Wright v. Csabi (In re Wright)

• Decision Date: 01 December 2017
• Docket Number: ADVERSARY NO. 16–1004,CASE NO: 13–10472
• Citation: 578 B.R. 570
• Parties: IN RE: Vicky Gribble WRIGHT; aka Wright; aka Wright; fdba Vicky Wright/borders Contractors Inc. Debtor Vicky Gribble Wright, Plaintiff v. William A. Csabi, et al, Defendants
• Court: U.S. Bankruptcy Court — Southern District of Texas

578 B.R. 570

IN RE: Vicky Gribble WRIGHT; aka Wright; aka Wright; fdba Vicky Wright/borders Contractors Inc. DebtorVicky Gribble Wright, Plaintiff

v.William A. Csabi, et al, Defendants

CASE NO: 13–10472

ADVERSARY NO. 16–1004

United States Bankruptcy Court, S.D. Texas, Brownsville Division.

Signed December 1, 2017

Abelardo Limon, Jr., Brownsville, TX, for Plaintiff.

Richard O. Habermann, Attorney at Law, James Patrick Grissom, Attorney at Law, Francisco J Rodriguez, Law Office of Francisco J. Rodriguez, McAllen, TX, for Defendants.

MEMORANDUM OPINION FINDING DEFENDANTS LIABLE FOR VIOLATIONS OF 11 U.S.C. §§ 327, 329, 362 & 504 BANKRUPTCY LOCAL RULE 2014–1 & F. R. BANKR. P. 2014 & 2016

Resolving in Part, ECF No. 1

Eduardo V. Rodriguez, United States Bankruptcy Judge

I. INTRODUCTION

"If citizens cannot trust that laws will be enforced in an evenhanded and honest fashion, they cannot be said to live under the rule of law."¹ When lawyers appear before this Court, they are charged with knowledge of the United States Bankruptcy Code,² the Federal Rules of Civil Procedure ("Civil Rules "), Federal Rules of Bankruptcy Procedure ("Bankruptcy Rules , Rules , or Rule "), Southern District of Texas Bankruptcy Local Rules ("Bankruptcy Local Rules , BLR , or Local Rule "), and this Court's Procedures and are obliged to follow those Rules and Procedures, without which it could be said that we are not living "under the rule of law." Let it be clear to all that appear before this Court that flagrant violations of the Code and the aforementioned Rules and Procedures will not be tolerated and such violations will be dealt with swiftly by this Court.

Turning to the merits of the case sub judice , three local attorneys, James P. Grissom ("Grissom "), William A. Csabi ("Csabi ") and Francisco J. Rodriguez ("Rodriguez ") (collectively "Defendants ") chose to test this Court's resolve. Vicki G. Wright "(Debtor or Plaintiff ") filed the instant complaint seeking disgorgement of an unauthorized fee, turnover of property of the estate, and violation of the automatic stay against the three Defendants. Specifically, Plaintiff has alleged that Defendants violated 11 U.S.C. §§ 105, 329, 330, 362, 504, 542 and Rules 2016, and 2017 as well as Texas Rules of Professional Conduct 1.04(d) and 1.04(f). On August 30, 2017,³ this Court conducted a three-day, bifurcated trial on the merits of Plaintiff's claims against the Defendants as to liability only. Therefore, the instant Memorandum Opinion will address the alleged violations of §§ 329, 362, 504, and Rule 2016. Additionally, and pursuant to the Court's inherent authority provisioned by § 105, the Court will also address patent violations of § 327, Rule 2014, and BLR 2014–1. However, §§ 330, 542 and Rule 2017 relate more to the damages that Plaintiff is seeking, and thus those matters, inter alia , will be reserved for a separate trial. Additionally, pursuant to the authority granted by 28 U.S.C. § 1334(c)(1) and in the "interest of comity" the Court declines Plaintiff's invitation to address the alleged violations of the Texas Disciplinary Rules of Professional Conduct. Those matters are better suited for the appropriate tribunal, including but not limited to the State Bar of Texas.⁴

At trial, Plaintiff was represented by counsel, Abelardo Limon Jr. ("Limon "). Both Grissom and Rodriguez appeared pro se, while Csabi was represented by counsel, Richard O. Habermann. At the conclusion of trial, the matter was taken under advisement and is now ripe for consideration. The Court has considered the pleadings; the arguments presented by the parties; the evidence; and relevant case law and now issues the instant ruling.

II. JURISDICTION, VENUE, AND THIS COURT'S CONSTITUTIONAL AUTHORITY TO ENTER A FINAL ORDER

This Court holds jurisdiction pursuant to 28 U.S.C. § 1334, which provides "the district courts shall have original and exclusive jurisdiction of all cases under title 11." Specifically, 28 U.S.C. § 1334(e), states that the district court in which a case under title 11 is pending has exclusive jurisdiction "(1) of all the property, wherever located, of the debtor as of the commencement of such case, and of property of the estate; and (2) over all claims or causes of action that involve construction of section 327 of title 11, United States Code, or rules relating to disclosure requirements under section 327." Section 157 allows a district court to "refer" all bankruptcy and related cases to the bankruptcy court, wherein the latter court will appropriately preside over the matter. 28 U.S.C. § 157(a) ; see also In re: Order of Reference to Bankruptcy Judges, Gen. Order 2012–6 (S.D. Tex. May 24, 2012). This is a core matter as it "concern[s] the administration of the estate." § 157(b)(2) ; see also In Re Southmark Corp. , 163 F.3d 925, 930 (5th Cir. 1999).⁵

This Court may only hear a case in which venue is proper. Venue with respect to proceedings arising under title 11 is governed by 28 U.S.C. § 1409, and "may be commenced in the district court in which such case is pending." Plaintiff resides in Harlingen, Texas, and has a Chapter 13 case under title 11 pending before this Court. Therefore, venue is proper within this jurisdiction.

