DECISIONS - 1991

Irvin N. Hoyt, Chief Bankruptcy Judge

Alphabetical Listing

1991 DECISION SUMMARIES

Irvin N. Hoyt, Chief Bankruptcy Judge

1. January 29, 1991. BECKLER, MARVIN AND SALLY: Case No. 90-10168, Chapter 12. ISSUE: Whether Chapter 12 petition should be dismissed where petition was filed while Debtor-husband was operating under prior Chapter 11 plan? RULING: The second case was filed in good faith, hence no cause for dismissal under § 1208(c) was found.

2. January 29, 1991. GINSBACH, WESLEY D. & JULIE A.: Case No. 89-50093, Adv. 89-5037, Chapter 7. ISSUE: Whether validity of claimed exemptions may be litigated in turnover action where neither creditor or trustee timely objected to exemption? RULING: (1) Validity of claimed exemptions may not be litigated in turnover action where no timely objections to claimed exemptions were filed if claimed exemptions have good faith statutory basis. ISSUE: (2) Whether property Sheriff possessed pre-petition under levy is subject to turnover under § 524(a) where property is claimed exempt? RULING: (2) Exempt property held by Sheriff under pre-petition levy is subject to turnover under § 524(a).

3. February 15, 1991. GARDNER, JOHN & JACQUELYNNE. Case No. 87-10109, Adv. No. 90-1005, Chapter 12. ISSUE: (1) Is a Chapter 12 debtor's post confirmation settlement of a lawsuit subject to Bankruptcy Court approval under Bankr. R. 9019(a)? RULING: (1) No. A Chapter 12 debtor's post confirmation settlement of a lawsuit is not subject to Bankruptcy Court approval pursuant to Bankr. R. 9019(a). The settlement may be scrutinized by the Court, however, upon a motion to dismiss or objection to discharge if there are allegations of fraud or gross mismanagement that is prejudicial to creditors. (2) Are post confirmation, pre discharge proceeds of a lawsuit income available for payments under a confirmed Chapter 12 plan? (2) Yes. Post confirmation, pre discharge proceeds of a lawsuit should be made available by the debtors for Chapter 12 plan payments.

4. March 6, 1991. VAUGHN, TODD & PAMELA: Case No. 88-50076, Chapter 13. ISSUE: (1) Whether treatment offered under original Chapter 13 plan that exceeds Code requirements must be continued in any modified plan on grounds of res judicata? RULING: (1) No, res judicata does not prevent debtor from elimination in modified plan treatment of a claim that exceeds Code requirements especially where there was no showing that the better treatment was the result of a bargained for exchange. ISSUE: (2) May a modified plan include a repayment term that exceeds five years from the date payments under the original plan began? RULING: (2) No. § 1329(c) precludes a repayment term in a modified plan that exceeds five years from the date payments under the original plan began.

5. March 14, 1991: HAMMRICH, JUNIOR SEBASTIAN AND JOYCE MARIE HAMMRICH, Case No. 87-10032, Chapter 12. ISSUE: Whether the debtor may be compelled to submit to discovery by creditor where no deposition or Bankr. R. 2004 examination had been ordered or noticed in compliance with Bankr. Rs. 2004, 7027-7037, or 7029? RULING: Debtor would not be compelled to submit to discovery by creditor where neither the creditor, case trustee, or other interested party had obtained order for Bankr. R. 2004 examination nor had sought deposition under Bankr. R. 7027-7037 deposition under Bankr. R. 7029.

6. March 18, 1991. SWANSON, GERALD L. & CHERYL M.: Case No. 186-00286, Adversary No. 90-1012. Chapter 12. ISSUE: (1) Whether discharge order could be vacated due to mistaken, untimely request for discharge by the debtor? RULING: (1) Order of discharge was properly vacated under Bankr. R. 9024 where the debtor erroneously requested untimely entry of discharge. ISSUE: (2) Whether question of revocation of discharge order for fraud was ripe where alleged fraudulent sale had not been consummated and where discharge order was vacated. RULING: (2) Question of revocation of discharge order for fraud was not ripe for decision where alleged fraudulent sale had not been consummated and where discharge order was to be vacated.

7. March 27, 1991. KAUER, RANDY L. AND MERRY M.: Case No. 88-300038-INH, Chapter 7. ISSUE: What are the standards for compensation of an attorney for a Chapter 7 trustee? RULING: To be compensated, an attorney for trustee must show that the services rendered required legal expertise more than that necessarily possessed by Chapter 7 trustee in the performance of his statutory duties.

