SMC Holdings v. McCann, No. 19-6009 (8th Cir. 2019)

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Justia Opinion Summary

The Bankruptcy Appellate Panel affirmed the bankruptcy court's judgment determining that SMC's claim against debtor was nondischargeable. The panel held that the bankruptcy court's finding that SMC was the proper party holding the claim against debtor was not clearly erroneous. In this case, the bankruptcy court permissibly viewed the evidence as demonstrating that Vinco was only acting on SMC's behalf and that SMC was the real party in interest.

Court Description: Shodeen, Author, with Saladino, Chief Judge, and Nail, Bankruptcy Judge] Bankruptcy Appellate Panel. The bankruptcy court's conclusion that SMC was the proper party holding the claim against debtor, and thus the proper party to file this adversary action to except its debt, is affirmed. [ July 08, 2019
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United States Bankruptcy Appellate Panel For the Eighth Circuit ___________________________ No. 19-6009 ___________________________ In re: Aaron James McCann, as surety for Switching Gears, LLC, as surety for 7 Flags Promotions, LLC, as surety for 7 F Food & Beverage, LLC, as surety for 2100 Club, LLC Debtor. -----------------------------SMC Holdings, LLC Plaintiff – Appellee, v. Aaron James McCann Defendant – Appellant ____________ Appeal from United States Bankruptcy Court for the District of Minnesota - Duluth ____________ Submitted: June 27, 2019 Filed: July 9, 2019 ____________ Before SALADINO, Chief Judge, NAIL and SHODEEN, Bankruptcy Judges. ____________ SHODEEN, Bankruptcy Judge, The Debtor, Aaron McCann, appeals the bankruptcy court’s1 February 11, 2019 judgment determining SMC Holdings, LLC’s claim against him was nondischargeable. BACKGROUND SMC Holdings, LLC filed an adversary proceeding to except its debt from McCann’s discharge under 11 U.S.C. §523(a)(2)(A). At the end of the trial, after presenting no defense, McCann’s counsel made an oral motion for judgment on partial findings on the basis that SMC was not the real party-in-interest. Fed. R. Civ. P. 17(a); Fed. R. Bankr. P. 7017; Curtis Lumber Co. v. La. Pac. Corp., 618 F.3d 762, 771 (8th Cir. 2010); Samuel J. Temperato Revocable Tr. v. Unterreiner (In re Unterreiner), 459 B.R. 725, 730 (B.A.P. 8th Cir. 2011). The bankruptcy court denied McCann’s request and entered judgment in favor of SMC for $2,500,000. McCann appeals the judgment. STANDARD OF REVIEW Our jurisdiction extends to “the events and rulings leading to a final order.” Zahn v. Fink (In re Zahn), 526 F.3d 1140, 1143 (8th Cir. 2008). We review the bankruptcy court's findings of fact for clear error and legal conclusions related to the entry of judgment pursuant to Rule 52(c) de novo. Minn. Laborers Health & Welfare Fund v. Scanlan, 360 F.3d 925, 927 (8th Cir. 2004); Clark v. Runyon, 218 F.3d 915, 918 (8th Cir. 2000). 1 The Honorable Robert J. Kressel, Judge, United States Bankruptcy Court for the District of Minnesota. 2 DISCUSSION McCann and his business Switching Gears, LLC (collectively McCann) began discussions with Renewtech, LLC to manufacture and install wind turbines on tribal lands. To move the project forward the parties agreed that contributions in exchange for an ownership interest in Switching Gears were required. SMC operated as an investment vehicle for Vinco, Inc. and Renewtech. Total contributions of $2.7 million were completed under this arrangement before it became clear that the project could not proceed. The focus of McCann’s argument is that Vinco was the entity that wired funds and issued him a check making it the proper party to assert this claim against him. In his answer McCann admits that SMC provided the funds. The testimony reflects that on the date of the transfer time was of the essence for the funds to be paid. Because SMC did not have immediate access to the amount necessary to fund the request Vinco made the transfer to McCaan as an entity under common ownership. This transfer was reflected on the companies’ books as a loan from Vinco to SMC. The parties’ term sheet specifically stated that should the agreement not be executed the money would be returned to SMC, not Vinco. The bankruptcy court viewed the evidence as demonstrating Vinco was only acting on SMC’s behalf and that SMC was the real party in interest; Debtor views the evidence as demonstrating the funds came from Vinco and that Vinco was the real party in interest. The bankruptcy court's view is certainly permissible in light of the evidence. For that reason alone, even assuming Debtor's view is also permissible, we cannot say the bankruptcy court's finding was clearly erroneous. Anderson v. City of Bessemer City, North Carolina, 470 U.S. 564, 574 (1985) (“Where there are two permissible views of the evidence, the factfinder's choice between them cannot be clearly erroneous.”). 3 CONCLUSION Based upon our de novo review the bankruptcy court’s conclusion that SMC is the proper party holding the claim against McCann was not clearly erroneous. Accordingly, the judgment is AFFIRMED. ______________________ 4

Primary Holding

The bankruptcy court's finding that SMC was the proper party holding the claim against debtor was not clearly erroneous.

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