DECISIONS - 1997

Irvin N. Hoyt, Bankruptcy Judge

Alphabetical Listing

1997 DECISION SUMAMREIS

Irvin N. Hoyt, Chief Bankruptcy Judge

1. January 9, 1997. CHARLES C. DAMMANN, Case No. 96-40373, Adversary No. 96-4027, Chapter 7.   ISSUE: Whether a credit union's lien on a vehicle was voidable as a preference under § 547(c) where the lien was not perfected on the petition date and where more than twenty days has passed since Debtor took possession of the vehicle?   RULING: The Credit Union's lien was a voidable preference.

2. January 16, 1997. GREGORY S. & PATRICIA L. BASSLER, Case No. 96-4031, Adversary No. 96-4031, Chapter 7.   ISSUE: Whether a bank's security interest in a vehicle withstood the trustee's challenge as a hypothetical lien creditor § 544 where the bank's lien was not perfected pre-petition and where the vehicle was still titled in Illinois rather than in South Dakota? RULING: Since vehicle was titled in Illinois on the petition date, Illinois' lien perfection rules governed. Under that law, the bank did not have a perfected security interest in the vehicle on the petition date although it had possession of the title. Accordingly, the trustee had the superior interest in the vehicle under § 544 and the bank was rendered unsecured.

3. January 28, 1997. RONALD J. & KIM A. TESCH, Case No. 96-10115, Chapter 12.   ISSUE: Whether agreement between a creditor and the debtors was executory and could be rejected by the debtors under § 365(d) where a state court had entered a default foreclosure judgment on the agreement pre-petition?   RULING: Under state law, a default judgment is enforceable upon entry and is not stayed when an appeal is filed unless specifically ordered. The state court's judgment was by default and had not been stayed on the petition date. Therefore, the judgment was final and it replaced the agreement between the debtors and the creditors. The agreement was no longer executory and could not be rejected by the debtors under § 365(d).

4. January 31, 1997. JOANNE HEIKES, Case No. 93-40002, Adversary No. 96-4037, Chapter 7.   ISSUE: Main Case Contested Matter -- Whether Debtor was entitled to have liens removed on certain exempt property under § 522(f)?   RULING: Debtor could not have liens removed from certain exempt property under § 522(f) because the secured creditor has a possessory lien on the petition date.

ISSUES - Adversary - Whether Debtor should be awarded possession of exempt property and damages where case trustee returned possession of secured, exempt property to secured creditor?    RULING: Case trustee properly returned collateral to secured creditor after Debtor declared the property exempt where creditor had a possessory secured interest on the petition date and where debtor could not have his lien removed under § 522(f).

5. February 4, 1997. DANIELSON, DAN. E., Case No. 96-40163, Adversary No. 96-4007, Chapter 13.    ISSUE: Whether a criminal restitution debt is non dischargeable under § 1328(a)(3) where the government satisfied the criminal judgment when it obtained a civil judgment to enforce the restitution order before the restitution was paid in full?    RULING: The restitution order is still non dischargeable. Section 3663 of Title 18 allows the government to enforce a restitution order through either a civil or criminal judgment. When § 3663 is read in harmony with § 1328(a)(3), it is clear that the method of enforcing the judgment does not affect its dischargeability.

6. February 5, 1997. VAN DYKE, JOHN, JR., Case No. L88-01173S, Adversary No. 96-5167KS, Chapter 11.    ISSUE: Whether adversary should be dismissed for lack of subject matter jurisdiction where Chapter 11 plan has been confirmed and where plan does not specifically retain post-confirmation jurisdiction for an equitable subordination complaint?    RULING: Motion to dismiss was denied. Court has post-confirmation jurisdiction over an equitable subordination complaint to insure plan is administered appropriately, especially where plan includes a jurisdiction-retention provision and where equitable subordination action arose post-petition and affected distributions to creditors.

