DECISIONS - 1998

Irvin N. Hoyt,  Bankruptcy Judge

Alphabetical Listing

1998 DECISION SUMMARIES

Irvin N. Hoyt, Chief Bankruptcy Judge

1. January 14, 1998. HOFER, TAMARA E., Case No. 96-40095, Adversary No. 96-4045, Chapter 7.    ISSUE: 1. Whether Debtor could have ex-husband's lien on her homestead sale proceeds removed under § 522(f)? 2. Whether Debtor's ex-husband's divorce related lien had priority over two mortgages that Debtor gave her lawyer on her homestead?    RULING: 1. Debtor could not remove her ex-husband's lien on her homestead sale proceeds because Debtor did not have sole title to the property before his lien attached. See Farrey v. Sanderfoot, 111 S.Ct. 1825 (1991). 2. Debtor's ex-husband's lien had priority. It was created at the same time the Debtor acquired her interest in the property. Debtor had no power to mortgage the homestead property until title was vested in her. That occurred simultaneously with her ex-husband's lien. Debtor's attorney also had actual notice of the ex-husband's lien and could not rely on the clerk of court's failure to timely docket the ex-husband's judgment lien in the judgment book to claim her mortgages had priority.

2. January 26, 1998. STERN, ARDEN LOREN & ARLENE ELSIE, Case No. 91-40509, Chapter 12.   ISSUE: 1. To what deficiency, if any, is a bank entitled when Debtors sell secured property post-discharge in compliance with a modified plan? 2. Can the bank's underlying state court judgment be discharged under S.D.C.L. § 15-16-20?    RULING: 1. The bank is entitled to any deficiency on its secured claim after the security is sold post-discharge. The modified plan did not alter the amount of the secured claim owed to the bank, only how it would be paid (either direct or after a sale of security). Although the sale provision kicked in, it did not diminish the amount of the secured claim due. 2. Only that portion of the state court judgment represented by Debtors' unsecured claim in bankruptcy could be discharged under S.D.C.L. § 15-16-20. That portion of the state court judgment represented by the secured claim could not be discharged until the secured claim is paid in full.

3. March 13, 1998. JENSEN, LYLE A. & CONNIE J., Case No. 96-40800, Chapter 7.   ISSUE: Whether pre-petition judgment was discharged under 11 U.S.C. § 524(a) and S.D.C.L. § 15-16-20?    RULING: Debtors did not have any non exempt real property on the petition date to which creditor's pre-petition judgment attached as a lien. Therefore, judgment was discharged in bankruptcy under § 524(a) and could be discharged or satisfied by the county clerk of court pursuant to S.D.C.L. § 15-16-20

4. March 19, 1998. TAYLOR, WAYNE DOUGLAS & PEGGY, Case No. 89-40349, Chapter 7.    ISSUE: Whether county's aid lien for providing public defender services survived Debtors' bankruptcy?    RULING: County's aid lien survived Debtors' bankruptcy. Lien could not be discharged under 11 U.S.C. § 524(a) and S.D.C.L. § 15-16-20 and could not be voided as a statutory lien under either 11 U.S.C. §§ 522(f) or 522(h). Whether the lien attaches to any post-petition (non bankruptcy) property is not within the Bankruptcy Court's jurisdiction.

5. April 6, 1998. KIRWAN, JAMES T. & SHIRLEY M., Case No. 97-30003, Adversary No. 97-3011, Chapter ISSUE: Whether Plaintiffs' adversary complaint was timely?    RULING: Plaintiffs' fraud-based complaint was dismissed because it was untimely under F.R.Bankr.P. 4007(c) where Plaintiff had not requested an extension before the original time expired. 12.

6. April 6, 1998. KIRWAN, WILLIAM P., Case No. 97-30005, Adversary No. 97-3010, Chapter 12.    ISSUE: Whether Plaintiffs' adversary complaint was timely? RULING: Plaintiffs' fraud-based complaint was dismissed because it was untimely under F.R.Bankr.P. 4007(c) where Plaintiff had not requested an extension before the original time expired.

7. April 16, 1998. HOOKIE, DARRELL, Case No. 97-40015, Chapter 12.    ISSUE: Whether county retains a statutory aid lien that was obtained post-petition when the county paid the debtor's medical bills soon after the petition was filed? RULING: The county's aid lien was voided because was obtained in violation of the automatic stay. The underlying debt was discharged as a contingent claim.

8. May 8, 1998. SWANSON, LYNN KEITH, d/b/a/ Midwest Transfer, Case No. 97-10300, Chapter 7.    ISSUE: Whether creditor was entitled to relief from the automatic stay to complete a state court garnishment action?    RULING: Creditor was not entitled to relief from the automatic stay to complete the garnishment action. The garnished funds were property of the bankruptcy estate. The creditor did not have a garnishment lien under state law to protect.

