Alaska Bankruptcy Reports - Digest Volume 3

  Menu   3 ABR 1: Ch. 13, stay, feasibility, good faith, lack of equity, mortgage arrearages (Singleton).

Remanded to Judge Ross.

Creditors appeal from confirmation of Fergusons' Ch. 13 Plan.

The "lack of equity" test is inapplicable in Ch. 13, and Creditors' have not shown that Ross abused his discretion in refusing to lift the stay for cause. Their argument that he erred in not requiring Fergusons to seek cheaper housing is without merit. The finding that the Plan was feasible was not clearly erroneous. But the contention that Ross erred in finding that the Plan was proposed in good faith is impossible to evaluate on this record. Remanded for further proceedings consistent with Lomas Mortgage (2 ABR 323).

Consistent with Judge Holland's holding in Goldome Realty (2 ABR 414) that a debtor who takes advantage of the long-term debt provisions of 1322(b)(5) must cure all arrearages within a reasonable time, Ross erred in allocating reserved mortgage payments to unsecured creditors, as these arrearages must be cured if Debtors are to retain their home at conclusion of the Plan.

Alaska Housing Finance Corp. et al v. Ferguson, 9/29/92.

Chris Johansen, Anchorage, for Debtors; Gordon Schadt, Anchorage, for Creditors.

  Menu    3 ABR 8: Ch. 7, discharge exception/objection, fraudulent transfers, false oath, failure to explain loss of assets, fraud in obtaining loan (Holland).

Judge MacDonald's decision (2 ABR 248) that Normans' debt is nondischargeable under 727(a)(2), (4), and (5) is affirmed; his decision that the debt should not be excepted under 523 is reversed.

Debtors engaged in fraudulent conduct in procuring a loan from Cummins Financial to build a tourist boat. The vessel was repossessed and Cummins obtained a deficiency judgment against Normans, who subsequently filed Ch. 7. Both parties appeal.

MacDonald's finding that Debtors' transfer of funds to North Rim Bank and deposit of checks into a minor daughter's account was made to hinder, delay, or defraud Cummins is not clearly erroneous, nor was the finding that they made false statements regarding cash on hand and value of Dr. Norman's interest in Anchorage Anesthesia Affiliates. Debtors argue that business failure caused by the Exxon oil spill was sufficient explanation for failure to pay debts. But considering the large amount of income, concealment and misrepresentation of funds, size of investment in the vessel, and value of stock in the professional corporation, MacDonald's finding that they failed to satisfactorily explain loss of assets is not clearly erroneous.

MacDonald found that although Cummins had proved the first 6 elements of nondischargeable fraud under 523, it had failed to link the fraud with actual damages. That conclusion would be correct under tort analysis. But in bankruptcy discharge, the lender need prove only "cause in fact" --- that it would not have made the loan but for the fraud --- and not "legal causation" --- that the reason for the default was related to the misrepresentations.

Cummins Financial v. Norman [In re Norman], 11/5/92.

Jan Ostrovsky (Bogle & Gates), Anchorage, for Cummins; Scott Dattan, Anchorage, for Debtors.

  Menu    3 ABR 37: Ch. 7, discharge, fraud, damages (BAP, unpublished).

Judge MacDonald's judgment for Plaintiffs exempting debt from discharge (1 ABR 488) affirmed.

The record supports the finding that financial statements regarding Debtor's landscape business were false and were reasonably relied upon by Morrows in buying it, and that Debtor intended to deceive Morrows. MacDonald did not err in his damages calculation; indeed, a case could be made for a greater award.

May v. Morrow [In re May], 9/28/92.

David May, Anchorage, pro se; Paul Davis, Anchorage, for Morrows.

  Menu    3 ABR 49: Ch. 11, attorney fees, costs (MacDonald).

Giannini & Associates is allowed $267,942 fees & costs of $371,000 requested in its final application; Birch, Horton, Bittner & Cherot is allowed $188,729 of $244,270 requested. Fees reduced for duplication of services, attendance at board meetings, clerical/legal secretary functions, and research on fundamental bankruptcy principles. Costs reduced for copies, fax, courier, Westlaw, Lexis, and secretarial overtime.

In re Chugach Alaska, 9/29/92.

  Menu    3 ABR 59: Ch. 13, tax lien, pension, spendthrift trust (BAP, unpublished).

Judge MacDonald's holding that Debtor's interest in an ERISA retirement trust is subject to a federal tax lien (2 ABR 82) affirmed.

A debtor's interest in an ERISA pension plan is property or a right to property to which an IRS tax lien may attach pursuant to 26 USC 6321.

Anderson v. US [In re Anderson], 9/30/92.

Gregory Oczkus, Anchorage, for Debtor; Robert Branman (Dept. of Justice), Washington, DC.

  Menu    3 ABR 68: Ch. 13, mortgage, mortgage insurance, transaction costs (Ninth Circuit).

Judge Singleton affirmed.

At the time of their Ch. 13 petition, Debtors' residence was worth less than the $155,000 balance outstanding on the debt to Lomas. Singleton properly affirmed the Bankruptcy Court's order bifurcating Lomas' claim into secured and unsecured portions and letting Debtors modify the unsecured portion. This Court declines to reexamine Hougland (9th Cir. 1989), which permitted modification of unsecured portions of the debt. Singleton also properly concluded that the Bankruptcy Court properly excluded the mortgage insurance from valuation of the secured claim. Nor did he err in reversing the Bankruptcy Court's deduction of transaction costs from value of the secured claim.

Lomas Mortgage USA v. Weise, 12/4/92.

Richard Ullstrom (Routh, Crabtree & Harbour), Anchorage, for Lomas; David Rankine (McNall & Rankine), Anchorage, for Debtors.

  Menu    3 ABR 83: Ch. 13, mortgage, stripdown (Ninth Circuit, unpublished).

Judge Kleinfeld's judgment affirming Bankruptcy Court's confirmation of Ch. 13 Plan affirmed.

The Court declines to overturn Hougland, which was recently reaffirmed in Lomas (above).

Alaska Housing Finance Corp. v. Kurth [In re Kurth], 12/9/92.

  Menu    3 ABR 86: Child support, guardian ad litem fees (MacDonald).

Guardian ad litem fees incurred in child custody litigation are nondischargeable child support under 523(a)(5).

Harrington v. Wood [In re Wood], 12/16/92.

Alan Sherry, Anchorage, for Harrington; Harry Goldbar, Anchorage, for Wood.

  Menu    3 ABR 89: Stay violation, turnover, breach of contract, collateral estoppel, attorney fees/costs, consequential damages (Ross).

The parties stipulated that VAFS violated the automatic stay when it sold the computer equipment and software and subsequently rented and/or sold it. Damages will be determined at trial based on 362(h). The equipment has been sold to third parties; therefore, the necessary parties are not present to make a ruling on turnover. A Michigan judgment on damages from breach of contract estops relitigation in this Court. The note that was subject of the Michigan action governs fees/costs, although the Court does not foreclose equitable fees/costs due to improper behavior by Wagner in avoiding collection of the Michigan judgment. Consequential damages alleged as a result of nonpayment of the note are denied.

