Caudill Seed & Warehouse Co., Inc. v. MMR Farms, LLC

In action seeking to collect on debt arising out of reaffirmation agreement entered in Bankruptcy Ct., where debtor agreed to pay plaintiff $285,000 for defaulted debt owed to plaintiff in exchange for plaintiff’s withdrawal of its request to have Bankruptcy Ct. deny debtor’s discharge of remaining debts in bankruptcy proceeding, Dist. Ct. did not err in allowing plaintiff to execute debt on land that had been fraudulently conveyed to third-party defendant (entity owned by debtor’s son) during bankruptcy proceedings in effort to avoid paying debtor’s creditors, including plaintiff. While third-party defendant conceded that land had been fraudulently conveyed, it argued that plaintiff was blocked from satisfying debt via execution on instant land by doctrine of issue preclusion, where plaintiff had entered into settlement agreement in Bankruptcy Ct. arising out of adversary proceeding that sought to pull land into bankruptcy estate. However, issue preclusion did not apply since: (1) issue preclusion requires entry of actual decision by judge that was necessary in prior litigation; and (2) issue regarding whether transfer of land was fraudulent conveyance was not actually litigated, but rather was settled and not decided by Bankruptcy Ct. Moreover, instant settlement agreement did not release third-party defendant from any potential fraudulent conveyance claim, and third-party defendant did not raise with Dist. Ct. in instant enforcement proceeding defense that it had been released from any such action.