2007 Decisions

Irvin N. Hoyt,  Bankruptcy Judge

Numerical Listing

2007 DECISION SUMMARIES

Irvin N. Hoyt, Bankruptcy Judge

1.    January 10, 2007.  LUDEMANN, DONALD R. & MAVIS B. ((Klich v. Ludemann), Case No. 05-10436, Adv. No. 06-1005, Chapter 7.  ISSUE: Whether Defendants were entitled to judgment on the pleadings with respect to Plaintiffs’ complaint to determine dischargeability of their claim against Defendant-Debtor under 11 U.S.C. § 523(a)(9)? RULING: Defendants were entitled to judgment on the pleadings. Plaintiffs pled only that Defendant-Debtor was “operating his vehicle while impaired by alcohol use” at the time of the automobile accident giving rise to Plaintiffs’ claim against him. Plaintiffs pled no facts that would support a finding that Defendant was “intoxicated” within the meaning of 11 U.S.C. § 523(a)(9) and S.D.C.L. § 32-23-1, and it would not be reasonable to infer from the fact Defendant-Debtor was “impaired” he was therefore “intoxicated” within the meaning of those statutes.
 

 2.    January 22, 2007.  TRI-STATE ETHANOL COMPANY, LLC (Murphy Brothers), Case No. 03-10194, Chapter 7.  ISSUE: Whether Chapter 7 trustee’s proposed settlement of a creditor’s claim should be approved? RULING: The settlement was approved. The objector’s legal concerns regarding the documents underlying the claim could not be sustained, and the settlement was reasonable, in the best interests of the bankruptcy estate, and fair and equitable.

3.    January 31, 2007.  ALMEN, JANET M., Case No, 05-50297, Chapter 13.  ISSUE: Whether the debtor’s attorney was entitled to fees from the bankruptcy estate for services rendered and costs incurred after debtors filed Chapter 7 but before the case converted to Chapter 13, in addition to fees for her Chapter 13 services and costs? RULING: Section 330(a)(1) permits a debtor’s attorney to be paid an administrative expense from the bankruptcy estate only for the Chapter 13 fees. Debtor’s attorney could file a proof of claim against the Chapter 13 estate for services rendered and costs incurred post-petition but pre-conversion.
 

4.    January 31, 2007.  HERDING, JAMIE L.  Case No. 05-42419, Chapter 7.  ISSUE: Whether the debtor could claim a homestead exemption in the marital home that he vacated pre-petition pursuant to a protection order where the debtor was not living in the home on his petition date, where the debtor had not sought to retain the home in his and his wife’s divorce action, and where the debtor disclosed in his Statement of Intention that he was going to surrender the house to the mortgage holder? RULING: The debtor was not permitted to claim a homestead exemption in the marital home. Though the debtor had involuntarily vacated the home, he thereafter exhibited no actual intent to return to that house and use it as his home.

5.    February 21, 2007.  AGUIRRE, ANTONIO M., SR. & KELLI D. (Aguirre v. Fullerton Lumber Co., Inc.), Case No. 01-40161, Adv. No. 06-4048, Chapter 7.  ISSUE: On stipulated facts, whether a mechanics’ lien on Debtors’ homestead was avoidable by the Bankruptcy Court where the exempt homestead was no longer property of the estate when the lien was imposed post-petition and where the materials were furnished by the lien holder post-petition but before Debtors’ case was converted from Chapter 13 to Chapter 7? RULING: Debtors did not identify any bankruptcy law statute that would avoid the mechanics’ lien on their homestead under the facts presented. The parties would have to look to the state court to determine the impact of S.D.C.L. § 43-45-8 on the validity of the lien.
 

6.    February 21, 2007.  CINK, RICHARD J. & CAROLYN J., Case No. 06-40019, Chapter 7.   ISSUE: Whether Debtors’ motion to voluntarily dismiss their case should be granted where the bankruptcy estate contained a non exempt real property interest that could be liquidated to pay claims but where Debtors reported they had made arrangements to pay all their pre-petition creditors? Whether Debtors should be required to turn over information regarding the location and value of the real property interest held by one of the debtors? RULING: Debtors’ motion to voluntarily dismiss their case was denied since the record did not reflect creditors had been paid in full and thus the creditors may be prejudiced if the case were dismissed without a distribution of assets. Debtors were ordered to turn over to the case trustee information about the real property interest.
 