Barstow and Wagner v. Van Arnem Financial Services [In re Wagner], 2/10/93.

Karl Walter, Anchorage, for Debtor; James DeWitt (Guess & Rudd), Fairbanks, for Van Arnem.

  Menu    3 ABR 93: Ch. 7, dismissal, notice (Ross).

Debtor's motion to dismiss on grounds that he may have filed too early to discharge federal incomes taxes denied because of inadequate notice and possible detriment to a creditor.

In re Willison, 1/21/93.

Robert Willison, pro se.

  Menu    3 ABR 96: Jury (Ross).

Recommended that US District Court withdraw reference, on the basis that a bankruptcy court lacks authority to conduct a jury trial.

Battley v. Kemp [In re Kemp-Paulucci Seafoods], 3/3/93.

Cabot Christianson, Anchorage, for Battley; Jan Ostrovsky (Bogle & Gates), Anchorage, for Kemp.

  Menu    3 ABR 99: Jury (Ross).

Addendum to 3 ABR 96: Kemp has not filed a proof of claim; had he done so, he would have submitted himself to jurisdiction of this Court and waived the right to a jury.

Battley v. Kemp, 3/5/93.

   Menu    3 ABR 101: Ch. 7, exemption, homestead, 6-plex, partnership (MacDonald).

Debtor's claim of exemption in a 6-plex disallowed.

The 6-plex is owned by Debtor and creditor McNall as tenants in common and is partnership property. Debtor lives in one of the units. Although he cannot claim a homestead exemption, he may be able to claim an exemption for his personal property interest in the partnership.

In re Brady, 3/12/93.

Gregory Oczkus, Anchorage, for Debtor; David Rankine (McNall & Rankine), Anchorage, for McNall; Penny Dufek, Anchorage, for Trustee.

  Menu    3 ABR 106: Ch. 7, dischargeability, willful & malicious injury, res judicata (MacDonald).

Summary judgment for Defendant.

Debtor Holta bought beer for his friends with a false Alaska ID in Oregon. All were under-age. His friend Cloutier lost control of his car and hit Damesek head-on. Damesek sued Holta for buying the beer and letting Cloutier consume it. Default was entered against Holta in Oregon. Holta subsequently filed Ch. 7 and seeks discharge. Damesek alleges that Holta caused willful & malicious injury by supplying alcohol to Cloutier.

The Oregon judgment is not res judicata on the issue of willful & malicious injury since the case against Holta was not actually litigated.

While the purchase & dissemination of beer were intentional acts, they were not malicious. The act of sharing beer was not certain or almost certain to produce harm. A myriad of scenarios could have occurred, most of which were dependent solely on Cloutier's actions. The Court is unwilling to stretch "willful & malicious injury" to find a nondischargeable debt under these circumstances.

Damesek v. Holta, 4/19/93.

Paul Paslay, Anchorage, for Holta; Michael White, Anchorage, for Damesek.

  Menu    3 ABR 114: Trustee fees, attorney fees/costs (Sedwick).

Remanded to Judge Ross to quantify the benefit provided Trustee Barstow and his counsel Bundy & Christianson to the secured creditors. Subject to any limitation arising from the requirement that a direct benefit to the secured creditors be provided: (1) the order awarding Barstow 3% of the $850,000 sales price for the fish processing plant is affirmed; (2) the award of fees & costs to Bundy & Christianson is affirmed except for parking tickets, messenger services, and overnight deliveries, and FAX and copy charges shall be reduced to actual costs incurred. Any fees & expenses recoverable under 506(c) are to be allocated pro rata among secured creditors benefitting from actions of Trustee and counsel.

F/V Pacific Star and F/V Topaz v. Barstow [In re Eagle Fisheries], 4/15/93.

Thomas Yerbich, Anchorage, for Appellants Pacific Star and Topaz; Cabot Christianson, Anchorage, for Barstow.

  Menu    3 ABR 127: Ch. 11, leasehold interest, fraudulent transfer, preference (Holland).

Judge Ross's decision denying Stewart/Hyde's motion for summary judgment is affirmed. Stewart/ Hyde is not entitled to an order declaring the Ground Lease surrendered --- not because the issue is moot, as Ross held, but because Debtors timely assumed the lease.

This Court joins courts which have held that, in situations where the leasehold interest is brought back into the estate as a result of a successful fraudulent transfer action or preference action, the 60 days under 365(d)(4) begins to run from the date the leasehold interest in the debtor is reinstated, rather than the date of entry of the order for relief. Since Debtors moved to assume the lease within 60 days after Ross determined that it was part of Debtors' estates, Debtors timely assumed the lease.

In re Olympic, Zamarello, and CBS Real Estate, 1/11/93.

Kermit Barker, Anchorage, for Stewart/Hyde; Walter Featherly (Koval & Featherly), Anchorage, for Debtors; Jon Dawson, Anchorage, for Weyerhauser Mortgage; Cabot Christianson, Anchorage, for Unsecured Creditors Committee.

  Menu    3 ABR 139: Ch. 11, attorney fees (Holland).

Judge Ross's order for Barry Jackson to turn over the full amount of a retainer received from L&C one day before he filed its Ch. 11 petition affirmed.

The order was based on motion of L&C's primary creditor FHLMC. Jackson argues that the funds paid to him were not collateral of FHLMC, he was paid out of the interest on the rents, FHLMC is barred from seeking reimbursement by laches, and Ross failed to consider the type of retainer used.

The proper course would have been for Jackson to deposit the retainer in his trust account, disclose the terms of his agreement with L&C to the Court, and apply for a draw against the trust funds under 331. Although at the time he had entered into his fee agreement with L&C no court had yet ruled that FHLMC had a perfected security interest in the funds, he was on notice that it claimed such interest and would oppose any transfer.

Jackson v. FHLMC [In re L&C Development], 1/20/93.

Barry Jackson, Fairbanks, for Plaintiff; John Siemers (Burr, Pease & Kurtz), Anchorage, for FHLMC.

  Menu    3 ABR 158: Fraudulent transfer, statute of limitations (Singleton).

Judge Ross's order (2 ABR 269) setting aside a fraudulent transfer after equitably tolling the statute affirmed.

Debtors argue that statutes of limitation in bankruptcy cannot be tolled. However, the 9th Circuit would likely follow the 8th and hold that debtors' conduct may toll the statute in an appropriate case.

In re Olsen, 1/11/93.

John Olsen, pro se; Bernd Guetschow, Anchorage, for Trustee Zerbetz; Joseph Moran, Anchorage, for First Interstate Bank.

  Menu    3 ABR 161: Ch. 7, tax lien, pension (BAP).

Judge MacDonald's decision (2 ABR 193) to allow attachment of a federal tax lien to Debtors' interest in a vested pension plan affirmed.

The interest constitutes "property" or "rights to property" that are subject to a federal tax lien under 26 USC 6321.

Raihl v. US and Barstow [In re Raihl], 4/6/93.

