Case 25-80772-BSK Doc 61 Filed 10/15/26 Entered 10/15/26 13:59:13 Desc Main Document Page 1 of 8
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF NEBRASKA
In the Mat ter of: ) Case No. BK25-80772
)
BRENT S. J ACKSON, ) Chapter 7
)
Debtor . ) F in d in gs a n d Con clu s ion s R e ga r d in g Ob jec t ion t o Cla im No. 4-1 Philip M. Kelly, the Chapter 7 t rustee objected to the proof of cla im filed by David Raymond (Doc. #53). The Chapter 7 t rustee appeared. Michael T. Eversden appeared for Mr . Raymond. The t rustee's object ion is sustained. Raymond's claim is disallowed. The cla im is a cont ingent cla im for cont r ibut ion from the debtor on a sta te court judgment for which Raymond and the debtor a re both liable, t r igger ing 11 U.S.C. § 502(e)(1)(B). Raymond concedes each element of § 502(e)(1)(B). The sta tu te mandates disa llowance. F in d in gs of F a c t
Trane U.S. Inc. ("Trane") sued Raymond, the debtor , and Facility Advocates, LLC, in the Dist r ict Cour t of Douglas County, Nebraska, a t Case No. CI 22- 3093.1Trane asser ted cla ims for breach of cont ract and breach of the duty of loya lty aga inst the debtor and Raymond. It asser ted var ious tor t cla ims and a cla im for civil conspiracy aga inst a ll th ree defendants. A jury awarded Trane damages, assessing them defendant by defendant :
C la im R a ym on d Deb t or F a c ili t y Ad voca t e s
Breach of Cont ract $125,000 $125,000 N/A
Tor t Cla ims $2,616,136 $1,579,600 $1,425,600
Duty of Loyalty $329,367 $108,071 N/A
Tot a l $3,070,503 $1,812,671 $1,425,600
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According to Raymond, the sta te cour t en tered an order confirming the na ture of the judgment : The cont ract and duty-of-loya lty damages a re severa l. The jury assessed the tor t damages aga inst each defendant for it s own misconduct . Because the jury found a ll three defendants were co- conspira tors, they a re join t ly and severa lly liable for the tor t damages.2 The judgment is on appea l to the Nebraska Supreme Court . The issues appea led include whether the judgment is join t and severa l as between Raymond and the debtor . The case is set for a rgument in November 2026. Raymond posted a supersedeas bond of $1,089,646.50, which he descr ibes as
"individua lized" to h im and secur ing "his own exposure."3 The debtor filed h is Chapter 7 pet it ion on J u ly 28, 2025. Raymond filed Cla im No. 4-1, asser t ing tha t "in the event the appea l of the J udgment is unsuccessfu l," he holds a cont ingent cla im "for cont r ibut ion or indemnity for any por t ion of the J udgment tha t he pays tha t is a t t r ibutable to the Debtor ."4 Trane a lso filed a cla im in the amount of $1,856,035.95, consist ing of $1,812,671.00 in pr incipa l and $43,364.95 in post -judgment in terest . The t rustee liquida ted the debtor 's estate and recovered asset s. He filed a fina l repor t seeking to dist r ibute $101,929.58 to genera l unsecured creditors. In h is repor t , he proposed to pay Trane, the largest unsecured creditor , $100,642.79. He a lso proposed to a llow Raymond's cla im, "but pay zero"
because "[n]o amounts were cla imed." Raymond objected to the final repor t . The court directed the t rustee to object to the cla im so it s a llowance or disa llowance could be decided on the mer its.5The t rustee filed the object ion , which is now before the cour t . In it he asser ts Raymond's cla im is a
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cont ingent cla im for reimbursement or cont r ibut ion that must be disa llowed under § 502(e)(1)(B).
