DECISIONS - 1989

Irvin N. Hoyt, Chief Bankruptcy Judge

Alphabetical Listing

1989 DECISION SUMMARIES

Irvin N. Hoyt, Chief Bankruptcy Judge

1. February 3, l989: BAR 7 BAR CHAROLAIS RANCH, Case No. 585-00200, Adversary No. 88-5010, Chapter 11. ISSUE: Determine the core/non-core status of the adversary. RULING: A proceeding which arguably falls within one of the categories of core proceedings listed in 28 U.S.C. §157(b)(2) should not automatically be treated as a core proceeding. Judge Porter's Lower Brule Construction decision adopted the "but for" non-core jurisdiction rule. Court gave overview of bankruptcy jurisdiction.

2. February 16, 1989: SPECK, ROBERT AND LEONA , Case No. 87-30054, Chapter 12. ISSUE: Valuation Dispute. RULING: Court determined value.

APPEAL RECORD:

March 30, 1989: SPECK, ROBERT & LORNA . Case No. 87-30054. Notice of Appeal to District Court filed by debtors from Order Determining Value of Property entered 3-23-89; Memorandum Decision 2-16-89. APPEAL STATUS: Referred to Hon. Donald J. Porter 5-10-89. Affirmed by Judge Porter 9-19-89 (Civ. 89-3020).

3. February 16, 1989: LELAND AND GLENNIS PEARSON, Case No. 87-30047, Chapter 12. ISSUE: Post-confirmation modification of the plan. RULING: The order confirming a Chapter 12 plan has res judicata effect as to matters which could have been raised prior to or at the time of confirmation. In re Cooper, ___ B.R. ___, 1989 W.L. 581 (Bkrtcy. S.D. Ill, 1989); In re Olsen, 861 F.2d 188 8th Cir. 1988).

4. March 8, 1989: EARL AND RUBY HANSON, Case No. 386-00136, Chapter 12. HAROLD AND JIM ASSMAN, Case No. 87-30147, Chapter 12. LOWER BRULE CONSTRUCTION, Case No. 87-30079, Chapter 11. WARD AND NORMA LEMMON, Case No. 88-10078, Chapter 12.GARY & KATHLEEN SCHINDLER, Case No.88-30036, Chapter 12. DONALD & BONNIE SCHINDLER, Case No.88-30037, Chapter 12. ISSUE: Court approval of professional compensation from estate funds. RULING: Travel Time - Professionals should be compensated at their full reasonable hourly rate of necessary travel hours, unless the travel fees become too large a percentage of the total fees applied for, exclusive of expenses and sales tax. Because the geographic locations of the court points does not always coincide with the attorney's residence and because of the limited number of attorneys in the District who practice bankruptcy law, the debtor's ability to hire qualified counsel would be unduly chilled if travel was not fully compensable.

Mileage Expense - Section 330(b)(2) allows a professional reimbursement from the estate for "actual, necessary expenses". The Court allowed a mileage expense of 24 cents per mile, regardless of the economy of the auto driven. (This is the standard mileage rate the I.R.S. presently allows taxpayers for autos used in business).

Paraprofessional Billing - If paralegal work is to be compensable, the qualifications of the assistant should be established to justify the charge.

Adequate Itemization - B.R. 2016. Problem of inadequately itemized applications is not limited to travel related fees and expenses - In re Pothoven, 84 B.R. 579, 584 (1988), citing In re Pettibone Corp., 74 B.R. 293 (Bkrtcy. N.D. Ill. 1987; In re S.T.N. Enterprises, Inc., 70 B.R. 823 (Bkrtcy. D. Vt. 1987); In re Doyle - Lunstra Sales Corp., 19 B.R. 1003, 1005 (D. S.D. 1982).

5. March 15, 1989: WEEMS FARMS, Case No. 186-00225, Adversary No. 88-1028, Chapter 12. ISSUE: Whether a stipulation concerning cash collateral between debtor and a creditor formalized in an order signed by the Court is effective against other creditors where the stipulation was not noticed for Court approval? RULING: The Court found it was not.