Erik LeRoy, Anchorage, for Plaintiffs; Robert Branman (IRS), Washington, DC; Michael Mills (Bankston & McCollum), Anchorage, for Trustee Barstow.

  Menu    3 ABR 170: Ch. 11, labor lien, evidence from prior hearing, attorney fees, marshaling (Ross).

$77,000 proceeds from sale of Lot 10 shall be paid to BF Properties as payment on note signed by Debtor. BF shall credit a $56,000 payment as if paid 9/5/92 in recognition of value found by the Court to have been received in non-judicial foreclosure of Lots 11 & 12.

Any labor lien claims do not arise from work on "original construction" as used in AS 34.35.060(c) and therefore the labor lien claimants are subordinate to trust deed beneficiary BF Properties.

Since both BF and Debtor as well as some of the lien claimants participated in the relief from stay hearing, reliance on the prior testimony is appropriate.

In determining reasonable fees to include as part of the secured claim, a bankruptcy court should apply federal bankruptcy law rather than Alaska law.

It is inappropriate to apply the doctrine of marshalling to require BF to look to Debtor's 16% interest in BF before being allowed to reimburse itself out of the proceeds of Lot 10.

In re Seaward, 1/12/93.

Thomas Seaward, Anchorage, pro se; Walter Featherly (Koval & Featherly), Anchorage, for BF; Thomas Tatka and Reginald Christie, Anchorage, for lien claimants.

  Menu    3 ABR 184: Ch. 11, stay, prepetition consent, good faith (MacDonald).

Capital Investments' motion for relief from stay denied.

A prepetition consent to relief from stay, entered into in a state court collection suit, is unenforceable under 541(c)(1) which provides that an interest of the debtor in property becomes property of the estate notwithstanding any agreement. Prepetition agreements resulting in waiver of fundamental rights in bankruptcy have been found to be void as against public policy.

Capital is also not entitled to relief from stay on the basis of bad faith. Debtor's actions are not a "clear abuse" of the process, Capital has adequate protection, and the property is necessary to reorganization.

In re Aurora Towing, 5/13/93.

William Walker, Anchorage, for Debtor; Raymond Royce, Anchorage, for Capital Investments.

  Menu    3 ABR 190: Ch. 7, exemption, homestead, duplex (MacDonald).

Trustee's objections to Debtors claim of exempt property in a duplex and 3 adjoining lots denied.

Frank and Carolyn Rose jointly owned a duplex in Anchorage. Frank has been living near Fairbanks. Carolyn quitclaimed her interest to Frank 9/21/92. They filed Ch. 7 in 2/93 and 3 days later divorced. Frank is entitled to a homestead exemption in the property, even if he did not use it as his principal residence, since as of petition date it served as principal residence of his wife and son.

Debtors have always used the lots for homestead purposes, and there is no equity above the $54,000 homestead exemption and $38,000 underlying encumbrance.

In re Rose, 5/14/93.

David Rankine (McNall & Rankine), Anchorage, for Debtors; Michael Mills (Bankston & McCollum), Anchorage, for Trustee.

  Menu    3 ABR 195: Ch. 11, equity security holders' committee (Ross).

Motion to remove member of Equity Security Holders' Committee denied without prejudice.

The power to appoint & delete members of the creditors' committee now resides exclusively with the US Trustee. Presumably the same is true for equity security holders' committees.

In re O'Malley Fund, 6/11/93.

Thomas Yerbich, Anchorage, for Debtor; Walter Featherly (Koval & Featherly), Anchorage, for Dolores Hyer; Cabot Christianson, Anchorage, for the Committee.

  Menu    3 ABR 196: Ch. 7, fishing boat, calculation of unsecured claim, transaction costs, interest (Ross).

SBPCA's unsecured claim on a note secured by a preferred ship's mortgage and SBPCA stock is tentatively found to be $75,575. Debtors may seek reconsideration if they establish that a higher secured claim should be found which would reduce the unsecured claim and possibly leave them with some cash.

The parties have failed to go through the calculations contemplated by the Code in the proper sequence: figure SBPCA's total allowed claim on the petition date pursuant to 502, figure the allowed amount of its secured claim under 506(a), determine the remaining allowed unsecured claim by deducting the allowed secured claim from the total claim, and recalculate the third step using the appropriate interest allowance under 726(a)(5) if this is a solvent case. Whether it is solvent depends on whether the Trustee or Colpitts prevails with respect to entitlement to an Alaska Limited Entry Permit for the Bristol Bay salmon fishery.

SBPCA's foreclosure costs must be considered in a liquidation case in determining the allowed secured claim.

The appropriate interest rate is the federal judgment rate if this is a solvent estate.

In re Colpitts, 6/30/93.

Dan Allan & Stephenie Patel, Anchorage, for Debtors; Ronald Offret (Aglietti, Rodey & Offret), Anchorage, for the Trustee; UST Kenneth Battley.

  Menu    3 ABR 205: Ch. 11, taxes, Native corporation (Holland).

Judge MacDonald's ruling that Chugach may carryback its losses from 1990 to offset income assigned from Waste Management Inc. (a purchaser of NOLs from Chugach) to its 1987 return is affirmed.

As to the second issue involving application of the AMT to sale of the NOLs, MacDonald concluded that nothing in the special legislation could be interpreted as exempting Native corporations from AMT liability and so ruled against Chugach. However, he erred in failing to address Chugach's position that it should be permitted to retain sufficient assigned income to make use of all of its NOLs. The issue of whether Chugach's AMT income may be defined in such a way that no AMT liability arises for the year in question was not reached by MacDonald. Remanded for further proceedings on this issue.

IRS v. Chugach Alaska Corp., 6/25/93.

Giannini & Associates, Anchorage, for Chugach.

  Menu    3 ABR 220, 226: Ch. 11, post-confirmation collection of pre-confirmation administrative expense, notice, excusable neglect (Ross).

Summary judgment for KPB that it did not violate the discharge injunction by bringing a Superior Court action 4 years after confirmation to collect unpaid sales taxes from Debtor which had accrued during the Ch. 11 case. The taxes are not discharged, and KPB is not enjoined from seeking to collect them. Motion to reconsider denied (3 ABR 226).

No notice of confirmation was sent by the Court, and no separate notice of confirmation or of the 30-day bar date provided in the Plan was sent by Debtor or the Court. While lack of notice raises a due process question, summary judgment is based on excusable neglect under Rule 9006(b)(2). Among the Dix factors: the delay does not prejudice Debtor since it essentially got a $30,000 loan from KPB by not having to pay its administrative expense in cash shortly after confirmation, and the delay was beyond reasonable control of KPB since it never had proper notice of the deadline.

D&A Supermarkets v. Kenai Peninsula Borough [In re D&A Supermarkets], 8/4/93.

Thomas Yerbich, Anchorage, for D&A; Bryan Merrill, Anchorage, for KPB.

  Menu    3 ABR 230: Ch. 13, priority tax claim (Ross).

A proof of claim for personal property taxes is allowed as a priority tax claim, to be paid without interest. A proof of claim for real property taxes is denied. Order on reconsideration.

