DECISIONS - 1993

Irvin N. Hoyt, Chief Bankruptcy Judge

Alphabetical Listing

1993 DECISION SUMMARIES

Irvin N. Hoyt, Chief Bankruptcy Judge

1. January 26, 1993. ELLIS BROTHERS & DOROTHY FAYE ELLIS: Case No. 87-30059, Chapter 12.    ISSUE: (1) Whether, under the terms of Debtors' confirmed plan and related settlements, any objection to confirmation survived so as to trigger the disposable income provision of 11 U.S.C. § 1225(b)(1)(B)?    RULING: The § 1225(b)(1)(B) triggering objection of Tri-County State Bank survived confirmation as provided in the May 2, 1988 settlement between the Bank and Debtors. The settlement was incorporated into Debtors' confirmed plan and was not modified by the confirmation order.    ISSUE: (2) Whether any "zero" or "no dividend" plan payment to unsecured claim holders in Debtors' confirmed plan may be modified under 11 U.S.C. § 1229?    RULING: Since Debtors are obligated to make disposable income payment but have not done so, all plan payments have not been completed. Accordingly, the plan may be modified under § 1229.

APPEAL RECORD:

February 5, 1993: ELLIS BROTHERS & DOROTHY FAYE ELLIS.  Case No.186-00156. Notice of Appeal to District Court filed by Debtors from Order Determining Debtors' Obligation to Pay Disposable Income entered 1-26-93.    APPEAL STATUS:    Dismissed. Order of Dismissal entered by Judge Jones 2-17-94.

2. March 5, 1993, GOLDEN HILLS RESORT, INC.: Case No.92-50211, Adv. No. 92-5012, Chapter 11.    ISSUE: Whether creditor had post-petition secured interest in Debtor-hotel's receipts?    RULING: Creditor did not have a post-petition secured interest in debtor-hotel's receipts. By the terms of the mortgage, the creditor's secured interest in rents, profits, etc., did not vest until default and enforcement of the mortgage. The interest did not vest pre-petition because the creditor did not enforce the mortgage pre-petition. The interest could not be perfected post-petition under § 546(b) because no state law allowed the creditor's post-petition perfection to relate back to a time pre-petition so as to defeat the lien avoidance powers of the debtor-in-possession.

3. March 25, 1993, BLACK HILLS GREYHOUND RACING, ASS'N.:  Case No.91-50224, Chapter 7.    ISSUE: Whether a corporate debtor's counsel may obtain compensation under § 330(a) where the counsel failed to disclose that he had previously represented the debtor's parent company on financial matters involving the debtor, where the parent company owed the debtor a large debt, and where the parent paid the counsel's bankruptcy retainer?    RULING: Compensation was denied because the debtor's counsel was never eligible under § 327(2) to represent the debtor. The counsel was not disinterested, he represented an entity who held an adverse interest, and he personally held an adverse interest. Further, the facts did not support an award of any fees on a quantum meruit theory.

4. April 23, 1993. ANDERSON, JACKALYN R.: Case No. 92-50273, Chapter 7.    ISSUE: Chapter 7 debtor sought dismissal of her case so that she could re-file to include debts incurred post-petition. The United States Trustee objected because discharge had already been entered.    RULING: The motion was denied because granting the motion would cause substantial prejudice to creditors. Present creditors' dividend would be reduced and payment would be delayed. The new creditors would be denied the protection of § 727(a)(8), which allows a Chapter 7 discharge only every six years. The Code did not authorize to revoke discharge.

5. May 21, 1993, HARRISON, J. HOWARD & DARLENE F:  Case No. 87-50250, Chapter 12.    ISSUE: Whether written confirmation order that was entered two months after confirmation hearing and that confirmed a plan which was modified after the confirmation hearing without notice to creditors took precedence over the oral confirmation order where no party timely appealed the written confirmation order or otherwise sought to attack it?    RULING: Oral confirmation order took precedence over written confirmation order where several procedural errors occurred prior to the entry of the written order, where the written order varied plan terms recognized by the oral order, and where the evidence did not support the conclusion that an interested creditor had consented to treatment of its claim other than as stated in the oral confirmation order and the debtors' original plan. Court ordered the reformation of the written confirmation sua sponte under F.R.Civ.P. 60(a).

APPEAL RECORD

June 24, 1993. HARRISON, J. HOWARD & DARLENE F. Case No. 87-50250. Notice of Appeal to the U.S. District Court filed by Debtors from the Memorandum Decision and Order denying Motion to Overrule FmHA's Objection to Debtors' Discharge in Chapter Twelve and Requiring Reformation of the Confirming Order filed May 21, 1993.    APPEAL STATUS:   Affirmed. Order entered 11-1-93 by Judge Battey affirming bankruptcy decision (CIV. 93-5083).

