Du Trac Community Credit Union v. Hefel et al

Filing 13

ORDER re 1 Bankruptcy Appeal filed by Du Trac Community Credit Union: Finding no error of fact or law in the record, this matter shall be affirmed. Signed by Senior Judge Edward J McManus on 11/18/13. (ksy)

111813Lf

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF IOWA
CEDAR RAPIDS DIVISION

IN RE:

)
)
DOUGLAS HEFEL and
)
SHEILA HEFEL,
)
)
Debtors,
)
____________________________ )
)
DU TRAC COMMUNITY CREDIT
)
UNION,
)
)
Plaintiff-Appellee,
)
)
vs.
)
)
DOUGLAS PHILLIP HEFEL and
)
SHEILA KAY HEFEL,
)
)
Defendants-Appellants. )

No. C 13-1029 EJM
ORDER

This matter is before the court on an appeal filed September 30, 2013,
from the final order and judgment of the Bankruptcy Court (BC)1 filed August 5,
2013. Affirmed.
The grounds of the appeal from BC's decision are that the revocation of
appellants’ discharge after finding fraud and concealment was incorrect, and that
the appellee’s claims concerning the valuation of certain of appellants’ property
were precluded by BC’s previous order approving the Trustee’s motion to

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The Honorable Paul J. Kilburg.

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compromise, entered before the fraud was discovered. This court has jurisdiction
pursuant to 28 USC §158, and its standard of review for the findings of fact is for
clear error, and for the conclusions of law is de novo. In Re Mathiason, 16 F.3d
234, 235 (8th Cir. 1994).
BC, in its Order, details the fraud and concealment by defendants/debtors,
see Trial Exhibits 28 and 29. It then finds that “Debtors committed fraud by
recklessly or knowingly omitting assets in their bankruptcy schedules and
statements in order to mislead…”, p.13. This court, after reviewing the substantial
record on this issue, holds the finding to be well supported.
Finding fraud and concealment, the revocation of the discharge by BC was
proper. 11 U.S.C. §727(d)(1). This section provides a two-prong test for
revocation: 1) the discharge was obtained through the debtor’s fraud, and 2) the
plaintiff did not know of the fraud until after the entry of the discharge. In re
Peterson, 356 B.R. 468, 475 (Bankr. N.D. Iowa 2006); In re Kote, 262 B.R. 464,
471 (B.A.P. 8th Cir. 2001.) The revocation was proper under the statute’s test.
BC concluded that the appellees’ claims concerning the valuation of
appellants’ property were not precluded by its previous Order, entered before the
fraud was discovered. The discovery of fraud committed by appellants permits
the subsequent changes. Jefferson Smurfit Corp. (U.S.) v. United States, 439
F.3d 448, 454 (8th Cir. 2006).

Furthermore, the principles of res judicata,

collateral estoppel and law of the case do not apply, due to the fraud, Jefferson
Smurfit, supra, and also due to the fact that a non-appealable final judgment had
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not been entered. Lovell v. Mixon, 719 F.2d 1373 (8th Cir. 1983); Costner v. URS
Consultants, Inc., 153 F.3d 667 (8th Cir. 1998).
Finding no error of fact or law in the record, this matter shall be affirmed.
It is therefore
ORDERED
Affirmed.
November 18, 2013

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