Under Alaska law, the taxpayer is not personally liable for real property taxes which are in rem charges against the land.

In re Smith,8/12/93.

Chris Johansen, Anchorage, for Debtors; Dep. Kenai Peninsula Borough Atty. Kristine Schmidt.

  Menu    3 ABR 232: Attorney fees, costs (Ninth Circuit, unpublished).

Judge Singleton affirmed the Bankruptcy Court's award of 50% of Debtor's fees and costs in connection with a creditor's claim which was disallowed pursuant to Alaska law. Under Alaska law the prevailing party in a civil action may be awarded fees. Therefore, the Court did not err by awarding fees. However, it erred in awarding attorney travel expenses.

Edenso v. Haida Corp. [In re Haida], 8/5/93.

Charles Evans, Anchorage, for Edenso; Cabot Christianson, Anchorage, for Haida.

   Menu    3 ABR 235, 237, 239: Ch. 13, mortgage, bifurcation (Ninth Circuit, unpublished).

Judge Singleton, relying on Lomas Mortgage (9th Cir. 1992), affirmed the Bankruptcy Court's bifurcation of the mortgagees' claims into secured and unsecured claims. Lomas has been overruled in Nobleman (USSC 1993). Reversed and remanded for reconsideration of the plans in light of Nobleman.

Alaska Housing Finance Corp. v. Graham; Lomas Mortgage USA v. Roberts; National Bank of Alaska v. Parker; 8/16/93.

Richard Ullstrom (Routh, Crabtree & Harbour), Anchorage, for AHFC, Lomas, and NBA; Chris Johansen, Anchorage, for Graham; William Artus (Artus, Choquette & Williams), Anchorage, for Roberts; Robert McFarlane (Law Offices of McNall), Anchorage, for Parker.

  Menu    3 ABR 241: Ch. 7, sale of estate property, stay pending appeal (Ninth Circuit, unpublished).

Judge Holland's affirmance of a Bankruptcy Court order authorizing sale of estate property is affirmed.

Holland properly held that because Debtor had failed to obtain a stay pending appeal her challenge to the sale was moot under 363(m). Exceptions argued by Debtor --- statutory right of redemption, lack of good faith by the buyer, and erroneous fraudulent conveyance judgment --- are rejected.

Preblich v. Battley and Sammut [In re Preblich], 8/24/93.

Evalyn Preblich, Anchorage, pro se; Cabot Christianson, Anchorage, for Battley.

  Menu    3 ABR 247: Ch. 7, fraud, damages (Ninth Circuit, unpublished).

BAP's affirmance of Judge MacDonald's determination of fraud damages (3 ABR 37) affirmed.

Morrows did not benefit from ownership of the landscaping business and received nothing of value for their purchase price. Therefore, MacDonald correctly concluded that the difference between the purchase price ($120,000) and value received was $120,000.

May v. Morrow [In re May], 9/1/93.

David May, Anchorage, pro se; Paul Davis, Anchorage, for Morrows.

  Menu    3 ABR 251: Ch. 11, bad faith filing, failure to prosecute, dismissal (MacDonald).

Askinuk's Ch. 11 petition, filed to obtain a stay pending appeal after failing to file an appeal bond, was not filed in bad faith. It could not continue to do business facing depletion of its cash & inventory by judgment creditor ANICA. Dismissal is inappropriate on that basis. However, dismissal is appropriate for cause. Askinuk has been delinquent in virtually every phase of the bankruptcy process.

In re Askinuk Corp., 9/7/93.

Lee Petersen, Anchorage, for Debtor; AUST Barbara Franklin; Harold Snow (Robertson, Monagle & Eastaugh), Anchorage, for ANICA.

  Menu    3 ABR 256: Ch. 13 eligibility, good faith filing, disposable income, estimation of claims (MacDonald).

Confirmation hearing continued pending adjudication of wrongful death actions against Debtor.

Debtor filed Ch. 13 after being sued following murder acquittal on grounds of self-defense. His Plan calls for payment of $100/mo for 36 months plus 50% of his plumber income in excess of $2,900 after taxes and union dues.

Ch. 13 eligibility is met. Although the claims are in excess of $1 million, they are contingent and unliquidated.

Debtor's desire to avoid expensive litigation will not necessarily be served by filing Ch. 13. This Court's jurisdiction is limited to estimation of claims. As Ch. 13 claimants are not entitled to vote, estimation of the wrongful death claims serves no purpose. They must be tried in Federal District Court. The net effect of Debtor's filing has been to change the forum of the wrongful death cases. He must still defend them and there may be no appreciable savings to him by defending in federal rather than state court. But there is nothing so adverse about his conduct or pleadings to warrant a finding of bad faith. However, until the claims have been adjudicated, this Court cannot approve or disapprove the Plan on disposable income grounds. Until the claims are allowed, the confirmation process must grind to a halt.

In re Young, 9/9/93.

Jan Ostrovsky, Anchorage, for Debtor; Lawrence Pederson, Anchorage, for S. Hamlie; Kenneth Jarvi, Anchorage, for R. Hamlie.

  Menu    3 ABR 261: Ch. 7, dischargeability, fraudulent transfers, liquor license (Ross).

Although William & Lillian Harris put forth various reasons rationalizing certain transfers of Viking Restaurant & Lounge and their own property 11/86-2/87, certain transfers were to a large degree to hinder, delay, and/or defraud creditors, principally Loveless/ Tollefson Properties. Timing of transactions, relationship to the transferees, and suspicious structuring are badges of fraud. Harrises retained continuing control of assets notwithstanding the appearance of having made the transfer and therefore were within the one-year limit of 727(a)(2). Harrises discharge denied.

Notwithstanding fraudulent transfers of other properties, nothing Harrises have done with respect to the liquor license in relation to their creditors warrants denial of their claim for an exemption for the license.

Transfers of Shelter Island and Windham Bay property are avoided. Transfer of the restaurant property to THC and restaurant property sold by Creekpaum and proceeds of the note should be recovered for benefit of the VRLI estate.

Dealings of Harrises and the other Defendants in various other properties are not avoidable transactions.

Loveless/Tollefson Properties v. Harris (Viking Restaurant & Lounge); Wild v. Harris et al [In re Harris] 9/13/93.

Stephen Pearson, Juneau, for Loveless/Tollefson; William Olmstead (Domke & Olmstead), Juneau, for Defendants except Larry Leap.

  Menu    3 ABR 270: Ch. 7, service (Ross).

Debtors' motion to dismiss denied.

A copy of the complaint was mailed to Debtors' attorney but not Debtors. Rule 4(j) dismissal is not required, however, because Debtor's attorney made what was analogous to a general appearance by stipulating with LTP's attorney that the liquor license challenge should be consolidated with the adversary proceeding. There is also justification under the Whale test to avoid strict adherence to the rule.

Loveless/Tollefson Properties, 9/13/93.

Stephen Pearson, Juneau, for Loveless/Tollefson; William Olmstead (Domke & Olmstead), Juneau, for Defendants.

  Menu    3 ABR 273: Ch. 11, proof of claim, timeliness (Ross).