7.    February 21, 2007.  ZUFALL, RONALD H. & REBECCA S. (Spyke, Inc., et al. v. Zufall), Case No. 05-50693, Adv. No. 06-5005, Chapter 7.  ISSUE: Whether Defendants-Debtors were entitled to summary judgment with respect to Plaintiffs’ amended complaint to determine dischargeability under 11 U.S.C. § 523(a)(2)(A)?   RULING: Defendants-Debtors were entitled to summary judgment. Plaintiffs could not rely on a prepetition settlement agreement or a prepetition judgment of confession to establish nondischargeability under 11 U.S.C. § 523(a)(2)(A), because a prepetition agreement in which the debtor purports to waive the benefits of a bankruptcy discharge is void as against public policy and a state court judgment incorporating such a prepetition agreement is unenforceable, and Plaintiffs did not otherwise advance specific facts to create a genuine issue of material fact for trial.
 

8.    March 26, 2007.  LOCKHART-JOHNSON, TERRY L. (Lovald v. GEMB Lending, Inc.), Case No. 05-30151, Adv. No. 06-3001, Chapter 7.   ISSUE: Whether summary judgment should be entered regarding a creditor‛s secured interest in a boat motor on the petition date where the creditor‛s security interest was perfected earlier in Minnesota but where Debtor moved to South Dakota before he filed bankruptcy? RULING: Whether the creditor‛s security interest in the boat motor was still perfected under M.S.A. § 336.9-316 when Debtor filed bankruptcy depended on the date Debtor moved to South Dakota. That date was not of record, so summary judgment could not be entered. A trial on that fact question only will be held if the parties are unable to stipulate to the date of the move.

9.    April 18, 2007.  TRI-STATE ETHANOL COMPANY LLC (Several Related Matters), Case No. 03-10194, Chapter 7.    ISSUE: The Court was presented with several related matters, including an objection to a proof of claim and motions regarding the employment and payment of certain attorneys for the bankruptcy estate. RULING: The Court issued some interim and some final orders and requested additional pleadings or briefs on some of the matters not finally resolved. The most notable ruling discussed the qualifications for employment of special counsel for the estate under 11 U.S.C. § 327(e).


10.    April 30, 2007.  MITCHELL, PAUL W. (Paul W. Mitchell v. Monica Iverson), Case No. 05-50528,  Adv. No. 06-5002, Chapter 7.  ISSUE: Whether Plaintiff-Debtor was entitled to summary judgment on a § 523(a) dischargeability action where Defendant-Creditor had obtained a judgment in state court based only on breach of contract?  RULING: Summary judgment was entered for Plaintiff-Debtor. Where Defendant-Creditor had sought and obtained a default judgment against Debtor in state court that alleged only breach of contract, judicial estoppel precluded Defendant-Creditor from arguing in bankruptcy her late-scheduled claim against Debtor arose from fraud. The fact the default judgment had been obtained in violation of the automatic stay did not affect the application of judicial estoppel.
 

11.    April 30, 2007.  MITCHELL, PAUL W. (Paul W. Mitchell v. Anita Chittenden, et al.), Case No. 05-50528, Adv. No. 06-5006, Chapter 7.  ISSUE: Whether Defendants-Creditors were entitled to summary judgment on Plaintiff-Debtor's  § 523(a)(3) action where they had obtained a pre-petition default judgment against Plaintiff-Debtor in Arizona?  RULING: Summary judgment was denied. Under Arizona law, a default judgment, especially where the defendant makes no appearance in the action, is not entitled to preclusive effect. Therefore, Defendants-Creditors could not rely on the Arizona state court default judgment to establish in bankruptcy their late-filed claim against Plaintiff-Debtor arose from fraud and therefore was nondischargeable.
 

12.    May 7, 2007.  SQUIRES, JULIE A., Case No. 05-10433, Chapter 13.  ISSUE: Whether Debtor’s chapter 13 plan was proposed in good faith?  RULING: No. Debtor’s only unsecured debt would have been nondischargeable in chapter 7; Debtor was motivated to seek chapter 13 relief, not by a sincere desire to repay her creditors, but by the rapidly approaching effective date of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, under which her only unsecured debt would no longer have been dischargeable in chapter 13; and Debtor’s pre-petition conduct in misstating her husband’s income and net worth on her applications for veterans benefits three times over the course of several years did not support a finding of good faith.
 

13.    June 19, 2007.  TRI-STATE ETHANOL COMPANY LLC, Case No. 03-10194, Chapter 7.  ISSUE: Whether the trustee's proposed settlement of a large claim should be approved?   RULING: The settlement was approved based on the application of the four factors set forth in Drexel Burnham Lambert, Inc. v. Flight Transportation Corp. (In re Flight Transportation Corp. Securities Litigation), 730 F.2d 1128, 1135-36 (8th Cir. 1984).