2001

Irvin N. Hoyt,  Bankruptcy Judge

Numerical Listing

2001 DECISION SUMMARIES

Irvin N. Hoyt, Chief Bankruptcy Judge

1. January 11, 2001.  ALDRICH, JESSE B., Case No. 00-40969, Chapter 7.  ISSUE: Upon a § 329(b) review of the debtor's attorney's fees, is the attorney entitled to full compensation for his time spent traveling from his home office to the site of the § 341 meeting, though it may notably increase the fees paid by the debtor? RULING: Attorneys who do not live in one of the divisional towns where § 341 meetings are conducted are entitled to their regular hourly compensation for their time traveling to and from the meeting. This travel time should be pro rated with other cases when possible. Substitute counsel from the divisional town to appear at the meeting in the attorney's stead should be considered when appropriate.

2.   January 10, 2001.    BEILKE, TONI-DEE L.,    Case No. 00-40818, Chapter 7.   ISSUE: Upon a § 329(b) review of the debtor's attorney's fees, is the attorney entitled to full compensation for his time spent traveling from his home office to the site of the § 341 meeting, though it may notably increase the fees paid by the debtor? RULING: Attorneys who do not live in one of the divisional towns where § 341 meetings are conducted are entitled to their regular hourly compensation for their time traveling to and from the meeting. This travel time should be pro rated with other cases when possible. Substitute counsel from the divisional town to appear at the meeting in the attorney's stead should be considered when appropriate.

3.    January 10, 2001. KEEFE, DANIEL M., Case No. 00-40806, Chapter 7.  ISSUE: Upon a § 329(b) review of the debtor's attorney's fees, is the attorney entitled to full compensation for his time spent traveling from his home office to the site of the § 341 meeting, though it may notably increase the fees paid by the debtor? RULING: Attorneys who do not live in one of the divisional towns where § 341 meetings are conducted are entitled to their regular hourly compensation for their time traveling to and from the meeting. This travel time should be pro rated with other cases when possible. Substitute counsel from the divisional town to appear at the meeting in the attorney's stead should be considered when appropriate.

4.   January 10, 2001. IRON HAWK, ALVINA E., Case No. 00-30084, Chapter 7.   ISSUE: Whether the debtor's attorney's fees of $1,300 were reasonable under § 329(b)? RULING: The fees were deemed reasonable since the case took longer than average to prepare and because a somewhat unique land title issue had to be researched.

5.    January 10, 2001.  KIRWAN RANCH  (Lovald v. Gerald & Leona Kirwan),  Case No. 97-30004, Adv. No. 99-3001, Chapter 7.  ISSUE: Whether appellant's motion for stay pending appeal should be granted where the notice of appeal was filed untimely? RULING: Appellant's motion for stay pending appeal was granted pending resolution of any timely motion by the appellant for an extension of time to file an appeal based on excusable neglect, as provided by Fed.R.Bankr.P. 8002(c)(2). [Only an order was entered; there is no accompanying written decision.]

6.    January 11, 2001.  NOLTE, JOANNE R., Case No. 00-40804, Chapter 7.    ISSUE: Whether the debtor's attorney's fees of $1,300 were reasonable under § 329(b)? RULING: Fees of $800 were deemed reasonable. The excess was ordered to be returned to the debtor, if she had excess exemptions available, or to the bankruptcy estate. The facts of the case did not warrant higher than usual fees. Though post-petition work regarding exemptions and the dischargeability of a divorce-related debt were expected, those post-petition services could not be paid by the debtor pre-petition without running afoul of Snyder v. Dewoskin (In re Mahendra), 131 F.3d 750 (8th Cir. 1997). Attorney could seek compensation for post-petition work from debtor's post-petition, non bankruptcy estate assets.

7.    January 11, 2001.   PEARSALL, RICHARD J. & ARLA R., Case No. 00-30080, Chapter 7.  ISSUE: Whether the debtors' attorney's fees of $1,300 were reasonable under § 329(b)? RULING: Fees of $800 were deemed reasonable. The excess was ordered to be returned to the debtors as part of their available exemptions. The facts of the case did not warrant higher than usual fees. Though post-petition work regarding the dischargeability of a fraud-related debt was expected, those post-petition services could not be paid by the debtors pre-petition without running afoul of Snyder v. Dewoskin (In re Mahendra), 131 F.3d 750 (8th Cir. 1997). Attorney could seek compensation for post-petition work from debtors' post-petition, non bankruptcy estate assets.

