926 F. 2d 762 - Farm Credit Bank of Omaha v. R Franzen L

Raymond and Sonja Franzen appeal from an order of the district court1 reversing the bankruptcy court's order which had denied Farm Credit Bank of Omaha's motion for relief from an automatic stay following the bank's foreclosure sale of the Franzens' property. We affirm.

In December 1983 the Franzens filed a voluntary petition in bankruptcy under Chapter 11. On February 7, 1985, the bank moved for relief from the automatic stay to commence foreclosure of a mortgage it held on the Franzens' farm.2 The bankruptcy court granted the bank's motion whereupon the bank obtained a decree of foreclosure and received a deed to the property as the high bidder at the 1987 foreclosure sale. The state supreme court confirmed the sale.

In October 1988, after the Franzens refused to relinquish possession, the bank filed a second motion for relief from the automatic stay to enable it to pursue state remedies to obtain possession. The bankruptcy court denied the motion. The court stated that on motion of either party it would schedule an evidentiary hearing on whether "reasonably equivalent value" had been given pursuant to 11 U.S.C. Sec. 548, or whether "fair consideration" under state law had been given pursuant to 11 U.S.C. Secs. 549 or 544. The bank appealed. The district court concluded that the bankruptcy court had erroneously determined it could schedule a hearing under sections 544, 548 and 549. Finding that cause existed for relief from the stay, the district court remanded the case to the bankruptcy court for necessary proceedings. This appeal by the Franzens followed.

In reviewing a district court's reversal of a bankruptcy court, "this court asks whether the bankruptcy court's legal conclusions are correct and whether its factual findings are clearly erroneous." In re Muncrief, 900 F.2d 1220, 1224 (8th Cir.1990). Here the district court correctly concluded that the bankruptcy court could not conduct hearings on the value of the property under sections 548 and 549. See In re Matheson, 84 B.R. 435, 436 (Bankr.N.D.Tex.1987). Assuming, without deciding, that the provisions of section 544(b) apply to a post-petition sale, the bankruptcy court is foreclosed from examining the sale for voidness under state law because the Nebraska courts have already determined that this property was sold "for fair value" and otherwise conformed to the requirements of state law. See Neb.Rev.Stat. Sec. 25-1531. The Franzens' arguments relating to the bankruptcy court's authority are frivolous. Thus, the district court was correct in holding that the bank should be granted relief to dispossess the Franzens.

Accordingly, we affirm.