In re Krisle
| Citation | 54 BR 330 |
| Decision Date | 11 October 1985 |
| Docket Number | No. 584-00065.,584-00065. |
| Parties | In re Kenneth R. KRISLE and LaVon E. Krisle, Debtors. |
| Court | United States Bankruptcy Courts. Eighth Circuit. U.S. Bankruptcy Court — District of South Dakota |
COPYRIGHT MATERIAL OMITTED
Haven L. Stuck, Lynn, Jackson, Shultz & Lebrun, P.C., Rapid City, S.D., for Creditor First Bank of South Dakota, N.A.
Raymond R. DeGeest, Rapid City, S.D., for debtors Kenneth R. Krisle and LaVon E. Krisle.
John M. Fousek, Fousek, Lefholz & Mairose, Rapid City, S.D., Max A. Gors and James E. Carlon, Gors, Braun & Carlon, Pierre, S.D., Shelley B. Heller, Fort Pierre, S.D., Carter King, Reno, Nev., Judith A. Atkinson, Bismarck, N.D., and Pierre, S.D., for debtors.
FINDINGS AND DECISION
This matter came for hearing before the Court on October 2, 1985, in Pierre, South Dakota. Attorney Haven L. Stuck represented the creditor, First Bank of South Dakota, N.A., and Attorneys Shelley B. Heller and Carter King represented the debtors, Kenneth R. Krisle and LaVon E. Krisle. Several related matters were taken under advisement: attorney withdrawal; automatic stay; change of venue; contempt of debtor; contempt of attorney; disqualification of judge; and stay of bankruptcy proceedings.
The relevant facts and procedural history are these.
The Krisles (hereafter debtors) filed a Chapter 11 petition for reorganization on June 1, 1984. The debtors are farmers. Raymond R. DeGeest was the attorney of record at the time of filing. On September 25, 1984, John M. Fousek, another Rapid City attorney, was approved by the Court to represent the debtors. He was subsequently allowed to withdraw, and, on January 9, 1985, Max A. Gors, Pierre, South Dakota, was approved as the debtors' attorney. Attorney Gors was subsequently allowed to withdraw. At the October 2, 1985, hearings, Attorneys Shelley B. Heller, Fort Pierre, South Dakota, and Carter King, Reno, Nevada, were approved by the Court to represent the debtors.
A confirmation hearing on the debtors' third amended plan was scheduled for May 21, 1985, in Rapid City, South Dakota. Prior to this hearing, Mr. Gors, on behalf of his clients, made several attempts to negotiate with their major secured creditor, First Bank of South Dakota, Lemmon Branch. When these negotiations proved unsuccessful, the parties agreed to continue the hearing on plan confirmation.
On May 23, 1985, Attorney Haven L. Stuck, on behalf of First Bank, filed a Motion to Dismiss which also requested an expedited hearing. Accompanied by a supporting Affidavit, a second motion was filed on June 3, 1985. This was a Motion for Issuance of Order to Show Cause, for Turnover of Property, for Restraining Order, and for an expedited hearing. Because the Court was in transit to Pierre, South Dakota, for its June court term prior to the filing of the second motion and affidavit, Mr. Stuck provided the Court a copy at the June 4, 1985, hearing. The certificate of mailing attached to the pleadings indicated that Mr. Stuck had sent copies to both the debtors and their attorney, Mr. Gors, on May 29, 1985.
The Court reviewed the pleadings. The accompanying affidavit recited that First Bank had been informed that the debtors had withdrawn all the funds from the debtor-in-possession account and closed the account. Further, that the amount withdrawn was approximately $100,000 which was cash proceeds from sale of livestock secured to the bank. Acting pursuant to 11 U.S.C. § 362(f), the Court determined that there was both an emergency situation and that it should be immediately heard. Neither the debtors nor their attorney, Mr. James E. Carlon (Gors Law Firm), raised any objections.
