2002

Irvin N. Hoyt,  Bankruptcy Judge

Numerical Listing

2002 DECISION SUMMARIES

Irvin N. Hoyt, Chief Bankruptcy Judge

1. January 2, 2002.   TURNER, SUEANN, Bankr. No. 01-50504, Chapter 7.    ISSUE: Whether case should be dismissed under § 707(b) based on the pleadings filed?   RULING: Absent a voluntary conversion, the Court concluded that the case would be dismissed under § 707(b). Based on the pleadings filed, Debtor admitted she had at least $355 available income per month that she could use to fund a meaningful Chapter 13 plan.

2.  January 23, 2002.  KELL, STACY LEE & ANGELA KAY, Bankr. No. 01-50563, Chapter 7.   ISSUE: Whether Debtors were entitled to have several judgments removed from state court records pursuant to S.D.C.L. § 15-16-20?  RULING: Some of the judgments creditors listed in Debtors’ motion to discharge judgment did not receive timely notice of the bankruptcy case. Debtors’ motion was denied as to those creditors. Also, two creditors who were governmental entities were not properly served with Debtors’ motion to discharge judgments as required by Local Bankr. R. 9014-1(b)(4) and (5). The motion was also denied as to those creditors. Debtors’ motion was granted as to the remaining creditors who did receive timely notice of the case and appropriate notice of the motion. The partial denial of the motion was without prejudice to Debtors curing the service problems and without prejudice to Debtors bringing dischargeability actions under § 523(a)(3).

3.  January 28, 2002.  FISCHER ENTERPRISES, INC. (Lovald v. Dakota Truck Underwriter), Bank. No. 01-40442, Adv. No. 01-4027, Chapter 7.  ISSUE: Whether a workers compensation underwriter was obligated under the Bankruptcy Code to turnover to the bankruptcy estate the debtor’s pre-petition excess contributions earlier than contemplated by the parties’ contract? RULING: The debtor’s bankruptcy does not alter the contract so as to require the underwriter to turnover the funds sooner than what was contemplated by the contract. The case trustee acquires no greater rights than what the debtor had on the petition date.

4.   February 7, 2002.  ANDERSON, GREGORY A. & DEANNE M., Bank. No. 01-10280, Chapter 7.  ISSUE: (1) Whether trustee’s withdrawal of a motion to approve a settlement was appropriately approved by the Court? (2) Whether creditor should be granted relief from the automatic stay to pursue statutory costs and disbursements from the state court arising from a pre-trial, but post-petition, offer of judgment that was refused by the debtor? RULING: (1). The Trustee’s withdrawal of his motion to approve a settlement was appropriately approved by the Court. No party in interest has filed a response to the Trustee’s motion. Thus, under Fed.R.Bankr.P. 7042, Fed.R.Civ.P. 41(a), and Fed.R.Bankr.P. 9014, the Trustee was free to withdraw the motion. (2) The creditor was not granted relief from the stay because the continued litigation would not produce any tangible result. The bankruptcy estate, not the debtor, controlled the state court law suit at the time the offer of judgment was refused. Thus, any claim for costs and disbursement would not become a post-petition claim against the debtor, but could be a claim against the bankruptcy estate, which did not have any assets to pay any claims.

5.  February 15, 2002.  WILLIAMSON, BRUCE A (American Family Insurance & Rhonda Opsahl v. Williamson), Bank. No. 01-10216, Adv. No. 01-1019, Chapter 7.  ISSUE: Whether the defendant-debtor was entitled to summary judgment on the plaintiff’s nondischargeability complaint under § 523(a)(6) where the plaintiff claim arose from an auto accident?  RULING: Even assuming that all of the plaintiff’s allegations were true, the plaintiff could not show that the defendant-debtor wilfully inflicted the damages to the plaintiff’s automobile or that he wilfully failed to carry insurance so that the plaintiff could not recovery from that source.

