Beverly Mfg. Corp., In re

• Decision Date: 28 March 1988
• Docket Number: 87-5187,Nos. 86-5719,s. 86-5719
• Citation: 841 F.2d 365
• Parties: , Bankr. L. Rep. P 72,256 In re BEVERLY MANUFACTURING CORP., Debtor. Robert BRAKE, Esq., Plaintiff-Appellant, v. Jeanette TAVORMINA, Trustee, Defendant-Appellee. In re BEVERLY MANUFACTURING CORPORATION, Debtor. Robert BRAKE, Plaintiff-Appellant, v. Jeanette E. TAVORMINA, as Trustee of Beverly Manufacturing Corporation, Defendant-Appellee.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 365

841 F.2d 365

17 Bankr.Ct.Dec. 849, Bankr. L. Rep. P 72,256

In re BEVERLY MANUFACTURING CORP., Debtor.

Robert BRAKE, Esq., Plaintiff-Appellant, v. Jeanette TAVORMINA, Trustee, Defendant-Appellee.

In re BEVERLY MANUFACTURING CORPORATION, Debtor.

Robert BRAKE, Plaintiff-Appellant, v. Jeanette E. TAVORMINA, as Trustee of Beverly Manufacturing

Corporation, Defendant-Appellee.

Nos. 86-5719, 87-5187.

United States Court of Appeals, Eleventh Circuit.

March 28, 1988.

Robert M. Brake, Coral Gables, Fla., pro se.

Barbara L. Phillips, Phillips & Phillips, P.A., Miami, Fla., for defendant-appellee.

Appeals from the United States District Court for the Southern District of Florida.

Before RONEY, Chief Judge, KRAVITCH, Circuit Judge, and HENDERSON, Senior Circuit Judge.

HENDERSON, Senior Circuit Judge:

These two consolidated appeals arise out of the same bankruptcy proceeding. In No. 87-5187, Robert Brake, attorney for Beverly Manufacturing Corporation ("debtor"), appeals from an order of the district court denying his claim to a retaining lien. In No. 86-5719, Brake appeals from a denial of his petition for attorney's fees. In both cases, we affirm.

Brake represented the debtor on various legal matters from approximately 1972. On January 25, 1980, the debtor filed for corporate reorganization under Chapter 11 of the Bankruptcy Code, 11 U.S.C. Secs. 1101 et seq. Prior to the filing of this petition, Brake rendered services to the debtor with respect to the transfer of title of four stock certificates in the Hotsy Corporation ("Hotsy"). In order to transfer title, Brake had to bring suit to quiet title to the stock. Brake and the debtor agreed that Brake would be paid 50% of the sale price of the Hotsy stock as a fee and that the remaining 50% (less costs of the litigation) would be applied to the running account between Brake and the debtor. At the time of the bankruptcy, the debtor owed Brake $28,474.02. The Hotsy litigation was eventually settled when Hotsy agreed to buy back its stock.

On January 7, 1981, the bankruptcy court converted the proceedings to one under Chapter 7, 11 U.S.C. Secs. 701 et seq., and appointed the appellee, Jeanette E. Tavormina, as liquidating trustee. All the assets of the debtor were subsequently sold, producing an estate of $68,613.00. Among the property sold, by consent of all parties, was the Hotsy stock which was transferred to Hotsy for $28,075.00.

Case No. 87-5187 was commenced on December 23, 1982, when Tavormina instituted an adversary proceeding against Brake seeking (1) a return of the Hotsy stock certificates or its equivalent monetary value, (2) a determination of the validity of Brake's liens, if any, in the certificates, and (3) leave to sell the Hotsy certificates free of liens. Brake claimed to have a charging and retaining lien in the stock for fees and costs in connection with the Hotsy litigation and a retaining lien for fees and costs in connection with other pre-bankruptcy legal matters.

On March 17, 1983, the matter was tried before the bankruptcy judge. ¹ Both Brake and the debtor's president, William Barkett, testified that Barkett gave Brake the stock certificates in November of 1977 and that he held them until 1983, when Hotsy purchased the shares in settlement of the litigation. Brake also introduced into evidence two letters he wrote to Brian Snow, an attorney, in December of 1977 and January of 1978. In both letters Brake related to Snow that he had been given the stock certificates by the debtor and that the certificates were in his possession. There was also evidence that Barkett had formally assigned the stock to Brake after the filing of the bankruptcy petition.

The debtor's bankruptcy petition and schedules, prepared by Brake, stated that no property in which the debtor had an interest was in the hands of third parties and that the Hotsy stock was the personal property of the debtor. Barkett signed the petition and schedules under oath. When questioned about the inconsistency between his testimony that he gave the stock to Brake in 1977 and the statement in the schedule that none of the debtor's property was in the hands of third persons at the time the Chapter 11 petition was filed, Barkett stated that he did not disclose Brake's possession of the stock because he "didn't think it was necessary ... it was already given away before the petition was filed." Barkett further testified that although he provided the information for preparation of the schedules, he had not read the schedules when he signed them. He also said that he had formally assigned the stock to Brake after the bankruptcy filing "just ... to make it legal.... [The transfer] was legal before, but [Brake] just wanted it in writing, I assume."

