DECISIONS - 1999
Irvin N. Hoyt, Bankruptcy Judge
Numerical Listing
1999 DECISION SUMMARIES
Irvin N. Hoyt, Chief Bankruptcy Judge
1. January 6, 1999. ELLIOTT, KENNETH E. and MARLYS-HARVARD-ELLIOTT, Case No. 97-40901. Adversary No. 98-4027, Chapter 7. ISSUE: Whether Bankruptcy Court should retain jurisdiction over some counts of Plaintiffs' complaint and all counts of Defendants' third-party complaint where underground storage tanks, possible contamination, and cleanup where at issue and where cleanup funds were within the control of the state and its agencies? RULING: The Bankruptcy Court abstained from further jurisdiction pursuant to 28 U.S.C. § 1334(c)(1). State and its agencies could better address the matter. Case had also recently been converted to Chapter 7 and the Trustee could work with the state and interested parties to get the cleanup done and the costs for it allocated timely.
2. January 11, 1999. ELLIOTT, KENNETH E.
and MARLYS-HARVARD-ELLIOTT, Case No. 97-40901. Adversary No. 98-4027, Chapter
7. ISSUE: Whether Defendants-Sellers
breached purchase agreement with Plaintiffs-Debtors in conveying restaurant equipment,
heating and cooling system, and sewer system to Debtors that was not in a "good state
of repair and working order." RULING: Evidence did not
support Plaintiffs-Debtors' allegations and judgment was entered for Defendants-Sellers.
Problems Debtors encountered with the equipment, heating and cooling system, and the sewer
system were not out of the ordinary nor the result of neglectful maintenance by the
Sellers.
3. January 13, 1999. DAVIS, LINDA KAY , Case No. 97-40475. Chapter 7. ISSUE: Whether Debtor was a head of a family under S.D.C.L. § 43-45-4 where she was married and maintained a joint household with her husband and minor daughter, she ran the household in her husband's absence due to his employment away from home as a trucker, and he earned more than her? RULING: Debtor was not the head of the family as that term in used in § 43-45-4, as it was amended in 1998. Her husband earned more than her at the time of the petition, they maintained a joint household, and he was not absent from the home due to dereliction and abandonment. She fell within the new class of debtors under § 43-45-4, as amended: non heads of a family.
4. January 28, 1999. GARRETT, JAMES E. & SANDRA VERNON (GARRETT RANCHES, INC.), Case No. 386-00024, Adv. No. 98-3013, Chapter 11. ISSUE: Parties filed cross motions for summary judgment on Plaintiffs' complaint for declaratory relief regarding interpretation of a confirmed Chapter 11 plan. Jurisdiction as to all the relief sought was raised by the Court sua sponte (Defendant had raised some jurisdictional issues). RULING: Court abstained from jurisdiction pursuant to 28 U.S.C. § 1334(c)(1) because neither the plan nor confirmation order delineated any post-confirmation jurisdiction, the plan had already been substantially consummated and the main case had been closed, the parties had entered into a post-confirmation stipulation in a foreclosure action before the District Court, and the Bankruptcy Court did not have jurisdiction to interpret the effect of the confirmed plan (or the stipulation in District Court) on these plaintiffs who had not been Debtors in the Chapter 11 cases.
5. March 5, 1999. BURNEY, WILLIAM J., ( WEST RIVER SURGERY V. BURNEY), Case No. 98-50158, Adv. No. 98-5012, Chapter 7. ISSUE: Whether Defendant-Debtor was entitled to attorney's fees and costs under § 523(d)? RULING: Defendant-Debtor was awarded attorneys' fees and costs under § 523(d). Record established that the plaintiff-creditor requested a determination of the dischargeability of a debt, the debt was a consumer debt, and the debt was discharged. Plaintiff-creditor was unable to go forward and show that its complaint was substantially justified because it learned only after the complaint was filed that it could not prevail on one element under § 523(a)(2)(A).