Raymond resisted. He does not dispute h is cla im meets the sta tu te: "Cla im No. 4-1 fa lls with in Sect ion 502(e)(1)(B), and Raymond does not contend otherwise." He seeks three a lt erna t ive forms of relief. He asks the cour t to over ru le the object ion . He seeks a cont inuance unt il the Nebraska Supreme Cour t rules on the appea l. And he asks the court to defer ru ling, est imate h is cla im under § 502(c), and direct the t rustee to hold a reserve for the est imate. Con clu s ion s of La w
Disa llowa nce Under § 502(e)(1)(B) Is Ma nda tory
Sect ion 502(e)(1) mandates disa llowance of Raymond's cla im. It provides in relevant par t :
Notwithstanding subsect ions (a ), (b), and (c) of th is sect ion and paragraph (2) of th is subsect ion , the cour t sha ll disa llow any cla im for reimbursement or cont r ibut ion of an ent ity that is liable with the debtor on or has secured the claim of a creditor , to the extent tha t— ... (B) such cla im for reimbursement or cont r ibut ion is cont ingent as of the t ime of a llowance or disa llowance of such claim for reimbursement or cont r ibut ion[.]
11 U.S.C. § 502(e)(1)(B). The sta tu te "preclude[s] redundant recover ies on ident ica l cla ims aga inst insolvent esta tes in viola t ion of the fundamenta l Code policy foster ing equitable dist r ibut ion among a ll creditors of the same class." Potter v. CNA Ins. Cos. (In re MEI Diversified , Inc.), 106 F.3d 829, 831 (8th Cir . 1997) (quot ing J uniper Dev. Grp. v. Ka hn (In re Hemingwa y Tra nsp., Inc.), 993 F .2d 915, 923 (1st Cir . 1993)). It a lso a llows "dist r ibut ion to unsecured creditors without a reserve for these types of cont ingent cla ims when the cont ingency may not occur unt il a fter the severa l years it often takes to lit iga te the under lying lawsuit ." In re Drexel Burnham Lamber t Grp., Inc., 148 B.R. 982, 986 (Bankr . S.D.N.Y. 1992) (quot ing In re Wedtech Corp., 85 B.R. 285, 290 (Bankr . S.D.N.Y. 1988)). Both purposes a re implica ted.
Disallowance requires three elements: "(1) the cla im is for reimbursement , (2) the claimant is 'liable with the debtor', and (3) the cla im is cont ingent as of the t ime of it s a llowance or disa llowance." In re Pettibone Corp., 110 B.R. 837,
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847 (Bankr . N.D. Ill. 1990); a ccord In re APCO Liquida ting Tr ., 370 B.R. 625, 631 (Bankr . D. Del. 2007).
Raymond concedes a ll th ree elements. The concession is well t aken. A cla im for indemnity, as well as one for contr ibut ion, is a cla im for reimbursement . In re Pettibone, 110 B.R. a t 848; In re Drexel, 148 B.R. a t 985. The debtor and Raymond are joint ly and severa lly liable to Trane for the conspiracy damages. And the cla im is cont ingent . "The pr imary example of a cont ingent cla im . . . is when 'a codebtor has not pa id the creditor and [thereby] established h is r ight to payment from the debtor .'" In re MEI, 106 F .3d a t 832 (quota t ion omit ted).
Cont ingency is measured on the da te of the ruling on the object ion, and it
"rela tes to both payment and liability." In re Drexel, 148 B.R. a t 986. A co- obligor 's cla im "is cont ingent unt il their liability is established . . . a nd the co- debtor has pa id the creditor ." Id . a t 987 (emphasis added); In re APCO, 370 B.R. a t 636. Raymond's liability is on appea l, and he has pa id noth ing. Raymond's request to over ru le the object ion must be denied. When the three elements a re met , "the cour t sha ll disa llow" the cla im. 11 U.S.C. § 502(e)(1)(B); In re Pinna cle Bra nds, Inc., 259 B.R. 46, 56 (Bankr . D. Del. 2001). That the estate is being liquidated ra ther than reorganized "is insignificant for the purposes of determining the applicability of sect ion 502(e)(1)(B). The Code makes no such dist inct ion ." In re Pinna cle Bra nds, 259 B.R. a t 56.
