DECISIONS - 1996

Irvin N. Hoyt, Bankruptcy Judge

Alphabetical Listing

1996 DECISION SUMMARIES

Irvin N. Hoyt, Chief Bankruptcy Judge

1. January 26, 1996: WINGERT, JOHN A. Case No. 95-40479, Chapter 11.    ISSUE: Whether Chapter 11 case should continue where Debtor had died post-petition, where Debtor's brother had been appointed a special administrator under state law to continue the bankruptcy case, and where the special administrator had filed with the bankruptcy court a motion requesting continuance of the case?    RULING: The Court issued a preliminary ruling that the case could continue in a Chapter 11 but that a Chapter 11 trustee needed to be appointed. The state's appointment of a special administrator did not constitute a de facto Chapter 11 trustee appointment under the Bankruptcy Code. After concluding that the case could be converted to a Chapter 7, the Court urged interested parties to file dispositive motions and seek conversion to a Chapter 7, dismissal, or the appointment of a Chapter 11 trustee.

2. January 26, 1996: WILLIAMS, BRITT E. Case No. 95-30031, Chapter 7.    ISSUE: Whether antique bed suite that Debtor received from his mother as a gift to be passed to the Debtor's eldest son was exempt?    RULING: The antique bed set was property of the estate because Debtor did not receive it as a custodian or in trust for another. Debtor could exempt it under S.D.C.L. § 43-45-4 depending on its value and the value of other property he declared exempt, as total exemptions under S.D.C.L. § 43-45-4 could not exceed $2,000.00.

3. March 4, 1996: TUNNISSEN, DONALD JOHN & CHARLENE JOAN. Case No. 95-30001, Adversary No. 95-3007, Chapter 12.    ISSUES: 1. Whether a shared appreciation agreement between Debtor and FSA was an executory contract where Debtors had received a debt write-down under the agreement and where the agreement had not expired by its own terms? 2. How should FSA's and the Credit Union's claims secured by real property be valued when the amount of FSA's claim could not be determined until the shared appreciation agreement expired?    RULINGS: 1. The shared appreciation agreement was not an executory contract because a failure to perform by Debtors would not excuse FSA's performance. By receiving the write-down of debt, Debtors already had received the benefit of their bargain with FSA. That FSA had to release mortgages after Debtors made all payments was not a condition of performance that rendered the contract executory. 2.The values of FSA's and the Credit Union's claims secured by real estate would have to be estimated for confirmation and finally determined when the shared appreciation agreement expired.

4. March 22, 1996: MAY, OMA (BRONC) K. & DALE S. MAY. Case No. 95-40397, Chapter 13.    ISSUE: Whether Chapter 13 debtor must pay value of creditor's secured interest in exempt property when determining plan treatment under § 1325(a)(5)?    RULING: Value of secured property for purpose of plan treatment under § 1325(a)(5) includes property of the estate on the petition date, although the valuation is made at the time of confirmation. Exempt property is property of the estate on the petition date so exempt property may be included in the value of a secured claim for plan treatment.

5. April 26, 1996. LUTTER, KERRY AND JANET: Case No. 93-30010, Adversary No. 95-3011, Chapter 7.    ISSUE: Whether FSA had a perfected security interest in certain estate property based on a second continuation statement?    RULING: FSA did not have a perfected security interest. The second continuation statement was not filed timely under S.D.C.L. § 57A-9-403(3).

6. May 10, 1996. BROWN, JEFFREY W.: Case No. 94-40543, Chapter 12.    ISSUE: Whether Court may order Debtor to comply with plan provision regarding signing new security documents for creditor?    RULING: Since creditor had other remedies available to it under bankruptcy, state, and non bankruptcy federal laws, the Court did not order Debtor to comply with his plan. Among other things, the creditor could move to dismiss the case, commence foreclosure (it already had relief from stay), or utilize another federal notice provisions to protect its secured interest in certain farm products. The Court did prohibit Debtor for thirty days from selling any collateral secured to that creditor so that creditor could initiate one of its other options.

