In re Roman
| Decision Date | 20 July 2017 |
| Docket Number | CASE NO. 15–05119 (ESL) |
| Citation | 574 B.R. 430 |
| Parties | IN RE: Carmelo Rivera ROMAN, Zuleika Del Carmen Campos Ruiz, Debtors |
| Court | U.S. Bankruptcy Court — District of Puerto Rico |
Ada M. Conde, Estudio Legal 1611 Corp., San Juan, PR, for Debtor.
Wigberto Lugo Mender, Lugo Mender & Co., Centro Internacional De Mercadeo, Guaynabo, PR, for Trustee.
This case is before the court upon the United States Trustee's Motion for Sanctions (Docket No. 18). The United States Trustee seeks sanctions against attorney Ada Conde for: (1) filing an Application to Pay Filing Fees in Installments despite having allegedly received the full amount of the fees, (2) failing to disclose the true amount of her compensation on the 2016(b) Disclosure of Compensation and Statement of Financial Affairs, and (3) collecting dischargeable post-petition fees. Accordingly, the United States Trustee (the "U.S. Trustee") requests that sanctions be imposed against attorney Conde pursuant to Section 105, Section 707(b)(4), Federal Rule of Bankruptcy Procedure 9011 and/or 28 U.S.C. § 1927. Attorney Conde filed her Reply to the United States Trustee's Motion for Sanctions (Docket No. 28). Also before the court is the United States Trustee's Report in Compliance with Order at Docket No. 74 (Docket No. 76).
On July 3, 2015, the Debtors filed a voluntary petition in the bankruptcy court for the District of Puerto Rico under the provisions of chapter 7 of the Bankruptcy Code. (Docket No. 1). The Debtors indicated on the petition that the filing fee would be paid in installments (Docket No. 1, p. 1). The Disclosure of Compensation of Attorney for Debtor(s) indicates that attorney Conde agreed to accept $1,000 for legal services and that prior to the filing of the statement she received $0.00 (Docket No. 1, p. 8). On July 3, 2015, the Debtors also filed an Application for Individuals to Pay the Filing Fees in Installments (Docket No. 2) indicating that they paid $95.00 with the filing of the petition and proposing to pay the fees in four installments1 . On that same date, the Debtors also filed their schedules, the summary of the schedules, the statement of financial affairs and other documents (Docket No. 4). The SOFA indicates that the Debtors paid attorney Conde $95.00 prior to the filing of the petition (Docket No. 4, pp. 24–25, item no. 9). On July 4, 2015, the court entered the Notice of Chapter 7 Bankruptcy Case, Meeting of Creditors & Deadlines (Docket No. 7) scheduling the 341(a) meeting for August 12, 2015. On July 15, 2015, the court entered an Order granting the Application to Pay Filing Fees in Installments (Docket No. 11).
The 341(a) meeting held on August 12, 2015, was continued to October 7, 2015 (Docket No. 17)2 . On August 13, 2015, the Debtors paid the remaining $240.00 filing fees (Docket No. 16). On that same date, the U.S. Trustee filed its motion requesting sanctions against attorney Conde (Docket No. 18). The U.S. Trustee stated that during the meeting of the creditors held on August 12, 2015, the "Debtors testified they made two partial payments to the attorney towards her required fees, one of $700 on July 3 (the same day of the petition and Application) and one of $1,360 on July 9, for a total of $2,060." (Docket No. 18, p. 1, ¶ 6). The U.S. Trustee argues that: (i) Fed. R. Bankr. P. 1006(b)(3) prohibits an attorney from receiving payment from the debtor (or through a plan) while there is an outstanding filing fee balance; (ii) Fed. R. Bankr. P. 9011(b) states that an attorney who files a petition or other bankruptcy documents certifies that the document is not being presented for an improper or frivolous purpose and that the allegations and other factual contentions contained therein have evidentiary support or are likely to have support after further investigation; (iii) 28 U.S.C. § 1927 allows courts to impose sanctions on attorneys who unreasonably and vexatiously multiply the proceedings in a case; (iv) Fed. R. Bankr. P. 2016(b) and Section 329 require that attorney's disclose their compensation and attorney Conde "failed to inform $700 fees already received in her Rule 2016(b) Statement of Compensation, and in fact, informed $1,000 remained to be paid, when these are dischargeable in Chapter 7" (Docket No. 18, p. 5, ¶ 17); and (v) "Debtors' attorney received $1,360 in fees post-petition, when courts have held that unpaid pre-petition obligations, including unpaid attorney's fees, are dischargeable" (Id. at p. 6,¶ 19). Accordingly, the U.S. Trustee requests sanctions be imposed against attorney Conde pursuant to Section 105, Section 707(b)(4), Fed. R. Bankr. P. 9011, and/or 28 U.S.C. § 1927.
