In re Walker, Bankruptcy No. 03-32158-BKC-PGH.

• Citation: 356 B.R. 877
• Decision Date: 05 December 2006
• Docket Number: Adversary No. 06-01610-PGH-A.,Bankruptcy No. 03-32158-BKC-PGH.
• Parties: In re James F. WALKER, Debtor. Gary J. Rotella & Assoc., P.A., as Assignee of Ferrell Law's Summary of Final Application for Compensation of Fees & Costs of Former Chapter 7 Trustee's Counsel, et al., Plaintiffs, v. Susan Lundborg, Defendant.
• Court: United States Bankruptcy Courts. Eleventh Circuit. U.S. Bankruptcy Court — Southern District of Florida

356 B.R. 877

In re James F. WALKER, Debtor Gary J. Rotella & Assoc., P.A., as Assignee of Ferrell Law's Summary of Final Application for Compensation of Fees & Costs of Former Chapter 7 Trustee's Counsel, et al., Plaintiffs, v. Susan Lundborg, Defendant.

Bankruptcy No. 03-32158-BKC-PGH.

Adversary No. 06-01610-PGH-A.

United States Bankruptcy Court, S.D. Florida, West Palm Beach Division.

December 5, 2006.

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COPYRIGHT MATERIAL OMITTED

Gary J. Rotella, Esq., Ft. Lauderdale, FL, for Debtor.

Aviva L. Wernick, Miami, FL, for Defendant.

FINAL ORDER GRANTING DEFENDANT SUSAN LUNDBORG'S MOTION FOR SUMMARY JUDGMENT DISMISSING AMENDED COMPLAINT FOR AWARD OF ACTUAL DAMAGES, INCLUDING ATTORNEY'S FEES, COSTS AND PUNITIVE DAMAGES, PURSUANT TO 11 U.S.C. § 362(k)(1), 11 U.S.C. § 105(a) AND THE COURT'S INHERENT CONTEMPT POWERS

PAUL G. HYMAN, Chief Judge.

THIS MATTER came before the Court on August 21, 2006 upon Susan Lundborg's ("Lundborg" or "Defendant") Motion for Summary Judgment Dismissing Amended Complaint for Award of Actual Damages, Including Attorney's Fees, Costs and Punitive Damages, Pursuant to 11 U.S.C. § 362(k)(1), 11 U.S.C. § 105(a) and the Court's Inherent Contempt Powers (the "Motion For Summary Judgment") [Adv. C.P.29].¹ Gary J. Rotella, P.A., as Assignee of Ferrell Law's Summary of Final Application for Compensation of Fees & Costs of Former Chapter 7 Trustee's Counsel ("Rotella As Assignee") and Debtor, James F. Walker, as Assignee of the Debtor's Estate's interest in the Cat Cay Property ("Debtor As Assignee")² filed the Complaint that initiated this adversary proceeding on June 20, 2006. An Amended Complaint for Award of Actual Damages Including Attorneys' Fees, Costs and Punitive Damages, Pursuant to 11 U.S.C. § 362(k)(1), 11 U.S.C. § 105(a) and the Court's Inherent Contempt Powers ("Amended Complaint") [Adv.C.P.24] was filed August 7, 2006. Rotella As Assignee, Debtor As Assignee, and. Gary J. Rotella & Associates, P.A. as unpaid administrative claim owner ("Rotella") (collectively, "Plaintiffs") are listed as Plaintiffs in the first paragraph of the Amended Complaint.³ On November 2, 2006, Plaintiffs filed a Partial Response to Defendant's [Motion, for Summary Judgment] [Adv. C.P.69] ("Response"). On November 7, 2006, Defendant Med a Reply Brief in Support of [Defendant's Motion for Summary Judgment] [Adv.C.P.70]." The, parties filed a Joint Stipulation of Undisputed Facts Re: [Defendant's Motion for Summary Judgment] [Adv.C.P.54] on October 13, 2006.

