James Daniel Melvin

UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NORTH CAROLINA
FAYETTEVILLE DIVISION
IN RE:
JAMES DANIEL MELVIN, JR.
DEBTOR
JANE HARRIS MELVIN
DEBTOR
CASE NO.
05-02621-8-ATS
05-10333-8-ATS
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
SO ORDERED.
SIGNED this 22 day of May, 2006.
________________________________________
A. Thomas Small
United States Bankruptcy Judge
____________________________________________________________
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1 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
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]nly 	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.1
Generally speaking, whether a claim is contingent depends upon
"the nature or origin of liability. 	More precisely, it relates to
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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
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