8.    January 23, 2001.   KIRWAN RANCH,  Case No. 97-30004, Adv. No. 99-3001, Chapter 7.    ISSUE: Whether Defendants' motion under Fed.R.Bankr.P. 8002(c)(2) to extend the time to file an appeal based on excusable neglect should be granted? RULING: Motion was denied. Defendants' attorneys' error in applying the wrong rule for computing the last date to file a notice of appeal did not constitute excusable neglect as defined by Pioneer Investment Services Co. v. Brunswick Assoc., L.T.D. Partnership, 507 U.S. 380 (1993), and Ceridian Corp. v. SCSC Corp., 212 F.3d 398 (8th Cir. 2000).

9.    January 23, 2001.  REEVES, ARTHUR DEAN and EMMA LU, Case No. 99-30008, Chapter 12.  ISSUE: Whether fees for Debtors' counsel should be denied or reduced due to the attorney's failure to disclose a potential conflict of interest? RULING: The conflict of interest became apparent post-petition. Debtors' counsel should have disclosed it in a supplemental to the earlier application to employ and his affidavit as the professional to be employed. No sanction was imposed for this first time error.

10.    January 23, 2001.  REEVES, THOMAS ZANE, Case No. 99-30061, Chapter 12.  ISSUE: Whether fees for Debtor's attorney should be reduced or denied due to the attorney's failure to disclose a potential conflict of interest? RULING: Debtor's counsel knew he was concurrently representing a creditor of Debtor's on the petition date, but failed to timely disclose the potentially disqualify conflict under 11 U.S.C. § 327(c). Counsel's fees were denied except for certain pre-petition, non bankruptcy services and certain post-petition, bankruptcy services that were specifically authorized by the Court.

11.    February 7, 2001.  DONOVAN, JAMES DOUGLAS, Case. No. 00-30031, Adv. 00-3004, Chapter 7.    ISSUE: Whether claim against the debtor for converted grain was non dischargeable on fraud-based grounds under § 523(a)? RULING: Claim was declared non dischargeable under § 523(a)(4) where the evidence established by a preponderance of the evidence that the debtor had committed larceny by taking his employer's grain and selling it for his own benefit. That the debtor had been acquitted of criminal charges surrounding the missing grain was not binding on the Bankruptcy Court because the standard of proof for the criminal charges was the higher "beyond a reasonable doubt."

12.    February 20, 2001.  WHEELER, DALLAS A.  Case No. 00-10016, Chapter 12.  ISSUE: Whether automatic stay should be lifted to allow FSA to exercise its right of setoff against collected and future CRP payments due Debtor? RULING: The stay was lifted. FSA was permitted to offset its unsecured claim against the CRP payments recently paid or to be paid to Debtor once FSA complied with all conditions established by contract or regulation. Debtor had not offered any adequate protection. Debtor also had not established any compelling circumstances that would warrant a denial or delay of the setoff.

13.    February 23, 2001.  KIRWAN RANCH ADV.  (Lovald v. Kirwan),   Case No. 97-30004, Adv. No. 99-3001, Chapter 7.  ISSUE: Whether Court's earlier denial of Defendants' request for the Court to set certain deadlines regarding proofs of and claims and the Trustee's final report and distribution should be reconsidered? RULING: The Court treated Defendants' motion as one filed under Fed.R.Bankr.P. 7059 and Fed.R.Civ.P. 59(e), but did not grant the relief requested. All the concerns raised by Defendants were not related to the adversary proceeding but to the main case, where a separate order had been entered regarding the requested deadlines.

14.    February 23, 2001.  KIRWAN RANCH, Case No. 97-30004, Chapter 7.    ISSUE: Whether Court's earlier denial of two parties-in-interest's request for the Court to set certain deadlines regarding proofs of and claims and the Trustee's final report and distribution should be reconsidered? RULING: The Court treated the motion as one filed under Fed.R.Bankr.P. 7059 and Fed.R.Civ.P. 59(3). The original order was not modified since the movants had not identified any error by the Court.

