United States District Court, S.D. Indiana, New Albany Division
ENTRY ON DEFENDANT'S AND INTERESTED PARTY'S
OBJECTIONS TO MAGISTRATE JUDGE'S ORDER ON MOTION TO AVOID
WALTON PRATT, JUDGE
matter is before the Court on Defendant Mark D. Rose's
(“Rose”), and Interested Party MMR Farms
LLC's (“MMR Farms”), Objections to Magistrate
Judge's Recommended Disposition on Motion to Avoid
Fraudulent Conveyances (the “Order”). (Filing
No. 66.) Plaintiff Caudill Seed & Warehouse Co.
(“Caudill Seed”), initiated proceedings
supplemental, seeking to pursue property that Rose
fraudulently conveyed to MMR Farms, in order to satisfy a
post-bankruptcy judgment against Rose. (Filing No.
54.) On April 18, 2016, the Magistrate Judge entered an
Order granting Caudill Seed's Motion to Avoid Fraudulent
Conveyances. (Filing No. 60.) Rose and MMR Farms
filed objections to the Order fourteen days later, on May 2,
2016, asserting that the Magistrate Judge erred. (Filing
No. 65.) For the following reasons, the Court
OVERRULES Rose's and MMR Farms'
Objections and ADOPTS the Magistrate
Judge's Report and Recommendation.
1996, Rose created Rose Seeding and Sodding, Inc. to conduct
his farming business. (Filing No. 54 at 5.) Mark
Matthew Rose (“Matt”), Rose's teenage son,
began working for Rose during this time. Id. In late
2008, Rose purchased grass seed on credit for his farming
operations from Caudill Seed. Id. at 4. Thereafter,
Rose's business began to decline dramatically.
Id. at 5. Rose defaulted on his payment terms with
Caudill Seed, and in July 2009, Caudill Seed commenced
litigation against Rose for breach of contract. Id.
the litigation proceedings, on October 19, 2009, Matt formed
MMR Farms. Id. at 6. Rose and Matt collectively
opened a bank account for MMR Farms with First Harrison Bank
on November 25, 2009. Id. Both Rose and Matt are
authorized signers on the account. Id. In 2010, as
litigation with Caudill Seed continued, Rose transferred
approximately 440 acres of real property to MMR Farms without
consideration. Id. at 7. Caudill Seed obtained
summary judgment on December 23, 2010, requiring Rose to pay
Caudill Seed $152, 646.76, plus ongoing interest. (Filing
No. 1 at 2.)
20, 2011, Rose filed Chapter 7 bankruptcy. (Filing No. 56
at 2.) Thereafter, on September 8, 2011, Caudill Seed
initiated adversary proceedings in Rose's bankruptcy
case, asserting that Rose should be denied a discharge under
§ 727(a)(2) because Rose transferred property to
insiders within a year of filing bankruptcy in order to
hinder, delay, or defraud creditors. (Filing No. 56-1 at
4.) On December 28, 2012, the Trustee filed a Motion to
Compromise and Settle certain claims the bankruptcy estate
had against Rose, Matt, and MMR Farms, among others.
(Filing No. 56-5.) The Trustee agreed to dismiss
claims asserted by the Trustee against Rose, Matt and MMR
Farms if they paid $100, 000.00 to the Trustee. Id.
at 2-3. On January 16, 2013, Caudill Seed objected to the
Trustee's motion, asserting that the Trustee's
proposed compromise and settlement was not in the best
interest of the unsecured creditors and Rose should not
obtain a discharge. (Filing No. 56-6.) On February
4, 2013, the Bankruptcy Court granted the Trustee's
proposed settlement. (Filing No. 56-8.)
on April 18 and April 19, 2013, the Bankruptcy Court
conducted a trial on Caudill Seed's adversary proceedings
against Rose. (Filing No. 1 at 2; Filing No.
