In re Cochener

• Decision Date: 09 February 2007
• Docket Number: No. 01-34884.,01-34884.
• Citation: 360 B.R. 542
• Parties: In re Beverly COCHENER, Debtor.
• Court: U.S. Bankruptcy Court — Southern District of Texas

360 B.R. 542

In re Beverly COCHENER, Debtor.

No. 01-34884.

United States Bankruptcy Court, S.D. Texas, Houston Division.

February 9, 2007.

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David W. Barry, Law Offices of David W. Barry, Houston, TX, Jason Alexander Hawks, Hawks Law Firm, Tomball, TX, Edmond N. O'Suji, Attorney at Law, Houston, TX, for Debtor.

Hilary B. Bonial, Brice Vander Linden et al., Dallas, TX, John P. Dillman, Linebarger, Goggan, et al., Houston, TX, Diane Brazen Gordon, Butler & Hailey PC, Angela K. Randermann, Houston, TX, for Creditors.

Susan J. Brandt, Nathan Sommers Jacobs, Houston, TX, Mynde Shuane Eisen, Attorney at Law, Houston, TX, for trustee.

MEMORANDUM OPINION ON: (1) TRUSTEE'S MOTION FOR SANCTIONS AGAINST DAVID BARRY FOR CAUSING UNNECESSARY DELAY AND EXPENSE TO THE ESTATE; (2) DAVID BARRY'S MOTION TO DISMISS THE TRUSTEE'S MOTION FOR SANCTIONS AGAINST DAVID BARRY FOR CAUSING UNNECESSARY DELAY AND EXPENSE TO THE ESTATE; AND (3) REGARDING THE COURT'S SHOW CAUSE ORDER OF SEPTEMBER 1, 2006 AGAINST BEVERLY COCHENER, CHAD COCHENER, AND JASON HAWKS [Docket Nos. 78, 79, and 95]

JEFF BOHM, Bankruptcy Judge.

I. INTRODUCTION

In 2005, Congress enacted the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) to rectify perceived fraud and abuse in the bankruptcy system. The legislative history reflects that Congress passed BAPCPA to address "debtor misconduct and abuse" and "misconduct by attorneys and other professionals" within the bankruptcy system. See H.R.Rep. No. 109-31, at 5 (2005), reprinted in 2005 U.S.C.A.N. 88, 92.¹ In the case at bar, which was initiated upon the voluntary filing of a Chapter 7 petition in 2001, the conduct of Beverly Cochener (the Debtor) and one of her attorneys demonstrates why Congress perceived that there was sufficient abuse in the system to warrant passage of this legislation.

The abuse in this case was egregious. The Debtor bears some of the blame; her second attorney bears more. The Debtor's defense is that she relied on the advice of her attorneys; she is correct to a point, but cannot totally evade responsibility for her actions. The attorney, David Barry (Barry), raises certain defenses, not the least of which is that his actions occurred in 2001, and to sanction him now after the passage of this much time is absurd and unfair. It is neither. Indeed, Barry has known since 2001 that the Chapter 7 Trustee was very unhappy with his conduct, and ever since the Trustee's initial expression to Barry of misgivings about his conduct, the Trustee has repeatedly told him that he needed to reimburse the Trustee for the unnecessary legal fees and expenses which the Trustee incurred due to Barry's conduct. Barry chose to turn a deaf ear to the patient pleas of the Trustee to arrive at a resolution. As a result of Barry's unwillingness to reimburse the Trustee, and because of other events that have occurred since 2001, the Trustee decided to file a Motion for Sanctions against Barry in 2006. Given that, in 2006, the Trustee was finally able to liquidate certain assets, the existence of which Barry did everything in 2001 to prevent the Trustee from uncovering, the Trustee's Motion for Sanctions is hardly absurd or untimely. Just the converse: it is reasonable and timely.²

The purpose of this Memorandum Opinion is to discuss the reasons that the Trustee's Motion for Sanctions has merit and what form of sanctions should be imposed against Barry. Additionally, this Opinion addresses what form of sanctions should be imposed against the Debtor, and against her non-debtor son, for their unacceptable conduct.

II. FINDINGS OF FACT

1. The Debtor initiated the above-referenced case by filing her Chapter 7 petition on May 1, 2001. [Docket No. 1.]³ This case was assigned to

the undersigned judge's predecessor, the Honorable William R. Greendyke (Judge Greendyke).

2. The Debtor's attorney on May 1, 2001 was Jason Hawks (Hawks). [Docket No. 1.]

3. Along with her petition, the Debtor filed her Schedules. [Docket No. 1.]

4. The Debtor's Schedules set forth that her total assets were $403.00, and her liabilities were $111,000.00. [Docket No. 1, Summary of Schedules.]

5. The Debtor listed her personal property, which included $18.00 in cash on hand, clothing, a small collection of books, jewelry valued at $35.00, and other items, all totaling $403.00. [Docket No. 1, Schedule B.] The Debtor claimed all of this property as exempt property. [Docket No. 1, Schedule C.]

6. Notably, the Debtor did not include any real property in her Schedules, thereby representing to this Court that she owned none. [Docket No. 1, Schedule A.]

