustee.
Robert and Korley objected to Rhett, Ron and Dane's
proofs of claim because they alleged: (1) the proofs of claim
were unenforceable against AFY or its property, (2) AFY did
not sign a promissory note and was not obligated to them
under the stock sale agreement, (3) the claimants materially
breached their implied duties of good faith and fair dealing,
and (4) the claimants materially breached the agreement by
opposing the efforts of AFY's to effect a chapter 11 plan
and by collaborating with the trustee. The bankruptcy court
allowed the proofs of claim. Robert and Korley appealed and
we affirmed. Sears v. Sears (In re AFY,
Inc), 463 B.R. 483 (BAP 8th Cir. 2012). Robert and
Korley appealed our decision to the Eighth Circuit Court of
Appeals. The Eighth Circuit dismissed the appeal, holding
that Robert and Korley lacked standing to appeal the
bankruptcy court's order against AFY. Sears v.
Sears (In re AFY, Inc), 733 F.3d 791 (8th Cir.
January 31, 2014, the chapter 7 trustee filed a motion to
approve interim payments to Rhett, Ron and Dane and other
unsecured creditors, of $3 million of the $4.5 million held
in AFY's estate. The bankruptcy court granted the motion
over Robert and Korley's objection but the court delayed
the payments to creditors until resolution of Robert and
Korley's petition for a writ of certiorari to the Supreme
Court. The order was not appealed. The Supreme Court denied
the petition for writ of certiorari and the trustee made the
authorized distribution to creditors. After selling all of
the estate property, the trustee made final distributions to
creditors. On August 6, 2015, the trustee filled a final
account and certification that the estate had been fully
administered. The bankruptcy court closed the case on Aril
re Korley Sears (Case No. 10-40277)
February 2, 2010, Korley Sears filed a Chapter 11 petition.
His case is still pending. Rhett, Ron and Dane filed proof of
claims. Korley objected to the claims based on the same
grounds as those asserted in the AFY bankruptcy, but in
addition argued that the stock sale agreement was an
executory contract that has not been rejected. On August 29,
2014, the bankruptcy court allowed the claims.
appealed this order to the district court (Case No.
14CV3206). On August 25, 2015, the district court affirmed
the bankruptcy court's order allowing the claims. In
re Sears, 536 B.R. 286 (D. Neb. 2015). The debtor
appealed this decision to the Eighth Circuit Court of Appeals
and on July 18, 2017, the Court of Appeals affirmed the
district court. In re Sears, No. 15-3352, 2017 WL
3027070, (8th Cir. Jul. 18, 2017).
R. Sears, et al., v. Korley Sears (A.P.
9, 2012, Rhett, Ron and Dane Sears filed an adversary
proceeding against Korley Sears objecting to Korley's
discharge pursuant to 11 U.S.C. §727(a)(2) and (a)(4). A
trial was held on September 25, 2014. On September 26, 2014,
the bankruptcy court entered judgment against Korley denying
him a discharge. The debtor appealed this order to the
district court (Case No. 14CV3219). On September 21, 2015,
the district court affirmed the bankruptcy court's order.
Sears v. Sears, 542 B.R. 463 (D. Neb. 2015). On
October 20, 2015, Korley appealed the district court's
order to the Eighth Circuit Court of Appeals and on July 18,
2017, the Court of Appeals affirmed the district court.
Sears v. Sears, No. 15-3417, 2017 WL 3027076, (8th
Cir. Jul. 18, 2017).
re Robert Sears (Case No. 10-40275)
February 2, 2010, Robert Sears also filed a chapter 11 case.
His case is still pending.
A. Sears, et al. v. Rhett R. Sears, et al.
October 17, 2014, Robert A. Sears, Robert A. Sears as a
trustee for the will of Redmond Sears and Korley B. Sears
filed a complaint against Rhett R. Sears, Rhett R. Sears
revocable trust, Ron H. Sears, Ronald H. Sears Trust and Dane
R. Sears, in the district court of Madison County, Nebraska
(Case No.14-389J). The plaintiffs alleged the following
claims in their complaint: breach of contract, breach of
fiduciary duty, restitution, conspiracy and tortuous
interference, and abuse of process. The facts alleged to
support the causes of action in the complaint are all related
to the defendants' alleged wrongful conduct during the
AFY bankruptcy case including AFY's liability to the
defendants in the stock sale agreement, the defendants'
participation in the AFY bankruptcy, the defendants receiving
distribution, and the alleged effort of the defendants in
making AFY's reorganization impossible. We note that the
defendant's actions in the bankruptcy case were largely
approved by the bankruptcy court and the bankruptcy
court's orders are final.
November 24, 2014, the defendants removed the state court
proceeding to the bankruptcy court in the bankruptcy cases of
AFY, Inc. (Case No. 10-40875), Robert Sears (Case No.
10-40275), and Korley Sears (Case No. 10-40277) as adversary
proceedings 14-4060, 14-4061, and 14-4062. On December 1,
2014, the defendants filed, in each case, (1) a motion to
dismiss the complaint for failure to state claims upon which
relief may be granted, (2) a motion for sanctions for
liability for excessive costs of counsel, and (3) a motion to
consolidate cases 14-4060, 14-4061 and 14-4062.
December 9, 2014, the plaintiffs filed a "Statement of
Intent, " asking the court to remand the case to state
district court because the proceedings were not core and
stating that they did not consent to the ...