Robert J Maurer and Mendy S Maurer

MEMORANDUM OF DECISION - 1
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF IDAHO
IN RE 	)
)
ROBERT J. MAURER and 	) 	Case No. 	04-21629-TLM
MENDY S. MAURER, 	)
)
Debtors. 	) 	MEMORANDUM OF DECISION
)
________________________________ )
INTRODUCTION
The Office of the United States Trustee (“UST”) filed a motion under
§ 329(b) and Fed. R. Bankr. P. 2017(a) to review the conduct of attorney Robert
Van Idor (“Counsel”) and the reasonableness of the compensation Counsel
charged debtors Robert and Mendy Maurer (“Debtors”) for his services. See Doc.
No. 24 (“Motion”). The matter was heard on April 4, 2005 and taken under
advisement. This Decision constitutes the Court’s factual findings and legal
conclusions. Fed. R. Bankr. P. 9014, 7052.
FACTS
The facts in this matter for the most part come directly from the pleadings
of record in the Court’s file. At the April 4 hearing, the Court granted the UST’s
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MEMORANDUM OF DECISION - 2
request for judicial notice of the record, a request not opposed by Counsel. See
Fed. R. Evid. 201, 801. Additional facts were established, or at least illuminated,
by the comments of Mrs. Maurer, who addressed the Court at hearing, by the
affidavit of counsel filed immediately before hearing and reviewed afterward, and
by Counsel’s statements to the Court at hearing.
Debtors filed a voluntary chapter 13 petition for relief on October 30, 2004
with the assistance of Counsel. The petition was filed along with the appropriate
filing fee, but was unaccompanied by a mailing matrix listing creditors and their
addresses, any schedules, the statement of financial affairs, a Rule 2016(b)
disclosure of compensation, or any of the other papers generally associated with a
bankruptcy filing. Those other papers and documents were due no later than
November 14, 2004. Fed. R. Bankr. P. 1007(c). If they could not be filed by that
date, it was incumbent upon Counsel to request, before that date, an extension of
time. Id.; see also LBR 1007.2. A requested extension of time, if it was supported
by adequate cause and complied with the requirements of Fed. R. Bankr. P. 1007
and LBR 1007.2, could not run past the date scheduled for the § 341(a) meeting of
creditors. See LBR 1007.2.
Because the petition was filed without the required mailing matrix, no
§ 341(a) meeting could be set or noticed to creditors. The Clerk noted that defect.
See Doc. Nos. 1, 5. The missing mailing matrix was supplied on November 16,
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1 The Court presumes that the Clerk issued this continuance notice at the behest of the
Debtors’ Trustee, who recognized the futility of holding a § 341(a) meeting in the absence of
schedules and statements but, for some reason, wanted to continue the case rather than urge its
dismissal. It was not established that the meeting was continued on any request of Debtors or
Counsel made in compliance with the Local Rule. However, the details are not relevant to the
disposition of the issues presented.
MEMORANDUM OF DECISION - 3
allowing the scheduling and notice of a § 341(a) meeting for December 30, 2004.
November 14, however, came and went without the filing of the required
documents and without any request for an extension of time. The first meeting of
December 30 was continued to February 7, 2005. See Doc. No. 8. 1
Finally, on December 27, Counsel made an untimely request for an
extension of time. See Doc. No. 10. Schedules were then filed on January 2. See
Doc. No. 11. The signature and verification page for the schedules, the summary
of schedules, the statement of financial affairs, the 2016(b) disclosure, and the
chapter 13 plan were all missing. However, Counsel that same day asked for an
extension to file the statement of financial affairs and the plan. Doc. No. 12. That
request was granted, and Debtors were given until January 13 to do so. See Doc.
No. 14.
Debtors did not comply with this Order. No statement of affairs was filed.
And it was only on February 5 that a proposed chapter 13 plan was filed. Doc.
No. 17. Two days later, the § 341(a) meeting took place. While Debtors
appeared, another lawyer substituted and appeared for Counsel. Doc. No. 18.
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MEMORANDUM OF DECISION - 4
On March 11, the UST sought dismissal of the case based on Debtors’
failure to complete all their required filings. Doc. No. 21. The motion was
granted and the case dismissed. Doc. No. 22. That same day, Counsel filed
another extension request, Doc. No. 27, which was ultimately denied because the
case was already dismissed. Doc. No. 28.
By its motion, the UST seeks the Court’s review of the reasonableness of
the fees that were or may have been charged by Counsel. Doc. No. 24. The
specific relief was admittedly difficult for the UST to identify because among the
several missing documents were Counsel’s Rule 2016(b) disclosure of the
compensation he was paid, and the statement of affairs which at question 9 would
also show pre-bankruptcy payments to him.
On March 21, Counsel filed a Rule 2016(b) disclosure indicating that he
agreed to accept $750.00 for services in the case, had received nothing, and was
still due the $750.00. Doc. No. 29. Counsel “certified” the completeness and
accuracy of this statement regarding the agreement with his clients. Id.