6.    March 15, 2002.  LARSON, DEBRA ANN (Lawayne Larson v. Debra Ann Larson), Bank. No. 01-50166, Adv. No. 01-5010, Chapter 7.  ISSUE: Whether a credit card debt assigned to Debtor in a pre-petition divorce should be nondischargeable under § 523(a)(15) where Debtor paid the amount of the debt existing on the date of the divorce decree, but where Debtor also continued to charge on the card, which resulted in a significant debt in her name and in her ex-husband’s name on the petition date? RULING: The debt was nondischargeable under § 523(a)(15) in the amount due on the petition date. Although Debtor had paid the credit card company the amount that was due at the time of the divorce, she was still obligated under the divorce decree to hold her ex-husband harmless from that creditor’s claim, which had grown to include the sum due on the petition date. Thus, the sum due on the petition date fell under § 523(a)(15). Further, Debtor did not meet her burden of proof under either exception provided by § 523(a)(15).

7.    March 22, 2002.  JOHNSON, TAMARA JO, Bankr. No. 01-41133, Chapter 7.  ISSUE: Whether the United States Trustee’s motion for judgment on the pleadings regarding her motion to dismiss for substantial abuse should be granted? RULING: The motion for judgment on the pleadings was not granted because the Court concluded that it needed to receive evidence on: (1) Debtor’s income and expenses exclusive of her sons’ income from Social Security and exclusive of her sons’ share of the household expenses (or in the alternative, inclusive of both); and (2) the actual amount of unsecured claims against Debtor after application of any insurance benefits that may have paid some scheduled claims in full or in part.

8.    April 8, 2002.  KING SEA RESTAURANT NO. 3, INC. Bankr. No.  01-40853, Chapter 11.  ISSUE: Whether Debtor established that its plan was feasible under § 1129(a)(11)? RULING: Debtor did not meet its burden of proving that its plan was confirmable, especially where the value of the guarantees b others of its debt was not established.

9.  May 6, 2002.  FORD, MICHAEL & HOLLEE, Bankr. No. 01-10034, Chapter 7.  ISSUE: Whether promised payments intended to "make up the difference" between what an individual had made working for a debtor and what the individual would make working for another employer are "wages, salaries, or commissions" entitled to priority under 11 U.S.C. § 507(a)(3)? RULING: Absent evidence of an ongoing "employer-employee" or "master/servant" relationship, promised payments intended to "make up the difference" between what an individual had made working for a debtor and what the individual would make working for another employer are not "wages, salaries, or commissions" entitled to priority under 11 U.S.C. § 507(a)(3).

10.  May 8, 2002.  CAP, KEVIN G. & CATHY J., Bankr. No. 01-41239, Chapter 7.  ISSUE: Whether the case should be dismissed under § 707(b) based on the pleadings filed to date? RULING: The case was not dismissed under § 707(b) on the pleadings. The Court directed that an evidentiary hearing be held on whether one debtor was having the appropriate amount of wages withheld for income tax purposes and whether the debtors’ housing expenses (mortgages and utilities) were reasonable.

11.    May 13, 2002.  KNOPF, JEFFREY L. & HEIDI M. (Estate of Lacey v. Knopf), Bankr. No. 01-40570, Adv. No. 01-4030  and  KNOPF, PATRICK J. & LISA F. (Estate of Lacey v. Knopf), Bankr. No. 01-40828, Adv. No. 01-4037, Chapter 7.  ISSUE: Whether summary judgment should be granted for the defendants-debtors on the plaintiff’s complaint for nondischargeability under § 523(a)(4)? RULING: The defendants-debtors’ motion for summary judgment was granted in part and denied in part. The motion was granted to the extent that the Court found that defendants-debtors were not a fiduciary of the plaintiff under § 523(a)(4). The motion was denied regarding whether the plaintiff’s claim arose from larceny or embezzlement by the defendants-debtors because the present record was insufficient.

12.    May 17, 2002.  STANFORD, DARCI & JOHN,  Bankr. No. 02-40129, Chapter 7.  ISSUE: Whether Debtors’ Chapter 7 case should be dismissed on Debtors’ motion? RULING: The case was not dismissed since creditors would benefit from the continued administration of the Chapter 7 proceeding. To protect some nonexempt assets, however, Debtors were given time to consider converting their case to a Chapter 13 proceeding.

