In re Overmyer
| Citation | 30 BR 127 |
| Decision Date | 23 May 1983 |
| Docket Number | Bankruptcy No. 82 B 20329,82 Adv. 6160. |
| Parties | In re Daniel H. OVERMYER a/k/a D.H. Overmyer, Dan Overmyer, and Daniel Harrison Overmyer, Debtor. |
| Court | United States Bankruptcy Courts. Second Circuit. U.S. Bankruptcy Court — Southern District of New York |
McConwell & Sullivan, Overland Park, Kan., for plaintiff.
Reich & Reich, White Plains, N.Y., for debtor.
DECISION ON COMPLAINT OF EDWARD A. McCONNELL RE NONDISCHARGEABILITY OF DEBT.
Edward A. McConnell, the plaintiff in this case, is an attorney who claims that the debtor, Daniel H. Overmyer, is personally liable to him for unpaid legal fees for services performed for R.T. Systems, Inc., a public corporation of which the debtor is chairman of the board and chief executive officer. Plaintiff also claims legal fees for services performed for the debtor personally. The plaintiff further contends that the debtor's liability for the unpaid legal services is nondischargeable under Code § 523 by reason of the debtor's fraud and false representations upon which the plaintiff relied.
1. On May 28, 1982 the debtor, Daniel H. Overmyer, filed with this court his voluntary petition for relief under Chapter 7 of the Bankruptcy Reform Act of 1978.
2. At all times during the period in question the debtor was the chairman of the board, chief executive officer and controlling
voice of R.T. Systems, Inc., a public corporation organized under the laws of the State of Delaware with principal offices at 3 Park Avenue, New York, New York.
3. Plaintiff is an attorney at law with offices located in Johnson County, Kansas.
4. In 1977, the president of R.T. Systems, Inc. was Peter Starr, who was a client and a personal friend of the plaintiff. Peter Starr caused R.T. Systems, Inc. to retain the plaintiff to commence an action against Midwest Communications in the United States District Court for the District of Kansas. That case was subsequently transferred to the United States District Court for the Northern District of Texas. In early 1979, the case was consolidated with several related cases for a single trial scheduled for April 22, 1979. Up until that time the plaintiff had received from R.T. Systems, Inc. between $75,000 to $90,000 in legal fees and was owed, according to his calculations, approximately $151,000 for unpaid legal services and expenses.
5. In the course of his representation of R.T. Systems, Inc. the plaintiff had occasion to meet with the debtor, Daniel H. Overmyer, concerning the progress of the litigation. As a result of one such meeting, the plaintiff performed certain legal services for the debtor personally in Dallas, Texas, in 1978, regarding an entity referred to as Elliot Realty Company. Several other persons in the plaintiff's firm also performed legal services in this matter, for which the plaintiff billed the debtor $13,922.00.
6. During the evening of the second night after the commencement of the Dallas trial, the plaintiff had a telephone conversation with the debtor who informed the plaintiff that he had heard that the trial was not going well and that he wanted the debtor's associate, Thomas Bornhold, to take over as trial counsel for R.T. Systems, Inc. The plaintiff objected to this strategy, to which the debtor responded that he would shoulder the responsibility for this change. The plaintiff reluctantly acquiesced, although he disagreed and wanted to continue, especially since R.T. Systems, Inc. owed him a substantial balance for legal fees and he believed that therefore he had a vested interest in the success of the trial. The debtor assured the plaintiff that his legal fees would be paid. The plaintiff's associate, Thomas Bornhold, then took over the trial of the action, as directed by the debtor.
7. On May 2, 1979 the jury in the Dallas case rendered a verdict against R.T. Systems, Inc. However, a portion of the case remained to be tried by the court without a jury. The plaintiff testified that the debtor continued to insist that the plaintiff should not try the nonjury case nor should he reinsert himself into the active conduct of the trial saying: "It's on my head." The plaintiff also testified that the debtor promised to send the plaintiff five $5,000 checks, totalling $25,000, as partial payment towards the plaintiff's unpaid bill for legal services. The plaintiff relied upon this promise and continued to perform billable legal services for R.T. Systems, Inc.
8. On May 3, 1979, the plaintiff telephoned the debtor from the hall telephone in the Dallas Courthouse and again discussed the matter concerning his fees. The debtor again said "Do it my way; it's on my head; whatever happens in this case, I will see that you're paid and I'll send you that money, the $25,000 immediately."
