In Re Rorabaugh

62 B.R. 623, 1986 Bankr. LEXIS 5746
CourtUnited States Bankruptcy Court, D. Kansas
DecidedJuly 3, 1986
Docket19-20368
StatusPublished
Cited by3 cases

This text of 62 B.R. 623 (In Re Rorabaugh) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, D. Kansas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In Re Rorabaugh, 62 B.R. 623, 1986 Bankr. LEXIS 5746 (Kan. 1986).

Opinion

ORDER

GEORGE C. PAINE, II, Bankruptcy Judge.

This matter is before the court on an objection by Joan Rorabaugh (hereinafter “the debtor”) to a pre-petition attorney fee claim filed in this Chapter 11 case by Keith A. Greiner (hereinafter “Greiner”) and an objection by the U.S. Trustee to Greiner’s request for administrative fees and expenses pursuant to § 503(b).

*625 The debtor objects to the unsecured claim of Greiner, her pre-petition attorney, on the basis of alleged conflicts of interest which existed during his representation of her. The U.S. Trustee objects to any post-petition fees and expenses for Greiner, who represented himself as a petitioning creditor in the debtor’s involuntary Chapter 11, because his efforts did not substantially contribute to the estate and were duplica-tive of the efforts of a subsequently-appointed Chapter 11 trustee. Upon consideration of the exhibits, affidavits, testimony of witnesses, and the entire record, the court concludes that Greiner has a valid unsecured claim in the amount of $7,558.82 and is entitled to $5,146.48 as an administrative expense for attorney’s fees and expenses.

The following shall constitute findings of fact and conclusions of law pursuant to Bankruptcy Rule 7052.

I.

Greiner had represented the debtor prior to filing this case. He had also represented a client attempting to buy the debtor’s drugstore during this pre-petition period. He then filed an involuntary Chapter 11 petition against the debtor as an unsecured creditor, since he was due unpaid attorney’s fees. During the Chapter 11 proceeding he represented himself as a creditor of the debtor’s estate and also represented the other client who had a continued interest in purchasing the drugstore and its contents from the estate.

This is a unique case. At first blush it would appear to demand that the court deny Greiner his attorney’s fees and expenses, both pre-petition and post-petition. However, based on the proof, the court finds he has carried his burden of establishing his claims and there is no basis to deny Greiner’s pre-petition attorney’s fee claim or to deny his request for administrative expenses and attorney’s fees under § 503(b).

The applicant is a sole practitioner in Emporia. He describes his work, which is primarily an office practice, as a “country lawyer’s practice.” As a country lawyer, he does trial and appellate work but has had relatively little bankruptcy experience. He has been in Emporia since graduating from the University of Virginia School of Law in 1966.

The debtor’s husband died approximately five or six years ago. They had been married for five years. Mr. Rorabaugh had very successfully operated the Red X Pharmacy, and “old line” drugstore in Emporia for thirty years prior to his death. The debtor had been a home economics teacher prior to her marriage, at the approximate age of fifty, with no prior business experience. During their marriage, although she occasionally went to the drugstore, her activities were focused primarily in politics, her church, and her garden club. After her husband’s death, she unsuccessfully attempted to run the drugstore by herself.

On March 7, 1984, Greiner arranged to meet with the debtor. He sought to convince her to sell the drugstore to his client Don Hill (hereinafter “Hill”), the owner of Hill’s Apothecary in Emporia. Greiner had known the debtor as a friend for several years, and a law firm in which he had previously practiced had represented her husband.

Prior to this meeting, a local bank had instituted foreclosure proceedings against the debtor’s home because she had defaulted on a business loan. She had failed to answer the state court foreclosure action, and the bank had taken a default judgment against her. The debtor told Greiner something of her disastrous financial situation and that she had done nothing in regard to the foreclosure. The debtor thereupon retained Greiner to represent her in her “financial affairs.”

After the meeting, Greiner, now serving as the debtor’s attorney, contacted the bank and convinced it to set aside the default judgment. He then delayed the matter as long as possible in order to give the debtor an opportunity to refinance or otherwise repay the note at the bank. During the month following the meeting, the debt- *626 or contacted two of the other three banks in Emporia, but failed to deliver to them additional information which they requested. Greiner also contacted these banks and, learning of the debtor’s strange and inexplicable reluctance to follow up on these leads, unsuccessfully attempted to convince her to do so.

During this same period, a drug supplier had a state court judgment against the debtor. She also owed the state for back sales tax, which led to the forfeiture of her tax number and threats by the state of a lawsuit to recover the money due it.

When Greiner realized that because of his client’s lack of action, he could not extend the foreclosure proceeding any longer, he began looking for additional ways for the debtor to obtain the needed funds. The debt to the bank exceeded $100,000, but the bank only held a mortgage on her home. This left the drugstore and its contents available to raise money through sale or by offering it as security.

The Red X Pharmacy’s sales had steadily deteriorated since the death of the debtor’s husband. She had failed to pay various drug suppliers in a timely fashion, and they were refusing to provide drugs except on a cash-on-delivery basis. Consequently, when customers called in prescriptions, there was little stock on hand. The debtor frequently told these customers the drugs were on order and then tried to borrow from other drugstores while delaying the customer. Consequently, the drugstore’s base of customers was rapidly dwindling.

On September 6, 1984, a sheriff’s sale occurred, and the bank bid in the debtor’s home for $115,000.

At this time, Greiner concluded that the only way the debtor could save her home and protect an interest in a family farm she had inherited from her parents was to sell the drugstore building, the inventory, and sundries. He arranged for her to meet with two interested buyers. One was his client, Hill, and the other was Don Bailey, the owner of the hardware store next door to the drugstore. Although she met with the potential buyers twice, she refused to negotiate with them. Greiner nevertheless received written offers from both. Hill’s was an unconditional offer to purchase everything, and Bailey’s was contingent upon financing.

Greiner set up additional conferences with these potential purchasers on several occasions, but the debtor cancelled them. This was done despite his advice that she might lose everything if she didn’t take some immediate action to obtain the necessary money. The debtor seemed to be unable to accept the reality of her disastrous financial situation or to take steps to resolve it.

In late fall of 1984 Greiner was faced with a client who refused to take any action to obtain financing to redeem her home and protect a family farm and whose major asset, the drugstore, was about to be closed by the state. He determined that the only way his client could survive, or at least maintain her options, was through an involuntary Chapter 11 bankruptcy.

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Cite This Page — Counsel Stack

Bluebook (online)
62 B.R. 623, 1986 Bankr. LEXIS 5746, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-rorabaugh-ksb-1986.