In Re Vann

128 B.R. 285, 8 Colo. Bankr. Ct. Rep. 127, 1991 Bankr. LEXIS 766, 1991 WL 96047
CourtUnited States Bankruptcy Court, D. Colorado
DecidedJune 4, 1991
Docket19-10951
StatusPublished
Cited by3 cases

This text of 128 B.R. 285 (In Re Vann) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, D. Colorado primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In Re Vann, 128 B.R. 285, 8 Colo. Bankr. Ct. Rep. 127, 1991 Bankr. LEXIS 766, 1991 WL 96047 (Colo. 1991).

Opinion

MEMORANDUM OPINION AND ORDER

ROLAND J. BRUMBAUGH, Bankruptcy Judge.

THIS MATTER comes before the Court upon the Disclosure and Statement of Compensation filed May 23, 1991, by The Law Offices of Andrew L. Quiat, P.C. (“Quiat”) in response to this Court’s Order entered April 23, 1990, in Adversary Case No. 89 J 0451. On June 13,1990, this Court ordered that any party having any objections to the fees claimed by Quiat had to and including July 2, 1990, to file their objections. Timely objections were filed by creditors C.L. Phillips, the Resolution Trust Corporation as Receiver of Capitol Federal Savings and Loan Association, Metro National Bank, and by the Chapter 7 Trustee. Hearing on the matter commenced on October 23,1990, continued on December 14, 1990, March 6, 1991, and April 12, 1991.

ETHICAL CONSIDERATIONS

The Court, and all parties agree, that this entire matter is to be considered under 11 U.S.C. § 329, not § 327. Somehow Quiat argues that the standards should be different under the two sections, i.e. that under § 329 all the court should consider is whether the compensation “exceeds the reasonable value of any such services.” Quiat is relying on the case of In re Devers, 12 B.R. 140 (D.D.C.1981). That case held that ethical violations are relevant to fee determinations in bankruptcy proceedings, but that it is the absence of competency, not the violation of the Code of Professional Responsibility, that affects the fee determination, and that there must be specific findings that the unethical conduct lessened the value of the lawyer’s services to his clients in order to support reductions in the fees. Thus, argues Quiat, the per se rule contained in 11 U.S.C. § 328(c) regarding denial of all fees in the event of conflicts of interest by the attorney, does not apply. This Court agrees that § 328(c) does not apply in a matter under § 329, if for no other reason than § 328(c) is limited by its own terms to matters arising under §§ 327 and 1103. However, the fact that § 329 does not list ethical improprieties as a criterion in determining the reasonableness of fees does not preclude this court from looking to the legislative history of § 329 and resorting to well established tenets of common law and strong public policy considerations. In re Paine, 14 B.R. 272 (W.D.Mich.S.D.1981).

Judge Kane in In re Land, 116 B.R. 798 at 804 (D.Colo.1990) quoted from the legislative history as to the purpose and intent of § 329, to-wit:

“Section 329 was enacted in response to the concern that [pjayments to a debtor’s attorney provide serious potential for evasion of creditor protection provisions of the bankruptcy laws, and serious potential for overreaching by the debtor’s attorney, and should be subject to careful scrutiny.” H.R.Rep. 595, 95th Cong., 1st Sess. 329 (1977); S.Rep. No. 989, 95th Cong., 2d Sess. 39, reprinted in 1978 U.S.Code Cong. & Admin.News 5787, 5825, 6285.

Judge Gibson, U.S. District Court Judge, in the Paine case, supra, traced the common law back to the Seventeenth Century and found that an attorney must not repre *287 sent opposing interests and that the penalty for doing so is the denial of any fees.

... the Courts will not allow the attorney to demonstrate that the conflict of loyalties had no influence upon his conduct, nor that in fact his labors were successful. Put succinctly, “when an actual conflict of interest exists, no more need be shown ... to support a denial of compensation.” Woods v. City Nat. Bank & Trust, 312 U.S. 262, 268, 61 S.Ct. 493, 497, 85 L.Ed. 820 (1941). 14 B.R. 272, 274.

Judge Gibson also found that there is a strong public policy in maintaining the public confidence in the integrity of the judicial process, particularly regarding bankruptcy proceedings. Judge Gibson further stated: “At common law such conduct would clearly preclude the attorney from enforcing a claim for compensation, here the bankruptcy court must exact no less.” 14 B.R. 272, 275.

Thus, at least insofar as where a conflict of interest is shown when an attorney’s fees are questioned under § 329, this court adopts a per se rule that a debtor’s attorney must forfeit all fees. See also, In re Mattocks, 15 B.R. 379 (Bankr.E.D.N.Y.1981).

Quiat had a long standing relationship with the Debtor, both as an attorney and as a business partner. In 1973 a limited partnership was formed called Midcontinent Management Group. Both Quiat and the Debtor were and are general and limited partners. In fact Quiat was the attorney and manager of the partnership. Another partner was Stapo Company in which the Debtor held a general partnership interest. The evidence showed that the Debtor had attempted (through Quiat) 1 to transfer his partnership interests in Mid-continent and Stapo to his children prior to bankruptcy but that Quiat had failed to properly complete the transfer. Thus, at the time of the Debtor’s petition, the Debt- or still remained a general and limited partner, as did Quiat. A contract to sell real property of the partnership for $88,000 was initiated in June 1988, (just prior to the bankruptcy) between the partnership (with the Debtor signing on behalf of the partnership as general partner) and Cooley Gravel Co. As late as January 30, 1989, the parties were still exchanging amendments to the sales contract. The contract was eventually abandoned, but all of this activity was completely secreted from the Trustee and creditors. The Debtor was in fact a general and limited partner, as was Quiat, all during this bankruptcy. And in fact Quiat was representing both the Debt- or and the partnership, and presumably himself as a partner. Therefore, an actual conflict existed and continues to exist. In re W.F. Development Corp., 905 F.2d 883 (5th Cir.1990). Quiat himself, as a partner in the partnership, was an interested party in this bankruptcy proceeding and therefore could not have represented the Debtor herein without conflict.

In addition, a Mr. Fairchild who is a creditor in this bankruptcy, was also a limited partner in the partnership. Thus, Qui-at held a fiduciary relationship to Mr. Fair-child through the partnership (which Quiat admits in his Hearing memorandum filed October 12, 1990), and yet Mr. Fairchild, as a creditor herein, held interests adverse to the Debtor whom Quiat represented. If not an actual conflict of interest, there is a definite potential conflict.

Quiat also represented the Debtor, the Debtor’s wife, Jill, and the Debtor’s children in these bankruptcy proceedings. Jill is not a debtor in bankruptcy. The Debtor filed his Chapter 7 petition on September 2, 1988. The day previous the Debtor filed a petition in state court for legal separation from Jill. When a spouse files an action for dissolution of marriage, the inchoate rights of the spouse in the marital property *288 become choate.

Free access — add to your briefcase to read the full text and ask questions with AI

Related

In Re Lacy
353 B.R. 264 (D. Colorado, 2006)
In Re Quiat
979 P.2d 1029 (Supreme Court of Colorado, 1999)
Quiat v. Berger (In Re Vann)
136 B.R. 863 (D. Colorado, 1992)

Cite This Page — Counsel Stack

Bluebook (online)
128 B.R. 285, 8 Colo. Bankr. Ct. Rep. 127, 1991 Bankr. LEXIS 766, 1991 WL 96047, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-vann-cob-1991.