In re Wyman

• Decision Date: 23 September 2019
• Docket Number: Case No. 12-32264-dof
• Parties: IN RE: CHRISTOPHER D. WYMAN, Debtor.
• Court: U.S. Bankruptcy Court — Eastern District of Michigan

IN RE: CHRISTOPHER D. WYMAN, Debtor.

Case No. 12-32264-dof

UNITED STATES BANKRUPTCY COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION - FLINT

September 23, 2019

Chapter 7 Proceeding

Hon. Daniel S. Opperman

OPINION REGARDING APPLICATION FOR PAYMENT OF PRE-APPROVED ATTORNEY FEES OF SPECIAL COUNSEL TO TRUSTEE PURSUANT TO 11 U.S.C. § 328(a)

Special Counsel for the Chapter 7 Trustee requests the Court to issue an order to pay his attorney fees. The Trustee objects to this request for numerous reasons. For the reasons stated in this Opinion, the Court concludes that Special Counsel is entitled to no more than $21,869.33, less amounts attributed to the Trustee's efforts to complete the sale of assets and subordination of claims for the benefit of the estate.

Jurisdiction

This Court has subject matter jurisdiction over this proceeding under 28 U.S.C. §§ 1334(b), 157(a) and 157(b)(1) and E.D. Mich. LR 83.50(a). This is a core proceeding pursuant to 27 U.S.C. § 157(b)(2)(A) (matters concerning the administration of the estate).

Findings of Fact

Shortly after the Debtor filed his Chapter 7 Petition, Michael Tindall, who represented Barbara Duggan, a creditor of the Debtor, contacted the Chapter 7 Trustee, Michael Mason, to inform him about possible avoidable transfers of real and personal property of the Debtor. Mr. Mason was already represented by counsel, but he reached an understanding with Mr. Tindall to allow Mr. Tindall and his law firm, Tindall Law Firm, (collectively "Tindall") to represent Mr. Mason and the estate as special counsel for a limited purpose. Accordingly, Mr. Mason, through counsel, filed an Application for Approval of Employment of Tindall Law Firm as Special Counsel for the Estate on July 16, 2012 ("Application"). Pertinent portions of this Application state:

2. That one of the potential assets in this bankruptcy estate consists of possible avoidable transfers. Said claims arose prior to the filing of this bankruptcy estate and Attorney Michael E. Tindall and the Tindall Law Firm was pursuing avoidance of the transfers on behalf of Creditor Barbara Duggan and will continue to represent her in this bankruptcy proceeding, which may include the following:

a. Objections to the dischargeability of the debts owing to Ms. Duggan under 11 U.S.C. § 523(a).

b. Objections to discharge under 11 U.S.C. § 727.

c. Objections to Proofs of Claim.

d. Other actions that do not conflict with Attorney Michael E. Tindall and/or the Tindall Law Firm's duties and obligations as special counsel to the Trustee.

The aforementioned do not constitute an actual conflict of interest, and thus under 11 U.S.C. § 327(c) Attorney Michael E. Tindall and the Tindall Law Firm may be employed by the Trustee as his special counsel for the limited purposes of pursuing the avoidance of transfers. This representation as special counsel to Trustee shall not limit or restrict the ability of Attorney Michael E. Tindall or the Tindall Law Firm to continue to represent Creditor Barbara Duggan in this or any other court or proceeding. Michael E. Tindall and the Tindall Law Firm are duly qualified to practice law in the Courts of the State of Michigan.

3. Because the Tindall Law Firm and Michael E. Tindall were pursuing avoidance of various transfers, pre-filing, the employment of the Law Firm would be in the best interest of the Bankruptcy Estate and Applicant is therefore requesting authority to hire the Tindall Law Firm of Box 46564, Mount Clemens, MI 48046 (PH 313-638-7613) to represent the estate in these matters. Said law firm is willing to represent the bankruptcy estate with same to be compensated, pursuant to 11 U.S.C. 328 (a), as follows: The law firm will be reimbursed for its costs from any recovery and will be allowed a fee of one third (1/3) of any recovery after deducting all costs incurred, pre and post filing.

. . .

5. The law firm has been informed and understands that no settlement of the controversy insofar as it relates to the bankruptcy estate's interest in same may be consummated until after a notice and a hearing and approval by the Bankruptcy Court and that fees and costs may be paid only upon entry of a Bankruptcy Court order.

6. Said law firm is aware of the provisions of 11 USC 328(a) and has agreed, notwithstanding the terms and conditions of employment herein set forth, that the Court may allow compensation different from the compensation provided herein if such terms and conditions prove to have been improvident in light ofdevelopments not capable of being anticipated at the time of the fixing of such terms and conditions.

The Declaration of Disinterestedness of the Tindall Law Firm was attached to the Application and states in part:

3. The Trustee's application to employ has been read by the Tindall Law Firm and the law firm agrees to accept said employment on the terms and conditions contained in the Trustee's Application.

