In re Ostrander, 11-33801

CourtUnited States Bankruptcy Courts. Sixth Circuit. U.S. Bankruptcy Court — Northern District of Ohio
Writing for the CourtMary Ann Whipple, J.
PartiesIn Bonnie Sue Ostrander Debtor.
Docket Number11-33801
Decision Date01 April 2022

In Bonnie Sue Ostrander Debtor.

No. 11-33801

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

April 1, 2022

Chapter 7


Mary Ann Whipple, J.

This case is before the court on Debtor's Motion for Contempt Against Thomas Pigott, Esq. and Pigott, Ltd., [Doc. # 103], and the Response of Thomas Pigott, Esq. and Pigott, Ltd. (together "Respondents"), [Doc # 106]. The court held an evidentiary hearing on the motion that Debtor, her counsel and Thomas Pigott attended virtually[1] and at which the parties presented testimony and other evidence.

The district court has jurisdiction over this Chapter 7 case pursuant to 28 U.S.C. § 1334(a) as a case under Title 11. It has been referred to this court by the district court under its general order of reference. 28 U.S.C. § 157(a); General Order 2012-7 of the United States District Court for the Northern District of Ohio. Proceedings relating to adjustment of the debtor-creditor relationship, such as enforcement of the Chapter 7 discharge and this court's own orders, are core proceedings that this court may hear and decide. 28 U.S.C. § 157(b)(1) and (b)(2)(O); see 28 U.S.C. § 157(b)(2)(J).


This memorandum of decision constitutes the court's findings of fact and conclusions of law pursuant to Fed.R.Civ.P. 52, made applicable to this proceeding by Fed.R.Bankr.P. 9014(c) and 7052. Regardless of whether specifically referred to in this memorandum of decision, the court has examined the submitted materials, weighed the credibility of the hearing witnesses, considered all of the evidence, and reviewed the entire docket and record of Debtor's Chapter 7 case, related bankruptcy cases and public records of the Lucas County, Ohio Court of Common Pleas.[2] Based upon that review and for the reasons stated below, the court finds the Debtor's Motion for Contempt is without merit.


Attorney Thomas Pigott ("Pigott") and his law firm Pigott, Ltd. represented Stone Oak Investments, LLC, and perhaps also Bonnie Ostrander ("Ostrander" or "Debtor") and Stone Oak Market, Inc., into early 2011 on business matters involving ownership and operation of a convenience store and gas station known as Stone Oak Market. There is no dispute that Ostrander was the sole member and shareholder, respectively, of the entities and was responsible for their decision-making and operations at all relevant times. But the business operations ended up mired in litigation over improvements and an attempted expansion that were unsuccessful. The business closed and the real estate on which it operated was eventually sold through a state court receivership sale.

As business operations struggled, amounts owed to Pigott, Ltd. for legal services rendered over the years had not been fully paid. Pigott knew the business was having trouble paying its creditors, including Pigott, Ltd. To enhance its own prospects for payment of its outstanding invoices, Pigott, Ltd. prepared for its client(s) a promissory note to be secured by mortgages on certain real property not subject to the receivership. Pigott did not recall at the hearing whether his law firm had a written fee agreement but did not think there was one.

A promissory note dated January 18, 2011, in the amount of $23, 714.85 was entered into between Ostrander, Stone Oak Market, Inc., Stone Oak Investments, LLC (all as "Maker") and Pigott, Ltd. [Dor Ex. 1 (Ex. A thereto)]. Ostrander signed this promissory note "in her individual capacity and as Managing and Sole Member of Stone Oak Investments, LLC and as President and Sole Shareholder of Stone Oak


Market, Inc." [Id.]. Although bearing the date January 18, 2011, Ostrander recalls that she actually signed the note on July 10, 2011, which was just before she filed this Chapter 7 case.

At the same time, Ostrander executed a mortgage on real property located at 9136 Angola Road in Holland, Ohio. [Dor Ex. 1 (Ex. D thereto)]. This parcel was adjacent to the former convenience store but not included in the receivership sale because there was no mortgage on it. The Mortgagor on the document is Stone Oak Investments, LLC. Prior to Ostrander's signature is the typed title "STONE OAK INVESTMENTS, LLC:." The typed word "BY:" precedes her signature and the typed designation "Bonnie Ostrander, Managing and Sole Member" is under her signature. [Id.].

On the same day Ostrander also executed as Mortgagor an open-end mortgage on real property at 1120 S. Raab Road in Swanton, Ohio. [Dor Ex. 1 (Ex. C thereto)]. Under her signature on this mortgage, Ostrander's designation is simply "Bonnie Ostrander." [Id.].

Respondent Pigott, Ltd. was Mortgagee on both open-end mortgages.

There is no dispute that Pigott drafted the promissory note and the two mortgages for Pigott, Ltd.'s client(s) to sign in its favor. For her part, Ostrander believably says that she signed what Pigott presented to her to sign and that she signed them because he asked her to do so.

