In re Ezell
| Decision Date | 07 August 2013 |
| Docket Number | No. 04 B 41448.,04 B 41448. |
| Citation | 502 B.R. 798 |
| Parties | In the Matter of Angela M. EZELL, Debtor. |
| Court | U.S. Bankruptcy Court — Northern District of Illinois |
OPINION TEXT STARTS HERE
Timothy K. Liou, Liou Law Firm, Chicago, IL, for Debtor.
Jeffrey Snell, Office of the United States Trustee, Chicago, IL.
Steven Shebar, Shebar Law Firm, Oak Park, IL, for Timothy K. Liou.
Tom Vaughn, Chicago, IL, Chapter 13 Trustee.
FINDINGS OF FACT AND CONCLUSIONS OF LAW ON U.S. TRUSTEE'S MOTION FOR DISGORGEMENT AND SANCTIONS (DOCKET NO. 47)
This case was filed under Chapter 13 of the Bankruptcy Code, Title 11 U.S.C.
The United States Trustee filed a Motion to Compel Debtor's counsel, Timothy K. Liou (“Liou”) to disgorge fees received by him and for sanctions. Liou responded to the Motion and evidentiary hearing was held thereon. The following constitutes Findings of Fact and Conclusions of Law pursuant to which the Motion will be allowed by separate order.
The Debtor previously filed her first Chapter 13 case (No. 03 B 17903). That case was dismissed pursuant to 11 U.S.C. § 1307(c)(5) on August 13, 2003, after confirmation of her Chapter 13 Plan was denied. Liou received $173 directly from Debtor in that case. Liou filed an Application for Compensation seeking $2,700 in legal fees. That application was pending at the time the case was dismissed; therefore, no order awarding fees was ever entered. The Chapter 13 Trustee made no distributions.
In the present case, on November 9, 2004, (the “Petition Date”) Liou did not disclose on Schedule F any debt owed to him by the Debtor for prior attorneys' fees. Instead, Liou listed a prepetition debt to Kurt J. Kolar, Esq. (“Kolar”), as “assignee to breach of contract,” in the amount of $2,341.40. Neither the original nor the Amended Statement of Financial Affairs (“SOFA”) show any payments made to Liou in the prior bankruptcy case. Also, at that time, Debtor filed an application to pay filing fees in installments.
On February 2, 2005, Debtor's Chapter 13 Plan in this case was confirmed. The Plan provided for monthly payments of $202 and proposed a 54.97% dividend to general unsecured creditors. The Plan only repaid general unsecured debt; there were no home mortgage or other secured claims.
On January 18, 2005, Liou filed an Application for Compensation seeking total compensation of $2,908.40 (“Application”), which reflected that Liou received $623 in the prior case. On February 2, 2005, Liou's Application was granted and he was awarded compensation.
On May 24, 2006, Liou filed Proof of Claim 5–1 in the amount of $2,625.26 in the name and on behalf of Kolar, as “assignee to contract” (“Kolar Claim”). The Kolar Claim was filed well after the claims bar date expired on May 9, 2005, but Liou as attorney for Debtor did not object to the Kolar Claim. On December 5, 2007, he filed a Motion to Extend Time to File Proof of Claim, thus seeking to have the Kolar Claim treated as timely filed (“Claim Motion”). On January 9, 2008, Liou's Motion was approved.
On March 23, 2010, a discharge order was entered after Debtor completed all Plan payments.
On June 1, 2010, the Chapter 13 Trustee filed his Final Report, indicating in pertinent part that $1,663.41 was paid on the Kolar Claim. Kolar and Liou have since admitted that once paid to Kolar, the $1,663.41 was actually transferred to and received by Liou.
On June 2, 2010, the Debtor's Chapter 13 case was closed.
On February 15, 2012, the U.S. Trustee filed the Motion to Reopen Chapter 13 Case in light of a statement of charges filed by Judges Wedoff and Hollis regarding Liou's actions in two other cases.
The issue presented here turns on the fake Kolar Claim that Liou arranged to be filed and allowed so that Liou could receive payment on that claim through Kolar's turnover of payments he received thereon, and on Liou's explanation as to why he did that.
1. This Chapter 13 case was commenced by the Debtor, Angela M. Ezell (“Ezell” or “Debtor”), with the filing of her voluntary petition on November 9, 2004. (Answer at ¶ 1).
2. Throughout the duration of the case, attorney Timothy K. Liou (“Liou”) was Debtor's counsel of record. ( Id. at ¶ 2).
3. Prior to this case, Debtor had another Chapter 13 bankruptcy case in the Northern District of Illinois, Case No. 03 B 17903 (the “First Case”). ( Id. at ¶ 3).
4. Liou was Debtor's counsel of record in the First Case. ( Id. at ¶ 4).
5. In the First Case, Liou filed an Application for Compensation seeking $2,700 in fees; said Application indicated that
Liou had received $173 directly from the Debtor. ( Id. at ¶ 5).
6. On August 13, 2003, the First Case was dismissed. ( Id. at ¶ 6).
7. Liou's Application for Compensation remained pending at the time the First Case was dismissed, and an order awarding fees was never entered. ( Id. at ¶ 7).
