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Trial Court on Remand is Bound By Prior Findings of Fact Only to the Extent Appellate Court Adopted Findings

By Karl Johnson posted 04-22-2018 10:13 AM

  
BANKRUPTCY BULLETIN
Editors-in-Chief
Karl Johnson, Hellmuth & Johnson, PLLC
Jeffrey Klobucar, Bassford Remele, P.A.

 Contributing Editor: Christopher Wilcox, Christensen Law Office, PLLC
Eighth_Circuit___Allison_v__Centris_Federal_Credit_Union.pdf

 
In Allison, et. al v. Centris Federal Credit Union, No. 16‑3923 (8th Cir. Mar. 29, 2018), the Eighth Circuit Court of Appeals determined that a successor bankruptcy judge did not exceed the BAP’s mandate on remand by re-visiting findings of fact that the BAP’s decision declined to resolve. The court further determined that the law-of-the-case doctrine did not require the successor judge to follow the prior bankruptcy judge’s findings of fact.

A dispute arose between a group of investors and both a secured creditor and a chapter 11 trustee regarding whether funds recovered by the trustee were property of the estate. The bankruptcy judge determined that the funds were held in trust and not part of the debtor’s bankruptcy estate. The secured creditor and the chapter 11 trustee appealed to the BAP, which reversed and remanded for further proceedings while declining to reach the issue of whether the funds were property of the estate.

As the first bankruptcy judge had retired, on remand the matter was reassigned to a successor judge. The successor judge concluded that the funds were in fact loan proceeds and property of the bankruptcy estate.

The investors appealed to the BAP and asserted that the successor judge had exceeded the scope of the BAP’s prior mandate and violated the law of the case doctrine. The BAP remanded and required the successor judge to certify her familiarity with the record and give the parties an opportunity to recall witnesses pursuant to Fed. R. Civ. P. 63 and Fed. R. Bankr. P. 9028. The judge did so and entered an order again concluding that the funds were property of the estate.

The investors’ appeal of that order to the district court was affirmed. The investors then appealed to the Eighth Circuit. The Eighth Circuit affirmed the district court and reasoned that a trial court is bound by its own prior rulings only to the extent the appellate court explicitly or implicitly adopted those findings in resolving the appeal. As the BAP had explicitly declined to adopt a finding with regard to whether  the funds were property of the estate, the trial court was not bound by that prior ruling. And as the successor judge steps into the shoes of his or her predecessor, with the same freedom as the first judge, the successor was not bound by the ruling of the first judge.

 

 

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