9. May 11, 1998. SHULTZ, WILLIAM C. & EVELYN, Case No. 96-50121, Chapter 7.   ISSUE: Whether Debtors should be held in civil contempt for the failure to pay estate for excess exemptions?    RULING: Debtors were not held in civil contempt for their present failure to pay the estate for their excess exemptions. Their attorney had misadvised them that they no longer had to the pay the trustee and their financial circumstances in 1997 did not permit them to comply with the order. Debtors remain obligated to pay the trustee.

10. May 28, 1998. BEAUCHAMP, PAMELA E., Case No. 97-50487, Chapter 7.    ISSUE: Whether case should be dismissed for substantial abuse?    RULING: Case will be dismissed for substantial abuse Debtor had available $460.00 per month that she had been using to cure a mortgage arrearage that can now be used to pay other creditors. Court did not finally decide whether Debtor had to use all her children's government benefits to fund a Chapter 13 plan. It only concluded that she had to use the same portion for debt repayment that she had previously used for that purpose.

11. June 10, 1998. KUMLEY, EDWARD A. & LEESA I., Case No. 91-50357, Adversary No. 98-5003, Chapter 7. ISSUE: Whether Debtors' discharge should be revoked where Debtors did not originally schedule cash received pre-petition and also did not testify truthfully at the § 341 meeting regarding the cash but where Debtors' disclosed the funds upon conversion to Chapter 13, where one Debtor was later convicted of bankruptcy fraud and completed the restitution order entered by the District Court, and where the Trustee knew about the fraud before the conversion of the case before conversion to Chapter 13 and later re-conversion to Chapter 7?    RULING: The discharge was revoked. Section 727(e) gave the Trustee until the case was closed to seek revocation under § 727(d)(2). Section 727(d)(2) does not impose on the plaintiff a "lack of pre-discharge knowledge" of the fraud as does § 727(d)(1). Consequently, Defendants-Debtors could not argue that the complaint was untimely or that Plaintiff-Trustee was barred by laches from bringing the revocation complaint so late in the case. Further, § 727(d)(2) does not provide that a debtor can avoid revocation by later disclosing an asset or by completing a criminal sentence.

12. June 17, 1998. BUXCEL, CLIFFORD & ELAINE, Case No. 98-30004, Chapter 13.   ISSUE: Whether Chapter 13 case should be dismissed where Debtors proposed repayment of $27.38 per month, where income was minimal and expenses were understated, and where automatic stay insulated Debtors from possible state court action with large judgment holder? (2) Whether Debtors may declare home exempt where they have no ownership interest in it on the petition date but where they have an executory agreement with foreclosing creditor to repurchase it?     RULING: (1) Confirmation of plan was denied and the case was dismissed. Case and plan were not filed in good faith because Debtors did not come in ready to reorganize. Further, success of plan was improbable based on income and expenses stated and the plan did not meet the best interest of creditors test. (2) Homestead exemption was disallowed because Debtors did not have an ownership interest in the home on the petition date.

13. June 23, 1998. LE PERA, ANTHONY L., Case No. 97-40908, Adversary No. 97-4060, Chapter 7.    ISSUE: Whether creditor had perfected secured interest in a vehicle where its lien was noted on the title but where the underlying security agreement described a different car that was of the same make and year?    RULING: Creditor did not have a perfected secured interest in the vehicle on which it had a lien notation on the title. Security interest never attached to that collateral because the security agreement described the wrong vehicle. The description in the security agreement did not merely have an error in the VIN for the correct vehicle.

14. June 24, 1998. LANSDOWNE, HAL ARDEN & TRACY J., Case No. 97-40679, Adversary No. 97-4055, Chapter 7.    ISSUE: Whether certain debts incurred during a divorce were dischargeable under § 523(a)(5)?    RULING: Plaintiff failed in her burden to show that certain debts to third parties that Defendant-Debtor was ordered to pay pursuant to a divorce decree were non dischargeable under § 523(a)(5) because there was no evidence that debts were divided based on anything but equality, there was no evidence of unequal ability to pay, and there was no evidence the debts were for basic living expenses or that one party had incurred the debts but the other party was ordered to pay them regardless. Debt to Plaintiff's attorney rising from a child support hearing, however, was declared non dischargeable since it was clearer that state court considered the parties' respective abilities to pay and the merit of the movant's claim.

15. July 2, 1998. HANDBOY, RAYMOND C. & MARVEL J., Case No. 97-50358, Chapter 13.    ISSUE: Whether order regarding plan modification should be vacated?    RULING: Order modifying a confirmed plan, which the Court had been told was only correcting a technical error, was vacated in part because the order contained a material change to the confirmed plan (date of first and last payments) that had not been properly noticed to creditors for objections.

