DECISIONS - 1992

Irvin N. Hoyt, Chief Bankruptcy Judge

Alphabetical Listing

1992 DECISION SUMMARIS

Irvin N. Hoyt, Chief Bankruptcy Judge

1. February 10, 1992. OLSON, MARVIN F. & BEVERLY E.: Case No. 91-30025, Chapter 13. ISSUE: Whether the Chapter 13 plan treatment offered a secured creditor comported with §§ 1322(b)(3) and 1325(a)(5) where Debtors proposed to pay the secured value of the claim over the original term of the notes and pay the unsecured value with disposable income. RULING: No. Debtors had to either pay the secured claim during the life of the plan under § 1325(a)(5) or cure the default during the plan and reinstate all other repayment terms of the original notes. A "long-term cram down" is not available under the Code.

2. March 9, 1992. COONES RANCH, INC., Case No. 91-40183 Chapter 11. ISSUE: Whether Rule 9011 sanctions should be imposed on a corporate debtor, its principal,, and its bankruptcy attorney for filing a Chapter 11 petition that the Court dismissed as a bad faith filing. RULING: The Court imposed a joint and severable sanction of $10,000.00 on the debtor, its principal, and its bankruptcy attorney because they had not made a reasonable investigation of the law or facts and because the petition was improperly filed to delay or circumvent other legal proceedings in Wyoming.

APPEAL RECORD

March 26, 1992: COONES RANCH, INC. Case No. 91-40183, Notice of Appeal to District Court filed by Cecelia Grunewaldt from the Amended Order Imposing Sanctions entered March 19, 1992; Memorandum Decision dated 3-9-92. Motion for Stay Pending Appeal filed by Cecelia Grunewaldt on 3-26-92. Order Granting Stay Pending Appeal entered 3-30-92. Referred to Judge Jones 5-6-92. APPEAL STATUS: 7-7-92 - - Judgment affirmed, reversed and remanded in part. Affirmed insofar as it imposes sanctions of $5,00.00 in favor of each appellee and against Debtor Coones Ranch, Inc., James A. Coones & Cecelia Grunewaldt, jointly and severally. Reversed insofar as it orders appellant Grunewaldt to return to the payor any compensation she has received for services and costs. Remanded to the Bankruptcy Court to enter judgment in conformity therewith.

3. March 20, 1992, LAKE REGION DEVELOPMENT, INC. - IN RE MARSHALL MANOR, INC., JOINTLY ADMINISTERED: Case No. 91-10111, Chapter 11. ISSUE: Whether creditor's proposed disclosure statement contained adequate information. RULING: Upon application of applicable law, Court held proposed disclosure statement did not contain adequate information and would need further amendment.

4. March 24, 1992. MORRIS, MITCHELL E.: Case No. 91-50242, Chapter 11. ISSUE: Whether a creditor was entitled to relief from the automatic stay where debtor failed to pay post-petition taxes but where debtor argued the property was necessary for an effective reorganization. RULING: The creditor was not entitled to relief for cause under § 362(d)(1) because debtor offered to pay post-petition taxes as adequate protection. The creditor was not entitled to relief under § 362(d)(2) because in the early stage of the case, debtor made a minimal showing that the property was necessary for reorganization.

5. March 27, 1992. MINN-KOTA FARM AGENCY, INC.: Case No. 90-10107, Adversary No. 91-1001, Chapter 11. ISSUE: Whether debtor was entitled to turnover of rents collected by a creditor pursuant to an assignment of rents agreement that was separate from the mortgage debtor gave the creditor. RULING: Debtor was not entitled to a turnover of the rents because under the terms of the agreement, the creditor had a perfected interest in the rents upon debtor's pre-petition default.

APPEAL RECORD

August 5, 1992. MINN-KOTA FARM AGENCY, INC. Case No. 90-10107, Adv. 91-1001. Notice of appeal to District Court filed by debtor from Memorandum Decision re: Complaint for Turnover entered on 3-27-92. APPEAL STATUS: Referred to Judge Battey on 10-14-92. Dismissed. Order Dismissing case for lack of jurisdiction entered by Judge Battey on 12-7-92 (CIV. 92-1037).

