In re Community Home Financial Services, Inc.

571 B.R. 714
CourtUnited States Bankruptcy Court, S.D. Mississippi
DecidedMay 1, 2017
DocketCASE NO. 12-01703-NPO
StatusPublished
Cited by1 cases

This text of 571 B.R. 714 (In re Community Home Financial Services, Inc.) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, S.D. Mississippi primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re Community Home Financial Services, Inc., 571 B.R. 714 (Miss. 2017).

Opinion

MEMORANDUM OPINION AND ORDER DENYING MOTION FOR ALLOWANCE OF ADMINISTRATIVE EXPENSES AND FEES PURSUANT TO 11 U.S.C. § 503(b)(4) OF LUKE DOVE

• Judge Neil P. Olack, United States Bankruptcy Judge

This matter came before the Court for hearing on February 28, 2017 (the “Hearing”), on the Motion for Allowance of Administrative Expenses and Fees Pursuant to 11 U.S.C. § 503(b)(4) (the “Motion”) (Dkt. 1577) filed by Luke Dove (“Dove”); the Edwards Family Partnership, LP and Beher Holdings Trust’s Objection to Motion for Allowance of Administrative Expenses and Fees Pursuant to 11 U.S.C. § 503(b)(4) (the “Edwards Entities’ Objection”) (Dkt. 1599) filed by Edwards Family Partnership, LP and Beher Holdings Trust (the “Edwards Entities”); and the United States Trustee’s Objection to Motion for Allowance of Administrative Expenses and Fees Pursuant to 11 U.S.C. § 503(b)(4) (Dkt. # 1577) (the “U.S. Trustee’s Objection") (Dkt. 1610) filed by Henry G. Hobbs, Jr., Acting U.S. Trustee for Region 5 (the “U.S. Trustee”), in the above-referenced chapter 11 bankruptcy case (the “Bankruptcy Case”). At the Hearing, Dove, a licensed attorney, represented himself; Jim F. Spencer, Jr. represented the Edwards Entities, Ronald H. McAlpin and Christopher J. Steiskal rep[718]*718resented the U.S. Trustee, and Mark A. Mintz represented Kristina M. Johnson (“Johnson”), the duly appointed chapter 11 trustee (the “Chapter 11 Trustee”). Dove and the Chapter 11 Trustee testified at the Hearing. Dove introduced four (4) exhibits into evidence.1 After considering the testimony, other evidence, and arguments of counsel, the Court finds as follows:

Jurisdiction

The Court has jurisdiction over the parties to and the subject matter of this proceeding pursuant to 28 U.S.C. § 1334. This is a core proceeding under 28 U.S.C. § 157(b)(2)(A). Notice of the Motion was proper under the circumstances.

Facts

1. This Opinion is one in a series of opinions entered in the Bankruptcy Case. For a detailed discussion of the background facts leading up to the filing of the Bankruptcy Case and the appointment of the Chapter 11 Trustee, see In re Community Home Financial Services Inc., Case No. 12-01703-EE, 2015 WL 6511183 (Bankr. S.D. Miss. Oct. 27, 2015) (Ellington, J.).2

2. Community Home Financial Services, Inc. (“CHFS”) is a home mortgage lending company that was initially based in Jackson, Mississippi. Its founder, William D. Dickson (“Dickson”), was its chief executive officer. (Mot. at 1).

3. On May 23, 2012, CHFS filed a chapter 11 petition for relief. (Dkt. 1). For more than a year, CHFS operated as the debtor in possession (the “DIP”) pursuant to 11 U.S.C. § 1101, with Dickson controlling its business operations and exercising control over the estate funds.

4. Early in the Bankruptcy Case, Eileen N. Shaffer (“Shaffer”) filed a Notice of Appearance and Request for Notification (Dkt. 84), entering her appearance as Dickson’s personal bankruptcy lawyer. Dickson filed a proof of claim in the Bankruptcy Case (Claim 10-1), seeking an unknown amount against the estate as a' “result of an indemnity which may arise regarding his personal guaranty” on loans made to CHFS by the Edwards Entities. (Dove Hr’g Ex. 1).

5. On December 20, 2013, bankruptcy counsel for CHFS, Derek A. Henderson, filed a Disclosure of Transfer of Funds and Other Matters (the “Disclosure”) (Dkt. 426), informing the Court that CHFS had moved its principal place of business from Jackson, Mississippi, to Panama, had transferred funds (the “DIP Funds”) from its DIP operating account (the “DIP Account”) to bank accounts in Panama, and had set up branch offices in Panama and Costa Rica, where it continued conducting its mortgage business. (Id.).

6. A later criminal investigation revealed that Dickson had orchestrated the actions described in the Disclosure. (Dkt. 1017-2). He controlled the Panamanian accounts to which the DIP Funds were transferred, and he had moved to Costa Rica with family members where he had set up a “rogue” operation of CHFS’s business that siphoned the revenue stream away from the estate. (Dkt. 918 at 7). In a series of wire transfers beginning in November 2013, he withdrew all but approximately $7,500.00 from the DIP Account. As a mortgage servicing company, CHFS’s business operations historically generated substantial sums of money. For example, the October 2013, monthly operating re-, port (Dkt. 416 at 6), the last one signed by Dickson as president of CHFS, showed a cash balance of $9,059,191.49.

[719]*7197. In response to the Disclosure, the U.S. Trustee filed the United States Trustee’s Emergency Motion for Order for the Appointment of a Chapter 11 Trustee (Dkt. 427), which was granted on December 23, 2013. (Dkt. 429). The entry of that order meant that Dickson no longer had decision-making authority for CHFS. 11 U.S.C. § 704, § 1106.

8. The U.S. Trustee filed an application for approval of the appointment of Johnson as the Chapter 11 Trustee. (Dkt. 455). Dickson and CHFS opposed Johnson’s appointment. (Dkt. 458). After a hearing, the prior bankruptcy judge approved Johnson’s appointment pursuant to the Order (Dkt. 473) entered on January 21, 2014.

9. The Chapter 11 Trustee testified at the Hearing that after her appointment, she faced “chaos.” She had hardly any funds, no employees, and no records or books of the loans serviced by CHFS. Her primary goal was to recover the funds that Dickson withdrew from the DIP Account. Her initial attempts to recover the DIP Funds were unsuccessful because of the Panamanian bank’s refusal to recognize her authority. For more details of the obstacles she faced, she referred the Court to the detailed reports she filed intermittently in the Bankruptcy Case. (Dkt. 918,1017, 1188 & 1648).

10. In early 2014, Dickson retained Dove as his criminal defense attorney (Hr’g at 3:46:10)3 and .paid him a retainer fee.4 (Hr’g at 3:54:32). Dove associated Joe Holloman (“Hollomon”) as co-counsel for Dickson in his criminal case.

11. On February 25, 2014, Dove filed a Notice of Appearance (Dkt. 538) as Dickson’s personal bankruptcy lawyer although his representation of Dickson in the Bankruptcy Case was outside the scope of his retention agreement in the criminal case. Dove explained at the Hearing that he believed that Shaffer would likely withdraw as Dickson’s personal bankruptcy counsel5 and was concerned that Dickson then would have no representation in the Bankruptcy Case. Also, he agreed to “take on” some bankruptcy matters to assist the Chapter 11 Trustee.

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Bluebook (online)
571 B.R. 714, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-community-home-financial-services-inc-mssb-2017.