16. July 21, 1998. GREEN, WILLIAM M., Case No. 96-40590, Adversary No. 97-4016, Chapter 13.    ISSUE: Whether Defendant was entitled to summary judgment where the subject property in question was not estate property but where Plaintiff-Debtor also wanted Defendant's claim valued?    RULING: Summary judgment motion was denied. Under F.R.Bankr.P. 3007, Plaintiff-Debtor could combine an adversary proceeding with a claim valuation proceeding. Although some matters in the adversary were resolved, Debtor's request for a valuation of Defendant's claim remained. To value Defendant's claim would take the resolution of two legal questions and the receipt of evidence. The Court directed the parties to file responses and briefs on the first legal issue.

17. July 29, 1998. ANDRAWIS, EHAB A., Case No. 98-40040, Chapter 7.    ISSUE: Whether the debtor could declare exempt life insurance that he purchased pre-petition from proceeds from the sale of his lien-free car to his mother?    RULING: The exemption in the life insurance policy was denied. The Court found that the debtor had made a sham sale of his unencumbered car to his mother in order to temporarily shelter his equity in the car in an exempt life insurance policy. The debtor's fraudulent intent regarding the car sale and purchase of the insurance policy was evidenced by his lack of present intent to retain the policy, the transfer of his car was made in anticipation of bankruptcy, the transfer was to a family member, and the debtor retained use of the car. The Court did not find that the sale price for the car was unreasonable (not all the proceeds were used to purchase the policy). Therefore, only the value of the life insurance policy remained in the estate and could not be exempted.

18. September 21, 1998. HAFFER, KEITH NEIL, Case No. 97-41065, Chapter 13.    ISSUE: (1) Whether Debtor's plan was proposed in good faith? (2) Whether the case should be dismissed or converted to a Chapter 7?    RULING: Debtor had not proposed in his plan in good faith because he had not shown that his large IRAs are exempt, the plan did not recognize that the IRAs and a monthly annuity payment may constitute disposable income, his schedule I was incomplete, and he and his non-debtor wife's business transactions were apparently designed to minimize his assets to forestall a judgment creditor's collection efforts. Debtor was given a deadline to file a modified plan and get it confirmed or the case will be dismissed.

19. November 10, 1998. MENDELSOHN, ROBERT D. & SUSAN R., Case No. 98-40099, Chapter 7.    ISSUE: Whether case should be dismissed for substantial abuse?    RULING: Case was dismissed. Debtors' expenditures were excessive. By curbing unnecessary spending, Debtors could substantially repay creditors through a Chapter 13 plan. College expenses for adult children living at home were not reasonable where creditors remain unpaid. children's contributions were not quantified, and other expenditures were not reasonable or necessary.

20. November 16, 1998. VIKING GLASS, INC., Case No. 97-40115, Adversary No. 98-4011, Chapter 7.    ISSUE: Whether summary judgment for Plaintiff should be entered in this preference action?    RULING: Plaintiff-Trustee was granted summary judgment on the issue of Debtor's insolvency at the time of transfer because the record indicated no disputed facts. Plaintiff was denied summary judgment on whether the transfer was for a reasonably equivalent value because the parties had offered conflicting evidence of valuation and each argued a different valuation method. Defendant's companion motion to dismiss was denied because the pleading problems raised therein had been resolved.

21. November 19, 1998. GASPER M. KARUNARATNE, Case No. 98-40524, Adversary No. 98-4051, Chapter 13. ISSUE: Whether dischargeability complaint under § 523(a)(2)(A) should be dismissed where Debtor was in Chapter 13? RULING: Complaint was dismissed without prejudice. Fraud based debts that may be non dischargeable under § 523(a)(2)(A) in Chapter 7 are dischargeable in Chapter 13 if a plan is completed. If the case converts from Chapter 13 to Chapter 7, Plaintiff can then file his complaint.

22. December 4, 1998. GREEN, WILLIAM M., Case No. 96-40590, Adversary No. 97-4016, Chapter 13.    ISSUE: Whether creditor's amended proof of claim was timely where it was filed after Debtor's plan was confirmed, confirmed plan did not acknowledge an unresolved claim, and where creditor changed large claim from secured to unsecured?    RULING: Amended claim was not timely. Most important, under § 1329, confirmed plan could not be modified to treat the amended claim because none of three allowed types of modification was applicable. The Court, however, agreed to value the amended claim to aid Debtor and the creditor it treating the claim outside the plan.

23. December 4, 1998. STROMSETH, BRIAN E. & PATRINA J., Case No. 98-10118, Adversary No. 98-1015, Chapter 7.    ISSUE: Whether Debtors were entitled to actual damages or punitive damages arising from Defendant's violation of the automatic stay?    RULING: Evidence showed Defendant-water softening company violated the automatic stay when it continued a small claims action post-petition and when its principal confronted one debtor at his place of employment. However, Debtors did not establish any actual damages from these violations. Further, Debtors were not entitled to punitive damages because no egregious conduct on Defendant's part was established.