7. March 7, 1997. VAN DENTOP, MELVIN D.: Case No. 95-40644,Chapter 7.    ISSUE: Whether funds represented by a check may be declared exempt where the debtor wrote the check pre-petition but where the check was honored post-petition by an insurance company that held a debt against the Debtor's life insurance policy?    RULING: The check was intended to repay a loan against Debtor's life insurance. The check had not cleared on the petition date and, therefore, the funds represented by the check were still estate property. The trustee could seek to avoid the post-petition transfer by bringing an action against the insurance company.

APPEAL RECORD:

March 17, 1997. MELVIN D. VAN DENTOP. Case NO. 95-40644. Notice of Appeal filed by Debtor from Order Sustaining Trustee's Objection to Exempt Life Insurance entered 3-7-97. APPEAL STATUS: AFFIRMED.  Judgment entered by Judge Piersol 9-11-98 affirming bankruptcy court decision.

8. March 12, 1997. LAMPHERE, FRITZ R.: Case No.96-50074, Adversary Nos. 96-5015 and 96-5016, Chapter 7.    ISSUE: Whether a creditor was entitled to summary judgment of non dischargeability for fraud where a state court had previously decided all issues relevant to the dischargeability complaint in a civil action but where the debtor now challenged the validity of the state court judgment because he alleges he was coerced to default in the state court action?    RULING: The creditor was entitled to a summary judgment of non dischargeability where the state court had determined all relevant issues and where the judgment was final. The state court, not the bankruptcy court, was the appropriate place for the debtor to challenge the validity of the state court default judgment. If the debtor prevailed on rehearing in state court, he could seek reconsideration of the non dischargeability judgment from the bankruptcy court.

9. March 17, 1997. BRUNER, E. JOHN & EILEEN: Case No. 96-40381, Adversary No. 96-4049, Chapter 12.    ISSUE: Whether third party dischargeability complaint should be dismissed as untimely?    RULING: Third party non dischargeability complaint was dismissed as untimely. Deadline under F.R.Bankr.P. 4007(c) had passed and Court could find no equitable grounds for extending the deadline, assuming such equitable extensions are allowed.

APPEAL RECORD:   BRUNER, E.JOHN & EILEEN.   Notice of appeal to District Court filed by Green Tree Financial Corp. on 7-3-97.   APPEAL STATUS:  AFFIRMED.  Judgment entered by Judge Piersol on 9-24-98 affirming decision of Bankruptcy Court.

10. March 25, 1997. SMITH, CRAIG R.: Case No. 95-40637, Adversary No. 96-4024, Chapter 7.    ISSUE: Whether second bank was subrogated to recorded lien on vehicle held by first bank whose lien was satisfied by funds supplied to the debtor by the second bank?    RULING: While S.D.C.L. §44-3-6 recognizes the general right of subrogation, the statute does not apply to liens on vehicles because S.D.C.L. Ch. 32-3 specifically governs the perfection and enforcement of liens on vehicles.

11. March 27, 1997. ERICKSON, AUTUMN A.: Case No. 96-40398, Chapter 7. ISSUE: Whether certain rights to regular payments the debtor had arising from a personal injury settlement agreement constituted an annuity under S.D.C.L. § 58-12-5 that could be declared exempt under S.D.C.L. § 58-12-6? RULING: The settlement agreement met the definition of an annuity under § 58-12-5 but the debtor could only declare $250.00 per month exempt under §§ 58-12-5 and -8.

12. April 2, 1997. DICE, ROGER L.: Case NO. 96-30095, Chapter 7.    ISSUE: (1) Whether the debtor was a head of household under S.D.C.L. § 43-45-4 where he resided with his fiancee and her children and where he paid support for his minor daughter? (2) Whether the debtor could declare a homestead exempt under S.D.C.L. § 43-31-1 where he resided elsewhere on the petition date? (3) Whether the trustee could abandon certain cattle from the estate under 11 U.S.C. § 554(a) where the sale of the cattle would generate a tax obligation to the debtor?    RULING: (1) The debtor is a head of household under § 43-45-4 because he pays support for his daughter. (2) The debtor could not declare a homestead exempt under § 43-31-1 because he did not reside on the property on the petition date, he evidenced no intent to return, and he did not live elsewhere for job or health reasons. (3) Trustee could abandon cattle because they were burdensome to the estate. Tax ramifications for the debtor are not part of the requirement or considerations for abandonment under § 554(a).