8. The Chapter 13 Trustee made no disbursements in the First Case. ( Id. at ¶ 8).
9. Debtor testified that she had no knowledge of filing more than one bankruptcy case. She testified that she believed her only bankruptcy case completed successfully. (Trial Tr., Dec. 10, p. 69, lines 2–17).
10. In the instant case, complete Schedules and a Statement of Financial Affairs were filed with the Petition on November 9, 2004. (Answer at ¶ 9).
11. At the time Liou filed the instant case for Debtor, he believed he held a claim against her for attorney's fees from the First Case. (Trial Tr., Dec. 10, p. 105, lines 8–11; p. 107, lines 1–11; p. 138, lines 12–14).
12. On Schedule F filed in the instant case, there was no indication of any debt owed to Liou on account of outstanding attorney's fees from the First Case. (Answer at ¶ 10; Govt. Ex. 1).
Liou disputed this finding of fact, but Schedule F filed in the instant case only indicated that Kurt J. Kolar, Esq. (“Kolar”) was a claimant for $2,341.40 as an “assignee to breach of contract.” (Govt.Ex. 1). Liou claims that Kolar was his assignee for purposes of processing Liou's claim for the unpaid attorney's fees that he earned in Debtor's prior bankruptcy case (the “Prior Fees”). (Trial Tr., Dec. 10, p. 105, line 12; p. 106, line 8; p. 168, line 16; p.169, line 6).
However, in his Answer, Liou admitted the precise language of Finding No. 12. ( See Answer, ¶ 10). The Final Pretrial Order [Docket No. 63] provided that “All well pleaded facts admitted in the pleadings are admitted into evidence, unless objections are filed to relevance or prejudice at least 7 calendar days prior to trial.” Moreover, the Kolar Claim filed as supposed assignee of the Liou fee claim was phoney, the purported assignment was a mere conduit for Liou to recover the unpaid fees due from the first case and Kolar paid Liou what was paid on the Kolar Claim.
13. Liou testified and claimed that his claim appears on Schedule F “indirectly ... by way of the claim of Kurt J. Kolar as assignee to breach of contract.” (Trial Tr., Dec. 10, p. 105, lines 23–25).
14. Liou purported to assign his claim against the Debtor to Kurt J. Kolar (“Kolar”), but has no written documentation evidencing the assignment, (Trial Tr., Dec. 10, p. 143, lines 8–24), thus making the purported “assignment” fictional.
15. Liou, or someone operating at his direction, prepared the Debtor's Schedule F listing Kolar as a creditor. (Govt. Ex. 1, Schedule F, filed Nov. 9, 2004).
16. Liou now acknowledges that the Schedule F filed in this case was false. (Trial Tr., Dec. 10, p. 29, lines 13; p. 30, line 3).
Liou disputes Finding of Fact No. 16. However, in Liou's counsel's opening statement, he was questioned by the Court and gave a partial answer. Liou personally gave a more complete answer to the question of whether Schedule F filed in this case was “false.” He first testified that, “I didn't believe [the schedules] were not truthful.” (Trial Tr., Dec. 10. p. 168, lines 12–13). He further testified that, while “[o]ne might think that” Schedule F was, on its face, not truthful, “as a nominal assignment, I believed that this was the custom and practice that the trustee wanted me to use.” ( Id. at p. 169, line 1–6). Liou further testified that he listed Kolar on Schedule F as holding a claim against the Debtor because “I was told my name could not be in the Schedule F, and I'm still told that to this day.” ( Id. at p. 170, lines 1–3).
But despite the foregoing evasiveness, Liou's Answer conceded that the Schedule F filed in this case was, “in a literal sense, ‘false and erroneous ...’ ” (Answer, p. 21).
17. Debtor attested to the accuracy of Schedule F under penalty of perjury. (Answer at ¶ 32).
18. Neither the original nor amended Statement of Financial Affairs filed in the instant case show any payments made to Liou on account of the First Case. (Answer at ¶ 11).
19. Accompanying the Petition and Schedules was a Chapter 13 Plan (“Plan”) which proposed a 54.97% dividend to general unsecured creditors over a sixty-month term. ( Id. at ¶ 12).
20. Debtor did not have a home mortgage or other secured debt; her Plan repaid only general unsecured debt. Had Debtor proposed a thirty-six month repayment Plan with the same monthly payment provided in the Plan, it would have resulted in a roughly 24% distribution to general unsecured creditors. ( Id. at ¶ 12, n. 1).
21. Liou asserts that the Plan proposed a sixty-month term because Debtor had “parking citations totaling $10,340 and that it was [her] desire to have the longest Plan pay off duration possible to keep her driving privileges as long as possible.” ( Id.).
22. Debtor testified that Liou advised her to propose a sixty-month term for her Plan. (Trial Tr., Dec. 10, p. 53, lines 16–18).
23. Debtor's Schedule I indicates that she worked two jobs to support herself and her two sons. Her total monthly household income was $1,946.71 and her total monthly household expenses were $1,744, leaving monthly disposable income of $202.71. (Answer at ¶ 13).
24. The monthly payment under the Plan...
To continue reading
Request your trial