I need help writing a legal brief for In reGomery,523 B.R. 773 (W.D. Mich. 2015)

Lawyer/Debtor in the Hoosegow: Still Eligible for Chapter 13?

Topous obtained a judgment against Clarence Kenyon Gomery, a lawyer (Debtor), and his law firm, Gomery and Associates, PLLC. That case arose from Mr. Gomery's representation of Topous in various business transactions, including the purchase of property referred to as the Old Mitchell Creek Golf Course. Topous alleged that Mr. Gomery drafted an Operating Agreement creating a limited liability company, T & G Real Estate Development, LLC, to purchase and hold the Mitchell Creek property. Although Topous paid the full purchase price to acquire the property, Mr. Gomery defrauded Topous in the transaction by surreptitiously giving himself a one-half ownership interest in T & G in the Operating Agreement he drafted. The jury awarded ownership of the Mitchell Creek property to Topous and ordered Mr. Gomery to pay Topous damages in the net amount of $11,622.22 and imposed sanctions for Frivolous Defense and for Spoliation of Evidence (see Chapter 2) against Mr. Gomery and his law firm, jointly and severally, for $314,629.27.

Unable to pay the judgment, Mr. Gomery filed a voluntary petition under Chapter 13 on April 2, 2014.

In July 2014, Mr. Gomery was arrested and charged with solicitation of murder. Detective Gomez testified about a recorded conversation between Mr. Gomery and Dale Fisher. During the course of the recorded conversation, Mr. Gomery offered Mr. Fisher $20,000 to kill Christopher K. Cooke, the attorney who represented Topous. Detective Gomez also testified that Mr. Gomery paid Mr. Fisher $1,000 during the recorded conversation, purportedly to purchase the weapon that would be used in committing the crime. Mr. Gomery is currently incarcerated and awaiting trial on these criminal charges.

Mr. Gomery seeks confirmation of his Chapter 13 Plan. The Trustee and Topous have objected to the Plan on the grounds that the Plan is not feasible, and that neither the Plan nor the petition was filed in good faith. The Trustee has also requested that Mr. Gomery's case be converted to Chapter 7 due to the Debtor's lack of good faith.

JUDICIAL OPINION

BOYD, Bankruptcy Judge ... In his testimony, the Debtor consistently claimed to have no knowledge about the details of his personal finances or the finances of his law firm, Gomery and Associates, PLLC. He repeatedly refused to answer questions about specific transactions, instead referring them to his wife or sometimes his accountant, bookkeeper, or attorney. The Court finds the Debtor's professed lack of knowledge surprising and implausible, particularly in light of the fact that he has been an attorney for twenty-five years and his representations that he reviewed all of the relevant financial information before certifying its accuracy in filings with this Court.

The evidence presented at the hearings established that the Debtor's schedules failed to disclose a significant and valuable asset, JACCK Enterprises, LLC in which the Debtor had an interest. The assets of JACCK consist of two commercial buildings located at 413 and 423 Eighth Street in Traverse City, Michigan. When questioned about tax returns that showed Debtor as having a fifty percent ownership interest in JACCK, the Debtor insisted the tax returns were filed in error.

The accountant who prepared the Debtor's tax returns, Jerry Keelan, testified that he always reported income from JACCK as partnership income. He also testified that the Debtor and Aileen Gomery were aware that the returns were being prepared in this manner. He explained that neither the Debtor nor Aileen Gomery (his co-owner in JACCK and sister) objected to the returns listing them as equal owners of JACCK until early in 2014.

The Court also notes that these sizeable payments to the Debtor or for his benefit were not adequately disclosed in the Gomery and Associates chapter 7 case. The Debtor signed the Gomery and Associates petition, schedules, on behalf of the PLLC, and he testified that he certified that the information contained in the documents was true and correct under penalty of perjury.

The Debtor's Schedules did not disclose that he owned any firearms. At a 2004 exam held on June 5, 2014, the Debtor testified that he owned a "30-06 deer rifle" and that any other guns were owned by his son. Dale Fisher testified at the evidentiary hearings that he had personally observed a .308 rifle on the gun rack in the Debtor's residence. (Tr. III at 100.) When the Debtor was questioned at the hearings about whether he owned a .308 rifle, he invoked his rights under the Fifth Amendment.

