2000

Irvin N. Hoyt,  Bankruptcy Judge

Numerical Listing

2000 DECISION SUMMARIES

Irvin N. Hoyt, Chief Bankruptcy Judge

1. January 3, 2000.   BROST, TERI R.  Case No. 99-40588, Adv. No. 99-4020, Chapter 7.   ISSUE: Whether divorce-related debts were dischargeable under § 523(a)(15)(B)? RULING: Debts were declared dischargeable. Benefits to Debtor in receiving a discharge of the divorce-related debts outweighed detriments to Debtor’s ex-spouse if he had to assume sole responsibility for the joint debts. Most significant factor was disparity between the parties’ respective living standards and the ex-spouse’s ability to pay the debts over time without significant consequence to himself, his family, or his business.

2.   January 11, 2000.  OTTEN, DEBRA J.  Case No. 96-40513, Chapter 12.   Whether Applicant appraisal company was entitled to compensation and reimbursement of expenses pursuant to 11 U.S.C. § 330 and F.R.Bankr.P. 2016, where Debtor alleged that: (1) Applicant breached an agreement with Debtor’s attorney that a specific appraiser would testify on Debtor’s behalf at Debtor’s confirmation hearing; and (2) the appraiser who testified on Debtor’s behalf at Debtor’s confirmation hearing was not qualified to do so? RULING: Applicant appraisal company was awarded compensation and reimbursement of expenses pursuant to 11 U.S.C. § 330 and F.R.Bankr.P. 2016. Applicant was not obligated to have a particular appraiser testify at Debtor’s confirmation hearing. Neither Debtor’s Application for Employment of Appraiser nor the Court’s Order approving Debtor’s Application required Applicant to do so. Debtor would not be permitted to question the qualifications of the appraiser who testified on Debtor’s behalf at Debtor’s confirmation hearing. Debtor effectively represented in her Application for Employment of Appraiser that the appraiser was qualified. Debtor proffered the appraiser as an expert witness at Debtor’s confirmation hearing. And Debtor was not harmed by the appraiser’s testimony at Debtor’s confirmation hearing. 

3.    January 12, 2000.  KIRWAN RANCH.  Case No. 97-30004, Adv. No. 99-3001, Chapter 7.    ISSUE: Whether Defendants were entitled to summary judgment? RULING: Defendants' motion was denied. Some of the transactions of which the Plaintiff-Trustee alleged were fraudulent or preferential were within the reach-back period. Any earlier state court decision did not give rise to claim or issue preclusion. The Plaintiff-Trustee's preference claim was not barred merely because Debtor had never been formally issued the subject stock by Defendants as the Defendants obligated themselves to do in a land purchase deal.

4.    January 26, 2000.  NIELSEN, WAYNE A. & NINA C.  Case No. 00-50015, Chapter 7.   ISSUE: Whether stay should be enforced to prevent further discovery in aid of execution by judgment creditor in state court where state court had already found Debtors in contempt for failure to comply with its orders? RULING: State court could continue to hear and enter any appropriate order regarding Debtors' alleged failure to comply with the state court's orders as long as the contempt action was criminal (punitive), not civil (forcing the contemnor to act), in nature. Stay remained in place regarding any further collection or discovery matters. Creditor could utilize the § 341 meeting and a Rule 2004 exam in the bankruptcy case to complete the discovery it had begun in state court.

5.    February 3, 2000.  STANTON, THOMAS W. & MARY.  Case No. 99-50465, Adv. No. 99-5022, Chapter 7.  ISSUE: Whether the defendant's motion to dismiss the adversary should be granted where adversary complaint and subpoena were not served within ten days after the clerk issued the subpoena?  RULING: The motion was denied. Federal Rule of Civil Procedure 4(m), which applies to bankruptcy adversary proceedings through F.R.Bankr.P. 7004, gives a plaintiff 120 after a complaint is filed to get it served. Thus, the plaintiff could request an alias summons and serve the complaint as long as her 120 days had not expired. Federal Rule of Bankruptcy Procedure 7004(e) does not impose dismissal of a complaint as a penalty if the complaint and original summons are not served within ten days.