7. June 3, 1996. GRAY, KENDALL L. AND LAURI A. GRAY: Case No. 91-50133, Adversary No. 94-5016, Chapter 7.    ISSUE: Whether co-plaintiff-debtor was bound by employment terms agreed to by plaintiff-trustee and the plaintiffs' attorney and approved by court?    RULING: Employment order bound only co-plaintiff-trustee. Co-plaintiff-debtor was not a part of the employment agreement between the trustee and plaintiffs' attorney and had been given no opportunity to object to it. Co-plaintiff-debtor would be obligated to pay attorney pursuant to the terms of their separate agreement. Court could scrutinize that agreement only for reasonableness under § 329(b).

8. June 6, 1996. NEUHAUSER RANCH, INC.: Case No. 87-50123, Chapter 12. ISSUE: Whether Debtor owed disposable income and if so, what amount?    RULING: Debtor owes $192,093.15 in disposable income.

9. June 21, 1996. DOLD, PAUL J.: Case No. 95-40220, Adversary No. 96-4002, Chapter 7.    ISSUE: Whether Debtor was entitled to a permanent injunction where post-discharge a creditor tried to execute on personal property Debtor had declared exempt in the bankruptcy case?    RULING: Debtor was not entitled to a permanent injunction. Debtor had agreed that the creditor had a non dischargeable claim. That agreement reasonably included collateral orders by the state court that Debtor could not exempt certain property as to that creditor's judgment. Debtor also had misleading schedules and Debtor had not disclosed the collateral orders by the state court in his schedules.

10. July 3, 1996. JOSEPH, CLAUDETTE L.: Case No. 96-40011, Chapter 7.    ISSUE: Whether case trustee was entitled to costs from the debtor where the Chapter 7 case was dismissed on the debtor's motion?     RULING: Case trustee was not entitled to costs upon the dismissal of the Chapter 7 case upon the debtor's motion. The case was filed in good faith, as was the debtor's motion to dismiss. Further, the trustee's costs were not unusually large nor apparently cause by any egregious errors or omissions in the debtor's schedules and statement of financial affairs.

11. July 5, 1996. TORIGIAN, JOEL L. & DIANE J.: Case No. 95-10202, Chapter 7.    ISSUE: Whether an expected refund of federal income taxes has value for the estate when a Chapter 7 case is filed before the end of the tax year?   RULING: The expected federal income tax refund is valuable property of the estate although the tax year may not have ended when the Chapter 7 debtor filed his petition. The estate will receive that portion of the refund that is attributable to pre-petition earnings. The remainder is part of the debtor's post-petition earnings and is not property of the estate.

12. July 11, 1996. HERMANSON, DALE G. & BRENDA L.: Case No. 95-40711, Chapter 7.    ISSUE: Whether a Chapter 7 debtor's attorney was entitled to compensation from the estate?    RULING: The Chapter 7 debtor's attorney was only entitled to compensation from the estate only for services that benefited the estate. These services generally include analyzing the debtor's financial condition and determining whether to file a petition, preparing the petition, schedules, and statement of financial affairs and any necessary amendments, and attending the § 341 meeting. A Chapter 7 debtor's attorney who is not employed by the estate is not entitled to compensation for services that should have been performed by the trustee or the trustee's attorney, services that benefitted only the debtor, or services that were not professional in nature.

13. July 29, 1996. ROWLEY, LEONARD A. BEVERLY A.: Case No. 87-40157, Chapter 12.    ISSUE: What amount, if any, of disposable income did Debtors owe before they could receive a discharge under § 1228(a)?    RULING: Debtors owe $183,231.23 in disposable income.

14. August 19, 1996. DOUBLE L.J. FARMS: Case No. 93-40213, Chapter 12. ISSUE: Whether Debtor's proposed modification of its confirmed plan should be approved where Debtor would no longer farm after the current crop year?   RULING: Debtor's proposed post-confirmation modification was not approved. The modification was not offered in good faith because Debtor would not pay the Bank with interest as soon as it could and because it offered little for unsecured creditors. There also was no evidence that the modification was feasible or that it met the best interest of creditors test.