"Chapter 13 relief is reserved for the 'honest but unfortunate debtor,'" and in chapter 13 cases, a debtor's good faith may be relevant in several respects. Section 1307(c) also provides that a chapter 13 case may be converted or dismissed, "whichever is in the best interests of creditors and the estate," for "cause."

The concept of good faith under both 1325(a) and 1307(c) is an "amorphous notion" that is both flexible and fact-specific.

The evidence is indisputable that the Debtor possessed an ownership interest in JACCK. The Debtor's own individual tax returns for 2009 through 2013, along with the returns of JACCK itself, reflect his income from JACCK and show him as having a one half ownership interest in the LLC. Several other documents admitted into evidence at the hearing also demonstrate that the Debtor held himself out as a half owner of JACCK and signed documents in that capacity.

The Debtor has been a practicing attorney for twenty-five years and certainly has more than a rudimentary understanding of business law. Similarly, the Debtor's original chapter 13 plan did not include any provisions for the Debtor to account for his interest in JACCK for the benefit of his creditors. Subsequent plan proposals called for one parcel of property owned by JACCK to be sold, and for one half of the proceeds to be used in the Debtor's chapter 13 case. The Modified First Amended Plan now provides for both parcels of JACCK's property to be sold and states that Aileen Gomery has agreed that "to resolve the dispute" over ownership of the LLC, one half of the proceeds from the sale may be used to fund the Debtor's chapter 13 Plan. Again, the Debtor and his wife have made these offers only after the omission of the Debtor's interest in JACCK was discovered and objected to by the Trustee and Topous. This is simply too little, too late.

The Debtor's bankruptcy schedules do not disclose ownership of any firearms, sports or other hobby equipment. At his 341 meeting, the Debtor stated that he owned a hunting rifle, and Dale Fisher testified that he had personally observed a .308 rifle when visiting the Debtor's home. When the Debtor was asked at the hearing if he owned a .308 firearm, the Debtor invoked his rights under the Fifth Amendment. The Court may draw a negative inference from the Debtor's refusal to answer this question.

Based on the totality of circumstances in this case, the Court concludes that the Debtor lacked good faith in filing his chapter 13 Plan and his chapter 13 petition. The Debtor sought bankruptcy relief when he was unable to obtain an appellate bond to stay collection of the Topous judgment and sanctions order, a large portion of which resulted from the Debtor's misconduct in the state court litigation. The Debtor's bankruptcy schedules were filed under penalty of perjury, yet they contained several material omissions and errors. Fundamental omissions have impeded the chapter 13 case and the bankruptcy process. Throughout this case, the Debtor has not been fair in his treatment of his creditors, and has not been forthright in his dealings with the Trustee, the creditors, and this Bankruptcy Court. Under the circumstances, the Debtor has not acted in good faith.

The Court believes that conversion to chapter 7, which will allow these matters to be investigated by a chapter 7 trustee, is in the best interests of creditors in this case.

In this case, the Debtor has failed to establish that his proposed Plan is feasible. Although the Plan requires minimal monthly payments of $100, the Debtor has offered no evidence of how he will obtain the funds to make even these nominal payments. The undisputed evidence is that the Debtor has been incarcerated since July 2014; the Debtor presented no evidence demonstrating, or even suggesting, that he has any income at this time. Under these circumstances, the Debtor's Plan is not feasible.

The Debtor has offered no explanation, let alone evidence, of the source of the funds he proposes to use to make the $100 monthly payments required under his proposed Plan. The Debtor is currently incarcerated and has offered no evidence that he has any current income. The Debtor's Plan also proposes increasing his payments in the future, if he is able to obtain employment. Debtor's attorney admitted that it is unlikely that the Debtor will resume his legal practice in the future. Because the Debtor has no current income, and limited prospects for income in the future, the Court concludes that the Debtor is not eligible to be a debtor under chapter 13. Conversion of the Debtor's case to chapter 7 is warranted.

List and discuss the reasons the court finds a lack of good faith on Gomery's part.