Motion to bar untimely claim denied.

Frank Blood's proof of claim for $14,415 was filed a month after the bar date. He was listed on the schedules as having a claim for $0. It will be treated as a "deemed filed" claim which is subject to amendment.

In re Harbor Fuel (Wolverine Gas & Oil), 10/7/93.

Michael Mills (Bankston & McCollum), Anchorage, for Harbor Fuel; Ronald Offret (Aglietti, Rodey & Offret), Anchorage, for Blood.

  Menu    3 ABR 275: Ch. 11, tax lien, liquor license (Ninth Circuit).

BAP affirmed Judge Ross's ruling that while a liquor license is property to which a federal tax lien may attach, the prior tax lien was subordinate to claims of creditors who filed objections to transfer of the license under AS 04.11.360(4)(A) (1 ABR 129, 2 ABR 127). The US contends that to the extent that 360 grants the state, municipalities, and third-party creditors priority over a federal tax lien which was perfected prior to the state liens it is preempted by federal law. In accordance with Battley (9th Cir. 1992), that portion of the judgment letting the State condition sale of the license upon satisfaction of Debtor's obligation to pay state and municipal taxes is affirmed; that portion subordinating the prior federal tax lien to claims of trade creditors who filed objections to sale of the license under the Alaska statute is reversed.

In re Stone (The Broiler); US v. Stone, Alaska Hotel & Restaurant Trust Funds, K&L Distributors, et al; 9/22/93.

William Estabrook (Tax Div., Dept. of Justice), DC; Asst. AG Teresa Williams; Randall Simpson (Jermain, Dunnagan & Owens), Anchorage, for Defendants.

  Menu    3 ABR 285: Ch. 7, service of government agency, pleading, filing fee (Ross).

The SBA seeks to dismiss for insufficient service, failure to state a cause of action, and failure to pay the filing fee.

Debtor did not serve the US. Therefore, the complaint will be dismissed in light of the Court's perception that he has been manipulating the system. If the Trustee feels that there is merit in the suit, he can move for reconsideration or refile.

The complaint should not be dismissed for lack of sufficient factual allegations. The rules do not require a claimant to set out in detail the facts upon which he bases his claim.

Debtor appears to be acting as DIP, in which case the fee should be payable only from the estate. There may be no estate to pay the fee at this point.

Bolt v. SBA [In re Bolt], 11/24/93.

Alex Bolt, pro se; Jon DeVore (SBA); Trustee Larry Compton.

  Menu    3 ABR 288: Ch. 7, environmental cleanup (BAP, unpublished).

Judge Ross properly found that an environmental cleanup company was qualified to remove contamination from underground fuel & oil tanks and that its costs were reasonable. His order approving the 4th application to pay the company was not an abuse of discretion. Affirmed.

Preblich v. Battley [In re Preblich], 11/23/93.

Evalyn Preblich, Anchorage, pro se; Cabot Christianson, Anchorage, for Trustee Kenneth Battley.

  Menu    3 ABR 295: Ch. 11, failure to report property, sale of property without approval (Sedwick).

The evidence supports Judge Ross's findings that Debtor knew he owned certain fuel tanks, failed to report the income derived from their sale, disbursed the proceeds to associates without Court approval, and then declined to disclose those facts at his Rule 2004 examination. Affirmed.

Briske v. North Slope Borough, 12/29/93.

Jerald Briske, Anchorage, pro se; Suzanne Ishii-Regan, Anchorage, for North Slope.

  Menu    3 ABR 301: Ch. 7, discharge, fraud, res judicata, interest, exempt property, garnished wages (MacDonald).

Prescott Equipment's claim against Debtor Raymond Dronenburg is excepted from discharge on grounds of fraud. Dronenburg's counterclaim for exempt garnished wages granted.

Prescott hired Dronenburg to dispose of PCB contamination pursuant to EPA order. He was paid $7,655, but spent the funds on other than the clean-up, and the hazardous waste barrels themselves mysteriously disappeared. EPA has refused to clear Prescott. Dronenburg wrongfully misused the funds, thereby defrauding Prescott. Prescott's state court default judgment is not res judicata on damages. The rate of prejudgment interest will be determined by state law; postjudgment interest will be at the federal rate.

While Debtor's counterclaim appears based on a writ of garnishment outside the 90-day prepetition period, the transfers made pursuant to the writ occurred within the preference period. Wages garnished prepetition by Prescott are exempt property.

Prescott Equipment v. Dronenburg [In re Dronenburg], 1/31/94.

Randall Farleigh, Anchorage, for Prescott; Gregory Oczkus, Anchorage, for Debtor.

  Menu    3 ABR 308: Ch. 7, discharge, divorce, support (Ross).

Summary judgment for Jeanne Willis: obligations imposed on Edward in the divorce decree are in the nature of support for dischargeability purposes.

The decree provides that he shall pay all debts incurred during the marriage. He argues that the provision should not be given effect since it was a default decree and the judge rubber stamped anything she requested. However, he was the breadwinner and she was basically the care-giver at home. He could afford to pay these bills whereas she could not.

Willis v. Willis [In re Edward Willis], 1/14/94.

David Rosendin, Ketchikan, for Edward; Jeanne Willis, pro se.

  Menu    3 ABR 311: Ch. 7, discharge, fraud (MacDonald).

Plaintiff Jim Rice shall recover $11,310 from Debtor Mike Johnson, which sum is nondischargeable in accordance with 523(a)(2).

Rice traded foxes, cages, feed, and equipment to Johnson for land. Johnson misrepresented both the parcel and value of equity. Rice received nothing out of the transaction and is entitled to the value given, which the Court determines to be the $5,900 stated in his bankruptcy schedules, not the claimed $46,800 real estate equity or the $60,000 value listed in Johnson's FmHA application. He is also entitled to funds advanced as closing costs and to interest.

Rice and Johnson deserve each other. Each has demonstrated remarkable ability for deception. Rice, however, was outhornswaggled by Johnson on the transaction and is entitled to some damages. He is entitled to only one remedy; his claims under 523(a)(4) and (6) are dismissed.

Rice v. Johnson [In re Johnson], 2/4/94.

Kenneth Ringstad, Fairbanks, for Rice; Donald Ellis, Anchorage, for Johnson.

  Menu    3 ABR 317: Ch. 7, discharge, conversion, continuance, jury, judicial bias (Ross).

Debtor Ava Jourdan converted $15,000 of Plaintiff Charles Elder's money; this amount is dischargeable. There is no offsetting contract for lifetime support. There are no grounds for recusal; Jourdan may not achieve this result merely by means of a federal suit. Continuances and jury trial were denied.

