In re Alvarado, C 12–06190 PJH.

• Citation: 496 B.R. 200
• Decision Date: 29 April 2013
• Docket Number: Bankruptcy Nos. 12–32156 DM, 12–32049 DM.,No. C 12–06190 PJH.,C 12–06190 PJH.
• Parties: In re Reyna ALVARADO, Debtor.
• Court: U.S. District Court — Eastern District of California

496 B.R. 200

In re Reyna ALVARADO, Debtor.

No. C 12–06190 PJH.

Bankruptcy Nos. 12–32156 DM, 12–32049 DM.

United States District Court, N.D. California.

April 29, 2013.

Albert Miklos Kun, San Francisco, CA, pro se.

Albert Miklos Kun, Law Office of Albert M. Kun, San Francisco, CA, for Reyna Alvarado.

Gilda Alvarado, Daly City, CA, pro se.

Dennis Montali, San Francisco, CA, pro se.

U.S. Bankruptcy Court, No. District of Ca., San Francisco, CA, pro se.

E. Lynn Schoenmann, San Francisco, CA, pro se.

Kumar Vikas, United States Trustee, San Francisco, CA, for the Office of the U.S. Trustee.

Janina M. Hoskins, Middletown, CA, pro se.

ORDER AFFIRMING ORDERS OF THE BANKRUPTCY COURT

PHYLLIS J. HAMILTON, District Judge.

In these consolidated appeals, Attorney Albert M. Kun (“Kun”) appeals from the orders of the bankruptcy court dismissing the bankruptcy cases and requiring disgorgement of attorney's fees. The United States Trustee filed an answering brief and Kun filed a reply brief in each appeal. The court determines that the matter is suitable for decision without oral argument. For the reasons set forth below, the orders of the bankruptcy court are AFFIRMED.

BACKGROUND

A. Reyna Alvarado

On July 23, 2012, Kun filed a petition for relief under chapter 7 as counsel for debtor Reyna Alvarado. Debtor filed a certificate of credit counseling which stated that she completed a course in credit counseling on December 1, 2011, or 235 days prior to filing. In re Reyna Alvarado, C 12–6190 PJH, doc. no. 10–1 at 10 (appellant's designation of record on appeal). This time between obtaining credit counseling and filing the petition was “slightly over the 180 days provided by law.” Id., doc. no. 15 at 2 (appellant brief). See11 U.S.C. § 109(h) (requiring debtor to receive credit counseling “during the 180–day period ending on the date of filing of the petition by such individual”).

Kun entered a fee arrangement with debtor for a flat fee of $1,000, plus filing fees, and was paid in three installments prior to the filing of the petition. In re Reyna Alvarado, C 12–6190 PJH, doc. no. 10–1 at 32–33 (Kun declaration).

The Acting United States Trustee moved to dismiss debtor's case on the ground that debtor did not obtain credit counseling within the 180–day statutory period. Id. at 11. The trustee also moved for disgorgement of fees paid to Kun in connection with debtor's case on the ground that Kun did not properly advise debtor to obtain timely credit counseling and filed the case with a stale credit counseling certificate. Id. at 21. On November 14, 2012, the bankruptcy court entered orders dismissing the case and requiring Kun to disgorge fees in the amount of $1,000. The bankruptcy court ordered Kun to pay $1,000 to debtor within ten days of the entry of the order. Id. at 42.

Kun timely filed a notice of appeal from the order to disgorge fees and the order dismissing the case. Debtor did not appeal from the order of dismissal.

On November 29, 2012, the bankruptcy court entered a docket text order stating that more than ten days have passed since the entry of the order to disgorge fees, and that “Mr. Kun is ordered to file a certificate of compliance or non-compliance no later than December 7, 2012.” Id. at 46 (docket sheet).

On December 4, 2012, Kun filed a motion to stay pending appeal, which the bankruptcy court denied by order dated December 6, 2012. Id., doc. no. 10–2 at 164–66 (appellee's designation of record on appeal). Kun subsequently filed a motion to stay in this court, which denied the motion to stay by order entered January 30, 2013.

Kun filed his opening brief in the In re Reyna Alvarado appeal on February 7, 2013. The trustee filed an answering brief on March 19, 2013, and Kun filed a reply brief on April 1, 2013.

B. Gilda Alvarado

On July 10, 2012, Kun filed a petition for relief under chapter 7 as counsel for debtor Gilda Alvarado, Reyna Alvarado's daughter. Debtor filed a certificate of credit counseling which stated that she completed a course in credit counseling on November 29, 2011, or 224 days prior to filing. In re Gilda Alvarado, Case No. 12–6478 PJH, doc. no. 3–1 at 11 (appellant's designation of record on appeal). This time between obtaining credit counseling and filing the petition was “slightly over the 180 days provided by law.” Id., doc. no. 11 at 2 (appellant brief). See11 U.S.C. § 109(h) (requiring debtor to receive credit counseling “during the 180–day period ending on the date of filing of the petition by such individual”).

