Now Updating
The Security National Bank of Sioux City, IA v. Vera T. Welte Testamentary Trust

Summarizing by Amir Shachmurove

In re: JAMES LLOYD WALKER

Case Type:
Consumer
Case Status:
Affirmed
Citation:
21-1162 (9th Circuit, Feb 02,2022) Not Published
Tag(s):
Ruling:
The U.S. Bankruptcy Appellate Panel of the Ninth Circuit (BAP) affirmed an award of nearly $90,000 in fees and costs by the U.S. Bankruptcy Court for the Central District of California (BC) to Robert S. Whitmore, the chapter 7 trustee (TR) appointed in the chapter 7 case of James L. Walker (DR) and the instant appellee, discerning no error, as the "unusually large fee award" was attributed to the DR's "obstructive and obstreperous conduct," a view shared by the BC, TR, and DR's own counsel.
Procedural context:
Due to the DR's continued refusal to turn over property and records, the TR filed multiple motions. As the first fee application by Best Best & Krieger LLP (BBK), the TR's retained law firm, revealed, this conduct had resulted in fees and costs totaling approximately $43,000, a number to which the DR did not object.. After a hearing on the interim application for the payment of these fees, the BC reduced the amount requested and awarded BBK $34,358.50 in fees and $2,029.19 in costs. The DR appealed this award, sought a stay pending appeal that the BC denied, then moved to dismiss the appeal, and finally filed an application for a writ of mandamus with the U.S. Court of Appeals for the Ninth Circuit, promptly denied. Separately, the TR's accountant filed an application for fees totaling $1,838 and costs totaling $277.80; as with BBK's fees, the DR did not oppose the application prior to the BC's order. In November 2020, BBK filed a final application for compensation, which now sought an additional $42,006.00 in fees and $4,812.26 in costs purportedly incurred as a result of the DR's "obstructive conduct"; again, the DR did not oppose this third professional application. In May 2021, the TR filed his final report and request for compensation. He reported that he had realized $310,365.92 for the estate and incurred a total of $24,751.96 in administrative expenses plus compensation for himself, BBK, and the TR's accountant in the amount of $95,574.83, leaving a balance of $190,039.13 payable to the DR. The DR objected; the TR countered; and even the DR's own lawyer agreed with the BC's assessment of his client's conduct even as he argued that some of the work had been unnecessary. The BC continued the hearing, reviewed the fee application, and reduced the fees, but, at BBK's request, toned down language that it agreed conveyed an incorrect message. The DR timely appealed.
Facts:
The DR filed a chapter 7 petition in November 2015. In March 2016, the TR was appointed and won BC approval to retain the law firm of BBK over the DR's objection. Meanwhile, the TR filed a motion for turnover of the DR's books and records (Turnover Motion). As the TR pointed out, the DR's schedules disclosed only two pieces of real property, but his 2014 tax return listed five rental properties. The DR twice failed to appear at his § 341 meeting of creditors, the TR added; when he finally did so, he mentioned assets that were not listed in his schedules. When the TR requested certain documents from the DR but received no response, he filed the Turnover Motion. The DR opposed this request with the aid of his second attorney, not only contending that his prior counsel had filed the chapter 7 petition "fraudulently without his approval" but also requesting that the BC dismiss his case or convert it to one under chapter 13. The BC held a hearing and granted the Turnover Motion. In July 2016, the TR filed an adversary complaint to deny the DR's discharge based on his failure to disclose assets, false statements, and the like; one month later, the DR waived his discharge. Separately, the TR successfully objected to two of the five filed proofs of claims, and the remaining creditors withdrew their claims or amended them to $0. Having continued investigation into the DR's assets, the TR filed a motion for turnover of an undisclosed rental property located in Hesperia, California (Second Turnover Motion), in March 2018. The DR, now represented by his third counsel, filed a brief opposition to this document. He argued that there were no unsecured creditors remaining in his case and even offered to pay the existing administrative claims in lieu of turning over the rental property, as the DR's then lawyer revealed in his declaration. The DR's counsel had communicated that decision to the TR, and the parties agreed to continue the hearing on the Second Turnover Motion. However, once the DR discovered that the TR's expenses stood at $50,000, he refused to pay a penny. After a hearing, the BC granted the Second Turnover Motion and ordered the DR to turn over to the TR possession and control of the rental property, its books and accounting records, and its post-petition proceeds. It got worse. When the DR continued to refuse to turn over the rental property or cooperate with the TR, the BC issued an order to show cause why the DR should not be held in contempt and set a hearing date; once more, the DR did not respond. After multiple continuances, the bankruptcy court issued an interim order directing the DR to cooperate with the TR and allow the TR access to the rental property. The TR next filed a motion for approval to sell the rental property; again, the DR did not file an opposition to the sale motion. After a hearing, the BC approved the sale of the rental property for $310,000, subject to overbid. Soon thereafter, the TR filed an emergency application for an amended order to sell the property, asserting that the DR's wife was impeding the sale of the rental property. The BC then issued an amended order clarifying that the spouse's community property interest was also subject to the sale order and allowing the TR to execute documents on her behalf. Finally, in August 2019, the TR reported the successful sale of the property to the BC. It was then that the procedural machinations summed above took center stage.
Judge(s):
Robert J. Faris; William J. Lafferty III; and Gary A. Spraker

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