In re Finn
| Decision Date | 28 August 2020 |
| Docket Number | Case No. 19-71144,Case No. 19-71778 |
| Parties | In Re MARILYN ANN FINN, Debtor. In Re GALE RAY CUSTER and JOYCE ANNETTE CUSTER, Debtors. |
| Court | U.S. Bankruptcy Court — Central District of Illinois |
Before the Court are two Motions for Determination of Reasonable Value of Services of Debtor's Attorney and for Sanctions ("Motions for Sanctions"). Both Motions for Sanctions complain about the quality of work performed by Eric Homa, the attorney for the Debtors in each of the above cases. For the reasons set forth herein, both Motions for Sanctions will be granted, in part.
Because the same legal issues were raised in each of these cases, they have been consolidated for the purposes of this Opinion. The factual basis for the relief sought in each case is slightly different, however, and the facts of each case will therefore be set forth separately.
Marilyn Ann Finn filed her voluntary petition under Chapter 7 on August 2, 2019. She was represented in the filing by Attorney Eric Homa, who disclosed an affiliation with UpRight Law, LLC ("UpRight Law") with his appearance. On her Statement of Financial Affairs ("SOFA"), at question 16, Ms. Finn disclosed that, on May 22, 2019, she paid Attorney Homa $1675 in attorney fees and $335 for the filing fee.
Andrew Erickson was appointed as the Chapter 7 trustee ("Trustee") in Ms. Finn's case, and her initial meeting with creditors was scheduled for September 9, 2019. According to a motion filed later by the Trustee seeking to compel Ms. Finn to participate in a Rule 2004 examination, the initial creditors meeting was continued because neither Mr. Homa nor Ms. Finn had provided the Trustee with required documents before the meeting, and Mr. Homa failed to appear for the meeting. At a continued meeting, Ms. Finn testified about previously undisclosed sales of real estate and investments, as well as the transfer of a vehicle to a family member. The Trustee requested a Rule 2004 examination to inquire of Ms. Finnabout the transactions and to compel her to provide required bank statements and other documents. The Trustee also filed a motion seeking an extension of time to object to Ms. Finn's discharge based on his concerns about the undisclosed sales and transfers and her failure to provide documents. Orders were subsequently entered requiring Ms. Finn to attend a Rule 2004 examination and extending the deadline for the Trustee to object to her discharge.
The United State Trustee ("UST") also filed a motion seeking to compel Ms. Finn to attend a Rule 2004 examination. The UST expressed concerns about the undisclosed sales and transfers but also stated an intent to inquire about Ms. Finn's contacts with Attorney Homa. The UST alleged that Attorney Homa did not meet with Ms. Finn before filing her bankruptcy and did not fully investigate her financial affairs before the filing. The UST's motion was also granted.
In November 2019, Ms. Finn filed an amended SOFA and several amended schedules providing information about the sales and transfers that the Trustee had discovered. It appears from the record and other subsequently-filed documents that Ms. Finn never appeared for a Rule 2004 examination by the Trustee or UST. She did, however, receive her discharge on January 8, 2020. On March 2, 2020, the UST filed the Motion for Sanctions. The Motion for Sanctions will be discussed in more detail below.
Gale Ray Custer and Joyce Annette Custer filed their voluntary petition under Chapter 7 on December 5, 2019. They were represented by Attorney Eric Homa, who disclosed an affiliation with UpRight Law with his appearance. Ontheir SOFA, the Custers disclosed that they had paid Attorney Homa $1775 in attorney fees and $335 for the filing fee; the payments were made in installments beginning in September 2018 and ending in October 2019.
Andrew Erickson was also appointed Trustee in the Custers' case, and their first meeting of creditors was set for January 6, 2020. According to motions filed by the UST seeking to compel the appearances of both Mr. and Mrs. Custer, as well as Attorney Homa, at Rule 2004 examinations, Mr. Homa did not attend the Custers' creditors meeting due to illness but sent a substitute attorney instead. During that meeting, the Custers disclosed to the Trustee that Mr. Custer was trustee of a trust for his grandchildren, that Mr. Custer operated a business selling items on Ebay, that the Custers had a Christmas Club bank account, that the Custers had transferred a vehicle to a grandson and made other payments for the benefit of the grandson, and that the Custers had been paying a law firm $750 per month to help them reduce the interest rate on their home mortgage loan. None of this information had been disclosed on the Custers' SOFA or schedules. The Custers also reported that they had not met with Attorney Homa prior to the filing of their case.
