2008 Decisions

Charles L. Nail, Jr.,  Chief Bankruptcy Judge

Numerical Listing

2008 DECISION SUMMARIES

Charles L. Nail, Jr., Chief Bankruptcy Judge

1.  March 3, 2008.  KLUNDT, DAVID LEE AND SHARON RUTH d/b/a Timelessescents And Fine Things. Case No. 05-42197, Chapter 7.  Issue I: Whether medical expense benefits from Debtors' vehicle insurance policy and personal injury settlement funds received due to Debtors' injuries from a pre-petition auto accident are property of the estate?  Ruling: Both the insurance benefits and the personal injury settlement funds were property of the bankruptcy estate. No party in interest demonstrated how any exclusion under 11 U.S.C. § 541 applied or how state law excluded the property from the estate upon application of § 541(a).  Issue II: Whether a post-petition creditor who provided medical services to one of the debtors related to a pre-petition accident had a priority interest in the medical expense benefits from Debtors' vehicle insurance policy or the personal injury settlement funds that were property of the estate?  Ruling: No party in interest demonstrated, under applicable bankruptcy or nonbankruptcy law, how the medical provider's post-petition claim could be paid from the insurance proceeds and settlement funds that were property of the bankruptcy estate.

2.  May 16, 2008.  MC GREEVY, STEPHEN J. AND SUSAN S. (Trustee Lovald v. Stephen J. & Susan S. McGreevy, Avera McKennan Hospital, Wellmark Blue Cross Blue Shield of SD, and United Fire Group).  Case No. 04-41113, Adv. No. 07-4050, Chapter 7.  Issue: The case trustee asked the Court to determine the interests of several parties in settlement funds the bankruptcy estate received post-petition arising from one debtor's pre-petition car accident. Ruling: The Court concluded, in separate decisions: (1) the debtor's health insurance provider held a subrogated interest in the settlement funds to the extent of benefits paid related to the accident, both pre- and post-petition, and subrogated funds were excluded from the bankruptcy estate; (2) a post-petition medical care provider, a hospital, did not have any interest in the settlement funds or the debtor's insurance benefits based on post-petition hospital liens or admission consent forms signed by the debtor; and (3) the debtors' interest in the settlement funds was limited to the amount they had claimed exempt under S.D.C.L. § 43-45-4.

3.  June 30, 2008.  NELSON, DANIEL A. (Tidewater Finance Company v. Daniel A. Nelson) - Plaintiff Decision.  Case No. 07-40093, Adv. No. 07-4035, Chapter 7.  Issue: Whether Plaintiff was entitled to summary judgment with respect to its complaint to determine dischargeability under 11 U.S.C. § 523(a)(2)(A)?  Ruling:  No. Plaintiff failed to point the Court to anything in the record to suggest Debtor-Defendant knew his statements were false at the times they were made. Moreover, while no defense to an insufficient showing is required, the only evidence in the record of what Debtor-Defendant knew or did not know at the times in question was that provided by Debtor-Defendant's affidavit, in which he denied knowing the statements were false at the times they were made. Thus, even if Plaintiff had pointed the Court to evidence in the record to suggest Debtor-Defendant knew the statements were false at the times they were made, a genuine issue of fact would have remained.

4. June 30, 2008.  NELSON, DANIEL A. (Tidewater Finance Company v. Daniel A. Nelson) - Defendant Decision.  Case No. 07-40093, Adv. No. 07-4035, Chapter 7.  Issue: Whether Debtor-Defendant was entitled to summary judgment with respect to Plaintiff's complaint to determine dischargeability under 11 U.S.C. § 523(a)(2)(A)?  Ruling: Yes. The only evidence in the record of what Debtor-Defendant knew or did not know at the times he was alleged to have made the statements in question was that provided by Debtor-Defendant's affidavit, in which he denied knowing the statements were false at the times they were made. Plaintiff failed to advance specific facts to create a genuine issue of material fact regarding Debtor-Defendant's knowledge for trial. Specifically, Plaintiff did not point the Court to anything in the record to suggest, contrary to the declarations in his affidavit, Debtor-Defendant knew his statements were false at the times they were made.