15.    March 2, 2001.  WILSON, MONTE & BETTY.  Case No. 00-40790, Chapter 7.  ISSUE: Whether contract that the Chapter 7 trustee had not timely assumed should be abandoned to the debtor upon the request of the vendee on the contract? RULING: Though the contract was deemed rejected by the trustee under § 365(d)(1) because he had not timely assumed it, the rejection gave the vendee the option under § 365(i) or (j) of continuing with the contract or recognizing the contract as rejected. Since the vendee had apparently chosen to continue with the contract, the contract had value to the estate. There were no grounds under § 554(b) upon which to order the trustee to abandon it.

16.    April 25, 2001.  KLAMMES, JACOB P.   Case No. 00-50433, Chapter 13.  ISSUE: To what compensation is Debtor’s attorney entitled? RULING: Of the $3,413.35 in compensation for services, sales tax, and reimbursement of expenses sought by Debtor’s counsel, the Court awarded a total of $2,606.92. Deductions were made for several non professional services and one unnecessary service. A general deduction of $300 was also made in light of the non complex nature of the case.

17.  April 25, 2001.  PETERSON, JEFFREY & ROXANN.   Case No. 00-50410, Chapter 13.  ISSUE: To what compensation is Debtors’ attorney entitled? RULING: Of the $3,576.37 in compensation for services, sales tax, and reimbursement of expenses sought by Debtors’ counsel, the Court awarded a total of $2,824.62. Deductions were made for several non professional services, one unnecessary service, and one instance of excessive time spent on a particular service. A general deduction of $300 was also made in light of the non complex nature of the case.

18.  January 31, 2001.  MENDEL, CLIFFORD E. Case No. 00-10159, Chapter 13.   ISSUE: Whether Debtor may declare exempt as his homestead a house in which he had not continually lived for the past several years, but had rented to others, and in which he was living on the petition date, but which he soon thereafter left to take employment elsewhere? RULING: Debtor was permitted to claim the house has his homestead. He lived there on the petition date and he had not done anything on that date that was inconsistent with that homestead claim. His new job and plans to move were not controlling.

19.  April 9, 2001.  HANSON, STEVEN D. & BONNIE M. HANSON.  Case No. 00-30078, Chapter 13.  ISSUE: Whether Debtors may claim as a portion of their exempt homestead a lien that one Debtor held on a former marital residence? RULING: The lien interest could not be exempted either as a homestead or as the proceeds of a homestead under S.D.C.L. § 43-45-3(2). The lien was a product of a divorce decree, not the proceeds of a voluntary sale or court-ordered sale under S.D.C.L. ch. 21-19 as required by § 43-45-3(2).

20.  May 7, 2001. HEFNER, PAMYLA.   Case No. 00-40944, Chapter 7.    ISSUE: Whether the United States Trustee was entitled to a judgment on the pleadings regarding her motion to dismiss for substantial abuse. RULING: When the United States Trustee’s motion to dismiss and Debtor’s response alone are considered, the United States Trustee was entitled to dismissal. These pleadings showed that Debtor had the ability to fund a Chapter 13 plan. However, in her response to the United States Trustee’s motion for judgment on the pleadings, Debtor advised the Court of changes in her financial circumstances that might affect her ability to fund a Chapter 13 plan. Therefore, the United States Trustee’s motion for judgment on the pleadings was denied and Debtor was ordered to amend her response to the motion to dismiss.

21.  May 8, 2001.  HAAR, MYRON L. & CHARMAINE R.  Case No. 00-10183, Chapter 7.  ISSUE: Whether Debtors’ Chapter 7 case should be dismissed for substantial abuse? RULING: Substantial abuse was found. If moneys now used by Debtors to repay retirement account loans and student loans and to fund the retirement account were applied to all unsecured debt, excluding the retirement account loans, Debtors could fund a Chapter 13 plan. Debtors were given a few days to voluntarily convert to Chapter 13 in lieu of dismissal. Whether private school tuition for Debtors’ minor children is an appropriate expense will be considered, if necessary, at the time a Chapter 13 plan is confirmed.