6. March 23, 1989: JOHN D. AND KELLIE B. LIPP, Case No. 88-50112, Chapter 7. ISSUES: (1) Whether a statutory redemption right existing at the time of bankruptcy was filed is property of a Chapter 7 estate? (2) Are the proceeds of the post-petition sale of the redeemed real estate remained encumbered by a second mortgagee which filed foreclosure upon the property at the pre-petition foreclosure sale, or are unencumbered and available to satisfy unsecured claims? (3) Are the proceeds exempted from the estate under the debtors' homestead exemption? RULINGS: (1) The Court ruled that the debtors' right of redemption was part of the bankruptcy estate at the time of the filing - Johnson v. First National Bank of Montevideo, Minn., 719 F.2d 270, 276 (1983) cert. denied, 465 U.S. 1012 (1984) citing 4 Collier on Bankruptcy para. 541, 07[3] at 541-30 (15th ed. 1983). (2) The Court ruled that under South Dakota Law, by virtue of the debtors' redemption, the second mortgage survived the foreclosure of the first mortgage. (3) The Court ruled that the debtors are unable to exempt the proceeds of the sale from their bankruptcy estate.

APPEAL RECORD

March 30, 1989: JOHN & KELLIE LIPP. Case No. 88-50112. Notice of Appeal to District Court filed by debtors from Order denying debtors' right of exemption through their homestead exemption proceeds obtained from a post-discharge sale of their home entered 3-24-89; Memorandum Decision 3-24-89. APPEAL STATUS: Referred to Hon. Richard H. Battey 4-27-89. Dismissed. Stipulation and Order Dismissing Appeal with prejudice entered by Judge Battey July 26, 1989 (Civ. 89-5053).

7. March 31, 1989. ROBERT LAVERNE EHRICH. Case No. 585-00119, Chapter 11. ISSUE: Whether in a Section 506(a) hearing the real estate securing a claim should be valued as ranch land, the debtor-in-possession's present use, or whether it should be valued as sub-devisable land where the creditor can prove that the land is viable for this purpose? RULING: The Court ruled that in a Section 506(a) hearing the real estate securing the claim of a creditor should be valued at its highest and best use where the creditor can prove that the land is more valuable for a purpose other than the debtor's present use, and that such proposed use is not speculative, but rather affects the property's present fair market value.

8. April 10, 1989. LELAND JOHN RAPP AND MARI MARGARET RAPP. Case No. 87-10354, Adversary No. 88-1031. ISSUE: Whether a bank received a preference when it agreed with the debtor prior to bankruptcy to receive the debtor's pickup and $2,000.00 in exchange for debt forgiveness on a note secured by the pickup and an unsecured note. RULING: Preference was found for the value of the pickup over the amount due on the secured note - Section 547.

9. February 10, 1989: KATCON, INC.. Case No. 87-30158, Adversary No. 88-3006. ISSUE: Whether two simultaneously recorded encumbrances on the debtor's real estate have equal priority or whether one lien was intended by the parties to have superiority over the other. RULING: The Court held that the mortgage given to FmHA had priority over an assignment of the contract for deed to Bank under the facts of this case.

APPEAL RECORD

February 21, 1989: KATCON, INC.. Case No. 87-30158, Adversary No. 88-3006. Notice of Appeal to District Court filed by Bankwest from Judgment Determining Relative Priority of Instruments entered 2-10-89; Findings of Fact and Conclusions of Law 2-10-89. APPEAL STATUS: Referred to Hon. Donald J. Porter 3-24-89. Affirmed. Order Affirming entered by Hon. Donald J. Porter 7-13-89 (Civ. 89-3015).  March 3, 1989: Notice of Cross-Appeal filed by FmHA from same judgment as above. APPEAL STATUS: Referred to Hon. Donald J. Porter 3-24-89. Affirmed. Order affirming entered by Hon. Donald J. Porter 7-13-89 (Civ. 89-3015).

10. April 25, 1989: FRED AND BESSIE FANNING. Case No 386-00115, Chapter 12. ISSUE: Valuation of property. RULING: Court determined value of creditor's appraiser.

11. April 28, 1989: ROBERT LAVERNE EHRICH. Case No. 585-00119, Chapter 11. ISSUE: Whether the Court would issue an opinion regarding the legality of the debtor's contemplated dismissal of a pre-confirmation Chapter 11 and subsequent filing of a Chapter 12 in order to avoid the effects of the 8th Circuit In re Erickson decision which prohibits converting Chapter 11 cases pending at the effective date of Chapter 12 to Chapter 12. RULING: The debtor requested an advisory opinion which the Court could not give.