8. April 5, 1991. TRAVIS, JAMES EARENFIGHT. Case No. 90-10094, Chapter 11. ISSUE: Whether movant established year-old Chapter 11 debtor had an "inability to effectuate a plan" or had caused "unreasonable delay" that was prejudicial to creditors so as to establish cause for dismissal? RULING: Movant failed to establish that there was no more than a "hopeless and unrealistic possibility" that the debtor could propose a confirmable plan that met the new value exception to the absolute priority rule or that the debtor could not propose a feasible plan.

9. April 5, 1991. TRAVIS, JAMES EARENFIGHT. Case No. 90-10094, Chapter 11. ISSUE: Whether interim fees would be awarded to the debtor's attorney where benefit to the estate of the services was in question where the debtor may not have the ability to obtain confirmation of a plan? RULING: Interim fees were allowed for meeting with the debtor, preparing and amending schedules, and representing the debtor at the § 341 meeting of creditors. Whether a Chapter 11 plan was confirmed or not, the debtor's attorney bore burden of proving remaining fees requested for reorganization-related services benefited the estate.

10. April 9, 1991. MC DANIEL ENTERPRISES, INC.: Case No. 88-10199, Chapter 11. ISSUE: Whether the debtor's counsel met burden to show that compensation of services and reimbursement of expenses she sought were reasonable, actual, and necessary as required by 11 U.S.C. § 330(a)? RULING: Court held the counsel's agreement with the debtor to take one-half the compensation and the actual expenses, as set forth in her modified application, met § 330(a) and sufficiently reduced compensation to meet the Court's concerns about excessive time spent in the case, insufficiently documented entries, and a too-large minimum increment of time used to bill services. Court ruled fee applicants will now have burden to show that billing increment of time is reasonable. Actual time to render each service should be set forth on fee application.

11. April 15, 1991. REINBOLD, WILFRED. Case No. 88-30038, Chapter 7. ISSUE: Whether Chapter 7 Trustee's proposed private sale of certain personal property should be approved over objection of the debtor that property was not appropriately appraised? RULING: Court sustained objection to proposed private sale of certain personal property by Chapter 7 Trustee where only evidence of the property's value was by the potential buyer and where some of the property was sufficiently unique such that Trustee could not readily ascertain the value himself.

12. April 23, 1991. MINN-KOTA FARM AGENCY, INC. Case No. 90-10107, Chapter 11. ISSUE: Whether movant had met burden of establishing cause for dismissal of Chapter 11 case when an appeal of relief from stay and an adversary key to the debtor's reorganization were pending? RULING: No. The case was in its early stages in many respects and an appeal and a key adversary were pending. Consequently, movant needed to show that the debtor had no more than a "hopeless and unrealistic" prospect of rehabilitation. That showing was not made.

13. June 6, 1991, VOELKER, GERALD JEROME & ANTOINETTE: Case No. 486-00428, Chapter 12. ISSUE: Whether creditor is entitled to relief from stay where the debtor did not fully comply with orders of the Court and where cattle secured to creditor were not maintained in good condition and were dying at an excessive rate? RULING: The creditor is entitled to relief from the automatic stay under § 362(d)(1) for cause. Cause is found due to the excessive death loss in the debtors' cattle herd, the poor to very poor condition of over one-half of the cattle in debtors' herd, and the debtors' continued inability to adequately care for their cattle, and because debtors failed to fully comply with the terms of prior orders of the Court.

14. June 11, 1991. SCHMIDT, DONALD E. AND HELEN M. Case No. 91-40183, Chapter 12. ISSUE: Whether Chapter 12 Debtors had completed all plan payments, including payments of disposable income to unsecured claim holders, and thus were entitled to discharge? RULING: Debtors failed to show that there was no disposable income available for unsecured creditors. Annual reports, as amended by Debtors at the hearing, indicated as much as $92,000.00 may be available. Insufficient evidence was presented on Debtors' borrowing ability and there was no clear evidence presented on the Debtors' financial needs for the coming year. Finally, Debtors failed to justify expansion of their farming operation.

15. June 14, 1991: CARR, EDWARD W. AND WILMA. CARR FARMS, INC., (jointly administered). Case Nos. 87-40067 and 87-40068, Chapter 11. ISSUE: Whether substantially consummated Chapter 11 case should be dismissed when debtors file subsequent Chapter 7 petition? RULING: No. Insufficient evidence was presented for the Court to determine that dismissal of the Chapter 11 case was in the best interest of the estate and creditors, especially when confirmation and discharge would not be revoked by a dismissal order.

