In re Benson

9 N.E.3d 659, 2014 WL 2558400, 2014 Ind. LEXIS 454
CourtIndiana Supreme Court
DecidedJune 2, 2014
DocketNo. 53S00-1304-DI-281
StatusPublished

This text of 9 N.E.3d 659 (In re Benson) is published on Counsel Stack Legal Research, covering Indiana Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re Benson, 9 N.E.3d 659, 2014 WL 2558400, 2014 Ind. LEXIS 454 (Ind. 2014).

Opinion

PUBLISHED ORDER FINDING MISCONDUCT AND IMPOSING DISCIPLINE

Upon review of the report of the hearing officer, the Honorable David M. Brinley, [660]*660who was appointed by this Court to hear evidence on the Indiana Supreme Court Disciplinary Commission’s “Verified Complaint for Disciplinary Action,” and the briefs of the parties, the Court finds that Respondent engaged in professional misconduct and imposes discipline on Respondent.

Facts: Respondent represented two companies (together “clients”) in a debt collection action brought against them by “Co-Alliance.” While the collection action was pending, the clients reached an agreement to sell their assets to a third party for $75,000. Co-Alliance filed a motion for prejudgment attachment prohibiting the clients from distributing any monies received from the sale. On January 7, 2010, Judge Matthew Hansen of the Morgan Circuit Court entered an order setting the matter for hearing on February 22 and ordering that any sale proceeds not be distributed until the court ruled on a motion. On February 11, the sale was completed and the $75,000 in proceeds were deposited into Respondent’s trust account. On February 22, the trial court entered an order directing the clients remit any sale proceeds to the clerk of the court and stating that prior orders were to remain in place.

On February 26, 2010, Respondent filed a motion for partial relief from the court’s orders regarding the sales proceeds, seeking permission to use the sale proceeds to pay about $16,000 to various creditors plus about $24,000 to Respondent for attorney fees. Respondent did not disclose that he had already made partial distribution of the sales proceeds on February 17. Respondent testified that he believed that the clients had the right to pay creditors regardless of what the trial court had ordered. He contended that he was following his clients’ instructions in making the payments, but the clients were acting on his legal advice that they had the right to pay the chosen creditors despite the order saying they could not.

On March 4, 2010, the trial court denied Respondent’s motion for partial relief, reaffirming its prior orders prohibiting distribution of the sales proceeds. On March 22, Co-Alliance filed a motion for an accounting, which the court granted. Respondent filed an accounting on April 7 showing that the sales proceeds were deposited into his escrow account without any indication that part of the proceeds had been distributed.

After a hearing, the trial court entered an order of prejudgment attachment on June 18, 2010, which ordered that the full proceeds of the sale be provided to and held by the clerk of the court until further order of the court. Respondent failed to remit any of the proceeds to the clerk. Instead, he continued to distribute the remainder of the proceeds to pay debts of the clients, including tax obligations. By June 26, Respondent had distributed the entire $75,000 to various creditors of the clients, including approximately $38,000 to himself for attorney fees.

On or about June 27, 2010, Respondent filed bankruptcy petitions on behalf of the clients. Respondent advised clients to file for bankruptcy to remove jurisdiction from the state trial court to circumvent the trial court’s orders.

On August 12, 2010, Co-Alliance filed a motion in the state trial court to find Respondent in contempt (“Contempt Motion”). The trial court held a hearing at which Respondent admitted that he was aware of the orders prohibiting the distribution of the sale proceeds and that he distributed funds from the sale after the orders were issued. The trial court entered an order (“Contempt Order”) finding Respondent in contempt, fining him $75,000, and ordering him incarcerated un[661]*661til the fine was paid. Respondent spent two days in jail before he paid the fine and was released. Respondent appealed the Contempt Order to the Court of Appeals, which affirmed. See In re the Order of Contempt against Benson, 955 N.E.2d 215 (Ind.Ct.App.2011), trans. denied.

Aggravating and mitigating facts. The hearing officer found the following facts in aggravation: (1) Respondent engaged in dishonesty in failing to advise the trial court that he had already made distributions from the sale proceeds when he sought leave to do so; (2) Respondent committed the misconduct for personal gain; and (3) Respondent does not acknowledge his wrongdoing, lacks insight regarding his misconduct, and lacks remorse. The hearing officer found the following facts in mitigation: (1) Respondent has no prior disciplinary history; and (2) Respondent has already suffered other penalties for his misconduct, i.e., two days imprisonment and a $75,000 fine.

Violations: Respondent is charged with violating these Indiana Professional Conduct Rules prohibiting the following misconduct:

3.4(c): Knowingly disobeying a court order.
8.4(d): Engaging in conduct prejudicial to the administration of justice.

Arguments in Respondent’s brief in support of his petition for review. In this brief, the only defenses Respondent asserts depend on the effect of the clients’ filing for bankruptcy relief. Generally, when a debtor files for bankruptcy relief, the debtor’s property becomes property of a bankruptcy estate that is under the exclusive jurisdiction of the bankruptcy court (by referral from the district court). See 11 U.S.C. § 541(a); 28 U.S.C. § 1334(e). The filing for bankruptcy relief also gives rise to an automatic stay of most actions to collect a debt from the debtor or the bankruptcy estate. See 11 U.S.C. § 362(a). In considering Respondent’s appeal of the Contempt Order, the Court of Appeals rejected Respondent’s arguments that his clients’ bankruptcy filing barred the trial court from fining him for contempt, concluding that the $75,000 fine Respondent was ordered to pay came from his personal money, not property of the bankruptcy estate, and was therefore not subject to the bankruptcy court’s jurisdiction. 955 N.E.2d at 221-24.

In his brief in support of his petition for review, Respondent states that the question presented to this Court is whether the hearing officer incorrectly relied on Cowart v. White, 711 N.E.2d 523, clarified on reh’g, 716 N.E.2d 401 (Ind.1999), in concluding that the trial court had jurisdiction to enter the Contempt Order. In the Co-wart opinion, this Court recited the well-settled principle that when one party in a dissolution action files for bankruptcy relief, the bankruptcy court and the dissolution court have concurrent jurisdiction to determine what obligations are nondis-chargeable debts for “maintenance or support.” See 711 N.E.2d at 528. Respondent points out that the action in the trial court was not a dissolution case and did not involve any issue of dischargeability. However, state and bankruptcy courts have concurrent jurisdiction in other circumstances. See, e.g., 28 U.S.C. §

Related

City of Gary v. Major
822 N.E.2d 165 (Indiana Supreme Court, 2005)
Cowart v. White
716 N.E.2d 401 (Indiana Supreme Court, 1999)
Cowart v. White
711 N.E.2d 523 (Indiana Supreme Court, 1999)
In Re Benson
955 N.E.2d 215 (Indiana Court of Appeals, 2011)

Cite This Page — Counsel Stack

Bluebook (online)
9 N.E.3d 659, 2014 WL 2558400, 2014 Ind. LEXIS 454, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-benson-ind-2014.