Attorney Stuck called the debtor, Kenneth R. Krisle, as a witness. When asked his name, Mr. Krisle refused to answer, basing his refusal on protection of the Fifth Amendment. The debtor continued to rely on the Fifth Amendment when asked who his attorney was and whether he had a debtor-in-possession account. Attorney Carlon requested that his client be granted immunity pursuant to 11 U.S.C. § 344. The Court, after confirming that Mr. Krisle would not answer any questions, ordered that he turn over the cash collateral. When Mr. Krisle disobeyed this order, he was held in civil contempt. Following proper civil contempt procedures, the Court ordered the debtor into the custody of the United States Marshal until the proceeds of the debtor-in-possession account is made available to the Clerk of the Bankruptcy Court.
The order entered stated that, upon reviewing the case file, sufficient evidence was present for the Court to find that there was sufficient showing that the debtors had closed the debtor-in-possession account at the West River State Bank in Hettinger, North Dakota, and had withdrawn all funds consisting of not less than $94,207.00. Findings included that the First Bank of South Dakota, Lemmon, would be irreparably harmed if the cash collateral was not turned over to the Court. It was ordered that Kenneth R. Krisle and LaVon E. Krisle turn over the cash collateral to the Clerk of the United States Bankruptcy Court; that the debtors file a complete accounting; and that Kenneth Krisle be remanded to the custody of the United States Marshal until the proceeds withdrawn from the debtor-in-possession account are deposited with the Clerk of the Bankruptcy Court. Mr. Krisle was remanded to the Marshal's custody.
On June 10, 1985, David L. Bergren, as attorney for Kenneth Krisle, filed a Petition for Writ of Habeas Corpus in the United States District Court for the District of South Dakota, Central Division.1 The petition claimed Mr. Krisle was illegally incarcerated for refusing to testify and the court proceeding was invalid because of a lack of notice to the debtor of the motion for turnover of property. Mr. Krisle was released pending the outcome of the hearing.
On July 12, 1985, Attorney Judith A. Atkinson, on behalf of the debtors, filed suit against First Bank and the Bankruptcy Judge (Hon. Peder K. Ecker) in the United States District Court for the District of South Dakota, Western Division. While seeking over three million dollars in compensatory and punitive damages, the complaint alleges, among other things, illegal ex parte contacts between First Bank and the Court and civil rights violations of the debtor. The Court received service of process from the Minnehaha County Sheriff's Department, Sioux Falls, South Dakota, on August 23, 1985.
On August 8, 1985, Attorney Max A. Gors filed a Motion and Notice of Motion for Allowance of Administrative Expense Claim and Lien. This was a request by Attorney Gors for attorney's fees as an administrative expense from his previous representation of the debtors in their Chapter 11 reorganization.
On August 14, 1985, Attorney Raymond R. DeGeest filed a Motion to Withdraw. No responsive pleadings were filed.
On August 20, 1985, the Petition for Writ of Habeas Corpus was heard in the United States District Court for the District of South Dakota with the Honorable Donald J. Porter, presiding. Findings were issued on August 23, 1985. The United States District Court, among other things, found:2
On August 27, 1985, Attorney Stuck, on behalf of First Bank, filed a Motion for Issuance of Order to Show Cause, for Turnover of Property, for a Restraining Order, and for an Order Holding Debtors in Contempt and an Affidavit in Support of Motion for Show Cause Order. Attached, as part of the Affidavit, were copies of a Statement of Debtors' Account for the month of May, 1985, and a check drawn on this account on May 23, 1985, by Mr. Krisle for the amount of $94,207.81. On this same date, the Bankruptcy Court entered an Order to Show Cause. The Court specifically ordered that this was a proceeding against the debtors for civil contempt for violating provisions of the Bankruptcy Code and previous orders of the Bankruptcy Court. It further ordered that the debtors be prepared to testify as to the whereabouts of all property of the estate and to turn over this property to the Court at that time.
On August 28, 1985, the debtors, pro se, filed a Motion to Disqualify Judge with Affidavit and a Motion to Stay Bankruptcy Proceedings.
On September 3, 1985, the United States District Court for the District of South Dakota, Central Division, entered an order stating that, after reviewing the Writ of Habeas Corpus and all the briefs and after hearing all the arguments, it held the following:3
The United States District Court then ordered that this matter be remanded to the Bankruptcy Court "specifically to readjudicate the issue of whether one of the debtors is in civil contempt of the Bankruptcy Court for violating the provisions of a bankruptcy statute or rule or an order of the Bankruptcy Court" and...
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