Jourdan and Elder were romantically involved for a time. He gave her rent money and other support. He had suffered a stroke which did not impair his mind but made it difficult to write. He often gave her checks signed in blank, mostly with instructions as to the amount to be inserted, payee, and use of the funds. He bought a house and sold it at a loss (probably for tax purposes) to her real estate company; it was used as her abode and she claims that it was to be hers, but he considered it his. The real estate contract provides that he would do all his real estate transactions through her brokerage or else pay off the $164,000 mortgage. It was drafted by Jourdan and Elder testified that he did not realize that the provisions were in it. The agreement is unconscionable given that she was a real estate professional and had a fiduciary responsibility to him notwithstanding their personal relationship. Feeling that the relationship was ending, Jourdan filled in a check for $19,000, approximately $15,000 more than usual, to carry her while she negotiated a settlement for "lifetime support." When she demanded $750,000 Elder decided that he would give her no more money. She sued in state court to enforce the alleged contract for support and written contract to pay off the mortgage on the residence. Just before trial she filed Ch. 7. She began stalking Elder and his female companion and has tried to implicate them in alleged illegal gambling and/or unlawful sexual activities.

There was no contract for lifetime support. It is unlikely that Elder, a womanizer with a number of relationships going at any one time, would have committed to a lifetime of support with respect to a romantic relationship which was terminating. However, his claim that he paid more than $500,000 in fear for his life or that of his friends is overstated. The fact that he signed checks in blank and gave them to Jourdan belies the suggestion of total fear. The threats were undoubtedly a factor in his paying her off for a number of years, either because he hoped to avoid the aggravation she was producing or through some concern about her bizarre behavior. However, the payments were voluntary enough, except for the $15,000 from the final check, that they are dischargeable.

Elder v. Jourdan [In re Jourdan], 1/21/94.

Vince Vitale, Anchorage, for Elder; Ava Jourdan, pro se.

  Menu    3 ABR 329: Dismissal, failure to make discovery (Singleton).

Judge Ross's dismissal of all claims for refusal to make discovery after being warned affirmed.

Olsens may not relitigate issues earlier resolved against them because the issues are on appeal to the Ninth Circuit and because of the law of the case.

Olsen v. Zerbetz, 1/11/94.

Raymond Olsen, pro se; Bernd Guetschow, Anchorage, for Zerbetz.

  Menu    3 ABR 331: Ch. 11, compromised claims (Ross).

Debtor is enjoined from enforcing compromises of Class 9 claims.

Issues: whether it was appropriate for Debtor to make these compromises without proceeding under 1127 regarding modification of a confirmed plan, whether the case was "substantially consummated" under 1101(2), making modification unavailable in any event, and what effect the Court should give to the compromises if they were made after substantial consummation or without regard to whether substantial consummation had been achieved.

The plan had not been substantially consummated at the time of compromise, but this is not a factor in the result. The information disseminated by Debtor to convince creditors to agree to the compromise was materially inaccurate or misleading. Many of the claimants compromised their claims for less than the 100% payments plus interest they were entitled to under the plan. They may seek to recover the balance of their claims by negotiating with Debtor or enforcing payment of the balance in state court.

In re Martinson Gravel & Crane, 1/10/94.

William Artus (Artus, Choquette & Williams), Anchorage, for Debtor; Jon DeVore (SBA).

  Menu    3 ABR 345: Ch. 7, exemptions, IRA proceeds, liquid assets (MacDonald).

IRA proceeds lost exempt status when they were transferred to creditors the day before the petition was filed; Debtors cannot claim them exempt if the trustee recovers them as preferences. Savings bonds and credit union cash are not entitled to the "liquid asset" exemption because both Debtors are regular wage earners.

In re Murphy, 2/9/94.

Arthur Robson, Fairbanks, for Debtors; Joseph McKinnon, Anchorage, for Alaska Housing Finance Corp.

  Menu    3 ABR 349: Ch. 11, partnership, corporation (MacDonald).

This is a state-law action to determine ownership of condos and contract receivables. It is fundamentally a partnership dispute with corporate aspects. Daniel Lourie bought condos through realtor Pamela Larson, who took an equity interest in lieu of some commissions. Larson managed the properties in Lourie's absence by power of attorney and through a corporation controlled by her. She treated the condos and rental income as her personal property. Lourie filed a state court accounting action, then filed this suit following her Ch. 11 filing.

Larson betrayed Lourie's trust. She plundered his personal and partnership assets for her own gain. He is entitled to retention of all partnership assets.

Lourie v. Larson [In re Larson], 2/24/94.

William Artus (Artus, Choquette & Williams), Anchorage, for Lourie; Gregory Oczkus, Anchorage, for Larson.

  Menu    3 ABR 358: Ch. 11, partnership, attorney (Ross).

Partnership Debtor must appear through attorney.

In re Venture Investments, 4/4/94.

  Menu    3 ABR 359: Ch. 11, taxes (MacDonald).

KPB's assessments of Chugach's Seward lumber mill for 1990-91 are correct. Chugach's objections to the 1992 assessment are accepted; it is entitled to refund of $133,464.

Debtor's failure to pursue state remedies does not preempt this Court's ability to determine taxes under 505; the taxes have never been contested before or adjudicated by a judicial or administrative tribunal.

KPB is incorrect that Chugach must prove that KPB chose a method of valuation that was either fraudulent or fundamentally wrong. Grounds for adjustment are unequal, excessive, improper, or under-valuation.

The mill was built at the wrong time, at the wrong place, for the wrong price ($27 million). The $1 million bid in 1992, the fact that it was no longer in production, and testimony of Jim Morgan convince the Court that KPB's 1992 assessment was excessive and improper. However, Chugach failed to sustain its burden of proof as to 1990-91. 1992 values cannot be equated to 1992 or 1991 without evidence.

In re Chugach Alaska Corp., Chugach Fisheries, Chugach Forest Products, and Chugach Timber Corp., 4/20/94.

Peter Giannini, Anchorage, for Chugach; Dennis Fennerty & Bryan Merrell, Anchorage, for KPB.

  Menu    3 ABR 370: Ch. 11, taxes, settlement (MacDonald).

Settlement of tax dispute for $133,469 approved. Order & judgment entered 4/20/94 vacated and shall have no precedential value.

In re Chugach Alaska Corp., 5/9/94.

  Menu    3 ABR 371: Ch. 7, exemption, pension (Holland).

Bankruptcy Court's denial of discharge affirmed.

The effect of the 50% rule and Arizona statute is that when Debtor transferred funds from his self-directed pension to an IRA they were no longer exempt from creditors. When the money was invested in an exempt homestead only days later, on the eve of his bankruptcy petition, that transfer could form the basis for denial of discharge if made with intent to hinder or delay creditors. The Court found ample evidence of such intent.

Cummings v. Sea Lion Corp., 5/3/94.

Lee Peterson, Anchorage, for Debtor; Kevin Clarkson, Anchorage, for Sea Lion.

  Menu    3 ABR 375: Ch. 11, employment security taxes (Ross).

ESD is required to refund the penalty assessed against Ryan for employment security taxes not paid prepetition.

This Court has jurisdiction under 505; there has been no adjudication of the ESD tax or penalty by any tribunal. The prepetition delinquent taxes were provided for in the Plan and discharged. Use of these discharged taxes as a basis for charging a penalty rate was improper under Active Steel Erectors. Setting of a penalty rate based on a discharged debt is little different from denying or conditioning a license based on such a debt. 525(a) bars ESD from imposing a penalty.

