Bremer Bank, National Association v. Border Bank
- Susan Nelson
- 0:25-cv-01249
- U.S. District Court · District of Minnesota
- 9
In Bremer Bank, National Association v. Border Bank, Judge Susan Richard Nelson denied Border Bank's motion to pause the lawsuit, ruling that bankruptcy's automatic freeze on legal proceedings does not apply because the disputed crop sale proceeds are not part of the bankrupt farmers' estate and the case is not duplicative of the ongoing bankruptcy proceedings.
Banks and other secured creditors involved in disputes over collateral proceeds where the original borrower has filed for bankruptcy protection; parties seeking to stay federal civil litigation based on a related bankruptcy proceeding; farmers and agricultural borrowers with multiple creditors holding competing security interests.
What happened
In Bremer Bank, National Association v. Border Bank (Case No. 25-cv-1249), Bremer Bank sued Border Bank in federal court claiming that farmers Douglas and Jessica Clark, who had borrowed money from Bremer Bank and pledged their farm assets as collateral, instead paid crop sale proceeds to Border Bank rather than to Bremer Bank, which held the senior claim on those assets. The Clarks later filed for bankruptcy protection, and they separately asked the bankruptcy court to decide whether Bremer Bank's security interest in their assets was ever valid. Border Bank then asked the federal district court to pause this lawsuit, arguing that the bankruptcy filing automatically froze all related legal proceedings, or alternatively, that the district court case was too similar to the bankruptcy proceedings to run at the same time.
Border Bank argued that federal bankruptcy law automatically halts lawsuits that involve a bankrupt person's property, so this case should be put on hold. Bremer Bank opposed the pause, contending that the crop proceeds at issue are no longer in the Clarks' possession — they were already handed over to Border Bank — and therefore are not part of the bankruptcy estate. Bremer Bank also argued the district court case and the bankruptcy proceedings address different legal questions: the bankruptcy court is examining whether Bremer Bank's security interest was released by an informal agreement, while this lawsuit seeks to recover proceeds that Border Bank already holds based on Bremer Bank's claimed superior right to those proceeds.
Judge Susan Richard Nelson denied the motion to stay. She found that the automatic freeze under bankruptcy law does not apply because the disputed proceeds are not in the Clarks' hands and are not part of the bankruptcy estate, relying on comparable rulings from other courts that have refused to extend the automatic freeze to actions against non-bankrupt parties over property the bankrupt person no longer holds. She also found the proceedings are not truly duplicative because they raise different questions, and she noted that any risk of conflicting rulings can be managed through coordination between her court and the bankruptcy judge assigned to the related proceedings. She further concluded that pausing the case would harm Bremer Bank with delay while causing no comparable harm to Border Bank.
The detailed version
- Bremer Bank, National Association v. Border Bank, No. 25-cv-1249 (SRN/DTS)
- Susan Richard Nelson, United States District Judge
- October 29, 2025
Background and Parties
Plaintiff Bremer Bank, National Association (now succeeded by Old National Bank in some of the parallel proceedings) sued Defendant Border Bank based on claims arising from promissory notes issued to non-party farmers Douglas and Jessica Clark. The Clarks had pledged their farming assets as collateral to Bremer Bank, which held a senior (superior) security interest. Border Bank held a junior (subordinate) lien on the same collateral. Bremer Bank alleges that beginning around 2021, the Clarks paid proceeds from the sale of their 2022 and 2023 crops to Border Bank rather than to Bremer Bank, thereby reducing the Clarks' debt to Border Bank. Bremer Bank alleges Border Bank retained these proceeds knowing that Bremer Bank held a superior security interest.
Claims in District Court
Bremer Bank's complaint asserts four counts: (1) a declaratory judgment that its lien is valid, perfected, and superior to Border Bank's interests; (2) conversion (wrongful taking of another's property); (3) civil theft; and (4) receipt of stolen property. It seeks compensatory damages for the value of the collateral, punitive damages, and attorneys' fees.