On July 12, 2011, Ostrander filed a Chapter 7 petition in this court, Case No. 11-33801. Attorney Steve Diller ["Diller"] represented her in this case at filing.[3] In her Schedule F, Debtor listed Pigott, Ltd. as an unsecured, nonpriority creditor for a debt of $26, 733.02. [Doc. # 12, p. 16/44]. Debtor, in Schedule B, listed as assets her interests (and values) in Stone Oak Market, Inc. ($0) and Stone Oak Investments, LLC ($135, 000.00). [Id. at p. 5/44]. This case was first administratively closed on January 15, 2013. [Doc. # 91].

The deadline for creditors to file claims in this case was December 21, 2011. [Doc. # 15-1]. On October 25, 2011, Pigott, Ltd. filed a general unsecured claim for $29, 349.53. [Claim 8-1]. While initially vague as to whether he was aware of Ostrander's bankruptcy filing in the early December 2011 time frame, Pigott acknowledges that he must have been aware of it by October 25, 2011, to have filed the proof of claim. He attached a statement to the proof of claim, showing a beginning balance as of June 13, 2007, of $23, 832.50, and charges and credits running through July 2011, with the ending balance of $29, 349.53 as set forth in the proof of claim. It is directed only to Bonnie Ostrander and Stone Oak Investments, LLC.


A different Pigott, Ltd. "A/R Transaction Listing" is attached to its state court complaint. [Dor Ex. 1 (exhibit I thereto)]. It starts June 13, 2007 and ends November 13, 2019. It specifies Stone Oak, Investments, LLC as its client. It shows amounts of invoices for services through August 5, 2011. Thereafter, it shows five invoices at differing intervals through November 13, 2019, for what appears to be compound interest on the unpaid account balance. It also shows that payments were made regularly until April 25, 2011. Four payments were made in 2011 after the date on Pigott, Ltd.'s promissory note. The payments made in 2011 totaled $5, 000.00, with the last payment made on April 25, 2011, in the amount of $2, 000.00.

Debtor received her Chapter 7 discharge in this case on November 10, 2011, and all creditors, including Pigott, Ltd., were contemporaneously provided notice of same. [Doc. ## 42, 45]. Pigott, Ltd. did not file an adversary proceeding seeking to have Ostrander's debt to him declared nondischargeable as within the scope of 11 U.S.C. § 523(a)(2)(fraud), (4)(fraud or defalcation in a fiduciary capacity, embezzlement, larceny), or (6)(willful and malicious conduct). There were no objections to Ostrander's discharge and there were no dischargeability actions filed.

On December 5, 2011, Pigott e-mailed another lawyer, Bertram Puligandla ("Puligandla"), to address an apparent request from Ostrander regarding another, unrelated document. [Resp. Ex. C, p.1]. Pigott also references in his e-mail as attached the mortgages she previously executed and indicated to the lawyer that "I will be filing this tomorrow unless I hear otherwise from you." [Id.]. Pigott filed the mortgages post-petition with the Lucas County Recorder on December 6, 2011, at approximately 1:24 p.m., per the Recorder's office time-stamps. [Dor Ex.1 (Exs. C and D thereto)].

As to the 9136 Angola Road real property and mortgage, on August 27, 2013, the Lucas County Treasurer commenced a tax foreclosure action in the common pleas court against Stone Oak Investments, LLC. [Dor Ex 1, ¶ 39]. Pigott, Ltd. was also a party in that action because of its recorded mortgage interest in the property. It filed a cross-claim against Stone Oak Investments, LLC seeking both foreclosure of its mortgage on 9136 Angola Road and a money judgment for the unpaid legal fees. [Doc. # 106, Ex. F]. On November 14, 2014, the common pleas court entered in the tax foreclosure action a consent judgement in favor of Pigott, Ltd., represented by Pigott, and against Stone Oak Investments, LLC, represented by Diller, including a money judgment in the amount of $48, 218.77. [Doc. # 106, Ex. G]. Pigott, Ltd. eventually obtained a certificate of judgment on the consent money judgment on December 14, 2016. [Dor Ex. 1, ¶ 45 (Ex. E thereto)].


As to the 1120 S. Raab Road real property, Pigott figured out that he listed the wrong Mortgagor on the Pigott, Ltd. mortgage in what he calls a "scrivener's error." [Resp. Ex. C, p. 3]. Pigott having drafted the mortgage identifying Ostrander as Mortgagor instead of the owner of the property, Stone Oak Investments, LLC, he was the "scrivener." [Id.]. At the hearing, he testified that he did not recall when he discovered that the 1120 S. Raab Road mortgage named the wrong Mortgagor. But on December 6, 2011, Piggott raised the incorrect Mortgagor issue with Puligandla. Pigott's e-mail, sent on December 6, 2011, said that on his return, which the court infers as being from the county recorder's office, "I discovered that there is an error with the 1120 S. Raab Road mortgage, a scrivener's error." [Id.]. He stated that the...

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