Matter of Wilson, Bankruptcy No. 81-B-20175.

• Citation: 11 BR 986
• Decision Date: 30 June 1981
• Docket Number: Bankruptcy No. 81-B-20175.
• Parties: In the Matter of Frances WILSON, Debtor.
• Court: United States Bankruptcy Courts. Second Circuit. U.S. Bankruptcy Court — Southern District of New York

11 B.R. 986 (1981)

In the Matter of Frances WILSON, Debtor.

Bankruptcy No. 81-B-20175.

United States Bankruptcy Court, S.D. New York.

June 30, 1981.

Jeffrey L. Sapir, Yonkers, N.Y., Standing Chapter 13 trustee.

Irving H. Picard, New York City, U.S. Trustee, Cornelius Blackshear, New York City, Asst. U.S. Trustee, of counsel.

R. Mark Goodman, White Plains, N.Y., of counsel for Salzman, Ingber & Winer, New York City, Pope, Billups, Sneed & Harris, New York City, for debtor.

HOWARD SCHWARTZBERG, Bankruptcy Judge.

The standing Chapter 13 trustee and the United States Trustee have jointly applied to this court, pursuant to 11 U.S.C. § 329(b) and Bankruptcy Rule 220, to review the fee arrangement between the law firm of Salzman, Ingber & Winer, and its client, Frances Wilson, the above-captioned Chapter 13 debtor. The applicants seek an order directing the law firm to remit to the debtor the fee already paid to them for this case.

FINDINGS OF FACT

1. The debtor's petition under Chapter 13 of the Bankruptcy Code 11 U.S.C. § 1301 et. seq., was filed with this court on March 27, 1981. At the time, a second mortgagee with respect to the debtor's multi-family residence was proceeding with a foreclosure action in the state court. The property is located on Warwick Avenue in Mount Vernon, New York. The filing of the Chapter 13 petition had the effect of automatically staying the foreclosure action, as directed under Code § 362(a).

2. The debtor's petition states that she retained the law firm of Salzman, Ingber & Winer as her counsel and that she agreed to pay them for their services the sum of $660, including court costs. The attorney's compensation disclosure statement which was filed with the petition on March 27, 1981, pursuant to Bankruptcy Rule 219(b), states that the debtor agreed to pay $725 as a fee, of which $350 had been paid prior to the filing and that the firm would render legal services in behalf of the debtor in connection with the case.

3. Mr. Winer, a member of the firm of Salzman, Ingber & Winer, testified that the discrepancy between the $660 figure and the $725 fee was due to the fact that the petition was prepared on the eve of foreclosure and was typed at night, thereby warranting a larger fee than the $660 sum the firm normally charges for such services. The debtor's husband testified that no other figure than $660 was specified.

4. The debtor's husband testified that all of the information for the preparation of the Chapter 13 petition was provided by him because he was familiar with the details and that the residence in question was in his wife's name because he was concerned about any judgment that might be obtained against him in the course of his work as a truck driver. Indeed, the debtor, Frances Wilson, never even met Mr. Winer, or any member of his firm. She signed the petition the morning after it was prepared in the office of the law firm at the instruction of one of the secretaries. Hence, Mr. Winer, who was in charge of this case for his firm, never consulted with his nominal client before the petition was filed. The Chapter 13 petition was filed on her behalf since she was the named owner of the property which was then the subject of the state court foreclosure action. The debtor's husband did not file any petition for relief.

5. On April 13, 1981, shortly after this debtor's Chapter 13 petition was filed, Herbert L. Johnson, the second mortgagee on the debtor's residence, who was the plaintiff in the state court foreclosure action commenced an adversary proceeding in this court seeking relief from the automatic stay so as to proceed with the sale of the debtor's residence in accordance with the foreclosure judgment that had previously been entered in the state court. Salzman, Ingber & Winer filed an answer on behalf of the debtor in which it was alleged that the debtor had an equity in her residence and that the complaint should be dismissed.

6. No attorney from the firm of Salzman, Ingber & Winer appeared at the adversary trial on April 29, 1981. Instead, R. Mark Goodman, Esquire, an attorney with an office in White Plains and who was not affiliated with the firm of Salzman, Ingber & Winer, appeared to represent the debtor. Neither the debtor nor her husband was ever advised by Salzman, Ingber & Winer that an attorney other than one from that firm would represent the debtor at the adversary proceeding. Indeed, the debtor was not even apprised of the hearing and did not appear for it.

