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In re Boddie

United States District Court, S.D. Ohio, Eastern Division

August 22, 2017

IN RE KAREN ELAINE BODDIE
v.
FRANK PEES, Chapter 13 Trustee Appellee. JOSEPH S. TANN, JR., Appellant, Bankruptcy No. 07-51645

          OPINION & ORDER

          JAMES L. GRAHAM, UNITED STATES DISTRICT JUDGE.

         This matter is before the Court on Appellant Joseph S. Tann, Jr.'s appeal from a bankruptcy court order. The United States Bankruptcy Court for this district denied Tann's request to lift the automatic stay imposed by federal bankruptcy law. For the reasons more fully described herein, that denial is AFFIRMED.

         I. Factual Background

         Some of the essential background facts in this appeal relate to background bankruptcy law. For example, “[w]hen a bankruptcy petition is filed, § 362(a) of the Bankruptcy Code provides an automatic stay of, among other things, actions taken to realize the value of collateral given by the debtor.” United Sav. Ass'n of Tex. v. Timbers of Inwood Forest Assocs., Ltd., 484 U.S. 365, 369 (1988). Tann wants the bankruptcy court to lift the automatic stay to permit him to pursue a lien for attorneys' fees. The bankruptcy court issued an opinion and order denying Tann's motion to lift the automatic stay. (Bankr. Ct. Op. & Order, Doc. 1-1). The bankruptcy court's decision sits at the confluence of two sets of litigation: (1) the bankruptcy of Karen Elaine Boddie, and (2) a civil claim brought by Boddie against PNC Bank in which she was represented by Joseph Tann (hereinafter the “PNC Claim”). (Bankr. Ct. Op. & Order at 2). The Court reviews the progress of each to describe the nature of today's dispute.

         Karen Boddie filed a voluntary petition under Chapter 13 of the Bankruptcy Code on March 12, 2007. After filing the petition, Boddie acquired additional assets, including the PNC Claim, which she, at least initially, did not properly disclose to the bankruptcy court. Boddie hired Tann to prosecute the PNC Claim, but the bankruptcy court never appointed Tann to perform legal services on behalf of the bankruptcy estate.

         Here's a more detailed timeline of these events. In January 2013, after making payments pursuant to her confirmed Chapter 13 bankruptcy plan, Boddie filed a motion for determination, which asked the bankruptcy court to determine, among other things, whether the PNC Claim was property of the bankruptcy estate. The bankruptcy court found that it was and ordered that Bod-die had no authority to prosecute the PNC Claim on behalf of the estate. (Doc. 4-3 at 2-3). The court further ordered that Boddie could file a motion to employ counsel to prosecute the PNC Claim on behalf of the estate. (Id. at 3). In September 2013, Boddie moved to employ Tann as special counsel to prosecute the PNC Claim, but the bankruptcy court denied the motion. (Order Sustaining Objs., Doc. 4-22). In March 2015, Boddie again moved to employ Tann as an attorney. (Mot. of Karen Elaine Boddie, Doc. 4-41). Again, the Court denied the motion. (Or. Den. Mot., Doc. 4-47).

         In between the first and second motions to employ Tann as the PNC Claim attorney, the bankruptcy trustee apparently reached a settlement of the PNC Claim. Boddie then threw a wrench in the spokes of the settlement. In between the first and the second orders denying Bod-die's motions to retain Tann as counsel for the PNC Claim, Boddie filed, pro se, a “reply” to the bankruptcy trustee's motion to approve a settlement between the trustee and PNC Bank. The bankruptcy court then denied the trustee's motion to approve the settlement. (Or. Den. Trustee's Mot. Approve Settlement at 2, Doc. 4-43).

         Tann then began filing his own motions with the bankruptcy court. Tann filed an application with the bankruptcy court to permit him to be compensated for his work on the PNC Claim. (Mem. Op. & Order on App. of Tann for Allowance of Compensation for the Period July 19, 2011 Through August 14, 2014, Doc. 4-52). Tann argued that two separate legal principles entitled him to attorney's fees. First, Tann requested compensation under bankruptcy law, specifically 11 U.S.C. § 330(a)(4)(B) and Local Bankruptcy Rule 2016-1. Second, Tann argued that he possessed an attorney-charging lien as authorized by Ohio law. The Bankruptcy court denied Tann's request for compensation, rejecting both arguments that Tann presented. (Mem. Op. & Order at 17, Doc. 4-52). The district court affirmed the order. (Op. & Order of District Ct., Doc. 4-61).

