Jane Harris Melvin

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Case 05-10333-8-RDD Doc 26 Filed 05/22/06 Entered 05/22/06 16:33:08 Page 1 of 4

SO ORDERED.

SIGNED this 22 day of May, 2006.

A. Thomas Small
United States Bankruptcy Judge

UNITED STATES BANKRUPTCY COURT
BASTERN DISTRICT OF NORTH CAROLINA
FAYETTEVILLE DIVISION

IN RE: CASE NO.

JAMES DANIEL MELVIN, JR. 05-02621-8-ATS
DEBTOR

JANE HARRIS MELVIN 05-10333-8-ATS
DEBTOR

ORDER DETERMINING DEBTORS ARE INELIGIBLE FOR CHAPTER 13
AND ESTABLISHING TIME IN WHICH TO CONVERT CASES

The matters before the court are the motions filed by John S.
Hair, Sr. to dismiss these chapter 13 cases. A hearing took place
in Fayetteville, North Carolina on May 18, 2006.

James Daniel Melvin, Jr. filed a petition for relief under
chapter 7 of the Bankruptcy Code on April 1, 2005, and his case was
converted to chapter 13 on February 21, 2006. Jane Harris Melvin
filed a petition for relief under chapter 13 of the Bankruptcy Code
on October 15, 2005. Dr. Hair contends that neither debtor is
eligible to be a debtor under chapter 13, as they both owe debts in
excess of the limits established by 11 U.S.C. § 109(e).

On November 19, 2004, a judgment was entered in favor of Dr.

Hair against Mr. and Mrs. Melvin, jointly and severally, by the

AUTHENTICATED
U.S. GOVERNMENT
INFORMATION

GPO

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North Carolina Superior Court in Cumberland County in the amount of
$2,781,255.41 plus interest and $139,067.77 in attorney's fees.
Prior to filing their bankruptcy petitions, the Melvins appealed
the judgment. Both Mr. and Mrs. Melvin listed the debt in the
amount of $3,281,999.38 in their bankruptcy schedules, with Mr.
Melvin indicating that the debt was contingent, disputed, and
unliquidated, while Mrs. Melvin indicated that the debt was
contingent and disputed. Their Statements of Financial Affairs
further noted that the judgment was on appeal. On February 7,
2006, the judgment was affirmed by the North Carolina Court of
Appeals, and the North Carolina Supreme Court denied discretionary
review on April 10, 2006.

Section 109(e) provides, in relevant part, that

[o]Jnly an individual with regular income that owes, on

the date of the filing of the petition, noncontingent,

liquidated, unsecured debts of less than $307,675 and
noncontingent, liquidated, secured debts of less than

$922,975 . . . may be a debtor under chapter 13 of this
title.
11 U.S.C. § 109(e). Clearly the debt owed to Dr. Hair exceeds the

limits of § 109(e), but the Melvins contend that because the
judgment was on appeal on the petition date, it was not
noncontingent and should not be included in the calculation of
debt .*

Generally speaking, whether a claim is contingent depends upon

"the nature or origin of liability. More precisely, it relates to

* The appeal was pending both on the date Mr. Melvin filed his

chapter 7 petition and on the date his case was converted to
chapter 13, so the result is not dependent upon whether the initial
petition date or the conversion date is considered.

2

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the time or circumstances under which the liability arises. In
this connection liability does not mean the same as judgment or
remedy, but only a condition of being obligated to answer for a

claim." In re Knight, 55 F.3d 231, 236 (7th Cir. 1995), quoted in

In re Mazzeo, 131 F.3d 295, 303 (2nd Cir. 1997). "Distilled to

their essence, the gist of the cases establish that a debt is
noncontingent if all of the events necessary to give rise to
liability for it take place prior to the filing of the petition."

In re Knowles, Case No. 05-06402-8-ATS (Bankr. E.D.N.C. Oct. 31,

2005).

In this case, the actions giving rise to liability all
occurred prepetition. The existence of the appeal on the petition
date meant only that the debt was, at that time, "disputed," not
that it was "contingent." "[T]he disputed status of a claim that
is otherwise noncontingent and liquidated is not a basis to exclude
it from the § 109(e) jurisdictional calculation." In re Tabor, 232

B.R. 85, 89 (Bankr. N.D. Ohio 1999); see also Craig Corp. v. Albano

(In re Albano), 55 B.R. 363 (N.D. Ill. 1985) (holding judgment debt

is noncontingent: pendency of appeal does not suspend operation of
an otherwise final judgment).

Well-settled law establishes that the Melvins’ judgment debt
was not contingent or unliquidated on the dates the petitions were
filed, and neither debtor is eligible for chapter 13 relief. The
debtors may convert their cases to either chapter 7 or chapter 11

within 15 days of the date of this order, failing which Mr.

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Melvin’s case will be re-converted to chapter 7 and Mrs. Melvin’s
case will be dismissed.

SO ORDERED.

END OF DOCUMENT