7. Mr. Goodman interrogated two witnesses in the course of the plaintiff's case. It appeared that the debtor's residence was purchased only a few months earlier at a cost of $75,000 and that the foreclosure judgment, together with costs, and unpaid taxes exceeded $85,000, to which Mr. Goodman stipulated. Upon the completion of the second mortgagee's case, Mr. Goodman's routine request to dismiss the complaint was denied and he was directed to proceed with the debtor's case. At this time Mr. Goodman requested an adjournment on the ground that he had been asked by Salzman, Ingber & Winer on the previous day (April 28th) to appear in its place at the trial and that he was not prepared to present witnesses or evidence. He stated that he "was under the impression that this was a submission of motion papers." This court noted that the plaintiff had travelled from Florida to attend the trial and that Mr. Goodman never indicated he was unprepared until after the plaintiff had completed his case. The motion for an adjournment was denied and the relief from the stay was granted from the bench on the ground that the plaintiff had satisfied his burden, imposed under Code § 362(g)(1), of proving that the debtor lacked equity in the property in question within the meaning of Code § 362(d)(2)(A) and that the second mortgagee was not adequately protected in the context of Code § 362(d)(1).

8. Mr. Goodman's participation in this case was explained in his affirmation, dated June 18, 1981, which contains among other information, the following facts with respect to this case:

"2. I am an individual practitioner with offices at 199 Main Street, White Plains, New York. I am not, and have never been a member, partner or associate of the firm of SALZMAN, INGBER & WINER (hereinafter SALZMAN, et. al.).

3. From approximately August, 1980, through January, 1981, SALZMAN, et. al., was a sub-tenant in the same suite of offices in which I rent an office. During this time I had no contact with any member of that firm, since the members of said firm conducted interviews with prospective clients after normal business hours.

. . . . .

15. On April 28, 1981, in the afternoon of that day, I was asked by a secretary at the firm of SALZMAN, et al., whether I could attend a hearing to be held at 11 o\'clock a.m. on April 29, 1981, In re Frances Wilson, No. 81/B/20175. Since I had seen neither the petition nor any motion papers and had never observed a Bankruptcy Court hearing, I did not think that I could be of any help. I asked to speak with Mr. WINER. In the course of our conversation, Mr. WINER, assured me that this was a `routine\' and that the motion papers on file with the Court were self-explanatory. I was not advised that under 11 U.S.C. § 362(g) the party opposing relief from a stay had the burden of proof on all issues other than the debtor\'s equity in the property. Moreover, I was told that it was not necessary that either the debtor or witnesses in her behalf be called at said hearing. Prior to the hearing I copied all papers on file at the Bankruptcy Court and researched the issues of `adequate protection\' under 11 U.S.C. § 362(d) and the burden of proof under 11 U.S.C. § 362(g). It was apparent that the debtor had no equity in the premises based on the motion papers and the petition. I assumed (improperly) that adversary proceedings, like contested motions in New York Supreme Court, did not require testimony and, hence, that the motion papers would be determinative as advised by Mr. WINER. In any event, I did not know how to reach the debtor and did not have adequate time to prepare for a plenary hearing. At the hearing, I was therefore, limited to a cross-examination of the creditor\'s witnesses. When my motion to dismiss the creditor\'s case was denied, I could not continue and my request for adjournment was denied and the stay lifted.

16. Immediately upon returning to my office on April 29, 1981, I contacted SALZMAN, et al. and informed the secretary and Mr. WINER that I could not appear in their behalf again. A copy of a letter sent to Mr. WINER on April 29, 1981 is enclosed herein as Exhibit "B".

17. During the months of March and April, 1981, when I appeared in behalf of SALZMAN, et. al. in the White Plains Bankruptcy Court, I was compensated at the rate of $50.00 per appearance for most appearances. The purpose of the fee was to compensate me for time expended and, upon information and belief, my participation could not have been predicted at the time the petitions were prepared and the statements pursuant to Rule 219(b) were filed. Therefore, I am not aware of any agreements or arrangements (written or oral) which contemplated `fee-splitting\' or the sharing of compensation (directly or indirectly) as that term is used in 11 U.S.C. 504(a)."

9. After the granting of the second mortgagee's request for relief...