12. May 10, 1989, HERMAN POEPPEL. Case No. 89-30035, Chapter 12. ISSUE: Whether the Bankruptcy Court should voluntarily abstain under 28 U.S.C. §1334(c)(1) from hearing a lender liability claim brought by the debtor against a creditor where the claim was pending in state court over two years prior to the debtor's filing bankruptcy. RULING: The Court held it would abstain to allow the state court to try the lender liability claims but it would not abstain or lift the stay regarding the lender's state court complaint to foreclose.

13. May 15, 1989: CAL AND JEAN NOWELL. Case No. 185-00075, Chapter 12. ISSUE: Whether a creditor awarded an administrative expense claim could offset or recoup the claim against a pre-petition security deposit the debtor gave to creditor without seeking relief from stay. RULING: The Court held the automatic stay prevents such a setoff.

14. June 29, 1989: EDWARD W. AND WILMA CARR. Case Nos. 87-40067 and 87-40068, Chapter 11. ISSUE: Whether quarterly trustee's fees required by 28 U.S.C. §1930(a)(6) must be paid in each of two or more cases ordered to be jointly administered? RULING: The Court held the quarterly trustee's fees must be paid in each of two or more consolidated cases ordered to be jointly administered. Jointly administered cases do not lose their independent character and thus such fees are payable in each case.

15. June 29, 1989: NORMAN L. AND CINDY SCHAFER. Case. No. 88-10208, Chapter 7. ISSUE: Whether tardy (6 days) objections to a proposed sale waives such objection? RULING: The Court found: (1) Procedural defects of no consequence were evident on the part of both parties and the Court will not default a party for failing to strictly comply with the technicalities of the Code, Rules and Local Rules. (2) There was no equity in the property (a steel bin), which could be sold closer to harvest time at a higher price. Thus the property should be abandoned to the secured party.

16. July 5, 1989: MARTIN FRANK, JR. AND ERNESTINE FRANK. Case No. 89-10012, Chapter 7. ISSUE: Whether debtor was a family farmer and thus not subject to involuntary bankruptcy under Chapter 7. RULING: The Court found the debtor met the definition of "family farmer", §101(17), despite his outside income. The wife of the debtor, who had few, if any, links to the farm, should not have her income considered in determining debtor's "family farmer" status.

APPEAL RECORD:

July 14, 1989. MARTIN FRANK, JR. AND ERNESTINE FRANK. Case No. 89-10012. Notice of Appeal to District Court filed by Farm Credit Bank of Omaha from the Order entered July 6, 1989 dismissing involuntary petition; Memorandum Decision dated 7-5-89. APPEAL STATUS: Referred to Hon. Donald J. Porter 8-7-89. Reversed. Order reversing and remanding entered by Judge Porter 12-27-89 (Civ. 89-1027).

17. July 10, 1989: DOUGLAS GORDON RUHNOW. Case No. 85-50195, Adversary 88-5022, Chapter 7. ISSUE: Whether an award of attorney's fees is appropriate under §523(d) after determining dischargeability of a non-consumer debt? RULING: The Court ruled the award of attorney's fees is appropriate. The debt here was intended to satisfy previous creditors of the debtor's defunct business. §523(d) award of fees is therefore inappropriate.

18. July 10, 1989: PHILIP AND ROSE WOLFF. Case No. 89-10011, Chapter 12. ISSUE: Whether Bank is collaterally estopped from challenging the value of collateral in debtors' Chapter 12 plan, which value had been previously determined in a state court proceeding. RULING: The Court found that the previous foreclosure action (prior to bankruptcy filing) which determined the value of debtors' collateral, absent evidence of a substantial change, collaterally estops the Bank from re-litigating the issue.

APPEAL RECORD

August 10, 1989. PHILIP AND ROSE WOLFF. Case No. 89-10011. Notice of Appeal to District Court

filed by Eureka State Bank from Order Overruling Eureka State Bank's Objection to the Proposed Chapter 12 Plan dated 7-10-89. APPEAL STATUS: Referred to Hon. Donald J. Porter 8-22-89. Motion for leave to appeal granted by Judge Porter 8-23-89. Affirmed. Memorandum Order of affirmance entered by Judge Porter 1-31-90 (Civ. 89-1032).

