Hernandez v. General Mills Federal Credit Union, No. 16-3111 (8th Cir. 2017)
Annotate this CaseGeneral Mills filed an adversary proceeding to determine the dischargeability of a debt in debtor's Chapter 7 bankruptcy. Applying Minnesota law to its preclusion analysis, the Eighth Circuit affirmed the bankruptcy court's rejection of debtor's claim preclusion defense. In this case, because all claims between codefendants were dismissed without prejudice by stipulation, there was no final adjudication on the merits. Furthermore, because General Mills' adversary claim arose from its rights and remedies with respect to debtor's execution of a promissory note secured by the property at issue, there was no final adjudication of that issue. The court affirmed the bankruptcy court as to issue preclusion as well. The court rejected debtor's claim of judicial estoppel where General Mills did not take inconsistent positions. The court also held that General Mills' fraud claims were not barred by the statute of limitations; rejected debtor's challenges to the bankruptcy court's evidentiary rulings; and affirmed the bankruptcy court's finding that debtor's debt was not dischargeable. Accordingly, the court affirmed the judgment.
Court Description: Beam, Author, with Benton and Murphy, Circuit Judges] Civil case - Bankruptcy. The bankruptcy court properly concluded that a state court settlement should not be given preclusive effect on the issue of whether debtor had committed fraud with respect to the debt in question as there was no final judgment on the merits in the state court matter; judicial estoppel argument rejected; creditor's fraud claims are not barred by the statute of limitations; any error in the bankruptcy court's evidentiary rulings was harmless; the bankruptcy court did not err in finding the debt was not dischargeable under Section 523(a)(2)(A) which excepts from discharge a debt for extension of credit to the extent the loan was obtained by fraud.
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