6.  February 9, 2000.  GESINGER, GERALD JAMES & HEIDI MARIE.  Case No. 99-50185, Chapter 12.   ISSUE: Whether the case should be dismissed? RULING: Case was dismissed. Based on their own income and expense projections, the debtors did not have sufficient income to pay unsecured creditors under the best interest of creditors test at § 1225(a)(4). The debtor's lack of good faith in filing the case and proposing a confirmable plan was also shown by the lack of accuracy in some schedules and their statement of affairs, poor disclosure of several large pre-petition expenditures, some inconsistencies in their post-petition monthly reports, a lack of timely progress on contested issues with a major creditor, a failure to abide by some Code requirements for post-petition actions by a debtor-in-possession, an inaccurate liquidation analysis, and a failure to timely propose a confirmable plan.

7.    February 15, 2000.  STERN, ARDEN L. & ARLENE E..  Case No. 91-40509, Chapter 12.  ISSUE: Whether case should be reopened to allow a secured creditor to move to dismiss the case because Debtors had not made post-plan payments? RULING: Motion was denied. There was no relief that the Court could grant the creditor if the case were reopened. Creditor could not move to modify, discharge of unsecured claims could not be revoked, and dismissal of the case would not void the confirmation order or the discharge of unsecured debts. Secured debt was not discharged and creditor could enforce that claim outside bankruptcy.

8.    February 18, 2000.  PESICKA, BETTY ANN E.  - OVERRULED - Case No. 98-50348, Chapter 7.  ISSUE: Whether Debtor could exempt under S.D.C.L. § 3-12-115 an interest in her former husband's state retirement account that she had received in the divorce? RULING: Debtor's interest in the retirement account was not protected by § 3-12-115. The language of the statute covered only benefits to employees covered by the state retirement system and moneys of the retirement system. Her divorce-related interest did not qualify as either.

9.    March 17, 2000.  GOERGEN, DANIEL J. & ARLENE F. Case No. 99-50511, Chapter 7.  ISSUE:  ISSUE: Whether the United States Trustee's motion to dismiss for substantial abuse under § 707(b) should be granted on the pleadings? RULING: The case was dismissed for substantial abuse on the pleadings. Debtors failed to dispute any of the U.S. Trustee's calculations that demonstrated the Debtors' ability to repay a substantial portion of their debt through a Chapter 13 plan.

10.    March 17, 2000.  HALBERT, GARY R. & NANCY LEE.  Case No. 99-10196, Adv. No. 99-1020, Chapter 7.   ISSUE: ISSUE: Whether a default judgment entered by a Texas state court in a defamation suit collateral estopped Debtor from trying the non dischargeability of the debt under § 523(a)(6)? RULING: Under Texas law, collateral estoppel did not arise from the default judgment, especially where Debtor had not been given any opportunity to participate in a hearing determining the damages. Further, the default judgment did not clearly determine whether Debtor's actions were willful and malicious as those terms are used in § 523(a)(6) and interpreted by applicable case law.

11.    March 28, 2000.  OTTEN, DEBRA J.  Case No. 96-40513, Chapter 12.  ISSUES: (1) Whether Applicant appraisal company may be reimbursed for attorneys fees and costs it incurred in preparing its application for compensation? (2) Whether Applicant appraisal company may be reimbursed for attorneys fees and costs it incurred in defending its application for compensation? RULINGS: (1) Applicant appraisal company was entitled to be reimbursed for attorneys fees and costs it incurred in preparing its application for compensation, where the debtor failed to prepare the necessary application. (2) Applicant appraisal company was entitled to be reimbursed for attorneys fees and costs it incurred in defending its application for compensation, where the debtor's objections to its application were not well-taken. 

12.    March 31, 2000.  FERGUSON, CHELSEA D. & DONNA M.  Case No. 97-50639, Chapter 11.  ISSUE: Whether the attorneys' fees sought by a secured creditor under § 506(b) were reasonable? RULING: The fees were not reasonable. Deductions were made because the file had been passed around the firm, resulting in duplicative re-education of each attorney, the issues presented were not complex, and the creditor's claim was never in danger of becoming unsecured during the bankruptcy process.

