In re Goddard
| Decision Date | 07 July 1997 |
| Docket Number | Civil No. 97-0421 GEB. |
| Citation | 212 BR 233 |
| Parties | In re Alan David GODDARD, Debtor. NEW JERSEY LAWYERS' FUND FOR CLIENT PROTECTION, Plaintiff, v. Alan David GODDARD, Defendant. |
| Court | U.S. District Court — District of New Jersey |
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Michael T. McCormick, Trenton, NJ, for New Jersey Lawyers' Fund for Client Protection.
Joseph M. Casello, Broege, Neumann, Fischer & Shaver, Manasquan, NJ, for Alan David Goddard.
This matter comes before the Court on the appeal of the New Jersey Lawyers' Fund for Client Protection (the "Fund" or "Appellant") of the Bankruptcy Court's Final Order of December 10, 1996 ("December 10th Order"), wherein the Bankruptcy Court denied the Fund's motion to dismiss the Chapter 13 petition (the "Petition") of Alan David Goddard (the "Debtor" or "Appellee") and confirmed the Debtor's modified Chapter 13 plan (the "Modified Plan"). See In re Goddard, No. 96-30281 (Bankr.D.N.J. Dec. 10, 1996) (WHG). For the reasons set forth in this Memorandum Opinion, the Court will: (1) reverse the Bankruptcy Court to the extent it found that the Debtor accurately reported his debts and expenses; and (2) vacate the December 10th Order and remand for further proceedings consistent with this Opinion.
The Debtor was admitted to the practice of law in New Jersey in 1970. On July 10, 1985, he was disbarred from practice by Order of the Supreme Court of New Jersey. The Debtor's disbarment was part of a plea agreement in which he was convicted and served two years in federal prison for tax evasion and "helping his clients hide their assets from the IRS." See Deposition of Alan David Goddard ("Goddard Dep.") at 35, attached to Appellant's Designation of Items to be Included in the Record on Appeal ("Appellant's Record") as Exh. 8.
The Appellant is an entity established by the Supreme Court of New Jersey under N.J. CT. R. 1:28-1 et seq. Its purpose is to reimburse clients for losses caused by the dishonest conduct of members of the Bar of New Jersey. When a claim is made, the Fund conducts an investigation to determine if the client's loss is the result of the attorney's dishonest conduct. Both the claimant and the respondent attorney are notified of all findings and invited to submit documentation of their position with regard to the claim. All documentation is reviewed and considered by the Fund's Board of Trustees. Claimant and respondent may be invited to appear personally before the Board to offer their own testimony. Each party may submit additional, newly discovered evidence, and request a reconsideration of the Trustees' decision, if the decision is contrary to their interests. Once a claim is paid, the Fund takes an assignment of the victim's rights and pursues recovery from the responsible party or parties.
In the instant case, the Fund first paid the claim of Timothy and Sharyn Downey v. Goddard on May 22, 1987 in the amount of $325.50. The Trustees found that the Debtor failed to purchase title insurance for the Downeys while representing them in a real estate transaction, although he collected the premium to do so. Subsequently, in April, 1989, the Fund paid the claim of Louis and Stella Davino v. Goddard in the amount of $50,000. In this matter, the Debtor had represented both the Davinos as buyers and Racine Landscaping as the seller in a real estate transaction. The Debtor was acting as the court appointed Administrator with Will Attached for the estate of the deceased sole owner and director of Racine Landscaping. At the time of the sale, there were tax liens against the subject property in the amount of $48,166.43, which exceeded the property's $45,000.00 sale price. The Debtor, however, advised the Davinos that the $45,000 sale price would be sufficient to satisfy all liens on the property, and conducted the closing. When the Davinos attempted to sell the property in 1988, they discovered that the Debtor had neither paid off the liens nor forwarded the $361.80 title insurance fee they had given him for the insurance provider. As a result, no title insurance was issued and the liens had by then grown to $87,046.80. The Fund's award of $50,000 represented the maximum payable at that time, under court rule, of $25,000 per claimant.
Thereafter, the Fund filed suit against the Debtor and Judgment was entered by the Superior Court of New Jersey against the Debtor on December 20, 1990 for the full amount paid on the Debtor's behalf of $50,325.50. The Debtor failed to respond to the Appellant's subsequent attempts to collect the judgment amount, and on July 14, 1995, the Appellant sent the Debtor an Information Subpoena in accordance with N.J. CT. R. 4:59-1(e). The Debtor refused service of the Subpoena and did not respond to the Appellant's motion to have him held in contempt for noncompliance. The Debtor was held in contempt and an Order for his arrest was entered by the court on September 29, 1995.
