In re DeSantis, Case No. 6:07-bk-03840-KSJ (Bankr.M.D.Fla. 1/8/2009)

• Decision Date: 08 January 2009
• Docket Number: Case No. 6:07-bk-03840-KSJ.
• Parties: In re Victor Anthony DeSantis, Dana Jo DeSantis, Chapter 7, Debtors.
• Court: U.S. Bankruptcy Court — Middle District of Florida

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In re Victor Anthony DeSantis, Dana Jo DeSantis, Chapter 7, Debtors.

Case No. 6:07-bk-03840-KSJ.

United States Bankruptcy Court, M.D. Florida, Orlando Division.

January 8, 2009.

Debtors: Victor Anthony DeSantis, Dana Jo DeSantis, Melbourne, FL.

Debtors' Attorney: David J. Volk, Volk Law Offices, PA, Melbourne, FL.

Community Educators' Credit Union, c/o Chip Trimmier, Trimmier LLC, Birmingham, Alabama.

Trustee: Marie E. Henkel, Avenue, Orlando, FL.

U.S. Trustee, Orlando, FL.

MEMORANDUM OPINION DENYING DEBTORS' MOTION FOR RECONSIDERATION, DENYING CREDITOR'S MOTION FOR DISQUALIFICATION, PARTIALLY SUSTAINING OBJECTION TO FEES AND COSTS, AND AWARDING FEES AND COSTS

KAREN S. JENNEMANN, Bankruptcy Judge

In an earlier decision (Doc. Nos. 61 and 62), the Court awarded sanctions in an undetermined amount to the Community Educators Credit Union ("CECU") to compensate CECU for attorney fees and costs it otherwise would pay to their attorney, Chip Trimmier, for services incurred in this case as a result of the actions taken by debtors' counsel, the Volk Law Offices ("VLO"). In order to assist the Court in determining the amount of the sanctions, CECU has filed an affidavit and Mr. Trimmier's invoices requesting attorney fees of $17,905.62 and expenses of $650.93 (Doc. No. 71).

VLO objects to the amount of the attorney fees and requests time for additional discovery and a further evidentiary hearing (Doc. No. 81). VLO also has filed a motion seeking reconsideration of the Court's initial ruling (Doc. No. 65). In response, CECU has moved to disqualify VLO from any further representation of the debtors in this case (Doc. No. 78).

The Court concludes that these on-going disputes between opposing counsel must end with this order. The Court will not reconsider its prior ruling; however, it also will not award the full amount of attorney fees sought by CECU, finding them unreasonable and excessive. Disqualification of VLO also is not required.

Reconsideration is Not Merited

VLO argues that the Court should reconsider its prior ruling because, first, VLO did not anticipate that the adequacy of its representation of the debtors was at issue, and, second, that CECU improperly filed a motion to dismiss the debtors' bankruptcy case (Doc. No. 15). Only three reasons justify reconsideration of a prior ruling: (1) a change in controlling law; (2) newly discovered evidence; or (3) a clear error of law or fact that results in manifest injustice. In re Kellogg, 197 F.3d 1116 (11th Cir. 1999); In re Barber, 318 B.R. 921, 924 (Bankr. M.D. Ga. 2004); In re Investors Florida, 168 B.R. 760, 768 (Bankr. N.D. Fla. 1994).

Because VLO timely filed its motion for reconsideration¹ within 10 days of the issuance of the Memorandum Opinion (Doc. No. 61), the Court will construe the request as a motion to alter or amend a judgment pursuant to Rule 59(e).² In re Mathis, 312 B.R. 912, 914 (Bankr. S.D. Fla. 2004) (citing Hatfield v. Board of County Commissioners, 52 F.3d 858 (10th Cir. 1995); accord Mendenhall v. Goldsmith, 59 F.3d 685 (7th Cir.1995); Goodman v. Lee, 988 F.2d 619 (5th Cir.1993)). "Reconsideration of an order under Rule 59(e) `is an extraordinary remedy to be employed sparingly'" due to interests in finality and conservation of judicial resources. Mathis, 312 B.R. 912, 914 (citing Sussman v. Salem, Saxon & Nielsen, P.A., 153 F.R.D. 689, 694 (M.D. Fla. 1994); accord Taylor Woodrow Construction Corp. v. Sarasota/Manatee Airport Authority, 814 F. Supp. 1072, 1073 (M.D. Fla. 1993)). Motions requesting reconsideration should not seek to re-argue issues already resolved by the court or to raise new arguments. Sanderlin v. Seminole Tribe of Florida, 243 F.3d 1282, 1292 (11th Cir. 2001); Investors Florida, 168 B.R. at 768.

VLO first argues it had no notice that the adequacy of its representation of the debtors was an issue and, therefore, it had no opportunity to present evidence. Specifically, VLO argues that, if given better notice, it would have presented evidence of why Mr. DeSantis chose to represent himself in the negotiations over the reaffirmation agreement with CECU rather than relying on his attorneys. VLO now attaches an affidavit submitted by Mr. DeSantis (Doc. No. 65).