13.    April 10, 2000.  WHITE HILLS, INC. (Gartner v. Marquette Bank, et al.), Bankr. No. 93-40149, Adv. No. 99-4004, Chapter 12.   ISSUE: Whether the debtor was entitled to attorneys' fees, other costs, and $100 statutory penalty under S.D.C.L. § 44-3-8 where creditor failed to timely satisfy lien upon tender of payment by the corporate debtor's principal? RULING: Conditions for application of § 44-3-8 were met and attorneys' fees, other costs, and the $100 statutory penalty were awarded to the debtor. The debtor's attorney's fees and costs were reduced slightly based on the record presented.  

14.    April 13, 2000.  OUTKA, BERT & ROSALIE J. Bankr. No. 97-50491, Chapter 12. ISSUE: Whether compensation sought by the debtors' counsel for post-petition services was reasonable? RULING: Compensation was reduced. Fees for preparing first plan, which failed to reflect the best interest of creditors test under § 1225(a)(4), and related costs were not allowed.

15.    May 3, 2000.  ELKHORN FARM, INC., Bankr. No. 99-50553, Adv. No. 00-5004, Chapter 11.   ISSUE: Whether Bank had a post-petition security interest under § 552(b)(1) in federal government farm program payments that the debtor had received? RULING: The Bank did have a post-petition security interest in the farm program payments. Evidence was needed, however, on the issue of whether this security interest should be cut off based on the equities of the case.

16.    May 3, 2000.  STANTON, THOMAS W. & MARY, Bankr. No. 99-50465, Adv. No. 99-502ISSUE: Is a state court judgment dismissing a cause of action as a discovery sanction entitled to collateral estoppel (issue preclusion) effect? RULING: The Court will give collateral estoppel (issue preclusion) effect to a state court judgment dismissing a cause of action as a discovery sanction, under the facts and circumstances of this case. Refusing to do so would effectively render nugatory S.D.C.L. § 15-6-37(b)(2)(C), as any party "sanctioned" by having her case dismissed could simply re-file her complaint. Moreover, the Court should not condone or excuse the behavior of litigants who abuse the processes and dignity of the court.2, Chapter 7.   

17.    May 4, 2000. SWENSON, CHARLES R. & KARNA L., Bankr. No. 99-10195, Chapter 13.   ISSUE: Whether fee application by debtors' counsel, wherein the amount requested exceeded the amount estimated in debtor's confirmed plan, could be allowed? RULING: Application was allowed in the amount requested but the sum in excess of the amount estimated in the debtors' plan had to be paid by the debtors after discharge. The debtors' attorney was also reminded to abide by the disclosure requirements of § 529(a) and Fed.R.Bankr.P. 2016(b). 

18.  May 25, 2000.  TYLER, THOMAS W. (LOVALD V. JENSEN), Bankr. No. 98-40686, Adv. 00-4007, Chapter 7.     ISSUE: In an individual bankruptcy filed by the sole shareholder, director, and officer of a closely-held corporation, was the pre-petition sale of the closely-held corporation's "book of business" a fraudulent transfer within the meaning of 11 U.S.C. § 548(a)(1)(B)? RULING: The sale of the closely-held corporation's "book of business" was not a fraudulent transfer within the meaning of 11 U.S.C. § 548(a)(1)(B). Under South Dakota state law, shareholders, directors, and officers of a corporation do not have an interest in corporate assets. Thus, the sale did not involve a "transfer of an interest of the debtor in property." 

19.  May 30, 2000.  HUSKEY, DAVID K. & COLLEEN L., Bankr. No. 00-10009, Chapter 7.   ISSUE: Whether case should be dismissed for substantial abuse where Debtors acknowledged they would have disposable income of over $600 per month? RULING: Court concluded case should be dismissed for substantial abuse based on Debtors' ability to adequately fund a Chapter 13 plan with their monthly disposable income. Subsequently, Debtors voluntarily converted their case to Chapter 13.

20.  June 8, 2000.  WEST, JESSE B. & LUELLA V., Bankr. No. 99-10322, Chapter 7.   ISSUE: Through Debtors' motion to discharge judgments, the parties briefed issue of whether Debtors' homestead exemption was unlimited based on state law applying to persons over age 70. RULING: The Court declined to rule on the homestead question. No timely objection to Debtors' homestead exemption had been filed. Further, the only issue raised by Debtors' motion to discharge judgments under S.D.C.L. § 15-16-20 and 11 U.S.C. § 524(a) was whether Debtors' personal liability on the judgment held by the opposing creditor had been discharged. Debtors' personal liability had been discharged under § 524(a), so the motion was granted. Left in place was any pre-petition judgment lien that the creditor may have.