13.    May 24, 2002.  PARKINSON, MARVIN E.W. (Keller v. Parkinson), Bankr. No. 01-40938, Adv. No. 01-4035, Chapter 7.    ISSUE: Whether former spouse’s claim against Debtor was nondischargeable under § 523(a)(15)? RULING: The claim was not dischargeable under either §§ 523(a)(15)(A) or (B). Under subsection (A), Debtor had not shown that he was unable to pay the debt, primarily because he had not maximized his income earning potential. Under subsection (B), Debtor had not shown that the benefit in his receiving a discharge would outweigh any detrimental consequences to his former spouse, especially where her income earning potential was lower.

14.    June 24, 2002.  ELSPERGER, KEVIN J. & TARI A. (Pfeiffer v. Aberdeen Finance Corp.), Bankr No. 01-10166, Adv. No. 01-1018, Chapter 7.  ISSUE: Whether certain transfers by the debtors to the finance corporation where recoverable by the case trustee as either avoidable pre-petition preference payments under § 547(b) or as avoidable post-petition transfers under § 549(a)? RULING: While the pre-petition transfers were preferential under § 547(b), they were not avoidable by the case trustee because the payments fell under the normal course of business exception at § 547(c)(2). Further, the post-petition transfers were not avoidable under § 549(a) to the extent that the transfers were of one debtor’s post-petition wages, which were not property of the Chapter 7 bankruptcy estate.

15.    July 12, 2002.  ZOSS, JONATHAN L. (Larson v. Zoss),  Bankr. No. 01-41418, Adv. No. 02-4024, Chapter 7.    ISSUE: Whether Plaintiff’s claim against Defendant-Debtor for injuries received in an altercation were nondischargeable under § 523(a)(6) as a debt arising from a willful and malicious injury?  RULING: The debt (amount not yet determined) was nondischargeable under § 523(a)(6). The injury was willful because Defendant-Debtor intentionally struck Plaintiff with an intent to harm him. The injury was malicious because the blows were struck by Defendant-Debtor without just cause or excuse.

16.    July 15, 2002.  SWENSON, DWAIN & LINDA,  Bankr. No. 02-40154, Chapter 7.  ISSUE: Whether the debtors’ case should be dismissed on the pleadings under § 707(b) for substantial abuse? RULING: The case was subject to dismissal under § 707(b) because the debtors had disposable income of $434.75, which would allow them to fund a meaningful Chapter 13 plan. At the debtors’ earlier request, the case was converted to Chapter 13 in lieu of dismissal.

17.  July 30, 2002.  BARNES, WILLIAM G. (Sohler v. Barnes), Bankr. No. 01-50397, Adv. No. 01-5014, Chapter 7.  ISSUE: Whether the plaintiff’s claim was excepted from discharge under § 523(a)(4) for embezzlement where the defendant-debtor failed to return to an account managed by the plaintiff all the proceeds from livestock purchased through that account? RULING: The debt was not excepted from discharge under § 523(a)(4) for embezzlement. Even assuming that the livestock purchased through the account were owned by the plaintiff, there was no evidence that the defendant-debtor acted with any malevolent intent when he failed to immediately turnover the sale proceeds. The Court could not identify a place in time when the defendant-debtor used the sale proceeds with an intent contrary to his loose agreement with the plaintiff. 

APPEAL RECORD

APPEAL FILED August 12, 2002 by Debtor.  Order entered by Judge Karen E. Schreier, dated August 11, 2003, affirming Bankruptcy Court's decision  (CIV.02-5070-KES). 

18.  August 12, 2002.  NEHLICH, LOREN J. & APRIL M., Bankr. No. 02-10049, Chapter 7.  ISSUE: (1)May a debtor claim an Individual Retirement Account ("IRA") exempt under S.D.C.L. § 43-45-16? (2) May a debtor claim a "Roth IRA" exempt under S.D.C.L. § 43-45-16? RULING:(1) A debtor may claim an Individual Retirement Account ("IRA") exempt under S.D.C.L. § 43-45-16. (2) A debtor may claim a "Roth IRA" exempt under S.D.C.L. § 43-45-16.  NOTE: The parties did not ask the Court to determine, and the Court did not determine, whether the $250,000.00 exemption provided for in S.D.C.L. § 43-45-16 is excessive.

