In re Haney, No. 01-35985.

• Decision Date: 23 September 2002
• Docket Number: No. 01-35985.
• Citation: 284 B.R. 841
• Parties: In re Betty Jo HANEY, Debtor.
• Court: U.S. Bankruptcy Court — Northern District of Ohio

284 B.R. 841

In re Betty Jo HANEY, Debtor.

No. 01-35985.

United States Bankruptcy Court, N.D. Ohio, Western Division.

September 23, 2002.

COPYRIGHT MATERIAL OMITTED

Derrick V. Rippy, Cleveland, OH, for Ira Bodenstein.

MEMORANDUM OF DECISION

MARY ANN WHIPPLE, Bankruptcy Judge.

This case involves two common issues surrounding the services of a bankruptcy petition preparer to an individual chapter 7 debtor. First, does the Bankruptcy Code prohibit a bankruptcy petition preparer from handling a money order made payable to the clerk of the bankruptcy court for the filing fee required to commence a debtor's bankruptcy case? Second, what fee measures the value of the services of a bankruptcy petition preparer in preparing the documents necessary to prosecute an individual debtor's chapter 7 case?

The United States Trustee ("UST") raises these issues in his Motion to Fine Bankruptcy Petition Preparer Donald Harris and Order the Refund of Excessive Fees ("Motion") [Doc. # 11]. The UST filed an identical motion against Donald Harris ("Mr. Harris") in another case pending in this court, In re Shirley J. Alexander, 284 B.R. 626 (Bankr.N.D.Ohio 2002). The court held a joint evidentiary hearing on the motions; however, separate orders will be entered in each case.

This court has jurisdiction over Debtor Betty Jo Haney's ("Debtor" or "Ms. Haney") chapter 7 bankruptcy case under 28 U.S.C. §§ 1334 and 157 and General Order 84-1, the general order of reference in this district. The Motion is a contested matter and a core proceeding, which this court may hear and determine under 28 U.S.C. § 157(b)(2)(A). The court has examined the submitted written arguments, weighed the credibility of the hearing witnesses, considered all of the evidence, and reviewed the entire record of the case. Based upon that review, and for the following reasons, the court finds that the Motion should be GRANTED in part, and DENIED in part. This Memorandum of Decision constitutes the court's finding of facts and conclusions of law on the Motion under Fed.R.Civ.P. 52(a), which applies to this contested matter pursuant to Fed. R. Bankr.P. 9014 and 7052.

Findings of Fact:

Ms. Haney testified at the hearing. Mr. Harris did not testify, but he made statements and arguments on his own behalf, both orally and in writing, which could be construed as binding judicial admissions against him to the extent of any facts involved.¹ Cf. In re Stephenson, 205 B.R. 52, 55 n. 2 (Bankr.E.D.Pa.1997)(statements of counsel not evidence, but may be binding judicial admissions); In re Menell, 160 B.R. 524, 525 n. 3 (Bankr.D.N.J.1993), aff'd, 37 F.3d 113 (3d Cir.1994)(concessions of counsel in open court are binding judicial admissions). There were some documents referred to at the hearing, but none were offered or admitted into evidence. So except as otherwise specified below, these findings of fact are based upon Ms. Haney's testimony and reasonable inferences therefrom. Although Ms. Haney's memory was not good with respect to dates and sequences of events, the court found her testimony overall to be credible. This is so notwithstanding Mr. Harris' effort to show on cross-examination that her anger at the delayed filing of her case, and his referral of her debt to him to a collection agency, was influencing her testimony adversely to him.

Ms. Haney lives in Sandusky, Ohio, where Mr. Harris also has his office. [Doc. # 1 at 1]. She first met with Mr. Harris in July, 2001. She had been referred to him by co-workers. At that meeting, Mr. Harris explained to Ms. Haney that he was a bankruptcy petition preparer and gave her a printout of his charges. Ms. Haney was firm in her testimony that she paid Mr. Harris $100.00 in cash at that first meeting.

A short time later, sometime in August, 2001, Ms. Haney paid Mr. Harris an additional $200.00 for what she repeatedly described during the hearing as the "retaining fee." On cross-examination by Mr. Harris, Ms. Haney acknowledged that the "$200 retaining fee" was a money order payable to the clerk to be delivered to the court. Although she did not remember when she actually signed documents to commence her case, Ms. Haney testified more than once that she "figured the bankruptcy would take effect then" and "that was when I thought it would be filed." It was Ms. Haney's understanding that her payment of the "retaining fee" would stop the garnishment of her wages. So when her paycheck continued to be garnished, she became upset and contacted Mr. Harris again in August or September. Ultimately she discovered, when she received the filed paperwork back from Mr. Harris, that her chapter 7 case was not filed until September 25, 2001. Ms. Haney did not personally file or mail her documents to the court, as she understood that Mr. Harris would bring or otherwise deliver them to the court. Ms. Haney was clearly upset that the case was not commenced until September 25th, and that her wages continued to be garnished even after she paid the "retaining fee." She felt that "action should have taken place more quickly" because she paid the "retaining fee to stop the garnishment" of her wages.