16. June 14, 1991: CARR, EDWARD W. AND WILMA. CARR FARMS, INC., Case Nos. 91-30030 and 91-30031, Chapter 7. ISSUE: Whether secured creditor was entitled to relief from stay? RULING: No. Creditor was not entitled to relief under § 362(d)(2) because it failed to show that the Chapter 7 estate did not have equity in the property. Creditor was not entitled to relief under §362(d)(1) because it did not establish cause, including lack of adequate protection.

17. June 22, 1991. COONES RANCH, INC., Case No. 91-40183, Chapter 11. ISSUE: Whether Chapter 11 case should be dismissed for bad faith filing or inability to reorganize. RULING: Case should be dismissed for lack of good faith in filing and because Debtor had no reasonable prospect of reorganizing. Debtor's bad faith in filing was evidenced by several factors: (1) "new debtor syndrome;" (2) attempt to file a successive petition after principal's case in Wyoming failed, and (3) abuse of process in several courts.

18. July 19, 1991. REINBOLD, WILFRED. Case No. 87-10311,Chapter 7. ISSUE: Whether the debtor properly invoked his Fifth Amendment privilege against self-incrimination in response to an order for 2004 examination and a request for production of documents? RULING: No, the debtor did not properly invoke his privilege because he made a blanket assertion against answering any question and producing any document and thus he failed to establish that any such communication would be compelled, testimonial, and incriminating.

APPEAL RECORD: July 30, 1991. REINBOLD, WILFRED. Case No. 10311. Notice of appeal filed by debtor from Memorandum Decision Granting Trustee's Motions for Order Compelling Discovery dated July 19, 1991. APPEAL STATUS: Dismissed by District Court 1-5-93.

19. August 7, 1991. REED, DONALD S. AND SHARON M.: Case No. 87-10312, Chapter 13. ISSUE: Whether dismissal or conversion of Chapter 13 case was in best interest of the estate and creditors? RULING: Insufficient facts were presented to the Court to establish the best interest of the estate and creditors. The matter was continued until a date certain by which time the needed information should be available.

20. August 27, 1991. ALDERSON, L.D.: Case No. 89-50106, Chapter 7. ISSUE: Whether the debtor may claim as exempt certain civil service retirement benefits. RULING: No. The debtor may not claim his retirement benefits exempt where he did not properly notice this post-petition claim and where he exhibited bad faith in filing the exemption claim. The debtor's bad faith was demonstrated by the untimeliness of the exemption claim, the lack of credibility in debtor's explanation for the late claim, and debtor's efforts throughout the case to thwart the trustee's and creditor's efforts to administer the estate.

21. October 25, 1991. GERTH, WILLIS R. : Case No. 91-10002, Chapter 12. ISSUE: Whether FmHA was entitled to setoff post-petition payments from pre-petition CRP contract against its pre-petition claim? RULING: CRP contract was executory contract that did not presumptively constitute a pre-petition debt owed by creditor to debtor. Thus, that requirement for setoff under § 553 was not satisfied. Court declined to follow that line of cases which hold a debtor and debtor-in-possession are not same party when "mutuality of the debt" requirement under § 553 is considered.

APPEAL RECORD:

November 4, 1991. Gerth, Willis R., Notice of Appeal to District Court filed by ASCS/CCC from the final order denying the Motion for Modification of Stay and for Setoff entered October 25,1991. STATUS OF APPEAL: AFFIRMED. Order affirming Bankruptcy Court entered by Judge Battey 2-6-92.

22. November 13, 1991: HABECK, ORVILLE E. AND LOUISE M., Case No. 91-10113, Chapter 7. ISSUE: Whether Trustee may sell homestead claimed exempt by Debtors where Trustee has failed to show estate has any interest in the property? RULING: Trustee may not sell homestead claimed exempt because he failed to show estate had an interest in the property which could be sold under § 363.

APPEAL RECORD

December 19, 1991. HABECK, ORVILLE & LOUISE. Case No. 91-10113. Notice of Appeal to District Court filed by Wilmot State Bank from Order Approving Sale of Estate Real Property Free & Clear of Liens entered 11-18-91. APPEAL STATUS: AFFIRMED. Order affirming Bankruptcy Court decision entered by Judge Battey on 3-24-92.

23. December 31, 1991: BELLMAN FARMS, INC., Case No. 384-00017, Chapter 7. ISSUE: Whether creditor had established by a preponderance of evidence that her unsecured claims were entitled to administrative expense priority under 11 U.S.C. §§ 503(b)(1) and 507 )\(a)(1)? RULING: No. Creditor failed to present sufficient evidence to support her claims. "Sparse, self-serving, and cursory evidence is insufficient" to show that the expense arose post-petition and that it benefited the DIP in the operation of its business.