Steele v. First National Bank in Wichita

136 B.R. 278, 1991 U.S. Dist. LEXIS 19481, 1991 WL 315398
CourtDistrict Court, D. Kansas
DecidedDecember 27, 1991
DocketCiv. A. 90-1592-B
StatusPublished
Cited by3 cases

This text of 136 B.R. 278 (Steele v. First National Bank in Wichita) is published on Counsel Stack Legal Research, covering District Court, D. Kansas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Steele v. First National Bank in Wichita, 136 B.R. 278, 1991 U.S. Dist. LEXIS 19481, 1991 WL 315398 (D. Kan. 1991).

Opinion

MEMORANDUM AND ORDER

BELOT, District Judge.

This matter is before the Court on the motion of plaintiffs for partial summary judgment. (Doc. 25).

The action is the latest in a series of actions between plaintiffs and defendant (“the Bank”). The following chronology of the suits involving these parties is either admitted or not specifically controverted:

1. On February 25,1988, the Bank filed four separate suits against plaintiffs herein in the District Court of Greeley County, Kansas. The nature of the state court actions is the foreclosure upon mortgages and security agreements held by the Bank on certain personal and real property of plaintiffs.

2. On or about March 10, 1988, plaintiffs filed four separate reorganization proceedings in the United States Bankruptcy Court for the District of Kansas, all pursuant to Title 11 of the United States Bankruptcy Code. On August 10, 1989, the Bankruptcy Court entered orders confirming the reorganization plans in each of the four cases.

3. On or about January 23, 1989, First Tribune Insurance Agency — a corporation controlled by the individual plaintiffs herein — filed a “Lender Liability” suit against the Bank in the District Court of Sedgwick County, Kansas. This suit, which complained of the Bank’s lending relationship with plaintiffs, was dismissed by the court, and was affirmed on appeal.

4. On or about July 27, 1989, plaintiffs filed four separate “Lender Liability” adversary complaints against the Bank in the Bankruptcy Court. On February 10, 1990, plaintiffs filed motions to stay these proceedings and the proceedings are presently pending.

5. Also on or about July 27, 1989, the same plaintiffs filed another “Lender Liability” suit against the Bank in the District Court of Sedgwick County, Kansas. This action was voluntarily dismissed by plaintiffs.

6. Plaintiffs filed the instant action on December 21, 1990. Plaintiffs seek damages and injunctive relief for the Bank’s lending conduct allegedly violating: the Bankruptcy Code, 11 U.S.C. §§ 524 and 1141; the Bank Holding Company Act Amendments of 1970, 12 U.S.C. § 1972(1); the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. §§ 1961 et seq.; Federal Reserve Act, 12 U.S.C. § 503; several criminal statutes from which plaintiffs apparently imply a civil action; and the *280 Kansas Consumer Protection Act, K.S.A. 50-623 et seq. Plaintiffs also allege several common law claims ranging from fraud to slander; a breach of various duties under the Uniform Commercial Code, K.S.A. §§ 84-1-203 and 84-2-309; as well as a claim of tortious interference with business advantage claim which they seek to imply from the Bankruptcy Code. (Doc. 23, passim ).

Plaintiffs’ present motion does not specify on which claims of the 57-page, 267-paragraph Third Amended Complaint they are seeking partial summary judgment. In their argument, however, plaintiffs discuss 11 U.S.C. §§ 524 and 1141, violations of which are alleged in Counts 1 and 9, paragraphs 233-244, of the Complaint. Therefore, the Court will assume that the motion for partial summary judgment goes only to Count 1 and Count 9, paragraphs 233-244, of the Third Amended Complaint.

Count 1 alleges that the Bank has committed an abuse of process by its failure to dismiss the four state court actions still pending in Greeley County. Relying on 11 U.S.C. § 524 and 1141, plaintiffs contend that the Bank was “required” to dismiss the suits after the Bankruptcy Court filed Orders of Confirmation on August 28, 1989. Plaintiffs seek an order from this Court requiring the Bank to dismiss the state court actions; attorney fees and costs associated with the continued prosecution of the state action; compensatory damages for emotional distress; and punitive damages. (Doc. 23, ¶¶ 70-87).

Count 9, paragraphs 233-244, of the Third Amended Complaint likewise alleges violations of §§ 524 and 1141 for the failure of the Bank to dismiss its state court actions. (Doc. 23, 1111233-244). Plaintiffs allege that the Bank has committed a “tor-tious interference” with plaintiffs’ business advantage by its continued prosecution of the state actions, allegedly crippling plaintiffs’ ability to obtain credit. Plaintiffs seek injunctive relief as well as damages.

The effect of a discharge is set forth in 11 U.S.C. § 524(a)(2):

(a)A discharge under this title—
(2) operates as an injunction against the commencement or continuation of an action, the employment of process, or any act, to collect, recover or offset any such debt as a personal liability of the debtor, or from property of the debtor, whether or not discharge of such debt is waived; ....

The effect of a confirmation order is set forth in 11 U.S.C. § 1141:

(b) Except as otherwise provided in the plan or the order confirming the plan, the confirmation of a plan vests all of the property of the estate in the debtor.
(c) [Ajfter confirmation of a plan, the property dealt with by the plan is free and clear of all claims and interests of creditors ... except as otherwise provided in the plan or in the order confirming the plan.

(emphasis added).

Plaintiffs contend that the August 10, 1989 Confirmation Orders entered by the Bankruptcy Court “required” the Bank to dismiss the four state court foreclosure actions and to release its mortgages and security agreements in plaintiffs’ property. (Doc. 43, at 5-6). The general tenor of plaintiffs’ argument implies that an order of confirmation and discharge automatically extinguishes all prior existing debts and renders “moot” any lawsuits filed prior to entry of the order of confirmation. (Doc. 26, at 14-15).

Plaintiffs’ argument ignores the exceptions contained in §’ 1141: if the plan or order confirming the plan provide otherwise, the property does not vest in the estate of the debtor, and the claims of creditors are not released. Similarly, the § 524 injunction against actions on discharged debts does not affect a creditor’s ability to maintain an action on property that the plan or order confirming the plan has excepted from the operation of § 1141.

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Bluebook (online)
136 B.R. 278, 1991 U.S. Dist. LEXIS 19481, 1991 WL 315398, Counsel Stack Legal Research, https://law.counselstack.com/opinion/steele-v-first-national-bank-in-wichita-ksd-1991.