Disa llowa nce Is Not Forfeiture
Raymond is cor rect in sta t ing disa llowance under § 502(e)(1)(B) is not a for feiture. Sect ion 502(e)(2) provides:
A cla im for reimbursement or cont r ibut ion of such an ent ity tha t becomes fixed a fter the commencement of the case sha ll be determined, and sha ll be a llowed under subsect ion (a), (b), or
(c) of th is sect ion, or disa llowed under subsect ion (d) of th is sect ion , the same as if such cla im had become fixed before the da te of the filing of the pet it ion .
11 U.S.C. § 502(e)(2). Sect ions 502(e)(1)(B) and 502(e)(2) "serve essent ia lly to defer a llowing cla ims for reimbursement unt il they a re no longer cont ingent . Once such a cla im is no longer cont ingent , § 502(e)(2) permits it to be a llowed as a pre-pet it ion cla im." In re Pettibone, 110 B.R. a t 846-47. A co-obligor
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facing disa llowance "may elect to cause it s cont ingent cont ract cla im to become 'fixed' pr ior to disa llowance . . . by it self sa t isfying the debt due the creditor of the debtor esta te, leaving the en t ity as the sole holder of a cla im aga inst the estate based on tha t debt ." In re Hemingwa y Tra nsp., 993 F .2d at 923-24; see a lso In re Lull Corp., 162 B.R. 234, 238 (Bankr . D. Minn. 1993). Cont r ibut ion cla ims ar ising from join t tor t liability a re t rea ted the same way:
"to the extent tha t the par ishes eventua lly make payments to the tor t creditors, their cla ims may be a llowed." In re Archdiocese, 579 B.R. a t 197. If the cont ingency is resolved after disa llowance, the cla imant may seek reconsiderat ion. 11 U.S.C. § 502(j). A bankruptcy cour t "has the power to reconsider the a llowance or disa llowance of a cla im for cause by vir tue of § 502(j) and Bankruptcy Rule 3008." Pettry v. Pa tr iot Coa l Corp. (In re Pa tr iot Coa l Corp.), 511 B.R. 563, 566 (B.A.P. 8th Cir . 2014).6
A Continua nce Is Una va iling
The requested cont inuance would not change the resu lt . Cont ingency is measured on the da te the court ru les. The Nebraska Supreme Cour t 's decision will not fix Raymond's cla im. Payment will. If the judgment is reversed, Raymond's cla im disappears. If it is a ffirmed, the cla im remains cont ingent unt il Raymond pays more than h is own share of the common liability. His bond secures h is own exposure, and it is roughly a th ird of the damages assessed aga inst him a lone. The decision will not come unt il a fter ora l a rgument in November , and payment , if any, only after the decision. Noth ing in the record suggest s the cla im will be fixed with in any defined per iod.
The court in In re Agway rejected a simila r request to "defer disa llowance of the ba lance of [the] cla im unt il the end of the case." In re Agwa y, Inc., 2008 WL 2827439, a t *3 (Bankr . N.D.N.Y. J uly 18, 2008). In declin ing, the cour t reasoned:
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F & D has a remedy pursuant to Code § 502(j) to have its cla im(s) reconsidered once the cla im(s) has become fixed and liquidated. The Cour t is a t a loss to understand the advantage to F & D in having the Cour t defer indefinitely it s ruling on the disa llowance of F & D's cla im(s). It has suggested that th is will r esult in it s having to make severa l mot ions in the fu ture pursuant to Code § 502(j). However , if it were willing to wait for the Court to delay ruling on the disa llowance of it s cla im(s) to some da te in the future, then it should have no problem delaying any requests for reconsiderat ion of the disa llowance of it s cla im(s) pursuant to Code § 502(j) as well. It appears to be a dist inct ion without a difference as fa r as the t rea tment of it s cla im(s) is concerned.
Id . a t *4. The same is t rue here, except that here the difference has a cost . The esta te would remain open, with it s funds undist r ibuted and administ rat ive expenses accru ing.7
Estima tion a nd Reserve Are Not Ava ila ble
Raymond's claim cannot be est imated under § 502(c) and reserved. Neither is an ava ilable remedy. Sect ion 502(e)(1) applies "[n]otwithstanding subsect ions (a ), (b), and (c)." 11 U.S.C. § 502(e)(1). As the cour t expla ined in In re Drexel:
Although § 502(c) provides for the est imat ion of cont ingent cla ims, the sect ion only applies to direct cont ingent claims because § 502(e)(1)(B) expressly provides for disa llowance of cont ingent cla ims of a par ty secondar ily liable with the debtor
"[n]otwithstanding subsect ions (a ), (b), and (c) of th is sect ion."