On August 24, 2015, the Debtors filed a Notice of Conversion to Chapter 13 (Docket No. 20). On August 25, 2015, attorney Conde amended the Disclosure of Compensation of Attorney for Debtor(s) indicating that she agreed to accept $2,100 for her legal services and that she received $1,300 prior to the filing of the statement (Docket No. 24). On August 31, 2015, attorney Conde filed her Reply to the U.S. Trustee's Motion for Sanctions (Docket No. 28) declaring that: (i) she personally advised the Debtors on or around the month of June 2015; (ii) "Debtors informed that they did not have the money to pay the amounts required neither for Chapter 13 and Chapter 7 not even the filing fees"; (iii) the Debtors went to her office on July 3, 20153 , and "explained they were in a rush to file and they [sic ] not have the money to pay the full amount of filing fees and were interested in filing a Chapter 7"; (iv) attorney Conde explained to the Debtors that she would be out of the office for some weeks because her daughter was having surgery; (v) attorney Madelaine Llovet agreed to assist the Debtors at the 341(a) meeting scheduled for August 12, 2015; and (vi) she found out that the Debtors had paid additional money for the first time on the evening of August 12, 2015 when she spoke to attorney Llovet. Attorney Conde sustains that she proceeded to investigate the matter and discovered that her secretary, Ms. Maelen Cubano, against her instructions, "received the money because the Debtors insisted they wanted the conversion to Chapter 13." (Docket No. 28, p. 4, ¶¶ n-o). Moreover, she states that she proceeded to pay the full amount of filing fees owed and met with the Debtors to prepare the conversion to Chapter 13 as the Debtors indicated that they had changed their mind.
On September 11, 2015, the court entered an Order granting the conversion to Chapter 13 and the 341(a) meeting was scheduled for October 13, 2015 (Docket No. 30). On September 16, 2015, the court entered an Order and Notice scheduling a hearing for February 23, 2016, to consider the U.S. Trustee's request for sanctions and attorney Conde's reply (Docket No. 36). On October 13, 2015, the 341(a) meeting was held and the Chapter 13 Trustee's minutes reflect, among other things, that the amount the debtors agreed to pay attorney Conde was not clear and that (Docket No. 40, p. 2, ¶¶ 4(a)-(b)). Moreover, the minutes indicate that the SOFA (Docket No. 40, p. 4, ¶ 5).
On November 27, 2015, the Debtors filed a Notice of Conversion to Case from Chapter 13 to Chapter 7 (Docket No. 48) and the same was granted on December 22, 2015 (Docket No. 56). The 341(a) meeting was scheduled for February 3, 2016 (Docket No. 59). The 341 meeting was closed on February 8, 2016 (Docket No. 68).
On February 23, 2016, a hearing was held were the U.S. Trustee and attorney Conde argued their respective positions (Docket No. 69 Audio File , Docket No. 70, Minute Entry and Docket No. 74 Transcript ). The court ordered the U.S. Trustee to submit proposed findings and facts and conclusions of law within thirty days and granted attorney Conde thirty days thereafter to submit hers. On March 24, 2016, the U.S. Trustee filed its Report in Compliance with Order at Docket No. 74 (the "Report ", Docket No. 76). In its Report the U.S. Trustee argues that attorney Conde: (i) "violated Federal Rule of Bankruptcy Procedure 1006(b)(3), by filing an application to pay the filing fees in instalments on behalf of Debtors, when Debtors had already paid her the amount of $700 on July 3, 2015, and subsequently the amount of $1,360 on July 9, 2015"; (ii) violated ABA Model Rule of Professional Conduct 1.4(a)(1),(2) and (3) "by failing to inform Debtors that she filed an application to pay filing fees in instalments on their behalf"; (iii) violated Fed. R. Bankr. P. 1008 ; (iv) "violated FRBP 9011(b) by filing an application to pay filing fees in installments when Debtors had the means to pay the full filing fee as well as all of her legal fees"; (v) "failed to perform a factual investigation regarding the amount of fees she received before filing the Statement of Financial Affairs, as required by the above-cited provisions [Section 707(b)(4)(B), (C) and (D) and Fed. R. Bankr. P. 9011(b) ) ]"; (vi) unreasonably and vexatiously multiplied the proceedings pursuant to 28 U.S.C. § 1927 with the filing of the unnecessary application to pay filing fees in installments; (vii) violated Section 329 and Fed. R. Bankr. P. 2016(b)"by filing two Statements of Compensation that did not accurately disclose the legal fees she received; and (viii) "also acted inappropriately by receiving payment for legal services from Debtors after the filing of the petition, when cour...
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