6. March 9, 1999. MC TIGHE INDUSTRIES, INC., Case No. 98-40440, Chapter 11. ISSUE: What were the reasonable attorney's fees and costs to be awarded the debtor's counsel? RULING: Attorney was awarded $150.00 per hour for his legal services based on the complexity of the case, the comparable rates in the District, and his experience. Compensation at that rate was not allowed for basic bankruptcy research. Allowed cost for a fax was reduced to $.50 per page in the absence of supporting evidence for a higher charge.
7. March 16, 1999. SNYDER, CHARLES J., Case No. 98-30068, Adv. No. 98-3016, Chapter 7. ISSUE: Whether interim support order former wife obtained prior to divorce from Debtor was non dischargeable under § 523(a)(5)? RULING: Debt was for support and was, therefore, non dischargeable under § 523(a)(5).
8. March 18, 1999. GEBUR, JEROME DEAN. Case No. 98-40153, Chapter 7 . ISSUE: Whether the debtor could declare a homestead interest in a lien on his former homestead that he received when divorced? RULING: No homestead exemption was allowed for the debtor's lien or the proceeds from that lien. He quit claimed away his interest in the home pre-petition. His lien on the home did not qualify as proceeds of a homestead sale under S.D.C.L. ch. 21-19 and he did not convert the lien into an actual new homestead within one year of receiving it. Instead, he used the value of the lien to offset child support payments he owed.
9. March 19, 1999. NEUHARTH, LEROY EMIL.Case No. 97-30155, Adv. No. 98-3004, Chapter 7. ISSUE: Whether the debtor's pre-petition assignment of a life insurance policy to a bank in lieu of further payment on a debt and in exchange for the release of other collateral, was valid on the petition date or otherwise subject to the Chapter 7 trustee's strong arm powers? RULING: The assignment was a true assignment that transferred essentially all ownership of the life insurance policy to the bank from the debtor. Under state law, the bank did not have to maintain an insurable interest for the assignment to remain valid. The debtor had no defenses to the validity of the assignment on the petition date that the trustee could raise under 11 U.S.C. § 558 and the trustee could not avoid it under § 544(a)(1) as a hypothetical judicial lien holder.
10. March 31, 1999. WYLY, CAMERON W. Case No. 94-10088, Chapter 7 . ISSUE: Whether county poor lien could be removed by a Chapter 7 debtor? RULING: The debtor's motion to remove a county poor lien was denied. The debtor did not file the motion under the appropriate Bankruptcy Code section and Local Bankruptcy Rule. Moreover, the lien appeared to be a pre-petition, statutory lien that could not be removed from exempt property in bankruptcy.
11. April 1, 1999. LEE'S TRAVELERS LODGE, INC. Case No. 97-50297, Chapter 7. ISSUE: Whether the trustee's report before distribution would be approved where some question existed about the amount or validity of a secured claim held by the debtor's principals? RULING: The party objecting to the trustee's final report and account made an adequate showing that legitimate questions existed regarding the amount or validity of a secured claim held by the debtor's principals. The Court directed the trustee to make further investigation, especially about the application of state law fraud claims through 11 U.S.C. § 544(b).
12. April 2, 1999. ZILVERBERG, GARY O. Case No. 96-30056, Adv. No. 96-3010, Chapter 7. ISSUE: Whether judgment of non dischargeability entered earlier against defendant-ex husband under §§ 523(a)(5) and (a)(15) should be vacated where the plaintiff-ex wife had now received a Chapter 7 discharge of her obligation on the subject marital debts? RULING: The Court did not vacate or otherwise amend its earlier judgment. That the ex-wife had now received a discharge had no impact on those support debts declared non dischargeable under § 523(a)(5). As to the property settlement debts declared non dischargeable under § 523(a)(15), the Court concluded that the motion was not timely, the debtor-ex husband would still have to prove there was no detriment to his wife if the debt were discharged or that he could not afford to pay the debts, money judgments are generally not subject to a Rule 60(b)(5) motion, and debtor's continued failure to pay the debts forced his ex-wife into bankruptcy. Hence, there were no exceptional, unforeseen circumstances warranting a change in the judgment.
