Chandler v. McIntosh (In re McIntosh)

Summarized by David Hercher , U.S. Bankruptcy Court, District of Oregon
10 years 3 months ago

Citation:

In re McIntosh, No. NC-15-1029-JuTaD (9th Cir. B.A.P. Nov. 3, 2015).

Tag(s):

Ruling:

After chapter 13 debtor discharged her lawyer, lawyer breached duty of loyalty to debtor by challenging debtor’s exemption claim in order to collect lawyer’s fee. Not-for-publication memorandum.

Procedural context:

David Chandler represented debtor, Deborah McIntosh, in her California chapter 13 case. He commenced an adversary proceeding seeking to avoid a deed of trust on her home. She claimed a homestead exemption in the home. At a hearing on confirmation of her chapter 13 plan, he told the judge that the lien was not being avoided under the Bankruptcy Code and thus would not be preserved for the benefit of the estate, a position that benefitted her. The dispute with the lienor was later settled; the home was sold; and proceeds subject to the homestead claim were held in escrow. A disagreement arose between Chandler and debtor regarding his fees. She discharged him. In his final fee application, he argued that the home proceeds were property of the estate due to the operation of sections 544 and 541. She opposed his fee application on the ground that he had breached his duty of loyalty by switching his position from first arguing for her benefit that the lien was not preserved for the benefit of the estate and second arguing that the lien was preserved when preservation would benefit him. The bankruptcy court denied the application and ordered him to disgorge all previous compensation in the case. On his appeal, the BAP affirmed.

Facts:

A California lawyer may not do anything that will “injuriously affect” a former client in any matter in which the lawyer formerly represented the client. Here, Chandler’s later position arguing for preservation of the lien directly conflicted with his position on that issue when he was representing debtor. His later argument was a clear contest to her right to her homestead exemption. It is irrelevant that his later argument was correct. He was not entitled to any fees as a result of his ethical violation, and disgorgement was proper.

Judge(s):

Meredith A. Jury, Laura S. Taylor, and Randall L. Dunn, Bankruptcy Judges.

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