In a memorandum decision dated March 30, 1983, the bankruptcy judge found that Brake "was given the four stock certificates" in November, 1977 and told by Barkett to "establish title to the stock." In re Beverly Manufacturing Corporation, 29 B.R. 513, 514 (Bkrtcy.S.D.Fla.1983). The court awarded Brake expenses ($1,835.71) and half of the proceeds from the sale of the stock ($14,037.50) as payment for his services in the Hotsy litigation. The judge, however, denied Brake's claim for an attorney's retaining lien on the remaining half of the stock proceeds as payment for his pre-bankruptcy services because he found that the stock was not assigned to Brake until after the Chapter 11 petition was filed. Id.

Brake filed a motion for a rehearing, contending that possession of the stock certificates prior to bankruptcy was sufficient to establish a valid retaining lien. A hearing on the motion was held on April 18, 1983. In his order on the motion, the bankruptcy judge reversed one of his earlier findings of fact:

In reviewing the Memorandum Decision I am now persuaded that a previous finding was in error. The finding relates to the critical issue of when defendant obtained possession of the stock. Relying on the evidence and agreement of defendant, I erroneously recited on page 2, paragraph 3:

'In November, 1977, defendant was given four stock certificates.... Defendant has held the certificates continuously since then.'

This statement of the facts is inconsistent with the facts upon which I relied in rejecting the claim based on an attorney's retaining lien. To correct this error, the paragraph is amended to delete the reference to November, 1977, as the date of transfer.

Both the defendant attorney and his client, Barkett, testified that the stock was delivered to defendant in November, 1977. The only document which would reflect transfer of possession is an assignment dated December 3, 1980, unquestionably after bankruptcy was filed on January 25, 1980.

The testimony that delivery of possession was three years prior to the assignment is inconsistent with the debtor's statements in its bankruptcy petition and schedules [that none of the debtor's property was in the hands of third parties.] ...

Under these circumstances, I find that the stock certificates were not surrendered to the defendant before bankruptcy ...

To establish a valid retaining lien, defendant has the burden to demonstrate that possession of the stock certificates was lawfully transferred to him before bankruptcy as an attorney representing the debtor. He has not. In these proceedings, defendant has been confronted with physical evidence to the contrary which he has failed to overcome.

Thus, the bankruptcy judge affirmed his prior ruling that Brake had not established a valid retaining lien. The district court affirmed.

The bankruptcy judge's finding that Brake did not have possession of the Hotsy stock certificates prior to the filing of the bankruptcy petition is a question of fact, and will not be overturned unless it is clearly erroneous. See Bank.R. 8013. A finding of fact is clearly erroneous only if, upon review of the entire evidence, we are left with the "definite and firm conviction that a mistake has been committed," United States v. Gypsum Co., 333 U.S. 364, 395, 68 S.Ct. 525, 542, 92 L.Ed. 746, 766 (1948), or if the district court's version of the facts is implausible, Anderson v. City of Bessemer City, N.C., 470 U.S. 564, 573-74, 105 S.Ct. 1504, 1512, 84 L.Ed.2d 518, 528 (1985). If the judge chooses between two permissible interpretations of the evidence, his finding is not clearly erroneous. United States v. Yellow Cab Co., 338 U.S. 338, 342, 70 S.Ct. 177, 179, 94 L.Ed. 150, 153 (1949).

Under Florida law, which both parties agree is controlling, an attorney must have possession of his client's property in order to establish a retaining lien:

[A]n attorney has a right to a retaining lien upon all of the client's property in the attorney's possession, including money collected for the client. Unlike a charging lien, a retaining lien covers the balance due for all legal work done on behalf of the client regardless of whether the property is related to the matter for which the money is owed to the attorney.

Daniel Mones, P.A. v. Smith, 486 So.2d 559, 561 (Fla.1986) (citations omitted) (emphasis added). Brake had to have the stock in his possession prior to the filing of the Chapter 11 petition because such a petition acted as a stay of any act to obtain possession or control of property of the estate or to create, perfect or enforce any lien against the property of the estate. See 11 U.S.C. Sec. 362(a)(3)-(4).

Although Brake is correct in arguing that he did not need to obtain legal title to the stock to establish a valid retaining lien, he has not shown that he had possession of the stock in 1977. The testimony before the bankruptcy court as to when Brake received the stock was conflicting. The bankruptcy judge obviously did not give much weight to the testimony of Brake and Barkett concerning the time of the transfer, and relied on the statement sworn to by Barkett on the bankruptcy petition and schedules which were prepared by Brake. On review...