Parallel Bankruptcy Proceedings
The Clarks filed a first Chapter 12 bankruptcy case (a form of bankruptcy designed for family farmers) in June 2024, which was dismissed without prejudice in April 2025 due to delays in confirming a reorganization plan. They filed a second Chapter 12 case in May 2025. In July 2025, the Clarks filed an adversary proceeding (a lawsuit within the bankruptcy case) against Old National Bank (Bremer's successor) and Border Bank, arguing that Bremer Bank released its security interest in their assets in 2020 or 2021, and contending that Bremer Bank's district court lawsuit violates the automatic stay — the automatic freeze on most legal proceedings against a debtor and the debtor's property that takes effect when a bankruptcy petition is filed, under 11 U.S.C. § 362. Old National Bank moved to dismiss the adversary proceeding; hearings were scheduled for November 12, 2025 in the bankruptcy court.
The Motion to Stay
Border Bank moved the district court to stay (pause) the proceedings. It advanced two grounds: (1) the automatic stay under Bankruptcy Code Section 362(a) mandatorily applied because the lawsuit involved the Debtors' property; and (2) alternatively, the court should exercise its discretion to stay the case to avoid duplicative litigation and conserve judicial resources.
Analysis — Automatic Stay Under 11 U.S.C. § 362(a)
Section 362(a)(1) automatically stays any judicial proceeding "against the debtor." Section 362(a)(3) stays any act to obtain possession of "property of the estate." Under 11 U.S.C. § 541, property of the estate generally means all legal or equitable interests of the debtor in property as of the commencement of the bankruptcy case, plus proceeds and profits therefrom.
Judge Nelson found the automatic stay inapplicable because the disputed crop proceeds are no longer in the Clarks' possession — the Clarks themselves acknowledged in the adversary proceeding that the proceeds were "signed over" to Border Bank in 2021. The court is not proceeding against the debtor (the Clarks are not defendants), and the contested property is not in the bankruptcy estate. The court relied on two persuasive authorities: (1) Indigo Marketplace, LLC v. FarmOp Cap., LLC, No. 4:22-CV-00618-LPR, 2023 WL 3687173 (E.D. Ark. May 26, 2023), a factually analogous case involving crop proceeds held by a third party where the district court also declined to apply the automatic stay; and (2) In re TXNB Internal Case, 483 F.3d 292 (5th Cir. 2007), in which the Fifth Circuit Court of Appeals held that a stay was inapplicable to a conversion claim against a non-debtor that did not implicate the debtor's property. Judge Nelson quoted Indigo Marketplace for the proposition that no binding authority extends the automatic stay to an action that is both against a non-debtor and regarding property that is not part of the bankruptcy estate, and noted that Border Bank pointed to no such authority.
Analysis — Discretionary Stay to Avoid Duplicative Litigation
Even without a mandatory stay, a court may stay proceedings in its discretion if they are duplicative of concurrent federal proceedings. Judge Nelson applied the standard that litigation is duplicative when a plaintiff tries to litigate the same issue at the same time in more than one federal court, citing Ritchie Capital Management, L.L.C. v. Jeffries, 849 F. Supp. 2d 881 (D. Minn. 2012), and Blakley v. Schlumberger Tech. Corp., 648 F.3d 921 (8th Cir. 2011).
The court found the proceedings are not duplicative: the adversary proceeding in bankruptcy court concerns whether an oral credit agreement released the Clarks from their loan obligations and extinguished Bremer Bank's security interest entirely; the district court case concerns whether Bremer Bank can recover from Border Bank the proceeds Border Bank already received, based on Bremer Bank's alleged superior security interest. The Clarks are not parties to the district court case. While acknowledging some interconnected issues and the risk of inconsistent results, the court found that coordination between the district court judge and Bankruptcy Judge William Fisher — to whom the adversary proceeding is assigned, and who sits in the same district — would minimize that risk. Additionally, a stay would prejudice Bremer Bank by delay, while Defendant Border Bank would not suffer comparable prejudice from proceeding.
Ruling
The Motion to Stay [Doc. No. 24] filed by Border Bank is DENIED. A separate motion by Border Bank for partial dismissal under Federal Rule of Civil Procedure 12(b)(6) (seeking dismissal of Counts 2, 3, and 4 of the complaint) remains pending and was not addressed in this order.
Reviewer note from the AI+
Read the full 9-page opinion on CourtListener, the free public archive maintained by the Free Law Project.