In Re Moix-McNutt

220 B.R. 631, 40 Fed. R. Serv. 3d 1090, 1998 Bankr. LEXIS 631, 1998 WL 279208
CourtUnited States Bankruptcy Court, E.D. Arkansas
DecidedApril 29, 1998
DocketBankruptcy 97-40003M
StatusPublished
Cited by5 cases

This text of 220 B.R. 631 (In Re Moix-McNutt) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, E.D. Arkansas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In Re Moix-McNutt, 220 B.R. 631, 40 Fed. R. Serv. 3d 1090, 1998 Bankr. LEXIS 631, 1998 WL 279208 (Ark. 1998).

Opinion

ORDER

JAMES G. MIXON, Bankruptcy Judge.

This matter is before the Court to determine whether R.J. Brown, C. Richard Crockett, and Crockett & Brown PLLC, the attorneys for Ramona Moix-McNutt (“Debtor”), should be sanctioned pursuant to various provisions of the Bankruptcy Code. This is a core proceeding in accordance with 28 U.S.C. § 157(b)(2)(A), and the Court has jurisdiction to enter a final judgment in the case.

On July 14, 1997, this Court issued its Order for R.J. Brown (“Brown”) and C. Richard Crockett (“Crockett”) of Crockett & Brown to appear and show cause why they should not be sanctioned pursuant to Federal Rule of Bankruptcy Procedure 9011. On December 5, 1997, this Court issued a supplemental Order requiring Brown to appear and show cause why he should not be sanctioned under sections 105(a) and 329 of the United States Bankruptcy Code for advising and assisting the Debtor in the preparation of a false and misleading petition and schedules; the unauthorized post-petition transfer of real estate, which was property of the estate; the unauthorized transfer of estate money to the Debtor’s husband; and the unauthorized payments of pre-petition claims to an insider of the Debtor. At both show-cause hearings Brown appeared in person and by counsel, and in both instances he declined the Court’s invitation to present evidence justifying his actions. Crockett also appeared at the first hearing and declined to offer evidence.

I

THE FALSE PETITION

The Debtor’s petition and schedules were prepared from information provided by or at the direction of the Debtor and the ease was originally filed under the provisions of chapter 13 of the United States Bankruptcy Code on January 2, 1997. The schedules filed February 18, 1997, listed unsecured claims totaling $233,358.80 and secured claims totaling $660,527.17. Crockett signed the bankruptcy petition, and Crockett, Brown, and Crockett & Brown PLLC are listed as attorneys for the Debtor.

At a trial on June 26,1997, both the Debt- or and her husband acknowledged that they were both personally liable for an unscheduled claim owed to Conway Water Improvement District Number Ten in the approximate sum of $208,000.00. The Debtor admitted that the debt was liquidated but *633 did not mature until October 1998. Hibernia National Bank of Texas (“Hibernia”), as Trustee for the owner of the improvement bonds, filed a claim on January 5, 1998, for $208,845.00, reserving the right to an additional 25% penalty, attorney’s fees, and costs. Hibernia’s claim states that the sum became delinquent October 10, 1997, and now constitutes a lien against real property owned by the Debtor and her husband.

The Debtor stated the following in response to questions by the Court:

Q I don’t see an improvement district listed as a creditor. Maybe I overlooked it.
AI don’t believe it is.
Q Well, why would it not be listed as a creditor?
A I asked if I needed to include that and I was told no.
Q By whom?
A By my attorneys.

(Tr. at 76; June 26,1997 hearing.)

Mark McNutt, the Debtor’s husband, testified that the improvement district had come into being two years previously and that the $208,000.00 assessment was for the year 1996 and would be due in approximately one year. He also stated that he had known for at least six months prior to the June 26,1997 hearing that this amount was due. Thus, both he and the Debtor knew of this noncontingent, liquidated debt prior to the filing of the bankruptcy petition on January 2 and the completion of the Debtor’s schedules filed February 18.

Only debtors with noncontingent, liquidated, unsecured indebtedness of less than $250,000.00 and noncontingent, liquidated, secured indebtedness of less than $750,000.00 are eligible for chapter 13 relief. 11 U.S.C. § 109(e) (1994). Debtors seeking relief under the Bankruptcy Code must file a list of creditors and, unless the court orders otherwise, a schedule of assets and liabilities. 11 U.S.C. § 521(1) (1994). Intentional failure to list a creditor is grounds to deny the Debtor a discharge and may constitute a crime. 11 U.S.C. § 727(a)(4) (1994); 18 U.S.C. § 152(2) & (3) (1994); In re Shebel, 54 B.R. 199, 202 (Bankr.D.Vt.1985) (failure to list a creditor on schedules may constitute a false oath under section 727(a)(4)(A)); In re Schnabel, 61 F.Supp. 386, 387 (D.Minn.1945) (objection to discharge was sustained for intentional omission of creditors).

The definition of a claim is a “right to payment whether or not such right is ... liquidated, unliquidated, fixed, contingent, matured, unmatured-”11 U.S.C. § 101(5) (1994). The record establishes that the improvement district had such a claim on the date the petition was filed.

According to the Debtor’s testimony, Brown was fully aware of this claim of more than $200,000.00 for improvements to the Debtor’s property. The Court accepts the Debtor’s testimony that she informed counsel of the indebtedness and was told that she was not required to schedule the claim. Even after the omission of this creditor was disclosed on the record, Crockett & Brown failed to amend the schedules. The incentive to omit this creditor is obvious. If the omitted creditor had been properly scheduled, any argument that the Debtor is eligible for chapter 13 would have been patently frivolous because the Debtor’s debts exceeded the limitations set by 11 U.S.C. § 109(e) (1994).

II

THE UNAUTHORIZED TRANSFERS

The Debtor’s schedules reflect that she and her husband were the owners of a dwelling located at 1808 Independence, Conway, Arkansas, valued at $38,500.00. The petition listed Kirk and Marilyn Moix as the creditors, and under the heading “nature of lien” the schedules provided “purchase of property.”

The Debtor testified that this real property was sold in April 1997, several months after the bankruptcy petition was filed. She said that she contacted Brown and “told him that ... we were ... ready to close out. And he told me to go ahead and close it out and then to send the check to him.” (Tr. at 70, hearing June 26,1997.)

The following were the Debtor’s answers to the Court’s inquiry into the transfer of the real property in question:

*634

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Cite This Page — Counsel Stack

Bluebook (online)
220 B.R. 631, 40 Fed. R. Serv. 3d 1090, 1998 Bankr. LEXIS 631, 1998 WL 279208, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-moix-mcnutt-areb-1998.