19. August 1, 1989: WILLIS R. GERTH. Case No. 89-10062, Chapter 12. ISSUE: Can a debtor's Chapter 12 petition be dismissed because he is currently operating under a confirmed Chapter 11 plan? RULING: One may not be a debtor in two separate cases under different Chapters of the Bankruptcy Code. 116 B.R. 167 (Bkrtcy. D.S.D. 1989).

20. August 16, 1989. JARRETT RANCH, INC., JARRETT ELEVATORS, INC.; DONALD & JEANNINE JARRETT and RONALD & JACQUELINE JARRETT. Case No. 88-10117, Adversary No. 89-1001. Chapter 11. ISSUE: Whether the Agricultural Credit Act of 1987 contains an implied private right of action for enforcement of the provisions of the Act. RULING: A private right of action may be implied under the Agricultural Credit Act of 1987.

APPEAL RECORD:

August 28, 1989: JARRETT RANCHES, INC., Case No. Adv. 89-1001. Notice of Interlocutory Appeal to District Court filed by Farm Credit Bank of Omaha from order denying motion for summary judgment on the pleadings entered 8-16-89. APPEAL STATUS: Motion for leave to file an interlocutory appeal granted by Judge Porter 9-15-89.

October 31, 1989. JARRETT RANCH, INC., Case No. 88-10117, Adversary No. 89-1001. Notice of Appeal to District Court filed by Farm Credit Bank of Omaha, Production Credit Association of the Midlands and the Federal Land Bank Association of Aberdeen from order denying motion for summary judgment on the pleadings entered 8-16-89. APPEAL STATUS: Referred to Honorable Donald J. Porter 11-16-89. Dismissed. Order of dismissal without prejudice pursuant to stipulation of the parties entered by Judge Porter 12-7-89 (Civ. 89-1039).

21. August 16, 1989. JARRETT RANCH, INC., JARRETT ELEVATORS, INC.; DONALD & JEANNINE JARRETT and RONALD & JACQUELINE JARRETT. Case No. 88-10117, Adversary No. 89-1001. Chapter 11. ISSUE: (1) Whether one may be awarded summary judgment where no formal motion has been made therefor. RULING: (1) Summary judgment may be awarded in the absence of a formal motion where notice has been provided, the interests of the parties and judicial economy would be served, and all requirements for summary judgment are met. ISSUE: (2) Whether waiver of rights under the Agricultural Credit Act is void as a matter of law. RULING: (2) Waiver of rights under the Agricultural Credit Act is not void as a matter of law. ISSUE: (3) Whether extension of previously waived rights estops lenders from later canceling such extension. RULING: (3) Lender, having extended previously waived rights, is estopped from later unilaterally withdrawing such extension. ISSUE: (4) Whether property to be completely liquidated may be appraised in numerous acts. RULING: (4) Where entire property is to be sold, it must be appraised as one unit. ISSUE: (5) Whether value set forth by lender on IRS Form 1099 may be used in determining fair market value. RULING: (5) IRS Form 1099 may be used in establishing fair market value of real estate. ISSUE: (6) Whether method of sale proposed by lender complies with the Agricultural Credit Act. RULING: (6) Method of sale proposed by lender did not comply with the Agricultural Credit Act.

APPEAL RECORD

October 31, 1989. JARRETT RANCH, INC., Case No. 88-10117, Adversary No. 89-1001. Notice of Appeal to District Court filed by Farm Credit Bank of Omaha, Production Credit Association of the Midlands and the Federal Land Bank Association of Aberdeen from order denying motion for summary judgment entered 8-16-89. APPEAL STATUS: Referred to Honorable Donald J. Porter 11-16-89. Reversed and Remanded to Bankruptcy Court. Order entered by Judge Porter 11-21-90 reversing Bankruptcy Court's decision granting summary judgment to plaintiffs and remanded to the Bankruptcy Court for further proceedings. (CIV. 89-1048).

