In re Hopkins

• Decision Date: 19 November 2019
• Docket Number: Case No.: 18-28111-ABA
• Citation: In re Hopkins, Case No.: 18-28111-ABA (Bankr. N.J. Nov 19, 2019)
• Parties: In Re: Michael Hopkins, Debtor.
• Court: U.S. Bankruptcy Court — District of New Jersey

In Re: Michael Hopkins, Debtor.

Case No.: 18-28111-ABA

UNITED STATES BANKRUPTCY COURT DISTRICT OF NEW JERSEY

November 19, 2019

NOT FOR PUBLICATION

Chapter: 13

Judge: Andrew B. Altenburg, Jr.

MEMORANDUM DECISION

Before the court is the issue of how it should respond to the debtor's having proceeded to closing on a sale of property without prior court approval, and failing to advise the chapter 13 trustee of the sale, and failing to immediately turn over the proceeds of the sale to the chapter 13 trustee and using a portion of the funds for personal unauthorized use,¹ as well as, the numerous errors committed by his attorney throughout this case. After a plenary hearing held October 9, 2019, the court concluded that the debtor acted in bad faith and abused the bankruptcy process. Then, both the debtor and his attorney were warned by the court that sanctions would be imposed for their behavior, The matter was taken under advisement to determine the appropriate remedy, with both the trustee and the debtor allowed to submit arguments on what action might be taken. Those submissions having been filed, the matter is now ripe for decision.

Pursuant to Fed. R. Bankr. P. 7052, the court issues the following findings of fact and conclusions of law.

JURISDICTION AND VENUE

This matter before the court is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(A), (N) and (O), and the court has jurisdiction pursuant to 28 U.S.C. § 1334, 28 U.S.C. § 157(a) and the Standing Order of Reference issued by the United States District Court for the District of New Jersey on July 23, 1984, as amended on September 18, 2012, referring all bankruptcy cases to the bankruptcy court. The following constitutes this court's findings of fact and conclusions of law as required by Federal Rule of Bankruptcy Procedure 7052.

FINDINGS OF FACT

The debtor, Michael Hopkins, filed this chapter 13 bankruptcy case on September 10, 2018. Doc. No. 1. He had one prior case dismissed within the prior year, thus he filed a Motion to Extend the Automatic Stay, which was granted October 9, 2018. See docket entry at September 1, 2018, Doc. Nos. 8, 16.

On September 17, 2018, the trustee filed an objection to the Chapter 13 Disclosure of Attorney Compensation, stating that though the disclosure marked that the compensation "will not be paid through the plan," the plan listed an amount to be paid through it. Doc. No. 13. The debtor's attorney, Mark Ford, then filed a corrected Disclosure, though he e-filed it as a "missing document" rather than an amended document, Doc. No. 15.

On February 25, 2019, the bankruptcy case was dismissed at confirmation for failure to file required schedules, statements, plan and/or summary, file a feasible plan, income and/or budget statement, make all required pre-confirmation payments to the trustee, provide all required documents to the trustee, and complete business debtor forms. Doc. No. 51. Mr. Ford on behalf of Mr. Hopkins filed a Motion to Vacate Dismissal of Case on March 4, 2019, wherein Mr. Hopkins certified that all the documents requested by the trustee had been sent to her. Doc. No. 55. On April 2, 2019, the court entered an order granting the Motion to Vacate. Doc. No. 58. The Order was served on the debtor and Mr. Ford by the Bankruptcy Noticing Center.

On April 4, 2019, Mr. Ford on behalf of his client filed a Notice of Proposed Private Sale. Doc. No. 59. Mr. Hopkins sought to sell 1371 Oriental Avenue, Gloucester City, New Jersey, to Timothy Savage for $42,000. Mr. Hopkins attached a Contract of Sale that had been executed March 22, 2019. He asked that the broker be paid 3% of the sale price plus $50.

Mr. Ford did not also file a Motion to Sell Property as required by this court's local rules that would include the material terms of the proposed sale. D.N.J. LBR 6004-1(a). Instead, he only filed the Notice of Proposed Private Sale that the local rules require to be filed in addition to the actual Motion to Sell Property. D.N.J. LBR 6004-1(c). Had Mr. Ford filed the Motion, the certification of his client should have explained why he was selling the property for $42,000 when he had estimated on his Schedule A/B that the property was worth $85,000.

On April 23, 2019, the chapter 13 trustee objected to the sale insofar as Mr. Hopkins had not exempted this property, thus she argued that she should receive the $25,315 proceeds after the costs of sale and the $12,484 tax lien on the property was paid. Doc. No. 64. She noted that as Mr. Hopkins' plan had not yet been confirmed, title must be conveyed jointly by the trustee and the debtor. She also pointed out that Mr. Hopkins had not filed an Application to Retain Professional so that his broker could be paid. The chapter 13 trustee's objection was served on both Mr. Ford and Mr. Hopkins. Id.

