Jury award pushes town toward backruptcy

Wednesday, November 13, 2002

REEDS SPRING, Mo. -- Caught between a $100,000 personal injury verdict and the need to pay bills, the small Ozarks town of Reeds Spring is seeking relief in bankruptcy court.

Officials hope the filing will provide a path to settling with the woman who hurt her ankle on a city sidewalk in 1998 while ensuring that creditors and public employees get what is due to them as well.

"With the lawsuit and everything else that came about, the city can't afford to pay them," said Dan Lade, mayor of the town just northwest of Branson. "We have no other choice but to go the route we are going right now."

The city's immediate goal is to get a judge to overturn a Nov. 4 court order that garnished all city accounts to satisfy the $100,000 verdict. That move left officials unable to pay bills, which include mounting legal fees related to the lawsuit.

"It's my opinion there's no way a public entity's funds should have been garnished," said attorney Janice Ellis McCain, who filed a motion Nov. 5 challenging the garnishment. "They are municipally owned property used for public purposes."

On Friday, the city took the rare step of filing for protection under Chapter 9 of the U.S. Bankruptcy Code, which provides relief for municipalities and local governments suffering financial distress.

Although the community of 465 people would ideally repay all of its debts over time, Chapter 9 would allow it to "adjust debts" with a plan accepted by the bankruptcy court.

The city's 2001 audit lists revenue of $239,815 and expenditures of more than $235,000.

"All we've been doing is fighting and paying attorney fees," Lade said. "Even though this is a voluntary bankruptcy, we were forced into it."

Part of Reeds Spring's problem is that the city was between insurance carriers in July 1998 when Stone County resident Sally Stewart stepped in a hole along a city sidewalk and tore two ligaments in her ankle.

Without insurance, the city was saddled with a large out-of-pocket expense when a jury found it liable for Stewart's injury, a verdict upheld Sept. 29 by the Missouri Court of Appeals.

Some officials blame an earlier administration for leaving Reeds Spring without insurance.

"The people who were in here before got the city in a mess and we're doing what we can to get out," said Luke Gann, a member of the board of aldermen.

Reeds Spring's mayor in July 1998 was the flamboyant Joe Dan Dwyer, a multimillionaire by virtue of his own legal settlement over injuries he suffered in a 1970s logging accident.

Although he spread his largesse -- personally funding some improvements around town -- Dwyer was also just ahead of the law in mid-1998.

What began with the seizure of pornographic materials from his home that August led to Dwyer's eventual guilty plea to transporting a 15-year-old girl from Kansas to St. Louis for sex. He was sentenced to seven years in federal prison.

Now, with the legal steps taken toward keeping funds available for police protection and other public operations, Reeds Spring officials are optimistic about the future.

"Once our water tower is in operation, we'll have more revenue in the city," Gann said. "We'll have some more places annexing in. I think all in all, the city is moving full-speed ahead. I don't think we'll be hurt by this much at all."

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