In re Delcorso
| Decision Date | 27 December 2007 |
| Docket Number | No. 06-21459REF.,06-21459REF. |
| Citation | 382 B.R. 240 |
| Parties | In re Silvia Maria DELCORSO, Debtor. |
| Court | U.S. Bankruptcy Court — Eastern District of Pennsylvania |
P. Gregory Dolan, II, Chester & Dolan II, Bethlehem, PA, Thomas L. Lightner, Lightner Law Offices, P.C., Allentown, PA, for Debtor.
David A. Eisenberg, David A. Eisenberg, Esq., P.C., Allentown, PA, for trustee.
Dave P. Adams, Kevin P. Callahan, Philadelphia, PA, for U.S. Trustee.
ORDER GRANTING MOTIONS OF UNITED STATES TRUSTEE FOR DISGORGEMENT OF FEES AND, IMPOSITION OF SANCTIONS
AND NOW, this 27th day of December, 2007, upon my consideration of the United States Trustee's Motion for Disgorgement and Return of Fees Paid by Debtor (the "Disgorgement Motion") and her Motion for Sanctions Pursuant to Federal Rule of Bankruptcy Procedure 9011 (the "Sanctions Motion")(the Disgorgement Motion and the Sanctions Motion are referred to together herein as the "Motions"), which Motions seek both (i) the disgorgement of fees paid to Thomas L. Lightner, Esquire ("Mr.Lightner"), who was Debtor's original counsel in the above-captioned Chapter 7 case, and (ii) sanctions against. Mr. Lightner, upon Mr. Lightner's response to the Motions, upon the testimony and exhibits offered and admitted in the hearing on the Motions on October 18, 2007, upon the briefs of the parties, and based upon the findings of fact, conclusions of law, and discussion in the accompanying Memorandum Opinion of even date,
IT IS HEREBY ORDERED that both of the Motions are GRANTED.
IT IS FURTHER ORDERED that Mr. Lightner is hereby directed and compelled to disgorge his fees received from Debtor in this case and to pay $1,155 to Debtor within ten (10) days of this Order.
IT IS FURTHER ORDERED that Mr. Lightner is hereby also directed and compelled to pay to Debtor, within ten (10) days of this Order, an additional $95 as a sanction for his conduct.
MEMORANDUM OPINIONThe instant matter arose upon the filing by the United States Trustee of two motions, one seeking disgorgement of fees paid by Debtor, Silvia Maria DelCorso ("Debtor") to her original counsel in this case, Thomas L. Lightner, Esquire ("Mr.Lightner"), and the other motion seeking sanctions against Mr. Lightner. Debtor had transferred property from her name alone to herself and her husband immediately prior to the filing of her petition in this case. The basis for the United States Trustee's motions was Mr. Lightner's explicit advice and counsel to Debtor to transfer the property. The United States Trustee claims it was a fraudulent transfer on the eve of Debtor's bankruptcy. Mr. Lightner's fee was $1,155.1
Ten days before Debtor initiated her bankruptcy, she was the sole title holder for the home in which she, her husband, and their family resided. Upon Mr. Lightner's advice, counsel, and assistance, Debtor transferred the property nine days before she filed for bankruptcy relief. Debtor performed the transfer through the execution and recording of the deed for the home, transferring it from Debtor alone to both Debtor and her husband as tenants by the entirety. As discussed more fully below, I find that. Mr. Lightner deliberately and intentionally advised and assisted Debtor in the unlawful act of transferring property immediately prior to filing her bankruptcy.
I therefore grant, in the Order accompanying this Memorandum Opinion, both of the motions of the United States Trustee. I will order Mr. Lightner to disgorge and return to Debtor his fees of $1,155, and I will further sanction Mr. Lightner by ordering him to pay to Debtor an additional $95.2 My discussion below in this Memorandum Opinion contains my findings of facts and my conclusions of the law in this case.
Debtor filed her petition in this case under Chapter 7 on September 29, 2006 Mr. Lightner was her counsel and prepared her petition, statement of financial affairs, schedules, and other necessary documents. The Chapter 7 Trustee examined Debtor at her Section 341 initial creditors' meeting3 on November 6, 2006, and asked her if she had transferred any property prior to filing her bankruptcy. Debtor admitted that she had done so and the Trustee initiated proceedings to recover the property for the estate.4 Debtor obtained new counsel, who entered his appearance on January 17, 2007, replacing Mr. Lightner, and settled with the Chapter 7 Trustee in early March 2007. I approved the settlement by my Order dated March 9, 2007. On May 8, 2007, the United States Trustee moved for approval of a waiver by Debtor of her discharge. Debtor did not oppose the waiver of discharge and I approved it by my Order dated May 31, 2007.