This disclosure was exceedingly late. Rule 2016(b) requires the filing of
the disclosure within 15 days of the filing of the case. While extensions are
possible, the need for an extension is difficult to justify – the disclosure is signed
only by the debtors’ attorney, and the information needed to complete it is all
within the personal knowledge of the lawyer. There is little credible reason why
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2 Recall, this disclosure was filed after the UST’s motion was filed and issues over
Counsel’s conduct were raised. That such a substantial error was made under those
circumstances is astounding.
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such a disclosure cannot be filed within the 15 days, if not filed with the petition
itself.
Though already bad, the situation is actually worse. First, Counsel’s
comments at the April 4 hearing make clear that this Rule 2016(b) disclosure
wasn’t just late, it wasn’t accurate. Counsel stated at hearing that the disclosure
should have indicated the $750.00 agreed fee was paid in full prior to the filing of
the bankruptcy. Counsel’s “certification” on the disclosure thus has no value. 2
Additionally, a quick review of the chapter 13 plan filed in the case on February 5
indicates a proposal that Counsel be paid $1,000.00 through the plan. Doc. No. 17
at 3, ¶ 4.1.2. This matches neither the filed Rule 2016(b) disclosure or the
situation as described by Counsel at hearing.
Further to the issue, it appears Counsel actually received more than the
$750.00 from or on behalf of Debtors. In December, Debtors’ mortgagee,
Countrywide Homes Loans, Inc. (“Countrywide”) moved for relief from the
§ 362(a) automatic stay. This motion was resolved by stipulation. See Doc. Nos.
15, 16. Mrs. Maurer explained at hearing that, for some indeterminate reason,
Debtors’ payments to Countrywide were returned to Counsel, and he was holding
those funds. The exact amount and the disposition of the funds was not clearly
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3 This is by no means the only case, either in this District or Circuit, on point. (Extensive
citation is unnecessary.) As the powers and responsibilities of the Court in reviewing fees under
§ 329 and § 330, and the factors and authorities informing the exercise of the Court’s discretion,
are not disputed. Extensive citation is unnecessary.
MEMORANDUM OF DECISION - 6
explained by Counsel. Counsel admits the receipt of moneys in excess of the
$750.00, and says that he “retained” certain of these funds for his fees. It was
exceedingly apparent that there was wholly inadequate communication between
Counsel and Debtors on this issue, and that there was no agreement or
understanding as to the amount Counsel would be paid or how.
DISCUSSION
This Court has previously explained that chapter 13 debtors’ attorneys are
limited to “reasonable” compensation for their services. In re Dunnagan, 02.1
I.B.C.R. 47, 47-48 (Bankr. D. Idaho 2002) (citing, inter alia, § 329(b),
§ 330(a)(1), § 330(a)(3), § 330(a)(4)(B)).3 The Court has the ability to review the
services that were (or were not) rendered, and the compensation paid or agreed to
be paid therefore. If the Court determines that the compensation is excessive, it
may reduce or deny the same and order any excess returned. Id. at 48 (citing
§ 329(b), Fed. R. Bankr. P. 2017(a), and In re Jastrem, 253 F.3d 438 (9th Cir.
2001)). This, the Court notes, is “Bankruptcy Law 101.” Id.
Counsel’s affidavit, filed just before the April 4 hearing, concedes that the
filing defects in the case leading to its dismissal were his fault, not his clients’
fault. See Doc. No. 33 at 1. His comments at hearing were consistent.
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4 Counsel’s argument at hearing, and to a degree in his affidavit, Doc. No. 33 at 2,
operate on the assumption that all the problems can be traced to the use of “short filings” (i.e.,
petitions only), and that he will in the future only file cases where all schedules and other
pleadings accompany the petition. To be sure, Counsel’s approach to compliance with Fed. R.
Bankr. P. 1007 and LBR 1007.2 has been regularly and consistently inadequate. But the record
here indicates that the problems run deeper and may not be so simply solved. In any event, the
issue before the Court today is what should now be done in Debtors’ case.
MEMORANDUM OF DECISION - 7
The errors, however, were not limited to the missing statement of financial
affairs that eventually provided the basis for the dismissal. The case is replete
with Counsel’s errors and neglect, from its initiation. Even after the UST raised
the issue of competent and reasonable representation of Debtors, Counsel filed a
materially inaccurate Rule 2016(b) disclosure. Counsel’s conduct in this case has
not been reasonable or appropriate. 4 That one of the errors led to dismissal of the
case was simply a crowning blow.
Upon the entirety of the record in this case, the Court determines that no
compensation whatsoever is warranted. To the extent Counsel provided some
tangible value to Debtors from his services, that value was more than offset by the
injuries resulting from the balance of his conduct. No credible excuse has been
offered for Counsel’s neglect of the case and failure to attend even the most
fundamental filing requirements and rules. No compensation will be allowed.
