2006 Decisions

Irvin N. Hoyt,  Bankruptcy Judge

Numerical Listing

2006 DECISION SUMMARIES

Irvin N. Hoyt, Bankruptcy Judge

1.    January 6, 2006.  LEHMANN, THOMAS L. & REBECCA S.  Case No. 05-50830, Chapter 7.  ISSUE: Whether creditor was entitled to relief from stay and abandonment over objection of other creditor who wanted its own property interest protected? RULING: Relief and abandonment were granted since objecting creditor did not dispute that moving creditor’s allegation that there was no equity in the subject property for the estate. Court asked the parties to cooperate to insure that the objector’s rental property, if any, was kept separate from the collateral being returned to the moving creditor.

2.    January 17, 2006.  ANDERSON, RICHARD L. & RITA H. Case No. 05-41069, Chapter 7.  ISSUE: Whether a Chapter 7 debtor’s counsel’s fees can be paid from the estate? RULING: There is no provision in the Bankruptcy Code for a Chapter 7 debtor’s counsel to be paid his fees from the estate.

3.    January 6, 2006.  SCHWEINFORTH, DAVID A.  Case No. 02-40446, Chapter 7.  ISSUE: In this case that was converted from Chapter 7 to Chapter 13 and back to Chapter 7, what fees for Debtor’s counsel could be paid from the estate? RULING: The attorney’s fees for Chapter 13 services were an administrative expense. His fees for Chapter 7 services -- both pre- and post-petition -- were a general unsecured claim against the estate. They would be paid with the other general unsecured claims. Payment of both claims was dependent on the availability of sufficient estate funds. To the extent the fees were not paid by the estate, they were discharged.

4.    January 27, 2006.  SI TANKA UNIVERSITY (Si Tanka University v. United States Department of the Interior, Bureau of Indian Affairs).  Case No. 05-30027, Adv. No. 05-3006, Chapter 11.  ISSUE: Whether Plaintiff-Debtor’s amended complaint, wherein it sought a declaration regarding its eligibility for certain public funds for FY 2005 and FY 2006, should be dismissed because the Defendant-government agency had not waived sovereign immunity, the Bankruptcy Court lacked subject matter jurisdiction, and the matters were not ripe for adjudication? RULING: The Court found it had jurisdiction to review only the Defendant-government agency’s determination that Plaintiff-Debtor was ineligible for certain funds for FY 2005. The Court also concluded sovereign immunity had been waived under the Administrative Procedures Act, though Plaintiff-Debtor would need to file a second amended complaint to appropriately plead that. The Court dismissed the amended complaint regarding Plaintiff-Debtor’s request for a declaratory judgment regarding its eligibility for FY 2006 funds since that matter was not ripe for adjudication.

5.    January 27, 2006.  TAPKEN, CHRISTIAN J., Case No. 05-42109, Chapter 7.  ISSUE: Whether a creditor’s motion to extend the deadline to file a denial of discharge complaint should be granted over the objection of a party where the basis of her objection was unclear?  RULING: The motion to extend the deadline was granted. The creditor had shown cause for a reasonable extension. The objector had not made clear the basis for her objection and some of her legal presumptions regarding the impact of an extension were erroneous.

6.    January 31, 2006.  DURFEE, DAVID AND SANDRA., Case No. 05-10354, Chapter 7.  ISSUE: Whether the United States Trustee’s motion for judgment on the pleadings regarding its motion to dismiss for substantial abuse under 11 U.S.C. § 707(b) should be granted where pleadings indicated Debtors had monthly disposable income of just over $1,300.00 with which to fund a Chapter 13 plan? RULING: The motion for judgment on the pleadings was granted, and the debtors were given an opportunity to convert their Chapter 7 case to Chapter 13 in lieu of dismissal under § 707(b).

7.    February 1, 2006.  OTTESON, JACQUELINE L., Case No. 05-30005, Chapter 13.  ISSUE: In this case converted from Chapter 7 to Chapter 13, which fees of the debtors’ counsel could be paid from the estate as an administrative expense? RULING: Under 11 U.S.C. § 330(a) and Lamie v. United States Trustee, 124 S.Ct. 1023 (2004), fees for a Chapter 7 debtor’s counsel cannot be paid from the bankruptcy estate. Instead, the attorney should receive his fees in full for his pre-petition work before the petition is filed, and the debtor is responsible to pay any fees for post-petition services. Since this case converted from a Chapter 7 to a Chapter 13, the unpaid fees for the debtor’s counsel’s Chapter 7 services became an unsecured claim against the Chapter 13 bankruptcy estate that could be paid to the extent funds were available to pay unsecured claims. Only the attorney’s fees for his Chapter 13 services and related expenses could be paid from the estate as a higher-priority administrative expense.

