In re Murphy

487 B.R. 86, 2013 WL 830703, 2013 Bankr. LEXIS 826
CourtUnited States Bankruptcy Court, D. Rhode Island
DecidedMarch 6, 2013
DocketNo. 10-13659
StatusPublished
Cited by3 cases

This text of 487 B.R. 86 (In re Murphy) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, D. Rhode Island primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re Murphy, 487 B.R. 86, 2013 WL 830703, 2013 Bankr. LEXIS 826 (R.I. 2013).

Opinion

MEMORANDUM OF DECISION AND ORDER

DIANE FINKLE, Bankruptcy Judge.

The Chapter 13 Trustee seeks to effectuate the terms of the Debtors’ Chapter 13 Plan (the “Plan”) by requiring the Debtors to contribute to the Plan the net proceeds paid on account of a pre-petition personal injury claim of Debtor Jean Murphy. In turn, some two years after the confirmation of their Plan, the Debtors seek to retain these funds (as well as potentially additional funds) by modifying the Confirmation Order and exempting these funds from their bankruptcy estates. The procedural background of this case is somewhat torturous but critical to the resolution of the opposing goals of the Trustee and the Debtors in the matter.

PROCEDURAL HISTORY

A. Debtors’ Exemptions and Plan Confirmation

The procedural history of this case, which the Court outlined in a bench decision on December 11, 2012,1 reaches back [88]*88to August 2010 when the Debtors filed a voluntary skeleton petition under Chapter 13 of the Bankruptcy Code.2 The Debtors subsequently filed their Plan and the remainder of the required Schedules and Statements, including Schedule C. The Debtors listed as an exempt asset on Schedule C, “Personal injury claim pending — David Ursillo Attorney,” and allocated the exemption amount among three separate provisions of § 522(d). The Debtors claimed 100% of the personal injury claim proceeds as exempt under § 522(d)(ll)(E); pursuant to § 522(d)(ll)(D), the Debtors claimed $21,625 of such proceeds as exempt; and under § 522(d)(5), the so-called “wildcard” exemption, the Debtors claimed $11,975 of such proceeds as exempt.3 (Doc. # 10).

On October 8, 2010, the Trustee filed an Objection to Confirmation of the Debtors’ Plan on the basis that “the [Djebtors’ proposed payments under the Plan do not comply with the requirements of the means test, so called.” (Doc. # 13) (“Objection to Confirmation”). That same day, the Trustee also filed an Objection to the Debtors’ claim of exemption “in a personal injury claim on the grounds that the debtors have not shown or demonstrated any facts to indicate that the personal injury claim is exempt.” (Doc. # 14) (“Objection to Exemptions”). In their response to the Trustee’s Objection to Exemptions, the Debtors represented the following:

The Debtors state that the personal injury claim is in the process of concluding and the Debtors claimed the exemption as stated in an abundance of caution. Upon resolution of the personal injury claim and approval by the Court the Debtors shall move to amend Schedule C in accordance with a discussion with the Chapter 13 Trustee regarding the appropriateness of the exemptions.

(Doc. # 18).

Now-retired Bankruptcy Judge Arthur N. Votolato held a hearing on confirmation of the Debtors’ Plan as well as the Trustee’s Objection to Exemptions on November 4, 2010. At that hearing the Trustee presented the Plan to the Court for confirmation explaining:

MR. BOYAJIAN: Your Honor, with respect to confirmation, the debtors will pay the sum of $1,882 a month for 60 months. Mr. Iascone is due a $2,411 counsel fee. There is approximately a $32,000 mortgage arrearage to BAC. In the — oh, in addition, Your Honor, I’m sorry, in addition, federal tax refunds and the proceeds from personal injury claims, one of which has been settled, will also be paid into the plan. And the unsecured creditors receive approximately 56 percent of the amount of their claims. I recommend confirmation.

(Nov. 4, 2010 Hrg. Tr. at p. 3) (emphasis added).

Nothing further was mentioned with respect to the Trustee’s Objection to Exemptions. The day after the hearing, on November 5, 2010, the Court entered an order sustaining the Trustee’s Objection to Exemptions (Doc. #22). Thereafter, on November 16, 2010, the Trustee submitted a Proposed Confirmation Order (Doc. #27) which contained the following ex[89]*89press provision set forth in paragraph 7 of the order: “[t]he [D]ebtors shall pay to the Trustee the proceeds received from Jean Murphy’s personal injury case.” The Debtors did not object to the Proposed Confirmation Order as submitted by the Trustee, and the Court entered the Confirmation Order on November 24, 2010, confirming the Plan as described at the confirmation hearing (Doc. # 29). The Debtors did not appeal either the Court’s order sustaining the Trustee’s Objection to Exemptions or the Confirmation Order.

B. Settlement of the Personal Injury Claim

Three months after the Plan was confirmed and the personal injury exemptions disallowed, the Trustee filed an application to compromise Mrs. Murphy’s personal injury claim.4 (Doc. #34) (“Application to Compromise”). In the Application to Compromise the Trustee made the following recitations:

3. Prior to the filing of the within petition, the debtor, Jean Murphy, settled a personal injury claim with the tortfea-sor’s insurance company.
4. A check in the amount of $21,094.80 was sent to her attorney, David Ursillo.
5. Mr. Ursillo recommended settlement prior to the filing of the petition, and settlement was consummated prior to the filing of the petition.

The Debtors objected to the Application to Compromise, stating:

Your Debtors state that in the current bankruptcy proceeding pending with the Court the Debtors have claimed exemptions under 522(d)(ll)(E), 522(d)(ll)(D) and 522(d)(5).
The Debtors further state that this Court should withhold its decision on the Trustee’s Application until the cases that are currently under advisement in this Court, namely, In re Vargas, 10-13103 and In re Rodriguez, 10-130995 are decided in an effort to determine what, if any, amount of the net proceeds of this claim are not part of the bankruptcy estate to conform with the result in those pending decisions in that the Debtors may be entitled to at least part of the proceeds of the personal injury action.

(Doc. # 44-1).

At the hearing on the Application to Compromise, held on March 24, 2011, the Trustee informed the Court:

Mr. Boyajian: Your Honor, I spoke yesterday about this case with Mr. Ias-cone. Your Honor has under advisement a case involving whether or not proceeds from a personal injury case are disposable income which should be paid into a plan. Mr. Iascone filed an objection saying that the settlement of this case should await decision in that case. I spoke to him yesterday. He doesn’t have an objection to the amount of the settlement. He doesn’t have an objection to the attorneys fees either. So subject to Your Honor’s approval, both motions can be granted, but I told Mr. Iascone that I would hold up distribution of any funds until Your Honor comes out with that decision.
[90]*90The Court: Okay. And you’re asking then just to get the settlement out of the way and talk about the proceeds later?
Mr. Boyajian: Yes, Your Honor.
The Court: So ordered.

(Mar. 24, 2011 Hrg. Tr. at p. 2).

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Related

Pawtucket Credit Union v. Boyajian
527 B.R. 800 (First Circuit, 2015)
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514 B.R. 79 (D. Puerto Rico, 2014)

Cite This Page — Counsel Stack

Bluebook (online)
487 B.R. 86, 2013 WL 830703, 2013 Bankr. LEXIS 826, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-murphy-rib-2013.