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ST. LOUIS RECORD

Thursday, March 28, 2024

U.S. Court of Appeals for the Eighth Circuit allows creditors to seek claims totaling more than $5 million

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ST. LOUIS — The U.S. Court of Appeals for the Eighth Circuit has affirmed a ruling from a Nebraska federal court that denied discharging debts in a Chapter 11 bankruptcy proceeding. 

The ruling, which was filed on July 18, involved the action taken by creditors Rhett R. Sears, the Rhett Sears Revocable Trust, Ronald Sears, the Ron H. Sears Trust and Dane Sears against their relative, Korley B. Sears.

Details in the ruling indicate that in Nebraska bankruptcy court, the creditors argued that Korley Spears should not be discharged from his debts under a reorganization plan. And at trial in bankruptcy court, Judge Thomas L. Saladino denied discharge on the grounds that Korley Sears concealed property interest in a fishing boat and trailer, which he used for his personal enjoyment, and made a false oath about the boat.

U.S. District Judge Richard G. Kopf for the District of Nebraska affirmed Saladino's decision.

According to the court filing, the relatives described as "the Searses" sold their shares of a company called AFY Inc. to the company and Korley Sears in 2007.

In 2010, Korley sought Chapter 11 bankruptcy protection, with a principal issue being whether the Searses claims totaling $5.2 million could be allowed.

The dispute over the discharge of debts arose in 2009 when Korley transferred title of a fishing boat and trailer to his business associate April Good, according to the appellate court ruling. Korley Sears had indicated that the transfer would cancel an $18,000 debt, but in truth, he kept the boat and trailer, but he did not list them in personal property paperwork, according to the appeals court ruling.

An adversarial proceeding then commenced in February 2012 to recover the transfer of property. The Searses claimed that after they filed that action, they learned that the boat and trailer were never transferred to April Good and her husband.

The Searses claimed that Korley Sears hid property by failing to disclose beneficial interest in the boat and trailer on his statement of financial affairs. They further claimed that he made a false statement to the bankruptcy court in these financial documents.

"Korley produced no persuasive contrary evidence to compel a finding that he did not intend to hinder, delay or defraud his creditors," the appeals court said in its ruling. "The bankruptcy court thus did not clearly err in finding the requisite intent."

In a separate ruling filed on July 18, the panel affirmed the granting of summary judgment to the Searses, allowing proofs of claim totaling more than $5.2 million.

"We conclude that there is no merit to Korley’s several objections, so we affirm," the panel said in the decision.

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