Walton v. Jones (In re Shirley)

184 B.R. 613, 34 Collier Bankr. Cas. 2d 143, 1995 Bankr. LEXIS 1635
CourtUnited States Bankruptcy Court, N.D. Georgia
DecidedJuly 14, 1995
DocketBankruptcy No. 93-77254; Adv. No. 94-6219
StatusPublished
Cited by3 cases

This text of 184 B.R. 613 (Walton v. Jones (In re Shirley)) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, N.D. Georgia primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Walton v. Jones (In re Shirley), 184 B.R. 613, 34 Collier Bankr. Cas. 2d 143, 1995 Bankr. LEXIS 1635 (Ga. 1995).

Opinion

ORDER

MARGARET H. MURPHY, Bankruptcy Judge.

This adversary proceeding is before the court on Plaintiffs Motion For Imposition of Sanctions Against Defendant For Contempt of Court (the “Contempt Motion”) for failure to obey the Preliminary Injunction entered September 1, 1994 and the Permanent Injunction entered October 18, 1994. The U.S. Trustee’s Contempt Motion and the Notice of Hearing were served upon Defendant and upon Defendant’s attorney December 15, 1994 and January 30, 1995, respectively. Hearing was held February 23,1995. Defendant and his attorney were present at that hearing. The parties were permitted to file post hearing briefs. The U.S. Trustee filed a brief; Defendant did not.

PROCEDURAL HISTORY

The U.S. Trustee alleged in the complaint which commenced this adversary proceeding that Defendant had filed the Chapter 13 peti[615]*615tion in the main ease in the fictitious name of Charles Shirley to forestall the scheduled foreclosure sale of property owned by Linda Jeanette Shirley. At the hearing on the U.S. Trustee’s motion for a preliminary injunction held August 23-24,1994, Ms. Shirley testified that at the time she consulted Defendant, she had her own Chapter 13 ease pending in which the automatic stay had been modified to permit her mortgagee to foreclose on her residence. Ms. Shirley testified that she paid Defendant $1,500.00 based upon Defendant’s representation that, although it was last minute and would cost more, they could “petition the court for appeal” to stop the threatened foreclosure. Ms. Shirley further testified that she was unaware that Defendant had filed a bankruptcy petition in the name of Charles Shirley (who does not exist), listing Ms. Shirley’s property as an asset, until she began receiving notices at her residence pertaining to the ease.

In addition to the testimony of Ms. Shirley, the U.S. Trustee presented the testimony at the hearing of several witnesses, including five other “customers” of Defendant and Defendant’s secretary/receptionist. The testimony of those witnesses established Defendant’s modus opemndi: By means of telemarketing by his secretary and the mailing of 800-900 fliers per month to prospects whose names were obtained from the foreclosure advertisements in the local newspapers, Defendant solicited customers with promises that he could stop the foreclosure. Defendant was not engaged in the business of obtaining refinancing, although he sometimes discussed with a customer refinancing as a possible service he could provide.

The evidence presented at the preliminary injunction hearing established that Defendant, doing business as The Mortgage Place, operated to stop foreclosures by filing ostensibly pro se skeletal bankruptcy petitions. The evidence showed Defendant participated in filing or caused to have filed more than one such bankruptcy petition in a fictitious name to delay a foreclosure proceeding and showed that he routinely advised his customers not to disclose on the pro se affidavit required in this district that the customer received assistance in preparing the petition from Defendant or any employee of the Mortgage Place.

A review of the evidence presented at the preliminary injunction hearing shows that Defendant was in the business of preying upon the ignorance and desperation of persons anxious to save their home from foreclosure, utilizing methods whose description was sufficiently specific to secure payment of an excessive fee and sufficiently ambiguous to prevent the customers from becoming wary, while providing promises of assistance whose details were tailored to the client’s experience or lack thereof. For example, if a customer were reluctant to file bankruptcy, Defendant would promise proceeding in state court or discuss refinancing. The fee Defendant charged his customers was usually $1,500.00 and included only the preparation of a skeletal bankruptcy petition (a “skeletal” petition requires a minimum of information necessary to commence a bankruptcy and contains no schedules and plan, which are allowed to be filed within 15 days1). The average fee charged in this district by licensed attorneys does not exceed $1,000.002 for typical services, which include preparing and filing a Chapter 13 petition, schedules and plan and representing the debtor at the § 341 meeting of creditors, at the hearing on confirmation, and, often, at a motion to lift stay hearing. The average attorneys fee for filing a “no-asset” consumer Chapter 7 case is generally less.

Defendant’s practice of charging a $1,500.00 fee would be inappropriate without court approval if he were an attorney. The maximum so-called “retainer” or advance fee [616]*616allowed by this court (without a detailed application and prior court approval) in a Chapter 13 case is $400.00.3 Many Chapter 13 attorneys commence a case for a debtor in Chapter 13 for less than $400:00, as the whole fee allowed in.the case is structured to be paid through the Debtor’s Chapter 13 plan at $75.00 per month.4 Thus, for a non-lawyer to charge and obtain $1,500.00 from debtors who could obtain legal services for much less is an abuse of the bankruptcy court system and a fraud on the public. The practice is repugnant when the preparer is a non-lawyer because the case is not filed in good faith to obtain the opportunity to pay creditors via a plan; the case has little or no chance of success without a lawyer to guide the debtor; the debtor’s scarce resources are obtained by a form of deception, promising that which cannot be delivered and the public, the court system — including creditors— and the Debtor, however desperate or willing, are abused.

At the conclusion of the preliminary injunction hearing August 24, 1994, the undersigned addressed Defendant at length directly and explained to him the types of activities in which he had engaged which would be considered practicing law. The undersigned orally directed Defendant on the record in open court to cease providing advice, assistance or services related to the preparation or filing of bankruptcy petitions or regarding remedies available under the Bankruptcy Code. See, transcript August 24, 1994. By written order entered September 1,1994 (the “Preliminary Injunction”), this court concluded that Defendant was engaged in the unauthorized practice of law and that the practices in which Defendant engaged constituted an abuse of the bankruptcy court system and process and that the continuation of those practices posed a substantial risk of irreparable injury to the public. A preliminary injunction was ordered which instructed Defendant to cease those activities and to prevent his employees or anyone using the facilities of The Mortgage Place from performing those activities. Additionally, Defendant, his employees or employees of The Mortgage Place were enjoined from entering into any fee-sharing agreements or arrangements with attorneys, law firms, paralegals or paralegal service firms with respect to bankruptcy matters.

Defendant filed a notice of appeal of the Preliminary Injunction, but, on October 18, 1994, a consent order (the “Permanent Injunction”) was entered in which Defendant agreed to a permanent injunction of the activities described in the Preliminary Injunction. Defendant also agreed to imposition of a monetary sanction in the amount of $1,000.00, payable within 20 days, and to payment of restitution to three individuals in the total amount of $2,350.00, payable over a five-month period.

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

Related

Tighe v. Mora (In Re Nieves)
290 B.R. 370 (C.D. California, 2003)
In Re Howell
226 B.R. 279 (M.D. Florida, 1998)
In Re Zepecki
224 B.R. 907 (E.D. Arkansas, 1998)

Cite This Page — Counsel Stack

Bluebook (online)
184 B.R. 613, 34 Collier Bankr. Cas. 2d 143, 1995 Bankr. LEXIS 1635, Counsel Stack Legal Research, https://law.counselstack.com/opinion/walton-v-jones-in-re-shirley-ganb-1995.