9. Thereafter, Thomas Bornhold, the plaintiff's associate, went to New York City, at the plaintiff's request, to discuss the pending case with representatives of R.T. Systems, Inc. John Donohue, the then president of R.T. Systems, Inc., handed Bornhold an envelope with the plaintiff's name on it for delivery to the plaintiff in Kansas City. When Bornhold returned to Kansas City on May 24, 1979, he gave the envelope to the plaintiff, which contained four checks dated May 18, 1979, each made payable to the plaintiff for $5000 and signed by John Donohue, as president of R.T. Systems, Inc. and David Raible, who was then the secretary of R.T. Systems, Inc. The plaintiff testified that Donohue included a note in the envelope advising the plaintiff not to deposit the checks without first calling Donohue.
10. The plaintiff testified that on May 21, 1979 he telephoned John Donohue and said: "I've got to go ahead and put these in and I have." The plaintiff also advised Donohue that the debtor had promised during the trial in April, 1979 that these checks would be sent and that, nevertheless, the plaintiff had not received any checks until May 21, 1979. The plaintiff had already deposited two of the four $5000 checks that he had received.
11. On May 28, 1979, the plaintiff received a letter from R.T. Systems, Inc., dated May 25, 1979 and signed by John Donohue as president, terminating the plaintiff's services for the corporation.
12. On June 1, 1979, the plaintiff travelled to New York to meet with the debtor concerning his unpaid fees, which were billed at a total of $219,141.75. The debtor, Daniel H. Overmyer, met with the plaintiff and reassured the plaintiff that the first two $5000 checks signed by Donohue and Raible on behalf of R.T. Systems, Inc., and which the plaintiff had already deposited, were good and should clear the bank. However, as to the balance, according to the testimony of Peter Starr, the debtor said that R.T. Systems, Inc. could not pay the bill because the corporation just did not have the money. A proposed solution was arrived at between the plaintiff and Peter Starr whereby the plaintiff's bill was to be reduced to $135,000 and to be paid by R.T. Systems, Inc. over a period of time. In addition to the four $5000 checks from R.T. Systems, Inc. that the plaintiff received on May 21, 1979, he was to receive a series of thirty-four weekly post-dated checks, totalling $115,000, for a total sum of $135,000. Twenty-two checks in this series were to be mailed to the plaintiff upon his return to Kansas. The plaintiff received these 22 checks, all dated June 19, 1979, in an envelope on June 21, 1979.
13. The first three checks in the post-dated series that were given to the plaintiff in New York were mistakenly made payable for $3000 each, instead of $5000. The debtor corrected the error by having checks drawn for the correct amounts. These three checks drawn by R.T. Systems, Inc. were signed by John Donohue as president of the corporation and the debtor as its chief executive officer. The bank account on which the checks were drawn was specially opened at Peter Starr's suggestion just to handle the prearranged installment payments to the plaintiff because the corporation had a cash flow problem and a corporate account had been subjected to a judicial lien. It was the plaintiff's understanding that R.T. Systems, Inc. would deposit sufficient funds in this account to cover the checks as they came due. The debtor had the responsibility for seeing to it that this account was funded because, as John Donohue testified, the debtor was exclusively in charge of supervising the payments of legal fees to attorneys.
14. The plaintiff testified that the series of checks that he received as a result of the June 1st meeting were delivered to him by R.T. Systems, Inc. unconditionally. The debtor, on the other hand, testified that when he signed the three checks on June 1, 1979, he informed the plaintiff not to deposit them until the plaintiff first contacted somebody at the company. The debtor testified that he believed that the $135,000 proposal was too high and he wanted Peter Starr to continue negotiating with the plaintiff because Peter Starr was the one who was responsible for the company's retention of the plaintiff as its attorney. Therefore, he cosigned the first three checks, together with John Donohue, each in the sum of $5000, and expected that Peter Starr would negotiate a settlement in the area of $80,000.
15. Shortly after June 1, 1979, when the plaintiff had returned to his office in Kansas, he learned that the first $5000 check from R.T. Systems, Inc. that had been signed on May 18, 1979 by John Donohue and David Raible, had been returned for insufficient funds. The plaintiff immediately called Peter Starr, who advised the plaintiff to send him the check for replacement by a bank check. The plaintiff mailed the requested check to Peter Starr but never received the promised replacement.
16. The creditor contends that no conditions were placed on his right to deposit the series of checks that he received from R.T. Systems, Inc. following the June 1, 1979 meeting in the corporation's office in New York City. Accor...
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