In re Thomas

612 B.R. 46

IN RE: Sharonn E. THOMAS, Debtor.

Bky. No. 18-17430 ELF

United States Bankruptcy Court, E.D. Pennsylvania.

Filed February 13, 2020

As amended: February 24, 2020

Damien Nicholas Tancredi, Flaster Greenberg P.C., Philadelphia, PA, Joshua Louis Thomas, Joshua L. Thomas & Associates, Pocopson, PA, for Debtor.

Holly Smith Miller, Gary F. Seitz, Gellert Scali Busenkell & Brown, LLC, for Trustee.

OPINION

ERIC L. FRANK, U.S. BANKRUPTCY JUDGE

I. INTRODUCTION

Joshua Louis Thomas, Esq. ("Thomas") represented Sharon E. Thomas ("the Debtor")¹ in this and a previous bankruptcy case, filed approximately sixteen (16) months apart. Both cases have been contentious, largely due to the opposition of a major creditor, Martin Brown, acting individually and through his entity, Brown and Thomas, LLC ("B&T") ("Brown" when referred to collectively).

B&T is a real estate brokerage firm in which the Debtor formerly was a shareholder. Martin Brown owned 51% of the company and the Debtor owned 49%. The Debtor withdrew from B&T on April 22, 2016, which resulted in state court litigation against her that Brown has pursued vigorously.

Currently, the Debtor owns and operates her own real estate company that acts as a sales broker and manages properties, primarily in New Jersey. In addition, the Debtor, acting individually, buys, sells, and rents properties, primarily in Philadelphia.

In the Debtor's first bankruptcy, twenty-two (22) creditors, most of which hold mortgages against the Debtor's Philadelphia properties, filed proofs of claim. Despite this, the schedules filed by Thomas in the Debtor's current bankruptcy case fail to account for or report the existence of numerous secured claims filed in her first bankruptcy case. Instead, the schedules in the Debtor's two (2) bankruptcy cases, both filed with this court by Thomas (the Debtor's counsel) are nearly identical.

Because of the obvious omissions and inaccuracies in the Debtor's schedules in the present case, I issued a sua sponte Order to Show Cause for Thomas to appear and demonstrate why he should not be sanctioned pursuant to Federal Rule of Bankruptcy Procedure 9011(b)(3). A hearing on the matter was held and concluded on March 12, 2019.

For the reasons discussed in this Opinion, I find that Thomas violated Rule 9011 in failing to make a reasonable inquiry into the facts averred in the Debtor's bankruptcy schedules that he submitted to this court with the Debtor's second bankruptcy filing.²

Based on this violation of Rule 9011, I will sanction Thomas in three (3) ways.

First, Thomas, who has not received payment in the present bankruptcy case, will be barred from filing a claim for an administrative expense for his services (i.e., he will not receive payment for his work in this matter).

Second, Thomas will be ordered to pay $1,000.00 to the chapter 7 Trustee for the benefit of the Debtor's estate.

Third, this matter will be referred to the Acting U.S. Trustee in order to determine whether a further disciplinary proceeding should be initiated against Thomas in the U.S. District Court.

II. FACTUAL FINDINGS

A. The Debtor's First Bankruptcy Case

1. The Debtor filed her first chapter 13 bankruptcy case in this court on July 6, 2017 (Bky.- No. 17-14588) ("the First Case").³

2. Thomas represented the Debtor in her First Case.

3. The Debtor lives in New Jersey and operates a real estate brokerage and property management business there called Vanguard Realty Group, Inc. ("Vanguard Realty").

4. The Debtor owns approximately twenty (20) investment properties in the City of Philadelphia ("the Philadelphia Properties").

5. Some, but not all, of the Philadelphia Properties are encumbered by mortgage debt and municipal liens.

6. The First Case was precipitated by receipt of a money judgment against the Debtor in favor of Dalin Financial ("Dalin"). The judgment concerned a property for which the Debtor co-signed a loan. (Hearing Transcript, April 15, 2019, at 40-42) (Bky. No. 18-17430, Doc. # 134) (hereafter, "Tr.").⁴

7. The First Case was filed in order to stay the enforcement of Dalin's judgment against the Debtor. (Tr. at 19, 42).

8. Thomas was aware that Dalin was a creditor of the Debtor. (Tr. at 41-42).

9. Thomas and the Debtor reviewed the Debtor's properties and schedules prior to filing the First Case. (Tr. at 16-17).

10. On August 10, 2017, in the First Case, Thomas filed the Debtor's Schedules A/B, C, D, E/F, G, H, I, J, the Schedule of Financial Affairs ("SOFA"), Disclosure of Compensation of Attorney for Debtor, and Official Form 122C-1.⁵

11. The Debtor's schedules did not list Dalin as a creditor in the First Case.

12. Vanguard Realty generated gross receipts of approximately $100,000.00 from January to mid-April of 2019, resulting in net income of about $30,000.00. (Tr. at 20-21).

