In re Norman, Bankruptcy No. 80-03805-S-13
| Decision Date | 03 September 1981 |
| Docket Number | Bankruptcy No. 80-03805-S-13,Adv. No. 81-0097-S-13. |
| Citation | 13 BR 894 |
| Parties | In re Robert David NORMAN, d/b/a Ferguson Drug Company, Debtor. Sharon L. NORMAN, Plaintiff, v. Robert David NORMAN, Defendant. |
| Court | U.S. Bankruptcy Court — Western District of Missouri |
Donald E. Bonacker, Springfield, Mo., for plaintiff.
Gary A. Love, Springfield, Mo., for debtor.
Debtor filed this proceeding under Chapter 13 on November 18, 1980. He scheduled a judgment owing his former wife, arising out of an action for dissolution of marriage, as a disputed debt. Initially he proposed to pay that debt as unsecured at 10% of the allowed amount. On January 19, 1981, the former wife filed an objection to confirmation of the plan, contending that it was not proposed in good faith and would pay unsecured creditors less than they would receive from liquidation.
On February 5, 1981, debtor proposed an amendment to the plan increasing substantially the amount of payment to unsecured creditors. The motion to amend was denied as it would extend the plan beyond the statutory term of five years.
Debtor denied the allegations contained in the objection to confirmation. He then filed an objection to the former wife's claim, saying that the claim was not secured and not of the value alleged.
On March 16, 1981, debtor filed an additional amendment to the plan, raising the payments so that the plan could be completed within the statutory term. Mrs. Norman then filed another motion to dismiss, contending that debtor was not eligible to file under Chapter 13, having too much debt and that the proceeding is hindering creditors and not filed in good faith.
At the same time that these proceeds were going on, actions in the domestic relations suit were taking place. The decree was affirmed on appeal on August 4, 1980. Norman v. Norman, 604 S.W.2d 680 (Mo. App.1980). At the time of appeal, debtor had posted a supersedeas bond with his parents as sureties. Posted as security were 50 shares of the stock of Ava Drug Company, which debtor claims as exempt and as of no value. After the appeal was decided, Mrs. Norman attempted to execute upon the appeal bond, alleging that the judgment was largely unpaid. A hearing on the proposed execution was set for April 23, 1981, in the Circuit Court of Webster County, Missouri.
By letter, debtor's counsel had notified the State Court of the pendency of the bankruptcy. That Court declined to stay its proceedings and, on April 23, 1981, entered judgment on the supersedeas bond in favor of Mrs. Norman and against the sureties. On the same day, debtor filed a complaint in this Court against Mrs. Norman and her attorney, alleging that the proceedings against the sureties violated the automatic stay imposed by Section 362 of the Code.
In addition to her objection to confirmation, Mrs. Norman filed, on January 19, 1981, a complaint to lift the stay to allow her to execute on her dissolution judgment against the 50 shares of stock, clearly part of the property of the estate. A hearing on this complaint was held on April 1, 1981, at which time the parties were present in person and by counsel. Evidence was heard and the matter taken under advisement. On April 21, 1981, Mrs. Norman moved the Court to allow her to present in this proceeding the testimony of the State trial judge as to his analysis of the decree. On July 13, 1981, the Court overruled that motion. 12 B.R. 512 (Bkrtcy.)
There was a hearing on the complaint alleging violation of the stay order on May 26, 1981. The parties appeared in person and by counsel. Evidence was heard and the matter taken under advisement. Briefs as to each of the issues raised in these various proceedings have been filed.
At the time of the appeal, debtor and his parents executed a supersedeas bond to Mrs. Norman in the sum of $80,000.00 conditioned as follows:
"if the said appellant shall satisfy the said judgment in full together with the costs, interest and damages for delay, if for any reason the appeal is dismissed or if the judgment is affirmed, and shall satisfy in full such modification of the judgment and such cost, interest and damages as the appellate court may adjudge and award, or if said judgment be set aside, then this obligation shall be void; otherwise to remain in full force and effect."
The judgment was affirmed. Mrs. Norman then attempted to execute upon the bond. In defense against this attempt, debtor argues that execution is stayed generally under Section 362, more specifically under Section 1301 which stays an action against a co-debtor where there is a Chapter 13 proceeding and further that a judgment creditor cannot execute against a surety where the underlying debt is subject to modification in the bankruptcy proceeding.
Section 362 of the Code, Title 11, U.S.C. provides, in part, that:
The plain language of these portions of Section 362 prohibits actions against the debtor or the property of the estate. The stay does not reach property belonging to others, although it reaches the debtor's property held by others. "Execution and levy against the debtor's prepetition property are stayed and attempts to collect a judgment from the debtor personally are stayed." House Report No. 95-595, 95th Cong., 1st Sess. (1977) 341, reprinted in 2 App. Collier on Bankruptcy (15th Ed.), U.S. Code Cong. & Admin. News 1978, p. 5787, 6297.
There is an exception contained in Section 362(b) permitting actions for "the collection of alimony, maintenance or support from property that is not property of the estate." In a Chapter 13 proceeding, post petition earnings are property of the estate, Section 1306, and initially includes even property that the debtor may declare as exempt under Section 522 until such time as the Court approves, in some fashion, the claim of exemption. Since the Court has not yet determined whether the judgment at issue here is alimony, support or maintenance, Mrs. Norman is stayed at the outset from executing against the debtor or property of the estate under the general language of Section 362.
She is not stayed, however, from executing against the sureties on the supersedeas bond. Section 1301 provides the protection of the stay to a codebtor only as to a consumer debt. A consumer debt is defined in the Code as a "debt incurred by an individual primarily for a personal, family, or household purpose." Section 101(7), Title 11, U.S.C. The meaning is borrowed from the definition of "consumer goods" set out in the Uniform Commercial Code, 5 Collier on Bankruptcy ¶ 1300.16 (15th Ed.). See, for example, Section 400.9-109(1), R.S.Mo. 1969.
The words "personal, family or household" are used in many places in the Code. See, for example, Section 522. They are intended to describe debts or property relating to the ability of the debtor to have a fresh start. They are used as a phrase of art, growing out of long history wherein the Courts were concerned with leaving a debtor with sufficient goods to continue family life. 3 Collier on Bankruptcy ¶ 522.02 (15th Ed.).
The supersedeas bond is intended to protect a judgment debtor from levy during the course of an appeal. It has the additional purpose of guaranteeing paying of the judgment if it is affirmed.
A supersedeas bond is not a consumer debt as that phrase is used in the Code. While debtor and the property of the estate are protected by the provisions of Section 362, the sureties are not protected by the provisions of Section 1301. While such a stay would permit the debtor to develop his plan in a less harried atmosphere, the language of the statute does not support the extension of the stay to protect the sureties.
While the process by which these issues have been brought before this Court has left something to be desired, the conduct of Mrs. Norman and her attorneys do not constitute contempt within the meaning of Rule 920, Rules of Bankruptcy Procedure. The order to show cause is satisfied and denied. Since the Court has concluded that there is no automatic stay against the efforts of Mrs. Norman to enforce her judgment against the sureties on the supersedeas bond, her complaint to lift the stay is DISMISSED as moot.
The parties also seek a determination as to whether obligations which were created as a result of the dissolution proceeding are dischargeable in bankruptcy. The trial court awarded Mrs. Norman an automobile,...
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