6. August 12, 1993. BRUNO, INC.: Case No. 92-50206, Chapter 11.    ISSUE: Whether compensation for services and reimbursement for expenses may be awarded a debtor's counsel where: (1) some items of service were poorly documented and/or failed to show that a professional service was rendered; (2) compensation was sought for trying to sell or lease Debtor's business when a sale or lease was not contemplated with the reorganization; (3) compensation was sought for "reviewing financial Documents," especially where substantial time was also spent preparing Debtor's schedules, plan, and disclosure statement; and (4) compensation was sought for an aborted adversary proceeding filed by Debtor.    RULING: Absent additional justification in an amended fee application, compensation and related expenses will not be allowed for non-professional services, poorly documented services, efforts contrary to reorganization that did not benefit the estate, unreasonable time spent reviewing financial documents, and preparing and working on an aborted adversary proceeding.

7. August 16, 1993. HENNING, JOHN & MARILYN: Case No. 88-10212, Chapter 12.    ISSUE: Whether Debtors are obligated to pay disposable income under § 1225(b)(1)(B)?    RULING: Debtors' confirmed plan contained a disposable income provision that had a slightly different definition of disposable income and repayment term than provided by § 1225(b)(1)(B). The plan terms control. Moreover, Debtors' agreement to give FmHA a secured interest in chattels and to pay FmHA the value of the chattels over time did not supplant the plan's disposable income provision.

8. August 20, 1993. YOST, WILLIS FERRIS & IONA MAE: Case No. 92-30036, Chapter 7.    ISSUES: (1) To what extent may Debtors' counsel be compensated in a case converted from Chapter 12 to Chapter 7? (2) What is a reasonable hourly rate of compensation for Debtors' attorney?    RULINGS: (1) Debtors' attorney may be compensated for post-conversion services that benefit the estate. In this case, the only compensable service after conversion was representing Debtors at the Chapter 7 § 341 meeting. (2) Debtors' attorney was allowed $85.00 per hour compensation. Some pre-conversion services were not allowed due to insufficient itemization.

9. September 16, 1993. SCHULTZ, JEFFREY P.: Case No. 91-50290, Chapter 11.    ISSUE: Whether creditor met burden of proof on motion to convert case to Chapter 7?    RULING: Creditor's motion to dismiss was denied. Debtor testified that his plan was feasible and Creditor did not offer any evidence to refute Debtor's testimony. There was no evidence of equity erosion so as to impair Creditor's unsecured claim. Court set deadline for Debtor to get his plan confirmed.

10. October 18, 1993. , BRUNO, INC:   Case No. 92-50206Chapter 11.    ISSUES: Whether the lessee of restaurant from Debtor was entitled to: (1) a determination of the lessee's claim when the lease is terminated; (2) reimbursement for a replaced water heater; and (3) damages, including "lost projected profits," due to the disruption of business when the roof leaked and while the roof was repaired?     RULINGS: (1) The lessee's claim against Debtor that will arise when the lease is terminated does not need to be determined by the Court at this time. The lease is still running, that claim will not be paid under the plan, and any payment of that claim will not affect the feasibility of the plan. (2) Under the terms of the lease, the lessee was obligated to replace the broken water heater. (3) Lessee was entitled to damages for labor costs in cleaning the restaurant after leaks and during the roof repair. Lessee was not entitled to damages for lost "projected profits" or a rent abate because those damages were too speculative to determine based on the evidence presented.

11. October 27, 1993. ROBERTS, RANDALL R. Case No. 93-50083, Adversary No. 93-5010, Chapter 7.    ISSUE: How are preference payments of less than $600 excluded from turnover under § 547(c)(7)?    RULING: If a debtor with primarily consumer debts makes preferential payments to a single creditor within the preference period and if the preferential payments total less than $600.00, then the preferential payments are excluded from turnover pursuant to § 547(c)(7). If the aggregate preferential payments to a single creditor are over $600.00, the entire amount is subject to turnover, not just the amount over $600.00.

12. November 19, 1993. ANDERSON, JAMES AND DOROTHY ANDERSON: Case No. 86-30044, Chapter 12.    ISSUE: Whether some post-confirmation payments by Debtors on a contract for deed constituted disposable income where Debtors cured the default and made the remaining payments under the original contract but where the payments were not disclosed in Debtors' confirmed plan?    RULING: Debtors' post-confirmation payments on the contract for deed did not constitute disposable income. The contract, although not in Debtors' confirmed plan, was scheduled. There was no evidence Debtors fraudulently omitted it from the plan. The payments were made according to the original contract. Debtors could not force the deed holder to agree to different terms. Any concern about the contract payments should have been raised at confirmation.