13. The Debtor pays herself wages from Vanguard Realty. Id. Her income fluctuates month to month and year to year. (Tr. at 21, 29-30).

14. The Debtor's reported monthly income of $2,830.47 on Schedule I in the First Case was based solely on her income derived from Vanguard Realty. (Tr. at 18, 65).

15. Schedule I in the First Case did not disclose income derived from the rents of the Philadelphia Properties, even though she discussed this income with Thomas. (Tr. at 18, 36). Nor did this Schedule I disclose her husband's income, even though her husband was either employed or receiving unemployment insurance.⁶ (Tr. at 18, 19, 36).

16. As summarized in the chart below, a total of twenty-two (22) claims were filed by creditors in the First Case:

 Claim Date Creditor Basis for Claim Amount of Secured
No. Filed Claim
  1        8/18/17      Wilmington           Mortgage on            $96,225.17      Yes
                        Trust, National      2045 W. Oxford
                        Assoc.               St. Philadelphia
  2        8/29/17      Dalin Funding,       Judgment lien          $111,638.78     Yes
                        L.P.                 entered in state
                                             court on 5/18/15
                                             (plus 6% interest)
  3        8/29/17      First Tennessee      Mortgage on 49         $87,152.35      Yes
                        Bank, N.A.           Graypebble Cir
                                             Sicklerville, NJ
  4        8/31/17      Bank of New          Mortgage on 504        $15,923.33      Yes
                        York Mellon,         N. 57th St
                        serviced by          Philadelphia
                        Nationstar
                        Mortgage LLC
  5        9/1/17       Bank of New          Mortgage on            $17,828.28      Yes
                        York Mellon,         6106 Oxford St
                        serviced by          Philadelphia
                        Nationstar
                        Mortgage LLC
  6        9/6/17,      PA Dept. of          Personal income        $1,391.02       No
           amended      Revenue              taxes                                  (Priority
           10/23/17

  7        9/29/17      Ditech Financial     Mortgage on 49         $52,991.43      Yes
                        LLC                  Graypebble Cir
                                             Sicklerville NJ
                                             (residence)
  8        10/26/17     JPMorgan Chase       Mortgage on            $31,095.20      Yes
                        Bank, N.A.           2338 North Gratz
                                             St
                                             Philadelphia
  9        10/30/17     Portfolio            Credit card debt       $5,761.51       No
                        Recovery
                        Assoc., LLC
                        (from Citibank)
  10       10/31/17     Bank of New          Mortgage on            $25,629.32      Yes
                        York Mellon          4712 Penn St
                                             Philadelphia
  11       11/1/17,     Martin Brown,        September 2017         $723,954.01     Partially
           amended      LLC (B&T)            arbitration award,                     secured by
           1/31/18                           entered as                             Debtor's
                                             judgment in the                        residence at
                                             Superior Court of                      49
                                             New Jersey on                          Graypebble
                                             January 19, 2018                       Cir
                                                                                    Sicklerville
                                                                                    NJ
  12       11/7/17      JP Morgan            Mortgage on            $35,573.96      Yes
                        Chase Bank,          2607 N.24th St
                        N.A.                 Philadelphia
  13       11/10/17     PNC Bank, N.A.       Mortgage on            $4,082.47       Yes
                                             2817 N. Taney
                                             St.
                                             Philadelphia
  14       11/27/17     JP Morgan            Mortgage on            $39,848.71      Yes
                        Chase Bank           5710 Hadfield St.
                                             Philadelphia

  15       12/4/17      Cavalry SPV I,       Credit card debt       $3,009.50       No
                        LLC, assignee of
                        Citibank
  16       12/6/17      Wells Fargo          Mortgage on            $96,937.96      Yes
                        Bank, N.A.           5403 N. 12th St.
                        Ocwen Loan           Philadelphia
                        Servicing, LLC
  17       12/12/17     U.S. Bank, N.A.      Mortgage on            $32,535.42      Yes

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