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Court’s Conclusion Cannot be Clearly Erroneous if a Permissible View

By Karl Johnson posted 10-09-2019 02:44 PM

  
BANKRUPTCY BULLETIN
Editors-in-Chief
Karl Johnson, Briggs and Morgan, P.A.
Alexander J. Beeby, Larkin, Hoffman, Daly, & Lindgren Ltd.
Contributing Editor: Mary Sieling, Manty & Associates, P.A.
BAP___SMC_Holdings__LLC_v__McCann.pdf 

In SMC Holdings, LLC v. McCann (In re McCann), 601 B.R. 813 (B.A.P. 8th Cir. 2019), SMC Holdings, LLC commenced an adversary proceeding seeking to except its debt from discharge under 11 U.S.C. § 523(a)(2)(A).  At trial, the debtor presented no defense and instead moved for judgment on partial findings—arguing that SMC was not the real party-in-interest to seek the requested relief.

SMC and Vinco, Inc. are under common ownership.  The parties were involved in a financing scheme to fund the manufacture and install of wind turbines. SMC did not have funds readily available to transfer to the debtor, but Vinco did.  The transfer from Vinco to the debtor was reflected on SMC’s books as a loan from Vinco to SMC.  Additionally, the debtor, SMC and Vinco agreed that if the deal did not materialize, then the funds would be returned to SMC. 

Given these facts, the bankruptcy court rejected the debtor’s argument that Vinco was the real party-in-interest.  It held SMC was the party in interest and entered judgment in its favor for $2,500,000. Without ruling on whether the debtor’s view was also permissible, the BAP held that the bankruptcy court’s conclusion was permissible and not clearly erroneous. Anderson v. City of Bessemer City, North Carolina, 470 U.S. 564, 574 (1985).

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