13. April 28, 1997. DAKOTA INDUSTRIES, INC., Case No. 87-40209, Chapter 11. ISSUE: What amount, if any, does Debtor owe for interest on the IRS's claim based on the Court's (Ecker, J.) earlier rulings and Debtor's plan?    RULING: The Court found that Debtor owed pre-petition and post-confirmation interest on Debtor's withholding taxes but no interest on Debtor's employment taxes.

14. May 29, 1997. WEBB, DAVID C. & JANICE L., Case No. 86-40476, Chapter 7. ISSUE: Whether the debtor's exemption of tools of a mechanic was limited to $200 and whether debtor's exemption of household and kitchen furniture was excessive?    RULING: Under S.D.C.L. § 43-45(4), a debtor may declare exempt only $200 in "tools and implements of any mechanic." Under § 43-45-5(2), a debtor may declare only $200 in "household and kitchen furniture." Debtor's claimed exemptions exceeded both statutes.

15. May 29, 1997. WEBB, DAVID C. & JANICE L., Case No. 86-40476, Adversary No. 97-4050, Chapter 7.    ISSUE: Whether Plaintiff was entitled to summary judgment on denial of discharge complaint where it showed Defendant-Debtor's schedules did not accurately set forth Defendant-Debtor's interest in two pickups but where Defendant-Debtor argued he should be allowed to testify as to his lack of fraudulent intent when he prepared the schedules?     RULING: Trial on Defendant-Debtor's fraudulent intent regarding errors and omissions on his schedules was not necessary where a reasonable trier of fact could only infer from the present record that Debtor's errors and omissions were fraudulent and where Defendant-Debtor could point to no other evidence that would support his lack of fraudulent intent. Summary judgment for Plaintiff was entered.

16. June 4, 1997. SEEFELDT, BRIAN & CARRIE J., Case No. 96-10182, Adversary No. 96-1017, Chapter 7.    ISSUE: Whether debts Debtor owed to third party based on a divorce decree were non dischargeable as to her former spouse under § 523(a)(15)?    RULING: While Debtor would be personally discharged from the debts owed to the third parties, her spouse would retain the hold harmless protections that the divorce decree provided him from these debts and the debts would be nondischargeable as to him under § 523(a)(15). The Court did not require specific "hold harmless" language in the divorce decree for the debts to be of the type covered by § 523(a)(15). Further, under §§ 523(a)(15)(A) and (B), Debtor did not meet her burden of proving that she did not have the ability to pay these debts or that the benefits of a discharge for her outweighed the detriment her former husband would suffer if the debts were discharged as to him.

17. June 17, 1997. BRUNER, E. JOHN & EILEEN: Case No. 96-40381, Adversary No. 96-4049, Chapter 12.    ISSUE: Whether bank-mortgagee had a superior secured interest in a manufactured home that became a fixture on the mortgaged real property where the purchase money security lien holder did not make a fixture filing but where the mortgagor-home buyer promised the purchase money lender that the manufactured home would remain personalty? RULING: The bank had the superior interest in the manufactured home. The manufactured home was placed permanently on a foundation and thus became a fixture on the real property mortgaged to the bank. The purchase money lender did not make a fixture filing to protect its lien against the bank's mortgage as required by state law. The mortgagor-home buyer's promise that the manufactured home would remain personalty did not mirror what actually happened and was not the controlling factor in deciding whether the home became a fixture.

