In re Ahern, Bankruptcy No. 82-250.
| Decision Date | 25 June 1984 |
| Docket Number | Bankruptcy No. 82-250. |
| Citation | 40 BR 850 |
| Parties | In re Patricia AHERN, William Ahern, Veronica Ahern, Debtors. |
| Court | U.S. Bankruptcy Court — District of New Hampshire |
Albert Weeks, Keene, N.H., for Ashuelot Nat. Bank.
Thomas P. Connair, Claremont, N.H., for L.F. Trottier and Sons, Inc.
John R. Michels, Londonderry, N.H., Trustee.
Patricia, William and Veronica Ahern, debtors, pro se.
This case came before the court for a hearing on April 2, 1984 upon the Motions to Dismiss this Chapter 11 proceeding filed by Ashuelot National Bank and L.F. Trottier and Sons, Inc., secured creditors, and upon a number of complaints seeking relief from the automatic stay filed by those creditors, and by various additional creditors, in separate adversary proceedings in this case.
At the conclusion of the April 2, 1984 hearing the court continued all motions for thirty days to give the debtors a chance to file a revised Chapter 11 plan of reorganization that could be confirmed under the provisions of Chapter 11 of the Bankruptcy Code.
The debtors did file a revised plan on April 28, 1984, and a continued hearing was held before the court on May 3, 1984. The creditors contend that the revised plan still could not be confirmed by the court and is nothing but a further attempt to thwart and delay them in the exercise of their lawful rights.
To consider and act on this matter the undersigned judge, who had his first exposure to this case at the April 2, 1984 hearing, has had to review and consider not only the testimony and evidence received at the aforesaid hearings, but has also been obliged to review the entire record in this case and in all adversary files relating thereto.
The debtors filed their Chapter 11 petition with this court on May 3, 1982. They operate a farm property known as "Great Meadows Farms" in Charlestown, Sullivan County, New Hampshire. The schedules filed by the debtors on June 1, 1982 list taxes owing of $9,300.00; secured claims of $177,900.00; and unsecured claims of $34,950.00 —for total scheduled liabilities of $222,150.00. The same schedules list real property assets at fair market value of $701,000.00; farming supplies and implements of $20,800.00; and claims against others of $5,150.00—for total scheduled assets of $726,950.00.
Based upon the decided degree of solvency set forth by the debtor in the schedules, it should have been possible to formulate a successful plan of reorganization quickly in this case. The actual result, however, has been just the opposite. The case has dragged on through a series of plans and continued hearings before the prior bankruptcy judge, with the debtors having discharged their attorneys on several occasions immediately prior to scheduled hearings. The delay has not been based upon any serious economic problems the debtors would have in fashioning a normal plan of reorganization but rather upon their adamant refusal to accept the results of certain pre-bankruptcy litigation that they had in the state courts with several of their secured creditors. In effect they are seeking to relitigate in this court, in various adversary proceedings contemplated to continue under the revised plan of reorganization, a number of issues litigated with res judicata effect in the state courts up to and including the Supreme Court of New Hampshire.
The debtor's controversy with the Ashuelot National Bank started back in September 1975 when the Bank filed suit against the debtors and received and recorded a writ of attachment on their real estate in the amount of $15,000.00. The Bank obtained a judgment in the amount of its $12,500.00 debt, but for various reasons the Bank was not able to have the sheriff schedule a sale of the property until May 4, 1982, the day before the debtor's Chapter 11 petition was filed. The Bank's secured debt at this point, with accrued interest, is in excess of $16,500.00.
The debtor's other key controversy was with a creditor named William F. Tempel who obtained a final judgment against them in the Sullivan County Court on March 10, 1980, which judgment was ultimately affirmed by the New Hampshire Supreme Court on December 2, 1980. The 1980 judgment was in the amount of $64,979.04, and now totals in excess of $81,000.00 with accrued interest. The judgment was entered upon Tempel's claim that he suffered a deficiency after foreclosing earlier upon certain collateral he had for his debt. The debtors contended that he received full payment by virtue of the prior property foreclosed, and that accordingly he had no remaining claim against them. The debtors lost that battle in the state courts long before this Chapter 11 proceeding was commenced.
The debtors have not directly disputed the $12,500.00 debt that was owing to Ashuelot National Bank but have resisted payment on that claim based on various allegations that the Bank interfered with their business operations and upon their realization on other assets. The debtors also contend, as set forth in a separate adversary proceeding in this case, that the Asheulot Bank should not be paid on its secured debt until it first seeks payment out of the assets foreclosed and now possessed by Tempel, inasmuch as Tempel held only a second lien on those assets, inferior to the Bank's first lien.
This novel attempt to use the "marshaling" doctrine to benefit the debtors, as opposed to a true marshaling of collateral between lienholders, has received no support in either the state or federal courts. Lessard v. Darker, 94 N.H. 209, 49 A.2d 814 (1946); Meyer v. United States, 375 U.S. 233, 236, 84 S.Ct. 318, 320, 11 L.Ed.2d 293 (1963). Moreover, the doctrine is never applied when to do so would unduly delay or cause increased expenses to the senior creditor. In re United Retail Corporation, 33 B.R. 150, 8 CBC 2d 600, 604, (D.Hawaii 1983).
The debtors through their then-counsel filed a plan of reorganization in this proceeding in November of 1982. However, when the plan came before the court on a hearing on the proposed disclosure statement on June 21, 1983, the debtors advised the court that they had discharged their counsel and had never authorized the plan that was filed notwithstanding their signing the same. At the conclusion of the June 21, 1983 hearing, Judge Betley continued the matter until July 19, 1983 to give the debtors an opportunity to obtain new counsel and to file an amended plan. The court noted at several points during the course of the June 21, 1983 hearing that the debtors had established a pattern of discharging their lawyers prior to scheduled hearings in the state courts—thus obtaining various continuances and delays during the 1977-1982 period—and that the Bankruptcy Court would tolerate no further such delays but nevertheless would give the...
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