22. September 7, 1989. NEUHAUSER RANCH, INC., Case No. 87-50123, Adversary No. 88-5005. ISSUE: Whether attorney fees as provided for in a contract may be recovered by the attorney in the prevailing party in an adversary proceeding. RULING: A contract which provided for the payment of the prevailing party's attorney's fees, costs and expenses is enforceable and the prevailing party may recover such amounts in an adversary proceeding.

23. October 13, 1989: MARCUS & LEONA MOELLER. Case No. 89-30022. ISSUE: Whether debtors, who have voluntarily dismissed their Chapter 11 case may shortly thereafter file for protection under Chapter 12. RULING: Filing for relief under Chapter 12 on the heels of a voluntary dismissal of their Chapter 11 case constitutes a de facto conversion from Chapter 11 to Chapter 12, which is not permissible.

APPEAL RECORD

October 27, 1989. MOELLER, MARCUS & LANA: Case No. 89-30022. Notice of Appeal to District Court filed by debtors from order granting Farm Home Administration's motion to dismiss entered October 17, 1989. APPEAL STATUS: Referred to Honorable Donald J. Porter 11-27-89. Affirmed. Order affirming Bankruptcy Court's decision entered by Judge Porter 2-14-90 (Civ. 89-3038).

24. October 13, 1989. NEUHAUSER RANCH, INC. Case No. 87-50123, Adversary No. 88-5005. ISSUE: Motion for terms against counsel for debtor. RULING: (1) Counsel's failure to determine whether damages claimed against creditor bank were well grounded in fact and warranted by law was sanctionable under Rule 9011. (2) Counsel's claims concerning the validity of creditor's bank's liens were not objectively the product of a reasonable inquiry, nor well grounded in fact or warranted by law, thus contravening Rule 9011.

24A. October 19, 1989. NEUHAUSER RANCH, INC. Case No. 87-50123, Adversary No. 88-5005. THIS IS A SUPPLEMENT TO DECISION 1989 #24 ABOVE. ISSUE: Whether terms should be imposed against debtor corporation as well as attorney for the debtor. RULING: Allocation of sanctions between attorney and client is usually warranted because an attorney presumably acts on behalf of his client and the client is accountable for the attorney's acts. Thus, debtor's participation in the pursuit of a frivolous claim against creditor is sanctionable.

25. October 13, 1989. ODEAN & ARDYS OLSON. Case No. 89-30026. Chapter 7. ISSUE: Whether inclusion of debtors' $780.00 monthly church tithe constituted a substantial abuse of Chapter 7. RULING: (1) Debtors' counsel's attempt to raise an argument for the first time in a post-hearing brief where the argument was never previously raised constitutes a waiver of that issue. 2) Debtors' inclusion of a $780.00 monthly church tithe in their Chapter 7 schedules constitutes a substantial abuse of Chapter 7 of the Code.

26. October 13, 1989. MARVIN & ELLEN SPECK. Case No. 88-30065. Chapter 11. ISSUE: Motion for terms against counsel for debtors. RULING: Debtors' counsel's legal contention, while not ultimately meritorious, was well grounded in fact and warranted by law and not interposed for an improper purpose, thus preventing the imposition of sanctions under Rule 9011.

27. October 13, 1989. ROGER STORM. Case No. 87-30022. Chapter 12. ISSUE: Whether debtor's former counsel's application for attorney's fees sufficiently justified the compensation sought. RULING: Attorney's application for fees showed no serious abnormalities, but Trustee's concerns re: explanation and justification should be more closely followed in the future.

28. October 19, 1989. WEISZHAAR FARMS, INC. AND L.J. HOG COMPANY. Case Nos. 186-00226 and 186-00227. Chapter 11. ISSUE: Motion for sanctions against debtor corporation and their attorney. RULING: (1) Filing of successive bankruptcy petitions poses a serious risk of the imposition of sanctions. (2) "Drop dead" clauses in agreements between debtors and creditors will be enforced according to their terms by the Court. (3) Creditor's deductions of expenses for maintenance of livestock from sale proceeds does not preclude it from recovering such expenses from debtor who has already received a discharge under Chapter 11.