The record concerning the fees paid to Mr. Harris is confusing in two respects. The first respect is what Ms. Haney and Mr. Harris agreed upon as the fee amount for Mr. Harris' document preparation services. The UST contends that the fee agreed to, and paid, was $650.00. [UST's Post-Hearing Brief on Motion to Fine Bankruptcy Petition Preparer Donald Harris and Order the Refund of Excessive Fees, Doc. # 15, at 2, 5]. Ms. Haney testified that she was quoted a fee of $650.00, but that Mr. Harris "agreed to take" $550.00. The court finds that the originally agreed-upon amount was $550.00, not $650.00.

The second respect in which the record is confusing is what amount was actually paid by Ms. Haney to Mr. Harris, or at least sought to be collected by Mr. Harris, irrespective of the original agreement. Specifically, the record is unclear whether the $200.00 filing fee for commencing the chapter 7 case was ultimately treated by Mr. Harris as part of, or was in addition to, the agreed "fee" amount of $550.00. Ms. Haney's recollection was clear that she had initially paid $100.00 in cash, and then the $200.00 "retaining fee." Sorting through her testimony, it appears she only transmitted $300.00 directly to Mr. Harris before the commencement of the case, her initial $100.00 cash payment and then the $200.00 money order for the "retaining fee." Ms. Haney said she did not receive a receipt for the $200.00 money order, from which the court infers that she did receive one for the $100.00 cash payment. However, there were no receipts or statements of account offered or admitted into evidence. The court cannot find from the record that Ms. Haney made a second $200.00 lump sum payment to Mr. Harris, which would be consistent with a total service fee, in addition to the case filing fee, of $550.00.

The Disclosure of Compensation of Bankruptcy Petition Preparer completed by Mr. Harris, and filed with Ms. Haney's petition on September 25, 2001, stated that $550.00 was charged, $300.00 had been collected and a balance of $250.00 was due. [Doc. # 1]. The court takes judicial notice of Mr. Harris' filed Disclosure of Compensation as being in the record, Fed.R.Evid. 201(a), (b) and (c); In re Bestway Products, Inc., 151 B.R. 530, 540-41 (Bankr.E.D.Cal.1993), and finds further that it is at least an evidentiary admission by Mr. Harris. Compare Jenkins v. Tomlinson (In re Basin Resources Corp.), 182 B.R. 489, 493 (Bankr.N.D.Tex.1995)(statements in proof of claim and objection are binding judicial admissions) with In re Cobb, 56 B.R. 440, 442 n. 3(Bankr.N.D.Ill.1985) (statements in schedules are evidentiary, not binding judicial, admissions in adversary proceeding on party making them). This document confirms Ms. Haney's testimony that she had transmitted a total of $300.00 to Mr. Harris before commencement of her case.

Ms. Haney's testimony and Mr. Harris' statements at the hearing also revealed that approximately $250.00 was being collected post-petition from Ms. Haney, at the rate of $25.00 every two weeks, through a collection agency in Sandusky called "State Collections." It does appear that some interest or other charges, perhaps for courier fees, had been included in the balance being collected by the collection agency. The post-petition amount actually due was identified as $258.22, without any explanation as to the odd amount. Ms. Haney testified that "he [Mr. Harris] took me to a collection agency for $254.00" and she later identified that amount as being $261.00.² By the time of the hearing, Ms. Haney understood that her remaining debt to Mr. Harris was down to $150.00, as she had already made four $25.00 payments to the collection agency. A fifth such payment was due that same week. The court therefore finds that the total post-petition balance being collected by or on behalf of Mr. Harris was at least $258.22, and that Ms. Haney's bi-weekly post-petition payments of $25.00 should be subtracted from that amount, not added to it, in ascertaining the total fee actually being collected by Mr. Harris.

The court finds that, of the $550.00 fee agreed upon, the amount actually being collected by Mr. Harris from Ms. Haney as a fee for his services as a petition preparer was $358.00 ($100.00 pre-petition cash payment plus another approximately $258.00 being collected post-petition). The court further finds that the $200.00 "retaining fee" Ms. Haney transmitted to Mr. Harris pre-petition was not actually collected by Mr. Harris as a document preparation fee; rather, he transmitted it to the court as the required filing fee to commence Ms. Haney's chapter 7 case, in the form of a money order payable to the clerk of court.³

Law and Analysis:

The Bankruptcy Code recognizes the reality that pro se debtors often turn to non-lawyers for assistance in filing bankruptcy....