Bankr. L. Rep. P 71,896 American Universal Insurance Company, Cross-Appellee v. Joe Freeman Pugh and Joan Betty Pugh, Cross-Appellants

American Universal Insurance Company (“American”) appeals from the district court’s affirmance of the bankruptcy court’s denial of its request for a jury trial. Joe and Joan Pugh (the “Pughs”) cross-appeal from the district court’s reversal of an award of attorney’s fees in their favor by the bankruptcy court.

I. MAIN APPEAL

A. Facts

The Pughs operated a commercial fishing business. In November, 1982, they filed á petition for Chapter 11 bankruptcy. In June, 1983, the Pughs purchased from American a marine insurance policy in the amount of $400,000 covering one of their vessels. Four months later, the vessel sank. American paid the policy limits.

In February, 1984, American commenced an adversary proceeding in the Pughs’ pending consolidated bankruptcy cases claiming that the Pughs had intentionally caused the sinking of the vessel in order to defraud American. American’s complaint and amended complaint prayed for money had and received from American and to impose a constructive trust on the proceeds in the Pughs’ possession.

In March, 1984, American timely filed a request for a jury trial in the adversary proceeding before the bankruptcy court. In May, 1984, the bankruptcy…