In his Affidavit, Mr. DeSantis explains that he and his wife were very satisfied with VLO's services. Mr. DeSantis avers that VLO was always available and responsive, answered any questions he and his wife had regarding their Chapter 7 case, never refused to perform any services, and even provided advice on issues collateral to their bankruptcy case, prior to and post-discharge, exceeding the parameters of their representation agreement with VLO, free of charge.³

As to the reaffirmation agreement with CECU, Mr. DeSantis explains that, although he and his wife initially indicated that they intended to reaffirm the debt (Doc. No. 1, p. 38), he and his lawyers together determined reaffirmation was a poor choice because the debt on the vehicles securing the CECU loans was cross-collateralized with an unsecured line of credit. Mr. DeSantis stated that he "was unwilling to reaffirm" but then decided to "handle the matter myself to eliminate the `middle' man." Mr. DeSantis then wrote a letter to Mr. Trimmier offering to reaffirm the debt on the two cars but not the unsecured loan.

It was this letter that started the confusion. Mr. DeSantis continued to act as his own lawyer for some purposes; VLO represented the debtors for most other purposes. Although, as explained in the Memorandum Opinion, VLO should have sought to withdraw before allowing this type of bifurcated representation to continue, the real problem was that VLO never clearly responded to Mr. Trimmier's request to talk to Mr. DeSantis. VLO could have avoided this entire dispute by simply permitting Mr. Trimmier to contact the debtors directly.

VLO now cannot contend they had no notice that the adequacy of its representation was an issue insofar as the pleadings heard on April 2, 2008, and addressed in the Memorandum Opinion clearly raised the issue. On February 29, 2008, the Court noticed an evidentiary hearing on the following pleadings: (1) CECU's Second Amended Motion to Strike Debtors' Opposition to Motion to Dismiss (Doc. No. 45); (2) Response by Debtors to the Motion to Strike (Doc. No. 29); (3) CECU's Motion for Sanctions (Doc. No. 47); (4) CECU's Motion for Sanctions (Doc. No. 48); (5) Debtors' Response to the First Amended Motion to Strike and Second Amended Motion to Strike (Doc. No. 49); (6) Debtors' Response to Motion for Sanctions (Doc. No. 50); and (7) Debtors' Response to Motion for Sanctions (Doc. No. 51). These pleadings are addressed at length in the Memorandum Opinion and its Appendix. However, a summary review indicates that it was precisely VLO's bifurcated representation of the debtors that caused the confusion,⁴ prompted the dispute raised in these pleadings, and resulted in the award of sanctions. Therefore, the Court concludes that VLO had adequate notice of the issues prior to the final hearing and is not entitled to a second opportunity to present its case.

Nor is Mr. DeSantis' belated affidavit "new" evidence. It could have been submitted prior to or during the hearing held in this matter. In re Cleanmaster Industries, Inc., 106 B.R. 628 (B.A.P. 9th Cir. 1989) (where proffered affidavits were available at the time of trial, such cannot be considered to be "new," particularly in the absence of any explanation as to why affiants did not testify at the time of trial, accordingly, trial court did not abuse its discretion for declining to consider post-trial affidavits).

However, even if Mr. DeSantis had testified at trial exactly as he testified in his affidavit, the testimony would not have changed the Court's determination that VLO did not fulfill its obligation to fully represent the debtors on the reaffirmation issues with CECU. VLO did a very good job for these debtors and provided a high level of competent legal service. Doing a good job, however, does not mitigate VLO's duty to follow the Local Rules or to work with opposing counsel by permitting direct client contact when a debtor opts to represent him or herself. Even though the debtors are very satisfied with their lawyers, VLO still breached the representational obligations causing direct cost and prejudice to CECU. Mr. DeSantis' affidavit is neither new evidence nor testimony, even if considered, that would justify reconsideration.

Second, VLO raises a new legal argument in support of its motion for reconsideration—that CECU lacked "cause" to file the Motion to Dismiss the debtors' bankruptcy case because the debtors effectively had surrendered the vehicles subject to CECU's security interest by asking Mr. Trimmier for instructions for turnover. (Previously, VLO had merely argued that the Motion to Dismiss was "unwarranted"⁵ and that it was filed in "bad faith"⁶).

VLO, relying on the decision of In re Cornejo, 342 B.R. 834, 837 (Bankr. M.D. Fla. 2005), now argues that surrender instantaneously occurs as a matter of law when a debtor agrees, or evidences an intent, to make collateral available to a secured creditor and that no physical transfer is required. Thus, because the debtors effectively "surrendered" their interest in the vehicles in Mr. DeSantis' second letter of November 3, 2007, VLO argues CECU had no justifiable reason to file its motion to dismiss because the debtors had complied with their obligations pursuant to Bankruptcy Code⁷ Section 521.⁸ VLO argues that it should not have to pay Mr. Trimmier's fees and costs if he improperly filed the Motion to Dismiss without "cause."

VLO's argument fails on several grounds. Exactly what constitutes "surrender" admittedly is a subject of some debate because the term is not defined in the Bankruptcy Code.⁹ Section 521(a)(2)(B), which was substantially altered by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 enacted after th...