18. June 19, 1997. SMITH, WILBUR J. & BETTY J.: Case No. 87-30162, Adversary No. 94-3010.    ISSUE: Whether FSA's liens on Debtors' real property would be extinguished when they completed their Chapter 12 plan payments although the real property might be subject to a different lien arising from a modified § 1111(b) election in a related Chapter 11 case?    RULING: FSA's liens on Debtors' real property arising from Debtors' confirmed Chapter 12 plan would be extinguished when Debtors completed their Chapter 12 plan payments. Any liens on the same real property arising from a modified § 1111(b) election in a related Chapter 11 case would have to be decided in a separate action under or related to the confirmed Chapter 11 case.

APPEAL RECORD: SMITH, WILBUR JOHN & BETTY JEAN. Notice of appeal filed by John and Betty Smith on 6-27-97.  Cross-appeal filed by U.S.A./Rural Economic and Community Development on 6-30-97.  APPEAL STATUS:  DISMISSED.    Order Dismissing Appeals filed on 1-8-98 by Judge Kornmann dismissing appeal and cross-appeal. 

19. July 21, 1997. HOFFMAN, MARGO J. Case No. 96-40624. Chapter 7.    ISSUE: Whether debt owed to former spouse was non dischargeable under § 523(a)(15) and whether Debtor should be denied a discharge for errors and omissions on her schedules?    RULING: Funds owed to Debtor's former husband were found to be non dischargeable under § 523(a)(15). Debtor had not shown that the benefit of a discharge to her outweighed the detriment to her former spouse if the debt was discharged and Debtor had not shown that she did not have the resources to pay the debt. Debtor was not denied a discharge as no fraudulent intent was found in the omissions and errors in her schedules.

20. August 1, 1997. SCHMIDT, MARJORIE ALVINA. Case No. 97-30009, Chapter 7. ISSUE: Whether Debtor could claim additional personal property exemption as either a head of a family or a single person under S.D.C.L. § 43-45-4? RULING: Debtor was not a single person because she was married on the petition date. Further, Debtor was not a head of a family because she did not have any dependents. Accordingly, Debtor could not declare any additional personal property exempt under S.D.C.L. § 43-45-4.

21. August 6, 1997. SCHMIDT, MARJORIE ALVINA. Case No. 97-30009, Adversary No. 97-3001, Chapter 7.    ISSUE: Whether Debtor's IRA accounts were excluded from property of the estate under § 521(c)(2)?    RULING: Debtor's IRA accounts were property of the estate and were not excluded under § 521(c)(2). The IRA accounts did not have a restriction on transfer enforceable by a state or non bankruptcy federal law.

22. August 29, 1997. GROVENBURG, DOUGLAS A. & KATHY A. Case No. 97-40030, Adversary No. 97-4021, Chapter 13.    ISSUE(on proposed findings and conclusions to District Court under 28 U.S.C. sec. 157(c)(1): Whether day care insurance provider or homeowner's insurance provided had a duty to defend the debtor/in-home day care operator where the debtor's son, who was not an employee, is alleged to have sexually abused some day care children while in the day care home or while the son babysat one day care child in the child's home?     RULING: The homeowner's insurer did not have a duty to defend the debtor. The day care insurer did have a duty to defend the debtor.

23. September 5, 1997. KRUEGER, KIM M., Case No. 96-40587, Chapter 7.    ISSUE: Whether judgment could be declared discharged where creditor argued she had timely mailed an adversary complaint, in the form of an adversary proceeding cover sheet, to the clerk and where the clerk never received the cover sheet?    RULING: The judgment was discharged. Unlike the "in the mail" rule for service, a complaint must be filed with the clerk by the deadline. Compare F.R.Bankr.P. 7005 and F.R.Civ.P. 5(e) to F.R.Bankr.P. 9006(e). Since a complaint was not timely filed and since the other requirements of § 524 and § 15-16-20 had been met, the judgment was discharged.