In re Ryan Air Service, 5/9/94.

Roy Longacre, Anchorage, for Ryan; Asst. AGs Susan Daniels & Julie Coster.

  Menu    3 ABR 383: Ch. 7, interest (Ross).

Judgment in favor of Haida will be without interest.

Library of Congress (USSC 1986) controls; no interest is required in a judgment against the US absent a specific waiver of sovereign immunity.

Haida Corp. v. Coleman Drilling et al [In re Haida Corp.], 5/10/94.

Cabot Christianson, Anchorage, for Haida; Robert Branman (IRS); Bernd Guetschow, Anchorage, for Zerbetz.

  Menu    3 ABR 385: Ch. 13, consolidation, joint petition (Ross).

Husband and wife debtors' estates are not consolidated, although there are possible disputes regarding source of funds and whether they are wife's separate property.

The Court will be modifying its form which gives notice to creditors of the 341 meeting and other deadlines to advise that in a joint case estates of husband and wife will be treated as consolidated absent timely objection.

In re Mitchell, 5/16/94.

Thomas Yerbich, Anchorage, for Debtors; William Evans, Anchorage, for Trustee.

  Menu    3 ABR 389: Ch. 11, automatic stay, maritime lien foreclosure (Ninth Circuit).

Bankruptcy and district courts correctly held that Northern Stevedoring did not violate the automatic stay by foreclosing a lien on the Hermes Island even though the vessel contained Chugach's property. The foreclosure did not threaten to dismember the bankruptcy estate or impede orderly distribution of Debtor's assets. Northern had no ability to release Chugach's logs and lumber once the Marshall arrested the vessel. No "unusual circumstances" justify extending the stay to protect nondebtors Alpac and Hermes Island.

Chugach Timber Corp. and Chugach Forest Products v. Northern Stevedoring & Handling Corp. [In re Chugach Timber Corp. and Chugach Forest Products], 4/28/94.

Peter Giannini (Law Offices of Giannini & Associates), Anchorage, for Chugach; James Nebel (Flynn, Delich & Wise), San Francisco, for Northern.

  Menu    3 ABR 402: Ch. 7, discharge of omitted creditors (BAP, unpublished).

Judge MacDonald correctly allowed debts of initially omitted creditors to be discharged. He did nothing more than state the law that under 727 debts are discharged except as provided under 523 and that Rule 4007(b) provides these creditors with the right to litigate dischargeability outside the normal time limits.

McCarty v. Shelver [In re Shelver], 5/11/94.

David Bundy, Anchorage, for Debtors.

  Menu    3 ABR 411: Ch. 7, discharge, criminal restitution, NSF checks, state court judgment, collateral estoppel (Ross).

Criminal restitution is nondischargeable. NSF checks based on misrepresentation when the account was insufficient to pay them are nondischargeable. A state court award for harassment, malicious prosecution, general damages, and interest and prorated fees on those items is nondischargeable based on collateral estoppel.

Taylor and Ketchikan Credit Bureau v. Howell [In re Howell], 6/7/94.

R.W. Shaffer, Ketchikan, for Plaintiffs; Paul Howell, pro se.

  Menu    3 ABR 416: Ch. 7, default, innocent spouse (Ross).

Default judgment entered by Bankruptcy Court for more than $500,000 in which Kubicks' debt to Kleberg FNB was declared nondischargeable is set aside as to Sharon but not as to Robert.

The debt arose out of Robert's guarantee of a loan to CDS Agency. Kubicks made sufficient showing of lack of culpable negligence or prejudice to Kleberg. But Robert has not shown a meritorious defense. He has not provided affidavits explaining the vast difference in his net worth between the time a loan renewal was obtained by CDS and Kubicks' Ch. 7 petition. Relief is granted to Sharon as the innocent spouse. There is no inference that she was directly involved in CDS or made any representations to Kleberg.

Kleberg FNB Kingsville v. Kubick [In re Kubick (Kubick Enterprises, Southwest Enterprises, Quadrant & Development Co.)], 6/8/94.

Clare Newbern, Texas, for Kleberg; Rebecca Copeland, Anchorage, for Defendants; Spencer Sneed, Anchorage, for Trustee.

  Menu    3 ABR 425: Ch. 7, fraudulent transfer, property of the estate (Ross).

Summary judgment denied which would dismiss Trustee's complaint to revoke Debtors' discharge.

Property conveyed by Debtor to her sister prepetition may be property of the estate. Trustee has raised a fact issue as to whether on the date of filing Debtor had an undisclosed, concealed interest in a property of substantial value. This is property of the estate, even if legal title must also be recovered from a relative by a fraudulent transfer action.

Battley v. Vockner [In re Vockner], 6/10/94.

Cabot Christianson and Michelle Boutin, Anchorage, for Plaintiff; Peter Giannini (Law Offices of Giannini & Associates), Anchorage, for Defendants.

  Menu    3 ABR 432: Ch. 11, binding effect of plan, failure to object to claim (MacDonald).

Debtor's motion to confirm that Plan is binding on Creditor despite lack of formal objection to claim granted. Creditor Link's motion for relief from confirmation order denied.

The Court approves the approach of Basham (Bankr. WD Mo. 1994): Did the creditor receive adequate notice that its rights were to be modified under the plan? Notices received by Link were reasonably calculated to apprise her that her rights may be modified. She was heavily involved in the bankruptcy proceeding from its inception and did not rely on the claims allowance procedures by filing a proof of claim. Due process requirements have been met.

In re Hawkins Enterprises, 6/23/94.

William Artus (Artus, Choquette & Williams), Anchorage, for Debtors; Erik LeRoy, Anchorage, for Link.

  Menu    3 ABR 446: Ch. 11, taxes, partnership (MacDonald).

Partial summary judgment for Debtors.

The IRS failed to comply with 26 USC 6223(a) notice provisions because it failed to send a Notice of Beginning of Administrative Procedure to the proper parties. Indirect partners, such as Debtors, are included in the definition of partner. The requirement that a pass-through partner also serve notices it receives from the IRS on indirect partners does not absolve the IRS of its responsibility to properly give notice.

Camacho v. US [In re Camacho], 7/6/94.

George Lyle, Anchorage, for Plaintiffs; Robert Branman (Dept. of Justice Tax Div.), DC.

  Menu    3 ABR 455: Ch. 7, taxes, pension (Ninth Circuit).

A federal tax lien had attached to the vested retirement benefits of a retired Alaska Supreme Court justice. Judge MacDonald correctly held that the benefits represent property within the meaning of 26 USC 6321 to which the lien had attached prior to bankruptcy, rather than "after acquired property" not subject to the lien (2 ABR 138). The BAP improperly reversed MacDonald, finding Connor's retirement benefits to be "reduced salary" for continuing service.

Connor v. US [In re Connor], 6/13/94.

Gregory Oczkus, Anchorage, for Connor; Bridgett Rowan (Dept. of Justice Tax Div.), DC.

  Menu    3 ABR 459: Ch. 7, attorney fees (Ninth Circuit, unpublished).