19.  September 6, 2002.  MEINDERS, RAY & JOY, Bankr. No. 00-40914, Chapter 13.  ISSUE: Whether a bank should be granted relief from the automatic stay to enforce a security interest it claimed in some vehicles owned by the debtors? RULING: In reviewing the debtors’ confirmed plan to decipher the treatment afforded the bank on its claim, the Court found several significant problems and errors with the confirmed plan and the debtors’ schedules. The Court exercised its § 105(b) powers to vacate the confirmation order, and it directed all parties to start anew. The bank’s motion for relief from the stay was denied.

20.    September 30, 2002.  OCHS, DAVID L. & ANNETTE L. (Arnoldy v. Ochs), Bankr. No. 01-10336, Adv. No. 02-1008, Chapter 7.   ISSUE: Whether Plaintiffs’ claim against Debtors was excepted form discharge? RULING: Plaintiffs’ claim was declared nondischargeable under § 523(a)(2)(B). The only two elements in dispute were whether Plaintiffs, when purchasing a home built by Debtor, reasonably relied on certain sale closing documents signed by Debtor and whether Debtor acted with a fraudulent intent. The Court found that Plaintiffs reasonably relied on all the closing documents, which erroneously indicated that there were no outstanding materialmen’s liens due to Debtor’s failure to disclose, and that Debtor acted with a reckless disregard for the truth of whether all subcontractors and materialmen and their claims had been accurately disclosed before or at the closing.

21.    October 7, 2002.  Hagen Transportation Services (Swaney & Teisler Trucking), Bankr. No. 00-40682, Adv. No. 02-4013, Chapter 7.  ISSUE: Whether Plaintiff-Trustee’s motion for summary should be granted? RULING: Motion was granted. Plaintiff-Trustee made a prima facie showing and neither Defendant was able to identify a disputed fact or question of law.

22.    October 17, 2002.  CAHOY TRUCKING, INC. (Lovald v. Cahoy Trucking), Bankr. No. 02-30015, Adv. No. 02-3002, Chapter 7.  ISSUE: Whether Defendant bank’s motion for summary judgment should be granted? RULING: Motion was granted to the extent that Plaintiff-Trustee’s complaint sought relief under § 547(b) since the facts plead did not fall under that Bankruptcy Code section. Plaintiff-Trustee was directed to file an amended complaint to clarify the alternative Bankruptcy Code sections on which he seeks relief.

23.    November 5, 2002.  SAYLES, TODD H. & JILL R., Bankr. No. 01-41423, Chapter 11.  ISSUE: Whether Debtors were farmers as defined by § 101(20) so as to preclude conversion of their Chapter 11 case to a Chapter 7 case pursuant to § 1112(c)? RULING: Debtors were not farmers as defined by § 101(20) so their Chapter 11 case was converted to Chapter 7. They did not meet the requirement of § 101(20) that 80% of their gross income in the year preceding their petition come from their farm.

24.    November 6, 2002.  KUSSOW, JAMES W., Bankr. No. 97-40952, Chapter 12.  ISSUE: Whether Debtor’s attorney was entitled to compensation over the objection of a creditor that held a personal debt guarantee from Debtor? RULING: Debtor’s attorney’s fees were approved with two small deductions to expenses. That the creditor held a personal guarantee did not give him a secured claim against Debtor’s property or elevate the priority of his claim over allowed administrative expenses such as the attorney’s fees.

25.    December 9, 2002.  DELOZIER, JAMES M. & MARY L., Bankr. No. 02-40659, Chapter 7.  ISSUE: Whether the debtor’s obligation to pay her son’s student loans is a priority claim ahead of other unsecured claims? RULING: The student loan debt was a general, unsecured debt. Although it may be nondischargeable, it does not receive priority treatment under a Chapter 13 plan.

26.    December 3, 2002.  IHNEN, DENNIS L. & MARY ANN, Bankr. No. 02-40459, Chapter 7.  ISSUE: (1) Whether each joint debtor is entitled to clam a $20,000 cash value in life insurance exempt? (2) Whether the debtors had properly declared exempt an annuity under South Dakota law where the annuity was not in payment status? RULING: (1) The joint debtors could only claim up to $20,000 total exempt under the plain language of S.D.C.L. § 58-12-4. (2) State law did not require the annuity to be in payment status to be declared exempt, but S.D.C.L. § 58-13-8 nonetheless limited the amount that could be declared exempt as discussed in In re McGruder, Bankr. No 00-30094, slip op. at 14 (Bankr. D.S.D. August 14, 2001).