24. September 18, 1997. JORGENSEN, DOROTHY MARIE, Case No. 96-40694, Adversary No. 97-4029, Chapter 7.    ISSUE: Whether case trustee was entitled to full settlement proceeds where alleged subrogee did not object to the trustee's motion to approve settlement?    RULING: The subrogee waived its participation in the settlement before the bankruptcy was commenced and did nothing to "revive" it until after the trustee's settlement was approved. Accordingly, the full settlement was property of the bankruptcy estate.

25. September 18, 1997. MELLENBERNDT, WILLIAM C., Case No. 97-40270, Chapter 13.    ISSUE: Whether confirmation order should be vacated where IRS filed its objection late and where the confirmed plan did not comply with § 1322(a)(2)?    RULING: The confirmation order was vacated. The late objection was due to excusable neglect and the confirmed plan did not meet Code requirements for the treatment of priority claims.

26. September 17, 1997. THYEN, DAVID J. & TAMMY L., Case No. 97-10030, Chapter 12.    ISSUE: Whether the debtors' Chapter 12 plan was filed in good faith?    RULING: The debtors' Chapter 12 plan was not filed in good faith because the debtors had not accurately scheduled their assets. The debtors was allowed to file a modified plan.

27. September 23, 1997. CICHONSKI, STANLEY T. & LYNNE D., Case No. 97-50170, Chapter 7.    ISSUE: Whether case trustee should receive costs on voluntary dismissal in Chapter 7 case?    RULING: Any costs that a Chapter 7 trustee seeks when a debtor voluntarily seeks dismissal of his case should be made through a formal application to the Court, not through negotiations with the debtor.

28. October 14, 1997. GROVENBERG, DOUGLAS A. & KATHY A., Case No. 97-40030, Adversary No. 97-4021, Chapter 7.    ISSUE: Whether Defendant was entitled to an extension of time in which to file objections to the Court's proposed findings and conclusions?    RULING: The Defendant's motion to extend time was granted. The Court also clarified the form and nature of an appropriate objection under F.R.Bankr.P. 9033(b). [Note: Subsequent to this decision, the 8th Circuit BAP adopted stricter standards for excusable neglect that would probably disallow this motion based on attorney error. See Hartford Casualty Insurance Co. v. Food Barn Stores, Inc., (In re Food Barn Stores, Inc.), 214 B.R. 197 (8th Cir. B.A.P. 1997).]

29. October 15, 1997. COLE, FLORENCE M., Case No. 94-30046, Chapter 12. ISSUE: Whether Debtor's motion to modify her confirmed plan was filed in good faith and was feasible?    RULING: Debtor's motion to modify her confirmed plan was filed in good faith and was feasible. However, the modified plan was approved only on certain conditions: Debtor had to memorialize any pasture leases, hunting leases, crop sharing agreements, work sharing agreements, cattle wintering agreements, or other financial arrangements on which her modified plan relied. Debtor had to stop all gambling. Debtor had to maintain adequate crop insurance.

30. November 6, 1997. CONRAD, LEONARD CHARLES, Case No. 97-40191, Chapter 7. ISSUE: Whether certain Individual Retirement Accounts were excluded from property of the estate?    RULING: The IRAs were property of the bankruptcy estate because they did not contain the necessary transfer restrictions under state or federal non bankruptcy law required by 11 U.S.C. § 541(c)(2) to exclude the funds from the estate.

31. November 10, 1997. JUTTELSTAD, LOUIS & ELEANOR R., Case No. 97-40409, Chapter 13.    ISSUE: Whether Debtor's attorney was entitled to fees that greatly exceeded the amount estimated in Debtors' confirmed plan?    RULING: Debtor's attorney would be allowed the fees requested but that amount that exceeded the plan estimate could only be paid by Debtors directly after discharge.

32. November 14, 1997. HAMANN, DAVID R. & PEGGY J., Case No. 97-10069, Chapter 7.    ISSUE: Whether Debtors could have creditor's lien on exempt furniture removed pursuant to 11 U.S.C. § 522(f)?    RULING: The creditor had a purchase money security interest that could not be removed under § 522(f).