BACKGROUND

The Court takes judicial notice of the pleadings and proceedings in the main case.

1. On April 25, 2003, James F. Walker ("Debtor") filed for relief under Chapter 7 of the Bankruptcy Code. See Petition [C.P.1].

2. On May 27, 2003, the Debtor filed Schedules [C.P.10] showing, an insolvent estate with $101.00 in assets and $1,095,257.28 in liabilities. None of the scheduled liabilities was indicated by the Debtor to have been contingent, unliquidated, or disputed.

3. Debtor's Schedules listed real property known as Lot 32, North Cat Cay, Bahamas' (the "Cat Cay Property") as exempt on the basis that the property was held by the Debtor and his wife as joint tenants. However the Court sustained Linda Walden, the fernier Trustee's ("Former Trustee Walden") objection "to this classification and found that the Cat Cay Property was not exempt. See Memorandum, Order Sustaining Trustee's Objection to Debtor's Real Property Claimed. As Exempt [C.P. 228] entered on February 6, 2004.

4. In 1996 Eleanor C. Cole, a judgment creditor of the Debtor, sought and received relief in the courts of the Bahamas for a judicial sale of the Cat Cay Property to satisfy her judgment. A September 3, 2002 Bahamian Court order authorized the sale of the Cat Cay. Property to Lundborg. The sale, although authorized by the Bahamian Court, was not completed prepetition. See Bahamian Sale Order dated September 3, 2002 [Amended Complaint Ex. "B"].

5. On November 14, 2004 after a five day hearing, the Court found cause to remove, Former Trustee Walden from the position of Chapter 7 Trustee.⁴ Deborah Menotte was appointed as Trustee on November 18, 2004, and she resigned on December 6, 2004 because she was not disinterested. Patricia Dzikowski ("Trustee") was appointed successor Trustee on December 6, 2004.

6. On May 12, 2005, Lundborg timely filed Proof of Claim No. 5 ("Lundborg's Proof of Claim"), wherein she asserted claims against the Debtors' bankruptcy estate ("Estate") for expenses incurred with respect to the Cat Cay Property.

7. On May 27, 2005, Debtor Med an Emergency Motion To Strike Susan Lundborg's Proof Of Claim; Motion for Compensatory And Punitive Sanctions Against Lundborg, Wernick, Lubell, and Hughes, LLP Pursuant To 28 U.S.C. § 1927 and 11 U.S.C. § 105 For Filing Fraudulent Proof Of Claim; and Motion To Immediately Refer Lundborg, Wernick, and Lubell To United State's [sic] Attorneys Office For Criminal Prosecution For Filing Fraudulent Proof Of Claim Pursuant to 18 U.S.C. §§ 152 and 3571 [C.P. 926] ("Debtor's Motion to Strike Claim"). Debtor's Motion to Strike Claim sought sanctions against Lundborg and her counsel, Aviva. Wernick and Daniel Lubell, for Lundborg's having filed an allegedly fraudulent Proof of Claim. On July 29, 2005, the Court sua sponte struck the criminal referral portion of Debtor's Motion to Strike Claim. Sua Sponte Order [C.P. 1109]. See infra ¶ 17.

8. On June 2, 2005, Debtor filed an Objection to Proof of Claim No. 5 [C.P. 935] ("Debtor's Objection to Claim"). Debtor's Objection to Claim was a one-page filing that incorporated Debtor's Motion to Strike Claim in its entirety without adding any additional allegations.

9. On June 9, 2005, Trustee filed an Objection to [Lundborg's] Claim No. 5 [C.P. 945] ("Trustee's Objection to Claim"). Trustee's Objection to Claim disclosed that the Trustee had entered into a settlement agreement with the Debtor ("Settlement Agreement"), whereby the Estate's "right title and interest, subject to any and all claims, liens, and encumbrances, in the Cat Cay Property located in the Bahamas is being conveyed to the Debtor." Trustee's Objection to Claim maintained that to the extent Lundborg had any claim(s) secured by the Cat Cay Property, that claim would serve as an encumbrance against the real property, that claim would follow the real property, and that claim would be enforceable against it in the Bahamas. Trustee's Objection to Claim was resolved by Lundborg withdrawing her Proof of Claim as part of an overall settlement between Trustee and Lundborg. See infra ¶ 14.