22.  May 25, 2001.  COOKIE, JUSTIN URIAH (Ford v. Cookie).  Case No. 01-50017, Adv. No. 01-5005, Chapter 7.   ISSUE: Whether credit card debts assigned to the debtor in a pre-petition divorce were nondischargeable under § 523(a)(15)? RULING: The subject credit card debts were nondischargeable under § 523(a)(15) since the debtor had not shown either that he did not have the ability to pay the debts or that the benefits of a discharge for him would outweigh any detriment to his former spouse.

23.  June 13, 2001. REEVES, ARTHUR DEAN & EMMA LU.  Case No. 99-30008, Chapter 12.  ISSUE: What fees should be awarded when the fee application appears to include services for two different bankruptcy estates?  RULING: The Court did not allow compensation for those items of service and related expenses that appeared to have been rendered for the companion bankruptcy estate.

ISSUE: Whether an attorney employed by the Chapter 7 bankruptcy estate may be paid from the estate on a contingency fee basis without submitting an itemized statement of services as part of his fee application?  RULING: The estate attorney may be paid his contingent fee without filing an itemization of services where the contingent nature of his fees had been approved in his employment order. Had the attorney sought costs in addition to the contingency fee for services, as the order authorizing his employment permitted, the costs would have had to have been itemized in the fee application.

24.  June 13, 2001.  TIDWELL, RONALD EDWARD (Hayden v. Tidwell), Case No. 98-50422, Adv. No. 00-5016, Chapter 7.   ISSUE: Whether certain credit card debts assigned to Defendant-Debtor in a pre-petition divorce were nondischargeable under 11 U.S.C. § 523(a)(5)? RULING: The debts were nondischargeable under § 523(a)(5) because Defendant-Debtor’s obligation to pay the subject credit card debts were in the nature of support for Plaintiff, his former spouse. This conclusion was based on: Plaintiff’s inferior financial situation at the time of the divorce; Defendant-Debtor’s receipt of more property at the time of the divorce, some of which was to be sold with the proceeds applied to marital debt; the difficulty Plaintiff would have paying her basic expenses if she also had to pay the subject credit card debts; and the divorce court’s conclusion that Defendant-Debtor’s obligation to pay the credit card debts was enforceable through a contempt proceeding.

25.  May 16, 2001.  WEHDE, DOROTHY J., Case No. 98-40522, Chapter 7.   ISSUE: Whether an attorney employed by the Chapter 7 bankruptcy estate may be paid from the estate on a contingency fee basis without submitting an itemized statement of services as part of his fee application? RULING: The estate attorney may be paid his contingent fee without filing an itemization of services where the contingent nature of his fees had been approved in his employment order. Had the attorney sought costs in addition to the contingency fee for services, as the order authorizing his employment permitted, the costs would have had to have been itemized in the fee application.

26.    May 18, 2001.  SCHULP, CARLENE R., Case No. 01-50124, Chapter 7.   ISSUE: Whether creditor’s motion to extend the time in which to file a discharge complaint should be extended where creditor and Debtor were in the midst of a divorce and the creditor wanted to preserve any divorce-related dischargeability actions? RULING: The motion was denied. Since the divorce was not final pre-petition, the creditor-spouse would not have any pre-petition claim that would be affected by the discharge. Under the law of this Circuit, a divorce-related claim does not come into existence until a dispositive order is entered.

27.    June 26, 2001. SCHENKEL, CONSTANCE, Case No. 00-40956, Chapter 7.  ISSUE: Whether contract for deed holder, on real property that Chapter 7 debtor had not claimed exempt, could get discharged two mechanics’ liens that had been placed on the property subsequent to the contract? RULING: The contract for deed holder’s motion was denied. First, only Debtor’s personal liability to the mechanics’ lien holders was discharged; the general discharge order did not affect the validity of the pre-petition liens. Second, any determination of the validity, priority, or extent of the liens could only be determined through an adversary proceeding. Finally, the issues raised were more appropriately brought before a state court since no bankruptcy laws were at issue and the real property in question was not being administered by the Chapter 7 trustee.

28.    July 16, 2001.  BOEKA, ROBERT L., JR., Case No. 01-40301, Chapter 7.  ISSUE: What amount of compensation, if any, was Debtor’s counsel entitled to have paid from the estate as an administrative expense?  RULING: Debtor’s attorney was allowed total fees of $567.93 from the estate for basic Chapter 7 services through the meeting of creditors. He was not compensated for non professional services.