8.    March 3, 2006.  GUKEISEN, DANIEL RAY, Case No. 04-50103, Chapter 7.  ISSUE: Whether a chapter 7 trustee has standing to bring a motion to discharge judgments under S.D.C.L. §§ 15-16-20 and 15-16-21? RULING: Only the debtor has standing to bring a motion to discharge judgments under S.D.C.L. §§ 15-16-20 and 15-16-21. 

9.    March 6, 2006.  MONTGOMERY, MONTY R. & SUSAN M., Case No. 03-50416, Chapter 13.  ISSUE: Whether Debtors were entitled to modify their confirmed Chapter 13 plan over the objection of a creditor who had not timely filed a proof of claim and who wanted their claim now included in the modification? RULING: Debtors’ motion to modify their confirmed plan, which changed the treatment of a home mortgage claim, was granted. Since the objector had not timely filed a proof of claim, 11 U.S.C. § 1329(a) restricted Debtors’ and the creditor’s ability to now modify the plan to treat the claim. The unfiled claim, however, will not be discharged because it was not provided for by the plan. 11 U.S.C. § 1328(a).

10.    March 9, 2006.  DICKHAUT, RANDY L. & ANNE C., Case No. 03-50141, Chapter 13.  ISSUE: Whether Debtors’ motion to sell their home and their motion to obtain credit should be granted where Debtors wanted to sell their present home, complete the plan payments, and buy a new home where Debtors’ monthly mortgage payment would increase by about $375, where unsecured creditors were only receiving about a 21% payment on their claims, and where it was unclear how and when disposable income due under the plan would be paid? RULING: Both motions were denied. Debtors could not justify an increase in their housing expense and unsecured creditors would be deprived of disposable income.

11.    March 31, 2006.  MEYER, JAMES D. & KARMEN L. (Meyer v. Credit Collections Bureau), Case No. 01-30117, Adv. No. 05-3007, Chapter 13.  ISSUE: On a summary judgment motion, whether creditor violated the automatic stay by instituting a post-confirmation garnishment to collect a post-petition debt? RULING: The creditor did not violate the automatic stay when it obtained a judgment for its post-petition debt but it did violate the stay when it commenced the garnishment action since the garnishment affected wages, which were property of the bankruptcy estate.

12.    April 3, 2006.  MONTGOMERY, MONTY R. & SUSAN M., Case No. 03-50416, Chapter 13.  ISSUE: On a motion for reconsideration, whether a general unsecured claim held by creditor who had notice of a case in time to file a proof of claim but who did not have notice of the case in time to participate in the confirmation process should be discharged upon completion of plan payments? RULING: Only debts "provided for" by a confirmed plan are discharged under 11 U.S.C. § 1328(a). For a claim to be "provided for" by a plan, the creditor’s claim must be recognized in the plan and the creditor must have had notice of the case in time to participate in the confirmation process. Since the creditor in this case was not served with the plan and did not receive notice of the case in time to file an objection to the plan, its claim cannot be deemed to have been provided for by the plan and will not be discharged.

13.    March 31, 2006.  OBERG, DEBORAH R., Case No. 05-40387, Chapter 13.  ISSUE: Following the conversion of a case from Chapter 7 to Chapter 13, whether the debtor’s attorney’s Chapter 7 fees may be paid as an administrative expense? RULING: Only the attorney’s Chapter 13 fees may be paid as an administrative expense. The attorney may file a proof of claim for any unpaid Chapter 7 fees.

14.    March 16, 2006.  VOLKER, ROYCE H. & BARBARA J. (Volker v. Credit Collections Bureau, et al.), Case No. 04-50372, Adv. No. 06-5007, Chapter 7.  ISSUE: Whether a creditor’s claim should be discharged upon completion of a Chapter 13 plan where the creditor received notice of the case in time to file a proof of claim but did not receive notice in time to participate in the confirmation process? RULING: Since the creditor did not have notice of the case in time to participate in the confirmation process, its claim could not be discharged upon completion of plan payments.