Because of the objection, the clerk's office scheduled a hearing on the sale for May 7, 2019. Mr. Hopkins was served with notice of the hearing. Doc. No. 66. At the hearing, Mr. Ford agreed to submit an order resolving the trustee's objections, including calling for an Application to Retain Broker to be filed. However, he never submitted such an order. Nor, for the relevant portion of this matter, did Mr. Ford file an application to retain the real estate broker.

On June 12, 2019, Mr. Ford on behalf of Mr. Hopkins filed a new Notice of Proposed Private Sale for the same property and, this time, also a Motion to Approve Sale of Real Estate (the "Sale Motion"). Doc. Nos. 78, 79. The purchase price was still $42,000 and the buyer was still Mr. Savage, but an addendum to the sale contract was added stating that that Mr. Savage would now be responsible for the initial removal and testing of an underground storage tank on the property, up to $4,700 in cost. If it cost more to ameliorate, then Mr. Hopkins and Mr. Savage would renegotiate what to do.

Mr. Hopkins' certified that he wanted to sell the property in order to pay off an auto loan. This would be an improper use of the sale proceeds, as the property did not secure the loan.²

Mr. Ford later explained that he filed the new Notice of Proposed Private Sale and the Sale Motion because he believed that the first Notice of Proposed Private Sale had been filed prior to the case being dismissed and dismissal vacated. However, he filed the first Notice two days after the dismissal was vacated.

On June 13, 2019, PC7, LLC objected to the sale due to the failure of the sale to redeem its tax lien. Doc. No. 80. It had filed a Proof of Claim on January 4, 2019 in the amount of $12,484. The Chapter 13 trustee also objected to the sale, stating that the debtor had not corrected any of the issues raised the first time around. Doc. No. 83.

On July 15, 2019, Mr. Hopkins filed a Supplemental Certification stating that the sale price was now $32,000. Doc. No. 90. He asked that the court approve the sale free and clear. He gave no explanation for why the price had dropped and did not attach a new sale contract.

On July 16, 2019 at the hearing on the Sale Motion, Mr. Ford revealed that the sale had gone to closing on July 1. Doc. No. 104 (transcript). He explained that Mr. Hopkins had told him that the title company had thought that the bankruptcy case had been dismissed, Despite having drafted and filed Mr. Hopkins' Supplemental Certification the day before, Mr. Ford had no explanation for why the sale price had dropped. He stated that the net proceeds were in Mr. Hopkins' bank account. The court instructed Mr. Ford to file a supplemental certification regarding the change in price and confirming that the debtor had turned over proceeds to the trustee.

Mr. Hopkins later testified that the title company had done a "draw down" to confirm that the bankruptcy case was no longer pending. The court does not find this testimony credible. First, while Mr. Hopkins' case had been dismissed and reinstated once, Mr. Hopkins signed a certification to get dismissal vacated, Doc. No. 55-1, and was served with a copy of the order granting his motion to vacate. Doc. No. 61. The case was never dismissed again from that point to July 1, thus there was no reason for Mr. Hopkins to believe that his case was not still pending. Healso testified to communicating with Mr. Ford via text message several times during the bankruptcy case, and yet he did not double-check the case status with Mr. Ford when the title company allegedly found that the case was no longer pending. Moreover, Mr. Ford did not bring in a witness from the title company, or minimally submit a certification from it, to support Mr. Hopkins' assertion.

Additionally, Mr. Hopkins did not behave as if his case was not pending. Mr. Hopkins made trustee payments in April, May and June 2019, after the case had been reinstated. Most damning, he informed Mr. Ford on July 3 that the sale had closed. Mr. Ford was not acting as Mr. Hopkins' real estate attorney. There would be no reason to alert Mr. Ford to the closing if the bankruptcy case was not active.

As for Mr. Ford, after finding out about the closing, Mr. Ford did not immediately inform the court and/or the trustee. Instead, the day before the hearing on the Sale Motion, he filed the Supplemental Certification where Mr. Hopkins stated that the sale price was now $32,000 and asked for the sale to be approved. He did this knowing that the sale had already taken place, yet he did not ask that approval be granted nunc pro tunc or seek the court's forgiveness that his client had gone ahead with closing. It was as though he did not understand that his client had done something very wrong. That despite learning of the closing on July 3, Mr. Ford did not immediately instruct Mr. Hopkins to turnover the proceeds to the chapter 13 trustee, or at least not to spend any of the proceeds, supports this conclusion. According to the chapter 13 trustee, Mr. Ford even later forwarded the quit claim deed to her, asking her to add her name to the grantee, despite that she could not do so...