29.   July 17, 2001, BARRETT, DANIEL W. & MEGAN (Barrett v. SBA & First Dakota National Bank), Case No. 99-40138, Adv. No. 01-4011, Chapter 7.   ISSUE: Whether lien SBA held on life insurance policy pre-petition survived Debtors’ Chapter 7 discharge where Debtors declared the policy exempt? RULING: SBA’s lien survived post-discharge. Debtors’ exemption declaration did not impact the lien. 11 U.S.C. § 522(c)(2). There were also no grounds to void the lien under 11 U.S.C. § 105(a).

30.    July 19, 2001, THOMPSON, SAMUEL DORSEY, Case No. 01-50009, Chapter 7.   ISSUE: Whether the United States Trustee was entitled to a judgment on the pleadings regarding her motion to dismiss for substantial abuse where the pleadings showed Debtor had around $2,800 per month to fund a Chapter 13 plan? RULING: The motion was granted. The disposable income Debtor had available to pay creditors was calculated based on Debtor’s own exhibits regarding income and expenses. Further, there was no basis to consider Debtor’s soon-to-be ex-wife’s claims as priority claims when calculating the disposable income. Finally, even if one of the wife’s claims was treated as a priority claim, Debtor still had sufficient income to fund a Chapter 13 plan.

31.    July 20, 2001, HEYD, JACK RAY-HENRY (Pfeiffer v. Heyd), Case No. 01-10088, Adv. No. 01-1010, Chapter 7.  ISSUE: Whether judgment on the pleadings should be granted to Plaintiff-Trustee on a preferential transfer action where record established the elements of a preferential transfer under 11 U.S.C. § 547(b) and where Defendant did not offer any defenses under § 547(c)? RULING: The motion for judgment on the pleadings was granted.

32.    August 2, 2001, ABBOTT, JOHN M. & ROBERTA F. (Howard v. Abbott), Case No. 01-30028, Adv. No. 01-3005, Chapter 7.  ISSUE:Whether Debtor’s obligation, pursuant to a separation agreement, to pay one-half of his daughter’s uninsured medical and dental expenses and one-half of her college expenses should be discharged? RULING:Debtor’s obligation, pursuant to a separation agreement, to pay one-half of his daughter’s uninsured medical and dental expenses and one-half of her college expenses is in the nature of support and is thus nondischargeable under 11 U.S.C. § 523(a)(5).

33.    August 13, 2001, OUDERKIRK, PETER J. & TRACY A., Case No. 01-40240, Chapter 7.  ISSUE: Whether certain pre-petition judgments could be discharged under S.D.C.L. § 15-16-20? RULING: Some of the judgments listed by Debtors’ in their motion to discharge judgments were actually judgments against other entities, not Debtors. Those debts were not discharged in Debtors’ bankruptcy and thus, those judgments could not be discharged on the state court’s records. The two judgments that were against Debtors were discharged. 

34.    August 14, 2001, MCGRUDER, JOHN D. & MARLENE J., Case No. 00-30094, Chapter 7.   ISSUE: Whether a certain annuity, on which several payments remained on the petition date, is excluded from the estate or whether Debtors may declare exempt the payments from the annuity?  RULING: The annuity benefits were not excluded from property of the estate under 11 U.S.C. § 541(c)(2) because the annuity was not a "trust" as required by § 541(c)(2). However, under S.D.C.L. § 58-12-4, Debtors could declare exempt a portion of the remaining annuity payments. The amount they could declare exempt was calculated by computing the number of months from the petition date to the last annuity payment date and multiplying it by the $250. Debtors could also request an additional exemption allowance based on need under § 58-12-9. A separate, evidentiary hearing on that issue was required.

34A.  August 14, 2001, WARD, ABDUL T. (Paige Hofer-Ward v.  Abdul T. Ward), Case No. 00-40098, Adv. No. 00-4011, Chapter 7.  ISSUE: None. Court advised parties that a state court ruling on certain divorce debts had negated the necessity for further dischargeability proceedings. Court also advised party of the decision in Arleaux v. Arleaux (In re Arleaux), 229 B.R. 182, 184-86 (B.A.P. 8th Cir. 1999), where the court concluded that a divorce-related claim does not come into existence until the divorce court enters a dispositive order. RULING: None. See above.