15.    April 7, 2006.  FERGUSON, AISLEY B., Case No. 05-42224, Chapter 7.  ISSUE: Whether the debtor could claim personal property exemptions under S.D.C.L. § 43-45-4 as a head of household? RULING: The debtor’s income was less than her non-filing husband’s and she had no dependents. Thus, her husband was the head of their household for exemption purposes, not the debtor.

16.    April 24, 2006.  FEUCHT, TERESA J., Case No. 05-41178, Chapter 7.    ISSUE: Whether a debtor could declare a homestead exemption in the marital home where she did not live in it on the petition date, where the debtor had vacated the marital home upon separation from her husband more than a year before she filed a Chapter 7 petition in bankruptcy, where she had lived separately since then and had no plans to reconcile, and where she only intended to return to the marital home if her husband vacated it or if he or their adult son needed her care, circumstance that did not presently exist and were not anticipated? RULING: The debtor’s claimed homestead interest in the marital home was denied since she did not live there on the petition date and did not have any present intention to return. The ruling had no impact on the debtor’s estranged husband’s ability to protect his homestead interest.

17.    May 15, 2006.  HOFFMAN, HERBERT L. & MARIE A. (Trustee Lovald v. Walter Heien, et al.), Case No. 05-40950, Chapter 7.  ISSUE: Whether Debtors’ transfer of certain real estate should be avoided as a constructively fraudulent transfer under 11 U.S.C. § 548(a)(1)(B)? RULING: Debtor received less than a reasonably equivalent value for the real estate and was insolvent on the date of the transfer. The transfer was therefore avoided under 11 U.S.C. § 548(a)(1)(B).

18.    May 17, 2006.  BUECHLER, JEROLD L. & AMY L., Case No. 05-10227, Chapter 13.  ISSUE: In a pre-BAPCPA case, whether 11 U.S.C. § 1322(b)(2) barred modification of the rights of a secured creditor whose claim was secured by a mortgage against Debtors’ principal residence and an assignment of rents? RULING: An assignment of rents gives the secured creditor something more than a security interest in real property and renders the anti-modification provision of 11 U.S.C. § 1322(b)(2) inapplicable. The Court could not apply BAPCPA’s definitions of “debtor’s principal residence” and “incidental property” retroactively. Debtors could modify the rights of the secured creditor.

19.    May 26, 2006.  POWELL, SUSAN M., Case No. 05-41698, Chapter 7.  ISSUE: Whether S.D.C.L. § 54-8A-4 provides a basis for objecting to a debtor’s claim of exemption in an annuity pursuant to S.D.C.L. § 58-12-6? RULING: The trustee did not establish S.D.C.L. § 54-8A-4 provides a basis for denying the debtor’s claim of exemption. Her objection was therefore overruled.

20.    May 30, 2006.  JOHNSON, LLOYD CURTIS (Reed v. Johnson), Case No. 05-30023, Adv. No. 05-3004, Chapter 7.  ISSUE: Whether debt incurred by Defendant-Debtor on his former girlfriend’s credit card account was non dischargeable? RULING: The debt was nondischargeable under § 523(a)(4) as one arising from larceny. Though Plaintiff-former girlfriend had plead only under § 523(a)(2)(A), which did not apply to the facts presented, the parties had impliedly tried the matter under § 523(a)(4).

21.    June 1, 2006.  ENGELS, MARY E. (First Premier Bank v. Engels), Case No. 05-42297, Adv. No. 06-4018, Chapter 7.  ISSUE: Whether Plaintiff was entitled to a default judgment of nondischargeability against Defendant-Debtor where Defendant-Debtor did not timely answer but where Plaintiff had pled only under 11 U.S.C. § 523(a)(2)(A) without setting forth specific allegations of fraud excluding statements by Defendant-Debtor regarding her financial condition? RULING: A default judgment was denied. Relief under § 523(a)(2)(A) cannot be premised on a statement by a debtor respecting his or her financial condition. A statement respecting financial conditions includes statements regarding a debtor’s ability to pay the subject debt. Here, Plaintiff did not make any allegations of fraud actionable under § 523(a)(2)(A) that referenced anything other than statements by Defendant-Debtor regarding her ability to pay. Plaintiff was given a stated time to file an amended complaint in lieu of dismissal of its original complaint.

