Spitz v. Nitschke

528 B.R. 874, 2015 U.S. Dist. LEXIS 48796, 2015 WL 1650000
CourtDistrict Court, E.D. Wisconsin
DecidedApril 14, 2015
DocketNo. 14-CV-1149-JPS
StatusPublished

This text of 528 B.R. 874 (Spitz v. Nitschke) is published on Counsel Stack Legal Research, covering District Court, E.D. Wisconsin primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Spitz v. Nitschke, 528 B.R. 874, 2015 U.S. Dist. LEXIS 48796, 2015 WL 1650000 (E.D. Wis. 2015).

Opinion

ORDER

J.P. STADTMUELLER, District Judge.

This bankruptcy appeal arises from three of Judge Susan V. Kelley’s orders in Donald F. Nitschke and Kristal R. Nitsch-ke’s (collectively “the Debtors”) Chapter 7 bankruptcy case. Those orders: (1) denied the motion of the Trustee to sell property of the Estate pursuant to 11 U.S.C. § 363(b) (Docket # 1-3 at 137); (2) granted relief from the automatic stay to permit state court proceedings, id. at 139-JO; and (3) granted the Debtors’ motion for abandonment of property of the Estate, id. at 145-147.

Notably, the Chapter 7 Trustee did not appeal these orders; instead, John C. Spitz (“Spitz”), a prospective buyer1 of property of the estate brings this appeal. The Court will dismiss this appeal because Spitz lacks standing to appeal the bankruptcy court’s orders.

1. BACKGROUND

The genesis of this case is the falling out of three business partners, Donald Nitsch-ke (“Nitschke”), Spitz, and Timothy Zigne-go (“Zignego”). (Docket # 5 at 7); (Docket # 4 at 8). In 2006, the three business partners intended to buy three apartment buildings and convert them to condominiums. Id. To do so, they created three LLCs (collectively, “the Oak Leaf LLCs”), one for each apartment building they purchased in Oak Creek, Wisconsin. Id. The Oak Leaf LLCs borrowed just shy of five million dollars from Park Bank to purchase the apartment buildings. (Docket [877]*877# 1-3 at 157-158). Ultimately, the Oak Leaf LLCs had four notes from Park Bank: a note on each of the three buildings and an additional $1.5 million note that the bank required after the economic downturn in 2007 and 2008. Id. at 157. To secure the $1.5 million note the bank required additional collateral from each business partner. Id. Nitschke, Spitz, and Zignego each pledged property valued at $500,000.00 to satisfy the bank, id.; and, as relevant here, Nitschke’s pledge was 240 acres of hunting land he owned in Shawa-no County, Wisconsin, together with a cabin located on the property (hereinafter, “the Aniwa Property”). (Docket # 5 at 4).

In late January 2014, the Park Bank loans were coming due and the bank demanded a $700,000.00 pay down in order to renew the loans. (Docket # 5 at 8-9).' At a mid-January meeting between Spitz, Zig-nego, and Nitschke, they voted to obtain the money necessary for the pay down by borrowing from themselves; they also decided to refinance the Park Bank notes with a different bank.2 Id. Nitschke, however, declined to put in new capital. (Docket # 4 at 9).

Without Nitschke, Spitz and Zignego forged ahead and established J & T Lending LLC (“J & T”); Spitz and Zignego fronted J & T the $700,000.00 for the pay down. Id. Thereafter, J & T refinanced the Oak Leaf LLCs using the $700,000.00 to buy out the Park Bank loan; J & T refinanced with Home Federal. (Docket # 1-3 at 161-62). As part of this refinance, J & T obtained the notes on the three apartment buildings, and the guarantees on the personal collateral that each member had put up to secure the $1.5 million Park Bank note. Id. One of those guarantees, as noted above, was Nitschke’s pledge of the Aniwa Property.