35.    October 25, 2001, LUDWIG, NORA Y., Case No. 01-40473, Chapter 7.   ISSUE: Whether Trustee’s proposed resolution of objection to exemptions, which was set forth as part of a motion to sell estate property, should be approved where the Trustee was requiring Debtor to turnover cash in lieu of anticipated excess claimed exempt personalty arising from an improvement in the available equity in the subject exempt property? RULING: The Court approved the sale, but directed Debtor to amend her schedules to maximize her allowed personal property exemptions. Debtor and the Trustee could then better calculate any excess exemptions and settle any payment terms.

36.    October 26, 2001.  FRANZEN, LYNDON M. dba FRANZEN FREIGHTWAYS), (Whetzal v. First International Bank), Case No. 99-50153, Adv. No. 01-5008, Chapter 7.   ISSUE: Whether summary judgment should be granted regarding certain voidable preferential transfers and voidable post-petition transfers alleged by the Trustee where Defendant-Bank had raised the defense that the transfers were in the ordinary course of business? RULING: Summary judgment was granted to the Trustee as to certain pre-petition transfers that Defendant-Bank had admitted were not in the ordinary course of business and as to certain post-petition transfers that were not authorized by the Bankruptcy Code or the Court. Trial was ordered on the remaining issues, beginning with whether Defendant-Bank possessed a pre-petition right of setoff that precluded the avoidance of any of the pre-petition transfers.

37.    November 19, 2001.  DURANTE, MARILYN A. Case No. 01-50181, Chapter 7.   ISSUE: Whether Debtor could avoid under § 522(f)(1)(B) a nonpossessory, nonpurchase-money security interest in her mobile home, which she had declared exempt as her homestead? RULING: Debtor could not avoid the nonpossessory, nonpurchase-money security interest in her mobile home. The mobile home was not one of the exempt items governed by § 522(f)(1)(B).

  38.  November 29, 2001.  DOERR, BRADLEY M. & DEBRA J.  Case No. 01-40036, Chapter  7.  ISSUE: Whether a stipulation between the debtors and a creditor to revoke the debtors’ discharge should be approved where the request was based on a desire to file an enforceable reaffirmation agreement? RULING: The stipulation was not approved because there was no need to vacate or revoke the debtors’ discharge order. The reaffirmation agreement that the parties had filed earlier, after the discharge was entered, was already enforceable because it had been "made" before the discharge was entered, as required by § 524(c)(1).

39.  September 24, 2001.  MARYOTT, NED (fdba Maryott Livestock), Case No. 01-10052, Chapter 7.  ISSUE: (1) Whether a law firm had a valid, pre-petition attorneys’ lien on a judgment awarded to the debtor pre-petition?  (2) Whether the debtor had an unlimited homestead exemption where he was at least age 70 on the petition date? (3) Whether the debtor’s judgment debtor, a bank, could "recoup" its claim against the debtor against the judgment it owed the debtor? (3) Whether a pre-petition setoff of the debtor’s and bank’s claims occurred pre-petition? RULING: (1) The law firm had a valid statutory lien on the subject funds, subject to any § 545(2) avoidance action by the trustee. The law firm had docketed its notice of lien and the notice sufficiently stated the amount claimed. [Court note: The parties later settled the § 542(2) issue.] (2) The debtor was entitled to a homestead of unlimited value since he was over age 70 on the petition date. (3) The bank was not entitled to recoupment because its claim against the debtor did not arise out of the same transaction as the debtor’s claim against the bank. (4) A setoff did not occur pre-petition because no action was taken pre-petition to accomplish the setoff after a state court authorized it.

40.  December 6, 2001.  HOFER, RONNY A. & TISHA D.  Case No. 01-40825, Chapter 7.  ISSUE: Whether the United States Trustee’s motion for judgment on the pleadings regarding an earlier motion to dismiss for substantial abuse should be granted where the debtors’ schedules showed they had $119 per month in disposable income and where the debtors were also making voluntary retirement fund contributions of $156 per month? RULING: The motion was granted. Utilizing both the $119 and $156 per month, the debtors could fund a meaningful Chapter 13 plan. Thus, the debtors were given the option of having their case dismissed under § 707(b) or they could voluntarily convert to Chapter 13.