10. On June 15, 2005, Trustee filed a Motion By Trustee Patricia Dzikowski to Approve Settlement and Sale of the Bankruptcy Estate's Right Title and Interest in the Bahamian Real Property at Cat Cay, Lot 32 [C.P.953] ("Trustee's Motion to Approve Sale") which sought the Court's approval of, among other things, sale of the Estate's interest in the Cat Cay Property to Rotella and the Debtor. Trustee's Motion to Approve Sale included as Exhibit "A" the. Settlement Agreement between Trustee and Debtor dated March 9, 2005.

11. On July 1, 2005, the. Law Firm of Ferrell. Law, P.A. ("Ferrell") filed a final application seeking compensation and expenses in the amount of $629,239.86 for Ferrell's representation of Former Trustee Walden. On. August 18, 2005 the Court entered an Order Awarding Attorneys' Fees and Costs ("Ferrell Fee Order") [C.P.1124] to Ferrell in the amount of $536,552.36 (the "Ferrell Administrative Claim"). The Ferrell Fee Order noted that Rotella was the owner by assignment of the Ferrell Administrative Claim. The Ferrell Fee, Order permitted Rotella to credit bid the full amount of the Ferrell Administrative Claim at any sale of the Estate's assets. On August 23, 2005, the Court entered an Order of Substitution of Claim [C.P.1125] which substituted Rotella, transferee for Ferrell, as' the claimant for this award of fees. However Rotella had disclosed in open Court as early as August 10, 2005 that he had acquired the Ferrell. Administrative Claim. See Aug. 10, 2005 Hearing Tr. at p. 186 [C.P.1205].

12. On July 14, 2005, Rotella and the Debtor filed adversary proceeding number 05-3127-BKC-PGH-A against the Trustee seeking attorneys' fees and costs in the amount of $637,559.68 allegedly incurred for services rendered to, and on behalf of, the Estate. The adversary proceeding was settled after resolving the objection of the United States Trustee, and on August 18, 2005 the Court entered an Order Awarding Attorneys' Fees and Casts ("Rotella Fee Order")[Adv. Proc. 05-3127; C.P.7] to Rotella in the amount of $220,492.35 ("Rotella Administrative Claim"). The Rotella Fee Order permitted Rotella to credit bid the full amount of the Rotella Administrative Claim at any sale of the Estate's assets.

13. During July 2005, the Debtor and Lundborg' filed sanctions motions against each other for alleged violations of the automatic Stay in connection with prosecution of litigation in the Bahamas. See Debtor's Motion far Contempt and Sanctions for Violation of 11 U.S.C. § 362 and Enforcement of Automatic Stay Against Susan Lundborg ("Debtor's First Stay Sanctions Motion") [C.P. 1004] and Lundborg's Response to [Debtor's First Stay Sanctions Motion] and Cross-Motion Against Debtor and Debtor's Counsel for Contempt and Sanctions for Violations of 11 U.S.C, § 362 and 28 § 1927 and Enforcement of the Automatic Stay [C.P.1071]. The. Order Denying Susan Lundborg's Cross-Motion Against. Debtor and Debtor's Counsel for Contempt and Sanctions for Violation of 11 U.S.C. § 362 and 28 U.S.C. § 1927 and Enforcement of the Automatic Stay [C.P.1182] determined that the Debtor had not violated the automatic stay. However the Court found that Lundborg had willfully violated the automatic stay by authorizing her Bahamian counsel to file two separate notices appealing the Bahamian Court orders of December 7, 2004 and February...