5.  July 10, 2008.  JOHNSON, LONNY D. and NANCY J., Bankr. No. 04-40842, Chapter 13 (bench ruling, July 10, 2008).  Issue: Whether the Court should approve the parties' agreement to settle Debtors' disposable income obligation for $19,000? Ruling: No. Referring to the Internal Revenue Service's national standards for food, clothing, and other items and the Internal Revenue Service's local standards for housing, utilities, and transportation to determine the reasonableness and necessity of Debtors' expenditures for those items, the Court estimated Debtors' disposable income was in excess of $40,000. Relying on Tri-State Financial, LLC v. Lovald (In re Tri-State Financial, LLC), 525 F.3d 649, 654 (8th Cir. 2008) (citations therein), which sets forth the four factors that must be considered in determining the reasonableness of a proposed settlement, the Court concluded the parties' settlement should not be approved.

6.    July 18, 2008.  MC NARY, THOMAS W. & JANET M., Bankr. No. 08-50120, Chapter 7.  Issue: Whether on the United States Trustee's motion for judgment on the pleadings, Debtors' chapter 7 case should be dismissed for abuse pursuant to 11 U.S.C. § 707(b)(3)? Ruling: Yes. Debtors admitted having monthly net income of $162.00. Debtors also admitted giving their adult children $300.00 per month. If they committed those sums to paying their unsecured creditors, Debtors could pay $16,632.00, less chapter 13 trustee fees, over a 36-month period or $27,720.00, less chapter 13 trustee fees, over a 60-month period. Debtors thus had the ability to fund a meaningful chapter 13 plan.

7.      September 23, 2008.  MEFFERD, LARRY CHARLES and JULIE ANN, Bankr. No. 08-30034, Chapter 7 (bench ruling, September 23, 2008). Issue 1: Whether under S.D.C.L. § 43-45-4, Debtors could exempt two accounts receivable, valued at "unknown" on their schedule B, by claiming a value of "all" exempt on their schedule C? Issue 2: Whether under S.D.C.L. § 43-45-4, Debtors could exempt their accrued but unpaid wages and their 2008 tax refund, valued at "unknown" on their schedule B, by claiming a value of "unknown" exempt on their schedule C? Ruling: No. While it may not always be possible to assign a precise value to an item of personal property for the purposes of schedule B, a debtor must specify the dollar amount being claimed exempt under S.D.C.L. § 43-45-4 on schedule C. A claim of "all" or "unknown" is inappropriate.

8.    October 8, 2008.  DOUGHERTY, PATRICIA ARLENE, Bank. No. 08-40378, Chapter 13 (bench ruling, October 8, 2008).  Issue: Whether Debtor's plan was proposed in good faith within the meaning of 11 U.S.C. § 1325(a)(3)?   Ruling: No. Debtor had annual income of nearly $115,000. Her budget for a family of two was more than generous, but she had made no real effort to reduce her spending for the benefit of her unsecured creditors. She proposed to retain a house worth between $260,000 and $300,000 by making payments of more than $2,500 per month, when the Internal Revenue Service's guidelines allowed her only $858 per month, when she had no equity in the house to protect or preserve, and when her unsecured creditors would receive virtually nothing under the plan (and less than Debtor spent on her pet). Considering the totality of the circumstances, Debtor's plan was not proposed in good faith, and confirmation was denied.

9.    October 17, 2008.  CAMERON, GERALD W. & RENA E. DORCAS (Pioneer Bank & Trust as Special Administrator and Personal Representative for the Estate of Eleanor Youman Sigloh v. Gerald W. & Rena E. Dorcas Cameron), Bank No. 08-50005, Adversary No. 08-5007, Chapter 7.  Issue: Whether Debtors' fiduciary duty to an elderly relative under two powers of attorney met the federal definition of a fiduciary under 11 U.S.C. § 523(a)(4) so as to allow entry of summary judgment for the plaintiff-bank who had obtained, as the elderly person's estate representative, a state court judgment against Debtors for their misuse of the elderly relative's assets?  Ruling: Yes, summary judgment was entered for the plaintiff-bank. Debtors were a fiduciary under § 523(a)(4) because the initial power of attorney established the parameters of the fiduciary relationship and the res of the trust but did not evidence any expectation of supervision by the elderly person; the relationship was not contractual in nature; and the trust did not arise from Debtors' wrongdoing.