15. October 1, 1996. JORGENSEN,DICKSON WARREN AND CHRISTINE MARION.   Case No. 96-50173, Chapter 7.    ISSUE: Whether the case may be dismissed or whether the debtor-wife only may be dismissed from the case where a post-petition inheritance by the debtor-wife would allow her to pay all her personal debts and some joint debts and where the debtor-husband has substantial personal debts arising from a separate business interest? RULING: The case was not dismissed nor was the debtor-wife only allowed out. Her inheritance, which became property of the estate under § 541(a)(5), would not allow all her personal and joint debts to be paid in full so that the joint creditors would be prejudiced. Further, there were no guarantees of how and when she would use the inheritance to pay her creditors. The two debtors' individual bankruptcy estates, however, were deconsolidated since substantive consolidation of the estates was no longer appropriate.

16. October 16, 1996. WASILK, WAYNE E. AND MARLYS R. Case No. 96-10070, Chapter 12.    ISSUE: Whether Debtors' proposed lease of part of their farm to their son should be approved? Whether Debtors' plan, which hinged on the lease of part of their farm, should be confirmed?    RULING: Debtors' proposed lease of part of their farm to their son so that their son could operate a dairy was not shown to be in the best interest of the estate. The son had limited dairy experience. There was no showing that Debtors' and their son's respective contributions to the endeavor reflected the income each would receive. The plan was not confirmable because it was not shown to be feasible and was not offered in good faith.

17. October 29, 1996. ANDERSON, JAMES A. Case No. 93-10223, Chapter 12. ISSUE: Whether Debtor's proposed modification to his confirmed Chapter 12 plan was feasible?    RULING: Proposed modification was feasible because it was workable and had a reasonable prospect of success.

18. November 7, 1996. DAKOTA INDUSTRIES, INC. Case No. 87-40209, Chapter 11. ISSUE: Whether a closed Chapter 11 case should be reopened to allow Debtor to get clarification on prior orders or to allow a creditor to bring a motion to dismiss?    RULING: The case was reopened only to allow the Court to interpret its prior orders. The confirmed plan contemplated such action and it was within the Court's statutory post-confirmation jurisdiction. The case was not reopened to allow the creditor to file a motion to dismissal or convert. Dismissal or conversion would not reinstate creditors to their pre-petition status nor revoke Debtor's discharge.

19. November 14, 1996. HARRIS, JOHN R., Case No. 96-40507, Chapter 13. ISSUE: Whether stay should be modified to allow state court action regarding some scheduled real property to continue?    RULING: Stay was modified. While Debtor had scheduled the property, title was not in his name. State court could determine whether debtor or the creditors had any interest in the property and could protect debtor's homestead interest, if any, as readily as the bankruptcy court. The state court action had already been commenced and progress toward resolution had been made. Not all parties to the state court action were within the Bankruptcy Court's core jurisdiction. The debtor's Chapter 13 case would not be impeded by the state court action.

20. December 2, 1996. STRATMEYER, GARY J. Case No. 96-40354, Chapter 13. ISSUE: Whether case should be dismissed for lack of a good faith filing where Debtor filed a Chapter 13 petition soon after he filed an appeal of a state court judgment against him, where Debtor did not post a supersedeas bond in state court, and where Debtor did not propose to begin plan payments until the state court appeal was decided?    RULING: The case was dismissed for lack of a good faith filing because Debtor did not come into the Chapter 13 ready to pay his creditors but instead proposed not to pay them until a state court appeal was decided.

21. December 23, 1996. STEINFURTH, MARK J. & SUSAN X. Case No. 96-40221, Chapter 7.    ISSUE: Whether creditor had a perfected security interest in a vehicle where perfection occurred post-petition?    RULING: Creditor's post-petition perfection of its security interest in a vehicle is either void as an act in violation of the automatic stay of § 362 or voidable under §§ 544 and 549(a).

APPEAL RECORD

January 9, 1997: STEINFURTH, MARK J. & SUSAN X.: Case No. 96-40221, Adv. No. 96-4032. Notice of Appeal to District Court filed by debtors from Judgment entered 12-31-96.    APPEAL STATUS: AFFIRMED. Order affirming JUDGMENT of the Bankruptcy Court entered by Judge Piersol 9-11-97 (Civ. 97-4004).