13. May 7, 1999. VIKING GLASS, INC. Case No. 97-40115, Adv. No. 98-4011, Chapter 7. ISSUE: Whether a constructively fraudulent transfer occurred when Debtor sold a subsidiary to Debtor's sole director and SOLE common shareholder and whether the director breached his fiduciary duty to Debtor in regards to the sale? RULING: The transfer was constructively fraudulent under § 548(a)(1)(B) because Debtor did not receive the reasonably equivalent value for the subsidiary [earlier decision resolved other elements of a constructively fraudulent transfer]. Debtor's sole director also breached his fiduciary duty to Debtor because he did not insure that Debtor received a fair price for the subsidiary.
14. May 18, 1999. WHITE HILLS, INC. Case No. 93-40149, Adv. No. 99-4004, Chapter 12. ISSUE: Whether the person who windrowed Debtor's hay over the 1998 haying season had an ag products processor's lien that was superior to the defendant-bank's general crop mortgage? RULING: The bank's general crop mortgage was second to the windrower's ag products processor's lien. The lien was filed timely after the windrowing of all the season's hay was completed by that windrower and the lien statement contained sufficient information.
15. June 2, 1999. ARCH, MYRIL, II. Case No. 98-30026, Adv. No. 98-3020, Chapter 7. ISSUE: Whether summary judgment should be granted for Defendant on Plaintiff-Trustee's complaint for fraudulent transfer surrounding Debtor's purchase of a supper club from his father, the defendant, and a later sale of the club by Debtor? RULING: The motion was denied. A genuine issue of material fact existed on when Debtor and Defendant had a binding contract from Debtor to purchase the club from Defendant.
16. June 11, 1999. OLSEN, DAVID K. Case No. 98-10213, Adv. No. 98-1026, Chapter 7. ISSUE: Whether Bank's claims against Debtor were non dischargeable where Debtor moved some collateral out of state without formally notifying the Bank, where a corporate financial statement was incomplete, and where some collateral was turned over to Debtor's father in repayment of loans from him? RULING: The Bank did not meet its burden of proof under § 523(a)(2) regarding the Bank's reliance on the financial statement or regarding Debtor's fraudulent intent. Under § 523(a)(4), the Bank was unable to show that Debtor was the Bank's fiduciary.
17. June 29, 1999. KREBER, MICHAEL L. AND SANDRA L. Case No. 97-40197, Chapter 12. ISSUE: Whether a Chapter 12 debtor may modify his confirmed plan regarding the treatment of FSA's claim in a manner similar to a government disaster program for which the debtor was not eligible? RULING: The modification was approved. It met the criteria of § 1229. That the changes made to the confirmed plan mirrored the government program did not render the modification improper under § 1229. FSA was also cautioned that in the future it may be estopped from relying on regulations prohibiting a bankruptcy debtor from participating in certain programs when FSA sends a letter to the debtor indicating the debtor is eligible.
18. July 9, 1999. STRATMAN, JOHN. Case No. 96-40778, Chapter 7. ISSUE: Whether the debtor could discharge a judgment where, after the discharge had been entered, the creditor holding the judgment argued his claim arose from a "swindle"? RULING: The judgment was discharged. The deadline for filing a non dischargeability complaint for fraud had passed. Further, the debtor did not have any non exempt real property to which the judgment could have attached pre-petition.