6. June 12, 1992, IVERS, VERNON E. AND MARILYN K. Case No. 91-50191. Chapter 7. ISSUE: Whether Debtors' filing of an objection to a settlement they made with creditor-bank and two subsequent motions to reconsider the order approving the settlement were sanctionable under F.R.Bankr.P. 9011? RULING: Debtors' objection to the settlement and their first motion to reconsider were sanctionable because neither was well-grounded in fact or law. Debtors' counsel was sanctioned via a public reprimand. Debtors were not sanctioned because the case had already been converted to a Chapter 7.

7. July 1, 1992. WALGAMUTH, RONALD MARION AND KARLA KAY. Case No. 91-50270, Chapter 7. ISSUE: Whether Debtors' counsel is entitled to compensation from the estate in addition to retainers totaling $1,325.00? RULING: Debtors' counsel is not entitled to compensation from the estate in addition to the $1,325.00 retainers received because: (1) he failed to show that any post-petition services, except representing Debtors at the § 341 meeting benefited the estate, and (2) he failed to follow the prescription of 11 U.S.C. §§ 329(a) and 330(a) and Bankr. Rs. 2014(a) and 2016(a).

8. July 17, 1992. BRANDENBURGER, LYNN AND VALERIA C. Case No. 87-10162, Chapter 12 and SEARCY, ARDELL FRANCIS AND BERNETTE MAE: Case No. 87-10257, Chapter 12 ISSUE: (1)Whether Court may award compensation to a Chapter 12 debtor's counsel counsel after confirmation? (2) Whether Services related to a Chapter 12 discharge are compensable from the estate? RULING: (1) Court may award compensation and reimbursement to a Chapter 12 debtor's counsel for all post-confirmation services that benefit the estate. (2) Preparing and filing a Chapter 12 debtor's final report and account and providing notice of that report are required by the local rules. Consequently, these discharge related services are compensable from the estate because they benefit the administration of the estate. If discharge is contested, all subsequent services are not compensable from the estate because those services benefit only the debtor.

9. September 8, 1992. WALGAMUTH, RONALD MARION AND KARLA KAY, Case No. 91-50270, Chapter 7. ISSUE: Whether Plaintiff was entitled to a constructive trust on Debtors' homestead to the extent of $19,000.00? RULING: (1) Dischargeability complaint was untimely filed because it was filed several days after the deadline established by F.R. Bankr. P. 4007(c). The deadline in Rule 4007(c) must be strictly construed. (2) Since Debtors wrongfully obtained the $19,000.00 that they used to purchase their new home, the $19,000.00 was never a part of the bankruptcy estate. Plaintiff, the rightful owner of the $19,000.00, was entitled under state law to a constructive trust on Debtors' home to the extent of the $19,000.00.

10. October 5, 1992. SMITH, VERNELL E. AND CAROL J. Case No. 87-30110. Chapter 12. ISSUE: Whether the debtors' counsel was entitled to compensation from the estate for post confirmation services that addressed a default by the debtors on their plan payments? RULING: The debtors' counsel was entitled to compensation from the estate for post confirmation services that addressed a default by the debtors on their plan payments because the services benefited the administration of the estate, were not excessive, and were not rendered when counsel knew the attempt to cure the default was futile or unreasonable.

11. October 5, 1992. UTNE, WILLIAM CLARENCE. Case No. 91-10189, Chapter 12. ISSUE: Whether debtor filed Chapter 12 petition and plan in bad faith? RULING: Court held Chapter 12 petition and plan were filed in bad faith where (1) the debtor's previously confirmed, substantially consummated Chapter 11 plan provided for the treatment of the claim for FmHA, including an 1111(b) election, but where Chapter 12 plan did not duplicate Chapter 11 treatment; (2) the debtor made no voluntary Chapter 11 payments to FmHA or unsecured creditors; (3) where the debtor failed to file complete and accurate schedules and statements' and (4) the debtor failed to show sufficient change in circumstances such as would justify a second reorganization.