56-10.) On February 27, 2014, the Bankruptcy Court
entered judgment denying discharge pursuant to §
727(a)(2) because Rose failed to rebut the presumption of
fraudulent intent in his transferring of property to MMR
Farms and other entities for no consideration, prior to the
bankruptcy filing. Id. On May 27, 2014, the
Bankruptcy Court then conducted a settlement conference
resulting in Rose and Caudill Seed entering into a
Reaffirmation Agreement. (Filing No. 1 at 2-3.) The
Reaffirmation Agreement specified that Rose agreed to pay
Caudill Seed a total of $100, 000.00 but, if Rose defaulted
on the scheduled payments, Caudill Seed was entitled to
judgment against Rose in the sum of $300, 000.00 minus any
previously tendered payments. (Filing No. 1-1 at 7.)
The Reaffirmation Agreement was filed with the Bankruptcy
Court on June 5, 2014. (Filing No. 1-1.) On June 20,
2014, the Bankruptcy Court vacated its prior judgment denying
discharge and entered an order granting Rose's discharge.
(Filing No. 56-11.) On June 30, 2014, Rose delivered
the initial installment of $15, 000.00 to Caudill Seed, as
required by the Reaffirmation Agreement, but has since
refused to pay any additional sums. (Filing No. 1 at
January 9, 2015, Caudill Seed filed the underlying action
against Rose, asserting default on the Reaffirmation
Agreement. (Filing No. 1.) On June 26, 2015, this
Court entered default judgment against Rose, holding that
Rose owed Caudill Seed $285, 000.00 plus 3.5% annual interest
beginning November 30, 2014. (Filing No. 19.) Rose
failed to tender any payment to Caudill Seed, and on January
4, 2016, Caudill Seed filed a Complaint seeking to avoid the
fraudulent conveyances Rose made to MMR Farms and other
entities. (Filing No. 54.) On February 5, 2016, Rose
and MMR Farms filed a joint response, asserting only issue
preclusion and that Caudill Seed lacks standing. (Filing
April 18, 2016, the Magistrate Judge entered an Order
granting Caudill Seed's Motion to Avoid Fraudulent
Conveyances, holding that the doctrine of issue preclusion
does not apply and Caudill Seed may properly enforce a
post-bankruptcy judgment. (Filing No. 60.) Rose now
appeals the Magistrate Judge's decision. (Filing No.
district court may assign dispositive motions to a magistrate
judge, in which case the magistrate judge may submit to the
district judge only a report and recommended disposition,
including any proposed findings of fact.” Schur v.
L.A. Weight Loss Ctrs., Inc., 577 F.3d 752, 760 (7th
Cir. 2009) (citing 28 U.S.C. § 636(b)(1)(B);
Fed.R.Civ.P. 72(b)). “The magistrate judge's
recommendation on a dispositive matter is not a final order,
and the district judge makes the ultimate decision to adopt,
reject, or modify it.” Schur, 577 F.3d at 760
(citing 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 72(b)(3)).
After a magistrate judge makes a report and recommendation,
either party may object within fourteen days. 28 U.S.C.
§ 636(b)(1); Fed.R.Civ.P. 72(b)(2). “A judge of
the court shall make a de novo determination of
those portions of the report or specified proposed findings
or recommendations to which objection is made” with
respect to dispositive motions. 28 U.S.C. § 636(b)(1).
Further, a judge “may accept, reject, or modify, in
whole or in part, the findings or recommendations made by the
magistrate judge.” Id.
and MMR Farms object to the Order on several grounds. They
rely on Matter of Leonard, 125 F.3d 543, 544 (7th
Cir. 1997), when asserting that Caudill Seed lacks standing
and objecting to the Magistrate Judge's finding that
Caudill Seed has standing to bring a fraudulent conveyance
claim without permission from the Bankruptcy Court. Rose and
MMR Farms further contend that the Magistrate Judge erred in
concluding that the doctrine of issue preclusion does not
apply. They also assert, and Caudill Seed does not dispute,
that the Order is dispositive and should be characterized as
a report and recommendation subject to a de novo
review. The Court agrees with the final assertion and reviews
the Order de novo. See Fed. R. Civ. P.