22.    September 1, 2006.  TRI-STATE ETHANOL COMPANY LLC, Case No. 03-10194, Chapter 7.  ISSUE: Upon a motion for recusal filed by a party in interest, (1) whether the Court should recuse itself under 28 U.S.C. §§ 455(a) or 455(b)(1) or the Due Process Clause of the Fifth Amendment of the United States Constitution, and (2) whether the party’s request for recusal was timely. RULING: The party’s motion for recusal was denied. (1) Grounds for recusal under § 455 (a), § 455(b)(1), or the Due Process Clause of the Fifth Amendment were not found. (2) The party in interest’s motion for recusal was untimely.
 

APPEAL RECORD

23.    November 7, 2006.  MEINDERS, RAY & JOY, Case No. 00-40914, Chapter 13.  ISSUE: Whether Debtors were entitled to a refund of statutory attorneys’ fees paid to the county post-petition as part of a setting aside of some tax deeds where Debtors failed to list the county as a creditor and also failed to ensure tax deeds were not issued after learning of tax certificates being issued and where the county issued the tax certificates after learning of the bankruptcy? RULING: The Court allowed the statutory attorneys’ fees as a reasonable and necessary administrative expense incurred by the bankruptcy estate. Thus, the county was not required to refund the money to Debtors.
 

24.    November 13, 2006.  TRI-STATE ETHANOL COMPANY LLC., Case No. 03-10194, Chapter 7.  ISSUES: (1) Whether pursuant to 11 U.S.C. § 506(b) the Court may allow a prepayment charge incurred by the debtor prior to the filing of the debtor’s petition? (2) Whether a secured creditor may include a prepayment charge incurred by the debtor prior to the filing of the debtor’s petition as a component of its secured claim?   RULINGS: (1) Section 506(b) applies only to interest, fees, costs, and other charges accruing post-petition. Thus, it has no bearing on the allowability of a prepayment charge incurred by the debtor prior to the filing of the debtor’s petition. (2) Pursuant to 11 U.S.C. § 502(b), a court may not allow a claim to the extent it “is unenforceable against the debtor and property of the debtor under any agreement or applicable law for a reason other than because such claim is contingent or unmatured.” In this case, despite certain ambiguities in the loan documents, the parties clearly intended to provide for a prepayment charge and specifically agreed in the event of a default, the total sum due and owing would include the prepayment charge. As nothing in the reported cases suggests the South Dakota Supreme Court would refuse to enforce such an agreement, the secured creditor may include the prepayment charge as a component of its secured claim.

TRI-STATE ETHANOL COMPANY LLC.  November 13, 2006.  Case No. 03-10194, Chapter 7.  ISSUES: (1) Whether pursuant to 11 U.S.C. § 506(b) the Court may allow a prepayment charge incurred by the debtor prior to the filing of the debtor’s petition? (2) Whether a secured creditor may include a prepayment charge incurred by the debtor prior to the filing of the debtor’s petition as a component of its secured claim? RULINGS: (1) Section 506(b) applies only to interest, fees, costs, and other charges accruing post-petition. Thus, it has no bearing on the allowability of a prepayment charge incurred by the debtor prior to the filing of the debtor’s petition. (2) Pursuant to 11 U.S.C. § 502(b), a court may not allow a claim to the extent it “is unenforceable against the debtor and property of the debtor under any agreement or applicable law for a reason other than because such claim is contingent or unmatured.” In this case, despite certain ambiguities in the loan documents, the parties clearly intended to provide for a prepayment charge and specifically agreed in the event of a default, the total sum due and owing would include the prepayment charge. As nothing in the reported cases suggests the South Dakota Supreme Court would refuse to enforce such an agreement, the secured creditor may include the prepayment charge as a component of its secured claim.

25.    December 1, 2006.  JONES, RICHARD M. & CHRISTINE A. (Jones v. Jones), Case No. 05-40627, Adv. No. 05-4067, Chapter 7.  ISSUE: Whether Debtor-Defendant could set off an alleged pre-petition claim against Plaintiff against Plaintiff’s nondischargeable claim against Debtor-Plaintiff? RULING: Debtor-Defendant’s alleged pre-petition claim against Plaintiff belonged to the bankruptcy estate, not Debtor-Defendant. Thus, Debtor-Defendant had no claim to set off against Plaintiff’s nondischargeable claim.