7. The Debtor did not schedule any secured creditors. [Docket No. 1, Schedule D.]

8. The Debtor did, however, schedule ten (10) unsecured creditors, indicating $111,000.00 in total unsecured debts. [Docket No. 1, Schedule F.] One of these creditors was her ex-husband, John Cochener⁴; the other unsecured creditors were five credit card companies and banks, a psychologist, and three other individuals. Id. The Debtor did not schedule any of these debts as disputed. [Docket No. 131, p. 78:2-15.]

9. The Debtor further indicated in her Schedule I that she had no current monthly income, with the following footnote:

Although debtor did receive some monthly maintenance payments from her ex-husband during the divorce (year 2000 was when payments were received), debtor has not been employed either prior to or subsequent to her divorce. Debtor currently lives expense free with her son, who has been supporting her in his home since just prior to the date of divorce.

[Docket No. 1, Schedule I.]

10. The Debtor's Schedule J indicated "$0.00" for her monthly expenses with the following notation: "Debtor lives expense free in her son's home." [Docket No. 1, Schedule J.]

11. The Debtor's son, with whom she has lived, is Chad Cochener. [Docket No. 131, p. 95:20-21.] At or about the time that the Debtor filed her Chapter 7 petition, Chad Cochener was a consultant at a car wash in Houston, Harris County, Texas. [Docket No. 132, p. 15:1-16.]

12. On May 15, 2001, the Clerk of the Bankruptcy Court sent all interested parties the Notice of Commencement of Case Under Chapter 7 of the Bankruptcy Code, Meeting of Creditors, and Fixing of Dates, which stated in pertinent part:

MEETING OF CREDITORS. The debtor (both husband and wife in a joint case) is required to appear at the meeting of creditors on the date and at the place set forth above for the purpose of being examined under oath . . . The meeting may be continued or adjourned from time to time by notice at the meeting .. .

[Docket No. 4 (emphasis added).]

13. On May 17, 2001, the Debtor filed an Amended Summary of Schedules, listing total assets of $403.00 and amending the amount of her total liabilities to $111,556.99. [Docket No. 5, Amended Summary of Schedules.]

14. On May 17, 2001, the Debtor also filed an Amended Schedule F, changing the amount of the claim for creditor Dana Carlson from $7,775.90 to $9,707.89. [Docket No. 5, Amended Schedule F.] The Debtor also changed John Cochener's claims, keeping the first in the 19. amount of $35,661.11, and reducing the second to $10,000.00 while adding the designation "Attorney's Fees." Id. Additionally, the Debtor added a third claim for John Cochener in the amount of $1,000.00 with the designation "Attorney's Fees." Id.

15. The Debtor's Statement of Financial Affairs and Schedules, as initially filed and as amended, were inaccurate.

16. The initial Meeting of Creditors was held on June 6, 2001. [Docket No. 4.] In attendance were: (a) Ron Sommers, the Chapter 7 Trustee in this case (the Trustee); (b) the Debtor; (c) Hawks, as counsel for the Debtor; and (d) Pam Stewart (Stewart), the attorney for John Cochener. [Docket No. 131, pp. 75:25-76:5, 81:11-13.]

17. The fact that the Debtor scheduled $403.00 in assets, combined with information that the Trustee received from John Cochener, gave the Trustee concerns that the Debtor's Schedules were inaccurate. [Docket Nos. 130, pp. 33:18-34:1; 131, pp. 131:15-133:22.] The Trustee had developed these concerns as of June 6, 2001. [Docket No. 131, p. 133:6-17.]

18. At the Meeting of Creditors on June 6, 2001, the Trustee therefore requested certain documentation from the Debtor, including: the Debtor's Divorce Decree; any trust agreements between the Debtor, Chad Cochener, or anybody related to him; and information regarding the ownership of the property where the Debtor was residing. [Docket No. 130, pp. 34:2-35:12; Docket No. 131, p. 76:19-77:1.]

19. The Trustee made this request in fulfilling his duties as the Chapter 7 Trustee to investigate the assets in the Debtor's case and the financial condition of the Debtor. [Docket No. 130, p. 35:7-12.]

20. On behalf of the Debtor, and in the Debtor's presence, Hawks agreed to produce the documents that the Trustee requested within 10 days. [Docket No. 130, p. 34:22-25; Docket No. 131, pp. 54:10-55:16, 81:11-21, 89:1-15, 126:2-17.] Moreover, the Debtor agreed to produce the documents. [Docket No. 131, p. 126:2-14.] The Trustee therefore continued the Meeting of Creditors for 14 days until June 20, 2001 so that he could first review the documents, to be produced and then examine the Debtor about these documents, including any transactions related to or described in the documents. [Docket No. 131, p. 126:2-17; Docket No. 130, p. 35:1-6.]

21. At the end of the June 6, 2001 Meeting of Creditors, the Trustee expressly informed the Debtor that she must attend the continuation of the Meeting of Creditors to be held on June 20, 2001. [Docket No. 131, pp. 125:25-126:19; Trustee's Exhibit No. 1.]⁵

22. Both the Debtor and Hawks agreed to appear at the continued Meeting of Creditors. [Docket No. 131, p. 126:18-19.]

23. At the initial. Meeting of Creditors held on June 6, 2001, given the questions being asked by the Trustee and the...