In re Woerner

• Decision Date: 12 November 1986
• Docket Number: Adv. No. 85-0739K.,Bankruptcy No. 84-01980K
• Citation: 66 BR 964
• Parties: In re Edward R. WOERNER, Debtor. SPRAGUE, THALL & ALBERT, Plaintiff, v. Edward R. WOERNER, Defendant.
• Court: U.S. Bankruptcy Court — Eastern District of Pennsylvania

66 B.R. 964 (1986)

In re Edward R. WOERNER, Debtor.

SPRAGUE, THALL & ALBERT, Plaintiff, v. Edward R. WOERNER, Defendant.

Bankruptcy No. 84-01980K, Adv. No. 85-0739K.

United States Bankruptcy Court, E.D. Pennsylvania.

November 12, 1986.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Richard A. Sprague, Bruce L. Thall, William K. Doak, Stephen V. Yarnell, Philadelphia, Pa., for Creditor, Sprague, Thall & Creamer.

Stephen H. Silverman, King of Prussia, Pa., for debtor.

Stephen Raslavich, Philadelphia, Pa., trustee.

OPINION

DAVID A. SCHOLL, Bankruptcy Judge.

This is an adversarial proceeding in which the Plaintiff, a Philadelphia law firm, objects to the discharge of the Debtor, Edward R. Woerner (hereinafter "the Debtor"), a former client, pursuant to 11 U.S.C. § 727(a)(4)(A) and (B). Alternatively, the Plaintiff seeks to determine the dischargeability of the debt of $149,229.83 owed to it by the Debtor pursuant to 11 U.S.C. § 523(a)(2)(A). The Debtor has filed a Counterclaim for attorney's fees pursuant to 11 U.S.C. §§ 523(d) should this Court determine that the debt owed to the Plaintiff is discharged despite the Plaintiff's Complaint.

The basis of the Plaintiff's objection to the Debtor's discharge is that the Debtor made false oaths in connection with his Petition for Bankruptcy. The Plaintiff further seeks that the Debtor's debt to the Plaintiff in the amount of $149,229.83 be found non-dischargeable on the theory that the Debtor had obtained the Plaintiff's services by false representations or actual fraud.

A non-jury trial of this adversarial matter commenced on October 1, 1985. This matter was then continued until April 8, 1986, at which time the Plaintiff completed its case. Prior to offering any testimony in defense, the Debtor moved for a dismissal of this action pursuant to Bankruptcy Rule 7041, which incorporates Federal Rule of Civil Procedure 41(b). We will grant the Debtor's Motion and dismiss the Plaintiff's case.

I. Findings of Fact

1. The Plaintiff is the law firm of Sprague, Thall and Albert, and it is a creditor of the Debtor by virtue of an unsatisfied judgment in the amount of $149,229.83. (T33-34)¹

2. The Plaintiff was retained by the Debtor in May of 1983 to represent him on the charge of first degree murder. Both the Debtor and his father, Russell E. Woerner (hereinafter "the Father"), signed a retainer agreement. (T5, 14, 99)

3. The retainer agreement provided that the Debtor would pay a non-refundable retainer of $50,000.00 to the Plaintiff, against which the Debtor would be charged $150.00 per hour for the time of each attorney who worked on the Debtor's criminal case. A later agreement between the Plaintiff and the Debtor provided that Debtor would also keep up a separate retainer account of $3,000.00 for expenses. (T5, 16, 99) 4. The Plaintiff did receive the $53,000.00, which was paid by the Father. (T10, H17)² Additional payments totalling $4,860.00 were received by the Plaintiff from the Father between July 11, 1983, and October 24, 1983. These payments were credited toward the Debtor's expense account. (T21-24)

5. The Debtor's criminal trial commenced on October 17, 1983. (T31) Immediately prior thereto, on October 15, 1983, a billing statement was issued by the Plaintiff which showed a credit balance of $10,283.50 on the attorney fee retainer, and a balance due of $6,563.67 on the costs and expenses account. Additionally, the Statement reflected an additional $3,000.00 retainer due on the costs and expense portion, for a total due of $9,563.67. (T24)

6. Prior to the commencement of the trial, the Plaintiff was concerned about the Debtor's ability to pay the fees and costs over and above what had already been paid. (T6, 11) The Father was also concerned about the rapid depletion of the initial $53,000.00 payment and wrote a letter to the Plaintiff to that effect in August of 1983. (H20) This letter also made reference to the Debtor's concern about the rapid depletion of the $53,000.00 retainer. The Plaintiff and the Debtor engaged in an unspecified number of discussions concerning the payment of the Plaintiff's fees and costs in connection with the criminal defense of the Debtor. (T16-17, 20, 26. H9-10, 19)

7. The Debtor understood that more attorneys' fees would be incurred as a result of the trial itself and the Debtor assured the Plaintiff that he would pay these fees and costs. (T7, 11. H10, 13-17)