Accord Dunnagan, 02.1 I.B.C.R. at 50.
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5 Counsel indicated that he had not yet filed pleadings seeking this relief because he
believed he should delay that request until he was in a position to prove that Debtors could
propose a confirmable plan. Just when he anticipated making this motion was decidedly unclear.
(continued...)
MEMORANDUM OF DECISION - 8
This conclusion requires that Counsel return to Debtors all the funds he
received and/or held as compensation. Based on Counsel’s oral “clarification” of
the filed Rule 2016(b) disclosure, it appears that this amount is $750.00.
In addition, Counsel will be required to deliver to Debtors any and all other
funds he otherwise received on their account. Mrs. Maurer’s comments, and to
some degree Counsel’s, indicate that some amount of money in excess of $750.00
was received by Counsel from Countrywide. All these funds must be returned to
Debtors.
The Court will require that the return of funds to Debtors occur within 10
days of the date of this Decision and related Order, and that proof of compliance
be provided by Counsel to the UST. Furthermore, Counsel shall prepare a full and
complete accounting of all funds received from, for, or on behalf of Debtors at any
time, and the accounting shall accompany the returned funds, with copies provided
the UST.
In addition to the foregoing, the Court concludes that certain other relief is
warranted. Recall that Debtors’ case was dismissed. Both Counsel and Mrs.
Maurer indicate to the Court that they would like to have the dismissal set aside
and the case reopened.5 In addition, Mrs. Maurer’s comments to the Court made
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5(...continued)
Mrs. Maurer advised the Court at hearing that Countrywide, following dismissal of the case, had
rescheduled foreclosure of its deed of trust for a late April trustee’s sale. It appears virtually
inescapable that Counsel’s request would not be filed, served and heard in time to save Debtors’
residence from foreclosure.
6 In addition to the problems already identified in this Decision, Mrs. Maurer spoke of
Counsel’s failure to return their calls or communicate with them, and also his failure to explain
the chapter 13 bankruptcy process to them, something they got only from the Trustee.
MEMORANDUM OF DECISION - 9
absolutely clear that Debtors have no interest at all in allowing Counsel to
continue to represent them in any reopened case. 6
The Court concludes that the basis of the dismissal – the missing
documents – was the fault of Counsel, and that Debtors were not made fully
aware of the filing problems or possible consequences. Cause exists to reopen and
reinstate the case. See § 350(b); see also § 105(a). The dismissal will be set aside,
and the case will be reopened. By virtue thereof, the stay of § 362(a) will again
arise.
Further, while there is no pending request for withdrawal or substitution of
Debtors’ attorney, the Court will not require that Debtors proceed in this case with
Counsel as their lawyer, against their wishes. Counsel will be relieved of further
responsibility for representing Debtors. He will provide to them (within the same
10 day period during which he must return all funds and make his accounting), all
files and documents regarding their case. Consistent with LBR 9010.1(f)(3), no
further proceedings that will adversely affect Debtors will occur in this case for
twenty (20) days from the date of the Court’s order reopening and
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MEMORANDUM OF DECISION - 10
reinstating the case. This will provide Debtors the opportunity to identify and
retain an attorney to assist them. They should take action to find new counsel
promptly. The return of their funds should help and, of course, new counsel can
seek additional compensation through the chapter 13 plan process.
CONCLUSION
Matters such as these are distressing for debtors, for the attorneys involved,
and even for the Court. But the need for judicial supervision and, on occasion,
remedial action is clear.
Whether Counsel’s promises, about changing his practices and rectifying
errors of the sort manifested here, will be honored remains to be seen. But the
focus in the Maurers’ case is not on what Counsel’s future conduct will be but,
instead, on what it has been.
In this case, that conduct was so deficient as to require a conclusion that
any compensation is excessive and unreasonable. All Counsel’s compensation is
therefore disallowed, and all funds paid to or otherwise held by Counsel must be
returned to Debtors. This, and the other relief noted above, will be reflected in the
Court’s order.
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MEMORANDUM OF DECISION - 11
DATED: April 7, 2005
TERRY L. MYERS
CHIEF U. S. BANKRUPTCY JUDGE
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MEMORANDUM OF DECISION - 12
CERTIFICATE RE: SERVICE
A “notice of entry” of this Decision, Order and/or Judgment has been
served on Registered Participants as reflected by the Notice of Electronic Filing.
A copy of the Decision, Order and/or Judgment has also been provided to non-
registered participants by first class mail addressed to:
Robert J. Maurer
Mendy S. Maurer
3729 19th Street
Lewiston, ID 83501
Lance E. Olsen
ROUTH, CRABTREE, OLSEN, PS
P.O. Box 4143
Bellevue, WA 	98009-4143
Case No. 04-21629-TLM (Robert J. Maurer and Mendy S. Maurer)
Dated: April 7, 2005
/s/Jo Ann B. Canderan
Judicial Assistant to Chief Judge Myers
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