Lariat Co., Inc. v. Wigley, No. 14-6043 (8th Cir. 2015)
Annotate this CaseLariat and Tenant entered into a 10-year lease for operation of a restaurant. Debtor personally guaranteed Tenant's performance. Tenant was evicted in 2010 and obtained a judgment of $2,224,237.00, plus interest and attorney fees. In 2011, Lariat filed an involuntary chapter 7 petition against Debtor, which was dismissed by agreement. The same creditors filed suit against Debtor's wife. After the involuntary petition was dismissed, they added Debtor as a codefendant. The court held Debtor and his wife liable for fraudulent transfers ($795,098.00) and awarded interest and costs. In 2013, Debtor sued Lariat; the court dismissed, based on collateral estoppel. Appeal is pending. In 2014 Tenant filed a chapter 11 petition and an adversary proceeding against Lariat. The bankruptcy court dismissed the adversary proceeding. On the Trustee's motion, Tenant’s chapter 11 case was dismissed. Debtor filed his own chapter 11 petition. Lariat filed a proof of claim for $1,734,539.00. Debtor objected on grounds that the amount sought based on Debtor's personal guaranty under the lease exceeded the amount allowable under 11 U.S.C. 502(b)(6) and the amount sought based on fraudulent transfers was duplicative of, and subject to the same limitation as, sought based on thatl guaranty. Lariat filed an amended proof of claim for $1,610,787.00. The court capped Lariat's claim at $445,272.93. The Eighth Circuit Bankruptcy Appellate Panel remanded for recalculation of damages under the lease and of fees and expenses, but agreed that damages for fraudulent transfers were duplicative.
Court Description: Nail, Author, with Federman, Chief Judge, and Shodeen, Bankruptcy Judge. Bankruptcy Appellate Panel. The amounts the creditor was seeking for unpaid rent, common area maintenance and late fees through the eviction date accrued prior to the termination of debtor's lease and cannot be said to have resulted from the termination of the lease; similarly, the interest the creditor sought related to these sums did not result from termination; as a result, none of these amounts was subject to the cap found in Sec. 502(b)(6); the court did not err in sustaining an objection to the interest on future rents as such a claim would not exist if the lease had not been terminated; attorneys' fees, costs and certain disbursements which accrued prior to the termination were not subject to the cap; certain portions of a state court judgment concerning fraudulent transfers to debtor's wife duplicated damages already awarded the creditor for debtor's breach of the lease; reversed for further proceedings.
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