On their schedules, the Custers listed ownership of what they described as a single-family home where they resided; they valued the home at $68,000 and said it was subject to a $99,000 lien. Shortly after the case was filed, a motion seeking relief from stay was filed by 21st Mortgage Corporation ("21st Mortgage") asserting a lien on a mobile home in an amount in excess of $100,000. The creditor claimed that, as of the date of filing, the Custers had missed five monthly payments of $1264 each and that it was entitled to relief from stay to obtainpossession of the mobile home.
Following the Court's standard procedures, notice of the motion for stay relief, including a deadline for filing objections to the motion, was sent to the Debtors and their attorney. The Debtors responded themselves, without assistance from Attorney Homa. They wrote to the Court saying that they wanted to keep their home, that they had hired lawyers to help them reduce the interest rate on their loan, and that, because of their ages and health issues, it would be difficult for them to move. The motion for relief from stay was then set for hearing. Prior to the motion being heard, Attorney Homa filed a motion to convert the case to Chapter 13.
The Custers appeared with Attorney Homa at a hearing on January 28, 2020. Attorney Homa said that he told the Custers that the only way to save their home was to convert to a Chapter 13 but that he had also advised them that the Trustee might object to the conversion because of the undisclosed assets and the amount of time that had elapsed after the case filing. He said that he had no idea that the Custers had hired and paid another law firm to look into refinancing their mortgage; he apparently learned the information when he attended a continued meeting with the Trustee. As the Court discussed the fact that a Chapter 13 plan might require the Custers to make significant payments, Mrs. Custer shook her head, strongly indicating that they would not be able to make such payments. Attorney Homa did not address the Custers' ability to fund a Chapter 13 plan and seemed oblivious to Mrs. Custer's strong reaction to his comments to the Court.
At the hearing, the Trustee stated that he intended to object to the motion to convert due to the significant number of undisclosed assets and transfers. TheCourt also expressed concern about the many errors in the Custers' schedules and SOFA and asked Attorney Homa whether he had actually met with the Custers before filing the case. He admitted that he had not but then claimed that this Court had previously said that attorneys did not need to meet with their clients before filing cases.1 The Court reacted strongly by saying that it was absolutely not the Court's position that attorneys did not have to meet with their bankruptcy clients. To the contrary, the Court had previously sanctioned attorneys for not meeting with their clients and had issued a written opinion on the issue.2 The Court stated that it had no ability to relieve attorneys of theirethical responsibilities to thoroughly investigate their clients' situations in order to provide competent representation. And, although Attorney Homa argued that he could do an adequate interview by running through questions on the phone, the Court pointed out that the unfortunate result of his not meeting and conducting a complete interview with the Custers was obvious. The matters were continued for further hearing to give the Trustee time to object to the conversion and to give the Custers time to consider whether conversion was a viable and beneficial option for them to pursue.
Prior to the continued hearing, the Custers, through Attorney Homa, withdrew their motion to convert and their objection to 21st Mortgage's motion for stay relief. Stay relief was granted to 21st Mortgage. In the meantime, the Custers amended their schedules and SOFA to add information previously omitted. And, even though it appears that they never attended a 2004 examination, they received their discharge on March 11, 2020. The Motion for Sanctions that will be discussed in detail below, was filed on March 2, 2020.
The UST's Motions for Sanctions recite the facts of each case and seek sanctions against Attorney Homa. In large measure, the requests for sanctions are based on Attorney Homa's failure to meet personally with either Ms. Finn or the Custers and his failure to otherwise collect and review all required information before filing the bankruptcy cases. In each case, the UST says that Attorney Homa failed to provide personal and meaningful representation to his clients. Attorney Homa is said to have admitted in both cases that it was his standard practice tonot meet with clients before filing their cases, and, in at least the Custers' case, Attorney Homa asserted that this Court had condoned the practice.
Both Motions for Sanctions seek a review of Attorney Homa's fees and the disgorgement of those...
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