Bank is not entitled to fees in discharge litigation. MacDonald (2 ABR 398) and BAP affirmed.

While 523(d) now provides for mandatory award of fees to successful debtor litigants, Congress did not provide for fees for a successful creditor.

Key Bank of Washington v. Martin [In re Martin], 1/19/94.

Warren Taylor, Fairbanks, for Debtors; Francois Fisher and William Weinstein, Seattle, for the bank.

  Menu    3 ABR 462: Ch. 7, discharge, state court fee judgment, willful/malicious injury, collateral estoppel (Ross).

Collateral estoppel effect given to state court's award of fees & costs to collection agency.

The award was made to the agency in its successful defense against Debtor's counter-claim under the Federal Debt Collection Practices Act. The issue decided by Judge Michalski (whether there was "bad faith" or "harassment" by Debtor) is identical to the nondischargeability issue under 523(a)(6) (whether Debtor's conduct was "willful and malicious").

Alaska Financial Services v. Brown [In re Brown], 7/13/94.

Gail Shortell, Anchorage, for AFS; Stephen McKee, Anchorage, for Brown.

  Menu    3 ABR 470: Ch. 11, discharge, civil penalty (Ross).

State civil penalty for NSF checks not nondischargeable. (See 3 ABR 411.)

Taylor and Ketchikan Credit Bureau v. Howell [In re Howell], 6/7/94.

R.W. Shaffer, Ketchikan, for Plaintiffs; Paul Howell, pro se.

  Menu    3 ABR 472: Ch. 7, trust, fraudulent transfer, will, summary judgment (Ross).

Motion by Trustee Barstow to establish Restatement of Trusts 156 as law of case regarding self-settled trusts granted. The Alaska Supreme Court would likely adopt 156, which holds that a creditor of the settlor of a spendthrift trust for his own benefit or of a discretionary trust can reach the assets to the extent that they could have been distributed to the settlor.

Motion by Barstow for summary judgment for all assets of the KAE Family Housing Trust granted. The Trust is a self-settled discretionary trust pursuant to Restatement of Trusts 156(2).

Barstow's adversary proceeding for avoidance of certain transfers was timely. The 6-year statute under AS 09.10.050 applies to a fraudulent transfer action under AS 34.40, as opposed to the 2-year statute of AS 09.10.070.

Barstow's motion for summary judgment for Trustees' avoidance of preferential transfers of Arizona property denied. He failed to provide competent evidence of insolvency or that the party receiving the transfer received more than it would have in a hypothetical Ch. 7.

Motion to turnover the Shady Lane property denied. A codicil to the probated will was time-barred to vary the distribution under the will.

Barstow v. Ferrara, KAE Family Housing Trust, and Alaska Valuation Services [In re Ferrara], 8/2/94.

Jon Givens & Chris Gronning (Bankston & McCollum), Anchorage, for Trustee; Jay Durych (Routh, Crabtree & Harbour), Anchorage, for Dennis Ferrara and KAE Family Housing Trust; William Artus (Artus, Choquette & Williams), Anchorge, for Gloria Ferrara and AVS.

  Menu    3 ABR 501: Ch. 11, taxes, Native corporation (Ninth Circuit).

Judge Holland's affirmation (3 ABR 205) of Judge MacDonald's ruling that Chugach may carryback 1990 losses to offset income assigned to it by Waste Management (a purchaser of NOLs from Chugach) is affirmed. Holland's ruling (which reversed the result reached by MacDonald) that Chugach could retain enough of the income assigned to it by the profitable corporation in 1987 to avoid paying any AMT for that year is also affirmed.

Chugach Alaska, Chugach Development, Chugach Fisheries, Chugach Forest Products, and Chugach Timber v. US, 8/25/94.

Edward Perelmuter (Justice Dept. Tax Div), DC; John Taurman (Vinson & Elkins), DC, for Chugach.

  Menu    3 ABR 515: Ch. 7, fraud, damages (BAP, unpublished).

Judge MacDonald's judgment (3 ABR 311) affirmed.

MacDonald did not abuse his discretion by assessing only Plaintiff Rice's out-of-pocket damages against Debtor Johnson, rather than awarding Rice the benefit of his bargain. He found that Rice was not merely hornswaggled, he was outhornswaggled. Where both parties have unclean hands, a judge would be entitled to leave them where they were, much less award one his out-of-pocket losses.

MacDonald's valuation of Rice's fox operation at $5,900 rather than $60,000 is not clearly erroneous. Rice's trustee informally abandoned the foxes to Rice, indicating agreement with the lower value. Rice's explanation that he did so to avoid responsibility under the cruelty to animals statute is unconvincing.

Rice v. Johnson [In re Johnson], 7/26/94.

Kenneth Ringstad, Fairbanks, for Rice; Donald Ellis, Anchorage, for Johnson.

  Menu    3 ABR: 525: Ch. 13, dismissal, bad faith (Ross).

Sua sponte dismissed as bad faith filing for using this Ch. 13 as a tax protest.

The Court could never determine whether priority debt was due the IRS due to Debtor's not having filed tax returns.

In re Chryson, 10/20/94.

Mark Chryson, pro se; Robert Branman, DC (Dept. of Justice Tax Div.).

  Menu    3 ABR 526: Ch. 7, judicial lien, auto, tenancy by entirety (MacDonald).

Judicial lien against car owned by Debtors avoided. Claim for wrongful execution and conversion dismissed without prejudice.

Debtors Darrel & Susan Fincher's car, which they held as tenants by the entirety, is valued at $5,700. Evanses won a $3,459 judgment against Aron Fincher and executed on the car. Finchers filed Ch. 7 after the seizure and claimed the car as fully exempt.

A car cannot be partitioned, and the cost of partitioning or severing the interest of the debtor would be substantial. Therefore, Darrel's interest is nominal and certainly less than his $3,450 state law allowable exemption. Evanses' judicial lien impairs an exemption to which he would have been entitled under state law.

Wrongful execution and conversion issues are best left for a state court.

Fincher v. Evans [In re Fincher], 10/27/94.

Robert Crowther, Anchorage, for Plaintiffs; Peter Giannini (Law Offices of Giannini & Associates), Anchorage, for Defendants.

  Menu    3 ABR 530: Ch. 7, discharge exception, state court default judgment, willful/malicious injury, collateral estoppel (MacDonald).

Children's judgment debt against their mother is excepted from discharge.

Linda Beatty was required pursuant to divorce decree to maintain accounts for her children's Permanent Fund dividends. Instead, she spent the funds. The children obtained a $28,572 state court default judgment against her. She subsequently filed Ch. 7. This Court previously declined to give collateral estoppel effect to the judgment because the issue of willful & malicious injury had not been "actually litigated."

Beatty used the money for herself when she had her own money in the bank and a steady paycheck. Thus, she was not poor and unable to maintain herself in the context of AS 25.20.030. She also acted intentionally.

Henrie et al v. Beatty [In re Beatty], 11/16/94.

Kenneth Ringstad, Fairbanks, for Plaintiffs; Chris Johansen, Anchorage, for Defendant.