19. July 12, 1999. DECKER, DAVID K. Case No. 98-41053, Chapter 7. ISSUE: Whether the debtor's motion to discharge judgments should be granted where the claim had not been scheduled before the discharge was entered? RULING: As provided by § 523(a)(3), the unscheduled debt and attendant judgment may not be discharged if the creditor had any basis on which to bring a fraud-based non dischargeability complaint and if the trustee had assets to distribute. The creditor was given an opportunity to advise the Court if it had grounds for such a dischargeability complaint. If not, the debtor's motion to discharge the judgment will be granted. The Court advised the debtor's counsel that an adversary proceeding under § 523(a)(3) is preferably to a motion to discharge judgments when the debt and attendant judgment had not been scheduled before discharge.
20. July 23, 1999. FRANZEN, LYNDON M. Case No. 99-50153, Chapter 11. ISSUE: Whether an agreement between the debtor and a truck and trailer business was a true lease that the debtor had to assume or reject or a sale/security deal? RULING: Based on the applicable Colorado statutes and case law, the Court concluded that the agreement was a true lease which the truck and trailer business could compel the debtor to assume or reject.
21. August 5, 1999. MC LEOD, CARA. Case No. 99-10083, Chapter 7. ISSUE: Whether the debtor may exempt two pre-petition, transfers to insiders? RULING: Under § 522(g), the debtor may not exempt the pre-petition transfers if they were voluntary.
22. August 5, 1999. DREPS, JOSEPH WILLIAM & CYNTHIA ANN. Case No. 99-50103, Chapter 7. ISSUE: Whether compensation the debtor's counsel received exceeded the reasonable value of the services rendered and therefore should be returned to the bankruptcy estate under § 329(b)? RULING: The attorney's staff member rendered all services but her services could not be compensated from the estate because she was not a certified paralegal. The attorney rendered no services at all so he could not be compensated from the estate. The attorney was directed to return to the bankruptcy estate all moneys he had received from the debtors except that portion representing the filing fee.
23. August 10. 1999. FOSTER, RODNEY M. Case No. 96-10025, Chapter 7. ISSUE: Whether party who filed a late proof of claim for lease payments made pre-petition could be included in the trustee's distribution where all timely filed claims could not be paid in full? RULING: Party's late claim could not be paid pursuant to § 726(a).
24. October 14, 1999. LOWE, MARGARET A. Case No. 98-50456, Adv. 99-5006, Chapter 7. ISSUE: Whether summary judgment should be granted to either party on plaintiffs' discharge and dischargeability complaint regarding the debtor's alleged misuse of her mother's fund? RULING: The debtor was served as a fiduciary to her mother but not as a fiduciary of the plaintiff-nursing home. Plaintiff-nursing home therefore could not seek non dischargeability under § 523(a)(4) of any claim it had against the debtor. Court also directed plaintiffs to amend their discharge complaint to specify the subsections of § 727(a) under which they sought relief. Plaintiffs were also directed to re-file their request for relief from the automatic stay in the main case; they had erroneously included it the adversary proceeding.
25. October 18, 1999. HUGHES, JESSIE JOYCE & CARROLL LEE (homestead). Case No. 99-40302, Chapter 7. ISSUE: Whether the debtor's homestead exemption was limited to $30,000 in value? [Note: The debtor essentially challenged the constitutionality of S.D.C.L. § 21-19-2.] RULING: State law limits the value of a homestead exemption to $30,000 when judgment creditors are present. The case trustee serves as the judgment creditor under bankruptcy law to similarly limit the amount of debtor's homestead exemption in bankruptcy cases. Further, the debtor failed to show that S.D.C.L. § 21-19-2 was unconstitutional.
26. October 18, 1999. HUGHES, JESSIE JOYCE & CARROLL LEE (personalty). Case No. 99-40302, Chapter 7. ISSUE: If the trustee sells the debtor's homestead to realize on equity in excess of the allowed homestead exemption of $30,000, may the debtor declare part of the proceeds exempt under S.D.C.L. § 43-45-4? RULING: No. Exemptions are determined on the petition date. Sale proceeds obtained later by the case trustee if he sells the homestead do not become personalty that the debtor can exempt under § 43-45-4.