Because of the Appellant's continued efforts to serve this Order, the Debtor filed a voluntary petition pursuant to Chapter 13 of the Bankruptcy Code. See Transcript of December 10, 1996 Hearing ("Hearing Tr.") at 19 ( ). In his Petition, the Debtor listed all of his creditors, including the Fund, and the proposed Chapter 13 plan ("Original Plan") filed with the Petition required Mr. Goddard to contribute $145 per month for a period of thirty-six (36) months toward the repayment of his debts.
The Appellant filed an objection to confirmation of the Debtor's Original Plan on April 9, 1996. See Appellant's Record, Exh. 3. Essentially, the Fund objected on the grounds that the Debtor's schedules contained "inaccurate" information and that the Debtor was not contributing all of his disposable income to the Original Plan. The Fund maintained that the inaccuracies, as well as the circumstances surrounding the filing, reflected that the Original Plan had not been proposed in good faith. The Objection requested the dismissal of the Debtor's Chapter 13 Petition.
In July, 1996, the Debtor filed a Modified Plan as a result of the filing of a priority proof of claim by the Internal Revenue Service. According to the filed proof of claim, the IRS held a priority claim as a result of certain trust fund taxes which the debtor failed to pay in 1984. Given the IRS priority claim, the Debtor filed a Modified Plan providing for payment of that claim in the amount of $4,802.51. See Modified Chapter 13 Plan, attached to Appellant's Record as Exh. 5. However, the Modified Plan provided for no payment to unsecured creditors.
The Confirmation Hearing in this matter was first adjourned by the Bankruptcy Court from June 18 to July 30, 1996, and then by the Debtor from August 6 to October 22, 1996. Because the Debtor's personal absence from the October 22 hearing precluded the court from considering the Fund's objection that the Debtor's Modified Plan was not filed in good faith, the court adjourned the hearing until December 10, 1996 to allow the Fund to depose the Debtor and present evidence of the Debtor's bad faith.
The Debtor was deposed on November 19, 1996 and his wife, Joanne Goddard, was deposed as a fact witness on December 5, 1996. At the subsequent hearing of the matter on December 10, 1996, the Bankruptcy Court confirmed the Debtor's Modified Plan and determined that his Petition had been filed in good faith. It is from this Order which the Fund now appeals.
Bankruptcy Rule 8013 provides in pertinent part: 11 U.S.C.A. Rule 8013 (West Supp.1995); Resyn Corp. v. United States, 851 F.2d 660, 664 (3d Cir.1988). In defining the term "clearly erroneous" the United States Supreme Court has stated that "a finding is clearly erroneous when, although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conclusion that a mistake has been committed." United States v. U.S. Gypsum Co., 333 U.S. 364, 395, 68 S.Ct. 525, 542, 92 L.Ed. 746 (1948). A bankruptcy court's conclusions of law are subject to plenary review. Brown v. Pennsylvania State Employees Credit Union, 851 F.2d 81, 84 (3d Cir.1988). Where mixed questions of law and fact are presented, the appropriate standard must be applied to each component. In re Sharon Steel Corp., 871 F.2d 1217, 1222 (3d Cir.1989).
In the present matter, the Appellant argues that the issue on appeal is whether the Bankruptcy Court erred in finding that the Debtor's Chapter 13 Petition and Modified Plan were filed in good faith "when the evidence demonstrated that the said petition misrepresented the financial condition of the debtor and his ability to fund an appropriate plan and had been filed in an attempt to evade payment to the Appellant." Appellant's Brief at 2. Whether a Chapter 13 petition or plan has been proposed in good faith is a question of fact subject to the clearly erroneous standard of review. In re Love, 957 F.2d 1350, 1354 (7th Cir.1992). However, the Bankruptcy Court's conclusions with regard to the legal standard applicable to good faith determinations are questions of law reviewed under the de novo standard. Id.
Chapter 13 does not explicitly contain a good faith requirement for the filing of a petition. In re Lilley, 91 F.3d 491, 496 (3d Cir.1996); In re Love, 957 F.2d 1350, 1354 (7th Cir.1992). Nevertheless, Section 1307(c) of the Bankruptcy Code does state...
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