21.  June 8, 2000.  RIEGER, KANDIS K.   Bankr. No. 99-30043, Chapter 7.   ISSUE: Whether Debtor's motion to dismiss her case should be granted where the discharge already has been entered? RULING: Debtor's motion to dismiss her case was denied. She already had received a discharge of debts. The discharge could not be revoked; Debtor would still be time-barred for several years from obtaining another Chapter 7 discharge. The fact that one debt in particular had been declared on dischargeable did not constitute cause for dismissal.

22.  June 19, 2000.    KIRWAN RANCH, Bankr. No. 97-30004, Adv. No. 99-3001, Chapter 7.   ISSUE: Whether Debtor's transfer of its real property pre-petition to a cousin of a partner and his wife was fraudulent or preferential? RULING: Transfer was deemed fraudulent under state law and 11 U.S.C. § 544(b)(1). The buyers were ordered to return to the estate the value of the transferred property. Court did not reach any preferential transfer question.

23.  June 27, 2000.  BITTERMAN, PHYLLIS R., Bankr. No. 99-41111, Chapter 7.   ISSUE: Whether Debtor's Chapter 7 case should be dismissed for substantial abuse? RULING: The Chapter 7 case constituted a substantial abuse. Debtor, after payment of reasonable and necessary expenses, had sufficient disposable income to fund a Chapter 13 plan.

24.  July 6, 2000.  DEZELL, GARY B. & FLORANCE E.,    Bankr. No. 00-40227, Chapter 7.   ISSUE: Whether case should be dismissed for substantial abuse under § 707(b) where Debtors admitted they had disposable income of $615.07 per month, but where Debtors state this disposable income may be needed later if Debtors decide to maintain separate households? RULING: Motion was granted and Debtors were given an opportunity to convert to Chapter 13 in lieu of dismissal. Court held that any change in circumstances could be addressed in a motion to modify their confirmed Chapter 13 plan.

25.  July 14, 2000.  KIRWAN RANCH.  Bankr. No. 97-30004, Chapter 7.   ISSUE: No ruling was entered. The Court brought to Debtor's counsel's attention his and Debtor's failure to adequately disclose conflicts of interest arising from the attorney's relationship with parties against whom Debtor held claims [the case was originally under Chapter 12]. The Court did not set a hearing under § 329(b) since the bankruptcy estate would not benefit from any attorneys' fees that might be recovered.

26.  July 20, 2000.  WARD, ABDUL T. Bankr. No. 00-40098, Chapter 7.  ISSUE: Whether case should be dismissed under § 707(a)? RULING: Case was not dismissed. There was no evidence that Debtor filed bankruptcy only to force his estranged wife to also file bankruptcy or to thwart pending divorce proceeding. Debtor's financial circumstances warranted Chapter 11 relief. Further, estranged wife could file the appropriate non dischargeability complaint to address property settlement debts in dispute and the U.S. Trustee could file a motion to dismiss under § 707(b) if Debtor had the ability to fund a Chapter 13 plan.

27.  July 20, 2000.  WARD, ABDUL (Paige Hofer-Ward v. Abdul T. Ward), Bank. No.    00-40098, Adv. No. 00-4011, Chapter 7.  .  ISSUE: Whether certain credit card charges were non dischargeable under § 523(a)(15) where estranged wife was co-obligor on them? RULING: The Court held the matter in abeyance pending entry of a final divorce decree and a division of joint debts between the parties.

28.  August 14, 2000.  REEVES, THOMAS ZANE, Bank. No. 99-30061, Chapter 12.  ISSUE: Whether the Chapter 12 debtor's counsel was entitled to compensation where he failed to disclose a disqualifying conflict of interest at the time the debtor sought to employ him? RULING: The debtor's attorney's compensation will be reduced or denied. The amount will be determined after a § 329(b) review of the same attorney's fees for another debtor in a related case.

29.  August 16, 2000.  TIDWELL, RONALD E. Bank. No. 98-50422. Chapter 7.    ISSUE: Whether a creditor's motion to reopen a case should be granted where the creditor sought relief regarding marital debts divided at the time of divorce from the debtor? RULING: The motion to reopen was denied. What the movant was seeking was, in essence, a non dischargeability declaration. The main bankruptcy case need not be reopened to commence a non dischargeability adversary proceeding.