Finally, this Court has an independent duty to evaluate whether it has the constitutional authority to sign a final order. Stern v. Marshall , 564 U.S. 462, 131 S.Ct. 2594, 180 L.Ed.2d 475 (2011). But see Wellness Int'l Network v. Sharif , ––– U.S. ––––, 135 S.Ct. 1932, 1938–39, 191 L.Ed.2d 911 (2015) (holding that parties may consent to jurisdiction on non-core matters). However unlike the claims in Stern , the instant matter derives solely from the Code, Rules, and Local Rules, specifically §§ 105, 327, 329, 504, and 362 ; Rule 2014 and 2016; and BLR 2014–1, and cannot exist outside of a bankruptcy proceeding. Compare ECF No. 24 with Stern , 564 U.S. at 499, 131 S.Ct. 2594 ("Vickie's claim, in contrast, is in no way derived from or dependent upon bankruptcy law; it is a state tort action that exists without regard to any bankruptcy proceeding."). As such, Stern is not applicable and this Court holds constitutional authority to enter a final order and judgment with respect to the core matter at bar.

III. FINDINGS OF FACT

This Court makes the following findings of fact and conclusions of law pursuant to Fed. R. Bankr. P. 7052, which incorporates Fed. R. Civ. P. 52, and 9014. Any finding of fact more properly considered a conclusion of law, or any conclusion of law more properly considered a finding of fact, should be so considered. The case at bar is an adversary proceeding brought by Plaintiff against her former counsel arising from actions taken in connection with Plaintiff's Chapter 13 bankruptcy.⁶ Due to the tortured history of this case and overlapping nature of these proceedings, this Court adopts and incorporates by reference each of the finding of facts made in the Bankruptcy Case Memorandum Opinions; Bankr. ECF Nos. 91, 180; the findings of facts made in the Adversary Proceeding Memorandum Opinion; ECF No. 48; and the findings of facts in all relevant prior orders in the Bankruptcy Case and Adversary Proceeding. Bankr. ECF Nos. 72, 92, 114, 120, 126, 141, 159, 162, 175, 177, 256, 280; ECF Nos. 49, 56 (collectively, the "Orders ").

On October 31, 2013, Plaintiff filed a petition under Chapter 13 of the Code. Bankr. ECF No. 1. On March 26, 2014, Plaintiff and Grissom executed an "Amended Attorney Consultation and Fee Contract for Contingency Cases," which reflects a "fee-sharing agreement" with Rodriguez that states, in part, as follows:

2.03 Attorney proposes to associate on this matter with another lawyer or law firm. Client's execution of this Agreement represents Client's written consent to the following terms of the association and fee-sharing agreement:

a. [Rodriguez] will participate in the fee-sharing agreement.

b. Fees will be divided based on an agreement by the above-referenced lawyers, law firms and Attorney to assume joint responsibility for the representation.

c. [Rodriguez] and [Grissom] will share equally in all attorneys [sic] fees recovered.

Pl.'s Ex. 1, ¶ 2.03. On April 22, 2014, Grissom and Csabi signed and entered into an agreement that was self-described as a "fee-sharing arrangement," which states, in part, as follows:

a. [Grissom] and [Csabi] will participate equally in the fee-sharing arrangement for the division of attorneys [sic] fees according to the contract between [Plaintiff] and [Grissom].

b. Fees will be divided based on an agreement by the above-referenced lawyers, law firms and Attorney to assume joint responsibility for the representation.

Pl.'s Ex. 2.

On December 8, 2014, an Application to Employ Grissom, and Grissom alone, as Special Counsel to Plaintiff was filed on the Court's CM/ECF docket, which is to say that Grissom's fee sharing agreements with Csabi and Rodriguez were not filed of record or in any other manner disclosed to the Court. Bankr. ECF No. 71. The Court thereafter approved the employment of Grissom, and Grissom alone, as Special Counsel to Plaintiff on December 31, 2014. Bankr. ECF No. 72.

On April 8, 2016, this Court issued an order awarding $90,000.00 in attorney's fees to Grissom, which were subtracted from Plaintiff's portion of the previously approved settlement proceeds,⁷ and this Court ordered Grissom to remit the remainder of the settlement proceeds to Cindy Boudloche, the Chapter 13 trustee, for the benefit of the Plaintiff's Chapter 13 estate. Bankr. ECF No. 114. Despite that order, on April 12, 2016, Csabi and Rodriguez each received a $73,333.00 wire transfer from Grissom's Interest on Lawyers Trust Account (IOLTA). Pl.'s Ex. 21, at 25. On June 10, 2016, Limon faxed a demand letter to Rodriguez and emailed a similar demand letter to Csabi notifying each individual that the $73,333.00 transfer that each had received from Grissom "[were] part of the debtor's bankruptcy estate per the Court's order." and demanded...