27. November 12, 1999. GUDAHL, KENNETH M. & JOAN K. Case No. 99-40740, Chapter 13. ISSUE: On what date is a creditor's collateral assessed for the application of § 1322(b)(2), which prohibits a Chapter 13 debtor from modifying the rights of a creditor whose only security is the debtor's principal residence? RULING: Section 1322(b)(2) is applied on the petition date to assess what collateral a secured creditor has.
28. November 16, 1999. HERBST, DEAN. Case No. 91-40279, Chapter 12. ISSUE: Whether judgment that represents a claim that was not scheduled nor specifically included in the debtor's Chapter 12 plan may be discharged under S.D.C.L. § 15-16-20? RULING: The creditor's claim was not discharged because it was not "provided for" by the debtor's confirmed plan, as required by 11 U.S.C. § 1228(a). Therefore, the judgment, which reflects the undischarged claim, was not discharged under 11 U.S.C. § 524(a) or S.D.C.L. § 15-16-20.
29. November 30, 1999. MAIER, RICHARD M. Case No. 99-10177, Chapter 12. ISSUE: Whether the debtor was eligible for Chapter 12 relief? RULING: The debtor was not eligible for Chapter 12 relief. Over 50% of his income in the year preceding the filing was from custom harvesting, which under the circumstances presented in this case and the applicable Code definitions, did not constitute income from a farming operation.
30. December 3, 1999. MAXWELL, DEBORAH. Case No. 97-40596, Adv. No. 99-4022, Chapter 7. ISSUE: Whether creditor's pre-petition, preferential garnishments could be avoided by the trustee where total sum of checks cashed by the creditor were less than $600? RULING: The trustee could not avoid the preferential transfer. Since the checks cashed by the creditor totaled less than $600, the funds were excepted from the trustee's voiding powers under 11 U.S.C. § 547(c)(8). The other garnishments checks received but not cashed pre-petition by the creditor were not added to the total for the application of § 547(c)(8).
31. December 7, 1999. ETZEL, GAIL E. & JOHN H. . Case No. 99-10262, Chapter 7. ISSUE: Whether the relief requested in a creditor's "Objection to Discharge of Secured Interest" could be given? RULING: Due to procedural errors, the Objection was overruled without prejudice to the extent that it requested a determination of the non dischargeability of a debt, the denial of discharge, or a deferral of the entry of discharge. The Objection was allowed to stand as the creditor's additional objection to exemptions (the creditor had earlier joined the Trustee's objections to exemptions).
32. December 14, 1999. HANSON, BRETT RICHARD. Minnesota Case No. 98-42360, Adv. No. 99-4303, Chapter 7. ISSUE: Whether the plaintiffs were entitled to maintain a denial of discharge and a fraud-based non dischargeability complaint where their claims have never been scheduled and where they have never received formal notice of the case, but where they received actual notice of the case before the deadlines but still failed to file a timely complaint due alleged threats by the debtor? RULING: The complaint was dismissed on all grounds. Relief could not be granted under §§ 727 or 523(a)(2), (4), or (6) because the complaint was not timely. Relief could not be granted under § 523(a)(3)[unscheduled claims] because the plaintiffs had actual knowledge of the case in time to file a non dischargeability complaint and to file a proof of claim. The deadlines for filing a § 523(a)(2), (4), or (6) complaint, a § 727 complaint, or a proof of claim could not be extended under other equitable grounds because F.Rs.Bankr.P. 3002(c), 4004(b), 4007(c), and 9006(b)(3) limit how and when the applicable filing deadlines may be extended.
33. December 17, 1999. KAISER, GARY L. Case No. 98-50285, Chapter 7. ISSUE: Whether creditor violated either the automatic stay or the post-discharge injunction by pursuing various state court actions after Debtor’s bankruptcy? RULING: Creditor’s continuation post-petition of a foreclosure action violated the automatic stay as to all orders and judgments entered after the petition date. Creditor’s post-discharge partition action did not violate the post-discharge injunction.