30.  August 31, 2000.  STASKO, RONALD M. & JENNIFER L.  Bank. No. 99-10142, Chapter 7.  ISSUE: Whether, after he sold some estate real property, the trustee failed to include as creditors to be paid from the proceeds the parties who had originally sold the real property to the debtors? RULING: The trustee's proposed distribution of the proceeds correctly followed the applicable Bankruptcy Code sections that govern the order in which creditors are paid. The sellers did not have a recorded mortgage on the property so they could not be paid as lien holders. The sellers also did not have status as priority unsecured creditors. They were general unsecured creditors. The trustee, after paying liens, administrative expenses, and priority unsecured claims, did not have any money left to pay the sellers' or other general unsecured creditors' claims.

31.  August 31, 2000.  WEST, JESSE B. & LUELLA V.  Bank. No. 99-10322, Chapter 7.    ISSUE: Whether the debtors, a creditor, and the trustee could stipulate to extend the deadline to file an objection to exemptions after the original deadline expired? RULING: Federal Rules of Bankruptcy Procedures 9006(b)(3) and 4003(b) prohibited the extension.

32.  September 7, 2000.  TEBAY, CASEY J.  Bank. No. 00-40245, Chapter 7.  ISSUE: Whether under S.D.C.L. § 48-4-14 the debtor may declare exempt his interest in a sound system owned by a partnership in which he is a partner? RULING: Section 48-4-14 is not an exemption statutes for individuals. Further, the debtor may exempt only his general interest in the partnership under S.D.C.L. § 43-45-4, not his interest in specific partnership property.

33.  September 8, 2000.  PIPITONE,   EVAN D. Bank. No. 00-50113, Adv. No. 00-5009.  Chapter 7.   ISSUE: Whether Plaintiff's complaint under § 523(a)(15) was filed timely where the § 341 meeting was rescheduled due to a blizzard?  RULING: No, the complaint was not timely. As provided by Fed.R.Bankr.P. 4007(c), the date on which the first meeting of creditors is set, not when the meeting is actually held, governs the deadline for filing a non dischargeability complaint under § 523(a)(15).

34.  September 13, 2000.  HAVLOVIC, CLEO C. & MICHAEL R.   Bank. No. 98-40602, Adv. No. 00-4019, Chapter 7.    ISSUE: Whether the defendant's counterclaim under § 523(a)(15) was timely? RULING: The defendant's counterclaim under § 523(a)(15) was not timely since it was filed after the deadline established by Fed.R.Bankr.P. 4007(c). The complaint and counterclaim did not address whether the post-petition acts of which the defendant complained were discharged as part of the plaintiff's pre-petition hold-harmless obligation to the defendant.

35.    September 27, 2000.  FREDRICKS, EVERT L. & RHODA A.  Bankr. No. 00-40484, Chapter 7.  ISSUE: Whether house in another town in which the debtors had not lived for several years could be declared their exempt homestead?  RULING: The unoccupied house was deemed the debtors homestead. They did not have another homestead, they lived in a different town due to employment, and they had a present intent to return to the house when one debtor retired and when they had sufficient funds to make it habitable again.

36.    September 27, 2000.  TUNNISSEN, DONALD JOHN & CHARLENE JOAN.   Bankr. No. 95-30001, Chapter 12.  ISSUE: Whether the debtors appropriately treated FSA-Ag Credit's matured shared appreciation agreement in their motion to modify their confirmed plan? RULING: The debtors' motion to modify did not appropriately treat the matured shared appreciation agreement. The original confirmed plan did not estimate what the value of FSA's claim would be upon maturity of the shared appreciation agreement, although the agreement would mature during the plan term. Instead, the confirmed plan contemplated a modification of the plan once the agreement matured. Now that the agreement has matured, the modification must provide plan treatment that recognizes the matured agreement as a separate secured claim held by FSA.