This Declaration was signed by Mr. Tindall. After approval of the employment by the United States Trustee, the Court entered an Order Approving Application for Employment of Tindall Law Firm as Special Counsel for the Estate on July 18, 2012 ("Employment Order"). The Employment Order states:

IT IS HEREBY ORDERED that Michael A. Mason's employment of Michael E. Tindall and the Tindall Law Firm ("Firm") pursuant to 11 U.S.C. 327 on the terms and conditions contained in the Trustee's Application is approved.

IT IS FURTHER ORDERED that the Court may allow compensation different from the compensation provided in the Trustee's application if such terms and conditions prove to have been improvident in light of developments not capable of being anticipated at the time of the fixing of said terms and conditions and that any fees and costs will not be paid without prior Court approval.

Tindall filed adversary proceedings to avoid the transfer of real estate located at 1011 Jones Road, Howell, Michigan and assorted construction machinery, equipment, tools, and miscellaneous items ("Personal Property") on behalf of the estate and Ms. Duggan. The Defendants in these actions aggressively defended these adversary proceedings, resulting in protracted and contentious litigation.

Ultimately, however, through negotiations by Samuel Sweet the successor Trustee to Mr. Mason, 1101 Jones Road was returned to the Trustee, as well as some of the Personal Property. Mr. Sweet then sold 1011 Jones Road for a net amount of $65,607.98 and included the Personal Property as part of the settlement of the adversary proceedings. But Tindall did not see this result to the end. On September 20, 2017, Mr. Tindall was disbarred and therefore unable to representMr. Sweet. Despite that set back, Mr. Sweet brought these assets into the estate, settled the adversary proceedings, and sold 1011 Jones Road.

Mr. Tindall reappeared as an interested party to contest the sale of 1011 Jones Road, this time as a partial assignee of Ms. Duggan's claim and later on his own behalf as a claimant for his attorney fees and costs. Mr. Sweet has closed the sale of 1011 Jones Road, disbursed funds to Ms. Duggan, and negotiated a subordination of tax claim with Livingston County that created funds to pay administrative claims. Mr. Tindall has one of these administrative claims. To that end, Mr. Tindall has filed two documents: a Notice of Claim of Interest ("Notice") and the Application.

The Notice states:

NOTICE OF CLAIM OF INTEREST

Please take notice that MICHAEL E. TINDALL, acting in pro per as sole successor in interest to TINDALL LAW, claims the below listed and described interest(s) in the real property commonly known as 1011 East Jones Road, Township of Cohoctah, County of Livingston, State of Michigan, Tax Id No. 02-24-300-007, more fully described in attached Exhibit 1, and any and all proceeds of or from the sale of such real property by Trustee Samuel D. Sweet, bankruptcy trustee in Chapter 7 Case No. 12-32264-dof, In re CHRISTOPHER D. WYMAN, DEBTOR, pursuant to that certain agreement of sale dated June 14, 2018 and approved by Order of sale dated July 5, 2018.

1. Fifty (50%) percent ($15,500.00) of all proceeds ($32,000.00) of a certain Judgment entered April 24, 2012 in favor of Barbara Duggan by the 53rd District Court and perfected by Judgment Lien dated May 3, 2012 and recorded at 2012R-015343, Livingston County Records.

2. Thirty Three (33%) ($21,710.00) of the sale price of the property ($65,000.00) by the Bankruptcy Trustee, pursuant to paragraph 3 of the Agreement attached as Exhibit 2 and the Order approving same attached as Exhibit 3.

3. Thirty Three (33%) ($16,700.00) of the value ($50,000.00) of certain equipment to be transferred and included in the July 14, 2018, under paragraph 5 of Addendum 1 thereof, pursuant to paragraph 3 of the Agreement attached as Exhibit 2 and the Order approving same attached as Exhibit 3.

Actual and constructive notice of the interest(s) claimed herein is hereby given to all concerned parties and to SELECT TITLE CO. of Brighton, MI, on this date.

In turn, the Application states that 1011 Jones Road sold for $65,000.00, that Ms. Duggan had an allowed secured claim of $32,288.91, which Mr. Sweet paid, that Ms. Duggan has paid post petition attorney fees of $28,642.93 which Mr. Tindall apparently asserts she should be paid as a secured creditor under Section 506(b), and that Mr. Sweet currently holds $31,904.82 subject to his fees. Finally, Mr. Tindall asserts that he is entitled to a 1/3 contingency fee of $34,410.00 based on values determined by Mr. Sweet.

Mr. Sweet disputes that Mr. Tindall is entitled to $34,000.00 because his efforts and the result do not warrant such award. Moreover, Mr. Sweet argues that Mr. Tindall has a conflict of interest given his representation of Ms. Duggan and that his claim that she is entitled to attorney fees is unwarranted and is in conflict with Mr. Tindall's and the estate's interest. Moreover, Mr. Sweet pointed out that 1/3 of $65,607.98 is $21,869.33, not $34,100.00.

Applicable Statu...