Kun entered a fee arrangement with debtor for a flat fee of $1,000, plus filing fees, and was paid in three installments prior to the filing of the petition. In re Gilda Alvarado, Case No. 12–6478 PJH, doc. no. 3–1 at 38–39 (Kun declaration).

The Acting United States Trustee moved to dismiss debtor's case on the ground that debtor did not obtain credit counseling within the 180–day statutory period. Id. at 12. The trustee also moved for disgorgement of fees paid to Kun in connection with debtor's case on the ground that Kun did not properly advise debtor to obtain timely credit counseling and filed the case with a stale credit counseling certificate. Id. at 22. On October 10, 2012, the bankruptcy court entered an order requiring Kun to disgorge fees in the amount of $1,000 and to pay debtor the amount of $1,000 within ten days of the entry of the order. Id. at 66. On October 11, 2012, the bankruptcy court entered an order dismissing the case. Id., doc. no. 3–2 at 49 (appellee's designation of record on appeal).

On October 24, 2012, Kun filed a notice of appeal from the order to disgorge fees and the order dismissing the In re Gilda Alvarado case. Debtor did not appeal from the order of dismissal. Kun filed a motion to stay in this court, which denied the motion to stay by order entered January 30, 2013.

Kun filed an opening brief in In re Gilda Alvarado on January 29, 2013. The trustee filed an answering brief on March 19, 2013, and Kun filed a reply brief on April 1, 2013. The court consolidated the In re Gilda Alvarado appeal with the earlier-filed appeal in In re Reyna Alvarado.

ISSUES PRESENTED

Kun's appeals from the orders of the bankruptcy court in the bankruptcy cases of Gilda Alvarado and Reyna Alvarado (collectively, “debtors”) present the following issues:

1. Whether Kun has standing to appeal from the orders dismissing the bankruptcy cases;

2. Whether the bankruptcy court erred in dismissing debtors' chapter 7 cases pursuant to 11 U.S.C. § 707;

3. Whether the bankruptcy court erred in ordering Kun to return his retainer fee to each debtor pursuant to 11 U.S.C. § 362; and

4. Whether the trustee had authority to ask the bankruptcy court to disgorge fees.

STANDARDS OF REVIEW

The court reviews the bankruptcy court's conclusions of law de novo, and its findings of fact for clear error. Citibank v. Eashai (In re Eashai), 87 F.3d 1082, 1086 (9th Cir.1996). A bankruptcy court's decision to grant or deny a motion to dismiss for misconduct that constitutes “cause” is reviewed for abuse of discretion; however, whether a particular type of misconductcan constitute “cause” under § 707(a) is a question of law that is reviewed de novo. In re Sherman, 491 F.3d 948, 969 (9th Cir.2007). A bankruptcy court's decision on attorney's fees is reviewed for abuse of discretion. Hale v. United States Trustee, 509 F.3d 1139, 1146 (9th Cir.2007).

DISCUSSION

A. Legal Standards

A bankruptcy court may dismiss a case pursuant to section 707(a) “only after notice and a hearing and only for cause.” The statute defines cause as “including” the following:

(1) unreasonable delay by the debtor that is prejudicial to creditors;

(2) nonpayment of any fees or charges required under chapter 123 of title 28; and

(3) failure of the debtor in a voluntary case to file, within fifteen days or such additional time as the court may allow after the filing of the petition commencing such case, the information required by paragraph (1) of section 521(a) [i.e., a list of creditors and various financial disclosures], but only on a motion by the United States trustee.

11 U.S.C. § 707(a)(1)-(3). The types of conduct enumerated in § 707(a) as cause are not exclusive. Neary v. Padilla (In re Padilla), 222 F.3d 1184, 1191 (9th Cir.2000), partially superseded by statute on other grounds,11 U.S.C. § 707(b)(3)(A).

Under 11 U.S.C. § 329(b), “a bankruptcy court may examine the reasonableness of a debtor's attorney fees and, ‘if such compensation exceeds the reasonable value of any such services, the court may cancel any such agreement, or order the return of any such payment, to the extent excessive.’ ” Hale, 509 F.3d at 1147.

B. Bankruptcy Court's Ruling

Upon noticed motions of the trustee to dismiss and for disgorgement of all fees paid to Kun in connection with each debtor's case, the court held a hearing on the motions in each case after briefing on the motions was complete.

1. Gilda Alvarado

The bankruptcy court held a hearing on the motions to dismiss and for disgorgement in Gilda Alvarado's case on October 5, 2012, at which Kun and debtor were present. Kun argued that there was no authority that the requirement to take credit counseling within 180 days of filing the petition must be strictly enforced, and argued that there was no prejudice caused by the staleness of the counseling certificate, which he conceded was dated 45 days beyond the 180–day period. The bankruptcy court held that under the plain meaning of section 109(h), “as I read the statute and I think as the U.S. Trustee reads the statute, if the credit counseling was 181 days before the petition, the Debtor is not eligible.” October 5, 2012 Transcript at 7–8. The bankruptcy court advised debtor that under the statute, “you have to do this counseling within the 180–day window before your bankruptcy, and there are some exceptions, but you haven't indicated any basis for an exception.” Id. at 10. The bankruptcy court informed debtor that the motion to...