Pantazelos v. J. Kevin Benjamin & Benjamin Brand, LLP (In re Pantazelos)
| Decision Date | 27 December 2016 |
| Docket Number | Bankruptcy No. 15–bk–08916,Adversary No. 15–ap–00314 |
| Citation | 562 B.R. 723 |
| Parties | IN RE: Faye T. PANTAZELOS, Debtor. Faye T. Pantazelos, Plaintiff v. J. Kevin Benjamin and Benjamin Brand, LLP, Defendants. |
| Court | U.S. Bankruptcy Court — Northern District of Illinois |
David P Lloyd, David P. Lloyd, Ltd., LaGrange, IL, for Plaintiff.
J. Kevin Benjamin, Esq., Benjamin & Brand LLP, Andrew M. Everest, The Everest Firm, Chicago, IL, for Defendants.
FINDINGS OF FACT AND CONCLUSIONS OF LAW ON DEBTOR'S ADVERSARY COMPLAINT TO AVOID AND RECOVER PREFERENCE AND OTHER RELIEF (COUNT 1)
Faye T. Pantazelos filed a petition for bankruptcy relief under Chapter 13 of Bankruptcy Code. She then brought this adversary proceeding against her former attorneys in prior bankruptcy cases, J. Kevin Benjamin, Theresa Benjamin, and the firm of Benjamin Brand, LLP, seeking: (Count 1) avoidance and recovery of an allegedly preferential payment of $14,000 claimed to have been made within 90 days of filing her bankruptcy case on account of legal fees owed at the time; (Count 2) turnover of $4,000 claimed to have been intended to be paid to reinstate her previous bankruptcy case but instead was retained by the Defendants, and; (Count 3) examination of the fees paid or agreed to be paid to the Defendants for representation in a prior case.
Trial on the adversary claims was held over the course of four afternoons. Before the close of the Plaintiff's case, and upon oral motion of counsel for the Plaintiff, Count 3 was dismissed with prejudice. [Dkt. No. 85.] Plaintiffs also voluntarily dismissed all remaining counts against one of the original defendants, Theresa Benjamin, and she has been dismissed from this proceeding. [Dkt. No. 107.]
At the close of the evidence, all parties having rested and final oral arguments having been heard on Count 2, Findings of Fact and Conclusions of Law were made and entered on Count 2 seeking turnover of $4,000. For reasons stated from the bench, relief sought in Count 2 was entirely denied with entry of judgment for the Defendants. [Dkt. No. 103.]
Plaintiff's remaining count seeking avoidance and recovery of an allegedly preferential transfer of $14,000 set forth in Count 1, and Defendants' asserted defenses to that claim, were taken under advisement after final argument. Findings of Fact and Conclusions of Law as to Count 1 are now hereby made and entered.
Plaintiff's complete trial exhibits, identified and marked as Plaintiff's Exhibits 1 through 33 [See Dkt. No. 73], were entirely admitted into evidence at trial, Defendants made no timely objection to exhibits identified prior to trial, and any oral objections to Plaintiff's offer of her exhibits into evidence were heard, considered and, for reasons stated on the record, entirely overruled.
For reasons stated below, Plaintiff has met her burden of proving a voidable preference pursuant to 11 U.S.C. § 547(b) with respect to a $14,000 payment for legal fees due when such payment was made less than 90 days before the bankruptcy case was filed. Defendants, in turn, have failed to establish any exception to avoidance under 11 U.S.C. § 547(c). Plaintiff has also established a right to recover the avoided transfer for the benefit of the estate pursuant to 11 U.S.C. § 550, and Defendants have not established any defense to recovery under that provision.
Accordingly, Judgment on Count 1 will separately be entered in favor of the Plaintiff for avoidance and recovery of the $14,000 preference from the Defendants.
Plaintiff, Faye Pantazelos (the "Debtor") is the debtor in the above-captioned Chapter 13 bankruptcy case, no. 15 B 08916, and had previously been a debtor in two other bankruptcy cases filed by her in 2013—first under Chapter 11 and then under Chapter 13—which had both been dismissed before her current bankruptcy case was filed in March of 2015. Defendants, Kevin J. Benjamin ("Benjamin") and the law firm of Benjamin Brand LLP ("BBLLP"), provided legal services to the Debtor in connection with her two prior bankruptcy cases. Benjamin, a licensed attorney authorized to practice law in Illinois, is a partner in BBLLP. Within the 90 days immediately preceding the filing of Debtor's pending bankruptcy case, she owed a debt for legal services rendered in her prior case, and she paid an agreed amount on the balance of such fees by making a $14,000 payment to and for the benefit of the Defendants.
Debtor's former Chapter 11 case, no. 13 B 01419, was filed on January 15, 2013 (the "2013 Chapter 11 Case"). Benjamin represented the Debtor in her 2013 Chapter 11 Case. (Pl's Trial Ex. ["PX"] 33, ¶ 9.)