11 U.S.C. § 502(e)(1)(B). Although a creditor's cla im which is cont ingent may give a r ight to est imat ion, "a person secondar ily liable to a creditor is not in the same posit ion as the [direct ] creditor ." Thus, the cla im may be est imated only if it is not disa llowed by § 502(e)(1)(B).
In re Drexel, 148 B.R. a t 991 (cit a t ion modified) (quot ing In re Pa cor , Inc., 110 B.R. 686, 690 (E.D. Pa. 1990)); see a lso In re Hemingwa y Tra nsp., 993 F .2d at
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926 n .12 (not ing a lt erna t ives such as placing a codebtor's dist r ibut ion in t rust
"find lit t le support in the ca tegor ica l language of sect ion 502(e)(1)(B)").8 The author ity Raymond cites to support a reserve is not applicable. He cit es In re Hea lth Dia gnostic La b'y, Inc., 551 B.R. 218, 235 (Bankr . E .D. Va . 2016), and In terco Inc. v. ILGWU Na t'l Ret. Fund (In re In terco Inc.), 137 B.R. 993, 997 (Bankr . E .D. Mo. 1992). Neither case involved a cla im subject to disa llowance under § 502(e)(1)(B). In In re Hea lth Dia gnostic the cour t approved a provision in a Chapter 11 liquidat ing plan a llowing a liquida t ing t rustee to est imate cla ims and set reserves dur ing the dist r ibut ion process. The court in In re In terco est imated a direct pension withdrawal-liability cla im "for the purpose of a llowance."
Nor does equity mandate a different answer . Any equitable power the cour t has under 11 U.S.C. § 105(a) "does not a llow the bankruptcy cour t to over r ide explicit mandates of other sect ions of the Bankruptcy Code." Law v. S iegel,
571 U.S. 415, 421 (2014) (quot ing 2 Collier on Ba nkruptcy ¶ 105.01[2], p. 105- 6 (16th ed. 2013)). The Bankruptcy Code requires disa llowance. It does not au thor ize est imat ion and reserve on equitable grounds. Equity cannot in tercede.
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Raymond's pr incipa l equitable argument oversta tes In re Hemingwa y Tra nsp. Raymond argues the Fir st Circuit "caut ioned aga inst a llowing § 502(e)(1)(B) to inflict a point less loss on a co-obligor whose payment would fix it s cla im." In re Hemingwa y Tra nsp. involved a pre-pet it ion CERCLA cla im the EPA held against the debtor . J uniper purchased the contamina ted land from the debtor in possession. CERCLA imposed liability on J uniper as subsequent owner . The EPA refused to file a claim in the bankruptcy case, causing the Fir st Circuit to note that there was only "a remote 'double- dipping' prospect ," and disa llowance "may occasion a poin t less financial loss to J uniper and result in a windfa ll to the chapter 7 esta te." In re Hemingwa y Tra nsp., 993 F .2d a t 926, 928. The cour t required a surroga te cla im for the EPA under § 501(c) as a precondit ion to disa llowance. Here, Trane filed it s own cla im for the debtor 's share of the judgment . The r isk of paying the same debt twice is not remote. The r isk exist s. This case presents the compet it ion between creditor and co-obligor tha t the sta tu te exists to prevent . In re MEI,
106 F .3d a t 831.9 Con clu s ion
For the reasons sta ted above, the t rustee's object ion (Doc. #53) is sustained. Cla im No. 4-1 is disa llowed under 11 U.S.C. § 502(e)(1)(B). Raymond's request s to cont inue the hear ing, defer ru ling, est imate the cla im under § 502(c), and require the t rustee to hold a reserve (Doc. #58) are denied. A separate order will be en tered.
Dated: October 14, 2026
BY THE COURT:
/s/ Br ian S. Kruse Br ian S. Kruse Chief Bankruptcy J udge
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