37.  November 3, 2000.  HILL, LAMONT D.  Bankr. No. 00-30071, Chapter 11.  ISSUE: Whether the government was entitled to costs arising from preparing for an evidentiary hearing that was rendered moot at the last minute by a change in the debtor's intentions, and if so, how much? RULING: The Court ordered the debtor to pay the government all of the costs ($1,848.15) arising from a foreclosure sale that was canceled after the bankruptcy was filed (the debtor had earlier agreed to pay a similar sum for any future foreclosure sale costs) and to pay one-half ($194.36) of the costs incurred by the government in preparing for the hearing and bringing in witnesses. The debtor's counsel was ordered to pay the other half ($194.36) of the hearing-related costs.

38.  November 13, 2000.  BOYER, DARRELL & BARBARA I. Bankr. No. 00-50142, Adv. No. 00-5008, Chapter 7.   ISSUE: Whether certain debts the debtor was ordered to pay in her earlier divorce are non dischargeable under § 523(a)(15)? RULING: The divorce-related debts were declared dischargeable under the exception provided by § 523(a)(15)(B) because the benefits of the debtor receiving a discharge outweighed the detriments to her former spouse if he had to repay the debts himself after the debtor's discharge. 

39.  November 29, 2000.  TIDWELL, RONALD EDWARD (Holly Hayden v. Ronald Edward Tidwell), Bankr. No. 98-50422, Adv. No. 00-5016, Chapter 7.  ISSUE: Whether deadline under Fed.R.Bankr.P. 4007(c) for filing a complaint under § 523(a)(c), which encompasses § 523(a)(15), may be extended for equitable reasons after the deadline has passed? RULING: Deadline under Rule 4007(c) may not be extended for equitable reasons after the deadline has expired. Under Fed.R.Bankr.P. 9006(b)(3), the ability to extend the deadline is limited to the procedure described in Rule 4007(c).

40.  December 6, 2000.  DAWSON, FINESHA RANDLE, Bankr. No. 00-40405, Chapter 7.  ISSUE: Whether pre-petition the debtor had assigned to her chiropractor her rights in a stated amount of insurance or lawsuit proceeds to cover her medical bill so as to exclude those fund from property of the bankruptcy estate? RULING: The agreement between the debtor and her chiropractor created only a security interest for the chiropractor. The insurance proceeds the debtor received for a pre-petition personal injury thus became property of the estate and the debtor was able to exempt a portion of it. Further, the chiropractor's security interest was not perfected pre-petition so he was not able to establish a priority claim to the funds. The Trustee's settlement of the debtor's excess exemptions, which included the insurance proceeds, was therefore approved over the chiropractor's objection.

41.  December 7, 2000.  KOTALIK, STEVEN A. & SHARON M., Bankr. No. 00-40225, Chapter 12.   ISSUE: Whether CCC may exercise a right of setoff following confirmation of a plan that makes no mention of the right of setoff? RULING: Where the debtor and CCC agree to the specific treatment of CCC's claim under the confirmed plan and where the treatment does not provide for CCC's right of setoff, CCC was found to have waived its right of setoff.

42.  December 26, 2000.  WEST, JESSE B. & LUELLA V., Bankr. No. 99-10322, Adv. No. 00-1013, Chapter 7.  ISSUE: Debtors' motion to avoid the bank's lien and the bank's complaint to determine the validity, priority, and extent of its lien on Debtors' homestead were combined for resolution. The key issue presented was whether the bank had a lien on Debtors' homestead that survived Debtors' Chapter 7 bankruptcy. RULING: The Court concluded that regardless of whether the Bank's lien formally attached to Debtors' homestead pre-petition (or attached to at least any equity in excess of the allowable homestead exemption of $30,000 when the judgment was entered), the lien impaired the homestead exemption, which was unlimited in amount since one debtor had turned 70 before the petition was filed. Since the lien impaired the homestead, as the term impairment is defined by § 522(f)(2)(A), the lien was subject to removal under 11 U.S.C. § 522(f). The Bank no longer had an enforceable interest.

43.  December 28, 2000.  GREENWOOD, GERALD B., Bankr. No. 00-50415, Chapter 13.  ISSUE: Whether Debtor's former attorney was entitled to requested compensation of $1,250 for services rendered before the meeting of creditors and the confirmation of a plan. RULING: Court concluded that attorney was entitled to compensation of $800 for preparing the petition, schedules, statement of financial affairs, and the initial proposed plan and meeting with debtor. The case had a limited number of creditors and no complex issues. The fact that the debtor was not easy to work with did not warrant a higher fee under the terms of the attorney and debtor's fee arrangement.