APPEAL RECORD: October 15, 1992: WILLIAM CLARENCE UTNE. Case No. 91-10189. Notice of Appeal filed by Debtor from Order Dismissing Case entered 10-5-92. APPEAL STATUS: Order Affirming Dismissal by Bankruptcy Court entered by Judge Battey 2-11-93 (CIV. 92-1041)

12. November 3, 1992: WAX, SARAH ANTHONY: Case No. 91-30086, Chapter 7. ISSUE: Whether Debtor's interest as a trust beneficiary is property of the estate under § 541(c)(2)? RULING: Debtor's future interest in a trust created under Massachusetts law was not property of the estate because the trust contained a spendthrift clause provision that precluded debtor from any present interest that she could control.

13. November 3, 1992: CUMMINGS, MICHAEL E. AND DIANE L: Case No. 91-30076, Adversary No. 92-3002, Chapter 7. ISSUE: Whether Debtor's obligation, created by a divorce settlement, to remove a second mortgage on his ex-wife's home is non dischargeable under § 523(a)(5)? RULING: Debtor's obligation to remove the second mortgage is non dischargeable under § 523(a)(5) because it is an obligation in the nature of support, not a property settlement. Significant facts included: Debtor received the business that was financed by the loan and second mortgage; his pre-divorce child support obligation was reduced when he assumed the second mortgage; his ex-wife could not afford to keep the home with both mortgages on it; and his ex-wife and children intended to remain in the home for at least thirty months.

14. November 3, 1992: CUMMINGS, MICHAEL E. AND DIANE L: Case No. 91-30076, Adversary No. 92-3002, Chapter 7. ISSUE: Whether creditor bank sold Debtor's secured property in compliance with the U.C.C.? RULING: Creditor bank did not sale Debtor's secured property in a commercially reasonable manner and did not give Debtor proper notice of the private sale. Significant factors included: the bank did not have the secured property inventoried or appraised and the bank made little effort to locate potential buyers. Bank was not entitled to claim a deficiency against Debtor or seek recovery from the remaining secured property owned by Debtor's ex-wife.

15. December 1, 1992. ALDERSON, L.D. Case No. 89-50106, Adversary No. 92-5002, Chapter 7. ISSUE: Whether Debtor's Civil Service Retirement fund is property of the estate where Debtor has immediate access to lump-sum payment? RULING: Debtor's Civil Service Retirement fund is property of the estate under § 541(a) where Debtor's immediate access to fund excepts the fund from property excluded from the estate under § 541(c)(2).

APPEAL RECORD:

December 11, 1992.  L.D. ALDERSON. Case No. 89-50106, Adversary No. 92-5002. Notice of Appeal filed by United States of America with the District Court from the Bankruptcy Court's Memorandum of Decision re: Turnover of Estate Property filed December 1, 1992. APPEAL STATUS: AFFIRMED - Memorandum Opinion and Order from Judge Battey filed 4-6-93 (Civ. #'s 93-5001 and 92-5152).

April 26, 1993: L.D. ALDERSON. Case No. 89-50106, Adversary No. 92-5002. Notice of Appeal filed by L.D. Alderson appealing to the U.S. Court of Appeals re: Judge Battey's Order filed 4-6-93. APPEAL STATUS: REVERSED AND REMANDED - Eighth Circuit Court of Appeals Decision filed 8-19-94 (No. 93-2582).

June 7, 1993:  L.D. ALDERSON. Case No. 89-50106, Adversary No. 92-5002. Notice of Appeal filed by U.S. of America through the U.S. Office of Personnel Management (OPM) appealing to the U.S. Court of Appeals re: Judge Battey's Order filed 4-6-93. APPEAL STATUS: REVERSED AND REMANDED - Eighth Circuit Court of Appeals Decision filed 8-19-94 (No. 93-2582).