24. December 8, 1998. WALTERS, DEAN ROBERT, JR., Case No. 98-50064, Chapter 7.    ISSUE: Whether Debtor's counsel's fees for services rendered in a non dischargeability adversary proceeding were reasonable under § 329(b)? RULING: The fees were not reasonable because they exceeded the amount of debt at issue in the adversary. Defendant-Debtor that attorney represented ended up paying more in attorneys fees that the total debt declared non dischargeable. Court directed Debtor to first pay the non dischargeable debt before paying his attorney.

25. December 8, 1998. WALTERS, DEAN ROBERT, JR., Case No. 98-50064, Adversary No. 98-5005, Chapter 7. ISSUE: Whether debts owed by Defendant-Debtor to his former spouse were dischargeable under § 523(a)(15)?    RULING: Debts were not dischargeable under § 523(a)(15) because Debtor had the ability to repay them and the hardship he would suffer if the debts were not discharged was equal to the hardship his former spouse would suffer if the debts were discharged.

26. December 17, 1998. BARDONNER, JOHN NICHOLAS, Case No. 97-50379, Adversary No. 98-5016, Chapter 7. ISSUE: Whether summary judgment for the defendant-Debtor should be granted as to the Plaintiff's counts under § 523(a)(2), (4), or (6) where the debt arose from a failed sale of a dental business and where the debtor's actions clouded the plaintiff-seller's security interest in the property?    RULING: Summary judgment was granted under § 523(a)(4) because the record did not show that the debtor was a fiduciary. Summary judgment was granted under § 523(a)(6) because the record did not establish any claim for a willful and malicious injury. A trial was to be held under § 523(a)(2) because the record bore some evidence of general fraud.

27. December 18, 1998. TEIGEN, WAYNE "TOM" AND PAMELA, Case No. 96-10055, Chapter 7.   ISSUE: Whether payments made or to be made under a confirmed Chapter 11 plan, on a debt jointly owed by the Chapter 11 debtor and this Chapter 7 debtor, should be recognized by the Chapter 7 trustee in his proposed distribution?    RULING: The Chapter 7 Trustee's objections to the creditors' full proofs of claims were sustained. The Court held that payments these creditors had or would receive under the confirmed Chapter 11 plan of the Debtors' co-debtor had to be recognized in the Chapter 7 case.

28. December 18, 1998. DIEFENDERFER, TERRY R., JR., & AMY M., Case No. 98-40319, Chapter 7.    ISSUE: Whether creditor was entitled to attorneys' fees and costs arising from its motion for relief from automatic stay?    RULING: Creditor's request for attorneys' fees and costs was denied. The Court relied on the "American Rule," 28 U.S.C. § 1920, the absence of a fee-shifting statute that was applicable in this contested matter, and general policy to reach its conclusion.

29. December 23, 1998. KITTERMAN, JOHN W., Case No. 98-40600, Chapter 7.    ISSUE: Whether trailer home and lot on which it sat could be declare exempt under § 43-45-4?    RULING: Debtor elected to have the trailer and lot taxed separately and the trailer was movable from the lot. Therefore, only the trailer was personalty that could be declared exempt under § 43-45-4 (subject to valuation). Section 43-45-4 excludes the lot, which is realty.

30. December 23, 1998. GRYGIERCZYK, DANIEL F., Case No. 98-40412, Adversary No. 98-4028, Chapter 7. ISSUE: Whether Plaintiff was entitled to summary judgment that Defendant-Debtor was driving while intoxicated at time of accident that was basis of Plaintiff's judgment based on the present record?    RULING: Summary judgment was granted for Plaintiff. Record supported Plaintiff's contention that Defendant-Debtor was driving while intoxicated and Defendant-Debtor was unable to offer any admissible evidence to the contrary.

31. December 29, 1998. KAUPP, WILLIAM J., Case No. 98-30047, Adversary No. 98-3014, Chapter 7.    ISSUE:  Whether Defendant-Debtor was entitled to summary judgment on Plaintiff's complaint for non dischargeability of debt arising from a willful and malicious injury where Plaintiff had no evidence that Debtor intended the injuries which Plaintiff's children suffered after Debtor unlawfully served them alcohol?     RULING:  Summary judgment for Defendant-Debtor was entered.  While Debtor had unlawfully served Plaintiff's minor children alcohol and while the children were later in an alcohol-related auto accident where one child was killed and the other was seriously injured, Plaintiff had no evidence that Debtor intended the injuries to occur.  Therefore, the debt did not arise from a willful injury as required by Section 523(a)(6), as interpreted by Kawaauhau v. Geiger,      U.S.      , S.Ct. 974 (1998).