On September 17, 2007, the United States Trustee filed both her Motion for Disgorgement and Return of Fees Paid by Debtor (the "Disgorgement Motion") and her Motion for Sanctions Pursuant to Federal Rule of Bankruptcy Procedure 9011 (the "Sanctions Motion"), (The Disgorgement Motion and the Sanctions Motion are referred to together herein as the "Motions.") The factual averments in the Motions are almost identical. Mr. Lightner filed his Answer to the Disgorgement Motion on September 24, 2007, but filed no response to the Sanctions Motion.
At the hearing on the Motions, held on October 18, 2007, counsel for the United States Trustee and Mr. Lightner agreed to consider Mr. Lightner's Answer to the Disgorgement Motion as his response to the Sanctions Motion. Both parties also agreed that the hearings on the two Motions would be consolidated and that all testimony and exhibits presented in the October 18, 2007 hearing would be admitted into evidence for both the Disgorgement Motion and the Sanctions Motion. At the close of the October 18, 2007 hearing, the parties agreed to a briefing schedule and the parties have filed their briefs. This matter is now ripe for my determination.
Both Debtor and her husband, Anthony DelCorso ("Mr.DelCorso"), testified at some length about their various conversations with Mr. Lightner. Counsel for the United States Trustee notified both Debtor and Mr. DelCorso (together, the "DelCorsos"), near the start of their testimony, that he would ask them questions about their discussions and communications with Mr. Lightner. Counsel asked them if they Would waive the attorney-client privilege prohibiting disclosure of such communications and answer his questions.5 Both DelCorsos agreed, without any limitation, that they waived the privilege.6 The waiver of the attorney-client privilege protecting communications between the DelCorsos on the one hand and Mr. Lightner on the other was openly, knowingly, and intelligently given.
Beginning sometime in or before 2004, the DelCorsos experienced financial difficulties when Mr. DelCorso became disabled and Debtor was out of work while bearing and raising their three children. They decided to sell their home at 4130 Crestview Drive, Stroudsburg, Pennsylvania (the "Stroudsburg home") and move to Florida. The Stroudsburg home was titled in both of the DelCorsos' names as tenants by the entirety. After signing an agreement for the sale of their Stroudsburg home, however, the DelCorsos reconsidered and wanted to remain in the Lehigh Valley because they have family and friends there. The buyers of the Stroudsburg home refused to cancel the sale agreement to allow the DelCorsos to keep the Stroudsburg home. The DelCorsos had only five days to find alternative housing.
Within that five days, the DelCorsos found a suitable new home to buy at 4674 Maryann Drive, Bethlehem, Pennsylvania (the "Bethlehem home"), but could not obtain traditional mortgage financing because of both (i) the very short time-frame and (ii) Mr. DelCorso's financial difficulties. Debtor and her husband agreed to use funds in excess of $100,000, which were proceeds' from the sale of their Stroudsburg home, as a down payment on the Bethlehem home.7 They were also able to find a mortgage company, Countrywide Home Loans ("Countrywide"), that would finance the purchase of the Bethlehem home quickly, on certain express preconditions. Because Debtor's husband had a poor credit rating, Countrywide structured the financing as an immediate, "no-doc" loan.8 But Countrywide would finance the purchase only if the Bethlehem home were acquired by Debtor alone and only if the mortgage loan were made to Debtor alone. To satisfy Countrywide's requirements, therefore, Debtor acquired the Bethlehem home in her name alone and obtained the mortgage financing in her name alone.
Although the title to the Bethlehem home was in Debtor's name alone, Debtor and her husband have regarded, at all times since 2004, the Bethlehem home as their family home. At least a portion of the monthly mortgage payment was and is provided by Mr. DelCorso, who also provides or contributes to other household expenses, maintenance, and repairs.
Soon after Debtor bought the Bethlehem home, both DelCorsos considered bankruptcy as a way to deal with their financial difficulties. After an abominable experience with a Georgia credit repair company,9 the DelCorsos decided to retain a lawyer and file for bankruptcy. They found Mr. Lightner's name in the telephone book and went to speak with him in 2005, intending to file for bankruptcy relief jointly. But Mr. Lightner advised them that Mr. DelCorso should file alone,10 which he did in October 2005.
In preparing the papers for Mr. DelCorso's bankruptcy, which was filed in this Court at Docket No. 05-26671,11 Mr. Lightner left both Schedule A (real property) and Schedule D (creditors holding secured claims) blank, indicating no ownership interest whatsoever by Mr. DelCorso in any real property and no...
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