         Then, Tann filed the motion that is the subject of this appeal: a motion to lift the automatic stay so that he can obtain an attorney's lien on any proceeds from the PNC Claim. Tann argued that principles of equity and quantum meruit (“the reasonable value of services, ” Garner's Modern Legal Usage at 741, (3d. 2011)), dictated that the stay be lifted for him to pursue a lien for attorney's fees. The Chapter 13 Trustee, on the other hand, argued that since the court never authorized Tann to represent the estate in the PNC Claim, he isn't entitled to any attorneys' fees, and permitting him to attach an attorney's lien on the PNC Claim proceeds would essentially nullify the bankruptcy court's earlier rulings.

         The bankruptcy court rejected Tann's argument and sided with the trustee. (Bankr. Ct. Mem. Op. & Order at 17, Doc. 1-1). The court held that while the Bankruptcy Code permits a court to grant relief from the automatic stay in certain circumstances, those circumstances weren't present in Tann's case. Specifically, the bankruptcy court held that Tann was-if any-thing-an unsecured creditor because he did not (and does not now) possess an attorney's lien. Under Ohio law, an attorney's lien only attaches to a judgment or funds collected for a client, and since Tann had no judgment or funds collected for a client, he had no attorney's lien. In the catch-all provision in the bankruptcy code's automatic-stay rule, the statute permits courts to grant relief from the automatic stay “for cause.” 11 U.S.C. § 362(d). The bankruptcy court denied Tann relief even under this catch-all provision because Tann sought essentially the reversal of the court's earlier order refusing to appoint Tann as counsel for the PNC Claim. Further still, the bankruptcy court recognized the “nonsensical” nature of permitting “a person to impress a lien on property based on an agreement entered into with someone other than the owner of that property.” (Bankr. Ct. Op. & Order at 16, Doc. 1-1). Finally, § 362(d) permits the court to lift the stay if “the debtor does not have any equity in [estate] property.” Id. Tann argued that Boddie had no equity in the PNC Claim because the PNC Claim was encumbered with his attorney's lien. But Tann had no attorney's lien; therefore, the court denied Tann's request to lift the automatic stay.

         Here's a summary of what led to Tann's appeal. After filing the bankruptcy petition, Boddie hired Tann to prosecute the PNC Claim on her behalf. Later realizing that she could not do so, Boddie moved to employ Tann as special counsel to the estate to prosecute the PNC Claim. The bankruptcy court refused to appoint Tann to prosecute the PNC Claim, and it found that Boddie had no authority as the debtor in bankruptcy to appoint Tann herself. When Tann tried to assert his right to payment for his work on the PNC Claim, the bankruptcy court denied his claim. Then, Tann tried to move to lift the automatic bankruptcy stay on debt collection so he could assert an attorney's lien on the PNC Claim, but the bankruptcy court denied this too. This appeal followed.

         II. Jurisdiction and Standard of Review

         A bankruptcy court's order denying a motion for relief from the automatic stay is a final, appealable order. In re Miller, 459 B.R. 657, 661 (B.A.P. 6th Cir. 2011). Final, appealable orders can be appealed to the district court. 28 U.S.C. § 158. “Orders denying motions for relief from stay are reviewed for an abuse of discretion.” In re Rice, 462 B.R. 651, 653 (B.A.P. 6th Cir. 2011) (citing Spierer v. Federated Dep't Stores, Inc. (In re Federated Dep't Stores, Inc.), 328 F.3d 829, 836 (6th Cir. 2003)). “‘An abuse of discretion occurs only when the [trial] court relies upon clearly erroneous findings of fact or when it improperly applies the law or uses an erroneous legal standard.'” Id. (alteration in original) (quoting Kaye v. Agripool, SRL (In re Murray, Inc.), 392 B.R. 288 (B.A.P. 6th Cir. 2008)).

         III. ...


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