APPEAL RECORD

WEISZHAAR FARMS, INC. AND HOG, L.J. CO., INC. November 20, 1989.. Case Nos. 186-00226 and 186-00227. Notice of Appeal to District Court filed by Curt Ewinger, Attorney for Thomas M. Tobin from Order Granting Sanctions entered 10-20-89. APPEAL STATUS: Appeal referred to Hon. Donald J. Porter 12-6-89. Affirmed in part and reversed in part. Order entered by Judge Porter 4-30-90 (Civ. 89-1051) affirming the Bankruptcy Court's ruling granting sanctions in the amount of $50,777.59 against Attorney Thomas Tobin, but reversed the Bankruptcy Court's ruling granting sanctions against appellants Weiszhaar Farms. (113 B.R. 1017 (D.S.D. 1990)).

29. October 25, 1989. NORMAN & SHEILA CHRISTOFFERSON. Case No. 186-00308. Chapter 12. ISSUE: Whether debtors, who had previously stipulated to the value of certain collateral, could later turn that collateral over to the secured party as full payment of the secured debt. RULING: Debtors' attempt to turn over the collateral to completely satisfy a secured debt constitutes a post confirmation modification under §1229. No evidence has been presented which would warrant such modification. Further, the parties' stipulation clearly stated that the turn over of any collateral would only reduce the amount of the allowed secured claim by the value of the collateral, rather than extinguishing the claim.

30. November 13, 1989. HAMMRICH, JUNIOR SEBASTIAN AND JOYCE MARIE HAMMRICH. Case No. 87-10032, Chapter 12. ISSUE: Whether FmHA's otherwise valid (but valueless) liens survive the debtors' discharge under Chapter 12. RULING: FmHA did not return or has waived any liens against debtors' property, except for their 123 head of cattle mentioned in the judgment by consent, because of the failure to provide for the survival of such liens after discharge of the debtors' debts.

31. November 20, 1989. JARRETT RANCH, INC., JARRETT ELEVATORS, INC.; DONALD & JEANNINE JARRETT and RONALD & JACQUELINE JARRETT. Case No. 88-10117, Adversary NO. 89-1001. Chapter 11. ISSUE: Whether certain costs requested by prevailing party were recoverable after completion of an adversary action. RULING: (1) Costs may be taxed regardless of the fact that a notice of appeal has been filed. (2) Deposition transcript not read at trial may be taxed if it was reasonably necessary to preparation of the case and not purely investigative in nature. (3) Costs for witness mileage is not limited to 100 miles. (4) Copying costs are generally taxable, but must be sufficiently broken down and found to be reasonable. (5) Premium for letter of credit is properly taxable. (6) Long distance telephone and postage costs are not properly taxable. (7) Costs for computerized legal research is not properly taxable.

32. December 12, 1989. CLARENCE J. HURN. Case No. 89-30038. Chapter 12. ISSUE: (1) Whether debtor may deduct special use tax liability (Internal Revenue Code § 2032A) from the value of estate property for liquidation analysis purposes. (2) Whether debtor may deduct certain income taxes in his liquidation analysis, and if so, in what amount. RULING: (1) Debtor may not deduct potential special use tax liability from the value of his estate due to the unlikelihood of its enforcement and its contingent nature. (2) Debtor may deduct those taxes attributable to his income, but not those of his wife because she is not a party to the bankruptcy, in debtor's liquidation analysis.

33. December 12, 1989. PARMELY FARMS, H & M. Case No. 384-00055. Chapter 11. ISSUE: (1) Whether FmHA is estopped from enforcing its § 1111(B) election. (2) Whether the sale provisions in debtors' plan is sufficiently specific to preclude FmHA's § 1111(b) election. RULING: (1) Debtors' failure to properly incorporate FmHA's § 1111(b) election in its plan precludes it from attempting to estop FmHA's § 1111(b)(2) treatment. (2) FmHA is not precluded from making its § 1111(b) election despite § 1111(b)(1)(B)(ii), where the sale provision in debtors' plan does not permit FmHA, an undersecured recourse creditor, to "credit bid" its claim.

APPEAL RECORD

February 8, 1990. PARMELY FARMS, H & M., Case No. 384-00055. Notice of Appeal filed by James Carlon from Order Denying Debtors' Motion to Enforce Provisions of Their Chapter 11 Plan dated December 13, 1989. APPEAL STATUS: Referred to Hon. Donald J. Porter 3-28-90. AFFIRMED. Order confirming Bankruptcy Court entered by Judge Porter 8-9-90 (Civ. No. 90-3009).