On January 15, 2013, Benjamin filed a Disclosure of Compensation for Attorney for the Debtor ("Fee Disclosure") in the 2013 Chapter 11 Case indicating that he had received $6,000 prepetition for services rendered or to be rendered in connection with that case. (PX 33, ¶ 10; See Fee Disclosure, Dkt. No. 5, 13 B 01419, Jan. 15, 2013, at l.1 ) The Fee Disclosure was filed by Benjamin, as member or otherwise associated with "Benjamin Legal Services." (See Fee Disclosure, Dkt. No. 5, at 2.) The Retainer Agreements attached to the referenced Fee Disclosure, however, purport to be made between the Debtor, as " ‘Client’ or ‘Debtor,’ " and BBLLP, as " ‘Firm’ or ‘Attorney,’ " and signed by the Debtor, as party-client, and by Benjamin, not individually but on behalf of BBLLP and solely as representative "FOR FIRM[.]" No reference to Benjamin in his individual capacity or to "Benjamin Legal Services" is included. (See Fee Disclosure, Dkt. No. 5, Ex. 1, 2.) Instead, the Agreements both bear BBLLP's letterhead and were executed between client and the firm of BBLLP.
Although Benjamin filed an Application to retain and employ himself and his firm, BBLLP, to represent the Debtor in possession in the 2013 Chapter 11 Case (see Application, Dkt. No. 16,13 B 01419, Feb. 5, 2013), the Application was ultimately withdrawn on May 2, 2015 with no order entered approving or denying the Application. (see Dkt. No. 55.)
On May 21, 2013, Debtor's 2013 Chapter 11 Case was dismissed upon motion of the United States Trustee "for cause," including failure to meet timely filing and reporting requirements and to obtain counsel. (See Order Dismissing for Debtor, Dkt. No. 56 (citing 11 U.S.C. § 1112(b) ) (granting U.S. Trustee's Mot. to D. or Convert Case, Dkt. No. 47, April 18, 2013).)
The parties agree that the Debtor was represented by Benjamin, at least in the beginning of that case. Debtor testified that she signed a retention agreement for that representation. However, she did not recall when or whether that agreement was filed, or the precise terms of any agreement signed.
At trial, Benjamin testified that fees owed for legal services rendered in connection with the 2013 Chapter 11 Case had been paid, in part, out of the $6,000 prepetition retainer disclosed in that case, and any fees due but not covered by the retainer were waived before the Debtor's prior Chapter 13 case was filed.
On July 22, 2013, Debtor filed her prior Chapter 13 bankruptcy case, no. 13 B 29200 (the "2013 Chapter 13 Case"). (PX 33, ¶ 6.) Debtor was represented by Benjamin and Theresa Benjamin of the firm of BBLLP. (See PX 33, ¶¶ 7, 8; Fee Disclosure, infra , Ex. 2; see also PX 3, 4.)
On July 25, 2013, Benjamin filed a Fee Disclosure in the 2013 Chapter 13 Case, disclosing prior receipt of $423.00 "towards legal services." Compensation for legal services rendered in the case was agreed to be accepted on an "hourly" rate basis. The source of the compensation received was "Debtor's Friend." The source of the compensation to be paid was identified as "Debtor."(See PX 33, ¶ 8; Fee Disclosure, Dkt. No. 8, 13 B 29200, July 25, 2013, at 1.) Additional terms and limitations were disclosed by reference to the Attorney Client Retainer Agreement attached to the Fee Disclosure. (the "Chapter 13 Retainer")
The Chapter 13 Retainer purports to have been executed between BBLLP, as " ‘Firm’ or ‘Attorney,’ " and the Debtor, as " ‘Client’ or ‘Debtor,’ " and signed by Benjamin, not individually but "FOR FIRM[,]" namely, BBLLP. The Chapter 13 Retainer also bears the firm's letterhead. (See Fee Disclosure, Dkt. No. 8, supra , at 2 and 6.) The "Subject Matter" of legal representation under that agreement was defined, in part, by the following:
Client retains and employs Attorney (and not any specific individual attorney) to advise and consult Client in relation the qualifications and procedures related to a potential filing of a petition for relief under Chapter 13 of the US Bankruptcy Code ....
(Id. at 2, ¶ 1.) Postpetition hourly fees were to be paid under the Debtor's Chapter 13 Plan, subject to court approval. (Id. at 5–6, ¶ 15.) Postpetition fees remaining due upon conversion or dismissal of the case, however, "shall be due and owing and payable immediately upon said conversion or dismissal." (Id. at 2, ¶ 1.)
On November 5, 2014, the Chapter 13 case was dismissed upon motion of the Chapter 13 trustee for failure to make timely payments proposed by the plan in accordance with 11 U.S.C. § 1326(a)(1). (PX 33, ¶ 11; PX 22, 23.) Debtor's proposed plan, as modified from time to time, had not yet been confirmed, but she was required by law to start making and maintain proposed monthly payments to the Chapter 13 trustee for disbursement upon plan confirmation, see 11 U.S.C. § 1326. While Debtor made payments to the Chapter 13 trustee of more than $14,000 during the pendency of her case, she appears to have fallen behind and was unable to cure arrearages in time to confirm her proposed plan. ...
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