In re Dinubilo

139 B.R. 501, 1991 Bankr. LEXIS 2056, 1991 WL 330806
CourtUnited States Bankruptcy Court, E.D. California
DecidedNovember 7, 1991
DocketBankruptcy No. 190-03254-A-7F; No. MC MTH-2
StatusPublished
Cited by1 cases

This text of 139 B.R. 501 (In re Dinubilo) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, E.D. California primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re Dinubilo, 139 B.R. 501, 1991 Bankr. LEXIS 2056, 1991 WL 330806 (Cal. 1991).

Opinion

OPINION

RICHARD T. FORD, Bankruptcy Judge.

INTRODUCTION

James M. Ford, the Chapter 7 Trustee in this case (no relation to the undersigned), moves to dismiss the United States Trustee’s Motion to remove him as the Chapter trustee. Alternatively, he seeks enforcement of the Court’s Rule 2004 examination order and sanctions for the United States Trustee’s failure to comply with that order. Lastly, Mr. Ford moves for disqualification of certain United States Trustee attorneys.

The United States Trustee’s Office for the Fresno Division filed an opposition to the Trustee’s Motion on July 23, 1991. They oppose all requests for relief by the Chapter trustee.

Having reviewed the evidence submitted herein, and being intimately familiar with these proceedings since their inception, the Court finds and holds that the United States Trustee’s flagrant unprofessional and dilatory conduct warrants dismissal of the United States Trustee’s Motion to remove James M. Ford as the Chapter trustee. Further, monetary sanctions in the amount of $3,871.05 are imposed against the United States Trustee’s Office, as to the Department of Justice. Sanctions are also imposed individually against Mark St. Angelo, Regional Assistant U.S. Trustee and Special Assistant U.S. Attorney, in the amount of $800.

FACTS

Debtor filed its Voluntary Petition under Chapter 7 of the Code on July 6, 1990. On July 17, 1990, James M. Ford was appointed Interim Trustee for the estate. That Order also provided that the amount of the bond was fixed and approved according to the blanket bond on file in the Clerk’s Office. Ford has remained the Trustee in this case thereafter.

On January 22, 1991, the Court heard and approved the appointment of a Creditors’ Committee in this case, authorizing them to bring any actions necessary to avoid any transfers avoidable by a Trustee. The Order reference this motion was filed February 21, 1991. The underlying Motion seeking such authority for the Unsecured Creditors’ Committee represented to the Court that Ford, as the Trustee, refused to take action to recover certain transfers, alleging that the estate lacked the requisite funds and that he was unable to obtain counsel to represent him in connection with any lawsuit or adversary proceeding. This Court found it to be in the best interest of the estate to allow the Creditors’ Committee to pursue such actions for the benefit of the estate.

[503]*503Thereafter, on February 14, 1991, the United States Trustee’s Office, Fresno Division, brought a Motion to remove Ford as the Chapter 7 Trustee (MC No. UST-1). Not only was Ford’s removal sought in this case on the basis that he failed to investigate all allegations reference alleged fraudulent conveyances, the United States Trustee also sought his removal from all cases under 11 U.S.C. § 324(b) in which he was acting as trustee. That particular section states that when a trustee is removed under § 324(a) for cause, he is removed from “all other cases ... unless the Court orders otherwise.” Specifically, the United States Trustee’s Office sought Ford’s removal in 19 other cases. It was alleged that the Trustee’s attitude was one of stubborn noncooperation and that his consistent position was that if he was not compensated as defined by him, that he would refuse to administer the cases so assigned to him.

In order to prepare for his defense to the United States Trustee’s Motion (MC No. UST-1), Ford’s attorney, Mr. Hertz, caused a Notice of Deposition under Bankruptcy Rules 7030 and 9014 to be filed with this Court February 20, 1991, notifying the United States Trustee for District 17, Anthony G. Sousa, of the Trustee’s intent to depose Edward R. Handler and Gary W. Dyer. Evidently the examinations could not be worked out on a voluntary basis, and this Court issued subpoenas reference these witnesses on February 19, 1991.

Thereafter, on March 1, 1991, Ford’s attorney filed a Motion for Order of Examination reference Edward R. Handler and Gary W. Dyer. In the supporting declaration, Ford advanced the need to examine Handler and Dyer to prepare his defense. It is further advanced that James Snyder of the United States Trustee’s Office advised Mr. Hertz that the Notice of Deposition filed February 20, 1991, was ineffectual as there had been no response filed to the United States Trustee’s Motion to remove the Chapter trustee and that this therefore was not a “contested matter” and no deposition could be set. The declaration further indicates attempts by Mr. Hertz to arrange mutually convenient times for these depositions; however, the United States Trustee’s Office apparently refused Mr. Hertz’s attempts.

A hearing on the Motion for Order of Examination was held on March 14, 1991. The United States Trustee’s Office, by Assistant U.S. Trustee St. Angelo of the San Francisco Office, opposed the Trustee’s request requiring Messrs. Dyer and Handler to appear for examination. After a hearing on the matter, this Court granted the request for a 2004 examination. The Findings of Fact and Conclusions of Law and Order upon the motion for the order of examination were signed and filed by the Court on March 27, 1991.

Thereafter, on March 29, 1991, the United States Trustee’s Office (San Francisco Office) filed an appeal from that order to the District Court, Eastern District of California, Fresno Division. On April 1, 1991, the United States Trustee’s Office moved the Bankruptcy Court to stay the effect of its order allowing the 2004 examinations to go forward pending the appeal of this Court’s order of March 27, 1991. The request for the stay pending appeal was denied by the Bankruptcy Court but subsequently granted on appeal by the District Court until the matter could be heard.

The District Court for the Eastern District of California, Judge Price presiding, heard the United States Trustee’s appeal reference this Court’s Order Denying Stay Pending Appeal. After hearing the matter, the District Court for the Eastern District of California, Fresno Division, Judge Price presiding, issued a Memorandum Decision on April 18, 1991, affirming this Court’s decision not to issue a stay pending appeal. The Court found no basis to hold that the United States Trustee’s Office was exempt from examination under Bankruptcy Rule 2004.

On April 29, 1991, this Court ordered Messrs. Handler and Dyer to submit to a 2004 examination. The record reflects this examination occurred on May 15, 1991. The record further reflects that Mark St. Angelo of the United States Trustee’s office lodged numerous objections. It is the Trustee’s contention that because of the [504]*504numerous objections, the purpose of the 2004 exam was thwarted.

Thereafter, on July 1, 1991, Trustee Ford, through his attorneys, Lang, Richert & Patch, brought this Motion (MC No. MTH-2) to Dismiss the United States Trustee’s Motion (MC UST-1) as a sanction for its failure to comply with the 2004 examination order; alternatively, this Motion sought enforcement of the Court’s 2004 examination order with respect to the questions objected to by the United States Trustee’s Office; the Motion also sought monetary sanctions for the failure to comply with that 2004 examination order; and lastly disqualification of all United States Trustee’s Fresno Office attorneys and Mark St. Angelo from participating in the furtherance of the United States Trustee’s Motion to Remove James M. Ford as Chapter trustee.

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Related

In Re Dinubilo
177 B.R. 932 (E.D. California, 1993)

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Bluebook (online)
139 B.R. 501, 1991 Bankr. LEXIS 2056, 1991 WL 330806, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-dinubilo-caeb-1991.