Shortly after the refinance of the Oak Leaf LLCs, the Debtors filed a voluntary petition under Chapter 7. (Docket # 1-2 at 1). The Debtors’ schedules listed a fee simple interest in the Aniwa Property with a value of $593,000.00, subject to a secured claim of $535,000.00; the secured claim was listed as a mortgage lien held by Park Bank. Id. at 33. As discussed above, this lien was transferred to J & T upon the refinancing of the Oak Leaf LLCs. The Debtors’ schedules also listed a $585,000.00 unsecured, nonpriority claim held by Spitz for “Judgment on Loans”; that judgment lien was against the Aniwa Property. Id. at 46.

On April 7, 2014, the Trustee filed a motion to sell the Aniwa Property, pursuant to 11 U.S.C. § 363(b). (Docket # 1-2 at 113-16). The Trustee sought to sell the property to Spitz for $10,000.00 in a private sale. Id. Spitz would take the Aniwa Property subject to existing liens; namely, the $535,000.00 mortgage held by J & T lending, and the $585,000.00 judgment lien held by Spitz himself. Id. The sale would generate $8,250 of equity for the Estate, for the benefit of unsecured creditors. Id.

On April 18, 2014, the Debtors filed amended schedules, claiming a $25,450.00 wild card exemption in the Aniwa Property under 11 U.S.C. § 522(d)(5). (Docket # 1-2 at 139). Since this exemption would swallow any profit from sale proposed by the Trustee, and the property was fully encumbered, the Debtors thereafter filed a motion to abandon the Aniwa Property pursuant to 11 U.S.C. § 554. Id. at 145-49. The Debtors also filed an objection to the Trustee’s motion to sell, arguing that selling the property would nullify their wild card exemption. Id. at 170. Subsequently, the Trustee objected to the Debt- or’s wild card exemption, id. at 176, and [878]*878Spitz and the Trustee objected to the Debtors’ motion to abandon the Aniwa Property. Id. at 248; (Docket # 1-3 at 18-20).

On May 8, 2014, J & T filed a motion for relief from the automatic stay to allow it to take action under state law to enforce its interest in the Aniwa Property, pursuant to the mortgage lien it acquired after the refinance of the Oak Leaf LLCs. (Docket # 1-2 at 189-91). In its motion, J & T asserted that the debt secured by the Ani-wa Property was not the value of the mortgage lien of $535,000.00, but $4,795,797.91, which was the amount due on the notes held by J & T for the Oak Leaf LLCs. (See Docket # 1-2 at 189-92). The Debtors objected to the motion for relief from stay because of the overvaluation of the lien against the Aniwa Property. (Docket # 1-3 at 24). However, the Debtors did agree that the stay should be lifted so that a state court could resolve claims of “LLC ownership, loan collateral, mortgage, indemnification and contribution ... that the Debtors wish[ed] to pursue” against J & T, Spitz, and Zignego. Id. at 25.

The Debtors were granted a discharge under 11 U.S.C. § 727 on June 13, 2014. Id. at 38. This included discharge of the judgment lien that Spitz held against the Aniwa Property in the amount of $585,000.00. See In re Nitschke, Case No. 14-20569 (Docket # 87); Spitz v. Nitschke, Shawano County Circuit Court Case No. 2013TJ000006 (noting on the docket that the “Judgment Status” of Spitz’s judgment lien against Nitschke and the Aniwa Property was “Satisf of judg due to bankrupt” and this occurred on August 6, 2014).

On August 5, 2014, the bankruptcy court held an evidentiary hearing to address the Trustee’s motion to sell the Aniwa Property, the Debtors’ motion to abandon the Property, and J & T’s motion for relief from stay to pursue state court remedies. Id.

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Cite This Page — Counsel Stack

Bluebook (online)
528 B.R. 874, 2015 U.S. Dist. LEXIS 48796, 2015 WL 1650000, Counsel Stack Legal Research, https://law.counselstack.com/opinion/spitz-v-nitschke-wied-2015.