8. The Plaintiff had knowledge of the financial conditions of the Debtor, and of the Father. The Plaintiff knew that the Debtor was a salaried employee, earning approximately thirty thousand ($30,000.00) dollars per year. The Plaintiff was also aware of the Debtor's modest standard of living, e.g., that he resided in a one-bedroom apartment directly over a commercial establishment, because the Plaintiff maintained the Debtor's apartment by payments from the Debtor's expense account. (T7, 21. H10, 25-26)

9. The Plaintiff was aware that the Father was seventy-six (76) years old, retired on a modest pension, had paid half of his life savings to his life care residence and that the other half of his life savings had gone to pay the $53,000.00 fee and cost retainer to the Plaintiff. This information was revealed to the Plaintiff in the Father's letter to the Plaintiff of August, 1983. (H20-25, D-18)³

10. On November 15, 1983, the Plaintiff issued a billing statement which showed attorney fees of $89,706.50 due, as well as expenses advanced of $18,400.00. The Statement also demanded the payment of an additional $3,000.00 retainer on the expense account. (T31)

11. The December 15, 1983 billing statement issued by the Plaintiff reflected a payment of $500.00 received on November 21, 1983, from the Debtor which was credited against the expenses owed in the amount of $28,331.03, attorney's fees owed in the amount of $120,846.50, and a demand for the $3,000.00 expense retainer for a total of $152,177.53. (T32)

12. On January 15, 1984, the Plaintiff issued a billing statement which showed that the total expenses owed amounted to $31,334.92 and that the total attorney's fees owed amounted to $120,891.50, for a total of $152,226.42. The billing statement issued by the Plaintiff on February 15, 1984, showed the same amounts due as of the January, 1984, statement. (T32-33)

13. The March 15, 1984 and April 15, 1984 billing statements are identical and showed a total balance due and owing of $149,229.83, the exact amount of the Plaintiff's claim and judgment against the Debtor. This final amount reflects a deduction of the $3,000.00 expense retainer which had previously been added to the amount due and owing from the Debtor. (T33-34)

14. The Plaintiff was aware that if the Debtor was convicted of first degree murder, he could be sentenced to either life imprisonment or death. (H28)

15. There has been no evidence offered as to whether the Debtor denied his liability to the Plaintiff for the legal services performed. Likewise, there has been no evidence offered as to whether the Debtor objected to the amount of the fees and costs other than the letter of August, 1983, from the Father to the Plaintiff.

16. Although the Plaintiff argues strenuously about the Debtor's intent respecting the payment of the Debtor's legal fees, the Plaintiff offered no evidence of the Debtor's intent to defraud the Plaintiff and no evidence of fraud. In fact, there was no evidence that the Debtor did not intend to pay the Plaintiff for its legal services when the services were rendered or when promises or assurances of payment were made by the Debtor.

17. On June 20, 1984, the Debtor filed a Petition for Relief under Chapter 7 of the Bankruptcy Code. In Schedule B-2, the Debtor failed to itemize his personal property. Instead, the Debtor ascribed value or dollar amounts to general categories of property. (P-7)⁴

18. The Section 341 Meeting of Creditors was held on September 11, 1984, at which the Debtor was examined under oath by the Trustee concerning the information set forth on the Debtor's Petition, Schedules and Statement of Affairs. The Debtor affirmed the accuracy of those documents. The Plaintiff sent one of its lawyers to attend this meeting. (P-9, T113-114 and H11) Only portions of the Debtor's § 341 examination were admitted into evidence by the Plaintiff. (T114)

19. On Schedule A-3, the Debtor listed a debt to his Father's estate in the amount of $53,500.00. (P7, T88)

20. On June 13, 1985, the Plaintiff took depositions of the Debtor, only portions of which were admitted into evidence at the trial in this matter. (T54-101)⁵

21. At the depositions, the Debtor basically affirmed the accuracy of his original Petition, Schedules and Statement of Affairs, with some corrections. (T57-58)

22. The Debtor's explanation for these changes was that he had made a more detailed analysis since originally reviewing and signing his Petition. (T58)

23. The Debtor affirmed that he had $50.00 "cash on hand" at the time that he signed his Petition. (T58)

24. The Debtor did not know exactly how much money he had in the bank when he signed his Petition because of the fluctuating nature of his checking accounts. Furthermore, the Debtor assumed that the category "cash on hand" included any monies in his checking account. (T60)

25. At the deposition, the Debtor testified that he owned a rangefinder camera without interchangeable lenses (T70-71); that he had not owned any interchangeable lenses or cameras between January, 1983, and June, 1984 (T73); and that he had not owned a slide projector before June, 1984. (T76)

26. Subsequent to the Debtor's deposition, he was given the opportunity to review the transcribed deposition for accuracy. Before verifying the truthfulness of his deposition, the Debtor made certain corrections. (Dep. 178-179)

27. The substance of these corrections were that the Debtor had owned a 35 millimeter camera with interchangeable lenses between January, 1983, and ...