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In re Paulson

United States Court of Appeals, Eighth Circuit

November 17, 2016

In re: Herman Eugene Paulson, Eugene Paulson Debtor
Daniel McDermott U.S. Trustee -Appellee Herman Eugene Paulson Debtor - Appellant Sunflour Railroad, Inc. Creditor - Appellee

          Submitted: October 6, 2016

         Appeal from United States Bankruptcy Court for the District of South Dakota - Aberdeen

          Before FEDERMAN, Chief Judge, SCHERMER and SALADINO, Bankruptcy Judges.

          FEDERMAN, Chief Judge

         Debtor Herman Eugene Paulson appeals from an Order of the Bankruptcy Court[1] denying his motion to reinstate his dismissed Chapter 13 bankruptcy case and an Order denying his motion to reconsider that Order. For the reasons that follow, we affirm.


         This case stems from a long-running dispute between the Debtor and two of his creditors, People's State Bank and Sunflour Railroad, Inc. The details of that dispute have been recounted in numerous decisions from the South Dakota state courts, the South Dakota Bankruptcy Court, this Bankruptcy Appellate Panel, and the Eighth Circuit Court of Appeals, [2] and need not be repeated in detail here.

         To summarize, however, People's State Bank and Sunflour Railroad each have state court judgments against the Debtor. Sunflour's judgment relates to a dispute over the Debtor's grain elevator which encroached on a railroad right of way: When the Debtor refused Sunflour's demand that he remove the grain elevator from its property, Sunflour sued him in state court. That lawsuit resulted in a money judgment in favor of Sunflour the amount of $19, 280, which became a lien on the Debtor's property.[3] The South Dakota Supreme Court has affirmed this judgment.[4]

         The Debtor's debt to People's Bank stems from a loan which was secured by the Debtor's personal property. When the Debtor defaulted on the loan, People's obtained a state court judgment in the amount of about $60, 000, as well as possession of the collateral. The Debtor did not appeal this judgment, but instead filed a "writ of prohibition" from the South Dakota Supreme Court, which was denied.

         After the Debtor's attempts to challenge the judgments in the state courts proved unsuccessful, he convened a group of individuals which he refers to as "the Peoples Seventh Amendment Jury." The "jury" purported to void the judgments against the Debtor as being fraudulently obtained and also assessed punitive damages against the parties involved in the alleged fraud. In 2013, the Debtor filed the Peoples Seventh Amendment Jury's judgment and other documents containing the heading of "Our One Supreme Court" in the South Dakota state court. The filing of these documents resulted in the Debtor being convicted of the crime of accusing a state court judge of treason and threatening the judge with death. That conviction was affirmed by the South Dakota Supreme Court.[5]

         Meanwhile, as People's Bank was attempting to collect its judgment and obtain possession of its collateral, and apparently around the time the Debtor was convening the private jury, the Debtor filed his first Chapter 13 bankruptcy petition on August 22, 2011. Three things relevant to this appeal occurred in that first bankruptcy case:

         One, the Debtor filed several pleadings and initiated adversary proceedings seeking the Bankruptcy Court's determination that, inter alia, the state court judgments obtained by Sunflour and People's Bank were void based on fraud, and that the decision of the Peoples Seventh Amendment Jury was valid. Those attempts failed when the Bankruptcy Court held that, under the Rooker-Feldman doctrine, it lacked the authority to invalidate the state court judgments.[6]

         Two, the Debtor made five attempts at filing a Chapter 13 plan, each of which drew objections from People's Bank and Sunflour on the grounds that they contained only vague language about selling collateral to pay People's claim, and language indicating Sunflour's claim was invalid and would not be paid. The creditors also asserted that the plans lacked detailed provisions regarding payments, failed to properly account for them as secured creditors, were not feasible, and were not proposed in good faith. None of the proposed plans was confirmed.

         And, finally, after the Bankruptcy Court denied confirmation of the Debtor's third proposed plan, the Chapter 13 Trustee filed a motion to dismiss the case.[7] On March 16, 2012, the Bankruptcy Court granted that motion for many reasons, including that the Debtor continued to refuse to properly provide for the payment of Sunflour's and People's secured claims, resulting in unreasonable delay.[8] After the Court denied the Debtor's motion for new trial or amendment of judgment, he appealed to this panel, which affirmed, [9] and then to the Eighth Circuit Court of Appeals, which affirmed by a decision filed on August 5, 2013.[10]

         The Debtor then filed this Chapter 13 bankruptcy case on September 28, 2015.

         On March 1, 2016, the Debtor filed an adversary proceeding against more than twenty defendants, including Sunflour and its principals and attorneys, again attacking the validity of the state court judgments. In addition to the arguments which had previously been rejected by the courts, he also now asserts that ConAgra and the political and judicial leaders of South Dakota have conspired to destroy his livelihood as an organic farmer and take over the food industry.

         Meanwhile, the Debtor filed two proposed Chapter 13 plans in this case, both of which continue to turn on his claim that People's and Sunflour's liens are not valid. As before, Sunflour and People's Bank objected to confirmation of each of the proposed plans.

         After the Bankruptcy Court denied confirmation of the second plan, the United States Trustee (the "UST") filed a motion, on March 30, 2016, to dismiss the bankruptcy case. Sunflour filed a joinder of that motion on April 25, 2016. In essence, the UST's motion asserted that the plans in the current case were substantially similar to the ones rejected in the first case, and were simply continued attempts to retry or void the state court judgments, which the courts have repeatedly said the Bankruptcy Court lacks the authority to do. The UST asserted that the "failure to propose a plan that bears any semblance of conforming to the Court's concerns creates an unjustifiable and unreasonable delay prejudicial to creditors, " amounting to cause for dismissal pursuant to § 1307(c)(1) of the Bankruptcy Code. He also asserted that the case should be dismissed for bad faith.

         The deadline to respond to that motion to dismiss was April 25, 2016, and the Debtor failed to respond by that date. Therefore, the Bankruptcy Court entered an order on April 26, 2016 granting the UST's motion and dismissing the case (the "Dismissal Order"). On April 29, 2016, after the Dismissal Order had been entered, the Debtor filed an objection to the UST's motion to dismiss. He also filed a motion to reinstate the case on May 4, 2016. The UST and Sunflour objected.

         On May 20, 2016, the Bankruptcy Court entered an Order denying the Debtor's motion to reinstate the case. On June 2, 2016, the Debtor filed a motion to reconsider the denial of the motion to reinstate. The Bankruptcy Court denied that motion on June 7, 2016.

         On June 21, 2016, the Debtor filed a Notice of Appeal of the May 20 Order Denying Reinstatement and the June 7 Order Denying Reconsideration.


         This appeal is untimely as it relates to the April 26, 2016 Dismissal Order; rather, as the UST suggests, our review is limited to the Bankruptcy Court's Orders denying the motion to reinstate and denying the motion to reconsider.

         Federal Rule of Bankruptcy Procedure 8002(a)(1) provides that, generally, "a notice of appeal must be filed with the bankruptcy clerk within 14 days after entry of the judgment, order, or decree being appealed."[11] However, certain motions, if timely filed, toll the time to appeal, such that the time for appeal will begin running from the entry of the order disposing of such motions.[12] These include motions to alter or amend the judgment under Federal Rule of Civil Procedure 59(e)[13] and motions for relief under Federal Rule of Civil Procedure 60(b), [14] if filed within 14 days from the order from which relief is sought.[15]

         Here, the Dismissal Order - which was a final, appealable order[16] - was entered on April 26, 2016. Absent the filing of a tolling motion, the ...

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